Exhibit 99.3
August 12, 2001
Mr. Michael J. Hartley
Mrs. Sandra T. Hartley
Michael J. Hartley Revocable Trust dated December 21, 1988, as amended
c/o Michael J. Hartley
1440 Kapiolani Boulevard
Honolulu, Hawaii 96814
Sandra Tatsue Hartley Revocable Trust dated December 21, 1988, as amended
c/o Sandra T. Hartley
1440 Kapiolani Boulevard
Honolulu, Hawaii 96814
Hartley Investments Limited Partnership
c/o Michael J. Hartley
1440 Kapiolani Boulevard
Honolulu, Hawaii 96814
Ladies and Gentlemen:
Reference is made to: (a) that certain Agreement and Plan of Merger (the
"Merger Agreement"), dated as of August 12, 2001, by and among Platinum Corp., a
Delaware corporation (the "Purchaser"), another Delaware corporation and wholly-
owned subsidiary of Purchaser (the "Acquisition Sub"), and Diamondhead., a
Delaware corporation (the "Company"); (b) that certain Stockholder Agreement
("Stockholder Agreement"), dated as of August 12, 2001, by and among the
Purchaser, Acquisition Sub, the Company, Mr. Michael J. Hartley ("Mr. Hartley"),
Mrs. Sandra T. Hartley ("Mrs. Hartley"), Michael J. Hartley Revocable Trust
dated December 21, 1988, as amended ("Hartley Trust I"), Sandra Tatsue Hartley
Revocable Trust dated December 21, 1988, as amended ("Hartley Trust II") and
Hartley Investments Limited Partnership ("Hartley Trust III"). Mr. Hartley,
Mrs. Hartley, Hartley Trust I, Hartley Trust II and Hartley Trust III are
hereinafter referred to as the "Hartley Parties." Capitalized terms not defined
herein shall have the meaning given to them in the Merger Agreement.
Section 8.2(b)(v) of the Merger Agreement provides that if the Purchaser
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terminates the Merger Agreement under circumstances where (a) any of the
Hartley Parties breaches the Stockholder Agreement or fails to perform any of
its obligations under the Stockholder Agreement; and (b) within twelve (12)
months after any such breach or failure, (1) the Company enters into a merger
agreement, acquisition agreement or similar agreement (including a letter of
intent) with
respect to a Takeover Proposal, or a Takeover Proposal is consummated, or (2)
the Company enters into a merger agreement, acquisition agreement or similar
agreement (including a letter of intent) with respect to a Takeover Proposal, or
a Takeover Proposal is consummated, the Purchaser will be entitled to a
Termination Fee, as defined in Section 8.2(b) of the Merger Agreement. As a
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condition to proceeding with the transactions contemplated by the Merger
Agreement, the Board of The Company has requested the Hartley Parties to agree
as follows:
1. In the event that the Company pays the Termination Fee pursuant to
Section 8.2(b)(v) of the Merger Agreement, the Hartley Parties hereby
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irrevocably agree, jointly and severally, to indemnify and hold harmless the
Company for the loss to the Company incurred as a result thereof provided that
the breach by one or more of the Hartley Parties is reasonably understood to
have been an actual cause of the Purchaser's termination of the Merger
Agreement.
2. The Company and the Hartley Parties acknowledge that the loss
indemnified hereunder may be mitigated to the extent that the Company
consummates a Takeover Proposal that results in the Company and/or its
shareholders receiving an amount in the aggregate that exceeds the amount to be
received by the Company shareholders pursuant to the Merger Agreement. If the
Hartley Parties deem they are entitled to such mitigation, they shall notify the
Company within two (2) business days after the consummation of such transaction.
The parties agree on the principle that if stockholders of the Company receive a
greater amount per share than they would have received from consummation of the
Takeover Proposal, all factors (including the time value of money, tax
considerations, etc.) considered, then the Hartley Parties should not be
required to pay any amount in indemnification hereunder. The Hartley Parties and
the Company (with none of the Hartley Parties participating in the negotiations
or Board deliberations on behalf of the Company) shall then endeavor to reach
agreement on the amount, if any, of appropriate mitigation that should apply in
the circumstances, it being recognized that there may exist reasonable
differences of opinion regarding whether, in fact, the consummation of the
Takeover Proposal is more favorable to the Company and, if so, by what amount,
taking into account all financial and tax factors, the time of the transaction,
the kind of consideration received, the number of shareholders benefited, and
other such factors. If no such agreement is reached within thirty (30) days, the
resolution of the amount of such mitigation, if any, that applies shall be
submitted by the Company and the Hartley Parties to binding and final
determination to a nationally recognized investment banking firm or accounting
firm (the "Neutral Party") mutually agreeable to the Company and the Hartley
Parties. The Company, on the one hand, and the Hartley Parties, on the other
hand, shall submit to the Neutral Party, within ten days following the
expiration of thirty-day period of negotiation, the dollar amount of mitigation
to which each thinks the Hartley Parties are entitled. The Neutral Party shall
render its final and binding determination of the question by designating, as
the amount of permissible mitigation, if any, the amount submitted by the
Company, or by the Hartley Parties, based on the Neutral Party's judgment as to
which of the two proposed amounts most closely represents the amount of
reasonable mitigation, taking into account all relevant financial and tax
factors. The Neutral Party's decision shall be rendered within twenty days after
receiving the submissions of each of the parties. The fee of the Neutral Party
shall be borne by that party whose proposed amount of mitigation was chosen by
the Neutral Party as appropriate.
3. The question of whether the Hartley Parties were in breach of their
obligations under the Stockholder Agreement shall not be submitted to the
Neutral Party for decision.
4. The Hartley Parties shall pay to the Company, within two (2)
business days after receipt of notice of a claim for indemnification, the amount
thereof unless the Hartley Parties make a claim for mitigation, in which case
such payment shall be made within two (2) business days of any amicable
resolution or the decision of the Neutral Party. Upon payment of the
indemnification due hereunder, the Company shall assign to the Hartley Parties
any claim it may have against Platinum Corp. that payment of the Termination Fee
was not owing and payable under Section 8.2(b)(v) of the Agreement. If,
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following a resolution of the mitigation issue, there is a payment of an amount
that is less than the entire Termination Fee, such assignment shall be as to a
proportionate part of any such claim.
5. The Hartley Parties, jointly and severally, hereby agree to indemnify
and hold the Company from and against any and all damages, losses, claims,
expenses, costs (including reasonable attorneys' fees and litigation costs),
causes of action or any other liability whatsoever arising from or relating to
any breach of its obligations under this letter agreement.
If this letter accurately and completely sets forth your understanding of
the matters set forth above, please so indicate by executing below counterparts
of this letter and returning them to me immediately, so that we may proceed with
the transactions contemplated by the Merger Agreement.
Yours truly,
Sam E. Galeotos
President and CEO
ACKNOWLEDGED AND AGREED TO:
/s/ Michael J. Hartley August 12, 2001
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MICHAEL J. HARTLEY Date: August 12, 2001
/s/ Sandra T. Hartley August 12, 2001
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SANDRA T. HARTLEY Date: August 12, 2001
MICHAEL J. HARTLEY REVOCABLE TRUST
DATED DECEMBER 21, 1988, AS AMENDED
/s/ Michael J. Hartley August 12, 2001
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Michael J. Hartley, Trustee Date: August 12, 2001
SANDRA TATSUE HARTLEY REVOCABLE
TRUST DATED DECEMBER 21, 1988,
AS AMENDED
/s/ Sandra T. Hartley August 12, 2001
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Sandra T. Hartley, Trustee Date: August 12, 2001
HARTLEY INVESTMENTS LIMITED
PARTNERSHIP
/s/ Michael J. Hartely August 12, 2001
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Michael J. Hartley, General Partner Date: August 12, 2001