Exhibit 10.19
Execution Copy
MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is entered into as of the 20th
day of November, 2003, by and between Xxxxxxx Foods, Inc., a Delaware
corporation, f/k/a M-Foods Holding, Inc. (the "Company"), and THL Managers V,
LLC, a Delaware limited liability company (the "Sponsor").
WHEREAS, certain affiliates of THL have provided equity financing to
the Company's indirect parent, MF Investors, LLC, a Delaware limited liability
company ("Investors"), pursuant to that certain Contribution Agreement dated as
of November 20, 2003, by and among Investors and the persons listed on the
signatures pages thereto.
WHEREAS, Investors' subsidiary, THL Food Products Holdings Co.
("Holdings"), and Holdings' subsidiary, THL Food Products Co. ("Merger Co.")
entered into that certain Agreement and Plan of Merger by and among Holdings,
Merger Co. and the Company pursuant to which, as of the date hereof, Merger Co.
merged with and into the Company (the "Merger").
WHEREAS, immediately following the Merger, Xxxxxxx Foods, Inc., a
Minnesota corporation, merged with and into the Company and the Company changed
its name to Xxxxxxx Foods, Inc.
WHEREAS, the Sponsor has staff specifically skilled in corporate
finance, strategic corporate planning, and other management skills and advisory
services.
WHEREAS, the Company will require the Sponsor's special skills and
management advisory services in connection with its business operations and
execution of its strategic plan.
WHEREAS, the Sponsor is willing to provide such skills and services to
the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Services. The Sponsor hereby agrees that if, during the term of
this Agreement (the "Term"), the Company reasonably and specifically requests
that the Sponsor provide the services set forth below and the Sponsor agrees to
provide such services, the Sponsor or one of its affiliates will provide the
following services to the Company and its subsidiaries:
(a) advice in connection with the negotiation and consummation of
agreements, contracts, documents and instruments related to the Company's
finances or relationships with banks or other financial institutions; or
(b) advice with respect to the development and implementation of
strategies for improving the operating, marketing and financial performance of
the Company, and other senior management matters related to the business,
administration and policies of the Company.
The Sponsor shall have no obligation to the Company as to the method or
timing of services rendered hereunder, and the Company shall not have any right
to dictate or direct the details of the performance of services by the Sponsor
rendered hereunder.
The parties hereto expressly acknowledge that the services to be performed
hereunder by the Sponsor shall not include investment banking or other financial
advisory services rendered by Sponsor or its affiliates to the Company in
connection with any specific acquisition, divestiture, refinancing or
recapitalization by the Company or any of its subsidiaries for which the Sponsor
may be entitled to receive additional compensation by mutual agreement of the
Company or its subsidiary and the Sponsor. This Agreement shall in no way
prohibit the Sponsor or any of its affiliates or any of their respective
partners (both general and limited), members (both managing and otherwise),
officers, directors, employees, agents or representatives from engaging in other
activities, whether or not competitive with any business of the Company of any
of its affiliates.
2. Payment of Fees. In exchange for the Sponsor's arrangement of the
equity financing and agreement to provide the services set forth herein, the
Company hereby agrees to pay to the Sponsor (or its designee) the following
fees:
(a) a transaction fee in connection with the transactions
contemplated in the Merger Agreement payable at the Effective Time (as defined
in the Merger Agreement) of $15,000,000;
(b) a management fee (the "Fee") equal to the greater of (i)
$1,500,000 per year or (ii) 1.0% of Consolidated EBITDA (as defined in the
Credit Agreement dated as of November 20, 2003 by and among the Lenders from
time to time party thereto, Bank of America, N.A., Banc of America Securities
LLC, UBS Securities LLC, Deutche Bank, the Company and Holdings and certain of
the subsidiaries of the Company, as the same may be amended, modified, renewed,
refunded, replaced or refinanced from time to time) before deducting the Fee
payable pursuant to this Section 2(b) ("Adjusted EBITDA"), commencing at the
Effective Time. The Fee shall be payable semi-annually in advance (based on the
prior year's Adjusted EBITDA), with an adjustment of the Fee for any fiscal year
payable promptly following the determination of Adjusted EBITDA for such fiscal
year or on termination of this Agreement. The first installment of the Fee shall
be payable at the Effective Time. All references to "per annum" or "annual"
herein refer to the fiscal year of the Company. The initial Fee shall be pro
rated to reflect the portion of the current fiscal year which elapses prior to
the Effective Time; and
(c) customary and reasonable fees in connection with investment
banking, consulting or advisory services provided by the sponsor or its
affiliates in connection with any sale of the Company and its Subsidiaries in a
single transaction or series of related transactions.
