CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
PURSUANT TO RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
[Just Toys, Inc. Letterhead]
August 31, 1998
Xxxxxx Xxxxxx Xxxxxxxx & Co., Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
This letter constitutes the agreement between Xxxxxx Xxxxxx Xxxxxxxx &
Co., Inc. ("Xxxxxx Xxxxxx") and Just Toys, Inc. (the "Company") regarding the
retention of Xxxxxx Xxxxxx as the Company's financial advisor.
1. Scope of Services. The Company hereby engages Xxxxxx Xxxxxx as its
exclusive financial advisor for the purpose, among other things, of identifying
and assisting the Company with the structure, evaluation, negotiation and
financing of Acquisition Transactions (as hereinafter defined). As used in this
agreement, the term "Acquisition Transaction" means, whether effected in one
transaction or a series of transactions: (a) any acquisition, purchase,
transfer, merger, consolidation, reorganization, or other business combination
pursuant to which any entity or company (an "Acquisition Candidate") or the
business or one or more product lines of the Acquisition Candidate is acquired
or combined with the Company or a subsidiary of the Company, whether or not the
Company is the surviving entity as a result of such transaction, (b) the
acquisition, directly or indirectly, by the Company of more than 50% of the
capital stock outstanding or a substantial portion of the assets, of the
Acquisition Candidate or a subsidiary of the Acquisition Candidate by way of
tender or exchange offer, negotiated purchase or otherwise, or (c) the
acquisition, directly or indirectly, by the Company of control of the
Acquisition Candidate or the ability to effect such control, through a proxy
contest or otherwise. Xxxxxx Xxxxxx shall use its best efforts to perform the
foregoing functions and acknowledges that the Company's primary goal is a
transaction or series of transactions in which the Company is the surviving
entity.
Acquisition Transactions shall include any such transactions
effected by the Company during the term of Xxxxxx Xxxxxx'x retention hereunder
or within 18 months following the termination of Xxxxxx Xxxxxx'x retention
hereunder, with parties introduced to the Company by Xxxxxx Xxxxxx or with whom
Xxxxxx Xxxxxx has had substantial discussions regarding the Company respecting
such a transaction. [*]
------------------
[*] Certain information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934,
as amended.
The consummation of any Acquisition Transaction and the terms
thereof shall be wholly within the Company's sole and absolute discretion. The
Company may terminate negotiations with respect to any Acquisition Transaction
at any time whether or not a contract calling for the transaction has been
entered into.
2. Term and Termination. The term of this agreement shall commence on
the date hereof and shall continue unless and until terminated by either party
hereto upon the giving of 60 days prior written notice of termination (the
"Term").
3. Compensation. As full and complete compensation for all services
rendered by Xxxxxx Xxxxxx pursuant to this agreement, the Company shall issue to
Xxxxxx Xxxxxx a five year warrant to purchase up to 500,000 shares of the
Company's common stock, par value $.01 per share ("Common Stock"), at an
exercise price per share of $1.00 (the "Warrants") on the terms set forth in
that certain Warrant Agreement dated and being executed and delivered
concurrently herewith. As a retainer for Xxxxxx Xxxxxx'x services hereunder, the
Warrant Agreement provides that the Warrants are immediately exercisable with
respect to 100,000 shares of Common Stock. Upon termination of this agreement,
except as provided in the Warrant Agreement, all Warrants which have not
therefore become exercisable in accordance with Section 2 of the Warrant
Agreement shall forthwith terminate and be of no further force or effect. The
Warrant Agreement also provides that if, prior to termination of this agreement,
a Change of Control shall occur, all unexercised Warrants shall become fully
exercisable. A "Change in Control" shall be deemed to have occurred at such time
as (i) a person, or any persons acting together in a manner which would
constitute a "group" (a "Group") for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended, or any successor provision thereto, together
with any affiliates thereof, (a) become the beneficial owners, directly or
indirectly, of capital stock of the Company, entitling such person or persons
and its or their affiliates to exercise more than 50% of the total voting power
of all classes of the Company's capital stock entitled to vote generally in the
election of the Company's directors or (b) shall succeed in having sufficient of
its or their nominees (who are not supported by a majority of the then current
Board of Directors of the Company) elected to the Board of Directors of the
Company such that nominees, when added to any existing directors remaining on
the Board of Directors of the Company after such election who are affiliates of
or acting in concert with such persons, shall constitute a majority of the Board
of Directors of the Company, (ii) the Company shall consolidate with or merge
with or into any other person or sell, convey, transfer or lease its properties
and assets substantially as an entirety to any person (other than a subsidiary
of the Company), or any other person shall consolidate with or merge into the
Company (other than, in the case of this clause (ii) pursuant to any
consolidation or merger where persons who are stockholders of the Company
immediately prior thereto become the beneficial owners of shares of capital
stock of the surviving company entitling such persons to exercise more than 50%
2
of the total voting power of all classes of such surviving company's capital
stock entitled to vote generally in the election of directors).
Xxxxxx Xxxxxx shall be entitled to additional compensation, on terms to
be agreed upon between Xxxxxx Xxxxxx and the Company, in the event that Xxxxxx
Xxxxxx shall arrange financing for an Acquisition Transaction.
