EXHIBIT 10.5
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT ( the "AGREEMENT") is made and
entered into as of December 10, 2003(1), among ADVANCED LIGHTING TECHNOLOGIES,
INC., an Ohio corporation (the "COMPANY"), and SARATOGA MANAGEMENT COMPANY, LLC,
a Delaware limited liability company ("SARATOGA").
The Company desires that Saratoga provide certain ongoing management
and advisory services to the Company, and Saratoga is willing to provide such
services subject to the terms and conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
Section 1. Services. During the term of this Agreement, Saratoga shall
provide such advisory and management services to the Company as the Board of
Directors of the Company shall reasonably request and Saratoga shall agree to
provide from time to time. The Company agrees that Saratoga shall have the
right, but not the obligation, to act as sole advisor to the Company with
respect to significant business transactions. Services provided by Saratoga will
include, but not be limited to, ensuring that the Company is in compliance with
good corporate governance practices, providing ongoing operations review and
financial performance monitoring, reviewing and advising on the annual budgeting
process, significant contractual commitments and capital expenditures,
supporting relationships with financial institutions, advising on compensation
policy and structure, and providing ongoing strategic advice on the business and
management. Such services shall be performed at Saratoga's offices or at such
other locations as Saratoga shall reasonably determine.
Section 2. Compensation. In consideration of the services to be
provided in accordance with Section 1, the Company agrees to pay, to Saratoga:
(i) an advisory fee of 1% of the enterprise value of the
Company as of the date hereof, which fee shall be fully earned as of
the date hereof and shall be paid from excess working capital and/or
the proceeds of certain non-core assets of the reorganized Company
which is expected to take place within the first year of confirmation
of the Plan (defined below); and
(ii) a quarterly management fee, payable in advance (on or
before March 31, June 30, September 30, and December 31 of each year
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(1) Effective date
that this Agreement is in effect) equal to $150,000 ($600,000 in the
aggregate) (the "MANAGEMENT FEE") to be adjusted annually upwards on
each anniversary date for any increase in the rate of inflation as
indicated by the Consumer Price Index from the prior year, as the case
may be plus 0.5% of the aggregate amount of cash (and the fair market
value of other property as reasonably determined by the Company's Board
of Directors) (the "EQUITY FEE") received by the Company after the
Effective Date in connection with issuances of the Company's equity
securities (with a prorated Equity Fee amount to be paid with respect
to the period in which such cash or property is received, payable on
the date such cash or other property is received); provided, however
that upon an Event of Default (as defined in the New Indenture) which
has not been cured or waived, the Management Fee and Equity Fee
otherwise required by this Section 2(ii) shall accrue but not be
payable until such time as the default is cured; and
(iii) advisory and/or structuring fees in connection with
significant business transactions (including, without limitation,
acquisitions, investments and financings) ("STRUCTURING FEES") in
amounts comparable for similarly situated companies. The Structuring
Fees shall be negotiated in good faith by the Company and Saratoga and
payable on such date as the parties determine under a separate
agreement.
In the event that the Company fails to make a payment under this
Section 2 (with the exception of non-payment in accordance with the proviso in
Section 2(ii) hereof), or a dispute regarding payment arises, Saratoga reserves
the right to not perform under this Agreement until such time as the Company
either pays Saratoga or the parties hereto resolve their dispute. Both parties
agree to promptly negotiate any such disputes in good faith.
Notwithstanding the foregoing, the Company shall not be required to pay
to Saratoga any such payment that is otherwise prohibited by any credit
agreement or applicable law. In such cases, the due dates shall be deferred
until payment of cash is permitted and all amounts owed shall accrue interest at
the same rate paid on the Company's senior debt.
Section 3. Reimbursement. Saratoga and its affiliates shall be entitled
to reimbursement of all reasonable out-of-pocket expenses (including travel,
consultant and legal expenses) incurred in connection with or relating to the
performance of this Agreement (other than salary expenses and associated
overhead charges).
