EXHIBIT 10.25
FINANCIAL ADVISORY AND CONSULTING AGREEMENT
This Agreement is made and entered into as of this __ day of
________, 1997, by and between CTI Industries Corporation, a Delaware
corporation (the "Company"), and Joseph Stevens & Company, Inc. (the
"Consultant").
In consideration of and for the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt 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 on 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:
(i) advice regarding formation of corporate goals
and their implementation;
(ii) advice regarding the financial structure of
the Company and its divisions or subsidiaries or any
programs and projects of such entities;
(iii) advice concerning the securing, when
necessary and if possible, of additional financing
through banks, insurance companies and/or other
institutions; and
(iv) 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 subsidiary.
4. Relationships with Others. The Company acknowledges that
the Consultant and its affiliates are in the business of providing financial
services 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 hereunder. Except in those cases where the gross negligence or willful
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 to 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.
2
7. Compensation. As compensation for the services to be
rendered by the Consultant to the Company pursuant to Section 3 hereof, the
Company shall pay the Consultant a financial consulting fee of two thousand
dollars ($2,000) per month for twenty-four (24) months commencing on ______ __
1997. Forty-Eight Thousand Dollars ($48,000), representing payment in full of
all amounts due the Consultant pursuant to this Section 7, shall be paid by the
Company on _______ __, 1997.
8. Other Advice. In addition to the duties set out in Section
3 hereof, the Consultant agrees to furnish advice to the Company in connection
with the acquisition of and/or merger with other companies, joint ventures with
any third parties, license and royalty agreements and any other financing (other
than the private or public sale of the Company's securities for cash),
including, but not limited to, the sale of the Company itself (or any
significant percentage, subsidiaries or affiliates thereof).
In the event that any such transactions are directly or
indirectly originated by the Consultant for a period of five (5) years from the
date hereof, the Company shall pay fees to the Consultant as follows:
Legal Consideration Fee
------------------- ---
1. $ -0- - $3,000,000 5% of legal consideration
2. $ 3,000,001 - $4,000,000 Amount calculated pursuant to line 1
of this computation, plus 4% of
excess over $3,000,000
3. $ 4,000,001 - 5,000,000 Amount calculated pursuant to lines
1 and 2 of this computation, plus 3%
of excess over $4,000,000
4. above $ 5,000,000 Amount calculated pursuant to lines
1, 2 and 3 of this computation, plus
2% of excess over $5,000,000.
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 as set forth herein for other property), 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 any independent appraiser), irrespective of period of payment or
terms.
9. Sales or Distributions of Securities. If the Consultant
assists the Company in the sale or distribution of securities to the public or
in a private transaction, the Consultant shall receive fees in the amount and
form to be arranged separately at the time of such transaction.
3
10. Form of Payment. All fees due to the Consultant pursuant
to Section 8 hereof are due and payable to the Consultant, in cash or by
certified check, at the closing or closings of a transaction specified in such
Section 8 or as otherwise 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 receipt 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 if terminated for any reason prior to
the end of such five (5) year period then, notwithstanding any such non-renewal
or termination, the Consultant shall be entitled to the full fee for any
transaction contemplated under Section 8 hereof which closes within twelve (12)
months after such non-renewal or termination.
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 of or reliance upon such advice by
others, without the prior written consent of the Consultant.
B. It is clearly understood that the Consultant, for services
rendered under this Agreement, makes no commitment whatsoever as to making 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 written 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
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.
4
E. The Consultant shall not disclose confidential information
which it learns about the Company as a result of its engagement hereunder,
except as 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 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 22160 North Pepper Road, Barrington, Illinois 60010,
Attention: Stephen Merrick, President, with a copy to Fishman & Merrick, P.C.,
30 La Salle Street, Suite 3500, Chicago, Illinois, Attention: John M. Klimek,
or, if to the Consultant, addressed to it at 33 Maiden Lane, 8th Floor, New
York, New York 10038, Attention: Joseph Sorbara, Chief Executive Officer, 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 one party to the other. 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
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 construed and interpreted in
accordance with laws of the State of New York, without giving effect to
conflicts of laws.
N
5
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.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date hereof.
CTI INDUSTRIES CORPORATION
By:_______________________________
Howard W. Schwan
President
JOSEPH STEVENS & COMPANY, INC.
By:_______________________________
Name:
Title:
6
EXHIBIT A
_________________, 1997
JOSEPH STEVENS & COMPANY, INC.
33 Maiden Lane
8th Floor
New York, New York 10038
Ladies and Gentlemen:
In connection with our engagement of JOSEPH STEVENS & COMPANY, INC.
(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 arising 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.
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 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 hand, 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 stockholders 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.
2
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 an Indemnified Part may have at law or at
equity.
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,
CTI INDUSTRIES CORPORATION
By: _________________________
Howard W. Schwan
President
CONFIRMED AND AGREED TO:
JOSEPH STEVENS & COMPANY, INC.
By:___________________________
Name:
Title:
3