AMENDED AND RESTATED MANAGEMENT ADVISORY SERVICES
AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT ADVISORY SERVICES AGREEMENT
("Agreement"), effective as of the 1st day of November, 1997 (the "Effective
Date"), by and between MENTMORE HOLDINGS CORPORATION, a Delaware corporation
("Mentmore") and STELLEX INDUSTRIES, INC., a Delaware corporation, TSMD
ACQUISITION CORP., a Delaware corporation, STELLEX MICROWAVE SYSTEMS, INC.
(formerly ▇-▇ TSMD Inc.), a California corporation, KII HOLDING CORP., a
Delaware corporation, KII ACQUISITION CORP., a Delaware corporation, STELLEX
AEROSPACE (formerly ▇▇▇▇▇▇▇▇ INDUSTRIES, INC.), a California corporation,
PARAGON PRECISION PRODUCTS, a California corporation, ▇▇▇▇▇ MACHINING
INTERNATIONAL, a California corporation, SCANNING ELECTRON ANALYSIS
LABORATORIES, INC., a California corporation, and GENERAL INSPECTION
LABORATORIES, INC., a California corporation (hereinafter, collectively, the
"Companies") amends and restates that certain Management Advisory Services
Agreement between Mentmore and certain of the Companies dated July 1, 1997.
WHEREAS, the Companies are engaged in the aerospace, defense, and space
industries; and
WHEREAS, the Companies desire to engage Mentmore for the purpose of
providing certain staff and services, including management advisory, consulting
and other services and facilities to the Companies and Mentmore desires to
provide such staff, services and facilities upon the terms and conditions stated
herein.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. MANAGEMENT ADVISORY SERVICES.
A. The Companies hereby engage Mentmore to provide to the
Companies executive management advisory, consulting and other services
including, but not limited to:
1) strategic planning, financial planning, accounting and
financial reporting services oversight and review, including expertise
and assistance in financial presentation and planning and such services
as are reasonably necessary for the Companies to comply with its
financial reporting obligations to third parties, including report
preparation, compliance with generally accepted accounting principles
("GAAP"), footnote disclosure, compilation and review;
2) consulting, expertise and assistance with respect to
traditional treasury functions (including cash management and managing
the Companies' relationships with its lenders, monitoring the
Companies' compliance with current
lender requirements, monitoring of debt covenants, negotiation of
waivers and exceptions, monitoring of cash flow and negotiations of
lines of credit and other credit facilities);
3) general business development services; and
4) oversight and review required for all federal, state and
local tax preparation, planning and audits.
B. Mentmore agrees to provide such services to the Companies through
the use of Mentmore employees or agents who Mentmore reasonably deems to be
qualified to provide such services. Mentmore shall have the right to determine
the manner in which it shall perform its responsibilities and provide the
services required hereunder.
2. COMPENSATION.
A. In consideration of the performance of such services as are
contemplated hereunder, the Companies agree to pay to Mentmore during the term
of this Agreement annual base compensation (hereinafter the "Base Compensation")
in the aggregate amount of (a) SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($750,000.00) per annum, plus (b) from and after November 1, 1998, an amount
equal to one per cent (1%) of the Companies' total consolidated sales in any
fiscal year less the amounts paid pursuant to (a), above.
B. The Base Compensation shall be payable by the Companies to Mentmore
in equal monthly installments payable on the 1st day of each calendar month
during the term hereof, the first monthly installment to be due and payable on
November 1, 1997. That portion of the Base Compensation payable under 2, A(b),
above shall be estimated by the parties for purposes of calculating the monthly
installments hereunder and adjustments paid to the appropriate party(ies) within
ten (10) days after the Companies' audited financial statements for each fiscal
year are prepared. All unpaid monthly installments of Base Compensation shall
bear interest compounded annually at the lesser of: (a) a per annum rate equal
to the Prime Rate adjusted on the first business day of each calendar quarter
for so long as any amounts remain unpaid hereunder, or (b) the maximum rate
allowed by law until such time as such installment(s) are paid. The "Prime Rate"
shall mean the rate of interest reported as the prime rate from time to time in
The Wall Street Journal newspaper (or its successor in interest) in its "Money
Rates" column; provided, however, if more than one rate or a range of rates are
reported as the prime rate, then the higher or highest of such rates shall be
considered the Prime Rate.
C. The parties hereto agree to re-negotiate such annual rate of Base
Compensation in the event that, as a result of the acquisition by the Companies
of other companies or businesses, or otherwise, there is a material increase in
the level of services and responsibilities of Mentmore hereunder.
3. BUSINESS EXPENSES; WORKING FACILITIES.
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A. During the term hereof, the Companies agree to pay or promptly
reimburse Mentmore for the aggregate of all direct and indirect costs which are
incurred or accrued by Mentmore or its employees or agents and which are, in the
reasonable business judgment of Mentmore, necessary for the performance of its
responsibilities and the rendering of the services required hereunder,
including, but not limited to:
1) all operating expenses (such as office costs, travel and
entertainment);
2) overhead costs (such as costs for office space and assets);
3) fees and other amounts paid to third parties;
4) any and all costs incurred or accrued in connection with
the termination or maintenance of any services or expenses incurred
under this Agreement that Mentmore in its business judgment no longer
considers appropriate or useful to the long term benefit of the
Companies; and
5) an appropriate allocation for all costs incurred to acquire
or place in service and to thereafter utilize and maintain capital
assets (hereinafter, "Common Fixed Assets") that Mentmore uses in
connection with the performance of its responsibilities and the
rendering of the services required hereunder which capital assets are
used for the common benefit of the Companies as well as other companies
or entities which are also managed by Mentmore (individually an
"Affiliated Corporation" and, collectively, the "Affiliated
Companies").
B. Examples of Common Fixed Assets contemplated by subparagraph (e)
above would include, but not be limited to, the purchase, use and maintenance of
a corporate airplane, corporate apartment(s) or corporate automobiles. The costs
and expenses for Common Fixed Assets would be allocated among the Affiliated
Companies, as follows:
1) The cost to acquire or place in service a particular Common
Fixed Asset, together with the cost of all leasehold or other
improvements thereto, would be allocated among and paid by each of the
Affiliated Companies, including the Companies, based upon a fraction,
the numerator of which is the five-year moving average of revenues for
each Affiliated Corporation and the denominator is the aggregate of the
five-year moving averages of revenues for all of the Affiliated
Companies.
2) In general, Common Fixed Asset related costs which are
associated with clearly identifiable usage by a particular Affiliated
Corporation would be billed to that Affiliated Corporation at a
pre-determined fixed rate. The fixed rate would be based upon
incremental out-of-pocket costs. The remaining costs for Common Fixed
Assets (which arise both out of use that is common (or
indistinguishable as to a particular Affiliated Corporation) as well as
insufficient use to fully absorb all Common Fixed Asset costs) would be
allocated among all
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Affiliated Companies based upon the formula described in subparagraph
(1) above.
4. TERM AND TERMINATION.
A. The term of this Agreement (the "Term") shall commence as of the
Effective Date hereof and shall continue for an initial term expiring on
December 31, 2007, which Term shall be automatically extended for an additional
year as of December 31st of each year, commencing December 31, 1997, unless
either party shall have previously notified the other in writing, on or before
September 30th of any applicable year, that the Term of this Agreement shall not
be further extended, it being the intent of the parties that this Agreement
shall have a rolling "evergreen" term of ten (10) years. To illustrate, if
neither party has notified the other in writing before September 30, 1998 that
the Term of this Agreement shall not be further extended, as of such date the
Term of this Agreement shall continue until December 31, 2008. As used herein,
"term of this Agreement" shall include all extensions. Upon the expiration of
the final Term of this Agreement, all amounts owed or due and owing to Mentmore
shall be paid in full by the Companies.
B. Notwithstanding the terms of Section 4.A. above, Mentmore may
terminate this Agreement upon ninety (90) days' prior written notice to the
Companies.
C. Notwithstanding the terms of Section 4.A. above, the Companies may
terminate this Agreement "for cause" upon the occurrence of: (I) the commission
of a felony, embezzlement, or any act of material dishonesty by any individual
providing services to the Companies hereunder on behalf of Mentmore which causes
material harm to the Companies, or (ii) a material failure of Mentmore to
provide the services contemplated hereunder and the failure of Mentmore to cure
the same within ninety (90) days following the date of receipt of written notice
thereof setting forth in detail the nature of such failure.
D. In the event of the termination of this Agreement by the Companies
"for cause," Mentmore shall receive payment in full of all amounts due and
payable hereunder through the effective date of such termination and during the
period of any judicial appeal of such termination, and in no event shall the
effective date of termination be earlier than the date of expiration of the
ninety (90) day cure period specified in Section 4.C. above. In the event of any
termination of this Agreement, amounts payable pursuant to Article 2 above shall
be prorated based upon the ratio of the number of days during the fiscal year
during which Mentmore shall be deemed hereunder to have provided such services
to two hundred fifty (250). All such amounts shall be paid by the Companies to
Mentmore in cash or its equivalent within a reasonable period of time, not to
exceed thirty (30) days, following such termination.
E. In the event of the termination of this Agreement, Mentmore will
cooperate and assist the Companies in order to effectuate a smooth and orderly
transition.
5. INDEPENDENT CONTRACTOR; INDEMNIFICATION.
A. Mentmore shall provide management advisory services to the Companies
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hereunder only in the capacity as an independent contractor. Mentmore shall have
sole responsibility for the payment of all income, social security, employment
and related taxes with respect to amounts payable to Mentmore hereunder, and for
the provision of all welfare, pension and other employee benefits to the
employees of Mentmore.
B. With regard to the services to be provided and performed by Mentmore
pursuant to this Agreement, neither Mentmore nor its shareholders, directors,
officers, employees, agents or representatives shall be liable to the Companies
or any of its subsidiaries for any acts or omissions of Mentmore in the
provision or performance of such services, other than acts or omissions
resulting from the fraud, bad faith or gross negligence of Mentmore, its
shareholders, directors, officers, employees, agents or representatives. The
Companies shall hold harmless, defend and indemnify Mentmore, its shareholders,
directors, officers, employees, agents, representatives, successors and assigns
(the "Indemnified Parties") from and against any and all liabilities, costs,
damages, expenses and attorneys' fees resulting from or attributable to any and
all acts and omissions of the Indemnified Parties in providing or performing the
services required under this Agreement, other than acts or omissions resulting
from fraud, bad faith or gross negligence by any of the Indemnified Parties. To
the extent that any such liabilities, costs, damages, expenses and attorneys'
fees are compensated for by insurance purchased or arranged for by the
Companies, neither Mentmore nor any of the other Indemnified Parties shall be
required to reimburse the Companies on account thereof.
6. GENERAL PROVISIONS.
A. The construction and interpretation of this Agreement shall at all
times and in all respects be governed by the laws of the State of New York
without regard to its rules of conflicts of laws. The parties hereby consent to
the jurisdiction of the State of New York courts over disputes involving this
Agreement.
B. All notices, requests, demands and other communications to be given
by the parties hereunder shall be in writing and shall be sent: (I) by United
States registered or certified mail, return receipt requested, postage prepaid,
(ii) by a recognized overnight commercial courier service, (iii) transmitted by
fax (confirmed by telephone), or (iv) delivered in person with a receipt
requested therefor to the following addresses or such other addresses of which
the other party hereto shall have been given notice pursuant to this Section
6.B.:
(1) If to the Companies:
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President
Stellex Industries, Inc.
▇▇▇▇▇▇▇ Research Park
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
with a copy to:
President
Stellex Aerospace
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(2) If to Mentmore:
President
Mentmore Holdings
Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All notices, requests, demands and other communications to be given by the
parties hereunder shall be effective (a) upon receipt or refusal if delivered
personally or by facsimile; (b) one (1) business day after depositing with such
an overnight courier service or (c) two (2) business days after deposit in the
mails, if mailed.
C. This Agreement shall be binding upon, and shall inure to the benefit
of, the Companies and Mentmore and their respective successors. Neither Mentmore
nor the Companies shall assign this Agreement or any rights, duties or
obligations hereunder.
D. This Agreement contains the entire agreement and understandings by
and between the Companies and Mentmore with respect to the provision of
management advisory, consulting and other services, and no representations,
promises, agreements or understandings, written or oral, not contained herein
shall be of any force and effect. No change, modification or waiver of the
effect of (or of any breach or failure of) any term, condition or provision
hereof shall be valid or binding unless the same is in writing and signed by the
party against whom such change, modification or waiver is sought to be enforced;
moreover, no valid waiver of the effect of (or of any breach or failure of) any
term, condition or provision of this Agreement at any time shall be deemed to be
a waiver of the effect of (or of any breach or failure of) any other term,
condition or provision of this Agreement at such time or will be deemed a valid
waiver of such term, condition or provision at any other time. No failure to
exercise, and no delay in exercising, any right or power hereunder shall operate
as a waiver thereof.
E. Headings of the Articles of this Agreement are for the convenience
of the parties only, and shall be given no substantive or interpretive effect
whatsoever.
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F. This Agreement may be executed in one (1) or more counterparts, all
of which together shall constitute one and the same instrument.
G. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision hereof, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement effective for all purposes and in all respects as of the day and year
first above written.
STELLEX INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: President
TSMD ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: President
STELLEX MICROWAVE SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Treasurer
KII HOLDING CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Assistant Treasurer
KII ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Assistant Treasurer
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STELLEX AEROSPACE
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Assistant Treasurer
PARAGON PRECISION PRODUCTS
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Assistant Treasurer
▇▇▇▇▇ MACHINING INTERNATIONAL
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Assistant Treasurer
SCANNING ELECTRON ANALYSIS
LABORATORIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Assistant Treasurer
GENERAL INSPECTION LABORATORIES,
INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Assistant Treasurer
MENTMORE HOLDINGS CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: President
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