September 11, 2001
SIMCALA, INC.
1940 Ohio Ferro Road
Mt. Meigs, AL 36057
Attention: C. Edward Boardwine
President and Chief Executive Officer
Ladies and Gentlemen:
1. Retention. This letter agreement (the "Agreement") confirms
that SIMCALA, INC. (the "Company"), has engaged Jefferies & Company, Inc.
("Jefferies") to act as exclusive financial advisor to the Company in connection
with a restructuring of its 9 5/8% Senior Notes due 2006 (the "Old Notes") and
any of its other indebtedness (together with the Old Notes, the "Old
Securities") accomplished through (a) any offer by the Company with respect to
the Old Notes being repurchased by the Company at a price satisfactory to the
Company, (b) a solicitation of votes, approvals, or consents, including with
respect to a prepackaged, pre-negotiated or other plan of reorganization
pursuant to Chapter 11 of the United States Code (a) prepackaged or
pre-negotiated plan, collectively, a "Pre-Arranged Chapter 11") resulting in a
Pre-Arranged Chapter 11 being filed on terms satisfactory to the Company, (c) a
solicitation of votes, approvals or consents with respect to a plan of
reorganization proposed by the Company, as debtor-in-possession, pursuant to a
reorganization proceeding instituted by the Company pursuant to Chapter 11 of
the United States Code, other than a Pre-Arranged Chapter 11 (a "Conventional
Chapter 11"), (d) an offer to exchange the Old Notes on terms satisfactory to
the Company, (e) any negotiation of, modifications to, or suspensions of, the
obligations to pay principal and interest on the Old Notes, or any amendments
thereof resulting in revised terms of the Old Notes satisfactory to the Company
or (f) the liquidation or sale of the Company or its assets either through a
Conventional Chapter 11 or through Chapter 7 of the United States Code (each of
the above, individually and collectively, the "Restructuring"). During the Term
of the Agreement (as defined in Section 19), the Company agrees that it will
not, directly or indirectly, contact, approach or negotiate with any person or
persons with respect to any Restructuring, other than through Jefferies as
agent. Notwithstanding the foregoing, Jefferies acknowledges and agrees that CGW
Southeast Management, LLC and affiliates thereof will continue to act as a
financial advisor to the Company consistent with past practices (and that such
advisory services are not in breach of the terms of this Agreement), and that
the Company may engage other advisors for purposes other than to consult on
Restructurings related to the Old Notes.
In connection with the Restructuring, Jefferies will perform the
following financial advisory services, among others, for the Company: (a) become
familiar, to the extent Jefferies deems appropriate, with and analyze the
business, operations, properties, financial condition and prospects of the
Company; (b) advise the Company on the current
state of the "restructuring market"; (c) assist and advise the Company in
developing a general strategy for accomplishing the Restructuring; (d) assist
and advise the Company in evaluating and analyzing a Restructuring including the
value of the securities, if any, that may be issued to certain creditors under
any Restructuring plan; (e) assist in solicitation to repurchase or exchange old
Notes; (f) if necessary, assist in auction or sale of the Company or its assets
in Chapter 11; and (g) render such other financial advisory services as may from
time to time be agreed upon by the Company and Jefferies.
2. Information on the Company. In connection with Jefferies'
activities hereunder, the Company will furnish Jefferies and its counsel with
all material and information regarding the business and financial condition of
the Company as Jefferies shall reasonably request (all such information so
furnished being the "Information"), and if necessary, with solicitation
materials with respect to the Old Securities and the Company and/or with an
information memorandum with respect to the Restructuring and the Company (such
solicitation materials and information memorandum, including all exhibits or
supplements thereto, the "Offering Materials"). The Company recognizes and
confirms that Jefferies: (a) will use and rely solely on the Information, the
Offering Materials and on information available from generally recognized public
sources in performing the services contemplated by this Agreement without having
independently verified the same; (b) is authorized as the Company's exclusive
financial advisor to transmit to any potential participant in any Restructuring
any solicitation materials, and the forms of exchange agreements and other legal
documents necessary or advisable in connection with the Restructuring; (c) does
not assume responsibility for the accuracy or completeness of the Information,
Offering Materials or such other information; (d) will not make an appraisal of
any assets or liabilities of the Company; and (e) retains the right to continue
to perform due diligence on the Company during the course of the engagement.
Except as specifically contemplated in the Agreement, Jefferies agrees to keep
the Information confidential so long as it is and remains non-public, unless
disclosure is required by law or requested by any governmental, regulatory or
self-regulatory agency or body and Jefferies will not make use thereof, except
in connection with its services hereunder for the Company.
