EXHIBIT 10.2
EXECUTION COPY
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT (this "AGREEMENT") is made as of April
28, 2005, by and among VMC ACQUISITION CORPORATION, a Delaware corporation (the
"COMPANY") and TRANSPORTATION RESOURCE ADVISORS, LLC, a Delaware limited
liability company ("TRA"), UNITED AUTO GROUP, INC. ("UAG"), PENSKE TRUCK LEASING
CO., L.P. ("PTL"), and OPUS VENTURES GENERAL PARTNER LIMITED ("OPUS" and
collectively with TRA, UAG and PTL, the "MANAGERS," and each a "MANAGER").
WHEREAS, the Company is a direct wholly-owned subsidiary of VMC Holding
Corporation, a Delaware corporation ("HOLDINGS");
WHEREAS, the parties hereto desire to enter into this Agreement to
evidence the Company's obligations to pay the amounts set forth herein in
consideration of the services set forth herein.
NOW THEREFORE, it is mutually agreed as follows:
1. Term.
(a) The term of this Agreement shall commence on the date hereof and shall
continue until terminated upon the earlier to occur of (i) immediately prior to
the first firm commitment underwritten public offering of the common stock of
Holdings, registered under the Securities Act of 1933, as amended, or (ii) the
written consent of all Managers then a party hereto.
(b) This Agreement shall terminate as to any individual Manager upon the
earlier to occur of (i) written notice delivered by such Manager, or (ii) such
Manager (including its affiliates) ceasing to hold at least 5% of the issued and
outstanding common stock of Holdings.
2. Annual Fee.
(a) As compensation for valuable benefit received or to be received by the
Company with respect to advisory services to be provided by the Managers or
their designated affiliates with respect to recommending, structuring and
identifying sources of capital for the Company, monitoring, evaluating and
making recommendations regarding potential acquisitions, analyzing the Company's
operations, historical performance and future prospects in connection with
financial and strategic corporate planning and other advisory services as the
parties may mutually agree (collectively, the "MANAGEMENT SERVICES"), the
Company shall pay to the Managers, to be divided among them as set forth in
Annex A, for so long as this Agreement continues in effect, an aggregate annual
fee equal to the greater of (i) $350,000 or (ii) two percent (2%) of the
Company's consolidated EBITDA for each fiscal year (the "ANNUAL FEE") payable in
cash in immediately available funds in quarterly installments on the 15th day of
each calendar quarter. The Annual Fee and all other payments hereunder shall be
prorated for partial periods. Payments in respect of the Annual Fee shall be
made in advance based on the
Company's EBITDA for the most recently ended quarter prior to the applicable
payment date; provided, however, that the payment for the period from May 1,
2005 though June 30, 2005 shall be made on May 15, 2005 and shall be in an
amount equal to the greater of (x) 2% of the Company's EBITDA for the
three-month period ending March 31, 2005, multiplied by 0.66 and (y) $58,333.34.
At the time each payment is due, the Company will deliver to the Managers its
calculation of EBITDA for the most recently ended quarter. That calculation
shall be (x) based on the Company's financial statements, prepared in accordance
with generally accepted accounting principals consistently applied and in
accordance with Annex B, as Annex B may be changed from time to time and (y)
certified by the Company's chief accounting or financial officer. Any
disagreements shall be resolved as provided in paragraph 3(b) below. For the
sake of clarity: each payment shall be in an amount equal to (x) the greater of
the payment calculated as a percentage of EBITDA and (y) the same payment
calculated as a percentage of the minimum Annual Fee. All amounts payable
hereunder shall be calculated and paid in U.S. dollars, unless otherwise
specified by the Managers.
(b) At the end of each fiscal year, the Company shall prepare financial
statements, which shall include a calculation of the Company's EBITDA, and shall
cause its independent auditors to audit such financial statements and deliver
the opinion of such auditors with respect to such financial statements, all in
accordance with United States generally accepted accounting principles, applied
consistently (the "AUDIT REPORT"). The Company shall cause the Audit Report to
be delivered to the Managers. If any of the Managers has any objections to the
Audit Report, it will deliver a detailed statement describing such objections to
the Company within ten (10) days after receiving the Audit Report.
(c) The parties will use reasonable efforts to resolve any such objections
themselves. If the parties do not obtain a final resolution within ten (10) days
after having received the statement of objections, the parties will select an
accounting firm mutually acceptable to them to resolve any remaining objections.
If the parties are unable to agree on the choice of an accounting firm, they
will select a nationally-recognized accounting firm by lot (after excluding
their respective regular outside accounting firms). The determination of any
accounting firm so selected will be set forth in writing. The parties will
revise the Audit Report, including the calculation of EBITDA, as appropriate to
reflect the resolution of any objections thereto.
(d) Upon obtaining an Audit Report the Company and the Managers shall true
up the Annual Fee as determined based upon the Audit Report to the amounts paid
hereunder during the preceding fiscal year. If the Annual Fee (as finally
determined by the Audit Report) shall be greater than the amounts paid to the
Managers hereunder during such fiscal year, then any amounts due to the Managers
shall be paid by the Company to the Managers in immediately available funds. If
the Annual Fee (as finally determined by the Audit Report) shall be less than
the amounts paid to the Managers during such fiscal year, then any amounts due
to the Company shall be deducted from the next scheduled fee payments, or in the
case of the adjustment for the final period of this Agreement (or the final
period applicable to any Manager), made by a payment to the Company by the
Managers (or Manager, as applicable).
(e) Upon the request of UAG (not to be made more frequently than once per
calendar year), the Annual Fee payable to UAG shall be reviewed by UAG, to
determine if the fair market value of the Management Services actually delivered
by UAG (the "FMV") exceeds the Annual
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Fee paid to UAG for such year (the "UAG FEE"). If the FMV is greater than the
UAG Fee for such year, the Company shall promptly pay the full amount of the
difference to UAG.
(f) For the purposes of determining the Annual Fee, the Company's
consolidated EBITDA for each fiscal year shall be determined in accordance with
the calculation set forth on Annex B hereto.
(g) Notwithstanding anything to the contrary set forth herein, if the
Company is prohibited from making any payment hereunder by any contractual
obligation or debt instrument to which the Company or any of its subsidiaries is
a party (or if making such payments would violate or cause a breach or default
under any such contract or instrument), then such payment shall not be made and
shall not then be due and the amount of such payment shall accrue and be paid at
such time as the Company is no longer prohibited from making such payment.
3. Each of the Managers shall be reimbursed by the Company for expenses incurred
by it and its affiliates in connection with performing the Management Services
or any other services on behalf of the Company.
4. It is the understanding of the parties that any of the Managers and/or their
respective affiliates may be involved with services (other than the Management
Services) or potential acquisitions, mergers, financings or other major
transactions involving the Company, in which case such Manager and/or its
affiliates shall be entitled to compensation, in addition to the fees provided
for herein, as the Company and such Manager shall mutually agree.
5. No advice rendered by any Manager in its advisory role hereunder, whether
formal or informal, may be disclosed, in whole or in part, or summarized,
excerpted from or otherwise referred to without such Manager's prior written
consent. In addition, the advisory role of any Manager hereunder may not be
otherwise referred to without such Manager's prior written consent.
6. The Company hereby acknowledges and agrees to the indemnification and other
provisions set forth on Annex C, which is incorporated by reference into this
Agreement.
7. In connection with the services provided hereunder, each Manager will be
acting as an independent contractor and not in any other capacity, with duties
owing solely to the Company.
8. Any notice required to be given hereunder shall be in writing and shall be
deemed sufficient if delivered in person or mailed by certified mail or sent by
reputable overnight courier service as follows:
if to the Company:
6001 North Adams Road
Suite 100
Bloomfield Hills, MI 48304
if to TRA:
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c/o Transportation Resource Advisors, LLC
One Harmon Plaza, 9th Floor
Secaucus, NJ 07094
Attention: James A. Hislop.
if to UAG:
United Auto Group, Inc.
2555 Telegraph Road
Bloomfield Hills, MI 48302
Attention: General Counsel
Telecopier: (248) 648-2515
if to PTL:
Penske Truck Leasing Co., L.P.
