EXHIBIT 10.4 - Financial Advisory Agreement with LM Investment Group, Inc.
LM Investment Group, Inc.
000 XX 00xx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
May 1, 2000
Xxx Xxxxxxxx
CEO
Pipeline Technologies, Inc., Inc..
0000 Xxxxx Xxxxxx
Xxxxx Xxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
Gentlemen,
The purpose of this letter is to confirm the engagement of LM Investment
Group, Inc.(LMIG) as exclusive placement agent and financial advisor for
Pipeline Technologies, Inc. Inc. for the Engagement Period (as herein defined),
in connection with a proposed private offering of 1,000,000 minimum / 3,000,000
maximum shares to be priced at $2.00 per share on the terms set forth on the
Term Sheet hereto (the "Financing"). The terms pursuant to which LMIG is to
assist and advise the Company in connection with the Financing are:
1. Services. The Company hereby engages LMIG as its exclusive placement agent
and financial advisor in connection with the Financing. In connection
therewith, LMIG shall provide the following services: (i) advise the
Company with respect to the form and structure of the proposed Financing;
(ii) assist the Company in developing any necessary materials; (iii)
identify and make contact with prospective financing sources; (iv) assist
the Company in conducting presentations and due diligence meetings with
prospective financing sources; and (v) assist the Company in obtaining a
Nasdaq small-cap market listing; & (vi) provide such other financial and
advisory and investment banking services required to close the Financing.
The Financing is to be placed by LMIG on a "best efforts" basis to
accredited investors.
2. Information. In connection with LMIG activities on the Company's behalf,
the Company will furnish LMIG or prospective financing sources with all
information that it may reasonably request and provide LMIG or prospective
financing sources reasonable access to Company officers, directors,
accountants and counsel.
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3. Documentation. The Company and it's counsel shall prepare a Private
Placement Memorandum or said other documentation which in the opinion of
company counsel is sufficient for the financing; and the Company and its
counsel shall prepare any Notes, Certificates of Designation, or other
certificates that may be necessary representing the securities to be sold
in the Financing. The Company will pay all expenses incurred in connection
with the preparation and the printing of any such documents, as well as its
own accounting, legal, travel and other expenses incurred in connection
with the Financing.
4. Compensation. In consideration of LMIG services, LMIG shall be entitled to
receive, and the Company hereby agrees to pay LMIG the following:
(a) A $10,000 retainer vs. expenses due upon the execution of this
agreement; plus;
(b) Upon closing (or any partial closing) of the Financing, a consulting
fee equal to 10% of the gross proceeds of the Financing plus
accountable expenses up to 3% plus;
(c) Upon the closing of the Financing, seven year warrants to purchase 15%
of the common shares sold by LMIG in the Financing, exercisable at
same price ($2.00) as the offering; plus
(d) A one year advisory agreement providing for payment of $5,000.00 per
month in consideration for investor relations consultative efforts
inclusive but not limited to, reverse split analyses/merger &
acquisitions analyses and financial public relations support; plus
(e) First right of refusal
5. Expenses. In addition to the compensation described in Section 4 above, the
Company agrees to promptly reimburse LMIG, upon request from time to time,
for all out-of-pocket accountable expenses incurred (including, without
limitation, all printing, mailing, reproduction, word processing, travel
and lodging expenses reasonable fees and disbursements of LMIG' counsel
(not to exceed $5,000 without written Company approval, and fees and
disbursements of other consultants and advisors retained by LMIG with the
Company consent) in connection with LMIG services pursuant to this
Agreement.
6. Conditions to Financing. LMIG engagement hereunder is subject to the
satisfaction, in its sole discretion, of the following conditions:
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(a) LMIG due diligence investigation of the Company, including, without
limitation, background searches, customer evaluations, market
analysis, financial statements, business prospects, financial
projections, etc;
(b) A capitalization structure reasonably acceptable to LMIG which shall
consist of (I) no more than an aggregate of 15 million shares of fully
diluted Common Stock.
(c) If the business plan is not met within 75% of the profomas of the
business plan (as to sales and earnings), the offering price will be
reset.
(d) The approval of LMIG Commitment Committee;
(e) The execution of an Agency Agreement containing such other
representations and covenants of the Company as are customarily
included in such agreement; and
(f) There being no material adverse change in the business of the Company
or in general market conditions.
(g) LMIG will get one seat on the Pipeline Technologies, Inc. board of
directors.
