CONFIDENTIAL Exhibit 10.42
July 8, 1999
Xx. Xxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
Elcom International, Inc.
00 Xxxxxx Xxx
Xxxxxxx, XX 00000
Dear Xx. Xxxxxxx:
The purpose of this letter ("Agreement") is to confirm the engagement of Wit
Capital Corporation ("Wit Capital") to act as its financial advisor and as
exclusive placement agent to Elcom International, Inc. and subsidiaries
("Company") in connection with a proposed private placement of up to $15 million
or more ("Placement") of the equity or equity-related securities ("Securities")
of the Company or the Company's wholly-owned subsidiary, xxxxx.xxx
("Subsidiary").
1. In connection with its engagement, as requested by the Company Wit Capital
shall:
i. review with the Company its strategic alternatives relating to its
Internet activities, including evaluating selected strategic partners;
ii. assist and advise with respect to the form and structure of any
transaction;
iii. review the business and operations of the Company and Subsidiary
including its historical and projected financial condition;
iv. assist the Company in the drafting, preparation and distribution of an
offering memorandum ("Memorandum") and other related documentation
(together with the Memorandum, "Offering Materials") describing the
Company or the Subsidiary and the terms of the Placement;
v. assist the Company in formulating a marketing strategy for the
Securities and in developing the process thereof; vi. assist the
Company in identifying and contacting prospective purchasers of the
Securities; vii. advise the Company as to the strategy and tactics of
negotiations with such prospective purchasers and, if requested by the
Company, participate in such negotiations;
viii.advise the Company as to the timing and structure of the Placement;
ix. assist in the drafting of an S-1 when deemed appropriate; and
x. provide such other financial advisory services as are customary for
similar transactions and as may be mutually agreed upon by the Company
and Wit Capital.
2. It is expressly understood and acknowledged that Wit Capital's engagement
hereunder does not constitute any commitment, express or implied, on the
part of Wit Capital to purchase or place the Securities and that the
Placement will be made by Wit Capital on a "best efforts" basis.
3. As compensation for Wit Capital's services hereunder, the Company hereby
agrees to pay Wit Capital a monthly retainer fee (the "Retainer Fee")
payable in cash in an amount of $40,000 per month for three (3) months and
a placement fee ("Placement Fee"). The first month's Retainer Fee is due
and payable promptly in cash upon signing of this letter and subsequent
payments are due one and two months thereafter. The Retainer Fee shall be
credited against any Placement Fee. The Company hereby agrees to pay Wit
Capital a Placement Fee in cash of seven percent (7%) of the gross proceeds
of all Securities sold in the Placement (whether in a single transaction or
a series of transactions), but in no event less than $700,000. The Company
targets a minimum capital raise of $10 million. Additionally, upon closing
of the Placement, Wit Capital shall receive
warrants to purchase one percent (1%) of the Company's fully-diluted, as
calculated by the Treasury Method, common stock ("Equity Fee") from the
Company at the same price at which the Securities are sold in the
Placement. The warrants will contain customary terms and conditions,
including weighted-average anti-dilution protection. In the event that the
Placement is in equity securities of the Subsidiary, Wit Capital shall
receive warrants to purchase one percent (1%) of the Subsidiary's
fully-diluted, as calculated by the Treasury Method, common stock from the
Company at the price at which the Securities are sold in the Placement. The
warrants shall contain customary terms and conditions, including
weighted-average anti-dilution protection. The Company agrees that
provision for payment of the Placement Fee will be included in a
subscription agreement or similar document.
Notwithstanding the foregoing, if the Company receives a signed term sheet
for financing from Softbank Technology Ventures ("Softbank") within 30 days
from the date hereof, and such financing is completed within 45 days from
the date hereof, then the cash portion of Wit Capital's Placement Fee shall
be reduced to $50,000, and the warrant portion reduced to 0.8% of the
Company or Subsidiary, but all other fees and expenses, shall remain
unchanged. If the Company receives a signed term sheet from Softbank within
the aforementioned 30 day period and desires to proceed towards a financing
from Softbank, Wit Capital shall suspend further financing activities until
the financing is completed, abandoned or the 45 day period elapses.
In the event that the Company determines not to pursue the Placement, as
compensation for its strategic advisory services hereunder, Wit shall
receive 80% of the Equity Fee with the exercise price fixed at the market
value of the Company at that date.
4. Wit Capital shall have a right of first refusal during the term of this
Agreement and for a period of twelve (12) months thereafter to act as the
Company's exclusive placement agent in connection with any private
placement of equity securities, or a merger or acquisition transaction
(together, "Financing") that may be undertaken by the Company, on terms and
conditions customary for Wit Capital for similar transactions.
Additionally, during the term of this Agreement and for a period of twelve
(12) months thereafter, Wit Capital shall have the right to participate as
co-manager in any public offering ("Public Offering") and the Company will
use its best efforts to ensure that Wit has the right to directly place at
least 20% of the Company's securities offered and to receive at least 30%
of the total underwriter fees for such Public Offering. Wit Capital shall
have the exclusive right to electronically distribute shares in connection
with such Public Offering. Any such Financing or Public Offering shall be
subject to, among other things, the following conditions: (i) satisfactory
completion of due diligence, (ii) the execution of an underwriting,
placement or similar agreement containing terms and conditions in Wit
Capital's customary form, (iii) satisfactory market conditions, (iv) the
absence of adverse changes to the Company's business or financial
condition, (v) satisfactory completion of the offering or filing process,
including completion of offering materials in form and substance
satisfactory to Wit Capital, and (vi) approval of Wit Capital's internal
commitment committee.
It is further agreed that if the Company determines not to proceed with the
Placement as a result of a sale of the Company or of any of the Company's
subsidiaries (excluding any UK subsidiaries), then Wit Capital shall
receive a fee at the closing of such sale equal to one percent (1%) of the
gross proceeds (including without limitation, cash, stock, assumption of
debt, or any other economic benefit) of such sale, but in no event less
than $700,000. Such fee shall include compensation for any related fairness
opinion required by the Company. For purposes of this Agreement, a sale of
the Company or of any subsidiary shall mean a transfer or disposition of
50% or more of the beneficial ownership or the sale of all, or
substantially all of the assets of the Subsidiary thereof.
5. In addition to any fees that may be payable to Wit Capital hereunder (and
regardless of whether a Placement occurs), the Company hereby agrees, from
time to time upon request, to reimburse Wit Capital promptly for all
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reasonable travel, reasonable legal fees and expenses and other normal
out-of-pocket expenses (all subject to pre-approval by the Company)
incurred in performing its services hereunder.
6. The term of Wit Capital's engagement hereunder shall commence on the date
hereof and continue until the earlier of the consummation of the Placement
or twelve (12) months from the date hereof, unless extended by mutual
written consent or earlier terminated by either party upon 30 days' prior
written notice; provided, however, that no such expiration or termination
shall affect the indemnification, contribution and confidentiality
obligations of the Company, the right of Wit Capital to receive any fees
payable hereunder or fees that have accrued prior to such termination, or
the right of Wit Capital to receive reimbursement for its out-of-pocket
expenses as described above.
7. If within the twelve (12) month period following the termination of this
Agreement, securities similar to those described in the Offering Materials
are sold by the Company through a private placement to investors to which
Wit has introduced the Company and with which Wit has had material
discussions, then Wit shall be entitled to receive the Placement Fee
specified herein.
8. The Company agrees to indemnify Wit Capital and related persons in
accordance with the indemnification provisions attached hereto as Annex A,
which are incorporated herein in their entirety by reference.
