EXHIBIT 10.2
August 18, 1998
Xxxxx Brothers, Inc.
0000 Xxxxx Xx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxx
President and Chief Executive Officer
Dear Xxxx:
We are pleased to set forth the terms of the retention of EVEREN
Securities, Inc. ("EVEREN") by Xxxxx Brothers, Inc. (collectively with its
affiliates, the "Acquiror") to assist the Acquiror as its exclusive financial
advisor and exclusive agent in connection with the Acquiror's efforts to acquire
certain business entities ("Acquisition Candidates"). This Agreement will
confirm XXXXXX's engagement by the Acquiror on the following terms and
conditions:
l. Description of Engagement. XXXXXX will advise the Acquiror on a
variety of subjects relating to Acquisition Candidates and any Transaction (as
defined below), including, but not limited to:
(a) the market value of the Acquisition Candidates, taking into
account competitive factors;
(b) the pricing of acquisition proposals;
(c) the form and terms of consideration to be utilized in
acquisition proposals; and
(d) strategies to be utilized in approaches and negotiations;
EVEREN will use its best efforts to identify Acquisition Candidates meeting
Acquirors criteria, and assist the Acquiror in providing advisory support from
the negotiation process through closing and, if requested, will assist the
Acquiror in obtaining any financing it may need to consummate the Transaction
("the Financing").
2. Definition of Transaction. As used in this Agreement, the term
"Transaction" shall mean an acquisition (a) by merger, consolidation,
reorganization, recapitalization, business combination or other transaction
pursuant to which an Acquisition Candidate is acquired by or combined with the
Acquiror, or (b) the acquisition, directly or indirectly, by the Acquiror (or by
one or more persons acting together with the Acquiror pursuant to a written
agreement or otherwise) in a single Transaction or a series of Transactions of
(i) any subsidiary, business segment or operation divisions or assets of the
Acquisition Candidate or (ii) 25% or more of the Acquisition Candidate's
outstanding stock (whether by way of tender or exchange offer, open market
purchases, negotiated purchases or otherwise).
3. Information. In connection with XXXXXX's activities on the
Acquiror's behalf, the Acquiror will cooperate with XXXXXX and will furnish
EVEREN with all reasonable information and data concerning the Acquiror, any
Transaction and, to the extent available to the Acquiror, each Acquisition
Candidate (the "Information") which XXXXXX xxxxx appropriate and will provide
EVEREN with access to the Acquiror's officers, directors, employees, independent
accountants and legal counsel. To the extent that the Acquiror has access to the
officers, directors, employees, independent accountants and legal counsel of any
Acquisition Candidate, it will provide such access to EVEREN. The Acquiror
represents and warrants that all Information (a) made available to EVEREN by the
Acquiror or (b) contained in any filing by the Acquiror with any court or
governmental regulatory agency, commission or instrumentality with respect to
any Transaction will, at all times during the period of the engagement of EVEREN
hereunder, be complete and correct in all material respects and will not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances under which such statements are made. The Acquiror further
represents and warrants that any projections provided by it to EVEREN will have
been prepared in good faith and will be based upon assumptions which, in light
of the circumstances under which they are made, are reasonable. The Acquiror
acknowledges and agrees that, in rendering its services hereunder, XXXXXX will
be using and relying on the Information (and information available from public
sources and other sources deemed reliable by XXXXXX) without independent
verification thereof by XXXXXX or independent appraisal by XXXXXX of any of the
Acquiror's or the Acquisition Candidate's assets. XXXXXX does not assume
responsibility for the accuracy or completeness of the Information or any other
information regarding the Acquiror, any Acquisition Candidate or any
Transaction. Any advice rendered by XXXXXX pursuant to this Agreement may not be
disclosed publicly without XXXXXX's prior written consent, except as may be
required by applicable law.
4. Compensation. In consideration of XXXXXX's services pursuant to this
Agreement, XXXXXX shall be entitled to receive, and the Acquiror agrees to pay
XXXXXX, the following compensation:
(a) Upon execution of this Agreement, the Acquiror shall pay to
EVEREN an initial cash fee of $25,000, the amount of which
shall be credited to any fees payable to EVEREN under
subparagraphs (c) and (d) below.
(b) Upon execution of this Agreement and for every 90 day period
thereafter until the termination of this Agreement, the
Acquiror shall pay EVEREN, a cash fee of $5,000 on the first
of such 90-day period, the aggregate amount of which shall be
credited to any fees payable to EVEREN under subparagraphs (c)
and (d) below.
