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EXHIBIT 10.2
April 7, 1998
Mr. Xxxx Xxxx
President
AMC, Inc.
Suite 2200
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Dear Xxxx:
This letter agreement (the "Agreement") will serve to set forth and confirm our
mutual understanding regarding the terms of engagement of Xxxxxx Capital Group,
L.P. ("VCG") by AMC, Inc. ("AMC"), for itself and as agent for the related
entities listed on Exhibit A, for financial advisory services to be rendered by
VCG.
OBJECTIVES
It is our understanding that AMC and other related entities own (i) interests
in a number of income producing real estate assets listed on Exhibit B (the
"Real Estate Assets"), (ii) 100% of a trade mart/show management business
listed on Exhibit C (the "Management Business"), and (iii) interests in certain
other assets listed on Exhibit D (the "Other Assets"; the Real Estate Assets,
the Management Business and the Other Assets are hereinafter collectively
referred to as the "Assets").
Based on our conversations, VCG will undertake to assist AMC in the
identification and evaluation of strategic alternatives which may include
certain transactions designed to maximize the value of AMC and/or the Assets.
These objectives could include a capital restructuring, asset repositioning
and/or outright sale of AMC and/or the Assets. We believe that AMC's objective
can best be accomplished through a single transaction or a series of related
transactions including the recapitalization of existing debt and/or equity and
the disposition of all or a portion of the Assets and/or AMC (the execution of
this strategy and the strategy itself shall be hereinafter referred to as the
"Assignment").
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Mr. Xxxx Xxxx
AMC, Inc.
April 7, 1998
Page 2
SCOPE OF PROFESSIONAL SERVICES
VCG accepts this Assignment as exclusive financial advisor to AMC and agrees to
provide such financial advisory services as requested by AMC in connection with
the Assignment including, but not limited to, the following (it being expressly
acknowledged that affiliates of AMC may, from time to time, provide certain
other financial services to AMC):
1. Development of Strategic/Tactical Plan
VCG will assist AMC in evaluating alternative capital structures for
AMC and/or the Assets which may include the sale, refinancing and/or
restructuring of the ownership interests in AMC and/or the Assets. The
evaluation, based in part on interviews with potential capital
providers (including investment banks and other ventures with
institutional or quasi-institutional investment funds), will result in
specific recommendations to AMC concerning a strategic/tactical plan
for the implementation of AMC's objectives.
2. Information Collection and Due Diligence
VCG will conduct a thorough review and analysis of the Assets. VCG's
review will include historical operating results, projected cash
flows, management contracts, and supporting data and assumptions;
AMC's financial projections and budgets for the Assets will be
reviewed and necessary revisions shall be recommended. VCG will also
prepare a work plan to gather and synthesize information that is not
currently available.
3. Financial Model
VCG will design an analytic framework to evaluate, and assess the
various strategic alternatives under various property, operating and
financial scenarios. Critical inputs will include: cost of equity
capital, acquisition velocity, projected cash flow, management income
and leverage. Based on these variables, the financial model will
analyze the overall financial impact on AMC under different scenarios.
4. Marketing Materials
VCG will assist AMC in organizing, packaging and presenting
information regarding the Assignment to prospective investors and
agents.
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Mr. Xxxx Xxxx
AMC, Inc.
April 7, 1998
Page 3
5. Negotiating with Prospective Investors and Agents
VCG will solicit proposals from potential investors and agents in
accordance with the execution of the Assignment, analyze the
proposals, and assist AMC in negotiating the terms of any contracts,
agreements or documents relating to or arising from said execution.
6. Investor Due Diligence
VCG will manage the due diligence process with all investors and third
parties.
7. Documentation and Closing
VCG will work with AMC's legal, tax and accounting advisors to ensure
a timely closing. We will coordinate the creation and review of all
required documentation, relating to the execution of the Assignment.
The terms and conditions of and the decision to consummate any recommended
transaction will be determined by AMC in its sole discretion. Except as
expressly empowered in writing by AMC, VCG will not have the authority either
to make or to accept any offer or proposal or to enter into any commitment or
give any representations or assurances on behalf of AMC.
In connection with VCG's activities on AMC's behalf, AMC agrees to furnish VCG
with all available information and data concerning AMC and its ownership and
the Assets which are reasonably required in connection with the engagement (the
"Information").
In rendering its services hereunder, VCG will be using and relying primarily on
the Information without independent verification thereof and, to the extent any
such Information is provided to third parties, such Information shall first be
approved by AMC. AMC will diligently undertake to ensure that the Information
made available to VCG by AMC with respect to AMC and its ownership, and the
Assets will be complete and correct in all material respects and will not
contain any untrue statement of material fact or intentionally omit a material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. AMC will undertake to
notify VCG promptly: (i) of any material adverse change in the financial
condition of AMC and its ownership or the Assets, and (ii) of any statement
contained in the Information which in its reasonable judgment, violates its
obligations set forth in the immediately preceding sentence. No representation
will be given, nor warranty made with respect to the accuracy or completeness
of the Information and a statement to that effect will be
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Mr. Xxxx Xxxx
AMC, Inc.
April 7, 1998
Page 4
included in materials provided to potential investors and agents.
Notwithstanding the preceding sentence, any claim by third parties arising out
of the inaccuracy or incompleteness of the Information shall be subject to
AMC's indemnity obligation set forth below.
TERM OF EMPLOYMENT
VCG's engagement will commence on the date hereof and continue for up to twelve
(12) months from the date of the Agreement (the "Termination Date"); provided,
however, that the Termination Date may be extended by agreement in writing
executed by AMC and VCG. This Agreement may be terminated by AMC in whole at
any time prior to the Termination Date upon at least thirty (30) days written
notice; however, any termination hereunder will not limit VCG's right to
receive the VCG Transaction Fees (as defined below).