Each payment made pursuant to this Section 2 shall be paid by wire transfer
of immediately available funds to the accounts specified on Exhibit A attached
hereto, or to such other account(s) as each Sponsor may specify in writing to
the Company.
3. Term. This Agreement shall be effective as of the date hereof and
shall continue in full force and effect, unless and until (a) terminated by the
Sponsor, (b) terminated automatically on the date which the Sponsor and its
affiliates no longer beneficially owns at least twenty percent (20%) of the
equity securities of Investors, or (c) terminated by the Sponsor upon the
consummation
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of any public offering of the equity securities of the Company or Holdings. Upon
any termination of this Agreement, each of (A) the obligations of the Company
under Section 4 below, (B) any and all owed and unpaid obligations of the
Company under Section 2 above and (C) the provisions of Section 7 shall survive
any termination of this Agreement to the maximum extent permitted under
applicable law. In the event that the Sponsor terminates this Agreement in
accordance with clause (c) above of this Section, the Company agrees to pay the
Sponsor a cash lump-sum termination fee equal to the net present value of the
fees that would have been payable to such Sponsor (but for the termination
hereof) pursuant to Section 2(b) hereof for a period of seven (7) years from the
date of such termination calculated using a discount rate equal to the ten-year
treasury rate on the date of such termination. Such termination fee shall be
payable by wire transfer of immediately available funds within ten (10) days
after the date of termination to the account specified on Exhibit A attached
hereto, or to such other account(s) as the Sponsor may specify in writing to the
Company. As used herein, the term "Person" shall be construed in the broadest
sense and means and includes a natural person, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization and any other entity and any
federal, state, municipal, foreign or other government, governmental department,
commission, board, bureau, agency or instrumentality, or any private or public
court or tribunal.
4. Expenses; Indemnification.
(a) Expenses. In addition to the fees set forth in Section 2 hereof, the
Company agrees to pay on demand all costs and expenses incurred by the Sponsor
and their affiliates or any of them in connection with this Agreement and in
connection with performing services hereunder including but not limited to air
travel charged at charter equivalent rates, legal, consulting, out of pocket and
other expenses, including but not limited to the fees and disbursements of Weil,
Gotshal & Xxxxxx LLP, counsel to the Sponsor, and any other consultants or
advisors retained by the Sponsor or its respective counsel arising in connection
therewith, including but not limited to the preparation, negotiation and
execution of this Agreement, the performance of services hereunder (including,
without limitation, fees and expenses of independent professionals, research,
transportation and per diem costs).
(b) Indemnity and Liability. The Company will indemnify and hold harmless
the Sponsor, its affiliates and their respective partners (both general and
limited), members (both managing and otherwise), officers, directors, employees,
agents and representatives (each such Person being an "Indemnified Party") from
and against any and all losses, claims, damages and liabilities, whether joint
or several, expenses of any nature (including reasonable attorneys' fees and
disbursements), judgments, fines, settlements and other amounts arising from any
and all claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative, arbitral or investigative, in which an Indemnified Party was
involved or may be involved, or threatened to be involved, as a party or
otherwise (the "Liabilities"), related to, arising out of or in connection with
the advisory and consulting services contemplated by this Agreement or the
engagement of the Sponsor pursuant to, and the performance by the Sponsor of the
services contemplated by, this Agreement, and any other action taken by an
Indemnified Party on behalf of the Company, whether or not pending or
threatened, and any other action taken by an Indemnified Party on behalf of the
Company, whether or not resulting in any liability and whether or not such
action, claim, suit, investigation or proceeding is initiated or brought by the
Company. The Company will reimburse any Indemnified Party for all reasonable
costs and expenses (including reasonable attorneys' fees and expenses) as they
are incurred in connection with investigating, preparing, pursuing, defending
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or assisting in the defense of any action, claim, suit, investigation or
proceeding for which the Indemnified Party would be entitled to indemnification
under the terms of the previous sentence, or any action or proceeding arising
therefrom, whether or not such Indemnified Party is a party thereto, provided
that, subject to the following sentence, the Company shall be entitled to assume
the defense thereof at its own expense, with counsel satisfactory to such
Indemnified Party in its reasonable judgment. Any Indemnified Party may, at its
own expense, retain separate counsel to participate in such defense, and in any
action, claim, suit, investigation or proceeding in which both the Company
and/or one or more of its subsidiaries, on the one hand, and an Indemnified
Party, on the other hand, is, or is reasonably likely to become, a party, such
Indemnified Party shall have the right to employ separate counsel at the expense
of the Company and to control its own defense of such action, claim, suit,
investigation or proceeding if, in the reasonable opinion of counsel to such
Indemnified Party, a conflict or potential conflict exists between the Company,
on the one hand, and such Indemnified Party, on the other hand, that would make
such separate representation advisable. The Company agrees that it will not,
