exv10w7



 






Exhibit 10.7




CONFIDENTIAL




May 9, 2005




Jared E. Abbruzzese, Sr. and Wayne Barr, Jr.

Capital & Technology Advisors, Inc.

18 Corporate Woods Boulevard

3rd floor

Albany, New York 12211



Gentlemen:




     This letter of intent (this “Letter”) sets forth the preliminary understanding of the proposed
terms and conditions for the acquisition (the “Transaction”) of Capital & Technology Advisors Inc.,
a Delaware corporation (the “Company”), by Tejas Incorporated, a Delaware corporation, or its
designee (the “Buyer”) with Jared E. Abbruzzese, Sr. and Wayne Barr, Jr., holders of a majority of
the capital stock of the Company (the “Stockholders”) (each, a “Party” and collectively, the
“Parties”), by a transaction which is tax free under the Internal Revenue Code of 1986, as amended,
as further described in the term sheet attached hereto as Exhibit A (the “Term Sheet”). The Term
Sheet is not a contract, and none of the Parties intend that the preliminary understandings
contained therein represent the final agreement with respect to the Transaction. The preliminary
understandings expressed in the Term Sheet are subject, among other things, to the satisfactory
completion of Buyer’s business, financial and legal due diligence of the Company as provided in
Section 4 and the other provisions of this Letter, which may result in a restructuring or
abandoning of the Transaction, and we agree that no liability will arise in the event of any such
abandonment or restructuring except as provided in Section 7 hereof.




	 	1.  	Expenses. Each Party will bear its own internal and external
expenses incurred in connection with this Letter.
	 
	 	2.  	Non-Disclosure. Each Party will take appropriate cautions to
safeguard trade secrets and other confidential or proprietary information
regarding the other Party gained in the context of the proposed Transaction,
whether or not the Transaction is consummated, and will conduct themselves in a
manner that will preserve the confidential nature of the Transaction and shall not
use any such information except for purposes of evaluating the Transaction.
Furthermore, from and after the date hereof, none of the Parties hereto shall
make, and shall cause their respective representatives, officers, directors,
employees and affiliates (collectively, “Representatives”) not to make, any
disclosure regarding this Letter or the Transaction, and will not relate any
information concerning either Party to this Letter or the Transaction,




 









 






	 	   	to any individual or organization, unless required to do so by applicable laws
(in which event the disclosing Party shall provide the other Party with
reasonable prior notice of the contents of the disclosure), provided that
Tejas Incorporated may file this Letter (a) under cover of a Current Report on
Form 8-K to be filed with the Securities and Exchange Commission, and (b) with
any other regulatory body having jurisdiction over the operations of Buyer or
any of its subsidiaries in whatever form and manner required by such
regulatory body. Buyer and Company agree to hold, and to cause their
respective Representatives to hold, all information regarding any potential
Transaction, in strict confidence (“Confidential Information”); provided that
the following types of information shall not be deemed “Confidential
Information” for the purposes hereof and shall not be required to be treated
as such: (i) information that at the time of disclosure is or thereafter
becomes generally available to the public or members of the industries in
which the Buyer or Company conducts business (other than as a result of a
disclosure in violation of the provisions hereof); (ii) information that was
available to a Party from a source other than the Party hereto and was not
obtained from a source in violation of any agreement known to the obtaining
Party or applicable law; (iii) information that one Party hereto has furnished
to a person not a Party to this Letter without a similar restriction on
disclosure; and (iv) information that any Party hereto, or any of its
directors, officers, employees or agents, is, on advice of counsel, compelled
to disclose to any tribunal or else stand liable for contempt. Each Party
hereto agrees that if discussions regarding a potential Transaction are
terminated for whatever reason, each Party shall, within 10 days after such
termination, return or destroy all Confidential Information it has in its
possession that was furnished by the other Party hereto to such other Party
without retaining any copies or other physical embodiments thereof. This
Section 2 will survive any termination of this Letter.
	 
