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EXHIBIT 10.10
ADVISORY AGREEMENT
XXXXXXX AMERICAN CORPORATION
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
August 18, 1999
Monroe & Company, LLC
0 Xxxxx Xxxxxx, Xxxxx 00X
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Richmont Capital Partners I, L.P.
00000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx
Gentlemen:
This letter agreement ("Agreement") confirms the terms and conditions
of the exclusive engagement of Monroe & Company, LLC, a Delaware limited
liability company ("Monroe"), and Richmont Capital Partners I, L.P., a Delaware
limited partnership ("Richmont," and together with Monroe, the "Consultants"),
by Xxxxxxx American Corporation, a Delaware corporation ("MAC" or the
"Company"), to render certain business consulting, financial advisory and
investment banking services to MAC on an exclusive basis in connection with
possible Transactions and consulting projects. This Agreement supersedes and
replaces all prior consulting and/or advisory agreements by and between Monroe
and MAC and by and between Richmont and Richmont Marketing Specialists Inc., a
Delaware corporation ("RMSI"), and is being executed in connection with the
merger of RMSI with and into MAC (the "Current Transaction"). For the purposes
of this Agreement, "Transaction" means any merger, consolidation,
reorganization, business combination, joint venture or other transaction
pursuant to which the Company (a) is acquired by, or combined with, a third
party or (b) acquires all or a portion of the assets or capital stock of a third
party (a "Prospective Target") or (c) enters into a joint venture agreement with
a third party, in each case in a single transaction or a series of transactions;
provided, however, that "Transaction" does not include the Current Transaction
and that nothing herein shall prevent any payment of monies owed to either
Consultant in connection with the Current Transaction under any agreement
replaced or superseded by this Agreement. In addition, a "Transaction" includes,
but is not limited to, either Consultant acting as an exclusive private
placement agent on behalf of the Company in
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connection with the arrangement of a senior credit facility for the Company from
a lending institution.
1. Services. Each of the Consultants agrees to perform the following
services throughout the term of this Agreement:
(a) Review historical and projected financial and operating
information of MAC;
(b) Build a financial model to be used for analytical
purposes, including acquisition reviews and financial projections;
(c) Identify and seek out strategic acquisitions and joint
ventures, both domestic and abroad, consistent with MAC's strategic
objectives as the same may be established from time to time by MAC's
Board of Directors;
(d) Advise and assist MAC as to the financial aspects and
structure of any proposed Transaction and assist in negotiating the
terms thereof;
(e) Advise and assist MAC in the negotiation of any
documentation relating to a Transaction, which would include but not be
limited to letters of intent and definitive agreements;
(f) Prepare a memorandum describing MAC and the proposed
capital structure of MAC in connection with arranging a senior credit
facility;
(g) Assist and advise MAC with respect to the negotiation of
any documentation relating to a senior credit facility;
(h) Prepare communications and engage in discussions on behalf
of MAC in connection with public relations and Wall Street analyst
requirements;
(i) Assist in the development of a database which captures
relevant operations data to be used in connection with evaluating
principal conflicts and business opportunities;
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(j) Assist in various business endeavors including, but not
limited to, endeavors with principals, retailers, food service
providers, and private label opportunities; and
(k) Assist MAC on an on-going basis as to the restructuring of
its organization including departments, personnel and functions.
2. Fees. MAC agrees to pay the Consultants for their services in the
Aggregate as follows:
(a) A financial advisory fee ("Advisory Fee") equal to (i) 5%
of the Consideration (as defined below) paid up to $1 million, plus
(ii) 4% of the Consideration paid in excess of $1 million and up to $2
million, plus (iii) 3% of the Consideration paid in excess of $2
million and up to $3 million, plus (iv) 2% of the Consideration paid in
excess of $3 million and up to $4 million, plus (y) 1% of the
Consideration paid in excess of $4 million.
(b) Private placement fee ("Private Placement Fee") equal to
three quarters of one percent (0.75%) of the principal amount committed
under any senior credit facility. An additional fee shall be payable
upon increases in such amount or upon refinancings with a new lender
during the term of this Agreement. Such additional fee shall be equal
to three quarters of one percent (.75%) of the principal amount upon a
refinancing with a new lender or one half of one percent (.50%) of the
incremental principal amount authorized by the same lender.
(c) Consulting fees ("Consulting Fees") based on projects and
fee schedules to be mutually agreed upon by the Consultants and a
majority of the independent directors, (not including Xxxxx X. Xxxxxx,
Xxxx X. Xxxxxx, Xxxx X. Xxxxxx and Xxxxxxx X. Xxxx) of MAC.
