EXHIBIT NO. 10(q)
Form of Standstill Agreement dated January 29, 1986,
among Material Sciences Corporation,
Richard L. Burns and Joyce Burns
AGREEMENT
THIS AGREEMENT, made and entered into as of January 29, 1986, among
Material Sciences Corporation, a Delaware Corporation (the "Company"), Richard
L. Burns and Joyce Burns (Mr. Burns and Mrs. Burns being hereinafter referred to
collectively as the "Noteholders" and individually as a "Noteholder").
W I T N E S S E T H:
WHEREAS, pursuant to a Share Purchase Agreement dated as of January
29, 1986 (the "Share Purchase Agreement") between the Company and all of the
shareholders of Deposition Technology, Inc. ("DTI"), including the Noteholders,
the Noteholders have agreed to exchange shares of the common stock of DTI for
subordinated convertible notes due January 29, 1996 of the Company (the
"Notes"); and
WHEREAS, the Notes are convertible into shares of the series of
authorized common stock of the Company designated as "Common Stock" (the "Common
Stock"); and
WHEREAS, the parties believe it is not in the best interests of the
Noteholders or the Company for the Noteholders to become involved in, or in any
way to interfere with, the management or operations of the Company, DTI or any
of their Affiliates or the Company's relationships with any of its other
security holders; and
WHEREAS, the Share Purchase Agreement requires the execution and
delivery of this Agreement by the Noteholders as a condition to the consummation
of the transactions provided for therein;
NOW, THEREFORE, in consideration of the foregoing and the agreements
hereinafter set forth, the parties hereto agree as follows:
1. Stand Still Agreement. The Noteholders agree that from the date
---------------------
hereof to the Termination Date (as hereinafter defined), they will not, nor will
they permit any of their Affiliates (as hereinafter defined), directly or
indirectly, to:
(a) acquire, directly or indirectly, by purchase or otherwise (except
as provided in the Share Purchase Agreement or by way of stock dividends or
other distributions made available to security holders generally), any
additional Notes, Common Stock or other securities of the Company, except
that the foregoing shall not prohibit the Noteholders and their Affiliates
from acquiring such number of shares of Common Stock of the Company which
when added to all such shares then owned or otherwise controlled by them,
directly or indirectly, shall not exceed a total of 100,000 shares of
Common Stock of the Company;
(b) "solicit" proxies or become a "participant" or a "participant in
a solicitation" with respect to any securities of the Company under any
circumstances (including, without limitation, any "election contest"
relating to the election of directors of the Company), as such terms are
defined in Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act");
(c) initiate, propose or otherwise solicit shareholders for the
approval of one or more shareholder proposals at any time, or induce or
attempt to induce any other person to initiate any shareholder proposal; or
(d) form or join a partnership, limited partnership, syndicate or
other group, or otherwise act in concert with any other person, for the
purpose of acquiring, holding, voting or disposing of any securities of the
Company, or otherwise become a "person" within the meaning of Section
13(d)(3) of the Exchange Act.
2
2. Non-Interference Agreement. The Noteholders further agree that
--------------------------
from date hereof to the Termination Date, they will not act in any way, nor will
they permit any of their Affiliates to act in any way, directly or indirectly,
either alone or in concert with any other person, to seek to control, influence
or otherwise interfere with the management, board of directors or policies of
the Company, DTI or any of their Affiliates.
3. Transfer Restrictions.
---------------------
(a) For a period of three years from the date hereof, neither
Noteholder shall sell or otherwise dispose of any Note, except pursuant to
a registered public distribution or with the prior written consent of the
Company.
(b) After the expiration of three years from the date hereof, neither
Noteholder (or any successor thereto) shall sell or otherwise dispose of
any interest in his or her Notes and/or any shares of Common Stock acquired
upon conversion of any Notes or otherwise acquired after the date hereof
except in accordance with the terms and conditions of this Agreement.
