Exhibit 10.10
EXECUTION COPY
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT, dated December 19, 2001 (this
"Agreement"), is made by and between TurnWorks Acquisition III, Inc., a Delaware
corporation (the "Company"), and TurnWorks, Inc., a Texas corporation ("TW").
Capitalized terms used herein but not otherwise defined shall have the meanings
given to them in the Employment Agreement and the Merger Agreement (each of the
aforementioned terms being defined below).
W I T N E S S E T H:
WHEREAS, on the date hereof, Aloha Airgroup, Inc., a Hawaii corporation
("A"), Hawaiian Airlines, Inc., a Hawaii corporation ("B"), the Company and TW
have entered into an Agreement and Plan of Merger, dated the date hereof,
pursuant to which A will merge into a subsidiary of the Company, and B will
merge either into the Company or into a subsidiary of the Company (the "Merger
Agreement");
WHEREAS, TW is a company that provides a wide variety of services to
companies including, investment banking, financial advisory, executive
recruitment and management consulting services;
WHEREAS, TW and its employees have devoted a significant amount of time
and resources providing various services to the Company in order to bring about
the transactions contemplated under the Merger Agreement (the "Transactions");
WHEREAS, subject to the consummation of the Transactions (the date on
which such consummation shall have occurred being hereinafter referred to as the
"Effective Date"), the Company has requested TW to provide investment banking,
financial advisory, executive recruitment and management consulting services to
the Company and TW has agreed to provide such services, under the terms and
provisions hereof; and
WHEREAS, simultaneously with the execution and delivery hereof and in
accordance with the terms of this Agreement, the Company has also requested that
TW arrange for Xxxxxxx X. Xxxxxxxxx, TW's Chief Executive Officer (hereinafter,
"Executive"), to provide his services pursuant to an employment agreement, dated
the date hereof (the "Employment Agreement"), pursuant to which Executive shall
agree to act as the Company's Chairman and Chief Executive Officer.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, TW and the Company agree as follows:
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ARTICLE 1 TERM AND TERMINATION OF AGREEMENT
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1.1 TERM. Unless sooner terminated pursuant to other provisions hereof,
the Company agrees to retain the services of TW for a two-year period beginning
on the Effective Date. The term shall be extended automatically for an
additional and successive one-year period as of the second anniversary of the
Effective Date and as of the last day of each one-year term thereafter that this
Agreement is in effect; PROVIDED, however, that if, prior to the date which is
six months before the last day of the term, either party shall give written
notice to the other that no such automatic extension shall occur, then TW's
engagement hereunder shall terminate on the last day of any such term during
which such notice is given.
1.2 COMPANY'S RIGHT TO TERMINATE. Notwithstanding the provisions of
paragraph 1.1 of this Agreement, the Company shall have the right to terminate
TW's engagement under this Agreement at any time for any of the following
reasons:
(i) a material breach by TW of any provision of this Agreement
which, if correctable, remains uncorrected for thirty (30) days following
written notice of such breach by the Company to TW; or
(ii) for any other reason whatsoever, in the sole discretion of the
Company.
1.3 TW'S RIGHT TO TERMINATE. Notwithstanding the provisions of
paragraph 1.1 of this Agreement, TW shall have the right to terminate its
engagement under this Agreement at any time for any of the following reasons:
(i) a material breach by the Company of any provision of this
Agreement (other than a payment default addressed in paragraph 1.3(ii) below)
which, if correctable, remains uncorrected for thirty (30) days following
written notice of such breach by TW to the Company;
(ii) failure of the Company to make payment for any amounts due
hereunder within thirty (30) days of the date on which such payment was due; or
(iii) for any other reason whatsoever, in the sole discretion of TW.
1.4 NOTICE OF TERMINATION. If the Company or TW desires to terminate
this Agreement at any time prior to expiration of the term, it shall do so by
giving written notice to the other party that it has elected to terminate this
Agreement and stating the effective date and reason for such termination,
provided that no such action shall alter or amend any other provisions hereof or
rights arising hereunder.
1.5 AUTOMATIC TERMINATION. Notwithstanding any of the foregoing, in the
event that the Employment Agreement shall terminate for any reason, this
Agreement shall automatically terminate.
