EXHIBIT 10.3
SERVICES AGREEMENT
SERVICES AGREEMENT, dated as of September 9, 1997, by and between
Harvest Partners, Inc., a New York corporation ("Harvest"), and Xxxx
International Holdings, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the Company and an affiliate of Harvest ("Purchaser") have
entered into that certain Governance Agreement of even date herewith (the
"Governance Agreement") relating to matters associated with the proposed
acquisition by Purchaser of outstanding shares of Common Stock of the Company
pursuant to that certain Stock Purchase Agreement of even date herewith among
Purchaser and Xxxxx X. Xxxx and related parties (the "Stock Purchase
Agreement"); and
WHEREAS, the Company is in the business of designing, manufacturing and
marketing a broad line of exterior accessories for new and used light trucks,
sport utility vehicles and vans (the "Business"); and
WHEREAS, the Company desires that Harvest provide the Company with
financial advisory and strategic planning services relating to the Company's
business and affairs (collectively, the "Harvest Services"); and
WHEREAS, Harvest has designated two representatives with financial
and/or management expertise to serve on the Board of Directors of the Company,
such representatives
to render counsel, guidance and managerial assistance to the Company while
serving on the Company's Board of Directors (collectively, the "Director
Services").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. Effective Date. This Agreement shall be effective as of the closing
date under the Stock Purchase Agreement (the "Effective Date").
2. SERVICES. (a) Harvest will provide the Harvest Services to the
Company from time to time as requested by the Board of Directors of the Company.
The Harvest Services shall include, without limitation, (i) assisting the
Company, generally, with respect to financial and business matters, as the
Company's financial advisor, (ii) recommending and assisting the Company in
implementing a general strategy in connection with the Company's accomplishing
its business plan and anticipated growth; (iii) assisting the Company to
structure and negotiate acquisitions and dispositions of assets and/or business
units; (iv) if necessary, locating equity partners and structuring the terms of
any such equity investment, (v) communicating with lenders and stockholders,
including, assisting in the coordination of investor relation services, (vi)
structuring and negotiating refinancings and other lending or borrowing
transactions relating to the Company and (vii) such other investment, advisory
and related financial services as Harvest or the Company shall, from time to
time, deem necessary or appropriate. The Harvest Services may be rendered both
through the Harvest Directors (as defined below) and directly by Harvest and its
affiliates, provided, however, that the Harvest Services are understood by the
parties to be in addition to the Director Services. The Harvest Services shall
be strictly advisory in nature and
the Company shall be free to accept or reject any such advise in its sole
discretion. Harvest shall have no authority to bind or obligate the Company in
any way. Nothing contained in this Agreement shall require the Company to
exclusively use the services of Harvest in connection with the matters referred
to herein as Harvest Services.
(b) Harvest hereby agrees to provide the Company with the Director
Services, if requested by the Board of Directors of the Company or if Harvest
unilaterally elects in accordance with the Governance Agreement. In that event,
Harvest hereby agrees to cause two of its principals, directors or designees
with financial and/or management expertise to serve on the Company's Board of
Directors (the "Harvest Directors"). The Harvest Directors shall provide
guidance, counsel and managerial assistance to the Company in providing such
Director Services and shall devote such time and attention as is reasonably
necessary to provide the Director Services.
