Exhibit 10.1
CONFORMED VERSION
DARTFORD PARTNERSHIP L.L.C.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
December 31, 1996
MBW Foods Inc.
Community Corporate Center
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Re: Management Services Agreement
Gentlemen:
This letter sets forth our understanding with respect to the
engagement by you, MBW Foods Inc., a Delaware corporation (the "Company"), of
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. During the Term, Dartford will render such
management services, including, without limitation, providing organization and
strategic direction, oversight of operations, corporate and financial planning,
production of business plans, identification of possible acquisitions and advice
with respect to the financing thereof, 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.
MBW Foods Inc.
December 31, 1996
Page 2
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.
2. Compensation of Dartford.
(a) Subject to the terms and conditions hereof, during the
Term the Company shall pay Dartford a management fee (the "Management Fee"). The
Management Fee shall be paid in at least quarterly installments for the period
from the date hereof to the Termination Date at a rate per annum equal to a
percentage of the consolidated annual net sales ("Sales") of MBW Investors LLC
and its subsidiaries. The percentage of Sales shall be as follows:
Sales Percentage of Sales
----- -------------------
Up to $250,000,000................ 0.5%
$250,000,000 to $500,000,000...... An additional amount equal to
0.375% of Sales above
$250,000,000 (but less than
$500,000,000)
Above $500,000,000................ An additional amount equal to
0.25% of Sales above
$500,000,000
For example, if Sales are $350,000,000, the Management Fee shall be at a rate of
$1,625,000 per annum (which equals the sum of $250,000,000 x .005) +
($100,000,000 x .00375). Notwithstanding the foregoing, the Management Fee shall
be at a rate of $600,000 per annum for the period beginning on the date hereof
and ending on the earlier of (x) December 31, 1997 and (y) the closing date of
any Acquisition (as such term is defined in Section 2(b)(2) below), at which
time the Management Fee shall be subject to adjustment as provided in Section
2(b)(2) below).
MBW Foods Inc.
December 31, 1996
Page 3
(b) Adjustment to Management Fee.
(1) The Management Fee shall be adjusted annually as of
January 1st of each year (beginning as of January 1, 1998) to
reflect the sales for the year then ended; provided, that in
no event shall the Management Fee be less than $600,000 per
annum.
(2) In the event that the Company, MBW Holdings Inc.
(the Company's parent) or MBW Investors LLC (the parent of MBW
Holdings Inc.) or any direct or indirect subsidiary of MBW
Investors LLC consummates an acquisition of the stock or
assets of another entity (including, without limitation, by
way of merger or consolidation), enters into a joint venture
with another entity, or effects any similar investment or
business combination during the Term (each such transaction
being an "Acquisition") the Management Fee shall be increased
as of the closing date of such Acquisition to reflect the
additional Sales of the entity or business acquired pursuant
to such Acquisition. In the event that, during the six-month
period following the consummation of an Acquisition, the
Company, MBW Holdings Inc. or MBW Investors LLC consummates a
sale or divestiture of a material portion of the assets or
business acquired pursuant to such Acquisition, the Management
Fee shall be decreased as of the closing date of such sale or
divestiture to reflect the Sales of the business or division
sold or divested.
(3) In the event that the Company, MBW Holdings Inc. or
MBW Investors LLC hereafter hires or appoints a Chief
Executive Officer or other senior executive with
responsibility and authority for providing to the Company the
management services provided by Dartford under this Agreement,
the Management Fee shall be reduced by an amount equal to the
base salary, benefits (as valued by the Board of Directors of
the Company in good faith) and annual base bonus which the
Chief Executive Officer would receive if the Company achieved
exactly 100% of its projected earnings before interest, taxes,
depreciation and amortization as set forth in the Company's
annual
MBW Foods Inc.
December 31, 1996
Page 4
budget for the upcoming fiscal year (as determined in
accordance with the Chief Executive Officer's employment
agreement).
(4) In the event of a sale to the public by the Company,
MBW Holdings Inc. or MBW Investors LLC for its own account of
shares of capital stock or limited liability company interests
pursuant to a registration statement filed with the Securities
and Exchange Commission under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder,
the Management Fee shall be subject to reduction by an amount
mutually agreed upon by the Company and Dartford, with the
decrease to reflect the good faith estimate of the underwriter
for such public sale of the reduction needed to satisfactorily
consummate such public sale.
