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EXHIBIT (C)3
BROWN, GIBBONS, LANG & COMPANY, L.P.
INVESTMENT BANKERS
0000 XXXXXXXX XXXXXX, XXXXX 000 000 XXXX XXXXXXXXXX XXXXXX, 0XX XXXXX
XXXXXXXXX, XXXX 00000 XXXXXXX, XXXXXXXX 00000
(000) 000-0000 (000) 000-0000
TELECOPIER (000) 000-0000 TELECOPIER (000) 000-0000
January 5, 1996
Xx. Xxxxx X. Drill
Varitronic Systems, Inc.
000 Xxxxxxxxxxx Xxxxx
000 Xxxxxxx 000 Xxxxx
Xxxxxxxxxxx, XX 00000
Dear Xxxxx:
This will confirm the understanding and agreement between Brown, Gibbons,
Lang & Company, L.P. (BGL) and Varitronic Systems, Inc. ("Varitronic" or the
"Company") as follows:
1. The Company hereby engages BGL to act as exclusive financial
advisor to the Company (together with its affiliates, subsidiaries,
successors, properties and principals, the "Company") in connection with a
potential Transaction involving the Company. For purposes hereof, a
"Transaction" shall mean, whether in one or a series of transactions, the
sale or other transfer, directly or indirectly, of all or a substantial
portion of the assets or securities of the Company or any other
extraordinary corporate transaction involving the Company, whether by way
of a merger or consolidation, reorganization, recapitalization or
restructuring, negotiated purchase, minority investment or partnership,
collaborative venture or otherwise, or any combination of the
aforementioned.
2. BGL hereby accepts the engagement described in paragraph 1 and, in
that connection, agrees to:
(a) review the business and operations of the Company and its
historical and projected financial condition and results of operations;
(b) assist the Company in the preparation and negotiation of any
confidentiality agreement to be entered into by third parties in
connection with a Transaction;
(c) assist the Company in presentations, discussions, due diligence
and negotiations relating to a Transaction;
(d) only if so specifically instructed by the Board of Directors of
the Company in writing, identify potential parties to a transaction
(other than X. X. Xxxxx Co.) and contact such parties and/or their
representatives on behalf of the Company, and assist the Company in the
preparation of a confidential information package describing the Company
and its operations;
(e) advise the Company as to the timing, structure and pricing of a
Transaction;
(f) provide such other financial advisory and investment banking
services as are customary for similar transactions and as may be
mutually agreed upon by the Company and BGL;
(g) keep and maintain all non-public information which BGL receives
concerning the Company confidential, limit its disclosure internally
only to those employees who have been appropriately admonished
concerning its confidential nature and have a need to know, use it or
disclose it to third parties only as contemplated by this agreement or
as required by law, and return
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to Varitronic or destroy, upon request, all writings or other tangible
materials furnished to BGL containing such information and,
(h) BGL will (i) render an opinion, in such form as it shall
consider appropriate (if requested by the Company, such opinion shall be
in writing) as to the fairness, from a financial point of view, to the
Company's common stockholders of the consideration to be received by
such stockholders in the Possible Transaction or (ii) advise the Board
of Directors that it is unable to render such an opinion due to the
inadequacy of such consideration.
3. As compensation for BGL's services hereunder, the Company hereby
agrees to pay BGL the following fees:
(a) A retainer fee of $50,000 to BGL will be due upon execution of
this Agreement. This retainer fee will be fully credited against the
transaction fee payable in section 3(b) hereof.
(b) A transaction fee (the "Transaction Fee") equal to a percentage
of the Transaction Value (as defined immediately below):
5% (five percent) of the first $1 million, plus
4% (four percent) for the second $1 million, plus
3% (three percent) for the third $1 million, plus
2% (two percent) for the fourth $1 million, plus
1% (one percent) of the amount in excess of $4 million up to $40
million, plus
2.5% (two point five percent) of the Transaction Value in excess of
$40 million,
payable in cash promptly upon consummation of a Transaction if, during the term
of this agreement or within 12 months thereafter, a Transaction is consummated
or definitive agreement is entered into that subsequently results in a
Transaction.
