KANDERS & COMPANY, INC. One Landmark Square, 22nd Floor Stamford, Connecticut 06901 September 22, 2006
KANDERS
& COMPANY, INC.
Xxx
Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx,
Xxxxxxxxxxx 00000
September
22, 2006
Net
Perceptions, Inc.
Xxx
Xxxxxxxx Xxxxxx, 00xx xxxxx
Xxxxxxxx,
Xxxxxxxxxxx 00000
Dear
Sirs:
We
are
pleased to set forth in this agreement (the “Agreement”) the terms of the
retention of Kanders & Company, Inc. (the “Consultant”) by Net Perceptions,
Inc. and its affiliates and subsidiaries (collectively, the
“Company”).
1. During
the Term (as hereinafter defined) of this Agreement the Consultant will act
as a
consultant to the Company, and will, subject to the provisions hereinafter
set
forth, render investment banking and financial advisory services to the Company
on a non-exclusive basis, including strategic planning, assisting in the
development and structuring of corporate debt and equity financings,
introductions to sources of capital, guidance and advice as to (i) potential
targets for mergers and acquisitions, joint ventures, and strategic alliances,
including facilitating the negotiations in connection with such transactions,
(ii) capital and operational restructuring, and (iii) shareholder
relations. In connection with the Consultant’s activities on the Company’s
behalf, the Consultant has familiarized itself with the business, operations,
properties and financial condition of the Company, including the business and
operations of CRC Acquisition Co., LLC d/b/a Concord Steel. The services to
be
provided by the Consultant shall be primarily provided by Xxxxxx X. Xxxxxxx,
personally, at such times and in such manner as he may reasonably determine.
Nothing contained in this Agreement shall require the Consultant to render
a
fairness opinion to the Company.
2. In
consideration for the services to be rendered by Consultant to the Company
under
this Agreement, the Company shall pay Consultant the following
fees:
(a) $500,000
in cash per annum during the Term hereof, which shall be payable monthly or
in
such other manner as the parties hereto may agree (the “Cash Fee”);
and
(b) 1%
of the
amount by which the Company’s revenues (as set forth in its income statement)
for each fiscal year, as reported in the Company’s Annual Report on Form 10-K,
or if no such report is filed by the Company, as reflected in the Company’s
audited financial statements for the fiscal year in question, exceeds
$60,000,000, which shall be payable in shares of common stock of the Company
(the “Stock Fee”). For purposes of calculating the Stock Fee, the shares of the
Company’s common stock shall be valued at the weighted average price of the
Company’s common stock for the fiscal year in question.
Kanders
& Company, Inc.
September
22, 2006
Page
2
The
Consultant agrees to defer any payments of the Cash Fee and/or the Stock Fee
due
at the written request of the Board of Directors in order to comply with the
terms of any credit agreement entered into between the Company and an
institutional lender requiring such deferral, with payment of such deferred
amounts to be made, with interest at the prevailing borrowing rate for the
Company, such interest to commence three months after any deferral, as soon
as
practicable after such deferral requirement of any such credit agreement is
no
longer applicable, or such other time as may be permitted under Section 409A
of
the Internal Revenue Code of 1986, as amended (the “Code”) and the applicable
regulations thereunder.
3. In
connection with the Consultant’s activities on the Company’s behalf, the Company
will cooperate with the Consultant and will furnish the Consultant with all
information and data concerning the Company which the Consultant reasonably
believes appropriate to its assignment (all such information so furnished being
the “Information”) and will provide the Consultant with access to the Company’s
officers, directors, employees, independent accountants and legal counsel.