All fees in connection with Sections 2(a) and (b) above shall be paid
to the Consultants in cash at the closing of the relevant Transaction. All other
Consulting Fees shall be payable on a monthly basis as services are rendered. An
Advisory Fee shall be payable to the Consultants for Transactions entered into
by the Company during the term of this Agreement and within 6 months after the
expiration of such term. Any fees paid pursuant to this Agreement shall be split
equally between Monroe and Richmont.
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In the context of this Agreement, "Consideration" means the value of
all cash, securities, assumption of debt of the Prospective Target and any other
forms of payment to the Prospective Target pursuant to a Transaction, including
the total of all interest-bearing indebtedness including long term debt,
payments for noncompete agreements and earn-out obligations and other
obligations of the Prospective Target that are assumed or refinanced by MAC in
connection with the closing of a Transaction. The term "Consideration" expressly
includes any payments for noncompete agreements and excess employment
compensation to the existing shareholders and employees of a Prospective Target.
If all or any portion of the Consideration payable in connection with any
Transaction includes contingent future payments, then MAC shall pay to the
Consultants a mutually agreed upon amount based upon the discounted value of
such contingent future payments.
If the Company requests the assistance of either Consultant in
arranging any transaction or the undertaking of any consulting project that is
not otherwise covered by the provisions of this Agreement and such Consultant
agrees to pursue such a transaction or consulting project, MAC agrees to pay
such Consultant mutually acceptable compensation taking into account among other
things, the results obtained and the custom and practice among investment
bankers and consultants acting in similar transactions or consulting
assignments. The Consultant will not perform any services which it believes are
not covered by the provisions of this Agreement, unless the Consultant agrees to
the nature and scope of such services and is authorized to do so by the Company
in a written document that specifies the agreed-upon additional compensation for
such services.
3. Expense Reimbursement. The Company agrees to reimburse each
Consultant for all of its reasonable out-of-pocket expenses actually incurred in
connection with the performance of its activities under the terms of this
Agreement. Reasonable out-of-pocket expenses include, but are not limited to,
costs such as printing, telephone, courier services, direct computer expenses,
legal and accounting expenses, accommodations and travel. All such fees,
expenses and costs will be billed monthly and shall be payable upon the
Company's receipt of the applicable invoice. The parties' obligations under this
section shall survive the termination or expiration of this Agreement.
4. Term; Exclusivity. The term of the Consultants engagement hereunder
as the Company's exclusive financial advisors shall commence on the date hereof
and shall expire on the third anniversary of the date hereof. During the term of
this Agreement, the Consultants shall have the exclusive right to represent the
Company in connection with specific services described in Section 1. Moreover,
the Company will be required to use the Consultants in
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connection with all Transactions contemplated by it during the term of this
Agreement and shall pay the Consultants for its services pursuant to Section 2
hereof. The Consultants, on the other hand, shall be free to perform such
services for any other party or parties at any time during and after the term of
this Agreement.
5. Indemnity. In addition to the fees and reimbursement of expenses
provided for above, the parties agree to the indemnification provisions set
forth as Annex A hereto, which are incorporated herein by reference and shall be
deemed to be included in this Section 5. The parties' obligations under this
Section 5 shall survive the termination or expiration of this Agreement.
6. Information. The Company shall furnish, or cause to be furnished, to
the Consultants all information reasonably requested by the Consultants for the
purpose of rendering services hereunder (all such information being the
"Information"). In addition, the Company agrees to make available to the
Consultants upon request from time to time the officers, directors, accountants,
counsel and other advisors of the Company. The Company recognizes and confirms
that the Consultants (a) will use and rely 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;
and (b) does not assume responsibility for the accuracy or completeness of the
Information and such other information.
The Company agrees that all information furnished to the Consultants in
connection with this Agreement shall be accurate in all material respects at the
time provided and that if such information, in whole or in part, becomes
materially inaccurate, misleading or incomplete during the term of the
Consultants engagement hereunder, the Company shall promptly so advise the
Consultants in writing and correct any such inaccuracy or omission.
7. Disclosure. Each party agrees that, except as compelled by law, it
will not disclose services or advice to be provided by the Consultants under
this Agreement or any Information publicly or to any third party, without the
approval of the other party. It is understood that the existence and terms of
this Agreement will be disclosed under the Company's reports and filings under
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Notwithstanding the above, upon the completion of a Transaction, the
Consultants shall be permitted to publicize the services it provided in
connection with such Transaction.
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8. Governing Law: Amendments. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to conflict of law principles thereof. This Agreement may
not be amended or modified except in writing signed by all parties hereto.
9. Successors. This Agreement and all rights, liabilities and
obligations hereunder shall be binding upon and inure to the benefit of each
party's successors but may not be assigned without the prior written approval of
the other party which shall not be unreasonably withheld.
