UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Fuel-Tech N.V.
--------------
(Name of Issuer)
Common Stock, $.01 Par Value,
-----------------------------
and Warrants to Purchase Common Stock
-------------------------------------
(Title of Class of Securities)
359523107
--------------
(CUSIP Number)
Ralph E. Bailey
c/o American Bailey Corporation
695 East Main Street
Stamford, Connecticut 06901
(203) 348-8700
--------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
April 30, 1998
--------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this Schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ]
Page 1 of 20 pages
<PAGE>
- --------------------------------- -----------------------------------
CUSIP No. 359523107 Page 2 of 20 Pages
- --------------------------------- -----------------------------------
- ------- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Ralph E. Bailey
- ------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER (a) [X]
OF A GROUP (See Instructions) (b) [ ]
- ------- ------------------------------------------------------------------------
3 SEC USE ONLY
- ------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
PF
- ------- ------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- ------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,750,000
OWNED BY ------- ---------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 4,650,000
PERSON ------- ---------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
400,000
- --------------------------- ---------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,050,000
- ------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions) [ ]
- ------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.6%
- ------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- ------- ------------------------------------------------------------------------
<PAGE>
- --------------------------------- -----------------------------------
CUSIP No. 359523107 Page 3 of 20 Pages
- --------------------------------- -----------------------------------
- ------- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Douglas G. Bailey
- ------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
- ------- ------------------------------------------------------------------------
3 SEC USE ONLY
- ------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
PF
- ------- ------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- ------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------- ---------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,750,000
OWNED BY ------- ---------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,912,500
PERSON ------- ---------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
400,000
- --------------------------- ---------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,312,500
- ------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions) [ ]
- ------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%
- ------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- ------- ------------------------------------------------------------------------
<PAGE>
- --------------------------------- -----------------------------------
CUSIP No. 359523107 Page 4 of 20 Pages
- --------------------------------- -----------------------------------
- ------- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Nolan R. Schwartz
- ------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
- ------- ------------------------------------------------------------------------
3 SEC USE ONLY
- ------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
PF
- ------- ------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- ------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------- ---------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,750,000
OWNED BY ------- ---------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 225,000
PERSON ------- ---------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
100,000
- --------------------------- ---------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
325,000
- ------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions) [ ]
- ------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.8%
- ------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- ------- ------------------------------------------------------------------------
<PAGE>
- --------------------------------- -----------------------------------
CUSIP No. 359523107 Page 5 of 20 Pages
- --------------------------------- -----------------------------------
- ------- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Guy C. Heckman
- ------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
- ------- ------------------------------------------------------------------------
3 SEC USE ONLY
- ------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
PF
- ------- ------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- ------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- ------------------ ------- ---------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,750,000
OWNED BY ------- ---------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 125,000
PERSON ------- ---------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
100,000
- ------------------ ------- ---------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
225,000
- ------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions) [ ]
- ------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.3%
- ------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- ------- ------------------------------------------------------------------------
<PAGE>
- --------------------------------- -----------------------------------
CUSIP No. 359523107 Page 6 of 20 Pages
- --------------------------------- -----------------------------------
- ------- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
J. William Drake
- ------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
- ------- ------------------------------------------------------------------------
3 SEC USE ONLY
- ------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
PF
- ------- ------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- ------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- ------------------ ------- ---------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,750,000
OWNED BY ------- ---------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 125,000
PERSON ------- ---------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
100,000
- ------------------ ------- ---------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
225,000
- ------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions) [ ]
- ------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.3%
- ------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- ------- ------------------------------------------------------------------------
<PAGE>
- --------------------------------- -----------------------------------
CUSIP No. 359523107 Page 7 of 20 Pages
- --------------------------------- -----------------------------------
- ------- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Robert M. Davenport
- ------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
- ------- ------------------------------------------------------------------------
3 SEC USE ONLY
- ------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
PF
- ------- ------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- ------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- ------------------ ------- ---------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,750,000
OWNED BY ------- ---------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 125,000
PERSON ------- ---------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
37,500
- ------------------ ------- ---------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
162,500
- ------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions) [ ]
- ------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.9%
- ------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- ------- ------------------------------------------------------------------------
<PAGE>
- --------------------------------- -----------------------------------
CUSIP No. 359523107 Page 8 of 20 Pages
- --------------------------------- -----------------------------------
- ------- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Betsy S. Kenyon
- ------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
- ------- ------------------------------------------------------------------------
3 SEC USE ONLY
- ------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
PF
- ------- ------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- ------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- ------------------ ------- ---------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,750,000
OWNED BY ------- ---------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 75,000
PERSON ------- ---------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
25,000
- ------------------ ------- ---------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
100,000
- ------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions) [ ]
- ------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.6%
- ------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- ------- ------------------------------------------------------------------------
<PAGE>
- --------------------------------- -----------------------------------
CUSIP No. 359523107 Page 9 of 20 Pages
- --------------------------------- -----------------------------------
- ------- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
James G. Hannoosh
- ------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
- ------- ------------------------------------------------------------------------
3 SEC USE ONLY
- ------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
PF
- ------- ------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- ------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- ------------------ ------- ---------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,750,000
OWNED BY ------- ---------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 50,000
PERSON ------- ---------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
12,500
- ------------------ ------- ---------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
62,500
- ------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions) [ ]
- ------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.4%
- ------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- ------- ------------------------------------------------------------------------
<PAGE>
- --------------------------------- -----------------------------------
CUSIP No. 359523107 Page 10 of 20 Pages
- --------------------------------- -----------------------------------
- ------- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Geneve E. Hendricks
- ------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
- ------- ------------------------------------------------------------------------
3 SEC USE ONLY
- ------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
PF
- ------- ------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- ------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- ------------------ ------- ---------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,750,000
OWNED BY ------- ---------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 37,500
PERSON ------- ---------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
12,500
- ------------------ ------- ---------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
50,000
- ------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions) [ ]
- ------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.3%
- ------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- ------- ------------------------------------------------------------------------
<PAGE>
- --------------------------------- -----------------------------------
CUSIP No. 359523107 Page 11 of 20 Pages
- --------------------------------- -----------------------------------
- ------- ------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Lindsay G. Mortner
- ------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(See Instructions) (b) [ ]
- ------- ------------------------------------------------------------------------
3 SEC USE ONLY
- ------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
PF
- ------- ------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- ------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- ------------------ ------- ---------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- ---------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,750,000
OWNED BY ------- ---------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 25,000
PERSON ------- ---------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
12,500
- ------------------ ------- ---------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
37,500
- ------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions) [ ]
- ------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.2%
- ------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- ------- ------------------------------------------------------------------------
<PAGE>
Page 12 of 20
Introduction
This Schedule 13D is being filed in order to report the acquisition of
an aggregate of (i) 4,750,000 shares of common stock, $.01 par value (the
"Common Stock"), and (ii) warrant rights to purchase an additional 3,000,000
shares of Common Stock, of Fuel-Tech N.V., a Netherlands Antilles limited
liability company (the "Issuer") by the group of individuals reporting herein
(each, a "Reporting Person", collectively, the "Reporting Persons"). The
Reporting Persons purchased all of the shares and warrants in a securities
purchase transaction (closed April 30, 1998) among Issuer and each of the
Reporting Persons pursuant to a securities purchase agreement dated as of March
23, 1998 (the "Securities Purchase Agreement"). All of the shares and/or
warrants, as the case may be, that were obtained by each Reporting Person were
obtained individually and for his or her own account. In connection with this
transaction, the Reporting Persons and/or Issuer also executed and delivered
several other agreements, including a shareholders agreement dated as of April
30, 1998 among Issuer and each of the Reporting Persons (the "Shareholders
Agreement") (discussed immediately below and in Item 6), a share pledge
agreement among all of the Reporting Persons and a third party (discussed in
Item 6), and certain call agreements among the Reporting Persons (discussed in
Item 6).
Pursuant to the Shareholders Agreement, the Reporting Persons share
their voting power solely with respect to their obligation to vote all of their
shares of Common Stock in favor of Issuer's four (4) designees on Issuer's board
of directors. Also pursuant to said Shareholders Agreement, the Reporting
Persons collectively possess rights (i) to nominate three (3) members of the
board of directors of Issuer and (ii) to select at least 50% of the members of
the board of directors of Issuer's wholly owned subsidiary, Fuel Tech, Inc., a
Massachusetts corporation. (The eighth member of Issuer's board of directors
must be a Netherlands Antilles person mutually agreeable to Issuer and a
majority of the shares of the Reporting Persons.)
Item 1. Security and Issuer.
The class of equity securities to which this Schedule relates is
Issuer's Common Stock, $.01 par value. The Issuer is Fuel-Tech N.V., a
Netherlands Antilles limited liability company, and its principal executive
offices are located at Castorweg 22-24, Curacao, Netherlands Antilles.
Item 2. Identity and Background.
This Schedule 13D is being filed on behalf of the following group of
Reporting Persons: Ralph E. Bailey, Douglas G. Bailey, Nolan R. Schwartz, Guy C.
Heckman, J. William Drake, Robert M. Davenport, Betsy S. Kenyon, Lindsay G.
Mortner, James G. Hannoosh, and Geneve E. Hendricks. Ralph E. Bailey and Douglas
G. Bailey are (or expect shortly to become) directors of Issuer.
<PAGE>
Page 13 of 20
Each of the Reporting Persons has a business address c/o American
Bailey Corporation, 695 East Main Street, Stamford, CT 06901. American Bailey
provides management services to various businesses. Each of the Reporting
Persons has the present principal occupation or employment that is indicated by
the title(s) set forth directly opposite his or her name:
Ralph E. Bailey Chairman of the Board
Douglas G. Bailey CEO and President
Nolan R. Schwartz Vice President
J. William Drake Vice President
Guy C. Heckman Vice President
Robert M. Davenport Vice President and Treasurer
Betsy S. Kenyon Vice President and Secretary
Lindsay G. Mortner Assistant Secretary
James Hannoosh Consultant
Geneve Hendricks System Administrator
No Reporting Person nor any other person named above has, during the
last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violations with respect to such laws.
Each Reporting Person is a United States citizen.
Item 3. Source and Amount of Funds or Other Consideration.
All of the Common Stock purchased by the Reporting Persons and
reported herein was obtained as a result of cash payment. Each Reporting Person
was the sole source of the cash consideration paid for the Common Stock.
Item 4. Purpose of Transaction.
The Common Stock was acquired primarily for investment purposes. The
Reporting Persons intend to review on a continuing basis their investment in the
Issuer and the Issuer's business, prospects and financial condition. Based on
such continuing review, alternative investment opportunities available to the
reporting persons and all other factors deemed relevant (including, without
limitation, the market for and price of the Common Stock, offers for shares of
the Common Stock, general economic conditions and other
<PAGE>
Page 14 of 20
future developments), the Reporting Persons may decide, subject to certain
restrictions contained in the Securities Purchase Agreement, the Shareholders
Agreement and related agreements, to sell or seek the sale of all or part of the
Common Stock or increase their holdings of the Common Stock.
The Reporting Persons hope to influence the operation of Issuer in a
manner that will improve the performance of the Reporting Persons' investment in
Issuer. In this regard, pursuant to the Shareholders' Agreement, the Reporting
Persons have obtained the rights (i) to nominate three (and reasonably withhold
approval of another) of Issuer's eight board members and (ii) to select at least
50% of the members of the board of directors of Issuer's wholly owned
subsidiary, Fuel Tech, Inc. (see Introduction above; see also Item 6 below).
However, except for acquiring and exercising the afore-mentioned director
nomination rights, the Reporting Persons currently have no plans or proposals
that relate to or would result in any of the consequences listed in paragraphs
(a) - (j) of Item 4 of the Special Instructions for Complying With Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) and (b) Set forth in the table below are the number and percentage
of shares of Issuer Common Stock beneficially owned by each Reporting Person
named in Item 2 as of the date hereof, which persons collectively comprise a
group within the meaning of ss.13(d)(3) of the Act. (These figures include the
warrant rights to purchase Issuer Common Stock (held by each Reporting Person
other than Ralph E. Bailey), which rights are exercisable until April 30, 2008
at an exercise price of $1.75 subject to certain upward or downward adjustments
based on possible future occurrences such as the consolidation or merger of
Issuer or the reclassification, split or subdivision of the Common Stock.)
<TABLE>
<CAPTION>
Number of Shares Number of Shares Number of Shares Aggregate Percentage of
Beneficially Owned Beneficially Beneficially Owned Numbers of Shares Shares
With Shared Owned With Sole With Shared Beneficially Beneficially
Name Voting Power Dispositive Power Dispositive Power Owned Owned
- ---- ------------ ----------------- ----------------- ----- -----
<S> <C> <C> <C> <C> <C>
Ralph E. Bailey 7,750,000(1) 4,650,000 400,000 5,050,000 28.6%
Douglas G. Bailey 7,750,000(1) 1,912,500(2) 400,000 2,312,500 11.8%
Nolan R. Schwartz 7,750,000(1) 325,000(3) 100,000 325,000 1.8%
Guy C. Heckman 7,750,000(1) 225,000(4) 100,000 225,000 1.3%
J. William Drake 7,750,000(1) 225,000(4) 100,000 225,000 1.3%
Robert M. Davenport 7,750,000(1) 162,500(4) 37,500 162,500 0.9%
Betsy S. Kenyon 7,750,000(1) 100,000(4) 25,000 100,000 0.6%
James G. Hannoosh 7,750,000(1) 62,500(4) 12,500 62,500 0.4%
Geneve E. Hendricks 7,750,000(1) 50,000(4) 12,500 50,000 0.3%
Lindsay G. Mortner 7,750,000(1) 37,500(4) 12,500 37,500 0.2%
</TABLE>
- ------------------
(1) All of the shares of Issuer Common Stock owned by the Reporting Persons have
shared voting power with respect to the election of directors of Issuer;
thus, none of such shares can be characterized as having sole voting rights.
However, with respect to any other matter, the Reporting Persons are
entitled to vote their shares of Common Stock (but not the shares
represented by their unexercised warrant rights) in any legal manner.
<PAGE>
Page 15 of 20
(2) Includes 75,000 shares of Common Stock and warrant rights to purchase an
additional 1,837,500 shares of Common Stock.
(3) Includes 25,000 shares of Common Stock and warrant rights to purchase an
additional 300,000 shares of Common Stock.
(4) Includes no shares of Common Stock but only warrant rights to purchase
shares of Common Stock.
(5) The sole basis upon which certain Related Persons share the dispositive
power of warrant rights (exercisable within sixty days) to purchase certain
shares of Issuer Common Stock is a series of Call Agreements dated as of
March 23, 1998 between Ralph E. Bailey and Douglas G. Bailey (jointly), on
the one hand, and such other Related Person, on the other hand. Each Call
Agreement encumbers a percentage of the respective Related Person's warrant
rights to shares for the joint benefit of Ralph E. Bailey and Douglas G.
Bailey. Specifically, these Call Agreements have caused all Related Persons
other than Ralph E. Bailey and Douglas G. Bailey to have made their warrant
rights to an aggregate amount of 400,000 shares of Issuer Common Stock
subject to call and exercise by either of the Baileys upon any attempt by
certain unrelated third parties to enforce their rights of collection
against the Baileys pursuant to that certain Pledge and Security Agreement
dated December 9, 1994 among Caterpillar Overseas S.A., Ralph E. Bailey and
Douglas G. Bailey. (For further discussion of the Call Agreements, see Item
6.)
(c) None.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Each of the Reporting Persons entered into a Securities Purchase
Agreement dated as of March 23, 1998, and a Shareholders Agreement dated as of
April 30, 1998, with Issuer. The Reporting Persons obtained their shares (and
warrant rights to additional shares) of Issuer Common Stock pursuant to the
Securities Purchase Agreement, a copy of which is attached as Exhibit 1 to this
Schedule. Pursuant to the Shareholders Agreement, a copy of which is attached as
Exhibit 2 to this Schedule, the Reporting Persons (i) obtained certain rights,
with respect to nomination of and voting on certain designees of the board of
directors of Issuer and its wholly owned subsidiary, Fuel Tech, Inc. ("FTI"), a
Massachusetts corporation, and (ii) agreed to certain restrictions on transfer
or encumbrance of all of their shares of Issuer Common Stock (and warrants
representing rights therefor) until Issuer and FTI have satisfied their
obligations under the Purchase Agreement (as defined below). The Reporting
Persons' rights regarding the board of directors will have a duration of between
four and ten years provided that they continue to hold certain stipulated
amounts of Issuer Common Stock during such periods. The restrictions on the
Reporting Persons' Issuer Common Stock shares and warrants terminate upon the
satisfaction by FTI of its obligations under the Purchase Agreement discussed in
the following paragraph.
Simultaneous to execution and delivery of the Securities Purchase
Agreement and the Shareholders Agreement, each of the Related Persons also
entered into
<PAGE>
Page 16 of 20
that certain Bailey Pledge Agreement, dated as of April 30, 1998 (the "Bailey
Pledge Agreement""), with Nalco FT, Inc. ("Nalco FT"), a Delaware corporation
acting in its own capacity and as agent for Nalco Chemical Company ("Nalco
Chemical"), a Delaware corporation and the parent company of Nalco FT (Nalco
Chemical and Nalco FT, the "Nalco Parties"). Pursuant to the Bailey Pledge
Agreement, which is attached as Exhibit 3 to this Schedule, the Related Persons
pledged all 4,750,000 shares of, and warrants representing the rights to
3,000,000 shares of, Issuer Common Stock to the Nalco Parties as collateral to
secure various purchase obligations of Issuer and FTI set forth in that certain
Purchase Agreement (the "Purchase Agreement") dated as of March 23, 1998 among
Nalco Chemical, Nalco FT and FTI. The Purchase Agreement enabled Issuer, acting
through FTI, to obtain sole ownership of Nalco Fuel Tech, a Delaware general
partnership previously owned 50% by Nalco FT and 50% by FTI. (Nalco Fuel Tech
was and is Issuer's primary source of revenue.) Execution and delivery of the
Bailey Pledge Agreement by the Related Persons constituted a material inducement
to the Nalco Parties to enter into the Purchase Agreement. If any of the Nalco
Parties subsequently exercises its Bailey Pledge Agreement rights as a secured
party and forecloses on the Reporting Persons' shares of (or warrants
representing the rights to shares of) Issuer Common Stock, such Nalco Party
would obtain voting power or investment power over such securities.
Simultaneous to their obtaining the warrant rights to purchase Issuer
Common Stock discussed in Item 5 above, each Reporting Person (other than Ralph
E. Bailey and Douglas G. Bailey) executed a Call Agreement dated as of March 23,
1998 among such Reporting Person, Ralph E. Bailey and Douglas G. Bailey. Each
Call Agreement (two representative examples of which are attached as Exhibit 4
to this Schedule) encumbers a portion of each such Reporting Person's warrant
rights for the benefit of Ralph E. Bailey and Douglas G. Bailey jointly. The
Call Agreements collectively encumber the warrant rights to purchase 500,000
shares of Common Stock, but only the rights to 400,000 of such shares are
exercisable within sixty (60) days. Accordingly, the group's Reporting Persons
other than Ralph E. Bailey and Douglas G. Bailey share with said Baileys
dispositive power over 400,000 shares of Common Stock of Issuer.
Pursuant to a Registration Rights Agreement dated as of April 30, 1998
among each of the Reporting Persons, Issuer and certain other parties, the
Issuer granted the Reporting Persons registration rights which, upon the
Reporting Persons fulfillment of certain conditions over various periods of
time, require the Issuer, on demand, to cause Common Stock of the Issuer held by
the Reporting Persons to be registered under the Securities Act of 1933, as
amended, so as to permit the Reporting Persons' sale or other disposition of the
Common Stock.
Pursuant to the Management Services Agreement dated April 30, 1998
between Issuer and American Bailey Corporation, a Connecticut corporation (of
which each Reporting Person either is an owner, an employee or a consultant), a
copy of which is attached as Exhibit 5 to this Schedule, American Bailey agreed
to provide certain management consulting services to Issuer. Neither American
Bailey nor any of the Reporting Persons will charge a fee to Issuer for any
services rendered pursuant to said Management Services Agreement during the 24
month period beginning April 30, 1998
<PAGE>
Page 17 of 20
and thereafter for the duration of such agreement both sides will negotiate an
annual fee for services rendered.
<PAGE>
Page 18 of 20
Item 7. Material to Be Filed as Exhibits.
Exhibit
Number Description
- ------ -----------
1 Securities Purchase Agreement dated as of March 23, 1998 among each
of the Reporting Persons and Issuer.
2 Shareholders Agreement dated as of April 30, 1998 by and among each
of the Reporting Persons and Issuer.
3 Bailey Pledge Agreement dated as of April 30, 1998 among each of the
Reporting Persons and Nalco FT.
4 Two Call Agreements dated as of March 23, 1998, one among Nolan R.
Schwartz, Ralph E. Bailey and Douglas G. Bailey, and the other among
Guy C. Heckman, Ralph E. Bailey and Douglas G. Bailey.
5 Registration Rights Agreement dated as of April 30, 1998 among
Issuer and each of the Reporting Persons.
