SECOND AMENDED AND RESTATED STOCKHOLDER'S AGREEMENT
SECOND AMENDED AND RESTATED STOCKHOLDER'S AGREEMENT (the
"Agreement"), dated as of [ ], between Ecolab Inc., a Delaware corporation (the
"Company"), and Henkel Kommanditgesellschaft auf Aktien, organized under the
laws of the Federal Republic of Germany (the "Stockholder").
WHEREAS, the Stockholder and the Company entered into the
Amended and Restated Stockholder's Agreement, dated as of June 26, 1991 (the
"Original Stockholder's Agreement"), in connection with the combination of their
European and certain other cleaning and sanitizing businesses in a joint venture
(the "Joint Venture");
WHEREAS, the Company and the Stockholder have entered into the
Master Agreement, dated as of [ ], 2000 (the "Master Agreement" and, together
with certain other agreements contemplated thereby, the "Transaction
Agreements"), relating to a transaction involving the Company's and the
Stockholder's interests in the Joint Venture (the "Transaction"); and
WHEREAS, in connection with the consummation of the
Transaction, the Company and the Stockholder desire to amend and restate in its
entirety the Original Stockholder's Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and in the Transaction Agreements and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Section The Company's Representations and Warranties.
The Company represents and warrants to the Stockholder as
follows:
(a) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware;
(b) The Company has the full power and authority to execute, deliver and carry
out the terms and provisions of this Agreement and to consummate the
transactions contemplated hereby, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement;
(c) This Agreement has been duly and validly authorized, executed and delivered
by the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that (i) such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
certain equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought; and
(d) The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with, result in the breach of
any of the terms or conditions of, constitute a default under or violate,
accelerate or permit the acceleration of any other similar right of any other
party under, the Restated Certificate of Incorporation or By-Laws of the
Company, any law, rule or regulation or any agreement, lease, mortgage, note,
bond, indenture, license or other document or undertaking, to which the Company
is a party or by which the Company or its properties may be bound, nor will such
execution, delivery and consummation violate any order, writ, injunction or
decree of any federal, state, local or foreign court, administrative agency or
governmental or regulatory authority or body (each, an "Authority") to which the
Company or any of its properties is subject, the effect of any of which, either
individually or in the aggregate, would impair the ability of the Company to
perform its obligations hereunder.
2. Section The Stockholder's Representations and Warranties.
The Stockholder represents and warrants to the Company as
follows:
(a) The Stockholder is a Kommanditgesellschaft auf Aktien validly existing under
the laws of the Federal Republic of Germany;
(b) The Stockholder has the full power and authority to execute, deliver and
carry out the terms and provisions of this Agreement and to consummate the
transactions contemplated hereby, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement;
(c) This Agreement has been duly and validly authorized, executed and delivered
by the Stockholder, and constitutes a legal, valid and binding agreement of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
except to the extent that (i) such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
certain equitable defenses and to the discretion of the court before which any
proceedings therefor may be brought;
(d) Except for ____ [insert number that includes shares of Common Stock received
upon closing of the Master Agreement] shares of the Company's common stock, par
value $1.00 per share (the "Common Stock"), and the associated rights to
purchase shares of the Company's Series A Junior Participating Preferred Stock
under the Company's Stockholder Rights Plan (the "Rights Plan"), beneficially
owned as of the date hereof and the right to acquire additional shares pursuant
to the terms of this Agreement and the Rights Plan (the Common Stock
beneficially owned by the Stockholder, together with any equity securities of
the Company acquired by the Stockholder during the Agreement Period (as
hereinafter defined), are sometimes collectively referred to herein as the
"Shares"), neither the Stockholder nor any of its Affiliates (for the purposes
of this Agreement, the term "Affiliates" shall be defined as such term is
defined on the date hereof under the rules and regulations promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), provided that for purposes of this
Agreement the Company and the Stockholder shall not be deemed to be Affiliates
of each other), (i) beneficially owns any equity securities of the Company
entitled to vote at any meeting of stockholders of the Company ("Voting
Securities" which, for purposes of this Agreement, shall be deemed to be
outstanding only if actually entitled to vote at the time the calculation of
outstanding Voting Securities is to be made) or (ii) possesses any rights to
acquire any Voting Securities;
(e) The Stockholder is an "accredited investor" within the meaning of Regulation
D under the Securities Act, and it is acquiring the Shares for its own account
and not with a view to the public distribution thereof; and
(f) The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with, result in the breach of
any of the terms or conditions of, constitute a default under or violate,
accelerate or permit the acceleration of any other similar right of any other
party under, the charter or by-laws of the Stockholder, any law, rule or
regulation, or any agreement, lease, mortgage, note, bond, indenture, license or
other document or undertaking, to which the Stockholder is a party or by which
the Stockholder or its properties may be bound, nor will such execution,
delivery and consummation violate any order, writ, injunction or decree of any
Authority to which the Stockholder or any of its properties is subject , the
effect of any of which, either individually or in the aggregate, would impair
the ability of the Stockholder to perform its obligations hereunder.
3. Section Covenants and Agreements of the Stockholder.
(a) During the Agreement Period (as defined below), except (i) by way of stock
dividend, stock split, reorganization, recapitalization, merger, consolidation
or other like distributions made available to holders of Common Stock generally
or (ii) as specifically permitted by the terms of this Agreement or the Rights
Plan, the Stockholder will not, and will cause each of its Affiliates not to,
acquire, offer or propose to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, or exercise any attribute of beneficial
ownership (as defined on the date hereof in Rule 13d-3 of the Commission under
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act")) with respect to, any equity securities of the Company, or direct or
indirect rights or options to acquire (through purchase, exchange, conversion or
otherwise) any equity securities of the Company. The term "Agreement Period"
means the period beginning on the date hereof and ending on the date that the
Stockholder and its Affiliates beneficially own less than 2% of the outstanding
Voting Securities.
(b) During the Agreement Period, except (i) upon the prior written invitation of
the Company and (ii) as otherwise specifically permitted by this Agreement, the
Stockholder will not, directly or indirectly, through one or more intermediaries
or otherwise, and will cause each of its Affiliates not to, singly or as part of
a partnership, limited partnership, syndicate or other group (as those terms are
used within the meaning of Section 13(d)(3) of the 1934 Act, which meanings
shall apply for all purposes of this Agreement):
(i) make, or in any way participate in, any "solicitation" of "proxies"
(as such terms are defined or used in Regulation 14A under the 1934 Act)
with respect to any Voting Securities (including by the execution of
actions by written consent), become a "participant" in any "election
contest" (as such terms are defined or used in Rule 14a-11 under the 1934
Act) with respect to the Company or seek to advise, encourage or
influence any person or entity with respect to the voting of any Voting
Securities; provided, however, that the Stockholder shall not be
prevented hereunder from being a "participant" in support of the
management of the Company, by reason of the membership of the
Stockholder's designees on the Company's Board of Directors or the
inclusion of the Stockholder's designees on the slate of nominees for
election to the Board of Directors proposed by the Company;
(ii) initiate, propose or otherwise solicit, or participate in the
solicitation of, stockholders for the approval of one or more stockholder
proposals with respect to the Company as described in Rule 14a-8 under
the 1934 Act or knowingly induce any other individual or entity to
initiate any stockholder proposal relating to the Company;
(iii) form, join or in any way participate in a "group," act in concert
with any other person or entity or otherwise take any action or actions
which would cause it to be deemed a "person" (for purposes of Section
13(d) of the 1934 Act) (other than to the extent it is a "person" at the
time of consummation of the transactions contemplated by the Transaction
Agreements and this Agreement), with respect to any equity securities of
the Company;
(iv) participate in or encourage the formation of any group which owns
or seeks or offers to acquire beneficial ownership of securities of the
Company or rights to acquire such securities or which seeks or offers to
affect control of the Company or for the purpose of circumventing any
provision of this Agreement;
(v) solicit, seek or offer to effect, negotiate with or provide any
information to any party with respect to, make any statement or proposal,
whether written or oral, either alone or in concert with others, to the
Board of Directors of the Company, to any director or officer of the
Company or to any other stockholder of the Company with respect to, or
otherwise formulate any plan or proposal or make any public announcement,
proposal, offer or filing under the 1934 Act, any similar or successor
statute or otherwise, or take action to cause the Company to make any
such filing, with respect to: (A) any form of business combination or
transaction involving the Company (other than transactions contemplated
by this Agreement, including, without limitation, giving the Company an
Offer (as hereinafter defined) pursuant to Section 5(c) hereof) or any
Affiliate thereof, including, without limitation, a merger, exchange
offer or liquidation of the Company's assets, (B) any form of
restructuring, recapitalization or similar transaction with respect to
the Company or any Affiliate thereof, including, without limitation, a
merger, exchange offer or liquidation of the Company's assets, (C) any
acquisition or disposition of assets material to the Company, (D) any
request to amend, waive or terminate the provisions of this Agreement or
(E) any proposal or other statement inconsistent with the terms of this
Agreement; provided, however, that the Stockholder and its Affiliates may
discuss the affairs and prospects of the Company, the status of the
Stockholder's investment in the Company and any of the matters described
in clauses (A) through (E) of this paragraph at any time, and from time
to time, with the Board of Directors of the Company or any director or
executive officer of the Company and the Stockholder may discuss any
matter, including any of the foregoing, with its outside legal and
financial advisors, if as a result of any such discussions the
Stockholder is not required to make, and does not make, any public
announcement or filing under the 1934 Act otherwise prohibited by this
Agreement as a result thereof. Notwithstanding this clause (v) but
subject to Section 3(c)(i),
(x) after December 31, 2010, the Stockholder may
make one written proposal (as may be modified or amended to
respond to the Board of Directors of the Company or to
competition from third parties) to the Board of Directors of the
Company to acquire all, but not less than all, of the outstanding
equity securities of the Company, which proposal shall provide,
among other things, that the management headquarters of the
cleaning and sanitizing business would be maintained in St. Paul,
Minnesota for a period of no less than ten years from the
consummation of any such proposed acquisition; the Stockholder
may make one second written proposal (as may be modified or
amended to respond to the Board of Directors of the Company or to
competition from third parties), only after 18 months have
elapsed after the date the first proposal was first made, to the
Board of Directors of the Company to acquire all, but not less
than all, of the outstanding equity securities of the Company,
which proposal shall provide, among other things, that the
management headquarters of the cleaning and sanitizing business
would be maintained in St. Paul, Minnesota for a period of no
less than ten years from the consummation of any such proposed
acquisition; the Stockholder may make one third written proposal
(as may be modified or amended to respond to the Board of
Directors of the Company or to competition from third parties),
only after 36 months have elapsed after the date the second
proposal was first made, to the Board of Directors of the Company
to acquire all, but not less than all, of the outstanding equity
securities of the Company, which proposal shall provide, among
other things, that the management headquarters of the cleaning
and sanitizing business would be maintained in St. Paul,
Minnesota for a period of no less than ten years from the
consummation of any such proposed acquisition; and, thereafter,
the Stockholder may make additional written proposals (as may be
modified or amended to respond to the Board of Directors of the
Company or to competition from third parties), provided that each
such proposal may be made only after five years have elapsed
after the date the immediately preceding proposal was first made,
to the Board of Directors of the Company to acquire all, but not
less than all, of the outstanding equity securities of the
Company, which proposal shall provide, among other things, that
the management headquarters of the cleaning and sanitizing
business would be maintained in St. Paul, Minnesota for a period
of no less than ten years from the consummation of any such
proposed acquisition; provided, however, that any material breach
by the Stockholder of any material provision of this Section
3(b)(v)(x) shall automatically terminate the Stockholder's right
to make any additional proposals pursuant to this Section
3(b)(v)(x);
(y) if at any time during the Agreement Period the
Board of Directors causes the Company to enter into a definitive
agreement providing for the issuance of shares of its equity
securities in a single transaction or series of related
transactions that would cause the Stockholder's and its
Affiliates' percentage ownership of Voting Securities immediately
prior to such transaction to be reduced by greater than 50%, then
the Stockholder may make, within 90 days of the Company's
announcement of entering into such an agreement, one written
proposal (as may be modified or amended to respond to the Board
of Directors of the Company or to competition from third parties)
to the Board of Directors of the Company to acquire all, but not
less than all, of the outstanding equity securities of the
Company, which proposal shall provide, among other things, that
the management headquarters of the cleaning and sanitizing
business would be maintained in St. Paul, Minnesota for a period
of no less than ten years from the consummation of any such
proposed acquisition; and
(z) in connection with any written proposal
permitted by clause (x) or (y) above, the Stockholder may make
such filings with Authorities which, in the good faith judgment
of the Stockholder based upon the written advice of outside
counsel to the Stockholder for the respective jurisdiction, are
required by law in connection with making a proposal permitted by
clauses (x) or (y) above;
(vi) otherwise act, alone or in concert with others (including by
providing financing for another party), to seek or offer to control or
influence, in any manner, the management, Board of Directors or policies
of the Company; provided, however, that this provision shall not prevent
the Stockholder's designees from participating in, or otherwise seeking
to affect the outcome of, discussions and votes of the Board of Directors
of the Company with respect to matters coming before it; or
(vii) knowingly instigate or encourage any third party to take any of
the actions enumerated in this Section 3(b).
(c) During the Agreement Period, except as permitted by Section 5(a)(ii) hereof,
the Stockholder will not
(i) merge with or into, or consolidate or combine with, any other
corporation unless (A) the Stockholder is the surviving corporation or
the surviving or newly created corporation and its Affiliates and any
person controlling it and any such controlling person's Affiliates agree
in writing to be bound by this Agreement, including Section 11 hereof,
and (B) after consummation of the transaction, the surviving or newly
created corporation and its Affiliates and any person controlling it and
any such controlling person's Affiliates do not beneficially own Voting
Securities in excess of the Permitted Percentage (as hereinafter
defined); provided, however, that the Stockholder shall not be in
violation of this Section 3(c)(i) if after consummation of a transaction
such persons beneficially own Voting Securities in excess of the
Permitted Percentage if all of the following conditions are satisfied:
(x) Voting Securities held by such persons are
agreed in writing to be subject to all of the provisions of this
Agreement as if they were Shares held by the Stockholder;
(y) such persons cause Voting Securities held in
excess of the Permitted Percentage to be sold, transferred or
disposed of as if they were Shares subject to the provisions of
this Agreement within 270 days of the date of the consummation of
the transaction; and
(z) from the earliest date an agreement with the
Stockholder relating to such a transaction is entered into until
the provisions of clause (y) above are satisfied, the Stockholder
may not make, continue or pursue any proposal otherwise permitted
by Section 3(b)(v)(x) or Section 3(b)(v)(y) and must terminate
any such proposal previously made and not yet terminated; or
(ii) liquidate, dissolve or otherwise make a distribution of all of its
assets to its stockholders unless, after such liquidation or other
distribution, each person receiving equity securities of the Company in
such liquidation or other distribution and each of such person's
Affiliates and each person controlling such person and each of such
controlling person's Affiliates does not beneficially own equity
securities of the Company representing 2% or more of the total
outstanding equity securities of the Company.
(d) During the Agreement Period, the Stockholder and its Affiliates shall be
present, in person or by proxy, and without further action hereby agree that
they shall be deemed to be present, at all meetings of stockholders of the
Company so that all Voting Securities beneficially owned by the Stockholder and
its Affiliates shall be counted for purposes of determining the presence of a
quorum at such meetings. During the Agreement Period, all Voting Securities
beneficially owned by the Stockholder and its Affiliates shall be voted by the
Stockholder and its Affiliates, at the option of the Stockholder, either in
accordance with the recommendation or direction of the Company's Board of
Directors or pro rata in the same manner and proportion that votes of the
stockholders of the Company, other than the Stockholder's and its Affiliates'
votes and the votes of all executive officers and directors of the Company and
of the members of their immediate families, have been cast; provided, however,
that the Stockholder and its Affiliates shall cast their votes in accordance
with the recommendation of the Company's Board of Directors (i) in all elections
of directors of the Company in which the designees of the Stockholder are
included in the slate of nominees in accordance with the terms of this Agreement
and (ii) on all matters (A) submitted to the vote of stockholders of the Company
which have been proposed by any stockholder or stockholders, (B) affecting or
regarding the compensation or benefits of directors, officers or employees of
the Company and (C) relating to matters concerning the continued independent,
publicly traded nature of the Company or any potential change in control of the
Company (other than the matters set forth in items (V) - (X) below) or
concerning federal or state statutes relating to such matters; and provided
further, that the Stockholder and its Affiliates may vote the Voting Securities
owned by them as the Stockholder determines in its sole discretion with respect
to any of the following transactions initiated by the Board of Directors of the
Company which are presented at a meeting of stockholders of the Company for
their approval (any such transaction being referred to herein as a "Strategic
Transaction"): (V) any disposition of the Company (by way of merger, sale of
assets or otherwise) or a substantial part of its assets, (W) any
recapitalization of the Company (other than a recapitalization for the purpose
of forming a holding company or to effect a change in the Company's state of
incorporation), (X) any liquidation of, or consolidation involving, the Company,
(Y) any increase in the Company's authorized shares or other amendment to the
Restated Certificate of Incorporation or By-Laws of the Company or (Z) any
transaction not otherwise provided for in this paragraph (d) that could
reasonably be expected to have a material effect on the Stockholder's investment
in the Shares. Notwithstanding anything to the contrary in this Agreement, in
the event that the Stockholder exercises a right provided it under this
Agreement which may require a vote of the stockholders of the Company, the
Stockholder and its Affiliates shall be present, in person or by proxy, and
shall vote all Voting Securities beneficially owned by the Stockholder and its
Affiliates in accordance with the recommendation of the Company's Board of
Directors so as to facilitate the exercise of such right.
4. Section The Stockholder's Right to Purchase; Dilution
Provisions.
(a) If, during the Agreement Period, the Company issues any additional Voting
Securities (an "Additional Issuance"), except for issuances pursuant to (i) any
presently outstanding stock option, warrant, convertible security or other right
to purchase shares of any equity securities of the Company, (ii) any benefit
plan or other employee or director arrangement, (iii) an employee stock
ownership plan not in excess of 10% of the outstanding Voting Securities or (iv)
any stock split, stock dividend or similar distribution made available to
holders of Common Stock generally (each a "Permitted Issuance"), then the
Stockholder shall be entitled to purchase from the Company during the 90-day
period following the date on which the Company has given the Stockholder written
notice of the occurrence of the Additional Issuance, at the then Market Price
(as hereinafter defined) of the Shares, that number of shares of Voting
Securities obtained by calculating, on the third business day prior to the
closing date of such purchase, (1) the product of (A) the quotient of (x) the
number of shares of Voting Securities owned by the Stockholder immediately prior
to the Additional Issuance divided by (y) the aggregate number of outstanding
shares of Voting Securities immediately prior to the Additional Issuance and (B)
the aggregate number of shares of Voting Securities being issued by the Company
in the Additional Issuance reduced by the number of Voting Securities acquired
by the Company from the date of the Additional Issuance until the third business
day prior to the closing date of such purchase, rounded up to the nearest whole
share and (2) subtracting from such product the number of shares of Voting
Securities, if any, issued to, or purchased by, the Stockholder and its
Affiliates in such Additional Issuance and the number of shares of Voting
Securities otherwise acquired by the Stockholder and its Affiliates during the
period beginning on the date of the Additional Issuance until the third business
day prior to the closing date of such purchase; provided, however, that the
Stockholder shall not have the right to acquire any shares of Voting Securities
pursuant to this Section 4(a) to the extent that the acquisition of such shares
would result in the Stockholder owning more than the Permitted Percentage of
outstanding Voting Securities; provided further, however that the failure of the
Company to give written notice of the occurrence of the Additional Issuance
shall not prevent the Stockholder from exercising its rights hereunder if it
shall otherwise become aware of the occurrence of the Additional Issuance.
(b) The Stockholder may purchase (i) from time to time, in the open market or in
privately negotiated transactions, up to an aggregate number of shares of Voting
Securities which, when added to the shares of Voting Securities then
beneficially owned by the Stockholder and its Affiliates, would result in the
Stockholder and its Affiliates beneficially owning no more than 35% of the then
outstanding shares of Voting Securities (the "Permitted Percentage") and (ii)
subject to Section 5(b) hereof, such equity securities from the Company as it
may be permitted to purchase under the Rights Plan as a result of its ownership
of Common Stock.
(c) (1) If within any consecutive 24-month or less period (a "Measuring Period")
during the Agreement Period the Company issues additional Voting Securities
(other than Voting Securities issued (i) pursuant to a Permitted Issuance, (ii)
pursuant to the Rights Plan, (iii) to the Stockholder or its Affiliates or (iv)
pursuant to a transaction or an issuance that a majority of the members of the
Board of Directors of the Company designated by the Stockholder do not vote
against) in an aggregate amount (reduced by any Voting Securities acquired by
the Company during the Measuring Period) that would cause, solely as a result of
such issuances, the percentage ownership of Voting Securities of the Stockholder
(including, for the purpose of calculating such percentage ownership, Voting
Securities acquired by the Stockholder pursuant to Section 4(a) hereof during
the Measurement Period, but excluding Voting Securities sold by the Stockholder)
as of the end of the Measuring Period to be reduced by more than 25% of its
holding at the beginning of the Measuring Period (the date such reduction first
occurs being a "Dilution Date"), then for 60 days commencing on the date on
which the Company has given the Stockholder written notice of the occurrence of
a Dilution Date, the Stockholder shall have the right to request by written
notice that the Company repurchase all of its Shares or otherwise sell its
Shares as provided in subparagraph (3) of this Section 4(c) (the "Stockholder
Election"); provided, however, that the failure of the Company to give written
notice of the occurrence of a Dilution Date shall not prevent the Stockholder
from exercising its rights hereunder if it shall otherwise become aware of the
occurrence of a Dilution Date; provided further, that no Dilution Date shall be
deemed to have occurred if, during the Measuring Period, the Stockholder shall
have sold, in the aggregate, more than twenty (20%) of its Shares based on its
holding of Shares at the beginning of the Measuring Period; and provided
further, that the Stockholder may exercise a Stockholder Election only once
during the Agreement Period.
(2) In the event that the Stockholder determines not to
exercise the Stockholder Election within 60 days after its receipt of notice of
the occurrence of a Dilution Date, a new Measuring Period shall commence, and
none of the issuances of Voting Securities by the Company during the prior
Measuring Period shall be taken into account in the new Measuring Period.
(3) If the Stockholder exercises the Stockholder Election, the
Company shall be obligated, in its sole discretion, to (i) purchase some or all
of the Shares from the Stockholder at a per Share price equal to the average
closing price of the Common Stock on the New York Stock Exchange for the 15
trading days prior to and including the Dilution Date (the "Dilution Date
Price") pursuant to the terms of subparagraph (v) below and/or (ii) direct the
Stockholder to sell the Shares pursuant to the terms of subparagraph (w) below.
The Stockholder shall receive, within a period of 24 months commencing on the
date the Company receives the Stockholder Election (the "Payment Period"), the
Dilution Date Price, plus interest accruing from the date the Payment Period
begins to the date of payment for such Shares at the prime rate as determined by
Citibank, N.A. (the "Prime Rate"), less any dividends paid on the Shares during
the Payment Period, multiplied by the total number of Shares owned by the
Stockholder (the "Guaranteed Amount"), as follows:
(v) the Company may, in its sole discretion, at any
time and from time to time during the Payment Period, purchase
some or all of the Shares from the Stockholder at a per Share
price equal to the Dilution Date Price, plus interest accruing
from the date the Payment Period begins to the date of payment
for such Shares at the Prime Rate, less any dividends paid on the
Shares during the Payment Period;
(w) the Stockholder shall sell Shares at such times
and in such amounts as the Company shall instruct in one or more
private transactions arranged by the Company or in underwritten
secondary public offerings in accordance with Section 5(a)(vi)
hereof;
(x) to the extent that, by the earlier of the end of
the Payment Period or the date when the Stockholder no longer
owns any Shares, the aggregate payments received by the
Stockholder for the sale of its Shares pursuant to subparagraphs
(v) and/or (w) above do not equal the Guaranteed Amount, the
Company shall pay to the Stockholder an amount of consideration,
in, at the Company's sole discretion, (A) cash and/or (B) in the
form of equity securities of the Company or any other
consideration that would not result in any Shares held by the
Stockholder being classified as a "redeemable equity security"
pursuant to the Commission's Accounting Series Release No. 268,
having a value equal to the Guaranteed Amount minus the aggregate
payments actually received by the Stockholder during the Payment
Period;
(y) as of the time, and to the extent, that the
aggregate payments received by the Stockholder for the sale of
its Shares pursuant to subparagraphs (v) and (w) above exceeds
the Guaranteed Amount, the Stockholder shall promptly pay the
Company such excess amount, and, to the extent that the
Stockholder then still owns any Shares, the Stockholder shall
transfer to the Company such remaining Shares; and
(z) during the Payment Period, the Stockholder shall
not acquire beneficial ownership of any additional equity
securities of the Company, and, other than pursuant to the terms
of this Section 4(c), the Stockholder shall not, without the
Company's prior written consent, dispose of any Shares.
(4) The Company may terminate its obligations pursuant to this
Section 4(c) if the Stockholder shall fail in any material respect to comply
with any of its material obligations under this Agreement as such alleged
failure is set forth in the Company's written notice to the Stockholder unless,
if the failure can be cured, within 30 days of such notice the Stockholder has
cured the failure to comply.
5. Section Dispositions of Shares and the Company's Right of
First Refusal.
(a) Except as otherwise provided in this Section 5, during the Agreement Period
and subject to the provisions of Sections 5(b) and 5(c) hereof, the Stockholder
will not sell, transfer, pledge, encumber or dispose of, directly or indirectly,
any Shares except:
(i) to the Company or in a transaction approved by the Board of
Directors of the Company;
(ii) to an Affiliate of the Stockholder provided that such Affiliate
agrees to be bound by this Agreement;
(iii) in any transaction permitted by Section 3(c) hereof;
(iv) to a person other than the Stockholder or any Affiliate of the
Stockholder (a "Third Person") pursuant to Rule 144 under the
Securities Act; provided, however, that (A) the Stockholder will use
all reasonable efforts to insure that such Third Person and such Third
Person's Affiliates, or any group such Third Person may be a member of
shall not hold in the aggregate more than 2% (any such Third Person who
would hold in excess of such limit being referred to herein as a
"Prohibited Holder") of the outstanding Voting Securities after such
transaction or (B) such Third Person agrees in writing to be bound by
the terms of this Agreement and the Board of Directors of the Company
approves such transaction;
(v) in a valid private placement to a person that (A) the Stockholder
reasonably believes after due inquiry would not be a Prohibited Holder
following such transaction and obtains a written representation from
the purchaser to that effect or (B) agrees in writing to be bound by
the terms of this Agreement and the Board of Directors approves such
transaction;
(vi) pursuant to an underwritten public offering under the Securities
Act in accordance with the terms for registration rights attached
hereto as Exhibit A, pursuant to which the managing underwriter agrees
to effect the sale of the Voting Securities in a manner which will
effect a broad distribution thereof and provided that the Stockholder
shall use all reasonable efforts to insure that no sales of Voting
Securities are made to any Prohibited Holder (other than the
underwriters or any selected dealers);
(vii) pursuant to any tender or exchange offer made pursuant to Section
14(d) of the 1934 Act by a person with respect to which the Company
does not recommend rejection (it being understood that the Stockholder
may not tender its Shares pursuant to such tender or exchange offer
until the Company has publicly taken a position with respect to such
offer or has stated that it will remain neutral or is unable to take a
position with respect thereto) in accordance with Rule 14e-2 of the
1934 Act, any successor regulation or otherwise;
(viii) to a bona fide financial institution in connection with the
grant of a pledge or other encumbrance securing a bona fide loan so
long as the pledgee agrees in writing prior to the execution of the
pledge that upon any transfer to the pledgee of any Shares upon any
foreclosure, such Shares and the pledgee thereof will remain and become
subject to the restrictions contained in this Agreement; or
(ix) in any transaction permitted by Section 4(c) hereof.
The Stockholder shall give the Company notice promptly upon the disposition
hereunder of any Shares. Purchases, transfers or other distributions of Shares
in violation of the provisions of this Agreement shall be null and void, and the
Shares subject to such purchase, transfer or other disposition shall remain
subject to this Agreement.
(b) If at any time the Company repurchases or acquires any outstanding Voting
Securities by means of a share repurchase program, a self tender offer or
otherwise (a "Share Repurchase") or the Stockholder acquires Voting Securities
pursuant to the Rights Plan such that the percentage of outstanding Voting
Securities owned by the Stockholder and its Affiliates is greater than the
Permitted Percentage and the Company so requests by written notice to the
Stockholder, the Stockholder shall, or shall cause its Affiliates to, sell,
within six months after the date on which the Stockholder receives the Company's
written notice, Voting Securities as required in accordance with the terms of
this Agreement so that the percentage of outstanding shares of Voting Securities
owned by the Stockholder and its Affiliates shall not exceed the Permitted
Percentage; provided, however, that the Stockholder and its Affiliates shall use
all reasonable efforts to insure that sales of Voting Securities are not made to
any Prohibited Holder; provided further, however, that if the Stockholder or any
of its Affiliates is required to dispose of Shares pursuant to this Section 5(b)
and such disposition during such six-month period would result in liability to
the Stockholder or such Affiliate under Section 16(b) of the 1934 Act or any
similar statute that may replace it, then the six-month period during which the
Stockholder or such Affiliate shall be required to dispose of Shares pursuant to
this Section 5(b) shall begin on the first date on which the Stockholder and
such Affiliate may dispose of Shares without incurring liability under Section
16(b) of the 1934 Act as a result of such disposition. If the Stockholder and
its Affiliates fail to reduce their holdings of Voting Securities within six
months after the Company so requests in connection with a Share Repurchase (or
such longer period not to exceed seven (7) months as provided in the second
proviso to the preceding sentence), in addition to any other remedies the
Company may have, the Company shall be entitled to repurchase from the
Stockholder or its Affiliates, from time to time for a period of 90 days
thereafter, at the greater of (x) the Market Price of such Shares on the date of
the Company's notice to the Stockholder to repurchase Shares pursuant to this
Section 5(b) and (y) the highest price paid per share by the Company in such
Share Repurchase during the 30-day period prior to the date on which the
Stockholder receives the written notice referred to in the first sentence of
this Section 5(b), such number of shares of Voting Securities as will reduce the
Stockholder's and its Affiliates' aggregate percentage ownership of Voting
Securities to the Permitted Percentage.
(c) During the Agreement Period, notwithstanding any other provision of this
Agreement, any sale, transfer or other disposition of the Shares by the
Stockholder permitted by this Agreement shall not be made without first making
an offer in writing to sell such Shares to the Company at the bona fide proposed
price per Share (the "Offer Price"), and upon such other bona fide terms and
conditions upon which the Stockholder proposes to make such sale, transfer or
disposition (the "Offer"). Upon receipt of such Offer (which shall also set
forth the method of payment, the amount and class of Shares to be sold, the
identity (if known) of the person or persons to whom the Stockholder proposes to
sell, transfer or otherwise dispose of such Shares, the other material terms (to
the extent known) upon which such sale is to be made and all other relevant
information reasonably requested by the Company), the Company shall have that
number of days set forth in the following sentence within which to accept such
Offer by delivering a written notice to the Stockholder irrevocably electing to
purchase all, but not less than all, of the Shares covered thereby. Subject to
Section 5(f) hereof, if the Offer is with respect to Shares having an aggregate
market value on the date of such notice (a) of less than or equal to $50
million, the Company shall have 5 days to accept such Offer, (b) greater than
$50 million and less than or equal to $150 million, the Company shall have 10
days to accept such Offer, (c) greater than $150 million and less than or equal
to $250 million, the Company shall have 15 days to accept such Offer or (d)
greater than or equal to $250 million, the Company shall have 20 days to accept
such Offer; provided, however, that if the proposed sale is to be made pursuant
to a tender or exchange offer, the Company shall have one day less than the
number of days remaining before the tender or exchange offer expires to accept
such Offer. If the Company elects to accept such Offer, the closing of the
purchase pursuant thereto shall occur, with payment in immediately available
funds, on the latest of (i) 20 days after the acceptance by the Company of such
Offer, (ii) the closing date provided for in the Offer or (iii) the end of such
period of time as the Company and the Stockholder may reasonably require in
order to comply with applicable laws and regulations. Transfers pursuant to
Sections 5(a)(i), 5(a)(ii), 5(a)(iii) and 5(a)(viii) hereof are not subject to
the provisions of this Section 5(c).
(d) If the Offer specifies that the Shares are to be sold in the market in a
method whereby the price cannot be determined at the time of the making of the
Offer (a "Market Sale"), the purchase price for the Shares proposed to be sold
shall be equal to the Market Price of such Shares on the date of such Offer. For
purposes of this Agreement, the term "Market Price" shall mean the average of
the daily Closing Prices of the Shares for the 20 consecutive trading days
immediately prior to the date on which the Market Price is to be determined. The
"Closing Price" for each day with respect to any securities shall be the last
sale price of such securities on the national securities exchange on which such
securities are listed and principally traded or, if such securities are not
listed on any national securities exchange, as reported by NASDAQ, or, if not so
reported by NASDAQ, the average of the high bid and low asked quotations for
such securities as reported by the National Quotations Bureau Incorporated or
similar organization, or, if on any such date such securities are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such securities
mutually selected by the Company and the Stockholder. Market Sales shall be
deemed to be for cash.
(e) If the purchase price specified in the Offer includes any property other
than cash, such purchase price shall be deemed to be the amount of any cash
included in the purchase price plus the value (determined as provided below) of
such other property included in such price. The value of any non-cash property
shall be determined in the following manner:
(i) The value of securities which are publicly traded shall be deemed
to be the Market Price of such securities on the date of the Offer; and
(ii) The value of any other property shall be determined by an
appropriate expert mutually selected by the Company and the
Stockholder. The determination of the dollar value of the non-cash
consideration at issue by any such expert shall be made promptly (but
in no event more than 15 business days after receipt of the Offer) and
shall be conclusive and binding on all the parties hereto.
(f) The sale, transfer or other disposition to any third party of such Voting
Securities shall not be made until such determination referred to in Section
5(e)(ii) has been completed and delivered to all the parties hereto. The Company
shall have the later of (i) five business days after the receipt of such
determination by the expert referred to in Section 5(e)(ii) and (ii) the
applicable time period set forth in Section 5(c) within which to accept such
Offer.
(g) If the Company has not exercised its option to purchase the Shares pursuant
to the Offer, the Stockholder shall be free, for a period of 60 days (or, if
longer, 60 days from the effective date of a registration statement under the
Securities Act, if such registration is required) from the date of the Company's
rejection of the Offer (which, unless the Company shall have given written
notice of its rejection of the Offer, shall be deemed to have occurred on the
last day on which the Company could accept the Offer in accordance herewith), to
sell all of the Shares to the third party transferee subject to the provisions
of this Agreement, at a price equal to or greater than the price specified in
the Offer and in the manner and on terms no less favorable to the Stockholder
than were specified in the Offer. If the Shares are not sold within such 60-day
period, they shall again become subject to the procedures provided in this
Section 5.
6. Section Economic Parity. If at any time during the Agreement
Period any person or group acquires beneficial ownership of Voting Securities,
whether pursuant to a tender or exchange offer made pursuant to Section 14(d) of
the 1934 Act as to which the Company has recommended that its stockholders
reject such offer or otherwise, such that such person or group beneficially owns
more than 50% of the outstanding Voting Securities (a "Change in Control
Transaction"), in addition to any other rights the Stockholder may have, the
Stockholder shall have the right for a period of six months after such person or
group acquires such beneficial ownership to deliver a notice relating to all,
but not less than all, of the Shares then held by the Stockholder at that time
(the "Notice Shares") to the Company. Within 45 days following receipt of such
notice, the Company shall pay to the Stockholder an amount of consideration, in
either, at the Company's sole discretion, (i) cash or (ii) in the form of equity
securities of the Company or any other consideration that would not result in
any Shares held by the Stockholder being classified as a "redeemable equity
security" pursuant to the Commission's Accounting Series Release No. 268, having
a value equal to the product of the number of Notice Shares times the positive
difference between (i) the consideration per Share equal to the highest price
per share paid by such person or group in acquiring Voting Securities and (ii)
in the case of Notice Shares held by the Stockholder on the date of such
payment, the Market Price on the day before the payment and, in the case of
Notice Shares sold by the Stockholder after the Change in Control Transaction
and prior to such payment, the amount realized by the Stockholder pursuant to
such dispositions, net of transaction costs (the aggregate amount being the
"Aggregate Spread"). The Company shall indemnify and hold the Stockholder
harmless against any adverse tax consequences suffered by the Stockholder as a
result of the Company's payment to the Stockholder pursuant to the previous
sentence as compared to the tax consequences of purchasing the Notice Shares at
the consideration per share equal to the highest price per share paid by such
person or group in acquiring Voting Securities. Such indemnification shall take
the form of either, at the Company's sole discretion, (i) cash or (ii) equity
securities of the Company or any other consideration that would not result in
any Shares held by the Stockholder being classified as a "redeemable equity
security" pursuant to the Commission's Accounting Series Release No. 268. In the
event that the Company determines to make a payment to the Stockholder pursuant
to this Section 6 in a form of consideration other than cash, the Company shall
provide an opinion to the Stockholder from an internationally recognized
investment banking firm, mutually agreeable to both parties hereto, as to the
value of such consideration. In addition, unless the Company arranges for the
purchase of such securities from the Stockholder at a price at least equal to
the Aggregate Spread, upon request of the Stockholder within 45 days of such
payment, the Company shall, within 90 days of such request, register the
securities delivered as payment (the "Registered Securities") for resale by the
Stockholder to the extent possible in an underwritten offering with an
internationally recognized underwriter mutually agreeable to both parties. If
the aggregate net proceeds to the Stockholder in such registered offering will
be less than the Aggregate Spread, the Company shall deliver to the Stockholder
either, at the Company's sole discretion, (i) cash equal to the amount by which
the Aggregate Spread exceeds such net proceeds, or (ii) additional Registered
Securities for resale in such registered offering in the amount required so that
the aggregate net proceeds of such offering to the Stockholder equals the
Aggregate Spread. In the event that the Company determines to make a payment to
the Stockholder pursuant to this Section 6 in the form of cash, then the Company
shall make such payment within such 45 day period to the extent funds are
legally available therefor (and, if not then legally available therefor, as soon
thereafter as such funds are legally available therefor).
7. Section Legend on Certificates. The Stockholder hereby
acknowledges and agrees that each of the certificates representing the Shares
held by the Stockholder shall be subject to stop transfer instructions and shall
include the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY BE OFFERED OR SOLD ONLY IF REGISTERED UNDER
THE SECURITIES ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THESE SHARES ARE SUBJECT TO CERTAIN LIMITATIONS ON TRANSFER SET FORTH
IN AN AGREEMENT, DATED AS OF ___________, ______, BETWEEN ECOLAB INC.
AND HENKEL KGaA, INCLUDING, BUT NOT LIMITED TO, RESTRICTIONS ON THE
SALE, TRANSFER, PLEDGE, ENCUMBRANCE OR OTHER DISPOSITION TO ANY PERSON
AND THAT PERSON'S AFFILIATES OR ANY GROUP THAT PERSON MAY BE A MEMBER
OF THAT WOULD HOLD IN THE AGGREGATE MORE THAN 2% OF THE OUTSTANDING
VOTING SECURITIES AFTER SUCH TRANSACTION. A COPY OF SUCH AGREEMENT IS
ON FILE WITH THE SECRETARY OF ECOLAB INC.
Within one business day after receipt by the Company of a
demand by the Stockholder, the Company agrees to (i) terminate the stop transfer
instructions and remove the legend in connection with transfers pursuant to
Sections 5(a)(iv)(A) and 5(a)(vi) of this Agreement, (ii) terminate the stop
transfer instructions and remove only the first sentence of the above legend in
connection with transfers pursuant to Section 5(a)(iv)(B), (iii) terminate the
stop transfer instructions and remove all but the first sentence of the above
legend (A) in connection with transfers pursuant to Sections 5(a)(v)(A) and
5(a)(vii) hereof and (B) after the Agreement Period and (iv) remove the first
sentence of the above legend if the Company is furnished an opinion of counsel
reasonably satisfactory to the Company that such Shares may be freely
transferred under applicable securities laws.
Promptly upon the acquisition by the Stockholder of any shares
of Voting Securities other than pursuant to the Transaction Agreements, the
Stockholder shall surrender the certificates representing such Shares to the
Company, and the Company shall place the last two sentences of the foregoing
legend on such certificates and thereafter reissue such certificates to the
Stockholder.
8. Section Directors Designated by the Stockholder. At each
annual meeting of the stockholders of the Company following the date hereof and
prior to the end of the Agreement Period, the Company will nominate, or cause to
be nominated, a number of individuals (rounded down to the nearest whole number)
to be designated by the Stockholder for election as members of the Board of
Directors (which designees shall not include individuals whose membership on the
Board of Directors would be a violation of law) such that the percentage of the
total number of members of the Board of Directors designated by the Stockholder
equals the percentage of Voting Securities then beneficially owned by the
Stockholder and its Affiliates. The Board of Directors of the Company shall
consider any request by the Stockholder to increase the Stockholder's percentage
representation on the Board if between annual meetings the Stockholder's
percentage ownership of Voting Securities has increased such that the
Stockholder would be entitled to designate additional nominees to the Board of
Directors at the next annual meeting of the Board. If between annual meetings
the Stockholder's percentage ownership of Voting Securities has decreased such
that the Stockholder would be entitled to designate fewer nominees to the Board
of Directors at the next annual meeting of the Board and the Stockholder has
sold some Voting Securities since the last annual meeting, then the Stockholder
shall use all reasonable efforts to cause one or more of the directors it has
designated to resign from the Board so that the number of directors designated
by the Stockholder serving on the Board equals the number it would be entitled
to designate at the next annual meeting. The members of the Board of Directors
of the Company that have been designated by the Stockholder pursuant to this
Section 8 shall be allocated as equally as possible among the three classes of
the Company's Board of Directors. The parties hereto anticipate that Directors
designated by the Stockholder will participate in all Board of Directors'
deliberations concerning extraordinary transactions, including, but not limited
to, acquisitions by the Company and Third-Party proposals to acquire the
Company, except to the extent that, in the reasonable judgment of the Board, the
topic to be considered raises a conflict of interest for such Directors. Upon
the date the Stockholder is no longer entitled to designate nominees for
election to the Board of Directors of the Company, the Stockholder shall cause
the members of the Board of Directors of the Company that have been designated
by the Stockholder to resign from the Board of Directors, effective immediately.
9. Section Covenants of the Company.
(a) Issuance of Securities Having Disproportionate Voting Rights. During the
Agreement Period, the Company shall not issue Voting Securities having voting
rights disproportionately greater than the equity investment in the Company
represented by such Voting Securities.
(b) For so long as the Stockholder owns Shares which represent more than 2% of
the voting power of the Company's then outstanding Voting Securities:
(i) the Company, as soon as practicable and in any event within 50 days
after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, will furnish to the Stockholder statements
of consolidated net income and cash flows and a statement of changes in
consolidated stockholders' equity of the Company and its subsidiaries
for the period from the beginning of the then current fiscal year to
the end of such quarterly period, and a consolidated balance sheet of
the Company and its subsidiaries as of the end of such quarterly
period, setting forth in each case in comparative form figures for the
corresponding period or date in the preceding fiscal year, all in
reasonable detail and certified by an authorized financial officer of
the Company, subject to changes resulting from year-end adjustments;
provided, however, that delivery pursuant to paragraph (iii) below of a
copy of the Quarterly Report on Form 10-Q (without exhibits unless
requested by the Stockholder) of the Company for such quarterly period
filed with the Commission shall be deemed to satisfy the requirements
of this paragraph (i);
(ii) the Company, as soon as practicable and in any event within 95
days after the end of each fiscal year, will furnish to the Stockholder
statements of consolidated net income and cash flows and a statement of
changes in consolidated stockholders' equity of the Company and its
subsidiaries for such year, and a consolidated balance sheet of the
Company and its subsidiaries as of the end of such year, setting forth
in each case in comparative form the corresponding figures for the
preceding fiscal year, all in reasonable detail and examined and
reported on by independent public accountants of recognized standing
selected by the Company; provided, however, that delivery pursuant to
paragraph (iii) below of a copy of the Annual Report on Form 10-K
(without exhibits unless requested by the Stockholder) of the Company
for such fiscal year filed with the Commission shall be deemed to
satisfy the requirements of this paragraph (ii);
(iii) the Company, promptly upon transmission thereof, will furnish to
the Stockholder copies of all such financial statements, proxy
statements, notices and reports as it shall send to its stockholders
and copies of all such registration statements (without exhibits) and
all such regular and periodic reports as it shall file with the
Commission; and
(iv) the Company will furnish to the Stockholder such other
non-confidential financial data of the Company and its Subsidiaries as
the Stockholder may reasonably request.
10. Section Exceptions to Restrictions. Notwithstanding anything
contained in this Agreement to the contrary, the restrictions set forth in
Sections 3(a), 3(b), 3(c), 3(d) and 5 hereof shall terminate and be of no
further force and effect upon the occurrence of any of the following events:
(a) (i) At any time, any Third Person (other than the Company, an employee stock
ownership plan or other pension, stock bonus or stock incentive plan of the
Company or any of its subsidiaries) is or becomes the beneficial owner of, or
makes a tender or exchange offer pursuant to Section 14(d) of the 1934 Act with
respect to which the Company does not recommend rejection (it being understood
that such restrictions shall not be terminated until the Company has publicly
taken a position with respect to such offer or has stated that it will remain
neutral or is unable to take a position with respect thereto) in accordance with
Rule 14e-2 of the 1934 Act, any successor regulation or otherwise for, an amount
of Voting Securities greater than 32.5% of the outstanding Voting Securities,
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company and
any new director whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof or (iii) at any time any
Third Person, by way of ownership of Voting Securities, representation on the
Board of Directors of the Company or both, is in fact controlling the operations
of the Company;
(b) The Company's Board of Directors determines to effect, or to solicit
proposals to effect a Sale of the Company or causes the Company to enter into a
definitive agreement providing for the Sale of the Company; or
(c) The Company shall fail in any material respect to comply with any of its
material obligations under this Agreement as such alleged failure is set forth
in the Stockholder's written notice to the Company unless, if the failure can be
cured, within 30 days of such notice the Company has cured the failure to
comply.
For purposes of this Section 10, a "Sale of the Company" shall mean a merger
(other than a merger for the purpose of forming a holding company or to effect a
change in the Company's state of incorporation), combination or, in any one or
more related transactions, sale of all or substantially all of the Company's
assets as a result of which the Directors of the Company immediately prior to
such transaction do not represent a majority of the board of directors, or the
stockholders of the Company immediately prior to such transaction do not
continue to own equity securities representing more than 50% of the vote and of
the equity of the Company or the ultimate controlling corporation following such
merger or combination or succeeding to ownership of all or substantially all of
the Company's assets.
11. Section The Company's Right to Repurchase. Notwithstanding
anything contained in this Agreement to the contrary, upon the occurrence of any
of the following events:
(a) (i) at any time, any Competitor (as defined below), or any Affiliate
thereof, is or becomes the beneficial owner of an amount of equity securities of
the Stockholder representing more than 50% of the voting power of the
Stockholder's outstanding securities or (ii) at any time any Competitor, or any
Affiliate thereof, by way of ownership of equity securities of the Stockholder,
representation on the Shareholders' Committee of the Stockholder (or, upon a
conversion of the Stockholder to another corporate form, the Supervisory Board
or such other body as appoints and dismisses the members of the management board
of the Stockholder) or both, is in fact controlling the operations of the
Stockholder; or
(b) the Stockholder enters into a definitive agreement with any Competitor, or
any Affiliate thereof, pursuant to which the Competitor, or any Affiliate
thereof, will acquire an amount of equity securities of the Stockholder
representing more than 50% of the voting power of the Stockholder's outstanding
securities;
then the Company shall have the option, for a period of 90 days after the
occurrence of any of the foregoing events, to repurchase all, but not less than
all, of the Shares held by the Stockholder on the date of such event at the
Market Price, as determined on the date the Company notifies the Stockholder of
its intention to exercise such option. The closing for the repurchase of the
Shares shall occur on the later of (i) 180 days from the date that the Company
notifies the Stockholder of its intention to exercise its repurchase option
pursuant to this Section 11 or (ii) the end of such period of time as the
Company and the Stockholder may reasonably require in order to comply with
applicable laws and regulations. Furthermore, during the period beginning when
the Company notifies the Stockholder of its intention to exercise its repurchase
option pursuant to this Section 11 until the closing of such repurchase, the
Stockholder shall not purchase any additional equity securities of the Company.
For purposes of this Section 11, a "Competitor" shall mean any
Third Person that directly or through an Affiliate is engaged in a business
which is competitive with a business then engaged in by the Company or
manufactures, sells, leases, markets, distributes or otherwise provides products
or services similar to those of a business of the Company but does so in a
channel of distribution different from the channels of distribution utilized by
the Company; provided, that unless the annual revenues to such Third Person
and/or its Affiliate from such businesses or provision of such products or
services shall aggregate at least $200 million, such Third Person shall not
constitute a Competitor.
12. Section Affiliates. A person or entity who at any time may
be an Affiliate of the Stockholder shall be deemed to be an Affiliate of the
Stockholder for purposes of this Agreement while such person is an Affiliate of
the Stockholder regardless of whether such person was such an Affiliate on the
date hereof.
13. Section Specific Performance. Each of the parties hereto
recognizes and acknowledges that this Agreement is an integral part of the
transactions contemplated in the Transaction Agreements, that the Company would
not have entered into the Transaction Agreements unless this Agreement was
executed and that a breach by a party of any covenants or agreements contained
in this Agreement will cause the other party to sustain injury for which it
would not have an adequate remedy at law for money damages. Therefore each of
the parties hereto agrees that in the event of any such breach, the aggrieved
party shall be entitled to the remedy of specific performance of such covenants
and agreements and preliminary and permanent injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity, and the parties hereto further agree to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any such
injunctive or other equitable relief.
14. Section Amendment and Modification. This Agreement may be
amended, modified and supplemented only by written agreement of the Stockholder
and the Company.
15. Section Notices. All notices, requests, demands and other
communications required or permitted shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier or air courier guaranteeing
overnight delivery:
(a) If to the Stockholder, to:
Henkel KGaA
Henkelstrasse 67, Postfach 1100
D-4000 Dusseldorf 1, Germany
Attention: General Counsel
(with a copy to:)
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll
or to such other person or address as the Stockholder shall furnish to the
Company;
(b) If to the Company, to:
Ecolab Inc.
Ecolab Center
St. Paul, Minnesota 55102
Attention: General Counsel
(with a copy to:)
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Attention: Charles W. Mulaney, Jr.
or to such other person or address as the Company shall furnish to the
Stockholder in writing.
All such notices, requests, demands and other communications
shall be deemed to have been duly given; at the time delivered by hand, if
personally delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
16. Section Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall fail to be
in effect only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement or of any such provision.
17. Section Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but except as otherwise
provided for or permitted herein neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other party.
18. Section Governing Law. This Agreement and the legal
relations among the parties hereto shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its
conflicts of law doctrine.
19. Section Jurisdiction and Venue. Each of the Company and the
Stockholder hereby agrees that any proceeding relating to this Agreement shall
be brought in the state of Delaware. Each of the Company and the Stockholder
hereby consents to personal jurisdiction in any such action brought in any such
Delaware court, consents to service of process by registered mail made upon such
party and such party's agent and waives any objection to venue in any such
Delaware court or to any claim that any such Delaware court is an inconvenient
forum.
20. Section Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
21. Section Headings. The headings of the Sections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
22. Section Entire Agreement. Upon consummation of the
Transaction, this Agreement and the Transaction Agreements will set forth the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein, and supersede all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto.
23. Section Third Parties. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation, other than the
parties hereto and their successors or assigns, any rights or remedies under or
by reason of this Agreement.
24. Section Tax Reporting. The Stockholder agrees to provide the
Company with, and shall retain, for the time periods prescribed by law, all of
the information concerning the Stockholder and its Subsidiaries which is
reasonably required to be included in the Company's tax returns as a result of
the Stockholder's direct and/or indirect ownership of Common Stock. The Company
and the Stockholder agree that the Stockholder shall have no liability under
this Section 24 if the Stockholder shall have retained the same type and amount
of information concerning transactions and relationships between the Stockholder
and its Subsidiaries on the one hand and the Company on the other hand as it
retains concerning transactions and relationships between the Stockholder and
its Subsidiaries on the one hand and Henkel of America Inc. and its Subsidiaries
on the other hand as prescribed by law.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first above written.
HENKEL KGAA ECOLAB INC.
By: By:
--------------------------- ---------------------------
Name: Name:
Title: Title:
<PAGE>
Exhibit A
---------
REGISTRATION RIGHTS
-------------------
Capitalized terms used herein shall have the meanings defined
in the Stockholder's Agreement.
1. "Piggyback" Registration. Whenever the Company proposes to file a
registration statement relating to any of its capital stock under the Securities
Act (other than a registration statement required to be filed in respect of
employee benefit plans of the Company on Form S-8 or any similar form from time
to time in effect or any registration statement on Form S-4 or similar successor
form), the Company shall, at least twenty-one days (or if such twenty-one day
period is not practicable, then a reasonable shorter period which shall not be
less than seven days) prior to such filing, give written notice of such proposed
filing to the Stockholder. Upon receipt by the Company not more than seven days
(unless the notice given to the Stockholder pursuant to the previous sentence is
less than ten days, in which case such seven-day period shall be shortened to
five days) after such notice of a written request from the Stockholder for
registration of Shares (i) the Company shall include such Shares in such
registration statement or in a separate registration statement concurrently
filed, and shall use all reasonable efforts to cause such registration statement
to become effective with respect to such Shares, unless the managing underwriter
therefor concludes in its reasonable judgment that compliance with this clause
(i) would materially adversely effect such offering, in which event the Company
shall cause such Shares to be registered under a separate registration statement
a limited period of time thereafter, which in no event shall be more than 60
days and (ii) if such proposed registration is in connection with an
underwritten offering of Common Stock, upon request of the Stockholder, the
Company shall use all reasonable efforts to cause the managing underwriter
therefor to include in such offering the Shares as to which the Stockholder
requests such inclusion, on terms and conditions comparable to those of the
securities offered on behalf of the Company, unless the managing underwriter
therefor concludes in its reasonable judgment that the inclusion of such Shares
in such offering would materially adversely affect such offering.
2. Demand Registration. If the Company shall receive at any time or from time to
time a written request from the Stockholder requesting the Company to register
under the Securities Act on Form S-3 (or if the Company is not eligible to use
Form S-3, then on Form S-1 or S-2), or any other similar Form then in effect,
securities representing at least one percent (1%) of the Company's then
outstanding Common Stock, the Company agrees that it will use all reasonable
efforts to cause the prompt registration of all Shares as to which such request
is made. The Company may postpone for a limited time, which in no event shall be
longer than 90 days, compliance with a request for registration pursuant to this
Section 2 if (i) such compliance would materially adversely affect (including,
without limitation, through the premature disclosure thereof) a proposed
financing, reorganization, recapitalization, merger, consolidation or similar
transaction or (ii) the Company is conducting a public offering of capital stock
and the managing underwriter concludes in its reasonable judgment that such
compliance would materially adversely affect such offering. Notwithstanding
anything in this Section 2 to the contrary, the Company shall not be required
to: (a) comply with more than two (2) requests of the Stockholder pursuant to
this Section 2 in any twelve (12) month period or (b) prepare or cause to be
prepared audited financial statements of the Company other than those prepared
in the normal course of the Company's business at its fiscal year end. Any
underwriter selected by the Stockholder to act as such in connection with a
registration pursuant to this Section 2 shall be reasonably acceptable to the
Company.
3. General Provisions: The Company will use all reasonable efforts to cause any
registration statement referred to in Sections 1 and 2 to become effective and
to remain effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the earlier of 45 days from the effective date of the
registration statement and the date the Stockholder completes its distribution
of Shares. The Company will use all reasonable efforts to effect such
qualifications under applicable Blue Sky or other state securities laws as may
be reasonably requested by the Stockholder (provided that the Company shall not
be obligated to file a general consent to service of process or qualify to do
business as a foreign corporation or otherwise subject itself to taxation in any
jurisdiction solely for the purpose of any such qualification) to permit or
facilitate such sale or other distribution. The Company will cause the Shares to
be listed on the principal stock exchange on which the shares of Common Stock
are listed.
4. Information, Documents, Etc. Upon making a request for registration pursuant
to Sections 1 or 2, the Stockholder shall furnish to the Company such
information regarding its holdings and the proposed manner of distribution
thereof as the Company may reasonably request and as shall be required in
connection with any registration, qualification or compliance referred to
herein. The Company agrees that it will furnish to the Stockholder the number of
prospectuses, offering circulars or other documents, or any amendments or
supplements thereto, incident to any registration, qualification or compliance
referred to herein as the Stockholder from time to time may reasonably request.
5. Expenses. The Company will bear all expenses of registrations (other than
underwriting discounts and commissions and brokerage commissions and fees, if
any, payable with respect to Shares sold by the Stockholder and fees and
expenses of counsel and any accountants for the Stockholder), including, without
limitation, registration fees, printing expenses, expenses of compliance with
Blue Sky or other state securities laws, and legal and audit fees incurred by
the Company in connection with such registration and amendments or supplements
in connection therewith.
6. Cooperation. In connection with any registration of Shares, the Company
agrees to:
(a) enter into such customary agreements (including an underwriting agreement
containing such representations and warranties by the Company and such other
terms and provisions, including indemnification provisions, as are customarily
contained in underwriting agreements for comparable offerings and, if no
underwriting agreement is entered into, an indemnification agreement on such
terms as is customary in transactions of such nature) and take all such other
actions as the Stockholder or the underwriters, if any, participating in such
offering and sale may reasonably request in order to expedite or facilitate such
offering and sale;
(b) furnish, at the request of the Stockholder or any underwriters participating
in such offering and sale, (i) a comfort letter or letters, dated the date of
the final prospectus with respect to the Shares and/or the date of the closing
for the sale of the Shares from the independent certified public accountants of
the Company and addressed to the Stockholder and any underwriters participating
in such offering and sale, which letter or letters shall state that such
accountants are independent with respect to the Company within the meaning of
Rule 1.01 of the Code of Professional Ethics of the American Institute of
Certified Public Accountants and shall address such matters as the Stockholder
and underwriters may reasonably request and as may be customary in transactions
of a similar nature for similar entities and (ii) an opinion, dated the date of
the closing for the sale of the Shares, of the counsel representing the Company
with respect to such offering and sale (which counsel may be the General Counsel
of the Company or other counsel reasonably satisfactory to the Stockholder),
addressed to the Stockholder and any such underwriters, which opinion shall
address such matters as they may reasonably request and as may be customary in
transactions of a similar nature for similar entities;
(c) make available for inspection by the Stockholder, the underwriters, if any,
participating in such offering and sale (which inspecting underwriters shall, if
reasonably possible, be limited to any manager or managers for such
participating underwriters), the counsel for the Stockholder, one accountant or
accounting firm retained by the Stockholder and any such underwriters, or any
other agent retained by the Stockholder or such underwriters, all financial and
other records, corporate documents and properties of the Company, and supply
such additional information, as they shall reasonably request; provided that any
such party shall keep the contents thereof confidential in the manner prescribed
by Section 8.02 of the Master Agreement.
7. Action to Suspend Effectiveness; Supplement to Registration Statement. (a)
The Company will notify the Stockholder and its counsel promptly of (i) any
action by the Commission to suspend the effectiveness of the registration
statement covering the Shares or the institution or threatening of any
proceeding for such purpose (a "stop order") or (ii) the receipt by the Company
of any notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. Immediately upon receipt of any such notice, the
Stockholder shall cease to offer or sell any Shares pursuant to the registration
statement in the jurisdiction to which such stop order or suspension relates.
The Company will use all reasonable efforts to prevent the issuance of any such
stop order or the suspension of any such qualification and, if any such stop
order is issued or any such qualification is suspended, to obtain as soon as
possible the withdrawal or revocation thereof, and will notify the Stockholder
and its counsel at the earliest practicable date of the date on which the
Stockholder may offer and sell Shares pursuant to the registration statement.
(b) Within the applicable period referred to in Section 3
following the effectiveness of a registration statement filed pursuant to these
registration rights, the Company will notify the Stockholder and its counsel
promptly of the occurrence of any event or the existence of any state of facts
that, in the judgment of the Company, should be set forth in such registration
statement. Immediately upon receipt of such notice, the Stockholder shall cease
to offer or sell any Shares pursuant to such registration statement, cease to
deliver or use such registration statement and, if so requested by the Company,
return to the Company, at its expense, all copies (other than permanent file
copies) of such registration statement. The Company will, as promptly as
practicable, take such action as may be necessary to amend or supplement such
registration statement in order to set forth or reflect such event or state of
facts. The Company will furnish copies of such proposed amendment or supplement
to the Stockholder and its counsel and will not file or distribute such
amendment or supplement without the prior consent of the Stockholder, which
consent shall not be unreasonably withheld.