3. Use of Name. The Company agrees that any reference to
Jefferies in any release, communication, or other material is subject to
Jefferies' prior written approval. If Jefferies resigns prior to the
dissemination of any such release, communication or material, no reference shall
be made therein to Jefferies, despite any prior written approval that may have
been given therefor, except as otherwise required by law.
4. Use of Advice. No statements made or advice rendered by
Jefferies in connection with the services performed by Jefferies pursuant to
this Agreement will be quoted by, nor will any such statements or advice be
referred to, in any report, document, release or other communication, whether
written or oral, prepared, issued or transmitted by, the Company or any person
or corporation controlling, controlled by or under common control with, the
Company or any director, officer, employee, agent or representative of any such
person, without the prior written authorization of Jefferies, except to the
extent required by law (in which case the appropriate party shall so advise
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Jefferies in writing prior to such use and shall consult with Jefferies with
respect to the form and timing of disclosure).
5. Compensation. In payment for services rendered and to be
rendered hereunder by Jefferies, the Company agrees to pay to Jefferies as
follows:
(a) Upon the consummation of a Restructuring the Company
shall pay Jefferies a fee (the "Success Fee") equal to the following:
(i) If the Restructuring is consummated through
a Conventional Chapter 11, a fee of
$500,000;
(ii) If the Restructuring is consummated through
a Pre-Arranged Chapter 11, a fee of
$750,000; and
(iii) If the Restructuring is consummated through
any other method (other than through (i) or
(ii) above), a fee of $850,000.
(b) In addition to the compensation set forth in Section
5(a), the Company shall pay to Jefferies a monthly cash retainer fee (the
"Retainer Fee") in the amount of $100,000 for the first three (3) months of the
engagement and $75,000 for each month thereafter. The first Retainer Fee shall
be payable upon the signing of this Agreement, and such amount shall be pro
rated for the first month starting with the date of this Agreement. Thereafter,
the Retainer Fee shall be paid on the first business day of each month, but upon
termination of this Agreement, the last Retainer Fee shall be prorated for the
final month ending with the date the Agreement is terminated, and Jefferies
shall refund the amount of the last Retainer Fee attributed to the portion of
the month occurring after termination.
(c) In addition to the compensation to be paid to
Jefferies as provided in Section 5(a) and 5(b) hereof, without regard to whether
any Restructuring is consummated or this Agreement expires or is terminated, the
Company shall pay to, or on behalf of, Jefferies, promptly as billed, all
reasonable disbursements and out-of-pocket expenses incurred by Jefferies in
connection with its services to be rendered hereunder (including, without
limitation, travel and lodging expenses, word processing charges, messenger and
duplicating services, facsimile expenses and other customary expenditures).
(d) If pursuant to Section 17, Jefferies resigns or the
Company terminates Jefferies' services for any reason, Jefferies shall be
entitled to receive the amounts payable pursuant to Sections 5(a), 5(b), and
5(c) hereof up to and including the effective date of such termination or
resignation, as the case may be. If Jefferies' services hereunder are terminated
by the Company or this Agreement expires, and the Company thereafter completes a
Restructuring (other than through a Conventional Chapter 11) within one year of
such termination or expiration, then the Company shall pay Jefferies
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concurrently with the closing of such Restructuring transaction in cash the fees
as outlined in Section 5(a).
(e) No fee paid or payable to Jefferies or any of its
affiliates shall be credited against any other fee paid or payable to Jefferies
or any of its affiliates.
6. Representations and Warranties. The Company represents and
warrants to Jefferies that (a) this Agreement has been duly authorized, executed
and delivered by the Company; and, assuming the due execution by Jefferies,
constitutes a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, and (b) the Information and
the Offering Materials will not, when delivered nor at the consummation of any
Restructuring, contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company shall
advise Jefferies promptly of the occurrence of any event or any other change
prior to the closing of any Restructuring which results in the Information or
the Offering Materials containing any untrue statement of a material fact or
omitting to state any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
7. Indemnity; Limitation of Liability. In partial consideration
of the services to be rendered hereunder the Company shall indemnify Jefferies
and certain other Indemnified Persons (as defined in Schedule A hereto) in
accordance with Schedule A attached hereto. The Company shall not, and shall use
commercially reasonable efforts to cause its affiliates and their respective
directors and officers, shareholders, employees and agents not to initiate any
action or proceeding against Jefferies or any other Indemnified Person in
connection with this engagement or any Restructuring unless such action or
proceeding is based solely upon the bad faith or gross negligence of Jefferies
or any such Indemnified Person. The parties hereto agree that Jefferies and the
Indemnified Persons shall not, and shall not be deemed to, owe any fiduciary
duties to the Company under this Agreement or otherwise.
