Exhibit 10.2
September 27, 1996
Xx. Xxxx X. Xxxxxxx
Chairman, CEO
X.X. Xxxxxxx Company
000 Xxxxx Xxxxxxxx
X.X. Xxx 00000
Xxxxxxxx Xxxx, XX 00000-0000
Dear Xxxx:
1. This letter (the "Agreement") will confirm the engagement of
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Capital ("Xxxxxxxx Xxxxx") as
financial advisor to X.X. Xxxxxxx Company (together with its
successors and assigns, the "Company") to perform such general
corporate finance advisory services as Xxxxxxxx Xxxxx and the
Company may agree upon in connection with pursuing an
acquisition, sale, recapitalization, or merger (collectively, a
"Transaction"). The term of this agreement shall run from the
date of this letter until a Transaction is consummated or upon 5
days written notice by either party hereto (the "Term").
Xxxxxxxx Xxxxx is authorized and retained to act as financial
advisor to the Company, its subsidiaries, affiliates and any
entities it may form or invest in (collectively, the "Company")
in connection with the Company's analysis of potential strategic
alternatives and subsequently effecting a Transaction if
requested by the Company. As used in this letter, the term
"Transaction", as it relates to potential strategic alternatives,
shall include, but not be limited to:
a) acquisitions (an "Acquisition") pursuant to which (i)
the Company consummates a merger, consolidation or
other business combination with another entity, where
the Company is the surviving entity (or its
shareholders own a majority of the equity in the
surviving entity) in such business combination, or (ii)
the Company acquires a majority of the total equity
ownership of another entity, or all or substantially
all of the assets of another entity;
b) the sale of the Company (the "Sale") whether by merger,
stock sale or sale in one or more transactions, of all
or substantially all of the assets of the Company to
another entity or where the shareholders of the Company
own less than a majority of the surviving entity; and
c) a recapitalization (a "Recapitalization") involving the
issuance of any indebtedness or equity securities by
the Company to institutional investors and/or other
lenders and investors whereby an extraordinary dividend
is paid or equity securities are repurchased by the
Company, whether as a standalone Transaction or in
connection with a related Transaction.
Should the Company decide to pursue a Transaction, the Company
agrees to retain Xxxxxxxx Xxxxx as its financial advisor in
effecting such Transaction.
2. Xxxxxxxx Xxxxx will, to the extent requested by the Company,
assist the Company in analyzing possible Transactions on the
terms and conditions of this letter. In this regard, we shall
undertake certain activities on behalf of the Company including
the following:
a) performing an analysis of the Company, its business,
operations and prospects;
b) performing a similar analysis of other potential
parties to a possible Transaction;
c) analyzing Transaction options available to the Company,
including not pursuing any of the possible Transactions
outlined in paragraph 1;
d) counseling as to strategy and tactics for effecting a
potential Transaction;
e) advising as to the structure and the form of a possible
Transaction, including the form of any agreements
related thereto;
f) assisting the Company in obtaining appropriate
information and in performing financial due diligence
regarding possible Transactions;
g) arranging, if requested, financing on behalf of the
Company to help consummate a possible Transaction;
h) assisting in negotiations, as appropriate, on behalf of
the Company; and
i) rendering such other financial advisory and investment
banking services as may from time to time be agreed
upon by Xxxxxxxx Xxxxx and the Company.
3) The Company agrees to pay Xxxxxxxx Xxxxx the following fees
with respect to services rendered hereunder:
a) In the event that the Company consummates an
Acquisition, the Company will pay a transaction fee of
(i) 1.375% of the aggregate Purchase Price (as
hereinafter defined) paid by the Company if the
aggregate purchase price is equal to or less than $30
million and (ii) 1.375% of the first $30 million and 1%
of the excess over $30 million if the aggregate
purchase price exceeds $30 million; provided, however,
that any fee earned pursuant to this paragraph 3(c)
shall not be less than $500,000. This success fee
shall be payable upon closing of the Acquisition. The
term "Purchase Price" means the sum of the aggregate
fair market value of any securities issued, and any
cash consideration paid, to the seller in connection
with an Acquisition or Sale Transaction, plus the
amount of any non-working capital indebtedness that is
assumed, directly or indirectly, or refinanced by the
purchaser. The term "Purchase Price" shall also include
the present value of any consideration that is or may
be payable subsequent to the closing, including
consideration for non-compete or similar agreements or
other payments which are contingent upon the occurrence
or nonoccurrence of specified events or the passage of
time. The Company and Xxxxxxxx Xxxxx shall in good
faith agree at closing on the value of any such non-
cash consideration included in the price of an
Acquisition or Sale. In addition to the foregoing, if
the Company requests that Xxxxxxxx Xxxxx assist in
obtaining financing for an Acquisition, the Company
shall pay Xxxxxxxx Xxxxx financing fees of (i) 1.0% of
the total amount, including any unfunded portion, of
any senior debt facility arranged by Xxxxxxxx Xxxxx,
(ii) 3.0% of the total amount, including any unfunded
portion, of any subordinated debt facility arranged by
Xxxxxxxx Xxxxx and (iii) 4.0% of the total amount of
any equity arranged by Xxxxxxxx Xxxxx;
b) In the event that the Company proceeds with a Sale,
Xxxxxxxx Xxxxx will assist and advise the Company in
its analysis of the potential sale and possible
alternative ways in which the Sale might be structured.
The initial focus will be to work with the Company to
determine whether a Transaction can be effected on
terms acceptable to the Company. If requested,
Xxxxxxxx Xxxxx will also assist the Company in
preparing a Selling Memorandum (the "Memorandum") which
describes the Company. The Memorandum will be approved
by the Company, in its discretion, prior to the
commencement of its dissemination. Further, Xxxxxxxx
Xxxxx will assist the Company in identifying potential
purchasers and in all negotiations related to a Sale as
well as help in effecting a Sale. In consideration of
the foregoing, the Company agrees to pay to Xxxxxxxx
Xxxxx at the closing of a Sale a success fee of 1.375%
of the aggregate Purchase Price received by the
Company;
c) In the event that the Company proceeds with a
Recapitalization, either as a separate standalone
Transaction or in conjunction with another Transaction
whereby financing is necessary, Xxxxxxxx Xxxxx will (i)
assist the Company in preparing a Financing Memorandum
(the "Memorandum") which describes the Company, the
contemplated financing and the terms under which the
financing is offered, (ii) market the financing on a
best efforts basis with potential investors approved by
the Company, and will negotiate, on the Company's
behalf, the terms of the financing with these
investors, and (iii) coordinate the due diligence
effort of the investors and will assist the Company in
the negotiation of the final terms of the financing and
assist, where appropriate, to expedite the
documentation and closing. In consideration of the
foregoing, the Company agrees to pay at closing of the
Recapitalization fees to Xxxxxxxx Xxxxx in accordance
with the provisions of paragraph 3(a) of this
Agreement; provided, however, that if the Company
elects to pursue a self-tender offer for outstanding
common stock using financing sources not introduced or
arranged by Xxxxxxxx Xxxxx, no fee shall be payable to
Xxxxxxxx Xxxxx under this paragraph 3(c); and
d) If, during the period of Xxxxxxxx Lokey's engagement
hereunder, or within twelve months thereafter, a
Transaction is consummated or the Company enters into
an agreement relating to a possible Transaction that at
any time thereafter results in a Transaction which
Xxxxxxxx Xxxxx, during its engagement, analyzed and
discussed with the Company and which were identified in
writing at the time of termination of this Agreement,
the Company shall pay Xxxxxxxx Xxxxx a Transaction fee
in accordance with the provisions of this Agreement.
In the event a Transaction is effectuated, it is contemplated
that Xxxxxxxx Xxxxx will assist the Company in selecting an
independent advisor to provide a fairness opinion to the extent
desired, with such advisor to be compensated directly by the
Company.
In addition to the foregoing, Xxxxxxxx Xxxxx shall be reimbursed
for all reasonable out-of-pocket expenses incurred in connection
with its services hereunder, including any reasonable legal fees
incurred by Xxxxxxxx Xxxxx. Xxxxxxxx Xxxxx will discuss its
general expense items with the Company, and will not xxxx for
"overhead" items such as secretarial or word processing time.
During the period of Xxxxxxxx Lokey's engagement hereunder, or
within twelve months thereafter, neither Xxxxxxxx Xxxxx nor any
director, officer, shareholder, or managing director that is (i)
assigned to this matter, or (ii) has access to material
information regarding the Company (other than such information
deemed as non-confidential pursuant to paragraph 10) will, or
assist any other party in its efforts to (a) purchase or offer to
purchase any shares of the capital stock of the Company, or other
securities exercisable for, or convertible into, such shares of
capital stock, (b) solicit any proxies, votes, authorizations or
other consents from shareholders of the Company, (c) offer to
effect any merger, consolidation, recapitalization or other
similar transaction with or involving the Company, or (d) offer
to effect any purchase of all or any substantial portion of the
assets of the Company, unless Xxxxxxxx Xxxxx or such other
persons have obtained the advance approval of the Board of
Directors of the Company to that particular activity or
transaction.
4. The Company will furnish Xxxxxxxx Xxxxx with such
information as Xxxxxxxx Xxxxx believes reasonably appropriate to
its assignment (all such information so furnished being the
"Information"). The Company recognizes and confirms that
Xxxxxxxx Xxxxx (i) will use and rely primarily on the Information
and on information available from generally recognized public
sources in performing the services contemplated by this Agreement
without having independently verified the same, (ii) does not
assume responsibility for the accuracy or completeness of the
Information and such other information and (iii) will not make an
appraisal of the Company. To the best of the Company's
knowledge, the Information to be furnished by the Company, when
delivered, will be true and correct in all material respects and
will not contain any material misstatement of fact or omit to
state any material fact necessary to make the statements
contained therein not misleading. The Company will promptly
notify Xxxxxxxx Xxxxx if it learns of any material inaccuracy or
misstatement in, or material omission from, any Information
therefore delivered to Xxxxxxxx Xxxxx.
5. It is understood that Xxxxxxxx Xxxxx is being engaged
hereunder solely to provide the services described above to the
Company, and that Xxxxxxxx Xxxxx is not acting as an agent or
fiduciary of, and shall have no duties or liability to, the
equity holders of the Company or any other third party in
connection with its engagement hereunder, all of which are hereby
expressly waived.
6. The Company agrees to the indemnification and other
agreements set forth in Schedule A attached hereto (the
"Indemnification Agreement"), the provisions of which are
incorporated herein by reference and shall survive the
termination, expiration or supersession of this Agreement. In no
event, regardless of legal theory advanced, shall Xxxxxxxx Xxxxx
be responsible to any person other than for its gross negligence
or bad faith with respect to its obligations or duties. In no
event, regardless of the legal theory advanced, shall Xxxxxxxx
Lokey's aggregate liability to all parties in connection with the
Transaction or its services in connection therewith exceed the
aggregate fees actually received by Xxxxxxxx Xxxxx hereunder.
7. If Xxxxxxxx Xxxxx is called upon to render services directly
or indirectly relating to the subject matter of this Agreement
beyond the services contemplated above (including, but not
limited to, producing of documents, answering interrogatories,
giving depositions, giving expert or other testimony, whether by
agreement, subpoena or otherwise), the Company shall pay Xxxxxxxx
Xxxxx, in addition to other fees hereunder, Xxxxxxxx Lokey's then
current hourly rates for the persons involved by the time
expended in rendering such services, including, but not limited
to, time for meetings, conferences, preparation and travel, and
all related costs and expenses, and the reasonable legal fees and
expenses of Xxxxxxxx Lokey's counsel.
8. The obligations of Xxxxxxxx Xxxxx are solely corporate
obligations, and no officer, director, employee, agent,
shareholder or controlling person shall be subjected to any
personal liability whatsoever to any person, nor will any such
claim be asserted by or on behalf of any other party to this
Agreement.
9. Nothing in this Agreement, expressed or implied, is intended
to confer or does confer on any person or entity other than the
parties hereto and their respective successors and assigns and,
to the extent expressly set forth herein, the Indemnified
Persons, any rights or remedies by reason of this Agreement or as
a result of the services to be rendered by Xxxxxxxx Xxxxx
hereunder.
10. Except as may be required by law, or by court or regulatory
process, all information provided by the Company will be treated
by Xxxxxxxx Xxxxx as confidential and will not, without the prior
consent of the Company, be disclosed to any third parties in the
absence of appropriate assurances of confidentiality, and
Xxxxxxxx Xxxxx will not make any use thereof, except in
connection with its services under this Agreement. Materials and
information furnished to Xxxxxxxx Xxxxx shall not be deemed
confidential if (a) such materials and information are or become
generally available to the public other than as a result of
disclosure by Xxxxxxxx Xxxxx or (b) Xxxxxxxx Xxxxx acquires such
materials or information on a non-confidential basis from a
source other than the Company who was not otherwise bound by a
confidentiality agreement.
11. Xxxxxxxx Lokey's engagement hereunder may be terminated by
either the Company or Xxxxxxxx Xxxxx at any time upon written
notice to that effect to the other party, it being understood
that the provisions relating to the payment of fees and expenses,
indemnification and contribution will survive any such
termination in accordance with the terms of this Agreement.
12. This Agreement (including the attached Indemnification
Agreement) embodies the entire agreement and understanding
between the parties hereto and supersedes all prior agreements
and understandings relating to the subject matter hereof. If any
provision of this Agreement is determined to be invalid or
unenforceable in any respect, such determination will not affect
such provision in any other respect or any other provision of
this Agreement, which will remain in full force and effect. This
Agreement may not be amended or otherwise modified or waived
except by an instrument in writing signed by both Xxxxxxxx Xxxxx
and the Company. Neither this Agreement nor the rights or
obligations of the parties hereunder may be assigned or delegated
by either party without the prior written consent of the other
party hereto. This Agreement shall be governed by and
interpreted in accordance with the law of the state of New York
applicable to agreements negotiated, executed and to be performed
in that State, without regard to the choice or conflicts of law
rules on principles of that State. Any right to trial by jury
with respect to any lawsuit, claim or other proceeding arising
out of or relating to this Agreement or the services to be
rendered by Xxxxxxxx Xxxxx hereunder is expressly and irrevocably
waived.
If the foregoing correctly sets forth our understanding, please
so indicate by signing and returning to Xxxxxxxx Xxxxx the
enclosed duplicate of this Agreement and the attached
Indemnification Agreement.
We look forward to working with you.
Very truly yours,
HOULIHAN, LOKEY, XXXXXX & ZUKIN CAPITAL
By: /s/ X. Xxxxxxx
P. Xxxx Xxxxxxx
Senior Vice President
The foregoing has been read, understood and approved, and the
undersigned agrees to retain Xxxxxxxx Xxxxx upon the foregoing
terms.
X.X. XXXXXXX COMPANY
By: /s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
Chairman and CEO
By:
Date: 10-17-96
SCHEDULE A
This Schedule A is pursuant to the Agreement dated September 27,
1996 and addressed to X.X. Xxxxxxx Company (the "Company") by
Xxxxxxxx Xxxxx. Unless otherwise noted, all capitalized terms
used herein shall have the meaning set forth in the Agreement.
Since Xxxxxxxx Xxxxx will be acting on behalf of the Company in
providing financial advisory services pursuant to the Agreement,
and as part of the consideration for the agreement of Xxxxxxxx
Xxxxx to furnish its services under the Agreement, the Company
agrees to indemnify and hold harmless Xxxxxxxx Xxxxx and its
affiliates, and the respective directors, officers, shareholders,
employees, agents, attorneys, shareholders and controlling
persons of Xxxxxxxx Xxxxx and its affiliates within the meaning
of either Section 15 of the Securities Act of 1933, as amended,
or Section 20 of the Securities Exchange Act of 1934, as amended
(collectively, the "Indemnified Parties"), to the fullest extent
lawful, against any and all losses, claims, damages or
liabilities (or actions in respect thereof), joint or several, to
which the Indemnified Parties may become subject arising out of
or related to actions taken or omitted to be taken by an
Indemnified Party pursuant to the terms of, or in connection with
services rendered pursuant to, the Agreement or any transaction
or proposed transaction contemplated thereby or any Indemnified
Party's role in connection therewith and to reimburse the
Indemnified Parties on demand for any legal or other expenses
reasonably incurred by them in respect thereof at the time such
expenses are incurred; provided, however, the Company shall not
be liable under the foregoing indemnity agreement in respect of
any loss, claim, damage or liability if a court having
jurisdiction shall have determined by a final judgment that such
loss, claim, damage or liability resulted from the bad faith or
gross negligence of the Indemnified Parties.
