Exhibit 10.18
MANAGEMENT
CONSULTING AGREEMENT dated as
of November 14, 2000, between
RESOLUTION PERFORMANCE
PRODUCTS LLC, a Delaware corporation
(the "Company"), and
-------
APOLLO MANAGEMENT IV, L.P., a Delaware
limited partnership ("Apollo").
------
The Company desires to avail itself of Apollo's expertise and
consequently has requested Apollo to make such expertise available from time to
time in rendering certain management consulting and advisory services related to
the business and affairs of the Company and its respective subsidiaries and
affiliates and the review and analysis of certain financial and other
transactions. Apollo and the Company agree that it is in their respective best
interests to enter into this Agreement whereby, for the consideration specified
herein, Apollo has provided and shall provide such services as independent
consultant to the Company.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the Company and Apollo agree as follows:
SECTION 1. RETENTION OF APOLLO.
-------------------
The Company hereby retains Apollo, and Apollo accepts such retention,
upon the terms and conditions set forth in this Agreement.
SECTION 2. TERM.
----
This Agreement shall commence on the date hereof and, unless otherwise
extended pursuant to the final sentence of this Section 2, shall terminate on
the tenth anniversary of the date hereof (the "Term"). Upon the fifth
----
anniversary of the date hereof, and at the end of each year thereafter (each of
such fifth anniversary and the end of each year thereafter being a "Year End"),
--------
the Term shall automatically be extended for an additional year unless notice to
the contrary is given by either party at least 30, but no more than 60, days
prior to such Year End, as applicable.
SECTION 3. MANAGEMENT CONSULTING SERVICES.
------------------------------
(a) Apollo shall advise the Company concerning such management
matters that relate to proposed financial transactions, acquisitions and other
senior management matters related to the business, administration and policies
of the Company and its subsidiaries and affiliates, in each case as the Company
shall reasonably and specifically request by way of written notice to Apollo,
which notice shall specify the
services required of Apollo and shall include all background material necessary
for Apollo to complete such services. Apollo shall devote such time to any such
written request as Apollo shall deem, in its discretion, necessary. Such
consulting services, in Apollo's discretion, shall be rendered in person or by
telephone or other communication. Apollo shall have no obligation to the Company
as to the manner and time of rendering its services hereunder, and the Company
shall not have any right to dictate or direct the details of the services
rendered hereunder.
(b) The Company acknowledges and agrees that Apollo (i) has
structured the recapitalization and the other transactions contemplated by the
Master Sale Agreement dated as of July 10, 2000, as amended (the "MSA"), among
---
Shell Oil Company, Shell Epoxy Resins Inc., and the Company, (ii) has arranged
for financing in connection with the recapitalization, and (iii) has provided
other services in connection with the transactions contemplated by the MSA.
Apollo agrees to continue to provide services to the Company in connection with
the consummation of the transactions contemplated by the MSA and each of the
documents referred to therein.
(c) Apollo shall perform all services to be provided hereunder
as an independent contractor to the Company and not as an employee, agent or
representative of the Company. Apollo shall have no authority to act for or to
bind the Company, without its prior written consent.
(d) This Agreement shall in no way prohibit Apollo or any of its
partners or Affiliates or any director, officer, partner or employee of Apollo
or any of its partners or Affiliates from engaging in other activities, whether
or not competitive with any business of the Company or any of its respective
subsidiaries or affiliates.
SECTION 4. COMPENSATION.
------------
As consideration for Apollo's agreement to render the services
set forth in Section 3(a) of this Agreement and as compensation for any such
services rendered by Apollo, the Company agrees to pay to Apollo an annual fee
of $1,000,000.00, payable in equal quarterly installments of $250,000.00 each on
the first day of each fiscal quarter (or, if such date is not a business day, on
the next business day thereafter).
As consideration for services rendered and Apollo's agreement to
render services as set forth in Section 3(b), the Company agrees to pay to
Apollo a fee of $5,000,000.00, which shall be earned upon consummation of the
transactions contemplated by the MSA.
Upon presentation by Apollo to the Company of such documentation
as may be reasonably requested by the Company, the Company shall reimburse
Apollo for all out-of-pocket expenses, including, without limitation, legal fees
and expenses, and other disbursements incurred by Apollo, its Affiliates or any
of its Affiliates' directors, officers, employees or agents in the performance
of Apollo's obligations hereunder, whether incurred on or prior to the date
hereof, including, without
limitation, out-of-pocket expenses incurred in connection with the transactions
contemplated by the MSA and each of the documents referred to therein.
Nothing in this Agreement shall have the effect of prohibiting Apollo
or any of its Affiliates from receiving from the Company or any of its
subsidiaries or Affiliates any other fees, including any fee payable pursuant to
Section 6.
Reference is made to the Credit Agreement to be entered into at or
prior to the consummation of the transactions contemplated by the MSA (as
amended, restated, modified or supplemented and in effect from time to time, the
"Credit Agreement"), among the Company, Resolution Performance Products Inc.,
----------------
RPP Capital Corporation, Resolution Nederland B.V., Salomon Smith Barney Inc.,
Morgan Guaranty Trust Company of New York, and Morgan Stanley Senior Funding,
Inc. Any portion of the fees payable to Apollo under this Agreement which the
Company is prohibited from paying to Apollo under the Credit Agreement, shall be
deferred, shall accrue and shall be payable at the earliest time permitted under
the Credit Agreement or upon the payment in full of all obligations under the
Credit Agreement. The Company shall notify Apollo if the Company shall be unable
to pay any fees pursuant to the Credit Agreement on each date on which the
Company would otherwise make a payment of fees under this Agreement to Apollo.
