Exhibit 10.7
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated August 31, 1995 (the "Agreement"), between Xxxx
X. Xxxx/Xxxxx X. Xxxxxxx, L.L.C., a Delaware Limited Liability Company ("L&S")
and Intermetrics, Inc., a Delaware corporation (the "Company").
WHEREAS, Apollo Holding, Inc. ("Apollo") acquired as of the date hereof all
of the outstanding capital stock of the Company pursuant to the terms and
provisions of the Agreement and Plan of Merger dated as of April 6, 1995 (the
"Merger Agreement");
WHEREAS, the Company desires to obtain financial, acquisition, strategic
and business planning and consulting services from L&S;
WHEREAS, L&S is in the business of providing such consulting services and
is willing to provide such services to the Company in accordance with the terms
and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth and the mutual benefits to be derived
herefrom, L&S and the Company hereby agree as follows:
1. Engagement. Upon the terms and subject to the conditions set forth in
this Agreement, the Company hereby agrees to retain L&S as a consultant to
provide financial, strategic and business planning and consulting services,
including analysis and advice with respect to programs relating to value for the
common stock of Apollo's stockholders (the "Services").
2. L&S's Duties and Obligations. L&S hereby agrees, during the term of this
Agreement, to provide the Services in a professional manner to the Company and
to provide other consulting services as may be reasonably requested from time to
time by the
Board of Directors of the Company or the Chief Executive Officer thereof in
accordance with this Agreement.
3. Compensation; Expenses.
(a) In consideration of providing the Services to the Company hereunder,
the Company agrees to pay to L&S, during the term of this Agreement, the
following fees:
(i) An annual fixed consulting fee in the amount of $100,000 per
annum; and
(ii) An annual variable fee equal to two and two-tenths percent
(2.2%) of the Company's consolidated EBITDA for each of the Company's
fiscal years or portions thereof during the term of this Agreement;
provided, however (A) during the period from Closing (as defined in the
Merger Agreement) to the end of the first fiscal year following Closing,
the fee payable under this Section 3(a)(ii) shall not be less than
$100,000 on an annualized basis, (B) during the first and second full
fiscal years following Closing, the fee payable under this Section 3(a)
(ii) shall not be less than $100,000, and (C) during the third, fourth and
fifth full fiscal years following the Closing, the fee payable under this
Section 3(a)(ii) shall not be less than $150,000.
(b) The fees payable hereunder shall be reduced by the amounts the Company
pays to Westgate Capital Co. ("Westgate Fee") pursuant to Section 3(a) (i) and
(ii) of the Consulting Agreement dated the date hereof between Westgate Capital
Co. and the Company as in effect on the date hereof without giving effect to any
increases in the amount of the Westgate Fee which may occur after the date
hereof.
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(c) "EBITDA" is defined on the attached Exhibit 1.
(d) The fees payable under Section 3(a)(i) and (ii) hereunder shall be paid
quarterly in arrears on the last day of the fiscal quarter. The first payment on
account of such fees shall be prorated from the Closing until the end of the
first fiscal quarter following Closing. For such purpose, the annual fee under
subparagraph (a) (i) above shall be payable at the rate of $25,000 per quarter
and the variable fee under subparagraph (a) (ii) above shall be payable at the
rate of $25,000 per quarter for an aggregate of $50,000 per quarter, with
adjustments to be made after the end of the year on the basis of actual EBITDA
calculated from the Company's audited financial statements.
(e) The Company shall reimburse L&S for all reasonable documented
out-of-pocket expenses incurred by L&S, its managers and agents in connection
with providing the Services hereunder; provided, however, the consulting fees
which L&S shall pay to Fulcrum Management, Inc. ("Fulcrum") shall not be
considered a reimbursable expense although the expenses of Fulcrum shall be
reimbursable by the Company.
