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EXHIBIT 10.16
FINANCIAL ADVISORY AGREEMENT
This Agreement is made effective as of the 1st day of
February, 1997 by and between R.K. GRACE & COMPANY, Douglas Centre, Suite 150,
2600 Douglas Road, Coral Gables, Florida 33134 (the "R.K. Grace"), JOHN D.
KAWESKE, having an address at the same office, and OFFICE CENTRE CORPORATION
("OCC" or the "Company"), with its principal place of business in care of The
King Group located at 38 East 32nd Street, New York, New York 10016.
R E C I T A L S
WHEREAS, R.K. Grace represents to the Company that it has
broad experience in providing technical and economic advice concerning business
development; rendering advice to the Company to achieve the Company's goals
through various business combinations including, but not limited to, capital
formation, mergers/ acquisitions, joint ventures, licensing, and corporate
partnerships;
WHEREAS, the Company desires to obtain such services from R.K.
Grace and the Company agrees to provide compensation for such services to R.K.
Grace pursuant to the terms contained herein below; and
WHEREAS, this agreement will replace all existing agreements
whether oral or written relating to the subject matter covered hereby between
R.K. Grace and/or John D. Kaweske, on the one hand, and UDI Corp., UDI II Corp.
and/or the Company on the other hand.
NOW THEREFORE, the parties do hereinafter agree as follows:
1. DUTIES OF R.K. GRACE. The Company hereby retains R.K. Grace
to perform those duties delineated below and R.K. Grace agrees to perform the
following activities on behalf of the Company:
(a) Suggest revisions to and make recommendations to the
Company's business plan;
(b) Participate in the Company's Acquisition Program, the
mission of which is to secure appropriate acquisitions by aiding in the
following activities: (i) locate, (ii) negotiate terms; (iii) complete letter of
intent; (iv) perform due diligence; (v) complete definitive agreement; (vi)
develop
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transition plan; and (vii) assist in closing.
These specific objectives may be altered, modified or revised
based on the Company's needs or new developments and as may be directed by the
Company.
2. COMPENSATION OF R.K. GRACE.
(a) In consideration of the services to be provided by R.K.
Grace herein, the Company will compensate and pay R.K. Grace on a monthly basis
at the rate of Five Thousand Dollars ($5,000) per month, plus expenses during
the term of this Agreement. The Company shall pay R.K. Grace the monthly fee of
$5,000 on the first day of each calendar month commencing February 1, 1997. If
John D. Kaweske receives any director's fee from the Company during any month,
the fees otherwise payable on the first day of the following month shall be
reduced by the amount of such director's fee, and John D. Kaweske shall waive
any director's fee otherwise owing to him during the last month of the term of
this Agreement.
(b) In addition, R.K. Grace shall receive and the Company
shall pay a fee ("M&A Fee") based upon the following terms:
(i) Upon the closing of an Initial Public Offering
("IPO") of the Company's stock during the term of this Agreement (subject to
Section 4), the M&A Fee shall be due and payable at the closing of the IPO as
follows:
A. R.K. Grace shall receive the sum of
$587,500 in the form of cash plus $1,175,000 in the form of the Company's
unregistered shares of stock calculated at a price per share which is the IPO
price of the stock.
B. (This subparagraph intentionally left
blank).
(ii) Upon the closing of a merger transaction during
the term of this Agreement (subject to Section 4) in which the Company is merged
into another entity prior to the occurrence of an IPO, then instead of the fee
described in (b)(i) above, the M&A Fee shall be due and payable at the closing
of the merger transaction as follows:
A. In the event the surviving entity is a
privately held entity or a natural person, R.K. Grace shall receive an M&A Fee
in the amount of $1,400,000 payable in the form of cash and due immediately upon
the closing of the merger
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transaction; or
B. In the event the surviving entity is a
publicly held company with registered, freely tradeable shares of stock, R.K.
Grace shall receive an M&A Fee in the form of cash in the amount of $500,000,
plus $500,000 in the form of the surviving company's registered shares of stock
with no restrictions calculated at a price per share which is 50% of the value
of the surviving company's stock on the date of closing the merger transaction.
However, at the Company's sole option, the Company may elect to pay R.K. Grace
the M&A Fee due under this subparagraph (B) in the form of cash in the amount of
$1,400,000.
(iii) If none of the transactions described in Section
2(b)(i)(A) or 2(b)(ii) above occur prior to the normal expiration of the term of
this Agreement and except as otherwise provided in this Agreement, the M&A Fee
shall be the lesser of $1,400,000 or an amount equal to 2% of the value of all
Acquisition Transactions finally closed during the term of the Agreement;
provided however, in any event R.K. Grace shall receive an M&A Fee equal to a
minimum of (i) $250,000 if one Acquisition Transaction (other than an
acquisition involving UDI Corp. or UDI II Corp.) is finally closed during the
term of this Agreement or, in the alternative, (ii) $500,000 if two or more
Acquisition Transactions (other than an acquisition involving UDI Corp. or UDI
II Corp.) are finally closed during the term of this Agreement. The value of
such Acquisition Transactions shall be equal to the purchase price of all such
Acquisition Transactions paid by the Company in whatever form the purchase price
is payable including cash, debt assumed, notes, stock, or property, and all
deferred payments. In the event any portion of the purchase price of any such
Acquisition Transaction is paid or is payable in property of a kind other than
cash, assumed debt, notes, stock or deferred payments, the parties shall
negotiate in good faith to determine the M&A Fee payable to R.K. Grace with
respect to such other property, with the valuation to be determined based on the
valuation that the parties to the Acquisition Transaction in question ascribed
to such property in reaching their agreement effecting such Acquisition
Transaction. In the event the parties cannot reach an agreement as a result of
such good faith negotiations, the issue of the M&A Fee payable with respect to
such other property shall be submitted to arbitration under paragraph 7 of this
Agreement. For purposes of this Agreement, an Acquisition Transaction shall be a
transaction in which the Company purchases the assets or the stock of another
person or entity. However, the Company's acquisition of UDI Corp. and UDI II
Corp. shall not be included within the definition of Acquisition Transactions
for purposes of this Agreement, and therefore no fee shall be paid for such
acquisitions. In addition, any compensation paid to the
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principals of the acquisition targets for services actually to be performed by
those principals shall not be included in such calculation of the M&A Fee. The
M&A Fee payable under this Section 2(b)(iii) shall be due and payable within
thirty days following December 31, 1998.
(c) If an event described in Sections 2(b)(i) or 2(b)(ii)
occurs during the term of this Agreement, and the combined product and service
sales volumes of completed Acquisition Transactions (excluding UDI Corp. and UDI
II Corp.) made prior to the occurrence of any event described in Sections
2(b)(i) or 2(b)(ii) and during the term of this Agreement exceed $150 million in
gross annual revenues, R.K. Grace shall receive an additional fee equal to 1% of
the value of all Acquisition Transactions finally closed during the term of this
Agreement which resulted in such product and service sales exceeding the $150
million threshold. The value of such Acquisition Transactions shall be
calculated in the same manner described in subparagraph 2(b)(iii) above, and the
determination whether gross annual revenues in fact exceeds $150 million shall
be based on, for each Acquisition Transaction, the most recent 12-month figures
set forth in the audited financial statements used at the closing of such
Acquisition Transaction. If a target in an Acquisition Transaction (the
"Target") has such product and service sales volumes in an amount which, when
added together with all such product and service sales volumes of targets in
previously consummated Acquisition Transactions (excluding UDI Corp. and UDI II
Corp.), exceed $150 million, the additional 1% fee with respect to the Target
shall be equal to the product of (a) 1% of the value of the Acquisition
Transaction involving the Target multiplied by (b) a fraction, the numerator of
which equals the difference between (x) the combined product and service sales
volumes of completed Acquisition Transactions at that date (including the
Target) and (y) $ 150 million, and the denominator of which is such product and
service sales volumes of the Target. All fees and compensation due R.K. Grace
under Paragraph 2(c) of this Agreement shall be due and payable within 15 days
after the earlier of (a) the date on which the IPO closes, (b) the date on which
the transaction described in paragraph 2(b)(ii)(A) closes, or (c) the date on
which the transaction described in paragraph 2(b)(ii)(B) closes.
(d) In the event of a disagreement related to any of the M&A
Fees payable under this Agreement, Company and R.K. Grace agree to be guided by
GAAP (Generally Accepted Accounting Principles) with such dispute to be
submitted to arbitration pursuant to Section 7 hereto.
(e) The M&A Fees described in Sections 2(b)(i)(A), 2(b)(ii)
and 2(c) shall be in addition to and exclusive of the
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monthly fees payable by the Company to R.K. Grace described in subparagraph 2(a)
of this Agreement.
(f) The Company shall reimburse R.K. Grace's reasonable and
customary business expenses incurred by R.K. Grace in connection with its
performance of the services described in this Agreement. The Company shall
deliver the actual reimbursement funds to R.K. Grace within 10 days following
R.K. Grace's delivery to Company of a written expense report containing
reasonable detail of the expenses for which R.K. Grace seeks reimbursement
together with receipts evidencing such expenses.
(g) The Company shall issue 164,229 shares of its common stock
to John D. Kaweske individually; provided that if, by August 8, 1998, there has
been no IPO, and the Company has not consummated any Acquisition Transactions,
the Company shall have the right (the "Right") to purchase, and John D. Kaweske
shall sell and agrees to cause his affiliates and assignees to sell, to OCC any
shares of capital stock of OCC that have been issued to John D. Kaweske or his
affiliates on or before the exercise date of the Right, at par value. In
addition, upon exercise of the Right, for no additional consideration, John D.
Kaweske shall cancel, and shall cause his affiliates and assignees to cancel,
any options, warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character relating to the capital stock of
OCC or obligating OCC to issue or sell any shares of capital stock of, or any
other interest in, OCC, to John D. Kaweske or any of his affiliates or
assignees.
(h) If R.K. Grace is involved in negotiating a line of credit
for the Company, and such line of credit is entered into by the Company during
the term of this Agreement with an amount equal to at least $10,000,000, OCC
shall pay to R.K. Grace $25,000 (the "Credit Payment") at the time such line of
credit is entered if such line of credit is entered into prior to any payments
being made to R.K. Grace pursuant to Section 2(b). If the Credit Payment is
made, any payment made to R.K. Grace under Section 2(b) shall be reduced by the
amount of the Credit Payment.
3. INTENTIONALLY DELETED.
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4. PAYMENT OF CONSIDERATION AFTER TERMINATION.
(a) If this Agreement is terminated pursuant to Section 8 for
any reason other than by the Company for just cause as described in Paragraph
8(b) and if any relevant IPO or merger transaction as described in Sections
2(b)(i)(A) and 2(b)(ii) closes by December 31, 1998, R.K. Grace shall be
entitled to receive the full M&A Fee described in said Sections 2(b)(i)(A) and
2(b)(ii) less the amounts, if any, actually received by R.K. Grace pursuant to
Section 2(b)(iii). If, after the early termination of this Agreement, any of the
Acquisition Transactions are consummated prior to December 31, 1998, R.K. Grace
shall be entitled to receive the M&A Fee (if applicable) described in Section
2(b)(iii) with respect to such Acquisition Transaction.
(b) In the event the Company terminates this Agreement for
just cause as described in Section 8(b) of this Agreement, and except as
otherwise provided in this Section 4(b), R.K. Grace only shall be entitled to
receive an M&A Fee if the Company closes an IPO or merger transaction as
described in Sections 2(b)(i)(A) and 2(b)(ii) by December 31, 1998. The M&A Fee
payable in that event shall be equal to the M&A Fee described in either Section
2(b)(i)(A) or Section 2(b)(ii), as appropriate, times a fraction the denominator
of which shall be the total combined product and service sales volume of
completed Acquisition Transactions at the time of the closing of the IPO or
merger transaction and the numerator of which shall be the total combined
product and service sales volume of Acquisition Transactions under either
contract or letter of intent (but not yet closed) which actually close prior to
or at the closing of the IPO or merger transaction. In the event the Company
terminates this Agreement for just cause as described in Section 8(b) of this
Agreement and the Company does not close an IPO or merger transaction as
described in Sections 2(b)(i)(A) and 2(b)(ii) by December 31, 1998, R.K. Grace
shall be entitled only to receipt of an M&A Fee in an amount described in
Section 2(b)(iii) for all Acquisition Transactions closed prior to December 31,
1998.
5. OBLIGATIONS OF COMPANY. The Company will make available to
R.K. Grace copies of all correspondence exchanged between Company, and any
Target as well as any entity described in Paragraph 2(b) and Company will, in
general, keep R.K. Grace apprised in a timely fashion of the nature of any such
proposed transactions.
6. RESTRICTIVE COVENANTS. The following restrictive covenants
shall be in full force and effect during the term of
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this Agreement and for a period of one (1) year after this Agreement has been
terminated:
(a) R.K. Grace and John D. Kaweske will take all action
necessary to insure that all information provided by the Company to R.K. Grace
and John D. Kaweske shall be kept in strictest confidence by R.K. Grace and John
D. Kaweske; and
(b) During the term of this restrictive covenant, R.K. Grace
and John D. Kaweske agree not to, directly or indirectly, solicit any of the
parties whose names have been identified by the Acquisition Team as potential
Targets for any other entity other than on behalf of the Company.
7. MANDATORY ARBITRATION. Any controversy or claim arising out
of or relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by arbitrator(s)
may be entered in any court having jurisdiction thereof. In the event either
party utilizes an attorney in order to enforce the terms of this Agreement and
such party prevails, then the losing party shall reimburse the prevailing party
for the costs of said action including, but not limited to, reasonable attorneys
fees.
8. TERM. (a) Unless otherwise terminated in accordance with
the provisions contained in subparagraphs (b) or (c) of this Paragraph 8, the
term of this Agreement shall be from February 1, 1997 through December 31, 1998.
(b) The Company may terminate this Agreement for just cause
which shall include the following:
(i) Repeated failure by R.K. Grace, following not
less than 30 days' prior written warning, to perform duties and obligations
pursuant to this Agreement in a correct, timely and expeditious manner;
(ii) Conviction or please of guilty or nolo contendre
to any crime which constitutes a felony under the laws of any state or the laws
of the United Stated by any of R.K. Grace's principals;
(iii) Engaging in activities by R.K. Grace which
constitutes a material breach of the provisions contained in Paragraph 6 of this
Agreement.
In the event the Company elects to terminate this Agreement
for just cause pursuant to this subparagraph 8(b), R.K.
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Grace shall not be entitled to any of the monthly fees described in Paragraph
2(a) accruing after the effective date of termination nor any of the M&A Fees
which otherwise would be due and owing for the consummation of Acquisition
Transactions following the effective date of the termination of this Agreement
except as provided in Section 4(b).
In the event the Company terminates this Agreement for any
reason other than for just cause, Company shall remain obligated to pay and
shall pay R.K. Grace an amount equal to 50% of the monthly fee described in
paragraph 2(a) of this Agreement for the remaining term of this Agreement as
well as M&A Fees and the additional fees described in Section 4(a) of this
Agreement.
(c) R.K. Grace may terminate this Agreement for just cause
which shall include the following:
(i) The Company fails to pay any of the fees due and
payable to R.K. Grace under this Agreement and such failure continues for a
period of thirty days following R.K. Grace's delivery of written notice of such
failure to Company;
(ii) The Company breaches any other provision of this
Agreement and fails to cure such breach within thirty days following R.K.
Grace's delivery of written notice of such breach to Company;
(iii) The Company fails to pursue with reasonable
diligence any of the prospective Acquisition Transactions with the Targets and
Company continues its failure to do so during the thirty days following R.K.
Grace's delivery of written notice thereof to Company;
(iv) The Company becomes insolvent during the term of
this Agreement.
In the event R.K. Grace elects to terminate this Agreement for proven, just
cause pursuant to this subparagraph 8(c), R.K. Grace shall be entitled to
receive and the Company shall remain obligated to pay and shall pay R.K. Grace
the amounts to which R.K. Grace otherwise would be entitled to received under
subparagraphs 2(a), 2(b), 2(c) and 4(a) of this Agreement.
9. AUTHORITY TO ACT. each party hereby represents and warrants
that the individual who executes this Agreement on behalf of such party has been
granted the requisite authority to do so by such party.
10. INDEMNIFICATION. Each party will indemnify and hold the
other party and its agents, officers, directors and
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employees harmless from any and all claims arising from its activities under
this Agreement except in the event that actions or inactions of such party are
deemed to involve negligence or willful misconduct. Such indemnification shall
include, but not limited to, the non-breaching party's attorneys fees.
11. NOTICE. Any notice required hereunder shall be complete
upon certified mailing of the notice to the party at the address appearing
herein, or at the address which shall from time to time be provided to the other
party. The parties shall notify the other of any alteration or change in address
hereinafter occurring.
12. COUNTERPARTS. This Agreement may be executed in multiple
counterparts. Each executed counterpart shall be considered an original, and
taken together, shall constitute one and the same document. Any signature,
notice of other communication with respect to the subject matter hereof may be
given by telex, telecopy or other facsimile transmission and relied upon to the
same extent as if it were an original.
13. SEVERABILITY. If any provision, paragraph or subparagraph
of this Agreement is adjudged by any court to be void or unenforceable in whole
or in part, this adjudication shall not affect the validity of the remainder of
the Agreement, including any other provision, paragraph or subparagraph. Each
provision, paragraph or subparagraph of this Agreement is separable from every
other provision, paragraph and subparagraph and constitutes a separate and
distinct covenant.
14. GOVERNING LAW. This Agreement shall be subject to and
governed by the laws of the State of New York.
15. AMENDMENT. This Agreement may only be amended in writing,
duly endorsed by the parties hereto.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
understandings, whether oral or written, between R.K. Grace and/or John D.
Kaweske, on the one hand, and UDI Corp., UDI II Corp. and/or the Company on the
other hand.
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IN WITNESS WHEREOF, the parties have executed this Agreement,
effective the date first written above.
R.K. GRACE & COMPANY
By: /s/John D. Kaweske
Name: John D. Kaweske
Title: CEO
/s/John D. Kaweske
John D. Kaweske, individually
OFFICE CENTRE CORPORATION
By: /s/R.J. Gillon, Jr.
Name: Robert J. Gillon, Jr.
Title: CEO
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For value received, the sufficiency of which hereby is
acknowledged by UDI Corp. and by UDI II Corp., UDI Corp. and UDI II Corp. join
this Agreement solely for the purpose of guaranteeing Office Centre
Corporation's performance of its obligations under this Agreement. The guarantee
of UDI Corp. and Of UDI II Corp. is one of performance and not merely of
collection.
UDI CORP. UDI II. CORP.
By: By:
Name: Name:
Title: Title:
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