EXHIBIT 2.2
EXECUTION COPY
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STOCKHOLDERS AGREEMENT
dated as of
February 13, 2004
among
IONICS, INCORPORATED
and
THE INDIVIDUALS AND ENTITIES LISTED ON EXHIBIT A
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STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of February
13, 2004, among Ionics, Incorporated, a Massachusetts corporation (the
"Company"), and the individuals and entities listed on Exhibit A attached hereto
(each, a "Seller" and collectively, the "Sellers").
S WHEREAS, the Company and the Sellers are parties to a Stock
Purchase Agreement, dated as of November 18, 2003 (the "Purchase Agreement"),
pursuant to which, among other things, the Investor Group (as defined below)
will acquire shares of Common Stock (as defined below);
WHEREAS, the Company and the Sellers wish to make provision
relating to the rights and obligations of the parties relating to ownership and
disposition of the shares of the Common Stock; and
WHEREAS, the Closing (as defined below) is conditioned upon the
Company and the Sellers entering into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Acquisition Shares" means the Common Stock issued to the Sellers
at the Closing (including the Common Stock placed into the Escrow Account in
accordance with the Purchase Agreement).
An "Affiliate" of any Person means any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person. The Company
and its subsidiaries shall not be deemed Affiliates of any member of the
Investor Group.
Any Person shall be deemed to "Beneficially Own" shares of Common
Stock that such Person is deemed to "beneficially own" within the meaning of
Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the date of this
Agreement; provided that, any Person shall be deemed to Beneficially Own any
securities that such Person has the right to acquire, whether or not such right
is exercisable immediately. The Investor Group shall be deemed to Beneficially
Own all shares of Common Stock held as of the date of measurement in the Escrow
Account.
"Blackout Period" shall have the meaning ascribed to such term in
Section 5.11.
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"Board" means the board of directors of the Company.
"Bona Fide Offer" means any Third Party Bid reasonably capable of
being consummated, after taking into account the likelihood of redemption by the
Company of any rights to acquire Common Stock issued under the Rights Agreement
and of the implementation by the Company of other available anti-takeover
defenses and mechanisms.
"Change in Control" means (i) the sale, lease or other Transfer
to any Person or Persons, in one or a series of related transactions, of any
assets of the Company or its subsidiaries having a value in excess of 50% of the
book value of the total assets of the Company and its subsidiaries, taken as a
whole, as reflected on the then most recent financial statements of the Company
filed with the SEC, (ii) any transaction that would result in the Directors who
immediately prior to the transaction constituted the Board (together with any
new Directors whose election by the Board was approved by the aforementioned
Directors) ceasing for any reason to constitute a majority of the Board; or
(iii) the acquisition by any Person or Persons (whether by way of merger,
consolidation, tender offer, exchange offer or any similar transaction) of
Beneficial Ownership in excess of 50% of the Outstanding Shares.
"Closing" shall have the meaning ascribed to such term in the
Purchase Agreement.
"Closing Date" shall have the meaning ascribed to such term in
the Purchase Agreement.
"Closing Ownership Percentage" shall mean the percentage of the
Outstanding Shares issued to the Investor Group and into the Escrow Account at
Closing, after giving effect to such issuance.
"Common Stock" shall mean the Common Stock of the Company, par
value $1.00 per share.
"Company" shall have the meaning ascribed to such term in the
recitals.
"Competitor List" shall have the meaning ascribed to such term in
Section 4.01(b).
"Cut-Off Date" shall have the meaning ascribed to such term in
Section 2.04.
"Demand Registration Statement" shall have the meaning ascribed
to such term in Section 5.02(a).
"Director" shall mean a member of the Board.
"Escrow Account" shall have the meaning ascribed to such term in
the Purchase Agreement.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Holders" shall mean the members of the Investor Group who hold
Registrable Securities.
"Incidental Registration Statement" shall have the meaning
ascribed to such term in Section 5.03(a).
"Independent Director" means a director who qualifies as
independent for purposes of membership on a board of directors of a company (as
opposed to committee membership) under the then effective rules and regulations
of the NYSE and the SEC.
"Investor Directors" means such Persons who are designated in
writing by the Investor Group, as such designation may change from time to time,
to serve as Directors in accordance with Section 2.01; provided, however, that a
Person designated by the Investor Group to serve as an Investor Director shall
continue to be an Investor Director for all purposes under this Agreement, and
the Investor Group shall not change (or attempt to change) the designation of
such Person previously designated as an Investor Director, in each case until
such Person is no longer serving as a Director, and any such change (or
attempted change) shall be null and void; and further provided that each
Investor Director other than Mr. LD and Mr. Stant must qualify as an Independent
Director; and further provided that each Investor Director must (i) not be a
director, officer, employee, consultant or material customer of, or material
supplier to, any Person listed on the Competitor List, and (ii) in the good
faith judgment of the Investor Group, have such credentials and experience as
would reasonably be expected of a member of a board of directors of a company
with securities listed on the NYSE (Mr. LD and Mr. Stant is hereby acknowledged
to have such credentials and experience).
"Investor Group" means the Sellers and any Permitted Transferee
to whom Acquisition Shares have been transferred in accordance with this
Agreement; provided that any such Permitted Transferee has become a party hereto
and has agreed to be bound by the terms hereof.
"Investor-Related Party" means a member of the Investor Group and
any Affiliate controlled by any member of the Investor Group.
"LD Family Group" means (i) Mr. LD, (ii) the spouse, children
(whether by birth or adoption) and grandchildren (or other lineal descendants)
of Mr. LD, (iii) the heirs, executors, administrators, testamentary trustees,
legatees or beneficiaries of any of the Persons specified in clauses (i) or (ii)
of this sentence, and (iv) a trust of which Mr. LD is trustee, the beneficiaries
of which include only one or more of the Persons specified in clauses (i), (ii)
and (iii) of this sentence. For purposes of this Agreement only, neither the LD
Family Group nor any member of the LD Family Group shall be deemed to
Beneficially Own any Acquisition Shares Beneficially Owned by any Person not
specified in the preceding sentence.
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"Lower Share Total" shall mean the number of shares of Common
Stock obtained by multiplying (i) 0.10 and (ii) the Outstanding Shares as of the
date of measurement.
"Mr. LD" shall mean Lyman B. Dickerson.
"Non-Investor Directors" shall mean Directors other than the
Investor Directors.
"Mr. Stant" shall mean Frederick T. Stant, III.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Outstanding Shares" means the aggregate number of issued and
outstanding shares of Common Stock as of the date of measurement. The term
"Outstanding Shares" shall not include Common Stock that is subject to issuance
upon exercise or exchange of rights of conversion or any options, warrants or
other rights.
"Permitted Transferees" means (i) any member of the Investor
Group, (ii) the spouse, children (whether by birth or adoption), grandchildren
(or other lineal descendants), aunts, uncles, nieces and nephews of any member
of the Investor Group, (iii) the heirs, executors, administrators, testamentary
trustees, legatees or beneficiaries of any member of the Investor Group and (iv)
a trust, the beneficiaries of which, or a corporation or partnership, the
stockholders or general and limited partners of which, include only one or more
of the Persons specified in clauses (i), (ii) and (iii) of this sentence.
"Person" means any individual, corporation, firm, partnership,
limited liability company, joint venture, trust, estate, business association,
organization, governmental entity or other entity.
"Purchase Agreement" shall have the meaning ascribed to such term
in the recitals.
"Registration Expenses" shall mean all expenses incurred by the
Company arising from the Company's performance of or compliance with Article V,
including all registration and filing fees and expenses (including SEC, stock
exchange and NASD fees), fees and expenses of compliance with state securities
or "blue sky" laws (including reasonable fees and disbursements of counsel for
the underwriters in connection with "blue sky" qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, the fees and
expenses incurred in connection with the listing, if any, of the securities to
be registered on each securities exchange or national market system on which the
Common Stock is then listed, fees and disbursements of counsel for the Company
and of the independent certified public accountants of the Company (including
the expenses of any annual audit, special audit and "cold comfort" letters
required by or incident to such performance and compliance), the fees and
disbursements of one law firm representing holders of Registrable Securities,
the fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (including, if applicable,
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the fees and expenses of any "qualified independent underwriter" (and its
counsel) that is required to be retained in accordance with the rules and
regulations of the NASD), the reasonable fees and expenses of any special
experts retained by the Company in connection with such registration, and fees
and expenses of other Persons retained by the Company. Registration Expenses
shall exclude all discounts and commissions payable to underwriters, selling
brokers, managers or other similar Persons, all transfer taxes, if any, related
to the sale or disposition of Registrable Securities by holders of such
Registrable Securities, and the fees and disbursements of more than one law firm
representing holders of Registrable Securities.
"Registrable Securities" shall mean the Acquisition Shares and
any securities that are issued or distributed or are issuable in respect of any
Registrable Securities by way of conversion, dividend, stock split or other
distribution, merger, consolidation, exchange, recapitalization or
reclassification or similar transaction. As to any particular Registrable
Securities, once issued, such securities shall cease to be Registrable
Securities if (i) such securities have been registered under the Securities Act,
the registration statement with respect to the sale of such securities has
become effective under the Securities Act and such securities have been disposed
of pursuant to such effective registration statement, (ii) such securities have
been sold or distributed pursuant to Rule 144, or (iii) such securities shall
cease to be outstanding; provided, however, that Registrable Securities
Transferred among the members of the Investor Group shall remain Registrable
Securities, regardless of how they are sold or distributed.
"Registration Statement" means any registration statement of the
Company filed with, or to be filed with, the SEC under the rules and regulations
promulgated under the Securities Act, and any amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Registration Share Total" shall mean the lesser of (a) 896,252
shares of Common Stock, representing 5% of the Outstanding Shares as of the
close of business on the day immediately preceding the Closing Date; provided
that in the event the Company, by stock split, reverse stock split or
combination, changes as a whole the number of Outstanding Shares, the
Registration Share Total shall be adjusted proportionately to reflect such event
and (b) the number of shares of Common Stock obtained by multiplying (i) 0.05
and (ii) the Outstanding Shares as of the date of measurement.
"Release Share Total" shall mean the number of shares of Common
Stock obtained by multiplying (i) 0.15 and (ii) the Outstanding Shares as of the
date of measurement.
"Required Registration Statement" shall mean any Demand
Registration Statement or any Shelf Registration Statement, as applicable.
"Rights Agreement" means the Renewed Rights Agreement, dated as
of August 19, 1997, between the Company and EquiServe Trust Company, N.A. (as
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successor to BankBoston, N.A.), as amended at any time or from time to time, and
any renewal or replacement of such Renewed Rights Agreement or any new, similar
agreement adopted or implemented by the Company at any time or from time to time
after the date hereof.
"Rule 144" means Rule 144 (or any similar provision then in
force) under the Securities Act.
"SEC" means the Securities and Exchange Commission or any
successor governmental entity.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Selling Holder" means a Holder who has requested inclusion of
Registrable Securities in a Demand Registration Statement or an Incidental
Registration Statement, and each Holder whose Registrable Securities are
included in a Shelf Registration Statement, as the case may be.
"Selling Period" shall have the meaning ascribed to such term in
Section 5.02.
"Shelf Registration Statement" shall mean a "shelf" registration
statement filed by the Company pursuant to the provisions of Section 5.01 with
the SEC covering offers and sales in accordance with Rule 415 under the
Securities Act, or any similar rule that may be adopted by the SEC (whether or
not the Company is then eligible to use Form S-3), that covers some or all of
the Registrable Securities, and any amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Spanish Holders" shall mean those certain non-employee
optionholders, who have registration rights with respect to no more than 30,000
shares of Common Stock, subject to adjustment for any stock splits, stock
dividends and the like.
"Standstill Period" shall have the meaning ascribed to such term
in Section 3.01(a).
"Third Party Bid" means an offer or proposal by any Person or
Persons, or any "group" within the meaning of Section 13(d)(3) of the Exchange
Act, other than an Investor-Related Party or any such "group" of which an
Investor-Related Party is a member or any such "group" or Person of which an
Investor-Related Party is an Affiliate or an "associate" (as such term is
defined under Rule 12b-2 under the Exchange Act), to acquire (whether by way of
purchase, merger, consolidation, tender offer, exchange offer or any similar
transaction) in excess of 25% of Outstanding Shares or any assets or group of
assets of the Company or its subsidiaries having a book value in excess of 25%
of the book value of the total assets of the Company and its subsidiaries, taken
as a whole, as reflected on the then most recent financial statements of the
Company filed with the SEC.
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"Total Ownership Amount" means the aggregate number of
Outstanding Shares Beneficially Owned by the members of the Investor Group.
"Transfer" shall have the meaning ascribed to such term in
Section 4.01(a).
"Transfer Restricted Period" shall have the meaning ascribed to
such term in Section 4.01(a).
"Underwriter" shall have the meaning ascribed to such term in
Section 5.08(a).
"Underwritten Offering" shall have the meaning set forth in
Section 5.02(d).
"Upper Share Total" shall mean the number of shares of Common
Stock obtained by multiplying (i) 0.15 and (ii) the Outstanding Shares as of the
date of measurement.
ARTICLE II
Corporate Governance
SECTION 2.01. Board of Directors. (a) Effective as of the
commencement of business on the first business day immediately after the day of
the Closing, the Company shall have taken appropriate action to increase the
size of the Board such that the Board shall consist of no more than 12
Directors. Unless otherwise required by the Massachusetts Business Corporation
Law, for so long as the Investor Group is entitled to designate any Investor
Director pursuant to this Section 2.01, the Board shall not consist of more than
12 Directors or be classified into less than three classes, with each class
holding office for a term of three years.
(b) Effective as of the commencement of business on the first
business day immediately after the day of the Closing, the Company shall have
taken appropriate action to cause the Investor Directors set forth on Schedule I
attached hereto (which such Investor Directors shall be Mr. LD and one other
Investor Director) to be appointed to the Board as Directors, each to serve in a
different class of Director; provided that Mr. LD shall be appointed to that
class of Director which term of office expires the furthest length of time from
the Closing and the other Investor Director set forth on such Schedule I shall
be appointed to that class of Director which term of office expires the next
furthest length of time from the Closing. For so long as the Investor Group is
entitled to designate at least one Investor Director to serve as Director under
this Agreement, that Investor Director shall be Mr. LD.
(c) (i) For so long as the Total Ownership Amount continuously
equals or exceeds the Upper Share Total from and after the date hereof, the
Investor Group shall be entitled to designate up to two Investor Directors to
serve as Directors. For so long as the Total Ownership Amount is less than the
Upper Share Total but continuously equals or
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exceeds the Lower Share Total from and after the date hereof, the Investor Group
shall be entitled to designate up to one Investor Director to serve as a
Director. If, during the period commencing on the date hereof and ending on the
fourth anniversary of the date hereof, the Total Ownership Amount is less than
the Lower Share Total but the LD Family Group continuously Beneficially Owns
from and after the date hereof at least 75% of the Acquisition Shares
Beneficially Owned by the LD Family Group on the date hereof (after giving
effect to the Closing), the Investor Group shall be entitled to designate Mr. LD
(but no other person) as an Investor Director to serve as a Director. Subject to
the foregoing sentence, if at any time the Total Ownership Amount is less than
the Lower Share Total, the Investor Group shall not be entitled to designate any
Investor Director to serve as a Director and, effective as of the first time the
Total Ownership Amount is less than the Lower Share Total, the Investor Group's
rights under this Section 2.01 and Sections 2.02 shall terminate.
(ii) If an Investor Director dies, resigns from the Board (other
than pursuant to Section 2.03) or is removed from the Board or disqualified from
serving on the Board in accordance with applicable law or the Company's articles
of organization or by-laws, a new Investor Director may be designated by the
Investor Group to fill the vacancy created by the death, resignation,
disqualification or removal of such Investor Director, if at the time of such
designation, after taking into account the other Investor Directors then serving
as Directors, there are less than the number of Investor Directors serving on
the Board than the number of Investor Directors the Investor Group is then
entitled to designate pursuant to Section 2.01(c)(i), and the Company shall use
its best efforts to cause such new Investor Director so designated to be
appointed to the Board to fill such vacancy. Subject to the maximum number of
Directors permitted by the by-laws and articles of organization of the Company
and this Agreement, if any Investor Director included in the slate of nominees
recommended by the Board for election at a meeting of the stockholders of the
Company is not elected to be a Director at such meeting, and if at the time of
the designation referred to later in this sentence, after taking into account
the other Investor Directors then serving as Directors, there are less than the
number of Investor Directors serving on the Board than the number of Investor
Directors the Investor Group is then entitled to designate pursuant to Section
2.01(c)(i), the Company shall use its best efforts to cause the number of
directorships on the Board to be increased by one or two, if necessary, and
shall use its best efforts to cause a new Investor Director designated by the
Investor Group in accordance with the provisions of this Section 2.01(c) (who
shall not be the Investor Director who failed to be so elected) or, in the case
of Mr. LD (unless such appointment would not be permitted under the then
applicable listing or corporate governance standards of the NYSE or any
applicable law, rule or regulation), Mr. LD, to be appointed to the Board to
fill the vacancy created by such increase in directorships. If the by-laws or
articles of organization of the Company then in effect would not permit the
increase in the number of directorships contemplated by the foregoing sentence,
the Company shall use its best efforts to cause the by-laws or articles of
organization of the Company, as the case may be, to be amended to permit such
increase. If, at the time the Company commences soliciting proxies for, or puts
a slate of nominees up for election as Directors at, the next meeting of the
Company's stockholders at which Directors are to be elected after there occurs
or is created a vacancy contemplated by either of the first two sentences of
this Section 2.01(c)(ii), (A)
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after taking into account the other Investor Directors then serving as
Directors, there are less than the number of Investor Directors serving on the
Board than the number of Investor Directors the Investor Group is then entitled
to designate pursuant to Section 2.01(c)(i), and (B) the Board has failed to
appoint as a Director an Investor Director designated by the Investor Group
pursuant to either of the first two sentences of this Section 2.01(c)(ii) to
fill a then-existing vacancy on the Board, despite the Company's obligation to
use its best efforts to cause an Investor Director to be so appointed to the
Board, the Investor Group may designate in writing, in advance of the time the
Company commences soliciting proxies for such meeting, an Investor Director to
be included in the slate of nominees recommended by the Board for election as
Directors at such meeting in lieu of requiring the Board to appoint an Investor
Director to fill such vacancy.
(iii) If (A) the class of Directors in which an Investor Director
is serving is to stand for election at the next meeting of the Company's
stockholders and (B) after taking into account the other Investor Directors then
serving as Directors, there are less than the number of Investor Directors
serving on the Board than the number of Investor Directors the Investor Group is
then entitled to designate pursuant to Section 2.01(c)(i), an Investor Director
(to be designated in writing in advance of the time the Company commences
soliciting proxies for such meeting by the Investor Group) shall be included in
the slate of nominees recommended by the Board for election (which such
inclusion in such slate shall be in addition to the inclusion of an Investor
Director in the slate of nominees contemplated by the last sentence of Section
2.01(c)(ii)).
(d) At any time the slate of nominees recommended by the Board
for election as Directors includes any Investor Director, the Company shall use
its best efforts to secure the election of such Investor Director to the Board,
including by active solicitation of proxies and contesting any proxy contest,
provided that such proxy contest is being waged by a Person other than an
Investor-Related Party or any "group" within the meaning of Section 13(d)(3) of
the Exchange Act of which an Investor-Related Party is a member. The Company
shall not include in any slate of nominees recommended by the Board for election
as Directors at a meeting of the Company's stockholders any more nominees than
there are directorships on the Board that are subject to election at such
meeting.
(e) As a condition to an Investor Director's ability to stand for
election, such Investor Director shall provide to the Company in a timely manner
all information required by Regulation 14A and Schedule 14A under the Exchange
Act as the Company may reasonably request with respect to such Investor Director
in a timely manner.
(f) If, for any reason, any Investor Director nominated for
election at a meeting of the stockholders called therefor is not so elected to
the Board by the stockholders of the Company, then the Company shall (i)
exercise all authority under applicable law to cause a Person designated by the
Investor Group who would otherwise qualify as an Investor Director (an "Investor
Group Observer") to attend all Board meetings and to the extent contemplated by
Section 2.02 all committees thereof as an observer; (ii) provide such Investor
Group Observer advance notice of each such meeting, including such meeting's
time and place, at the same time and in the same
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manner as such notice is provided to the members of the Board, provided that if
the Investor Group Observer attends any such meeting, such Investor Group
Observer will be deemed to have had proper notice thereof (or such committee
thereof); (iii) provide such Investor Group Observer with copies of all
materials, including notices, minutes and consents, distributed to the members
of the Board (or such committee thereof) at the same time as such materials are
distributed to the Board (or such committee thereof) and shall permit such
Investor Group Observer to have the same access to information concerning the
business and operations of the Company as such Investor Group Observer would
have had as an Investor Director; and (iv) on a basis consistent with the
members of the Board (or such committee thereof), permit such Investor Group
Observer to discuss the affairs, finances and accounts of the Company with the
Board (or such committee thereof), and to make proposals and furnish advice to
the Board (or such committee thereof) with respect thereto, without voting. As a
condition precedent to any Person serving as an Investor Group Observer, such
Person shall enter into a written agreement with the Company specifying that
such Person shall be bound by the same duties of confidentiality, good faith and
loyalty as if such Investor Group Observer were a Director, and containing
provisions regarding non-disclosure and restrictions on use of confidential
information (which such provisions may be perpetual), and provisions regarding
non-competition and non-solicitation and prohibiting such Person from pursuing
the Company's corporate opportunities (which such provisions shall be no more
restrictive than similar obligations imposed on a Director by virtue of service
on the Board), which agreement shall be in form and substance reasonably
acceptable to the Company and the Investor Group. Neither any failure by the
Company, the Board, or the agents thereof, to provide notice to an Investor
Group Observer of a meeting of the Board pursuant to the foregoing provisions,
nor any failure by an Investor Group Observer to attend any such meeting, shall
in any way affect the authority of the Board to hold such meeting or the
legitimacy of any actions taken by the Board at such meeting.
