Sample Business Contracts

Management Agreement - Burke Industries Inc. and J.F. Lehman & Co.

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                             MANAGEMENT AGREEMENT

     This Management Agreement (this "Agreement"), dated as of August 20, 
1997, by and between Burke Industries, Inc., a California corporation (the 
"Company") and J.F. Lehman & Company, a Delaware corporation (the "Advisor").

     WHEREAS, the Board of Directors of the Company has determined to effect 
a recapitalization of Burke Industries, Inc. pursuant to which, among other 
things, (i) J.F. Lehman Equity Investors I, L.P. ("JFLEI"), an affiliate of 
the Advisor, will make a capital contribution in the amount of $20.0 million 
to JFL Merger Co., a wholly owned subsidiary of JFLEI and an affiliate of the 
Advisor ("MergerCo"), (ii) MergerCo will issue to certain purchasers $18.0 
million in stated value of its Series A 11.5% Cumulative Redeemable Preferred 
Stock (the "Series A Preferred Stock") and warrants to purchase up to 20% of 
the shares of its common stock on a fully diluted basis (the "Warrants") in 
exchange for an aggregate of $18.0 million, (iii) MergerCo will offer and the 
Company will issue $110.0 million in aggregate principal amount of 10% Senior 
Notes due 2007 (the "Senior Notes"), (iv) MergerCo will merge with and into 
the Company, with the Company surviving such merger and assuming the 
liabilities and obligations of MergerCo (the "Merger"), including without 
limitation the liabilities and obligations with respect to the Series A 
Preferred Stock, the Warrants and the Senior Notes, (v) pursuant to the 
Merger Agreement, (A) each share of the Company's common stock, no par value 
(the "Common Stock") issued and outstanding immediately prior to the Merger, 
other than certain shares held by certain shareholders and members of 
management, will be converted into the right to receive approximately $9.16 
per share in cash and (B) each outstanding vested option to purchase a share 
of Common Stock will be converted into the right to receive cash in the 
amount of approximately $9.16 per share less the exercise price for such 
option and (vi) the Company will enter into a new credit facility providing 
for revolving credit borrowings of up to $15.0 million (all such transactions 
shall be collectively referred to herein as the "Recapitalization");

     WHEREAS, the Company desires to retain the Advisor to provide 
management, consulting and financial services to the Company after 
consummation of the Recapitalization; and

     WHEREAS, the Advisor wishes to provide such services to the Company and 
the Company wishes to compensate the Advisor for such services.

     NOW, THEREFORE, in consideration of the premises and the covenants and 
conditions contained herein, the parties hereto agree as follows: 


     (a)  RECAPITALIZATION FEE.  Upon consummation of the 
Recapitalization, the Company shall pay to the Advisor a one-time advisory 
fee (the "Recapitalization Fee") in the amount of $1,500,000 in consideration 
for services rendered by the Advisor to the Company in connection with the 
Recapitalization.  The Recapitalization Fee shall be paid upon consummation 
of the 



Recapitalization in immediately available funds by wire transfer to such 
account as the Advisor shall specify prior to the consummation of the 

     (b)  ANNUAL FEE.  In consideration for the advisory and consulting 
services to be rendered by the Advisor to the Company hereunder, including 
services in connection with strategic financial planning, investment 
management, management and administration and other matters relating to the 
business and operations of the Company, the Company shall pay to the Advisor 
a fee (the "Annual Fee") in the amount of $500,000 per annum for each year 
during the period commencing on October 1, 1998 and ending on the date of the 
termination this Agreement.  The Annual Fee shall be payable in quarterly 
installments, payable in arrears beginning on January 1, 1999 and on the same 
calendar day of every third month thereafter until the date of termination of 
this Agreement.

     (c)  FUTURE TRANSACTION FEES.  The Advisor shall be entitled to receive 
such additional compensation under this Agreement for services rendered in 
transactions such as mergers, consolidations, sales or purchases of a 
significant amount of assets or capital stock, and financings involving the 
public or private offering of the Company's debt or equity securities or the 
incurrence of bank debt.  The compensation to be payable to the Advisor for 
services rendered in connection with any such transaction shall be such 
compensation as is customary for the type of services rendered in similar 
transactions and as may be agreed upon by the Company and the Advisor at such 

     (d)  REIMBURSEMENTS FOR OUT-OF-POCKET EXPENSES.  In addition to the fees 
set forth above, the Company shall reimburse the Advisor for all reasonable 
out-of-pocket expenses incurred by the Advisor in rendering the services to 
the Company contemplated by paragraphs (a), (b) and (c) above.  All 
reimbursements for out-of-pocket expenses shall be made promptly upon or as 
soon as practicable, and in any event not later than 30 days, after 
presentation by the Advisor to the Company of a reasonably detailed statement 
of expenses in connection therewith.

