LOGO] IONICS Address Mail To:
____________________ P.O. Box 9131
IONICS, INCORPORATED Watertown, Massachusetts 02471-9131
65 Grove Street
Watertown, Massachusetts 02472-2882
Telephone: (617) 926-2500
Fax: (617) 926-3760
May 15, 2001
Securities and Exchange Commission
Filing Desk - Room 1004
450 Fifth St., NW
Washington, D.C. 20549
Re: Ionics, Incorporated (Commission File No. 1-7211) -
Filing of Form 10-Q for quarter ended March 31, 2001
Account No. 0000052466
Ladies and Gentlemen:
I enclose via electronic filing pursuant to the Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") System on behalf of Ionics, Incorporated
(the "Company"), the Form 10-Q for the quarter ended March 31, 2001. Please
acknowledge receipt of this electronic filing by return E-mail to the Company's
E-mail address, plynes@ionics.com.
A manually signed copy of the Form 10-Q will be kept on file at the offices of
the Company.
If you have any questions or require further information, please contact
the undersigned at (617)926-2510, ext. 450.
Very truly yours,
/s/Stephen Korn
Stephen Korn
Vice President and
General Counsel
Enclosures
cc: Arthur L. Goldstein, Chairman and Chief Executive Officer
Daniel M. Kuzmak, Vice President, Finance and Chief Financial Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2001
--------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 1-7211
IONICS, INCORPORATED
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 4-2068530
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
65 Grove Street
Watertown, Massachusetts 02472
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 926-2500
Former name, former address and former fiscal year, if changed since last
report: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At April 30, 2001 the Company had 17,270,429 shares of Common Stock, par value
$1 per share, outstanding.
IONICS, INCORPORATED
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 2001
INDEX
Page Number
Part I Financial Information
Consolidated Statements of Operations 1
Consolidated Balance Sheets 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of Results
of Operations and Financial Condition 7
Part II Other Information 10
Signatures 11
Exhibit Index 12
PART I - FINANCIAL INFORMATION
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share amounts)
Three months ended
March 31,
----------------------------
2001 2000
----------- ------------
Revenue:
Equipment Business Group $ 51,981 $ 41,356
Ultrapure Water Group 33,848 27,746
Consumer Water Group 29,345 26,419
Instrument Business Group 7,788 7,274
----------- ------------
122,962 102,795
----------- ------------
Costs and expenses:
Cost of sales of Equipment Business Group 40,000 31,405
Cost of sales of Ultrapure Water Group 25,680 21,865
Cost of sales of Consumer Water Group 18,004 15,701
Cost of sales of Instrument Business Group 3,439 3,278
Research and development 1,690 1,821
Selling, general and administrative 28,501 22,974
----------- ------------
117,314 97,044
----------- ------------
Income from operations 5,648 5,751
Interest income 225 267
Interest expense (1,604) (724)
Equity income 441 332
----------- ------------
Income before income taxes and minority interest 4,710 5,626
Provision for income taxes 1,601 1,913
----------- ------------
Income before minority interest 3,109 3,713
Minority interest expense 114 151
----------- ------------
Net income $ 2,995 $ 3,562
=========== ============
Basic earnings per share $ 0.18 $ 0.22
=========== ============
Diluted earnings per share $ 0.18 $ 0.22
=========== ============
Shares used in basic earnings per share calculations 16,389 16,209
=========== ============
Shares used in diluted earnings per share calculations 16,574 16,404
=========== ============
The accompanying notes are an integral part of these financial statements.
IONICS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except share and par value amounts)
March 31, December 31,
2001 2000
---------------- ---------------
---------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 21,976 $ 25,497
Short-term investments 468 1,105
Notes receivable, current 4,194 4,741
Accounts receivable 154,966 162,711
Receivables from affiliated companies 1,375 792
Inventories:
Raw materials 21,400 21,061
Work in process 9,958 8,264
Finished goods 4,898 5,376
---------------- ---------------
36,256 34,701
Other current assets 10,985 16,443
Deferred income taxes 12,749 12,749
---------------- ---------------
Total current assets 242,969 258,739
Notes receivable, long-term 21,764 17,502
Investments in affiliated companies 22,277 18,310
Property, plant and equipment:
Land 8,652 8,738
Buildings 48,349 48,773
Machinery and equipment 310,214 312,138
Other, including furniture, fixtures and vehicles 49,071 48,470
---------------- ---------------
416,286 418,119
Less accumulated depreciation (198,984) (195,276)
---------------- ---------------
217,302 222,843
Other assets 58,313 60,072
---------------- ---------------
Total assets $ 562,625 $ 577,466
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt $ 78,898 $ 75,045
Accounts payable 37,617 56,014
Customer deposits 5,939 4,883
Accrued commissions 2,283 2,002
Accrued expenses 37,288 35,419
---------------- ---------------
Total current liabilities 162,025 173,363
Long-term debt and notes payable 11,049 10,911
Deferred income taxes 27,636 30,334
Other liabilities 6,073 5,997
Stockholders' equity:
Common stock, par value $1, authorized
shares: 55,000,000; issued: 16,395,429 in 2001 and 16,369,029 in 2000 16,395 16,369
Additional paid-in capital 162,664 162,114
Retained earnings 200,611 197,616
Accumulated other comprehensive income (23,828) (19,238)
---------------- ---------------
Total stockholders' equity 355,842 356,861
---------------- ---------------
Total liabilities and stockholders' equity $ 562,625 $ 577,466
================ ===============
The accompanying notes are an integral part of these financial statements.
IONICS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31,
---------------------------------------
2001 2000
------------- -------------
Net income $ 2,995 $ 3,562
Adjustments to reconcile net income to net cash (used)
provided by operating activities:
Depreciation and amortization 8,758 7,788
Provision for losses on accounts and notes receivable 1,421 724
Compensation expense on restricted stock awards - 27
Changes in assets and liabilities:
Notes receivable (4,591) (459)
Accounts receivable 3,476 (8,434)
Inventories (2,012) (1,977)
Other current assets 5,209 1,199
Investments in affiliates (4,091) 877
Accounts payable and accrued expenses (13,871) 4,904
Income taxes 716 584
Other (440) (1,302)
------------- -------------
Net cash (used) provided by operating activities (2,430) 7,493
------------- -------------
Investing activities:
Additions to property, plant and equipment (6,513) (12,369)
Disposals of property, plant and equipment 241 724
Acquisitions, net of cash acquired - (4,250)
Sale (purchase) of short-term investments 515 (214)
------------- -------------
Net cash used by investing activities (5,757) (16,109)
------------- -------------
Financing activities:
Principal payments on current debt (18,543) (18,785)
Proceeds from borrowings of current debt 23,368 29,332
Principal payments on long-term debt (243) (18)
Proceeds from borrowings of long-term debt 135 1,285
Proceeds from stock option plans 576 242
------------- -------------
Net cash provided by financing activities 5,293 12,056
------------- -------------
Effect of exchange rate changes on cash (627) 336
------------- -------------
Net change in cash and cash equivalents (3,521) 3,776
Cash and cash equivalents at beginning of period 25,497 13,169
------------- -------------
Cash and cash equivalents at end of period $ 21,976 $ 16,945
============= =============
The accompanying notes are an integral part of these financial statements.
IONICS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
In the opinion of the management of Ionics, Incorporated (the "Company"), all
adjustments have been made that are necessary to present fairly the consolidated
financial position of the Company, the consolidated results of its operations
and the consolidated cash flows for each period presented. The consolidated
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year. These financial
statements should be read in conjunction with the Company's 2000 Annual Report
as filed on Form 10-K with the Securities and Exchange Commission. Other than as
noted below, there have been no significant changes in the information reported
in those Notes, other than from the normal business activities of the Company,
and there have been no changes which would, in the opinion of management, have a
materially adverse effect upon the Company. Certain prior year amounts have been
reclassified to conform to the current year presentation with no impact on net
income.
2. Contingent Liabilities:
On March 30, 2001, the two lawsuits alleging infringement of certain United
States patents and brought against the Company by United States Filter
Corporation, U.S. Filter/Ionpure, Inc., IP Holding Company, Millipore
Corporation and Millipore Investment Holdings Limited in U.S. District Court,
Boston (Civil Actions No. 98-10541-REK and No. 99-11242-RWZ), and a third
lawsuit alleging infringement of another United States patent and also brought
against the Company by United States Filter Corporation and U.S. Filter/Ionpure,
Inc., in U.S. District Court, Boston (Civil Action No. 00-11157-REK), were
settled.
Under terms of the settlement agreement concluding the first two lawsuits, the
Company will make certain payments to United States Filter Corporation (USF) in
exchange for a release and covenant not to sue. In the fourth quarter of 2000,
Ionics reserved against this financial obligation. Under terms of the settlement
agreement, Ionics is free to continue its current activities in
electrodeionization (EDI).
Under terms of the settlement agreement concluding the third lawsuit, also
entered into as of March 30, 2001, the Company agreed to an injunction against
its future infringement of U.S. Patent No. 4,574,049. The Company has no
separate financial obligation under this settlement agreement.
3. Earnings Per Share (EPS) Calculations:
(Amounts in thousands, except per share amounts)
For the three months ended March 31,
---------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------- ---------------------------------------------
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
------------ ------------ ------------ ------------ ------------ --------------
Basic EPS
Income available to
common stockholders $ 2,995 16,389 $ 0.18 $ 3,562 16,209 $ 0.22
Effect of dilutive
stock options - 185 - - 195 -
------------ ------------ ------------ ------------ ------------ --------------
Diluted EPS $ 2,995 16,574 $ 0.18 $ 3,562 16,404 $ 0.22
============ ============ ============ ============ ============ ==============
The effect of dilutive stock options excludes those stock options for which the
impact would have been antidilutive based on the exercise price of the options.
The number of options that were antidilutive at the three months ended March 31,
2001 and 2000 was 1,568,234 and 736,250, respectively.
4. Comprehensive Income:
The Company has adopted the Statement of Financial Accounting Standards ("SFAS")
No. 130, "Reporting Comprehensive Income," which establishes standards for the
reporting and display of comprehensive income and its components. The table
below sets forth "comprehensive income" as defined by SFAS No. 130 for the
three-month periods ended March 31, 2001 and 2000.
(Amounts in thousands)
Three months ended
March 31,
-------------------------------
-------------------------------
2001 2000
------------- ------------
------------- ------------
Net income $ 2,995 $ 3,562
Other comprehensive income,
net of tax:
Translation adjustments (4,590) (2,410)
------------- ------------
------------- ------------
Comprehensive income $ (1,595) $ 1,152
============= ============
5. Segment Information:
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." At the end of 1998, the Company changed
from three reportable segments to four reportable "business group" segments
corresponding to a "business group" structure which was put into place in the
latter part of 1998. As of March 31, 2001, no changes have been made to the
basis of segmentation or the measurement of profit or loss from that which was
reported in the Company's 2000 Annual Report as filed on Form 10-K with the
Securities and Exchange Commission, and there were no material changes to total
assets by segment.
The following table summarizes the Company's operations by the four business
group segments and "Corporate" (Corporate includes the elimination of
intersegment transfers).
For the three months ended March 31, 2001
-------------------------------------------------------------------------------------
Equipment Ultrapure Consumer Instrument
Business Water Water Business
Group Group Group Group Corporate Total
------------- ------------ ------------ ------------- ----------- -------------
(Amounts in thousands)
Revenue - unaffiliated
customers $ 51,981 $ 33,848 $ 29,345 $ 7,788 $ - $ 122,962
Inter-segment transfers 1,397 1,181 - 682 (3,260) -
Gross profit 11,981 8,168 11,341 4,349 - 35,839
For the three months ended March 31, 2000
-------------------------------------------------------------------------------------
Equipment Ultrapure Consumer Instrument
Business Water Water Business
Group Group Group Group Corporate Total
------------- ------------ ------------ ------------- ----------- -------------
(Amounts in thousands)
Revenue - unaffiliated
customers $ 41,356 $ 27,746 $ 26,419 $ 7,274 $ - $ 102,795
Inter-segment transfers 1,582 225 - 386 (2,193) -
Gross profit 9,951 5,881 10,718 3,996 - 30,546
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Comparison of the Three Months Ended March 31, 2001 with the Three Months Ended
-------------------------------------------------------------------------------
March 31, 2000
--------------
Revenues for the first quarter of 2001 increased 19.6%, and net income decreased
by 15.9%, compared to the results of the first quarter of 2000. Gross profit was
$35.8 million in the first quarter of 2001 compared to gross profit of $30.5
million in the first quarter of 2000. Gross profit for the first quarter of 2001
increased in each of the four business groups from the first quarter of 2000.
These increases were primarily due to higher sales volume of capital equipment
and consumer water products as well as improved margins for the Ultrapure Water
Group (UWG) in the first quarter of 2001 compared to the first quarter of 2000.
Total revenues for the first quarter of 2001 were $123.0 million compared to
revenues of $102.8 million for the first quarter of 2000. Revenues were higher
in all of the business group segments for the first quarter of 2001 as compared
to the first quarter of 2000.
Equipment Business Group (EBG) revenues increased 25.7%, or $10.6 million, for
the first three months of 2001 as compared to the first three months of 2000.
The increase was due to increased capital equipment sales and continuing work on
a desalination facility in Trinidad as well as partial delivery of a storage
system for the containment of nuclear fuel at a commercial U.S. nuclear energy
plant.
UWG revenues increased $6.1 million, or 22%, in the first quarter of 2001 from
the first quarter of 2000, primarily as a result of increased capital equipment
sales to the microelectronics industry.
The revenues of the Consumer Water Group (CWG) increased $2.9 million, or 11.1%,
in the first quarter of 2001 compared to the first quarter of 2000. This
increase was due to continued growth in both the bottled water and home water
businesses.
Instrument Business Group (IBG) revenues increased $0.5 million, or 7.1%, in the
first quarter of 2001 compared to the first quarter of 2000.
Cost of sales as a percentage of revenue was 70.9% in the first quarter of 2001
compared to 70.3% in the first quarter of 2000.
Cost of sales as a percentage of revenue increased in the first quarter of 2001,
compared to the first quarter of 2000, for EBG and CWG while such percentage
decreased for UWG and IBG. EBG's cost of sales percentage increased to 77.0% in
the first quarter of 2001 from 75.9% in the first quarter of 2000 reflecting a
shift in business mix to lower margin capital equipment. The increase in CWG's
cost of sales to 61.4% in the first quarter of 2001 from 59.4% in the first
quarter of 2000 is primarily the result of higher distribution costs due to
continued increases in fuel and labor costs. These increases were offset by
decreases in the cost of sales as a percentage of revenue for UWG and IBG. The
decrease in UWG's cost of sales percentage to 75.9% in the first quarter of 2001
from 78.8% in the first quarter of 2000 was primarily due to improved
performance in certain domestic and Far East operations. Cost of sales as a
percentage of revenues for IBG decreased to 44.2% in the first quarter of 2001
from 45.1% in the first quarter of 2000, primarily due to the consolidation of
operations at the end of 2000.
Operating expenses as a percentage of revenues were 24.6% in the first quarter
of 2001 and 24.1% in the first quarter of 2000. The increase in operating
expenses as a percentage of revenue primarily relates to accounts receivable
charges and legal expenses.
Interest income of $0.2 million for the first quarter of 2001 was flat in
comparison to interest income for the first quarter of 2000. The increase of
interest expense by $0.9 million in the first quarter of 2001 from the first
quarter of 2000 is attributable to higher average borrowings by the Company.
Financial Condition
-------------------
Working capital decreased $4.4 million during the first three months of 2001
while the Company's current ratio of 1.5 at March 31, 2001 was unchanged from
the Company's current ratio at December 31, 2000. At March 31, 2001 the Company
had $155.0 million of accounts receivable, a decrease of $7.7 million from
December 31, 2000. Accounts payable decreased by $18.4 million, and other
current assets decreased by $5.5 million.
Cash used by operating activities totaled $2.4 million for the first three
months of 2001, primarily due to the decrease in accounts payable. The primary
use of cash for investing purposes was for additions to property, plant and
equipment by the Company's various business groups and among the different asset
classifications. Net cash provided by financing activities was $5.3 million,
primarily from short-term borrowings.
During 2001, construction has been continuing on the Trinidad desalination
facility owned by Desalination Company of Trinidad and Tobago Ltd. (Desalcott),
in which the Company has a 40% equity interest. During 2000 and through the
first quarter of 2001, the Company loaned $10 million to the 60% equity owner,
Hafeez Karamath Engineering Services Ltd. (HKES), as the source of HKES' equity
contribution, in addition to the $10 million contributed by the Company for its
40% equity interest. Desalcott has entered into a "bridge loan" agreement with a
Trinidad bank providing $60 million in construction financing. However, the
bridge loan plus the $20 million equity provided to Desalcott will not provide
sufficient funds to complete construction of the project. Although Desalcott has
received proposals for long-term debt financing, there is no assurance that such
financing will be obtained on terms acceptable to Desalcott, or prior to
completion of construction. If permanent financing is not obtained prior to the
completion of construction, Desalcott will be required to obtain additional
funds to complete construction, and the Company has committed to lend to
Desalcott up to $10 million under such circumstances.
The Company completed a private placement of common stock to Fidelity Management
& Research Company (Fidelity), on behalf of funds and accounts managed by
Fidelity, in April 2001. 875,000 shares were sold at a price of $24.93 per
share, and the total proceeds to the Company were approximately $21.8 million.
The proceeds were used to reduce short-term borrowings. The Company has agreed
to file a registration statement with the Securities and Exchange Commission
covering the resale of these shares.
On March 1, 2001, the Company's principal revolving credit agreement with Fleet
National Bank (the Bank) was amended and restated to increase the amount
available for borrowing from $70 million to $80 million. In consideration of
this increase, the company gave the Bank a "springing lien," which would result
in a perfected security interest in the assets of the Company and its domestic
subsidiaries (other than real estate and motor vehicles) in the event that the
Company (i) defaults under any of its covenants or obligations in the credit
agreement, or (ii) fails to pay down outstanding borrowings under the credit
agreement to $50 million by May 15, 2001. On May 14, 2001, the principal
revolving credit agreement with the Bank was again amended to eliminate the
"springing lien" and to reduce the borrowing capacity from $80 million to $65
million. Under the amended credit agreement, the Company has agreed to reduce
the principal amount of its borrowings to $50 million by September 30, 2001.
The Company believes that its cash and cash equivalents, cash from operations,
lines of credit and foreign exchange facilities are adequate to meet its
currently anticipated needs.
Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
Derivative Instruments and Market Risk
--------------------------------------
There has been no material change in the information reported in the Company's
2000 Annual Report as filed on Form 10-K with the Securities and Exchange
Commission with respect to these risk matters.
Forward-Looking Information
---------------------------
Safe Harbor Statement under Private Securities Litigation Reform Act of 1995
----------------------------------------------------------------------------
The Company's future results of operations and certain statements contained in
this report, including, without limitation, "Management's Discussion and
Analysis of Results of Operations and Financial Condition," constitute
forward-looking statements. Such statements are based on management's current
views and assumptions and involve risks, uncertainties and other factors that
could cause actual results to differ materially from management's current
expectations. Among these factors are business conditions and the general
economy; competitive factors, such as acceptance of new products and price
pressures; risk of nonpayment of accounts receivable; risks associated with
foreign operations; risks involved in litigation; regulations and laws affecting
business in each of the Company's markets; market risk factors, as described
above under "Derivative Instruments and Market Risks;" and other risks and
uncertainties described from time to time in the Company's filings with the
Securities and Exchange Commission.
PART II - OTHER INFORMATION
Item 5. Other Information
The two lawsuits alleging infringement of certain United States patents and
brought against the Company by United States Filter Corporation, U.S.
Filter/Ionpure, Inc., IP Holding Company, Millipore Corporation and Millipore
Investment Holdings Limited in U.S. District Court, Boston (Civil Actions No.
98-10541-REK and No. 99-11242-RWZ), and a third lawsuit alleging infringement of
another United States patent and also brought against the Company by United
States Filter Corporation and U.S. Filter/Ionpure, Inc., in U.S. District Court,
Boston (Civil Action No. 00-11157-REK), have been settled.
Under the terms of the settlement agreement concluding the first two lawsuits,
entered into as of March 30, 2001, the Company will make certain payments to
United States Filter Corporation (USF) in exchange for a release and a covenant
not to sue. In the fourth quarter of 2000, Ionics reserved against this
financial obligation. Under the terms of the settlement agreement, Ionics is
free to continue its current activities in electrodeionization (EDI).
Under the terms of the settlement agreement concluding the third lawsuit, also
entered into as of March 30, 2001, the Company agreed to an injunction against
its future infringement of U.S. Patent No. 4,574,049. The Company has no
separate financial obligation under this settlement agreement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Exhibit
10.1 Shareholders' Agreement dated
April 3, 2001 between the Company
and Mohammed Abdulmohsin Al-Kharafi
& Sons.
10.2 Amendment Agreement No. 2, dated May
14, 2001, to Second Amended and
Restated Credit Agreement among the
Company, Fleet National Bank and
Fleet National Bank as agent.
(b) Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and
Exchange Commission during the quarter ended March 31, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IONICS, INCORPORATED
Date: May 15, 2001 By: /s/Arthur L. Goldstein
------------ -------------------------------------
Arthur L. Goldstein
Chairman and Chief Executive Officer
(duly authorized officer)
Date: May 15, 2001 By: /s/Daniel M. Kuzmak
------------ -------------------------------------
Daniel M. Kuzmak
Vice President and
Chief Financial Officer
(principal financial officer)
EXHIBIT INDEX
Exhibits
--------
10.1 Shareholders' Agreement dated April 3, 2001 between the Company and
Mohammed Abdulmohsin Al-Kharafi & Sons.
10.2 Amendment Agreement No. 2, dated May 14, 2001, to Second Amended and
Restated Credit Agreement among the Company, Fleet National Bank and Fleet
National Bank as agent.
EXHIBIT 10
DATED April 3, 2001
MOHAMMED ABDUL MOHSIN AL KHARAFI & SONS
and
IONICS, INCORPORATED
-------------------------------------------------------------
SHAREHOLDERS' AGREEMENT
-------------------------------------------------------------
CONTENTS
CLAUSE Page
1. INTERPRETATION......................................3
2. CONDITIONS PRECEDENT................................6
3. WARRANTIES..........................................6
4. BUSINESS OF THE COMPANY.............................6
5. FORMATION OF THE COMPANY............................6
6. RESERVED MATTERS....................................7
7. MANAGEMENT AND CONTROL BODIES.......................7
8. THE BOARD...........................................7
9. CONTINUING OBLIGATIONS..............................9
10. FUNDING.............................................9
11. DIVIDEND POLICY....................................10
12. PROTECTIVE COVENANTS...............................10
13. OPTION.............................................11
14. DEFAULT............................................12
15. CONFIDENTIALITY....................................12
16. DURATION...........................................13
17. DISPUTES...........................................14
18. ANNOUNCEMENTS......................................14
19. NOTICES............................................14
20. COSTS .............................................15
21. SEVERABILITY.......................................15
22. GENERAL............................................15
23. WHOLE AGREEMENT....................................17
24. GOVERNING LAW......................................17
SCHEDULES
1. RESERVED MATTERS
2. REPRESENTATIONS AND WARRANTIES
3. CONTINUING OBLIGATIONS
4. SHARED COSTS
THIS AGREEMENT is made on April 3, 2001 BETWEEN:
(1) MOHAMMED ABDUL MOSHIN AL KHARAFI & SONS (or its wholly owned Affiliate), a
company duly incorporated under the laws of Kuwait and whose registered
office is at MAK Building No. 4, Area No. 2, Shuwaikh, Kuwait ("Kharafi");
and
(2) IONICS, INCORPORATED (or its wholly owned Affiliate), a company duly
incorporated under the laws of Massachusetts and whose registered office is
at 65 Grove Street, Watertown, Massachusetts, 02472, U.S.A. ("Ionics")
each a "Party" and together the "Parties".
WHEREAS:
(A) The Parties have agreed to form a consortium for the purpose of performing
the concession awarded by the State of Kuwait, through either the Ministry
of Finance or the Ministry of Public Works, to build, operate and transfer
a wastewater treatment and reclamation plant in Sulaibiya, Kuwait (the
"Concession").
(B) The Parties intend to establish a With Limited Liability company to be
incorporated under the laws of Kuwait and whose registered office is at
Office No. 2, 2nd Floor, Building No. 282, Al-Shuhada Street, Plot No. 1,
Area No. 11, Kuwait City, Kuwait (the "Company") to act as concessionaire,
and upon its establishment to conduct its business in accordance with the
terms and conditions of this Shareholders Agreement, the Concession
Agreement and the Articles.
(C) The Shareholders (as defined below) have agreed to enter into this
Agreement for the purposes of (i) recording the terms and Conditions on
which they will subscribe for shares in and provide funding for the
Company, (ii) regulating their relationship with each other in the period
prior to the establishment of the Company and for so long as they are
shareholders in the Company, and (iii) regulating, as between themselves,
certain aspects of the affairs of the Company, including voting as required
under the Articles to give effect to the provisions of this Agreement.
IT IS AGREED as follows:
1. Interpretation
(1) In this Agreement:
"Affiliate" means in relation to any party, any other person that,
directly or indirectly, through one or more intermediaries, controls,
is controlled by or is under common control with the specified person.
For the purposes of this definition, the term "control" means the power
to direct the management or policies of an entity, directly or
indirectly, whether through the ownership of voting securities or other
equity interests, by contract or otherwise (provided that the direct or
indirect ownership of fifty percent (50%) or more of the voting
securities is deemed to constitute control of that entity);
"Agreed Form" means, in relation to any document, the form of that
document which has been initialled for the purpose of identification by
the Parties with such changes as the Shareholders may agree in writing
before the Effective Date.
"Articles" means the articles of association of the Company in the
Agreed Form.
"Auditors" means the auditors of the Company from time to time, being
an independent firm of accountants of international repute.
"Board" means the board of directors for the time being of the Company.
"Business" means the development, engineering, procurement,
construction, operation, and maintenance of a wastewater treatment and
reclamation project in Sulaibiya, Kuwait in accordance with the
provisions of the Project Agreements.
"Business Plan" means the business plan from time to time of the
Company and its subsidiaries (if any).
"Chairman" means the chairman of the Board appointed in accordance with
the provisions of this Agreement and the Articles.
"Companies Law" means the Kuwait Commercial companies Law No. 15 of
1960.
"Concession Agreement" means the agreement to be entered between the
State of Kuwait and the Company.
"Director" means a member of the Board appointed in accordance with the
provisions of this Agreement and the Articles.
"Effective Date" means the date on which the Concession Contract is
signed by the Parties and the State of Kuwait.
"Financial Year" means a financial year for the purposes of the
Companies Law.
"General Assembly" means any meeting of the Shareholders and Investors
including both general meetings and extraordinary meetings of
Shareholders and Investors.
"Investor" means a person or entity, other than a Shareholder, with
equity participation in the Company.
"Kuwait" means the State of Kuwait.
"Loan Agreement" means the long-term financing loan agreement and any
bridge loan agreement in the Agreed Form between the Company and its
lender(s), including any letters of commitment.
"Plant" means the wastewater treatment and reclamation plant to be
built, operated and transferred in accordance with the provisions of
the Concession Agreement.
"Post-tax Profits" means in respect of any Financial Year the audited
post-tax profit of the Company as shown in the audited profit and loss
account of the Company for that Financial Year.
"Project" means the build, operate and transfer project for Sulaibiya
Wastewater Treatment and Reclamation Plant in accordance with the
Concession Agreement.
"Project Agreements" includes but is not limited to the Concession
Agreement, the Articles, the EPC Agreements, the Ductile Iron Pipe
Supply Agreement, the O&M Agreements, and the Loan Agreement.
"Relevant Date" means the date on which any party becomes a party to
this Agreement whether as an original party or by subsequently adhering
to its terms in the manner described in this Agreement.
"Required Majority" means:
(One)in respect of the matters set out in Schedule 1 ("Reserved Matters), the
affirmative vote of a majority of the Board of Directors, provided the
affirmative vote of the Ionics Directors are included ; and
(Two) in respect of any other matter a simple majority of the Directors.
"Reserved Matters" means each of the matters in Schedule 1.
"Shareholder" means each of Kharafi and Ionics or any Affiliate, as
defined previously, of each of them to whom Shares are transferred,
subject to the transfer policy and to the approval of the Ministry of
Finance or Ministry of Public Works, in accordance with this Agreement
from time to time.
"Shareholder Loan" means any capital contribution required to be made
by a Shareholder pursuant to Clause 10 which is contributed by a
Shareholder by way of debt.
"Shares" means the investment representing the equity share interest of
each Shareholder in the capital of the Company having the rights set
out in the Articles.
(2) Any reference, express or implied, to an enactment includes references to:
(a) that enactment as re-enacted, amended, extended or applied by or under
any other enactment (before or after the signature of this Agreement);
(b) any enactment which that enactment re-enacts (with or without
modification); and
(c) any subordinate legislation made (before or after the signature of
this Agreement) under that enactment, as re-enacted, amended, extended
or applied as described in paragraph (a) above, or under any enactment
referred to in paragraph (b) above.
(3) In this Agreement:
(a) words importing the singular shall include the plural and vice versa;
(b) words denoting persons shall include bodies corporate and
unincorporated associations of persons and vice versa; and
(c) references to a Party shall include successors or assigns of that
Party.
(4) The headings in this Agreement do not affect its interpretation.
(5) Any schedule or appendix to this Agreement shall take effect as
if set out in this Agreement and references to this Agreement shall
include its schedules and appendices.
2. Conditions Precedent
The provisions of Clauses 2, 5(1)(a)(i), 12, 13, 15, 17, 18, 19, 20,
21, 22, 23 and 24 shall be effective on and from the date of this
Agreement. All other provisions of this Agreement shall only become
effective on and from the Effective Date.
3. Warranties
Each Shareholder represents and warrants to the others as at the
Effective Date that the matters contained in Schedule 2 are true and
accurate.
4. Business of the Company
(1) The business of the Company shall be the development,
engineering, procurement, construction, operation and maintenance of a
wastewater treatment and reclamation plant located at Sulaibiya,
Kuwait, in accordance with the provisions of the Project Agreements.
(2) Subject as otherwise required by law or by this Agreement,
proceedings of the Company shall be conducted in such a way as to
maximise profit available for distribution to the Shareholders to the
extent consistent with good business practice.
(3) The Company, in all matters during the course of the Project and
under this Agreement, shall deal with the Shareholders and their
Affiliates on an arm's length basis and the Shareholders shall ensure
that any existing or potential conflicts of interest are brought to the
attention of the Company at the earliest opportunity so that they can
be dealt with in accordance with this Agreement and the Articles. In
the event of any conflicts between Shareholders with respect to the
determination of the form of any Project Agreements, the interests of
the Company shall have primacy over the interests of the Shareholders.
5. Formation of the Company
(1) As soon as reasonably practicable:
(a) the Parties shall (i) take all such preliminary administrative
actions as may be reasonably necessary to incorporate the
Company, and thereafter (ii) incorporate the Company and procure
that the Company is duly authorised in accordance with all
applicable laws to carry on the Business;
(b) Kharafi shall subscribe for 75 Shares in cash and shall pay to
the Company the cash sum of 750,000 Kuwaiti Dinars;
(c) Ionics shall subscribe for 25 Shares in cash and shall pay to the
Company the cash sum of 250,000 Kuwaiti Dinars;
(d) the Shareholders shall procure that the Company shall on receipt
by it of the subscription monies allot and issue the Shares
specified in paragraphs (b) and (c) (inclusive) above credited as
fully paid to the respective Shareholder and enter their names in
the register of members of the Company as the holders of those
Shares;
(e) the Articles shall stipulate that the Board of Directors will
comprise a minimum of five and a maximum of seven Directors
appointed by the General Assembly in accordance with the
Articles, three to represent Kharafi, two to represent Ionics,
(collectively constituting the minimum of five Directors) and in
the event of the admission of Investors, two to represent such
Investors; and
(f) the Shareholders shall procure that a meeting is held at which it
is resolved that:
(i) the three (3) persons identified in writing by Kharafi to Ionics;
(ii) the two(2)persons identified in writing by Ionics to Kharafi;
(iii) Pricewaterhouse Coopers LLC be appointed as the Auditors;
(iv) the Financial Year of the Company shall be set as the period
commencing on 1 January and ending on 31 December in each year;
(v) the registered office of the Company be fixed to Office No. 2,
2nd Floor, Building No. 282, Al-Shuhada Street, Plot No. 1, Area
No. 11, Kuwait City, Kuwait;
(vi) the first meeting of the Board shall resolve that
a) the Business Plan in the Agreed Form be adopted;
b) the Project Agreements, when due, be entered into by the
Company or, where relevant, the Shareholders or their nominees.
6. RESERVED MATTERS
The Parties agree that they shall procure that the Company shall not do
any of the things listed in Schedule 1 without the prior written
approval of the Required Majority.
7. Management and Control Bodies
(1) The highest governing body of the Company shall be the General Assembly
(2) (a) The General Assembly shall be responsible for deciding all matters
which are reserved for the General Assembly under the laws of
Kuwait.
(b) The Board shall be responsible for the overall management of the
Company.
8. The Board
8.1 Constitution of the Board
(1) Following the Effective Date the Board shall comprise Directors as
stipulated in Article 5 of this Agreement.
(2) As long as Kharafi and Ionics shall collectively own not less than 51% of
the shares of the Company, Kharafi shall maintain three (3) Directors and
Ionics shall maintain two (2) Directors to the Board.
(3) No Director representing a Shareholder shall be entitled to receive
remuneration from the Company (for acting in his capacity as a Director but
without prejudice to any entitlement he may have to be remunerated if he
also acts as an executive or employee of the Company) but the Company shall
meet the reasonable costs and expenses (including, without limitation,
travel and accommodation costs) for Directors attending a meeting of the
Board.
(4) The Chairman shall be appointed by simple majority.
8.2 Authority of the Board
(1) A Director shall be fully authorised to vote and make decisions
which are binding on the Shareholder he represents. Technical and other
advisors as the Board may deem appropriate shall be entitled to attend
Board Meetings upon invitation of the Board but shall not be counted in
the quorum for any such meeting and shall not be entitled to vote on
any resolution.
(2) The Board may establish such sub-committees, including technical
and financial sub-committees, as the Board may deem appropriate by a
decision passed by the simple majority. The functions of such
sub-committees shall be advisory or as otherwise determined by simple
majority.
(3) The business and affairs of the Company shall be managed by or
under the direction of the Board. The power to act for or to bind the
Company shall be vested exclusively in the Board. The Board may, by a
decision passed by the simple majority, delegate any of its powers and
duties which are not Reserved Matters to officers, employees, agents
and other persons as deemed appropriate.
(4) The Board shall appoint and determine the terms of compensation of any
Director or senior employees of the Company.
8.3 Board Decisions
All decisions, resolutions, approvals and other actions or action items
of the Board shall be by simple majority unless stated under this
Agreement to require the Required Majority.
8.4 Proceedings of Directors
(1) The quorum for a meeting of the Board shall be four Directors
present throughout the meeting, provided that both Shareholders are
represented by at least one Director each.
(2) Subject to the remaining provisions of this Clause 8.4, each
Director shall be given not less than twenty (20) days written notice
of any meeting of the Board. Such notice shall specify the date, time
and place such meeting is to take place. The Company shall send an
agenda of the matters and proposals to be considered or voted upon at
the meetings to each Director and each Shareholder not less than five
(5) days prior to meetings of the Board.
(3) Any Shareholder may request a special meeting of the Board or,
where relevant, a meeting of the General Assembly, by requesting that
the Company give notice to each Director and each Shareholder of the
Company. Upon receiving such request, the Company shall call such
meeting for a date not less than five (5) days and not more than
fifteen (15) days following such request.
(4) The Company shall keep records of all proceedings of the Board.
The Company shall make a record of each proposal voted on and the
results of such voting at each Board meeting. The Company shall provide
each Director and each Shareholder with a copy of the minutes of the
Board meeting within 15 days after the end of the meeting, which shall
be considered and if appropriate approved by the Board during the next
Board meeting.
(5) Notwithstanding sub-clause (2) above, a meeting of the Board
(including, for the avoidance of doubt, a meeting convened pursuant to
sub-clause (3) above) may consist of a conference between Directors
some or all of whom are in different places, provided that each
Director who participates is able:
(One) to hear each of the other participating Directors addressing the
meeting; and
(Two)if he so wishes, to address all of the other participating Directors
simultaneously, whether directly, by conference telephone or by any other
form of communications equipment (whether in use as at the Effective Date
or not) or by a combination of those methods.
(6) Resolutions of the Directors may be passed in writing without
the need for a meeting provided that all Directors sign such written
resolutions.
9. Continuing Obligations
The Shareholders undertake that for so long as they are shareholders in
the Company, they will take such actions and make such decisions as
appropriate to comply with the obligations in Schedule 3.
10. Funding
(1) The Shareholders agree that the Company shall obtain financing
without recourse against Shareholders or any of their Affiliates (and
for purposes of this Clause 10(1), the term Affiliates shall include
the joint venture arrangements of Affiliates with third parties) from
financial institutions, capital and/or investment markets. In no event
shall the Company's funding requirements obligate either Shareholder to
accept financing terms and conditions that are not in accordance with
this Agreement, and the failure of a Shareholder to accept or undertake
financing with recourse against such Shareholder shall not constitute a
breach of this Agreement or expose such Shareholder to liability under
any performance undertakings or guarantees pursuant to the Concession
Agreement. The Shareholders and their Affiliates will, as required,
provide pre-completion guarantees for the construction period for their
respective scopes of work, subject to the successful negotiations with
the lending institutions.
(2) In the event that the General Assembly determines that the
capital of the Company should be increased, the Shareholders shall, in
proportion to the number of Shares then held by each of them
(proportionately adjusted in the event of the admission of Investors)
subscribe such further capital as is determined, and pay the capital at
such times as is determined by General Assembly.
(3) The Company (in accordance with this Agreement) may arrange
financing in addition to or in lieu of that referred to in sub-clause
(1) above, from:
(a) additional loans or credit from the Shareholders, banks
or other financial institutions, capital markets or investors
within or outside Kuwait, on subordinated or other terms to be
approved by the Required Majority;
(b) any other means of financing permitted by applicable law; or
(c) any combination of the above.
(4) If the Shareholders or any of their Affiliates (and for purposes
of this Clause 10(4), the term Affiliate(s) shall include the joint
venture arrangements of Affiliates with third parties) are required
individually or together to provide any guarantees, warranties, or
performance bonds, or other types of contingent equity of any kind
pursuant to their requirements of the Concession Contract or to obtain
debt financing, the Company shall negotiate directly with such
Shareholder or Affiliate, on an arms length basis, a reasonable fee as
compensation for the risk accepted by such Shareholder or Affiliate. If
the guarantees, warranties or performance bonds can be provided by the
Company directly, then the Company shall obtain back-to-back
guarantees, warranties, or performance bonds from each of the
Shareholders, their Affiliates and third parties entering into Project
Agreements with the Company for their respective scopes of work.
However, it is the intent of the Shareholders to limit, to the maximum
extent permitted under the Concession Contract, any recourse to support
of whatever nature from the Shareholders or their Affiliates to their
equity commitments to the Company. If a Shareholder or Affiliate is
responsible by its action or omission which results in a call on a
guarantee, warranty or performance bond, that Shareholder or Affiliate
alone will replenish such guarantee, warranty or performance bond.
11. Dividend Policy
The Shareholders shall procure that the Company shall, to the extent
permitted by applicable law, the Loan Agreement, the Project Agreements
and subject to the Company's cash requirements, distribute among the
Shareholders the maximum amount of monies after allowing for any
applicable legal reserve and the payment of taxes, such distributions
to be made from time to time as soon as the Company may lawfully do so.
12. Protective Covenants
(1) The Shareholders agree to work exclusively with each other and
their Affiliates during the term of this Agreement with respect to the
Project.
(2) In recognition of the mutual benefit to be achieved from working
exclusively together in relation to the Project, during the term of
this Agreement no Shareholder shall approach (and each Shareholder
shall procure that none of its Affiliates shall approach), whether
directly or indirectly whether as a promoter, developer, shareholder,
investor, lender, advisor or in any other capacity whatsoever, and
whether for its own benefit or that of another, any third party (except
such Shareholder's own advisors) on issues relating to Reserved Matters
and Confidential Information concerning the Project without the prior
consent or agreement of the other Shareholder.
(3) Each Shareholder acknowledges that the provisions of this clause
are no more extensive than is reasonable to protect the other
Shareholder as a subscriber of Shares.
13. OPTION
(1) In the event that there is any adverse governmental action whose
impact to the Shareholders shall be solely and exclusively restricted
to Ionics with respect to the Project, then Ionics shall have two (2)
options:
Option A: Ionics may sell its Shares to a third party acceptable to Kharafi
(whose consent to such third party shall not be unreasonably withheld); or
Option B: Ionics may exercise the option which is hereby granted by
Kharafi to Ionics to sell all (but not less than all) of its Shares and its
Shareholder Loans (if any) to Kharafi.
Option B may be exercised on the following terms:
(One) If approval of the purchase of Shares by Kharafi is
required by the Ministry of Finance (or such other Ministry
having authority) in accordance with the Concession Contract,
then such approval shall be a condition precedent to the
purchase of Ionics' shares by Kharafi. Kharafi hereby agrees
to use reasonable efforts to seek and obtain such approval.
