EXHIBIT 10.8
MONITORING AND OVERSIGHT AGREEMENT
THIS MONITORING AND OVERSIGHT AGREEMENT (this "Agreement") is made and
entered into effective as of September 19, 2002, by and among Swift Foods
Company, a Delaware corporation (together with its successors, the "Company"),
Swift & Company, a Delaware corporation (together with its successors, "Swift
Meats"), Swift Pork Company, a Delaware corporation (together with its
successors, "Swift Pork"), Swift Beef Company, a Delaware corporation (together
with its successors, "Swift Beef"), S&C Australia Holdco Pty. Ltd., an
Australian corporation (together with its successors, "S&C Australia"),
Australia Meat Holdings Pty. Limited, an Australian corporation ("Australia
Meat"), S&C Holdco 2, Inc., a Delaware corporation ("S&C 2"), and S&C Holdco 3,
Inc., a Delaware corporation ("S&C 3," and together with the Company, Swift
Meats, Swift Pork, Swift Beef, S&C Australia, Australia Meat and S&C 2, the
"Clients"), and Xxxxx, Muse & Co. Partners, L.P., a Texas limited partnership
(together with its successors, "HMCo").
1. Retention. The Clients hereby acknowledge that they have retained
HMCo to, and HMCo acknowledges that, subject to reasonable advance notice in
order to accommodate scheduling, HMCo will, provide financial oversight and
monitoring services to the Company as requested by the board of directors of the
Company during the term of this Agreement.
2. Term. The term of this Agreement shall continue until the earlier to
occur of (i) the tenth anniversary of the date hereof or (ii) the date on which
Hicks, Muse, Xxxx & Xxxxx Incorporated ("HMTF") or its successors and their
respective affiliates (including, without limitation, any equity fund sponsored
by HMTF or its successors) shall cease to own beneficially, directly or
indirectly, any securities of any of the Clients or their respective successors.
3. Compensation.
(a) As compensation for HMCo's services to the Clients under
this Agreement, the Clients hereby irrevocably agree, jointly and severally, to
pay to HMCo an annual fee (the "Monitoring Fee") equal to $2,000,000 (the "Base
Fee"), subject to adjustment pursuant to paragraphs (b) and (c) below and
prorated on a daily basis for any partial fiscal year during the term of this
Agreement. The Monitoring Fee shall be payable in equal quarterly installments
on each of September 1, December 1, March 1 and June 1 during the term of this
Agreement (each a "Payment Date"), beginning with the first Payment Date
following the date hereof. All payments shall be made by wire transfer of
immediately available funds to the account described on Exhibit A hereto (or
such other account as HMCo may hereafter designate in writing).
NOTICE IS HEREBY GIVEN THAT THIS AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS
IN PARAGRAPH 5 THAT APPLY TO CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES
THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR
PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY NEGLIGENCE OF HMCO OR ANY
OTHER INDEMNIFIED PERSON IDENTIFIED THEREIN.
(a) On the first day of each fiscal year during the term of
this Agreement beginning with the fiscal year beginning after the fiscal year
ended in May 2002, the Monitoring Fee shall be adjusted so that the Monitoring
Fee, as adjusted, shall be equal to the greater of (a) the Base Fee and (b) the
(i) budgeted consolidated annual EBITDA of the Company and its subsidiaries for
the then current fiscal year, multiplied by (ii) 1% (the "Percentage"). For
purposes of this Agreement, "EBITDA" means gross revenue (other than
extraordinary gains or losses from the sale of assets) less operating expenses
(including direct and indirect expenses and corporate overhead expenses of the
Company and its subsidiaries, but excluding depreciation and amortization).
