EXHIBIT NO. 10.1
(AP SERVICES LLC LOGO) Detroit New York Chicago Dallas
December 7, 2006
Board of Directors
Tecumseh Products Company
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Re: Interim Management, Financial Advisory and Consulting Services
Gentlemen:
This letter, together with the attached Schedule(s), Exhibit and General Terms
and Conditions, sets forth the agreement ("Agreement") between AP Services, LLC,
a Michigan limited liability company ("APS"), and Tecumseh Products Company (the
"Company"), for the engagement of APS to provide interim management, financial
advisory and consulting services to the Company.
This Agreement replaces in its entirety the engagement letters between APS and
the Company dated July 20, 2005 and AlixPartners, LLC, now known as
AlixPartners, LLP a Delaware limited liability partnership ("AlixPartners") and
the Company dated July 20, 2005 (collectively the "Engagement Letters"). The
Company confirms that the Objectives and Tasks under the Engagement Letters were
satisfactorily completed as of the date hereof.
All defined terms shall have the meanings ascribed to them in this letter and in
the attached Schedule(s), Exhibit and General Terms and Conditions.
OBJECTIVES AND TASKS
Xxx Xxxxxxx will be designated "President of the Engine & Transmission Group,"
reporting to the Company's Chief Executive Officer. In addition, Xxx Xxxxx will
be designated as "Vice President-Finance Engine & Transmission Group," reporting
to Xxx Xxxxxxx. APS may provide additional resources including a Plant Manager
of New Holstein Operations and up to three consultants to work with the
Company's Engine Group on its sourcing project. Xxxxx Xxxxxxx, as well as all
APS personnel regardless of designation or title will be deemed to be temporary
employees ("Temporary Staff") of the Company.
Working collaboratively with the senior management team, the Board of Directors
and other Company professionals, Xx. Xxxxxxx will assist the Company in
evaluating and implementing strategic and tactical options for performance
improvement. In addition, the Temporary Staff (as defined below) will work with
the Company and its team to do the following:
2000 Town Center | Xxxxx 0000 x Xxxxxxxxxx, XX x 00000 | 248.358.4420 |
000.000.0000 fax | xxx.xxxxxxxxxxxx.xxx
(AP SERVICES LLC LOGO)
Board of Directors of Tecumseh Products Company
December 7, 2006
Page 2
- Perform functions typically assigned to the President, Vice
President-Finance and Plant Manager.
- Provide consultation to the President and the Engine procurement group
related to the sourcing of product previously or currently manufactured in
New Holstein.
- Assist with such other matters as may be requested that fall within APS'
expertise and that are mutually agreeable.
STAFFING
APS will provide the Company with the individuals set forth on Exhibit A subject
to the terms and conditions of this Agreement, with titles, pay rates and other
descriptions set forth therein.
The Temporary Staff may be assisted by or replaced by other professionals at
various levels, as required, who shall also become Temporary Staff. APS will
keep the Company informed as to APS' staffing and will not add additional
Temporary Staff to the assignment without first consulting with the Company to
obtain Company concurrence that such additional resources are required.
SETTLEMENT OF PRIOR ACCOUNTS
In satisfaction of all sums due AlixPartners LLC under the July 20, 2005
engagement letter, the Company and APS agree that $4,176,000 is still owed.
The Company agrees to pay $4,176,000 to AlixPartners on the following schedule:
Payment of $338,000 on December 7, 2006 and $338,000 on December 22, 2006
- Payment of $250,000 twice a month (the 15th and last day of each
month) beginning January 15, 2007 through July 31, 2007. The total of
such payments being $3,500,000.
- If payments are made in arrears of the above schedule and such
arrearage is 20 days, the Company agrees to pay AlixPartners a one
time additional fee of $5,000,000.
TIMING, FEES AND RETAINER
APS commenced this engagement on December 1, 2006. Please return a copy of the
Agreement executed by the Company accompanied by the Retainer, as set forth on
Schedule 1.
(AP SERVICES LLC LOGO)
Board of Directors of Tecumseh Products Company
December 7, 2006
Page 3
The Company shall compensate APS for its services, and reimburse APS
for expenses, as set forth on Schedule 1.
* * *
The terms and conditions set out in the attached Schedule(s), Exhibit and the
General Terms and Conditions form part of the Agreement and are incorporated by
reference herein.
If these terms meet with your approval, please sign and return the enclosed copy
of the Agreement and wire transfer the amount to increase the Retainer.
We look forward to our continuing relationship with you.
