Exhibit 10.1
LETTER OF ENGAGEMENT
--------------------
AND WORK AUTHORIZATION
----------------------
March 11, 2002
Category 5 Technologies, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Gentlemen:
This letter (the "Agreement") confirms the terms and conditions of the
engagement of Metropolitan Capital Partners, Inc. ("MCP"), by Category 5
Technologies, Inc. (the "Company") to render certain investor relations and
financial communication services to the Company which are referred to herein.
1. Services. XXX agrees to perform investor relations services (also
referred to as the "Program") for the Company which are ordinarily and
customarily performed by an investor relations firm on behalf of a corporate
client. These services include, but are not limited to, (a) review of the
financial and non-financial portions of quarterly and annual reports sent to
security holders by the Company, exclusive of any current, quarterly or annual
reports filed with U.S. Securities and Exchange Commission and/or other
regulatory agencies; (b) drafting and distribution of financial and general
press releases; (c) drafting and distribution of collateral material to the
Company's shareholders and the investing public; (d) the introduction of the
Company to the private and professional investment community, including, but not
limited to private investors, independent money managers, buy and sell-side
analysts, and brokerage houses; (e) the development of financial media articles
regarding the Company; and (f) overall consulting relating to the Company's
investor relations activities.
2. Non-exclusive Relationship; No Guarantee. Commencing on March 11,
2002 (the "Commencement Date"), MCP will act as a non-exclusive agent of the
Company and shall use its best efforts in the performance of its services
described above. Nothing in this Agreement shall be construed as limiting MCP's
right to represent other clients, except that MCP agrees not to represent any
other person or entity which is in direct competition with the Company unless
MCP first obtains the Company's written consent, which shall not be unreasonably
withheld.
3. Fees.
(a) Rule 144 Shares. As an inducement for MCP to enter into this
Agreement, the Company agrees to grant to MCP or its successor or designee
within 5 business days of the date of this Agreement, 12,500 Rule 144 shares of
the Company's common stock (the "Shares") , and 12,500 additional shares on the
10th day of each succeeding month, until the Company has issued 150,000 shares
to MCP. The Company shall include the issued Shares with any of the Company's
securities it determines to register for its own account at any time, subject
only, in an underwritten public offering, to such customary limitations which
such underwriter may impose based upon its determination that marketing factors
require a limitation on the number of shares to be underwritten (the "Piggy Back
Rights"). The Piggy Back Rights shall not apply from time to time, if, at the
time such holder desires to sell any of the Shares, the holder of the Shares
(together with its affiliates) is able to sell all such Shares remaining
pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended.
The Piggy Back Rights shall continue until all the Shares are registered and
sold.
(b) Financings. In addition, if MCP is assigned the additional
responsibility for seeking new financing arrangements for the Company, and if
MCP is successful in that effort, the Company agrees to pay MCP a special
finder's fee, upon closing for the financing, equal to the following formula:
- 5% for the first $1 million in proceeds;
- 4% for the next $1 million;
- 3% for the next $1 million;
- 2% for the next $1 million;
- 1% of each additional $1 million.
The finder's fee shall be paid to MCP in a blend of 50% equity and 50%
cash. For example, based on the above finder's fee formula, a $2 million
financing would require a fee of $90,000 - in other words, 5% of the first $1
million ($50,000) and 4% of the second $1 million ($40,000). Of this amount,
$45,000 would be paid to MCP in cash and $45,000 would be paid to MCP in Rule
144 common stock.
4. Expenses. In addition to any fees that may be payable hereunder, the
Company agrees to reimburse MCP for all reasonable out of pocket expenses
incurred by it in the performance of services on behalf of the Company. Such out
of pocket expenses shall include, but are not limited to, teleconference costs,
mileage/travel, messenger services, printing, copying, postage, and other such
ancillary services. However, it is understood by MCP that any single expense in
excess of $500.00 will be approved, in advance by the Company in writing. Any
disputed expense must be made known to MCP in writing within 5 days of receipt.
Out of pocket expenses will be billed on or about the fifteenth of each month
and will be due and payable with 10 days of receipt.
5. Termination of the Engagement. Termination of MCP's engagement may
be given by the Company at any time after two months from the date hereof, on 30
days' written notice. Termination of MCP's engagement hereunder shall not effect
the provisions of Section 4, which shall survive such termination.
MCP will be entitled to its full fee for the month of Program
activities under Section 3 hereof during which this Agreement is terminated if
terminated by the Company, provided, that the provisions of this Section 5 and
Sections 4 and 6 hereof shall survive such termination.
