CONFIDENTIAL
May 23,2000
Probex Corp.
1467 Lemay, Suite 111
Carrollton, Texas 75007
Attention: Thomas G. Plaskett
Chairman/President/CEO
Gentlemen:
The purpose of this letter (the "Agreement") is to set forth the terms of the
engagement by Probex Corporation ("Probex" or the "Company") of Stonegate
Securities, Inc. ("Stonegate") to serve as the Company's non-exclusive financial
advisor and to furnish certain investment banking services to Probex as
described below. Stonegate and the Company are each sometimes referred to herein
as a "Party" and collectively, as the "Parties".
1) Services Provided by Stonegate.
(a) Familiarize itself to the extent it deems appropriate and
feasible with the business, operations, properties, financial
condition, management, and strategic direction of Probex, as well
as make any suggestions on how the Company might enhance any of
the above;
(b) Evaluate the possible sale of equity related securities in the
Company, including, without limitation, evaluating potentially
raising capital for the Company in the form of a private
placement of common stock, convertible preferred stock, or
convertible debt securities with Stonegate's institutional and
other clients (such an evaluation could include, among other
things, a restructuring and/or a refinancing of the Company's
current levels of debt, or assistance in restructuring the
Company's existing bank financing); it being agreed and
understood that the undertaking of any such possible sale of
securities shall be pursuant to a separate agreement between the
Parties; and
(c) Evaluate potential acquisitions, mergers, or joint ventures by
the Company, or other strategic alternatives available to the
Company.
2) Term of Engagement.
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The term of Stonegate's engagement shall be for the period commencing
on the date of this Agreement and continuing until the second
anniversary of the date of this Agreement (the "Initial Term"), and
may be extended beyond the Initial Term by mutual written consent of
the Parties. Notwithstanding the foregoing, either Party may terminate
this Agreement at any time upon ten (10) days written notice to the
other Party, in which event neither Party will have any further
obligations hereunder, except for any unpaid amounts under Sections 3,
4, and 5 below, and except for any obligations set forth in Section 7
below, which shall survive any such termination.
3) Compensation.
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For providing services hereunder, upon execution of this Agreement,
Probex shall deliver to Stonegate a warrant, in substantially the form
attached hereto as Exhibit A.
4) Compensation for Other Services.
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If Stonegate provides services to the Company in addition to those
provided in Section 1 above, Stonegate shall be compensated for such
services pursuant to a separate agreement between, and as mutually
agreed to by, the Parties. Such other transactions could include, but
are not limited to; (i) a sale, financing, restructuring, joint
venture, private placement, merger, or acquisition: (ii) providing or
making available, upon request by Probex, an advisor or advisors who
will accompany officers, directors, or employees of Probex on any trips
involving potential corporate finance or merger/acquisition activities;
or (iii) generating fairness opinions, completing corporate valuations,
conducting due diligence investigations, and completing background
checks of the management of potential acquisition targets. As of the
date hereof, the Parties have entered into a separate Placement Agency
Agreement.
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5) Reimbursement of Expenses.
In addition to the engagement fees in Section 3, the Company agrees to
reimburse Stonegate on a monthly basis for reasonable out-of-pocket
expenses incurred by Stonegate with regard to rendering services
hereunder, including but not limited to, airfare, hotel, and other
expenses in connection with visiting the Company, and expenses incurred
in connection with any road show or other presentations or marketing
efforts made on behalf of the Company by Stonegate.
6) Information.
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The Company agrees to make available to Stonegate all information
relating to the Company, which information, taken as a whole, 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
light of the circumstances under which they were made, not misleading
(the "Information"). The Company agrees to advise Stonegate
immediately of the occurrence of any event or any other change known
to the Company that results in the Information, taken as a whole,
containing an untrue statement of a material fact or omitting to state
any material fact necessary to make the statements contained therein,
in light of the circumstances under which they were made, not
misleading. The Company acknowledges that Stonegate may rely on the
Information without undertaking independent verification.
7) Indemnification.
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(a) If in connection with any services or matters that are the
subject of or arise out of this Agreement or Stonegate's
engagement hereunder, Stonegate becomes involved (whether or not
as a named party) in any action, claim, investigation, or legal
proceeding (including any governmental inquiry or investigation
and including, but not limited to, actions, claims or legal
proceedings arising out of or based upon any breach by the
Company of any agreement or representation or warranty of the
Company contained herein, or any untrue statement or alleged
untrue statement of a material fact by the Company in any release
or communication to an offeree of the Company's securities or an
omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements contained
therein, not misleading), the Company agrees to indemnify and
hold Stonegate, and its officers, directors, employees, agents,
and affiliates (collectively, the "Stonegate Indemnitees"),
harmless against any losses, claims, costs, damages, or
liabilities as they are incurred, to which any Stonegate
Indemnitee may incur or suffer in connection therewith, provided
that such Stonegate Indemnitee promptly notifies the Company of
any such action, claim, investigation, or legal proceeding.
