EXHIBIT 10.2
[LETTERHEAD OF XXXXXXX & MARSAL, LLC]
September 21, 2004
Xx. Xxx Xxxxxxx
Chairman of the Board
Interstate Bakeries Corporation
00 Xxxx Xxxxxx Xxxxxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Dear Xx. Xxxxxxx:
This letter amends and restates the letter agreement dated August 27, 2004 by
and between Xxxxxxx & Marsal, LLC ("A&M") and Interstate Bakeries Corporation
("IBC") (as amended and restated, "this Agreement"). You have requested that
A&M modify its engagement as set forth herein, and A&M is willing to do so. As
part of those modifications, you have requested that certain of IBC's
affiliates become parties to this Agreement (each such affiliate individually,
an "IBC Entity" and collectively with IBC, the "Company"). Each IBC Entity is
listed on the signature pages; and any other affiliate which becomes a debtor
under the United States Bankruptcy Code in a case administratively
consolidated with the cases for the Company shall be deemed to have executed
this letter upon the commencement of its case and shall be also be referred to
as a IBC Entity and included in the term "Company". Upon execution of this
letter by each of the parties below, and subject to the approval of the
engagement and terms and conditions provided for in this letter by the
bankruptcy court having jurisdiction over the Company's cases commenced under
the United States Bankruptcy Code (the "Bankruptcy Court"), this letter will
be effective immediately after the commencement of the cases of one or more of
IBC and the IBC Entities under the United States Bankruptcy Code. (The letter
agreement in the form prior to this amendment and restatement shall continue
to govern for periods prior to the date hereof.) A&M shall continue to hold
the remaining portion of the retainer previously delivered on the terms and
conditions set forth herein.
1. Description of Services
-----------------------
(a) Officers.
--------
In connection with this engagement, A&M shall make available to the Company:
(i) Xxxxxxx Xxxxxxx XX to serve as the Chief Executive Officer
of the Company (the "CEO");
(ii) Xxxx X. Xxxxxx to serve as the Chief Restructuring Officer
of the Company (the "CRO"); and
(iii) Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxxxx, Xxxxxx X.
Xxxxxxxxx, and Xxxxxx Xxxxxxx (collectively with the CEO and
the CRO, the "Officers" and each of the Officers
individually, an "Officer"), as well as, upon the mutual
agreement of A&M and the Board of Directors of IBC (the
"Board of Directors"), such additional personnel as are
necessary to assist in the performance of the duties set
forth in clause 1.b below (the "Additional Officers"). Each
of the Officers and any Additional Officers shall be
designated by the Board of Directors as executive officers.
Upon such designation for an Additional Officer, he or she
shall also be included with the defined term "Officers".
Each of the Officers may also become officers of one or more
of the IBC Entities if requested by the board of directors
of such IBC Entities and designated as executive officers.
If requested and if agreed to by A&M, one or more of the
Officers may also become directors of non-debtor affiliates
of IBC if such non-debtor affiliates become a party to this
agreement, whereupon they will be included in the definition
of IBC Entities.
(b) Duties.
------
In his capacity as CEO, Xxxxxxx Xxxxxxx XX shall perform duties typically
performed by chief executive officers.
In his capacity as CRO, Xxxx Xxxxxx shall be responsible for the overall
management of the reorganization efforts. This will include coordinating
efforts of other professionals hired by the Company (e.g. lawyers, investment
bankers and crisis communication specialists). He will also have primary
responsibility for communications with the Creditors' Committee and the
Secured Creditors as well as the professionals retained by each constituency.
In his capacity as CRO, Xxxx Xxxxxx will also assist the CEO in the following
efforts:
(i) Development of short term cash flows and liquidity plans for
the Company;
(ii) Development of employee retention plans;
(iii) Development of business plans, including operating and cash
flow projections;
(iv) Provide testimony, as required by the court;
(v) Once the business plan is completed, working closely with
the investment banker, development of proposed
reorganization plans; and
(vi) Other activities as directed by the CEO and approved by the
Board of Directors
The other Officers will perform tasks necessary to support the efforts
outlined above.