Sincerely yours,
AP SERVICES, LLC
/s/ Xxxxx X. Xxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxx
Managing Director
Acknowledged and Agreed to:
TECUMSEH PRODUCTS COMPANY
By: /s/ Xxxx X. Xxxxxxx
---------------------------------
Its: CEO
Dated: 12/8/06
Acknowledged and Agreed to with respect to the Settlement of Accounts:
ALIXPARTNERS, LLP
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Its: Managing Director
Dated: 12/8/06
(AP SERVICES LLC LOGO)
AP SERVICES, LLC
EMPLOYMENT BY TECUMSEH PRODUCTS COMPANY
EXHIBIT A
TEMPORARY EMPLOYEES
INDIVIDUALS WITH EXECUTIVE OFFICER POSITIONS
COMMITMENT
NAME DESCRIPTION HOURLY RATE FULL(1) OR PART(2)TIME
----------------- --------------------------------- ----------- ----------------------
Xxxxx Xxxxxxx President - Engine & 2006-$670 Full
Transmission Group 2007-$700
ADDITIONAL TEMPORARY EMPLOYEES
COMMITMENT
NAME DESCRIPTION HOURLY RATE FULL(1) OR PART(2)TIME
----------------- --------------------------------- ----------- ----------------------
Xxxxxx Xxxxx Vice President - Finance Engine & 2006-$550 Full
Transmission Group 2007-$565
Xxxx Xxxx Plant Manager - New Holstein 2006-$450 Full
Operations 2007-$470
Xxx Xxxxxxxx Director APS 2006-$525 Full
2007-$550
Xxxxxxx Xxxxxxxxx Vice President APS 2006-$495 Full
2007-$520
Xxxxx Xxxxxxxxxx Vice President APS 2006-$430 Full
2007-$450
The parties agree that Exhibit A can be amended by APS from time to time to add
or delete staff.
(1) Full time is defined as substantially full time.
(2) Part time is defined as approximately 2-3 days per week, with some weeks
more or less depending on the needs and issues facing the Company at that
time.
(AP SERVICES LLC LOGO)
SCHEDULE 1
FEES AND EXPENSES
1. FEES: APS' fees will be based on the hours worked by APS personnel at the
hourly rates specified in Exhibit A In satisfaction of all sums due APS
under the July 20, 2005 Engagement Letter, the Company and APS agree that
$395,687.49 is still owing.
2. SUCCESS FEE: APS does not seek a Success Fee in connection with this
engagement.
3. EXPENSES: In addition to the fees set forth herein, the Company shall pay
directly, or reimburse APS upon receipt of periodic xxxxxxxx, for all
reasonable out-of-pocket expenses incurred in connection with this
assignment, such as travel, lodging, postage and a communications charge of
$4.00 per billable hour to cover telephone and facsimile charges.
4. BREAK FEE: APS does not seek a Break Fee in connection with this
engagement.
5. RETAINER: In addition to the $250,000 retainer paid in accordance with the
July 20, 2005 engagement, the Company shall pay APS $350,000 for a total
retainer of $600,000 to be applied against Fees and Expenses as set forth
in this Schedule and in accordance with Section 2 of the attached General
Terms and Conditions.
(AP SERVICES LLC LOGO)
SCHEDULE 2
DISCLOSURES
We know of no fact or situation that would represent a conflict of interest for
us with regard to the Company. However, we wish to disclose the following:
- Xx Xxxx, a Managing Director of AlixPartners, an affiliate of APS, is also
on the Board of Directors of Tecumseh Products Company.
- Pursuant to the Recapitalization Agreement, dated as of August 3, 2006,
among AlixPartners Holdings, Inc., AlixPartners, LLC, Xxx Xxxx
individually, H&F Astro LLC and those other persons that may become bound
thereto, three private equity funds (collectively, "HFCP V") sponsored by
Xxxxxxx & Xxxxxxxx, LLC ("H&F LLC") acquired, indirectly through H&F Astro
LLC, a controlling stake in AlixPartners as of October 12, 2006. Xxxxxxx &
Xxxxxxxx Investors V, LLC and H&F LLC (collectively, "H&F") control HFCP V.
No material nonpublic information about Company has been furnished by
AlixPartners to H&F. In conjunction with this transaction AlixPartners, LLC
was converted to AlixPartners, LLP, a Delaware limited liability
partnership.
- Xxxxxxxx & Xxxxx, a professional services firm of the Company, is counsel
and adverse counsel to current and former AlixPartners and/or APS clients
in matters unrelated to the Company. AlixPartners has been client of
Xxxxxxxx & Xxxxx in matters unrelated to the Company.