6 Agreement dated April 30, 1998 among each of the Reporting Persons
relating to the execution, delivery and filing of this Schedule 13D.
<PAGE>
Page 19 of 20
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: April 30, 1998
/s/ RALPH E. BAILEY
------------------------------
Ralph E. Bailey
/s/ DOUGLAS G. BAILEY
------------------------------
Douglas G. Bailey
/s/ NOLAN R. SCHWARTZ
------------------------------
Nolan R. Schwartz
/s/ GUY C. HECKMAN
------------------------------
Guy C. Heckman
/s/ J. WILLIAM DRAKE
------------------------------
J. William Drake
/s/ ROBERT M. DAVENPORT
------------------------------
Robert M. Davenport
/s/ BETSY S. KENYON
------------------------------
Betsy S. Kenyon
/s/ JAMES G. HANNOOSH
------------------------------
James G. Hannoosh
/s/ GENEVE E. HENDRICKS
------------------------------
Geneve E. Hendricks
/s/ LINDSAY G. MORTNER
------------------------------
Lindsay G. Mortner
<PAGE>
Page 20 of 20
EXHIBIT INDEX
-------------
Exhibit
Number Description
- ------ -----------
1 Securities Purchase Agreement dated as of March 23, 1998 among each
of the Reporting Persons and Issuer.
2 Shareholders Agreement dated as of April 30, 1998 by and among each
of the Reporting Persons and Issuer.
3 Bailey Pledge Agreement dated as of April 30, 1998 among each of the
Reporting Persons and Nalco FT.
4 Two Call Agreements dated as of March 23, 1998, one among Nolan R.
Schwartz, Ralph E. Bailey and Douglas G. Bailey, and the other among
Guy C. Heckman, Ralph E. Bailey and Douglas G. Bailey.
5 Registration Rights Agreement dated as of April 30, 1998 among
Issuer and each of the Reporting Persons.
6 Agreement dated April 30, 1998 among each of the Reporting Persons
relating to the execution, delivery and filing of this Schedule 13D.
EXHIBIT 1 TO SCHEDULE 13D
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement") dated as of March 23,
1998, between Fuel-Tech N.V., a Netherlands Antilles limited liability company
(the "Company" or "FTNV"), and the purchasers set forth on the signature page
hereto (each, a Purchaser, and collectively, the "Purchasers").
WHEREAS, the Company's authorized capital stock consists of 20,000,000
shares of Common Stock, par value $0.01 per share (the "FTNV Stock"), of which,
as of January 30, 1998, 12,548,380 are validly issued and outstanding, fully
paid and nonassessable;
WHEREAS, as of January 30, 1998, the Company has an additional
3,780,795 shares of FTNV Stock subject to issuance upon exercise of options,
warrants and the Company's Nil Coupon Non-Redeemable Perpetual Loan Notes;
WHEREAS, the Board of Directors of the Company has authorized, subject
to approval by the Company's shareholders, (i) an increase in the Company's
authorized capital stock to 40,000,000 shares of FTNV Stock, (ii) the issuance
of an additional 4,750,000 shares of FTNV Stock for delivery to Purchasers as
set forth in Schedule I hereto (the "Purchaser Stock") and (iii) the issuance of
Purchaser warrants exercisable for an aggregate of 3,000,000 shares of FTNV
Stock for delivery to Purchasers as set forth in Schedule I hereto (the
"Purchaser Warrants", and together with Purchaser Stock, the "Purchaser
Shares");
WHEREAS, concurrently with the purchase of the Purchaser Shares by
Purchasers, among other things, (i) the Company and each of the Purchasers are
entering into (a) a Shareholders Agreement, substantially in the form attached
hereto as Exhibit A (the "Shareholders Agreement"), (b) a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit B (the
"Registration Rights Agreement") and (c) the Purchaser Warrants, substantially
in the form attached hereto as Exhibit C, (ii) Fuel Tech, Inc., a Massachusetts
corporation and a wholly-owned subsidiary of the Company ("FTI"), pursuant to a
purchase agreement by and among FTI, Nalco FT, Inc. ("Nalco FT"), a Delaware
corporation, and Nalco Chemical Company ("Nalco Chemical"), a Delaware
corporation for the limited purposes set forth therein (the "Purchase and Sale
Agreement"), is acquiring (the "NFT Acquisition") the remaining 50% interest
(the "NFT Interest") in Nalco Fuel Tech, a Delaware general partnership, that
FTI does not currently own, (iii) in connection with the NFT Acquisition, (a)
each of the Purchasers is entering into a pledge agreement with Nalco FT
(collectively, the "Bailey Pledge Agreements"), pursuant to which the Purchaser
Shares will be pledged to Nalco FT and certain related
<PAGE>
Sale Agreement and related documents, and (b) FTNV and FTI are entering into a
pledge agreement (the "FTI/FTNV Pledge Agreement") and FTI is entering into a
security agreement with Nalco FT (the "Security Agreement") pursuant to which
certain securities and assets will be pledged to Nalco FT and certain related
parties to secure certain obligations of FTI and the Purchasers under the
Purchase and Sale Agreement and related documents, and (iv) American Bailey
Corporation, a Delaware corporation, certain shareholders of which are
Purchasers hereunder, is entering into a Management Services Agreement with FTI
and FTNV (the "Management Services Agreement"), the consummation of each of the
foregoing of which shall occur substantially simultaneously with the
consummation of the transactions contemplated hereby. Capitalized terms used but
not defined herein shall have the respective meaning set forth in the Purchase
and Sale Agreement.
NOW, THEREFORE, in consideration of and subject to each of the
representations, warranties, covenants and agreements contained herein, the
Company and Purchasers hereby agree as follows:
I. THE PURCHASER SHARES
1.1. Purchase and Sale of Purchaser Shares. Subject to the terms and
conditions herein set forth, the Company hereby agrees to sell to the
Purchasers, and Purchasers agree to purchase from the Company (the "Purchase"),
the Purchaser Shares, for an aggregate purchase price of $3,350,000 (the
"Purchase Price"). The Company will sell, assign, transfer, convey and deliver
to the Purchasers, at the offices of Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois, 60603, (i) stock certificates evidencing an aggregate
of 4,750,000 shares of FTNV Stock, and (ii) Purchaser Warrants exercisable for
an aggregate of 3,000,000 shares of FTNV Stock, each registered in each of the
Purchaser's names and representing such number of shares and warrants as is set
forth on Schedule I hereto, against payment of the Purchase Price therefor by
wire transfer of immediately available funds to an account designated by the
Company prior to the Closing Date (as defined in Section 1.2).
1.2. Closing Date. The closing of the sale and purchase of the
Purchaser Shares (the "Closing") shall take place at (i) the offices of Mayer,
Brown & Platt, 190 South LaSalle Street, Chicago, Illinois, 60603, at 9:00 a.m.,
local time, on April 30, 1998; provided, that if all of the conditions to
Closing shall not have been satisfied or waived by such time, the Closing shall
take place as promptly as practicable after all of the conditions to each
party's obligations have been satisfied or waived, or (ii) at such other time
and place as the parties may agree. The date on which the closing occurs is
herein referred to as the "Closing Date."
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<PAGE>
II. PURCHASER'S REPRESENTATIONS AND WARRANTIES
Each of the Purchasers represents and warrants to FTNV, as follows:
2.1. Authority. Each Purchaser has the authority to enter into and
perform this Agreement and the Shareholders Agreement, the Registration Rights
Agreement, the Purchaser Warrants and the Bailey Pledge Agreements
(collectively, the "Purchaser Ancillary Documents") and to consummate the
transactions contemplated hereby and thereby and this Agreement and the
Purchaser Ancillary Documents constitute valid and binding obligations of each
Purchaser, enforceable against each Purchaser in accordance with their
respective terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or principles governing the availability of
equitable remedies).
2.2. Brokers. All negotiations relative to this Agreement and the
Purchaser Ancillary Documents and the transactions contemplated hereby and
thereby have been carried on by the Purchasers directly with the Company and
without the intervention of any other person, either as a result of any act of
the Purchasers or otherwise to the knowledge of the Purchasers, in such manner
as to give rise to any valid claim against any of the parties for a finder's
fee, brokerage commission or other like payment.
2.3. Governmental Consents. No consent, approval or authorization of
any governmental authority or any other third party is required in connection
with the execution and delivery of this Agreement or the Purchaser Ancillary
Documents and the consummation of the transactions contemplated hereby and
thereby, except for any applicable requirements relating to the Registration
Rights Agreement under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Act"), the Securities Exchange Act of
1934, as amended (the " 1934 Act"), state or "Blue Sky" laws and the National
Association of Securities Dealers Automated Quotations Systems.
2.4. Purchase for Investment, etc. Each Purchaser is acquiring the
Purchaser Shares for its own account as principal, with no view to any resale or
distribution of any of the Purchaser Shares or any beneficial ownership in the
Purchaser Shares, and each Purchaser has no present intent, agreement or
understanding to sell, pledge or otherwise dispose of the Purchaser Shares or
any beneficial interest in the Purchaser Shares to any other person or entity,
other than as provided by the terms of the Bailey Pledge Agreements. Each
Purchaser understands that the Purchaser Stock has not been registered under the
Act or applicable state securities laws, and therefore the Purchaser Shares may
not be sold or otherwise transferred unless registered under the Act and any
applicable state securities laws or unless an exemption from such registration
is available; and these securities are also subject to, and the transfer of
these securities is restricted by, the terms of the Bailey Pledge Agreements and
the Shareholders Agreement. The
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<PAGE>
undersigned (i) is either knowledgeable with respect to the financial, business
and tax aspects of ownership of the Purchaser Stock or has been represented by
such a knowledgeable person in connection herewith and (ii) can bear the
economic risk of an Investment in the Purchaser Stock, including the complete
loss thereof.
2.5. Litigation. There are no actions, proceedings pending or to the
knowledge of any Purchaser, threatened against any Purchaser that could prevent
or hinder the consummation of the transactions contemplated by this Agreement
and the Purchaser Ancillary Documents.
III. REPRESENTATIONS AND WARRANTIES OF FTNV
FTNV represents and warrants to Purchasers as follows:
3.1. Corporate Authority. The respective Boards of Directors of FTNV
and FTI have duly approved this Agreement, the Purchase and Sale Agreement, the
Shareholders Agreement, the Registration Rights Agreement, the Purchaser
Warrants, the FTI/FTNV Pledge Agreement, the Security Agreement, the Nalco
Administrative Services Agreement, the Fuel Chem Agreement, the Sublease
Agreement, the Mutual Release and the Management Services Agreement
(collectively, the "Seller Ancillary Documents") to which they are a party, and
the transactions contemplated hereby and thereby, and have authorized the
execution and delivery by FTNV, FTI and the Joint Venture of this Agreement and
the Seller Ancillary Documents to which they are a party, and, subject to the
shareholder approvals contemplated by Section 6.1(a) of this Agreement, the
transactions contemplated hereby and thereby constitute the valid and binding
obligations of FTNV, FTI and the Joint Venture, as the case may be, enforceable
against FTNV, FTI, the Joint Venture, as the case may be, in accordance with
their respective terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or principles governing the availability
of equitable remedies).
3.2. Organization. Each of FTNV, FTI, Fuel Tech Europe, Ltd. ("FTE")
and Platinum Plus, Inc. ("PPI", and together with FTE, the "Wholly-Owned
Subsidiaries"), Nalco Fuel Tech, a Delaware general partnership (the "Joint
Venture"), Nalco FT Holdings, N.V., a Netherlands Antilles limited liability
company ("FT Holdings"), Nalco Fuel Tech, B.V., a Netherlands Antilles limited
liability company ("FTBV"), Nalco Fuel Tech GmbH, a German limited liability
company ("GmbH"), Nalco Fuel Tech, Ltd., a Canadian limited liability company
("NFT") and Nalco Fuel Tech Poland Sp.z o.o., a Polish limited liability company
("NFTP"; together with the Joint Venture, FT Holdings, FTBV, GmbH and NFT,
collectively, the "Joint Venture Entities") is an entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of formation
and has all of the requisite power and authority to carry on its business as now
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<PAGE>
conducted, and each of FTNV, FTI, the Wholly-Owned Subsidiaries and the Joint
Venture Entities, is duly qualified to transact business and is in good standing
in each jurisdiction in which the failure to so qualify would have a material
adverse effect on the business or properties of FTNV, FTI, any Wholly-Owned
Subsidiary or any Joint Venture Entity (a "Material Adverse Effect").
3.3. Capitalization. The capitalization is as follows:
(i) the authorized capital stock of FTNV consists of
20,000,000 shares of Common Stock, par value $0.01 per share, of which, as of
January 30, 1998, 12,548,380 are validly issued and outstanding, fully paid and
non-assessable. As of January 30, 1998, there are 3,780,795 additional shares of
FTNV Common Stock subject to issuance upon exercise of options, warrants and
FTNV's Nil Coupon NonRedeemable Perpetual Loan Notes. At the Closing Date (i)
FTNV's authorized capital stock shall be increased to 40,000,000 shares of
Common Stock, par value $.01 per share, (ii) an additional 4,750,000 shares of
FTNV Common Stock shall be validly issued and outstanding for delivery to
Purchasers and (iii) there shall be 3,000,000 additional shares of FTNV Common
Stock subject to issuance upon exercise of the FTNV Warrants. Except for the
Purchaser Warrants and except as set forth on Schedule 3.3(i) attached hereto,
there are not outstanding any options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from FTNV of
any shares of its capital stock and FTNV is not a party or subject to any
agreement or understanding which affects or relates to voting or giving of
written consents with respect to its securities;
(ii) the authorized capital stock of FTI, the Wholly-Owned
Subsidiaries and the Joint Venture Entities (other than the Joint Venture) and
the number of issued and outstanding shares of such capital stock and the
holders thereof are as set forth on Schedule 3.3(ii)(a) attached hereto. All of
such shares of capital stock are validly issued and outstanding and are fully
paid and non-assessable. Except pursuant to the terms of the FTI/FTNV Pledge
Agreement, there are not outstanding any options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from FTI, any Wholly-Owned Subsidiary or Joint Venture Entity of any shares of
its capital stock and neither FTI, any Wholly-Owned Subsidiary nor Joint Venture
Entity is a party or subject to any agreement or understanding which affects or
relates to voting or giving of written consents with respect to any security of
FTI, any Wholly-Owned Subsidiary or Joint Venture Entity; and
(iii) FTI owns a fifty percent (50%) partnership interest
(the "Partnership Interest") in the Joint Venture, which is owned free and clear
of liens other than the Joint Venture Agreement, dated as of December 21, 1989,
as amended, between Nalco Chemical Company and FTNV, and the Partnership
Agreement, dated as of January 31,
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<PAGE>
1990, as amended, between Nalco FT and FTI. The Partnership Interest constitutes
50% of the partnership interests in the Joint Venture.
(iv) the outstanding shares of capital stock and other
securities of each of FTNV, FTI, the Joint Venture Entities and the Wholly-Owned
Subsidiaries have been issued in accordance with the registration or
qualification provisions of the Securities Act of 1933, as amended, and any
relevant state securities laws or pursuant to valid exemptions therefrom.
3.4. Subsidiaries. Other than as set forth on Schedule 3.4 attached
hereto, none of FTNV, FTI, the Joint Venture Entities or the Wholly-Owned
Subsidiaries owns or controls, directly or indirectly, any interest in any other
person or entity.
3.5. Charter Documents. The copies of the articles of organization or
charter documents of FTNV, FTI, the Joint Venture Entities and the Wholly-Owned
Subsidiaries and the by-laws of FTNV, FTI, the Joint Venture Entities and the
Wholly-Owned Subsidiaries and, in each case, all amendments thereto, that have
been delivered to Purchasers are complete and correct.
3.6. Financial Statements.
(i) the copies of the audited, consolidated balance sheet of
FTNV as of December 31, 1996, certified by Ernst & Young LLP, certified public
accountants, and its related statement of operations, shareholders equity, and
cash flows for the year ended December 31, 1996, present fairly, in all material
respects, the consolidated financial position of FTNV and its subsidiaries at
that date and the consolidated results of their operations and their cash flows
for such period, in conformity with accounting principles generally accepted in
the United States ("U.S. GAAP") applied on a consistent basis;
(ii) the copies of the audited, consolidated balance sheet
of FTNV as of December 31, 1997, certified by Ernst & Young LLP, certified
public accountants (the "1997 FTNV Audited Financial Statements"), and its
related statement of operations, shareholders equity, and cash flows for the
year ended December 31, 1997, to be delivered to the Purchasers (A) will present
fairly, in all material respects, the consolidated financial position of FTNV
and its subsidiaries at that date and the consolidated results of their
operations and their cash flows for such period, in conformity with U.S. GAAP
applied on a consistent basis and (B) other than the inclusion of notes thereto,
year-end closing and audit adjustments and as set forth on Schedule 3.6(ii),
will not contain any changes from the 1997 FTNV Unaudited Financial Statements
(as defined below) which could reasonably be expected to have a Material Adverse
Effect;
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<PAGE>
(iii) the copies of the unaudited, consolidated balance sheet of FTNV as of
December 3 1, 1997, and related unaudited income statement for the period ended
December 31, 1997 (the "FTNV Unaudited Financial Statements"), present fairly,
in all material respects, the consolidated financial position of the Joint
Venture and its subsidiaries at that date and the consolidated results of their
operations and their cash flows for such period, in conformity with U.S. GAAP
applied on a consistent basis, subject to the absence of notes thereto and
year-end closing and audit adjustments;
(iv) the copies of the audited, consolidated balance sheet
of the Joint Venture as of December 31, 1996, certified by Ernst & Young LLP,
certified public accountants, and its related statement of operations,
shareholders equity, and cash flows for the year ended December 31, 1996,
present fairly, in all material respects, the consolidated financial position of
the Joint Venture and its subsidiaries at that date and the consolidated results
of their operations and their cash flows for such period, in conformity with
accounting U.S. GAAP applied on a consistent basis; and
(v) the copies of the audited, consolidated balance sheet of
the Joint Venture as of December 31, 1997, certified by Ernst & Young LLP,
certified public accountants (the "1997 Joint Venture Audited Financial
Statements"), and its related statement of operations, shareholders equity, and
cash flows for the year ended December 31, 1997, present fairly, in all material
respects, the consolidated financial position of the Joint Venture and its
subsidiaries at that date and the consolidated results of their operations and
their cash flows for such period, in conformity with accounting U.S. GAAP
applied on a consistent basis.
3.7. Tax Returns, Payments and Elections. Each of FTNV, FTI, the
Wholly-Owned Subsidiaries and the Joint Venture Entities has filed all requisite
tax returns. Each of FTNV, FTI, the Wholly-Owned Subsidiaries and the Joint
Venture Entities has paid all taxes and other assessments due, except those
contested by it in good faith and, except where the failure to do so would not
have a Material Adverse Effect; the provision for taxes of such entities as
shown in the most recently prepared financial statements described in Section
3.6 is reasonably adequate for taxes due or accrued as of the date thereof. Each
of FTNV, FTI, the Wholly-Owned Subsidiaries and the Joint Venture Entities has
withheld or collected from each payment made to each of its employees, the
amount of all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositories, in each case, except
where the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
3.8. Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.8 attached hereto and except as and to the extent reflected or
reserved against in the
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<PAGE>
aforesaid most recently prepared balance sheets of FTNV or the Joint Venture and
liabilities incurred in the ordinary course since the date of the latest balance
sheet, neither FTNV nor the Joint Venture has any liabilities or obligations
(whether accrued, absolute, contingent or otherwise) that could reasonably be
expected to have a Material Adverse Effect.
3.9. Absence of Certain Changes. Except as set forth in Schedule 3.9
attached hereto, since December 31, 1997, there has not been with respect to
FTNV, FTI, the Wholly-Owned Subsidiaries or the Joint Venture Entities:
(i) any change in the assets, liabilities, financial
condition or operating results from that reflected in the aforesaid most
recently prepared financial statements, except changes in the ordinary course or
business that could not be reasonably expected to have, in the aggregate, a
Material Adverse Affect;
(ii) any declaration, setting aside or payment of dividends
or other distribution in respect of its capital stock or joint venture interests
as the case may be;
(iii) any change in the accounting methods, tax practices,
policies or any tax election;
(iv) any incurrence or guarantee of indebtedness for
borrowed money;
(v) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results or business (as such business is
presently conducted);
(vi) any waiver of a material right or of a material debt
owed;
(vii) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation, except in the ordinary course of
business;
(viii) any material change or amendment to a material
contract or arrangement by which any assets or property is bound or subject;
(ix) any material change in any compensation arrangement or
agreement with any employee;
(x) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(xi) any resignation or termination of employment of any key
employee;
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<PAGE>
(xii) receipt of notice that there has been a loss of, or
material order cancellation by, any major customer;
(xiii) except pursuant to the terms of the FTI/FTNV Pledge
Agreement and the FTI Security Agreement, any mortgage, pledge, transfer of a
security interest in, or lien created with respect to any material properties or
assets, except liens for taxes not yet due or payable;
(xiv) any loan or guarantees made to or for the benefit of
employees, officers, directors, or any members of their immediate families,
other than travel advances and other advances made in the ordinary course of
business;
(xv) any other event or condition of any character that
could reasonably be expected to cause a Material Adverse Effect; or
(xvi) any arrangement or commitment to do any of the things
otherwise described in this Section 3.9.
