Xxxxxxxxx & Company, Jnc.
CORPORATE FINANCE
000 Xxxxxxx Xxx 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000
Telephone (000) 0000000 Fax (000) 000-0000
January 10, 2002
FLOOR DECOR, INC.
0000 Xxxxxxxxx Xxxx
Xxxx Xxxxxxxxxx, XX 00000
Attention: Xx. X.X. Xxxxxx, President
Gentlemen:
1. Retention. This letter agreement (the "Agreement") confirms that Floor Decor,
Inc. (the "Company"), a Delaware corporation, has engaged Xxxxxxxxx & Company,
Inc. ("Jefferies") to act as (a) exclusive financial advisor to the Company in
connection with the financial aspects of its strategic planning and the
evaluation of various potential transactions for the Company, and (b) sole
placement agent for the Company in connection with the structuring and placement
(the "Transaction") of a $10 million to $15 million loan, credit facility or
similar bank debt instrument (the "Loan") for Eagle Eye Scandinavian
Distribution Limited (the "Borrower"), a wholly owned subsidiary of the Company.
In connection with such engagement, Jefferies will provide such services as it
customarily provides in similar investment banking engagements, which may
include (i) assisting the Company in the preparation of an information
memorandum describing the Borrower and the Loan (such memorandum, including all
exhibits or supplements thereto, the "Information Memorandum"), (ii) contacting,
approaching and negotiating the financial aspects of any Transaction with
potential participants in the Transaction, and (iii) advising the Company
regarding structure of the Loan and various other financing strategies.
Jefferies understands that the Company has engaged Banyan Capital Markets, LLC,
a registered broker dealer and member of the NASD, as placement agent for the
Company in connection with a private placement of up to $3,000,000 of equity
securities of the Company and up to $2,000,000 of debt receivable financing (the
"Bridge Financing"). The Company understands and agrees that Jefferies has not
and will not participate in the Bridge Financing in any way, and Jefferies
agrees that no fee shall be payable to Jefferies in connection with the Bridge
Financing. During the term of the Agreement, the Company agrees that it will
not, directly or indirectly contact, approach or negotiate with respect to a
Loan with any person or persons, other than ~rough Jefferies as agent.
2. Information on the Company. In connection with Jefferies' activities
hereunder, the Company will furnish Jefferies and its counsel with all materials
and information regarding the business and financial condition of the Company
and the Borrower (all such information so furnished being the "Information") and
with the Information Memorandum approved for distribution to potential
participants in the Transaction. The Company recognizes and confirms that
Jefferies: (i) will use and rely solely on the Information, the Information
Memorandum and on information available from generally recognized public sources
in performing the services contemplated by this Agreement without having
independently verified the same; (ii) is authorized as the Company's exclusive
financial advisor and sole placement agent, to transmit to any potential lender
a copy or copies of the Information, the Information Memorandum, and other legal
documentation necessary or advisable in connection with the transactions
contemplated hereby; (iii) does not assume responsibility for the accuracy or
completeness of the Information, the Information Memorandum or such other
information; (iv) will not make an appraisal of any assets or liabilities of the
Company; and (v) retains the right to continue to perform due diligence on the
Company during the course of the engagement.
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3. Use of Name. The Company agrees that any reference to Jefferies in any
release, communication, or other material is subject to Jefferies' prior written
approval, which may be given or withheld in its sole discretion. If Jefferies
resigns prior to the dissemination of any such release, communication or
material, no reference shall be made therein to Jefferies, despite any prior
written approval that may have been given therefor.
4. Use of Advice. No statements made or advice rendered by Jefferies in
connection with the services performed by Jefferies pursuant to this Agreement
will be quoted by, nor will any such statements or advice be referred to, in any
report, document, release or other communication, whether written or oral,
prepared, issued or transmitted by, the Company or any person or corporation
controlling, controlled by or under common control with, the Company or any
director, officer, employee, agent or representative of any such person, without
the prior written authorization of Jefferies, which may be given or withheld in
its sole discretion, except to the extent required by law (in which case the
appropriate party shall so advise Jefferies in writing prior to such use and
shall consult with Jefferies with respect to the form and timing of disclosure).
Compensation. In payment for services rendered and to be rendered hereunder
by Jefferies, the Company agrees to pay to Jefferies as follows:
(a) In consideration for Jefferies' services as financial advisor, the Company
shall pay to Jefferies a non-refundable cash retainer fee equal to $25,000, and
a non-refundable monthly retainer equal to $10,000 per month (the '~Monthly
Retainer") for the duration of the Agreement. The first Monthly Retainer shall
be payable in cash on the first business day of the first calendar month after
the execution of Agreement and the first business day of calendar month
thereafter during the Term of this Agreement
(b) In consideration for Jefferies' services as placement agent for the Loan,
the Company shall issue to Jefferies, upon execution of this Agreement, 50,000
shares of the common stock of the Company (NASDAQ: XXXX). The Company shall
issue an additional 50,000 shares of common stock of the Company to Jefferies
upon the completion to the satisfaction of the Company of the Information
Memorandum. The Company shall issue an additional 150,000 shares of common stock
of the Company to Jefferies upon the earlier to occur of ninety days after the
first delivery of the Information Memorandum to a potential lender or the date
of placement of the Loan, whichever is sooner. The Company shall also xxxxx
Xxxxxxxxx customary registration rights.
