MANAGEMENT SERVICES AGREEMENT
Exhibit
10.33
Execution
Copy
THIS
MANAGEMENT SERVICES AGREEMENT (this “Agreement”)
is
made and entered into as of August 17, 2007, by and among Advanced
Communications Technologies, Inc., a Delaware corporation (the “Company”),
and
H.I.G. Capital L.L.C., a Delaware limited liability company (“H.I.G.”).
WHEREAS,
the Company’s wholly-owned subsidiary, Encompass Group Affiliates, Inc. (the
“Buyer”),
has
entered into a Stock Purchase Agreement, dated as of the date hereof, with
Xxxxx
Xxxxxxx, Inc. (“VB”)
and
Xxxx Xxxxxxx, pursuant to which Xx. Xxxxxxx, the sole shareholder of VB will
sell all of the issued and outstanding stock of VB to the Buyer (the
“Acquisition”).
WHEREAS,
on the terms and subject to the conditions contained in this Agreement, the
Company desires to engage H.I.G. to provide certain management and consulting
services and H.I.G. desires to perform such services for the Company and its
subsidiaries.
WHEREAS,
the Company has entered into a Note Purchase Agreement (the “NPA”),
dated
as of the date hereof, with Encompass Group Affiliates, Inc., SpectruCell,
Inc.,
Xxxxxx Street Investments, Inc., Cyber-Test, Inc., VB, Sankaty Advisors, LLC
as
First Lien Collateral Agent for the Senior Note Purchasers (as defined therein)
and Second Lien Collateral Agent for the Subordinated Note Purchasers (as
defined therein), and each Senior Note Purchaser and Subordinated Note Purchaser
listed on Schedule I attached thereto.
NOW,
THEREFORE, in consideration of the premises and the respective mutual
agreements, covenants, representations and warranties contained in this
Agreement, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Appointment
of H.I.G.
On the
terms and conditions provided in this Agreement, the Company (on behalf of
itself and its subsidiaries) appoints H.I.G. and H.I.G. accepts appointment
as a
management consultant to the Company and its subsidiaries, including the
business of any companies hereafter formed or acquired by the Company or any
such subsidiary.
2. Board
of Directors Supervision.
The
activities of H.I.G. to be performed under this Agreement will be subject to
the
supervision of the Board of Directors of the Company (the “Board”)
to the
extent required by applicable law or regulation and subject to reasonable
policies consistent with the terms of this Agreement adopted by the Board and
in
effect from time to time.
3. Authority
of H.I.G.
Subject
to any limitations imposed by applicable law or regulation, H.I.G. will render
management and consulting services to the Company and its subsidiaries, which
services will include advice and assistance concerning any and all aspects
of
the operations, planning and budgeting of the Company and its subsidiaries,
as
needed from time to time, including advising the Company and its subsidiaries
in
their relationships with banks and other financial institutions and with
accountants, attorneys, financial advisers and other professionals with respect
to such services. Upon the request of the Board, H.I.G. will make periodic
reports to the Company with respect to the management services provided
hereunder. H.I.G. will cause its employees and agents to provide the Company
and
its subsidiaries with the benefit of their special knowledge, skill and business
expertise to the extent relevant to the business and affairs of the Company
and
its subsidiaries.
4. Reimbursement
of Expenses; Independent Contractor.
All
obligations or expenses incurred by H.I.G. in the performance of its duties
under this Agreement will be for the account of, on behalf of, and at the
expense of the Company (or the applicable subsidiary). H.I.G. will not be
obligated to make any advance to, or for the account of, the Company or to
pay
any sums, except out of funds held in accounts maintained by the Company (or
the
applicable subsidiaries), nor will H.I.G. be obligated to incur any liability
or
obligation for the account of the Company or any subsidiary without assurance
that the necessary funds for the discharge of the liability or obligation will
be provided. H.I.G. will be an independent contractor, and nothing contained
in
this Agreement will be deemed or construed (a) to create a partnership or joint
venture between the Company and H.I.G., (b) to cause H.I.G. to be responsible
in
any way for the debts, liabilities or obligations of the Company, any of its
subsidiaries or any other party or (c) to constitute H.I.G. or any of its
employees as employees, officers, or agents of the Company or any of its
subsidiaries.
5. Other
Activities of H.I.G.; Investment Opportunities.
The
Company acknowledges and agrees that H.I.G. will not be required to devote
H.I.G.’s (or any of its employees, officers, directors, affiliates or
associates) full time and business efforts to the duties of H.I.G. specified
in
this Agreement, but only so much of such time and efforts as H.I.G. reasonably
deems necessary. The Company further acknowledges and agrees that H.I.G. and
its
affiliates are or may be engaged in the business of investing in, acquiring
and/or managing businesses for H.I.G.’s own account, for the account of H.I.G.’s
affiliates and associates and for the account of other unaffiliated parties
and
that no aspect or element of these activities will be deemed to be engaged
in
for the benefit of the Company nor to constitute a conflict of interest. H.I.G.
will be required to bring only those investments and/or business opportunities
to the attention of the Company which H.I.G., in its sole discretion, deems
appropriate.
