AIPC LETTERHEAD
March 10, 2006
James P. Fogarty
Managing Director
Alvarez & Marsal, LLC
600 Lexington Avenue
6th Floor
New York, NY 10022
Dear Mr. Fogarty:
This letter (the "Supplement") addresses various matters related to the
engagement letter dated September 28, 2005 (the "Letter") between Alvarez &
Marsal, LLC ("A&M") and American Italian Pasta Company (the "Company"). Upon
execution hereof by each of the parties below, this Supplement will supplement
and amend the Letter.
Paragraph 1(a)(iii) of the Letter states that the staffing levels, after
the Phase One Review (as defined herein), will be agreed with the Company's
board of directors (the "Board") or its designees. A&M acknowledges and agrees
that the staffing levels, committed personnel and related costs for the
remainder of 2006 will be as set forth on Schedule 1 to this Letter and that any
changes to or deviations from Schedule 1 must be approved in writing in advance
by William R. Patterson.
Paragraph 2(a) of the Letter states that the billing rates of Mr. Fogarty
and the other A&M personnel "shall be subject to adjustment annually on January
1, to the extent that the Company and A&M agree." The current billing rate for
Mr. Fogarty is $600 per hour, and the current billing rate for Messrs. Moye,
Roizen and Gordon is $475 per hour. The current hourly billing rates for other
A&M personnel, by position held at A&M, are: (1) Director: $375-500; Associate:
$275-375; and Analyst: $200-275. The Company and A&M agree to maintain these
same billing rates for all of these positions during 2006.
Paragraph 2(d)(i) of the Letter states that A&M will be eligible to receive
objectives based incentive compensation of $2.0 million upon the satisfactory
completion of certain targets. A&M acknowledges and agrees that such incentive
compensation potential is now $1.5 million rather than $2.0 million.
Paragraph 2(d)(i)(1) of the Letter states that A&M will be eligible to
receive objectives based incentive compensation of $1.0 million for achieving
the FY 2006 EBITDAR target that is established by the Board during the 2005
calendar year. A&M acknowledges and agrees that the FY 2006 EBITDAR target, as
established by the Board, is as set forth on Schedule 2 and such incentive
compensation potential is now $750,000 rather than $1.0 million.
James P. Fogerty
March 10, 2006
Page 2
Paragraph 2(d)(i)(2) of the Letter states that A&M will be eligible to
receive objectives based incentive compensation of $1.0 million for achieving
the FY 2006 cash flow target that is established by the Board during the 2005
calendar year. A&M acknowledges and agrees that the FY 2006 cash flow target, as
established by the Board, is as set forth on Schedule 2 and such incentive
compensation potential is now $750,000 rather than $1.0 million.
Paragraph 2(d)(ii) of the Letter states that warrants to purchase 472,671
shares of the Company will be paid to A&M. Notwithstanding the provisions of
such Paragraph, A&M acknowledges and agrees that the Warrant to Purchase Class A
Common Stock of American Italian Pasta Company, in the form attached hereto
which is being issued contemporaneously herewith, satisfies the warrant payment
requirements of the Letter in all respects.
The Letter, including the Indemnification Agreement, as supplemented and
amended hereby, is hereby ratified and approved.
If the foregoing is acceptable to you, please sign this letter to
acknowledge your agreement with its terms.
Sincerely,
American Italian Pasta Company
By: /s/ William R. Patterson
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William R. Patterson
Chairman
Accepted and Agreed:
Alzarez & Marsal, LLC
By: /s/ James P. Fogarty
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James P. Fogarty
Managing Director
LCB