8. Survival of Certain Provisions. The indemnity and contribution
agreements contained in Schedule A to this Agreement and the provisions of
Sections 2, 3, 4, 5, 6, 7, 9, 14 and 15 of this Agreement and this Section 8
shall remain operative and in full force and effect regardless of (a) any
investigation made by or on behalf of Jefferies, or by or on behalf of any
affiliate of Jefferies or any person controlling either, (b) the resignation of
Jefferies or any termination of Jefferies' services or (c) any amendment,
expiration or termination of this Agreement, and shall be binding upon, and
shall inure to the benefit of, any successors, assigns, heirs and personal
representatives of the Company, Jefferies, and the Indemnified Persons.
9. Conditions of Engagement. It is understood that the execution
of this Agreement shall not be deemed or construed as obligating Jefferies to
purchase or place any securities of the Company. Without limiting the foregoing,
Jefferies' services to be performed hereunder are subject to certain conditions,
including, among others, (i)
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satisfactory completion of due diligence on the Company by Jefferies, (ii)
market conditions, and (iii) no adverse change in the condition of the Company.
10. Notices. Notice given pursuant to any of the provisions of
this Agreement shall be in writing and shall be mailed or delivered (a) if to
the Company, at the address set forth above, and (b) if to Jefferies, at the
offices of Jefferies at 11100 Santa Monica Boulevard, Suite 1000, Los Angeles,
California 90025, Attention: Jerry M. Gluck, Executive Vice President and
General Counsel.
11. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
12. Assignment. This Agreement may not be assigned by either party
hereto without the prior written consent of the other, to be given in the sole
discretion of the party from whom such consent is being requested. Any attempted
assignment of this Agreement made without such consent may be void, at the
option of the non-assigning party.
13. Third Party Beneficiaries. This Agreement has been and is made
solely for the benefit of the Company, Jefferies and the other Indemnified
Persons referred to in Schedule A hereof and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement.
14. Construction and Choice of Law. This Agreement incorporates
the entire understanding of the parties and supersedes all previous agreements
relating to the subject matter hereof should they exist. This Agreement and any
issue arising out of or relating to the parties' relationship hereunder 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.
15. Jurisdiction and Venue. Each party hereto consents
specifically to the exclusive jurisdiction of the federal courts of the United
States sitting in the Southern District of New York, or if such federal court
declines to exercise jurisdiction over any action filed pursuant to this
Agreement, the courts of the State of New York sitting in the County of New
York, and any court to which an appeal may be taken in connection with any
action filed pursuant to this Agreement, for the purposes of all legal
proceedings arising out of or relating to this Agreement. In connection with the
foregoing consent, each party irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
court's exercise of personal jurisdiction over each party to this Agreement or
the laying of venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum. Each party further irrevocably waives its right to a trial
by jury and consents that service of process may be effected in any manner
permitted under the laws of the State of New York.
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16. Headings. The section headings in this Agreement have been
inserted as a matter of convenience of reference and are not part of this
Agreement.
17. Press Announcements. At any time after the consummation or
other public announcement of any Restructuring, Jefferies may place an
announcement in such newspapers and publications as it may choose, stating that
Jefferies has acted as exclusive financial advisor to the Company in connection
with the Restructuring.
18. Amendment. This Agreement may not be modified or amended
except in a writing duly executed by the parties hereto.
19. Term. This Agreement shall be in effect until the first
anniversary of the date hereof, unless extended by written consent of the
parties or earlier terminated as provided below. Jefferies and the Company shall
each have the right to terminate this Agreement at any time prior to the
expiration of the term of this Agreement by giving not less than 30 days written
notice to the other party. The period that this Agreement is in effect until its
expiration or termination is the "Term." The foregoing notwithstanding, this
agreement may be amended and the parties' obligations hereunder may be suspended
upon the mutual written agreement of the parties hereto.
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Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein, whereupon
this letter and your acceptance shall constitute a binding agreement between the
Company and Jefferies as of the date first above written.
Sincerely,
JEFFERIES & COMPANY, INC.
By
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Bill Derrough
Managing Director
Accepted and Agreed:
SIMCALA, INC.
By
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C. Edward Boardwine
President and Chief Executive Officer
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