[LETTERHEAD]
March 31, 1997
Mr. Xxxxx Xxxxx
President
Advanced Materials Group, Inc.
00000 Xxxxx Xxxxxx Xxxx
Xxxxxx Xxxxxxxxx, XX 00000
Dear Xxxxx,
We are writing this letter to confirm our agreement that Xxxxxxxx and Company
("PASCO") has been retained by Advanced Materials Group, Inc. ("AMG" or the
"Company") to provide various corporate finance services to the Company.
These services will include the identification of and successful acquisition
of target companies ("Target") meeting the criteria of AMG whether introduced
by PASCO or other sources during the term of this engagement. Services may
also include identifying financing for growth or acquisition purposes.
This Agreement shall become binding upon the execution hereof by PASCO and
AMG. The term of this Agreement shall extend for a minimum of 24 months. The
contract shall be renewed with the mutual consent of AMG and PASCO for twelve
months periods.
I. SERVICES
XXXXX agrees to coordinate and initiate all discussions with targets and as
well contact all appropriate transaction sources that might be able to assist
in finding an appropriate Target.
II. COMPENSATION FOR SERVICES
In consideration for the services rendered, AMG shall pay PASCO a monthly
retainer due on the first of each month. The retainer shall be $10,000 for
the first month and for each of the next 23 months, a monthly retainer of
$4,000.
XXX agrees to reimburse PASCO monthly for all reasonable out-of-pocket
expenses incurred in carrying out the terms of this Agreement, including
travel, lodging, meals, telephone, facsimile, courier, printing charges, data
acquisition and mailing charges. These out-of-pocket expenses will be payable
upon invoicing by PASCO on a monthly basis.
In addition to the retainer, PASCO will receive a 10 year option to purchase
50,000 AMG shares at a market price at the close of today. In addition, AMG
shall revise the previous option agreement earned for past acquisition
services to extend for 10 years from the date of signing. The option price
shall be set as of the close of business 3/31/97.
A. If an acquisition of a Target is completed during the course of this
agreement or within one(1) year following the termination of this Agreement
in which AMG acquires the stock or assets of the Target, PASCO shall be
compensated based on the following schedule:
PASCO will earn options to purchase the following number of shares of AMG
stock at the price of the day the transaction closes.
1. Options in the amount of 75,000 shares shall be earned if
total consideration for the Target is $10.0 million or less,
2. Additional options will be issued at a pro-rata rate of 10,000
shares for each additional $1.0 million of purchase price
above $10.0 million.
For the purposes of this agreement consideration for stock shall be defined
as the cash, debt instruments and stock transferred to the shareholders in
exchange for their ownership in Target plus any long term debt assumed.
Consideration for assets shall be defined as cash, debt and stock instruments
transferred for selected assets and liabilities. In the event some portion of
the consideration is contingent payable based on future events, that portion
of the fee shall be payable at that time.
B. In the event of an acquisition PASCO shall have the right of first
refusal as placement agent for subordinated debt financing (non-bank) if
appropriate.
III. DISCLOSURE
All non-public information provided by the AMG to Target(s) will be
considered as confidential information and shall be maintained as such by
PASCO, except as required by law.
IV. ENTIRE AGREEMENT, ETC.
This Agreement sets forth the entire understanding of the parties relating to
the subject matter hereof and supersedes and cancels any prior
communications, understandings, and agreements between the parties. This
Agreement cannot be modified or changed, nor can any of its provisions be
waived, except by written agreement signed by all parties hereto. Attached to
this agreement is an indemnification agreement that will survive this
agreement.
V. ACCEPTANCE
Please confirm that the foregoing is in accordance with your understanding by
signing upon behalf of the Company and returning an executed copy of this
Agreement.
Sincerely, ACCEPTED AND AGREED TO:
ADVANCED MATERIALS GROUP, INC.
XXXXXXXX and COMPANY
By: [illegible]
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/s/ X. Xxxxx Xxxxxxxx
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X. Xxxxx Xxxxxxxx
Managing Director Title: PRESIDENT/CEO
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Date: April 28, 1997
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XXXXXXXX and COMPANY
ANNEX "A"
Indemnification Provisions
In connection with the engagement of PASCO by AMG pursuant to the Engagement
Letter of March 31, 1997 between AMG and PASCO, as it may be amended from
time to time (the "Engagement Letter"), AMG hereby agrees as follows:
1. (a) In connection with or arising out of or relating to the engagement
of PASCO under the Engagement Letter, or any actions taken or omitted,
services performed or matters contemplated by or in connection with the
Engagement Letter, or otherwise in connection with activities of PASCO that
involve and are in good faith intended to benefit AMG, AMG agrees to
reimburse PASCO, its affiliates and their respective directors, officers,
employees, agents and controlling persons (each an "Indemnified Party")
promptly upon demand for reasonable expenses (including reasonable fees and
expenses of legal counsel) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened
claim, or any litigation, proceeding or other action in respect thereof. AMG
agrees (in connection with the foregoing) to indemnify and hold harmless
each Indemnified Party from and against any and all losses, claims, damages
and liabilities, joint and several, to which any Indemnified Party may
become subject, including any amount paid in settlement of any litigation
or other action (commenced or threatened), to which AMG shall have
consented in writing (such consent not to be unreasonably withheld),
whether or not any Indemnified Party is a party and whether or not
liability resulted; PROVIDED, HOWEVER, that AMG shall not be liable
pursuant to this sentence in respect of any loss, claim, damage or
liability resulting primarily from the wilful misconduct of gross
negligence of such Indemnified Party.
(b) Notwithstanding the foregoing, no payments will be due hereunder to
the extent that X. Xxxxx Xxxxxxxx as a director of AMG, would be
prohibited from receiving such payments pursuant to Nevada or California
law, or pursuant to AMG's certificate of incorporation or bylaws, in the
event the actions of PASCO were attributable to Xx. Xxxxxxxx, nor will such
payments be due to the extent N. Price Xxxxxxxx has the right to claim
such payments either from AMG in his capacity as a director or pursuant to
AMG's directors' and officers' liability policy.
2. An Indemnified Party shall have the right to retain separate legal
counsel of its own choice to conduct the defense and all related matters
in connection with any such litigation, proceeding or other action;
PROVIDED, HOWEVER, that AMG shall not be obligated to pay the expense of
more than one legal counsel for each jurisdiction for all Indemnified
Parties in connection with any one litigation, proceeding or other action.
AMG shall pay the reasonable fees of one such legal counsel and such legal
counsel shall, to the fullest extent consistent with its professional
responsibilities, cooperate with AMG and any legal counsel designated by
AMG. AMG agrees to consult in advance with PASCO with respect to the terms
of any proposed waiver, release or settlement of any claim, liability,
proceeding or other action against AMG to which any Indemnified Party may
also be subject, and to use
its best efforts to afford PASCO and/or any such Indemnified Party the
opportunity to join in such waiver, release or settlement.
3. In the event that the Indemnity provided for in paragraphs 1 or 2 hereof
is unavailable or insufficient to hold any Indemnified Parties harmless,
then AMG shall contribute to amounts paid or payable by an Indemnified
party in respect of such Indemnified Party's losses, claim, damages and
liabilities to which the Indemnity provided in paragraphs 1 and 2 hereof
is unavailable or insufficient (i) in such proportion as appropriately
reflects the relative benefits received by AMG on the one hand, and PASCO
on the other hand, in connection with the matters as to which such losses,
claims, damages or liabilities relate, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such
proportion as appropriately reflects not only the relative benefits
referred to in clause (i) but also the relative fault of AMG, on the one
hand, and PASCO on the other hand, as well as any other equitable
considerations. The amounts paid or payable by a party in respect of
losses, claims, damages and liabilities referred to above shall be deemed
to include any reasonable legal or other fees and expenses incurred in
defending any litigation, proceeding or other action or claim.
Notwithstanding the provisions hereof, XXXXX's share of the liability
hereunder shall not be in excess of the amount of fees received by PASCO
under the Engagement Letter (excluding any amounts received as
reimbursement of expenses incurred by XXXXX).
4. XXXXX agrees to reimburse AMG or its affiliates and their respective
directors (except X. Xxxxx Xxxxxxxx), officers, employees, agents and
controlling persons (the "AMG Parties") for expenses, to indemnify and
hold harmless the AMG Parties from losses, claims damages and liabilities
(including reasonable fees and expenses of legal counsel) and to contribute
to amounts paid or payable by the AMG Parties, on the same terms and
conditions on which AMG agrees to reimburse, indemnify and contribute to
Indemnified Parties herein, but only to the extent that any expense or
indemnity, or any claim for contribution, results primarily and directly
from the wilful misconduct or gross negligence of PASCO.
5. These Indemnification Provisions shall remain in full force and effect
whether or not any of the assignments contemplated by the Engagement
Letter are consummated and shall survive the expiration of the period
of the Engagement Letter, and shall be in addition to any liability that
AMG might otherwise have to any Indemnified Party under the Engagement
Letter or otherwise.
6. It is further agreed that no Indemnified Party (including PASCO) shall be
liable to AMG in connection with any matter arising out of or relating to
the engagement of PASCO under the Engagement Letter, or any actions taken
or omitted, services performed or matters contemplated by or in connection
with the Engagement Letter, except to the extent that a court having
competent jurisdiction shall have determined by final judgement (not
subject to further appeal) that such liability resulted solely from the
wilful misconduct or gross negligence of such Indemnified Party.
