[LETTERHEAD OF EQUITY GROUP INVESTMENTS, L.L.C.]
April 14, 1999
Board of Directors
Danielson Holding Corporation
767 Third Avenue
New York, NY 10017-2023
Attention: Martin J. Whitman
Chairman and Chief Executive Officer
Ladies and Gentlemen:
This letter will confirm our understanding of the basis on which Equity
Group Investments, L.L.C. ("EGI") will provide, on a non-exclusive basis,
certain advisory services to Danielson Holding Corporation (together with its
affiliates and subsidiaries, the "Company") in connection with potential
business acquisitions by the Company, whether by purchase of capital stock or
other assets or by merger, joint venture or otherwise ("Acquisition
Transactions").
1. Services. To the extent requested by the Company and deemed
appropriate by EGI, EGI shall assist the Company in identifying and evaluating
candidates for Acquisition Transactions, assist the Company in evaluating and
responding to inquiries and proposals that may be received by the Company
regarding potential Acquisition Transactions, assist the Company in negotiations
in respect of Acquisition Transactions and consult with and assist counsel and
accountants in the structuring and execution of Acquisition Transactions.
2. Transaction Fee. In consideration of our services as described
herein, the Company agrees to pay EGI, at the closing of any Acquisition
Transaction in respect of which the Acquisition Committee of the Company's
Board of Directors (or the Board of Directors in the event there is no
Acquisition Committee) has determined, by the affirmative vote of a majority
of its members, that EGI has provided material services as contemplated by this
letter, a transaction fee in cash in the amount of 1% of the Aggregate
Consideration (as hereinafter defined) in the Acquisition Transaction.
"Aggregate Consideration" means the sum of the value of all cash, securities
(whether debt or equity) and other property paid or payable or otherwise to be
distributed (including, without limitation, by exchange of securities) by
the Company to the selling party or its equity owners, plus the amount of
indebtedness, preferred stock or similar items assumed or remaining
outstanding, in connection with an Acquisition Transaction.
3. Reimbursement of Expenses. In addition to the fee described above
and whether or not any proposed Acquisition Transaction is consummated, the
Company agrees to periodically reimburse EGI, upon request: (i) EGI's travel and
other out-of-pocket expenses, provided, however, that in the event such expenses
exceed $5,000 in the aggregate with respect to any single proposed Acquisition
Transaction, EGI shall first obtain the Company's consent before incurring
additional reimbursable expenses, and (ii) provided the Company's prior consent
to their engagement with respect to any particular proposed Acquisition
Board of Directors April 14, 1999
Danielson Holding Corporation Page 2
Transaction is obtained, all reasonable fees and disbursements of counsel
(including, without limitation, the law firm of Rosenberg & Liebentritt, P.C.),
accountants and other professionals, incurred from and after the date hereof in
connection with EGI's services under this letter. The Company agrees that, in
lieu of reimbursing EGI for such expenses, EGI may forward to the Company
invoices for the same, and the Company shall promptly pay such invoices directly
to the payee.
4. Indemnification; No Liability. In consideration of our services as
described herein, the Company agrees to indemnify and hold harmless EGI, its
direct and indirect affiliates and each of their respective directors, officers,
agents, employees, representatives, shareholders, partners, members and other
affiliated persons (each of the foregoing an "Indemnified Party) against any and
all losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) relating to or arising out of this letter agreement or EGI's provision
of services hereunder and will reimburse each Indemnified Party for reasonable
attorneys', accountants', investigators', and experts' fees and expenses and
other out-of-pocket fees and expenses 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 any
Indemnified Party is a party; provided, however, that the Company will not be
liable in any such case for losses, claims, damages, liabilities or expenses
that a court of competent jurisdiction shall have determined in a final
unapealable judgment to have arisen primarily from the gross negligence, bad
faith or willful misconduct of the Indemnified Party seeking indemnification. In
addition, neither EGI nor any other Indemnified Party shall have any liability
(whether direct or indirect, in contract, tort or otherwise) related to or
arising from this letter agreement or EGI's provision of services hereunder,
except for liability for losses, claims, damages and expenses that a court of
competent jurisdiction shall have determined in a final unapealable judgment to
have arisen primarily from EGI's gross negligence, bad faith or willful
misconduct. The Company expressly acknowledges and agrees that each Indemnified
Party is an intended third party beneficiary of this paragraph 4, and that each
Indemnified Party shall have the right individually to enforce the terms and
provisions of this paragraph 4.
5. This letter agreement (a) shall be governed by, and construed in accordance
with, the laws of the State of Illinois without regard to the principles of
conflicts of law, (b) contains the complete and entire understanding and
agreement of EGI and the Company with respect to the specific subject matter
hereof, and supersedes all unperformed prior understandings, conditions and
agreements, oral or written, express or implied, respecting EGI's provision of
services in connection with any contemplated Acquisition Transaction and the
other subject matter specifically addressed herein, and (c) may be amended or
modified in a writing duly executed by both of the parties hereto and not by any
course of conduct, course of dealing or purported oral amendment or
modification. The waiver by either party of a breach of any provision of this
letter agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach of that provision or any other provision hereof.
6. Neither EGI nor the Company may assign or delegate their rights or
obligations under this letter agreement without the express written consent of
the other party hereto, which consent shall not be unreasonably withheld, except
that (i) EGI may assign any and all of its rights under this letter agreement to
receive payment of fees and reimbursement of EGI's expenses as provided in this
letter agreement, and (ii) the Company's rights and obligations hereunder may be
assigned and delegated by operation of law pursuant to any merger,
reorganization or similar business combination. This letter agreement and all
the obligations and
Board of Directors April 14, 1999
Danielson Holding Corporation Page 3
benefits hereunder shall be binding upon and shall inure to the successors and
permitted assigns of the parties.
If the foregoing accurately sets forth our understanding, please so signify by
signing and returning to us the enclosed duplicate hereof.
Very truly yours,
EQUITY GROUP INVESTMENTS, L.L.C.
By: /s/ Donald J. Liebentritt
________________________________
Vice President
Accepted and agreed
to as of the date first
above written:
DANIELSON HOLDING CORPORATION
By: /s/ David Barse
___________________
President