SERVICES AGREEMENT
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SERVICES AGREEMENT, dated as of September 9, 1997, by
and between Harvest Partners, Inc., a New York corporation
("Harvest"), and Xxxx International Holdings, Inc., a Delaware
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corporation (the "Company").
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W I T N E S S E T H:
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WHEREAS, the Company and an affiliate of Harvest
("Purchaser") have entered into that certain Governance Agreement
of even date herewith (the "Governance Agreement") relating to
matters associated with the proposed acquisition by Purchaser of
outstanding shares of Common Stock of the Company pursuant to
that certain Stock Purchase Agreement of even date herewith among
Purchaser and Xxxxx X. Xxxx and related parties (the "Stock
Purchase Agreement"); and
WHEREAS, the Company is in the business of designing,
manufacturing and marketing a broad line of exterior accessories
for new and used light trucks, sport utility vehicles and vans
(the "Business"); and
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WHEREAS, the Company desires that Harvest provide the
Company with financial advisory and strategic planning services
relating to the Company's business and affairs (collectively, the
"Harvest Services"); and
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WHEREAS, Harvest has designated two representatives
with financial and/or management expertise to serve on the Board
of Directors of the Company, such representatives to render
counsel, guidance and managerial assistance to the Company while
serving on the Company's Board of Directors (collectively, the
"Director Services").
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NOW, THEREFORE, in consideration of the mutual
covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. EFFECTIVE DATE. This Agreement shall be
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effective as of the closing date under the Stock Purchase
Agreement (the "Effective Date").
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2. SERVICES. (a) Harvest will provide the Harvest
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Services to the Company from time to time as requested by the
Board of Directors of the Company. The Harvest Services shall
include, without limitation, (i) assisting the Company,
generally, with respect to financial and business matters, as the
Company's financial advisor, (ii) recommending and assisting the
Company in implementing a general strategy in connection with the
Company's accomplishing its business plan and anticipated growth;
(iii) assisting the Company to structure and negotiate
acquisitions and dispositions of assets and/or business units;
(iv) if necessary, locating equity partners and structuring the
terms of any such equity investment, (v) communicating with
lenders and stockholders, including, assisting in the
coordination of investor relation services, (vi) structuring and
negotiating refinancings and other lending or borrowing
transactions relating to the Company and (vii) such other
investment, advisory and related financial services as Harvest or
the Company shall, from time to time, deem necessary or
appropriate. The Harvest Services may be rendered both through
the Harvest Directors (as defined below) and directly by Harvest
and its affiliates, provided, however, that the Harvest Services
are understood by the parties to be in addition to the Director
Services. The Harvest Services shall be strictly advisory in
nature and the Company shall be free to accept or reject any such
advise in its sole discretion. Harvest shall have no authority
to bind or obligate the Company in any way. Nothing contained in
this Agreement shall require the Company to exclusively use the
services of Harvest in connection with the matters referred to
herein as Harvest Services.
(b) Harvest hereby agrees to provide the Company
with the Director Services, if requested by the Board of
Directors of the Company or if Harvest unilaterally elects in
accordance with the Governance Agreement. In that event, Harvest
hereby agrees to cause two of its principals, directors or
designees with financial and/or management expertise to serve on
the Company's Board of Directors (the "Harvest Directors"). The
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Harvest Directors shall provide guidance, counsel and managerial
assistance to the Company in providing such Director Services and
shall devote such time and attention as is reasonably necessary
to provide the Director Services.