9. a. The Company recognizes and confirms that Wit Capital in acting
pursuant to this Agreement will be using information provided by
others, including, without limitation, information provided by or on
behalf of the Company, and that Wit Capital does not assume
responsibility for and may rely, without independent verification, on
the accuracy and completeness of any such information. The Company
hereby warrants that the Memorandum and the other Offering Materials,
and any other information relating to the Company or the Placement,
will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements contained
therein, in the light of circumstances under which they were made, not
misleading. The Company agrees to provide Wit Capital with (i) prompt
notice of any material development affecting the Company or the
occurrence of any event or other change known to the Company that
could result in the Memorandum or the other Offering Materials
containing an untrue statement of a material fact or omitting to state
any material fact necessary to make the statements contained therein,
in the light of the circumstances under which they were made, not
misleading, (ii) copies of any financial reports as soon as reasonably
practicable and (iii) such other information concerning the business
and financial condition of the Company as Wit Capital may from time to
time reasonably request. The Company and Wit Capital will have the
right to approve the Memorandum and the other Offering Materials and
other written communications furnished by or on behalf of the Company
in connection with the Placement, and the Company will cause to be
furnished to Wit Capital and the purchasers of the Securities, on the
closing date of the Placement, copies of such opinions of counsel and
such other documents, letters, certificates and opinions as Wit
Capital or the purchasers may reasonably request in form and substance
reasonably satisfactory to Wit Capital and its counsel or the
purchasers and their counsel. The Company shall have the right to
approve a list of companies which Wit Capital targets as a prospective
investor.
b. Except as contemplated by the terms hereof or as required by
applicable law, regulation or legal process, Wit Capital shall keep
confidential all material non-public information provided to it by the
Company, and shall not disclose such information to any third party
without the Company's written consent, other than to such of its
employees and advisors as Wit Capital determines have a need to know.
c. The Company agrees that any information or advice (whether written or
oral) rendered by Wit Capital or its representatives in connection
with this Agreement is solely for the confidential use of the Company
and, except as otherwise required by applicable law, regulation or
legal process, the Company will not, and will
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not permit any third party to, disclose or otherwise refer to such
advice or information in any manner without Wit Capital's prior
written consent except for any related fairness opinion rendered by
Wit Capital, which may be reproduced only in its entirety without the
written consent of Wit Capital.
10. Neither Wit Capital nor the Company has taken, and neither will take, any
action, directly or indirectly, that may cause the Placement to fail to be
entitled to exemption from registration under the U.S. federal securities
laws or applicable state securities or "blue sky" laws. Wit Capital shall
not offer the Securities in any jurisdiction without pre-clearing such
offer with the Company. The Company shall be responsible for all filing and
other fees and expenses related to U.S. federal securities laws and "blue
sky" laws, including its attorneys' fees.
11. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law thereof. The Company
hereby expressly and irrevocably agrees and consents that any action, suit
or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby may be instituted in any state or federal
court sitting in the City of New York, State of New York and, by execution
of this Agreement, the Company expressly waives any objection which it may
have now or hereafter to the venue or jurisdiction of any such action, suit
or proceeding and irrevocably submits to the jurisdiction of any such court
in any such action, suit or proceeding. The Company and Wit Capital agree
to waive trial by jury in any action, proceeding or counterclaim brought by
or on behalf of either party with respect to any matter whatsoever relating
to or arising out of any actual or proposed Placement, or the engagement of
or performance by Wit Capital hereunder.
12. This Agreement (a) incorporates the entire understanding of the parties
with respect to the subject matter hereof and supersedes all previous
agreements should they exist with respect thereto, (b) may not be amended
or modified except in a writing executed by the Company and Wit Capital,
(c) shall be binding upon and inure to the benefit of the Company, Wit
Capital, the Indemnified Parties (as defined in Annex A hereto) and their
respective successors and assigns and (d) may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Please confirm that the foregoing is in accordance with your understanding of
our agreement by signing and returning to us a copy of this letter.
