MANAGEMENT AGREEMENT
This Management Agreement, dated as of June 30, 2000, is made by and
among Marketing Specialists Sales Company, a Texas corporation ("MSSC"), and
Xxxxxxx & Groesbeck, Inc., a Utah corporation ("MGU"), Xxxxxxx & Groesbeck, Inc.
Montana, a Montana corporation ("MGM", and together with MGU, the "COMPANIES"),
Xxx Xxxxxxx ("TM") and Xxxxx Xxxxxxx (together with TM, "XXXXXXX"). Each of
MSSC, the Companies and Xxxxxxx are sometimes referred to herein as a "PARTY"
and collectively as "PARTIES".
RECITALS:
Xxxxxxx and the Companies own and operate a sales, marketing and
merchandising business operating in Utah, Idaho, Montana and serving Albertson's
corporately in Idaho and Arizona.
MSSC operates a national sales, marketing and merchandising company.
The Parties hereto desire to formalize a contractual relationship
outlining rights, duties and obligations relating to the Business (as defined
below) and the potential acquisition by MSSC of the Companies;
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1. DEFINITIONS. As used herein the following terms shall have the
following meanings:
"ACQUISITION PROPOSAL" means any proposal or offer, other than
a proposal or offer by MSSC or its Affiliates, with respect to (a) any
merger, reorganization, recapitalization, consolidation, share
exchange, business combination, liquidation, dissolution or other
similar transaction involving the Companies, (b) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 5% or more
of the assets of the Companies, in a single transaction or series of
transactions (whether related or unrelated), other than inventory sold,
leased, exchanged, mortgaged, pledged, transferred or otherwise
disposed of in the ordinary course of business, (c) any sale of, tender
offer or exchange offer for, 5% or more of the outstanding shares of
any class of the Companies' equity or debt securities or the filing of
a registration statement under the Securities Act of 1933 in connection
therewith, (d) the acquisition by any Person of beneficial ownership of
5% or more of the then outstanding shares of any class of the
Companies'
equity or debt securities or (e) any public announcement of a proposal,
plan or intention to do any of the foregoing or any agreement to engage
in any of the foregoing.
"AFFILIATE" shall mean, with respect to a specified Person,
any Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with, the specified Person, whether through the ownership of
voting securities, by contract or otherwise.
"AGREEMENT" shall mean this Management Agreement as originally
executed, and as amended, modified, supplemented or restated from time
to time.
"BASE LINE AMOUNT" shall mean an amount equal to $500,000.
"BUSINESS" shall mean the business of providing outsourced
sales, merchandising, marketing and order management services to
manufacturers, suppliers and producers of food products and consumer
goods in order to sell the products and goods to various retailers and
wholesalers in a variety of trade channels, including grocery stores,
drug stores, convenience stores and mass merchandisers located in Utah,
Montana and Idaho, plus Albertson's corporately.
"BUYOUT" shall have the meaning given such term in Section 6.1
hereof
"BUYOUT DATE" shall have the meaning given such term in
Section 6.1 hereof.
"BUYOUT PURCHASE PRICE" shall have the meaning given such term
in Section 6.2 hereof.
"CHANGE IN CONTROL" shall mean (i) the transfer, sale or other
disposition of all or substantially all of the assets of MSSC to
another Person, (ii) the merger or consolidation of Parent or MSSC with
or into another Person which results in the capital stock of Parent or
MSSC held by the shareholders of Parent or MSSC, as the case may be,
immediately prior to such transaction being converted into less than
50% of the outstanding capital stock of the surviving corporation, or
(iii) a transaction or series of related transactions in which more
than 50% of the voting power of Parent or MSSC is disposed of;
PROVIDED, HOWEVER, that no Change of Control shall result from the
transfer of assets to, or merger or consolidation with, an Affiliate of
Parent or MSSC, or from a transaction or series of related transactions
in which Parent converts its corporate existence in the form of a
publicly-held company to a privately-held company.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, or corresponding provisions of future laws.
"EFFECTIVE DATE" shall mean July 1, 2000.
"OPTION FEE" shall have the meaning given such term in Section
2.1 hereof.
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"LOSSES" shall mean, for any fiscal period during the term of
this Agreement, the net loss recognized by the Companies applying an
accrual method of accounting as determined in accordance with the Code
and the Regulations thereunder.
"PARENT" shall mean Marketing Specialists Corporation, a
Delaware corporation and parent corporation of MSSC.
"PERSON" shall mean any individual, partnership, corporation,
trust or other entity, or any government or political subdivision, or
any agency, department or instrumentality thereof.
"PROFITS" shall mean, for any fiscal period during the term of
this Agreement, the net income recognized by the Companies applying an
accrual method of accounting as determined in accordance with the Code
and the Regulations thereunder.
"REGULATIONS" shall mean the Treasury Regulations promulgated
under the Code, as such Treasury Regulations shall be in effect from
time to time.
"SERVICES" shall have the meaning given such term in Section
2.3 hereof.
"STOCK PURCHASE AGREEMENT" shall mean a Stock Purchase
Agreement to be entered into among the Parties, substantially in the
form of EXHIBIT A attached hereto, with such changes as may be mutually
agreed to by the Parties.
