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EXHIBIT 10.7
[FORM OF]
TRANSACTION ADVISORY AGREEMENT
THIS TRANSACTION ADVISORY AGREEMENT is made effective as of October
___, 1997, by and between KRG Capital Partners, LLC, a Colorado limited
liability company ("KRG"), White Cap Industries, Corp., a California corporation
("WCI"), and White Cap Industries, Inc., a Delaware corporation ("WCII").
BACKGROUND
WCII, WCI and WCI's subsidiaries, if any (collectively, the "Company"),
desire to receive transaction advisory services from KRG in connection with
acquisitions by the Company of other professional contractor supply businesses.
KRG is willing to provide transaction advisory services to the Company.
Accordingly, the compensation arrangements set forth in this Transaction
Advisory Agreement are designed to compensate KRG for such services.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, KRG and the Company hereby agree as follows:
TERMS
1. ENGAGEMENT.
The Company hereby engages KRG as a transaction advisor, and KRG hereby
agrees to provide transaction advisory services to the Company, all on the terms
and subject to the conditions set forth below.
2. SERVICES OF KRG.
KRG hereby agrees during the term of this engagement to consult with
the Company's boards of directors (collectively, the "Board") and management of
the Company in such manner and on such business and financial matters related to
transactions and such other matters as may be reasonably requested from time to
time by the Board, including, but not limited to:
(i) acquisition strategies and related support;
(ii) certain acquisition finance functions, including assistance in the
review of financial forecasts;
(iii) acquisition related financing strategies and support; and
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(iv) acquisition origination, structuring, negotiation, due diligence
and closing related services.
Members of the KRG Group (as defined below) will devote such time and attention
to the Company's affairs as reasonably necessary to accomplish the purposes of
this Transaction Advisory Agreement. For purposes of this Transaction Advisory
Agreement, the "KRG Group" means the Managing Directors of KRG Capital and
associates of KRG Capital.
3. COMPENSATION.
WCI and WCII jointly and severally agree to pay to KRG as compensation
for services to be rendered by KRG hereunder an aggregate fee equal to $200,000
per year (the "Base Transaction Fee"), payable monthly in arrears in an amount
equal to $16,666.67 per month with payment due by the fifth day of each month.
In addition to the Base Fee, the Company agrees to pay to KRG, as compensation
for services rendered to the Company with respect to the consummation of any
acquisition of a contractor supply business which transaction closes after the
date hereof a transaction closing fee (the "Transaction Closing Fee") equal to:
(i) $50,000 for any transaction where the aggregate Transaction Value is $20
million or less, provided such fee may be adjusted upward if the Board of
Directors determines such transaction presented unusual complexities, and (ii)
an amount to be agreed upon by the parties hereto and approved by the Board, but
in no event less than $50,000, for any transaction where the aggregate
Transaction Value exceeds $20 million. "Transaction Value" shall mean the
aggregate of cash and non-cash consideration paid to the sellers of the company
or business being acquired and the value of all interest bearing debt assumed by
WCI or WCII. Any non-cash consideration shall be valued at fair market value and
the value of any equity securities issued shall be fair market value on the date
of issuance assuming such equity securities are fully vested on such date.
4. TERM.
This Transaction Advisory Agreement shall be in effect for an initial
term of five years (the "Original Term") commencing on the date hereof, and
shall be automatically renewed thereafter on a year to year basis (each, a
"Supplemental Term") unless one party gives the other 60 days' prior written
notice of its desire not to renew this Transaction Advisory Agreement.
Notwithstanding the foregoing, WCI and WCII may terminate this Transaction
Advisory Agreement at any time upon 60 days prior written notice; provided that
in the case of such termination, KRG shall be entitled to receive its Base
Transaction Fee for the period that is the lesser of (i) three years or (ii) the
remainder of the Original Term or the Supplemental Term, as the case may be.
Termination of this Transaction Advisory Agreement shall not relieve WCI and
WCII of the obligation to pay any Transaction Closing Fee upon the closing of
any acquisition which was under letter of intent or definitive agreement with
WCI or WCII prior to the effective date of termination.
5. INDEMNIFICATION.
The Company and its subsidiaries shall defend, indemnify and hold
harmless KRG, its affiliates, partners, employees and agents from and against
any and all loss, liability, damage, or expenses arising from any claim (a
"Claim") by any person with respect to, or in any way related to,
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the performance of services contemplated by this Transaction Advisory Agreement
or services provided in connection with the Transaction Advisory Agreement
(including attorneys' fees) (collectively, "Claims") resulting from any act or
omission of KRG, its affiliates, partners, employees or agents, other than for
Claims which shall be proven to be the direct result of gross negligence, bad
faith or willful misconduct by KRG, its affiliates, partners, employees or
agents. The Company and its subsidiaries shall defend at its own cost and
expense any and all suits or actions (just or unjust) which may be brought
against the Company, its subsidiaries and KRG, its officers, directors,
affiliates, partners, employees or agents or in which KRG, its affiliates,
partners, employees or agents may be impleaded with others upon any Claim or
Claims, or upon any matter, directly or indirectly, relating to or arising out
of this Agreement or the consummation of the Agreement or the performance hereof
or thereof by KRG, its affiliates, partners, employees or agents, except that if
such damage shall be proven to be the direct result of gross negligence, bad
faith or willful misconduct by KRG, its affiliates, partners, employees or
agents, then KRG shall reimburse the Company and its subsidiaries for the costs
of defense and other costs incurred by the Company and its subsidiaries.
6. KRG AN INDEPENDENT CONTRACTOR.
KRG and the Company agree that KRG shall perform services hereunder as
an independent contractor, retaining control over and responsibility for its own
operations and personnel. Neither KRG nor its officers, employees or members of
the KRG Group shall be considered employees or agents of the Company as a result
of this Transaction Advisory Agreement, nor shall any of them have authority to
contract in the name of or bind the Company, except as expressly approved by the
Company; provided, however, if any member of the KRG Group is serving as an
officer of the Company, such person shall have all authority as an officer of
the Company to contract in the name or bind the Company notwithstanding any
other provision of this Transaction Advisory Agreement.
7. CONFIDENTIAL INFORMATION.
KRG acknowledges that the information, observations and data obtained
by it, its agents and employees and members of the KRG Group during the course
of KRG's performance under this Transaction Advisory Agreement concerning the
business plans, financial data and business relations of the Company (the
"Confidential Data") are the Company's valuable, special and unique assets. The
Company therefore agrees that it will not, nor will it permit any of its agents,
employees or members of the KRG Group, to disclose to any unauthorized person
any of the Confidential Data obtained by KRG during the course of KRG's
performance under this Transaction Advisory Agreement without the Company's
prior consent unless and to the extent that (i) the Confidential Data becomes
generally known to and available for use by the public otherwise than as a
result of its acts or omissions to act, (ii) such disclosure is required by any
statute, rule, regulation or law or any judicial or administrative body having
jurisdiction or (iii) such disclosure is made in the course of KRG's performance
of its duties under this Agreement to existing or potential lenders or investors
in the Company, potential acquirors or acquisition candidates of the Company or
other third parties performing or proposing to provide services to the Company
who have a need to know such information.
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8. NOTICES.
Any notice or report required or permitted to be given or made under
this Transaction Advisory Agreement by one party to the other shall be deemed to
have been duly given or made if personally delivered, delivered by reputable
overnight courier, sent by telecopy, or, if mailed, when mailed by registered or
certified mail, postage prepaid to the other party at the following addresses
(or at such other address as shall be given in writing by one part to the
other):
If to KRG:
KRG Capital Partners, LLC
Xxxxx 0000
00 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxx, Managing Director
Telecopy: (000) 000-0000
If to WCI or WCII:
White Cap, Inc.
0000 Xxxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx, President
Telecopy: (000) 000-0000
9. ENTIRE AGREEMENT; MODIFICATION, TERMINATION OF PRIOR
AGREEMENT.
This Transaction Advisory Agreement (i) contains the complete and
entire understanding and agreement of KRG, the Company with respect to the
subject matter hereof; (ii) as provided below, supersedes all prior and
contemporaneous understandings, conditions and agreements, oral or written
express or implied; respecting the engagement of KRG in connection with the
subject matter hereof; and (iii) may not be modified except by an instrument in
writing executed by KRG, WCI and WCII.
The Management Agreement dated as February 27, 1997 by and between KRG
Capital, WCI and WCII shall be deemed terminated as of the date hereof and all
accrued but unpaid amounts owing thereunder shall be paid in full to KRG within
15 days of the date hereof. The parties expressly agree that Transaction Closing
Fees due for currently pending acquisition of WCI and WCII as of the date hereof
under this Transaction Advisory Agreement shall not be affected by the
termination of the prior Management Agreement.
10. WAIVER OF BREACH.
The waiver by any party of a breach of any provision of this
Transaction Advisory Agreement by any other party shall not operate or be
construed as a waiver of any subsequent breach of that provision or any other
provision hereby.
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11. ASSIGNMENT.
Neither KRG, WCI nor WCII may assign its rights or obligations under
this Transaction Advisory Agreement without the express written consent of the
other.
12. GOVERNING LAW.
This Transaction Advisory Agreement shall be deemed to be a contract
made under, and is to be governed and construed in accordance with the internal
laws (and not the law of conflicts) of the State of Delaware.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date written above.
KRG CAPITAL PARTNERS, LLC
___________________________________
By: Xxxx X. Xxxx
Its: Managing Director
WHITE CAP INDUSTRIES, CORP.
By: _________________________________
Name: Xxxxxxx Xxxxxx
Title: President
WHITE CAP INDUSTRIES, INC.
By: _________________________________
Name: Xxxxxxx Xxxxxx
Title: President
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