EXHIBIT 10.9
FINANCIAL ADVISORY AND CONSULTING AGREEMENT
This Agreement is made and entered into as of this 26th day of April,
1996, by and between First American Railways, Inc. and its successor by merger
or consolidation (the "Company"), and Capital Growth International, LLC (the
"Consultant").
In consideration of and for the mutual promises and covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. PURPOSE. The Company hereby retains the Consultant during the term
specified in SECTION 2 hereof to render consulting advice to the Company as an
investment banker relating to financial and similar matters, upon the terms and
conditions as set forth herein.
2. TERM. Subject to the provisions of SECTIONS 8, 9 and 10 hereof, this
Agreement shall be effective for a period of twenty four (24) months commencing
the date
hereof.
3. DUTIES OF CONSULTANT. During the term of this Agreement, the
Consultant will provide the Company with such regular and customary consulting
advice as is reasonably requested by the Company, provided that the Consultant
shall not be required to undertake duties not reasonably within the scope of the
consulting advisory service contemplated by this Agreement. In performance of
these duties, the Consultant 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 Consultant's advice is not measurable in any quantitative
manner, and that the Consultant shall be obligated to render advice, upon the
request of the Company, in good faith, but shall not be obligated to spend any
specific amount of time in doing so. The Consultant's duties may include, but
will not necessarily be limited to:
A. Providing sponsorship and exposure in connection with the
dissemination of corporate information regarding the Company to the investment
community at large under a systematic planned approach.
B. Rendering advice and assistance in connection with the
preparation of annual and interim reports and press releases.
C. Arranging, on behalf of the Company and its representatives, at
appropriate times, meetings with securities analysts of major regional
investment banking firms.
D. Assisting in the Company's financial public relations,
including discussions between the Company and the financial community.
E. Rendering advice with regard to internal operations, including:
(1) advice regarding the formation of corporate goals and their
implementation;
(2) advice regarding the financial structure of the Company and
its future divisions or subsidiaries, if any, or any programs and
projects of such entities;
(3) advice concerning the securing, when necessary and if
possible, of additional financing through banks, insurance
companies and/or other institutions; and
(4) advice regarding corporate organization and personnel.
F. Rendering advice with respect to any acquisition program of the
Company.
G. Rendering advice regarding a future public or private offering
of securities of the Company or of any future subsidiary.
4. RELATIONSHIPS WITH OTHERS. The Company acknowledges that the
Consultant and its affiliates are in the business of providing financial service
and consulting advice (of all types contemplated by this Agreement) to others.
Nothing herein contained shall be construed to limit or restrict the Consultant
or its affiliates from rendering such services or advice to others.
5. CONSULTANT'S LIABILITY. In the absence of gross negligence or
willful misconduct on the part of the Consultant or the Consultant's breach of
this Agreement, the Consultant shall not be liable to the Company, or to any
officer, director, employee, shareholder or creditor of the Company, for any act
or omission in the course of or in connection with the rendering or providing of
advice or services hereunder. Except in those cases where the gross negligence
or misconduct of the Consultant or the breach by the Consultant of this
Agreement is alleged and proven, the Company agrees to defend, indemnify and
hold the Consultant harmless from and against any and all reasonable costs,
expenses and liability (including, but not limited to, attorneys' fees paid in
the defense of the Consultant) which may in any way result from services
rendered by the Consultant pursuant to or in any connection with this Agreement.
6. EXPENSES. The Company, upon receipt of appropriate supporting
documentation, shall reimburse the Consultant for any and all reasonable
out-of-pocket expenses incurred by the Consultant in connection with services
rendered by the Consultant
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to the Company pursuant to this Agreement, including, but not limited to, hotel,
food and associated expenses, all charges for travel and long-distance telephone
calls and all other expenses incurred by the Consultant in connection with
services rendered by the Consultant to the Company pursuant to this Agreement.
Expenses payable under this SECTION 6 shall not include allocable overhead
expenses of the Consultant, including, but not limited to, attorneys' fees,
secretarial charges and rent.
