Exhibit 10.4
EXECUTION VERSION
MANAGEMENT SERVICES
AGREEMENT
MANAGEMENT SERVICES AGREEMENT dated
as of January 23, 2007 (this “ Agreement
”), by and among Ripplewood Holdings L.L.C., a limited
liability company organized under the laws of the State of Delaware
(“ Ripplewood ”), GoldenTree Asset Management,
LP, a limited partnership organized under the laws of the State of
Delaware (“ GoldenTree ”), J. Rothschild Group
(Guernsey) Ltd., a company organized under the laws of Guernsey,
Channel Islands (“ Rothschild ” and, together
with Ripplewood and GoldenTree, the “ Service
Providers ”), RDA Holding Co., a corporation organized
under the laws of the State of Delaware (“ Parent
”). Capitalized terms used herein but not otherwise defined
shall have the meanings ascribed to such terms in the
Stockholders’ Agreement (as defined below).
WHEREAS, the Parent desires the
Service Providers to provide management advisory services and other
services and the Service Providers desire to render such services
to Parent and its subsidiaries (which shall include The
Reader’s Digest Association, Inc. (the “
Company ”)) in consideration for a management fee and
other compensation as hereinafter specified; and
WHEREAS, the Service Providers (or
their respective Affiliates) and Parent are parties to the
Stockholders Agreement, dated as of January 23, 2007 (the
“ Stockholders Agreement ”), in respect of
Parent;
NOW, THEREFORE, in consideration of
the mutual agreements set forth herein, the parties agree as
follows:
1. Management
Services . Parent hereby engages the Service Providers to
provide management advisory services to Parent and its
subsidiaries, as requested by Parent, which services shall include,
without limitation, (i) recommending, structuring and
identifying sources of capital, (ii) monitoring, evaluating
and making recommendations regarding potential acquisitions and
(iii) analyzing the Company’s operations, historical
performance and future prospects, in connection with financial and
strategic corporate planning and other management services as
Parent and the Service Providers shall mutually agree
(collectively, the “ Management Services ”). In
consideration of the Management Services, until the Termination
Date (as defined below), Parent agrees to pay (or cause the Company
to pay) an aggregate quarterly management fee of $7.5 million (the
“ Management Fee ”) each January 1,
April 1, July 1 and October 1 following the Closing
Date to the Service Providers (or their respective designees) pro
rata in accordance with the percentage listed for each Service
Provider on Annex A , as such percentage shall be adjusted
from time to time (including as of the Closing Date) to reflect any
subsequent changes to the relative percentages among the Service
Providers (and their respective Affiliates) of outstanding Stock
(excluding Stock Equivalents) held by the parties (and their
Affiliates). The first payment shall be payable on the Closing
Date, and shall be a pro rata portion of the Management Fee,
calculated by taking the product of (A) the Management Fee and
(B) a fraction, the numerator of which
shall be the number of days from the Closing
Date to the last day of the month prior to the month beginning a
new quarter, inclusive, and the denominator of which shall be the
total number of days in the applicable full quarter, inclusive (and
each Service Provider shall receive its pro rata portion of such
payment in accordance with the immediately preceding sentence).
Thereafter, commencing on each January 1, April 1,
July 1 and October 1, Parent shall pay (or cause the
Company to pay) to each Service Provider its pro rata portion of
the Management Fee in respect of the quarterly period commencing on
such date; provided , however , that the final
payment shall be paid promptly following the Termination Date and
shall be a pro rata portion of the Management Fee, calculated by
taking the product of (A) the Management Fee and (B) a
fraction, the numerator of which shall be the number of days from
the first day of the month beginning the quarter in which the
Termination Date occurs to the Termination Date, inclusive, and the
denominator of which shall be the total number of days in the
applicable full quarter, inclusive (and each Service Provider shall
receive its pro rata portion of such payment in accordance with the
second sentence of this Section 1). The Management Fee shall
be paid in cash in immediately available funds to the account of
each Service Provider provided to Parent in writing by such Service
Provider. Five days prior to any such payment, Parent shall give
each Service Provider notice of such impending payment, together
with a reasonably detailed calculation thereof.
2.
Expenses . In addition to the Management Fee, Parent shall
pay (or cause the Company to pay) directly or reimburse the Service
Providers for their Out-of-Pocket Expenses (as defined below).
Promptly following Parent’s request, the Service Providers
shall provide reasonable written back-up relating to any
Out-of-Pocket Expenses to be paid or reimbursed by Parent pursuant
to this Agreement. For the purposes of this Agreement, the term
“ Out-of-Pocket Expenses ” shall mean the
reasonable out-of-pocket costs and expenses incurred by the Service
Providers in connection with the services rendered hereunder,
including, without limitation, (i) reasonable fees and
disbursements of any independent professionals and organizations,
including independent accountants, outside legal counsel or
consultants, (ii) costs of any outside services or independent
contractors such as financial printers, couriers, business
publications, on-line financial services or similar services,
(iii) research and research-related expenses and
(iv) transportation, hotel and other 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 the Service Providers to Parent of a written
statement thereof.
3. Other
Services; Fees . Subject to Section 8(b) of the
Stockholders Agreement, to the extent that Parent requests services
other than Management Services from a Service Provider, Parent and
such Service Provider may negotiate from time to time mutually
agreed upon fees and expenses to be paid by Parent for such other
services, and such other services shall be deemed to be provided
under this Agreement.
4.
Indemnification . Parent shall