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ARTICLE 2 PERFORMANCE OF SERVICES BY TW
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2.1 GENERAL. Beginning on the Effective Date and subject to the
provisions hereof, during the term, TW shall provide the Company with investment
banking, financial advisory, executive recruitment and management consulting
services (such services being hereinafter referred to as the "Services").
2.2 SERVICES OF EXECUTIVE. TW agrees that it shall cause Executive to
enter into the Employment Agreement and provide his services thereunder in
accordance with the terms thereof.
2.3 WORKING TIME; AVAILABILITY. TW will exercise commercially
reasonable efforts to vary the time spent in order to provide the Services at
times reasonably convenient to the Company; PROVIDED, however, that (except with
respect to the services provided by Executive under paragraph 2.2 above) TW
shall not, in connection with the rendition of the Services, be obligated to
devote to the Company, in general, an amount of time exceeding 50% of the
working time of a full-time employee. The parties hereto acknowledge that all
employees of TW (except Executive) made available to the Company for the
performance of Services hereunder shall at all times remain exclusively the
employees of TW.
2.4 STANDARD OF CARE. TW will use commercially reasonable efforts in
the performance of its obligations hereunder. TW makes no representations or
warranties whatsoever, either express or implied, to the Company or any other
Person that the Services provided hereunder are or will be adequate and
sufficient (as to quantity, quality or type) to meet the needs (including any
specifically identified needs) or any objectives of the Company.
2.5 DISCLAIMER. TW does not represent that it is qualified to provide
any legal or other professional services, the providers of which must be
licensed or are otherwise subject to requirements of law establishing
educational, professional or similar qualifications for providers of such
service. Nothing contained in this Agreement shall be construed as requiring TW
to provide any such services.
ARTICLE 3 SERVICE FEES AND EXPENSES
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3.1 GENERAL. During the term hereof: (i) if and so long as Executive
shall be serving as the Company's Chairman AND Chief Executive Officer, TW shall
receive a fee at the annualized rate of One Million Six Hundred Thousand Dollars
($1,600,000.00), and (ii) if and so long as Executive shall be acting ONLY as
the Company's Chairman, TW shall receive a fee at the annualized rate of Six
Hundred Thousand Dollars ($600,000.00). The parties hereto acknowledge that the
aforementioned fees shall be paid to TW in addition to any other amounts that
may be due and owing to TW under the terms of this Agreement including, without
limitation, any payments under paragraph 3.2 of this Agreement. The fees
described above shall be paid to TW in equal, monthly installments, payable in
advance, with the first fee installment being paid on the Effective Date and
subsequent fee installments being paid on each successive
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one-month anniversary of the Effective Date. The parties acknowledge that the
dollar amount of the monthly fee installments may change due to changes in the
annualized payment rates described above.
3.2 TW BUSINESS EXPENSES. The Company shall reimburse, or pay on behalf
of, TW, all reasonable and appropriate out-of-pocket expenses (E.G., meals and
travel expenses of TW employees) incurred by TW prior to the termination of this
Agreement (other than expenses being reimbursed to the Executive under the
Employment Agreement) in connection with the rendition of Services hereunder.
The Company agrees to make any such reimbursement to TW within ten (10) days
after the Company's receipt of an invoice therefor from TW, accompanied by
copies of receipts or other documentation substantiating the amount of all such
costs and expenses. All expense reimbursements to TW under this paragraph 3.2
shall be subject to periodic review and approval by the Company's audit
committee.
ARTICLE 4 EFFECT OF TERMINATION
---------------------
4.1 TERMINATION BY EXPIRATION. If this Agreement shall terminate upon
expiration of the term in accordance with the provisions of paragraph 1.1
hereof, then the Company shall: (i) not be obligated to make any payments under
paragraph 3.1 of this Agreement with respect to any periods after the date of
such termination, and (ii) perform its remaining obligations under this
Agreement including, but not limited to, its remaining obligations under
paragraph 3.2 hereof.
