Exhibit 10.1
ADVISORY AGREEMENT
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AGREEMENT, dated as of the 8th day of July 2010, by and between XXXXXXX
TECHNOLOGY COMPANY, INC., a Delaware corporation with an office at 0 Xxxx Xxxxx
Xxxx, Xxxxx 000, Xxxxxxx, XX 00000 (the "Company" or "Xxxxxxx"), and OBX
PARTNERS, LLC, a Florida limited liability company with an office at 00000, Xxxx
Xxxxx Xxxx, Xxxxxx, Xxxxxxx 00000 ("OBX").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, OBX is engaged in the business of providing financial and
strategic advisory services to businesses; and
WHEREAS, the Company desires to engage OBX to provide such services to the
Ad Hoc Advisory Committee of the Board of Directors of Xxxxxxx (the
"Committee"), and OBX is willing to provide such services to the Committee,
subject to the terms of this Agreement;
NOW, THEREFORE, the parties do hereby agree as follows:
1. Services. The Company has requested that OBX act, and OBX has agreed
that OBX will act, as a financial advisor and strategic consultant to the
Committee, advising the Committee with regard to any transactions being
contemplated by the Company or any of its subsidiaries during the term of this
engagement, advising the Committee with respect to the Company's budget and
business plans and advising the Committee with respect to the Company's
financing needs and liquidity. Such advisory services to be rendered by OBX to
the Committee are outlined in the Proposal to the Committee dated June 8th, 2010
attached hereto as Exhibit A (the "Proposal").
2. Consideration. The Company hereby agrees that as consideration for
such services rendered to the Committee:
(a) the Company will pay OBX $200,000 in cash as follows:
(i) $130,000 upon the execution of this Agreement, and
(ii) $70,000 on or before August 1, 2010.
(b) the Company will grant to OBX upon the execution of this
Agreement an option (the "Option") to purchase three hundred thousand (300,000)
shares of the Company's Class A Common Stock (the "Shares"), at an exercise
price per share of $1.26 and, in conjunction therewith, the Company and OBX will
enter into the option agreement attached hereto as Exhibit B (the "Option
Agreement").
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3. Securities Law Matters. OBX acknowledges and agrees as follows:
(a) Neither the Option nor the Shares, (i) have been, or will be,
registered with the U.S. Securities and Exchange Commission (the "SEC") or the
securities commission of any state in reliance upon an exemption from
registration under the Securities Act of 1933, as amended (the "Securities Act")
or any state securities law and, accordingly, neither the Option nor the Shares
may be offered or sold by OBX except pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act, and in accordance with applicable state securities laws; and
(ii) the Option Agreement to be delivered by the Company to OBX shall contain
such representations, covenants and other terms as are customarily contained in
agreements entered into in transactions involving the issuance and sale of
unregistered securities.
(b) In the performance of services under this Agreement, OBX shall at
all times be and remain in compliance with all federal and state securities and
other applicable laws, rules and regulations. OBX acknowledges that it is aware,
and that it will so advise its representatives and affiliates who receive
Confidential Information (as defined in Section 6 below) pursuant to this
Agreement, that the U.S. securities laws prohibit any person who has received
from an issuer material, non-public information from purchasing or selling
securities of such issuer and from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such other
person is likely to purchase or sell any such securities.
4. Expenses. The Company shall reimburse OBX for all reasonable
out-of-pocket expenses in connection with this Agreement and the Proposal
incurred by OBX, including but not limited to, travel, long distance telephone
charges, photocopying, data services, courier and messenger expenses incurred in
connection with OBX's engagement under this Agreement, provided however that any
individual expense or related series of expenses greater than $2,000 shall have
received the approval of such person as the Committee shall have designated for
such purpose.
5. Engagement Term. The term of OBX's engagement by the Company under
this Agreement (the "Engagement Term") shall expire on September 30, 2010
subject to such termination and extension provisions as follow. The Engagement
Term may be terminated by either party, with a thirty (30) day advance notice to
the other party and the payment of any accrued fees and expenses. The Engagement
Term may be extended by the parties on a month-to-month basis on notice given
prior to the Expiration Date or any monthly extension (unless the other party
gives written notice of non renewal prior to the commencement of any monthly
term).
6. Confidentiality. OBX acknowledges that in connection with the
services rendered pursuant to this Agreement, OBX will have access to
Confidential Information which belongs to the Company and/or its subsidiaries.
"Confidential Information" for purposes of this Section 6 means all information
and documents, whether in written or oral form, which the Company furnishes or
otherwise discloses to you or any of your representatives, whether furnished or
otherwise disclosed before or after the date of this Agreement, together with
all analysis, compilations, studies or other documents, records or data prepared
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by OBX or any of its representatives which contain or otherwise reflect or are
generated from such information and documents. OBX agrees to treat all
Confidential Information as confidential and proprietary, and not disclosed to
any other person, or use or assist any other person in using, any Confidential
Information other than as required by this Agreement or as necessary for the
performance of services contemplated by this Agreement. Any permitted
disclosure which may be necessary in connection with the performance of services
pursuant to this Agreement shall be made only on a need-to-know basis to a
person who has agreed to be bound by the confidentiality provisions of this
Section 6. The obligations of confidentiality shall not apply to Confidential
Information which (a) is received by OBX from another party not under an
obligation of confidentiality, (b) becomes public knowledge in the industry
other than as a result of a violation of an obligation of confidentiality, or
(c) is required to be disclosed pursuant to law or legal process. This Section
6 shall not affect or limit any other remedies available to the Company or any
of its subsidiaries, whether wholly or partially owned by the Company or any of
its subsidiaries, at law or in equity.
7. Independent Contractors. In all matters relating to this Agreement,
the Company and OBX shall act as independent contractors, neither shall be the
employee of the other, and each party shall assume any and all liability for its
own acts. Neither the Company nor OBX shall have any authority to assume or
create obligations, express or implied, on behalf of the other party or any
subsidiary or affiliate of the other party, and neither party shall have any
authority to represent any other party as its agent, employee, partner or in any
other capacity. Any action taken on behalf of the Company by any individual who
is an officer or employee of the Company (or by an officer, partner or employee
of OBX at the direction of an officer or employee of the Company or of such
person as the Committee shall designate) shall be deemed for all purposes as an
action by the Company.
8. Indemnification by Company of OBX. The Company shall indemnify and
hold harmless OBX, its officers, directors, members, agents, employees and
counsel from and against any and all manner of loss, liability, damage and
expense (including reasonable fees and expenses of counsel) which they may incur
as a result of the performance of their obligations pursuant to this Agreement,
including the distribution of any information or other materials concerning the
Company which were prepared by or at the request of the Company in connection
with the services provided for in this Agreement, except for acts or omissions
of OBX constituting fraud, gross negligence, willful misconduct or a material
breach of this Agreement.
9. Indemnification by OBX of Company. OBX shall indemnify and hold
harmless the Company, its officers, directors, stockholders, agents, employees
and counsel from and against any and all manner of loss, liability, damage and
expense (including reasonable fees and expenses of counsel) which they may incur
as a result of the Company entering into this Agreement and the performance by
the Company of its obligations pursuant to this Agreement, including the payment
by the Company to OBX of any and all amounts in cash and the granting by the
Company to OBX of the Option provided for in Section 2 and the issuance by the
Company to OBX of the Shares and/or any other securities pursuant to the Option
Agreement.
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10. Miscellaneous.
(a) This Agreement constitutes the entire agreement and understanding
of the parties, superseding any and all prior written and prior and
contemporaneous oral agreements, understandings and letters of intent, and 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 a modification, amendment
or waiver and is signed by both parties in the case of a modification or
amendment or by the party to be charged in the case of a waiver. No course of
conduct or dealing and no trade custom or usage shall be construed to modify or
amend any of the provisions of this Agreement. The failure of any of the
parties to this Agreement to enforce any provision of this Agreement on any
occasion shall not be deemed to be a waiver of any preceding or succeeding
breach of such provision or of any other provision.
(b) This Agreement, and the respective rights, duties and obligations
of the parties pursuant to this Agreement, shall be governed and construed in
accordance with the laws of the State of Florida applicable to agreements
executed and to be performed wholly within such State. Each of the parties
hereby (i) irrevocably consents and agrees that any legal or equitable action or
proceeding arising under or in connection with this Agreement shall be brought
exclusively in any Federal or state court in the State of Florida, and (ii) by
execution and delivery of this Agreement, irrevocably submits to and accepts,
with respect to its properties and assets, generally and unconditionally, the
jurisdiction of the aforesaid courts.
(c) This Agreement shall bind and inure to the benefit of the
parties, and their respective successors and assigns, but may not be assigned or
delegated by either party hereto without the prior written consent of the other
party and any attempted assignment or delegation without such prior written
consent shall be void and be of no effect.
(d) Any notice under the provisions of this Agreement shall be given
in writing and by hand, overnight courier or messenger service, against signed
receipt or acknowledgment of receipt, registered or certified mail, return
receipt requested, or telecopier or similar means of communication if confirmed
by mail as provided in this Section 10(d), to the parties at their respective
addresses set forth at the beginning of this Agreement or by telecopier to the
Company at 000 000-0000 or to OBX at 000 000-0000 Notices to the parties shall
be sent to the attention of the person executing this Agreement on behalf of
such party. Either party may, by like notice, change the person, address or
telecopier number to which notice should be sent.
(e) If any provision of this Agreement is found to be void or
unenforceable by a court of competent jurisdiction, the remaining provisions of
this Agreement, shall, nevertheless, be binding upon the parties with the same
force and effect as though the unenforceable part had been severed and deleted.
(f) Each of the parties to this Agreement shall execute and deliver
to the other party, without charge to the other party, any further instruments
and documents and take such other action as may be requested by the other party
in order to provide for the other party the benefits of this Agreement.
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(g) All references to the masculine, feminine and neuter genders
shall include the other genders, the singular shall include the plural, and the
plural shall include the singular.
(h) This Agreement may be executed in one or more counterparts, all
of which shall be deemed to be duplicate originals.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
XXXXXXX TECHNOLOGY COMPANY, INC. OBX PARTNERS, LLC
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxxx Xxxxxxx
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Name: Xxxx X. Xxxxxx Name: Xxxxx Xxxxxxx
Title: Chairman Title: Managing Partner
Ad Hoc Advisory Committee
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EXHIBIT A
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PROPOSAL
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Proposal to the Ad Hoc Advisory Committee
of the
Board of Directors
of
Xxxxxxx Technology Company, Inc.
June 8th 2010
This note is to summarize discussions regarding the Advisory Proposal and to
outline the purpose and scope of the intended work.
All senior partners as well as support staff will be actively involved with the
assignment, as the combined experiences as operating executives and Investment
bankers as well as directors of companies with publicly traded securities are
all relevant, if not critical, to advising the Ad Hoc Advisory Committee (the
"Committee") well.
While there may be a need to refine the scope and process of the assignment to
accommodate interim needs of the Committee, it is understood that the ultimate
objective is the development of a comprehensive strategic plan to include
identification and development of proposals and action steps to deliver enhanced
shareholder value. This will require several steps, including participation in
the budget preparation, review of the liquidity outlook and potential covenant
stress points as well as possible options for improving the liquidity and
refinancing the existing bank financing.
The following steps are planned:
PREPARATION: The documents, some of which are enumerated below, have been
reviewed and are being further developed and analyzed. Further information
needs will be developed as the process proceeds:
- Cash flow forecasts - short and medium term,
- Written correspondence with in connection with recent waivers,
- Forecasts of future covenant calculations,
- Details of working capital elements (receivables/payables) with aging and
history,
- Capital spending budget for the coming fiscal year including any spending
commitments not yet funded,
- List of all banking relationships including foreign accounts,
- Most recent Strategic Plan,
- Most recent budget and actual performance variances -- by operating unit,
- Product line information and profitability analysis.
- Organization structure and personnel including budgets by function,
- Consolidating statements including results of foreign subsidiaries,
- Information and analyses regarding recent consideration of various value
building strategies.
- Research reports about the company and other background information about the
industry and competitors,
Three main tasks will then be undertaken that are expected to be completed for
the Board Meeting or, should more information and analysis be required, at the
latest, before the Bank submission:
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LIQUIDITY ASSESSMENT: (performed by both operating and Investment banking
resources). Deliverables will incorporate tasks into the Company's cash flow
reporting to the Board. Tasks will include:
(1) A review with management of the short term cash flow of the company (1-6
months), and stress test of current forecasts to identify possible risks of
illiquidity and violation of covenants currently in place.
(2) A review with management of potential to provide additional short term
liquidity to Company should the need arise.
(3) A review with management of all recent discussions with the Company's
lenders about waivers and of all requests by the lenders,
(5) A review of Company proposed bank covenant targets related to the 2011 AOP
presentation deadline,
(7) A review with management of all recent efforts to replace the company's debt
and identification of prospects for replacement lenders.
BUDGET REVIEW: (performed by both operating and Investment banking resources
and expected to require three weeks). No separate report will be generated;
comments, analysis and recommendations to be covered in the presentation during
the Board meeting and at subsequent meetings prior to the Bank submission.