3. COMPENSATION. (a) Subject to Section 4 below, as full payment for
the Harvest Services and the Director Services to be rendered to the Company
hereunder (specifically excluding, however, all amounts payable directly by the
Company to its directors, including the Harvest Directors, for directors'
services), the Company shall pay to Harvest a fee (the "Harvest Fee") equal to
$150,000 with respect to the first year (which for purposes of this paragraph 3
shall mean the four consecutive fiscal quarters ending September 30, 1998) of
the term hereof, $250,000 with respect to the second year (which for purposes of
this paragraph 3 shall mean the four consecutive fiscal quarters ending
September 30, 1999) of the term hereof and $400,000 with respect to the third
year (which for purposes of this paragraph 3 shall mean the four consecutive
fiscal quarters ending September 30, 2000) of the term hereof, payable in
equal quarterly installments in advance simultaneously with the Company's public
release of the Company's earnings following the end of each fiscal quarter of
the Company; provided, however, that the first payment, relating to the quarter
ending December 31, 1997, shall be made on the date hereof; provided, further,
however, that such quarterly installment payments shall only be required if the
Company's quarterly earnings before interest, taxes, depreciation and
amortization ("EBITDA"), as calculated in accordance with generally accepted
accounting principles in the United States of America as in effect from time to
time, applied on a basis consistent with those used in the preparation of the
Company's financial statements ("GAAP"), is not less than (i) $1,000,000 per
fiscal quarter during the first year of the term hereof, (ii) $1,375,000 per
fiscal quarter during the second year of the term hereof and (iii) $1,750,000
per fiscal quarter during the third year of the term hereof (each such amount
being herein called the "Target"). For purposes of this Section 3(a), the
quarterly EBITDA of the Company shall be determined by the Chief Financial
Officer of the Company, whose determination, in the absence of manifest error,
shall be binding and conclusive on Harvest and the Company. Notification of the
amount of the Company's quarterly EBITDA, together with a copy of the Chief
Financial Officer's certification to the Company of such amount, shall be
delivered to Harvest in writing by the Company simultaneously with the public
release of the Company's earnings following the end of each fiscal quarter of
the Company.
(b) Notwithstanding the provisions of Section 3(a) above, payment of
the Harvest Fee shall be suspended for each fiscal quarter immediately following
a fiscal quarter in which the Company's quarterly EBITDA (plus the cumulative
amount, if any, of the EBITDA Excess, as
hereinafter defined, for the fiscal quarters preceding the fiscal quarter in
which EBITDA did not meet Target) did not meet the Target. To the extent the
Company's actual quarterly EBITDA for any quarter exceeds the Target, such
excess is hereinafter referred to as the "EBITDA Excess." To the extent the
Company's actual quarterly EBITDA for any quarter is less than the Target, such
deficiency is hereinafter referred to as the "EBITDA Deficiency". All suspended
payments of the Harvest Fee shall accumulate and shall be payable at such time
as, with respect to each full fiscal quarter ending prior to termination of this
Agreement, the cumulative amount of the EBITDA Excess, on a dollar-for-dollar
basis, equals or exceeds the then cumulative amount of the EBITDA Deficiency.
(c) The Company, provided prior approval of a majority of the
Independent Directors (as defined in the Governance Agreement) is obtained, may
pay Harvest negotiated amounts in excess of the Harvest Fee to the extent
Harvest provides the Company with investment banking, advisory or other similar
Harvest Services in connection with any extraordinary transaction effected by
the Company, including any merger, business combination, recapitalization or
significant asset acquisition or disposition.
(d) Harvest shall not be entitled to reimbursement of out-of-pocket
expenses for performing Harvest Services hereunder. Notwithstanding the
foregoing, the Harvest Directors shall be entitled to expense reimbursement
available to the Company's directors generally.
4. TERM. This Agreement shall commence on the date hereof and shall
terminate upon the earlier of (a) the date immediately preceding the third
anniversary of the date of this Agreement, (b) the date on which this Agreement
is terminated for cause as provided in
Section 7 below, or (c) the date the number of shares of Common Stock
Beneficially Owned (as defined in the Stock Purchase Agreement) by Purchaser or
any Affiliate or Associate (as defined in the Stock Purchase Agreement) thereof
which is a signatory to the Stock Purchase Agreement decreases to less than 50%
of the number of Permitted Shares (as defined in the Stock Purchase Agreement).
5. RIGHT TO ENGAGE IN OTHER ACTIVITIES. The Harvest Services and the
Director Services provided herein are not to be deemed exclusive. Nothing
contained herein shall restrict Harvest or any of its shareholders, directors,
officers, employees or agents from engaging in any other business or devoting
time and attention to the management, investment, involvement or other aspects
of any other business, including becoming an officer or director thereof, or
rendering services of any kind to any other corporation, firm, individual or
association. The Company further acknowledges that Harvest, from time to time,
may provide investment, management and advisory services to other companies and
entities. In addition, the Company acknowledges that Harvest has, and will
continue, to render investment and advisory advice and services to certain of
the Company's stockholders, including LIH Holdings, LLC, a Delaware limited
liability corporation ("LIH"), and LIH's members and their affiliates.
