MONITORING AGREEMENT
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MONITORING AGREEMENT (this "Agreement"), dated as of March 13,
1998, among THE IMPERIAL HOME DECOR GROUP INC., a Delaware corporation
("IHDG"), and BLACKSTONE MANAGEMENT PARTNERS III L.L.C., a Delaware limited
liability company ("BMP").
Recitals
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A. BMP, by and through itself, its affiliates and their
respective officers, employees and representatives, has expertise in the areas
of management, finance, strategy, investment and acquisitions relating to the
business of IHDG; and
B. IHDG desires to avail itself, for the term of this
Agreement, of the expertise of BMP in the aforesaid areas and BMP wishes to
provide the services to IHDG as herein set forth;
Agreement
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NOW, THEREFORE, in consideration of the foregoing recitals
and the covenants and conditions contained herein, the parties hereto agree as
follows:
1. Appointment. IHDG hereby engages BMP to render the
advisory and consulting services described in Section 2 hereof for the term of
this Agreement.
2. Services. BMP hereby agrees that during the term of this
Agreement it shall render to IHDG and its subsidiaries, by and through itself,
its affiliates, and their respective officers, members, employees and
representatives as BMP in its sole discretion shall designate from time to
time, advisory and consulting services in relation to the affairs of IHDG and
its subsidiaries, including, without limitation, (i) advice in designing
financing structures and advice regarding relationships with IHDG and its
subsidiaries' lenders and bankers; (ii) advice regarding the structure and
timing of public offerings of debt and equity securities of IHDG and its
subsidiaries; (iii) advice regarding property dispositions or acquisitions;
and (iv) such other advice directly related or ancillary to the above
financial advisory services as may be reasonably requested by IHDG. It is
expressly agreed that the services to be performed hereunder shall not include
investment banking or other financial advisory services rendered by BMP or its
affiliates to IHDG in connection with any specific acquisition, divestiture,
refinancing or recapitalization by IHDG or any of its subsidiaries. BMP may be
entitled to receive additional compensation for providing services of the type
specified in the preceding sentence by mutual agreement of IHDG or such
subsidiary and BMP.
3. Fees. In consideration of the services contemplated by
Section 2 and for similar services rendered prior to the date hereof (a) IHDG
agrees to pay to BMP the sum of $4,000,000, payable on the date hereof, and
(b) for the term of this Agreement, IHDG and its respective successors,
jointly and severally, agree to pay to BMP an annual fee (the "Monitoring
Fee") of $1,500,000, payable in quarterly installments on March 31, June 30,
September 30 and
December 31 of each year commencing on the date hereof through the date (the
"Termination Date") on which affiliates of BMP hold, directly, beneficial
ownership of less than 10% of the equity interest in IHDG acquired in the
Transactions, or such earlier date as IHDG and BMP shall agree. The Monitoring
Fee shall not be prorated for the first calendar year of this Agreement. Any
Monitoring Fee for the last calendar year of this Agreement shall be prorated
for the period of such year ending on the Termination Date. To the extent
required by any debt financing of IHDG or its subsidiaries, the Monitoring Fee
shall be deferred until the (i) dissolution of IHDG, and (ii) payment of the
Monitoring Fee shall bear interest at a rate of ten percent (10%) per annum,
compounded annually, from the date deferred until paid. The "Transactions" are
the transactions contemplated by the Recapitalization Agreement (the
"Recapitalization Agreement"), dated as of October 14, 1997, as amended, among
Xxxxxx, Inc., a New Jersey corporation, Xxxxxx Decorative Products Holdings,
Inc., a Delaware corporation, and BDPI Holdings Corporation ("MergerCo"), a
Delaware corporation and an Amended and Restated Acquisition Agreement (the
"Imperial Acquisition Agreement"), dated as of November 4, 1997 and amended
and restated on March 9, 1998, among Imperial Wallcoverings, Inc., a Delaware
corporation, Xxxxxxx & Xxxxxx Products Co., a Delaware corporation and
MergerCo.
4. Reimbursements. In addition to the fees payable pursuant
to this Agreement, IHDG shall pay directly or reimburse BMP for its
Out-of-Pocket Expenses. Promptly following IHDG's request therefor, BMP will
provide written back-up relating to any Out-of-Pocket Expenses to be paid or
reimbursed by IHDG pursuant to this Agreement. For the purposes of this
Agreement, the term "Out-of-Pocket Expenses" shall mean the reasonable
out-of-pocket costs and expenses reasonably incurred by BMP or its affiliates
in connection with the services rendered hereunder in pursuing, or otherwise
related to, the business or IHDG and the transactions contemplated by the
Recapitalization Agreement and the Imperial Acquisition Agreement, including,
without limitation, (i) fees and disbursements of any independent
professionals and organizations, including independent accountants, outside
legal counsel or consultants, (ii) costs of any outside services or
independent contractors such as financial printers, couriers, business
publications, on-line financial services or similar services, (iii) research
and research related expenses and (iv) transportation, per diem costs, word
processing expenses or any similar expense not associated with its ordinary
operations. All reimbursements for Out-of-Pocket Expenses shall be made
promptly upon or as soon as practicable after presentation by BMP to IHDG of a
written statement thereof.
