EXECUTION COPY
MANAGEMENT AGREEMENT
AGREEMENT made this 7th day of February, 2006, by and among Xxxxxx
Xxxxxx, Inc., a Delaware corporation ("CHI"), RathGibson, Inc., a Delaware
corporation ("RathGibson"), RGCH Holdings Corp., a Delaware corporation
("Acquisition"), and RGCH Holdings LLC, a Delaware limited liability company
("Holdings" and, together with RathGibson and Acquisition, the "Companies" and
each, a "Company").
W I T N E S S E T H:
WHEREAS, the Companies desire to retain CHI to provide business and
organizational strategy, financial and investment management, advisory and
merchant and investment banking services to the Companies and their direct and
indirect subsidiaries upon the terms and conditions hereinafter set forth, and
CHI is willing to undertake such obligations;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Appointment. The Companies hereby engage CHI, and CHI hereby
agrees, upon the terms and subject to the conditions set forth herein, to
provide certain services to the Companies and their direct and indirect
subsidiaries as described in Section 3 hereof.
2. Term. The term of this Agreement (the "Term") shall be for an
initial term expiring December 31, 2013. Such term shall be renewed
automatically for additional one-year terms thereafter unless CHI or the
Companies shall give notice in writing within 90 days before the expiration of
the initial term or any one-year renewal thereof of its desire to terminate this
Agreement. The provisions of Section 6 and otherwise as the context so requires
shall survive the termination of this Agreement.
3. Duties of CHI. CHI shall provide the Companies and their
direct and indirect subsidiaries with business and organizational strategy,
financial and investment management, advisory and merchant and investment
banking services (collectively, the "Services").
3.1. Exclusions from "Services". Notwithstanding anything in the
foregoing to the contrary, the following services are specifically excluded from
the definition of "Services":
(i) Independent Accounting Services. Accounting services rendered
to the Companies, their direct or indirect subsidiaries, or CHI, with prior
notice and consultation with the management of the Companies, by an independent
accounting firm or accountant (i.e., an accountant who is not an employee of
CHI);
(ii) Legal Services. Legal services rendered to the Companies,
their direct or indirect subsidiaries, or CHI, with prior notice and
consultation with the management of the Companies, by an independent law firm or
attorney (i.e., an attorney who is not an employee of CHI);
(iii) Transaction Services. Services in connection with any
transaction in which the Companies or their direct or indirect subsidiaries may
be, or may consider becoming, involved, including acquisitions, divestitures or
financings, it being understood that CHI shall be first approached and shall
have a thirty day period concerning all opportunities during which it may decide
to perform, for an additional fee to be established at such time, any of such
transaction related services; and
(iv) Independent Actuarial Services. Actuarial services rendered to
the Companies, their direct or indirect subsidiaries, or CHI with prior notice
and consultation with the management of the Companies, by an independent
actuarial firm or actuary (i.e., an actuary who is not an employee of CHI).
4. Powers of CHI. So that it may properly perform its duties
hereunder, CHI shall, subject to Section 8 hereof, have the authority to do all
things necessary and proper to carry out the duties set forth in Section 3.
5. Compensation and Reimbursement.
(a) Transaction Fee. As consideration payable to CHI with respect
to the services provided by CHI in connection with the acquisition of the
capital stock of RathGibson on the date hereof and the financing related
thereto, the Companies shall pay to CHI a transaction fee in an amount equal to
1% of the aggregate equity contributions made by members of the Xxxxxx Xxxxxx
Group (as hereinafter defined) to any of the Companies or their subsidiaries on
or as of the date hereof, earned and payable on the date hereof.
(b) Initial Annual Fee. As consideration payable to CHI or any of
its Affiliates (as defined below) for providing the Services to the Companies
and their direct and indirect subsidiaries, the Companies shall pay to CHI, not
more frequently than quarterly in advance, an annual management fee in an amount
equal to 3% of the aggregate equity contributions made by members of the Xxxxxx
Xxxxxx Group to the Companies and their subsidiaries (the "Initial Annual Fee");
provided that the Initial Annual Fee in respect of the first full year shall be
paid on the date hereof. Such payments shall accrue to the extent not paid.