Very truly yours,
WIT CAPITAL CORPORATION
By: /s/ Xxxxxxx Xxxx
Xxxxxxx Xxxx
Managing Director
Accepted and agreed to as of the date set forth above:
ELCOM INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
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ANNEX A: Indemnification Provisions
In connection with the engagement of Wit Capital Corporation ("Wit Capital") by
Elcom International, Inc. ("Company") pursuant to a letter agreement dated July
8, 1999 between the Company and Wit Capital, as it may be amended from time to
time ("Agreement"), the Company hereby agrees as follows:
A) The Company agrees to indemnify Wit Capital and/or any controlling person,
partner, director, officer, employee, agent, affiliate or representative of
Wit Capital (hereinafter collectively referred to as the "Indemnified
Parties") and hold each of them harmless against any losses, claims,
damages, judgments, assessments, costs and other liabilities (collectively,
the "Liabilities") and will reimburse each Indemnified Party for all
reasonable fees and expenses (including the reasonable fees and expenses of
their respective attorneys) (collectively, the "Expenses") as they are
incurred in investigating, preparing or defending any claims, actions,
proceedings, investigations (formal or informal), inquiries or threats
thereof to which an Indemnified Party may become subject, arising in any
manner out of or in connection with the rendering of services by Wit
Capital hereunder (including, without limitation, services rendered in
connection with a Placement), unless it is finally judicially determined
that the Liabilities or Expenses arose out of the gross negligence or
willful misconduct of such Indemnified Party, and in case any action shall
be brought against an Indemnified Party with respect to which indemnity may
be sought against the Company, such Indemnified Party shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such
Indemnified Party and payment of all fees and expenses; provided that
failure to so notify the Company shall not relieve the Company from any
liability which the Company may have on account of this indemnity or
otherwise, except to the extent the Company shall have been materially
prejudiced by such failure.
The Indemnified Parties shall have the right to retain separate counsel,
but the fees and expenses of such counsel shall be at the expense of the
Indemnified Parties, unless (i) the employment of such counsel has been
specifically authorized in writing by the Company, (ii) the Company has
failed to assume the defense and employ counsel as required above, or (iii)
the named parties to any such action (including any impleaded parties)
include both (a) the Indemnified Parties and (b) the Company, and the
Indemnified Parties shall have been advised by counsel that there may be
one or more legal defenses available to the Indemnified Parties which are
different from or additional to those available to the Company (in which
case the Company shall not have the right to assume the defense of such
action on behalf of the Indemnified Parties); it being understood, however,
that the Company shall not, in connection with any one such action or
separate, substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the reasonable fees and expenses of more than one separate firm of
attorneys for the Indemnified Parties, which firm shall be designated in
writing by the Indemnified Parties.
For actions brought against the Indemnified Parties for which the Company
has assumed the defense, the Company agrees that it will not enter into a
settlement of any such action without the prior written consent of each of
the Indemnified Parties, which shall not be unreasonably withheld or
delayed.
B) The Company and Wit Capital agree that if any indemnification or
reimbursement sought pursuant to the preceding Paragraph A is finally
judicially determined to be unavailable (except by reason of the gross
negligence or willful misconduct of the Indemnified Parties) then, whether
or not Wit Capital is the person entitled to indemnification or
reimbursement, the Company and Wit Capital shall contribute to the
Liabilities for which such indemnification or reimbursement is held
unavailable in such proportion as is appropriate to reflect (a) the
relative benefits to the Company on the one hand, and Wit Capital on the
other hand, in connection with the transaction to which such
indemnification or reimbursement relates, (b) the relative fault of the
parties, and (c) other equitable considerations; provided, however, that in
no event shall the amount to be contributed by Wit Capital exceed the
amount of fees actually received by Wit Capital for the Placement, as the
case may be.
ELCOM INTERNATIONAL, INC. WIT CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxxxx Xxxx
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Xxxxxx X. Xxxxxxx Xxxxxxx Xxxx
Chairman and Chief Executive Officer Managing Director
