FINANCIAL ADVISORY AGREEMENT
This Financial Advisory Agreement (the "Agreement") is made as of May 15,
1997, by and between US LIQUIDS INC., a Delaware corporation (the "Company"),
and XXXXXXX XXXXXX XXXXX INC. (the "Advisor").
1. ENGAGEMENT OF ADVISOR. The Company hereby engages the Advisor on a
non- exclusive basis, and the Advisor hereby agrees, to advise, consult with,
and assist the Company on a non-exclusive basis, in (i) the development,
implementation and operation of an expansion and acquisition program, (ii) the
identification and structuring of and negotiation with potential sources of
capital for the Company, and (iii) such other matters as the parties hereto may
mutually agree.
2. COMPENSATION. As compensation for services rendered to the Company
under this Agreement, the Company shall pay to the Advisor the following
compensation:
2.1 In consideration of this Agreement, the Company shall issue to
the Advisor an assignable warrant representing the right of the holder to
purchase 200,000 shares of the common stock of the Company at an exercise
price equal to the price at which shares are offered to the public in the
Company's initial public offering (the "Advisor's Warrant"). Such
Advisor's Warrant shall have a term of five years, shall be fully vested to
the Advisor at the date of issuance, shall provide for customary weighted
average anti-dilution adjustments to the exercise price and number of
shares issuable under the warrant, and shall include such other terms as
are agreed to by the parties hereto. In addition, the Company shall grant
to the Advisor piggyback registration rights (not including the
registration of the initial public offering) with respect to the common
stock issuable upon exercise of the Advisor's Warrant.
2.2 The Company agrees to pay to the Advisor a fee for the following
transactions which are introduced to the Company by the Advisor or arranged
by the Advisor during the term of this Agreement: (i) any acquisition,
business combination, or other transaction involving the Company and
another party (whether in the form of an asset purchase, a stock purchase,
or a merger, consolidation or any other business combination transaction,
and regardless of whether the consideration is paid by the Company or the
other party to the transaction) and (ii) any financing transaction (whether
debt or equity, public or private; provided, however, that the issuance of
securities to a seller in a transaction shall not be deemed to be a
financing transaction for the purposes of this Agreement but the value of
such securities shall be included in determining the amount of acquisition
and business combination fees payable hereunder). The fee for any
acquisition, business combination, or other transaction shall be determined
as set forth in Exhibit A hereto. The fee for any financing transaction
shall be determined as set forth in Exhibit B hereto. Any fee payable to
the Advisor under this section 2.2 will be due and payable to the Advisor
in cash at the closing of the transaction. If the Company desires to
engage the Advisor to furnish any opinion as to the financial aspects of
any transaction, such engagement shall be in addition to the services
contemplated hereunder and shall be under separate agreement containing
terms and provisions, including the terms of compensation, to be mutually
agreed upon.
2.3 The Company will pay, or reimburse the Advisor for, all
reasonable out of pocket costs and expenses incurred by the Advisor in
performing its obligations under this Agreement, which costs and expenses
shall include, but not be limited to, travel expenses including but not
limited to those incurred in attending meetings of the Company's Board of
Directors, expenses incurred in performing due diligence in connection with
transactions, legal fees and expenses, costs of supplies, copying and
mailing and all other expenses reasonably incurred by the Advisor in
performing its obligations under this Agreement; provided however, that the
Advisor shall obtain the prior approval of the Company for any expenditures
in excess of $1,000 in the aggregate per month, which approval shall not be
unreasonably withheld. In seeking reimbursement for expenses, the Advisor
shall provide to the Company a written statement or statements detailing
expenses for which reimbursement is sought and, upon request by the
Company, shall provide copies of invoices and other documentation
supporting such expenses. Reimbursable expenses shall be payable by the
Company within 30 days of receipt by the Company of such written statement
or, if requested by the Company, copies of supporting documentation.
2.4 Within 30 days following the termination of this Agreement, the
Advisor shall submit to the Company a listing of all persons introduced
to the Company by the Advisor and all transactions introduced
to or arranged by the Advisor during the term of this Agreement. Within
15 days after the receipt of such listing, the Company shall have the
right to object to the inclusion of any person or transaction identified
on the list on the basis that such person or transaction was not
introduced or arranged by the Advisor. In such event, the Company and
Advisor shall use their best, good faith efforts to resolve the Company's
objections. The Company shall pay fees to the Advisor, on the terms and
in the amounts set forth in this Agreement, upon the closing or
consummation by the Company of a transaction which involves any person
(including any officer, director, employee or affiliate thereof) or
transaction included on the Advisor's listing and to which no objection
was made and maintained by the Company, provided that such closing occurs
within one year after the termination of this Agreement.
