Exhibit 10.11
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT (the "Agreement"), dated as of April 19, 2002,
by and between Harvest Partners, Inc. ("Harvest"), a New York corporation, and
Associated Materials Incorporated (the "Company"), a Delaware corporation .
W I T N E S S E T H:
WHEREAS, the Company is engaged in the building products industry,
electrical cable manufacturing industry and activities related to each of the
foregoing (the "Business"); and
WHEREAS, affiliates of Harvest have caused Simon Acquisition Corp.
("Simon"), a Delaware corporation , to be formed to invest in the capital stock
of the Company; and
WHEREAS, Associated Materials Holdings Inc. ("Holdings"), a Delaware
corporation controlled by affiliates of Harvest, Simon and the Company have
entered into a Merger Agreement (the "Merger Agreement"), dated as of March 16,
2002, pursuant to which Simon has been merged (the "Merger") with and into the
Company, with the Company as the surviving entity;
WHEREAS, the Company desires that Harvest cause Holdings to
designate representatives with financial and/or management expertise to serve on
the Board of Directors of the Company, and Harvest desires to cause Holdings to
designate such representatives to serve on the Board of Directors of the
Company, and that such representatives render counsel, guidance and directorial
assistance to the Company and/or its subsidiaries and affiliates while serving
on the Board of Directors of the Company (the "Director Services"); and
WHEREAS, the Company further desires that Harvest provide the
Company and/or its subsidiaries and affiliates with financial advisory and
strategic planning services (the "Harvest Services"), including, without
limitation, various advisory services, consulting, marketing, management,
strategic planning, corporate organization and structure, financial matters in
connection with the operation of the businesses of the Company, expansion of
services, acquisitions and business opportunities and review and advise the
Company regarding its overall progress, needs and condition.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and 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. Effective Date. This Agreement shall be effective as of the
date first above written (the "Effective Date").
2. Services. Harvest shall cause certain of its employees,
directors or designees (the "Harvest Directors") with financial and/or
management expertise to serve on the Board of Directors of the Company. Harvest
shall cause the Harvest Directors to provide, the Director Services and shall
devote such time and attention as is reasonably necessary to provide
the Director Services. Harvest shall also provide the Harvest Services to the
Company from time to time as requested by the Company. The Harvest Services may
be rendered both through the Harvest Directors and directly by Harvest.
3. Compensation. (a) Subject to Sections 3(f) and 4 below, as
full payment for the Director Services and the Harvest Services to be rendered
by the Harvest Directors and Harvest hereunder, the Company shall pay to Harvest
a fee (the "Harvest Fee") equal to the sum of $750,000 (to be adjusted annually
in accordance with the U.S. Consumer Price Index) for each year (such years to
begin on each April 1 and ending on each March 31; provided however that the
initial year shall commence on the Effective Date (each, a "Harvest Year")).
Except as otherwise provided in Section 3(c) below, the Harvest Fee shall be
payable in equal quarterly installments during each year of this Agreement, in
advance, on the first day of each quarterly period commencing on the Effective
Date.
(b) In addition to the payment of the Harvest Fee provided for in
Section 3(a) above and in Section 3(c) below, the Company agrees to pay to
Harvest, in consideration of Harvest's efforts to direct the relevant entity to,
and provide advice and strategic planning to the relevant entity in connection
with a Transaction, from time to time, a fee (each, a "Transaction Fee")
concurrently, with, and as a condition to, the closing of (i) a sale, merger
(other than the "Merger"), joint venture formation or other business combination
or recapitalization of Holdings, the Company or one or more of its subsidiaries
in connection with which direct or indirect control of such entity is assumed by
an unaffiliated third party (each, a "Business Combination"), (ii) a sale, lease
or conveyance of all or substantially all of Holdings' or the Company's or one
or more of its subsidiaries' assets (an "Asset Sale"), (iii) any offering of
Holdings' or the Company's or one or more of its subsidiaries capital stock or
indebtedness (an "Offering"), or (iv) any declaration of an extraordinary
dividend by Holdings or the Company (an "Extraordinary Dividend" and, together
with a Business Combination, an Asset Sale and an Offering, a "Transaction").
