quick draw know what this contract means^[CIBC OPPENHEIMER LETTERHEAD] June 17, 1998
Automotive Performance Group, Inc.1207 N. Miller RoadTempe, AZ 85234
PERSONAL AND CONFIDENTIALAttention: Mr. Andrew L. Evans
ChairmanDear Mr. Evans:
This letter agreement ("Agreement") confirms the terms and conditions of
the engagement of CIBC Oppenheimer Corp. ("CIBC Oppenheimer") by Automotive
Performance Group, Inc., ("APG" or the "Company"), to render certain financial
advisory and investment banking services on an exclusive basis to the Company in
connection with the evaluation of the Company's financial and strategic
alternatives and one or more possible Transaction(s) (as hereinafter defined)
involving the Company.
1. Services. CIBC Oppenheimer agrees to perform services that include, but are
not limited to, the following:
(a) review the Company's overall business strategy, core competencies,
historical financial information and business operations, prospects
and forecasts of future financial results in order to render financial
advice and assistance to the Company with regard to its financial and
strategic alternatives and to Transaction opportunities;
(b) prepare a presentation for the Company's Board of Directors outlining
strategic and financial alternatives for the Company and relevant
valuation considerations;
(c) assist the Company in identifying and evaluating Transaction
opportunities with a view towards maximizing shareholder value;
(d) with the assistance of the Company, develop, update and review on an
ongoing basis a list of parties which might be interested in a
Transaction with the Company ("Interested Parties") and, with the
approval of the Company, contact such Interested Parties;
(e) assist the Company in negotiating a Transaction with any Interested
Party(ies); and
(f) if a Financing (as hereinafter defined) is proposed by the Company,
assist the Company with (i) the preparation of a prospectus (in the
event of a public offering) or a descriptive memorandum (in the event
of a private placement), (ii) the dissemination of such materials to
prospective investors identified by CIBC Oppenheimer and the Company,
and (iii) the negotiations of the terms of a Financing.
In the context of this Agreement, "Transaction" is defined and understood
to include (i) the purchase by the Company, either through a direct acquisition
or other arrangement, in whole or in part, of all or a substantial portion of a
business operation from any party ("Acquisition"); (ii) any joint venture or
partnership arrangement or other similar transaction with any party(ies)
regarding joint marketing or business development arrangements (a "Strategic
Partnering Arrangement"); (iii) the sale of common shares or securities
convertible into common shares of the Company representing less than 50% of the
fully diluted shares outstanding of the Company to any third party ("Minority
Interest"); (iv) a merger or consolidation, or any other business combination of
the Company with another party involving the disposition of a significant or
material portion of the common shares or securities convertible into common
shares representing 50% or more of the fully diluted shares outstanding,
businesses or assets of the Company (a "Merger"); (v) any financing of the
Company, or its subsidiaries, including the sale of equity and/or debt
securities (including, without limitation, senior or subordinated secured or
unsecured debt as well as bank loan arrangements) through a private placement or
public offering (a "Financing"); and (vi) any other fundamental corporate
transaction (an "Other Transaction") including, without limitation, a
reorganization or recapitalization of the Company; the acquisition by the
Company of any other company, business or product; or any other meaningful
corporate arrangement entered into by the Company that is outside of the normal
course of business.
2. Exclusivity. The Company agrees to retain CIBC Oppenheimer on an exclusive
basis during the term of this Agreement to perform the services described
in Paragraph 1 in connection with a Transaction involving any Interested
Party(ies). If the Company or any of its management or directors receives
an inquiry concerning a possible Transaction that the Company is interested
in pursuing, they will promptly inform CIBC Oppenheimer of the party's
prospective interest in order that CIBC Oppenheimer can assess that party's
interest and assist the Company in any resulting negotiations.
