Services Agreement - Collins & Aikman Corp., Collins & Aikman Products Co. and Heartland Industrial Partners LP
SERVICES AGREEMENT (this "Agreement"), dated as of February
23, 2001, among Collins & Aikman Corporation, a Delaware corporation, Collins &
Aikman Products Co., a Delaware corporation (together with Collins & Aikman
Corporation, the "Company"), and Heartland Industrial Partners, L.P., a Delaware
limited partnership ("Heartland").
WHEREAS, Heartland, by and through itself, its affiliates and
their respective officers, employees and representatives, has expertise in the
areas of finance, strategy, investment and acquisitions relating to the business
of the Company; and
WHEREAS, the Company desires to avail itself, for the term of
this Agreement, of the expertise of Heartland in the aforesaid areas and
Heartland wishes to provide the services to the Company as herein set forth;
NOW, THEREFORE, in consideration of the foregoing recitals and
the covenants and conditions contained herein, the parties hereto agree as
follows:
1. Appointment. The Company hereby appoints Heartland to
render the advisory and consulting services described in Section 2 hereof for
the term of this Agreement. It is understood that the services rendered in
exchange for the annual Advisory Fee referred to herein shall be construed as
being extended to Collins & Aikman Products Co. and that the services rendered
in exchange for the fees referred to in Section 3(c) or otherwise agreed to
hereunder shall be construed as being extended to the particular entity or
entities engaging in the transaction for which fees are being paid. All monetary
obligations of the Company referred to herein shall nonetheless be construed as
joint and several obligations of each of Collins & Aikman Corporation and
Collins & Aikman Products Co.
2. Services. Heartland hereby agrees that, during the term of
this Agreement, it shall render to the Company, by and through itself and its
officers, employees and representatives as Heartland in its sole discretion
shall designate from time to time in consultation with the Company (it being
understood that any representatives not associated with Heartland must be
reasonably acceptable to the Company), advisory and consulting services in
relation to the affairs and strategic direction of the Company and its
subsidiaries, including, without limitation, (i) advice with respect to general
developments in the automotive industry and the manner in which those
developments may impact the Company; (ii) advice on market developments
concerning the purchase and sale of automotive suppliers in its market area and
other automotive industry entities identified by the Company and the manner in
which those developments may impact the Company; (iii) advice on the Company's
financial plans, strategic plans, and alternatives after review of such plans
and alternatives with management of the Company; and (iv) advice in other
business and financial areas as may be reasonably requested by the Company and
which are within the expertise of Heartland. Nothing herein shall be construed
as precluding Heartland or any of its affiliates from receiving fees in
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addition those contemplated hereby for acquisitions and dispositions and for
providing its personnel for general advice (in any such case with the requisite
approvals of the Company). Additional services to which such fees may relate may
include, but not be limited to, the negotiation and arrangement of financings
(whether in the form of debt, equity, lease financing, public or private
offerings of securities or otherwise), work-outs and other traditional and
non-traditional investment banking, consultant or management services.
3. Fees. (a) In consideration of the services contemplated by
Section 2, for the term of this Agreement, the Company and its successors agree
to pay to Heartland an annual fee (the "Advisory Fee") equal to (x) a fee of
$404,494.38 in cash for the period from Closing Date through March 31, 2001,
payable on February 23, 2001, (y) $3,000,000 in cash for the balance of calendar
year 2001 and (z) $4,000,000 for each calendar year thereafter, in each case
under clauses (y) and (z) payable in quarterly installments in advance on
January 1, April 1, July 1 and October 1 of each year beginning March 31, 2001
through the date (the "Termination Date") which is the earlier of (x) the tenth
anniversary hereof (unless extended by the Company) or (y) the date on which
Heartland and its affiliates (including, without limitation, the "Heartland
Entities" and their "Permitted Transferees" referred to, in each case, in the
Stockholders Agreement entered into on the date hereof) hold, directly or
indirectly, beneficial ownership of less than 25% of the common equity interests
(including shares underlying preferred stock held by Heartland) of the Company
acquired on the Closing Date, or such earlier date as the Company and Heartland
shall agree. Any Advisory Fee for the last calendar year of this Agreement shall
be prorated for the period of such year ending on the Termination Date. The
"Closing Date" shall mean the date of the closing of the transactions
contemplated by the Primary Share Purchase Agreement dated January 12, 2001
between Heartland and the Company (the "Primary SPA").