The
Company recognizes and confirms that the Consultant (a) will use and rely
primarily on the Information and on information available from generally
recognized public sources in performing the services contemplated by this
Agreement, without having independently verified same, (b) does not assume
responsibility for the accuracy or completeness of the Information and such
other information and (c) will not make an independent appraisal of any of
the
Company’s assets. The Information to be furnished by the Company, when
delivered, will be true and correct in all material respects and will not
contain any material misstatement of fact or omit to state any material fact
necessary to make the statements contained therein not misleading. The Company
will promptly notify the Consultant if it learns of any material inaccuracy
or
misstatement in, or material omission from, any information theretofore
delivered to the Consultant. The Consultant agrees to keep confidential and
not
disclose, without the Company’s prior written consent, any Information delivered
to the Consultant by the Company that the Company has identified in writing
as
not publicly available and confidential after termination of this Agreement
(“Confidential Information”), except to officers and employees of the Company,
accountants, attorneys, consultants and other persons who have a need for such
information for purposes in the best interests of the Company, and except (i)
for such information which is or becomes of general public knowledge from
authorized sources other than the Consultant, or (ii) as may be required by
law,
regulation, legal proceeding or court order, or (iii) for such information
which
was disclosed to Consultant from a source other than the Company or its
representatives, provided the disclosing party did not have, to the knowledge
of
Consultant, a duty of confidentiality with respect to such information to the
Company, or (iv) for such information which was in the possession of Consultant
prior to its disclosure by the Company or its representatives. Consultant
understands and agrees that the implementation of any recommendation or proposal
suggested by Consultant will be subject to the sole and absolute discretion
of
the Company’s Board of Directors.
Kanders
& Company, Inc.
September
22, 2006
Page
3
4. In
addition to the fees described in Section 2 herein, the Company shall reimburse
the Consultant, upon request from time to time, upon presentation of receipts
and such other documentation as the Company may reasonably request, for
reasonable direct disbursements and for reasonable out-of-pocket expenses
incurred for travel and entertainment.
5. The
Company agrees to the indemnification and other agreements set forth in the
Indemnification Agreement attached hereto, the provisions of which are
incorporated herein by reference and shall survive the termination of this
Agreement.
6. (a) Upon
a
Change-in-Control (as defined below) of the Company, the Consultant shall be
paid a one-time lump sum cash payment equal to three times the average annual
amount the Consultant received, or was entitled to receive, from the Company
during the two complete fiscal years preceding such a Change-in-Control;
provided, however, that in no event will the payment required to be made by
this
Section 6a.
be more
than three times Consultant’s “base amount” (as such term is defined in Section
280G of the Code) minus $1. If a Change-in-Control occurs before two fiscal
years are completed, the total payment shall be calculated based upon the one
fiscal year preceding such Change-in-Control. Upon the occurrence of a
Change-in-Control and the payment to Consultant of the amount described in
this
Section 6(a), this Agreement shall terminate.
(b) For
purposes hereof, a “Change-in-Control” of the Company shall be deemed to have
occurred in the event that: (i) individuals who, as of the date hereof,
constitute the Board cease for any reason to constitute at least a majority
of
the Board; provided, however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Board shall be considered as though such individual was
a
member of the Board as of the date hereof; (ii) the Company shall have been
sold
by either (A) a sale of all or substantially all its assets, or (B) a merger
or
consolidation, other than any merger or consolidation pursuant to which the
Company acquires another entity, or (C) a tender offer, whether solicited or
unsolicited; or (iii) any party, other than the Company, is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended), directly or indirectly, of voting securities of the
Company representing 30% or more of the total voting power of all the
then-outstanding voting securities of the Company; provided, however, that
in
the event that such 30% acquisition of voting securities has been approved
by
the Company’s Board of Directors, then no Change-in-Control shall be deemed to
have occurred solely by virtue of clause (iii) of this Section 6(b).
Kanders
& Company, Inc.
September
22, 2006
Page
4
7. Upon
the
death or permanent disability of Xx. Xxxxxxx, the Company shall make a one
time
lump sum cash payment to the Consultant, or his beneficiaries, as the case
may
be, equal to the amount the Consultant would be entitled to receive upon a
Change-in-Control as provided in Section 6 herein, and subject to the
limitations set forth therein. For the purposes of this Agreement, the term
“permanent disability” shall mean Xx. Xxxxxxx’ inability to perform services on
behalf of the Consultant for the benefit of the Company under this Agreement
for
a period of ninety (90) consecutive days or for an aggregate of one hundred
twenty (120) days, whether or not consecutive, in any twelve (12) month period,
due to illness, accident or any other physical or mental incapacity, as
reasonably determined by the Board of Directors of the Company. In the event
that a dispute arises with respect to the disability of Xx. Xxxxxxx, Consultant
and the Company shall each select a physician licensed to practice in the State
of Connecticut to make such a determination. If the two (2) physicians selected
cannot agree on a determination, they will mutually select a third physician
and
the decision of the majority of the three (3) physicians will be binding. The
Company shall use its best efforts to obtain a key man life insurance policy
on
Xx. Xxxxxxx, naming the Company as beneficiary, at the Company’s expense,
sufficient to provide a death benefit in such amount as the Company may
determine, to insure the Company’s obligation to the Consultant pursuant to this
Section 7. Xx. Xxxxxxx agrees to submit to a reasonable physical examination
as
requested by an insurance carrier to assist the Company in obtaining such a
policy or policies. Upon the death or permanent disability of Xx. Xxxxxxx,
and
the payment to Consultant of the amount described in this Section 7, this
Agreement shall terminate.
