Exhibit 10.22
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 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 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 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 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.
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.
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, 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.
[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