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EXHIBIT 10.20
[SEARCH CAPITAL GROUP, INC. LETTERHEAD]
May 24, 1995
VIA FACSIMILE
Xx. Xxxxx Xxxxxxx
Xxxx. Xxxxx & Sons
0000 Xxxxxx xx xxx Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Dear Xxxxx:
Attached please find your letter agreement executed as of this date.
My compliments for your changes in a very timely fashion.
We also will mail a hard copy to follow. Attached also please find for
your information a prospective news release, subject to the finalization of the
written legal settlement today. We should be issuing this tomorrow, if not, at
the latest, next Tuesday.
Please confirm with me or Xxxxx your clearance related to Xxxx. Xxxxx'x
portion. We will be talking with you next week.
Sincerely,
[ILLEGIBLE]
GCE:li
Attachments
cc: Xxx Xxxxxx
Xxxxxx Xxxx
P.S. Please clear the news release as soon as possible today. Thanks.
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[XXXX. BROWN & SONS INCORPORATED LETTERHEAD]
May 23, 1995
Xx. Xxxxxx X. Xxxxx
Chairman of the Board, President
and Chief Executive Officer
Search Capital Group, Inc.
000 X. Xxxxx Xxxxxx - Xxxxx 000
Xxxxxx, XX 00000-0000
Dear Xxxxxx:
This letter agreement (the "Agreement") confirms the understanding and
agreement between Search Capital Group, Inc. ("Search" or the "Company"), and
Xxxx. Xxxxx & Sons Incorporated ("Xxxx. Xxxxx" or the "Financial Advisor") as
follows:
1. The Company hereby retains Xxxx. Xxxxx to render financial
advisory services to the Company, on the terms and subject to
the conditions set forth herein, in connection with the
restructuring of certain secured notes (the "Notes") of eight
Securitization Subsidiaries of the Company. The Notes
currently total approximately $70 million in aggregate
outstanding principal as detailed in Exhibit I. Such proposed
restructuring, whether by a solicitation of waivers and
consents with respect to the Notes or an exchange offer
involving new securities, or a settlement on the existing
securities, or other similar transactions is hereinafter
referred to as the "Restructuring".
2. Xxxx. Xxxxx'x services will include, as necessary:
(a) Evaluating from a financial point of view the
Company's business operations and projections;
(b) Determining the Company's and each of the
Securitization Subsidiaries' debt capacity in light
of its projected cash flows;
(c) Rendering financial advice to the Company and
participating in any meetings or negotiations with
the Noteholders and/or their representatives in
connection with any restructuring, modification or
refinancing of the Notes, including any solicitation
of waivers, consents or exchanges that may be
required as a part of the Restructuring;
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Search Capital Group, Inc.
May 23, 1995
Page 2
(d) Rendering financial advice to the Company and
participating in any meetings or negotiations with
GECC or any other prospective lender in connection
with any secured lending facility;
(e) Providing the Company with general capital
restructuring advice;
(f) Assisting the Company in the development of a
specific restructuring proposal to present to the
Noteholders;
(g) Advising the Company on specific tactics and strategy
for negotiating with the Noteholders;
(h) Assisting the Company with potential exchange offers;
(i) Advising the Company with respect to the timing, the
nature and the terms of securities or other
inducements to be offered pursuant to the
Restructuring;
(j) Assisting the Company in the preparation of any
documentation required in connection with the
restructuring of the Notes;
(k) Providing the Company with general restructuring
advice from a financial point of view, as required.
3. As consideration for Xxxx. Xxxxx'x services as set forth
herein, the Company agrees to pay Xxxx. Xxxxx certain
restructuring fees as follows:
(a) Upon acceptance of this Agreement and on the 15th of
each succeeding month, the Company shall pay Xxxx.
Xxxxx a monthly cash fee of $60,000.
(b) Upon the completion of the Restructuring, the Company
shall pay Xxxx. Xxxxx a success fee, in the form of
cash, equal to 8/10ths of one percent (i.e. 0.8% of
the aggregate outstanding principal amount of any
Notes participating in such Restructuring. The
monthly fees described in 3(a) above will be
credited against the fee due, in 3(b). In the event
no Restructuring is undertaken, Xxxx. Xxxxx will only
be paid the monthly cash fee, as provided for in 3(a)
above.
(c) Upon the completion of the Restructuring, the Company
shall pay Xxxx. Xxxxx a success fee, in the form of
common stock of Search Capital Group, Inc., equal to
4/10th of one percent (i.e. 0.4%) of the aggregate
outstanding principal amount of any Notes
participating in such Restructuring. In calculating
the number of shares to be provided to Xxxx. Xxxxx,
the success
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Search Capital Group, Inc.
