Exhibit 10
May 20, 2002
Xxxxxxx X. Xxxxxxx
Chairman
CRIIMI MAE Inc.
00000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Dear Xxxx:
This agreement ("Agreement") sets forth the terms of the engagement by CRIIMI
MAE Inc. (the "Company") of Friedman, Billings, Xxxxxx & Co., Inc. ("FBR" or the
"Advisor"), pursuant to which FBR shall serve as the financial advisor to the
Company in connection with evaluating strategic alternatives including, but not
limited to the potential sale or recapitalization of all or substantially all of
the assets and/or liabilities or capital stock of the Company regardless of how
the transaction is structured (a "Sale Transaction").
1. Scope of Services. In connection with the analysis and pursuit of the
above mentioned Sale Transaction, FBR will, as the Company's financial advisor
and investment banker, at the Company's request, undertake one or more of the
following activities (hereinafter referred to as the "Advisory Services"):
(i) Perform a complete and thorough analysis of the business,
operations, properties, financial condition and prospects of the
Company by providing a sufficient number of experienced FBR staff
to conduct such analysis, it being understood that FBR shall, in
the course of such analysis, rely entirely upon the completeness
and accuracy of publicly available information and information
supplied by the Company, its directors, officers, employees,
agents, independent accountants and counsel, without independent
investigation;
(ii) Prepare an analysis of recent merger or similar transactions
(including sales of substantially all of the assets of a company
("Extraordinary Transactions")) in which the acquired company may
be considered comparable to the Company with respect to one or
more of the following characteristics: asset size, financial
condition, profitability and market area;
(iii) Assess current market conditions for comparable mergers or
Extraordinary Transactions in light of current economic factors,
equity market conditions and the industry environment, and present
information concerning such market conditions to the Company;
(iv) Identify and profile potential investor, purchaser or merger
candidates for the Company or its assets (each a "Purchaser
Entity"); analyze the historical stock price and financial
performance of selected Purchaser Entities; advise on the
transaction capacity and appropriate transaction structure for
each Purchaser Entity;
(v) With prior knowledge, input and approval of the Company's
Board of Directors, seek proposals for a Sale Transaction from a
select number of Purchaser Entities;
(vi) Advise and assist the Company in evaluating the various
forms and structures of a proposed Sale Transaction, considering
in each case, as appropriate, the historical and prospective
earnings of each potential acquirer, the pro forma financial
impact and earnings per share dilution of the proposed Sale
Transaction to the potential acquirer, the pro forma change for
the Company's shareholders in earnings and dividends per share,
the liquidity and trading characteristics of the securities to be
received by the Company's shareholders and other information
deemed relevant by FBR;
(vii) Participate and assist the Company with: (i) discussions
between the Company and a Purchaser Entity; (ii) "due diligence"
investigations of such Purchaser Entity; and (iii) negotiation of
a letter of intent, memorandum of understanding and/or definitive
agreement with a Purchaser Entity;
(viii) Counsel the Company as to strategy and tactics for negotiating
with potential acquirers and assist the Company in such
negotiations;
(ix) Assuming an agreement in principle is reached for a proposed Sale
Transaction, assist the Company together with its counsel
in negotiating a definitive agreement;
(x) If appropriate, conduct presentations to the Board of
Directors regarding potential Purchaser Entities and Sale
Transactions; render an oral and written opinion to the Board of
Directors as to whether or not the exchange ratio, in the case of
an exchange of common stock, or the financial consideration, in
the case of cash and other securities, to be received in the
proposed Sale Transaction (including a series of related
transactions) is fair, from a financial point of view, to the
shareholders of the Company at the time of execution of an
agreement with a Purchaser Entity, with an update thereof at the
time proxy materials are mailed to the Company's shareholders with
respect to approval of such agreement, or as otherwise required by
the definitive agreement with the Purchaser Entity (a "Fairness
Opinion"); and
(xi) Such other financial advisory and investment banking
services as are customary in engagements of the type contemplated
hereby and as may be reasonably agreed upon by the Company and
FBR.
The Company acknowledges that all advice (written or oral) given by FBR to
the Company is intended solely for the benefit and use of the Company (including
its management, directors, attorneys, accountants, and advisors). Other than to
the extent reflected in the meeting minutes of the Board of Directors, or as may
be required by law or regulation (including, without limitation, the proxy rules
under the federal securities laws), no advice (written or oral) of FBR hereunder
shall be used, reproduced, disseminated, quoted or referred to at any time, in
any manner, or for any purpose, nor shall any public written references to FBR
be made by the Company except for the public announcement of this engagement (or
its management, directors or attorneys), without the prior written consent by
FBR.