4.2 TERMINATION PRIOR TO EXPIRATION.
(i) Upon termination of this Agreement prior to the expiration of
the term, and subject to paragraphs 4.2(ii) and 4.2(iii) below, the Company
shall: (a) pay to TW, within five days after the date of such termination, a
one-time payment in an amount equal to any and all amounts that TW would have
been entitled to receive under paragraph 3.1 of this Agreement with respect to
the period that begins on the date of termination and ends on the date on which
this Agreement would otherwise have expired; and (b) perform its remaining
obligations under this Agreement including, but not limited to, its remaining
obligations under paragraph 3.2 hereof;
(ii) Notwithstanding paragraph 4.2(i) of this Agreement, in the
event that:
(a) TW terminates this Agreement for the reason set forth in
paragraph 1.3(iii) of this Agreement;
(b) the Company terminates this Agreement for the reason set
forth in paragraph 1.2(i) of this Agreement;
(c) this Agreement terminates because of Executive's termination
for the reasons set forth in paragraphs 2.2(iii) or 2.2(iv)
of the Employment Agreement; or
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(d) this Agreement terminates because of Executive's termination
for the reasons set forth in paragraph 2.3(viii) of the
Employment Agreement,
then paragraph 4.2(i) of this Agreement shall be inapplicable and the Company
shall: (i) not be obligated to make any payments under paragraph 3.1 of this
Agreement with respect to any periods after the date of such termination; and
(ii) perform its remaining obligations under this Agreement including, but not
limited to, its remaining obligations under paragraph 3.2 hereof; and
(iii) Notwithstanding paragraph 4.2(i) of this Agreement, and in the
event that this Agreement terminates because of Executive's termination for the
reasons set forth in paragraphs 2.2(i) or 2.2(ii) of the Employment Agreement,
then paragraph 4.2(i) of this Agreement shall be inapplicable and the Company
shall (a) pay to TW, within five days after the date of such termination, a
one-time payment in an amount equal to the sum of any and all amounts that TW
would have been entitled to receive under paragraph 3.1 of this Agreement with
respect to the period that begins on the date of termination and ends on the
date falling one year after the date of termination; and (b) perform its
remaining obligations under this Agreement including, but not limited to, its
remaining obligations under paragraph 3.2 hereof.
4.3 CERTAIN ADDITIONAL PAYMENTS BY COMPANY. Notwithstanding anything to
the contrary in this Agreement, if any payment, distribution or provision of a
benefit by the Company to or for the benefit of TW, whether paid or payable,
distributed or distributable or provided or to be provided pursuant to the terms
of this Agreement or otherwise (a "Payment"), would be subject to an excise or
other special additional tax that would not have been imposed absent such
Payment (including, without limitation, any excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended), or any interest or penalties
with respect to such excise or other additional tax (such excise or other
additional tax, together with any such interest or penalties, are hereinafter
collectively referred to as the "Excise Tax"), the Company shall pay to TW an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by TW of all taxes (including any interest or penalties imposed with respect to
such taxes), including any income taxes and Excise Taxes imposed on any Gross-Up
Payment, TW retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. The Company and TW shall make an initial
determination as to whether a Gross-Up Payment is required and the amount of any
such Gross-Up Payment. TW shall notify the Company in writing of any claim by
the Internal Revenue Service which, if successful, would require the Company to
make a Gross-Up Payment (or a Gross-Up Payment in excess of that, if any,
initially determined by the Company and TW) within ten business days after the
receipt of such claim. The Company shall notify TW in writing at least ten
business days prior to the due date of any response required with respect to
such claim if it plans to contest the claim. If the Company decides to contest
such claim, TW shall cooperate fully with the Company in such action; PROVIDED,
however, the Company shall bear and pay directly or indirectly all costs and
expenses (including additional interest and penalties) incurred in connection
with such action and shall indemnify and hold TW harmless, on an after-tax
basis, for any Excise Tax or income tax, including interest and penalties with
respect thereto, imposed as a result of the Company's action. If, as a result of
the Company's action with respect to a claim, TW receives a refund of any
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amount paid by the Company with respect to such claim, TW shall promptly pay
such refund to the Company. If the Company fails to timely notify TW whether it
will contest such claim or the Company determines not to contest such claim,
then the Company shall immediately pay to TW the portion of such claim, if any,
which it has not previously paid to TW.