8. (a) Upon
execution of this Agreement, Xx. Xxxxxxx shall resign as the Executive Chairman
of the Company’s Board of Directors upon being nominated and elected to the
position of Non-Executive Chairman of the Board of Directors.
(b) This
Agreement shall commence on the date hereof and continue for a period of five
years. Prior to the expiration of such five year period, the Company shall
review Consultant’s performance hereunder in good faith to determine the extent
of the creation of shareholder value as a result of Consultant’s efforts
hereunder, and in so doing, the Company shall review companies comparable to
the
Company and such other data as the Company may believe is appropriate, including
compensation programs of private equity firms. Based on such considerations
as
the Company deems appropriate under the circumstances, including the increase
in
shareholder value for the Company as compared to other comparable companies
and
such other data as the Company may believe is appropriate, including
compensation programs of private equity firms, if the Company so determines,
and
if Consultant so agrees, this Agreement may be renewed for a period of three
years, and prior to the expiration of such three year period and upon a like
review of circumstances, if the Company so determines, and if the Consultant
so
agrees, this Agreement may be further renewed for a period of two years. If
no
agreement is reached at the end of any such periods, this Agreement shall
terminate, with no further compensation obligations hereunder other than those
previously earned. The original five year period, and, unless terminated as
herein provided, any renewal period, are herein collectively referred to as
the
“Term”.
Kanders
& Company, Inc.
September
22, 2006
Page
5
(c) In
the
event of a material breach by Consultant or Xx. Xxxxxxx of this Agreement not
cured within 15 days after receipt of a notice of default from the Company
to
Consultant and Xx. Xxxxxxx, the Company shall have the right to terminate this
Agreement upon expiration of such cure period, in which event the Company’s
payment obligations to Consultant under this Agreement shall cease to accrue
as
of the effective date of such termination, and the Company will pay all accrued
and unpaid amounts due Consultant under this Agreement to Consultant, including,
without limitation, amounts under Sections 2, 4, 6 and 7 hereof, within 10
business days of the effective date of such termination.
(d) In
the
event of a material breach by the Company of this Agreement not cured within
15
days after receipt of a notice of default from the Consultant to the Company,
Consultant shall have the right to terminate this Agreement upon expiration
of
such cure period, in which event the Consultant’s obligations pursuant to this
Agreement shall terminate, and Consultant shall be entitled to all rights and
remedies available at law or equity.
9. This
Agreement will be governed by, and construed in accordance with, the laws of
the
State of New York applicable to agreements made and to be fully performed
therein.
10. Notices.
All
notices and other communications hereunder will be in writing and will be deemed
received (a) the date delivered if delivered personally, (b) three (3) business
days after being mailed by registered or certified mail (return receipt
requested), (c) one (1) business day after being delivered to any reputable
nationwide overnight courier service and (d) upon confirmation of delivery,
if
delivered by facsimile, at the following addresses (or at such other address
for
a party as will be specified by like notice):
(i)
If
to the
Company, to:
Net
Perceptions, Inc.
Xxx
Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx,
Xxxxxxxxxxx 00000
Attn: Xxxxx
X.
Xxxxx
Fax: 000-000-0000
Kanders
& Company, Inc.
September
22, 2006
Page
6
with
a
required copy to:
Xxxx
Xxxxxxx, P.C.
1350
Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn: Xxxxxx
X.
