Mercer Capital, Ltd. New York, NY 10005 Tel: (212) 269-8484 Fax: (212) 269-8545
Xxxxxx
Capital, Ltd.
00
Xxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
| January 23, 2007 |
c/o
Xxxx
Xxxxxxxx
0000
Xxxx
Xx., #000
Xxxxx
Xxxxxxx, XX 00000
Dear
Xx.
Xxxxxxxx:
This
letter shall replace any agreements between Nucon-RF, Inc., a Nevada corporation
(the “Company”) and Xxxxxx Capital, Ltd. (“Mercer”). Anything to the contrary
herein notwithstanding, any obligations of the Company to Mercer relating to
the
payments of fees and/or disbursements or the issuance of shares and/or warrants
arising out of previous agreements with the Company shall remain in full force
and effect.
1.
Nature
of Services. Mercer
will continue to assist the Company with its investment banking requirements
on
a exclusive basis for the term set forth in Section 9 hereof and provide
investment banking services on a “best efforts’ basis that will include, without
limitation, assistance in mergers, acquisitions and internal capital
structuring, as well as the placement of new debt and/or equity issues, all
with
the objective of accomplishing the Company’s business and financial goals. In
each instance, Mercer will render such services as to which the Company and
Mercer mutually agree, and Mercer will use its best efforts to accomplish the
goals agreed to by Mercer and the Company. Anything to the contrary herein
notwithstanding, Mercer shall be free to render the same or similar services
to
any other entity selected by it.
2.
Responsibilities
of the Company. The
Company shall provide Mercer with all financial and business information about
the Company as requested by Mercer in a timely manner. In addition, executive
officers and directors of the Company shall make themselves available for
personal consultations with Mercer and/or third party designees, subject to
reasonable prior notice, pursuant to the request of Mercer.
3.
Investment
Banking Fee. In
consideration for the services set forth above, the Company shall pay Mercer,
upon execution of this Agreement, and unrelated to any offering undertaken
by
Mercer, including the offerings hereinafter proposed, an investment banking
fee
of Twenty Five Thousand ($25,000) Dollars and issue to Mercer, warrants to
purchase five hundred thousand (500,000) shares of the Company’s common stock
exercisable for a period of five (5) years at $0.10 per share on a cashless
basis. The aforesaid shares shall have “piggyback registration
rights.”
1
4.
Placement
of Securities and Compensation.
Upon the
execution of this Agreement, Mercer will, in conjunction with the Company’s
management, commence an offering of One Million Five Hundred Thousand
($1,500,000) Dollars of the Company’s 8% Convertible Notes (the “Notes”) which
shall be convertible into shares of the Company’s common stock as follows: (A)
at seventy-five ($0.75) cents per share at any time prior to the shares of
the
Company’s Common Stock being quoted on the Over-the-Counter Bulletin Board
(“OTCBB”); (B) for a period of ninety (90) days from the date the shares of the
Company’s Common Stock are quoted on the OTCBB, at the lesser of a 25% discount
to the Closing Price on the business day preceding the Date of Conversion or
One
($1.00) Dollar with a floor of seventy-five ($0.75) cents; or (C) thereafter,
at
the greater of a 25% discount to the Closing Price on the business day preceding
the Date of Conversion or Seventy-Five ($0.75) cents. The
Note
purchasers will also receive warrants to purchase one (1) share of common stock
for each two ($2.00) dollars of Notes purchased (the “Warrants”) which shall be
exercisable at one dollar fifty cents ($1.50) per share (the “Warrants”). The
shares of common stock underlying the Notes and the Warrants shall have
piggyback registration rights. Upon completion of the sale of all of the Notes,
the Company reserves the right, with the consent of Mercer, to offer and sell
up
to an additional Five Hundred Thousand ($500,000) Dollars of Notes with Warrants
upon the same terms as the sale of the Notes.
In
connection with the placement of the Notes and Warrants, Mercer shall be paid
a
sales commission of ten (10%) percent, a non-accountable expense allowance
of
three (3%) percent and placement agent warrants (the “Placement Warrants”) equal
to ten (10%) percent of securities into which the Notes and Warrants are
convertible or exercisable into. The Placement Warrants shall be exercisable
for
a period of five (5) years on a cashless basis at $0.75 per share and the shares
underlying the Placement Warrants shall have “piggyback” registration rights.
For
future capital raising investment banking services that will be rendered by
Mercer, the cash fees and warrants issuable for such services will not be less
than the fees set forth in this Section 4.
5.
Expenses.
