Fee Letter

 

SMBCP LLC

2810 N Church St PMB 844865

Wilmington, Delaware 19802

 

 

 SMBCP LLC (“SMBCP”, “we” or “us”) would be pleased to provide services to you or your company (collectively, with its successors and assigns and its and their affiliates and subsidiaries, the “Company” or “you”), subject to the terms and conditions of this Fee Letter (including any exhibits, appendices and other attachments hereto, this “Agreement”).

 

1.     Services

We are pleased to confirm the arrangements under which SMBCP will work with the Company as an advisor with respect to the Proposed Transactions (as defined herein).  During the term of our engagement, we will provide the Company with lead sourcing support in connection with the following Proposed Transaction (collectively, the “Proposed Transaction”): a potential strategic partnership, joint venture, licensing arrangement, commercial arrangement, merger, acquisition, investment or other similar transaction with a person or corporation (the “Target”).

 

Specifically, the services provided will be as follows (collectively the “Advisory Services”):

 

Lead Sourcing Program: SMBCP will provide leads for a potential acquisition based on the Company’s investment thesis.

 

2.     Compensation and Expense Reimbursement

As compensation for the Advisory Services hereunder, we will be entitled to a Lehman Scale success fee and a Proprietary Lead Fee (defined below), payable upon closing of a transaction that SMBCP sourced through proprietary means, meaning the target company was not sourced through a broker, for the Company (each, a “Fee”). If the Company consummates a transaction with a target company that was sourced by SMBCP through a broker, then the Company will pay SMBCP a Reduced Lehman Scale Fee.

 

The Lehman Scale success fee shall be calculated using the following formula, with Enterprise Value defined as the total capital invested into the acquired business, including debt, equity and all other consideration provided for the purchase of a business:

·      5% of the first $1 million in Enterprise Value

·      4% of the second $1 million in Enterprise Value

·      3% of the third $1 million in Enterprise Value

·      2% of the fourth $1 million in Enterprise Value

·      1% of Enterprise Value greater than $4 million

For example, an acquisition with a $5 million Enterprise Value would generate $150,000 in success fee payable to SMBCP upon closing of a transaction.

 

The Reduced Lehman Scale Fee shall be calculated as follows:

·      2% of the first $4 million in Enterprise Value

·      1% of Enterprise Value greater than $4 million

The Proprietary Lead Fee is defined as follows:

  • The Company will pay a monthly fee (“Fee”) of $500 to $1,000 per proprietary lead upon entering into NDA with the lead and until the potential transaction is either completed, or deemed abandoned

  • If the Company enters into NDA with three to five companies at the same time, the Fee will step down to $500 to $750 per lead per month for the additional leads only

  • If the Company enters into NDA with more than 5 companies, the Fee will step down to $500 per lead per month for the additional leads only

  • For avoidance of doubt, the Fee would be paid at the beginning of each period and terminate immediately once the potential transaction is either completed or deemed abandoned

  • The monthly fees paid will be credited against any success fees paid. For example, if $5,000 in monthly fees are paid and a successful transaction occurs that generates a $100,000 success fee, the success fee due upon closing will be $95,000

 

3.     Currency, etc.

All amounts payable under this Agreement are quoted exclusive of value added or similar tax and shall be paid in immediately available funds in U.S. dollars, without setoff and without deduction for any withholding, value-added or other similar taxes, charges, fees or assessments, unless otherwise specified. 

 

4.     Termination

The Agreement shall continue indefinitely until terminated in accordance with this Section 4. The Agreement may be terminated at any time by either SMBCP or the Company for any reason giving 30 days prior written notice of termination of this Agreement to the other party.

 

Following termination of this Agreement, Sections 3 through 16 shall survive in accordance with their terms. In furtherance of the foregoing, and for the avoidance of doubt, any termination of this Agreement shall not affect the parties’ rights and obligations under the indemnification, contribution and limitation of liability provisions set forth in Section 6 (Indemnification, Contribution and Limitation of Liability) or the Company’s obligations to pay any compensation or Reimbursable Expenses that have accrued prior to the termination of this Agreement.

 

Section 2 of this Agreement shall survive for a period of 24 months for all leads and introductions provided by SMBCP during the term of this Agreement. For avoidance of doubt, if SMBCP introduces a lead while this agreement is in effect, and the company closes a transaction with that lead within 24 months of terminating this agreement, SMBCP would be entitled to a Fee.

 

5.     No Exclusivity

Nothing in this Agreement shall create an exclusive relationship between SMBCP and the Company.

 

6.     Non-Circumvent

The Company and SMBCP hereby agree that their business involves, among other activities, introducing, participating, effectuating and consummating transactions between their respective contacts, including other Parties and Affiliates (each, a “Transaction”). In consideration of the foregoing, each undersigned Party hereby irrevocably agrees and warrants that it and its Affiliates shall not, directly or indirectly, interfere with, circumvent, attempt to circumvent, avoid or bypass any Party from any Transactions between the Parties’ contacts, or obviate or interfere with the relationship of any Party and its contacts for the purpose of gaining any benefit, whether such benefit is monetary or otherwise. The Parties also undertake not to make use of any third party to circumvent this paragraph.

 

7.     Confidentiality

Except for disclosures that SMBCP determines are necessary or appropriate in connection with providing services hereunder (including to its employees, contractors, advisors and other representatives who need to know such information in connection with SMBCP’s provision of services hereunder), SMBCP will maintain the confidentiality of the Information and, unless and until such information shall have been made publicly available by the Company or by others without breach of a confidentiality agreement, shall disclose the Information only as authorized by the Company or as required by law or by order of a governmental authority or court of competent jurisdiction. In the event that SMBCP is legally required to make disclosure of any of the Information, SMBCP will give notice to the Company prior to such disclosure, to the extent that SMBCP can practically do so and is legally permitted to do so. The foregoing shall not apply to information that:

(i)             at the time of disclosure or after disclosure, is or subsequently becomes generally available to the public or within the industries in which the Company, Target or SMBCP and its affiliates conduct business, other than as a direct result of a breach by SMBCP of its obligations under this Agreement;

(ii)           prior to or at the time of disclosure by the Company, was already in the possession of, or conceived of, by SMBCP or its affiliates, other than from the Company;

(iii)         at the time of disclosure or subsequent to disclosure, is obtained by SMBCP or its affiliates from a third party who is reasonably believed by SMBCP or its affiliates to be lawfully in possession of the information and not in violation of any contractual, legal or fiduciary obligation to the Company with respect to that information; or

(iv)          is or was independently developed by SMBCP or its affiliates.

 

8.     Indemnification, Contribution and Limitation of Liability

The Company shall indemnify and hold SMBCP harmless from any damages or liabilities relating to or resulting from any false commitments, guarantees, representations or warranties, and/or materials made or supplied directly or indirectly by the Target or its representatives in connection with the performance of SMBCP’s services under this Agreement.

 

9.     Announcements

 

SMBCP shall, without the further consent of the Company and at its own cost and expense, have the right to advertise its participation in the Proposed Transactions.

 

10.  Independent Contractor; Duties

SMBCP shall act as an independent contractor, and any duties of SMBCP arising out of its engagement pursuant to this Agreement shall be contractual in nature and shall be owed solely to the Company. Each party, to the extent legally permissible, disclaims any intention to impose any fiduciary duty on the other. Nothing in this Agreement shall be construed to prohibit or limit the ability of SMBCP or its affiliates from pursuing, investigating, analyzing or engaging in similar services for and other business relationships with entities other than the Company, notwithstanding that such entities may be engaged in a business which is similar to the business of the Company, and notwithstanding that such entities may have customers, or potential customers, similar or identical to the Company’s, or may have been identified by the Company as potential merger or acquisition targets or potential candidates for some other business combination, cooperation or relationship.

 

The Company further agrees and acknowledges that SMBCP does not provide, and will not be providing to the Company, any accounting, tax, legal or regulatory advice, and that SMBCP’s role in any due diligence will be limited solely to performing such review as it shall deem necessary to support its own advice and analysis and shall not be on behalf of the Company. 

 

11.  Governing Law; Venue; Waiver of Trial by Jury

This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts executed and to be wholly performed therein without regard to conflicts-of-law principles that would require the application of any other law. Any dispute hereunder shall be brought in the state or federal courts in Delaware, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court.  In any dispute, each of SMBCP and the Company waives all right to trial by jury in any action, proceeding, claim or counterclaim (whether based on contract, tort or otherwise) related to or arising out of this Agreement.

 

12.  Notices

Notice to either party shall be given in writing to the address on the first page of this Agreement. Notice may be by email or delivery by mail or overnight courier.

 

13.  Benefits of this Agreement

This Agreement shall inure to the sole and exclusive benefit of SMBCP and the Company and their respective successors and the indemnified parties hereunder (who are intended third party beneficiaries hereof) and their respective successors and representatives. The obligations and liabilities under this Agreement shall be binding upon SMBCP and the Company. The Company acknowledges that all advice (written or oral) given by SMBCP to the Company is intended solely for the benefit and use of the Company (including its senior management and directors), and shall not confer rights or remedies upon, any shareholder or creditor of the Company or any other person, and may not be used, disclosed or relied upon for any other purpose.

 

14.  Amendments

This Agreement cannot be modified or amended, nor may any provision hereof be waived, except in writing signed by each of the parties hereto.

 

15.  Entire Agreement

This Agreement (including Appendix A hereto) constitutes the entire agreement between the parties and supersedes and cancels any and all prior or contemporaneous arrangements, understandings and agreements, written or oral, between them relating to the subject matter hereof.

 

16.  Severability

If any portion 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 the Agreement shall be deemed severable and in full effect.

 

17.  Assignment

This Agreement may not be assigned by SMBCP or the Company without the prior written consent of the other party.

 

18.  Headings; Counterparts; Electronic Transmission

The descriptive headings of the paragraphs and sections of this Agreement are inserted such for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretations of this Agreement. Any number of counterparts of this Agreement may be executed by the parties hereto (including via facsimile transmission, e-mail with scan attachment, or e-signature). Each counterpart shall be, and shall be deemed to be, an original instrument, but all such counterparts taken together shall constitute one and the same instrument.

BY CHECKING THE BOX TITLED “I AGREE” YOU AGREE TO THIS FEE LETTER AND SHALL BE BOUND BY ITS TERMS AND CONDITIONS.