EXHIBIT 10.15
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[Letterhead of Xxx Xxxx & Associates, Inc.]
October 15, 1996
Xx. Xxxxxxx X. Xxxxxxx
Xxxxx TRS, Inc.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Re: Advisory, Restructuring and Turnaround Services
Dear Xx. Xxxxxxx:
This letter outlines the understanding between Xxx Xxxx & Associates, a Michigan
corporation ("JA&A") and Ryder TRS, Inc. (the "Company") of the objective,
tasks, work product and fees for the engagement of JA&A to provide advisory,
restructuring and turnaround services to the Company.
OBJECTIVE
Assist the Company and its management and new owners to achieve the business
plan and objectives that have been set out in the deal syndication book prepared
by Questor Management Company. Such plan reflects realization of financial
benefits from initiatives that will be focused on improving the Company's income
statement, balance sheet, organization structure and corporate processes.
TASKS
Conduct a comprehensive review of the Company through meetings with key
employees, on-site operations review and analysis of financial and other
information to gain a working knowledge of the Company and identify areas of
opportunity.
. Assess and develop a plan to realign the Company's organization structure
appropriate to meeting the Company's objective.
. Develop the goals, measurements, structure and composition of Profit
Improvement Teams that will be made up of Company employees.
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
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January 19, 1997
Page 2
. Assist in selecting members for the Steering Committee and Profit Improvement
Teams, and assist in structuring their organization.
. Develop and provide training for Profit Improvement Team leaders.
. Organize and lead the Profit Improvement Team kick-off meeting.
. Assist the Company in developing a communications program for Profit
Improvement Teams, including key messages and communications vehicles
targeted at employees, shareholders, customers, vendors and others.
. Actively participate as facilitators to Profit Improvement Teams and assist
in monitoring and reporting on their progress.
. Provide oversight assistance during the implementation process for
initiatives that are identified by Profit Improvement Teams and approved by
the Steering Committee.
. Assist in measuring financial and other benefits derived from the Profit
Improvement Team process.
. Assist in developing a cash flow forecasting model.
. Assist in challenging capital spending plans to help assure that such
expenditures are necessary, appropriately timed and effective as proposed.
. Assist in evaluating proposed contracts to make recommendation to the Board
of Directors as to the terms proposed and necessity of the contract.
. Assist in other matters as may be mutually agreed upon.
WORK PRODUCT
. Our work product will be in the form of:
. Information to be discussed with you and others, as you may direct.
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
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January 19, 1997
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. Written reports and analysis worksheets to support our suggestions as we deem
necessary or as you may request.
STAFFING
Xxxxxxxx X. Xxxxxxxxx will be the principal responsible for the overall
engagement. He will be assisted by a staff of consultants at various levels,
all of whom have a wide range of skills and abilities related to this type of
assignment.
PROFESSIONAL FEES
We charge a combination of hourly and success fees, as follows:
ESTIMATED HOURLY FEES
Based on our current understanding of the situation, we estimate the total
hourly fees will be $2.6 million; however, the actual hourly fees may be
higher or lower depending on a number of factors that cannot be precisely
estimated. This estimate includes out of pocket cash expenses, such as
travel and lodging that we estimate will approximate 10% of hourly fees.
We will require a retainer of $250,000. Invoices for hourly fees and out
of pocket cash expenses will be rendered semi-monthly and are due upon
receipt.
Hourly rates are based upon the following schedule:
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Staff Classification Rate Range
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Principals *
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Senior Associates *
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Associates and Consultants *
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For purposes of planning, we estimate that hourly fees will be incurred as
follows:
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Time Period Per Month Cumulative
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Months 1 to 6 $300,000 $1,800,000
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Months 7 and 8 $200,000 $2,200,000
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Months 9 through 12 $100,000 $2,600,000
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* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
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January 19, 1997
Page 4
CONTINGENT SUCCESS FEES
In addition to hourly fees, the Company has agreed to pay a contingent
success fee based upon achieving the Company's business plan of EBITDA
equal to * for 1997 and * for 1998 (unless such business plan is
reduced in negotiation between management and Questor in which case the
lower amount shall be the threshold). Further, in determining the EBITDA
results achieved, there shall not be deducted as an expense, restructuring
charges or other start-up costs. This formula will also be adjusted up or
down for changes, errors or omissions in plan activities and unusual or
unplanned items not related to turnaround activities, such as an
acquisition or similar event.
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Success Fee Level 1997 Plan 1998 Plan
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Achieve Plan * *
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First $10 Million Over Plan * *
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Next $10 Million Over Plan * *
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Next $10 Million Over Plan * *
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Next $10 Million Over Plan * *
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More Than $40 Million Over Plan * *
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PAYMENT OF CONTINGENT SUCCESS FEE
The amount of contingent success fee earned will be payable in cash.
SEMI-MONTHLY BILLINGS
As noted, we will require a retainer of $250,000 to be applied against the time
charges, excluding expenses, specific to the engagement. We will submit semi-
monthly invoices for services rendered and expenses incurred as described above,
and we will offset such invoices against the retainer. Payment will be due upon
receipt of the invoices to replenish the retainer to the agreed upon amount.
Any unearned portion of the retainer will be returned to you at the termination
of the engagement.
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
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January 19, 1997
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RELATIONSHIP OF THE PARTIES
The parties intend that an independent contractor relationship will be created
by this agreement. JA&A is not to be considered an employee or agent of the
Company and the employees of JA&A are not entitled to any of the benefits that
the Company provides for the Company's employees.
The Company also agrees not to solicit or recruit any employees or agents of
JA&A for a period of two years subsequent to the completion and/or termination
of this agreement.
