Exhibit 10.13
Execution Copy
PROFESSIONAL SERVICES
AGREEMENT
This PROFESSIONAL SERVICES
AGREEMENT, dated as of January 31, 2007 (the “
Agreement ”), by and among Sbarro, Inc., a New York
corporation (the “ Company ”), MidOcean SBR
Holdings, LLC, a Delaware limited liability company (“
Parent ”), and MidOcean US Advisor, LP, a Delaware
limited partnership (“ MidOcean ”).
WITNESSETH:
WHEREAS, the Company, Parent,
MidOcean SBR Acquisition Corp., a New York corporation and an
indirect wholly-owned subsidiary of Parent (“ Acquisition
Corp ”), and the stockholders of the Company entered into
an Agreement and Plan of Merger, dated as of November 22, 2006
(the “ Merger Agreement ”), pursuant to which
Acquisition Corp was merged with and into Sbarro, resulting in the
Company becoming an indirect wholly-owned subsidiary of
Parent;
WHEREAS, MidOcean Partners III, L.P.
and MidOcean Partners III-A, L.P., each a Cayman Islands exempted
limited partnership, and MidOcean Partners III-D, L.P., a Delaware
limited partnership (collectively, the “ MidOcean
Partnerships ”), are members of Parent;
WHEREAS, MidOcean provides
investment advisory services to the MidOcean
Partnerships;
WHEREAS, MidOcean has performed
financial, management advisory and other services (the “
Transaction Services ”) for the Company in connection
with the transactions contemplated by the Merger Agreement and the
Credit Agreements (as defined below) (the “
Transactions ”), including services in connection with
(i) the retention of various financial and other advisors and
consultants in connection with the Merger Agreement, and
(ii) the structuring, implementation and consummation of the
Transactions; -!
WHEREAS, Parent, the Company and
their respective affiliates from time to time in the future may:
(a) offer and sell or cause to be offered and sold equity or
debt securities (such offerings, collectively, the “
Subsequent Offerings ”), including (i) offerings
of membership interests of Parent to its employees and directors
(“ Management Offerings ”), (ii) offerings
of equity securities of the Company and (iii) offerings of
debt securities to refinance any indebtedness of Parent, the
Company and their respective affiliates or for other corporate
purposes; and (b) repurchase, redeem or otherwise acquire
securities of Parent, the Company and their respective affiliates
(any such repurchase or redemption being referred to herein as a
“ Redemption ”);
WHEREAS, each of Parent and the
Company desires to receive financial and managerial advisory
services from MidOcean, and MidOcean desires to provide such
services to Parent and the Company; and
WHEREAS, the parties hereto
recognize that claims might be made against and liabilities
incurred by MidOcean, the MidOcean Partnerships, or related persons
or affiliates, under applicable securities laws or otherwise, in
connection with the Transactions or any Securities Offerings, or
relating to other actions or omissions of or by Parent or the
Company, or relating to
the provision by MidOcean of management
consulting, monitoring and financial advisory services to Parent
and the Company, and the parties hereto accordingly wish to provide
for MidOcean, the MidOcean Partnerships, and related persons and
affiliates to be indemnified in respect of any such claims and
liabilities.
NOW, THEREFORE, in consideration of
the foregoing and the mutual agreements contained herein, and for
other good and valuable consideration, the value, receipt and
sufficiency of which are acknowledged, the parties hereby agree as
follows:
1. Definitions .
“ Agreement ” has
the meaning set forth in the preamble.
“ Boards ” means
the Parent Board and the Company Board.
“ Claim ” means,
with respect to any Indemnitee, any claim against such Indemnitee
involving any Obligation with respect to which such Indemnitee may
be entitled to be defended and indemnified by the Company under
this Agreement.
“ Closing Fee ”
has the meaning set forth in Section 4(a) .
“ Company ” has
the meaning set forth in the preamble.
“ Company Board ”
means the Board of Directors of the Company.