SECTION 2.02. Committee Membership. For so long as the Investor
Group is entitled to designate at least one Investor Director for election to
the Board under this Agreement, each committee of the Board shall consist of at
least one Investor Director; provided, however, that if no Investor Director is
eligible for membership on any given committee of the Board under then
applicable listing and corporate governance standards of the NYSE or any
applicable law, rule or regulation, then such committee of the Board shall
include an Investor Director only when so permitted by the listing and corporate
governance standards of the NYSE and any applicable law, rule or regulation;
provided, further, that the Company shall exercise all authority under
applicable law, rule and regulation to permit the inclusion of any Investor
Director designated by the Investor Group on such committee, including, without
limitation, by causing an increase in the number of Directors on such committee.
To the extent that no Investor Director is eligible for membership on a
committee of the Board, the Investor Group shall be entitled to designate an
Investor Group Observer to attend and observe the meetings of such committee,
provided that (i) the observation is not prohibited by applicable listing or
corporate governance standards of the NYSE, or any applicable law, rule or
regulation, and (ii) that such Investor Group Observer would otherwise satisfy
all of the eligibility requirements for service on such committee applicable to
the Directors in accordance with the applicable listing and corporate governance
standards of the NYSE and any
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applicable law, rule or regulation. Subject to the foregoing, the Company shall
take appropriate action, effective as the commencement of business on the first
business day immediately after the day of the Closing Date, to allow for the
appointment of the Investor Director set forth on Schedule I attached hereto to
the Board committees set forth opposite such Investor Director's name on
Schedule I.
SECTION 2.03. Resignations. If, at any time the Company notifies
the Investor Group in writing (supported by adequate detail as to its
calculation) that the Total Ownership Amount is less than the minimum level
required under Section 2.01(c)(i) to designate the number of Investor Directors
then serving on the Board, the Investor Group shall cause, within three (3)
business days thereafter, that number of Investor Directors (the identity of
such Directors to be selected by the Investor Group) to resign from the Board so
that the number of Investor Directors on the Board after such resignation(s)
equals the number of Investor Directors that the Investor Group would have been
entitled to designate in accordance with Section 2.01(c)(i); provided that if
Mr. LD is then sitting on the Board, all Investor Directors other than Mr. LD
shall have resigned before Mr. LD resigns pursuant to this Section 2.03. As a
condition to an Investor Director's nomination for membership on the Board or
election as a Director (whichever comes first), and in support of the provisions
of this Section 2.03, such Investor Director shall furnish the Company with his
or her written resignation from the Board, effective upon the Company's
acceptance thereof, in the event that such Investor Director does not so resign
in accordance with the foregoing provisions of this Section 2.03.
SECTION 2.04. Voting of Shares. Until the earliest of (a) the
first anniversary of the Closing Date, (b) the date the Total Ownership Amount
is less than the Release Share Total and (c) the date when the Investor Group no
longer has the right to designate any Investor Directors, or relinquishes the
right to designate all Investor Directors (the earliest of such dates, the
"Cut-Off Date"), each member of the Investor Group will vote, or grant a proxy
to the Company or its authorized designee to vote, all shares of Common Stock
Beneficially Owned by such Person as to any matter presented to the stockholders
of the Company in the same proportion as the votes cast by or on behalf of the
holders of the Common Stock other than the members of the Investor Group on such
matter; provided, that the members of the Investor Group may vote in any manner
they choose in any election of the Investor Directors.
SECTION 2.05. Restrictions on Company Action; Bylaws. Except as
required by applicable law, rule or regulation or the applicable listing or
corporate governance standards of the NYSE, the Company shall not approve or
recommend to its stockholders any transaction or approve, recommend or take any
other action that would conflict with the terms of this Agreement. The Company
and each member of the Investor Group shall each take or cause to be taken all
lawful action necessary to ensure at all times that the Company's articles of
organization and by-laws or any other agreement are not at any time inconsistent
with the provisions of this Agreement.
SECTION 2.06. Certain Protective Provisions. From the date hereof
until the earlier of (x) the date on which the Standstill Period ends and (y)
the date on
12
which the members of the Investor Group are released from the provisions of
Section 3.01 in accordance with this Agreement, the Company shall not (i) amend
the Rights Agreement in a manner, or adopt, enter into or implement any Rights
Agreement, that would restrict the ability of the members of the Investor Group
from acquiring "Beneficial Ownership" (as defined in the Rights Agreement) of up
to the number of shares of "Common Stock" (as defined in the Rights Agreement)
that the members of the Investor Group are permitted to acquire under the Rights
Agreement without becoming an "Acquiring Person" (as defined in the Rights
Agreement) under the Rights Agreement as in effect on the date of the Purchase
Agreement; and (ii) except in connection with any Rights Agreement (which shall
be governed by clause (i) of this sentence and not this clause (ii)), enter
into, amend or modify any contract, instrument or agreement, or issue any debt
or equity securities, that would limit, in a manner materially adverse to, and
materially disproportionate to, the members of the Investor Group compared to
holders of shares of Common Stock generally (or holders of securities issued in
respect of shares of Common Stock generally), the ability of the members of the
Investor Group to (A) own or maintain ownership of a specified number or
percentage of shares of Common Stock or (B) vote their shares of Common Stock,
unless such contract, instrument, agreement or debt or equity securities permits
the members of the Investor Group to continue owning and voting (1) the same
number or percentage of shares of Common Stock held by the members of the
Investor Group from and after the time of such entry into, amendment,
modification or issuance to the same extent that the members of the Investor
Group could do so before such entry into, amendment, modification or issuance
and (2) any additional shares of Common Stock that members of the Investor Group
may acquire Beneficial Ownership of, without violating any provision of this
Agreement and without becoming an "Acquiring Person" (as defined in the Rights
Agreement) under the Rights Agreement as in effect at the applicable time. The
Company shall take all action necessary to exempt any Transfer to any Seller
made in accordance with this Agreement, or any acquisition of Beneficial
Ownership of shares of Common Stock that Sellers may acquire without violating
any provision of this Agreement and without becoming an "Acquiring Person" (as
defined in the Rights Agreement) under the Rights Agreement as in effect at the
applicable time, from the provisions of Chapters 110C and 110F under the
Massachusetts Corporation-Related Laws (or any successor statutes to such
Chapters).
SECTION 2.07. Chairmanship. Mr. LD shall have the right, should
he so desire, to be appointed as Chairman of the Board for each of the two years
following the effective date of Mr. LD's resignation as an employee of the
Company if either (i) Arthur L. Goldstein no longer serves as Chairman of the
Board at such time or (ii) such resignation occurs at any time following the
second anniversary of the date hereof, subject to the action of the Board to
appoint Mr. LD to that position (and the Company shall use its best efforts to
obtain such appointment unless such appointment is prohibited by the applicable
listing or corporate governance standards of the NYSE or any applicable law,
rule or regulation). Mr. LD shall have the right to continue to serve as
Chairman of the Board for each year during such two-year period following the
effective date of his resignation as an employee of the Company, subject to (a)
the action of the Board continuing him in such position (and the Company shall
use its best efforts to continue such appointment unless such continuation is
prohibited by the applicable listing or corporate governance standards of the
NYSE or any applicable law, rule or regulation)
13
and (b) Mr. LD then being a Director. Notwithstanding the foregoing, Mr. LD
shall have no right to be Chairman of the Board at any time after the LD Family
Group ceases to Beneficially Own at least 75% of the Acquisition Shares
Beneficially Owned by the LD Family Group on the date hereof (after giving
effect to the Closing). To exercise his rights under this Section 2.07, Mr. LD
must provide the Board and the Company written notice thereof, and the Board
shall have a reasonable time to act on such notice, but in any event shall so
act no later than 120 days after the Company's receipt of such notice.
ARTICLE III
Standstill
SECTION 3.01. Standstill. (a) Except as otherwise provided in
this Agreement, from the date hereof until the earlier of (x) the fifth
anniversary of the date of the Purchase Agreement and (y) the date the Total
Ownership Amount is less than the Release Share Total (the "Standstill Period"),
without the prior approval of a majority of the Non-Investor Directors, no
Investor-Related Party shall, directly or indirectly, (i) acquire voting
securities of the Company that would result in the Investor Group Beneficially
Owning, in the aggregate, a percentage of the Outstanding Shares in excess of
the sum of (A) the Closing Ownership Percentage plus (B) 1% (excluding any
changes to ownership resulting solely as a result of a reduction in the number
of shares of Common Stock outstanding due to the repurchase of shares of Common
Stock by the Company), (ii) make, solicit, initiate, encourage or participate in
any offer or proposal that would reasonably be expected to result in a Change of
Control or, if made by a Person other than an Investor-Related Party or a group
of which an Investor-Related Party is a member, to constitute a Third Party Bid,
(iii) engage in any "solicitation" of "proxies" (as such terms are used in the
proxy rules promulgated by the SEC under the Exchange Act), other than for the
benefit of the Investor Directors, if and to the extent the Investor Group is
entitled to designate any Investor Directors hereunder, or the other Director
nominees of the Board, (iv) become part of a "group" (other than a group that
includes only members of the Investor Group) that would be required to file a
Schedule 13D with the SEC disclosing an intention to change or influence the
control of the Company, or (v) grant any proxies, transfer shares to any voting
trust or enter into any voting agreement (other than (x) among the members of
the Investor Group, (y) pursuant to this Agreement or (z) in respect of proxies
voting in favor of a slate of Directors nominated by the Board). Notwithstanding
the foregoing, any member of the Investor Group may propose, or engage in
discussions with the Board regarding, (I) a possible Change of Control
transaction involving the Investor Group or (II) a possible acquisition
involving members of the Investor Group of the securities or assets of the
Company or its subsidiaries, provided that such discussions are not, and shall
not be, publicly disclosed by any member of the Investor Group or any other
Investor-Related Party or any of their respective respresentatives and would not
in the written opinion of counsel to the Company reasonably satisfactory to the
Investor Group (it being agreed and acknowledged that Testa, Hurwitz &
Thibeault, LLP is satisfactory counsel) be required by applicable law to be
publicly disclosed.
