FINANCIAL ADVISORY AGREEMENT
This Agreement is made and entered into as of the 20th day of January,
1998, between Coventry Industries Corp. (the "Company") and Xxxxxx Xxxxx
Securities, Inc. (the "Financial Advisor").
W I T N E S S E T H :
WHEREAS, The Company is seeking financial advice regarding business and
financing activities; and
WHEREAS, the Financial Advisor is willing to furnish business and
financial related advice and services to the Company on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual terms and covenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. Purpose. The Company hereby engages the Financial Advisor on a
non-exclusive basis for the term specified in this Agreement to render financial
advisory consulting advice to the Company as an investment banker relating to
financial and similar matters upon the terms and conditions set forth herein.
2. Representations of the Financial Advisor and the Company. The
Financial Advisor represents and warrants to the Company that (i) it is a member
in good standing of the National Association of Securities Dealers, Inc.
("NASD") and that it is engaged in the securities brokerage business; (ii) in
addition to its securities brokerage business, the Financial Advisor provides
consulting advisory services; and (iii) it is free to enter into this Agreement
and the services to be provided pursuant to this Agreement are not in conflict
with any other contractual or other obligation to which the Financial Advisor is
bound. The Company acknowledges that the Financial Advisor is in the securities
business and may provide financial services and consulting advice (of the type
contemplated by this Agreement) to others and that nothing herein contained
shall be construed to limit or restrict the Financial Advisor in providing
financial services to others, or rendering such advice to others.
3. Duties of the Financial Advisor. During the term of this Agreement,
the Financial Advisor will provide the Company with consulting advice as
specified below at the request of the Company, provided that the Financial
Advisor shall not be required to undertake duties not reasonably within the
scope of the consulting advisory service in which the Financial Advisor is
engaged generally. In performance of these duties, the Financial Advisor shall
provide the Company with the benefits of its best judgment and efforts, and the
Financial Advisor cannot and does not guarantee that its efforts will have any
impact on the business of the Company or that any subsequent improvement will
result from the efforts of the Financial Advisor. It is understood and
acknowledged by the parties that the value of the Financial Advisor's advice is
not measurable in any quantitative manner, and that the amount of time spent
rendering such consulting advice shall be determined according to the Financial
Advisor's discretion.
The Financial Advisor's duties may include, but will not necessarily be
limited to rendering the following services to the Company:
a) Stud y and review the business, operations, historical financial
performance of the Company (based upon management's forecast of financial
performance) so as to enable the Financial Advisor to provide advice to the
Company;
b) Assis t the Company in attempting to formulate the optimum strategy
to meet the Company's working capital and capital resources needs during the
period of this Agreement;
c) Assist in the formulation of the terms and structure of any
reasonable proposed business combination transaction involving the Company
("Transaction");
d) Assist in any presentation to the Board of Directors of the Company,
as requested, in connection with a proposed Transaction; and
e) Advise the Company as to the expected reaction of the financial
community to any Transaction and assist in determining the optimum means of
communicating the pertinent aspects, such as strategic considerations, benefits
to the Company and financial impact, to the financial community.
f) Assist the Company in the preparation of press releases and other
communications with the investment community.
4. Term. The term of this Agreement shall be for three (3) years
commencing from the date of this Agreement ("Commencement Date"); provided,
however, that this Agreement may be renewed or extended upon such terms and
conditions as may be mutually agreed upon by the parties hereto.
This Agreement shall terminate, however, in the event that (i) the
Financial Advisor is no longer a member in good standing of the NASD; (ii)
proceedings have been initiated against the Financial Advisor by a regulatory
agency which has resulted in a determination of a violation of applicable
securities laws, and which, in the judgment of counsel to the Company and
counsel to the Financial Advisor, requires disclosure in any registration
statement or other financing document in which the Company is then involved; and
(iii) the Financial Advisor commits acts of willful misconduct in the
performance of its duties hereunder, after written notice and an opportunity to
cure.
5. Financial Advisory Fee. The Company shall pay the Financial Advisor a
fee of $3,500 per month during the term of this Agreement for the financial
services to be rendered pursuant to this Agreement. The initial monthly payment
shall be due on February 1, 1998, and each subsequent monthly payment shall be
due and payable on the first day of each month. In addition, upon the execution
of this Agreement, the Company shall sell to the Financial Advisor and/or
persons designated by the Financial Advisor ("holder"), for an aggregate
purchase price of ten dollars ($10.00), Investment Banking Purchase Warrants
("Warrants") for the purchase of an aggregate of 300,000 shares of the Company's
Common Stock at $4.50 per share. The Warrants may be exercised in whole or in
part at any time, and from time to time, during the five (5) year period
following the Effective Date.
During such time as the Warrants are outstanding, the Company agrees
not to merge, reorganize, or take any action which would terminate the Warrants
without first making adequate provisions for the Warrants. Other terms regarding
the rights of the holders of the Warrants are included in the Investment Banking
Warrant Agreement entered into between the Company and the Financial Advisor.
6. Right of First Refusal. Subject to existing right of first refusal
between the Company and Pro Futures Special Equities Fund, L.P., during the term
of this Agreement, in the event the Company wishes to engage in a Financing by
offering, selling and/or issuing any of its securities in a private or public
debt and/or equity transaction, the Financial Advisor shall have a right of
first refusal to act as manager or co-manager or participate with respect to any
such public or private sale of any securities of the Company or any of its
subsidiaries. In connection with such right, the Company agrees to furnish the
Financial Advisor with the terms and conditions of any bona fide proposed
private or public sale of securities to be made by it or any of its
subsidiaries, and the name and address of any person, entity, broker or dealer
proposing to effectuate such sale, together with all compensation terms. The
Financial Advisor shall have the right within twenty (20) days from such
notification by the Company to notify the Company whether the Financial Advisor
will exercise its right to effect such proposed financing. In the event the
Financial Advisor declines to exercise its right of first refusal, such action
shall only relate to the financing and terms and conditions contained in the
specific notice furnished to the Financial Advisor and not to any other proposed
financing thereafter. In the event the Financial Advisor declines to exercise
the right of first refusal on two (2) occasions, the right of first refusal
granted to the Financial Advisor shall terminate. In the event the Financial
Advisor agrees to act as manager or participates with respect to a public or
private sale of any securities of the Company or any of its subsidiaries, the
Company and the Financial Advisor shall agree on the financing fee the Financial
Advisor is to receive in connection with effecting or participating in any such
financing, which fee shall be exclusive of any other fee contained in this
Agreement.
7. Business Combination Finder's Fee. For a period of five (5) years
from the date of this Agreement, in the event the Company consummates a business
transaction with another entity that results in an acquisition by the Company of
another entity or a business combination between the Company and another entity
(the "Transaction"), the Company agrees to pay a Business Combination Finder's
Fee ("Finder's Fee") to the Financial Advisor equal to one percent (1%) of the
consideration paid in such transaction or the value of such transaction
regardless of whether or not the Financial Advisor introduced the Transaction.
In the event the Financial Advisor introduces to the Company another party or
entity, in writing, and that as a result of such introduction, a transaction
between such entity and the Company is consummated, then the Company shall pay
to the Financial Advisor a Business Combination Finder's Fee as follows:
a. Five percent (5%) of the first $1,000,000 of the consideration paid
in such transaction; b. Four percent (4%) of the consideration in excess
of $1,000,000 and up to $2,000,000; c. Three percent (3%) of the
consideration in excess of $2,000,000 and up to $3,000,000; d. Two
percent (2%) of any consideration in excess of $3,000,000 and up to
$4,000,000; and e. One percent (1%) of any consideration in excess of
$4,000,000.
The Finder's Fee due the Financial Advisor shall be paid by the Company
in cash and/or in stock at the closing of the Transaction as mutually agreed
between the Company and the Financial Advisor, without regard to whether the
Transaction involves payments in cash, in stock, or a combination of stock and
cash, or is made on an installment sale basis. By way of example, if the
Transaction involved securities of the acquiring entity (whether securities of
the Company, if the Company is the acquiring party, or securities of another
entity, if the Company is the selling party) having a value of $5,000,000, the
consideration to be paid by the Company to the Financial Advisor at closing
shall be $150,000.
In the event that for any reason the Company shall fail to pay to the
Financial Advisor all or any portion of the Finder's Fee payable hereunder when
due, interest shall accrue and be payable on the unpaid balance due hereunder
from the date when first due through and including that date when actually
collected by the Financial Advisor, at a rate equal to two (2) points over the
prime rate of Citibank, N.A. in New York, New York, computed on a daily basis
and adjusted as announced from time to time.
