CORNELL LETTERHEAD
September 5, 2001
Xx. Xxxxx X. Xxxxxxx
Xxxxxx Brothers Inc.
000 Xxxxxxxxxxx Xxxxxx, X.X.
Suite 1200
Washington, D.C. 20006
Dear Xxxxx:
The letter agreement (the "Agreement") will confirm the understanding and
agreement between Xxxxxx Brothers Inc. ("Xxxxxx Brothers") and Cornell
Companies, Inc. (the "Company") as follows:
1. The Company hereby engages Xxxxxx Brothers on a non-exclusive basis to
provide financial advisory services to the Company concerning future
financing vehicles and the strategic development of the Company's
business, including advice with respect to acquisitions, divestitures,
joint ventures or other corporate transactions which the Company is
currently contemplating entering into or which it may consider at a
future date. In particular, the Company may pursue the following
transactions: (i) raising approximately $90 million for a potential
Alaska adult prison, (ii) refinancing approximately $100 million of the
Company's New Xxxxxx and pending Moshannan Valley projects, and
(iii) pursuing several juvenile projects that the Company is pursuing in
various states. In addition, the Company expects several proposals from
the Federal Bureau of Prisons during the next 5 to 7 years that will
likely need $45 million to $60 million for each project, which Federal
Bureau of Prisons projects could, in the aggregate, comprise financing
needs of over $500 million (collectively referred to as "Future
Projects").
Xxxxxx Brothers will, if requested by the Company, advise the Company
with respect to any financing as well as the structuring of any of the
transactions described above.
2. Lehman agrees to use its best efforts to devote sufficient time and
resources to pursue the above noted items, as well as other mutually
acceptable opportunities as they arise. It is understood that this
letter does not commit Cornell to exclusively using Lehman to provide
financing on Future Projects, nor does it commit Lehman to provide or
underwrite financing for the Future Projects. In addition, any Lehman
financing would be subject to Xxxxxx'x Investment Banking Credit
Committee. As compensation for the services rendered by Xxxxxx Brothers
hereunder, the Company shall pay Xxxxxx Brothers as follows:
Xx. Xxxxx X. Xxxxxxx
September 5, 2001
Page 2
(a) A non-refundable retainer fee for $3.65 million (the "Retainer"),
payable on or before November 5, 2001. The Retainer will be applied
on a mutually agreed upon basis toward future contingent fees
associated with investment banking services that may be provided by
Xxxxxx Brothers to the Company.
(b) In the event that Xxxxxx Brothers is engaged to assist the Company
in arranging for any financing or to provide any specific investment
banking or financial advisory services to the Company in connection
with any particular transaction, Xxxxxx Brothers shall be paid fees
to be mutually agreed upon based on Xxxxxx Brothers' customary fees
for the services rendered. Notwithstanding the above or any oral
representations or assurances previously or subsequently made by the
parties, this Agreement does not constitute a commitment by or
obligation of Xxxxxx Brothers to act as undewriter or placement
agent in connection with any offering of securities or to provide
any financing. Such a commitment on the part of Xxxxxx Brothers
will exist only upon the execution of a final, written underwriting
or placement agent agreement or commitment letter or loan agreement,
as the case may be, and then only in accordance with the terms and
conditions thereof.
3. The Company shall:
(a) indemnify Xxxxxx Brothers and hold it harmless against any and all
losses, claims, damages or liabilities to which Xxxxxx Brothers may
become subject arising in any manner out of or in connection with
the rendering of services by Xxxxxx Brothers hereunder or the
rendering of additional services by Xxxxxx Brothers as requested by
the Company that are related to the services rendered hereunder,
unless it is finally judicially determined that such losses, claims,
damages or liabilities resulted directly from the gross negligence
of willful misconduct of Xxxxxx Brothers; and
(b) reimburse Xxxxxx Brothers promptly for any legal or other expenses
reasonably incurred by it in connection with investigating,
preparing to defend or defending, or providing evidence in or
preparing to serve or serving as a witness with respect to, or
otherwise relating to, any lawsuits, investigations, claims or
other proceedings arising in any manner out of or in connection
with the rendering of services by Xxxxxx Brothers hereunder or the
rendering of additional services by Xxxxxx Brothers as requested by
the Company that are related to the services rendered hereunder
(including, without limitation, in connection with the enforcement
of this Agreement and the indemnification obligations set forth
herein); provided, however, that in the event a final judicial
determination is made to the effect specified in subparagraph 3(a)
above, Xxxxxx Brothers will remit to the Company any amounts
reimbursed under this subparagraph 3(b).
The Company agrees that the indemnification and reimbursement commitments set
forth in this paragraph 3 shall apply if either the Company or Xxxxxx Brothers
is a formal party to any such
Xx. Xxxxx X. Xxxxxxx
September 5, 2001
Page 3
lawsuits, investigations, claims or other proceedings and that such commitments
shall extend upon the terms set forth in this paragraph to any controlling
person, affiliate, director, officer, employee or consultant of Xxxxxx Brothers
(each, with Xxxxxx Brothers, an "Indemnified Person"). The Company further
agrees that, without Xxxxxx Brothers' prior written consent, it will not enter
into any settlement of a lawsuit, claim or other proceeding arising out of the
transactions contemplated by this Agreement (whether or not Xxxxxx Brothers or
any other Indemnified Person is an actual or potential party to such lawsuit,
claim or proceeding) unless such settlement includes an explicit and
unconditional release from the party bringing such lawsuit, claim or other
proceeding of all Indemnified Persons.
