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July 9, 1997
PRIVATE AND CONFIDENTIAL
Xxxx Media Group, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
President & CEO
Gentlemen:
This letter agreement (the "Agreement"), dated hereof confirms our
understanding that Xxxx Media Group, Inc. (the "Company") has engaged
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation ("DLJ") to act as its
exclusive financial advisor, commencing upon your acceptance of this Agreement,
with respect to (i) the sale, merger, consolidation, or any other business
combination, in one or a series of transactions, involving all or a substantial
amount of the business, securities or assets of the Company, and (ii) the
Company's acquisition of a company known to us as "Project D" ("Target") (each,
a "Transaction").
As discussed, we propose to undertake certain services on your behalf
including to the extent requested by you: (i) assisting you in preparing a
package of information describing the Company, its operations, its historical
performance and its future prospects; (ii) identifying and contacting selected
qualified acquirors acceptable to you; (iii) arranging for potential acquirors
to conduct business investigations; and (iv) negotiating the financial aspects
of any proposed Transaction under your guidance.
As compensation for the services to be provided by DLJ hereunder, the
Company agrees (i) to pay to DLJ if a Transaction is consummated, additional
cash compensation as set forth below (the "Transaction Fee" and the "Target
Advisory Fee"), and (ii) upon request by DLJ from time to time, to reimburse
DLJ promptly for all out-of-pocket expenses (including the reasonable fees and
expenses of counsel) incurred by DLJ in connection with its engagement
hereunder, whether or not a Transaction is consummated. As DLJ will be acting
on your behalf, the Company agrees to the indemnification and other obligations
set forth in Schedule I attached hereto, which Schedule is an integral part
hereof.
The additional cash compensation referred to in clause (i) above shall
be in the following amounts: (a) a Transaction Fee of one percent (1.0%) of the
total transaction value with respect to any Transaction excluding a Transaction
involving the Target and (b) a Target Advisory Fee of $1,500,000 with respect
to any Transaction involving the Target. In addition to cash or other forms of
payment received for all of the Company's outstanding common stock, the total
transaction value shall include the value of any shares issuable upon exercise
of options, warrants or other rights of
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Xxxx Media Group, Inc.July 9, 1997
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conversion as outstanding plus the amount of any debt assumed, acquired,
remaining outstanding, retired or defeased or preferred stock redeemed or
remaining outstanding in connection with the Transaction, including, in the
case of a sale or other disposition by the Company of assets, the net value of
any assets not sold by the Company. The Transaction Fee or the Target Advisory
Fee shall be payable in cash promptly upon consummation of a Transaction, as
applicable. For purposes of this Agreement, a Transaction shall be deemed to
have been consummated upon the earliest of any of the following events to
occur: (i) in the case of a Transaction excluding any Transaction involving
Target (a) the acquisition of at least 40% of the outstanding common stock of
the Company calculated on a fully-diluted basis; (b) a merger or consolidation
of the Company or any of its subsidiaries with another person; (c) the
acquisition by another person of assets of the Company representing at least
40% of the Company's book value; or (d) in the case of any other Transaction,
the consummation thereof and (ii) in the case of a Transaction involving Target
(a) the acquisition of at least 40% of the outstanding Common Stock of Target;
(b) the merger or consolidation of the Company or any of its subsidiaries with
Target; (c) the acquisition by the Company of assets representing at least 40%
of Target's book value; or (d) in the case of any other Transaction, the
consummation thereof.
The value per share of common stock of the Company, for purpose of
calculating our additional compensation, shall be (i) in the event the
consideration for such common stock is in the form of cash and/or securities
with an existing public trading market, such value shall be determined by the
amount of cash to be paid per share of common stock being acquired and/or the
last sales price for such securities on the last trading day thereof prior to
the consummation of the Transaction, or otherwise, (ii) the fair market value
thereof, as the parties hereto shall mutually agree, on the day prior to the
consummation of the Transaction.
The Company shall make available to DLJ all financial and other
information concerning its business and operations which DLJ reasonably
requests as well as any other information relating to any Transaction prepared
by the Company or any of its other advisors. In performing its services
hereunder DLJ shall be entitled to rely without investigation upon all
information that is available from public sources as well as all other
information supplied to it by or on behalf of the Company or its advisors and
shall not in any respect be responsible for the accuracy or completeness of, or
have any obligation to verify, the same or to conduct any appraisal of assets.
