Exhibit 10.20
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MANAGEMENT SERVICES AGREEMENT
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MANAGEMENT SERVICES AGREEMENT, dated as of February 26, 2001, by and
among The FINOVA Group Inc. ("FINOVA" or the "Company"), a Delaware corporation,
and Leucadia National Corporation, a New York corporation ("Leucadia" or
"Manager") and Leucadia International Corporation, a Utah corporation that is a
wholly owned subsidiary of Leucadia ("Leucadia International").
WHEREAS, FINOVA has agreed to file a petition for voluntary
reorganization (the "Voluntary Petition") under chapter 11 of title 11 of the
United States Code 11 U.S.C. Sections 101 et seq. (the " Bankruptcy Code") with
the United States Bankruptcy Court for the District of Delaware (and together
with the United States District Court the "Bankruptcy Court"); and
WHEREAS, FINOVA, its subsidiary, FINOVA Capital Corporation ("FCC"),
Berkadia LLC, a Delaware limited liability company (the "Lender"), Berkshire
Hathaway Inc., a Delaware corporation ("Berkshire") and Leucadia have entered
into a commitment letter dated as of the date hereof (the "Commitment Letter")
pursuant to which, among other things, the Lender will make its commitment,
guarantied by Berkshire and Leucadia, to lend to FCC $6 billion on the terms and
conditions set forth in the Commitment Letter; and
WHEREAS, pursuant to the Commitment Letter, the Company and FCC have
agreed to file a chapter 11 plan containing the principal terms outlined in the
Commitment Letter or such other terms agreed to by the Company as are mutually
acceptable to both Leucadia and Berkshire in their reasonable discretion (the
"Plan"); and
WHEREAS, the Board of Directors of the Company (the "Board") will
form a special committee consisting of two directors to serve as a special
committee of the Board until the effective date of the Company's chapter 11 plan
(the "Special Committee"), to work closely with Leucadia and the chief
restructuring officer of the Company (the "Chief Restructuring Officer"); and
WHEREAS, certain management functions have previously been performed
for FINOVA by its own officers; and
WHEREAS, Leucadia, directly and through its subsidiaries, has the
capability to provide those services to FINOVA; and
WHEREAS, the Board has determined that it is in the best interests of
FINOVA to obtain such services from Leucadia and its subsidiaries.
It is hereby mutually agreed as follows:
1. Term. The term of this Management Agreement shall be ten years
commencing on the date hereof.
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2. Compensation. For a period of ten years, commencing on the date of
this Agreement, FINOVA shall pay to Leucadia International annually a management
fee of $8 million, payable in immediately available funds (the "Annual
Management Fee"). The Annual Management Fee shall be payable quarterly, in
advance, at the beginning of each calendar quarter; provided, however, that the
entire first Annual Management Fee shall be paid to Leucadia International on
the date hereof. Until Leucadia International receives the first Annual
Management Fee, neither Leucadia nor Leucadia International shall have any
responsibilities to FINOVA under this Agreement.
3. Services of Leucadia. Subject to the authority of the Board,
Leucadia, directly and through its subsidiaries including Leucadia
International, (i) shall be responsible, together with the Special Committee,
for the general management of the Company; (ii) shall assume principal
responsibility for management of the "portfolio" of FCC, including the
supervision of corporate wide management of the portfolio sales, dispositions,
acquisitions, and administration; and (iii) shall provide to the Company the
Chief Restructuring Officer who initially shall be Xxxxxxxx X. Xxxxxxxxxx (an
employee of Leucadia International), who will report to and work closely with
the Special Committee and who, as part of his duties related to the
restructuring of the Company and its subsidiaries, will supervise all
communications with lenders and all banking/creditor and other financial
relationships.
In addition, following the effective date of the Plan, Leucadia shall
provide to the Company, the Chairman of the Board and President of the Company
and such other officers, if any, as shall be mutually determined between
Leucadia and the Company.
4. Personnel. Leucadia shall provide a portion of the time of such
executive officers of Leucadia and its subsidiaries as Leucadia reasonably
determines is necessary to carry out the services specified herein. The number
of persons providing services at any one time and the number of hours such
persons devote to the services specified herein shall not be fixed but shall at
all times be adequate to properly and promptly perform and discharge the
specified services, it being understood that acting as Chief Restructuring
Officer shall be Xx. Xxxxxxxxxx'x principal professional activity through the
effective date of the Plan.
The persons provided by Leucadia hereunder shall for all purposes be
employees of Leucadia. Neither Leucadia nor Leucadia International shall be
entitled to receive any additional compensation for services rendered under this
Agreement other than the payments set forth in paragraph 2 above, but shall be
reimbursed for all reasonable out of pocket expenses, including reimbursement of
travel expenses. Nothing herein shall prevent, however, any individual provided
hereunder from becoming an elected or appointed officer or director of FINOVA
and enjoying the benefits (other than compensation) afforded to any persons in
any such position.
5. Office Space, Equipment and Supplies, Etc. FINOVA shall provide to
Leucadia and its personnel provided hereunder office space, secretarial
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services, equipment and supplies, telephone, telefax and related support
facilities to the extent available at FINOVA's regular work locations.
6. Mutual Obligations. In addition to their other obligations under
this Agreement, each of FINOVA and Leucadia shall cooperate with the other in
the preparation of the Plan. The parties hereto also shall keep each other fully
and promptly informed of developments in FINOVA's and FCC's businesses and
relationships and discussions and negotiations with or affecting their
respective creditors, including any notices from their respective lenders,
suppliers or advisors or any notices from any third party related to their
respective creditors. As promptly as practicable following execution of this
Agreement, the Board of FINOVA shall elect Xxxxxxxx X. Xxxxxxxxxx, or such other
person designated by Leucadia as is reasonably acceptable to FINOVA, as the
Chief Restructuring Officer and shall elect three designees of Leucadia that are
mutually acceptable to FINOVA and Leucadia as members of the Board (or upon
mutual advice of counsel to Leucadia and FINOVA, to become advisory participants
of the Board and, in such capacity, to attend all meetings of the Board (whether
telephonic or in person) and to receive all communications with the Board at the
same time sent to all regular members of the Board). FINOVA agrees that prior to
confirmation of the Plan, FINOVA and its subsidiaries will carry on their
respective businesses under the supervision of Leucadia and the Special
Committee in the ordinary course of business in compliance in all material
respects with all applicable laws and in accordance with Annex A hereto.
7. Company Expenses. FINOVA will continue to bear the cost and
expense of its own employees, including their salary, travel, entertainment,
other business and benefit expenses.
8. Bankruptcy Court Approval. If the Bankruptcy Court does not
approve this Agreement on or before the day an order is issued by the Bankruptcy
Court approving a disclosure statement for the Company and FCC (which shall be
no later than 130 days from the date hereof), this Agreement will automatically
terminate unless termination is specifically waived by Leucadia in writing. The
Company agrees that it will use its best efforts to obtain Bankruptcy Court
approval of this Agreement in a timely manner. If the Agreement is not approved
by the Bankruptcy Court, the $8 million Annual Management Fee paid to Leucadia
International upon execution of this Agreement shall be deemed to be fully
earned upon its payment and shall not be refundable to the Company upon
termination of this Agreement.
9. Termination. If (i) the Commitment Letter is terminated or (ii) a
plan of reorganization other than the Plan is confirmed by order of the
Bankruptcy Court, then Leucadia and the Company each shall have the right to
terminate this Agreement. Any termination shall be upon not less than 30 days
prior written notice given by the terminating party to the other party to this
Agreement. However, any termination (whether under this paragraph or otherwise)
shall not relieve FINOVA of its obligation to pay to Leucadia International the
portion of the Management Fee, if any, that has been earned through the
termination date but has not been paid to Leucadia International as of the date
of such termination and any unpaid Management Fee due to the date of termination
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shall be paid to Leucadia International in one payment, in immediately available
funds, upon the effective date of such termination. Notwithstanding the
foregoing, the $8 million Annual Management Fee paid to Leucadia International
upon execution of this Agreement shall be deemed to be fully earned upon its
payment and shall not be refundable to the Company upon termination of this
Agreement.
10. Governing Law. This Agreement shall be governed in accordance
with the laws of the State of New York.
11. Assignment. Neither party may assign this Agreement or any of its
rights or duties hereunder, except that Manager may assign this Agreement to any
entity that is controlled by, controlling or under common control with Leucadia.
