Exhibit 10.11
December 12, 1997
PRIVATE AND CONFIDENTIAL
AHC I Acquisition Corp.
c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Gentlemen:
This letter agreement (the "Agreement") confirms our understanding
that AHC I Acquisition Corp. (which together with its subsidiaries is
hereinafter referred to as the "Company") has engaged Xxxxxxxxx, Lufkin &
Xxxxxxxx Securities Corporation ("DLJ") to act as its (i) exclusive financial
advisor commencing with the acceptance of this Agreement with respect to the
acquisition of Arcade Holding Corporation (the "Acquisition"), and (ii)
following the closing of the Acquisition and continuing for a period through
December 31, 2002 (the "Engagement Period") with respect to the review and
analysis of financial and structural alternatives available to the Company with
a view to meeting its long term strategic objectives.
As discussed, we propose to undertake certain services on your
behalf, to the extent requested by you, which shall consist of the following:
(i) advising you with regard to the Acquisition, (ii) assisting you in
analyzing the Company's operations and its historical performance; and (iii)
assisting you in analyzing the Company's future prospects.
As compensation for the services to be provided by DLJ hereunder,
the Company agrees to pay DLJ (i) a financial advisory fee of $2,000,000 for
services related to the Acquisition, payable upon consummation of the
Acquisition and (ii) an annual advisory fee of $250,000, payable quarterly in
equal installments of $62,500, payable March 31, June 30, September 30 and
December 31 of each year. As further compensation, the Company agrees that in
the event the Company determines to pursue any Transaction (as hereinafter
defined) during the period of our engagement, DLJ shall have the right to act
as the Company's exclusive financial advisor, sole placement agent, sole
initial purchaser or sole managing underwriter or sole dealer-manager, as the
case may be, with respect to each such Transaction.
For purposes of this letter, the term "Transaction" shall include
each of the following: (i) the sale, merger, consolidation or any other
business combination, in one or a series of transactions, involving any portion
of the business, securities or assets of the Company; (ii) the acquisition (and
any related matters such as financings, divestitures, etc.), in one or a series
of transactions, of all or a portion of the business, securities or assets of
another entity or person; (iii) any recapitalization, refinancing, repurchase
or restructuring of the Company's equity or debt securities or indebtedness or
any amendments or modifications to the Company's debt securities or indentures
whether or not in connection therewith, involving, by or on behalf of the
Company, an offer to purchase or
AHC I Acquisition Corp.
Page 2 December 12, 1997
exchange for cash, property, securities, indebtedness or other consideration,
or a solicitation of consents, waivers of authorizations with respect thereto;
(iv) any spin-off, split-off or other extraordinary dividend of cash,
securities or other assets to stockholders of the Company; or (v) any sale of
securities of the Company effected pursuant to a private sale or an
underwritten public offering.
If the Company determines to pursue any such Transaction, DLJ and
the Company will enter into an agreement appropriate to the circumstances,
containing provisions for, among other things, compensation, indemnification,
contribution, and representations and warranties, which are usual and customary
for similar agreements entered into by DLJ or other investment bankers of
international standing acting in similar transactions. DLJ shall have no
obligation to act as placement agent, initial purchaser, underwriter, or dealer
manager to the Company or to place or purchase any securities of the Company,
except to the extent that such obligations arise out of a placement agent
agreement, purchase agreement, underwriting agreement or dealer-manager
agreement, as the case may be, with respect to a particular Transaction
executed and delivered by both DLJ and the Company.
As further consideration for its services hereunder, the Company
shall, upon request by DLJ from time to time, reimburse DLJ promptly for all
out-of-pocket expenses (including the reasonable fees and expenses of counsel)
incurred by DLJ in connection with its engagement hereunder, regardless of
whether a Transaction is consummated. As DLJ will be acting on your behalf, it
is our practice to receive indemnification and the Company agrees to the
indemnification and other obligations set forth in Schedule I attached hereto,
which Schedule is an integral part hereof.
The Company acknowledges and agrees that DLJ has been retained
solely to provide the advice or services set forth in this Agreement. In such
capacity, DLJ shall act as an independent contractor, and any duties of DLJ
arising out of its engagement hereunder shall be owed solely to the Company.
The Company shall make available to DLJ all available financial and
other information concerning its business and operations which DLJ reasonably
requests and will provide DLJ with access to the Company's officers, directors,
employees, independent accountants and legal counsel. In performing its
services hereunder, DLJ shall be entitled to rely without investigation upon
all information that is available from public sources as well as all other
information supplied to it by or on behalf of the Company or its advisors and,
except as otherwise specifically agreed to in a writing signed by both parties,
shall not in any respect be responsible for the accuracy or completeness of, or
have any obligation to verify, the same or to conduct any appraisal of assets.
