EXHIBIT 10.15
X. XXXX & COMPANY, INC.
INVESTMENT BANKERS
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
(000) 000-0000
Member: NASD/SIPC
March 19, 1997
The Board of Directors
ELECTROPHARMACOLOGY, INC.
0000 X.X. 00xx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xx. Xxxxxx Xxxxxxxxx, Chief Executive Officer CONFIDENTIAL
This letter agreement ("Agreement") confirms the exclusive engagement of
X. XXXX & COMPANY, INC., ("MKC") by Electropharmacology, Inc. and its
affiliates, in existence now or hereinafter formed (the "Company") to render
certain financial advisory and investment banking services in connection with a
prospective business combination "Combination" (as hereinafter defined in
Appendix A attached hereto and incorporated herein by reference) with "Third
Parties" (as hereinafter defined in Appendix C attached hereto and incorporated
herein by reference).
1.0 SERVICES. MKC agrees to perform the following services (the
"Services"):
1.0.1 review the recent historical financial information and business
operations, prospects and forecasts of future financial results of the
Company which are made available to MKC by the Company and such other
matters as MKC deems relevant to enable it to render financial advice
and assistance to the Company;
1.0.2 derive the current (baseline) enterprise value of the Company on an
aggregate and market value basis;
1.0.3 identify, with the Company, potential entities with which the Company may
desire to form a Combination, which shall be listed from time to time on
Appendix C attached hereto and incorporated herein by reference ("Third
Parties");
1.0.4 assist the Company to compile information in a form determined by MKC
that describes the Company and its operations, management and financial
data, and other data furnished by the Company, to be circulated to
selected Third Parties on a confidential basis (in view of the
accelerated schedule on which the Company requires a prospective
Combination, the Company acknowledges that there is insufficient time to
produce a formal Confidential Memorandum and that MKC and Third Parties
will be relying primarily on the Company's publicly filed documents,
supplemented by the Company's financial projections);
1.0.5 approach Third Parties as the Company directs;
1.0.6 as necessary to potential proposed Combinations, review the recent
historical financial information and business operations, prospects and
forecasts of future financial results of Third Parties which are made
available to MKC by the Company or such Third Parties and such other
matters as MKC deems relevant to enable it to render financial advice and
assistance to the Company;
1.0.7 advise the Company as to the developing financial aspects relating to the
execution of the selected Combination and assist the Company to evaluate
and configure possible financial structures for a potential Combination;
ELECTROPHARMACOLOGY, INC.
March 19, 1997
Page 2
1.0.8 assist the Company to negotiate the principal economic terms and
conditions relating to a "Combination" and assist Company counsel to
assure that the "Combination Documents" (as defined in Section 1.2,
below) prepared to effectuate the Combination conform to such principal
economic terms and conditions; and
1.0.9 at the Company's option, render an opinion as to the fairness of the
Combination, from a financial point of view, to the shareholders of the
Company ("Fairness Opinion").
1.2 INTEGRITY OF INFORMATION. The Company recognizes and confirms that in
providing the Services, MKC will be using and relying upon data, material and
other information furnished by the Company and its respective employees and
representatives ("Information"). The Company hereby agrees and represents that
all Information furnished to MKC by the Company 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 in part, becomes materially
inaccurate, misleading or incomplete during the term of MKC's engagement
hereunder, the Company will so advise MKC in writing and correct any such
inaccuracy or omission. Accordingly, MKC assumes no responsibility for the
accuracy and completeness of such Information. MKC will not be required to make
an independent verification of any Information or independent evaluation of the
Company's assets and liabilities. All Information concerning the Company so
furnished that is not publicly available will be treated in strict confidence
and will not be revealed by MKC unless legally compelled. The Company agrees
that it and its counsel are responsible for ensuring that a Combination,
including any legal agreements, applications or other materials used in the
Combination (the "Combination Documents"), will comply in all respects with
applicable law.
