EXHIBIT 2
[DLJ LETTERHEAD]
MAY 13, 1999
PRIVATE AND CONFIDENTIAL
JUBILEE LIMITED PARTNERSHIP
C/O SCHOTTENSTEIN STORES CORPORATION
0000 XXXXX XXXX
XXXXXXXX, XX 00000
ATTENTION: XXX XXXXXXXXXXXXX, CHAIRMAN
GENTLEMEN:
This letter agreement (the "Agreement") confirms our
understanding that Jubilee Limited Partnership (the "Company") has engaged
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation ("DLJ") to act as its
exclusive financial advisor for a period of nine months commencing upon your
acceptance of this Agreement, with respect to the possible acquisition (and any
related financing) of Xxxxxxx Pacific Properties, Inc. ("Target"), in one or a
series of transactions, by purchase, merger, consolidation or any other business
combination, involving all or a substantial amount of the business, securities
or assets of the Target, or otherwise (each, a "Transaction").
As discussed, we propose to undertake certain services on your
behalf, to the extent requested by you, which shall consist of the following:
(i) assisting you in evaluating the Target, its operations, its historical
performance and its future prospects; (ii) advising on a proposed purchase price
and form of consideration; (iii) assisting you in structuring the Transaction;
and, (iv) negotiating the financial aspects of any Transaction under your
guidance. In addition, we will act as exclusive dealer/manager for the Company
in any tender or exchange offer relating to a Transaction. The specific terms
and conditions, including the dealer/manager fees, of such engagement will be
further delineated in a separate agreement, which agreement shall contain normal
and customary provisions for such agreements entered into by DLJ and other
investment banks of international standing.
As compensation for the services to be provided by DLJ
hereunder, the Company agrees (i) to pay to DLJ a fee equal to 0.55% of the
aggregate value of outstanding common stock of the Target (treating any shares
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XX. XXX XXXXXXXXXXXXX
JUBILEE LIMITED PARTNERSHIP
C/O SCHOTTENSTEIN STORES CORPORATION
issuable upon exercise of options, warrants or other rights of conversion as
outstanding) plus the amount of any debt assumed, acquired, remaining
outstanding, retired or defeased or preferred stock redeemed or remaining
outstanding in connection with the Transaction, payable consummation of a
Transaction, and (ii) upon request by DLJ from time to time, to reimburse DLJ
promptly for all reasonable and necessary out-of-pocket expenses (including the
reasonable fees and expenses of counsel) incurred by DLJ in connection with its
engagement hereunder, whether or not a Transaction is consummated. As DLJ will
be acting on your behalf, the Company agrees to the indemnification and other
obligations set forth in Schedule I attached hereto, which Schedule is an
integral part hereof.
For purposes of this Agreement, a Transaction shall be deemed
to have been consummated upon the earliest of any of the following events to
occur: (a) the acquisition by the Company or any of its affiliates of a majority
of the outstanding voting equity securities of the Target calculated on a
fully-diluted basis; (b) a merger or consolidation of the Target with the
Company or an affiliate of the Company; or (c) in the case of any other
Transaction, the consummation thereof.
In the event a Transaction is not consummated and the Company
is entitled to receive a "termination fee", "break-up fee", "topping fee" or
other form of compensation payable in cash or other assets, including, but not
limited to, an option to purchase securities from the Target (such cash,
securities, including, in the case of options, the right to exercise such
options or other assets hereinafter referred to as the "Break-up Fee"), then the
Company shall pay to DLJ in cash, promptly upon the Company's receipt of such
Break-up Fee, an amount equal to one-third (33.3%) of such Break-up Fee
received, less any amounts previously paid pursuant to clause (ii) above.
In the event that the Break-up Fee is paid to the Company in
whole or in part in the form of securities or other assets, the value of such
securities or other assets, for purposes of calculating our fee, shall be the
fair market value thereof, as the parties hereto shall mutually agree, on the
day such Break-up Fee is paid to the Company; provided that, if such Break-up
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XX. XXX XXXXXXXXXXXXX
JUBILEE LIMITED PARTNERSHIP
C/O SCHOTTENSTEIN STORES CORPORATION
Fee includes securities with an existing public trading market, the value
thereof shall be determined by the last sales price for such securities on the
last trading day thereof prior to such payment.
If within twelve months after the date hereof the Company
shall (i) sell, dispose of or otherwise transfer any rights to (or take any
action which would result in any such sale, disposition or transfer at some
later date) any securities of the Target which it presently owns or which it
acquires within twelve months of the date hereof to any person, or (ii)
terminate its effort to effect the Transaction, in addition to the fees referred
to above, the Company shall promptly pay to DLJ a fee equal to twenty-two and
one-half percent (22.5%) of the Profit (as hereinafter defined), before taxes,
earned by the Company as a result of any such sale, disposition, transfer or
termination, subject to a maximum of $1.0 million. The term "Profit" shall mean
the difference between the consideration (including any payment which the
Company receives as a result of terminating the Company's effort to effect the
Transaction) received by the Company (which in the case of non-cash
consideration shall be valued at its fair market value as mutually agreed to by
DLJ and the Company) and the Company's actual cost in acquiring such securities
(including as expenses for this purpose customary brokerage commissions and the
reasonable out-of-pocket expenses of the Company in connection with the
Transaction, and any amounts previously paid pursuant to clause (ii) in the
third paragraph) and interest expenses incurred net of dividends paid or payable
to the Company. If any such securities of the Target have not been sold,
disposed of or otherwise transferred within eighteen months after the date
hereof, such securities shall be deemed to have been sold at the last sale price
therefor on the preceding trading day.