Notwithstanding anything herein to the contrary, if the Company shall,
within 180 days immediately following the termination of this Agreement,
conclude a Transaction with any party introduced by the Financial Advisor to the
Company prior to the termination of this Agreement, the Company shall also pay
the Financial Advisor the Finder's Fee determined above.
8. Transfer Sheets and Depository Trust Company Reports. The Company
shall direct the Company's transfer agent to furnish
the Financial Advisor with weekly transfer sheets as to each of the Company's
securities as prepared by the Company's transfer agent and copies of lists of
stockholders and warrantholders as reasonably requested by the Underwriter, for
a three (3) year period commencing from the date of this Agreement.
In addition, the Company shall cause the Depository Trust Company, or
such other depository of the Company's securities, to deliver a "special
security position report" to the Financial Advisor on a weekly basis at the
expense of the Company, for a three (3) year period from the date of this
Agreement.
9. Expenses. In addition to the fees payable hereunder, the Company
shall reimburse the Financial Advisor, within five (5) business days of its
request, for any and all reasonable out-of-pocket expenses incurred in
connection with the services performed by the Financial Advisor and its counsel
pursuant to this Agreement, including (i) reasonable hotel, food and associated
expenses; (ii) reasonable charges for travel; (iii) reasonable long-distance
telephone calls; and (iv) other reasonable expenses spent or incurred on the
Company's behalf. All such expenses in excess of $500 shall be pre-approved by
the Company.
10. Use of Advice by the Company; Public Market for the Company's
Securities. The Company acknowledges that all opinions and advice (written or
oral) given by the Financial Advisor to the Company in connection with the
engagement of the Financial Advisor are intended solely for the benefit and use
of the Company in considering the transaction to which they relate, and the
Company agrees that no person or entity other than the Company shall be entitled
to make use of or rely upon the advice of the Financial Advisor to be given
hereunder, and no such opinion or advice shall be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose, nor may the Company make any public references to the Financial
Advisor, or use of the Financial Advisor's name in any annual reports or any
other reports or releases of the Company without the prior written consent of
the Financial Advisor.
The Company acknowledges that the Financial Advisor makes no commitment
whatsoever as to making a public trading market in the Company's securities or
to recommending or advising its clients to purchase the Company's securities.
The Company hereby represents that it understands that the Financial Advisor has
not agreed to make a market in and/or market such securities and that the
Financial Advisor may never do so. The Company hereby represents and
acknowledges that any payment made pursuant to this agreement is not
compensation for the purpose of making a market in the Company's securities or
to cover out-of-pocket expenses for making a market in the Company's securities
or for submitting an application to make a market in the Company's securities.
Research reports or corporate finance reports that may be prepared by the
Financial Advisor will, when and if prepared, be done solely on the merits or
judgment and analysis of the Financial Advisor or any senior corporate finance
personnel of the Financial Advisor.
11. Company Information. The Company recognizes and confirms that, in
advising the Company and in fulfilling its engagement hereunder, the Financial
Advisor will use and rely on data, material and other information furnished to
the Financial Advisor by the Company. The Company acknowledges and agrees that
in performing its services under this engagement, the Financial Advisor may rely
upon the data, material and other information supplied by the Company without
independently verifying the accuracy, completeness or veracity of same. In
addition, in the performance of its services, the Financial Advisor may look to
such others for such factual information, economic advice and/or research upon
which to base its advice to the Company hereunder as the Financial Advisor shall
in good xxxxx xxxx appropriate. The parties further acknowledge that the
Financial Advisor undertakes no responsibility for the accuracy of any
statements to be made by Company management contained in press releases or other
communications, including, but not limited to, filings with the Securities and
Exchange Commission and the NASD.
12. Indemnification. In the performance of its services, the Financial
Advisor shall be obligated to act only in good faith, and shall not be liable to
the Company for errors in judgment not the result of willful misconduct. The
Company shall indemnify and hold harmless the Financial Advisor against any and
all liabilities, claims, lawsuits, including any and all awards and/or judgments
to which it may become subject under the Securities Act of 1933, (the "Act"),
the Securities Exchange Act of 1934, as amended (the "1934 Act") or any other
federal or state statute, at common law or otherwise, insofar as said
liabilities, claims and lawsuits (including costs, expenses, awards and/or
judgments) arise out of or are in connection with the services rendered by the
Financial Advisor or any transactions in connection with this Agreement, except
for any liabilities, claims and lawsuits (including awards and/or judgments),
arising out of willful misconduct or willful omissions of the Financial Advisor.
