EXHIBIT 10.1
EXECUTION COPY
MANAGEMENT AGREEMENT
This Management Agreement (the "AGREEMENT") is entered into as of June 4,
2004, by and among J.W. Childs Associates, L.P., a Delaware limited partnership
("JWC"), Borealis Capital Corporation, an Ontario company ("BOREALIS") and
Ontario Municipal Employees Retirement Board, a corporation established under
the Ontario Municipal Employees Retirement System Act ("OMERS" and together with
JWC and Borealis, the "CONSULTANTS"), MAAX Holdings, Inc., a Delaware
corporation ("HOLDINGS") and MAAX Corporation, a Nova Scotia unlimited company
(the "COMPANY"), and is made effective as of the Effective Time (as defined in
the Merger Agreement (as defined below)).
The Consultants, Holdings and the Company are hereinafter jointly referred
to as the "PARTIES."
RECITALS
A. The Consultants are specifically skilled in corporate finance,
strategic corporate planning and other management services and provide similar
commercial services to various third parties.
B. The Company has undertaken to provide corporate financing, strategic
corporate planning and management skills to its subsidiaries and will enter into
a definitive agreement with each of them with respect thereto.
C. The Company requires assistance from the Consultants in providing such
services to its subsidiaries.
D. The Company does not possess the corporate financing, strategic
corporate planning and management skills of the Consultants to enable the
Company and its subsidiaries to maximize their full commercial potential.
E. In contemplation of the acquisition of all of the issued and
outstanding shares of MAAX Inc., pursuant to that certain Agreement and Plan of
Merger, dated as of March 10, 2004 (the "MERGER AGREEMENT"), by and among
3087052 Nova Scotia Company, 3087053 Nova Scotia Company, 9139-4460 Quebec Inc.
("SUBCO"), 9139-7158 Quebec Inc. ("SUBCO II") and the Company, the Company will
become a wholly-owned indirect subsidiary of Holdings as a result of the
amalgamation of Subco, Subco II and the Company (together with the other
transactions contemplated by the Merger Agreement, the "ACQUISITION").
F. Prior to the date hereof, the Consultants rendered substantial and
valuable services to the Company and its subsidiaries in connection with the
Acquisition, including services regarding the planning and structuring of the
Acquisition and the raising of debt and equity financing therefor.
G. The Company wants to retain the Consultants in order to have access to
their special skills and management advisory services on a recurring basis in
connection with the Company's and its subsidiaries' general business operations
following the consummation of the Acquisition.
H. The Consultants are willing to make such skills available and to
provide such services to the Company and its subsidiaries on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the Company and its subsidiaries and the
Consultants, intending to be legally bound, do hereby agree as follows:
1. Engagement. The Company hereby retains the Consultants for the Term (as
hereinafter defined) and upon the terms and conditions herein set forth to
provide consulting and management advisory services to the Company and/or any of
its subsidiaries, on a recurrent basis. These services will be in the field of
financial and strategic corporate planning and such other management areas as
the Consultants and the Company shall mutually agree. In consideration of the
compensation to the Consultants herein specified, the Consultants accept such
engagement and agree to perform the services specified herein in the manner set
out in Schedule A.
2. Term. The engagement hereunder shall be for a term commencing at the
Effective Time and expiring on the fifth (5th) anniversary of such Effective
Time (the "INITIAL TERM") unless terminated earlier as provided below. Upon
expiration of the Initial Term, this Agreement shall automatically extend for
successive periods of one (1) year each, unless terminated earlier as provided
below or the Consultants or the Company shall give notice to the other at least
ninety (90) days prior to the end of the Initial Term (or any annual extension
thereof) indicating that it does not intend to extend the term of this
Agreement. The Initial Term, together with all such annual extensions of the
Initial Term, is referred to herein as the "TERM." This Agreement will
automatically terminate upon a sale of all of the stock, assets or business of
the Company or an initial public offering of the Company's capital stock for
sale to the public pursuant to a registered offering in the United States or a
prospectus in Canada.
3. Services to be Performed. The Consultants shall remain available at all
times and shall devote reasonable time and efforts to the performance of the
consulting and management advisory services contemplated by this Agreement.
However, no precise number of hours is to be devoted by the Consultants on a
weekly or monthly basis. The Consultants may perform services under this
Agreement directly, through their respective employees or agents, or with such
outside consultants as the Consultants may engage for such purpose. The Company
acknowledges that such services to it will not be exclusive, and that the
Consultants and their affiliates will render similar services to other persons.
The obligations of the Consultants to provide services hereunder shall be
several and not joint.
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4. Confidentiality. The Consultants shall hold in confidence all
proprietary and confidential information of the Company and/or any of its
subsidiaries which may come into the Consultants' possession or knowledge as a
result of their performance of services hereunder, exercising a degree of care
in maintaining such confidence as is used by the respective Consultant to
protect its own proprietary or confidential information that it does not wish to
disclose. The Consultants shall use all reasonable efforts to ensure that their
respective employees, agents and outside consultants similarly maintain the
confidentiality of such proprietary and confidential information of the Company
and/or any of its subsidiaries.
5. Compensation; Expense Reimbursement.
5.1 Closing Fee. In consideration of the Consultants' provision of
services regarding the planning and structuring of the Acquisition and the other
transactions contemplated by the Merger Agreement and raising of debt and equity
financing in connection therewith, and the Consultant's execution and delivery
of this Agreement, the Company shall pay (i) JWC a fee in the amount of US$2.5
million, (ii) Borealis a fee in the amount of C$1.4 million, and (iii) OMERS a
fee in the amount of C$1.4 million, each of which shall be due and payable in
immediately available funds immediately upon consummation of the Acquisition.
5.2 Consulting Fee. In consideration for retaining the Consultants
for strategic planning and management advisory services on an ongoing basis as
described hereunder, (i) JWC shall be paid an aggregate annual fee (hereinafter
the "JWC CONSULTING FEE") equal to US$360,000, which JWC Consulting Fee shall be
paid to JWC by the Company and/or its subsidiaries (or any one of them) in equal
monthly installments of US$30,000 per month, (ii) Borealis shall be paid an
aggregate annual fee (hereinafter the "BOREALIS CONSULTING FEE") equal to
US$137,676, which Borealis Consulting Fee shall be paid to Borealis by the
Company and/or its subsidiaries (or any one of them) in equal monthly
installments of US$11,473 per month and (iii) OMERS shall be paid an aggregate
annual fee (hereinafter the "OMERS CONSULTING FEE") equal to US$137,676, which
OMERS Consulting Fee shall be paid to OMERS by the Company and/or its
subsidiaries (or any one of them) in equal monthly installments of US$11,473 per
month (the JWC Consulting Fee, Borealis Consulting Fee and the OMERS Consulting
Fee together, the "CONSULTING FEES"); provided that the monthly installments due
to JWC, Borealis and OMERS in respect of any calendar month during which the
Term commences shall be appropriately pro-rated for the number of days in such
calendar month for which the Term was in effect, and provided, further that the
Consulting Fees shall not be required to be paid to the extent such Consulting
Fees are not permitted to be paid under the (x) Credit and Guaranty Agreement,
dated as of June 4, 2004, by and among the Company, Beauceland Corporation
("BEAUCELAND"), the Subsidiaries of Beauceland from time to time party thereto,
Goldman Sachs Credit Partners L.P., Royal Bank of Canada and Merrill Lynch
Capital Corporation, as agents and arrangers, and the lenders from time to time
party thereto, as the same may be amended, supplemented, restated, extended,
refinanced or otherwise modified from time to time or (y) Indenture, dated as of
June 4, 2004, by and among the Company, the Guarantors (as defined therein) and
U.S. Bank Trust National Association, as Trustee, as the same may be amended,
supplemented, restated, extended, refinanced or otherwise modified from time to
time. Such Consulting Fees are to be paid monthly in arrears on the first day of
each calendar month, except for the installment which would otherwise be payable
with respect to the calendar month in which the
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Term commences, which shall instead be paid upon consummation of the
Acquisition. The Company and/or any of their subsidiaries shall allocate the
Consulting Fees among themselves according to the services received. If the
Company is not able to obtain a refund of any GST/QST taxes paid to the relevant
tax authorities, the Company will reduce the amount of the Borealis Consulting
Fees and if subject to such taxes, the OMERS Consulting Fees, so that the net
amount payable to Borealis and, if applicable, OMERS, including payment by the
Company of any GST/QST taxes to such tax authorities, will not exceed US$11,473
per month.
5.3 Expenses. The Company shall reimburse the Consultants for all
reasonable out-of-pocket expenses incurred in connection with strategic
corporate planning and management advisory services to be provided by the
Consultants hereunder, including, without limitation, costs in connection with
agents or outside consultants described in Section 3, reasonable travel, lodging
and similar out-of-pocket costs incurred by the Consultants in connection with
or on account of their performance of services for the Company and its
subsidiaries hereunder. The Consultants may from time to time establish an
estimated monthly reimbursement rate whereby the Company shall remit on a
monthly basis a fixed sum to offset the Consultants' estimated expenses. The
Consultants shall periodically reconcile the Company's estimated expense
payments with actual expenses, and the parties shall adjust future expense
reimbursement payments accordingly. The Consultants shall provide reasonably
itemized documentation for all billed expenses.
6. Indemnification. In addition to their agreements and obligations under
this Agreement, the Company agrees, jointly and severally, to indemnify and hold
harmless the Consultants, and their affiliates, including their officers,
directors, stockholders, partners, members, employees and agents (collectively,
the "INDEMNITEES") from and against any and all claims, liabilities, losses and
damages or actions, suits or proceedings in respect thereof (collectively, the
"OBLIGATIONS") as and when incurred by the Indemnitees, in any way related to
the Acquisition or arising out of the performance by the Consultants of services
under this Agreement, and to reimburse the Indemnitees for reasonable
out-of-pocket legal and other expenses ("EXPENSES") as and when incurred by any
of them in connection with or relating to investigating, preparing to defend, or
defending any actions, claims or other proceedings (including any investigation
or inquiry) arising in any manner out of or in connection with the Acquisition
or the Consultants' performance under this Agreement (whether or not such
Indemnitee is a named party in such proceeding); provided, however, that the
Company shall not be responsible under this Section 6 for any Obligations or
Expenses incurred by an Indemnitee to the extent that it is finally judicially
determined (in an action in which such Indemnitee is a party) to result from
actions taken by such Indemnitee due to such Indemnitee's gross negligence or
willful misconduct.
7. Contribution. If for any reason the indemnity provided for in Section 6
is unavailable or is insufficient to hold harmless any Indemnitee from any
Obligations or Expenses, then the Company shall contribute to the amount paid or
payable by such Indemnitees as a result of such Obligations or Expenses in such
proportion as is appropriate to reflect (i) the relative fault of the Company,
on the one hand, and such Indemnitee, on the other, in connection with the state
of facts giving rise to such Obligations or Expenses, (ii) if such Obligations
or Expenses result from, arise out of, are based upon or relate to the
Acquisition or any transaction contemplated hereby, the relative benefits
received by the Company, on the one hand, and such Indemnitee, on the other,
from
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the Acquisition or the other transactions contemplated hereby, and (iii) if
required by law, any other relevant equitable considerations. For purposes of
this Section 7, the relative fault of the Company, on the one hand, and of the
Indemnitee, on the other, shall be determined by reference to, among other
things, their respective relative intent, knowledge, access to information and
opportunity to correct the state of facts giving rise to such Obligations or
Expenses. For purposes of this Section 7, the relative benefit of the Company,
on the one hand, and of the Indemnitee, on the other, shall be determined by
weighing the direct monetary proceeds to the Company, on the one hand, and such
Indemnitees, on the other, from the Acquisition or such transactions
contemplated hereby. The Parties hereto acknowledge and agree that it would not
be just and equitable if contributions pursuant to Section 7 were determined by
pro rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to above. The Company shall not be
liable under this Section 7 for contribution to the amount paid or payable by
any Indemnitee except to the extent and under such circumstances that the
Company would have been liable to indemnify, defend and hold harmless such
Indemnitee under Section 6, if such indemnity were enforceable under applicable
law. No Indemnitee shall be entitled to contribution from the Company with
respect to any Obligations or Expenses in the event that such Indemnitee is
finally determined to be guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act of 1933, as amended) in
connection with such Obligations or Expenses and the Company is not guilty of
such fraudulent misrepresentation.
8. Third-Party Beneficiaries. All Indemnitees not signatory to this
Agreement are intended beneficiaries of Sections 6 and 7 of this Agreement.
9. Notices. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) when delivered
personally, (b) upon confirmation of receipt when such notice or other
communication is sent by facsimile, (c) one day after delivery to an overnight
delivery courier or (d) on the fifth day following the date of deposit in the
United States mail if sent first class, postage prepaid, by registered or
certified mail. The addresses for such notices shall be as follows:
(i) If to JWC, addressed to it at:
c/o J.W. Childs Associates, L.P.
111 Huntington Avenue
Suite 2900
Boston, Massachusetts 02199
Facsimile: (617) 753-1101
Attention: Steven G. Segal
with a copy (which shall not constitute notice) to:
Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
Facsimile: (212) 836-6419
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Attention: Stephen C. Koval, Esq.
Fasken Martineau DuMoulin LLP
Stock Exchange Tower
800, Place Victoria, Suite 3400
P.O. Box 242
Montreal, Quebec H4Z 1E9
Fax: (514) 397-7600
Attn.: Robert Pare, Esq.
