EXHIBIT 10.1
FINANCIAL ADVISORY AGREEMENT
This Financial Advisory Agreement (the "Agreement") is made as of the 29th day
of September, 2004 by and between BPI Industries, Inc., a British Columbia
corporation ("BPI" or the "Company") and Xxxxxxx Xxxxxx Xxxxxx Inc., a Texas
corporation ("SMH" or the "Advisor"). The term BPI or Company is understood to
include any entity in which the Company has an ownership, profits or similar
interest, including any entity formed for the purpose of facilitating a
Transaction (as defined herein).
Section 1. Engagement of Advisor. BPI hereby engages the Advisor, on an
exclusive basis for the term of this Agreement, and the Advisor hereby agrees,
to advise, consult with, and assist the Company in various matters including,
(i) a review of the Company's business, properties, operations and financial
condition, including advising on capitalization structures, capital raising,
joint ventures, and mergers and acquisitions, (ii) the preparation of
presentation materials including the development of a financial and valuation
model, (iii) to act as placement agent for one or more private placements of
debt or equity securities from financial investors or drilling credits or other
advances or contributions for development expenses from industry partners
("Private Placement"), (iv) to act as manager for the public offering of the
Company's debt or equity securities ("Public Offering"), and (v) to assist in
the evaluation, negotiation and closing of potential mergers, acquisitions or
joint ventures with other natural resource companies or properties ("M&A
Transaction"). Section 1 (iii), (iv), and (v) are collectively referred to as a
"Transaction". During the term of this Agreement, the Company agrees not to use
the services of any other investment banker regarding matters similar to those
outlined herein.
Section 2. Compensation. As compensation for services rendered to the
Company under this Agreement, the Company shall pay to the Advisor the following
compensation:
Section 2.1 In consideration of this Agreement, BPI shall pay the
Advisor a retainer of $50,000 (the "Advisory Fee") with payment due and
payable on the date of this Agreement.
Section 2.2 BPI agrees to pay to SMH a fee for completion of any
Private Placement as set forth in Exhibit A hereto. Any fee payable to the
Advisor under this Section 2.2 will be due in cash at the closing of the
transaction and shall be payable to the Advisor by the Company, provided,
however, that the Advisor shall not be entitled to any fee under this
Section 2.2 unless the closing of the Private Placement occurs during the
term of this Agreement or not later than 12 months after termination of
this Agreement. The fee for any subsequent financing shall be determined
as set forth in Exhibit A hereto.
Section 2.3 The Company agrees to pay to SMH a fee for completion of
any M&A Transaction as set forth in Exhibit B hereto. Any fee payable to
the Advisor under this Section 2.3 will be due in cash at the closing of
the transaction and shall be payable to the Advisor by the Company,
provided, however, that the Advisor shall not be entitled to any fee under
this Section 2.3 unless the closing of the transaction occurs during the
term of this Agreement or not later than 12 months after termination of
this Agreement with any M&A Transaction which was introduced by the
Advisor or with which the
Advisor became actively involved at the request of the Company during the
term of this Agreement.
Section 2.4 In the event that the Company desires to have the
Advisor furnish any formal written opinion as to the financial aspects of
any transaction, such as a fairness opinion or formal valuation, then such
transactions will be subject to a separate engagement. Such engagement
shall be in addition to the services contemplated by this Agreement and
shall be made under a separate agreement containing terms and provisions,
including the terms of compensation, to be mutually agreed upon at that
time.
Section 2.5 BPI will pay or reimburse the Advisor for all reasonable
out-of-pocket costs and expenses incurred by the Advisor solely in
performing its obligations under this Agreement, which costs and expenses
shall include, but not be limited to, travel expenses incurred in
performing its duties, including due diligence, in connection with this
Agreement and possible 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. 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 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 and copies of supporting documentation.
Section 2.6 SMH shall have a right of first refusal to act as lead
manager or co-manager on the next succeeding offering by the Company of
public securities or private placement of any equity or debt financing
conducted during the first 12 months following a Transaction which has
been closed pursuant to this Agreement, with a fee having been paid to SMH
pursuant to Section 2.2 or 2.3 of this Agreement. Such rights will survive
for a period of 12 months from the Closing Date or until completion of the
next succeeding transaction.
