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EXHIBIT 10.2
BRUCKMANN, XXXXXX, XXXXXXXX & CO., L.L.C.
000 XXXX 00XX XXXXXX, 00XX XXXXX
XXX XXXX, XXX XXXX
November 30, 1999
X'Xxxxxxxx Industries, Inc.
0000 Xxxx Xxxxxx
Xxxxx, XX 00000-0000
Re: Management Services Agreement
Gentlemen:
This letter sets forth our understanding with respect to the engagement by
you, X'Xxxxxxxx Industries, Inc., a Delaware corporation (the "Company"), of the
undersigned Bruckmann, Xxxxxx, Xxxxxxxx & Co., L.L.C., a Delaware limited
liability company ("BRS"), to provide management and financial advisory services
to the Company.
1. Duties.
The Company hereby retains BRS to provide management services including,
without limitation, providing strategic direction and oversight of corporate and
financial planning and analyzing and negotiating financial alternatives, as the
Company may reasonably request from time to time (the "Services"). The Services
will be provided to the Company on a non-exclusive basis on the terms and
conditions set forth in this Agreement.
The Company will use the services of BRS and BRS will make itself available
for the performance of services under this Agreement upon reasonable notice. BRS
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 BRS may have.
2. Compensation of BRS. As consideration payable to BRS or any of its
affiliates for providing the services set forth in Section 1, the Company shall
make the following payments to BRS:
(a) A management fee in respect of the period beginning on the date hereof
and ending June 30, 2000 (the "Interim Period") in an amount equal to the
greater of (x) $175,000 and (y) one percent of the Company's Consolidated Cash
Flow (as such term is defined in the Indenture relating to the Company's 133/8%
Senior Subordinated Notes due 2009 (the "Indenture") for the Interim Period (the
"Interim Management Fee"). The Interim Management Fee shall be payable on the
date hereof in the amount of $175,000. In the event that it shall be determined
following the end
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November 30, 1999
Page 2
of the Interim Period that one percent of the Company's Consolidated Cash Flow
for the Interim Period exceeds $175,000 (as determined by the Board in its good
faith business judgment), such excess shall promptly be paid to BRS in respect
of the Interim Management Fee;
(b) An annual management fee in respect of each fiscal year of the Company
(other than the fiscal year ending June 30, 2000) in an amount equal to the
greater of (x) $300,000 and (y) one percent of the Company's Consolidated Cash
Flow for such fiscal year (the "Annual Management Fee" and, together with the
Interim Management Fee, the "Management Fee"). The Annual Management Fee shall
be payable semi-annually in advance on each July 1 and January 1, commencing
July 1, 2000, in an amount equal to the greater of (i) $150,000 (representing
one-half of $300,000) and (ii) one percent of the budgeted Consolidated Cash
Flow (without giving effect to the reduction for cash payments made pursuant to
this Agreement under clause (8) of the definition of Consolidated Cash Flow set
forth in the Indenture), as determined by the Board by reference to the
Company's budget for such period, for the two full fiscal quarters immediately
following such payment date. In the event that it shall be determined following
the end of each fiscal year of the Company, excluding the fiscal year ending
June 30, 2000, that the amount equal to the greater of (1) $300,000 and (2) one
percent of the Company's Consolidated Cash Flow (as determined by the Board by
reference to the Company's audited financial statements for such year and
without giving effect to the reduction for cash payments made pursuant to this
Agreement under clause (8) of the definition of Consolidated Cash Flow set forth
in the Indenture) for such fiscal year exceeds the amount of cash actually paid
to BRS for such fiscal year, the Company shall promptly pay an amount equal to
such excess to BRS in respect of the Annual Management Fee, and in the event
that it shall be determined that the amount of cash actually paid to BRS for
such fiscal year exceeds the greater of (1) $300,000 and (2) one percent of the
Company's Consolidated Cash Flow (without giving effect to the reduction for
cash payments made pursuant to this Agreement under clause (8) of the definition
of Consolidated Cash Flow set forth in the Indenture), an amount equal to such
excess to the Company shall be offset against the next payment payable to BRS
hereunder; and
(c) Actual and direct out-of-pocket expenses (including fees and
disbursements of attorneys, accountants and other professionals and consultants
retained by BRS in connection with the Services provided hereunder) incurred by
BRS and its personnel in performing the Services, which shall be reimbursed to
BRS by the Company upon the delivery of rendering of a statement such supporting
data as the Company reasonably shall require.
Notwithstanding the foregoing, the right of BRS to receive cash payments
pursuant to this Section 2 and the ability of the Company to make any cash
payments pursuant to this Section 2 shall be conditional and contingent upon the
following: (i) the Fixed Charge Coverage Ratio (as defined in the Indenture) for
the four most recently ended full fiscal quarters for which internal financial
statements are available to management immediately preceding any payment date is
at least 2.0 to 1 and (ii) the payments must be permitted pursuant to Section
7.20 of the Credit Agreement. Any payments to which BRS has no right pursuant to
the limitations of the preceding sentence and that are not permitted to be paid
by the Company shall be paid in cash only at the time, if any, such
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November 30, 1999
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payments are permitted pursuant to the Fixed Charge Coverage Ratio test above
and are permitted under the Credit Agreement.
In the event of a bankruptcy, liquidation or winding-up of the Company, the
payment of all accrued and unpaid fees and other obligations under this
agreement shall be subordinated to the prior payment in full of all amounts due
and owing under the Indenture and the Credit Agreement.
In the event the Company acquires other entities (including by way of merger,
consolidation or otherwise), the Management Fee shall be subject to increase in
an amount that is mutually agreed upon by the Company and BRS.
3. Indemnification. In the event that BRS or any of its affiliates,
principals, partners, directors, members, stockholders, employees, agents and
representatives (collectively, the "Indemnified Parties") becomes involved in
any capacity in any action, proceeding or investigation in connection with any
matter referred to in or contemplated by this Agreement, or in connection with
the Services, the Company will indemnify and hold harmless the Indemnified
Parties from and against any actual or threatened claims, lawsuits, actions or
liabilities (including out-of-pocket expenses and the fees and expenses of
counsel and other litigation costs and the cost of any preparation or
investigation of any kind or nature ("Losses")), arising as a result of or in
connection with this Agreement and the Services, and will periodically reimburse
BRS for its expenses as described above, except that the Company will not be
obligated to so indemnify any Indemnified Party if, and to the extent that, such
claims, lawsuits, actions or liabilities against such Indemnified Party directly
result from the gross negligence or wilful misconduct of such Indemnified Party
as admitted in any settlement by such Indemnified Party or held in any final,
non-appealable judicial or administrative decision. In connection with such
indemnification, the Company will promptly remit or pay to BRS any amounts which
BRS certifies to the Company in writing are payable to BRS or other Indemnified
Parties hereunder. The reimbursement and indemnify obligations of the Company
under this Section 3 shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
Indemnified Party, as the case may be, of BRS and any such affiliate and shall
be binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, BRS and any such Indemnified Party. The
foregoing provisions shall not supersede any obligation of a party hereto to
provide indemnification to another party hereto pursuant to any other agreement
among such parties, or to release such indemnifying party from any
indemnification obligation pursuant to such other agreement. The provisions of
this Section 3 shall survive the termination of this Agreement.
4. Independent Contractors. Nothing herein shall be construed to create a
joint venture or partnership between the parties hereto or an employee/employer
relationship. BRS shall be an independent contractor pursuant to this Agreement.
No party hereto shall have any express or implied right or authority to assume
or create any obligations on behalf of or in the name of the other parties or to
bind the other parties to any contract, agreement or undertaking with any third
party.
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November 30, 1999
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5. Termination and Engagement. This Agreement and the Company's engagement
of BRS hereunder shall terminate on November 30, 2009 or upon mutual agreement
of BRS and the Company.
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 BRS:
Bruckmann, Xxxxxx, Xxxxxxxx & Co., L.L.C.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxx
If to the Company:
X'Xxxxxxxx Industries, Inc.
0000 Xxxx Xxxxxx
Xxxxx, XX 00000-0000
Attention: President
Addresses may be changed by a notice in writing in accordance with the
provisions of this paragraph 6.
7. Assignment. This Agreement shall inure to the benefit of and be binding
upon the parties and their successors and assigns. However, neither this
Agreement nor any of the rights of the parties hereunder may be transferred or
assigned by either party hereto, except that (i) if the Company shall merge or
consolidate with or into, or sell or otherwise transfer substantially all its
assets to, another corporation which assumes the Company's obligations under
this Agreement, the Company may assign its rights hereunder to that corporation,
and (ii) BRS may assign its rights and obligations hereunder to any other person
or entity controlled, and which continues to be so controlled, directly or
indirectly, by Xxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxx XX, Xxxxxxx X. Xxxxxxxx,
Xxxxxxx X. Xxxxxxx and Xxxx Xxxxxxxx. Any attempted transfer or assignment in
violation of this Section 7 shall be void.
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November 30, 1999
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8. 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
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 two 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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November 30, 1999
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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.
BRUCKMANN, XXXXXX, XXXXXXXX & CO., L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxxx
Title:
Accepted and agreed as of the date first above written:
X'XXXXXXXX INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief Operating Officer