(c) If a Transaction is consummated during the term of this
Agreement, then the Acquiror shall pay EVEREN, upon such
consummation, cash fee equal to 2% of the value of the total
consideration paid by the Acquiror in the Transaction in
respect of (i) assets of the Acquisition Candidate, (ii)
capital stock of the Acquisition Candidate (and any securities
convertible into, or options, warrants or other rights to
acquire, such capital stock) and (iii) the assumption,
directly or indirectly (by operation of law or otherwise), or
repayment of indebtedness (including, without limitation,
indebtedness secured by assets of the Acquisition Candidate),
less amounts paid pursuant to (a) and (b) above. The value of
total consideration paid will be calculated as the sum of the
following values at closing:
(i) Cash and cash equivalents paid to an Acquisition
Candidate or its shareholders;
(ii) Market value of any common stock issued to an
Acquisition Candidate or its shareholders;
(iii) The liquidation preference of any preferred stock
issued to an Acquisition Candidate or its
shareholders, unless market value is easily
determinable;
(iv) The face value of any notes issued to an Acquisition
Candidate or its shareholders, unless market value is
easily determinable;
(v) Consideration paid or payable under covenants not to
compete, earn-outs (determinable upon consummation)
and consulting arrangements (such terms not to
encompass standard employment agreements).
(vi) The face value of any debt owed or preferred stock
issued by an Acquisition Candidate or its
shareholders which is assumed and/or forgiven, unless
market value is easily determinable; and
(vii) The difference between the exercise price of any
stock options and the fair market value per share of
common stock even though such differences may be paid
to the option holder in cash rather than through
exercise of the options.
(d) Upon the closing of each and any part of a Financing obtained
by XXXXXX or negotiation with the assistance of XXXXXX, the
Acquiror shall pay EVEREN a cash fee equal to:
(i) 1.0% of the aggregate principal amount of any senior
debt Financing raised: plus
(ii) 3% of the aggregate principal amount of any
subordinated debt Financing raised: plus
(iii) 3% of any preferred equity Financing raised: plus
(iv) 7% of the aggregate of any common equity Financing
raised,
less the amounts paid pursuant to (a) and (b) above.
Any financing involving a public offering of senior
subordinated debt to be based on terms as may from time to
time be agreed upon by XXXXXX and the Acquiror.
(e) In no event shall the aggregate fees earned by EVEREN pursuant
to this Agreement for Transactions consummated during the
first two years after the date of this Agreement, be less than
$100,000; provided, however, that such minimum required fee
amount shall be reduced pro rata in the event that this
Agreement is terminated by XXXXXX for any reason at any time
prior to the expiration of such two-year period.
(f) EVEREN shall receive from the Acquiror warrants to purchase up
to 2.5% of the fully diluted shares of common stock of the
Acquiror upon execution of this Agreement. Such warrants will
have an aggregated exercise price to be no greater than the
fair market value of the underlying common stock, and shall
have such other terms (including, without limitation,
customary anti-dilution and piggy back registration
provisions) as shall be mutually agreed upon in good faith by
XXXXXX and the Acquiror. The above warrants will have a 5 year
term, be issued effective upon execution of this Agreement and
vest as follows: 50% when the Acquiror's annual Sales are at
$50,000,000 on a pro forma basis and the additional 50% when
the Acquiror's annual sales are at $100,000,000 on a pro forma
basis.
For purposes of this subparagraph 4(f), "Acquiror's Sales"
shall mean sales of the businesses owned by Acquiror on the
date hereof, plus sales of the businesses acquired in a
Transaction pursuant to which XXXXXX is eligible for
compensation pursuant to subparagraph 4(c) above,
(g) XXXXXX shall be entitled to the fees enumerated in any
preceding subparagraph of this Paragraph 4 with respect to any
event specified in any such subparagraph if both: (i) the
transaction is consummated during the term of this Agreement
or within one year after the date of termination of this
Agreement; and (ii) prior to the termination of this Agreement
EVEREN, at the request of the Acquiror, participates and plays
a material role in connection with the identification,
analysis, structuring and/or negotiation of such Transaction.
(h) If a Transaction is not consummated, but the Acquiror receives
a "break-up" fee or any other payment as a result of the
termination or cancellation of an Acquisition Candidate's
efforts to effect a Transaction, a judgment for damages, or an
amount in settlement of any dispute relating to a Transaction
or Alternate Transaction, then the Acquiror shall pay to
EVEREN a cash fee equal to 25% of such fee, payment, judgment
or amount, not to exceed the fee EVEREN would otherwise have
received if the Transaction had been consummated.
(i) For purposes of this paragraph 4, the term "Acquiror" includes
any person acting together with the Acquiror pursuant to a
written agreement or otherwise.
5. No Assurances. XXXXXX makes no representations, express or implied
that XXXXXX will succeed in its efforts to assist the Acquiror in consummating a
Transaction.
