Exhibit 10.3
ADVISORY AGREEMENT
This Advisory Agreement (this "Agreement") is made and entered into as
of December 12, 2004 by and between GMH Holding Company ("Holdings"), GMH
Acquisition Corp. (the "Company" and together with Holdings, the "Companies")
and CVC Management LLC ("Advisor"). Capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Agreement and Plan
of Merger, dated as of the date hereof (the "Merger Agreement") by and among the
Companies and Gallarus Media Holdings, Inc.
WHEREAS, the Companies desire to retain Advisor and Advisor desires to
perform for the Companies and/or their subsidiaries certain services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto, intending
to be legally bound hereby, agree as follows:
1. Term. (a) This Agreement shall be in effect for an initial term
often (10) years commencing on the date of the closing under the Merger
Agreement (the "Term"), and shall be automatically extended thereafter on a year
to year basis unless the Companies provide or Advisor provides written notice of
its or then desire to terminate this Agreement to the other party 90 days prior
to the expiration of the Term or any extension thereof; provided, however, that
Holdings may terminate its obligation to pay Advisory Fees (as such term is
defined below), and correspondingly, Advisor's obligations under Section 2, at
Holdings' option, upon or concurrently with Holdings' First Public Offering, by
providing Advisor not less than ten (10) days prior written notice (an "Early
Termination"). In the event of an Early Termination, Holdings shall pay to
Advisor an amount equal to the Termination Fee.
(b) As used herein, the "Termination Fee" means the net present
value of all Advisory Fees that would have been payable from Holdings to Advisor
from the effective date of the Early Termination through the end of the Term,
assuming that an Early Termination had not occurred. Any calculation of net
present value done in connection with the payment of the Termination Fee shall
be calculated by the board of directors of Holdings in good faith.
(c) As used herein, "First Public Offering" means the first
underwritten public offering of the Common Stock of Holdings after the date
hereof pursuant to an effective registration statement under the Securities Act
of 1933, as amended, other than pursuant to a registration statement on Form S-4
or Form S-8 or any similar or successor form or a registration statement
registering a public offering of a combination of debt and equity securities of
Holdings in which not more than ten percent (10%) of the gross proceeds received
from the sale of such securities is attributed to such equity securities,
provided that the net proceeds of such public offering equal $50,000,000 or
more.
2. Services. Advisor shall perform or cause to be performed such
services for the Companies and/or their subsidiaries as directed by such
Company's board of directors, which may include, without limitation, the
following:
(a) executive and management services;
(b) identification, support and analysis of acquisitions and
dispositions by such Company or its subsidiaries;
(c) support and analysis of financing alternatives, including,
without limitation, in connection with acquisitions, capital expenditures and
refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing agreements;
(e) human resource functions, including searching and hiring of
executives; and
(f) other services for such Company or its subsidiaries upon
which such Company's board of directors and Advisor agree.
Notwithstanding any provision in this Agreement to the contrary, each
of the parties hereto acknowledges and agrees that there are no minimum levels
of services required to be provided to the Companies pursuant to this Agreement.
3. Advisory Fee. Subject to the terms and conditions herein, payment
for services rendered by Advisor and/or its affiliates incurred in connection
with the performance of services pursuant to this Agreement shall be billed on
an hourly basis for actual services rendered (it being agreed that no minimum
services levels shall be required), plus reasonable out-of-pocket expenses
incurred by Advisor and/or its affiliates commencing with the fiscal quarter
first ending after December 31, 2004; provided that, if the Companies and their
subsidiaries are in compliance with the financial covenants and negative
covenants contained in the Companies' agreements governing its senior
indebtedness (the "Loan Agreement"), in lieu of the aforementioned fees and
expenses, Advisor and/or its affiliates shall have the right to collect an
annual advisory fee (the "Advisory Fee"), the amount of which shall be the
greater of (i) $210,000 per annum (the "Flat Fee") or (ii) .016% per annum of
the annual consolidated revenue the Companies and their subsidiaries (determined
on a trailing twelve month basis) (the "Percentage Fee"), plus reasonable
out-of-pocket expenses of Advisor and/or its affiliates.
(a) Adjustment. In the event that the Advisory Fee paid in any
given year pursuant to this Section 3 exceeds the greater of the Flat Fee or the
Percentage Fee, the Advisor shall promptly repay to the Companies the difference
between the greater of the Flat Fee or the Percentage Fee and the amount of the
Advisory Fee actually paid by the Companies during that year. In the event that
the amount of the Advisory Fee paid by the Companies to the Advisor in any given
year is less than the greater of the Flat Fee or the Percentage Fee, the
Companies shall promptly pay the difference between the amount of Advisory Fee
actually paid to the Advisor and the greater of the Flat Fee or the Percentage
Fee.
(b) Collection of Fee. The decision whether to collect any
Advisory Fee in a given year shall be in the Advisor's sole discretion. The
Advisor's decision not to collect an Advisory Fee in any given year shall not be
construed to be a waiver of the Advisor's right to collect an Advisory Fee in
any future year.
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(c) Fee Calculation. All fees and expenses described in this
paragraph 3 shall be payable to Advisor or its designees on a quarterly basis
in advance (based on the parties' estimate of the amount of fees and expenses
which shall become due and payable for such quarter) commencing as of the date
hereof. For the purposes of this Section 3, compliance with the financial
covenants and negative covenants contained in the Loan Agreement shall be
determined on a pro-forma basis and, to the extent required by the Loan
Agreement, shall include the dividend paid by the Company to Holdings for the
purpose of paying the Advisory Fee and any other fees and expenses that may be
payable to the Advisor hereunder.