6. Indemnity.
(a) Indemnification by the Company. In connection with XXX's engagement
hereunder, including modifications or future additions to this engagement and
the related activities prior to this date, the Company agrees that it will
indemnify, hold harmless and defend MCP and its affiliates, any director,
officer, agent or employee of MCP or any of its affiliates and each other
2
person, if any, controlling MCP or any of its affiliates and each of their
successors and assigns (collectively, the "MCP Group") against and in respect of
any and all losses, damages, claims, obligations, demands, actions, suits,
proceedings, assessments, liabilities, judgments, recoveries and deficiencies,
costs and expenses (including, without limitation, reasonable attorneys' fees
and costs and expenses incurred in investigating, preparing, defending against
or prosecuting any litigation, claim, proceeding or demand), all on an after-tax
basis, less any amounts actually paid as insurance reimbursement, of any kind or
character (collectively, a "Loss"), (i) related to, arising out of or result
from (A) oral or written information provided by the Company, the Company's
employees or the Company's other agents, for use by MCP in connection with MCP's
performance of services under this Agreement; (B) other action or failure to act
by the Company, the Company's employees or the Company's other agents or by MCP
at the Company's request or with the Company's consent or (C) any breach of, or
failure by the Company to fully perform, or any inaccuracy in, any of the
representations, warranties, covenants or agreements of the Company in this
Agreement or (ii) otherwise related to or arising out of the engagement of MCP
pursuant to this Agreement or any transaction or conduct in connection therewith
except that this clause (ii) and clause (i) (D) relating to actions by MCP,
shall not apply with respect to any losses that are finally judicially
determined to have resulted primarily from MCP's bad faith or gross negligence.
(b) Notice of Claim. Whenever XXX learns of or discovers any matter
which may give rise to a claim for indemnification (the "Claim") against the
Company under this Section 6 (the "Indemnity Obligor"), as the indemnified party
(the "Indemnified Party"), shall give notice to the Indemnity Obligor of the
Claim. With respect to Claims which are the subject of actions, suits, or
proceedings threatened or asserted in writing by any third party (a "Third Party
Claim"), the Indemnified Party shall, within 15 days following receipt of such
Third Party Claim, promptly notify the Indemnity Obligor in writing of any Claim
for recovery, specifying in reasonable detail the nature of the Loss and the
amount of the liability estimated to arise therefrom. If the Indemnified Party
does not so notify the Indemnity Obligor within 15 days of its discovery of a
Third Party Claim, such Claim shall be barred only to the extent that the
Indemnity Obligor is prejudiced by such failure to notify. The Indemnified Party
shall provide to the Indemnity Obligor as promptly as practicable thereafter all
information and documentation reasonably requested by the Indemnity Obligor to
verify the Claim asserted.
(c) Defense. If the facts relating to a Loss arise out a Third Party
Claim, or if there is any claim against a third party available by virtue of the
circumstances of the Loss, the Indemnity Obligor shall, by giving written notice
to the Indemnified Party within 15 days following its receipt of the notice of
such claim, assume the defense or the prosecution thereof, including the
employment of counsel or accountants, reasonably satisfactory to the Indemnified
Party, at its cost and expense; provided, however, that during the interim the
Indemnified Party shall use its best efforts to take all action (not including
settlement) reasonably necessary to protect against further damage or loss with
respect to the Loss. The Indemnified Party shall have the right to employ
counsel separate from counsel employed by the Indemnity Obligor in any such
action and to participate therein, but the fees and expenses of such counsel
shall be at the Indemnified Party's own expense, unless (a) the employment
thereof has been specifically authorized by the Indemnity Obligor, (b) such
Indemnified Party has been advised by counsel reasonably satisfactory to the
Indemnity Obligor that there may be one or more legal defenses available to it
which are different from or additional to those available to the Indemnity
Obligor and in the reasonable judgment of such counsel it is advisable for such
Indemnified Party to employ separate counsel, or (c) the Indemnity Obligor has
failed to assume the defense of such action and employ counsel reasonably
satisfactory to the Indemnified Party. Whether or not the Indemnity Obligor
defends or prosecutes such claim, all the parties hereto shall cooperate in the
defense or prosecution thereof and shall furnish such records, information and
testimony and shall attend such conferences, discovery proceedings and trial as
may be reasonably requested in connection therewith. The Indemnity Obligor shall
3
not be liable for any settlement of any such claim effected without its prior
written consent. In the event of payment by the Indemnity Obligor to the
Indemnified Party in connection with any Loss arising out of a Third Party
Claim, the Indemnity Obligor shall be subrogated to and shall stand in the place
of the Indemnified Party as to any events or circumstances in respect of which
the Indemnified Party may have any right or claim against such third party
relating to such indemnified matter. The Indemnified Party shall cooperate with
the Indemnity Obligor in prosecuting any subrogated claim. The Indemnity Obligor
will take no action in connection with any claim that would adversely affect the
Indemnified Party without the consent of the Indemnified Party.
