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EXHIBIT 10.8
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made and entered into
as of this 28th day of May, 1998 between Key Components, LLC (the "Company"), a
Delaware limited liability company, having its principal address at Wing Road,
▇▇ ▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ and Millbrook Capital Management,
Inc., a New York corporation ("Millbrook"), having its principal address at ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
W I T N E S S E T H:
WHEREAS, the Company is the sole shareholder of ▇.▇. ▇▇▇▇▇▇▇
Manufacturing Co., Inc., a New York corporation ("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ Lock, Inc.,
a Delaware corporation ("▇▇▇▇▇▇"), Key Components Finance Corp., a Delaware
corporation ("Finance Corp.") and ESP Lock Products, Inc. ("ESP"), a Delaware
corporation (collectively referred to herein as the "Subsidiaries"); and
WHEREAS, the Company desires the benefit of the experience, supervision
and services of Millbrook and desires to employ it upon the terms and conditions
hereinafter set forth, and Millbrook is willing and able to accept such
employment on such terms and conditions;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the Company and Millbrook agree as follows:
1. Defined Terms. All terms used herein, and not otherwise defined
herein, shall have the meaning set forth in the Indenture, dated as of May __,
1998, between the Company, the Subsidiaries and U.S. Trust Company, as indenture
trustee (the, "Indenture").
2. Employment. The Company agrees to employ, and Millbrook agrees to
serve the Company, in the management capacity and upon the other terms and
conditions hereinafter set forth.
3. Term. The employment of Millbrook shall be renewed on the date
hereof and shall continue for the term of the Company, unless such employment
shall be terminated as hereinafter provided.
4. Termination for Cause.
(a) The Company may terminate this Agreement if Millbrook
violates any one or more of the terms of this Agreement and such violations
result in substantial detriment to the Company's business. If the Company
reasonably determines that Millbrook has violated the terms of this Agreement,
it shall give written notice thereof describing the default and granting thirty
(30) days in which to cure the default. If Millbrook fails or refuses to cure
the default within thirty
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(30) days of the receipt of such notice, the Company may terminate this
Agreement at the end of the thirty (30) day period.
(b) Millbrook may terminate this Agreement if the Company
fails to pay amounts owing to Millbrook. If Millbrook reasonably determines that
the Company has failed to pay amounts owing under this Agreement, it shall give
written notice thereof describing the amount owing and granting thirty (30) days
in which to cure such failure. If the Company fails or refuses to pay amounts
owing to Millbrook within thirty (30) days of the receipt of such notice,
Millbrook may terminate this Agreement at the end of the thirty (30) day period.
5. Duties. Millbrook shall perform (or supervise the performance of)
certain executive and administrative activities relating to the internal
operation of the Company and its Subsidiaries, subject always to the general
control and direction of Key Components, Inc., the sole member of the Company
(the "Sole Member"). Millbrook's duties shall consist of the following:
(a) Millbrook shall provide certain executive level employee
services to the Company and its Subsidiaries, consisting of the provision of the
services of ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (or his successor in office) as Chief Executive
Officer and President, ▇▇. ▇▇▇▇ ▇▇▇▇▇▇ (or his successor in office) as General
Counsel, and ▇▇. ▇▇▇▇▇ ▇▇▇▇ (or his successor in office) as the Director of
Corporate Development and Administrative Services (collectively, the
"Executives"). Notwithstanding anything in this Agreement to the contrary,
Millbrook shall not be obligated to provide executive level services to the
Company in the nature of those generally performed by a Chief Financial Officer
and/or Controller;
(b) Millbrook shall monitor all matters relating to the legal
and tax status of the Company and its Subsidiaries, including supervising the
preparation of the Company's and its Subsidiaries' financial statements and tax
returns, and shall hire any necessary attorneys and accountants, which
professionals shall be retained by the Company at its expense. Millbrook shall
assist with any presentations to any taxing authorities upon audit of the
Company or any of its Subsidiaries, as may be necessary or appropriate in
connection with the Company's tax objectives;
(c) Millbrook shall supervise office systems, filing systems,
accounting systems, and bookkeeping systems for the Company and its
Subsidiaries;
(d) Millbrook shall consult with and advise the other
officers, directors, agents and employees of either the Company, its Sole Member
or the Subsidiaries regarding the internal operations of the Company or the
Subsidiaries;
(e) Millbrook shall prepare and distribute to the Sole Member
quarterly and annual reports regarding the operations of the Company's
Subsidiaries; and
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(f) Millbrook shall provide (or supervise the provision by a
third party hired at the Company's expense) certain financial advisory, research
and consulting services in the nature of those generally provided by investment
banking firms and management consulting firms.
In the event that Millbrook provides services to the Company
or its Subsidiaries that exceed those described above (including but not limited
to consultation, negotiation, review and analysis in connection with joint
ventures, mergers and acquisitions or bank financings involving or transactions
with respect to the sale or disposition of, the Company or any of its
Subsidiaries), Millbrook shall be entitled to negotiate with the Company for the
receipt of additional fees, subject to any applicable limitations contained in
the Indenture.
The Company shall have the right to hire any or all of the
Executives as employees of the Company and pay them for their services directly.
To the extent that the aggregate amount of compensation payable to the
Executives exceeds $10,000 in any calendar year, the Base Fee (as hereinafter
defined) payable to Millbrook shall be reduced by said excess.
6. Powers. So that it may properly perform its duties, Millbrook shall
have the power to take all action and do all things necessary and proper to
bring about the efficient operation of the Company and its Subsidiaries, subject
to the overall direction and control of the Sole Member. Millbrook shall have
the power to employ, supervise and discharge all employees of the Company and
its Subsidiaries and to fix their compensation, subject to the overall direction
and control of the Sole Member.
7. Liabilities and Expenses. All reasonable costs, expenses, losses,
and damages incurred by Millbrook in the provision of the services to the
Company or its Subsidiaries provided for hereunder shall be paid by the Company,
or if paid for by Millbrook, shall be reimbursed by the Company upon provision
of a written record of said costs. However, Millbrook shall not be reimbursed
for, and shall itself pay for the cost of its offices, equipment, management
personnel (either employees or independent contractors, including the
Executives) and facilities and supplies necessary to enable it to fully perform
the management duties to be performed by it hereunder.
8. Compensation.
(a) As compensation for its' services performed hereunder,
Millbrook shall be entitled to the following compensation from the Company:
(i) a $500,000 annual base fee (the "Base Fee"),
payable by the Company in quarterly installments on the first day of each
calendar quarter, commencing June 1, 1998. In the event that there exists an
Event of Default on the day that an installment of the Base Fee is otherwise due
and payable, the payment of that installment of the Base Fee (as well as any
payment that may be due and payable under Section 8 (a)(ii) hereto) shall be
deferred and shall accrue (without interest) until such time that the Event of
Default is cured. From and after the
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cure or waiver of any Event of Default, any and all deferred installments of the
Base Fee (and any payments owing pursuant to Section 8 (a)(ii) hereunder) may be
paid.
(ii) an additional fee payable with respect to each
calendar year or portion thereof during the term of this Agreement (the
"Additional Fee"), such additional fee to be paid on the later of (i) March 31
of each year or (ii) the date of the completion of the Company's audited
financial statements for the previous fiscal year (the "Financial Statements"),
provided that, (i) at the time for payment of the Additional Amount, no Event of
Default exists, and (ii) after giving pro forma effect to the payment of the
Additional Fee, the Consolidated Coverage Ratio for the fiscal year or period
covered by the Financial Statements is equal to or greater than the Applicable
Ratio (as defined herein). The amount of the Additional Fee shall initially be
$300,000 per year, and shall be subject to increase as set forth in Section 8
(b) below. In the event that (i) there is an Event of Default, or (ii) the
Consolidated Coverage Ratio is less than the Applicable Ratio, payment of the
Additional Fee (or such portion thereof as shall result in the pro forma
Consolidated Coverage Ratio being equal to or greater than the Applicable Ratio)
shall be deferred and shall accrue (without interest) until such time that,
after giving pro forma effect to the payment of the portion of the Additional
Fee then being paid, the Consolidated Coverage Ratio, as determined as of the
last day of the most recently ended fiscal quarter of the Company for which
internal financial statements of the Company are available, is equal to or
greater than the Applicable Ratio. As used herein, the Applicable Ratio shall
mean: (i) for fiscal years ending on or prior to December 31, 1999, 2.0:1 and
(ii) for fiscal years ending after December 31, 1999, 2.25:1.
(b) For the fiscal year ending December 31, 2000, and for each
fiscal year thereafter, the then current amount of the Additional Fee (after
giving effect to prior increases under this Section 8 (b)) with respect to such
year, may be increased in the discretion of the Board of Directors', by an
amount up to 15% of the aggregate amount of the Base Fee and Additional Fee,
computed as of such date of increase (each an "Annual Increase Amount");
provided however, the percentage obtained by dividing the Annual Increase Amount
by the aggregate amount of the annual Base Fee and Additional Fee immediately
prior to giving effect to such increase shall not exceed the Cash Flow Growth
Percentage. "Cash Flow Growth Percentage" is defined hereunder as the percentage
increase in Consolidated Cash Flow for the year to which the Annual Increase
Amount relates over the Consolidated Cash Flow for the preceding fiscal year;
provided however, for this purpose, Consolidated Cash Flow shall be computed on
a pro forma basis in accordance with the manner that Consolidated Cash Flow is
computed for purposes of computing the Consolidated Coverage Ratio. The Annual
Increase Amount for any fiscal year shall be paid at the same time as the
Additional Fee with respect to that fiscal year and shall be subject to the same
restrictions as to payment as are set forth in Section 8 (a) (ii) above with
respect to the Additional Fee. Notwithstanding the foregoing, the aggregate of
all Annual Increase Amounts shall not exceed $400,000.
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(c) Upon consummation of the Offering, the Company shall pay
to Millbrook an investment fee equal to $900,000 for financial advisory and
other services rendered to the Company in connection with the Offering.
9. Covenant of Millbrook. Millbrook covenants and agrees that it will
maintain (or will otherwise have available to it) facilities and staff necessary
and adequate in all material respects to perform properly its obligations
hereunder.
10. Notices. All notices and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been duly
given if delivered or mailed first class mail postage prepaid to the address of
the Company and Millbrook set forth above.
11. Construction. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
12. Benefit. This Agreement shall bind and inure to the benefit of the
parties and their legal representatives, successors and assigns, including,
without limitation, a successor by merger.
13. Assignment. No party hereto may assign or transfer its rights or
obligations arising under this Agreement without the prior written consent of
the other party hereto, which consent shall not be unreasonably withheld.
14. Entire Agreement. The parties hereto agree that this Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings between
them as to such subject matter; and there are no restrictions, agreements,
arrangements, oral or written, between the parties relating to the subject
matter hereof which are not fully expressed or referred to herein.
15. Waivers and Further Agreements. Any waiver of any terms or
conditions of this Agreement shall not operate as a waiver of any other breach
of such terms or conditions or any other term or condition, nor shall any
failure to enforce any provision hereof operate as a waiver of such provision or
of any other provision hereof; provided, however, that no such waiver unless it
by its own terms explicitly provides as to the contrary, shall be construed to
effect a continuing waiver of the provision being waived and no such waiver in
any instance shall constitute a waiver in any other instance or for any other
purpose or impair the right of the party against whom such waiver is claimed in
all other instances or for all other purposes to require full compliance with
such provision. Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action as the other party
may reasonably require in order to effectuate the terms and purposes of this
Agreement.
16. Amendments. This Agreement may not be amended nor shall any waiver,
change, modification, consent or discharge be effected except by an instrument
in writing executed by or on behalf of the party or parties against whom
enforcement of any amendment, waiver, change,
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modification, consent or discharge is sought, subject to the terms of any
outstanding loans of the Company.
17. Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question, invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
18. Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
KEY COMPONENTS, LLC, a Delaware
limited liability company
By:
Title:
MILLBROOK CAPITAL
MANAGEMENT, INC., a New York
corporation
By:
Title:
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