“ Credit Agreements
” means: (i) that certain indenture and note purchase
agreement, each dated the date hereof, with respect to the issuance
by the Company of $150 million of senior notes, and (ii) that
certain credit agreement entered into between MidOcean SBR
Acquisition Corp., the Company, Parent, the lenders from time to
time party thereto, Bank of America, N.A., as administrative agent,
Credit Suisse, as syndication agent, and Bank of America Securities
LLC and Credit Suisse Securities (USA) LLC, as joint lead arrangers
and book managers, in each case including all ancillary agreements
and instruments entered into in connection therewith and as the
same may be amended, restated, restructured, supplemented or
otherwise modified from time to time (whether or not any of the
foregoing have the effect of increasing the principal amount of
indebtedness thereunder), and any replacement or refinancing
thereof.
“ Exchange Act ”
means the Securities Exchange Act of 1934, as amended.
“ Expenses ” has
the meaning set forth in Section 4(d) .
“ Financial Advisory
Fee ” has the meaning set forth in
Section 4(c) .
“ Financial Advisory
Services ” has the meaning set forth in
Section 3(b) .
“ Indemnitee ”
means each of MidOcean, the MidOcean Partnerships and their
respective successors and assigns, and each of their respective
directors, officers, partners, members, managers, employees,
agents, advisors, representatives and controlling persons (within
the meaning of the Securities Act).
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“ Information ”
has the meaning set forth in Section 3(c) .
“ Management Fee
” has the meaning set forth in Section 4(b)
.
“ Management Offerings
” has the meaning set forth in the recitals.
“ Management Services
” has the meaning set forth in Section 3(a)
.
“ Merger Agreement
” has the meaning set forth in the recitals.
“ MidOcean ” has
the meaning set forth in the preamble.
“ MidOcean Partnerships
” has the meaning set forth in the recitals.
“ Notice of Claim
” has the meaning set forth in Section 8(a)
.
“ Notice of Payment
” has the meaning set forth in Section 8(c)
.
“ Obligations ”
means, collectively, any and all claims, obligations, liabilities,
causes of actions, actions, suits, proceedings, investigations,
judgments, decrees, losses, damages, fees, costs and expenses
(including interest, penalties and fees and disbursements of
attorneys, accountants, investment bankers and other professional
advisors), in each case whether incurred, arising or existing with
respect to third parties or otherwise at any time or from time to
time.
“ Person ” means
any individual, partnership, joint venture, corporation, limited
liability company, trust, unincorporated organization or other
entity.
“ Parent ” has
the meaning set forth in the preamble.
“ Parent Board ”
means the Board of Directors of Parent.
“ Qualified Public
Offering ” has the meaning assigned to such term in the
Amended and Restated Limited Liability Company Agreement of Parent,
dated as of the date hererof, as the same may be amended from time
to time.
“ Redemption ”
has the meaning set forth in the recitals.
“ Related Document
” means any agreement, certificate, instrument or other
document to which the Company or any subsidiary thereof may be a
party or by which the Company or any of its properties or assets
may be bound or affected from time to time relating in any way to
the Transactions, any Securities Offerings or any of the
transactions contemplated thereby.
“ Securities Act
” means the Securities Act of 1933, as amended.
“ Securities Offerings
” means any Redemption, any Management Offering and any other
Subsequent Offering.
“ Subsequent Offerings
” has the meaning set forth in the recitals.
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“ Transaction Services
” has the meaning set forth in the recitals.
“ Transactions ”
has the meaning set forth in the recitals.
2. Engagement . Each of
Parent and the Company hereby engages MidOcean as a consultant, and
MidOcean hereby agrees to provide financial and managerial
consulting and advisory services to Parent and the Company, all on
the terms and subject to the conditions set forth below.