2.0 COMPENSATION: The Company agrees to pay MKC via wire transfer the
following cash fees for the Services as follows, time being of the essence and
all such payments to be fully earned when paid (the "Compensation"):
2.1 a non-refundable cash Advisory Retainer (the "Advisory Retainer"),
payable at the rate of $10,000 per month, commencing upon the execution
of this Agreement to start the engagement, and thereafter at the
beginning of each month during which Services are to be rendered, on a
month to month basis, based on the continuing viability of the Company so
as to be able to effectuate a Combination at any meaningful level of
"Consideration" (as hereinafter defined in Appendix A, attached hereto
and incorporated herein by reference), as determined in good faith by the
Company. Any suspension by the Company, or waiver by MKC upon Company
request, of these Advisory Retainer payments: (A) will permit MKC to
suspend, at its sole discretion, substantial time and effort on new
activities under this engagement for the ensuing month for which no
Advisory Retainer payment has been made; and (B) will not constitute a
waiver by MKC of, or relieve the Company of the obligation to pay, any of
the other Compensation set forth in this Agreement or to reimburse MKC
expenses as set forth in Section 3.0 of this Agreement.
2.2 The aggregate cash success fee for a Combination (the "Success Fee")
shall be the greater of $250,000 or two percent (2%) of the
"Consideration" (as hereinafter defined in Appendix A, attached hereto
and incorporated herein by reference) received. Upon the date of
execution by the Company of an agreement with a Third Party expressing an
intent to enter into a Combination at any time, the stated Consideration
and other material provisions within which are acceptable to the Company,
the Company will remit to
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X. XXXX & COMPANY, INC.
INVESTMENT BANKERS
COMPLEX BUSINESS, TECHNOLOGY OR TRANSACTION: RESOURCEFUL FINANCIAL ADVISORY
ELECTROPHARMACOLOGY, INC.
March 19, 1997
Page 3
MKC a non-refundable fifty thousand dollars ($50,000), upon receipt of
at least that amount from a Third Party (the "Milestone Success Fee")
which shall be credited against (i.e., deducted from) the aggregate
Success Fee. The balance of the Success Fee (that is, the applicable
Success Fee, less the Milestone Success Fee), shall be paid in full via
wire transfer at and through the earlier of the first closing of the
Combination, or the first time the Company, any shareholder and/or
creditor of the Company receives any "Consideration" (as hereinafter
defined in Appendix A) from a Third Party in connection with any
Combination;
2.3 a Fairness Opinion Fee (the "Fairness Opinion Fee") equal to $100,000
upon the delivery of the Fairness Opinion to the Board of Directors, in
writing; and
2.4 if MKC assists the Company in arranging a transaction other than that
which is contemplated herein, the Company agrees to pay MKC mutually
acceptable compensation taking into account, among other things, the
results obtained and the custom and practice among investment bankers
acting in similar transactions.
3.0 EXPENSES. In addition to the Compensation provided for hereunder, and
irrespective of whether a Combination is consummated, the Company agrees to
reimburse MKC for all of its reasonable out-of-pocket fees and expenses arising
out of MKC's engagement hereunder, not to exceed $10,000 without the Company's
permission, which shall not be unreasonably withheld. Reasonable out-of-pocket
fees and expenses include, but are not limited to, such costs as travel,
accommodations, telephone, telex, courier service, copying, direct computer and
data base expenses, secretarial overtime, fees and disbursements of legal
counsel and accountants and transaction closing announcements ("Expenses"). All
Expenses will be accounted for and invoiced monthly, and are payable within
thirty (30) days of submission to the Company. All Expenses not previously
reimbursed shall be due and payable on the effective date of "Expiration" or
"Termination" (as hereinafter defined). This Paragraph 3 shall survive the
termination or expiration of this Agreement.
4.0 INDEMNIFICATION. Execution of this Agreement shall obligate the Company
to the indemnification terms set forth in Appendix B attached hereto and
incorporated herein by reference as if fully set forth below. This Paragraph 4
shall survive the termination or expiration of this Agreement.
5.0 TERM. The term ("Term") of this engagement shall extend twelve (12)
months from the date hereof. Any party may terminate this Agreement at any time
by giving the other party at least thirty (30) days prior written notice of any
such termination. Upon termination or expiration the Company shall pay to MKC
all Compensation earned and all unpaid Expenses incurred to the date thereof.
MKC shall be entitled to the Success Fee, as set forth in Paragraph 2, if a
Combination is consummated with any Third Party listed on Appendix C within
twenty four (24) months of the termination or expiration of this Agreement.
6.0 DISCLOSURE. The Services or financial advice to be provided by MKC under
this Agreement shall not be disclosed publicly nor made available to third
parties either by MKC or by the Company without the other party's prior written
approval, except as required by law.