ARTICLE II.
OPTION; SERVICES; AND TERM
2.1. OPTION FEE. In consideration for the Parties' agreement to the
Buyout on the terms and conditions in this Agreement and the Stock Purchase
Agreement, as applicable, and for the Option described in Section 6.1 hereof,
MSSC shall pay to Xxxxxxx a non-refundable option fee in an amount equal to
$1,000,000 (the "OPTION FEE"). The Option Fee shall be paid to Xxxxxxx as
follows: (i) $500,000 on the date of this Agreement and (ii) $500,000 on the
date that is six (6) months after the date hereof. Payment of the Option Fee
shall be made by wire transfer of lawful money of the United States of America
in immediately available funds to the accounts designated by Xxxxxxx.
2.2. MANAGEMENT OF BUSINESS. The Companies shall be responsible for the
performance of the Business heretofor performed separately by MSSC and the
Companies. The overall management and control of the day-to-day business and
affairs of the Business shall be vested in the respective directors and officers
of the Companies. The Companies shall conduct the Business in the ordinary
course of business consistent with past practices. MSSC and the Companies shall
each continue to own their separate assets.
2.3. MSSC SERVICES. As consideration for the Parties' agreement to the
payment of performance bonuses and the distribution of Profits in accordance
with Section 4.1 hereof, during the term of this Agreement, MSSC shall provide
to the Business certain services, including managerial, technological and
accounting support services, as the Companies may
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request and as MSSC deems, in its sole discretion, appropriate and advisable
to the management of the Business (the "SERVICES"). As part of the Services
provided to the Business pursuant to this Agreement, MSSC shall make all
decisions regarding brokerage contracts providing for national coverage and
resolution of any conflicts created by such national appointments.
2.4. OFFICE LOCATIONS. The Business shall be conducted from the offices
currently occupied by the Companies. As soon as reasonably practicable after the
Effective Date, Xxxxxxx and the Companies shall allow MSSC to move its assets to
be used in connection with the Services into the Companies' offices located in
Salt Lake City, Utah, Boise, Idaho and Billings, Montana. MSSC shall provide
such technological and logistical assistance in connection with these migrations
as may be reasonably requested. Any and all office leases to which MSSC is
currently a party shall not be assumed by the Companies or Xxxxxxx and shall
remain the sole responsibility of MSSC. The Parties acknowledge that it will not
be practical to move employees from the MSSC Salt Lake City offices until the
Genesys system is operational in the Companies' facility. The Parties agree to
use their best efforts to promptly arrange for the installation of the Genesys
system in the Companies' facility. Until such installation has been completed,
MSSC will allow Company personnel to make such use of the MSSC facility in Salt
Lake City and the Genesys system as may be required in conducting the Business.
2.5. PAYMENT FOR MANAGEMENT OF THE BUSINESS. In consideration of the
Companies' management of the Business, MSSC shall pay to the Companies an amount
equal to any and all commissions or other sums actually received by MSSC
attributable to services performed or contracted for after the Effective Date
relating to the Business. On or before the 15th day of each month, beginning
July 0000, XXXX shall pay to the Companies the sum of $166,667.00 as an advance
on payments due under this Section 2.5. As soon as practicable after the close
of each calendar quarter, MSSC shall reconcile the amount actually due the
Companies with the amount of the advances paid. If the amount of the advances
exceeds the amount actually due, the Companies shall pay the difference to MSSC.
If the amount of the advances is less than the amount actually due, MSSC shall
pay the difference to the Companies. At least monthly, MSSC shall provide the
Companies documentation evidencing the payments received by MSSC which are the
basis for payments due the Companies. The advance payments described in this
section are intended to approximate amounts actually due the Companies. If any
quarterly reconciliation evidences that the advance payments do not reasonably
approximate amounts actually due, the amount of subsequent advance payments
shall be adjusted.
2.6. TERM. The initial term of this Agreement shall commence as of the
Effective Date and shall continue for a period of one (1) year, unless earlier
terminated pursuant to the provisions of this Agreement. Unless otherwise
terminated pursuant to Article VIII, this Agreement shall automatically renew
for successive one-year terms.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES. Each of the Parties hereby makes
the following representations and warranties to the others that:
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3.1.1. ORGANIZATION. If the Party is a corporation it is, and during the
term of this Agreement shall at all times continue to be, a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation.
3.1.2. AUTHORITY. The Party has all requisite power, authority and
capacity to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery by the Party of this Agreement, and the
performance by it of its obligations hereunder, have been duly and validly
authorized by all requisite action on its part. This Agreement has been duly
executed and delivered by the Party, and this Agreement and all exhibits and
documents executed and delivered by the Party in connection with the
consummation of the transactions contemplated hereby, are the valid and legally
binding obligations of the Party, enforceable against the Party in accordance
with the terms hereof and thereof, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting creditor's rights generally and by principles of equity (whether
considered in a proceeding at law or in equity). No consent, approval or other
action by any governmental authority is required in connection with the
execution, delivery and performance by the Party of this Agreement.
3.1.3. NO VIOLATION. The execution, delivery and, assuming receipt of
the consents described in Section 6.4 hereof, performance by the Party of this
Agreement and the consummation of the transactions contemplated hereby, do not
and will not, to the extent applicable, (i) violate, conflict with or result in
the breach of any provision of its charter documents or by-laws, (ii) violate,
conflict with or result in the breach of any of the terms of, result in a
material modification of, or otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time, or both,
constitute) a default under, any material instrument, contract or other
agreement to which the Party or any of its Affiliates is a party, or by or to
which the Party or any of its Affiliates or any of their respective assets or
properties may be bound or subject; (iii) violate any order, writ, judgment,
injunction, award or decree of any federal, state, local or foreign court,
arbitrator or governmental or regulatory body against, or binding upon, the
Party or any of its Affiliates or any of their respective assets or properties;
(iv) violate any statute, law or regulation of any governmental or regulatory
body; or (v) result in the creation or imposition of any lien, charge or
encumbrance of any nature or description upon any of the properties, assets or
businesses of the Party or any of its Affiliates.
3.1.4. BROKERS. Neither the Party nor any of its Affiliates has engaged
any broker, finder or investment banker in connection with this Agreement or any
transactions contemplated by this Agreement.
3.1.5. NO LITIGATION. Except as disclosed on SCHEDULE 3.1 hereto, there
is no litigation or proceeding pending nor, to the Party's knowledge, is any
investigation pending or litigation, proceeding or investigation threatened
involving the Party or any of its Affiliates, which could, if adversely
determined, materially and adversely affect its operations and financial
condition, or its performance under this Agreement. MSSC hereby undertakes to
notify the other Parties if at any time during the term of this Agreement MSSC
or Parent becomes a party to a proceeding in a state or federal court located in
the State of Utah.
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ARTICLE IV.
PERFORMANCE BONUSES AND DISTRIBUTIONS
4.1. PERFORMANCE BONUSES. The Parties hereby agree that the Companies
shall pay performance bonuses, if any, during the term of this Agreement in
accordance with the following:
(a) The Companies shall have the right to all Profits up to and equal to
the Base Line Amount; and
(b) To the extent Profits exceed the Base Line Amount, MSSC shall
receive a performance bonus equal to fifty percent (50%) of such excess
Profits.
4.2. ALLOCATION OF LOSSES. Losses during the term of this Agreement, if
any, shall be allocated fifty percent (50%) to the Companies and fifty percent
(50%) to MSSC.
4.3. DISTRIBUTIONS. Periodically, but in no event less frequently than
at the end of each fiscal quarter, the Companies shall pay performance bonuses
and make distributions of Profits, if any, in accordance with the provisions of
Section 4.1 and to the extent permitted by all applicable laws. From time to
time, the Companies may pay bonuses to Xxxxxxx in accordance with Section 5.1
herein and any such bonuses paid shall be deemed Profits allocated to the
Companies for purposes of this Article IV.
ARTICLE V.
COVENANTS
5.1. CONDUCT OF THE COMPANIES. During the term of this Agreement,
Xxxxxxx and the Companies hereby agree that the Companies (i) shall operate and
maintain their assets, properties and business, and otherwise conduct their
business, only in the ordinary course of business and consistent with past
practices, and (ii) will use all reasonable efforts to preserve substantially
the relationships with their representatives, suppliers, principals and
customers, perform its obligations under all contracts, leases, licenses and
permits, and comply with all applicable laws. Xxxxxxx shall cause the Companies
not to (a) enter into or agree to any transaction outside the scope and limits
of the Business, (b) incur any indebtedness other than in the ordinary course of
business and consistent with past practices, (c) issue any equity securities or
rights to purchase equity securities, (d) increase or agree to increase the
salary, compensation, bonus, or benefits of any of the directors, officers or
employees of the Companies other than in the ordinary course of business and
consistent with past practices, (e) make or cause to be made any dividends,
advances or similar distributions of any kind to any shareholder, director,
officer or employee of the Companies other than in the ordinary course of
business and consistent with past practices, or (f) sell or otherwise dispose of
or encumber any material asset or property of the Companies or any of their
Affiliates.
5.2. BOOKS AND RECORDS. At all times during the term of this Agreement,
the Companies shall maintain accurate books and records in which shall be
entered all matters relating to the Business, including all income,
expenditures, assets and liabilities thereof. MSSC
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and its authorized representatives shall have the right to inspect, examine
and copy the books, records, files and other documents of the Companies at
all reasonable times at the Companies' principal place of business. MSSC may
at any time request an audit of the Companies books and records; provided,
however, that such audit shall be conducted in a manner that causes it to not
unreasonably interfere with the conduct of business by the Companies.
5.3. MSSC CORPORATE EXPENSES. The Companies shall reimburse a portion
of MSSC's overhead expenses relating to the Companies' use of certain
administrative and sales technologies purchased by MSSC on a national basis.
