EXECUTION COPY
TRANSACTION AND MONITORING FEE AGREEMENT
This Transaction and Monitoring Fee Agreement is entered into as of
August 13, 1999, among Republic Technologies International, LLC, a Delaware
limited liability company (including its successors and assigns, the "Company"),
Blackstone Management Partners L.P., a Delaware limited partnership ("BMP"),
Veritas Capital Management, L.L.C., a Delaware limited liability company
("Veritas"), USX Corporation, a Delaware corporation ("USX"), Kobe Steel USA
Holdings, Inc., a Delaware corporation ("Kobe Steel"), and Kobe Delaware, Inc.,
a Delaware corporation ("Kobe Delaware").
WHEREAS, Bar Technologies Inc., to be renamed Republic Technologies
International, Inc. ("BarTech"), RES Holding Corporation, Republic Engineered
Steels, Inc., RTI Holdings, the Company, Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone
Family Investment Partnership II L.P., The Veritas Capital Fund, L.P., HVR
Holdings, L.L.C., USX, Kobe, USX Holdings, Kobe Holdings, USX RTI Holdings,
Inc., Kobe RTI Holdings, Inc., Kobe Delaware Inc., Lorain Tubular Company, LLC
and USS/Kobe Steel Company have entered into the Master Restructuring Agreement
dated as of August 13, 1999 (the "Master Restructuring Agreement" and the
transactions contemplated therein, the "Transactions"). Capitalized terms used
and not defined herein shall have the meanings assigned to them in the Master
Restructuring Agreement;
WHEREAS, each of BMP, Veritas, USX and Kobe Steel has undertaken to
facilitate the Transactions (in such capacity, the "Transaction Advisors"),
through each of the Transaction Advisor's provision of the financial and
structural analysis, due diligence investigations and negotiation assistance
necessary for such transactions to be consummated;
WHEREAS, BMP, Veritas, USX and Kobe Delaware, by and through
themselves, their respective affiliates and their respective officers, employees
and representatives, have expertise in the areas of finance, strategy,
investment and acquisitions relating to the business of the Company, and the
Company desires to avail itself, for the term of this Agreement, of the
expertise of BMP, Veritas, USX and Kobe Delaware in the aforesaid areas and BMP,
Veritas, USX and Kobe Delaware wish to provide the services to the Company as
herein set forth (in such capacity, the "Monitoring Parties");
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions contained herein, the parties hereto agree as follows:
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SECTION 1
TRANSACTION FEE
Section 1.1 Transaction Fee. In consideration of each of BMP,
Veritas, USX and Kobe Steel undertaking the financial and structural analysis,
due diligence investigations and negotiation assistance necessary in order to
enable the Company to engage in the Transactions, the Company agrees to pay,
immediately upon consummation of the Transactions, a transaction fee in the
amount of (a) $2,100,000 to BMP, (b) $700,000 to Veritas, (c) $600,000 to USX
and (d) $600,000 to Kobe Steel.
Section 1.2 Reimbursements. In addition to the fees payable pursuant
to this Agreement, the Company, shall pay directly or reimburse each of the
Transaction Advisors and its affiliates for the out-of-pocket costs and expenses
incurred by such Transaction Advisor or its affiliates in connection with the
Transactions.
SECTION 2
MONITORING SERVICES AND FEE
Section 2.1 Appointment. The Company hereby appoints each of the
Monitoring Parties to render the advisory and consulting services described in
Section 2.2 hereof for the term of this Agreement.
Section 2.2 Services. Each of the Monitoring Parties hereby agrees
that during the term of this Agreement it shall render to the Company, by and
through itself, its affiliates, and their respective officers, employees and
representatives as each Monitoring Party in its sole discretion shall designate
from time to time, advisory and consulting services in relation to the affairs
of the Company and its subsidiaries, including, without limitation, (i) advice
in designing financing structures and advice regarding relationships with the
Company's and its subsidiaries' lenders and bankers; (ii) advice regarding the
structure and timing of public offerings of debt and equity securities of the
Company 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 the Company
(the "Monitoring Services"). It is expressly agreed that the Monitoring Services
shall not include investment banking or other financial advisory services
rendered by each Monitoring Party or its affiliates to the Company in connection
with any specific acquisition, divestiture, refinancing or recapitalization by
the Company or any of its subsidiaries. Each Monitoring Party 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 and
such Monitoring Party, subject to Section 2.2(b) and (c) of the Equityholders
Agreement.
Section 2.3 Monitoring Fees. (a) In consideration of the Monitoring
Services, for the term of this Agreement, the Company and its successors, agree
to pay an annual fee (the "Monitoring Fee") of $4.0 million per year to the
Monitoring Parties, (i) $1.5 million of which shall be payable to BMP quarterly
in advance on the first day of each quarter commencing
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on the Closing through the date (the "Blackstone Termination Date") on which
affiliates of BMP hold beneficial ownership of less than 66-2/3% of the number
of shares of Common Stock held by them as of the Closing, on a fully-diluted
basis (whether such holdings are represented by shares of Common Stock or common
stock of a successor or acquiring entity into which such shares are converted or
exchanged) (the "Minimum Blackstone Ownership"), or such earlier date as the
Company and BMP shall agree, (ii) $500,000 of which shall be payable to Veritas
quarterly in advance on the first day of each quarter commencing on the Closing
through the date (the AVeritas Termination Date") on which affiliates of Veritas
hold beneficial ownership of less than 66 2/3% of the number of shares of Common
Stock held by them as of the Closing, on a fully-diluted basis (whether such
holdings are represented by shares of Common Stock or common stock of a
successor or acquiring entity into which such shares are converted or exchanged)
(the "Minimum Veritas Ownership"), or such earlier date as the Company and
Veritas shall agree, (iii) $1.0 million of which shall be payable to USX
quarterly in advance on the first day of each quarter commencing on the Closing
through the date (the AUSX Termination Date") on which USX or affiliates of USX
hold beneficial ownership of less than 66 2/3% of the number of shares of Common
Stock (calculated as if the USX Exchange Event had occurred with respect to RTI
Holdings Units held by USX) held by them as of the Closing, on a fully-diluted
basis (whether such holdings are represented by shares of Common Stock or common
stock of a successor or acquiring entity into which such shares are converted or
exchanged) (the "Minimum USX Ownership"), or such earlier date as the Company
and USX shall agree, and (iv) $1.0 million of which shall be payable to Kobe
Delaware quarterly in advance on the first day of each quarter commencing on the
Closing through the date (the "Kobe Termination Date") on which Kobe Delaware or
affiliates of Kobe Delaware hold beneficial ownership of less than 66 2/3% of
the number of shares of Common Stock (calculated as if the Kobe Exchange Event
had occurred with respect to RTI Holdings Units held by Kobe) held by them as of
the Closing, on a fully-diluted basis (whether such holdings are represented by
shares of Common Stock or common stock of a successor or acquiring entity into
which such shares are converted or exchanged) (the "Minimum Kobe Ownership"), or
such earlier date as the Company and Kobe shall agree. With respect to any
Monitoring Party, any Monitoring Fee for the first or last calendar year of this
Agreement shall be prorated for the period of such year commencing on the
Closing through the date of termination. Notwithstanding anything herein to the
contrary, in no event shall the Monitoring Fee accrue and be payable to any of
the Monitoring Parties beyond the sixth anniversary of the Closing Date,
provided, this shall not affect the obligation of the Company to pay Monitoring
Fees accrued through such sixth anniversary that remain unpaid.
(b) In the event that any Monitoring Fees (other than those provided
for in Section 2.3(a) hereof) are paid to BMP or Veritas or their respective
affiliates, a Monitoring Fee equal to 50% of the combined Monitoring Fee paid to
BMP and Veritas and their respective affiliates shall be paid to each of USX and
Kobe Delaware; provided, however, that the foregoing shall not apply to the
provision of financial advisory services by BMP or Veritas or their respective
affiliates on terms that are no less favorable than those that could have been
obtained in a comparable transaction on an arms length basis from a person
unaffiliated with BMP or Veritas or any of their respective affiliates, if
consented to by USX and Kobe in accordance with Section 2.2(b) or (c), as
applicable, of the Equityholders Agreement.
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(c) To the extent required by any debt financing of the Company or
its subsidiaries, payment (but not accrual) of the Monitoring Fee shall be
deferred until the earlier of (i) dissolution of the Company, and (ii) the date
payment of such deferred Monitoring Fees is permitted under such debt financing.
Any deferred and unpaid Monitoring Fees shall bear interest at a rate of ten
percent (10%) per annum, compounded annually, from the date deferred until paid.
Section 2.4 Reimbursements. In addition to the fees payable pursuant
to this Agreement, for so long as a Monitoring Party is entitled to a Monitoring
Fee hereunder, the Company shall pay directly or reimburse such Monitoring Party
for its Out-of-Pocket Expenses (as defined below). Promptly following the
Company's request therefor, a Monitoring Party will provide written back-up
relating to any Out-of-Pocket Expenses to be paid or reimbursed by the Company
pursuant to this Agreement. For the purposes of this Agreement, the term
AOut-of-Pocket Expenses" shall mean the out-of-pocket costs and expenses
incurred by a Monitoring Party or its affiliates in connection with the
Monitoring Services, 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 and (iii)
transportation, per diem costs, word processing expenses or any similar expense
not associated with its ordinary operations; provided, however, that no expenses
of an affiliate of a Monitoring Party will be Out-of-Pocket Expenses for
purposes of this Agreement unless agreed to in writing by the other Monitoring
Parties. All reimbursements for Out-of-Pocket Expenses shall be made promptly
upon or as soon as practicable after presentation by a Monitoring Party to the
Company of a written statement thereof.
SECTION 3
INDEMNIFICATION
Section 3.1 BMP Indemnification. The Company 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 a ABlackstone Indemnified
Party") from and against any and all losses, claims, damages and liabilities,
whether joint or several (the ALiabilities"), 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 a Blackstone 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 Blackstone 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 Blackstone 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 Blackstone Indemnified Party is a party thereto.
The Company
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will not be liable under the foregoing indemnification provision with respect to
any Blackstone 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 gross
negligence or willful misconduct of BMP. If a Blackstone 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 Liabilities
in question resulted primarily from the gross negligence or willful misconduct
of BMP.
Section 3.2 Veritas Indemnification. The Company will indemnify and
hold harmless Veritas, 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 a
"Veritas Indemnified Party") from and against any and all Liabilities, related
to, arising out of or in connection with the advisory and consulting services
contemplated by this Agreement or the engagement of Veritas pursuant to, and the
performance by Veritas of the services contemplated by, this Agreement, whether
or not pending or threatened, whether or not a Veritas 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 Veritas 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 Veritas 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 Veritas Indemnified Party is a party thereto. The
Company will not be liable under the foregoing indemnification provision with
respect to any Veritas 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
gross negligence or willful misconduct of Veritas. If a Veritas 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
Liabilities in question resulted primarily from the gross negligence or willful
misconduct of Veritas.
Section 3.3 USX Indemnification. The Company will indemnify and hold
harmless USX, 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 "USX Indemnified Party")
from and against any and all Liabilities, related to, arising out of or in
connection with the advisory and consulting services contemplated by this
Agreement or the engagement of USX pursuant to, and the performance by USX of
the services contemplated by, this Agreement, whether or not pending or
threatened, whether or not a USX 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 USX 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 USX 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 USX Indemnified Party is a party thereto. The Company will not be
liable under the foregoing indemnification provision with respect to any USX
Indemnified
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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 gross negligence or willful
misconduct of USX. If a USX 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 Liabilities in question resulted
primarily from the gross negligence or willful misconduct of USX.