3.10. Title to Assets (Other than Patents and Trademarks); Absence of
Liens and Encumbrances, etc. FTNV, FTI, the Wholly-Owned Subsidiaries and the
Joint Venture Entities have good and marketable title to all of their respective
properties and assets, real and personal (including those reflected in the
balance sheets of December 31, 1997 but excluding patents and trademarks)) free
and clear of any and all liens, claims, options, charges or encumbrances of any
nature whatever, except (i) the liens of taxes not yet due and payable, (ii)
such imperfections of title and encumbrances, if any, that could not reasonably
be expected to have a Material Adverse Effect, (iii) such properties and assets,
not material in amount, over which such entities have effective control, and
(iv) the liens created pursuant to the FTI/FTNV Pledge Agreement, the Security
Agreement and the Purchaser Obligations (as defined in the Purchase and Sale
Agreement). With respect to property and assets it leases, each of FTNV, FTI,
the Joint Venture Entities and the Wholly-Owned Subsidiaries is in material
compliance with such leases and holds a valid leasehold interest free and clear
of any material liens, claims and encumbrances.
3.11. Material Contracts. Except as set forth on Schedule 3.11 attached
hereto, there are no agreements, understandings, instruments or contracts to
which FTNV, FTI, the Wholly-Owned Subsidiaries or the Joint Venture Entities is
a party that may involve:
(i) outstanding obligations of any such entity in excess of
$350,000;
(ii) the license of any intellectual property (except for
customers of the products or services of any such entity) to or from any such
entity; or
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<PAGE>
(iii) provisions restricting or affecting the development,
manufacture or sale of the products or services of any such entity.
3.12. Properties. Except as set forth on Schedule 3.12 attached hereto,
none of FTNV, FTI, the Wholly-Owned Subsidiaries or the Joint Venture Entities
owns or leases, and prior to the effective time of the Purchase, will own or
lease any real property.
3.13. Governmental and Third Party Consents. Except as set forth on
Schedule 3.13 attached hereto, no consent, approval or authorization of any
governmental authority or any other third party is required in connection with
the execution and delivery of this Agreement, the Seller Ancillary Documents and
the transactions contemplated hereby and thereby, except for any applicable
requirements relating to the Registration Rights Agreement under the Act, the
1934 Act, state or "Blue Sky" laws and the National Association of Securities
Dealers Automated Quotations System ("NASDAQ").
3.14. Defaults.
(i) None of FTNV, FTI, the Wholly-Owned Subsidiaries or the
Joint Venture Entities is in default under any of its respective articles of
organization, bylaws, partnership agreement or any instrument or agreement, and
no event has occurred and is continuing under the provisions of any such
instrument or agreement that with the lapse of time or the giving of notice, or
both, would constitute a default thereunder, which could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, and none of
such entities is in violation of any judgment, order, writ, injunction, decree,
ordinance, statute, rule or regulation of any governmental authority which
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(ii) The execution and delivery by FTNV, FTI and the Joint
Venture of this Agreement and the Seller Ancillary Documents to which it is a
party does not, and the performance by FTNV, FTI and the Joint Venture of its
respective obligations hereunder and thereto will not, violate any provisions of
its respective articles of organization or by-laws or partnership agreement, or
constitute a default under any other license, permit, constraint or agreement or
any ordinance, statute, rule or regulation of any governmental authority to
which any such entity, the Wholly-Owned Subsidiaries or any other Joint Venture
Entity is a party or by which it or its respective assets may be bound which
could reasonably be expected to have a Material Adverse Effect.
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3.15. Litigation. Except as set forth in Schedule 3.15 attached hereto,
there is no litigation, proceeding or governmental investigation pending or
threatened against or relating to:
(i) FTNV, FTI, the Wholly-Owned Subsidiaries or the Joint
Venture Entities, respectively, or its respective properties or business, which
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;
(ii) the transactions contemplated by the Agreement or the
Seller Ancillary Documents; or
(iii) the directors, officers or employees of FTNV, FTI, the
Wholly-Owned Subsidiaries or the Joint Venture Entities in reference to actions
taken by them in such capacities, nor does any such entity know of any basis for
any such litigation, proceeding or investigation; and there are no decrees,
injunctions or orders of any court, governmental department or agency
outstanding against it. There is no action, suit or proceeding by FTNV, FTI, the
Wholly-Owned Subsidiaries or the Joint Venture Entities that such party intends
to initiate.
3.16. Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by FTNV directly with
Purchasers and without the intervention of any other person, either as a result
of any act of FTNV or otherwise to the knowledge of FTNV, in such manner as to
give rise to any valid claim against any of the parties for a finder's fee,
brokerage commission or other like payment.
3.17. Patents and Trademarks. Each of FTNV, FTI, the Wholly-Owned
Subsidiaries and the Joint Venture Entities has sufficient title and ownership
of, or right to use, all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted, free and clear of any and all
liens, except imperfections of title, and encumbrances, if any, that could not
reasonably be expected to have a Material Adverse Effect, without any conflict
with or infringement of the rights of others, and none of such entities has
received any communications alleging that such party has violated, would violate
any of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person (it being understood
that none of FTNV, FTI, the Wholly-Owned Subsidiaries or the Joint Venture
Entities is authorized to practice sorbent injection with Orimulsion(TM) in coal
fired plants).
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3.18. Permits. Each of FTNV, FTI, the Wholly-Owned Subsidiaries and the
Joint Venture Entities has all franchises, permits, licenses, and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could reasonably be expected to cause a Material Adverse
Effect; and none of such entities is in default in any material respect under
any of such franchises, permits, licenses, or other similar authority.
3.19. Environmental and Safety Laws. Neither FTNV, FTI, the
Wholly-Owned Subsidiaries nor the Joint Venture Entities is in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety where the failure to comply with such statute,
law or regulation could reasonably be expected to have a Material Adverse
Effect.
3.20. Labor Agreements and Actions. Neither FTNV, FTI, the Wholly Owned
Subsidiaries nor the Joint Venture Entities is bound by or subject to (and none
of its assets or properties is bound by or subject to) any written or oral,
express or implied, contract, commitment or arrangement with any labor union,
and no labor union has requested or has sought to represent any of the
employees, representatives or agents of any such entity; there is no strike or
other labor dispute involving any such entity pending or threatened that could
reasonably be expected to have a Material Adverse Effect; nor is any such entity
aware of any labor organization activity involving its employees.
3.21. Insurance. Each of FTNV, FTI, the Wholly-Owned Subsidiaries or
the Joint Venture Entities has in full force and effect fire and casualty
insurance policies and products liability insurance in amounts customary for
companies similarly situated. Schedule 3.21 attached hereto sets forth a
description of each such insurance policy (including the carrier's name and
policy number) maintained by or on behalf of each such entity.
3.22. Employee Benefit Plans. Except as set forth in Schedule 3.22,
none of FTNV, FTI, the Wholly-Owned Subsidiaries or the Joint Venture Entities
has any Employee Benefit Plan as defined in the Employee Retirement Income
Security Act of 1974.
3.23. SEC Filings. FTNV has complied, in all material respects, with
all reporting requirements of the Securities Exchange Act of 1934, as amended.
3.24. Valid Issuance of Purchaser Shares. Subject to the approval by
the shareholders of FTNV of the amendment to FTNV's articles of organization
contemplated by Section 6.1(a)(ii) and the filing with and acceptance of such
amendment by the government of the Netherlands Antilles, (a) the Purchaser
Shares that are being purchased by the Purchasers hereunder, when issued, sold
and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly
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issued, fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement, the
Shareholders Agreement, the Bailey Pledge Agreements and under applicable state
and federal securities laws (b) the FTNV Stock issuable upon exercise of the
Purchaser Warrants purchased under this Agreement will be duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Articles of Organization of the Company, will be duly and validly issued, fully
paid, and nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Shareholders Agreement, the
Bailey Pledge Agreements and under applicable state and federal securities laws.
3.25. Offering. Subject to the truth and accuracy of each Purchaser's
representations set forth in Article II of this Agreement, the offer, sale and
issuance of the Purchaser Shares as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act of 1933, as amended,
and neither the Company nor any authorized agent acting on its behalf will take
any action hereafter that would cause the loss of such exemption.
IV. OBLIGATIONS PRIOR AND SUBSEQUENT TO THE CLOSING
4.1. Conduct of Business. FTNV covenants and agrees that except as
expressly provided by this Agreement or as otherwise consented to by the
Purchasers, after the date hereof and prior to the Closing, it shall not, and it
shall cause FTI and the Wholly-Owned Subsidiaries and shall, to the extent
permitted by the organizational documents of the Joint Venture, use reasonable
efforts to cause the Joint Venture Entities, not to take any action which would
cause FTNV, FTI, the Wholly-Owned Subsidiaries or the Joint Venture Entities, as
the case may be, to act other than in the ordinary course of business, and to
preserve the assets, business and relationships of such entities with material
customers, suppliers and others having material business relationship with such
entities.
4.2. Consents, Additional Agreements. Subject to the terms and
conditions set forth herein, each of the parties hereto shall cooperate with the
other party and use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper and
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including:
(i) using all reasonable efforts to remove any legal
impediment to the consummation of such transactions; and
(ii) using all reasonable efforts to obtain all necessary
waivers, consents and approvals of third parties and governmental bodies
referred to in Sections 2.3 and 3.13, and to effect all necessary filings.
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4.3. Access to Information. From the date hereof to the Closing, FTNV
shall, and shall cause FTI and the Wholly-Owned Subsidiaries to, and the extent
permitted by the organizational documents of the Joint Venture, use reasonable
efforts to cause the Joint Venture Entities, to afford Purchasers access, at all
reasonable times, to the officers, employees, agents, properties, books and
records of such entity, and shall furnish Purchasers with all existing
financial, operating and other data and information relating to such entity as
Purchasers may reasonably request, provided that nothing herein will obligate
any such entity to take any actions that would unreasonably disrupt the normal
course of their business or to violate the terms of any contract to which any of
them is a party or to which any of their assets are subject.
V. INDEMNIFICATION
5.1. Purchaser's Indemnity. The Purchasers agree, jointly and
severally, to indemnify, defend and hold harmless FTNV and its officers,
directors and employees from and against any and all claims, liabilities,
losses, damages and expenses, including reasonable fees and disbursements of
counsel (collectively, "Losses"), related to or arising out of any of the
following:
(a) Any inaccuracy in or any breach or any representation or
warranty made by any of the Purchasers in this Agreement or in any Purchaser
Ancillary Document; or
(b) Any breach by any of the Purchasers of any covenant of the
Purchasers in this Agreement or in any Purchaser Ancillary Document.
5.2. Indemnity of FTNV.
(a) FTNV agrees to indemnify, defend and hold harmless each
Purchaser as follows:
(i) If there is any claim, liability, loss or damage related
to or arising out of any inaccuracy or breach of the representations and
warranties regarding the most recent audited balance sheets of FTNV and the
Joint Venture made by FTNV in Section in 3.6 of this Agreement which relates in
any way to the "current assets" (as such term is utilized under U.S. GAAP) or
any "liability" (as such term is utilized under U.S. GAAP) set forth on such
balance sheets, then each Purchaser shall be entitled to be indemnified and paid
a dollar amount equal to the result of (x) the percentage of the outstanding
FTNV Common Stock owned by such Purchaser multiplied by (y) the quotient of (I)
the total amount of such claim, liability, loss or damage, but excluding related
fees and expenses, including attorneys fees and expenses, to FTNV, the Wholly
Owned Subsidiary or the Joint Venture Entity (the "Quantified Loss") divided by
(II) the result of one (1) minus the percentage of the outstanding FTNV Common
Stock owned by such Purchaser at the time such Quantified Loss was incurred
(provided that if the breach which gave rise
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to the Quantified Loss is also covered by a similar representation or warranty
made by Nalco FT or Nalco Chemical to FTI pursuant to the Purchase and Sale
Agreement, then the Quantified Loss shall be reduced by fifty percent (50%)).
For purposes of this Agreement, shares of FTNV Common Stock "owned" by a
Purchaser shall not include shares obtainable pursuant to the Purchaser Warrants
or pursuant to the exercise of any other option held by such Purchaser at the
time the relevant loss is incurred.
(ii) If there are any drawings made by or on behalf of the Polish Customer
on or before March 31, 1998 (or, if extended or replaced by mutual agreement of
FTI and Nalco FT under Section 10.2(d) of the Purchase and Sale Agreement, on or
before such extended or replaced expiration date) under the SG Letter of Credit
(as extended or replaced), then each Purchaser shall be entitled to be
indemnified and paid a dollar amount equal to the result of (x) the percentage
of the outstanding FTNV Common Stock owned by such Purchaser multiplied by (y)
fifty percent (50%) of the quotient of (I) the aggregate amount of such drawings
(the "Drawings") divided by (II) the result of one (1) minus the percentage of
the outstanding FTNV Common Stock owned by such Purchaser at the time of such
drawing; provided that in no case shall FTNV's aggregate liabilities to all
Purchasers pursuant to this Section 5.2(a)(ii) exceed the lesser of (a) one-half
(1/2) of the aggregate Drawings made under the SG Letter of Credit (as extended
or replaced) and (b) one hundred fifty thousand dollars ($150,000).
(iii) If the Polish Customer shall fall to pay all or any
portion of the Polish Customer Invoices, then each Purchaser shall be entitled
to be indemnified and paid a dollar amount equal to the result of (x) the
percentage of the outstanding FTNV Common Stock owned by such Purchaser
multiplied by (y) fifty percent (50%) of the quotient of (I) the aggregate
amount of such unpaid Polish Customer Invoices (the "Unpaid Invoices") divided
by (II) the result of one (1) minus the percentage of the outstanding FTNV
Common Stock owned by such Purchaser; provided that FTNV shall not be obligated
to make any payment under this Section 5.5(a)(iii) until FTI shall have written
off any unpaid amount of the Polish Customer Invoices in full (which write-off
shall not occur prior to July 31, 1998); and, provided, further, that in no case
shall FTNV's aggregate liability pursuant to this Section 5.2(a)(iii) exceed the
lesser of (a) one-half (1/2) of the Unpaid Invoices as of the Closing Date and
(b) one hundred and fifty thousand dollars ($150,000).
(iv) If any Purchaser suffers any Loss relating to or
arising out of any breach of any covenant made by FTNV in this Agreement or any
Seller Ancillary Document, or any inaccuracy or breach of a representation or
warranty made by FTNV in this Agreement or the Seller Ancillary Documents, which
is not in each case covered by Sections 5.2(a)(i) - (iii), then such Purchaser
shall be indemnified for such Loss by FTNV pursuant to this Section 5.2(a)(iv)
and each such Purchaser's Loss shall be determined by calculating the diminution
in value of the FTNV Common Stock held by
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such Purchaser directly as a result of such breach, without giving effect to any
"gross up" similar to those set forth in Section 5.2(a)(i) - (iii).
(b) FTNV further agrees to indemnify and hold harmless, and to
cause FTI to indemnify and hold harmless, each person who is a director of FTNV
or FTI, as the case may be, at the request of the Purchasers against any Loss
incurred in connection with any claims, action, suit, proceeding or
investigation arising out of or pertaining to acts or omissions, or alleged acts
or omissions, by them in their capacities as such to the fullest extent that
FTNV or FTI, as the case may be, is permitted under applicable law and to
advance expenses as incurred to the fullest extent permitted under applicable
law.
5.3. Limitations on Liability of Purchasers. Notwithstanding any
other provision of this Agreement:
(a) FTNV shall have the right to payment by Purchasers under
Section 5.1 only if, and only to the extent that, FTNV shall have incurred as to
all inaccuracies, breaches and claims indemnifiable Losses in excess of $75,000
in the aggregate;
(b) In no event shall Purchaser have any liability for
special, speculative, indirect or consequential damages, including for lost
profits;
(c) Each Purchaser shall have no liability to FTNV under or in
connection with this Agreement, the Purchaser Ancillary Documents or the
transactions contemplated hereby and thereby (including under any breach or
inaccuracy of any representation or warranty or for any breach of any covenant
or for any other reason), in an aggregate amount in excess of the then current
market value of the Purchaser Shares held by such Purchaser, measured at the
time that such breach of representation, warranty or covenant by the Purchaser
occurred; and
(d) Each Purchaser may elect to return first, the Purchaser
Shares and second, the FTNV Warrants, held by such Purchaser in full
satisfaction of any claim by FTNV for indemnification.
5.4. Limitations on Liability of FTNV. Notwithstanding any other
provision of this Agreement:
(a) The Purchasers shall have the right to payment by FTNV
under Section 5.2 only if, and only to the extent that, the Purchasers shall
have incurred as to all inaccuracies, breaches and claims indemnifiable Losses
in excess of $75,000 in the aggregate; provided, however, that the limitation
set forth in this Section 5.4(a) shall not apply to Losses arising under
Sections 5.2(a)(ii) or (a)(iii) of this Agreement.
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(b) In no event shall FTNV have any liability for special,
speculative, indirect or consequential damages, including for lost profits; and
(c) FTNV shall have no liability to the Purchasers under or in
connection with this Agreement, the Seller Ancillary Documents or the
transactions contemplated hereby and thereby (including under any breach or
inaccuracy of any representation or warranty or for any breach of any covenant
or for any other reason), in an aggregate amount in excess of the Purchase
Price.
5.5. Procedures for Indemnification. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it may seek indemnification and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made without its consent (but such consent will not be unreasonably withheld).
An indemnifying party who is not entitled, or elects not, to assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which case the
indemnifying party shall pay the fees and expenses of one (1) additional
counsel. Purchasers will promptly indemnify FTNV if and to the extent it is
finally determined that Purchasers are obligated to indemnify FTNV under this
Article V. FTNV will promptly indemnify Purchasers if and to the extent it is
finally determined that FTNV is obligated to indemnify Purchasers under this
Article V.
5.6. Polish Project Recoveries. If FTNV, any of the Wholly-Owned
Subsidiaries or the Joint Venture Entities at any time receive payment (a
"Polish Recovery") from or on behalf of (a) the Polish Customer of any amounts
for which FTNV has made an indemnification payment to any Purchaser under
Section 5.2(a)(ii) or (iii), or (b) Amerex Industries, Inc. (or any of its
affiliates), the contractor on the project with the Polish Customer,
representing damages or settlement proceeds arising out of its failure to
perform such contract, then and in either such event such Purchaser shall
promptly pay over to FTNV an amount equal to (i) the result of (x) the amount of
such indemnity payments previously made to such Purchaser times (y) (i) the
Recovery (net of out-of-pocket expenses of recovery incurred by FTNV, such
Wholly-Owned Subsidiary or such Joint Venture Entity) divided by (ii) the amount
of the Drawings and/or the Unpaid Invoices in respect of which such indemnity
payments were previously made.
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VI. CONDITIONS TO THE PURCHASE
6.1. Conditions to the Obligations of Each Party. The obligations of
Purchasers and FTNV to consummate the purchase of the Purchaser Shares are
subject to the satisfaction of the following conditions:
(a) the shareholders of FTNV, at an extraordinary general
meeting, shall have approved, adopted and elected, as the case may be, in
accordance with the laws of the Netherlands Antilles and its articles of
organization, the following:
(i) this Agreement, the Shareholders Agreement, the
Registration Rights Agreement and the Warrants and the transactions contemplated
hereby,
(ii) an amendment to the articles of organization of FTNV to
increase the number of authorized shares of FTNV Common Stock to 40,000,000; and
(iii) an amendment to FTNV's Incentive Plan or the adoption
of a substantially similar plan to provide for an increase in the percentage of
outstanding shares of FTNV Stock available for option grants to 12.5% of all
outstanding shares of FTNV Stock;
(b) FTNV shall have received all requisite approvals from
NASDAQ;
(c) FTI, Nalco FT, Inc. and Nalco Chemical Company shall have
entered into the Purchase and Sale Agreement which shall constitute the valid
and binding obligation of each party thereto (except insofar as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, or principals governing
the availability of equitable remedies);
(d) no temporary restraining order or preliminary or permanent
injunction or other order by any United States federal or state court or
Netherlands Antilles court preventing consummation of the transactions
contemplated hereby, by the Purchase and Sale Agreement, the Purchaser Ancillary
Documents or the Seller Ancillary Documents shall have been issued and
continuing in effect; and such transaction shall not have been prohibited under
any applicable United States or Netherlands Antilles law or regulation;
(e) Each of FTNV and the Purchasers shall be reasonably
satisfied that this Agreement, the Purchase and Sale Agreement, the Purchase
Ancillary Documents and the Seller Ancillary Documents and the transactions
contemplated thereby and hereby, shall not (i) impair FTI's loss carryforwards
under U.S. tax law or
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(ii) constitute a default, or otherwise cause an acceleration of indebtedness,
under FTNV's Nil Coupon Perpetual Loan Notes; and
(f) the transactions contemplated by the Purchase and Sale
Agreement shall close simultaneously with the Closing.