(b) Upon the Closing Date, the Company shall pay to Heartland
or its designees a fee for services rendered in connection with the transactions
contemplated by the Primary SPA in the amount of $12,000,000 and will reimburse
Heartland and its affiliates for their reasonable out-of-pocket expenses
incurred in connection with such Transactions on the basis described in the
Primary SPA.
(c) In addition, commencing on February 23, 2002 and for the
balance of the term of this Agreement, the Company shall pay to Heartland or its
designees a transaction fee in connection with the consummation of each
acquisition or divestiture by the Company or any of its subsidiaries (with
respect to which Heartland provides any significant advisory services) of any
business constituting a going concern or any division or line of business or
separable plant or manufacturing facility or significant set of related assets
in an amount equal to 1% of the aggregate total enterprise value of the business
or assets being acquired or divested, for Heartland's services in negotiating,
analyzing, arranging and executing such acquisitions and divestitures.
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(d) To the extent required by any debt financing of the
Company or its subsidiaries, any fees payable hereunder shall be deferred until
the earlier of (i) the liquidation or dissolution of the Company, and (ii) the
time that payment of such deferred amounts is permitted under such debt
financing. Any deferred fees and Out-of-Pocket Expenses shall bear interest at a
rate of ten percent (10%) per annum, compounded annually, from the date deferred
until paid.
4. Reimbursements. In addition to the fees payable pursuant to
this Agreement, the Company shall pay directly or reimburse Heartland for its
Out-of-Pocket Expenses. For the purposes of this Agreement, the term
"Out-of-Pocket Expenses" shall mean the reasonable out-of-pocket costs and
expenses (which, for the avoidance of doubt, shall not include any payment of
salaries, bonuses or other compensation to personnel of Heartland) reasonably
incurred by Heartland or its affiliates in connection with the services rendered
hereunder in pursuing, or otherwise related to, the business of the Company,
including, without limitation, (i) fees and disbursements of any independent
professionals and organizations, including independent accountants, outside
legal counsel or consultants, incurred in consultation with the Company, (ii)
costs of any outside services or independent contractors such as financial
printers, couriers, business publications, on-line financial services or similar
services and (iii) transportation, per diem costs, 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 Heartland to the Company of a written
statement thereof with supporting invoices as reasonably requested by the
Company.
5. Indemnification. The Company will indemnify and hold
harmless Heartland, its affiliates and their respective partners (both general
and limited), members (both managing and otherwise), 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 advisory and consulting services contemplated by this
Agreement or the engagement of Heartland pursuant to, and the performance by
Heartland of the services contemplated by, this Agreement, whether or not
pending or threatened, whether or not an Indemnified Party is a party, whether
or not resulting in any liability and whether or not such action, claim, suit,
investigation or proceeding is initiated or brought by the Company; provided
that if initiated or brought by the Company, such Indemnified Party shall not
have been adjudged liable to the Company. 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 thereto. The
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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, bad faith or willful misconduct of Heartland. If an Indemnified
Party is reimbursed hereunder for any expenses, such reimbursement of expenses
shall be promptly refunded to the Company to the extent it is finally judicially
determined that the Liabilities in question resulted primarily from the gross
negligence, bad faith or willful misconduct of Heartland.
The Indemnified Parties shall give prompt written notice to
the Company of any pending or threatened claim or any action or proceeding
arising therefrom. The failure of an Indemnified Party to so notify the Company
of any such matter shall not release the Company, in whole or in part, from its
obligations to indemnify hereunder except to the extent that such failure
materially prejudices the ability of the Company to defend such action. If it so
elects, the Company may assume the defense of such action with counsel chosen by
it, and upon such assumption, the Company shall not be liable for any legal
costs subsequently incurred by any Indemnified Party, unless (i) the Company has
failed to provide counsel to such Indemnified Parties in a timely manner of (ii)
either counsel provided by the Company or counsel to such Indemnified Parties
reasonably determines that its representation of such Indemnified Parties would
present it with a conflict of interest or the interests of the Company and the
Indemnified Parties are materially in conflict other than by reason of those
provisions, in which case the Company shall pay the reasonable fees and expenses
of separate counsel for the Indemnified Parties, provided, however, that in no
event shall the Company be liable for the fees and expenses of more than one
counsel for the Indemnified Parties.