3. COMPENSATION. (a) Subject to Section 4 below, as
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full payment for the Harvest Services and the Director Services
to be rendered to the Company hereunder (specifically excluding,
however, all amounts payable directly by the Company to its
directors, including the Harvest Directors, for directors'
services), the Company shall pay to Harvest a fee (the "Harvest
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Fee") equal to $150,000 with respect to the first year (which for
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purposes of this paragraph 3 shall mean the four consecutive
fiscal quarters ending September 30, 1998) of the term hereof,
$250,000 with respect to the second year (which for purposes of
this paragraph 3 shall mean the four consecutive fiscal quarters
ending September 30, 1999) of the term hereof and $400,000 with
respect to the third year (which for purposes of this paragraph 3
shall mean the four consecutive fiscal quarters ending
September 30, 2000) of the term hereof, payable in equal quarterly
installments in advance simultaneously with the Company's public
release of the Company's earnings following the end of each
fiscal quarter of the Company; provided, however, that the first
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payment, relating to the quarter ending December 31, 1997, shall
be made on the date hereof; provided, further, however, that such
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quarterly installment payments shall only be required if the
Company's quarterly earnings before interest, taxes, depreciation
and amortization ("EBITDA"), as calculated in accordance with
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generally accepted accounting principles in the United States of
America as in effect from time to time, applied on a basis
consistent with those used in the preparation of the Company's
financial statements ("GAAP"), is not less than (i) $1,000,000
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per fiscal quarter during the first year of the term hereof,
(ii) $1,375,000 per fiscal quarter during the second year of
the term hereof and (iii) $1,750,000 per fiscal quarter during
the third year of the term hereof (each such amount being
herein called the "Target"). For purposes of this Section 3(a),
the quarterly EBITDA of the Company shall be determined by the
Chief Financial Officer of the Company, whose determination,
in the absence of manifest error, shall be binding and
conclusive on Harvest and the Company. Notification of the
amount of the Company's quarterly EBITDA, together with a copy of
the Chief Financial Officer's certification to the Company of
such amount, shall be delivered to Harvest in writing by the
Company simultaneously with the public release of the Company's
earnings following the end of each fiscal quarter of the Company.
(b) Notwithstanding the provisions of Section 3(a)
above, payment of the Harvest Fee shall be suspended for each
fiscal quarter immediately following a fiscal quarter in which
the Company's quarterly EBITDA (plus the cumulative amount, if
any, of the EBITDA Excess, as hereinafter defined, for the fiscal
quarters preceding the fiscal quarter in which EBITDA did not
meet Target) did not meet the Target. To the extent the
Company's actual quarterly EBITDA for any quarter exceeds the
Target, such excess is hereinafter referred to as the "EBITDA
Excess." To the extent the Company's actual quarterly EBITDA for
any quarter is less than the Target, such deficiency is
hereinafter referred to as the "EBITDA Deficiency". All
suspended payments of the Harvest Fee shall accumulate and shall
be payable at such time as, with respect to each full fiscal
quarter ending prior to termination of this Agreement, the
cumulative amount of the EBITDA Excess, on a dollar-for-dollar
basis, equals or exceeds the then cumulative amount of the EBITDA
Deficiency.
(c) The Company, provided prior approval of a majority
of the Independent Directors (as defined in the Governance
Agreement) is obtained, may pay Harvest negotiated amounts in
excess of the Harvest Fee to the extent Harvest provides the
Company with investment banking, advisory or other similar
Harvest Services in connection with any extraordinary transaction
effected by the Company, including any merger, business
combination, recapitalization or significant asset acquisition or
disposition.
(d) Harvest shall not be entitled to reimbursement of
out-of-pocket expenses for performing Harvest Services hereunder.
Notwithstanding the foregoing, the Harvest Directors shall be
entitled to expense reimbursement available to the Company's
directors generally.
4. TERM. This Agreement shall commence on the date
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hereof and shall terminate upon the earlier of (a) the date
immediately preceding the third anniversary of the date of this
Agreement, (b) the date on which this Agreement is terminated for
cause as provided in Section 7 below, or (c) the date the number
of shares of Common Stock Beneficially Owned (as defined in the
Stock Purchase Agreement) by Purchaser or any Affiliate or
Associate (as defined in the Stock Purchase Agreement) thereof
which is a signatory to the Stock Purchase Agreement decreases to
less than 50% of the number of Permitted Shares (as defined in
the Stock Purchase Agreement).
5. RIGHT TO ENGAGE IN OTHER ACTIVITIES. The Harvest
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Services and the Director Services provided herein are not to be
deemed exclusive. Nothing contained herein shall restrict
Harvest or any of its shareholders, directors, officers,
employees or agents from engaging in any other business or
devoting time and attention to the management, investment,
involvement or other aspects of any other business, including
becoming an officer or director thereof, or rendering services of
any kind to any other corporation, firm, individual or
association. The Company further acknowledges that Harvest, from
time to time, may provide investment, management and advisory
services to other companies and entities. In addition, the
Company acknowledges that Harvest has, and will continue, to
render investment and advisory advice and services to certain of
the Company's stockholders, including LIH Holdings, LLC, a
Delaware limited liability corporation ("LIH"), and LIH's members
and their affiliates.
