[FORM OF]
[____________,] 1997
Conversion Technologies International, Inc.
0000 Xxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Re: Financial Advisory Agreement
Dear Sirs:
1. This is to confirm our understanding that Placement Agent, its
affiliates and designees have been engaged as a non-exclusive financial advisor
of Conversion Technologies International, Inc. (the "Company") for a period of
twenty-four (24) months commencing on the date hereof (as extended pursuant to
Paragraph 12 hereto, or by mutual agreement of the parties hereto, the "Term").
2. The Company shall pay in cash all out-of-pocket expenses incurred by
Placement Agent in providing its services hereunder, including reasonable fees
and disbursements of Placement Agent's counsel, such expenses to be paid upon
submission of a bill or bills by Placement Agent from time to time.
3. Upon the Closing of each Investment (as defined below) during the Term
or during the twelve-month period following the expiration or earlier
termination of the Term, the Company shall pay to Placement Agent a fee in an
amount equal to nine percent (9%) of the aggregate value of such Investment and
shall issue to Placement Agent warrants to purchase an amount of securities
equal to ten percent (10%) of the securities sold as part of such Investment at
an exercise price equal to one-hundred-ten percent (110%) of the price of such
securities, exercisable until ten (10) years from the date of issuance of such
warrants. Other than with respect to trades made in the open market, for the
purposes of this Agreement, an Investment shall mean any purchase of securities
of the Company which is made during the Term or during the twelve-month period
following the expiration of the Term by an investor first introduced to the
Company by or through Placement Agent during or prior to the Term; provided that
no compensation shall be due to Placement Agent pursuant to this paragraph 3 for
an Investment with respect to which Placement Agent is entitled to compensation
pursuant to that certain Placement Agency Agreement dated April 1, 1997 (the
"Placement Agency Agreement") and provided further that if the terms of both the
Placement Agency Agreement and this Agreement
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would be applicable to any particular investment, the terms of the Placement
Agency Agreement shall govern and Placement Agent shall be entitled to the
compensation set forth therein.
4. (a) Should the Company enter into an agreement with a party first
introduced to the Company by or through Placement Agent during or prior to the
Term pursuant to which the Company consummates a sale, merger, consolidation,
tender offer, business combination or similar transaction involving a majority
of the business assets or stock of the Company (a "Sale") during the Term, or
during the twelve-month period following the expiration of such Term, then the
Company shall pay Placement Agent: (i) a cash fee equal to ten percent (10%) of
the aggregate consideration paid to the Company by the acquiror, such fee to be
payable in cash simultaneously with the closing of such Sale; and (ii) a warrant
(a "Warrant") to purchase a number of shares of Common Stock of the surviving
entity equal to the product of (x) the quotient of the aggregate amount of the
aggregate consideration received by the Company or the aggregate amount of
equity received by the Company's shareholders as a result of the Sale divided by
the lesser of (i) the per share value attributed to the Common Stock in the
Sale, if any (determined by dividing the aggregate consideration received by the
Company by the number of shares received by the Company as a result of the
Sale), and (ii) the per share fair market value of the Common Stock at the time
of the closing of the Sale, and (y) eight percent (8%). Each Warrant shall be
exercisable for at least ten (10) years from the date of their respective
issuances at an exercise price which is 110% of the fair market value of the
Common Stock at the time each such Warrant is granted.
(b) Should the Company enter into an agreement with a party first
introduced to the Company by or through Placement Agent during or prior to the
Term pursuant to which the Company consummates a transaction wherein the Company
acquires all or substantially all of the business assets or stock of another
entity in which the Company is the surviving entity (an "Acquisition") during
the Term, or during the twelve-month period following the expiration of such
Term, then the Company shall pay Placement Agent: (i) a fee equal to ten percent
(10%) of the aggregate consideration paid by the Company to the entity acquired,
such fee to be payable simultaneously with the closing of such Acquisition; and
(ii) a warrant (a "Warrant") to purchase a number of shares of Common Stock of
the Company equal to the product of (x) the quotient of the aggregate amount of
the aggregate consideration received by the Company as a result of the
Acquisition divided by the lesser of (i) the per share value attributed to the
Common Stock in the Acquisition, if any (determined by dividing the aggregate
consideration received by the Company by the number of shares received by the
Company as a result of the Acquisition), and (ii) the per share fair market
value of the Common Stock at the time of the closing of the Acquisition, and (y)
eight percent (8%). Each Warrant shall be exercisable for at least ten (10)
years from the date of their respective issuances at an exercise price which is
110% of the fair market value of the Common Stock at the time each such Warrant
is granted.
