Exhibit 10.6 - Management Services Agreement dated June 27, 2003, by and between
the Company and Sun Capital Partners Management III, LLC.
Exhibit E
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT (the "Agreement"), dated as of June
27, 2003 (the "Effective Date"), is entered into by and between One Price
Clothing Stores, Inc., a Delaware corporation with offices at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and Sun Capital Partners
Management III, LLC, a Delaware limited liability company with offices at ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Manager").
WHEREAS, the Company desires to receive financial and management
consulting services from the Manager and to obtain the benefit of the experience
of the Manager in business and financial management;
WHEREAS, the Manager desires to provide financial and management
consulting services to the Company pursuant to the terms of this Agreement; and
WHEREAS, the compensation arrangements set forth in this Agreement are
designed to compensate the Manager for providing such financial and management
consulting services to the Company;
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
1. Agreement; Term.
(a) The Company hereby retains the Manager to perform, and the
Manager agrees to render to the Company, on the terms herein set forth,
management and consulting services regarding the business of the Company and
such other services relating to the Company as may from time to time be
reasonably requested by the Board of Directors or executive officers of the
Company. Without limiting the generality of the foregoing, the parties currently
contemplate that these services shall include advice regarding improvements to
the Company's financial reporting, accounting and management information systems
and staffing.
(b) It is expressly understood and agreed that the Manager
shall devote only so much time, and shall consult with and advise the officers
and managers of the Company only to such extent and at such times and places as
may be mutually convenient to the Company and the Manager. The Manager shall be
free to provide similar services to such other business enterprises or
activities as the Manager may deem fit without any limitation or restriction
whatsoever; provided, however, that the Company's confidential information shall
not be used to the Company's detriment.
(c) The term of this Agreement shall commence as of the
Effective Date and shall terminate on the earlier of (i) the tenth anniversary
of the Effective Date and (ii) the date on which Sun One Price, LLC and its
affiliates and co-investors (including, without limitation, ▇▇▇▇▇▇▇▇ Street
Partners V, or H.I.G. Sun Partners, Inc.) no longer owns or controls at least
50% of the voting power of the Company.
2. Compensation and Expenses.
(a) For the services to be rendered by the Manager hereunder,
the Manager shall receive an annual fee (the "Management Fee") equal to the
greater of (i) $500,000.00 or (ii) 6% of the Company's EBITDA (as such term is
hereinafter defined), computed without taking into consideration the fees
payable under this Section 2, as determined by the Company's regular auditors,
or in the absence thereof, by the Company's Board of Directors, with respect to
each fiscal year. The Company shall pay the Management Fee in quarterly
installments in advance equal to $125,000, and at the end of each fiscal year,
promptly following an audit of the Company's financial statements, to the
extent, that 6% of EBITDA (as such term is hereinafter defined) for the
immediately preceding fiscal year, computed without taking into consideration
the fees payable under this Section 2, exceeds $500,000, an amount equal to such
excess shall be promptly paid to the Manager. On the date hereof, the Company
shall pay the Manager $______, representing the pro rata portion of the
Management Fee for the quarter ending ____________, 2003. For purposes of this
Agreement, the term "EBITDA" means, for any period, the sum of the amounts for
such period of (A) net income (or loss) after taxes of the Company and its
direct and indirect subsidiaries on a consolidated basis ("Net Income"), plus
(B) interest expense which has been deducted in the determination of Net Income,
plus (C) federal, state and local taxes which have been deducted in determining
Net Income, plus (D) depreciation and amortization expenses which have been
deducted in determining Net Income, including without limitation amortization of
capitalized transaction expenses incurred in connection with the acquisition of
certain shares of Common Stock of the Company by Sun One Price, LLC (the "One
Price Acquisition"), plus (E) extraordinary losses which have been deducted in
the determination of Net Income, plus (F) uncapitalized transaction expenses
incurred in connection with the One Price Acquisition, plus (G) all other
non-cash charges, minus (H) extraordinary gains which have been included in the
determination of Net Income. Each item used in calculating EBITDA shall be
determined in accordance with generally accepted accounting principles,
consistent with that used in prior periods.
(b) The Company shall reimburse the Manager for the cost of
all reasonable out-of-pocket fees and expenses incurred by the Manager and its
affiliates in the performance of the services hereunder and all matters related
thereto.
(c) In connection with additional management services required
in connection with certain corporate events, the Manager shall also be entitled
to additional customary and reasonable fees for management consulting services
provided to the Company or to any of its direct or indirect subsidiaries or
shareholders, including with respect to, without limitation, refinancings,
restructurings, equity or debt offerings, acquisitions, mergers, consolidations,
business combinations, sales and divestitures (each a "Management Consulting
Event"). In the event that at any time during the term hereof, there shall occur
a Management Consulting Event involving the Company or any of the Company's
direct or indirect subsidiaries or shareholders, the Company shall pay the
Manager a management consulting fee, in cash, equal to 1% of the aggregate
consideration (including assumed debt and long-term liabilities) paid to or by
the Company or to or by any of its direct or indirect subsidiaries or
shareholders in consideration for the Manager's performance of management
consulting services in connection with such Management Consulting Event. The
Manager and the Company acknowledge and agree that in connection with the
closing of the One Price Acquisition, the Manager shall be entitled to receive a
management consulting fee equal to $460,000.