Route 10, Green Hills
Reading, PA 19603-0563
Attention: Vice President & Treasurer
Telecopier: 610-856-1055
with copy to:
Sr. Vice President & General Counsel
Telecopier: 610-775-6330
if to Opus:
Opus Ventures General Partner Limited
The Giraffe House
Burrough Court
Burrough on the Hill
Leicestershire
LE142QS
Attention: Laurence Vaughan
Telecopier: +44(0)1664 452815
Any of the Company or any Manager may hereafter designate a different address
for the purpose of receipt of notice by following the notice provisions hereof.
9. This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, both written and oral, with
respect to the subject matter hereof. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, including any corporation into which the Company shall consolidate or
merge (without regard to whether the Company is the surviving entity) or to
which it shall transfer substantially all of its assets. The rights and
obligations of a Manager
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under this Agreement may be assigned by such party in its sole discretion to an
affiliate or affiliates of such Manager. This Agreement may be amended only by a
written instrument duly executed by all the parties hereto. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Michigan applicable to contracts made and to be performed entirely within such
state without giving effect to the principles of conflicts of laws.
10. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date and first written above.
VMC ACQUISITION CORPORATION
By: /s/ David R. Mitchell
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Name: David R. Mitchell
Title: President
TRANSPORTATION RESOURCE ADVISORS, LLC
By: /s/ David R. Mitchell
----------------------------------------------
Name: David R. Mitchell
Title: Principal
UNITED AUTO GROUP, INC.
By: /s/ Shane M. Spradlin
----------------------------------------------
Name: Shane M. Spradlin
Title: Secretary
PENSKE TRUCK LEASING CO., L.P.
By: Penske Truck Leasing Corporation, its General
Partner
By: /s/ Wayne S. Angelbeck
----------------------------------------------
Name: Wayne S. Angelbeck
Title: Vice President and Treasurer
OPUS VENTURES GENERAL PARTNER LIMITED
By: /s/ L. Vaughan
----------------------------------------------
Name: L. Vaughan
Title: Parnter
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ANNEX A
MANAGER PERCENTAGE OF ANNUAL FEE(1)
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UAG 22.5%
TRA 57.5%
PTL 10.0%
Opus 10.0%
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(1) If this Agreement terminates as to any Manager pursuant to Section 1(b), the
Annual Fee shall be reallocated among the remaining Managers in the same
relative proportions as reflected above.
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ANNEX B
Consolidated EBITDA is determined as follows:
Consolidated Net Income (as defined below) $__________
PLUS: (without duplication and only to the extent
reflected as a charge or reduction in the statement
of Consolidated Net Income for such period):
all income taxes ___________
Consolidated Interest Expense (as defined below),
whether paid or accrued for such period ___________
depreciation and amortization expense ___________
amortized debt discount ___________
any deduction as the result of any grant to any
employees, officers or directors of the Company or
any of its Subsidiaries of any capital stock of the
Company ___________
loss from extraordinary items ___________
any non-cash loss arising from the sale, exchange
or other disposition of assets out of the ordinary
course of business, other than Accounts (as defined
below) ___________
any other non-cash losses (other than non-cash
losses relating to write-offs, write-downs or
reserves with respect to Accounts) ___________
items expensed as set forth on Schedule 1.1(a) of
the Credit Agreement, dated as of April 29, 2005,
among the Company, VMC Acquisition Corporation, VAM
UK Acquisition Corporation Limited, and Comerica
Bank. ___________
stay, retention and/or exit bonuses paid to
employees during the 12 month period following
April 29, 2005. ___________
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LESS: (without duplication and only to the extent
included in Consolidated Net Income for such
period):
income tax credits ___________
interest income ___________
gain from extraordinary items ___________
any gain arising from the sale, exchange or other
disposition of assets out of the ordinary course of
business, other than Accounts ___________
any other non-cash gains ___________
TOTAL: $__________
For the purposes of this Annex B:
"Accounts" shall mean accounts or accounts receivable as defined under the
Uniform Commercial Code.
"Consolidated Interest Expense" shall mean for any period consolidated
cash interest expenses of the Company and its consolidated Domestic Subsidiaries
(including that attributable to capitalized leases) determined in accordance
with GAAP.
