exv10w4



 






EXHIBIT 10.4




MANAGEMENT AGREEMENT




     This Management Agreement (the “Agreement”) is made as of the 24th day of August,
2004, by and between Standard Aero Holdings, Inc., a Delaware corporation (the “Company”), and TC
Group, L.L.C., a Delaware limited liability company (“Carlyle”).



RECITALS:




     WHEREAS, Carlyle, by and through its officers, employees, agents, representatives and
affiliates, has expertise in the areas of corporate management, finance, product strategy,
investment, acquisitions and other matters relating to the business of the Company; and



     WHEREAS, the Company desires to avail itself of the expertise of Carlyle in the aforesaid
areas, in which it acknowledges the expertise of Carlyle.



AGREEMENT:




     NOW, THEREFORE, in consideration of the foregoing recitals and the covenants and conditions
herein set forth, the parties hereto agree as follows:



     1.      Appointment.



     The Company hereby appoints Carlyle to render the advisory and consulting services described
in Section 2 hereof for the term of this Agreement.



     2.      Services.



               (a)      During the term of this Agreement, Carlyle shall render to the Company, by and through
such of Carlyle’s officers, employees, agents, representatives and affiliates as Carlyle, in its
sole discretion, shall designate, in cooperation with the Chief Executive Officer, from time to
time, advisory, consulting and other services (the “Oversight Services”) in relation to the
operations of the Company, strategic planning, domestic and international marketing and financial
oversight and including, without limitation, advisory and consulting services in relation to the
selection, retention and supervision of independent auditors, the selection, retention and
supervision of outside legal counsel, the selection, retention and supervision of investment
bankers or other financial advisors or consultants and the structuring and implementation of equity
participation plans, employee benefit plans and other incentive arrangements for certain key
executives of the Company.



               (b)      The parties hereto acknowledge that certain events will require Carlyle to render services
beyond the scope of activities which the parties contemplate as part of the Oversight Services and
for which Carlyle shall be entitled to additional compensation hereunder. It is expressly agreed
that the Oversight Services shall not include Investment Banking Services. “Investment Banking
Services” means investment banking, financial advisory or any other services rendered by
Carlyle to the Company in connection with (i) the transactions contemplated by that certain
Agreement, dated as of July 5, 2004, by and among the Company, the Managers, Meggitt Acquisition
Limited and the Vendors identified therein (the “Acquisition Transaction”), (ii) any
acquisitions and divestitures by the Company or any of its subsidiaries, including, without
limitation, the sale of substantially all of the assets of the



 









 







Company, whether by a sale of assets, the equity interests of the Company, merger or
otherwise, and the acquisition or sale of any subsidiary or division of the Company, or (iii) the
public or private sale of debt or equity interests of the Company, or any of its affiliates or any
similar financing transactions. The Oversight Services and the Investment Banking Services shall
be referred to herein as the “Services.”



     3.      Fees.



               (a)      In consideration of the performance of the Oversight Services contemplated by Section 2(a)
hereof, the Company agrees to pay to Carlyle an aggregate per annum fee (the “Fee”) (i) for
the period commencing on the date hereof and continuing until December 31, 2004, an amount equal to
$500,000 and (ii) for the period commencing January 1, 2005 and continuing until such time as this
Agreement is terminated in accordance with Section 6, an amount equal to $1,500,000 per annum. The
Fee shall be payable on the date hereof for the period set forth in subclause (i) of the preceding
sentence and quarterly in advance beginning January 1, 2005 for the period set forth in subclause
(ii) of the preceding sentence. Fee payments shall be non-refundable.



               (b)      In consideration of the Investment Banking Services provided to the Company in connection
with the Acquisition Transaction, the Company shall pay to Carlyle an amount equal to U.S.
$11,000,000 and shall pay Out-of-Pocket Expenses incurred in connection with the Acquisition
Transaction.



               (c)      In consideration of any additional Investment Banking Services provided to the Company in
connection with the events described in clauses (ii) and (iii) of the definition of Investment
Banking Services, Carlyle shall be entitled to receive additional reasonable compensation as agreed
upon by the parties hereto and approved by a majority of the members of the board of directors of
the Company.



     4.      Out-of-Pocket Expenses



     In addition to the compensation payable to Carlyle pursuant to Section 3 hereof, the Company
shall, at the direction of Carlyle, pay directly, or reimburse Carlyle for, its reasonable
Out-of-Pocket Expenses. For the purposes of this Agreement, the term “Out-of-Pocket
Expenses” shall mean the amounts actually paid by Carlyle in cash in connection with its
performance of the Services, including, without limitation, reasonable (i) fees and disbursements
(including, underwriting fees) of any independent auditors, outside legal counsel, consultants,
investment bankers, financial advisors and other independent professionals and organizations, (ii)
costs of any outside services or independent contractors such as financial printers, couriers,
business publications or similar services and (iii) transportation, per diem, telephone calls, word
processing expenses or any similar expense not associated with its ordinary operations. All
reimbursements for Out-of-Pocket Expenses shall be made promptly upon or as soon as practicable
after presentation by Carlyle to the Company of the statement in connection therewith.