If any action, suit, proceeding or investigation is commenced, as
to which an Indemnified Party proposes to demand indemnification,
it shall notify the Company with reasonable promptness; provided,
however, that any failure by an Indemnified Party to notify the
Company shall not relieve the Company from its obligations
hereunder, so long as such failure does not materially prejudice
the rights of the Company. The Company shall assume the defense
thereof, including, the employment of the counsel reasonably
satisfactory to the Indemnified Party, and the payment by the
Company of all reasonable expenses. The Indemnified Party shall
have the right to employ separate counsel in any such action,
suit, proceeding or investigation and to participate in the
defense thereof, but the fees and expenses of such counsel shall
be at the expense of an Indemnified Party unless: (i) the
employment thereof has been specifically authorized in writing by
the Company; (ii) the Company has failed to assume the defense
and employ counsel; or (iii) the main parties to any such action,
suit, proceeding or investigation include both the Indemnified
Party and the Company and the Indemnified Party shall have been
advised in writing by independent counsel that the representation
of the Indemnified Party and the Company by the same counsel
would be inappropriate due to actual or potential differing
interests between them, in each of which cases the reasonable
fees of counsel for the Indemnified Party shall be paid by the
Company. In such event, the Company shall not have the right to
assume the defense of such action on behalf of the Indemnified
Party. The Company shall not be liable for any settlement of any
such action, suit, proceeding or investigation effective without
the Company's prior written consent. Neither the Company nor the
Indemnified Party shall, without the prior written consent of the
other, settle or compromise any suit, claim (or permit a default
or consent to the entry of any judgment in respect thereof)
litigation, threatened litigation or threatened claim arising out
of or based upon, or in any way related to the Transaction and to
which the Company and any Indemnified Party may reasonably be
expected to become a party, unless such settlement, compromise or
consent includes, as an unconditional term thereof (which is
satisfactory in form and substance to each such person), the
giving by the claimant to each such person of an unconditional
release from any and all liability in respect to such claim.
If for any reason the foregoing indemnification is unavailable to
any Indemnified Party or insufficient to hold it harmless, the
Company shall contribute to the amount paid or payable by the
Indemnified Party as a result of such loss, claim, expense,
damage, settlement or liability for which such indemnification is
held unavailable or is insufficient in such proportion as is
appropriate to reflect the relative benefits received or to be
received by the Company on the one hand and the Indemnified Party
on the other hand in connection with the services rendered by
Xxxxxxxx Xxxxx under the letter. If, however, the allocation
provided by the immediately preceding sentence is not permitted
by applicable law or otherwise, then the Company shall contribute
to such amount paid or payable by any Indemnified Party in such
proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company on the one
hand and the Indemnified Parties on the other hand in connection
with any actions or omissions or any other matters which result
in any such loss, claim, expense, damage, settlement or liability
as well as any other relevant equitable considerations. No
person found liable for a fraudulent misrepresentation shall be
entitled to contribution from any person who is not also found
liable for such fraudulent misrepresentation. Notwithstanding
the foregoing, the aggregate contribution of all Indemnified
Parties to all losses, claims, damages, liabilities and expenses
shall not exceed the amount of fees actually received by Xxxxxxxx
Xxxxx pursuant to the Agreement. The Company agrees that it
would not be just and equitable if contribution were determined
by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to
in this paragraph.
The reimbursement, indemnity and contribution obligations of the
Company set forth herein shall be in addition to any liability
which the Company may otherwise have and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, and any such person. No
Indemnified Party shall have any liability to the Company or any
other person in connection with the services rendered pursuant to
the Agreement except for any liability for losses, claims,
damages or liabilities finally judicially determined by a court
having jurisdiction to have resulted from actions taken or
omitted to be taken by such Indemnified Party's bad faith or
gross negligence. The foregoing provisions shall survive any
termination of the relationship established by the Agreement.
