Exhibit 10.3
THIS MANAGEMENT FEE
AGREEMENT is dated as of
December 2, 2006 (this “ Agreement
”) and is between Freescale Semiconductor, Inc., a Delaware
corporation (“ Freescale ” or the “
Company ”) and Permira Advisers (London)
Limited (the “ Advisor ”).
RECITALS
WHEREAS , the Company has entered into an Agreement and
Plan of Merger (the “ Merger Agreement
”), dated as of September 15, 2006, by and among
Firestone Holdings LLC, and Firestone Acquisition Corporation, a
Delaware corporation (“ Merger Sub ”),
and Freescale.
WHEREAS , pursuant to an assignment and assumption
agreement dated November 13, 2006, Firestone Holdings LLC
assigned all of its rights and obligations under the Merger
Agreement to Firestone Holdings L.P., a Cayman Islands exempted
limited partnership (“ Parent ”), which
agreed to assume all such rights and obligations.
WHEREAS , pursuant to the terms and subject to the
conditions of the Merger Agreement, the Merger Sub merged with and
into Freescale (the “ Merger ”), with
Freescale surviving the Merger.
WHEREAS , funds affiliated with or managed or advised by
each of The Blackstone Group, The Carlyle Group, Permira Advisers
LLC and Texas Pacific Group, along with certain other investors
(each such fund, an “ Investor ”; and
each such group of affiliated funds or funds advised by the same
adviser, an “ Investor Group ”) made an
investment in Parent (the “ Equity Financing
”) in connection with the Merger and entered into an
Investors Agreement dated as of December 1, 2006 (the “
Investors Agreement ”).
WHEREAS , the Merger was financed in part by the Equity
Financing and in part by debt financings arranged by the Advisor
(such financings, together with the Merger, the Equity Financing
and related transactions are collectively referred to as the
“ Transactions ”).
WHEREAS , the Advisor has expertise in the areas of
finance, strategy, investment, acquisitions and other matters
relevant to the Company and its business.
WHEREAS , the Advisor used its expertise to provide
substantial financial and structural analysis, due diligence
investigations, corporate strategy, and other advice and assistance
in connection with the Transactions.
WHEREAS , the Company desires to avail itself and its
subsidiaries of the Advisor’s expertise in providing
financial and structural analysis, due diligence investigations,
corporate strategy, and other advice and assistance, which the
Company believes will be beneficial to it and its subsidiaries, and
the Advisor wishes to provide the services to the Company as set
forth in this Agreement in consideration of the payment of the fees
described below.
WHEREAS , concurrently with the execution of this
Agreement, the Company is entering into substantially identical
management fee agreements (“ Advisory
Agreements ”) with the affiliates or advisors of the
Investors listed on Schedule A hereto (the “ Other
Advisors ”).
NOW, THEREFORE
, in consideration of the premises
and agreements contained herein and of other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the
parties agree as follows:
AGREEMENT
SECTION 1.
Appointment.
The Company hereby engages the
Advisor, on a non-exclusive basis, to provide the services
described in Section 2 (the “ Services
”) on the terms and subject to the conditions of this
Agreement.
SECTION 2.
Services.
(a) The Advisor agrees that until
the earlier of the Termination Date or the date mutually agreed
upon pursuant to Section 3(b) below, it will provide to the
Company, to the extent appropriate and requested by the Company, by
and through itself and/or its successors, assigns, affiliates,
officers, employees and/or representatives and third parties
(collectively hereinafter referred to as the “ Advisor
Designees ”), as the Advisor in its sole discretion
may designate from time to time, management, advisory and
consulting services in relation to the affairs of the Company and
its subsidiaries, including, without limitation, (a) advice
regarding the structure, terms, conditions and other provisions,
distribution and timing of debt and equity offerings and advice
regarding relationships with the Company’s and its
subsidiaries’ lenders and bankers, (b) advice regarding
the strategy of the Company, (c) advice regarding dispositions
and/or acquisitions and (d) such other advice directly related
or ancillary to the above financial advisory services as may be
reasonably requested by the Company; provided that the
Services do not include any advisory or other services in
connection with the Transactions; and provided ,
further , that if the Investor Group affiliated with or
advised by the Advisor holds less than 10% of the limited
partnership interests of Parent purchased by such Investor on the
Closing Date, the Advisor will not be obligated to provide any
Services.