7. Indemnification. The Company shall indemnify LMIG under its standard
indemnification provisions attached hereto and made a part hereof.
8. Termination. (a) As long as LMIG is proceeding in good faith with the
preparations of the Financing, the Company agrees not to enter into any
agreement with or solicit any underwriter, placement agent, financial
advisor or other person in connection with an offering of the Company's
securities for at least 90 days following LMIG receipt of financing
documents allowing for subscription to the Financing or July, 2000
whichever is earlier.
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9. Registration. The 1,000,000 - 3,000,000 shares sold as part of the offering
must become registered ( a registration statement must be filed and
declared effective within six months of the close of the offering). If this
is not attained, supplemental shares at the rate of 10% per month will be
issued to the investor until their stock is fully registered.
10. Future Transactions. (a) The Company hereby agrees that if at any time
within 90 days from the later of (I) the date hereof, (ii) the date of the
closing of the Financing, or (iii) the date of termination of this
Agreement (the "Effective date"), the Company (or any of its subsidiaries
or affiliated entities or successors) obtains any financing from any person
or entity introduced by LMIG, the Company will pay to LMIG the fees set
forth in Sections 4(b) and 4(c) above. The Company also agrees that in the
event that if at any time within one year from the Effective Date, the
Company enters into or consummates any merger or other business
combination, or any acquisition or sale of 25% or more of the stock or
assets of such selling entity (each a "Sale Transaction") with any person
or entity introduced by LMIG, the Company will pay to LMIG a fee equal to
three percent (3%) of the " total consideration" paid to or received by the
Company and its shareholders in such Sale Transaction, such fee to be paid
at the closing of the transaction to which it relates in the same manner,
kind and proportion as the consideration paid in such transaction. For
purposes hereof, "total consideration" shall include, but not limited to,
cash, the face or fair market value of any debt or equity securities
issued, any long term debt assumed or paid off, and any severance,
non-compete or other payments in excess of standard amounts.
11. Governing Law/Resolution of Disputes. The validity and interpretation of
the Agreement shall be governed by the laws of the State of Florida
applicable to agreements made to be fully performed therein. LMIG and the
Company will attempt to settle any claim or controversy arising out of this
Agreement through consultation and negotiation in good faith and a spirit
of mutual cooperation. If those attempts fail, then the dispute will be
mediated by a mutually acceptable mediator to be chosen by LMIG and the
Company within 15 days after written notice from either party demanding
mediation. Neither party may unreasonably withhold consent to selection of
a mediator, and the parties will share the costs of the mediation equally.
Any dispute which the parties cannot resolve through negotiation or
mediation within six months of the date of the initial demand for it by one
of the parties may then be submitted to binding arbitration under the rules
of the American Arbitration Organization of New York for resolution.
The use of mediation will not be construed under the doctrine of latches,
waiver or estoppel to affect adversely the rights of either party. Nothing
in this paragraph will prevent either party from resorting to judicial
proceedings if (a) good faith efforts to resolve the dispute under these
procedures have been unsuccessful or (b) interim relief from a court is
necessary to prevent serious and irreparable injury.
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12. Successors and Assigns. The benefits of this Agreement shall inure to the
respective successors and assigns of the parties hereto, their successors,
assigns and representatives, and the obligations and liabilities assumed in
this agreement by the parties shall be binding upon their respective
successors and assigns; provided, that the rights and obligations of either
party under this Agreement may not be assigned without the prior written
consent of the other party and any other purported assignment shall be null
and void.
13. Miscellaneous. The following conditions apply:
(a) It is understood that the obligation of LMIG is to use its best
efforts to secure the Financing and there is no obligation on the part
of LMIG to participate in such Financing.
(b) The Company represents hereby that it is a sophisticated business
enterprise that has retained LMIG for the limited purposes set forth
in this letter, and the parties acknowledge and agree that their
respective rights and obligations are contractual in nature. Each
party disclaims an intention to impose fiduciary obligations on the
other by virtue of the engagement contemplated by this letter.
(c ) If the Company does not attain the estimated sales and earnings of
the business plan(within 75%), a provision shall be made with respect
to the stock price or the amount of stock the investor will receive
and shall be reset.
If the foregoing is acceptable, please sign a copy of this letter in the space
provided below and return the copy to the undersigned by April 10, 2000. If an
executed copy of the letter agreement is not received on or prior to such date,
this letter shall be void and no further force or effect.