(5) If this Agreement terminates pursuant to Section
3(a)(i) below, the Management Fee payable for the 3-month
period immediately preceding the Termination Date shall be at
a rate equal to 50% of the rate which would otherwise be
payable absent this clause (5).
(6) 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
condition covenant default has occurred, that such financial
condition covenant default is continuing, in either case under
the credit agreement or indenture relating to indebtedness for
borrowed money incurred by the Company, but the Management Fee
shall nonetheless continue to accrue during any period of such
deferral.
3. Termination; Severance.
(a) 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
MBW Foods Inc.
December 31, 1996
Page 5
the Company or of MBW Holdings Inc., the Company's parent, or of MBW Investors
LLC, the parent of MBW Holdings Inc., (ii) December 31, 2001, provided that
unless either the Company or Dartford shall have given notice prior to July 1,
2001 or prior to July 1st of any year thereafter of its election not to extend
this Agreement, the first date set forth in this subclause (ii) shall
automatically be extended to December 31st of the following year; (iii) at the
Company's election on written notice to Dartford, upon repeated willful neglect
by Dartford of any duty or responsibility created pursuant to Section 1(b) of
this Agreement, which breach or neglect shall not have been cured within 30 days
after written notice thereof from the Company to Dartford; (iv) 30 days
following written notice from the Company to Dartford given within six months of
notice to the Company that any of Messrs. Xxxxxx, Xxxxxx or Xxxxx, other than by
reason of death or Permanent Disability (as hereinafter defined), have ceased to
be actively involved in Dartford's affairs, including its performance under this
Agreement, (v) by the Company upon theft or misappropriation by Dartford of
funds or property of the Company or any of its subsidiaries or other like
willful breach; (vi) by the Company upon the breach by Dartford of its covenant
contained in Section 4 of this Agreement or its obligations under Section 16.1
of the MBW LLC Agreement (as hereinafter defined); (vii) by Dartford on written
notice to the Company; or (viii) by the Company on written notice to Dartford
for any reason other than those set forth in clauses (iii), (iv), (v) or (vi)
above. "Permanent Disability" shall mean the failure by or inability of any of
Messrs. Xxxxxx, Xxxxxx or Xxxxx, as a result of physical or mental illness or
incapacity, to be actively involved in Dartford's affairs for a period of four
consecutive months or for an aggregate of more then six months in any 12-month
period, as reasonably determined by the Board in good faith.
(b) In the event the Company terminates this Agreement and the
Company's engagement of Dartford pursuant to Section 3(a)(viii) above, Dartford
shall be entitled to receive an amount (the "Severance Amount") equal to the
following:
(1) If the effective date of such termination under
Section 3(a)(viii) is prior to December 31, 1998 and, at the
effective date of such termination, the Company does not have
$200,000,000 of Sales (as adjusted to reflect the additional
Sales of any entity or business acquired pursuant to an
Acquisition and as adjusted to reflect any divestiture
provided in Section 2(b)(2) above), the Severance
MBW Foods Inc.
December 31, 1996
Page 6
Amount shall be an amount equal to the Management Fee per
annum as of such effective date.
(2) For any termination under Section 3(a)(viii) above
that does not satisfy the conditions set forth in cause (1) of
this Section 3(b), the Severance Amount shall be an amount
equal to the lesser of (x) 200% of the Management Fee per
annum as of such effective date and (y) the aggregate
Management Fee payable under this Agreement for the remainder
of the then current Term.
The Company shall pay the Severance Amount to Dartford on the effective date of
its termination under Section 3(a)(viii).
4. Limitations on Dartford Activities.
(a) The Company acknowledges Dartford's existing management
and equity relationships with the VDK Foods LLC group, the Xxxxx Xxxx Pet Food
L.L.C. group and the New Age Beverages Investments Limited group (each a
"Platform" and, collectively with the MBW Investors LLC group, the "Existing
Platforms"). The Company acknowledges and agrees that, from time to time during
the Term, but subject to Dartford's obligations under Section 16.1 of the MBW
LLC Agreement, Dartford and its partners may, without the participation of the
Company, MBW Investors LLC or its principal equity owners, pursue business
opportunities relating to an Acquisition (as such term is defined in Section
2(b)(2) above) through any of the Existing Platforms.