7. COMPENSATION. As compensation for the services to be rendered by the
Consultant to the Company pursuant to SECTION 3 hereof during the term set forth
in SECTION 2 hereof, the Company shall pay the Consultant on a monthly basis a
financial consulting fee of five thousand dollars ($5,000) per month payable in
advance on or before the first business day of each month.
8. OTHER ADVICE. In addition to the duties set out in SECTION 3 hereof,
the Consultant agrees to advise the Company in connection with any transaction
involving the Company with respect to (a) an acquisition of, or merger or
consolidation with, any other company, (b) a sale of the Company itself (or any
significant percentage, subsidiary or affiliate thereof), (c) a joint venture
with any third party, (d) a license or royalty agreement or (e) a financing
(other than the private or public sale of the Company's securities for cash).
In the event that any transaction listed in the previous paragraph is
directly or indirectly originated, facilitated or arranged, at any time during a
period of five (5) years from the date hereof, by the Consultant, the Company
shall pay fees to the Consultant as follows:
LEGAL CONSIDERATION FEE
---------------------- -----
$-0- - $ 8,000,000 5% of Legal Consideration
$8,000,001 - $12,000,000 4% of excess over $8,000,000
Over $12,000,000 3% of excess over $12,000,000
Legal Consideration is defined, for purposes of this Agreement, as the
total of stock (valued at market on the day of closing, or if there is no public
market, valued at fair market value as agreed or, if not, by an independent
appraiser), cash and assets and property or other benefits exchanged by the
Company or received by the Company or its shareholders (all valued at fair
market value as agreed or, if not, by an independent appraiser), irrespective of
period of payment or terms.
9. SALES OR DISTRIBUTIONS OF SECURITIES.
A. The Company hereby grants to the Consultant a preferential
right on the terms and subject to the conditions set forth in this paragraph,
for a period of two (2) years from the date hereof, to purchase for its account,
or to sell for the account of the
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Company any securities of the Company with respect to which the Company may seek
a public or private placement, offering or sale. The Company, for a period of
two (2) years from the date hereof, will consult with the Consultant with regard
to any such sale, offering or placement and will offer to the Consultant the
opportunity, on terms not more favorable to the Company than it can secure
elsewhere, to purchase or sell any such securities. If the Consultant fails to
accept in writing a proposal under this Section 9(A) made by the Company within
10 business days after receipt of a written, detailed notice containing such
proposal, then the Consultant shall not have further claim or right with respect
to such proposal. If, thereafter, such proposal is materially modified, the
Company shall again consult with the Consultant in connection with such
modification and shall in all respects have the same obligations and adopt the
same procedures with respect to the modified proposal as are provided herein
with respect to the original proposal. In addition to the foregoing, the parties
hereto agree that the Consultant shall be offered the first opportunity to act
as managing underwriter of the Company's public offering of any of its
securities, which offer will provide that the managing underwriter shall receive
its customary underwriting compensation. This provision shall also apply to the
Company's present and future subsidiaries and affiliates.
B. If the Consultant assists the Company in the sale or
distribution of securities to the public or in a private transaction, the
Company shall pay fees to the Consultant (in the absence of other fee
arrangements) as follows:
SECURITIES ISSUED FEE
- ---------------------- ------
Senior or secured debt 1.5% of gross proceeds
Subordinated debt 4% of gross proceeds
Equity 8% of gross proceeds
10. FORM OF PAYMENT. All fees due to the Consultant pursuant to
SECTIONS 8 and 9 hereof are due and payable to the Consultant, in cash or by
certified check, at the closing or closings of any transaction specified in such
SECTIONS 8 and 9 or as otherwise shall mutually be agreed between the parties
hereto; PROVIDED, HOWEVER, that in the case of license and royalty agreements
specified in SECTION 8 hereof, the fees due the Consultant in respect of such
license and royalty agreements shall be paid as and when license and/or royalty
payments are received by the Company. In the event that this Agreement shall not
be renewed for a period of at least twelve (12) months at the end of the five
(5) year period referred to in SECTION 8 hereof, or the two (2) year period
referred to in SECTION 9 hereof, or if terminated for any reason prior to the
end of such five (5) year period, or two (2) year period, as the case may be,
then, notwithstanding any such non-renewal or termination, the Consultant shall
be entitled to the full fee for any transaction contemplated under SECTION 8 and
SECTION 9, respectively hereof which closes within twelve (12) months after such
non-renewal or termination.
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11. LIMITATION UPON THE USE OF ADVICE AND SERVICES.
A. No person or entity, other than the Company or any of its
subsidiaries, shall be entitled to make use of or rely upon the advice of the
Consultant to be given hereunder, and the Company shall not transmit such advice
to others, or encourage or facilitate the use or reliance upon such advice by
others, without the prior consent of the Consultant.
B. It is clearly understood that the Consultant, with respect to
services rendered under this Agreement, makes no commitments whatsoever to make
a market in the securities of the Company or to recommend or advise its clients
to purchase the securities of the Company. Research reports or corporate finance
reports that may be prepared by the Consultant will, when and if prepared, be
done solely on the merits or judgment of analysts of the Consultant or senior
corporate finance personnel of the Consultant.
C. The use of the Consultant's name in any annual report or other
report of the Company, or any release or similar document prepared by or on
behalf of the Company, must have the prior approval of the Consultant unless the
Company is required by law to include the Consultant's name in such annual
report, other report or release, in which event the Consultant will be furnished
with a copy of such annual report, other report or release using the
Consultant's name in advance of publication by or on behalf of the Company.
D. Should any purchases of securities be requested to be effected
through the Consultant by the Company, its officers, directors, employees or
other affiliates, or by any person on behalf of any profit sharing, pension or
similar plan of the Company, for the account of the Company or the individuals
or entities involved, such orders shall be taken by a registered account
executive of the Consultant, shall not be subject to the terms of this
Agreement, and the normal brokerage commission as charged by the Consultant will
apply in conformity with all rules and regulations of the New York Stock
Exchange, the National Association of Securities Dealers, Inc. or other
regulatory bodies. Where no regulatory body sets the fee, the normal established
fee as used by the Consultant shall apply.
E. The Consultant shall not disclose confidential information which
it learns about the Company as a result of its engagement hereunder, except for
such disclosure as may be required for Consultant to perform its duties
hereunder.
12. INDEMNIFICATION. Since the Consultant will be acting on behalf of
the Company in connection with its engagement hereunder, the Company and
Consultant have entered into a separate indemnification agreement substantially
in the form attached hereto as EXHIBIT A and dated the date hereof, providing
for the indemnification of Consultant by the Company. The Consultant has entered
into this Agreement in reliance on the indemnities set forth in such
indemnification agreement.
13. SEVERABILITY. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is deemed unlawful or invalid for any
reason
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whatsoever, such unlawfulness or invalidity shall not affect the validity of the
remainder of this Agreement.
14. MISCELLANEOUS.
A. Any notice or other communication between the parties hereto
shall be sent by certified or registered mail, postage prepaid, if to the
Company, addressed to it at First American Railways, Inc., 1360 South Ocean
Boulevard, Pompano Beach, Florida 33062, Attention: Allen C. Harper with a copy
to Olle, Macaulay & Zorrilla, P.A., 1402 Miami Center, 201 South Biscayne
Boulevard, Miami, Florida, 33131, Attention: Dennis J. Olle, Esq., or, if to the
Consultant, addressed to it at Capital Growth International, LLC, 666 Steamboat
Road, 2nd Floor, Greenwich, Connecticut 06830, Attention: Michael Jacobs, with a
copy to Orrick, Herrington & Sutcliffe, 666 Fifth Avenue, New York, New York
10103, Attention: Rubi Finkelstein, Esq., or to such address as may hereafter be
designated in writing by any of such entities to the others. Such notice or
other communication shall be deemed to be given on the date of receipt.