Tasks will include:
(1) Review of the Budget and the Budget process with analysis of trends,
divisional and product line profitability, expected economic/industry recovery,
and revenue and margin assumptions,
(2) Identification through analysis and discussions with management of key risks
inherent in the Budget
(3) Review with management the draft of the Budget to be presented to the banks,
including challenging assumptions, discussing trade-offs between approaches and
considering iterations and alternatives,
(4) Review of cash flow projections and risk areas to Company liquidity
(5) Preliminary assessment of the Budget in relation to management incentive
compensation plans.
STRATEGIC REVIEW: (performed by both operating partners and investment banking
partners and expected to last approximately eight to ten weeks beginning as soon
as the above tasks have been completed).
Building on the process and output from the 2011 budget, embark upon the
thorough strategic review of the company culminating in a new Strategic Plan.
This would include: market and technology assessment, competitive position, and
manufacturing, sales, and financial strategy-including the company's capital
structure and its ability to attract capital in both debt and equity markets.
Comprehensive analysis of the business model, the supply chain and the cost
structure of the organization will be required. This will require travel to and
communication with the Company's overseas operating units and key personnel.
As a part of this process, additional resources beyond the scope of this
proposal may be identified and selected to ascertain the ability of the
company's products/technology to compete and to satisfy its customers' needs.
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The goal would be to identify specific action plans for improving structural
costs and operating results that would result in improved and sustainable
shareholder value.
It would include a capital plan as well as specific goals and a revised budget
for the remainder of the fiscal year.
It would also include suggested course of action for management incentive
compensation.
These phases would include support for management during communication and
negotiations with lenders with respect to the Plan and the Budget.
At the completion of this phase, the conclusions, recommendations and an
implementation plan will be presented to the Committee.
Considering the liquidity situation at the company and the nature of the work --
to drive shareholder value, compensation is proposed that aligns our goals
clearly with shareholders and with management. (As outlined in the Advisory
Agreement.)
While it is the intent to remain available to management and to the Committee
for routine consultation beyond the delivery and acceptance of the Strategic
Plan, to the extent that additional services are proposed during the term of the
Advisory Agreement or after the completion of the Strategic Plan, including, for
example, potentially assisting in further negotiating with current or
alternative lenders, assisting or leading the implementation of any "strategic
initiatives", raising additional equity capital for the company or providing
interim management or consulting services, compensation for such services would
be negotiated at that time.
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EXHIBIT B
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STOCK OPTION AGREEMENT
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AGREEMENT, dated as of the 8th day of July, 2010 between XXXXXXX TECHNOLOGY
COMPANY, INC., a Delaware corporation with an office at 0 Xxxx Xxxxx Xxxx, Xxxxx
000, Xxxxxxx, XX 00000 (the "Company" or "Xxxxxxx"), and OBX PARTNERS, LLC, a
Florida limited liability company with an office at 00000, Xxxx Xxxxx Xxxx,
Xxxxxx, Xxxxxxx 00000 (the "Option Holder").
WHEREAS, the Company and the Option Holder entered into an Advisory
Agreement, dated as of July 8, 2010 (the "Advisory Agreement") pursuant to which
the Option Holder will act as a financial advisor and strategic consultant to
the Ad Hoc Advisory Committee of the Board of Directors of the Company (the
"Committee").
WHEREAS, the advisory services to be rendered by the Option Holder are
outlined in the Proposal to the Committee dated June 8th, 2010 attached to the
Advisory Agreement as Exhibit A thereto (the "Proposal").
WHEREAS, pursuant to the Advisory Agreement, the Company agreed, as part of
the consideration for the advisory services to be rendered by the Option Holder
to the Company, to grant to the Option Holder an option to purchase shares of
the Company's Class A Common Stock, par value $0.01 per share ("Class A Common
Stock").
NOW, THEREFORE, the parties hereto agree as follows:
1. The Company irrevocably granted to the Option Holder on July 1, 2010
(hereinafter called the "Date of Granting the Option") an option (hereinafter
called the "Option") to purchase three hundred thousand (300,000) shares of
Class A Common Stock, upon and subject to the terms and conditions set forth in
this Agreement.
2. The purchase price of the shares of Class A Common Stock subject to
the Option shall be $1.26 per share.
