Exhibit 16
August 6, 1998
Fingerhut Companies, Inc.
0000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxx Xxxxxx, Chairman & CEO
Xxxx Xxxxxxx, President
Re: ENGAGEMENT LETTER
This letter ("Letter Agreement") shall serve to confirm our understanding
pursuant to which Fingerhut Companies, Inc. (the "Company") has agreed to engage
Wit Capital Corporation ("Wit") to act as its financial advisor to assist the
Company as described below for a period commencing as of the date hereof and
ending on the twelve month anniversary hereof (the "Engagement Period").
1. FINANCIAL ADVISORY SERVICES. Xxx will assist the company in connection
with developing an Internet strategy and identifying and structuring
Internet investments, which leverage off the core competencies of
Fingerhut. If requested by the company, Xxx will also be available to
assist the company in connection with other general financial advisory
services.
2. BASE COMPENSATION. In consideration of the services to be rendered by
Xxx, the Company agrees to pay Wit or its permitted designee the
following base compensation:
(a) A retainer of $100,000.00 payable upon execution of this Letter
Agreement.
(b) Reimbursement of all reasonable travel and other out-of-pocket
expenses incurred by Xxx in connection with its services rendered
hereunder. Notwithstanding the foregoing, Wit shall not, without the
prior written consent of the Company, incur other reimbursable
expenses such as expenses of consultants, legal, accounting, and
financial experts, and other agents that may be retained by Wit in
connection with its services to be rendered to the Company.
3. TRANSACTIONAL FEES. If during the Engagement Period, Xxx introduces an
investment opportunity to Fingerhut which is consummated by Fingerhut or
provides consulting services with respect to a financing, merger,
acquisition, or business combination that is consummated (a
"Transaction"), then in addition to the retainer and other compensation
referred to in Paragraph 2 above, the Company, at its discretion, shall
pay to Wit a fee (a "Transaction Fee"). Such Transaction Fee shall be
negotiated in good faith and mutually agreed upon by the parties prior to
the closing of the Transaction and shall be based upon customary fees
charged by full service
investment banks for providing similar services in connection with such
Transactions. Any Transaction Fee shall be payable upon the closing of
such Transaction.
4. INTERNET INVESTMENTS. Xxxxxx X. Xxxxxx, or one of his designees, will
have the right to invest in Internet companies that Wit Capital
introduces to Fingerhut at the same value at which Fingerhut makes such
investments.
5. INDEMNITY. Since Wit shall be acting on behalf of the Company, the
Company agrees to indemnify Wit in accordance with the provisions of
Annex A hereto, which is incorporated by reference and made a part
hereof.
6. MISCELLANEOUS. This Letter Agreement sets forth the entire understanding
of the parties with respect to the subject matter hereof, supersedes all
existing agreements between Wit and the Company concerning such subject
matter, and may be modified only by a written instrument duly executed by
each party. Wit and its permitted designees shall, except with the prior
written consent of the Company, hold strictly confidential all other
information relating to the Company and its affiliates received or
developed in connection with the services contemplated by this Letter
Agreement. This Letter Agreement shall be binding upon and inure to the
benefit of the Company and Wit and their respective successors and
assigns. This Letter Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without reference to
the rules governing the conflicts of laws. The provisions of Annex A
hereto shall survive any termination of this Letter Agreement.
If the foregoing terms correctly set forth our understanding, please
confirm this by signing and returning the duplicate copy of this letter.
I am pleased to have this opportunity to work with you.
Very truly yours,
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Chairman & CEO
Agreed to and Accepted
this 11th day of August, 1998
-------------------------------------
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: EVP
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ANNEX A
INDEMNIFICATION
Recognizing that transactions of the type contemplated in this engagement
sometimes result in litigation and that Wit's and its affiliated companies'
(collectively, "Wit") role is advisory, the Company agrees to indemnify and hold
harmless Wit, its affiliates and their respective officers, directors,
employees, agents and controlling persons (collectively, the "Indemnified
Parties"), from and against any losses, claims, damages and liabilities, joint
or several, related to or arising in any manner out of any transaction, proposal
or any other matter (collectively, the "Matters") contemplated by the engagement
of Wit hereunder, and will promptly reimburse the Indemnified Parties for all
expenses (including, reasonable fees and expenses of legal counsel), as and when
incurred, in connection with the investigation of, preparation for or defense of
any pending or threatened claim related to or arising in any manner out of any
Matter contemplated by the engagement of Wit hereunder, or any action or
proceeding arising therefrom (collectively, "Proceedings"), whether or not such
Indemnified Party is a formal party to any such Proceeding. Notwithstanding the
foregoing, the Company shall not be liable in respect of any losses, claims,
damages, liabilities or expenses that a court of competent jurisdiction shall
have resulted primarily from the gross negligence or willful misconduct of an
Indemnified Party. The Company further agrees that it will not, without the
prior written consent of Wit, which shall not be unreasonably withheld, settle
compromise or consent to the entry of any judgment in any pending or threatened
Proceeding in respect of which indemnification may be sought hereunder (whether
or not Wit or any Indemnified Party is an actual or potential party to such
Proceeding), unless such settlement, compromise or consent includes an
unconditional release of Wit and each other Indemnified Party hereunder from all
liability arising out of such Proceeding.
The Company agrees that if any indemnification or reimbursement sought
pursuant to this Letter Agreement were for any reason not to be available to any
Indemnified Party or insufficient to hold it harmless as and to the extent
contemplated by this Letter Agreement, then the Company shall contribute to the
amount paid or payable by such Indemnified Party in respect of losses, claims,
damages and liabilities in such proportion as is appropriate to reflect the
relative benefits to the Company and its stockholders on the one hand, and Wit
on the other, in connection with the Matters to which such indemnification or
reimbursement relates or, if such allocation is not permitted by applicable law,
not only such relative benefits but also the relative faults of such parties as
well as any other equitable considerations. It is hereby agreed that the
relative benefits to the Company and/or its stockholders and to Wit with respect
to Xxx's engagement shall be deemed to be in the same proportion as (i) the
total value paid or received or to be paid or received by the Company and/or its
stockholders pursuant to the Matters (whether or not consummated) for which Wit
is engaged to render financial advisory services bears to (ii) the fees paid to
Wit in connection with such engagement. In no event shall the Indemnified
Parties contribute or otherwise be liable for an amount in excess of the
aggregate amount of fees actually received
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by Wit pursuant to such engagement (excluding amounts received by Xxx as
reimbursement of the expenses).
The Company further agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with Xxx's engagement hereunder except for losses,
claims, damages, liabilities or expenses that a court of competent jurisdiction
shall have determined resulted primarily from the gross negligence or willful
misconduct of such Indemnified Party.
The indemnity, reimbursement and contribution provisions set forth herein
shall remain operative and in full force and effect regardless of (i) any
withdrawal, termination or consummation of or failure to initiate or consummate
any Matter referred to herein, (ii) any investigation made by or on behalf of
any party hereto or any person controlling (within the meaning of Section 15 of
the Securities Act of 1933 as amended, or Section 20 of the Securities Exchange
Act of 1934, as amended) any party hereto, (iii) any termination or the
completion or expiration of this Letter Agreement relating to Xxx's engagement
and (iv) whether or not Wit shall, or shall not be called upon to, render any
formal or informal advice in the course of such engagement.
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