Exhibit 10.17
EXECUTION COPY
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made as of August 6, 1999 by and among Mattress
Discounters Holding Corporation, a Virginia corporation ("Holdings"), and
Mattress Discounters Corporation, a Delaware corporation ("MD"; and together
with Holdings, the "Companies"), and Xxxx Capital Partners VI, L.P. ("Bain").
WHEREAS, the Companies desire to retain Bain and Bain desires to
perform for the Companies and their subsidiaries certain services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1. Term. This Agreement shall be in effect for an initial term of
ten (10) years commencing on the date hereof (the "Term"), and shall be
automatically extended thereafter on a year to year basis unless Holdings or
Bain provides written notice to the other party of its desire to terminate this
Agreement 90 days prior to the expiration of the Term or any extension thereof.
2. Services. Bain shall perform or cause to be performed such
services for Holdings and its direct and indirect subsidiaries (including MD) as
directed by Holdings' board of directors, which may include, without limitation,
the following:
(a) general management services;
(b) identification, support, negotiation and analysis of
acquisitions and dispositions;
(c) support, negotiation and analysis of financing alternatives,
including, without limitation, in connection with acquisitions, capital
expenditures and refinancing of existing indebtedness;
(d) finance functions, including assistance in the preparation of
financial projections, and monitoring of compliance with financing agreements;
(e) strategic planning functions, including evaluating major
strategic alternatives; and
(f) other services for Holdings and its subsidiaries (including MD)
upon which Holdings' board of directors and Bain agree.
3. Advisory Fees and Transaction Fees.
(a) Payment to Bain for services rendered in connection with the
performance of services pursuant to this Agreement shall be $1,000,000 per year
or such other amount as the parties hereto shall agree ("Advisory Fees") plus
reasonable out-of-pocket expenses of Bain and/or its affiliates. Following each
acquisition of an additional business by the Companies or any of their
subsidiaries (each, an "Acquisition"), the Advisory Fees shall be increased (in
the fiscal quarter in which such Acquisition is consummated) by an amount (if
positive) equal to (i) Acquired EBITDA (as defined below), divided by (ii) 30
(each, an "Advisory Fee Increase"). Notwithstanding the foregoing sentence, no
Advisory Fee Increase shall be added to Advisory Fees until the aggregate amount
of all Advisory Fee Increases exceed $100,000 per year, at which time, all
Advisory Fee Increases not previously added shall be added to Advisory Fees. The
Advisory Fees shall be payable quarterly in advance by the Companies to Bain or
its designees in immediately available funds, the first such payment to be made
promptly after the date hereof. "Acquired EBITDA" means earnings before
interest, taxes, depreciation, amortization, gain (loss) on sale of assets,
(net), and nonrecurring other income (expense), (net), of the Acquisition,
calculated for the most recent 12 month period for which financial information
is available, pro forma for any cost savings or other synergies.
(b) During the term of this Agreement, Bain shall be entitled to
receive from the Companies a transaction fee in connection with the consummation
by Holdings or any of its subsidiaries (including MD) of (i) each material
acquisition of an additional business, (ii) each material divestiture and (iii)
each material financing or refinancing, in each case, in an amount equal to 1%
of the aggregate value of such transaction (each such payment, a "Transaction
Fee").
(c) Upon the consummation of the merger of MD Acquisition
Corporation, a transitory Virginia merger corporation ("MD Acquisition") with
and into Xxxxxx-Xxxxxx Associates, Inc. as contemplated by the Transaction
Agreement dated May 28, 1999, by and among Xxxxxx-Xxxxxx Associates, Inc., MD
Acquisition and Xxxxxx-Xxxxxx Company, a Virginia corporation, the Companies
shall pay to Bain a transaction fee of $2,635,000 (the "Closing Fee") in
immediately available funds, to an account designated by Bain; it being
understood that the Closing Fee shall be in lieu of the Transaction Fee with
respect to such merger.
4. Personnel. Bain shall provide and devote to the performance of
this Agreement such partners, employees and agents of Bain as Bain shall xxxx
appropriate to the furnishing of the services required.