The Company's Board of Directors shall use the Fairness Opinion solely in
connection with their consideration of the Sale Transaction, and (ii) the
Company will not furnish any Fairness Opinion or other material prepared by the
Advisor to any other person or persons or use or refer to any Fairness Opinion
for any other purposes without the prior written approval of the Advisor.
Notwithstanding the foregoing, the Advisor acknowledges that any such Fairness
Opinion, at Company's option, may be referred to and reproduced in its entirety
in proxy materials filed with the Securities and Exchange Commission and sent to
the Company's stockholders for their consideration in connection with the
solicitation of approval for a Sale Transaction and may be required by the
Company to be addressed to the shareholders of the Company as well as the Board
of Directors.
The Advisor and its affiliates are engaged in securities trading, brokerage
activities and private equity investments, as well as providing investment
banking and financial advisory services. In the ordinary course of such
activities consistent with law, they may at any time hold long or short
positions, and may trade or otherwise effect transactions, for their account or
the accounts of customers, in debt or equity securities of the Company and
potential Purchaser Entities. Nothing in this Agreement shall be construed to
prohibit or limit the ability of FBR or its affiliates from pursuing,
investigating, analyzing or engaging in investment banking, financial advisory
and other business relationships with entities other than the Company ("Other
FBR Clients"), notwithstanding that such entities may be engaged in a business
which is similar to the business of the Company, and notwithstanding that such
entities may have customers, or potential customers, similar or identical to the
Company's, or may have been or may be identified as potential merger or
acquisition targets or potential candidates for some other business combination,
cooperation or relationship. Notwithstanding anything in this paragraph, FBR
will ensure that confidential and proprietary information provided by or on
behalf of the Company to FBR or its representatives will not be provided by FBR
to Other FBR Clients who are involved in such activities. The Company expressly
acknowledges and agrees that it does not claim any proprietary interest in the
identity of any other entity in its industry or otherwise, and that the identity
of any such entity is not confidential information.
2. Compensation. In connection with providing the Company with the
Advisory Services set forth above, FBR will be compensated by the Company as
follows:
(a) Upon the execution of this Agreement, the Company will remit to FBR a
nonrefundable initial fee of $250,000.
(b) Upon the beginning of each month subsequent to the signing of this
Agreement, the Company shall remit to FBR a nonrefundable monthly fee of
$100,000.
In the event that (i) the Company requests FBR to provide a written Fairness
Opinion and (ii) FBR provides such written Fairness Opinion in a form reasonably
satisfactory to the Company, FBR shall receive a cash fee equal to 0.10% of the
Total Consideration (as herein after defined) proposed to be paid for such Sale
Transaction. This fee shall be due and payable on delivery of the written
Fairness Opinion. In the event such Sale Transaction that is the subject of the
written Fairness Opinion rendered in accordance with the first sentence of this
paragraph is consummated, FBR shall receive a cash fee equal to 0.30% of the
Total Consideration paid for the Sale Transaction. Should the Company request a
written Fairness Opinion from a financial advisor other than FBR, FBR would be
entitled to a cash fee of $500,000 provided however, that such Fairness Opinion
is reasonably satisfactory to the Company, is provided by such other party and
the subject Sale Transaction is consummated and FBR has not received other fees
pursuant to this subparagraph.
For purposes of Paragraph 2(c) above, Total Consideration for the Sale
Transaction shall be either (i) in the case of a merger, consolidation or
similar transaction, the value of the consideration paid for the Company or (ii)
in the case of a sale of the Company's assets, the consideration paid for such
assets, but not including any accrued interest paid by the purchaser, plus the
value of any funded recourse debt of the Company assumed by the purchaser..
(d) The Company agrees from time to time upon written request
from FBR, to reimburse FBR for all reasonable travel, legal, accounting and
other out-of-pocket expenses incurred in performing the services hereunder,
which expenses shall not exceed $20,000, without the prior approval of the
Company. Such expenses shall be reimbursed to FBR within 30 days of the
Company's receipt of such written request.
