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Exhibit 10.7
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made and
entered into as of November 1, 1996 by and between THE YUCAIPA COMPANIES, a
California general partnership ("Yucaipa"), DOMINICK'S SUPERMARKETS, INC., a
Delaware corporation (the "Company"), and DOMINICK'S FINER FOODS, INC., a
Delaware corporation ("Dominick's").
W I T N E S S E T H:
WHEREAS, Dominick's is a wholly owned subsidiary of the
Company and is in the business of operating supermarkets;
WHEREAS, the Company and Dominick's entered into that certain
Consulting Agreement with Yucaipa dated as of March 22, 1995 (the "Consulting
Agreement") and such parties intend to terminate the Consulting Agreement
concurrently with the consummation of an initial public offering of the common
stock of the Company which shall be a "Qualified IPO" (as defined in that
certain Stockholders Agreement dated as of March 22, 1995 among the Company and
the stockholders named therein);
WHEREAS, the Company and Dominick's desire to have continued
access to the services of Yucaipa following the termination of the Consulting
Agreement; and
WHEREAS, Yucaipa has the ability to provide certain general
business and financial consultation and advice and management services to the
Company and Dominick's in connection with the operation of their businesses;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants of the parties hereto and other good and valuable
consideration paid and received by each of the parties to this Agreement, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. ENGAGEMENT.
The Company and Dominick's hereby engage Yucaipa as an
independent contractor and consultant to provide general business consultation
and advice and management services to the Company, Dominick's and its
subsidiaries in connection with the operation of their respective businesses.
SECTION 2. MANAGEMENT SERVICES.
Yucaipa, through its partners and/or employees, shall provide
the Company and Dominick's with consultation and advice, when and as reasonably
requested by the Company or Dominick's, in such fields as supermarket
operations, planning and development, budgeting, accounting, general business
management and such other fields as Yucaipa may offer from time to time. All
partners and employees of Yucaipa or any of its affiliates (other than the
Company and its subsidiaries or any operating companies managed by Yucaipa) who
serve the Company or Dominick's or any of their respective subsidiaries as an
officer, director or employee shall do so without charge during the term of
this Agreement, except for (a) the fees and expenses provided for herein, (b)
customary compensation and expense reimbursement arrangements between the
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Company or Dominick's and Xxxxxx X. Xxxxx in his capacity as an officer or
employee of the Company or Dominick's, (c) customary fees (or reimbursement of
expenses) payable to members of the Board of Directors, in their capacity as
such, or (d) any other agreement or arrangement approved by a majority of the
disinterested members of the Board of Directors.
SECTION 3. MANAGEMENT FEES.
Commencing on the date hereof (the "Effective Date"),
Dominick's shall pay to Yucaipa an annual management fee, in consideration of
the services rendered by Yucaipa pursuant to Section 2 above, equal to
$1,000,000, payable in 13 equal installments in advance on the first day of
each of Dominick's 13 four-week fiscal periods and past due on the fifteenth
day of such fiscal period; provided that such fee will be payable in advance on
the Effective Date for the partial fiscal period beginning on the Effective
Date and ending on the last day of the current fiscal period.
SECTION 4. OTHER CONSULTING SERVICES.
The Company, Dominick's and their respective subsidiaries (or
any one of them) may retain or employ Yucaipa as a financial advisor and/or
consultant in connection with any acquisition or disposition transaction by the
Company, Dominick's or any of their respective subsidiaries, other than a sale
of all of the outstanding capital stock of, or all or substantially all of the
assets of, the Company or Dominick's. The parties expressly agree that the
services contemplated by this Section 4 shall not include financial advisory or
consulting services in connection with debt or equity financings or equipment
lease arrangements. If any retention of Yucaipa by the Company, Dominick's or
any of their respective subsidiaries pursuant to this Section 4 is made
pursuant to a retention or engagement agreement containing terms varying from
or in addition to the terms contained in this Agreement, such agreement shall
be reasonably acceptable to a majority of the members of the Board of Directors
of the Company or Dominick's, as the case may be, that are neither affiliates
of Yucaipa nor designated or nominated to such Board of Directors by Yucaipa or
any of its affiliates.
SECTION 5. OTHER CONSULTING FEES.
The Company or Dominick's, as applicable, shall pay to Yucaipa
a cash fee for providing any financial advisory or consulting services pursuant
to Section 4 above in connection with the acquisition or disposition
transactions specified therein (other than disposition transactions with
respect to any stores designated for divestiture or closing in the ordinary
course of business), equal to one percent (1.0%) of the amount or value of all
cash and noncash consideration actually paid or received (including assumed
indebtedness) by the Company, Dominick's or any of their respective
subsidiaries, as the case may be, in connection therewith.
SECTION 6. REIMBURSEMENT OF EXPENSES.
Dominick's shall reimburse Yucaipa for all of its reasonable
out-of-pocket costs and expenses incurred in connection with the performance of
its obligations under this Agreement. Yucaipa shall xxxx Xxxxxxxx'x for the
amount of all such expenses monthly, and shall provide Dominick's with a
reasonable itemization of such expenses. Notwithstanding the foregoing, the
aggregate amount of such costs and expenses for which Yucaipa may be reimbursed
in connection with the rendering of management services under Section 2 hereof
shall not exceed $300,000 in
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any fiscal year of Dominick's (which maximum amount shall be prorated for the
period beginning on the Effective Date and ending on the last day of Dominick's
current fiscal year). In addition to the foregoing, Dominick's shall reimburse
Yucaipa for all of its reasonable out-of-pocket costs and expenses incurred in
connection with the rendering by Yucaipa of financial advisory or consulting
services to the Company, Dominick's and/or their respective subsidiaries, in
connection with any acquisition or disposition transaction, debt or equity
financing or equipment leasing arrangement, whether or not Yucaipa is obligated
to render such services or has a right to be paid any fee relating thereto
under Sections 4 or 5 of this Agreement.
SECTION 7. TERM OF AGREEMENT.
The term of this Agreement shall be for a period of five (5)
years commencing on the Effective Date; provided, however, that the term shall
be automatically renewed annually for a term of five (5) years on April 1 of
each year, unless at least ninety (90) days prior notice is given by either
party electing not to so renew this Agreement.
SECTION 8. TERMINATION.
8.1 Termination at Will. Dominick's and the Company,
acting jointly, may terminate this Agreement at any time by giving Yucaipa at
least ninety (90) days written notice of such termination.
8.2 Termination for Cause.
(a) Dominick's and the Company on the one hand, or
Yucaipa on the other hand, may terminate this Agreement if the other party
shall fail to reasonably perform any material covenant, agreement, term or
provision of this Agreement to be kept, observed or performed by it and such
failure shall continue for a period of sixty (60) days after written notice
from the other party, which notice shall describe the alleged failure with
particularity; provided that Yucaipa shall use its best efforts to cause
Dominick's and the Company to perform each material covenant, agreement, term
and provision of this Agreement. Notwithstanding the foregoing, any failure or
alleged failure of the Company, Dominick's, or Yucaipa to perform any material
covenant, agreement, term or provision of this Agreement shall not constitute
cause for termination of this Agreement if the same shall be occasioned by or
result from force majeure, directly or indirectly.
(b) Yucaipa may terminate this Agreement if Dominick's or
the Company shall fail to make any payment due to Yucaipa hereunder, if such
payment is not made in full within twenty (20) days after written notice of
such failure; provided that Yucaipa shall use its best efforts to cause
Dominick's and the Company to make all such payments in a timely manner.
8.3 Termination for Change of Control. This Agreement
may be terminated, at the election of Yucaipa or Dominick's, if during the term
hereof there shall have been a change in control of the Company or Dominick's,
which for purposes of this Agreement shall be deemed to have occurred upon any
of the following events: (a) the acquisition after the Effective Date, in one
or more transactions, of "beneficial ownership" (within the meaning of Rule
13d-3(a)(1) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) by any person (other than Yucaipa or any of its partners or
affiliates) or any group of persons (excluding any group which includes Yucaipa
or any of its partners or affiliates) who constitute a group (within the
meaning of Section 13(d)(3) of the Exchange Act) of any securities of the
Company or Dominick's such
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that, as a result of such acquisition, such person or group beneficially owns
(within the meaning of Rule 13d-3(a)(1) under the Exchange Act) 51% or more of
the Company or Dominick's then outstanding voting securities entitled to vote
on a regular basis for a majority of the Board of Directors of the Company or
Dominick's; (b) the sale of all or substantially all of the assets of the
Company or Dominick's (including, without limitation, by way of merger,
consolidation, lease or transfer) in a transaction where the Company or
Dominick's or the beneficial owners of common stock of the Company or
Dominick's do not receive (i) voting securities representing a majority of the
voting power entitled to vote on a regular basis for the Board of Directors of
the acquiring entity or of an affiliate which controls the acquiring entity, or
(ii) securities representing a majority of the equity interest in the acquiring
entity or of an affiliate which controls the acquiring entity, if other than a
corporation; or (c) at any time the Continuing Directors (as defined below) do
not constitute a majority of the Board of Directors of the Company (or, if
applicable, a successor corporation to the Company); provided, however, that
no change in control shall be deemed to have occurred under (a) or (b) above
upon any transfer, sale or disposition of shares of common stock of the Company
or Dominick's in any transaction between the Company or Dominick's and any
person or persons who are affiliates of the Company or Dominick's on the date
hereof. For purposes of this Section 8.3, "Continuing Directors" shall mean,
as of any date of determination, any member of the Board of Directors who (i)
was a member of the Board of Directors on the date of this Agreement or (ii)
was nominated for election or elected to the Board of Directors with the
approval of a majority of the Continuing Directors who were members of the
Board of Directors at the time of such nomination or election.
8.4 Payments upon Termination.
(a) In the event of any termination pursuant to (i) Section
8.1, (ii) Section 8.2(a) (if Yucaipa has elected to terminate because of a
material failure of performance by Dominick's or the Company), or (iii) Section
8.2(b) (if Yucaipa has elected to terminate because of a failure to pay by
Dominick's or the Company), Dominick's shall pay to Yucaipa an amount equal to
the total management fees that would have been earned by Yucaipa under Section
3 hereof during the remaining term of this Agreement as if the Agreement had
not been terminated; provided that a discount rate of 10% shall be applied in
valuing, for purposes of such payment, the management fees otherwise payable
during the remaining term of this Agreement.
(b) In the event of any termination pursuant to Section
8.2(a) (if Dominick's and the Company have elected to terminate because of a
material failure of performance by Yucaipa), Yucaipa promptly shall refund to
Dominick's a prorated portion of the management fee received by it under
Section 3 for the four-week fiscal period in which such termination occurs.
(c) In the event of any termination pursuant to Section 8.3,
Dominick's shall pay to Yucaipa an amount equal to the total management fees
that would have been earned by Yucaipa under Section 3 hereof during the period
commencing on the date of such change of control and ending on the fifth
anniversary of the Effective Date, as if the Agreement had not been terminated;
provided that (i) a discount rate of 10% shall be applied in valuing, for
purposes of such payment, the management fees otherwise payable during such
period and (ii) if such termination occurs on or after the fifth anniversary of
the Effective Date, no payment shall be due to Yucaipa as a result of such
termination.
(d) Such amount, if any, which shall be due Yucaipa pursuant
to this Section 8.4 in the event of any such termination shall be due and
payable to Yucaipa, in full, as of the date of
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such termination. The parties intend that should the foregoing payments be
determined to constitute liquidated damages, such payments shall in all events
be deemed reasonable.
SECTION 9. NOTICES.
9.1 Manner of Notice. All notices, statements or other
documents which any party shall be required or shall desire to give to the
others hereunder shall be in writing and shall be given by the parties hereto
only as follows: (a) by personal delivery, (b) by addressing it as indicated
below, and by depositing it certified mail, postage prepaid, in the U.S. mail,
first class (airmail if the address is outside of the country in which such
notice is deposited), or (c) by addressing it as indicated below, and by
delivering it toll prepaid to a telegraph, cable company or courier service
(e.g., Federal Express).
9.2 Delivery of Notice; Addresses. If so delivered,
mailed, telegraphed, cabled or couriered, each such notice, statement or other
document shall, except as herein expressly provided, be conclusively deemed to
have been given when personally delivered, or on the third business day after
the date of mailing, or on the date of delivery to a telegraph or cable company
or on the first business day after delivery to a courier service, as the case
may be. The addresses of the parties shall be those of which the other parties
actually receives written notice pursuant to this Section 9 and until further
notice are:
If to Yucaipa: The Yucaipa Companies
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
If to the Company: Dominick's Supermarkets, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: President and Chief Executive Officer
If to Dominick's: Dominick's Finer Foods, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: President and Chief Executive Officer
SECTION 10. MISCELLANEOUS.
10.1 Entire Agreement; Amendments. This Agreement contains
all of the terms and conditions agreed upon by the parties hereto in connection
with the subject matter hereof. This Agreement may not be amended, modified or
changed except by written instrument signed by all of the parties hereto.
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10.2 Assignment; Successors. This Agreement shall not be
assigned and is not assignable by any party without the prior written consent
of each of the other parties hereto; provided, however, that Yucaipa may
assign, without the prior consent of Dominick's or the Company, its rights and
obligations under this Agreement to any of its affiliates controlled by Xxxxxx
Xxxxxx, and provided further, that Yucaipa may assign the right to receive any
payment hereunder to any other person or entity. Subject to the preceding
sentence, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective permitted successors and assigns.
10.3 Captions. All captions and headings are inserted for
the convenience of the parties, and shall not be used in any way to modify,
limit, construe or otherwise affect this Agreement.
10.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal domestic laws of the State of
California, without reference to the choice of law principles thereof.
10.5 Attorneys' Fees. If any legal action is brought
concerning any matter relating to this Agreement, or by reason of any breach of
any covenant, condition or agreement referred to herein, the prevailing party
shall be entitled to have and recover from the other party to the action all
costs and expenses of suit, including attorneys' fees.
10.6 Severability. If any term, provision or condition of
this Agreement is determined by a court or other judicial or administrative
tribunal to be illegal, void or otherwise ineffective or not in accordance with
public policy, the remainder of this Agreement shall not be affected thereby
and shall remain in full force and effect.
10.7 Interpretation. In the event of a dispute hereunder,
this Agreement shall be interpreted in accordance with its fair meaning and
shall not be interpreted for or against any party hereto on the ground that
such party drafted or caused to be drafted this Agreement or any part hereof.
10.8 Indemnity. The parties to this Agreement shall
indemnify and hold one another and their respective officers, directors,
employees and agents, harmless from any and all loss, cost, liability and
damage (including attorneys' fees) arising out of or connected with, or claimed
to arise out of or be connected with, any act performed or omitted to be
performed under this Agreement, provided such act or omission was taken in good
faith, and in the event of criminal proceedings, that the indemnitee had no
reasonable cause to believe his conduct was unlawful. An adverse judgment or
plea of nolo contendere shall not, of itself, create a presumption that the
indemnitee did not act in good faith or that he had reasonable cause to believe
his conduct was unlawful. Expenses incurred in defending a civil or criminal
action shall be paid by the indemnitor upon receipt of an undertaking by or on
behalf of the indemnitee to repay such amount if it be later shown that such
person was not entitled to indemnification.
(signature page follows)
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IN WITNESS WHEREOF, the parties hereto have caused this
Management Agreement to be duly executed as of the date first above written.
THE YUCAIPA COMPANIES
By:
--------------------------------
Name:
Title: General Partner
DOMINICK'S SUPERMARKETS, INC.
By:
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Name: Xxxxxx X. Xxxxxxx
Title: President and
Chief Executive Officer
DOMINICK'S FINER FOODS, INC.
By:
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Name: Xxxxxx X. Xxxxxxx
Title: President and
Chief Executive Officer
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