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Exhibit 10.20
December 3, 2003
Mr. Xxx Xxxxxxx, Chief Executive Officer
Decorize, Inc.
0000 X. Xxxxxx
Xxxxxxxxxxx, XX 00000
Re: Investment Banking/Advisory Agreement ("Agreement")
Dear Xx. Xxxxxxx:
We are pleased to set forth the terms of the retention of First Securities
USA, Inc., member NASD/SiPC through its SBI USA division ("Investment Banker")
by Decorize, Inc. (collectively with its affiliates, subsidiaries, successors,
and assigns, the "Company").
1. The Company hereby engages the Investment Banker, and the Investment
Banker hereby accepts such engagement, as the Company's exclusive financial
advisor, for 12 months from the date of this Agreement, in connection with
financial advisory services. Investment Banker will assist the Company through
Investment Banking Services and Introductions to Certain Parties relevant to the
Company's industry.
(a) Investment Banking Services: In such capacity, the Investment
Banker shall be available for advice, and shall advise the Company with respect
to such financial matters as the Company shall from time to time request,
including matters relating to: capital raising, whether from institutional and
other investors or lenders or from the private placement of debt instruments or
equity securities; public offerings of debt or equity; structure of debt or
equity financings; acquisitions and other business ventures; stockholder and
securities dealer relations; and general investor relations. In performance of
these duties, the Investment Banker shall provide the Company with the benefits
of its best judgment and efforts. It is understood and acknowledged by the
parties that the value of the Investment Banker's advice is not measurable in
any quantitative manner, and that the Investment Banker shall be obligated to
render advice, upon the request of the Company, in good faith, without any
requirement as to specific methodology or time requirement.
(b) Introduction to Certain Parties: In such capacity, Investment
Banker will provide introductions to Broker-Dealers, Market Makers or small
Institutional Investors with a focus on relevant industries and/or securities.
(c) Mergers and Acquisition Advisory: In such capacity, Investment
Banker shall assist the Company in the identification, analysis, negotiation and
due diligence related to
First Securities USA, Inc., member NASD/SiPC
December 3, 2003
Page 2
potential mergers or acquisitions involving the Company. If required, the
Investment Banker shall provide a fairness opinion for the merger or acquisition
transaction.
(d) Capital Raising: In such capacity, the Investment Banker shall
assist the Company in raising capital for working capital purposes. The
structure of such financings shall be governed by a separate Managing Dealer
Agreement.
2. In connection with the Investment Banker's activities on the Company's
behalf, (a) the Investment Banker will familiarize itself with the business,
operations, properties, financial condition, and prospects of the Company, and
(b) the Company will cooperate with the Investment Banker and will furnish the
Investment Banker with all information and data concerning the Company (the
"Information") which the Investment Banker deems appropriate and will provide
the Investment Banker with access to the Company's officers, directors,
employees, independent accountants, and legal counsel. The Company represents
and warrants that, to the Company's knowledge, all Information made available to
the Investment Banker by, or on behalf of, the Company will, at all times during
the period of engagement of the Investment Banker hereunder, be complete and
correct in all material respects and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances under which
such statements are made. The Company further represents and warrants that any
projections provided by, or on behalf of, it to the Investment Banker 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 its services hereunder, the
Investment Banker will be using and relying on the Information without
independent verification thereof by the Investment Banker or independent
appraisal by the Investment Banker of any of the Company's assets. The
Investment Banker does not assume responsibility regarding the Company or any
other party. Any advice rendered by the Investment Banker pursuant to this
Agreement may not be disclosed publicly without our prior written consent.
3. The Investment Banker shall be compensated for its services as
follows:
(a) The Company shall deliver to the Investment Banker 100,000 shares
of the Company's common stock upon the execution of this Agreement. These shares
shall be registered as soon as possible after the execution of this Agreement
(b) 90 days after the execution of this Agreement, the Company will
authorize, and the Investment Banker or its designees shall be entitled to
receive, purchase warrants (the "Warrants") to purchase 1,500,000 shares of the
Company's stock at $2.00 per share. The term of the Warrants shall be nine
months from the date of authorization.