3. Services, etc .
(a) MidOcean hereby agrees during
the term of this Agreement to assist, advise and consult with the
Company Board and management of the Company in such manner and on
such business, management and financial matters, and provide such
other financial and other consulting and advisory services
(collectively, the “ Management Services ”), as
may be reasonably requested from time to time by either of the
Company Board, including assistance, advice or consultation
in:
(i) establishing and maintaining
banking, legal and other business relationships for the
Company;
(ii) developing and implementing
corporate and business strategy and planning for the Company,
including plans and programs for improving operating, marketing and
financial performance, budgeting of future corporate investments,
acquisition and divestiture strategies, and reorganizational
programs; and
(iii) providing professional
employees to serve as directors or officers of Parent and the
Company.
(b) MidOcean further agrees to
provide to Parent and the Company and their affiliates investment
banking, financial advisory and other similar services in
connection with any debt and equity financings, mergers,
acquisitions, divestitures and other similar transactions, in which
Parent, the Company and their affiliates may engage (or contemplate
engaging) from time to time during the term of this Agreement (the
“ Financial Advisory Services ”) as may be
reasonably requested by Parent or the Company.
(c) Parent and the Company will
furnish MidOcean with such information as MidOcean reasonably
believes appropriate to its engagement hereunder (all such
information so furnished being referred to herein as the “
Information ”). Each of Parent and the Company
recognizes and confirms that: (i) MidOcean will use and rely
primarily on the Information and on information available from
generally recognized public sources in performing the services to
be performed hereunder; and (ii) MidOcean does not assume
responsibility for the accuracy or completeness of the Information
and such other information.
4. Compensation; Expenses
.
(a) The Company agrees to pay, or
cause to be paid, on the date hereof on behalf of itself, to
MidOcean a fee in an amount to be specified by MidOcean of up to
$2,000,000, as
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compensation for the Transaction Services
rendered by MidOcean in connection with the Transactions (the
“ Closing Fee ”), it being hereby agreed by the
parties that the Closing Fee is being paid for services provided by
MidOcean to the Company itself.
(b) The Company agrees to pay to
MidOcean, as compensation for the Management Services rendered and
to be rendered to itself hereunder, an annual fee (the “
Management Fee ”), equal to $1,000,000, payable
quarterly, in advance, with the first payment due on the date
hereof, where the first payment shall be calculated on a pro rata
basis based on the number of days remaining in the quarter, and
with all subsequent quarterly payments of $250,000 due in advance
of each quarter and payable on
January 1, April 1, July 1 and
October 1, during the term of this Agreement, unless MidOcean
agrees to defer receipt of any or all of such quarterly payments in
which event they shall accrue and be paid by the Company no later
than 30 days following the end of the applicable fiscal year of the
Company, it being hereby agreed by the parties that the Management
Fee is being paid for services provided by MidOcean to the Company
itself. The Management Fee may be increased only upon approval in
writing by the Company and may be decreased only with the prior
written consent of MidOcean.
(c) In addition, the Company and
Parent each agree to pay to MidOcean, as compensation for the
Financial Advisory Services to be rendered hereunder to either the
Company or Parent, as applicable, advisory fees (the “
Financial Advisory Fees ”); provided that the
Financial Advisory Fees shall be at rates no greater than market
rates for the services being performed, nor greater than the rates
the Company could reasonably obtain from an unaffiliated third
party in an arm’s-length transaction; and provided ,
further , that the Company shall pay MidOcean for the
Financial Advisory Services provided hereunder to the Company and
Parent shall pay MidOcean for the Financial Advisory Services
provided hereunder to Parent.
(d) The Company and Parent each
agree to reimburse MidOcean for such travel and other reasonable
out-of-pocket fees and expenses (“ Expenses ”)
incurred by MidOcean, the MidOcean Partnerships or any of their
respective affiliates (including any employees thereof), including
any Expenses, in connection with this Agreement or the negotiation
and consummation of the Transactions; provided that the
Company shall reimburse MidOcean for Expenses incurred by MidOcean
on behalf of the Company and Parent shall reimburse MidOcean for
Expenses incurred by MidOcean on behalf of Parent. Additional
expenses incurred by MidOcean and its employees and advisors may be
reimbursed by the Company or Parent, as the case may be, in
accordance with the principles set forth in the preceding sentence,
if such additional expenses were approved in advance by the Company
or Parent, as applicable. MidOcean may submit monthly expense
statements to the Company or Parent, as applicable, which shall be
payable within 30 days from the date of such submission.
