EXHIBIT 10.7
CONFIDENTIAL
March 31, 2003
Mr. Xxxx Xxx
CEO
American Oriental Bioengineering Inc.
00 Xxxxxx Xxxx, Xxxxxxx Xxxxxxxx
Xxxxxx, Xxxxx X0 00000
Dear Xx. Xxx:
The purpose of this letter is to describe the terms upon which
FirsTrust Group, Inc. ("FirsTrust") has agreed to introduce American Oriental
Bioengineering (AOBO, OTCBB) and its affiliates (the "Company") to certain
potential investors (each, a "Counterparty"). The purpose of the introduction is
to permit the Company to consider a possible financial transaction with the
Counterparty.
This agreement confirms that the Company and their respective
representatives, members, agents, associates, employees, consultants, companies,
subsidiaries, businesses and/or entities (collectively, "Representatives"),
hereby agree that they will not directly or indirectly circumvent payment of any
fees, or attempt circumvention or otherwise engage in any transaction with any
Counterparty introduced by FirsTrust without the payment of the fees set forth
in this agreement. This agreement confirms our understanding that the Company
shall be responsible for the payment of fees to FirsTrust in the event the
Company receives funding from a Counterparty through the direct or indirect
efforts of FirsTrust within two year after such introduction to the Company of
such Counterparty by FirsTrust. The Counterparties introduced to the Company
will be listed on an Addendum A (as attached), which will be updated as
additional investors are introduced to the Company.
If, within the two-year period commencing on the date hereof, the
Counterparty, singly or with others, purchases debt or equity securities of the
Company (or otherwise makes an investment in the Company), FirsTrust or its
designee(s) will be paid at the time of the closing of such transaction:
A) Cash fee equal to nine percent (9%) of the total investment by the
Counterparty, including all amounts placed in an escrow account or
payable in the future (including future issuances resulting from
anti-dilution provisions) and all amounts paid or payable upon
exercise, conversion or exchange of such securities received or
receivable directly by the Company ("Aggregate Consideration") in
any placement of the Company's securities in connection with
FirsTrust's efforts hereunder. All cash fee shall be paid directly
out of an escrow arrangement at the closing;
B) Common Stocks equal to two percent (2%) of the funds invested by
the Counterparty. The exact share number will be determined by the
purchase price of the Counterparty. The common stocks should be
either free tradable or registered for sale immediately after the
closing;
C) Five years warrants (the "Warrants") purchasing 250,000 shares of
common stock per $1,000,000 of the value of the investment made by
the Counterparty. The exercise price of the Warrants shall equal
to 120% of the purchase price by the Counterparty. The Warrants
shall be exercisable immediately after the date of issuance, and
shall expire 5 years after the date of issuance, unless otherwise
extended by the Company. The Warrants shall include customary
anti-dilution protection, including protection against issuances
of securities at prices (or with exercise prices, in the case of
warrants, options or rights) below the lower of the exercise price
of the Warrants of the then fair market value of the underlying
common equity, a cashless exercise provision and will be
non-redeemable and provide for automatic exercise upon expiration.
The Warrant shall be transferable, subject only to the securities
laws, by the holders thereof.
If alternatively, within the period described above, the Counterparty,
singly or with other investors, acquires or causes the Company, or substantially
all of the Company's assets or businesses to be acquired, FirsTrust will be paid
at the time of the closing of such transaction an amount equal to 5% of the
value of the Aggregate Consideration received by the Company or its
stockholders.
For the purpose of this Agreement, "Aggregate Consideration" shall mean
the value of all cash, securities and the other property paid by the acquiring
party to a selling party in connection with a business combination, plus all
amounts paid by the Company or an acquiring party to holders of options or stock
appreciation rights, whether vested or not vested. In this connection, the value
of securities (whether debt or equity) that are freely tradable in an
established public market will be determined on the basis of the last closing
price in such market prior to the consummation of the business combination (the
"Valuation Date"), and the value of securities that are not freely tradable (or
have no established public market) or other property will be the fair market
value of such securities or other property on such Valuation Date. Aggregate
Consideration shall also be deemed to include any indebtedness for money
borrowed, including pension liabilities and guarantees, assumed by the acquirer
in connection with any business combination.
You understand that FirsTrust is providing services as a consultant and
is not providing investment banking advisory or financing services. FirsTrust
disclaims any responsibility for accurately describing or recommending any
transaction that the Company may engage in. FirsTrust's obligation with respect
to any Transaction is solely as described herein and you agree that you shall
not make any representation that FirsTrust endorses or sponsors the Company or
its securities, has performed any due diligence with respect to the Company or
has participated in any way in pricing the securities or structuring any
transaction. You agree that no reference to FirsTrust will be made in any press
release or advertisement of any transaction with the Counterparty without the
express approval, in writing, of such release or advertisement by FirsTrust.
You further agree to indemnify FirsTrust and its officers, directors,
employees, agent and controlling persons from any liability, claim, damage,
expense (including reasonable legal fees) arising from or related to (i) any
transaction, whether or not consummated, with the CounterParty or (ii) any
breach of the representations in the immediately preceding paragraph, in this
connection, you agree to pay such liabilities, claims, damages or expenses as
incurred.
-2-
This Agreement shall be construed according to the laws of the State of
Georgia and subject to the jurisdiction of the courts of said state, without
application of the principles of conflicts of laws. Each of the parties'
consents exclusively to personal jurisdiction in the Xxxxxx County, Georgia,
waives any objection as to jurisdiction or venue, and agrees not to assert any
defense based on lack of jurisdiction or venue. In any litigation, arbitration,
or other dispute resolution arising out of or relating to this Agreement, the
prevailing party shall be reimbursed by the other party (as determined by a
court of competent jurisdiction) for reasonable attorneys' fees and/or
arbitration costs.
This Agreement may be executed in any number of counterparts each of
which shall be enforceable against the parties executing such counterparts, and
all of which together shall constitute a single document. Except as otherwise
stated herein, in lieu of the original documents, a facsimile transmission or
copy of the original documents shall be as effective and enforceable as the
original.
You hereby represent, warrant and covenant as follows;
(i) The Company has the full right, power and authority to
enter into this Agreement and to perform all of its obligations
hereunder, (ii) this Agreement has been duly authorized and executed by
and constitutes a valid and binding agreement of the Company
enforceable in accordance with its terms, (iii) the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby do not conflict with or result in a breach of (A)
The Company's certificate of incorporation or by-laws, or (B) any
agreement to which the Company is a party or by which any of its
property or assets is bound.
If the foregoing is consistent with our understanding, please sign the
enclosed copy of this letter in the space indicated below and return it to the
undersigned.
Very truly yours,
FirsTrust Group, Inc.
By:
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Accepted and Agreed:
American Oriental Bioengineering Inc.
By: /s/ Xxxx Xxx
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Mr. Xxxx Xxx, Chief Executive Officer
Date: 2003.4.1