B. If, during the term hereof, the Consultant shall cease to do
business, the provisions hereof relating to the duties of the Consultant and the
compensation by the Company as it applies to the Consultant shall thereupon
cease to be in effect, except for the Company's obligation of payment for
services rendered prior thereto. This Agreement shall survive any merger of,
acquisition of, or acquisition by the Consultant and, after any such merger or
acquisition, shall be binding upon the Company and the corporation surviving
such merger or acquisition.
C. This Agreement embodies the entire agreement and understanding
between the Company and the Consultant and supersedes any and all negotiations,
prior discussions and preliminary and prior agreements and understandings
related to the central subject matter hereof.
D. This Agreement has been duly authorized, executed and delivered
by and on behalf of the Company and the Consultant.
E. This Agreement shall be governed by and construed in all
respects under the laws of the State of New York, without reference to its
conflict of laws rules or principles. Any suit, action, proceeding or litigation
arising out of or relating to this Agreement shall be brought and prosecuted in
such federal or state court or courts located within the State of New York as
provided by law. The parties hereby irrevocably and unconditionally consent to
the jurisdiction of each such court or courts located within the State of New
York and to service of process by registered or certified mail, return receipt
requested, or by any other manner provided by applicable law, and hereby
irrevocably and unconditionally waive any right to claim that any suit, action,
proceeding or litigation so commenced has been commenced in an inconvenient
forum.
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F. This Agreement and the rights hereunder may not be assigned by
either party (except by operation of law) and shall be binding upon and inure to
the benefit of the Parties and their respective successors, assigns and legal
representatives.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date hereof.
FIRST AMERICAN RAILWAYS, INC.
By:___________________________________
Name:
Title:
CAPITAL GROWTH INTERNATIONAL, LLC
By:__________________________________
Name:
Title:
8
EXHIBIT A
_______ , 1996
Capital Growth International, LLC
666 Steamboat Road
2nd Floor
Greenwich, Connecticut 06830
Ladies and Gentlemen:
In connection with our engagement of CAPITAL GROWTH INTERNATIONAL, LLC
(the "Consultant") as our financial advisor and investment banker, we hereby
agree to indemnify and hold the Consultant and its affiliates, and the
directors, officers, partners, shareholders, agents and employees of the
Consultant (collectively the "Indemnified Persons"), harmless from and against
any and all claims, actions, suits, proceedings (including those of
shareholders), damages, liabilities and expenses incurred by any of them
(including, but not limited to, fees and expenses of counsel) which are (A)
related to or arise out of (i) any actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made) by
us, or (ii) any actions taken or omitted to be taken by any Indemnified Person
in connection with our engagement of the Consultant pursuant to the Financial
Advisory and Consulting Agreement, of even date herewith, between the Consultant
and us (the "Consulting Agreement"), or (B) otherwise related to or arise out of
the Consultant's activities on our behalf pursuant to the Consultant's
engagement under the Consulting Agreement, and we shall reimburse any
Indemnified Person for all expenses (including, but not limited to, fees and
expenses of counsel) incurred by such Indemnified Person in connection with
investigating, preparing or defending any such claim, action, suit or proceeding
(collectively a "Claim"), whether or not in connection with pending or
threatened litigation in which any Indemnified Person is a party. We will not,
however, be responsible for any Claim which is finally judicially determined to
have resulted exclusively from the gross negligence or willful misconduct of any
person seeking indemnification hereunder. We further agree that no Indemnified
Person shall have any liability to us for or in connection with the Consultant's
engagement under the Consulting Agreement except for any Claim incurred by us
solely as a direct result of any Indemnified Person's gross negligence or
willful misconduct.
We further agree that we will not, without the prior written consent of
the Consultant, settle, compromise or consent to the entry of any judgment in
any pending or threatened Claim in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such Claim), unless such settlement, compromise or consent
includes a legally binding, unconditional, and irrevocable release of each
Indemnified Person hereunder from any and all liability arising out of such
Claim.
