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EXHIBIT 10.10
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT (the "Agreement") is made and entered into
effective as of August 15, 1997, among Authentic Specialty Foods, Inc., a Texas
corporation (the "Company"), and Shansby Partners, L.L.C., a Delaware limited
liability company (together with its successors, "Shansby Partners").
1. Retention. The Company hereby acknowledges that it has
retained Shansby Partners, and Shansby Partners acknowledges that, subject to
reasonable advance notice in order to accommodate scheduling, Shansby Partners
will provide the Company with financial advisory services, including assistance
with respect to (a) the Initial Public Offering (as defined below) and (b)
identification of potential acquisition candidates and assistance in the
negotiation, implementation and financing of these acquisitions, during the
term of this Agreement. Notwithstanding the foregoing, neither Shansby Partners
nor any of its affiliates will be required to use their funds to provide any
financing (in connection with an acquisition or otherwise) on behalf of the
Company.
2. Term. The term of this Agreement shall expire on the third
anniversary of the consummation of the Company's initial public offering of
shares of its common stock pursuant to the Registration Statement on Form S-1
(Registration Number 333-29959) filed with the Securities and Exchange
Commission on June 25, 1997 under the Securities Act of 1933, as amended (the
"Initial Public Offering"), and the Agreement may be terminated by either party
for a material breach of the Agreement by the other party if the breach has not
been remedied within 60 days after notice of the breach is received by the
non-breaching party.
3. Compensation. (a) As compensation for the advisory
services rendered to the Company in connection with the Initial Public
Offering, the Company agrees to pay Shansby Partners a financial advisory fee
of $250,000, which financial advisory fee shall be payable subject to, and
simultaneously with, the consummation of the Initial Public Offering.
(b) In addition to the financial advisory fee described above, the
Company shall pay Shansby Partners financial advisory fees in connection with
acquisitions identified by the Company during the term of this Agreement. The
amount of such financial advisory fees shall be comparable to those customary
for investment banking firms rendering financial advisory services in
connection with acquisition transactions to the acquisition in question.
4. Reimbursement of Expenses. The Company agrees to pay or
reimburse Shansby Partners for all "Reimbursable Expenses," which shall consist
of all reasonable out-of-pocket expenses and disbursements (including without
limitation, costs of travel, postage, deliveries, communications, etc.)
incurred by Shansby Partners or its affiliates for the account of the Company
or in connection with the performance by Shansby Partners of the services
contemplated by Section 1 hereof, in each case upon presentation of evidence of
same; provided, however, that the parties agree
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that the amount of Reimbursable Expenses relating to the Initial Public
Offering with respect to which Shansby Partners shall be entitled to
reimbursement shall not exceed $50,000. Promptly (but not more than 10 days)
after request by or notice from Shansby Partners, the Company shall pay Shansby
Partners, by wire transfer of immediately available funds to such account as
Shansby Partners shall designate in writing, the Reimbursable Expenses for
which Shansby Partners has provided the Company 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 5% from the Payment Date to
and including the date on which such Reimbursable Expenses plus accrued
interest thereon are fully paid to Shansby Partners.
5. Acquisition Opportunities. During the term of this Agreement,
Shansby Partners shall offer to the Company for its consideration any
acquisition opportunities for Mexican food companies that primarily produce
tortillas, tortilla chips, salsas or Mexican sauces and that are identified by
Shansby Partners or any affiliate thereof after the consummation of the Initial
Public Offering (each, an "Acquisition Opportunity").
If the Company declines to pursue any such Acquisition Opportunity,
then Shansby Partners or its affiliates can pursue such Acquisition Opportunity
without the involvement of the Company. Neither Shansby Partners nor any of its
affiliates will be required to use their funds to provide any financing (in
connection with an acquisition or otherwise) on behalf of the Company. If the
Company fails to notify Shansby Partners that the Company desires to pursue,
and has the financial capability to pursue, an Acquisition Opportunity within
30 days after Shansby Partners advises the Company of such Acquisition
Opportunity, then the Company shall be deemed to have declined such Acquisition
Opportunity. For purposes of this Agreement, the Company's "financial
capability" with respect to an Acquisition Opportunity shall mean the sum of,
without duplication: (i) the Company's cash on hand, (ii) the Company's
unutilized borrowing capacity under any existing revolving credit facility and
(iii) the amount that the Company could reasonably expect to borrow from third
parties in connection with the Acquisition Opportunity (including, without
limitation, through seller financing).