5. Liability. Neither Bain nor any other Indemnitee (as defined in
Section 6 below) shall be liable to either Company or any of their respective
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 gross negligence, willful misconduct or bad faith on the
part of Bain or any other Indemnitee acting within the scope of their employment
or authority. Bain makes no representations or warranties, express or implied,
in respect of the services to be provided by Bain or any of the other
Indemnitees. Except as Bain may otherwise agree in writing after the date
hereof: (i) Bain shall have the right to, and shall have no duty (contractual or
otherwise) not to, directly or indirectly: (A)
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engage in the same or similar business activities or lines of business as the
Companies, including those competing with the Companies and (B) do business with
any client or customer of the Companies; (ii) neither Bain nor any officer,
director, employee, partner, affiliate or associated entity thereof shall be
liable to the Companies or their subsidiaries or affiliates for breach of any
duty (contractual or otherwise) by reason of any such activities of or of such
person's participation therein; and (iii) in the event that Bain acquires
knowledge of a potential transaction or matter that may be a corporate
opportunity for both the Companies and Bain or any other person, Bain shall have
no duty (contractual or otherwise) to communicate or present such corporate
opportunity to the Companies and, notwithstanding any provision of this
Agreement to the contrary, shall not be liable to the Companies or their
affiliates for breach of any duty (contractual or otherwise) by reasons of the
fact that Bain directly or indirectly pursues or acquires such opportunity for
itself, directs such opportunity to another person, or does not present such
opportunity to the Companies. In no event will either party hereto be liable to
the other for any indirect, special, incidental or consequential damages,
including lost profits or savings, whether or not such damages are foreseeable,
or in respect of any liabilities relating to any third party claims (whether
based in contract, tort or otherwise) other than the Claims (as defined in
Section 6 below) relating to the service to be provided by Bain hereunder.
6. Indemnity. Each Company and its respective subsidiaries shall
defend, indemnify and hold harmless each of Bain, its affiliates, partners,
employees and agents (collectively, the "Indemnitees") from and against any and
all loss, liability, damage, or expenses arising from any claim by any person
with respect to, or in any way related to, the performance of services
contemplated by this Agreement (including attorneys' fees) (collectively,
"Claims") resulting from any act or omission of any of the Indemnitees, other
than for Claims which shall be proven to be the direct result of gross
negligence, bad faith or willful misconduct by an Indemnitee. Each Company and
its respective subsidiaries shall defend at its own cost and expense any and all
suits or actions (just or unjust) which may be brought against any Company,
and/or any of its respective subsidiaries or any of the Indemnitees or in which
any of the Indemnitees may be impleaded with others upon any Claims, or upon any
matter, directly or indirectly, related to or arising out of this Agreement or
the performance hereof by any Indemnitee, except that if such damage shall be
proven to be the direct result of gross negligence, bad faith or willful
misconduct by an Indemnitee, then Bain shall reimburse the Companies for the
costs of defense and other costs incurred by the Companies.
7. Notices. All notices or other communications required or
permitted by this Agreement shall be effective upon receipt and shall be in
writing and delivered personally or by overnight courier, or sent by facsimile,
as follows:
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To either Company:
Mattress Discounters Holding Corporation
Mattress Discounters Corporation
0000 Xxxxxxx Xxxxx
Xxxxx Xxxxxxxx, Xxxxxxxx 00000
Attention: President
Telecopy No.: (000) 000-0000
To Bain:
Xxxx Capital, Inc.
Two Xxxxxx Place
Boston, Massachusetts 02116
Attention: Xxxx Xxxxxx
Telecopy No.: (000) 000-0000
With a copy, which shall not constitute notice, to:
Xxxxxxxx & Xxxxx
Citicorp Center
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telecopy No.: (000) 000-0000
8. Assignment. No party hereto may assign any obligations hereunder
to any other party without the prior written consent of all other parties
hereto, which consent shall not be unreasonably withheld; provided, however,
that, notwithstanding the foregoing, Bain may assign its rights and obligations
under this Agreement to any of its affiliates without the consent of the
Companies.
9. Successors. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties hereto.
10. CounterpartsThis Agreement may be executed and delivered by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and both of which taken together shall
constitute but one and the same agreement.
11. Entire Agreement; Modification; Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of this
Agreement nor waiver of the terms or conditions hereof shall be binding upon any
party hereto unless approved in writing by an authorized representative of such
party. All issues concerning this
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Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the law of any jurisdiction other than the
State of New York.
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IN WITNESS WHEREOF, the parties have executed this Management
Services Agreement as of the date first written above.
MATTRESS DISCOUNTERS HOLDING
CORPORATION
/s/ Xxxxxxx X. Xxxxxx
By:_____________________________________
Name: Xxxxxxx X. Xxxxxx
Title: President
MATTRESS DISCOUNTERS CORPORATION
/s/ Xxxxxxx X. Xxxxxx
By:_____________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
XXXX CAPITAL PARTNERS VI, L.P.
By: Xxxx Capital Investors VI, Inc.
Its: General Partner
/s/ Xxxxxxx X. Xxxxxx
By:_____________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
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