The Warrants will contain standard anti-dilution provisions. The
Company agrees, at its expense, after their issuance, to grant the Warrants
piggyback registration rights to register the Securities (the "Underlying
Securities") issuable, directly or indirectly, upon the exercise of the Warrants
for resale at any time during the term of the Warrants. The Company will bear
all the
December 3, 2003
Page 3
costs of such piggyback registration, except for customary underwriting
discounts and commissions. The Company shall not enter into any agreement or
take any other step that would impair the registration rights of any of such
holders granted hereby. The Company shall be required to register, and bear all
costs associated with the piggyback registration of the shares underlying the
Warrants.
(c) In the event of a merger or acquisition during the term of this
engagement, the Investment Banker shall provide a fairness opinion for
transaction. The Investment Banker shall receive a fee for this opinion at
closing of the transaction in an amount equal to 1.75% of the transaction value.
The Investment Banker and Company shall execute a separate engagement letter for
the fairness opinion upon occurrence of a Transaction.
(d) In the event the Investment Banker provides debt or equity
capital to the Company through a private placement led by the Investment Banker,
the Investment Banker shall be entitled to the following compensation:
1. 10% cash commission on the gross proceeds of the private
placement
2. 10% warrant commission on the gross shares sold in the
private placement. The warrants shall have an exercise price
equal to 125% of the offering price.
4. The Company agrees to promptly reimburse the Investment Banker, upon
request from time to time, for all out-of-pocket expenses incurred by Investment
Banker (including fees and disbursements of counsel, and of other consultants
and advisors retained by Investment Banker) in connection with the matters
contemplated by this Agreement. Pre-approval from the Company shall be required
for any individual expenses in excess of $500.00 and any total month's expense
of more than $1,000. The Investment Banker shall invoice the Company from time
to time for out-of-pocket expenses incurred with payment due upon receipt of the
invoice. In addition, the Company shall pay all of its costs and expenses
incident to the purchase, sale, and delivery of the Securities and the
securities issuable upon the conversion, exchange, or exercise thereof,
including without limitation, all fees and expenses of filings with the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc., in each case if applicable; all blue sky fees and expenses; all
fees of the counsel to the Placement Agents; fees of counsel and accountants for
the Company; printing costs, including costs of printing the Memorandum and any
amendments, supplements, or exhibits thereto, any preliminary drafts thereof or
amendments thereto, all private placement documents, blue sky memoranda, and a
reasonable quantity of Memoranda as determined by the Investment Banker; costs
of investigative reports regarding the Company and its affiliates; the Company's
road show costs and expenses; and the cost of preparing five bound volumes of
the Private Placement documents for the Investment Banker and counsel to the
Placement Agents.
5. The Company agrees to indemnify and hold harmless the Investment
Banker and their respective affiliates, their respective directors, officers,
agents, and employees and affiliates, and each other person, if any, controlling
the Investment Banker or any of their respective
December 3, 2003
Page 4
affiliates (collectively the "Indemnified Persons"), from and against any
losses, claims, damages, liabilities or expenses (or actions, including
shareholder actions, in respect thereof) related to or arising out of such
engagement or the Investment Banker's role in connection therewith, and will
reimburse the Indemnified Persons for all reasonable expenses (including
out-of-pocket expenses and Investment Banker's counsel fees and expenses) as
they are incurred by the Indemnified Persons in connection with investigating,
preparing or defending any such action or claim, whether or not in connection
with pending or threatened litigation in which the Investment Banker or any
Indemnified Person is a party. The Company will not, however, be responsible to
the Investment Banker for any losses, claims, damages, liabilities, or expenses
which are finally judicially determined to have resulted primarily from the
Investment Banker's gross negligence. The Company also agrees that none of the
Indemnified Persons shall have any liability to the Company for, or in
connection with, the services or matters pertaining to the Agreement except for
any such liability for losses, claims, damages, liabilities, or expenses
incurred by the Company that results primarily from the Investment Banker's
gross negligence. If the forgoing indemnity is unavailable or insufficient to
hold the Indemnified Persons harmlessfor any reason other than gross negligence,
then the Company shall contribute to the amount paid or payable by the
Indemnified Persons, in respect of the Indemnified Persons, for losses, claims,
damages, liabilities, or expenses in such proportion as appropriately reflects
the relative benefits received by, and fault of, the Company, on the one hand
and the Indemnified Persons, on the other, in connection with the matters as to
which such losses, claims, damages, liabilities or expenses relate and other
equitable consideration; provided, however, the Company agrees that the
aggregate contribution of all Indemnified Persons shall in all cases be not more
than the amount of fees actually received by the Investment Banker for its
services. It is hereby further agreed that the relative benefits to the Company
on the one hand and the Indemnified Persons on the other with respect to any
transaction contemplated by the Agreement shall be deemed to be in the same
proportion as (i) the total value of the transaction bears to (ii) the fees
actually paid to the Investment Banker with respect to such transaction. The
foregoing Agreement shall be in addition to any rights that any Investment
Banker or any Indemnified Person may have at common law or otherwise. The
Company hereby consents to personal jurisdiction and service and venue in any
court in which any claim which is subject to this Agreement is brought against
the Investment Banker or any other Indemnified Person. If any action,
proceeding, or investigation is commenced as to which an Indemnified Person is
entitled to indemnification, the Indemnified Person shall have the right to
retain counsel of its own choice to represent it, the Company shall pay the
reasonable fees and expenses 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; provided that the Company
shall not be responsible for the fees and expenses of more than one counsel.