To the extent consistent with legal requirements, all information given to DLJ
by the Company, unless publicly available or otherwise available to DLJ without
restriction or breach of any confidentiality agreement, will be held by DLJ in
confidence and will not be disclosed to anyone other than DLJ's agents and
advisors without the Company's prior approval or used for any purpose other
than those referred to in this Agreement.
Any advice, written or oral, provided by DLJ pursuant to this
Agreement will be treated by the Company as confidential, will be solely for
the information and assistance of the Company in connection with its
consideration of the Transaction and will not be reproduced, summarized,
described or referred to, or furnished to any other party or used for any other
purpose, except in each case with our prior written consent.
This Agreement may be terminated by either the Company or DLJ upon
receipt of written notice to that effect by the other party. Upon any
termination of this Agreement, DLJ will be entitled to prompt payment of all
fees accrued prior to such termination and reimbursement of all
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Xxxx Media Group, Inc.July 9, 1997
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out-of-pocket expenses as described above. The indemnity and other provisions
contained in Schedule I will also remain operative and in full force and effect
regardless of any termination or expiration of this Agreement.
In addition, if at any time prior to 12 months after the termination
of this Agreement a Transaction is consummated, or if at any time prior to 18
months after the termination of this Agreement a Transaction is consummated
with any party contacted regarding a Transaction during the period of our
engagement, DLJ will be entitled to payment in full of the Transaction Fee or
the Target Advisory Fee, whichever the case may be. Promptly following any
termination of this Agreement, DLJ will provide the Company with written notice
of the parties contacted by DLJ regarding a Transaction during the period of
our engagement.
It is understood that if the Company completes a transaction in lieu
of any Transaction for which DLJ is entitled to compensation pursuant to this
Agreement (including, but not limited to, a recapitalization or a partial or
complete liquidation), DLJ and the Company will in good faith mutually agree
upon acceptable compensation for DLJ taking into account, among other things,
the results obtained and the custom and practice of investment bankers acting
in similar transactions; provided that, in all cases such compensation shall
not be less that $1,000,000.
Please note that DLJ is a full service securities firm engaged in
securities trading and brokerage activities, as well as providing investment
banking and financial advisory services. In the ordinary course of our trading
and brokerage activities, DLJ or its affiliates may at any time hold long or
short positions, and may trade or otherwise effect transactions, for our own
account or on the accounts of customers, in debt or equity securities of the
Company or other entities that may be involved in the Transaction. We
recognize our responsibility for compliance with Federal laws in connection
with any such activities.
The Company acknowledges and agrees that DLJ has been retained solely
to provide the advice or services set forth in this Agreement. DLJ shall act
as an independent contractor, and any duties of DLJ arising out of its
engagement hereunder shall be owed solely to the Company.
This Agreement shall be binding upon and inure to the benefit of the
Company, DLJ, each Indemnified Person (as defined in Schedule I hereto) and
their respective successors and assigns.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
If any term, provision, covenant or restriction contained in this
Agreement, including Schedule I, is held by a court of competent jurisdiction
or other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
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Xxxx Media Group, Inc.July 9, 1997
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After reviewing this Agreement, please confirm that the foregoing is
in accordance with your understanding by signing and returning to me the
duplicate of this letter attached hereto, whereupon it shall be our binding
Agreement.
Very truly yours,
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
By: /s/ XXXXX X. XXXXXXXX
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Xxxxx X. Xxxxxxxx
Managing Director
Accepted and agreed to
this 9th day of July, 1997
XXXX MEDIA GROUP, INC.
By: /s/ XXXXXX X. XXXXX
------------------------------------
Xxxxxx X. Xxxxx
President & Chief Executive Officer
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SCHEDULE I
This Schedule I is a part of and is incorporated into that certain
letter agreement (together, the "Agreement"), dated July 9, 1997 by and between
Xxxx Media Group, Inc. (the "Company") and Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation ("DLJ").
The Company agrees to indemnify and hold harmless DLJ and its
affiliates, and the respective directors, officers, agents and employees of DLJ
and its affiliates (which for purposes of this Schedule I shall not include the
Company) (DLJ and each such entity or person, an "Indemnified Person") from and
against any losses, claims, damages, judgments, assessments, costs and other
liabilities (collectively "Liabilities"), and will reimburse each Indemnified
Person for all fees and expenses (including the reasonable fees and expenses
of counsel) (collectively, "Expenses") as they are incurred in investigating,
preparing, pursuing or defending any claim, action, proceeding or
investigation, whether or not in connection with pending or threatened
litigation or arbitration and whether or not any Indemnified Person is a party
(collectively, "Actions"), arising out of or in connection with advice or
services rendered or to be rendered by any Indemnified Person pursuant to this
Agreement, the transactions contemplated hereby or any Indemnified Person's
actions or inactions in connection with any such advice, services or
transactions; provided that, the Company will not be responsible for any
Liabilities or Expenses of any Indemnified Person that are determined by a
judgment of a court of competent jurisdiction which is no longer subject to
appeal or further review to have resulted solely from such Indemnified Person's
gross negligence or willful misconduct in connection with any of the advice,
actions, inactions or services referred to above. The Company also agrees to
reimburse each Indemnified Person for all Expenses as they are incurred in
connection with enforcing such Indemnified Person's rights under this Agreement
(including, without limitation, its rights under this Schedule I).
Upon receipt by an Indemnified Person of actual notice of an Action
against such Indemnified Person with respect to which indemnity may be sought
under this Agreement, such Indemnified Person shall promptly notify the Company
in writing; provided that failure so to notify the Company shall not relieve
the Company from any liability which the Company may have on account of this
indemnity or otherwise, except to the extent the Company shall have been
materially prejudiced by such failure. The Company shall, if requested by DLJ,
assume the defense of any such Action including the employment of counsel
reasonably satisfactory to DLJ. Any Indemnified Person shall have the right to
employ separate counsel in any such Action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person, unless: (i) the Company has failed promptly to assume
the defense and employ counsel or (ii) the named parties to any such Action
(including any impleaded parties) include such Indemnified Person and the
Company, and such Indemnified Person shall have been advised by counsel that
there may be one or more legal defenses available to it which are different
from or in addition to those available to the Company; provided that the
Company shall not in such event be responsible hereunder for the fees and
expenses of more than one firm of separate counsel in connection with any
Action in the same jurisdiction, in addition to any local counsel. The Company
shall not be liable for any settlement of any Action effected without its
written consent. In addition, the Company will not, without prior written
consent of DLJ, 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.
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In the event that the foregoing indemnity is unavailable to an
Indemnified Person other than in accordance with this Agreement, the Company
shall contribute to the Liabilities and Expenses paid or payable by such
Indemnified Person in such proportion as is appropriate to reflect (i) the
relative benefits to the Company and its shareholders, on the one hand, and to
DLJ, on the other hand, of the matters contemplated by this Agreement or (ii)
if the allocation provided by the immediately preceding clause is not permitted
by the applicable law, not only such relative benefits but also the relative
fault of the Company, on the one hand, and DLJ, on the other hand, in
connection with the matters as to which such Liabilities or Expenses relate, as
well as any other relevant equitable considerations; provided that in no event
shall the Company contribute less than the amount necessary to ensure that all
Indemnified Persons, in the aggregate, are not liable for any Liabilities and
Expenses in excess of the amount of fees actually received by DLJ pursuant to
this Agreement. For purposes of this paragraph, the relative benefits to the
Company and its shareholders, on the one hand, and to DLJ, on the other hand,
of the matters contemplated by this Agreement shall be deemed to be in the same
proportion as (a) the total value paid or contemplated to be paid or received
or contemplated to be received by the Company or the Company's shareholders, as
the case may be, in the transaction or transactions that are within the scope
of this Agreement, whether or not any such transaction is consummated, bears to
(b) the fees paid to DLJ under this Agreement.
The Company also agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with advice or services rendered or to be rendered
by any Indemnified Person pursuant to this Agreement, the transactions
contemplated hereby or any Indemnified Person's actions or inactions in
connection with any such advice, services or transactions except for
Liabilities (and related Expenses) of the Company that are determined by a
judgment of a court of competent jurisdiction which is no longer subject to
appeal or further review to have resulted solely from such Indemnified Person's
gross negligence or willful misconduct in connection with any such advice,
actions, inactions or services.
The reimbursement, indemnity and contribution obligations of the
Company set forth herein shall apply to any modification of this Agreement and
shall remain in full force and effect regardless of any termination of, or the
completion of any Indemnified Person's services under or in connection with,
this Agreement.
