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EXHIBIT 10.63
NATIONSBANC MONTGOMERY SECURITIES
PERSONAL AND CONFIDENTIAL
March 3, 1999
Mr. William E. Dickenson
Hagler Bailly, Inc.
1776 I Street, N.W.
5th Floor
Washington, D.C. 20006
Dear William:
We are pleased to have been selected to assist you with your investment
banking needs. This letter confirms the understanding and agreement between
NationsBanc Montgomery Securities LLC and Hagler Bailly, Inc. ("you" or the
"Company") to provide such investment banking services as we may agree upon
from time to time. We fully understand that our responsibility will be to
assist you in considering strategic alternatives for building the Company
through strategic acquisitions and to assist you if and when you request and
only at your direction, in pursuing opportunities to maximize shareholder
value through a sale or merger of the Company.
You have engaged us to advise you concerning various opportunities (each, a
"Transaction"). As used in this Agreement, the term "Transaction" includes,
directly or indirectly, in one or a series of related transactions, either or
both of the following: (i) opportunities for maximizing shareholder value,
which may include a sale of the Company, a change in control of the Company
or the acquisition by a third party of all or substantially all of the
Company's business or assets in a sale or exchange of stock, merger or
consolidation, sale of assets or other similar transaction (a "Sale
Transaction") and (ii) acquisition opportunities, which may include acquiring
control of or all or substantially all of a company's business or assets by
you in a sale or exchange of stock, merger or consolidation, purchase of
assets or other similar transaction (each single transaction with Aggregate
Consideration (as defined below) in excess of $75 million defined as an
"Acquisition Transaction").
We will render to you such financial advisory and investment banking services
as we mutually agree are necessary or appropriate in connection with any
Transaction. For example, if necessary or appropriate, we will (i) assist
you in preparing a descriptive memorandum concerning the Company, (ii)
develop, update from time to time, and review with you on an on-going basis a
list of parties which might be interested in acquiring the Company with the
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MARCH 3, 1999
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understanding that we will contact only parties you approve, (iii) consult
with and advise you concerning any acquisition of any target company, (iv)
participate on your behalf in negotiations related to any Transaction, (v)
assist you in conducting your business investigation of any target company,
(vi) report to management and the board regarding proposals or offers made,
(vii) assist you in developing and administering a "bidding" process, if
appropriate, (viii) analyze offers or proposals made by the Company or
received for the Company, (ix) consult with you with respect to the financial
aspects of any Transaction as described in the agreements effecting the
Transaction, and (x) assist you in the administration of the closing of any
Transaction.
Finally, if, pursuant to a Transaction, you request, we will render to the
Company's board of directors our opinion with respect to the fairness from a
financial point of view to the shareholders of the Company of the
consideration to be received by the shareholders in a Sale Transaction or in
the case of an Acquisition Transaction of the consideration to be paid by the
Company in any Acquisition Transaction, as the case may be, as of, in either
case, the date of any such opinion. We will render our opinion at the
meeting of your board of directors to finally consider any Transaction and,
if we mutually agree, as of the date of the mailing of the proxy statement or
prospectus soliciting the approval of your shareholders, if required. Our
opinion will be directed and addressed solely to the Company's board of
directors in connection with its consideration of any such Transaction and
will not be a recommendation to any shareholder as to whether such
shareholder should participate in or vote in favor of the applicable
Transaction. Shareholders of the Company will not be addressees nor intended
beneficiaries of our opinion and may not rely or allege any reliance thereon.
In connection with performing our services we will use publicly available
information and information which you provide to us, including information
concerning the business, assets, operations or financial condition of the
Company and any target company. We may rely upon the accuracy and
completeness of such information without independent verification.
The term of our engagement will begin on the date hereof and continue for
twelve months or until earlier terminated by either of us upon 15 days
written notice. The expiration or early termination of our engagement will
not affect your obligation to pay our fees or reimburse our expenses as set
forth below.
As compensation for our services, you will pay us a cash retainer fee of
$100,000 upon execution of this letter agreement, which will be credited
against any one fee due to us upon the consummation of a Transaction.