7.0 LIMITATION. The Company recognizes that MKC has been retained only by the
Company, and that the Company's engagement of MKC is not deemed to be on behalf
of, and is not intended to confer rights upon, any individual shareholder,
owner, creditor or partner of the Company (differentially to any other within
the same
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X. XXXX & COMPANY, INC.
INVESTMENT BANKERS
COMPLEX BUSINESS, TECHNOLOGY OR TRANSACTION: RESOURCEFUL FINANCIAL ADVISORY
ELECTROPHARMACOLOGY, INC.
March 19, 1997
Page 4
class) or any other person not a party hereto as against MKC or any of MKC's
affiliates or the respective directors, officers, agents, employees or
representatives of either MKC or any of MKC's affiliates. Unless otherwise
expressly agreed, no one other than the Company is authorized to rely upon the
engagement of MKC hereunder or any statements, advice, opinions or conduct by
MKC.
8.0 PUBLICITY. The Company and MKC mutually agree that any references to MKC
or the Company, or any affiliate of MKC or the Company, in any release or
communication, is subject to MKC's and the Company's prior written approval,
which consent will not be unreasonably withheld. If either MKC resigns or is
terminated prior to the dissemination of any Combination Document or any other
release or communication, reference made therein to MKC shall be at MKC's
express written option. If a Combination is consummated, the Company hereby
grants permission to MKC to place an appropriate announcement in the Wall Street
Journal and such other newspapers and periodicals as the Company and MKC shall
mutually determine, stating the essential facts of the Combination and the
capacity within which MKC acted in connection with the Combination, after review
and approval by the Company, which shall not be unreasonably withheld.
9.0 EXCLUSIVITY. The Company agrees to retain MKC on an exclusive basis to
perform the Services with respect to a Combination with any Third Party listed
on Appendix C until the expiration or termination of this Agreement. If the
Company or any of its management or directors receives an inquiry concerning a
possible Combination from any party, they will promptly inform MKC of the
party's prospective interest in order that MKC can assess that party's interest
and determine whether that party should be considered for a Combination.
10.0 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF DELAWARE AND MAY NOT BE AMENDED OR MODIFIED EXCEPT IN A WRITING SIGNED BY ALL
PARTIES.
11.0 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.
12.0 THIRD PARTY SERVICES. MKC will not be liable for, or have its
compensation reduced by, any obligation the Company or anyone else may incur to
a third party for that third party's services in connection with any Combination
contemplated hereby.
13.0 MEDIATION/ARBITRATION. Mindful of the high costs of litigation, not only
in dollars but time and energy as well, the parties intend to and do hereby
establish a quick, final and binding out of court dispute resolution procedure
to be followed in the unlikely event any controversy should arise out of or
concerning the performance of this agreement, other than with respect to matters
within the ambit of the of the indemnification terms set forth in Appendix B and
the determination of the Consideration in Appendix A, as to which the terms
contained in those Appendices, respectively, shall be controlling. Accordingly,
the parties do hereby covenant and agree as follows: any controversy, dispute,
or claim of whatever nature arising out of, in connection with, or in relation
to the interpretation, performance or breach of this agreement, including any
claim based on contract, tort, or statute (other than those contemplated by the
indemnification terms set forth in Appendix B and the determination of
Consideration set forth in Appendix A, in which case those Appendices,
respectively, shall be controlling) shall be resolved at the request of any
party to this agreement through a two-step dispute resolution process
administered by either the American Arbitration Association ("AAA") or
JAMS/ENDISPUTE involving first mediation with a
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X. XXXX & COMPANY, INC.
INVESTMENT BANKERS
COMPLEX BUSINESS, TECHNOLOGY OR TRANSACTION: RESOURCEFUL FINANCIAL ADVISORY
ELECTROPHARMACOLOGY, INC.
March 19, 1997
Page 5
panel member from the AAA or JAMS/ENDISPUTE panel followed, if necessary, by
final and binding arbitration conducted at a location determined by the
arbitrator in West Los Angeles, California administered by and in accordance
with the then existing Rules of Practice and Procedure of AAA or
JAMS/ENDISPUTE, and judgment upon any award rendered by the arbitrator(s) may
be entered by any State or Federal Court having jurisdiction thereof.
Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the enclosed duplicate of this
letter. We look forward to working with you on this assignment.
