MANAGEMENT AGREEMENT
Exhibit
10.7
THIS
MANAGEMENT AGREEMENT (“Agreement”), dated as of February 24, 2006, (the
“Effective Date”) among TECHPRECISION, LLC, a Delaware limited liability company
having an address at X.X. Xxx 0000, Xxxxxxxxxx, XX 00000 (the “Manager”), and
RANOR, INC., a Delaware corporation having an address at Xxx Xxxxx Xxxxx,
Xxxxxxxxxxx, Xxxxxxxxxxxxx 00000 (the “Company”).
WITNESSETH:
WHEREAS,
the Board of Directors of the Company has determined that it would be in the
best interests of the Company to retain the services of Manager to provide
general management, corporate planning, sales and financial consulting services
to the Company, and Manager is willing to render such services upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS,
contemporaneously with the execution of this Agreement, (i) the stock of the
Company is being acquired by Xxxxxxxxxx Holdings II, Inc., a Delaware
corporation (“Parent”), (ii) Xxxxxx Partner, LP is purchasing shares of
preferred stock in the Parent, (iii) the Company is financing its equipment,
and
(iv) the Company is selling its real estate to WM Realty Management, LLC, in
a
sale and leaseback transaction, the foregoing transactions being referred to
collectively as the “Acquisition Transactions”;
NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto intending to be bound hereby, the parties hereto
agree as follows:
SECTION
1. DEFINITIONS. For purposes of this Agreement, the following terms have the
meanings set forth below:
“Affiliate”
means, with respect to any Person, any other Person controlling, controlled
by
or under common control with such Person or any of its Affiliates.
“Cause”
means:
(a)
a
breach of trust whereby Manager or any of its Affiliates, in violation of this
Agreement, obtains material personal gain or benefit to the detriment of the
Company;
(b)
any
fraudulent or dishonest conduct by Manager or any other wrongful conduct by
Manager which damages the Company or its property, business or reputation;
(c)
a
conviction of, or guilty plea or plea of nolo contendere by, Manager of (i)
any
felony or (ii) any other crime involving fraud, theft, embezzlement or use
or
possession of illegal substances, or the admission by Manager of any matters
set
forth in this clause (c), or
(d)
a
material violation of Sections 6, 7 or 8 of this Agreement.
“Company”
means Ranor, Inc., a Delaware corporation.
Page
1
“Confidential
Information” means any and all information, however documented and regardless of
the medium on which such information is provided and whether the information
is
provided in machine readable or human readable form, that is a trade secret
within the meaning of applicable statutory or case law concerning the business
and affairs of the Company, including, but not limited to: (a) computer software
and programs; source and object codes; database technologies; concepts, ideas
and methods; product specifications; data; know-how; formulas; compositions;
processes; designs; sketches; photographs; graphs; drawings; samples; inventions
and ideas; past, current and planned research and development; customer lists;
current and anticipated customer requirements; relationships with vendors;
price
lists and costs; market studies and business plans; (b) preliminary financial
statements, information and data derived from or based on such financial
statements and information; financial projections and budgets; historical and
projected sales; capital spending budgets and plans; the names and backgrounds
of key personnel, personnel training, techniques and materials; (c) any and
all
notes, analysis, compilations, studies, summaries and other material prepared
by
or for the Manager containing or based, in whole or in part, on any information
including the foregoing; (d) any letters of intent, memoranda of understanding,
term sheets, agreements and understandings, whether oral or in writing and
whether formal or informal, to which the Company is a party, and the status
of
any negotiations relating to any of the foregoing and the identity of the other
party to any such transaction. Notwithstanding the foregoing, if any
confidential information is given other than in written or computer readable
form, the Company shall advise Manager within five (5) business days of the
delivery thereof as to the confidential nature of such material, and such
material shall be treated as Confidential Information. Notwithstanding the
foregoing, Confidential Information does not include any information which:
(a)
is now, or hereafter becomes, generally known or publicly available other than
as a result of a breach by Manager of this Agreement; (b) is already known
by
Manager at the time it receives such information, or (c) after the term, is
furnished to Manager by a third party unless the Manager knows or has reason
to
know that the third party is subject to a confidentiality restriction, or (d)
is
otherwise approved for disclosure by the Company.
“Consulting
Period” has the meaning set forth in Section 2.1 of this Agreement.