(c) For purposes of calculating Placement Agent's fee under this Paragraph
4, the aggregate consideration paid with respect to the business, assets or
stock of the
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Company shall be equal to the total of all cash, securities and/or other assets
paid for such business, assets or stock by the acquiror. Aggregate consideration
shall also include: (i) any commercial bank or similar indebtedness of the
Company which is repaid or for which the responsibility to pay is assumed by the
acquiror in connection with such transaction; (ii) the greater of the stated
value or the liquidation value of preferred stock of the Company which is
assumed or acquired by the acquiror and which is not converted into common stock
upon the consummation of such transaction; (iii) future payments for which the
acquiror is obligated absolutely ("Acquiror Future Payments"); and (iv) future
payments for which the acquiror is obligated upon the attainment of milestones
or financial results ("Acquiror Contingent Payments"). The fee to be paid to
Placement Agent as a result of Acquiror Future Payments shall be paid upon the
date of closing of such Acquisition and shall be valued at the present value of
the Acquiror Future Payments. The fee to be paid to Placement Agent as a result
of Acquiror Contingent Payments shall be paid upon the receipt of such payments
by the Company. In the event that a Sale of the Company or an Acquisition by the
Company is consummated through a multiple-step transaction wherein the acquiror
is not obligated either absolutely or upon the attainment of milestones or
financial results to make future payments to further increase the acquiror's
ownership in the Company (the "Multiple-Step Payments"), the Company agrees to
pay Placement Agent a fee on such Multiple-Step Payments which shall be
calculated pursuant to this Paragraph 4. Such fee shall be paid to Placement
Agent upon receipt by the Company of such Multiple-Step Payments and shall be in
addition to the fee paid to Placement Agent in the first step of such
transaction.
5. Should the Company enter into an agreement with an investor first
introduced to the Company by or through Placement Agent during or prior to the
Term pursuant to which the Company consummates a Strategic Alliance(s) (as
defined below), or during the twelve-month period following the expiration of
such Term, then the Company shall pay Placement Agent: (a) a cash fee equal to
ten percent (10%) of the present value of the Aggregate Consideration (as
defined below) to be received by the Company, its shareholders or employees in
each such transaction (such fee shall be paid to Placement Agent in cash
simultaneously with the closing of each such transaction); and (b) a payment in
the form of equity securities in an amount to be agreed upon between the
parties, but in no event less than ten percent (10%) of the Aggregate
Consideration. For the purpose of calculating Placement Agent's fee under this
Paragraph 5, Aggregate Consideration shall include, but not be limited to: (i)
all payments made at the closing of such transaction for equity securities,
equity security rights or similar rights; (ii) technology access fees or similar
up-front payments, (iii) other future payments, including without limitation,
licensing fees, lump sum payments, royalties and deferred technology access
fees, to be made to the Company or its employees for which the Strategic
Alliance partner(s) or other counter-parties (each a "Partner") is obligated
either absolutely ("Strategic Future Payments") or upon the attainment of
milestones or on a percentage or royalty basis ("Strategic Contingent
Payments"); (iv) funding provided, arranged or introduced by the Partner
(through reimbursement or otherwise) relative to research and development,
testing, clinical trials and related expenditures, whether such work is
performed, subcontracted or managed by the Company or the Partner; and (v) the
repayment or assumption by the Partner of obligations of the
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Company, including indebtedness for money borrowed or amounts owed by the
Company to inventors or owners of technology. It is further understood that
Aggregate Consideration shall not be reduced by the amount of the fee due to
Placement Agent hereunder. Any portion of the Aggregate Consideration
constituting Strategic Future Payments shall be paid at closing and shall be
valued at the present value of the Strategic Future Payments. The fee to be paid
to Placement Agent as a result of Strategic Contingent Payments shall be paid
upon the receipt of such payments and shall be in addition to any fees paid at
closing. A "Strategic Alliance" may include, but is not limited to: (i) any
joint venture, partnership, license or other contract for the research,
development, manufacturing, marketing, distribution, sale or other activity
relating to the Company's present and/or future products; (ii) the purchase of,
or commitment to purchase from the Company, less than a majority of the
business, assets or stock of the Company by a Partner(s); (iii) the sale of any
of the Company's assets or any rights in respect to its products and /or
technology; and (iv) a commitment to provide funding for all or part of the
Company's research and development activities, whether such work is performed or
managed by the Company or Partner.