COMPENSATION
VCG shall receive for this transaction total compensation (collectively, the
VCG Transaction Fees), plus approved disbursements, as follows:
(1) A retainer fee of $250,000 payable on execution of this
Agreement and $50,000 per month on the first day of each
successive month during the term hereof. All payments made to
VCG pursuant to this subparagraph (i) will be credited
against the Success Fee (as defined below).
(2) With respect to a sale, recapitalization and/or refinancing
of the Real Estate Assets, the Management Business and the
Other Assets, AMC will pay VCG a success fee in cash (the
"Success Fee") equal to (i) one percent (1.00%) of gross
consideration ("Gross Consideration") up to $500MM, plus (ii)
seven percent (7.0%) of Gross Consideration between $500MM
and $600MM, plus (iii) ten percent (10.0%) of Gross
Consideration in excess of $600MM. Gross Consideration will
include cash, stock, other securities, debt assumed by a
buyer and amounts paid to capitalize any ongoing entity that
may be created as a result of the Assignment. If AMC or one
of its successors receives Gross Consideration at any point
in the future (e.g., earn out or any other type of deferred
compensation or income) as a result of agreements or
contracts entered into as a result of the Assignment, then
AMC will pay VCG a Success Fee in accordance with the
foregoing amounts. Any Success Fee earned by VCG under this
Agreement will be due and payable upon the receipt of any
Gross Consideration by AMC, an ongoing entity or one of its
successors as contemplated herein.
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Mr. Xxxx Xxxx
AMC, Inc.
April 7, 1998
Page 5
In the event that AMC concludes a transaction covered by this
Agreement within 24 months from the date of this Agreement,
VCG shall be entitled to the same Success Fee which it would
have received had the transaction occurred during the term of
this Agreement.
(3) To the extent that VCG is successful in negotiating a
discount from AMC's lenders, VCG shall be entitled to 7.5% of
such savings.
(4) VCG and AMC agree that the following will be paid by AMC
regardless of the outcome of the Assignment (based on a
pre-approved budget): (i) reasonable expenses relating to the
production of marketing materials (including printing and
desk-top publishing expenses and the costs of procuring and
reproducing photographs, renderings, maps, etc.); and (ii)
all reasonable out-of-pocket expenses of VCG (including
authorized travel expenses). All expense reimbursements due
VCG under this Agreement will be due and payable by AMC
within 30 days of their receipt of a written detailed request
from VCG.
CONFIDENTIALITY
Except as required by law, regulation, legal process or regulatory authority,
VCG agrees to keep all of the Information confidential, not to disclose any
Information to anyone other than VCG's employees, officers, partners, agents
and advisors without AMC's prior approval and not to use the Information for
any purposes other than those referred to in this Agreement, all as more
particularly set forth in that certain Confidentiality and Non-Disclosure
Agreement dated February 28, 1998 between Capital Trust and AMC.
INDEMNIFICATION
AMC will indemnify, defend and hold VCG and any and all of its respective
officers, directors, partners and employees (including the officers, directors
and employees of the general partner of VCG) (each such person being an
"Indemnified Party") harmless against any and all losses, claims, damages,
liabilities, and expenses arising directly or indirectly out of, or in
connection with any actions or proceedings, or threatened actions or
proceedings, which any Indemnified Party may suffer or for which such
Indemnified Party may become liable arising out of this engagement or the
performance of services hereunder, including reasonable fees of counsel
retained to act on behalf of such Indemnified party (such counsel being
mutually acceptable to VCG and AMC), except that AMC will not be liable for any
losses, claims, damages, liabilities
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Mr. Xxxx Xxxx
AMC, Inc.
April 7, 1998
Page 6
or expenses of any Indemnified party who shall be found by a court of competent
jurisdiction to have been negligent or guilty of willful misconduct.
MISCELLANEOUS
The terms of VCG's employment hereunder shall be construed and enforced in
accordance with the laws of the State of New York. No changes may be made to
this Agreement except pursuant to a written instrument executed by both parties
hereto. This Agreement represents the entire agreement between the parties.
This Agreement including Exhibits A, B and C contain the entire understanding
among the parties hereto relating to the matters dealt with herein and may not
be amended or otherwise modified except by an agreement in writing signed by
the parties hereto.
Very truly yours,
XXXXXX CAPITAL GROUP, L.P.
By: VIC, Inc.
Its General Partner
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxxx
AGREED TO AND ACCEPTED:
AMC, INC., for itself and as agent
for the entities listed on Exhibit A
By: /s/ Xxxx Xxxx
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Xxxx Xxxx
President
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EXHIBIT A
RELATED ENTITIES
1. Portman Lightfair Associates, L.P.
2. AMC Orlando, Inc.
3. CGS Associates, L.P.
4. ADAC, L.P.
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EXHIBIT B
REAL ESTATE ASSETS
Property Name Location
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1. Apparel Mart Atlanta, Georgia
2. Merchandise Mart Atlanta, Georgia
3. Gift Mart Atlanta, Georgia
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EXHIBIT C
MANAGEMENT BUSINESS
Name of Company Location
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AMC, Inc. Atlanta, Georgia
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EXHIBIT D
OTHER ASSETS
1. 100% of the common stock of LFGP, Inc. (which holds a 49.9981% general
partnership interest in Portman Lightfair Associates, L.P.).
2. Surf Expo owned by AMC Orlando, Inc.
3. California gift show owned by CGS Associates, L.P.
4. Atlanta Decorative Arts Center which is owned by ADAC, L.P.