You understand that the services to be rendered by the Officers may include
the preparation of projections and other forward-looking statements, and
numerous factors can affect the actual results of the Company's operations,
which may materially and adversely differ from those projections. In addition,
the Officers will be relying on information provided by the Company in the
preparation of those projections and other forward-looking statements. Neither
A&M nor any of the Officers makes any representation or guarantee that an
appropriate restructuring proposal can be formulated for the Company, that
restructuring is the best course of action for the Company or, if formulated,
that any proposed restructuring plan will be accepted by the Company's
creditors, shareholders and other constituents. Further, neither the Officers
nor A&M assumes any responsibility for the implementation or selection of any
restructuring proposal which the Officers assist the Company in formulating.
In rendering their services to the Company, the CEO and CRO will report
directly to the Board of Directors and will make recommendations to and
consult with the Board of Directors.
(c) Employment by A&M. The CEO, the CRO and the Officers will continue to
be employed by A&M and while rendering services to the Company will
continue to work with other personnel at A&M in connection with other
unrelated matters, which will not unduly interfere with services
pursuant to this engagement. With respect to the Company, however,
the CEO, the CRO and the Officers shall operate under the direction
of the Board of Directors and A&M shall have no liability to the
Company for any acts or omissions of such officers. The CEO will
devote substantially all of his working time to the affairs of the
Company, subject to his responsibilities with respect to the internal
governance of A&M.
The Officers will at all times remain employees of A&M who will be
responsible for payroll and withholding expenses on their behalf.
2. Compensation
------------
(a) A&M shall be compensated at a rate of $150,000 per month for
the services of the CEO .
(b) A&M will receive fees based on the following hourly rates,
for the services of the CRO and other Officers available
(based on the positions they hold as personnel of A&M):
Managing Directors $500 - $650
Directors $375 - $450
Associates $275 - $350
Analysts $200 - $250
Such rates shall be subject to adjustment at such time as
A&M adjusts its rates generally.
(c) In addition, A&M will be reimbursed for the reasonable
out-of-pocket expenses of the CEO, the CRO and the other
Officers incurred in connection with this assignment, such
as travel, lodging, duplicating, computer research,
messenger and telephone charges. In addition, A&M shall be
reimbursed for the reasonable fees and expenses of its
counsel incurred in connection with the preparation,
negotiation and enforcement of this Agreement. All fees and
expenses will be billed and payable on a monthly basis or,
at A&M's discretion, more frequently.
(d) In accordance with the August 27, 2004 letter agreement, the
Company remitted a retainer to A&M in the amount of
$500,000. A&M incurred estimated fees and expenses of
$440,000 through the date of this letter in accordance with
the August 27, 2004 letter agreement and that amount was
applied against the retainer. This amount is subject to
adjustment pending the preparation of a final billing as of
the date of this letter. A&M received an additional payment
of approximately $190,000 leaving a retainer of
approximately $250,000 which shall be credited against any
amounts due at the termination of this engagement and
returned upon the satisfaction of all obligations hereunder.
(e) In addition to the compensation set forth above, A&M will be
entitled to receive incentive compensation, to be based on
5% of value created, the definition of which will be agreed
to with the Board of Directors within 90 days of this
letter. Under all circumstances other than a liquidation of
the Company (in which case there shall be no guaranteed
incentive compensation), A&M's incentive compensation will
be a minimum of $ 3.85 million. The incentive compensation
shall be payable upon the earlier of (x) a consummation of a
plan of reorganization of IBC, (y) a sale of all or a
substantial portion of the assets of IBC in one or more
transactions, or (z) a liquidation of the Company.