3. Subject to the provision that OBX shall be advised timely by the
Committee of any deficiency and the necessity for remedial work to any previous
submissions to the Committee, and having been granted reasonable time to correct
such deficiencies, and, further subject to the provision that the Engagement
Term may be extended as provided in the Advisory Agreement, if the Option Holder
shall not have substantially completed the Engagement and delivered to the
Committee all necessary reports and a three year strategic plan for the Company
in form and substance satisfactory to the Committee, all as more fully described
in the Proposal, by November 16th 2010, the date of the November Board of
Directors Meeting, the Option shall terminate at 5:00 pm on that date and become
null and void.
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4. The Option Holder may not exercise the Option prior to October 1,
2011. If the Option shall not have previously terminated pursuant to Section 3,
the Option Holder may exercise the Option at any time or from time to time
during the period commencing at 12:01am on October 1, 2011 and ending at 5:00 pm
on September 30, 2020 as to all or any part of the total number of shares
subject to the Option, but only as to a whole number of shares, and not as to
less than one thousand (1,000) shares at any one time, except upon the purchase
of the remaining balance of shares as to which the Option is at the time
exercisable.
5. If the Option shall not have previously terminated pursuant to Section
3, the Option shall terminate at 5:00 pm on September 30, 2020 and become null
and void.
6. The Option may not be transferred by the Option Holder except with the
prior written consent of the Company.
7. In the event of any reclassification or increase or decrease in the
number of the issued shares of Class A Common Stock by reason of a split-up or
consolidation of shares, the payment of a stock dividend, a recapitalization, a
combination or exchange of shares, or any like capital adjustment, the number
and class of shares subject to the Option and the price per share (but not the
total price) shall be appropriately and equitably adjusted.
If the Company shall be reorganized or shall merge into or consolidate
with any other Company, the Option shall be adjusted so as to apply to the
securities to which a holder of the number of shares of Class A Common Stock
subject to the Option would have been entitled by reason of such reorganization,
consolidation or merger.
Adjustments under this Section shall be made by the Board of Directors
of the Company. Such adjustments shall be binding and conclusive.
8. Subject to the terms and conditions of this Agreement, the Option may
be exercised by the Option Holder delivering written notice thereof to the
Company at its office at 0 Xxxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxx, XX 00000, or at
such other address as the Company may from time to time designate in writing,
marked for the attention of the Secretary of the Company. Such notice of
exercise shall (a) state that the Option Holder elects to exercise the Option
and specify the number of shares in respect of which the Option is being
exercised, (b) be accompanied by a check payable to the order of the Company in
an amount equal to the full purchase price of the shares as to which the Option
is being exercised, and (c) be signed by the person or persons exercising the
Option. If the Option is being exercised by any person or persons other than
the Option Holder, such notice shall also be accompanied by evidence
satisfactory to the Company as to the right of such person or persons to
exercise the Option in accordance with the provisions hereof.
As soon as practicable after such exercise, the Company shall cause to
be issued and delivered a certificate or certificates representing the shares as
to which the Option has been exercised, issued in the name of the person or
persons by whom the Option has been exercised. All shares issued upon exercise
of the Option will be fully paid and non-assessable.
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9. The Option Holder hereby agrees for itself and any person or persons
other than itself entitled to exercise the Option that all shares of Class A
Common Stock of the Company purchased upon the exercise of the Option shall be
acquired and held in compliance with the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, and that there shall be
furnished with each notice of exercise of the Option such documents as the
Company in its discretion may deem necessary to assure compliance with the
applicable rules and regulations of any governmental authority having
jurisdiction over the issuance or exercise of the Option or the issuance of
shares of Class A Common Stock of the Company pursuant to such exercise.
10. If and so long as any shares of Class A Common Stock of the Company
shall be listed on any national securities exchange, the Company shall not be
obligated to issue shares upon the exercise of the Option unless and until
authority for listing such shares on such national securities exchange upon
official notice of issue has been obtained; nor shall the Company be obligated
so to issue any of such shares except in compliance with the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, and the
applicable rules and regulations of the Securities and Exchange Commission.
11. The Company shall at all times during the term of the Option reserve
and keep available such number of shares of Class A Common Stock of the Company
as may be required to be issued upon the exercise of the Option.
12. The Option Holder shall not have any of the rights or privileges of a
stockholder of the Company with respect to any shares of Class A Common Stock
that may be purchased upon the exercise of the Option prior to the date of
exercise of the Option.
13. The Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
XXXXXXX TECHNOLOGY COMPANY, INC.
By: /s/ Xxxx X. Xxxxxxxxxx
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Name: Xxxx X. Xxxxxxxxxx
Title: President
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OBX PARTNERS, LLC
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Managing Partner
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