(b) It is expressly agreed that the
Services to be performed under this Agreement will not include any
investment banking or other financial advisory services which may
be provided by the Advisor or any of its affiliates or Advisor
Designees in connection with any actual or potential acquisition,
divestiture, financing, refinancing, recapitalization or other
transaction involving the Company or any of its subsidiaries. The
Advisor or its Advisor Designees shall be entitled to receive
compensation, in addition to any fees paid under this Agreement,
for providing services of the type specified in the preceding
sentence by mutual agreement of the Company or such subsidiary, on
the one hand, and the Advisor or its relevant affiliates or Advisor
Designees, on the other hand.
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SECTION 3.
Fees.
(a) Management Fee . In
consideration for the Services, the Company will pay to the Advisor
or its Advisor Designee an annual management fee in respect of each
fiscal year from and including fiscal year 2006 (for which a
pro-rated amount shall be assessed as described below) (the “
Management Fee ”; the term “Management
Fee” as used in this Agreement means the Annual Amount as
adjusted by the terms of this paragraph (a)). The Management Fee
will accrue and be payable through December 31 of the year in
which the Termination Date (as defined below) occurs. No Management
Fee, or any portion thereof shall be refundable under any
circumstances, except as provided below.
(i) On December 4, 2006, the
Company shall pay to the Advisor or its Advisor Designee an
aggregate amount of $219,402.46, representing a pro rata portion of
the Annual Amount (as defined below) in respect of fiscal year 2006
calculated from December 2, 2006 through December 31,
2006.
(ii) Subject to
Section 3(a)(iv) below, the Company shall pay to the Advisor
or its Advisor Designee an annual aggregate amount equal to the
product of (x) 9.60% and (y) 1.5% of the projected annual
EBITDA (as defined below) based on the Company’s annual
budget for such year (the “ Annual Amount
”). The Annual Amount shall be paid quarterly in advance in
four equal payments on each
January 1, April 1, July 1 and
October 1, commencing on January 1, 2007.
(iii) On each April 30,
commencing on April 30, 2008, (i) the Advisor will
deliver to the Company a statement of the Services rendered for the
most recently completed fiscal year (the “ Recent
Fiscal Year ”) and (ii) the Company shall
deliver to the Advisor a statement (the “ EBITDA
Statement ”) setting forth for the Recent Fiscal Year
a calculation of the Annual Amount based on the actual amount of
the Company’s EBITDA for such Recent Fiscal Year. If the
actual Annual Amount set forth on the EBITDA Statement exceeds the
estimated Annual Amount previously paid with respect to such Recent
Fiscal Year, then the Company shall promptly pay to the Advisor or
its Advisor Designee, without interest, an amount equal to such
excess.
(iv) If the estimated Annual Amount
previously paid with respect to such Recent Fiscal Year exceeds the
actual Annual Amount set forth on the EBITDA Statement, then the
estimated Annual Amount to be paid in respect of the next fiscal
year of the Company shall be reduced by the amount of such
excess.
If the Advisor receives any payment
of Management Fees in advance and its obligation to provide
Services terminates within the calendar quarter to which such
payment relates, the Advisor shall promptly (no later than 15 days
after any such termination) turn over to the Company a portion of
the payment or payments so received equal to the number of days
remaining in the calendar quarter from the date the Advisor was no
longer obligated to provide Services divided by 90 (“
Returned Amounts ”). The Company shall pay such
Returned Amounts to the Other Advisors under all other Advisory
Agreements, other than to any such Other Advisor that, under its
respective agreement, is no longer obligated to provide Services.
In the event there are Returned Amounts under any Advisory
Agreement, in consideration for the incremental Services to be
provided by the Advisor, the Advisor shall be
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entitled to receive a portion of such Returned
Amounts equal to a fraction, the numerator of which is the
aggregate Management Fee which the Advisor became entitled to
receive in respect of such calendar quarter, and the denominator of
which is the aggregate Management Fee paid to all advisors under
all Advisory Agreements (including this Agreement) in respect of
such calendar quarter, other than any advisor that, under its
respective agreement, is no longer obligated to provide
Services.
