J. J. B. XXXXXXXX, X. X. XXXXX, INC.
XXXXXXXX XXXXX CENTER
POST OFFICE BOX 32760 TELEPHONE
XXXXXXXXXX, XXXXXXXX 00000-0000 502-588-8400
ESTABLISHED 1854 800-444-1854
September 9, 1998
Mannatech Incorporated
000 X. Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Chairman of the Board and Chief Executive Officer
Dear Xx. Xxxxxxxx:
This letter agreement sets forth our understanding with respect to the
proposed directed public offering ("Directed Public Offering") of common
stock of Mannatech Incorporated ("the Company") to your Associates and
employees.
1. J.J.B. Xxxxxxxx, X.X. Xxxxx, Inc. (referred to hereafter as "Hilliard" or
the "Placement Agent") presently intends, subject to the satisfactory
completion of ongoing due diligence and the other provisions of this
letter, to assist the Company in placing directly with its Associates
and/or employees, on a best efforts basis in the form of the Directed
Public Offering, a minimum of 1,500,000 shares, and a maximum of 2,200,000
shares of the Company's Common Stock to be sold by the Company (the
"Primary Shares") and a maximum of 2,755,000 shares of the Common Stock to
be sold by certain selling shareholders (the "Selling Shareholders'
Shares"). Together, the Primary Shares and Selling Shareholders' Shares
are hereafter collectively referred to as "Offered Shares."
The Offered Shares will have certain material restrictions on liquidity,
which restrictions will be fully described in all Securities and Exchange
Commission ("SEC") and Blue Sky filings and to all Associates and
employees whom the Company solicits to purchase Offered Shares. Among
other things, the Offered Shares will be restricted upon subsequent resale
following the Directed Public Offering to then-current Associates and/or
employees of the Company. Such restriction, for as long as it remains in
effect, will appear as a legend on all applicable share certificates.
Xx. Xxxxxxx X. Xxxxxxxx
September 9, 1998
Page 2
2. The Company will establish an offering price or price range. Based on
initial discussions, the financial data and other materials the Company
has provided, including the Company's proposed operations, its capital
structure and financial condition, among other things, it is anticipated
that the offering price will be approximately $8.00 per share, a
value arrived at by the Company's Board of Directors after consideration
of a number of relevant factors.
3. The Company will promptly take all steps necessary to effectuate the
Directed Public Offering including (i) using its reasonable best efforts
to cause an S-1 registration statement (the "Registration Statement") to
be prepared, filed and declared effective by the Securities and Exchange
Commission as soon as practicable; and (ii) undertake, in cooperation with
Xxxxxxxx and its counsel, the qualification of the Offered Shares for
sale in the states designated by the Company, which qualification shall be
completed by the Company's outside counsel.
4. The best efforts management fee to which the Placement Agent shall be
entitled shall be four percent (4%) of the aggregate value of the Offered
Shares placed with Associates and other employees, payable as set forth
below.
Such best efforts management fee will be contingent upon and payable on
the date or dates of closing of the Directed Public Offering, in stages as
the Directed Public Offering is completed. It is presently contemplated
that the Company will sell first a minimum of 1,500,000 Primary Shares,
collecting funds in a designated escrow account. At stages, as yet
undetermined, funds will be released from escrow and share certificates
distributed. At each stage or stages of escrow release, the Placement
Agent will be due its appropriate portion of the contingent management fee.
Among other things, Xxxxxxxx will assist the Company with (i) the
preparation of the Registration Statement, (ii) the Company's solicitation
of Associates and employees to purchase Offered Shares, (iii) the
distribution of materials, as appropriate, to Associates and employees,
(iv) receipt and processing of subscriptions to purchase Offered Shares
from Associates and employees, (v) follow up, administrative and recording
duties related to the Company's solicitation of Associates and employees,
(vi) opening accounts, where appropriate, for certain Associates and
employees, (vii) administrative matters related to closing or closing for
the Directed Public Offering, including without limitation the transmission
of subscription and other relevant information concerning subscribers of
the Offered Shares to the Company's escrow agent for the Directed Public
Offering and the Company's transfer agent, (viii) cooperating with the
Company in regard to Blue Sky registration and other regulatory matters
respecting the Directed Public Offering, and (ix) such other
administrative duties as may be requested by the Company and appropriate
to perform in assisting the Company with the Directed Public Offering. The
Placement Agent will cooperate fully including, when possible, opening
Xx. Xxxxxxx X. Xxxxxxxx
September 9, 1998
Page 3
accounts for purchasers as the Company shall request, to maximize the
availability of state Blue Sky exemptions where applicable or desired by
the Company.
The Company will pay to the Placement Agent a retention fee of $50,000
("Retention Fee"), payable upon the execution of this letter agreement. It
is understood that upon completion of all or any portion of the Directed
Public Offering, the Retention Fee will be credited against the
contingent management fee. Should Xxxxxxxx'x Commitment Committee fail to
authorize Xxxxxxxx to serve as Placement Agent for the Directed Public
Offering by no later than September 16, 1998, then Xxxxxxxx shall return
the Retention Fee, less reasonable and necessary expenses, including
legal and out-of-pocket expenses, in consideration of the undertaking as
contemplated by this letter. No expenses in excess of $50,000 shall, in any
event, be reimbursed by the Company to Xxxxxxxx. In the event the Directed
Public Offering is canceled prior to completion for any reason, after
September 16, 1998, the Retention Fee is understood to be non-refundable
and to have been earned in full.
