Exhibit 10.8
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") is entered into
as of this 29th day of December, 1994, by and between 24 Hour Fitness, Inc., a
Delaware corporation (the "Company"), and MDC Management Company III, L.P., a
California limited partnership ("MDC").
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereinafter set forth, MDC and the Company hereto agree as follows:
1. RETENTION AS MANAGEMENT ADVISOR. Subject to each of the terms,
conditions and provisions of this Agreement, the Company hereby retains MDC and
MDC hereby agrees to be retained by the Company to perform those financial and
managerial functions set forth in Section 4 of this Agreement.
2. TERM.
2.1 Subject to the provisions for termination set forth herein, this
Agreement shall be from the date hereof through December 28, 2004, and
automatically renewable annually thereafter unless MDC receives 30 days notice
of the termination prior to the renewal date.
2.2 The Company, by written notice to MDC, authorized by a majority
of the directors other than those who are partners, principals or employees of
MDC (or an affiliate of MDC), may terminate this Agreement for justifiable
cause, which shall mean any of the following events: material breach by MDC of
any of its obligations hereunder; misappropriation by MDC of funds or property
of the Company or other willful breach in the course of the consultancy; any
attempt by MDC to secure personal profit related to the business of the Company
and not fairly disclosed to and approved by the Board of Directors; or gross
neglect by MDC in the fulfillment of its obligations hereunder.
2.3 MDC, by thirty (30) days prior written notice to the Company, may
terminate this Agreement at any time.
3. COMPENSATION.
3.1 As compensation to MDC for its management and advisory services
to the Company under this Agreement, the Company agrees to pay MDC a fee in the
amount of three hundred fifty thousand ($350,000) per year, adjusted upward by
$100,000 each year until such fee shall equal $750,000 per year; PROVIDED that
in no event shall such fee for any one year exceed .7 of 1% of the consolidated
revenues of the Company and its subsidiaries (including, without limitation, the
revenues of 24 Hour Workout) for the previous year. Such
fee shall be payable in arrears in equal quarterly installments, on the first
day of January, April, July and October, commencing on April 1, 1995.
3.2 MDC shall also be entitled to be reimbursed by the Company for
all reasonable out-of-pocket costs and expenses incurred by MDC and any of its
partners, employees or affiliates in connection with (i) providing the Services
under this Agreement, or (ii) serving as a member of the Board of Directors or
as an officer of the Company including, without limitation, all travel expenses.
Reimbursement shall be provided upon receipt by the Company of invoices from MDC
with respect to such costs and expenses.
4. DUTIES AS MANAGEMENT ADVISOR. MDC's duties as a financial and
management consultant to the Company under the provisions of this Agreement
shall include providing services in obtaining equity, debt, lease and
acquisition financing, as well as providing other financial and consulting
services for the operation and growth of the Company at any time during the term
of this Agreement (the "Services"). Such Services shall be rendered upon the
reasonable request of the Company. MDC shall devote as much time as reasonably
necessary to the affairs of the Company.
5. DECISIONS. The Company reserves the right to make all decisions
with regard to any matter upon which MDC has rendered its advice and
consultation, and there shall be no liability to MDC for any such advice
accepted by the Company pursuant to the provisions of this Agreement.
6. AUTHORITY OF MANAGEMENT ADVISOR. MDC shall have authority only
to act as a consultant and advisor to the Company. MDC shall have no authority
to enter into any agreement or to make any representation, commitment or
warranty binding upon the Company or to obtain or incur any right, obligation or
liability on behalf of the Company.
7. INDEPENDENT CONTRACTOR. Except as may be expressly provided
elsewhere in this Agreement, MDC shall act as an independent contractor and
shall have complete charge of its personnel engaged in the performance of the
Services.
8. BOOKS AND RECORDS. MDC's books and records with respect to the
Services and any reimbursable costs ("Books and Records") shall be kept at MDC's
office located at 0000 Xxxx Xxxx Xxxx, Xxxxxxxx 0, Xxxxx 000, Xxxxx Xxxx,
Xxxxxxxxxx 00000. The Books and Records shall be kept in accordance with
recognized accounting principles and practices, consistently applied, and shall
be made available for the Company or the Company's representatives' inspection
and copying at all times during regular office hours. MDC shall not be required
to maintain the Books and Records for more than three (3) years after
termination of this Agreement.
-2-
9. CONFIDENTIAL INFORMATION.
9.1 The parties acknowledge that during the course of provision of
the Services, the Company may disclose confidential information to MDC or its
affiliated companies. MDC shall treat such information as the Company's
confidential property and safeguard and keep secret all such information about
the Company, including reports and records, customer lists, trade lists, trade
practices, and prices pertaining to the Company's business coming to the
attention or knowledge of MDC because of any activities conducted by MDC under
or pursuant to this Agreement.