14
(b) Nothing in this Section 3.01 shall (i) prohibit or restrict
any member of the Investor Group from responding to any inquiries from any
stockholders of the Company as to such Person's intention with respect to the
voting of any Common Stock Beneficially Owned by such Person, (ii) restrict the
right of each Investor Director on the Board or any committee thereof to vote on
any matter as such individual believes appropriate or the manner in which an
Investor Director may participate in his or her capacity as a director in
deliberations or discussions at meetings of the Board or as a member of any
committee thereof, (iii) prohibit any member of the Investor Group from
acquiring securities of the Company issued by way of conversion, dividend, stock
split or other distribution or exchange, recapitalization or reclassification or
similar transaction in respect of securities which such member of the Investor
Group is permitted to Beneficially Own under this Agreement, or (iv) except as
provided in Section 2.04, restrict the ability of the members of the Investor
Group from voting for or against or abstaining from any vote in connection with
any Change in Control transaction or Third Party Bid, (v) prevent the members of
the Investor Group from selling their Acquisition Shares or (vi) prohibit any
member of the Investor Group from complying with applicable law.
(c) Each member of the Investor Group shall be fully released
from the provisions of this Section 3.01 in the event that (i) the Board fails
to appoint Mr. LD as Chairman of the Board at any time that Mr. LD has the right
to, and has exercised his right to, be so appointed by the Board in accordance
with Section 2.07 and such appointment is not prohibited by the applicable
listing or corporate governance standards of the NYSE or any applicable law,
rule or regulation, (ii) at any time during the two-year period after the date
hereof, an Investor Director then serving on the Board dies, resigns (other than
as required by Section 2.03) or is removed or disqualified and the Board fails
to appoint to the Board any Investor Director designated by the Investor Group
to be so appointed by the Board in accordance with Section 2.01(c)(ii) as
successor to such Investor Director and such appointment is not prohibited by
the applicable listing or corporate governance standards of the NYSE or any
applicable law, rule or regulation, or (iii) the Board fails to appoint Mr. LD
to the Board as an Investor Director in accordance with Section 2.01(b) and
maintain Mr. LD on the Board as an Investor Director in accordance with the
applicable provisions of Sections 2.01 and 2.03 at any time during the
three-year period after the date hereof (other than as a result of Mr. LD's
death or resignation or the prohibition, by the applicable listing or corporate
governance standards of the NYSE or any applicable law, rule or regulation, of
Mr. LD's appointment to or continuation of service on the Board as an Investor
Director).
SECTION 3.02. Right to Participate in Sale; Certain Releases from
Standstill. (a) Notwithstanding the provisions of Section 3.01, during the
Standstill Period, the Company shall provide each member of the Investor Group
with the opportunity to participate in any bidding process sponsored by the
Company or its representatives in connection with any transaction which could
result in a Change in Control or constitute a Third Party Bid. In connection
therewith, the Company shall (i) notify a designated representative of the
Investor Group promptly of (but no later than five (5) business days after) (A)
its receipt of any offer or proposal relating to a Change in Control transaction
or a Third Party Bid and (B) the Company or its representatives
15
soliciting, initiating or encouraging any offer or proposal relating to a Change
in Control transaction or a Third Party Bid, (ii) promptly upon request provide
the Investor Group detail as to the status of any such bidding process or any
negotiations or discussions with any other Person in connection with a Change in
Control or a Third Party Bid (except that the Company shall not be required to
provide any member of the Investor Group any information as to the identity of,
or the terms and conditions (including price) being discussed with or offered
by, any other Person), (iii) provide the members of the Investor Group the
opportunity to participate in any bidding process relating to such transaction
on terms no less favorable than those applicable to any other potential bidder
and (iv) provide members of the Investor Group access and information relating
to such transaction on a basis no less favorable than the access and information
provided to any other potential bidder.
(b) Each member of the Investor Group shall be fully released
from the provisions of Section 3.01 in the event that any Person (other than any
Investor-Related Party) publicly proposes a Third Party Bid and either (i) such
Third Party Bid constitutes a Bona Fide Offer or (ii) the Company takes
substantive action in respect of, or in response to, such Third Party Bid and
that action does not require the approval of the Company's stockholders (e.g.,
the sale of significant assets).
ARTICLE IV
Transfer Restrictions
SECTION 4.01. Restrictions. (a) During the six months following
the Closing (the "Transfer Restricted Period"), no member of the Investor Group
may sell, dispose, convey or otherwise transfer (collectively, "Transfer") any
of the Acquisition Shares if, following the consummation of such Transfer, the
Investor Group would Beneficially Own less than 90% of the Acquisition Shares;
provided, however, that any member of the Investor Group shall have the right to
Transfer Acquisition Shares to any Permitted Transferee; provided, further,
that, as a condition to any such Transfer to a Permitted Transferee, such
Permitted Transferee shall become a party hereto and agree to be bound by the
terms hereof as if such Permitted Transferee were a member of the Investor
Group. Subject to Section 4.01(b), after the Transfer Restricted Period, the
members of the Investor Group shall not be restricted under this Section 4.01
from Transferring any Acquisition Shares.
(b) For so long as the Total Ownership Amount equals or exceeds
the Release Share Total, no member of the Investor Group shall, without the
prior written approval of a majority of the Non-Investor Directors, knowingly
Transfer any Acquisition Shares to any Person set forth on Schedule II hereto
(the "Competitor List"). The Board may, no more than once during any six-month
period, replace up to two of the Persons included on the Competitor List with
two other Persons; provided, however, that no Person may be included in the
Competitor List unless the Board (by majority vote of the Non-Investor
Directors) reasonably determines that such Person is a competitor of the Company
and its subsidiaries in a significant business line of the Company and its
16
subsidiaries. At no time shall the number of Persons included on the Competitor
List exceed eight.
(c) Notwithstanding anything in this Agreement to the contrary,
any member of the Investor Group may Transfer shares of Common Stock pursuant to
(i) any merger, consolidation or other transaction which has been approved by
the Board and the stockholders of the Company or (ii) any tender offer or
exchange offer (A) constituting a Bona Fide Offer, regardless whether such offer
has been approved by the Board or (B) made by the Company.
(d) All Transfers of Acquisition Shares by the Investor Group
shall be made (i) in accordance with Rule 144, (ii) pursuant to an effective
registration statement under the Securities Act, (iii) in a transaction exempt
from the registration requirements of the Securities Act or (iv) in a Third
Party Bid if and to the extent permitted under Section 4.01(c).
SECTION 4.02. Legends. (a) Except as set forth in Section
4.02(b), during the term of this Agreement, all certificates representing
Acquisition Shares Beneficially Owned by the Investor Group shall bear an
appropriate restrictive legend indicating that such Acquisition Shares are
subject to restrictions pursuant to this Agreement and that such shares were not
issued pursuant to a public offering registered pursuant to the Securities Act.
(b) Prior to any Transfer or proposed Transfer of Beneficial
Ownership by any members of the Investor Group of any Acquisition Shares to any
Person (other than pursuant to Article V), such member shall give written notice
to the Company of its intention to effect such Transfer. Each such notice shall
describe the manner of the proposed Transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel reasonably satisfactory to the
Company (it being agreed and acknowledged that Williams Mullen is satisfactory
counsel) to the effect that the proposed Transfer may be effected pursuant to a
then-effective Registration Statement or without registration under the
Securities Act and any applicable state securities laws, whereupon, subject to
the provisions of Section 4.01, such member shall be entitled to Transfer such
stock in accordance with the terms of its notice. Each certificate for
Acquisition Shares transferred as above provided shall bear the legends provided
in Section 4.02(a), except that such certificate shall not bear such legends as
they relate to the Securities Act if (i) such transfer is made under an
effective Registration Statement or in accordance with the provisions of Rule
144 (or any other rule permitting public sale without registration under the
Securities Act) or (ii) the opinion of counsel referred to above is to the
further effect that the transferee and any subsequent transferee (other than an
affiliate of the Company) would be entitled to Transfer such securities in a
public sale without registration under the Securities Act.
17
ARTICLE V
Registration Rights
SECTION 5.01. Shelf Registration Statement. (a) On or before the
Closing Date, the Company shall use its commercially reasonable efforts to
register all of the Registrable Securities by filing with the SEC a Shelf
Registration Statement relating to the offer and sale of the Registrable
Securities by the Holders from time to time in accordance with the methods of
distribution elected by such Holders and set forth in the Shelf Registration
Statement and shall use its commercially reasonable efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act by the
Closing; provided, however, that if having the Shelf Registration Statement
filed or declared effective as of the Closing will cause the issuance of the
Acquisition Securities to the Investor Group at Closing to fail to meet an
applicable exemption from the registration requirements of the Securities Act,
the Shelf Registration Statement may be declared effective under the Securities
Act no later than 10 days following the Closing (if the condition to the Closing
under the Purchase Agreement relating to such Shelf Registration Statement has
been waived). The Company shall use its commercially reasonable efforts to keep
such Shelf Registration Statement continuously effective during the period from
the date a Shelf Registration Statement is declared effective by the SEC until
the first date on which (i) the Total Ownership Amount is less than the
Registration Share Total, (ii) following the first anniversary of the date
hereof, all Registrable Securities held by all members of the Investor Group
represent less than 1% of all then Outstanding Shares, or (iii) no member of the
Investor Group is an "affiliate" of the Company as such term is defined in Rule
144 and all Registrable Securities held by all members of the Investor Group may
be sold in a single transaction under Rule 144(k) (including, if necessary, by
filing with the SEC a post-effective amendment or a supplement to the Shelf
Registration Statement or the related prospectus or any document incorporated
therein by reference or by filing any other required document or otherwise
supplementing or amending the Shelf Registration Statement, if required by the
rules, regulations or instructions applicable to the registration form used by
the Company for such Shelf Registration Statement or by the Securities Act, any
state securities or "blue sky" laws, or any other rules and regulations
thereunder). No Person other than the Holders and the Spanish Holders shall be
entitled to have included in the Shelf Registration Statement any shares of
Common Stock.
(b) A Shelf Registration Statement shall be deemed not to have
become effective (and the related registration shall be deemed not to have been
effected) unless it has been declared effective by the SEC.
(c) If at any time or from time to time any Holder desires to
sell Registrable Securities in an Underwritten Offering pursuant to the Shelf
Registration Statement, the underwriters, including the managing underwriter,
shall be selected by the Holders and shall be reasonably acceptable to the
Company (it being acknowledged and agreed that each of Goldman Sachs & Co. and
Needham & Co. is an acceptable managing underwriter).
18
(d) The Company's obligations under this Section 5.01 shall
terminate after the first date on which (i) the Total Ownership Amount is less
than Registration Share Total, (ii) following the first anniversary of the date
hereof, all Registrable Securities held by all members of the Investor Group
represent less than 1% of all then Outstanding Shares, or (iii) no member of the
Investor Group is an "affiliate" of the Company as such term is defined in Rule
144 and all Registrable Securities held by all members of the Investor Group may
be sold in a single transaction under Rule 144(k).
SECTION 5.02. Demand Registration. (a) If (i) for any reason,
during any period when the Shelf Registration Statement is required under
Section 5.01 to be effective, the Company is not qualified under the Securities
Act to maintain the effectiveness of the Shelf Registration Statement or fails
to do so, or (ii) during the period between the termination of the Company's
obligations under Section 5.01 and the termination of the Company's obligations
under this Section 5.02 (any such period, a "Demand Period"), then at any time
during a Demand Period, Holders of not less than 25% of the Registrable
Securities may make a written request to the Company (which request shall
specify the Registrable Securities intended to be disposed of by such Persons
and the intended method of distribution thereof) that the Company register any
and all of the Registrable Securities requested to be so registered by filing
with the SEC a Registration Statement covering such Registrable Securities (a
"Demand Registration Statement"). Upon the receipt of such a request, the
Company shall promptly notify all Holders from whom notice has not been
received, and such Holders shall then be entitled within 10 days thereafter to
request the Company to include in such Demand Registration Statement all or any
portion of their Registrable Securities. Promptly following the expiration of
such 10-day period, and provided the Company is then in a Demand Period, the
Company shall cause to be filed a Demand Registration Statement providing for
the registration under the Securities Act of the Registrable Securities which
the Company has been so requested to register to the extent necessary to permit
the disposition of such Registrable Securities in accordance with the intended
methods of distribution thereof specified in such request, and shall use its
commercially reasonable efforts to have such Demand Registration Statement
declared effective by the SEC as soon as practicable thereafter and to keep such
Demand Registration Statement continuously effective for a period of time
necessary following the date on which such Demand Registration Statement is
declared effective for the underwriters or Selling Holders, as applicable, to
sell all the Registrable Securities covered by such Demand Registration
Statement, but in any event a period of no more than 150 days following the date
on which such Demand Registration Statement is declared effective (the "Selling
Period") or such shorter period which will terminate when all of the Registrable
Securities covered by such Demand Registration Statement have been sold pursuant
thereto (including, if necessary, by filing with the SEC a post-effective
amendment or a supplement to the Demand Registration Statement or the related
prospectus or any document incorporated therein by reference or by filing any
other required document or otherwise supplementing or amending the Demand
Registration Statement, if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Demand
Registration Statement or by the Securities Act, any state securities or "blue
sky" laws, or any other rules and regulations thereunder). The Company shall not
be required to cause to be effective more than two Demand Registration
Statements pursuant to this Section 5.02. In
19
no event shall the Company grant any "incidental" or "piggyback" registration
rights to any Person other than the Holders in connection with the filing of a
Demand Registration Statement relating to an underwritten sale of the securities
to be so registered, and other than Spanish Holders.
(b) Subject to the provisions of Section 5.02(e), a Demand
Registration Statement shall be deemed not to have become effective (and the
related registration shall be deemed not to have been effected) unless it has
been declared effective by the SEC; provided, however, that if, after it has
been declared effective, the offering of any Registrable Securities pursuant to
such Demand Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court (other than any such stop order or injunction issued as a result
of the inclusion in such Demand Registration Statement of any information
supplied to the Company for inclusion therein by a Selling Holder), the Selling
Period shall be extended by that number of days during which such stop order,
injunction or other order or requirement remains in effect or is not reversed,
vacated, waived or otherwise lifted.
(c) If at any time or from time to time any Selling Holder
desires to sell Registrable Securities in an Underwritten Offering pursuant to a
Demand Registration Statement, the underwriters, including the managing
underwriter, shall be selected by the Selling Holders and shall be reasonably
acceptable to the Company (it being acknowledged and agreed that each of Goldman
Sachs & Co. and Needham & Co. is an acceptable managing underwriter).
(d) If a registration pursuant to this Section 5.02 involves an
underwritten offering of the securities being registered (an "Underwritten
Offering"), which securities are to be distributed on a firm commitment basis by
or through one or more underwriters of recognized standing under underwriting
terms appropriate for such transaction, and the underwriter or the managing
underwriter, as the case may be, of such Underwritten Offering shall inform the
Company and the Selling Holders that, in its opinion, the amount of securities
requested to be included in such registration exceeds the amount which can be
sold in such offering without adversely affecting the distribution of the
securities being offered, then the Company will include in such registration
only the amount of Registrable Securities and other securities that the Company
is so advised can be sold in such offering; provided, however, that (i) any
securities requested by any parties other than the Spanish Holders to be
included in such registration shall be excluded from such registration before
any Registrable Securities may be so excluded, and (ii) the amount of
Registrable Securities requested to be included in such registration that the
Company is so advised can be sold in such offering shall be allocated pro rata
among the Selling Holders on the basis of the number of Registrable Securities
requested to be registered by all Selling Holders.
(e) The Selling Holders, at any time prior to the effective date
of a Demand Registration Statement, may revoke the Demand Registration
Statement, without liability to any Holder except as may be provided under this
Section 5.02(e), by providing a written notice to the Company revoking such
request. Notwithstanding the
20
provisions of Section 5.02(b), any Demand Registration Statement revoked by
Selling Holders (whether before or after such Demand Registration Statement has
been declared effective) shall be deemed to have been "effective" for purposes
of this Agreement unless (i) such revocation was made by the Selling Holders due
to adverse, material non-public information about the Company of which none of
the Selling Holders were aware at the time of initiating the request for such
Demand Registration Statement, or (ii) the Selling Holders, within 30 days of
such revocation, reimburse the Company for all Registration Expenses incurred by
the Company in connection with the Demand Registration Statement so revoked.
(f) The Company's obligations under this Section 5.02 shall
terminate after the first date on which (i) the Total Ownership Amount is less
than the Registration Share Total, (ii) following the first anniversary of the
date hereof, all Registrable Securities held by all members of the Investor
Group represent less than 1% of all then Outstanding Shares, or (iii) no member
of the Investor Group is an "affiliate" of the Company as such term is defined
in Rule 144 (other than in situations in which the only reason no member of the
Investor Group is such an "affiliate" is the Company's breach of its obligations
under Section 2.01) and all Registrable Securities held by all members of the
Investor Group may be sold in a single transaction under Rule 144(k).
SECTION 5.03. Incidental Registration. (a) If (x) for any reason
the Company is not qualified under the Securities Act to maintain an effective
Shelf Registration Statement or fails, if so required pursuant to Section 5.01,
to do so, or (y) during the period between the termination of the Company's
obligations under Section 5.01 and the termination of the Company's obligations
under this Section 5.03, and the Company proposes to register under the
Securities Act any shares of Common Stock for sale for its own account or for
the account of any other Person, other than pursuant to Section 5.02, (other
than (i) any Registration Statement relating to any employee benefit or similar
plan or any dividend reinvestment plan, (ii) pursuant to a Registration
Statement filed in connection with an exchange offer or (iii) in connection with
a transaction subject to Rule 145 under the Securities Act) the Company shall,
if at such time the Shelf Registration Statement is not effective, give written
notice to each Holder at least 10 days prior to the initial filing of a
Registration Statement with the SEC pertaining thereto (an "Incidental
Registration Statement") informing such Holder of its intent to file such
Incidental Registration Statement and of such Holder's rights under this Section
5.03 to request the registration of the Registrable Securities held by such
Holder. Upon the written request of any Holder made within 10 days after any
such notice is given (which request shall specify the Registrable Securities
intended to be disposed of by such Holder), the Company shall use its
commercially reasonable efforts to effect the registration under the Securities
Act of all Registrable Securities that the Company has been so requested to
register by such Holder, to the extent required to permit the disposition of the
Registrable Securities so requested to be registered, including, if necessary,
by filing with the SEC a post-effective amendment or a supplement to the
Incidental Registration Statement or the related prospectus or any document
incorporated therein by reference or by filing any other required document or
otherwise supplementing or amending the Incidental Registration Statement, if
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Incidental
21
Registration Statement or by the Securities Act or by any other rules and
regulations thereunder.
(b) If a registration pursuant to this Section 5.03 involves an
Underwritten Offering and the underwriter or the managing underwriter, as the
case may be, of such Underwritten Offering shall inform the Company and the
Selling Holders that, in its opinion, the amount of securities requested to be
included in such registration exceeds the amount which can be sold in such
offering without adversely affecting the distribution of the securities being
offered, then the Company will include in such registration only the amount of
Registrable Securities and other securities that the Company is so advised can
be sold in such offering; provided, however, that the Company shall be required
to include in such required registration: first, all the securities initially
proposed to be sold pursuant to such Incidental Registration Statement by the
Company (in the case of a primary offering by the Company), and second, the
amount of Registrable Securities and other securities requested to be included
in such registration that the Company is so advised can be sold in such
offering, allocated pro rata among the Selling Holders and other security
holders of the Company requesting such registration on the basis of the number
of Registrable Securities and other securities requested to be included by all
Selling Holders and other security holders.
(c) The Company may, at any time prior to the effective date of
an Incidental Registration Statement, revoke such Incidental Registration
Statement without liability to any Holder, by providing a written notice of such
revocation to the Selling Holders.
(d) The Company's obligations under this Section 5.03 shall
terminate after the first date on which (i) the Total Ownership Amount is less
than Registration Share Total, (ii) following the first anniversary of the date
hereof, all Registrable Securities held by all members of the Investor Group
represent less than 1% of all then Outstanding Shares, or (iii) no member of the
Investor Group is an "affiliate" of the Company as such term is defined in Rule
144 (other than in situations in which the only reason no member of the Investor
Group is such an "affiliate" is the Company's breach of its obligations under
Section 2.01) and all Registrable Securities held by all members of the Investor
Group may be sold in a single transaction under Rule 144(k).
