Exhibit
10.12


 


EXECUTION
VERSION


 


MANAGEMENT
AGREEMENT


 


MANAGEMENT AGREEMENT,
dated as of March 24, 2005, by and between One Equity Partners LLC, a Delaware
limited liability company (“OEP” or the “Manager”), and Progress
Rail Services Parent Corp., a Delaware corporation (“Parent”).


 


WHEREAS, Parent desires
that the Manager provide Parent with certain services as set forth herein (the “Services”),
and the Manager desires to render such services to Parent in consideration of a
management fee as specified herein; and


 


WHEREAS, the Manager may
provide certain individuals with financial and/or management expertise (the “Directors”)
who may be directors, officers, employees or affiliates of the Manager to serve
on the board of directors (the “Board”) of Parent or on the board of
directors of any direct or indirect subsidiary of Parent (individually, a “Subsidiary”
and, collectively, the “Subsidiaries”; and, together with Parent, the “Company”);


 


NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:


 


1.                                      SERVICES


 


1.1           Services. At Parent’s
request, the Manager, through its personnel and, to the extent such personnel
determine that it would be necessary or advisable in order to perform the
Services required hereunder, by arranging for and coordinating services of
other professionals, experts and consultants, shall provide Services to Parent.
Such Services shall consist of, without limitation, (a) assistance relating to
(i) identifying other companies for potential acquisitions (the “Target
Companies”), (i) reviewing and evaluating potential investments in
Target Companies, (iii) structuring and negotiating the terms of
investments in Target Companies, and (iv) obtaining financing necessary to
acquire Target Companies; provided, however, that in no event
shall the Manager be deemed to be managing the investments of the Company or an
investment advisor to the Company and the Manager shall not be required to take
any action inconsistent with this proviso, and (b) at the Manager’s discretion,
providing the Directors to serve, from time to time, on the Board and boards of
directors of any Subsidiary.


 


1.2           Independent
Contractor. Notwithstanding the Services requested,
provided or to be provided hereunder, the Manager shall be deemed to be an
independent contractor and, unless otherwise expressly authorized or provided,
shall not be authorized to manage the affairs of, act in the name of, or bind
the Company pursuant to this Agreement. The Manager is not, and shall not be
considered, a partner of the Company and the parties do not intend that this
Agreement, separately or in conjunction with any other document, create any
joint venture or partnership. The Company shall not be obligated to follow or
accept any recommendation made by the Manager. The management, policies and
operations of the


 

















 


Company (including the
ultimate approval of the making or disposition of any investment in any Target
Company and terms) shall be the responsibility of each entity’s board of
directors.


 


2.                                      LIABILITY AND INDEMNIFICATION.


 


2.1           Liability of
Indemnified Persons. Neither the Manager nor any of its
affiliates nor any stockholder, member, director, partner, officer, employee,
agent, representative or affiliate of any of the foregoing (collectively, “Indemnified
Persons”) shall be liable to the Company, any subsidiary of the Company,
any Target Company or any of their respective affiliates for any claims,
damages, losses, expenses or liabilities of any nature whatsoever, including,
but not limited to, legal fees and expenses (collectively, “Losses”), to
which such Indemnified Person may become subject in connection with or arising
out of or related to this Agreement, including, without limitation, by reason
of any act or omission in connection with Services or any act or omission of
any Director whether or not an Indemnified Person continues to be such at the
time any such Losses are paid or incurred, unless and to the extent it is
determined by a final decision (after all appeals and the expiration of time to
appeal) of a court of competent jurisdiction that such Losses resulted from the
fraud or gross negligence of such Indemnified Person. Each Indemnified Person
shall be entitled to rely in good faith on the advice of counsel, public
accountants or other independent persons experienced in the matter at issue,
and any act or omission of any Indemnified Person in reasonable reliance on
such advice shall in no event subject any of them to liability to the Company
or any Target Company, or any of their respective affiliates.


 


2.2           Indemnification. Parent
shall, to the fullest extent permitted by applicable laws, indemnify and hold
harmless each of the Indemnified Persons from and against any and all Losses to
which such Indemnified Person may become subject in connection with or arising
out of or related to this Agreement, or the operation and affairs of the
Company or any Target Company, or any of their respective affiliates,
including, without limitation, in connection with providing or failing to
provide Services (or any act or omission in connection therewith) or any act or
omission of any Director, whether or not an Indemnified Person continues to be
such at the time any such Losses are paid or incurred; provided, however,
that the foregoing indemnification shall not include or apply to the extent
that any Losses are determined by a final decision (after all appeals and the
expiration of time to appeal) of a court of competent jurisdiction to have
resulted from the fraud or gross negligence of such Indemnified Person. In the
event that any Indemnified Person becomes involved in any capacity in any
action, proceeding or investigation in connection with any matter arising out
of or in connection with this Agreement or the operations or affairs of the
Company or any Target Company, or any of their respective affiliates, Parent
will periodically advance to or reimburse such Indemnified Person for its legal
and other expenses (including the cost of any investigation and preparation) as
incurred in connection therewith; provided, however, that such
Indemnified Person shall promptly repay to Parent the amount of any such
advanced or reimbursed expenses paid to it to the extent it shall ultimately be
determined by a final decision (after all appeals and the expiration of time to
appeal) of a court of competent jurisdiction that such Indemnified Person is
not entitled to such advance or reimbursement by Parent as herein provided in
connection with such action, proceeding or investigation. The rights of
indemnification provided in this Section 2.2 will be in addition to any rights
to which an Indemnified Person may otherwise be entitled by contract or as a
matter of law, including pursuant to the bylaws of the Company, and shall
extend to each of its or his heirs, successors and assigns.