"Transaction Value" shall mean the total proceeds and other consideration
paid or received in connection with a Transaction (which consideration shall be
deemed to include amounts in escrow), including, without limitation: (i) cash,
(ii) notes, securities and other property; (iii) the present value of any
payments made in installments; (iv) the present value of any amounts payable
under consulting agreements, agreements not to compete or similar arrangements
entered into in connection with a Transaction (including such payments to
management); (v) the present value of any contingent payments (whether or not
related to future earnings or operations); and (vi) if the Transaction involves
the disposition of assets, the net value of current assets not sold. In addition
to the foregoing, Transaction Value shall also include the value of any equity
interest retained by any of the current owners of the Company. For purposes of
computing any fees payable to BGL hereunder, non-cash consideration shall be
valued as follows: (x) publicly traded securities shall be valued at the average
of their bid/ask closing prices (as reported in The Wall Street Journal) for the
five trading days prior to the closing of the Transaction and (y) any other
non-cash consideration shall be valued at the fair market value thereof as
determined in good faith by the Company and BGL.
4. In addition to any fees that may be payable to BGL hereunder (and
regardless for whether a Transaction occurs), the Company hereby agrees from
time to time upon request to reimburse BGL promptly for travel and other
out-of-pocket expenses incurred by BGL in performing its services hereunder,
including, without limitation, the reasonable fees and expenses of its legal
counsel.
5. Recognizing that BGL's role is advisory, the Company agrees to indemnify
and hold harmless BGL, 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 BGL hereunder, and will promptly reimburse the Indemnified Parties for all
expenses (including fees and expenses of legal counsel) as incurred in
connection with the investigation of, preparation for or defense of any pending
or threatened claim related to or rising in any manner out of the engagement of
BGL hereunder, or any action or proceeding arising therefrom (collectively,
"Proceedings"), as whether or not such Indemnified Party is a formal party to
any such Proceeding. Notwithstanding the
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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 determined by final judgment resulted solely from the gross negligence or
willful misconduct (including breach of contract) of an Indemnified Party. The
Company further agrees that it will not, without the prior written consent of
BGL, 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 BGL 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 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, 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 BGL on the
other, in connection with the Matters to which 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 BGL with respect to BGL'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 BGL is engaged to render
financial advisory services bears to (ii) the fees paid to BGL 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 by BGL pursuant to such engagement (excluding amounts received
by BGL as reimbursement of expenses).
The indemnity, reimbursement and contribution obligations of the Company
shall be in addition to any liability which the Company may otherwise have and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company or an 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 or BGL's engagement and (iv) whether or
not BGL shall, or shall not be called upon to, render any formal or informal
advice in the course of such engagement.
6. (a) The Company recognizes and confirms that BGL, in acting pursuant to
this engagement, will be using information in reports and other information
provided by others, including without limitation, information provided by or on
behalf of the Company, and BGL does not assume responsibility for and may relay,
without independent verification, on the accuracy and completeness of any such
reports and information. The Company hereby warrants that any information
relating to the Company that is furnished to BGL by or on behalf of the Company
will be fair, accurate and complete and will not contain any material omissions
or misstatements of fact. The Company agrees that any information or advice
rendered by BGL or its representatives in connection with this engagement is for
the confidential use of the Company's Board of Directors only in its evaluation
of a Transaction and, except as otherwise required by law, the Company will not
and will not permit any third party to disclose or otherwise refer to such
advice or information in any manner without BGL's prior written consent.
(b) The Company agrees that, at all times during the Engagement, the
Company will give BGL (i) notice of any material development affecting the
Company as soon as reasonably practicable, but not later than the time at which
an announcement of any such development is released to the general public or any
other party, (ii) copies of any financial reports as soon as reasonably
practicable, but not later than the earliest time the Company makes the same
available to others, and (iii) such other information concerning the business
and financial condition of the Company as BGL may from time to time reasonably
request.
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7. The Company agrees that after the closing of a Transaction, BGL has the
right to place advertisements in financial and other newspapers and journals at
its own expense describing its services to the Company hereunder.
8. Subject to the provisions of paragraphs 2(g), 3 (but only for the period
provided in 3(b)), 4, 5 and 6(a) which shall survive any termination of this
Agreement, either BGL or the Company may terminate BGL's engagement hereunder at
any time without cause by giving the other party at least 10 days' prior written
notice of termination.
9. We understand and you agree, that there are not brokers, representatives
or other persons which have an interest in compensation due BGL from this
transaction.
10. This Agreement may not be amended or modified except in writing. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Ohio, regardless of the laws that might otherwise govern under
applicable principles for conflicts of law thereof.
11. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and supersedes any prior oral or
written agreements or understandings.
If the foregoing correctly sets forth the understanding and agreement between
BGL and the Company, please so indicate in the space provided for that purpose
below, whereupon this letter shall constitute a binding agreement.
BROWN, GIBBONS, LANG & CO. L.P.
BY: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Senior Vice President
AGREED:
BY: /s/ XXXXX X. DRILL
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Xxxxx X. Drill
Chairman, President and Chief Executive Officer
Varitronic Systems, Inc.
Date: January 5, 1996
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