[LETTERHEAD]
August 6, 1997
PRIVILEGED AND CONFIDENTIAL
Geographics, Inc.
0000 Xxxxx Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
Chairman of the Board, President and
Chief Executive Officer
Gentlemen:
This letter agreement (the "Agreement") will confirm the
understanding between Geographics, Inc. (the "Company") and
Cruttenden Xxxx Incorporated ("CRI" or the "Advisor") pursuant to
which the Company has retained CRI to render financial advisory
services to the Company, on the terms and subject to the conditions
set forth herein, in connection with: 1) an assessment of its
strategic financing options and at the Company's option; 2) the sale
of all of, or a controlling interest in, any or all of the Company's
operations by way of a merger, sale of assets or stock, or other
significant transaction involving all or substantially all of, or a
controlling interest in, the business, assets or stock of the Company
or any of its operations or subsidiaries or any financing that provides
additional funds to the Company (a "Transaction").
1. RETENTION. The Company hereby retains the Advisor on an
exclusive basis and the Advisor agrees to act as financial advisor
to the Company in connection with a Transaction or potential
Transaction. This Agreement shall expire on February 28, 1998 (the
"Expiration Date"), unless extended by mutual agreement of the
Company and the Advisor. Subject to the terms and conditions of this
Agreement, the nature and scope of the Advisor's efforts shall be
such as CRI deems appropriate. In connection with its advisory work,
the Advisor will evaluate the Company's strategic financing options
and will perform promptly, if appropriate, the following:
(a) an analysis of the Company, its business and its future
operating prospects;
(b) an analysis of the objectives of the Company and its
shareholders' objectives, analyzing the priorities and
tradeoffs associated with such objectives;
(c) an analysis of values to be received in connection with a
possible Transaction;
(d) delivery of a written summary of strategic financing
options;
(e) assistance with the preparation of a confidential
memorandum describing the Company and distribution of such a
memorandum to potential participants in a Transaction;
provided that all potential participants to be contacted by
CRI shall have been approved by the Company in advance in
writing (the "Prospective Purchasers");
(f) the identification, the introduction to, and on-going
discussions and negotiations with parties to a Transaction
described in (d) above;
(g) assistance with other matters related to closing a
Transaction; and
(h) other studies, analyses and advisory services as deemed
appropriate.
The Company agrees to retain its own legal counsel and
accountants for any necessary legal and tax advice.
2. COMPENSATION. As compensation for services rendered and
to be rendered hereunder by the Advisor, the Company agrees, subject
to the provisions of paragraph 6 below, to pay the Advisor (or cause
the Advisor to be paid) non-refundable cash fees as follows:
(a) The Advisor shall be entitled to receive a monthly
retainer fee payable in arrears in the amount of $20,000 per
month. The first such payment shall be paid upon the
acceptance of this letter.
(b) Upon the closing of any financing (including cash
investment or loan) with parties with whom the Company has
already initiated discussions, the Company shall pay to
CRI a cash fee of $100,000. The Company shall promptly
supply CRI a list of such entities in writing. Any monthly
retainer fees paid prior to such closing shall be credited
against such
$100,000. Such fee shall be $100,000 irrespective of the
number of participants in such financing.
(c) Upon execution of a letter of intent or definitive purchase
agreement with respect to any Transaction except that
described in paragraph (b) above, which is executed by an
officer or director of the Company authorized to execute
such a letter or agreement on behalf of the Company, the
Company will pay CRI $100,000 for the initial Transaction
and $50,000 for any Transaction following the payment of any
Success Fee by the Company to CRI. Any monthly retainers
fees paid by the Company to CRI that have not already
been credited against fees due under paragraph (b) above
shall be credited against such $100,000 up to the full
amount due under this paragraph (c). No such fee shall be
payable for parties from whom the Company has received a
letter of intent as of the date or the execution of this
letter. Such letters are appended to this letter as
Exhibit II.
(d) In the event that a Transaction is closed (except as
specified in Section 6 hereof), the Company will pay or
cause to be paid in cash to CRI, as provided herein, a
Success Fee (the "Success Fee") of $200,000 for each
Transaction for which payment has been made under paragraph
(c) and $300,000 for Transactions for which no payment has
been made under paragraph (c). Up to three monthly retainer
fees that have not already been credited against other fees
payable under this Agreement shall be credited against the
Success Fee.
(e) In addition to the compensation to be paid to the Advisor
as provided above, the Company shall pay to, or on behalf of
the Advisor, promptly as billed, all reasonable
out-of-pocket expenses (including all reasonable fees and
expenses of Advisor's counsel, and messenger, overnight
courier, fax, telephone, copying, printing and travel
related expenses) incurred by the Advisor in connection with
the services to be rendered hereunder, not to exceed $20,000
without the approval of the Company.
3. INDEMNITY. As partial consideration for the services to
be rendered by CRI, the Company agrees to indemnify CRI and the other
Indemnified Persons as set forth in Exhibit I hereto, which is
incorporated herein and made a part hereof.
