EXHIBIT 10.5
[EXECUTION COPY]
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made as of May 26, 1999, by and between
Bruckmann, Xxxxxx, Xxxxxxxx & Co., Inc., a Delaware corporation (the "SERVICE
PROVIDER") and ICM Equipment Company L.L.C., a Delaware limited liability
company (the "COMPANY").
WITNESSETH:
WHEREAS, the Company desires to retain the Service Provider to provide
business and organizational strategy, financial and investment management, and
merchant and investment banking services to the Company and its subsidiaries,
upon the terms and conditions hereinafter set forth, and the Service Provider is
willing to undertake such obligations; and
WHEREAS, the Company is a borrower pursuant to the terms of the Credit
Agreement dated as of February 4, 1998, as amended and restated as of July 31,
1998, and as further amended by Amendment No. 1 made as of February 5, 1999 and
by Amendment Xx. 0 xxxx xx xx Xxx 0, 0000 (xxx "CREDIT AGREEMENT"), by and among
the Company, Great Northern Equipment, Inc., GNE Investments, Inc. (formerly
known as Xxxxxxxx Bros. Construction, Inc.), the Lenders signatory thereto,
Bankers Trust Company, as Syndication Agent and Co-Agent, General Electric
Capital Corporation, as Documentation Agent and Co-Agent, and The CIT
Group/Equipment Financing, Inc., as Administrative Agent.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. APPOINTMENT. The Company hereby engages the Service Provider, and the
Service Provider hereby agrees under the terms and conditions set forth herein,
to provide certain services to the Company and its subsidiaries as described in
Section 3 hereof.
2. TERM. The term of the Agreement (the "TERM") shall commence on the
date hereof and shall continue until the tenth anniversary of this Agreement.
3. DUTIES OF THE SERVICE PROVIDERS. The Service Provider shall provide
the Company and its subsidiaries with business and organizational strategy,
financial and investment management, and merchant and investment banking
services (collectively, the "SERVICES"). The Services will be provided at such
times and places as may reasonably be determined by the Services Provider.
Notwithstanding anything in the foregoing to the contrary, the following
services are specifically excluded from the definition of "SERVICES":
(i) INDEPENDENT ACCOUNTING SERVICES. Accounting Services rendered to
the Company, its subsidiaries or the Service Provider by an independent
accounting firm or accountant (I.E., an accountant who is not an employee of the
Service Provider); and
(ii) LEGAL SERVICES. Legal services rendered to the Company, its
subsidiaries, or the Service Provider by an independent law firm or attorney
(I.E., an attorney who is not an employee of the Service Provider).
4. POWER OF THE SERVICE PROVIDER. So that it may properly perform its
duties hereunder, the Service Provider shall, subject to Section 7 hereof, have
the authority and power to do all things necessary and proper to carry out the
duties set forth in Section 3 hereof.
5. COMPENSATION. As consideration payable to the Service Provider or any
of its affiliates for providing the Services to the Company, the Company shall
make the following payments to the Service Provider.
(i) During the Term, the Company shall pay to the Service Provider
an annual management fee equal to the greater of (x) $500,000 or (y) one percent
(1%) of EBITDA (as herein defined) (the "MANAGEMENT FEE") plus the reasonable
out-of-pocket fees and expenses of the Service Provider or any of its affiliates
(other than the Company or any of its subsidiaries); PROVIDED that,
notwithstanding the foregoing, if the Company or any of its subsidiaries
acquires (whether by merger, recapitalization, consolidation, reorganization,
combination or otherwise) Head & Xxxxxxxx Equipment, L.L.C., a Louisiana limited
liability company, or any of its successors ("H&E"), Gulf Wide Industries,
L.L.C., a Louisiana limited liability company, or any of its successors ("GWI")
or substantially all of the assets or business of H&E or GWI (including pursuant
to any joint venture arrangement) (any such transaction, a "HEAD & XXXXXXXX
ACQUISITION"), then the Management Fee shall be immediately increased to the
greater of (x) $1,000,000 or (y) one percent (1%) of EBITDA (as herein defined).
The Management Fee shall be payable quarterly in advance by the Company in
immediately available funds on each June 1, September 1, December 1 and March 1,
such payments to commence on June 1, 1999 (such first payment to include a
pro-rated portion of the Management Fee for the period beginning on the date
hereof and ending on May 31, 1999) and shall be based on EBITDA for the
immediately preceding twelve month period. For purposes of this Agreement,
"EBITDA" means, for any period, (x) the net income of the Company and its
subsidiaries, on a consolidated basis, for such period (before the payment of
any dividends or other distributions and excluding the effect of any
extraordinary gains or losses during such period), PLUS (y) the interest
expense, federal, state, foreign and local income, franchise, capital gain,
capital stock and other similar taxes, depreciation and amortization expense,
and the Management Fee of the Company and its subsidiaries, on a consolidated
basis, for such period, in each case, determined in accordance with United
States generally accepted accounting principles.
(ii) During the Term, the Service Provider shall be entitled to
receive from the Company a transaction fee in connection with the consummation
by the Company or any of its subsidiaries of (i) each material acquisition of an
additional business (other than any acquisition of Coastal or Pacific Utilities
Equipment Company), (ii) each material divestiture and (iii) each material
financing or refinancing (other than any financing which is consummated by the
Company in order to replace the financing provided to the Company pursuant to
the Credit Agreement), in each case, in an
amount equal to 1.25% of the aggregate value of such transaction (each such
payment, a "TRANSACTION FEE") plus all reasonable out-of-pocket fees and
expenses of the Service Provider or any of its affiliates (other than the
Company or any of its subsidiaries) in connection with any such transaction.
(iii) Upon the consummation of the recapitalization of the Company
contemplated by the Purchase and Redemption Agreement dated as of May 7, 1999
(the "PURCHASE AND REDEMPTION AGREEMENT"), by and among the Company,
Inter-Mountain Equipment L.L.C., BRS Equipment Company, Inc. and the other
parties named therein, the Company shall be obligated to pay to the Service
Provider a transaction fee of $4,000,000 (the "ICM TRANSACTION FEE") in
immediately available funds, to an account designated by the Service Provider;
it being understood that the ICM Transaction Fee shall be in lieu of the
Transaction Fee with respect to such recapitalization; PROVIDED, that,
notwithstanding the foregoing, the Company shall pay the ICM Transaction Fee to
the Service Provider on the earlier of (x) May 31, 2006 or (y) the consummation
of either (i) a public offering and sale of debt securities of the Company
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "SECURITIES ACT") the resulting in net proceeds to the
Company of at least $100,000,000 or (ii) an offering and sale of debt securities
of the Company to United States buyers who fit the requirements of Rule 144A of
the Securities Act and/or overseas buyers under Regulation S of the Securities
Act resulting in net proceeds to the Company of at least $100,000,000, but only
if such offering and sale requires that the Company file and effect a
registration statement under the Securities Act for such debt securities within
one year after the consummation of such offering and sale. In addition, the
Company shall either pay directly or reimburse the Service Provider for all of
the reasonable out-of-pocket fees and expenses, including legal and accounting
fees, incurred by the Service Provider or any of its affiliates (other than the
Company or any of its subsidiaries) in connection with the negotiation and
execution of the Purchase and Redemption Agreement and the consummation of the
transactions contemplated by the Purchase and Redemption Agreement.
(iv) Upon the consummation of a Head & Xxxxxxxx Acquisition, the
Company shall pay, or shall cause a subsidiary of the Company to pay, to the
Service Provider a transaction fee of $3,218,750 (the "H&E TRANSACTION FEE") in
immediately available funds, to an account designated by the Service Provider;
it being understood that the Closing Fee shall be in lieu of the Transaction Fee
with respect to such acquisition and with respect to any financing entered into
in connection therewith. In addition, the Company shall either pay directly or
reimburse the Service Provider for all of the reasonable out-of-pocket fees and
expenses, including legal and accounting fees, incurred by the Service Provider
or any of its affiliates (other than the Company or any of its subsidiaries) in
connection with any Head & Xxxxxxxx Acquisition.
Notwithstanding anything to the contrary contained in this Agreement, all
payments required to be made by the Company to the Service Provider pursuant to
the terms of this Agreement (including the Management Fee, any Transaction Fee,
the ICM Transaction Fee and any H&E Transaction Fee) will be subject to
applicable restrictions contained in the Credit Agreement. If any such
restrictions prohibit any payment which the Company is required to make to the
Service Provider pursuant to the terms of this Agreement or if such payment
would cause a default under the Credit Agreement, then
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the Company shall make such payment as soon as it is permitted to do so under
such restrictions and/or as soon as such payment would not cause such a default.