6. Compensation
of H.I.G.
6.1 Management
Fee.
The
Company shall pay (or cause to be paid) to H.I.G. or its designees with respect
to the management of the business operations of the Company and its
subsidiaries, a cash consulting and management fee (the “Management
Fee”)
equal
to (i) $400,000 per annum if EBITDA (as defined in the NPA) is less than
$6,500,000 for the four calendar quarters preceding the date of any payment,
(ii) $450,000 per annum if EBITDA is greater than or equal to $6,500,000 for
the
four calendar quarters preceding the date of the payment, or (iii) $500,000
per
annum if EBITDA is greater than or equal to $7,250,000 for the four calendar
quarters preceding the date of any payment, as the case may be, in each case,
payable quarterly in advance in equal installments of $100,000 on the first
business day of each month of January, April, July and October (as adjusted
pursuant to this Section 6), provided that the Management Fee for the remainder
of the current calendar quarter shall be paid on a pro rated basis (based on
the
number of days remaining in such quarter) on the date hereof. In the event
that
EBITDA has changed sufficiently during any calendar quarter or for any trailing
four calendar quarters to change the amount of Management Fee paid, then any
such change shall be made as of the first payment to be made after the delivery
of the financial statements under the NPA (or any other credit documents of
the
Company in the event the NPA has terminated) has documented such change in
EBITDA. Such payment shall also include an adjustment for any increased or
decreased Management Fee that should have been paid on the first day of the
previous quarter based on the EBITDA for the four calendar months preceding
the
date of such payment.
6.2 Additional
Business Operations.
If the
Company or its subsidiaries acquire or enter into any additional business
operations after the date of this Agreement, the Board and H.I.G. will, prior
to
the acquisition or prior to entering into the business operations, (i) in good
faith, determine whether and to what extent the applicable annual fee set forth
in Section 6.1 above should be increased as a result thereof, and (ii) notify
the First Lien Collateral Agent and the Second Lien Collateral Agent in writing
of any such increase. The Management Fee may not exceed $1,000,000 in any year
and may only be increased to up to $750,000 per annum if EBITDA for the four
calendar quarters preceding the date of any payment is at least $12,500,000
and
may only be increased to up to $1,000,000 per annum if EBITDA for the four
calendar quarters preceding the date of any payment is at least $17,500,000
for
the four calendar quarters preceding the date of any payment. Any increase
in
the Management Fee will be evidenced by a written supplement to this Agreement
signed by the Company and H.I.G. and will only be payable to the extent
permitted by the NPA.
6.3 Limitations
on Payment of Management Fee.
Notwithstanding anything contained herein to the contrary the Management Fee
shall only be payable to the extent permitted by the terms of the NPA. The
parties hereby agree that to the extent the Company is prohibited from timely
paying the Management Fee in whole or in part by the NPA, such unpaid Management
Fee, or portion thereof, shall be accrued (and shall accrue interest at a rate
of 5% per annum, compounded monthly). Any such accrued Management Fee, or
portion thereof, shall be paid by the Company within ten (10) days after the
prohibition on such payment has been waived or otherwise terminated.
6.4 Reimbursement of Expenses.
The
Company agrees to reimburse H.I.G. for certain out-of-pocket expenses incurred
by H.I.G. in connection with the Acquisition and the financing thereof. Such
reimbursement of expenses shall be paid as of the date hereof by wire transfer
of immediately available funds to an account designated by H.I.G.
7. Term.
This
Agreement will commence as of the date hereof and will remain in effect until
the fifth anniversary of the date hereof, unless terminated earlier in
accordance with the provisions of this Agreement.
8. Termination.
Either
the Company or H.I.G. may terminate H.I.G.’s engagement under this Agreement in
the event of the breach of any of the material terms or provisions of this
Agreement by the other party, which breach is not cured within 10 business
days
after notice of the same is given to the party alleged to be in breach by the
other party. If this Agreement is terminated by H.I.G. because of the breach
of
any of the material terms or provisions hereof by the Company, H.I.G. will
be
entitled to recover damages from the Company and will not be required to
mitigate or reduce damages by seeking or undertaking other management
arrangements or business opportunities.
9. Standard
of Care.
H.I.G.
(including any person or entity acting for or on behalf of H.I.G.) will not
be
liable for any mistakes of fact, errors of judgment, losses sustained by the
Company or any subsidiary or acts or omissions of any kind, unless caused by
the
gross negligence or willful misconduct of H.I.G., as finally determined by
a
court of competent jurisdiction.
10. Indemnification
of H.I.G.
The
Company will indemnify and hold harmless H.I.G. and its present and future
officers, directors, affiliates, employees, controlling persons, agents and
representatives (“Indemnified
Parties”)
from
and against all losses, claims, liabilities, suits, costs, damages and expenses
(including attorneys’ fees) arising from their performance of services
hereunder, except as a result of their gross negligence or willful misconduct.
The Company will reimburse the Indemnified Parties on a monthly basis for the
cost of defending any action or investigation (including, but not limited to,
attorneys’ fees and expenses) subject to an undertaking from any such
Indemnified Party to repay the Company if such party is determined not to be
entitled to indemnity.