6. Right of First Refusal. (a) If the Acquiror requires Financing to
consummate the Transaction during the term of this Agreement, then XXXXXX shall
have the right to act as the Acquiror's sole managing underwriter or exclusive
agent, as the case may be, in connection with raising such financing, subject to
approval of XXXXXX's Capital Commitment Committee and the good faith negotiation
of customary and mutually agreeable terms; provided that XXXXXX's compensation
in connection with such engagement shall be as set forth on Paragraph 4(d)
hereof.
7. Expenses. In addition to the fees described above, the Acquiror
agrees to promptly reimburse EVEREN, upon request from time to time, for all
reasonable out-of-pocket expenses incurred by XXXXXX (including without
limitation, fees and disbursements of counsel, and of other consultants and
advisors retained by XXXXXX) in connection with the matters contemplated by this
Agreement. Such expenses shall not exceed $5,000 in the aggregate without prior
approval of the Acquiror, which approval shall not be unreasonably withheld.
8. Indemnification. The Acquiror hereby agrees to indemnify EVEREN in
accordance with the indemnification provisions (the "Indemnification
Provisions") attached to this Agreement, which Indemnification Provisions are
incorporated herein and made a part hereof.
9. Termination; Survival. Either party hereto may terminate this
Agreement at any time upon written notice, without liability or continuing
obligation except as set forth in the following sentence. Neither termination
nor completion of this assignment shall affect: (i) any compensation earned by
EVEREN up to the date of termination or completion, or after termination, as the
case may be, pursuant to the paragraph herein entitled "Compensation", (ii) the
reimbursement of expenses incurred by XXXXXX up to the date of termination or
completion, as the case may be, pursuant to the paragraph herein entitled
"Expenses", (iii) the attached Indemnification Provisions, and (iv) the
provisions of the paragraphs herein entitled "Governing Law; Jurisdiction" and
"Successors and Assigns" of this Agreement, all of which shall remain operative
and in full force and effect.
10. Governing Law; Jurisdiction. The validity and interpretation of
this agreement shall be governed by the laws of the State of Illinois applicable
to agreements made and to be fully performed therein. The Acquiror irrevocably
submits to the jurisdiction of any court of the State of Illinois or the United
States District Court for the Northern District of the State of Illinois for the
purpose of any suit, action or other proceeding arising out of this Agreement or
any of the agreements or transactions contemplated hereby, which is brought by
or against the Acquiror, and (i) hereby irrevocably agrees that all claims in
respect of any such suit, action or proceeding may be heard and determined in
any such court and (ii) to the extent that the Acquiror has acquired, or
hereafter may acquire, any immunity from jurisdiction of any such court or from
any legal process therein, the Acquiror hereby waives, to the fullest extent
permitted by law, such immunity. The Acquiror hereby waives and agrees not to
assert in any such suit, action or proceeding, in each case, the fullest extent
permitted by applicable law, any right to trial by jury and any claim that (a)
the Acquiror is not personally subject to the jurisdiction of any such court,
(b) the Acquiror is immune from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to the Acquiror's property or (c) any such suit,
action or proceeding is brought in an inconvenient forum.
11. Assignment. This agreement shall be binding upon and insure to the
benefit of the parties hereto and their respective successors, but the rights
and obligations of the parties shall not be assignable by either of the parties
hereto without the prior written consent of the other party.
12. Advertisement. EVEREN or the Acquiror may publish an advertisement,
at its own expense with prior approval of the other party, which approval shall
not be unreasonably withheld, or issue a press release announcing the hiring of
EVEREN or the completion of a Transaction and XXXXXX's role therein after the
consummation of such event.
13. Conflicts. XXXXXX acknowledges their professional responsibility
regarding conflicts of interest and agrees that XXXXXX will act accordingly in
representing other premium food companies.
14. Counterparts; Amendments. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties hereto.
Each such counterpart shall be, and shall be deemed to be, an original
instrument, but all such counterparts taken together shall constitute one and
the same Agreement. This Agreement may not be modified or amended except in
writing signed by the parties hereto.
If the foregoing correctly sets forth our Agreement, please sign the
enclosed copy of this letter in the space provided and return it to us.
Very truly yours,
EVEREN SECURITIES, INC.
By: /s/ Xxxxx X. Xxxx
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Xxxxxxxx X. Xxxx
Managing Director - Corporate Finance
Accepted and Agreed to this 18th day of August, 1998.
XXXXX BROTHERS, INC.
By: /s/ Xxxx X. Xxxxx
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Name: Xxxx X. Xxxxx
Title: President and Chief Executive Officer
