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Exhibit 9
May 26, 2000
Piercing Pagoda, Inc.
3910 Adler Place
Bethlehem, PA 18017
Attention: Mr. Richard Penske
Chairman of the Board and Chief Executive Officer
Gentlemen:
This is to confirm the engagement of ING Barings LLC ("ING Barings") on an
exclusive basis to render financial advisory and investment banking services to
Piercing Pagoda, Inc. (the "Company") in connection with the possible sale,
merger, consolidation, reorganization or other business combination, tender
offer or similar transaction involving all or a substantial portion of the
business, assets or stock of the Company, whether effected in one transaction or
a series of transactions on terms and conditions satisfactory to the Company.
In this connection, ING Barings will:
(i) familiarize itself to the extent it deems appropriate and feasible
with the business, operations, properties, financial condition, management
and prospects of the Company;
(ii) advise the Company with respect to the structure and financial
terms of a possible transaction and the negotiating strategy to be used in
connection therewith;
(iii) if requested, seek to introduce the Company to companies and
persons who might be interested in a transaction involving the Company; and
(iv) assist the Company in any discussions and negotiations which may
ensue.
If during the term of this engagement a transaction of the type described
above occurs (the "Transaction"), regardless of whether the party or parties to
the Transaction were identified by ING Barings or whether ING Barings rendered
advice concerning the Transaction, then ING Barings shall be paid a cash fee at
the closing of the Transaction equal to 1.0% of the Aggregate Consideration (as
defined below) payable in connection with the Transaction. In addition, ING
Barings will be paid a $50,000 retainer upon the execution of this engagement
letter, which retainer shall be credited toward any fee owed to ING Barings upon
the closing of the Transaction.
At the request of the Company, ING Barings will undertake a study to enable
it to render its opinion (the "Opinion") with respect to the fairness from a
financial point of view of the consideration proposed to be paid to the Company
or its securityholders in connection with the Transaction. In connection with
this Opinion, ING Barings will be paid an opinion fee of $500,000 payable at
such time as ING Barings delivers the Opinion to the Board of Directors of the
Company, which fee shall be credited toward any fee owed to ING Barings upon the
closing of the Transaction.
In connection with the Opinion, ING Barings agrees to conduct such
financial review of the Company and its business and operations as ING Barings
shall deem appropriate and feasible, it being understood that ING Barings will
have no obligation to perform any appraisal of any of the assets or liabilities
of the Company or the Target. The Company agrees to provide ING Barings with
such financial and other information concerning the Company (and the Acquiror)
as ING Barings may request from time to time in connection with the services
performed or to be performed hereunder. The Company will also make its
management and other personnel and appropriate representatives of its
independent public accountants and its advisors available to ING Barings for
discussions and consultations from time to time as ING Barings may request in
connection with such services. In rendering the Opinion, ING Barings will be
assuming and relying upon, without independent verification, the accuracy and
completeness of the financial and other information used by it in
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arriving at its Opinion and it will not have any responsibility for the accuracy
or completeness of such information. ING Barings may qualify the Opinion as it
may reasonably deem appropriate.
For purposes of this engagement, the term Aggregate Consideration means the
aggregate amount of cash and the fair market value (on the date of payment) of
securities (whether debt or equity) or assets receivable by the Company, its
employees or its securityholders, as the case may be, or by any subsidiary of
the Company (including, without limitation, amounts paid by the Company, the
Company's subsidiaries or the buyer in a Transaction such as a leveraged
recapitalization, employee benefit plans or other similar arrangements).
Aggregate Consideration shall also include the amount of any indebtedness
(including capital leases) of the Company assumed, continued, defeased,
refinanced or otherwise paid in connection with the Transaction.
The fair market value of publicly-traded equity securities included in the
Aggregate Consideration shall be the average of the last sales prices for such
securities during the period of five trading days ending five days prior to the
consummation of the Transaction. The fair market value of debt securities shall
be equal to the aggregate principal amount thereof, and the fair market value of
any other securities issued for which there is no existing public trading market
during such period, or any other non-cash consideration delivered or retained in
connection with a Transaction, will be the value mutually determined in good
faith by the Company and ING Barings.
In addition to any fees payable hereunder, if a transaction is not
consummated, ING Barings shall be reimbursed by the Company for its reasonable
out-of-pocket expenses (including legal fees and disbursements) in connection
with this engagement.
In order to coordinate the efforts to effect a Transaction satisfactory to
the Company (and its security holders) during the period of our engagement
hereunder, the Company will not initiate any discussions looking toward a
Transaction involving the Company except through ING Barings. In the event that
the Company receives any inquiry or is otherwise aware of the interest of any
third party in a Transaction involving the Company, it will promptly inform ING
Barings of the prospective buyer and its interest.
Please note that ING Barings is a full service securities firm that engages
in securities trading and brokerage activities, in addition to providing
investment banking and financial advisory services. In the ordinary course of
its business, ING Barings (as a market maker or otherwise) may trade or
otherwise effect transactions in, the securities of the Company or any other
company that may be involved in a Transaction with the Company, and,
accordingly, may at any time hold a long or short position in such securities.
ING Barings and the Company have entered into a separate indemnification
agreement, dated the date hereof and attached hereto as Schedule A, providing
for the indemnification of ING Barings by the Company in connection with ING
Barings' engagement hereunder, the terms of which are incorporated by reference
herein. The Company acknowledges that the Company's execution and delivery of
the indemnification agreement was a condition to ING Barings' execution and
delivery of this letter agreement.
This engagement shall continue in effect until June 1, 2001, except that
(i) the indemnification agreement referred to above and the provisions of the
paragraphs hereof regarding compensation and reimbursement shall survive the
term of this letter agreement, and (ii) if within twelve months of the end of
such term a Transaction shall occur involving any buyer that during such term
conducted discussions with the Company regarding a Transaction, ING Barings
shall be paid a fee in accordance with the fee provisions above.
This letter agreement contains the entire agreement between the Company and
ING Barings concerning the engagement of ING Barings by the Company, and no
modifications of this agreement or waiver of the terms and conditions hereof
will be binding upon either party , unless approved in writing by both parties.
This letter agreement shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to principles of conflicts
of laws.
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Please confirm that the foregoing is in accordance with your understandings
and agreements with ING Barings by signing and returning to us the duplicate of
this letter enclosed herewith.
Very truly yours,
ING BARINGS LLC
By: /s/ DAVID HARRIS
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David Harris
Managing Director
CONFIRMED AND AGREED:
Piercing Pagoda, Inc.
By: /s/ RICHARD PENSKE
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Richard Penske
Chairman of the Board and Chief
Executive Officer
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