The Company further agrees that the Indemnified Persons are entitled to retain
separate counsel of their choice in connection with any of the matters in
respect of which indemnification, reimbursement or contribution may be sought
under this Agreement, but such separate counsel shall be at the expense of the
Indemnified Persons; provided that the Company shall reimburse reasonable
expenses for one counsel for all Indemnified Persons if it is determined under
applicable standards of legal ethics that a conflict of interest exists making
representation by counsel for the Company inappropriate.
4. The Company and Xxxxxx Brothers agree that if any indemnification or
reimbursement sought pursuant to the preceding paragraph 3 is judicially
determined to be unavailable for a reason other than the gross negligence
or willful misconduct of Xxxxxx Brothers, then, whether or not Xxxxxx
Brothers is the Indemnified Person, the Company and Xxxxxx Brothers shall
contribute to the losses, claims, damages, liabilities and expenses for
which such indemnification or reimbursement is held unavailable (i) in
such proportion as is appropriate to reflect the relative benefits to the
Company on the one hand, and Xxxxxx Brothers on the other hand, in
connection with the transactions to which such indemnification or
reimbursement relates, or (ii) if the allocation provided by clause
(i) above is judicially determined not to be permitted, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) but also the relative faults of the Company on
the one hand, and Xxxxxx Brothers on the other hand, as well as any
other equitable considerations; provided, however, that in no event
shall the amount to be contributed by Xxxxxx Brothers pursuant to this
paragraph exceed the amount of fees actually received by Xxxxxx Brothers
hereunder.
5. Except as required by applicable law or pursuant to an order entered or
subpoena issued by a court of competent jurisdiction, Xxxxxx Brothers
shall keep confidential all material non-public information provided to
it by the Company, and shall not disclose such information to any third
party, other than such of its employees and advisors as Xxxxxx Brothers
determines to have a need to know. Xxxxxx Brothers shall be responsible
for any breach of this confidentiality obligation by its employees and
advisors.
6. Except as required by applicable law, any advice to be provided by Xxxxxx
Brothers under this Agreement shall not be disclosed publicly or made
available to third parties
Xx. Xxxxx X. Xxxxxxx
September 5, 2001
Page 4
without the prior approval of Xxxxxx Brothers, and accordingly such
advice shall not be relied upon by any person or entity other than the
Company.
7. The term of Xxxxxx Brothers' engagement hereunder shall extend from the
date hereof until terminated as set forth below. Subject to the
provisions of paragraphs 2 through 6 and paragraphs 9 through 11, which
shall survive any termination of this Agreement after payment of the
non-refundable retainer fee, the Company may terminate Xxxxxx Brothers'
engagement hereunder at any time by giving at least 10 days' prior
written notice.
8. The Company agrees that Xxxxxx Brothers has the right to place
advertisements in financial and other newspapers and journals at its own
expense describing its services to the Company hereunder, provided that
Xxxxxx Brothers will submit a copy of any such advertisements to the
Company for its approval, which approval shall not be unreasonably
withheld.
9. Nothing in this Agreement, expressed or implied, is intended to confer or
does confer on any person or entity other than the parties hereto or
their respective successors and assigns, and to the extent expressly set
forth herein, the Indemnified Persons, any rights or remedies under or
by reason of this Agreement or as a result of the services to be
rendered by Xxxxxx Brothers hereunder. The parties acknowledge that
Xxxxxx Brothers is not acting as an agent of the Company or in a
fiduciary capacity with respect to the Company and that Xxxxxx Brothers
is not assuming any duties or obligations other than those expressly set
forth in this Agreement. The Company further agrees that neither Xxxxxx
Brothers nor any of its controlling persons, affiliates, directors,
officers, employees or consultants shall have any liability to the
Company or any person asserting claims on behalf of or in right of the
Company for any losses, claims, damages, liabilities or expenses arising
out of or relating to this Agreement or the services to be rendered by
Xxxxxx Brothers hereunder, unless it is finally judicially determined
that such losses, claims, damages, liabilities or expenses resulted
directly from the gross negligence or willful misconduct of Xxxxxx
Brothers.
10. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provisions
of this Agreement, which shall remain in full force and effect.
11. This Agreement may not be amended or modified except in writing signed by
each of the parties and shall be governed by and construed and enforced
in accordance with the laws of the State of New York.
Xx. Xxxxx X. Xxxxxxx
September 5, 2001
Page 5
If the foregoing correctly sets forth the understanding and agreement between
Xxxxxx Brothers and the Company, please so indicate in the space provided for
that purpose below, whereupon this letter shall constitute a binding agreement
as of the date hereof.
CORNELL COMPANIES, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Xxxxxx X. Xxxxx
Chairman and Chief Executive Officer
AGREED:
XXXXXX BROTHERS INC.
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx
Senior Vice President