In
connection with the placement of the Notes and Warrants, the Company shall
be
responsible for, and shall pay, all expenses directly and necessarily incurred
in connection therewith, including, but not limited to (i) the costs of
preparing, printing and filing, where necessary, the offering documents and
all
amendments and supplements thereto; (ii) the legal fees of Xxxxxx’x counsel up
to $15,000 which fees shall be paid from the escrowed funds at the first
closing; and (iii) the blue sky fees and disbursement of Xxxxxx’x counsel, which
filing fees shall be advanced by the Company.
In
addition to the fees described in section “4” above, the Company agrees to
promptly reimburse Mercer upon request from time to time, for all out-of-pocket
expenses directly incurred in connection with Mercer acting for the Company
pursuant to this Agreement.
2
6.
Mergers,
Acquisitions and Related Fees. In
the
event Mercer directly introduces a third party to the Company which results
in
the consummation of a merger or acquisition by and between such third party
and
the Company (a “Transaction”), Mercer shall be entitled to receive a merger and
acquisition fee equal to the “Xxxxxx Formula” based on $5 million increments,
that is, 5% of the first $5 million, 4% of the second $5 million, etc., of
the
consideration paid in the Transaction, or the Xxxxxx Formula for the equity
value of the organization being acquired, at the option of Mercer.
For
purposes of this agreement, and expressly subject to the initial sentence of
this Section 6, “Transaction” shall mean (a) any merger, consolidation,
reorganization, recapitalization, business combination or other transaction
pursuant to which an entity is acquired (a “Acquired Party”) or combined with,
the Company, (b) the acquisition, directly or indirectly, by the Company of
(i)
substantially all of the assets of the Acquired Party of (ii) fifty percent
or
more of the Acquired Party’s outstanding common stock, whether by way of tender
or exchange offer, open market purchases, negotiated purchases or otherwise,
or
(c) the election or appointment of nominees or representatives of the Company
to
the Board of Directors of the Acquired Party so that the nominees or
representatives represent, in the aggregate, at least a majority of such Board
of Directors.
For
purpose of this Agreement, "Consideration" means the aggregate value, whether
in
cash, securities, assumption (or purchase subject to) of debt or liabilities
(including, without limitation, indebtedness for borrowed money, pension
liabilities or guarantees) or other property, obligations or services, paid
or
payable directly or indirectly (in escrow or otherwise) or otherwise assumed
in
connection with a Transaction, or the net present value of the estimated
benefits to the Company of any joint venture, licensing or marketing agreement
(“Consideration”). The value of Consideration shall be determined as
follows:
|
(a)
|
the
value of securities, liabilities, obligations, property and services
shall
be the fair market value as shall mutually be agreed upon at the
date of
the closing of the Transaction;
|
|
(b)
|
the
value of indebtedness, including indebtedness assumed, shall be the
face
amount; and/or
|
|
(c)
|
the
net present value of the estimated benefits to the Company of any
joint
venture, licensing or marketing agreement, as mutually determined
by the
parties. If the parties cannot come to such mutual determination,
the net
present value described above shall be determined by
arbitration.
|
If
the
consideration payable in a Transaction includes contingent payments to be
calculated by reference to uncertain future occurrences, such as future
financial or business performance, then any fees of Mercer relating to such
consideration shall be payable at the time of the receipt of such
consideration.
The
Company acknowledges that Mercer and its affiliates are in the business of
providing merger and acquisition services (of all types contemplated by this
Agreement) to others. Nothing herein contained shall be construed to limit
or
restrict Mercer or its affiliates in conducting such business with respect
to
others or in rendering such advice to others.
3
The
Company also acknowledges that Mercer and its affiliates have or may have
ownership interests in businesses, assets or technologies identified by them
or
others to the Company as potential Transactions. Nothing herein contained shall
be construed to limit or restrict the ability of Mercer or its affiliates to
be
compensated for its ownership interest in such a Transaction on a basis separate
and apart from the compensation described herein.
In
connection with Xxxxxx’x merger and acquisition services, the Company agrees
that if during the period Mercer is retained by the Company or within two (2)
years thereafter, a Transaction is consummated with a third party directly
introduced by Mercer or the Company enters into a definitive agreement with
a
third party directly introduced by Mercer which at any time thereafter results
in a Transaction (“Third Parties”), the Company will pay Mercer a transaction
fee equal to the Xxxxxx Formula set forth above.
It
is
understood that for purposes of this Agreement, Mercer shall be deemed to have
introduced such Third Parties to the Company not only by physical introductions
and meetings, but also by arranging or facilitating telephonic or correspondence
meetings between the parties, whether or not Mercer participated in such
meetings, telephone calls or correspondence.