3. Term
----
The engagement will commence as of the date hereof and may be
terminated by either party without cause by giving 30 days' written
notice to the other party. In the event of any such termination, any
fees and expenses due to A&M shall be remitted promptly (including
fees and expenses that accrued prior to but were invoiced subsequent
to such termination). If the Company terminates this engagement
without Cause or if A&M terminates this engagement for Good Reason,
A&M shall also be entitled to receive the Incentive Fee; provided
that the consummation of the Restructuring occurs within 12 months of
the termination. The Company may immediately terminate A&M's services
hereunder at any time for Cause by giving written notice to A&M. Upon
any such termination, the Company shall be relieved of all of its
payment obligations under this Agreement, except for the payment of
fees and expenses through the effective date of termination
(including fees and expenses that accrued prior to but were invoiced
subsequent to such termination) and its obligations under paragraph
8. For purposes of this Agreement, "Cause" shall mean if (i) any of
the Officers is convicted of, admits guilt in a written document
filed with a court of competent jurisdiction to, or enters a plea of
nolo contendere to, an allegation of fraud, embezzlement,
misappropriation or any felony; (ii) any of the Officers willfully
disobeys a lawful direction of the Board of Directors; or (iii) a
material breach of any of A&M's or any of the Officers' material
obligations under this Agreement which is not cured within 30 days of
the Company's written notice thereof to A&M describing in reasonable
detail the nature of the alleged breach A&M shall be entitled to
immediately terminate its services hereunder for Good Reason. For
purposes of this Agreement, termination for "Good Reason" shall mean
its resignation caused by a breach by the Company of any of its
material obligations under this Agreement that is not cured within 30
days of A&M having given written notice of such breach to IBC
describing in reasonable detail the nature of the alleged breach.
4. Relationship of the Parties
---------------------------
It is understood that the Officers and A&M are not being requested to
perform an audit, review or compilation, or any other type of
financial statement reporting engagement that is subject to the rules
of the AICPA, SEC or other state or national professional or
regulatory body. They are entitled to rely on the accuracy and
validity of the data disclosed to them or supplied to them by
employees and representatives of the Company. The Officers and A&M
are under no obligation to update data submitted to them or review
any other areas unless specifically requested by the Board of
Directors to do so.
5. No Third Party Beneficiary
--------------------------
The Company acknowledges that all advice (written or oral) given by
the Officers to the Company in connection with this engagement is
intended solely for the benefit and use of the Company (limited to
the respective boards of directors and management) in considering the
matters to which this engagement relates. The Company agrees that no
such advice shall be reproduced, disseminated, quoted or referred to
at any time in any manner, nor shall it be used for any purpose other
than accomplishing the tasks referred to herein, in each case without
A&M's prior approval (which shall not be unreasonably withheld),
except as required by law.
6. Conflicts
---------
A&M is not currently aware of any relationship that would create a
conflict of interest with the Company or those parties-in-interest of
which you have made us aware. A&M has performed work for various
banks and lenders, some of which may be lenders, participants or
agents for lenders to the Company. Because A&M is a consulting firm
that serves clients on a national basis in numerous cases, both in
and out of court, it is possible that A&M may have rendered services
to or have business associations with other entities or people which
had or have or may have relationships with the Company, including
creditors of the Company. In the event you accept the terms of this
engagement, A&M will not represent the interests of any such entities
or people in connection with this matter.
7. Confidentiality / Non-Solicitation
----------------------------------
Neither A&M nor any of the Officers shall publish, disclose, or
otherwise divulge Confidential Information to any person, at any time
during or after the term of this Agreement, without the Company's
prior consent. Except in connection with fulfilling its and their
respective obligations hereunder, A&M and the Officers may permit
knowledge of and access to the Confidential Information only to those
of its board members, officers and employees who have a need to know
such information in order to perform the services under this
Agreement. For purposes of this Agreement, "Confidential Information"
shall mean non-public, confidential or proprietary information.
The term "Confidential Information" does not include any information
which (i) at the time of disclosure or thereafter is generally
available to the public (other than as a result of a disclosure by
A&M or its representatives or the Officers in violation of this
Agreement), (ii) was available to A&M or the Officers on a
non-confidential basis from a source other than the Company, provided
that such source is not bound by a confidentiality agreement that was
applicable to the Confidential Information or (iii) has been
independently acquired or developed by A&M without violating any of
its obligations under this Agreement.
In the event that A&M becomes legally compelled (by deposition,
interrogatory, request for documents, subpoena, civil investigative
demand or similar process) to disclose any of the Confidential
Information, A&M shall give IBC prompt prior written notice of such
requirement so that the Company may seek a protective order or other
appropriate remedy and/or waive compliance with the terms of this
Agreement. In the event that such protective order or other remedy is
not obtained, or that the Company waives compliance with the terms
hereof, A&M agrees to provide only that limited portion of the
Confidential Information that it is legally required and to exercise
reasonable efforts to obtain assurance that confidential treatment
will be accorded such Confidential Information.