Such expenses may include Genesys, Spectra, Market Metrics, Apollo, XX Xxxxxxx,
Intactix, and Information Resources (IRI). No later than ten (10) days after the
receipt of a financial report from MSSC supporting its overhead expenses
allocated to the Companies, which reports shall not be more frequent than
monthly, the Companies shall pay to MSSC an amount equal to the Companies'
proportional share of the expenses indicated in such report. MSSC is in the
process of obtaining vendor approval for the Companies to use the technologies.
If any vendor refuses to grant such permission, the Companies will not be
required to pay any portion of that expense.
5.4. FINANCIAL REPORTS. The Companies shall cause to be delivered to
MSSC, within sixty (60) days after the end of the Companies' fiscal year,
financial statements of the Companies for the year then ended consisting of at
least (i) a balance sheet as of the close of such year and (ii) an income
statement and statement of cash flows for such year, together with a report
thereon without qualifications by independent public accountants acceptable to
MSSC. In addition to the foregoing, the Companies shall deliver to MSSC, within
30 days after the end of each fiscal quarter, financial statements of the
Companies for the fiscal quarter then ended, certified by the corporate
secretary of the Companies as being true and correct, and consisting of at least
(i) a balance sheet as of the end of such fiscal quarter and (ii) an income
statement and statement of cash flows for such fiscal quarter. The parties
acknowledge that the Companies do not have audited financial statements and that
the Companies' financial statements are prepared on the accounting basis used by
the Companies for income tax purposes, which is a comprehensive basis of
accounting, other than generally accepted accounting principles.
ARTICLE VI.
BUYOUT PROVISIONS
6.1. BUYOUT. Subject to the terms and conditions of this Agreement and
the Stock Purchase Agreement, MSSC shall purchase from Xxxxxxx all of the issued
and outstanding capital stock of the Companies (the "BUYOUT"). Except as
otherwise provided herein, the Buyout shall occur on the first anniversary of
the Effective Date or such other date as is mutually agreed upon by the Parties
(the "BUYOUT DATE"). In the event a Change of Control occurs, Xxxxxxx, in its
sole discretion, shall have the option to (i) accelerate the Buyout Date to a
date mutually agreeable to the Parties, which date shall be no later than sixty
(60) days after the effective date of the Change of Control, or (ii) elect not
to consummate the Buyout and terminate this Agreement. Further, in the event (i)
Parent's gross revenues for the fiscal year ended December 31, 2000 are less
than $300,000,000, or (ii) MSSC does not have available cash to satisfy the cash
portion of the Buyout Purchase Price on the Buyout Date, Xxxxxxx shall have the
right to elect not to consummate the Buyout and terminate this Agreement. In the
event the Companies'
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annualized gross revenues as of the Buyout Date are less than $3,000,000,
MSSC shall have the right to elect not to consummate the Buyout and terminate
this Agreement (the "OPTION").
6.2. BUYOUT CONSIDERATION. Subject to any adjustment as set forth in
this Section 6.2, the total consideration to be paid by MSSC to Xxxxxxx for the
Buyout shall be an amount equal to the sum of (i) cash payment equal to fifty
percent (50%) of the current accounts receivable of the Companies for the month
immediately preceding the Buyout Date, (ii) $1,000,000 in cash, (iii)
subordinated promissory notes in the aggregate original principal amount of
$4,000,000 substantially in the form attached to the Stock Purchase Agreement as
Exhibit A thereto, and (iv) the previously paid Option Fee (the "BUYOUT PURCHASE
PRICE"). For purposes of determining the Buyout Purchase Price, "current
accounts receivable" shall mean an amount due and payable in accordance with the
normal receivable cycle of the Companies for that particular principal or
customer, but in no event more than thirty (30) days past due. The Parties agree
and acknowledge that if the annualized revenues of the Companies are less than
$7,000,000 as of the Buyout Date, the Buyout Purchase Price automatically shall
be adjusted downward $1.00 for each $1.00 the annualized revenues are below
$7,000,000. If the annualized revenues of the Companies are $7,000,000 or
greater as of the Buyout Date, there shall be no adjustment of the Buyout
Purchase Price.
6.3. DEFERRED COMPENSATION OBLIGATIONS. The Companies are party to
certain deferred compensation agreements with Xxxxx Xxxxxxx and Xxxxx Xxxxx. In
connection with the Buyout, MSSC shall assume the Companies' obligations as of
the Buyout Date under such deferred compensation agreements in the amounts so
indicated: (i) Xxxxx Xxxxxxx in an amount not to exceed $388,000 payable in
monthly installments through June 30, 2002, and (ii) Xxxxx Xxxxx in an amount
not to exceed $72,000 payable in monthly installments through June 30, 2002.
Notwithstanding the foregoing, in the event the Buyout Date is accelerated
before the first anniversary of the date of this Agreement, MSSC shall assume
all payment obligations under the deferred compensation agreements of Xxxxx
Xxxxxxx and Xxxxx Xxxxx as of the accelerated Buyout Date; provided that the
Companies are current with respect to all amounts due and payable under such
deferred compensation agreements and are not in default or breach of the terms
of such deferred compensation agreements. Xxxxxxx shall remain liable for such
amounts and other obligations owed under the deferred compensation agreements
that are not assumed by MSSC pursuant to this Section 6.3.