Stonegate shall provide reasonable assistance to the Company in
any such matter, at the Company's expense. The Company shall
promptly reimburse Stonegate for any legal action or other costs
of expenses reasonably incurred by such Stonegate Indemnitee in
connection with the investigation, contest or defense of any such
loss, claim, damage, liability or action. Notwithstanding the
above, the Company shall not be liable under the indemnity
provisions hereof in respect of any loss, claim, cost, damage, or
liability pertaining to such matter to the extent, but only to
the extent, that it is found in a final judgement by a court of
competent jurisdiction that such loss, claim, cost, damage, or
liability resulted from such Stonegate Indemnitee's gross
negligence, bad faith, or willful misconduct. The foregoing
agreements shall apply to any modification of Stonegate's
engagement hereunder, and shall remain in full force and effect
following the completion or termination of Stonegate's engagement
hereunder and the sale of any securities, and shall be in
addition to any rights that any Stonegate Indemnitee may have, at
common law or otherwise. If for any reason the foregoing
indemnification is judicially determined to be unavailable, or
insufficient to hold any Stonegate Indemnitee harmless, then the
Company agrees to contribute to the losses, claims,
<PAGE>
costs, damages, or liabilities for which such indemnification is
held unavailable in such proportion as is appropriate to reflect
not only the relative benefits received by the Company and such
Stonegate Indemnitee, but also the relevant fault of each such
person or entity, as well as any relevant equitable
considerations.
(b) If in connection with any services or matters that are the
subject of or arise out of this Agreement or Stonegate's
engagement hereunder, the Company becomes involved in any action,
claim, investigation, or legal proceeding which is finally
judicially determined to have resulted primarily from the bad
faith or, gross negligence or willful misconduct of Stonegate,
Stonegate agrees to indemnify and hold the Company, and its
officers, directors, employees, agents, and affiliates
(collectively, the "Company Indemnitees"), harmless against any
losses, claims, costs, damages, or liabilities as they are
incurred, to which any Company Indemnitee may incur or suffer in
connection therewith, provided that such Company Indemnitee
promptly notifies Stonegate of any such action, claim,
investigation. or legal proceeding. The Company shall provide
reasonable assistance to Stonegate in any such matter, at
Stonegate's expense. Stonegate shall promptly reimburse the
Company for any legal action or other costs of expenses
reasonably incurred by such Company Indemnitee in connection with
the investigation. contest or defense of any such loss, claim,
damage, liability or action. The foregoing agreements shall apply
to any modification of Stonegate's engagement hereunder, and
shall remain in full force and effect following the completion or
termination of Stonegate's engagement hereunder and the sale of
any securities, and shall be in addition to any rights that any
Company Indemnitee may have, at common law or otherwise. If for
any reason the foregoing indemnification is judicially determined
to be unavailable, or insufficient to hold any Company Indemnitee
harmless, then Stonegate agrees to contribute to the losses,
claims, costs, damages, or liabilities for which such
indemnification is held unavailable in such proportion as is
appropriate to reflect not only the relative benefits received by
Stonegate and such Company Indemnitee, but also the relevant
fault of each such person or entity, as well as any relevant
equitable considerations.
(c) Any person entitled to indemnification under the provisions of
this Section 7 shall unless in such indemnified party's
reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, permit such indemnifying party to assume the defense of
such claim, with counsel reasonably satisfactory to the
indemnified party; and if such defense is so assumed, such
indemnifying party shall not enter into any settlement without
the consent of the indemnified party if such settlement
attributes liability to the indemnified party and such
indemnifying party shall not be subject to any liability for any
settlement made without its consent (which shall not be
unreasonably withheld). In the event an indemnifying party shall
not be entitled, or elects not, to assume the defense of a claim,
such indemnifying party shall not be obligated to pay the fees
and expenses or more than one counsel or firm of counsel (plus
one local counsel or firm of counsel) for all parties indemnified
by such indemnifying party hereunder in respect of such claim,
unless in the reasonable judgment of any such, indemnified party
a conflict of interest may exist between such indemnified party
and any other of such indemnified parties in respect to such
claim.
8) Company Not Responsible for Content of Published Research by Stonegate.
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The Company recognizes that Stonegate may follow, and continue to
follow, the Company and its common stock and, from time to time,
Stonegate may issue research reports concerning the Company and its
common stock. It is understood between the Company and Stonegate that
such reports are not issued on behalf, or with the authorization, of
the Company, and Stonegate shall have sole responsibility for their
content. It is also understood that Stonegate is under no obligation to
issue any research reports on the Company, and any such research shall
be conducted at the sole discretion of Stonegate's research department.
9) General.
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This Agreement (together with the Exhibit) represents the entire
agreement of the Parties concerning the subject matter hereof and
supersedes all prior agreements or understandings, oral or written,
between the Parties with respect to the subject matter hereof. This
Agreement may not be amended or modified except in writing and signed
by the Parties, Stonegate and the Company, and shall be governed by and
construed in accordance with the laws of the State of Texas. This
Agreement is binding upon and inures to the benefit of the parties
hereto and the indemnitees set forth in Section 7 above. This Agreement
may not be assigned by either Party without the prior written consent
of the other Party, which consent shall not be unreasonably withheld.
Delivered herewith are two identical copies of this Agreement. If the
foregoing is in accordance with your understanding of the terms of our
engagement please confirm your agreement by signing both enclosed
copies of this Agreement and returning to Stonegate one executed copy
of this Agreement, along with the payment to be made pursuant to
Section 3(a) above and mi executed warrant certificate as set forth in
Exhibit A, to the undersigned, it being understood and agreed that the
failure to deliver the foregoing to Stonegate on or before May 31,
2000, shall. render this Agreement null and void.
Very truly yours,
STONEGATE SECURITIES, INC.
By: /s/ Scott R. Griffith
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Scott R. Griffith, President
AGREED TO AND ACCEPTED as of the date first set forth above:
PROBEX CORP.
By: /s/ Thomas G. Plaskett
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Thomas G. Plaskett
Chairman/President/CE0
