CONFORMED COPY
September 6, 1996
Swing-N-Slide Corp.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, President
and Chief Executive Officer
Gentlemen:
Glencoe Investment Corporation ("Glencoe") and Xxxxx Capital
Management Incorporated ("Xxxxx") are pleased to act as acquisition
advisers to Swing-N-Slide Corp. ("Company"). This letter agreement is to
confirm our understanding with respect to our engagement. In this regard,
Glencoe and Xxxxx will provide, as determined in consultation with the
Company, (a) assistance to the Company to undertake certain purchases or
acquisitions including providing valuation advice, negotiating and
assisting with the due diligence process; (b) various financing techniques
and alternatives with regard to acquisition funding; (c) periodic analysis
of the Company's acquisition resources, investment objectives and capacity
to compete for acquisition opportunities; (d) periodic review of other
strategic restructuring alternatives which could provide long-term
benefits and enhance value to the Company shareholders; and (e) such other
acquisition services the Company and Glencoe and Xxxxx may mutually agree
upon.
In furtherance of the general services referred to above,
Glencoe and Xxxxx will advise the Company in connection with its currently
pending acquisitions named by the Company as Project Tiger and Project
Lion and with such other acquisitions as the board of directors of the
Company (the "Board") shall request that they act as acquisition advisors
under this agreement (the "Acquisitions"). Our services in connection
with the Acquisitions will include:
1. Detailed Due Diligence - extensive strategic, operational
and financial due diligence of Tiger and Lion and other acquisition
targets leading to a detailed report to be presented to the Board which
would fully assess these issues. Subject to oversight by the Board,
Xxxxxxx and Xxxxx will direct all aspects of the Acquisitions, some of
which will be performed by Company management, the Company's financial
agent and other third party advisors.
2. Analysis and Structuring of Transactions. Glencoe and
Xxxxx will develop detailed financial models under various acquisition
structure alternatives to evaluate the potential Acquisitions. Xxxxxxx
and Xxxxx will prepare financial models for prospective lenders and equity
investors. Glencoe and Xxxxx will provide the Board with a detailed
assessment of various strategic and structural alternatives for each
Acquisition and, on behalf of the Company, will negotiate principal
acquisition agreements.
3. Debt and Equity Corporate Financing. Glencoe and Xxxxx, in
coordination with the Company and its other advisors, will prepare
detailed private placement memoranda for potential purchasers of Company
debt securities and equity securities necessary to finance the potential
Acquisitions. Xxxxxxx and Xxxxx will assist in identifying and qualifying
potential investors and negotiating the terms of the respective securities
purchase agreements.
As compensation for the Acquisition services to be provided by
Xxxxxxx and Xxxxx hereunder, the Company agrees to pay a fee equal to:
(i) 4.0% of the gross proceeds of new equity raised by the
Company for an Acquisition during the term of this agreement,
(ii) 1.125% of senior loan financing received by the
Company for an Acquisition during the term of this agreement,
including the refinancing of the Company's existing senior loan
obligations (less the amount of any fees paid to other placement
agents), and
(iii) 1.00% of the Transaction Value on an Acquisition
consummated by the Company or its subsidiaries during the term
of this agreement. The term "Transaction Value" means an amount
equal to (a) the aggregate of the fair market value of any
consideration paid by the Company or its subsidiaries or
securityholders, whether in cash, securities or other property,
in connection with the purchase of equity securities or assets
of, or the merger with, an entity which is not an affiliate of
the Company on the date hereof, plus (b) the amount of
obligations for borrowed money on the balance sheet of any such
acquired company immediately prior to such purchase.
In addition, the Company agrees to reimburse Glencoe and Xxxxx,
upon request made from time to time, for their reasonable out-of-pocket
expenses incurred in connection with activities under this letter,
including the reasonable fees and disbursements of legal counsel and other
outside advisers engaged to assist in connection with the services
rendered hereunder.
These fees are in addition to the $75,000 quarterly management
fee currently paid by the Company to Glencoe and Xxxxx.
The Company will furnish Glencoe and Xxxxx with such information
as is appropriate to enable them to fulfill their obligations under this
letter agreement. Xxxxxxx and Xxxxx will enter into an appropriate
confidentiality agreement with respect to such information.
The Company agrees to indemnify Glencoe and Xxxxx and their
respective affiliates and their respective directors, officers, employees,
agents and controlling persons from and against any and all losses,
claims, damages and liabilities, joint or several, to which Glencoe or
Xxxxx may become subject under any applicable federal or state law or
otherwise related to or arising out of any transaction or matter
contemplated by this letter agreement or the engagement of Xxxxxxx and
Xxxxx pursuant hereto, and the performance of services contemplated by
this letter agreement, except to the extent caused by Xxxxxxx's or Xxxxx'x
xxxxx negligence or wilful misconduct. The Company will reimburse Glencoe
and Xxxxx for all expenses (including reasonable counsel fees and
expenses) as they are incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any
action or proceeding arising therefrom, whether or not Glencoe or Xxxxx is
a party, and whether or not such claim, action or proceeding is initiated
or brought by or on behalf of the Company.
The Company acknowledges and agrees that Xxxxxxx and Xxxxx have
been retained solely to provide the advice or services set forth in this
agreement. Xxxxxxx and Xxxxx shall act as independent contractors, and
any duties arising out of their engagement hereunder shall be owed solely
to the Company.
This agreement shall not give rise to any express or implied
commitment by Xxxxxxx or Xxxxx to purchase or place any securities of or
loans to the Company. No waiver, amendment or other modification of this
agreement shall be effective unless it specifically refers in writing to
how this agreement is being changed and is signed by each party to be
bound thereby.
Xxxxxxx and Xxxxx will act for the Company as provided above
through the first anniversary of this letter, with an automatic one-year
renewal period on such anniversary and on each anniversary thereof, unless
this agreement shall have been terminated by either party on no less than
30 days written notice to the other party prior to such renewal date, it
being understood that the provisions relating to the confidential
treatment of information, the payment of fees and expenses,
indemnifications, the status of Glencoe and Xxxxx as an independent
contractors and the limitation on to whom Xxxxxxx and Xxxxx shall owe any
duties will survive the term of this agreement.
Please confirm the foregoing sets forth our agreement by signing
and returning to Glencoe the duplicate copy of this letter agreement
enclosed herewith.
Very truly yours,
GLENCOE INVESTMENT CORPORATION
By: /S/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
President
XXXXX CAPITAL MANAGEMENT
By: /S/ Xxxxx X. Xxxxx, Xx.
Accepted and agreed as of the
date first written above.
SWING-N-SLIDE CORP.
By: /S/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
President
