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Exhibit 10.1
July 31, 2000
Board of Directors
Take To Xxxxxxx.Xxx, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx 00
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Chief Executive Officer and President
Dear Xx. Xxxxxxxx:
This letter confirms the understanding and agreement (the "Agreement")
between Take to Xxxxxxx.Xxx, Inc. (together with its subsidiaries and
affiliates, the "Company") and Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Capital ("Xxxxxxxx
Xxxxx") as follows:
1. ENGAGEMENT; SERVICES; TERM. The Company hereby retains Xxxxxxxx
Xxxxx as its exclusive financial advisor to provide financial advisory and
investment banking services in connection with the possible merger,
consolidation, tender or exchange offer, leveraged buyout, leveraged
recapitalization, acquisition or sale of assets or equity interests, or similar
transaction involving all or a part of the business, assets or equity interests
of the Company and/or its subsidiaries and affiliates in one or more
transactions (each, a "Transaction").
In addition, Xxxxxxxx Xxxxx is also retained by the Company to act as
exclusive financial advisor and exclusive agent in connection with the Company's
proposed acquisition program. As used in this Agreement, the term Acquisitions
means, whether effected in one transaction or a series of transactions: (a) any
merger, consolidation, reorganization or other business combination pursuant to
which the business of the Company or one or more of its subsidiaries are
combined with that of one or more target companies or their subsidiaries, or (b)
the acquisition, directly or indirectly, by the Company of substantially all of
the assets of one or more target companies or their subsidiaries by way of a
negotiated purchase or otherwise.
Xxxxxxxx Lokey's services for a Transaction will include, if
appropriate or if requested by the Company, (a) reviewing the Company's
financial condition, operations, competitive environment, prospects and related
matters, (b) soliciting, coordinating and evaluating indications of interest and
proposals regarding a Transaction, (c) advising the Company as to the structure
of the Transaction (including the valuation of any non-cash consideration), (d)
negotiating the financial aspects, and facilitating the consummation, of any
Transaction, and (e) providing such other financial advisory and investment
banking services reasonably necessary to accomplish the foregoing.
For any Acquisition, Xxxxxxxx Xxxxx will identify potential targets and
review their financial condition and future prospects and any other matters
which you and we deem relevant to assist and advise the Company in its analysis
of any Acquisition and will assist you in the negotiation and structuring of the
financial aspects of the proposed Acquisition. Upon Xxxxxxxx Lokey's request,
you will furnish us with such material regarding the business and financial
condition of the Company and target(s) as we request, all of which will be, to
your best knowledge, accurate and complete in all material respects at the time
furnished. Xxxxxxxx Xxxxx may rely, without independent verification, on the
accuracy and completeness of all information furnished by the Company or any
other potential party to any Acquisition.
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The Company agrees that neither it, its controlling equity holders or
other affiliates, nor its management will initiate any discussions regarding a
Transaction during the term of this Agreement, except through Xxxxxxxx Xxxxx. In
the event the Company, its controlling equity holders or affiliates, or its
management receive any inquiry regarding a Transaction, Xxxxxxxx Xxxxx will be
promptly informed of such inquiry so that it can evaluate such party and its
interest in a Transaction, and assist the Company in any resulting negotiations.
This Agreement shall have an initial term of twelve (12) months, and
thereafter shall be automatically extended on a month-to-month basis unless
either party provides thirty days prior written notice of termination to the
other party; PROVIDED, HOWEVER, that no expiration or termination of this
Agreement shall affect (a) the Company's indemnification, reimbursement,
contribution and other obligations as set forth on Schedule A attached hereto,
(b) the confidentiality provisions set forth herein and Sections 5-9 hereof, and
(c) Xxxxxxxx Lokey's right to receive, and the Company's obligation to pay, any
and all fees and expenses due, and whether or not any Transaction shall be
consummated prior to or subsequent to the effective date of termination, all as
more fully set forth in this Agreement.
2. FEES AND EXPENSES. The Company shall pay Xxxxxxxx Xxxxx
non-refundable retainer fees of $50,000 commencing upon the mutual execution of
this Agreement.
In addition to the foregoing retainer fees, upon the consummation of a
Transaction, the Company shall pay Xxxxxxxx Xxxxx a cash fee ("Transaction Fee")
equal to:
a. For a Transaction involving a Transaction Value of less than $75 million:
o For a Transaction Value up to $25 million greater of $250,000 or 3.00% of the Transaction
Value, plus
o For a Transaction Value from $25 million to $50 million: 2.00% of such incremental value, plus
o For a Transaction Value from $50 million to $75 million: 1.75% of such incremental value.
b. For a Transaction involving a Transaction Value greater than $75 million:
o For a Transaction Value from $75 million: 1.25% of the Transaction Value, plus
o For a Transaction Value from $75 million to $100 million: 1.50% of such incremental value, plus
o For a Transaction Value from $100 million to $150 million: 2.00% of such incremental value, plus
o For a Transaction Value in excess of $150 million: 3.00% of such incremental value.
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Upon the closing of an Acquisition, Xxxxxxxx Xxxxx will be entitled, in
each case, to an additional Acquisition Fee payable in cash in connection with
the consummation of the closing of each Acquisition. The terms of the
Acquisition Fee shall be based on the following schedule:
o For a Transaction Value less than $25 million: $500,000, plus
o For a Transaction Value from $25 million to $30 million 2.25% of such incremental value,
plus
o For a Transaction Value from $30 million to $50 million 2.00% of such incremental value,
plus
o For a Transaction Value from $50 million to $75 million 1.75% of such incremental value,
plus
o For a Transaction Value in excess of $75 million: 1.50% of such incremental value.
For the purpose of calculating the Transaction Fee or the Acquisition
Fee, the Transaction Value shall be the total proceeds and other consideration
paid or received, or to be paid or received, in connection with a Transaction or
an Acquisition (which consideration shall be deemed to include amounts in
escrow), including, without limitation, cash, notes, securities, and other
property; amounts payable under consulting agreements, above-market employment
contracts, non-compete agreements or similar arrangements; and Contingent
Payments (as defined below). The Transaction Value shall be calculated as if
100% of the ownership of the equity interests of the Company had been sold by
dividing (i) the total consideration, whether in cash, securities, notes or
other forms of consideration, received or receivable by the Company and/or its
creditors and equity holders by (ii) the percentage of ownership which is sold.
In addition, if any of the Company's interest-bearing liabilities are assumed,
decreased or paid off in conjunction with a Transaction, or any of the Company's
assets are retained, sold or otherwise transferred to another party prior to the
consummation of the Transaction, the Transaction Value will be increased to
reflect the fair market value of any such assets or interest-bearing
liabilities. Contingent Payments shall be defined as the fair market value of
consideration received or receivable by the Company, its employees, former or
current equity holders and/or any other parties in the form of deferred
performance-based payments, "earn-outs", or other contingent payments based upon
the future performance of the Company or any of its businesses or assets.
For the purpose of calculating the consideration paid or received in an
Acquisition or a Transaction, any securities (other than a promissory note) will
be valued at the time of the closing of the Transaction or the Acquisition as
follows: (i) if such securities are traded on a stock exchange, the securities
will be valued at the average last sale or closing price for the ten trading
days immediately prior to the closing of the Transaction or the Acquisition;
(ii) if such securities are traded primarily in over-the-counter transactions,
the securities will be valued at the mean of the closing bid and asked
quotations similarly averaged over a ten trading day period immediately prior to
the closing of the Transaction or the Acquisition; and (iii) if such securities
have not been traded prior to the closing of the Transaction or the Acquisition,
Xxxxxxxx Xxxxx will prepare a valuation of the securities (without regard to any
restrictions on transferability), and Xxxxxxxx Xxxxx and the Company will
negotiate in good faith to agree on a fair valuation thereof for the purposes of
calculating the Transaction or Acquisition Fee. The value of any purchase money
or other promissory notes shall be deemed to be the face amount thereof. In the
event the Transaction Value includes any Contingent Payments, the Company and
Xxxxxxxx Xxxxx will negotiate in good faith to agree on that portion of the
Transaction Fee to be paid to Xxxxxxxx Xxxxx as of the closing of the
Transaction in consideration thereof. If the parties cannot reach
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such an agreement, an additional Transaction Fee(s) shall be paid to Xxxxxxxx
Xxxxx in the same proportions and at the same times as the Contingent Payments
are paid or received.
If this Agreement is terminated for any reason, and the Company
consummates, or enters into an agreement in principle to engage in (and which
subsequently closes), a Transaction or an Acquisition within 12 months after
such termination date, Xxxxxxxx Xxxxx shall be entitled to receive its
Transaction or Acquisition Fee upon the consummation of such Transaction or
Acquisition as if no such termination had occurred.
Additionally, and regardless of whether any Transaction or Acquisition
is consummated, Xxxxxxxx Xxxxx shall be entitled to reimbursement of its
reasonable out-of-pocket expenses incurred from time to time during the term
hereof in connection with the services to be provided under this Agreement,
promptly after invoicing the Company therefor.
3. INFORMATION. The Company will furnish Xxxxxxxx Xxxxx with such
information regarding the business and financial condition of the Company as is
reasonably requested, all of which will be, to the Company's best knowledge,
accurate and complete in all material respects at the time furnished. The
Company will promptly notify Xxxxxxxx Xxxxx if it learns of any material
misstatement in, or material omission from, any information previously delivered
to Xxxxxxxx Xxxxx. Xxxxxxxx Xxxxx may rely, without independent verification, on
the accuracy and completeness of all information furnished by the Company or any
other potential party to any Transaction. The Company understands that Xxxxxxxx
Xxxxx will not be responsible for independently verifying the accuracy of such
information, and shall not be liable for any inaccuracies therein. Except as may
be required by law or court process, any opinions or advice (whether written or
oral) rendered by Xxxxxxxx Xxxxx pursuant to this Agreement are intended solely
for the benefit and use of the Company, and may not be publicly disclosed in any
manner or made available to third parties (other than the Company's management,
directors, advisors, accountants and attorneys) without the prior written
consent of Xxxxxxxx Xxxxx, which consent shall not be unreasonably withheld.
4. INDEMNIFICATION; STANDARD OF CARE. The Company agrees to provide
indemnification, contribution and reimbursement to Xxxxxxxx Xxxxx and certain
other parties in accordance with, and further agrees to be bound by the other
provisions set forth in, Schedule A attached hereto.
5. OTHER SERVICES. To the extent Xxxxxxxx Xxxxx is requested by the
Company to perform any financial advisory or investment banking services which
are not within the scope of this assignment (such as rendering a fairness
opinion), such fees shall be mutually agreed upon by Xxxxxxxx Xxxxx and the
Company in writing, in advance, depending on the level and type of services
required, and shall be in addition to the fees and expenses described
hereinabove. Except as set forth in the preceding sentence, if Xxxxxxxx Xxxxx is
called upon to render services directly or indirectly relating to the subject
matter of this Agreement (including, but not limited to, producing documents,
answering interrogatories, giving depositions, giving expert or other testimony,
and whether by subpoena, court process or order, or otherwise), the Company
shall pay Xxxxxxxx Lokey's then current hourly rates for the persons involved by
the time expended in rendering such services, including, but not limited to,
time for meetings, conferences, preparation and travel, and all related
reasonable out-of-pocket costs and expenses, and the reasonable legal fees and
expenses of Xxxxxxxx Lokey's legal counsel incurred in connection therewith.
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6. XXXXXXXX LOKEY'S FUTURE FINANCING RIGHTS. If, during the next 24
months, the Company or any of its subsidiaries or affiliates determines to raise
external funds, whether directly or indirectly, and whether through the issuance
of debt or equity securities, borrowings from financial institutions (including,
without limitation, banks) or otherwise. If such financing involves the issuance
or sale of equity securities, the issuance or sale of debt securities, or any
other form of borrowings (including bank borrowings), Xxxxxxxx Xxxxx shall be
retained as the issuer or borrower's exclusive placement agent and/or, if such
offering is underwritten, sole underwriter with respect to such financing.
For the services it renders pursuant to this paragraph, the Company
agrees to pay Xxxxxxxx Xxxxx, or to cause Xxxxxxxx Xxxxx to be paid, fees
comparable to those customarily charged by Xxxxxxxx Xxxxx in similar
transactions, such fees to be paid no later than upon the consummation of the
relevant financing. All of the financing raised or arranged pursuant to this
paragraph shall be at prevailing market terms for similar loans or investments
made in similar circumstances and shall be made pursuant to one or more purchase
agreements, loan agreements, indentures or certificates of designation, in such
form, and containing such terms and conditions, as are customary for similar
financings arranged by Xxxxxxxx Xxxxx.
7. ATTORNEYS' FEES. If any party to this Agreement brings an action
directly or indirectly based upon this Agreement or the matters contemplated
hereby against another party, the prevailing party shall be entitled to recover,
in addition to any other appropriate amounts, its reasonable costs and expenses
in connection with such proceeding, including, but not limited to, reasonable
attorneys' fees and court costs.
8. CREDIT. Upon consummation of any Transaction, Xxxxxxxx Xxxxx may, at
its own expense, place announcements in financial and other newspapers and
periodicals (such as a customary "tombstone" advertisement) describing its
services in connection therewith.
9. MISCELLANEOUS. This Agreement shall be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, however, is intended to confer or does confer on
any person or entity, other than the parties hereto and their respective
successors and permitted assigns and, to the extent expressly set forth in
Schedule A attached hereto, the Indemnified Parties, any rights or remedies
under or by reason of this Agreement or as a result of the services to be
rendered by Xxxxxxxx Xxxxx hereunder.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect pursuant to the terms
hereof.
The Company agrees that it will be solely responsible for ensuring that
any Transaction or Acquisition complies with applicable law.
This Agreement incorporates the entire understanding of the parties
regarding the subject matter hereof, and supersedes all previous agreements or
understandings regarding the same, whether written or oral.
