EXHIBIT 10.8
EXECUTION COPY
THIS MONITORING FEE AGREEMENT is dated as of November 4, 2003 (this
"AGREEMENT") and is between Nalco Company, a Delaware corporation (the
"COMPANY"), Blackstone Management Partners IV L.L.C., a Delaware limited
liability company ("BMP"), Apollo Management V, L.P. ("Apollo") and Xxxxxxx,
Xxxxx & Co. ("GS"). BMP, Apollo and GS are referred to herein collectively as
the "SPONSOR MANAGEMENT ENTITIES".
BACKGROUND
1. The Investor Groups (as defined in the LLC Agreement) entered into an
amended and restated limited liability company operating agreement dated
November 4, 2003, relating to Nalco Investment Holdings LLC (the "LLC
AGREEMENT").
2. Nalco Holdings LLC, Xxx Holding Company and Nalco International S.A.S.
entered into a Stock Purchase Agreement dated as of August 31, 2003 (the "SPA"),
pursuant to which Nalco Holdings LLC acquired the Company and certain
subsidiaries of Nalco International S.A.S.
3. The Sponsor Management Entities, which are affiliated with Nalco
Investment Holdings LLC (the ultimate parent company of the Company), have
expertise in the areas of finance, strategy, investment, acquisitions and other
matters relating to the Company and its business.
4. The Company desires to avail itself, for the term of this Agreement, of
the Sponsor Management Entities' expertise in providing financial and structural
analysis, due diligence investigations, corporate strategy, other advice and
negotiation assistance, which the Company believes will be beneficial to it, and
the Sponsor Management Entities wish to provide the services to the Company as
set forth in this Agreement in consideration of the payment of the fees
described below.
In consideration of the premises and agreements contained herein and of
other good and valuable consideration, the sufficiency of which are hereby
acknowledged, the parties agree as follows:
AGREEMENT
SECTION 1. APPOINTMENT. The Company hereby engages the Sponsor Management
Entities to provide the services described in Section 2 (the "SERVICES") for the
term of this Agreement on the terms and subject to the conditions of this
Agreement.
SECTION 2. SERVICES. The Sponsor Management Entities agree that during the
term of this Agreement, they will provide to the Company, by and through
themselves, their affiliates and such respective officers, employees,
representatives and third parties as the Sponsor Management Entities in their
sole discretion may designate from time to time, monitoring,
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advisory and consulting services in relation to the affairs of the Company and
its subsidiaries, including, without limitation, (a) advice regarding the
structure, terms, conditions and other provisions, distribution and timing of
debt and equity offerings and advice regarding relationships with the Company's
and its subsidiaries' lenders and bankers, (b) advice regarding the strategy of
the Company, (c) advice regarding dispositions and/or acquisitions and (d) such
other advice directly related or ancillary to the above financial advisory
services as may be reasonably requested by the Company; provided that the
responsibilities of any Sponsor Management Entity shall not be substantially
disproportionate to the responsibilities of the other Sponsor Management
Entities. It is expressly agreed that the services to be performed hereunder
will not include investment banking or other financial advisory services which
may be provided by the Sponsor Management Entities or any of their affiliates to
the Company in connection with any specific acquisition, divestiture,
refinancing or recapitalization by the Company or any of its subsidiaries. The
Sponsor Management Entities may be entitled to receive additional compensation
for providing services of the type specified in the preceding sentence by mutual
agreement of the Company or such subsidiary (subject to approval of the board of
directors of Nalco Investment Holdings LLC as provided in the LLC Agreement), on
the one hand, and one or more of the Sponsor Management Entities or their
relevant affiliates, on the other hand.
SECTION 3. MONITORING FEE.
(a) In consideration of the Services being provided by the Sponsor
Management Entities, the Company will pay to the Sponsor Management Entities an
annual monitoring fee in respect of each fiscal year from and including fiscal
2003 (for which a pro-rated amount shall be assessed) (the "MONITORING FEE"; the
term "Monitoring Fee" as used in this Agreement with respect to any fiscal year,
means the Annual Amount and the Excess Amount (each as defined below)) which,
with respect to any Annual Amount, shall be paid annually and in advance. The
first payment of an aggregate amount of $1,800,000, which shall be paid in
respect of fiscal 2003, shall be paid on December 31, 2003. On each subsequent
January 1 (beginning on January 1, 2004) the Company shall pay the Sponsor
Management Entities an aggregate amount of $10,000,000 (such amount, an "ANNUAL
AMOUNT"). In addition, on each April 30, commencing on April 30, 2004, the
Company shall pay the Sponsor Management Entities the excess, if any, of an
amount equal to 2% of EBITDA (as defined below) for the most recently completed
fiscal year over $10,000,000 (any such amount, an "EXCESS AMOUNT"); provided,
that in the event the Termination Date occurs prior to April 30 in any fiscal
year, the Excess Amount shall be payable on the Termination Date. The Monitoring
Fee will accrue and be payable through December 31 of the year in which the
Termination Date (as defined below) occurs. Except as set forth in paragraph
(c), any amounts payable by the Company to the Sponsor Management Entities
pursuant to this Section 3 shall be paid to each respective Sponsor Management
Entity (i) with respect to any Annual Amount, pro rata based on the percentage
interests in Nalco Investment Holdings LLC (of which the Company is an indirect
subsidiary) held by the Investor Group(s) that is affiliated with such Sponsor
Management Entity (relative to the interests held by the other Investor Groups)
as of the last day of the quarterly period preceding the payment date or (ii)
with respect to any Excess Amount, pro rata based on the average of the
percentage interests in Nalco Investment Holdings LLC held by the Investor
Group(s) that is affiliated with such Sponsor Management Entity (relative to the
interests held by the other Investor Groups) at the end of each quarterly period
during the fiscal year in respect of which such Excess Amount is owed. All
amounts paid by the Company to the Sponsor Management Entities pursuant to this
Section 3
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shall be made by wire transfer in same-day funds to the respective bank accounts
designated by the Sponsor Management Entities, and shall not be refundable under
any circumstances. For purposes of this Agreement, "TERMINATION DATE" means the
earliest of (i) the twelfth anniversary of the date hereof, (ii) such time as
the Investor Groups and their affiliates then owning beneficial economic
interests in Nalco Investment Holdings LLC own less in the aggregate than 5% of
the beneficial economic interest of Nalco Investment Holdings LLC and (iii) such
earlier date as the Company and the Sponsor Management Entities may mutually
agree upon. For purposes of this Section 3, "EBITDA" shall have the meaning set
forth in the Credit Agreement dated November 4, 2003 by and among Nalco Holdings
LLC ("HOLDINGS"), the Company, certain foreign subsidiary borrowers and the
lenders named therein (the "CREDIT AGREEMENT").
(b) To the extent the Company does not pay the Monitoring Fee for any
reason, including by reason of any prohibition on such payment pursuant to the
terms of any debt financing of the Company or its subsidiaries, the payment by
the Company to the Sponsor Management Entities of the accrued and payable
Monitoring Fee will be payable immediately on the earlier of (i) the first date
on which the payment of such deferred Monitoring Fee is no longer prohibited
under any contract applicable to the Company and the Company is otherwise able
to make such payment, and (ii) total or partial liquidation, dissolution or
winding up of the Company. Any annual Monitoring Fee not paid on the scheduled
due date will bear interest, payable in cash on each scheduled due date, at an
annual rate of 10%, compounded quarterly, from the date due until paid.
SECTION 4. REIMBURSEMENTS. In addition to the fees payable pursuant to
this Agreement, the Company will pay directly or reimburse the Sponsor
Management Entities and each of their respective affiliates for their respective
Out-of-Pocket Expenses (as defined below). For the purposes of this Agreement,
the term "OUT-OF-POCKET EXPENSES" means the reasonable out-of-pocket costs and
expenses incurred by a Sponsor Management Entity and their respective affiliates
in connection with the Services provided under this Agreement (including prior
to the Effective Time), including, without limitation, (a) fees and
disbursements of any independent professionals and organizations, including
independent accountants, outside legal counsel or consultants, retained by such
Sponsor Management Entity, Investor Groups or any of their affiliates, (b) costs
of any outside services or independent contractors such as couriers, business
publications, on-line financial services or similar services, retained or used
by such Sponsor Management Entity, Co-Investor or any of their respective
affiliates and (c) transportation, per diem costs, word processing expenses or
any similar expense not associated with their or their affiliates' ordinary
operations. All payments or reimbursements for Out-of-Pocket Expenses will be
made by wire transfer in same-day funds to the bank account designated by such
Sponsor Management Entity or its relevant affiliate (if such Out-of-Pocket
Expenses were incurred by such Sponsor Management Entity, Co-Investor or their
respective affiliates) promptly upon or as soon as practicable following request
for reimbursement in accordance with this Agreement, to the account indicated to
the Company by the relevant payee.
SECTION 5. INDEMNIFICATION. The Company will indemnify and hold
harmless the Sponsor Management Entities, their affiliates and their respective
partners (both general and limited), members (both managing and otherwise),
officers, directors, employees, agents and representatives (each such person
being an "INDEMNIFIED PARTY") from and against
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any and all losses, claims, damages and liabilities, including in connection
with seeking indemnification, whether joint or several (the "LIABILITIES"),
related to, arising out of or in connection with the Services contemplated by
this Agreement or the engagement of the Sponsor Management Entities pursuant to,
and the performance by the Sponsor Management Entities of the Services
contemplated by, this Agreement, whether or not pending or threatened, whether
or not an Indemnified Party is a party, whether or not resulting in any
liability and whether or not such action, claim, suit, investigation or
proceeding is initiated or brought by the Company. The Company will reimburse
any Indemnified Party for all reasonable costs and expenses (including
reasonable attorneys' fees and expenses) as they are incurred in connection with
investigating, preparing, pursuing, defending or assisting in the defense of any
action, claim, suit, investigation or proceeding for which the Indemnified Party
would be entitled to indemnification under the terms of the previous sentence,
or any action or proceeding arising therefrom, whether or not such Indemnified
Party is a party thereto. The Company will not be liable under the foregoing
indemnification provision with respect to any particular loss, claim, damage,
liability, cost or expense of an Indemnified Party that is determined by a
court, in a final judgment from which no further appeal may be taken, to have
resulted primarily from the gross negligence or willful misconduct of such
Indemnified Party. The attorneys' fees and other expenses of an Indemnified
Party shall be paid by the Company as they are incurred upon receipt, in each
case, of an undertaking by or on behalf of the Indemnified Party to repay such
amounts if it is finally judicially determined that the Liabilities in question
resulted primarily from the gross negligence or willful misconduct of such
Indemnified Party.
SECTION 6. ACCURACY OF INFORMATION. The Company shall furnish or cause
to be furnished to the Sponsor Management Entities such information as the
Sponsor Management Entities believe reasonably appropriate to their monitoring,
advisory and consulting services hereunder and to comply with Securities and
Exchange Commission or other legal requirements relating to the beneficial
ownership by the Co-Investors of equity securities of Nalco Investment Holdings
LLC (all such information so furnished, the "INFORMATION"). The Company
recognizes and confirms that the Sponsor Management Entities (a) will use and
rely primarily on the Information and on information available from generally
recognized public sources in performing the Services contemplated by this
Agreement without having independently verified the same, (b) do not assume
responsibility for the accuracy or completeness of the Information and such
other information and (c) are entitled to rely upon the Information without
independent verification.
SECTION 7. EFFECTIVE TIME. This Agreement will become effective (the
"EFFECTIVE TIME") as of the date hereof.
SECTION 8. TERM. The obligation to provide Services shall continue
through and until the earlier of (i) the Termination Date or (ii) a transaction
(including, without limitation, any merger, consolidation or sale of assets or
equity interests) the result of which is that any Person (as defined in the LLC
Agreement) other than an Investor Group or a Permitted Transferee (as defined in
the LLC Agreement) of an Investor Group becomes the beneficial owner, directly
or indirectly, of more than 50% of the voting stock, or all or substantially all
of the assets of the Company (each such event, a "CHANGE OF CONTROL"). Except as
expressly provided otherwise herein, all other provisions will survive the
Termination Date and a Change of Control.
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SECTION 9. PERMISSIBLE ACTIVITIES. Subject to applicable law, nothing
herein will in any way preclude the Sponsor Management Entities or their
affiliates (other than the Company or its subsidiaries and their respective
employees) or their respective partners (both general and limited), members
(both managing and otherwise), officers, directors, employees, agents or
representatives from engaging in any business activities or from performing
services for its or their own account or for the account of others, including
for companies that may be in competition with the business conducted by the
Company.
SECTION 10. MISCELLANEOUS.
(a) No amendment or waiver of any provision of this Agreement, or consent
to any departure by any party hereto from any such provision, will be effective
unless it is in writing and signed by the parties hereto. Any amendment, waiver
or consent will be effective only in the specific instance and for the specific
purpose for which given. The waiver by any party of any breach of this Agreement
will not operate as or be construed to be a waiver by such party of any
subsequent breach.
(b) Any notices or other communications required or permitted hereunder
will be sufficiently given if delivered personally or sent by facsimile with
confirmed receipt, or by overnight courier, addressed as follows or to such
other address of which the parties may have given written notice:
if to BMP:
c/o The Blackstone Group L.P.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxx
Facsimile: (000) 000-0000
with a copy (which will not constitute notice) to:
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
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if to Apollo:
Apollo Management V, L.P.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
with a copy (which will not constitute notice) to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Fax: (000) 000-0000
if to GS:
Xxxxxxx Xxxxx & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Fax: (000) 000-0000
with a copy (which will not constitute notice) to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx
Fax: (000) 000-0000
if to the Company:
Nalco Company
0000 X. Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
Unless otherwise specified herein, such notices or other communications will be
deemed received (i) on the date delivered, if delivered personally or sent by
facsimile with confirmed receipt, and (ii) one business day after being sent by
overnight courier.
(c) This Agreement, the LLC Agreement and the Sponsors Agreement dated
November 4, 2003 by and among Nalco Investment Holdings LLC and the Sponsor
Members named therein, will constitute the entire agreement between the parties
with respect to the subject
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matter hereof, and will supersede all previous oral and written (and all
contemporaneous oral) negotiations, commitments, agreements and understandings
relating hereto.
(d) This Agreement will be governed by, and construed in accordance with,
the laws of the State of New York.
(e) The provisions of this Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors. Subject to the
next sentence, no Person other than the parties hereto and their respective
successors is intended to be a beneficiary of this Agreement. The parties
acknowledge and agree that the Co-Investors and their affiliates and their
respective partners (both general and limited), members (both managing and
otherwise), officers, directors, employees, agents and representatives are
intended to be third-party beneficiaries under Section 5 of this Agreement.
(f) This Agreement may be executed by one or more parties to this Agreement
on any number of separate counterparts (including by facsimile), and all of said
counterparts taken together will be deemed to constitute one and the same
instrument.
(g) Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction will, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.
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IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Monitoring Fee Agreement on the date first written above.
NALCO COMPANY
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chairman and Chief Executive Officer
BLACKSTONE MANAGEMENT PARTNERS IV L.L.C.
By: /s/ Xxxxx Xxx
-----------------------------------
Name: Xxxxx Xxx
Title: Member
APOLLO MANAGEMENT V, L.P.
By: /s/ Xxxx Xxxxxx
-----------------------------------
Name: Xxxx Xxxxxx
Title: Vice President
XXXXXXX XXXXX & CO.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Managing Director