6. Upon the completion of SBI's due diligence the Company represents,
warrants, and covenants that:
(a) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of its state of incorporation. The
Company is duly qualified or licensed and in good standing as a foreign
corporation in each jurisdiction in which it
December 3, 2003
Page 5
does business. The Company has all requisite corporate power and authority, and
all material and necessary authorizations, approvals, orders, licenses,
certificates and permits of and from all governmental regulatory officials and
bodies to own or lease its properties and conduct its business. The Company has
all corporate power and authority to enter into this Agreement and any
agreement(s) evidencing the Agent's Warrant (the "Warrant Agreements") and to
carry out the provisions and conditions hereof and thereof. No consent,
authorization or order of, and no filing with, any court, government agency or
other body is required for the issuance of the Agent Warrants or any securities
issuable upon exercise of the Agent Warrants except with respect to applicable
federal and state securities laws.
(b) The authorized capital and the issued and outstanding securities
of the Company are as set forth in the Company's filings with the Securities and
Exchange Commission ("SEC") (collectively, the "Disclosure Documents").
(c) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property owned
or leased by it, free and clear of all liens, claims, encumbrances, security
interests and defects of any material nature whatsoever.
(d) There is no litigation or governmental proceeding pending or
threatened against, or involving the properties or business of, the Company
which might materially adversely affect the value or the operation of the
properties or the business of the Company, except as set forth in the Disclosure
Documents.
(e) The financial statements of the Company contained in the
Disclosure Documents fairly present the financial position and the results of
operations of the Company at the dates and for the periods to which they apply;
and such financial statements have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods
involved.
(f) There has been no material adverse change in the condition or
prospects for commercialization of the Company, financial or otherwise, as of
the latest dates as of which such condition or prospects, respectively, are set
forth in the Disclosure Documents; and the outstanding debt, the property and
the business of the Company each conforms in all material respects to the
descriptions thereof contained therein.
(g) The Company is not in violation of its Articles of Incorporation
or By-Laws. Neither the execution and delivery of this Agreement or the Warrant
Agreements, nor the issuance of the Agent Warrants or the securities upon
exercise of the Agent Warrants, nor the consummation of any of the transactions
contemplated herein or in the Warrant Agreements, has conflicted with or will
conflict with, or has resulted in or will result in a breach of, any of the
terms and provisions of, or has constituted or will constitute a default under,
or has resulted in or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of any indenture, mortgage, deed of trust, note, loan
December 3, 2003
Page 6
or credit agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is subject; nor will such action result in any violation of the
provisions of the Certificate of Incorporation or the By-Laws of the Company, or
any statute or any order, rule or regulation applicable to the Company of any
court or of any federal, state or other regulatory authority or other government
body having jurisdiction over the Company; except for any conflict, breach,
default, lien, charge or encumbrance which does not have a material and adverse
effect on the Company, any of its business, property or assets, or any
transactions contemplated hereby.
(h) All taxes which are due and payable from the Company have been
paid in full, and the Company does not have any material tax deficiency or claim
outstanding, assessed or proposed against it.
