Exhibit 10.18
ABN AMRO engagement letter dated March 7, 1996 as amended January 16, 1998
Chicago Dearborn Company
One First National Plaza, Suite 3350
Chicago, IL 60603
March 7,1996
Mr. Werner E. Neuman
President
Corcom, Inc.
844 East Rockland Road
Libertyville, IL 60048-3375
Dear Mr. Neuman:
The Chicago Dearborn Company ("Chicago Dearborn") is pleased to set forth
the terms of this engagement letter agreement (the "Agreement") relating to
its retention for financial advisory services by Corcom, Inc. ("Corcom").
1. Description of Engagement. Chicago Dearborn agrees to act as the
exclusive financial advisor and agent for Corcom to provide financial
advisory and investment banking services in connection with a financial
evaluation of Corcom and a review of financial and strategic alternatives.
The terms of this Agreement shall extend from the date of this letter for a
period of twelve months thereafter, and may be extended on a quarter-to-
quarter basis by mutual written consent of the parties hereto, hereinafter
referred to as the "Term".
2. Services to be Provided. In connection with its financial evaluation
of Corcom, a review of financial and strategic alternatives and a Transaction,
as defined herein, Chicago Dearborn will, or will stand ready to:
Review the businesses, operations and assets of Corcom; Analyze the historical
and projected financial performance of Corcom;
Prepare an information package describing the business and prospects of
Corcom;
Formulate a strategy for discussions and negotiations with potential partners;
Compile a list of potential partners and, at Corcom's request, contact
potential partners to present the opportunity and distribute the information
package;
Coordinate and assist in due diligence meetings with potential partners;
Assist in the negotiations and execution of a definitive purchase agreement
pursuant to a Transaction, as defined herein
Render an opinion to the Board of Directors of Corcom, if requested, as to the
fairness of any Transaction, as defined herein, to the shareholders of Corcom
from a financial point of view; and
Provide, as deemed appropriate by Chicago Dearborn, additional financial
advisory services related to a Transaction, as defined herein.
3. Compensation. In consideration of Chicago Dearborn providing, or
standing ready to provide, the financial advisory services described in
paragraph 2 above, Corcom agrees to pay to Chicago Dearborn the following:
a) a non-refundable Retainer of $25,000 per quarter, due and payable in
advance, with the first quarter payable upon signing of this Agreement, and
with such Retainer to be credited against any Financial Advisory Fee payable
pursuant to paragraph 3b below, and
b) in the event there is a transaction or series of transactions
("Transaction") whereby, directly or indirectly, control or a material
interest in the stock or assets of Corcom is transferred for consideration,
including, without limitation, by means of a merger, consolidation, sale of
assets, sale of stock, stock or rights offering, tender or exchange offer,
leveraged buyout, the formation of a joint venture or partnership,
recapitalization, restructuring, business combination or investment by
another entity involving Corcom, Corcom agrees to pay Chicago Dearborn a
Financial Advisory Fee equal to:
(i) $150,000 on the first $10.0 million of the Transaction Value,
as defined in paragraph 4 below, and
(ii) 1.50% of the Transaction Value, as defined in paragraph 4
below, in excess of $10.0 million.
c) If so requested by the Board of Directors of Corcom, Chicago Dearborn
shall render one or more opinions ("Opinions"), verbal or written, regarding
the terms of any proposed Transaction, from a financial point of view. In such
an event, Corcom will pay Chicago Dearborn a one time opinion fee (the
"Opinion Fee") of $100,000 in cash upon delivery of the first of such
Opinions. Corcom agrees that (a) the Opinions shall be used solely by the
Board of Directors of Corcom, including any Committee thereof, in considering
the terms of the proposed Transaction and (b) Corcom shall not furnish the
Opinions or any summaries or excerpts thereof to any other person or persons
or use the Opinions for any other purpose without the prior written approval
of Chicago Dearborn; provided, however, that in any event, Corcom is hereby
authorized to use or introduce into evidence or otherwise refer to the
Opinions in connection with any litigation relating to the proposed
Transaction or as otherwise required, in the reasonable judgment of counsel
for Corcom, by law. Corcom also may, in its discretion, publish or refer to
the Opinions in any proxy statement or otherwise in connection with the
proposed Transaction, so long as Chicago Dearborn gives its prior written
consent to such publication or reference, which consent shall not be
unreasonably withheld. The Opinion Fee shall be credited against the
Financial Advisory Fee payable under paragraph 3b above.
Subject to the provisions set forth in paragraph 11 herein, this Financial
Advisory Fee shall be payable in immediately available funds on the closing
date of a Transaction regardless of whether such closing occurs during the
Term or such Transaction is initiated during the Term and is closed within
nine months of the Term. Corcom's obligation to pay the Financial Advisory
Fee shall be contingent solely upon closing of a Transaction. The Financial
Advisory Fee shall not include any fees earned by Chicago Dearborn or others
for furnishing services other than as provided herein, such as fees payable
in connection with the placement or arrangement of any debt or equity
financing necessary to consummate a Transaction or advisory work unrelated to
the Transaction including, without limitation, advisory fees associated with
any divestitures of assets by Corcom following a Transaction.
4. Definition of Transaction Value. "Transaction Value" shall be defined
as the total consideration paid for the stock (including stock options or
stock issuable pursuant to stock options) or assets of Corcom and will be the
sum of all cash, the market value of any securities issued (if the securities
are not readily marketable, the market value will be established at fair
value or by mutual agreement) as consideration towards the purchase of such
stock or assets, the present value of (i) any non-compete payments payable
pursuant to a Transaction, (ii) any post-closing adjustments, (iii) any
contingent future payments (such amounts to be determined in good faith
negotiations between Corcom and Chicago Dearborn) using a discount rate of 10%
per annum, and the unpaid principal amount of any funded-debt obligation
(debt for borrowed money including, without limitation, any interest-bearing
debt or capitalized lease obligation) of Corcom assumed or discharged pursuant
to a Transaction, or in the case of a purchase of stock of Corcom, the amount
of such obligations at the time of closing of a Transaction.
5. Expenses. In addition to the Financial Advisory Fee and Retainer
described in paragraph 3 above, Corcom agrees to promptly reimburse Chicago
Dearborn, upon request, for all reasonable travel and external legal fees and
other out-of-pocket expenses incurred in performing the financial advisory
services hereunder regardless of whether a Transaction is consummated. Corcom
will not reimburse out-of-pocket expenses in excess of $20,000 without having
granted its prior approval, provided such approval will not be unreasonably
withheld.
6. Indemnification. Corcom agrees to: (i) indemnify and hold harmless
Chicago Dearborn, its directors, officers, agents, employees, and any
individual(s) who may be deemed to control Chicago Dearborn (collectively
"Indemnified Persons") against all losses, claims, damages, penalties,
judgments, liabilities and expenses of every kind whatsoever (including,
without limitation, all reasonable expenses of litigation or preparation
therefor, including reasonable attorney's fees, whether or not an Indemnified
Person is a party thereto) (collectively, "Liabilities"), which any of the
Indemnified Persons may pay or incur arising out of or relating to this
Agreement or the Transaction; and (ii) expressly and irrevocably waive any
and all rights and objections which it may have against any Indemnified
Persons in respect of any Liabilities arising out of or relating to this
Agreement or the Transaction, except, in each case, to the extent that such
Liabilities arise primarily from an Indemnified Person's gross negligence or
willful misconduct.
Corcom further agrees not to settle any claim, litigation or proceeding
(whether or not any Indemnified Person is a party thereto) relating to this
Agreement or Transaction without Chicago Dearborn's prior written consent
unless: (i) such settlement releases all the Indemnified Persons from any and
all Liabilities related to this Agreement or the Transaction; and (ii) the
entire settlement amount and all costs of settlement are borne by Corcom.
An Indemnified Person shall have the right to employ his own counsel in any
suit, action or proceeding arising from the Agreement or the Transaction if
the Indemnified Person reasonably concludes, based on advice of counsel, that
a conflict of interest exists between Corcom and the Indemnified Person which
would materially impact the effective representation of the Indemnified
Person. In the event that the Indemnified Person concludes that such a
conflict of interest exists, the Indemnified Person shall have the right to:
(i) assume and direct the defense of such suit, action, or proceeding on his
own behalf; and (ii) to select counsel which will represent him in any such
action, suit or proceeding, and Corcom shall indemnify the Indemnified Person
for the reasonable legal fees and expenses of such counsel and other out-of-
pocket expenses reasonably incurred by the Indemnified Person.
7. Referral. Corcom acknowledges that, although The First National Bank
of Chicago (the "Bank") has referred Corcom to Chicago Dearborn, neither the
Bank nor any of its affiliates, officers, directors or employees shall have
any responsibility or liability of any kind whatsoever in connection with the
services rendered pursuant to this Agreement. Furthermore, Corcom acknowledges
that Chicago Dearborn is not an affiliate of the Bank.
8. Persons Entitled to Reliance. Corcom recognizes that Chicago Dearborn
has been retained only by the undersigned, and that its engagement of Chicago
Dearborn is not deemed to be on behalf of and is not intended to confer rights
upon any shareholder, owner or partner of Corcom or any other person not a
party hereto as against Chicago Dearborn or any of Chicago Dearborn's
affiliates, the respective directors, officers, agents and employees of
Chicago Dearborn's affiliates or each other person, if any, controlling
Chicago Dearborn or any of Chicago Dearborn's affiliates. Unless otherwise
expressly stated in an opinion letter issued by Chicago Dearborn or otherwise
expressly agreed to by Chicago Dearborn, no one other than Corcom is
authorized to rely upon this engagement of Chicago Dearborn or any statements
or conduct by Chicago Dearborn.
9. Cooperation. In connection with Chicago Dearborn's activities pursuant
to this Agreement, Corcom will cooperate with Chicago Dearborn and will, to
the extent possible, furnish Chicago Dearborn with all information and data
concerning the Transaction and Corcom which Chicago Dearborn deems appropriate
and will, to the extent possible, provide Chicago Dearborn with access to
Corcom's respective officers, directors, employees, financial advisors,
independent accountants and legal counsel. Corcom represents and warrants that
all information made available to Chicago Dearborn by Corcom or contained in
any filing by Corcom with any court or governmental regulatory agency,
commission or instrumentality with respect to any Transaction will, at all
times during the period of the engagement of Chicago Dearborn hereunder, be
complete and correct in all material respects and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances under which such statements are made. Corcom further represents
and warrants that any projections provided by it to Chicago Dearborn will have
been prepared in good faith and will be based upon assumptions which, in light
of the circumstances under which they are made, are reasonable. Corcom
acknowledges and agrees that, in rendering its services hereunder, Chicago
Dearborn will be using and relying on information provided by Corcom or
information available from public sources and other sources deemed reliable
by Chicago Dearborn without independent verification thereof by Chicago
Dearborn or independent appraisal by Chicago Dearborn. Chicago Dearborn does
not assume responsibility for the accuracy or completeness of any of this
information regarding Corcom.
10. Confidentiality
a) Chicago Dearborn agrees to keep confidential non-public information
which it receives from Corcom concerning Corcom and the Transaction and to
disclose that information only with the consent of Corcom or as required by
law or legal process.
b) Corcom agrees to keep confidential non-public information which it
receives from Chicago Dearborn (including, without limitation, opinions and
advice) and to disclose that information only with the consent of Chicago
Dearborn; provided that Corcom may disclose the fact that it has retained
Chicago Dearborn as an advisor, and as required by regulation, law or legal
process.
11. Termination
This Agreement shall become effective upon Corcom's acceptance of this letter.