To the extent consistent with legal requirements, all information given to DLJ
by the Company, unless publicly available or otherwise available to DLJ without
restriction or breach of any confidentiality agreement, will be held by DLJ in
confidence and will not be disclosed to anyone other than DLJ's agents and
advisors without the Company's prior approval or used for any purpose other
than those referred to in this Agreement.
Any advice, written or oral, provided by DLJ pursuant to this
Agreement will be treated by the Company as confidential, will be solely for
the information and assistance of the Company in connection with the advisory
services performed by DLJ hereunder and will not be reproduced, summarized,
described or referred to, or furnished to any other party or used for any other
purpose, except in each case with our prior written consent.
AHC I Acquisition Corp.
Page 3 December 12, 1997
This Agreement may be terminated by DLJ at any time or by the
Company upon expiration of the Engagement Period upon receipt of written notice
to that effect by the other party. Upon any termination or expiration of this
Agreement, DLJ will be entitled to prompt payment of all fees accrued prior to
such termination or expiration and reimbursement of all out-of-pocket expenses
as described above. The indemnity and other provisions contained in Schedule I
will also remain operative and in full force and effect regardless of any
termination or expiration of this Agreement. This Agreement shall be extended
automatically and without further action by the parties for an additional term
of one (1) year, unless otherwise terminated by either party in writing within
60 days prior to the expiration of the initial term or the applicable renewal
term.
The Company further agrees that it will not enter into a
Transaction referred to in the preceding paragraph unless, prior to or
simultaneously with consummation of such Transaction, adequate provision is
made with respect to the payment of compensation to DLJ as contemplated by such
paragraph.
This Agreement including Schedule I hereto, incorporates the entire
understanding of the parties and supersedes all previous agreements with
respect to the subject matter hereof and shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York. This
Agreement shall be binding upon and inure to the benefit of the Company, DLJ,
each Indemnified Person (as defined in Schedule I hereto) and their respective
successors and assigns.
The Company irrevocably and unconditionally submits to the
exclusive jurisdiction of any State or Federal court sitting in New York City
over any suit, action or proceeding arising out of or relating to this
Agreement (including Schedule I). The Company hereby agrees that service of any
process, summons, notice or document by U.S. registered mail addressed to the
Company shall be effective service of process for any action, suit or
proceeding brought in any such court. The Company irrevocably and
unconditionally waives any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in such a court has been brought in an
inconvenient forum. The Company agrees that a final judgment in any such suit,
action or proceeding brought in any such court shall be conclusive and binding
upon the Company and may be enforced in any other courts to whose jurisdiction
the Company is or may be subject, by suit upon such judgment.
The Company irrevocably and unconditionally submits to the
exclusive jurisdiction of any State or Federal court sitting in New York City
over any suit, action or proceeding arising out of or relating to this
Agreement (including Schedule I). The Company hereby agrees that service of any
process, summons, notice or document by U.S. registered mail addressed to the
Company shall be effective service of process for any action, suit or
proceeding brought in any such court. The Company irrevocably and
unconditionally waives any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such
suit, action or proceeding brought in such a court has been brought in an
inconvenient forum. The Company agrees that a final judgment in any such suit,
action or proceeding brought in any such court shall be conclusive and binding
upon the Company and may be enforced in any other courts to whose jurisdiction
the Company is or may be subject, by suit upon such judgment.
The prevailing party in any suit, action or proceeding arising out
of or relating to this Agreement shall be entitled to recover from the
non-prevailing party all of the attorney fees and
AHC I Acquisition Corp.
Page 4 December 12, 1997
other expenses the prevailing party may incur in such suit, action or
proceeding and in any subsequent suit to enforce a judgment.
This letter agreement shall be binding upon and inure to the
benefit of the Company, DLJ, each Indemnified Person (as defined in Schedule I
hereto) and their respective successors and assigns.
If any term, provision, covenant or restriction contained in this
Agreement, including Schedule I, is held by a court of competent jurisdiction
or other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
After reviewing this letter, please confirm that the foregoing is
in accordance with your understanding by signing and returning to me the
duplicate of this Agreement attached hereto, whereupon it shall be our binding
Agreement.
Very truly yours,
XXXXXXXXX, LUFKIN & XXXXXXXX
SECURITIES CORPORATION
By: /s/ Xxxxx Xxxxxxx
-----------------------------
Xxxxx Xxxxxxx
Managing Director
Accepted and agreed to
this 12th day of December, 1997
AHC I ACQUISITION CORP.
By: /s/ Xxxxx Xxxxxxx
---------------------------
Xxxxx Xxxxxxx
SCHEDULE I
This Schedule I is a part of and is incorporated into that certain
letter agreement (together, the "Agreement") dated December 12, 1997 by and
between AHC I Acquisition Corp. (the "Company") and Xxxxxxxxx, Lufkin &
Xxxxxxxx Securities Corporation ("DLJ").
