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EXHIBIT 10.2
INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT,
DATED AS OF MARCH 28, 2000,
BY AND BETWEEN
CABOT CORPORATION
AND
CABOT MICROELECTRONICS CORPORATION
2
Exhibit 10.2
TABLE OF CONTENTS
Page
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1. DEFINITIONS 2
2. THE INITIAL PUBLIC OFFERING AND THE DISTRIBUTION 9
2.1. THE INITIAL PUBLIC OFFERING 9
2.2. THE DISTRIBUTION 9
2.3. CERTAIN STOCKHOLDER MATTERS 9
2.4. PRIOR RELATIONSHIP 10
2.5. FURTHER ASSURANCES REGARDING THE DISTRIBUTION 10
2.6. ABANDONMENT OF THE DISTRIBUTION 11
3. EXPENSES 11
3.1. GENERAL 11
3.2. CERTAIN EXPENSES RELATING TO THE INITIAL PUBLIC OFFERING AND THE SEPARATION 11
3.3. CERTAIN EXPENSES RELATING TO THE DISTRIBUTION 11
4. CERTAIN COVENANTS 12
4.1. FINANCIAL AND OTHER INFORMATION 12
4.2. OTHER COVENANTS 19
4.3. COVENANTS REGARDING THE INCURRENCE OF INDEBTEDNESS 21
5. INDEMNIFICATION 22
5.1. INDEMNIFICATION BY CMC 22
5.2. INDEMNIFICATION BY CABOT 23
5.3. OTHER LIABILITIES 24
5.4. TAX EFFECTS OF INDEMNIFICATION 24
5.5. EFFECT OF INSURANCE UPON INDEMNIFICATION 25
5.6. PROCEDURE FOR INDEMNIFICATION INVOLVING THIRD-PARTY CLAIMS 25
5.7. PROCEDURE FOR INDEMNIFICATION NOT INVOLVING THIRD-PARTY CLAIMS 27
5.8. EXCLUSIVE REMEDIES 27
6. MISCELLANEOUS 28
6.1. DISPUTE RESOLUTION 28
6.2. SURVIVAL 28
6.3. COMPLETE AGREEMENT 28
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6.4. AUTHORITY 28
6.5. GOVERNING LAW 28
6.6. CONSENT TO EXCLUSIVE JURISDICTION 29
6.7. NOTICES 29
6.8. AMENDMENT AND MODIFICATION 30
6.9. BINDING EFFECT; ASSIGNMENT 30
6.10. THIRD PARTY BENEFICIARIES 31
6.11. COUNTERPARTS 31
6.12. WAIVER 31
6.13. SEVERABILITY 31
6.14. REMEDIES 32
6.15. PERFORMANCE 32
6.16. REFERENCES; CONSTRUCTION 32
EXHIBITS
Agreements Subject to Section 4.2(e) Exhibit A
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INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT
This INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT (the
"Agreement") is made and entered into as of March 28, 2000, by and between Cabot
Corporation, a Delaware corporation ("Cabot"), and Cabot Microelectronics
Corporation, a Delaware corporation and a wholly owned subsidiary of Cabot
("CMC"). Certain capitalized terms used herein are defined in Section 1 of this
Agreement.
RECITALS
WHEREAS, the Board of Directors of Cabot has determined that
it would be in the best interests of Cabot and its stockholders to completely
separate the MMD Business from Cabot;
WHEREAS, Cabot has caused CMC to be incorporated in order to
effect such separation;
WHEREAS, Cabot and CMC have previously entered into the Master
Separation Agreement and the Ancillary Agreements (other than this Agreement),
each effective as of March 28, 2000, pursuant to which Cabot has contributed and
transferred to CMC, and CMC has received and assumed, the assets and liabilities
then associated with the MMD Business as described therein;
WHEREAS, Cabot and CMC intend that the Contribution qualify
either as a tax-free reorganization under Section 368(a)(1)(D) of the Code or as
a tax-free transfer of assets under Section 351 of the Code;
WHEREAS, Cabot currently owns all of the issued and
outstanding CMC Common Stock;
WHEREAS, CMC has previously filed the IPO Registration
Statement with the SEC but it has not yet become effective;
WHEREAS, the parties currently contemplate that, reasonably
promptly following the execution of this Agreement, CMC shall consummate the
Initial Public Offering;
WHEREAS, immediately following the consummation of the Initial
Public Offering, Cabot shall own approximately 82.6%of the outstanding shares of
CMC Common Stock (or approximately 80.5% if the underwriters exercise their
over-allotment option in full in accordance with the Underwriting Agreement);
WHEREAS, Cabot currently intends to divest itself of its
entire ownership of CMC within twelve months following the closing of the
Initial Public Offering by
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distributing in the Distribution all of its shares of CMC Common Stock to the
holders of Cabot Common Stock;
WHEREAS, Cabot currently expects to accomplish the
Distribution by means of a spin-off;
WHEREAS, Cabot and CMC intend that the Distribution will be
tax-free to Cabot and its stockholders under Section 355 of the Code;
WHEREAS, the parties intend in this Agreement to set forth the
principal arrangements between them regarding the Initial Public Offering and
the Distribution; and
WHEREAS, the parties hereto have determined that in order to
accomplish the objectives of the Initial Public Offering and the Distribution
and to facilitate the consummation thereof, it is necessary and desirable to
restructure certain intercompany relationships, allocate certain liabilities and
provide for certain indemnification, all as set forth herein;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereby agree as follows:
1. DEFINITIONS.
"Abandonment Notice" has the meaning set forth in Section 2.6.
"Active Trade or Business" means the active conduct of the
trade or business (as defined in Section 355(b)(2) of the Code and the
regulations thereunder) conducted by CMC immediately prior to the applicable
Distribution Date.
"Affiliate" means a CMC Affiliate or a Cabot Affiliate, as the
case may be.
"Agreement" has the meaning set forth in the Preamble.
"Ancillary Agreements" has the meaning ascribed to such term
in the Master Separation Agreement.
"Annual Financial Statements" has the meaning set forth in
Section 4.1(a)(vi).
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"Below the Threshold Action" has the meaning set forth in
Section 4.2(c).
"Business" means the CMC Business or the Cabot Business, as
the case may be.
"Business Day" means any day other than a Saturday, a Sunday,
or a day on which banking institutions located in the State of Illinois are
authorized or obligated by law or executive order to close.
"Cabot Affiliate" means a Person that, after giving effect to
the Distribution, directly or indirectly through one or more intermediaries, is
Controlled by Cabot.
"Cabot Annual Statements" has the meaning set forth in Section
4.1(b)(ii).
"Cabot Business" means any business or operations of Cabot or
any Cabot Affiliates other than the CMC Business.
"Cabot Common Stock" means the Common Stock, par value $1.00
per share, of Cabot.
"Cabot Disclosure Portions" means all material set forth in,
or incorporated by reference into, either the IPO Registration Statement or the
Distribution Registration Statement, as applicable, to the extent relating
exclusively to (i) Cabot and the Cabot Affiliates (excluding CMC and the CMC
Affiliates), (ii) the Cabot Business, (iii) Cabot's intentions with respect to
the Distribution or (iv) the terms of the Distribution, including, without
limitation, the form, structure and terms of any transaction(s) and/or
offering(s) to effect the Distribution and the timing of and conditions to the
consummation of the Distribution.
"Cabot Public Filings" has the meaning set forth in Section
4.1(a)(xiii).
"Cabot Transfer Agent" means Boston EquiServe, L.P., in its
capacity as the transfer agent and registrar for the Cabot Common Stock.
"Cabot's Auditors" has the meaning set forth in Section
4.1(c)(ii).
"Claim" has the meaning set forth in Section 5.7.
"CMC Affiliate" means a Person that, after giving effect to
the Distribution, directly or indirectly through one or more intermediaries, is
Controlled by, or is under common Control with CMC.
"CMC Business" means any business or operations of CMC or any
CMC Affiliates, including, in all cases, any predecessor entities (including,
without limitation,
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the MMD Business).
"CMC Capital Stock" means all classes or series of capital
stock of CMC.
"CMC Common Stock" means the Common Stock, par value $.001 per
share, of CMC.
"CMC Indebtedness" has the meaning set forth in Section 4.3.
"CMC Public Filings" has the meaning set forth in Section
4.1(a)(ix).
"CMC Transfer Agent" means Boston EquiServe, L.P., in its
capacity as the transfer agent and registrar for the CMC Common Stock.
"CMC's Auditors" has the meaning set forth in Section
4.1(b)(i).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, together with the rules and regulations promulgated
thereunder.
"Contribution" means the transfer of certain assets by Cabot
to CMC (and the assumption by CMC of certain liabilities) as contemplated by the
Master Separation Agreement.
"Control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"D Reorganization" means a transaction qualifying as a
reorganization under Section 368(a)(1)(D) of the Code.
"Disputes" has the meaning set forth in Section 7.1.
"Dispute Notice" means written notice of any dispute between
Cabot and CMC arising out of or relating to this Agreement, which shall set
forth, in reasonable detail, the nature of the dispute.
"Distribution" means the distribution of CMC Common Stock by
Cabot in one or more transactions occurring after the Initial Public Offering
that collectively have the effect that all shares of CMC Common Stock held by
Cabot are distributed to Cabot stockholders, whenever such transaction(s) shall
occur.
"Distribution Date" means any date or dates, as the case may
be, determined by Cabot, in its sole and absolute discretion, to be a date on
which shares of CMC Common Stock held by Cabot are distributed in connection
with the Distribution.
"Distribution Registration Statement" means any and all
registration
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statements, information statements or other documents filed by any party with
the SEC in connection with any transaction constituting part of the
Distribution, in each case as supplemented or amended from time to time.
"Employee Benefit Plan Issuance" shall have the meaning set
forth in Section 4.2(d).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, together with the rules and regulations promulgated
thereunder.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Indemnifying Party" means a Person that is obligated to
provide indemnification under this Agreement.
"Indemnitee" means a Person that is entitled to seek
indemnification under this Agreement.
"Indemnity Payment" means an amount that an Indemnifying Party
is required to pay to an Indemnitee under this Agreement.
"Initial Public Offering" means the initial public offering by
CMC of shares of CMC Common Stock as contemplated by the IPO Registration
Statement.
"Insurance Proceeds" means the payment received by an insured
from an insurance carrier or paid by an insurance carrier on behalf of the
insured, net of any applicable premium adjustment and tax effect.
"IPO Registration Statement" means the Registration Statement
on Form S-1, Registration No. 333-95093, of CMC, as supplemented and amended
from time to time.
"IRS" means Internal Revenue Service of the U.S. Department of
Treasury or any successor agency.
"Losses" means all losses, liabilities, claims, obligations,
demands, judgments, damages, dues, penalties, assessments, fines (civil or
criminal), costs, liens, expenses, forfeitures, settlements, or fees, reasonable
attorneys' fees and court costs, of any nature or kind, whether or not the same
would properly be reflected on a balance sheet, and "Loss" means any of these.
"Master Separation Agreement" means the Master Separation
Agreement by and between Cabot and CMC, dated as of March 28, 2000, as amended
from time to time.
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"MMD Business" has the meaning ascribed to such term in the
Master Separation Agreement.
"Notice" means any notice, request, claim, demand, or other
communication under this Agreement.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Pre-Distribution Period" means the period of time from the
date hereof until the completion of the Distribution.
"Quarterly Financial Statements" has the meaning set forth in
Section 4.1(a)(v).
"Regulation S-K" means Regulation S-K of the General Rules and
Regulations promulgated by the SEC.
"Regulation S-X" means Regulation S-X of the General Rules and
Regulations promulgated by the SEC.
"Representative" means, with respect to any Person, any of
such Person's directors, officers, employees, agents, consultants, advisors,
accountants or attorneys.
"Request" has the meaning set forth in Section 5.7.
"Rights Plan" means the Agreement by and between CMC and
BankBoston N.A., as Rights Agent, as amended from time to time.
"SEC" means the United States Securities and Exchange
Commission or any successor agency.
"Section 4.2(d) Per Share Fair Market Value" means, as of any
date of determination, (i) with respect to any share of CMC Common Stock or any
other share of CMC Capital Stock quoted on the Nasdaq National Market or any
other stock exchange or inter-dealer or other quotation system, the average of
the closing prices of CMC Common Stock or such other CMC Capital stock on the
Nasdaq National Market or such other stock exchange or inter-dealer or other
quotation system during the sixty (60) trading days immediately preceding such
date of determination (it being understood and agreed that if any class of CMC
Common Stock or CMC Capital Stock is traded and/or quoted on more than one stock
exchange or inter-dealer or other quotation system, the calculation to be made
pursuant to this clause (i) shall be based upon the closing prices of such class
of CMC Common Stock or CMC Capital Stock on the stock exchange or inter-
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dealer or other quotation system which had the greatest average daily trading
volume in shares of such class during the relevant sixty (60) trading day
period), and (ii) with respect to any share of CMC Capital Stock that is not
publicly traded, the per share fair market value as determined by a nationally
recognized investment banking firm mutually agreed by CMC and Cabot in their
reasonable discretion.
"Securities Act" means the Securities Act of 1933, as amended
from time to time, together with the rules and regulations promulgated
thereunder.
"Separate Counsel" has the meaning set forth in Section
5.6(b).
"Service Agent" means (i) for Cabot, The Corporation Trust
Company, with offices on the date hereof at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxx of Xxx Xxxxxx, Xxxxxxxx 00000; and (ii) for CMC, The Corporation Trust
Company, with offices on the date hereof at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxx of Xxx Xxxxxx, Xxxxxxxx 00000.
"Subsequent Tax Opinion/Ruling" means either (i) an opinion of
counsel selected by Cabot, in its sole and absolute discretion, confirming, in
form and substance reasonably satisfactory to Cabot, that, as a consequence of
the consummation of a subsequent transaction, no income, gain or loss for U.S.
federal income tax purposes will be recognized by Cabot, the stockholders or
former stockholders of Cabot, or any Cabot Affiliate with respect to the
Distribution, or (ii) an IRS private letter ruling to the same effect.
"Subsidiary" means with respect to any specified Person, any
corporation or other legal entity of which such Person or any of its
Subsidiaries Controls or owns, directly or indirectly, more than 50% of the
stock or other equity interest entitled to vote with respect to the election of
members to the board of directors or similar governing body; provided, however,
that for the purposes of this Agreement, neither CMC nor any of the Subsidiaries
of CMC shall be deemed to be Subsidiaries of Cabot or of any of the Subsidiaries
of Cabot.
"Tax" or "Taxes" has the meaning set forth in the Tax Sharing
Agreement.
"Tax Control" means, with respect to CMC, ownership of CMC
Capital Stock which constitutes at least 80% of both (i) the total combined
voting power of all outstanding shares of Voting Stock of CMC and (ii) each
class and series of CMC Capital Stock other than Voting Stock of CMC.
"Tax Counsel" means the law firm of Fried, Frank, Harris,
Xxxxxxx & Xxxxxxxx.
"Tax-Free Status of the Distribution" means the nonrecognition
of taxable gain or loss for U.S. federal income tax purposes to Cabot, Cabot
Affiliates and Cabot's stockholders in connection with the Distribution.
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"Tax Opinions/Rulings" means the opinions of Tax Counsel and
the rulings by the IRS deliverable to Cabot in connection with the Contribution
and the Distribution.
"Tax-Related Losses" means (i) all federal, state and local
Taxes (including interest and penalties thereon) imposed pursuant to any
settlement, final determination, judgment or otherwise; (ii) all accounting,
legal and other professional fees, and court costs incurred in connection with
such taxes; and (iii) all costs and expenses that may result from adverse tax
consequences to Cabot payable by Cabot or Cabot Affiliates.
"Tax Sharing Agreement" means the Tax Sharing Agreement
between Cabot and CMC, dated March 28, 2000.
"Third-Party Claim" means any claim, suit, arbitration,
inquiry, proceeding or investigation by or before any court, governmental or
other regulatory or administrative agency or commission or any arbitration
tribunal asserted by a Person other than Cabot or any Cabot Affiliate or CMC or
any CMC Affiliate which gives rise to a right of indemnification hereunder.
"Underwriting Agreement" means the Underwriting Agreement
between CMC and the underwriters relating to the Initial Public Offering, as
amended from time to time.
"Value" means with respect to any trade or business (or
portion thereof), the fair market value of the assets constituting such trade or
business, less the current liabilities associated with such trade or business,
in each case determined as of the applicable Distribution Date.
"Voting Stock" means with respect to any Person, all classes
and series of the capital stock of such Person entitled to vote generally in the
election of directors.
2. THE INITIAL PUBLIC OFFERING AND THE DISTRIBUTION.
2.1. THE INITIAL PUBLIC OFFERING. CMC shall consult with, and
cooperate in all respects with, Cabot in connection with the pricing of the CMC
Common Stock to be offered in the Initial Public Offering and shall, at Cabot's
direction, promptly take any and all actions necessary or desirable to
consummate the Initial Public Offering as contemplated by the IPO Registration
Statement and the Underwriting Agreement.
2.2. THE DISTRIBUTION. Cabot currently intends, following the
consummation of the Initial Public
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Offering, to complete the Distribution within six to twelve months of the date
of a letter ruling from the IRS confirming that the Distribution is tax-free to
Cabot. Cabot intends to complete the Distribution through means of a spin-off.
Cabot shall, in its sole and absolute discretion, determine whether to proceed
with all or part of the Distribution and all terms of the Distribution,
including, without limitation, the form, structure and terms of any
transaction(s) and/or offering(s) to effect the Distribution and the timing of
and conditions to the consummation of the Distribution. In addition, Cabot may
at any time and from time to time until the completion of the Distribution
modify or change the terms of the Distribution, including, without limitation,
by accelerating or delaying the timing of the consummation of all or part of the
Distribution. CMC shall cooperate with Cabot in all respects to accomplish the
Distribution and shall, at Cabot's direction, promptly take any and all actions
necessary or desirable to effect the Distribution, including, without
limitation, the registration under the Securities Act of CMC Common Stock on an
appropriate registration form or forms to be designated by Cabot. Cabot shall
select any investment banker(s) and manager(s) in connection with the
Distribution, as well as any financial printer, solicitation and/or exchange
agent and outside counsel for Cabot; provided that nothing herein shall prohibit
CMC from engaging (at its own expense) its own financial, legal, accounting and
other advisors in connection with the Distribution.
2.3. CERTAIN STOCKHOLDER MATTERS. From and after the
distribution of CMC Common Stock in connection with any transaction(s) included
as part of the Distribution and until such CMC Common Stock is duly transferred
in accordance with applicable law, CMC shall regard the Persons receiving CMC
Common Stock in such transaction(s) as record holders of CMC Common Stock in
accordance with the terms of such transaction(s) without requiring any action on
the part of such Persons. CMC agrees that, subject to any transfers of such
stock, (a) each such holder shall be entitled to receive all dividends payable
on, and exercise voting rights and all other rights and privileges with respect
to, the shares of CMC Common Stock then held by such holder and (b) each such
holder shall be entitled, without any action on the part of such holder, to
receive one or more certificates representing, or other evidence of ownership
of, the shares of CMC Common Stock then held by such holder. Cabot shall
cooperate, and shall instruct the Cabot Transfer Agent to cooperate, with CMC
and the CMC Transfer Agent, and CMC shall cooperate, and shall instruct the CMC
Transfer Agent to cooperate, with Cabot and the Cabot Transfer Agent, in
connection with all aspects of the Distribution and all other matters relating
to the issuance and delivery of certificates representing, or other evidence of
ownership of, the shares of CMC Common Stock distributed to the holders of Cabot
Common Stock in connection with any transaction(s) included as part of the
Distribution. Following the Distribution, Cabot shall instruct the Cabot
Transfer Agent to deliver to the CMC Transfer Agent true, correct and complete
copies of the stock and transfer records reflecting the holders of Cabot Common
Stock receiving shares of CMC Common Stock in connection with any transaction(s)
included as part of the Distribution.
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2.4. PRIOR RELATIONSHIP. CMC, with respect to CMC and all of
the CMC Affiliates, and Cabot, with respect to Cabot and all of the Cabot
Affiliates, agree to take all commercially reasonable action to discontinue
their respective uses as promptly as is commercially reasonable of any printed
material that indicates an ownership or other relationship between or among
Cabot and CMC or any of their respective Affiliates that has changed as a result
of the Initial Public Offering, the Distribution or any other transactions
contemplated hereby; provided that this Section 2.4 shall not prohibit the use
of printed material containing appropriate and accurate references to such
relationship.
2.5. FURTHER ASSURANCES REGARDING THE DISTRIBUTION. In
addition to the actions specifically provided for elsewhere in this Agreement,
CMC shall, at Cabot's direction, use all commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things commercially reasonably necessary, proper or expeditious under applicable
laws, regulations and agreements in order to consummate and make effective the
Distribution as promptly as reasonably practicable. Without limiting the
generality of the foregoing, CMC shall, at Cabot's direction, cooperate with
Cabot, and execute and deliver, or use all commercially reasonable efforts to
cause to have executed and delivered, all instruments, including instruments of
conveyance, assignment and transfer, and to make all filings with, and to obtain
all consents, approvals or authorizations of, any domestic or foreign
governmental or regulatory authority requested by Cabot in order to consummate
and make effective the Distribution.
2.6. ABANDONMENT OF THE DISTRIBUTION. The parties expressly
acknowledge and agree that Cabot is not obligated in any respect to proceed with
or complete the Distribution and that Cabot may, in its sole and absolute
discretion, at any time abandon its plans to proceed with or complete the
Distribution. In the event that Cabot so determines that it no longer intends to
proceed with or complete the Distribution, Cabot shall provide to CMC a written
notification of such determination (an "Abandonment Notice"). Effective as of
the date of the Abandonment Notice, (a) provided that no Distribution Date has
yet occurred, Sections 4.2 and 4.3 of this Agreement shall terminate, become
null and void and have no further force and effect (it being expressly
understood and agreed by the parties that such Sections shall remain in full
force and effect in the event that a Distribution Date has occurred on or prior
to the date of the Abandonment Notice) and (b) Cabot's rights, and CMC's
obligations, set forth in the Registration Rights Agreement shall immediately
become effective.
3. EXPENSES.
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3.1. GENERAL. Except as otherwise provided in this Agreement,
the Master Separation Agreement, any of the other Ancillary Agreements or any
other agreement between the parties relating to the Contribution, the Initial
Public Offering or the Distribution, all costs and expenses of either party
hereto in connection with the Contribution, the Initial Public Offering and the
Distribution shall be paid by the party that incurs such costs and expenses.
3.2. CERTAIN EXPENSES RELATING TO THE INITIAL PUBLIC OFFERING
AND THE SEPARATION. CMC shall be liable for all costs, fees and expenses
relating to the Initial Public Offering. CMC shall also be liable for all costs,
fees and expenses relating to the transfer of Assets from Cabot and the Relevant
Cabot Subsidiaries to CMC and the assumption by CMC of the Assumed Liabilities,
all in accordance with the Master Separation Agreement (as all such capitalized
terms (except for the Master Separation Agreement, are defined in the Master
Separation Agreement)).
3.3. CERTAIN EXPENSES RELATING TO THE DISTRIBUTION. Cabot
shall liable for all costs, fees and expenses relating to the Distribution;
provided that CMC shall be responsible for the payment of (a) the costs, fees
and expenses of all of CMC's financial, legal, accounting and other advisors
incurred in connection with the Distribution and (b) any internal fees, costs
and expenses incurred by CMC or any CMC Affiliate in connection with the
Distribution.
4. CERTAIN COVENANTS.
4.1. FINANCIAL AND OTHER INFORMATION.
(a) CMC Financial Information. CMC agrees that, for so long as
Cabot is required to consolidate CMC's results of operations and financial
position or to account for its investment in CMC under the equity method of
accounting (determined in accordance with generally accepted accounting
principles consistently applied):
(i) CMC shall, and shall cause each of its
Subsidiaries to, maintain a system of internal accounting
controls that will provide reasonable assurance that: (A)
CMC's and such Subsidiaries' books, records
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and accounts fairly reflect all transactions and dispositions
of assets and (B) the specific objectives of accounting
control are achieved.
(ii) CMC shall, and shall cause each of its
Subsidiaries to, maintain a fiscal year which commences on
October 1 and ends on September 30 of each calendar year.
(iii) CMC shall deliver to Cabot all schedules
consistent with Cabot's corporate closing requirements and in
a time consistent with Cabot's corporate closing schedule.
(iv) As soon as practicable, and in any event within
35 days after the end of each of the first three fiscal
quarters in each fiscal year of CMC and no later than five
days before CMC intends to file its Quarterly Financial
Statements (as defined below) with the SEC, CMC shall deliver
to Cabot drafts of (A) the consolidated financial statements
of CMC and its Subsidiaries (and notes thereto) for such
periods and for the period from the beginning of the current
fiscal year to the end of such quarter, setting forth in each
case in comparative form for each such fiscal quarter of CMC
the consolidated figures (and notes thereto) for the
corresponding quarter and periods of the previous fiscal year
and all in reasonable detail and prepared in accordance with
Article 10 of Regulation S-X, and (B) a discussion and
analysis by management of CMC's and its Subsidiaries'
financial condition and results of operations for such fiscal
period, including, without limitation, an explanation of any
material adverse change, all in reasonable detail and prepared
in accordance with Item 303(b) of Regulation S-K. The
information set forth in (A) and (B) above is herein referred
to as the "Quarterly Financial Statements." No later than the
earlier of (x) two Business Days prior to the date CMC
publicly files the Quarterly Financial Statements with the SEC
or otherwise makes such Quarterly Financial Statements
publicly available or (y) two Business Days prior to the date
on which Cabot has notified CMC that it intends to file its
quarterly financial statements with the SEC, CMC shall deliver
to Cabot the final form of the Quarterly Financial Statements
certified by the chief financial officer of CMC as presenting
fairly, in all material respects, the financial condition and
results of operations of CMC and its Subsidiaries; provided
that CMC may continue to revise such Quarterly Financial
Statements prior to the filing thereof in order to make
corrections and changes which corrections and changes shall be
delivered by CMC to Cabot as soon as practicable, and in any
event within eight hours thereafter; and, provided, further,
that Cabot and CMC financial representatives shall actively
consult with each other regarding any changes (whether or not
substantive) which CMC may consider making to its Quarterly
Financial Statements and related
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disclosures during the three Business Days immediately prior
to any anticipated filing with the SEC, and CMC shall obtain
Cabot's consent prior to making any change to CMC's Quarterly
Financial Statements or related disclosures which would have
an effect upon Cabot's financial statements or related
disclosures. In addition to the foregoing, no Quarterly
Financial Statement or any other document which refers, or
contains information with respect, to the ownership of CMC by
Cabot, the separation of CMC from Cabot or the Distribution
shall be filed with the SEC or otherwise made public by CMC or
any of its Subsidiaries without the prior written consent of
Cabot.
(v) CMC shall deliver to Cabot as soon as
practicable, and in any event within 45 days after the end of
each fiscal year of CMC and no later than 10 days before CMC
intends to file its Annual Financial Statements (as defined
below) with the SEC, (A) drafts of the consolidated financial
statements of CMC (and notes thereto) for such year, setting
forth in each case in comparative form the consolidated
figures (and notes thereto) for the previous fiscal year and
all in reasonable detail and prepared in accordance with
Regulation S-X and (B) a discussion and analysis by management
of CMC's and its Subsidiaries' financial condition and results
of operations for such year, including, without limitation, an
explanation of any material adverse change, all in reasonable
detail and prepared in accordance with Item 303(a) of
Regulation S-K. The information set forth in (A) and (B) above
is herein referred to as the "Annual Financial Statements."
CMC shall deliver to Cabot all revisions to such drafts as
soon as any such revisions are prepared or made. No later than
the earlier of (1) five Business Days prior to the date CMC
publicly files the Annual Financial Statements with the SEC or
otherwise makes such Annual Financial Statements publicly
available or (2) five Business Days prior to the date on which
Cabot has notified CMC that it intends to file its annual
financial statements with the SEC, CMC shall deliver to Cabot
the final form of the Annual Financial Statements certified by
the chief financial officer of CMC as presenting fairly, in
all material respects, the financial condition and results of
operations of CMC and its Subsidiaries; provided that CMC may
continue to revise such Annual Financial Statements prior to
the filing thereof in order to make corrections and changes
which corrections and changes shall be delivered by CMC to
Cabot as soon as practicable, and in any event within eight
hours thereafter; and, provided, further, that Cabot and CMC
financial representatives shall actively consult with each
other regarding any changes (whether or not substantive) which
CMC may consider making to its Annual Financial Statements and
related disclosures during the three Business Days immediately
prior to any anticipated filing with the SEC, and CMC shall
obtain Cabot's consent prior
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17
to making any change to CMC's Annual Financial Statements or
related disclosures which would have an effect upon Cabot's
financial statements or related disclosures. In addition to
the foregoing, no Annual Financial Statement or any other
document which refers, or contains information with respect,
to the ownership of CMC by Cabot, the separation of CMC from
Cabot or the Distribution shall be filed with the SEC or
otherwise made public by CMC or any of its Subsidiaries
without the prior written consent of Cabot. In any event, CMC
shall deliver to Cabot, no later than 70 days after the end of
each fiscal year of CMC, the final form of the Annual
Financial Statements accompanied by an opinion thereon by
CMC's independent certified public accountants.
(vi) CMC shall deliver to Cabot all Quarterly and
Annual Financial Statements of each Subsidiary of CMC which is
itself required to file financial statements with the SEC or
otherwise make such financial statements publicly available,
with such financial statements to be provided in the same
manner and detail and on the same time schedule as those
financial statements of CMC required to be delivered to Cabot
pursuant to this Section 4.1.
(vii) All information provided by CMC or any of its
Subsidiaries to Cabot pursuant to Sections 4.1(a)(iii) through
(vii) inclusive shall be consistent in terms of format and
detail and otherwise with the procedures in effect on the date
hereof with respect to the provision of such financial
information by the CMC Business and/or CMC and its
Subsidiaries, as applicable, to Cabot (and, where appropriate,
as presently presented in financial reports to Cabot's Board
of Directors), with such changes therein as may be requested
by Cabot from time to time consistent with changes in
reporting by sectors and Subsidiaries of Cabot.
(viii) CMC and each of its Subsidiaries which files
information with the SEC shall deliver to Cabot: (A) as soon
as the same are prepared, substantially final drafts of: (x)
all reports, notices and proxy and information statements to
be sent or made available by CMC or any of its Subsidiaries to
their security holders, (y) all regular, periodic and other
reports to be filed under Sections 13, 14 and 15 of the
Exchange Act (including Reports on Forms 10-K, 10-Q and 8-K
and Annual Reports to Shareholders), and (z) all registration
statements and prospectuses to be filed by CMC or any of its
Subsidiaries with the SEC or any securities exchange pursuant
to the listed company manual (or similar requirements) of such
exchange (collectively, the documents identified in clauses
(x), (y) and (z) are referred to herein as "CMC Public
Filings"), and (B) as soon as practicable, but in no event
later than five Business Days prior to the date
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18
the same are printed, sent or filed, whichever is earliest,
final copies of all such CMC Public Filings; provided that CMC
may continue to revise such CMC Public Filings prior to the
filing thereof in order to make corrections and changes which
corrections and changes shall be delivered by CMC to Cabot as
soon as practicable, and in any event within four hours
thereafter; and, provided, further, that Cabot and CMC
financial representatives shall actively consult with each
other regarding any changes (whether or not substantive) which
CMC may consider making to any of its CMC Public Filings and
related disclosures prior to any anticipated filing with the
SEC, and CMC shall obtain Cabot's consent prior to making any
change to its CMC Public Filings or related disclosures which
would have an effect upon Cabot's financial statements or
related disclosures. In addition to the foregoing, no CMC
Public Filings or any other document which refers, or contains
information with respect, to the ownership of CMC by Cabot,
the separation of CMC from Cabot or the Distribution shall be
filed with the SEC or otherwise made public by CMC or any of
its Subsidiaries without the prior written consent of Cabot.
(ix) CMC shall, as promptly as practicable, deliver
to Cabot copies of all annual and other budgets and financial
projections (consistent in terms of format and detail and
otherwise with the procedures in effect on the date hereof)
relating to CMC or any of its Subsidiaries and shall provide
Cabot an opportunity to meet with management of CMC to discuss
such budgets and projections.
(x) With reasonable promptness, CMC shall deliver to
Cabot such additional financial and other information and data
with respect to CMC and its Subsidiaries and their business,
properties, financial positions, results of operations and
prospects as from time to time may be reasonably requested by
Cabot.
(xi) Prior to issuance, CMC shall deliver to Cabot
copies of substantially final drafts of all press releases and
other statements to be made available by CMC or any of its
Subsidiaries to employees of CMC or any of its Subsidiaries or
to the public concerning material developments in the
business, properties, earnings, results of operations,
financial condition or prospects of CMC or any of its
Subsidiaries or the relationship between (A) CMC or any of its
Subsidiaries and (B) Cabot or any of its Affiliates. In
addition, prior to the issuance of any such press release or
public statement, CMC shall consult with Cabot regarding any
changes (other than typographical or other similar minor
changes) to such substantially final drafts. Immediately
following the issuance thereof, CMC shall deliver to Cabot
copies of final drafts of all press releases and other public
statements.
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19
CMC and Cabot will consult with each other as to the timing of
their annual and quarterly earnings releases and will give
each other an opportunity to review the information therein
relating to CMC and its Subsidiaries and to comment thereon.
(xii) CMC shall cooperate fully, and cause its
accountants to cooperate, with Cabot to the extent reasonably
requested by Cabot in the preparation of Cabot's public
earnings releases, quarterly reports on Form 10-Q, Annual
Reports to Shareholders, Annual Reports on Form 10-K, any
Current Reports on Form 8-K and any other proxy, information
and registration statements, reports, notices, prospectuses
and any other filings made by Cabot with the SEC, any national
securities exchange or otherwise made publicly available
(collectively, "Cabot Public Filings"). CMC agrees to provide
to Cabot all information that Cabot reasonably requests in
connection with any Cabot Public Filings or that, in the
judgment of Cabot's legal staff, is required to be disclosed
or incorporated by reference therein under any law, rule or
regulation. Such information shall be provided by CMC in a
timely manner on the dates reasonably requested by Cabot
(which may be earlier than the dates on which CMC otherwise
would be required hereunder to have such information
available) to enable Cabot to prepare, print and release all
Cabot Public Filings on such dates as Cabot shall determine.
CMC shall cause its accountants to consent to any reference to
them as experts in any Cabot Public Filings required under any
law, rule or regulation. If and to the extent reasonably
requested by Cabot, CMC shall diligently and promptly review
all drafts of such Cabot Public Filings and prepare in a
diligent and timely fashion any portion of such Cabot Public
Filing pertaining to CMC. Prior to any printing or public
release of any Cabot Public Filing, an appropriate executive
officer of CMC shall, if requested by Cabot, certify that the
information relating to CMC, any CMC Affiliate or the CMC
Business in such Cabot Public Filing is accurate, true and
correct in all material respects. Unless required by law, rule
or regulation, CMC shall not publicly release any financial or
other information which conflicts with the information with
respect to CMC, any CMC Affiliate or the CMC Business that is
included in any Cabot Public Filing without Cabot's prior
written consent. Prior to the release or filing thereof, Cabot
shall provide CMC with a draft of any portion of a Cabot
Public Filing containing information relating to CMC and its
Subsidiaries and shall give CMC an opportunity to review such
information and comment thereon; provided that Cabot shall
determine in its sole discretion the final form and content of
all Cabot Public Filings.
(b) Cabot shall cooperate fully, and cause its accountants to
cooperate fully, with CMC to the extent reasonably requested by CMC in the
preparation of any
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20
CMC Public Filings. Cabot agrees to provide to CMC all
information that CMC reasonably requests in connection with any CMC Public
Filings or that, in the judgment of CMC's legal staff, is required to be
disclosed or incorporated by reference therein under any law, rule or
regulation. Such information shall be provided by Cabot in a timely manner on
the dates reasonably requested by CMC (which may be earlier than the dates on
which Cabot otherwise would be required hereunder to have such information
available) to enable CMC to prepare, print and release all CMC Public Filings on
such dates as CMC shall determine. Cabot shall cause its accountants to consent
to any reference to them as experts in any CMC Public Filings required under any
law, rule or regulation. If and to the extent reasonably requested by CMC, Cabot
shall diligently and promptly review all drafts of such CMC Public Filings and
prepare in a diligent and timely fashion any portion of such CMC Public Filing
pertaining to Cabot. Prior to any printing or public release of any CMC Public
Filing, an appropriate executive officer of Cabot shall, if requested by CMC,
certify that the information relating to Cabot, any Cabot Affiliate or any of
their respective businesses in such CMC Public Filing is accurate, true and
correct in all material respects. Unless required by law, rule or regulation,
Cabot shall not publicly release any financial or other information which
conflicts with the information with respect to Cabot, any Cabot Affiliate or any
of their respective businesses that is included in any CMC Public Filing without
CMC's prior written consent. Prior to the release or filing thereof, CMC shall
provide Cabot with a draft of any portion of a CMC Public Filing containing
information relating to Cabot and its Subsidiaries and shall give Cabot an
opportunity to review such information and comment thereon; provided that CMC
shall determine in its sole discretion the final form and content of all CMC
Public Filings.
(c) Auditors and Audits; Annual Statements and Accounting. CMC
agrees that, for so long as Cabot is required to consolidate CMC's results of
operations and financial position or to account for its investment in CMC under
the equity method of accounting (in accordance with generally accepted
accounting principles):
(i) CMC shall not select a different accounting firm
than PricewaterhouseCoopers, LLP to serve as its (and its
Subsidiaries') independent certified public accountants
("CMC's Auditors") without Cabot's prior written consent
(which shall not be unreasonably withheld).
(ii) CMC shall use its reasonable best efforts to
enable the CMC's Auditors to complete their audit such that
they will date their opinion on CMC's audited annual financial
statements on the same date that Cabot's independent certified
public accountants ("Cabot's Auditors") date their opinion on
Cabot's audited annual financial statements (the "Cabot Annual
Statements"), and to enable Cabot to meet its timetable for
the printing, filing and public dissemination of the Cabot
Annual Statements.
(iii) CMC shall provide to Cabot on a timely basis
all information
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that Cabot reasonably requires to meet its schedule for the
preparation, printing, filing, and public dissemination of the
Cabot Annual Statements. Without limiting the generality of
the foregoing, CMC will provide all required financial
information with respect to CMC and its Subsidiaries to CMC's
Auditors in a sufficient and reasonable time and in sufficient
detail to permit CMC's Auditors to take all steps and perform
all reviews necessary to provide sufficient assistance to
Cabot's Auditors with respect to information to be included or
contained in the Cabot Annual Statements.
(iv) CMC shall authorize CMC's Auditors to make
available to Cabot's Auditors both the personnel who performed
or are performing the annual audit of CMC and work papers
related to the annual audit of CMC, in all cases within a
reasonable time prior to CMC's Auditors' opinion date, so that
Cabot's Auditors are able to perform the procedures they
consider necessary to take responsibility for the work of
CMC's Auditors as it relates to Cabot's Auditors' report on
Cabot's statements, all within sufficient time to enable Cabot
to meet its timetable for the printing, filing and public
dissemination of the Cabot Annual Statements.
(v) CMC shall provide Cabot's internal auditors
access to CMC's and its Subsidiaries, books and records so
that Cabot may conduct reasonable audits relating to the
financial statements provided by CMC pursuant hereto as well
as to the internal accounting controls and operations of CMC
and its Subsidiaries.
(vi) CMC shall give Cabot as much prior notice as
reasonably practical of any proposed determination of, or any
significant changes in, its accounting estimates or accounting
principles from those in effect on the date hereof. CMC will
consult with Cabot and, if requested by Cabot, CMC will
consult with Cabot's independent public accountants with
respect thereto. CMC will not make any such determination or
changes without Cabot's prior written consent if such a
determination or a change would be sufficiently material to be
required to be disclosed in CMC's financial statements as
filed with the SEC or otherwise publicly disclosed therein.
(vii) Notwithstanding clause (vi) above, CMC shall
make any changes in its accounting estimates or accounting
principles that are requested by Cabot in order for CMC's
accounting estimates and principles to be consistent with
those of Cabot.
Nothing in this Section 4.1 shall require CMC to violate any agreement with any
of its customers regarding the confidentiality of commercially sensitive
information relating to that customer or its business; provided that in the
event that CMC is required under this Section 4.1 to disclose any such
information, CMC shall use all commercially reasonable
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22
efforts to seek to obtain such customer's consent to the disclosure of such
information.
4.2. OTHER COVENANTS. CMC hereby covenants and agrees that,
for so long as Cabot beneficially owns at least 50% of the outstanding shares of
CMC Common Stock:
(a) CMC shall not, without the prior written consent of Cabot
(which it may withhold in its sole and absolute discretion), take, or cause to
be taken, directly or indirectly, any action, including making or failing to
make any election under the law of any state, which has the effect, directly or
indirectly, of restricting or limiting the ability of Cabot to freely sell,
transfer, assign, pledge or otherwise dispose of shares of CMC Common Stock or,
other than as provided in the Rights Plan, would restrict or limit the rights of
any transferee of Cabot as a holder of CMC Common Stock. Without limiting the
generality of the foregoing, CMC shall not, without the prior written consent of
Cabot (which it may withhold in its sole and absolute discretion), (i) amend,
supplement, restate, modify or alter the Rights Plan or any successor
stockholder rights plan in any manner that would result in (A) the ownership of
CMC Common Stock by Cabot causing the rights thereunder to detach or become
exercisable and/or (B) Cabot and its transferees not being entitled to the same
rights thereunder as other holders of CMC Common Stock or (ii) take any action,
or take any action to recommend to its stockholders any action, which would
among other things, limit the legal rights of, or deny any benefit to, Cabot as
a CMC stockholder in a manner not applicable to CMC stockholders generally.
(b) CMC shall not, without the prior written consent of Cabot
(which it may withhold in its sole and absolute discretion), issue any shares of
CMC Capital Stock or any rights, warrants or options to acquire CMC Capital
Stock (including, without limitation, securities convertible or exchangeable for
CMC Capital Stock), if after giving effect to such issuances and considering all
of the shares of CMC Capital Stock acquirable pursuant to such rights, warrants
and options to be outstanding on the date of such issuance (whether or not then
exercisable), Cabot would own less than 80.5% of the then outstanding shares of
CMC Common Stock.
(c) Subject to Section 4.2(d), if Cabot determines in its sole
discretion that CMC has taken, is taking or will or will likely undertake any
action, including, without limitation, the issuance or distribution of any
equity securities, that has or will or will likely result in Cabot owning less
than 80.5% of the then outstanding shares of CMC Capital Stock (a "Below the
Threshold Action"), (i) CMC shall, at Cabot's option, (x) upon notice from Cabot
immediately seek to reverse any such action already taken, cease any such action
being taken or not take any future action, as the case may be, in each case to
the satisfaction of Cabot or (y) issue or otherwise distribute to Cabot, at no
cost to Cabot, additional equity securities such that, after the consummation of
any such action Cabot will again or will continue to (as the case may be) own
not less than 80.5% of the then outstanding shares of CMC Capital Stock, or (ii)
Cabot shall have the right to
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purchase shares of CMC Capital Stock on the open market or from third parties
sufficient to ensure that after the consummation of any such action Cabot will
again or will continue to (as the case may be) own not less than 80.5% of the
then outstanding shares of CMC Capital Stock, and CMC shall promptly reimburse
Cabot for the purchase price of such shares of CMC Capital Stock, together with
all fees, commissions and other expenses incurred by Cabot in making such
purchase.
(d) If Cabot determines in its sole discretion that CMC has
taken, is taking or will or will likely undertake a Below the Threshold Action
after the second anniversary of the closing date of the Initial Public Offering
consisting solely of, or solely as a result of, the issuance of CMC Common Stock
under CMC's 2000 Equity Incentive Plan or CMC's Employee Stock Purchase Plan as
such plans are in effect on such closing date (an "Employee Benefit Plan
Issuance"), (i) CMC shall have no obligation to comply with Section
4.2(c)(i)(x), (ii) any additional equity securities of CMC required to be issued
or otherwise distributed by CMC to Cabot in accordance with Section 4.2(c)(i)(y)
shall be issued to Cabot at a price per share equal to the Section 4.2(d) Per
Share Fair Market Value and (iii) CMC shall have no obligation to reimburse
Cabot for purchases by Cabot of CMC Capital Stock on the open market or from
third parties in accordance with Section 4.2(c)(ii), provided that this Section
4.2(d) shall be of no force and effect and Section 4.2(c) shall continue to
apply to any Below the Threshold Action if Cabot determines, in its reasonable
discretion, that (x) the Below the Threshold Action is not solely attributable
to an Employee Benefit Plan Issuance or (y) it cannot in good faith determine
whether the Below the Threshold Action is solely attributable to an Employee
Benefit Plan Issuance.
(e) To the extent that Cabot is a party to any contracts or
agreements that provide that certain actions of Cabot's Subsidiaries may result
in Cabot being in breach of or in default under such agreements and Cabot has
advised CMC of the existence, and has furnished CMC with copies, of such
contracts or agreements (or the relevant portions thereof), CMC shall not take
any actions that reasonably could result in Cabot being in breach of or in
default under any such contract or agreement. As of the date hereof, the
contracts and agreements (or relevant portions thereof) applicable to this
covenant are set forth on Exhibit A attached hereto. CMC hereby acknowledges and
agrees that Cabot has furnished it with copies of each contract or agreement (or
the relevant portion thereof) listed on Exhibit A. The parties acknowledge and
agree that, after the date hereof, Cabot may in good faith (and not solely with
the intention of imposing restrictions on CMC pursuant to this covenant) enter
into additional contracts or agreements that provide that certain actions of
Cabot's Subsidiaries may result in Cabot being in breach of or in default under
such agreements. In such event, Exhibit A shall be deemed to be automatically
amended to reflect the addition of any other contracts or agreements (or
relevant portions thereof) of which Cabot advises CMC after the date hereof in
accordance with this Section 4.2(e). CMC agrees to keep confidential and not to
disclose any information provided to it pursuant to this Section 4.2(e).
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4.3. COVENANTS REGARDING THE INCURRENCE OF INDEBTEDNESS.
(a) CMC hereby covenants and agrees that, for so long as Cabot
continues to beneficially own at least 50% of the outstanding shares of CMC
Common Stock, CMC shall not, and shall not permit any of its Subsidiaries to,
without Cabot's prior written consent (which it may withhold in its sole and
absolute discretion), create, incur, assume or suffer to exist any CMC
Indebtedness in excess of an aggregate of $50,000,000 outstanding at any time.
(b) In order to implement this Section 4.3, CMC shall notify
Cabot in writing at least 15 Business Days prior to the time it or any of its
Subsidiaries contemplates incurring any CMC Indebtedness or agreeing to acquire
Control of an Acquisition Target of its intention to do so and shall either (i)
demonstrate to Cabot's satisfaction that this Section 4.3 shall not be violated
by such proposed additional CMC Indebtedness or acquisition or (ii) obtain
Cabot's prior written consent to such proposed additional CMC Indebtedness or
acquisition. Any such written notification from CMC to Cabot shall include
documentation of any existing CMC Indebtedness and estimated CMC Indebtedness
after giving effect to such proposed incurrence of additional CMC Indebtedness
or acquisition and, if delivered in connection with any transaction(s) involving
an Acquisition Target, (A) documentation of the Acquisition Target's Target
Indebtedness, (B) calculations of the Acquisition Target's FFO to Debt Ratio and
(C) calculations of compliance with this Section 4.3, including the Adjusted CMC
Indebtedness, if applicable. Cabot shall have the right to verify the accuracy
of such information and CMC shall cooperate fully with Cabot in such effort
(including, without limitation, by providing Cabot with access to the working
papers and underlying documentation related to any calculations used in
determining such information).
(c) For purposes of this Section 4.3, the following terms
shall have the following meanings:
"CMC Indebtedness" means the sum of (i) the aggregate
principal amount of total liabilities (whether long-term or short-term) for
borrowed money (including capitalized leases) of CMC and its Subsidiaries, as
determined for purposes of its consolidated financial statements prepared in
accordance with GAAP, and (ii) the aggregate amount attributable to all
factoring or securitization of receivables and other financial assets by CMC and
its Subsidiaries.
5. INDEMNIFICATION.
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5.1. INDEMNIFICATION BY CMC. Subject to Section 5.3, CMC shall
indemnify, defend and hold harmless Cabot, all Cabot Affiliates and each of
their respective directors, officers and employees (in their capacities as
such), from and against:
(a) all Losses relating to, arising out of, or due to,
directly or indirectly, any breach by CMC or any CMC Affiliate of any of the
provisions of this Agreement;
(b) all Losses relating to, arising out of, or due to,
directly or indirectly, any incorrect, inaccurate or incomplete financial and
other information provided by CMC or any CMC Affiliate to Cabot pursuant to
Section 4.1 of this Agreement;
(c) all Losses relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the IPO Registration Statement or the omission
or alleged omission to state (whether pursuant to direct statement or
incorporation by reference) in the IPO Registration Statement a material fact
required to be stated therein or necessary to make the statements therein not
misleading other than with respect to the Cabot Disclosure Portions; and
(d) all Losses relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the Distribution Registration Statement or the
omission or alleged omission to state (whether pursuant to direct statement or
incorporation by reference) in the Distribution Registration Statement a
material fact required to be stated therein or necessary to make the statements
therein not misleading other than with respect to the Cabot Disclosure Portions.
5.2. INDEMNIFICATION BY CABOT. Subject to Section 5.3, Cabot
shall indemnify, defend, and hold harmless CMC, all CMC Affiliates, and each of
their respective directors, officers and employees (in their capacities as
such), from and against:
(a) all Losses relating to, arising out of, or due to,
directly or indirectly, any breach by Cabot or any Cabot Affiliate of any of the
provisions of this Agreement;
(b) all Losses relating to, arising out of, or due to,
directly or indirectly, any incorrect, inaccurate or incomplete financial and
other information provided by Cabot or any Cabot Affiliate to CMC pursuant to
Section 4.1 of this Agreement;
(c) all Losses relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the Cabot Disclosure Portions of the IPO
Registration Statement or the omission or alleged omission to state (whether
pursuant to direct statement or incorporation by
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reference) in the Cabot Disclosure Portions of the IPO Registration Statement a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and
(d) all Losses relating to, arising out of, or due to any
untrue statement or alleged untrue statement of a material fact contained in, or
incorporated by reference into, the Cabot Disclosure Portions of the
Distribution Registration Statement or the omission or alleged omission to state
(whether pursuant to direct statement or incorporation by reference) in the
Cabot Disclosure Portions of the Distribution Registration Statement a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
5.3. OTHER LIABILITIES.
(a) Except as provided in Section 5.4, this Section 5 shall
not be applicable to any Tax-Related Losses, which shall be governed by the Tax
Sharing Agreement.
(b) This Section 5 shall not be applicable to any Losses
relating to, arising out of, or due to any breach of the provisions of any other
contract, agreement or understanding between Cabot or any Cabot Affiliate and
CMC or any CMC Affiliate, including, without limitation, the Master Separation
Agreement, the Tax Sharing Agreement and any of the other Ancillary Agreements,
which Losses shall be governed by the terms of such contract, agreement or
understanding.
5.4. TAX EFFECTS OF INDEMNIFICATION.
(a) Any indemnification payment made under this Agreement
shall be characterized for tax purposes as if such payment were made immediately
prior to the latest Distribution Date, and shall therefore be treated, to the
extent permitted by law, as either (i) a distribution from CMC to Cabot or (ii)
a capital contribution from Cabot to CMC.
(b) The amount of any Loss for which indemnification is
provided under this Agreement shall be (i) increased to take account of net Tax
cost, if any, incurred by the Indemnitee arising from the receipt or accrual of
an Indemnity Payment hereunder (grossed up for such increase) and (ii) reduced
to take account of net Tax benefit, if any, realized by the Indemnitee arising
from incurring or paying such Loss. In computing the amount of any such Tax cost
or Tax benefit, the Indemnitee shall be deemed to recognize all other items of
income, gain, loss, deduction or credit before recognizing any item arising from
the receipt or accrual of any Indemnity Payment hereunder or incurring or
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paying any indemnified Loss. Any Indemnity Payment hereunder shall initially be
made without regard to this Section 5.4 and shall be increased or reduced to
reflect any such net Tax cost (including gross-up) or net Tax benefit only after
the Indemnitee has actually realized such cost or benefit. For purposes of this
Agreement, an Indemnitee shall be deemed to have "actually realized" a net Tax
cost or a net Tax benefit to the extent that, and at such time as, the amount of
Taxes payable by such Indemnitee is increased above or reduced below, as the
case may be, the amount of Taxes that such Indemnitee would be required to pay
but for the receipt or accrual of the Indemnity Payment or the incurrence or
payment of such Loss, as the case may be. The amount of any increase or
reduction hereunder shall be adjusted to reflect any final determination (which
shall include the execution of Form 870-AD or successor form) with respect to
the Indemnity's liability for Taxes, and payments between Cabot and CMC to
reflect such adjustment shall be made if necessary.
5.5. EFFECT OF INSURANCE UPON INDEMNIFICATION. The amount
which an Indemnifying Party is required to pay to any Indemnitee pursuant to
this Section 5 shall be reduced (including retroactively) by any Insurance
Proceeds and other amounts actually recovered by such Indemnitee in reduction of
the related Loss, it being understood and agreed that each of CMC and Cabot
shall use commercially reasonable efforts to collect any such proceeds or other
amounts to which it or any of its Affiliates is entitled, without regard to
whether it is the Indemnifying Party hereunder. No Indemnitee shall be required,
however, to collect any such proceeds or other amounts prior to being entitled
to indemnification from an Indemnifying Party hereunder. If an Indemnitee
receives an Indemnity Payment in respect of a Loss and subsequently receives
Insurance Proceeds or other amounts in respect of such Loss, then such
Indemnitee shall pay to such Indemnifying Party an amount equal to the
difference between (a) the sum of the amount of such Indemnity Payment and the
amount of such Insurance Proceeds or other amounts actually received and (b) the
amount of such Loss, in each case adjusted (at such time as appropriate
adjustment can be determined) to reflect any premium adjustment attributable to
such claim.
5.6. PROCEDURE FOR INDEMNIFICATION INVOLVING THIRD-PARTY
CLAIMS.
(a) Notice of Claim. If any Indemnitee receives notice of the
assertion of any Third-Party Claim with respect to which an Indemnifying Party
is obligated under this Agreement to provide indemnification, such Indemnitee
shall give such Indemnifying Party notice thereof (together with a copy of such
Third-Party Claim, process or other legal pleading) promptly after becoming
aware of such Third-Party Claim; provided, however, that the failure of any
Indemnitee to give notice as provided in this Section shall
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not relieve any Indemnifying Party of its obligations under this Section 5,
except to the extent that such Indemnifying Party is actually prejudiced by such
failure to give notice. Such notice shall describe such Third-Party Claim in
reasonable detail.
(b) Obligation of Indemnifying Party. An Indemnifying Party,
at such Indemnifying Party's own expense and through counsel chosen by such
Indemnifying Party (which counsel shall be reasonably acceptable to the
Indemnitee), may elect to defend any Third-Party Claim. If an Indemnifying Party
elects to defend a Third-Party Claim, then, within ten Business Days after
receiving notice of such Third-Party Claim (or sooner, if the nature of such
Third-Party Claim so requires), such Indemnifying Party shall notify the
Indemnitee of its intent to do so, and such Indemnitee shall cooperate in the
defense of such Third-Party Claim. Such Indemnifying Party shall pay such
Indemnitee's reasonable out-of-pocket expenses incurred in connection with such
cooperation. Such Indemnifying Party shall keep the Indemnitee reasonably
informed as to the status of the defense of such Third-Party Claim. After notice
from an Indemnifying Party to an Indemnitee of its election to assume the
defense of a Third-Party Claim, such Indemnifying Party shall not be liable to
such Indemnitee under this Section 5 for any legal or other expenses
subsequently incurred by such Indemnitee in connection with the defense thereof
other than those expenses referred to in the preceding sentence; provided,
however, that such Indemnitee shall have the right to employ one law firm as
counsel, together with a separate local law firm in each applicable jurisdiction
("Separate Counsel"), to represent such Indemnitee in any action or group of
related actions (which firm or firms shall be reasonably acceptable to the
Indemnifying Party) if, in such Indemnitee's reasonable judgment at any time,
either a conflict of interest between such Indemnitee and such Indemnifying
Party exists in respect of such claim, or there may be defenses available to
such Indemnitee which are different from or in addition to those available to
such Indemnifying Party and the representation of both parties by the same
counsel would be inappropriate, and in that event (i) the reasonable fees and
expenses of such Separate Counsel shall be paid by such Indemnifying Party (it
being understood, however, that the Indemnifying Party shall not be liable for
the expenses of more than one Separate Counsel (excluding local counsel) with
respect to any Third-Party Claim (even if against multiple Indemnitees)) and
(ii) each of such Indemnifying Party and such Indemnitee shall have the right to
conduct its own defense in respect of such claim. If an Indemnifying Party
elects not to defend against a Third-Party Claim, or fails to notify an
Indemnitee of its election as provided in this Section 5 within the period of
ten Business Days described above, the Indemnitee may defend, compromise, and
settle such Third-Party Claim and shall be entitled to indemnification hereunder
(to the extent permitted hereunder); provided, however, that no such Indemnitee
may compromise or settle any such Third-Party Claim without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, the Indemnifying Party shall
not, without the prior written consent of the Indemnitee, (i) settle or
compromise any Third-Party Claim or consent to the entry of any judgment which
does not include as an unconditional term thereof the delivery by the
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29
claimant or plaintiff to the Indemnitee of a written release from all liability
in respect of such Third-Party Claim or (ii) settle or compromise any
Third-Party Claim in any manner that would be reasonably likely to have a
material adverse effect on the Indemnitee.
(c) Joint Defense of Certain Claims. Notwithstanding the
provisions of Section 5.6(b), Cabot and CMC shall jointly control the defense
of, and cooperate with each other with respect to defending, any Third-Party
Claim with respect to which each party is claiming that it is entitled to
indemnification under Section 5.1 or 5.2. If either Cabot or CMC fails to defend
jointly any such Third-Party Claim, the other party shall solely defend such
Third-Party Claim and the party failing to defend jointly shall use all
commercially reasonable efforts to cooperate with the other party in its defense
of such Third-Party Claim; provided, however, that neither party may compromise
or settle any such Third-Party Claim without the prior written consent of the
other party, which consent shall not be unreasonably withheld or delayed. All
costs and expenses of either party in connection with, and during the course of,
the joint control of the defense of any such Third-Party Claim shall be
initially paid by the party that incurs such costs and expenses. Such costs and
expenses shall be reallocated and reimbursed in accordance with the respective
indemnification obligations of the parties at the conclusion of the defense of
such Third-Party Claim.
5.7. PROCEDURE FOR INDEMNIFICATION NOT INVOLVING THIRD-PARTY
CLAIMS. If any Indemnitee desires to assert against an Indemnifying Party any
claim for indemnification under this Section 5 other than a Third-Party Claim (a
"Claim"), the Indemnitee shall deliver to the Indemnifying Party notice of its
demand for satisfaction of such Claim (a "Request"), specifying in reasonable
detail the amount of such Claim and the basis for asserting such Claim. Within
30 days after the Indemnifying Party has been given a Request, the Indemnifying
Party shall either (i) satisfy the Claim requested to be satisfied in such
Request by delivering to the Indemnitee payment by wire transfer or a certified
or bank cashier's check payable to the Indemnified Party in immediately
available funds in an amount equal to the amount of such Claim, or (ii) notify
the Indemnitee that the Indemnifying Party contests such Claim by delivering to
the Indemnitee a Dispute Notice, stating that the Indemnifying Party objects to
such Claim and specifying in reasonable detail the basis for contesting such
Claim. Any dispute described in clause (ii) of this Section 5.7 shall be subject
to the provisions of Section 6.1.
5.8. EXCLUSIVE REMEDIES. Except for the right to pursue
equitable remedies, the remedies provided in this Section 5 shall be deemed the
sole and exclusive remedies of the parties with respect to the subject matters
of the indemnification provisions of this Section 5.
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6. MISCELLANEOUS.
6.1. DISPUTE RESOLUTION. Except as otherwise set forth in the
Ancillary Agreements, resolution of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, or otherwise
(collectively, "Disputes"), shall be exclusively governed by and settled in
accordance with the provisions of this Section 6.1. The parties hereto shall use
all commercially reasonable efforts to settle all Disputes without resorting to
mediation, arbitration, litigation or other third party dispute resolution
mechanisms. If any Dispute remains unsettled, the parties hereby agree to
mediate such Dispute using a mediator reasonably acceptable to all parties
involved in such Dispute. If the Parties are unable to resolve such dispute
through mediation, each Party will be free to commence proceedings for the
resolution thereof. No Party shall be entitled to consequential, special,
exemplary or punitive damages.
6.2. SURVIVAL. The representations and warranties contained in
this Agreement shall survive the execution and delivery hereof and all
Distribution Dates until the expiration of all applicable statutes of
limitations.
6.3. COMPLETE AGREEMENT. Except as otherwise set forth in this
Agreement, this Agreement and the exhibits hereto shall constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and shall supersede all prior agreements and understandings, whether written or
oral, between the parties with respect to such subject matter.
6.4. AUTHORITY. Each of the parties hereto represents to the
other that (a) it has the corporate power and authority to execute, deliver and
perform this Agreement, (b) the execution, delivery and performance of this
Agreement by it has been duly authorized by all necessary corporate action, (c)
it has duly and validly executed and delivered this Agreement, and (d) this
Agreement is a legal, valid and binding obligation, enforceable against it in
accordance with its terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general equity principles.
6.5. GOVERNING LAW.
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This Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware (other than the laws regarding conflicts of laws) as to
all matters, including matters of validity, construction, effect, performance
and remedies.
6.6. CONSENT TO EXCLUSIVE JURISDICTION. Any action, suit or
proceeding arising out of any claim that the parties cannot settle through good
faith negotiations shall be litigated exclusively in the state courts of
Delaware. Each of the parties hereto hereby irrevocably and unconditionally (a)
submits to the jurisdiction of the state courts of Delaware for any such action,
suit or proceeding, (b) agrees not to commence any such action, suit or
proceeding except in the state courts of Delaware, (c) waives, and agrees not to
plead or to make, any objection to the venue of any such action, suit or
proceeding in the state courts of Delaware, (d) waives, and agrees not to plead
or to make, any claim that any such action, suit or proceeding brought in the
state courts of Delaware has been brought in an improper or otherwise
inconvenient forum, (e) waives, and agrees not to plead or to make, any claim
that the state courts of Delaware lack personal jurisdiction over it, and (f)
waives its right to remove any such action, suit or proceeding to the federal
courts except when such courts are vested with sole and exclusive jurisdiction
by statute. Cabot and CMC shall cooperate with each other in connection with any
such action, suit or proceeding to obtain reliable assurances that confidential
treatment will be accorded any information that either party shall reasonably
deem to be confidential or proprietary. Each of the parties hereto irrevocably
designates and appoints its respective Service Agent as its agent to receive
service of process in any such action, suit or proceeding. Each of the parties
hereto further covenants and agrees that, until the expiration of all applicable
statutes of limitations relating to potential claims under this Agreement, each
such party shall maintain a duly appointed agent for the service of summonses
and other legal process in the State of Delaware, and shall promptly notify the
other party hereto of any change in the name or address of its Service Agent and
the name and address of any replacement for its Service Agent, if such agent is
no longer the Service Agent named herein. Notwithstanding anything contained in
this Section 6.6, all claims for indemnification under Section 5 shall be
governed by the provisions thereof.
6.7. NOTICES. All Notices and other communications hereunder
shall be in writing and shall be delivered in person, by telecopy, by express or
overnight mail delivered by a nationally recognized air courier (delivery
charges prepaid), or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
(a) If to Cabot, to:
Cabot Corporation
00 Xxxxx Xxxxxx
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00
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Financial Officer
Telecopy No.: (000) 000-0000
With a copy to:
Law Department
Cabot Corporation
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: General Counsel
Telecopy No.: (000) 000-0000
(b) If to CMC, to:
Cabot Microelectronics Corporation
000 Xxxxx Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: President
Telecopy No.: (000) 000-0000
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery or when delivery is refused. Any notice or communication sent by
telecopy or by air courier shall be deemed effective on the first Business Day
at the place at which such notice or communication is received following the day
on which such notice or communication was sent.
6.8. AMENDMENT AND MODIFICATION. This Agreement may not be
amended or modified in any respect except by a written agreement signed by both
of the parties hereto.
6.9. BINDING EFFECT; ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon the parties hereto and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Except with respect to a merger of either party with another Person,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either party hereto without the prior written consent of
the other
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party, which consent shall not be unreasonably withheld or delayed.
6.10. THIRD PARTY BENEFICIARIES. The Indemnitees and their
respective successors shall be third party beneficiaries of the indemnification
provisions of Section 6, as applicable, and shall be entitled to enforce those
provisions and in connection with such enforcement shall be subject to Section
6.6, in each such case as fully and to the same extent as if they were parties
to this Agreement. Except as provided in the previous sentence, nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person
any legal or equitable right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement, and no Person (other than as provided in the
previous sentence) shall be deemed a third party beneficiary under or by reason
of this Agreement.
6.11. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The Agreement may be
executed by facsimile signature.
6.12. WAIVER. The observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) by the party entitled to enforce such term, but such waiver
shall be effective only if it is in writing signed by the party against which
such waiver is to be asserted. Unless otherwise expressly provided in this
Agreement, no delay or omission on the part of any party in exercising any right
or privilege under this Agreement shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right or privilege under this
Agreement operate as a waiver of any other right or privilege under this
Agreement nor shall any single or partial exercise of any right or privilege
preclude any other or further exercise thereof or the exercise of any other
right or privilege under this Agreement. No failure by either party to take any
action or assert any right or privilege hereunder shall be deemed to be a waiver
of such right or privilege in the event of the continuation or repetition of the
circumstances giving rise to such right unless expressly waived in writing by
the party against whom the existence of such waiver is asserted.
6.13. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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34
6.14. REMEDIES. Each of Cabot and CMC shall be entitled to
enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorneys' fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. Each of Cabot and CMC acknowledges and agrees that under certain
circumstances the breach by Cabot or any of its Affiliates or CMC or any of its
Affiliates of a term or provision of this Agreement will materially and
irreparably harm the other party, that money damages will accordingly not be an
adequate remedy for such breach and that the non-defaulting party, in its sole
discretion and in addition to its rights under this Agreement and any other
remedies it may have at law or in equity, may apply to any court of law or
equity of competent jurisdiction (without posting any bond or deposit) for
specific performance and/or other injunctive relief in order to enforce or
prevent any breach of the provisions of this Agreement.
6.15. PERFORMANCE. Each of the parties hereto shall use all
commercially reasonable efforts to cause to be performed all actions, agreements
and obligations set forth herein to be performed by any Affiliate of such party.
6.16. REFERENCES; CONSTRUCTION. The table of contents and the
section and other headings and subheadings contained in this Agreement and the
exhibits hereto are solely for the purpose of reference, are not part of the
agreement of the parties hereto, and shall not in any way affect the meaning or
interpretation of this Agreement or any exhibit hereto. All references to days
or months shall be deemed references to calendar days or months. All references
to "$" shall be deemed references to United States dollars. Unless the context
otherwise requires, any reference to a "Section" or an "Exhibit" shall be deemed
to refer to a section of this Agreement or an exhibit to this Agreement, as
applicable. The words "hereof," "herein" and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, unless otherwise
specifically provided, they shall be deemed to be followed by the words "without
limitation." This Agreement shall be construed without regard to any presumption
or rule requiring construction or interpretation against the party drafting or
causing the document to be drafted.
* * * * *
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35
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date and year first
written above.
CABOT CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman and
Chief Executive Officer
CABOT MICROELECTRONICS CORPORATION
By: /s/ Xxxxxxx Xxxxxxx
--------------------
Name: Xxxxxxx Xxxxxxx
Title: President and
Chief Executive Officer
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36
EXHIBIT A
AGREEMENTS SUBJECT TO SECTION 4.2(e)
Cabot is a party to the following agreements, the covenants of which shall be
subject to Section 4.2(e) of the IPO and Distribution Agreement:
1. Indenture, dated as of December 1, 1987, between Cabot Corporation and
the First National Bank of Boston, Trustee.
2. First Supplemental Indenture dated as of June 17, 1992, to Indenture,
dated as of December 1, 1987, between Cabot Corporation and the First
National Bank of Boston, Trustee.
3. Second Supplemental Indenture, dated as of January 31, 1997, between
Cabot Corporation and State Street Bank and Trust Company, Trustee.
4. Third Supplemental Indenture, dated as of November 20, 1998, between
Cabot Corporation and State Street Bank and Trust Company, Trustee.
5. Credit Agreement, dated as of January 3, 1997, among Cabot Corporation,
the banks listed therein and Xxxxxx Guaranty Trust Company of New York,
as Agent.
6. Note Purchase Agreement between Xxxx Xxxxxxx Mutual Life Insurance
Company, State Street Bank and Trust Company, as trustee for the Cabot
Corporation Employee Stock Ownership Plan, and Cabot Corporation.,
dated as of November 15, 1988.
7. Various confidentiality and secrecy agreements between Cabot
Corporation and third parties with respect to which employees of CMC
have knowledge as a result of their employment with Cabot Corporation.
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