12. Notices. Services of all notices, if any, under this Agreement
shall be sufficient if given personally or sent by certified, registered mail,
return receipt requested, or telefax to the addresses set forth below:
If to Company, at:
The FINOVA Group Inc.
0000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxx, Senior
Vice-President, General
Counsel and Secretary
Facsimile No.: (000) 000-0000
with a copy (which shall not constitute notice)
to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
If to Manager or Leucadia International, at:
Leucadia National Corporation
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, President
Facsimile No.: (000) 000-0000
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with a copy (which shall not
constitute notice) to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile No: (000) 000-0000
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, telecopied and confirmed by telecopy
answerback or three Business Days after the same shall have been deposited in
the United States mail.
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IN WITNESS WHEREOF, the parties hereto have caused this Management
Services Agreement to be duly executed on the date first written above.
THE FINOVA GROUP INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
LEUCADIA NATIONAL CORPORATION
By: /s/ Xxxxxx X. Orlando
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Name: Xxxxxx X. Orlando
Title: Vice President
LEUCADIA INTERNATIONAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
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Annex A
Except as otherwise expressly permitted or required by the terms of
the Plan or as otherwise expressly contemplated by this Management Agreement or
the Commitment Letter, during the period from the date of the Management
Agreement to entry of a final order of the Bankruptcy Court confirming the Plan,
the Company shall not, and shall cause any of its subsidiaries not to, without
the written consent of Manager, which decision regarding consents shall be made
promptly (in light of its circumstances) after receipt of notice seeking such
consent:
(i) amend its certificate of incorporation, bylaws or other
comparable organizational documents or those of any subsidiary of the
Company;
(ii) except (A) pursuant to the exercise or conversion of
outstanding securities, (B) for issuances of Common Stock upon the
exercise of outstanding options under the benefit plans of the
Company, (C) in connection with other awards outstanding on the date
of this Management Agreement under any benefit plan, or (D) upon
conversion of TOPrS, redeem or otherwise acquire any shares of its
capital stock, or issue or sell any securities (including securities
convertible into or exchangeable for any shares of its capital
stock), or grant any option, warrant or right relating to any shares
of its capital stock, or split, combine or reclassify any of its
capital stock or issue any securities in exchange or in substitution
for shares of its capital stock;
(iii) make any material amendment to any existing, or enter
into any new, employment, consulting, severance, change in control or
similar agreement, or establish any new compensation or benefit or
commission plans or arrangements for directors or employees, or amend
or agree to amend any existing benefit plan;
(iv) other than in connection with foreclosures in the
ordinary course of business and mergers or consolidations among
wholly-owned subsidiaries of the Company, merge, amalgamate or
consolidate with any other entity in any transaction, sell all or any
substantial portion of its business or assets, or acquire all or
substantially all of the business or assets of any other person;
(v) enter into any plan of reorganization or
recapitalization, dissolution or liquidation of the Company;
(vi) declare, set aside or make any dividends, payments or
distributions in cash, securities or property to the stockholders of
the Company in respect of any capital stock of the Company;
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(vii) except for borrowings under credit facilities or
lines of credit existing on the date hereof, incur or assume any
indebtedness of the Company or any of its subsidiaries, except
indebtedness of the Company or any of its subsidiaries incurred in
the ordinary course of business;
(viii) take any action that would have a material impact on
the consolidated federal income tax return filed by the Company as
the common parent, make or rescind any express or deemed material
election relating to taxes, settle or compromise any material claim,
action, suit, litigation, proceeding, arbitration, investigation,
audit or controversy relating to taxes, enter into any material tax
ruling, agreement, contract, arrangement or plan, file any amended
tax return, or, except as required by applicable law or GAAP or in
accordance with past practices, make any material change in any
method of accounting (whether for taxes or otherwise) or make any
material change in any tax or accounting practice or policy;
(ix) enter into any contract, understanding or commitment
that restrains, restricts, limits or impedes the ability of the
Company or any of its subsidiaries, or the ability of Leucadia, to
compete with or conduct any business or line of business in any
geographic area;
(x) enter into, or amend the terms of, any contract
relating to interest rate swaps, caps or other hedging or derivative
instruments relating to indebtedness of the Company or any of its
subsidiaries; or
agree or commit, whether in writing or otherwise, to do any of the foregoing.
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