(c) Upon placement of the Loan, the Company shall pay to Jefferies a cash fee in
an amount equal to 3.00/o of the maximum loan amount available to the Borrower
under the Loan. In addition, if within two years of the date of this Agreement
the Company or the Borrower undertakes (i) a financing, Jefferies shall be given
the right, but not the obligation, to act as lead manager, co-manager or
financing advisor for such an offering and to receive an amount of the gross
spread that is usual or customary in the circumstances for the role performed by
Jefferies (such xxxxx spread in such transactions will be mutually determined in
good faith by such company and Jefferies and shall be based on the prevailing
market for similar services); or (ii) a merger with or into, a consolidation
with, a sale of all or substantially all of its assets to, or an acquisition of
all or substantially all of the assets of, another person or group of affiliated
persons (other than the Company or its subsidiaries) in a transaction or series
of related transactions (any such transaction, a "Sale"), then Jefferies shall
be given the right, but not the obligation, to act as a financial advisor to the
Company for such transaction or transactions. The retention and compensation of
Jefferies for such subsequent transactions shall be outlined in a mutually
agreeable separate agreement or agreements not considered part of this
Agreement.
(d) In addition to the compensation to be paid to Jefferies as provided in
Sections 5(a), 5(b) and 5
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(c) hereof, without regard to whether any transaction is consummated or
this Agreement expires or is terminated, the Company shall pay to, or on behalf
of, Jefferies, promptly as billed, all fees, disbursements and out-of-pocket
expenses incurred by Jefferies in connection with its services to be rendered
hereunder (including, without limitation, the reasonable fees and disbursements
of Jefferies' counsel, reasonable travel and lodging expenses, word processing
charges, messenger and duplicating services, facsimile expenses and other
reasonable customary expenditures) which shall not exceed $10,000 without the
prior consent of the Company not to be unreasonably withheld.
(e) Jefferies may resign at any time and the Company may terminate Jefferies'
services at any time, each by giving prior written notice to the other. If this
Agreement expires, Jefferies resigns or the Company terminates Jefferies'
services for any reason, Jefferies and its counsel shall be entitled to receive
all of the amounts due pursuant to Sections 5(a), 5(b), 5(c) and 5(d) hereof up
to and including the effective date of such expiration, termination or
resignation, as the case may be. If Jefferies' services hereunder are terminated
by the Company or this Agreement expires, and the Company completes a
transaction similar to the Transaction contemplated herein within six months of
such termination or expiration, then the Company shall pay Jefferies
concurrently with the closing of such transaction in cash the fees as outlined
in Section 5(c). In addition, if the Company completes a transaction similar to
the Transaction contemplated herein within two years of such termination or
expiration with a party introduced by Jefferies, then the Company shall pay
Jefferies concurrently with the closing of such transaction in cash the fees
outlined in Section 5(c).
(f) No fee paid or payable to Jefferies or any of its affiliates under this
Agreement and the Transaction shall be credited against any other fee paid or
payable to Jefferies or any of its affiliates under another agreement or
transaction unless and until so agreed in writing by Jefferies and the Company.
6. Representations and Warranties. The Company represents and warrants to
Jefferies that (a) this Agreement has been duly authorized, executed and
delivered by the Company; and, assuming the due execution by Jefferies,
constitutes a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, and (b) the Information and
the Information Memorandum will not, when delivered nor at any time prior to the
consummation of the' Transaction, contain any untrue statement of a material
fact or omit to state a material ~ct necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Company shall advise Jefferies promptly of the occurrence of any event or any
other change prior to the consummation of the Transaction which results in the
Information or the Information Memorandum containing any untrue statement of a
material fact or omitting to state any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
7. Indemnity; Limitation of Liability.
In partial consideration of the services to be rendered hereunder the Company
shall indemnify Jefferies and certain other Indemnified Persons (as defined in
Schedule A) in accordance with Schedule A attached hereto. The Company shall not
and shall cause its affiliates and their respective directors, officers,
employees, shareholders and agents not to, initiate any action or proceeding
against Jefferies or any other Indemnified Person in connection with this
engagement or the Transaction unless such action or proceeding is based solely
upon the bad faith or gross negligence of Jefferies or any such Indemnified
Person. The parties hereto agree that Jefferies and the Indemnified Persons
shall not, and shall not be deemed to, owe any fiduciary duties to the Company
under this Agreement or otherwise.