3. NONEXCLUSIVITY. The Company recognizes that the Advisor is in the
business of advising and consulting with other businesses, some of which
businesses may be in competition with the Company. The Company acknowledges and
agrees that the Advisor may advise and consult with other businesses, including
those in competition with the Company, and shall not be required to devote its
full time and resources to performing services on behalf of the Company under
this Agreement or to introducing potential acquisition, business combination or
financing transactions to the Company. The Advisor shall only be required to
expend such time and resources as are reasonably appropriate to advise and
assist the Company as provided for herein. The Advisor acknowledges that this
Agreement is nonexclusive with respect to the Company, and that the Company may
employ other advisors.
4. CONFIDENTIALITY. Except for information which becomes generally
available to the public other than as a result of disclosure by the Advisor in
violation of this Agreement, or which was obtained by the Advisor from a person
that was not subject to any confidentiality agreement with the Company, the
Advisor agrees that all information provided by the Company to it will be used
solely by the Advisor, its officers, directors, employees and agents for the
purposes of providing services to the Company pursuant to this Agreement and
that, except as required by law, such information will not be disclosed to any
person for any other reason.
5. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
the Advisor and its affiliates, agents, and advisors, and their respective
directors, officers, employees, agents and controlling persons (each such person
is hereinafter referred to as an "Indemnified Party"), from and against any and
all losses, claims, damages, liabilities and expenses whatsoever, joint or
several, to which any such Indemnified Party may become subject under any
applicable federal or state law of the United States of America or otherwise,
caused by, relating to or arising out of the engagement evidenced hereby. The
Company will reimburse any Indemnified Party for all expenses (including
reasonable counsel fees and expenses) as they are incurred by an Indemnified
Party in connection with the investigation of, preparation for or defense of any
pending or threatened claim or any action or proceeding arising therefrom,
whether or not resulting in liability; provided, however, that at the time of
such reimbursement the Indemnified Party shall have entered into an agreement
with the Company whereby the Indemnified Party agrees to repay all such
reimbursed amounts if it is determined in a final judgement by a court of
competent jurisdiction that the Indemnified Party is not entitled to indemnity
from the Company. Notwithstanding the foregoing, the Company shall not be
liable to any Indemnified Party under the foregoing indemnification provision to
the extent that any loss, claim, damage, liability or expense results directly
from any such Indemnified Party's misconduct or negligence.
If for any reason (other than a final non-appealable judgement finding any
Indemnified Party liable for losses, claims, damages, liabilities or expenses
for its gross negligence or willful misconduct) the foregoing indemnity is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party
harmless, then the Company shall contribute to the amount paid or payable by an
Indemnified Party as a result of such loss, claim, damage, liability or expense
in such proportion as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and the Advisor on the other, but also
the relative fault by the Company and the Indemnified Party as well as any
relevant equitable considerations, subject to the limitation that in no event
shall the total contribution of all Indemnified Parties to all such losses,
claims, damages, liabilities or expenses exceed the amount of fees actually
received and retained by the Advisor hereunder.
6. TERM OF AGREEMENT. This Agreement shall one year from the date hereof.
Upon termination of this Agreement, neither party shall have any further rights
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or obligations to the other, except that (i) the Company shall be obligated
under section 2.1 hereof for consideration which was due and payable during
the period prior to termination of this Agreement, (ii) the Company shall be
obligated to pay fees under section 2.2 hereof relating to transactions
commenced by the Company prior to termination of this Agreement and closed
within one year from the date of termination if such transaction is specified
or is with a person identified on the list delivered pursuant to section 2.4,
(iii) the Company shall be obligated to reimburse expenses under section 2.3
incurred by the Advisor during the period prior to termination of this
Agreement, (iv) the Advisor and the Company shall continue to be bound by the
provisions of sections 4 and 5 hereof, (v) the Advisor shall be obligated to
return all Company confidential information related to this engagement, and
(vi) the Advisor shall seek to complete any specific engagement for the
Company previously undertaken by it.
7. RELATIONSHIP OF PARTIES. The parties agree that their relationship
under this Agreement is an advisory relationship only, and nothing herein shall
cause the Advisor to be partners, agents or fiduciaries of, or joint venturers
with, the Company or with each other.