The amount of any Transaction Fee shall be equal to (x) 1% of the "Transaction
Amount" (as defined below) in connection with a Business Combination, Asset Sale
or Extraordinary Dividend, provided, that, in the case of a Business
Combination, Asset Sale or Extraordinary Dividend, the gross proceeds from such
a Business Combination, Asset Sale or, as the case may be, Extraordinary
Dividend generate a cumulative annual eight percent (8%) compound internal rate
of return on the initial investment in Holdings by holders of capital stock of
Holdings on the Effective Date; and (y) 2% of the net proceeds to the relevant
entity in connection with an Offering. "Transaction Amount," as used herein,
shall mean the total consideration (including, without limitation, cash;
securities; earnouts (when and if paid); dividends or other distribution to
stockholders; evidences of indebtedness; other debt instruments, capital leases
and preferred securities or interests remaining on the financial statements,
indebtedness, capital leases, preferred securities or interests and debt and
other obligations assumed, retired or defeased by the purchaser; and any other
property or form of consideration) distributed or directly or indirectly paid,
payable or contributed, for the assets and/or existing and newly issued stock
and/or other ownership interest in connection with the relevant Transaction;
provided, however, that Transaction Amount shall exclude (i) refinanced
indebtedness of the Company and (ii) proceeds from Offerings by Holdings to
holders of capital stock of Holdings on the Effective Date (other than any such
holder that is managed by Harvest). Any securities that form part or all of the
Transaction Amount shall be valued at the quoted public market price or, in the
absence of a quoted market price, the fair value thereof, as
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determined in good faith by the Board of Directors of the Company. Any other
Transaction Amount that is not represented by cash shall be valued at the fair
value thereof as determined in good faith by the Board of Directors of the
Company. A Transaction Fee shall in any and all circumstances be payable in cash
at the closing of Transaction. In the event of a recapitalization of any person
or entity, a Transaction Amount shall also include, without duplication, the
value of cash, notes, property and securities distributed to the person's or
entity's stockholders or members. The Transaction Fee will be payable so long as
a Transaction is consummated or a definitive agreement providing for a
Transaction is entered into at any time during the Initial Term or Renewal Term
or within the two (2) year period subsequent to the termination hereof.
Notwithstanding anything else herein to the contrary, in lieu of payment thereof
by the Company, the Company may cause any of its subsidiaries to pay any
Transaction Fee payable to Harvest in connection with a Transaction; provided,
that nothing in this sentence shall affect the absolute right of Harvest to be
paid such Transaction Fee and the Company shall in all respects remain liable
therefor until such obligation is paid in full. The Company may agree to pay
Harvest a fee in connection with any other transaction, including without
limitation, an acquisition of capital stock or assets of another person or
entity, so long as such fee is approved by a majority of the members of the
Board of Directors of the Company other than the Harvest Directors.
(c) Concurrent with, and as a condition to, the closing of any
Business Combination or Asset Sale involving the Company, the Company shall pay
to Harvest, in a lump sum payment, an amount equal to the aggregate Harvest Fee
which would otherwise be payable by the Company through the completion of the
then-remaining Initial Term or Renewal Term, as the case may be. Notwithstanding
anything else herein to the contrary, in lieu of payment thereof by the Company,
the Company may cause any of its subsidiaries to pay the amount of any Harvest
Fee payable to Harvest pursuant to this Section 3(c); provided, that nothing in
this sentence shall affect the absolute right of Harvest to be paid such Harvest
Fee and the Company shall in all respects remain liable therefor until such
obligation is paid in full.
(d) In addition to the fees provided for in Section 3(a), (b) and
(c) above, the Company agrees to pay to Harvest a fee in the amount of
$5,000,000 plus all out of pocket expenses incurred by Harvest in connection
with the consummation of the Merger (the "Closing Fee") upon consummation of the
Merger. The Closing Fee shall be payable in cash upon consummation of the
Merger.