Additionally,
if during the period Mercer is retained by the Company a Transaction is
consummated with a third party not introduced to the Company by Mercer, Mercer
will be paid a fee equal to 50% of its compensation due pursuant to the language
above.
7.
Additional
Agreements of the Company.
As
additional consideration for Mercer agreeing to place securities of the Company,
the Company agrees as follows:
(a)
to
utilize the services of Xxxxxx Asset Management, Inc. (or its successor), an
affiliate of Mercer, for all of its benefits related issues, including, but
not
limited to insurance and pension related services.
(b)
to
have the directors, officers and all stockholders holding at least 1% of the
issued and outstanding common stock of the Company enter into lock-up agreements
with Mercer whereby they will agree not to sell any of their shares for a period
commencing on the date hereof and concluding on the six (6) month anniversary
of
the Company’s common stock initially trading on the Over-the-Counter Bulletin
Board.
(c)
to
have its directors and officers open brokerage accounts with Mercer at such
time
as they intend to offer for sale their individually owned shares of the
Company.
8. Indemnification
The
Company shall indemnify Mercer and hold it harmless against any and all losses,
claims, damages or liabilities to which Mercer may become subject arising in
any
manner out of or in connection with the rendering of services by Mercer
hereunder, unless it is finally judicially determined that such losses, claims,
damages or liabilities resulted from the gross negligence, bad faith and willful
misconduct of Mercer.
4
The
Company shall reimburse Mercer promptly for any legal or other expenses
reasonably incurred by it in connection with investigating, preparing to defend
or defending, or providing evidence in or preparing to serve or serving as
a
witness with respect to, or otherwise relating to, any lawsuits, investigations,
claims or other proceedings arising in any manner out of or in connection with
the rendering of services by Mercer hereunder (including without limitation,
in
connection with the enforcement of this Agreement and the indemnification
obligations set forth herein); provided, however, that in the event that a
final
judicial determination is made to the effect specified above, Mercer will remit
to the Company any amounts reimbursed under such paragraph.
The
Company agrees that the indemnification and reimbursement commitments set forth
in this paragraph shall apply if either the Company or Mercer is a formal party
to any such lawsuits, claims or other proceedings and that such commitments
shall extend upon the terms set forth in this paragraph to any controlling
person, affiliate, director, officer, employee, or agent of Mercer (each, with
Mercer, an “Indemnified Person”). The Company further agrees that, without
Xxxxxx’x prior written consent, which consent will not be unreasonably withheld,
it will not enter into any settlement of a lawsuit, claim or any other
proceeding arising out of the transactions contemplated by this Agreement unless
such settlement includes an implicit and unconditional release from the party
bringing such lawsuit, claim or other proceeding of all Indemnified
Persons.
The
Company further agrees that the Indemnified Persons are entitled to retain
separate counsel of their choice in connection with any matters in respect
of
which Indemnification, reimbursement or contribution may be sought under this
Agreement. Fees for counsel will be payable only if management and counsel
to
the Company have been consulted and allowed to participate fully in the
selection of reasonable and appropriate counsel to the Indemnified Person(s).
Each Indemnified person shall give notice to the Company within thirty (30)
days
of the assertion against such Indemnified Person of any claim or the
commencement of any action or proceeding relating to any of the foregoing,
provided further that if the Indemnified person fails to notify the Company,
then the Company shall be relieved of any liability that it may have to such
Indemnified Person as to such claim hereunder.
The
Company and Mercer agree that if any indemnification or reimbursement sought
pursuant to the preceding paragraph is judicially determined to be unavailable
for a reason other than the gross negligence, bad faith or willful misconduct
of
Mercer, then whether or not Mercer is the Indemnified Person, the Company and
Mercer shall contribute to the losses, claims, damages, liabilities and expenses
for which such indemnification or reimbursement is held unavailable (i) in
such
proportion as is appropriate to reflect the relative benefits to the Company
on
the one hand, and Mercer on the other hand, in connection with the transactions
to which such indemnification or reimbursement relates, or (ii) if the
allocation provided by clause (i) above is judicially determined not to be
permitted, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) but also the relative faults of the Company
on the one hand, and Mercer on the other hand, as well as any other equitable
considerations; provided, however, that in no event shall the amount to be
contributed by Mercer pursuant to this paragraph exceed the amount of the fees
actually received by Mercer hereunder.
5
9.
Term
and Termination.
The term
of this Agreement will be for a period of two (2) years from the date of this
Agreement.