4. Term. The initial term of L&S's engagement under this Agreement shall
commence on the date hereof and shall continue through and until the seventh
anniversary of the Closing (the "Initial Term"), and the engagement shall
thereafter be cancelable on a year-to-year basis by the Company, with the
approval of a majority of the Board of Directors of the Company, upon six (6)
months prior written notice prior to the end of the Initial Term or any
subsequent one-year extension.
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5. Indemnification. (a) The Company agrees to indemnify and hold harmless
L&S and its managers, members, agents and affiliates against and from any and
all claims, liabilities, losses, costs, damages, expenses, judgments, fines and
amounts paid in settlement (including attorneys' fees), arising from any source,
including, without limitation, from any threatened, pending or completed actions
or lawsuits whether civil, criminal, administrative or investigative, or by or
in the right of the Company to procure a judgment in its favor, arising from
L&S's performance of its duties hereunder, except insofar as such may arise
solely from L&S's gross negligence or intentional wrongdoing. The Company shall
be entitled to direct the defense of any claim for which it is obligated to
provide indemnification, at the Company's expense, but such defense shall be
conducted by legal counsel agreed to by both the Company and L&S. If the Company
and L&S can not agree on legal counsel within a reasonable period of time, legal
counsel shall be selected by Windels, Marx, Davies & Ives. The Company agrees to
keep L&S informed on a timely basis of the status of all legal proceedings
relating to this indemnification and shall provide copies of all documents
relating to the legal proceedings to L&S or at L&S's request, its legal counsel.
(b) Expenses incurred in defending any threatened or pending civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Company in advance of the final disposition of such action, suit or
proceeding, upon receipt of an undertaking by or on behalf of L&S to repay such
amount if it is
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ultimately determined, in a final non-appealable judgment of a court of
competent jurisdiction, that L&S is not entitled to be indemnified against such
expenses. This undertaking by L&S shall be an unqualified general undertaking,
but no security for such undertaking will required.
(c) All of L&S's rights under this Section 5 will continue even after this
Agreement has been terminated for any reason.
6. Nature of L&S's Undertaking: No Joint Venture or Partnership. L&S and
the Company hereby agree that neither L&S's entering into this Agreement nor
L&S's providing of Services to the Company shall be construed to have created
either a joint venture or a partnership for the purpose of providing such
Services.
7. Confidentiality; Noncompetition. L&S and its affiliates shall not
disclose or use (other than as may be authorized by the Company) any secret,
private or confidential information or other proprietary knowledge concerning
the Company which is received in the course of providing the Services hereunder,
including (without limitation) all industrial property rights and lists of sales
of products, employees, agents, customers and suppliers; provided, however, that
such obligation of confidentiality shall not apply to information which (i) is
in the public domain, (ii) is known to L&S prior to disclosure by the Company,
(iii) is received from a third party having a right to make disclosure thereof,
(iv) is disclosed by L&S in connection with the performance of its duties
hereunder, (v) is required by law or court order to be disclosed or (vi) is
disclosed by L&S to the shareholders of the Company.
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Except as specifically stated above, L&S shall not be limited in any way in the
conduct of its business. This provision shall survive the termination of this
Agreement. L&S also agrees to comply with the noncompetition provisions set
forth in Exhibit 2 hereto.
8. Notices. Any notice, report or payment required or permitted to be given
or made under this Agreement by one party to the other shall be deemed to have
been sufficiently given or made for all purposes hereof if mailed, by registered
mail, postage prepaid, addressed to such party at its address indicated below or
to such other address as the addressee shall have theretofore furnished in
writing to the other party:
Xxxx X. Xxxx/Xxxxx X. Xxxxxxx, L.L.C.
000 Xxxx 00xx xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
With a copy to:
Windels, Marx, Davies & Ives
000 Xxxx 00xx xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax No.: (000) 000-0000
If to the Company:
Intermetrics, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Executive Officer
Fax No.: (000) 000-0000
9. Agreement. This Agreement (a) contains the complete and entire
understanding and agreement of L&S and the Company respecting the matter subject
hereof; (b) supersedes and cancels all other understandings or agreements, oral
or written, respecting
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the subject matter hereof; and (c) may not be modified except by an instrument
in writing executed by L&S and the Company.
10. Waiver of Breach. The waiver by either party of a breach or any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach of that provision or any other provision
hereof.
11. Assignment. L&S and the Company may not assign their respective rights
or obligations under this Agreement without the express written consent of the
parties hereto, except that L&S may assign a portion of its duties and benefits
herein to Fulcrum Management, Inc.
12. Section Headings. All section headings herein have been inserted for
convenience of reference only and shall in no way modify or restrict any of the
terms or provisions hereof.
13. Governing Law. This Agreement shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be governed
by, construed, interpreted and enforced according to the laws of the State of
New York.
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IN WITNESS WHEREOF, L&S and the Company have caused this Agreement to be
duly executed and delivered on the date and year first above written.
XXXX X. XXXX/XXXXX X. XXXXXXX, L.L.C.
By: /s/ XXXXX X. XXXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Manager
INTERMETRICS, INC.
By: /s/ XXXXXXX X. XXXXXXXXX
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman and Chief
Executive Officer
AGREEMENT TO COMPLY
WITH THE PROVISIONS
OF EXHIBIT 2:
/s/ XXXX X. XXXX
--------------------------
Xxxx X. Xxxx
/s/ XXXXX X. XXXXXXX
--------------------------
Xxxxx X. Xxxxxxx
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Exhibit 1
EBITDA DEFINITION
This definition of EBITDA is intended to clearly define earnings derived
solely from the normal operations of Apollo and the Company.
EBITDA, with respect to any fiscal period, shall be obtained from the
Company's consolidated annual audited income statement and shall be defined as
follows:
(i) Operating income (minus interest income and plus interest expense
to the extent they are reflected above the operating income
line);
(ii) plus depreciation, amortization and other similar non-cash
charges, software development and design and research and
development expenses in the aggregate in excess of $100,000 not
reimbursed by a third party at the time of the expense;
(iii) plus consulting fees described in Sections 3(a)(i) and (ii) of
this Agreement and the Consulting Agreement between the Company
and the Westgate Capital Co.;
(iv) plus any charges to income related to the grant, issuance or
exercise of stock options to management of, or lenders to,
Apollo, the Company or their subsidiaries;
(v) less extraordinary and nonoperating gains and plus extraordinary
and nonoperating losses, including, without limitation, any
prepayment penalties resulting from the retirement of debt before
its scheduled repayment date;
(vi) plus any expenses incurred or minus reimbursement received, both
net of reserves, in settlement of any claims or other items
related to the assets and liabilities of Apollo or the Company
for events occurring prior to the closing of the Merger
Agreement;
(vii) plus the special bonuses to be paid to Xxxxxxx X. Xxxxxxxxx by
the Company on September 15, 1996 and September 15, 1997;
(viii) plus travel, lodging and entertainment expense for Directors of
Apollo and the Company;
(ix) minus gains or plus losses from the sale of assets other than
write-offs in the ordinary course of business;
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(x) plus charges amortized or expensed relating to future
acquisitions of Apollo or the Company;
(xi) plus extraordinary litigation expenses and extraordinary legal
and accounting expenses;
(xii) plus amortization or expenses relating to asset writeups in
connection with the acquisition of the Company; and
(xiii) plus in the first twelve months only, expenses for special
consultants, not in the ordinary course, but this adjustment
shall be limited to a maximum of $100,000.
