EXHIBIT 10.32
SEABURY TRANSPORTATION ADVISORS LLC
December 16, 2002
CONFIDENTIAL
Xx. Xxxxxx Xxxxxx
President & Chief Executive Officer
HiEnergy Technologies, Inc.
0000 Xxxxx Xxxxxxx, Xxxx X
Xxxxxx, Xxxxxxxxxx 00000
Re: Engagement of Seabury
Gentlemen:
This letter agreement (this "Agreement") confirms the engagement of Seabury
Transportation Advisors LLC and the designated NASD-registered broker-dealer
affiliate of Seabury Transportation Advisors LLC, (collectively "Seabury") by
HiEnergy Technologies, Inc. ("HiEnergy" or the "Company") as placement agent to
arrange the sale of equity or equity-linked securities (the "Securities") on
behalf of the Company. The sale of Securities (the "Financing" or "Financings")
may occur through a private placement pursuant to one or more exemptions from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), and in compliance with applicable securities laws of states and other
jurisdictions ("Blue Sky Laws").
1. Retention. Subject to the terms and conditions of this Agreement,
HiEnergy hereby engages Seabury to act on behalf of the Company as placement
agent during the Authorization Period (as defined below) to arrange the sale of
Securities in the amount of approximately $15 million and on terms and
conditions satisfactory to the Company and Seabury hereby accepts such
engagement.
Subject to the exceptions set forth below, (a) during the Authorization Period,
HiEnergy shall not, and shall not permit its affiliates or their representatives
to, directly or indirectly, (i) offer any Securities for sale to, or otherwise
contact, discuss or negotiate with respect to any offer or sale of any
Securities with, any person, (ii) authorize anyone other than Seabury to act on
behalf of the Company to place any Securities or (iii) have any discussions or
negotiations with any person other than Seabury with respect to engaging such
person as a finder, broker, dealer, agent or financial advisor in connection
with any sale of Securities; and (b) HiEnergy shall, and shall cause its
affiliates and its and their officers, directors, employees and representatives
to, promptly refer to Seabury all offers, inquiries and proposals relating to
any Securities received at any time during the Authorization Period.
Although Seabury is retained on a non-exclusive basis by XxXxxxxx, the Company
agrees that XX Xxxxxxxxxx is the only financial intermediary currently retained
by the company and is focused on individual investors. Xxxxxxxxxx will not
approach institutional investors or strategic partners without the consent of
both Seabury and HiEnergy. In addition, due to SEC and NASD regulations,
HiEnergy will ensure that Seabury is provided with, and consents to, any and all
material XX Xxxxxxxxxx delivers to potential investors in order to ensure that
it materially conforms to the material HiEnergy and Seabury have created for
distribution to potential investors. If HiEnergy in its sole discretion deems it
appropriate, HiEnergy may direct Xxxxxxxxxx and retain such other placement
agents as it sees fit to conduct a private placement with registration rights to
investors other than institutional investors or strategic partners. Seabury
acknowledges that XxXxxxxx is in discussions with respect to a placement in the
$3 million to $5 million range, in which the parties do not expect Seabury to
participate.
2. Authorization Period. Xxxxxxx'x engagement shall become effective on the
date hereof and, unless extended by XxXxxxxx and Seabury, shall expire one (1)
year after the signing of this Agreement. In the event that there has not been
an acceptable term sheet regarding a Financing within one hundred and eighty
(180) days of the execution of this Agreement, or a closing of such a Financing
within two hundred forty (240) days of the execution of this Agreement, the
Company may terminate (either a "Company Termination Event") this Agreement in
writing upon ten days notice. The period from the date hereof through the
expiration of this Agreement is called the "Authorization Period." In the event
of a material change affecting Seabury's status as a company or related to its
personnel occurs, the Company may terminate this Agreement in writing upon ten
days notice.
3. Compensation. HiEnergy shall pay Seabury the compensation set forth
below:
a. Fee. In consideration for entering into this agreement, XxXxxxxx shall
pay Seabury a retainer fee of $25,000 in cash upon execution of this Agreement
and $25,000 in cash on March 1, 2003. HiEnergy shall also pay Seabury a cash
placement fee equal to 8.0% on that portion of any gross proceeds placed by
Xxxxxxx and received by the Company (the "Aggregate Consideration") in
connection with the Financings thereafter. The cash placement fee shall be
payable on the closing date on which such Aggregate Consideration is received by
the Company.