Section 3. Private Placement Memorandum. In connection with a Private
Placement or other transaction contemplated by this Agreement, the Company will
cooperate with SMH and will furnish SMH with all information and data concerning
the Company, the financing and such other information which SMH and the Company
deem appropriate (the "Information") and will provide SMH and any prospective
financing sources with access to the Company's officers, directors, independent
accountants and legal counsel. The Company warrants and represents that, to the
best of the Company's knowledge, all Information (a) provided or otherwise made
available to SMH by or on behalf of the Company or (b) contained in any private
placement memorandum prepared by the Company with respect to the Private
Placement (the "Memorandum") will, at all times during the period of the
engagement of SMH hereunder, be correct in all material respects and will not
contain any untrue statement of a material fact or omit a material fact
necessary in order to make the statements therein not misleading in light of the
circumstances under which such statements are made. The Advisor acknowledges
that all of such Information is proprietary to the Company and agrees to keep
such Information confidential and not to disclose any of such Information to any
third party, except for third parties to whom
SMH shall present such Information for purposes of evaluation of a Private
Placement or other transaction pursuant to this Agreement.
The Company further warrants and represents that any projections approved
or provided by it to the Advisor or contained in the Memorandum will have been
prepared in good faith and will be based upon assumptions which, in light of the
circumstances under which they are made, are reasonable. The Company
acknowledges and agrees that in rendering services hereunder, the Advisor will
be using and relying upon the Information (and information available from public
sources and other sources deemed reliable by SMH) without independent
verification thereof by SMH or independent appraisal by SMH of any of the
Company's assets.
Section 4. Business Practice. 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 which may be 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. 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.
Section 5. Indemnification. (a) BPI 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 "SMH Indemnified Party"), from and against any
and all losses, claims, damages, liabilities and expenses whatsoever, joint or
several, to which any such SMH 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 SMH Indemnified Party for any expenses (including
reasonable attorney fees and expenses) as they are incurred by an SMH
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 SMH Indemnified Party shall have entered into an
agreement with the Company whereby the SMH Indemnified Party agrees to repay all
such reimbursed amounts if it is determined in a final judgment by a court of
competent jurisdiction that the SMH Indemnified Party is not entitled to
indemnity from the Company. Notwithstanding the foregoing, the Company shall not
be liable to any SMH Indemnified Party under the this Section 5(a) to the extent
that (a) any loss, claim, damage, liability or expense is determined by a court
of competent jurisdiction to result directly from any such SMH Indemnified
Party's willful misconduct or gross negligence or (b) to the extent that the
Advisor is required to indemnify the Company pursuant to Section 5(b) hereof.
(b) The Advisor agrees to indemnify and hold harmless the Company, BPI and
their affiliates, agents, and advisors, and their respective directors,
officers, employees, agents and controlling persons (each individually a
"Company Indemnified Party'), from and against any and all losses, claims,
damages, liabilities and expenses whatsoever, joint or several, to which any
such Company 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
Advisor's breach of a representation, warranty or covenant herein, or actions or
inactions by the Advisor relating to or arising out of the engagement evidenced
hereby. The Advisor will reimburse any Company Indemnified Party for all
expenses (including reasonable attorney fees and expenses) as they are incurred
by such Company 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 Company Indemnified Party
shall have entered into an agreement with the Advisor whereby the Company
Indemnified Party agrees to repay all such reimbursed amounts if it is
determined in a final judgment by a court of competent jurisdiction that the
Company Indemnified Party is not entitled to indemnity from the Advisor.
Notwithstanding the foregoing, the Advisor shall not be liable to any Company
Indemnified Party under this section 5(b) to the extent that (a) any loss,
claim, damage, liability or expense is determined by a court of competent
jurisdiction to result directly from any such Company Indemnified Party's
willful misconduct or gross negligence, or (b) to the extent the Company is
required to indemnify the Advisor therefore pursuant to section 5(a) hereof.
(c) If for any reason (other than a final non-appealable judgment finding
any SMH Indemnified Party or the Company or Company Indemnified Party (any such
party, an "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 other party 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, the Advisor and each
Indemnified Party, as well as any relevant equitable considerations, subject to
the limitation that in no event shall the total contribution of all SMH
Indemnified Parties to all such losses, claims, damages, liabilities or expenses
exceed the amount of fees actually received and retained by the Advisor
hereunder.
Section 6. Term of Agreement. This Agreement shall terminate 6 months
after the date hereof unless extended by mutual agreement. Upon termination of
this Agreement, neither party shall have any further rights or obligations to
the other, except that (i) the Company shall be obligated to pay fees under
Sections 2.2 and 2.3 hereof relating to transactions commenced by SMH prior to
termination of the Agreement and closed within 12 months from the date of
termination, (ii) the Company shall be obligated to reimburse expenses under
Section 2.5 incurred by the Advisor during the period prior to termination of
this Agreement or related to transactions continuing beyond termination of the
Agreement, and (iii) the Advisor and the Company shall continue to be bound by
the provisions of Section 5 hereof.