Xxxxxxxx
Fax: (000)
000-0000
and
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxxxx Xxxxxx
State
Street Financial Center
Xxx
Xxxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Attn: Xxxxx
Xxxxxxxx
Fax: (000)
000-0000
(ii)
If
to
Consultant:
Kanders
& Company, Inc.
Xxx
Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx,
Xxxxxxxxxxx 00000
Attn: Xxxxxx
X.
Xxxxxxx
Fax: (000)
000-0000
11. The
benefits of this Agreement shall inure to the parties hereto and their
respective successors and assigns, and the obligations and liabilities assumed
in this Agreement by the parties hereto shall be binding upon their respective
successors and assigns.
12. It
is
intended that this Agreement, and any payments the Consultant is entitled to,
shall comply with the provision of the Code and regulations adopted thereunder
including Sections 280G, 162(m) and 409A of the Code. If any provision of this
Agreement is inconsistent with the Code, such inconsistency shall not render
this Agreement invalid and any such provision will be interpreted in a manner
designed to comply with the Code.
13. For
the
convenience of the parties hereto, any number of counterparts of this Agreement
may be executed by the parties hereto. Each such counterpart shall be, and
shall
be deemed to be, an original instrument, but all such counterparts taken
together shall constitute one and the same Agreement. This Agreement may not
be
modified or amended except in writing signed by the parties hereto. This
Agreement shall only become effective upon the closing of the Company’s
acquisition of the business of CRC Acquisition Co. LLC.
Kanders
& Company, Inc.
September
22, 2006
Page
7
If
the
foregoing correctly sets forth our Agreement, please sign the enclosed copy
of
this letter in the space provided and return it to us.
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Very
truly yours,
KANDERS
& COMPANY, INC.
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| By: | /s/ Xxxxxx X. Xxxxxxx | |
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Xxxxxx X. Xxxxxxx
President
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AGREED
TO
AND ACCEPTED:
Net
Perceptions, Inc. hereby accepts the terms and provisions of, and agrees to
be
bound by the terms and provisions of the foregoing letter, as of this 22 day
of
September, 2006.
NET
PERCEPTIONS, INC.
| By: /s/ Xxxxx X. Xxxxx | |||
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Name:
Xxxxx X. Xxxxx
Title:
Chief Administrative Officer
|
AGREED, with respect to Sections 7 and 8(a) only:
| /s/ Xxxxxx X. Xxxxxxx | |||
|
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NET
PERCEPTIONS, INC.
Xxx
Xxxxxxxx Xxxxxx, 00xx
xxxxx
Xxxxxxxx,
Xxxxxxxxxxx 00000
September
22, 2006
Kanders
& Company, Inc.
Xxx
Xxxxxxxx Xxxxxx, 00xx xxxxx
Xxxxxxxx,
Xxxxxxxxxxx 00000
Gentlemen:
In
connection with the engagement of Kanders & Company, Inc. (the “Consultant”)
to advise and assist us with the matters set forth in the Agreement dated the
date hereof between us and the Consultant (the “Consulting Agreement”), we
hereby agree to indemnify and hold harmless the Consultant, its affiliated
companies, and each of the Consultant’s and such affiliated companies’
respective officers, directors, agents, employees and controlling persons
(within the meaning of each of Section 20 of the Securities Exchange Act of
1934
and Section 15 of the Securities Act of 1933) (each of the foregoing, including
the Consultant, being hereinafter referred to as an “Indemnified Person”) to the
fullest extent permitted by New York law from and against any and all losses,
claims, damages, expenses (including reasonable fees and disbursements of
counsel), actions (including shareholder derivative actions), proceedings or
investigations (whether formal or informal), or threats thereof (all of the
foregoing being hereinafter referred to as “Liabilities”), based upon, relating
to or arising out of such engagement or any Indemnified Person’s role therein;
provided, however, that we shall not be liable under this paragraph: (a) for
any
amount paid in settlement of claims without our consent, which consent shall
not
be unreasonably withheld, or (b) to the extent that it is finally judicially
determined that such Liabilities resulted primarily from the willful misconduct,
bad faith or gross negligence of the Indemnified Person seeking indemnification.
In connection with our obligation to indemnify for expenses as set forth above,
we further agree to reimburse each Indemnified Person for all such expenses
(including reasonable fees and disbursements of counsel) as they are incurred
by
such Indemnified Person; provided, however, that if an Indemnified Person is
reimbursed hereunder for any expenses, such reimbursement of expenses shall
be
refunded to the extent it is finally judicially determined that the Liabilities
in question resulted primarily from the willful misconduct, bad faith or gross
negligence of such Indemnified Person.
Promptly
after the Consultant receives notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, the Consultant will notify us thereof; but the omission so to notify
us shall not relieve us from any obligation hereunder unless, and only to the
extent that, such omission results in our forfeiture of substantive rights
or
defenses. If any such action or other proceeding shall be brought against any
Indemnified Person, we shall, upon written notice given reasonably promptly
following your notice to us of such action or proceeding, be entitled to assume
the defense thereof at our expense with counsel chosen by us and reasonably
satisfactory to the Indemnified Person; provided, however, that any Indemnified
Person may at its own expense retain separate counsel to participate in such
defense. Notwithstanding the foregoing, such Indemnified Person shall have
the
right to employ separate counsel at our expense and to control its own defense
of such action or proceeding if (i) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to us, or (ii) in the reasonable opinion
of counsel to such Indemnified Person, a conflict or potential conflict exists
between us and such Indemnified Person that would make such separate
representation advisable; provided, however, that in no event shall we be
required to pay fees and expenses under this indemnity for more than one firm
of
attorneys in any jurisdiction in any one legal action or group of related legal
actions.
Kanders
& Company, Inc.
September
22, 2006
Page
2
If
the
indemnification or reimbursement provided for hereunder is finally judicially
determined by a court of competent jurisdiction to be unavailable to an
Indemnified Person in respect of any Liabilities (other than as a consequence
of
a final judicial determination of willful misconduct, bad faith or gross
negligence of such Indemnified person), then we agree, in lieu of indemnifying
such Indemnified Person, to contribute to the amount paid or payable by such
Indemnified Person as a result of such Liabilities (i) in such proportion as
is
appropriate to reflect the relative benefits received, or sought to be received,
by us on the one hand and by such Indemnified Person on the other hand from
the
transactions in connection with which the Consultant has been engaged or (ii)
if
(but only if) the allocation provided in clause (i) of this sentence is not
permitted by applicable law, in such a proportion as is appropriate to reflect
not only the relative benefits referred to in such clause (i) but also the
relative fault of us and of such Indemnified Person; provided, however, that
in
no event shall the aggregate amount contributed by the Indemnified Person exceed
the amount of fees actually received by the Consultant pursuant to this
engagement. The relative benefits received or sought to be received by us on
the
one hand and by the Consultant on the other shall be deemed to be in the same
proportion as (a) the total value of the transactions with respect to which
the
Consultant has been engaged bears to (b) the fees paid or payable to the
Consultant with respect to such engagement.
The
rights accorded to Indemnified Persons hereunder shall be in addition to any
rights that any Indemnified Person may have at common law, by separate agreement
or otherwise.
This
agreement shall be governed by and construed in accordance with the laws of
the
State of New York applicable to agreements made and to be performed entirely
in
such state. This agreement may not be amended or otherwise modified except
by an
instrument signed by both the Consultant and us. If any provision hereof shall
be determined to be invalid or unenforceable in any respect, such determination
shall not effect such provision in any other respect or any other provision
of
this agreement, which shall remain in full force and effect.
Kanders
& Company, Inc.
September
22, 2006
Page
3
The
foregoing indemnification agreement shall remain in effect indefinitely,
notwithstanding any termination of the Consultant’s engagement or the Consulting
Agreement.
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Very
truly yours,
NET
PERCEPTIONS, INC.
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| By: | /s/ Xxxxx X. Xxxxx | |
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Name:
Xxxxx X. Xxxxx
Title:
Chief Administrative Officer
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ACKNOWLEDGED
AND AGREED TO:
KANDERS
& COMPANY, INC.
| By: /s/ Warrant X. Xxxxxxx | |||
|
Xxxxxx
X. Xxxxxxx
President
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