b. Placement Agent Warrants. On each closing date on which Aggregate
Consideration is paid or becomes payable, HiEnergy shall issue to Seabury or its
permitted assigns warrants (the "Warrants") to provide 10% warrant coverage
based on the Aggregate Consideration received from purchasers divided by the
exercise price. The exercise price of the Warrants shall be equal to the price
at which common equity of the Company is issued (or in the event of a
convertible security, the conversion price or exercise price into common equity
on the closing date). The Warrants shall be exercisable after the date of
issuance and shall expire five years after the date of issuance, unless
otherwise extended by the Company. The Warrants shall be substantially in the
form of Exhibit 3(b) hereto. The Warrants shall also include piggyback
registration rights. The Warrants shall be transferable within Seabury, at
Seabury's discretion. Notwithstanding the foregoing, the compensation payable
under this section may be paid in HiEnergy common shares, subject to mutual
agreement between Seabury and HiEnergy.
c. Tail Period. HiEnergy shall, and shall cause its affiliates to, pay to
Seabury all compensation described in this Section 3 with respect to all
Securities including debt, convertible debt or any equity or debt investment
sold to a purchaser or purchasers at any time prior to the expiration of twelve
(12) months after the expiration of this Agreement (the "Tail Period") if (i)
such purchaser or purchasers were identified to the Company by Seabury during
the Authorization Period, (ii) Seabury advised the Company with respect to such
purchaser or purchasers during the Authorization Period or (iii) the Company or
Seabury had substantive discussions with such purchaser or purchasers regarding
a significant investment in HiEnergy during the Authorization Period.
Notwithstanding the foregoing, in the event the Agreement is terminated due to a
Company Termination Event, (1) the Tail Period shall be reduced to a period of
six months after expiration of this Agreement and (2) the corresponding cash fee
percentage shall be reduced to 4% from 8% and the corresponding warrant coverage
percentage shall be reduced to 4% from 10%.
4. Reimbursements. Regardless of whether the Private Placements or sales of
Securities are consummated, the Company shall reimburse Seabury for all of its
reasonable out-of-pocket expenses, not to exceed $10,000 without the written
consent of HiEnergy, incurred in connection with its engagement, including the
fees and disbursements of counsel for Seabury and the expenses of any travel
that may be necessary.
5. Representations. Warranties and Covenants of HiEnergy. XxXxxxxx
represents and warrants to, and covenants with, Xxxxxxx as follows:
a. Neither the Company nor any person acting on its behalf has taken, and
HiEnergy shall not and shall not permit its affiliates to take, directly or
indirectly, any action so as to cause any of the transactions contemplated by
this agreement to fail to be entitled to exemption from registration or
qualification under all applicable securities laws or which constitutes general
advertising or general solicitation (as those terms are used in Regulation D
under the Securities Act) with respect to the Securities.
b. HiEnergy shall take and shall cause its affiliates to take such actions
as may be required to cause compliance with this Agreement. Seabury acknowledges
that HiEnergy may cause its affiliates to perform any of its obligations
hereunder; provided, however, that XxXxxxxx's intention to do so (or any action
by HiEnergy or Seabury in respect thereof) shall not relieve HiEnergy from its
obligation to perform such obligations when due.
c. HiEnergy shall render its performance hereunder in compliance with all
applicable laws.
6. Representations, Warranties and Covenants of Seabury. Seabury represents and
warrants to, and covenants with, HiEnergy as follows:
a. None of Seabury, its affiliates or any person acting on behalf of
Seabury or any of such affiliates has engaged or will engage in any general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) with respect to the Securities.
x. Xxxxxxx will use its best efforts to conduct the offering and sale of
Securities so that Securities are sold in a transaction or series of
transactions exempt from registration under the Securities Act.
x. Xxxxxxx shall render its performance hereunder in compliance with all
applicable laws. Seabury shall deliver to potential investors only those
materials that HiEnergy and Seabury have created and HiEnergy has approved for
distribution to potential investors.
x. Xxxxxxx will send materials related to the Financings only to persons
that the Seabury reasonably believes are "accredited investors" (as defined
under Rule 501(a) of the Securities Act).
7. Indemnification. The Company agrees to the indemnification and other
agreements set forth in the attached Indemnification Agreement, the provisions
of which are incorporated herein by reference.