This Schedule 2 may be updated by AlixPartners from time to time to disclose
additional connections or relationships between AlixPartners and the interested
parties.
AP SERVICES, LLC
GENERAL TERMS AND CONDITIONS
These General Terms and Conditions ("Terms") are incorporated into the letter
agreement ("Agreement") between the Company and APS to which these Terms are
attached.
SECTION 1. COMPANY RESPONSIBILITIES
The Company will undertake responsibilities as set forth below:
1. Provide reliable and accurate detailed information, materials,
documentation and
2. Make decisions and take future actions, as the Company determines in its
sole discretion, on any recommendations made by APS in connection with this
Agreement.
APS' delivery of the services and the fees charged are dependent on (i) the
Company's timely and effective completion of its responsibilities; and (ii)
timely decisions and approvals made by the Company's management. The Company
shall be responsible for any delays, additional costs or other deficiencies
caused by not completing its responsibilities.
SECTION 2. RETAINER, BILLING AND PAYMENTS
RETAINER AND BILLING. APS will submit monthly invoices for services rendered and
expenses incurred and will offset such invoices against the Retainer. Payment
will be due upon receipt of the invoices to replenish the Retainer to the
agreed-upon amount. Any unearned portion of the Retainer will be returned to the
Company at the termination of the engagement.
PAYMENTS. All payments to be made by the Company to APS shall be payable upon
receipt of invoice via wire transfer to APS' bank account, as follows:
Receiving Bank: Comerica Bank
ABA #000000000
Receiving Account: AP Services, LLC
A/C #1851-765410
SECTION 3. RELATIONSHIP OF THE PARTIES
The parties intend that an independent contractor relationship will be created
by the Agreement. As an independent contractor, APS will have complete and
exclusive charge of the management and operation of its business, including
hiring and paying the wages and other compensation of all its employees and
agents, and paying all bills, expenses and other charges incurred or payable
with respect to the operation of its business. Of course, neither the Temporary
Staff nor APS will be entitled to receive from the Company any vacation pay,
sick leave, retirement, pension or social security benefits, workers'
compensation, disability, unemployment insurance benefits or any other employee
benefits. APS will be responsible for all employment, withholding, income and
other taxes incurred in connection with the operation and conduct of its
business.
The Company shall not solicit, recruit or hire any employees or agents of APS
for a period of two years subsequent to the expiration or termination of the
Agreement.
SECTION 4. CONFIDENTIALITY
APS shall keep confidential all non-public confidential or proprietary
information obtained from the Company during the performance of its services
hereunder (the "Information"), and neither APS nor the Temporary Staff will
disclose any Information to any other person or entity. "Information" includes
non-public confidential and proprietary data, plans, reports, schedules,
drawings, accounts, records, calculations, specifications, flow sheets, computer
programs, source or object codes, results, models or any work product relating
to the business of the Company, its subsidiaries, distributors, affiliates,
vendors, customers, employees, contractors and consultants.
The foregoing is not intended to prohibit, nor shall it be construed as
prohibiting, APS or the Temporary Staff from disclosure pursuant to a valid
subpoena or court order, but neither APS nor the Temporary Staff shall
encourage, suggest, invite or request, or assist in securing, any such subpoena
or court order; and the Temporary Staff shall promptly give notice of any such
subpoena or court order by fax transmission to the Company. APS and the
Temporary Staff may make reasonable disclosures of Information to third parties
in connection with the performance of APS' obligations and assignments
hereunder. In addition, APS will have the right to disclose to others in the
normal course of business its involvement with the Company.
The Company acknowledges that all information (written or oral), including
advice and Work Product (as defined in Section 5), generated by APS and the
Temporary Staff in connection with this engagement is intended solely for the
benefit and use of the Company (limited to its management and its Board of
Directors) in connection with the transactions to which it relates. The Company
agrees that no such information shall be used for any other purpose or
reproduced, disseminated, quoted or referred to with attribution to APS at any
time in any manner or for any purpose without APS' prior approval except as
required by law.
SECTION 5. INTELLECTUAL PROPERTY
All methodologies, processes, techniques, ideas, concepts, know-how, procedures,
software, tools, writings and other intellectual property that APS has created,
acquired or developed prior to the date of this Agreement are, and shall remain,
the sole and exclusive property of APS, and the Company shall not acquire any
interest therein. APS shall be free to use all methodologies, processes,
techniques, ideas, concepts, know-how, procedures, software, tools, writings and
other intellectual property that APS may create or develop in connection with
this engagement, subject to its duty of confidentiality to the extent that the
same contain information or materials furnished to APS by the Company that
constitute Information referred to in Section 4 above. Except as provided above,
all information, reports, materials, software and other work product that APS
creates or develops specifically for the Company as part of this engagement
(collectively known as "Work Product") shall be owned by the Company and shall
constitute Information referred to in Section 4 above. APS may retain copies of
the Work Product subject to its obligations under Section 4 above.