6. CONFIDENTIALITY. Harvest acknowledges that in connection with the
performance of the Harvest Services hereunder, it and its employees may have
access to the Company's confidential information (as hereinafter defined).
Harvest agrees that neither it nor its employees will use or disclose outside
the scope of its engagement hereunder any confidential information of the
Company and will take normal and reasonable steps to protect the
confidentiality of any such confidential information. Confidential Information
shall encompass information about the Company's products, business, finances and
marketing plans, but shall not include information which (i) becomes generally
available to the public other than as a result of a disclosure by Harvest or its
employees, (ii) was available to Harvest on a non-confidential basis prior to
its disclosure to Harvest by the Company, its representatives or agents or (iii)
becomes available to Harvest on a non-confidential basis from a source other
than the Company, its representatives or agents, provided that such source is
not bound by a confidentiality agreement with the Company, its representatives
or its agents or otherwise is prohibited from transmitting the information to
Harvest or its employees by a confidential, legal or fiduciary obligation.
7. TERMINATION FOR CAUSE. This Agreement may be terminated for cause by
the party whose conduct is not the cause for such termination if (a) either
party commits an act of criminal misconduct or gross negligence or neglect in
any material respect of its obligations as set forth herein, or (b) either party
files a voluntary petition in bankruptcy or is adjudicated as bankrupt or
insolvent, or such party files a petition under any chapter of the United States
Bankruptcy Code or any other present or future applicable Federal, state or
other statute or law regarding bankruptcy, insolvency or other relief for
debtors, or any party seeks, or consents to, or acquiesces in the appointment
of, any trustee, receiver, conservator or liquidator of itself or of all or any
substantial portion of its property, and such petition in bankruptcy, or
adjudication as a bankrupt or insolvent entity, is not waived, dismissed or
overturned within 60 days from the date of the filing or adjudication in
question.
8. ASSIGNMENT. Neither Harvest nor the Company may assign this
Agreement or any of their respective rights or obligations hereunder, except
that either of them may assign or transfer this Agreement to any other person
who or which acquires all or substantially all of their respective property,
business and assets, provided that, in the case of Harvest, the successor to its
business employs substantially the same personnel to provide the Harvest
Services and the Director Services hereunder.
9. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not in any manner or way affect any other provision hereof,
and this Agreement shall be construed, if possible, as if amended to conform to
legal requirements, failing which it shall be construed as if any such offending
provision were omitted.
10. INDEPENDENT CONTRACTOR RELATIONSHIP. Harvest shall serve as an
independent contractor to the Company pursuant to the terms and conditions of
this Agreement and this Agreement does not create and shall not be construed to
create a relationship of principal and agent, joint venturers, co-partners,
employer and employee, or any similar relationship between the Company and
Harvest, and the parties hereto expressly deny the existence of any such
relationship.
11. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York, without
giving effect to the conflicts of law principles thereof.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
13. BINDING NATURE. Subject to the restrictions on assignability
contained herein, each and all of the covenants, terms, conditions, provisions
and agreements herein contained shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors, heirs and permitted
assigns.
14. AMENDMENT, ETC. The provisions of this Agreement may not be
amended, waived, modified or changed except by an instrument in writing signed
by all of the parties hereto. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their representatives thereunto duly authorized on the date first
above written.
HARVEST PARTNERS, INC.
By: /s/ Xxx X. Xxxxxxxx
---------------------------------
Name: Xxx X. Xxxxxxxx
Title: Partner
XXXX INTERNATIONAL HOLDINGS, INC.
By: /s/ Xxxxxxx X. XxXxxxx
---------------------------------
Name: Xxxxxxx X. XxXxxxx
Title: Chief Executive Officer