In the event of a loss from a catastrophe or other casualty loss, an act of
God (including, but not limited to, fire, flood, wind damage, lightning or other
event), industrial sabotage, labor strikes, disputes or work stoppages or any
other unforeseen event (whether at the Company or at any of its vendors), which
such event or events shall cause a disruption or cessation of all or a portion
of the normal business operations of the Company for a period of forty-eight
hours or longer, then for purposes of the determination of operating earnings,
to the extent that the Company is not reimbursed by its business interruption
insurance policy, the final amount will be credited with an amount equal to the
product of the daily average operating earnings for the period of the Company's
normal business operation for the two most recent fiscal years (as adjusted by
an aggregate annual amount [including depreciation and amortization as set forth
in Intermetrics' financial statements) of plus $1,915,000 for 1994 and by plus
$3,257,000 for 1995, respectively), whichever is larger, and the number of days
that the normal business operations were disrupted or ceased.
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Exhibit 2 L&S
Noncompetition
(a) L&S hereby acknowledges and recognizes its possession of confidential
or proprietary information and the competitive nature of the business of Apollo,
the Company and any of their direct or indirect subsidiaries (referred to in
this Exhibit 2, as the "Company") and accordingly agrees that, in consideration
of the premises contained herein, it will not, during the term of this Agreement
and for a period of eighteen (18) months following the termination of this
Agreement for any reason whatsoever, (i) directly or indirectly engage in any
Competitive Business (as hereinafter defined), whether such engagement shall be
as an employer, officer, director, owner, employee, partner, consultant, advisor
or other participant in any of the (A) states of the United States or (B) other
geographic areas outside the United States in which the Company currently, or at
any time during this Agreement or the eighteen month period after termination of
this Agreement, is doing business, or (ii) assist others in the foregoing clause
(i). L&S's purchase after the date hereof of not more than the lesser of
$500,000 of value or one-quarter of one percent (.25%) of the outstanding
capital stock of any public corporation shall not (in itself) be deemed to be
engaging in any Competitive Business for purposes of this Exhibit 2. Any shares
of capital stock of any public corporation owned by L&S prior to the date hereof
shall be excluded from the restrictions contained herein. As used in this
Exhibit 2, the term "Competitive Business" means and includes (i) any business,
whether serving government, commercial, private or other customers, in which the
Company is engaged in, or proposes to engage in pursuant to actual proposals or
bona fide plans to propose, and (ii) any business that has or will provide the
services outlined below to any customer of the Company, in either case during
the period this Agreement is in effect or the eighteen months prior to the
closing of the Merger, including, without limitation
(i) systems engineering, software design services and software
coding including (x) analysis and design, (y) coding development,
test and integration and (z) operational support and maintenance;
(ii) multimedia programming services, development software, computer
multimedia systems;
(iii) tools for embedded systems development; and
(iv) software for operation and testing of manufacturing plants and
products.
The Board of Directors of the Company may waive or alter the provisions of
paragraph (a) of this Exhibit 2, upon request by L&S to the Board of Directors
to engage in specified activities, which requests shall not be unreasonably
denied upon a finding by the Board of Directors that the proposed activities by
L&S will not harm the Company. Any such requests by L&S and the responses by the
Board of Directors shall be read into the minutes of the meetings of the Board
of Directors.
(b) L&S agrees that during the term of this Agreement and for a period of
eighteen months thereafter, without the prior written consent of the Company,
L&S shall not (i) solicit, employ or otherwise engage, or assist in the
solicitation, employment or engagement as an employee, independent consultant or
otherwise, any person who is an employee of the Company or was an employee of
the Company during the eighteen months prior to the termination of this
Agreement, or in any manner induce or attempt to induce any employee of the
Company to terminate his or her employment with the Company; or (ii) induce any
employee of the Company to engage in any Competitive Business in any of the (A)
states of the United States or (B) other geographic areas outside the United
States in which the Company currently, or at any time during the term of this
Agreement or the eighteen month period after termination of this Agreement, is
doing business, or (iii) tortiously interfere with the relationship of the
Company with any person, including any person who at any time during the term of
this Agreement was an employee, a customer, a vendor, a supplier or a consultant
of, or to, the Company.
(c) For purposes of this Exhibit 2, L&S shall include Xxxx X. Xxxx and
Xxxxx X. Xxxxxxx, the principals of L&S.