In addition, the Company shall also indemnify and hold harmless the Financial
Advisor against any and all reasonable costs and expenses, including reasonable
counsel fees, incurred relating to the foregoing.
The Financial Advisor shall give the Company prompt notice of any such
liability, claim or lawsuit which the Financial Advisor contends is the subject
matter of the Company's indemnification and the Company thereupon shall be
granted the right to take any and all necessary and proper action, at its sole
cost and expense, with respect to such liability, claim and lawsuit, including
the right to settle, compromise and dispose of such liability, claim or lawsuit,
excepting therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
The Financial Advisor shall indemnify and hold the Company harmless
against any and all liabilities, claims and lawsuits, including any and all
awards and/or judgments to which it may become subject under the Act, the 1934
Act or any other federal or state statute, at common law or otherwise, insofar
as said liabilities, claims and lawsuits (including costs, expenses, awards
and/or judgments) arise out of or are based upon willful misconduct or willful
omissions of the Financial Advisor. In addition, the Financial Advisor shall
also indemnify and hold the Company harmless against any and all reasonable
costs and expenses, including reasonable counsel fees, incurred relating to the
foregoing.
The Company shall give the Financial Advisor prompt notice of any such
liability, claim or lawsuit which the Company contends is the subject matter of
the Financial Advisor's indemnification and the Financial Advisor thereupon
shall be granted the right to take any and all necessary and proper action, at
its sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise or dispose of such liability, claim or
lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
13. The Financial Advisor as an Independent Contractor. The Financial
Advisor shall perform its services hereunder as an independent contractor and
not as an employee of the Company or an affiliate thereof. It is expressly
understood and agreed to by the parties hereto that the Financial Advisor shall
have no authority to act for, represent or bind the Company or any affiliate
thereof in any manner, except as may be agreed to expressly by the Company in
writing from time to time.
14. Miscellaneous.
(a) This Agreement between the Company and the Financial Advisor
constitutes the entire agreement and understanding of the parties hereto, and
supersedes any and all previous agreements and understandings, whether oral or
written, between the parties with respect to the matters set forth herein.
(b) Any notice or communication permitted or required hereunder shall
be in writing and shall be deemed sufficiently given if hand-delivered or sent
postage prepaid by certified or registered mail, return receipt requested, to
the respective parties as set forth below, or to such other address as either
party may notify the other in writing:
If to the Company: Xxxxxx Xxxxxxx, President
Coventry Industries Corp.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
If to the Financial Advisor: Xxxxxx X. Xxxx, President
Xxxxxx Xxxxx Securities, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
(c) This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and their respective successors, legal
representatives and assigns.
(d) This Agreement may be executed in any number of counterparts, each
of which together shall constitute one and the same original document.
(e) No provision of this Agreement may be amended, modified or waived,
except in a writing signed by all of the parties hereto.
(f) This Agreement shall be construed in accordance with and governed by
the laws of the State of Florida, without giving effect to conflict of law
principles. The parties hereby agree that any dispute which may arise between
them arising out of or in connection with this Agreement shall be adjudicated
before a court located in Palm Beach County, Florida, and they hereby submit to
the exclusive jurisdiction of the courts of the State of Florida located in Palm
Beach County, Florida and of the federal courts in the Southern District of
Florida with respect to any action or legal proceeding commenced by any party,
and irrevocably waive any objection they now or hereafter may have respecting
the venue of any such action or proceeding brought in such a court or respecting
the fact that such court is an inconvenient forum, relating to or arising out of
this Agreement, and consent to the service of process in any such action or
legal proceeding by means of registered or certified mail, return receipt
requested, in care of the address set forth in sub-paragraph (b) above.
(g) This Agreement has been duly authorized, executed and delivered by
and on behalf of the Company and the Financial Advisor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written. Very truly yours,
COVENTRY INDUSTRIES CORP.
BY:
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Xxxxxx Xxxxxxx, President
XXXXXX XXXXX SECURITIES, INC.
BY:
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Xxxxxx X. Xxxx, President