VII. CONDITIONS TO THE OBLIGATIONS OF PURCHASERS
7.1. Condition to the Obligations of Purchasers. The obligations of
Purchasers to consummate the purchase of the Purchaser Shares are subject to the
satisfaction of the following further conditions:
(i) each of the representations and warranties of FTNV set forth in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct as of such certain date), and Purchasers shall have received a
certificate of the Chief Financial Officer of FTNV to such effect;
(ii) FTNV shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the effective time of the
closing of the purchase of the Purchaser Shares and Purchasers shall have
received a certificate of the Chief Financial Officer of FTNV to that effect;
(iii) FTNV shall have delivered to Purchasers the 1997 FTNV
Audited Financial Statements and the 1997 Joint Venture Audited Financial
Statements, certified in each case by Ernst & Young LLP, certified public
accountants;
(iv) FTNV, FTI and the Joint Venture shall have entered into
the Seller Ancillary Documents to which they are a party, which shall constitute
the valid and binding obligation of each party thereto (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or principals governing the availability of equitable remedies);
(v) American Bailey Corporation, FTNV and FTI shall have
entered into that certain Management Services Agreement substantially in the
form of Exhibit D, which shall constitute the valid and binding obligation of
each party thereto (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or principals governing the availability
of equitable remedies);
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(vi) FTNV shall have furnished Purchasers with certified
resolutions of its Board of Directors and its shareholders authorizing the
transactions contemplated by this Agreement, certified by FTNV's Corporate
Secretary and a certificate from a duly qualified Netherlands Antilles notary
certifying as to the authenticity of FTNV's Articles and its good standing; and
(vii) FTNV shall have furnished to Purchasers an opinion of
FTNV's general counsel, dated as of the Closing Date, substantially in the form
of Exhibit E.
VIII. CONDITIONS TO THE OBLIGATIONS OF FTNV
8.1. Conditions to the Obligations of FTNV. The obligations of FTNV to
consummate the purchase of the Purchaser Shares are subject to the satisfaction
of the following further conditions:
(i) each of the representations and warranties of Purchasers
set forth in this Agreement shall be true and correct in all material respects
on and as of the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date
which shall be true and correct as of such certain date), FTNV shall have
received certificates of the Purchasers to such effect;
(ii) Purchasers shall have performed or compiled in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the effective time of the
purchase of the Purchaser Shares and FTNV shall have received certificates of
the Purchasers to that effect;
(iii) FTNV shall have received an opinion letter from
Dominick & Dominick, Incorporated as to the fairness to the shareholders of FTNV
of the transactions contemplated by this Agreement, the Purchase and Sale
Agreement, the Purchaser Ancillary Documents and the Seller Ancillary Documents;
(iv) each of the Purchasers shall have entered into the
Purchaser Ancillary Documents which shall constitute the valid and binding
obligation of each party thereto (except insofar as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or principals governing the
availability of equitable remedies);
(v) each of the Purchasers shall have entered into the
Bailey Pledge Agreements which shall constitute the valid and binding obligation
of each party thereto (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors rights generally, or principals governing the availability
of equitable remedies);
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(vi) FTNV shall have received a legal opinion from counsel
to ABC, substantially in the form of Exhibit F.
IX. ADDITIONAL AGREEMENTS
9.1. Further Assurances. If at any time FTNV or Purchasers shall
consider or be advised that any further assurance in law or other action is
necessary or desirable, the proper officers and directors of FTNV and the
Purchasers, respectively, shall be and they hereby are severally and fully
authorized to deliver such assurances in law and take such other action as may
be necessary or proper in the name of FTNV or Purchasers to carry out the
purposes of this Agreement.
9.2. Notification of Certain Matters. Each party hereto shall give
prompt notice to the other parties hereto of:
(i) the occurrence or nonoccurrence of any event, the
occurrence or nonoccurrence of which would be likely to cause any representation
or warranty made by such party in this Agreement to be materially untrue or
inaccurate; or
(ii) the failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with by it hereunder; provided,
however, that delivery of any notice pursuant to this Section 9.2(ii) shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
9.3. Termination and Abandonment. Anything herein to the contrary
notwithstanding, this Agreement, the Purchaser Ancillary Documents and the
Seller Ancillary Documents may be terminated and the transactions herein and
therein contemplated may be abandoned at any time:
(a) by mutual consent of FTNV and Purchasers; or
(b) by FTNV or Purchasers if the Closing has not occurred on
or before June 30, 1998, unless the absence of such occurrence shall be due to
the failure of the party seeking to terminate such agreements to perform any of
its obligations required to be performed by it at or prior to the Closing
pursuant to the terms hereof or thereof, provided that in the event the Board of
Directors of FTNV, in order to properly discharge its fiduciary duties to its
shareholders, recommends to such shareholders an unsolicited, third party offer
which it believes to be of greater value to its shareholders than the offer of
Purchasers set forth herein and therein, FTNV may terminate such documents and
the transactions contemplated hereby and thereby.
In the event of termination and abandonment by FTNV or the Purchasers,
or both, pursuant to this Section 9.3, written notice thereof shall be given to
the other
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party. Notwithstanding any such termination, (i) the confidentiality provisions
of Section 4.4 shall continue in full force and effect and (ii) nothing herein
shall relieve any party from liability from any willful breach hereof.
9.4. Amendments, Supplements, etc. At any time before or after approval
and adoption by the shareholders of FTNV, this Agreement may be amended in
matters of form, or supplemented by additional agreements, articles or
certificates, as may be determined in the judgment of the Board of Directors of
FTNV or Purchasers to be necessary, desirable, or expedient to clarify the
intention of the parties hereto, or to effect or facilitate the official
approval and consummation of the purchase of the Purchaser Shares provided for
herein, in accordance with the purpose and intent of this Agreement.
9.5. Waiver. At any time prior to the Closing Date, any party hereto may
(i) extend the time for the performance of any obligation or other act of any
other party hereto, (ii) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any agreement or condition contained herein. Any
such extension of waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
9.6. Expenses. All expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, whether or not the purchase of the Purchaser Shares is
consummated.
9.7. Survival. The representations and warranties made in this
Agreement shall survive the Closing Date and remain in full force and effect for
a period equal to the later of four (4) years after the Closing Date or the
termination of all liabilities and obligations of FTI to Nalco FT, Inc. under
Sections 2.02(b), 2.02(c) and 10.04 of the Purchase and Sale Agreement and the
Purchaser Note, as defined in Section 2.02(b) of the Purchase and Sale Agreement
(collectively, the "Purchaser Obligations") (except for the representations and
warranties of FTNV under Sections 3.7 and 3.19 of this Agreement, which shall
remain in full force and effect until the expiration of any applicable statute
of limitations), and the corresponding obligation to indemnify under Article V
shall expire at such time, except with respect to a claim that has been properly
made prior thereto pursuant to such Article V.
9.8. Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be sent by an overnight
courier service that provides proof of receipt, mailed by registered or
certified mail (postage prepaid, return receipt requested) or telecopied to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
if to FTNV:
-22-
<PAGE>
Charles W. Grinnell, Esq.
Fuel Tech, Inc.
100 Atlantic Street
Suite 703
Stamford, CT 06901-3522
Telephone: (203) 363-7105
Facsimile: (203) 363-7108
with a copy to:
Kenneth Rosh, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Telephone: (212) 859-8000
Facsimile: (212) 859-4000
if to Purchasers:
[Names of Purchasers listed in the signature page hereto]
c/o American Bailey Corporation
Attention: Guy Heckman and Nolan Schwartz
Financial Centre
695 East Main Street
Stamford, CT 06901
Telephone: (203) 348-8700
Facsimile: (203) 967-3877
with a copy to,
Thomas J. Freed, Esq.
Cummings and Lockwood
Four Stamford Plaza
107 Elm Street
P.O. Box 120
Stamford, CT 06904-0120
Telephone: (203) 327-1700
Facsimile: (203) 351-4535
9.9. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the
-23-
<PAGE>
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
9.10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
9.11. Interpretation. The parties hereto acknowledge that certain
matters set forth in the Disclosure Schedules are included for informational
purposes only, notwithstanding the fact that, because they do not rise above
applicable materiality thresholds or otherwise, they would not be required to be
set forth therein by the terms of this Agreement and that disclosure of such
matters shall not be taken as an admission by the Company that such disclosure
is required to be made under the terms of any provision of this Agreement and in
no event shall be disclosure of such matters be deemed or interpreted to broaden
or otherwise amplify the representations and warranties contained in this
Agreement.
9.12. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the Laws of the State of Connecticut applicable to contracts
executed in and to be performed in that state. All actions and proceedings
arising out of or relating to this Agreement shall be heard and determined in
any Connecticut state or federal court.
9.13. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
9.13. Entire Agreement. This Agreement (including the Exhibits and
Schedules), together with the Purchase and Sale Agreement (including the
Exhibits and Schedules thereto) and the Purchaser Ancillary Documents and the
Seller Ancillary Documents, constitutes the entire agreement among the parties
with respect to the subject matter hereof and, supersedes all prior agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof
9.15. Execution of Counterparts. For the convenience of the parties and
to facilitate filing, this Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
-24-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by the Managing
Directors of Fuel-Tech N V. and each of the Purchasers, respectively, all as of
the day and year first above written.
FUEL-TECH N.V.
/s/
---------------------------------
By:
Title: a Managing Director
PURCHASERS:
/s/ RALPH E. BAILEY
---------------------------------
Ralph E. Bailey
/s/ DOUGLAS G. BAILEY
---------------------------------
Douglas G. Bailey
/s/ NOLAN R. SCHWARTZ
---------------------------------
Nolan R. Schwartz
/s/ GUY C. HECKMAN
---------------------------------
Guy C. Heckman
/s/ J. WILLIAM DRAKE
---------------------------------
J. William Drake
/s/ ROBERT M. DAVENPORT
---------------------------------
Robert M. Davenport
/s/ BETSY S. KENYON
---------------------------------
Betsy S. Kenyon
/s/ LINDSAY G. MORTNER
---------------------------------
Lindsay G. Mortner
/s/ JAMES G. HANNOOSH
---------------------------------
James G. Hannoosh
/s/ GENEVE E. HENDRICKS
---------------------------------
Geneve E. Hendricks
-25-
EXHIBIT 2 TO SCHEDULE 13D
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT, dated as of April 30, 1998 (the "Agreement"),
by and among Fuel-Tech N.V., a Netherlands Antilles limited liability company
(the "Company"), and the shareholders set forth on the signature page hereto
(each a "Shareholder", collectively, the "Shareholders").
WHEREAS, Fuel Tech, Inc., a Massachusetts corporation ("FTI") is
acquiring a 50% interest in Nalco Fuel Tech, a partnership ("NFT") (the
"Purchase"), pursuant to a Purchase Agreement, dated as of March 23, 1998, among
FTI, Nalco FT, Inc. ("Nalco FT") and Nalco Chemical Company, for the limited
purposes set forth therein (the "Purchase and Sale Agreement");
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of March
23, 1998 (the "Securities Purchase Agreement"), the Company will issue certain
shares of Common Stock, par value $.01 of the Company ("FTNV Common Stock"), and
Warrants to purchase shares of FTNV Common Stock (the "FTNV Warrants") to the
Shareholders;
WHEREAS, each Shareholder will pledge the FTNV Common Stock and FTNV
Warrants as security for the benefit of Nalco FT and certain related parties
pursuant to a Bailey Pledge Agreement, dated as of the date hereof, among the
Shareholders and Nalco FT (the "Pledge Agreement");
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the closing of the transaction(s) set forth in the Purchase and
Sale Agreement and the Securities Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound thereby, the parties hereto agree as follows:
1. Shares and Warrants Subject to Agreement. The provisions of this
Agreement shall apply to any and all shares of FTNV Common Stock and FTNV
Warrants (and shares of FTNV Common Stock issuable upon the exercise thereof)
issued to the Shareholders pursuant to the Securities Purchase Agreement.
2. Transfer Restrictions. Except pursuant to the terms of the Bailey Pledge
Agreement (as defined in the Purchase and Sale Agreement), no Shareholder shall,
directly or indirectly, sell, distribute, transfer, assign, pledge, hypothecate
or otherwise dispose of or encumber (all of which acts shall be deemed included
in the term "transfer" as used in this Agreement) any shares of FTNV Common
Stock or FTNV Warrants, or
<PAGE>
shares of FTNV Common Stock issuable upon the exercise thereof, or any interest
therein, unless:
(a) for so long as any Purchaser Obligations (as defined in the
Purchase and Sale Agreement) remain outstanding, such transfer of FTNV Common
Stock and/or FTNV Warrants does not and will not, immediately thereafter or
after the lapse of time, result in a Change of Control or a Purchaser Event of
Default (each as defined in the Purchase and Sale Agreement); and
(b) any transferee agrees to be bound by this Agreement as if named
as a Shareholder herein and executes a counterpart hereof and such further
documents as may be necessary to make it a party hereto; and
(c) such transfer of shares of FTNV Common Stock or FTNV Warrants
is made pursuant to either (i) an effective registration statement under the
Securities Act of 1933, as amended, and any applicable state securities laws, or
(ii) an available exemption from the registration requirements of the Securities
Act of 1933 and applicable state securities laws.
Any transferee who receives shares of FTNV Common Stock and/or FTNV
Warrants pursuant to and in accordance with this Section 2 is a "Permitted
Transferee" who shall be deemed a Shareholder for all purposes of this
Agreement. Any purported transfer of shares or FTNV Common Stock and/or FTNV
Warrants in violation of this Agreement shall be null and void, and the Company
shall refuse to recognize any such transfer for any purpose and shall not
reflect in its records any change in ownership of shares or FTNV Common Stock
and/or FTNV Warrants pursuant to such purported transfer.
3. Corporate Governance.
3.1 Board of Directors of FTNV.
(a) The Company hereby agrees with the Shareholders that during the
Corporate Governance Term (as defined below), the Board of Directors of the
Company shall consist of eight directors, of whom two shall be outside directors
(i.e., neither an officer nor employee of the Company) and one shall be a
Netherlands Antilles representative director. During such period, the
Shareholders and directors of the Company shall be entitled to nominate persons
to serve as directors at each meeting of shareholders of the Company for the
election of directors of the Company as follows:
(i) the Shareholders shall be entitled to nominate three
persons to serve as directors of the Company, one of whom shall be an outside
director;
-2-
<PAGE>
(ii) the Shareholders and the directors of the Company shall
nominate Tarma Trust Company N.V., or another mutually acceptable Netherlands
Antilles person; and
(iii) (x) for the first meeting of shareholders of the Company
on the date hereof at which the election of directors is on the agenda, those
directors of the Company who were directors of the Company immediately prior to
the closing of the Securities Purchase Agreement shall nominate four directors,
one of whom shall be an outside director (collectively, the "Company-nominated
Directors"), and (y) for all subsequent meetings of shareholders at which the
election of directors is on the agenda, the Company-nominated Directors (or
their successors pursuant to this paragraph) shall nominate four directors, one
of whom shall be an outside director, as well as a sufficient number of persons
to serve as directors in respect of any positions for which the Shareholders
have not nominated persons to serve as directors pursuant to Section 3(a)(i) and
(ii) above or Section 3(c) below.
(b) At each meeting of shareholders at which the election of
directors is on the agenda, the Company shall recommend to shareholders the
election of the designees nominated pursuant to Section 3(a)(i)-(iii) above.
(c) Each director nominated pursuant to Section 3(a)(i)-(iii) who
is elected to the Company's board of directors shall hold his office until his
death or resignation or until his successor shall have been duly elected and
qualified. If any designee of the Shareholders or the Company-nominated
Directors (or, in the case of Section 3(a)(ii), by mutual agreement) shall cease
to serve as a director of the Company for any reason, the vacancy resulting
thereby shall be filled by the Shareholders, the Company-nominated Directors or
by mutual agreement, respectively, in accordance with the provisions of Section
3(a)(i)-(iii).
(d) "Corporate Governance Term" shall mean (i) during the period ending on
the fourth anniversary (the "Fourth Anniversary") of the closing of the
Securities Purchase Agreement, for so long as the Shareholders own in the
aggregate at least 50% of the shares of FTNV Common Stock acquired pursuant to
the Securities Purchase Agreement and (ii) during the period following the
Fourth Anniversary and ending on the tenth anniversary of the closing of the
Securities Purchase Agreement, for so long as the Shareholders own in the
aggregate at least 10% of the then outstanding shares of FTNV Common Stock. For
purposes of this Agreement, shares of FTNV Common Stock "owned" by a Shareholder
shall not include shares obtainable pursuant to the exercise of the FTNV
Warrants or pursuant to the exercise of any other option held by such
Shareholder.
3.2 Board of Directors of FTI. For so long as the Purchaser Obligations
remain outstanding, the Company shall elect persons nominated by the
-3-
<PAGE>
Shareholders to act as directors of FTI to fill at least 50% of the positions on
FTI's board of directors.
3.3 Actions of the Shareholders. (a) Without either (a) the prior
approval of the Board of Directors of the Company or (b) the prior written
consent of all directors of FTI, each of the Shareholders hereby agrees not to
take any action or cause any person or entity to take any action, that would
lead to any of the following: (i) any amendment to FTI's articles of
organization or bylaws; or (ii) any amendment to, or waiver on the Company's or
FTI's behalf under the Purchaser Note, the Purchase and Sale Agreement or
Management Services Agreement.
(b) During the Corporate Governance Term, at each meeting of
shareholders at which the election of directors is on the agenda, each
Shareholder agrees to vote all of the shares of FTNV Common Stock held of record
by him or her IN FAVOR OF those directors nominated pursuant to Section
3.l(a)(ii) and above.
4. Stock Certificate Legend.
A copy of this Agreement shall be filed with the Secretary of the
Company and kept with the records and minutes of the Company. Each certificate
representing shares of FTNV Common Stock owned by the Shareholders and their
Permitted Transferees (unless registered under the Securities Act and any
applicable state securities laws and/or no longer subject to the terms of the
Pledge Agreement and/or this Agreement) shall be stamped or imprinted with a
legend (in addition to any securities law legend) in the following form:
"THESE SECURITIES ARE SUBJECT TO, AND THE TRANSFER OF
THESE SECURITIES ARE RESTRICTED BY, THE TERMS OF A
PLEDGE AGREEMENT AND A SHAREHOLDERS AGREEMENT, COPIES
OF WHICH ARE AVAILABLE FROM THE COMPANY UPON REQUEST."
5. Covenants of the Shareholders.
(a) Confidential Information. Shareholders acknowledge and agree that they
may receive during the term of this Agreement information from FTNV and its
subsidiaries, affiliates and investees that is non-public, confidential or
proprietary in nature (the "Confidential Information"). Shareholders agree that
in no event shall they disclose, transfer, copy, duplicate or publish any
Confidential Information to any third party without the prior written consent,
which consent may be withheld in FTNV's sole discretion. Shareholders further
agree that they shall not utilize any Confidential Information for any purpose
whatsoever other than for the purpose of performing their obligations under this
Agreement. Confidential Information does not include information which (i) was
or becomes generally available to the public other than as a result of an act or
omission in violation of this Section 5(a) by Shareholders, (ii) was or
-4-
<PAGE>
becomes available to Shareholders on a nonconfidential basis from a source other
than the originating party, or (iii) was already known to Shareholders at the
time of receipt thereof without legal restriction to the confidentiality
thereof.
(b) Noncompetition. (i) Any Shareholder who holds a position as a
director of FTNV or FTI during the term of this Agreement (a "Shareholder
Director") agrees that, during the term that such Shareholder is a Shareholder
Director and for a period of two years thereafter (the "Non-Compete Period"),
such Shareholder Director will not, directly or indirectly: (A) engage in, or
control, invest in, provide material advice or assistance to, manage, benefit
from exert material influence upon any person or entity that engages in
manufacturing, licensing or sale anywhere in the world of (i) any chemical or
non-chemical process, system, technology or product that removes, or prevents
the formation of, oxides of nitrogen and sulfur or particulates from a
stationary combustion unit, (ii) any chemical process for the treatment of a
combustor used to prevent fireside corrosion, fouling or stagging (known under
the name "Fuel Chem" in the case of the Joint Venture), (iii) any computer
modeling or software development related to the foregoing businesses, or (iv)
any use of Urea SCR NOx reduction for mobile applications (the "Competitive
Activity"); or (B) induce, attempt or persuade any employee of FTNV, FTI, the
Joint Venture Entities or the Wholly-Owned Subsidiaries to terminate his or her
employment relationship in order to enter into competitive employment. (ii)
Without limiting the right of FTNV to pursue all other legal and equitable
remedies available in the event of a violation by the Shareholder Directors of
covenants contained in this Section 5(b), it is expressly agreed that remedies
other than injunctive or other equitable relief cannot fully compensate FTNV for
such a violation and that FTNV shall be entitled to injunctive or other
equitable relief to prevent any such violation or continuing violation thereof.
