EXHIBIT 2.1
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EXECUTION COPY
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PURCHASE AGREEMENT
BETWEEN
THE INDIVIDUALS AND ENTITIES LISTED ON EXHIBIT A
AND
IONICS, INCORPORATED
DATED AS OF NOVEMBER 18, 2003
TABLE OF CONTENTS
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Page
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ARTICLE I PURCHASE AND SALE OF THE EQUITY INTERESTS...................2
SECTION 1.01 PURCHASE AND SALE OF THE EQUITY INTERESTS................2
SECTION 1.02 CLOSING DATE.............................................3
SECTION 1.03 TRANSACTIONS TO BE EFFECTED AT THE CLOSING...............3
SECTION 1.04. ADJUSTMENTS TO INITIAL PURCHASE PRICE....................5
SECTION 1.05 ALLOCATION OF PURCHASE PRICE; SECTION 338
TAX ADJUSTMENTS.........................................9
SECTION 1.06 SELLERS REPRESENTATIVES; ATTORNEYS-IN-FACT..............13
SECTION 1.07 ESTATE TAX LIEN.........................................14
ARTICLE II INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF SELLERS.......14
SECTION 2.01 AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY.......14
SECTION 2.02 TITLE TO THE EQUITY INTERESTS...........................14
SECTION 2.03 CAPITAL STOCK...........................................15
SECTION 2.04 INVESTMENT REPRESENTATION...............................15
SECTION 2.05 NO CONFLICT.............................................15
SECTION 2.06 LITIGATION..............................................16
SECTION 2.07 PURCHASER STOCK OWNERSHIP...............................16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS
CONCERNING THE COMPANIES AND THEIR SUBSIDIARIES...........17
SECTION 3.01 ORGANIZATION AND STANDING...............................17
SECTION 3.02 CAPITAL STOCK OF THE COMPANIES AND THEIR
SUBSIDIARIES; JOINT VENTURE............................17
SECTION 3.03 NO CONFLICTS OR VIOLATIONS; NO CONSENTS OR
APPROVALS REQUIRED.....................................19
SECTION 3.04 FINANCIAL STATEMENTS....................................19
SECTION 3.05 ASSETS OTHER THAN REAL PROPERTY INTERESTS;
SUFFICIENCY OF ASSETS..................................20
SECTION 3.06 REAL PROPERTY...........................................21
SECTION 3.07 INTELLECTUAL PROPERTY...................................22
SECTION 3.08 CONTRACTS...............................................25
SECTION 3.09 LITIGATION..............................................28
SECTION 3.10 TAXES...................................................28
SECTION 3.11 ABSENCE OF CHANGES OR EVENTS............................32
SECTION 3.12 COMPLIANCE WITH APPLICABLE LAW..........................33
SECTION 3.13 EMPLOYEE AND LABOR MATTERS..............................34
SECTION 3.14 EMPLOYEE BENEFIT PLANS..................................34
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SECTION 3.14A INTERNATIONAL EMPLOYEE BENEFIT PLANS....................36
SECTION 3.15 ENVIRONMENTAL MATTERS...................................36
SECTION 3.16 INSURANCE...............................................38
SECTION 3.17 TRANSACTIONS WITH AFFILIATES............................39
SECTION 3.18 GOVERNMENTAL PERMITS....................................39
SECTION 3.19 ACCOUNTS RECEIVABLE.....................................39
SECTION 3.20 INVENTORY...............................................39
SECTION 3.21 CUSTOMERS AND SUPPLIERS.................................40
SECTION 3.22 BROKERS.................................................40
SECTION 3.23 NALCO JV................................................40
ARTICLE IV REPRESENTATION AND WARRANTIES OF PURCHASER.................40
SECTION 4.01 ORGANIZATION AND STANDING...............................40
SECTION 4.02 AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY.......40
SECTION 4.03 CAPITAL STOCK OF PURCHASER, JOINT VENTURES..............41
SECTION 4.04 NO CONFLICTS OR VIOLATIONS; NO CONSENTS OR
APPROVALS REQUIRED.....................................42
SECTION 4.05 PURCHASER SEC REPORTS...................................43
SECTION 4.06 FINANCIAL STATEMENTS....................................44
SECTION 4.07 SUFFICIENCY OF ASSETS...................................44
SECTION 4.08 LITIGATION..............................................45
SECTION 4.09 ABSENCE OF CHANGES OR EVENTS............................45
SECTION 4.10 SECURITIES ACT..........................................46
SECTION 4.11 SELLERS' COMMON STOCK...................................46
SECTION 4.12 BROKERS.................................................46
SECTION 4.13 VOTING REQUIREMENTS.....................................46
SECTION 4.14 OPINION OF FINANCIAL ADVISOR............................47
SECTION 4.15 RIGHTS AGREEMENTS.......................................47
SECTION 4.16 COMPLIANCE WITH APPLICABLE LAW..........................47
SECTION 4.17 EMPLOYEE AND LABOR MATTERS..............................47
SECTION 4.18 CONTRACTS...............................................47
SECTION 4.19 TAXES...................................................49
SECTION 4.20 ENVIRONMENTAL MATTERS...................................49
SECTION 4.21 GOVERNMENTAL PERMITS....................................51
SECTION 4.22 BENEFIT PLANS...........................................51
SECTION 4.23 INTELLECTUAL PROPERTY...................................52
SECTION 4.24 COMMITMENT LETTER.......................................53
ARTICLE V COVENANTS..................................................53
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SECTION 5.01 COVENANTS RELATING TO CONDUCT OF THE PARTIES
BEFORE THE CLOSING.....................................53
SECTION 5.02 ACCESS..................................................58
SECTION 5.03 CONFIDENTIALITY.........................................58
SECTION 5.04 EFFORTS.................................................59
SECTION 5.05 CONSENTS................................................61
SECTION 5.06 PUBLICITY...............................................61
SECTION 5.07 ARRANGEMENTS WITH SELLERS...............................61
SECTION 5.08 NONCOMPETITION AND NONSOLICITATION......................61
SECTION 5.09 CORPORATE INDEMNITY FOR COMPANY MANAGERS,
OFFICERS AND DIRECTORS.................................63
SECTION 5.10 NO SOLICITATION OF PROPOSALS OR OFFERS..................63
SECTION 5.11 COMPANIES' FINANCIAL STATEMENTS; PROXY
STATEMENT; SEC FILINGS.................................66
SECTION 5.12 NEW YORK STOCK EXCHANGE LISTING.........................68
SECTION 5.13 PURCHASER STOCKHOLDERS MEETING..........................68
SECTION 5.14 RIGHTS AGREEMENT........................................68
SECTION 5.15 SHELF REGISTRATION STATEMENT............................69
SECTION 5.16 BORROWED DEBT...........................................69
SECTION 5.17 FOREIGN QUALIFICATIONS..................................69
SECTION 5.18 PERMITS.................................................69
SECTION 5.19 STATUTE OF LIMITATIONS..................................70
SECTION 5.20 NOTICES OF CERTAIN EVENTS...............................70
SECTION 5.21 INTERNAL CONTROLS.......................................71
SECTION 5.22 401(K) PLAN TERMINATION.................................71
SECTION 5.23 PURCHASER FINANCING.....................................71
SECTION 5.24 CERTAIN EMPLOYEE BONUSES................................72
SECTION 5.25 PERMITTED DESIGNEES.....................................72
SECTION 5.26 401(K) PLAN QUALIFICATION...............................72
SECTION 5.27 SHAREHOLDERS AGREEMENTS AND OPERATING AGREEMENT.........72
SECTION 5.28 IDENTIFICATION OF INVESTOR DIRECTORS....................72
SECTION 5.29 TRUSTEE UNDERTAKING.....................................73
SECTION 5.30 NALCO JV................................................73
SECTION 5.31 FINANCING EFFORTS.......................................73
ARTICLE VI EMPLOYEE AND BENEFIT MATTERS...............................73
SECTION 6.01 EMPLOYEES...............................................73
SECTION 6.02 BENEFIT PLANS...........................................74
ARTICLE VII TAX MATTERS.............................................75
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SECTION 7.01 PREPARATION OF TAX RETURNS..............................75
SECTION 7.02 TRANSFER AND SIMILAR TAXES..............................76
SECTION 7.03 SUBCHAPTER S STATUS.....................................76
SECTION 7.04 FIRPTA CERTIFICATE......................................76
SECTION 7.05 ASSISTANCE AND COOPERATION..............................76
SECTION 7.06 DISPUTES BY TAXING AUTHORITY............................77
SECTION 7.07 SECTION 338(H)(10) ELECTIONS............................77
SECTION 7.08 FAILURE TO MAINTAIN SUBCHAPTER S STATUS.................78
SECTION 7.09 STRADDLE PERIOD........................................78
SECTION 7.10 TAX CLEARANCE CERTIFICATES..............................78
SECTION 7.11 ACTIONS ON CLOSING DATE.................................78
SECTION 7.12 TAX AUDITS..............................................79
SECTION 7.13 SECTION 83(B) ELECTIONS.................................79
ARTICLE VIII CONDITIONS PRECEDENT....................................79
SECTION 8.01 CONDITIONS TO OBLIGATION OF PURCHASER...................79
SECTION 8.02 CONDITIONS TO OBLIGATION OF SELLERS.....................81
SECTION 8.03 WAIVER..................................................82
SECTION 8.04 FRUSTRATION OF CLOSING CONDITIONS.......................82
ARTICLE IX TERMINATION................................................83
SECTION 9.01 TERMINATION.............................................83
SECTION 9.02 EFFECT OF TERMINATION...................................84
SECTION 9.03 FEE AND EXPENSES........................................85
SECTION 9.04 AMENDMENT...............................................86
SECTION 9.05 EXTENSION; WAIVER.......................................86
SECTION 9.06 EXPENSE OR FEE REIMBURSEMENT............................86
ARTICLE X INDEMNIFICATION............................................87
SECTION 10.01 TAX AND 401(A) COMPANY BENEFIT PLAN INDEMNIFICATION.....87
SECTION 10.02 ARTICLE II AND CERTAIN OTHER INDEMNIFICATIONS...........88
SECTION 10.03 OTHER INDEMNIFICATION BY SELLERS........................88
SECTION 10.04 OTHER INDEMNIFICATION BY PURCHASER......................90
SECTION 10.05 LIMITATIONS ON LIABILITY; COOPERATION...................92
SECTION 10.06 LOSSES NET OF INSURANCE, ETC............................93
SECTION 10.07 TERMINATION OF INDEMNIFICATION..........................93
SECTION 10.08 PROCEDURES RELATING TO INDEMNIFICATION FOR
THIRD-PARTY CLAIMS.....................................93
SECTION 10.09 PROCEDURES RELATED TO INDEMNIFICATION FOR
OTHER CLAIMS (OTHER THAN TAX CLAIMS
UNDER SECTION 10.01)...................................94
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SECTION 10.10 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS....95
SECTION 10.11 REPRESENTATIONS AND WARRANTIES..........................95
ARTICLE XI GENERAL PROVISIONS...............................................96
SECTION 11.01 ASSIGNMENT..............................................96
SECTION 11.02 NO THIRD-PARTY BENEFICIARIES............................96
SECTION 11.03 EXPENSES................................................96
SECTION 11.04 NOTICES.................................................97
SECTION 11.05 HEADINGS; CERTAIN DEFINITIONS...........................98
SECTION 11.06 DISCLAIMERS; ACKNOWLEDGMENTS; INTEGRATED CONTRACT......106
SECTION 11.07 EXHIBITS/SCHEDULES; CONFLICTS..........................108
SECTION 11.08 COUNTERPARTS...........................................108
SECTION 11.09 GOVERNING LAW..........................................108
SECTION 11.10 CONSENT TO JURISDICTION................................109
SECTION 11.11 WAIVER OF JURY TRIAL...................................109
SECTION 11.12 SURVIVAL OF CERTAIN REPRESENTATIONS....................109
SECTION 11.13 FURTHER ASSURANCES.....................................110
EXHIBIT A.........Listing of Sellers and Sellers' Equity
EXHIBIT B.........Allocation of Purchase Price
EXHIBIT C.........Employment Agreement
EXHIBIT D.........Stockholders Agreement
EXHIBIT E.........Escrow Agreement
EXHIBIT F.........Working Capital/Excess Cash Calculation Examples
EXHIBIT G.........Amendment to Purchaser's Rights Agreement
EXHIBIT H.........Opinion of Williams Mullen
EXHIBIT I.........Opinion of Testa, Hurwitz & Thibeault, LLP
EXHIBIT J ........Sellers' Release
EXHIBIT K ........Section 338 Escrow Agreement
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THIS PURCHASE AGREEMENT is dated as of November 18, 2003 (the
"Agreement") among the individuals and entities listed on EXHIBIT A (each a
"Seller" and collectively, "Sellers"), and Ionics, Incorporated, a Massachusetts
corporation ("Purchaser").
RECITALS
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A. Purchaser, either directly or through one or more of its direct or
indirect wholly-owned subsidiaries (each, a "Permitted Designee" and
collectively, the "Permitted Designees"), wishes to purchase from Sellers
holding shares of common stock of Ecolochem, Inc. ("Ecolochem Sellers"), and
Ecolochem Sellers wish to sell to Purchaser or its Permitted Designees, all the
issued and outstanding shares of common stock (the "Ecolochem Shares") of
Ecolochem, Inc., a Virginia corporation ("Ecolochem");
B. Purchaser, either directly or through its Permitted Designees,
wishes to purchase from Sellers holding shares of common stock of Ecolochem
International, Inc. ("International Sellers"), and International Sellers wish to
sell to Purchaser, all the issued and outstanding shares of common stock (the
"International Shares") of Ecolochem International, Inc., a Delaware corporation
("International");
C. Purchaser, either directly or through its Permitted Designees,
wishes to purchase from Sellers holding equity interests in Ecolochem S.A.R.L.
("S.A.R.L. Sellers"), and S.A.R.L. Sellers wish to sell to Purchaser or its
Permitted Designees, all of the issued and outstanding equity interests (the
"S.A.R.L. Interests") of Ecolochem S.A.R.L., a societe a responsabilite limitee
organized under the laws of France ("S.A.R.L.");
D. Purchaser, either directly or through its Permitted Designees, wish
to purchase from Sellers holding membership interests of Moson Holdings, LLC
("Moson Holdings Sellers"), and Moson Holdings Sellers wish to sell to Purchaser
or its Permitted Designees, all the issued and outstanding membership interests
(the "Moson Holdings Interests") of Moson Holdings, LLC, a Virginia limited
liability company ("Moson Holdings"); and
E. Ecolochem, International, S.A.R.L. and Moson Holdings are
collectively referred to as the "Companies" and each as a "Company." The
Ecolochem Shares, International Shares, the S.A.R.L. Interests and the Moson
Holdings Interests are collectively referred to as the "Equity Interests."
Purchaser's or its Permitted Designees' acquisition of the Equity Interests and
all ancillary transactions contemplated by this Agreement are referred to
collectively as the "Transaction." Section 11.05 identifies the Sections of this
Agreement in which certain capitalized terms are defined.
AGREEMENT
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Accordingly, the parties agree:
ARTICLE I
Purchase and Sale of the Equity Interests
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SECTION 1.01. Purchase and Sale of the Equity Interests.
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(a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing, (i) Ecolochem Sellers will sell and transfer to
Purchaser (or its Permitted Designee), and Purchaser (or such Permitted
Designee) will purchase, all the issued and outstanding Ecolochem Shares, (ii)
International Sellers will sell and transfer to Purchaser (or its Permitted
Designee), and Purchaser (or such Permitted Designee) will purchase, all the
issued and outstanding International Shares, (iii) subject to Section 1.07,
S.A.R.L. Sellers will sell and transfer to Purchaser (or its Permitted
Designee), and Purchaser (or such Permitted Designee) will purchase, all the
outstanding S.A.R.L. Interests, and (iv) Moson Holdings Sellers will sell and
transfer to Purchaser (or its Permitted Designee), and Purchaser (or such
Permitted Designee) will purchase, all the outstanding Moson Holdings Interests,
for an aggregate purchase price (the "Initial Purchase Price") of (A)
$200,000,000 in cash which shall be subject to adjustment under this Section
1.01(a), Section 1.03(a)(viii), Section 1.04 (Certain Post-Closing Adjustments)
and Section 1.05 (Allocation of Purchase Price; Section 338 Tax Adjustment) plus
(B) 4,905,660 shares of the common stock of Purchaser, par value $1.00 per share
(the "Common Stock"), which shall be subject to adjustment under this Section
1.01(a). Notwithstanding anything to the contrary set forth in this Section 1.01
or otherwise in this Agreement, Purchaser shall have the right to substitute
cash for the shares of Common Stock that Sellers otherwise would be entitled to
receive under this Agreement as and to the extent reasonably necessary to ensure
that such Sellers, as a group (and applying the stock ownership attribution
rules of Section 267(c) of the Code) do not (directly or by such attribution
rules) own immediately after the Transaction in excess of 19.5% of the
outstanding shares of capital stock of Purchaser. Each share of Common Stock for
which cash is substituted under the preceding sentence shall be valued at $26.50
(the "Share Price"). The term "Initial Cash Consideration" shall mean the
aggregate amount of cash to be received by Sellers under this Section 1.01(a).
The term "Initial Stock Consideration" shall mean the aggregate number of shares
of Common Stock to be received by Sellers under this Section 1.01(a). The
Initial Cash Consideration and the Initial Stock Consideration and all
adjustments thereto under Sections 1.01(a), 1.03(a)(viii), 1.04 and 1.05 shall
be allocated among the Companies and the covenant contained in Section 5.08 as
shown on EXHIBIT B; provided, that all payments in respect of the S.A.R.L.
Interest, the Moson Holdings Interest and the covenant contained in Section 5.08
shall be made in cash (and not Common Stock). The number of shares, equity
interests or the percentage of membership interests in a Company, as applicable,
to be transferred by each Seller to Purchaser or its Permitted Designee, is set
forth on EXHIBIT A.
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(b) Unless otherwise required by a Final Determination or by
Applicable Law, neither Purchaser nor Sellers shall take any position on any Tax
Return or with any Taxing Authority inconsistent with the allocation of the
Initial Cash Consideration and the Initial Stock Consideration set forth on
EXHIBIT A and EXHIBIT B and as adjusted under Sections 1.01(a), 1.03(a)(viii),
1.04 and 1.05 or as contemplated by EXHIBIT B or with any Allocation Schedule
(taking into account any Final Section 338 Tax Adjustment). The aggregate amount
of the Initial Cash Consideration and the Initial Stock Consideration allocated
to the Equity Interests of a Company as set forth on EXHIBIT A and EXHIBIT B and
as adjusted under Sections 1.01(a), 1.03(a)(viii), 1.04 and 1.05 and EXHIBIT B
is referred to as the "Company Amount" for such Company. The aggregate amount of
the Initial Cash Consideration and the Initial Stock Consideration allocated to
the Equity Interests of all Companies as set forth on EXHIBIT A and EXHIBIT B
and as adjusted under Sections 1.01(a), 1.03(a)(viii), 1.04 and 1.05 and EXHIBIT
B is referred to as the "Aggregate Consideration."
(c) Each Company Amount shall be allocated to Sellers in the
percentages set forth beside their names for the applicable Company on EXHIBIT
A. Subject to Section 1.03(a)(vii) and (viii), each Seller shall be entitled to
receive from Purchaser an amount equal to the aggregate Company Amounts
allocated to such Seller in accordance with the preceding sentence.
SECTION 1.02. Closing Date. The closing of the Transaction (the
"Closing") will take place at the offices of Williams Mullen, 222 Central Park
Avenue, Suite 1700, Virginia Beach, Virginia 23462, at 10:00 a.m., local time,
as soon as reasonably practicable (but in no event later than the second
business day) following the satisfaction (or, to the extent permitted, the
waiver) of the conditions set forth in Article VIII, other than conditions which
by their terms are to be satisfied on that day (but nonetheless subject to
satisfaction or permitted waiver of such conditions), or at such other place,
time and date as may be agreed by Sellers Representatives and Purchaser. The
date the Closing occurs is the "Closing Date."
SECTION 1.03. Transactions To Be Effected at the Closing.
(a) At the Closing:
(i) each Ecolochem Seller shall deliver to Purchaser,
or its Permitted Designee, certificates representing the Ecolochem Shares held
by such Seller duly endorsed in blank or accompanied by stock powers duly
endorsed in blank in proper form for transfer;
(ii) each International Seller shall deliver to
Purchaser, or its Permitted Designee, certificates representing the
International Shares held by such Seller, duly endorsed in blank or accompanied
by stock powers duly endorsed in blank in proper form for transfer;
(iii) subject to Section 1.07, Purchaser or its
Permitted Designees shall execute and deliver to each of the S.A.R.L. Sellers,
and each of the S.A.R.L. Sellers shall execute and deliver to Purchaser or its
Permitted Designees, instruments of transfer of the S.A.R.L. Interests owned by
such S.A.R.L. Sellers, in a form reasonably acceptable to Sellers
Representatives and Purchaser;
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(iv) each Moson Holdings Seller shall deliver to
Purchaser, or its Permitted Designee, duly executed instruments of transfer of
the Moson Holdings Interests owned by such Seller, in a form reasonably
acceptable to Sellers Representatives and Purchaser;
(v) Sellers shall deliver, or cause to be delivered,
to Purchaser written resignations of the directors of the Companies;
(vi) Sellers Representatives, Purchaser and Citibank
N.A. (or another escrow agent reasonably acceptable to Purchaser and Sellers
Representatives)(the "Escrow Agent") shall execute and deliver the escrow
agreement substantially in the form of EXHIBIT E (such form shall be subject to
changes requested by the Escrow Agent and reasonably acceptable to Sellers
Representatives and Purchaser (the "Escrow Agreement")), providing for the
establishment of an escrow account (the "Escrow Account") with the Escrow Agent
to secure the obligations of Sellers to Purchaser under this Agreement. The
Escrow Account shall consist of (i) $20,000,000 in cash and (ii) 490,566 of the
shares of Common Stock (the "Escrowed Shares") Sellers are entitled to receive
under Section 1.01(a) (collectively, the "Escrow Amount"); provided that Sellers
may elect at least two business days before Closing to replace some or all of
the Escrowed Shares with an amount of cash equal to the number of Escrowed
Shares to be replaced multiplied by the Share Price. At the Closing, Purchaser
shall deposit the Escrow Amount in the Escrow Account to be held, invested and
subsequently disbursed in accordance with the terms, conditions and provisions
of this Agreement and the Escrow Agreement. The Escrow Account shall be divided
into sub-accounts (each a "Sub-Account") for each Seller, which shall be based
on the percentage of the Aggregate Consideration to be received by such Seller.
The right of any Seller to receive any funds held in the Escrow Account shall be
conditioned on such funds not being otherwise distributed in accordance with
this Agreement and the Escrow Agreement. On its termination, all funds and
Escrowed Shares remaining in the Escrow Account shall be distributed to each
Seller to the extent of the balance of such Seller's Sub-Account, as provided in
this Agreement and the Escrow Agreement;
(vii) Purchaser shall deliver to each Seller amounts
of the Initial Stock Consideration allocated to such Seller under Section
1.01(c) minus the amount of Common Stock to be placed in such Seller's
Sub-Account under Section 1.03(a)(vi);
(viii) (A) Purchaser shall deliver to each Seller
amounts of cash equal to the respective portion of the
Initial Cash Consideration allocated to such Seller under Section 1.01(c), minus
(1) the amount of cash to be placed in such Seller's Sub-Account under Section
1.03(a)(vi), plus (2) the Estimated Closing Excess Cash Amount (which may be
either positive or negative) allocated to such Seller under Section 1.01(c),
plus (3) the Estimated Closing WC Amount (which may be either positive or
negative) allocated to such Seller under Section 1.01(c).
(B) All cash amounts payable by Purchaser
under this Section 1.03(a)(viii) shall be made by wire
transfer in immediately available funds to accounts of Sellers, in each case
which accounts shall have been designated by Sellers Representatives at least
two business days before the Closing Date;
(ix) Sellers shall provide evidence to the reasonable
satisfaction of Purchaser that (A) all Borrowed
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Debt and any and all obligations relating thereto have been repaid, (B) any
Liens securing such Borrowed Debt have been or will be discharged and (C) all
agreements relating to foreign currency swaps, interest rate swaps, commodity
swaps, options, caps, collars, hedges or forward exchanges or similar agreements
(collectively, "Derivatives") have been terminated; and
(x) if required, each Permitted Designee shall
deliver to Sellers the certificate required pursuant to
Section 5.25.
(b) The parties acknowledge that the terms of any instruments
delivered in connection with this Section 1.03 or Sections 1.04, 1.07 or 11.13
(other than any certificate required pursuant to Section 5.25) will not require
any party to make any additional representations, warranties or covenants,
express or implied (other than those set forth in this Agreement) and such
instruments will not result in any increase in the obligations of any Seller or
Purchaser beyond those expressly set forth in this Agreement.
(c) In the event that, prior to Closing, Purchaser determines that
Purchaser or its Permitted Designees may be obligated to withhold, pursuant to
any Tax law, any amount from the consideration otherwise payable to any Seller
hereunder, Purchaser shall use reasonable efforts to notify such Seller of the
same and whether such obligation may be relieved by the delivery by such Seller
of any certificate or other documentation (including, as applicable, an IRS Form
W-9, W-8BEN, W-8EXP, or W-8ECI). Prior to Closing, each Seller shall provide to
Purchaser any such certificate or other documentation, to the extent that such
Seller is legally entitled to do so. Notwithstanding the foregoing, Purchaser
and its Permitted Designees shall be entitled to deduct and withhold from any of
the consideration otherwise payable to any of the Sellers pursuant to this
Agreement or as part of the transactions contemplated herein such amounts in
cash as may be required to be deducted and withheld with respect to the making
of such payment under the Code, or any provision of state, local or non-United
States Tax law. To the extent that amounts are so withheld and paid over to the
appropriate Taxing Authority, Purchaser or its Permitted Designees (as
appropriate) will be treated as though it paid to the Sellers such amount
deducted or withheld as consideration otherwise payable pursuant to this
Agreement.
SECTION 1.04. Adjustments to Initial Purchase Price.
(a) "Excess Cash" shall mean the amount equal to (i) the sum of
(A) all cash, cash equivalents (including cash represented by undeposited
checks) and marketable securities held by the Companies and their subsidiaries
as of the close of business on the business day immediately prior to the Closing
Date plus (B) cash deposits made by the Companies and held by the Internal
Revenue Service for Required Payment for Refund under Section 7519 of the Code
(which, as of the date hereof, were in the approximate amount of $1,620,988) as
described in SECTION 1.04(A) OF THE SELLER DISCLOSURE SCHEDULE (collectively,
the "Deposits"), minus (ii) the sum of (A) all amounts necessary for the
Companies and their subsidiaries to satisfy and discharge in full all Borrowed
Debt and all monetary liabilities and obligations arising under any Derivatives
existing as of the Closing (including any Liens securing such Borrowed Debt and
other items), (B) if, as of the close of business on the business day
immediately prior to the Closing Date, the Companies and their subsidiaries
shall not have made all Required Capital Calls (as defined below) in cash, the
aggregate amount of all Required Capital Calls that have not been made by the
Companies and their subsidiaries before the close
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of business on the business day immediately prior to the Closing Date, (C) the
amount represented by checks issued by the Companies and their subsidiaries but
uncollected or unpaid as of the close of business on the business day
immediately prior to the Closing Date and (D) $1,000,000, which represents the
agreed upon adjustment related to UK deferred income taxes as disclosed in the
Combined Balance Sheet. Between the date hereof and the close of business on the
business day immediately prior to the Closing Date, the Companies and their
subsidiaries shall make all investments in, and capital contributions to, the
Nalco JV that the Companies and their subsidiaries are required to make through
the Closing Date pursuant to any partnership, operating or other governing
agreements of the Nalco JV (the "Required Capital Calls"). Sellers hereby inform
Purchaser that the aggregate amount of all unmade Required Capital Calls as of
the date hereof is approximately $650,000. For purposes of determining Excess
Cash (and any related items), all assets and liabilities of the Nalco JV shall
be excluded. The parties acknowledge that Sellers intend to cause to be
distributed to Sellers before the Closing all Excess Cash and no more. Sellers
Representatives shall prepare and deliver to Purchaser at least two business
days before the Closing Date, a good faith estimate of the amount of Excess Cash
as of the Closing (the "Estimated Closing Excess Cash Amount") (such estimate to
separately set forth both the aggregate and detailed amounts supporting the
Estimated Closing Excess Cash Amount and the amounts thereof allocated to each
Seller under Section 1.01(c)). From and after the time the Sellers
Representatives submit to Purchaser the good faith estimate of the amount of
Excess Cash, neither the Companies nor their subsidiaries shall make any
distribution of cash, cash equivalents, marketable securities or Deposits unless
the making of such distribution and the amount thereof was specifically included
in the Sellers' calculation of the Estimated Closing Excess Cash Amount. "Final
Excess Cash Amount" shall mean the amounts of Excess Cash set forth on the
Closing Excess Cash Statement that becomes final and binding on each Seller and
Purchaser in accordance with this Section 1.04.
(b) Within 90 days after the Closing Date, Purchaser shall deliver
to Sellers Representatives two statements (the "Post-Closing Statements")
setting forth: (i) a calculation of Excess Cash (the "Closing Excess Cash
Statement") and (ii) a calculation of Closing Working Capital and the Closing WC
Amount (the "Closing Working Capital Statement"). The Post-Closing Statements
will be prepared by Purchaser's outside accountants (it being acknowledged by
Sellers that Purchaser may use either PricewaterhouseCoopers LLP or Ernst &
Young LLP for this purpose) and be accompanied by a certificate of Purchaser's
outside accountants stating that the Post-Closing Statements have been prepared
in compliance with the requirements of this Section 1.04.
(c) During the 60-day period following Sellers Representatives'
receipt of the Post-Closing Statements, Purchaser shall cause Purchaser's
accountants to provide Sellers' outside accountants with such access, on
reasonable prior notice and during normal business hours, to the work papers of
Purchaser's outside accountants reasonably necessary to verify the calculations
underlying the Closing Excess Cash Statement and the Closing Working Capital
Statement. A Post-Closing Statement will be final, deemed accepted by and be
binding on the parties on the 60th day following its delivery unless Sellers
Representatives give written notice to Purchaser of their disagreement with such
Post-Closing Statement (such notice, a "Notice of Disagreement") before such
date. Any Notice of Disagreement must specify in reasonable detail the nature of
any disagreement so asserted. If a Notice of Disagreement is received by
Purchaser in a timely manner, then the applicable Post-Closing Statement (as
revised in accordance with
6
clause (d) below) will become final and binding on each Seller and Purchaser, on
the earlier of (1) the date Sellers Representatives and Purchaser resolve in
writing any differences they have with respect to the matters specified in such
Notice of Disagreement and (2) the date all disputed matters specified in such
Notice of Disagreement are finally resolved in writing by Deloitte & Touche or
such other nationally recognized independent accounting firm mutually agreed on
by Sellers Representatives and Purchaser (the "Accounting Firm").
(d) During the 30-day period following delivery of a Notice of
Disagreement, Sellers Representatives and Purchaser shall seek in good faith to
resolve in writing any differences they may have with respect to the matters set
forth in the Notice of Disagreement. If any disagreement included in the Notice
of Disagreement is not resolved in writing within such 30-day period, Sellers
Representatives or Purchaser may submit to the Accounting Firm for review and
resolution any and all matters that remain in dispute and that were properly
included in the Notice of Disagreement. The scope of the Accounting Firm's
review shall be limited to only those matters that remain in dispute and that
are included in the Notice of Disagreement. Sellers Representatives and
Purchaser shall use all commercially reasonable efforts to cause the Accounting
Firm to render a decision resolving the matters submitted to it within 30 days
of the receipt of such submission. Judgment may be entered on the determination
of the Accounting Firm in any court having jurisdiction over the party against
which such determination is to be enforced. The Accounting Firm's determination
will be accompanied by a certificate of the Accounting Firm that it reached its
decision in accordance with the provisions of this Section 1.04. The fees and
expenses of the Accounting Firm under this Section 1.04 shall be borne by
Purchaser and Sellers in inverse proportion as they may prevail on matters
resolved by the Accounting Firm, and such proportionate allocation also shall be
determined by the Accounting Firm when its determination is rendered on the
merits of the matter submitted. All other costs of any arbitration shall be
borne by the party or parties incurring such costs.
(e) The scope of the disputes to be resolved by the Accounting
Firm shall be limited to disagreements based on mathematical errors or based on
the amount of Excess Cash or Closing Working Capital set forth in the
Post-Closing Statements not being calculated in accordance with this Section
1.04 and the Accounting Firm is not to make any other determination, including
any determination whether Excess Cash or Closing Working Capital is in
accordance with GAAP.
(f) If (i) the Final Closing WC Amount exceeds the Estimated
Closing WC Amount, Purchaser shall, or if (ii) the Estimated Closing WC Amount
exceeds the Final Closing WC Amount, Sellers shall, within three business days
after the Closing Working Capital Statement becomes final and binding on the
parties in accordance with this Section 1.04, make payment by wire transfer in
immediately available funds of the amount of such difference, together with
interest thereon at a rate equal to the rate of interest from time to time
publicly announced by Citibank, N.A., in its New York office as its prime or
base rate (the "Prime Rate"), calculated on the basis of the actual number of
days elapsed over 365 from the Closing Date to the date of payment. Such payment
shall be made to the bank accounts of Sellers or Purchaser, as the case may be,
designated in writing by Sellers Representatives, on the one hand, and
Purchaser, on the other hand. Any payments shall be allocated in accordance with
Section 1.01(c). An example of the calculation of Closing Working Capital is set
forth on EXHIBIT F hereto.
7
(g) If (i) the Final Excess Cash Amount exceeds the Estimated
Closing Excess Cash Amount, Purchaser shall, or (ii) if the Estimated Closing
Excess Cash Amount exceeds the Final Excess Cash Amount, Sellers shall, within
three business days after the Closing Excess Cash Statement becomes final and
binding on the parties in accordance with this Section 1.04, make payment by
wire transfer in immediately available funds of the amount of such difference,
together with interest thereon at a rate equal to the Prime Rate, calculated on
the basis of the actual number of days elapsed over 365 from the Closing Date to
the date of payment. Such payment shall be made to the bank accounts of Sellers
or Purchaser, as the case may be, designated in writing by Sellers
Representatives, on the one hand, and Purchaser, on the other hand. Any payments
to be made to Sellers shall be allocated in accordance with Section 1.01(c). An
example of the calculation of Excess Cash is set forth on EXHIBIT F hereto.
(h) "Working Capital" shall mean Current Assets minus Current
Liabilities. "Current Assets" shall mean total current assets of the Companies
and their subsidiaries, excluding any items included in the calculation of
Excess Cash. Current Assets shall be calculated in a consistent manner, using
the same GAAP accounting principles, practices, methodologies and policies as
applied to current assets in the Combined Balance Sheet. "Current Liabilities"
shall mean total current liabilities of the Companies and their subsidiaries,
excluding any items included in the calculation of Excess Cash. Current
Liabilities shall be calculated in a consistent manner, using the same GAAP
accounting principles, practices, methodologies and policies as applied to
current liabilities in the Combined Balance Sheet. Working Capital shall include
Current Assets or Current Liabilities relating to Taxes properly accruable by
the Companies or their subsidiaries calculated in a consistent manner, using the
same GAAP accounting principles, practices, methodologies and policies as
applied to Taxes in the Combined Balance Sheet (for the avoidance of doubt,
deferred taxes related to the UK, as recorded in the Combined Balance Sheet, are
not includable in Current Assets or Current Liabilities). Working Capital shall
not include any Borrowed Debt or any Derivatives, which are included in the
calculation of Excess Cash. Working Capital shall not include any accruals for
(i) unused vacation or (ii) advances to Sellers that are reclassified as
distributions to such Sellers before the Closing Date. For purposes of
determining Working Capital (and any related items), all assets and liabilities
of the Nalco JV shall be excluded. All bonuses payable to employees of the
Companies and their subsidiaries that are currently scheduled to be paid in
November 2003 for sales bonuses and January 2004 for other employees, although
discretionary, shall be paid before the close of business on the business day
immediately prior to the Closing Date. "Closing Working Capital" shall mean
Working Capital as of the close of business on business day immediately prior to
the Closing Date. "Closing WC Amount" shall mean Closing Working Capital minus
$17,000,000. Sellers Representatives shall prepare and deliver to Purchaser at
least two business days before the Closing Date, a good faith estimate of the
amount of Closing Working Capital (the "Estimated Closing Working Capital") and
Closing WC Amount (the "Estimated Closing WC Amount") (such estimates to
separately set forth both the aggregate and detailed amounts supporting the
Estimated Closing Working Capital and Estimated Closing WC Amount and the
amounts thereof allocated to each Seller under Section 1.01(c)). "Final Closing
Working Capital" shall mean the amounts of Closing Working Capital set forth on
the Closing Working Capital Statement that becomes final and binding on each
Seller and Purchaser in accordance with this Section 1.04. "Final Closing WC
Amount" shall mean Final Closing Working Capital minus $17,000,000.
8
(i) Until final resolution of any issues regarding the
Post-Closing Statements, Purchaser shall not take any actions with respect to
the historical accounting books and records of the Companies on which the
Post-Closing Statement are based not consistent with the past practices of the
Companies. Without limiting the generality of the foregoing, no changes shall be
made until such determination in any reserve or other account existing as of the
date of the Combined Balance Sheet or the Closing Date except as a result of
events occurring after the date of the Combined Balance Sheet through the
Closing Date and, in such event, only in a manner consistent with the
methodology used in the Combined Balance Sheet. During the period required for
the preparation and review of, and resolution of disputes relating to, the
Post-Closing Statements or any amounts set forth therein or based thereon,
Sellers and Purchaser shall each afford the other's accountants and other
designated representatives reasonable access during regular business hours to
the books and records of the Companies and their respective subsidiaries as they
may reasonably require in order to review and verify the items in the
Post-Closing Statements.
(j) Within fifteen months after the Closing Date, Purchaser shall
prepare and provide to Sellers Representatives a statement setting forth the
amount of such Taxes reflected in Closing Working Capital and the amount of such
Taxes actually paid or remaining accrued by the Companies and their subsidiaries
during the 12-month period following the Closing Date. In the event that Sellers
Representatives disagree with such calculation, the Sellers Representatives and
Purchaser shall follow the dispute resolution mechanism of Section 1.04(d). If
the amount of such Taxes actually paid or that remain accrued during such period
in respect of periods ending on or before the Closing Date, is less than the
amount of such Taxes reflected in Closing Working Capital, Purchaser shall pay
to Sellers (divided among the Sellers in the amounts to be specified in writing
in advance by Sellers) an amount equal to (x) the amount of such Taxes reflected
in Closing Working Capital minus (y) the sum of the amount of such Taxes paid or
that remain accrued by the Companies or their subsidiaries during such period
with respect to periods ending on or before the Closing Date. Such payment shall
be made in immediately available funds to the accounts designated by the Sellers
Representatives at least two business days prior to payment.
SECTION 1.05. Allocation of Purchase Price; Section 338 Tax
Adjustments.
(a) In the event that Purchaser elects to make any Section 338
Election, the provisions of this Section 1.05 shall apply.
(b) Purchaser shall pay to each Seller, at the time and in the
amounts and manner described below, the amount in cash necessary to cause: (i)
if Purchaser makes a Section 338 Election with respect to Ecolochem, the
after-Tax proceeds from the sale of the Ecolochem Shares of such Ecolochem
Seller to be equal to the after-Tax proceeds that such Seller would have
received in connection with the sale of the Ecolochem Shares hereunder had the
Section 338 Election not been made with respect to Ecolochem, and (ii) if
Purchaser makes a Section 338 Election with respect to International, the
after-Tax proceeds from the sale of the International Shares of such
International Seller to be equal to the after-Tax proceeds that such Seller
would have received in connection with the sale of the International Shares
hereunder had the Section 338 Election not been made with respect to
International, in each case taking into account all applicable federal, state
and local Income Taxes (the "Section 338 Tax Adjustment").
9
(c) No later than 30 days prior to the Closing, Purchaser shall
prepare in good faith and deliver to the Sellers, using such assumptions
concerning the value of the Common Stock to be delivered to the Sellers at
Closing and such other adjustments to the Initial Purchase Price as Purchaser
reasonably expects to be made under the provisions of this Article I, a
preliminary schedule, allocating the applicable aggregate deemed sales price (as
determined under Section 338 of the Code and the Treasury Regulations thereunder
and based on such assumptions and adjustments) among the assets of Ecolochem and
International (the "Preliminary Allocation").
(d) No later than 15 days prior to Closing, Sellers shall, in good
faith, complete a preliminary computation of the Section 338 Tax Adjustment (the
"Preliminary 338 Tax Adjustment") and submit such computation to Purchaser for
Purchaser's review based upon the preliminary allocation set forth in Section
1.05(c) above and in accordance with Section 1.05(e) below. In the event that
Purchaser determines that the result of Sellers' computation is in excess of
Purchaser's calculation of the Preliminary 338 Tax Adjustment by more than
$1,000,000, then the Sellers and the Purchaser shall follow the dispute
resolution mechanism of Section 1.04(d), provided that each reference in Section
1.04(d) to any 30-day period shall be deemed to be a 5-day period. In the event
any such dispute is not resolved as of the Closing, Section 1.05(f) shall be
applied based on Sellers' calculation of the Preliminary 338 Tax Adjustment,
until such time as such dispute is resolved, at which time the amount of the
letter of credit or the amount of Section 338 Escrowed Funds shall be adjusted
to be consistent with such resolution.
(e) In making all computations under Section 1.05(d), (i) the
highest federal, state and local Tax rates to which such Seller is subject with
respect to the consideration to be delivered to such Seller pursuant to this
Agreement (taking into account the proper character of such income (e.g. capital
gain or ordinary income)) shall be used, (ii) any other items of income,
deduction, gain, loss or credits of such Seller not associated with the
Transaction shall be ignored, (iii) the aggregate amount of consideration to
which such Seller is entitled pursuant to this Agreement shall be treated as
having been received by such Seller at the time of Closing, without regard to
the deferral of any payments contemplated under Section 1.03(a)(vi) or otherwise
(and, therefore, no Seller shall be treated as having received any evidence of
indebtedness for Tax purposes) and (iv) in the case of any Seller that is a
trust, all Taxes applicable to both such trust and the beneficiaries of such
trust shall be taken into account without duplication (including by taking into
account any deduction available to the trust for distributions to beneficiaries
of income arising from the Section 338 Election, or the sale of the Equity
Interests, as the case may be).
(f) Upon the written request of Sellers Representatives at least
10 days prior to the Closing, Purchaser shall, in its sole discretion, elect to
either (i) deliver at Closing to Sellers Representatives, and continuously
maintain until at least April 30, 2005, an irrevocable standby letter of credit
(which shall be an asset of Sellers), from a financial institution, and in a
form, reasonably satisfactory to Sellers Representatives, which shall initially
be in the amount of the Preliminary 338 Tax Adjustment, and which amount shall
be adjusted upward or downward so as to equal the amount of the Section 338 Tax
Adjustment as and when such amount is finally determined pursuant to Section
1.05(g), or (ii) enter into an escrow agreement substantially in the form
attached hereto as Exhibit K with Citibank N.A., or another escrow agent
mutually agreed
10
to by the Sellers Representatives and the Purchaser and requiring Purchaser to
escrow, for the benefit of Sellers, an amount equal to the Preliminary 338 Tax
Adjustment which amount shall be adjusted upward or downward so as to equal the
amount of the Section 338 Tax Adjustment as and when such amount is finally
determined pursuant to Section 1.05(g) (such agreement, the "Section 338 Escrow
Agreement" and the amount held in escrow, the "Section 338 Escrowed Funds").
Sellers Representatives shall be entitled to draw against such letter of credit
in satisfaction of any payment obligation of Purchaser under Section 1.05(g) not
paid by Purchaser when due within twenty-four (24) hours following notice to
Purchaser of such failure to pay. Sellers Representatives may also fully draw
down such letter of credit at any time during the 60 days immediately preceding
the expiration date of such letter of credit, unless Sellers Representatives
have been provided a substitute letter of credit on terms not different than
those reflected in the prior letter of credit; provided, however, that Sellers
Representatives shall not be permitted to draw down such letter if the
expiration date of such letter of credit is after April 30, 2005 other than to
satisfy any payment obligation of Purchaser under Section 1.05(g) not paid in
accordance with the immediately preceding sentence. Sellers Representatives may
draw down the Section 338 Escrowed Funds in accordance with the terms of the
Section 338 Escrow Agreement. Should Sellers Representatives draw upon any
letter of credit or upon the Section 338 Escrowed Funds provided for hereunder,
it may retain the proceeds thereof and apply the same against Purchaser's
payment obligations under Section 1.05(g). At the expiration of the term
established pursuant to the Section 338 Escrow Agreement, any remaining proceeds
shall be remitted to Purchaser. The amount of such letter of credit or the
amount of the Section 338 Escrowed Funds shall be reduced at any time, so that
such amount is equal to but not less than the amount of the Section 338 Tax
Adjustment that has not been paid as of such time. Such letter of credit or the
Section 338 Escrow Agreement may be terminated by Purchaser in the event that
the amount of the Section 338 Tax Adjustment that remains unpaid is equal to
zero. If the letter of credit is issued, Sellers Representatives, on behalf of
the Sellers, shall bear all reasonable fees charged to Purchaser by the letter
of credit issuing bank for issuing the letter of credit described in this
Section 1.05(f) in an amount not to exceed $900,000 in the aggregate or, if the
Section 338 Escrow Agreement is entered into, Sellers Representatives, on behalf
of the Sellers, shall bear all fees payable to the escrow agent as provided for
in the Section 338 Escrow Agreement and shall pay an arrangement fee (the "338
Escrow Arrangement Fee") to the Purchaser in an amount equal to the difference
between the actual borrowing cost to Purchaser of the funds borrowed through
Purchaser's credit arrangement and deposited with the escrow agent and the
actual interest earned on such funds which amount shall be payable from time to
time (but no more frequently than once per calendar quarter) as requested by the
Purchaser upon presentation of documentation to the Sellers Representatives
evidencing such amounts then payable. Notwithstanding the foregoing, in no event
shall the 338 Escrow Arrangement Fee exceed an amount equal to the amount of the
Section 338 Escrowed Funds initially deposited by the Purchaser as of the
execution of the Section 338 Escrow Agreement multiplied by .04083.
(g) Within 90 days after the Closing, Purchaser shall prepare in
good faith and deliver to Sellers a final allocation schedule (the "Allocation
Schedule"), allocating the applicable aggregate deemed sales price (as
determined under Section 338 of the Code and the Treasury Regulations
thereunder) among the assets of Ecolochem and/or International. Within 30 days
after Purchaser has delivered to Sellers the Allocation Schedule, Sellers shall
in good faith compute the Section 338 Tax Adjustment based upon the Allocation
Schedule and submit such computation to Purchaser for Purchaser's review. In the
event that Purchaser disagrees
11
with Sellers' computation of the Section 338 Tax Adjustment, Sellers and
Purchaser shall follow the dispute resolution mechanism of Section 1.04(d),
provided that each reference in Section 1.04(d) to a 30-day period shall be
deemed to be a 10-day period. The Section 338 Tax Adjustment shall be allocated
among the Sellers as designated by Seller's Representatives. Not later than 5
business days prior to any Seller's Tax Payment Date, Purchaser shall make
payment by wire transfer in immediately available funds of the amount of such
Seller's allocable portion of the Section 338 Tax Adjustment (to the extent not
previously drawn down by Sellers under Section 1.05(f) above and in an amount
sufficient to permit such Seller to pay that portion of the Tax attributable to
the Section 338 Election then due as determined in accordance with this Section
1.05). Such payment shall be made to the bank accounts of such Sellers
designated in writing by Sellers Representatives to Purchaser in advance. The
"Tax Payment Date" of a Seller is the later of (i) the date upon which such
Seller is required, under U.S. Tax law, to pay to a Taxing Authority Taxes
attributable to the Section 338 Elections and (ii) the date that is 10 business
days after the day upon which such Seller notifies Purchaser of the date
described in clause (i).
(h) In making all computations under Section 1.05(g), (i) the
highest federal, state and local Tax rates to which such Seller is subject with
respect to the consideration delivered, or to be delivered, to such Seller
pursuant to this Agreement (taking into account the proper character of such
income (e.g. capital gain or ordinary income)) shall be used, (ii) any items of
income, deduction, gain, loss or credits of such Seller not associated with the
Transaction shall be ignored, (iii) the aggregate amount of consideration to
which such Seller is entitled pursuant to this Agreement shall be treated as
having been received by such Seller at the time of Closing, without regard to
the deferral of any payments contemplated under Section 1.03(a)(vi) or otherwise
(and, therefore, no Seller shall be treated as having received any evidence of
indebtedness for Tax purposes) and (iv) in the case of any Seller that is a
trust, all Taxes applicable to both such trust and the beneficiaries of such
trust shall be taken into account without duplication (including by taking into
account any deductions available to the trust for distributions to beneficiaries
of income arising from the Section 338 Election, or the sale of the Equity
Interests, as the case may be).
(i) In the event that (i) a Final Determination results in (A) a
change to the Allocation Schedule that affects the Income Taxes paid by a
Seller, (B) a change to the tax basis of the Ecolochem Shares or the
International Shares as of the Closing Date, or (C) a change to the tax basis of
the assets of Ecolochem or International as of the Closing Date or (ii) the
aggregate consideration to which any Seller is entitled is reduced pursuant to
the Escrow Agreement or any provision of this Agreement, the Section 338 Tax
Adjustment shall be recalculated by Sellers in good faith (each, a "Final
Section 338 Tax Adjustment"). Sellers shall complete such recalculation within
30 days of such Final Determination or reduction, and shall submit such
computation to Purchaser for Purchaser's review. In the event that Purchaser
disagrees with Sellers' computation of such Final Section 338 Tax Adjustment,
Sellers and Purchaser shall follow the dispute resolution mechanism of Section
1.04(d), provided that in applying Section 1.04(d) each reference therein to any
30-day period shall be deemed to be a 10-day period. Within 10 days after
determination of such Final Section 338 Tax Adjustment (including after
resolution of any dispute), if (i) the Section 338 Tax Adjustment exceeds the
Final Section 338 Tax Adjustment, Sellers shall, or (ii) if the Section 338 Tax
Adjustment is less than the Final Section 338 Tax Adjustment Purchaser shall,
make payment to the other party by
12
wire transfer in immediately available funds of the amount of such difference.
Such payment shall be made to the bank accounts of Sellers or Purchaser, as the
case may be, designated in writing by Sellers Representatives, on the one hand,
and Purchaser, on the other hand. Any payments to be made to Sellers shall be
allocated as designated by Sellers Representatives.
SECTION 1.06. Sellers Representatives; Attorneys-in-Fact.
(a) Each Seller appoints Lyman B. Dickerson and Douglas G.
Dickerson as the representatives of such Seller ("Sellers Representatives") to
act as the agent and on behalf of such Seller for purposes of (i) determining
any adjustment to be made to the Initial Cash Consideration under Sections
1.03(a)(viii), 1.04 and 1.05, (ii) determining whether the conditions to Closing
in Article VIII have been satisfied, including waiving any such condition if
Sellers Representatives, in their sole discretion, determine that such waiver is
appropriate or desirable, (iii) taking any action that may be necessary or
desirable, as determined by Sellers Representatives in their sole discretion, in
connection with the termination of this Agreement in accordance with Section
9.01, (iv) taking any action that may be necessary or desirable, as determined
by Sellers Representatives in their sole discretion, in connection with any
amendment of this Agreement, (v) accepting notices on behalf of such Seller in
accordance with Section 11.04, (vi) delivering or causing to be delivered to
Purchaser, or its Permitted Designees, at the Closing certificates representing
the Ecolochem Shares, (vii) delivering or causing to be delivered to Purchaser,
or its Permitted Designees, at the Closing certificates representing the
International Shares, (viii) delivering or causing to be delivered to Purchaser,
or its Permitted Designees, duly executed instruments of transfer of the
S.A.R.L. Interests, (ix) delivering or causing to be delivered to Purchaser, or
its Permitted Designees, duly executed instruments of transfer of the Moson
Holdings Interests, (x) granting any consent or waiver in respect of this
Agreement on behalf of such Seller, (xi) taking all actions on behalf of Sellers
with respect to Article X, (xii) executing and delivering, in their capacity as
the representatives of such Seller, any and all notices, documents or
certificates to be executed by Sellers Representatives, on behalf of such
Seller, in connection with this Agreement and the transactions contemplated
hereby, (xiii) entering into and amending the Escrow Agreement and the Section
338 Escrow Agreement and (xiv) for any other purpose consistent with their
appointment as representatives of Sellers. As the representatives of Sellers,
Sellers Representatives shall act as the agent for all such persons and have
authority to bind each such person in connection with this Agreement, and
Purchaser may rely on such appointment and authority until the receipt of notice
of the appointment of successor Seller Representatives. Unless otherwise
specified herein, no action by a Sellers Representative shall be effective
unless both Sellers Representatives take such action.
(b) Each Seller appoints Lyman B. Dickerson and Douglas G.
Dickerson as such Seller's true and lawful attorneys-in-fact and agents (the
"Attorneys-in-Fact"), with full power of substitution and resubstitution, in
such Seller's name, place and stead, in any and all capacities, in connection
with the transactions contemplated by this Agreement, granting to the
Attorneys-in-Fact, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in connection with the sale of such
Seller's Equity Interests as fully to all intents and purposes as such Seller
might or could do in person. Purchaser may rely on such appointment and
authority until the receipt of notice of the appointment of a successor
Attorney-in-Fact. No action by an Attorney-in-Fact shall be effective unless
both Attorneys-in-Fact take such action.
13
(c) Neither Sellers Representatives nor the Attorneys-in-Fact
shall have any liability to any person in their capacity as such except for
liability arising from actions taken in bad faith by them on behalf of, or in
the name of, a Seller.
(d) Neither Sellers Representatives nor the Attorneys-in-Fact
shall have any liability to Purchaser in their capacities as such for any breach
or default under this Agreement by any Seller.
SECTION 1.07. Estate Tax Lien. Notwithstanding anything to the contrary
set forth in this Article I, in the event that the Estate tax lien referred to
in Section 3.10(j) has not been extinguished prior to Closing, either by a
certificate of release of lien or certificate of discharge obtained pursuant to
Section 6325 of the Code, the receipt of a closing letter from the Internal
Revenue Service or otherwise, then, at Purchaser's election, Purchaser may elect
(and the Sellers shall consent to any such election) to purchase all of the
assets and liabilities (other than Tax or Estate Tax liabilities) of S.A.R.L.
pursuant to a form of asset purchase agreement reasonably acceptable to Sellers
Representatives and Purchaser, and, in that event Sellers and Purchaser will use
their commercially reasonable efforts to cause S.A.R.L. to execute all required
instruments of transfer, certificates (including governmental approvals) and
other consents as may be necessary or desirable to effect the transfer to
Purchaser or Purchaser's Permitted Designee of all of the assets and liabilities
(other than Tax or Estate Tax liabilities) of S.A.R.L.
ARTICLE II
Individual Representations and Warranties of Sellers
----------------------------------------------------
Except as set forth in that certain letter, dated as of the date
hereof, addressed to the Purchaser from Sellers (such letter being referred to
herein as the "SELLER DISCLOSURE SCHEDULE"), each Seller, severally and not
jointly, represents and warrants to Purchaser as hereinafter provided in this
Article II:
SECTION 2.01. Authority; Execution and Delivery; Enforceability. Such
Seller has the requisite authority and capacity to execute, deliver and perform
this Agreement and the other agreements and instruments to be executed in
connection with this Agreement (the "Ancillary Agreements") to which such Seller
is to be a party and to consummate the Transaction. Such Seller has duly
executed and delivered this Agreement, and at or before the Closing will have
duly executed and delivered each Ancillary Agreement to which it is to be a
party, and this Agreement constitutes, and each Ancillary Agreement to which
such Seller is to be a party will, when executed, constitute such Seller's
legal, valid and binding obligation, enforceable against such Seller in
accordance with its terms.
SECTION 2.02. Title to the Equity Interests. Such Seller has good and
valid title to the Equity Interests held by it as shown on SECTION 3.02(A) OF
THE SELLER DISCLOSURE SCHEDULE, free and clear of all Liens. On delivery to
Purchaser (or its Permitted Designees) at the Closing of all necessary
instruments of transfer, and, on such Seller's receipt of such Seller's portion
of the Initial Purchase Price, good and valid title to such Equity Interests
will pass to Purchaser (or its Permitted Designees), free and clear of any
Liens, other than those arising from acts of Purchaser (or its Permitted
Designees) or its affiliates. Except as described in SECTION 2.02 OF THE SELLER
DISCLOSURE SCHEDULE, none of the Equity Interests held by such Seller is subject
to any voting trust agreement or other Contract restricting or otherwise
relating to the voting or disposition of the Equity Interests held by such
Seller.
SECTION 2.03. Capital Stock. No Seller has granted any warrants,
options, rights, "phantom" stock rights, agreements, convertible or exchangeable
securities or other commitments (other than this Agreement) (A) under which such
Seller is or may become obligated to sell or purchase any shares of capital
stock, membership interests, equity interests or similar ownership interests or
other securities of the Companies or their subsidiaries or (B) that give any
person the right to receive any benefits or rights similar to any rights enjoyed
by or accruing to the holders of shares of capital stock, membership interests
or equity interests of the Companies or their subsidiaries.
SECTION 2.04. Investment Representation. Such Seller represents and
warrants that:
(i) the Common Stock to be issued to such Seller
under this Agreement is being acquired for investment only and not with a view
to any public distribution thereof in violation of any of the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the securities laws of any other jurisdiction applicable to the Transaction
or such Seller;
(ii) such Seller has had the opportunity to ask
questions of and to receive answers from representatives of Purchaser concerning
the business, management and financial condition of Purchaser and the terms and
conditions of the Common Stock;
(iii) such Seller is able to bear the economic risk
of its investment in the Common Stock for an indefinite period of time;
(iv) such Seller can afford a complete loss of its
investments in the Common Stock;
(v) such Seller has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of the investment in Common Stock; and
(vi) such Seller is an "accredited investor" within
the meaning of Rule 501 under the Securities Act.
SECTION 2.05. No Conflict.
(a) The execution, delivery and performance of this Agreement and
the Ancillary Agreements by such Seller does not, and the consummation of the
Transaction by such Seller will not, conflict with, or result in any violation
of or default under, or give rise to a right of termination, cancellation or
acceleration of any right or obligation with notice, lapse of time or both, or
result in the creation of any Lien on any of the properties or assets of such
Seller, under, (i) any Contract to which such Seller is a party or by which any
of such Seller's properties or
15
assets are bound, (ii) any Judgment applicable to such Seller or any of such
Seller's properties or assets, (iii) to the knowledge of such Seller, and
subject to the matters referred to in Section 2.05(b), any Applicable Law
applicable to such Seller or any of such Seller's properties or assets or (iv)
with respect to any Seller that is a trust, partnership, limited liability
company or corporation, the trust agreement, partnership agreement, limited
liability company agreement, articles of incorporation, or other corporate
formation documents of such Seller, in the case of each of clauses (i), (ii) and
(iii) in a manner that could reasonably be expected to materially impair such
Seller's ability to consummate the Transaction.
(b) No Consent of, or registration, declaration or filing with, or
notice to any Governmental Entity is required to be obtained or made with
respect to such Seller in connection with the execution, delivery and
performance of this Agreement or the Ancillary Agreements or the consummation of
the Transaction, other than (i) compliance with and filings under the HSR Act
and similar compliance and filings with non-U.S. Governmental Entities having
authority over merger, control or competition laws, (ii) those that may be
required solely by reason of the participation of Purchaser or Purchaser's
affiliates in the Transaction, (iii) filings required under the Securities Act
or the Exchange Act and (iv) those the failure of which to obtain or make,
individually or in the aggregate, would not reasonably be expected to materially
impair such Seller's ability to consummate the Transaction.
SECTION 2.06. Litigation. There are no pending or, to the knowledge of
such Seller threatened, Proceedings against such Seller, or such Seller's
properties or assets, that if adversely determined, individually or in the
aggregate, could reasonably be expected to materially impair such Seller's
ability to consummate the Transaction.
SECTION 2.07. Purchaser Stock Ownership. (a) As of the date hereof,
such Seller does not own more than .01% of the outstanding stock of Purchaser,
taking into account stock owned by such Seller (i) directly, (ii) indirectly
through any affiliate controlled by such Seller, (iii) to the knowledge of such
Seller, indirectly other than through an affiliate controlled by such Seller or
(iv), to the knowledge of such Seller, by operation of the ownership attribution
rules of Section 267 and Section 318 of the Code (provided, however, that in
applying the ownership attribution rules of Section 267 and 318 of the Code for
this purpose, such Seller shall not be required to treat outstanding Purchaser
stock owned by a regulated investment company under Subchapter M of the Code or
other publicly-traded investment vehicle as owned by such person unless such
person owns more than 0.1% of the shares of such regulated investment company or
other publicly traded investment vehicle). Further, as of the date hereof, such
Seller does not own more than 0.1% of the shares or other equity interests of
any regulated investment company under Subchapter M of the Code or other
publicly-traded investment vehicle.
(b) As of the date hereof, if such Seller is a trust or estate, to
the knowledge of such Seller, the beneficiaries of such trust or estate do not
own in the aggregate more that .01% of the outstanding stock of Purchaser,
taking into account stock owned by such beneficiary (i) directly, (ii)
indirectly through any affiliate controlled by such beneficiary, (iii)
indirectly other than through an affiliate controlled by such beneficiary or
(iv) by operation of the ownership attribution rules of Section 267 and 318 of
the Code (provided, however, that in applying the ownership attribution rules of
Section 267 and 318 of the Code for this purpose, any Purchaser stock owned by a
regulated investment company under Subchapter M of the Code or other
16
publicly-traded investment vehicle shall not be deemed to be owned by such
beneficiary unless such person owns more that 0.1% of the shares of such
regulated investment company or other publicly traded investment vehicle).
Further, as of the date hereof, if such Seller is a trust or estate, to the
knowledge of such Seller, the beneficiaries of such trust or estate do not own
in the aggregate more than .01% of the shares or other equity interests of any
regulated investment company under Subchapter M of the Code or other
publicly-traded investment vehicle.
ARTICLE III
Representations and Warranties of Sellers Concerning the Companies and their
Subsidiaries
Except as set forth in the SELLER DISCLOSURE SCHEDULE, each Seller
jointly and severally represents and warrants to Purchaser as hereinafter
provided in this Article III:
SECTION 3.01. Organization and Standing. Ecolochem is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. International is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. S.A.R.L.
is a societe a responsibilite limitee duly organized and validly existing under
the laws of France. Moson Holdings is a limited liability company duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. Each subsidiary of the Companies is duly organized and
validly existing in the jurisdiction of its organization. Each of the Companies
and each of their subsidiaries has full corporate or other power and authority
to carry on its business as presently conducted. Each of the Companies and each
of their subsidiaries is duly qualified and in good standing to do business as a
foreign entity in each material jurisdiction in which the conduct or nature of
its business or the ownership, leasing or holding of its properties makes such
qualification necessary. Sellers have caused the Companies to make available to
Purchaser true and complete copies of the articles of incorporation and bylaws
or comparable organizational documents, each as amended to the date hereof, of
the Companies and each of their subsidiaries.
SECTION 3.02. Capital Stock of the Companies and their Subsidiaries;
Joint Venture.
(a) SECTION 3.02(A) OF THE SELLER DISCLOSURE SCHEDULE sets forth
(i) in the case of Ecolochem, the amount of its authorized and issued and
outstanding capital stock and the record owners thereof, (ii) in the case of
International, the number of shares of its authorized and issued and outstanding
capital stock and the record owners thereof, (iii) in the case of S.A.R.L., the
number of its issued and outstanding equity interests and the record owners of
all outstanding equity interests therein and the percentage of ownership
represented thereby, (iv) in the case of Moson Holdings, the record owners of
all outstanding membership interests therein and the percentage of ownership
represented thereby and (v) in the case of each subsidiary of the Companies the
name of each such subsidiary, its jurisdiction of incorporation and the record
and beneficial owners of all of its outstanding equity interests. Except for the
Ecolochem Shares and the International Shares being transferred to Purchaser or
its Permitted Designees in the Transaction, there are no shares of capital stock
of Ecolochem or International outstanding. Except for the S.A.R.L. Interests and
the Moson Holdings Interests being transferred to Purchaser in the Transaction,
there are no equity interests, membership interests or other
17
ownership interests of S.A.R.L. or Moson Holdings outstanding. All of the
outstanding shares of capital stock, membership interests and equity interests,
as applicable, of each of Ecolochem, International, S.A.R.L. and Moson Holdings,
and each of their subsidiaries, is duly authorized, validly issued, fully paid
and nonassessable and have been issued in accordance with the securities laws of
the jurisdictions within which each such security was offered and issued. None
of the outstanding shares of capital stock, membership interests or equity
interests, as applicable, of each of Ecolochem, International, S.A.R.L. or Moson
Holdings, or any of their subsidiaries, has been issued in violation of any
provision of Applicable Law, the articles of incorporation, bylaws, limited
liability company agreements or other comparable organizational documents of the
Companies or their subsidiaries or any Contract to which any of the Companies or
their subsidiaries is subject, bound or a party or in violation of any
preemptive, subscription or similar rights under any provision of Applicable
Law, the articles of incorporation, bylaws, limited liability company agreements
or other comparable organizational documents of the Companies or their
subsidiaries or any Contract to which any of the Companies or their subsidiaries
is subject, bound or a party.
(b) There are no outstanding warrants, options, rights, "phantom"
stock rights, agreements, convertible or exchangeable securities or other
commitments (other than this Agreement) (A) under which the Companies or their
subsidiaries are or may become obligated to issue, sell, purchase or redeem any
shares of capital stock, membership interests, equity interests or similar
ownership interests or other securities of the Companies or their subsidiaries
or (B) that give any person the right to receive any benefits or rights similar
to any rights enjoyed by or accruing to the holders of shares of capital stock,
membership interests or equity interests of the Companies or their subsidiaries.
There are no equity securities of the Companies or their subsidiaries reserved
for issuance for any purpose. There are no outstanding bonds, debentures, notes
or other indebtedness having the right to vote on any matters on which
stockholders or members of any of the Companies or their subsidiaries may vote.
(c) Except as shown in SECTION 3.02(C) OF THE SELLER DISCLOSURE
SCHEDULE, none of the Companies or their subsidiaries, directly or indirectly,
owns any capital stock of or other equity interests in any corporation,
partnership, joint venture or similar entity (other than any equity interest
held as a purely financial investment) and none of the Companies or their
subsidiaries is a member of or participant in any partnership, corporation,
joint venture or similar entity. There are no outstanding contractual
obligations of the Companies or any of their subsidiaries to make any material
investment (in the form of a loan, capital contribution, guarantee or otherwise)
in any person; provided, however, that performance bonds, letters of credit,
letters of guarantee and similar instruments and commitments provided by the
Companies or their subsidiaries in the ordinary course of business consistent
with past practice in connection with the sale of equipment or the provision of
services shall not be considered a contractual obligation to make an investment
in any person.
(d) SECTION 3.02(A) OF THE SELLER DISCLOSURE SCHEDULE sets forth,
as of the date of this Agreement, the holders of any equity interest in any
corporation, partnership, joint venture, limited liability company, or similar
operating entity in which any of the Companies or their subsidiaries has an
interest (except for any such entity in which the interests held by the
Companies or their subsidiaries are held as purely financial investments).
SECTION 3.02(A) OF THE SELLER DISCLOSURE SCHEDULE sets forth, as of the Closing
Date, the holders of any equity interest
18
in any corporation, partnership, joint venture, limited liability company, or
similar operating entity in which any of the Companies or their subsidiaries has
an interest (except for any such entity in which the interests held by the
Companies or their subsidiaries are held as purely financial investments) other
than changes in the identity of such holders since the date of this Agreement
permitted by the constituent documents of the entity and not requiring the
consent of the Companies or any of their subsidiaries. Sellers have caused the
Companies to deliver to Purchaser true and correct copies of all operative
documents regarding the formation and governance of all such corporations,
partnerships, joint ventures, limited liability companies and similar operating
entities, to which the Companies or their subsidiaries are a party.
SECTION 3.03. No Conflicts or Violations; No Consents or Approvals
Required.
(a) The execution, delivery and performance of this Agreement and
the Ancillary Agreements by Sellers does not, and the consummation of the
Transaction will not, conflict with, or result in any violation of or default
under, or give rise to a right of termination, cancellation or acceleration with
notice, lapse of time or both, of any right or obligation under, or result in
the creation of any Lien on any of the assets or properties of the Companies or
their subsidiaries, under any provision of (i) the articles of incorporation,
bylaws, limited liability company agreement, partnership agreement or other
comparable organizational or governing documents of the Companies or their
subsidiaries, (ii) any material Contract to which any of the Companies or their
subsidiaries is a party or by which any of their properties or assets is bound,
(iii) any Judgment applicable to any of the Companies or their subsidiaries or
any of their properties or assets or (iv) subject to the matters referred to in
Section 3.03(b), any Applicable Law applicable to any of the Companies or their
subsidiaries or any of their properties or assets other than in the case of each
of clauses (iii) and (iv), any such items that would not reasonably be expected
to have a Company Material Adverse Effect.
(b) No Consent of, or registration, declaration or filing with, or
notice to any Governmental Entity is required to be obtained or made with
respect to the Companies or their subsidiaries or any Seller in connection with
the execution, delivery and performance of this Agreement or the Ancillary
Agreements or the consummation of the Transaction, other than (i) compliance
with and filings under the HSR Act and similar compliance and filings with
non-U.S. Governmental Entities having authority over merger, control or
competition laws, (ii) those that may be required solely by reason of the
participation of Purchaser or Purchaser's affiliates in the Transaction, (iii)
filings required under the Securities Act or the Exchange Act and (iv) those the
failure of which to obtain or make, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.04. Financial Statements.
(a) SECTION 3.04 OF THE SELLER DISCLOSURE SCHEDULE sets forth (i)
the audited combined balance sheets and statements of income and cash flows of
the Companies and their subsidiaries as of, and for the fiscal years ended,
September 30, 2001, 2002 and 2003, together with the notes thereto (the balance
sheet as of September 30, 2003, together with the notes thereto, the "Combined
Balance Sheet" and, collectively, with the financial statements set forth on
SECTION 3.04 OF THE SELLER DISCLOSURE SCHEDULE and notes thereto, the "Combined
Financial Statements"). The Combined Financial Statements have been prepared in
conformity with
19
generally accepted accounting principles ("GAAP") in effect in the United States
applied on a consistent basis (except as may be indicated therein or in the
notes thereto). The Combined Financial Statements fairly presented, in all
material respects, the combined financial position and results of operations and
cash flows of the entities to which they relate as of the dates thereof and for
the periods indicated.
(b) Except (i) as reflected in the Combined Balance Sheet or
liabilities described in any notes thereto and liabilities for which neither
accrual nor footnote disclosure is required under GAAP or (ii) for liabilities
incurred in the ordinary course of business consistent with past practice since
September 30, 2003, neither the Company nor any of its subsidiaries has any
obligation or liabilities of any nature which would reasonably be expected to
have a Company Material Adverse Effect.
(c) SECTION 3.04(C) OF THE SELLER DISCLOSURE SCHEDULE lists, and
Sellers have delivered to Purchaser copies of, the documentation creating or
governing, all securitization transactions and "off-balance sheet arrangements"
(as defined in Item 303(c) of Regulation S-K) effected by the Company or its
subsidiaries between January 1, 2002 and the date hereof.
SECTION 3.05. Assets Other than Real Property Interests; Sufficiency of
Assets.
(a) The Companies and their subsidiaries have good and valid title
(or immediately prior to the Closing, will have good and valid title) to all the
material assets reflected on the Combined Balance Sheet or thereafter acquired,
except those sold or otherwise disposed of or consumed since the date of the
Combined Balance Sheet in the ordinary course of business and consistent with
past practices, in each case free and clear of all liens, charges, claims,
licenses, pledges, options, security interests, mortgages, leases, subleases,
easements, covenants, rights-of-way or other similar encumbrances or other
similar restrictions (collectively, "Liens"), except (i) Liens set forth in
SECTION 3.05 OF THE SELLER DISCLOSURE SCHEDULE, (ii) inchoate mechanics',
carriers', workmen's, repairmen's or other like Liens arising or incurred in the
ordinary course of business for amounts not yet due and payable or for amounts
which are due and payable but are not material to the Companies and their
subsidiaries, (iii) Liens arising under original purchase price conditional
sales contracts for tangible personal property and equipment leases with third
parties entered into in the ordinary course of business and consistent with past
practices, (iv) Liens for governmental Taxes and other charges that are not due
and payable, (v) other imperfections of title, licenses or encumbrances, if any,
which do not, individually or in the aggregate, prohibit, prevent or materially
impair the continued use, operation or value of the assets to which they relate
in the business of the Companies and their subsidiaries as presently conducted
(the Liens described in clauses (i) through (v) above are collectively
"Permitted Liens"). This Section 3.05(a) does not relate to real property or
interests in real property, which are the subject of Section 3.06, to
Intellectual Property, which is the subject of Section 3.07, or to Contracts,
which are subject of Section 3.08.
(b) As of the date hereof, the assets of the Companies and their
subsidiaries constitute all of the material assets and material properties
necessary to operate and conduct the business of the Companies and their
subsidiaries as currently operated and conducted. After the consummation of the
Transaction, no Seller or Affiliate of any Seller shall retain any ownership
interest in any material assets or material properties of the Companies or their
subsidiaries necessary to operate and conduct the business of the Companies and
their subsidiaries
20
as currently operated and conducted, except by virtue of such Seller's holding
of Purchaser Common Stock. The material equipment of the Companies and their
subsidiaries, taken as a whole, have been reasonably maintained by the Companies
and their subsidiaries (giving due account to the age and length of use of same,
ordinary wear and tear excepted) and is substantially suitable for its present
use.
SECTION 3.06. Real Property.
(a) SECTION 3.06 OF THE SELLER DISCLOSURE SCHEDULE lists all real
property owned or leased by the Companies or their subsidiaries identifying such
property under the headings "Owned" or "Leased" (the "Company Properties"). The
Companies or their subsidiaries hold good title to and are in actual possession
of the owned Company Properties listed under the heading "Owned" on SECTION 3.06
OF THE SELLER DISCLOSURE SCHEDULE and have valid leasehold interests in, and
exclusively occupy, the Company Properties leased by the Companies or their
subsidiaries in each case free and clear of all Liens, except (i) Permitted
Liens, (ii) such Liens as are set forth in SECTION 3.06 OF THE SELLER DISCLOSURE
SCHEDULE, (iii) easements, covenants, rights-of-way and other similar
restrictions of record that do not secure any obligations of the Companies or
their subsidiaries, that do not render title to such Company Property
unmarketable or prohibit, prevent or materially impair the continued use and
operation of the Company Property to which they relate in the business of the
Companies or their subsidiaries as presently conducted, (iv) any conditions that
would be apparent as part of a visual inspection of any Company Property, (v) in
the case of property leased to the Companies, Liens that affect the title of the
landlord to such property and (vi) (A) zoning, building and other similar
restrictions, (B) Liens that have been placed by any developer, landlord or
other third party on any Company Property and subordination or similar
agreements relating thereto and (C) unrecorded easements, covenants,
rights-of-way and other similar restrictions, none of which items set forth in
clause (vi) individually or in the aggregate, prohibit, prevent or materially
impair the continued use, operation or value of the Company Property to which
they relate in the business of the Companies or their subsidiaries as presently
conducted. To the knowledge of Sellers, there are no boundary or title disputes
relating to the owned Company Properties including any encroachments from
adjacent properties onto the Company Properties or from the Company Properties
onto adjacent properties, nor to the knowledge of Sellers is any owned Company
Property the subject of any other outstanding or threatened dispute, claim,
action or notice of violation, except such encroachments, disputes, claims,
actions or notices that would not reasonably be expected to prohibit, prevent or
materially impair the continued use, operation or value of such owned Company
Property. As of the date hereof, the Companies have not received written notice
of any pending or proposed change in zoning, urbanization regulation or other
land use law, classification or designation which, if implemented, would
materially impede or otherwise materially adversely affect the continued use of
the owned Company Properties as currently being used. All material leases of
Company Properties are valid, binding and enforceable against the Companies or
their subsidiaries in accordance with their respective terms, and there does not
exist under any such lease of Company Property any material default on the part
of the Companies or their subsidiaries or, to the knowledge of Sellers on the
part of any other party to such lease. The plants of the Companies or their
subsidiaries, to the knowledge of Sellers, have been reasonably maintained by
the Companies or their subsidiaries
21
(giving due account to the age and length of use of same, ordinary wear and tear
excepted) and are substantially suitable for their present uses.
(b) Except as provided in SECTION 3.06 OF THE SELLER DISCLOSURE
SCHEDULE with respect to all Company Properties set forth under the heading
"Owned" on SECTION 3.06 OF THE SELLER DISCLOSURE SCHEDULE and located in the
United Kingdom (the "Owned U.K. Real Property"):
(i) To the knowledge of Sellers, the documents of
title consist of original documents or properly examined abstracts, all of which
are in possession of International or are unconditionally held to its order. To
the knowledge of Sellers, where necessary, all title deeds are fully stamped
with ad valorem stamp duty and a produced document stamp.
(ii) To the knowledge of Sellers, no buildings,
extensions or major alterations have been erected or carried out on any Owned
U.K. Real Property within the last six (6) years, nor is any such construction
in process or under contract. To the knowledge of Sellers, no development (as
defined in the Town and Country Planning Act 1990) is being carried out at any
U.K. Real Property. To the knowledge of Sellers, all material planning
permissions are either unconditional or subject only to conditions which have
either been satisfied in all material respects or, in the case of continuing
conditions, are being complied with in all material respects in the ordinary
course.
(c) In the case of all Company Properties set forth under the
heading "Leased" on Section 3.06 of the Seller Disclosure Schedule and located
in the United Kingdom (the "Leased U.K. Real Property"):
(i) To the knowledge of Sellers, any consent required
for the grant of lease or the vesting of the
lease in International or for any works carried out by or change of use effected
by such tenant has been obtained and placed with the documents of title, along
with evidence of the registration of any such grant or vesting where requisite.
(ii) To the knowledge of Sellers, if title to the
lease is not registered at HM Land Registry with
leasehold title absolute, the titles of the landlord and any superior landlord
have been investigated on behalf of International and found to be satisfactory
in all material respects.
SECTION 3.07. Intellectual Property.
(a) SECTION 3.07(A) OF THE SELLER DISCLOSURE SCHEDULE lists: (i)
all patents and all registered trademarks, service marks, copyrights, and any
applications and renewals for any of the foregoing owned by or on behalf of the
Companies or their subsidiaries and (ii) all licenses (in and out), sublicenses
and other agreements to which the Companies or their subsidiaries are a party
and pursuant to which the Companies or their subsidiaries, or any other person
is authorized to use any material Company Intellectual Property (other than
implied licenses pursuant to sales of the services and products of the business
of the Companies and their subsidiaries) (all such intellectual property set
forth on SECTION 3.07(A) OF THE SELLER DISCLOSURE SCHEDULE being referred to
herein as the "Scheduled Company Intellectual Property").
22
(b) Each item of Scheduled Company Intellectual Property is
either: (i) owned solely by one of the Companies or their subsidiaries free and
clear of any Liens (which for this purposes shall specifically exclude implied
licenses pursuant to sales of the services and products of the business of the
Companies and their subsidiaries) other than Permitted Liens or (ii) rightfully
used and authorized for use by the Companies or their subsidiaries as between
the Companies and their subsidiaries on the one hand, and the licensors of such
Scheduled Intellectual Property on the other hand. All Scheduled Company
Intellectual Property that is used by the Companies or their subsidiaries
pursuant to a license or other grant of a right by a third party to use its
proprietary information is separately identified as such on SECTION 3.07(B) OF
THE SELLER DISCLOSURE SCHEDULE.
(c) Neither the Companies nor any of their subsidiaries is in
material violation of any license, sublicense or other agreement to which such
entity is a party or otherwise bound relating to any material Company
Intellectual Property. Except as noted on SECTION 3.07(C) OF THE SELLER
DISCLOSURE SCHEDULE, neither the Companies nor their subsidiaries is obligated
to provide any current or future financial consideration to any third party,
with respect to any exercise of rights by the Companies or their subsidiaries or
Purchaser, as successor to the Companies and their subsidiaries in the material
Company Intellectual Property (it being understood that this sentence does not
apply to any consideration payable as a result of any infringement claim covered
by the first or second sentence of Section 3.07(d)).
(d) The use of the term "Ecolochem" in any trademark, service
mark, trade dress, logo, trade name, domain name, or corporate name by the
Companies and their subsidiaries as currently used does not infringe or
otherwise violate any other person's trademark rights or other proprietary. The
"Ecolochem" trademark is valid, subsisting and enforceable in the United States
and United Kingdom and in each other jurisdiction in which such trademark is
presently registered. The use of the Company Intellectual Property owned by the
Company or their subsidiaries other than the "Ecolochem" trademark as currently
used does not infringe any other person's Intellectual Property right except for
circumstances where such infringement by the use of the Company Intellectual
Property would not be reasonably expected to have a Company Material Adverse
Effect. Each copy of any Commercially Available Software used by the Companies
or their subsidiaries is used pursuant to, and in accordance with, valid license
rights in favor of the Companies or their subsidiaries, other than instances of
misuse that could not reasonably be expected to result in a liability of the
Companies or their subsidiaries of an aggregate amount in excess of $250,000. As
of the date of this Agreement, no claims have been asserted in writing against
the Companies or their subsidiaries or, to the knowledge of the Sellers,
threatened in writing by any person either: (i) challenging the validity,
enforceability, effectiveness or ownership by the Companies or their
subsidiaries of any of the material Company Intellectual Property owned by the
Companies or their subsidiaries; or (ii) to the effect that the use,
reproduction, modification, manufacture, distribution, licensing, sublicensing,
sale, or any other exercise of rights in any of such Company Intellectual
Property by the Companies or their subsidiaries infringes or will infringe on
any intellectual property or other proprietary right of any person. To the
knowledge of the Sellers, as of the date of this Agreement, there does not exist
any valid basis for a claim of the type set forth in the preceding sentence.
Except as would
23
not reasonably be expected to have a Company Material Adverse Effect, as of
Closing, there will be no claims asserted in writing against the Companies or
their subsidiaries or, to the knowledge of the Sellers, threatened in writing by
any person either: (i) challenging the validity, enforceability, effectiveness
or ownership by the Companies or their subsidiaries of any of the material
Company Intellectual Property owned by the Companies or their subsidiaries; or
(ii) to the effect that the use, reproduction, modification, manufacture,
distribution, licensing, sublicensing, sale, or any other exercise of rights in
any of such Company Intellectual Property by the Companies or their subsidiaries
infringes or will infringe on any intellectual property or other proprietary
right of any person. As of the Closing Date, to the knowledge of the Sellers,
there will not exist any valid basis for a claim of the type set forth in the
preceding sentence, except as would not reasonably be expected to have a Company
Material Adverse Effect. Except as would not reasonably be expected to have a
Company Material Adverse Effect, all granted or issued patents, and all
registered trademarks (other than "Ecolochem") and service marks, owned by
Purchaser or its subsidiaries are valid, subsisting and enforceable. To the
knowledge of Sellers, as of the date of this Agreement there is no pending U.S.
or foreign patent applications which, if issued, would materially limit or
materially prohibit the current activities of the Companies or their
subsidiaries. As of the date hereof, to the knowledge of Sellers, there is no
unauthorized use, infringement, or misappropriation of any of the Scheduled
Company Intellectual Property by any third party, employee or former employee.
Except as would not reasonably be expected to have a Company Material Adverse
Effect, as of Closing there will be no unauthorized use, infringement, or
misappropriation of any of the Company Intellectual Property by any third party,
employee or former employee.
(e) The Companies or their subsidiaries have secured from all
parties (including employees) who have created any portion of, or otherwise have
any rights in or to, the material Company Intellectual Property owned by the
Companies or their subsidiaries valid and enforceable written assignments of any
such work, invention, improvement or other rights to the Companies or their
subsidiaries to the extent necessary to vest valid title in such Company
Intellectual Property in the Companies or their subsidiaries.
(f) The Transaction does not materially and adversely affect any
rights of the Company or its subsidiaries to use any material Company
Intellectual Property.
(g) The Companies and their subsidiaries have taken commercially
reasonable measures to protect the proprietary nature of the Company
Intellectual Property and to maintain in confidence all material trade secrets
and material confidential information owned or used by the Companies and their
subsidiaries.
(h) "Intellectual Property" means:
(A) (i) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereon, and all patents, patent applications and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
divisions, revisions, extensions and re-examinations thereof, (ii) all
trademarks, service marks, trade dress, logos, trade names, domain
names, and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all
24
goodwill associated therewith, and all applications, registrations and
renewals in connection therewith, (iii) all copyrights and all
applications, registrations and renewals in connection therewith, (iv)
all trade secrets and confidential business information (including
ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, methods,
schematics, technology, technical data, designs, drawings, flowcharts,
block diagrams, specifications, customer and supplier lists, customer
data, pricing and cost information and business and marketing plans and
proposals), and (v) all software (in both source and object code form)
and firmware (including data, databases and related documentation);
(B) all documents, records, instructions and files
relating to design, end user documentation, manufacturing, quality
control, sales, marketing or customer support for, and tangible
embodiments of, all intellectual property described herein; and
(C) all licenses, agreements and other rights in any
third party product or any third party intellectual property described
in (A) and (B) above other than any commercially available
"off-the-shelf" third party software, so-called "click wrap" or related
intellectual property ("Commercially Available Software").
(i) "Company Intellectual Property" means all
Intellectual Property that is owned, held or used by the Companies or their
subsidiaries.
SECTION 3.08. Contracts.
(a) Except for this Agreement and the Ancillary Agreements or as
set forth in SECTION 3.08(A) OF THE SELLER DISCLOSURE SCHEDULE, none of the
Companies or their subsidiaries or their respective properties is a party to, or
bound by any:
(i) employment, independent contractor, consulting,
severance, termination, special incentive, change in control or similar
agreement or employment Contract (other than employment "at will" or statutory
employment Contract required under Applicable Law for employees outside the
United States);
(ii) employee collective bargaining agreement or
other Contract with any labor union (except as may be required under Applicable
Law for employees outside the United States);
(iii) except with respect to the items set forth in
Section 3.06(a)(vi)(A), covenant not to compete that limits the conduct of the
Companies or their subsidiaries or other covenant of any of the Companies or
their subsidiaries restricting the development, marketing or distribution of the
products and services of any of the Companies or their subsidiaries or limits
any of the Companies or their subsidiaries from soliciting the employees,
suppliers, or customers of any third party;
(iv) lease, sublease or similar agreement with any
person under which any of the Companies or their subsidiaries is a lessor or
sublessor of, or makes available for use, to any person, (A) any Company
Property or (B) any portion of any premises otherwise occupied
25
by any of the Companies or their subsidiaries, in any such case that has an
aggregate future receivable in excess of $100,000 and is not terminable by any
of the Companies or their subsidiaries by notice of not more than 90 days for a
cost of less than $25,000;
(v) lease or similar agreement (other than a Contract
with a customer of the Companies or their subsidiaries for the provision of
goods or services by the Companies or their subsidiaries) with any person under
which (A) any of the Companies or their subsidiaries is lessee of, or holds or
uses, any tangible personal property owned by any person or (B) any of the
Companies or their subsidiaries is a lessor or sublessor of, or makes available
for use by any person, any tangible personal property owned or leased by any of
the Companies or their subsidiaries, in any such case which has an aggregate
future liability or receivable, as the case may be, in excess of $100,000 and is
not terminable by any of the Companies or their subsidiaries by notice of not
more than 90 days for a cost of less than $25,000;
(vi) (A) continuing Contract requiring the future
purchase of materials, supplies or equipment by the Companies or their
subsidiaries, (B) management, service, or other similar type of Contract or (C)
advertising agreement or arrangement, in any such case that has an aggregate
future liability to any person in excess of $100,000 and is not terminable by
any of the Companies or their subsidiaries by notice of not more than 90 days
for a cost of less than $25,000;
(vii) Contract in existence as of the date hereof
under which any of the Companies or their subsidiaries has borrowed any money
from or deferred the purchase price of any property, or issued any note, bond,
debenture or other evidence of indebtedness to, any person or any other note,
bond, debenture or other evidence of indebtedness issued to any person;
(viii) Contract involving interest rate or foreign
currency swaps, commodity swaps, options, caps, collars, hedges or forward
exchanges, or other similar agreements, regardless whether entered into for
purposes of hedging, investment or otherwise;
(ix) Contract (including so-called take-or-pay or
keep well agreements) under which (A) any person has directly or indirectly
guaranteed indebtedness, liabilities or obligations of any of the Companies or
their subsidiaries or (B) any of the Companies or their subsidiaries has,
directly or indirectly guaranteed indebtedness, liabilities or obligations of
any person (in each case other than endorsements for the purpose of collection
in the ordinary course of business), in any such case which, individually, is in
excess of $25,000;
(x) Contract under which any of the Companies or
their subsidiaries has, directly or indirectly, made or committed to make any
material advance, loan, extension of credit or capital contribution to, or other
investment in, any person;
(xi) Except with respect to Liens relating to
indebtedness pursuant to Section 5.01(a)(viii), material mortgage, pledge,
security agreement, deed of trust or other instrument granting a Lien on any
Company Property not set forth in SECTION 3.06 OF THE SELLER DISCLOSURE
SCHEDULE;
26
(xii) Contract evidencing a limited liability
company, partnership, joint venture or similar business relationship or entity;
(xiii) Contract (other than a Contract with a
customer of the Companies or their subsidiaries for the provision of goods or
services by the Companies or their subsidiaries and other than sales or purchase
orders with suppliers entered into by the Companies or their subsidiaries in the
ordinary course of business) that has an aggregate future liability to any
person in excess of $100,000 and is not terminable by any of the Companies or
their subsidiaries by notice of not more than 90 days for a cost of less than
$25,000;
(xiv) Any agency, dealer, sales representative,
distributorship or other similar Contract that is not terminable by any of the
Companies or its subsidiaries by notice of not more than 90 days for a cost of
less than $25,000;
(xv) Any Contract (other than a Contract with a
customer of the Companies or their subsidiaries for the provision of goods or
services by the Companies or their subsidiaries and other than sales or purchase
orders with suppliers entered into by the Companies or their subsidiaries in the
ordinary course of business) in existence as of the date hereof requiring future
capital expenditures of $100,000 or more in any particular instance or for any
particular project;
(xvi) Any so-called requirements Contract requiring
the Companies or any of their subsidiaries to purchase its requirements of a
particular raw material, resource or product from a particular supplier or
suppliers, or to purchase all or substantially all of the output or production
of a particular supplier; or
(xvii) Any material Contract (other than Contracts or
purchase orders with customers or purchase or sales orders with suppliers
entered into by the Companies or their subsidiaries in the ordinary course of
business) that would reasonably be expected to have a potential aggregate future
liability as a result of any warranty or indemnification provision in excess of
$50,000.
(b) Each Contract set forth in SECTION 3.08(A) OF THE SELLER
DISCLOSURE SCHEDULE (the "Company Contracts") is valid, binding and in full
force and effect and, to the knowledge of Sellers, is enforceable by the
applicable Company or subsidiary in accordance with its terms (subject to
applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
transfer or similar laws affecting creditors' rights generally and to general
equitable principles), except for such failures to be valid, binding, in full
force and effect or enforceable that would not reasonably be expected to have a
Company Material Adverse Effect. Each of the Companies or their subsidiaries has
performed all obligations required to be performed by them under the Company
Contracts and are not (with or without the lapse of time, giving of notice, or
both) in breach or default thereunder and, to the knowledge of Sellers, no other
party to any of the Company Contracts is (with or without the lapse of time,
giving of notice, or both) in breach or default in any aspect thereunder, in
each case except to the extent that any such lack of performance, breach or
default by a Company or a subsidiary or any such third party would not
reasonably be expected to have a Company Material Adverse Effect. To the
knowledge of the Sellers, as of the date of this Agreement, no party to a
Company Contract has given written
27
notice of, or has threatened to terminate any such Company Contract. Except as
would not reasonably be expected to have a Company Material Adverse Effect, as
of Closing, no party to a Company Contract will have given written notice, or
threatened to terminate any such Company Contract.
(c) The Companies and their subsidiaries have provided or made
available to Purchaser true, complete and correct copies of all "extended term
agreements" Contracts and all "priority service agreement" Contracts (other than
those on standard company forms without material changes thereto) in existence
on the date of this Agreement ("Customer Contracts"). Each Customer Contract is
valid, binding and in full force and effect and, to the knowledge of Sellers, is
enforceable by the applicable Company or subsidiary in accordance with its terms
(subject to applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent transfer or similar laws effecting creditors' rights generally and to
general equitable principles), except for such failures to be valid, binding, in
full force and effect or enforceable that would not reasonably be expected to
have a Company Material Adverse Effect. Each of the Companies and their
subsidiaries has performed all obligations required to be performed by them to
date under the Customer Contracts and are not (with or without the lapse of
time, giving of notice, or both) in breach or default thereunder and, to the
knowledge of Sellers, no other party to any of the Customer Contracts is (with
or without the lapse of time, giving of notice, or both) in breach or default
thereunder, in each case except to the extent that any such lack of performance,
breach or default by a Company or a subsidiary or any such third party would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.09. Litigation. SECTION 3.09 OF THE SELLER DISCLOSURE
SCHEDULE lists, as of the date of this Agreement, all pending or, to the
knowledge of Sellers threatened, Proceedings against the Companies or their
subsidiaries that (a) involve a specified amount of, or unspecified amount that
would reasonably be expected to result in a liability of, more than $50,000, (b)
involve any Governmental Entity as an adverse party or (c) seek any injunctive
relief. There are no pending or, to the knowledge of Sellers, threatened
Proceedings, against the Companies or their subsidiaries that, if adversely
determined, individually or in the aggregate, would reasonably be expected to
have a Company Material Adverse Effect. None of the Companies or their
subsidiaries or their respective properties is subject to, bound by, or in
default under, any unsatisfied, unbonded Judgment in excess of $50,000.
SECTION 3.10. Taxes.
(a) Each of the Companies and its subsidiaries has timely filed or
caused to be timely filed (taking into account any applicable extension periods)
all material Tax Returns required to be filed by it and each such Tax Return was
true, complete and correct in all material respects. All Taxes covered by such
material Tax Returns, and all other material Taxes otherwise due and payable
from a Company or any of its subsidiaries, have been timely paid in full other
than such Taxes being contested in good faith and for which adequate reserves
have been provided. There are no material Liens for Taxes with respect to any of
the assets or properties of any Company or any of its subsidiaries not
adequately provided for in the Combined Balance Sheet, except for statutory
Liens for property Taxes not yet due and payable.
28
(b) (i) As of the date hereof, no Tax Return of the Companies or
their subsidiaries is under audit or examination by or with any Taxing
Authority, and no notice of such an audit or examination has been received by
the Companies or any of their subsidiaries; (ii) as of the date hereof, no claim
has been made in the last six years by a Taxing Authority in a jurisdiction
where the Companies and their subsidiaries do not file Tax Returns that they are
or may be subject to taxation by that jurisdiction; and (iii) as of the date
hereof, none of the Tax Returns filed or Taxes payable by the Companies and
their subsidiaries (or Sellers as they relate to the income, assets or business
of the Companies or their subsidiaries) have been the subject of any audit,
action, suit, proceeding, claim, examination, deficiency or assessment by any
Taxing Authority in the past six years. All material elections with respect to
Taxes of the Companies and their subsidiaries made in the last six years are set
forth in the Combined Financial Statements, in Section 3.10(b) of the Seller
Disclosure Schedule, or in Tax Returns filed by the Companies and their
subsidiaries that have been delivered to the Purchaser prior to the date hereof.
None of the Companies or their subsidiaries has any liability for Taxes of any
other person, as a transferee or successor, by contract, or otherwise.
(c) (i) The accrued but unpaid Taxes of the Companies and their
subsidiaries did not, as of the date of the Combined Balance Sheet, exceed the
liability for Taxes payable, as shown on the Combined Balance Sheet; (ii) none
of the Companies or any of their subsidiaries will be required to include in a
taxable period (or a partial period) beginning on or after the Closing Date,
taxable income that accrued in a prior taxable period that was not recognized in
any prior taxable period as a result of the installment method of accounting,
the long-term contract method of accounting, the completed contract method of
accounting, the cash method of accounting, Section 481 of the Code or any
comparable provisions of state, local and foreign Tax law; and (iii) the equity
interests of the Companies are not subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code, and are not subject to a
"non-lapse" restriction as that term is defined in Section 83 of the Code.
(d) Section 3.10(d) of the Seller Disclosure Schedule lists each
non-U.S. jurisdiction in which any of the Companies or their subsidiaries has
filed an Income Tax Return in the last six years. S.A.R.L. does not have an
office or fixed place of business in the U.S., and none of the income of S.A.R.L
is sourced in the United States for purposes of the Code and comparable
provisions of state and local law. None of the Companies or any of their
subsidiaries is, or holds an interest in, any entity that would be treated as a
"passive foreign investment company" within the meaning of Section 1297 of the
Code.
(e) (i) Neither Ecolochem nor International has distributed stock
of another corporation, or had its stock distributed by another corporation, in
a transaction that was purported or intended to qualify, in whole or in part,
for tax-free treatment under Section 355 or Section 361 of the Code, (ii)
neither Ecolochem nor International has been a "United States real property
holding corporation" within the meaning of Section 897(c) of the Code during the
period specified in Section 897(c)(1)(a)(ii) of the Code ending on the Closing
Date, and (iii) Section 3.10(e) of the Seller Disclosure Schedule lists each of
the subsidiaries of the Companies that is, and any arrangement to which any of
the Companies or their subsidiaries is a party which is treated as, a
partnership for federal, state or local U.S. Income Tax purposes.
29
(f) (i) None of the Companies or any of their subsidiaries is a
party to or bound by, any agreement, contract, plan or arrangement that has
resulted or would result, separately or in the aggregate, in the payment of (i)
any "excess parachute payment" within the meaning of Section 280G of the Code
(or any corresponding provision of state, local, or foreign tax law) or (ii) any
amount that will not be fully deductible as a result of Section 162(m) of the
Code (or any corresponding provision of state, local or foreign tax law).
(g) None of the Companies or their subsidiaries is party to or
bound by any Tax sharing agreement.
(h) There is no agreement or other document extending, or having
the effect of extending, the period of assessment or collection of any Taxes and
no power of attorney with respect to any Taxes has been executed or filed with
any Taxing Authority by or on behalf of any Company or any of its subsidiaries.
(i) The Companies and their subsidiaries have complied in all
material respects with all Applicable Laws relating to the payment and
withholding of Taxes (including but not limited to withholding of Taxes under
Sections 1441, 1442, 3121 and 3402 of the Code or similar provisions under any
state, local or foreign laws) and have, within the time and the manner
prescribed by law, withheld from and paid over to the proper governmental
authorities all material amounts required to be so withheld and paid over under
Applicable Law.
(j) Ecolochem has had at all times from October 1, 1986, and
International has, since inception, had, in effect a valid election to be
treated as an "S corporation" within the meaning of Section 1361 of the Code
(and has had a similar election in effect during such period for purposes of
comparable state and local Income Tax laws in every jurisdiction in which either
is required to file Income Tax Returns or where such election may be relevant),
and none of Ecolochem, International or the Sellers has taken any action that
would have caused a termination of any such election (or which would otherwise
have terminated the status of Ecolochem and International as "S corporations"
within the meaning of Section 1361 of the Code) for any period. Section 3.10(j)
of the Seller Disclosure Schedule identifies every entity owned by Ecolochem and
International that is a "qualified Subchapter S subsidiary" within the meaning
of Section 1361(b)(3)(B) of the Code. Each such subsidiary so identified has
been a "qualified Subchapter S subsidiary" at all times since its inception up
to and including the Closing Date. Every person or entity that has ever been a
holder of any equity interest in Ecolochem or International has been, for all
periods during which such person has been a holder of such an equity interest, a
person that is eligible to own equity interests in an "S Corporation" (as that
term is defined in Section 1361(a)(1) of the Code) without causing the
corporation to fail to be treated as a "small business corporation" within the
meaning of Section 1361(b)(1) of the Code. The Sellers hereby acknowledge that
certain Equity Interests are included in the federal gross estate of Richard C.
Dickerson, a resident of the Commonwealth of Virginia who died on July 23, 2002,
and are subject to federal estate tax as a consequence of his death. The duly
appointed executors of the Estate of Richard C. Dickerson ("Dickerson's
Executors") have timely filed the federal Estate Tax Return, Form 706.
Dickerson's Executors elected pursuant to Section 6166 of the Code for an
extension of time to pay the federal estate tax attributable to the value of
certain closely-held business interests in the estate. Dickerson's Executors did
not elect to release the executors from personal liability for the federal
estate tax pursuant to Section 2204
30
of the Code. Dickerson's Executors did not elect to impose a lien with respect
to any of the assets of the estate pursuant to Section 6324A of the Code. The
only assets which Purchaser is purchasing which were owned by Richard C.
Dickerson individually on the date of his death are the S.A.R.L. Interests. None
of the remaining assets being purchased are included in the federal gross estate
of Richard C. Dickerson other than pursuant to Sections 2034 through 2042 of the
Code. There is no Virginia state estate tax lien which arises on such assets.
(k) Neither Ecolochem nor International (nor any of their
qualified Subchapter S subsidiaries) has, in the past 10 years, (i) acquired
assets from another person in a transaction in which Ecolochem's or
International's (or any of their qualified Subchapter S subsidiaries') tax basis
for the acquired assets was determined, in whole or in part, by reference to the
tax basis of the acquired assets (or other property) in the hands of the
transferor or (ii) acquired the stock of any corporation which is a qualified
Subchapter S subsidiary, and consequently, neither Ecolochem nor International
will be subject to tax under Section 1374 of the Code as the result of any
Section 338 Election.
(l) The Companies and their subsidiaries have complied in all
material respects with the requirements of Sections 6011, 6111 and 6112 of the
Code and the Treasury Regulations thereunder.
(m) None of the assets of the Companies or their subsidiaries
secures, directly or indirectly, any debt the interest on which is tax exempt
under Section 103(a) of the Code. None of the assets of the Companies or their
subsidiaries is "tax-exempt use property" within the meaning of Section 168(h)
of the Code. None of the assets of the Companies or their subsidiaries is
property which is required to be treated as being owned by any other person
pursuant to the so-called "safe harbor lease" provisions of former Section
168(f)(8) of the Code. None of the Companies or their subsidiaries is a personal
holding company within the meaning of Section 542 of the Code.
(n) To the knowledge of the Sellers, all documents which establish
or are necessary to establish the title of International, or any of its
subsidiaries, to any asset, or to enforce any rights, and which attract stamp
duty or any similar foreign tax or duty, have been properly stamped, and
International has duly paid all stamp duty and similar taxes or duties in other
countries to which it is, has been, or may be made, liable;
(o) The Companies and their subsidiaries have not agreed in the
last six years to make any adjustments under Section 481(a) of the Code (and any
corresponding provisions of state, local and foreign law) by reason of a change
in accounting method or otherwise. Each of Ecolochem and International have
utilized, for the past six taxable years or periods ending on or before the
Closing Date, the accrual method of accounting for federal, state, local and
foreign tax purposes with respect to each material item of income.
(p) Each of Ecolochem and International and their respective
Sellers is eligible to join with Purchaser in making a Section 338 Election.
(q) S.A.R.L. is, and always has been, a societe a responsibilite
limitee treated as a partnership for United States Income Tax purposes. Moson
Holdings is, and has always been, a limited liability company treated as a
partnership for United States Income Tax purposes.
31
SECTION 3.11. Absence of Changes or Events.
(a) Since September 30, 2003, there has not been any change,
event, fact or circumstance affecting the Companies or their subsidiaries that,
when taken in the aggregate with all other changes, events and circumstances
whether beneficial or detrimental to the Companies and their subsidiaries, taken
as a whole, has had, or would reasonably be expected to have, a Company Material
Adverse Effect.
(b) Between September 30, 2003 and the date hereof, the Companies
and their subsidiaries have been operated in the ordinary course of business in
substantially the same manner as currently conducted, and have not:
(i) amended their articles of incorporation, bylaws,
limited liability company agreements or comparable organizational documents;
(ii) declared, set aside or paid any dividend or made
any other distribution on or in respect of any shares of their capital stock,
membership interests, equity interests or similar ownership interests other than
transfers between a Company and its subsidiaries;
(iii) redeemed or otherwise acquired any shares of
their capital stock, membership interests, equity interests, or similar
ownership interests;
(iv) issued, delivered, sold, granted, pledged or
otherwise encumbered any capital stock, membership interests or similar
ownership interest or any securities convertible or exchangeable into or
exchangeable for any rights, warrants, "phantom" stock rights, stock
appreciation rights, options or similar derivative securities to acquire, any
such capital stock, membership interests or similar ownership interest or made
any announcement of the intention to so issue, deliver, sell, grant, pledge or
encumber any such capital stock, membership interests or similar ownership
interest, convertible securities, rights, warrants, "phantom" stock rights,
stock appreciation rights, options or similar derivative securities;
(v) (A) split, combined or reclassified any of its
capital stock, membership interests or similar ownership interest or engaged in
a recapitalization, exchange of shares or similar transaction with respect to
its capital stock, membership interests or similar ownership interest or (B)
issued or authorized the issuance of any other securities in respect of, in lieu
of, or in substitution for, any of its capital stock, membership interests or
similar ownership interest;
(vi) (A) granted any severance or termination pay to
any of their employees, directors or officers, (B) entered into, amended or
increased benefits payable under any severance or termination pay policies or
employment or other agreements, (C) established, adopted or amended any bonus,
profit sharing, thrift, pension, retirement, change-in-control, deferred
compensation, compensation, stock option, restricted stock or other benefit plan
or arrangement covering any of their directors, officers or employees or (D)
increased compensation, bonus or other benefits payable to any of their
directors or officers, in each case
32
other than (1) as required by Applicable Law, and (2) as required under the
terms of any Company Benefit Plan or to satisfy contractual obligations in
existence on September 30, 2003;
(vii) incurred any indebtedness for borrowed money or
granted any guarantee in respect thereof;
(viii) acquired by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, other than those in the ordinary course of
business not in excess of $100,000 in the aggregate;
(ix) sold, transferred, leased or otherwise disposed
of any assets in excess of $100,000 in the aggregate, except (A) the sale or
disposal of obsolete or excess equipment or (B) sales, transfers, leases or
disposals in the ordinary course of business consistent with past practice;
(x) canceled any material indebtedness (individually
or in the aggregate) or waived any claims or rights of material value;
(xi) paid, loaned or advanced any amount to, or sold,
transferred or leased any assets to, or entered into any agreement or
arrangement with, any Seller;
(xii) made any change in accounting methods,
principles or practices, except as required by GAAP or Applicable Law;
(xiii) taken or permitted any action that would cause
either Ecolochem or International to fail to be treated as an "S corporation"
within the meaning of Section 1361 of the Code, or to fail to be treated as an
"S corporation" under comparable state and local Tax laws (or permitted any such
action to be taken by any of their respective shareholders);
(xiv) amended any Tax Return or changed or modified
any method of reporting income, deductions or other items for Tax purposes; or
(xv) agreed, whether in writing or otherwise, to do
any of the foregoing.
(c) Between September 30, 2003 and the date hereof, there has not
occurred any event or occurrence resulting in damage, destruction or other
casualty loss of $100,000 or more (whether or not covered by insurance) to the
Companies or their subsidiaries or their respective assets.
SECTION 3.12. Compliance with Applicable Law. The Companies and their
subsidiaries are in compliance with all Applicable Laws applicable to the
conduct of their businesses, except for instances of non-compliance that,
individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect. None of the Companies nor their subsidiaries
has received, during the two years before the date of this Agreement, any
written notice from a Governmental Entity alleging that the Companies or any of
their subsidiaries are in violation of any Applicable Law applicable to the
conduct of the business of the Companies or their subsidiaries in a manner that
would be material to the Companies and their subsidiaries taken as a whole.
33
SECTION 3.13. Employee and Labor Matters.
(a) As of the date hereof (i) there is not and has not been during
the past five years any labor strike, dispute, work stoppage or lockout pending,
or, to the knowledge of Sellers, threatened, against the Companies or their
subsidiaries, (ii) to the knowledge of Sellers, no union organizational campaign
is in progress with respect to the employees of any of the Companies or their
subsidiaries and no question concerning representation has been presented to
such employees, (iii) to the knowledge of Sellers, none of the Companies or
their subsidiaries is engaged in any unfair labor practice and (iv) neither the
Companies nor any of their subsidiaries has received any written notice that
there is an unfair labor practice charge or complaint against any of them
pending or threatened before the National Labor Relations Board.
(b) The employees of the Companies and their subsidiaries have
been since January 1, 2001, and currently are, properly classified in all
material respects under the Fair Labor Standards Act of 1938, as amended, and
under any comparable, state Applicable Law. The Companies and their subsidiaries
are not delinquent to, and have not failed to pay any of its employees,
consultants or contractors for any wages (including overtime), salaries,
commissions, bonuses, benefits or other direct compensation for any services
performed by them to the date hereof or amounts required to be reimbursed to
such individuals except where the failure to pay any such wages, salaries,
commissions, bonuses, benefits or other direct compensation could not reasonably
be expected to result in criminal liability or material civil liability on the
part of the Company or their subsidiaries or any officer or director thereof.
(c) The Companies and their subsidiaries do not have an
established severance pay practice or policy. The Companies and their
subsidiaries are not liable for any severance pay, bonus compensation,
acceleration of payment or vesting of any equity interest, or other payments
(other than accrued salary, vacation, or other paid time off in accordance with
the policies of the Companies and their subsidiaries) to any employee or former
employee arising from the termination of employment of such employee or former
employee.
(d) The Companies and their subsidiaries are in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, employee
benefits, terms and conditions of employment and immigration matters, in each
case, with respect to its employees.
(e) As of the date hereof, neither the Companies nor any of their
subsidiaries has communicated to any employee, at the managerial level or above
(each a "Senior Company Employee" and collectively, the "Senior Company
Employees"), an intention to terminate the employment of such employee. To the
knowledge of the Sellers, as of the date hereof, no Senior Company Employee has
given the Companies or their subsidiaries notice or any other communication
relating to such Senior Company Employee's intention to terminate his or her
employment with the Companies or their subsidiaries.
SECTION 3.14. Employee Benefit Plans.
34
(a) SECTION 3.14(A) OF THE SELLER DISCLOSURE SCHEDULE lists each
"employee benefit plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and each other material
plan, arrangement or policy relating to stock options, stock purchases, deferred
compensation, severance, fringe benefits or other employee benefits (other than
plans or arrangements mandatory under Applicable Law), in each case maintained
by or contributed to the Companies or any of their respective ERISA Affiliates
for the benefit of any of their present or former directors, officers or
employees or with respect to which the Companies or any of their respective
ERISA Affiliates may incur any liability (collectively, "Company Benefit
Plans"). Notwithstanding the foregoing, the Stakeholder Scheme (as defined in
Section 3.14A) shall be considered a "Company Benefit Plan" for purposes of this
Agreement. Sellers have caused the Companies to deliver or make available to
Purchaser copies of (i) each Company Benefit Plan and (ii) the most recent
summary plan description for each Company Benefit Plan for which such a summary
plan description is required.
(b) Neither the Companies nor their respective ERISA Affiliates
have ever maintained any employee benefit plan that was (i) subject to Title IV
of ERISA, (ii) a multiple employer welfare arrangement (as defined in Section
3(40) of ERISA), or (iii) a multiemployer plan (as defined in Section 3(37) of
ERISA). With respect to each Company Benefit Plan, no material liability has
been incurred and there exists no condition or circumstances in connection with
which the Companies or any of their respective ERISA Affiliates could be subject
to any liability that would, individually or in the aggregate, have a
significant adverse effect, in each case under ERISA, the Code or any other
Applicable Law, rule or regulation. Neither the Companies nor any of their
respective ERISA Affiliates have incurred any liability with respect to any
transaction described in Section 4069 of ERISA, and there is no reasonable basis
to expect any such liability to occur in the future.
(c) No person will be entitled to any additional benefits or any
acceleration of the time of payment or vesting of any benefits under any Company
Benefit Plan as a result of the Transaction.
(d) Each Company Benefit Plan which is intended to be qualified
under Section 401(a) of the Code is so qualified and has been so qualified at
all times during the period from its adoption to date, and each trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code, except
where failure to be qualified or tax-exempt, respectively, could not reasonably
be expected to have a Company Material Adverse Effect. The Company has furnished
to Purchaser copies of the most recent Internal Revenue Service determination or
opinion letter with respect to each such Company Benefit Plan.
(e) Each Company Benefit Plan has been maintained in compliance
with its terms and with the requirements prescribed by all applicable statutes,
orders, rules and regulations, except where noncompliance could not reasonably
be expected to have a Company Material Adverse Effect. No Company Benefit Plan
is under examination by the Department of Labor, the Internal Revenue Service,
or any other governmental body.
(f) Neither the Companies nor any of their respective ERISA
Affiliates has ever maintained any plan providing for post-retirement health or
welfare benefits for current or
35
former employees, except as required by Section 4980B of the Code or state
Applicable Law. No tax under Section 4980B or 4980D of the Code has been
incurred in respect of any Company Benefit Plan that is a "group health plan,"
as defined in Section 5000(b)(1) of the Code, except where incurrence of such
tax could not reasonably be expected to have a Company Material Adverse Effect.
(g) No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any Company
Benefit Plan, except where a statutory or regulatory exemption applies, except
where the occurrence of such a prohibited transaction could not reasonably be
expected to have a Company Material Adverse Effect.
(h) Neither the Companies nor any of their respective ERISA
Affiliates have made an amendment to, written interpretation of or announcement
(whether or not written) relating to any change in employee participation or
coverage under any Company Benefit Plan that would materially increase the
expense of maintaining such Company Benefit Plan above the level of expense
incurred in respect thereof for the fiscal year ended prior to the date hereof.
(i) Set forth on SECTION 3.14(I) OF THE SELLER DISCLOSURE SCHEDULE
is an accurate statement of the vacation policies of the Companies and their
subsidiaries.
SECTION 3.14A. International Employee Benefit Plans. For the purpose of
this Section 3.14A, "Pension Scheme" means the stakeholder scheme maintained by
International for the benefit of its Employees; and "Employee" means an
employee, former employee officer or former officer of International.
(a) Except as imposed under Applicable Law, the Pension Scheme is
the only arrangement to which International has any liability for the purpose of
providing benefits on retirement.
(b) The Pension Scheme is a Stakeholder Scheme within the meaning
of Part I (Stakeholder Pension Schemes) Section 1(1) Welfare Reform and Pensions
Act 1999.
(c) All benefits under the Pension Scheme payable to or in respect
of the Employees (other than those which are fully insured) are calculated on a
money purchase basis only and there is no material obligation of International
or under the Pension Scheme in respect of the Employees (other than in the case
of those benefits which are fully insured) to provide any specified level of
benefits.
(d) All investment business in relation to the Pension Scheme in
respect of the Employees has been conducted by Norwich Union which, to the
knowledge of Sellers, has nominated the Pension Scheme, and is itself
authorized, in accordance with the requirements of the Financial Service and
Markets Act 2000.
SECTION 3.15. Environmental Matters.
(a) Except as set forth in the Malcolm Pirnie environmental
assessment reports of the Company Properties previously delivered to Purchaser
or in the Environ environmental assessment reports of the Company Properties
previously delivered to Purchaser:
36
(i) the Companies and their subsidiaries (A) are and
have been in compliance in all material respects
at all times with all Environmental Laws, and (B) are in compliance in all
material respects with all Environmental Permits required to conduct the
Companies' and their subsidiaries' operations as currently conducted;
(ii) except for materials used in the ordinary course
of business consistent with past practice, there
are no Hazardous Materials at any property currently owned, used or leased by
the Companies or their subsidiaries, or to the knowledge of Sellers, formerly
owned, used or leased by the Companies or their subsidiaries, in each case,
under circumstances that create any material liability for any of the Companies
or their subsidiaries under any Environmental Law;
(iii) (A) as of the date of this Agreement, none of
the Companies nor any of their subsidiaries has
received any written notice alleging that it is liable under Environmental Laws,
or any written information request, related to any Release of Hazardous
Materials at any location except with respect to such matters that have been
resolved with the Governmental Entity having jurisdiction over the matter and
without requiring any of the Companies or their subsidiaries to make any payment
to such Governmental Entity (B) except as would not reasonably be expected to
have a Company Material Adverse Effect, as of Closing, no Company or any of its
subsidiaries will have received any written notice alleging that it is liable
under Environmental Laws, or any written information request related to any
Release of Hazardous Materials at any location except with respect to such
matters that have been resolved with the Government Entity having jurisdiction
over the matter;
(iv) (A) none of the Companies nor any of their
subsidiaries has entered into or agreed to any consent
decree or order under any Environmental Law, (B) as of the date of this
Agreement, no Company or any of its subsidiaries is subject to any court order
relating to compliance with, or liability under, any Environmental Laws, in each
case, in respect of any current or former Company business or Company Property
and (C) except as would not reasonably be expected to have a Company Material
Adverse Effect, as of Closing, no Company or any of its subsidiaries will be
subject to any court order relating to compliance with, or liability under, any
Environmental Laws, in each case, in respect of any current or former Company
business or Company Property;
(v) as of the date hereof, no action, claim or
proceeding under any Environmental Laws or
Environmental Permits has been commenced, or to the knowledge of Sellers, is
threatened by any Governmental Entity against any Company or any of its
subsidiaries and as of the Closing, no action, claim or proceeding under any
Environmental Laws or Environmental Permits will have been commenced, or to the
knowledge of Sellers, will be threatened by any Governmental Entity against any
Company or any of its subsidiaries except for such actions, claims or
proceedings under Environmental Laws or Environmental Permits that could not
reasonably be expected to form the basis for liability that would be material to
the Companies and their subsidiaries taken as a whole;
(vi) in connection with the Companies' or their
subsidiaries' current or former businesses or properties (in each case while
they were operated by the Companies or their subsidiaries) there have been no
actions or omissions, and there are no circumstances or
37
conditions that have occurred or currently exist that would reasonably be
expected to form the basis for any liability that would be material to the
Companies and their subsidiaries taken as a whole under Environmental Laws;
(vii) no Lien has been placed or, to the knowledge of
Sellers, is threatened to be placed, on any Company Property under any
Environmental Law; and
(viii) Sellers have caused to be provided to
Purchaser copies of any material written report of any environmental
investigation, study, audit, test, review or other analysis conducted in
relation to any current operations or properties of any Company or any of its
subsidiaries or any other operations or properties or facilities now or
previously owned or leased by any Company or any of its subsidiaries, in the
possession of or under the control of any Company or any of its subsidiaries.
(b) No Hazardous Materials have been Released at any property
owned, used or leased by the Companies or their subsidiaries under circumstances
that create any material obligations or material liability for the Companies or
their subsidiaries.
(c) Except for Contracts with customers of the Companies or their
subsidiaries for the provisioning of goods or services by the Companies or their
subsidiaries, the Companies and their subsidiaries have not (1) contracted, or
otherwise agreed, to indemnify any person, in whole or in part, with respect to
any liability, claim, costs, fees or demand, known or unknown, arising under, or
related to, any Environmental Law, (2) contractually agreed to assume any
liability, costs, expenses, claims or fees arising under any Environmental Law,
or (3) entered into any agreement to undertake any remediation, removal,
response or site assessment activities at any site, property or location, in
each case that would reasonably be expected to form the basis for liability that
would be material to the Companies and their subsidiaries taken as a whole under
Environmental Law.
(d) Notwithstanding any other representations and warranties in
this Agreement (other than Section 3.18), the representations and warranties in
this Section 3.15 are the only representations and warranties in this Agreement
by Sellers with respect to environmental matters.
SECTION 3.16. Insurance. SECTION 3.16 OF THE SELLER DISCLOSURE SCHEDULE
contains a list of the policies of casualty, liability, theft, fidelity, life,
director and officer and other forms of insurance held by the Companies and any
of their subsidiaries, as of the date of this Agreement. All such insurance
policies are in the name of the Companies or their subsidiaries, and all
premiums with respect to such policies due before the date of this Agreement
have been paid. All such policies are in full force and effect, and neither the
Companies nor any of their subsidiaries have received notice of cancellation or
termination of any policy. Since December 31, 2000, none of the Companies or any
of their subsidiaries has been denied or had revoked or rescinded any policy of
insurance. The Companies and its subsidiaries have been covered since the date
each commenced business by insurance in scope and amount customary and
reasonable for their business.
38
SECTION 3.17. Transactions with Affiliates. Except as described in
SECTION 3.17 OF THE SELLER DISCLOSURE SCHEDULE, no Related Party or Related
Entity is a party to any transaction with the Companies or their subsidiaries,
including any Contract, agreement or other arrangement providing for the
employment of, furnishings of services by, rental of real or personal property
from or otherwise requiring payment to any Related Entity or Related Party,
other than employment-at-will arrangements in the ordinary course of business.
For purposes of the foregoing, a "Related Party" shall mean any Seller, and any
director, officer, stockholder, partner, equity holder or limited liability
company member of the Companies or their subsidiaries, and any beneficiary of
any Seller that is a trust or an estate, or any immediate family member of any
of the foregoing; and "Related Entity" shall mean any corporation, partnership,
trust or other entity in which any Related Party, or any immediate family member
of any Related Party, has a substantial interest or is an officer, director,
trustee, partner or direct holder of more than 5% of the outstanding capital
stock or interests of such entity.
SECTION 3.18. Governmental Permits. Each of the Companies and its
subsidiaries owns, holds or possesses all licenses, franchises, permits,
approvals and other authorizations from all Governmental Entities necessary for
it to own or lease, operate and use its assets and to carry on and conduct its
business (collectively "Governmental Permits") except such Governmental Permits
(other than any wastewater discharge permits relating to or required under any
Environmental Law) the lack of which would not reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect.
SECTION 3.18 OF THE SELLER DISCLOSURE SCHEDULE sets forth a list and a brief
description of each material Governmental Permit of the Companies and their
subsidiaries (including, without limitation, all wastewater discharge permits
relating to or required under any Environmental Law), complete and correct
copies of which have been delivered to Purchaser by Sellers. Except as set forth
on SECTION 3.18 OF THE SELLER DISCLOSURE SCHEDULE, each material Governmental
Permit is in full force and effect and to the knowledge of Sellers, no
revocation, termination or expiration of any Governmental Permit is threatened
or pending.
SECTION 3.19. Accounts Receivable. All accounts receivable reflected on
the Combined Balance Sheet and all account receivable of the Companies and their
subsidiaries that have arisen since the Combined Balance Sheet Date derive from
bona fide transactions of the Companies or their subsidiaries in the ordinary
course. No person has asserted in writing or, to knowledge of Sellers,
threatened to assert any counterclaims or offsetting claims or defenses to
collection of any of the accounts receivable of the Companies and their
subsidiaries other than (a) claims in the ordinary course which in the aggregate
are not material relative to the total amount, net of reserves, of the accounts
receivable taken as a whole or (b) claims included in the Estimated Closing WC
Amount.
SECTION 3.20. Inventory. All of the inventory recorded on the Combined
Balance Sheet consists of, and all inventory on the Closing Date will consist
of, items of a quality usable or saleable in the ordinary course of business
consistent with past practice except to the extent of the reserve therefor set
forth in the Estimated Closing WC Amount. Each of the Companies and their
subsidiaries has sufficient inventories on hand for the continued operation of
its business in the ordinary course of business consistent with past practice.
39
SECTION 3.21. Customers and Suppliers. Sellers have previously
delivered to the Purchaser a written list of the names and addresses of (a) the
25 largest customers of Ecolochem and the 10 largest customers of International
and (b) the 25 largest suppliers of Ecolochem and the 10 largest suppliers of
International (measured in each case by dollar volume of purchases or sales
during the fiscal years ended September 30, 2002 and September 30, 2003) and the
dollar amount of purchases or sales that each such customer or supplier
represented during each of the years ended September 30, 2002 and 2003. Except
as set forth in SECTION 3.21 OF THE SELLER DISCLOSURE SCHEDULE, as of the date
hereof, there exists no actual or threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship of
Ecolochem and International with any such customer or supplier.
SECTION 3.22. Brokers. The only investment advisor that has acted for
Sellers or the Companies in connection with this Agreement or the Transaction is
Needham & Company, Inc. ("Needham") whose fees will be paid by Sellers.
SECTION 3.23. Nalco JV. As of the date hereof, the remaining amount of
Ecolochem's required investment in and capital contribution amount to the Nalco
JV does not exceed $750,000 in the aggregate.
ARTICLE IV
Representations and Warranties of Purchaser. Except as set forth in the
Purchaser SEC Reports filed before the date hereof or in that certain letter,
dated as of the date hereof, addressed to the Sellers from the Purchaser (such
letter being referred to herein as the "PURCHASER DISCLOSURE SCHEDULE"),
Purchaser represents and warrants to each Seller as hereinafter provided in this
Article IV:
SECTION 4.01. Organization and Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of
Massachusetts. Each subsidiary of Purchaser is duly organized, validly existing
and in good standing in the jurisdiction of its organization except where the
failure of such subsidiary to be so organized, existing or in good standing
would not reasonably be expected to have a Purchaser Material Adverse Effect.
Each of Purchaser and each of its subsidiaries has full corporate and other
power and authority to carry on its business as presently conducted. Each of
Purchaser and its subsidiaries is duly qualified and in good standing to do
business as a foreign corporation in each jurisdiction in which the conduct or
nature of its business or the ownership, leasing or holding of its properties
makes such qualification necessary, except such jurisdictions where the failure
to be so qualified or in good standing, individually or in the aggregate, would
not reasonably be expected to have a Purchaser Material Adverse Effect.
Purchaser has delivered or otherwise made available to Sellers true and complete
copies of the articles of organization and bylaws or comparable organizational
documents, each as amended to the date hereof, of Purchaser and its material
subsidiaries, joint ventures and affiliates.
SECTION 4.02. Authority; Execution and Delivery; Enforceability.
Purchaser has the requisite corporate power and authority to execute, deliver
and perform this Agreement and each Ancillary Agreement to which it is to be a
party and to consummate the Transaction. Purchaser has taken all corporate
action required to authorize the execution,
40
delivery and performance of this Agreement and each Ancillary Agreement to which
it is to be a party, except for the approval by the stockholders of Purchaser of
the issuance of the shares of Common Stock to be issued to Sellers in the
Transaction. Purchaser has duly executed and delivered this Agreement, and, at
or before the Closing, will have duly executed and delivered each Ancillary
Agreement to which it is specified to be a party, and this Agreement
constitutes, and each Ancillary Agreement to which it is to be a party will,
when executed, constitute Purchaser's legal, valid and binding obligation,
enforceable against Purchaser in accordance with its terms.
SECTION 4.03. Capital Stock of Purchaser, Joint Ventures.
(a) The authorized capital stock of Purchaser consists of
55,000,000 shares of Common Stock and no shares of preferred stock. As of the
close of business on September 30, 2003, Purchaser had issued only 17,734,761
rights to purchase shares of Common Stock (the "Purchaser Rights") that were
issued pursuant to the Renewed Rights Agreement dated as of August 19, 1997 (the
"Purchaser Rights Agreement"), between Purchaser and Equiserve Trust Company,
N.A. At the close of business on September 30, 2003: (i) 17,734,761 shares of
Common Stock were outstanding; (ii) no shares of Common Stock were held by
Purchaser; and (iii) 3,910,667 shares of Common Stock were issuable upon the
exercise of outstanding employee or director stock options (the "Purchaser
Employee Stock Options") that were granted pursuant to any stock plan, program
or arrangement of Purchaser (the "Purchaser Employee Stock Plans"). Except as
set forth above, at the close of business on September 30, 2003, no shares of
capital stock or other voting securities of Purchaser were issued, reserved for
issuance or outstanding. All of the outstanding shares of capital stock of
Purchaser and Purchaser's Significant Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable and have been issued in accordance with the
securities laws of the jurisdictions within each such security was offered and
issued. None of the outstanding shares of capital stock of Purchaser or
Purchaser's Significant Subsidiaries has been issued in violation of any
provision of Applicable Law, the articles of organization, bylaws, limited
liability company agreements or other comparable organizational documents of the
Purchaser or its Significant Subsidiaries or any Contract to which any of the
Purchaser or its Significant Subsidiaries is subject, bound or a party or in
violation of any preemptive, subscription or similar rights under any provision
of Applicable Law, the articles or organization, bylaws, limited liability
company agreements or other comparable organizational documents of the Purchaser
or its Significant Subsidiaries or any Contract to which any of the Purchaser or
its Significant Subsidiaries is subject, bound or a party.
(b) Except as described in Section 4.03(a), as of the date hereof,
there are no (i) outstanding warrants, options, rights, "phantom" stock rights,
agreements, stock appreciation rights, Contracts, stock-based performance or its
convertible or exchangeable securities or other commitments (other than this
Agreement) (A) under which Purchaser or Purchaser's Significant Subsidiaries are
or may become obligated to issue, sell, purchase or redeem any shares of their
capital stock or other securities or extend or enter into any such warrant,
option, right, "phantom" stock right, agreement, stock appreciation right,
Contract, stock based performance unit, convertible or exchangeable security or
other commitment or (B) that give any person the right to receive any benefits
or rights similar to any rights enjoyed by or accruing to the holders of shares
of the capital stock or securities of Purchaser or Purchaser's Significant
Subsidiaries,
41
(ii) equity securities of Purchaser or Purchaser's Significant Subsidiaries
reserved for issuance for any purpose or (iii) outstanding bonds, debentures,
notes or other indebtedness (or convertible into, or exchangeable for,
securities) having the right to vote on any matters on which stockholders of
Purchaser or Purchaser's Significant Subsidiaries may vote. All shares of Common
Stock that are subject to future issuance on issuance on the terms and
conditions specified in the instrument under which they are issuable, will be
duly authorized, validly issued, fully paid and nonassessable.
(c) As of the date of this Agreement, there are no outstanding
contractual obligations of Purchaser or any of its subsidiaries to make any
material investment (in the form of a loan, capital contribution, guarantee or
otherwise) in any person; provided, however, that performance bonds, letters of
credit, letters of guarantee and similar instruments and commitments provided by
the Purchaser or its subsidiaries in the ordinary course of business consistent
with past practice in connection with the sale of equipment or the provision of
services shall not be considered a contractual obligation to make an investment
in any person.
(d) SECTION 4.03(D) OF THE PURCHASER DISCLOSURE SCHEDULE sets
forth, as of the date of this Agreement, the holders of any equity interest in
any material corporation, partnership, joint venture, limited liability company,
or similar operating entity in which any of Purchaser or its subsidiaries has an
interest (except for any such entity in which the interests held by the
Purchaser or its subsidiaries are held as purely financial investments). SECTION
4.03(D) OF THE PURCHASER DISCLOSURE SCHEDULE sets forth, as of the Closing Date,
the holders of any equity interest in any material corporation, partnership,
joint venture, limited liability company, or similar operating entity in which
any of Purchaser or its subsidiaries has an interest (except for any such entity
in which the interests held by the Purchaser or its subsidiaries are held as
purely financial investments) other than changes in the identity of such holders
since the date of this Agreement permitted by the constituent documents of the
entity and not requiring the consent of Purchaser or any of its subsidiaries.
Purchaser has delivered or otherwise made available to Sellers true and correct
copies of all operative documents regarding the formation and governance of all
such partnerships, joint ventures, limited liability companies and similar
operating entities, to which Purchaser or its subsidiaries are a party.
SECTION 4.04. No Conflicts or Violations; No Consents or Approvals
Required.
(a) The execution, delivery and performance by Purchaser of this
Agreement and the Ancillary Agreements does not, and the consummation of the
Transaction will not, conflict with, or result in any violation of or default
under, or give rise to a right of termination, cancellation or acceleration with
notice, lapse of time or both, of any right or obligation under, or result in
the creation of any Lien on any of the assets or properties of Purchaser or its
subsidiaries, under any provision of (i) the articles of organization or by-laws
or comparable organizational or governing documents of Purchaser or Purchaser's
Significant Subsidiaries, (ii) any material Contract to which Purchaser or any
of its subsidiaries is a party or by which any of the properties or assets of
Purchaser or any of its subsidiaries is bound (iii) any Judgment applicable to
Purchaser or any of its subsidiaries or any of their properties or assets or
(iv) subject to the matters referred to in Section 4.04(b), any Applicable Law
applicable to Purchaser or any of its subsidiaries or any of their properties or
assets other than, in the case of each of clauses (iii) and (iv), any such items
that would not reasonably be expected to have a Purchaser
42
Material Adverse Effect. As of the Closing Date, the execution, delivery and
performance by Purchaser of this Agreement and the Ancillary Agreements and the
consummation of the Transaction will not conflict with, or result in any
violation of or default under, or give rise to a right of termination,
cancellation or acceleration with notice, lapse of time or both, of any right or
obligation under, or result in the creation of any Lien on any of the assets or
properties of Purchaser or its subsidiaries, under any provision of the articles
of organization or by-laws or comparable organizational or governing documents
any of Purchaser's subsidiaries.
(b) No Consent of, or registration, declaration or filing with any
Governmental Entity is required to be obtained or made with respect to Purchaser
or its subsidiaries in connection with the execution, delivery and performance
of this Agreement or the Ancillary Agreements or the consummation of the
Transaction, other than (i) compliance with and filings under the HSR Act and
similar compliance and filings with non-U.S. Governmental Entities having
authority over merger, control or competition laws, (ii) those that may be
required solely by reason of the participation of Sellers or the Companies or
their subsidiaries in the Transaction, (iii) the filing with the SEC of the
Proxy Statement and those required to be made by Purchaser under this Agreement
or the Ancillary Agreements or in connection with the Transaction or the
performance of Purchaser's obligations under this Agreement or the Ancillary
Agreements in each case under the Securities Act or the Exchange Act, and
filings and qualifications with the NYSE in respect of the Initial Share
Consideration, (iv) those required under any state "blue sky" laws in connection
with the issuance or resale of the shares of Common Stock to be issued by the
Purchaser hereunder and (v) those the failure of which to obtain or make,
individually or in the aggregate, would not reasonably be expected to have a
Purchaser Material Adverse Effect.
SECTION 4.05. Purchaser SEC Reports.
(a) Purchaser has, on a timely basis, filed all forms, reports and
documents required to be filed by it with the SEC since January 1, 2003.
Purchaser has delivered or otherwise made available to Sellers copies in the
form filed with the SEC of, (i) Purchaser's Annual Reports on Form 10-K for the
fiscal years of Purchaser beginning on or after January 1, 2002, (ii) its
Quarterly Reports on Form 10-Q for each of the first three fiscal quarters in
the fiscal years of Purchaser beginning on or after January 1, 2003, (iii) all
proxy statements relating to Purchaser's meetings of stockholders (whether
annual or special) held, and all information statements relating to stockholder
consents, since January 1, 2003, (iv) all certifications and statements required
by (x) the SEC's Order dated June 27, 2002 under Section 21(a)(1) of the
Exchange Act (File No. 4-460), (y) Rule 13a-14 or 15d-14 under the Exchange Act
or (z) 18 U.S.C. ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002 "SOX")
with respect to any report referred to in clause (i) or (ii) above, (v) all
other forms, reports, registration statements and other documents filed or to be
filed with the SEC since January 1, 2003 (other than preliminary materials if
the corresponding definitive materials have been provided or made available to
Sellers, filed by Purchaser with the SEC since January 1, 2003 (the forms,
reports, registration statements and other documents referred to in clauses (i),
(ii), (iii), (iv) and (v) above, as amended, collectively, the "Purchaser SEC
Reports")) and (vi) all comment letters received by Purchaser from the staff of
the SEC since January 1, 2003 and all responses to such comment letters by or on
behalf of Purchaser. The Purchaser SEC Reports (A) were or will be prepared in
accordance with the requirements of the Securities Act and the Exchange Act, as
the
43
case may be, and the rules and regulations thereunder and (B) did not at the
time they were filed with the SEC (or in the case of Purchaser SEC Reports that
have been amended before the date hereof, at the time any such amendment was
filed), or will not at the time they are filed with the SEC, 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 made therein, in the light of
the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, Purchaser makes no representations regarding any information
contained in any Purchaser SEC Report to the extent such information was
provided by or on behalf of the Sellers or the Companies or their subsidiaries.
No subsidiary of Purchaser is or has been required to file any form, report,
registration statement or other document with the SEC.
(b) As of the date hereof, Purchaser is in compliance in all
material respects with all current listing and currently effective corporate
governance requirements of the New York Stock Exchange.
SECTION 4.06. Financial Statements.
(a) The financial statements (including balance sheets, statements
of income and statements of cash flows) of Purchaser and its subsidiaries
included in the Purchaser SEC Reports (including the related notes), (i)
complied as to form, as of their respective dates of filing with the SEC, in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto (including, without
limitation, Regulation S-X), (ii) were prepared in conformity with GAAP in
effect in the United States applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and (iii) each fairly presented, in
all material respects, the consolidated financial condition and results of
operations and cash flows of Purchaser and its subsidiaries at the dates thereof
and for the periods indicated.
(b) Except (i) as reflected in the audited consolidated balance
sheet of Purchaser as of December 31, 2002, contained in the Purchaser SEC
Reports (the "Purchaser Balance Sheet") or liabilities described in any notes
thereto and liabilities for which neither accrual nor footnote disclosure is
required under GAAP, or (ii) for liabilities incurred in the ordinary course of
business consistent with past practice since December 31, 2002, neither
Purchaser nor any of its subsidiaries has any obligation or liabilities of any
nature which would reasonably be expected to have a Purchaser Material Adverse
Effect.
(c) SECTION 4.06(C) OF THE PURCHASER DISCLOSURE STATEMENT lists,
and Purchaser has delivered to Sellers copies of, the documentation creating or
governing, all securitization transactions and "off-balance sheet arrangements"
(as defined in Item 303(c) of Regulation S-K) effected by Purchaser or its
subsidiaries between January 1, 2002 and the date hereof.
SECTION 4.07. Sufficiency of Assets. As of the date hereof, the
Purchaser and its subsidiaries have good and valid title to, or a valid right to
use, all material assets and material properties necessary to operate and
conduct the business of the Purchaser and its subsidiaries as currently
conducted.
44
SECTION 4.08. Litigation. SECTION 4.08 OF THE PURCHASER DISCLOSURE
SCHEDULE lists, as of the date of this Agreement, all pending or, to the
knowledge of Purchaser, threatened Proceedings against Purchaser or its
subsidiaries that (a) involve a specified amount of, or unspecified amount that
would reasonably be expected to result in a liability of more than $200,000, (b)
involve any Governmental Entity as an adverse party or (c) seek any injunctive
relief. There are no pending, or to the knowledge of Purchaser, threatened
Proceedings against Purchaser or its subsidiaries that, if adversely determined,
individually or in the aggregate, would reasonably be expected to have a
Purchaser Material Adverse Effect. None of Purchaser or its subsidiaries is
subject to, bound by, or in default under, any unsatisfied, unbonded Judgment in
excess of $200,000.
SECTION 4.09. Absence of Changes or Events.
(a) Since December 31, 2002, there has not been any change, event,
fact or circumstance affecting Purchaser or its subsidiaries that, when taken in
the aggregate with all other changes, events and circumstances whether
beneficial or detrimental to Purchaser and its subsidiaries, taken as a whole,
has had, or would reasonably be expected to have, a Purchaser Material Adverse
Effect.
(b) Between December 31, 2002 and the date hereof, Purchaser and
its subsidiaries have been operated in the ordinary course of business in
substantially the same manner as currently conducted, and have not:
(i) redeemed or otherwise acquired any shares of
Purchaser's capital stock or similar ownership interests;
(ii) issued, delivered, sold, granted, pledged or
encumbered any shares of the Purchaser's capital stock, voting securities or any
securities convertible or exchangeable into or exchangeable for, or any rights,
"phantom stock rights", stock appreciation rights, warrants or options or
similar derivative securities to acquire, any such shares of capital stock,
voting securities or convertible securities or made any announcement of the
intention to so issue, deliver, sell, grant, pledge or encumber any such shares,
other voting securities, convertible or exchangeable securities, rights,
warrants, options or similar derivative securities (other than (A) as was
required under existing agreements with current or former employees, and
directors, and the Purchaser Employee Stock Option Plan and the Purchaser
Benefit Plans in effect on the date of this Agreement and (B) the issuance of
Common Stock and related rights on the exercise of Purchaser Employee Stock
Options in accordance with their present terms);
(iii) split, combined or reclassified any of
Purchaser's capital stock or similar ownership interests or engaged in a
recapitalization, exchange of shares or similar transaction with respect to
Purchaser's capital stock or similar ownership interests or (B) issued or
authorized the issuance of any other securities in respect of, in lieu of, or in
substitution for, any of Purchaser's capital stock or similar ownership
interests;
(iv) incurred any indebtedness for borrowed money or
granted any guarantee in respect thereof, in each case outside of the ordinary
course of business consistent with past practice;
45
(v) acquired by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, other than those not in excess of $10,000,000
in the aggregate;
(vi) sold, transferred, leased or otherwise disposed
of (x) more than 10% of the assets of Purchaser's ultrapure water group, or (y)
any other assets material to the Purchaser and its subsidiaries, taken as a
whole, except (A) the sale or disposal of obsolete or excess equipment or (B)
sales, transfers, leases or disposals in the ordinary course of business
consistent with past practice;
(vii) made any change in accounting methods,
principles or practices, except as required by GAAP or Applicable Law; or
(viii) agreed, whether in writing or otherwise, to do
any of the foregoing.
(c) Between December 31, 2002 and the date hereof, there has not
occurred any event or occurrence resulting in damage, destruction or other
casualty loss of $100,000 or more (whether or not covered by insurance) to
Purchaser or its subsidiaries or its respective assets.
SECTION 4.10. Securities Act. The Equity Interests to be purchased by
Purchaser or its Permitted Designees are being acquired for investment only and
not with a view to any public distribution thereof in violation of any of the
registration requirements of the Securities Act or the securities laws of any
other jurisdiction applicable to the Transaction.
SECTION 4.11. Sellers' Common Stock. Except as set forth in Section
4.11 of the Purchaser Disclosure Schedule, the shares of Common Stock to be
issued to Sellers as part of the Initial Share Consideration have been reserved
for issuance and have been duly authorized, and, on delivery to Sellers at the
Closing, will be validly issued, fully paid, nonassessable, free and clear of
Liens imposed by Purchaser or by any Contract to which the Purchaser is a party
(other than those arising from the acts of Sellers) and issued in compliance
with Applicable Law. None of such shares of Common Stock will be issued in
violation of any provision of Applicable Law, the articles of organization,
bylaws or other comparable organizational or governing documents of Purchaser or
its subsidiaries or any Contract to which Purchaser or any of its subsidiaries
is subject, bound or a party or in violation of any preemptive, subscription,
first refusal or similar rights under any provision of Applicable Law, the
articles of organization or bylaws or comparable organizational or governing
documents of Purchaser or any of its subsidiaries or any Contract to which
Purchaser or any of its subsidiaries is subject, bound or a party.
SECTION 4.12. Brokers. The only investment advisor that has acted for
Purchaser in connection with this Agreement or the Transaction is Goldman, Sachs
& Co. whose fees will be paid by Purchaser.
SECTION 4.13. Voting Requirements. The approval of the issuance of the
Initial Share Consideration to Sellers in the Transaction as contemplated by
this Agreement by the holders of a majority of a quorum of the outstanding
shares of Common Stock (the "Purchaser
46
Stockholder Approval") is the only vote of the holders of any class or series of
capital stock of Purchaser necessary in connection with this Agreement or the
Ancillary Agreements or the Transaction. The Purchaser Board, at a meeting duly
called and held, duly and unanimously adopted resolutions (i) approving this
Agreement and the Transaction and (ii) recommending that the stockholders of
Purchaser grant the Purchaser Stockholder Approval. In addition, the Purchaser
Board has taken all action necessary to render Sections 110C, 110D and 110F of
the Massachusetts Corporation-Related Laws inapplicable to this Agreement and
the Transaction.
SECTION 4.14. Opinion of Financial Advisor. Purchaser has received the
opinion of Goldman, Sachs & Co. to the effect that, as of the date hereof, the
Initial Purchase Price is fair to the Purchaser from a financial point of view.
SECTION 4.15. Rights Agreements. Purchaser has prior to Closing taken
all necessary action to amend the Purchaser Rights Agreement in the form
attached hereto as EXHIBIT G. As of the Closing, the Purchaser Board shall have
taken all necessary action to cause one Purchaser Right to be issued with each
share of Common Stock issuable to Sellers in the Transaction.
SECTION 4.16. Compliance with Applicable Law. Purchaser and its
subsidiaries are in compliance with all Applicable Laws applicable to the
conduct of their businesses, except for instances of non-compliance that,
individually or in the aggregate, would not reasonably be expected to have a
Purchaser Material Adverse Effect. None of Purchaser or any of its subsidiaries
has received, during the two years before the date of this Agreement, any
written notice from a Governmental Entity alleging that Purchaser or any of its
subsidiaries is in violation of any Applicable Law applicable to the conduct of
the business of the Purchaser or its subsidiaries in a manner that would be
material to the Purchaser and its subsidiaries taken as a whole.
SECTION 4.17. Employee and Labor Matters. As of the date hereof, with
respect to the businesses currently conducted by Purchaser and its subsidiaries,
(i) there is not and has not been during the past five years any labor strike,
dispute, work stoppage or lockout pending, or, to the knowledge of Purchaser,
threatened, against Purchaser or its subsidiaries, (ii) to the knowledge of
Purchaser, no union organizational campaign is in progress with respect to the
employees of any of Purchaser or its subsidiaries and no question concerning
representation has been presented to such employees, (iii) to the knowledge of
Purchaser, none of Purchaser or its subsidiaries is engaged in any unfair labor
practice and (iv) neither Purchaser nor its subsidiaries has received any
written notice that there is an unfair labor practice charge or complaint
against any of them pending or threatened before the National Labor Relations
Board.
SECTION 4.18. Contracts. (a) Except for this Agreement and the
Ancillary Agreements or as set forth in Section 4.18(a) of the PURCHASER
DISCLOSURE SCHEDULE, there are no Contracts to which Purchaser or any subsidiary
of Purchaser is a party, or by which any of them or their respective properties
are bound, (A) as of the date hereof, which are required to be filed or listed
as an exhibit to the Purchaser SEC Documents which have not been so filed or
listed or (B) involving the following (the Contracts required to be set forth on
the PURCHASER DISCLOSURE SCHEDULE, together with the Contracts filed or listed
or required to be filed or listed as an exhibit to the Purchaser SEC Documents,
the "Purchaser Contracts"):
47
(i) covenant not to compete that limits the conduct
of Purchaser or its subsidiaries or other covenant of any of Purchaser or its
subsidiaries restricting the development, marketing or distribution of the
products and services of any of Purchaser or its subsidiaries;
(ii) Contract in existence on the date hereof under
which any of Purchaser or its subsidiaries has borrowed any money from, or
issued any note, bond, debenture or other evidence of indebtedness to, any
person or any other note, bond, debenture or other evidence of indebtedness
issued to any person;
(iii) Contract in existence on the date hereof
involving interest rate or foreign currency swaps, commodity
swaps, options, caps, collars, hedges or forward exchanges, or other similar
agreements, regardless whether entered into for purposes of hedging, investment
or otherwise, other than those entered into in the ordinary course of business
consistent with past practice (which shall not include those entered into for
the purpose of trading or speculative purposes);
(iv) Contract (including so-called take-or-pay or
keep well agreements) under which (A) any person has
directly or indirectly guaranteed indebtedness, liabilities or obligations of
any of Purchaser or its subsidiaries or (B) any of Purchaser or its subsidiaries
has, directly or indirectly guaranteed indebtedness, liabilities or obligations
of any person (in each case other than (x) endorsements for the purpose of
collection in the ordinary course of business or (y) guarantees among Purchaser
and its subsidiaries entered into in the ordinary course of business consistent
with past practice), in any such case which, individually, is in excess of
$1,000,000;
(v) Contract in existence on the date hereof under
which any of Purchaser or its subsidiaries has, directly
or indirectly, made or committed to make any material advance, loan, extension
of credit or capital contribution to, or other investment in, any person; or
(vi) Contract in existence on the date hereof
evidencing a limited liability company, partnership, joint
venture or similar business relationship or entity.
(b) Each Purchaser Contract is valid, binding and in full force
and effect and, to the knowledge of Purchaser, is enforceable by Purchaser or
its subsidiaries in accordance with its terms (subject to applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent transfer or similar laws
affecting creditors' rights generally and to general equitable principle(s)),
except for such failures to be valid, binding, in full force and effect or
enforceable that would not reasonably be expected to have a Purchaser Material
Adverse Effect. Purchaser or its subsidiaries has performed all obligations
required to be performed by them under the Purchaser Contracts and is not (with
or without the lapse of time, giving of notice, or both) in breach or default
thereunder and, to the knowledge of Purchaser, no other party to any Purchaser
Contract is (with or without the lapse of time, giving of notice, or both) in
breach or default in any aspect thereunder in each case except to the extent
that any such lack of performance, breach or default by a Purchaser or a
subsidiary or any such third party would not reasonably be expected to have a
Purchaser Material Adverse Effect. To the knowledge of Purchaser, as of the date
of this Agreement, no party to a Purchaser Contract has given written notice of,
or has threatened to terminate any such Purchaser Contract. Except as would not
reasonably be expected to have a
48
Purchaser Material Adverse Effect, as of the Closing, no party to a Purchaser
Contract will have given written notice, or threatened to terminate any such
Purchaser Contract.
(c) Purchaser has made available to Sellers true and complete
copies of all material Contracts relating to any material joint ventures in
which Purchaser or its subsidiaries has an interest.
SECTION 4.19. Taxes.
(a) Each of Purchaser and its subsidiaries has timely filed or
caused to be timely filed (taking into account any applicable extension periods)
all Tax Returns required to be filed by it and each such Tax Return was true,
complete and correct in all respects, except where the failure to so file a Tax
Return, or the failure of any such Tax Return to be true, complete and correct
in all respects, would not reasonably be expected to have a Purchaser Material
Adverse Effect. All Taxes with respect to taxable periods covered by such Tax
Returns (whether or not shown on Tax Returns), and all other Taxes otherwise due
and payable from Purchaser or any of its subsidiaries, have been timely paid in
full, other than such Taxes being contested in good faith and for which adequate
reserves have been provided in its financial statements filed with the SEC, and
except for such failures to pay that would not reasonably be expected to have a
Purchaser Material Adverse Effect.
(b) (i) No material Tax Return of Purchaser or any of its
subsidiaries is under audit or examination by or with any Taxing Authority, and
no written notice of such an audit or examination has been received by Purchaser
or any of its subsidiaries; (ii) no written claim has been made in the last six
years by a Taxing Authority in a jurisdiction where Purchaser and its
subsidiaries do not file Tax Returns that they are or may be subject to taxation
by that jurisdiction; and (iii) none of the material Tax Returns filed or
material Taxes paid by Purchaser and its subsidiaries have been the subject of
any audit, action, suit, proceeding, claim, examination, deficiency or
assessment by any Taxing Authority in the last six years.
(c) Other than any transaction with one or more past or present
affiliates, neither Purchaser nor any of its subsidiaries, within the two-year
period ending on the date of this Agreement, has distributed stock of another
corporation, or had its stock distributed by another corporation, in a
transaction that was purported or intended to qualify, in whole or in part, for
tax-free treatment under Section 355 or Section 361 of the Code.
SECTION 4.20. Environmental Matters. (a) Except as set forth in SECTION
4.20 OF THE PURCHASER DISCLOSURE SCHEDULE or set forth in the Environ
environmental assessment reports of certain of Purchaser's properties previously
delivered to Sellers:
(i) Purchaser and its subsidiaries (A) are and have
been in compliance in all material respects at all times with all Environmental
Laws, and (B) are in compliance in all material respects with all Environmental
Permits required to conduct the Purchaser's and its subsidiaries' operations as
currently conducted;
(ii) except for materials used in the ordinary course
of business consistent with past practice, there are no Hazardous Materials at
any property currently owned, used or
49
leased by Purchaser or its subsidiaries, or to the knowledge of Purchaser,
formerly owned, used or leased by Purchaser or its subsidiaries, in each case,
under circumstances that create any material liability for any of Purchaser or
its subsidiaries under any Environmental Law;
(iii) (A) as of the date of this Agreement, neither
Purchaser nor any of its subsidiaries has received any written notice alleging
that it is liable under Environmental Laws, or any written information request,
related to any Release of Hazardous Materials at any location except with
respect to such matters that have been resolved with the Governmental Entity
having jurisdiction over the matter and without requiring the Purchaser or its
subsidiaries to make any payment to such Governmental Entity (B) except as would
not reasonably be expected to have a Purchaser Material Adverse Effect, as of
Closing, neither Purchaser nor any of its subsidiaries will have received any
written notice alleging that it is liable under Environmental Laws, or any
written information request related to any Release of Hazardous Materials at any
location except with respect to such matters that have been resolved with the
Government Entity having jurisdiction over the matter;
(iv) (A) neither Purchaser nor any of its
subsidiaries has entered into or agreed to any consent decree or order under any
Environmental Law that would materially and adversely impact the operations of
Purchaser's ultrapure water group, (B) as of the date of this Agreement, neither
Purchaser nor any of its subsidiaries is subject to any court order relating to
compliance with, or liability under, any Environmental Laws, in each case, in
respect of any current or former business of Purchaser or its subsidiaries or
real property owned or leased by Purchaser or its subsidiaries and (C) except as
would not reasonably be expected to have a Purchaser Material Adverse Effect, as
of Closing, neither Purchaser nor any of its subsidiaries will be subject to any
court order relating to compliance with, or liability under, any Environmental
Laws, in each case, in respect of any current or former business of Purchaser or
its subsidiaries or real property owned or leased by Purchaser or its
subsidiaries;
(v) As of the date hereof, no action, claim or
proceeding under any Environmental Laws or Environmental Permits has been
commenced, or to the knowledge of Purchaser, is threatened by any Governmental
Entity against Purchaser or any of its subsidiaries as of the Closing no action,
claim or proceeding under any Environmental Laws or Environmental Permits will
have been commenced, or to the knowledge of Purchaser, will have been threatened
by any Governmental Entity against Purchaser or any of its subsidiaries except
for such actions, claims or proceedings under any Environmental Laws or
Environmental Permits that could not reasonably be expected to form the basis
for liability that would be material to the Purchaser and its subsidiaries taken
as a whole;
(vi) in connection with the Purchaser's or its
subsidiaries' current or former businesses or properties (in each case while
they were operated by Purchaser or its subsidiaries) there have been no actions
or omissions, and there are no circumstances or conditions that have occurred or
currently exist that would reasonably be expected to form the basis for any
liability that would be material to the Purchaser and its subsidiaries taken as
a whole under Environmental Laws; and
50
(vii) no Lien has been placed or, to the knowledge of
Purchaser, is threatened to be placed, on any real property owned or leased by
Purchaser or its subsidiaries under any Environmental Law.
(b) No Hazardous Materials have been Released at any property
owned, used or leased by Purchaser or its subsidiaries under circumstances that
create any material obligations or material liability for Purchaser or its
subsidiaries.
(c) Except for Contracts with customers for the provisioning of
goods or services by Purchaser or its subsidiaries, Purchaser and its
subsidiaries have not (1) contracted, or otherwise agreed, to indemnify any
person, in whole or in part, with respect to any liability, claim, costs, fees
or demand, known or unknown, arising under, or related to, any Environmental
Law, (2) contractually agreed to assume any liability, costs, expenses, claims
or fees arising under any Environmental Law or (3) entered into any agreement to
undertake any remediation, removal, response or site assessment activities at
any site, property or location in each case that would reasonably be expected to
form the basis for any liability that would be material to the Purchaser and its
subsidiaries taken as a whole under Environmental Laws.
(d) Notwithstanding any other representations and warranties in
this Agreement (other than Section 4.21), the representations and warranties in
this Section 4.20 are the only representations and warranties in this Agreement
by Purchaser with respect to environmental matters.
SECTION 4.21. Governmental Permits. Each of Purchaser and its
subsidiaries owns, holds or possesses all Governmental Permits except such
Governmental Permits (other than any wastewater discharge permits relating to or
required under any Environmental Law) the lack of which would not reasonably be
expected, individually or in the aggregate, to have a Purchaser Material Adverse
Effect. Except as set forth on SECTION 4.21 OF THE PURCHASER DISCLOSURE
SCHEDULE, each material Governmental Permit is in full force and effect and to
the knowledge of Purchaser, no revocation, termination or expiration of any
Governmental Permit is threatened or pending.
SECTION 4.22. Benefit Plans. Neither the execution and delivery of this
Agreement nor the consummation of the Transaction (alone or in conjunction with
any other event, such as termination of employment) will constitute or result in
a "change in control," "change of control" or any substantially similar concept
for purposes of any employee benefit plans, programs, arrangements or policies
of Purchaser or any of its subsidiaries, or for purposes of any individual
agreement between Purchaser or any of its subsidiaries, on the one hand, and any
director, officer, employee or consultant of Purchaser or any of its
subsidiaries, on the other hand, or otherwise (i) entitle any current or former
director, officer, employee or consultant of Purchaser or any of its
subsidiaries to severance or termination pay, (ii) accelerate the time of
payment or vesting, or trigger any payment or funding (through a grantor trust
or otherwise) of, compensation or benefits under, increase the amount payable or
trigger any other material obligation under any such employee benefit plan,
program, arrangement, policy or individual agreement or (iii) result in any
breach or violation of, or default under, any such employee benefit plan,
program, arrangement, policy or individual agreement.
51
SECTION 4.23. Intellectual Property.
(a) Each item of material Purchaser Intellectual Property is
either: (i) owned solely by Purchaser or its subsidiaries free and clear of any
Liens other than Permitted Liens or (ii) rightfully used or authorized for use
by Purchaser or its subsidiaries as between Purchaser or its subsidiaries on the
one hand, and the licensors of such intellectual property on the other hand.
(b) Neither Purchaser nor any of its subsidiaries is in material
violation of any license, sublicense or other agreement to which such entity is
a party or otherwise bound relating to any material Purchaser Intellectual
Property.
(c) The use of the term "Ionics" in any trademark, service mark,
trade dress, logo, trade name, domain name, or corporate name by the Purchaser
and its subsidiaries as currently used does not infringe or otherwise violate
any other person's trademark rights or other proprietary rights. The "Ionics"
trademark is valid, subsisting and enforceable in the United States and the
United Kingdom and in each other jurisdiction in which such trademark is
presently registered. The use of the Purchaser Intellectual Property other than
the "Ionics" trademark by Purchaser and its subsidiaries as currently used does
not infringe any other person's Intellectual Property right except for
circumstances where such infringement by the use of the Purchaser Intellectual
Property would not be reasonably expected to have a Purchaser Material Adverse
Effect. As of the date of this Agreement, no claims have been asserted in
writing against Purchaser or its subsidiaries or, to the knowledge of
Purchasers, threatened in writing by any person, either: (i) challenging the
validity, enforceability, effectiveness or ownership by Purchaser and its
subsidiaries of any material Purchaser Intellectual Property owned by the
Purchaser or its subsidiaries; or (ii) to the effect that the use, reproduction,
modification, manufacture, distribution, licensing, sublicensing, sale, or any
other exercise of rights in any of the material Purchaser Intellectual Property
by Purchaser or its subsidiaries infringes or will infringe on any intellectual
property or other proprietary right of any person. As of the date hereof, to the
knowledge of the Purchaser, there does not exist any valid basis for a claim of
the type set forth in the preceding sentence. Except as would not reasonably be
expected to have a Purchaser Material Adverse Effect, as of the Closing, there
will be no claims asserted in writing against the Purchaser or its subsidiaries
or, to the knowledge of Purchaser, threatened in writing by any person either:
(i) challenging the validity, enforceability, effectiveness or ownership by
Purchaser and its subsidiaries of any material Purchaser Intellectual Property
owned by the Purchaser or its subsidiaries; or (ii) to the effect that the use,
reproduction, modification, manufacture, distribution, licensing, sublicensing,
sale, or any other exercise of rights in any of the material Purchaser
Intellectual Property by Purchaser or its subsidiaries infringes or will
infringe on any intellectual property or other proprietary right of any person.
As of the Closing Date, to the knowledge of the Purchaser, there will not exist
any valid basis for a claim of the type set forth in the preceding sentence,
except as would not reasonably be expected to have a Purchaser Material Adverse
Effect. Except as would not reasonably be expected to have a Purchaser Material
Adverse Effect, all granted or issued patents, and all registered trademarks
(other than "Ionics") and service marks, owned by Purchaser or its subsidiaries
are valid, subsisting and enforceable. To the knowledge of Purchaser, as of the
date of this Agreement there is no pending U.S. or foreign patent applications
which, if issued, would materially limit or materially prohibit the current
activities of Purchaser or its subsidiaries. As of the date hereof, to the
knowledge of Purchaser, there is no unauthorized use, infringement, or
52
misappropriation of any of the material Purchaser Intellectual Property by any
third party, employee or former employee. Except as would not reasonably be
expected to have a Purchaser Material Adverse Effect, as of Closing there is no
unauthorized use, infringement, or misappropriation of any of the Purchaser
Intellectual Property by any third party, employee or former employee.
(d) Purchaser or its subsidiaries have secured from all parties
(including employees) who have created any portion of, or otherwise have any
rights in or to, the material Purchaser Intellectual Property valid and
enforceable written assignments of any such work, invention, improvement or
other rights to Purchaser or its subsidiaries to the extent necessary to vest
valid title in such Purchaser Material Property in Purchaser or its
subsidiaries.
(e) Purchaser and its subsidiaries have each taken reasonable
measures to protect the proprietary nature of the Purchaser Intellectual
Property and to maintain in confidence all material trade secrets and material
confidential information owned or used by Purchaser and its subsidiaries.
(f) "Purchaser Intellectual Property" means all Intellectual
Property that is owned, held or used by Purchaser or its subsidiaries.
SECTION 4.24. Commitment Letter.. Purchaser has delivered to Sellers
Representatives a copy of the commitment letter and related documents that
Purchaser has entered into with the other parties identified therein (the
"Commitment Letter") in connection with the proposed financing of a portion of
the Initial Cash Consideration.
ARTICLE V
Covenants
---------
SECTION 5.01. Covenants Relating to Conduct of the Parties Before the
Closing.
(a) Except as (A) consented to, in writing, by Purchaser, (B)
otherwise contemplated by this Agreement or (C) set forth in SECTION 5.01(A) OF
THE SELLER DISCLOSURE SCHEDULE, from the date of this Agreement to the Closing,
Sellers shall cause the Companies and their subsidiaries not to take any of the
following actions (each, a "Restricted Action"):
(i) amend their articles of incorporation, bylaws,
limited liability company agreements or comparable organizational documents;
(ii) declare, set aside or pay any non-cash dividend
or make any other non-cash distribution whether on or in respect of any shares
of their capital stock, membership interests, equity interests or similar
ownership interests; provided, however, that the Companies and their
subsidiaries may continue to make inter-company transfers pursuant to existing
Contracts and any Company and its direct subsidiaries may make inter-company
transfers with one another;
(iii) redeem or otherwise acquire any shares of their
capital stock, membership interests, equity interests, or similar ownership
interests;
53
(iv) issue, deliver, sell, grant, pledge or otherwise
encumber any capital stock, membership interests or similar ownership interest
or any securities convertible or exchangeable into or exchangeable for any
rights, warrants, "phantom" stock rights, stock appreciation rights, options or
similar derivative securities to acquire, any such capital stock, membership
interests or similar ownership interest or make any announcement of the
intention to so issue, deliver, sell, grant, pledge or encumber any such capital
stock, membership interests or similar ownership interest, convertible
securities, rights, warrants, "phantom" stock rights, stock appreciation rights,
options or similar derivative securities;
(v) (A) split, combine or reclassify any of its
capital stock, membership interests or similar ownership
interest or engage in a recapitalization, exchange of shares or similar
transaction with respect to its capital stock, membership interests or similar
ownership interest or (B) issue or authorize the issuance of any other
securities in respect of, in lieu of, or in substitution for, any of its capital
stock, membership interests or similar ownership interest;
(vi) (A) grant any severance or termination pay to
any of their employees, directors or officers, (B)
establish, enter into, amend or increase benefits payable under any severance or
termination pay policies or employment or other agreements, (C) establish, adopt
or amend any bonus, profit sharing, incentive scheme, thrift, pension,
retirement, supplementary private pension or health or welfare scheme,
change-in-control, deferred compensation, compensation, stock option, restricted
stock or other benefit plan or arrangement covering any of their directors,
officers or employees or (D) increase compensation, bonus, incentive scheme or
other benefits payable to any of their directors or officers, in each case other
than (1) as required by Applicable Law, and (2) as required under the terms of
any Company Benefit Plan or to satisfy contractual obligations in existence on
the date of this Agreement and (3) as set forth on SECTION 5.01(A)(VI) OF THE
SELLER DISCLOSURE SCHEDULE relating to the establishment of, or increases in,
compensation, employee benefits, and severance and termination benefits, in the
ordinary course of business consistent with past practice;
(vii) incur any indebtedness for borrowed money or
grant any guarantee in respect thereof; provided, however, that the foregoing
shall be deemed not to include any Borrowed Debt or other indebtedness, or
guarantees thereof, that will be repaid in full at or before Closing;
(viii) except in respect of Liens relating to
indebtedness permitted under subclause (vii) above, voluntarily permit any of
their assets to become subject to any Lien that would have been required to be
set forth in SECTION 3.05 OF THE SELLER DISCLOSURE SCHEDULE or SECTION 3.06 OF
THE SELLER DISCLOSURE SCHEDULE if existing as of the date of this Agreement;
(ix) acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof other than acquisitions not in excess of
$100,000 in the aggregate;
(x) sell, transfer, lease or otherwise dispose of any
assets in excess of $100,000 in the aggregate, except (A) the sale or disposal
of obsolete or excess equipment or (B)
54
sales, transfers, leases or disposals in the ordinary course of business
consistent with past practice;
(xi) cancel any material indebtedness (individually
or in the aggregate) or waive any claims or rights of material value;
(xii) incur any obligation or liability for any
capital expenditure in excess of $1,000,000, except (A) in accordance with the
capital expenditure budgets of the Companies and their subsidiaries for the
calendar quarter ending December 31, 2003 and the calendar year ending December
31, 2004, (B) for expenditures for extended term agreements over and above the
budgeted expenditures for such periods, or (C) for obligations and liabilities
that are paid in full before the Closing.
(xiii) pay, loan or advance any amount to, or sell,
transfer or lease any assets to, or enter into any agreement or arrangement with
any Seller or any beneficiary of any Seller that is a trust other than in
respect of (A) dividends and distributions permitted under Section 5.01(c), (B)
payments of salary and benefits to any Seller (or any affiliate of any Seller
who is employed by any of the Companies or their subsidiaries), or (C)
transactions set forth in SECTION 5.01(A)(XIII) OF THE SELLER DISCLOSURE
SCHEDULE;
(xiv) make any change in accounting methods,
principles or practices, except as required by GAAP or Applicable Law;
(xv) other than the sale of the outstanding capital
stock of Ecolochem or International to Purchaser hereunder, take or permit any
action that would cause either Ecolochem or International to fail to be treated
as an "S corporation" within the meaning of Section 1361 of the Code, or to fail
to be treated as an "S corporation" under comparable state and local Tax laws
(or permit any such action to be taken by any of their respective shareholders);
(xvi) change or modify any method of reporting
income, deductions or other items for Tax purposes or amend any Tax Return if
such filing would have any impact on Purchaser's or its subsidiaries' Tax
liability, the effectiveness of the Section 338 Elections, or any Tax attribute
relevant to Purchaser or its subsidiaries;
(xvii) enter into any Contract involving interest
rate or foreign currency swaps, commodity swaps, options, caps, collars, hedges
or forward exchanges, or other similar agreements, regardless whether entered
into for purposes of hedging, investment or otherwise;
(xviii) declare, set aside or pay any cash dividend
or make any other cash distribution on or in respect of any shares of their
capital stock, membership interests, equity interests or similar ownership
interest if the payment of such distribution would cause the cash balance of the
Companies and its subsidiaries on a consolidated basis, to fall below the amount
required to repay in full the amounts set forth in Section 1.04(a)(ii)(A),
measured immediately prior to the payment of any such distribution or dividend;
or
(xix) agree, whether in writing or otherwise, to do
any of the foregoing.
55
(b) From the date of this Agreement to the Closing, Sellers shall
cause the Companies and their subsidiaries not to spend less than the amounts
set forth in the capital expenditure budget for the calendar quarter ending
December 31, 2003 and the calendar year ending December 31, 2004 (each in the
form set forth in SECTION 5.01(B) OF THE SELLER DISCLOSURE SCHEDULE)(it being
acknowledged that if Closing occurs prior to December 31, 2004, the Companies
and their subsidiaries shall not be required to expend all amounts for such
period prior to Closing but shall be required to expend such amounts on a basis
consistent with past practice and maintenance practices in effect as of the date
of this Agreement); provided that the Companies and their subsidiaries shall not
be required to expend any amounts set forth in the capital expenditure budget
associated with any extended term agreements which are not entered into during
such periods.
(c) Except as (i) consented to, in writing, by Sellers
Representatives, (ii) otherwise contemplated in this Agreement or (iii) set
forth in SECTION 5.01(C) OF THE PURCHASER DISCLOSURE SCHEDULE, from the date of
this Agreement to the Closing, Purchaser shall not, and shall cause its
subsidiaries not to, take any of the following actions:
(i) amend Purchaser's or its subsidiaries' articles
of organization or bylaws or comparable organizational or governing documents in
a manner that adversely affects Sellers or consummation of the Transaction,
other than to increase the number of shares of authorized Common Stock;
(ii) declare, set aside or pay any dividend or make
any other distribution whether on or in respect of any shares of its capital
stock or similar ownership interests; provided; however, that Purchaser and its
subsidiaries may continue to make inter-company transfers;
(iii) redeem or otherwise acquire any shares of its
capital stock or similar ownership interests;
(iv) issue, deliver, sell, grant, pledge or otherwise
encumber any shares of capital stock, voting securities or any securities
convertible or exchangeable into or exchangeable for, or any rights, warrants,
"phantom stock rights", stock appreciation rights, options or similar derivative
securities to acquire, any such shares of capital stock, voting securities or
convertible or exchangeable securities or make any announcement of the intention
to so issue, deliver, sell, grant, pledge or encumber any such shares, other
voting securities, convertible securities, rights, warrants, "phantom stock
rights", stock appreciation rights, options or similar derivative securities
(other than (A) under existing agreements with current or former employees, and
directors, and the Purchaser Employee Stock Option Plan and the Purchaser
Benefit Plans in effect on the date of this Agreement, (B) the issuance of
Common Stock and related rights on the exercise of Purchaser Employee Stock
Options outstanding on the date of this Agreement and in accordance with their
present terms, (C) the issuance of shareholder rights of the Purchaser under the
Purchaser Rights Agreement and (D) other issuances not to exceed 1,750,000
shares of Common Stock in the aggregate);
(v) split, combine or reclassify any of Purchaser's
capital stock or similar ownership interests or engage in a recapitalization,
exchange of shares or similar transaction with respect to Purchaser's capital
stock or similar
56
ownership interests or issue or authorize the issuance of any other securities
in respect of, in lieu of, or in substitution for, any of Purchaser's capital
stock or similar ownership interests;
(vi) incur any indebtedness for borrowed money or
grant any guarantee in respect thereof (other than debt incurred in connection
with the financing of the Transactions), in each case outside of the ordinary
course of business;
(vii) acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or acquire any assets other than those not in
excess of $10,000,000 in the aggregate;
(viii) sell, transfer, lease or otherwise dispose (x)
of more than 10% of the assets of Purchaser's ultrapure water group or (y) any
other assets material to Purchaser and its subsidiaries, taken as a whole,
except (A) the sale or disposal of obsolete or excess equipment or (B) sales,
transfers, leases or disposals in the ordinary course of business consistent
with past practice;
(ix) make any change in accounting methods,
principles or practices, except as required by GAAP or Applicable Law;
(x) except in connection with any financing
agreements entered into in connection with the consummation of the Transaction,
enter into any Contract involving interest rate or foreign currency swaps,
commodity swaps, options, caps, collars, hedges or forward exchanges, or other
similar agreements, regardless whether entered into for purposes of hedging,
investment or otherwise, other than in the ordinary course of business
consistent with past practice (which shall not include those entered into for
the purpose of trading or speculative purposes);
(xi) except as set forth on SECTION 5.01(C)(XI) OF
THE PURCHASER DISCLOSURE SCHEDULE, enter into any Contract under which any of
Purchaser or its subsidiaries, directly or indirectly, makes or commits to make
any advance, loan, extension of credit or capital contribution to, or other
investment in, any person in each case if such loan, extension of credit,
capital contribution or investment would either individually or in the aggregate
obligate the Purchaser to expend more than $10,000,000;
(xii) except as set forth on SECTION 5.01(C)(XII) OF
THE PURCHASER DISCLOSURE SCHEDULE, enter into any Contract evidencing a limited
liability company, partnership, joint venture or similar business relationship
or entity in each case if such relationship or entity would either individually
or in the aggregate obligate the Purchaser to expend more than $10,000,000; or
(xiii) agree, whether in writing or otherwise, to do
any of the foregoing.
(d) Notwithstanding anything in this Agreement to the contrary, at
or before the Closing, each of the Companies shall be permitted to transfer to
Sellers any cash, cash equivalents, marketable securities or Deposits held by
the Companies and their subsidiaries to
57
the extent that such transfer would not cause the cash then available to the
Companies and its subsidiaries, on a consolidated basis, to fall below the
amount required to repay in full the amounts set forth in Section
1.04(a)(ii)(A), measured immediately prior to the payment of any such
distribution or dividend.
SECTION 5.02. Access.
(a) From the date hereof to the Closing, except to the extent
prohibited or limited by Applicable Law, each party shall grant or furnish the
other and its representatives, employees, counsel and accountants reasonable
access, during normal business hours and on reasonable written notice, to the
personnel, properties, books and records of such party (which in the case of
Sellers, shall include each of the Companies and their subsidiaries); provided,
however, that such access does not unreasonably disrupt the normal operations of
such party.
(b) After the Closing, Purchaser shall, and shall cause its
affiliates (including the Companies and their subsidiaries) to, grant or furnish
each Seller and such Seller's representatives, agents, counsel and accountants
reasonable access, during normal business hours and on reasonable notice, to the
personnel, properties, books and records of the Companies and their subsidiaries
(including, for purposes of Sections 1.04 and 1.05, bank account information) in
connection with (i) the preparation and validation of the adjustment to the
Initial Purchase Price under Sections 1.04 and 1.05, (ii) any Tax Return of such
Seller, (iii) any item for which indemnification is being sought from or by
Sellers or (iv) any Proceeding involving such Seller. Purchaser shall provide
copies of any books and records reasonably requested by Sellers in connection
with this Section 5.02. Purchaser shall not, and shall cause its affiliates to
not, destroy any books and records of the Companies before the seventh
anniversary of the Closing.
SECTION 5.03. Confidentiality.
(a) Purchaser acknowledges that the information being provided to
it in connection with the Transaction is subject to the terms of a
confidentiality agreement between Purchaser and Needham for the benefit of the
Companies, dated as of May 6, 2003 (the "Confidentiality Agreement"), the terms
of which are incorporated herein by reference. Effective as of, and only as of,
the Closing, the Confidentiality Agreement shall terminate with respect to
information relating to the Companies and their subsidiaries; provided, however,
that Purchaser acknowledges that any and all other information not related to
the Companies and their subsidiaries provided to it by the Companies, Sellers or
any other person shall remain subject to the terms and conditions of the
Confidentiality Agreement after the Closing Date as if such information was
Evaluation Material (as defined in the Confidentiality Agreement).
(b) Sellers acknowledge that the information being provided to the
Sellers in connection with the Transaction is subject to the terms of the
Confidentiality Agreement, the terms of which are incorporated herein by
reference, and that the Confidentiality Agreement shall survive the Closing with
respect to any and all information provided to the Sellers relating to the
Purchaser and its subsidiaries. From and after the Closing Date, neither Lyman
B. Dickerson nor Douglas G. Dickerson (each an "Executive") nor any Seller shall
divulge, furnish, use or make available to any person (other than Purchaser or
its affiliates) any confidential proprietary information of the Companies that
relates to the business of the Companies. This
58
Section 5.03(b) shall not apply to any such confidential proprietary information
that (i) shall have entered the public domain or become generally available
through no act of such Executive or Seller, unless such act is expressly
permitted under a contractual arrangement between Purchaser and such Executive
or Seller (it being understood that the Employment Agreement permits disclosure
in the proper performance of Lyman B. Dickerson's duties), (ii) shall have
become available to such Executive or Seller from a third party who, to the
knowledge of such Executive or Seller, is not obligated to the Companies or
Purchaser or its affiliates to keep such proprietary information confidential or
(iii) shall be required by Applicable Law, legal process, legal proceeding or
any Governmental Entity to be disclosed, provided, in the case of clause (iii)
that such Executive or Seller shall give reasonably prompt notice of such
requirement to Purchaser.
(c) Notwithstanding anything herein to the contrary or in the
Confidentiality Agreement, any party to this Agreement (and any employee,
representative or other agent of such party) may disclose to any and all
persons, without limitation of any kind, the Tax treatment and Tax structure of
the Transaction and all materials of any kind (including opinions or other Tax
analyses) provided to it relating to such Tax treatment and Tax structure,
except that (i) Tax treatment and Tax structure shall not include the identity
of any existing or future party (or any affiliate of such party) to this
Agreement and (ii) this provision shall not permit disclosure to the extent that
nondisclosure is necessary to comply with applicable securities laws. Nothing in
this Agreement shall in any way limit any party's ability to consult any Tax
advisor (including a Tax advisor independent from all other entities involved in
such transactions) regarding the Tax treatment or Tax structure of the
Transaction.
SECTION 5.04. Efforts.
On the terms and subject to the conditions set forth in this Agreement, each of
the parties shall use its commercially reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, but in any event before the Outside Date, the Transaction,
including (i) obtaining all necessary actions or nonactions, waivers, consents
and approvals from Governmental Entities and making all necessary registrations
and filings (including filings with Governmental Entities, if any) and taking
all steps as may be reasonably necessary to obtain an approval or waiver from,
or to avoid an action or proceeding by, any Governmental Entity, (ii) causing
(A) the Companies and their subsidiaries to hold separate or divest any of their
assets or lines of business that are not material to their businesses, taken as
a whole, if required by any Governmental Entity or (B) the Purchaser or its
subsidiaries to hold separate or divest any of their assets or lines of business
that are not material to their businesses, taken as a whole, if required by any
Governmental Entity and (iii) until a final non-appealable order has been
issued, defending any lawsuits or other Proceeding, whether judicial or
administrative, challenging this Agreement or the consummation of the
Transaction, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed.
(a) Neither Sellers nor Purchaser shall, directly or indirectly,
extend any waiting period under the HSR Act or enter into any agreement with a
Governmental Entity to, or represent to a Governmental Entity that it will delay
or not consummate the Transaction, except with the prior written consent of
Purchaser or the Sellers Representatives, respectively. In
59
furtherance and not in limitation of the foregoing, each party shall make and,
as may be required, Sellers shall cause each Company and/or its subsidiaries to
make, an appropriate filing of a Notification and Report Form under the HSR Act
(and to make such other filings as are required under Applicable Law in foreign
jurisdictions governing antitrust, competition or merger control matters) with
respect to the Transaction as promptly as practicable after the date hereof (but
in no event later than ten days in the case of the "Notification and Report
Form" under the HSR Act) and to supply as promptly as practicable any additional
information and documentary material that may be requested under the HSR Act (or
under such foreign laws). All such filings and information shall be in
substantial compliance with Applicable Law. Each party will consult with counsel
for the other parties as to, and will permit such counsel to participate in, any
litigation referred to in Section 5.04(a)(iii) above. Each party will (x)
promptly notify the other party of any written communication to that party from
any Governmental Entity located in the U.S. and outside of the U.S. and, subject
to Applicable Law, permit the other party to review in advance any proposed
written communication to any such Governmental Entity and incorporate the other
party's reasonable comments, (y) not agree to participate in any substantive
meeting or discussion with any such Governmental Entity in respect of any
filing, investigation or inquiry concerning this Agreement or the Transaction
unless it consults with the other party in advance and, to the extent permitted
by such Governmental Entity, gives the other party the opportunity to attend and
(z) furnish the other party with copies of all correspondence, filings and
written communications between them and their affiliates and their respective
representatives on one hand, and any such Governmental Entity or its respective
staff on the other hand, with respect to this Agreement and the Transaction.
Each party shall promptly notify the other parties in writing of any pending or,
to the knowledge of such party, threatened Proceeding or investigation by any
Governmental Entity or any other person (i) challenging this Agreement or the
consummation of the Transaction or seeking material damages in connection with
consummation of the Transaction or (ii) seeking to restrain or prohibit the
consummation of the Transaction.
(b) In connection with and without limiting the foregoing,
Purchaser and the Companies and their respective Boards of Directors shall (i)
take all action necessary so that no takeover statute or similar statute or
regulation is or becomes applicable to the Transaction, and (ii) if any takeover
statute or similar statute or regulation becomes applicable to the Transaction,
take all action necessary so that the Transaction may be consummated as promptly
as practicable on the terms contemplated hereby and thereby and otherwise to
minimize the effect of such statute or regulation on the Transaction and the
other transactions contemplated by this Agreement.
(c) Notwithstanding the foregoing, in no event and under no
circumstances shall Purchaser or Sellers have any obligation, in order to
consummate the Transaction or to resolve objections, if any, to the consummation
of the Transaction, to: (i) accept or offer to accept an order providing for the
divestiture by Purchaser of any material part of the properties, assets,
operations or businesses of the Companies or their subsidiaries taken as a whole
or the Purchaser, its Permitted Designees or their respective affiliates taken
as a whole, (ii) offer or agree to hold separate such properties, assets,
operations or businesses pending divestiture, or (iii) agree to any other
material conditions, restrictions or limitations on the material operations or
businesses of the Companies or their subsidiaries, taken as a whole.
60
SECTION 5.05. Consents. (a) Prior to the Closing, Sellers shall cause
the Companies and their subsidiaries to use commercially reasonable efforts to
obtain all necessary actions or nonactions, waivers, consents, approvals, orders
and authorizations from any third party required under any Contract (including
those set forth on SECTION 5.05 OF THE SELLER DISCLOSURE SCHEDULE), and to give
prompt notice to the Purchaser of any notice or other communication from any
person alleging that the consent of such person is or may be required under any
Contract in connection with the transactions contemplated hereby. Purchaser
shall, and shall cause its subsidiaries to (i) reasonably cooperate with Sellers
and the Companies and their subsidiaries in connection with the foregoing and
(ii) use all commercially reasonable efforts to obtain all necessary actions or
nonactions, waivers, consents, approvals, orders and authorizations from any
third party required under any Contract and to give prompt notice to Sellers of
any notice or other communication from any person alleging that the consent of
such person is or may be required under any Contract in connection with the
transactions contemplated hereby. Notwithstanding the foregoing, none of
Sellers, the Companies, their subsidiaries, Purchaser or its subsidiaries shall
be required to expend money or, without Purchaser's prior written consent,
amend, waive or otherwise alter any material terms under any Contract in order
to obtain any waiver, consent, approval, order or authorization from any third
party required under any Contract.
SECTION 5.06 Publicity. Sellers and Purchaser agree that no public
release or announcement concerning this Agreement or the transactions
contemplated hereby shall be issued by any party (which for this purpose shall
include the Companies and their subsidiaries or any affiliate thereof), without
the prior consent of the other parties (which consent shall not be unreasonably
withheld), except as such release or announcement may be required by Applicable
Laws or the rules or regulations of any United States or foreign securities
exchange, in which case the party required to make the release or announcement
shall allow the other party reasonable time to comment on such release or
announcement in advance of such issuance; provided, however, that each of the
parties may make internal announcements to their respective employees that are
consistent with the parties' prior public disclosures regarding this Agreement
or the transactions contemplated hereby. Promptly on or immediately after the
date hereof, Purchaser and Sellers shall jointly release a press release in the
form agreed on before the date hereof.
SECTION 5.07 Arrangements with Sellers. Except as described in or
contemplated by this Agreement, or as otherwise set forth in SECTION 5.07 OF THE
DISCLOSURE SCHEDULE, before the Closing, Sellers shall cause all Contracts and
arrangements (including any Contract or arrangement relating to the extension of
credit in the form of personal loans), if any, between the Companies or their
subsidiaries, on the one hand, and Sellers or Executives, on the other hand, to
be terminated or settled and be of no further force or effect, notwithstanding
any terms thereof to the contrary.
SECTION 5.08 Noncompetition and Nonsolicitation.
(a) Subject to Section 5.08(b), for a period of five years from
the Closing Date or, if later, five years from the date he is no longer employed
by Purchaser, a Company or any of their subsidiaries (but in no event later than
December 31, 2010, unless such Seller or Executive enters into a new employment
agreement with Purchaser or its subsidiaries), no Seller
61
or Executive shall engage, anywhere in the world, in any business competitive
with any water related business conducted by the Companies or their
subsidiaries, or by Purchaser or its subsidiaries on the Closing Date and on the
date such Seller or Executive ceases to be employed by the Companies or their
subsidiaries, or the Purchaser or its subsidiaries (the "Water Related
Competitive Activities"), including through the ownership of an interest in a
business engaged in a Water Related Competitive Activity or by managing such a
business. Subject to Section 5.08(b), for a period of two years from the Closing
Date or, if later, two years from the date he is no longer employed by
Purchaser, a Company or any of their subsidiaries (but in no event later than
four years from the Closing Date, unless such Seller or Executive enters into a
new employment agreement with Purchaser or its subsidiaries), no Seller or
Executive shall engage, anywhere in the world, in any business competitive with
any non-water related business conducted by the Companies or their subsidiaries,
or by Purchaser or its subsidiaries on the Closing Date and on the date such
Seller or Executive ceases to be employed by the Companies or their
subsidiaries, or the Purchaser or its subsidiaries (the "Non-Water Related
Competitive Activities" and collectively with the Water Related Competitive
Activities, the "Competitive Activities"), including through the ownership of an
interest in a business engaged in a Non-Water Related Competitive Activity or by
managing such a business.
(b) The covenant in Section 5.08(a) shall not (i) apply to any
activities conducted by any Seller or Executive on behalf of Purchaser or its
affiliates (including the Companies), (ii) be breached as a result of the
ownership by any Seller or any Executive of (A) less than 3% of any class of
publicly traded equity or debt securities of a person engaged in any Competitive
Activity, provided that no Seller controls such person (it being understood that
the 3% threshold set forth in this subsection (A) shall not include any
securities held by a registered investment company in which such Seller or
Executive participates), or (B) any interest in any person who, after the date
of acquisition of such interest, commences any Competitive Activity, provided
that no Seller controls such person.
(c) For a period of five years from the Closing Date or, if later,
five years from the date he is no longer employed by Purchaser, any Company or
any of their respective subsidiaries (but in no event later than December 31,
2010 unless such Seller or Executive enters into a new employment agreement with
Purchaser or its subsidiaries), no Seller or Executive shall directly or
indirectly (i) recruit or solicit for hire or hire or otherwise engage any
employees of Purchaser, any Company or their respective subsidiaries or any such
person who has terminated his/her relationship with the Purchaser, any Company
or their respective subsidiaries within six months prior to such action by
Seller or Executive or (ii) encourage or participate in such recruitment,
solicitation or hiring.
(d) For a period of five years from the Closing Date or, if later,
five years from the date he is no longer employed by Purchaser, any Company or
any of their subsidiaries (but in no event later than December 31, 2010 unless
such Seller or Executive enters into a new employment agreement with Purchaser
or its subsidiaries), no Seller or Executive shall directly or indirectly,
solicit or do business in any capacity that constitutes Water Related
Competitive Activities with any customer of the Purchaser, any Company or any of
their respective subsidiaries.
62
(e) For a period of two years from the Closing Date or, if later,
two years from the date he is no longer employed by Purchaser (but in no event
later than four years from the Closing Date, unless such Seller or Executive
enters into a new employment agreement with Purchaser or its subsidiaries), a
Company or any of their subsidiaries, no Seller or Executive shall directly or
indirectly, solicit or do business in any capacity that constitutes Non-Water
Related Competitive Activities with any customer of the Purchaser, any Company
or any of their respective subsidiaries.
(f) If any provision of this Section 5.08 shall for any reason be
held to be excessively broad as to scope, activity, subject or otherwise, so as
to be unenforceable by law, such provision or provisions shall be construed by
the appropriate judicial body by limiting or reducing it or them, so as to be
enforceable to the maximum extent compatible with the applicable law as it shall
then appear. Sellers and Executives agree that if any Seller or Executive
violates any of the covenants in this Section 5.08, monetary damages will be
inadequate, and Purchaser shall be entitled to injunctive relief and specific
performance.
SECTION 5.09 Corporate Indemnity For Company Managers, Officers and
Directors.
(a) Purchaser acknowledges that all rights with respect to
indemnification, advancement of expenses and exculpation of former or present
managers, directors, members, agents, officers and employees of the Companies or
their subsidiaries with respect to acts or omissions occurring before the
Closing, presently set forth in the articles of incorporation, bylaws, limited
liability agreements or other comparable organizational documents or any other
agreements of the Companies or their subsidiaries, shall continue indefinitely
and Purchaser and its affiliates shall take no action to alter such rights as
they apply to periods before the Closing.
(b) This covenant is intended to be for the benefit of, and shall
be enforceable by, each of the former or present officers, directors, managers,
members, agents and employees of the Companies and their subsidiaries and their
respective heirs and legal representatives. The indemnification provided for
herein shall not be deemed exclusive of any other rights to which such person is
entitled, whether under law, contract or otherwise.
(c) In the event that Purchaser or any Company or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or a majority of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of such Purchaser or
Company shall succeed to the obligations set forth in this Section 5.09.
SECTION 5.10. No Solicitation of Proposals or Offers.
(a) From the date hereof until the Closing (or, if earlier,
termination of this Agreement in accordance with the terms hereof), Sellers
shall not, nor shall any of them permit any Company or any of its subsidiaries
to, nor shall any of them authorize or permit any officer, director or employee
of or any investment banker, attorney, agent, accountant or other advisor or
other representative of, any of the Sellers, the Companies or any of their
subsidiaries to,
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(i) solicit, initiate or encourage the submission of any offer or proposal for a
stock purchase, merger, consolidation or other business combination involving
the Companies or any of their subsidiaries or the sale of all or any significant
portion of the assets, capital stock or equity interests in the Companies or any
of their subsidiaries (a "Seller Transaction"), (ii) enter into any agreement
with respect to any Seller Transaction or (iii) provide any non-public
information regarding any Company or its subsidiaries to any third party or
engage in any negotiations or discussions in connection with any Seller
Transaction. Sellers shall, and shall cause the Companies and their subsidiaries
to, immediately cease and cause to be terminated any existing activities,
discussions or negotiations by Sellers, the Companies or their subsidiaries or
any officer, director or employee of or any investment banker, attorney, agent,
accountant or other advisor or other representative of, Sellers, the Companies
or their subsidiaries, with any parties conducted heretofore with respect to any
of the foregoing.
(b) Sellers promptly shall advise Purchaser orally and within 24
hours in writing of the receipt of any communication (written or oral) relating
to a Seller Transaction. Sellers promptly shall advise Purchaser of the identity
of the person making or proposing any such Seller Transaction and of the
material terms of any such Seller Transaction and of any changes thereto.
Sellers promptly shall advise Purchaser orally and within 24 hours in writing of
the commencement of any discussions with any third party or its representatives
regarding a Seller Transaction by such third party.
(c) From the date hereof and until the Closing (or, if earlier,
termination of this Agreement in accordance with the terms hereof), Purchaser
shall not, nor shall it permit any of its subsidiaries to, nor shall it
authorize or permit any officer, director or employee of or any investment
banker, attorney, agent, accountant or other advisor or other representative of,
Purchaser or any of its subsidiaries to, (i) solicit, initiate or encourage the
submission of any offer or proposal for an Acquisition Transaction, (ii) enter
into any agreement with respect to any Acquisition Transaction or (iii) provide
any non-public information regarding Purchaser or its subsidiaries to any third
party or engage in any negotiations or discussions in connection with or
relating to, any Acquisition Transaction (or offer or proposal therefor);
provided, however, that Purchaser may, after receiving any offer or proposal
with respect to an Acquisition Transaction that was not solicited by Purchaser
or its subsidiaries or any officer, director or employee of, or any investment
banker, attorney, agent, accountant or other advisor or other representative of
Purchaser or its subsidiaries, solicit, initiate or encourage the submission of
any Acquisition Transaction from any third party, provide any non-public
information regarding itself to any third party, engage in any negotiations or
discussions with any third party regarding any Acquisition Transaction or enter
into any agreement with respect to any Acquisition Transaction if Purchaser's
Board determines in good faith, after consultation with counsel and its
financial advisors, that the failure to solicit, initiate or encourage the
submission of any Acquisition Transaction from any third party, provide such
information, engage in such negotiations or discussions or enter into such
agreement could result in a breach of its fiduciary duties under Applicable Law,
except that (A) Purchaser may not take any such actions with respect to an offer
or proposal for an Acquisition Transaction that is (at the time such action is
taken) conditioned upon the Transaction not being consummated unless Purchaser's
Board determines in good faith, after consultation with counsel and its
financial advisors, that such Acquisition Transaction could result in a
Purchaser Superior Proposal, (B) Purchaser may not request or require that any
offer or proposal for an Acquisition Transaction solicited or initiated by
Purchaser be conditioned
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upon the Transaction not being consummated (although the receipt of, and taking
of any action (including those specified in clauses (i), (ii) and (iii) above)
with respect to, offers or proposals for Acquisition Transactions that are so
conditioned shall not constitute a breach of Purchaser's obligations under this
clause (B), as long as Purchaser complies with the other requirements of this
Section 5.10 with respect to such offers or proposals, including clauses (A) and
(C) of this proviso) and (C) Purchaser and its subsidiaries may not enter into a
definitive agreement providing for the implementation of an Acquisition
Transaction that is conditioned upon the Transaction not being consummated
unless (1) at least two business days prior to the date such definitive
agreement is entered into, Purchaser has delivered to Sellers written notice
advising Sellers that that Purchaser or its subsidiaries are prepared to enter
into such a definitive agreement, specifying the material terms and conditions
of such Purchaser Superior Proposal and identifying the person making such
Purchaser Superior Proposal, and (2) Purchaser terminates this Agreement
pursuant to Section 9.01(a)(vii) concurrently with entering into such definitive
agreement. Purchaser shall, and shall cause each of its subsidiaries to,
immediately cease and cause to be terminated any existing activities,
discussions or negotiations by Purchaser, any subsidiary of Purchaser or any
officer, director or employee of, or any investment banker, attorney, agent,
accountant or other advisor or other representative of, Purchaser or its
subsidiaries, with any parties conducted heretofore with respect to any of the
foregoing. The term "Acquisition Transaction" means (i) a merger or
consolidation involving Purchaser or (ii) the acquisition by any person or
persons in any manner, directly or indirectly, of in excess of 25% of the voting
stock of Purchaser or any assets or group of assets of Purchaser or its
subsidiaries (including by way of a stock acquisition) having a value in excess
of 25% of the book value of the total assets of Purchaser and its subsidiaries,
taken as a whole (as reflected on the then most recent financial statements of
Purchaser filed with the SEC), other than the Transaction. The term "Purchaser
Superior Proposal" means an Acquisition Transaction that Purchaser's Board
determines in good faith, after consultation with counsel and a financial
advisor of nationally recognized reputation and taking into account all relevant
material terms of such Acquisition Transaction and this Agreement (including any
changes to this Agreement proposed by Sellers in response to an Acquisition
Transaction), that, if consummated, would be more favorable to the stockholders
of Purchaser than the Transaction and is reasonably capable of being consummated
(including by not being subject to a financing condition).
(d) After the date hereof and before the Closing (or, if earlier,
termination of this Agreement in accordance with the terms hereof), neither the
Purchaser Board nor any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Sellers, its
recommendation to Purchaser's stockholders that they grant the Purchaser
Stockholder Approval or (ii) approve or recommend, or propose publicly to
approve or recommend, any Acquisition Transaction. Notwithstanding the
foregoing, at any time after the date hereof and before receipt of the Purchaser
Stockholder Approval, as a result of a Purchaser Superior Proposal, the
Purchaser Board may withdraw or modify in a manner adverse to Sellers its
recommendation to Purchaser's stockholders that they grant the Purchaser
Approval, but only if and to the extent that Purchaser's Board determines in
good faith, after consultation with counsel and its financial advisors, that
failing to take any such action could result in a breach of the fiduciary duties
of Purchaser's Board.
(e) Purchaser promptly shall advise Sellers orally and within 24
hours in writing of the receipt of any offer or proposal for an Acquisition
Transaction. Purchaser
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promptly shall advise Sellers of the identity of the person making any such
offer or proposal for an Acquisition Transaction and of the material terms of
any such offer or proposal and of any changes thereto. Purchaser promptly shall
advise Sellers orally and within 24 hours in writing of the commencement of any
discussions with any third party or its representatives regarding an Acquisition
Transaction by such third party.
(f) Nothing contained in this Section 5.10 or Section 5.13 shall
prohibit Purchaser or Purchaser's Board from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or from making any other disclosure to Purchaser's stockholders if,
in the good faith judgment of Purchaser's Board after consultation with outside
counsel, the failure so to disclose could be inconsistent with its obligations
under Applicable Law.
SECTION 5.11. Companies' Financial Statements; Proxy Statement; SEC
Filings.
(a) Promptly after the date hereof, Sellers shall cause the
Companies to conform the Combined Financial Statements to the requirements of
Regulation S-X of the Exchange Act (collectively, the "S-X Compliant
Financials"), and thereafter to promptly deliver the S-X Compliant Financial
Statements (together with notes and schedules thereto), to the Purchaser.
(b) As promptly as practicable after the execution of this
Agreement, the parties shall prepare, and Purchaser shall file with the SEC, a
proxy statement (the "Proxy Statement") to be sent to the stockholders of
Purchaser in connection with Purchaser's stockholders meeting (the "Purchaser
Stockholders Meeting") to consider the Purchaser Stockholder Approval. The
Purchaser and each Seller shall promptly respond to any comments of the SEC
relating to the Proxy Statement and shall use their respective commercially
reasonable efforts to have the Proxy Statement cleared by the SEC as soon as
reasonably practicable after the date hereof. Purchaser shall cause the Proxy
Statement to be mailed to its stockholders as soon as practicable after SEC
clearance. Purchaser and each of the Sellers shall notify each other promptly on
the receipt by it or its representatives of any comments from the SEC or its
staff or any other government officials and of any request by the SEC or its
staff or any other government officials for amendments or supplements to the
Proxy Statement or any filing made under Section 5.11(c) or for additional
information and shall supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and the SEC, or its
staff or any other government officials, on the other hand, with respect to the
Proxy Statement or any filing made under Section 5.11(c). No filing of, or
amendment or supplement to, or correspondence to the SEC or its staff with
respect to, the Proxy Statement will be made by Sellers or Purchaser, without
providing the other party a reasonable opportunity to review and comment
thereon. The Purchaser and each Seller, as the case may be, shall use their
commercially reasonable efforts to cause all documents that Purchaser is
responsible for filing with the SEC or other regulatory authorities in
connection with the consummation of the Transaction under this Section 5.11 to
comply in all material respects with all Applicable Law. Whenever any event
occurs that is required to be set forth in an amendment or supplement to the
Proxy Statement or any filing made under Section 5.11(c), Purchaser or Sellers,
as the case may be, shall promptly inform the other of such occurrence and
cooperate in filing with the SEC or its
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staff or any other government officials, and, to the extent required by
Applicable Law, mailing to stockholders of Purchaser, of such amendment or
supplement.
(c) Purchaser and Sellers shall promptly after the date hereof
make all necessary filings with respect to this Agreement and the Ancillary
Agreements under the Securities Act, the Exchange Act, the rules and regulations
of the NYSE, applicable state blue sky laws and the rules and regulations
thereunder ("the Applicable Filings"). Purchaser and Sellers shall cause all
Applicable Filings to comply as to form and substance in all material respects
with all Applicable Laws including (i) the Exchange Act, (ii) the Securities
Act, and (iii) the rules and regulations of the NYSE.
(d) Sellers shall promptly furnish to Purchaser all information
(including all S-X Compliant Financials) concerning the business and affairs of
the Companies and their subsidiaries or the Sellers, as may reasonably be
requested by Purchaser, in a form reasonably satisfactory to Purchaser, as shall
be required to be included in or is otherwise reasonably necessary in connection
with the preparation of, the Proxy Statement or any filing made under Section
5.11(c) or any amendments thereto. All financial statements furnished to
Purchaser shall have been prepared in conformity with GAAP in effect in the
United States applied on a consistent basis with the Combined Financials
Statements and shall comply with the requirements of Regulations S-X of the
Exchange Act. In addition, Sellers shall cause the counsel and accountants of
the Companies and their subsidiaries to reasonably cooperate with Purchaser's
counsel and auditors in preparation of the Proxy Statement and any filing made
under Section 5.11(c). The information to be supplied by the Sellers for
inclusion in the Proxy Statement or any filing made under Section 5.11(c), as
applicable, (i) shall comply in all material respects with all Applicable Laws
including the Exchange Act, the Securities Act and the rules and regulations of
the NYSE, and (ii) will not, on the date the Proxy Statement is first mailed to
stockholders of Purchaser, or, at the time of the Purchaser Stockholders
Meeting, or on the date any filing made under Section 5.11(c) is filed with SEC
or state securities authorities, as applicable, contain any statement that, at
such time and in light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or omits to state any material
fact necessary to make the statements made in the Proxy Statement or any filing
made under Section 5.11(c), as applicable, not false or misleading, or omits to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Purchaser
Stockholders Meeting that has become false or misleading. Sellers shall update
any information or materials provided to Purchaser pursuant to this Section
5.11(d) to the extent necessary to maintain the accuracy and completeness
thereof. Sellers' timely delivery to Purchaser of the information required by
this Section 5.11 is a condition precedent to Purchaser's obligations pursuant
to this Agreement and the Ancillary Agreements to file the Proxy Statement and
any other documents; provided, however, that Purchaser's obligations shall
continue after receipt of such information, except that Purchaser shall as
promptly as practicable after the receipt of such information continue to comply
with such obligations. The information to be supplied by Purchaser for inclusion
in the Proxy Statement or any filing made under Section 5.11(c), as applicable,
(i) shall comply with all Applicable Laws including the Exchange Act, the
Securities Act and the rules and regulations of the NYSE, and (ii) will not, on
the date the Proxy Statement is first mailed to stockholders of Purchaser, or,
at the time of the Purchaser Stockholders Meeting, or on the date any filing
made under Section 5.11(c) is filed with SEC or state securities authorities, as
applicable, contain any statement that, at such time and in light of
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the circumstances under which it is made, is false or misleading with respect to
any material fact, or omits to state any material fact necessary to make the
statements made in the Proxy Statement or any filing made under Section 5.11(c),
as applicable, not false or misleading, or omits to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Purchaser Stockholders Meeting that has
become false or misleading. Purchaser shall update any information or materials
included in the Proxy Statement or any filing made under Section 5.11(c) to the
extent necessary to maintain the accuracy and completeness thereof.
(e) Purchaser will timely file with the SEC all Contracts to which
Purchaser or any subsidiary of Purchaser becomes a party, or by which any of
them or their respective properties become bound and which are required to be
filed or listed as an exhibit to the Purchaser SEC Documents.
SECTION 5.12. New York Stock Exchange Listing. Purchaser shall use its
commercially reasonable efforts to cause the shares of Common Stock to be issued
to Sellers in the Transaction to be approved on or before the Closing Date for
listing on the NYSE, subject to official notice of issuance.
SECTION 5.13. Purchaser Stockholders Meeting. Purchaser, acting through
its Board of Directors (the "Purchaser Board"), shall take all actions in
accordance with Applicable Law and its articles of organization and bylaws to
promptly and duly call, give notice of, convene and hold as promptly as
practicable, and in any event within 120 days after the execution of this
Agreement, the Purchaser Stockholders Meeting for the purpose of considering the
Purchaser Stockholder Approval. In no event shall the Purchaser Stockholders
Meeting not be held unless this Agreement is terminated in accordance with its
terms. The Purchaser Board has voted to recommend to the stockholders of
Purchaser that they grant the Purchaser Stockholder Approval and such
recommendation shall be included in the Proxy Statement. Subject to the terms of
Section 5.10(d), neither the Purchaser Board nor any committee thereof shall
withdraw or modify, or publicly propose to withdraw or modify, in a manner
adverse to Sellers, the recommendation of the Purchaser Board that the
Purchaser's stockholders grant the Purchaser Stockholder Approval.
Notwithstanding anything to the contrary contained in this Agreement, after
consultation with Sellers Representatives, Purchaser may adjourn or postpone the
Purchaser Stockholders Meeting to the extent necessary to ensure that any
required supplement or amendment to the Proxy Statement is provided to the
Purchaser's stockholders or, if, as of the time for which the Purchaser
Stockholders Meeting is originally scheduled (as set forth in the Proxy
Statement), there are insufficient shares of Purchaser Common Stock represented
(either in person or by proxy) to constitute a quorum necessary to conduct the
business of the Purchaser Stockholders Meeting.
SECTION 5.14. Rights Agreement. Purchaser Board shall take all action
necessary as Sellers or Purchaser may reasonably request to cause the Purchaser
Rights Agreement to be inapplicable to the Transaction. Except as provided in
the immediately preceding sentence or as requested in writing by Sellers
Representatives, before the Closing, Purchaser Board shall not amend the
Purchaser Rights Agreement. If any "Distribution Date" occurs under the
Purchaser Rights Agreement at any time during the period from the date of this
Agreement to the Closing (other than as a result of any action by any of the
Sellers), Purchaser and Sellers shall make such
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adjustment to the Initial Share Consideration as Purchaser and Sellers shall
mutually agree so as to preserve the percentage ownership of Purchaser's capital
stock that Sellers reasonably expected to receive as of the Closing as a result
of the consummation of the Transaction.
SECTION 5.15. Shelf Registration Statement. Purchaser shall comply with
the provisions of the Stockholders Agreement relating to its obligation to
register the shares of Common Stock comprising the Initial Share Consideration
by filing the Shelf Registration Statement (as defined in the Stockholders
Agreement) with the SEC, it being acknowledged that the effectiveness thereof is
a condition to the Closing.
SECTION 5.16. Borrowed Debt. At or before Closing, Sellers shall cause
the Companies and their subsidiaries to repay all Borrowed Debt and pay or
satisfy all obligations relating thereto and discharge (or provide for the
discharge of) any Liens securing such Borrowed Debt and to terminate any
agreements relating to foreign currency swaps, interest rate swaps, commodity
swaps, options, caps, collars, hedges or forward exchanges or other similar
agreements.
SECTION 5.17. Foreign Qualifications. At or before Closing, Sellers
shall cause (i) International to take any and all commercially reasonable
actions necessary to restore its foreign qualification and good standing within
the United Kingdom, Australia, Columbia and Thailand, (ii) S.A.R.L. to take any
and all commercially reasonable actions necessary to restore its foreign
qualification and good standing within France, and (iii) Ecolochem to take any
and all commercially reasonable actions necessary to establish or restore its
foreign qualification and good standing in any United States jurisdiction in
which the conduct or nature of its business or the ownership, leasing or holding
of its properties makes such qualification necessary. The parties agree that
failure to so establish or so restore such qualifications shall not result in a
failure of a condition to Closing set forth in this Agreement.
SECTION 5.18. Permits. Sellers and Purchaser shall use their
commercially reasonable efforts to cause the Companies or their subsidiaries and
the Permitted Designees of Purchaser, to the extent necessary, to obtain the
written consent or approval of each of the Governmental Entities issuing any of
the Governmental Permits specified in SECTION 3.18 OF THE SELLER DISCLOSURE
SCHEDULE to the transfer of any such Governmental Permit if, as a result of the
Transaction, such consent or approval is necessary in order to allow the
Companies or any of their subsidiaries to continue to enjoy the use of such
Governmental Permit after the Closing. With respect to any Governmental Permits
to be transferred to Purchaser or its Permitted Designees, or reissued in the
name of Purchaser or its Permitted Designees, Sellers shall use their
commercially reasonable efforts to cause the Companies and their subsidiaries to
reasonably cooperate with Purchaser and Purchaser and the Permitted Designees
shall reasonably cooperate with Sellers, the Companies and their subsidiaries in
effectuating the transfer or reissuance of such Governmental Permits in the name
of Purchaser or its Permitted Designees effective as of the Closing, including
providing necessary information and confirming to any Governmental Entity the
applicable Company or subsidiaries' readiness to surrender the Governmental
Permits in the name of such Company or subsidiary upon the Closing and their
subsequent transfer or reissuance to Purchaser or its Permitted Designees.
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SECTION 5.19. Statute of Limitations. Without the prior written consent
of the other parties hereto, no party shall, nor shall such party permit or
cause its affiliates to, extend the statute of limitations with respect to Tax
matters in a manner that would lengthen the time during which a party hereto is
required to provide indemnification under Article X.
SECTION 5.20. Notices of Certain Events. (a) From the date hereof until
the Closing Date, Sellers shall promptly notify Purchaser of:
(i) any notice or other communication received by any
person included within the definition of "knowledge of Sellers" in Section
11.05(b) (A) from any person alleging that the consent of such person is or may
be required in connection with the transactions contemplated by this Agreement
or (B) from any Governmental Entity alleging that the Companies or their
subsidiaries are liable under any Environmental Law;
(ii) any notice or other communication received by
any person included within the definition of "knowledge of Sellers" in Section
11.05(b) from any Governmental Entity in connection with the Transaction;
(iii) any actions, suits, claims, investigations or
proceedings commenced or threatened of which any person included within the
definition of "knowledge of Sellers" in Section 11.05(b) has knowledge and which
are against, relating to or involving or otherwise affecting (A) the Companies
or their subsidiaries or (B) the Equity Interests, in each case which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.09 or which relate to the consummation of the
Transaction;
(iv) any condition, event or matter (other than those
for which Purchaser's consent has been obtained) of which any person included
within the definition of "knowledge of Sellers" in Section 11.05(b) has
knowledge which, if pending or in existence on the date of this Agreement, would
have been required to be disclosed pursuant to Section 3.11;
(v) any pending U.S. or foreign patent applications
which, if issued, would materially limit or materially prohibit the then current
activities of the Companies or their subsidiaries of which any person included
within the definition of "knowledge of Sellers" in Section 11.05(b) becomes
aware;
(vii) any notice or other communication received by
any person included within the definition of "knowledge of Sellers" that any
Senior Company Employee intends to terminate his or her employment to the extent
that the disclosure of such information would not violate Applicable Law;
(viii) any condition, event or matter (other than
those for which Purchaser's consent has been obtained) of which any person
included within the definition of "knowledge of Sellers" in Section 11.05(b)
which, if pending or in existence on the date of this Agreement would have been
required to be disclosed pursuant to Section 3.15.
(b) From the date hereof until the Closing Date, Purchaser shall
promptly notify Sellers Representatives of:
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(i) any notice or other communication received by any
person included within the definition of "knowledge of Purchaser" in Section
11.05(b) (A) from any person alleging that the consent of such person is or may
be required in connection with the Transaction or (B) from any Governmental
Entity alleging that Purchaser or its subsidiaries are liable under any
Environmental Law;
(ii) any notice or other communication received by
any person included within the definition of "knowledge of Purchaser" in Section
11.05(b) from any Governmental Entity in connection with the Transaction;
(iii) any actions, suits, claims, investigations or
proceedings commenced or threatened of which any person included within the
definition of "knowledge of Purchaser" has knowledge and which are against,
relating to or involving or otherwise affecting Purchaser or any of its
subsidiaries, in each case which, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 4.08 or
which relate to the consummation of the Transaction;
(iv) any condition, event or matter (other than those
for which the consent of Sellers Representatives consent has been obtained) of
which any person included within the definition of "knowledge of Purchaser" has
knowledge which, if pending or in existence on the date of this Agreement, would
have been required to be disclosed pursuant to Section 4.09;
(v) any pending U.S. or foreign patent applications
which, if issued, would materially limit or materially prohibit the then current
activities of the Purchaser or its subsidiaries of which any person included
within the definition of "knowledge of Purchaser" in Section 11.05(b) becomes
aware of;
(vi) any condition, event or matter (other than those
for which Sellers' consent has been obtained) of which any person included
within the definition of "knowledge of Purchaser" in Section 11.05(b) which, if
pending or in existence on the date of this Agreement would have been required
to be disclosed pursuant to Section 4.20; and
(vii) any communication received from any Lender
indicating that any financing for the Initial Cash Consideration to be entered
into by Purchaser in connection with the Transaction will not be available.
SECTION 5.21. Internal Controls. Sellers shall cause the Companies and
their subsidiaries to use their commercially reasonable efforts to take any
actions reasonably requested by Purchaser to establish and conform their
internal controls and procedures to those required of a public company or a
subsidiary thereof.
SECTION 5.22. 401(k) Plan Termination. If requested by Purchaser no
later than 30 days prior to the Closing Date, Sellers shall cause the Companies
to terminate prior to the Closing Date any Company Benefit Plan that is intended
to be qualified under Section 401(a) of the Code.
SECTION 5.23. Purchaser Financing. Each Seller shall and shall cause
each of the
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Companies and their respective subsidiaries and their employees and
representatives to use commercially reasonable efforts to actively assist the
Purchaser, as may reasonably be requested by the Purchaser, in securing the
credit facilities sought by the Purchaser in connection with the Transaction and
further to actively assist the bank or banks providing such credit facilities,
as may be reasonably requested by any such bank in the provision of such credit
facilities or the syndication of the same.
SECTION 5.24. Certain Employee Bonuses. Before the Closing Date, the
Sellers shall cause the Companies and their subsidiaries to pay any and all
sales bonuses payable by the Companies and their subsidiaries in November 2003
and executive bonuses payable by the Companies and their subsidiaries in January
2004.
SECTION 5.25. Permitted Designees. In the event that Purchaser elects
to cause any Permitted Designee to acquire any of the Equity Interests at the
Closing, Purchaser shall ensure that any such Permitted Designee has the
requisite corporate power and authority to execute, deliver and perform the
Agreement and each Ancillary Agreement to which such Permitted Designee is a
party and shall deliver a certificate to Sellers at the Closing setting forth
representations and warranties relating to such Permitted Designee comparable to
the representations and warranties regarding Purchaser set forth in the first
and last sentences of Section 4.01, Section 4.02 and clause (i) of Section
4.04(a), it being agreed and acknowledged that such representations and
warranties shall be subject to the provisions of Article VIII and Article X as
if such representations and warranties were made by the Purchaser.
SECTION 5.26. 401(k) Plan Qualification. Sellers shall and shall cause
Ecolochem to act as promptly as possible (but in any event prior to Closing) in
a manner reasonably acceptable to Purchaser to file a proper application with
the Internal Revenue Service pursuant to Revenue Procedure 2003-44 (or successor
guidance) that identifies the failures described in Section 3.14(a) of the
Seller's Disclosure Schedule and seeks IRS approval of such corrections thereto,
and Sellers shall use their commercially reasonable efforts to take any further
action required to obtain such IRS approval.
SECTION 5.27 Shareholders Agreements and Operating Agreement. Prior to
the Closing Date, each Seller shall have taken all necessary action to (A)
execute, on behalf of such Seller, any consent to the Transaction necessary
under any of the Shareholders Agreements set forth on SECTION 2.02 OF THE
SELLERS DISCLOSURE SCHEDULE (the "Sellers' Shareholder Agreements") to which
such Seller is a party; (B) waive, on behalf of such Seller, any rights of first
refusal such Seller may possess in connection with the consummation of the
transactions contemplated by this Agreement under any of the Sellers'
Shareholder Agreements to which such Seller is a party; (C) terminate, effective
as of the Closing, each of the Sellers' Shareholder Agreements; (D) amend or
waive the provisions of the operating agreement of Moson Holdings relating to
any restrictions on the transfer of the Moson Holdings Interests; and (E) amend
the Articles of Association of S.A.R.L. to provide that the death of a member
will not cause the dissolution of S.A.R.L.
SECTION 5.28 Identification of Investor Directors. Prior to December
31, 2003, the Sellers shall provide Purchaser in writing with the identity of
each Investor Director (as such term is defined in the Stockholders Agreement)
to be appointed to the Purchaser Board effective
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as of the Closing, and shall provide to Purchaser in a timely manner, with
respect to each such Investor Director, all information required by Regulation
14A and Schedule 14A under the Exchange Act as the Purchaser may reasonably
request.
SECTION 5.29 Trustee Undertaking. The trustees of any Seller that is a
trust shall require each beneficiary of such trust who is of legal capacity (or
in the case of a beneficiary not of legal capacity, the parent or legal guardian
of such beneficiary) and who is to receive a distribution of trust proceeds
comprised in whole or in part of any consideration received by such trust
pursuant to the Transaction, to execute, as a condition precedent to the receipt
of any such distribution, an agreement (which for this purpose may be a single
agreement encompassing all future distributions) whereby each such beneficiary
agrees to return up to the entire amount of all such distributions (but no more)
to the trust in order to indemnify, defend and hold harmless such trustees, to
the extent that such trustees are required to indemnify the Purchasers against
any Loss or Tax specified in Sections 10.01, 10.02 and 10.03. Further, each
Executive shall use their respective best efforts to cause the trustees of any
Seller that is a trust to comply with the foregoing requirements of this Section
5.29.
SECTION 5.30. Nalco JV. Neither the Sellers, nor any of the Companies
or their subsidiaries shall take any action or otherwise agree to or consent to
the taking of any action or inaction without the prior written consent of the
Purchaser that would have the effect of increasing the remaining amount of
Ecolochem's required investment in, and capital contribution amount to, the
Nalco JV.
SECTION 5.31 Financing Efforts. Prior to the earlier of the Closing or
the termination of this Agreement in accordance with its terms, Purchaser shall
use its reasonable best efforts (i) to consummate the financing transactions
contemplated by the Commitment Letter or (ii) to obtain Acceptable Alternative
Financing. If Purchaser pursues financing other than as contemplated by the
Commitment Letter, Purchaser shall first use its reasonable best efforts to
obtain Acceptable Alternative Financing that does not involve the issuance, sale
or delivery of equity or equity-related securities (including debt securities
convertible into, or exercisable or exchangable for, Common Stock), and then if
such financing is not available on terms acceptable to Purchaser Board, and if
Purchaser Board determines in good faith that it is in the best interests of
Purchaser andits stockholders to do so, such Acceptable Alternative Financing
that involves the issuance, sale or delivery of equity or equity-related
securities (including debt securities convertible into, or exercisable or
exchangable for, Common Stock). During the periods that Purchaser is complying
with its obligations under this Section 5.31, Sellers and the Sellers
Representatives shall continue to perform their obligations under Section 5.23.
ARTICLE VI
Employee and Benefit Matters
----------------------------
SECTION 6.01. Employees. At the Closing, each of Ecolochem,
International and S.A.R.L. shall continue to employ all employees thereof (the
"Company Employees") as at-will employees or as required under Applicable Law
for employees outside the United States.
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SECTION 6.02. Benefit Plans. (a) Purchaser currently intends to offer
to the Company Employees a package of employee benefits that is substantially
comparable to the employee benefits currently provided under the existing plans
and arrangements of the Companies and their subsidiaries which Purchaser
employee benefits presently include a paid vacation policy, 401(k) plan
participation, and group medical, dental, accident, disability, and life
insurance coverage; provided, however, that Purchaser and its subsidiaries shall
not be required to establish or offer any specific benefit plans or
arrangements, except to the extent such plans or arrangements are offered to
Purchaser's Employees generally; and provided further, that Purchaser and its
subsidiaries shall not be precluded from discontinuing, reducing or modifying
any particular benefit plans or arrangements at any time or from time to time.
Notwithstanding anything in this Agreement to the contrary, in no event will any
Company Employee be permitted to participate in the Purchaser's defined benefit
pension plan.
(b) Service. All service credited to each Company Employee through
the Closing Date shall be recognized for purposes of determining each Company
Employee's eligibility to participate and vest in employee benefit plans,
programs, arrangements and policies maintained by Purchaser or its subsidiaries
(including any severance, vacation or other time off plan or policy) in which
such Company Employee participates after the Closing Date; provided, however,
that such service need not be recognized to the extent that such recognition
would result in any duplication of benefits.
(c) Pre-Existing Conditions, Co-Payments and Deductibles.
Purchaser shall use commercially reasonable efforts to waive (or cause to be
waived) all pre-existing conditions, exclusions, waiting periods and
actively-at-work requirements under all employee benefit plans, programs,
arrangements and policies maintained by Purchaser or its subsidiaries for
Company Employees and their covered dependents who are participants in
comparable Company Employee Benefit Plans immediately prior to the Closing
(other than limitations, including pre-existing conditions, exclusions, or
waiting periods that are already in effect with respect to such Company
Employees and dependents under such plans, programs, arrangements and policies
and that have not been satisfied as of the date such Company Employees and
dependents commence participation in such plans, programs, arrangements and
policies), and Purchaser shall grant (or cause to be granted) full credit under
all such plans, programs, arrangements and policies for all co payments and
deductibles to the extent paid in the plan year in which the Closing Date occurs
(or the year in which Company Employees and their dependents commence
participation in such plans, programs, arrangements and policies, if later).
(d) Vacation. Purchaser shall honor all unused vacation and other
time-off, earned or accrued by the Company Employees through the Closing Date in
accordance with the policies of the Companies and its subsidiaries in effect on
the date hereof.
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ARTICLE VII
Tax Matters
-----------
SECTION 7.01. Preparation of Tax Returns.
(a) Sellers shall prepare and file, or shall cause to be prepared
and filed, on a timely basis all Tax Returns of the Companies and their
subsidiaries with respect to taxable periods ending on or before the Closing
Date (including any Tax Return relating to any "S corporation" short taxable
year of Ecolochem and International or any of its subsidiaries ending on the
Closing Date). At least 30 business days prior to the due date for any such Tax
Returns, the Companies shall deliver such prepared Tax Returns to Purchaser for
its review and comment, and the Companies shall not file such Tax Returns,
without Purchaser's consent prior to the due date for such Tax Returns (taking
into account any available extensions) if such filing would have any impact on
Purchaser's or its subsidiaries' Tax liability, the effectiveness of the Section
338 Elections, or any Tax attribute relevant to Purchaser or its subsidiaries.
If any dispute in this regard has not been resolved before the filing of such
Tax Return, then such dispute shall be submitted to the Accounting Firm for
review and resolution pursuant to the procedure provided in 1.04(d). The parties
shall use best efforts to resolve any disputes with respect to any such Tax
Return prior to the due date (including extensions) thereof. If such dispute is
not resolved on or before the due date for filing of any such Tax Return
(including extensions), the Sellers shall have the authority to file such Tax
Return or cause such Tax Return to be filed, and after the resolution of such
dispute, the parties shall amend, or cause to be amended, such Tax Return as
necessary to give effect to such resolution.
(b) Purchaser shall file, or shall cause to be filed on a timely
basis all other Tax Returns of the Companies and their subsidiaries (including
any Tax Returns of the Companies and their subsidiaries with respect to a
taxable year or period that includes, but does not end on, the Closing Date (a
"Straddle Period")). At least 30 business days prior to the due date for any
such Tax Returns for a Straddle Period, Purchaser shall deliver such Tax Returns
for such Straddle Period to Sellers and shall not file such Tax Returns for such
Straddle Period without the Sellers Representatives' consent prior to the due
date for such Tax Return (taking into account any available extensions) if such
filing would have any impact on Seller's Tax liability, or any Tax attribute
relevant to Seller. If any dispute in this regard has not been resolved before
the filing of such Tax Return, then such dispute shall be submitted to the
Accounting Firm for review and resolution pursuant to the procedure provided in
1.04(d). The parties shall use best efforts to resolve any disputes with respect
to any such Tax Return for such Straddle Period prior to the due date (including
extensions) thereof. If such dispute is not resolved on or before the due date
for filing of any such Tax Return for such Straddle Period (including
extensions), Purchaser shall have the authority to file such Tax Return for such
Straddle Period, and after the resolution of such dispute, the Purchaser shall
amend such Tax Return for such Straddle Period as necessary to give effect to
such resolution.
(c) All Tax Returns described in Section 7.01(a) and all Tax
Returns for a Straddle Period shall be prepared by the applicable party, to the
extent permitted under Applicable Law, in a manner consistent with past practice
of the Companies that does not distort
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Taxable income (e.g., by accelerating or deferring income or deduction) and in
accordance with any Allocation Schedule (and any Final Section 338 Tax
Adjustment thereto).
(d) Purchaser shall not be permitted, and shall not permit the
Companies or any of their subsidiaries following the Closing, to file any
amended Tax Returns of the Companies or any of their subsidiaries relating to
any period, or portion thereof, ending on or before the Closing Date without the
prior written consent of Sellers Representatives, which consent shall not be
unreasonably withheld. If there is any dispute in this regard, then such dispute
shall be submitted to the Accounting Firm for review and resolution pursuant to
the procedure provided in 1.04(d).
SECTION 7.02. Transfer and Similar Taxes. All sales (including, without
limitation, bulk sales), use, value added, transfer, recording, ad valorem,
privilege, documentary, registration, conveyance, license, stamp, duties or
similar Taxes (including all applicable real estate transfer Taxes) and fees
(including any penalties, interest and additions to Taxes) (collectively,
"Transfer Taxes") arising out of, in connection with, or attributable to the
Transaction shall be borne and paid 50% by Purchaser and 50% by Sellers.
Purchaser and Sellers shall cooperate in preparing and timely filing all
relevant Tax Returns required to be filed in respect of any Transfer Tax.
Purchaser and Sellers shall use commercially reasonable efforts to avail
themselves of any available exemptions or other opportunities to reduce or
eliminate any Transfer Taxes.
SECTION 7.03. Subchapter S Status. Sellers shall cause each of
Ecolochem and International to maintain its respective status as an "S
corporation" for U.S. Tax purposes through the Closing Date. Sellers shall cause
each of S.A.R.L. and Moson Holdings to maintain its status as a societe a
responsibilite limitee and limited liability company, respectively, so that each
will be treated as a partnership for U.S. Tax purposes through the Closing Date.
SECTION 7.04. FIRPTA Certificate. Sellers shall deliver to Purchaser at
the Closing a certificate in form and substance reasonably satisfactory to
Purchaser, duly executed and acknowledged, certifying to all facts necessary to
exempt the Transactions from withholding under the provisions of the Foreign
Investment in Real Property Tax Act.
SECTION 7.05. Assistance and Cooperation. Each party, and its
respective affiliates, shall:
(a) cooperate fully in preparing and filing any Tax Returns of or
relating to the Companies and their subsidiaries and preparing for any audits
of, or disputes or litigation with Taxing Authorities regarding, any such Tax
Returns;
(b) maintain and make available to the other and to any Taxing
Authority as reasonably requested all records, information, and documents
relating to Taxes or Tax Returns of or relating to the Companies and their
subsidiaries (including, without limitation, making available the personnel
necessary to timely provide and, if necessary, answer any inquiries regarding
such records, information, and documents);
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(c) provide timely notice to the other party in writing of any
pending or threatened Tax audits, assessments or litigation with respect to the
Companies and their subsidiaries for any taxable period for which the other
party may have liability under this Agreement or otherwise;
(d) furnish the other party with copies of all correspondence
received from any Taxing Authority in connection with any Tax audit or
information request with respect to any taxable period for which the other may
have liability under this Agreement or otherwise; and
(e) cooperate to ascertain, prior to Closing, the number of shares
of capital stock of the Purchaser that will be held by the Sellers as a group
(applying the stock attribution rules of Sections 267 and 318 of the Code)
immediately after the Closing. In furtherance of the foregoing, Sellers shall
use their commercially reasonable efforts to assist Purchaser in obtaining from
all relevant persons, prior to Closing, a certificate indicating the number of
shares of capital stock of the Purchaser that will be held by such persons
directly or indirectly (applying the stock attribution rules of Sections 267 and
318 of the Code) immediately after Closing. Furthermore, on the date of this
Agreement, each Seller shall inform Purchaser of the number of shares of capital
stock of the Purchaser held by such Seller either directly or through any
affiliate that such Seller controls. From the date of this Agreement to Closing,
the Sellers shall not (and shall use their commercially reasonable efforts to
cause their respective affiliates and beneficiaries not to) acquire either
directly, or indirectly through any affiliate controlled by such Seller,
affiliate or beneficiary, any (i) of the outstanding shares of capital stock of
Purchaser or (ii) shares of stock in a regulated investment company under
Subchapter M of the Code or other publicly-traded investment vehicle that exceed
(together with shares of stock of such regulated investment company or other
publicly-traded investment vehicle held by such person as of the date hereof)
0.5% of the outstanding shares of stock of such regulated investment company or
other publicly-traded investment vehicle. In the event that Sellers, directly,
indirectly, or by operation of the attribution rules of the Code referred to
above, own shares of capital stock of the Purchaser prior to Closing, and
Purchaser determines that such ownership could have a detrimental effect on
Purchaser for Tax purposes, Sellers shall use their commercially reasonable
efforts to cooperate with Purchaser to avoid such detrimental effect (which
cooperation may include using their commercially reasonable efforts to dispose
of shares of capital stock of the Purchaser, or using their commercially
reasonable efforts to cause their affiliates and/or their beneficiaries to
dispose of shares of capital stock of the Purchaser, if Purchaser so requests).
SECTION 7.06. Disputes by Taxing Authority. In the event that any of
the allocations described in EXHIBIT A, EXHIBIT B or Section 1.05 are disputed
by any Taxing Authority, the party receiving notice of such dispute shall
promptly notify the other party, and Sellers and Purchaser shall cooperate in
good faith in responding to such challenge to preserve the effectiveness of such
allocation, each at its own cost and expense.
SECTION 7.07. Section 338(h)(10) Elections. The applicable Sellers and
Purchaser shall, if Purchaser so elects, (i) join in making the election
provided for by Section 338(h)(10) of the Code and Section 1.338(h)(10)-1 of the
Treasury regulations promulgated thereunder and any comparable election under
state or local tax law with respect to Purchaser's acquisition of Ecolochem
and/or International (any such election, a "Section 338 Election"), (ii) provide
the necessary information to permit any Section 338 Election to be made, (iii)
as
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promptly as practicable following the Closing Date, take all actions necessary
and appropriate (including filing such tax returns, forms, elections, schedules
and other documents as may be required, including IRS Form 8023, any equivalent
form required by state or local law and any required schedules thereto) to
effect and preserve any timely Section 338 Election, (iv) report Purchaser's
acquisitions of Ecolochem and/or International, as the case may be, consistent
with any Section 338 Election and (v) take no position to the contrary thereto
in any Tax Return, any proceeding before any Taxing Authority or otherwise
prejudice any such Section 338 Election, in each case unless otherwise required
by a Final Determination. Sellers shall use their best efforts to insure that
the acquisition of Ecolochem and International satisfies the provisions of
Section 338(d)(3) of the Code.
SECTION 7.08. Failure to Maintain Subchapter S Status. In the event
that it is determined that either (i) International has failed to qualify as an
"S corporation" within the meaning of Section 1361 of the Code (or any
comparable provision of any state or local Tax law) at any time after its
inception and up to and including the Closing, or (ii) Ecolochem has failed to
so qualify at any time after October 1, 1986 and up to and including the
Closing, Sellers will use their best efforts to remedy International's and/or
Ecolochem's (as the case may be) disqualification from treatment as an "S
corporation" (which efforts shall include any measures that may be taken
pursuant to Section 1362 of the Code or the Treasury Regulations related thereto
and any comparable provision of any state or local Tax law).
SECTION 7.09. Straddle Period. For purposes of this Agreement, in the
case of any Straddle Period, the amount of any Income Taxes of the Companies and
their subsidiaries for the period ending on and including the Closing Date shall
be determined based on an interim closing of the books as of 11:59:59 p.m. on
the Closing Date (and for such purpose, the Taxable period of any partnership or
other pass-through entity in which the Companies or any of their subsidiaries
hold an interest shall be deemed to terminate at such time) (the "Pre-Closing
Period"), and the amount of Taxes other than Income Taxes of the Companies and
their subsidiaries for a Straddle Period which relate to the Pre-Closing Period
shall be deemed to be the amount of such Tax for the entire period multiplied by
a fraction, the numerator of which is the number of days in the Taxable period
ending on and including the Closing Date and the denominator of which shall be
the number of days in such Straddle Period.
SECTION 7.10. Tax Clearance Certificates. If requested in writing by
Purchaser (which writing shall specify the applicable Tax Authority in
question), Sellers shall use their commercially reasonable efforts to obtain as
promptly as possible any Tax clearance certificates or other similar documents
necessary to relieve Purchaser of any Tax withholding obligation or any
successor or transferee liability for Taxes, but only to the extent that Sellers
(on behalf of the Companies or on their own behalf) are legally entitled to
obtain such certificates.
SECTION 7.11. Actions on Closing Date. Other than the consummation of
the Transaction and other transactions in the ordinary course of business,
Sellers shall not take any action (or cause any of the Companies or their
subsidiaries to take any action) on the day of Closing that is reasonably likely
to increase the Tax liability of Purchaser, the Companies, or any of their
respective subsidiaries.
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SECTION 7.12. Tax Audits. In the event that Sellers, become aware of
the commencement or scheduling of any Tax audit or the commencement or
scheduling of any other administrative or judicial proceeding with respect to
the termination, assessment or collection of any Tax of the Companies or any of
their subsidiaries, Sellers shall provide prompt notice to Purchaser describing
such matter in reasonable detail.
SECTION 7.13 Section 83(b) Elections. Each Seller that receives any
consideration pursuant to this Agreement that is or may be subject to a
"substantial risk of forfeiture" within the meaning of Section 83(c) of the Code
shall make and file a timely election in accordance with Section 83(b) of the
Code and the Treasury Regulations promulgated thereunder (and shall make a
comparable election, if required or available, in any state or local
jurisdiction). Notwithstanding Article X or any other provision of this
Agreement to the contrary, Sellers shall jointly and severally indemnify, defend
and hold harmless Purchaser and its affiliates (including the Companies and
their subsidiaries) for any withholding Tax or any other Tax arising as a result
of the election required by this Section 7.13 or as a result of any failure to
make and file the election required by this Section 7.13.
ARTICLE VIII
Conditions Precedent
--------------------
SECTION 8.01. Conditions to Obligation of Purchaser. The obligation of
Purchaser to purchase the Equity Interests and to consummate the Transaction is
subject to the satisfaction (or written waiver by Purchaser) as of the Closing
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of each Seller in this Agreement qualified as to materiality, Company
Material Adverse Effect or knowledge and the representations set forth in
Sections 2.02, 2.03, 2.04 and 3.02(a) and 3.02(b) shall be true and correct in
all respects as of the Closing Date as though made on the Closing Date, except
to the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall be true and
correct in all respects as of such earlier date), and the representations and
warranties of each Seller in this Agreement not so qualified shall be true and
correct in all material respects as of the Closing Date as though made on the
Closing Date, except to the extent such representations and warranties expressly
relate to an earlier date (in which case such representations and warranties
shall be true and correct in all material respects as of such earlier date).
Purchaser shall have received a certificate dated as of the Closing Date signed
by such Seller to such effect.
(b) Performance of Obligations. Each Seller shall have performed
or complied in all material respects with all covenants and agreements required
by this Agreement to be performed or complied with by it by the time of the
Closing. Purchaser shall have received a certificate dated as of the Closing
Date signed by such Seller to such effect.
(c) No Injunctions or Restraints. No Applicable Law or temporary
restraining order, or preliminary or permanent injunction or other order or
decree enacted, entered, promulgated, enforced or issued by any Governmental
Entity or other legal restraint or prohibition (each, a "Legal Restraint") shall
be in effect preventing the sale of any portion of the
79
Equity Interests, the issuance of any of the Initial Stock Consideration or the
execution, delivery or performance of the Stockholders Agreement, the Employment
Agreement, the Escrow Agreement or the Section 338 Escrow Agreement.
(d) Governmental Approvals. The waiting period under the HSR Act
shall have expired or been terminated.
(e) Employment Agreement. Lyman B. Dickerson shall have duly
executed and delivered to Purchaser a counterpart of the Employment Agreement in
the form of EXHIBIT C (the "Employment Agreement").
(f) Escrow Agreement. Each Seller and the Escrow Agent shall have
duly executed and delivered to Purchaser counterparts of the Escrow Agreement.
(g) Stockholders Agreement. Each Seller shall have duly executed
and delivered to Purchaser counterparts of the Stockholders Agreement in the
form of EXHIBIT D (the "Stockholders Agreement").
(h) Stockholder Approval. The Purchaser Stockholder Approval shall
have been obtained.
(i) NYSE Listing. The shares of Common Stock constituting the
Initial Share Consideration shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(j) Opinion. Purchaser shall have received an opinion of Williams
Mullen, in form and substance reasonably acceptable to Purchaser, substantially
to the effect, set forth on EXHIBIT H, along with a reliance letter in favor of
the lending institutions providing financing to the Purchaser in connection with
the Transaction.
(k) Seller Releases. Each Seller shall have executed a release in
the form attached hereto as EXHIBIT J.
(l) Borrowed Debt. All Borrowed Debt shall have been repaid and
all obligations relating thereto shall have been paid or satisfied. All Liens
securing such Borrowed Debt shall have been discharged or the discharge thereof
shall have been adequately provided for. All Derivatives shall have been
terminated.
(m) Section 338 Escrow Agreement. If Purchaser shall have elected,
pursuant to Section 1.05(f), to enter into the Section 338 Escrow Agreement,
each Seller, Sellers Representatives and the escrow agent named in such Section
338 Escrow Agreement shall have duly executed and delivered to Purchaser
counterparts of the Section 338 Escrow Agreement.
(n) Shareholders/Operating Agreements. Each Seller shall have
taken all necessary action to (A) execute, on behalf of such Seller, any consent
to the Transaction necessary under any of the Sellers' Shareholder Agreements to
which such Seller is a party; (B) waive, on behalf of such Seller, any rights of
first refusal such Seller may possess in connection
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with the consummation of the transactions contemplated by this Agreement under
any of the Sellers' Shareholder Agreements to which such Seller is a party; (C)
terminate, effective as of the Closing Date, each of the Sellers' Shareholder
Agreements; (D) amend or waive the provisions of the operating agreement of
Moson Holdings relating to any restrictions on the transfer of the Moson
Holdings Interests; and (E) amend the Articles of Association of Ecolochem
S.A.R.L. to provide that the death of a member will not cause the dissolution of
Ecolochem S.A.R.L.
(o) Availability of Funds. Purchaser shall have either: (i)
obtained Purchaser's proposed financing of the portion of the Initial Cash
Consideration contemplated by the Commitment Letter; or (ii) obtained Acceptable
Alternative Financing.
SECTION 8.02. Conditions to Obligation of Sellers. The obligation of
each Seller to transfer its Equity Interests and consummate the Transaction is
subject to the satisfaction (or written waiver by Sellers Representatives) as of
the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser in this Agreement qualified by materiality, Purchaser
Material Adverse Effect or knowledge and the representations set forth in
Sections 4.10 and 4.11 shall be true and correct in all respects as of the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and correct in all
respects as of such earlier date), and the representations and warranties of
Purchaser in this Agreement not so qualified shall be true and correct in all
material respects as of the Closing Date as though made on the Closing Date,
except to the extent such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date). Sellers
Representatives shall have received a certificate dated as of the Closing Date
signed by the Chief Financial Officer of Purchaser to such effect.
(b) Performance of Obligations of Purchaser. Purchaser shall have
performed or complied in all material respects with all covenants and agreements
required by this Agreement to be performed or complied with by Purchaser by the
time of the Closing. Sellers Representatives shall have received a certificate
dated as of the Closing Date signed by the Chief Financial Officer of Purchaser
to such effect.
(c) No Legal Restraint. No Applicable Law or Legal Restraint shall
be in effect preventing the sale of any portion of the Equity Interests, the
issuance of any of the Initial Stock Consideration or the execution, delivery or
performance of the Stockholders Agreement, the Employment Agreement, the Escrow
Agreement or the Section 338 Escrow Agreement.
(d) Governmental Approvals. The waiting period under the HSR Act
shall have expired or been terminated.
(e) Employment Agreement. Purchaser shall have duly executed and
delivered to Lyman B. Dickerson a counterpart of the Employment Agreement.
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(f) Escrow Agreement. Purchaser and the Escrow Agent shall have
duly executed and delivered to each Seller counterparts of the Escrow Agreement.
(g) Stockholders Agreement. Purchaser shall have duly executed and
delivered to each Seller counterparts of the Stockholders Agreement.
(h) Stockholders Approval. The Purchaser Stockholder Approval
shall have been obtained.
(i) NYSE Listing. The shares of Common Stock constituting the
Initial Share Consideration shall have been approved for listing on the NYSE,
subject to official notice of issuance.
(j) Opinion. Sellers shall have received an opinion of Testa,
Hurwitz & Thibeault, LLP, in form and substance reasonably acceptable to Sellers
Representatives, substantially to the effect set forth in EXHIBIT I, along with
a reliance letter in favor of the lending institutions providing financing to
the Purchaser in connection with the Transaction.
(k) Shelf Registration Statement. The Shelf Registration Statement
shall have been declared effective by the SEC on or before the Closing and shall
continue to be effective as of the Closing.
(l) Letter of Credit/Section 338 Escrow Agreement. Purchaser, at
its option, shall have either obtained the letter of credit described in Section
1.05(f) or Purchaser and the escrow agent named in the Section 338 Escrow
Agreement shall have duly executed and delivered to each Seller counterparts of
the Section 338 Escrow Agreement.
(m) Board of Directors. Provided that Sellers shall have complied
with their obligations under Section 5.28, the Investor Directors (as such term
is defined in the Stockholders Agreement) shall have been appointed to the Board
of Directors of Purchaser.
(n) Availability of Funds. Purchaser shall have either: (i)
obtained Purchaser's proposed financing of the portion of the Initial Cash
Consideration contemplated by the Commitment Letter; or (ii) obtained Acceptable
Alternative Financing.
SECTION 8.03. Waiver. If (a) any party entitled to the benefit of a
representation or warranty contained in this Agreement becomes aware (the
"Specified Party") of any event, change, effect, development, action or omission
occurring between the date hereof and Closing (a "Specified Event") that has
caused or will cause any representation or warranty contained in this Agreement
to be untrue or incorrect or to be incapable of being true and correct as of the
Closing Date, (b) such Specified Event would result in the failure of any of the
conditions set forth in Section 8.01 or Section 8.02, as the case may be, to be
satisfied and (c) the Specified Party does not exercise its rights to delay the
Closing under this Article VIII, then such Specified Party shall not be entitled
to make a claim for indemnity hereunder or otherwise with respect to such
Specified Event.
SECTION 8.04. Frustration of Closing Conditions. None of Purchaser or
Sellers may rely on the failure of any condition set forth in this Article VIII
to be satisfied if such failure
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was caused by such party's failure to act in good faith or to use its
commercially reasonable efforts to cause the Closing to occur, as required by
Section 5.04.
ARTICLE IX
Termination
-----------
SECTION 9.01. Termination.
(a) Notwithstanding anything to the contrary in this Agreement,
this Agreement may be terminated and the Transaction abandoned at any time
before the Closing:
(i) by mutual written consent of Sellers
Representatives and Purchaser;
(ii) by Sellers Representatives if any of the
conditions set forth in Section 8.02 shall have become incapable of fulfillment,
and shall not have been waived in writing by Sellers Representatives;
(iii) by Purchaser if any of the conditions set forth
in Section 8.01 shall have become incapable of fulfillment, and shall not have
been waived in writing by Purchaser;
(iv) by Sellers Representatives if Purchaser's Board
approves or recommends (or, if Purchaser is required under Applicable Law to
publicly disclose its position with respect to a publicly announced Acquisition
Transaction or offer or proposal therefor, Purchaser fails to recommend against,
including by taking no position with respect to) an Acquisition Transaction;
(v) by Sellers Representatives if Purchaser's Board,
in accordance with Section 5.10(d), withdraws or modifies, or publicly proposes
to withdraw or modify, in a manner adverse to Sellers its recommendation that
the stockholders of Purchaser grant the Purchaser Stockholder Approval or fails
to recommend, or publicly proposes not to recommend, that the stockholders of
Purchaser grant the Purchaser Stockholder Approval;
(vi) by Sellers Representatives if an Acquisition
Transaction is consummated or a definitive agreement providing for the
implementation of an Acquisition Transaction is entered into;
(vii) by Purchaser, if Purchaser's Board shall have
approved an Acquisition Transaction that is a Purchaser Superior Proposal and
that is conditioned on the Transaction not being consummated, and the Purchaser
shall have concurrently with such termination entered into a definitive
agreement providing for the implementation of such Acquisition Transaction;
(viii) by Sellers Representatives or Purchaser, if
the Closing does not occur on or before six months from the date of this
Agreement (the "Outside Date") provided that (i) the terminating party has
fulfilled its obligations under Section 5.04 and (ii) Sellers Representatives or
Purchaser may extend the Outside Date for an additional three-month period,
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if, as of the Outside Date, (A) there exists a Legal Restraint that has not
become final and non-appealable or (B) the waiting period under the HSR Act
shall not have expired or been terminated;
(ix) by Sellers Representatives or Purchaser, if at a
duly held stockholders meeting of Purchaser or any adjournment thereof at which
the Purchaser Stockholder Approval is voted on, the Purchaser Stockholder
Approval shall have not been obtained;
(x) by Sellers Representatives or Purchaser, if
Purchaser shall not have obtained financing by the Outside Date (as such date
may be extended as contemplated by Section 9.01(a)(viii)) for the Initial Cash
Consideration (including the proposed financing as contemplated by the
Commitment Letter or financing that qualifies as Acceptable Alternative
Financing);
(xi) by Sellers Representatives if Purchaser shall
have obtained financing for the Initial Cash Consideration that involves the
issuance, sale or delivery of equity or equity-related securities (including
debt securities convertible into, or exercisable or exchangable for, Common
Stock);
provided, however, that any party seeking termination under clause (ii), (iii),
or (viii) is not then in material breach of any of its representations,
warranties, covenants or other agreements contained in this Agreement.
(b) In the event of termination by Sellers Representatives or
Purchaser under this Section 9.01, written notice thereof shall forthwith be
given to the other parties and the Transaction shall be terminated, without
further action by any party. If the Transaction is terminated as provided
herein:
(i) each party shall return to the other all
documents and other material received from the other or their agents or
representatives in connection with the Transaction, whether so obtained before
or after the execution hereof; and
(ii) all confidential information received by each
party with respect to the other shall be treated in accordance with the
Confidentiality Agreement and the terms of this Agreement, which shall remain in
full force and effect notwithstanding its termination.
SECTION 9.02. Effect of Termination. If this Agreement is terminated
and the Transaction is abandoned as described in Section 9.01, this Agreement
shall become null and void and of no further force and effect, except for the
provisions of (i) Section 5.03 relating to confidential information, (ii)
Section 11.03 relating to certain expenses, (iii) Sections 9.01, 9.02 and 9.03,
(iv) Section 5.06 relating to publicity, (v) Section 11.09 relating to governing
law, (vi) Section 11.10 relating to jurisdiction and (vii) Section 11.11
relating to waiver of jury trial. Nothing in this Section 9.02 shall be deemed
to release any party from any liability for any willful breach by such party of
the terms and provisions of this Agreement or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement.
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SECTION 9.03. Fee and Expenses.
(a) Purchaser shall pay Sellers a fee of $13,200,000 if:
(i) this Agreement is terminated under Section
9.01(a)(iv) or 9.01(a)(vi) if the Acquisition Transaction that triggers the
Sellers Representatives' right to so terminate is conditioned on the Transaction
not being consummated in accordance with the terms of this Agreement;
(ii) this Agreement is terminated under Section
9.01(a)(v) or Section 9.01(a)(vii);
(iii) an Acquisition Transaction is consummated and
this Agreement is subsequently terminated under Sections 9.01(a)(viii) or
9.01(a)(ix), without the Transaction being consummated;
(iv) an Acquisition Transaction is publicly announced
or publicly proposed or publicly commenced and this Agreement is terminated
under Section 9.01(a)(viii) or 9.01(a)(ix); or
(v) this Agreement is terminated by either Sellers
Representatives or Purchaser under Section 9.01(a)(x), if Purchaser fails to
obtain financing, or Acceptable Alternative Financing, for the Initial Cash
Consideration other than because of: (1) any change or development that shall
have occurred since September 30, 2003 with respect to the Companies, or any
additional information is disclosed to or discovered by any Lender (including,
without limitation, information contained in any review, report or financial
statement required to be provided to any of them in connection with the
Commitment Letter), which any Lender reasonably determines has had or could
reasonably be expected to have a material adverse effect on, or indicates a
material worsening of, the business, results of operations, condition (financial
or otherwise), assets, liabilities or prospects of Companies and their
subsidiaries, taken as a whole; or (2) in the reasonable judgment of any Lender,
a material adverse change or material disruption that shall have occurred after
the date of the Commitment Letter in the financial, banking or capital markets
generally (including, without limitation, the markets for loans to or debt
securities issued by companies similar to Purchaser or the Companies), which has
had or could reasonably be expected to have a material adverse effect on the
syndication of any portion of the "Bank Facilities" (as such term is defined in
the Commitment Letter).
(b) If this Agreement is terminated under Section 9.01(a)(iv) or
9.01(a)(vi) in a manner that does not give rise to the rights set forth in
Section 9.03(a)(i), Purchaser shall pay Sellers an amount equal to the
reasonable out-of-pocket costs and expenses of Sellers and the Companies
incurred in connection with the negotiations leading up to and the performance
of their obligations under this Agreement up to an aggregate of $4,500,000. If
this Agreement is terminated under Section 9.01(a)(xi), Purchaser shall pay
Sellers an amount equal to the reasonable out-of-pocket costs and expenses of
Sellers and the Companies incurred in connection with the negotiations leading
up to and the performance of their obligations under this Agreement up to an
aggregate of $4,500,000.
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(c) Any amounts due under Section 9.03(a) or Section 9.03(b) shall
be paid by wire transfer of immediately available funds within 10 business days
after the date of termination of this Agreement. Such payment shall be made to
the bank accounts of Sellers designated in writing by Sellers Representatives.
(d) Purchaser acknowledges that the agreements contained in this
Section 9.03 are an integral part of the Transaction, and that, without these
agreements, Sellers would not enter into this Agreement.
(e) Sellers' sole and exclusive remedy for any breach of any
representation or warranty of Purchaser contained in Section 4.24 (or any
certificate delivered by Purchaser to Sellers with respect to such
representations or warranties) or any covenant or other agreement of Purchaser
contained in Section 5.31 shall be its ability to terminate this Agreement as
contemplated by Section 9.01(a)(x) or (xi) and, if applicable, to be paid the
amounts specified in Section 9.03(a)(v) or Section 9.03(b).
SECTION 9.04. Amendment. This Agreement may be amended in writing by
the parties (in the case of Purchaser), by action taken or authorized by
Purchaser's Board, at any time before or after the Purchaser Stockholder
Approval; provided, however, that, after the Purchaser Stockholder Approval, no
amendment shall be made that, under Applicable Law or applicable rules and
regulations of the NYSE, requires further approval by the stockholders of
Purchaser without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of all of the parties.
SECTION 9.05. Extension; Waiver. At any time before the Closing, the
parties, by action taken or authorized by Sellers Representatives and Purchaser,
may in writing, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties contained herein or
in any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein; provided that any party hereto
may unilaterally waive in writing compliance with any of the agreements or
conditions contained herein to the extent any such agreement or condition is
exclusively for the benefit of such party. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. Subject to Section 8.03, the
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
SECTION 9.06. Expense or Fee Reimbursement. If either party fails to
promptly pay to the other any expense, reimbursement or fee due hereunder, the
defaulting party shall pay the costs and expenses (including reasonable legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment.
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ARTICLE X
Indemnification
---------------
SECTION 10.01. Tax and 401(a) Company Benefit Plan Indemnification.
(a) Sellers shall jointly and severally indemnify, defend and hold
harmless Purchaser and its affiliates (including the Companies and their
subsidiaries after the Closing) and each of their respective officers,
directors, employees, stockholders, agents and representatives from any loss,
liability, claim, damage or expense including reasonable legal fees and expenses
(the amount of any such loss, liability, claim, damage or expense shall be
determined without regard to any qualification relating to materiality, the
cause or occurrence of a Company Material Adverse Effect or Purchaser Material
Adverse Effect, as applicable, or the knowledge of any person contained in any
representation or warranty, giving rise to claim for indemnity hereunder) (each,
a "Loss" and, collectively, "Losses") suffered or incurred by any such
indemnified party (and in the case of Section 10.01(a)(ii), 10.01(a)(iii), and
10.01(a)(vi) below, shall pay any such Tax to Purchaser and its affiliates
(including the Companies and their subsidiaries after the Closing)), to the
extent arising from (i) any breach of any representation or warranty of Sellers
contained in Sections 3.10(j), (k), (o), or (p), or any certificate delivered by
such Seller under this Agreement with respect to Sections 3.10(j), (k), (o), or
(p), or Article VII (but excluding any breach of Section 7.05(e)), (ii) any
Taxes (or the non-payment thereof) of the Companies or any of their respective
subsidiaries, attributable to Taxable periods ending on or before the Closing
Date (and, for any Straddle Period, the portion of such period extending through
the end of the Closing Date), and for this purpose any Tax or other item that is
attributable to an "overall foreign loss" within the meaning of Sections 904(f)
and/or 1373 of the Code and that results from the transactions set forth in this
Agreement shall be deemed to be Taxes of the Companies or any of their
respective subsidiaries and shall be deemed to be attributable to Taxable
periods ending on or before the Closing Date; (iii) any Tax imposed on the
Companies or any of their respective subsidiaries as a result of or by reason of
the transactions contemplated by this Agreement (other than (A) any Tax solely
and directly attributable to making any Section 338 Election, (B) any Tax
described in Section 7.02 payable by Purchaser or (C) without prejudice to the
indemnification provided in Section 10.01(a)(i) with respect to Section 3.10(o),
any Tax relating to any adjustment under Section 481(a) of the Code (and any
corresponding provisions of state, local and foreign law) by reason of a change
in accounting method or otherwise)); (iv) the failure by the Companies, any of
their subsidiaries or the Sellers to satisfy any of the covenants of such
persons under this Agreement, including but not limited to the covenants of such
persons under Article VII hereof, to the extent that such covenants relate to
Tax matters (but specifically excluding Section 7.05(e)), (v) the maintenance
prior to Closing by the Companies or their subsidiaries of any Company Benefit
Plan that is intended to be qualified under Section 401(a) of the Code (other
than claims for benefits under any such Company Benefit Plan that are fully
funded as of the Closing Date; provided that Sellers shall not be liable for any
contributions or expenses in respect of any such Company Benefit Plan to the
extent that such contributions or expenses are not due and payable at or prior
to the Closing) and (vi) any Estate Tax attributable to assets included in the
gross estate of the Estate of Richard C. Dickerson and assessed against the
Purchaser and its affiliates (including the Companies and their subsidiaries) by
the Internal Revenue Service, the Commonwealth of Virginia, or any other
federal, state or foreign governmental authority. Notwithstanding anything in
the foregoing to
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the contrary, no indemnification shall be made with respect to
an item to the extent such item was included in Closing Working Capital.
(b) The aggregate liability of all Sellers for a breach of the
representation in Section 3.10(p) shall in no event exceed the amount of the
Section 338 Tax Adjustment (taking into account any Final Section 338 Tax
Adjustment).
(c) Purchaser shall, and shall cause the Companies and their
subsidiaries to, indemnify, defend and hold harmless Sellers and their
affiliates (other than the Companies and their subsidiaries after the Closing)
and each of their respective officers, directors, employees, stockholders,
agents and representatives from any Loss suffered or incurred by such
indemnified party to the extent arising from any Taxes (or the non-payment
thereof) of the Companies or any of their respective subsidiaries attributable
to Taxable periods (or portion of any Straddle Period) beginning after the
Closing Date; provided, however, that Purchaser and the Companies and their
subsidiaries shall not be required to indemnify, defend or hold harmless Sellers
or any other person pursuant to this Section 10.01(c) for any matter with
respect to which Sellers are obligated to indemnify Purchaser pursuant to this
Article X, and, for the avoidance of doubt, no Loss attributable to any such
obligation of Sellers shall be treated as a Loss for purposes of this 10.01(c).
(d) Notwithstanding anything in this Agreement to the contrary,
Sellers shall have no liability under Sections 2.07 or 7.05 for any
representations, warranties or covenants relating to the ownership of Purchaser
stock by the beneficiaries of any Seller that is a trust or an estate.
SECTION 10.02. Article II and Certain Other Indemnifications.
(a) Each Seller, severally and not jointly, shall indemnify,
defend and hold harmless Purchaser and its affiliates (including the Companies
and their subsidiaries) and each of their respective officers, directors,
employees, stockholders, agents and representatives against any Loss suffered or
incurred by any such indemnified party to the extent arising from (i) any breach
of any representation or warranty of such Seller contained in Sections 2.01,
2.02, 2.03 or 2.04 of this Agreement or any certificate delivered by such Seller
under this Agreement with respect to Sections 2.01, 2.02, 2.03 or 2.04 and (ii)
any breach by such Seller of Sections 5.03(b) or 5.08; provided that the
aggregate liability of any Seller under this Section 10.02 shall in no event
exceed the portion of the Initial Purchase Price received by such Seller.
(b) Purchaser acknowledges that liability in respect of Section
10.02(a) shall be several and not joint and Purchaser shall only be entitled to
seek indemnification in respect thereof from Sellers in breach of the applicable
representation, warranty, covenant or certificate.
SECTION 10.03. Other Indemnification by Sellers.
(a) Except as relates to the specific matters identified in
Section 10.01 and Section 10.02, for which the sole indemnification is provided
in Section 10.01 and Section 10.02, each Seller shall, jointly and severally,
indemnify, defend and hold harmless Purchaser and its affiliates (including the
Companies and their subsidiaries) and each of their respective officers,
88
directors, employees, stockholders, agents and representatives against any Loss
suffered or incurred by any such indemnified party to the extent arising from:
(i) (A) any breach of any representation or warranty
of Sellers contained in Article III or Sections 2.05 or 2.06 of this Agreement
or any certificate delivered by Sellers to Purchaser with respect to such
representations or warranties;
(ii) any breach of any covenant or other agreement of
Sellers contained in this Agreement (other than Section 7.05(e), and Sections
5.03(b) and 5.08, which shall be governed by Section 10.02); and
(iii) the failure by the Companies or their
subsidiaries to receive the Consent required under any Contract set forth on
SECTION 3.03(A) OF THE SELLER DISCLOSURE SCHEDULE under the heading Ecolochem,
Inc. Customer Contracts (the "Consent Contracts") which results in the
termination of such Consent Contract by the other party thereto in the 12-month
period after Closing (the date upon which such Consent Contract is terminated
being referred to herein as the "Termination Date"), provided that (y) the other
party to such Consent Contract does not withhold Consent based solely on the
identity of Purchaser or its subsidiaries and (z) Purchaser uses commercially
reasonable efforts to procure such Consent after the Closing (which shall not
include a requirement to materially amend or otherwise materially alter the
terms of such Consent Contract or to make any monetary payment), and provided
further that any Loss under this Section 10.03(a)(iii) shall, with respect to
any such terminated Consent Contract, be equal to the product of three times the
Assumed Revenues received by the Companies or their subsidiaries under such
Consent Contract. For purposes of the foregoing, "Assumed Revenues" with respect
to a terminated Consent Contract shall equal the revenue generated under such
Consent Contract during the period commencing on the date one year before the
Termination Date and ending on the Closing Date.
(iv) any Loss resulting from a determination by the
Department of Labor that the Companies' field
service representatives or other employees should be classified as non-exempt
employees entitled to overtime pay; provided that such Loss shall only relate to
pay periods occurring on or before the Closing Date.
(b) Notwithstanding the foregoing,
(i) Sellers shall not have any liability under clause
(i) of Section 10.03(a) unless the aggregate of all such Losses for which all
Sellers would, but for this Section 10.03(b)(i), be liable exceeds on a
cumulative basis an amount equal to $3,300,000, and then Sellers shall only have
liability to the extent of such excess;
(ii) Sellers shall not have any liability under
clause (i) of Section 10.03(a) for any individual item where the Loss relating
thereto is less than $50,000 and such items shall not be aggregated for purposes
of any other clause of this Section 10.03(b); provided that the amounts of any
individual items which are substantially similar shall be aggregated together
for purposes of satisfying such $50,000 amount;
89
(iii) except in respect of a breach of the
representations and warranties contained in Section 3.15, the aggregate
liability of all Sellers under clause (i) of Section 10.03(a) shall in no event
exceed $66,000,000 (the "Seller General Cap"); provided that all amounts paid by
Sellers in respect of clauses (i), (ii), and (iv) of Section 10.03(b) shall be
aggregated for purposes of determining whether the Seller General Cap has been
reached;
(iv) in respect of a breach of the representations
and warranties contained in Section 3.15, the aggregate liability of all Sellers
under clause (i) of Section 10.03(a) shall in no event exceed $165,000,000 (the
"Seller Environmental Cap"); provided that all amounts paid by Sellers in
respect of clauses (i), (ii), and (iii) of Section 10.03(b) shall be aggregated
for purposes of determining whether the Seller Environmental Cap has been
reached;
(v) no indemnification shall be made with respect to
an item of Loss under this Section 10.03 to the extent such item was included
within the calculation of, or in determining Excess Cash or Closing Working
Capital.
(c) Purchaser acknowledges that except for remedies that cannot be
waived as a matter of law, the remedies set forth in this Article X shall be its
sole and exclusive remedies from and after the Closing with respect to any and
all claims relating to (i) this Agreement, (ii) any certificate delivered in
connection herewith, (iii) the Transaction, (iv) the Equity Interests or (v) the
assets, liabilities and businesses of the Companies or their subsidiaries, in
the case of clause (v) with respect to facts or circumstances in existence at or
prior to the Closing; provided, however, that the foregoing shall not limit the
right of the Purchaser to bring an action against any Seller in tort for fraud
or other intentional misconduct or omission. In furtherance of the foregoing,
Purchaser waives, from and after the Closing, to the fullest extent permitted
under Applicable Law, any and all rights, claims and causes of action it or any
of its affiliates (including the Companies and their subsidiaries) may have
against Sellers under any Applicable Law or equitable or common law rights and
remedies relating to (i) this Agreement, (ii) any certificate delivered in
connection herewith, (iii) the Transaction, (iv) the Equity Interests or (v) the
assets, liabilities and businesses of the Companies or their subsidiaries, in
the case of clause (v) with respect to facts or circumstances in existence at or
prior to the Closing (except under the indemnification provisions of this
Article X); provided, however, that the foregoing shall not limit the right of
the Purchaser to bring an action against any Seller in tort for fraud or other
intentional misconduct or omission, or prevent Purchaser from seeking equitable
remedies available to it as a result of Sellers' breach of the covenants set
forth in Section 5.03 or Section 5.08.
(d) Purchaser acknowledges and agrees that, solely with respect to
indemnification claims under Sections 10.03(a)(i) or (ii), Purchaser must first
proceed against the Escrowed Funds (as such term is defined in the Escrow
Agreement) prior to proceeding directly against Sellers with respect thereto.
SECTION 10.04. Other Indemnification by Purchaser.
(a) Purchaser shall, and shall cause its affiliates to, indemnify,
defend and hold harmless Sellers and their affiliates (other than the Companies
and their subsidiaries) and each of their respective agents, partners,
employees, directors, officers, trustees and
90
representatives against any Loss suffered or incurred by any such indemnified
party to the extent arising from:
(i) any breach of any representation or warranty of
Purchaser contained in Article IV of this Agreement (other than Section 4.24) or
any certificate delivered by Purchaser to Sellers with respect to such
representations or warranties;
(ii) any breach of any covenant or other agreement of
Purchaser contained in this Agreement (other than Section 5.31); and
(iii) all obligations, liabilities and commitments of
whatever kind and nature, primary or secondary, direct or indirect, express,
implied, liquidated, absolute, contingent or otherwise, known or unknown,
whether or not accrued, of the Companies or their subsidiaries arising from
facts or circumstances in existence at or prior to the Closing, including any
such obligations, liabilities or commitments relating to (A) any Contract or
oral contract, permit, plan or other commitment or agreement to which any of the
Companies or their subsidiaries is a party or by which any of the Companies or
their subsidiaries or any of their properties or assets is bound, (B) any
Company Benefit Plan or (C) any Proceeding, except, in the case of each of
clauses (A), (B) and (C), to the extent Sellers are required to provide
indemnification for such obligations, liabilities and commitments under Sections
10.01, 10.02 or 10.03.
(b) Notwithstanding the foregoing,
(i) Purchaser shall not have any liability under
clause (i) of Section 10.04(a) unless the aggregate of all such Losses for which
Purchaser would, but for this Section 10.04(b)(i), be liable exceeds on a
cumulative basis an amount equal to $3,300,000, and then Purchaser shall only
have liability to the extent of such excess;
(ii) Purchaser shall not have any liability under
clause (i) of Section 10.04(a) for any individual item where the Loss relating
thereto is less than $50,000 and such items shall not be aggregated for purposes
of any other clause of this Section 10.04(b); provided that the amounts of any
individual items which are substantially similar shall be aggregated together
for purposes of satisfying such $50,000 amount;
(iii) except in respect of a breach of the
representations and warranties contained in Section 4.20, the aggregate
liability of Purchaser under clause (i) of Section 10.04(a) shall in no event
exceed $66,000,000 (the "Purchaser General Cap"); provided that all amounts paid
by Purchaser in respect of clauses (i), (ii), and (iv) of Section 10.04(b) shall
be aggregated for purposes of determining whether the Purchaser General Cap has
been reached;
(iv) in respect of a breach of the representations
and warranties contained in Section 4.20, the aggregate liability of Purchaser
under clause (i) of Section 10.04(a) shall in no event exceed $165,000,000 (the
"Purchaser Environmental Cap"); provided that all amounts paid by Purchaser in
respect of clauses (i), (ii), and (iii) of Section 10.04(b) shall be aggregated
for purposes of determining whether the Purchaser Environmental Cap has been
reached;
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(c) Notwithstanding the foregoing, any breach of the
representations and warranties of Purchaser contained in Sections 4.02, 4.10,
4.11 and 4.13 shall not be subject to the limitations contained in clauses (i),
(ii), (iii) or (iv) of Section 10.04(b) and an item of Loss relating thereto
shall not be aggregated for any such clause.
(d) Sellers acknowledge that except for remedies that cannot be
waived as a matter of law, the remedies set forth in this Article X shall be
their sole and exclusive remedies from and after the Closing with respect to any
and all claims relating to (i) this Agreement, (ii) any certificate delivered in
connection herewith, (iii) the Transaction, and (iv) the assets, liabilities and
business of the Purchaser or its subsidiaries, in the case of clause (iv) with
respect to facts or circumstances in existence at or prior to the Closing;
provided, however, that the foregoing shall not limit the right of Sellers to
bring an action against Purchaser in tort for fraud or other intentional
misconduct or omission. In furtherance of the foregoing, Sellers waive, from and
after the Closing, to the fullest extent permitted under Applicable Law, any and
all rights, claims and causes of action they or any of their affiliates
(including the Companies and their subsidiaries) may have against Purchaser
under any Applicable Law or equitable or common law rights and remedies or
otherwise relating to this Agreement, any certificate delivered in connection
herewith and the Transaction (except under the indemnification provisions of
this Article X); provided, however, that the foregoing shall not limit the right
of Sellers to bring an action against Purchaser in tort for fraud or other
intentional misconduct or omission.
(e) Sellers' sole and exclusive remedy for any breach of any
representation or warranty of Purchaser contained in Section 4.24 or any
certificate delivered by Purchaser to Sellers with respect to such
representations or warranties, or any covenant or other agreement of Purchaser
contained in Section 5.31, shall be its ability to terminate this Agreement as
contemplated by Section 9.01(a)(x) or (xi) and, if applicable, to be paid the
amounts specified in Section 9.03(a)(v) or Section 9.03(b).
SECTION 10.05. Limitations on Liability; Cooperation.
(a) Notwithstanding any provision herein, none of Sellers or
Purchaser shall in any event be liable to the other party or their affiliates,
officers, directors, employees, stockholders, partners or trustees, on account
of any indemnity obligation set forth in Section 10.01, Section 10.02, Section
10.03, Section 10.04 or otherwise for any indirect, consequential, special,
incidental or punitive damages (including, but not limited to, lost profits,
loss of use, damage to goodwill or loss of business).
(b) Purchaser and each Seller shall cooperate with each other with
respect to resolving any claim or liability with respect to which one party is
obligated to indemnify the other party hereunder including by making
commercially reasonable efforts to mitigate or resolve any such claim or
liability.
(c) Nothing in this Agreement shall preclude Sellers from
attempting to establish that the diminution in the value of the shares of Common
Stock issued in the Transaction constitutes a direct damage of Sellers and that
liability therefor is not precluded under Section 10.05(a).
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SECTION 10.06. Losses Net of Insurance, etc. The amount of any Loss for
which indemnification is provided under this Article X shall be net of any
amounts recovered by the indemnified party under insurance policies with respect
to such Loss. Any indemnity payment under this Agreement shall be treated, to
the extent permitted by Applicable Law as an adjustment to the Initial Purchase
Price for Tax purposes, and to the extent not so permitted, the amount of any
such payment shall be adjusted to take into account the Tax, if any, resulting
from the receipt of such payment.
SECTION 10.07. Termination of Indemnification. The obligations to
indemnify, defend and hold harmless a party:
(a) under Section 10.01 shall terminate six months after the time
the applicable statutes of limitation with respect to the Tax or 401(k) Plan
matters liabilities in question expire (after giving effect to any extensions
thereof);
(b) under Section 10.03(a)(i) and 10.04(a)(i) shall terminate when
the applicable representation or warranty terminates under Section 11.12;
(c) under Section 10.03(a)(ii) and 10.04(a)(ii) with respect to
covenants and other agreements for which performance is required at or before
the Closing shall terminate 18 months after the Closing Date;
(d) under Sections 10.03(a)(iii) and 10.03(a)(iv) shall terminate
18 months after the Closing Date;
(e) under Sections 10.02(a)(ii), 10.03(a)(ii), and 10.04(a)(ii),
in each case with respect to covenants and other agreements for which
performance is required at or after the Closing Date, shall terminate 18 months
after the last date for which performance is required in respect of such
covenant or other agreement; and
(f) under the other clauses of Section 10.02, Section 10.03 and
Section 10.04 shall not terminate; provided, however, that as to clauses (a),
(b), (c), (d) and (e) of this Section 10.07, such obligations to indemnify,
defend and hold harmless shall not terminate with respect to any item as to
which the person to be indemnified or the related party thereto shall have,
before the expiration of the applicable period, previously made a claim by
delivering a notice of such claim (stating in reasonable detail the basis of
such claim) to the indemnifying party.
SECTION 10.08. Procedures Relating to Indemnification for Third-Party
Claims.
(a) For a person (the "indemnified party") to be entitled to any
indemnification provided for under this Agreement (other than indemnification
under Section 10.01 that shall be governed by Section 10.10), in respect of,
arising out of or involving a claim or demand made by any third party against
the indemnified party (a "Third-Party Claim"), such indemnified party must
promptly notify the indemnifying party in writing, and in reasonable detail, of
the Third-Party Claim after receipt by such indemnified party of the Third-Party
Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure (except that the indemnifying party shall not be
93
liable for any expenses incurred during the period the indemnified party failed
to give such notice). Thereafter, the indemnified party shall deliver to the
indemnifying party, promptly after the indemnified party's receipt thereof,
copies of all notices and documents (including court papers) received by the
indemnified party relating to the Third-Party Claim.
(b) If a Third-Party Claim is made against an indemnified party
that could result in an indemnification obligation of the indemnifying party,
the indemnifying party shall be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof. Should the indemnifying
party so elect to assume the defense of a Third-Party Claim, the indemnifying
party shall not be liable to the indemnified party for legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof, unless the indemnified party retains its own counsel because of a
mutually agreed on conflict of interest. If the indemnifying party assumes such
defense, the indemnified party shall have the right to participate in the
defense thereof and to employ counsel (not reasonably objected to by the
indemnifying party), at its own expense, separate from the counsel employed by
the indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the fees and
expenses of counsel employed by the indemnified party for any period during
which the indemnifying party has failed to assume the defense thereof (other
than during the period before the time the indemnified party shall have given
notice of the Third-Party Claim as provided above).
(c) If the indemnifying party so elects to assume the defense of
any Third-Party Claim, all of the indemnified parties shall cooperate with the
indemnifying party in the defense or prosecution thereof. Such cooperation shall
include the retention and (on the indemnifying party's request) the provision to
the indemnifying party of records and information reasonably relevant to such
Third-Party Claim, and making employees, if applicable, reasonably available to
provide additional information and explanation of any material provided
hereunder. Whether the indemnifying party shall have assumed the defense of a
Third-Party Claim, the indemnified party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third-Party Claim without
the indemnifying party's prior written consent. If the indemnifying party
chooses to defend or prosecute any Third-Party Claim, the indemnified party must
agree to any settlement, compromise or discharge of such Third-Party Claim that
the indemnifying party may recommend and that by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third-Party Claim.
SECTION 10.09. Procedures Related to Indemnification for Other Claims
(Other than Tax Claims under Section 10.01). If any indemnified party has a
claim against any indemnifying party under Sections 10.02, 10.03 or 10.04 not
involving a Third-Party Claim being asserted against or sought to be collected
from such indemnified party, the indemnified party shall promptly deliver to the
indemnifying party notice of such claim. The failure by any indemnified party to
notify the indemnifying party shall not relieve the indemnifying party from any
liability that it may have to such indemnified party under Sections 10.02, 10.03
or 10.04, except to the extent the indemnifying party shall have been actually
prejudiced as a result of such failure (except that the indemnifying party shall
not be liable for any expenses incurred during the period in that the
indemnified party failed to give such notice).
94
SECTION 10.10. Procedures Relating to Indemnification of Tax Claims.
(a) If one party is responsible for the payment of Taxes under
Section 10.01 or is otherwise responsible under the indemnification provisions
of Section 10.01 for a Loss relating to a Tax (the "Tax Indemnifying Party"),
and the other party to this Agreement (the "Tax Indemnified Party") receives
notice or otherwise becomes aware of any deficiency, proposed adjustment,
assessment, audit, examination, suit, dispute or other claim (a "Tax Claim")
with respect to such Taxes or becomes aware of such Loss, the Tax Indemnified
Party shall use reasonable efforts to notify the Tax Indemnifying Party in
writing of such Tax Claim or Loss. Failure to deliver the aforementioned notice,
however, shall not limit the liability of the Tax Indemnifying Party to the Tax
Indemnified Party.
(b) Subject to Section 10.10(d), with respect to any Tax Claim for
which Purchaser is the Tax Indemnified Party and for which Purchaser has not
waived its rights to indemnification for Taxes under this Agreement, Purchaser
shall assume and control all proceedings taken in connection with such Tax Claim
(including selection of counsel) and, without limiting the foregoing, may in its
sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing Authority with respect
thereto, and may, in its sole discretion, either pay the Tax claimed and sue for
a refund where Applicable Law permits such refund suits or contest the Tax Claim
in any permissible manner;
(c) The Sellers and each of their respective affiliates shall
cooperate with Purchaser in contesting any Tax Claim, which cooperation shall
include the retention and (on the Purchaser's request) the provision to the
Purchaser of records and information reasonably relevant to such Tax Claim, and
making employees reasonably available to provide additional information or
explanation of any material provided hereunder or to testify at proceedings
relating to such Tax Claim.
(d) In no case shall Purchaser or the Companies or their
subsidiaries or any of their respective officers, directors, employees,
stockholders, agents, representatives or affiliates settle or otherwise
compromise any Tax Claim or Loss for which indemnification may be provided under
Section 10.01(a) without the prior written consent of Sellers Representatives,
which consent may not be unreasonably withheld. Neither party shall settle a Tax
Claim relating solely to Taxes of the Companies or any of their subsidiaries for
a Straddle Period without the other party's prior written consent, which consent
may not be unreasonably withheld.
SECTION 10.11. Representations and Warranties. All representations,
warranties, covenants, and agreements of the Sellers and the Purchaser made in
this Agreement (as modified by the SELLERS DISCLOSURE SCHEDULE and the PURCHASER
DISCLOSURE SCHEDULE) shall be deemed to have been relied upon by the party or
parties to this Agreement to whom they are made, and shall survive the Closing
as provided in Sections 10.07 and 11.12 regardless of any investigation or
knowledge of any facts, circumstances or events on the part of such party or its
representatives and each party hereby expressly reserves their respective rights
to rely on, enforce and seek redress with respect to any breach of or
non-compliance with any such representations, warranties, covenants and/or
agreements regardless of any investigation or knowledge of any facts,
circumstances or events on the part of such party or its representatives (other
than in
95
respect of such facts, circumstances or events disclosed in the Sellers
Disclosure Schedule or the Purchaser Disclosure Schedule), in each case subject
to the limitations set forth in this Article X. Nothing contained in this
Section 10.12 is intended to supercede the provisions of Section 8.03.
ARTICLE XI
General Provisions
------------------
SECTION 11.01. Assignment. This Agreement and the rights and
obligations hereunder shall not be assignable or transferable by Purchaser or
Sellers without the prior written consent of the other parties; provided,
however, that Purchaser may assign its right to purchase the Equity Interests to
one or more direct or indirect wholly-owned subsidiaries of Purchaser without
the prior written consent of Sellers; provided further, that (a) no assignment
shall limit or affect the assignor's obligations hereunder and (b) such assignee
agrees in writing to be bound by the terms hereof and delivers any certificate
contemplated by Section 5.25. This Agreement shall bind and inure to the benefit
of Seller's heirs, legal guardians and successors and permitted assigns. Any
attempted assignment in violation of this Section 11.01 shall be void.
SECTION 11.02. No Third-Party Beneficiaries. Except as provided in Article X or
Section 5.09, this Agreement is for the sole benefit of the parties, their
heirs, legal guardians and their successors and permitted assigns and nothing
herein expressed or implied shall give or be construed to give to any person,
other than the parties, their heirs, legal guardians and permitted assigns, any
legal or equitable rights hereunder.
SECTION 11.03. Expenses.
(a) Whether or not the transactions contemplated by this Agreement
are consummated, except as provided in Section 7.02, Section 9.03(b) or Section
11.03(b), each Seller and the Purchaser shall be responsible for the payment of
their own respective costs and expenses incurred in connection with the
negotiations leading up to and the performance of its respective obligations
under this Agreement, including the fees of any attorneys, accountants or
advisors employed or retained by or on behalf of such party. Subject to the
provisions of Section 7.02, Section 9.03(b) and Section 11.03(b), the costs and
expenses of Sellers, the Companies and their subsidiaries incurred in connection
with the negotiations leading up to and the performance of their respective
obligations under this Agreement, including the fees of any attorneys,
accountants or advisors employed or retained by relating to the Transaction,
shall be paid by Sellers individually, and no portion thereof shall be paid by,
or shall be the responsibility of, the Companies or their subsidiaries after the
Closing. Sellers shall jointly and severally indemnify Purchaser, the Companies
and their subsidiaries for all costs and expenses of Sellers, the Companies and
their subsidiaries referred to in the preceding sentence that are not paid in
full before the Closing, without application of any deductible, threshold or
other reduction or set off provided in this Agreement or otherwise.
(b) Any provision in this Agreement to the contrary
notwithstanding, all filing fees of Sellers, the Companies or their subsidiaries
relating to compliance with the HSR Act and any similar merger, takeover or
competitive laws of any foreign Governmental Entity or jurisdiction shall be
reimbursed by Purchaser at Sellers' demand.
96
SECTION 11.04. Notices. All notices, requests, permissions, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given (a) 5 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:
(i) if to Sellers,
Ecolochem, Inc.
4545 Patent Road
Norfolk, VA 23502
Attention: Lyman B. Dickerson
Fax: (757) 855-1478
with a copy to:
Williams Mullen
A Professional Corporation
222 Central Park Avenue, Suite 1700
Virginia Beach, VA 23462
Attention: Frederick T. Stant, Esq.
Fax: (757) 473-0395
and to:
Cravath, Swaine & Moore, LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Alan Stephenson, Esq.
Fax: (212) 474-3700
(ii) if to Purchaser,
Ionics, Incorporated
65 Grove Street
Watertown, MA 02459
Attention: Stephen Korn, Vice
President and General Counsel
Fax: (617) 926-3760
97
with a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attention: Mark H. Burnett, Esq.
Fax: (617) 248-7100
or to such other address(es) as shall be furnished in writing by any such party
to each of the other parties in accordance with the provisions of this Section
11.04.
SECTION 11.05. Headings; Certain Definitions.
(a) The descriptive headings of the Articles and Sections of this
Agreement, the descriptive headings of the SELLER DISCLOSURE SCHEDULE and the
PURCHASER DISCLOSURE SCHEDULE and the Table of Contents to this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
(b) For all purposes hereof:
"affiliate" means, with respect to any specified
person, any other person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified person, but shall
not include any joint venture of the Companies and their subsidiaries or the
Purchaser or its subsidiaries.
"Acceptable Alternative Financing" shall mean any
financing obtained or to be obtained by Purchaser in connection with its
proposed financing of a portion of the Initial Cash Consideration as an
alternative to the proposed financing contemplated by the Commitment Letter that
is approved by Purchaser Board, which financing may involve the issuance, sale
or delivery of senior, senior subordinated or subordinated notes, or equity or
equity-related securities (including debt securities convertible into, or
exercisable or exchangable for, Common Stock), issued pursuant to a public
offering or Rule 144A or other private placement.
"Applicable Law" means any statute, law, ordinance,
rule or regulation promulgated by any Governmental Entity.
"Borrowed Debt" means (A) indebtedness of the
Companies or their subsidiaries for money borrowed from a financial institution
or any other person (other than the Companies and their subsidiaries) including,
without limitation, any Seller and any affiliate of any Seller and (B)
indebtedness evidenced by a promissory note, letter of credit, credit facility,
bond or similar security.
"business day" means a day, other than a Saturday or
a Sunday, on which commercial banks are not required or authorized to close in
the City of New York.
"Code" means the Internal Revenue Code of 1986, as
amended.
98
"Company Material Adverse Effect" means (i) any
change, event, fact or circumstance that has or would reasonably be expected to
have a material adverse effect on the business, assets, condition, results of
operations or prospects of the Companies and their subsidiaries, taken as a
whole, or (ii) any change, event, fact or circumstance that would materially
impair, or cause a material delay in the Sellers' ability to perform their
obligations under this Agreement or the Ancillary Agreements; provided that any
change, event, fact or circumstance resulting from the announcement or pending
status of the Transaction shall not constitute a Company Material Adverse
Effect.
"Consent" means any consent, approval or
authorization of any person.
"Contract" means any written or oral lease, sublease,
license, indenture, note, agreement, commitment, arrangement or other contract.
"control" when used with respect to any specified
person means the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
correlative meanings.
"Environmental Laws" means all applicable federal,
state, local and foreign statutes, laws (including common or case law),
regulations, ordinances, rules, judgments, judicial decisions, orders, decrees,
codes, plans, injunctions, Environmental Permits, or governmental restrictions,
arising thereunder, relating to property damage, the protection of human health
or safety or the environment or to Releases of any Hazardous Materials into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any Hazardous
Materials or the containment, removal or remediation thereof.
"Environmental Permits" means all permits, licenses,
registrations and other authorizations required under Environmental Laws.
"ERISA Affiliate" means, with respect to an entity,
any other entity that, together with such entity, would be treated as a single
employer under Section 414 of the Code or Section 4001 of ERISA.
"Estate Tax" or "Estate Taxes" means all federal,
state, and foreign estate, inheritance or other wealth transfer or wealth
receipt taxes imposed by virtue of the transmission of property, real or
personal, tangible or intangible, included in the measure of a decedent's
taxable estate or a beneficiary's taxable inheritance together with all
interest, penalties, additions to tax and additional amounts with respect
thereto.
"Exchange Act" means the Securities and Exchange Act
of 1934, as amended.
"Final Determination" shall mean the final resolution
of any Tax liability (including all related penalties, interest and additions to
Tax) for a taxable period. A Final Determination shall result from the first to
occur of:
99
(i) the expiration of 30 days after Internal Revenue
Service (the "IRS") acceptance of an offer to Waive Restrictions on Assessment
and Collection of Deficiency in Tax and to Accept Overassessment on Federal
Revenue Form 870-AD (or any successor comparable form or the expiration of a
comparable period with respect to any comparable agreement or form under the
laws of other jurisdictions);
(ii) a decision, judgment, decree, or other order by
a court of competent jurisdiction that is not subject to further judicial review
(by appeal or otherwise) and has become final;
(iii) the execution of a closing agreement under
Section 7121 of the Code or the acceptance by the IRS or its counsel of an offer
in compromise under Section 7122 of the Code, or comparable agreements under the
laws of other jurisdictions;
(iv) the expiration of the time for filing a claim
for refund or for instituting suit in respect of a claim for refund disallowed
in whole or part by the IRS or other relevant taxing authority;
(v) any other final disposition of the tax liability
for such period by reason of the expiration of the applicable statute of
limitations; or
(vi) any other event that the parties agree is a
final and irrevocable determination of the liability at issue.
"Governmental Entity" means any federal, state, local
or foreign government or court of competent jurisdiction, administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign.
"Hazardous Materials" means any and all environmental
pollutants and contaminants, environmental contamination, and any and all toxic,
caustic, radioactive or otherwise hazardous materials, substances or wastes that
are regulated under any Environmental Laws, and includes, without limitation,
petroleum and its derivatives and by-products, and any other hydrocarbons.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"including" or "includes" means including, without
limitation.
"Income Tax" or "Income Taxes" means all income or
franchise Taxes imposed on or measured by net income.
"Judgment" means any judgment, order or decree.
"knowledge of Purchaser" means the actual knowledge
of Douglas R. Brown, William J. McMahon, Edward J. Cichon, Thomas A. Heredia,
John F. Curtis, Stephen Korn or Daniel M. Kuzmak and no other person.
100
"knowledge of Sellers" means the actual knowledge of
Lyman B. Dickerson, Douglas G. Dickerson, Mary S. Landon, J. Roger Taylor,
Kenneth R. Schmidt, or F. Gray Kiger and no other person.
"Lender" shall mean any "Bank" or the "Lead Arranger"
(as each such term is defined in the Commitment Letter) or any lender or agent
party to any definitive financing agreements that Purchaser may have entered
into in connection with Purchaser's proposed financing of a portion of the
Initial Cash Consideration.
"Nalco JV" means Process Water Services GP.
"NYSE" means the New York Stock Exchange, Inc.
"material" when used in conjunction with the
Companies or their subsidiaries or Purchaser and its subsidiaries, the Combined
Balance Sheet or the Purchaser Balance Sheet, as applicable, means material to
the Companies and their subsidiaries, taken as a whole or Purchaser and its
subsidiaries, taken as a whole, as applicable.
"person" means any individual, firm, corporation,
partnership, limited liability company, trust, joint venture, Governmental
Entity or other entity.
"Proceeding" means any investigations, lawsuits,
actions or proceedings.
"Purchaser Benefit Plan" means each "employee benefit
plan" as defined under ERISA, and each other material plan, arrangement or
policy relating to stock options, stock purchases, deferred compensation,
severance, fringe benefits or other employee benefits (other than plans or
arrangements mandatory under Applicable Law), in each case maintained by or
contributed to the Purchaser or any of its ERISA Affiliates for the benefit of
any of their present or former directors, officers or employees or with respect
to which the Purchaser or any of its ERISA Affiliates may incur any liability.
"Purchaser Material Adverse Effect" means (i) any
change, event, fact or circumstance that has or would reasonably be expected to
have a material adverse effect on the business, assets, condition, results of
operations or prospects of Purchaser and its subsidiaries, taken as a whole, or
(ii) any change, event, fact or circumstance that would materially impair, or
cause a material delay in Purchaser's ability to perform its obligations under
this Agreement or the Ancillary Agreements; provided that any change, event,
fact or circumstance resulting from the announcement or pending status of the
Transaction shall not constitute a Purchaser Material Adverse Effect.
"Purchaser's Significant Subsidiaries" means Ionics
Iberica S.A., Ionics Italba S.p.A., Ionics Ultrapure Water Corporation, Aqua
Design, Inc., and Sievers Instruments, Inc.
"Release" means any release, spill, emission,
leaking, pumping, injection, deposit, disposal, dispersal, leaching or discharge
or any migration as a result of any of the foregoing, into the indoor or outdoor
environment.
101
"SEC" means the U.S. Securities and Exchange
Commission and any successor agency thereto.
"subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting partnership
interests sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, more than 50%
of its equity interests) owned, directly or indirectly, by such first person or
by another subsidiary of such first person.
"Tax" or "Taxes" means all federal, state, local and
foreign net income, alternative or add-on minimum, Estate Tax, estimated, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, capital profits, lease, service, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit taxes, customs duties and other taxes,
governmental fees and other like assessments and charges of any kind whatsoever
(including liability for Taxes imposed on another person, whether incurred or
borne as a transferee or successor or by contract or otherwise), together with
all interest, penalties, additions to tax and additional amounts with respect
thereto.
"Tax Return" means all returns, declarations,
reports, claims for refund, information statements and other documents relating
to Taxes, including all schedules and attachments thereto, and including all
amendments thereof.
"Taxing Authority" means any federal, state, local or
foreign government, any subdivision, agency, commission or authority thereof or
any quasi-governmental body exercising tax regulatory authority.
(c) The following terms have the meanings set forth in the
following Sections:
Term Section
- ---- -------
Accounting Firm..........................................................1.04(c)
Acquisition Transaction..................................................5.10(c)
Acceptable Alternative Financing........................................11.05(b)
affiliate...............................................................11.05(b)
Aggregate Consideration..................................................1.01(b)
Agreement...............................................................Preamble
Allocation Schedule......................................................1.05(g)
Ancillary Agreements........................................................2.01
Applicable Filings.......................................................5.11(c)
Applicable Law..........................................................11.05(b)
Assumed Revenues...................................................10.03(a)(iii)
Attorneys-in-Fact........................................................1.06(b)
Borrowed Debt...........................................................11.05(b)
business day............................................................11.05(b)
Closing.....................................................................1.02
Closing Date................................................................1.02
Closing Excess Cash Statement............................................1.04(b)
102
Closing WC Amount........................................................1.04(h)
Closing Working Capital..................................................1.04(b)
Closing Working Capital Statement........................................1.04(b)
Code....................................................................11.05(b)
Combined Balance Sheet...................................................3.04(a)
Combined Financial Statements............................................3.04(a)
Commercially Available Software..........................................3.07(h)
Commitment Letter...........................................................4.24
Common Stock.............................................................1.01(a)
Companies...............................................................Recitals
Company.................................................................Recitals
Company Amount...........................................................1.01(b)
Company Benefit Plans....................................................3.14(a)
Company Contracts........................................................3.08(b)
Company Employees...........................................................6.01
Company Intellectual Property............................................3.07(i)
Company Material Adverse Effect.........................................11.05(b)
Company Properties.......................................................3.06(a)
Competitive Activities...................................................5.08(a)
Confidentiality Agreement................................................5.03(a)
Consent.................................................................11.05(b)
Consent Contracts..................................................10.03(a)(iii)
Contract................................................................11.05(b)
control.................................................................11.05(b)
Current Assets...........................................................1.04(h)
Current Liabilities......................................................1.04(h)
Customer Contracts.......................................................3.08(c)
Deposits.................................................................1.04(a)
Derivatives..............................................................1.03(a)
Dickerson's Executors....................................................3.10(j)
Ecolochem...............................................................Recitals
Ecolochem Sellers.......................................................Recitals
Ecolochem Shares........................................................Recitals
Employee...................................................................3.14A
Employment Agreement.....................................................8.01(e)
Environmental Laws......................................................11.05(b)
Environmental Permits...................................................11.05(b)
Equity Interests.......................................................Recitals
ERISA...................................................................3.14(a)
ERISA Affiliate.........................................................11.05(b)
Escrow Account...........................................................1.03(a)
Escrow Agent.............................................................1.03(a)
Escrow Agreement.........................................................1.03(a)
Escrow Amount............................................................1.03(a)
Escrowed Shares..........................................................1.03(a)
Estate Tax..............................................................11.05(b)
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Estate Taxes............................................................11.05(b)
Estimated Closing Excess Cash Amount.....................................1.04(a)
Estimated Closing Working Capital........................................1.04(h)
Estimated Closing WC Amount..............................................1.04(h)
Excess Cash..............................................................1.04(a)
Executive................................................................5.03(b)
Exchange Act............................................................11.05(b)
Final Closing WC Amount..................................................1.04(h)
Final Closing Working Capital............................................1.04(h)
Final Determination.....................................................11.05(b)
Final Excess Cash Amount.................................................1.04(a)
Final Section 338 Tax Adjustment.........................................1.05(i)
GAAP.....................................................................3.04(a)
Governmental Entity.....................................................11.05(b)
Governmental Permits........................................................3.18
Hazardous Materials.....................................................11.05(b)
HSR Act.................................................................11.05(b)
includes...............................................................11.05(b)
including...............................................................11.05(b)
Income Tax..............................................................11.05(b)
Income Taxes............................................................11.05(b)
indemnified party.......................................................10.08(a)
Initial Cash Consideration ..............................................1.01(a)
Initial Purchase Price...................................................1.01(a)
Initial Stock Consideration..............................................1.01(a)
Intellectual Property....................................................3.07(h)
International...........................................................Recitals
International Sellers...................................................Recitals
International Shares....................................................Recitals
Judgment................................................................11.05(b)
knowledge of Purchaser..................................................11.05(b)
knowledge of Sellers....................................................11.05(b)
Leased U.K. Real Property................................................3.06(c)
Legal Restraint..........................................................8.01(c)
Lender..................................................................11.05(b)
Liens....................................................................3.05(a)
Loss...................................................................10.01(a)
Losses.................................................................10.01(a)
material................................................................11.05(b)
Moson Holdings..........................................................Recitals
Moson Holdings Interests...............................................Recitals
Moson Holdings Sellers..................................................Recitals
Needham.....................................................................3.22
Non-Water Related Competitive Activities.................................5.08(a)
Notice of Disagreement...................................................1.04(c)
NYSE....................................................................11.05(b)
104
Outside Date.......................................................9.01(a)(viii)
Owned U.K. Real Property.................................................3.06(b)
Pension Scheme.............................................................3.14A
Permitted Designee......................................................Recitals
Permitted Designees.....................................................Recitals
Permitted Liens..........................................................3.05(a)
person..................................................................11.05(b)
Pre-Closing Period..........................................................7.09
Post-Closing Statements..................................................1.04(b)
Preliminary Allocation...................................................1.05(c)
Preliminary 338 Tax Adjustment...........................................1.05(d)
Prime Rate...............................................................1.04(f)
Proceeding..............................................................11.05(b)
Proxy Statement..........................................................5.11(b)
Purchaser...............................................................Preamble
Purchaser Balance Sheet..................................................4.06(b)
Purchaser Benefit Plans.................................................11.05(b)
Purchaser Board..........................................................5.13(a)
Purchaser Contracts......................................................4.18(a)
Purchaser Disclosure Schedule................................Article IV Preamble
Purchaser Employee Stock Options.........................................4.03(a)
Purchaser Employee Stock Plans...........................................4.03(a)
Purchaser Environmental Cap.........................................10.04(b)(iv)
Purchaser General Cap..............................................10.04(b)(iii)
Purchaser Intellectual Property..........................................4.23(f)
Purchaser Material Adverse Effect.......................................11.05(b)
Purchaser Rights.........................................................4.03(a)
Purchaser Rights Agreement...............................................4.03(a)
Purchaser SEC Reports....................................................4.05(a)
Purchaser's Significant Subsidiaries....................................11.05(b)
Purchaser Stockholder Approval..............................................4.13
Purchaser Stockholders Meeting...........................................5.11(b)
Purchaser Superior Proposal..............................................5.10(c)
Related Entity..............................................................3.17
Related Party...............................................................3.17
Release.................................................................11.05(b)
Required Capital Calls...................................................1.04(a)
Restricted Action........................................................5.01(a)
S.A.R.L................................................................Recitals
S.A.R.L. Interests......................................................Recitals
S.A.R.L. Sellers........................................................Recitals
Scheduled Company Intellectual Property..................................3.07(a)
SEC.....................................................................11.05(b)
Section 338 Election........................................................7.07
Section 338 Escrow Agreement.............................................1.05(f)
Section 338 Escrow Arrangement Fee.......................................1.05(f)
105
Section 338 Escrowed Funds...............................................1.05(f)
Section 338 Tax Adjustment...............................................1.05(b)
Securities Act..............................................................2.04
Seller Disclosure Schedule...................................Article II Preamble
Seller Environmental Cap............................................10.03(b)(iv)
Seller General Cap.................................................10.03(b)(iii)
Sellers.................................................................Preamble
Sellers' Shareholder Agreements.............................................5.27
Sellers Representatives..................................................1.06(a)
Seller Transaction.......................................................5.10(a)
Senior Company Employee..................................................3.13(e)
Senior Company Employees.................................................3.13(e)
Share Price..............................................................1.01(a)
Specified Event.............................................................8.03
Specified Party.............................................................8.03
Stockholders' Agreement..................................................8.01(g)
Straddle Period..........................................................7.01(b)
Sub-Account..............................................................1.03(a)
subsidiary..............................................................11.05(b)
S-X Compliant Financials.................................................5.11(a)
Tax....................................................................11.05(b)
Tax Claim...............................................................10.10(a)
Tax Indemnified Party...................................................10.10(a)
Tax Indemnifying Party..................................................10.10(a)
Tax Payment Date.........................................................1.05(g)
Tax Return..............................................................11.05(b)
Taxes..................................................................11.05(b)
Taxing Authority........................................................11.05(b)
Termination Date...................................................10.03(a)(iii)
Third-Party Claim.......................................................10.08(a)
Transaction.............................................................Recitals
Transfer Taxes..............................................................7.02
Water Related Competitive Activities.....................................5.08(a)
Working Capital..........................................................1.04(h)
SECTION 11.06. Disclaimers; Acknowledgments; Integrated Contract.
(a) The parties acknowledge that this Agreement, including the
SELLER DISCLOSURE SCHEDULE, the PURCHASER DISCLOSURE SCHEDULE and the EXHIBITS,
any written amendments to the foregoing satisfying the requirements of Section
9.04 hereof, the Ancillary Agreements and the Confidentiality Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and supersede any previous agreements and
understandings (written or oral) between the parties with respect to such
matters. In connection therewith, the parties acknowledge that, except as
specifically set forth in writing
106
in this Agreement, any written amendments to this Agreement satisfying the
requirements of Section 9.04 hereof, the Ancillary Agreements and the
Confidentiality Agreement, there are no restrictions, promises, representations,
warranties, agreements or undertakings, express or implied, of any person with
respect to the subject matter of this Agreement, the Ancillary Agreements or the
Confidentiality Agreement, including any representation or warranty as to value,
merchantability, fitness for a particular purpose or any other matter.
(b) Purchaser acknowledges that Purchaser and its representatives
and agents have been permitted full and complete access to the books and
records, Contracts and other properties and assets of the Companies and their
subsidiaries that Purchaser and its representatives and agents have desired or
requested to see and/or review, and that Purchaser and its representatives and
agents have had a full opportunity to meet with Sellers and the officers of the
Companies and their subsidiaries to discuss the business of the Companies and
their subsidiaries.
(c) Sellers acknowledge that Sellers and their representatives and
agents have been permitted full and complete access to the books and records,
Contracts and other properties and assets of the Purchaser and its subsidiaries
that Sellers and their representatives and agents have desired or requested to
see and/or review, and that Sellers and their representatives and agents have
had a full opportunity to meet with Purchasers and the officers of the Purchaser
and its subsidiaries to discuss the business of the Purchaser and its
subsidiaries.
(d) Without limiting the generality of the foregoing, except as
expressly set forth herein, Purchaser acknowledges that none of Sellers or any
other person has made any representation or warranty, express or implied, as to
the accuracy or completeness of any information that Purchaser or its
representatives or agents have been provided (oral or in writing) regarding the
Companies and their subsidiaries and none of Sellers or any other person shall
have or be subject to any liability to Purchaser or any other person with
respect to any such information furnished by Sellers or the Companies or their
subsidiaries to Purchaser or its representatives or agents, including any
information made available to Purchaser and its representatives and agents in
certain "data rooms," management presentations or otherwise.
(e) Without limiting the generality of the foregoing, except as
expressly set forth herein, Sellers acknowledge that neither the Purchaser nor
any other person has made any representation or warranty, express or implied, as
to the accuracy or completeness of any information that Sellers or their
representatives or agents have been provided (oral or in writing) regarding the
Purchaser and its subsidiaries and neither the Purchaser nor any other person
shall have or be subject to any liability to Sellers or any other person with
respect to any such information furnished by Purchaser or its subsidiaries to
Sellers or their representatives or agents, including any information made
available to Sellers and their representatives and agents in certain "data
rooms," management presentations or otherwise.
(f) In connection with Purchaser's investigation of the Companies
and their subsidiaries, Purchaser has received from or on behalf of Sellers or
the Companies and their subsidiaries certain estimates, projections and
forecasts, of the future performance of the Companies and their subsidiaries.
Purchaser acknowledges that there are uncertainties inherent in attempting to
make such estimates, projections and other forecasts, that Purchaser is familiar
107
with such uncertainties, that Purchaser is taking full responsibility for making
its own evaluation of the adequacy and accuracy of all estimates, projections
and other forecasts furnished to it (including the reasonableness of the
assumptions underlying them), and that Purchaser has received no representation
or warranty from any Seller or any other person with respect to such estimates,
projections and other forecasts (including the reasonableness of the assumptions
underlying them). In furtherance thereof, each Seller expressly disclaims any
and all liability that may be based on such information or errors therein or
omissions therefrom.
(g) In connection with Seller's investigation of the Purchaser and
its subsidiaries, Sellers have received from or on behalf of Purchaser and its
subsidiaries certain estimates, projections and forecasts, of the future
performance of the Purchaser and its subsidiaries. Sellers acknowledge that
there are uncertainties inherent in attempting to make such estimates,
projections and other forecasts, that Sellers are familiar with such
uncertainties, that Sellers are taking full responsibility for making their own
evaluation of the adequacy and accuracy of all estimates, projections and other
forecasts furnished to it (including the reasonableness of the assumptions
underlying them), and that Sellers have received no representation or warranty
from Purchaser or any other person with respect to such estimates, projections
and other forecasts (including the reasonableness of the assumptions underlying
them). In furtherance thereof, Purchaser expressly disclaims any and all
liability that may be based on such information or errors therein or omissions
therefrom.
SECTION 11.07. Exhibits/Schedules; Conflicts
(a) THE SELLER DISCLOSURE SCHEDULE, THE PURCHASER DISCLOSURE
SCHEDULE and all EXHIBITS referred to herein are incorporated in and made a part
of this Agreement. Any capitalized, but undefined, terms used in any of the
above have the meaning defined in this Agreement. The disclosure of any matter
in any section of the SELLER DISCLOSURE SCHEDULE or THE PURCHASER DISCLOSURE
SCHEDULE shall expressly not be deemed to constitute an admission by any Seller
or Purchaser, or to otherwise imply, that any such matter is material for the
purpose of this Agreement. A fact or matter disclosed in the SELLER DISCLOSURE
SCHEDULE or PURCHASER DISCLOSURE SCHEDULE with respect to one section of Article
II, Article III or Article IV shall be deemed to be disclosed with respect to
each other section of such Article where such disclosure is appropriate only to
the extent that the relevance of the disclosure to such other section is readily
apparent on the face thereof.
(b) In the event of any conflict between the provisions of this
Agreement (including the SELLER DISCLOSURE SCHEDULE, the PURCHASER DISCLOSURE
SCHEDULE and the Exhibits), on the one hand, and the provisions of the
Confidentiality Agreement or the Ancillary Agreements, on the other hand, the
provisions of this Agreement shall control.
SECTION 11.08. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement.
This Agreement shall become effective when each party hereto shall have received
a counterpart, or facsimile of a counterpart, of this Agreement, each signed by
the other party or parties hereto or thereto.
SECTION 11.09. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
108
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF THE
STATE OF NEW YORK.
SECTION 11.10. Consent to Jurisdiction. 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 11.11. 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 or the Transaction 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.
SECTION 11.11. Waiver of Jury Trial. Each party waives, to the fullest
extent permitted by Applicable Law, any right it may have to a trial by jury in
respect to any litigation directly or indirectly arising out of, under or in
connection with this Agreement or the Transaction or disputes relating hereto or
thereto. Each party (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce the foregoing waiver and
(b) acknowledges that it and the other parties have been induced to enter into
this Agreement by, among other things, the mutual waivers and certifications in
this Section 11.11.
SECTION 11.12. Survival of Certain Representations.
(a) The representations and warranties of Sellers in this
Agreement (other than in Sections 2.01, 2.02, 2.03 and 2.04) and in any
certificate delivered pursuant hereto (in each case other than the
representations and warranties relating to Taxes and environmental matters set
forth in Section 3.15), shall survive the Closing solely for purposes of Section
10.03 and shall terminate at the close of business on the date 18 months after
the Closing Date, except that representations and warranties relating to Tax
matters, shall survive until the expiration of the date that is six months after
the expiration date of the applicable statute of limitations (including
extensions) and that the representations and warranties in Section 3.15 shall
terminate at the close of business on the fifth anniversary of the Closing Date.
The representations and warranties contained in Sections 2.01, 2.02, 2.03 and
2.04 shall not terminate.
(b) The representations and warranties of Purchaser in this
Agreement (other than Sections 4.02, 4.10, 4.11, 4.13, 4.19 and 4.20) and in any
certificate delivered pursuant hereto shall survive the Closing solely for
purposes of Section 10.04 and shall terminate at the close of business on the
18-month anniversary of the Closing Date, except that the
109
representations and warranties relating to Section 4.20 shall terminate at the
close of business on the fifth anniversary of the Closing Date and the
representations and warranties relating to Section 4.19 shall terminate as of
the Closing. The representations and warranties contained in Sections 4.02,
4.10, 4.11 and 4.13 shall not terminate.
SECTION 11.13. Further Assurances. On and after the Closing Date, from
time to time, each party shall take such other actions and execute such other
documents and instruments of conveyance and transfer as may be reasonably
requested by the other parties from time to time to effectuate or confirm the
transfer of the Equity Interests to Purchaser and the transfer of the Initial
Share Consideration to Sellers in accordance with the terms of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
110
IN WITNESS, each Seller and Purchaser have duly executed this Agreement
as of the date first written above.
ECOLOCHEM SELLERS:
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
November 18, 2003
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
November 18, 2003
Date Signed
By: /s/ Marguerite W. Dickerson
-------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
November 18, 2003
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
November 18, 2003
Date Signed
111
INTERNATIONAL SELLERS:
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
November 18, 2003
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
November 18, 2003
Date Signed
By: /s/ Marguerite W. Dickerson
-------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
November 18, 2003
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
November 18, 2003
Date Signed
112
THE LYMAN DICKERSON IRREVOCABLE TRUST, DATED JULY 1,
2001
By: /s/ Lyman B. Dickerson
-------------------------------
LYMAN B. DICKERSON, Trustee
November 18, 2003
Date Signed
By: /s/ Charles C. Kline
-------------------------------
CHARLES C. KLINE, Independent Trustee
November 18, 2003
Date Signed
THE RICHARD DICKERSON IRREVOCABLE TRUST NO. 3, DATED
JULY 1, 1991
By: /s/ Douglas G. Dickerson
-------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
November 18, 2003
Date Signed
By: /s/ Marguerite W. Dickerson
-------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
November 18, 2003
Date Signed
By: /s/ Frederick T. Stant
-------------------------------
FREDERICK T. STANT, III, Independent Trustee
November 18, 2003
Date Signed
113
THE DOUGLAS DICKERSON IRREVOCABLE TRUST NO. 3, DATED
JULY 1, 1991
By: /s/ Douglas G. Dickerson
-------------------------------
DOUGLAS G. DICKERSON, Trustee
November 18, 2003
Date Signed
By: /s/ Frederick T. Stant
-------------------------------
FREDERICK T. STANT, III, Independent Trustee
November 18, 2003
Date Signed
114
MOSON HOLDINGS SELLERS:
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
November 18, 2003
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
November 18, 2003
Date Signed
By: /s/ Marguerite W. Dickerson
-------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
November 18, 2003
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
November 18, 2003
Date Signed
115
THE LYMAN DICKERSON IRREVOCABLE TRUST, DATED JULY 1,
2001
By: /s/ Lyman B. Dickerson
-------------------------------
LYMAN B. DICKERSON, Trustee
November 18, 2003
Date Signed
By: /s/ Charles C. Kline
-------------------------------
CHARLES C. KLINE, Independent Trustee
November 18, 2003
Date Signed
THE RICHARD DICKERSON IRREVOCABLE TRUST NO. 3, DATED
JULY 1, 1991
By: /s/ Douglas G. Dickerson
-------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
November 18, 2003
Date Signed
By: /s/ Marguerite W. Dickerson
-------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
November 18, 2003
Date Signed
By: /s/ Frederick T. Stant
-------------------------------
FREDERICK T. STANT, III, Independent Trustee
November 18, 2003
Date Signed
116
THE DOUGLAS DICKERSON IRREVOCABLE TRUST NO. 3, DATED
JULY 1, 1991
By: /s/ Douglas G. Dickerson
-------------------------------
DOUGLAS G. DICKERSON, Trustee
November 18, 2003
Date Signed
By: /s/ Frederick T. Stant
-------------------------------
FREDERICK T. STANT, III, Independent Trustee
November 18, 2003
Date Signed
117
S.A.R.L. SELLERS:
/s/ Lyman B. Dickerson
-------------------------------
LYMAN B. DICKERSON
November 18, 2003
Date Signed
/s/ Douglas G. Dickerson
-------------------------------
DOUGLAS G. DICKERSON
November 18, 2003
Date Signed
THE ESTATE OF RICHARD C. DICKERSON
By: /s/ Douglas G. Dickerson
-------------------------------
DOUGLAS G. DICKERSON, Co-Executor
November 18, 2003
Date Signed
By: /s/ Marguerite W. Dickerson
-------------------------------
MARGUERITE W. DICKERSON, Co-Executor
November 18, 2003
Date Signed
118
Signature Page to Purchase Agreement
PURCHASER: IONICS, INCORPORATED
By: /s/ Douglas R. Brown
-------------------------------
DOUGLAS R. BROWN
Its: President and Chief Executive Officer
EXHIBIT A
---------
The number in parenthesis represents the allocation of the Initial Cash
Consideration and Initial Stock Consideration with respect to the applicable
Equity Interests set forth below.
ECOLOCHEM, INC.
Lyman B. Dickerson, Trustee of the Lyman B. Dickerson Revocable Trust dated
September 9, 1996, or any successor trustee, as amended - 6,000 shares of Common
Stock (50%)
Douglas G. Dickerson, Trustee of the Douglas G. Dickerson Revocable Trust dated
June 22, 1988, or any successor trustee, as amended - 3,000 shares of Common
Stock (25%)
Douglas G. Dickerson, Trustee of the Richard C. Dickerson Revocable Trust dated
March 5, 1993, or any successor Trustee, as amended - 3,000 shares of Common
Stock (25%)
ECOLOCHEM INTERNATIONAL, INC.
Lyman B. Dickerson, Trustee of the Lyman B. Dickerson Revocable Trust dated
September 9, 1996, or any successor trustee, as amended - 50 shares of Class A
Voting Common Stock (10%)
Douglas G. Dickerson, Trustee of the Douglas G. Dickerson Revocable Trust dated
June 22, 1988, or any successor trustee, as amended - 25 shares of Class A
Voting Common Stock (5%)
Douglas G. Dickerson, Trustee of the Richard C. Dickerson Revocable Trust dated
March 5, 1993, or any successor Trustee, as amended - 25 shares of Class A
Voting Common Stock (5%)
The Lyman Dickerson Irrevocable Trust, Lyman B. Dickerson and Charles C. Kline,
Trustees, dated July 1, 2001 - 200 shares of Class B Non-Voting Common Stock
(40%)
The Douglas Dickerson Irrevocable Trust No. 3, Douglas G. Dickerson and
Frederick T. Stant, III, Trustees, dated July 1, 1991 - 100 shares of Class B
Non-Voting Common Stock (20%)
The Richard Dickerson Irrevocable Trust No. 3, Frederick T. Stant, III, Trustee,
dated July 1, 1991 - 100 shares of Class B Non-Voting Common Stock (20%)
MOSON HOLDINGS, LLC
Lyman B. Dickerson, Trustee of the Lyman B. Dickerson Revocable Trust dated
September 9, 1996, or any successor trustee, as amended - 50 Class A Voting
Ownership Interests (5.56%)
Douglas G. Dickerson , Trustee of the Douglas G. Dickerson Revocable Trust dated
June 22, 1988, or any successor trustee, as amended - 25 Class A Voting
Ownership Interests (2.78%)
Douglas G. Dickerson, Trustee of the Richard C. Dickerson Revocable Trust dated
March 5, 1993, or any successor trustee, as amended - 25 Class A Voting
Ownership Interests (2.78%)
Lyman B. Dickerson, Trustee, and Charles C. Kline, Independent Trustee of The
Lyman Dickerson Irrevocable Trust dated July 1, 1991 - 400 Class B Non-Voting
Ownership Interests (44.44%)
Douglas G. Dickerson, Trustee, and Frederick T. Stant, III, Independent Trustee
of The Douglas Dickerson Irrevocable Trust dated July 1, 1991 - 200 Class B
Non-Voting Ownership Interests (22.22%)
Douglas G. Dickerson, Trustee, and Frederick T. Stant, III, Independent Trustee
of The Richard Dickerson Irrevocable Trust dated July 1, 1991 - 200 Class B
Non-Voting Ownership Interests (22.22%)
ECOLOCHEM, S.A.R.L.
Lyman B. Dickerson - 524 shares (50%)
Douglas G. Dickerson - 262 shares (25%)
The Estate of Richard C. Dickerson - 262 shares (25%)
EXHIBIT B
---------
Purchase Price Allocation
-------------------------
Ecolochem, Inc. $ 275,249,999
Ecolochem International, Inc. $ 50,000,000
Moson Holdings, LLC $ 4,000,000
Ecolochem, SARL $ 1
Non-competition Agreements $ 750,000
--------------
TOTAL $ 330,000,000
==============
COMPANY AMOUNT
--------------
Initial Cash Initial Stock
Consideration Consideration
$ 200,000,000 4,905,660 shares (5)
-------------- --------------
Ecolochem, Inc. $ 165,230,999 (1)(2)(3) 4,151,660
Ecolochem International, Inc. $ 30,019,000 (3) 754,000 (4)
Moson Holdings, LLC $ 4,000,000 (1) -0-
Ecolochem, SARL $ 1 -0-
Lyman B. Dickerson
Non-Competition Agreement $ 500,000 -0-
Doulgas G. Dickerson
Non-Competition Agreement $ 250,000 -0-
-------------- --------------
TOTAL $ 200,000,000 4,905,660
(1) The final valuation of these assets will be determined by appraisal prior to
Closing. Any adjustments upward or downward will result in an opposite
adjustment to the Initial Cash Consideration allocated to Ecolochem, Inc.
(2) Any adjustments pursuant to Section 1.05 will be allocated to Ecolochem,
Inc.
(3) To the extent permitted by Applicable Law relating to Taxes, adjustment
pursuant to Section 1.03(a)(viii) and 1.04 will be allocated to Ecolochem, Inc.,
however, between the date hereof and the Closing, the Sellers shall use all
commercially reasonable efforts, and shall work with Purchaser, to reduce or
eliminate, using all reasonable tax efficient means, Ecolochem International,
Inc.'s Excess Cash deficit noted on Schedule 1 to Exhibit B.
(4) The number of shares comprising the Initial Stock Consideration allocated to
Ecolochem International, Inc. shall be subject to adjustment based upon the
closing price of Purchaser Common Stock as of the close of business on the
trading day immediately preceding the Closing Date as reported on the NYSE (the
"Closing Price"). The number of shares shall be increased or decreased as
applicable, to a number equal to the quotient derived by dividing $19,981,000 by
the Closing Price. Any change in the number of shares allocated to Ecolochem
International, Inc. shall be offset by an offsetting adjustment to the number of
shares allocated to Ecolochem, Inc.
(5) If, under Section 1.01(a), Purchaser elects to substitute cash for the
shares of Common Stock that Seller would otherwise be entitled to receive under
this Agreement, before Closing, Sellers will notify Purchaser which Sellers will
reduce their share of the Initial Stock Consideration and correspondingly
increase their share of the Initial Cash Consideration.
EXHIBIT B
---------
SCHEDULE 1
----------
ECOLOCHEM
SCHEDULE EXPECTED CLOSING BALANCE SHEET / BOOK VALUE FOR INTERNATIONAL ON A
PROFORMA BASIS (using September 30,2003 figures as included in the audited
Combined Balance Sheet)
BALANCE SHEET PROFORMA
INCLUDED IN "Excess Cash" Interco CLOSING
COMBINED B/S DEFICIT Balances BALANCE SHEET
SEPT. 30, 2003 Sept. 30, 2003 net SEPT.30, 2003
-------------------------------------------------------
Cash (in effect the agreed upon adjustment
for Deferred Taxes) $ 552 $ (552) $ -- $ 1,000
$ 1,000
Short-term investments
Trade accounts receivable 2,559 2,559
Other receivables 65 65
Inventories 576 576
Prepaid expenses and other current assets 219 219
Intercompany Receivables 801 -801
-------------------------------------------------------
Total current assets 4,772 448 -801 4,419
-------------------------------------------------------
PP&E at cost 36,685 36,685
less Accum. Depreciation -16,782 -16,782
Net PP&E 19,903 19,903
Deposits 1 1
Other assets 34 34
-------------------------------------------------------
Total assets $ 24,710 $ 448 $ (801) $ 24,357
=======================================================
Notes payable $ $ $ $
Current installments of long-term debt 1,799 -1,799 0
Accounts payable (incl state & foreign
income taxes payable) 431 431
Accrued expenses 397 -17 380
Due to affiliates 770 -770 0
-------------------------------------------------------
Total current liabilities 3,397 -1,816 -770 811
-------------------------------------------------------
Long-term debt, less current portion 4,895 -4,895 0
-------------------------------------------------------
Deferred Tax Liability 1,438 1,438
Total Stockholders' Equity 14,980 7,159 -31 22,108
-------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 24,710 $ 448 $ (801) $ 24,357
=======================================================
EXHIBIT C
---------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT made as of_____________, 2004 (the
"Agreement") by and between Ionics, Incorporated, a Massachusetts corporation
with principal offices at 65 Grove Street, Watertown, MA 02472 (the
"Corporation"), and Lyman B. Dickerson, an individual residing at 280
Leucadendra Drive, Coral Gables, Florida 33156 (the "Employee").
W I T N E S S E T H
WHEREAS, the Corporation desires that the Employee be employed as its
Vice President, Water Systems Division (consisting of the operations described
below) on the terms and conditions set forth in this Agreement; and
WHEREAS, the Employee desires to be employed by the Corporation in such
capacity, on the terms and conditions set forth in this Agreement; and
WHEREAS, the Employee has represented and warranted to the Corporation
that he has no commitment, obligation or contract of any kind that is
inconsistent with his being employed by the Corporation on the terms contained
herein; and
WHEREAS, this Agreement is being entered into in connection with, and
its execution and delivery is a condition to the closing of, the sale to the
Corporation of all of the outstanding capital stock, equity and membership
interests of Ecolochem, Inc., Ecolochem S.A.R.L., Moson Holdings, LLC and
Ecolochem International, Inc. (each, an "Ecolochem Entity" and collectively, the
"Ecolochem Entities") by the holders thereof, including the Employee (the
"Acquisition");
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements contained in this Agreement, the parties hereby agree as follows:
1. Duties. The Corporation hereby hires and agrees to employ the Employee,
and the Employee agrees to be employed by the Corporation, in an executive
capacity for the Term (as defined in Section 3(a) below) and on the terms and
conditions set forth in this Agreement. During the Employment Term (as defined
in Section 3(a) below), the Corporation shall employ the Employee as its Vice
President, Water Systems Division (which includes, among other operations, the
Ecolochem Entities, their respective subsidiaries and the Corporation's
Ultrapure Water and Industrial Water operations), and as such, the Employee
shall be the senior executive officer with responsibility for such Division and
shall be responsible for managing the integration of the Ecolochem Entities with
the Corporation's existing Ultrapure Water operations. During the Employment
Term, the Employee shall report directly to, and shall be subject to the
direction and control of, the Corporation's Chief Executive Officer, and the
Employee shall be primarily based at Miami, Florida, except for reasonably
required travel on the Corporation's business. During the Employment Term, the
Employee shall devote substantially all of his business time, best efforts, and
business judgment, skill, ability, knowledge, and energies to the advancement of
the Corporation's best interests in the discharge of his responsibilities
hereunder, which shall be the responsibilities commensurate with an executive
position in a corporation with securities publicly traded in the United States.
2. Compensation.
(a) Base Salary. During the Employment Term, as compensation for the
Employee's services hereunder, the Corporation shall pay to the Employee a base
salary of $20,833.33 per month (for an annual rate of $250,000), subject to such
salary increases as may be granted by the Corporation's Board of Directors (the
"Board"). The base salary shall be payable in installments in accordance with
the Corporation's regular practices, as such practices may be modified from time
to time, but in no event less often than monthly. All payments shall be subject
to all applicable federal, state and/or local payroll and withholding taxes.
2
(b) Bonus. In addition to his base salary, during the Employment Term,
the Employee will be eligible to participate in any bonus program to be
established by the Corporation for its senior executive personnel, based upon
criteria determined solely by the Board. In order to be eligible to receive any
bonus, the Employee must be employed on the date upon which the bonus payment is
made.
(c) Stock Options. Employee shall be eligible to participate in any
stock option plans that may be provided by the Corporation to its key employees
from time to time, as determined by the Compensation Committee of the Board of
Directors.
(d) Benefits. During the Employment Term, the Employee shall be
eligible to participate in all benefit plans of the Corporation, including,
without limitation, the Ionics, Incorporated Section 401(k) plan, and group
medical, dental, accident, disability, life and other health benefit plans of
the Corporation, as may be provided by the Corporation from time to time to the
Corporation's executives of comparable status, subject to, and to the extent
that, the Employee is eligible under such benefit plans in accordance with their
respective terms. The Employee will be entitled to first-class air travel on all
air travel taken on behalf of the Corporation in furtherance of his duties as an
executive employee. The Corporation will pay for the maintenance of all airline
club memberships held by the Employee, to the extent not already provided on a
complimentary basis in conjunction with Employee's credit card accounts.
Notwithstanding anything in this Agreement to the contrary, The Employee will
not be eligible to or permitted to participate in the Corporation's defined
benefit pension plan.
(e) Vacation. The Employee shall be entitled to five weeks of vacation
for each calendar year during the Term, at such times as shall be mutually
agreed upon by the Corporation and the Employee, and otherwise in accordance
with the Corporation's regular practices, as such practices may be modified from
time to time.
(f) Expenses. During the Employment Term, the Employee is authorized to
incur reasonable expenses in the performance of his duties hereunder. The
Corporation shall reimburse the Employee for all such expenses upon the
presentation by the Employee, not less frequently than monthly, of signed,
3
itemized expense reports, together with any receipts or vouchers, in accordance
with the Corporation's policies and procedures as adopted and in effect from
time to time applicable to its executive officers.
(g) Indemnity. During the Employment Term and for six years thereafter,
the Corporation will provide to the Employee indemnification rights available to
its directors and officers generally, including the benefit of such policies of
directors' and officers' liability insurance as the Corporation maintains for
the benefit of all its directors and officers during such period.
3. Term and Termination.
(a) The term of this Agreement shall be for the period commencing on
the date hereof and terminating on the date that is two years after the date
hereof, unless earlier terminated pursuant to any of the provisions of this
Section 3 (the "Term"). The period commencing on the date hereof and ending on
the earlier of (i) the expiration of the Term and (ii) the last day of the
Employee's employment with the Corporation, a Ecolochem Entity or any of their
respective subsidiaries shall be referred to as the "Employment Term."
(b) The Corporation may terminate Employee's employment at any time for
Cause (as defined below). "Cause" shall mean any of the following: (i) the
Employee's dishonesty, malfeasance, disloyalty or breach of fiduciary duties to
the Corporation; (ii) the conviction of, or plea of guilty or NOLO CONTENDERE
by, the Employee for any felony involving moral turpitude (or for any lesser
crime or offense involving the Corporation); (iii) the failure or refusal,
except due to incapacity as a result of illness or disability, of the Employee
to perform the lawful duties appropriate to his office assigned to him pursuant
to this Agreement, provided that such failure or refusal continues uncorrected
for a period of 30 days after the Employee shall have received specific written
directions in respect thereof from the Chief Executive Officer; or (iv) any
breach by the Employee of Section 4 of this Agreement or of the Employer's
Agreement With Employee in the form of Exhibit A attached hereto. The Employee's
4
employment shall also terminate immediately upon his death. The Corporation may
terminate the Employee's employment upon ten (10) days' prior written notice
following a determination by the Board that the Employee has a Permanent
Disability (as hereinafter defined); provided, however, that no such termination
shall be effective (i) prior to the expiration of the 180-day period following
the date the Employee first incurred the condition which is the basis for the
Permanent Disability or (ii) if the Employee begins to substantially perform the
significant aspects of his regular duties prior to the proposed effective date
of such termination. For purposes of this Agreement, "Permanent Disability"
shall mean the Employee's inability, by reason of any physical or mental
impairment, to substantially perform the significant aspects of his regular
duties, as contemplated by this Agreement, which inability is reasonably
contemplated to continue for at least one (1) year from its incidence and at
least 90 days from the date of such determination. Any question as to the
existence, extent, or potentiality of the Employee's Permanent Disability shall
be determined by a qualified independent physician selected by the Employee (or,
of the Employee is unable to make such selection, by an adult member of the
Employee's immediate family) and reasonably acceptable to the Board. If the
Employee's employment is terminated due to any of the reasons stated in this
Section 3(b), or if the Employee terminates his employment ((other than for Good
Reason (as defined below) within 24 months after a Change in Control (as defined
below)), then the Corporation shall have no further obligation to the Employee
under this Agreement except for payment pursuant to Section 2 of this Agreement
for services theretofore rendered by the Employee and for benefits required to
be paid or provided by law and payments of the Employee's normal
post-termination benefits in accordance with the Corporation's retirement,
insurance and other benefit plans and arrangements.
(c) If the Corporation terminates this Agreement prior to its
expiration for any reason other than any of the reasons stated in Section 3(b),
or if the Employee terminates his employment with the Corporation for Good
Reason during the Employment Term within 24 months after a Change in Control,
then the Employee shall receive (i) a severance benefit equal to (A) the sum
equal to eighteen months of his then-current base salary, plus (B) an amount
equal to 1.5 times the Employee's target bonus, if any, for the fiscal year in
which such termination occurs, and (ii) benefits required to be paid or provided
5
by law and payment of the Employee's normal post-termination benefits in
accordance with the Corporation's retirement, insurance and other benefit plans
and arrangements, including without limitation thereto the bonus earned for any
fiscal year in which such termination occurs or any previous fiscal year but not
fully paid at the time of such termination.
(d) As used herein, the following terms shall have the following
respective meanings:
(i) A "Change in Control" shall occur or be deemed to have
occurred only if any of the following events occur: (A) any "person," as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (other than the Corporation, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation, or any corporation owned directly or indirectly by the stockholders
of the Corporation in substantially the same proportion as their ownership of
stock of the Corporation) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 30% or more of the combined voting power of the
Corporation's then outstanding securities; (B) individuals who, as of the date
hereof, constitute the Board (as of the date hereof, the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Corporation's stockholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Corporation,
as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or (C) the stockholders of the Corporation
approve a merger or consolidation of the Corporation with any other corporation,
other than (1) a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 70% of the combined voting power
of the voting securities of the Corporation or such surviving entity outstanding
6
immediately after such merger or consolidation, or (2) a merger or consolidation
effected to implement a recapitalization of the Corporation (or similar
transaction) in which no "person" (as hereinabove defined) acquires more than
30% of the combined voting power of the Corporation's then outstanding
securities; or (D) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the Corporation's
assets.
(ii) "Good Reason" shall mean, without the Employee's written
consent, the occurrence within 24 months after a Change in Control of the
Corporation, provided that such occurrence falls within the Employment Term, of
any of the following circumstances unless, in the case of paragraphs (A), (C),
(D) or (F), such circumstances are fully corrected prior to the Employee's date
of termination specified in the notice of termination given in respect thereof:
(A) any significant diminution in the Employee's
position, duties, responsibilities, power, title or office as in effect
immediately prior to a Change in Control;
(B) any reduction in the Employee's annual base
salary as in effect on the date hereof or as the same may be increased from time
to time;
(C) the failure of the Corporation to continue in
effect any material compensation or benefit plan in which the Employee
participates immediately prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Corporation to continue
the Employee's participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of the Employee's participation relative to
other participants, as existed at the time of the Change in Control, or the
failure by the Corporation to award cash bonuses to its executives in amounts
substantially consistent with past practice in light of the Corporation's
financial performance;
7
(D) the failure by the Corporation to continue to
provide the Employee with benefits substantially similar to those enjoyed by the
Employee under any of the Corporation's life insurance, medical, accident, or
disability plans in which the Employee was participating at the time of the
Change in Control, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits, or the failure by
the Corporation to provide the Employee with the number of paid vacation days to
which he is entitled under the terms of this Agreement;
(E) any requirement by the Corporation or of any
person in control of the Corporation that the location at which the Employee
performs his principal duties for the Corporation be changed to a new location
outside a radius of 50 miles from his principal residence at the time of the
Change in Control; or
(F) the failure of the Corporation to obtain a
satisfactory agreement from any successor to assume and agree to perform this
Agreement.
(e) Except for any right of continuation of benefits coverage to the
extent provided by this Agreement or applicable law, benefits shall terminate
pursuant to the terms of the applicable benefit plans as of the termination of
the Employment Term.
(f) All payments made by the Corporation under this Agreement shall be
subject to and reduced by any federal, state and/or local taxes or other amounts
required to be withheld by the Corporation under any applicable law.
4. Employee's Obligations.
(a) Trade Secrets and Confidential Information. The Employee shall hold
in confidence and not disclose (other than in the proper performance of his
duties as an officer of the Corporation or as required by law, court order,
subpoena or similar legal process) at any time (including any time subsequent to
the termination of this Agreement) any and all trade secrets, confidential
8
information or proprietary rights made known to him as such by the Corporation,
including, without limiting the generality of the foregoing, customer lists;
financial information of the Corporation and its customers; customer
requirements; product information, formulations and content; new invention
disclosures, patent applications, know-how and other proprietary intellectual
property; and plans, systems, processes and preparations for the Corporation's
current and proposed business activities. The Employee shall return all written
or printed materials (whether in the form of reports, memoranda, lists, computer
programs or otherwise) and all copies thereof belonging to the Corporation or
relating to any aspect of its business upon the termination of this Employment
Agreement.
(b) Non-Competition/Non-Solicit. The Employee acknowledges that as Vice
President, Water Systems Division of the Corporation, he will make a significant
contribution to the goodwill of its business. The Employee further acknowledges
that he will receive a significant economic benefit as a result of his
employment by the Corporation hereunder and the sale to the Corporation of the
Ecolochem Entities. In consideration thereof, the Employee agrees that during
the Employment Term and for a period of five years thereafter, he will not:
(i) subject, to Section 4(b)(iii) for a period of five years
from the date hereof or, if later, five years from the date Employee is no
longer employed by the Ecolochem Entities or their subsidiaries or by the
Corporation or its subsidiaries (but in no event later than December 31, 2010,
unless Employee enters into a new employment agreement with the Corporation or
its subsidiaries), Employee shall not engage, anywhere in the world, in any
business competitive with any water-related business conducted by the Ecolochem
Entities or their subsidiaries or by the Corporation or its subsidiaries on the
date hereof or on the date Employee ceases to be employed by the Ecolochem
Entities or their subsidiaries or by the Corporation or its subsidiaries (the
"Water-Related Competitive Activities"), including through the ownership of an
interest in a business engaged in a Water-Related Competitive Activity or by
managing such a business;
(ii) subject to Section 4(b)(iii), for a period of two years
from the date hereof or, if later, two years from the date Employee is no longer
employed by the Ecolochem Entities or their subsidiaries or by the Corporation
or its subsidiaries (but in no event later than four years from the date hereof,
9
unless Employee enters into a new employment agreement with the Corporation or
its subsidiaries) Employee shall not engage, anywhere in the world, in any
business competitive with any non-water-related business conducted by the
Ecolochem Entities or their subsidiaries or the Corporation and its subsidiaries
on the date hereof or on the date Employee ceases to be employed by the
Ecolochem Entities or their subsidiaries or by the Corporation or its
subsidiaries (the "Non-Water-Related Competitive Activities" and collectively
with the Water-Related Competitive Activities, the "Competitive Activities"),
including through the ownership of an interest in a business engaged in a
Non-Water-Related Competitive Activity or by managing such a business.
(iii) the covenants in Section 4(b)(i) and (ii) shall not (A)
apply to any activities conducted by Employee on behalf of the Corporation or
its affiliates (including the Ecolochem Entities and their subsidiaries), (B) be
breached as a result of the ownership by Employee of less than 3% of any class
of publicly traded equity or debt securities of a person engaged in any
Competitive Activity, provided that Employee does not control such person (it
being understood that the 3% threshold set forth in this subsection (X) shall
not include any securities held by a registered investment company in which
Employee participates or (Y) any interest in any person who, after the date of
acquisition of such interest, commences any Competitive Activity, provided that
Employee does not control such person.
(iv) for a period of five years from the date hereof or, if
later, five years from the date Employee is no longer employed by the Ecolochem
Entities or their subsidiaries or by the Corporation or its subsidiaries (but in
no event later than December 31, 2010 unless Employee enters into a new
employment agreement with the Corporation or its subsidiaries), Employee shall
not directly or indirectly (A) recruit or solicit for hire or hire or otherwise
engage any employees of the Ecolochem Entities or their subsidiaries or the
Corporation or its subsidiaries or any such person who has terminated his/her
relationship with the Ecolochem Entities or their subsidiaries or the
Corporation or its subsidiaries within six months prior to such action by
Employee or (B) encourage or participate in such recruitment, solicitation or
hiring.
(v) for a period of five years from the date hereof or, if
later, five years from the date Employee is no longer employed by the Ecolochem
Entities or their subsidiaries or by the Corporation or its subsidiaries (but in
no event later than December 31, 2010 unless Employee enters into a new
10
employment agreement with the Corporation or its subsidiaries), directly or
indirectly, solicit or do business in any capacity that constitutes
Water-Related Competitive Activities with any customer of the Ecolochem Entities
or their subsidiaries or the Corporation or its subsidiaries.
(vi) for a period of two years from the date hereof or, if
later, two years from the date Employee is no longer employed by the Ecolochem
Entities or their subsidiaries or by the Corporation or its subsidiaries (but in
no event later than four years from the date hereof, unless Employee enters into
a new employment agreement with the Corporation or its subsidiaries), Employee
shall not directly or indirectly, solicit or do business in any capacity that
constitutes Non-Water-Related Competitive Activities with any customer of the
Ecolochem Entities or their subsidiaries or the Corporation or its subsidiaries.
(c) Injunctive Relief. The parties hereto agree that (i) irreparable
injury will result to the Corporation, its business and property and its
shareholders in the event of a breach of the provisions of this Section 4; and
(ii) the remedy which the Corporation may have at law for any breach or threat
of breach of the provisions of this Section 4 is inadequate. Therefore, the
Employee agrees that in the event of breach or threat of breach of the
provisions hereof by the Employee, the Corporation shall be entitled to
injunctive relief, specific performance or other equitable relief against the
Employee restraining him from such a breach, in addition to any and all remedies
of law. The Employee agrees that the provisions contained in this Section 4
shall remain in full force and effect notwithstanding the breach or claimed
breach of any other provision hereof by any party hereto.
(d) Judicial Intervention. If any provision of this Section 4 shall
for any reason be held to be excessively broad as to scope, activity, subject or
otherwise, so as to be unenforceable by law, such provision or provisions shall
be construed by the appropriate judicial body by limiting or reducing it or
them, so as to be enforceable to the maximum extent compatible with the
applicable law as it shall then appear. Employee agrees that if he violates any
of the covenants in this Section 4, monetary damages will be inadequate, and the
Corporation entitled to injunctive relief and specific performance.
11
5. Waiver of Breach. The waiver by either party hereto of a breach of any
provision of this Agreement by the other party hereto shall not operate as or be
construed to be a waiver of any subsequent breach of such other party.
6. Notices. Any notice or other communication required by or which may be
given to either party hereunder shall be in writing and shall be deemed given
effectively if delivered personally to such party (or the Clerk, in the case of
the Corporation) or if mailed by registered or certified mail, postage prepaid,
return receipt requested, to the address stated for each party in the first
paragraph of this Agreement. Either party may designate a different address by
giving notice of change of address in the manner herein provided.
7. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the principles of conflicts of laws thereof.
8. Arbitration. Any controversy or claim arising out of or relating to
this Agreement or breach thereof (except those for which injunctive or other
equitable relief may be sought) shall be settled by arbitration administered by
the American Arbitration Association in Boston, Massachusetts in accordance with
the commercial arbitration rules then obtaining of the American Arbitration
Association and judgment upon the award may be entered in any court having
jurisdiction thereof.
9. Entire Agreement. This Agreement, together with the agreements attached
hereto as Exhibits, constitutes the entire agreement of the parties hereto
relating to the employment of the Employee by the Corporation. This Agreement
may not be changed except by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification, extension or discharge is
sought.
12
10. Assignment. This Agreement is a personal contract, and the Employee may
not assign any of his rights or delegate any of his duties under this Agreement,
but the rights of the Employee hereunder shall inure to the benefit of his
heirs, executors, administrators and legal representatives. The rights and
obligations of the Corporation under this Agreement shall inure to the benefit
of and be binding upon the successors and assigns of the Corporation. The
Corporation shall have the right to assign this Agreement to any successor of
substantially all of its business or assets, and any such successor shall be
bound by all of the provisions hereof.
11. Severability; Survival.
(a) It is further understood and agreed by the parties hereto that if
any of the provisions of this Agreement shall contravene, or be invalid under,
the laws of the jurisdiction where invoked, such contravention or invalidity
shall not invalidate the whole Agreement, but it shall be construed as it not
containing the particular provision or provisions held to be invalid in the said
particular jurisdiction, and the rights and obligations of the parities shall be
construed and enforced accordingly.
(b) Sections 4, 5, 6, 7, 8, 9, 11, and 13 of this Agreement shall
survive the expiration or earlier termination of this Agreement. In the event
any monetary or other obligations are owing to Employee at the time of
termination, such obligations shall not terminate.
12. Miscellaneous.
(a) The Employee shall sign the Agreement With Employee (dealing with
inventions and proprietary information) attached hereto as Exhibit A
simultaneously herewith.
(b) Each of the parties hereto shall, at any time and from time to time
hereafter, upon the reasonable request of the other, take such further action
and execute acknowledge and deliver such instruments and documents of further
assurance, as may be necessary to carry out the provisions of this Agreement.
13
13. Consent to Jurisdiction. To the extent any claim or action (i) arising
out of or based upon this Agreement; (ii) arising out of or based upon the
Employee's employment with the Corporation and/or termination thereof; or (iii)
relating to the subject matter hereof, is not subject to mandatory arbitration
pursuant to Section 8 above, each of the Corporation and the Employee, by its or
his execution hereof, hereby irrevocably submits to the exclusive jurisdiction
of the state or federal courts of Massachusetts and agrees not to commence any
such claim or action other than in the above named courts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date hereinabove first set forth.
IONICS, INCORPORATED
By:
-----------------------------
Douglas R. Brown
Chief Executive Officer
-----------------------------
Lyman B. Dickerson
14
EXHIBIT A
---------
AGREEMENT WITH EMPLOYEE
THIS AGREEMENT is made as of the ______day of __________________between Lyman B.
Dickerson (hereinafter called the "Employee") and IONICS, INCORPORATED, a
Massachusetts corporation (hereinafter called the "Company").
WHEREAS, the Company and its subsidiaries are engaged throughout the world in
the manufacture of products in accordance with secret processes and formulas,
and their employees have or may become acquainted with such processes and
formulas and the research and developments carried on and may contribute new
inventions or improvements on those already existing, or both; and
WHEREAS, Employee has become employed by the Company pursuant to an Employment
Agreement of even date herewith (the "Employment Agreement").
NOW, THEREFORE, it is agreed as follows:
1. INTELLECTUAL PROPERTY. (a) Employee will promptly disclose in writing to
the Clerk of the Company, or his nominee, all information, observations,
data and records arising out of or obtained in the course of his work for
the Company, and all those discoveries, inventions, devices, machines,
processes, designs, composition of matter and improvements thereon, and any
new use of the same, whether patentable or not, as well as patents and
patent applications (hereinafter collectively called "inventions") made,
conceived, developed or acquired by him, or under which Employee acquired
the right to grant licenses or become licensed, whether alone or jointly
with others, in connection with his employment by the Company and within a
period of one year after termination, for whatever reason, of his
employment hereunder, which (i) has arisen or may arise out of or in
connection with his employment with the Company, or (ii) relate to any
matters pertaining to or useful in connection with any present or
contemplated activity or interest of the Company or of any of the
affiliated or subsidiary companies of the Company, or (iii) relate to work
done by the Company for a client, in each case, with which matters Employee
has been or may be in any way connected or about which Employee has
obtained knowledge in connection with his employment by the Company. All
Employee's title and interest in, to and under all such inventions,
licenses and rights to grant licenses shall be the sole and exclusive
property of the Company, and Employee hereby assigns and agrees to assign
the same to the Company.
(b) It is the policy of the Company (which, however, assumes no obligation
by this paragraph) to transfer or quitclaim to Employee any invention or
improvement made or conceived by Employee which the Company deems not then
of active interest to it or likely to become so.
(c) Employee will at any time, whether or not then in the employ of the
Company, upon the request of the Company and without further remuneration
(except as provided in Section 4 hereof) (a) execute, acknowledge and
deliver to the Company any document which the Company shall deem reasonably
necessary to effect valid assignments to it of all Employee's right, title
and interest in, to and under such inventions, licenses and rights to grant
license, (b) execute any document which the Company shall deem reasonably
necessary to enable it to file and prosecute applications for letters
patent of the United States and any foreign country on such inventions, and
(c) do all other things (including the giving of evidence in suits,
interferences, oppositions, revocations and other proceedings) which the
Company shall deem reasonably necessary or reasonably convenient for
patenting or prosecuting or asserting patents for any and all such
inventions, for the prosecution of applications for the reissue, renewal
and extension of such patents, and for the establishing of any fact
becoming known to Employee in connection with his employment.
15
2. CONFIDENTIAL INFORMATION. Employee acknowledges his obligations concerning
trade secrets and confidential information set forth at Section 4(a) of the
Employment Agreement.
3. GOVERNMENTAL MATTERS. Employee will do all things reasonably necessary for
the Company to comply with U.S. Government regulations and with provisions
of contracts between the U.S. Government and the Company which relate
either to patent rights or to the safeguarding of information pertaining to
the defense of the United States.
4. EXPENSES. All expenses incident to any action required by the Company or
taken in its behalf pursuant to the terms of this agreement shall be borne
by the Company, including a reasonable payment for Employee's time and
expenses involved in case Employee is not then in the Company's employ,
which payment for Employee's time shall not in any event be less than his
salary for a comparable period of time as of the termination of his
employment.
5. CONFIDENTIAL INFORMATION OF OTHERS. Employee shall not be requested or
required to violate, and Employee agrees to respect, any valid obligations
employee now has to prior employers or others relating to proprietary or
confidential information and to Employee's inventions and discoveries.
Employee has supplied or promptly shall supply to the Company a copy of all
written agreements containing any such obligations.
This Agreement of two pages is executed in duplicate as a sealed instrument as
of the date first set forth above.
IONICS, INCORPORATED
By
------------------------
WITNESS: EMPLOYEE:
- -------------------------- --------------------------
Lyman B. Dickerson
16
EXHIBIT D
---------
================================================================================
STOCKHOLDERS AGREEMENT
dated as of
_______, 200_
among
IONICS, INCORPORATED
and
THE INDIVIDUALS AND ENTITIES LISTED ON EXHIBIT A
================================================================================
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of _____,
200_, 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").
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.
2
"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.
3
"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 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 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.
4
"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.
"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, 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
5
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)
[_____] 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
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.
6
"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.
7
"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) Prior to the Closing,
and as a condition to the Closing, the size of the Board shall be increased 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) As a condition to the Closing, and effective as of the
Closing, the Company shall 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 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
8
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) 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
9
(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 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,
10
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 applicable law, rule or regulation. Subject to the
foregoing, the Company shall take appropriate action, effective as of
immediately after 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.
11
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 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
12
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) 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
13
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.
(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
14
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 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
15
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
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.
16
(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.
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
17
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).
(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
18
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 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
19
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 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.
20
(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 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
21
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.
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
22
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;
(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;
23
(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 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;
24
(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 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
25
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 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;
26
(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 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
27
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;
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
28
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.
(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
29
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, 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.
30
(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
Regisrable 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 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
31
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 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:
32
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
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.
33
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.
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.
34
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 another party 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
35
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:
------------------------
Its:
-----------------------
THE LYMAN B. DICKERSON REVOCABLE TRUST
DATED SEPTEMBER 9, 1996, OR ANY
SUCCESSOR TRUSTEE, AS AMENDED
By:
-----------------------------------
LYMAN B. DICKERSON, Trustee
________________, 2004
Date Signed
THE DOUGLAS G. DICKERSON REVOCABLE
TRUST DATED JUNE 22, 1988, OR ANY
SUCCESSOR TRUSTEE, AS AMENDED
By:
-----------------------------------
DOUGLAS G. DICKERSON, Trustee
________________, 2004
Date Signed
THE RICHARD DICKERSON REVOCABLE TRUST
DATED MARCH 5, 1993, OR ANY
SUCCESSOR TRUSTEE, AS AMENDED
By:
-----------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
-----------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
________________, 2004
Date Signed
THE LYMAN DICKERSON IRREVOCABLE TRUST,
DATED JULY 1, 2001
By:
-----------------------------------
LYMAN B. DICKERSON, Trustee
________________, 2004
Date Signed
By:
-----------------------------------
CHARLES C. KLINE,
Independent Trustee
________________, 2004
Date Signed
THE DOUGLAS DICKERSON IRREVOCABLE
TRUST NO. 3, DATED JULY 1, 1991
By:
-----------------------------------
DOUGLAS G. DICKERSON, Trustee
________________, 2004
Date Signed
By:
-----------------------------------
FREDERICK T. STANT, III,
Independent Trustee
________________, 2004
Date Signed
THE RICHARD DICKERSON IRREVOCABLE
TRUST NO. 3, DATED JULY 1, 1991
By:
-----------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
-----------------------------------
MARGUERITE W. DICKERSON,
Co-Trustee
________________, 2004
Date Signed
By:
-----------------------------------
FREDERICK T. STANT, III,
Independent Trustee
________________, 2004
Date Signed
--------------------------------------
LYMAN B. DICKERSON
________________, 2004
Date Signed
--------------------------------------
DOUGLAS G. DICKERSON
________________, 2004
Date Signed
THE ESTATE OF RICHARD C. DICKERSON
By:
-----------------------------------
DOUGLAS G. DICKERSON, Co-Executor
________________, 2004
Date Signed
By:
-----------------------------------
MARGUERITE W. DICKERSON,
Co-Executor
________________, 2004
Date Signed
EXHIBIT A
LIST OF SELLERS
---------------
1. Lyman B. Dickerson, Trustee of the Lyman B. Dickerson Revocable Trust dated
September 9, 1996, or any other successor Trustee, as amended
2. Douglas G. Dickerson, Trustee of the Douglas G. Dickerson Revocable Trust
dated June 22, 1988, or any other successor Trustee, as amended
3. Douglas G. Dickerson, Trustee of the Richard C. Dickerson Revocable Trust,
dated March 5, 1993, or any other successor Trustee, as amended
4. The Lyman Dickerson Irrevocable Trust, Lyman B. Dickerson and Charles C.
Kline, Trustees, dated July 1, 1991
5. The Douglas Dickerson Irrevocable Trust No. 3, Douglas G. Dickerson and
Frederick T. Stant, III, Trustees, dated July 1, 1991
6. The Richard Dickerson Irrevocable Trust No. 3, Frederick T. Stant, III,
Trustee, dated July 1, 1991
7. Lyman B. Dickerson
8. Douglas G. Dickerson
9. Estate of Richard C. Dickerson
SCHEDULE I
INVESTOR DIRECTORS AND COMMITTEE APPOINTMENTS
---------------------------------------------
[TO BE COMPLETED PRIOR TO CLOSING.]
SCHEDULE II
COMPETITOR LIST
---------------
[TO BE COMPLETED PRIOR TO CLOSING.]
EXHIBIT E
---------
THIS ESCROW AGREEMENT is dated as of [ ], 200__ (this "Escrow
Agreement"), among IONICS, INCORPORATED, a Massachusetts corporation (the
"Buyer"), and the entities and persons listed on Exhibit A hereto (each a
"Seller" and collectively, the "Sellers"), [ ] and [ ] ("Sellers'
Representatives") and [ ] (the "Escrow Agent").
Buyer and Sellers entered into a Purchase Agreement dated as of
November 18, 2003 (the "Purchase Agreement"), pursuant to which Buyer has agreed
to purchase from Sellers and Sellers have agreed to sell to Buyer their
interests in Ecolochem, Inc., a Virginia corporation, Ecolochem International,
Inc., a Delaware corporation, Ecolochem S.A.R.L., a societe a responsabilite
limitee organized under the laws of France, and Moson Holdings, LLC, a Virginia
limited liability company. In accordance with Section 1.06 of the Purchase
Agreement, each of the Sellers appointed Sellers' Representatives to act on
their behalf under the terms and conditions of this Escrow Agreement.
Capitalized terms used but not otherwise defined herein shall have the
respective meanings given them in the Purchase Agreement.
In accordance with Section 1.03(a)(vi) of the Purchase Agreement, Buyer
is hereby depositing with the Escrow Agent the following:
(i) [$20,000,000][This amount is subject to increase in accordance with
Section 1.03(a)(vi) of the Purchase Agreement.] in cash (the "Cash Amount"),
which shall be allocated among sub-accounts in the name of each Seller (each
such sub-account, a "Sub-Account") in the manner and amount set forth on Exhibit
A hereto (such amount of cash placed in a Seller's Sub-Account, together with
any Interest (as defined in Section 3) attributable thereto, less any amounts
(A) distributed pursuant to any Indemnification Claim or Judicial Claim (as such
terms are defined below), or (B) available to be distributed pursuant to any
pending Indemnification Claim (whether or not contested) or Judicial Claim, in
each case in accordance with the terms and conditions of this Escrow Agreement,
a Seller's "Available Cash Amount"), to be held and disposed of as herein
provided; and
(ii) [ ] shares of Common Stock [This amount is subject to decrease in
accordance with Section 1.03(a)(vi) of the Purchase Agreement.] accompanied by
attached stock transfer powers (the "Stock Amount"), which shall be allocated
among the Sub-Accounts in the manner and amount set forth on Exhibit B hereto
(such amount of shares of Common Stock placed in a Seller's Sub-Account, less
any shares of Common Stock (A) distributed pursuant to any Indemnification Claim
or Judicial Claim, or (B) available to be distributed pursuant to any pending
Indemnification Claim (whether or not contested) or Judicial Claim, in each case
in accordance with the terms and conditions of this Escrow Agreement, a Seller's
"Available Stock Amount" and, together with a Seller's Available Cash Amount,
such Seller's "Seller's Escrowed Funds"), to be held and disposed of as herein
provided. The aggregate of all Sellers' Available Cash Amounts and Available
Stock Amounts are referred to herein as the "Escrowed Funds."
2
It is expressly understood and agreed by the parties hereto that all
references herein to the Purchase Agreement are for the convenience of the
parties hereto other than the Escrow Agent and the Escrow Agent shall have no
obligation or duties with respect thereto.
SECTION 1. Deposit of the Escrowed Funds. At the Closing, Buyer shall,
in the case of the Cash Amount, deliver to the Escrow Agent by wire transfer of
immediately available funds and, in the case of the Stock Amount, deliver
certificates representing the Common Stock in the amounts and registered in the
name of the Sellers, each as set forth on Exhibit B, to the Escrow Agent, and
the Escrow Agent, on behalf of the Sellers, shall promptly acknowledge receipt
in writing of, the Cash Amount and Stock Amount. The Escrow Agent shall allocate
the Cash Amount and the Stock Amount among the Sub-Accounts in the manner and
amount set forth on Exhibit B hereto. Each Seller's Available Cash Amount shall
be deposited initially into an insured interest-bearing money-market account of
[ ], and thereafter shall be invested and liquidated in accordance with Section
3.
SECTION 2. Disposition of Escrowed Funds. (a) Each of Buyer and
Sellers' Representatives shall only make claims for payment out of a Seller's
Escrowed Funds, and the Escrow Agent shall only make payment out of a Seller's
Escrowed Funds, in accordance with the following procedures and under the
following circumstances:
(i) In the event that Buyer determines, from time to time, that a Buyer
Indemnified Party (as defined in Section 8(b)) is entitled to indemnification
pursuant to Sections 10.01, 10.02 or 10.03 of the Purchase Agreement, Buyer
shall, if such indemnification is pursuant to Section 10.03 of the Purchase
Agreement (other than Section 10.03(a)(iii) or (iv) of the Purchase Agreement),
and may, if such indemnification is pursuant to Sections 10.01, 10.02 or
10.03(a)(iii) or (iv) of the Purchase Agreement, deliver to the Escrow Agent and
Sellers' Representatives a written notice signed by Buyer (A) certifying that a
Buyer Indemnified Party is entitled to indemnification pursuant to the Purchase
Agreement, (B) indicating the amount of indemnification to which such Buyer
Indemnified Party is entitled, (C) indicating the Sub-Accounts, and the
allocation thereof, from which payment should be made, (D) indicating the
account of such Buyer Indemnified Party to which payment shall be made and (E)
directing the Escrow Agent to deliver payment to the Buyer Indemnified Party
from the applicable Seller's Escrowed Funds (an "Indemnification Claim"). The
notice of claim shall only be based on a good faith belief that such claim is
valid and shall provide reasonable detail as to the nature of such claim and the
facts that serve as a basis therefor. All Indemnification Claims shall be
allocated to each Sub-Account in the amounts indicated in subsection (C). Each
Indemnification Claim shall be allocated pro rata among all of the Sub-Accounts,
unless the Indemnification Claim arises out of Section 10.02 of the Purchase
Agreement, in which case the Indemnification Claim shall be allocated to the
Sub-Account or pro rata among the Sub-Accounts of the Person or Persons whose
breach of the Purchase Agreement gave rise to the Indemnification Claim. In no
event shall the Escrow Agent remove from a Sub-Account any amounts in excess of
the amount allocated thereto pursuant to the previous sentence.
3
(ii) (A) Within 45 days after the date of receipt by the Escrow Agent
of an Indemnification Claim (the "Claim Receipt Date"), the Escrow Agent shall
deliver to Buyer from the Escrowed Funds the amount set forth in such
Indemnification Claim, unless:
(1) prior to the expiration of 40 days after the Claim Receipt
Date, the Escrow Agent shall have received written notice from the
Sellers' Representatives, a copy of which shall be forwarded by the
Sellers' Representatives to the Buyer simultaneously with the
forwarding thereof to the Escrow Agent, that Sellers' Representatives
elect to contest all or a portion of such Indemnification Claim; or
(2) prior to the expiration of 40 days after the Claim Receipt
Date, the Escrow Agent shall have received written notice from the
Buyer that such Indemnification Claim has been satisfied other than
through operation of this Escrow Agreement.
(B) If Sellers' Representatives have filed with the Escrow Agent a
written notification pursuant to Section 2(a)(ii)(A)(1) hereof, then the
Escrow Agent shall thereafter deliver to Buyer (1) any uncontested amount
set forth in such Indemnification Claim from the Escrowed Funds in
accordance with the provisions of Section 2(a)(iii) and Section 2(a)(iv),
and (2) the contested amount set forth in such Indemnification Claim from
the Escrowed Funds, in each case only in accordance with either: (i) joint
written instructions signed by Buyer and Sellers' Representatives and
received by the Escrow Agent; or (ii) the provisions of Section 2(a)(vi)
below.
(iii) Subject to the provisions of Sections 2(a)(i) and 2(a)(ii), the
Escrow Agent shall make payment in respect of an Indemnification Claim from the
applicable Seller's Escrowed Funds in the following amounts and in the following
order of priority:
(A) first, from such Seller's Available Cash Amount, cash in an
amount equal to the lesser of (x) the amount allocated to such Seller's
Sub-Account in accordance with the last two sentences of Section 2(a)(i)
and (y) such Seller's Available Cash Amount; and
(B) second, if and to the extent such Indemnification Claim is not
satisfied in its entirety by the payment out of such Seller's Available
Cash Amount pursuant to clause (A) of this Section 2(a)(iii), from such
Seller's Available Stock Amount, that number of shares of Common Stock
having a value (based on the Agreed Price, as defined below) equal to the
lesser of (x) the amount allocated to such Seller's Sub-Account in
accordance with the last two sentences of Section 2(a)(i) less any amount
paid out of such Seller's Available Cash Amount pursuant to clause (A) of
Section 2(a)(iii), and (y) the value of such Seller's Available Stock
Amount (based on the Agreed Price). For the avoidance of doubt, the Escrow
Agent shall not be authorized to make payment to Buyer from a Seller's
4
Available Stock Amount until no funds remain in a Seller's Available Cash
Amount.
(iv) Payments made by the Escrow Agent in cash from a Seller's
Available Cash Amount pursuant to Section 2(a)(iii)(A) or Section 2(a)(vi) shall
be made in the form of a wire transfer to the account of the Buyer Indemnified
Party specified in the Indemnification Claim, or the Enforcing Party specified
in the Judicial Claim, to which such payment relates. Payments made by the
Escrow Agent in stock from a Seller's Available Stock Amount pursuant to Section
2(a)(iii)(B) or Section 2(a)(vi) shall be made by (A) Buyer's receipt of the
applicable deposited certificates for the Available Stock Amount, (B) Buyer's
presenting to the Escrow Agent replacement certificates for each Seller's
remaining Available Stock Amount and (C) Buyer's stock transfer to the account
of, and in the name of, the Buyer Indemnified Party specified in the
Indemnification Claim, or the Enforcing Party specified in the Judicial Claim,
to which such payment relates.
(v) The shares of Common Stock placed in escrow hereunder shall, for
all purposes of this Escrow Agreement, be valued at $26.50 per share (the
"Agreed Price"). For the avoidance of doubt, to the extent a claim is made
against a Seller's Available Stock Amount, the amount of shares to be withdrawn
from such Available Stock Amount by any Buyer Indemnified Party will be
determined on the basis that one share of Common Stock has a value equal to the
Agreed Price.
(vi) In the event a court of competent jurisdiction has issued a final
and nonappealable award or order requiring payment of all or any portion of a
Seller's Escrowed Funds to a Seller or a Buyer Indemnified Party, the party
hereto entitled to enforce such award or order (the "Enforcing Party") shall
promptly deliver to the Escrow Agent and the other parties hereto a written
notice (A) attaching such award or order, (B) indicating the account of the
Enforcing Party to which payment shall be made, (C) indicating the Sub-Accounts
from which the court has ordered that payment shall be made, and (D) directing
the Escrow Agent to deliver payment to the Enforcing Party from the Escrowed
Funds (a "Judicial Claim"). All Judicial Claims shall be allocated to each
Sub-Account as set forth in the court's order; provided that if no allocation is
set forth in the court order made with respect to a Judicial Claim, such
Judicial Claim shall be allocated pro rata among all of the Sub-Accounts, unless
the Judicial Claim arises out of Section 10.02 of the Purchase Agreement, in
which case the Judicial Claim shall be allocated to the Sub-Account or pro rata
among the Sub-Accounts of the Person or Persons whose breach of the Purchase
Agreement gave rise to the Judicial Claim. In no event shall the Escrow Agent
remove from a Sub-Account any amounts in excess of the amount allocated thereto
pursuant to the previous sentence. The Escrow Agent shall as promptly as
reasonably practicable after the receipt of a Judicial Claim (but in no event
later than five business days after such receipt) make payment to the Enforcing
Party from the applicable Seller's Escrowed Funds in the priority described in
Section 2(a)(iii) and in accordance with the provisions of Section 2(a)(iv),
except that if a Seller is an Enforcing Party, Buyer shall present to the Escrow
Agent all necessary replacement certificates.
5
(vii) Unless otherwise directed in a writing jointly signed by Sellers'
Representatives and Buyer or by a court of competent jurisdiction, as promptly
as reasonably practicable after the day that is 12 months after the date hereof,
but in no event later than five business days after the day that is 12 months
after the date hereof, the Escrow Agent shall deliver to Sellers'
Representatives an aggregate amount that is equal to the excess, if any, of (A)
all Available Cash Amounts plus all Available Stock Amounts (valued on a per
share basis at the Agreed Price), over (B) 50% of the Cash Amount plus 50% of
the Stock Amount (valued on a per share basis at the Agreed Price). Payment
under this Section 2(a)(vii) shall be made by (x) a wire transfer to the
accounts designated in writing by Sellers' Representatives of the cash to be
withdrawn from all Available Cash Amounts and (y) delivery of the shares of
Common Stock to be withdrawn from all Available Stock Amounts to, and in the
name of, the persons designated in writing by Sellers' Representatives.
(viii) Unless otherwise directed in a writing signed by Sellers'
Representatives and Buyer or by a court of competent jurisdiction, as promptly
as reasonably practicable after the Cut-Off Time (as defined below), but in no
event later than five business days after the Cut-Off Time, the Escrow Agent
shall deliver to Sellers' Representatives an aggregate amount (the "Cut-Off
Payment") equal to all Available Cash Amounts and all Available Stock Amounts.
Payment under this Section 2(a)(viii) shall be made by (x) a wire transfer to
the accounts designated in writing by Sellers' Representatives of the cash to be
withdrawn from all Sellers' Available Cash Amounts and (y) delivery of an amount
of shares of Common Stock to be withdrawn from all Available Stock Amounts to,
and in the name of, the persons designated in writing by Sellers'
Representatives.
(ix) The Buyer Indemnified Parties may not seek directly from Sellers
any portion of an unsatisfied Indemnification Claim resulting from the market
price of the Common Stock being below the Agreed Price. Without limiting the
foregoing, as a condition precedent to Buyer making any Indemnification Claim
hereunder for the indemnification of any Buyer Indemnified Party other than the
Buyer and its subsidiaries, such Buyer Indemnified Party shall agree in writing
to be bound by the foregoing sentence.
(x) Notwithstanding the foregoing, the Escrow Agent shall not make any
payment in respect of an Indemnification Claim that it receives after 5:00 p.m.
New York City time on the day that is 24 months after the date hereof, if such
day is a business day, or if such day is not a business day, the next business
day thereafter (such time, the "Cut-Off Time").
(xi) The Escrow Agent shall continue to hold and administer, pursuant
to the terms hereof, any of the Escrowed Funds retained by the Escrow Agent
following payment of the Cut-Off Payment until the final disposition of all
pending Indemnification Claims and Judicial Claims in accordance with Section 2
of this Agreement. Upon final disposition of all such pending Indemnification
Claims and Judicial Claims pursuant to
6
Section 2, the Escrow Agent shall then distribute to Sellers the remainder of
the Escrow Funds pursuant to Section 2(a)(viii) hereof.
SECTION 3. Investments; Disposition of Income. (a) At the written
direction of Sellers' Representatives, the Escrow Agent shall invest a Seller's
Available Cash Amount within two business days after receipt of such written
direction in (i) United States' government securities or securities of agencies
of the United States government which are guaranteed by the United States
government and which mature nine months or less from the date of investment,
(ii) debt securities (including certificates of deposit) issued by any bank or
trust company organized under the laws of the United States of America or any
state thereof having capital and surplus aggregating in excess of $500 million
and whose long-term debt securities have a rating of "A" or higher by Standard
and Poor's Rating Service and which mature nine months or less from the date of
investment or (iii) any other instrument as Buyer and Sellers' Representatives,
from time to time, shall jointly designate in writing. Any income received by
the Escrow Agent from investments of a Seller's Available Cash Amount pursuant
to this Section 3 (such income being referred to as "Interest") shall be added
to such Seller's Available Cash Amount and distributed as provided in this
Escrow Agreement. Periodic statements will be provided to Sellers'
Representatives and Buyer reflecting transactions executed in connection with
the Escrowed Funds.
(b) In the event that the Escrow Agent is required to distribute a
Seller's Available Cash Amount under Section 2, the Escrow Agent shall sell or
liquidate the investments made under Section 3(a) in respect thereto as and to
the extent necessary to fund such distribution. The Escrow Agent shall sell or
liquidate such investments in accordance with such investments' average
overnight yield for the prior business day and in order of the lowest to highest
overnight yield for such investments. Such sales or liquidations shall be made
as promptly as practicable after the Escrow Agent becomes obligated to make such
distribution, but in no event later than one business day thereafter.
(c) Upon the sale or liquidation of an investment of a Seller's
Available Cash Amount, the proceeds shall be deposited into an insured
interest-bearing money-market account of the Escrow Agent pending distribution
pursuant to Section 2.
SECTION 4. Concerning the Escrow Agent. (a) The Escrow Agent shall not
be required to invest any funds held hereunder except as directed pursuant to
Section 1 and Section 3 of this Escrow Agreement.
(b) This Escrow Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Escrow Agreement against the
Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Escrow Agreement. The
Escrow Agent's duties are ministerial in nature.
7
(c) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor Escrow Agent)
from and against any and all losses, liabilities, claims, actions, taxes,
damages and expenses, including reasonable attorneys' fees and disbursements,
arising out of or in connection with this Escrow Agreement including the legal
costs and expenses of defending itself against any claim or liability in
connection with its performance hereunder. Without limiting the foregoing, the
Escrow Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in accordance with the terms
hereof, or as a result of any liquidation of any such investment prior to its
maturity, including any liability for any delays (not resulting from its gross
negligence or willful misconduct) in the investment or reinvestment of the
Escrowed Funds. Without limiting the joint and several nature of the obligations
of Sellers' Representatives and Buyer pursuant to this Section 4(c), as between
themselves, the Sellers' Representatives and Buyer agree that they shall each
share 50% of all losses, liabilities, claims, actions, taxes, damages and
expenses for which the Escrow Agent is entitled to indemnification hereunder
which, in the case of Sellers, shall be satisfied first from the Available Cash
Amount and second from the Available Stock Amount.
(d) The Escrow Agent shall be entitled to rely in good faith upon any
order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity or
the service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that any person purporting
to give notice or receipt or advice or make any statement or execute any
document in connection with the provisions hereof has been duly authorized to do
so.
(e) The Escrow Agent may act pursuant to the advice of counsel
reasonably acceptable to both Sellers' Representatives and Buyer with respect to
any matter relating to this Escrow Agreement and shall not be liable for any
action taken or omitted in accordance with such advice.
(f) The Escrow Agent does not have any interest in any Seller's
Available Cash Amount or any Seller's Available Stock Amount deposited hereunder
but is serving as escrow agent only and having only possession thereof. Any
payments of income from this Escrow Agreement shall be subject to withholding
regulations then in force with respect to United States taxes. Sellers'
Representatives shall provide the Escrow Agent with appropriate W-9 forms for
tax identification, number certification, or nonresident alien certifications.
(g) The Escrow Agent makes no representation as to the validity, value,
genuineness or the collectability of any security or other documents or
instrument held by or delivered to it.
8
(h) The Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
(i) Sellers' Representatives and Buyer may jointly remove the Escrow
Agent and terminate this Escrow Agreement upon ten days prior written notice
signed by both parties. Upon such removal and termination, all then existing
Available Cash Amounts and Available Stock Amounts (including all investments)
shall be transferred in accordance with the joint written instructions of
Sellers' Representatives and Buyer.
(j) The Escrow Agent shall have no responsibility for the contents of
any court order and may rely without any liability upon the contents thereof.
(k) The Escrow Agent shall be paid $[ ] annually. Buyer shall pay to
the Escrow Agent its fees for the acceptance and administration of this Escrow
Agreement (pursuant to the terms of Annex A attached hereto). All fees shall be
paid in United States currency and payable in the United States at the office of
the Escrow Agent. Notwithstanding anything in this Escrow Agreement to the
contrary, at any time that the Escrow Agent is authorized or directed or
otherwise required to make a disbursement or distribution from the Escrowed
Funds to Buyer, the Escrow Agent may refrain from making such disbursement or
distribution from the Escrowed Funds, without liability, if and to the extent
that there are any fees or expenses (including indemnities) then due to the
Escrow Agent from Buyer. Upon receipt of payment for such fees or expenses, the
Escrow Agent shall promptly make such disbursements or distributions to Buyer.
SECTION 5. Priority: Sellers' Assets. (a) Buyer acknowledges and agrees
that, solely with respect to indemnification claims under Section 10.03 of the
Purchase Agreement (other than indemnification claims under Section
10.03(a)(iii) or (iv) of the Purchase Agreement), the Buyer Indemnified Parties
must first proceed against the Escrowed Funds prior to proceeding directly
against Sellers with respect thereto.
(b) The parties agree that Escrowed Funds are assets of Sellers (and
not Buyer or its subsidiaries or any Buyer Indemnified Party) and are placed in
escrow solely to secure Sellers' indemnification obligations under the Purchase
Agreement. No other person shall have any right, title or interest in or to the
Escrowed Funds.
SECTION 6. Notices. All notices, requests, permissions, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given (a) 5 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:
(a) if to Buyer, to:
9
Ionics, Incorporated
65 Grove Street
Watertown, MA 02459
Fax: (617) 926-3760
Attention: Stephen Korn, Vice President and General Counsel
with copies to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Fax: (617) 248-7100
Attention: Mark H. Burnett
(b) if to Sellers' Representatives or any Seller, to:
Ecolochem, Inc.
4545 Patent Road
Norfolk, VA 23502
Fax: (757) 855-1478
Attention: Lyman B. Dickerson
with copies to:
Williams Mullen
222 Central Park Avenue, Suite 1700
Virginia Beach, Virginia 23462
Fax: (757) 473-0395
Attention: Frederick T. Stant
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax: (212) 474-3700
Attention: Alan Stephenson
(c) if to the Escrow Agent, to:
10
Attention:
SECTION 7. Termination. This Escrow Agreement shall automatically
terminate upon the complete distribution of all Cash Amounts and all Stock
Amounts in accordance with the terms hereof.
SECTION 8. Miscellaneous. (a) This Escrow Agreement and the rights and
obligations hereunder shall not be assignable or transferable by any party
without the prior written consent of the other parties hereto. Any attempted
violation of this Section 8(a) shall be void.
(b) As used herein the term "Buyer Indemnified Party" shall refer to
each of Buyer and its affiliates (including the Companies and their
subsidiaries) and each of their respective officers, directors, employees,
stockholders, agents and representatives.
(c) This Escrow Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement. This Escrow
Agreement shall become effective when each party hereto shall have received a
counterpart, or facsimile of a counterpart, of this Escrow Agreement, each
signed by the other party or parties hereto or thereto.
(d) This Escrow Agreement is for the sole benefit of the parties hereto
and their permitted assigns and nothing herein expressed or implied shall give
or be construed to give to any person, other than the parties hereto and such
assigns, any legal or equitable rights hereunder. This Escrow Agreement contains
the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. No amendment, modification or waiver in respect
of this Escrow Agreement shall be effective unless it shall be in writing and
signed by each party hereto.
(e) THIS ESCROW AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF THE STATE OF NEW YORK.
(f) 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 Escrow 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
11
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 paragraph. 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.
(g) Each party waives, to the fullest extent permitted by applicable
law, any right it may have to a trial by jury in respect to any litigation
directly or indirectly arising out of, under or in connection with this
Agreement or disputes relating hereto or thereto. Each party (i) certifies that
no representative, agent or attorney of any other party 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
and the other parties have been induced to enter into this Escrow Agreement by,
among other things, the mutual waivers and certifications in this paragraph.
(h) This Escrow Agreement may be amended in writing by the parties.
This Escrow Agreement may not be amended except by an instrument in writing
signed on behalf of all of the parties.
(i) The Sellers' Representatives, on behalf of each of the Sellers,
acknowledges and agrees that each Seller will provide its correct Taxpayer
Identification Number to the Escrow Agent, and will report all Interest earned
under this Escrow Agreement as taxable income to the Internal Revenue Service or
other Taxing Authority. The Escrow Agent (or Buyer, if Buyer is the withholding
agent) shall be permitted to report and withhold any required Taxes as it
determines it may be required by any law or regulation in effect, and remit such
Taxes to the appropriate Taxing Authorities, and the Sellers' Representatives,
on behalf of each of the Sellers, acknowledge and agree that the Sellers will
hold the Escrow Agent (and Buyer, if Buyer is the withholding agent) harmless
from and against any such Taxes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have duly executed this Escrow
Agreement as of the date first above written.
IONICS, INCORPORATED
By:
------------------------------------------
Its:
-----------------------------------------
THE LYMAN B. DICKERSON REVOCABLE
TRUST DATED SEPTEMBER 9, 1996, OR ANY
SUCCESSOR TRUSTEE, AS AMENDED
By:
------------------------------------------
LYMAN B. DICKERSON, Trustee
________________, 2004
Date Signed
THE DOUGLAS G. DICKERSON REVOCABLE
TRUST DATED JUNE 22, 1988, OR ANY
SUCCESSOR TRUSTEE, AS AMENDED
By:
------------------------------------------
DOUGLAS G. DICKERSON, Trustee
________________, 2004
Date Signed
THE RICHARD DICKERSON REVOCABLE
TRUST DATED MARCH 5, 1993, OR ANY
SUCCESSOR TRUSTEE, AS AMENDED
By:
------------------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
------------------------------------------
MARGUERITE W. DICKERSON, Co- Trustee
________________, 2004
Date Signed
THE LYMAN DICKERSON IRREVOCABLE
TRUST, DATED JULY 1, 2001
By:
------------------------------------------
LYMAN B. DICKERSON, Trustee
________________, 2004
Date Signed
By:
------------------------------------------
CHARLES C. KLINE, Independent Trustee
________________, 2004
Date Signed
THE DOUGLAS DICKERSON IRREVOCABLE
TRUST NO. 3, DATED JULY 1, 1991
By:
------------------------------------------
DOUGLAS G. DICKERSON, Trustee
________________, 2004
Date Signed
By:
------------------------------------------
FREDERICK T. STANT, III, Independent
Trustee
________________, 2004
Date Signed
THE RICHARD DICKERSON IRREVOCABLE
TRUST NO. 3, DATED JULY 1, 1991
By:
------------------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
------------------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
------------------------------------------
FREDERICK T. STANT, III, Independent
Trustee
________________, 2004
Date Signed
---------------------------------------------
LYMAN B. DICKERSON
________________, 2004
Date Signed
---------------------------------------------
DOUGLAS G. DICKERSON
________________, 2004
Date Signed
THE ESTATE OF RICHARD C. DICKERSON
By:
------------------------------------------
DOUGLAS G. DICKERSON, Co-Executor
________________, 2004
Date Signed
By:
------------------------------------------
MARGUERITE W. DICKERSON, Co-Executor
________________, 2004
Date Signed
[ ], as Escrow Agent
By:
------------------------------------------
Its:
-----------------------------------------
EXHIBIT F
---------
SCHEDULE OF EXCESS CASH
Combined Eliminate Adjusted
June 30, Joint June 30,
2003 Venture 2003
-------- -------- --------
Cash $ 7,103 $ (237) $ 6,866
Short-term investments 9987 0 9987
IRS tax deposits (included in long-term other assets) 1774 0 1774
-------- -------- --------
18,864 (237) 18,627
Notes payable $ -- $ -- $ --
Current installments of long-term debt -2679 0 -2679
Notes payable -5500 0 -5500
Long-term debt, less current installments -8800 0 -8800
Agreed upon Adjustment for Minority interest in NALCO
Joint Venture (A) 0 0
Accrued liability interest rate swap (B) -409 0 -409
Agreed upon Adjustment for Deferred income taxes (@ 10%
NPV of the Sept 30th amounts per provided KPMG analysis) 0 0 0
-------- -------- --------
-17388 0 -17388
"Excess Cash" $ 1,476 $ (237) $ 1,239
======== ======== ========
Audited
(Nov. 3rd
report)
Combined Eliminate Adjusted
September 30, Joint September 30,
2003 Venture 2003
-------- -------- --------
Cash $ 4,074 $ (468) $ 3,606
Short-term investments 11380 0 11380
IRS tax deposits (included in long-term other assets) 1621 0 1621
-------- -------- --------
17,075 (468) 16,607
Notes payable $ -- $ -- $ --
Current installments of long-term debt -2098 0 -2098
Notes payable -4800 0 -4800
Long-term debt, less current installments -8700 0 -8700
Agreed upon Adjustment for Minority interest in NALCO
Joint Venture (A) 0 0
Accrued liability interest rate swap (B) -362 0 -362
Agreed upon Adjustment for Deferred income taxes (@ 10%
NPV of the Sept 30th amounts per provided KPMG analysis) -1000 0 -1000
-------- -------- --------
-16960 0 -16960
"Excess Cash" $ 115 $ (468) $ (353)
======== ======== ========
(A) Any unpaid capital call amount to be deducted at Closing, if applicable*
(B) Figures presented are per information supplied by Gray Kiger - actual
figures as of Closing to be used
SCHEDULE OF "WORKING CAPITAL"
Adjusted
"Working
Combined Eliminate Capital"
June 30, "Excess Cash" Joint June 30,
2003 Adjustments Venture 2003
---------- ---------- ---------- ----------
Cash $ 7,103 $ (6,866) $ (237) $ --
Short-term investments 9,987 (9,987) -- --
Trade accounts receivable 17,428 -- (333) 17,095
Other receivables (1) 705 -- -- 705
Inventories 3,622 -- -- 3,622
Prepaid expenses and other current assets 808 -- -- 808
---------- ---------- ---------- ----------
Total current assets 39,653 (16,853) (570) 22,230
Notes payable $ -- $ -- $ -- $ --
Current installments of long-term debt 2,679 (2,679) -- --
Accounts payable 5,290 -- (84) 5,206
Accrued expenses(3)(4) 3,318 (409) (86) 2,823
State and foreign income taxes payable (2) -- -- -- --
---------- ---------- ---------- ----------
Total current liabilities 11,287 (3,088) (170) 8,029
---------- ---------- ---------- ----------
"Working capital" $ 28,366 $ (13,765) $ (400) $ 14,201
========== ========== ========== ==========
Adjusted
Audited "Working
Combined Eliminate Capital"
September 30, "Excess Cash" Joint September 30,
2003 Adjustments Venture 2003
---------- ---------- ---------- ----------
Cash $ 4,074 $ (3,606) $ (468) $ --
Short-term investments 11,380 (11,380) -- --
Trade accounts receivable 21,879 -- (326) 21,553
Other receivables (1) 1,187 -- -- 1,187
Inventories 3,437 -- -- 3,437
Prepaid expenses and other current assets 357 -- -- 357
---------- ---------- ---------- ----------
Total current assets 42,314 (14,986) (794) 26,534
Notes payable $ -- $ -- $ -- $ --
Current installments of long-term debt 2,098 (2,098) -- --
Accounts payable 6,364 -- (183) 6,181
Accrued expenses(3)(4) 3,644 (362) (111) 3,171
State and foreign income taxes payable (2) -- -- -- --
---------- ---------- ---------- ----------
Total current liabilities 12,106 (2,460) (294) 9,352
---------- ---------- ---------- ----------
"Working capital" $ 30,208 $ (12,526) $ (500) $ 17,182
========== ========== ========== ==========
Explanations for basis of calculation of Current Assets and Current Liabilities
included in the audited Combined Balance Sheets:
(1) Other receivables balance to exclude any advances to shareholders - for
example at March 31, 2003 Other receivables of $ 5,894 included $5,300 of
advances to shareholders for S-Corp taxes - it is agreed that any such
advances would be reclassified as shareholder distributions as of the
closing balance sheet date.
(2) At June 30, 2003 the state and foreign income taxes payable position (per
the KPMG audited financials dated Sept 26, 2003) shows a zero balance. At
September 30, 2002 and 2001 the prior audited report reflected the balances
of $413 and $1,172 respectively (the $1,172 apparently before some
Restatement adjustment of $478). Payables for state and foreign income
taxes as well as other taxes have been reclassified in the latest financial
statements under "Accounts Payable"; it is accepted that, as of Closing,
those balances shall be paid by the Companies with the amounts consistently
considered as current liabilities
(3) Accrued liabilities do not include unused vacation
(4) Accrued liabilites do not include discretionary bonuses; all Bonuses
payable to employees of the Companies and their subsidiaries that are
currently scheduled to be paid in November 2003 for sales bonuses and
January 2004 for other employees, although discretionary, shall be paid
before the close of business on the business day immediately prior to the
Closing Date
Schedule 1
to
Exhibit F
---------
ECOLOCHEM Example of "True Up" Mechanism for Closing Excess Cash and Closing
Working Capital
$000's
Example A Example B Example C Example D
Assumptions for Calculation of theoretical "Closing Cash Payment"
Initial Cash Consideration as per Sec 1.01 (a) $ 200,000 $ 200,000 $ 200,000 $ 200,000
less Escrow Amount per Sec 1.03(a)(vi) $ (20,000) $ (20,000) $ (20,000) $ (20,000)
Unadjusted Closing Cash Payment $ 180,000 $ 180,000 $ 180,000 $ 180,000
"Estimated Closing Excess Cash Amount" per Sec 1.03(a)(viii) and Sec 1.04(a) $ 1,000 $ (1,000) $ 1,000 $ (1,000)
"Estimated Closing Working Capital" $ 20,000 $ 15,000 $ 20,000 $ 15,000
minus Target Working Capital per Sec 1.04(h) $ 17,000 $ 17,000 $ 17,000 $ 17,000
"Estimated Closing WC Amount" per Sec 1.03(a)(viii) and Sec 1.04(h) $ 3,000 $ (2,000) $ 3,000 $ (2,000)
Unadjusted Closing Cash Payment $ 180,000 $ 180,000 $ 180,000 $ 180,000
Adjustment for "Estimated Closing Excess Cash Amount" per Sec 1.03(a)(viii) $ 1,000 $ (1,000) $ 1,000 $ (1,000)
Adjustment for "Estimated Closing WC Amount" at Closing per Sec 1.03(a)(viii) $ 3,000 $ (2,000) $ 3,000 $ (2,000)
Closing Cash Payment Amount $ 184,000 $ 177,000 $ 184,000 $ 177,000
True Up Based on "Closing Excess Cash Statement" and "Closing WC Statement"
"Final Excess Cash Amount" as per "Closing Excess Cash Statement" per
Sec 1.04 (b) $ 2,500 $ 2,500 $ (2,500) $ (2,500)
less "Estimated Closing Excess Cash Amount" per Sec 1.03(a)(viii) $ 1,000 $ (1,000) $ 1,000 $ (1,000)
Payment due re "Final Excess Cash Amount" due to (from) Sellers per Sec 1.04(g) $ 1,500 $ 3,500 $ (3,500) $ (1,500)
"Final Closing Working Capital" as per "Closing Working Capital Statement"
per Sec 1.04 (b) $ 18,000 $ 18,000 $ 15,000 $ 15,000
minus Target Working Capital per Sec 1.04(h) $ 17,000 $ 17,000 $ 17,000 $ 17,000
"Final Closing WC Amount" per Sec 1.04 (f) $ 1,000 $ 1,000 $ (2,000) $ (2,000)
less "Estimated Closing WC Amount" per Sec 1.03(A)(viii) $ 3,000 (2,000) 3,000 (2,000)
Payment due re "Final Closing WC Amount" due to (from) Sellers per Sec 1.04(f) $ (2,000) $ 3,000 $ (5,000) $ --
Net effect of Excess Cash and WC Amounts ("True Up") - balance due to
(from) Sellers $ (500) $ 6,500 $ (8,500) $ (1,500)
EXHIBIT G
---------
AMENDMENT NO. 1 TO THE RENEWED RIGHTS AGREEMENT
-----------------------------------------------
AMENDMENT NO. 1, dated as of November 17, 2003 (this "Amendment"), to
the RENEWED RIGHTS AGREEMENT, dated as of August 19, 1997 between IONICS,
INCORPORATED, a Massachusetts corporation (the "Company"), and EQUISERVE TRUST
COMPANY, N.A. (as successor to BankBoston, N.A.), as Rights Agent (the "Rights
Agreement"). All terms not otherwise defined herein shall have the meanings
given such terms in the Rights Agreement. Unless otherwise specified herein, all
section references made herein are references to sections in the Rights
Agreement.
W I T N E S S E T H:
WHEREAS, on December 22, 1987, the Board of Directors of the Company
(the "Board") adopted a stockholder rights plan (the "Existing Rights Plan") and
executed a Rights Agreement between the Company and the Rights Agent (the "1987
Agreement");
WHEREAS, the Existing Rights Plan expired on December 31, 1997;
WHEREAS, on August 19, 1997 the Board determined it desirable and in
the best interests of the Company and its stockholders for the Company to renew
the Existing Rights Plan upon its expiration and to implement such renewal by
executing the Rights Agreement;
WHEREAS, pursuant to Section 26 of the Rights Agreement, the Company
may cause the Rights Agreement to be amended at any time prior to the
Distribution Date without the approval of any holders of certificates
representing shares of Common Stock of the Company;
WHEREAS, on November 2, 2003, the Board authorized and approved the
acquisition by the Company of Ecolochem, Inc., Ecolochem S.A.R.L., Moson
Holdings, LLC and Ecolochem International, Inc. and their subsidiaries (the
"Ecolochem Acquisition") as provided under that certain Purchase Agreement (the
"Purchase Agreement") dated as of November 18, 2003 among the Company and the
individuals and entities listed on Exhibit A thereto (the "Sellers");
WHEREAS, in connection with the Ecolochem Acquisition, the Company
intends to issue to Sellers shares of the Common Stock of the Company pursuant
to the Purchase Agreement (the "Shares Sale") (which will be deemed Beneficially
Owned by the Sellers under the Rights Agreement);
WHEREAS, in connection with the Ecolochem Acquisition, the Company and
Sellers intend to enter into that certain Stockholders Agreement contemplated by
the Purchase Agreement (the "Stockholders Agreement") granting certain rights
to, and imposing certain restrictions on, Sellers with respect to shares of
Common Stock of the Company; and
WHEREAS, in anticipation of and in connection with the Ecolochem
Acquisition and Shares Sale, on November 2, 2003, the Board authorized and
approved an amendment of the Rights Agreement for the express purpose of
rendering the Rights Agreement inapplicable to the Transaction (as defined in
the Purchase Agreement), including without limitation, the Shares Sale and the
other transactions contemplated by the Purchase Agreement;
NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Notwithstanding anything to the contrary in the Rights Agreement,
the Rights Agreement shall not apply to, and none of the Sellers will become an
Acquiring Person upon, and no Distribution Date, Section 11(a)(ii) Event, Stock
Acquisition Date or Triggering Event will occur as a result of, (i) the
approval, execution, delivery, consummation or performance of the Purchase
Agreement, (ii) the announcement of the Ecolochem Acquisition or Shares Sale,
(iii) the consummation of the Transaction, or (iv) following the consummation of
the Transaction, the sale, disposition, conveyance or other transfer by any
Sellers or their Permitted Transferees (as such term is defined in the
Stockholders Agreement) to any Permitted Transferees of shares of Common Stock
of the Company issued to Sellers pursuant to the Purchase Agreement.
2. The definition of "Acquiring Person" set forth in Section 1(a) is
hereby amended and restated in its entirety as follows:
"Acquiring Person" shall mean any Person (as hereinafter
defined) who or which, together with all Affiliates and
Associates (each as hereinafter defined) of such Person, shall
be the Beneficial Owner (as hereinafter defined) of 15% or
more of the shares of Common Stock of the Company then
outstanding, but shall not include an Exempt Person or the
2003 Special Exempt Persons (each as hereinafter defined).
3. A new definition is hereby added to Section 1 as Section 1(uu),
which such new definition shall read in its entirety as follows:
"2003 Ecolochem Purchase Agreement" shall mean that certain
Purchase Agreement dated as of November 4, 2003 among the
Company and the Persons listed on Exhibit A thereto, as
amended and supplemented from time to time in accordance with
its terms.
-2-
4. A new definition is hereby added to Section 1 as Section 1(vv),
which such new definition shall read in its entirety as follows:
"2003 Ecolochem Stockholders Agreement" shall mean that
certain Stockholders Agreement contemplated by the 2003
Ecolochem Purchase Agreement, as amended and supplemented from
time to time in accordance with its terms.
5. A new definition is hereby added to Section 1 as Section 1(ww),
which such new definition shall read in its entirety as follows:
"2003 Special Exempt Persons" shall mean, collectively, (i)
the Persons listed on Exhibit A to the 2003 Ecolochem Purchase
Agreement (the "Sellers"), (ii) any Permitted Transferee (as
such term is defined in the 2003 Ecolochem Stockholders
Agreement) of any such Person who becomes a party to the 2003
Ecolochem Stockholders Agreement and (iii) any Persons to whom
the shares of Common Stock of the Company issued in the Shares
Sale are attributed due to their relationship with any Person
described in the immediately preceding clauses (i) and (ii)
(but only to the extent of such attribution); provided,
however, that each such Person shall cease to be 2003 Special
Exempt Persons upon the earliest to occur, subsequent to the
execution and delivery of the 2003 Ecolochem Purchase
Agreement, of the following events: (A) all Persons described
in the immediately preceding clauses (i) and (ii), together
with their Affiliates, Associates and Permitted Transferees
who become parties to the 2003 Ecolochem Stockholders
Agreement, cease to Beneficially Own in the aggregate 15% or
more of the shares of Common Stock of the Company then
outstanding, or (B) the percentage of outstanding shares of
Common Stock of the Company Beneficially Owned by all Persons
described in the immediately preceding clauses (i) and (ii),
together with their Affiliates, Associates and Permitted
Transferees who become parties to the 2003 Ecolochem
Stockholders Agreement, exceeds the sum of (x) the lowest
percentage of outstanding shares of Common Stock of the
Company Beneficially Owned in the aggregate by all Persons
described in the immediately preceding clauses (i) and (ii),
together with their Affiliates, Associates and Permitted
Transferees who become parties to the 2003 Ecolochem
Stockholders Agreement, while any such Persons are 2003
Special Exempt Persons, plus (y) 1% (excluding any such
changes to ownership resulting solely as a result of a
reduction in the number of shares of Common Stock of the
Company outstanding due to the repurchase of shares of Common
Stock of the Company by the Company), or (C) the percentage of
outstanding shares of Common Stock of the Company Beneficially
Owned by the Sellers exceeds the sum of (x) that percentage of
outstanding shares of Common Stock of the Company issued to
-3-
the Sellers pursuant to the 2003 Ecolochem Purchase Agreement
plus (y) 1% (excluding any such changes to ownership resulting
solely as a result of a reduction in the number of shares of
Common Stock of the Company outstanding due to the repurchase
of shares of Common Stock of the Company by the Company), or
(D) the 2003 Ecolochem Purchase Agreement is terminated prior
to the issuance of shares of Common Stock of the Company
contemplated thereby.
6. Section 3(a) is hereby amended and restated in its entirety as
follows:
(a) Until the earliest of (i) the Close of Business on the
tenth Business Day (or such specified or unspecified later
date as may be determined by the Board before the occurrence
of a Distribution Date) after the Stock Acquisition Date (or,
if the tenth Business Day (or such later date) after the Stock
Acquisition Date occurs before the Record Date, the Close of
Business on the Record Date), (ii) the Close of Business on
the tenth Business Day (or such specified or unspecified later
date as may be determined by the Board before the occurrence
of a Distribution Date) after the date that a tender or
exchange offer by any Person (other than an Exempt Person or,
solely with respect to the acquisition of shares of Common
Stock of the Company pursuant to the 2003 Ecolochem Purchase
Agreement, the 2003 Special Exempt Persons) is first published
or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act if upon
consummation thereof such Person would be the Beneficial Owner
of 15% or more of the Common Stock of the Company then
outstanding (the earlier of (i) and (ii) being herein referred
to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraphs (b) and (c)
of this Section 3) by the certificates for the Common Stock of
the Company registered in the names of the holders thereof
(which certificates shall be deemed also to be certificates
for Rights) and not by separate certificates and (y) the
Rights will be transferable only in connection with the
transfer of the underlying shares of Common Stock of the
Company (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will
send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock of the Company as of the
Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more
rights certificates, substantially in the form attached hereto
as Exhibit A (the "Rights Certificates"), evidencing one Right
for each share of Common Stock of the Company so held, subject
to adjustment as provided herein. In the event that an
adjustment in the number of Rights per share of Common Stock
of the Company has been made pursuant to Section 11(i) hereof,
at the time of distribution of the Rights Certificates, the
Company shall not be required to issue Rights Certificates
evidencing fractional Rights, but may, in lieu thereof, make
-4-
the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights.
As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
7. Section 11(a)(ii) is hereby amended and restated in its entirety as
follows:
(ii) In the event (a "Section 11(a)(ii) Event") that any
Person (other than an Exempt Person), alone or together with
its Affiliates and Associates, shall, at any time after the
Rights Dividend Declaration Date, become the Beneficial Owner
of 15% or more of the shares of Common Stock of the Company
then outstanding, unless the event causing the 15% threshold
to be crossed (A) is a transaction set forth in Section 13(a)
hereof, or (B) is an acquisition of shares of Common Stock of
the Company pursuant to a tender offer or an exchange offer
for all outstanding shares of Common Stock of the Company at a
price and on terms determined by at least a majority of the
Outside Directors, after receiving advice from one or more
investment banking firms, to be (x) at a price that is fair to
stockholders (taking into account all factors which such
members of the Board deem relevant, including without
limitation prices which could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed
to realize maximum value) and (y) otherwise in the best
interests of the Company and its stockholders, or (C) is the
execution, delivery, consummation and performance of the 2003
Ecolochem Purchase Agreement, or (D) is the sale, disposition,
conveyance or other transfer of shares of Common Stock of the
Company from one or more Persons, each of whom was a 2003
Special Exempt Person immediately prior to such transaction,
to a Person who, immediately following such transaction, is a
2003 Special Exempt Person, then promptly after the date of
occurrence of a Section 11(a)(ii) Event, proper provision
shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter
have the right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this
Agreement, such number of shares of Common Stock of the
Company as shall equal the result obtained by (1) multiplying
the then current Purchase Price by the then number of shares
of Common Stock of the Company for which a Right was
exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event (whether or not such Right was then
exercisable) and (2) dividing that product (which following
such first occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the Current Market Price per share of
Common Stock of the Company on the date of such first
occurrence (such number of shares being referred to as the
"Adjustment Shares").
-5-
8. Except as amended hereby, the Rights Agreement shall continue in
full force and effect.
9. The laws of the Commonwealth of Massachusetts shall govern the
interpretation, validity and performance of the terms of this Amendment,
regardless of the law that might be applied under principles of conflicts of
laws.
10. This Amendment 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 instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-6-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to the Renewed Rights Agreement to be duly executed and their respective
corporate seals to be hereunto affixed and attested, all as of the day and year
first above written.
Attest:
IONICS, INCORPORATED
By:_______________________ By:_________________________
Name: Name:
Title: Title:
Attest:
EQUISERVE TRUST COMPANY, N.A.
By:_______________________ By:_________________________
Name: Name:
Title: Title:
-7-
EXHIBIT H
---------
Legal Opinion of Counsel to Sellers and the Companies
The opinion of Williams Mullen to be delivered pursuant to Section 8.01 (j)
of the Purchase Agreement shall be to the following effect:
1. Each Company, and each Seller that is not a natural person, is duly formed
or organized, validly existing and in good standing under the laws of the
jurisdiction in which it is so formed or organized.
2. The execution, delivery and performance of the Purchase Agreement and each
of the Ancillary Agreements to which each Seller that is not a natural
person is a party are within the requisite power of such Seller and have
been duly authorized by all necessary action on such Seller's part.
3. The Purchase Agreement and each of the Ancillary Agreements to which each
Seller is a party have been duly executed and delivered by such Seller. The
Purchase Agreement and each of the Ancillary Agreements to which each
Seller is a party constitute the valid and binding obligations of such
Seller, enforceable against such Seller in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency
and other similar laws affecting the enforcement of creditors' rights
generally and, insofar as the remedy of specific performance is concerned,
the exercise of judicial discretion.
4. Each Seller's execution, delivery and performance of the Purchase Agreement
and each of the Ancillary Agreements to which such Seller is a party and
the consummation by such Seller of the Transaction do not require such
Seller to request or receive any consent, approval or action by or in
respect of, or any declaration, filing or registration with, any
Governmental Entity, except (i) such as have been obtained or made, (ii)
compliance with and filings under the HSR Act and similar compliance and
filings with non-U.S. Governmental Entities having authority over merger,
control or competition laws and filings under the Securities Act of 1933
and the Securities Exchange Act of 1934, (iii) those that may be required
solely by reason of the participation of Purchaser or Purchaser's
affiliates in the Transaction, and (iv) those the failure of which to
obtain or make, individually or in the aggregate, would not reasonably be
expected to materially impair such Seller's ability to consummate the
Transaction.
5. Each Seller's execution, delivery and performance of the Purchase Agreement
and the consummation by such Seller of the Transaction do not (i) conflict
with or contravene the organizational or governing documents of the
Companies or, if such Seller is not a natural person, such Seller, (ii)
violate any outstanding order, writ, injunction or decree of any court or
Governmental Entity applicable to such Seller or any Company and known to
such counsel, or (ii) assuming compliance with the matters referred to in
Section 2.05(b) of the Purchase Agreement, contravene any material
Applicable Law applicable to such Seller or any Company.
6. Upon the Purchaser obtaining control of the Equity Interests, and assuming
that the Purchaser is acquiring the Equity Interests without notice of any
adverse claim within the meaning of
Section 8-102 of the Uniform Commercial Code, upon delivery of the Equity
Interests by or on behalf of the Sellers to the Purchaser and the payment
of the Initial Cash Consideration and Initial Stock Consideration therefor
in accordance with the Purchase Agreement, the Purchaser will acquire all
rights of the Sellers in the Equity Interests free of any adverse claim.
EXHIBIT I
---------
Legal Opinion of Purchaser's Counsel
The opinion of Testa, Hurwitz & Thibeault, LLP to be delivered pursuant to
Section 8.02(j) of the Purchase Agreement shall be to the following effect:
1. Purchaser is a duly incorporated and validly existing corporation in good
standing under the laws of the Commonwealth of Massachusetts.
2. The execution, delivery and performance of the Purchase Agreement and the
Ancillary Agreements to which Purchaser is a party are within the corporate
power of Purchaser and have been duly authorized by all necessary corporate
action on Purchaser's part.
3. The Purchase Agreement and each of the Ancillary Agreements to which
Purchaser is a party have been duly executed and delivered by Purchaser.
The Purchase Agreement and the Ancillary Agreements to which Purchaser is a
party constitute the valid and binding obligations of Purchaser,
enforceable against Purchaser in accordance with their respective terms,
except as such enforcement may be limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally
and, insofar as the remedy of specific performance is concerned, the
exercise of judicial discretion. The foregoing notwithstanding, no opinion
is hereby expressed as to the validity or enforceability of the
indemnification and contribution provisions contained in the Stockholders
Agreement and, with respect to the performance by the Purchaser of its
obligations under the Stockholders Agreement, such counsel assumes
compliance by the Purchaser at such time with the registration requirements
of the Securities Act and with applicable state securities laws.
4. The execution, delivery and performance by Purchaser of the Purchase
Agreement and the Ancillary Agreements to which Purchaser is a party and
the consummation by Purchaser of the Transactions do not require Purchaser
to request or receive any consent, approval or action by or in respect of,
or any declaration, filing or registration with, any Governmental Entity,
except (i) such as have been obtained or made, (ii) those required under
any State "blue sky" laws in connection with the issuance or resale of the
shares of Common Stock to be issued by the Purchaser pursuant to the
Purchase Agreement, (iii) those that may be required solely by reason of
the participation of Sellers or the Companies or their subsidiaries in the
Transaction, (iv) the filing with the SEC of those required to be made by
Purchaser under the Purchase Agreement or the Ancillary Agreements or in
connection with the Transaction or the performance of Purchaser's
obligations under the Purchase Agreement or the Ancillary Agreements in
each case under the Securities Act or the Exchange Act, (v) filings and
qualifications with the NYSE in respect of the Initial Share Consideration,
(vi) compliance with and filings under the HSR Act and similar compliance
and filings with non-U.S. Governmental Entities having authority over
merger, control or competition laws, and (vii) those the failure of which
to obtain or make, individually or in the aggregate, would not reasonably
be expected to have a Purchaser Material Adverse Effect.
5. Purchaser's execution, delivery and performance of the Purchase Agreement
and the consummation by Purchaser of the Transaction do not (i) conflict
with or contravene the articles of organization or bylaws of Purchaser,
(ii) violate any outstanding order, writ, injunction or decree of any court
or Governmental Entity applicable to Purchaser and known to such counsel,
or (iii) assuming compliance with the matters referred to in Section
4.04(b) of the Purchase Agreement, contravene any material Applicable Law
applicable to the Purchaser. Purchaser's execution, delivery and
performance of the Stockholders Agreement do not (i) conflict with or
contravene the articles of organization or bylaws of Purchaser, or (ii)
assuming compliance with the matters referred to in Section 4.04(b) of the
Purchase Agreement, contravene any material Applicable Law.
6. The shares of Common Stock to be issued by the Purchaser pursuant to the
Purchase Agreement have been duly authorized and, when issued in accordance
with the Purchase Agreement, will be validly issued, fully paid and
nonassessable.
EXHIBIT J
---------
RELEASE OF CLAIMS AND COVENANT NOT TO SUE
This Release of Claims and Covenant Not To Sue (the "Release") is
executed as of ____________ __, 200__ pursuant to Section 8.01(k) of the
Purchase Agreement among each of the Sellers identified therein (each a "Seller"
and collectively, the "Sellers") and Ionics, Incorporated ("Ionics") dated as of
November 18, 2003 (the "Purchase Agreement"). Capitalized terms used in this
Release and not otherwise defined herein shall have the meanings ascribed to
such terms in the Purchase Agreement.
WITNESSETH
WHEREAS, it is a condition to the consummation of the Purchase
Agreement that Sellers execute this Release;
WHEREAS, Sellers have agreed to execute this Release as a condition to
their receipt of the Initial Purchase Price under the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and obligations contained herein and in the Purchase Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the undersigned hereby agree as follows:
Each of the undersigned Sellers, on its own behalf and on behalf of
each of such Seller's heirs, successors and assigns (and if such Seller is a
trust or estate, on behalf of such Seller's beneficiaries, to the extent the
trustees, executors, or legal representatives of such trust or estate are
permitted by the constituent trust or estate documentation or relevant law to
grant a release similar to that granted hereunder on behalf of the beneficiaries
of such trust or estate), hereby absolutely and unconditionally releases,
remises and discharges each of Ecolochem Inc., Ecolochem International, Inc.,
Ecolochem S.A.R.L. and Moson Holdings, LLC and each of their respective
subsidiaries (collectively, the "Companies"), and each of their divisions,
successors and assigns (the "Released Parties"), from any and all obligations,
debts, liabilities, claims, actions, causes of action, suits, complaints,
contracts, agreements, promises, judgments and damages of any kind whatsoever
(collectively, the "Released Claims"), whether in law or in equity, whether
existing or contingent, known or unknown, which such Seller now has or has ever
had, in his or its own name or names, in the name of or through any other person
or entity, in his or its individual capacities, or in any corporate,
representative or other capacity against the Companies arising out of any
matter, cause or event occurring on or prior to the date hereof (the "Closing
Date") relating to the business, operations, management, finances and other
affairs of the Companies; provided, however, that nothing contained herein shall
operate to release (a) as to any Seller who shall be offered continued
employment with the Companies, any obligation of the Companies arising under any
offer letter, employment agreement, assignment of invention and non-competition
agreement, or related employment documentation, (b) any rights under any benefit
plan of the Companies, (c) tort claims based on personal injury or similar
claims, and (d)
any of Sellers' rights, obligations or remedies under the Purchase Agreement or
the Ancillary Agreements.
The Sellers further covenant and agree not to voluntarily commence,
join in, prosecute, or otherwise voluntarily participate in any suit or
proceeding, at law, in equity, or through any other methods or means, in a
position which is adverse to the Companies or any of them, relating to any
Released Claim other than in respect of the matters described in clauses (a)-(d)
of the preceding paragraph.
Notwithstanding anything to the contrary herein, all rights to
indemnification existing on the Closing Date in favor of the present or former
employees, agents, representatives, officers and directors of the Companies with
respect to actions taken prior to the Closing Date, as provided in the
certificates of incorporation, by-laws or similar organizational documents of
the Companies (as amended), will survive this Release and continue in full force
and effect. Each Seller further represents that, except as permitted by the
Purchase Agreement, such Seller has not assigned and will not assign in the
future any claim such Seller may have against the Released Parties other than by
operation of law.
This Release represents a complete understanding between the parties
relating to the subject matter hereof and supersedes any and all other
agreements and understandings, whether oral or written, between such Seller and
the Released Parties which are not included herein. This Release may not be
modified, altered or changed except upon written consent of the parties. This
Release will be binding upon the parties and will inure to the benefit of such
Seller and the Released Parties and their respective successors and assigns.
This Release shall be governed by and construed in accordance with the
law of the State of New York. This Release may be signed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. In the event of a
conflict between the terms of the Release and the Purchase Agreement or any
Ancillary Agreement relating to the terms hereof, the terms of the Purchase
Agreement or such Ancillary Agreement shall control.
* * * * *
THE UNDERSIGNED REPRESENT THAT THEY HAVE READ THE FOREGOING RELEASE OF CLAIMS,
THAT THE UNDERSIGNED FULLY UNDERSTAND THE TERMS AND CONDITIONS OF SUCH RELEASE
OF CLAIMS AND THAT THE UNDERSIGNED ARE KNOWINGLY AND VOLUNTARILY EXECUTING THE
SAME. IN ENTERING INTO THIS RELEASE OF CLAIMS, THE UNDERSIGNED DO NOT RELY ON
ANY REPRESENTATION, PROMISE OR INDUCEMENT MADE BY IONICS, THE COMPANIES OR THEIR
RESPECTIVE ATTORNEYS WITH THE EXCEPTION OF THE CONSIDERATION DESCRIBED IN THIS
DOCUMENT.
IN WITNESS WHEREOF, the undersigned have executed this Release as of
the ________ day of ___________, 200__:
PURCHASER:
----------
IONICS, INCORPORATED
By:
------------------------------------------
Its:
-----------------------------------------
COMPANIES:
----------
ECOLOCHEM, INC.
By:
-----------------------------------------
Its:
----------------------------------------
ECOLOCHEM INTERNATIONAL, INC.
By:
------------------------------------------
Its:
-----------------------------------------
ECOLOCHEM S.A.R.L.
By:
------------------------------------------
Its:
-----------------------------------------
MOSON HOLDINGS, LLC
By:
------------------------------------------
Its:
-----------------------------------------
SELLERS:
--------
THE LYMAN B. DICKERSON REVOCABLE TRUST
DATED SEPTEMBER 9, 1996, OR ANY SUCCESSOR
TRUSTEE, AS AMENDED
By:
------------------------------------------
LYMAN B. DICKERSON, Trustee
________________, 2004
Date Signed
THE DOUGLAS G. DICKERSON REVOCABLE TRUST
DATED JUNE 22, 1988, OR ANY SUCCESSOR
TRUSTEE, AS AMENDED
By:
------------------------------------------
DOUGLAS G. DICKERSON, Trustee
________________, 2004
Date Signed
THE RICHARD DICKERSON REVOCABLE TRUST
DATED MARCH 5, 1993, OR ANY SUCCESSOR
TRUSTEE, AS AMENDED
By:
------------------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
------------------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
________________, 2004
Date Signed
THE LYMAN DICKERSON IRREVOCABLE TRUST,
DATED JULY 1, 2001
By:
------------------------------------------
LYMAN B. DICKERSON, Trustee
________________, 2004
Date Signed
By:
------------------------------------------
CHARLES C. KLINE, Independent Trustee
________________, 2004
Date Signed
THE DOUGLAS DICKERSON IRREVOCABLE TRUST
NO. 3, DATED JULY 1, 1991
By:
------------------------------------------
DOUGLAS G. DICKERSON, Trustee
________________, 2004
Date Signed
By:
------------------------------------------
FREDERICK T. STANT, III, Independent
Trustee
________________, 2004
Date Signed
THE RICHARD DICKERSON IRREVOCABLE TRUST
NO. 3, DATED JULY 1, 1991
By:
------------------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
------------------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
------------------------------------------
FREDERICK T. STANT, III, Independent
Trustee
________________, 2004
Date Signed
---------------------------------------------
LYMAN B. DICKERSON
________________, 2004
Date Signed
---------------------------------------------
DOUGLAS G. DICKERSON
________________, 2004
Date Signed
THE ESTATE OF RICHARD C. DICKERSON
By:
------------------------------------------
DOUGLAS G. DICKERSON, Co-Executor
________________, 2004
Date Signed
By:
------------------------------------------
MARGUERITE W. DICKERSON, Co-Executor
________________, 2004
Date Signed
EXHIBIT K
---------
THIS SECTION 338 ESCROW AGREEMENT is dated as of [ ], 200__ (this
"Escrow Agreement"), among IONICS, INCORPORATED, a Massachusetts corporation
(the "Buyer"), and the entities listed on Exhibit A hereto (each a "Seller" and
collectively, the "Sellers"), Lyman B. Dickerson and Douglas G. Dickerson
("Sellers' Representatives") and [ ] (the "Escrow Agent").
Buyer and Sellers entered into a Purchase Agreement dated as of
November 18, 2003 (the "Purchase Agreement"), pursuant to which Buyer has agreed
to purchase from Sellers and Sellers have agreed to sell to Buyer their
interests in Ecolochem, Inc., a Virginia corporation, Ecolochem International,
Inc., a Delaware corporation, Ecolochem S.A.R.L., a societe a responsabilite
limitee organized under the laws of France, and Moson Holdings, LLC, a Virginia
limited liability company. In accordance with Section 1.06 of the Purchase
Agreement, each of the Sellers appointed Sellers' Representatives to act on
their behalf under the terms and conditions of this Escrow Agreement.
Capitalized terms used but not otherwise defined herein shall have the
respective meanings given them in the Purchase Agreement.
In accordance with the Purchase Agreement, Buyer is hereby depositing
with the Escrow Agent [$Insert Amount of Preliminary 338 Tax Adjustment] in
cash, which amount shall be (A) decreased, if and when the Preliminary 338 Tax
Adjustment is finally determined to be less than such amount pursuant to Section
1.05(d) of the Purchase Agreement, or (B) increased or decreased, as applicable,
to an amount equal to the Section 338 Tax Adjustment as and when such amount is
finally determined pursuant to Section 1.05(g) or Section 1.05(i) (the "Cash
Amount"). The Cash Amount less any amounts distributed pursuant to Section 2(b)
below is referred to herein as the "Escrowed Funds."
It is expressly understood and agreed by the parties hereto that all
references herein to the Purchase Agreement are for the convenience of the
parties hereto other than the Escrow Agent and the Escrow Agent shall have no
obligation or duties with respect thereto.
SECTION 1. Deposit of the Escrowed Funds. At the Closing, Buyer shall
deliver to the Escrow Agent by wire transfer of immediately available funds and
the Escrow Agent, shall promptly acknowledge receipt in writing of, the Cash
Amount. The Cash Amount shall be deposited initially into an insured
interest-bearing money-market account of [ ], and thereafter shall be invested
and liquidated in accordance with Section 3. Immediately after the Section 338
Tax Adjustment is finally determined in accordance with the terms of Section
1.05 of the Purchase Agreement, Buyer shall deliver to the Escrow Agent by wire
transfer of immediately available funds an amount equal to the amount, if any,
by which the Section 338 Tax Adjustment exceeds the Preliminary 338 Tax
Adjustment, such amount shall be invested and liquidated in accordance with
Section 3 hereof. In the event that the Section 338 Tax Adjustment is finally
determined to be less than the Preliminary Section 338 Tax Adjustment, the
Escrow Agent shall deliver to the Buyer, by wire transfer of immediately
available funds, an amount equal to the
2
amount by which the Section 338 Tax Adjustment is less than the Preliminary 338
Tax Adjustment.
SECTION 2. Purpose and Release. (a) The Escrowed Funds shall serve as
the source of payments that may become due to Sellers from Buyer pursuant to
Section 1.05(g) of the Purchase Agreement (the "Section 338 Tax Adjustment
Amount"). For purposes of this Agreement, the term "Business Day" shall mean any
day other than a Saturday or Sunday on which the Escrow Agent is open for
business.
(b) Within three (3) Business Days of receipt of a written notice (a
"Claim Notice") executed and delivered by the Sellers' Representatives at any
time on or before June 15, 2005 instructing the Escrow Agent to disburse a
specified amount of funds (the "Claim Amount") from the Escrowed Funds to the
Sellers' Representatives, on behalf of any Seller for the payment of the tax
obligation of such Seller relating to the Section 338 Election of the Buyer, the
Escrow Agent shall release such funds as set forth in such notice; provided,
however, that Sellers' Representatives shall not be entitled to issue any Claim
Notice prior to any Tax Payment Date and provided, further, that any Claim
Notice shall be based on Sellers' Representatives' good faith belief that the
Claim Amount sought pursuant to such Claim Notice is owed to Sellers pursuant to
Section 1.05(g) of the Purchase Agreement and that such Claim Amount, when
aggregated with the Claim Amounts of all other Claim Notices issued hereunder,
does not exceed the amount of the Section 338 Tax Adjustment, or if so
determined prior to the termination of this Agreement, the amount of the Final
Section 338 Adjustment. Payments made by the Escrow Agent in cash from the
Escrowed Funds shall be made in the form of a wire transfer to the accounts
specified in the applicable Claim Notice.(c) The amount of the Escrowed Funds
which are not subject to a Claim Notice and which have not otherwise been
distributed to Sellers' Representatives, shall be released by the Escrow Agent
to the Buyer as soon as practicable, upon the earlier of (i) the date on which
Buyer determines that the amount of the Section 338 Tax Adjustment remaining
unpaid is equal to zero ("Buyer's Determination"), or (ii) June 30, 2005 (the
"Release Date"); provided that in the case of clause (i), (A) Buyer has provided
Sellers' Representatives and the Escrow Agent written notice of Buyer's
Determination at least 10 business days prior to the date of release specified
in such notice ("Buyer's Termination Notice") and (B) prior to the expiration of
the 10 business day period after delivery of Buyer's Termination Notice, the
Escrow Agent shall not have received written notice from the Sellers'
Representatives (the "Sellers' Notice") (a copy of which shall be forwarded by
the Sellers' Representatives to the Buyer simultaneously with the forwarding
thereof to the Escrow Agent) that Sellers' Representatives elect to contest
Buyer's Determination.
(d) If Sellers' Representatives have filed a Sellers' Notice pursuant
to Section 2(c)(ii)(B) hereof, then the Escrow Agent shall thereafter deliver to
Buyer Escrowed Funds in an amount equal to any amount not contested by Sellers'
Representatives in the Sellers' Notice and shall not make further disbursements
of the Escrowed Funds to Buyer until the earlier to occur of (i) such time as
the Escrow Agent has received joint disbursement instructions from the Sellers'
Representatives and Buyer or (ii) June 30, 2005.
3
SECTION 3. Investments; Disposition of Income. (a) At the written
direction of Buyer, the Escrow Agent shall invest the Escrowed Funds within two
business days after receipt of such written direction in (i) United States'
government securities or securities of agencies of the United States government
which are guaranteed by the United States government and which mature nine
months or less from the date of investment, (ii) debt securities (including
certificates of deposit) issued by any bank or trust company organized under the
laws of the United States of America or any state thereof having capital and
surplus aggregating in excess of $500 million and whose long-term debt
securities have a rating of "A" or higher by Standard and Poor's Rating Service
and which mature nine months or less from the date of investment or (iii) any
other instrument as Buyer and Sellers' Representatives, from time to time, shall
jointly designate in writing. Any income received by the Escrow Agent from
investments of the Escrowed Funds pursuant to this Section 3 (such income being
referred to as "Interest") shall be added to the Escrowed Funds and distributed
as provided in this Escrow Agreement. Periodic statements will be provided to
Sellers' Representatives and Buyer reflecting transactions executed in
connection with the Escrowed Funds.
(b) In the event that the Escrow Agent is required to distribute
Escrowed Funds under Section 2, the Escrow Agent shall sell or liquidate the
investments made under Section 3(a) in respect thereto as and to the extent
necessary to fund such distribution. The Escrow Agent shall sell or liquidate
such investments in accordance with such investments' average overnight yield
for the prior business day and in order of the lowest to highest overnight yield
for such investments. Such sales or liquidations shall be made as promptly as
practicable after the Escrow Agent becomes obligated to make such distribution,
but in no event later than one business day thereafter. Notwithstanding the
foregoing, no later than two business days prior to April 10, 2005 Escrow Agent
shall sell or liquidate all of the investments made under Section 3(a) in
respect of the Escrowed Funds.
(c) Upon the sale or liquidation of an investment of the Escrowed
Funds, the proceeds shall be deposited into an insured interest-bearing
money-market account of the Escrow Agent pending distribution pursuant to
Section 2.
SECTION 4. Concerning the Escrow Agent. (a) The Escrow Agent shall not
be required to invest any funds held hereunder except as directed pursuant to
Section 3 of this Escrow Agreement.
(b) This Escrow Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Escrow Agreement against the
Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto with respect to the subject matter
hereof except this Escrow Agreement. The Escrow Agent's duties are ministerial
in nature.
4
(c) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor Escrow Agent)
from and against any and all losses, liabilities, claims, actions, taxes (not
including any taxes of the Escrow Agent measured by or imposed upon income, and
not including any franchise or excise taxes), damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of or in connection
with this Escrow Agreement including the legal costs and expenses of defending
itself against any claim or liability in connection with its performance
hereunder. Without limiting the foregoing, the Escrow Agent shall in no event be
liable in connection with its investment or reinvestment of any cash held by it
hereunder in accordance with the terms hereof, or as a result of any liquidation
of any such investment prior to its maturity, including any liability for any
delays (not resulting from its gross negligence or willful misconduct) in the
investment or reinvestment of the Escrowed Funds.
(d) The Escrow Agent shall be entitled to rely in good faith upon any
order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity or
the service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that any person purporting
to give notice or receipt or advice or make any statement or execute any
document in connection with the provisions hereof has been duly authorized to do
so.
(e) The Escrow Agent may act pursuant to the advice of counsel
reasonably acceptable to both Sellers' Representatives and Buyer with respect to
any matter relating to this Escrow Agreement and shall not be liable for any
action taken or omitted in accordance with such advice.
(f) The Escrow Agent does not have any interest in any Escrowed Funds
deposited hereunder but is serving as escrow agent only and having only
possession thereof. Any payments of income from this Escrow Agreement shall be
subject to withholding regulations then in force with respect to United States
taxes. Sellers' Representatives shall provide the Escrow Agent with appropriate
W-9 or other certification forms for tax identification number certification, or
nonresident alien certifications with respect to Sellers.
(g) The Escrow Agent makes no representation as to the validity, value,
genuineness or the collectability of any security or other documents or
instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
5
(i) Sellers' Representatives and Buyer may jointly remove the Escrow
Agent and terminate this Escrow Agreement upon ten days prior written notice
signed by both parties. Upon such removal and termination, all then existing
Escrowed Funds (including all investments) shall be transferred in accordance
with the joint written instructions of Sellers' Representatives and Buyer.
(j) The Escrow Agent shall have no responsibility for the contents of
any court order and may rely without any liability upon the contents thereof.
(k) The Escrow Agent shall be paid $[ ] annually. Sellers'
Representative shall on behalf of the Sellers, pay to the Escrow Agent its fees
for the acceptance and administration of this Escrow Agreement (pursuant to the
terms of Annex A attached hereto). All fees shall be paid in United States
currency and payable in the United States at the office of the Escrow Agent.
Notwithstanding anything in this Escrow Agreement to the contrary, at any time
that the Escrow Agent is authorized or directed or otherwise required to make a
disbursement or distribution from the Escrowed Funds (A) to the Sellers'
Representative or Sellers, the Escrow Agent may refrain from making such
disbursement or distribution from the Escrowed Funds, without liability, if and
to the extent that there are fees or expenses or any amounts then due to the
Escrow Agent from the Sellers pursuant to Section 4(c) then due to the Escrow
Agent from the Sellers' Representatives; or (B) to Buyer, the Escrow Agent may
refrain from making such disbursement or distribution from the Escrowed Funds,
without liability, if and to the extent that there are any amounts then due to
the Escrow Agent from the Buyer pursuant to Section 4(c) hereof. Upon receipt of
payment for such fees or expenses, the Escrow Agent shall promptly make such
disbursements or distributions to Buyer.
SECTION 5. Sellers' Assets. The parties agree that Escrowed Funds (up
to an amount equal to the Section 338 Tax Adjustment, or if so determined prior
to the termination of this Agreement, the amount of the Final Section 338
Adjustment each as determined pursuant to Section 1.05 of the Purchase
Agreement) are assets of Sellers (and not Buyer or its subsidiaries), and are
placed in escrow solely to secure Buyer's obligations to Sellers in respect of
the amount of the Section 338 Tax Adjustment or the amount of the Final Section
338 Adjustment, as the case may be. No other person shall have any right, title
or interest in or to the Escrowed Funds.
SECTION 6. Notices. All notices, requests, permissions, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given (a) 5 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:
(a) if to Buyer, to:
6
Ionics, Incorporated
65 Grove Street
Watertown, MA 02459
Fax: (617) 926-3760
Attention: Stephen Korn, Vice President and General Counsel
with copies to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Fax: (617) 248-7100
Attention: Mark H. Burnett
(b) if to Sellers' Representatives or any Seller, to:
Ecolochem, Inc.
4545 Patent Road
Norfolk, VA 23502
Fax: (757) 855-1478
Attention: Lyman B. Dickerson
with copies to:
Williams Mullen
222 Central Park Avenue, Suite 1700
Virginia Beach, Virginia 23462
Fax: (757) 473-0395
Attention: Frederick T. Stant
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax: (212) 474-3700
Attention: Alan Stephenson
(c) if to the Escrow Agent, to:
7
Attention:
SECTION 7. Termination. This Escrow Agreement shall automatically
terminate upon the complete distribution of all Escrowed Funds in accordance
with the terms hereof.
SECTION 8. Miscellaneous. (a) This Escrow Agreement and the rights and
obligations hereunder shall not be assignable or transferable by any party
without the prior written consent of the other parties hereto. Any attempted
violation of this Section 8(a) shall be void.
(b) This Escrow Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement. This Escrow
Agreement shall become effective when each party hereto shall have received a
counterpart, or facsimile of a counterpart, of this Escrow Agreement, each
signed by the other party or parties hereto or thereto.
(c) This Escrow Agreement is for the sole benefit of the parties hereto
and their permitted assigns and nothing herein expressed or implied shall give
or be construed to give to any person, other than the parties hereto and such
assigns, any legal or equitable rights hereunder. This Escrow Agreement contains
the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. No amendment, modification or waiver in respect
of this Escrow Agreement shall be effective unless it shall be in writing and
signed by each party hereto.
(d) THIS ESCROW AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF THE STATE OF NEW YORK.
(e) 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 Escrow 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 paragraph. Each of the
parties irrevocably and
8
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.
(f) Each party waives, to the fullest extent permitted by applicable
law, any right it may have to a trial by jury in respect to any litigation
directly or indirectly arising out of, under or in connection with this
Agreement or disputes relating hereto or thereto. Each party (i) certifies that
no representative, agent or attorney of any other party 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
and the other parties have been induced to enter into this Escrow Agreement by,
among other things, the mutual waivers and certifications in this paragraph.
(g) This Escrow Agreement may be amended in writing by the parties.
This Escrow Agreement may not be amended except by an instrument in writing
signed on behalf of all of the parties.
(h) The Sellers' Representatives, on behalf of each of the Sellers,
acknowledges and agrees that each Seller will provide its correct Taxpayer
Identification Number to the Escrow Agent, and will report all Interest and
other income earned under this Escrow Agreement as taxable income to the
Internal Revenue Service or other Taxing Authority. The Escrow Agent (or Buyer,
if Buyer is the withholding agent) shall be permitted to report and withhold any
required Taxes as it determines it may be required by any law or regulation in
effect, and remit such Taxes to the appropriate Taxing Authorities, and the
Sellers' Representatives, on behalf of each of the Sellers, acknowledge and
agree that the Sellers will hold the Escrow Agent (and Buyer, if Buyer is the
withholding agent) harmless from and against any such Taxes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
IN WITNESS WHEREOF, the parties hereto have duly executed this
Escrow Agreement as of the date first above written.
IONICS, INCORPORATED
By:
----------------------------------------------
Its:
---------------------------------------------
THE LYMAN B. DICKERSON REVOCABLE TRUST
DATED SEPTEMBER 9, 1996, OR ANY SUCCESSOR
TRUSTEE, AS AMENDED
By:
------------------------------------------
LYMAN B. DICKERSON, Trustee
________________, 2004
Date Signed
THE DOUGLAS G. DICKERSON REVOCABLE TRUST
DATED JUNE 22, 1988, OR ANY SUCCESSOR
TRUSTEE, AS AMENDED
By:
------------------------------------------
DOUGLAS G. DICKERSON, Trustee
________________, 2004
Date Signed
THE RICHARD DICKERSON REVOCABLE TRUST
DATED MARCH 5, 1993, OR ANY SUCCESSOR
TRUSTEE, AS AMENDED
By:
------------------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
------------------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
________________, 2004
Date Signed
THE LYMAN DICKERSON IRREVOCABLE TRUST,
DATED JULY 1, 2001
By:
------------------------------------------
LYMAN B. DICKERSON, Trustee
________________, 2004
Date Signed
By:
------------------------------------------
CHARLES C. KLINE, Independent Trustee
________________, 2004
Date Signed
THE DOUGLAS DICKERSON IRREVOCABLE TRUST
NO. 3, DATED JULY 1, 1991
By:
------------------------------------------
DOUGLAS G. DICKERSON, Trustee
________________, 2004
Date Signed
By:
------------------------------------------
FREDERICK T. STANT, III, Independent
Trustee
________________, 2004
Date Signed
THE RICHARD DICKERSON IRREVOCABLE TRUST
NO. 3, DATED JULY 1, 1991
By:
------------------------------------------
DOUGLAS G. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
------------------------------------------
MARGUERITE W. DICKERSON, Co-Trustee
________________, 2004
Date Signed
By:
------------------------------------------
FREDERICK T. STANT, III, Independent
Trustee
________________, 2004
Date Signed
---------------------------------------------
LYMAN B. DICKERSON
________________, 2004
Date Signed
---------------------------------------------
DOUGLAS G. DICKERSON
________________, 2004
Date Signed
THE ESTATE OF RICHARD C. DICKERSON
By:
------------------------------------------
DOUGLAS G. DICKERSON, Co-Executor
________________, 2004
Date Signed
By:
------------------------------------------
MARGUERITE W. DICKERSON, Co-Executor
________________, 2004
Date Signed
[ ], as Escrow Agent
By:
------------------------------------------
Its:
-----------------------------------------