3. Confidential Review. FBR and its agents and counsel will be accorded
access to and may examine documents, records and other materials and information
of the Company and its subsidiaries as FBR reasonably deems appropriate to
perform its obligations hereunder. FBR shall keep all such information, to the
extent confidential and proprietary to the Company, confidential except to the
extent disclosure is required by any judicial, administrative or self-regulatory
agency or organization. In the event that FBR is legally required to make such
disclosure, FBR and the Company shall consult and cooperate with one another in
connection
with the preparation and disclosure of such information. The following
information shall not be deemed confidential or proprietary:
(a) Information that at the time of disclosure, or after
disclosure, is or subsequently becomes generally available to the public or
within the industries in which the Company or FBR and its affiliates conduct
business, other than as a result of a breach by FBR of its obligations under
this Agreement;
(b) Information that prior to or at the time of disclosure by
the Company, was already in the possession of FBR or its affiliates (provided
that FBR or its affiliates, at the time of such disclosure was not subject to a
non-disclosure obligation relating to such information including any
non-disclosure obligation under applicable "Xxxxxxx Xxxxxxx" laws and
regulations);
(c) Information that at the time of disclosure or subsequent to
disclosure, is obtained by FBR or its affiliates from a third party who is
lawfully in possession of the information and who is not in violation of any
contractual, legal or fiduciary obligation to the Company with respect to that
information; or
(d) Information that is or was independently developed by FBR or
its affiliates from information lawfully obtained by FBR or its affiliates from
parties lawfully in possession of such information and who are not in breach of
any contractual, legal or fiduciary obligation to the Company with respect to
the information.
The Company has furnished and will continue to furnish or cause to be
furnished to FBR such information as FBR believes appropriate to its assignment
(all information so furnished being the "Information"). The Company recognizes
and confirms that FBR: (a) will use and rely primarily on the Information and on
information available from generally recognized public sources in performing the
services contemplated by this Agreement without having independently verified
the same; (b) does not assume responsibility for the accuracy or completeness of
the Information and such other information; and (c) will not make an appraisal
of any assets or liabilities of the Company or a Purchaser Entity or any of
their market competitors.
4. Term. This Agreement and the retention of FBR hereunder shall
remain in full force and effect for three months from the date hereof provided,
however, the term will be renewable for one additional three (3) month term
unless the Company terminates this Agreement in writing two (2) weeks prior to
expiration of the initial three-month term. If the Company, within the six
months following the termination of this Agreement, enters into an agreement
with another financial advisor and requests and receives a written Fairness
Opinion from that financial advisor that is in a form reasonably satisfactory to
the Company, the Company would owe FBR a cash fee of $500,000, provided however,
that no such fee with respect to a Sale Transaction shall be required if such
Sale Transaction is not consummated or if FBR has already been paid a fee
pursuant to paragraph 2(c) above. The termination of this Agreement shall not
relieve the
Company or FBR from the provisions of this Agreement relating to
indemnification, limitation of liabilities, contribution, settlement, the
provisions relating to the payment of fees and expenses, confidentiality, the
status of FBR as an independent contractor, the limitation on to whom FBR shall
owe any duties and the waiver of the right to trial by jury in this Agreement.
5. Independent Contractor. The Company acknowledges and agrees that it
is a sophisticated business enterprise and that FBR has been retained pursuant
to this Agreement to act as financial advisor to the Company solely with respect
to the Sale Transaction. In such capacity, FBR shall act as an independent
contractor, and any duties of FBR arising out of its engagement pursuant to this
Agreement shall be contractual in nature and shall be owed solely to the
Company. Each party disclaims any intention to impose any fiduciary duty on the
either.
6. Announcement. If a Sale Transaction is completed, the Company
acknowledges and agrees that FBR may, at its option and expense, place an
announcement in such newspapers and periodicals as it may choose, stating that
FBR has acted as the financial advisor to the Company in connection with the
Sale Transaction. Other than announcements consistent with the preceding
sentence neither party shall make any public announcement relating to the
content of this agreement or any proposed sale or transaction in the absence of
mutual written agreements by the parties regarding the content and timing of
such announcement, except as may otherwise be required by applicable law or
governmental regulation, including the federal securities laws, as determined by
the Company in its sole and absolute discretion.
7. Indemnification, Contribution, and Limitation of Liability. The
Company agrees to indemnify FBR and its controlling persons, representatives and
agents in accordance with the indemnification provisions set forth in Appendix
I, and agrees to the other provisions of Appendix I, which is incorporated
herein by this reference, regardless of whether the proposed Sale Transaction is
consummated.
8. Beneficiaries. This Agreement shall inure to the sole and exclusive benefit
of FBR and the Company and the persons referred to in Appendix I and their
respective successors and representatives. The obligations and liabilities
under this Agreement shall be binding upon FBR and the Company.
