Document:

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

5exv10w4

 

Exhibit 10.4

EMPLOYMENT AGREEMENT

TERM SHEET (THE “AGREEMENT”)

JOHN RITTER

Mr. John Ritter (the “Executive”) and the United Components, Inc. (the
“Company”) agree to the following terms:

	 	 	 	 	 
	Employment Term	 	This Agreement shall be effective
as of April 25, 2003 (the
“Effective Date”) and shall
terminate on the six month
anniversary of the Effective Date
(the “Employment Term”), unless
otherwise extended at the
discretion of the Board of
Directors of the Company (the
“Board”).
	 	 	 	 	 
	Position and Duties	 	The Executive shall serve as
interim Chief Financial Officer
of the Company and shall devote
his reasonable best efforts to
(a) assist in the arranging,
marketing and syndication of the
Company’s acquisition financing,
(b) lead the integration,
development and transition of the
Company’s accounting, finance,
internal controls, tax, treasury,
insurance and benefits functions,
(c) work with the Company to
develop and implement a strategic
plan, (d) recruiting, training
and develop a full-time Chief
Financial Officer, (e) identify,
develop and implement
manufacturing cost savings
initiatives and (f) such other
responsibilities as may
reasonably be assigned to him
from time to time by the Chief
Executive Officer or Board.
Executive shall report to Bruce
Zorich, Chief Executive Officer,
and will be subject to his
oversight and direction.
	 	 	 	 	 
	Compensation	 	
•
	 	Base Salary. During the
Employment Term, Executive shall
earn a monthly base salary in the
amount of $33,333.33 (the “Base
Salary”). The first payment of
such salary (in an amount
representing all of such salary
accrued by such date) shall be on
the earlier to occur of the
Closing Date (as defined in the
contemplated Stock Purchase
Agreement by and among UIS
Industries, Inc., UIS, Inc. and
the Company) or the six month
anniversary of the Effective
Date. Thereafter such salary
shall be paid in equal
installments not less frequently
than monthly.
	 	 	 	 	 
	 	 	
•
	 	Supplemental Bonus. If
determined appropriate by Bruce
Zorich, in his sole discretion,
in addition to the Base Salary,
the Company shall pay Executive a
one-time lump sum amount of up to
$100,000 (the “Supplemental
Bonus”) within ten days after the
six month anniversary of the
Effective Date, provided,
however, unless otherwise stated
herein, the Supplemental Bonus
shall not be paid if the
Employment Term is terminated
prior to the six month
anniversary of the Effective
Date. In addition to any

 

 

	 	 	 	 	 
	 	 	 	 	Supplemental Bonus, if it is
jointly determined by the Board
and Bruce Zorich, in their sole
discretion, that the Executive
has provided exceptional services
to the Company, the Company may
pay Executive such additional
amount as the Board and Bruce
Zorich deem appropriate.
	 	 	 	 	 
	 	 	
•
	 	Expenses. The Executive shall
be entitled to prompt
reimbursement by the Company for
all of his reasonable ordinary
and necessary travel,
entertainment and other expenses
incurred by him during the
Employment Term (in accordance
with the policies and procedures
established by the Company for
its Executives) in the
performance of his duties
hereunder; provided that the
Executive shall properly account
for such expenses in accordance
with the Company’s policies and
procedures.
	 	 	 	 	 
	 	 	
•
	 	Benefits. The Executive shall
be entitled to participate in the
employee benefit plans, programs
and arrangements sponsored by the
Company which are applicable to
senior officers of the Company.
	 	 	 	 	 
	 	 	
•
	 	Prior Service Credit. If,
during the Employment Term, the
Company and the Executive enter
into a written agreement which
expressly supercedes this
Agreement, the Company shall
recognize the Executive’s service
under this Agreement for all
purposes (including, eligibility
to participate and vesting) under
any Company benefit plans,
including equity compensation
plans, provided that the
foregoing shall not apply to the
extent it would result in
duplication of benefits and shall
not apply with respect to benefit
accrual under any defined benefit
pension plans.
	 
	Termination of Employment	 	
•
	 	Termination by the Company.
The Company may, at any time
prior to the end of the
Employment Term, terminate
Executive’s employment for any
reason by giving Executive two
weeks prior written notice of the
effective date of such
termination. The Company shall
(a) in accordance with the
otherwise applicable payment
schedule, continue to pay to
Executive the Base Salary until
the earliest of (i) end of the
Employment Term, or (ii) the date
Executive violates any of the
covenants set forth herein, and
(b) pay the Executive a lump sum
Supplemental Bonus, if any, as
determined in accordance with the
provisions set forth herein,
provided however, that at the end
of the Employment Term, the
Executive shall be entitled to no
further payments hereunder. In
addition to any Supplemental
Bonus payable upon termination of
the Executive’s employment by the
Company, if it is jointly

2

 

	 	 	 	 	 
	 	 	 	 	determined by the Board and Bruce
Zorich, in their sole discretion,
that the Executive has provided
exceptional services to the
Company, the Company may pay
Executive such additional amount
as the Board and Bruce Zorich
deem appropriate.
	 	 	 	 	 