(ii) If to Borealis, addressed to it at:
c/o Borealis Private Equity Limited Partnership
1 Adelaide Street East, Suite 2800
Toronto, Ontario M5C 2V9
Facsimile: (416) 361-5042
Attention: Andre La Forge
(iii) If to OMERS, addressed to it at:
c/o Ontario Municipal Employees Retirement Board
1 University Avenue, Suite 700
Toronto, Ontario M5J 2PI
Facsimile: (416) 369-0675
Attention: Michael Graham
(iv) If to Holdings, addressed to it at:
c/o J.W. Childs Associates, L.P.
111 Huntington Avenue
Suite 2900
Boston, Massachusetts 02199
Facsimile: (617) 753-1101
Attention: Steven G. Segal
with a copy (which shall not constitute notice) to:
Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
Facsimile: (212) 836-6419
Attention: Stephen C. Koval, Esq.
Fasken Martineau DuMoulin LLP
Stock Exchange Tower
6
800, Place Victoria, Suite 3400
P.O. Box 242
Montreal, Quebec H4Z 1E9
Fax: (514) 397-760
Attn.: Robert Pare, Esq.
(v) If to the Company, addressed to the Company at:
640 Cameron
Sainte-Marie, Quebec
Canada G6E 1B2
Attention: Denis Aubin
Fax: (418) 387-3507
with a copy (which shall not constitute notice) to:
J.W. Childs Associates, L.P.
111 Huntington Avenue
Suite 2900
Boston, Massachusetts 02199
Facsimile: (617) 753-1101
Attention: Steven G. Segal
Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
Facsimile: (212) 836-6419
Attention: Stephen C. Koval, Esq.
Fasken Martineau DuMoulin LLP
Stock Exchange Tower
800, Place Victoria, Suite 3400
P.O. Box 242
Montreal, Quebec H4Z 1E9
Fax: (514) 397-7600
Attn.: Robert Pare, Esq.
10. Modifications. This Agreement constitutes the entire agreement among
the Parties hereto with regard to the subject matter hereof, superseding all
prior understandings and agreements, whether written or oral. This Agreement may
not be amended or revised except by a writing signed by the Parties.
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11. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors and permitted
assigns, but may not be assigned by any Party without the prior written consent
of the other Parties hereto.
12. Captions. Captions have been inserted solely for the convenience of
reference and in no way define, limit or describe the scope or substance of any
provision and shall not affect the validity of any other provision.
13. Governing Law; Jurisdiction; Service of Process. This Agreement shall,
in accordance with Section 5-1401 of the General Obligations Law of the State of
New York, be governed by the laws of the State of New York, without regard to
any conflicts of laws principles thereof that would call for the application of
the laws of any other jurisdiction. Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Agreement may be
brought against either of the Parties in the courts of the State of New York, or
if it has or can acquire jurisdiction, in the United States District Court for
the Southern District of New York, and each of the Parties hereby consents to
the jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world, whether within or without the State
of New York.
14. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
15. 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.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the date first above written.
J.W. CHILDS ASSOCIATES, L.P.
By: J.W. Childs Associates, Inc.,
its general partner
By: /s/ James C. Rhee
--------------------------------------
Name: James C. Rhee
Title: Vice President
ONTARIO MUNICIPAL EMPLOYEES
RETIREMENT BOARD
By: /s/ Michael Graham
--------------------------------------
Name: Michael Graham
Title: Portfolio Manager
By: /s/ David Rogers
--------------------------------------
Name: David Rogers
Title: Vice President
BOREALIS CAPITAL CORPORATION
By: /s/ Ian D. Collier
--------------------------------------
Name: Ian D Collier
Title: Chief Executive Officer
By: /s/ Gerard G. McGrath
--------------------------------------
Name: Gerard G McGrath
Title: Executive Vice President
MAAX CORPORATION
By: /s/ James C. Rhee
--------------------------------------
Name: James C. Rhee
Title: Secretary
MAAX HOLDINGS, INC.
By: /s/ James C. Rhee
--------------------------------------
Name: James C. Rhee
Title: Secretary
[Management Agreement Signature Page]
SCHEDULE A
The Company and its subsidiaries undertake to keep records and documents
that provide a complete and accurate description of the functions performed by
the Consultants. These records and documents will be kept in a file at the head
office of the Company.
At the end of each year, the Consultants will prepare and send to the
Company a description of services rendered during the immediately preceding
year.
At the end of the Initial Term and at the end of each successive period
for which this Agreement is extended, the Parties will review the Consulting
Fees to ensure that the Consulting Fees are reasonable.
JWC will not render any services in Canada. OMERS and Borealis will not
perform any services in the United States.