Exhibit 10.35
ADVISORY AGREEMENT
------------------
This Advisory Agreement (this "Agreement") is made and entered into as of
December 10, 2002 by and among Delco Remy International, Inc. ("Delco Remy") and
the subsidiaries of Delco Remy set forth on the signature pages hereto and such
other subsidiaries of Delco Remy as shall join in this Agreement (the
"Subsidiaries," and collectively with Delco Remy, the "Companies"), and CVC
Management LLC, a Delaware limited liability company ("Advisor").
WHEREAS, the Companies desire to retain Advisor and Advisor desires to
perform for the Companies and/or their subsidiaries certain services;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Term. This Agreement shall be in effect for an initial term commencing
on the date hereof through and including December 31, 2006 (the "Term"), and
shall be automatically extended thereafter on a year to year basis unless the
Companies provide or Advisor provides written notice of its or their desire to
terminate this Agreement to the other party ninety (90) days prior to the
expiration of the Term or any extension thereof; provided, however that this
Agreement shall terminate automatically upon a Change of Control (as defined in
the Indenture dated as of April 26, 2001 among Delco Remy, certain of Delco
Remy's subsidiaries signatory thereto and First Union National Bank, as Trustee,
which indenture relates to Delco Remy's 11% Senior Subordinated Notes Due 2009,
as such indenture may be amended from time to time).
2. Services. Advisor shall perform or cause to be performed such services
for the Companies and/or their subsidiaries as directed by such Company's board
of directors, which may include, without limitation, the following:
(a) the identification, support and analysis of tender offers,
acquisitions, dispositions, mergers, exchange offers, recapitalizations,
restructurings and other similar transactions by such Company or its
subsidiaries;
(b) support and analysis of financing alternatives, including, without
limitation, in connection with acquisitions, capital expenditures and
refinancing of existing indebtedness;
(c) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing
agreements;
(d) human resource functions, including searching and hiring of
executives; and
(e) other services for such Company or its subsidiaries upon which
such Company's board of directors and Advisor agree.
In the event the provision of services under this Agreement requires any
federal, state or local licensure or registration, such services shall be
provided by persons or entities having such licensure or registration.
3. Advisory Fee.
(a) Management Fees. Subject to the terms and conditions herein,
payment for services rendered by Advisor and/or its affiliates pursuant to
this Agreement will equal $1,000,000 for the period commencing on the date
hereof and ending December 31, 2002 (the "Initial Fee") and $1,000,000 per
annum thereafter (collectively with the Initial Fee, the "Management
Fees"). The Initial Fee shall be due and payable to Advisor or its designee
as follows: $500,000 on October 1, 2002, $500,000 on December 1, 2002 and
all other Management Fees described in this Section 3(a) shall be payable
to Advisor or its designee in quarterly installments of $250,000 in
advance, commencing as of January 1, 2003.
(b) Transaction Fees. At the closing of the financing contemplated by
the Financing Agreement (defined below), the Companies shall pay to Advisor
or its designees a transaction fee equal to Two Million Five Hundred
Thousand Dollars ($2,500,000). In addition, during the Term, the Companies
shall pay to Advisor or its designees a transaction fee in connection with
the consummation of each acquisition, divestiture or financing by any of
the Companies or their subsidiaries in connection with which Advisor
provided services under this Agreement in an amount to be mutually agreed
upon by the parties hereto. Such fees shall be payable to Advisor or its
designees by wire transfer to an account designated in writing by Advisor.
For purposes hereof, the "Financing Agreement" means the Loan and Security
Agreement, dated June 28, 2002 by and among certain of the Companies, as
Borrowers, Delco Remy and certain of the Companies, as Guarantors and
Congress Financial Corporation (Central), as Administrative Agent and US
Collateral Agent, Wachovia Bank, National Association, as Documentation
Agent, and the financial institutions named therein, as Lenders.
(c) Collection of Fee. Subject to the limitation described in Section
3(d) below, the decision whether to collect any fee contemplated by this
Agreement (an "Advisory Fee") in a given period shall be in the Advisor's
sole discretion. The Advisor's decision not to collect or to defer an
Advisory Fee in any given year shall not be construed to be a waiver of the
Advisor's right to collect a deferred Advisory Fee or an Advisory Fee in
any future period.
(d) Restrictions. Notwithstanding any other provision of this Section
3, the Companies shall not be required to pay any of the Management Fees
contemplated by
2
Section 3(a), if and to the extent such payment is expressly prohibited by the
provisions of the Financing Agreement, the Indentures governing the 85/8% Senior
Notes Due 2007 in an aggregate principal amount of $145 million, 11% Senior
Subordinated Notes Due 2009 in an aggregate principal amount of $165 million and
the 105/8% Senior Subordinated Notes Due 2006 in an aggregate principal amount
of $140 million (the "Indentures") or any other credit, financing or other
agreements or instruments binding upon the Companies or their properties, as
each of the foregoing agreements or instruments may be amended, modified or
supplemented, from time to time and so long as each such agreement or instrument
has not been terminated and remains in full force and effect; provided, however,
that if, as a result of the operation of any such prohibitions, payments
otherwise owed hereunder are not made, such payments shall not be cancelled but
rather shall accrue, and shall be payable by the Companies promptly when, and to
the extent that, the Companies are no longer prohibited from making such
payments, together with accrued interest calculated at the Base Rate of interest
then charged under the foregoing Financing Agreement from the date such payment
was due through the date of payment. Other than the foregoing Financing
Agreement and Indentures, the Companies will not enter into any financing
agreements or instruments which would prohibit payment of any amounts otherwise
owed hereunder without the prior written approval of the Advisor. This Section
3(d) will not prohibit nor restrict, in any manner, the Companies' obligation to
make the payments specified in Section 3(b), to provide indemnification pursuant
to Section 6, or to make any other payments contemplated by this Agreement.
4. Personnel. Advisor shall provide and devote to the performance of this
Agreement such partners, employees and agents of Advisor as Advisor shall deem
appropriate to the furnishing of the services required.
5. Liability. Neither Advisor nor any other Indemnitee (as defined in
Section 6 below) shall be liable to any of the Companies or any of their
subsidiaries or affiliates for any loss, liability, damage or expense arising
out of or in connection with the performance of services contemplated by this
Agreement, unless such loss, liability, damage or expense shall be proven to
result directly from gross negligence, willful misconduct or bad faith on the
part of an Indemnitee acting within the scope of such person's employment or
authority. Except as expressly set forth in this Section, Advisor makes no
representations or warranties, express or implied, in respect of the services to
be provided by Advisor or any of the other Indemnitees. Advisor shall provide
services under this Agreement in compliance with all applicable federal, state
and local laws and regulations. Except as Advisor may otherwise agree in writing
after the date hereof: (i) Advisor shall have the right to, and shall have no
duty (contractual or otherwise) not to, directly or indirectly: (A) engage in
the same or similar business activities or lines of business as any of the
Companies or any of their subsidiaries, including those competing with any of
the Companies or any of their subsidiaries and (B) do business with any client
or customer of any of the Companies or any of their subsidiaries; (ii) neither
Advisor nor any officer, director, employee, partner, affiliate or associated
entity thereof shall be liable to any of the Companies or any of their
subsidiaries or affiliates for breach of any duty (contractual or otherwise) by
reason of any such activities of or of such person's participation therein; and
3
(iii) in the event that Advisor acquires knowledge of a potential transaction or
matter that may be a corporate opportunity for the Companies or any of their
subsidiaries, on the one hand, and Advisor, on the other hand, or any other
person, Advisor shall have no duty (contractual or otherwise) to communicate or
present such corporate opportunity to the Companies or any of their subsidiaries
and, notwithstanding any provision of this Agreement to the contrary, shall not
be liable to the Companies or any of their affiliates for breach of any duty
(contractual or otherwise) by reasons of the fact that Advisor directly or
indirectly pursues or acquires such opportunity for itself, directs such
opportunity to another person, or does not present such opportunity to the
Companies. In no event will any of the parties hereto be liable to any other
party hereto for any indirect, special, incidental or consequential damages,
including lost profits or savings, whether or not such damages are foreseeable,
or in respect of any liabilities relating to any third party claims (whether
based in contract, tort or otherwise) other than the Claims (as defined in
Section 6 below) relating to the service to be provided by Advisor hereunder.
6. Indemnity. Each of the Companies and their subsidiaries shall defend,
indemnify and hold harmless each of Advisor, its affiliates and their respective
members, partners, directors, officers, employees and agents (collectively, the
"Indemnitees") from and against any and all loss, liability, damage or expenses
(including in connection with investigating, preparing for, defending, or
appealing any action, formal or informal claim, investigation, inquiry or other
proceeding, whether or not in connection with pending or threatened litigation)
arising from any claim by any person or entity with respect to, or in any way
related to, the performance of services contemplated by this Agreement
(including, without limitation, attorneys' fees) (collectively, "Claims")
resulting from any act or omission of any of the Indemnitees, other than for
Claims which shall be the direct result of gross negligence, bad faith or
willful misconduct by an Indemnitee as determined pursuant to a final
non-appealable order of a court of competent jurisdiction. Each of the Companies
and their subsidiaries shall defend at its own cost and expense any and all
suits or actions (just or unjust) which may be brought against any such Company,
any of its subsidiaries or any of the Indemnitees or in which any of the
Indemnitees may be impleaded with others upon any Claims, or upon any matter,
directly or indirectly, related to or arising out of this Agreement or the
performance hereof by any of the Indemnitees, whether or not any Indemnitee is
named as a party thereto and whether or not any liability results therefrom, or,
at the option of any Indemnitee, shall reimburse each such Indemnitee for all
costs and expenses, including fees of such Indemnitee's counsel, as they are
incurred, in connection with the foregoing, except that if such damage shall be
the direct result of gross negligence, bad faith or willful misconduct by an
Indemnitee as determined pursuant to a final non-appealable order of a court of
competent jurisdiction, then such Indemnitee shall reimburse the Companies and
their subsidiaries for the costs of defense and other costs incurred by the
Companies and their subsidiaries to the extent due to such gross negligence, bad
faith or willful misconduct.
Each of the Companies and their subsidiaries further shall not, without the
prior written consent of Advisor, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought
4
hereunder (whether or not any Indemnitee is an actual or potential party to such
claim, action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of Advisor and each other Indemnitee hereunder
from all liability arising out of such claim, action, suit or proceeding. EACH
OF THE COMPANIES AND THEIR SUBSIDIARIES HEREBY ACKNOWLEDGES THAT THE FOREGOING
INDEMNITY SHALL BE APPLICABLE TO ANY CLAIMS, LIABILITIES, LOSSES, DAMAGES, OR
EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE
OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF ADVISOR OR
ANY OTHER INDEMNITEE. The foregoing right to indemnity shall be in addition to
any rights that Advisor and/or any other Indemnitee may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of this Agreement. Each of the Companies and their subsidiaries
hereby consents to personal jurisdiction and to service and venue in any court
in which any claim which is subject to this Agreement is brought against Advisor
or any other Indemnitee. It is understood that, in connection with Advisor's
engagement hereunder, Advisor may also be engaged to act for the Companies or
their subsidiaries in one or more additional capacities, and that the terms of
this engagement or any such additional engagement may be embodied in one or more
separate written agreements. This indemnification shall apply to the engagement
hereunder as well as to any such additional engagement(s) (whether written or
oral) and any modification of said engagement or such additional engagement(s)
and shall remain in full force and effect following the completion or
termination of said engagement or such additional engagements.
7. Notices. All notices hereunder shall be in writing and shall be
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:
To the Companies, as appropriate:
Delco Remy International, Inc.
0000 Xxxxxxxxxx Xx.
Xxxxxxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
To Advisor:
CVC Management LLC
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxx 0
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. XxXxxxxxxx
Facsimile: (000) 000-0000
8. Assignment. The Companies may not assign any obligations hereunder to
any other party without the prior written consent of Advisor (which consent
shall not be
5
unreasonably withheld or delayed), and Advisor may not assign any Advisor
obligations hereunder to any other party without the prior written consent of
the Companies (which consent shall not be unreasonably withheld or delayed).
9. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and permitted assigns of the parties.
10. Counterparts. This Agreement may be executed and delivered by each
party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
11. Joinder. In the event any subsidiary of Delco Remy has not become a
party hereto (the "New Party"), such New Party shall execute an Agreement of
Joinder in the form attached as Exhibit A hereto and upon the execution thereof,
the New Party shall be bound by all the terms and conditions hereof to the same
extent as though such New Party had originally executed this Agreement. The
addition of the New Party shall not in any manner affect the obligations of the
other Companies hereto.
12. Entire Agreement; Modification; Governing Law. The terms and conditions
hereof constitute the entire agreement between the parties hereto with respect
to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions thereof shall be binding upon
either party unless approved in writing by an authorized representative of such
party. All issues concerning this Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of New York.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
IN WITNESS WHEREOF, the parties have executed this Advisory Agreement as of
the date first written above.
COMPANY:
DELCO REMY INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President, Treasurer and
Secretary
SUBSIDIARIES:
BALLANTRAE CORPORATION
DELCO REMY AMERICA, INC.
DR SALES, INC.
FRANKLIN POWER PRODUCTS, INC.
HSG I, INC.
HSG II, INC.
INTERNATIONAL FUEL SYSTEMS, INC.
JAX REMAN, L.L.C.
KRAFTUBE, INC.
M. & X. XXXXX AUTO PARTS, L.L.C.
MAGNUM POWER PRODUCTS, L.L.C.
NABCO, INC.
POWER INVESTMENTS, INC.
POWRBILT PRODUCTS, INC.
REMAN HOLDINGS, L.L.C.
REMY INTERNATIONAL, INC.
REMY KOREA HOLDINGS, L.L.C.
REMY LOGISTICS, L.L.C.
REMY REMAN, L.L.C.
TRACTECH, INC.
XXXXXXXX TECHNOLOGIES, INC.
WORLD WIDE AUTOMOTIVE, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President
(Signatures continue on next page)
7
ENGINE MASTER, L.P.
By: HSG I, Inc.
By: /s/ Xxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President Finance and Secretary
ADVISOR:
CVC MANAGEMENT LLC
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Managing Director
8
EXHIBIT A
---------
FORM OF JOINDER TO ADVISORY AGREEMENT
This Joinder dated as of ______________, ____ is delivered pursuant to that
certain Advisory Agreement dated as of _________ __, 2002 among the "Companies"
named therein (as amended, supplemented or modified from time to time, the
"Agreement") and CVC Management LLC. All capitalized terms not defined herein
shall have the meaning ascribed to them in the Agreement.
The undersigned hereby agrees that on and after the date hereof, it shall
be a Company under the Agreement and be obligated to perform all of the
obligations of the Companies thereunder.
[COMPANY NAME]
By:
--------------------------------------------
Name:
Title:
9