The Company will indemnify and hold harmless DLJ and its
affiliates, and the respective directors, officers, agents and employees of DLJ
and its affiliates (other than the Company) (DLJ and each such entity or
person, an "Indemnified Person"), from and against any losses, claims, damages,
judgments, assessments, costs and other liabilities (collectively
"Liabilities"), and will reimburse each Indemnified Person for all fees and
expenses (including the reasonable fees and expenses of counsel) (collectively,
"Expenses") as they are incurred in investigating, preparing, pursuing or
defending any claim, action, proceeding or investigation, whether or not in
connection with pending or threatened litigation and whether or not any
Indemnified Person is a party (collectively, "Actions"), arising out of or in
connection with advice or services rendered or to be rendered by any
Indemnified Person pursuant to this Agreement, the transactions contemplated
hereby or any Indemnified Person's actions or inactions in connection with any
such advice, services or transactions; provided that the Company will not be
responsible for any Liabilities or Expenses of any Indemnified Person that are
determined by a judgment of a court of competent jurisdiction which is no
longer subject to appeal or further review to have resulted solely from such
Indemnified Person's gross negligence or willful misconduct in connection with
any of the advice, actions, inactions or services referred to above. The
Company also agrees to reimburse each Indemnified Person for all Expenses as
they are incurred in connection with enforcing such Indemnified Person's rights
under this Agreement (including, without limitation, its rights under this
Schedule I).
Upon receipt by an Indemnified Person of actual notice of an Action
against such Indemnified Person with respect to which indemnity may be sought
under this Agreement, such Indemnified Person shall promptly notify the Company
in writing; provided that failure so to notify the Company shall not relieve
the Company from any liability which the Company may have on account of this
indemnity or otherwise, except to the extent the Company shall have been
materially prejudiced by such failure. The Company shall, if requested by DLJ,
assume the defense of any such Action including the employment of counsel
reasonably satisfactory to DLJ. Any Indemnified Person shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person, unless: (i) the Company has failed promptly to assume
the defense and employ counsel or (ii) the named parties to any such Action
(including any impleaded parties) include such Indemnified Person and the
Company, and such Indemnified Person shall have been advised by counsel that
there may be one or more legal defenses available to it which are different
from or in addition to those available to the Company; provided that the
Company shall not in such event be responsible hereunder for the fees and
expenses of more than one firm of separate counsel in connection with any
Action in the same jurisdiction, in addition to any local counsel. The Company
shall not be liable for any settlement of any Action effected without its
written consent. In addition, the Company will not, without prior written
consent of DLJ, settle, compromise or consent to the entry of any judgment in
or otherwise seek to terminate any pending or threatened Action in respect of
which indemnification or contribution may be sought hereunder (whether or not
any Indemnified Person is a party thereto) unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Person from all Liabilities arising out of such Action.
In the event the foregoing indemnity is unavailable to an
Indemnified Person other than in accordance with this Agreement, the Company
shall contribute to the Liabilities and Expenses paid or payable by such
Indemnified Person in such proportion as is appropriate to reflect (i) the
relative benefits to the Company and its shareholders, on the one hand, and to
DLJ, on the other hand, of the matters contemplated by this Agreement or (ii)
if the allocation provided by the immediately preceding clause is not permitted
by the applicable law, not only such relative benefits but also the relative
fault of the Company, on the one hand, and DLJ, on the other hand, in
connection with the matters as to which such Liabilities or Expenses relate, as
well as any other relevant equitable considerations; provided that in no event
shall the Company contribute less than the amount necessary to ensure that all
Indemnified Persons, in the aggregate, are not liable for any Liabilities and
Expenses in excess of the amount of fees actually received by DLJ pursuant to
the Agreement. For purposes of this paragraph, the relative benefits to the
Company and its shareholders, on the one hand, and to DLJ, on the other hand,
of the matters contemplated by the Agreement shall be deemed to be in the same
proportion as (a) the total value paid or contemplated to be paid or received
or contemplated to be received by the Company or the Company's shareholders, as
the case may be, in the transaction or transactions that are within the scope
of the Agreement, whether or not any such transaction is consummated, bears to
(b) the fees paid or to be paid to DLJ under the Agreement.
The Company also agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with advice or services rendered or to be rendered
by any Indemnified Person pursuant to this Agreement, the transactions
contemplated hereby or any Indemnified Person's actions or inactions in
connection with any such advice, services or transactions except for
Liabilities (and related Expenses) of the Company that are determined by a
judgment of a court of competent jurisdiction which is no longer subject to
appeal or further review to have resulted solely from such Indemnified Person's
gross negligence or willful misconduct in connection with any such advice,
actions, inactions or services.
The reimbursement, indemnity and contribution obligations of the
Company set forth herein shall apply to any modification of this Agreement and
shall remain in full force and effect regardless of any termination of, or the
completion of any Indemnified Person's services under or in connection with,
this Agreement.