“EBITDA”
shall mean income before interest, taxes, depreciation and amortization,
determined in accordance generally accepted accounting principles as reflected
in the Form 10-KSB or Form 10-K filed by the Company’s parent corporation,
Xxxxxxxxxx Holdings II, Inc. after giving effect to any payment to Manager
based
on EBITDA.
“Intellectual
Property” has the meaning set forth in Section 7 of this Agreement.
“Management
Fee” has the meaning set forth in Section 4 of this Agreement.
“Non-competition
Period” has the meaning set forth in Section 9.1 hereof.
“Person”
means an individual, a partnership, a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
“Reimbursable
Expenses” has the meaning set forth in Section 5.1 of this Agreement.
“Subsidiary”
means, with respect to any Person, any other Person in which such Person either
(a) owns a majority of the equity or voting rights or (b) has the power to
control the management regardless of the percentage of equity or voting rights
held by such Person.
Page
2
SECTION
2. CONSULTING PERIOD.
2.1.
The
Company hereby engages Manager, and Manager hereby accepts its engagement with
the Company, upon the terms and conditions set forth in this Agreement for
the
period beginning on the Effective Date of this Agreement and ending March 31,
2009 (the “Consulting Period”).
2.2.
In
the event of a termination for Cause, this Agreement and Manager’s obligations
shall terminate; provided, however, that Manager shall be entitled to accrued
compensation to the date of termination. If, at the date of termination, the
amount of Manager’s accrued compensation cannot be determined because the
adjustment required by Section 4.1 of this Agreement has not been determined,
then at such time as the Management Fee, as adjusted pursuant to Section 4
is
determined, any outstanding balance then due to Manager shall be paid.
SECTION
3. DUTIES.
3.1.
Duties. During the Consulting Period, Manager shall serve as a consultant to
the
Company and each of its existing and future Subsidiaries with primary
responsibility, subject at all times to the direction of the Board of Directors
of the Company, to consult in respect of: (a) the general policies and direction
of the Company and its Subsidiaries, (b) assistance in connection with various
forms of financings for the Company and its Subsidiaries, (c) interfacing with
operating management of the Company in all aspects of manufacturing, sales,
distribution and customer relations, (d) in establishment of budgets and
performance goals of the Company and its Subsidiaries, and (e) supervising
the
internal accounting of the Company. Manager shall, consistent with the
foregoing, perform such duties as may, from time to time, be determined and
assigned to it by the Board of Directors of the Company.
3.2.
Personnel. It is contemplated that Manager will, with their consent, assign
(i)
Xxxxx X. Xxxxxx for strategic planning, management oversight, marketing support
and assistance with day to day operation of Ranor, Inc. (ii) Xxxxxx X. Xxxx
for
marketing support and analysis of long-term contracts and (iii) Xxxxxx X. Xxxxx
for marketing support. Manager may replace any of these individuals with
similarly qualified persons in its discretion. The Company recognizes that
additional personnel may be required for the activities described in this
Section 3.2, and such persons shall be engaged by the Company.
3.3.
Performance of Duties; Other Activities. Manager shall devote its reasonable
efforts, attention and skills toward performing the consulting duties on behalf
of the Company and its Subsidiaries. Notwithstanding the foregoing, it is
recognized that Manager and its Affiliates and employees will be engaged in
other business activities and/or and consulting duties.
3.4.
Chairman. Manager will, with the consent of Xxxxx X. Xxxxxx, provide the
services of Xx. Xxxxxx to serve as Chairman of the Company during all or part
of
the Consulting Period if requested by the Company’s Board of Directors.
Page
3
SECTION
4. COMPENSATION.
4.1.
During the Consulting Period, Manager’s consulting fee will be initially set at
$200,000 per annum (the “Management Fee”), which Management Fee will be payable
monthly, in advance, at the rate of $16,666.67 per month, or pro rata for part
thereof, payable semi-monthly on the 1st and 15th day of each month, commencing
March 1, 2006. The payment due on March 1, 2006, shall also include the
proportionate payment for the period from the date of this Agreement to February
28, 2006.
4.2.
In
addition to the Management Fee, the Manager shall be entitled to a performance
bonus determined as follows. The compensation committee of the board of
directors shall, as early as practical, but not later than June 30, in each
fiscal year shall set performance objectives for the Company for the fiscal
year. If the performance objectives are attained or exceeded, the Company shall
pay Manager a performance bonus equal to two and one-half percent (2 1/2%)
of
the Company’s cash flow from operations for such fiscal year. The bonus shall be
paid within ten (10) business days after the Company files its Form 10-K or
Form
10-KSB for the fiscal year. In the event that the Company makes an acquisition
or disposes of a business segment during a fiscal year, the performance
objectives may be revised by the compensation committee to reflect such
transaction.
SECTION
5. EXPENSES. The Company will reimburse Manager for all reasonable expenses
incurred by it in the course of performing its duties under this Agreement
which
are consistent with the Company’s policies in effect from time to time with
respect to travel, entertainment and other business expenses (“Reimbursable
Expenses”), subject to the Company’s requirements with respect to reporting and
documentation of expenses.
SECTION
6. TRADE SECRETS AND PROPRIETARY INFORMATION.
6.1.
Manager recognizes and acknowledges that the Company, through the expenditure
of
considerable time and money, has developed and will continue to develop in
the
future information concerning customers, clients, marketing, products, services,
business, research and development activities and operational methods of the
Company and its customers or clients, contracts, financial or other data,
technical data or any other confidential or proprietary information possessed,
owned or used by the Company, the disclosure of which could or does have a
material adverse effect on the Company, its business, any business it proposes
to engage in, its operations, financial condition or prospects and that the
same
are confidential and proprietary and considered “confidential information” of
the Company for the purposes of this Agreement. In consideration of his
engagement, Manager agrees that neither Manager nor any of its members will,
during or after the Term, without the consent of the Company’s board of
directors, make any disclosure of confidential information now or hereafter
possessed by the Company, to any person, partnership, corporation or entity
either during or after the term here of, except that nothing in this Agreement
shall be construed to prohibit Manager or its members from using or disclosing
such information (a) if such disclosure is necessary in the normal course of
the
Company’s business in accordance with Company policies or instructions or
authorization from chief Manager or financial officer or an officer designated
by the chief Manager or financial officer, or (b) such information shall become
public knowledge other than by or as a result of disclosure by a person not
having a right to make such disclosure, or (c) subsequent to the Term, if such
information shall have either (i) been developed by Manager or its members
independent of any of the Company’s confidential or proprietary information or
(ii) been disclosed to Manager or its members by a person not subject to a
confidentiality agreement with or other obligation of confidentiality to the
Company. For the purposes of Sections 6, 7 and 8 of this Agreement, the term
“Company” shall include the Company, its parent, its subsidiaries and
affiliates, other than affiliates whose relationship as an affiliate is derived
solely from Manager’s interest in or position at the other party.
Page
4
6.2.
As
requested by the Company from time to time and upon the termination of Manager’s
services to the Company for any reason, Manager will promptly deliver to the
Company or destroy all copies and embodiments, in whatever form or medium,
of
all Confidential Information or Intellectual Property in the possession of
Manager or within its control (including written records, notes, photographs,
manuals, notebooks, documentation, program listings, flow charts, magnetic
media, disks, diskettes, tapes and all other materials containing any
Confidential Information or Intellectual Property) irrespective of the location
or form of such material and, if requested by the Company, will provide the
Company with written confirmation that all such materials have been delivered
to
the Company or destroyed. To the extent that any Confidential Information or
Intellectual Property is on Manager’s computer system, Manager shall, in lieu of
returning or destroying such material, Manager shall continue to treat the
material as confidential.
6.3.
In
the event that any trade secrets or other confidential information covered
by
Section 6.1 of this Agreement is required to be produced by Manager pursuant
to
legal process, Manager shall give the Company notice of such legal process
within a reasonable time, but not later than ten (10) business days prior to
the
date such disclosure is to be made, unless Manager has received less notice,
in
which event Manager shall immediately notify the Company. The Company shall
have
the right to object to any such disclosure, and if the Company objects (at
the
Company’s cost and expense) in a timely manner so that Manager is not subject to
penalties for failure to make such disclosure, Manager shall not make any
disclosure until there has been a court determination on the Company’s
objections. If disclosure is required by a court order, final beyond right
of
review, or if the Company does not object to the disclosure, Manager shall
make
disclosure only to the extent that disclosure is unequivocally required by
the
court order, and Manager will exercise reasonable efforts at the Company’s
expense, to obtain reliable assurance that confidential treatment will be
accorded the Confidential Information.
SECTION
7. COVENANT NOT TO SOLICIT OR COMPETE.
7.1.
