ATHENA CAPITAL PARTNERS, INCLETTER HEAD CONFIDENTIAL

 

 

                   ATHENA CAPITAL PARTNERS, INC. LETTER HEAD

 

CONFIDENTIAL

 

April 10, 2003

 

Mr. Richard Gabriel, CEO and

Hector Gomez, M.D., Ph.D., Chairman

DNAPrint Genomics 900 Cocoanut

Avenue Sarasota, FL 34236

 

Gentlemen:

 

         This letter agreement (the "Agreement") shall confirm the engagement of

Athena Capital Partners, Inc. ("Athena") by DNAPrint Genomics (the "Company") as

the Company's exclusive investment banking agent to:

 

1.       Arrange and negotiate a private placement of securities, issued by the

         Company and/or any of its subsidiaries or affiliates, in the form of

         common stock, convertible preferred stock, convertible debt, debt with

         warrants, or any other equity-linked securities (the "Securities"). The

         current plans are to raise $2.0 to $3.0 million at a pre-money

         valuation of $10.0 to $15.0 million.

 

2.       Obtain grant money from various governmental entities. The current plan

         is raise $500,000 to $1.0 million.

 

3.       Provide advisory services related to merger & acquisition activity, as

         requested by the Company.

 

The above-mentioned services are subject to the following terms and conditions:

 

         1. Exclusive Authorization. Subject to the terms and conditions of this

Agreement, the Company hereby appoints Athena to act on a best efforts basis as

its exclusive agent (except as it relates to the co-management relationship

discussed in paragraph 7 and the public sale of registered securities discussed

in paragraph 8) during the Authorization Period (as hereinafter defined) in all

the Company's investment banking activities, including the effort to privately

place the Securities (the "Transaction") in an amount and on terms and

conditions satisfactory to the Company. Athena hereby accepts such agency and

agrees on the terms of this Agreement to use its best efforts during

 

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the Authorization Period to arrange the sale of the Securities through such a

private placement to potential investors (the "Investors"). The Company

understands that Athena shall not have any obligation hereunder to purchase any

of the Securities or to provide financing of any kind to the Company. In

addition, the Company agrees that it will not hold Athena liable or responsible

in the event that the Transaction is not consummated for any reason whatsoever,

including, but not limited to, an adverse change in the financial or security

markets, insufficient demand for instruments similar to the Securities, or a

lack of interest by Investors in the Transaction. During the Authorization

Period, the Company shall be prohibited from (i) directly or indirectly offering

any of the Securities (or instruments substantially similar to the Securities)

for sale to, or soliciting any offer to purchase any of the Securities (or

instruments substantially similar to the Securities) from, or otherwise

contacting, approaching or negotiating with respect thereto with, any person,

and (ii) authorizing anyone other than Athena to act on its behalf to place the

Securities (or instruments substantially similar to the Securities). The Company

shall promptly refer to Athena all offers, inquiries and proposals relating to

any placement of the Securities (or instruments substantially similar to the

Securities) made to the Company at any time during the Authorization Period.

 

         2. Authorization Period. Athena's engagement hereunder shall become

effective on the date this engagement letter is executed (the "Execution Date")

and, unless earlier terminated or extended in writing by the Company and/or

Athena, shall expire in twelve (12) months from the Execution Date (the

"Termination Date"; the period from the Execution Date through the Termination

Date being hereinafter referred to as the "Authorization Period").

 

         3. Offering Materials. In connection with its engagement hereunder, the

Company shall prepare a Confidential Offering Materials, and such amendments or

supplements thereto as the Company may reasonably deem to be necessary or

appropriate to effectuate the sale of the Securities (the Confidential Offering

Material, as the same may be amended or supplemented from time to time, is

referred to herein as the "Offering Materials") and Athena shall cooperate and

assist the Company in the preparation of the Offering Materials, which shall

include: a business plan, comparable analysis, valuation analysis, etc. Prior to

any distribution thereof, the Offering Materials shall be subject to Athena's

and the Company's review and approval.

 

         4. Fees and Disbursements.

 

         (a) As compensation for Athena's services hereunder, the Company shall

pay Athena fees and issue and deliver warrants to Athena as follows:

 

         (i)      upon the execution of this Agreement, a retainer, payable in

                  warrants of the Company (no cash), in such amount that

                  represents $80,000 of the value of the Company (determined by

                  a 20 day moving average). This Retainer shall be

                  non-refundable, except as described below. Upon a closing of a

                  Transaction, one-half of the value of the Retainer (i.e.

                  warrants representing $40,000 in value) shall be credited

                  against the warrant portion of the fees payable to Athena

                  pursuant to subparagraph 4(a)(iii) below;

 

         (ii)     upon the closing of a Transaction, a transaction fee (the

                  "Transaction Fee") payable in cash to Athena in an amount

                  equal to 6% of the Aggregate

 

                                       -2-

 

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                  Consideration (as defined below) paid for the Securities by

                  Investors; provided, however, that the Transaction Fee shall

                  be an amount not less than, in any circumstance, $165,000 (the

                  "Minimum Fee"). If the Aggregate Consideration is less than

                  $1.0 million then the Minimum Fee shall be 16.5% of the

                  Aggregate Consideration; and

 

         (iii)    upon the closing of a Transaction, the Company shall issue to

                  Athena warrants for a nominal price to purchase such number of

                  shares of the common stock of the Company equal to 4% of the

                  Aggregate Consideration (as defined below) paid for the

                  Securities by Investors, which warrants would be exercisable

                  for a period of five (5) years from the date of such closing,

                  at an exercise price per share equal to that paid by Investors

                  in the Transaction. The terms of the warrants shall be set

                  forth in a warrant agreement in form and substance

                  satisfactory to Athena and the Company, which shall contain

                  terms substantially identical to those applicable to the

                  Securities issued to Investors in the Transaction, including,

                  without limitation, anti-dilution provisions, registration

                  rights, and cashless exercise. The Company, at its option, may

                  elect to pay this portion of the fee in cash instead of

                  warrants.

 

         (iv)     upon the receipt of grant money (as discussed in item 2 of the

                  introductory paragraph of this engagement letter), the Company

                  shall issue to Athena warrants for a nominal price to purchase

                  such number of shares of the common stock of the Company equal

                  to $35,000 of the value of the Company, which warrants would

                  be exercisable for a period of five (5) years from the date of

                  such closing, at an exercise price per share equal to that

                  paid by Investors in the Transaction. The terms of the

                  warrants shall be set forth in a warrant agreement in form and

                  substance satisfactory to Athena and the Company, which shall

                  contain terms substantially identical to those applicable to

                  the Securities issued to Investors in the Transaction,

                  including, without limitation, anti-dilution provisions and

                  registration rights.

 

         (v)      fees for merger & acquisition advisory services will include a

                  monthly retainer plus a success fee equal to a percentage of

                  the "Transaction Value". For purposes of this Agreement the

                  Transaction Value shall mean the market value of the stock of

                  the target plus the book value of the target's debt (the

                  target's enterprise value). Athena and the Company will

                  negotiate in good faith to arrive at a reasonable fee.

 

         (vi)     Fees for the public sale of registered securities during the

                  Authorization Period, are discussed in paragraph 8 below.

 

         (b) In addition to the fees payable to Athena hereunder and regardless

of whether the sale of any of the Securities is consummated, the Company shall

reimburse Athena, upon request made from time to time, for all of Athena's

out-of-pocket expenses incurred in connection with this engagement, including

the fees, disbursements and other charges of Athena's legal

 

                                       -3-

 

 

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counsel. The Company acknowledges that Athena has a monthly administrative

charge (the administrative charge includes small dollar charges for items such

as long distance telephone calls, regular mail postage, photocopies, etc. It

does not include charges such as fedex charges or charges for operator assisted

conference calls) of $200, in addition to specific direct reimbursable charges.

All expenses greater than $500 per month will be pre-approved by Company.

 

         (c) The Company shall pay to Athena all fees and issue and deliver

warrants to Athena as described in Section 4 of this Agreement in the event that

at any time prior to the expiration of 12 months after the Termination Date any

of the Securities (or instruments substantially similar to the Securities) are

sold to any Investor identified and/or contacted during the Authorization

Period.

 

         (d) The Company shall pay to Athena all fees and issue and deliver

warrants to Athena as described in Section 4 of this Agreement in the event that

at any time prior to the expiration of 12 months after the Termination Date

substantially all of the assets of the Company are sold to any Investor

identified and/or contacted during the Authorization Period.

 

         (e) If a Transaction has been consummated and one or more Additional

Transactions (for purposes of this Agreement "Additional Transactions" shall

mean the sale of securities other than the Securities contemplated in this

engagement letter) are consummated by the Company (or any affiliate or

subsidiary thereof) within 12 months from the closing date of the initial

Transaction with any Investor identified and/or contacted during the

Authorization Period, Athena shall be entitled to receive (i) an additional fee

(the "Additional Fee") in an amount equal to 6% of the Aggregate Consideration

paid by the Investors in connection with any such Additional Transactions,

payable in cash upon the closing of any such Additional Transactions and (ii)

warrants equal to 4% of the Aggregate Consideration paid by the Investors in

such Additional Transactions, issuable and deliverable to Athena upon the

closing of any such Additional Transactions. Such warrants shall be exercisable

for a period of five years from the date of such closing, at an exercise price

per share equal to that paid by the Investors in the Additional Transactions.

The terms of the warrants shall be set forth in a warrant agreement in form and

substance satisfactory to Athena and the Company, which shall contain terms

substantially identical to those applicable to the Securities issued to

Investors in the Transaction, including, without limitation, anti-dilution

provisions, registration rights, and cashless exercise.

 

         (f) The definition of "Aggregate Consideration" for purposes of

calculating Athena's fee shall be deemed to include the cumulative fair market

value of all cash and other consideration paid for the Securities (or

instruments substantially similar to the Securities) by the Investors during the

Authorization Period, as well as any amounts paid in escrow and amounts payable

in the future. The fair market value of any non-cash consideration will be the

value determined by the Company and Athena at or prior to the date of the

applicable Transaction. The portion of Athena's fee relating to any future

payments shall be calculated and paid when and as such future payments are made;

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