OUTSOURCING SERVICES GROUP, INC.
425 South Ninth Avenue
City of Industry, California 91746
Telephone: (626) 968-8531 Facsimile: (626) 336-4605
January 8, 1998
The Gordon + Morris Group
Suite 600
840 Newport Center Drive
Newport Beach, California 92660
Re: Amended and Restated Management Services Agreement
Dear Sirs:
This letter will confirm our agreement whereby The Gordon + Morris
Group will provide financial advisory, consulting and other management
services to Outsourcing Services Group, Inc. ("OSG") and each of its
following operating subsidiaries, Aerosol Services Company, Inc. ("ASC"),
Piedmont Laboratories, Inc. ("Piedmont"), and Kolmar Laboratories, Inc. and
each of its subsidiaries, Kolmar Canada Inc., Kolmar de Mexico, S.A. de
C.V., and Kolmar (Aust.) Pty Ltd. (collectively, "Kolmar") (each, an "OSG
Company," and collectively, the "OSG Companies"). For such services, the
OSG Companies shall pay you:
(a) a combined financial advisory fee of $350,000 per annum, payable in
equal quarterly installments in arrears on the first day of each
April, July, October and January, commencing April 1, 1998, which
fee is subject to adjustment in the event of further acquisitions
and/or dispositions (based upon one and one-half percent (1.5%) of
the EBITDA of the company being acquired or sold for the twelve
months prior to closing), provided you and your affiliates continue
to hold at least 33% of the greatest number of shares of OSG held by
you and your affiliates (after adjustments for stock splits and
similar events;
(b) upon the closing of the Kolmar acquisition, a fee of $800,000;
(c) an acquisition fee, upon the closing of any acquisition subsequent
to the Kolmar acquisition (including acquisitions structured as a
merger or consolidation of or with another corporation or entity),
or the acquisition of all or substantially all of the assets of
another entity by, any of the OSG Companies, to be equal to one
percent (1%) of the total consideration to third parties, including
assumption of debt involved in the transaction, or such other
percentage or amount (not to exceed two percent (2%)) as agreed by
The Gordon + Morris Group and the OSG Companies, but no such
transaction after which you and entities under your control no
longer hold an ownership interest in the OSG Companies shall be an
acquisition for purposes of this letter;
(d) a fee, upon the sale by OSG of any OSG Company, or of all or
substantially all the assets of any OSG Company, equal to one
percent (1%) of the total consideration received (including
assumption of debt), or such other percentage or amount (not to
exceed two percent (2%)) as agreed by The Gordon + Morris Group and
the OSG Companies;
(e) a debt refinancing fee, upon the closing of a debt refinancing
transaction involving any of the OSG Companies (but not with respect
to any refinancing which is part of a transaction for which a fee is
paid under paragraph (b) or (c) above), to be equal to one-half
percent (0.5%) of the amount refinanced, or such other percentage or
amount (not to exceed one percent (1%)) as agreed by The Gordon +
Morris Group and the OSG Companies; and
(f) reasonable out-of-pocket expenses for travel, meals, lodging, and
other items customarily reimbursed by clients to advisors and
consultants incurred in connection with the performance of services
hereunder, including without limitation reasonable fees and expenses
of counsel and accountants incurred in the performance of your
services to the OSG Companies.
The fees due hereunder shall be the joint and several obligations of all
OSG Companies. Upon the acquisition of any additional subsidiary of a OSG
Company, such subsidiary shall join in this agreement and be a OSG Company.
Upon sale of any OSG Company or any other transaction which results in such
entity not being controlled by OSG, such entity shall incur no further
liability under the Agreement.
Notwithstanding anything to the contrary contained herein, following
written notice to the OSG Companies and you by BT Commercial Corporation,
no such payments shall be made at any time at which payment of fees by the
OSG Companies is prohibited by Section 8.19 of the Credit Agreement to
which certain of the OSG Companies, BT Commercial Corporation, as Agent,
and Heller Financial, Inc., as Co-Agent, are parties, dated as of January
8, 1998, or the comparable terms of a successor agreement. Such items not
paid shall continue to accrue and shall be payable as soon as the Credit
Agreement no longer blocks or prohibits the payment of your fees.
This agreement may be terminated by OSG on 15 days written notice if you
no longer own any outstanding voting securities of the OSG Companies. On
such termination, any unearned fees shall be refunded to us.
This agreement amends and restates in its entirety, the Management
Services Agreement, dated as of June 30, 1997, by and among The Gordon +
Morris Group and certain of the OSG Companies.
Addendum A attached hereto sets forth certain rights and obligations of
the parties hereto with respect to any losses, claims, damages or
liabilities relating to or arising out of this agreement.
[Signature Page Follows]
[SIGNATURE PAGE -- MANAGEMENT SERVICES AGREEMENT]
If you are in agreement with the foregoing, please so indicate by
signing the enclosed copy of this letter and returning it to us, whereupon
it shall become a binding agreement between you and us as of the date first
written above. Upon payment of all amounts due under the separate
Management Services Agreements dated as of February 14, 1994, September 30,
1996 and June 30, 1997 to which you and one or more of the OSG Companies
are parties, such prior agreements shall be superseded by this agreement.
Very truly yours,
OUTSOURCING SERVICES GROUP, INC.
By:/s/ Joseph Sortais
-------------------------------------
Title: Chief Financial Officer
----------------------------------
AGREED and ACCEPTED as of this
date first above written:
THE GORDON + MORRIS GROUP AEROSOL SERVICES COMPANY, INC.
By:/s/ Michael Gordon By:/s/ Joseph Sortais
------------------------- -------------------------------------
Title: Chairman Title: Chief Financial Officer
--------------------- ---------------------------------
PIEDMONT LABORATORIES, INC.
By:/s/ Jospeh Sortais
-------------------------------------
Title: Chief Financial Officer
--------------------------------
[Signature Page Continues]
[SIGNATURE PAGE TO MANAGEMENT
SERVICES AGREEMENT CONTINUED]
KOLMAR LABORATORIES, INC.
By:/s/ Joseph Sortais
------------------------------------
Title: Chief Financial Officer
---------------------------------
KOLMAR CANADA INC.
By:/s/ Joseph Sortais
------------------------------------
Title: Chief Financial Officer
---------------------------------
KOLMAR DE MEXICO, S.A. de C.V.
By:/s/ Joseph Sortais
------------------------------------
Title: Chief Financial Officer
---------------------------------
KOLMAR (AUST.) PTY LTD.
By:/s/ Joseph Sortais
------------------------------------
Title: Chief Financial Officer
--------------------------------
Provided that it is in no
way liable for the $800,000
Kolmar acquisition fee.
ADDENDUM A
In connection with our engagement described in the foregoing letter
dated January 8, 1998 (the "Letter") to which this Addendum A is attached,
Outsourcing Services Group, Inc., Aerosol Services Company, Inc., Piedmont
Laboratories, Inc., Kolmar Laboratories, Inc., Kolmar Canada Inc., Kolmar
de Mexico, S.A. de C.V., and Kolmar (Aust.) Pty Ltd. (each, an "OSG
Company," collectively, the "OSG Companies") jointly and severally agree to
indemnify and hold harmless The Gordon + Morris Group and each of its
directors, officers, agents, employees and controlling persons (within the
meaning of the Securities Act of 1933, as amended) against any losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) related to or arising out of our engagement, and will reimburse
The Gordon + Morris Group and each other person indemnified hereunder for
all legal and other expenses as incurred in connection with investigations
or defending any such loss, claim, damage, liability, action or proceeding
whether or not in connection with pending or threatened litigation in which
The Gordon + Morris Group or any of its directors, officers, agents,
employees and controlling persons is a party; provided, however that none
of the OSG Companies will be liable in any such case (except cases arising
out of the use of information provided by any of them) for losses, claims,
damages, liabilities or expenses that a court of competent jurisdiction
shall have found in a final judgment to have arisen primarily from the
gross negligence or willful misconduct of The Gordon + Morris Group or the
party claiming a right to indemnification.
In case any proceeding shall be instituted involving any person in
respect of whom indemnity may be sought, such person (the "Indemnified
Party") shall promptly notify the OSG Companies, and the OSG Companies,
upon the request of the Indemnified Party, shall retain counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified Party
and any others the OSG Companies may designate in such proceeding and shall
pay as incurred the fees and expenses of such counsel related to such
proceedings. In any such proceeding, any Indemnified Party shall have the
right to retain its own counsel at its own expense, except that the OSG
Companies shall pay as incurred the fees and expenses of counsel retained
by the Indemnified Party in the event that (i) the OSG Companies and the
Indemnified Party shall have mutually agreed to the retention of such
counsel or, (ii) the named parties to any such proceeding (including any
impleaded parties) include the OSG Companies and the Indemnified Party and
representation of such parties by the same counsel would be inappropriate,
in the reasonable opinion of the Indemnified Party, due to actual or
potential differing interests between them.
No OSG Company shall be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or
if there be a final judgment for the plaintiff, the OSG Companies agree to
indemnify the Indemnified Party to the extent set forth in this Addendum A.
In addition, no OSG Company will, without the prior written consent of The
Gordon + Morris Group, settle or compromise or consent to the entry or any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not
The Gordon + Morris Group or any Indemnified Party is an actual or
potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of The
Gordon + Morris Group and each other Indemnified Party hereunder from all
liability arising out of such claim, action, suit or proceeding.
In the event a claim for indemnification under this Addendum A is
determined to be unenforceable by a final judgment of a court of competent
jurisdiction, then the OSG Companies shall contribute to the aggregate
losses, claims, damages or liabilities to which The Gordon + Morris Group
or its officers, directors, agents, employees or controlling persons may be
subject in such amount as is appropriate to reflect the relative benefits
received by the OSG Companies and the party seeking contribution on the one
hand and the relative faults of the OSG Companies and the party seeking
contribution on the other, as well as any other relevant equitable
considerations.
The indemnification provided herein shall survive termination of our
agreement and shall be binding upon any successors or assigns of each of
the OSG Companies.
Acknowledged and Agreed:
OUTSOURCING SERVICES GROUP, AEROSOL SERVICES COMPANY, INC.
INC.
By:/s/ Joseph Sortais By:/s/ Joseph Sortais
------------------------ -------------------------------
Title: Chief Financial Title: Chief Financial
Officer Officer
--------------------- ----------------------------
PIEDMONT LABORATORIES, INC.
By:/s/ Joseph Sortais
-------------------------------
Title: Chief Financial Officer
---------------------------
KOLMAR LABORATORIES, INC.
By:/s/ Joseph Sortais
-------------------------------
Title: Chief Financial Officer
---------------------------
KOLMAR CANADA INC.
By:/s/ Joseph Sortais
-------------------------------
Title: Chief Financial Officer
KOLMAR DE MEXICO, S.A. de C.V
By:/s/ Joseph Sortais
-------------------------------
Title: Chief Financial Officer
----------------------------
KOLMAR (AUST.) PTY LTD.
By:/s/ Joseph Sortais
--------------------------------
Title: Chief Financial Officer
-----------------------------
Provided that it is in no
way liable for the $800,000
Kolmar acquisition fee.