(e) In addition to the fees to be paid to Harvest under Sections
3(a), 3(b), 3(c) and 3(d), the Company shall pay to, or on behalf of, Harvest,
promptly as billed, all reasonable out-of-pocket expenses incurred by Harvest in
connection with the Director Services and the Harvest Services rendered
hereunder. Such expenses shall include, among other things, reasonable fees and
disbursements of counsel, travel expenses, messenger and duplicating services,
facsimile expenses and other reasonable and customary expenditures.
(f) In addition to the fees otherwise payable hereunder, in
consideration of the Director Services provided to the Company by any Harvest
Director who is not an employee or director of Harvest, the Company shall pay
reasonable and customary director's fees to such Harvest Director, in addition
to reimbursing the reasonable out-of-pocket expenses (including, but not limited
to, travel expenses) of such Harvest Director.
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(g) Notwithstanding the foregoing, if the payment of an amount in
respect of the Harvest Fee would result in a breach or event of default pursuant
to an instrument of indebtedness to which the Company is a party (the
"Indebtedness") such payment shall not be paid to the extent that the payment of
such amount would result in such breach or default, but instead shall be accrued
on the books of the Company and shall bear interest at 8% per annum and be
payable as soon as and to the extent permitted by the terms of the Indebtedness,
together with interest thereon as aforesaid. The Company covenants and agrees
that it shall not agree to an amendment of the terms of the Indebtedness which
would specifically prohibit the payment of the Harvest Fee hereunder or impose
any higher financial test ratio or other pre-condition more onerous that any
terms of the Indebtedness in effect on the date hereof. The Company covenants
and agrees that, in the event that it incurs additional indebtedness, it shall
not grant in favor of the holders of such additional indebtedness a covenant or
right specifically prohibiting the payment of the Harvest Fee hereunder or
imposing any higher financial test ratio or other pre-condition more onerous
than is applicable to the Indebtedness.
4. Stock Options. Harvest and employees of Harvest shall not be
eligible for any grant of stock options by Holdings or the Company for the
duration of the Initial Term and any Renewal Term.
5. Term. (a) The term of this Agreement shall commence on the
date hereof and shall terminate upon the earlier of (i) March 31, 2007 (such
period being referred to herein as the "Initial Term"), unless this Agreement is
automatically renewed as provided below in this Section 5, (ii) the date on
which this Agreement is terminated for cause as provided in Section 7 below and
(iii) the closing of any Business Combination or Asset Sale involving the
Company. Notwithstanding the foregoing the term of this Agreement shall
automatically and immediately be extended for additional one-year periods (each
such period being referred to herein as a "Renewal Term") if written notice of
termination of this Agreement has not been given by Harvest to the Company at
least three (3) years prior to the end of the Initial Term or, as the case may
be, a Renewal Term.
(b) Notwithstanding anything to the contrary contained herein, the
obligations of the Company set forth in Sections 3(b), 3(c), 3(e), 3(f) and 8 of
this Agreement shall survive termination of this Agreement.
6. Right to Engage in Other Activities. The Director Services
provided herein are not to be deemed exclusive. Nothing contained herein shall
restrict Harvest or any of its shareholders, directors, officers, employees or
agents from engaging in any other business or devoting time and attention to the
management, investment, involvement or other aspects of any other business,
including becoming an officer or director thereof, or rendering services of any
kind to any other Company, firm, individual or association.
7. Termination for Cause. This Agreement may be terminated for
cause by the party whose conduct is not the cause for such termination if (a)
either party materially breaches its obligations as set forth herein (which, in
this case of Harvest, should be terminated for willful misconduct or gross
negligence), or (b) either party files a voluntary petition in bankruptcy or is
adjudicated as bankrupt or insolvent, or such party files a petition under any
chapter of the United States Bankruptcy Code or any other present or future
applicable Federal,
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state or other statute or law regarding bankruptcy, insolvency or other relief
for debtors, or any party seeks, or consents to, or acquiesces in the
appointment of, any trustee, receiver, conservator or liquidator of itself or of
all or any substantial portion of its property.
