DARTFORD PARTNERSHIP L.L.C.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
As of May 2, 1997
Xxxxx Xxxx Pet Food Company, Inc.
Xxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000-0000
Re: Management Services Agreement
Gentlemen:
This letter sets forth our amended and restated understanding with
respect to the engagement by you, Xxxxx Xxxx Pet Food Company, Inc., a Delaware
company (the "Company"), of the undersigned Dartford Partnership L.L.C., a
Delaware limited liability company ("Dartford"), to provide management services
to the Company.
1. Terms of Agreement and Duties.
(a) Engagement. The Company hereby retains Dartford to provide
management services to the Company on a non-exclusive basis for a period (the
"Term") beginning on the date hereof and ending on the Termination Date (as such
term is hereinafter defined ), on the terms and conditions set forth in this
Agreement.
(b) Duties -- Management. During the Term, Dartford will render such
management services including, without limitation, providing the Chief Executive
Officer, providing organization and strategic direction, oversight of
operations, corporate and financial planning, financial and tax reporting,
treasury and cash management, auditing and internal control reviews, production
of business plans, definition and development of business opportunities,
investment recommendations and analysis and such other advisory work in
connection with the organization, financing, management and operations of the
Company, as the Company may reasonably request from time to time.
(c) Duties -- Acquisitions. During the Term, Dartford will also
render financial advisory services to the Company in connection with
acquisitions, financings and sales of business segments, including identifying
and analyzing appropriate acquisition candidates, negotiating acquisition
agreements, identifying sources of acquisition financing and
negotiating and identifying potential buyers for some or all segments of the
Company's business and negotiating the terms of such sales.
(d) Services. The Company will use the services of Dartford and
Dartford will make itself available for the performance of services under this
Agreement upon reasonable notice during the Term. Dartford will perform its
services at the times and places reasonably requested by the Company to meet its
needs and requirements, taking into account other engagements that Dartford may
have.
(e) Management Personnel. Dartford will make available to the
Company from time to time the services of Messrs. Xxx X. Xxxxxx, Xxxxx X. Xxxxxx
and Xxx Xxxxx and Ms. M. Xxxxxx Xxxxxxxx and such other of its management
personnel as are necessary to fulfill Dartford's obligations under this
Agreement.
2. Compensation of Dartford.
(a) Management Fee. Subject to the terms and conditions hereof,
during the Term, the Company shall pay Dartford an executive services fee (the
"Executive Services Fee") for the services set forth in Section 1(b) and an
acquisition fee (the "Acquisitions Fee") for the services set forth in 1(c) (the
Executive Services Fee and the Acquisitions Fee being herein sometimes referred
to collectively as the "Management Fee"). The Executive Services Fee shall be
paid in at least quarterly installments at a rate equal to $800,000 per annum
for the period from the date hereof to the Termination Date; provided, that if
this Agreement will terminate pursuant to Section 3(i) below, the Management Fee
payable for the three months immediately preceding the Termination Date shall be
at a rate equal to 50% of the rate which would otherwise be payable absent this
proviso. The Acquisitions Fee shall be paid in at least quarterly installments
at a rate equal to $200,000 per annum from the date hereof to the Termination
Date. Notwithstanding the foregoing, payment of the Management Fee may, at the
election of the Company, be deferred (i) during any period in which a payment
event of default exists and is continuing or (ii) during any period, commencing
30 days after a financial covenant default has occurred, that such financial
covenant default is continuing, in either case under the Company's $8,500,000
12% Subordinated Notes due 2006 or under the Company's $52,000,000 Credit
Agreement with NationsBank of Tennessee, N.A., as Administrative Agent (the
"Senior Credit Agreement") or any refinancings of the Senior Credit Agreement,
or (iii) during any period when the annual Management Fee exceeds 5% of the
Company's consolidated EBITDA for the preceding four fiscal quarters (provided,
in the case of this subclause (iii) only the excess of the Management Fee over
such 5% of EBITDA may be deferred) but the Management Fee shall nonetheless
continue to accrue during any period of such deferral. In addition, all payments
and increases of the Management Fee shall be subject in all respects to the
provisions of the Senior Credit Agreement and the Intercreditor and
Subordination Agreement dated as of the date hereof by and among
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Dartford, the Company, the Administrative Agent and Bruckmann, Xxxxxx, Xxxxxxxx
& Co., Inc.
(b) Adjustments to Management Fee.
(i) In the event that the Company or any direct or indirect
subsidiary of the Company consummates a material acquisition or disposition of
the stock or assets of another entity (including without limitation by way of
merger or consolidation), enters into or terminates a significant joint venture
with another entity, or effects any similar investment or business combination
during the Term, the Management Fee shall be subject to increase or decrease in
an amount that is mutually agreed upon by the Company and Dartford, with the
proportionate increase of the Management Fee to be less than the proportionate
contribution of the acquired entity to the Company;
(ii) Anything in Section 2(a) to the contrary notwithstanding,
in the event that a majority of the members of the Company's Board reasonably
determines, in its sole discretion, that Dartford is not adequately performing
its duties described in Section 1(c) it may elect to terminate the duties of
Dartford described in Section 1(c), in which event Dartford's right to the
Acquisitions Fee shall terminate from and after the Effective Date of such
election and the Management Fee shall be reduced to a rate of $800,000 per annum
from and after the effective date of such election.
(iii) The Management Fee shall be decreased by an amount
mutually agreed upon by Dartford and the Company in the event the Company either
(x) consummates a sale to the public, for its own account, of shares of its
capital stock pursuant to a registration statement filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended or (y) hires or
appoints a chief executive officer for the Company who has no affiliation with
Dartford.
3. Termination and Engagement. This Agreement and the Company's
engagement of Dartford hereunder shall terminate on the date (the "Termination
Date") that is the earlier of (i) the date that is six months following a sale
of substantially all of the equity securities or assets of the Company or of
Xxxxx Xxxx Pet Food Holdings, Inc., the Company's parent, or of 51% or more of
the stock of Xxxxx Xxxx Pet Food Holdings, Inc., (ii) April 30, 2001, provided
that unless either the Company or Dartford shall have given notice prior to
March 31, 2000 or prior to March 31st of any year thereafter of its election not
to extend this Agreement, the date set forth in this subclause (ii) shall
automatically be extended to April 1st of the next succeeding year; (iii) at the
Company's election provided that a majority of all members of the Company's
Board have voted in favor of such election, or (iv) at the Company's election,
upon repeated willful neglect by Dartford of any duty or responsibility created
pursuant to Section 1 of this Agreement, which breach or neglect shall
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not have been cured within 30 days after written notice thereof from the Company
to Dartford.
4. Notices. All notices, requests, demands and other communications
hereunder must be in writing and shall be deemed to have been duly given if
delivered by hand or mailed first class, certified mail, return receipt
requested, postage and registry fees prepaid and addressed as follows:
If to Dartford:
Dartford Partnership L.L.C.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxx X. Xxxxxx
If to the Company:
Xxxxx Xxxx Pet Food Company, Inc.
Xxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000-0000
Attention: President
Addresses may be changed by a notice in writing in accordance with the
provisions of this paragraph 4.
5. Miscellaneous. This Agreement shall be construed and enforced in
accordance with, and shall be governed by the laws of the State of New York,
without giving effect to the conflict of laws principles thereof. This Agreement
embodies the entire agreement and understanding between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof. This Agreement may not be modified or amended, and no term or
provision hereof may be waived or discharged, except in a writing signed by the
party against which such modification, amendment, waiver or discharge is sought
to be enforced. This Agreement cannot be assigned by either party hereto, except
that it may be assigned to an affiliate of the Company in connection with the
acquisition by the Company of all of the outstanding capital stock of Xxxxxxx
Milling Company. The headings in this Agreement are for purposes of reference
only and shall not limit or otherwise affect the meaning hereof. This Agreement
may be executed in several counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
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If you are in agreement with the foregoing, please so indicate by
signing the enclosed copy of this letter, whereupon it shall become a binding
agreement between the parties hereto as of the day and year first above written.
DARTFORD PARTNERSHIP L.L.C.
By /s/ Xxx Xxxxx
--------------------------------------
Name: Xxx Xxxxx
Title: Member Manager
Agreed to and accepted:
XXXXX XXXX PET FOOD COMPANY, INC.
By /s/ Xxxxxx X. Xxxx
------------------------------
Name: Xxxxxx X. Xxxx
Title: President
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