4. Right of First Refusal.
----------------------
(a) Each Noteholder agrees that from the date hereof to the
Termination Date, the Noteholder will not, directly or indirectly, sell or
otherwise dispose of any interest in any or all of his or her Notes and/or
Common Stock subject to the restrictions of Section 3(b) other than
------------
pursuant to (i) a registered public distribution in accordance with Section
-------
5.11 of Exhibit B of the Share Purchase Agreement (a "Registration"), (ii)
---- ---------
a bona fide offer from a third party who is not an Affiliate (an "Offer")
or (iii) in open market transactions (a "Market Disposition"). In the case
of a Registration, the provisions of Section 5.11 of Exhibit B of the Share
------------ ---------
Purchase Agreement shall apply in lieu of the balance this Section 4.
---------
Prior to any
3
such sale or other disposition pursuant to either an Offer or a Market
Disposition, such Noteholder shall transmit a written notice (the "Sales
Notice") to the Company setting forth (A) with respect to an Offer: (I) the
name, address and principal business activity of each person to whom a sale
or other disposition is proposed to be made, (II) the amount of Notes
and/or Common Stock proposed to be sold to each such person, (III) the
manner in which the sale is proposed to be made, and (IV) the price at
which or other consideration for which, and the material terms upon which,
such sale is proposed to be made, and stating that each such person's Offer
is, to the best of the knowledge of such Noteholder, bona fide; and (B)
---- ----
with respect to a Market Disposition: (I) the approximate date the sales
are scheduled to commence (which shall not be earlier than the expiration
of the time period specified in paragraph (c) hereof), (II) the amount of
-------------
Notes and/or Common Stock sought to be disposed of, and (III) the manner in
which, and the names of the brokers through which, the Market Disposition
is proposed to be made and the maximum rate of commission to be charged by
such brokers.
(b) Upon receipt of a Sales Notice pursuant to paragraph (a), the
-------------
Company shall have an option to purchase all or any part of the Notes
and/or Common Stock covered by such Sales Notice on the following terms and
conditions:
(i) If the option arises pursuant to an Offer, the purchase
price and terms for the purchase of the Notes and/or Common Stock
purchasable upon exercise of the option shall be the price and terms
specified in the Sales Notice; provided, however, that: (A) if the
-------- -------
Offer is a publicly announced tender offer, the price shall be the
highest price paid by the successful tender offeror pursuant to the
4
tender offer to any of the security holders of the Company (it being
understood that if the price offered in any tender offer is increased,
either by the original tender offeror or a third party, after the
Company has elected to exercise its option at a lower price, then the
Company shall have the right to reexamine its decision and to elect
not to exercise such option so long as notice of its election not to
exercise is received by such Noteholder at least twenty-four hours
prior to the earlier of (I) the expiration of the tender offer or (II)
any date after which securities tendered may be treated less favorably
than securities tendered prior thereto), and (B) if the price so
specified is payable in whole or in part in property (which term shall
include the securities of any other issuer), the price allocable to
such property shall be cash equal to the Appraisal Value (as
hereinafter defined) of such property on the date the Sales Notice is
sent to the Company.
(ii) If the option arises pursuant to a Market Disposition, the
exercise price per unit shall be equal to the Market Price
(hereinafter defined) of this Common Stock or Notes, as the case may
be, for the trading day next preceding the date on which the Purchase
Notice (hereinafter defined) is dispatched, less the estimated
underwriting discounts and commission (based on the maximum rate set
forth in the Sales Notice prescribed by Section 4(a)) which the
------------
Noteholders would have incurred if the Company had not elected to
purchase such securities, but no other expenses of sale.
5
(c) If the Company desires to exercise the aforesaid option to
purchase all or any part of the Notes and/or Common Stock covered by a
Sales Notice, the Company shall transmit to such Noteholder a written
notice (the "Purchase Notice") specifying the principal amount of Notes
and/or number of shares of Common Stock to be purchased pursuant to the
exercise of such option. The Purchase Notice must be sent to the Noteholder
prior to the later of (A) sixty days after the date on which the Company
shall have received the Sales Notice or (B) if applicable, thirty days
after the determination of any required Appraisal Value; provided, however,
-------- -------
that, in the case of a tender offer, in no event shall the Purchase Notice
be received later than twenty-four hours prior to the earlier of (C) the
expiration of the tender offer or (D) any date after which securities
tendered may be treated less favorably than securities tendered prior
thereto.
(d) If with respect to an Offer or a Market Disposition the conditions
prescribed in paragraphs (a) and (b) of this Section 4 have been met in
-------------- ---
connection with a proposed sale of any or all of either Noteholder's Notes
and/or Common Stock, and the Company has not transmitted the Purchase
Notice within the period required by paragraph (c) hereof, then such
-------------
Noteholder shall be free to effect such sale under the following terms and
conditions:
(i) if a sale pursuant to an Offer was proposed, such sale may
be effected for a period of sixty days from the last date on which the
Company could have transmitted such notice, but only to the person or
persons specified in the Sales Notice at the price (or for the
consideration) and on the terms specified in the Sales Notice; or
6
(ii) if sales pursuant to a Market Disposition were proposed,
such sales may be effected for a period of six months, but only in the
manner and through the broker specified in the Sales Notice; and
(iii) in either event, if or to the extent such sale or sales do
not occur within such sixty days or six month period, whichever is
applicable, the Notes and/or Common Stock so proposed to be sold will
again become subject to this Agreement to the same extent as if the
Sales Notice with respect to such sale or sales had never been given.
(e) Notwithstanding the foregoing, each Noteholder may (i) subject
any or all of his or her Notes and/or Common Stock subject to the
restrictions of Section 3(b) to a bona fide pledge or (ii) make gifts of
------------ ---- ----
any or all of such Notes and/or Common Stock to or for the benefit of the
Noteholder's spouse, children, grandchildren or parents or to charitable
organizations, provided that the pledgee or donee, as the case may be,
--------
delivers to the Company a written agreement to be bound by the restrictions
contained herein in form reasonably satisfactory to the Company.
5. Repurchase Upon Death of Noteholder.
-----------------------------------
(a) In the event of the death of either Noteholder prior to the
Termination Date, the administrator or executor (the "Estate
Representative") of the estate (the "Estate") of the deceased Noteholder
shall transmit to the Company a written notice (the "Estate Notice")
setting forth the date of such Noteholder's death and including a copy of a
duly certified death certificate.
7
(b) Upon receipt of an Estate Notice, the Company shall have an
option to purchase all or any part of the Notes and/or Common Stock subject
to the restrictions of Section 3(b) and held by the Estate at the following
------------
price:
(i) To the extent that there is a Market Price for the Common
Stock or Notes, the exercise price per unit shall be equal to the
Market Price of the Common Stock or Notes, as the case may be, for the
trading day next preceding the date on which the Estate Purchase
Notice is dispatched.
(ii) To the extent that there is no Market Price, the exercise
price per unit shall be equal to the Appraisal Value of the Common
Stock or Notes, as the case may be, on the date of such Noteholder's
death.
(c) If the Company desires to exercise the aforesaid option to
purchase any or all of such Notes and/or Common Stock held by the Estate,
the Company shall send a written notice (the "Estate Purchase Notice") to
the Estate Representative specifying the principal amount of Notes and/or
the number of shares of Common Stock to be purchased pursuant to the
exercise of such option. The Estate Representative must receive the Estate
Purchase Notice prior to the later of (A) ninety days after the date on
which the Company shall have received the Estate Notice or (B) if
applicable, sixty days after the determination of any required Appraisal
Value.
6. Option Exercise; Closing.
------------------------
(a) At the time the Purchase Notice or Estate Purchase Notice, as the
case may be, is transmitted pursuant to Section 4(c) or 5(c) hereof, there
------------ ----
shall be deemed to be a
8
binding agreement between such Noteholder or Estate, as the case may be,
and the Company concerning the sale at the price and on the terms provided
for in such notice. On the twentieth business day following receipt of such
notice (or such other time as the parties to such agreement shall agree),
such Noteholder or Estate, as the case may be, shall deliver to the Company
the Notes and/or certificates for the Common Stock to be purchased by the
Company pursuant to such notice, duly endorsed by, or accompanied by
instruments of transfer in form reasonably satisfactory to the Company duly
executed by, the Noteholder or his or her attorney duly authorized in
writing, with signatures guaranteed by a bank or member firm of the New
York Stock Exchange, and the Company will deliver to such Noteholder or
Estate, as the case may be, the purchase price to be paid in cash by
certified or bank cashier's check.
(b) The Company may assign its right to purchase Notes and/or Common
Stock pursuant to Sections 4 or 5 hereof and may designate in the Purchase
---------- -
Notice any person or persons to take title to any or all of the Notes
and/or Common Stock subject to such option, provided, however, that to the
-------- -------
extent that any such assignee or designee shall default in its performance
of any of the obligations of the Company hereunder, such assignment or
designation shall not relieve the Company of its responsibility therefor.
7. Definitions.
-----------
(a) As used herein, the term "Affiliate" shall have the meaning set
forth in Rule 12b-2 under the Exchange Act and the term "person" (except in
Section 1(d) hereof) shall mean any individual, partnership, corporation,
------------
trust or other entity.
(b) As used herein, the term "Appraisal Value" of an item of property
shall mean the fair market value of that property (less, in the case of the
Common Stock or the Notes,
9
an estimate of the brokerage commissions which the Noteholder or the Estate
involved would have incurred, if any, if the Company had not elected to
purchase such Common Stock or Notes) as of a given date as determined by an
appraiser mutually acceptable to the Company and the Noteholder or the
Estate involved. If a determination of the Appraisal Value of an item of
property is required hereunder, it shall be incumbent upon the Company to
request the appointment of an appraiser within thirty days of its receipt
of a Sales Notice or Estate Notice, as the case may be. In the event that
the Company and the party giving such Sales Notice or Estate Notice, as the
case may be, are unable to agree on an appraiser, each of them shall
appoint its own appraiser and such appraisers shall select a third
appraiser who alone shall determine such Appraisal Value. The costs and
expenses of any such appraisal shall be borne equally by the Company and
the party giving such Sales Notice or Estate Notice, as the case may be.
(c) As used herein, the term "Market Price" shall mean the last
reported sales price regular way for the day if the Common Stock or Notes,
as the case may be, are listed on a national securities exchange (or, if
there was no sale on such day, the closing bid price) or if the Common
Stock or the Notes, as the case may be, are not so listed the last reported
sales price or the average of the reported closing bid and asked prices for
such security in the over-the-counter market for the applicable day as
furnished by National Quotation Bureau, Inc. or, in its absence, any other
firm regularly engaged in the business of reporting such prices.
8. Legends and Stop Transfer Orders.
--------------------------------
(a) Each of the Noteholders agrees as follows:
10
(i) to the placement of the following legend on the face of any
Notes and/or certificates for Common Stock held by them subject to
this Agreement at any time prior to the Termination Date:
"No sale, transfer, pledge or other disposition of this Note (or,
in the case of Common Stock, 'the shares represented by this
certificate' ) may be made except in accordance with the
Agreement dated as of January 29, 1986, among Material Sciences
Corporation, Richard L. Burns and Joyce Burns, a copy of which is
on file in the office of the Secretary of Material Sciences
Corporation.";
and
(ii) to the entry of stop transfer orders with any transfer
agent of the Company's Notes and/or Common Stock and with the Voting
Trustee under the Voting Trust Agreement dated January 29, 1986, among
the Company, the Noteholders, 0. Morris Sievert, D. W. Watt and the
Voting Trustee thereunder against the transfer of Notes or
certificates for Common Stock legended pursuant hereto otherwise than
in compliance with the provisions of this Agreement.
(b) The Company agrees that it will, upon the presentation to its
transfer agent of the Notes or certificates for Common Stock containing
such legend, remove such legend and withdraw such stop transfer orders with
respect to such Notes or certificates for Common Stock under the following
circumstances:
(i) any sale of such Notes or of the Common Stock represented
by such certificates made in compliance with the provisions of this
Agreement; or
11
(ii) at any time after the Termination Date.
9. Corporate Name. The Noteholders hereby acknowledge that the
--------------
Company and DTI have an exclusive and perpetual right to use the name
"Deposition Technology, Inc.," and, in view of such exclusive and perpetual
right, the Noteholders shall cause Deposition Technology Corporation, a Texas
corporation, to change its corporate name to a name which is not confusingly
similar to the name of DTI within 30 days of the date hereof and shall not use
the term "Deposition Technology," or any variant thereof, in any manner in
connection with operations of any corporation, or other business or entity with
which the Noteholders are, or may become, affiliated.