For purposes of calculating the present value of any Strategic Future
Payments, Strategic Contingent Payments, Acquiror Future Payments or Acquiror
Contingent Payments, the Company and Placement Agent agree to discount all such
payments by a discount factor equal to fifteen percent (15%) per annum, and,
where necessary, to use the projections which have been provided to prospective
Partners in the course of the transaction to quantify these Strategic Future
Payments, Strategic Contingent Payments, Acquiror Future Payments or Acquiror
Contingent Payments. For the purposes of calculating Placement Agent's fee,
securities constituting part of Aggregate Consideration which are traded on a
national or recognized foreign securities exchange or the Nasdaq National Market
System shall be valued at the last closing bid price thereof prior to the date
of the consummation or closing of any such transaction. Such securities which
are traded over-the-counter shall be valued at the mean between the latest bid
and asked prices prior to date of the consummation or closing of any such
transaction.
6. Should Placement Agent introduce the Company to a potential product,
process, intellectual property or technology which is subsequently licensed or
otherwise acquired by the Company, the Company and Placement Agent shall
negotiate in good faith a fee for such introduction provided that in no event
shall such fee be less than: (a) two hundred thousand dollars ($200,000) in
cash; and (b) an equity payment in an amount to be agreed upon between the
parties, but in no event less than ten percent (10%) of the total outstanding
shares of common stock of the Company on a fully diluted basis.
7. In the event that the Company, its directors or management initiate any
discussions with a third party in furtherance of any Sale, Acquisition,
Investment or Strategic Alliance or receive any meaningful inquiry or are aware
of the interest of any third party concerning a Sale, Acquisition, Investment or
Strategic Alliance which is the subject of this Agreement, they shall promptly
inform Placement Agent of the party and its interest.
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8. Any financial advice rendered by Placement Agent pursuant to this
Agreement (and the existence of this Agreement) shall not be disclosed publicly
in any manner without Placement Agent's prior written approval and shall be
treated by the Company as confidential information. The Company shall provide
Placement Agent with all financial and other information requested by Placement
Agent for the purposes of rendering its services pursuant to this Agreement.
9. (a) The Company agrees not to divulge information which Placement Agent
discloses to it and which is marked as "Confidential" (the "Confidential
Information") to any third party or parties. The Company further agrees to limit
disclosure only to those of its officers, employees, agents, affiliates and
consultants as the Company considers necessary. The Company shall use its best
efforts to prevent the disclosure of the Confidential Information as provided
herein. This obligation shall be binding upon the Company and shall continue for
a period of five (5) years from the date of this Agreement.
10. All non-public information given to Placement Agent by the Company
shall be treated by Placement Agent as confidential information and shall not be
used by Placement Agent except in rendering its services pursuant to this
Agreement. Placement Agent may rely, without independent verification, on the
accuracy and completeness of any information furnished to Placement Agent by the
Company, subject to its obligations under the securities laws.
