EXHIBIT 10.1
VESTAR CAPITAL PARTNERS
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
As of June 1, 1998
Pinnacle Automation, Inc.
0000 Xxxxx Xxxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxxxx X. X'Xxxxx
President and Chief Executive Officer
Gentlemen:
Pursuant to the second sentence of paragraph 3 of that certain
consulting agreement among Pinnacle Automation, Inc. ("Pinnacle"), Xxxxx
Systems, Inc. ("Xxxxx") and Vestar Capital Partners ("Vestar") dated January 24,
1996, we are pleased to confirm our mutual understanding regarding the retention
of Vestar as outlined below.
1. Vestar has assisted and will continue to assist the Company
as its financial advisor and agent in connection with evaluating, negotiating
and consummating the following transactions (collectively, the "Transactions"):
(a) the spin-off of XxXxxx Software International, Inc. ("XxXxxx") from
Pinnacle's wholly-owned subsidiary Xxxxx and the subsequent distribution of
XxXxxx'x stock to Pinnacle's shareholders (the "Spin-off"); (b) the sale of a
minority equity interest in XxXxxx to a third party investor (the "Third Party
Investment"); (c) the exchange of a portion of Pinnacle's outstanding preferred
stock for Class B Common Stock of XxXxxx (the "Preferred Stock Exchange"); (d)
the obtaining of consents to the amendment of the terms of Xxxxx'x senior
subordinated notes (the "Consent"); (e) the amendment of Xxxxx'x existing credit
facility with its senior lenders (the "Amendment") and (f) the consummation of a
credit facility by XxXxxx (the "XxXxxx Facility").
2. During the term of our engagement, we will continue to
formulate, review and analyze proposals for the Transactions and advise the
Company as to structure and valuation and assist the Company in negotiations in
connection with the Transactions. Specifically, Vestar will: (1) assist in the
valuation, structuring and negotiation of the Spin-off and the transactions
related thereto; (2) assist in the valuation, structuring and negotiation of the
Third Party Investment; (3) advise and assist in the structuring and negotiation
of the Preferred Stock Exchange; and (4) advise and assist in arranging the
Consent, the Amendment and the XxXxxx Facility.
3. In connection with Vestar's activities on the Company's
behalf, the Company has furnished and will continue to furnish Vestar with all
information and data concerning the Company and the Transactions (the
"Information") which Vestar deems appropriate and will continue to provide
Vestar with access to the Company's officers, directors, employees, independent
accountants and legal counsel. The Company represents and warrants that all
Information made and to be made available to Vestar by the Company, to the best
of the Company's knowledge, is and will be complete and correct in all material
respects. The Company further represents and warrants that (i) any projections
that have been provided by it to Vestar have been prepared in good faith and are
based upon assumptions which, in light of the circumstances under which they
were made, were reasonable, and (ii) any projections which will be provided by
the Company to Vestar after the date hereof will be prepared in good faith and
will be based upon assumptions which, in the light of the circumstances under
which they are made, are reasonable. The Company acknowledges and agrees that,
in rendering its services hereunder, Vestar has been and will continue to be
using and relying on the Information (and information available from public
sources and other sources deemed reliable by Vestar) without independent
verification thereof or independent appraisal of any of the
1
Company's assets. Vestar does not assume responsibility for the accuracy or
completeness of the Information or any other information regarding the Company,
any third party or any of the Transactions. Any advice rendered by Vestar
pursuant to this Agreement may not be disclosed publicly without Vestar's prior
written consent.
4. In consideration of our services pursuant to this
Agreement, Vestar shall earn and be entitled to receive, and the Company agrees
to pay Vestar, the following compensation:
(a) Upon the consummation of the Spin-off, Vestar shall earn a
non-refundable cash fee of $900,000. Such fee shall be paid at the
closing of the Spin-off.
(b) Vestar shall be entitled to the fees set forth in this
paragraph 4 with respect to any Transactions consummated within twelve
months from the date hereof or consummated pursuant to any agreement in
principle or definitive agreement executed and delivered within twelve
months from the date hereof.
5. In addition to the fees described in paragraph 4 above, the
Company agrees to reimburse Vestar, upon Vestar's request from time to time, for
all reasonable out-of-pocket expenses incurred by Vestar (including fees and
disbursements of counsel) in connection with the matters contemplated by this
Agreement.
6. The Company agrees to indemnify Vestar in accordance with
the indemnification provisions (the "Indemnification Provisions") attached to
this Agreement, which Indemnification Provisions are incorporated herein and
made a part hereof.
7. The term of this Agreement is twelve months from the date
hereof. Either party hereto may terminate this Agreement at any time upon
written notice without liability or continuing obligation, except as set forth
in the following sentence. Neither the termination nor expiration of this
Agreement nor the completion of the assignment contemplated hereby shall affect:
(i) any compensation earned by Vestar up to the date of termination, expiration
or completion, as the case may be; (ii) the reimbursement of expenses incurred
by Vestar through the date of termination, expiration or completion, as the case
may be; or (iii) the provisions of paragraphs 6 (including the Indemnification
Provisions) through 9, inclusive, of this Agreement, all of which shall remain
operative and in full force and effect subsequent to the termination, expiration
or completion of this Agreement.
8. The validity and interpretation of this Agreement shall be
governed by the laws of the State of New York applicable to agreements made and
to be fully performed therein without regard to the conflicts of law principles
thereof.
9. The benefits of this Agreement shall inure to the
respective successors and assigns of the parties hereto and of the indemnified
parties hereunder and their successors and assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns.
10. For the convenience of the parties, any number of
counterparts of this Agreement may be executed by the parties hereto. Each such
counterpart shall be, and shall be deemed to be, an original instrument, but all
such counterparts taken together shall constitute one and the same Agreement.
This Agreement may not be modified or amended except in writing signed by the
parties hereto.
2
If the foregoing currently sets forth our agreement, please
sign the enclosed copy of this letter in the space provided and return it to us.
Very truly yours,
VESTAR CAPITAL PARTNERS
By:/s/Xxxxx X. Xxxxx, Xx.
-----------------------------
Name: Xxxxx X. Xxxxx, Xx.
Title: Managing Director
Confirmed and agreed to
as of June 1, 1998
Pinnacle Automation, Inc.
By:/s/Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice President
and Chief Financial Officer
3
INDEMNIFICATION PROVISIONS
Pinnacle Automation, Inc. (the "Company") agrees to indemnify
and hold harmless Vestar Capital Partners ("Vestar") against any and all losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements (and any and all actions, suits, proceedings and
investigations in respect thereof and any and all reasonable legal and other
costs, expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, the
reasonable costs, expenses and disbursements, as and when incurred, of
investigating, preparing or defending any such action, suit, proceeding or
investigation (whether or not in connection with litigation to which Vestar is a
party), directly or indirectly caused by, relating to, based upon, arising out
of or in connection with (a) Vestar's acting for the Company, whether before or
after the date of the Agreement referred to below, including, without
limitation, any act or omission by Vestar in connection with acceptance of or
the performance or non-performance of its obligations under the letter agreement
dated as of June 1, 1998, between Vestar and the Company, as it may be amended
from time to time (the "Agreement"), (b) any untrue statement or alleged untrue
statement of a material fact contained in, or omissions or alleged omissions of
material fact from, any sales, information or consent materials used in
connection with the Transactions contemplated by the Agreement or similar
statements or omissions in or from any other information furnished to Vestar or
any party to any of the Transactions (as such term is defined in the Agreement)
or (c) any Transactions; PROVIDED, HOWEVER, such indemnity agreement shall not
apply to any portion of any such loss, claim, damage, obligation, penalty,
judgment, award, liability, cost, expense or disbursement to the extent it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) to have resulted primarily from the gross negligence or willful
misconduct of Vestar. The Company also agrees that Vestar shall not have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company or to any person (including, without limitation, stockholders of the
Company) claiming through the Company for or in connection with the engagement
of Vestar, except to the extent that any such liability is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal) to
have resulted primarily from Vestar's gross negligence or willful misconduct.
These Indemnification Provisions shall be in addition to any
liability which the Company may otherwise have to Vestar and shall extend to
Vestar and its affiliates and their respective directors, partners, officers,
employees, advisors, agents and affiliates. All references to Vestar in these
Indemnification Provisions shall be understood to include any and all of the
foregoing indemnified parties.
If any action, suit, proceeding or investigation is commenced
as to which Vestar proposes to demand indemnification, it shall notify the
Company with reasonable promptness; provided, however, that any failure by
Vestar to notify the Company shall not relieve the Company from its obligations
hereunder. Except as provided otherwise in the next sentence, the Company shall
have the right to assume the defense of such action, suit, proceeding or
investigation with counsel reasonably satisfactory to Vestar. Vestar shall have
the right to retain separate counsel in any such matter and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at
Vestar's expense unless (i) the Company has agreed to pay such fees and expenses
or (ii) the indemnifying party shall have failed to assume the defense of such
matter or to retain counsel reasonably satisfactory to Vestar or (iii) the named
parties to any such matter (including any impleaded parties) include both the
Company and an indemnified party and (x) there are one or more legal defenses
available to the indemnified party which are different from or additional to
those available to the Company and which result in a conflict of interest
between the Company and such indemnified party or (y) the representation of both
parties by the same counsel would be inappropriate due to differing interests
between them, in either which case, the Company shall not have the right to
assume the defense of the matter. Vestar and the Company and their respective
counsel shall, to the extent consistent with such counsel's professional
responsibilities, cooperate with each other. The Company shall be liable for any
settlement of any claim against Vestar made with the Company's written consent,
which consent shall not be unreasonably withheld. The Company shall not, without
the prior written consent of Vestar, settle or compromise any claim, or permit a
default or consent to the entry of any judgment in respect thereof, unless such
settlement, compromise or consent includes, as an unconditional term thereof,
the giving by the claimant to Vestar of an unconditional release from all
liability in respect to such claim.
1
In order to provide for just and equitable contribution, if a
claim for indemnification pursuant to these Indemnification Provisions is made
but it is found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) that such indemnification may not be enforced in such
case, even though the express provisions hereof provide for indemnification in
such case, then the Company, on the one hand, and Vestar, on the other hand,
shall contribute to the losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses and disbursements to which
Vestar may be subject in accordance with the relative benefits received by the
Company, on the one hand, and Vestar, on the other hand, and also the relative
fault of the Company, on the one hand, and Vestar, on the other hand, in
connection with the statements, acts or omissions which resulted in such losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements and the relevant equitable considerations shall also
be considered. No person found liable for a fraudulent misrepresentation shall
be entitled to contribution from any person who is not also found liable for
such fraudulent misrepresentation. Notwithstanding the foregoing, Vestar shall
not be obligated to contribute any amount hereunder that exceeds the amount of
fees previously received by Vestar pursuant to the Agreement.
Neither the termination nor completion of the engagement of
Vestar referred to above shall affect these Indemnification Provisions, which
shall then remain operative and in full force and effect.
2