6.4. CONDITION TO BUYOUT. Xxxxxxx hereby acknowledges that MSSC and
Parent are parties to an indenture and credit facilities, which impose certain
restrictions on MSSC, including, but not limited to, a limitation on the amount
of debt that MSSC is permitted to incur, a limitation on the amount that MSSC is
permitted to pay for any acquisition to a specified multiple of the acquisition
target's cash flow, and a requirement that any indebtedness (including deferred
obligations) incurred or assumed in connection with an acquisition be
subordinated to the note holders and senior lenders. The Parties agree that the
Buyout is expressly conditioned upon there being no conflict with or violation,
default, breach or contravention of the indenture and credit facilities of
Parent or MSSC, as such exist on the Buyout Date, and any and all other
financing agreements that are in effect, and to which Parent or MSSC is subject,
on the Buyout Date.
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6.5. DUE DILIGENCE. Between the date of this Agreement and the Buyout
Date, the Companies and Xxxxxxx shall afford MSSC and its accountants,
attorneys, lenders and other representatives and designees access during normal
business hours and at other reasonable times to all things related to the
assets, personnel and affairs of the Companies, including, without limitation,
access to the Companies' books, records, files, properties, contracts, financial
data and operating data and accounting and legal representatives. Xxxxxxx shall
make the officers and employees of the Companies available to MSSC and its
representatives from time to time as reasonably requested.
6.6. STANDSTILL AGREEMENT. During the term of this Agreement, the
Companies and Xxxxxxx will not, and will cause their representatives to not,
directly or indirectly, (i) initiate, solicit, seek, encourage or otherwise
facilitate (including by way of furnishing information or assistance) any
inquiry, communication or proposal that constitutes, or could reasonably be
expected to result in, an Acquisition Proposal, (ii) enter into any agreement
contemplating or otherwise relating to an Acquisition Proposal, (iii) provide
any information or data to, or engage in, maintain or continue discussions or
negotiations with, any Person in furtherance of any such inquiry, communication
or proposal or otherwise relating to an Acquisition Proposal or for the purpose
of obtaining an Acquisition Proposal, (iv) accept, agree to, endorse or
recommend any Acquisition Proposal, or (v) release any third party from any
standstill or confidentiality agreement, or waive or amend any provision
thereof, to which it is a party; provided, that no Person shall be deemed to
have provided any information or data to, or engaged in, maintained or continued
discussions or negotiations with, any other Person in violation of this Section
6.6 if such Person advises the other Person that they are precluded from taking
any action that would constitute a violation of this Section 6.6. Xxxxxxx shall
notify MSSC orally (within one business day) and in writing (as promptly as
practicable) of all relevant details relating to, and all material aspects of
(including the identity of the Person making such inquiry, communication or
proposal), all inquiries, communications and proposals which it or any of its
representatives may receive relating to any of such matters and, if such
inquiry, communication or proposal is in written form or electronically or
magnetically stored, shall deliver to MSSC a copy of such inquiry, communication
or proposal as promptly as practicable. The Companies and Xxxxxxx have
terminated, and have caused each of their representatives to cease and
terminate, any existing initiation, solicitation, encouragement, facilitation,
communication, discussion or negotiation with any Person conducted heretofore by
the Companies or Xxxxxxx, or any of their representatives relating to any
Acquisition Proposal. The Companies and Xxxxxxx shall promptly notify their
representatives of the obligations undertaken in this Section 6.6 and any
violation of the restrictions set forth in the two immediately preceding
sentences by any representative, whether or not acting on behalf of the
Companies or Xxxxxxx, shall be deemed to be a breach of this Section 6.6 by the
Companies and Xxxxxxx.
ARTICLE VII.
OTHER AGREEMENTS
7.1. INDEMNIFICATION. (a) MSSC shall indemnify, defend and hold Xxxxxxx
and the Companies harmless from any and all losses, liabilities, claims, damages
and costs (including reasonable attorneys' fees) arising from or in connection
with the Business as operated by MSSC
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prior to the Effective Date, including, but not limited to, any claims by
MSSC employees not hired by the Companies.
(b) The Companies shall indemnify, defend and hold MSSC
harmless from any and all losses, liabilities, claims, damages and costs
(including reasonable attorneys' fees) arising from or in connection with the
Business as operated by the Companies prior to the Effective Date.
(c) Each of MSSC and the Companies shall indemnify, defend and
hold the other Party harmless from any and all losses, liabilities, claims,
damages and costs (including reasonable attorneys' fees) arising from any gross
negligence, fraud, willful or wanton misconduct, or breach of fiduciary duty on
the part of the indemnifying Party, its officers, directors and employees.
(d) Each of Xxxxxxx and MSSC shall indemnify, defend and hold
harmless the other Party from all losses, liabilities, claims, damages, claims
and costs (including reasonable attorneys' fees) arising from or in connection
with any breach by Xxxxxxx or MSSC, as the case may be, of Section 3.1.4 of this
Agreement.
7.2. EMPLOYEE BENEFITS. As soon as reasonably practicable after the
date of this Agreement, but in no event later than December 31, 2000, the
Companies shall convert their profit sharing plan into a 401(k) employee benefit
plan substantially similar to MSSC's plan that is currently in effect. The
Companies shall continue to provide their other employee benefits at
substantially similar levels from the date of this Agreement until the Buyout.
7.3. KEY-MAN INSURANCE. Within ten (10) days after the Effective Date,
MSSC shall purchase key-man life insurance on TM in an amount up to $2,000,000
with MSSC as the sole beneficiary. In the event of TM's death during the term of
this Agreement, MSSC shall use the proceeds from such insurance policy to pay
the cash portion of the Buyout Purchase Price.
7.4. OFFICE LEASE. Simultaneously with or prior to the Buyout, MSSC
shall enter into a lease of the real property in which the Companies' offices
are currently located in Salt Lake City, Utah. The lease shall be for a term of
three (3) years with an option for a term of an additional two (2) years. The
lease shall provide for rent consistent and comparable with similarly situated
properties and contain such other customary terms and conditions as MSSC and the
owner of the real property may mutually agree.
7.5. USE OF NAMES. The Business shall be conducted during the term of
this Agreement under the name "Xxxxxxx/Marketing Specialists". As of the Buyout
Date, Xxxxxxx, in its sole discretion, shall decide whether MSSC shall continue
to use the name "Xxxxxxx/Marketing Specialists" for a period of up to one year
following the Buyout Date. Pursuant to the Buyout, MSSC shall acquire all right,
title and interest in the "Xxxxxxx & Groesbeck, Inc." name.
7.6. MSSC EMPLOYEES. Prior to the Effective Date, MSSC shall terminate
the employment of all of MSSC's active employees who are assigned to its
operations in Salt Lake City, Utah, Boise, Idaho, and Billings, Montana and
MSSC's active employees who service the needs of Albertson's on a national
basis. The Parties agree and acknowledge that the Companies
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may interview and offer positions of employment to such former MSSC employees
as it deems necessary or advisable but the Companies shall not be obligated
to hire any such former MSSC employees. Any and all leases for vehicles used
by MSSC employees to which MSSC is currently a party shall not be assumed by
the Companies or Xxxxxxx and shall remain the sole responsibility of MSSC.
Following the Buyout Date, all the Companies' employees shall be given credit
for years of employment with the Companies, MSSC, or any of their predecessor
companies for purposes of seniority and benefits, including paid leave and
401(k) participation and vesting.
7.7. MSSC OFFICE EQUIPMENT, FURNISHINGS AND SUPPLIES. MSSC shall allow
the Companies the use of such furniture, equipment and supplies as MSSC has in
its Salt Lake City, Boise and Billings offices as the Companies may request. The
Companies may use such furniture, equipment and supplies at no charge to the
Companies, EXCEPT that the Companies shall pay the lease payments currently
associated with such assets. Any lease payment or similar obligation not
expressly assumed by the Companies shall remain the responsibility of MSSC.
7.8. GENESYS SYSTEM. The Companies agree to adopt and incorporate the
Genesys Order Entry/Administration computer system currently used by MSSC
nationally. MSSC shall provide the Companies all Genesys-related hardware and
software currently used in its Salt Lake City, Billings and Boise offices, and
agrees to provide such technical support and training as may be reasonably
requested, at no cost to Xxxxxxx. The Companies shall be responsible for the
payment of its actual or proportional monthly costs associated with the use of
the Genesys computer system.
ARTICLE VIII.
TERMINATION
8.1. TERMINATION OF AGREEMENT. This Agreement shall be terminated upon
the occurrence of any of the following circumstances:
(a) By mutual written agreement of the Parties;
(b) Upon the closing of the Buyout;
(c) By either Xxxxxxx or MSSC upon a material breach of any
representation, warranty, covenant or agreement on the part of the other
Party, which is not cured by the breaching Party within ten (10) days
following notice of such breach by the non-breaching Party;
(d) By either Xxxxxxx or MSSC if the other Party shall fail to
perform or observe any covenant or agreement contained in this
Agreement, to be performed or observed by such Party, which failure
shall remain unremedied for thirty (30) days following notice thereof by
the non-defaulting Party;
(e) By either Xxxxxxx or MSSC pursuant to the provisions of
Section 6.1 hereof; or
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(f) By either Xxxxxxx or MSSC upon 30 days written notice prior
to the expiration of any succession term.
8.2. EFFECT OF TERMINATION. A termination of this Agreement shall have
no effect on nor diminish, alter, nor affect (i) any rights or obligations of
the Parties which accrued or arose on or before the date of such termination,
(ii) any indemnification or confidentiality obligations under this Agreement
occurring before such termination, (iii) any provisions which by their express
terms contemplate performance following such termination, and (iv) any right or
cause of action and related remedies arising out of a Party's breach of this
Agreement.
ARTICLE IX.
GENERAL PROVISIONS
9.1. COMPLETE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement between the parties and supersedes all agreements (including
the letter agreement dated as of March 22, 2000 by and among the Parties),
representations, warranties, statements, promises and understandings, whether
oral or written, with respect to the subject matter hereof. No party hereto
shall be bound by or charged with any oral or written agreements,
representations, warranties, statements, promises or understandings not
specifically set forth in this Agreement or the exhibits hereto.