Section 4. Indemnity; No Liability. In consideration of the execution
and delivery of this Agreement by Saratoga, the Company hereby agrees to
indemnify, defend, exonerate and hold each of Saratoga and its affiliates, and
each of their respective partners, members, shareholders, affiliates, directors,
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officers, fiduciaries, employees and agents and each of the partners,
shareholders, affiliates, directors, officers, fiduciaries, employees and agents
of each of the foregoing (collectively, the "INDEMNITEES") free and harmless
from and against any and all claims, demands, liens, claims of lien, actions,
causes of action, suits, losses, liabilities and damages, and expenses in
connection therewith, including without limitation reasonable attorneys' fees
and disbursements (collectively, the "INDEMNIFIED LIABILITIES"), incurred by the
Indemnitees or any of them as a result of, or arising out of, or relating to the
execution, delivery, performance, enforcement or existence of this Agreement or
the transactions contemplated hereby or thereby except for any such Indemnified
Liabilities arising solely on account of such Indemnitee's gross negligence or
willful misconduct, and if and to the extent that the foregoing undertaking may
be unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. None of the Indemnitees
shall be liable to the Company or any of their affiliates for any act or
omission suffered or taken by such Indemnitee that is not finally judicially
determined to constitute gross negligence or willful misconduct.
Section 5.1. Agreement to Subordinate. Liabilities to Saratoga
hereunder are subordinated in right of payment, to the extent and in the manner
provided in these Sections 5.1 through 5.12, to the prior payment in full of all
principal and interest of the New Notes ("SENIOR DEBT"). The subordination
provisions are for the benefit of and enforceable by the holders of Senior Debt.
Section 5.2. Liquidation, Dissolution, Bankruptcy. Upon any payment or
distribution of the assets of the Company to creditors upon a total or partial
liquidation or a total or partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property:
(1) holders of Senior Debt are entitled to
receive payment in full in cash of all obligations in respect
of Senior Debt under the terms of the New Indenture, before
Saratoga will be entitled to receive any payment hereunder;
and
(2) until the Senior Debt is paid in full, any
distribution to which Saratoga would be entitled hereunder but
for these subordination provisions shall instead be made to
holders of Senior Debt as their interests may appear.
Section 5 .3. Default of Designated Senior Debt. (a) The Company shall
not make any payment to Saratoga hereunder if at the time any Senior Debt has
not been paid when due, whether at maturity, upon redemption or mandatory
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repurchase, acceleration, or otherwise, and such payment default has not been
cured or waived.
During the continuance of any Event of Default with respect to the
Senior Debt, the Company may not pay Saratoga hereunder until all the Senior
Debt has been paid in full.
Section 5.4. When Distribution Must Be Paid Over. If a payment or other
distribution is made to Saratoga hereunder that because of these subordination
provisions should not have been made to Saratoga, Saratoga shall hold it in
trust for holders of Senior Debt and pay it over to their indenture trustee for
proper distribution.
Section 5.5. Subrogation. A distribution made under these subordination
provisions to holders of Senior Debt which otherwise would have been made to
Saratoga hereunder is not, as between the Company and Saratoga, a payment by the
Company on Senior Debt. After all Senior Debt is paid in full and until the
holders of the Senior Debt are paid in full hereunder, Saratoga will be
subrogated to the rights of holders of Senior Debt to receive payments in
respect of Senior Debt.
Section 5.6. Relative Rights; Subordination Not to Prevent Events of
Default or Limit Right to Accelerate. These subordination provisions define the
relative rights of Saratoga hereunder and holders of Senior Debt and do not
impair, as between the Company and Saratoga, the obligation of the Company,
which is absolute and unconditional, to pay Saratoga hereunder in accordance
herewith. These provisions do not prevent Saratoga from exercising its available
remedies upon a default hereunder, subject to the rights of holders of Senior
Debt to receive distributions otherwise payable to Saratoga hereunder.
Section 5.7. Subordination May Not be Impaired by Company. No right of
any holder of Senior Debt to enforce the subordination of Saratoga hereunder
will be impaired by any act or failure to act by the Company or by its failure
to comply with the New Indenture.
Section 5.8. Distributions and Notices to, and Notices and Consents by,
Representatives of Holders of Senior Debt. Whenever a distribution is to be made
or a notice given to holders of Senior Debt, the distribution may be made and
the notice given to their indenture trustee.
Section 5.9. Trust Moneys Not Subordinated; Payments in Permitted
Junior Securities. Notwithstanding anything to the contrary, distributions to
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Saratoga hereunder in the form of Permitted Junior Securities* of the Company
are not subordinated to the prior payment of any Senior Debt or otherwise
subject to these subordination provisions, and Saratoga will not be obliged to
pay over any such payments or distributions to any holders of Senior Debt.
Section 5.10. Trustee Entitled to Rely. For the purpose of ascertaining
the outstanding amount of Senior Debt, the holders thereof, and all other
information relevant to making any payment or distribution to holders of Senior
Debt pursuant to these Sections 5.1 through 5.12, Saratoga is entitled to rely
upon an order or decree of a court of competent jurisdiction in which any
proceedings of the nature referred to in Section 5.2 are pending, a certificate
of the liquidating trustee or other person making a payment or distribution to
Saratoga is, or information provided by the holders of Senior Debt. Saratoga may
defer any payment or distribution pending receipt of evidence or instructions
satisfactory to it or a judicial determination regarding the rights of parties
to receive the payment or distribution.
Section 5.11. Saratoga Not Fiduciary for Holders of Senior Debt.
Saratoga will not be deemed to owe any fiduciary duty to the holders of Senior
Debt and will not be liable to any such holders if it mistakenly pays over or
distributes to itself or any other person any money or assets to which holders
of Senior Debt are entitled by virtue of these Sections 5.1 through 5.12.
Section 5.12. Reliance by Holder of Senior Debt on Subordination
Provisions; No Waiver. (a) Saratoga acknowledges and agrees that these
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of Senior Debt, whether created or acquired before
or after the execution and delivery of this Agreement, to acquire or to hold
such Senior Debt, and each holder of Senior Debt will be deemed conclusively to
have
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- "PERMITTED JUNIOR SECURITIES" means, as to the Company, or any one or
more of its successors or affiliates, as the case may be, any securities of the
Company or any one or more of its successors or affiliates, as the case may be,
provided for by a plan or reorganization or readjustment authorized by an order
or decree of a court of competent jurisdiction in a reorganization proceeding
under any applicable bankruptcy law relating to the Company that constitute
either (x) equity interests of the Company or any one or more of its successors
or affiliates or (y) debt of the Company or any one or more of its successors or
affiliates, subordinated in right of payment to all Senior Debt of the Company,
then outstanding to at least the same extent as the payments to Saratoga are
subordinated as provided for herein, it being specifically understood that after
the occurrence, and during the continuance of, any one or more Events of Default
on Senior Debt, interest on any debt of the Company or any one or more of its
successors or affiliates referred to in this clause (y) above may accrue at the
then-applicable rate provided for in the governing instrument, but such interest
shall not and may not be paid in cash until such Events of Default shall have
been cured or waived .
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relied on these subordination provisions in acquiring and holding such Senior
Debt.
(b) The holders of Senior Debt may, at any time and from time to
time, without the consent of or notice to their indenture trustee or Saratoga,
and without impairing the rights of holders of Senior Debt under these
subordination provisions, do any of the following:
(1) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior
Debt or any instrument evidencing the same or any agreement
under which Senior Debt is outstanding or secured;
(2) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing
Senior Debt;
(3) release any Person liable in any manner for
the payment of Senior Debt; or
(4) exercise or refrain from exercising any
rights against the Company and any other Person.
Section 6. Governing Law; Submission To Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York, without regard to conflicts of law principles.
Section 7. Termination. This Agreement may be terminated by Saratoga at
any time by written notice to the Company pursuant to Section 8 below. In
addition, this Agreement will terminate automatically as of the earlier of (i)
the tenth anniversary of this Agreement and (ii) the end of the fiscal year in
which the fully diluted ownership interest of Saratoga and its affiliates in the
outstanding common stock of the Company falls below 5%, unless expressly
extended in writing. The provisions of Section 4 shall survive any termination
of this Agreement.