SECTION 5.04. Registration Expenses. The Company shall pay all
Registration Expenses in connection with each registration pursuant to Sections
5.01, 5.02 and 5.03. Each Holder selling Registrable Securities pursuant to any
Required Registration Statement or any Incidental Registration Statement shall
pay all discounts and commissions payable to underwriters, selling brokers,
managers or other similar Persons, transfer taxes, if any, and all fees and
disbursements of legal counsel not included as Registration Expenses hereunder,
related to the sale or disposition of such Registrable Securities in proportions
to the amount of such Holder's shares of Common Stock included in any Required
Registration Statement or any Incidental Registration Statement.
22
SECTION 5.05. Restrictions on Public Sale by Holders of
Registrable Securities. If requested by the underwriter or managing underwriter
in any Underwritten Offering (by the Company or any other Person) of Common
Stock or of any securities convertible into or exchangeable for Common Stock, or
of warrants or other securities entitling the holder thereof to purchase Common
Stock, each Holder shall agree not to effect any public sale or distribution of
Common Stock during the 14 day period prior to, and during the 90 day period
beginning on, the date of sale of securities in connection with Underwritten
Offering.
SECTION 5.06. Registration Procedures. In connection with the
obligations of the Company pursuant to Sections 5.01, 5.02 and 5.03, the Company
shall use its commercially reasonable efforts to effect or cause to be effected
the registration under the Securities Act of the Registrable Securities entitled
to be included in such registration in order to permit the sale of such
Registrable Securities (in accordance with their intended method or methods of
distribution, in the case of a Required Registration Statement), and the Company
shall:
(a) (i) prepare and file a Registration Statement with the SEC
(within the time period specified in Section 5.01 or 5.02, as applicable, in the
case of a Required Registration Statement) which Registration Statement (x)
shall be on a form selected by the Company for which the Company qualifies, (y)
shall be available for the sale or exchange of the Registrable Securities in
accordance with the intended method or methods of distribution, in the case of a
Required Registration Statement, and (z) shall comply as to form in all material
respects with the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith, (ii) use its commercially
reasonable efforts to cause such Registration Statement to become effective and
remain effective in accordance with Section 5.01 or 5.02, as applicable, in the
case of a Required Registration Statement, and (iii) cause each Registration
Statement and the related prospectus and any amendment or supplement thereto, as
of the effective date of such Registration Statement, amendment or supplement
(x) to comply in all material respects with any requirements of the Securities
Act and the rules and regulations of the SEC and (y) not to contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
(b) in the case of a Required Registration Statement, and subject
to Section 5.06(j), prepare and file with the SEC such amendments and
post-effective amendments to each such Required Registration Statement as may be
necessary to keep such Required Registration Statement effective for the
applicable required period set forth herein with respect thereto; cause each
prospectus forming part of such Required Registration Statement to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by each Required Registration Statement during
the applicable required period in accordance with the intended method or methods
of distribution by the Selling Holders, as set forth in such Registration
Statement;
23
(c) furnish to each Selling Holder and to each underwriter of an
Underwritten Offering of Registrable Securities covered by such Registration
Statement, if any, without charge, as many copies of each prospectus forming
part of such Registration Statement, including each preliminary prospectus, and
any amendment or supplement thereto and such other documents as such Selling
Holder or underwriter may reasonably request in order to facilitate the public
sale or other disposition of such Registrable Securities; and subject to the
Selling Holders' compliance with the provisions of Section 5.07(b), the Company
hereby consents to the use of such prospectus, including each such preliminary
prospectus, by each such Selling Holder and underwriter, if any, in connection
with the offering and sale of such Registrable Securities;
(d) (i) use its commercially reasonable efforts to register or
qualify the Registrable Securities covered by a Registration Statement, no later
than the time such Registration Statement is declared effective by the SEC,
under all applicable state securities or "blue sky" laws of such jurisdictions
as each underwriter, if any, or any Selling Holder shall reasonably request;
(ii) use its commercially reasonable efforts to cause such registration or
qualification to remain effective during the period such Registration Statement
is required to be kept effective (in the case of a Required Registration
Statement); and (iii) do any and all other acts and things which may be
reasonably necessary to enable each such underwriter, if any, and Selling Holder
to consummate the disposition in each such jurisdiction of the Registrable
Securities covered by such Registration Statement; provided, however, that the
Company shall not be required to register or qualify any Registrable Securities
in any jurisdiction if registration or qualification in such jurisdiction would
subject the Company to unreasonable burden or expense or, in the case of an
Underwritten Offering, would unreasonably delay the commencement of such
Underwritten Offering; and provided, further, that the Company shall not be
obligated to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject or to consent to be subject to general service of process
(other than service of process in connection with such registration or
qualification or any sale of Registrable Securities in connection therewith) in
any such jurisdiction;
(e) advise each Selling Holder promptly, and, if requested by
such Selling Holder, confirm such advice in writing, (i) when a Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) during the period during which the
Company is required hereunder to keep a Registration Statement effective, of the
issuance by the SEC or any state securities authority of any stop order,
injunction or other order or requirement suspending the effectiveness of such
Registration Statement or the initiation of any proceeding for that purpose,
(iii) if, between the effective date of a Registration Statement and the closing
of any sale of Registrable Securities covered thereby pursuant to any agreement
to which the Company is a party, the representations and warranties of the
Company contained in such agreement cease to be true and correct in all material
respects or if the Company receives any notification with respect to the
suspension of the qualification of such Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose, and (iv) of
the happening of any event during the period a Registration
24
Statement is required hereunder to be effective as a result of which such
Registration Statement or the related prospectus contains any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(f) furnish counsel for each underwriter, if any, and for each
Selling Holder copies of any request by the SEC or any state securities
authority for amendments or supplements to a Registration Statement and
prospectus or for additional information;
(g) use its commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of a Registration Statement
at the earliest possible time;
(h) upon request, furnish to the underwriter or managing
underwriter of an Underwritten Offering of Registrable Securities, if any,
without charge, at least one signed copy of each Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits; and furnish to
each Selling Holder, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(i) cooperate with each Selling Holder and the underwriter or
managing underwriter of an Underwritten Offering of Registrable Securities, if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends; and enable such Registrable Securities to be in such denominations
(consistent with the provisions of the governing documents thereof) and
registered in such names as each Selling Holder or the underwriter or managing
underwriter of an Underwritten Offering of Registrable Securities, if any, may
reasonably request at least three business days prior to any sale of Registrable
Securities;
(j) upon the occurrence of any event contemplated by Section
5.06(e)(iv), during the period in which a Registration Statement is required
hereunder to be kept in effect, use its commercially reasonable efforts to
prepare a supplement or post-effective amendment to a Registration Statement or
the related prospectus, or any document incorporated therein as thereafter
delivered to the purchasers of the Registrable Securities covered by such
Registration Statement, such that such prospectus will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(k) in the case of an Underwritten Offering, enter into
underwriting agreements in customary form, (including provisions with respect to
indemnification and contribution in customary form and consistent with the
provisions and procedures relating to indemnification and contribution contained
herein) and take all other customary and appropriate actions in order to
expedite or facilitate the disposition of the
25
Registrable Securities covered by a Registration Statement as shall be
reasonably requested by the underwriters, and in connection therewith:
(i) make such representations and warranties to the
underwriters, if any, in form, substance and scope as are customarily
made by issuers to underwriters in similar underwritten offerings;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters and the
Selling Holders) addressed to each Selling Holder and the underwriters
covering the matters customarily covered in opinions requested in sales
of securities or underwritten offerings and such other matters as may
be reasonably requested by such underwriters and Selling Holders;
(iii) obtain "cold comfort" letters and updates thereof from
the Company's independent certified public accountants addressed to the
underwriters, which letters shall be customary in form and shall cover
matters of the type customarily covered in "cold comfort" letters to
underwriters in connection with primary underwritten offerings; and
(iv) deliver such customary documents and certificates as may
be reasonably requested by the managing underwriters;
(l) make available for inspection by representatives of the
Selling Holders and any underwriters participating in any disposition pursuant
to a Registration Statement and any counsel or accountant retained by such
Selling Holders or underwriters all relevant financial and other records,
pertinent corporate documents and properties of the Company and cause the
respective officers, directors and employees of the Company to supply all
information reasonably requested by any such representative, underwriter,
counsel or accountant in connection with a Registration Statement;
(m) (i) within a reasonable time prior to the filing of any
Registration Statement, any related prospectus, any amendment to a Registration
Statement or amendment or supplement to a prospectus, provide copies of such
document to each Selling Holder and to counsel to the Selling Holders and to the
underwriter or underwriters of an Underwritten Offering of Registrable
Securities, if any; and consider in good faith such reasonable changes in any
such document prior to or after the filing thereof as counsel to such Selling
Holders or the underwriter or underwriters may request and make available such
of the representatives of the Company as shall be reasonably requested by such
Selling Holders or any underwriter for discussion of such document; and (ii)
within a reasonable time prior to the filing of any document which is to be
incorporated by reference into a Registration Statement or a related prospectus,
provide copies of such document to counsel for the Selling Holders; consider in
good faith such reasonable changes in such document prior to or after the filing
thereof as counsel for the Selling Holders or such underwriter shall request;
and make available such of the
26
representatives of the Company as shall be reasonably requested by such counsel
for discussion of such document;
(n) use its commercially reasonable efforts to cause all
Registrable Securities covered by a Registration Statement to be listed on any
securities exchange on which the Common Stock is then listed if so requested by
the Selling Holders;
(o) provide a CUSIP number for all Registrable Securities covered
by a Registration Statement, no later than the effective date of such
Registration Statement;
(p) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering at least 12
months which shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder; and
(q) cooperate and assist in any filing required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter" that is required
to be retained in accordance with the rules and regulations of the NASD).
SECTION 5.07. Obligations of Selling Holders. (a) Each Selling
Holder shall, as a condition to the exercise of any registration rights of such
Person provided herein, furnish to the Company such information and materials
regarding such Person, the ownership of Registrable Securities by such Person
and the proposed distribution by such Person of such Registrable Securities as
the Company may from time to time reasonably request in writing. Each Selling
Holder shall, as a condition to participating in any Underwritten Offering of
Registrable Securities, enter into such agreements as the underwriters thereof
may reasonably request from time to time. Each Selling Holder shall promptly
update in writing any information or materials provided to the Company pursuant
to this Section 5.07(a) to the extent reasonably necessary to maintain the
accuracy and completeness thereof and the Company shall promptly update any
Registration Statement to reflect such updated information. Each Selling Holder
shall take all such action as may be reasonably required by the Company to
permit the Company to comply with all applicable requirements of the Securities
Act and the Exchange Act.