     5.      Indemnification



     The Company will indemnify and hold harmless Carlyle and its officers, employees, agents,
representatives, members and affiliates (each being an “Indemnified Party”) from and
against any and all losses, costs, expenses, claims, damages and liabilities (the
“Liabilities”) to which such Indemnified Party may become subject under any applicable law,
or any claim made by any third party, or otherwise, to the extent they relate to or arise out of
the performance of the Services contemplated by



2









 







this Agreement or the engagement of Carlyle
pursuant to, and the performance by Carlyle of the Services
contemplated by, this Agreement. The Company will reimburse any Indemnified Party for all
reasonable costs and expenses (including reasonable attorneys’ fees and expenses) as they are
incurred in connection with the investigation of, preparation for or defense of any pending or
threatened claim for which the Indemnified Party would be entitled to indemnification under the
terms of the previous sentence, or any action or proceeding arising therefrom, whether or not such
Indemnified Party is a party hereto, provided that, subject to the following sentence, the Company
shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to
such Indemnified Party in its reasonable judgment. Any Indemnified Party may, at its own expense,
retain separate counsel to participate in such defense, and in any action, claim or proceeding in
which the Company, on the one hand, and an Indemnified Party, on the other hand, is, or is
reasonably likely to become, a party, such Indemnified Party shall have the right to employ
separate counsel at the Company’s expense and to control its own defense of such action, claim or
proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a conflict or
potential conflict exists between the Company, on the one hand, and such Indemnified Party, on the
other hand, that would make such separate representation advisable. The Company agrees that it
will not, without the prior written consent of the applicable Indemnified Party, settle, compromise
or consent to the entry of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has
been actually threatened to be made a party thereto) unless such settlement, compromise or consent
includes an unconditional release of the applicable Indemnified Party and each other Indemnified
Party from all liability arising or that may arise out of such claim, action or proceeding.
Provided that the Company is not in breach of its indemnification obligations hereunder, no
Indemnified Party shall settle or compromise any claim subject to indemnification hereunder without
the consent of the Company. The Company will not be liable under the foregoing indemnification
provision to the extent that any loss, claim, damage, liability, cost or expense is determined by a
court, in a final judgment from which no further appeal may be taken, to have resulted solely from
the gross negligence or willful misconduct of Carlyle. If an Indemnified Party is reimbursed
hereunder for any expenses, such reimbursement of expenses shall be refunded to the extent it is
finally judicially determined that the Liabilities in question resulted solely from the gross
negligence or willful misconduct of Carlyle.



     6.      Termination



     This Agreement shall be in effect on the date hereof and shall continue until such time as
Carlyle or one or more of its affiliates collectively control, in the aggregate, less than 10% of
the equity interests of the Company, or such earlier time as the Company and Carlyle may mutually
agree. The provisions of Sections 5, 7 and 8 and otherwise as the context so requires shall
survive the termination of this Agreement.



     7.      Other Activities



     Nothing herein shall in any way preclude Carlyle or its officers, employees, agents,
representatives, members or affiliates from engaging in any business activities or from performing
services for its or their own account or for the account of others, including for companies that
may be in competition with the business conducted by the Company.



3









 





     8.      General.



               (a)     No amendment or waiver of any provision of this Agreement, or consent to any departure by
either party from any such provision, shall be effective unless the same shall be in
writing and signed by the parties to this Agreement, and, in any case, such amendment, waiver
or consent shall be effective only in the specific instance and for the specific purpose for which
given.



               (b)     This Agreement and the rights of the parties hereunder may not be assigned without the
prior written consent of the parties hereto; provided, however, that Carlyle may assign or transfer
its duties or interests hereunder to a Carlyle affiliate at the sole discretion of Carlyle.



               (c)      Any and all notices hereunder shall, in the absence of receipted hand delivery, be deemed
duly given when mailed, if the same shall be sent by registered or certified mail, return receipt
requested, and the mailing date shall be deemed the date from which all time periods pertaining to
a date of notice shall run. Notices shall be addressed to the parties at the following addresses:



	 	 	 
	If to Carlyle:

	 	TC Group, L.L.C.
	

	 	c/o The Carlyle Group
	

	 	1001 Pennsylvania Avenue, N.W.
	

	 	Suite 220 South
	

	 	Washington, D.C. 20004
	

	 	Attention: Andrew Shinn
	 
	 	 
	If to the Company:

	 	Standard Aero Holdings, Inc.
	

	 	500-1780 Wellington Avenue
	

	 	Winnipeg, Manitoba
	

	 	Canada R3H1B3
	

	 	Attention: David Shaw






               (d)     This Agreement shall constitute the entire agreement between the parties with respect to
the subject matter hereof, and shall supersede all previous oral and written (and all
contemporaneous oral) negotiations, commitments, agreements and understandings relating hereto.



               (e)     This Agreement shall be governed by, and enforced in accordance with, the laws of the
State of New York (excluding the choice of law principles thereof). The parties to this Agreement
hereby agree to submit to the non-exclusive jurisdiction of the federal and state courts located in
the state of Delaware in any action or proceeding arising out of or relating to this Agreement.
This Agreement shall inure to the benefit of, and be binding upon, Carlyle and the Company
(including any present or future subsidiaries of the Company that are not signatories hereto), and
their respective successors and assigns.



               (f)     This Agreement may be executed in two or more counterparts, and by different parties on
separate counterparts. Each set of counterparts showing execution by all parties shall be deemed
an original, and shall constitute one and the same instrument.



               (g)      The waiver by any party of any breach of this Agreement shall not operate as or be
construed to be a waiver by such party of any subsequent breach.



4









 





     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by
their duly authorized officers or agents as set forth below.


	 	 	 	 	 
	 	TC Group, L.L.C. 

 	 
	 	By:  	                     TCG Holdings, L.L.C.,
its Managing Member
 	 
	 	 	 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	
 /s/  Peter J. Clare	 
	 	 	Name:  	Peter J. Clare 	 
	 	 	Title:  	Managing Director 	 
	 
	 	Standard Aero Holdings, Inc. 

 	 
	 	By:  	
/s/  Andrew Shinn	 
	 	 	Name:  	Andrew Shinn 	 
	 	 	Title:  	Vice President 	 
	 





5