Exhibit 10.7
CONSULTING AGREEMENT
This CONSULTING AGREEMENT, dated as of March 30, 1998, by and among NA
Holding Corporation, a Delaware corporation ("Holding"), NA Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Holding ("NA
Acquisition"), and North American Van Lines, Inc. a Delaware corporation and
wholly owned subsidiary of Holding (the "Company", together with Holding and NA
Acquisition, the "Acquisition Group") and Clayton, Dubilier & Rice, Inc., a
Delaware corporation ("CD&R").
W I T N E S S E T H:
WHEREAS, NA Acquisition has acquired all of the outstanding shares of
capital stock of the Company pursuant to a certain Stock Purchase Agreement,
dated as of January 9, 1998 (as amended from time to time, the "Stock Purchase
Agreement") and a certain Preferred Shares Stock Purchase Agreement, dated as of
January 9, 1998 (the "Preferred Stock Agreement") (such transactions being
hereinafter referred to as the "Acquisition");
WHEREAS, CD&R has performed financial, management advisory and other
services for the Acquisition Group, including but not limited to assistance in
connection with (i) the preparation, negotiation, execution and delivery of the
Stock Purchase Agreement and the Preferred Stock Purchase Agreement, (ii) the
retention of legal, accounting, environmental, insurance, investment banking,
financial and other advisors and consultants in connection with the Acquisition,
(iii) the preparation, negotiation, execution and delivery of the commitment,
fee and engagement letters, registration rights and purchase agreements, credit
agreements, guarantees, mortgages, pledge agreements and other security
agreements, subscription, management equity agreements, and other agreements,
instruments and documents, relating to the Acquisition, the financing of the
Acquisition and (iv) the structuring, implementation and consummation of the
Acquisition (such services collectively, the "Acquisition Services");
WHEREAS, immediately following the closing of the Acquisition, it is
contemplated that NA Acquisition will be merged with and into the Company,
leaving the Company as the surviving entity and a wholly owned subsidiary of
Holding;
WHEREAS, the Acquisition Group desires, following the Acquisition, to
receive financial and managerial advisory services from CD&R, and CD&R desires
to provide such services to the Acquisition Group;
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth and the mutual benefits to be derived herefrom,
the parties hereto hereby agree as follows:
1. Engagement. The Acquisition Group hereby engages CD&R as a consultant,
and CD&R hereby agrees to provide financial and managerial advisory services to
the Acquisition Group, all on the terms and subject to the conditions set forth
below.
2. Services, etc. (a) CD&R hereby agrees during the term of this
engagement to assist, advise and consult with the respective Boards of Directors
and management of each member of the Acquisition Group and their respective
subsidiaries in such manner and on such business, management and financial
matters, and provide such other financial and managerial advisory services
(collectively, the "Continuing Services"), as may be reasonably requested from
time to time by the Boards of Directors of each member of the Acquisition Group,
including but not limited to assistance in:
(i) establishing and maintaining banking, legal and other business
relationships for each such member and its subsidiaries;
(ii) developing and implementing corporate and business strategy and
planning for each such member and its subsidiaries, including plans
and programs for improving operating, marketing and financial
performance, budgeting of future corporate investments, acquisition
and divestiture strategies, and reorganizational programs;
(iii) arranging future debt and equity financings and refinancings; and
(iv) providing professional employees to serve as directors or officers
of each member of the Acquisition Group.
(b) Each member of the Acquisition Group will furnish CD&R with such
information as CD&R believes appropriate to its engagement hereunder (all such
information so furnished being referred to herein as the "Information"). Each
member of the Acquisition Group recognizes and confirms that (i) CD&R will use
and rely primarily on the Information and on information available from
generally recognized public sources in performing the services to be performed
hereunder and (ii) CD&R does not assume responsibility for the accuracy or
completeness of the Information and such other information.
3. Compensation; Payment of Expenses. (a) The Acquisition Group jointly
and severally agree to pay to CD&R, concurrent with the execution of this
Agreement, as compensation for the Acquisition Services, a fee of $2,950,000.
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(b) The Acquisition Group jointly and severally agree to pay to CD&R, as
compensation for Continuing Services rendered and to be rendered by CD&R
hereunder, a fee of $500,000 per year (the "Continuing Services Fee"),
one-twelfth of which shall be payable on the first day of each month commencing
on the first day of the month following the date of the closing of the
Acquisition. Such Continuing Services Fee may, in the sole discretion of a
majority of the members of the Company's Board of Directors who are not
affiliated with CD&R, be increased but may not be decreased without the prior
written consent of CD&R. If any employee of CD&R shall be elected to serve on
the Board of Directors of any member of the Acquisition Group or any of their
affiliates (a "Designated Director"), in consideration of the Continuing
Services Fee being paid to CD&R, CD&R shall cause such Designated Director to
waive any and all fees to which such director would otherwise be entitled as a
director for any period for which the Fee or any installment thereof is paid.
(c) The Acquisition Group jointly and severally agree to reimburse CD&R
for such reasonable travel and other out-of-pocket expenses ("Expenses") as may
be incurred by CD&R and its employees and agents in the course or on account of
rendering any Acquisition Services or Continuing Services including but not
limited to any fees and expenses of any legal, accounting or other professional
advisors to CD&R engaged in connection with Acquisition Services and Continuing
Services previously provided or being provided hereunder and any expenses
incurred by any Designated Director in connection with the performance of his
duties. CD&R may submit monthly expense statements, which shall be payable
within thirty days.
4. Term, etc. (a) This Agreement shall be in effect until, and shall
terminate upon, the earlier to occur of (x) the tenth anniversary of the date
hereof and (y) the date on which the CD&R Fund no longer owns any shares of the
capital stock of Holding, and may be earlier terminated by either party hereto
upon 30 days' prior written notice to the other party hereto. The provisions of
this Agreement shall survive any termination of this Agreement, except for the
provisions of Section 1, Section 2(a), the first sentence of Section 2(b) and
(solely as to any portion of the Continuing Services Fee or any Expense not paid
or reimbursed prior to such termination and not required to be paid or
reimbursed thereafter pursuant to Section 4(c) hereof) Section 3 hereof.
(b) Upon any consolidation or merger, or any conveyance, transfer or lease
of all or substantially all of the assets of the Company as an entirety, the
successor corporation formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or lease is made shall succeed to,
and be substituted for, the Company under this Agreement with the same effect as
if such successor corporation has been a party thereto. No such consolidation,
merger or conveyance, transfer or lease of all or substantially all of the
assets of the Company shall have the effect of terminating this Agreement or of
releasing the Company or any such successor corporation from its obligations
hereunder.
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(c) Upon any termination of this Agreement, any accrued and unpaid
installment of the Continuing Services Fee or portion thereof (pro rated, with
respect to the month in which such termination occurs, for the portion of such
month that precedes such termination), and any unpaid and unreimbursed Expenses
that shall have been incurred prior to such termination (whether or not such
Expenses shall then have become payable), shall be immediately paid or
reimbursed, as the case may be, by the Company. In the event of the liquidation
of the Company, all amounts due CD&R hereunder shall be paid to CD&R before any
liquidating distributions or similar payments are made to stockholders of the
Company.
5. Indemnification. (a) Each member of the Acquisition Group confirms and
reaffirms its obligations pursuant to the Indemnification Agreement, dated as of
the date hereof, (the "Indemnification Agreement"), among Holding, the Company,
NA Acquisition, CD&R and the CD&R Fund (as such term is defined in the
Indemnification Agreement), as the same may be amended, waived, modified or
supplemented from time to time. Without limiting the generality of the
foregoing, each member of the Acquisition Group confirms and agrees that (a) it
shall indemnify, defend and hold harmless CD&R, the CD&R Fund (as defined in the
Indemnification Agreement), CD&R Associates (as defined in the Indemnification
Agreement) and each of the respective directors, officers, partners, employees,
agents, advisors, representatives and controlling persons (within the meaning of
the Securities Act of 1933, as amended) of CD&R, the CD&R Fund and CD&R
Associates (collectively, "Indemnitees") from and against any and all claims,
obligations, liabilities, causes of action, actions, suits, proceedings,
investigations, judgments, decrees, losses, damages, fees, costs and expenses
(including without limitation interest, penalties and fees and disbursements of
attorneys, accountants, investment bankers and other professional advisors)
(collectively, "Obligations"), whether incurred with respect to third parties or
otherwise, in any way resulting from, arising out of or in connection with,
based upon or relating to, the performance of the Merger Services or the
Continuing Services contemplated hereby, except to the extent that any such
Obligation is found in a final judgment by a court having jurisdiction to have
resulted from the gross negligence or intentional misconduct of CD&R, (b) no
Indemnitee shall have any liability (whether direct or indirect, in contract or
tort or otherwise) to a member of the Acquisition Group or their respective
security holders or creditors with respect to any Obligation in any way
resulting from, arising out of or in connection with, based upon or relating to,
the performance of the Merger Services or the Continuing Services contemplated
hereby, except to the extent that any such Obligation is found in a final
judgment by a court having jurisdiction to have resulted from the gross
negligence or intentional misconduct of CD&R, and (c) the rights of each
Indemnitee to be indemnified under any agreement, document, certificate or
instrument or applicable law are independent of and in addition to any rights of
such Indemnitee under any other agreement, document, certificate or instrument
or applicable law.
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(b) The Company hereby agrees to advance costs and expenses, including
attorneys' fees, incurred by CD&R (acting on its own behalf or, if requested by
any such Indemnitee other than itself, on behalf of such Indemnitee) or any
Indemnitee in defending any claim relating to any Obligation in advance of the
final disposition of such claim within 30 days of receipt from CD&R of (i) a
notice setting forth the amount of such costs and expenses (a "Payment Notice")
and (ii) an undertaking by or on behalf of CD&R or such Indemnitee to repay
amounts so advanced if it shall ultimately be determined that CD&R or such
Indemnitee is not entitled to be indemnified by the Company as authorized by
this Agreement. CD&R may submit Payment Notices to the Company monthly.
6. Independent Contractor Status. The parties agree that CD&R shall
perform services hereunder as an independent contractor, retaining control over
and responsibility for its own operations and personnel. Neither CD&R nor any of
its employees or agents shall, solely by virtue of this Agreement or the
arrangements hereunder, be considered employees or agents of any member of the
Acquisition Group nor shall any of them have authority to contract in the name
of a member of or bind the Acquisition Group, except (a) to the extent that any
professional employee of CD&R may be serving as an officer of a member of the
Acquisition Group pursuant to Section 2(a)(iv) hereof, (b) as expressly agreed
to in writing by a member of the Acquisition Group and (c) each member of the
Acquisition Group hereby acknowledges and agrees that any agreements,
arrangements or understandings entered into by CD&R on behalf of any member of
the Acquisition Group prior to the date hereof in connection with the formation
of the Company and the acquisition by the Company of its business (including,
but not limited to, any confidentiality agreements, agreements with brokers or
finders and any arrangements relating to the financing of such acquisition)
shall be obligations of the Company binding on it to the same extent as such
obligations may be binding on CD&R and the Company shall fully perform, and
shall indemnify and hold harmless CD&R from and against, all such obligations.
Any duties of CD&R arising out of its engagement to perform services hereunder
shall be owed solely to the Company.
7. Notices. Any notice or other communication required or permitted to be
given or made under this Agreement by one party to the other parties shall be in
writing and shall be deemed to have been duly given and effective (i) on the
date of delivery if delivered personally or (ii) when sent if sent by prepaid
telegram, or mailed first-class, postage prepaid, registered or certified mail,
or facsimile transmission as follows (or to such other address as shall be given
in writing by one party to the other parties in accordance herewith):
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If to Company, NA Holding Corporation or NA Acquisition Corporation to:
North American Van Lines, Inc.
5001 U.S. Highway 30 West
Fort Wayne, Indiana 46801-0988
Attention: General Counsel
Telephone: (219) 429-2511
Telecopy: (219) 429-3135
If to CD&R to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention: Kevin J. Conway
Telephone: (212) 407-5200
Telecopy: (212) 407-5252
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Paul S. Bird, Esq.