     2.  INTEREST.  In the event that the Company shall fail to pay all or 
any part of the fees or out-of-pocket expenses described in Section 1 hereof 
within 10 days after the date when due, then the Advisor shall be entitled to 
interest on the unpaid amount thereof at a rate equal to 10% per annum until 

     3.  INDEMNIFICATION.  The Company will indemnify and hold harmless the 
Advisor, its affiliates and their respective partners (both general and 
limited), officers, directors, employees, agents and representatives (each 
such person being an "Indemnified Party") from and against any and all 
losses, claims, damages and liabilities, whether joint or several (the 
"Liabilities"), related to, arising out of or in connection with the services 
contemplated by this Agreement or the engagement of the Advisor pursuant to, 
and the performance by the Advisor 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 investigating, preparing, 
pursuing, defending or assisting in the defense of any action, claim, suit, 
investigation or proceeding 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.  The 



Company will not be liable under the foregoing indemnification provision with 
respect to any Indemnified Party, 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 primarily from the 
gross negligence or willful misconduct of the Advisor.

     4.  TERM.  This Agreement shall be effective as of the date hereof and 
shall continue in effect until the earliest to occur of (i) the tenth 
anniversary of this Agreement and (ii) the closing of a sale to an entity 
which is not an "Affiliate" (as defined in Section 12b-2 of the Securities 
Exchange Act of 1934) of the Company or any of its existing shareholders on 
the date hereof of all or substantially all of the capital stock or assets of 
the Company.  The provisions of Sections 1(d), 2, 3 and otherwise as the 
context so requires shall survive the termination of this Agreement. 

     5.  PERMISSIBLE ACTIVITIES.  Subject to applicable law, nothing herein 
shall in any way preclude the Advisor, its affiliates or their respective 
partners (both general and limited), officers, directors, employees, agents 
or representatives 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.

     6.  CONSULTING RELATIONSHIP.  It is understood and agreed that the 
Advisor shall for all purposes hereof be deemed to be an independent 
contractor and shall not, unless otherwise expressly authorized by the 
Company, have any authority to act for or represent the Company in any way, 
execute any transaction on behalf of the Company or otherwise be deemed an 
agent of the Company.  No federal, state or local withholding deductions 
shall be withheld from the fees and other amounts payable to the Advisor 
pursuant to this Agreement unless otherwise required by law.


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

     (b)  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 

     If to the Advisor:     J.F. Lehman & Company
                            450 Park Avenue
                            New York, New York 10022
                            Attention:  Mr. Donald Glickman

     If to the Company:     Burke Industries, Inc.
                            2250 South Tenth Street



                            San Jose, California 95112
                            Attention:  Mr. Rocco C. Genovese

     (c)  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.

BE PERFORMED IN THAT STATE. This Agreement shall inure to the benefit of, and 
be binding upon, the Advisor and the Company, and their respective successors 
and permitted assigns.  None of the rights or obligations of the parties 
hereunder may be assigned by either party without the prior written consent 
of the other party hereto, PROVIDED that the Advisor may assign its rights 
and obligations hereunder to any corporation or other entity controlled by or 
under common control with the Advisor.

     (e)  This Agreement may be executed by one or more parties to this 
Agreement on any number of separate counterparts, and all of said 
counterparts taken together shall be deemed to constitute one and the same 

     (f)  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 

     (g)  Any provision of this Agreement which is prohibited or 
unenforceable in any jurisdiction shall, as to such jurisdiction, be 
ineffective to the extent of such prohibition or unenforceability without 
invalidating the remaining provisions hereof, and any such prohibition or 
unenforceability in any jurisdiction shall not invalidate or render 
unenforceable such provision in any other jurisdiction.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be 
executed and delivered by their duly authorized officers or agents as of the 
date first above written.

                                  BURKE INDUSTRIES, INC.

                                       Rocco C. Genovese,
                                       Chief Executive Officer

                                  J.F. LEHMAN & COMPANY

                                       Donald Glickman,
                                       Managing Principal