9. Amendments. This Agreement may be modified or amended, or its provisions
waived, only in writing signed by the person or persons against whom
enforcement of the modification, amendment or waiver is sought.
10. No Commitment. This Agreement does not and will not constitute any
agreement, commitment or undertaking, express or implied on the part of FBR or
any affiliate to purchase or to sell any securities or to provide any
financing and does not ensure the successful arrangement or completion of a
Sale Transaction.
11. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties and supersedes and cancels any and all prior or
contemporaneous arrangements, understandings and agreements, written or
oral, between them relating to the subject matter hereof.
12. Severability. If any portion of this Agreement shall be held or made
unenforceable or invalid by a statute, rule, regulation, decision of a tribunal
or otherwise, the remainder of this Agreement shall not be affected thereby and
shall remain in full force and effect, and, to the fullest extent, the
provisions of the Agreement shall be severable.
13. Governing Law; Waiver of Trial by Jury. This Agreement, and the
rights and obligations of the parties hereto, shall be governed by and construed
in accordance with Maryland law (without regard to any rules or principles of
conflicts of law that might look to any jurisdiction outside of the State of
Maryland). Any dispute arising hereunder shall be brought before a court in
Maryland.
EACH OF THE PARTIES HERETO WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERACTION (WHETHER BASED UPON CONTRACT, OR OTHERWISE) RELATED
TO OR ARISING OUT OF THE ENGAGEMENT PURSUANT TO, OR THE PERFORMANCE OF THE
SERVICES CONTEMPLATED BY, THIS AGREEMENT.
14. Waiver, Amendment and Modification; Headings. No waiver, amendment or
other modification of this Agreement shall be effective unless signed in writing
by each of the parties hereto. The headings used herein are for ease of
reference only and shall not be used to construe the meaning of this Agreement.
If the foregoing terms correctly set forth our agreement, please sign and return
to us a duplicate copy of this Agreement. We look forward to working with you
toward the successful conclusion of this engagement and continuing to develop a
long-term relationship with the Company.
Very truly yours,
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
By: /s/N. Xxxxx Xxxxx
---------------------------------
N. Xxxxx Xxxxx
Managing Director
Confirmed and accepted as of
this 20th day of May, 2002:
CRIIMI MAE Inc.
By /s/Xxxxxxx X. Xxxxxxx
---------------------------
C.O.B.
APPENDIX I
The Company agrees to indemnify and hold harmless FBR and its affiliates
(as defined in Rule 405 under the Securities Act of 1933, as amended) and their
respective directors, officers, employees, agents and controlling persons (FBR
and each such person being an "Indemnified Party") from and against all losses,
claims, damages and liabilities (or actions, including shareholder actions, in
respect thereof), joint or several, to which such Indemnified Party may become
subject under any applicable federal or state law, or otherwise, which are
related to or result from the performance by FBR of the services contemplated by
or the engagement of FBR pursuant to, this Agreement and will promptly reimburse
any Indemnified Party for all reasonable expenses (including reasonable counsel
fees and expenses) as they are incurred in connection with the investigation of,
preparation for or defense arising from any threatened or pending claim, whether
or not such Indemnified Party is a party and whether or not such claim, action
or proceeding is initiated or brought by the Company. The Company will not be
liable to any Indemnified Party under the foregoing indemnification and
reimbursement provisions, (i) for any settlement by an Indemnified Party
effected without its prior written consent (not to be unreasonably withheld); or
(ii) to the extent that any loss, claim, damage or liability is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted primarily from FBR's willful misconduct or gross negligence. The
Company also agrees that no Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to the Company or its
security holders or creditors related to or arising out of the engagement of FBR
pursuant to, or the performance by FBR of the services contemplated by, this
Agreement except to the extent that any loss, claim, damage or liability is
found in a final, non-appealable judgment by a court of competent jurisdiction
to have resulted primarily from FBR's willful misconduct or gross negligence.
Notwithstanding the forgoing, the Company shall not be liable to any
Indemnified Person hereunder for the costs of any investigations or similar
expenses undertaken by such Indemnified Person with respect to a third party
claim prior to the commencement of a legal action by such third party for which
indemnification hereunder may be sought, but after commencement of such case the
Indemnified Person shall be entitled to indemnification as otherwise
contemplated hereby. The Company shall not be liable to any Indemnified Party
for any loss (whether direct or indirect) of profit, business opportunity or
anticipated savings or indirect or consequential loss suffered by the
Indemnified Party or any punitive damages.
Promptly after receipt by an Indemnified Party of notice of any intention
or threat to commence an action, suit or proceeding or notice of the
commencement of any action, suit or proceeding, such Indemnified Party will, if
a claim in respect thereof is to be made against the Company pursuant hereto,
promptly notify the Company in writing of the same. In case any such action is
brought against any Indemnified Party and such Indemnified Party notifies the
Company of the commencement thereof, the Company may elect to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party, and an
Indemnified Party may employ counsel to participate in the defense of any such
action provided, that the employment of such counsel shall be at the Indemnified
Party's own expense, unless (i) the employment of such
counsel has been authorized in writing by the Company, (ii) the Indemnified
Party has reasonably concluded (based upon advice of counsel to the Indemnified
Party) that there may be legal defenses available to it or other Indemnified
Parties that are different from or in addition to those available to the
Company, or that a conflict or potential conflict exists (based upon advice of
counsel to the Indemnified Party) between the Indemnified Party and the Company
that makes it impossible or inadvisable for counsel to the Indemnifying Party to
conduct the defense of both the Company and the Indemnified Party (in which case
the Company will not have the right to direct the defense of such action on
behalf of the Indemnified Party), or (iii) the Company has not in fact employed
counsel reasonably satisfactory to the Indemnified Party to assume the defense
of such action within a reasonable time after receiving notice of the action,
suit or proceeding, in each of which cases the reasonable fees, disbursements
and other charges of such counsel will be at the expense of the Company;
provided, further, that in no event shall the Company be required to pay fees
and expenses for more than one firm of attorneys representing Indemnified
Parties unless the defense of one Indemnified Party is unique or separate from
that of another Indemnified Party subject to the same claim or action. Any
failure or delay by an Indemnified Party to give the notice referred to in this
paragraph shall not affect such Indemnified Party's right to be indemnified
hereunder, except to the extent that such failure or delay causes actual harm to
the Company, or prejudices its ability to defend such action, suit or proceeding
on behalf of such Indemnified Party.
If the indemnification provided for in this Agreement is for any reason
held unenforceable by an Indemnified Party, the Company agrees to contribute to
the losses, claims, damages and liabilities for which such indemnification is
held unenforceable (i) in such proportion as is appropriate to reflect the
relative benefits to the Company, on the one hand, and FBR on the other hand, of
the Sale Transaction contemplated by the Agreement whether or not the Sale
Transaction is consummated or, (ii) if (but only if) the allocation provided for
in clause (i) is for any reason unenforceable, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
but also the relative fault of the Company, on the one hand and FBR, on the
other hand, as well as any other relevant equitable considerations. The Company
agrees that for the purposes of this paragraph the relative benefits to the
Company and FBR of the Sale Transaction as contemplated shall be deemed to be in
the same proportion that the total value received or contemplated to be received
by the Company or its shareholders, as the case may be, as a result of or in
connection with the Sale Transaction, bear to the fees paid or to be paid to FBR
under this Agreement. Notwithstanding the foregoing, the Company expressly
agrees that FBR shall not be required to contribute any amount in excess of the
amount by which fees paid FBR hereunder (excluding reimbursable expenses),
exceeds the amount of any damages which FBR has otherwise been required to pay.
The Company agrees that without FBR's prior written consent, which shall
not be unreasonably withheld, it will not settle, compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
in respect of which indemnification could be sought under the indemnification
provisions of this Agreement (in which FBR or any other Indemnified Party is an
actual or potential party to such claim, action or proceeding), unless such
settlement, compromise or consent includes an unconditional release of each
Indemnified Party from all liability arising out of such claim, action or
proceeding.
In the event that an Indemnified Party is requested or required to appear
as a witness in any action brought by or on behalf of or against the Company in
which such Indemnified Party is not named as a defendant, the Company agrees to
promptly reimburse FBR on a monthly basis for all reasonable out-of-pocket
expenses incurred by it in connection with such Indemnified Party's appearing
and preparing to appear as such a witness, including, without limitation, the
reasonable fees and disbursements of its legal counsel.
If multiple claims are brought with respect to at least one of which
indemnification is permitted under applicable law and provided for under this
Agreement, the Company agrees that any judgment or arbitrate award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the judgment or arbitrate award
expressly states that it, or any portion thereof, is based solely on a claim as
to which indemnification is not available.
Confirmed and accepted as of
this 20th day of May, 2002:
CRIIMI MAE Inc.
By /s/Xxxxxxx X. Xxxxxxx
------------------------------
Xxxxxxx X. Xxxxxxx
C.O.B.