9.2. NOTICES. All notices under this Agreement shall be in writing and
shall be deemed properly given hereunder if (i) delivered by personal service,
(ii) delivered by courier service, (iii) telecopied and confirmed immediately in
writing by a copy mailed by registered or certified mail, postage prepaid,
return receipt requested, or (iv) when received, if sent by certified or
registered mail, postage prepaid, return receipt requested, to the Parties at
the addresses hereinafter set forth. The addresses for notices are as follows:
If to MSSC, to:
Marketing Specialists Sales Company
000 Xxxxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, CEO
Facsimile: (000) 000-0000
With a copy to:
Marketing Specialists Sales Company
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
If to Xxxxxxx or the Companies, to:
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Xxxxxxx & Groesbeck, Inc.
000 X. 0000 Xx.
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxx Xxxxxxx
Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
With a copy to:
Winder & Haslam
000 Xxxx 000 Xxxxx, Xxx 0000
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxx Xxxxxx
Facsimile: (000) 000-0000
Rejection or other refusal to accept or the inability to deliver because of
changed address of which no notice was given as provided herein shall be deemed
to be receipt of the notice, demand or request sent. By giving to the other
parties written notice thereof, the parties hereto and their respective
permitted successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addressee
or address for notices, and each shall have the right to specify as its address
for notices any other address within the United States of America.
9.3. PUBLIC ANNOUNCEMENTS. Xxxxxxx, the Companies and MSSC shall
consult with each other in connection with, and shall endeavor to agree upon the
content and timing of, any press releases or other public statements with
respect to this Agreement and the transactions contemplated hereby and in making
any filings with any federal or state governmental or regulatory agency. The
Parties shall not issue any such press release or make any such public statement
or filing prior to such consultation, except as may be required by law. In the
event the Parties are unable to agree on a public statement or announcement and
either MSSC, Xxxxxxx or the Companies determines after consultation with their
respective counsel that such statement or announcement is required by law or
otherwise appropriate, then MSSC, Xxxxxxx or the Companies, as the case may be,
may issue such statement or announcement.
9.4. CONFIDENTIAL INFORMATION. Each of Xxxxxxx, the Companies and MSSC
agrees that any information concerning the business or operations of the other
Parties that it has or may receive from the other Parties or such Parties'
counsel, accountants, lenders or other representatives shall be treated as
confidential and proprietary information, which shall not be disclosed to any
third party, shall not be used for any purpose other than evaluating the
transactions contemplated by this Agreement, and shall be safeguarded using the
same degree of care as the Party uses in protecting its own confidential
information, in each case unless such information is of a public record or
knowledge or becomes available to the Party on a non-confidential basis from a
source other than the other Parties or their representatives.
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9.5. VALIDITY. In the event that any provision of this Agreement shall
be held to be invalid or unenforceable, the same shall not affect in any respect
whatsoever the validity or enforceability of the remainder of this Agreement.
9.6. ASSIGNMENT. No Party shall be allowed to assign or otherwise
transfer this Agreement, by operation of law or otherwise, without the express
written consent of the other Parties, which consent shall not be unreasonably
withheld; provided, however, that MSSC may assign this Agreement and its rights
and obligation hereunder to one or more of its Affiliates, and MSSC, or its
Affiliates, may assign or pledge this agreement and its rights hereunder to its
lenders, without the consent of the other Parties. No such assignment shall
relieve MSSC from any obligations hereunder. Except as provided herein to the
contrary, this Agreement shall be binding upon and inure to the benefit of the
Parties, and their respective permitted successors and assigns.
9.7. GOVERNING LAW. This Agreement has been entered into in the State
of Texas and will be governed by and construed in accordance with the laws of
the State of Texas other than the conflict of laws rules thereof. The Parties
agree to submit all disputes arising under or relating to this Agreement to the
exclusive jurisdiction of the state courts and/or United States federal courts
located in Salt Lake County in the State of Utah and consent to the jurisdiction
of such courts.
9.8. WAIVER. No consent or waiver, express or implied, by a Party to or
of any breach or default by another Party in the performance by such other Party
of its obligations hereunder shall be deemed or construed to be a consent or
waiver to or of any other breach or default in the performance by such other
Party of the same or any other obligations of such other Party hereunder.
Failure on the part of a Party to complain of any act or failure to act on the
part of any other Party or to declare such other Party in default, irrespective
of how long such failure continues, shall not constitute a waiver by such Party
of its rights hereunder. The giving of a consent or waiver by a Party in any one
instance shall not limit or waive the necessity to obtain such Party's consent
or waiver in any future instance.
9.9. TERMINOLOGY AND CONSTRUCTION. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; and the singular shall include the plural and vice
versa. Titles of Articles, Sections and Subsections are for convenience only,
and neither limit nor amplify the provisions of this Agreement. The use herein
of the word "including," when following any general statement, term or matter,
shall not be construed to limit such statement, term or matter to the specific
items or matters set forth immediately following such word or to similar items
or matters, whether or not non-limiting language (such as "without limitation,"
or "but not limited to," or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items or matters that
could reasonably fall within the broadest possible scope of such general
statement, term or matter.
