EXHIBIT 10.11
[THE STERLING GROUP LETTERHEAD APPEARS HERE]
June 23, 1998
AXIA Group, Inc.
c/o The Sterling Group, Inc.
0 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Ladies and Gentlemen:
This letter agreement will confirm the agreement between The Sterling Group,
Inc. ("TSG") and AXIA Group, Inc. ("AXIA"), AXIA Acquisition Corp. and each of
their present and future direct and indirect wholly-owned subsidiaries
(collectively, the "Companies" and individually, a "Company"), in connection
with AXIA Group, Inc.'s acquisition of AXIA Holdings, Inc. (the "Acquisition"),
as follows:
1. Services. TSG has provided or will provide consulting services (the
"Services") to the Companies in connection with the organization of the
Companies, structuring the Acquisition, the financing and refinancing
thereof, arrangements for outside consulting services, advice with respect
to employee benefit and compensation arrangements and other reasonable
assistance when and as requested by the Companies prior to and following the
consummation of the Acquisition.
2. Fees and Expenses.
(a) For its services in connection with the Acquisition, TSG will be
entitled to receive from the Companies at the consummation of the
Acquisition a fee in the amount of Two Million Five Hundred Thousand
Dollars ($2,500,000) together with reimbursement of all expenses
paid or incurred (including expenses of any consultant) by TSG in
connection therewith. Any fee paid by TSG to Xxxx X. Xxxxxxxxx
("GLR") shall not be reimbursed to TSG by the Companies. The
Companies will reimburse any Expenses incurred by GLR in connection
with or related to the Acquisition.
(b) For its services performed from and after the consummation of the
Acquisition, TSG will be entitled to receive from the Companies on
January 1 of each year commencing January 1, 1999 and terminating
January 1, 2008 (i) an annual cash fee in the amount of One Hundred
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June 23, 1998
Thousand Dollars ($100,000) and (ii) an annual grant of AXIA
Group, Inc.'s common stock having a value of One Hundred
Thousand Dollars ($100,000) calculated based upon the latest
ESOP valuation of such common stock. In addition, TSG shall be
entitled to receive reimbursement of all expenses paid or
incurred (including expenses of any consultant) by TSG in
connection with its services to the Companies. Such expenses
shall be reimbursed to TSG by the Companies promptly upon
request by TSG.
3. Future Corporate Transactions. The Companies agree that if any of the
Companies determine, within ten years after the closing of the Acquisition,
to dispose of or acquire (regardless of the form of such transaction, and
whether directly or through one or more affiliated entities) assets of a
value of $1 million or more or any business (each a "Future Corporate
Transaction"), TSG is hereby retained by the Companies, in connection with
each Future Corporate Transaction, to provide services to the Companies of
the same nature as the Services (to the extent required), and the Companies
will pay to TSG, at the consummation of each Future Corporate Transaction, a
fee in the amount of one percent (1.0%) of the Project Value thereof and,
regardless of whether such Future Corporate Transaction is consummated, the
Companies shall reimburse TSG for all expenses paid or incurred by TSG in
connection therewith. In addition, the Companies agree that if any of the
Companies determine, within ten years after the closing of the Acquisition,
to offer securities for sale to the public or in private placement to raise
any debt or equity financing (each a "Future Securities Transaction"), TSG
is hereby retained by the Companies, in connection with each Future
Securities Transaction, to provide consulting services to the Companies in
connection therewith, and the Companies will pay to TSG, at the consummation
of each Future Securities Transaction, a fee in the amount of one-half
percent (0.5%) of the aggregate gross selling price of such securities, and
regardless of whether such Future Securities Transaction is consummated, the
Companies shall reimburse TSG for all expense paid or incurred by TSG in
connection therewith. The obligations of the Companies under this Section to
retain TSG with respect to a Future Corporate Transaction or a Future
Securities Transaction shall terminate prior to the expiration of the ten
year period referred to herein if no principal, or officer director of TSG
or any of their respective affiliates or family members (or trusts for the
benefit of any such person) owns any equity securities of AXIA or its
successors at the time the Company determines to engage in the Future
Corporate Transaction or Future Securities Transaction.
For purposes of this Agreement, the term "Project Value" shall mean the
aggregate consideration paid or received by the Company to or from a third
party to consummate an acquisition or disposition plus the aggregate amount
of all liabilities assumed by the acquiring party in connection with an
acquisition or disposition.
4. Expense Reimbursement. Reimbursement for expenses incurred by TSG in
connection with the Acquisition shall include reimbursement of an allocated
percentage of TSG's professional liability insurance premium for 1998. The
allocation shall be determined in good faith by TSG in its sole discretion.
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June 23, 1998
5. For so long as any principal, officer or director of TSG or any of their
respective affiliates or family members or trusts for the benefit of any
such person owns any equity securities of AXIA or its successors, TSG
shall be entitled to designate one observer who shall be entitled to
attend all special and regular meetings of the Board of Directors of AXIA
or its successors. Reasonable expenses incurred by the observer in
connection with attendance of Board meetings shall be reimbursed by the
Companies.
6. Indemnification. The Companies, jointly and severally, agree to indemnify
and hold harmless TSG, its consultants, each of their respective
controlling persons and each director, officer, employee, principal,
consultant, affiliate and agent thereof (each an "Indemnified Person")
from and against any and all losses, claims, damages and liabilities,
joint or several, to which any Indemnified Person may become subject
relating to or arising out of, or in connection with, any advice or
services provided under this Agreement or the transactions contemplated by
this Agreement, the Acquisition (including, without limitation, the use of
proceeds from the sale of securities and the financing of the Acquisition)
or any related transaction (including without limitation, that certain
letter agreement among TSG, and Banque Paribas dated May 7, 1998 and any
agreement between TSG, and Chase Securities, Inc. related to the
Acquisition, and the transactions contemplated thereby), and to reimburse
each Indemnified Person, promptly upon demand, for expenses (including
reasonable counsel fees and expenses) as they are incurred in connection
with the investigation of, giving testimony or furnishing documents for,
preparation for or defense of any pending or threatened loss, claim,
damage or liability, or any litigation, proceeding or other action in
respect thereof (collectively, "Actions"), including any amount paid in
settlement of any litigation, proceeding or other action (commenced or
threatened), to which the Companies shall have consented in writing (such
consent not to be unreasonably withheld), whether or not any Indemnified
Person is a party and whether or not liability resulted therefrom;
provided, however, that the indemnity contained in this Agreement will not
apply to any Indemnified Person with respect to losses, claims, damages,
liabilities or related expenses that are found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) to have
resulted from the willful misconduct or gross negligence of such
Indemnified Person. In addition, the Companies will not, without prior
written consent of TSG, settle, compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened
Action in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Person is a party thereto)
unless such settlement, compromise, consent or termination includes an
unconditional release of each Indemnified Person from all liabilities
arising out of such Action.
Promptly after receipt by an Indemnified Person of written notice with
respect to the commencement of any investigation, claim or other Action
with respect to which such Indemnified Person may seek indemnification
hereunder, such Indemnified Person shall notify the Companies in writing
at the address set forth on the first page hereof of such Action; but the
omission so to notify the Companies shall not relieve the Companies from
any liability that the Companies may have hereunder to such Indemnified
Person to the extent that such omission does not materially prejudice or
materially adversely affect the Companies. The Indemnified Persons shall
be entitled to retain separate counsel of their own
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June 23, 1998
choice; provided that the Companies shall not be responsible for the
fees and expenses of more than one firm of attorneys (and local counsel,
if appropriate) for all of the Indemnified Persons in any single Action,
unless the Indemnified Persons shall have been advised that there may be
one or more legal defenses available to any of them that may be
different from or additional to those available to the others, in which
event each such Indemnified Person shall be entitled to separate counsel
at the expense of the Companies.
If indemnification is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) for reason of public
policy not to be available, the Companies and TSG agree to contribute to
the losses, claims, damages, liabilities or expenses (or actions in
respect thereof) for which such indemnification is held unavailable in
such proportion as is appropriate to reflect the relative benefits to
and fault of the Companies, on the one hand, and TSG, on the other hand,
in connection with the matter giving rise to such losses, claims,
damages, liabilities or expenses (or actions in respect thereof).
Notwithstanding the foregoing, TSG shall not be obligated to contribute
any amount hereunder that exceeds the fees and expenses received by TSG
hereunder. No person found liable for a fraudulent misrepresentation
(within the meaning of Section 11 (f) of the Securities Act of 1933, as
amended) shall be entitled to contribution from any person who is not
found liable for such fraudulent misrepresentation.
The Companies also agree, jointly and severally, that no Indemnified
Person shall have any liability (whether direct or indirect, in contract
or tort or otherwise) to the Companies for or in connection with advice
or services rendered or to be rendered by any Indemnified Person
pursuant to this Agreement, the Acquisition, the financing thereof, the
transactions contemplated thereby or any Indemnified Person's actions or
inaction's in connection with any such advice, services or transactions
except for liabilities that are determined by a judgment of a court of
competent jurisdiction (not subject to further appeal) to have resulted
from such Indemnified Person's gross negligence or willful misconduct in
connection with any such advice, actions, inaction's or services.
If any term, provision, covenant or restriction contained in this
Section is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against public policy, the
remainder of the terms, provisions, covenants and restrictions contained
in the Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
The provisions contained in this Section 6 shall remain in full force
and effect (i) whether or not any of the transactions contemplated
hereby are consummated, (ii) regardless of the termination or completion
of any Indemnified Person's services hereunder, (iii) notwithstanding
the termination of this agreement and (iv) notwithstanding any
investigation made by or on behalf of TSG or any Indemnified Person.
7. Renewal. Unless written notice of non-renewal is issued by either TSG or
AXIA not less than ninety or more than one hundred and twenty days
before the termination of the obligations of TSG to provide services and
the obligations of the Companies to compensate and reimburse TSG under
the provisions of paragraphs 2 (b) and 3 above, than such obligations
will be automatically renewed for
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June 23, 1998
additional periods of one year each from the date the obligations would
have expired had notice of non-renewal been issued.
8. Termination. This agreement may be terminated by (i) TSG at any time; or
(ii) by either party for cause only and only upon thirty days written
notice of the intention to terminate. For the purposes of this
agreement, for cause shall mean only the material breach of a party in
honoring its obligations as set forth in this agreement.
The party intending to terminate this agreement for cause shall issue to
the other party a written notice of intention to terminate which shall
contain (i) a notice that the agreement will be terminated for cause,
(ii) a detailed description of the material breach alleged to have been
committed and (iii) a notice that said termination shall be effective
thirty days after it is received by the recipient unless within said
thirty days the recipient remedies the breach or in the case of a breach
that cannot in good faith be remedied within said period, the recipient
institutes good faith measures to remedy said breach.
9. Governing Law. This Agreement shall be governed by, and constructed in
accordance with, the laws of the State of Texas, without giving effect
to choice of law doctrines requiring the application of laws of any
other jurisdiction.
If the foregoing meets with your approval and correctly expresses our agreement,
please sign and return the enclosed duplicate copy of this letter.
Very truly yours,
THE STERLING GROUP, INC.
By: /s/ X. Xxxxxx Xxxxxx
--------------------------------
Name: X. Xxxxxx Xxxxxx
Title: Principal
ACKNOWLEDGED AND AGREED:
AXIA GROUP, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------
President
AXIA ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxx
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President