(c) On each occasion that the Company or any of its
subsidiaries shall acquire another entity or business during the term of this
Agreement, the annual Monitoring Fee for the fiscal year in which such
acquisition occurs shall be adjusted prospectively (i.e., for periods subsequent
to such acquisition until the next adjustment pursuant to clause (b) above), as
of the closing of such acquisition, to an annual amount equal to (i) the pro
forma combined budgeted consolidated annual EBITDA of the Company and its
subsidiaries for the entire then current fiscal year of the Company (including
the budgeted EBITDA of the acquired entity or business for such entire fiscal
year, on a pro forma basis), multiplied by (ii) the Percentage; provided,
however, that in no event shall the annual Monitoring Fee be less than the Base
Fee.
(d) The Monitoring Fee will be paid in full, free of any
deductions or withholdings, unless a Client is compelled by law to make payments
subject to any such taxes. In such event the Client shall pay to HMCo such
additional amounts as may be necessary that HMCo receives a net amount equal to
the full amount which would have been receivable had payment not been made
subject to such tax.
(e) All past due payments in respect of the Monitoring Fee
shall bear interest at the lesser of the highest rate of interest which may be
charged under applicable law or the prime commercial lending rate per annum of
The Chase Manhattan Bank or its successors (which rate is a reference rate and
is not necessarily its lowest or best rate of interest actually charged to any
customer) (the "Prime Rate") as in effect from time to time, plus five percent
(5%), from the due date of such payment to and including the date on which
payment is made to HMCo in full, including such interest accrued thereon.
(f) For purposes of this Agreement, the phrase "Company and
its subsidiaries" shall exclude Swift Cattle Holdco, Inc. and Xxxxxxx Finance
Company, Inc.
4. Reimbursement of Expenses. In addition to the compensation to be
paid pursuant to Section 3 hereof, the Clients agree, jointly and severally, to
pay or reimburse HMCo for all "Reimbursable Expenses," which shall consist of
(i) all reasonable disbursements and out-of-pocket expenses (including, without
limitation, costs of travel, postage, deliveries, communications, etc.) incurred
by HMCo or its affiliates for the account of any Client or in connection with
the performance by HMCo of the services contemplated by Section 1 hereof and
(ii) the Client's Pro Rata Share of Allocable Expenditures (as defined in
Exhibit B hereto). Promptly (but not more than 10 days) after request by or
notice from HMCo, applicable Client shall pay HMCo, by wire transfer of
immediately available funds to the account described on Exhibit A hereto (or
such other account as HMCo may hereafter designate in writing), the Reimbursable
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Expenses for which HMCo has provided such Client invoices or reasonably detailed
descriptions. All past due payments in respect of the Reimbursable Expenses
shall bear interest at the lesser of the highest rate of interest which may be
charged under applicable law or the Prime Rate plus five percent (5%) from the
Payment Date to and including the date on which such Reimbursable Expenses plus
accrued interest thereon are fully paid to HMCo.
5. Indemnification. The Clients jointly and severally shall indemnify
and hold harmless each of HMCo, its affiliates, and their respective directors,
officers, and controlling persons (within the meaning of Section 15 of the
Securities Act of 1933, as amended, or Section 20(a) of the Securities Exchange
Act of 1934, as amended), if any, agents, independent contractors and employees
(HMCo, its affiliates, and such other specified persons being collectively
referred to as "Indemnified Persons," and individually as an "Indemnified
Person") from and against any and all claims, liabilities, losses, damages and
expenses incurred by any Indemnified Person (including those arising out of an
Indemnified Person's negligence and reasonable fees and disbursements of the
respective Indemnified Person's counsel) which (A) are related to or arise out
of (i) actions taken or omitted to be taken (including, without limitation, any
untrue statements made or any statements omitted to be made) by the any of the
Clients or (ii) actions taken or omitted to be taken by an Indemnified Person
with the any Client's consent or in conformity with any Client's instructions or
any Client's actions or omissions or (B) are otherwise related to or arise out
of HMCo's engagement, and will reimburse each Indemnified Person for all costs
and expenses, including, without limitation, fees and disbursements of any
Indemnified Person's counsel, as they are incurred, in connection with
investigating, preparing for, defending or appealing any action, formal or
informal claim, investigation, inquiry or other proceeding, whether or not in
connection with pending or threatened litigation, caused by or arising out of or
in connection with HMCo's acting pursuant to HMCo's engagement, whether or not
any Indemnified Person is named as a party thereto and whether or not any
liability results therefrom. None of the Clients will, however, be responsible
for any claims, liabilities, losses, damages or expenses pursuant to clause (B)
of the preceding sentence that have resulted primarily from HMCo's bad faith,
gross negligence or willful misconduct. The Clients also agree that neither HMCo
nor any other Indemnified Person shall have any liability to any Client for or
in connection with such engagement except for any such liability for claims,
liabilities, losses, damages or expenses incurred by any Client that have
resulted primarily from HMCo's bad faith, gross negligence or willful
misconduct. The Clients agree that in no event will HMCo be liable for any
consequential, exemplary or punitive damages in connection with its performance
under this Agreement. Each Client further agrees that it will not, without the
prior written consent of HMCo, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not any
Indemnified Person is an actual or potential party to such claim, action, suit
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of HMCo and each other Indemnified Person hereunder from
all liability arising out of such claim, action, suit or proceeding. EACH CLIENT
HEREBY ACKNOWLEDGES THAT THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO ANY
CLAIMS, LIABILITIES, LOSSES, DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE
ALLEGED TO HAVE RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR
CONCURRENT ORDINARY NEGLIGENCE OF HMCO OR ANY OTHER INDEMNIFIED PERSON.
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The foregoing right to indemnity shall be in addition to any rights
that HMCo and/or any other Indemnified Person may have at common law or
otherwise and shall remain in full force and effect following the completion or
any termination of the engagement. Each Client hereby consents to personal
jurisdiction and to service and venue in any court in which any claim, which is
subject to this Agreement, is brought against HMCo or any other Indemnified
Person.
It is understood that, in connection with HMCo's engagement, HMCo may
also be engaged to act for a Client or Clients in one or more additional
capacities, and that the terms of this engagement or any such additional
engagement(s) may be embodied in one or more separate written agreements. This
indemnification shall apply to the engagement specified in the first paragraph
hereof as well as to any such additional engagement(s) (whether written or oral)
and any modification of said engagement or such additional engagement(s) and
shall remain in full force and effect following the completion or termination of
said engagement or such additional engagements.
Each of the Clients further understands and agrees that if HMCo is
asked to furnish any Client a financial opinion letter or act for any Client in
any other formal capacity, such further action may be subject to a separate
agreement containing provisions and terms to be mutually agreed upon.
6. Confidential Information. In connection with the performance of the
services hereunder, HMCo agrees not to divulge any confidential information,
secret processes or trade secrets disclosed by any Client or any of its
subsidiaries to it solely in its capacity as a financial advisor, unless such
Client consents to the divulging thereof or such information, secret processes
or trade secrets are publicly available or otherwise available to HMCo without
restriction or breach of any confidentiality agreement or unless required by any
governmental authority or in response to any valid legal process.
7. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Texas, excluding any
choice-of-law provisions thereof. Each of the parties hereby (a) irrevocably
submits to the exclusive jurisdiction of the United States Federal District
Court for the Northern District of Texas, sitting in Dallas County, Texas, the
United States of America, in the event such court has jurisdiction or, if such
court does not have jurisdiction, to any district court sitting in Dallas
County, Texas, the United States of America, for the purpose of any suit,
action, or proceeding arising out of or relating to this Agreement, including
any claims by any Indemnified Persons for indemnity pursuant to Section 5
hereof, (b) waives, and agrees not to assert in any such suit, action, or
proceeding, any claim that (i) it is not personally subject to the jurisdiction
of such court or of any other court to which proceedings in such court may be
appealed, (ii) such suit, action or proceeding is brought in an inconvenient
forum, or (iii) the venue of such suit, action, or proceeding is improper and
(c) expressly waives any requirement for the posting of a bond by the party
bringing such suit, action, or proceeding. Each of the parties consents to
process being served in any such suit, action, or proceeding by mailing,
certified mail, return receipt requested, a copy thereof to such party at the
address in effect for notices hereunder, and agrees that such services shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 7 shall affect or limit any right to serve process in any other
manner permitted by law.
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8. Assignment. This Agreement and all provisions contained herein shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned (other than with respect to the rights and obligations of HMCo, which
may be assigned to any one or more of its principals or affiliates) by any of
the parties without the prior written consent of the other parties.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended to,
any other counterpart.
10. Certain Waivers. No (a) direct or indirect holder of any equity
interests or securities of HMCo (whether such holder is a limited or general
partner, member, stockholder or otherwise), (b) affiliate of HMCo, or (c) any
direct or indirect director, officer, employee, partner, affiliate, member,
controlling person, representative, or agent of HMCo, any of HMCo's respective
affiliates or any such direct or indirect holder of any equity interests or
securities of HMCo (collectively, the "Party Affiliates") shall have any
liability or obligation of any nature whatsoever in connection with or under
this letter or the transactions contemplated hereby, and each party hereto herby
waives and releases all claims against such Party Affiliates related to any such
liability or obligation.
11. Other Understandings. All discussions, understanding and agreements
heretofore made between any of the parties hereto with respect to the subject
matter hereof are merged in this Agreement, which alone fully and completely
expresses the Agreement of the parties hereto. All calculations of the
Monitoring Fee and Reimbursable Expenses shall be made by HMCo and, in the
absence of mathematical error, shall be final and conclusive.
12. Amendment and Waiver. Any provision of this Agreement may be
altered, supplemented, amended, or waived by the written consent of the Clients
and HMCo. No failure or delay by any party to this Agreement in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
13. Notices. All notices, requests and other communications to any
party to this Agreement shall be in writing (including telex, facsimile
transmission or similar writing) and shall be given to such party by messenger,
telex, or facsimile transmission (a) at its address, facsimile number or telex
number set forth on the signature pages hereof, or (b) such other address,
facsimile number or telex number as a party may hereafter specify for the
purpose by notice to each of the other parties. Each such notice, request or
other communication shall be effective (i) if given by telex, when such telex is
transmitted and the appropriate answer back is received, (ii) if given by
facsimile transmission, when transmitted and electronic confirmation of receipt
is received and (iii) if given by messenger or any other means, when delivered
and a receipt of delivery is received.
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14. Section Headings. Headings contained in this Agreement are inserted
only as a matter of convenience and in no way define, limit or extend the scope
or intent of this Agreement or any provisions hereof.
15. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
16. Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any present or future law, and if
the rights or obligations of the parties under this Agreement shall not be
materially and adversely affected thereby (a) such provision shall be fully
severable, (b) this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom, and (d) in lieu of such illegal,
invalid, or unenforceable provision, there shall be added automatically as a
part of this Agreement a legal, valid, and enforceable provision as similar in
terms to such illegal, invalid, or unenforceable provision as may be possible.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
XXXXX, MUSE & CO. PARTNERS, L.P.
By: HM PARTNERS INC.,
its General Partner
By: /s/ XXXXX X. XXXXXXX
------------------------------
Name: Xxxxx X. Xxxxxxx
------------------------------
Title: Vice President & Treasurer
------------------------------
000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
SWIFT FOODS COMPANY
By: /s/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------
Title: Vice President
------------------------------
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
SWIFT & COMPANY
By: /s/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------
Title: Vice President
------------------------------
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
7
SWIFT PORK COMPANY
By: /s/ XXXXX X. XXXXX
------------------------------
Name: Xxxxx X. Xxxxx
------------------------------
Title: Vice President, Tax
------------------------------
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
SWIFT BEEF COMPANY
By: /s/ XXXXX X. XXXXX
------------------------------
Name: Xxxxx X. Xxxxx
------------------------------
Title: Vice President, Tax
------------------------------
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
S&C AUSTRALIA HOLDCO PTY. LTD.
By: /s/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------
Title: Attorney-in-Fact
------------------------------
c/o Swift & Company
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
8
AUSTRALIA MEAT HOLDINGS PTY. LTD.
By: /s/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------
Title: Attorney-in-Fact
------------------------------
c/o Swift & Company
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
S&C HOLDCO 2, INC.
By: /s/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------
Title: Attorney-in-Fact
------------------------------
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
S&C HOLDCO 3, INC.
By: /s/ XXXXXXX X. XXXXX
------------------------------
Name: Xxxxxxx X. Xxxxx
------------------------------
Title: Attorney-in-Fact
------------------------------
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Facsimile: (000) 000-0000
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EXHIBIT A
WIRE TRANSFER INSTRUCTIONS
Bank: JPMorgan Chase Bank, Texas
ABA#: 113 000 609
Account name: XXXXX, MUSE & CO. PARTNERS, L.P.
Account #: 088-00000000
Reference:
---------------
Attention: Xxxx XxXxxxxx 000-000-0000
A-1
EXHIBIT B
PRO RATA SHARE OF ALLOCABLE EXPENDITURES AND RELATED DEFINITIONS
Pro Rata Share of Allocable Expenditures shall equal the product
obtained by multiplying (i) the sum of all Allocable Expenditures that have not
previously been paid or reimbursed to HMCo by the Clients and other
Participating Acquired Companies, by (ii) a fraction, the numerator of which
shall equal the total amount of Invested Capital (as from time to time
outstanding) that any Fund has invested in the Client's respective securities or
instruments and the denominator of which shall equal the total amount of
Invested Capital (as from time to time outstanding) that any Fund has invested
in the securities or instruments of any and all Participating Acquired
Companies.
The capitalized terms used in the foregoing definitions have the meanings set
forth below:
Allocable Expenditures shall mean all variable, fixed, and other costs,
expenses, expenditures, charges or obligations (including, without limitation,
letters of credit, deposits, etc.) that are related to assets utilized, services
provided, or programs administered by HMCo or its affiliates in connection with
the performance by HMCo of financial oversight and monitoring services on behalf
of the Clients and other Participating Acquired Companies, including without
limitation corporate airplanes, charitable contributions, retainers for
lobbyists and other professionals, and premiums and finance charges for director
and officer insurance maintained for representatives of HMCo or its affiliates.
Fund shall mean any one or more of the equity funds now or hereafter
sponsored by Hicks, Muse, Xxxx & Xxxxx Incorporated or its successors, including
any LP Investment Entity (as defined in the limited partnership agreement for
any such equity fund) formed under or with respect to any such equity fund.
Invested Capital shall mean the total amount of partner capital that a
Fund from time to time invests in the purchase of securities or instruments of a
Participating Acquired Company, less the total cash distributions that
constitute a return of such partner capital with proceeds from the disposition
of all or any part of such securities or instruments. For each period for which
the Pro Rata Share of Allocable Expenditures is being made, the applicable
Invested Capital shall equal the amount outstanding as of the end of the
respective period.
Participating Acquired Company shall mean any partnership, corporation,
trust, limited liability company, or other entity that is, for the period for
which the Pro Rata Share of Allocable Expenditures is being determined, a party
to a monitoring agreement or similar contract with HMCo or its affiliates and
is, as of the end of such period, designated by HMCo to bear a portion of such
allocable expenditures. HMCo may, in its sole and absolute discretion, determine
not to designate an entity as a Participating Acquired Company with respect to
such period. HMCo may make such determination of non-designation for no reason
or for any reason, including without limitation the respective entity's
bankruptcy or other temporary or permanent inability to pay fees or expenses to
HMCo or its affiliates.
B-1