(d) Duration of the Company's Obligations. The Indemnity Obligor's
indemnification obligations under this Agreement shall survive the termination
of this Agreement.
7. Acknowledgments and Representations.
(a) The Company recognizes and confirms that in performing its duties
pursuant to this Agreement, MCP will be using and relying upon data, material
and other information furnished by the Company, its employees and
representatives (the "Information"). The Company hereby agrees and represents
that all Information furnished to MCP in connection with this Agreement shall be
accurate and complete in all material respects at the time furnished, and that
if such Information, in whole or part, becomes materially inaccurate, misleading
or incomplete during the term of MCP's engagement hereunder, the Company shall
so advise MCP in writing and correct any such inaccuracy or omission. MCP
assumes no responsibility for the accuracy and completeness of such Information.
In rendering its services hereunder, MCP shall be entitled to use and rely upon
the Information without independent verification thereof. To the extent
consistent with legal requirements, all Information, unless publicly available
or otherwise available to MCP without restriction or breach of any
confidentiality agreement, will be held by MCP in confidence and will not be
disclosed to anyone other than MCP's agents and advisors without the Company's
prior written approval or used for any purpose other than those referred to in
this Agreement.
(b) The Company understands and agrees that in furnishing the Company
with advice and other services as provided in this Agreement, neither MCP nor
any officer, director or agent thereof shall be liable to the Company, its
affiliates or its creditors for errors of judgment or anything except bad faith
or gross negligence in the performance of its duties under the terms of this
Agreement.
(c) The Company acknowledges that MCP has been retained solely as an
advisor to the Company, and not as an advisor to or agent of any other person,
and that the Company's engagement of MCP is not intended to confer rights upon
any persons not a party hereto (including shareholders, employees or creditors
of the Company) as against MCP, MCP's affiliates or their respective directors,
officers, agents and employees.
(d) The Company represents and warrants to MCP that it will not cause,
or knowingly permit (a) any action to be taken which violates or (b) a failure
to act, the effect of which violates, any federal or state securities law.
8. Notices. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be delivered by hand or fax
or mailed by overnight courier or first class certified or registered mail,
return receipt requested, postage prepaid and properly addressed as follows:
4
If to MCP, at Metropolitan Capital Partners, Inc., 0000 Xxxx 00xx
Xxxxxx, Xxxxx 000, Xxxxx Xxx, XX 00000, Attention: Xxxxxxx Xxxxxxxxx, President.
If to the Company, at Category 5 Technologies, Inc., 0000 Xxxxx Xxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000, Attention: Xx. Xxxxxxx Xxxxx,
Chairman and CEO.
Any party may change its address for purposes of this provision by
giving the other party written notice of the new address in the manner set forth
above. Notice will be conclusively deemed to have been given when personally
delivered, or if given by mail, on the second day after being sent by overnight
courier or on the third day after being sent by first class, registered or
certified mail, or if given by fax, when confirmation of transmission is
indicated by the sender's fax machine.
9. Arbitration. All controversies, disputes or claims arising out of or
relating to this Agreement shall be resolved by binding arbitration. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. All arbitrators shall possess
such experience in, and knowledge of, the subject area of the controversy or
claim so as to qualify as an "expert" with respect to such subject matter. The
governing law for the purposes of any arbitration arising hereunder shall be as
set forth in Section 10 hereof. The prevailing party shall be entitled to
receive its reasonable attorney's fees and all costs relating to the
arbitration. Any award rendered by arbitration shall be final and binding on the
parties, and judgment thereon may be entered in any court of competent
jurisdiction.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of California, without regard to the
conflicts of laws provisions thereof, and may not be amended or modified except
in writing signed by both parties.
11. Successors. This Agreement and all rights and obligations
thereunder shall be binding upon and inure to the benefit of each party's
successors, but may not be assigned without the prior written consent of the
other party, which shall not be unreasonably withheld or delayed.
12. Severability. If any provision of this Agreement shall be held or
made invalid by a statute, rule, regulation, decision of a tribunal or
otherwise, the remainder of this Agreement shall not be affected thereby and, to
this extent, the provisions of this Agreement shall be deemed severable.
13. Authorization. The Company represents and warrants that it has all
requisite power and authority, and has received all necessary authorizations, to
enter into and carry out the terms and provisions of this Agreement.
Please confirm that the foregoing correctly sets forth our Agreement by
signing the enclosed letter in the space provided and returning them to us for
execution, whereupon we will send you a fully executed original letter which
shall constitute a binding Agreement as of the date first above written. We look
forward to working with you on this assignment.
Very truly yours,
Metropolitan Capital Partners, Inc.
By: ________________________
Xxxxxxx Xxxxxxxxx
President
5
Agreed to and accepted as of the date above.
Category 5 Technologies, Inc.
By: ________________________
Xxxxxxxx Xxxxxxx
President
6
