EXHIBIT 10.3
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement"), is made as of this
23rd day of June, 2004, by and between ONEX PARTNERS MANAGER LP a Delaware
limited partnership ("Onex") and RES-CARE, INC., a Kentucky corporation (the
"Company").
- PRELIMINARY STATEMENT -
Onex Partners, LP, a Delaware limited liability company ("Onex Partners")
and an affiliate of Onex, along with various other affiliates, own 48,905 shares
of Series A Preferred Stock of the Company (the "Preferred Stock"), acquired
pursuant to the terms and conditions of the Preferred Stock Purchase Agreement
dated March 10, 2004;
As a condition to the acquisition of the Preferred Stock, the Company and
Onex Partners agreed to enter into a Management Services Agreement wherein the
Company would contract with Onex Partners, or one of its designated affiliates,
to provide mutually agreed-upon business management services to the Company;
Onex, an affiliate of Onex Partners, has access to substantial experience
in strategic and business planning, financial services, business arrangements,
business negotiations and various other business management and administration
matters;
The Company desires to avail itself of the resources, advice, assistance
and personnel of and available to Onex; and
Onex is willing to provide such services to the Company and the Company is
willing to engage Onex on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein set forth, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
- AGREEMENT -
ARTICLE 1
SERVICES
SECTION 1.1 ENGAGEMENT OF ONEX. The Company hereby engages Onex to provide
the services delineated in Section 1.2 below (the "Services") and Onex agrees to
provide such Services, in accordance with the terms and conditions set forth
herein. The Company expressly authorizes Onex and grants Onex all necessary
authority and power to render the Services to the Company on the terms and
conditions set forth herein.
SECTION 1.2 SERVICES. During the Term (as defined herein) Onex shall
assist the Company's Board of Directors and its management in such business and
financial matters of the Company and its affiliates as may be reasonably
requested by the Board of Directors or its management. Without limiting the
generality of the foregoing, the services to be rendered by Onex include: (i)
assisting with the development and implementation of corporate strategic plans
and acquisition and divestiture strategies; (ii) reviewing and providing advice
on corporate investments; (iii) providing management, tax, risk management and
financial advisory services; (iv) assisting in advising on subsequent debt and
equity financings (the "Services"); and (v) such other services as the Board of
Directors or management of the Company may reasonably request. From time to time
thereafter, the Board of Directors of the Company may request Onex and/or its
affiliates to provide additional services in addition to those contemplated
herein. However, the Company and Onex both acknowledge and agree that the
services referred to above do not include investment banking or financial advice
in connection with business acquisitions.
SECTION 1.3 SOURCING OF SERVICES. For purposes of this Agreement, Onex may
provide services under this Agreement by supplying Onex personnel or, at its
sole discretion, personnel from one or more of its affiliates. Under no
circumstance shall Onex be obligated to provide the Company or its subsidiaries
the services of external advisors, consultants and/or professionals. However,
Onex may seek the services of independent third parties, with such services
being paid for by the Company, so long as the Company approves of such services
in advance.
ARTICLE 2
TERM
SECTION 2.1 TERM. Subject to the terms herein, the term of this Agreement
shall commence on July 1, 2004 (the "Effective Date") and shall continue for an
initial five-year term (the "Term"). Thereafter, the Agreement shall be renewed
automatically for successive one-year periods.
SECTION 2.2 TERMINATION OF THIS AGREEMENT. This Agreement shall terminate
at such time when Onex Partners, or any of its affiliates, individually or in
the aggregate, no longer hold, either legally or beneficially, at least 26,452
shares of the Preferred Stock.
SECTION 2.3 CONSEQUENCES OF TERMINATION. Upon termination of this
Agreement, all power and authority granted Onex by the Company shall cease and
terminate immediately. Within 30 days of any termination of this Agreement, the
Company shall remit to Onex any accrued but unpaid Service Fee (as defined
herein) and reimbursable expenses.
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ARTICLE 3
COMPENSATION
SECTION 3.1 COMPENSATION.
(a) COMPENSATION. For and in consideration of the agreement of Onex
to provide the Services when requested by the Company's Board of Directors or
management, the Company shall pay Onex $350,000 per year (the "Service Fee").
(b) PAYMENT. The Company shall pay to Onex the Service Fee, in
advance, on a quarterly basis, on the first business day of January, April, July
and October of each year commencing July 1, 2004. Quarterly payments shall be
made not later than 5 business days after the beginning of the quarter in which
the Services will be performed. All payments to be made by the Company to Onex
shall be immediately available funds, unless the parties agree otherwise. In the
event the Company fails to pay the Service Fee to Onex, it shall be required to
pay Onex interest on all such unpaid amounts at an annual interest rate from
time to time announced by Bank One as its "Prime Rate" of interest used by it as
a reference rate for commercial loans in United States dollars adjusted on a
daily basis for changes in that rate. The Service Fee (and any interest due
thereon) shall accrue on a daily basis from and after July 1, 2004, and each
quarterly payment shall be in respect of the three-month period then ended or
such shorter period within such three months during which the Agreement was in
effect. Any amounts due to Onex under this Agreement may, at Onex's sole
discretion and direction, be payable to one or more affiliates of Onex.
(c) ANNUAL ACCOUNTING. During the first fiscal quarter of each year,
Onex shall invoice or provide a written accounting, in either case describing in
reasonable detail the Services provided during the preceding fiscal year
pursuant to this Agreement.
SECTION 3.2 EXPENSES. All reasonable ordinary and necessary expenses,
including but not limited to travel, fees for external consultants, advisors and
professionals approved by the Company as provided herein and other direct
out-of-pocket expenses incurred by Onex or its affiliates in the performance of
the Services shall be paid or reimbursed by the Company. The Company shall,
within 30 days after the receipt of an invoice from Onex, reimburse Onex in
full.
ARTICLE 4
MISCELLANEOUS
SECTION 4.1 RELATIONSHIP OF PARTIES. The parties acknowledge and agree
that each is a separate business entity, that each has its own management, and
separate policies and procedures, and that (except as otherwise set forth
herein) nothing contained herein shall constitute the delegation of authority
and power to Onex to manage and/or control the Company's business. The parties
further acknowledge and agree that the relationship established between the two
is that of independent contractors and is not a joint venture or partnership and
that the Services to be performed are intended to be merely auxiliary to and
supportive of the Company's business. Neither Onex nor its employees shall be
considered employees of the Company. Onex shall have no right to enter into any
contract or undertaking in the name of or for the account of the Company, nor to
assume or create any obligation of any kind, express or implied, on behalf of
the Company, without the prior written consent of the Company.
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SECTION 4.2 INDEMNIFICATION. The Company agrees to indemnify, defend and
hold harmless, Onex, its affiliates, directors, officers and/or employees from
and against any and all loss, liability, suits, claims, costs, damages and
expenses (including reasonable attorney fees) arising from their performance
hereunder, except where Onex's actions or omissions rise to the level of gross
negligence or willful misconduct.
SECTION 4.3 NOTICE. Any notice, request, consent or communication
(collectively "Notice") sent under this Agreement shall be effective only if it
is in writing and (a) personally delivered, (b) sent by certified or registered
mail, return receipt requested, postage prepaid, (c) sent by a nationally
recognized overnight delivery service, with delivery confirmed, or (d) telexed
or telecopied with receipt confirmed, addressed as follows:
If to Onex:
Onex Partners Manager LP
000 0xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xx Xxxxx, Managing Director,
Onex Partners Manager GP Inc.
Fax: (000) 000-0000
If to the Company:
Res-Care, Inc.
00000 Xxxx Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, President
Fax: (000) 000-0000
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
(i) when personally delivered, (ii) five (5) days after the date when deposited
with the United States mail properly addressed, (iii) when receipt of a Notice
sent by an overnight delivery service is confirmed by such overnight delivery
service, or (iv) when receipt of the telex or telecopy is confirmed, as the case
may be, unless the sending party has actual knowledge that a Notice was not
received by the intended recipient.
SECTION 4.4 WAIVER. The failure of either of the parties to insist, in any
one or more instances, upon performance of any of the terms or conditions of
this Agreement, shall not be construed as a waiver or relinquishment of any
rights granted hereunder or the future performance of any such term, covenant or
condition.
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SECTION 4.5 COMPLETE UNDERSTANDING. This Agreement constitutes the
complete understanding among the parties. No alteration or modification of any
of this Agreement's provisions shall be valid unless made in writing and signed
by all the parties to this Agreement.
SECTION 4.6 APPLICABLE LAW. The laws of the Commonwealth of Kentucky shall
govern all aspects of this Agreement, irrespective of the fact that one or more
of the parties now is or may become a resident of a different state, or that the
one or more of the parties now or hereafter locates its principal office outside
the Commonwealth of Kentucky. The parties acknowledge that the courts of the
Commonwealth of Kentucky shall have exclusive jurisdiction over this Agreement
and specifically waive any claims which they may have that involve jurisdiction
or venue, including but not limited to forum non conveniens. Service of process
for any claim which arises under this Agreement shall be valid if made in
accordance with the notice provisions set forth in Section 4.3 of this
Agreement. If service of process is made as aforesaid, the party served agrees
that such service shall constitute valid service, and specifically waives any
objections the party served may have under any state or Federal law or rule
concerning service of process. Service of process in accordance with this
Section 4.6 shall be in addition to and not to the exclusion of any other
service of process method legally available.
SECTION 4.7 DESCRIPTIVE HEADINGS. All section headings, titles and
subtitles are inserted in this Agreement for the convenience of reference only,
and are to be ignored in any construction of this Agreement's provisions.
SECTION 4.8 SEVERABILITY. If a court of competent jurisdiction rules that
any one or more of this Agreement's provisions are invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any of this Agreement's other provisions, and this Agreement
shall be construed as if it had never contained such invalid, illegal or
unenforceable provision.
SECTION 4.9 SUCCESSORS AND ASSIGNS AND THIRD PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 4.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts for all purposes shall constitute an
original.
SECTION 4.11 ASSIGNMENT. Except as otherwise set forth herein, neither the
Company nor Onex may assign its rights or obligations under this Agreement
without the written consent of the other party. The Company acknowledges and
agrees that Onex may assign this Agreement to any of its affiliates where at
least 50% of the voting securities are owned directly or indirectly by Onex
Partners and any such affiliate may assign the same to Onex or any other such
affiliate of Onex, without the consent of the Company.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the Effective Date.
ONEX PARTNERS MANAGER LP
a Delaware limited partnership
By: Onex Partners Manager GP Inc.,
its General Partner
Name: /s/ Xxxxxx X. Xx Xxxxx
-------------------------------------
Its: Managing Director
Name: /s/ Xxxx X. Xxxxx
-------------------------------------
Its: Managing Director
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RES-CARE, INC.
a Kentucky corporation
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxx
-------------------------------------
Its: President
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