CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into
effective as of July 1, 1998, by and between Chancellor Corporation, a
Massachusetts corporation, having a principal business address at 000 Xxxxx
Xxxxxx, Xxxxxx, XX 00000 (the "Company"), and VMI Corporation, a Massachusetts
corporation, having a principal business address at 000 Xxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxxxx, XX 00000 (the "Consultant").
WHEREAS, the Company desires that the Consultant provide certain general
business consulting services to the Company, including, but certainly not
limited to, identification, review and analysis of potential acquisition and
merger candidates and capital formation, on the terms and conditions contained
in this Agreement, and the Consultant wishes to provide such consulting services
on the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Company and the Consultant, each intending to be legally
bound hereby, agree as follows:
1. RETENTION OF CONSULTANT. Subject to the terms and conditions of this
Agreement, the Company hereby retains the Consultant to perform consulting
services in accordance with Section 3 hereof, and the Consultant hereby agrees
to render such services.
2. TERM.
(a) Unless otherwise terminated in accordance with Section 10 hereof, the
Consultant shall perform the duties and services specified herein for a period
commencing on the date hereof (the "Effective Date") and ending on July 1, 2001.
The period during which the Consultant is obligated to perform such duties and
services, as the same may be reduced by termination pursuant to Section 11
hereof, is referred to herein as the "Consulting Term."
(b) The Consulting Term of this Agreement may automatically extend for a period
of two (2) years if the Company achieves profitability from operations for two
(2) out of the three (3) fiscal years ending (1998, 1999 and 2000) during the
Consulting Term. The Consulting Term of this Agreement may also automatically
extend for a period of two (2) years if an event whereby any new person (within
the meaning of Section 13(b) of the 1934 Securities Exchange Act) becomes the
beneficial owner (directly or indirectly) of securities of the Company
representing Twenty Five (25%) percent or more of the combined voting power of
the Company's then outstanding securities entitled to vote generally in the
election of directors.
(c) The payment of fees due to the Consultant under this Agreement will
accelerate if an event whereby any new person (within the meaning of Section
13(b) of the 1934 Securities Exchange Act) becomes the beneficial owner
(directly or indirectly) of securities of the Company representing Forty (40%)
percent or more of the combined voting power of the Company's then outstanding
securities entitled to vote generally in the election of directors. If such an
event should occur, the Consultant will be entitled to receive a lump sum
payment of the aggregate of all fees entitled to it during the Consulting Term,
as may be amended pursuant to Section 2(b) of this Agreement.
3. CONSULTING SERVICES. During the Consulting Term, the Consultant shall
perform such general business consulting services including, but certainly not
limited to, identification, review and analysis of potential acquisition and
merger candidates and capital formation, and such other services as may be
requested of him from time to time by the Chief Executive Officer or Board of
Directors of the Company. All of the consulting services rendered by the
Consultant to the Company in accordance with the terms of this Agreement are
referred to herein as "Services."
4. COMPENSATION.
(a) As consideration for the Consultant's provision of Services hereunder and in
settlement for all previous amounts that may be outstanding, the Company shall
pay the Consultant an initial fee of Seven Hundred and Fifty Thousand
($750,000.00) dollars. Additionally, the Company shall pay the Consultant a fee
(the "Fee") of Fifty Thousand ($50,000.00) dollars per month. The Fee shall be
paid in installments consistent with the Company's normal payroll schedule,
commencing on either the first or fifteenth day of the month, as the case may
be, following the date of commencement of the Consulting Term.
(b) As additional consideration for the Consultant's provision of Services
hereunder, the Company shall pay the Consultant a bonus (the "Bonus") based on
the performance of the Company to be measured by the Company's consolidated
pre-tax operating income for the fiscal years ending during the Consulting Term.
The minimum Bonus to be paid to the Consultant will be calculated and paid based
upon the Company achieving a minimum pre-tax income target according to the
following schedule:
Fiscal Year Ending Pre-Tax Income Target Minimum Bonus
December 31, 1999 $ 1,250,000.00 $ 350,000.00
December 31, 2000 $ 1,500,000.00 $ 500,000.00
December 31, 2001 $ 2,000,000.00 $ 650,000.00
The Consultant shall also be entitled to additional bonus dollars based
upon the Company exceeding the aforementioned pre-tax income targets. The
Company shall pay the Consultant the sum of Fifty Thousand ($50,000.00) dollars
for each Five Hundred Thousand ($500,000.00) dollars that the Company exceeds
the aforementioned pre-tax income targets, or a portion thereof of approximately
Ten (10%) percent. As an illustration, if the Company achieves a pre-tax income
of $1,750,000.00 in fiscal 1999, then the Consultant shall be entitled to a
Bonus totaling Four Hundred Thousand ($400,000.00) dollars.
(c) Any fees not paid to the Consultant when due shall accrue interest at
the then prime lending rate LESS One Hundred (100) basis points, compounded
monthly. Additionally, any fees accrued under this Agreement shall become due
and payable in full upon the receipt of any proceeds of any debt, equity or
other such offering that causes a significant increase in the Company's
liquidity.
(d) The Company agrees to reimburse the Consultant for all reasonable
business expenses (including, without limitation, reasonable travel and
entertainment expenses) incurred by the Consultant in rendering Services
hereunder, subject to the Company's reimbursement policies in effect from time
to time. The Consultant agrees to maintain reasonable records of his business
expenses in such form and detail as the Company may request and to make such
records available to the Company as and when requested.
(e) If an event occurs as described in Section 2(b) to this Agreement,
whereby this Agreement is automatically renewed for a period of two (2) years,
then the Compensation contemplated under Section 4(a) and the Bonus under
Section 4(b) will be replaced by a Fee totaling Ninety Thousand ($90,000.00)
dollars per month for the twenty four (24) month period.
5. AGREEMENT NOT TO SOLICIT OR SELL TO CUSTOMERS. The Consultant agrees
that, during the Consulting Term and for two years thereafter, it will not
without the prior written consent of the Company, either directly or indirectly,
call on, solicit, take away, accept as a client, customer or prospective client,
customer or attempt to call on, solicit, take away or accept as a client,
customer, prospective client or customer, any person that was a client, customer
or prospective client or customer of the Company or any of its subsidiaries or
affiliates in so far as such solicitation is for a purpose within the scope of
the Company's business (e.g., transportation equipment leasing).
6. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION
6.1 As used in this Agreement, "Confidential Information"
shall mean all customer sales and marketing information, customer account
records, proprietary receipts and/or processing techniques, information
regarding vendors and products, training and operations memoranda and similar
information, personnel records, pricing information, financial information and
trade secrets concerning or relating to the business, accounts, customers,
employees and affairs of the Company, or any subsidiary or affiliate thereof,
obtained by or furnished, disclosed or disseminated to the Consultant, or
obtained, assembled or compiled by the Consultant or under his supervision
during the course of his rendering Services to the Company, and all physical
embodiments of the foregoing, all of which are hereby agreed to be the property
of and confidential to the Company, but Confidential Information shall not
include any of the foregoing to the extent the same is or becomes publicly known
through no fault or breach of this Agreement by the Consultant.
6.2 The Consultant agrees that he will not, either during the
Consulting Term or at any time thereafter, without the prior written consent of
the Company, use, disclose or make available any Confidential Information to any
person or entity, nor shall he use, disclose, make available or cause to be
used, disclosed or made available, or permit or allow, either on his own behalf
or on behalf of others, any use or disclosure of such Confidential Information
other than in the proper performance of the Consultant's duties hereunder.
6.3 The Company acknowledges and agrees that all financing documents,
work papers and other work products of the Consultant prepared in the course of
its engagement by the Company shall remain the property of the Consultant.
7. REASONABLENESS OF RESTRICTIONS. In the event that any provision
relating to time period or geographic area of any restriction set forth in
Sections 5 or 6 shall be declared by a court of competent jurisdiction to exceed
the maximum time period or area of restriction that the court deems reasonable
and enforceable, the time period or area of restriction which the court finds to
be reasonable and enforceable shall be deemed to become, and thereafter shall
be, the maximum time period or geographic area of such restriction.
8. ENFORCEABILITY. Any provision of Sections 5 or 6 which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
9. TERMINATION; COMPENSATION. Notwithstanding any provision in this
Agreement to the contrary, this Agreement may be terminated by the Company only
for "Cause" at any time during the Term hereof, and such termination shall be
effective immediately upon written notice to the Consultant. For purposes of
this Agreement, "Cause" for the termination of the Consultant's engagement
hereunder shall be deemed to exist only if: (a) the Consultant commits fraud,
theft or embezzlement against any the Company; (b) the Consultant discloses
trade secrets or other proprietary information of the Company or any of its
subsidiaries or affiliates thereof to any unauthorized person or entity; (c) the
Consultant engages in gross negligence or willful misconduct that causes
substantial and irreparable harm to the business and operations of the Company
or any of its subsidiaries or affiliates thereof. Upon any termination pursuant
to this Section 10, the Consultant shall be entitled to be paid solely the
Consultant's Fee then in effect through the effective date of termination, and
the Company shall have no further liability or other obligation of any kind
whatsoever to the Consultant hereunder.
10. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
the Consultant and any of its affiliates and each of their respective officers,
directors, employees and agents (each such person and Consultant being
hereinafter called an Indemnified Party) against any losses, claims, damages,
liabilities, or actions, including shareholder actions, in respect thereof,
joint or several, to which and Indemnified Party may become subject under any
statute or at common law or otherwise, and to reimburse promptly such
Indemnified Party for any reasonable legal or other expenses (including
appropriate compensation for preparation time, if any) incurred by such
Indemnified Party in connection with investigating any written claim or
preparing for or defending or assisting in the defense of any action (whether or
not such Indemnified Party is named as a party thereto) commenced or threatened
in writing, whether or not resulting in liability (including any loss to the
extent of the aggregate amount paid in settlement of any litigation commenced or
threatened, or of any claim whatsoever set forth therein, if such settlement is
effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities, actions, settlements or expenses arise out of, are
based upon or are in any way connected with services provided to the Company
whether performed prior to or after the date hereof.
The Company shall prepay the reasonable and estimable costs of defense of
Consultant, as set forth above, upon notice by Consultant that a claim has
arisen.
11. ARBITRATION. Consultant and Chancellor agree that any legal
disputes that may occur between Consultant and Chancellor, and that arise out
of, or are related in any way to, this Agreement and/or Consultant's performance
of services under this Agreement or the termination of this Agreement, and which
disputes cannot be resolved informally, shall be resolved exclusively through
final and binding private arbitration before an arbitrator mutually selected by
Consultant and Chancellor, with each party to bear its own costs and attorney
fees. If the Consultant and Chancellor are unable to agree upon an arbitrator
within twenty-one (21) days after either party has made a demand for
arbitration, the matter will be submitted for arbitration to the Boston office
of the American Arbitration Association pursuant to the rules governing dispute
resolution in effect as of January 1, 1999. Notwithstanding the foregoing, in
no event shall a demand for arbitration be made after the date when institution
of legal or equitable proceedings based on such claim, dispute, or other matter
in question would be barred by the applicable statutes of limitation.
12. GENERAL PROVISIONS.
12.1 Indulgences, Etc. Any failure or delay on the part of any
party to exercise any right, remedy, power or privilege under this Agreement
will not operate as a waiver thereof, nor will any single or partial exercise of
any right, remedy, power or privilege preclude any other or further exercise of
the same or of any other right, remedy, power or privilege, nor will any waiver
of any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of that right, remedy, power or privilege with respect to
any other occurrence.
12.2 Notices. All notices, requests, demands and other
communications required or permitted under this Agreement must be in writing and
will be deemed to have been duly given, made and received only when delivered
(personally, by facsimile transmission or by courier service such as Federal
Express, or by other messenger) or when deposited in the United States mails,
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(i) If to the Consultant:
VMI Corporation
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx
(ii) If to the Company:
Chancellor Corporation
000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Any party may alter the address to which communications or copies are to be sent
by giving notice of any change of address to the other party in conformity with
the provisions of this paragraph for the giving of notice.
12.3 Binding Nature of Agreement; Assignment. This Agreement
shall be binding upon and inure to the benefit of the Company and its successors
and assigns and shall be binding upon the Consultant, his heirs and legal
representatives. The Company may assign this Agreement at any time to any
affiliate, provided that such assignee assumes all of the obligations of the
Company hereunder; the Consultant may not assign this Agreement.
12.4 Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which will be deemed to be an original
and all of which will together constitute one and the same instrument.
12.5 Provisions Separable. The provisions of this Agreement
are independent of and separable from each other, and no provision will be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be invalid or unenforceable in whole or
in part.
12.6 Entire Agreement. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter of
this Agreement, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
with respect to the subject matter of this Agreement. The express terms of this
Agreement control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof. This Agreement may not be
modified or amended other than by an agreement in writing.
12.7 Remedies. The rights conferred upon the Company pursuant
to Section 10 hereof shall not be exclusive of, but shall be in addition to, any
other rights or remedies which the Company may have at law, in equity or
otherwise.
12.8 Section Headings. The section headings in this Agreement
are for convenience only; they form no part of this Agreement and will not
affect its interpretation.
12.9 Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts, excluding the choice of law rules thereof.
12.10 Survival. The provisions of Sections 5, 6, 8, 9, 10, 11
and 12 hereof shall survive the termination of this Agreement to the extent
necessary to effectuate the respective purposes of such provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
CHANCELLOR CORPORATION
By: /s/ Xxxxxxx Peselman___________
----------------------
Name: Xxxxxxx Xxxxxxxx
Title: Director, Chancellor Corporation
Attest:
By: /s/ Xxxxx X. Mullen______________
----------------------
Name: Xxxxx X. Xxxxxx
Title: Clerk, Chancellor Corporation
VMI CORPORATION
By: /s/ Xxxxx X. Coulter____________
-----------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Director, VMI Corporation
/s/ Xxxxxxxx X. Ezrin___________________
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Notary Public
My Commission Expires: _______________ [ SEAL ]