8. Indemnification. The Company shall (i) indemnify Harvest, its
affiliates, and their respective partners, directors, officers, employees,
agents and controlling persons and their respective affiliates, and any Harvest
Directors (collectively, the "Indemnified Parties"), to the fullest extent
permitted by law, from and against any and all losses, suits, proceedings,
demands, judgments, claims, damages and liabilities, joint or several, to which
any Indemnified Party may become subject, caused by, related to or arising out
of the Director Services or the Harvest Services or any other advice or services
contemplated by this Agreement or the engagement of Harvest pursuant to, and the
performance by any Indemnified Party of the Director Services or the Harvest
Services contemplated by, this Agreement, and (ii) promptly reimburse each
Indemnified Party for all costs and expenses (including reasonable attorney's
fees and expenses), as incurred, in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party
and whether or not such claim, action or proceeding is initiated or brought by
or on behalf of the Company and whether or not resulting in any liability.
9. Limited Liability. The Company agrees that no Indemnified
Party shall have any liability (whether direct or indirect, in contract or tort,
or otherwise) to the Company, holders of its securities or its creditors related
to or arising out of the engagement of Harvest pursuant to, or the performance
by any Indemnified Party of the Director Services or the Harvest Services
contemplated by, this Agreement, except to the extent that any loss, claim,
damage, liability, cost or expense is found in a final non-appealable judgment
by a court of competent jurisdiction to have resulted from Harvest's willful
misconduct or gross negligence.
10. Independent Contractor. The Company acknowledges that Harvest
has been retained hereunder solely as an advisor to the Company, and not as an
advisor to or agent of any other person, and that the Company's engagement of
Harvest is as an independent contractor and not in any other capacity including
as a fiduciary.
11. Information. The Company agrees to furnish or cause to be
furnished to Harvest all necessary or appropriate information for use in its
engagement and hereby warrants that any information relating to the Company or a
Transaction that is furnished to Harvest by or on behalf of the Company will be
true and correct in all material respects and not misleading.
12. Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party, as determined by the court,
shall be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
13. Assignment. Neither Harvest nor the Company may assign this
Agreement or any of their respective rights or obligations hereunder, except
that either of them may assign or transfer this Agreement to any other person
who or which acquires all or substantially all of their respective property,
business and assets, provided, however, that, in the case of
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Harvest, this Agreement may be assigned or transferred, in whole or in part, to
any affiliate of Harvest, and thereafter references in this Agreement to
"Harvest" shall include such affiliate.
14. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not in any manner or way affect any other
provision hereof, and this Agreement shall be construed, if possible, as if
amended to conform to legal requirements, failing which it shall be construed as
if any such offending provision were omitted.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
16. Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
17. Binding Nature. Subject to the restrictions on assignability
contained herein and the rights and obligations of the Indemnified Parties under
Sections 7 and 8 above, each and all of the covenants, terms, conditions,
provisions and agreements herein contained shall be binding upon, and inure only
to the benefit of, the parties hereto and their respective successors, heirs and
permitted assigns.
18. Amendment, etc. The provisions of this Agreement may not be
amended, waived, modified or changed except by an instrument in writing signed
by all of the parties hereto. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Management
Agreement to be executed by their representatives thereunto duly authorized on
the date first above written.
HARVEST PARTNERS, INC., a New York
corporation
By: /s/ Ira D. Kleinman
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Name: Ira D. Kleinman
Title: General Partner
ASSOCIATED MATERIALS INCORPORATED, a
Delaware corporation
By: /s/ Michael J. Caporale, Jr.
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Name: Michael J. Caporale, Jr.
Title: President and Chief Executive
Officer
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