EXHIBIT 10.7
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement"), dated as of July 31,
1998 is made by and between CHS Management III, L.P., a Delaware limited
partnership ("CHS") and Globe Manufacturing Corp., an Alabama corporation
formerly known as Globe Elastic Co., Inc. (the "Company").
BACKGROUND
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The Company desires to receive financial and management consulting
services from CHS, and thereby obtain the benefit of the experience of CHS in
business and financial management generally and its knowledge of the Company and
the Company's financial affairs in particular. CHS is willing to provide
financial and management consulting services to the Company. Accordingly, the
compensation arrangements set forth in this Agreement are designed to compensate
CHS for such services.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, CHS and the Company hereby agree as follows:
TERMS
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1. Engagement. The Company hereby engages CHS as a financial and
management consultant, and CHS hereby agrees to provide financial and management
consulting services to the Company, all on the terms and subject to the
conditions set forth below.
2. Services of CHS. CHS hereby agrees during the term of this
engagement to consult with the board of directors (the "Board") and the
management of the Company in such manner and on such business and financial
matters as may be reasonably requested from time to time by the Board, including
but not limited to:
(a) corporate strategy;
(b) budgeting of future corporate investments;
(c) acquisition and divestiture strategies; and
(d) debt and equity financings.
3. Compensation.
(a) Monthly Fee. The Company agrees to pay to CHS as compensation
for services to be rendered by CHS hereunder, a monthly fee equal to $83,333,
payable monthly in arrears on the last day of each month commencing on August
31, 1998.
(b) Recapitalization. The Company agrees to pay $3,000,000 to CHS on
the date hereof as compensation for services rendered by CHS to the Company in
connection with the transactions contemplated by the Agreement and Plan of
Merger, dated as of June 23, 1998, by and between Globe Holdings, Inc., a
Massachusetts corporation formerly known as Globe Manufacturing Co. and the
parent of the Company ("Holdings"), and Globe Acquisition Company, a Delaware
corporation, as amended, and in connection with the financing of such
transactions (the "Recapitalization").
(c) Future Acquisitions. When and as the Company consummates the
acquisition of any other business, company, product line or enterprise (each, an
"Acquisition"), the Company will pay to CHS a fee equal to the greater of (i)
one percent (1%) of the Acquisition Price (as defined below) of such Acquisition
and (ii) $250,000, as compensation for services to be rendered by CHS to the
Company in connection with the consummation of such Acquisition. "Acquisition
Price" means, with respect to a given Acquisition, the fair value of the total
sale proceeds and other consideration received by the target company and its
stockholders upon consummation of such Acquisition, including cash, securities,
notes, consulting agreements, noncompete agreements, contingent payments, plus
the fair value of all liabilities assumed.
(d) Notwithstanding the foregoing, payment under Section 3(a) and
Section 3(c) shall be subject to the terms of the Credit Agreement dated July
31, 1998, as amended from time to time (the "Credit Agreement"), by and among
the Company, Holdings, Bank of America National Trust and Savings Association as
Administrative Agent, BancAmerica Robertson Stephens as Arranger, and Merrill
Lynch, Pierce, Fenner & Smith, Inc., as Syndication Agent.
4. Expense Reimbursement. The Company shall promptly reimburse CHS
for such reasonable travel expenses and other out-of-pocket fees and expenses as
may be incurred by CHS, its partners and employees, Code, Hennessy & Simmons
III, L.P., or Code Hennessy & Simmons LLC, in connection with the
Recapitalization and future Acquisitions, and in connection with the rendering
of services hereunder.
5. Term. This Agreement shall be in effect for an initial term of
five years commencing on the date hereof, and shall be automatically renewed
thereafter on a year-to-year basis unless, at least 30 days prior to the end of
the then-effective term, one party gives written notice to the other of its
desire to terminate this Agreement. No termination of this Agreement, whether
pursuant to this paragraph or otherwise, shall affect the Company's obligations
with respect to the fees, costs and expenses incurred by CHS in rendering
services hereunder and not reimbursed by the Company as of the effective date of
such termination.
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6. Indemnification. The Company agrees to indemnify and hold
harmless CHS, its officers and employees against and from any and all loss,
liability, suits, claims, costs, damages and expenses (including attorneys'
fees) arising from their performance hereunder, except, as a result of their
gross negligence or intentional wrongdoing.
7. CHS an Independent Contractor. CHS and the Company agree that
CHS shall perform services hereunder as an independent contractor, retaining
control over and responsibility for its own operations and personnel. Neither
CHS nor its partners or employees shall be considered employees or agents of the
Company as a result of this Agreement nor shall any of them have authority to
contract in the name of or bind the Company, except as expressly agreed to in
writing by the Company.
8. Notices. Any notice, report or payment required or permitted to
be given or made under this Agreement by one party to the other shall be deemed
to have been duly given or made if personally delivered or, if mailed, when
mailed by registered or certified mail, postage prepaid to the other party at
the following addresses (or at such other address as shall be given in writing
by one party to the other):
If to CHS:
CHS Management III, L.P.
10 South Wacker Drive
Suite 3175
Chicago, IL 60606
Attn: Peter M. Gotsch
Edward M. Lhee
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Stephen L. Ritchie
If to the Company:
Globe Manufacturing Corp.
456 Bedford Street
Fall River, MA 02720
Attn: President
9. Entire Agreement Modification. This Agreement (a) contains the
complete and entire understanding and agreement of CHS and the Company with
respect to the subject matter
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hereof; (b) supersedes all prior and contemporaneous understandings, conditions
and agreements, oral or written, express or implied, respecting the engagement
of CHS in connection with the subject matter hereof; and (c) may not be modified
except by an instrument in writing executed by CHS and the Company.
10. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach of that provision or any other provision
hereof.
11. Assignment. Neither CHS nor the Company may assign its rights or
obligations under this Agreement without the express written consent of the
other.
12. Choice of Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.
* * * * *
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IN WITNESS WHEREOF, CHS and the Company have caused this Management
Agreement to be duly executed and delivered on the date and year first above
written.
CHS MANAGEMENT III, L.P.
By: Code Hennessy & Simmons LLC
its: General Partner
By: /s/ Peter M. Gotsch
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Peter M. Gotsch
Partner
GLOBE MANUFACTURING CORP.
By: /s/ Lawrence R. Walsh
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Name:________________________________
Title:_______________________________
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