Exhibit 10.19
MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is entered into as of the
27th day of September, 1999, by and between Icon Health & Fitness, Inc., a
Delaware corporation ("ICON"), HF Holdings, Inc., a Delaware corporation
("Holdings" and, together with ICON and each of its other direct and indirect
subsidiaries signatory hereto or hereafter becoming party hereto by executing a
counterpart signature page hereof, the "Company") and Bain Capital Partners IV,
L.P., a Delaware limited partnership ("Bain").
Whereas, Holdings was formed for the purpose of effecting an overall
plan to restructure the capitalization of ICON (the "Restructuring") and
becoming a direct parent of ICON, all on terms and subject to the
conditions of (a) the Exchange Offer and Consent Solicitation Statement,
dated July 30, 1999, for all outstanding 13% Senior Subordinated Notes due
2002 of ICON, 15% Senior Secured Discount Notes due 2004 of IHF Holdings,
Inc., a Delaware corporation ("IHF"), and 14% Senior Discount Notes due
2006 of ICON Fitness Corporation, a Delaware corporation, and (b) the
Agreement and Plan of Merger, dated as of September 24, 1999, among
Holdings, HF Acquisition, Inc., a Delaware corporation, and ICON.
Whereas, Bain is providing advisory and other services in connection
with the senior secured financing (the "Senior Financing") being provided
for the Restructuring pursuant to a Credit Agreement dated on or about the
date hereof by General Electric Capital Corporation and Fleet National
Bank, as agents, and the lending institutions from time to time party
thereto (the "Credit Agreement");
Whereas, certain funds (the "Bain Funds") affiliated with Bain are
providing equity financing (the "Equity Investments") in connection with
the Restructuring; and
Whereas, subject to the terms and conditions of this Agreement, the
Company desires to retain Bain to provide certain management and advisory
services to the Company, and Bain desires to provide such services;
Now, therefore, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Services. Bain hereby agrees that, during the term of this Agreement (the
"Term"), it will:
(a) provide the Company with advice in connection with the negotiation
and consummation of agreements, contracts, documents and instruments
necessary to provide the Company with financing from banks or other
financial institutions or other entities on terms and conditions
satisfactory to the Company; and
(b) provide ICON with financial, managerial and operational advice in
connection with its day-to-day operations, including, without
limitation:
(i) advice with respect to the investment of funds; and
(ii) advice with respect to the development and implementation of
strategies for improving the operating, marketing and
financial performance of ICON.
2. Payment of Fees. The Company hereby agrees to:
(a) pay to Bain (or an affiliate of Bain designated by it) a fee in the
amount of $2,202,000 in connection with the structuring of the
Senior Financing for the Restructuring, together with reimbursement
of Bain's expenses incurred on behalf of the Company through the
Closing Date (as defined in the Merger Agreement) in connection with
the Restructuring, such fees and expenses being payable by ICON at
the closing of the Restructuring or, if the Restructuring is not
consummated, promptly after the time the Company has abandoned the
Restructuring;
(b) subject to the terms of the credit agreement from time to time in
effect providing for working capital financing to ICON, during the
Term, pay to Bain (or an affiliate of Bain designated by it) a
management fee in an amount not to exceed $366,500 per annum in
exchange for the services provided to the Company by Bain, as more
fully described in Section 1, such fee being payable by ICON
quarterly in arrears, with each payment being made sixty (60) days
after the end of each fiscal quarter of the Company; and
(c) during the Term, allow Bain to participate in the negotiation and
consummation of senior financing for any recapitalization or
acquisition or other similar transactions by the Company, and pay to
Bain (or an affiliate of Bain designated by it) a fee in connection
therewith equal to one percent (1%) of the gross purchase price of
the transaction (including all liabilities assumed or otherwise
included in the transaction), such fee to be due and payable for the
foregoing services at the closing of such transaction, whether or
not any such senior financing is actually committed or drawn upon;
provided, however, that (i) Bain shall not be entitled to such fee
with respect to any acquisition by the Company in which such gross
purchase price is less than $10,000,000 and (ii) in the case of a
Liquidity Event (as defined in the Stockholders Agreement) Bain
shall provide Credit Suisse First Boston an opportunity to provide
services in connection with such transaction and to receive in
respect thereof a fee of up to one half (1/2) the fee otherwise
payable to Bain pursuant to this Section, such
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fee of Credit Suisse First Boston to
reduce such fee otherwise payable to Bain under this section but not
by more than one-half (1/2) of such fee otherwise payable to Bain.