4. Cooperation. During the Term, the Company shall (i) notify Xxxxxx
Xxxxxx of any discussions with a potential Acquisition Candidate, whether
identified by Xxxxxx Xxxxxx or a third party and (ii) offer Xxxxxx Xxxxxx the
opportunity to fully participate in a transaction with such potential
Acquisition Candidate.
5. Right of First Refusal. If during the Term, and (i) for a period of
six months after expiration of the Term if this Agreement shall have been
terminated by the Company and during the Term there shall have been no
Acquisition Transaction or (ii) for a period of 18 months after expiration of
the Term if this Agreement shall have been terminated by the Company and during
the Term there shall have been an Acquisition Transaction, the Company shall
receive a bona fide offer ("Bona Fide Offer") in writing in respect of an
underwritten public offering or private placement of the Company's securities
from a source other than Xxxxxx Xxxxxx, the Company shall first offer to Xxxxxx
Xxxxxx the opportunity to act as lead underwriter or exclusive placement agent
under the terms and conditions contained in the Bona Fide Offer. The Company's
offer shall be in writing and shall be accompanied by a true copy of the Bona
Fide Offer. Xxxxxx Xxxxxx shall have the right but not the obligation to accept
such offer by written notice of acceptance to the Company within 10 days after
receipt of such offer. In the event that Xxxxxx Xxxxxx fails to accept the
offer, the Company shall be free to engage in the underwritten public offering
or private placement, as the case may be, on substantially the terms contained
in the Bona Fide Offer or on terms more favorable to the Company.
6. Voting Agreement. During the period that Xxxxxx Xxxxxx is engaged by
the Company pursuant to this Agreement and for a period of one year thereafter,
Xxxxxx Xxxxxx will vote all shares of Common Stock acquired by exercise of the
Warrants in accordance with the majority of the Company's other outstanding
Common Stock with respect to any matter that is submitted to a vote of the
Company's stockholders.
7. Public Announcements. No public announcement regarding this
engagement shall be made by the Company or Xxxxxx Xxxxxx without the prior
written consent of the other. No public announcement regarding an Acquisition
Transaction shall be made by Xxxxxx Xxxxxx without the prior written consent of
the Company.
8. Confidentiality. Xxxxxx Xxxxxx shall treat as confidential and shall
not, without the Company's prior written consent, divulge to any third party,
except to the extent necessary for the performance of its services hereunder or
as may be required by applicable law, information, knowledge or data relating to
or concerned with the operations, sales, business and affairs of the Company.
3
9. Disclosure of Information. Xxxxxx Xxxxxx will not furnish any
information regarding the Company to any potential acquisition target or
financing source unless such potential acquisition target or financing source
has been approved by the Company and a confidentiality agreement is signed by
the Company and such potential acquisition target or financing source. Xxxxxx
Xxxxxx shall maintain a list of the name of each person to whom any such
information is distributed and, at the request of the Company, request any such
person to return information to Xxxxxx Xxxxxx.
10. Representation of Other Toy Companies. The Company acknowledges
that Xxxxxx Xxxxxx is active in the toy industry and may, from time to time,
represent other companies in the toy industry, including companies which may be
deemed to be competitors of the Company. The Company also acknowledges that
there may be transactions which Xxxxxx Xxxxxx has been retained by other
companies to handle which Xxxxxx Xxxxxx is unable to bring to the Company and
Xxxxxx Xxxxxx shall have no obligation to disclose the existence of such
transactions or companies to the Company.
11. Legal Matters. This agreement and the Warrant Agreement constitutes
the entire agreement between the parties hereto and supersedes any prior
agreement or understanding between the parties. This agreement shall be governed
and construed in accordance with the laws of the State of New York. The parties
will arbitrate any dispute, claim or controversy relating to or arising out of
this agreement in New York City in accordance with the rules of the American
Arbitration Association in effect at the time arbitration is commenced. The
arbitrator's decision and award will be final and binding on the parties and may
be entered and confirmed in any court of competent jurisdiction and enforced to
the full extent permitted by law. The arbitrator may grant any legal and/or
equitable relief to which a party may be entitled under the law or legal theory
under which the party seeks relief. Each party to such arbitration shall bear
its own costs of the proceeding. The compensation of the arbitrator and any
other costs of the proceeding shall be shared equally by the parties.
12. Notices. All notices required under this agreement shall be in
writing and shall become effective five business days after being deposited in
the United States mails, certified or registered, with appropriate postage
prepaid for first class mail or, if delivered by hand or courier service or in
the form of a telex, telecopy or telegram, when received (if received during
normal business hours on a business day, or if not, then on the next business
day thereafter), and shall be directed to the following address or telex or
telecopy number: if to the Company, Just Toys, Inc., 00 Xxxxxxxxxxx Xxx., Xxxxx
Xxxxx, Xxx Xxxx 00000, Attention: President, telecopy no. (000) 000-0000; if to
Xxxxxx Xxxxxx, Xxxxxx Xxxxxx Xxxxxxxx & Co., 000 Xxxxx Xxx., Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxxx Xxxxxx, telecopy no. (000) 000-0000.
4
If the foregoing is in accordance with your understanding and
agreement, kindly sign this letter below under the words "Agreed To and
Accepted".
Sincerely,
JUST TOYS, INC.
By: /s/ Xxxxx Xxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxxx
Title: President and
Chief Executive Officer
Agreed To and Accepted:
XXXXXX XXXXXX XXXXXXXX & CO., INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Sr. Managing Director
5