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EXHIBIT 10.16
[LETTERHEAD OF XXXXXXX XXXXXX & CO.]
The Directors
Knowles Electronics Inc
0000 Xxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxx
00000
28 June 1999
Dear Sirs
SERVICE AGREEMENT
We refer to the Recapitalisation Agreement dated 23rd June 1999 in relation to
which Xxxxxxx Xxxxxx & Co Managers Limited ("DHCM") has agreed to assist you,
and you have agreed to work exclusively with DHCM in the recapitalisation (the
"Recapitalisation") of certain businesses comprising the Xxxxxxx Electronics Inc
("the Recapitalised Businesses"). For arranging the purchase of shares or assets
in various legal entities, we have undertaken to negotiate the details of the
sale and purchase agreement with Xxxxxxx family ("the Vendor") at a purchase
price of US$530 million.
In consideration of DHCM providing these services to Xxxxxxx Electronics Inc, we
would now like to confirm our agreement concerning the fees to be paid to DHCM
upon the successful completion of the Recapitalisation.
1. Xxxxxxx Electronics Inc intends to acquire 90% of the Vendor's interests
in the Recapitalised Businesses.
2. DHCM has undertaken to provide Xxxxxxx Electronics Inc with the following
services:
- Advising and supervising the financial, commercial, environmental,
tax and insurance due diligence of the business to be acquired using
third party advisors where appropriate;
- Supervising the applications to the individual jurisdictions for
competition authorities clearance;
- Advising on the setting up of appropriate management incentive
arrangements for senior management;
- Mediating and arranging the purchase of the business activities as
described above including negotiating Letters of Intent, Purchase
Contract, and agreeing all associated documentation with the Vendor;
and
- Advising and assisting in the establishment of an appropriate tax
structure for Xxxxxxx Electronics Inc and its subsidiaries.
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3. Xxxxxxx Electronics Inc has agreed to pay DHCM a flat fee for the services
mentioned above at an amount of US$3million (plus VAT if applicable). This
fee shall be due to DHCM only upon a successful completion of the
Recapitalisation, and is subject to the provisions below.
The fee shall become due and payable at the completion of the
Recapitalisation.
4. Xxxxxxx Electronics Inc has undertaken and agreed that it will fully
reimburse DHCM for its out-of-pocket expenses (including VAT to the extent
that it is non-recoverable for DHCM); however, out-of-pocket expenses
(including non-recoverable VAT) shall only be chargeable insofar as the
aggregate amount of such expenses exceeds the fee payable above. Xxxxxxx
Electronics Inc has agreed to pay such an amount either in total or in
instalments when invoiced.
5. In addition, Xxxxxxx Electronics Inc has agreed that it will fully
reimburse DHCM for all expenses of all professional advisers engaged by
DHCM for the purpose of undertaking the activities listed above and
otherwise in connection with the Recapitalisation (including VAT to the
extent that it is non-recoverable for DHCM). Xxxxxxx Electronics Inc will
pay such expenses either in total or in instalments when invoiced. For the
avoidance of doubt, DHCM's professional advisers shall include, inter
alia, PricewaterhouseCoopers (financial due diligence and tax);
Environmental Resource Management (environmental due diligence); Xxxxxxxx
& Xxxxx (Co-ordination of legal due diligence, senior facilities
documentation, Recapitalisation documentation, shareholders agreement
documentation subordinated loan documentation); Xxxxxx Coroon (insurance
due diligence); Frost & Xxxxxxxx (technical due diligence) and such other
legal, tax, accounting, environmental and other consultant professional
advisers as DHCM may engage from time to time in the course of the
Recapitalisation.
6. DHCM has undertaken and will continue to undertake to keep secret and
confidential all information which we have received or which we will
receive in rendering services stipulated under this agreement except as
required under DHCM's obligations relating to Xxxxxxx Xxxxxx & Co Funds.
7. Xxxxxxx Electronics Inc has agreed and confirms such agreement that in
fulfilling its obligations under this agreement, DHCM is entitled to enter
into sub-contractor agreements with third parties to which DHCM passes
over its confidentiality obligations as mentioned above.
8. This agreement is governed by the laws of England.
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Please signify your agreement to the above terms by countersigning the attached
copy of this letter and sending the signed version back to us.
/s/ Xxx Xxxxx
For and on behalf of
Xxxxxxx Xxxxxx & Co Managers Limited
We agree with the contents of this letter
/s/ Reg X. Xxxxxxx
Xxxxxxx Electronics Inc
