EXHIBIT 10.2
AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT (the "Agreement") dated
as of October 1, 1998, among USS HOLDINGS, INC., a Delaware corporation
("USSH"), USS INTERMEDIATE HOLDCO, INC., a Delaware corporation ("USSIH"), U.S.
SILICA COMPANY, a Delaware corporation ("Silica") (collectively, the
"Companies", and individually a "Company"), and D. GEORGE HARRIS & ASSOCIATES,
INC., a Delaware corporation ("DGHA").
WHEREAS, USSH, USSIH, USS Acquisition, Inc., a Delaware corporation
("USSA") and DGHA have entered into a Management Services Agreement dated as of
February 9, 1996 (the "Old Agreement");
WHEREAS, USSA was merged with and into Silica on February 9, 1996.
WHEREAS, each Company desires to continue to avail itself of DGHA's
expertise and consequently has requested DGHA to continue to provide such
expertise, from time to time, in rendering certain management services related
to the business and affairs of such Company and its Subsidiaries and the review
and analysis of certain financial and other transactions.
WHEREAS, DGHA and the Companies agree that it is in their respective
interests to enter into this Agreement whereby, for the consideration specified
herein, DGHA shall provide such services to the Companies.
WHEREAS, each Company and DGHA wish to amend in certain respects and
restate the Old Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the Companies and DGHA agree as follows:
Section 1. Definitions.
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(a) Unless defined herein, capitalized terms used in this Agreement
shall have the meanings ascribed to them in the Amended and Restated
Stockholders Agreement dated as of the date hereof, as amended from time to time
(the "Stockholders Agreement"), among USSH and the Stockholders.
(b) The following capitalized terms used in this Agreement have the
meanings ascribed to them below:
"Actual EBITDA" shall be calculated at the end of each fiscal year,
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beginning with the fiscal year ending December 31, 1998, and shall mean the
EBITDA of the Company for the twelve-month period ended on the last day of each
fiscal year.
"Budgeted EBITDA" shall be calculated at the end of each fiscal year,
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beginning with the fiscal year ending December 31, 1998, and shall mean for each
fiscal year the EBITDA set forth opposite such fiscal year on Exhibit A.
"EBITDA" shall have the meaning ascribed to it in the Credit Agreement
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dated as of July 21, 1998, as amended from time to time, among Silica and the
Lenders party thereto.
"New Acquisition" means the acquisition of a business as a going concern,
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whether by asset acquisition, acquisition of capital stock or merger.
(c) The use in this Agreement of the term "including" means
"including, without limitation." The words "herein," "hereof," "hereunder" and
other words of similar import refer to this Agreement as a whole, including the
schedules and exhibits, as the same may from time to time be amended or
supplemented, and not to any particular section, subsection, paragraph,
subparagraph or clause contained in this Agreement. All references to sections,
schedules and exhibits mean the sections of this Agreement and the schedules and
exhibits attached to this Agreement.
(d) The title of and the section and paragraph headings in this
Agreement are for convenience of reference only and shall not govern the
interpretation of any of the terms or provisions of this Agreement.
(e) The use herein of the masculine, feminine or neuter forms shall
also denote the other forms, as in each case the context may require.
Section 2. Retention of DGHA.
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The Companies retain DGHA, and DGHA accepts such retention, upon the terms
and conditions set forth in this Agreement.
Section 3. Term.
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(a) Subject to the provisions of Section 3(b), this Agreement shall
commence on the date hereof and shall terminate on December 31, 2000 (the
"Initial Term"); provided that upon the termination of the Initial Term this
Agreement shall be automatically extended until terminated by USSH or DGHA by
serving 9 months prior written notice upon the other..