A&M and the Company agree that in the event of a breach of this
confidentiality provision, the Company shall be entitled to equitable
relief, including injunction and specific performance, in addition to
all other remedies available at law or equity. This confidentiality
provision shall survive for three years following the termination of
this Agreement.
Except as specifically provided for in this Agreement, the Company
agrees not to solicit, recruit or hire as an employee of the Company
any employee of A&M effective from August 27, 2004 and continuing for
a period of two years subsequent to the termination of this
engagement. Unless otherwise mutually agreed, should the Company
extend offers of employment to any A&M employee (other than as
specifically provided for in this Agreement) and should such an offer
be accepted, A&M will be entitled to liquidated damages based upon
such individual's hourly rates multiplied by an assumed annual
billing of 2,000 hours; provided, however, that this liquidated
damages provision shall not apply to employees of A&M hired by the
Company while Xx. Xxxxxxx is the CEO. These liquidated damages would
be payable at the time of the individual's acceptance of employment
from the Company.
8. Indemnification
---------------
The Company shall indemnify the Officers to the same extent as the
most favorable indemnification it extends to its officers or
directors, whether under the Company's bylaws, its certificate of
incorporation, by contract or otherwise, and no reduction or
termination in any of the benefits provided under any such
indemnities shall affect the benefits provided to the Officers. Each
of the Officers shall be covered as an officer and/or director, as
applicable, under the Company's existing director and officer
liability insurance policy. The Company shall also maintain any such
insurance coverage for each of the Officers for a period of not less
than two years following the date of the termination of such
Officer's services hereunder, unless such Officer shall have received
a release of liability under a plan of reorganization confirmed in
the Company's cases. The provisions of this section 8 are in the
nature of contractual obligations and no change in applicable law or
the Company's charter, bylaws or other organizational documents or
policies shall affect any of the Officers' rights hereunder.
Termination of this engagement shall not affect the obligations in
this provision, which shall remain in full force and effect. The
indemnity provisions incorporated into the letter agreement dated
August 27, 2004 shall continue as provisions incorporated into this
amendment and restatement with references to the "Agreement" therein
being deemed to include this Agreement (as it may be further amended,
modified, supplemented or amended and restated from time to time).
9. Miscellaneous
-------------
This engagement letter (together with the incorporated indemnity
provisions) shall be:(a) governed and construed in accordance with
the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflict of laws
thereof; (b) incorporates the entire understanding of the parties
with respect to the subject matter hereof; and (c) may not be amended
or modified except in writing executed by the parties hereto. The
Company and A&M agree to waive trial by jury in any action,
proceeding or counterclaim brought by or on behalf of the parties
hereto with respect to any matter relating to or arising out of the
engagement or the performance or non-performance of A&M hereunder.
The Company and A&M agree that the Bankruptcy Court shall have
exclusive jurisdiction over any and all matters arising under or in
connection with this Agreement and in connection with the services
rendered hereunder.
If the foregoing is acceptable to you, kindly sign the enclosed copy to
acknowledge your agreement with its terms.
Very truly yours,
Xxxxxxx & Marsal, Inc.
By: /s/ Xxxx X. Xxxxxx
----------------------------
Xxxx X. Xxxxxx
Managing Director
Accepted and agreed:
Interstate Bakeries Corporation
By: /s/ Xxx Xxxxxxx
------------------------------
Xx. Xxx Xxxxxxx
Chairman of the Board
International Bakeries Corporation
Armour & Main Redevelopment Corporation
Xxxxx'x Inn Quality Baked Goods, LLC
IBC Sales Corporation
IBC Services, LLC
IBC Trucking LLC
Interstate Brands Corporation
New England Bakery Distributors, LLC
Xxx. Xxxxxxxx'x Foods, Inc.
By: /s/ Xxxx Xxxxxx
------------------------------
Xx. Xxxx Xxxxxx
General Counsel