This
Agreement may be terminated by the Company for cause. For the purpose of this
agreement, “cause” means the failure by Mercer to perform in a material respect
its obligations hereunder in accordance with the skill and diligence normally
provided by recognized investment banking companies; provided,
however,
that
the Company shall first give Mercer reasonable prior written notice of the
Company’s intent to terminate the engagement (such notice to specify in
reasonable detail the facts alleged to give rise to the Company’s right to
terminate for cause) and shall have provided Mercer a reasonable opportunity
to
cure by performing such obligations (the reasonableness of such opportunity
to
be measured not only by Mercer’ ability to perform during such period but also
by the adverse effect on the Company resulting from providing such additional
period to enable Mercer to perform). Neither termination of the Agreement nor
completion of this assignment contemplated hereby shall affect the provisions
of
paragraphs 3, 4, 5, 6 or 7 which shall remain operative and in full force and
effect.
10.
Third
Party Agreements.
Mercer
has the right, in its sole discretion, to sub-contract any of its rights to
provide services hereunder to qualified third parties in its sole discretion,
so
long as Mercer remains the prime contractor of such services to the Company.
Mercer has the right to enter into any finder, inter dealer or syndication
agreements with qualified parties with respect to placing and arranging the
Financings.
11.
Advertisements.
The
Company agrees that Mercer has the right to place advertisements in financial
and other newspapers and journals describing the Company’s Financings and
Mercer’ related services to the Company hereunder (a “Tombstone”), provided that
Mercer will submit a copy of any such advertisements to the Company for its
prior approval, which approval shall not be unreasonably withheld.
12.
Complete
Agreement.
This
Agreement contains the entire Agreement between the parties with respect to
the
contents hereof and supersedes all prior agreements and understandings between
the parties with respect to such matters, whether written or oral. Neither
this
agreement, nor any term or provision hereof may be changed, waived, discharged
or amended in any manner other than by any instrument in writing, signed by
the
party against which the enforcement of the change, waiver, discharge or
amendment is sought.
13.
Severability.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement,
which shall remain in full force and effect.
14.
Amendments. This
Agreement may not be amended or modified except in writing signed by each of
the
parties
6
15.
Jurisdiction/Venue/Choice
of Law.
This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the State of New York. The Company and Mercer hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction of the courts
of
the State of New York and of the United States District Court for the Southern
District of New York for any lawsuits, actions or other proceedings arising
out
of or relating to this Agreement and agree not to commence any such lawsuit,
action or other proceeding except in such courts. The Company further agrees
that service of any process, summons, notice or document by mail, return receipt
requested, to the Company’s address set forth above shall be effective service
of process for any lawsuit, action or other proceeding brought against the
Company in any such court. The Company and Mercer hereby irrevocably and
unconditionally waive any objection to the laying of venue of any lawsuit,
action or other proceeding arising out of or relating to this Agreement in
the
courts of the State of New York or the United States District Court for the
Southern District of New York, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that
any
such lawsuit, action or other proceeding brought in any such court has been
brought in an inconvenient forum. Any right to trial by jury with respect to
any
lawsuit, claim or other proceeding arising out of or relating to this Agreement
or the services to be rendered by Mercer hereunder is expressly and irrevocably
waived.
16.
Miscellaneous.
(a)
The
benefits of this agreement shall insure to the respective successors and assigns
of the parties hereto and to the indemnified parties hereunder and their
successors and assigns and representatives, and the obligations and liabilities
assumed in this agreement by the parties hereto shall be binding upon their
respective successors and assigns.
(b)
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.
(c)
Neither the execution and delivery of this letter Agreement by the Company
nor
the consum-mation of the transactions contemplated hereby will, directly or
indirectly, with or without the giving of notice or lapse of time, or both:
(i)
violate any provisions of the Certi-ficate of Incorporation or By-laws of the
Company; or (ii) violate, or be in conflict with, or constitute a default under,
any agreement, lease, mortgage, debt or obligation of the Company or require
the
payment, any pre-payment or other penalty with respect thereto.
7
If
the
foregoing correctly sets forth the understanding and agreement between Mercer
and the Company, please so indicate in the space provided for that purpose
below, whereupon this letter shall constitute a binding agreement as of the
date
hereof.
| Very truly yours, | ||
| Xxxxxx Capital Ltd. | ||
| |
|
|
| By: /s/ Xxxxxxx Xxxxxx | ||
|
Xxxxxxx Xxxxxx, Managing Director and |
||
| Chief Operating Officer | ||
Confirmed
and Agreed to as of
January
23, 2007
| By: /s/ J.P. Xxxx Xxxxxxxx | |||
|
J.P. Xxxx Xxxxxxxx
Chief Financial Officer
|
8