Very truly yours,
Agreed to and Accepted this
X. XXXX & COMPANY, INC. 26th day of March 1997.
By: /s/ XXXXXXX X. XXXX ELECTROPHARMACOLOGY, INC.
-------------------------------------
Xxxxxxx X. Xxxx
President
By: /s/ XXXXXX XXXXXXXXX
------------------------------
Xx. Xxxxxx Xxxxxxxxx
Chief Executive Officer
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X. XXXX & COMPANY, INC.
INVESTMENT BANKERS
COMPLEX BUSINESS, TECHNOLOGY OR TRANSACTION: RESOURCEFUL FINANCIAL ADVISORY
ELECTROPHARMACOLOGY, INC.
March 19, 1997
Page 6
APPENDIX A
A.1 DEFINITIONS. In the context of this Agreement, the following terms shall
be defined as follows:
A.1.1 COMBINATION: a sale, merger, consolidation or acquisition, or any other
business combination of the Company with another entity, without regard
to form; the disposition of the securities, businesses or assets of the
Company to another entity without regard to form; or any other corporate
combination, or similar transactions or series of transactions,
including, but not limited to, a joint venture, earn-out, licensing or
royalty agreement involving a substantial portion of the Company's
products or service lines wherein the "Consideration" (as hereinafter
defined) received is conveyed directly to the Company's shareholders or
creditors or is conveyed to the Company's treasury and is intended or
used to redeem, repurchase or otherwise liquefy the equity interest of
any shareholder or to repay the long-term debt claim of any creditor.
A.1.2 CONSIDERATION: In the context of this agreement, "Consideration" means
cash, securities (including, but not limited to stock, warrants or notes)
and any other form of consideration (including, the assumption or the
repayment of existing Company debt) received by the Company, its
shareholders and/or creditors. If part or all of the Consideration is
represented by securities publicly traded prior to the consummation of a
Combination, the value thereof shall be determined by the average sale
price for such securities for the last ten (10) trading days prior to the
consummation of a Combination. If part or all of the Consideration
received is newly-issued securities, the average last sale price for such
securities for the first ten (10) trading days subsequent to the
consummation of a Combination shall be used in determination of the
Consideration for the purpose of computing that portion of the Success
Fee, which shall be due and payable via wire transfer on the eleventh
trading day. In the event that part or all of the Consideration received
is newly-issued securities for which no market exists, the fair value of
such securities as determined in good faith by the parties shall be used
in determination of the Consideration, for the purpose of computing that
portion of the Success Fee. In the event that the value of the
securities component of the Consideration is valued subsequent to such
closing pursuant hereto, then the Success Fee will be adjusted
accordingly. Any such adjustment will be due and payable upon demand.
In the event that all or a portion of the Consideration is structured as
future cash or stock payments, then the maximum contractually defined
amount of such payments shall be discounted as follows for the purpose of
computing this component of Consideration to in turn determine
Compensation hereunder: (i) if Fixed as to amount and timing, then this
component of the Consideration shall be valued on a net present value
basis using the six-month U.S. T-xxxx rate as the discount rate; and (ii)
if contingent as to amount and timing (e.g., a percentage-based earn-
out), then this component of the Consideration shall be valued on a net
present value basis using the six-month U.S. T-xxxx rate plus 8.30% as
the discount rate. The discounted period shall be the lesser of the
maximum period contemplated in the Combination Documents or five (5)
years. Any inability to agree upon the value of securities or contingent
payments will be resolved through submission to binding arbitration
before the National Association of Securities Dealers, Inc.
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X. XXXX & COMPANY, INC.
INVESTMENT BANKERS
COMPLEX BUSINESS, TECHNOLOGY OR TRANSACTION: RESOURCEFUL FINANCIAL ADVISORY
ELECTROPHARMACOLOGY, INC.