8. FINANCINGS. During the term of the Advisor's engagement hereunder, the
Advisor shall have the exclusive right (but not the obligation) to act as
private placement agent or co-managing underwriter, as the case may be, in the
event that the Company determines to make a private placement or public offering
of any of its securities (each, a "Financing"), subject to the Company's
consent, which consent shall not be unreasonably withheld. If the Company
determines to pursue a Financing, the Advisor and the Company will enter into an
agreement appropriate to the circumstances, containing provisions for, among
other things, compensation, indemnification, contribution, and representations
and warranties, which are usual and customary for similar agreements entered
into by the Advisor or other investment bankers of similar standing acting in
similar transactions, acceptable in form and substance to the Advisor and its
counsel. The Advisor shall have no obligation to act as placement agent or
underwriter or to place or purchase any securities of the Company. Any fee
payable to the Advisor in connection with a Financing shall be reduced by any
amount paid to the Advisor by the Company under Section 2.1 hereof, unless
previously credited under the terms of this agreement.
9. NOTICES. All notices required or permitted herein must be in writing
and shall be deemed to have been duly given the first business day following the
date of service if served personally, on the first business day following the
date of actual receipt if delivered by telecopier, telex or other similar
communication to the party or parties to whom notice is to be given, or on the
third business day after mailing if mailed to the party or parties to whom
notice is to be given by registered or certified mail, return receipt requested,
postage prepaid, to the Advisor and to the Company at the addresses set forth
below, or to such other addresses as either party hereto may designate to the
other by notice from time to time for this purpose.
Advisor: XXXXXXX XXXXXX XXXXX INC.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
attn: Xxx X. Xxxxxx
telecopy no. (000) 000-0000
Company: US LIQUIDS INC.
000 X. Xxx Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: President
telecopy no. (000) 000-0000
10. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
11. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas, except for its conflicts of law
principles.
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12. ENTIRE AGREEMENT, WAIVER. This Agreement constitutes the entire
Agreement between the parties hereto and supersedes all prior Agreements
relating to the subject matter hereof. This Agreement may not be amended or
modified in any way except by subsequent Agreement executed in writing. Either
the Company or the Advisor may waive in writing any term, condition, or
requirement under this Agreement which is intended for its own benefit, and
written waiver of any breach of such term or condition of this Agreement shall
not operate as a waiver of any other breach of such term or condition, nor shall
any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision hereof.
XXXXXXX XXXXXX XXXXX INC.
/s/ Xxxxx X. XxXxxxx
---------------------------------
BY: Xxxxx X. XxXxxxx
Vice President
US LIQUIDS INC.
/s/ W. Xxxxxxx Xxx
---------------------------------
BY: W. Xxxxxxx Xxx
its: Chief Executive Officer
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EXHIBIT A
ACQUISITION AND BUSINESS COMBINATION TRANSACTION FEES
1. FEE FOR IDENTIFYING AND NEGOTIATING A TRANSACTION.
In the event the Company consummates an acquisition, business combination,
or other transaction involving the Company and another party and the Advisor
introduced representatives of the Company to representatives of the other party
and assisted in negotiating such transaction for the Company, then the Company
shall pay to the Advisor a fee with respect to such transaction equal to a
percentage amount of the Purchase Price (as defined below) paid by the Company
in the transaction, which percentage amount shall be 5% of the first $1 million
or portion thereof of the Purchase Price, 4% of the next $1 million or portion
thereof of the Purchase Price, 3% of the next $1 million or portion thereof of
the Purchase Price, 2% of the next $1 million or portion thereof of the Purchase
Price, and 1% of the balance of the Purchase Price. Any fee payable to the
Advisor shall be payable in cash at the closing of the transaction unless
otherwise agreed. As used herein, "Purchase Price" shall include (i) cash paid
to sellers, (ii) the fair market value of any securities issued to sellers,
(iii) the fair market value of any other property transferred to sellers in
connection with the acquisition, (iv) balance sheet indebtedness assumed by the
Company in connection with the acquisition and (v) cash or the fair market value
of property paid by the Company to any officers, directors, employees or
affiliates of seller as consideration for any covenant not to compete or similar
agreement related to the transaction. In the event the Company agrees to pay
any contingent consideration in connection with such transaction (such as, for
example, consideration payable upon the fulfillment of some condition or event
which may or may not occur in the future), then such contingent consideration
shall be included in the Purchase Price, and the Advisor shall be paid its fee
with respect to that contingent consideration as and when it is paid by the
Company. If the Advisor is entitled to a fee under this paragraph 1, then the
Advisor shall not be entitled to a fee under paragraph 2 or 3.