8. Conditions. Jefferies' services to be performed hereunder are subject to
certain conditions, including, among others, (i) satisfactory completion of due
diligence on the Company by Jefferies, (ii) no adverse change in the condition
of the Company and (iii) all services to be performed by
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Jefferies hereunder shall be performed solely in jurisdictions in which
Jefferies is registered to act as a broker-dealer or where the provision of such
services by Jefferies is not in violation of applicable securities laws.
9. Survival of Certain Provisions. The indemnity and contribution agreements
contained in Schedule A to this Agreement and the provisions of Sections 2, 3,4,
5,6,7, II, 12,13, 14,15 and 18 of this Agreement and this Section 9 shall remain
operative and in full force and effect regardless of (a) any investigation made
by or on behalf of Jefferies, or by or on behalf of any affiliate of Jefferies
or any person controlling or controlled by either, (b) completion of the
Transaction, (c) the resignation of Jefferies or any termination of Jefferies'
services or (d) any amendment, expiration or termination of this Agreement, and
shall be binding upon, and shall inure to the benefit Of, any successors,
assigns, heirs and personal representatives of the Company, Jefferies, and the
Indemnified Persons.
10. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and shall be mailed or delivered (a) if to the
Company, at the address set forth above, and (b) if to Jefferies, at the offices
of Jefferies at 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxx, Executive Vice President and
General Counsel.
11. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
12. Assignment of this Agreement. This Agreement may not be assigned by either
party hereto without the prior written consent of the other, to be given in the
sole discretion of the party from whom such consent is being requested. Any
attempted assignment of this Agreement made without such consent may be void, at
the option of the non-assigning party.
13. Third Party Beneficiaries. This Agreement has been and is made solely for
the benefit of the Company, Jefferies and the other Indemnified Persons referred
to in Schedule A hereof and their respective successors, assigns, heir and
personal representatives and no other person shall acquire or have any right
under or by virtue of this Agreement.
14. Construction and Choice of Law. This Agreement, together with Schedule A,
incorporates the entire understanding of the parties and supersedes all previous
agreements relating to the subject matter hereof should they exist. This
Agreement and any issue arising out of or relating to the parties' relationship
hereunder shall be governed by, and construed in accordance with, the laws of
the State of New York, without regard to principles of conflicts of law.
15. Jurisdiction and Venue. Each party hereto consents specifically to the
exclusive jurisdiction of the federal courts of the United States sitting in the
Southern District of New York, or if such federal court declines to exercise
jurisdiction over any action filed pursuant to this Agreement, the courts of the
State of New York sitting in the County of New York, and any court to which an
appeal may be taken in connection with any action filed pursuant to this
Agreement, for the purposes of all legal proceedings arising out of or relating
to this Agreement. In connection with the foregoing consent, each party
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the court's exercise of personal jurisdiction
over each party to this Agreement or the laying of venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum. Each party further irrevocably
waives its right to a trial by jury and consents that service of process may be
effected in any manner permitted under the laws of the State of New York.
16. Headings. The section headings in this Agreement have been inserted as
a matter of
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convenience of reference and are not part of this Agreement.
17. Press Announcements. At any time after the consummation or other public
announcement of the placement of the Loan, Jefferies may place an announcement
in such newspapers and publications as it may choose, stating' that Jefferies
has acted as financial advisor to the Company in connection with the Transaction
and/or such transactions.
18. Amendment. This Agreement may not be modified or amended except in a
writing duly executed by the parties hereto.
19. Term. Except as otherwise provided herein, this Agreement shall
commence as from the date of this letter Agreement to a date of six months
thereafter, unless extended by mutual consent of the parties (the "Term").
20. Certain Offering Procedures. In the event the contemplated Transaction is
expanded or modified to include any placement of securities by the Company, the
Company agrees that, and as a condition to the closing of the Transaction, it
will furnish to Jefferies and to the investors in the Transaction an opinion of
its outside counsel reasonably satisfactory to Jefferies to the effect that (i)
the Transaction and all other prior private offerings of securities of the
Company would not result in integration with the Transaction or, if integration
would so result, that such integration would not cause the Transaction not to be
an exempt transaction and (ii) that all prior issuances of the Company's
securities have been issued in compliance with federal and state securities
laws. The Company agrees that it shall cause any other opinion of its outside
counsel delivered to any investors in the Transaction also to be addressed and
delivered to Jefferies, or to cause such outside counsel to deliver to Jefferies
a letter authorizing it to rely upon such opinion.
Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms and conditions set forth
herein, whereupon this letter and your acceptance shall constitute a binding
agreement between the Company and Jefferies as of the date first above written.
Sincerely,
XXXXXXXXX & COMPANY, INC.
By
Name: Xxxxxxxx X. Xxxxxx
Title: Executive Vice President
Accepted and Agreed:
FLOOR DECOR, INC.
X.X. Xxxxxx
EAGLE EYE SCANDINAVIANAN DISTRIBUTION LIMITED
Xxxx Xxxxx
Director
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