May 23, 1995
Page 3
fee shall be divided by the average of the per share
closing bid price for the 30 consecutive trading days
beginning with the first trading day which is 60
calendar days after the completion of the
Restructuring. In the event that trading prices are
not available for any 10 or more of these 30
consecutive trading days, Xxxx. Xxxxx shall have the
option to receive 50% of this fee in cash.
(d) In the event that the Restructuring is completed
under a pre-packaged bankruptcy filing, the Company
shall endeavor to retain Xxxx. Xxxxx as its financial
advisor on terms consistent with this Agreement.
(e) Except as noted in paragraph 2 above, the advisory
services and compensation arrangements set forth
herein do not encompass other investment banking
services, such as raising new debt or equity capital,
the solicitation of a third party investor, specific
asset sales, of any other similar transaction which
might be undertaken by Xxxx. Xxxxx, nor do they
include any expansion of the Financial Advisor role
beyond that outlined in this letter. To the extent
that the Company requires such additional services,
the Xxxx. Xxxxx will be entitled to compensation
relating to such services as mutually agreed to by
Xxxx. Xxxxx and the Company.
4. This Agreement may be terminated by the Company or the
Financial Advisor by written notice, with or without cause,
effective immediately upon receipt. Notwithstanding
termination of this Agreement, the Financial Advisor will be
entitled to receive: (i) reimbursement of all out-of-pocket
expenses through the effective date of termination, (ii) any
monthly restructuring fees that have been earned prior to such
termination, and (iii) the full benefit of the indemnity and
reimbursement provisions detailed in Addendum A which shall
remain in full force and effect. Furthermore, if within six
months after termination by the Company, the company completes
a restructuring substantially similar to such restructuring
recommended by the Financial Advisor, then the Financial
Advisor shall be entitled to the success fee in 3(b) and 3(c)
above.
5. In addition to any fees that may be payable to the Financial
Advisor, the Company shall reimburse the Financial Advisor for
all: (i) out-of-pocket expenses (including travel and lodging,
data processing and communications charges, courier and other
appropriate expenditures, and any expenses of counsel incurred
by the Financial Advisor with the Company's consent) and (ii)
fees and expenses (including expenses of counsel, if any) to
the extent described in Addendum A. Xxxx. Xxxxx agrees to
promptly notify the Company if it retains counsel. Xxxx. Xxxxx
will also provide the Company with a periodic summary of its
expenses and will notify the Company when its total expenses
have reached $25,000 and in increments of $10,000
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Search Capital Group, Inc.
May 23, 1995
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thereafter. Xxxx. Xxxxx'x expense policy is attached as
Addendum B.
6. In connection with the Financial Advisor's activities, the
Company will furnish the Financial Advisor with all
information concerning the Company which is necessary for the
Financial Advisor to perform its duties under this Agreement
and provide access to the Company's management, and its
outside attorneys and accountants (the "Information"). The
Company represents that to the best of its knowledge, unless
indicated otherwise, all Information will be complete and
correct in all material respects and will not contain any
materially untrue statement of a material fact. The Financial
Advisor will be using and relying on the Information without
independent verification thereof or independent appraisal of
any of the Company's assets and the Financial Advisor shall
bear no liability with respect to any services rendered by the
Financial Advisor pursuant to this Agreement, in which it used
or relied upon, directly or indirectly, any Information which
was incomplete or incorrect in any material respect or
contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the
statements therein not misleading in light of the
circumstances in which they were made. The Company agrees that
it will provide all information necessary to the Financial
Advisor to perform its duties including but not limited to
adequate and sufficient information as to all material aspects
of the Restructuring.
7. The Company is signing this Agreement solely for the purpose
of inducing the Financial Advisor to act hereunder and
undertakes to provide all compensation, reimbursement, as well
as indemnification and contribution as provided herein.
Accordingly, the Company agrees to the indemnification and
contribution provisions (the "Indemnification Provisions")
attached to this Agreement as Addendum A and incorporated
herein in their entirety, as well as the compensation and
reimbursement provisions contained herein.
8. The benefits of this Agreement shall inure to the respective
successors and assigns of the parties hereto and of the
indemnified parties hereunder and their respective successors
and assigns and representatives, and the obligations and
liabilities assumed in this Agreement by the parties hereto
shall survive the termination of the Financial Advisor's
engagement and shall be binding upon their respective
successors and assigns. Xxxx. Xxxxx agrees not to assign this
Agreement without the prior consent of the Company, which will
not be unreasonably withheld.