(b) Promptly upon receipt of any written notice of the Company of
the happening of any event of the kind described in Section 5.06(e)(ii) or (iv),
each Selling Holder shall, and shall cause its agents to, forthwith discontinue
disposition of Registrable Securities pursuant to the affected Registration
Statement until such Person's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 5.06(j), and, if so directed by the
Company, such Person shall deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies then in
such Person's possession, of the prospectus covering such Registrable Securities
which was current at the time of receipt of such notice. Without limiting the
foregoing, each Selling Holder shall, and shall cause its agents to, use only
the current prospectus, as amended or supplemented from time to time, that is
made
27
available to such Selling Holder by the Company for use in connection with the
disposition of such Selling Holder's Registrable Securities.
(c) Each Selling Holder agrees that it will not effect any
disposition under any effective Registration Statement of any Acquisition Shares
or other Registrable Securities other than in accordance with the plan of
distribution of such securities described in such Registration Statement.
SECTION 5.08. Indemnification. (a) The Company shall indemnify
and hold harmless each Person who participates as an underwriter (any such
Person being an "Underwriter"), each Selling Holder and their respective
partners, directors, officers and employees and each Person, if any, who
controls any Selling Holder or Underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act as follows:
(i) against any and all losses, liabilities, claims, damages,
judgments and reasonable expenses whatsoever, as incurred, arising out
of any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto)
pursuant to which Registrable Securities were registered under the
Securities Act, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any prospectus
(or any amendment or supplement thereto) including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all losses, liabilities, claims, damages,
judgments and reasonable expenses whatsoever, as incurred, to the
extent of the aggregate amount paid in settlement of any litigation,
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any other claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected with the prior
written consent of the Company; and
(iii) against any and all reasonable expense whatsoever, as
incurred (including, subject to Section 5.08(c), fees and disbursements
of counsel) incurred in investigating, preparing or defending against
any litigation, investigation or proceeding by any governmental agency
or body, commenced or threatened, in each case whether or not such
Person is a party, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
28
provided, however, that this indemnity agreement does not apply to any Selling
Holder or Underwriter with respect to any loss, liability, claim, damage,
judgment, settlement or expense to the extent arising out of (A) any untrue
statement or omission or alleged untrue statement or omission (1) made in
reliance upon and in conformity with written information furnished to the
Company by such Person expressly for use in a Registration Statement (or any
amendment thereto) or any related prospectus (or any amendment or supplement
thereto) or (2) if such untrue statement or omission or alleged untrue statement
or omission was corrected in an amended or supplemented Registration Statement
or prospectus and the Company had furnished or made available copies thereof to
the Underwriter or Selling Holder from which the Person asserting such loss,
liability, claim, damage, judgment, settlement or expense purchased the
securities that are the subject thereof prior to the date of sale by such
Underwriter or Selling Holder to such Person, or (B) the failure of such Selling
Holder to comply with its obligations set forth in Section 5.07.
(b) Indemnification by Sellers, Underwriters, Etc. Each Selling
Holder shall severally indemnify and hold harmless the Company, each Underwriter
and the other Selling Holders, and each of their respective partners, directors,
officers and employees (including each Director and each officer of the Company
who signed the Registration Statement) and each Person, if any, who controls the
Company, any Underwriter or any other Selling Holder within the meaning of
Section 15 of the Securities Act, against any and all losses, liabilities,
claims, damages, judgments, settlements and expenses described in the indemnity
contained in Section 5.08(a)(i) - (iii) (provided that any settlement of the
type described therein is effected with the written consent of such Selling
Holder), as incurred, but only with respect to (i) untrue statements or
omissions, or alleged untrue statements or omissions, made in a Registration
Statement (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Selling
Holder expressly for use in such Registration Statement (or any amendment
thereto) or such prospectus (or any amendment or supplement thereto), (ii)
untrue statements or omissions or alleged untrue statements or omissions that
were corrected in an amended or supplemented Registration Statement or
prospectus that the Company had made available to the Underwriter or such
Selling Holder prior to the date of sale of securities covered thereby by such
Underwriter or Selling Holder to the Person asserting such loss, liability,
claim, damage, judgment, settlement or expense, or (iii) third party claims
arising from the failure of such Selling Holder to comply with its obligations
set forth in Section 5.07 ; provided, however, that an indemnifying Selling
Holder shall not be required to provide indemnification in any amount in excess
of the amount by which (x) the total price at which the Registrable Securities
sold by such indemnifying Selling Holder and its affiliated indemnifying Selling
Holders and distributed to the public were offered to the public exceeds (y) the
amount of any damages which such indemnifying Selling Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. The Company shall be entitled, to the extent customary, to
receive indemnification and contribution from underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution, to the same extent as provided above with respect to
information so furnished in writing by such Persons specifically for inclusion
in any prospectus or Registration Statement.
29
(c) Conduct of Indemnification Proceedings. Each indemnified
party or parties shall give reasonably prompt notice to each indemnifying party
or parties of any action or proceeding commenced against it in respect of which
indemnity may be sought hereunder, but failure so to notify an indemnifying
party or parties shall not relieve it or them from any liability which it or
they may have under this indemnity agreement, except to the extent that the
indemnifying party is materially prejudiced by such failure to give notice. If
the indemnifying party or parties so elects within a reasonable time after
receipt of such notice, the indemnifying party or parties may assume the defense
of such action or proceeding at such indemnifying party's or parties' expense
with counsel chosen by the indemnifying party or parties and approved by the
indemnified party defendant in such action or proceeding, which approval shall
not be unreasonably withheld; provided, however, that, if such indemnified party
or parties reasonably determine that a conflict of interest exists and that
therefore it is advisable for such indemnified party or parties to be
represented by separate counsel or that, upon advice of counsel, there may be
legal defenses available to it or them which are different from or in addition
to those available to the indemnifying party, then the indemnified party or
parties shall be entitled to separate counsel (limited in each jurisdiction to
one counsel for all Underwriters and another counsel for all other indemnified
parties under this Agreement) at the indemnifying party's or parties' expense.
If any indemnifying party or parties does not assume such defense, after having
received the notice referred to in the first sentence of this paragraph, the
indemnifying party or parties will pay the reasonable fees and expenses of
counsel for the indemnified party or parties (limited in each jurisdiction to
one counsel for all Underwriters and another counsel for all other indemnified
parties under this Agreement). In no event, however, will any indemnifying party
or parties be liable for any settlement effected without the written consent of
such indemnifying party or parties (which consent shall not be unreasonably
withheld or delayed). If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with this
paragraph, such indemnifying party or parties shall not, except as otherwise
provided in this Section 5.08(c), be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action
or proceeding.
(d) Contribution. (i) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section 5.08 is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms in respect of any
losses, liabilities, claims, damages, judgments, settlements and expenses
suffered by an indemnified party referred to therein, each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, liabilities, claims, damages, judgments, settlements and
expenses in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and of the liable Selling Holders (including, in
each case, that of their respective officers, directors, employees and agents)
on the other in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages, judgments, settlements or expenses,
as well as any other relevant equitable considerations. The relative fault of
the Company on the one hand and of the liable Selling Holders (including, in
each case, that of their respective officers, directors,
30
employees and agents) on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by or on behalf of the
Selling Holders, on the other, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
liabilities, claims, damages, judgments, settlements and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Section 5.08(c), any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
(ii) The Company and each Selling Holder agree that it would
not be just and equitable if contribution pursuant to this Section
5.08(d) were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable
considerations referred to in sub-paragraph (i) above. Notwithstanding
this Section 5.08(d), an indemnifying Selling Holder shall not be
required to contribute any amount in excess of the amount by which (A)
the total price at which the Registrable Securities sold by such
indemnifying Selling Holder and its affiliated indemnifying Selling
Holders and distributed to the public were offered to the public
exceeds (B) the amount of any damages which such indemnifying Selling
Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
(iii) For purposes of this Section 5.08, each Person, if any,
who controls a Selling Holder or an Underwriter within the meaning of
Section 15 of the Securities Act shall have the same rights to
contribution as such Selling Holder or Underwriter; and each director
of the Company, each officer of the Company who signed the Registration
Statement, and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, shall have the same rights
to contribution as the Company.
SECTION 5.09. Inconsistent Actions. The Company shall not grant
to any Person the right to include securities in any Required Registration
Statement, other than the rights granted in this Agreement.
SECTION 5.10. Certain Actions by the Company. Upon the request of
the Selling Holders, the Company shall, and shall cause its officers to,
participate in customary "road shows" for purposes of assisting in the sale of
Registrable Securities by the Selling Holders, including by meeting with
potential investors and making presentations reasonably requested by the Selling
Holders and taking such actions as reasonably required by any Underwriter
participating in such sale; provided that (i) the dollar value of the
Registrable Securities being offered for sale is in excess of $10 million and
(ii) the Company shall not be required to participate in more than two (2) such
road shows per year in connection with offerings of Registrable Securities. The
Company shall
31
bear all costs and expenses incurred in connection with the performance of its
obligations under this Section 5.10.
SECTION 5.11. Blackout Periods. Notwithstanding anything in this
Agreement to the contrary, the Company shall be entitled, for reasonable periods
of time not to exceed 45 consecutive days and in no event to exceed more than an
aggregate of 90 days during any 360-day period (a "Blackout Period"), to
postpone and delay the filing or effectiveness of any Demand Registration
Statement, or suspend the effectiveness of any Registration Statement, if a
majority of the Non-Investor Directors shall determine in their good faith
judgment that any such filing or the offering of any Registrable Securities
would (a) impede, delay or otherwise interfere with any material pending or
contemplated acquisition or divestiture, or (b) require disclosure of material
non-public information (other than information relating to an event described in
clause (a) above) which, if disclosed at such time, would be detrimental to the
best interests of the Company and its stockholders. Upon written notice by the
Company to each Holder of such determination, such Holder shall keep the fact of
any such notice strictly confidential, and during any Blackout Period promptly
halt any offer, sale, trading or transfer by it or any of its subsidiaries of
any Common Stock for the duration of the Blackout Period set forth in such
notice (or until such Blackout Period shall be earlier terminated in writing by
the Company) and promptly halt any use, publication, dissemination or
distribution of each prospectus included in the Registration Statement, and any
amendment or supplement thereto by it for the duration of the Blackout Period
set forth in such notice (or until such Blackout Period shall be earlier
terminated in writing by the Company) and, if so directed by the Company, will
deliver to the Company any copies then in its possession of the prospectus
covering such Registrable Securities.
SECTION 5.12. Rules 144 and 144A. The Company shall timely file
or furnish the reports required to be filed or furnished by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
SEC thereunder (or, if the Company is not required to file such reports, it
will, upon the request of any Holder, make publicly available such necessary
information for so long as necessary to permit sales pursuant to Rules 144 or
144A under the Securities Act).