Section 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.
Section 8. 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 XXXXXX INC.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxxx X. Xxxxxxxxxxx
Xxxx X. Xxxxxxx
(000) 000-0000
Fax: (000) 000-0000
Company: BPI Industries, Inc.
000 X. Xxxxxxx Xxxxxx, Xxxxx 0000 000 Xxxx XxXxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx Marion, IL 62959
V6C 1V5 Canada
Attn: Xxxxx X. Xxxxxx Attn: Xxxxx X. Xxxxxx
(000) 000-0000 (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
Section 9. Parties. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Section 10. 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.
Section 11. 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 XXXXXX INC. BPI INDUSTRIES, INC.
/s/ Xxxxxxxx X. Xxxxxxxxxxx /s/ Xxxxx X. Xxxxxx
------------------------------- ----------------------
By: Xxxxxxxx X. Xxxxxxxxxxx By: Xxxxx X. Xxxxxx
Managing Director President
EXHIBIT A
FINANCING FEES
1. Fee for Private Equity.
In the event the Company consummates a Private Placement of its equity
securities pursuant to the terms of this Agreement, then the Company shall pay
to the Advisor a fee equal to seven percent (7%) of the aggregate gross proceeds
of such equity financing. Also, the Advisor shall be granted a five-year warrant
for common shares or an equivalent interest equal to 10% of the value of the
Private Placement, at a price equal to the effective price of the Financing. For
the purposes of this Agreement, equity securities shall be deemed to include any
form of common or preferred stock or any security or instrument which is
directly or through warrants, options, or similar instruments, convertible into,
or exchangeable for, equity securities of the Company. Not withstanding the
foregoing, it is understood that with respect to any investment made by entities
affiliated with Xxxxxx X. Vessels, no fee shall be payable to the Advisor, and
with respect to RAB Capital or Xxxxxxxx Investment Management, the fee payable
to the Advisor will be equal to twenty five percent (25%) of the amounts shown
above, although the first $10 million in any private equity placement will be
reserved for the Advisor to place with investors other than those referred to in
this sentence.
2. Fee for Private Debt.
In the event the Company consummates a private placement of debt pursuant
to the terms of this Agreement, then the Company shall pay to the Advisor a fee
equal to 3% of the principal amount of any subordinated debt, 2% of the
principal amount of any senior debt of up to $10,000,000 in any single
placement, and 1% of the principal amount of senior debt over $10,000,000 in any
single placement; provided that the minimum fee for any private debt financing
will be $200,000. For the purposes of this Agreement, senior debt shall be
deemed to mean bank or similar financing based on a first priority lien on
reserves consisting primarily of proved reserves and subordinated debt shall be
deemed to mean any mezzanine or similar financing based on a first or second
lien on proved reserves and including a substantial portion of the commitment
being made available to drill proved undeveloped properties or provide for other
capital expenditures.
3. Public Debt or Equity.
In the event the Company undertakes a public offering of its debt or
equity securities for which the Advisor serves as manager, 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.
Such fees, underwriting spreads, expense reimbursements and other transaction
costs may reflect negotiations with an underwriting group for which the Advisor
will act as lead manager or a co-manager.
EXHIBIT B
ACQUISITION AND BUSINESS COMBINATION TRANSACTION FEES
In the event the Company consummates an acquisition, divestiture, merger,
joint venture or other business combination, or other similar transaction
involving the Company and a party introduced by SMH, or with which the Advisor
has become actively involved at the request of 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 or received 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; however, in no
case will the aggregate fee be less than $200,000. Any fee payable to the
Advisor shall be payable in cash at the closing of the transaction.
As used herein, "Purchase Price" shall include (i) cash paid in the
transaction, whether in the form of payments to the Company, its shareholders,
or third parties such as for drilling credits, expense reimbursements or similar
types of payment, (ii) the fair market value of any notes or other securities
issued, (iii) the fair market value of any other property transferred in
connection with the transaction, (iv) balance sheet indebtedness (including
capital leases) assumed in connection with the transaction and (v) cash or the
fair market value of property paid to any officers, directors, employees or
affiliates as consideration for any covenant not to compete or similar agreement
related to the transaction. In the event any contingent consideration is agreed
to be paid 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.
In the case of a joint venture or similar transaction, such as those more
common with industry operating partners, "Purchase Price" shall include any
amounts paid directly to BPI or to any third parties which are designed to earn
BPI interests in leases, xxxxx, production or any related types of assets.