3. Term. The term of this engagement shall extend for twelve (12) months from
the date of this Agreement and will be renewed automatically for successive
monthly periods unless either party informs the other in writing, that it
chooses to terminate the Agreement. Either party may terminate this
Agreement at any time during the initial or renewal periods by giving the
other party at least thirty (30) business days prior written notice of such
termination at which time, subject to the limitations set forth herein, the
Company shall pay CIBC Oppenheimer (i) any and all reasonable out-of-pocket
expenses incurred up to the date thereof, as set forth in Paragraph 8, and
(ii) any remaining amount of the Retainer, as described in Paragraph 7(a),
that was to be paid during the initial or renewal periods, as the case may
be, of the engagement. The Company agrees to pay CIBC Oppenheimer a
Transaction Fee if the Company enters into a Transaction with any
Interested Party which was identified and contacted in connection with a
possible Transaction during the term of this Agreement or within twelve
(12) months of the termination or expiration of this Agreement. Any
obligation pursuant to this Paragraph 3 shall survive the termination or
expiration of this Agreement.
4. Due Diligence. It is understood that CIBC Oppenheimer's assistance in any
Financing will be subject to the satisfactory completion of such
investigation and inquiry into the affairs of the Company as CIBC
Oppenheimer deems appropriate under the circumstances (such investigation
hereinafter to be referred to as "Due Diligence"), absence of material
adverse changes in the Company, and the approval of Oppenheimer's
Commitment Committee. CIBC Oppenheimer shall have the right in its sole
discretion not to participate in a Financing if the outcome of the Due
Diligence is not satisfactory to CIBC Oppenheimer or if approval of the
Commitment Committee is not obtained ("Early Termination"). In addition,
neither the Company nor CIBC Oppenheimer will be obligated to proceed with
any public Financing unless and until the underwriting agreement is
executed.
5. Best Efforts. It is understood that Oppenheimer's involvement in any
Transaction is strictly on a best efforts basis and that the consummation
of any Transaction will be subject to, among other things, market
conditions.
6. Information. The Company recognizes and confirms that in providing it
services under this Agreement, CIBC Oppenheimer will be using and relying
upon data, material and other information furnished by the Company, its
employees and representatives ("Information") without independent
verification thereof or independent evaluation of any of the assets or
liabilities of the Company. The Company hereby agrees and represents that
all Information furnished to CIBC Oppenheimer in connection with this
Agreement shall be accurate and complete in all material respects at the
time furnished and that if such Information, in whole or in part, becomes
materially inaccurate, misleading or incomplete during the term of
Oppenheimer's engagement hereunder the Company shall so advise CIBC
Oppenheimer in writing and correct any such inaccuracy or omission.
Financial projections or estimates provided to CIBC Oppenheimer will be
reasonable and will be based on the Company's best estimate of the future
results of operations of the Company. Accordingly, CIBC Oppenheimer assumes
no responsibility for the accuracy and completeness of such Information and
financial projections. All Information that is not publicly available will
be treated in strict confidence and will not be revealed by CIBC
Oppenheimer unless legally compelled, as determined in good faith by
counsel to CIBC Oppenheimer and only upon reasonable prior notice to the
Company.
Inasmuch as it may be necessary to prepare and disseminate a memorandum
(the "Memorandum") describing, among other things, the Company and its
operations, historical and projected performance and product development
status, in order to consummate a Transaction, the Company is responsible
for preparing such Memorandum with the assistance of its counsel and CIBC
Oppenheimer, and will provide CIBC Oppenheimer a copy of such Memorandum
prior to dissemination. The Company will advise CIBC Oppenheimer in writing
that the Memorandum is accurate in all material respects and does not
contain an untrue statement of material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements
therein in light of the circumstances under which they are made, not
misleading. Such Memorandum will not be distributed without the Company's
prior approval of the prospective recipients of the Memorandum.