The Company shall not be required to make payment for any
settlement effected without its prior written consent, which shall not be
unreasonably withheld, and the Company shall not settle any claim against it by
a third party that does not result in the unconditional release of the
Indemnified Parties.
6. Accuracy of Information. The Company shall furnish or cause
to be furnished to Heartland such information as Heartland reasonably believes
appropriate to its advisory services hereunder and to the ownership by
affiliates of Heartland of equity interests of the Company (all such information
so furnished being the "Information"). The Company recognizes and confirms that
Heartland (i) will use and rely primarily on the Information and on information
available from generally recognized public sources in performing the services
contemplated by this Agreement without having independently verified the same,
(ii) does not assume responsibility for the accuracy or completeness of the
Information and such other information and (iii) is entitled to rely upon the
Information without independent verification.
Except as contemplated by the terms hereof or as required by
applicable law, regulation or regulatory oversight or pursuant to an order
entered or subpoena issued by a
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court of competent jurisdiction, Heartland will keep confidential all material
nonpublic Information provided to it by the Company pursuant to the terms
hereof, and will not disclose any such Information to any third party, other
than such of its employees, counsel, consultants, partners and investors, actual
and potential financing sources to it or the Company and its subsidiaries and
advisors as Heartland determines have a need to know. Any written material
produced by Heartland for the Company or attributable to the services performed
for the Company shall be the property of the Company and any and all of such
materials and documents and other information supplied by the Company to
Heartland in connection with this Agreement shall be promptly returned to the
Company upon written request.
7. Term. This Agreement shall be effective as of the date
hereof and shall continue until the Termination Date, provided that Section 4
shall remain in effect with respect to Out-of-Pocket Expenses incurred prior to
the Termination Date. The provisions of Sections 5 shall survive the termination
of this Agreement.
8. Permissible Activities. Subject to applicable law, nothing
herein shall in any way preclude Heartland, its affiliates or their respective
partners (both general and limited), members (both managing and otherwise),
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.
9. Miscellaneous. (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 all 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. 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.
(b) Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by
facsimile, Federal Express, or other overnight courier, addressed as follows or
to such other address of which the parties may have given notice:
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If to Heartland: 55 Railroad Avenue
Greenwich, CT 06830
Attention: David Stockman
Facsimile: (203) 861-2722
If to the Company: Collins & Aikman Corporation
5755 New King Court
Troy, Michigan 48098
Attention: Ronald T. Lindsay, General Counsel
Facsimile: (248) 824-1882
Unless otherwise specified herein, such notices or other communications shall be
deemed received (i) on the date delivered, if delivered personally or sent by
facsimile, and (ii) one business day after being sent by Federal Express or
other overnight courier.
(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.
(d) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York. This
Agreement shall inure to the benefit of, and be binding upon, Heartland, the
Company and their respective successors and permitted assigns; provided that
Heartland may not assign this Agreement or delegate its obligations hereunder to
any person other than its affiliates without the prior written consent of the
Company, which shall not be unreasonably withheld. Any assignment in violation
of this Agreement shall be null and void. The provisions of Section 5 shall
inure to the benefit of each Indemnified Party.
(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
instrument.
(f) 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.
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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 of the
date first above written.
HEARTLAND INDUSTRIAL PARTNERS, L.P.
By: Heartland Industrial Associates
L.L.C., its general partner
By: /s/ Daniel P. Tredwell
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Name: Daniel P. Tredwell
Title: Member
COLLINS & AIKMAN CORPORATION
By: /s/ Ronald T. Lindsay
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Name: Ronald T. Lindsay
Title: Senior Vice President
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ Ronald T. Lindsay
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Name: Ronald T. Lindsay
Title: Senior Vice President