9. The Company will not make any written reference to the
Financial Advisor or this Agreement or any statements
contained herein in connection with any proposal made by the
Company or in any press release or other public disclosure
announcing any such proposal or the acceptance thereof or in
any public filing by the Company
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Search Capital Group, Inc.
May 23, 1995
Page 5
without the prior approval of the Financial Advisor, which
shall not be unreasonably withheld except to the extent that
such disclosure is required by law or requested by any
governmental or regulatory agency or body.
10. This Agreement and the indemnification letter, attached as
Addendum A, incorporate the entire understanding of the
parties with respect to the subject matter of this Agreement
and supersede all previous agreements should they exist.
11. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which shall constitute
one and the same instrument.
12. This Agreement may not be amended or modified except in
writing executed by the Company and the Financial Advisor, and
shall be governed by and construed in accordance with the laws
of the State of New York, without regard to principles of
conflicts of law.
If the foregoing letter is in accordance with your understanding of
the terms of our engagement, please sign and return to us the enclosed
duplicate hereof.
Very truly yours,
XXXX. BROWN & SONS INCORPORATED
By: /s/ XXXXX X. XXXXXXX
------------------------------------
Xxxxx X. Xxxxxxx
Managing Director
Accepted and Agreed:
Search Capital Group, Inc.
By: /s/ XXXXXX X. XXXXX
-------------------------------------
Xxxxxx X. Xxxxx
Chairman of the Board, President
and Chief Executive Officer
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ADDENDUM A
In connection with the engagement of Xxxx. Xxxxx & Sons Incorporated
("Xxxx. Xxxxx") as a financial advisor, pursuant to a separate engagement
letter (the "Letter") between Xxxx. Xxxxx and the Company (as defined in the
Letter), the Company agrees to indemnify and hold harmless Xxxx. Xxxxx and each
of its directors, officers, agents, employees and controlling persons (within
the meaning of the Securities Act of 1933, as amended) against any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
related to or rising out of Xxxx. Xxxxx'x engagement and will reimburse Xxxx.
Xxxxx and each other person indemnified hereunder for all legal and other
expenses as such expenses are incurred in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding whether
or not in connection with pending or threatened litigation in which Xxxx. Xxxxx
or any other indemnified person is a party; provided, however, that the Company
will not be liable in any such case (except cases arising out of the use of
information provided by the Company) for losses, claims, damages, liabilities
or expenses that a court of competent jurisdiction shall have found in a final
judgment to have arisen primarily from the gross negligence or willful
misconduct of the person seeking indemnification.
In case any proceeding shall be instituted involving any person in
respect of whom indemnity may be sought, such person (the "indemnified party")
shall promptly notify the Company, but failure to so notify the Company will
not relieve it from any liability which it may have hereunder or otherwise,
except to the extent such failure materially prejudices the Company's rights.
The Company, upon the request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the Company may designate in such proceeding and shall pay
as incurred the fees and expenses of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain
its own counsel at its own expense, except that the Company shall pay as they
are incurred the fees and expenses of counsel retained by the indemnified party
in the event that (i) the Company and the indemnified party shall have mutually
agreed to the retention of such counsel or, (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Company and the
indemnified party and representation of both parties by the same counsel would
be inappropriate, in the reasonable opinion of the indemnified party, due to
actual or potential differing interests between them. The Company will not be
liable, without its consent, for the fees and expenses of more than one counsel
in any proceeding.
The Company shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there is a final judgment for the plaintiff, the Company agrees to indemnify
the indemnified party to the extent set forth herein. In addition the Company
will not, without the prior written consent of Xxxx. Xxxxx, which consent will
not be unreasonably withheld, settle or compromise or consent to the entry or
any judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not Xxxx.
Xxxxx or any indemnified party is an actual or potential party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of Xxxx. Xxxxx and each other indemnified
party hereunder from all liability arising out of such claim, action, suit or
proceeding.
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In the event a claim for indemnification hereunder is determined to be
unenforceable by a final judgment of a court of competent jurisdiction, then
the Company shall contribute to the aggregate losses, claims, damages or
liabilities to which Xxxx. Xxxxx or its officers, directors, agents, employees
or controlling persons may be subject in such amount as is appropriate to
reflect the relative benefits received by each of the Company and the party
seeking contribution on the one hand and the relative faults of the Company and
the party seeking contribution on the other, as well as any other relevant
equitable considerations.