Each payment made pursuant to this Section 2 shall be paid by wire
transfer of immediately available federal funds to the account specified
on Schedule 1 hereto, or to such other account(s) as Bain may specify to
the Company in writing prior to such payment.
3. Term. This Agreement shall commence on the Closing Date and continue in
full force and effect, unless and until terminated by mutual consent of
the parties, for so long as Bain (or any successor or permitted assign, as
the case may be) continues to carry on the business of providing services
of the type described in Section 1; provided, however, that (a) either
party may terminate this Agreement following a material breach of the
terms of this Agreement by the other party hereto and a failure to cure
such breach within 30 days following written notice thereof and (b) Bain
may terminate this Agreement upon not less than 60 days written notice to
the Company; and provided further that each of (x) the obligations of the
Company under Section 4, (y) any and all accrued and unpaid obligations of
the Company owed under Section 2 and (z) the provisions of Section 7 shall
survive any termination of this Agreement to the maximum extent permitted
under applicable law.
4. Expenses; Indemnification.
(a) Expenses. The Company agrees to pay on demand all expenses incurred
by Bain, the Bain Funds and Bain Capital, Inc. (or any of them) in
connection with this Agreement, the Restructuring and such other
transactions and all operations hereunder or in respect of the
Equity Investments or otherwise incurred in connection with the
Restructuring or the Company, including but not limited to (i) the
fees and disbursements of: (A) Ropes & Gray, special counsel to Bain
Capital, Inc. and the Bain Funds, (B) PricewaterhouseCoopers LLP,
accountant to Bain Capital, Inc. and the Bain Funds and (C) any
other consultants or advisors retained by Bain, Bain Capital, Inc.,
the Bain Funds or either of the parties identified in clauses (A)
and (B) arising in connection therewith (including but not limited
to the preparation, negotiation and execution of this Agreement and
any other agreement executed in connection herewith or in connection
with the Restructuring, the Senior Financing or the consummation of
the other transactions contemplated hereby (and any and all
amendments, modifications, restructurings and waivers, and exercises
and preservations of rights and remedies hereunder or thereunder)
and the operations of the Company) and (ii) any out-of-pocket
expenses incurred by Bain, the Bain Funds and Bain Capital, Inc.
(or any of them) in connection with the provision of
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services hereunder or the attendance at any meeting of the board
of directors (or any committee thereof) of the Company or
any of its affiliates.
(b) Indemnity and Liability. In consideration of the execution and
delivery of this Agreement by Bain and the provision of the Equity
Investments by the Bain Funds, the Company hereby agrees to
indemnify, exonerate and hold each of Bain, Bain Capital, Inc. and
each Bain Fund, and each of their respective partners, shareholders,
affiliates, directors, officers, fiduciaries, employees and agents
and each of the partners, shareholders, affiliates, directors,
officers, fiduciaries, employees, agents, advisors and attorneys of
each of the foregoing (collectively, the "Indemnitees") free and
harmless from and against any and all actions, causes of action,
suits, losses, liabilities and damages, and expenses in connection
therewith, including without limitation attorneys' fees and
disbursements (collectively, "Liabilities"), incurred by the
Indemnitees or any of them as a result of, or arising out of, or
relating to the Restructuring, the execution, delivery, performance,
enforcement or existence of this Agreement or the transactions
contemplated hereby (including but not limited to any
indemnification obligations assumed or incurred by any Indemnitee)
or the role or status of any of the foregoing as an officer,
director or shareholder of ICON, Holdings, IHF Capital, Inc., ICON
Fitness Corporation, IHF Holdings, Inc., ICON of Canada, Inc., ICON
International Holdings, Inc., Universal Technical Services, or
JumpKing, Inc. (collectively, the "Indemnified Liabilities") except
for any such Indemnified Liabilities arising on account of such
Indemnitee's willful misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the
Company hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law; provided, however, that
the Indemnified Liabilities shall not include any losses solely
attributable to a decrease in value of any equity investment by the
Bain Funds in Holdings.
5. Assignment, etc. Except as provided below, neither party shall have the
right to assign this Agreement. Bain acknowledges that its services under
this Agreement are unique. Accordingly, any purported assignment by Bain
(other than as provided below) shall be void. Notwithstanding the
foregoing, (a) Bain may assign all or part of its rights and obligations
hereunder to any affiliate of Bain which provides services similar to
those called for by this Agreement, in which event Bain shall be released
of all of its rights and obligations hereunder and (b) the provisions
hereof for the benefit of the Bain Funds shall inure to the benefit of
their successors and assigns.