(c) Shareholders agree that during the period ending on the third
anniversary of the closing of the Securities Purchase Agreement, they will not
themselves or in concert with any other person or group purchase any additional
securities of the Company (other than the shares of FTNV Common Stock and FTNV
Warrants (and shares of FTNV Common Stock issuable upon the exercise thereof)
issued to the Shareholders pursuant to the Securities Purchase Agreement) which
in themselves or in combination with transactions by other parties would tend to
or have the effect of imposing a limitation on the ability of FTI to deduct its
net loss carry forwards for U.S. income tax purposes.
6. Miscellaneous Provisions.
(a) Notices. Any notices required hereunder shall be sent by certified
or registered mail, and shall be addressed to the address of the Company's
corporate headquarters in the case of any notice to the Company, and until
changed by
-5-
<PAGE>
notice to the Company, to the Shareholders at c/o American Bailey Corporation,
Financial Centre, 695 East Main Street, Stamford, CT 06901.
(b) Amendments and Waivers. The provisions of this Agreement may be
amended and the Company may take action herein prohibited, or omit to perform
any act herein required to be performed by it, if the Company has obtained the
written consent of the Shareholders.
(c) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of, in the case of the Company, its successors, assigns and
transferees and, in the case of the Shareholders, their Permitted Transferees.
Except as expressly provided herein, the rights and obligations of the
Shareholders may not be transferred.
(d) Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the laws of the State
of Connecticut.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered to be an original instrument and
to be effective as of the date first written above.
(f) Severability. In the event any one or more of the provisions of
this Agreement shall for any reason be held invalid, illegal or unenforceable,
the remaining provisions of this Agreement shall be unimpaired, and the invalid,
illegal or unenforceable provisions shall be replaced by a mutually acceptable
valid, legal and enforceable provision, which comes closest to the intention of
the parties underlying the invalid, illegal or unenforceable provision.
(g) Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to injunctive relief, including specific performance, to enforce such
obligations without the posting of any bond, and, if any action should be
brought in equity to enforce any of the provision of this Agreement, none of the
parties hereto shall raise the defense that there is an adequate remedy at law.
(h) Insurance. The Company will use its best efforts to maintain,
without any gaps or lapses in coverage, directors' and officers' liability
insurance with terms and conditions no less favorable than those in existence on
the date hereof.
-6-
<PAGE>
(i) Term. The term of this Agreement shall commence on the date first
set forth above and terminate on the later of (i) the satisfaction in full of
the Purchaser Obligations or (ii) the lapsing of the Corporate Governance Term.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FUEL-TECH N.V.
/s/
-----------------------------------
Name:
Title:
PURCHASERS:
/s/ RALPH E. BAILEY
---------------------------------
Ralph E. Bailey
/s/ DOUGLAS G. BAILEY
---------------------------------
Douglas G. Bailey
/s/ NOLAN R. SCHWARTZ
---------------------------------
Nolan R. Schwartz
/s/ GUY C. HECKMAN
---------------------------------
Guy C. Heckman
/s/ J. WILLIAM DRAKE
---------------------------------
J. William Drake
/s/ ROBERT M. DAVENPORT
---------------------------------
Robert M. Davenport
/s/ BETSY S. KENYON
---------------------------------
Betsy S. Kenyon
/s/ LINDSAY G. MORTNER
---------------------------------
Lindsay G. Mortner
/s/ JAMES G. HANNOOSH
---------------------------------
James G. Hannoosh
/s/ GENEVE E. HENDRICKS
---------------------------------
Geneve E. Hendricks
-8-
EXHIBIT 3 TO SCHEDULE 13D
BAILEY PLEDGE AGREEMENT
THIS BAILEY PLEDGE AGREEMENT (this "PLEDGE AGREEMENT"), dated as of April
30, 1998, is made by each of the undersigned (hereinafter collectively referred
to as the "PLEDGORS" and individually as a "PLEDGOR"), in favor of NALCO FT,
INC., a Delaware corporation (the "SELLER"), in its individual capacity and as
agent (in such capacity, the "NALCO AGENT") for each of the Nalco Parties (as
defined below).
W I T N E S S E T H:
WHEREAS, Fuel Tech, Inc., a Massachusetts corporation (the "PURCHASER")
and the Seller have entered into a Purchase Agreement dated as of March 23, 1998
(the "PURCHASE AGREEMENT"), pursuant to which the Purchaser has agreed to
acquire from the Seller, and the Seller has agreed to sell to Purchaser, the
Seller's fifty percent (50%) partnership interest (the "PARTNERSHIP INTEREST")
in Nalco Fuel Tech, a Delaware general partnership (the "JOINT VENTURE")
organized under a Partnership Agreement dated as of January 31, 1990, as amended
(the "PARTNERSHIP AGREEMENT"), between the Seller and the Purchaser;
WHEREAS, concurrently with the consummation of the acquisition by the
Purchaser of the Partnership Interest under the Purchase Agreement, the Pledgors
and Fuel-Tech N.V., a Netherlands Antilles limited liability company ("FTNV")
and the owner of all the issued and outstanding capital stock of the Purchaser,
will consummate the transactions contemplated by a Securities Purchase Agreement
dated as of March 23, 1998 (the "Securities Purchase Agreement"), pursuant to
which the Pledgors shall receive stock and warrants to purchase stock in FTNV
(and the right to register such stock under certain circumstances);
WHEREAS, it is a condition precedent to the Closing of the Purchase
Agreement that each Pledgor execute and deliver this Pledge Agreement; and
WHEREAS, it is in the best interests of each Pledgor to execute this
Pledge Agreement inasmuch as each Pledgor will derive substantial direct and
indirect benefits from the acquisition of the Partnership Interest by the
Purchaser;
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, each Pledgor agrees, for the benefit
of the Nalco Agent and each Nalco Party, as follows:
<PAGE>
2
ARTICLE I.
DEFINITIONS
SECTION 1.1. PURCHASE AGREEMENT DEFINITIONS. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Purchase
Agreement.
SECTION 1.2. U.C.C. DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Pledge Agreement, including its preamble and recitals, with
such meanings.
SECTION 1.3. CERTAIN TERMS. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"ASSIGNED AGREEMENTS" means the agreements listed in ITEM B of ATTACHMENT
1, as such agreements may be amended, amended and restated, supplemented or
otherwise modified from time to time.
"BAILEY CALL AGREEMENTS" means that certain Call Agreements dated as of
March 23, 1998, among Ralph E. Bailey, Douglas G. Bailey and certain of the
other Pledgors.
"COLLATERAL" is defined in SECTION 2.1.
"COLLATERAL DOCUMENT" means any of this Pledge Agreement, the Fuel Tech
Pledge Agreement or the Security Agreement.
"DISTRIBUTIONS" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares, Pledged Warrants or
other shares of capital stock constituting Collateral, but shall not include
Dividends.
"DIVIDENDS" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business and not as a liquidating dividend.
"EVENT OF DEFAULT" means a Purchaser Event of Default.
"FTNV" is defined in the SECOND RECITAL.
"JOINT VENTURE" is defined in the FIRST RECITAL.
<PAGE>
3
"NALCO AGENT" is defined in the PREAMBLE.
"NALCO PARTIES" means the Nalco Agent, the Seller, Nalco and each other
Person entitled to indemnification by the Purchaser under the Purchase
Agreement.
"OBLIGOR" means each Person, including the Purchaser, liable under the
Purchase Agreement, the Purchaser Note or any Collateral Document.
"PARTNERSHIP AGREEMENT" is defined in the FIRST RECITAL.
"PARTNERSHIP INTEREST" is defined in the FIRST RECITAL.
"PERMITTED TRANSFER" shall mean the transfer of Pledged Shares or
Pledged Warrants by a Pledgor as the result of (i) the death of such Pledgor,
(ii) a transfer in trust or to a partnership, limited partnership or limited
liability company, in each case all of the beneficial interests of which are
held, directly or indirectly, for the benefit of the Pledgor or his/her
immediate family, (iii) divorce proceedings involving such Pledgor, (iv)
bankruptcy proceedings involving a Pledgor or by operation of law, or (v)
pursuant to one of the Bailey Call Agreements; provided that each such
transferee Person shall have delivered to the Nalco Agent (x) such stock or
warrants, in due form for transfer, and (y) an executed counterpart of this
Pledge Agreement.
"PLEDGE AGREEMENT" is defined in the PREAMBLE.
"PLEDGED PROPERTY" means all Pledged Shares, all Pledged Warrants, all
other pledged shares of capital stock or promissory notes, all other securities,
all assignments of any amounts due or to become due or to become due in respect
of any such shares, notes or other securities, all other instruments which are
now being delivered by any Pledgor to the Nalco Agent or may from time to time
hereafter be delivered by any Pledgor to the Nalco Agent for the purpose of
being pledged under this Pledge Agreement, and all proceeds of any of the
foregoing.
"PLEDGED SHARE ISSUER" means FTNV.
"PLEDGED SHARES" means all shares of capital stock of the Pledged Share
Issuer issued to the Pledgors in connection with the Securities Purchase
Agreement which are delivered by any Pledgor to the Nalco Agent as Pledged
Property hereunder, together with any Distributions thereon.
"PLEDGED WARRANTS" means all warrants or options to purchase capital
stock of the Pledged Share Issuer issued to the Pledgors in connection with the
Securities Purchase Agreement which are delivered by any Pledgor to the Nalco
Agent as Pledged Property hereunder, together with any Distributions thereon.
"PLEDGOR" is defined in the PREAMBLE.
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4
"PURCHASE AGREEMENT" is defined in the FIRST RECITAL.
"PURCHASER" is defined in the FIRST RECITAL.
"SECURITIES PURCHASE AGREEMENT" is defined in the SECOND RECITAL.
"SELLER" is defined in the PREAMBLE.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
Illinois, except to the extent that the validity or the perfection of the
security interest hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws of a jurisdiction other than the State of
Illinois, in which case "U.C.C." means the Uniform Commercial Code as in effect
in such jurisdiction.
ARTICLE II.
PLEDGE
SECTION 2.1. GRANT OF SECURITY INTEREST. Each Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the Nalco
Agent, for its benefit, and hereby grants to the Nalco Agent, for its benefit
and the ratable benefit of the Nalco Parties, a continuing security interest in,
all of such Pledgor's right, title and interest in and to the following property
(with respect to each Pledgor, such Pledgor's "COLLATERAL"):
a) the number of shares of capital stock of the Pledged Share Issuer
specified in ITEM A of ATTACHMENT 1 opposite the name of such Pledgor;
b) warrants to purchase the number of shares of capital stock of the
Pledged Share Issuer specified in ITEM A of ATTACHMENT 1 opposite the name of
such Pledgor;
c) all other Pledged Shares issued from time to time to such Pledgor
pursuant to the exercise of Pledged Warrants or in connection with a
Distribution on the Pledged Shares;
d) all other Pledged Property of such Pledgor, whether now or
hereafter delivered to the Nalco Agent in connection with this Pledge Agreement;
e) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property of such Pledgor;
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5
f) the Assigned Agreements, including, without limitation, (i) all
rights of such Pledgor to receive moneys due or to become due under or pursuant
to the Assigned Agreements, (ii) all rights of such Pledgor to receive proceeds
of any insurance, indemnity, warranty or guaranty with respect to the Assigned
Agreements, (iii) all claims of such Pledgor for damages arising out of any
breach of or default under the Assigned Agreements, and (iv) all rights of such
Pledgor to terminate, amend, supplement, modify or exercise rights or options
under the Assigned Agreements, to perform thereunder and to compel performance
and otherwise exercise all remedies thereunder; and
g) all proceeds of any of the foregoing.
SECTION 2.2. SECURITY FOR SECURED OBLIGATIONS. This Pledge Agreement
secures the payment in full of all Purchaser Obligations now or hereafter
existing. The Nalco Agent and the Nalco Parties agree that they will forbear
from foreclosing or otherwise exercising remedies upon any of the Collateral
until such time as at least ninety (90) days have passed since an Event of
Default has occurred, the Purchaser Obligations have become due and payable and
the Nalco Agent has commenced exercise of one or more of its applicable remedies
against the "Collateral" (as defined in the Fuel Tech Pledge Agreement) and the
"Collateral" (as defined in the Security Agreement), and such exercise of
remedies under the Fuel Tech Pledge Agreement and the Security Agreement (as
conducted by the Nalco Agent and/or the Nalco Parties in their sole discretion
but in good faith) were insufficient to satisfy the Purchaser Obligations in
full during such 90-day forbearance period; provided, however, that such 90-day
forbearance period shall not be applicable (i) to any Pledgor under this Pledge
Agreement who shall have died or be involved in a bankruptcy proceeding or (ii)
if Fuel Tech shall at such time be involved in a bankruptcy proceeding and the
Nalco Agent shall be prevented as a result of the automatic stay from exercising
such remedies; and provided further, that so long as the Nalco Agent is
proceeding in good faith in the exercise of such remedies, nothing in this
Section 2.2 shall require the Nalco Agent to be successful in realizing upon any
of such "Collateral."
SECTION 2.3. DELIVERY OF PLEDGED PROPERTY. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares and all Pledged Warrants, shall be delivered to and held by or on behalf
of the Nalco Agent pursuant hereto, shall be in suitable form for transfer by
delivery, and shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank.
SECTION 2.4. DIVIDENDS ON PLEDGED SHARES. In the event that any
Dividend is to be paid on any Pledged Share at a time when no Event of Default
has occurred and is continuing, such Dividend may be paid directly to the
applicable Pledgor. If any Event of Default has occurred and is continuing, then
any such Dividend or payment shall be paid directly to the Nalco Agent.
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6
SECTION 2.5. CONTINUING SECURITY INTEREST; TRANSFER OF PURCHASER
OBLIGATIONS. This Pledge Agreement shall create a continuing security interest
in the Collateral and shall:
a) remain in full force and effect until the indefeasible payment and
satisfaction in full of all Purchaser Obligations (subject to earlier
termination as provided in this SECTION);
b) be binding upon each Pledgor and its successors, transferees and
assigns; and
c) inure, together with the rights and remedies of the Nalco Agent
hereunder, to the benefit of the Nalco Agent and each other Nalco Party and
their respective successors, transferees and assigns.
Upon the indefeasible payment and satisfaction in full of the Purchaser
Note and all Earnout Payments, the security interest granted herein shall
terminate and all rights to the Collateral of each Pledgor shall revert to such
Pledgor; PROVIDED that there are at such time no existent claims for indemnity
under Section 10.4 of the Purchase Agreement; PROVIDED FURTHER that if there are
any such claims for such indemnity at such time, then the security interests
granted hereby shall remain to secure the payment of any amounts which may
become due and payable in respect of such claims; and PROVIDED FURTHER that
thereafter upon the indefeasible payment and satisfaction in full of all such
claims for indemnity under said Section 10.4 of the Purchase Agreement, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Pledgor. Upon any such termination, the Nalco
Agent will, at such Pledgor's sole expense, deliver to such Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all certificates
and instruments representing or evidencing all Pledged Shares and Pledged
Warrants (to the extent that such Pledged Warrants have not yet been exercised)
pledged pursuant hereto by such Pledgor, together with all other Collateral
pledged pursuant hereto by such Pledgor and held by the Nalco Agent hereunder,
and execute and deliver to such Pledgor such documents as such Pledgor shall
reasonably request to evidence such termination.
SECTION 2.6. SECURITY INTEREST ABSOLUTE. All rights of the Nalco Agent
and the security interests granted to the Nalco Agent hereunder, and all
obligations of each Pledgor hereunder, shall be absolute and unconditional,
irrespective of
a) any lack of validity or enforceability of the Purchase Agreement,
the Purchaser Note or any Collateral Document;
b) the failure of any Nalco Party
(i) to assert any claim or demand or to enforce any right or
remedy against the Purchaser, any other Obligor or any other Person
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7
under the provisions of the Purchase Agreement, the Purchaser Note, any
Collateral Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor of, or collateral securing, any Purchaser Obligation of the Purchaser
or any other Obligor;
c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Purchaser Obligations or any other extension,
compromise or renewal of any Purchaser Obligations of the Purchaser or any other
Obligor;
d) any reduction, limitation, impairment or termination of any
Purchaser Obligations of the Purchaser or any other Obligor for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and each Pledgor hereby waives any right to or claim of
any defense or set-off, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any Purchaser
Obligations of the Purchaser, any other Obligor or otherwise;
e) any amendment to, rescission, waiver, or other modification of,
or any consent to departure from, any of the terms of the Purchase Agreement,
the Purchaser Note or any Collateral Document;
f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for any of
the Purchaser Obligations of the Company or any other Obligor; or
g) any other circumstances which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the Purchaser, any
other Obligor, any surety or any guarantor.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Each Pledgor represents and warrants unto each Nalco Party, as at the
date of each pledge and delivery hereunder (including each pledge and delivery
of Pledged Shares and Pledged Warrants) by such Pledgor to the Nalco Agent of
any Collateral, as follows:
SECTION 3.1. POWER, AUTHORITY, ETC. Each Pledgor has power and
authority to execute, deliver and perform its obligations under this Pledge
Agreement and to pledge the Collateral pledged by it pursuant hereto.
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8
SECTION 3.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution and
delivery by each Pledgor of this Pledge Agreement, and the performance by each
Pledgor of its obligations hereunder, the pledge of the Collateral provided for
herein by such Pledgor and all other actions incidental to any thereof have been
duly authorized by all necessary action, do not and will not conflict with,
result in any violation of, or constitute any default under, any provision of
any organizational document or contract, agreement, indenture, instrument or
other document of such Pledgor or any law or governmental regulation or court
decree or order and will not result in or require the creation or imposition of
any Lien on any of such Pledgor's properties pursuant to the provisions of any
such contract, agreement, indenture, instrument or document.
SECTION 3.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by any Pledgor of this Pledge Agreement. No Pledgor is
an investment company within the meaning of the Investment Company Act of 1940
or a "holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935.
SECTION 3.4. VALIDITY, ETC. This Pledge Agreement has been duly
executed and delivered by each Pledgor, constitutes the legal, valid and binding
obligation of each Pledgor enforceable in accordance with its terms and creates
a valid security interest in the Collateral of each Pledgor securing the payment
of the Purchaser Obligations.
SECTION 3.5. OWNERSHIP, NO LIENS, ETC. Each Pledgor is the legal and
beneficial owner of (and has full right and authority to pledge and assign) any
Collateral pledged and assigned to the Nalco Agent by such Pledgor pursuant
hereto, free and clear of all Liens, except any lien or security interest
granted pursuant hereto in favor of the Nalco Agent.
SECTION 3.6. VALID SECURITY INTEREST. The delivery of such Collateral
to the Nalco Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Purchaser Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.7. AS TO PLEDGED SHARES AND PLEDGED WARRANTS. In the case of any
Pledged Shares and Pledged Warrants constituting such Collateral, all of such
Pledged Shares and Pledged Warrants are duly authorized and validly issued,
fully paid, and nonassessable, and constitute all of the issued and outstanding
shares of capital stock, warrants to purchase capital stock and other debt and
equity securities of the Pledged Share Issuer that are beneficially owned by the
Pledgors.
SECTION 3.8. AS TO ASSIGNED AGREEMENTS. Each Assigned Agreement (i) is
legal, valid and binding on the Pledgor, is in full force and effect and shall
continue in full
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9
force and effect without penalty or other adverse consequence as a result of the
assignment of such Assigned Agreement hereunder and (ii) to each Pledgor's best
knowledge, is legal, valid and binding on the other parties thereto. None of the
Pledgors and, to each Pledgors best knowledge, none of the other parties to any
Assigned Agreement, are in breach of, or in default under, any Assigned
Agreement.
SECTION 3.9. AUTHORIZATION, APPROVAL, ETC. No authorization, approval,
or other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
a) for the pledge by any Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery and performance of this Pledge
Agreement by any Pledgor; or
b) for the exercise by the Nalco Agent of the voting or other rights
provided for in this Pledge Agreement, or (except, with respect to any Pledged
Shares or Pledged Warrants, as may be required in connection with a disposition
of such Pledged Shares or Pledged Warrants by laws affecting the offering and
sale of securities generally) the remedies in respect of the Collateral pursuant
to this Pledge Agreement.
ARTICLE IV.
COVENANTS
SECTION 4.1. PROTECT COLLATERAL; FURTHER ASSURANCES, ETC. No Pledgor will
sell, assign, transfer, pledge, or encumber in any other manner any Collateral
(except in favor of the Nalco Agent hereunder or in connection with a Permitted
Transfer). Each Pledgor will warrant and defend the right and title herein
granted unto the Nalco Agent by such Pledgor in and to the Collateral (and all
right, title and interest represented by the Collateral pledged pursuant hereto
by such Pledgor) against the claims and demands of all Persons whomsoever. Each
Pledgor agrees that at any time, and from time to time, at the expense of such
Pledgor, such Pledgor will promptly execute and deliver all further instruments,
and take all further action, that may be necessary or desirable, or that the
Nalco Agent may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby and the priority of such
security interest or to enable the Nalco Agent to exercise and enforce its
rights and remedies hereunder with respect to any Collateral.
SECTION 4.2. STOCK POWERS, ETC. Each Pledgor agrees that all Pledged
Shares, all other shares of capital stock constituting Collateral and all
Pledged Warrants delivered by such Pledgor pursuant to this Pledge Agreement
will be accompanied by duly executed undated blank stock powers, or other
equivalent instruments of transfer acceptable to the Nalco Agent. Each Pledgor
will, from time to time upon the request of the Nalco Agent, promptly deliver to
the Nalco Agent such stock powers, instruments and similar documents,
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10
satisfactory in form and substance to the Nalco Agent, with respect to the
Collateral as the Nalco Agent may request and will, from time to time upon the
request of the Nalco Agent made at any time when an Event of Default shall have
occurred and be continuing, promptly transfer any Pledged Shares, any other
shares of capital stock constituting Collateral and any Pledged Warrants pledged
by such Pledgor pursuant hereto into the name of any nominee designated by the
Nalco Agent.
SECTION 4.3. CONTINUOUS PLEDGE. Each Pledgor will, at all times, keep
pledged to the Nalco Agent pursuant hereto all Pledged Shares pledged by such
Pledgor pursuant hereto and all other shares of capital stock constituting
Collateral, all Dividends and Distributions with respect thereto all Pledged
Warrants pledged by such Pledgor pursuant thereto, all Distributions with
respect thereto (including, without limitation, all Pledged Shares issued
pursuant to the exercise of Pledged Warrants) and all other Collateral and other
securities, instruments, proceeds, and rights from time to time received by or
distributable to such Pledgor in respect of any Collateral pledged by such
Pledgor pursuant hereto.
SECTION 4.4. VOTING AND EXERCISE RIGHTS; DIVIDENDS, ETC. Each Pledgor
agrees:
a) after any Event of Default shall have occurred and be continuing,
promptly upon receipt thereof by such Pledgor and without any request therefor
by the Nalco Agent, to deliver (properly endorsed where required hereby or
requested by the Nalco Agent) to the Nalco Agent all Dividends, Distributions
(to the extent any such Distribution was not theretofore required to be
furnished to the Nalco Agent pursuant to SECTION 4.3), all interest, all
principal, all other cash payments, and all proceeds of the Collateral pledged
by such Pledgor pursuant hereto, all of which shall be applied by the Nalco
Agent as additional Collateral in accordance with SECTION 6.4;
b) after any Event of Default shall have occurred and be continuing
and the Nalco Agent has notified any Pledgor of the Nalco Agent's intention to
exercise its voting power under this SECTION 4.4(B)
(i) the Nalco Agent may exercise (to the exclusion of such
Pledgor) the voting power, exercise rights and all other incidental rights of
ownership with respect to any Pledged Shares, any other shares of capital stock
constituting Collateral and any Pledged Warrants pledged by such Pledgor
pursuant hereto, and each Pledgor hereby grants the Nalco Agent an irrevocable
proxy, exercisable under such circumstances, to vote such Pledged Shares and
such other Collateral and to exercise such Pledged Warrants; and
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11
(ii) promptly to deliver to the Nalco Agent such additional
proxies and other documents as may be necessary to allow the Nalco Agent to
exercise such voting power and exercise rights.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by any Pledgor but which
such Pledgor is then obligated to deliver to the Nalco Agent, shall, until
delivery to the Nalco Agent, be held by such Pledgor separate and apart from its
other property in trust for the Nalco Agent. The Nalco Agent agrees that unless
an Event of Default shall have occurred and be continuing and the Nalco Agent
shall have given the notice referred to in SECTION 4.4(B), (i) each Pledgor
shall have the exclusive voting power with respect to any shares of capital
stock (including any of the Pledged Shares) constituting Collateral pledged by
such Pledgor pursuant hereto and the Nalco Agent shall, upon the written request
of such Pledgor, promptly deliver such proxies and other documents, if any, as
shall be reasonably requested by such Pledgor which are necessary to allow such
Pledgor to exercise voting power with respect to any such share of capital stock
(including any of the Pledged Shares) constituting Collateral, and (ii) each
Pledgor shall have the exclusive rights to exercise any Pledged Warrants pledged
by such Pledgor pursuant hereto and the Nalco Agent shall, upon the written
request of such Pledgor, promptly deliver such proxies and other documents, if
any, as shall be reasonably requested by such Pledgor which are necessary to
allow such Pledgor to exercise such Pledged Warrants; PROVIDED that no vote
shall be cast, or consent, waiver or ratification given, or exercise or action
taken by such Pledgor that would impair any Collateral or be inconsistent with
or violate any applicable provision of the Purchase Agreement or this Pledge
Agreement).
SECTION 4.5. SPECIAL PROVISIONS WITH RESPECT TO THE ASSIGNED
AGREEMENTS.
a) Each Pledgor shall at its expense:
(i) perform and observe all terms and provisions of the
Assigned Agreements to be performed or observed by it, maintain the Assigned
Agreements in full force and effect, enforce the Assigned Agreements in
accordance with their terms, and take all such action to such end as may be from
time to time requested by the Nalco Agent; and
(ii) furnish to the Nalco Agent, promptly upon receipt thereof, (A) copies
of all Assigned Agreements and, subject to CLAUSE (B) of this Section, any
amendments, amendments and restatements, supplements, modifications, and waivers
thereto and any consents and approvals relating thereto, in each case certified
by an officer of such Pledgor, and (B) copies of all notices, requests and other
documents received by such Pledgor under or pursuant to the Assigned Agreements,
and from time to time (C) furnish to the Nalco Agent such information and
reports regarding the Assigned
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12
Agreements as the Nalco Agent may reasonably request and (D) upon request of the
Nalco Agent make to the other parties under the Assigned Agreements such demands
and requests for information and reports or for action as such Pledgor is
entitled to make under the Assigned Agreements.
b) No Pledgor shall (without the written consent of Secured Party):
(i) cancel or terminate any of the Assigned Agreements or
consent to or accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give
any consent, waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned
Agreements;
(iv) consent to or permit or accept any prepayment of amounts
to become due under or in connection with the Assigned Agreements, except as
expressly provided therein; or
(v) take any other action in connection with the Assigned
Agreements that would impair the value of the interest or rights of such Pledgor
thereunder or that would impair the interest or rights of the Nalco Agent and
the other Nalco Parties.
ARTICLE V.
THE NALCO AGENT
SECTION 5.1. NALCO AGENT APPOINTED ATTORNEY-IN-FACT. Each Pledgor
hereby irrevocably appoints the Nalco Agent such Pledgor's attorney-in-fact,
with full authority in the place and stead of such Pledgor and in the name of
such Pledgor or otherwise, from time to time in the Nalco Agent's discretion, to
take any action and to execute any instrument which the Nalco Agent may
reasonably deem necessary or advisable to perfect, maintain and protect the
Nalco Agent's security interests in and Liens on and against the Collateral
granted or purported to be granted hereby, PROVIDED that if an Event of Default
has not occurred, the Nalco Agent has first reasonably requested such Pledgor to
take such action or to execute such instrument and such Pledgor has been unable
or unwilling to take such action or to execute such instrument, and PROVIDED
FURTHER that such Pledgor shall have a reasonable period of time to take such
action or execute such instrument prior to the occurrence and continuance of an
Event of Default. Each Pledgor hereby irrevocably appoints the Nalco Agent such
Pledgors attorney-in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor or otherwise, from time to time in the
Nalco Agent's discretion from and after the occurrence of an Event of Default,
to take
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13
any action and to execute any instrument which the Nalco Agent may deem
necessary or advisable to accomplish the purposes of this Pledge Agreement in a
manner consistent with the exercise of its rights and remedies pursuant to this
Pledge Agreement, including, without limitation:
a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
b) to receive, endorse, and collect any drafts or other instruments,
documents and chaftel paper, in connection with clause (A) above; and
c) to file any claims or take any action or institute any
proceedings which the Seller may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of the Nalco Agent
with respect to any of the Collateral;
Each Pledgor hereby acknowledges, consents and agrees that, subject to the LAST
TWO SENTENCES of SECTION 2.5, the powers of attorney granted pursuant to this
Section are irrevocable and coupled with an interest.
SECTION 5.2. NALCO AGENT MAY PERFORM. If any Pledgor fails to perform any
agreement contained herein, the Nalco Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Nalco Agent incurred in
connection therewith shall be payable by the Pledgors pursuant to SECTION 6.5.
SECTION 5.3. NALCO AGENT HAS NO DUTY. The powers conferred on the Nalco
Agent hereunder are solely to protect its interest (on behalf of the Nalco
Parties) in the Collateral and shall not impose any duty on it to exercise any
such powers. Except for reasonable care of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Nalco Agent
shall have no duty as to any Collateral or responsibility for ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Pledged Property, whether or not the Nalco
Agent has or is deemed to have knowledge of such matters, or taking any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
SECTION 5.4. REASONABLE CARE. The Nalco Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; PROVIDED that the Nalco Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral pledged
by any Pledgor pursuant hereto, if it takes such action for that purpose as such
Pledgor reasonably requests in writing at times other than upon the occurrence
and during the continuance of any Event of Default, but failure of the Nalco
Agent to comply with any such request at any time shall not in itself be deemed
a failure to exercise reasonable care.
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14
ARTICLE VI.
REMEDIES
SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have
occurred and be continuing:
a) The Nalco Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the U.C.C.
(whether or not the U.C.C. applies to the affected Collateral) and also may,
without notice except as specified below, sell or assign the Collateral or any
part thereof in one or more parcels at public or private sale, at any of the
Nalco Agent's offices or elsewhere, for cash, on credit or for future delivery,
and upon such other terms as the Nalco Agent may deem commercially reasonable.
Each Pledgor agrees at least ten (10) days' prior notice to the applicable
Pledgor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The Nalco
Agent shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Nalco Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned.
b) The Nalco Agent may
(i) transfer all or any part of the Collateral into the name of
the Nalco Agent or its nominee, with or without disclosing that such Collateral
is subject to the lien and security interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Nalco Agent of any amount due or to become due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than the
original period), any obligations of any nature of any party with respect
thereto,
(iv) endorse any checks, drafts or other writings in any
Pledgors name to allow collection of the Collateral,
<PAGE>
15
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of any Pledgor)
endorsements, assignments, stock powers and other instruments of assignment,
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. SECURITIES LAWS. If the Nalco Agent shall determine to
exercise its right to sell or assign all or any of the Collateral pursuant to
SECTION 6.1, each Pledgor agrees that, upon request of the Nalco Agent, such
Pledgor will, at its own expense, do or cause to be done all such acts and
things as may be necessary to make such sale of the Collateral or any part
thereof valid and binding and in compliance with applicable law; including,
without limitation, exercising any registration rights under any of the Assigned
Agreements.
SECTION 6.3. COMPLIANCE WITH RESTRICTIONS. Each Pledgor agrees that in
any sale or assignment of any of the Collateral, the Nalco Agent is hereby
authorized to comply with any limitation or restriction in connection with such
sale or assignment as it may be advised by counsel is necessary in order to
avoid any violation of applicable law (including compliance with such procedures
as may restrict the number of prospective bidders and purchasers, require that
such prospective bidders and purchasers have certain qualifications, and
restrict such prospective bidders and purchasers to persons who will represent
and agree that they are purchasing for their own account for investment and not
with a view to the distribution or resale of such Collateral), or in order to
obtain any required approval of the sale or assignment or of the purchaser by
any governmental regulatory authority or official, and such Pledgor further
agrees that such compliance shall not result in such sale or assignment being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Nalco Agent be liable or accountable to such Pledgor for any
discount allowed by the reason of the fact that such Collateral is sold in
compliance with any such limitation or restriction.
SECTION 6.4. APPLICATION OF PROCEEDS. All cash proceeds received by the
Nalco Agent in respect of any sale or assignment of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Nalco Agent, be held by the Nalco Agent as additional collateral security
for the Purchaser Obligations, or then or at any time thereafter be applied in
whole or in part by the Nalco Agent against, all or any part of the Purchaser
Obligations.
Any surplus of such cash or cash proceeds held by the Nalco Agent and
remaining after payment in full of all the Purchaser Obligations shall be paid
over to the applicable Pledgor or to whomsoever may be lawfully entitled to
receive such surplus.
SECTION 6.5. INDEMNITY AND EXPENSES. Each Pledgor hereby indemnifies
and holds harmless the Nalco Agent and each other Nalco Party from and against
any and all claims, losses and liabilities arising out of or resulting solely
from this Pledge Agreement
<PAGE>
16
(including, without limitation, enforcement of this Pledge Agreement), except
claims, losses or liabilities resulting solely from the Nalco Agent's or such
Nalco Party's negligence or willful misconduct. Upon demand, each Pledgor will
pay to the Nalco Agent the amount of any and all expenses, including the
reasonable fees and disbursements of its counsel and of any experts and agents,
which the Nalco Agent may incur in connection with:
a) the custody, preservation, use or operation of, or the sale or
assignment of, collection from, or other realization upon, any of the
Collateral;
b) the exercise or enforcement of any of the rights of the Nalco
Agent hereunder if the Nalco Agent or the Nalco Parties are the prevailing party
in any such proceeding; or
c) the failure by any Pledgor to perform or observe any of the
provisions hereof.
All of the foregoing fees, costs and expenses shall be part of the
Purchaser Obligations and shall be secured by the Collateral.
The foregoing indemnity shall survive termination of this Pledge
Agreement.
ARTICLE VII.
MISCELLANEOUS PROVISIONS
SECTION 7.1. REINSTATEMENT; AMENDMENTS, ETC. If any payment made in respect
of any Purchaser Obligations is rescinded or must otherwise be restored by any
Nalco Party and, pursuant to SECTION 2.5, the security interest granted herein
shall have terminated, this Pledge Agreement and such security interest shall be
reinstated and otherwise restored all as though such payment had not been made.
No amendment to or waiver of any provision of this Pledge Agreement nor consent
to any departure by any Pledgors herefrom shall in any event be effective unless
the same shall be in writing and signed by the Nalco Agent, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which it is given.
SECTION 7.2. PROTECTION OF COLLATERAL. The Nalco Agent may from time to
time, at its option, perform any act which any Pledgor agrees hereunder to
perform and which such Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Nalco Agent may from time to time take any other action which the Nalco Agent
reasonably deems necessary for the maintenance, preservation or protection of
any of the Collateral or of its security interest therein.
<PAGE>
17
SECTION 7.3. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing and shall be given,
and shall become effective, in the manner specified in SECTION 12.5 of the
Purchase Agreement, addressed or delivered to it at its address set forth
beneath its signature hereto.
SECTION 7.4. SECTION CAPTIONS. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.5. SEVERABILITY. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION 7.6. COUNTERPARTS. This Pledge Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
SECTION 7.7. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS PLEDGE
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF DELAWARE, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW
AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
ILLINOIS. THIS PLEDGE AGREEMENT AND THE PURCHASE AGREEMENT CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
PLEDGE AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE NALCO PARTIES OR ANY PLEDGOR SHALL
BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT THE NALCO AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY
<PAGE>
18
BE FOUND. EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL,
NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION.
EACH PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF ILLINOIS. EACH PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
SECTION 7.9. WAIVER OF JURY TRIAL. EACH PLEDGOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS PLEDGE AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE NALCO PARTIES OR
ANY PLEDGOR. EACH PLEDGOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE SELLER ENTERING INTO THE PURCHASE AGREEMENT.
SECTION 7.10. CONFLICTS WITH PURCHASE AGREEMENT. Notwithstanding
anything in this Pledge Agreement to the contrary, in the event of a conflict or
inconsistency between this Pledge Agreement and the Purchase Agreement, the
provisions of this Pledge Agreement shall govern to the extent of such conflict
or inconsistency.
<PAGE>
19
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
/s/ RALPH E. BAILEY
--------------------------------------
Name: Ralph E. Bailey
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
/s/ DOUGLAS G. BAILEY
--------------------------------------
Name: Douglas G. Bailey
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
/s/ NOLAN R. SCHWARTZ
--------------------------------------
Name: Nolan R. Schwartz
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
/s/ GUY C. HECKMAN
--------------------------------------
Name: Guy C. Heckman
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE>
20
/s/ J. WILLIAM DRAKE
--------------------------------------
Name: J. William Drake
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
/s/ ROBERT M. DAVENPORT
--------------------------------------
Name: Robert M. Davenport
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
/s/ BETSY S. KENYON
--------------------------------------
Name: Betsy S. Kenyon
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
/s/ LINDSAY G. MORTNER
--------------------------------------
Name: Lindsay G. Mortner
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE>
21
/s/ JAMES G. HANNOOSH
--------------------------------------
Name: James G. Hannoosh
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
/s/ GENEVE E. HENDRICKS
--------------------------------------
Name: Geneve E. Hendricks
Address for Notices:
--------------------------------------
--------------------------------------
--------------------------------------
ACKNOWLEDGED AND AGREED TO as of the
date first above written
NALCO FT, INC., in its individual capacity and
as agent for the Nalco Parties
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
<PAGE>
22
ATTACHMENT 1
ITEM A. PLEDGED SHARES AND WARRANTS
PLEDGOR PLEDGED SHARE ISSUER STOCK
Number Number of Shares
of Pledged Represented by
CLASS SHARES PLEDGED WARRANTS
[individuals] Fuel Tech, N.V. Common 4,750,000 3,000,000
Item B. ASSIGNED AGREEMENTS.
[registration rights
agreement]
EXHIBIT 4(a) TO SCHEDULE 13D
SCHWARTZ CALL AGREEMENT
CALL AGREEMENT (this "Agreement"), dated as of March 23, 1998, between
Ralph E. Bailey ("R. Bailey") and Douglas G. Bailey ("D. Bailey", and, together
with R. Bailey, the "Baileys"), on the one hand, and Nolan R. Schwartz (the
"Stockholder"), on the other hand.
WHEREAS, the Baileys, the Stockholder and the other Purchasers
signatory thereto are parties to a certain Securities Purchase Agreement, dated
as of the date of this Agreement (the "Securities Purchase Agreement";
capitalized terms used herein but not defined herein shall have the meanings
ascribed to such terms in the Securities Purchase Agreement), pursuant to which
the Baileys, the Stockholder and the other Purchasers have agreed to purchase,
and Fuel-Tech N.V., a Netherlands Antilles limited liability company ("FTNV")
has agreed to issue, the Purchaser Stock and the Purchaser Warrants in the
amounts set forth on Schedule I to the Securities Purchase Agreement (the
Purchaser Stock and the Purchaser Warrants being collectively, the "Purchaser
Shares");
WHEREAS, R. Bailey and Bettye J. Bailey ("B. Bailey") have pledged
certain collateral totaling FF10,000,000, as may be reduced by the COSA Release
Total defined in 1(e) below (the "Bailey Pledged Collateral") in favor of
Caterpillar Overseas S. A., a societe anonyme organized under Swiss law
("COSA"), as security for the payment by DieselCast France S. A. , a company
organized under the laws of France ("DieselCast"), of the purchase price for the
shares of Fonderie de Vernon S.A., a company organized under the laws of France
("Vernon"), pursuant to the Pledge and Security Agreement dated December 9, 1994
between COSA, R. Bailey and B. Bailey (the "Pledge and Security Agreement");
WHEREAS, R. Bailey and B. Bailey are beneficiaries of pledges of
certain assets from certain stockholders of DieselCast pursuant to the terms of
a Stockholders Agreement dated June 5, 1995 by and among R. Bailey, B. Bailey
and the other stockholders signatory thereto (the "DieselCast Stockholders
Agreement") and certain Deferred Compensation Agreements and Deferred Bonus
Agreements each dated October 31, 1994 between American Bailey Corporation
("ABC") and the employees of ABC signatory thereto (the "Other Pledge
Collateral");
WHEREAS, the Other Pledge Collateral shall be conveyed to R. Bailey
and B. Bailey only in the event and to the extent that the Bailey Pledged
Collateral is taken by COSA;
WHEREAS, the parties desire that either of the Baileys have an option
to purchase from the Stockholder a portion of the Stockholder's Purchaser
Warrants (or shares of FTNV Stock acquired as a result of the exercise of the
Purchaser Warrants if sufficient
<PAGE>
2
Purchaser Warrants do not exist) in the event of the taking by COSA of all or
part of the collateral pledged by R. Bailey and B. Bailey pursuant to the Pledge
and Security Agreement;
WHEREAS, it is a condition precedent to the Stockholder's participating in
the transactions contemplated by the Securities Purchase Agreement, that the
Stockholder enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained and intending to be legally bound hereby, the
parties agree as follows:
SECTION 1. The Vernon Right to Call Purchaser Warrants
(a) Upon any taking by COSA of any part of the Bailey Pledged
Collateral in excess of the Other Pledged Collateral (the "Unreimbursed
Amount"), the Stockholder agrees that either of the Baileys shall have the right
to require the Stockholder to sell a portion of the Stockholder's Purchaser
Warrants (or shares of FTNV Stock acquired as a result of exercise of the
Purchaser Warrants if sufficient Purchaser Warrants do not exist) to either of
the Baileys (the "Vernon Call Right").