Telephone: (212) 909-6000
Telecopy: (212) 909-6836
8. Entire Agreement. This Agreement, together with the Indemnification
Agreement (a) contain the complete and entire understanding and agreement of
CD&R and each member of the Acquisition Group with respect to the subject matter
hereof, and (b) supersede all prior and contemporaneous understandings,
conditions and agreements, oral or written, express or implied, in respect of
the subject matter hereof, including but not limited to in respect of the
engagement of CD&R in connection with the subject matter hereof. There are no
representations or warranties of CD&R in connection with this Agreement or the
services to be provided hereunder, except as expressly made and contained in
this Agreement.
9. Headings. The headings contained in this Agreement are for purposes of
convenience only and shall not affect the meaning or interpretation of this
Agreement.
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10. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall together
constitute one and the same instrument.
11. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and assigns and to each Indemnitee, provided that none of CD&R or any
member of the Acquisition Group may assign any of its rights or obligations
under this Agreement without the express written consent of the other party
hereto. This Agreement is not intended to confer any right or remedy hereunder
upon any person other than the parties to this Agreement and their respective
successors and permitted assigns and each Indemnitee.
12. Governing Law. This Agreement shall be deemed to be a contract made
under, and is to be governed and construed in accordance with, the laws of the
State of New York, without regard to the conflict of laws principles or rules
thereof. Each member of the Acquisition Group and CD&R hereby irrevocably submit
to the jurisdiction of the courts of the State of New York and the Federal
courts of the United States of America located in the State, City and County of
New York solely in respect of the interpretation and enforcement of the
provisions of this Agreement, and hereby waive, and agree not to assert, as a
defense in any action, suit or proceeding for the interpretation or enforcement
hereof, that it is not subject thereto or that such action, suit or proceeding
may not be brought or is not maintainable in such courts or that the venue
thereof may not be appropriate or that this Agreement may not enforced in or by
such courts, and the parties hereto irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in such a New
York State or Federal court. Each member of the Acquisition Group and CD&R
hereby consent to and grant any such court jurisdiction over the person of such
parties and over the subject matter of any such dispute and agree that mailing
of process or other papers in connection with any such action or proceeding in
the manner provided in Section 7, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
13. Waiver of Jury Trial. Each party hereto acknowledges and agrees that
any controversy that may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore it hereby irrevocably and
unconditionally waives any right it may have to a trial by jury in respect of
any litigation directly or indirectly arising out of or relating to this
Agreement, or the breach, termination or validity of this Agreement, or the
transactions contemplated by this Agreement. Each party certifies and
acknowledges that (a) no representative, agent or attorney of any other party
has represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver, (b) it understands
and has considered the implications of this waiver, (c) it makes this waiver
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voluntarily, and (d) it has been induced to enter into this Agreement by, among
other things, the mutual waivers and certifications contained in this Section
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14. Amendment; Waivers. No amendment, modification, supplement or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party or Indemnitee against
whom enforcement of the amendment, modification, supplement, discharge or waiver
is sought (and in the case of a member of the Acquisition Group, approved by
resolution of the Boards of Directors of such member of the Acquisition Group).
Any such waiver shall constitute a waiver only with respect to the specific
matter described in such writing and shall in no way impair the rights of the
party or Indemnitee granting such waiver in any other respect or at any other
time. Neither the waiver by any of the parties hereto or any Indemnitee of a
breach of or a default under any of the provisions of this Agreement, nor the
failure by any party hereto or any Indemnitee on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right, powers
or privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights,
power or privileges hereunder. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party or
Indemnitee may otherwise have at law or in equity or otherwise.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
CLAYTON, DUBILIER & RICE, INC.
By: /s/Joseph L. Rice
--------------------------------------
Name: Joseph L. Rice
Title: Chairman and Chief Executive
Officer
NA ACQUISITION CORPORATION
By: /s/Kevin J. Conway
--------------------------------------
Name: Kevin J. Conway
Title: Vice President
NA HOLDING CORPORATION
By: /s/Kevin J. Conway
--------------------------------------
Name: Kevin J. Conway
Title: Vice President
NORTH AMERICAN VAN LINES, INC.
By: /s/R. Barry Uber
--------------------------------------
Name: R. Barry Uber
Title: President and Chief Executive
Officer
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