8. Subsequent Offerings. Xxxxxxx shall have the right from the date hereof
until twelve months after the expiration of this Agreement, to act as the
managing placement agent in connection with the sale of equity or equity-linked
securities through a Private Placement. In addition, during the Authorization
Period and for two years thereafter, Xxxxxxx shall have the right to participate
as a co-manager, on a non-risk basis in an underwritten public offering of the
Company's securities and, unless otherwise determined by XxXxxxxx in
consultation with the lead managing underwriter, Xxxxxxx shall receive a minimum
allocation of 10% of the gross underwriting fees and any non-accountable expense
allowances, and Xxxxxxx'x name shall appear as a co-managing underwriter on the
cover of any prospectus used in connection with any sale of equity securities
described in this clause. Xxxxxxx agrees to consider alternate roles and
proportionate economically comparable compensation arrangements if XxXxxxxx, in
consultation with the lead managing underwriter, determines that market
conditions are not favorable to the allocations contemplated by this Section 8.
Notwithstanding the other provisions of this Section 8, Xxxxxxx shall have none
of the rights contemplated by this Section 8 in the event the Agreement is
terminated due to a Company Termination Event.
9. Mergers & Acquisitions. During the Authorization Period, Xxxxxxx shall
act as the financial advisor to the Company with respect to any potential
business combination involving the Company, including acquisitions or mergers or
the sale of the Company or certain assets or divisions of the Company (a
"Business Combination"). Seabury shall be compensated for any Business
Combination completed during the Authorization Period or for the twelve (12)
month period thereafter (the "Tail Period") with any person with whom the
Company or Seabury had substantive discussions regarding a Business Combination
during the Authorization Period. HiEnergy shall pay Seabury an amount (the
'Transaction Fee") according to the schedule hereunder, based on the transaction
value, which is payable in cash on the closing date of such Business
Combination, subject to a minimum Transaction Fee of $250,000 and a carve out
for a Business Combination with a transaction value of less than $5 million.
Transaction Value Transaction Fee
Up to $50,000,000 2.0% of such amount; plus
In excess of $50,000,000 1.5% of such amount
For the six month period following the expiration of this Agreement, if HiEnergy
elects to pursue the sale of the Company or receives an offer to purchase or
merge with the Company by a person not covered under the section above, XxXxxxxx
agrees to engage Seabury and Seabury agrees to act as XxXxxxxx's financial
advisor in connection with the potential sale or merger according to the terms
set forth above.
Notwithstanding the other provisions of this Section 9, Seabury shall have none
of the rights or entitlement to compensation contemplated by this Section 9 in
the event the Agreement is terminated due to a Company Termination Event.
10. Further Investment. Seabury has the right, but not the obligation, to
participate in any equity transaction completed during the term of this
Engagement, on the same terms as the other investors to such equity transaction.
Seabury's allocation in any equity transaction shall be limited, however, to ten
percent (10%) of the total capital raise.
11. Survival of Certain Provisions. The expense, indemnification,
reimbursement and contribution obligations of XxXxxxxx provided herein and in
the attached Indemnification Agreement and, except as expressly provided
otherwise in Sections 3(c), 8 and 9, Seabury's rights to compensation (which
term includes all fees, amounts and Warrants due or which may become due) shall
remain operative and in full force and effect regardless of (i) any withdrawal,
termination or consummation of or failure to initiate or consummate any
transaction described herein or (ii) any termination or the completion or
expiration of this Agreement.
12. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be given in writing and shall be sent by certified mail, return
receipt request or recognized overnight courier or personally delivered (a) if
to the Company, to HiEnergy Technologies, Inc. office at 0000 Xxxxx Xxxxxxx,
Xxxx X, Xxxxxx, Xxxxxxxxxx 00000. Attention: Xxxxxx Xxxxxx, President & Chief
Executive Officer, and; (b) if to Seabury, to its office at 000 Xxxxxxx Xxxxxx,
00xx xxxxx, Xxx Xxxx, XX 00000. Attention: Xxx Xxxxxx, Managing Director.
13. Confidentiality. No financial advice rendered by Xxxxxxx pursuant to
this Agreement or by XX Xxxxxxxxxx pursuant to its engagement agreement may be
disclosed publicly in any manner without Xxxxxxx'x prior written approval,
except as may be required by law, regulation or court order but subject to the
limitation below. If the Company is required or reasonably expects to be so
required to disclose any advice, HiEnergy shall provide Seabury with prompt
notice thereof so that Seabury may seek a protective order or other appropriate
remedy and take reasonable efforts to assure that all of such advice disclosed
will be covered by such order or other remedy. Whether or not such a protective
order or other remedy is obtained, HiEnergy will and will cause its affiliates
to disclose only that portion of such advice, which the Company is so required
to disclose.