The Company shall use its reasonable best efforts to evaluate and
pursue in an expeditious manner any Acquisition Opportunities that it elects to
pursue, and if the Company determines that it does not wish to continue to
pursue such Acquisition Opportunity (or that it does not have the financial
capability to continue to pursue such Acquisition Opportunity), then the
Company will promptly notify Shansby Partners. Upon such notification, then
Shansby Partners or its affiliates can pursue such Acquisition Opportunity
without the involvement of the Company.
6. Indemnification. The Company jointly and severally shall
indemnify and hold harmless each of Shansby Partners, its affiliates, and their
respective directors, officers, controlling persons (within the meaning of
Section 15 of the Securities Act of 1933 or Section 20(a) of the Securities
Exchange Act of 1934, as amended), if any, agents and employees (Shansby
Partners, 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,
costs 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
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Indemnified Person's counsel) which (i) are related to or arise out of actions
taken or omitted to be taken (including any untrue statements made or any
statements omitted to be made) by the Company or (ii) are related to or arise
out of actions taken or omitted to be taken by an Indemnified Person with the
Company's consent or in conformity with the Company's instructions or the
Company's actions or omissions or (iii) are otherwise related to or arise out
of Shansby Partners' engagement, as they are incurred, upon presentation of
evidence of same, 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 Shansby Partners
acting pursuant to Shansby Partners' engagement, whether or not any Indemnified
Person is named as a party thereto and whether or not any liability results
therefrom. The Company will, however, not be responsible for any claims,
liabilities, losses, damages or expenses (i) that have resulted primarily from
Shansby Partners' bad faith, gross negligence or willful misconduct or (ii)
that relate directly to the Initial Public Offering. The Company also agrees
that neither Shansby Partners nor any other Indemnified Person shall have any
liability to the Company for or in connection with such engagement except for
any such liability for claims, liabilities, losses, damages or expenses
incurred by the Company that have resulted primarily from Shansby Partners' bad
faith, gross negligence or willful misconduct. The Company further agrees that
it will not, without the prior written consent of Shansby Partners, which
consent shall not be unreasonably withheld, 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 (where
an Indemnified Person is a party to such claim, action, suit or proceeding, or
could reasonably be expected to potentially be such a party) unless such
settlement, compromise or consent includes an unconditional release of Shansby
Partners and each such Indemnified Person from all liability arising out of
such claim, action, suit or proceeding. THE COMPANY 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 SHANSBY PARTNERS OR ANY OTHER INDEMNIFIED PERSON.
The foregoing right to indemnity shall be in addition to any rights
that Shansby Partners 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. The Company 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 Shansby Partners or any
other Indemnified Person.
7. Investments in and Advice to Other Companies. The Company
acknowledges that Shansby Partners and its affiliates render advice to, own and
invest in a broad range of businesses and projects, including businesses and
projects that may be similar to, or competitive with, the Company, and, subject
to the provisions of Section 5, nothing in this Agreement shall prohibit
Shansby Partners or its affiliates from engaging in any such activities.
8. Governing Law. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Texas, without giving
effect to any conflicts-of-law provisions thereof.
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9. Notices. Any and all notices or other communications required
or permitted under this Agreement shall be given in writing and delivered in
person or sent by United States certified or registered mail, postage prepaid,
return receipt requested, or by overnight express mail, or by telex, facsimile
or telecopy to the address of such party set forth below. Any such notice shall
be effective upon receipt or three days after placed in the mail, whichever is
earlier.
If to Shansby Partners:
c/o The Shansby Group
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopy Number: (000) 000-0000
If to the Company:
0000 Xxxxxx X
Xxxxx Xxxxxxx, Xxxxx 00000
Attention: President
Telecopy Number: (000) 000-0000
Any party may, by notice so delivered, change its address for notice purposes
hereunder.
10. 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 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 Shansby Partners,
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.
11. 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.
12. Other Understandings. All discussions, understandings 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
financial advisory fees and Reimbursable Expenses shall be made by Shansby
Partners and, in the absence of mathematical error, shall be final and
conclusive.
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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.
SHANSBY PARTNERS, L.L.C.
By:
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Name:
Title:
AUTHENTIC SPECIALTY FOODS, INC.
By:
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Name:
Title:
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