EXHIBIT 10.4
MANAGEMENT AGREEMENT
This Agreement is made as of this th day of , 1999 among St. Xxxx
Knits International, Incorporated, a Delaware corporation (the "Company"), St.
Xxxx Knits, Inc., a California corporation ("SJK") and Vestar Capital Partners,
a New York general partnership ("Vestar").
WHEREAS, Vestar, by and through its officers, employees, agents,
representatives and affiliates, has expertise in the areas of corporate
management, finance, investment, acquisitions and other matters relating to the
business of the Company and SJK; and
WHEREAS, each of the Company and SJK desires to avail itself, for the term
of this Agreement, of the expertise of Vestar in the aforesaid areas, in which
it acknowledges the expertise of Vestar.
NOW, THEREFORE, in consideration of the foregoing recitals and the covenants
and conditions herein set forth, the parties hereto agree as follows:
1. Appointment. Each of the Company and SJK hereby appoints Vestar to render
the advisory and consulting services described in Paragraph 2 hereof commencing
upon the Effective Time (as defined in Section 3(b) hereof).
2. Services. Vestar hereby agrees that commencing upon the Effective Time it
shall render to each of the Company and SJK (and their subsidiaries) by and
through such of Vestar's officers, employees, agents, representatives and
affiliates as Vestar, in its sole discretion, shall designate from time to
time, advisory and consulting services in relation to the affairs of the
Company and SJK (and their subsidiaries) in connection with strategic,
financial planning and other services not referred to in the next sentence,
including, without limitation, advisory and consulting services in relation to
the selection, supervision and retention of independent auditors, the
selection, retention and supervision of outside legal counsel, and the
selection, retention and supervision of investment bankers or other financial
advisors or consultants. It is expressly agreed that the services to be
performed hereunder shall not include (x) investment banking or other financial
advisory services rendered by any of Vestar and its affiliates to the Company
and SJK (and their subsidiaries) after the Effective Time in connection with
acquisitions, divestitures, refinancings, restructurings and similar
transactions by the Company and SJK (and their subsidiaries) or (y) full or
part-time employment by any of the Company, SJK or their subsidiaries of any
employee or partner of any of Vestar and its affiliates, in each case, for
which Vestar and its affiliates shall enter into a separate agreement with the
Company and/or SJK and shall be entitled to receive additional compensation.
3. Fees. (a) In consideration of the services contemplated by Paragraph 2,
subject to the provisions of Paragraph 6, the Company and SJK and their
respective successors hereby jointly and severally agree to pay to Vestar an
aggregate per annum management fee (the "Fee") equal to $500,000, commencing at
the Effective Time. The Fee shall be payable semi-annually in advance. The
semi-annual Fee payments shall be refunded pro rata if this Agreement is
terminated prior to the end of period for which such semi-annual Fee advance
was paid.
(b) The Company and SJK and their respective successors also hereby jointly
and severally agree to pay Vestar at the effective time (the "Effective Time")
of the merger provided for in the Agreement and Plan of Merger dated as of
February 2, 1999 among the Company, SJK, SJKAcquisition, Inc. and Pearl
Acquisition Corp. (the "Merger Agreement") a transaction fee equal to $4.0
million plus all Out-of-Pocket Expenses (as defined in Section 4) incurred by
Vestar prior to the Effective Time for services rendered by Vestar in
connection with the consummation of the Offer and the Mergers referred to in
the Merger Agreement.
4. Reimbursements. In addition to the Fee, the Company and SJK hereby
jointly and severally agree, at the direction of Vestar, to pay directly or
reimburse Vestar for its reasonable Out-of-Pocket Expenses incurred after the
Effective Time in connection with the services provided for in Paragraph 2
hereof. For the purposes of this Agreement, the term "Out-of-Pocket Expenses"
shall mean the amounts paid by or on behalf of Vestar in connection with the
services contemplated hereby, including reasonable (i) fees and disbursements
of any independent professionals and organizations, including independent
auditors and outside legal counsel, investment bankers or other financial
advisors or consultants, (ii) costs of any outside services or independent
contractors, such as financial printers, couriers, business publications or
similar services, and (iii) transportation, per diem, telephone calls, word
processing expenses or any similar expense not associated with its ordinary
operations. All reimbursements for Out-of-Pocket Expenses shall be made
promptly upon or as soon as practicable after presentation by Vestar of a
statement in connection therewith.
5. Indemnification. The Company and SJK hereby jointly and severally agree
to indemnify and hold harmless Vestar and its affiliates and their respective
partners, officers, directors, employees, agents, representatives and
stockholders (each being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities of whatever kind or nature, joint or
several, absolute, contingent or consequential, to which such Indemnified Party
may become subject under any applicable federal or state law, or any claim made
by any third party, or otherwise, to the extent they relate to or arise out of
the services contemplated by this Agreement or the engagement of Vestar
pursuant to, and the performance by Vestar of the services contemplated by,
this Agreement. The Company and SJK hereby jointly and severally agree to
reimburse any Indemnified Party for all reasonable costs and expenses
(including reasonable attorneys' fees and expenses) as they are incurred in
connection with the investigation of, preparation for or defense of any pending
or threatened claim for which the Indemnified Party would be entitled to
indemnification under the terms of the previous sentence, or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party
hereto. The Company and SJK will not be liable under the foregoing
indemnification provision to the extent that any loss, claim, damage,
liability, cost or expense is determined by a court, in a final judgment from
which no further appeal may be taken, to have resulted primarily from the gross
negligence or willful misconduct of Vestar. Neither the Company nor SJK shall
be obligated to make any payment to Vestar hereunder unless and until the
Effective Time has occurred.
6. Term. This Agreement shall be in effect on the date hereof and shall
terminate upon the earlier to occur of (i) the termination of the Merger
Agreement or (ii) such time after the Effective Time as Vestar, and the
partners therein and the respective affiliates thereof, through Vestar/Xxxx
Investors LLC or otherwise, hold, in the aggregate, less than 50% of the stock
of the Company beneficially owned by Vestar immediately following the Effective
Time and cease to control a majority of the Board of Directors of the Company.
The provisions of Paragraphs 4, 5, 7 and 8 and the joint and several obligation
of the Company and SJK to pay Fees accrued during the term of this Agreement
pursuant to Section 2 shall survive the termination of this Agreement.
7. Permissible Activities. Subject to all applicable provisions of New York
law that impose fiduciary duties upon Vestar or its partners or affiliates,
nothing herein shall in any way preclude Vestar or its partners, officers,
employees or affiliates from engaging in any business activities or from
performing services for its or their own account or for the account of others,
including for companies that may be in competition with the business conducted
by the Company and SJK.
8. General. (a) No amendment or waiver of any provision of this Agreement,
or consent to any departure by either party from any such provision, shall in
any event be effective unless the same shall be in writing and signed by the
parties to this Agreement and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
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(b) Any and all notices hereunder shall, in the absence of receipted hand
delivery, be deemed duly given when mailed, if the same shall be sent by
registered or certified mail, return receipt requested, and the mailing date
shall be deemed the date from which all time periods pertaining to a date of
notice shall run. Notices shall be addressed to the parties at the following
addresses:
If to Vestar: Vestar Capital Partners
0000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
If to the Company or SJK: St. Xxxx Knits International, Incorporated
00000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
In any case, Xxxxxxx Xxxxxxx & Xxxxxxxx
with a copy to: 000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx III, Esq.
(c) This Agreement shall constitute the entire Agreement between the parties
with respect to the subject matter hereof, and shall supersede all previous
oral and written (and all contemporaneous oral) negotiations, commitments,
agreements and understandings relating hereto.
(d) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THE PARTIES TO THIS
AGREEMENT HEREBY AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE
FEDERAL AND STATE COURTS LOCATED IN THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. This Agreement shall
inure to the benefit of, and be binding upon, Vestar, the Indemnified Parties,
the Company and SJK and their respective successors and assigns.
(e) This Agreement may be executed in two or more counterparts, and by
different parties on separate counterparts, each set of counterparts showing
execution by all parties shall be deemed an original, but all of which shall
constitute one and the same instrument.
(f) The waiver by any party of any breach of this Agreement shall not
operate as or be construed to be a waiver by such party of any subsequent
breach.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers or agents as set forth below.
VESTAR CAPITAL PARTNERS
By its General Partner:
Vestar Management Corporation II
By: _________________________________
Name:
Title:
ST. XXXX KNITS INTERNATIONAL,
INCORPORATED
By: _________________________________
Name:
Title:
ST. XXXX KNITS, INC.
By: _________________________________
Name:
Title:
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