This indemnification shall apply to the engagement as set forth in the
Letter and any modification of the engagement and the indemnification provided
herein shall survive termination of Xxxx. Xxxxx'x engagement and shall be
binding upon any successors or assigns of the Company.
Acknowledged and Agreed:
Search Capital Group, Inc.
By: /s/ XXXXXX X. XXXXX
-------------------------------------
Xxxxxx X. Xxxxx
Chairman of the Board, President
and Chief Executive Officer
Date: 5/24/95
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EXHIBIT I
(AS OF MARCH 31, 1995)
NOTE
FUND PAYABLE
ACF $1,948,000
ACF 91-III 665,000
ACP 10,000,000
ACF 92-II 10,000,000
ACF III 15,000,000
ACF IV 10,000,000
ACF V 19,872,000
ACF VI 10,675,000
-----------
TOTAL $69,160,000
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ADDENDUM B
XXXX. BROWN & SONS
EXPENSE POLICY GUIDELINES
Xxxx. Xxxxx'x charges for expenses to the client are determined
pursuant to Xxxx. Xxxxx'x Travel and Entertainment Policy. Out-of-pocket
expenses incurred by Xxxx. Xxxxx are charged to a client if the expenses are
incurred in connection with services rendered for such particular client. In
particular, Xxxx. Xxxxx'x internal policies with respect to out-of-pocket
expenses billed to clients are set forth below:
(a) TRAVEL AND LODGING: All airfare charges billed to a client are based
on coach fare rates. Booking air travel first class is permitted only: (1) when
traveling with clients who are traveling first class, (2) and on domestic red
eye flights. Business class over and coach on the return flight is permitted on
international flights exceeding 7 hours. Business class round trip is
permitted for international flights exceeding 10 hours. Xxxx. Xxxxx has only
traveled coach airfare on this assignment.
With respect to local travel, Xxxx. Xxxxx'x general policy enables
employees to travel by taxi or private car service to and from meetings while
rendering services to a client on a client related matter, for which the client
is charged. This policy is based on Xxxx. Xxxxx'x determination that travel by
taxi or private car service is the most efficient use of a professional's time.
Xxxx. Xxxxx employees are not permitted to charge commutation expenses to a
client unless the employee is travelling after 8:00 p.m. or on a weekend.
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(b) MEALS: Xxxx. Xxxxx'x general policy permits its employees to bill
lunch or dinner meals to a client if the employee is required to render
services during such meal time to the client due to extreme time constraints.
Xxxx. Xxxxx employees are also permitted to bill clients for meals while
travelling on behalf of clients and their related matters. Xxxx. Xxxxx
employees are permitted to order meals in the office if the Alex, Xxxxx
employee is required to work after 8:00 p.m. or on weekends,
(c) COMPUTER ACCESS: Xxxx. Xxxxx bills its clients for time spent by its
employees on computer databases. Xxxx. Xxxxx purchases or leases such
databases from third party sources typically for a monthly fee. Such databases
are used to retrieve market price data (ie. such as stock or bond prices) and
financial information. For example, information from Securities Data
Company, a capital markets database, is required in analyzing comparable
companies. Xxxx. Xxxxx charges clients a fee of $250.00 a month for these
computer charges.
(d) POSTAGE AND MAILING: Messengers and couriers (including Federal
Express) are used by Xxxx. Xxxxx to deliver hard copy documents relating to the
client matter which require receipt on an expedited basis; otherwise, Xxxx.
Xxxxx uses the regular postal system. Any charges for either messengers and
couriers are billed to a client at cost.
(e) PRINTING EXPENSES: Xxxx. Xxxxx'x ability to produce color charts,
large volumes of reports and certain types of presentation slides is limited by
space and mechanical constraints. Outside production companies are used for
projects that can not be handled by Xxxx. Xxxxx'x in-house production
capabilities. Any charges for outside production are billed to a client at
cost.
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(f) DISCLOSURE INFORMATION SERVICES: Outside financial research consists
of charges from outside services, principally Disclosure Information Services,
which supply, for a fee, financial documents to Xxxx. Xxxxx. Such outside
charges are billed to a client at cost. Financial research services generally
consist of the retail of financial documents filed with the Securities and
Exchange Commission or other governmental and regulatory agencies.
(g) REPRODUCTION COSTS: Xxxx. Xxxxx bills photocopying charges at the rate
of $.25 per page.
(h) COMMUNICATIONS: Xxxx. Xxxxx employees must stay in contact with their
office while they are travelling. These charges consist of phone cards and air
or rail phone.