2. FEE FOR IDENTIFYING A TRANSACTION.
In the event the Company consummates a acquisition, business combination,
or other transaction involving the Company and another party and the Advisor
introduced representatives of the Company to representatives of the other party
but the Advisor did not assist in negotiating such transaction for the Company,
then the Company shall pay to the Advisor a fee with respect to such transaction
in an amount equal to 50% of the amount determined pursuant to paragraph 1
above, "Fee for Identifying and Negotiating a Transaction". Any fee payable to
the Advisor shall be payable in cash at the closing of the transaction unless
otherwise agreed. In the event the Company agrees to pay any contingent
consideration in connection with such transaction (such as, for example,
consideration payable upon the fulfillment of some condition or event which may
or may not occur in the future), then such contingent consideration shall be
included in the Purchase Price, and the Advisor shall be paid its fee with
respect to that contingent consideration as and when it is paid by the Company.
If a fee is payable to the Advisor under this paragraph 2, then the Advisor
shall not be entitled to a fee under paragraph 1 or 3.
3. FEE FOR NEGOTIATING AND CONSUMMATING A TRANSACTION.
In the event the Company undertakes any acquisition, business combination,
or other transaction involving the Company and another party and the Advisor did
not participate in or arrange the introduction of representatives of the Company
to representatives of the other party, but in which transaction the Advisor
assisted in the negotiation and consummation thereof for the Company, the
Company shall pay to the Advisor a fee, to be determined by the Company and the
Advisor for that transaction, which is reasonable and customary for such
services in the investment banking industry. Any such fee payable to the
Advisor shall be payable in cash at the closing of the transaction unless
otherwise agreed. If the Advisor is entitled to a fee under this paragraph 3,
then the Advisor shall not be entitled to a fee under paragraph 1 or 2.
EXHIBIT B
FINANCING FEES
1. FEE FOR PRIVATE EQUITY, OR PUBLIC DEBT OR EQUITY, FINANCING
TRANSACTIONS.
In the event the Company consummates a private placement of its equity
securities (the "Private Offering") for which the Advisor serves as placement
agent, then the Company shall pay to the Advisor a commission equal to seven
percent (7%) of the aggregate gross proceeds of the Offering. For the purposes
of this Agreement, equity securities shall be deemed to include any security or
instrument which is convertible into, or exchangeable for, equity securities of
the Company. If the Advisor serves as placement agent, the Advisor has the
right to form and manage a group of securities brokers or dealers to assist in
the Offering, as the case may be, to whom the Advisor may reallow all or a
portion of the commissions payable by the Company under this Agreement.
In the event the Company undertakes a public offering of its debt or equity
securities (the "Public Offering") for which the Advisor serves as underwriter,
then the Company shall pay to the Advisor a fee with respect to that offering in
an amount, to be determined by the Company and the Advisor for each transaction,
which is reasonable and customary for such services in the investment banking
industry.
2. FEE FOR PRIVATE DEBT FINANCING TRANSACTIONS.
In the event the Advisor assists the Company in securing debt financing,
then the Company shall pay to the Advisor a commission equal to one percent (1%)
of the amount of such debt in the case of senior debt obligations of the
Company, and three percent (3%) of the amount of such debt in the case of all
other debt obligations of the Company. In addition, whether or not such debt is
successfully placed, the Company shall provide the Advisor with an accountable
expense allowance to cover the Advisor's fees and expenses incurred in
connection therewith, including fees of attorneys and accountants.
3. FEES AND EXPENSES GENERALLY.
In addition to the foregoing fees, other than in the case of private debt
financing transactions, if a Private or Public Offering is consummated in which
the Advisor serves as placement agent or underwriter, unless mutually agreed
otherwise, the Company shall provide the Advisor with a nonaccountable expense
allowance equal to one percent (1%) of the gross proceeds therefrom. In the
event such a Private or Public Offering is not consummated, or in the case of
private debt financing transactions, the Company shall provide the Advisor with
an accountable expense allowance to cover the Advisor's reasonable fees and
expenses incurred in connection therewith, including reasonable fees of
attorneys and accountants.
If the Advisor is not the sole placement agent or underwriter in connection
with a transaction identified in this Exhibit B, the fees and expenses set forth
herein shall be allocated among the placement agents or underwriters as a group.
The amount of any fee under this Exhibit B shall be negotiated in good
faith by the parties hereto in the event that a fee is also payable to the
Advisor in respect of a simultaneous acquisition and business combination
transaction transaction.