CONFIDENTIALITY
JA&A agrees to keep confidential all information obtained from the Company.
JA&A agrees that neither it nor its directors, officers, principals, employees,
agents or attorneys will disclose to any other person or entity, or use for any
purpose other than specified herein, any information pertaining to the Company
or any affiliate thereof which is either non-public, confidential or proprietary
in nature ("Information") which it obtains or is given access to during the
performance of the services provided hereunder. JA&A also agrees that only
those of its directors, officers, principals, employees, agents and attorneys
who have a need-to-know to perform the services contracted herein and are under
an obligation to maintain the confidentiality of the Information will be given
access to the Information. JA&A may make reasonable disclosures of Information
to third parties in connection with their performance of their obligations and
assignments hereunder. In addition, JA&A will have the right to disclose to
others in the normal course of business its involvement with the Company.
Information includes data, plans, reports, schedules, drawings, accounts,
records, calculations, specifications, flow sheets, computer programs, source or
object codes, results, models, or any work product relating to the business of
the Company, its subsidiaries, distributors, affiliates, vendors, customers,
employees, contractors and consultants.
The Company acknowledges that all advice (written or oral) given by JA&A to the
Company in connection with JA&A's engagement is intended solely for the benefit
and use of the Company (limited to its management, shareholders and others, such
as lenders, who have a need for access to it) in considering the transactions to
which it relates. The Company agrees that no such advice shall be used for any
other purpose or reproduced, disseminated, quoted or referred to at any time in
any manner or for any purpose other than
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
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January 19, 1997
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accomplishing the tasks and programs referred to herein or in discussions with
the Company's lenders or debt holders, without JA&A's prior approval (which
shall not be unreasonably withheld) except as required by law. This agreement
will survive the termination of the engagement.
FRAMEWORK OF THE ENGAGEMENT
The Company acknowledges that it is not hiring JA&A because of its CPA
credentials, but purely to assist and advise the Company in business planning
and restructuring. JA&A's engagement shall not constitute an audit, review or
compilation, or any other type of financial statement reporting engagement that
is subject to the rules of the AICPA or other such state and national
professional bodies.
INDEMNIFICATION
In engagements of this nature, it is our practice to receive indemnification.
Accordingly, in consideration of our agreement to act on your behalf in
connection with this engagement, you agree to indemnify, hold harmless, and
defend us (including our principals, employees and agents) from and against all
claims, liabilities, losses, damages and reasonable expenses as they are
incurred, including reasonable legal fees and disbursements of counsel, and the
costs of our professional time (our professional time will be reimbursed at our
rates in effect when such future time is required), relating to or arising out
of the engagement, including any legal proceeding in which we may be required or
agree to participate but in which we are not a party. We, our principals,
employees and agents may, but are not required to, engage a single firm of
separate counsel of our choice in connection with any of the matters to which
this indemnification agreement relates. This indemnification agreement does not
apply to actions taken or omitted to be taken by us in bad faith or from our
gross negligence. This agreement will survive the termination of the
engagement.
TERMINATION AND SURVIVAL
The agreement may be terminated at any time by written notice by one party to
the other; provided, however, that notwithstanding such termination JA&A will be
entitled to any fees and expenses due under the provisions of the agreement.
Such payment obligation shall inure to the benefit of any successor or assignee
of JA&A.
The obligations of the parties under the Indemnification and Confidentiality
sections of this agreement shall survive the termination of the agreement as
well as the other sections
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
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January 19, 1997
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of this agreement which expressly provide that they shall survive termination of
this agreement.
GOVERNING LAW
This letter agreement is governed by and construed in accordance with the laws
of the State of Michigan with respect to contracts made and to be performed
entirely therein and without regard to choice of law or principles thereof.
CONFLICTS
We know of no fact or situation which would represent a conflict of interest for
us with regard to the Company. We do wish to disclose the following
information:
. All of the Principals of JA&A, including Xxx Xxxx, the Managing General
Partner of Questor Partners Fund, L.P. own general and/or limited partnership
interests in Questor Partners Fund, L.P. or Questor Side-by-Side Partners,
L.P., a related entity.
. Chase Bank, a lender to the Company and one of the equity investors in the
new entity, is also a limited partner of Questor.
. Ryder System, Inc., the seller of the Company's assets, is presently a client
of JA&A. Work on that engagement is currently on-going.
SEVERABILITY
If any portion of the letter agreement shall be determined to be invalid or
unenforceable, we each agree that the remainder shall be valid and enforceable
to the maximum extent possible.
ENTIRE AGREEMENT
All of the above contains the entire understanding of the parties relating to
the services to be rendered by JA&A and may not be amended or modified in any
respect except in writing signed by the parties.
NOTICES
All notices required or permitted to be delivered under this letter agreement
shall be sent, if to us, to the address set forth at the head of this letter, to
the attention of Mr.
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
Xx. Xxxxxxx X. Xxxxxxx
January 19, 1997
Page 8
Xxxxxx X. Xxxxxxxxxxxx, and if to you, to the address for you set forth above,
to the attention of your General Counsel, or to such other name or address as
may be given in writing to the other party. All notices under the agreement
shall be sufficient if delivered by facsimile or overnight mail. Any notice
shall be deemed to be given only upon actual receipt.
If these terms meet with your approval, please sign and return the enclosed copy
of this proposal and return it with the amount required to establish the
retainer.
We look forward to working with you.
Sincerely yours,
XXX XXXX & ASSOCIATES
Xxxxxxxx X. Xxxxxxxxx
Principal
Acknowledged and Agreed to:
By: /s/ Xxxxxxx X. Xxxxxxx
Its: Chairman
Dated: October 15, 1996
* CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION
PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
