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CUSIP NO. 45815R 10 0 SCHEDULE 13D Page 17 of 20 Pages
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Exhibit 3
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October 17, 1997
Xx. Xxxxx Xxxxx
Corporate Finance Dimensions
00000 Xxxxxxx Xxx
Xxxxxxx Xxxxx, XX 00000
Dear Xxxxx:
The purpose of this letter is to follow-up on the discussions you have had
with Xxxx Xxxxxx and Xxxxx Xxxxxx about formalizing Xxxxxxxxx's relationship
with CFD. Specifically, I would like to outline our agreement relative to your
compensation for assisting Ampersand in searching for investment opportunities
in the instrumentation and process control industry.
OBJECTIVE: As you know, you will be working with Ampersand primarily in
support of our efforts to find investment opportunities that will leverage
Xxxxx's extensive industry-specific skills and experience. Investment
opportunities of interest to Xxxxx and Ampersand consist of both (1)
privately-owned companies seeking investment capital for growth or where owners
are seeking partial or total liquidity; and (2) spinoffs or divestitures of
units from major corporations - an area in which Ampersand has had considerable
investment success. The attached one-page criteria list, which Xxxxx has
previously shared with you, offers more specific guidelines.
While we understand that the investment process can be long and involved,
our internal goal is to establish, through your efforts, a minimum of five
ongoing dialogues with business owners during the first six months of our
relationship. Based on past experience, this should be sufficient to produce one
investment commitment by the end of one year. For these purposes, we will define
"dialogue" as an investment opportunity where (1) Xxxxxxxxx has made a visit and
concluded that further work is warranted; and (2) the owner has expressed a
willingness to sell all or part of the company to Ampersand and has entered into
a good faith effort to negotiate appropriate terms.
COMPENSATION. Ampersand is prepared to compensate you in the following
manner:
1. You will receive a retainer of $3000 per month. This retainer will be
paid in advance at three month intervals upon receipt of an invoice from you.
With the exception of travel outside California, this retainer will cover all
expenses associated with this effort, including any advertising you wish to
place. In the extraordinary event that travel is necessary, you will submit a
request for approval in advance.
2. Upon closing of an investment by Xxxxxxxxx in an opportunity introduced
to us by CFD, you will receive a percentage of the "net consideration" paid by
Xxxxxxxxx according to the following formula:
5% of the first $2,000,000
4% of the next 1,000,000
3% of the next 1,000,000
1% thereafter
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CUSIP NO. 45815R 10 0 SCHEDULE 13D Page 18 of 20 Pages
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Exhibit 3 - Continued
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Xx. Xxxxx Xxxxx
For purposes of this agreement "net consideration" means (a) the amount of
cash paid by Ampersand, plus (b) the fair market value of any securities or
other property conveyed by Ampersand as additional consideration, plus (c) the
discounted present value of any liabilities assumed by Ampersand, less (d) the
amount of any cash or cash-equivalent assets acquired by Ampersand, either
directly or as part of the assets of the target company.
This fee will be paid with respect to (a) any net consideration paid at
closing, (b) any future installment payments, if and when such payments are
made, except that Ampersand may, at its election, pay you based on the
discounted present value of such payments at closing, and (c) any contingent
payments, such as earn-outs and payments out of escrow, only if and when such
payments are made.
3. Both Ampersand and you agree that we will make a best faith effort to
convert the cash fee described above into equity in the target company. Given
that any such conversion is heavily dependent on the specific circumstances of
the investment, the precise terms of your equity participation will be
negotiated on a case-by-case basis. We do agree that any such conversion will be
made at terms that offer a premium to the cash fee equivalent.
4. The term of this Agreement shall be one year. Either party, however, may
cancel this arrangement at the end of six months (i.e. by April 15, 1998).
NEXT STEPS. Assuming you are in agreement with these terms, please sign
this document and return it to Xxxx's attention. I will then ask Xxxx and Xxxxx
to continue leading the effort on Xxxxxxxxx's front, and specifically to draft
with you a work plan detailing more concretely how CFD and Ampersand will work
together over the coming months.
On behalf of my colleagues, let me say in closing that we are looking
forward to partnering with you on this effort and, in the process, to
establishing a long term working relationship between our two firms.
Sincerely yours,
/s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx
Chief Financial Officer
Agreed to:
/s/ Xxxxx Xxxxx
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Signature Date
cc: Ampersand Distribution