(c) Subsequent Annual Fee. As further consideration payable to CHI
or any of its Affiliates for providing the Services to the Companies and their
direct and indirect subsidiaries, in the event at any time or from time to time
after the date hereof any member of the Xxxxxx Xxxxxx Group makes equity
contributions to any of the Companies and/or their subsidiaries after the date
hereof, the Companies shall pay to CHI an annual management fee in an amount
equal to 3% of the aggregate equity contributions made by any member of the
Xxxxxx Xxxxxx Group to any of the Companies or their subsidiaries after the date
hereof (each, a "Subsequent Annual Fee"), earned and payable in advance not more
than frequently than quarterly from the date of such additional equity
contribution, with the first quarterly payment of each Subsequent Annual Fee
being due and payable on the date such additional equity contribution is made.
CHI hereby acknowledges the restriction of payment of each Subsequent Annual Fee
contained in Section 3.5 of the Credit Agreement, dated as of February 7, 2006,
by and among RathGibson, Inc., as Borrower, and the other persons thereto that
are designated credit parties and General Electric Capital Corporation, as
Agent, L/C Issuer and a Lender, and the other financial institutions party
thereto as Lenders.
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(d) Out of Pocket Expenses. In addition to the Annual Fee, the
Companies shall, at the direction of CHI, pay directly or reimburse CHI or any
of its Affiliates for its Out-of-Pocket Expenses (as hereinafter defined)
incurred in connection with the Services provided for in Section 3 hereof. For
purposes of this Agreement, the term "Out-of-Pocket Expenses" shall mean the
reasonable amounts paid by CHI or any of its Affiliates in connection with the
Services provided for in Section 3, including (i) fees and disbursements of any
independent professionals and organizations, including independent auditors and
outside legal counsel, investment bankers or other financial advisors or
consultants, (ii) costs of any outside services of independent contractors such
as financial printers, couriers, business publications or similar services and
(iii) transportation, per diem, telephone calls, entertainment and all other
reasonable expenses actually incurred by CHI or any of its Affiliates in
rendering the Services provided for herein. All reimbursements for Out-of-Pocket
Expenses shall be made promptly upon or as soon as practicable after
presentation by CHI to the Companies of the statement in connection therewith.
(e) Definition of Xxxxxx Xxxxxx Group. For purposes of this
Agreement, "Xxxxxx Xxxxxx Group" shall mean Xxxxxx Xxxxxx Partners IV, L.P., CHI
and any other accounts or funds managed by CHI (including limited partners of
Xxxxxx Xxxxxx Partners IV, L.P. and its affiliated funds) or Affiliates of CHI,
and "Affiliate" shall mean, with respect to any specified individual,
corporation, limited liability company, partnership, association, trust or other
entity or organization (each, a "Person"), a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with, such specified Person (it being understood that a Person
shall be deemed to "control" another Person, for purposes of this definition, if
such Person directly or indirectly has the power to direct or cause the
direction of the management and policies of such other Person, whether through
holding beneficial ownership interests in such other Person, through contracts
or otherwise).
6. Indemnification. The Companies will, jointly and severally,
indemnify and hold harmless CHI and its officers, directors, employees, agents,
representatives and Affiliates (each being an "Indemnified Party") from and
against any and all losses, claims, damages and liabilities, joint or several,
to which such Indemnified Party may become subject under any applicable federal
or state law, any claim made by any third party or otherwise, relating to or
arising out of the advisory and consulting Services contemplated by this
Agreement or the engagement of CHI pursuant to, and the performance by CHI or
such Indemnified Party of the Services, and the Companies will reimburse any
Indemnified Party for all costs and expenses (including reasonable attorneys'
fees and expenses) as they are incurred in connection with the investigation of,
preparation for or defense of any pending or threatening claim, or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party
thereto. The Companies will not be liable under the foregoing indemnification
provision 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 solely from the gross negligence or willful
misconduct of CHI. The reimbursement and indemnity obligations of the Companies
under this paragraph shall be in addition to any liability which the Companies
may otherwise have, shall extend upon the same terms and conditions to any
affiliate of CHI and the stockholders, officers, directors, employees, agents,
representatives, affiliates and controlling persons (if any), as the case may
be, of CHI and any such affiliate and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Companies, CHI, any such affiliate and any such person. The foregoing provisions
shall survive the termination of this Agreement.