6. INDEMNIFICATION. In the event that the Service Provider or any of its
affiliates, principals, partners, directors, stockholders, employees, agents and
representatives (collectively, the "INDEMNIFIED PARTIES") becomes involved in
any capacity in any action, proceeding or investigation in connection with any
matter referred to in or contemplated by this Agreement, or in connection with
its Services, the Company will indemnify and hold harmless the Indemnified
Parties from and against any actual or threatened claims, lawsuits, actions or
liabilities (including out-of-pocket expenses and the fees and expenses of
counsel and other litigation costs and the cost of any preparation or
investigation) of any kind or nature, arising as a result of or in connection
with this Agreement and its Services, activities and decisions hereunder, and
will periodically reimburse the Service Provider for its expenses as described
above, except that the Company will not be obligated to so indemnify any
Indemnified Party if, and to the extent that, such claims, lawsuits, actions or
liabilities against such Indemnified Party directly result from the gross
negligence or willful misconduct of such Indemnified Party as admitted in any
settlement by such Indemnified Party or held in any final, non-appealable
judicial or administrative decision. In connection with such indemnification,
the Company will promptly remit or pay to the Service Provider any amounts which
the Service Provider certifies to the Company in writing are payable to the
Service Provider or other Indemnified Parties hereunder. The reimbursement and
indemnity obligations of the Company under this Section 6 shall be in addition
to any liability which the Company may otherwise have, shall extend upon the
same terms and conditions to any Indemnified Party, as the case may be, of the
Service Provider and any such affiliate and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal representatives of
the Company, the Service Provider, and any such Indemnified Party. The foregoing
provisions shall survive the termination of this Agreement.
7. INDEPENDENT CONTRACTORS. Nothing herein shall be construed to create a
joint venture or partnership between the parties hereto or an employee/employer
relationship. The Service Provider shall be an independent contractor pursuant
to this Agreement. Neither party hereto shall have any express or implied right
or authority to assume or create any obligations on behalf of or in the name of
the other party or to bind the other party to any contract, agreement or
undertaking with any third party.
8. NOTICES. Any notice or other communications required or permitted to
be given hereunder shall be in writing and delivered by hand or mailed by
registered or certified mail, return receipt requested, or by telecopier to the
party to whom it is to be given at its address set forth herein, or to such
other address as the party shall have specified by notice similarly given.
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(a) If to the Company:
ICM Equipment Company L.L.C.
0000 Xxxx 0000 Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: President
Tel: (000) 000-0000
Fax: (000) 000-0000
(b) If to the Service Provider:
Bruckmann, Xxxxxx, Xxxxxxxx & Co., Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
9. LIABILITY. The Service Provider is not and never shall be liable to
any creditor of the Company and the Company agrees to indemnify and hold each
Indemnified Party harmless from and against any and all such claims of alleged
creditors of the Company and against all costs, charges and expenses (including
reasonable attorneys fees and expenses) incurred or sustained by any Indemnified
Party in connection with any action, suit or proceeding to which it may be made
a party by any alleged creditor of the Company. Notwithstanding anything
contained in this Agreement to the contrary, the Company agrees and acknowledges
that the Service Provider and its partners, principals, shareholders, directors,
officers, employees and affiliates intend to engage and participate in
acquisitions and business transactions outside of the scope of the relationship
created by this Agreement (including the acquisition of GWI and/or H&E) and they
shall not be under any obligation whatsoever to make such acquisitions, business
transactions or other opportunities through the Company or offer such
acquisitions, business transactions or other opportunities to the Company.
10. ASSIGNMENT. No party hereto may assign any obligations hereunder to
any other party without the prior written consent of the other party hereto.
11. SUCCESSORS. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and permitted assigns of the parties
hereto.
12. COUNTERPARTS. This Agreement may be executed and delivered by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and both of which taken together shall
constitute but one and the same agreement.
13. 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
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warranties of any kind whatsoever, except as expressly set forth herein. No
modifications of this Agreement nor waiver of the terms or conditions hereof
shall be binding upon any party hereto 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.
14. NO THIRD PARTY BENEFICIARIES. Except as provided in Section 6 and
Section 9 hereof, this Agreement is for the sole benefit of the parties hereto
and their permitted assigns and nothing herein expressed or implied shall give
or be construed to give to any person, other than the parties hereto and such
assigns, any legal or equitable rights hereunder.
15. HEAD & XXXXXXXX ACQUISITION. The parties hereto acknowledge and agree
that nothing contained herein provides the Company with any right to a Head &
Xxxxxxxx Acquisition and any such Head & Xxxxxxxx Acquisition shall be pursued
(or not pursued) and/or consummated (or not consummated) at such time and on
such terms as the Company's board of directors shall determine in their sole
discretion.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have signed this Management
Agreement as of the day and year first above written.
BRUCKMANN, XXXXXX, XXXXXXXX & CO., INC.
By: /s/ Xxxxx Xxxxxxxx
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Name: Xxxxx Xxxxxxxx
Title:
ICM EQUIPMENT COMPANY L.L.C.
By: /s/ Xxxx Xxxxxx
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Name: Xxxx xxxxxx
Title: President & CEO