6. CONFIDENTIALITY. Harvest acknowledges that in
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connection with the performance of the Harvest Services
hereunder, it and its employees may have access to the Company's
confidential information (as hereinafter defined). Harvest
agrees that neither it nor its employees will use or disclose
outside the scope of its engagement hereunder any confidential
information of the Company and will take normal and reasonable
steps to protect the confidentiality of any such confidential
information. Confidential Information shall encompass
information about the Company's products, business, finances and
marketing plans, but shall not include information which
(i) becomes generally available to the public other than as a
result of a disclosure by Harvest or its employees, (ii) was
available to Harvest on a non-confidential basis prior to its
disclosure to Harvest by the Company, its representatives or
agents or (iii) becomes available to Harvest on a non-
confidential basis from a source other than the Company, its
representatives or agents, provided that such source is not bound
by a confidentiality agreement with the Company, its
representatives or its agents or otherwise is prohibited from
transmitting the information to Harvest or its employees by a
confidential, legal or fiduciary obligation.
7. TERMINATION FOR CAUSE. This Agreement may be
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terminated for cause by the party whose conduct is not the cause
for such termination if (a) either party commits an act of
criminal misconduct or gross negligence or neglect in any
material respect of its obligations as set forth herein, or
(b) either party files a voluntary petition in bankruptcy or is
adjudicated as bankrupt or insolvent, or such party files a peti-
tion under any chapter of the United States Bankruptcy Code or
any other present or future applicable Federal, state or other
statute or law regarding bankruptcy, insolvency or other relief
for debtors, or any party seeks, or consents to, or acquiesces in
the appointment of, any trustee, receiver, conservator or
liquidator of itself or of all or any substantial portion of its
property, and such petition in bankruptcy, or adjudication as a
bankrupt or insolvent entity, is not waived, dismissed or
overturned within 60 days from the date of the filing or
adjudication in question.
8. ASSIGNMENT. Neither Harvest nor the Company may
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assign this Agreement or any of their respective rights or
obligations hereunder, except that either of them may assign or
transfer this Agreement to any other person who or which acquires
all or substantially all of their respective property, business
and assets, provided that, in the case of Harvest, the successor
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to its business employs substantially the same personnel to
provide the Harvest Services and the Director Services hereunder.
9. SEVERABILITY. The invalidity or unenforceability
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of any provision of this Agreement shall not in any manner or way
affect any other provision hereof, and this Agreement shall be
construed, if possible, as if amended to conform to legal
requirements, failing which it shall be construed as if any such
offending provision were omitted.
10. INDEPENDENT CONTRACTOR RELATIONSHIP. Harvest
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shall serve as an independent contractor to the Company pursuant
to the terms and conditions of this Agreement and this Agreement
does not create and shall not be construed to create a
relationship of principal and agent, joint venturers, co-
partners, employer and employee, or any similar relationship
between the Company and Harvest, and the parties hereto expressly
deny the existence of any such relationship.
11. GOVERNING LAW. This Agreement shall be governed
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by, and construed and enforced in accordance with, the laws of
the State of New York, without giving effect to the conflicts of
law principles thereof.
12. ENTIRE AGREEMENT. This Agreement constitutes the
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entire understanding of the parties hereto with respect to the
subject matter hereof.
13. BINDING NATURE. Subject to the restrictions on
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assignability contained herein, each and all of the covenants,
terms, conditions, provisions and agreements herein contained
shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors, heirs and permitted
assigns.
14. AMENDMENT, ETC. The provisions of this Agreement
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may not be amended, waived, modified or changed except by an
instrument in writing signed by all of the parties hereto. No
waiver of any breach or condition of this Agreement shall be
deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
15. COUNTERPARTS. This Agreement may be executed in
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any number of counterparts, each of which shall be an original
and all of which, when taken together, shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their representatives thereunto duly
authorized on the date first above written.
HARVEST PARTNERS, INC.
By: /s/ Harvest Partners, Inc.
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Name:
Title:
XXXX INTERNATIONAL HOLDINGS, INC.
By: /s/ Xxxx International Holdings, Inc.
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Name:
Title:
