[LOGO] MAXIM GROUP
Private and Confidential
March 26, 2003
J.D. McGraw
Vice President
EnerTeck Chemical Corporation
c/o Allan F. Dow Assoc.
2100 W Loop South suite 1210
Houston, TX 77027
Dear J.D.:
We are pleased to propose that EnerTeck Chemical Corporation ("EnerTeck" or the
"Company") retain Maxim Group LLC ("Maxim") as its exclusive investment banker,
strategic advisor and financial advisor. The principal elements of the agreement
("Agreement") between Maxim and the Company are:
1. SERVICES TO BE RENDERED. The services that Maxim will render to the Company
under the terms of this Agreement will include the following:
a) Maxim will provide the following strategic advisory services
("Advisory Services"):
i) advise EnerTeck with respect to its strategic planning process
and business plans including an analysis of markets, products,
positioning, financial models, organization and staffing,
potential strategic alliances, capital requirements, valuation
and funding. To prepare for this advisory function, Maxim will
perform a due diligence review of EnerTeck;
ii) work closely with EnerTeck's management team to develop a set of
long and short-term goals with special focus on enhancing
corporate and shareholder value. This will also include assisting
EnerTeck in completing a "gap analysis" i.e. helping EnerTeck
determine key business and actions, including review of financing
requirements and EnerTeck's capital structure, intended to help
enhance shareholder value and EnerTeck's exposure to the
investment community and;
iii) review the Company's presentation and marketing materials and
other materials used to present the Company to the investment
community. Maxim will provide the following strategic advisory
services ("Advisory Services"):
b) Maxim will help EnerTeck develop and evaluate financing or capital
raising alternatives including public and private issues of equity or
debt, as appropriate from time to time ("Banking Services").
Members NASD & SIPC
405 Lexington Ave. * New York, NY 10174
* tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 *
www.maximgrp.com
New York, NY * Long Island, NY * Chicago, IL
i) Public Offerings: In the event of a public offering, Maxim will
act as lead or co-underwriter. Maxim will work with the Company
to manage the process of identifying, evaluating and selecting
any other underwriters. Maxim will prepare a comprehensive letter
of intent for the proposed transaction that will be provided to
EnerTeck and will supplement the terms of this Agreement. If
Maxim is not selected as the lead manager in a public offering,
EnerTeck will use its best efforts to ensure that Maxim receives
at least 50 % of the share allocation and 50% of the total
underwriting fees.
ii) Private Placements: Maxim will act as placement agent for any
private placement. Maxim will prepare a comprehensive letter of
intent for the proposed transaction that will be provided to
EnerTeck and will supplement the terms of this Agreement.
c) Maxim will provide EnerTeck with merger and acquisition services (the
"M&A Services"). Maxim will assist the Company in determining
acquisition or strategic partnering strategies and tactics from time
to time as appropriate. Maxim will advise and assist EnerTeck in
identifying, evaluating, negotiating and structuring acquisitions, or
strategic investments or partnerships which may be accomplished
through a purchase or sale of all or a portion of the stock or assets,
a merger or reverse merger, joint venture, licensing or marketing
agreement or arrangement or other business combination or arrangement
("Transaction") with any entity ("Candidate"). A strategic investment
will include any investment or exchange of cash, equity, warrants,
assets or debt as part of a business relationship with a third party,
or any investment made directly by a third party in the Company
subject to a term sheet or agreement not marketed or syndicated beyond
a specific investor. A separate letter shall be generated for each
acquisition.
d) If requested by EnerTeck, Maxim will communicate its willingness to
provide an opinion of fairness (a "Fairness Opinion") of a particular
Transaction to the Company, and if Maxim determines that it is able to
provide such a Fairness Opinion, it will allow it to be used in
connection with material filed or submitted to the Securities and
Exchange Commission, or included in information mailed to shareholders
of EnerTeck in connection with each transaction.
2. COMPENSATION AND EXPENSES.
a) As compensation for providing the Advisory Services hereunder,
EnerTeck will pay Maxim a retainer of $50,000, payable upon execution
of this Agreement and monthly fee of $6,000 at the beginning of each
subsequent month.
b) Upon execution of this Agreement, EnerTeck will grant Maxim a warrant
("Advisory Warrant") representing 25,000 shares of the company's
common stock with an exercise price equal to the closing bid price on
the date this agreement is executed by the Company. The Advisory
Warrant will contain provisions for, among other things, change of
control, registration rights and net issuance, and will expire five
(5) years after the execution of this Agreement.
Members NASD & SIPC
405 Lexington Ave. * New York, NY 10174
* tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 *
www.maximgrp.com
New York, NY * Long Island, NY * Chicago, IL
c) Terms and fees for Banking Services performed under section 1(b) or
provision of a Fairness Opinion under 1(d) will be separately proposed
by Maxim with respect to each transaction when and if services are
provided.
d) For any Transaction completed by the Company with a Candidate EnerTeck
shall pay Maxim a fee ("Success Fee") upon closing equal to the sum
of: (1) $200,000 and (2) 21/2% of the aggregate transaction value.