4.4 PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to pay TW
the amounts and to make the arrangements provided in this Article 4 shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company (including its subsidiaries and affiliates) may
have against TW or anyone else. All amounts payable by the Company shall be paid
without notice or demand. TW shall not be obligated to seek other engagements in
mitigation of the amounts payable or arrangements made under any provision of
this Article 4, and the obtaining of any such other engagement shall in no event
effect any reduction of the Company's obligations to make (or cause to be made)
the payments and arrangements required to be made under this Article 4.
4.5 LIQUIDATED DAMAGES. In light of the difficulties in estimating the
damages upon termination of this Agreement, the Company and TW hereby agree that
the payments, if any, to be received by TW pursuant to this Article 4 shall be
received by TW as liquidated damages.
ARTICLE 5 INDEPENDENCE
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5.1 All employees and representatives of TW providing Services to the
Company, other than Executive, will be deemed for purposes of all compensation
and employee benefits to be employees or representatives of TW and not employees
or representatives of the Company. In performing such services, such employees
and representatives will be under the direction, control and supervision of TW
and TW will have the sole right to exercise all authority with respect to the
employment (including termination of employment), assignment and compensation of
such employees and representatives.
ARTICLE 6 INDEMNIFICATION
---------------
6.1 The Company agrees to indemnify and hold harmless TW and its
directors, officers and employees (TW and such directors, officers and employees
being hereinafter collectively referred to as the "TW Indemnified Parties" and
each a "TW Indemnified Party") from and against any and all liabilities,
obligations, losses, damages, penalties, judgments, costs, expenses or
disbursements (including, without limitation, reasonable attorney's fees and
disbursements) of any kind or nature whatsoever (collectively referred to as
"Losses") incurred by a TW Indemnified Party in connection with any suit, claim,
action or proceeding (any such suit, claim, action or proceeding being
hereinafter referred to as a "Claim") asserted by a third party against such TW
Indemnified Party and related to TW's rendition of Services under this
Agreement; PROVIDED, however, that the Company shall not be obligated to
indemnify any TW Indemnified Party in the event and to the extent that any
Losses were incurred as the direct result of such TW Indemnified Party's gross
negligence or willful misconduct.
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6.2 TW agrees to indemnify and hold harmless the Company and its
directors, officers and employees (the Company and such directors, officers and
employees being hereinafter collectively referred to as the "Company Indemnified
Parties" and each a "Company Indemnified Party") from and against any and all
Losses incurred by a Company Indemnified Party in connection with any Claim
asserted against a Company Indemnified Party by an individual then or
theretofore employed by TW, but only in the event and to the extent that such
Claim would NOT be cognizable at law absent a finding by a court of competent
jurisdiction that the Company was in fact the "employer" of such individual at
the times relevant to the Claim; PROVIDED, however, that TW shall not be
obligated to indemnify any Company Indemnified Party in the event and to the
extent that any Losses were incurred as the direct result of such Company
Indemnified Party's gross negligence or willful misconduct.
ARTICLE 7 CONVERSION AND CONTROL OF TW
----------------------------
7.1 Notwithstanding any other provision hereof, the Company
acknowledges that, subsequent to the date hereof, TW may enter into or
effectuate a merger, consolidation, sale of assets or other conversion or
reorganization pursuant to which TW would be converted into, or substantially
all of the assets and properties of TW (including all of the Shares (as defined
below) then owned by TW, if any) would be conveyed (by operation of law or
otherwise) to, a different legal entity Controlled (as defined below) by
Executive (a "Conversion", and any such surviving legal entity being the
"Survivor"). Company further acknowledges that (i) subsequent to any such
Conversion, references to "TW" in this Agreement shall automatically be deemed
to refer to the Survivor, (ii) this Agreement shall, automatically upon any such
Conversion, be deemed to have been assigned to the Survivor, with the result
that the Survivor shall succeed to all rights, and be bound by all liabilities
and obligations, of TW hereunder (including but not limited to those existing as
of the effective date of the Conversion) and (iii) accordingly, any such
Conversion shall not, except as set forth in (i) and (ii) above, affect the
rights or obligations of the parties hereunder. For purposes of this Article 7,
the term "Control" shall refer to beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended), directly or indirectly,
of securities representing a majority of the combined voting power, in the
election of directors (or other analogous managers) of the outstanding
securities of an entity, and the term "Shares" shall mean (i) the shares of the
Company's common stock owned by TW immediately after the consummation of the
transactions contemplated under the Merger Agreement and (ii) any other shares
of common stock which shall be issued on or with respect to, or issued in
exchange for, such shares of stock by way of stock split, stock dividend,
combination of shares or other such recapitalization.