6. Amendments and Waivers. No amendment or waiver of any term, provision or
condition of this Agreement shall be effective, unless in writing and
executed by each of Bain and the Company. No waiver on any one occasion
shall extend to or effect or
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be construed as a waiver of any right or remedy on any future
occasion. No course of dealing of any person nor any delay or omission in
exercising any right or remedy shall constitute an amendment of this
Agreement or a waiver of any right or remedy of any party hereto.
7. Miscellaneous.
(a) Choice of Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of law
provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction.
(b) Consent to Jurisdiction. Each of the parties agrees that all
actions, suits or proceedings arising out of or based upon this
Agreement or the subject matter hereof shall be brought and
maintained exclusively in the federal and state courts of The
Commonwealth of Massachusetts. Each of the parties hereto by
execution hereof (i) hereby irrevocably submits to the jurisdiction
of the federal and state courts in The Commonwealth of Massachusetts
for the purpose of any action, suit or proceeding arising out of or
based upon this Agreement or the subject matter hereof and (ii)
hereby waives to the extent not prohibited by applicable law, and
agrees not to assert, by way of motion, as a defense or otherwise,
in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts,
that it is immune from extraterritorial injunctive relief or other
injunctive relief, that its property is exempt or immune from
attachment or execution, that any such action, suit or proceeding
may not be brought or maintained in one of the above-named courts,
that any such action, suit or proceeding brought or maintained in
one of the above-named courts should be dismissed on grounds of
forum non conveniens, should be transferred to any court other than
one of the above-named courts, should be stayed by virtue of the
pendency of any other action, suit or proceeding in any court other
than one of the above-named courts, or that this Agreement or the
subject matter hereof may not be enforced in or by any of the
above-named courts. Each of the parties hereto hereby consents to
service of process in any such suit, action or proceeding in any
manner permitted by the laws of The Commonwealth of Massachusetts,
agrees that service of process by registered or certified mail,
return receipt requested, at the address specified in or pursuant to
Section 9 is reasonably calculated to give actual notice and waives
and agrees not to assert by way of motion, as a defense or
otherwise, in any such action, suit or proceeding any claim that
service of process made in accordance with Section 9 does not
constitute good and sufficient service of process. The provisions of
this Section 7(b) shall not restrict the ability of any
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party to enforce in any court any judgment obtained in a federal or
state court of The Commonwealth of Massachusetts.
(c) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES,
AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT, OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT
OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE
SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. Each
of the parties hereto acknowledges that it has been informed by each
other party that the provisions of this Section 7(c) constitute a
material inducement upon which such party is relying and will rely
in entering into this Agreement and the transactions contemplated
hereby. Any of the parties hereto may file an original counterpart
or a copy of this Agreement with any court as written evidence of
the consent of each of the parties hereto to the waiver of its right
to trial by jury.
8. Merger/Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes
any prior communication or agreement with respect thereto, including
without limitation the Management and Advisory Agreement dated as of
November 14, 1994 between ICON, IHF, IHF Capital, Inc., a Delaware
corporation, and Bain (the "1994 Management Agreement"); provided,
however, that the provisions of Section 3.2 of the 1994 Management
Agreement shall continue in full force and effect and shall survive any
termination of this Agreement.
9. Notice. All notices, demands, and communications of any kind which any
party may require or desire to serve upon any other party under this
Agreement shall be in writing and shall be served upon such other party
and such other party's copied persons as specified below by personal
delivery to the address set forth for it below or to such other address as
such party shall have specified by notice to each other party or by
mailing a copy thereof by certified or registered mail, or by Federal
Express or any other reputable overnight courier service, postage prepaid,
with return receipt requested, addressed to such party and copied persons
at such addresses. In the case of service by personal delivery, it shall
be deemed complete on the first business day after the date of actual
delivery to such address. In case of service by mail or by overnight
courier, it shall be deemed complete, whether or not received, on the
third day after the date of mailing as shown by the registered or
certified mail receipt or courier service receipt. Notwithstanding the
foregoing, notice to any party or copied person of change of address shall
be deemed complete only upon actual receipt by an officer or agent of such
party or copied person.
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If to the Company, to it at:
ICON Health & Fitness, Inc.