The Company shall make available to DLJ all financial and
other information concerning its business and operations that DLJ reasonably
requests as well as any other information relating to a Transaction prepared by
the Company or any of its other advisors. 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 or the Target or its advisors and
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XX. XXX XXXXXXXXXXXXX
JUBILEE LIMITED PARTNERSHIP
C/O SCHOTTENSTEIN STORES CORPORATION
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 any
assets or liabilities. 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 and its advisors as confidential, will
be solely for the information and assistance of the Company and its advisors in
connection with its consideration of the Transaction 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, which
consent shall not be unreasonably withheld.
Please note that DLJ is a full service securities firm engaged
in securities trading and brokerage activities, as well as providing investment
banking and financial advisory services. In the ordinary course of our trading
and brokerage activities, DLJ or its affiliates may at any time hold long or
short positions, and may trade or otherwise effect transactions, for our own
account or on the accounts of customers, in debt or equity securities or bank or
other senior debt of the Company or other entities that may be involved in the
Transaction. We recognize our responsibility for compliance with Federal laws in
connection with any such activities.
The Company acknowledges and agrees that DLJ has been retained
solely to provide the advice or services set forth in this Agreement. 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.
This Agreement may be terminated by either the Company or DLJ
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
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XX. XXX XXXXXXXXXXXXX
JUBILEE LIMITED PARTNERSHIP
C/O SCHOTTENSTEIN STORES CORPORATION
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, and the seventh paragraph of this
Agreement, will also remain operative and in full force and effect regardless of
any termination or expiration of this Agreement.
In addition, if at any time prior to twelve months after
termination by the Company or expiration of this Agreement a Transaction is
consummated or the Company is entitled to receive a Break-up Fee, DLJ will be
entitled to payment in full of the compensation described in the third or fifth
paragraph of this Agreement, as the case may be.
It is understood that if the Company completes an acquisition
transaction involving the Target in lieu of any Transaction, or the Company
completes any financing related to a Transaction, either during the term of this
Agreement or at any time prior to twelve months after termination by the Company
or expiration of this Agreement, for which DLJ is entitled to compensation
pursuant to this Agreement, DLJ and the Company will in good faith mutually
agree upon acceptable compensation for DLJ taking into account, among other
things, the results obtained and the custom and practice among investment
bankers of international standing acting in similar transactions.
This Agreement shall be binding upon and inure to the benefit
of the Company, DLJ, each Indemnified Person (as defined in Schedule I) and
their respective successors and assigns.
This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York.
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
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XX. XXX XXXXXXXXXXXXX
JUBILEE LIMITED PARTNERSHIP
C/O SCHOTTENSTEIN STORES CORPORATION
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 other expenses the
prevailing party may incur in such suit, action or proceeding and in any
subsequent suit to enforce a judgment.
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.
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XX. XXX XXXXXXXXXXXXX
JUBILEE LIMITED PARTNERSHIP
C/O SCHOTTENSTEIN STORES CORPORATION
After reviewing this Agreement, 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, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
BY: /S/ XXXXXXX X. XXXX
----------------------------------
XXXXXXX X. XXXX
MANAGING DIRECTOR
ACCEPTED AND AGREED
THIS 19TH DAY OF MAY, 1999
JUBILEE LIMITED PARTNERSHIP
BY: /S/ XXX XXXXXXXXXXXXX
-------------------------------------
XXX XXXXXXXXXXXXX
CHAIRMAN
Schottenstein Stores Corporation (the "Guarantor") hereby
unconditionally guarantees to (i) DLJ the prompt and full discharge by the
Company of all of the Company's obligations under this Agreement in accordance
with the terms hereof and (ii) DLJ and the other Indemnified Persons referred to
in Schedule I the prompt and full discharge of all of the Company's obligations
under such Schedule I in accordance with the terms thereof.
The Guarantor hereby agrees that, if the Company fails to
perform and discharge promptly all such obligations and liabilities in
accordance with such terms, the Guarantor will forthwith, upon demand, perform
and discharge the same. The unconditional obligation of the Guarantor hereunder
will not be affected, impaired or released by any termination or expiration
hereof or by any extension, waiver, amendment or other circumstance whatsoever
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XX. XXX XXXXXXXXXXXXX
JUBILEE LIMITED PARTNERSHIP
C/O SCHOTTENSTEIN STORES CORPORATION
which would release a guarantor (other than performance). This guarantee will be
governed by and construed in accordance with New York law.
SCHOTTENSTEIN STORES CORPORATION
BY: /S/ XXX XXXXXXXXXXXXX
----------------------------------------
XXX XXXXXXXXXXXXX
CHAIRMAN
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SCHEDULE I
This Schedule I is a part of and is incorporated into that
certain letter agreement (together, the "Agreement") dated May 13, 1999 by and
between Jubilee Limited Partnership (the "Company") and Xxxxxxxxx, Xxxxxx &
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 (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 or arbitration 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
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
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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
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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 this
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 this 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
this Agreement, whether or not any such transaction is consummated, bears to (b)
the fees paid or contemplated to be paid to DLJ under this 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 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.
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