exv10w3



 




Exhibit 10.3




MANAGEMENT AGREEMENT



          This Management Agreement (the “Agreement”) is made as of the 20th day of
June, 2003, by and between United Components, 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
acquisition by United Components, Inc., a Delaware corporation (“UCI”), and
certain of its affiliates of the Business (as such term is defined in the
Purchase Agreement) pursuant to that certain Purchase Agreement, dated as of
April 25, 2003, by and among UCI and the Seller 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, 2003, an amount equal to $1,000,000
and (ii) for the period commencing January 1, 2004 and continuing until such
time as this Agreement is terminated in accordance with Section 6, an amount
equal to $2,000,000 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, 2004 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. $10,000,000 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




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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.



          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



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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: Ian Fujiyama
	 	 	 	 	 
	 	 	
If to the Company:
	 	United Components, Inc.
	 	 	 	 	301 Industrial Drive
	 	 	 	 	Albion, Illinois 62806
	 	 	 	 	Attention: Bruce Zorich




               (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.


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               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/ Leslie Armitage
	 	 	

	 	 	
Name:
	 	Leslie Armitage
	 	 	
Title:
	 	Managing Director
	 	 	 	 	 
	 	 	United Components, Inc.
	 	 	 	 	 
	 	 	
By:
	 	/s/ Ian Fujiyama
	 	 	

	 	 	
Name:
	 	Ian Fujiyama
	 	 	
Title:
	 	Vice President






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