(b) This Agreement shall automatically terminate with respect to (i)
any Company and its Subsidiaries upon a sale of such Company to a person which
is not an Affiliate of such Company (whether pursuant to a merger or
consolidation, a sale of capital stock or all or substantially all of its
assets) and (ii) all of the Companies in the event that (A) the Majority of the
Institutional Stockholders have designated the Additional Institutional
Directors pursuant to Section 2(b) of the Stockholders Agreement and USSH has
provided written notice to DGHA of its desire to terminate this Agreement
pursuant to this clause (ii)(A) of Section 3(b) or (B) the DGHA Stockholders and
their respective Affiliates cease to own 50% or more of the Securities (other
than the DGHA Restricted Shares) held by them on the date hereof.
(c) This Agreement may be terminated at the option of USSH if neither
D. George Harris nor Anthony J. Petrocelli is actively involved in the
management of DGHA.
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Section 4. Management Services.
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(a) DGHA shall advise the Companies concerning such management matters
as relate to proposed financial transactions, acquisitions and other senior
management matters related to the Companies' business, administration and
policies, in each case as the Companies shall reasonably and specifically
request by way of notice to DGHA, which notice shall specify the services
required of DGHA and shall include all background material necessary for DGHA to
complete such services. DGHA shall not be required to devote any specified
amount of time to any such written request and shall be required to devote only
so much time to any such written request as DGHA shall, in its reasonable
discretion, deem necessary to complete such services. Such consulting services
shall, in DGHA's reasonable discretion, be rendered in person or by telephone or
other communication. DGHA shall (i) use its reasonable efforts to deal
effectively with all subjects submitted to it hereunder and (ii) endeavor to
further, by performance of its services hereunder, the policies and objectives
of the Companies.
(b) DGHA shall perform all such services as an independent contractor
to the Companies. DGHA is not an employee, agent or representative of any
Company and has no authority to act for or to bind any Company without its prior
written consent.
(c) This Agreement shall in no way prohibit DGHA or any partner or
employee thereof from engaging in other activities, whether or not competitive
with any business of the Companies.
Section 5. Compensation.
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(a) As consideration for DGHA's agreement to render the management
services set forth in Section 4 and as compensation for any such services
rendered by DGHA, the Companies shall pay DGHA (or one or more designees
thereof) an annual fee (the "Annual Fee") of $500,000, which shall be subject to
the adjustments set out in Sections 5(c) and (d).
(b) The Annual Fee shall be paid for each fiscal year in equal monthly
installments, payable in arrears.
(c) Promptly after receipt by the Compensation Committee of the annual
audited financial statements of the Companies for the preceding fiscal year, the
Companies shall pay DGHA, or, if the result of the following calculation is a
negative number, DGHA shall pay the Companies, an amount equal to the absolute
value of: (i) the aggregate amount of compensation to be paid by the Companies
to DGHA with respect to the preceding fiscal year as determined in accordance
with Exhibit B based on the Actual EBITDA for such fiscal year compared to the
Budgeted EBITDA for such fiscal year minus (ii) the aggregate amount of
compensation actually paid by the Companies to DGHA with respect to the
preceding fiscal year.
Notwithstanding the foregoing, (x) subject to the following clause (y), any
amount payable by DGHA to the Companies pursuant to Section 5(c) shall be paid
by deducting such amount, in equal monthly installments through the end of the
year in which any such amount is determined to be payable by DGHA, from the
monthly installments payable by the Companies to
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DGHA pursuant to Section 5(b), and (y) for any fiscal year during which this
Agreement is terminated (and not renewed) pursuant to the terms hereof, (i) the
Budgeted EBITDA for such fiscal year shall be prorated from the end of the
immediately preceding fiscal year through the date of termination, (ii) all
amounts otherwise payable as provided above shall be prorated from the end of
the immediately preceding fiscal year through the date of termination and (iii)
any amount payable by the Companies to DGHA or by DGHA to the Companies, as the
case may be, pursuant to Section 5(c) shall be paid by the Companies or DGHA, as
the case may be, notwithstanding any such termination, promptly after the
financial statements of the Companies for the period from the end of the
immediately preceding fiscal year through the date of termination become
available. The Companies shall promptly prepare and make available such
financial statements.
(d) In the event of (i) any New Acquisition which is approved by the
Requisite Stockholders pursuant to the Stockholders Agreement, this Agreement
shall automatically be amended to increase the levels of aggregate compensation
provided in Exhibit B hereto in such proportions as are necessary to reflect the
increase resulting from such acquisition in the Budgeted EBITDA provided in
Exhibit A hereto (as similarly adjusted), as such increase in the Budgeted
EBITDA was submitted to the Requisite Stockholders in connection with the
approval of such acquisition and (ii) any disposition by the Companies of the
stock or assets of any Company or any Subsidiary thereof, this Agreement shall
automatically be amended to decrease the levels of aggregate compensation
provided in Exhibit B hereto in such proportions as are necessary to reflect the
decrease (based upon the average annual EBITDA contribution of the disposed
assets for the last 12 fiscal quarters immediately preceding such disposition)
resulting from such disposition in the Budgeted EBITDA provided in Exhibit A
hereto (as similarly adjusted).
(e) All accounting determinations under this Agreement will be made in
accordance with generally accepted accounting principles, consistently applied,
as reasonably approved by the Compensation Committee. In the event of any
dispute between the parties relating to any accounting determination or
calculation hereunder, such dispute will be resolved by the Companies'
independent accountants, whose written determination shall be final and binding
on the parties hereto.
(f) The Companies shall reimburse DGHA for all reasonable out-of-
pocket travel and entertainment expenses incurred by DGHA in connection with the
rendering of management services pursuant to this Agreement, provided that in
any one year no more than $100,000 of such expenses not charged against a
completed transaction shall be reimbursed.
Section 6. Loans.
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(a) At the request of DGHA, Silica shall provide to DGHA one or more
interest-free loans of not more than $1 million in the aggregate per calendar
year, throughout the term of this Agreement (the "Loans").
(b) The Loans shall mature and be payable as of the date of the
consummation of an IRR Event.
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(c) The Loans shall be guaranteed by the persons listed on Schedule 1
attached hereto (the "Guarantors") and in proportion with the percentages listed
opposite such Guarantors' names on Schedule 1, which guarantees shall be several
but not joint obligations of the Guarantor. A form of such guarantees is
attached hereto as Exhibit C.
Section 7. Acquisition Fee.
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Within 30 days after the closing of any New Acquisition, USSH shall pay to
DGHA an acquisition fee equal to 1% (one percent) of the total purchase price,
plus all third party indebtedness for borrowed money assumed by any Company or
any Subsidiary of any Company, paid or payable, or otherwise to be distributed,
directly or indirectly, by any Company or any Subsidiary of any Company in
connection with such New Acquisition.
Section 8. Notices.
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All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed sufficient if personally delivered, sent by
nationally-recognized overnight courier, by facsimile, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to DGHA, to:
D. George Harris & Associates, Inc.
399 Park Avenue
32nd Floor
New York, New York 10022
Attention: Anthony J. Petrocelli
Telecopier: (212) 207-6450
Telephone: (212) 207-6405
if to the Companies:
USS Holdings, Inc.
c/o U.S. Silica Company
P.O. Box 187
Berkeley Springs, WV 25411
Attention: President
Telecopier: (304) 258-3500
Telephone: (304) 258-2500
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with a copy to:
Chase Venture Capital Associates, L.P.
c/o Chase Capital Partners
380 Madison Avenue
12th Floor
New York, NY 10017-2070
Attention: Timothy J. Walsh
Telecopier: (212) 622-3755
Telephone: (212) 622-3054
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of nationally-
recognized overnight courier, on the next business day after the date when sent,
(c) in the case of facsimile transmission, when received, and (d) in the case of
mailing, on the third business day following that on which the piece of mail
containing such communication is posted.
Section 9. Benefits of Agreement.
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This Agreement shall bind and inure to the benefit of any successors to or
assigns of DGHA and the Companies; provided, however, that this Agreement may
not be assigned by any party hereto without the prior written consent of the
other parties. The obligations of the Companies hereunder shall be joint and
several.
Section 10. Governing Law.
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This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York (without giving effect to
principles of conflicts of laws).
Section 11. Entire Agreement; Amendments.
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This Agreement contains the entire understanding of the parties with
respect to its subject matter, and neither it nor any part of it may in any way
be altered, amended, extended, waived, discharged or terminated except by a
written agreement signed by each of the parties hereto.
Section 12. Counterparts.
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This Agreement may be executed in counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such counterparts together
shall constitute but one agreement.
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Section 13. Waivers.
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Any party to this Agreement may, by written notice to the other parties,
waive any provision of this Agreement. The waiver by any party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
* * * * *
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IN WITNESS WHEREOF, the parties have duly executed this Management
Services Agreement as of the date first above written.
USS HOLDINGS, INC.
By: /s/
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Name:
Title:
USS INTERMEDIATE HOLDCO, INC.
By: /s/
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Name:
Title:
U.S. SILICA COMPANY
By: /s/ Richard E. Goodell
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Name:
Title:
D. GEORGE HARRIS & ASSOCIATES, INC.
By: /s/
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Name:
Title:
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EXHIBIT A
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Fiscal Year EBITDA
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Fiscal Year Ending December 31, 1998 $30,986
Fiscal Year Ending December 31, 1999 33,222
Fiscal Year Ending December 31, 2000 35,607
EXHIBIT B
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Aggregate
For any fiscal year Compensation
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Actual EBITDA equal to or greater
than 118% of Budgeted EBITDA $804,570
Actual EBITDA equal to or greater
than 116% of Budgeted EBITDA but less
than 118% of Budgeted EBITDA $777,751
Actual EBITDA equal to or greater
than 114% of Budgeted EBITDA but less
than 116% of Budgeted EBITDA $750,932
Actual EBITDA equal to or greater
than 112% of Budgeted EBITDA but less
than 114% of Budgeted EBITDA $724,113
Actual EBITDA equal to or greater
than 110% of Budgeted EBITDA but less
than 112% of Budgeted EBITDA $697,294
Actual EBITDA equal to or greater
than 108% of Budgeted EBITDA but less
than 110% of Budgeted EBITDA $670,475
Actual EBITDA equal to or greater
than 106% of Budgeted EBITDA but less
than 108% of Budgeted EBITDA $643,656
Actual EBITDA equal to or greater
than 104% of Budgeted EBITDA but less
than 106% of Budgeted EBITDA $616,837
Actual EBITDA equal to or greater
than 102% of Budgeted EBITDA but less
than 104% of Budgeted EBITDA $590,018
Actual EBITDA equal to or greater
than 100% of Budgeted EBITDA but less
than 102% of Budgeted EBITDA $563,199
Aggregate
For any fiscal year Compensation
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Actual EBITDA equal to or greater
than 98% of Budgeted EBITDA but less
than 100% of Budgeted EBITDA $536,380
Actual EBITDA equal to or greater
than 96% of Budgeted EBITDA but less
than 98% of Budgeted EBITDA $509,561
Actual EBITDA equal to or greater
than 94% of Budgeted EBITDA but less
than 96% of Budgeted EBITDA $482,742
Actual EBITDA equal to or greater
than 92% of Budgeted EBITDA but less
than 94% of Budgeted EBITDA $455,923
Actual EBITDA equal to or greater
than 90% of Budgeted EBITDA but less
than 92% of Budgeted EBITDA $429,104
Actual EBITDA equal to or greater
than 88% of Budgeted EBITDA but less
than 90% of Budgeted EBITDA $402,285
Actual EBITDA equal to or greater
than 86% of Budgeted EBITDA but less
than 88% of Budgeted EBITDA $375,466
Actual EBITDA equal to or greater
than 84% of Budgeted EBITDA but less
than 86% of Budgeted EBITDA $348,647
Actual EBITDA equal to or greater
than 82% of Budgeted EBITDA but less
than 84% of Budgeted EBITDA $321,828
Actual EBITDA equal to or greater
than 80% of Budgeted EBITDA but less
than 82% of Budgeted EBITDA $295,009
Actual EBITDA less than 80% of
Budgeted EBITDA $268,190