"Consolidated Net Income" shall mean for any period, the consolidated net
income (or loss) of the Company and its consolidated Domestic Subsidiaries (as
defined below), determined in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any person accrued prior to the date it
becomes a Domestic Subsidiary or is merged into or consolidated with the Company
or any Domestic Subsidiary, (b) the income (or deficit) of any person (other
than a Subsidiary of the Company) in which any person (other than the Company or
any of its Subsidiaries) has a joint interest, except to the extent that any
such income is actually received by the Company or any of its Domestic
Subsidiaries by such person in the form of dividends or similar distributions
and (c) the undistributed earnings of any Domestic Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of any contractual
obligation or requirement of law applicable to such Subsidiary, (d) any
restoration to income of any contingency reserve of the Company and its Domestic
Subsidiaries, except to the extent that provision for such reserve was made out
of income accrued during such period, (e) any non-cash net gain attributable to
the write up of any asset of the Company and its Domestic Subsidiaries and (f)
any non-cash loss attributable to the write-down of any asset (other than
Accounts) of the Company and its Domestic Subsidiaries.
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"Domestic Subsidiary" shall mean any Subsidiary of the Company
incorporated or organized under the laws of the United States of America, or any
state or other political subdivision thereof or which is considered to be a
"disregarded entity" for purposes of Section 956 of the Internal Revenue Code.
"Subsidiary(ies)" shall mean any other corporation, association, joint
stock company, business trust, limited liability company or any other business
entity of which more than fifty percent (50%) of the outstanding voting stock,
share capital, membership or other interests, as the case may be, is owned
either directly or indirectly by any person or one or more of its Subsidiaries,
or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by any person and/or its
Subsidiaries.
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ANNEX C
In the event that any Manager becomes involved in any capacity in any action,
proceeding or investigation brought by or against any person, in connection with
or as a result of any matter contemplated by or referred to in this Agreement,
the Company periodically will reimburse such Manager for its legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith. The Company also will indemnify and hold such Manager,
harmless against any and all losses, claims, damages or liabilities to any such
person in connection with or as a result of any matter contemplated by or
referred to in this Agreement, except to the extent that any such loss, claim,
damage or liability results from the gross negligence or bad faith of such
Manager, in performing the services that are the subject of this Agreement. If
for any reason the foregoing indemnification is unavailable to such Manager or
insufficient to hold it harmless, then the Company shall contribute to the
amount paid or payable by such Manager as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect the relative
economic interests of the Company, on the one hand, and such Manager on the
other hand, in the matters contemplated by or referred to in this Agreement as
well as the relative fault of the Company and such Manager with respect to such
loss, claim, damage or liability and any other relevant equitable
considerations. The reimbursement, indemnity and contribution obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any affiliate of such Manager and the partners, directors, agents, employees and
controlling persons (if any), as the case may be, of such Manager and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, such Manager, any of
their respective affiliates and any such person. The Company also agrees that
neither such Manager nor any of its affiliates, partners, directors, agents,
employees or controlling persons shall have any liability to the Company or any
person asserting claims on behalf of or in right of the Company in connection
with or as a result of any matter contemplated by or referred to in this
Agreement except to the extent that any losses, claims, damages, liabilities or
expenses incurred by the Company result from the gross negligence or bad faith
of such Manager in performing the services that are the subject of this
Agreement. Prior to entering into any agreement or arrangement with respect to,
or effecting, any proposed sale, exchange, dividend or other distribution or
liquidation of all or a significant portion of its assets in one or a series of
transactions or any significant recapitalization or reclassification of its
outstanding securities that does not directly or indirectly provide for the
assumption of the obligations of the Company set forth in this Annex A, the
Company will notify such Manager in writing thereof (if not previously so
notified) and, if requested by such Manager, shall arrange in connection
therewith alternative means of providing for the obligations of the Company set
forth in this Annex A, including the assumption of such obligations by another
party, insurance, surety bonds or the creation of an escrow, in each case in an
amount and upon terms and conditions satisfactory to such Manager. Any right to
trial by jury with respect to any action or proceeding arising in connection
with or as a result of any matter contemplated by or referred to in this
Agreement is hereby waived by the parties hereto. The provisions of this Annex A
shall survive any termination or completion of the term provided by this
Agreement, and this Agreement shall be governed by and construed in accordance
with the laws of the State of Michigan without regard to principles of conflicts
of laws.
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