	 	3.  	Option Payment; No Solicitation. On the date of the
acceptance of this Letter by the Company and each of the Stockholders (the
“Acceptance Date”), Buyer will deposit with the Company the amount of $2,000,000
(the “Option Payment”), which Option Payment will be non-refundable except as
provided in Section 7 here, and Buyer shall proceed as quickly as possible to
complete its due diligence of the Company and negotiate definitive agreements
relating to the Transaction (the “Definitive Agreements”) by the date which is 30
days after the Acceptance Date (the earlier to occur of the execution of
Definitive Agreements and the expiration of such 30 day period, the “Termination
Date”). In consideration of such covenant, during the period commencing on the
date of this Letter ending on the Termination Date (as extended pursuant to
agreement among the Parties hereto) (the “Diligence Period”), the Company and each
of the




 









 





	 	   	Stockholders shall not nor will it permit any of their respective directors,
officers, employees, agents, or representatives to, directly or indirectly,
(a) solicit or encourage any inquiries, discussions, or proposals regarding,
(b) continue, propose or enter into negotiations with respect to, or (c) enter
into any agreement or understanding contemplating, any Alternative Transaction
(as hereinafter defined), nor shall any of such persons or entities provide
any information to any person for the purpose of making, evaluating or
determining whether to make or pursue inquiries or proposals with respect to
any Alternative Transaction. The Company will immediately advise Buyer of, and
communicate to Buyer all terms of, any such inquiry or proposal. The term
“Alternative Transaction” means any (i) direct or indirect acquisition or
purchase of any voting securities or equity interest in the Company or any of
its subsidiaries and affiliates, (ii) merger, consolidation, business
combination or similar transaction involving the Company or any of its
subsidiaries and affiliates, (iii) sale of assets of the Company or any of its
subsidiaries and affiliates, or (iv) any other transaction involving the
Company or any of its subsidiaries and affiliates including, without
limitation, any merger, consolidation, business combination or similar
transaction involving or any direct or indirect acquisition or other purchase
of any voting securities or other equity interest in the Company or any of its
subsidiaries and affiliates, the pendency or consummation of which might
reasonably be expected to impede, interfere with, prevent or delay the
Transaction.
	 
	 	4.  	Due Diligence. For the Diligence Period, the Company shall
provide Buyer with reasonable access to its personnel, facilities, and information
with respect to the Company so as to facilitate the Transaction. On or before the
date hereof, the Company provided Buyer with its actual financial results for 2003
and 2004 and projected financial results for 2005 (the “Financial Statements”).
	 
	 	5.  	Indemnity. The Company and each of the Stockholders hereby
agree to indemnify, defend and hold Buyer, its affiliates and their officers,
directors and employees thereof harmless against any and all claims, losses,
liabilities, or expenses which may be asserted against or incurred by any of them
as a result of the Company’s dealings, arrangements or agreements with any
investment banker, broker or finder engaged by the Company in connection with the
Transaction. The Buyer hereby agrees to indemnify, defend and hold the Company,
its affiliates and their officers, directors and employees thereof harmless
against any and all claims, losses, liabilities, or expenses which may be asserted
against or incurred by any of them as a result of the Buyer’s dealings,
arrangements or agreements with any investment banker, broker or finder engaged by
the Buyer in connection with the Transaction.




 









 






	 	6.  	Approvals. The Definitive Agreements will be subject to the
approval of Buyer’s Board of Directors and any other consents that may be required
and shall provide for a target closing date for the Transaction of June 15, 2005.
	 
	 	7.  	Damages. The Parties hereto acknowledge and agree that money
damages would be both incalculable and an insufficient remedy for any breach of
Sections 2, 3, 4, 5 or 8 of this Letter, and that any such breach would cause
irreparable harm. Accordingly, in the event of any breach or threatened breach of
the foregoing provisions of this Letter by either Party, the other Party or
Parties shall be entitled to equitable relief. If a Party is alleged by the other
Party to have violated this Letter and such dispute results in litigation, the
non-prevailing Party to such litigation, as determined by a final, non-appealable
judgment of a court of applicable jurisdiction, shall be obligated to pay the
reasonable legal fees of the prevailing Party associated with such litigation.
	 
	 	   	Termination; Break-Up Fee. Buyer shall have the right to terminate
this Letter at any time for any reason or for no reason, without liability or
any further payments. If the Company shall at any time terminate this Letter
and enter into an Alternative Transaction; then upon the occurrence of such
event (a) the Company shall refund the Option Payment to Buyer and (b) the
Company and the Stockholders shall also pay Buyer a fee equal to thirty
percent (30%) of the amount of such Purchase Price exceeding $65,000,000 (the
“Break-Up Fee”), but in no event shall the Break-Up Fee exceed $4,000,000.
This Section 7 shall survive any termination of this Letter.
	 
	 	8.  	Right of First Refusal: If, at any time the Company or any
of the Stockholders deems an Alternative Transaction acceptable, then the Company
shall give notice to the Buyer prior to entering into any definitive agreements
relating to the contemplated Alternative Transaction, setting forth the terms and
conditions of the proposed Alternative Transaction, together with a copy of the
proposed letter of intent, contract or other document evidencing such offer and
such terms and conditions. The Buyer shall then have the option to purchase the
Company’s interest proposed to be sold in the Alternative Transaction upon
substantially the same terms and conditions as set forth therein. Such option
shall be exercised by notice to Stockholders within thirty (30) days after the
Company’s notice to Buyer. This Section 8 shall survive any termination of this
Letter.
	 
	 	9.  	Operation of Business. During the period between execution
of this Letter and closing of the Transaction (unless this Letter is sooner
terminated in accordance with its terms) the Company will




 









 












(1) operate its business as historically conducted in the ordinary course of
business and (2) not enter into any material agreement without providing the
Buyer with 24 hours prior notice thereof and discussing the same with the
Buyer prior to entering into such agreement; provided, however, that not
withstanding the foregoing provisions of this Section 9:




	 	   	a) With respect to engagements entered into by the Company before the execution of this
Letter, all fees paid to the Company before the closing of the Transaction or booked as
a receivable of the Company before the closing of the Transaction based on a
contractual obligation of a customer to pay will be utilized by the Company to pay all
of its obligations in the ordinary course of business in accordance with its historical
practices (provided that the Company will pay or make other arrangements for the
payment of all its professional fees and expenses relating to the Transaction
immediately prior to the closing thereof) and shall otherwise be deemed to be for the
benefit of the current stockholders of the Company and may be distributed to such
stockholders or otherwise as management of the Company determines, in its sole
discretion;
	 
	 	   	b) With respect to engagements entered into on or after the execution of this Letter,

(x) all recurring retainers and similar periodic fees (excluding event or success-based
fees) paid to the Company before the closing of the Transaction or booked as a
receivable of the Company before the closing of the Transaction based on a contractual
obligation of a customer to pay will be utilized by the Company to pay all of its
obligations in the ordinary course of business in accordance with its historical
practices (provided that the Company will pay or make other arrangements for the
payment of all its professional fees and expenses relating to the Transaction
immediately prior to the closing thereof) and shall otherwise be deemed to be for the
benefit of the current stockholders of the Company and may be distributed to such
stockholders or otherwise as management of the Company determines, in its sole
discretion; and (y) all other fees paid to the Company before the closing of the
Transaction or booked as a receivable of the Company before the closing of the
Transaction based on a contractual obligation of a customer to pay will be deemed to be
for the benefit of the Buyer and shall not be distributed to stockholders of the
Company or utilized to pay any obligation of the Company or otherwise but, rather,
shall be kept in a segregated bank account by the Company and retained in full by the
Company pending the closing of the Transaction; provided, however, that if the
Transaction is not closed by June 15, 2005 or a definitive agreement, subject only to
(i) the registration of the Company as an investment advisor, (ii) anti-trust approval,
if applicable, and (iii) termination upon the occurrence of a material adverse
condition, is not entered into by June 15, 2005, then all such success-based consulting
and transaction fees, whenever received, shall be for the benefit of the stockholders
of the Company and not for the benefit of the Buyer.




 









 













	 	10.  	Miscellaneous. This Letter shall be governed by the laws of
the State of New York other than such laws as would result in the application of
the law of a state other than the State of New York. This Letter may be amended
only by a writing executed by all Parties.




 









 












     If the foregoing correct sets forth our preliminary understandings, kindly sign and return to
me the enclosed copy of this Letter.



Confirmed and Agreed to



As of the Date First Set
Forth Above:



	 	 	 	 	 	 	 
	Capital & Technology Advisors, Inc.	 	Tejas Incorporated
	 
	 	 	 	 	 	 
	By:

	 	/s/ WAYNE BARR, JR. 	 	By:	 	/s/ KURT J. RECHNER 
	

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Stockholders of Capital & Technology Advisors, Inc.
	 
	 	 	 	 	 	 
	 
	 	/s/ JARED E. ABBRUZZESE, SR. 	 	 	 	 
	

	 	 	 	 	 	 
	

	 	Jared E. Abbruzzese, Sr.	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	/s/ WAYNE BARR, JR. 	 	 	 	 
	

	 	 	 	 	 	 
	

	 	Wayne Barr, Jr.	 	 	 	 