11. In the event that Placement Agent becomes involved in any capacity in
any action, proceeding, investigation or inquiry in connection with any matter
referred to in this Agreement or arising out of the matters contemplated by this
Agreement, the Company shall reimburse Placement Agent for its legal and other
expenses (including the cost of any investigation and preparation) as they are
incurred by Placement Agent in connection therewith. The Company also agrees to
indemnify each of Placement Agent, the directors, officers, employees and agents
thereof (the "Indemnitees"), pay on demand and protect, defend, save and hold
each Indemnitee harmless from and against any and all liabilities, damages,
losses, settlements, claims, actions, suits, penalties, fines, costs or expenses
(including, without limitation, attorneys' fees) (any of the foregoing, a
"Claim") incurred by or asserted against any Indemnitee of whatever kind or
nature, arising from, in connection with or occurring as a result of this
Agreement or the matters contemplated by this Agreement. The foregoing agreement
shall be in addition to any rights that any Indemnitee may have at common law or
otherwise.
12. The Term of this Agreement shall be twenty-four (24) months commencing
on the date hereof. Thereafter, this Agreement shall continue on a month to
month basis until terminated by either party upon not less than sixty (60) days
notice with the monthly retainer fee payable on the first day of each month (the
"Extended Term"); provided, however that, regardless of any termination,
Paragraphs 4, 5, 6, 11, 13 and 15 shall survive. In addition to any retainer
fees, Placement Agent shall be entitled to the reimbursement of reasonable
expenses incurred by Placement Agent as a result of services rendered prior to
the date of the termination.
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13. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of
law. The parties hereto irrevocably consent to the jurisdiction of the courts of
the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Agreement, any document or instrument delivered pursuant to, in connection with
or simultaneously with this Agreement, or a breach of this Agreement or any such
document or instrument. In any such action or proceeding, each party hereto
waives personal service of any summons, complaint or other process and agrees
that service thereof may be made in accordance with this Section 13. Within
thirty (30) days after such service, or such other time as may be mutually
agreed upon in writing by the attorneys for the parties to such action or
proceeding, the party so served shall appear or answer such summons, complaint
or other process.
14. This Agreement shall be binding upon Placement Agent and the Company
and the successors and assigns of Placement Agent. The Company shall not assign
or sell all or substantially all of the Company's business and/or assets without
first requiring in writing that such assignee or successor is bound by the
provisions of this Agreement.
15. (a) Placement Agent shall not be in any way precluded from (i) entering
into similar agreements with companies which engage in similar business
activities or lines of business as the Company or developing or marketing any
products, services or technologies that do or may in the future compete,
directly or indirectly, with those of the Company, (ii) investing or owning any
interest publicly or privately in, or developing a business relationship with,
any corporation, partnership or other person or entity engaged in the same or
similar activities or lines or business as, or otherwise in competition with,
the Company or (iii) doing business with any client, collaborator, licensor,
consultant, vendor or customer of the Company. Placement Agent and any of its
officers, directors, employees or former employees and affiliates shall not have
any obligation, or be liable, to the Company solely on account of the conduct
described in the preceding sentence. The Company recognizes that Placement Agent
is not obligated to present any opportunities for an Investment, Sale,
Acquisition, Strategic Alliance or any other opportunities to the Company and
nothing in this Agreement shall be construed to limit Placement Agent's ability
to introduce Investment, Sale, Acquisition, Strategic Alliance or any other
opportunities to any other company. In the event that Placement Agent and/or any
officer, director, employee or former employee or affiliate thereof acquires
knowledge of a potential transaction, agreement, arrangement or other matter
which may be a corporate opportunity for both Placement Agent and the Company,
neither Placement Agent nor any of its officers, directors, employees or former
employees or affiliates shall have any duty to communicate or offer such
corporate opportunity to the Company and neither Placement Agent nor any of its
officers, directors, employees or former employees or affiliates shall be liable
to the Company for breach of any fiduciary or other duty, as a stockholder or
otherwise, solely by reason of the fact that Placement Agent or any of its
officers, directors, employees or former employees or affiliates pursue or
acquire such corporate opportunity for Placement Agent, direct such
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corporate opportunity to another person or entity or communicate or fail to
communicate such corporate opportunity or entity to the Company.
(b) The provisions of this Section 15 shall be enforceable to the fullest
extent permitted by law.
Please confirm that the foregoing is in accordance with your understanding
by signing and returning to us the enclosed duplicate of this letter.
Sincerely yours,
PLACEMENT AGENT
By:
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Name:
Title:
Confirmed as of the date hereof:
CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
By:
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Name:
Title:
