Exhibit 10.7
FORM OF FINANCIAL ADVISORY SERVICES AGREEMENT
This financial advisory services agreement, dated as of
January 23, 1998, (the "Agreement"), is made and entered into between Windward
Capital Partners, L.P., a Delaware limited partnership (the "Advisor"), and
Financial Pacific Company, a Washington corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company entered into a Recapitalization Agreement
and Plan of Merger (the "Recapitalization Agreement"), dated as of January 23,
1998, among Windward Capital Associates, L.P. ("Windward"), Windward/Badger FPC,
L.L.C. ("Windward/ Badger"), Windward/Merban L.P. ("Windward/Merban") and
Windward/Merchant, L.P. ("Windward/Merchant"), (collectively the "Windward
Entities"), Windward/FPC Merger, L.P. ("Merger Sub"), the Company and the
Majority Shareholders (as listed in the signature pages thereto);
WHEREAS, the Company has entered into a Shareholders
Agreement, dated as of the date hereof, among Windward, Windward/Badger,
Windward/Merban, Windward/Merchant, the Company and the other shareholders of
the Company listed therein (the "Shareholders Agreement");
WHEREAS, the Company has requested that the Advisor make
available to the Company certain management and financial advisory services
commencing on the date hereof; and
WHEREAS, the Advisor desires to provide such management and
financial advisory services to the Company commencing on the date hereof;
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, it is agreed as follows:
1. Engagement and Duties
(a) The Company hereby retains the Advisor as an
advisor to the Company, whereby the Advisor shall, from time to time, to the
extent reasonably requested by the Company, provide those management and
financial advisory services to the Company which are set forth in Section l(b)
hereof The Advisor hereby accepts such appointment and agrees to provide each of
the services required to be provided by it under this Agreement and to make
itself available from time-to-time, on a part-time basis, to consult with the
management and Board of Directors of the Company in connection with such
services. In addition to the services of its own personnel, the Advisor shall be
permitted, to the extent that it
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Page 2
determines in its sole discretion that it would be advisable or appropriate in
order to perform its services hereunder, to arrange for and coordinate the
services of other professionals, experts and consultants:
(b) Upon the reasonable request of the Board of
Directors of the Company, the Advisor hereby agrees to provide the following
services to the Company and its subsidiaries:
(i) review periodically the business,
operations, financial condition and prospects of the Company and its
subsidiaries, including, without limitation: (A) reviewing the
strategic direction and plans of the Company and its subsidiaries; (B)
reviewing and evaluating the annual business plan and budget of the
Company and its subsidiaries; (C) reviewing and evaluating the sales,
profitability and working capital and other financing requirements of
the Company and its subsidiaries; and (D) reviewing the salary and
benefit levels of the senior management of the Company and its
subsidiaries and reviewing and evaluating the performance of the senior
management of the Company and its subsidiaries;
(ii) assist the Company in the
identification, planning, structuring and negotiation of each potential
acquisition by the Company,
(iii) assist the Company in seeking out
and negotiating with potential financing sources in connection with the
financing of any transaction referred to in clause (ii) above;
(iv) provide to the Company such other
management and financial advisory services as may be reasonably
requested by the Board of Directors of the Company; and
(v) advise the Company and its
subsidiaries regarding any claims for indemnification on behalf of the
Company or its subsidiaries pursuant to the Recapitalization Agreement.
(c) In the event the transactions contemplated
by the Recapitalization Agreement are not consummated, the parties to this
Agreement acknowledge that they shall not be obligated to perform any of their
respective obligations hereunder.
2. Nature of Relationship. Notwithstanding the services provided by the
Advisor, the Advisor shall be deemed to be an independent contractor and, unless
otherwise expressly authorized by the Company's Board of Directors, shall not be
authorized to manage the affairs of, act in the name of or bind the Company. The
Company shad not be obligated to follow or accept any advice or
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Page 3
recommendation made by the Advisor, and the management, policies and operations
of the Company shall be the sole responsibility of the Board of Directors and
the management of the Company. The obligations of the Advisor to the Company are
not exclusive, and the Advisor may, in its sole discretion, render the same or
similar services to any other person or entity. Nothing set forth in this
Agreement shall be deemed to prohibit the Advisor from serving any other person
or entity in any capacity the Advisor may deem appropriate or from conducting
its business and affairs in any manner it may elect, whether or not such
activities might Involve an actual or potential conflict of interest with
respect to the Company or any of its subsidiaries.
3. Term. Subject to the termination provisions of
Section 6 hereof, the initial term of this Agreement shall commence on the date
hereof and continue for a period of three (3) years following the date hereof;
thereafter, the term of this Agreement shall be extended automatically for
successive one-year periods unless the Board of Directors of the Company or the
Advisor shall give written notice to the other party at least six (6) months
prior to the end of (i) the initial three-year term, or (ii) any one-year
extended period then in elect (as the case may be).
4. Compensation and Expenses.
(a) In consideration of the services to be
provided by the Advisor to the Company, the Company shall pay the Advisor an
annual management fee of $150,000 (the "Management Fee"), payable in semi-annual
installments of $75,000 each on January 2 and July 1 of each year. The initial
payment of $75,000 shall occur promptly following the closing of transactions
contemplated by the Recapitalization Agreement should the closing occur after
January 2, 1998. Such semi-annual installments shall be paid at the beginning of
each such semi-annual period with the first such semi-annual installment paid on
the date hereof. The Company shall also pay or reimburse the Advisor for all
Expenses (as defined below) in accordance with Section 4(b) below. Upon any
termination of this Agreement, the Management Fee payable with respect to the
then-current semi-annual period shall be prorated to reflect the actual number
of days during which this Agreement was in effect; provided that no proration
shall be made by the Company if the Company elects to terminate this Agreement
as provided under Section 6(a) or if this Agreement is terminated as the result
of the operation of Section 6(b) and the Advisor shall be entitled to the full
Management Fee for such semi-annual period.
(b) The term "Expenses" shall mean all fees,
costs and expenses reasonably incurred by the Advisor in connection with its
provision of services hereunder, including, without limitation: (i) all fees and
expenses of legal counsel, accountants and other consultants and experts
retained by the Advisor in connection with its provision of services hereunder,
(ii) all travel and other out-of-
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pocket costs and expenses incurred by the Advisor in connection and (iii) all
Losses (as defined below) that are the subject of indemnification pursuant to
this Agreement. The Company shall reimburse the Advisor promptly for all
Expenses upon the Advisor's presentation of invoices or other documents
reasonably evidencing such Expenses.
5. Indemnification, Etc.
(a) The Company shall, to the fullest extent
permitted by law, indemnify the Advisor and each officer, director, partner,
employee, Affiliate (as defined in the Recapitalization Agreement), agent and
representative of the Advisor (collectively, the "Indemnitees") against, and the
Company will hold harmless and will release each Indemnitee from, any and all
Losses (as defined below), including any incurred in connection with any action,
claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or commission, whether pending or threatened, whether or
not any Indemnitee is or may be a party thereto, which arise out of, relate to
or are in connection with the provision of any services hereunder or otherwise
relate to this Agreement or the management or conduct of the business or affairs
of the Company or any of its subsidiaries, except for any Losses that are found
by a court of competent jurisdiction to have resulted primarily from the gross
negligence or willful misconduct of the Indemnitee seeking indemnification. The
term "Losses" shall mean all losses, claims, damages or liabilities of each
Indemnitee, joint or several, and all judgments, fines, penalties, interest and
charges, and all costs and expenses incurred in connection with the
investigation, defense or settlement of any pending or threatened claims
(including, without limitation, attorneys, fees and expenses related thereto).
(b) The termination of any proceeding by
settlement shall not, of itself, create a presumption that the Indemnitee acted
in a manner which constituted gross negligence, willful misconduct or a knowing
violation of law. The right of any Indemnitee to the indemnification provided
herein shall be cumulative of, and in addition to, any and all rights to which
such Indemnitee may otherwise be entitled by contract or as a matter of law or
equity and shall extend to his heirs, successors, assigns and legal
representatives.
(c) Promptly after receipt by an Indemnitee
hereunder of written notice of the commencement of any action or proceeding with
respect to which a claim for indemnification may be made pursuant to this
Section 5, such Indemnitee will, if a claim in respect thereof is to be made
against the Company, promptly give written notice to the Company of the
commencement of such action; provided that the failure of any Indemnitee to give
notice as provided herein shall not relieve the Company of its obligations under
this Section 5, except to the extent that the Company is actually and materially
prejudiced by such failure to give notice. In
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case any such action is brought against an Indemnitee, unless in such
Indemnitee's reasonable judgment a conflict of interest between such Indemnitee
and the Company may exist in respect of such claim, the Company will be entitled
to participate in and to assume the defense thereof, to the extent that it may
wish, with counsel reasonably satisfactory to such Indemnitee, and after notice
from the Company of its Section to assume the defense thereof, the Company will
not be liable to such Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with the defense thereof, unless in
such Indemnitee's reasonable judgment a conflict of interest between the
Indemnitee and the Company arises in respect of such claim after the assumption
of the defense thereof(in which case, the Company shall not assume the defense
thereof, but shall be responsible for the fees and expenses of one counsel in
each jurisdiction for all parties indemnified by the Company, subject to the
same exception as is set forth in the last sentence of this subsection (c)), and
the Company will not be subject to any liability for any settlement made without
its consent (which consent shall not be unreasonably withheld). The Company will
not consent to entry of any judgment or enter into any settlement (i) which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnitee of a release from, all liability in respect to such
claim or litigation, and (ii) that imposes any obligation on an Indemnitee
(except any obligation to make payments which the Company shall, and promptly
does, pay). If the Company elects not to assume the defense of a claim, it will
not be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by the Company with respect to such claim, unless in the
reasonable judgment of any Indemnitee a conflict of interest may exist between
such Indemnitee and any other of such Indemnitees with respect to such claim, in
which event the Company shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
(d) Notwithstanding any termination of this
Agreement pursuant to Section 6, the expiration of the term hereof pursuant to
Section 3 or otherwise, the indemnification provided under this Agreement shall
remain in full force and effect thereafter.
(e) No Indemnitee shall be liable to the Company
or its subsidiaries for any error of judgment or mistake of law or for any loss
incurred by the Company or its subsidiaries or any of their respective
Affiliates in connection with the matters to which this Agreement relates,
except for any damages that are found by a court of competent jurisdiction to
have resulted primarily from the gross negligence or willful misconduct of the
Indemnitee seeking indemnification. In no event shall the Advisor or any
Indemnitee be liable for any indirect, special or consequential damages arising
out of or in connection with this Agreement. The Advisor and the Indemnitees may
consult with legal counsel, accountants and other consultants and experts in
respect of the affairs of the Company and its subsidiaries and shall be fully
protected and justified in acting, or failing to act, in a manner consistent
with the advice or opinion of such legal counsel, accountants and other
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consultants and experts.
6. Termination. Notwithstanding anything to the contrary
contained in this Agreement, (a) this Agreement may be terminated by either the
Advisor or the Company upon at least six (6) months prior written notice to the
other party, and (b) this Agreement shall terminate automatically without any
action on the part of either party hereto upon (i) the consummation of a
Compelled Sale (as defined in the Shareholders Agreement), (ii) Windward
Entities no longer control at least 25% of the outstanding Common Stock (as
defined in the Recapitalization Agreement) calculated on a Fully Diluted Basis
(as defined in the Shareholders Agreement), or (iii) any termination of the
Shareholders Agreement in accordance with the terms thereof (other than a
termination that occurs as a result of an IPO Event, as defined therein).
7. Notices. Any notice, request, demand, waiver,
consent, approval or other communication which is required or permitted
hereunder shall be in writing and shall be deemed given only if delivered
personally to the address set forth below (to the attention of the person
identified below) or sent by telefax, telegram or by registered or certified
mail, postage prepaid, return receipt requested as follows:
If to the Company:
Financial Pacific Company
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Advisor:
Windward Capital Partners
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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8. Entire Agreement. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof It
supersedes any prior agreement or understanding among them, and it may not be
modified or amended in any manna other than by an instrument in writing signed
by both parties hereto, or their respective successors or assigns, or otherwise
as provided hereon.
9. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF.
10. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their legal
representatives, heirs, administrators, executors, successors and assigns.
Nothing in this Agreement, express or implied, is intended or shall be construed
to give any person other than the parties to this Agreement and their respective
successors or permitted assigns, any legal or equitable right, remedy or claim
under or in respect of any agreement or any provision contained harem.
11. Force Majeure. If the performance by the Advisor of
any of its services hereunder is prevented, restricted or interfered with in
whole or in part by reason of any event or cause whatsoever beyond the
reasonable control of the Advisor, then in any such event, the Advisor shall be
excused from such performance to the extent of such prevention, restriction or
interference, and the Management Fee payable hereunder shall be reduced
proportionately.
12. Headings. Captions contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provision hereof.
13. Severability. If any provision of this Agreement, or
the application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
14. Waivers. No provision of this Agreement shall be
deemed to have been waived unless such waiver is contained in a written notice
given to the party claiming such waiver, and no such waiver shall be deemed to
be a waiver of any other or further obligation or liability of the party or
parties in whose favor the waiver was given.
15. Counterparts. This Agreement may be executed in
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counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
WINDWARD CAPITAL PARTNERS, L.P.
By: Windward Management, Inc., its general
partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Authorized Signatory
FINANCIAL PACIFIC COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