In the event an Other
Advisor’s obligation to provide Services under its Advisory
Agreement terminates and it is no longer entitled to its management
fee, in consideration for the incremental Services to be provided
by the Advisor, the Advisor shall be entitled to receive a portion
of such management fee previously payable to such Other Advisor
equal to a fraction, the numerator of which is the aggregate
Management Fee which the Advisor is then entitled to, and the
denominator of which is the aggregate Management Fee to which all
advisors under all Advisory Agreements (including this Agreement)
are then entitled to, other than any such advisor that, under its
respective agreement, is no longer obligated to provide
Services.
All amounts paid by the Company to
the Advisor or its Advisor Designee pursuant to this Section 3
shall be made by wire transfer in same-day funds to the bank
account designated by the Advisor or its Advisor Designee, and
shall not be refundable under any circumstances, except as provided
above.
For purposes of this
Agreement:
(i) “ Termination
Date ” means the earliest of (i) the tenth
anniversary of the date hereof, (ii) such time as the Advisor
is no longer obligated to provide Services pursuant to
Section 2(a) and (iii) such earlier date as the Company
and the Advisor may mutually agree upon.
(ii) “ EBITDA
” shall mean “Consolidated EBITDA”, as such term
is defined in the Credit Agreement, dated as of December 1,
2006, among Merger Sub (to be merged with and into the Company),
Citibank, N.A., as Administrative Agent, Swing Line Lender and L/C
Issuer, and the other parties thereto, as the same may be amended
or replaced from time to time.
(b) Early Termination .
Notwithstanding anything to the contrary contained in this
Agreement, (i) at any time in connection with or in
anticipation of (but conditional upon) a Change of Control (as
defined below) or a Qualified Public Offering (as defined below),
or sale of all or substantially all of the Company’s shares,
businesses or assets (or at any time thereafter) or (ii) such
earlier time as mutually agreed upon, and so long as a similar
election is made with respect to all Advisory Agreements, the
Advisor and the Company may mutually agree to terminate this
Agreement and the Services provided hereunder in consideration for
a lump sum payment by the Company to the Advisor or its Advisor
Designee, in an amount to be determined at such time and consistent
with customary practices of the Advisor. Such payment shall be paid
on the date on which the Change of Control or Qualified Public
Offering, or sale of shares, businesses or assets is consummated,
or upon such other date as mutually agreed. Following the payment
of the lump sum payment, the obligation of the Advisor to provide
the Services hereunder, and the corresponding obligations of
the
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Company to pay Management Fees, shall be
terminated, but all other provisions of this Agreement shall
continue unaffected. For purposes of this Agreement, “
Change of Control ” and a “
Qualified Public Offering ” shall have the
meanings set forth in the Investors Agreement.
(c) Non-Payment . Other than
following or in connection with a Change of Control, with the
approval of the Majority Principal Investors (as defined in the
Investors Agreement), the Company may defer the payment of any
portion of the Management Fee (in the same proportion as the
aggregate Management Fee to which all advisors under all Advisory
Agreements (including this Agreement) is deferred) to the extent
necessary in order for the Company to remain in compliance with
rating agency requirements and covenants to lenders. To the extent
the Company does not pay any portion of the Management Fee for any
reason, including in reliance on the preceding sentence, or by
reason of any prohibition on such payment pursuant to the terms of
any agreement or indenture governing indebtedness of the Company or
its subsidiaries, (x) any accrued but unpaid portion of the
Management Fee shall be paid to the Advisor upon the earlier of
(i) the first date on which the payment of such unpaid amount
is permitted under such requirements or covenants, agreement or
indenture, to the extent permitted by such requirements or
covenants, agreement or indenture, and (ii) the total or
partial liquidation, dissolution or winding up of the Company. Any
portion of the Management Fee not paid on the scheduled due date
will bear interest, payable in cash on each scheduled due date, at
an annual rate of interest equal to the Non-Payment Rate (as
defin
