EXHIBIT 10.32
MANAGEMENT MEMBERS AGREEMENT
CONCERNING
NALCO LLC
DATED AS OF JUNE 11, 2004.
This MANAGEMENT MEMBERS AGREEMENT (the "Agreement") dated as of
June
11, 2004 by and among Nalco LLC (the "Company"), a Delaware limited
liability
company and the Persons who are or after the date hereof become
signatories
hereto (the "Management Members").
RECITALS
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WHEREAS, the Company is governed by that certain Second Amended and
Restated Limited Liability Company Operating Agreement (the "LLC
Agreement")
dated as of May 17, 2004.
WHEREAS, the Management Members will be providing services to the
Company or its Affiliates.
WHEREAS, each Management Member will subscribe for and acquire from
the
Company, and the Company will issue and sell to each Management
Member, the
Company's Class A Units (the "Units"), in the amounts set forth on
Schedule A to
the LLC Agreement, as the same may be amended from time to time;
WHEREAS, it is a condition to the sale of the Units that the
Management
Members enter into this Agreement;
WHEREAS, the Management Members will enter into the Registration
Rights
Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and
sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby
agree as
follows:
Management Members' Representations, Warranties and Agreements
(a) Units Unregistered. Each Management Member acknowledges and
represents that such Management Member has been advised by the
Company that:
(A) the offer and sale of the Units have not been registered
under the 1933 Act;
(B) the Units must be held and the Management Member must
continue to bear the economic risk of the investment in the Units
unless the offer and sale of such Units are subsequently registered
under the 1933 Act and all applicable state securities laws or an
exemption from such registration is available and the Units may
never
be so registered;
(C) there is no established market for the Units and it is not
anticipated that there will be any public market for the Units in
the
foreseeable future;
(D) a restrictive legend in the form set forth below shall be
placed on the certificates representing the Units:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON ______________, HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO CERTAIN TRANSFER AND OTHER
RESTRICTIONS SET FORTH IN THE LIMITED LIABILITY COMPANY
AGREEMENT, DATED AS OF MAY 17, 2004 AMONG NALCO LLC AND
CERTAIN OF ITS MEMBERS, THE MANAGEMENT MEMBERS AGREEMENTS,
DATED AS OF JUNE 11, 2004 AMONG NALCO LLC AND CERTAIN
MANAGEMENT MEMBERS NAMED THEREIN, THE REGISTRATION RIGHTS
AGREEMENT AMONG NALCO LLC AND CERTAIN OF ITS MEMBERS AND,
AMONG OTHER THINGS, MAY NOT BE OFFERED OR SOLD EXCEPT IN
COMPLIANCE WITH SUCH TRANSFER RESTRICTIONS. COPIES OF SUCH
LIMITED LIABILITY COMPANY AGREEMENT, SUCH MANAGEMENT MEMBERS
AGREEMENTS AND SUCH REGISTRATION RIGHTS AGREEMENT ARE ON FILE
WITH THE SECRETARY OF THE LIMITED LIABILITY COMPANY AND ARE
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR. THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE,
AGREES TO BE BOUND BY ALL OF THE APPLICABLE PROVISIONS OF THE
AFORESAID AGREEMENTS.";
(E) a restrictive legend in the form set forth below shall be
placed on the certificates representing the Units held by Georgia
residents:
"THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN
RELIANCE ON PARAGRAPH 13 OF CODE SECTION 10-5-9 OF THE
"GEORGIA SECURITIES ACT OF 1973," AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH
ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.";
and
(F) a notation shall be made in the appropriate records of the
Company indicating that the Units are subject to restrictions on
transfer and, if the Company should at some time in the future
engage
the services of a securities transfer agent, appropriate
stop-transfer
instructions may be issued to such transfer agent with respect to
the
Units.
(b) Additional Investment Representations. Each Management Member
represents and warrants that:
(A) the Management Member's financial situation is such that
such Management Member can afford to bear the economic risk of
holding
the Units for an indefinite period of time, has adequate means for
providing for the Management Member's current needs and personal
contingencies, and can afford to suffer a complete loss of the
Management Member's investment in the Units;
(B) the Management Member's knowledge and experience in
financial and business matters are such that the Management Member
is
capable of evaluating the merits and risks of the investment in the
Units;
(C) the Management Member understands that the Units are a
speculative investment which involves a high degree of risk of loss
of
Management Member's investment therein, there are substantial
restrictions on the transferability of the Units and, on the date
on
which such Management Member acquires such Units and for an
indefinite
period following such date, there will be no public market for the
Units and, accordingly, it may not be possible for the Management
Member to liquidate the Management Member's investment including in
case of emergency, if at all;
(D) the terms of this Agreement provide that if the Management
Member ceases to provide services to the Company and its
Affiliates,
the Company and its Affiliates have the right to repurchase the
Units
at a price which may be less than the Fair Market Value thereof;
(E) the Management Member understands and has taken cognizance
of all the risk factors related to the purchase of the Units and,
other
than as set forth in this Agreement, no representations or
warranties
have been made to the Management Member or Management Member's
representatives concerning the Units, the Company, the Subsidiaries
or
their respective prospects or other matters;
(F) the Management Member has been given the opportunity to
examine all documents and to ask questions of, and to receive
answers
from, the Company and its representatives concerning the Company
and
its subsidiaries, the acquisition of Nalco Company and certain
Subsidiaries of Nalco International S.A.S. by subsidiaries of the
Company, the LLC Agreement, the Company's organizational documents
and
the terms and conditions of the purchase of the Units and to obtain
any
additional information which the Management Member deems necessary;
and
(G) all information which the Management Member has provided
to the Company and the Company's representatives concerning the
Management Member and the Management Member's financial position is
complete and correct as of the date of this Agreement.
Section 1.04. Contingent Bonus. The Company shall cause one of its
Subsidiaries to pay a bonus to Management Members in the
circumstances set forth
in Exhibit A.
Transfers; Acceleration
(c) Transfer. (i) Until the occurrence of a Qualified IPO, except
as
required by law, no Management Member may directly or indirectly,
sell, contract
to sell, give, assign, hypothecate, pledge, encumber, grant a
security interest
in, offer, sell any option or contract to purchase, purchase any
option or
contract to sell, grant any option, right or warrant to purchase,
lend, or
otherwise transfer or dispose of any economic, voting or other
rights in or to
(collectively, "Transfer") any Units except pursuant to (i) Article
XI of the
LLC Agreement, (ii) Sections 2.02 or 2.04 hereof or (iii) a
Transfer to a
Manager Permitted Transferee (each a "Permitted Transfer").
(A) Following a Qualified IPO and the expiration of any
underwriter or Company "lock-up" period (as provided for in Section
4(a) of the Registration Rights Agreement or otherwise) applicable
to
such Qualified IPO, each Management Member may only Transfer its
Units
pursuant to (i) a Permitted Transfer, (ii) a Transfer pursuant to
Section 2.03, (iii) a Transfer in accordance with the Registration
Rights Agreement or (iv) a Transfer conducted in accordance with
the
requirements of Rule 144 promulgated under the 1933 Act; provided,
that
no Management Member shall make a Transfer pursuant to this clause
(iv)
without the Company's prior, written approval.
(B) No Transfer by any Management Member may be made pursuant
to this Article II unless (i) the transferee has agreed in writing
to
be bound by the terms and conditions of this Agreement and the LLC
Agreement (other than if the Transfer is conducted in accordance
with
the Registration Rights Agreement or the requirements of Rule 144
promulgated under the 1933 Act), (ii) the Transfer complies in all
respects with the applicable provisions of this Agreement, (iii)
the
Transfer complies in all respects with applicable federal and state
securities laws, including the 1933 Act and (iv) the Transfer is
made
in compliance with all applicable Company policies and restrictions
(including any trading "window periods" or other policies
regulating
insider trading); provided, that the conditions to Transfer
described
in clause (i) above shall not apply to a Transfer pursuant Article
XI
of the LLC Agreement or Sections 2.02, 2.03 or 2.04 hereof.
(d) No Transfer by any Management Member may be made pursuant to
this
Article II (except pursuant to an effective registration statement
under the
1933 Act) unless and until such Management Member has first
delivered to the
Company an opinion of counsel (reasonably acceptable in form and
substance to
the Company) that neither registration nor qualification under the
1933 Act and
applicable state securities laws is required in connection with
such Transfer.
(d) Call Option. (a) If a Management Member's Services to the
Company
or any Subsidiary terminate for any of the reasons set forth in
clauses (i),
(ii) or (iii) below (each such event a "Termination Event"), the
Company shall
have the right but not the obligation to purchase, from time to
time after such
termination of Services, any Units held by such Management Member
for a period
of 60 days (subject to extension as provided below) immediately
following the
later of (A) the date of the Termination Event and (B) the date
that is six (6)
months and one day after the date on which such Management Member
acquired such
Unit (the later of (A) and (B), the "First Purchase Date"), and
such Management
Member shall be required to sell to the Company, any or all of such
Units then
held by such Management Member, at a price per Unit equal to the
applicable
purchase price determined pursuant to Section 2.02(c):
(1) if such Management Member's Service with the Company and
its Subsidiaries is terminated due to the Disability or death of
the
Management Member;
(2) if such Management Member's Service with the Company and
its Subsidiaries is terminated by the Company and its Subsidiaries
without Cause or by the Management Member for any reason;
(3) if such Management Member's Service with the Company and
its Subsidiaries is terminated by the Company or any of its
Subsidiaries for Cause.
(b) If on the 61st day following the date of the Termination Event,
the
Company has not purchased all of a terminated Management Member's
Units, and the
Company has not opted to extend its 60 day election period pursuant
to Section
2.02(d), the Company shall on or before the 61st day provide
written notice to
the Investor Groups of (i) its decision not to purchase some or all
of such
Units and (ii) the number of such Management Member's Eligible
Units (defined
below) which the Company did not purchase, and the Investor Groups
shall have
the right to purchase and such Management Member shall be required
to sell to
the Investor Group(s), any or all of the Units (the "Eligible
Units") then held
by such Management Member at a price per Unit equal to the
applicable purchase
price determined pursuant to Section 2.02(c). The Investor Groups'
rights to
purchase such Eligible Units and each Management Member's
corresponding
obligation to sell such Eligible Units shall terminate on the 120th
day
following the date of the Termination Event. Upon receipt of the
written notice
described above, each Investor Group desiring to purchase Units
shall within 45
days of receipt of the Company's notice provide written notice to
the Company,
specifying that such Investor Group is willing to purchase either
(i) its pro
rata share of the Eligible Units (based upon the number of Units
held by such
Investor Group relative to the total number of Units held by all of
the Investor
Groups), (ii) a number of Eligible Units less than such Investor
Group's pro
rata share, or (iii) any and all Units available to be purchased;
provided, that
the Investor Groups shall, as much as reasonably practicable,
consult with each
other and coordinate the exercise of rights such that all Eligible
Units are
elected to be purchased. Upon receipt of the Investor Groups'
respective
notices, the Company will notify the Management Member of the
Investor Group(s)'
elections and the Management Member will be obligated to sell (x)
to the
Investor Groups making elections described in clauses (i) and (ii)
of the
preceding sentence, the number of Eligible Units elected to be
purchased by such
Investor Groups and (y) all remaining Eligible Units, if any, to
the Investor
Groups making the election described in clause (iii) of the
preceding sentence
to such Investor Group(s) on a pro rata basis (based upon the
number of Units
held by such Investor Group relative to the total number of Units
held by all of
the Investor Groups making such election), but in no event more
that any such
Investor Groups elected to purchase.
(c) In the event of a purchase by the Company pursuant to Section
2.02(a) and/or the Investor Group(s) pursuant to Section 2.02(b)
(each a "Units
Buyer"), the purchase price shall be:
(i) in the case of a Termination Event specified in Section
2.02(a)(i) or 2.02(a)(ii) a price per Unit equal to the most
recently
determined Fair Market Value, and
(ii) in the case of a Termination Event specified in Section
2.02(a)(iii), a price per Unit equal to the lesser of (1) Fair
Market
Value and (2) Cost.
(d) The Units Buyer may pay the purchase price for such Units (i)
by
delivery of funds deposited into an account designated by the
Management Member,
a bank cashier's check, a certified check or a company check of the
Units Buyer
for the purchase price; (ii) if the Units Buyer is the Company and
is prohibited
from paying cash by financing or liquidity constraints and is
unable to pay the
purchase price as provided in clause (iii), by delaying the
exercise of the
purchase right described under Section 2.02(a) until the earlier of
(x) when the
financing restrictions lapse and (y) when the Company is able to
pay the
purchase price as provided in clause (iii); or (iii) if the Units
Buyer is the
Company and has the right to purchase such Units during the period
following a
Qualified IPO (including in respect of a purchase that was delayed
pursuant to
clause (ii)), by delivery of a number of shares of Issuer Common
Stock
determined by dividing (A) the aggregate purchase price of the
Units being sold
by such Management Member by (B) the Public Share FMV as of the
close of trading
on the trading day immediately prior to the delivery thereof to the
Management
Member. Notwithstanding anything to the contrary in this Agreement,
the Units
Buyer may deduct and withhold from the amounts otherwise payable
pursuant to
this Agreement such amounts as necessary to comply with the
Internal Revenue
Code of 1986, as amended (the "Code"), or any other provision of
applicable law,
with respect to the making of such payment.
(e) Notwithstanding anything to the contrary elsewhere herein, the
Company shall not be obligated to purchase any Units at any time
pursuant to
this Section 2.02, regardless of whether it has delivered a notice
of its
election to purchase any such Units, (i) to the extent that (A) the
purchase of
such Units (together with any other purchases of Units pursuant to
Sections 2.02
or 2.03 hereof, or pursuant to similar provisions in any other
agreements with
other investors of which the Company has at such time been given or
has given
notice) or (B) in the event of an election to purchase such Units
with shares of
Issuer Common Stock, the issuance of such shares by the IPO Entity,
the purchase
of such shares by the Company or the distribution of such shares to
the
Management Member would result (x) in a violation of any law,
statute, rule,
regulation, policy, order, writ, injunction, decree or judgment
promulgated or
entered by any governmental authority applicable to the Company or
any of its
Subsidiaries or any of its or their assets (including any
unavailability of a
registration statement or exemption from registration necessary to
allow
delivery of shares of Issuer Common Stock to the Management
Member), (y) after
giving effect thereto (including any dividends or other
distributions or loans
from a Subsidiary of the Company to the Company in connection
therewith), in a
Financing Default or
(z) in the Company being required to disgorge any profit to the IPO
Entity
pursuant to Section 16(b) of the 1934 Act, (ii) if immediately
prior to such
purchase of Units, issuance of Issuer Common Stock or purchase of
shares of
Issuer Common Stock, as the case may be, there exists a Financing
Default which
prohibits such issuance or purchase (including any dividends or
other
distributions or loans from a Subsidiary of the Company to the
Company in
connection therewith), or (iii) if the Company does not have funds
available to
effect such purchase of Units or Issuer Common Stock. The Company
shall within
30 days of learning of any such fact so notify the Management
Member that it is
not obligated to purchase such Units and has deferred its right to
make such
purchase until such violation, potential liability under the 1933
Act or 1934
Act, Financing Default or unavailability of funds would not result
therefrom or
has ceased. The Company agrees to use commercially reasonable
efforts to cure
any such Financing Default that is curable. To the extent that,
pursuant to this
Section 2.02(e), the Company is not obligated to pay for a
Management Member's
Units in accordance with one of the payment methods described in
the first
sentence of Section 2.02(d), the Company shall, except as otherwise
permitted by
this Section 2.02(e), be required to pay for such Units pursuant to
an alternate
method of payment described in the first sentence of Section
2.02(d).
(f) Notwithstanding anything to the contrary contained in this
Section
2.02, any Units which the Company has elected to purchase from a
Management
Member, but which in accordance with Section 2.02(e) are not
purchased at the
applicable time provided in this Section 2.02, shall be purchased
by the Company
on the tenth Business Day after such date or dates that it is no
longer
permitted to defer purchasing such Units under Section 2.02(e), and
the Company
shall give such Management Member five Business Days prior notice
of any such
purchase.
(e) Put Right. (a) Subject to the Call Right described in Section
2.02,
following a Qualified IPO and for so long as no Termination Event
pursuant to
Section 2.02(a)(iii) shall have occurred with respect to a
Management Member,
such Management Member shall have the right, but not the
obligation, to sell
(the "Put Right") beginning on the later of (x) the first date
immediately
following the expiration of any Company or underwriter "lock-up"
period
applicable to such Qualified IPO and (y) the date that is at least
six (6)
months and one day after, the Sale Date ( the later of (x) and (y)
shall be
referred to as the "First Put Date"), and the Company shall be
required to
purchase from such Management Member, a number of such Management
Member's Units
as determined by such Management Member, at a price per Unit equal
to the Fair
Market Value as of the date the Management Member exercises such
Put Right. For
the avoidance of doubt, subject to the Call Right described in
Section 2.02, a
Management Member shall remain entitled to the Put Right following
a Termination
Event pursuant to Sections 2.02(a)(i) or (ii) with respect to such
Management
Member.
(b) Each Management Member who desires to sell any of his or her
Units
following the applicable First Put Date shall send written notice
to the Company
of his or her intention to sell such Units pursuant to this Section
2.03.
Subject to the exercise of any Call Right pursuant to Section 2.02,
the closing
of the purchase shall take place at the principal office of the
Company on a
date specified by the Company no later than 30 days after the
giving of such
notice.
(c) At the closing of a purchase pursuant to a Put Right, the
Company
will pay to the Management Member the purchase price for such Units
(determined
in accordance with Section 2.03(a)) by delivery of a number of
shares of Issuer
Common Stock determined by dividing (A) the aggregate purchase
price of the
Units being sold by such Management Member
by (B) the Public Share FMV as of the close of trading on the
trading day
immediately prior to the delivery thereof to the Management Member.
(d) Notwithstanding anything to the contrary elsewhere herein, the
Company shall not be obligated to purchase any Units at any time
pursuant to
this Section 2.03 (i) to the extent that (A) the purchase of such
Units
(together with any other purchases of Units pursuant to Sections
2.02 or 2.03
hereof, or pursuant to similar provisions in any other agreements
with other
investors of which the Company has at such time been given or has
given notice)
or (B) the issuance of shares by the IPO Entity or the purchase of
such shares
by the Company would result (x) in a violation of any law, statute,
rule,
regulation, policy, order, writ, injunction, decree or judgment
promulgated or
entered by any governmental authority applicable to the Company or
any of its
Subsidiaries or any of its or their assets (including any
unavailability of a
registration statement or exemption from registration necessary to
allow
delivery of shares of Issuer Common Stock to the Management
Member(s)), (y)
after