This Agreement may not be amended, and no portion hereof may be waived,
except in a writing duly executed by the parties.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO SUCH STATE'S RULES CONCERNING
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CONFLICTS OF LAWS. EACH OF XXXXXXXX XXXXX AND THE COMPANY (ON ITS OWN BEHALF
AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS EQUITY HOLDERS)
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATED TO OR ARISING OUT OF
THE ENGAGEMENT OF XXXXXXXX XXXXX PURSUANT TO, OR THE PERFORMANCE BY XXXXXXXX
XXXXX OF THE SERVICES CONTEMPLATED BY, THIS AGREEMENT.
We look forward to working with you on this assignment. Please confirm
that the foregoing terms are in accordance with your understanding by signing
and returning the enclosed copy of this Agreement, together with payment in the
amount of $50,000.
Very truly yours,
XXXXXXXX XXXXX XXXXXX & XXXXX CAPITAL
By: /s/ XXXX X. XXXXXX
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Xxxx X. Xxxxxx
Director
Accepted and agreed to as of July 31, 2000:
TAKE TO XXXXXXX.XXX, INC.
By: /s/ XXXXXX XXXXXXXX
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Xxxxxx Xxxxxxxx
Chief Executive Officer and President
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SCHEDULE A
This Schedule is attached to, and constitutes a material part of, that
certain agreement dated July 31, 2000, addressed to Take To Xxxxxxx.Xxx, Inc. by
Xxxxxxxx Xxxxx (the "Agreement"). Unless otherwise noted, all capitalized terms
used herein shall have the meaning set forth in the Agreement.
As a material part of the consideration for the agreement of Xxxxxxxx
Xxxxx to furnish its services under the Agreement, the Company agrees to
indemnify and hold harmless Xxxxxxxx Xxxxx and its affiliates, and their
respective past, present and future directors, officers, shareholders,
employees, agents and controlling persons within the meaning of either Section
15 of the Securities Act of 1933, as amended, or Section 20 of the Securities
Exchange Act of 1934, as amended (collectively, the "Indemnified Parties"), to
the fullest extent lawful, from and against any and all losses, claims, damages
or liabilities (or actions in respect thereof), joint or several, arising out of
or related to the Agreement, any actions taken or omitted to be taken by an
Indemnified Party (including acts or omissions constituting ordinary negligence)
in connection with the Agreement, or any Transaction or proposed Transaction
contemplated thereby. In addition, the Company agrees to reimburse the
Indemnified Parties for any legal or other expenses reasonably incurred by them
in respect thereof at the time such expenses are incurred; PROVIDED, HOWEVER,
the Company shall not be liable under the foregoing indemnity and reimbursement
agreement for any loss, claim, damage or liability which is finally judicially
determined to have resulted primarily from the willful misconduct or gross
negligence of any Indemnified Party.
If for any reason the foregoing indemnification is unavailable to any
Indemnified Party or insufficient to hold it harmless, the Company shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such losses, claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative benefits received (or anticipated to be
received) by the Company, on the one hand, and Xxxxxxxx Xxxxx, on the other
hand, in connection with the actual or potential Transaction or Acquisition and
the services rendered by Xxxxxxxx Xxxxx. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law or
otherwise, then the Company shall contribute to such amount paid or payable by
any Indemnified Party in such proportion as is appropriate to reflect not only
such relative benefits, but also the relative fault of the Company, on the one
hand, and Xxxxxxxx Xxxxx, on the other hand, in connection therewith, as well as
any other relevant equitable considerations. Notwithstanding the foregoing, the
aggregate contribution of all Indemnified Parties to any such losses, claims,
damages, liabilities and expenses shall not exceed the amount of fees actually
received by Xxxxxxxx Xxxxx pursuant to the Agreement.
The Company shall not effect any settlement or release from liability
in connection with any matter for which an Indemnified Party would be entitled
to indemnification from the Company, unless such settlement or release contains
a release of the Indemnified Parties reasonably satisfactory in form and
substance to Xxxxxxxx Xxxxx. The Company shall not be required to indemnify any
Indemnified Party for any amount paid or payable by such party in the settlement
or compromise of any claim or action without the Company's prior written
consent.
The Company further agrees that neither Xxxxxxxx Xxxxx nor any other
Indemnified Party shall have any liability, regardless of the legal theory
advanced, to the Company or any other person or entity (including the Company's
equity holders and creditors) related to or arising out of Xxxxxxxx Lokey's
engagement, except for any liability for losses, claims, damages, liabilities or
expenses incurred by the Company which are finally judicially determined to have
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resulted primarily from the willful misconduct or gross negligence of any
Indemnified Party. The indemnity, reimbursement, contribution and other
obligations and agreements of the Company set forth herein shall apply to any
modifications of the Agreement, 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
and each Indemnified Party. The foregoing provisions shall survive the
consummation of any Transaction and any termination of the relationship
established by the Agreement.
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