9.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
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9.11. FURTHER ASSURANCES. Each party hereto agrees to do all acts and
things, and to make, execute and deliver such written instruments, as shall from
time to time be reasonably required to carry out the terms and provisions of
this Agreement.
9.12. NO THIRD PARTY RIGHTS. This Agreement shall not (directly,
indirectly, contingently or otherwise) confer or be construed as conferring any
rights or benefits on any Person that is not named a Party or a permitted
transferee of a Party hereunder.
9.13. AMENDMENT. This Agreement may not be amended, altered or modified
except by an instrument in writing executed by each Party.
9.14. REMEDIES. Each of the parties to this Agreement will be entitled
to enforce his or its rights under this Agreement specifically, to recover
damages (including, without limitation, reasonable fees and expenses of counsel)
by reason of any breach of any provision of this Agreement and to exercise all
other rights existing in his or its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach or
threatened breach of the provisions of this Agreement and that any party may in
his or its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce or prevent any violations of the provisions of this Agreement. Such
injunction or decree shall be available without the posting of any bond or other
security.
9.15. SUBORDINATION. All obligations of MSSC under this Agreement are,
and at all times hereafter will be, junior and subordinate in right of payment
and exercise of remedies to the indefeasible prior payment in full in cash of
all obligations owed in respect of the Senior Debt (as defined below). The
subordination of the obligations under this Agreement is for the benefit of all
holders of Senior Debt from time to time, whether such Senior Debt is
outstanding on the date hereof or incurred, created or arising hereafter. Upon
the occurrence and during the continuance of any default or event of default
under any Senior Debt, MSSC will not make, and, provided the Companies and
Xxxxxxx (together, the "SUBORDINATED PARTIES") have received notice of such
default or event of default, the Subordinated parties will to accept or receive
or take any action to collect, any payment of any portion of the obligations
under this Agreement until all obligations with respect to such Senior Debt have
been indefeasibly discharged in full in cash. Should any payment, distribution,
security, or proceeds thereof be received by the Subordinated Parties contrary
to the terms hereof, the Subordinated Parties shall immediately upon demand
deliver the same to the holders of the Senior Debt in precisely the form
received (except for endorsement or assignment of such the Subordinated Parties
where necessary), for application on or to secure the Senior Debt, whether it is
due or not due, and until so delivered the same shall be held in trust by the
Subordinated Parties as property of the holders of the Senior Debt. Nothing in
this Section 9.15 shall prohibit the Subordinated Parties from receiving and
retaining amounts due to the Subordinated Parties hereunder, provided that at
the time such amount is paid to the Subordinated Parties there shall not have
occurred or be continuing any default or event of default under any Senior Debt.
For purposes of this Section 9.15, "SENIOR DEBT" shall mean (i) the
liabilities of MSSC under that certain guaranty given by MSSC guarantying all
indebtedness and obligations of Parent, as successor by merger to Richmont
Marketing Specialists, Inc., under that certain Indenture dated as of December
19, 1997, among Parent, Chase Bank of Texas, National
15
Association, successor-in-interest to Texas Commerce Bank National
Association, as trustee, and the notes issued pursuant thereto, as the same
may be amended, restated, refinanced, supplemented or otherwise modified from
time to time (the "INDENTURE"), (ii) all indebtedness and obligations of
Parent, as successor by merger to Richmont Marketing Specialists, Inc., under
the Indenture, (iii) all indebtedness and obligations of MSSC or Parent in
favor of any bank or trust company or any affiliate thereof or comparable
institutional lender that is part of a syndicated group of lenders that
includes a bank or trust company, providing financing to MSSC or Parent or
entering into swap or hedging agreements with MSSC or Parent, (iv) the
liability of MSSC under that certain Second Amended and Restated Guaranty,
dated March 30, 2000, given by MSSC guarantying all indebtedness and
obligations of Parent under that certain Second Amended and Restated Credit
Agreement, dated March 30, 2000, among Parent, the lenders party thereto and
First Union National Bank, as agent for the lenders, as the same may be
amended, restated, refinanced, supplemented or otherwise modified from time
to time (the "FIRST UNION CREDIT AGREEMENT"), (v) all indebtedness and
obligations under the First Union Credit Agreement and all Senior Obligations
as defined under the First Union Credit Agreement, and (vi) any other
indebtedness that by its terms ranks senior to or pari passu with the First
Union Credit Agreement in right of payment, including, without limitation,
the liabilities of MSSC under that certain Credit Agreement, dated March 30,
2000, among Parent and certain of its subsidiaries, The Chase Manhattan Bank,
as Agent, and the banks named therein, as the same may be amended, restated,
refinanced, supplemented or otherwise modified from time to time.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
MARKETING SPECIALISTS SALES
COMPANY, a Texas Corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
XXXXXXX & GROESBECK, INC., a Utah
Corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
XXXXXXX & GROESBECK, INC. MONTANA, a
Montana Corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------
XXX XXXXXXX
--------------------------------------
XXXXX XXXXXXX
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