 









 






EXHIBIT A




Acquisition of Capital & Technology Advisors, Inc. by Tejas Incorporated

Summary of Proposed Terms




     Section 1. Purchase. All defined terms used in this Exhibit A, if not otherwise defined, are
used as defined in the letter agreement to which this Exhibit A is attached (the “Letter”).
Pursuant to the Purchase Agreement, the Buyer will purchase the Company.



     Section 2. Purchase Price. Buyer will pay to all of the stockholders of the Company the
following consideration at closing to be allocated ratably among such stockholders based on their
percentage ownership of the Company:




	 	—  	(1) $5,000,000 in cash ($2,000,000 of which shall be in the form of the Option
Payment and $3,000,000 to be delivered on the Closing Date, as hereinafter defined);
and
	 
	 	—  	(2) $60,000,000 in the form of unregistered Buyer common stock (the “Buyer
Stock”) to be delivered on the Closing Date. If the average closing price of the Buyer
Stock for the period of ten (10) trading days prior to the date which is three (3)
trading days before the Closing Date (the “Average Price”) is less than or equal to
nineteen dollars ($19.00), the per share price of the Buyer Stock for purposes of the
calculation in this clause (2) shall be set at nineteen dollar ($19.00). If the
Average Price is greater than nineteen dollars ($19.00) but less than nineteen dollars
and thirty-five cents ($19.35), then the per share price of the Buyer Stock for
purposes of the calculation in this clause (2) shall be set at the Average Price. If
the Average Price is equal to or greater than nineteen dollars and thirty-five cents
($19.35), the per share price of the Buyer Stock for purposes of the calculation in
this clause (2) shall be set at nineteen dollars and thirty-five cents ($19.35).





     Section 3. Closing. The Parties will use their respective best efforts to close the
Transaction by June 15, 2005.



     Section 4. Employment of Company’s Employees. As a condition to the closing of the
Transaction, Jared E. Abbruzzese, Sr., Wayne Barr, Jr. and Shawn O’Donnel will have entered into an
employment agreement with Buyer, which will be mutually satisfactory.



     Section 5. Closing Conditions. The Purchase Agreement will contain standard closing
conditions for the Transaction, including, without limitation, termination of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and no material
adverse change shall have occurred with respect to the Company.



     Section 6. Pre-Closing Conditions. The Company must provide the Financial Statements and be a
registered Investment Adviser pursuant to the Investment Advisers Act of 1940.



 









 





     Section 7. Representations, Warranties and Covenants. Each Party shall use its good faith
efforts to negotiate mutually acceptable representations, warranties and covenants in the Purchase
Agreement as are customary for the nature and size of the Transaction.



     Section 8. Indemnification. The Stockholders shall indemnify Buyer and its related parties
for all Losses (to be defined in the Purchase Agreement). Such indemnity shall be joint and
several among the indemnitors, shall require Losses in an amount to be agreed by the Parties before
any indemnity payments (but at such point the indemnity shall provide coverage for all Losses
incurred from th first dollar) and shall provide coverage for Losses up to an amount to be agreed
by the Parties. This indemnity shall terminate two years from the Closing Date and shall be
secured by an escrow of ten percent (10%) of the shares of Buyer Stock, which shall be funded by
Jared E. Abbruzzese, Sr. and Wayne Barr, Jr.



     Section 9. Registration Rights. Buyer shall file a shelf registration statement with the
Securities and Exchange Commission (the “Shelf Registration Statement”) for the resale of the Buyer
Stock. Jared E. Abbruzzese, Sr. shall be restricted in the amount of Buyer Stock he may resell as
follows: 15% of the Buyer Stock which he received may be sold after the first anniversary of the
Closing Date, an additional 25% may be sold after the second anniversary of the Closing Date and
the remaining additional 60% may be sold after the third anniversary of the Closing Date. Any sale
of the Buyer Stock other than pursuant to the Shelf Registration shall be pursuant to a valid
exemption from the relevant registration requirements (which may include Rule 144 of the Securities
Act of 1933) and, in all cases, shall be subject to the approval of and conditions imposed by
Buyer.



     Section 10. Board Composition and Officers. Following the Closing, the Board of Directors and
Officers of Tejas Incorporated shall be comprised of the individuals listed below:



Tejas Incorporated




John Gorman – Chairman of the Board

William Ingelhart – Director

Charles Mayer – Director

Dennis Punches – Director

Barry Williamson – Director

Clark N. Wilson – Director

Jared E. Abbruzzese, Sr. – Vice Chairman of the Board