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7. Distributions. The Companies shall cause their subsidiaries to
distribute funds to the Companies to the extent necessary for the Companies to
satisfy their obligations under this Agreement.
8. Independent Contractors. Nothing herein shall be construed to
create a joint venture or partnership between CHI, on the one hand, and the
Companies, on the other hand, or an employee/employer relationship. CHI shall be
an independent contractor pursuant to this Agreement. Neither CHI nor the
Companies shall have any express or implied right or authority to assume or
create any obligations on behalf of or in the name of the other or to bind the
other to any contract, agreement or undertaking with any third party.
9. Notices. Any notice or other communications required or
permitted to be given hereunder shall be in writing and delivered by hand or
mailed by registered or certified mail, return receipt requested, or by
telecopier to the party to whom it is to be given at its address set forth
herein, or to such other address as the party shall have specified by notice
similarly given and the mailing date shall be deemed the date from which all
time periods pertaining to a date of notice shall run.
(i) If to RathGibson, to it at:
RathGibson, Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxx
(ii) If to Acquisition and Holdings, to it at:
RGCH Holdings Corp.
c/o Xxxxxx Xxxxxx, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx Xxx
Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
with a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxx, Esq.
(iii) if to CHI, to it at:
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X.Xxxxxxxxx
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with a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxx, Esq.
10. Assignment. This Agreement shall inure to the benefit of and
be binding upon the parties and their successors and assigns. However, neither
this Agreement nor any of the rights of the parties hereunder may be transferred
or assigned by either party hereto, except that (i) if either Company shall
merge or consolidate with or into, or sell or otherwise transfer substantially
all its assets to, another corporation which assumes the obligations of such
Company under this Agreement, such Company may assign its rights hereunder to
that corporation and (ii) CHI may assign its rights and obligations hereunder to
any other person or entity controlled, directly or indirectly, by Xxxx X. Xxxxxx
and/or Xxxxxxx X. Xxxxxx. Any attempted transfer or assignment in violation of
this Section 10 shall be void.
11. Permissible Activities. Nothing herein shall in any way
preclude CHI or its affiliates or its respective officers, directors and
partners from engaging in any business activities or from performing services
for its or their own account or for the account of others, including companies
which may be in competition with the business conducted by the Companies or
their direct or indirect subsidiaries.
12. General. No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party from any such provision,
shall in any event be effective unless the same shall be in writing and signed
by the parties to this Agreement. The waiver of any party of any breach of this
Agreement shall not operate or be construed to be a waiver of any subsequent
breach.
13. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof.
14. Section Headings. The section headings contained herein are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
15. Applicable Law. This agreement and the rights and obligations
of the parties hereunder shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of New York. Each of the parties
hereto hereby irrevocably submits to the exclusive jurisdiction of any Federal
court sitting in the Southern District of New York over any suit, action or
proceeding arising out of or relating to this agreement. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted or not
prohibited by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in such a
court and any claim that any such suit, action or proceeding brought in such a
court has been brought in an inconvenient forum. Each of the parties hereto
hereby irrevocably consents to
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the service of process in any suit, action or proceeding by sending the same by
certified mail, return receipt requested or by overnight courier service, to the
address of such party set forth in Section 9 or in the records of the Companies.
EACH PARTY HERETO WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION
BROUGHT HEREUNDER OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY.
16. Severability. Any section, clause, sentence, provision,
subparagraph or paragraph of this Agreement held by a court of competent
jurisdiction to be invalid, illegal or ineffective shall not impair, invalidate
or nullify the remainder of this Agreement, but the effect thereof shall be such
section, clause, sentence, provision, subparagraph or paragraph so held to be
invalid, illegal or ineffective.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and year first above written.
XXXXXX XXXXXX, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
_______________________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: Managing Director
RATHGIBSON, INC.
By: /s/ Xxxxxx X. Xxxxxx
_______________________________________
Name: Xxxxxx X. Xxxxxx
Title: President & CEO
RGCH HOLDINGS CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxx
_______________________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: President
RGCH HOLDINGS LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
_______________________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: President