without the prior written consent of the applicable Indemnified Party, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, suit, investigation, action or proceeding relating to the matters
contemplated hereby (if any Indemnified Party is a party thereto or has been
threatened to be made a party thereto) unless such settlement, compromise or
consent includes an unconditional release of the applicable Indemnified Party
and each other Indemnified Party from all liability arising or that may arise
out of such claim, suit, investigation, action or proceeding. Provided the
Company is not in breach of its indemnification obligations hereunder, no
Indemnified Party shall settle or compromise any claim subject to
indemnification hereunder without the consent of the Company. The Company will
not be liable under the foregoing indemnification provision with respect to any
Indemnified Party, to the extent that any loss, claim, damage, liability, cost
or expense is determined by a court, in a final judgment from which no further
appeal may be taken, to have resulted primarily from the gross negligence or
willful misconduct by an Indemnified Party. If an Indemnified Party is
reimbursed hereunder for any expenses, such reimbursement of expenses shall be
refunded to the extent it is finally judicially determined that the Liabilities
in question resulted primarily from the gross negligence or willful misconduct
of such Indemnified Party.
The Company agrees that if any indemnification sought by any Indemnified
Party pursuant to this Section 4 is unavailable for any reason or is
insufficient to hold the Indemnified Party harmless against any Liabilities
referred to herein, then the Company shall contribute to the Liabilities for
which such indemnification is held unavailable or insufficient in such
proportion as is appropriate to reflect the relative benefits received (or
anticipated to be received) by the Company, on the one hand, and the Indemnified
Party, on the other hand, in connection with the transactions which gave rise to
such Liabilities or, if such allocation is not permitted by applicable law, not
only such relative benefits but also the relative faults of the Company, on the
one hand, and the Indemnified Party, on the other hand, as well as any other
equitable considerations, subject to the limitation that in any event the
aggregate contribution by the Indemnified Parties to all Liabilities with
respect to which contribution is available hereunder shall not exceed the fees
actually received by the Sponsors in connection with the transaction which gave
rise to such Liabilities (excluding any amounts paid as reimbursement of
expenses).
5. Assignment, etc. Except as provided below, neither the Company nor the
Sponsor shall have the right to assign this Agreement. The Sponsor acknowledges
that its services under this Agreement are unique. Accordingly, any purported
assignment by the Sponsor shall be void. Notwithstanding the foregoing, the
Sponsor may assign all or part of its rights and obligations
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hereunder to any affiliate of such Sponsor which provides services similar to
those called for by this Agreement.
6. Amendments and Waivers. No amendment or waiver of any term, provision
or condition of this Agreement shall be effective, unless in writing and
executed by the Sponsor and the Company. No waiver on any one occasion shall
extend to or effect or be construed as a waiver of any right or remedy on any
future occasion. No course of dealing of any Person nor any delay or omission in
exercising any right or remedy shall constitute an amendment of this Agreement
or a waiver of any right or remedy of any party hereto.
7. Miscellaneous.
(a) Choice of Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
(b) Consent to Jurisdiction. Each of the parties agrees that all actions,
suits or proceedings arising out of or based upon this Agreement or the subject
matter hereof shall be brought and maintained exclusively in the federal and
state courts of the State of New York. Each of the parties hereto by execution
hereof (i) hereby irrevocably submits to the jurisdiction of the federal and
state courts in the State of New York for the purpose of any action, suit or
proceeding arising out of or based upon this Agreement or the subject matter
hereof and (ii) hereby waives to the extent not prohibited by applicable law,
and agrees not to assert, by way of motion, as a defense or otherwise, in any
such action, suit or proceeding, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that it is immune from
extraterritorial injunctive relief or other injunctive relief, that its property
is exempt or immune from attachment or execution, that any such action, suit or
proceeding may not be brought or maintained in one of the above-named courts,
that any such action, suit or proceeding brought or maintained in one of the
above-named courts should be dismissed on grounds of forum non conveniens,
should be transferred to any court other than one of the above-named courts,
should be stayed by virtue of the pendency of any other action, suit or
proceeding in any court other than one of the above-named courts, or that this
Agreement or the subject matter hereof may not be enforced in or by any of the
above-named courts. Each of the parties hereto hereby consents to service of
process in any such suit, action or proceeding in any manner permitted by the
laws of the State of New York, agrees that service of process by registered or
certified mail, return receipt requested, at the address specified in or
pursuant to Section 10 is reasonably calculated to give actual notice and waives
and agrees not to assert by way of motion, as a defense or otherwise, in any
such action, suit or proceeding any claim that service of process made in
accordance with Section 10 does not constitute good and sufficient service of
process. The provisions of this Section 7(b) shall not restrict the ability of
any party to enforce in any court any judgment obtained in a federal or state
court of the State of New York.