(i) The Company owns or possesses, free and clear of all liens or
encumbrances and rights thereto or therein by third parties, the requisite
licenses or other rights to use all trademarks, service marks, copyrights,
service names, trade names, patents, patents applications and licenses necessary
to conduct and material to its business (including, without limitation any such
licenses or rights described in the Disclosure Documents as being owned or
possessed by the Company), and there is no material claim or action by any
person pertaining to, or proceeding, pending or threatened, which challenges the
exclusive rights of the Company with respect to any trademarks, service marks,
copyrights, service names, trade names, patents, patent applications and
licenses used in the conduct of the Company's businesses (including, without
limitation, any such licenses or rights described herein or in the Disclosure
Documents as being owned or possessed by the Company); the Company's current
products, services and processes do not and will not infringe on any patents
currently held by third parties.
(j) Neither this Agreement nor the Warrant Agreements nor the
Disclosure Documents contains any untrue statement of a material fact or omits
to state any material fact required to be stated herein or therein or necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All statements of material facts herein or
therein (including, without limitation, any Exhibit or Schedule hereto or
thereto) are true and correct as of the date hereof and will be true and correct
on each Closing Date, if any.
(k) To the best knowledge of the undersigned officer, neither the
Company, nor any of its respective officers, employees or agents, nor any other
person acting on behalf of the Company has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of a customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or other person who is or may be
in a position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) which (A) might subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or
December 3, 2003
Page 7
proceeding, (B) if not given in the past, might have had a materially adverse
effect on the assets, business operations of the Company as reflected in any of
the financial statements delivered to the Investment Banker, or (C) if not
continued in the future, might adversely affect the assets, business, operations
or prospects of the Company.
(l) To the best knowledge of the undersigned officer, the minute
books of the Company contain a complete summary of all meetings and actions of
the directors and stockholders of the Company since the time of its
incorporation (and of any predecessor to the Company) and reflect all
transactions referred to in such minutes accurately in all respects.
(m) The Company has not dealt with or engaged any unlicensed finder
who was required to be licensed in connection with any financing activities.
7. The term of this Agreement shall commence on the date hereof and
expire on the first anniversary of the date hereof. Notwithstanding the
foregoing, either party hereto may terminate this Agreement at any time upon
written notice, without liability or expenses incurred or continuing obligation,
except as otherwise set forth in this section. Such termination shall be
effective 60 days from the date of the receipt of the written notice. Neither
termination of this Agreement nor completion of the assignment contemplated
hereby shall affect: (i) any compensation earned by Investment Banker up to the
effective date of termination or completion, as the case may be, (ii) the
reimbursement of expenses incurred by Investment Banker up to the date of
termination or completion, as the case may be, (iii) the provisions of Section 4
of this Agreement, and (v) the Indemnification Provisions of this Agreement, all
of which shall remain operative and in full force and effect.
8. The Company shall not use the name of the Investment Banker or of any
of the Investment Banker's divisions or affiliates in any promotional material,
press release or other written or oral communication without the express written
consent of the Investment Banker.
9. The validity and interpretation of this Agreement shall be governed by
the law of the State of California applicable to agreements made and to be fully
performed therein.
10. The benefits of this Agreement shall inure to the respective
successors and assigns of the parties hereto and of the indemnified parties
hereunder and their successors and assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns.
11. For the convenience of the parties hereto, any number of counterparts
of this Agreement may be executed by the parties hereto. Each such counterpart
shall be, and shall be deemed to be, an original instrument, but all such
counterparts taken together shall constitute one and the same Agreement. This
Agreement may not be modified or amended except in writing signed by the parties
hereto.
December 3, 2003
Page 8
If the foregoing correctly sets forth our agreement, please sign and return
the enclosed copy of this letter. By accepting this letter, the Company agrees
to keep this letter and all terms confidential and not to "shop" it with any
other placement agents or underwriters.
Very truly yours,
FIRST SECURITIES USA, INC. SBI USA
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxx Xxxxxxx
----------------------------------- -----------------------------------
BY: Xxxxxxx X. Xxxxxx BY: Xxxxxx Xxxxxxx
ITS: President ITS: Managing Director
ACCEPTED AND AGREED TO
This 13th day of November, 2003
DECORIZE, INC.
/s/ Xxx Xxxxxxx
-----------------------------------
BY: Xxx Xxxxxxx
ITS: President
