Exhibit 10.4
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of April 21, 1999 by and
between Hidden Creek Industries, a New York general partnership ("HCI"), and
J.L. French Automotive Castings, Inc., a Delaware corporation ("French").
BACKGROUND
French desires to receive financial and management consulting
services from HCI, and thereby obtain the benefit of the experience of HCI in
business and financial management generally and its knowledge of French and
French's financial affairs in particular. HCI is willing to provide financial
and management consulting services to French. Accordingly, the compensation
arrangements set forth in this Agreement are designed to compensate HCI 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, HCI and French hereby agree as follows:
TERMS
1. ENGAGEMENT. French hereby engages HCI as a financial and
management consultant, and HCI hereby agrees to provide financial and management
consulting services to French, all on the terms and subject to the conditions
set forth below.
2. SERVICES OF HIDDEN CREEK INDUSTRIES. HCI has provided
valuable services to French in connection with the consummation of the
transactions contemplated by the Transaction Agreement (as defined in Section 3
below). HCI hereby agrees during the term of this engagement to consult with
French's board of directors (the "Board") and the management of French and its
subsidiaries 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.
Members of the HCI Group will be available to serve on the Board and will devote
such time and attention to French's affairs as reasonably necessary to
accomplish the purposes of this Agreement. For purposes of this Agreement, the
"HCI Group" means S.A. Johnson, Scott D. Rued, Robert R. Hibbs, Carl E. Nelson,
Dave Huls, Daniel F. Moorse and such other persons as may be designated by HCI
from time to time, which persons shall be reasonably acceptable to French.
3. COMPENSATION. (a) French agrees to pay to HCI as
compensation for services rendered to French with respect to the consummation of
the transactions contemplated by the Recapitalization Agreement, dated as of
March 29, 1999, by and between French and the stockholders listed on the
signature pages thereto and JLF Acquisition LLC (the "Transaction Agreement"), a
fee for management services equal to $3,000,000 payable upon the Closing (as
defined in the Transaction Agreement), (b) French agrees to pay to HCI as
compensation for services to be rendered by HCI hereunder, a fee equal to
$500,000 per year (the "Management Fee"), payable monthly in advance, commencing
on the first day of the first month following the Closing; provided, however,
that in the event the Closing does not occur on the last day of the month, then
HCI shall be entitled to receive a Management Fee for the period beginning on
the date on which the Closing occurred until the first day of the month
following the Closing in an amount equal to the product of (x) $41,666.67
multiplied by (y) a ratio, the numerator of which equals to the number of days
from and including the date on which the Closing occurred until the first day of
the month following the Closing, and the denominator of which equals the number
of days in the month in which the Closing occurred; provided, further, that on
January 1st of each calendar year during the term of the Agreement, the
Management Fee shall be increased by the percentage increase in the Consumer
Price Index for All Urban Consumers, U.S. City Average, for all items for the
preceding twelve calendar months, or if the U.S. government ceases to publish
such index, then by such index published by the U.S. government as is in HCI's
judgment most similar to such index, (c) French agrees to pay to HCI as
compensation for services to be rendered by HCI in connection with various
future transactions a reasonable and customary fee to be determined mutually and
in good faith by French and HCI, payable upon consummation of any such future
transaction. The Board may, at its sole discretion, elect to increase the amount
of the Management Fee. French shall promptly reimburse HCI for such reasonable
travel expenses and other direct out-of-pocket expenses as may be incurred by
HCI, its affiliates and their respective officers and employees in connection
with the acquisition and the rendering of services hereunder.
4. 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 one party gives 30 days' prior written
notice of its desire to terminate this Agreement; provided, however, that this
Agreement shall terminate on the first to occur of (a) the date of the sale of
all or substantially all of French's assets (other than a sale to an affiliate
of French), (b) the date of the sale of all of the issued and outstanding
capital stock of French (other than a sale to an affiliate of French), or (c)
HCI giving French 30 days' prior written notice of termination. No termination
of this Agreement, whether pursuant to this paragraph or otherwise, shall affect
French's obligations with respect to the fees, costs and expenses incurred by
HCI in rendering services hereunder and not reimbursed by French as of the
effective date of such termination.
5. INDEMNIFICATION. French agrees to indemnify and hold
harmless HCI, 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.
- 2 -
6. HCI AN INDEPENDENT CONTRACTOR. HCI and French agree that
HCI shall perform services hereunder as an independent contractor, retaining
control over and responsibility for its own operations and personnel. Neither
HCI nor its employees shall be considered employees or agents of French as a
result of this Agreement nor shall any of them have authority to contract in the
name of or bind French, except as expressly agreed to in writing by French.
7. CONFIDENTIAL INFORMATION. HCI acknowledges that the
information, observations and data obtained by it and its agents and employees
during the course of its performance under this Agreement concerning the
business plans, financial data and customer relations of French and its
subsidiaries (the "Confidential Data") are French's valuable, special and unique
assets. Therefore, it agrees that it will not, nor will it permit any of its
agents or employees to, use or disclose to any unauthorized person or use any of
the Confidential Data obtained by it during the course of HCI's performance
under this Agreement without French's prior written consent unless and to the
extent that (i) the Confidential Data becomes generally known to and available
for use by the public other than as a result of its acts or omissions to act or
(ii) such use or disclosure is required by any statute, rule, regulation or law
or any judicial or administrative body having jurisdiction.
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 HCI:
Hidden Creek Industries
4508 IDS Center
Minneapolis, MN 55402
Attention: Carl E. Nelson
Telecopy: (612) 332-2012
If to French:
J.L. French Automotive Castings, Inc.
3101 South Taylor Drive
Sheybogan, WI 53802
Attention: President
Telecopy: (920) 458-4861
9. ENTIRE AGREEMENT; MODIFICATION. This Agreement (a)
contains the complete and entire understanding and agreement of HCI and
French with respect to the subject matter hereof; (b) supersedes all prior
and contemporaneous understandings, conditions and agreements, oral or
- 3 -
written, express or implied, respecting the engagement of HCI in connection with
he subject matter hereof; and (c) may not be modified except by an instrument in
writing executed by HCI and French.
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 hereby.
11. ASSIGNMENT. Neither HCI nor French may assign its rights
or obligations under this Agreement without the express written consent of the
other.
12. GOVERNING LAW. This Agreement shall be deemed to be a
contract made under, and is to be governed and construed in the accordance with
the internal laws (and not the law of conflicts) of the State of Delaware.
* * * *
- 4 -
IN WITNESS WHEREOF, the parties hereto have executed this
Management Agreement as of the date written above.
J.L. FRENCH AUTOMOTIVE CASTINGS, INC.
By: /s/ Thomas C. Dinolfo
-----------------------------
Title:
-----------------------------
HIDDEN CREEK INDUSTRIES
By: /s/ Carl E. Nelson
-----------------------------
Title:
------------------------------