ARTICLE VI
Miscellaneous
SECTION 6.01. Term; Notices. (a) This Agreement shall be
effective from the date hereof until the tenth anniversary of the date hereof,
or until mutually terminated by the parties hereto, if earlier. If the Company
is involved in a merger, consolidation or similar transaction in which the
Common Stock is converted or exchanged into shares of capital stock of another
Person, proper provision shall be made to cause Article V to apply to such
shares of capital stock from and after the consummation of that transaction,
except that for purposes of Article V, the terms "Registrable Securities" and
"Common Stock" shall mean such shares of capital stock received in that
transaction, and the calculation of "Outstanding Shares," "Registration
32
Share Total" and "Total Ownership Amount" shall be based on the shares of
capital stock received in that transaction, in each case instead of the Common
Stock.
(b) All notices, requests, permissions, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) five business days following sending by registered or certified
mail, postage prepaid, (b) when sent, if sent by facsimile; provided that the
facsimile transmission is promptly confirmed by telephone, (c) when delivered,
if delivered personally to the intended recipient and (d) one business day
following sending by overnight delivery via a national courier service and, in
each case, addressed to a party at the following address for such party:
If to any member of the Investor Group, to it at the following
address:
Ecolochem, Inc.
4545 Patent Road
Norfolk, VA 23502
Attention: Lyman B. Dickerson
Telecopy: 757.855.1478
with a copy to:
Williams Mullen
222 Central Park Avenue
Suite 1700
Virginia Beach, VA
Attention: Frederick T. Stant, Esq.
Telecopy: 757.473.5308
and
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Alan Stephenson, Esq.
Telecopy: 212.474.3700
If to the Company, at the following address:
Ionics, Incorporated
65 Grove Street
Watertown, MA 02472
Attention: General Counsel
Telecopy: 617.926.3760
33
with a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attention: Mark H. Burnett, Esq.
Telecopy: 617.248.7100
or, in the case of any other Person who becomes a party to, or subject to, this
Agreement, to the address set forth in the written agreement executed pursuant
to Section 6.06, or to such other address as the party to whom notice is to be
given may provide in a written notice to the Company, a copy of which written
notice shall be on file with the secretary of the Company.
SECTION 6.02. Applicable Law. The laws of the Commonwealth of
Massachusetts shall govern the interpretation, validity and performance of the
terms of this Agreement, regardless of the law that might be applied under
principles of conflicts of laws.
SECTION 6.03. Integration. This Agreement and the documents
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire understanding of the parties with respect to the subject matter
hereof. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the subject matter hereof.
SECTION 6.04. Descriptive Headings. The headings in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning of terms contained herein.
SECTION 6.05. Severability. The invalidity or unenforceability of
any provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this Agreement, or
any provision hereof, in any other jurisdiction, it being intended that all
rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law.
SECTION 6.06. Successors, Assigns, Transferees. The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns. Neither
this Agreement nor any right, remedy, obligation or liability arising hereunder
or by reason hereof may be assigned by any party without the prior written
consent of the other parties; provided that members of the Investor Group may
assign all or a portion of their rights under Article V to any Permitted
Transferee in connection with any permitted Transfer of Common Stock to such
Person if such Common Stock constitutes "restricted securities" as defined in
Rule 144 after such Transfer; provided that such transferee agrees to be bound
by the terms of Article V. Any purported assignment of rights under this
Agreement in violation of this Section 6.06 shall be void and of no effect.
34
SECTION 6.07. Defaults. A default by the Investor Group, on the
one hand, or by the Company, on the other hand, in such party's compliance with
any of the conditions or covenants hereof or performance of any of the
obligations of such party hereunder shall not constitute a default by the other
party.
SECTION 6.08. Amendments; Waivers. This Agreement may not be
amended, modified or supplemented and no waivers of or consents to departures
from the provisions hereof may be given unless consented to in writing by (a) in
the case of each Article other than Article V (and the definitions attendant
thereto), Section 2.07 and this Section 6.08, (i) the Company and (ii) the
Investor Group, (b) in the case of Article V (and the definitions attendant
thereto) and this Section 6.08, (i) the Company and (ii) the Holders, and (c) in
the case of Section 2.07, (i) the Company and (ii) Mr. LD.
SECTION 6.09. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but all of
which, when taken together, shall constitute one and the same Agreement.
SECTION 6.10. Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement other
than the provisions of Article V, the non-breaching parties would be irreparably
harmed and could not be made whole by monetary damages. The parties hereto, in
addition to any other remedy to which they may be entitled at law or in equity,
shall be entitled to seek an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof without the necessity of securing or posting any bond or
providing prior notice.
SECTION 6.11. Exclusive Jurisdiction; Waiver of Jury Trial. Each
of the parties irrevocably submits to the exclusive jurisdiction of the United
States District Court for the Southern District of New York, for the purposes of
any suit, action or other proceeding arising out of this Agreement, or any
transaction contemplated hereby. Each of the parties must commence any action,
suit or proceeding relating hereto either in the United States District Court
for the Southern District of New York, or, if such suit, action or other
proceeding may not be brought in such court for jurisdictional reasons, in the
Supreme Court of the City of New York, New York. Service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth above shall be effective service of process for any action,
suit or proceeding in such court with respect to any matters to which it has
submitted to jurisdiction in this Section 6.11. Each of the parties irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement in the United States District
Court for the Southern District of New York or the Supreme Court of the City of
New York, New York and further irrevocably and unconditionally waives and shall
not plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
(b) Each party waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect of any
litigation arising out of or relating to this Agreement. Each party (i)
certifies that no representative, agent or attorney of
35
another partys has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce the foregoing waiver and
(ii) acknowledges that it has been induced to enter into this Agreement by,
among other things, the mutual waivers and certifications set forth above in
this Section 6.11(b).
SECTION 6.12. Attorneys' Fees. In any action or proceeding (i)
brought to enforce any provision of this Agreement, or (ii) where any provision
hereof is validly asserted as a defense, the successful party shall be entitled
to recover reasonable attorneys' fees in addition to any other available remedy.
SECTION 6.13. Approvals, Etc. In each instance where this
Agreement requires any determination, approval, consent, or request to be made
collectively by the Investor Group, such determination, approval, consent, or
request shall be made by members of the Investor Group representing a majority
of the Common Stock Beneficially Owned by the Investor Group, unless the
Investor Group agrees upon a different methodology; provided that the Company is
notified in advance in writing of such methodology. In each instance where this
Agreement requires any determination, approval, consent, or request to be made
collectively by the Holders, such determination, approval, consent, or request
shall be made by Holders representing a majority of the Registrable Securities
Beneficially Owned by such Holders, unless the Holders agree upon a different
methodology; provided that the Company is notified in advance in writing of such
methodology. In each instance where this Agreement requires any determination,
approval, consent, or request to be made collectively by the Selling Holders,
such determination, approval, consent, or request shall be made by Selling
Holders representing a majority of the Registrable Securities requested to be
included (or, in the case of the Shelf Registration Statement, included) in the
applicable Registration Statement, unless the Selling Holders agree upon a
different methodology; provided that the Company is notified in advance in
writing of such methodology.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
IONICS, INCORPORATED
By: /s/ Stephen Korn
------------------------------------
Its: Vice President and General Counsel
[Stockholders Agreement Signature Page]
THE LYMAN B. DICKERSON REVOCABLE TRUST
DATED SEPTEMBER 9, 1996, OR ANY SUCCESSOR
TRUSTEE, AS AMENDED
By: /s/ Lyman B. Dickerson
----------------------------------------
LYMAN B. DICKERSON, Trustee
February 13, 2004
Date Signed
THE DOUGLAS G. DICKERSON REVOCABLE TRUST
DATED JUNE 22, 1988, OR ANY SUCCESSOR
TRUSTEE, AS AMENDED
By: /s/ Douglas G. Dickerson
----------------------------------------
DOUGLAS G. DICKERSON, Trustee
February 13, 2004
Date Signed
THE RICHARD DICKERSON REVOCABLE TRUST
DATED MARCH 5, 1993, OR ANY SUCCESSOR
TRUSTEE, AS AMENDED
By: /s/ Douglas G. Dickerson
----------------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
February 13, 2004
Date Signed
By: /s/ Marguerite W. Dickerson
----------------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
February 13, 2004
Date Signed
[Stockholders Agreement Signature Page]
THE LYMAN DICKERSON IRREVOCABLE TRUST,
DATED JULY 1, 1991
By: /s/ Lyman B. Dickerson
----------------------------------------
LYMAN B. DICKERSON, Trustee
February 13, 2004
Date Signed
By: /s/ Charles C. Kline
----------------------------------------
CHARLES C. KLINE, Independent Trustee
February 13, 2004
Date Signed
THE DOUGLAS DICKERSON IRREVOCABLE TRUST
NO. 3, DATED JULY 1, 1991
By: /s/ Douglas G. Dickerson
----------------------------------------
DOUGLAS G. DICKERSON, Trustee
February 13, 2004
Date Signed
By: /s/ Frederick T. Stant
----------------------------------------
FREDERICK T. STANT, III,
Independent Trustee
February 13, 2004
Date Signed
[Stockholders Agreement Signature Page]
THE RICHARD DICKERSON IRREVOCABLE TRUST
NO. 3, DATED JULY 1, 1991
By: /s/ Douglas G. Dickerson
----------------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
February 13, 2004
Date Signed
By: /s/ Marguerite W. Dickerson
----------------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
February 13, 2004
Date Signed
By: /s/ Frederick T. Stant
----------------------------------------
FREDERICK T. STANT, III,
Independent Trustee
February 13, 2004
Date Signed
[Stockholders Agreement Signature Page]
/s/ Lyman B. Dickerson
-------------------------------------------
LYMAN B. DICKERSON
February 13, 2004
Date Signed
/s/ Douglas G. Dickerson
-------------------------------------------
DOUGLAS G. DICKERSON
February 13, 2004
Date Signed
THE ESTATE OF RICHARD C. DICKERSON
By: /s/ Douglas G. Dickerson
----------------------------------------
DOUGLAS G. DICKERSON, Co-Executor
February 13, 2004
Date Signed
By: /s/ Marguerite W. Dickerson
----------------------------------------
MARGUERITE W. DICKERSON, Co-Executor
February 13, 2004
Date Signed
Schedules and Exhibits Omitted in Accordance With Item 601(b)(2) of
Regulation S-K
Exhibit A-List of Sellers
Schedule I-Investor Directors and Committee Appointments
Schedule II-Competitor List
Ionics will furnish supplementally a copy of any omitted schedule or exhibit to
the Securities and Exchange Commission upon request, provided however that
Ionics may request confidential treatment pursuant to Rule 24-2 of the Exchange
Act for any schedule or exhibit so furnished.