(b) The number of Purchaser Warrants of the Stockholder subject to the
Vernon Call Right shall be a whole number calculated by multiplying (i) the
total Vernon Restricted Warrants (as defined below) by (ii) the Vernon Call
Percentage (defined below) (fractional shares shall be rounded down to the
nearest whole share). If the Stockholder does not hold Purchaser Warrants
sufficient to satisfy the Vernon Call Right, then either of the Baileys shall
also have the right to require the Stockholder to sell to either of the Baileys
that number of shares of FTNV Stock which equals the number of shares of FTNV
Stock into which the shortfall of Purchaser Warrants converted (the "Shortfall
FTNV Stock").
"Vernon Restricted Warrants" shall mean 100,000 of the Stockholder's
Purchaser Warrants, as may be reduced by (i) Purchaser Warrants already
relinquished to the Baileys pursuant to the prior exercise of a Vernon Call
Right, if any, and (ii) the "Vernon Warrant Reduction Amount" (as defined in
1(e) below).
"Vernon Call Percentage" shall mean a fraction, (i) the numerator of
which is the Unreimbursed Amount and (ii) the denominator of which is
FF10,000,000, less (A) the portion of the Bailey Pledged Collateral previously
taken by COSA, if any, and (B) the "COSA Release Amount" (as defined in 1(e)
below), if any.
(c) The Baileys shall exercise the Vernon Call Right by sending
written notice to the Stockholder. Upon the exercise of the Vernon Call Right,
the closing of the
<PAGE>
3
transaction shall occur not later than thirty (30) days following the receipt of
notice by the Stockholder.
(d) The option price for each of the Vernon Restricted Warrants shall
be the price paid for the Purchaser Warrants pursuant to the Securities Purchase
Agreement (the "Warrant Purchase Price"). The option price for each share of
Shortfall FTNV Stock, if any, shall be the price paid for the Shortfall FTNV
Stock, as well as the price paid for the underlying Purchaser Warrants.
(e) Each time that a portion of the Bailey Pledged Collateral is
released by COSA to the Baileys (each such released amount being a "COSA Release
Amount" and the total of all COSA Release Amounts being the "COSA Release
Total"), then a pro rata portion of the Vernon Restricted Warrants shall be
released to the Stockholder (the "Vernon Warrant Reduction Amount"). The Vernon
Warrant Reduction Amount shall be the product of (i) the Vernon Restricted
Warrants, multiplied by (ii) a fraction, the numerator of which shall be the
COSA Release Amount and the denominator of which shall be the Bailey Pledged
Collateral as may be reduced by the portion of the Bailey Pledged Collateral
previously taken by COSA, if any.
(f) Notwithstanding the provisions of Sections 1(a) through 1(e), the
total value of the Vernon Restricted Warrants and Shortfall FTNV Stock subject
to the Vernon Call Right shall not exceed the Vernon Call Value (as defined
below). The Vernon Call Value shall be based upon (i) the closing price of the
common stock of FTNV subject to the Purchaser Warrants and (ii) the currency
exchange rate between U.S. dollars and French francs, each as listed in the Wall
Street Journal as of the business day immediately preceding the Stockholder's
receipt of written notice as provided in Section 1(c).
"Vernon Call Value" shall mean FF787,179, less the amount of the
Stockholder's Current Pledged Collateral set forth on Exhibit A hereto (as such
Exhibit A may be amended from time to time).
(g) Notwithstanding the provisions of Sections 1(a) through 1(f), if
the Vernon Call Right is exercised, and/or if the option under Section 6 of the
DieselCast Stockholders Agreement is exercised, then any proceeds ultimately
received by the Baileys from their exercise or sale of the Vernon Restricted
Warrants, sale of the Shortfall FTNV Stock or sale of the common stock of
DieselCast, which exceed the Vernon Call Value, shall be promptly returned by
the Baileys to the Stockholder.
SECTION 2. Binding Effect; Assignment. This Agreement shall inure to
the benefit of, and shall be binding upon, the parties hereto and their
respective successors, assigns, heirs, and legal representatives. This Agreement
may not be assigned by any party
<PAGE>
4
hereto without the written consent of the other parties which such consent shall
be at the sole discretion of each party.
SECTION 3. Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Connecticut. For purposes of any action or proceeding involving this Agreement,
the Baileys and the Stockholder hereby expressly submit to the jurisdiction of
all Federal and state courts sitting in the state of Connecticut and consent
that any order, process, notice or motion or other application to or by any of
said courts or a judge thereof may be served within or without such court's
jurisdiction by registered mail or by personal service, provided that a
reasonable time for appearance is allowed. The Baileys and the Stockholder
hereby irrevocably waive any objection that they may now or hereafter may have
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any Federal or state court sitting in
Connecticut and hereby further irrevocably waive any claim that any such suit,
action or proceeding in any such court has been brought in an inconvenient
forum.
SECTION 4. Execution of Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement.
SECTION 5. Waiver; Modification. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the parties hereto. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
[The remainder of this page is intentionally left blank.
The signature page follows.]
<PAGE>
5
IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date first set forth above.
THE BAILEYS
/s/ RALPH E. BAILEY
--------------------------------
Ralph E. Bailey
/s/ DOUGLAS G. BAILEY
-------------------------------
Douglas G. Bailey
THE STOCKHOLDER
/s/ NOLAN R. SCHWARTZ
--------------------------------
Nolan R. Schwartz
<PAGE>
EXHIBIT A
CURRENT PLEDGED COLLATERAL
--------------------------
of
--
STOCKHOLDER
-----------
FF311,540
$ 50,505*
- ------------
* Assumes a current exchange rate of $1.00 = FF6.1685 as of April 6, 1998
EXHIBIT 4(b) TO SCHEDULE 13D
HECKMAN CALL AGREEMENT
CALL AGREEMENT (this "Agreement"), dated as of March 23, 1998, between
Ralph E. Bailey ("R. Bailey") and Douglas G. Bailey ("D. Bailey", and, together
with R. Bailey, the "Baileys"), on the one hand, and Guy C. Heckman (the
"Stockholder"), on the other hand.
WHEREAS, the Baileys, the Stockholder and the other Purchasers
signatory thereto are parties to a certain Securities Purchase Agreement, dated
as of the date of this Agreement (the "Securities Purchase Agreement";
capitalized terms used herein but not defined herein shall have the meanings
ascribed to such terms in the Securities Purchase Agreement), pursuant to which
the Baileys, the Stockholder and the other Purchasers have agreed to purchase,
and Fuel-Tech N.V., a Netherlands Antilles limited liability company ("FTNV")
has agreed to issue, the Purchaser Stock and the Purchaser Warrants in the
amounts set forth on Schedule I to the Securities Purchase Agreement (the
Purchaser Stock and the Purchaser Warrants being collectively, the "Purchaser
Shares");
WHEREAS, R. Bailey and Bettye J. Bailey ("B. Bailey") have pledged
certain collateral totaling FF10,000,000, as may be reduced by the COSA Release
Total defined in 1(e) below (the "Bailey Pledged Collateral") in favor of
Caterpillar Overseas S. A., a societe anonyme organized under Swiss law
("COSA"), as security for the payment by DieselCast France S. A. , a company
organized under the laws of France ("DieselCast"), of the purchase price for the
shares of Fonderie de Vernon S.A., a company organized under the laws of France
("Vernon"), pursuant to the Pledge and Security Agreement dated December 9, 1994
between COSA, R. Bailey and B. Bailey (the "Pledge and Security Agreement");
WHEREAS, R. Bailey and B. Bailey are beneficiaries of pledges of
certain assets from certain stockholders of DieselCast pursuant to the terms of
a Stockholders Agreement dated June 5, 1995 by and among R. Bailey, B. Bailey
and the other stockholders signatory thereto (the "DieselCast Stockholders
Agreement") and certain Deferred Compensation Agreements and Deferred Bonus
Agreements each dated October 31, 1994 between American Bailey Corporation
("ABC") and the employees of ABC signatory thereto (the "Other Pledge
Collateral");
WHEREAS, the Other Pledge Collateral shall be conveyed to R. Bailey
and B. Bailey only in the event and to the extent that the Bailey Pledged
Collateral is taken by COSA;
WHEREAS, the parties desire that either of the Baileys have an option
to purchase from the Stockholder a portion of the Stockholder's Purchaser
Warrants (or shares of FTNV Stock acquired as a result of the exercise of the
Purchaser Warrants if sufficient
<PAGE>
2
Purchaser Warrants do not exist) in the event of the taking by COSA of all or
part of the collateral pledged by R. Bailey and B. Bailey pursuant to the Pledge
and Security Agreement;
WHEREAS, the Baileys wish to have an additional option to purchase
from the Stockholder a portion of the Stockholder's Purchaser Warrants in the
event that the Stockholder fails to achieve certain performance objectives;
WHEREAS, it is a condition precedent to the Stockholder's
participating in the transactions contemplated by the Securities Purchase
Agreement, that the Stockholder enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained and intending to be legally bound hereby, the
parties agree as follows:
SECTION 1. The Vernon Right to Call Purchaser Warrants
(a) Upon any taking by COSA of any part of the Bailey Pledged
Collateral in excess of the Other Pledged Collateral (the "Unreimbursed
Amount"), the Stockholder agrees that either of the Baileys shall have the right
to require the Stockholder to sell a portion of the Stockholder's Purchaser
Warrants (or shares of FTNV Stock acquired as a result of exercise of the
Purchaser Warrants if sufficient Purchaser Warrants do not exist) to either of
the Baileys (the "Vernon Call Right").
(b) The number of Purchaser Warrants of the Stockholder subject to the
Vernon Call Right shall be calculated by multiplying (i) the total Vernon
Restricted Warrants (as defined below) by (ii) the Vernon Call Percentage
(defined below) (fractional shares shall be rounded down to the nearest whole
share). If the Stockholder does not hold Purchaser Warrants sufficient to
satisfy the Vernon Call Right, then either of the Baileys shall also have the
right to require the Stockholder to sell to either of the Baileys that number of
shares of FTNV Stock which equals the number of shares of FTNV Stock into which
the shortfall of Purchaser Warrants converted (the "Shortfall FTNV Stock").
"Vernon Restricted Warrants" shall mean 100,000 of the Stockholder's
Purchaser Warrants, as may be reduced by (i) Purchaser Warrants already
relinquished to the Baileys pursuant to the prior exercise of a Vernon Call
Right, if any, and (ii) the "Vernon Warrant Reduction Amount" (as defined in
1(e) below).
"Vernon Call Percentage" shall mean a fraction, (i) the numerator of
which is the Unreimbursed Amount and (ii) the denominator of which is
FF10,000,000, less (A)
<PAGE>
3
the portion of the Bailey Pledged Collateral previously taken by COSA, if any,
and (B) the "COSA Release Amount" (as defined in 1(e) below), if any.
(c) The Baileys shall exercise the Vernon Call Right by sending
written notice to the Stockholder. Upon the exercise of the Vernon Call Right,
the closing of the transaction shall occur not later than thirty (30) days
following the receipt of notice by the Stockholder.
(d) The option price for each of the Vernon Restricted Warrants shall
be the price paid for the Purchaser Warrants pursuant to the Securities Purchase
Agreement (the "Warrant Purchase Price"). The option price for each share of
Shortfall FTNV Stock, if any, shall be the price paid for the Shortfall FTNV
Stock, as well as the price paid for the underlying Purchaser Warrants.
(e) Each time that a portion of the Bailey Pledged Collateral is
released by COSA to the Baileys (each such released amount being a "COSA Release
Amount" and the total of all COSA Release Amounts being the "COSA Release
Total"), then a pro rata portion of the Vernon Restricted Warrants shall be
released to the Stockholder (the "Vernon Warrant Reduction Amount"). The Vernon
Warrant Reduction Amount shall be the product of (i) the Vernon Restricted
Warrants, multiplied by (ii) a fraction, the numerator of which shall be the
COSA Release Amount and the denominator of which shall be the Bailey Pledged
Collateral as may be reduced by the portion of the Bailey Pledged Collateral
previously taken by COSA, if any.
(f) Notwithstanding the provisions of Sections 1(a) through 1(e), the
total value of the Vernon Restricted Warrants and Shortfall FTNV Stock subject
to the Vernon Call Right shall not exceed the Vernon Call Value (as defined
below). The Vernon Call Value shall be based upon (i) the closing price of the
common stock of FTNV subject to the Purchaser Warrants and (ii) the currency
exchange rate between U.S. dollars and French francs, each as listed in the Wall
Street Journal as of the business day immediately preceding the Stockholder's
receipt of written notice as provided in Section 1(c).
"Vernon Call Value" shall mean FF787,179, less the amount of the
Stockholder's Current Pledged Collateral set forth on Exhibit A hereto (as such
Exhibit A may be amended from time to time).
(g) Notwithstanding the provisions of Sections 1(a) through 1(f), if
the Vernon Call Right is exercised, and/or if the option under Section 6 of the
DieselCast Stockholders Agreement is exercised, then any proceeds ultimately
received by the Baileys from their exercise or sale of the Vernon Restricted
Warrants, sale of the Shortfall FTNV Stock or sale of the common stock of
DieselCast, which exceed the Vernon Call Value, shall be promptly returned by
the Baileys to the Stockholder.
<PAGE>
4
SECTION 2. Binding Effect; Assignment. This Agreement shall inure to
the benefit of, and shall be binding upon, the parties hereto and their
respective successors, assigns, heirs, and legal representatives. This Agreement
may not be assigned by any party hereto without the written consent of the other
parties which such consent shall be at the sole discretion of each party.
SECTION 3. The Performance Call Right.
(a) In the event that the Stockholder fails to carry out satisfactory
efforts to originate and provide a financing plan for at least one (1)
acquisition by American Bailey Corporation, a Delaware corporation, or any of
its affiliates (collectively, "ABC") approved by the board of directors of ABC
within eighteen (18) months of the Closing of the Securities Purchase Agreement
(the "Financing Objective"), then either of the Baileys shall have the right to
require that the Stockholder sell fifty thousand (50,000) Purchaser Warrants (or
shares of FTNV Stock acquired as a result of the exercise of the Purchaser
Warrants if sufficient Purchaser Warrants do not exist) (the "Performance
Warrants") to either of the Baileys (the "Performance Call Right"). If the
Stockholder does not hold Purchaser Warrants sufficient to satisfy the
Performance Call Right, then either of the Baileys shall also have the right to
require the Stockholder to sell to either of the Baileys that number of shares
of FTNV Stock which equals the number of shares of FTNV Stock into which the
shortfall of the Purchaser Warrants converted (the "Other Shortfall of FTNV
Stock").
(b) The determination of whether the Stockholder has satisfied the
Financing Objective shall be made by the board of directors of ABC in their sole
discretion. The board of directors of ABC shall exercise their discretion
reasonably.
(c) The Baileys shall exercise the Performance Call Right by sending
written notice to the Stockholder. Upon the exercise of the Performance Call
Right, the closing of the transaction shall occur not later than thirty (30)
days following the receipt of notice by the Stockholder.
(d) The option price for the Performance Warrants shall be the Warrant
Purchase Price. The option price for each share of the Other Shortfall of FTNV
Stock, if any, shall be the price paid for the Other Shortfall of FTNV Stock, as
well as the price paid for the underlying Purchaser Warrants.
SECTION 4. Binding Effect; Assignment. This Agreement shall inure to
the benefit of, and shall be binding upon, the parties hereto and their
respective successors, assigns, heirs, and legal representatives. This Agreement
may not be assigned by any party
<PAGE>
5
hereto without the written consent of the other parties which such consent shall
be at the sole discretion of each party.
SECTION 5. Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Connecticut. For purposes of any action or proceeding involving this Agreement,
the Baileys and the Stockholder hereby expressly submit to the jurisdiction of
all Federal and state courts sitting in the state of Connecticut and consent
that any order, process, notice or motion or other application to or by any of
said courts or a judge thereof may be served within or without such court's
jurisdiction by registered mail or by personal service, provided that a
reasonable time for appearance is allowed. The Baileys and the Stockholder
hereby irrevocably waive any objection that they may now or hereafter may have
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any Federal or state court sitting in
Connecticut and hereby further irrevocably waive any claim that any such suit,
action or proceeding in any such court has been brought in an inconvenient
forum.
SECTION 6. Execution of Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement.
SECTION 7. Waiver; Modification. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the parties hereto. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
[The remainder of this page is intentionally left blank.
The signature page follows.]
<PAGE>
6
IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the date first set forth above.
THE BAILEYS
/s/ RALPH E. BAILEY
--------------------------------
Ralph E. Bailey
/s/ DOUGLAS G. BAILEY
-------------------------------
Douglas G. Bailey
THE STOCKHOLDER
/s/ GUY C. HECKMAN
--------------------------------
Guy C. Heckman
<PAGE>
EXHIBIT A
CURRENT PLEDGED COLLATERAL
--------------------------
of
--
STOCKHOLDER
-----------
FF186,690
$ 30,265*
- ------------
* Assumes a current exchange rate of $1.00 = FF6.1685 as of April 6, 1998
EXHIBIT 5 TO SCHEDULE 13D
REGISTRATION RIGHTS AGREEMENT
BETWEEN
FUEL-TECH N.V.
AND
THE PURCHASERS
<PAGE>
Registration Rights Agreement
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
this 30th day of April, 1998 by and among FUEL-TECH N.V., a Netherlands Antilles
limited liability company (the "Company"), and the undersigned stockholders of
the Company (the "Stockholders").
WHEREAS, the Company and the Stockholders are parties to that certain
Securities Purchase Agreement, dated as of March 23, 1998 (the "Securities
Purchase Agreement");
WHEREAS, pursuant to the Securities Purchase Agreement, the Company
has issued certain shares of Common Stock and Warrants to the Stockholders;
WHEREAS, on the date of this Agreement such shares of Common Stock and
Warrants are subject to, and the exercise of such Warrants and the transfer of
such shares of Common Stock as well as the shares issuable upon the exercise of
such Warrants are restricted by, the terms of the Stockholders Agreement and the
Pledge Agreement;
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the closing of the transactions set forth in the Securities
Purchase Agreement; and
WHEREAS, certain capitalized terms used herein are used as defined in
Article 12.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Demand Registration
1.1. Requests for Registration. At any time during the term of
this Agreement, any Stockholder may demand registration under the Securities Act
(a "Demand Registration") on Form F-1, Form S-1 or Form S-3 or any other
registration statement that may be or become available for registration of the
Company's securities (each, a "Registration Statement") of all or any portion of
the Registrable Securities owned by such Stockholder. In order to accomplish
such demand, a Stockholder shall send written notice of the demand to the
Company, and such notice shall specify the number of Registrable Securities
sought to be registered. Subject to the terms of the Stockholders Agreement and
the Pledge Agreement, the Company shall proceed with any Demand Registration
requested by a Stockholder during the term of this Agreement if the number of
Registrable Securities which the Stockholders shall have elected to include in
such Demand Registration pursuant to this Section 1.1 and Section 1.3 shall
result in an
<PAGE>
2
anticipated aggregate offering price of at least U.S. $1,000,000.00. The form
for registration shall be selected by the Company, provided that such form is
available for the registration of all of the Registrable Securities so demanded
pursuant to this Section 1.
1.2. Maximum Number of Demand Registrations. In no event shall
the total number of Demand Registrations exceed three (3), and in no event shall
there be more than one (1) Demand Registration in any twelve (12) month period.
1.3. Procedure. Within 10 days after receipt of a demand pursuant
to Section 1.1 hereof, the Company shall give written notice of such requested
registration to all other Stockholders and will include in such registration,
subject to the allocation provisions below and the terms of the Stockholders
Agreement and the Pledge Agreement, all other Registrable Securities with
respect to which the Company has received written requests for inclusion within
20 days after the Company's mailing of such notice, plus any securities of the
Company that the Company chooses to include on its own behalf.
1.4. Expenses. The Company will pay the Registration Expenses of
any Demand Registration, but the Underwriting Commissions, if such Demand
Registration is underwritten, will be paid by the Selling Stockholders in
proportion to any Registrable Securities to be included on their behalf.
Notwithstanding the foregoing, if such Demand Registration is delayed, postponed
or abandoned due to acts of, or failures to act by, the Selling Stockholders,
the Selling Stockholders shall reimburse the Company for such Registration
Expenses that are caused by such delay, postponement or abandonment; provided
that such delay, postponement or abandonment is not related to a material
adverse change in the business or operations of the Company and its subsidiaries
and investees, taken as a whole, after such request for registration. In
addition, if such Demand Registration is abandoned due to acts of, or failures
to act by, the Selling Stockholders and the Selling Stockholders are responsible
for reimbursing the Company for certain Registration Expenses, then the Selling
Stockholders shall, at the option of the Selling Stockholders, (i) reimburse the
Company for such Registration expenses caused by such abandonment, or (ii)
eliminate one (1) of the available Demand Registrations under Section 1.2 of
this Agreement and therefore not be responsible to reimburse the Company for any
Registration Expenses caused by such abandonment.