The Company will pay all of its own expenses and fees incurred in
connection with the Directed Public Offering and the solicitation of the
purchase of shares thereunder including all regulatory and filing fees as
may be incurred.
5. If the Directed Public Offering is cancelled by the Company prior to
completion for any reason after acceptance by Xxxxxxxx'x Commitment
Committee, then the Company will promptly reimburse the Placement Agent
for reasonable and accountable out-of-pocket expenses, including fees
and disbursements of Placement Agent's counsel, incurred in connection
with the Directed Public Offering, up to an aggregate amount not to exceed
an additional $50,000, over and above the Retention Fee. If the Directed
Public Offering is consummated as contemplated herein, the Placement Agent
will bear its own expenses incurred in connection with the assistance
provided to the Company in connection with the Directed Public Offering.
6. In addition to its ongoing due diligence in connection with the Directed
Public Offering, the Placement Agent and its counsel will satisfy
themselves by performing a preliminary due diligence review of the
Company's business and financial condition. The Company will direct its
counsel, independent accountants, officers and directors to cooperate
with the Placement Agent's representatives in any due diligence review
performed by Xxxxxxxx. Such preliminary due diligence review, as well as
the Placement Agent's Commitment Committee approval will be completed by
no later than September 16, 1998.
7. Xxxxxxxx'x compensation in respect of the Directed Public Offering shall
not be reduced even if the Company should engage another investment
banking firm concerning the
Xx. Xxxxxxx X. Xxxxxxxx
September 9, 1998
Page 4
rendering of the services set forth herein by such other investment
banking firm in connection with the Directed Public Offering, unless
Xxxxxxxx shall otherwise agree.
8. Incident to the Directed Public Offering the Company shall be responsible
for: (i) preparation, filing and declaration of effectiveness by the SEC
of the Registration Statement as referred to in Sections 2 and 5 herein;
(ii) preparation of the current and projected operating results of the
Company in accordance with Generally Accepted Accounting Principles,
consistently applied; (iii) obtaining the determination of the Company's
outside counsel, with the reasonable concurrence of Xxxxxxxx'x counsel,
that (a) no material Blue Sky registration problems or restrictions, (b)
compliance with such restrictions of requirement has occurred and/or (c)
that the Company has decided not to offer the Directed Public Offering in
certain states, as the case may be.
Xxxxxxxx'x undertaking to proceed with the Directed Public Offering is
contingent upon Xxxxxxxx and its counsel having conducted a satisfactory
review of the financial, business, legal, regulatory and other affairs of
the Company and approval of Xxxxxxxx'x participation in the Directed
Public Offering by its Commitment Committee, all of which shall be
concluded on or before September 16, 1998.
9. The obligations of the Placement Agent and those of the Company to
complete the Directed Public Offering will be subject to the execution
and delivery of a best efforts agency agreement in a form and containing
terms and conditions acceptable to the parties for offerings of this type
and containing, among other things, customary representations,
warranties, covenants and conditions as well as specified indemnification
of the Placement Agent by the Company.
10. Xxxxxxxx acknowledges that pursuant to the various reviews which it
contemplates undertaking, it will be afforded by the Company information
which the Company considers confidential. Any information which is
afforded by the Company, in any form, to Xxxxxxxx concerning its
operations, its affairs, its business, its personnel and its Associates,
without limitation, unless the same is included in the Company's
registration statement (or any amendment thereto) filed with the
Securities and Exchange Commission, shall be deemed confidential
information ("Confidential Information"). Xxxxxxxx (including its
employees and contractors) agrees to hold in confidence any and all
Confidential Information, that has been or will be disclosed, directly or
indirectly to Xxxxxxxx, confidential from any third party, unless the
disclosure of such Confidential Information is authorized in writing in
advance by the Company, or where such disclosure may be required by law,
and then only after notice to, and opportunity for consultation with, the
Company by Xxxxxxxx. In the event that the contemplated Directed Public
Offering is terminated by either party, or upon the written request of the
Company,
Xx. Xxxxxxx X. Xxxxxxxx
September 9, 1998
Page 5
any Confidential Information in tangible form shall be returned to the
Company by Xxxxxxxx and its various outside professionals.
11. Except as to this letter agreement regarding the payment of fees and
expenses set forth in Sections 4 and 5 herein, and the provisions of
Sections 8 and 10 this letter of intent is not intended to constitute a
binding agreement.
Should Xxxxxxxx not accept the undertaking of Placement Agent on or
before September 16, 1998, the Company may but shall not be obligated to
accept Xxxxxxxx as Placement Agent for the Directed Public Offering and may
contract with others for such purpose unless the terms of this letter are
extended in writing by the Company. If the foregoing is is accord with your
understanding, please sign and return the enclosed copy of this letter,
together with a check in the amount of fifty thousand dollars ($50,000).
J.J.B. XXXXXXXX, X.X. XXXXX, INC.
By: Xxxxxx X. Xxxxxx, Xx. Vice President
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Xxxxxx X. Xxxxxx, Senior Vice President
ACKNOWLEDGED AND AGREED TO
THIS 10th DAY OF September, 1998
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MANNATECH INCORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
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Chairman of the Board and
Title: Chief Executive Officer
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