During the period from the date of this Agreement until one (1) year following
the expiration or termination of this Agreement, neither Manager nor its members
will, directly or indirectly:
(i)
Persuade or attempt to persuade any person or entity which is or was a customer,
client or supplier of the Company to cease doing business with the Company,
or
to reduce the amount of business it does with the Company (the terms “customer”
and “client” as used in this Section 7 to include any potential customer or
client to whom the Company submitted bids or proposals, or with whom the Company
conducted negotiations, during the term of Manager’s engagement hereunder or
during the twelve (12) months preceding the termination of this Agreement or
Manager’s engagement hereunder;
(ii)
solicit for himself or itself or any other person or entity other than the
Company the business of any person or entity which is a customer or client
of
the Company, or was a customer or client of the Company within one (1) year
prior to the termination of this Agreement or his engagement hereunder;
provided, that this clause (ii) shall not apply to business which does not
directly or indirectly compete with the Company;
(iii)
persuade or attempt to persuade any employee of the Company, or any individual
who was an employee of the Company during the one (1) year period prior to
the
termination of this Agreement, to leave the Company’s employ, or to become
employed by any person or entity other than the Company; or
Page
5
(iv)
engage in any business in the United States whether as an officer, director,
Manager, partner, guarantor, principal, agent, employee, advisor or in any
manner, which directly competes with the business of the Company as it is
engaged in at the time of the termination of this Agreement, unless, at the
time
of such termination or thereafter during the period that Manager is bound by
the
provisions of this Section 7, the Company ceases to be engaged in such activity,
provided, however, that nothing in this Section 7 shall be construed to prohibit
Manager from owning an interest of not more than five (5%) percent of any public
company engaged in such activities.
7.2.
Manager acknowledges that the restrictive covenants (the “Restrictive
Covenants”) contained in Sections 6 and 7 of this Agreement are a condition of
his engagement are reasonable and valid in geographical and temporal scope
and
in all other respects. If any court determines that any of the Restrictive
Covenants, or any part of any of the Restrictive Covenants, is invalid or
unenforceable, the remainder of the Restrictive Covenants and parts thereof
shall not thereby be affected and shall remain in full force and effect, without
regard to the invalid portion. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable because
of the geographic or temporal scope of such provision, such court shall have
the
power to reduce the geographic or temporal scope of such provision, as the
case
may be, and, in its reduced form, such provision shall then be enforceable.
SECTION
8. INVENTIONS AND DISCOVERIES. Manager agrees promptly to disclose in writing
to
the Company any invention or discovery made by him during the Term, whether
during or after working hours, in any business in which the Company is then
engaged or which otherwise relates to any product or service dealt in by the
Company and such inventions and discoveries shall be the Company’s sole
property. Upon the Company’s request, Manager shall, and shall cause its members
to, execute and assign to the Company all applications for copyrights and
letters patent of the United States and such foreign countries as the Company
may designate, and Manager shall execute and deliver to the Company such other
instruments as the Company deems necessary to vest in the Company the sole
ownership of all rights, title and interest in and to such inventions and
discoveries, as well as all copyrights and/or patents. If services in connection
with applications for copyrights and/or patents are performed by Manager at
the
Company’s request after the termination of his engagement hereunder, the Company
shall pay him reasonable compensation for such services rendered after
termination of this Agreement.
SECTION
9. INJUNCTIVE RELIEF. Manager agrees that the violation or threatened violation
of any of the provisions of Sections 6, 7 or 8 of this Agreement by Manager
or
its members shall cause immediate and irreparable harm to the Company. In the
event of any breach or threatened breach of any of said provisions, Manager
and
its members consent to the entry of preliminary and permanent injunctions by
a
court of competent jurisdiction prohibiting Manager from any violation or
threatened violation of such provisions and compelling Manager to comply with
such provisions. This Section 9 shall not affect or limit, and the injunctive
relief provided in this Section 9 shall be in addition to, any other remedies
available to the Company at law or in equity or in arbitration for any such
violation by Manager. The provisions of Sections 6, 7, 8 and 9 of this Agreement
shall survive any termination of this Agreement and Manager’s engagement
pursuant to this Agreement.
SECTION
10. MISCELLANEOUS.
10.1.
Any
notice, consent or communication required under the provisions of this Agreement
shall be given in writing and sent or delivered by hand, overnight courier
or
messenger service, against a signed receipt or acknowledgment of receipt, or
by
registered or certified mail, return receipt requested, or telecopier or similar
means of communication if receipt is acknowledged or if transmission is
confirmed by mail as provided in this Section 10.1, to the parties at their
respective addresses set forth at the beginning of this Agreement or by
telecopier to the numbers set forth on the signature page of this Agreement,
with notice to the Company being sent to the attention of the individual who
executed this Agreement on its behalf. Any party may, by like notice, change
the
Person, address or telecopier number to which notice is to be sent. If no
telecopier number is provided for Manager, notice to him shall not be sent
by
telecopier.
Page
6
10.2.
This Agreement shall in all respects be construed and interpreted in accordance
with, and the rights of the parties shall be governed by, the laws of the
Commonwealth of Massachusetts applicable to contracts executed and to be
performed wholly within such State, without regard to principles of conflicts
of
laws. Each party hereby (i) consents to the exclusive jurisdiction of the
federal courts in the County Worcester, Commonwealth of Massachusetts, (ii)
agrees that any process in any action commenced in such court under this
Agreement may be served upon it personally, either (x) by certified or
registered mail, return receipt requested, or by courier service which obtains
evidence of delivery, with the same full force and effect as if personally
served upon such party in such county, or (y) by any other method of service
permitted by law, and (iii) waives any claim that the jurisdiction of any such
court is not a convenient forum for any such action and any defense of lack
of
in personam jurisdiction with respect thereof.
10.3.
If
any term, covenant or condition of this Agreement or the application thereof
to
any party or circumstance shall, to any extent, be determined to be invalid
or
unenforceable, the remainder of this Agreement, or the application of such
term,
covenant or condition to parties or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Agreement shall be valid and be enforced
to
the fullest extent permitted by law, and any court or arbitrator having
jurisdiction may reduce the scope of any provision of this Agreement, including
the geographic and temporal restrictions set forth in Section 7 of this
Agreement, so that it complies with applicable law.
10.4.
This Agreement constitute the entire agreement of the Company and Manager as
to
the subject matter hereof, superseding all prior or contemporaneous written
or
oral understandings or agreements, including any and all previous employment
agreements or understandings, all of which are hereby terminated, with respect
to the subject matter covered in this Agreement; provided, however, that nothing
in this Agreement shall be deemed to modify any obligations which Manager may
have as a stockholder of the Company pursuant to the Merger Agreement. This
Agreement may not be modified or amended, nor may any right be waived, except
by
a writing which expressly refers to this Agreement, states that it is intended
to be a modification, amendment or waiver and is signed by both parties in
the
case of a modification or amendment or by the party granting the waiver. No
course of conduct or dealing between the parties and no custom or trade usage
shall be relied upon to vary the terms of this Agreement. The failure of a
party
to insist upon strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.
10.5.
No
party shall have the right to assign or transfer any of its or his rights
hereunder except that the Company’s rights and obligations may be assigned in
connection with a merger of consolidation of the Company or a sale by the
Company of all or substantially all of its business and assets.
10.6.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors, executors, administrators and
permitted assigns.
Page
7
10.7.
The
headings in this Agreement are for convenience of reference only and shall
not
affect in any way the construction or interpretation of this Agreement.
10.8.
This Agreement may be executed in counterparts, each of which when so executed
and delivered will be an original document, but both of which counterparts
will
together constitute one and the same instrument.
10.9.
The
descriptive headings of this Agreement are inserted for convenience only and
do
not constitute a part of this Agreement.
10.10.
This Agreement will not confer any rights or remedies upon any person other
than
the Company, Manager and their respective heirs, executors, successors and
assigns.
10.11.
The language used in this Agreement will be deemed to be the language chosen
by
the parties to express their mutual intent, and no rule of strict construction
will be applied against any party. Any reference to any federal, state, local
or
foreign statute or law will be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The use of the
word “including” in this Agreement means “including without limitation” and is
intended by the parties to be by way of example rather than limitation.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
and year first above written.
|
TECHPRECISION
LLC
|
||
|
By
|
/s/
Xxxxxx X. Xxxx
|
|
| Its Chairman | ||
|
RANOR,
INC.
|
||
|
By
|
/s/
Xxxxx X. Xxxxxx
|
|
| Its Chairman | ||
Page
8
The
undersigned members of Techprecision LLC do hereby agree to be bound by the
provisions of Section 6, 7, 8, 9 and 10 of the foregoing Management Agreement.
|
/s/
Xxxxxx X. Xxxx
|
|
|
Xxxxxx
X. Xxxx
|
|
|
/s/
Xxxxx X. Xxxxxx
|
|
|
Xxxxx
X. Xxxxxx
|
|
|
/s/
Xxxxxx X. Xxxxx
|
|
|
Xxxxxx
X. Xxxxx
|
Page
9