If you reach a definitive agreement or consummate any transaction during this
engagement, at any time prior to twelve months following the expiration of
the engagement, or at any time prior to six months following early
termination of the engagement, you will pay us a cash fee equal to the
following:
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MARCH 3, 1999
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If such transaction is a Sale Transaction, you will pay NationsBanc
Montgomery Securities LLC a cash fee due upon consummation of such
transaction equal to the following:
(i) 0.875% of any Aggregate Consideration (defined below) up to $425
million, plus
(ii) 1.5% of any Aggregate Consideration above $425 million
If such transaction is an Acquisition Transaction, you will pay NationsBanc
Montgomery Securities LLC a cash fee due upon consummation of such
transaction equal to the greater of
(i) $1.0 million, or
(ii) 0.875% of the Aggregate Consideration.
As used in this Agreement, Aggregate Consideration means the sum of (i) the
cash paid or payable, market value of marketable equity securities or
interests, fair value of unmarketable equity securities or interests, face
amount of straight and convertible debt instruments or obligations issued or
issuable (including any amounts paid into escrow) to you or your shareholders
or any entity affiliated with you or your shareholders in connection with a
Sale Transaction, or by you or your shareholders or any entity affiliated
with you or your shareholders in connection with an Acquisition Transaction,
as the case may be, (ii) the amount of indebtedness (excluding trade
payables) of the Company assumed directly or indirectly by an acquiring party
or any entity affiliated with an acquiring party in connection with a Sale
Transaction, or of the target company assumed directly or indirectly by you
or any entity affiliated with you or your shareholders in connection with an
Acquisition Transaction, as the case may be, and (iii) the fair value of
contingent future payment obligations (e.g., earn-outs) arising in connection
with the Transaction. Consideration shall be determined at the time you
execute a definitive agreement. Notwithstanding the foregoing, if the
Transaction is the result of the disposition of less than all of the
securities, assets or businesses of the Company, the target company or a
business unit of the target company, as the case may be, or occurs as the
result of a combination or series of transactions, then the total
consideration shall be determined (i) at the time you reach a definitive
agreement wherein more than 50% of the voting stock or net assets of the
Company, target company or business unit of the target company, as the case
may be, is proposed to be acquired; and (ii) as if all of the Company, the
target company or the business unit of the target company, as the case may
be, were proposed to be acquired as of such time. The amount of
consideration in such a case will be determined to be equal to:
--in the case of a Sale Transaction, (I) the sum of (a) any and all
consideration previously paid by an acquiring party or any entity
affiliated with an acquiring party and (b)
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MARCH 3, 1999
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consideration then payable by any such party (II) divided by the
percentage of voting stock or net assets of the Company acquired through
such date;
--in the case of an Acquisition Transaction, (I) the sum of (a) any and
all consideration previously paid by the Company or any entity affiliated
with the Company or its shareholders and (b) consideration then payable
by any such party (II) divided by the percentage of the target company or
the business unit of the target company, as the case may be, acquired
through such date.
In no event will any fee payable in connection with a Transaction be reduced
by any obligation that you may have to any other broker or finder. In
addition, if a Transaction for which we would have been entitled to a fee is
not consummated you will pay us one half of any "termination," "break-up,"
"topping" or other fee or of the value of any option you receive; provided,
however, that in no event shall the payment exceed 75% of the transaction fee
due if such Transaction had been consummated.
You will also reimburse us periodically upon request for our reasonable
out-of-pocket costs and expenses (including counsel fees), which shall be
accompanied by reasonable and customary documentation, incurred by us in
connection with this engagement, whether or not any Transaction is
consummated, and will indemnify us and related persons according to the
attached indemnification and contribution agreement. The obligations
contained in that agreement will remain operative regardless of any
termination or completion of our services hereunder. NMS agrees not to
exceed $75,000 of the total out-of-pocket expenses and/or $25,000 of counsel
fees without prior authorization from the Company.
If we deliver an opinion to you, you will pay us a fee equal to $250,000 in
respect of, and due upon, delivery of each such opinion. Any such fee paid
to us shall be credited against the fee relating to the applicable
Transaction. We understand you may request our opinion(s), if any, be
disclosed in one or more registration statements(s) and/or proxy
statement(s). You may disclose any such opinion in full and refer to it in
such documents provided that we expressly approve all statements in such
documents relating to us or the opinion. You will include in any such
disclosure a statement that we do not admit that we are experts with respect
to the registration statement within the meaning of the term "experts" as
used in the Securities Act of 1933. The opinion will not be used or referred
to by you, quoted or disclosed to any person (other than the Company's
directors, executive officers and attorneys) in any manner for any other
purpose without our express prior written consent.
The rights and obligations you have or may have to us or any of our
affiliates under any credit or other agreement are separate from your rights
and obligations under this engagement agreement and will not be affected by
our performance or failure to perform hereunder.
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MARCH 3, 1999
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We will provide our financial advice, written or oral, exclusively for the
information of your board of directors and senior management, who will make
all decisions regarding whether and how to pursue any opportunity or
transaction. Your board of directors and senior management will base their
decisions on our advice as well as on the advice of their legal, tax and
other business advisors and other factors that they consider appropriate.
Accordingly, as an independent contractor we will not assume the
responsibilities of a fiduciary to you or your shareholders in connection
with the performance of our services. In addition, we or our affiliates may
provide financing and financing advice to one or more potential purchasers of
the Company.
This engagement agreement, together with the attached agreement on
indemnification and contribution, contains our entire agreement concerning
the proposed transaction and supersedes any prior understandings and
agreements. This engagement agreement is made and shall be construed under
and in accordance with the laws of the State of New York (without reference
to any principle of the conflict of laws). Any waiver of any right or
obligation hereunder must be in writing signed by the party against whom such
waiver is sought to be enforced.
If the foregoing correctly sets forth our understanding and agreement, please
sign in the space below and return this letter to us. We thank you for the
opportunity to share in your business endeavors and are looking forward to a
successful and mutually beneficial relationship.
Very truly yours,
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Gidon Y. Cohen
--------------------------
Gidon Y. Cohen
Senior Managing Director
Accepted and Agreed as of the date set forth above:
HAGLER BAILLY, INC.
By: /s/ William E. Dickenson
---------------------------------
William Dickenson
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INDEMNIFICATION AND CONTRIBUTION AGREEMENT
In consideration of the agreement of NationsBanc Montgomery Securities
LLC ("NMS") to act on behalf of Hagler Bailly, Inc. (the "Company") pursuant to
the attached Engagement Letter dated March 3, 1999, the Company agrees to
indemnify and hold harmless NMS, its affiliates, and each of their respective
directors, officers, agents, shareholders, consultants, employees and
controlling persons (within the meaning of the Securities Act of 1933) (NMS and
each such other person or entity are hereinafter referred to as an "Indemnified
Person"), from and against any losses, claims, damages, expenses and liabilities
or actions in respect thereof (collectively, "Losses"), as they may be incurred
(including all legal fees and other expenses as incurred in connection with
investigating, preparing, defending, paying, settling or compromising any
Losses, whether or not in connection with any pending or threatened litigation
in which any Indemnified Person is a named party) to which any of them may
become subject (including in any settlement effected with the Company's consent)
and which are related to or arise out of any act, omission, transaction or event
contemplated by the Engagement Letter. The Company will not, however, be
responsible under the foregoing provisions with respect to any Losses to the
extent that a court of competent jurisdiction shall have determined by a final
judgment that such Losses resulted primarily from actions taken or omitted to be
taken by an Indemnified Person due to his gross negligence, bad faith or willful
misconduct. If multiple claims are brought against NMS in an arbitration, with
respect to at least one of which indemnification is permitted under applicable
law and provided for under this agreement, any arbitration award shall be
conclusively deemed to be based on claims as to which indemnification is
permitted and provided for, except to the extent the arbitration award expressly
states that the award, or any portion thereof, is based solely on the claim as
to which indemnification is not available.
If the indemnity referred to in this agreement should be, for any
reason whatsoever, unenforceable, unavailable or otherwise insufficient to
hold each Indemnified Person harmless, the Company shall pay to or on behalf
of each Indemnified Person contributions for Losses so that each Indemnified
Person ultimately bears only a portion of such Losses as is appropriate to
reflect the relative benefits received by and the relative fault of each such
Indemnified Person, respectively, on the one hand and the Company on the
other hand in connection with the transaction; provided, however, that in no
event shall the aggregate contribution of all Indemnified Persons to all
Losses in connection with any transaction exceed the amount of the fee
actually received by NMS pursuant to the Engagement Letter. The relative
fault of each indemnified person and the Company shall be determined by
reference to, among other things, whether the actions or omissions to act
were by such Indemnified Person or the Company and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action or omission to act.
The Company also agrees that no Indemnified Person shall have any
liability to the Company or its affiliates, directors, officers, employees,
agents or shareholders, directly or indirectly, related to or arising out of
the Engagement Letter, except Losses incurred by the Company which a court of
competent jurisdiction shall have determined by a final judgment to
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have resulted primarily from actions taken or omitted to be taken by such
Indemnified Person due to its gross negligence, bad faith or willful misconduct.
In no event, regardless of the legal theory advanced, shall any Indemnified
Person be liable for any consequential, indirect, incidental or special damages
of any nature. The Company agrees that without NMS's prior written consent it
shall not settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suitor proceeding related to the Engagement
Letter unless the settlement, compromise or consent also includes an express
unconditional release of all Indemnified Persons from all liability and
obligations arising therefrom. The Company shall have no liability for any
settlement or compromise of litigation affected without the Company's consent.
If an agreement for the sale of the Company is entered into and the
obligations of the Company referred to above are not assumed, satisfactory to
NMS, by operations of law or by contract by the acquiring entity, the Company
agrees to arrange alternative means of providing for such obligations prior
to consummation of such agreement, including providing insurance or creating
an escrow, in each case in an amount and upon terms and conditions
satisfactory to NMS.
The obligations of the Company referred to above shall be in addition
to any rights that any Indemnified Person may otherwise have shall be binding
upon and inure to be benefits of any successors, assigns, heirs and personal
representatives of any Indemnified Person and the Company. It is understood
that the obligations of the Company will remain operative regardless of any
termination or completion of NMS's services.
NationsBanc Montgomery Securities LLC HAGLER BAILLY, INC.
--------------------------------
By: /s/ William E. Dickenson
-----------------------------
Name: Gidon Y. Cohen Name:
----------------------------- ---------------------------
/s/ Gidon Y. Cohen Title:
- ---------------------------------- ---------------------------
Senior Managing Director
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BANK OF AMERICA
BANC OF AMERICA SECURITIES LLC 231 South LaSalle Street
Chicago, IL 60697
Tel: 312.828.4365
Fax: 312.987.9789
PERSONAL AND CONFIDENTIAL
October 5, 1999
Mr. William E. Dickenson
Hagler Bailly, Inc.
1776 Eye Street, N.W.
5th Floor
Washington, D.C. 20006
Dear Bill:
Banc of America Securities LLC (formerly known as NationsBanc Montgomery
Securities LLC) and Hagler Bailly, Inc. ("you" or the "Company") are parties
to an engagement letter agreement dated March 3, 1999 (the "Letter
Agreement"), pursuant to which we are engaged to advise you concerning
opportunities for maximizing shareholder value, which may include a sale of
the Company, and to advise you concerning opportunities for pursuing various
acquisitions. Capitalized terms not defined herein will have the meaning set
forth in the Letter Agreement. This will confirm our agreement to amend the
Letter Agreement as follows:
The first indented paragraph on page 3 which relates to the calculation of
our fee in the event of a Sale Transaction is hereby deleted in its entirety
and replaced with the following paragraph:
"If such transaction is a Sale Transaction, you will pay NationsBanc
Montgomery Securities LLC a cash fee due upon consummation of such
transaction equal to the following:
(i) 1.25% of any Aggregate Consideration (defined below) up to $180
million, plus
(ii) 1.75% of any Aggregate Consideration above $180 million;
provided, however, that in no event will such fee be less than $1.5
million."
Except as described above, the Letter Agreement will continue in full force
and effect, including but not limited to the paragraph on page 3 relating to
the calculation of our fee in the event of an
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Hagler Bailly, Inc.
October 5, 1999
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Acquisition Transaction. If the foregoing correctly sets forth our
understanding and agreement, please sign in the space below and return this
letter to us. We thank you for the opportunity to share in your business
endeavors and are looking forward to continuing our successful and mutually
beneficial relationship.
Very truly yours,
BANC OF AMERICA SECURITIES LLC
(formerly known as NationsBanc Montgomery
Securities LLC)
By: /s/ Michael A. Smith
----------------------------------------
Michael A. Smith, Managing Director
Accepted and Agreed as of the date set forth above:
HAGLER BAILLY, INC.
By: /s/ William E. Dickenson
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Name: President and Chief Executive Officer
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