Section 3.4 Kobe Delaware Indemnification. The Company will
indemnify and hold harmless Kobe Delaware, 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 a "Kobe Indemnified Party") from and against any and all Liabilities,
related to, arising out of or in connection with the advisory and consulting
services contemplated by this Agreement or the engagement of Kobe Delaware
pursuant to, and the performance by Kobe Delaware of the services contemplated
by, this Agreement, whether or not pending or threatened, whether or not a Kobe
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 Kobe
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 Kobe 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
Kobe Indemnified Party is a party thereto. The Company will not be liable under
the foregoing indemnification provision with respect to any Kobe 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 gross negligence or willful
misconduct of Kobe Delaware. If a Kobe 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 Liabilities in question resulted
primarily from the gross negligence or willful misconduct of Kobe Delaware.
SECTION 4
TERM OF AGREEMENT
Section 4.1 Term. This Agreement shall be effective as of the date
hereof and shall continue until the later of the Blackstone Termination Date,
the Veritas Termination Date, USX Termination Date or the Kobe Termination Date,
provided that Sections 2.3(c) and 2.4 shall remain in effect with respect to
Out-of-Pocket Expenses incurred prior to termination hereof. The provisions of
Sections 3 and 5 and otherwise as the context so requires shall survive the
termination of this Agreement.
SECTION 5
ADDITIONAL AGREEMENTS OF THE COMPANY
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Section 5.1 Accuracy of Information. The Company shall furnish or
cause to be furnished to each Monitoring Party such information as such
Monitoring Party believes appropriate to its monitoring services hereunder and
to the ownership by affiliates of such Monitoring Party of shares of BarTech
(all such information so furnished being the "Information"). The Company
recognizes and confirms that each of the Monitoring Parties (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.
Section 5.2 Permissible Activities. Subject to applicable law and to
any non-competition/non-solicitation provisions of the Master Restructuring
Agreement, nothing herein shall in any way preclude any of BMP, Veritas, USX,
Kobe Steel and Kobe Delaware, their respective 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 the Company.
SECTION 6
MISCELLANEOUS
Section 6.1 Amendments; Waiver. 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.
Section 6.2 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if delivered personally or sent
by telecopier, 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
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
If to Veritas: Veritas Capital Management, L.L.C.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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Attention: Xxxxxx X. XxXxxx
Telecopy: (000) 000-0000
If to USX: USX Corporation
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: X.X. Xxxxxxx, Xx.
Telecopy: (000) 000-0000
If to Kobe: Kobe Steel, Ltd.
00-00-Xxxxxxxxxx 0-Xxxxx
Xxxx-Xx, Xxxx, Hyugo 651-0072
Attention: Xxxxxxxx Xxxx
Telecopy: 011-81-78-261-5444
If to the Company: Republic Technologies International, LLC
0000 Xxxxxxx Xxxxxxx
Xxxxx, Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Telecopy: (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
telecopier, and (ii) one business day after being sent by Federal Express or
other overnight courier.
Section 6.3 Entire Agreement. This Agreement shall constitute the
entire agreement between the parties with respect to the subject matter hereof,
and shall supersede all other previous oral and written (and all contemporaneous
oral) negotiations, commitments, agreements and understandings relating hereto.
Section 6.4 Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.
Section 6.5 Assignments and Successors. This Agreement shall inure
to the benefit of, and be binding upon, BMP, Veritas, USX, Kobe Steel, Kobe
Delaware and the Company and their respective successors and assigns. The
Provisions of Section 3 shall inure to the benefit of each Indemnified Party.
Section 6.6 Counterparts. 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.
Section 6.7 Severability. 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 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 L.P.
By: Blackstone Management Associates
L.L.C., its general partner
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Member
VERITAS CAPITAL MANAGEMENT, L.L.C.
By:/s/ Xxxxxx X. XxXxxx
-------------------------------------
Name: Xxxxxx X. XxXxxx
Title: Member
USX CORPORATION
By: /s/ X.X. Xxxxxxx, Xx.
-------------------------------------
Name: X.X. Xxxxxxx, Xx.
Title: Vice President
KOBE STEEL USA, INC.
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxxx
Title:
KOBE DELAWARE, INC.
By: /s/ Xxxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxxx Xxxxxx
Title: Secretary
REPUBLIC TECHNOLOGIES INTERNATIONAL, LLC
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President of Finance,
Treasurer and Secretary