4. COVENANTS OF THE COMPANY. The Company agrees as follows:
(a) This Agreement is duly authorized and validly executed and
delivered by the Company, and constitutes a legal, valid and
binding agreement of the Company.
(b) In connection with Advisor's activities hereunder, the
Company agrees to furnish the Advisor with all information
concerning the Company and its business, prospects,
operations, and financial results and condition that the
Advisor reasonably deems appropriate. Such information will
include a memorandum, any amendments or supplements (hereto,
various corporate reports and any other materials used in
connection with consummating the Transaction (collectively,
the "Offering Materials"). All of the Offering Materials,
and any other documents supplied to CRI or Prospective
Purchasers shall have been prepared, reviewed and approved
by the Company and shall be, to the Company's best
knowledge, accurate and complete in all material respects.
Subject to such review and approval of the Offering
Materials by the Company, CRI is hereby authorized and
directed as the company's exclusive agent to transmit to
Prospective Purchasers a copy or copies of the Offering
Materials and any other documents delivered to CRI or
Prospective Purchasers by or on behalf of the company in
connection with the performance of CRI's services hereunder
or the consummation of a Transaction. The Company shall
promptly advise CRI of any material development affecting
the Company or the Offering Materials. In addition, the
Company agrees to provide the Advisor with access to the
company's accountants, counsel, consultants and other
appropriate agents and representatives. The Company
acknowledges that the Advisor may rely upon the completeness
and accuracy of information and data furnished to it by the
Company's officers, directors, employees, agents and
representatives without an independent verification of such
information and data or an appraisal of the Company's
assets.
(c) In order to coordinate the efforts to effect a Transaction
satisfactory to the Company and its shareholders, the
Company and its shareholders, officers, directors, and
employees will not initiate any discussions with respect to
a potential Transaction except with the Advisor. Also, the
Company hereby confirms and acknowledges that the only
discussions with, or inquiries from, Prospective Purchasers
with respect to a potential transaction, that have occurred
prior to the date of this Agreement are from the parties
listed on Exhibit II, which is attached hereto. The Company
hereby agrees to permit the Advisor to assist the Company in
any negotiations with the Prospective Purchasers listed on
Exhibit II. In the event that the Company and its
shareholders, officers, directors, and employees receive any
other inquiry or are otherwise aware of the interest of any
other third party concerning the availability of the company
for acquisition, they will promptly inform the Advisor of
the Prospective Purchaser and its interest and permit the
Advisor to assist the Company in any negotiations with such
Prospective Purchaser.
5. CONFIDENTIALITY. Except to the extent authorized by the
Company or required by any Federal or state law, rule or regulation or
any decision or order of any court or regulatory authority, the Advisor
agrees that it will refrain from disclosing to any person, other than to
any agents, attorneys, accountants, employees, officers, and directors of
the Advisor who need to know the information in connection with the
Advisor's engagement hereunder, any confidential information which has
not become public about the Company that the Advisor receives from the
Company or its agents, attorneys or accountants in connection with the
services rendered hereunder. Any advice rendered by CRI hereunder shall
not be disclosed publicly in any manner without CRI's written approval
and will be treated by the Company and CRI as confidential. In addition,
CRI's advice is not intended for, and should not be relied upon by, other
third parties. The Company also agrees that any reference to the Advisor
or any affiliate of the Advisor in any release or communication to any
party outside the Company is subject to the Advisor's prior approval,
which approval shall be unreasonably withheld or delayed. If the
Advisor resigns or is terminated prior to any release or communication,
no reference shall be made therein to the Advisor without the Advisor's
prior written permission.
6. TERMINATION. This Agreement may be terminated by either
the Company or CRI at any time prior to the Expiration Date upon written
notice to the other party. In either event, the Company shall continue
to be liable to CRI for any unpaid compensation earned or otherwise to be
paid to CRI pursuant to this Agreement and provided that the expense
reimbursement provisions contained in paragraph 2 herein, and the
indemnity, contribution and expense reimbursement provisions contained in
paragraph 3 and Exhibit I shall remain operative and in full force and
effect regardless of termination, expiration, or consummation of a
Transaction.
Also, if this Agreement expires or is terminated prior to consummation of
a Transaction and within 18 months after expiration or termination the
Company consummates a Transaction with a Prospective Purchaser for any
group that includes such Prospective
Purchaser or affiliate of such Prospective Purchaser, then the Company
hereby agrees to pay CRI compensation in accordance with paragraph 2 of this
Agreement. For purposes of computing the fee payable pursuant to the
preceding sentence, XXX agrees to provide the Company with a written list
within 30 business days of expiration or termination of all Prospective
Purchasers with whom the Advisor had discussions, on behalf of the Company,
about a potential Transaction.
7. NOTICES. Notice given pursuant to any of the provisions
of this Agreement shall be in writing and shall be mailed or delivered to
the Company at 0000 Xxxxx Xxxx, Xxxxxx, Xxxxxxxxxx 00000, Attention:
Xxxxxx X. Xxxxx; and to CRI at 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Corporate Finance Department.