7. Fees. The Company agrees to pay CIBC Oppenheimer non-refundable cash fees
(the "Fees") as follows:
(a) a non-refundable retainer (the "Retainer") equal to $250,000 and
payable as follows: (i) $50,000 upon the signing of this Agreement,
and (ii) $100,000 on December, 1998 and $100,000 on June 1, 1999; and
(b) a transaction fee (the "Transaction Fee") payable upon closing of a
Transaction involving Interested Parties as calculated using the
Transaction Fee schedule contained in Appendix A, attached hereto.
If this Agreement is renewed pursuant to Paragraph 3 herein, the Company
will pay to CIBC Oppenheimer an additional Retainer of $20,000 per month.
Such payment will be due on the first day of each month of the renewal
period. All retainer payments in excess of $200,000 shall be creditable
against any Transaction Fee(s).
If a Transaction is not consummated, but the Company receives a "break-up"
fee or any other payment as a result of the termination or cancellation of
the Company's or an Interested Party's efforts to effect a Transaction, a
judgment for damages or an amount in settlement of any dispute relating to
a Transaction or an Interested Party's investment in the Company, or any
payment to the Company not otherwise described in this Paragraph 7, then
the Company shall also pay to CIBC Oppenheimer a cash fee equal to 20% of
such fee, payment, judgment or amount.
8. Expenses. In addition to any fees that may be payable to CIBC Oppenheimer,
and regardless of whether a Transaction is consummated during the term of
this Agreement, the Company hereby agrees to reimburse CIBC Oppenheimer for
all of its reasonable out-of-pocket expenses arising out of Oppenheimer's
engagement hereunder. Reasonable out-of-pocket expenses include, but are
not limited to such costs as, telephone, telex, courier service, copying,
accommodations, travel, and fees and disbursements for consultants and
legal counsel.
All such fees and expenses will be billed monthly and are payable when
invoiced. Upon the earlier of the termination or expiration of this
Agreement, or the consummation of a Transaction, any outstanding fees and
expenses shall be due and payable as provided for in Paragraph 3 herein.
9. Indemnification. In addition to the payment of fees and reimbursement of
expenses provided for above, and regardless of whether a Transaction is
consummated, the Company agrees to indemnify CIBC Oppenheimer with regard
to matters contemplated herein, as set forth in Appendix B, attached
hereto, which is incorporated by reference as if fully set forth herein.
This Paragraph 9 shall survive the termination or expiration of this
Agreement.
10. Disclosure. The services or advice to be provided by CIBC Oppenheimer under
this Agreement shall not be disclosed publicly or made available to third
parties not affiliated with the Company without Oppenheimer's prior written
approval, except as required by law. Notwithstanding, CIBC Oppenheimer
shall be permitted to advertise the services it provided in connection with
a Transaction subsequent to the consummation of a Transaction.
11. Governing Law. This agreement shall be governed by, and construed in
accordance with, the laws of the state of New York and may not be amended
or modified except in writing signed by both parties.
12. Independent Contractor. CIBC Oppenheimer is an independent contractor and
has no authority, nor will CIBC Oppenheimer represent that CIBC Oppenheimer
has any authority, to bind the Company or to assume or to create any
obligation or responsibility, express or implied, on behalf of the Company
or in the Company's name.
13. Successors. This Agreement and all rights and obligations thereunder
shall be binding upon and inure to the benefit of each party's successors,
but may not be assigned without the prior written consent of the other
party, which shall not be unreasonably withheld or delayed.
14. No Brokers. The Company represents and warrants to CIBC Oppenheimer that
there are no brokers, representatives, or other persons which have an
interest in fees due to CIBC Oppenheimer from any Transaction contemplated
herein.
Please confirm that the foregoing is in accordance with your understanding
by signing the enclosed letters in the space provided and returning them to us
for execution, whereupon we will send you a fully executed original letter
which shall constitute a binding agreement as of the above date.
We look forward to working with you on this assignment.
Very truly yours,
CIBC Oppenheimer Corp.
By: /s/KARL C. JOHNSON, JR.
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