A-1
Promptly upon receipt by an Indemnified Person of notice of any
complaint or the assertion or institution of any Claim with respect to which
indemnification is being sought hereunder, such Indemnified Person shall notify
us in writing of such complaint or of such assertion or institution, but failure
to so notify us shall not relieve us from any obligation we may have hereunder,
unless, and only to the extent that, such failure results in the forfeiture by
us of substantial rights and defenses, and such failure to so notify us will not
in any event relieve us from any other obligation or liability we may have to
any Indemnified Person otherwise than under this Agreement. If we so elect or
are requested by such Indemnified Person, we will assume the defense of such
Claim, including the employment of counsel reasonably satisfactory to such
Indemnified Person and the payment of the fees and expenses of such counsel. In
the event, however, that such Indemnified Person reasonably determines in its
sole judgment that having common counsel would present such counsel with a
conflict of interest or such Indemnified Person concludes that there may be
legal defenses available to it or other Indemnified Persons that are different
from or in addition to those available to us, then such Indemnified Person may
employ its own separate counsel to represent or defend it in any such Claim and
we shall pay the reasonable fees and expenses of such counsel. Notwithstanding
anything herein to the contrary, if we fail timely or diligently to defend,
contest, or otherwise protect against any Claim, the relevant Indemnified Party
shall have the right, but not the obligation, to defend, contest, compromise,
settle, assert crossclaims or counterclaims, or otherwise protect against the
same, and shall be fully indemnified by us therefor, including, but not limited
to, for the fees and expenses of its counsel and all amounts paid as a result of
such Claim or the compromise or settlement thereof. In any Claim in which we
assume the defense, the Indemnified Person shall have the right to participate
in such defense and to retain its own counsel therefor at its own expense.
We agree that if any indemnity sought by an Indemnified Person
hereunder is held by a court to be unavailable for any reason, then (whether or
not the Consultant is the Indemnified Person) we and the Consultant shall
contribute to the Claim for which such Indemnity is held unavailable in such
proportion as is appropriate to reflect the relative benefits to us, on the one
hand, and the Consultant, on the other, in connection with the Consultant's
engagement by us under the Consulting Agreement, subject to the limitation that
in no event shall the amount of the Consultant's contribution to such Claim
exceed the amount of fees actually received by the Consultant from us pursuant
to the Consultant's engagement under the Consulting Agreement. We hereby agree
that the relative benefits to us, on the one hand, and the Consultant, on the
other, with respect to the Consultant's engagement under the Consulting
Agreement shall be deemed to be in the same proportion as (a) the total value
paid or proposed to be paid or received by us or our shareholders as the case
may be, pursuant to the transaction (whether or not consummated) for which the
Consultant is engaged to render services bears to (b) the fee paid or proposed
to be paid to the Consultant in connection with such engagement.
Our indemnity, reimbursement and contribution obligations under this
Agreement shall be in addition to, and shall in no way limit or otherwise
adversely affect any rights that any Indemnified Party may have at law or at
equity.
A-2
Should the Consultant, or any of its directors, officers, partners,
shareholders, agents or employees, be required or be requested by us to provide
documentary evidence or testimony in connection with any proceeding arising from
or relating to the Consultant's engagement under the Consulting Agreement, we
agree to pay all reasonable expenses (including, but not limited to, fees and
expenses of counsel) in complying therewith and one thousand dollars ($1,000)
per day for any sworn testimony or preparation therefor, payable in advance.
We hereby consent to personal jurisdiction and service of process and
venue in any court in which any claim for indemnity is brought by any
Indemnified Person.
It is understood that, in connection with the Consultant's engagement
under the Consulting Agreement, the Consultant may be engaged to act in one or
more additional capacities and that the terms of the original engagement or any
such additional engagement may be embodied in one or more separate written
agreements. The provisions of this Agreement shall apply to the original
engagement and any such additional engagement and shall remain in full force and
effect following the completion or termination of the Consultant's
engagement(s).
Very truly yours,
FIRST AMERICAN RAILWAYS, INC.
By:___________________________________
Name:
Title:
CONFIRMED AND AGREED TO:
CAPITAL GROWTH INTERNATIONAL, LLC
By:____________________________________
Name:
Title:
A-3