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[XXXXXXXXX, XXXXXX & XXXXXXXX XXXXXXXXXX]
June 2, 1997
PRIVATE AND CONFIDENTIAL
Xxxxxxxx PBE, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx xxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx, III
Chief Executive Officer
Gentlemen:
This letter agreement (the "Agreement") confirms our understanding that
Xxxxxxxx PBE, Inc. (the "Company") has engaged Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation ("DLJ") to act as its exclusive financial advisor for a
period of 9 months, commencing upon your acceptance of this Agreement, with
respect to the consideration by the Board of Directors of strategic alternatives
which, as indicated in the following paragraph, may include the sale, merger,
consolidation or any other extraordinary business combination, in one or a
series of transactions, involving all or a majority of the business, securities
or assets of the Company, any repurchase by the Company of a significant amount
of its equity securities, any recapitalization of the Company or any spin-off,
split-off or other extraordinary dividend of cash, securities or other assets to
stockholders of the Company (each, a "Transaction").
As discussed, we propose to undertake certain services on your behalf,
to the extent requested by you, which shall consist of the following: (a)
assist you, as exclusive financial advisor, in evaluating various plans,
strategies or transactions for maximizing the Company's value to its
stockholders and (b), in the event the Board elects to explore the sale of the
Company (i) assisting you in preparing an offering memorandum 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; (iv)
negotiating the financial aspects of any proposed Transaction under your
guidance; and (v) delivering an opinion to the Board of Directors of the
Company, if requested, as to the fairness from a financial point of view of the
consideration to be received by the stockholders of the Company in any proposed
Transaction and updates to such opinion. The scope, form and substance of the
opinion referred to in clause (v) shall be in customary form and, in the case of
a stock-for-stock merger, may be an opinion as to the fairness from a financial
point of view of the ratio to be applied for the exchange of common shares in
the merger. In addition, DLJ will provide a written presentation to the Board of
Directors regarding the exercise price under the Company's shareholders rights
plan.
As compensation for the services to be provided by DLJ hereunder, the
Company agrees (i) to pay to DLJ (a) a retainer fee of $100,000, payable
promptly upon execution of this Agreement,
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(b) additional cash compensation as set forth below, (c) a fee of $250,000 at
the time DLJ, in response to a request from the Company's Board of Directors,
delivers DLJ's written opinion referred to in clause (v) of the preceding
paragraph, irrespective of the conclusion reached therein, and (d) an
additional fee of $50,000 for each written update of a prior opinion delivered
by DLJ with respect to a Transaction, 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 1 attached hereto, which Schedule is an
integral part hereof.
The additional cash compensation referred to in clause (i)(b) above
shall be in an amount equal to (i) one percent (1.00%) of the aggregate amount
of consideration received by the Company and/or its shareholders (treating any
shares issuable upon exercise of options, warrants or other rights of
conversion as outstanding, subject to reduction to give effect to the exercise
consideration on a "net spread" basis), 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 (the
"Acquisition Price") in a Transaction in which the Acquisition Price is less
than or equal to $135,000,000 or (ii) $1,350,000 plus two percent (2%) of the
difference between the Acquisition Price and $135,000,000 in a Transaction in
which the Acquisition Price is greater than $135,000,000, less, in each case,
the amount paid by the Company pursuant to clauses (i)(a), (c) and (d) above.
The additional cash compensation referred to in clause (i)(b) above shall in no
case be less than $750,000, in connection with a Transaction, less the amount
paid by the Company pursuant to clauses (i)(a), (c) and (d) above. Such
additional compensation shall be payable in cash promptly upon consummation of
a Transaction. 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; (a) the acquisition by another person of a majority of the outstanding
equity securities of the Company calculated on a fully-diluted basis; (b) a
merger or consolidation of the Company with another person; or (c) in the case
of any other Transaction, the consummation thereof.
In the event that the consideration received in a Transaction is paid
in whole or in part in the form of securities or other assets, the value of
such securities or other assets, for purposes of calculating our additional
compensation, shall be the fair market value thereof, as the parties hereto
shall mutually agree, on the day prior to the consummation of the Transaction;
provided, that if such consideration includes securities with an existing
public trading market, the value thereof shall be determined by the average
last sales price for such securities on the ten trading days thereof prior to
such consummation.
The Company shall make available to DLJ all financial and other
information concerning its business and operations that DLJ reasonably requests
as well as any other information relating to any Transaction prepared by the
Company or any of its other advisors (it being understood that the Company
shall not be required to waive any legal privilege). In performing its
services hereunder (including, without limitation, in giving an opinion of the
type referred to in the second paragraph hereof), 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 or an acquiror 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
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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 opinion requested by the Company and any advice, written or oral,
provided by DLJ pursuant to this Agreement will, to the extent consistent with
legal requirements, 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. It
is further understood and agreed that, in the event that any opinion of DLJ
pursuant to this Agreement is to be included in any tender offer materials,
proxy or other document filed with the Securities and Exchange Commission (the
"SEC") and/or mailed in of connection with the Transaction, the opinion will be
reproduced therein in full and any description of or reference to DLJ or any
summary of the opinion or presentation of DLJ included in such document shall
be in form and substance reasonably acceptable to DLJ and its legal counsel and
in compliance with the requirements of the SEC.
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 or expiration of this Agreement, DLJ will be entitled to prompt
payment of all fees accrued prior to such termination or expiration and
reimbursement of all 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 9 months after the termination or
expiration of this Agreement, a Transaction is consummated, or if at any time
prior to 12 months after the termination or expiration 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 compensation described in the fourth paragraph of this Agreement provided,
DLJ shall not be entitled to such compensation if DLJ terminates this Agreement
other than in good faith for reasonable cause (it being understood
that if DLJ terminates this Agreement because it loses interest in the
engagement or believes that it is not practicable to achieve a Transaction for
the Company, that will not constitute reasonable cause). Within 15 business
days following any termination or expiration of this Agreement, DLJ will
provide the Company with written notice of the parties contacted by DLJ
regarding a Transaction during the period of DLJ's engagement.
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.
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This Agreement shall be binding upon and inure to the benefit of the
Company, DLJ, each Indemnified Person (as defined in Schedule I) 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.
The Company irrevocably and unconditionally submits to the exclusive
jurisdiction of any State or Federal court sitting in Los Angeles, California
over any suit, action or proceeding arising out of or relating to this letter
(including Schedule I). The Company hereby agrees that service of any process,
summons, notice or document by U.S. registered mail addressed to the Company
shall be effective service of process for any action, suit or proceeding
brought in any such court. The Company irrevocably and unconditionally waives
any objection to the laying of venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient forum.
The Company agrees that a final judgment in any such suit, action or proceeding
brought in any such court shall be conclusive and binding upon the Company and
may be enforced in any other courts to whose jurisdiction the Company is or may
be subject, by suit upon such judgment.
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.
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: Xxxx Xxxx
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Xxxx Xxxx
Senior Vice President
Accepted and agreed to
as of the first date set forth above
Xxxxxxxx PBE, Inc.
By: Xxxxxxxx X. Xxxxx XXX
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Xxxxxxxx X. Xxxxx XXX
Chief Executive Officer
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SCHEDULE 1
This Schedule I is a part of and is incorporated into that certain
letter agreement (together, the "Agreement"), dated June 2, 1997 by and between
Xxxxxxxx P.B.E., Inc. (the "Company") and Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation ("DLJ").
The Company agrees to identify and hold harmless DLJ and its
affiliates, and the respective directors, officers, agents and employees of DLJ
and its affiliates (DLJ and each such entity or person, an "Identified Person")
from and against any losses, claims, damages, judgments, assessments, costs and
other liabilities (collectively "Liabilities"), and will reimburse each 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
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 primarily 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's rights under this Agreement (including, without limitation, its rights
under this Schedule I); provided, however, that such Expenses shall be repaid
if such Indemnified Person does not prevail in the assertion of such rights.
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 significant 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 for all Indemnified Persons
in connection with any Action. In addition to any required 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,
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consent or termination includes an unconditional release of each Indemnified
Person from all Liabilities arising out of such Action.
In the event that the foregoing indemnity is unavilable 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 director 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 primarily 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.
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