Section 8. Notices. All notices and demands which any party is required
or desires to give to any other shall be given in writing by personal delivery
or by express courier service or certified mail, return receipt requested, to
the addresses below for the respective party. However, if either party gives
notice of a change of name or address, notices to that party shall thereafter be
given as demanded in that notice. All notices and demands given by personal
delivery or by express courier service shall be effective upon receipt by the
party to whom notice or a demand is being given. All notices given by mail shall
be effective on the third business day after mailing.
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For convenience, the addresses, telephone and facsimile numbers of the
parties and their respective counsel hereto are:
The Company:
Advanced Lighting Technologies, Inc.
00000 Xxxxxx Xxxx
Xxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Jenner & Block, LLC
Xxx XXX Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Saratoga:
Saratoga Management Company, LLC
000 Xxxxxxx Xxxxxx - 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Case
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 9. Relationship of Parties. Each party is an independent
contractor and not an agent or partner of, or joint venturer with, the other
party for any purpose, and neither party by virtue of this Agreement shall have
any right, power, or authority to act or create any obligation, express or
implied, on behalf of the other party except as expressly provided herein. In
the event that an agency relationship is created or implied, any such agency
will be a limited agency
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wherein the duties of Saratoga are specifically limited to the subject matter
hereof and will not create or result in the imposition on Saratoga of any other
duties of any kind or nature, including without limitation any duties which may
otherwise arise by operation of law. This Agreement is not intended to and does
not create any rights, claims, remedies or benefits inuring to any person
(including any customer, or any creditor or employee of Saratoga or the Company)
that is not a party hereto nor create or establish any third party beneficiary
hereto.
Section 10. Assignment. Rights under this Agreement shall not be
assignable and duties under this Agreement shall not be delegable by either
party except by the Company to any subsidiary or affiliate of Saratoga or the
Company or to any successor in interest to the Company's or Saratoga's business.
Section 11. Entire Agreement. This Agreement contains the entire
agreement of the parties hereto and supersedes all prior understandings and
agreements, whether oral or in writing, regarding the subject matter of this
Agreement.
Section 12. Severability. If any term, covenant, condition or provision
of this Agreement, or their application to any person or circumstance, shall to
any extent be held by a court of competent jurisdiction to be invalid, void or
unenforceable, the parties shall renegotiate the unenforceable or invalid terms
so as to effect the intent of this Agreement, and the remainder of the
provisions of this Agreement, or their application to any person or
circumstance, shall remain in full force and effect.
Section 13. Waiver Of Covenants. Waiver by one of the parties hereto of
any covenant or condition under this Agreement shall not invalidate this
Agreement nor shall it be considered a waiver of any other covenant or condition
under this Agreement.
Section 14. Further Acts. Each party hereto agrees to perform any
further acts and to execute, acknowledge and deliver any documents which may be
reasonably necessary to carry out the provisions of this Agreement.
Section 15. Section Headings. The section headings used in this
Agreement are intended solely for convenience of reference and shall not in any
manner amplify, limit, modify or otherwise be used in the interpretation of any
of the provisions hereof.
Section 16. Capitalized Terms. Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the Chapter 11 Plan
of Reorganization confirmed by the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division, in the cases captioned In re
Venture Lighting International, Inc., et al., Case No. 03-05255 (the "PLAN").
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Section 17. Counterparts. This Agreement may be executed in several
counterparts and all such executed counterparts shall constitute a single
agreement, binding on the parties hereto and their successors.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
ADVANCED LIGHTING
TECHNOLOGIES, INC.
By: /s/ Xxxxxxxxxxx X. Xxxxxx
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Name: XXXXXXXXXXX X. XXXXXX
Title: VP and CAO
SARATOGA MANAGEMENT
COMPANY, LLC
By: /s/ Xxxxxxx X. Xxxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxxx
Title: Treasurer