1.5. Priority on Demand Registrations. If a Demand Registration
is underwritten and the managing underwriters advise the Company in writing that
in their opinion the number of Registrable Securities requested to be included
exceeds the number that can be sold in such offering, at a price reasonably
related to the fair value, the Company will allocate the Registrable Securities
to be included in such Demand Registration pro rata on the basis of the number
of Registrable Securities owned by the Selling Stockholders. No securities of
the Company that the Company chooses to include shall be included as part of the
Demand Registration unless all of the Registrable Securities requested to be
included by the Selling Stockholders are included in the Demand Registration.
<PAGE>
3
1.6. Selection of Underwriters. Any Demand Registration may be
underwritten, at the election of the Selling Stockholders, and the selection of
investment banker(s) and manager(s) and the other decisions regarding the
underwriting arrangements for any such offering will be made by the Company;
provided, however, that the selection of investment banker(s) and manager(s)
shall be subject to the consent of the Selling Stockholders selling Registrable
Securities representing a majority of the Registrable Securities to be sold by
the Selling Stockholders in such Demand Registration, such consent not to be
unreasonably withheld.
1.7. Postponement. The Company shall be entitled to postpone for
a reasonable period of time (but not exceeding ninety (90) days and no more than
once in any twelve (12) month period) the filing of any registration statement
otherwise required to be prepared and filed by it pursuant to Section 1.1 if (i)
the Board of Directors of the Company determines, in its reasonable judgment,
that such registration and offering would interfere with any financing,
acquisition, corporate reorganization or other material transaction involving
the Company or any of its affiliates or would require premature disclosure
thereof or (ii) the Company desires to postpone the filing in order to be able
to include in such filing audited year-end financial statements prepared in the
ordinary course of preparing its Annual Report to Shareholders (including on
Form 20-F or such other applicable form), and in each case promptly gives
written notice of such delay to the holders of Registrable Securities requesting
registration thereof pursuant to Section 1.1. If the Company shall so postpone
the filing of a registration statement, such holders of Registrable Securities
requesting registration thereof shall have the right to withdraw the request for
registration by giving written notice to the Company within thirty (30) days
after receipt of the notice of postponement and, in the event of such
withdrawal, such request shall not be counted for purposes of the requests for
registration to which holder of the Registrable Securities are entitled pursuant
to Sections 1.1 and 1.2 hereof, and such holders of Registrable Securities
requesting registration thereof shall not be responsible to reimburse the
Company for any Registration Expenses.
2. Piggyback Registrations
2.1. Right to Piggyback. At any time during the term of this
Agreement, whenever the Company proposes to register under the Securities Act
the offer, sale or offer and sale of any of its securities for its own behalf or
on behalf of shareholders other than the Stockholders (other than a Demand
Registration or a registration of securities in connection with an employee
benefit plan or dividend reinvestment plan or a merger or consolidation), and
the registration form to be used may be used for the registration of Registrable
Securities to be sold in the manner proposed by the Selling Stockholders (a
"Piggyback Registration"), the Company will give prompt written notice to all
Stockholders and will include in such Piggyback Registration, subject to the
allocation provisions below and the terms of the Stockholders Agreement and the
Pledge Agreement, all Registrable Securities with respect to which the Company
has received written requests for inclusion within 20 days after the Company's
mailing of such notice.
<PAGE>
4
The Company shall not select a Restricted Form that would preclude registration
of the Registrable Securities that the Company has been requested to include in
such registration if the Company could use another available form of
registration statement which is not a Restricted Form and the use of which would
not give rise to added Registration Expenses.
2.2. Piggyback Expenses. In all Piggyback Registrations, the
Company will pay the Registration Expenses related to the Registrable Securities
of the Selling Stockholders, but the Underwriting Commissions will be paid by
the Selling Stockholders in proportion to any Registrable Securities included on
their behalf.
2.3. Priority on Piggyback Registrations. If a Piggyback
Registration is an underwritten registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering, at a price reasonably related to fair
value, the Company will allocate the securities to be included as follows:
first, the securities the Company proposes to sell on its own behalf or on
behalf of stockholders other than the Selling Stockholders; and second, subject
to the terms of the Stockholders Agreement and the Pledge Agreement, Registrable
Securities requested to be included in such registration, pro rata on the basis
of the number of Registrable Securities owned, among the Selling Stockholders.
2.4. Selection of Underwriters. Any Piggyback Registration may be
underwritten, at the election of the Company, and the selection of the banker(s)
and manager(s) and the other decisions regarding the underwriting arrangements
of any such offering will be made in the sole discretion of the Company.
2.5. Delay, Withdrawal or Abandonment. Nothing contained in this
Article 2 shall be construed as limiting or otherwise interfering with the right
of the Company to delay, withdraw or abandon in its sole discretion any
registration statement filed by it in connection with a Piggyback Registration
notwithstanding the inclusion therein of Registrable Securities.
3. Limitations on Registrations of Registrable Securities.
The Company shall not be required to effect any registration of
Registrable Securities pursuant to Section 1.1 or 2.1 hereof if it shall deliver
to the Selling Stockholder or Selling Stockholders requesting such registration
an opinion of counsel (which opinion shall be reasonably satisfactory to such
Selling Stockholder or Selling Stockholders) to the effect that the Registrable
Securities proposed to be sold by such holder may be sold in the public market
without registration under the Securities Act and any applicable state
securities laws.
<PAGE>
5
4. Holdback Agreements
During the term of this Agreement, each Stockholder and the
Company agree not to effect any sale or distribution of equity securities of the
Company or of any securities convertible into or exchangeable or exercisable for
such securities during the 7 days prior to and the 90 days after any
underwritten registration of equity securities of the Company becomes effective
(except (i) as part of such underwritten registration, (ii) in connection with
the grant or exercise of options under the Company's stock option plan, or (iii)
in connection with obligations of the Company existing on the effective date of
the registration statement relating to such underwritten offering).
5. Registration Procedures
Whenever the Stockholders have requested that any Registrable
Securities be registered pursuant to Article 1 or Article 2 of this Agreement,
subject to the terms of the Stockholders Agreement and the Pledge Agreement, the
Company will, as expeditiously as possible:
(a) Preparation and Filing of Registration Statement. Prepare and
file with the Securities and Exchange Commission a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
Registration Statement to become effective (provided that before filing a
Registration Statement or prospectus or any amendments or supplements thereto,
the Company will furnish each Selling Stockholder with copies of all such
documents proposed to be filed).
(b) Preparation and Filing of Amendments and Supplements. Prepare
and file with the Securities and Exchange Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
a period of not less than 120 days or until the Registrable Securities included
therein have been sold.
(c) Copies of Documents. Furnish to each Selling Stockholder such
number of copies of such Registration Statement, each amendment and supplement
thereto and the prospectus included in such Registration Statement (including
each preliminary prospectus), and such other documents as such Selling
Stockholder may reasonably request in order to facilitate the disposition of the
Registrable Securities included therein owned by such Selling Stockholder.
(d) Blue Sky Qualifications. Use its best efforts to register or
qualify such Registrable Securities under such other securities or blue sky laws
of such jurisdictions as the managing underwriters may reasonably request;
provided, however, that in connection with any such registration or
qualification the Company shall not be obligated to file a general consent to
service of process, or to qualify to do business as a foreign corporation, or
otherwise subject itself to taxation in connection with such qualification or
compliance.
<PAGE>
6
(e) Notification of Effectiveness; Amendments. Notify each
Selling Stockholder at any time when a prospectus relating to the Registrable
Securities included therein is required to be delivered under the Securities Act
within the period that the Company is required to keep the Registration
Statement effective of the happening of any event as a result of which the
prospectus included in such Registration Statement as theretofore amended or
supplemented contains an untrue statement of a material fact or omits any
material fact necessary to make the statements therein not misleading, and, at
the request of any such Selling Stockholder, the Company will prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading.
(f) Listing. Cause all such Registrable Securities to be listed
or included on securities exchanges on which similar securities issued by the
Company are then listed or included.
(g) Transfer Agent and Registrar. Provide a transfer agent and
registrar for all such Registrable Securities not later than the effective date
of such Registration Statement.
(h) Other Agreements. Enter into such customary agreements
(including an underwriting agreement in form reasonably acceptable to the
Company) and take such other customary actions as may be reasonably necessary to
expedite or facilitate the disposition of such Registrable Securities.
(i) Letters from Independent Accountants. Obtain a "cold comfort"
letter addressed to the Company from its independent accountants in such form
and covering such matters of the type customarily covered by "cold comfort"
letters delivered by such public accountants.
(j) Inspection of Records. Make available for inspection by any
Selling Stockholder, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such Registration Statement, subject to the execution of a
confidentiality agreement reasonably requested by the Company.
6. Representations and Warranties of the Company
The Company hereby represents and warrants to the Stockholders:
<PAGE>
7
6.1. Due Organization and Good Standing. The Company is a
corporation duly organized and validly existing under the laws of its
jurisdiction of incorporation and is duly qualified as a foreign corporation in
each jurisdiction in which the failure to be so qualified could reasonably be
expected to have a material adverse effect on the Company and its subsidiaries
and investees, taken as a whole.
6.2. Due Authorization; Binding Effect. The execution and
delivery of this Agreement by the Company has been duly authorized by all
necessary corporate action and this Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or principals governing the availability of
equitable remedies).
6.3. No Violation or Default. The execution and delivery by the
Company of this Agreement does not, and the performance by the Company of its
obligations hereunder will not, violate any provisions of its articles of
association or by-laws or constitute a default under any other agreement to
which the Company is a party or by which it or its assets may be bound which
could reasonably be expected to have a material adverse effect on the Company
and its subsidiaries and investees, taken as a whole.
7. Representations and Warranties of the Stockholders
Each of the Stockholders represents and warrants on behalf of
such Stockholder to the Company:
7.1. Binding Effect. The execution and delivery of this Agreement
by such Stockholder constitutes the legal, valid and binding obligation of such
Stockholder enforceable against such Stockholder in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or principals governing the availability of equitable
remedies).
7.2. No Default. The execution and delivery of this Agreement by
such Stockholder does not, and the performance by such Stockholder of its
obligations hereunder will not, violate any other agreement to which such
Stockholder is a party or by which any of its assets may be bound.
8. Information Regarding Selling Stockholders
Each Selling Stockholder shall provide to the Company such
information as may be reasonably requested by the Company for use in the
preparation and filing of any Registration Statement covering Registrable
Securities owned by such Selling Stockholder, and the obligation of the Company
to include Registrable Securities in any Registration
<PAGE>
8
Statement on behalf of any Selling Stockholder shall be subject to such Selling
Stockholder's providing such information as promptly as practicable.
9. Indemnification
9.1. Indemnification by the Company. The Company hereby
indemnifies, to the extent permitted by law, each Selling Stockholder, against
all claims, liabilities, losses, damages and expenses, including reasonable fees
and disbursements of counsel (collectively, "Losses"), arising out of or
resulting from any untrue or alleged untrue statement of material fact contained
in any Registration Statement, prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
the case of a prospectus or preliminary prospectus, in light of the
circumstances under which they were made, except insofar as the same are caused
by or contained in any information furnished in writing to the Company by any
Selling Stockholder expressly for use therein or by any such Selling
Stockholder's failure to deliver a copy of the Registration Statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such Selling Stockholder with copies of the same. In connection with
any underwritten offering, the Company will indemnify the underwriters, their
officers and directors, and each person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Selling Stockholders.
9.2. Indemnification by the Selling Stockholders. In connection
with any Registration Statement in which a Selling Stockholder is participating,
each such Selling Stockholder will furnish to the Company in writing such
information as is reasonably requested by the Company for use in such
Registration Statement or prospectus and will indemnify, severally and not
jointly, to the extent permitted by law, the Company, its respective directors,
officers, employees, agents, advisors and representatives and each person who
controls the Company or any of its affiliates (within the meaning of the
Securities Act) against any Losses arising out of or resulting from any untrue
or alleged untrue statement of material fact or any omission or alleged omission
of a material fact required to be stated in the Registration Statement or
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, in the case of a prospectus or
preliminary prospectus, in light of the circumstances under which they were
made, but only to the extent that such untrue statement or omission or such
alleged untrue statement or alleged omission is contained in information so
furnished in writing by such Selling Stockholder specifically for use in
preparation of the Registration Statement; provided, in no case, shall any
indemnity under this Section 9.2 exceed the gross proceeds from the offering
received by such Selling Stockholder.
9.3. Procedures as to Indemnification. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it may seek indemnification and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and
<PAGE>
9
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled, or elects not, to assume the defense of
a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which case the
indemnifying party shall pay the fees and expenses of one (1) additional
counsel.
9.4. Contribution. If the indemnification provided for in this
Section 8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue, or alleged untrue, statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
10. Condition to the Company's Obligations
In connection with an underwritten offering, it shall be a
condition to the Company's obligations to include Registrable Securities on
behalf of any Selling Stockholder that the underwriters agree to indemnify the
Company, its directors and officers and each person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses arising out of or resulting from any untrue or alleged
untrue statement of material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement or prospectus
or any amendment thereof or supplement thereto or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission or such alleged untrue statement or alleged omission is
contained in information furnished in writing by such underwriters on their own
behalf specifically for use in preparing the registration statement.
<PAGE>
10
11. Rule 144; Limits on Resale
11.1. Conditions of Rule 144. The Company represents, warrants
and covenants that it satisfies and that during the term of this Agreement, it
will use its best efforts to continue to satisfy the conditions set forth in
Rule 144 under the Securities Act which must be satisfied by an issuer in order
for a holder of restricted securities to sell such securities under the
provisions of such rule.
11.2. Limits on Resale. The Stockholders acknowledge and agree
that their rights to Demand Registrations and Piggyback Registrations are
subject to, and restricted by, (i) the covenant set forth in Section 2 of the
Stockholders Agreement whereby the Stockholders shall maintain certain ownership
percentages of the Company while any Purchaser Obligations (as defined in the
Securities Purchase Agreement) are outstanding and (ii) the provisions of the
Pledge Agreement pursuant to which the Shares of Common Stock and Warrants
issued to the Stockholders have been pledged to Nalco FT, Inc., as agent for
itself and certain related parties.
12. Definitions
12.1. Agreement. The term "Agreement" shall mean this
Registration Rights Agreement, as the same may be amended from time to time.
12.2. Common Stock. The term "Common Stock" shall mean the Common
Stock, par value $0.01 of the Company.
12.3. Company. The term "Company" shall have the meaning set
forth in the first paragraph of this Agreement.
12.4. Demand Registration. The term "Demand Registration" shall
have the meaning set forth in Section 1.1 hereof.
12.5. Piggyback Registration. The term "Piggyback Registration"
shall have the meaning set forth in Section 2.1 hereof.
12.6. Pledge Agreement. The term "Pledge Agreement" shall mean
that Bailey Pledge Agreement, dated as of the date hereof, among the
Stockholders and Nalco FT, Inc., as agent for itself and certain related
parties.
12.7. Registrable Securities. The term "Registrable Securities"
means any Common Stock registered in the names of the Stockholders from time to
time and any securities issued or to be issued with respect to such securities
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been (i) effectively registered under the
Securities Act and disposed of in accordance with the registration
<PAGE>
11
statement covering them or (ii) transferred pursuant to Rule 144 under the
Securities Act (or any similar rule then in force).
12.8. Registration Expenses. The term "Registration Expenses"
means all expenses incident to the Company's performance of or compliance with
this Agreement, including without limitation all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, expenses and fees for listing the
securities to be registered on exchanges or trading system on which similar
securities issued by the Company are then listed or included, and fees and
disbursements of counsel for the Company (but not counsel for the Stockholders,
if any).
12.9. Registration Statement. The term "Registration Statement"
shall have the meaning set forth in Section 1.1 hereof.
12.10. Restricted Form. The term "Restricted Form" shall mean a
form of registration statement under the Securities Act which imposes for its
use a limitation on the maximum value or number of securities to be included
therein.
12.11. Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended.
12.12. Securities Purchase Agreement. The term "Securities
Purchase Agreement" shall have the meaning set forth in the recitals to this
Agreement.
12.13. Selling Stockholder. The term "Selling Stockholder" means
Stockholders who request inclusion of all or a portion of their shares of
Registrable Securities in a Demand Registration pursuant to Sections 1.1 and 1.3
or a Piggyback Registration pursuant to Section 2.1.
12.14. Stockholders. The term "Stockholder" or "Stockholders"
shall have the meaning set forth in the first paragraph hereof.
12.15. Stockholders Agreement. The term "Stockholders Agreement"
shall mean that certain Stockholders Agreement, dated the date hereof, among the
Company and the Stockholders, substantially in the form of Exhibit _ to the
Securities Purchase Agreement.
12.16. Underwriting Commissions. The term "Underwriting
Commissions" means all underwriting fees, discounts or commissions relating to
the sale of Registrable Securities, but excludes any reasonable expenses
reimbursed to underwriters.
<PAGE>
12
12.17. Warrants. The term "Warrants" shall mean those securities
which are exercisable for shares of Common Stock issued to the Stockholders
pursuant to the Securities Purchase Agreement.
13. Miscellaneous
13.1. Notices. Any notices required hereunder shall be sent by
certified or registered mail, and shall be addressed to the address of the
Company's corporate headquarters in the case of any notice to the Company, and
until changed by notice to the Company, to the Stockholders at c/o American
Bailey Corporation, Financial Centre, 695 East Main Street, Stamford, CT 06901.
13.2. Amendments and Waivers. The provisions of this Agreement
may be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the Company has
obtained the written consent of the Stockholders.
13.3. Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective transferees, successors and personal
representatives of the Stockholders. Subject to the terms of the Stockholders
Agreement and the Pledge Agreement, the rights set forth in this Agreement may
be assigned by any Stockholder to a transferee or assignee of all or any part of
such Stockholder's Registrable Securities, provided such transferee or assignee
agrees to become a party to this Agreement, in which case such transferee or
assignee shall, for all purposes thereafter, be deemed to be a Stockholder.
13.4. Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the laws of
the State of Connecticut.
13.5. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be considered to be an original instrument
and to be effective as of the date first written above.
13.6. Term. The term of this Agreement shall commence on the
first (1st) anniversary of the date first set forth above and terminate on such
date's tenth (10th) anniversary. The parties acknowledge and agree that if the
process of a Demand Registration or Piggyback Registration is commenced prior to
the expiration of the term of this Agreement, then the term of this Agreement
shall be extended until the conclusion of such Demand Registration or Piggyback
Registration even if such term extends beyond ten (10) years. The parties also
acknowledge and agree that the indemnification obligations of each party set
forth in Section 9 shall survive the expiration of the term of this Agreement.
<PAGE>
13
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FUEL-TECH N.V.
/s/
By________________________________
Name:
Title:
/s/ RALPH E. BAILEY
----------------------------------
Ralph E. Bailey
/s/ DOUGLAS G. BAILEY
----------------------------------
Douglas G. Bailey
/s/ J. WILLIAM DRAKE
----------------------------------
J. William Drake
/s/ NOLAN R. SCHWARTZ
----------------------------------
Nolan R. Schwartz
/s/ GUY C. HECKMAN
----------------------------------
Guy C. Heckman
/s/ ROBERT M. DAVENPORT
----------------------------------
Robert M. Davenport
/s/ BETSY S. KENYON
----------------------------------
Betsy S. Kenyon
/s/ LINDSAY G. MORTNER
----------------------------------
Lindsay G. Mortner
/s/ JAMES G. HANNOOSH
----------------------------------
James G. Hannoosh
/s/ GENEVE E. HENDRICKS
----------------------------------
Geneve E. Hendricks
EXHIBIT 6 TO SCHEDULE 13D
AGREEMENT
Pursuant to Rule 13d-1(k)(1) promulgated under the Securities Exchange
Act of 1934, each of the undersigned hereby agrees that the Schedule 13D filed
in connection with his or her beneficial ownership of certain equity securities
of which this Agreement is an Exhibit is filed on behalf of each of us.
Each of the undersigned hereby further constitutes and appoints each
of Douglas G. Bailey and Nolan R. Schwartz as his attorney-in-fact, with power
to act jointly or severally, with power of substitution, for the undersigned in
any and all capacities, to sign the Schedule 13D and any amendments thereto, and
to file the same, with all exhibits thereto and other documents therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
This Agreement will be construed in accordance with laws of the United
States and the laws of the State of Connecticut.
This Agreement may be signed in one or more counterparts.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered
this Agreement as of April 30, 1998.
/s/ RALPH E. BAILEY
------------------------------
Ralph E. Bailey
/s/ DOUGLAS G. BAILEY
------------------------------
Douglas G. Bailey
/s/ NOLAN R. SCHWARTZ
------------------------------
Nolan R. Schwartz
/s/ GUY C. HECKMAN
------------------------------
Guy C. Heckman
/s/ J. WILLIAM DRAKE
------------------------------
J. William Drake
/s/ ROBERT M. DAVENPORT
------------------------------
Robert M. Davenport
/s/ BETSY S. KENYON
------------------------------
Betsy S. Kenyon
/s/ JAMES G. HANNOOSH
------------------------------
James G. Hannoosh
/s/ GENEVE E. HENDRICKS
------------------------------
Geneve E. Hendricks
/s/ LINDSAY G. MORTNER
------------------------------
Lindsay G. Mortner