This Agreement may be terminated during the Term by either Chicago Dearborn or
Corcom giving thirty days prior written notice of termination to the other.
Neither termination of this Agreement nor consummation of the Transaction
contemplated herein shall affect i) any compensation earned by Chicago
Dearborn up to and including the date of termination or consummation; ii) the
reimbursement of expenses incurred by Chicago Dearborn up to the date of
termination or consummation; and iii) paragraphs 3-12, inclusive, of this
Agreement. If this Agreement is terminated by Corcom or this Agreement is
terminated by Chicago Dearborn after a breach of the Agreement by Corcom or
the Agreement's Term expires without renewal, and if a Transaction is
consummated during the period of nine months following a termination for any
of the three foregoing reasons, then the Financial Advisory Fee in respect
of such Transaction shall become due and payable. Notwithstanding anything to
the contrary contained herein, Chicago Dearborn shall not be entitled to any
Financial Advisory Fee pursuant to this Agreement if Chicago Dearborn
terminates this Agreement, other than termination due to Corcom's breach of
terms of this Agreement.
12. Miscellaneous.
a) Corcom may not assign this Agreement. Chicago Dearborn may not assign
this Agreement to any party other than a related affiliate.
b) Corcom agrees that, upon consummation of a Transaction, Chicago
Dearborn has the right to publish a tombstone advertisement in financial
publications at its own expense describing its services hereunder.
c) The Agreement represented by this letter shall be governed by the
laws of the State of Illinois.
Please confirm that the foregoing is in accordance with your understanding of
this Agreement by signing and returning to us a copy of this letter.
Very truly yours,
THE CHICAGO DEARBORN COMPANY
s/s William C. Steinmetz
William C. Steinmetz
Senior Managing Director
ACCEPTED AND AGREED:
CORCOM, INC.
s/s Werner E. Neuman
President
Dated: March 7, 1996
ABN AMRO Chicago Corporation
208 S. LaSalle St.
Chicago, IL 60604
January 16, 1998
Mr. Werner E. Neuman
President
Corcom, Inc.
844 E. Rockland Rd.
Libertyville, IL 60048
Dear Mr. Neuman;
ABN AMRO Chicago Corporation ("AACC") is pleased to set forth terms of this
amendment agreement (the "Amendment") relating to the engagement letter (the
"Agreement") dated March 7, 1996 between The Chicago Dearborn Company (the
predecessor firm to AACC) and Corcom, Inc. ("Corcom").
All capitalized terms not otherwise defined in this Amendment have the
meanings provided in the Agreement.
Corcom and AACC agree to amend the Agreement as follows:
1. The Agreement will be assigned by The Chicago Dearborn Company to AACC;
2. The Financial Advisory Fee will be $150,000 plus 1.75% of the Transaction
Value in excess of $10 million; and
3. Corcom and AACC acknowledge that the Term of the Agreement expired without
renewal. Corcom and AACC agree to renew the Agreement and be bound by its
terms and conditions effective as of the date of Corcom's execution of this
Amendment (the "Renewed Agreement"). The Term of the Renewed Agreement shall
extend until June 15, 1998. AACC acknowledges that no quarterly Retainers
will be owed following the effectiveness of the Renewed Agreement. Finally,
AACC acknowledges that the quarterly Retainers paid by Corcom in the past
pursuant to the Agreement will be credited against any Financial Advisory Fee
paid to AACC pursuant to the Renewed Agreement.
All terms and conditions in the Agreement not amended herein remain in effect.
Please confirm that the foregoing is in accordance with your understanding of
this Amendment by signing and returning to us a copy of this letter
Very truly yours,
ABN AMRO Chicago Corporation
By: s/s Christopher C. McMahon
Christopher C. McMahon
Managing Director
Accepted and agreed:
CORCOM, INC.
By: s/s Werner E. Neuman
Werner E. Neuman
Its: President
Dated: 1-16-98