However, in the event the aggregate transaction value is equal to or
less than $1,000,000 the Success Fee will be calculated by multiplying
the Aggregate transaction value by 10%, however in no event shall this
fee be lower than $50,000. In the event that the aggregate transaction
value is between $1,000,000 and $2,000,000 the Success Fee shall be
equal to the sum of: (1) $100,000 and (2) 21/2% of the aggregate
transaction value. The aggregate transaction value shall include the
sum of cash and the fair market value at the time of the closing of a
transaction of equity securities; warrants; contingent payments;
deferred payments; non-compete agreements; liabilities assumed,
acquired, retired or defeased (other than normal working capital
liabilities); the face value of any debt securities issued in such a
Transaction; the fair market value of any licensing, marketing or
other business agreements or arrangements; and any other valuable
consideration issued in connection with a Transaction. Fees associated
with transactions described in section 1(b) will be subject to
negotiation between Maxim and the Company at the time a formal
agreement is reached between the parties. In no event however, will
these fees exceed 10% commission plus a 2% non-accountable expense
allowance as well as warrants to purchase 10% of the securities raised
in the transaction on the same terms as the securities offered in the
transaction.
e) The Company will reimburse Maxim in a timely manner for any
out-of-pocket and legal expenses relating to activities under this
Agreement. Pre-approval on expenses exceeding $1,000 shall be obtained
by EnerTeck prior to expenditure.
f) In no case will any fee obligations of the Company any other financial
advisor or any other person in connection with this transaction reduce
the fees owed by the Company to Maxim under Agreement.
g) MAXIM and the Company agree to establish an escrow agreement as soon
as practicable to govern the flow of all Transaction related fees.
3. FUTURE INVESTMENT BANKING ACTIVITIES. Upon the successful completion of any
Banking Services or Transactions, for a period of two (2) years from the
closing of such transaction, the Company grants Maxim the right of first
refusal to act as managing underwriter or minimally as co-manager wit at
least 50% of the economies; or, in the case of a three-handed deal 33% of
the economies, for any and all future public and private equity offerings
during such two year period of the Company, or any successor to any
subsidiary of the Company.
Members NASD & SIPC
405 Lexington Ave. * New York, NY 10174
* tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 *
www.maximgrp.com
New York, NY * Long Island, NY * Chicago, IL
4. TERM OF AGREEMENT. This Agreement shall continue in effect for a minimum of
twelve months and thereafter until terminated by either the Company or
Maxim (the "Term"). The Term will be automatically extended to one year
upon successful completion of any Banking Services or Transactions as
defined herein. Termination shall become effective thirty (30) days after
the other party receives written notification. Any future obligation that
could be reasonably expected to survive this Agreement will survive
termination of this Agreement. Specific surviving conditions will include,
but not limited to: (I) payment of the monthly retainer and expenses
incurred through termination, (ii) grant and survival of the Advisory
Warrant pursuant to 2(b), (iii) payment of Success Fees earned under
section 2(d) during the Term and for Transactions considered during the
Term and completed within 18 months of the termination of this agreement,
(iv) Section 3, Future Investment Banking Activities and (v) Section 5,
Indemnity.
5. INDEMNITY. The company agrees to indemnify and hold harmless Maxim,
including any affiliated companies, and their respective officers,
directors, controlling persons and employees and any persons retained in
connection with a proposed financing (whether or not consummated) (the
"Indemnitees"), from and against all claims, damages, losses, liabilities
and expenses as the same are incurred (including any legal or other
expenses incurred in connection with investigating or defending against any
such loss, claim, damage or liabilities or any action in respect thereof),
related to or arising out of its activities hereunder. Notwithstanding the
foregoing, the Company shall not be liable for indemnity under this
Agreement in respect to any loss, claim, damage, liability or expense
arising from Maxim's misconduct in performing the services described above.
This provision shall survive any termination of Maxim's engagement as well
as the consummation or abandonment of any Transaction, placement or
offering. EnerTeck agrees that any and all decisions, actions and
responsibility of EnerTeck's management, and that Maxim's engagement will
in no way expose Maxim to any liability, including but not limited to,
liability for any financing, operating, financial, merger, acquisition,
managerial, or other results achieved by the Company, as well as the
implementation of, or the results achieved by, strategies or business plans
on which Maxim has provided review or advice.
6. DISCLAIMERS.
a) It is understood by Maxim and the Company that the Company's ability
to raise capital will be affected by various factors at the time of
the proposed offering, including but not limited to, stock market
conditions, competitive positioning of EnerTeck's products, achieving
business plan goals that have been mutually agreed upon by Maxim and
the Company, short- and long-term business prospects, the plans and
performance of the management team and the capital structure of the
Company. In the event that Maxim does not deem itself able to act as
manager for a proposed placement or offering, subject to Maxims sole
reasonable discretion, it will advise the Company on an appropriate
course of action
b) In performing its M&A Services hereunder, Maxim may rely entirely on
publicly available information and such other information as may be
furnished to Maxim by the Company or a Candidate, and had not and does
not assume any responsibility for
Members NASD & SIPC
405 Lexington Ave. * New York, NY 10174
* tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 *
www.maximgrp.com
New York, NY * Long Island, NY * Chicago, IL
independent verification of such information or independent appraisal or
valuation of assets.
7. ENTIRE AGREEMENT AND GOVERNING LAW. This Agreement may be amended or
modified expect in writing, and shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
If the forgoing correctly sets forth your understanding, please so indicate by
signing and returning to us the enclosed copy of this letter along with a check
for $50,000 representing the first month's retainer. We look forward to working
with you and the team at EnerTeck.
Members NASD & SIPC
405 Lexington Ave. * New York, NY 10174
* tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 *
www.maximgrp.com
New York, NY * Long Island, NY * Chicago, IL
Sincerely,
Anthony J. Sarkis
Managing Director
Maxim Group, LLC.
By: s/s Date: 4/22/03
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Anthony J. Sarkis
Title: Managing Director
EnerTeck Chemical Corporation
By: s/s Date: 4-30-03
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J. D. McGraw
Title: Vice President
Members NASD & SIPC
405 Lexington Ave. * New York, NY 10174
* tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 *
www.maximgrp.com
New York, NY * Long Island, NY * Chicago, IL