14. Miscellaneous. This Agreement (including the attached Indemnification
Agreement) sets forth the entire agreement between the parties, supersedes and
merges all prior written or oral agreements with respect to the subject matter
hereof, may only be amended in writing and shall be governed by the laws of the
State of New York applicable to agreements made and to be performed entirely
within such State. The parties shall make reasonable efforts to resolve any
dispute concerning this Agreement, its construction or its alleged breach by
face-to-face negotiations. If such negotiations fail to resolve the dispute, the
dispute shall be finally decided by arbitration in accordance with the rules
then in effect of the American Arbitration Association. Any arbitration will be
conducted in the New York City metropolitan area. HiEnergy (for the Company, for
anyone claiming through or in the name of the Company and on behalf of the
equity holders the Company) and Seabury each hereby irrevocably waives any right
it may have to trial by jury in respect of any claim arising out of this
Agreement or the transactions contemplated hereby.
This Agreement may not be assigned by either party without the prior written
consent of the other party.
If any provision of this Agreement is determined to be invalid or unenforceable
in any respect, such determination will not effect such provision in any other
respect or any other provision of this Agreement. Please confirm that the
foregoing correctly sets forth our agreement by signing and returning to Seabury
the enclosed duplicate copy of this Agreement.
Very truly yours,
Seabury Transportation Advisors LLC
By: /s/ Xxxx X. Xxxx
---------------------
Xxxx X. Xxxx
President & CEO
Accepted and agreed to as of the date first written above
HiEnergy Technologies, Inc.
By: /s/ Xxx Xxxxxx
------------------
Xxxxxx Xxxxxx
President & Chief Executive Officer
December 18, 2002
Seabury Transportation Advisors LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Gentlemen:
In connection with the engagement of Seabury Transportation Advisors
LLC and/or one or more of its affiliates ("Seabury") to advise and assist
HiEnergy Technologies, Inc. (referred to herein as "we", "our", or "us") with
the matters set forth in the Agreement dated December 18, 2002 (the "Engagement
Agreement") between us and Seabury, we hereby agree to indemnify and hold
harmless Seabury, its affiliated companies, and each of Seabury's and such
affiliated companies' respective officers, directors, agents, employees, and
controlling persons (within the meaning of each of Section 20 of the Securities
Exchange Act of 1934 and Section 15 of the Securities Act of 1933) (each of the
forgoing, including Seabury, being hereinafter referred to as an "Indemnified
Person") to the fullest extent permitted by law from and against any and all
losses, claims, damages, expenses (including reasonable fees, disbursements, and
other reasonable charges of counsel), actions (including actions brought by us
or our equity holders or derivative actions brought by any person claiming
through us or in our name), proceedings, arbitrations or investigations (whether
formal or informal), or threats thereof (all of the foregoing being referred to
as "Liabilities"), based upon, relating to, or arising out of such engagement or
any Indemnified Person's role therein; provided, however that we shall not be
liable under the Engagement Agreement or this agreement: (a) for any amount paid
in settlement of claims without our consent, unless our consent is unreasonably
withheld (b) to the extent that it is finally judicially determined, or
expressly stated in an arbitration award, that such Liabilities resulted from
the willful misconduct or gross negligence of Seabury and/or an Indemnified
Person or (c) in the event Seabury is in breach of the Engagement Agreement. If
multiple claims are brought against any Indemnified Person in an arbitration or
other proceeding and at least one such claim is based upon, relates to, or
arises out of the engagement of Seabury by us or any Indemnified Person's role
therein, we agree that any award, judgment, and other Liabilities resulting
therefrom shall be deemed conclusively to be based on, relate to, or arise out
of the engagement of Seabury by us or any Indemnified Person's role therein,
except to the extent that such award or judgment expressly states that the award
or judgment, or any portion thereof, is based solely upon, relates to, or arises
out of other matters for which indemnification is not available hereunder. In
connection with our obligation to indemnify for expenses as set forth above, we
further agree to reimburse each Indemnified Person for all such expenses
(including reasonable fees, disbursements, and other charges of counsel) as they
are incurred by such Indemnified Person; provided, however that if an
Indemnified Person is reimbursed hereunder for any expenses, the amount so paid
shall be refunded if and to the extent it is finally judicially determined, or
expressly stated in an arbitration award, that the Liabilities in question
resulted primarily from the misconduct or negligence of such Indemnified Person.
We hereby agree that neither Xxxxxxx nor any other Indemnified Person shall have
any liability to us (or anyone claiming through us or in our name) in connection
with Xxxxxxx'x engagement by us except to the extent that such Indemnified
Person has engaged in willful misconduct or been grossly negligent or in the
event Seabury and/or an Indemnified Person is in breach of the Engagement
Agreement.
HIENERGY TECHNOLOGIES, INC. 2
Promptly after Xxxxxxx receives notice of the commencement of any
action or other proceeding in respect of which indemnification or reimbursement
may be sought hereunder, Xxxxxxx will notify us thereof; but the omission so to
notify us shall not relieve us from any obligation hereunder unless, and only to
the extent that, such omission results in our forfeiture of substantive rights
or defenses. If any such action or other proceeding shall be brought against any
Indemnified Person, we shall, upon written notice given reasonably promptly
following your notice to us of such action or proceeding, be entitled to assume
the defense thereof at our expense with counsel chosen by us and reasonably
satisfactory to such Indemnified Person; provided, however that any Indemnified
Person may, at its own expense retain separate counsel to participate in such
defense. Notwithstanding the foregoing, such Indemnified Person shall have the
right to employ separate counsel at our expense and to control its own defense
of such action or proceeding if, in the reasonable opinion of counsel to such
Indemnified Person, (i) there are or may be legal defenses available to such
Indemnified Person or to other Indemnified Persons that are different from or
additional to those available to us, or (ii) a difference of position or
potential difference of position exists between us and such Indemnified Person
that would make such separate representation advisable; provided, however that
in no event shall we be required to pay fees and expenses under this indemnity
for more than one firm of attorneys (in addition to local counsel) in any
jurisdiction in any one legal action or group of related legal actions. We agree
that we will not, without the prior written consent of Seabury and provided such
consent is not unreasonably withheld, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, or proceeding
relating to the matters contemplated by Xxxxxxx'x engagement (whether or not any
Indemnified Person is a party thereto) unless such settlement, compromise, or
consent includes an unconditional release of Seabury and each other Indemnified
Person from all liability arising or that may arise out of such claim, action,
or proceeding.
If the indemnification of an Indemnified Person provided for hereunder
is finally judicially determined by a court of competent jurisdiction to be
unenforceable, then we agree, in lieu of indemnifying such Indemnified Person,
to contribute to the amount paid or payable by such Indemnified Person as a
result of such Liabilities in such proportion as is appropriate to reflect the
relative benefits received, or sought to be received, by us on the one hand and
by Xxxxxxx on the other from the transactions in connection with which Xxxxxxx
has been engaged. If the allocation provided in the preceding sentence is not
permitted by applicable law, then we agree to contribute to the amount paid or
payable by such Indemnified Person as a result of such Liabilities in such
proportion as is appropriate to reflect not only the relative benefits referred
to in such preceding sentence but also the relative fault of us and of such
Indemnified Person.
Notwithstanding the foregoing, in no event shall the aggregate amount
required to be contributed by all Indemnified Persons taking into account our
contributions as described above exceed the amount of fees received by Seabury
pursuant to such engagement. The relative benefits received or sought to be
received by us on the one hand and by Xxxxxxx on the other shall be deemed to be
in the same proportion as (a) the total value of the transactions with respect
to which Xxxxxxx has been engaged bears to (b) the fees paid or payable to
Seabury with respect to such engagement.
HIENERGY TECHNOLOGIES, INC. 3
The rights accorded to Indemnified Persons hereunder shall be in
addition to any rights that any Indemnified Person may have at common law, by
separate agreement or otherwise.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
WE HEREBY CONSENT, SOLELY FOR THE PURPOSE OF ALLOWING AN INDEMNIFIED PERSON TO
ENFORCE ITS RIGHTS HEREUNDER, TO PERSONAL JURISDICTION AND SERVICE AND VENUE IN
ANY COURT IN WHICH ANY CLAIM FOR WHICH INDEMNIFICATION MAY BE SOUGHT HEREUNDER
IS BROUGHT AGAINST SEABURY OR ANY OTHER INDEMNIFIED PERSON.
We and Xxxxxxx also hereby irrevocably waive any right we and Xxxxxxx
may have to a trial by jury in respect of any claim based upon or arising out of
this agreement. This agreement may not be amended or otherwise modified except
by an instrument signed by both Seabury and us. If any provision hereof shall be
determined to be invalid or unenforceable in any respect, such determination
shall not affect such provision in any other respect or any other provision of
this agreement, which shall remain in full force and effect. Each Indemnified
Person is an intended beneficiary hereunder.
The foregoing indemnification agreement shall remain in effect
indefinitely, notwithstanding any termination of Xxxxxxx'x engagement.
Very truly yours,
HiEnergy Technologies, Inc.
By: /s/ Xxx Xxxxxx_______
Xxxxxx Xxxxxx
President & Chief Executive Officer
Acknowledged and Agreed to:
SEABURY TRANSPORTATION ADVISORS LLC
By: /s/ Xxxx X. Xxxx
---------------------------------------------
Xxxx X. Xx
President & CEO