March 19, 1997
Page 7
APPENDIX B
The Company agrees to indemnify MKC, including X. Xxxx & Company, Inc., its
employees, directors, officers, agents, affiliates, and each person, if any, who
controls it within the meaning of either Section 20 of The Securities Exchange
Act of 1934 or Section 15 of The Securities Act of 1933 (each such person,
including X. Xxxx & Company, Inc. is referred to as an "Indemnified Party") from
and against any losses, claims, damages and liabilities, joint or several
(including, all legal or other expenses reasonably incurred by an Indemnified
Party in connection with the investigation, preparation or providing evidence
for, or defense of, any threatened or pending claim, action or proceeding,
whether or not resulting in any liability) ("Damages"), as and when incurred, to
which such Indemnified Party, in connection with its services or arising out of
its engagement hereunder, may become subject under any applicable Federal or
state law or otherwise, including but not limited to, liability (i) caused by or
arising out of an untrue statement or an alleged untrue statement of a material
fact or the omission or the alleged omission to state a material fact necessary
in order to make the statement not misleading in light of the circumstances
under which it was made, (ii) caused by or arising out of any act or failure to
act, or (iii) arising out of MKC's engagement or the rendering by any
Indemnified Party of its services under this Agreement; provided, however, that
the Company will not be liable to the Indemnified Party hereunder to the extent
that any Damages are found in a final non-appealable judgment by a court of
competent jurisdiction to have resulted solely from the gross negligence, bad
faith or willful misconduct of the Indemnified Party seeking indemnification
hereunder. The Company also agrees that the Indemnified Parties shall not have
any liability (whether direct or indirect, in contract or tort or otherwise) to
the Company for or in connection with the retention of MKC, except to the extent
such liability is found in a final non-appealable judgment by a court of
competent jurisdiction to have resulted solely from gross negligence, bad faith
or willful misconduct.
If for any reason other than a final non-appealable judgment finding any
Indemnified Party liable for Damages for its gross negligence, bad faith or
willful misconduct the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then the Company
shall contribute to the amount paid or payable by an Indemnified Party as a
result of such Damages in such proportion as is appropriate to reflect not only
the relative benefits received by the Company and its shareholders on the one
hand and MKC on the other, but also the relative fault of the Company and the
Indemnified Party as well as any relevant equitable considerations, subject to
the limitation that in no event shall the total contribution of all Indemnified
Parties to all such Damages exceed the amount of Compensation actually received
and retained by MKC hereunder after deduction of all applicable taxes to which
the Indemnified Parties are subject. Promptly after receipt by the Indemnified
Party of notice of any claim or of the commencement of any action in respect of
which indemnity may be sought, the Indemnified Party will notify the Company in
writing of the receipt or commencement thereof and the Company shall have the
right to assume the defense of such claim or action (including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of fees
and expenses of such counsel), provided that the Indemnified Party shall have
the right to control its defense if, in the opinion of its counsel, the
Indemnified Party's defense is unique or separate to it as the case may be, as
opposed to a defense pertaining to the Company. In any event, the Indemnified
Party shall have the right to retain counsel reasonably satisfactory to the
Company, at the Company's expense, to represent it in any claim or action in
respect of which indemnity may be sought and agrees to cooperate with the
Company and the Company's counsel in the defense of such claim or action, it
being understood, however, that the Company shall not, in connection with any
such claim or action or separate but substantially similar or related claims or
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 all the Indemnified Parties unless the defense
of one Indemnified Party is unique or separate from that of another Indemnified
Party subject to the same claim or action. In the event that the Company does
not promptly assume the defense of a claim or action, the Indemnified Party
shall have the right to employ counsel reasonably satisfactory to the Company,
at the Company's expense, to defend such claim or action. The omission by an
Indemnified Party to promptly notify the Company of the receipt or commencement
of any claim or action in respect of which indemnity may be sought will relieve
the Company from any liability the Company may have to such Indemnified Party
only to the extent that such a delay in notification materially prejudices the
Company's defense of such claim or action. The Company shall not be liable for
any settlement of any such claim or action effected without its written consent,
which shall not be unreasonably withheld or delayed. Any obligation pursuant to
this Appendix A shall survive the termination or expiration of this Agreement.
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X. XXXX & COMPANY, INC.
INVESTMENT BANKERS
COMPLEX BUSINESS, TECHNOLOGY OR TRANSACTION: RESOURCEFUL FINANCIAL ADVISORY
ELECTROPHARMACOLOGY, INC.
March 19, 1997
Page 8
APPENDIX C
"Third Parties"
INITIALS
1. National Patient Care Systems 2/19/97 MWK/R 3/20/97
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
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X. XXXX & COMPANY, INC.
INVESTMENT BANKERS
COMPLEX BUSINESS, TECHNOLOGY OR TRANSACTION: RESOURCEFUL FINANCIAL ADVISORY