10. Termination Date. The Agreement (other than Section 9 hereof)
---------------- ---------
shall terminate (herein referred to as the "Termination Date") on January 29,
2001.
11. Miscellany.
----------
(a) The Noteholders, on the one hand, and the Company on the other,
acknowledge and agree that irreparable injury would occur in the event that
any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly
agreed that the Parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in addition to any
other remedy to which they may be entitled at law or equity.
(b) The Company and the Noteholders, acting for themselves and for
their respective successors and assigns, without regard to domicile,
citizenship or residence, hereby expressly and irrevocably consent to and
subject themselves to the nonexclusive jurisdiction of the courts of the
United States District Court for the Northern District of Illinois, or, if
such District Court shall not have or declines to accept jurisdiction, the
courts
12
of the State of Illinois located in Cook County, Illinois, in respect of
any matter arising under or in connection with this Agreement; and service
of process, notices and demands of the United States District Court for the
Northern District of Illinois and such courts of the State of Illinois and
any other notices or other communications required or permitted under this
Agreement, may be made upon any of them by personal service at any place
where they may be found or by mailing copies of such process, notices,
demands and communications by registered mail, postage prepaid and return
receipt requested, to their respective addresses set forth in Section 11(g)
-------------
hereof. No change in such addresses shall be effective insofar as service
of process, notices, demands and communications are concerned, unless such
addresses are located in the United States and receipt of notice of such
change shall have been acknowledged in writing by the other party hereto,
which acknowledgment shall not be unreasonably withheld. The foregoing
provisions of this Section 11(b) shall not be construed to limit the right
-------------
of any party to make such service of process, notices, demands and
communications in any manner permitted by applicable law or to obtain
jurisdiction over the other parties hereto in such other jurisdiction, and
in such other manner, as may be permitted by applicable law. Each party
further agrees that a final judgment or order in respect of such matter may
be enforced against such party in any other jurisdiction by suit on such
judgment or order or in such other manner as may be permitted by applicable
law. Each party hereby irrevocably waives, to the extent permitted by
applicable law, any objection which it now has or hereafter may have to the
laying of venue in respect of any such matter brought or maintained in the
United States District Court for the Northern District of Illinois or such
courts of the State of Illinois. Each party further waives, to the extent
permitted by applicable law, any claim which such party otherwise might
have that
13
any such action, suit or proceeding brought or maintained in the United
States District Court for the Northern District of Illinois or such courts
of the State of Illinois has been brought in an inconvenient forum.
(c) It is the intent and understanding of each party hereto that if
any term or provision of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or
against its regulatory policy, then such term or provision shall be deemed
modified to the extent necessary to make it enforceable by such court or
other authority.
(d) Except as otherwise provided herein, each party hereto pay its own
expenses incurred in connection with this Agreement.
(e) This Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the Estate Representative or any other
successor or transferee of each Noteholder and by any successor of the
Company.
(f) This Agreement may not be modified, amended, altered or
supplemented except by a written agreement signed by the Company and the
Noteholders.
(g) All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given when delivered
personally or when sent by registered or certified mail (postage prepaid,
return receipt requested) addressed as follows:
If the Company:
Material Sciences Corporation
2200 East Pratt Boulevard
Elk Grove Village, Illinois 60007
14
If the Noteholders:
Richard L. Burns
Joyce Burns
High Bluff Drive
Suite 375
San Diego, California 92130
or to such other address as any party may have furnished to the other
parties in writing in accordance herewith.
(h) No failure or delay on the part of either party in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Agreement
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
(i) This Agreement relates to the internal affairs and securities of a
Delaware corporation and shall be governed by and construed in accordance
with the laws of the State of Delaware.
(j) Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
(k) This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become a
binding agreement when one or more counterparts have been signed by each
party hereto and delivered to each other party or such party's
representative.
15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
MATERIAL SCIENCES CORPORATION
By:_________________________________
Title:__________________________
_____________________________________
Richard L. Burns
_____________________________________
Joyce Burns
16