November 4, 1997David J. CallardPresidentWand Partners, Inc.630 Fifth AvenueSuite 2435New York, NY 10112Dear David: As you know, in connection with your service as a director of Waverly,Inc. ('Waverly' or the 'Company'), you and Waverly have entered into theagreement attached as Exhibit A. Pursuant to that Agreement and further to yourservice as a director of Waverly, Waverly hereby confirms that is has requestedyou to undertake an active role on behalf of the Company in advising andassisting in the possible sale of Waverly, including by acting as a liaisonbetween the Company and Morgan Stanley & Co. Incorporated. In this connection,Waverly has agreed to pay you a contingent fee of $400,000 if (a) control ofmore than 55% of the Company's common stock changes hands or (b) the Companysells a substantial amount of its assets. In addition, Waverly will reimbursereasonable out-of-pocket expenses. Any contingent fee will be in addition to theretainer payments provided for in Exhibit A. As you are aware as director of Waverly you are entitled under certaincircumstances to indemnification from the Company. Without limiting such rights,this will confirm that if those rights do not fully indemnify you from loss inconnection with your advisory services as described above, in consideration ofyour agreement to act on Waverly's behalf in connection with your engagement asdescribed above (the 'Engagement'), we agree to indemnify and hold you harmlessfrom and against any losses, claims, damages or liabilities related to, arisingout of or in connection with the Engagement and will reimburse you for allexpenses (including fees and expenses of counsel) as they are incurred inconnection with investigating, preparing, pursuing or defending any action,claim, suit, investigation or proceeding related to, arising out of or inconnection with the Engagement, Whether or not pending or threatened and whetheror not you are a party. Waverly will not, however, be responsible for anylosses, claims, damages or liabilities (or expenses relating thereto) that arefinally judicially determined to have resulted from your bad faith or grossnegligence. The Company also agrees that you shall have no liability (whetherdirect or indirect, in contract or tort or otherwise) to us for or in connectionwith the Engagement except for any such liability for losses, claims, damages orliabilities incurred by us that are finally judicially determined to haveresulted from your bad faith or gross negligence. We will not, without your prior written consent, settle, compromise,consent to the entry of any judgment in or otherwise seek to terminate anyaction, claims, suit or proceeding in respect of which indemnification may besought hereunder (whether or not you are a party thereto) unless suchsettlement, compromise, consent or termination includes a release of you fromany liabilities arising out of such action, claim, suit or proceeding. Inseeking indemnification, reimbursement or contribution under this agreement youwill not, without our prior written consent, settle, compromise, consent to theentry of any judgment in or otherwise seek to terminate any action, claims, suitinvestigation or proceeding referred to in the preceding paragraph. If the indemnification provided for in the first paragraph of thisagreement is judicially determined to be unavailable (other than in accordancewith the terms hereof) to you in respect of any losses, claims, damages orliabilities referred to herein, then, in lieu of indemnifying you, we shallcontribute to the amount paid or payable by you as a result of such losses,claims, damages or liabilities (and expenses relating thereto) (i) in suchproportion as is appropriate to reflect the relative benefits to you, on the onehand, and us, on the other hand, of the Engagement or (ii) if the allocationprovided by clause (i) above is not available, in such proportion as isappropriate to reflect not only the relative benefits referred to in such clause(i) but also the relative fault of each of you and us, as well as any otherrelevant equitable considerations; provided, however, in no event shall youraggregate contribution to the amount paid or payable exceed the aggregate amountof fees actually received by you under the terms of this agreement as describedabove. For the purposes of this agreement, the relative benefits to us and youof the Engagement shall be deemed to be in the same proportion as (a) the totalvalue paid or contemplated to be paid or received or contemplated to be receivedby us or our stockholders, as the case may be, in the transaction ortransactions that are the subject of the Engagement, whether or not any suchtransaction is consummated, bears to (b) the fees paid or to be paid to you asdescribed above. The provisions of this agreement shall apply to the Engagement and anymodification thereof and shall remain in full force and effect regardless of anytermination by you or us or the completion of your services. This agreement shall be governed by and construed in accordance withthe laws of the State of New York applicable to contracts executed in and to beperformed in that state. Very truly yours, WAVERLY, INC. By: /s/Edward B. Hutton Jr. ----------------------------- Edward B. Hutton, Jr.Accepted:By: /s/David J. Callard ------------------- David J. CallardDate: November 14, 1997
Engagement Letter - Waverly Inc. and David J. Callard
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