SECTION 5. INDEMNIFICATION.
---------------
The Company agrees that it shall indemnify and hold harmless Apollo,
its Affiliates and its Affiliates' directors, officers, employees and agents
(collectively, the "Indemnified Persons") on demand from and against any and all
-------------------
liabilities, costs, expenses and disbursements (collectively, "Claims") of any
------
kind with respect to or arising from this Agreement or the performance by any
Indemnified Person of any services in connection herewith. Notwithstanding the
foregoing provision, the Company shall not be liable for any Claim under this
Section 5 arising from the willful misconduct of any Indemnified Person.
SECTION 6. OTHER SERVICES.
--------------
If the Company shall determine that it is advisable for the Company to
hire a financial advisor, consultant, investment banker or any similar agent in
connection with any merger, acquisition, disposition, recapitalization, issuance
of securities, financing or any similar transaction, it shall notify Apollo of
such determination in writing. Promptly thereafter, upon the request of Apollo,
the parties shall negotiate in good faith to agree upon appropriate services,
compensation and indemnification for the Company to hire Apollo or its
Affiliates for such services. The Company may not hire any person, other than
Apollo or its Affiliates, for any services, unless (a) the parties are unable to
agree after 30 days following receipt by Apollo of such written notice, (b) such
other person has a reputation that is at least equal to the reputation of Apollo
in respect of such services, (c) ten business days shall have elapsed after the
Company provides a written notice to Apollo of its intention to hire such other
person, which notice shall identify such other person and shall describe in
reasonable detail the nature of the
services to be provided, the compensation to be paid and the indemnification to
be provided and (d) the compensation to be paid is not more than Apollo was
willing to accept in the negotiations described above, and (e) the
indemnification to be provided is not more favorable to the Company than the
indemnification that Apollo was willing to accept in the negotiations described
above. In the absence of an express agreement to the contrary, at the closing of
any merger, acquisition or similar transaction, Apollo shall receive a fee equal
to 1% of the aggregate enterprise value paid or provided by the Company
(including the aggregate value of (x) equity securities, warrants, rights and
options acquired or retained, (y) indebtedness acquired, assumed or refinanced
and (z) any other consideration or compensation paid in connection with such
transaction).
SECTION 7. NOTICES.
-------
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed sufficient if personally delivered, sent
by nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to Apollo, to:
Apollo Investment Fund IV, L.P.
1301 Avenue of the Americas
38th Floor
New York, New York 10019
Attention: Mr. Josh Harris
Telecopier: (212) 261-4102;
if to the Company:
Resolution Performance Products LLC
1600 Smith Street
Suite 2416
Houston, Texas 77002
Attention: President
Telecopier: (713) 241-1308;
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of nationally-
recognized overnight courier, on the next business day after the date when sent,
(c) in the case of telecopy transmission, when received, and (d) in the case of
mailing, on the third business day following that on which the piece of mail
containing such communication is posted.
SECTION 8. BENEFITS OF AGREEMENT.
---------------------
This Agreement shall bind and inure to the benefit of Apollo, the
Company, the Indemnified Persons and any successors to or assigns of Apollo and
the Company; provided, however, that this Agreement may not be assigned by
-------- -------
either party hereto without the prior written consent of the other party, which
consent will not be unreasonably withheld in the case of any assignment by
Apollo.
SECTION 9. GOVERNING LAW.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York (without giving effect to
principles of conflicts of laws).
SECTION 10. HEADINGS.
--------
Section headings are used for convenience only and shall in no way
affect the construction of this Agreement.
SECTION 11. ENTIRE AGREEMENT; AMENDMENTS.
----------------------------
This Agreement contains the entire understanding of the parties with
respect to its subject matter, and neither it nor any part of it may in any way
be altered, amended, extended, waived, discharged or terminated except by a
written agreement signed by each of the parties hereto.
SECTION 12. COUNTERPARTS.
------------
This Agreement may be executed in counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
SECTION 13. WAIVERS.
-------
Any party to this Agreement may, by written notice to the other party,
waive any provision of this Agreement. The waiver by any party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
SECTION 14. AFFILIATES.
----------
For purposes of this Agreement, the term "Affiliate," with respect to
Apollo, shall include, without limitation, Apollo Overseas Partners IV, L.P.,
Apollo Management IV, L.P., Apollo Advisors IV, L.P., and Apollo Capital
Management IV, Inc. (collectively, the "Funds"), the general partner of Apollo,
-----
the general partner of each
of the Funds and each person controlling, controlled by or under common control
with any of the foregoing persons.
IN WITNESS WHEREOF, the parties have duly executed this
Management Consulting Agreement as of the date first above written.
RESOLUTION PERFORMANCE
PRODUCTS LLC
By: /s/ David T. Preston
---------------------------
Name: David T. Preston
Title: President
APOLLO MANAGEMENT IV, L.P.
By: /s/ Josh Harris
---------------------------
Name: Josh Harris
Title: Vice President