(e) For the avoidance of doubt, the
parties agree that, upon the request of Parent, to the extent
permitted under the Credit Agreements, the Company will loan (or
otherwise advance or provide) to Parent any amounts necessary to
allow Parent to pay any Financial Advisory Fees and reimburse
Expenses that it may owe to MidOcean (or any other person) under
the terms of this Agreement. Any such loans (or other payments, if
appropriate) shall bear interest at the appropriate applicable
Federal rate and shall be payable under such terms and conditions
as shall be established by the Company and Parent at the time such
loans are made.
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5. Term, etc.
(a) This Agreement shall be in
effect until, and shall terminate upon, the tenth anniversary of
the date hereof. MidOcean may terminate this Agreement at any time
with 30 days’ prior notice to Parent and the Company. The
provisions of this Agreement shall survive any termination of this
Agreement, except for the provisions of Sections 2 ,
3 , 4 , 7 , 8 and 9 .
(b) Upon any consolidation,
reorganization, merger, recapitalization or any conveyance,
transfer or lease of all or substantially all of the assets of
Parent or the Company, the successor corporation or other entity
formed by such consolidation or into which Parent or the Company is
merged or to which such conveyance, transfer or lease is made (the
“ Successor Entity ”) shall succeed to, and be
substituted for, Parent and/or the Company, as applicable, under
this Agreement with the same effect as if such successor entity had
been a party hereto if the MidOcean Partnerships and their
affiliates and designees, collectively, shall, directly or
indirectly, beneficially own (as defined in Rule 13d-3 of the
Exchange Act) at least one-third of the outstanding voting capital
stock of such Successor Entity. Any other consolidation, merger or
conveyance, transfer or lease of all or substantially all of the
assets or equity of Parent or the Company shall have the effect of
terminating this Agreement with respect to Parent and the Company
or of releasing Parent and the Company, or any such Successor
Entity, from its obligations hereunder other than the payment of
accrued but unpaid fees and expenses as provided in
Section 5(d) .
(c) This Agreement shall also
terminate upon the consummation of a Qualified Public
Offering
(d) Upon termination of this
Agreement: (i) any prepaid installment of the Management Fee
or the Financial Advisory Fees or any portion thereof (pro rated,
with respect to the quarter in which such termination occurs, for
the portion of such quarter following such termination), shall be
immediately refunded to the Company; (ii) any installment of
the Management Fee or any portion thereof which has been deferred
and accrued shall be immediately paid by the Company to MidOcean;
(iii) any portion of the fees payable to MidOcean pursuant to
Section 4(a) of this Agreement which remains unpaid
shall be immediately paid to MidOcean by the Company; (iv) in
the case of any termination of this Agreement pursuant to
Section 5(b) in connection with any transaction
specified therein, the Company shall pay MidOcean a fee of
$1,000,000; and (vi) in the case of any termination of this
Agreement pursuant to Section 5(c) in connection with a
Qualified Public Offering, the Company shall pay MidOcean a fee of
$2,000,000. In the event of the liquidation of Parent or the
Company, all amounts due by the Company to MidOcean hereunder shall
be paid to MidOcean before any liquidating distributions or similar
payments are made to stockholders of Parent or the
Company.
6. Independent Contractor
Status . The parties agree that MidOcean shall perform services
hereunder as an independent contractor, retaining control over and
responsibility for its own operations and personnel. Neither
MidOcean nor any of its employees or agents shall, solely by virtue
of this Agreement or the arrangements hereunder, be considered
employees or agents of Parent or the Company, and none of them
shall have authority to contract in the name of or bind Parent or
the Company, except (a) to the extent that any professional
employee of
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MidOcean may be serving as a director or officer
of Parent or the Company pursuant to Section 3(a)(iii)
hereof, or (b) as expressly agre