SECTION 6. FRAMEWORK OF THE ENGAGEMENT
The Company acknowledges that it is retaining APS to provide the Temporary Staff
solely to assist and advise the Company as described in the Agreement. This
engagement shall not constitute an audit, review or compilation, or any other
type of financial statement reporting engagement.
SECTION 7. INDEMNIFICATION AND OTHER MATTERS
AP SERVICES, LLC
GENERAL TERMS AND CONDITIONS
The Company shall indemnify, hold harmless and defend APS and APS' directors,
officers, employees, Temporary Staff and agents from and against all claims,
liabilities, losses, expenses and damages arising from services performed by APS
personnel in accordance with this Agreement. With respect to any matter for
which indemnification is provided herein, the Company shall pay costs as
incurred, including reasonable legal fees and disbursements of counsel in any
legal proceeding in which APS or other indemitees may be required or agree to
participate but in which they are not a party. APS and its directors, officers,
employees, Temporary Staff and agents will engage a single firm of separate
counsel acceptable to the Company, the approval for which shall not be
unreasonably withheld, in connection with any of the matters to which
indemnification agreement relates.
The Company shall use its best efforts to specifically include and cover, as a
benefit for their protection, Temporary Staff serving as directors or officers
of the Company or affiliates from time to time with direct coverage as named
insureds under the Company's policy for directors' and officers' ("D&O")
insurance, which policy shall be for at least $10 million.
APS is not responsible for any third-party products or services. The Company's
sole and exclusive rights and remedies with respect to any third party products
or services are against the third-party vendor and not against APS, whether or
not APS is instrumental in procuring the third-party product or service.
APS shall not be liable to the Company except for actual damages resulting from
bad faith, self-dealing or gross negligence.
SECTION 8. GOVERNING LAW
The Agreement is governed by and shall be construed in accordance with the laws
of the State of Michigan with respect to contracts made and to be performed
entirely therein and without regard to choice of law or principles thereof.
Any controversy or claim arising out of or relating to the Agreement, or the
breach thereof, shall be settled by arbitration. Each party shall appoint one
non-neutral arbitrator. The two party arbitrators shall select a third
arbitrator. If within 30 days after their appointment the two party arbitrators
do not select a third arbitrator, the third arbitrator shall be selected by the
American Arbitration Association (AAA). The arbitration shall be conducted in
Southfield, Michigan under the AAA's Commercial Arbitration Rules, and the
arbitrators shall issue a reasoned award. The arbitrators may award costs and
attorneys' fees to the prevailing party. Judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
SECTION 9. TERMINATION AND SURVIVAL
The Agreement may be terminated at any time by written notice by one party to
the other; provided, however, that notwithstanding such termination APS will be
entitled to any fees and expenses due under the provisions of the Agreement,
including Success Fee and Break Fee in accordance with Schedule 1. Such payment
obligation shall inure to the benefit of any successor or assignee of APS.
Sections 2, 4, 5, 7, 8, 9 and 10 of these Terms, the provisions of Schedule 2
and the obligation to pay accrued fees and expenses shall survive the expiration
or termination of the Agreement.
SECTION 10. GENERAL
SEVERABILITY. If any portion of the Agreement shall be determined to be invalid
or unenforceable, the remainder shall be valid and enforceable to the maximum
extent possible.
ENTIRE AGREEMENT. These Terms, the letter agreement into which they are
incorporated and the Schedule(s) and Exhibit to such letter agreement contain
the entire understanding of the parties relating to the services to be rendered
by APS and the Temporary Staff and may not be amended or modified in any respect
except in a writing signed by the parties. APS is not responsible for performing
any services not specifically described herein or in a subsequent writing signed
by the parties. If there is a conflict between these Terms and the balance of
the Agreement, these Terms shall govern.
NOTICES. All notices required or permitted to be delivered under the Agreement
shall be sent, if to APS, to:
AP Services, LLC
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxxxxxxxx
and if to the Company, to the address set forth in the Agreement, to the
attention of the Company's General Counsel, or to such other name or address as
may be given in writing to the other party. All notices under the Agreement
shall be sufficient if delivered by facsimile or overnight mail. Any notice
shall be deemed to be given only upon actual receipt.