10. No Brokers. The Company represents and warrants to the Consultants
that there is no other person or entity that is entitled to a finder's fee or
any type of brokerage commission in connection with the transactions
contemplated by this Agreement as a result of any agreement or understanding
with such person or entity which creates an interest in the compensation payable
to the Consultants hereunder or impairs the Consultants' interest in such
compensation. The Company agrees to indemnify and hold harmless the Consultants
from and against any actions, suits, claims, costs, expenses, losses and
liabilities arising out of any breach of the foregoing sentence.
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Very truly yours,
XXXXXXX AMERICAN CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------
Xxxxxx X. Xxxxxxx
President
Agreed to and accepted as of
the 18th day of August, 1999
MONROE & COMPANY, LLC
By: /s/ Xxxxx X. Xxxxxx
------------------------
Xxxxx X. Xxxxxx, Manager
RICHMONT CAPITAL PARTNERS I, L.P.
By: J.R. Investments Corp.,
Its General Partner
By: /s/ Xxxx X. Xxxxxx
----------------------
Xxxx X. Xxxxxx
Title:
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ANNEX A
The Company agrees to indemnify each of the Consultants, its members,
managers, employees, directors, officers, agents, affiliates and each person, if
any, who controls it within the meaning of either Section 20 of the Securities
Exchange Act of 1934, as amended, or Section 15 of the Securities Act of 1933,
as amended, (each such person, including each of the Consultants, is referred to
as an "Indemnified Party") from and against any losses, claims, damages and
liabilities, joint or several (including all legal or other expenses reasonably
incurred by any Indemnified Party in connection with the preparation for or
defense of any threatened or pending claim, action or proceeding, whether or not
resulting in any liability) ("Damages"), to which such Indemnified Party, in
connection with its services or arising out of its engagement hereunder, may
become subject under any applicable Federal or state law or otherwise, including
but not limited to liability (i) caused by or arising out of an untrue statement
or an alleged untrue statement of a material fact or the omission or the alleged
omission to state a material fact necessary in order to make a statement not
misleading in light of the circumstances under which it was made, (ii) caused by
or arising out of any act or failure to act or (iii) arising out of the
Consultants' engagement or the rendering by any Indemnified Party of its
services under this Agreement; provided, however, that the Company will not be
liable to the Indemnified Party hereunder to the extent that any Damages are
found in a final non-appealable judgment by a court of competent jurisdiction to
have resulted from the gross negligence, bad faith or willful misconduct of the
Indemnified Party seeking indemnification hereunder.
These indemnification provisions shall be in addition to any liability
which the Company may otherwise have to any Indemnified Party.
If for any reason, other than a final non-appealable judgment finding
an Indemnified Party liable for Damages for its gross negligence, bad faith or
willful misconduct, the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then the Company
shall contribute to the amount paid or payable by an Indemnified Party as a
result of such Damages in such proportion as is appropriate to reflect not only
the relative benefits received by the Company and its stockholders on the one
hand and the Consultants on the other, but also the relative fault of the
Company and the Indemnified Party as well as any relevant equitable
considerations, subject to the limitation that in no event shall the total
contribution of all Indemnified Parties to all such Damages exceed the total
amount of fees actually received and retained by the Consultants hereunder.
Promptly after receipt by the Indemnified Party of notice of any claim
or of the commencement of any action in respect of which indemnity may be
sought, the Indemnified Party will notify the Company in writing of the receipt
or commencement thereof and the Company shall have the right to assume the
defense of such claim or action (including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of fees and expenses of
such counsel), provided that the Indemnified Party shall have the right to
control its defense if, in the opinion of its counsel, the Indemnified Party's
defense is unique or separate to it as the case may be as opposed to a defense
pertaining to the Company. In any
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event, the Indemnified Party shall have the right to retain counsel reasonably
satisfactory to the Company, at the Company's expense, to represent the
Indemnified Party in any claim or action in respect of which indemnity may be
sought and agrees to cooperate with the Company and the Company's counsel in the
defense of such claim or action, it being understood, however, that the Company
shall not, in connection with any one such claim or action or separate but
substantially similar or related claims or action in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys, for
all the Indemnified Parties unless the defense of one Indemnified party is
unique or separate from that of another Indemnified Party subject to the same
claim or action. In the event that the Company does not promptly assume the
defense of a claim or action, the Indemnified Party shall have the right to
employ counsel reasonably satisfactory to the Company, at the Company's expense,
to defend such claim or action. The omission by an Indemnified Party to promptly
notify the Company of the receipt or commencement of any claim or action in
respect of which indemnity may be sought will relieve the Company from any
liability the Company may have to such Indemnified Party only to the extent that
such a delay in notification materially prejudices the Company's defense of such
claim or action. The Company shall not be liable for any settlement of any such
claim or action effected without its written consent, which shall not be
unreasonably withheld or delayed. Any obligation pursuant to this Annex A shall
survive the termination or expiration of this Agreement.