5. Indemnification. (a) IHDG will indemnify and hold
harmless BMP, its 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 any and all losses, claims, damages and liabilities,
whether joint or several (the "Indemnifiable Losses"), related to, arising out
of or in connection with the advisory and consulting services contemplated by
this Agreement or the engagement of BMP pursuant to, and the performance by
BMP of the services contemplated by, this Agreement, whether or not pending or
threatened, whether or not an Indemnified Party is a party and whether or not
such action, claim, suit, investigation or proceeding is initiated or brought
by IHDG, and 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,
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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 this sentence, or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party
thereto, provided that, subject to the following sentence, IHDG shall be
entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment. Any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense, and in any action, claim, suit, investigation or
proceeding in which both IHDG and/or one or more of its subsidiaries, on the
one hand, and an Indemnified Party, on the other hand, is, or is reasonably
likely to become, a party, such Indemnified Party shall have the right to
employ separate counsel at the expense of IHDG and to control its own defense
of such action, suit, claim, investigation or proceeding if, in the reasonable
opinion of counsel to such Indemnified Party, a conflict or potential conflict
exists between IHDG, on the one hand, and such Indemnified Party, on the other
hand, that would make such separate representation advisable. The Company
agrees that it will not, without the prior written consent of the applicable
Indemnified Party, settle, compromise or consent to the entry of any judgment
in any pending or threatened claim, suit, investigation, action or proceeding
relating to the matters contemplated hereby (if any Indemnified Party is a
party thereto or has been threatened to be made a party thereto) unless such
settlement, compromise or consent includes an unconditional release of the
applicable Indemnified Party and each other Indemnified Party from all
liability arising or that may arise out of such claim, suit, investigation,
action or proceeding. Provided IHDG is not in breach of its indemnification
obligations hereunder, no Indemnified Party shall settle or compromise any
claim subject to indemnification hereunder without the consent of the IHDG.
IHDG will not be liable under the foregoing indemnification provision with
respect to any Indemnified Party, to the extent that any loss, claim, damage,
liability, cost or expense is determined by a court, in a final judgment from
which no further appeal may be taken, to have resulted primarily from the
willful misconduct of BMP. If an Indemnified Party is reimbursed hereunder for
any expenses, such reimbursement of expenses shall be refunded to the extent
it is finally judicially determined that the Indemnifiable Losses in question
resulted primarily from the willful misconduct of BMP.
(b) The Company agrees that if any indemnification sought
by any Indemnified Party pursuant to this Section is unavailable for any
reason or is insufficient to hold the Indemnified Party harmless against any
Indemnifiable Losses referred to herein, then IHDG shall contribute to the
Indemnifiable Losses for which such indemnification is held unavailable or
insufficient in such proportion as is appropriate to reflect the relative
benefits received (or anticipated to be received) by IHDG, on the one hand,
and BMP, on the other hand, in connection with the transactions which gave
rise to such Indemnifiable Losses or, if such allocation is not permitted by
applicable law, not only such relative benefits but also the relative faults
of IHDG, on the one hand, and BMP, on the other hand, as well as any other
equitable considerations, subject to the limitation that in any event the
aggregate contribution by the Indemnified Parties to all Indemnifiable Losses
with respect to which contribution is available hereunder shall not exceed the
fees actually received by BMP in connection with the transactions which gave
rise to such Indemnifiable Losses (excluding any amounts paid as reimbursement
of such expenses).
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(c) Notwithstanding any provision herein to the contrary,
no officer or director of IHDG shall be liable for any obligations of IHDG
hereunder, including, without limitation, the payment of the Monitoring Fee
pursuant to Section 3, the payment or reimbursement of Out-of-Pocket Expenses
pursuant to Section 4 and the indemnification obligations under Section 5(a).
6. Accuracy of Information. IHDG shall furnish or cause to
be furnished to BMP such information as BMP believes appropriate to its
monitoring services hereunder and to the ownership by affiliates of BMP of
equity interests of IHDG (all such information so furnished being the
"Information"). IHDG recognizes and confirms that BMP (i) 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, (ii) does not assume
responsibility for the accuracy or completeness of the Information and such
other information and (iii) is entitled to rely upon the Information without
independent verification.
7. Term. This Agreement shall be effective as of the date
hereof and shall continue until the Termination Date, provided that Section 4
shall remain in effect with respect to Out-of-Pocket Expenses incurred, and
any Monitoring Fee that has become payable, prior to the Termination Date. The
provisions of Section 5, 6 and 8 and otherwise as the context so requires
shall survive the termination of this Agreement.
8. Permissible Activities. Subject to applicable law,
nothing herein shall in any way preclude BMP, its affiliates 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 IHDG.
9. Miscellaneous.
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(a) No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party hereto from any such
provision, shall be effective unless the same shall be in writing and signed
by all of the parties hereto. Any amendment, waiver or consent shall 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 shall 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 shall be sufficiently given if delivered personally or
sent by facsimile, Federal Express, or other overnight courier, addressed as
follows or to such other address of which the parties may have given notice:
If to BMP: c/o The Blackstone Group L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
0
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxxx
Senior Managing Director
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to IHDG: The Imperial Home Decor Group Inc.
00000 Xxxxxxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxx
President and Chief Executive Officer
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Unless otherwise specified herein, such notices or other communications shall
be deemed received (i) on the date delivered, if delivered personally or sent
by facsimile, and (ii) one business day after being sent by Federal Express or
other overnight courier.
(c) This Agreement shall constitute the entire agreement
between the parties with respect to the subject matter hereof, and shall
supersede all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating hereto.
(d) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York. This
Agreement shall inure to the benefit of, and be binding upon, BMP, IHDG and
their respective successors and assigns. The provisions of Section 5 shall
inure to the benefit of each Indemnified Party.
(e) This Agreement may be executed by one or more parties
to this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
(f) The waiver by any party of any breach of this
Agreement shall not operate as or be construed to be a waiver by such party of
any subsequent breach.
(g) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, 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 shall be not invalidate or render
unenforceable such provision in any other jurisdiction.
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IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered by their duly authorized officers or agents as of
the date first above written.
BLACKSTONE MANAGEMENT PARTNERS
III L.L.C.
By:
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Name:
Title:
THE IMPERIAL HOME DECOR GROUP INC.
By:
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Name:
Title:
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