4. Transaction Fees. The Companies hereby agree to pay to Advisor or
its designee on the Closing Date (as defined in the Merger Agreement) upon the
consummation of the transactions contemplated by the Merger Agreement a fee for
services rendered in connection with the structuring of the financing for the
transactions contemplated by the Merger Agreement (the "Transactions") and
certain other management services in the amount of Three Million Dollars
($3,000,000), plus reasonable out-of-pocket expenses. Such fees shall be payable
to Advisor or its designees by wire transfer to an account designated in writing
by the Advisor.
5. Personnel. Advisor shall provide and devote to the performance of
this Agreement such partners, employees and agents of Advisor as Advisor shall
deem appropriate to the furnishing of the services required.
6. Liability. Neither Advisor nor any other Indemnitee (as defined in
Section 7 below) shall be liable to any of the Companies or any of their
subsidiaries or affiliates for any loss, liability, damage or expense arising
out of or in connection with the performance of services contemplated by this
Agreement, unless such loss, liability, damage or expense shall be proven to
result directly from gross negligence, willful misconduct or bad faith on the
part of an Indemnitee acting within the scope of such person's employment or
authority. Advisor makes no representations or warranties, express or implied,
in respect of the services to be provided by Advisor or any of the other
Indemnitees. Except as Advisor may otherwise agree in writing after the date
hereof: (i) Advisor shall have the right to, and shall have no duty (contractual
or otherwise) not to, directly or indirectly: (A) engage in the same or similar
business activities or lines of business as any of the Companies or any of their
subsidiaries, including those competing with any of the Companies or any of
their subsidiaries and (B) do business with any client or customer of any of the
Companies or any of their subsidiaries; (ii) neither Advisor nor any officer,
director, employee, partner, affiliate or associated entity thereof shall be
liable to any of the Companies or any of their subsidiaries or affiliates for
breach of any duty (contractual or otherwise) by reason of any such activities
of or of such person's participation therein; and (iii) in the event that
Advisor acquires knowledge of a potential transaction or matter that may be a
corporate opportunity for the Companies or any of their subsidiaries, on the one
hand, and Advisor, on the other hand, or any other person, Advisor shall have no
duty (contractual or otherwise) to communicate or present such corporate
opportunity to the Companies or any of their subsidiaries and, notwithstanding
any provision of this Agreement to the contrary, shall not be liable to the
Companies or any of their affiliates for breach of any duty (contractual or
otherwise) by reasons of the fact that Advisor directly Or indirectly pursues or
acquires such opportunity for itself, directs such opportunity to another
person, or does not present such opportunity to the Companies. In no event will
any of the parties hereto be liable to any other party hereto for any indirect,
special, incidental or consequential damages, including lost profits
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or savings, whether or not such damages are foreseeable, or in respect of any
liabilities relating to any third party claims (whether based in contract, tort
or otherwise) other than the Claims (as defined in Section 7 below) relating to
the service to be provided by Advisor hereunder.
7. Indemnity. Each of the Companies and their subsidiaries shall
defend, indemnity and hold harmless each of Advisor, its affiliates, members,
partners, employees and agents (collectively, the "Indemnitees") from and
against any and all loss, liability, damage or expenses arising from any claim
by any person with respect to, or in any way related to, the performance of
services contemplated by this Agreement (including attorneys' fees)
(collectively, "Claims") resulting from any act or omission of any of the
Indemnitees, other than for Claims which shall be proven to be the direct result
of gross negligence, bad faith or willful misconduct by an Indemnitee. Each of
the Companies and their subsidiaries shall defend at its own cost and expense
any and all suits or actions (just or unjust) which may be brought against such
Company, any of its subsidiaries or any of the Indemnitees or in which any of
the Indemnitees may be impleaded with others upon any Claims, or upon any
matter, directly or indirectly, related to or arising out of this Agreement or
the performance hereof by any of the Indemnitees, except that if such damage
shall be proven to be the direct result of gross negligence, bad faith or
willful misconduct by an Indemnitee, then Advisor shall reimburse the Companies
and their subsidiaries for the costs of defense and other costs incurred by the
Companies and their subsidiaries.
8. Notices. All notices hereunder shall be in writing and shall be
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:
To the Companies as appropriate:
GMH Holding Company
Attention: Chief Financial Officer
To Advisor:
CVC Management LLC
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx XX
Facsimile: x0-000-000-0000
9. Assignment. The Companies may not assign any obligations hereunder
to any other party without the prior written consent of Advisor (which consent
shall not be unreasonably withheld), and Advisor may not assign any Advisor
obligations hereunder to any other party without the prior written consent of
the Companies (which consent shall not be unreasonably withheld); provided that
Advisor may, without consent of the Companies, assign its rights and obligations
under this Agreement to any Permitted Transferee (as such term is defined in the
Securities Purchase and Holders Agreement to be entered into on the Closing Date
among Holdings and its stockholders named therein).
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10. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties.
11. Counterparts. This Agreement may be executed and delivered by each
party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement
12. Entire Agreement; Modification: Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party. All issues concerning this Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of New York.
IN "WITNESS WHEREOF, the parties have executed this Advisory Agreement
as of the date first written above.
GMH HOLDING COMPANY
By: /s/ XXX X. XXXXXX
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Name: XXX X. XXXXXX
Title:
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GMH ACQUISITION CORP.
By: /s/ XXX X. XXXXXX
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Name: XXX X. XXXXXX
Title:
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CVC MANAGEMENT LLC,
By: /s/ XXXX X. XXXXXX XX
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Name: XXXX X. XXXXXX XX
Title:
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