7.2 TW represents that, on the date hereof, Executive owns 100% of the
capital stock of TW. Furthermore, TW covenants and agrees that Executive shall,
at all times during the term hereof, Control TW or the Survivor, as the case may
be.
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ARTICLE 8 FORCE MAJEURE
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8.1 Neither party to this Agreement shall be liable for delay or
failure in the performance of any of its obligations hereunder if such delay or
failure is due to causes beyond its reasonable control, including acts of god,
fires, earthquakes, strikes and labor dispute, acts of war, civil unrest or
intervention of any governmental authority.
ARTICLE 9 LIMITATION OF LIABILITY
-----------------------
9.1 In no event, whether as a result of breach of contract, tort
liability (including negligence), or otherwise, shall either party be liable to
the other party for any special, consequential, punitive or exemplary damages.
ARTICLE 10 MISCELLANEOUS
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10.1 NOTICES All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon delivery) by delivery by facsimile
transmission and by courier service (with proof of service), hand delivery or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this paragraph
10.1):
If to Company to:
TurnWorks Acquisition III, Inc.
0000 Xxxx Xxxxxxx Xx.
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: General Counsel
If to TW to:
TurnWorks, Inc.
0000 Xxxx Xxxxxxx Xx.
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: President
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
10.2 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed in that State.
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10.3 NO WAIVER. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
10.4 MUTUAL DRAFTING. Each party hereto has participated in the
drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties.
10.5 COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
10.6 HEADINGS. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.7 GENDER AND PLURALS. Wherever the context so requires, the
masculine gender includes the feminine or neuter, and the singular number
includes the plural and conversely.
10.8 INTEREST AND INDEMNIFICATION. If any payment to TW provided for in
this Agreement is not made by the Company when due, the Company shall pay to TW
interest on the amount payable from the date that such payment should have been
made until such payment is made, which interest shall be calculated at 3% plus
the prime or base rate of interest announced by Chase Bank of Texas N.A. (or any
successor thereto) at its principal office in Houston, Texas (but not in excess
of the highest lawful rate), and such interest rate shall change when and as any
such change in such prime or base rate shall be announced by such bank. If TW
shall obtain any money judgment or otherwise prevail with respect to any
litigation brought by TW or Company to enforce or interpret any provision
contained herein, the Company, to the fullest extent permitted by applicable
law, hereby indemnifies TW for its reasonable attorneys' fees and disbursements
incurred in such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money judgment
obtained by TW from the earliest date that payment to him should have been made
under this Agreement until such judgment shall have been paid in full, which
interest shall be calculated at the rate set forth in the preceding sentence.
10.9 ASSIGNMENT; BINDING EFFECT; BENEFIT. Except as set forth in
paragraph 7.1, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be transferred by either party hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns.
10.10 NO PARTNERSHIP. TW and the Company acknowledge and agree that the
relationship between TW and the Company is that of independent contractors and
no term or
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provision of this Agreement shall be construed to establish any relationship of
partnership, agency or joint venture between TW and the Company.
10.11 PAYMENT. If any payment to TW is subject to taxes to be paid by
the Company, TW shall pay to the Company the required amount in cash when due.
10.12 ENTIRE AGREEMENT. Except as provided in the Employment Agreement,
this Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements and
understandings between the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
TURNWORKS ACQUISITION III, INC.
/s/ Xxxxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President
TURNWORKS, INC.
/s/ Xxxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President