Very truly yours,
LM Investment Group, Inc. By: /s/ Xxxxxxx Xxxxx
-----------------
Confirmed and Agreed to this 1st day of May, 2000
Pipeline Technologies, Inc.
By: /s/ Xxxxxxx X. Xxxxxxxx, CEO
----------------------------
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Term Sheet
Offering: 1,000,000 - 3,000,000 shares of common stock
at $2.00.
Mini/Max: $2,000,000 - $6,000,000
Lock-up Provision: Until Registration is declared
(within 12 months)
Dividend Rate: None
Registration: Registration of underlying Common Stock one
year after closing with resets.
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INDEMNIFICATION PROVISIONS
Pipeline Technologies, Inc., Inc. (the "Company") agrees to indemnify and
hold harmless obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements (and any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal and other costs,
expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, the costs,
expenses and disbursements, as and when incurred of investigating, preparing or
defending any such action, suit, proceeding or investigation (whether or not in
connection with litigation in which LMIG is a party), directly or indirectly,
caused by, relating to, based upon, arising out of, or in connection with LMIG
acting for the Company, including without limitation, any act or omission by
LMIG in connection with its acceptance of or the performance or non-performance
of its obligations under the Agreement dated April 5, 2000, between the Company
and LMIG to which these indemnification provisions are attached and form a part
(the "Agreement"). The Company also agrees that LMIG shall not have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with the engagement of LMIG except to the extent
that any such liability is found in a final judgement by a court of competent
jurisdiction (not subject to further appeal) to have resulted primarily and
directly from XXXX xxxxx negligence or willful misconduct.
The indemnification provisions shall be in addition to any liability which
the Company may otherwise have to LMIG or the persons indemnified below in this
sentence and shall extend to the following: LMIG, its affiliated entities,
partners, employees, legal counsel, agents and controlling persons (within the
meaning of the federal securities laws), and the officers, directors, employees,
legal counsel, agents and controlling persons of any of them. All references to
LMIG in these indemnification provisions shall be understood to include any and
all of the foregoing.
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If any action, suit, proceeding or investigation is commenced, as to which
LMIG proposes to demand indemnification, it shall notify the Company with
reasonable promptness; provided, however, that any failure by LMIG to notify the
Company shall not relieve the Company from its obligations hereunder except to
the extent that the Company is materially prejudiced thereby. If the Company so
elects, or is requested by LMIG, the Company will assume the defense of such
action, suit, proceeding or investigation, including the employment of counsel
reasonably acceptable to LMIG, and the payment of fees and disbursements of such
counsel. In the event, however, that the Company fails to promptly assume the
defense thereof with counsel reasonably acceptable to LMIG, or LMIG determines
in its reasonable judgement that it has one or more defenses different than or
in addition to those of the Company, then LMIG shall have the right to retain
one counsel (in addition to any local counsel) of its own choice to represent
it, and the Company shall pay the fees, expenses and disbursements of such
counsel; and such counsel shall, to the extent consistent with its professional
responsibilities, cooperate with the Company and any counsel designated by the
Company. The Company shall be liable for any settlement of any claim against
LMIG made with the Company's written consent, which consent shall not be
unreasonably withheld. The Company shall not, without the prior written consent
of LMIG, settle or compromise any claim, or permit a default or consent to the
entry of any judgement in respect thereof, unless such settlement, compromise or
consent includes, as a conditional term thereof, the giving by the claimant to
LMIG of an unconditional release from all liability in respect of such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these indemnification provisions is made but it is
found in a final judgement by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Company, on the one hand, and LMIG, on the other hand, shall contribute
to the losses, claims damages, obligations, penalties, judgements, awards,
liabilities, costs, expenses, and disbursements, to which the indemnified
persons may be subject in accordance with the relative benefits received by the
Company, on the one hand, and LMIG, on the other hand, and also the relative
fault of the Company. On the one hand, and LMIG, on the other hand, in
connection with the statements, acts or omissions which resulted in such losses,
claims, damages obligations, penalties, judgements, awards, liabilities, costs,
expenses or disbursements and the relevant equitable considerations shall also
be considered.
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No person found liable for a fraudulent misrepresentation shall be entitled
to contribution from any person who is not also found liable for such fraudulent
misrepresentation. Notwithstanding the foregoing, LMIG shall not be obligated to
contribute any amount thereunder that exceeds the amount of fees previously
received by LMIG pursuant to this Agreement.
Neither termination nor completion of the engagement of LMIG referred to
above shall these indemnification provisions which shall then remain operative
and in full force and effect.
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