(d) If for any reason the Company is unable to pay any or all
of the amounts otherwise owed to the Manager pursuant to this Agreement, the
Company shall make such payments as soon as the Company is able to do so.
3. Relationship of the Parties. The Manager is providing services
hereunder as an independent contractor, retaining control and responsibility for
its operations and personnel. Nothing in this Agreement shall be deemed to
constitute the parties hereto joint venturers, partners or participants in an
unincorporated business or other separate entity, nor in any manner create any
employer-employee relationship between the Company on the one hand, and the
Manager or any of the Manager's employees on the other hand.
4. Board of Directors and Officers. Nothing in this Agreement shall be
construed to relieve the directors or officers of the Company from the
performance of their respective duties or limit the exercise of their powers in
accordance with the Company's Articles of Incorporation or Bylaws, any
applicable provisions of the applicable corporate law, or otherwise. The
activities of the Company shall at all times be subject to the control and
direction of its Board of Directors and officers. The Company reserves the right
to make all decisions with regard to any matter upon which the Manager has
rendered its advice and consultation.
5. Limitation of Liability. Neither the Manager nor any of its
affiliates, members, partners, managers, officers, employees or agents shall be
liable to the Company or any of its subsidiaries or affiliates for any loss,
liability, damage or expense arising out of or in connection with the
performance of services contemplated by this Agreement, unless such loss,
liability, damage or expense shall be proven to result directly from the willful
misconduct of such person. In no event will the Manager or any of its
affiliates, members, partners, managers, officers, employees or agents be liable
to the Company for special, indirect, punitive or consequential damages,
including, without limitation, loss of profits or lost business, even if the
Manager has been advised of the possibility of such damages. Under no
circumstances will the liability of the Manager and its affiliates, members,
partners, managers, officers, employees or agents exceed, in the aggregate, the
fees actually paid to the Manager hereunder.
6. Indemnification. The Company shall reimburse, defend, indemnify and
hold the Manager and its affiliates, members, partners, managers, officers,
employees and agents, harmless from and against any damage, loss, liability,
deficiency, diminution in value, action, suit, claim, proceeding, investigation,
audit, demand, assessment, fine, judgment, cost and other expense (including,
without limitation, reasonable legal fees and expenses) arising out of, related
to or in connection with (a) any act or omission of, or on behalf of, the
Company or the Manager, except to the extent proven to result directly from the
willful misconduct of the person seeking indemnification, or (b) any act or
omission made at the direction of the Company.
7. Notices. Any notice, request, demand or other communication
permitted or required to be given hereunder shall be in writing, shall be sent
by one of the following means to the addressee at the address set forth in the
preamble to this Agreement (or at such other address as shall be designated
hereunder by notice to the other party hereto, effective upon actual receipt)
and shall be deemed conclusively to have been given: (a) on the first business
day following the day timely deposited with a nationally recognized overnight
delivery service with an order for next-day delivery, with the cost of delivery
prepaid for the account of the sender; (b) on the fifth business day following
the day duly sent be certified or registered United States mail, postage prepaid
and return receipt requested; or (c) if delivered by other means, when actually
received by the addressee on a business day (or on the next business day if
received after the close of normal business hours or on any non-business day).
8. Assignment; Successors and Assigns. This Agreement and the rights,
duties and obligations of the Company hereunder may not be assigned or delegated
by the Company without the prior written consent of the Manager. This Agreement
and the rights, duties and obligations of the Manager hereunder may not be
assigned or delegated by the Manager, other than to an affiliate of the Manager,
without the prior written consent of the Company. All covenants, promises and
agreements by or on behalf of the parties contained in this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns.
9. Amendments. No amendment, supplement or waiver of any provision of
this Agreement shall be effective unless the same shall be in writing and signed
by the Manager and the Company (in the case of an amendment or supplement) or by
the waiving party (in the case of a waiver).
10. Applicable Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware, without
giving effect to principles of conflicts of law or choice of law that would
compel the application of the substantive laws of any other jurisdiction.
11. Section Headings. The headings of each section are contained herein
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
12. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto with regard to the subject matter hereof and supersedes and
replaces all prior agreements, understandings and representations, oral or
written, with regard to such matters.
13. Severability. If any provision of this Agreement or application
thereof under any circumstances is adjudicated to be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect any other
provision or application of this Agreement which can be given effect without the
invalid or unenforceable provision or application and shall not invalidate or
render unenforceable such provision or application in any other jurisdiction. If
any provision is held void, invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances.
14. Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original, and both of which together shall constitute one
and the same document.
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IN WITNESS WHEREOF, the parties have executed this Management Services
Agreement as of the date first above written.
SUN CAPITAL PARTNERS
MANAGEMENT III, LLC
By: /s/M. ▇▇▇▇▇▇ ▇▇▇▇
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Name: M. ▇▇▇▇▇▇ ▇▇▇▇
Title: Vice President
ONE PRICE CLOTHING STORES, INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer