Letter Agreement - HPP Specialty Pet Products Inc., Heinz Pet Products, Heinz H J Co., VCA Specialty Pet Products Inc. and Veterinary Centers of America Inc.
HPP SPECIALTY PET PRODUCTS, INC.
HEINZ PET PRODUCTS
One Riverfront Place
Newport, Kentucky 41070
September 9, 1996
CONFIDENTIAL
Mr. Robert Antin, President & CEO
VCA Specialty Pet products, Inc.
3420 Ocean Park Boulevard
Suite 1000
Santa Monica, CA 90405
Dear Bob,
Reference is made to the Partnership Agreement of Vet's Choice Partnership
(originally Specialty Pet products Partners) (the "Partnership') dated as of
January 1, 1993 by and between VCA Specialty Pet Products, Inc. ("VCA Specialty
Pet") and HPP Specialty Pet Products, Inc. ("HPP Specialty Pet"), as amended to
date (the "Partnership Agreement"). VCA Specialty Pet is a wholly owned
subsidiary of Veterinary Centers of America, Inc. ("VCA") and EPP Specialty Pet
is a wholly owned subsidiary of Star-Kist Foods, Inc. ("Star-Kist"), Star-Kist
is a wholly owned subsidiary of H. J. Heinz Company ("Heinz"). Undefined
capitalized terms used herein shall have the meanings set forth in the
Partnership Agreement.
Particular reference is made to section 6.10 Of the partnership which
relates to "Other Business of Partners." Section 6.10 provides that "the
Partners, their corporate Affiliates, and any Affiliate of any Partner who is
an executive officer of such Partner or of the Partnership shall not engage in
the wholesale marketing, sale or distribution of premium pet products through
the endorsement of veterinarians or veterinary facilities except through the
Partnership." In addition, Paragraph(i) of the letter agreement dated March 8,
1996 (the "Letter Agreement") among HPP Specialty Pet, HPP, VCA Specialty Pet
and VCA amending the Partnership Agreement provides the HPP Specialty Pet and
its corporate Affiliates shall not engage in the wholesale marketing, sale or
distribution of therapeutic pet foods which are competitive with Select Care
products through the endorsement of veterinarians or through veterinary
facilities except through the Partnership. HPP Specialty Pet has informed VCA
and VCA Specialty Pet that H. J. Heinz Company of Canada Ltd. ("Heinz Canada"),
or an Affiliate of Heinz Canada, intends to acquire the pet food business of
Martin Pet Foods Inc. and its affiliates (the "Acquired Business"). Products
manufactured, marketed and sold by the Acquired Business (including therapeutic
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products which are competitive with Select Care) are now and will in the future
be sold in veterinary facilities or through the endorsement of veterinarians.
In exchange for the payments provided for below, VCA Specialty Pet and VCA
shall provide support, assistance, management consultation and sales materials
and will assist in marketing and sales of pet food products by Heinz or any
current or future Affiliate of Heinz (collectively, a "Heinz Seller") in the
countries of Canada, Japan, New Zealand and Australia upon the request of any
Heinz Seller for a period of five years from the date of this letter agreement.
Heinz will reimburse VCA Specialty Pet and VCA for travel overseas and out-of-
pocket expenses incurred in connection with providing such services. VCA shall
not be required to provide such services if it determines, in its sole
judgment, that provision of such services shall interfere with VCA or its
operations. Subject to the provisions set forth in the following paragraph,
VCA Specialty Pet and VCA agree in perpetuity that no restrictions on the sales
or marketing of pet food products in Canada, Japan, New Zealand and Australia
by Heinz or any current or future Affiliate of Heinz shall be imposed by VCA
Specialty Pet, VCA or any Affiliate of either of such parties by reason of
Section 6.10 of the Partnership Agreement, the Letter Agreement or otherwise in
connection with the Partnership.
VCA and VCA Specialty Pet have agreed to the foregoing on the express
condition that Heinz agrees to the following:
(i) In consideration of the foregoing, Heinz or an Affiliate shall pay
VCA $1,000,000 on September 30, 1996 plus four payment of $1,200,000
each on September 30, 1997, 1998, 1998 and 2000 (or on the following
business day with respect to any such date that does not fall on a
business day). Heinz shall not be in default under this provision
unless payment is not made within five business days following
written notification of its failure to pay an installment on the
specified due date. Heinz shall have the right to prepay any amounts
due hereunder without penalty.
(ii) Heinz or an Affiliate shall provide Vet's Choice Partnership with
commercially reasonable R&D support.
(iii) Heinz will cause VMD US or the assignee of VMD US' partnership
interest in Vet's Choice Therapeutic to elect to dissolve Vet's
Choice Therapeutic in accordance with the Joint Venture
Agreement dated as of March 23, 1994.
Compliance with the provisions of clauses (i) through (iii) hereof are
conditions subsequent to the matters set forth in this letter. Time is of the
essence hereof. This agreement will be effective only upon the completion of
the acquisition of the Acquired Business by Heinz Canada or an Affiliate of
Heinz Canada. If such acquisition fails for any reason to be completed, this
Letter Agreement shall be null and void.
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Please indicate the agreement of VCA Specialty Pet and VCA to the matters
set forth in this letter by signing the enclosed copy of this letter and
returning it tome.
Very truly yours,
HPP SPECIALTY PET
PRODUCTS, INC.
By: ___________________________________
Its: ___________________________________
HEINZ PET PRODUCTS, a Division of
STAR-KIST FOODS, INC.
By: ____________________________________
Its: ____________________________________
Accepted and Agreed.
VCA SPECIALTY PET H J. HEINZ COMPANY
PRODUCTS, INC.
By: ______________________________ By: ____________________________________
Its: ____________________________________
VETERINARY CENTERS
OF AMERICA, INC.
By: ______________________________
Dated: September ____, 1996