11. Company
Representations.
Each
party hereby represents and warrants to the other that (i) the execution,
delivery and performance of this Agreement by it does not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order,
judgment or decree to which it is a party or by which it is bound and (ii)
upon
the execution and delivery of this Agreement by the other party, this Agreement
shall be the valid and binding obligation of the first party, enforceable in
accordance with its terms.
12. Successors
and Assigns.
This
Agreement is intended to bind and inure to the benefit of and be enforceable
by
H.I.G., the Company and their respective successors and assigns, except that
without the prior written consent of H.I.G., the Company will not assign,
transfer or convey any of its rights, duties or interest under this Agreement,
nor will it delegate any of the obligations or duties required to be kept or
performed by it hereunder.
13. Notices.
Any
notices, requests, demands and other communications required or permitted to
be
given under this Agreement will be in writing and, except as otherwise specified
in writing, will be given by personal delivery, facsimile transmission, express
courier service or by registered or certified mail, postage prepaid, return
receipt requested:
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If
to the Company:
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Advanced
Communications Technologies, Inc.
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000
Xxxxxxxxx Xxxxxx, Xxxxx 0000
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Xxx
Xxxx, XX 00000
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Attention:
Xxxxx Xxxxxx, Chief Executive Officer
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Facsimile:
646.227.1666
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If
to H.I.G.:
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H.I.G.
Capital, L.L.C.
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000
Xxxxxxxx Xxxxxx, 00xx Xxxxx
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Xxxxxx,
Xxxxxxxxxxxxx 00000
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Attn:
Xxxx Xxxxx and Xxxxxxx Xxxxx
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Facsimile
No.: (000) 000-0000
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or
to
such other addresses as either party hereto may from time to time give notice
of
(complying as to delivery with the terms of this Section 13) to the other.
Notice by registered or certified mail will be effective three days after
deposit in the United States mail. Notice by any other permitted means will
be
effective upon receipt.
14. Severability.
If any
term or provision of this Agreement or the application thereof to any person
or
circumstance will, to any extent, be invalid or unenforceable, the remainder
of
this Agreement, or the application of such term or provision to persons or
circumstances other than those which are invalid or unenforceable, will not
be
affected thereby, and each term and provision of this Agreement will be valid
and be enforced to the fullest extent permitted by law.
15. No
Waiver.
The
failure of the Company or H.I.G. to seek redress for any violation of, or to
insist upon the strict performance of, any term or condition of this Agreement
will not prevent a subsequent act by the Company or H.I.G., which would have
originally constituted a violation of this Agreement by the Company or H.I.G.,
from having all the force and effect of any original violation. The failure
by
the Company or H.I.G. to insist upon the strict performance of any one of the
terms or conditions of the Agreement or to exercise any right, remedy or
election herein contained or permitted by law will not constitute or be
construed as a waiver or relinquishment for the future of such term, condition,
right, remedy or election, but the same will continue and remain in full force
and effect. Except to the extent that the Company’s rights of termination are
limited herein, all rights and remedies that the Company or H.I.G. may have
at
law, in equity or otherwise upon breach of any term or condition of this
Agreement, will be distinct, separate and cumulative rights and remedies and
no
one of them, whether exercised by the Company or H.I.G. or not, will be deemed
to be in exclusion of any other right or remedy of the Company or
H.I.G.
16. Entire
Agreement; Amendment; Certain Terms.
This
Agreement contains the entire agreement among the parties hereto with respect
to
the matters herein contained and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way. The
provisions of this Agreement may be amended only with the prior written consent
of the Company and H.I.G.
17. Governing
Law.
This
Agreement will be governed by and construed in accordance with the internal
laws
of the State of New York without reference to the laws of any other
state.
18. Counterparts.
This
Agreement may be executed simultaneously in two or more counterparts, any one
of
which need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same
Agreement.
19. Delivery
by Facsimile.
This
Agreement and any amendments hereto, to the extent signed and delivered by
means
of a facsimile machine, shall be treated in all manner and respects as an
original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof delivered
in person. At the request of any party hereto, each other party hereto shall
reexecute original forms thereof and deliver them to all other parties. No
party
hereto shall raise the use of a facsimile machine to deliver a signature or
the
fact that any signature was transmitted or communicated through the use of
a
facsimile machine as a defense to the formation or enforceability of a contract
and each such party forever waives any such defense.
{Remainder
of Page Intentionally Left Blank}
IN
WITNESS WHEREOF, this Management Services Agreement has been duly executed
as of
the date first above written.
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ADVANCED
COMMUNICATIONS
TECHNOLOGIES,
INC.
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By:
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/s/
Xxxxx X. Xxxxxx
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Name:
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Xxxxx
X. Xxxxxx
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Its:
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President
& Chief Executive Officer
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H.I.G.
CAPITAL L.L.C.
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By:
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/s/
Xxxxxxx X. Xxxxx XX
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Name:
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Xxxxxxx
X. Xxxxx XX
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Its:
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