 


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3.                                      COMPENSATION FOR SERVICES


 


3.1           Service Fee. Parent
shall pay a service fee in United States dollars (the “Service Fee”) to
OEP of $1,000,000 for each 12-month period during the term of this Agreement,
payable in advance and in equal quarterly installments during the term of this
Agreement, on the first day of each February, May, August and
November (each such date, a “Payment Date”) commencing May 1, 2005.
To the extent any Service Fee is not paid it will accrue until paid. If on any
day on which the Service Fee is due is not a business day, the Service Fee
shall be due on the next succeeding business day. The Service Fee shall be
adjusted upward (but not downward) effective as of February 1 of each year
commencing February 1, 2006 based on any increase in the Consumer Price Index
for the preceding calendar year.


 


4.                                      TRANSACTION FEES


 


4.1          Progress
Transaction Fee. Parent shall pay a transaction fee in
United States dollars (the “Progress Transaction Fee”) to OEP of
$4,000,000 payable in full to OEP upon the closing of the mergers of PRSC
Acquisition Corp. with any into Progress Rail Services Corporation (“Progress
Rail”) and of PMRC Acquisition Co. with and into Progress Metal Reclamation
Company (“Progress Metal” and, together with Progress Rail, “Progress”).
The Progress Transaction Fee payable pursuant to this Section 4.1 is for
assistance provided by OEP relating to (i) the structuring and negotiation
of the terms of the transaction with Progress Energy, Inc. and Progress Fuels
Corporation, the parent companies of Progress, and (ii) obtaining,
negotiating and structuring the debt financing necessary to acquire Progress.


 


4.2          Other
Transaction Fees. In connection with any acquisition of
any business (whether by merger, stock acquisition, asset acquisition or
otherwise) by Parent or any Subsidiary (other than the acquisition of Progress
Rail described in Section 4.1) (an “Acquisition Transaction”) or any
sale of Parent or any Subsidiary or any business thereof (whether by merger,
stock acquisition, asset acquisition or otherwise) (a “Sale Transaction”),
Parent shall pay a transaction fee in United States dollars (the “Transaction
Fee”) to OEP equal to one percent (1%) of the Consideration payable in full
to OEP upon the closing of each such Acquisition Transaction or Sale
Transaction. The Transaction Fees payable pursuant to this Section 4.2 are for
assistance provided by OEP relating to (a) the structuring and negotiation
of the terms of each such Acquisition Transaction or Sale Transaction,
(b) obtaining, negotiating and structuring the necessary debt financing
and (c) any other services provided in connection with each such Acquisition
Transaction or Sale Transaction. For purposes hereof, “Consideration” shall be
deemed to include, without limitation, cash, the fair market value of all
property other than cash, dividends and distributions and all other
consideration paid or payable, directly or indirectly, in connection with an
Acquisition Transaction or Sale Transaction. “Consideration” shall also be
deemed to include, without limitation, any repayment, retirement or forgiveness
of indebtedness and any indebtedness for borrowed money directly or indirectly
assumed (including, without limitation, by way of guarantees or existing on a
balance sheet at the time of an Acquisition Transaction or Sale Transaction in
the event of a stock purchase or similar transaction). In the event that any
part of the Consideration is payable (whether in one payment or a series of two
or more payments) at any time following the consummation of any Acquisition
Transaction or Sale Transaction, the Consideration therefor shall be deemed to
be the present value of such future payment or payments, as determined in good
faith by OEP and Parent.


 


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5.                                      REIMBURSEMENT.


 


5.1          In addition
to the fees payable pursuant to Sections 3.1, 4.1 and 4.2, Parent shall
reimburse OEP promptly on demand for any expenses incurred by OEP in connection
with providing any Services hereunder.


 


6.                                      TERM.


 


6.1           The term of
this Agreement shall commence on the date hereof and shall terminate on
February 1, 2010 (the “Termination Date”) unless this Agreement is
automatically renewed. This Agreement automatically will be renewed for annual
periods (each such period being referred to herein as a “Renewal Year”)
on each February 1st, commencing February,
2010,  unless at least 30 calendar
days prior to the beginning of such Renewal Year, notice of termination has
been given by OEP to Parent.


 


6.2           In the event
of a Sale of the Company (as defined in the Stockholders’ Agreement, dated as
of March 24, 2005, by and among Parent and its stockholders named therein, as
such agreement may be amended, modified or restated from time to time), Parent
shall have the right to terminate this Agreement by providing prior written
notice of termination to OEP.


 


6.3           Notwithstanding
anything in this Section 6 to the contrary, OEP shall have the right to
terminate this Agreement at any time by providing prior written notice of
termination to Parent.


 


7.                                      NOTICES.


 


7.1           All notices,
requests, demands and other communications provided for by this Agreement shall
be in writing and shall be deemed to have been given at the time when received
by registered or certified mail, return receipt requested, or by a nationally
recognized overnight courier service or given in person, to the following
addresses of the parties hereto or to such changed address as such party may
have specified for notice:


 


	
  OEP:

  	
   

  	
  One Equity Partners LLC

  
	
   

  	
   

  	
  One Bank One Plaza,
  14th Floor

  
	
   

  	
   

  	
  Chicago, Illinois
  60670-0610

  
	
   

  	
   

  	
  Facsimile:  (312)
  732-7495

  
	
   

  	
   

  	
  Attention:  Thomas
  J. Kichler

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Morgan, Lewis &
  Bockius LLP

  
	
   

  	
   

  	
  101 Park Avenue

  
	
   

  	
   

  	
  New York, New York
  10178-0060

  
	
   

  	
   

  	
  Facsimile:  (212)
  309-6273

  
	
   

  	
   

  	
  Attention:  Ira
  White, Esq.

  
	
   

  	
   

  	
   

  
	
  Parent:

  	
   

  	
  Progress Rail Services
  Parent Corp.

  



 


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  1600 Progress Drive

  
	
   

  	
   

  	
  P.O. Box 1037

  
	
   

  	
   

  	
  Albertville, Alabama
  35950

  
	
   

  	
   

  	
  Facsimile:  (256)
  840-2782

  
	
   

  	
   

  	
  Attention:  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Morgan, Lewis &
  Bockius LLP

  
	
   

  	
   

  	
  101 Park Avenue

  
	
   

  	
   

  	
  New York, New York
  10178-0060

  
	
   

  	
   

  	
  Facsimile: (212)
  309-6273

  
	
   

  	
   

  	
  Attention: Ira White,
  Esq.

  



 


8.                                      MISCELLANEOUS.


 


8.1           Headings and
Captions. All headings and captions contained in this Agreement are
for convenience only and shall not be deemed a part of this Agreement.


 


8.2           Variations
of Pronouns. All pronouns and all variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the person may require.


 


8.3           Counterparts. This Agreement
may be executed in counterparts, each of which shall constitute an original and
all of which, when taken together, shall constitute the same agreement.


 


8.4           Governing
Law. All questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by
and construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.


 


8.5           No
Assignment. This Agreement may not be assigned by
any party hereto without the consent of each other party hereto.


 


8.6           Severability. The
parties hereto intend that each provision hereof constitute a separate
agreement among them. Accordingly, the provisions hereof are severable and in
the event that any provision of this Agreement shall be deemed invalid or
unenforceable in any respect by a court of competent jurisdiction, the
remaining provisions hereof shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect, and any invalid or
unenforceable provision shall be deemed, without further action on the part of
the parties hereto, amended and limited to the extent necessary to render the
same valid and enforceable.


 


8.7           Entire
Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto with respect to the transactions contemplated
hereby and


 


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supersedes all prior
oral or written agreements and understandings with respect to the subject
matter hereof. This Agreement may be amended, modified or supplemented only by
a written instrument executed by or on behalf of each of the parties hereto.


 


8.8           No Third
Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors and permitted assigns, and it is not the intention of the
parties to confer, and, except for Indemnified Persons as defined in Section 2.1,
no provision hereof shall confer third party beneficiary rights upon any other
person or entity.


 


8.9           Limited
Recourse. Notwithstanding anything in this Agreement or any other
document, agreement or instrument contemplated hereby or thereby to the
contrary, the obligations of the Manager hereunder shall be without recourse to
any partner, stockholder, member, associate, affiliate or employee of the
Manager or its members, partners, or any other respective officers, directors,
members, employees or agents.


 


8.10         Effect of
Termination or Non-Renewal. The provisions of Sections 1.2, 2, 5, 7
and 8 hereof shall survive any termination or non-renewal of this Agreement. The
fees paid or payable hereunder prior to any termination or non-renewal of this
Agreement pursuant to Sections 3 and 4 hereof shall be deemed earned when they
become so payable and shall not be affected by any subsequent termination or
non-renewal of this Agreement.


 


[Signature Page to
Follow]


 


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IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed by their
representatives thereunto duly authorized as of the day and year first above
written.


 


 


	
   

  	
  ONE EQUITY PARTNERS LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/
  William H. Wangerin, Jr.

  	
   

  
	
   

  	
   

  	
  Name: William H.
  Wangerin, Jr.

  
	
   

  	
   

  	
  Title: Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROGRESS RAIL SERVICES
  PARENT CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/
  William H. Wangerin, Jr.

  	
   

  
	
   

  	
   

  	
  Name: William H.
  Wangerin, Jr.

  
	
   

  	
   

  	
  Title: Senior Vice
  President and Secretary