(b) From the date hereof until the earlier of (x) June 30,
1998 and (y) the termination of the Term, Dartford will not organize and
participate in another business group (i.e., another "Platform") for the purpose
of effecting Acquisitions, and will not effect Acquisitions other than in
connection with the Existing Platforms, unless:
(1) a Change of Control, as such term is defined in the
Amended and Restated Limited Liability Company Agreement of
MBW Investors LLC, dated as of December 31, 1996 (the "MBW LLC
Agreement"), has occurred with respect to an Existing
Platform, with "Change of Control" to be construed with
respect to such Existing
MBW Foods Inc.
December 31, 1996
Page 7
Platform in a manner comparable to its use in the MBW LLC
Agreement; or
(2) the management services agreement between Dartford
and a member company of an Existing Platform has been
terminated.
If an event described in clause (1) or clause (2) above has occurred with
respect to an Existing Platform, Dartford may, subject to its obligations under
Section 16.1 of the MBW LLC Agreement, organize or participate in another
business group (i.e., another Platform, which shall thereafter qualify as an
"Existing Platform") and pursue business opportunities relating to Acquisitions
without the participation of the Company, MBW Investors LLC or its principal
equity owners. In no event from the date hereof until June 30, 1998, during the
Term shall Dartford be eligible hereunder to effect Acquisitions through more
than four Platforms.
(c) From and after July 1, 1998 until the termination of the
Term, subject to its obligations under Section 16.1 of the MBW LLC Agreement,
Dartford may organize and participate in an additional Platform and effect
Acquisitions through such additional Platform (in addition to Dartford's right
to effect Acquisitions through the Existing Platforms) to the extent that one of
the following occurs:
(1) an event described in Section 4(b)(1) above occurs with
respect to an Existing Platform;
(2) an event described in Section 4(b)(2) above occurs with
respect to an Existing Platform; or
(3) no event described in Sections 4(b)(1) or 4(b)(2) occurs
with respect to an Existing Platform, but for purposes of each
additional platform an individual not presently a member of Dartford
joins Dartford as a member and participates in a material respect in
Dartford's performance of its services with respect to an Existing
Platform.
MBW Foods Inc.
December 31, 1996
Page 8
5. Future Transaction Fees.
(a) Transaction Fees. In the event that during the Term the
Company, MBW Holdings Inc. or MBW Investors LLC either (i) consummates an
Acquisition or (ii) initiates any discussions or negotiations or undertakes a
review of a possible Acquisition that Dartford introduces to the MBW Investors
LLC group during the Term and that is ultimately consummated within one year
following termination of the Term, then in either case the Company shall pay to
Dartford on the closing date of such Acquisition, in consideration of services
rendered with respect thereto, a transaction fee (a "Transaction Fee") in an
amount equal to 1.25% of the Acquisition Price (as defined below). For purposes
of this Section 5, "Acquisition Price" means the sum of (A) the cash purchase
price (including any installment payments), (B) the value of any equity
securities issued to the seller in connection with the Acquisition, (C) the face
value of any promissory note or other debt instrument issued to the seller in
connection with such Acquisition, (D) the amount of any liabilities assumed by
the MBW Investors LLC group in connection with such Acquisition (other than
ordinary course of business trade payables).
(b) Adjustments. In the event the Acquisition Price for a
single Acquisition is greater than $250,000,000, Dartford and the Company agree
to negotiate in good faith as to a reduction in the percentage of that portion
of the Acquisition Price exceeding $250,000,000 payable to Dartford as part of
the Transaction Fee.
6. 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 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxx X. Xxxxxx
MBW Foods Inc.
December 31, 1996
Page 9
If to the Company:
MBW Foods Inc.
Community Corporate Center
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: President
With copies to:
XxXxxx De Leeuw & Co.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Addresses may be changed by a notice in writing in accordance with the
provisions of this Section 6.
7. 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. 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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MBW Foods Inc.
December 31, 1996
Page 10
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
---------------------
Title: Member
Agreed to and accepted:
MBW FOODS INC.
By:/s/ Xxx Xxxxx
--------------------------------
Title: Executive Vice President