(c) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS
THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY
RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND,
CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT OR THE SUBJECT
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HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN
CONTRACT OR TORT OR OTHERWISE. Each of the parties hereto acknowledges that it
has been informed by each other party that the provisions of this Section 7(c)
constitute a material inducement upon which such party is relying and will rely
in entering into this Agreement and the transactions contemplated hereby. Any of
the parties hereto may file an original counterpart or a copy of this Agreement
with any court as written evidence of the consent of each of the parties hereto
to the waiver of its right to trial by jury.
8. Independent Contractor. The parties agree and understand that the
Sponsor is and shall act as an independent contractor of the Company in the
performance of its duties hereunder. The Sponsor is not, and in the performance
of its duties hereunder will not hold itself out as, an employee, agent or
partner of the Company.
9. Merger/Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof and
supersedes any prior communication or agreement with respect thereto.
10. Notice. All notices, demands, and communications of any kind which any
party may require or desire to serve upon any other party under this Agreement
shall be in writing and shall be served upon such other party and such other
party's copied persons as specified below by personal delivery to the address
set forth for it below or to such other address as such party shall have
specified by notice to each other party or by mailing a copy thereof by
certified or registered mail, or by Federal Express or any other reputable
overnight courier service, postage prepaid, with return receipt requested,
addressed to such party and copied persons at such addresses. In the case of
service by personal delivery, it shall be deemed complete on the first business
day after the date of actual delivery to such address. In case of service by
mail or by overnight courier, it shall be deemed complete, whether or not
received, on the third day after the date of mailing as shown by the registered
or certified mail receipt or courier service receipt. Notwithstanding the
foregoing, notice to any party or copied Person of change of address shall be
deemed complete only upon actual receipt by an officer or agent of such party or
copied person.
If to the Company, to it at:
Xxxxxxx Foods, Inc.
000 Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxxxxx
Telecopier:________________
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If to Sponsor, to it at:
THL Managers V, LLC
c/o Xxxxxx X. Xxx Partners, L.P.
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. XxXxxx
Xx. Xxxx Xxxxxx
Xx. Xxxx Xxxxxxxx
Telecopier: (000) 000-0000
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Telecopier: (000) 000-0000
11. Severability. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement, then such
unenforceable provision shall be deemed eliminated from this Agreement for the
purpose of such proceedings to the extent necessary to permit the remaining
provisions to be enforced. To the full extent, however, that the provisions of
any applicable law may be waived, they are hereby waived to the end that this
Agreement be, deemed to be a valid and binding agreement enforceable in
accordance with its terms, and in the event that any provision hereof shall be
found to be invalid or unenforceable, such provision shall be construed by
limiting it so as to be valid and enforceable to the maximum extent consistent
with and possible under applicable law.
12. Counterparts. This Agreement may be executed in any number of
counterparts and by each of the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
13. Headings. All descriptive headings in this Agreement are inserted for
convenience only and shall be disregarded in construing or applying any
provision of this Agreement.
14. Prevailing Party. If any legal action or other proceedings is brought
for a breach of this Agreement or any of the warranties herein, the prevailing
party shall be entitled to recover its reasonable attorneys' fees and other
costs incurred in bringing such action or proceeding, in addition to any other
relief to which such party may be entitled.
* * * * *
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Exhibit 10.19
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as an instrument under seal as of the date first above
written by its officer or representative thereunto duly authorized.
XXXXXXX FOODS, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-------------------------------------
Name:
Title:
THL MANAGERS V, LLC
By: Xxxxxx X. Xxx Partners, L.P., its
Managing Member
By: THL Equity Advisors V, L.P., its
General Partner
By: /s/ Xxxxxxx X. XxXxxx
-------------------------------------
Name: Xxxxxxx X. XxXxxx
Title: Managing Director
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Exhibit A
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Wire Instructions
-----------------
THL Managers V, LLC
-------------------
FleetBoston
000 Xxxxxxx Xxxxxx
Xxxxxx, XX
ABA #000000000
Account Name: THL Managers V, LLC
Account #270-07242
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