1500 South 1000 West
Logan, Utah 84321
Attention: Chief Executive Officer
with a copy to:
Bain Capital Partners IV, L.P.
Two Copley Place, 7th Floor
Boston, MA 02116
Attention: Robert C. Gay
Ronald P. Mika
If to Bain, to it at:
Two Copley Place, 7th Floor
Boston, MA 02116
Attention: Robert C. Gay
Ronald P. Mika
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: R. Newcomb Stillwell
10. Severability. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement, then
such unenforceable provision shall be deemed eliminated from this
Agreement for the purpose of such proceedings to the extent necessary to
permit the remaining provisions to be enforced. To the full extent,
however, that the provisions of any applicable law may be waived, they are
hereby waived to the end that this Agreement be deemed to be valid and
binding agreement enforceable in accordance with its terms, and in the
event that any provision hereof shall be found to be invalid or
unenforceable, such provision shall be construed by limiting it so as to
be valid and enforceable to the maximum extent consistent with and
possible under applicable law.
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11. Disclaimer and Limitation of Liability.
(a) Disclaimer. Bain makes no representations or warranties, express or
implied, in respect of the services to be provided by it hereunder.
(b) Standard of Care. Neither Bain nor any other Indemnitee shall be
liable to the Company or any of its affiliates for any act, alleged
act, omission or alleged omission suffered or taken by Bain or any
other Indemnitee that does not constitute willful misconduct.
(c) Freedom to Pursue Opportunities, Etc. In anticipation that the
Company and Bain (or one or more affiliates, associated investment
funds or portfolio companies, or clients of Bain) may engage in the
same or similar activities or lines of business and have an interest
in the same areas of corporate opportunities, and in recognition of
the benefits to be derived by the Company from the services to be
provided under this Agreement and in recognition of the difficulties
which may confront any advisor who desires and endeavors fully to
satisfy such advisor's duties in determining the full scope of such
duties in any particular situation, the provisions of this clause
(c) are set forth to regulate, define and guide the conduct of
certain affairs of the Company as they may involve Bain. Except as
Bain may otherwise agree in writing after the date hereof:
(i) Bain shall have the right to, and shall have no duty
(contractual or otherwise) not to, directly or indirectly: (A)
engage in the same or similar business activities or lines of
business as the Company, including those competing with the
Company and (B) do business with any client or customer of the
Company;
(ii) Neither Bain nor any officer, director, employee, partner,
affiliate or associated entity thereof shall be liable to the
Company or its affiliates for breach of any duty (contractual
or otherwise) by reason of any such activities of or of such
person's participation therein; and
(iii) In the event that Bain acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for
both the Company and Bain or any other person, Bain shall have
no duty (contractual or otherwise) to communicate or present
such corporate opportunity to the Company and, notwithstanding
any provision of this Agreement to the contrary, shall not be
liable to the Company or its affiliates for breach of any duty
(contractual or otherwise) by reason of the fact that Bain
directly or indirectly pursues or acquires such opportunity
for itself,
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directs such opportunity to another person, or does not
present such opportunity to the Company.
(d) Limitation of Liability. In no event will either party hereto be
liable to the other for any indirect, special, incidental or
consequential damages, including lost profits or savings, whether or
not such damages are foreseeable, or in respect of any Liabilities
relating to any third party claims (whether based in contract, tort
or otherwise) other than the Indemnified Liabilities, relating to
the services to be provided by Bain hereunder.
12. Counterparts. This Agreement may be executed in any number of counterparts
and by each of the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
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[Management Agreement]
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as an instrument under seal as of the date first above
written by its officer or representative thereunto duly authorized.
THE COMPANY: ICON HEALTH & FITNESS, INC.
By /s/ S. Fred Beck
-------------------------------------
Name: S. Fred Beck
Title: CFO, V.P. and Treasurer
HF HOLDINGS, INC.
By /s/ S. Fred Beck
-------------------------------------
Name: S. Fred Beck
Title: CFO, V.P. and Treasurer
BAIN: BAIN CAPITAL PARTNERS IV, L.P.
By Bain Capital Investors, Inc.,
its general partner
By /s/ Robert Gay
----------------------------------
Name: Robert Gay
Title: Managing Director
Accepted and agreed:
IHF HOLDINGS, INC.
By /s/ S. Fred Beck
-------------------------------
Name: S. Fred Beck
Title: CFO
IHF CAPITAL, INC.
By /s/ S. Fred Beck
-------------------------------
Name: S. Fred Beck
Title: CFO
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