EXHIBIT 10.8
[LETTERHEAD OF MONROE & COMPANY APPEARS HERE]
May 11, 1998
Monroe, Inc.
0 Xxxxx Xxxxxx, Xxxxx 00X
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Gentlemen:
This letter agreement ("Agreement") confirms the terms and conditions of
the exclusive engagement of Monroe & Company, LLC, a Delaware limited liability
company ("Monroe"), by Monroe, Inc., a Delaware corporation with a pending name
change to Xxxxxxx American Corporation ("MAC" or the "Company"), to render
certain business consulting, financial advisory and investment banking services
to MAC on an exclusive basis in connection with possible Transactions and
consulting projects. For the purposes of this Agreement, "Transaction" means any
merger, consolidation, reorganization, business combination, joint venture or
other transaction pursuant to which the Company (a) is acquired by, or combined
with, a third party or (b) acquires all or a portion of the assets or capital
stock of a third party (a "Prospective Target") or (c) enters into a joint
venture agreement with a third party, in each case in a single transaction or a
series of transactions. In addition, a "Transaction" includes, but is not
limited to, Monroe acting as an exclusive private placement agent on behalf of
the Company in connection with the arrangement of a senior credit facility for
the Company from a lending institution in the initial principal amount of $75-
$100 million.
1. SERVICES. Monroe agrees to perform the following services throughout the
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term of this Agreement:
(a) Review historical and projected financial and operating information of
MAC;
(b) Build a financial model to be used for analytical purposes, including
acquisition reviews and financial projections;
(c) Identify and seek out strategic acquisitions and joint ventures, both
domestic and abroad, consistent with MAC's strategic objectives as the
same may be established from time to time by MAC's Board of Directors;
(d) Advise and assist MAC as to the financial aspects and structure of any
proposed Transaction and assist in negotiating the terms thereof;
(e) Advise and assist MAC in the negotiation of any documentation relating
to a Transaction, which would include but not be limited to letters of
intent and definitive agreements;
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May 11, 1998
Page 2
(f) Prepare a memorandum describing MAC and the proposed capital structure
of MAC in connection with arranging a senior credit facility;
(g) Assist and advise MAC with respect to the negotiation of any
documentation relating to a senior credit facility;
(h) Prepare communications and engage in discussions on behalf of MAC in
connection with public relations and Wall Street analyst requirements;
(i) Assist in the development of a database which captures relevant
operations data to be used in connection with evaluating principal
conflicts and business opportunities;
(j) Assist in various business endeavors including, but not limited to,
endeavors with principals, retailers, food service providers, and
private label opportunities; and
(k) Assist MAC on an on-going basis as to the restructuring of its
organization including departments, personnel and functions.
2. FEES. MAC agrees to pay Monroe for its services as follows:
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(a) A financial advisory fee ("Advisory Fee") equal to (i) 5% of the
Consideration (as defined below) paid up to $1 million, plus (ii) 4%
of the Consideration paid in excess of $1 million and up to $2
million, plus (iii) 3% of the Consideration paid in excess of $2
million and up to $3 million, plus (iv) 2% of the Consideration paid
in excess of $3 million and up to $4 million, plus (v) 1% of the
Consideration paid in excess of $4 million.
(b) Private placement fee ("Private Placement Fee") equal to three
quarters of one percent (0.75%) of the principal amount committed
under the senior credit facility. An additional fee shall be payable
upon increases in such amount or upon refinancings with a new lender
during the term of this Agreement. Such additional fee shall be equal
to three quarters of one percent (.75%) of the principal amount upon a
refinancing with a new lender or one half of one percent (.50%) of the
incremental principal amount authorized by the same lender.
(c) Consulting fees ("Consulting Fees") based on projects and fee
schedules to be mutually agreed upon by Monroe and a majority of the
independent directors, (not including Xxxxx X. Xxxxxx) of MAC.
All fees in connection with Sections 2(a) and (b) above shall be paid
to Monroe in cash at the closing of the relevant Transaction. All other
Consulting Fees shall be payable on a monthly basis as services are rendered. An
Advisory Fee shall be payable
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May 11, 1998
Page 3
to Monroe for Transactions entered into by the Company during the term of this
Agreement and within 6 months after the expiration of such term.
In the context of this Agreement "Consideration" means the value of all
cash, securities, assumption of debt of the Prospective Target and any other
forms of payment to the Prospective Target pursuant to a Transaction, including
the total of all interest bearing indebtedness including long term debt,
payments for noncompete agreements and earn-out obligations and other
obligations of the Prospective Target that are assumed or refinanced by MAC in
connection with the closing of a Transaction. The term "Consideration"
expressly includes any payments for noncompete agreements and excess employment
compensation to the existing shareholders and employees of a Prospective Target.
If all or any portion of the Consideration payable in connection with any
Transaction includes contingent future payments, then MAC shall pay to Monroe a
mutually agreed upon amount based upon the discounted value of such contingent
future payments.
If the Company requests Monroe to assist in arranging any transaction or to
engage in any consulting project that is not otherwise covered by the provisions
of this Agreement and Monroe agrees to pursue such a transaction or consulting
project, MAC agrees to pay Monroe mutually acceptable compensation taking into
account, among other things, the results obtained and the custom and practice
among investment bankers and consultants acting in similar transactions or
consulting assignments. Monroe will not perform any services which it believes
are not covered by the provisions of this Agreement, unless Monroe agrees to the
nature and scope of such services and is authorized to do so by the Company in a
writing which specifies the agreed-upon additional compensation for such
services.
3. EXPENSE REIMBURSEMENT. The Company agrees to reimburse Monroe for all of
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its reasonable out-of-pocket expenses in connection with the performance of
its activities under the terms of this Agreement. Reasonable out-of-pocket
expenses include, but are not limited to, costs such as printing,
telephone, courier services, direct computer expenses, legal and accounting
expenses, accommodations and travel. All such fees, expenses and costs will
be billed monthly and shall be payable upon the Company's receipt of the
applicable invoice. The parties' obligations under this section shall
survive the termination or expiration of this Agreement.
4. TERM; EXCLUSIVITY. The term of Monroe's engagement hereunder as the
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Company's exclusive financial advisor shall commence on the date hereof and
shall expire on the third anniversary of the date hereof. During the term
of this Agreement, Monroe shall have the exclusive right to represent the
Company in connection with specific services described in Section 1.
Moreover, the Company will be required to use Monroe in connection with all
Transactions contemplated by it during the term of this Agreement and shall
pay Monroe for its services pursuant to Section 2 hereof.
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May 11, 1998
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Monroe, on the other hand, shall be free to perform such services for any
other party or parties at any time during and after the term of this
Agreement.
5. INDEMNITY. In addition to the fees and reimbursement of expenses provided
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for above, the parties agree to the indemnification provisions set forth as
Annex A hereto, which are incorporated herein by reference and shall be
deemed to be included in this Section 5. The parties' obligations under
this Section 5 shall survive the termination or expiration of this
Agreement.
6. INFORMATION. The Company shall furnish, or cause to be furnished, to
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Monroe all information reasonably requested by Monroe for the purpose of
rendering services hereunder (all such information being the
"Information"). In addition, the Company agrees to make available to Monroe
upon request from time to time the officers, directors, accountants,
counsel and other advisors of the Company. The Company recognizes and
confirms that Monroe (a) will use and rely on the Information and on
information available from generally recognized public sources in
performing the services contemplated by this Agreement without having
independently verified the same; and (b) does not assume responsibility for
the accuracy or completeness of the Information and such other information.
The Company agrees that all information furnished to Monroe in connection
with this Agreement shall be accurate in all material respects at the time
provided and that if such information, in whole or in part, becomes
materially inaccurate, misleading or incomplete during the term of Monroe's
engagement hereunder, the Company shall promptly so advise Monroe in
writing and correct any such inaccuracy or omission.
7. DISCLOSURE. Each party agrees that, except as compelled by law, it will
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not disclose the services or advice to be provided by Monroe under this
Agreement or any Information publicly or to any third party, without the
approval of the other party. It is understood that the existence and terms
of this Agreement will be disclosed as part of the Company's S-1
registration Statement. Notwithstanding the above, upon the completion of a
Transaction, Monroe shall be permitted to publicize the services it
provided in connection with such Transaction.
8. GOVERNING LAW: AMENDMENTS. This Agreement shall be governed by and
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construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to conflict of law principles thereof. This Agreement
may not be amended or modified except in writing signed by both parties.
9. SUCCESSORS. This Agreement and all rights, liabilities and obligations
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hereunder shall be binding upon and inure to the benefit of each party's
successors but may not be assigned without the prior written approval of
the other party which shall not be unreasonably withheld.
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May 11, 1998
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10. NO BROKERS. The Company represents and warrants to Monroe that there is no
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other person or entity that is entitled to a finder's fee or any type of
brokerage commission in connection with the transactions contemplated by
this Agreement as a result of any agreement or understanding with such
person or entity which creates an interest in the compensation payable to
Monroe hereunder or impairs Monroe's interest in such compensation. The
Company agrees to indemnify and hold harmless Monroe from and against any
actions, suits, claims, costs, expenses, losses and liabilities arising out
of any breach of the foregoing sentence.
Very truly yours,
MONROE & COMPANY, LLC
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, Manager
Agreed to and accepted as of
the 11th day of May, 1998
MONROE, INC.
BY: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, President
ANNEX A
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The Company agrees to indemnify Monroe, its members, managers, employees,
directors, officers, agents, affiliates and each person, if any, who controls it
within the meaning of either Section 20 of the Securities Exchange Act of 1934
or Section 15 of the Securities Act of 1933 (each such person, including Monroe,
is referred to as an "Indemnified Party") from and against any losses, claims,
damages and liabilities, joint or several (including all legal or other expenses
reasonably incurred by any Indemnified Party in connection with the preparation
for or defense of any threatened or pending claim, action or proceeding, whether
or not resulting in any liability) ("Damages"), to which such Indemnified Party,
in connection with its services or arising out of its engagement hereunder, may
become subject under any applicable Federal or state law or otherwise, including
but not limited to liability (i) caused by or arising out of an untrue statement
or an alleged untrue statement of a material fact or the omission or the alleged
omission to state a material fact necessary in order to make a statement not
misleading in light of the circumstances under which it was made, (ii) caused by
or arising out of any act or failure to act or (iii) arising out of Monroe's
engagement or the rendering by any Indemnified Party of its services under this
Agreement; provided, however, that the Company will not be liable to the
Indemnified Party hereunder to the extent that any Damages are found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence, bad faith or willful misconduct of the Indemnified
Party seeking indemnification hereunder.
These indemnification provisions shall be in addition to any liability
which the Company may otherwise have to any Indemnified Party.
If for any reason, other than a final non-appealable judgment finding an
Indemnified Party liable for Damages for its gross negligence, bad faith or
willful misconduct, the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then the Company
shall contribute to the amount paid or payable by an Indemnified Party as a
result of such Damages in such proportion as is appropriate to reflect not only
the relative benefits received by the Company and its shareholders on the one
hand and Monroe on the other, but also the relative fault of the Company and the
Indemnified Party as well as any relevant equitable considerations, subject to
the limitation that in no event shall the total contribution of all Indemnified
Parties to all such Damages exceed the total amount of fees actually received
and retained by Monroe hereunder.
Promptly after receipt by the Indemnified Party of notice of any claim or
of the commencement of any action in respect of which indemnity may be sought,
the Indemnified Party will notify the Company in writing of the receipt or
commencement thereof and the Company shall have the right to assume the defense
of such claim or action (including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of fees and expenses of
such counsel), provided that the Indemnified Party shall have the right to
control its defense if, in the opinion of its counsel, the Indemnified Party's
defense is unique or separate to it as the case may be as
opposed to a defense pertaining to the Company. In any event, the Indemnified
Party shall have the right to retain counsel reasonably satisfactory to the
Company, at the Company's expense, to represent the Indemnified Party in any
claim or action in respect of which indemnity may be sought and agrees to
cooperate with the Company and the Company's counsel in the defense of such
claim or action, it being understood, however, that the Company shall not, in
connection with any one such claim or action or separate but substantially
similar or related claims or action in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys, for all the Indemnified
Parties unless the defense of one Indemnified party is unique or separate from
that of another Indemnified Party subject to the same claim or action. In the
event that the Company does not promptly assume the defense of a claim or
action, the Indemnified Party shall have the right to employ counsel reasonably
satisfactory to the Company, at the Company's expense, to defend such claim or
action. The omission by an Indemnified Party to promptly notify the Company of
the receipt or commencement of any claim or action in respect of which indemnity
may be sought will relieve the Company from any liability the Company may have
to such Indemnified Party only to the extent that such a delay in notification
materially prejudices the Company's defense of such claim or action. The Company
shall not be liable for any settlement of any such claim or action effected
without its written consent, which shall not be unreasonably withheld or
delayed. Any obligation pursuant to this Annex A shall survive the termination
or expiration of this Agreement.