	 	 	
•
	 	Resignation by Executive. In
the event that Executive
terminates his employment
relationship with the Company for
any reason, Executive shall be
paid his unpaid Base Salary and
unreimbursed expenses, in each
case as accrued through the date
of termination, and the Company
shall have no further obligation
hereunder from and after the
effective date of such
termination.
	 	 	 	 	 
	Confidentiality	 	Executive acknowledges and agrees
that all information acquired by
Executive from the Company will
be considered “confidential” and
will not be disclosed by
Executive without the prior
written consent of the Company.
Executive shall execute and abide
by the terms and conditions of
the Company’s customary
confidentiality agreement, the
terms and conditions of which are
incorporated herein by reference.
	 	 	 	 	 
	Non-Disclosure of Proprietary
Information	 	The Executive agrees, in
perpetuity, to maintain in
confidence any confidential or
proprietary information or trade
secrets relating to the Company.
Upon expiration of the Employment
Term, the Executive agrees to
return all correspondence,
drawings, materials, documents,
and similar items concerning the
Company, its clients, products or
processes. The Executive may
respond to valid subpoena, but
agrees to give the Company notice
thereof.
	 	 	 	 	 
	Arbitration	 	Any dispute or controversy
arising under or in connection
with this Agreement shall be
settled exclusively by
arbitration, conducted before an
arbitrator in New York, New York
in accordance with the rules of
the American Arbitration
Association then in effect.
Judgment may be entered on the
arbitration award in any court
having jurisdiction, provided,
however, that the Company shall
be entitled to seek a restraining
order or injunction in any court
of competent jurisdiction to
prevent any continuation of any
violation of the covenants
contained in this Agreement and
the Executive hereby consents
that such restraining order or
injunction may be granted without
requiring the Company to post a
bond. The arbitrator shall
require the non-prevailing party
to pay the arbitrator’s full fees
and expenses or, if in the
arbitrator’s opinion there is no
prevailing party, the
arbitrator’s fees and expenses
will be borne equally by the
parties thereto.

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* * * * *

     Please indicate your agreement with the foregoing terms by executing this
Agreement in the space indicated.

	 	 	 	 	 
	 	 	Very truly yours,
	 	 	United Components, Inc.
	 	 	
By:
	 	/s/ Authorized Person    .
	 	 	 	 	

	 	 	
Its:	 	 
	 	 	 	 	

ACCEPTED AND AGREED

    /s/ John Ritter    .

John Ritter

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UNITED COMPONENTS, INC.

CHAMPION LABORATORIES, INC.

                     June 20, 2003

Mr. John Ritter

Dear John:

     Reference is made to the Employment Agreement Term Sheet, effective as of
April 25, 2003, between United Components, Inc. and you (the “Agreement”). We
have mutually agreed to amend certain provisions of the Agreement.

     Accordingly, upon confirmation by you of your agreement thereto, the
Agreement shall be amended as follows:

     The preamble of the Agreement shall be amended to read in its entirety as
follows:

		
	 	     “Mr. John Ritter (the “Executive”), United Components, Inc. (“UCI”),
and Champion Laboratories, Inc. (“Champion”) (as the context requires
herein, UCI and any of its direct or indirect subsidiaries, including but
not limited to the Executive’s employer, Champion, individually or
collectively, shall be referred to herein as the “Company”) agree to the
following terms:”

     The Section of the Agreement entitled “Employment Term” shall be amended
by replacing the reference to the term “the Company” with the term “UCI.”

     The Section of the Agreement entitled “Position and Duties” shall be
amended by adding the following sentence to the beginning thereof:

		
	 	     “Champion shall employ the Executive and the Executive shall enter
the employ of Champion, for the period set forth herein, in the position
set forth herein, and upon the other terms and conditions herein
provided.”

     The Section of the Agreement entitled “Position and Duties” shall be
amended by replacing the first reference to the term “the Company” with “each
entity constituting the Company.”

     Except with respect to the first and the third references to the term
“Company”, the Section of the Agreement entitled “Compensation” shall be
amended by replacing each reference to the term “the Company” with the term
“Champion.”

 

 

 

Mr. John Ritter

June 20, 2003

     The Section of the Agreement entitled “Termination of Employment” shall be
amended by replacing the first and second reference to the term “Company” with
“Board.”

     The Section of the Agreement entitled “Termination of Employment” shall be
amended by replacing the third, fourth, sixth and seventh reference to the term
“the Company” with “Champion.”

     Upon your confirmation of your agreement with the amendment to the
Agreement set forth above by signing and returning to me the copy of this
letter provided herein, such amendment shall take effect immediately.

	 	 	 	 	 
	 	 	Very truly yours,
	 	 	 	 	 
	 	 	UNITED COMPONENTS, INC.
	 	 	 	 	 
	 	 	    /s/ Ian Fujiyama    .
	 	 	

	 	 	Ian Fujiyama
	 	 	Director
	 	 	 	 	 
	 	 	CHAMPION LABORATORIES, INC.
	 
	 	 	    /s/ Authorized Person    .
	 	 	

	 	 	
Name:	 	 
	 	 	 	
	 
	 	 	
Title:	 	 
	 	 	 	
	 

Confirmed and agreed this

    day of    , 2003

     /s/ John Ritter     .

John Ritter

 

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