8. ADVERTISEMENTS. The Company agrees that the Advisor
shall have the right to place advertisements in financial and other
newspapers and journals at its own expense describing its services to the
Company hereunder; provided that the Advisor shall have submitted a copy
of any such proposed advertisement to the Company for its prior approval,
which approval shall not be unreasonably withheld or delayed.
9. CONSTRUCTION. The Agreement incorporates the entire
understanding of the parties and supersedes all previous agreements and
shall be governed by, and construed in accordance with, the laws of the
State of Washington as applied to contracts made and performed in such
State, without regard to principles of conflicts of laws.
10. SEVERABILITY. Any determination that any provision of
this Agreement may be, or is, unenforceable shall not affect the
enforceability of the remainder of this Agreement.
11. HEADINGS. The section headings in this Agreement have
been inserted as a matter of convenience for reference and are not an
effective part of this Agreement.
12. 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.
13. THIRD PARTY BENEFICIARIES. This Agreement has been and
is made solely for the benefit of the Company, the Advisor and the other
Indemnified Persons referred to in paragraph 3 hereof and their
respective successors and assigns, and no other person shall acquire or
have any rights under or by virtue of this Agreement.
14. SUCCESSION. This Agreement shall be binding upon and
insure to the benefit of the Company, CRI, the Indemnified Persons and
their respective successors, assigns, heirs and personal representatives.
If the foregoing terms correctly set forth our Agreement,
please confirm this by signing and returning to the Advisor the duplicate
copy of this letter. Thereupon this letter, as signed in counterpart,
shall constitute our Agreement on the subject matter herein.
CRUTTENDEN XXXX INCORPORATED
By: /s/ Xxxxx X. Xxxxxxx
------------------------------
Confirmed and Agreed to:
Geographics, Inc.
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Title: Chairman & C.E.O.
---------------------------
Date: 8/11/97
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EXHIBIT I
CRI will be acting on behalf of Geographics, Inc. (the "Company") in
connection with the services or matters that are the subject of the Agreement
to which this Exhibit I is attached. Accordingly, the Company agrees to
indemnify and hold harmless CRI and CRI's affiliates, the respective
directors, officers, agents and employees of CRI and CRI's affiliates, and
each other person, if any, controlling CRI or any of CRI's affiliates
(collectively the "Indemnified Persons"), from and against any losses, claims,
damages, liabilities or expenses (or actions, including shareholder actions,
in respect thereof) related to or arising out of such engagement or CRI's
role in connection therewith, and will reimburse the Indemnified Persons for
all expenses (including out-of-pocket expenses, CRI's customary hourly
charges for time expended in defending or preparing to defend any action or
legal proceeding and CRI's counsel fees and expenses) as they are incurred by
the Indemnified Persons in connection with investigating, preparing or
defending any such action or claim, whether or not in connection with pending
or threatened litigation in which CRI or any Indemnified Person is a party.
The Company will not, however, be responsible for any losses, claims,
damages, liabilities or expenses which are finally judicially determined to
have resulted primarily from CRI's willful misconduct or gross negligence.
The Company also agrees that none of the Indemnified Persons shall have any
liability to the Company for or in connection with the services or matters
pertaining to the Agreement except for any such liability for losses, claims,
damages, liabilities or expenses incurred by the Company that results
primarily from CRI's willful misconduct or gross negligence. If the forgoing
indemnity is unavailable or insufficient to hold the Indemnified Persons
harmless, then the Company shall contribute to the amount paid or payable by
the Indemnified Persons, in respect of the Indemnified Persons, for losses,
claims, damages, liabilities or expenses in such proportion as appropriately
reflects the relative benefits received by, and fault of, the Company, on the
one hand and the Indemnified Persons, on the other, in connection with the
matters as to which such losses, claims, damages, liabilities or expenses
relate and other equitable consideration; provided, however, the Company
agrees that the aggregate contribution of all Indemnified Persons shall in
all cases be not more than the amount of fees actually received by CRI for
its services. It is hereby further agreed that the relative benefits to
the Company on the one hand and the Indemnified Persons on the other with
respect to any Transaction contemplated by the Agreement shall be deemed to
be in the same proportion as (i) the total value of the Transaction bears to
(ii) the fees actually paid to the CRI with respect to such Transaction. The
foregoing Agreement shall be in addition to any rights that CRI or any
Indemnified Person may have at common law or otherwise. The Company hereby
consents to personal jurisdiction and service and venue in any court in which
any claim which is subject to this Agreement is brought against CRI or any
other Indemnified Person. If any action, proceeding or investigation is
commenced as to which an Indemnified Person demands indemnification, the
Indemnified Person shall have the right to retain counsel of its own choice
to represent it, the Company shall pay the reasonable fees and expenses of
such counsel, and such counsel shall to the extent consistent with its
professional responsibilities cooperate with the Company and any counsel
designated by the Company; provided that the Company shall not be responsible
for the fees and expenses of more than one counsel.