9.2 MDC shall exercise its best efforts and shall cause any of its
affiliated companies to exercise their best efforts to prevent any confidential
information from being disclosed to third parties, except as necessarily
required in the performance of the Services and except under terms of
confidentiality satisfactory to the Company. This obligation shall remain in
effect until the Company shall release MDC or its affiliated companies from
their obligations under this paragraph 9, but in no event later than three (3)
years after the completion of the Services. MDC shall not use any of the
Company's confidential information in any way that is detrimental to the
interests of the Company, directly or indirectly, either during the term of this
Agreement or at any time thereafter.
10. INDEMNIFICATION. The Company agrees to indemnify and hold MDC
and its officers, directors and agents harmless from damages, losses or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
incurred or paid directly or indirectly, by MDC as a result or arising out of
any actions taken by MDC in connection with the performance of the Services
under this Agreement except to the extent that such actions resulted solely from
the gross negligence or willful misconduct of MDC. The Company hereby further
agrees to reimburse MDC for all reasonable fees and expenses incurred in
connection with defending any such claim to which MDC is a party, as such fees
and expenses are incurred by MDC.
11. NOTICES AND COMMUNICATIONS.
11.1 All communications relating to the day-to-day activities
necessary to render the Services shall be exchanged between the respective
representatives of the Company and MDC, who will be designated by the parties
promptly upon commencement of the Services.
11.2 All other notices, demands, and communications required or
permitted hereunder shall be in writing and shall be delivered personally to the
respective representatives of the Company and MDC set forth below or shall be
mailed by registered mail, postage prepaid, return receipt requested. Notices,
demands and communications hereunder shall be effective: (i) if delivered
personally, on delivery; or (ii) if mailed, forty-eight (48) hours after deposit
thereof in the United States mail addressed to the party to whom such notice,
-3-
demand, or communication is given. Until changed by written notice, all such
notices, demands and communications shall be addressed as follows:
If to the Company: 24 Hour Fitness, Inc.
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
If to MDC: XxXxxx De Leeuw & Co.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxx
Tel: (000) 000-0000
Fax: (000) 000-0000 or
(000) 000-0000
With copies to: White & Case
1155 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
12. ASSIGNMENTS. MDC shall not assign this Agreement in whole or in
part without the prior written consent of the Company; PROVIDED, HOWEVER, that
such consent shall not be unreasonably withheld with respect to assignments to
MDC's affiliates or wholly-owned subsidiaries; and PROVIDED FURTHER, that any
such assignment shall not relieve MDC of any of its obligations under this
Agreement.
Subject to the foregoing, all the terms and conditions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
13. APPLICABLE LAW AND SEVERABILITY. This document shall, in all
respects, be governed by the laws of the State of New York applicable to
agreements executed and to be wholly performed within the State of New York.
Nothing contained herein shall be construed so as to require the commission of
any act contrary to law, and wherever there is any conflict between any
provisions contained herein and any contrary present or future statute, law,
ordinance or regulation, the latter shall prevail, but the provision of this
document which is
-4-
affected shall be curtailed and limited only to the extent necessary to bring it
within the requirements of the law.
14. FURTHER ASSURANCES. Each of the parties hereto shall execute and
deliver any and all additional papers, documents and other assurances, and shall
do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
15. ATTORNEYS' FEES. In the event any action is instituted by a
party to enforce any of the terms and provisions contained herein, the
prevailing party in such action shall be entitled to such reasonable attorneys'
fees, costs and expenses as may be fixed by the court.
16. TIME OF THE ESSENCE. Time is of the essence of this Agreement
and all the terms, provisions, covenants and conditions hereof.
17. CAPTIONS. The captions appearing at the commencement of the
paragraphs hereof are descriptive only and for convenience and reference.
Should there be any conflicts between any such caption and the paragraph at the
head of which it appears, the paragraph and not such caption shall control and
govern in the construction of this document.
18. MODIFICATIONS OR AMENDMENTS. No amendment, change or
modification of this document shall be valid unless it is in writing and signed
by all the parties hereto and expressly states that it is an amendment, change
or modification of this Agreement is intended.
19. SEPARATE COUNTERPARTS. This document may be executed in one or
more separate counterparts, each of which, when so executed, shall be deemed to
be an original. Such counterparts shall, together, constitute and be one and
the same.
20. ENTIRE AGREEMENT. This Agreement shall constitute the entire
understanding and agreement between the parties hereto and shall supersede any
and all letters of intent, whether written or oral, pertaining to the subject
matter of this Agreement.
-5-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers on the date first appearing above.
24 HOUR FITNESS, INC.
By [ILLEGIBLE]
---------------------------------
MDC MANAGEMENT COMPANY III, L.P.,
a California limited partnership
By [ILLEGIBLE]
---------------------------------
General Partner
-6-