(Two) The option may only be exercised after sixty (60) days written
notice by Ionics to Kharafi;
(Three) The price for the Shares and the Shareholder Loans to be
transferred shall be based on the book value of these Shares
and Shareholder Loans as of the notice date and as certified
by the Auditors; and
(Four) The price for the Shares and the Shareholder Loans to be
transferred shall be payable on the date agreed upon in the
written notice and shall be payable in Kuwaiti Dinars.
Concurrently with the transfer of the Shares and the Shareholder
Loans, Kharafi will take all actions necessary to the extent legally
possible to remove, and to indemnify and hold harmless Ionics and its
Affiliates from all continuing obligations that Ionics may have
subsequent to the date of the exercise of the option with respect to
any guarantees, warranties, performance bonds, or other types of
contingent equity of any kind pursuant to the requirements of the
Concession Contract or to obtain debt financing.
(2) Kharafi may exercise the option which is hereby granted by
Ionics to Kharafi to purchase such number of Shares as may be required
to reduce Ionics' equity participation in the Company from twenty-five
percent (25%) to twenty percent (20%). This option may only be
exercised on the following terms:
(One) Kharafi shall obtain the approval of the purchase of Shares by
the Ministry of Finance (or such other Ministry having
authority) in accordance with the Concession Contract;
(Two) The option may only be exercised within sixty (60) days
following the execution of the Concession Agreement and upon
thirty (30) days written notice by Kharafi to Ionics;
(Three) The price for the Shares to be purchased shall be the book
value of the Shares at the time of purchase plus twenty
percent (20%) of the incremental difference between the book
value of the Shares and the market value of the Shares at the
time of purchase (the market value of Shares being determined
with reference to the last sale price of Shares in the Company
to Investors);
(Four) The price for the Shares to be purchased shall be payable
on the date of transfer and shall be payable in U.S.
Dollars; and
(Five) As consideration for Ionics' grant of the foregoing
option, and notwithstanding the provisions of sub-clause
22(16)(b), Kharafi agrees to fund any shared costs of the
Company in accordance with an eighty percent (80%) equity
participation.
14 Default
14.1 Failure to Meet Cash Call
(1) If any Shareholder fails to meet any request for additional
capital as provided for in sub-clause 10(2) within a period of thirty
(30) days from the date on which such request for additional capital
was required to be met, that Shareholder will be deemed to have waived
its right to receive the amount of Shares corresponding to that unmet
request for additional capital and such shares will instead be offered
in accordance with sub-clause (2) for subscription to each Shareholder
which has not failed to meet its request for additional capital.
(2) (a) The offer for subscription referred to in
sub-clause (1) (the "Subscription Offer") shall be made by
notice in writing from the Company to each Shareholder which
has not failed to meet in request for additional capital
pursuant to 10(2) stating the additional Shares being offered
and any other terms of the Subscription Offer.
(b) The Subscription Offer shall remain open for a period
of thirty (30) calendar days, and if not accepted within that
period, the Subscription Offer will be deemed to be declined
by the Shareholder(s) concerned.
(c) The additional Shares shall be allotted to those
Shareholders who apply for them in proportion to the number of
Shares then held by each Shareholder concerned
(proportionately adjusted in the event of the admission of
Investors), or in the amount applied for, whichever is the
lesser amount.
14.2 General
(1) In the event that any Shareholder fails to pay when due any
amount payable to the Company or to any other Shareholder under or in
respect of this Agreement; (and with respect to Clause 10(2) is not
otherwise acquired by other Shareholders pursuant to Clause 15(2)) it
shall pay on demand to such other person interest on the overdue amount
from the due date up to the date of actual payment at a rate per annum
equal to (i) the greater of (1) ten percent 10% or (2) Central Bank of
Kuwait Discount Rate + 2%.
(2) The rights and remedies, powers and privileges set out in this
Clause are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by applicable law.
15. Confidentiality
(1) This Agreement shall be held to be strictly confidential as to its
existence and the terms hereof, and shall only be disclosed to those
senior management employees and outside advisors (at each Party's risk)
on a need-to-know basis. During the term of this Agreement, and for a
period of five (5) years thereafter, no Party shall use or disclose (and
each Party shall procure that none of its Affiliates shall use or
disclose), for any authorised purpose, any confidential information
belonging to the others, their Affiliates or to any other person
connected with the others, and each Party shall take all reasonable
precautions for the safe custody of such confidential information. For
clarity, it is expressly agreed that a Party shall be entitled to
disclose such confidential information to any of its Affiliates which
reasonably need to know that confidential information to assist the
Parties in relation to the Project. That disclosure shall be made on
terms that the Affiliate may use or disclose the confidential information
only for that purpose, and in a way which reasonably protects the
confidentiality of the information.
(2) In this Agreement "confidential information" of a person means
information of any nature concerning that person or its business which is
not publicly known, including any compilation which is not publicly
available of items of publicly known information, but does not include
information which:
(a) is publicly known at the time of disclosure under this Agreement;
(b) after disclosure under this Agreement, becomes publicly known
other than as a result of a breach of this confidentiality
obligation; or
(c) can be shown was made available to the recipient by some
other person who had a right to do so and who has not imposed on
the recipient any obligation of confidentiality or restricted use.
(3) Any Party receiving Confidential Information may use the
Confidential Information only for the purposes of the Project and Project
Development.
(4) Nothing in this Agreement shall restrict a Party or its Affiliates
from making any statement or disclosure that may be required by law or
any applicable regulatory authority or stock exchange, or as may be
required for tax or accounting purposes, provided that that Party shall
advise the other about as to the nature, content and timing of the
disclosure.
(5) The Parties recognise that in some circumstances financial
compensation will not be an adequate remedy for breach of this clause.
Accordingly, each Party agrees that, in addition to any rights or
remedies available at law, the Party whose confidential information is to
be used or disclosed in an unauthorised way shall be entitled to
immediate injunctive relief and to specific performance of the
obligations in this Clause 15.
(6) In the event of this Agreement being terminated prior to financial
close, all confidential information shall be returned to the Party from
which it was received, or shall be destroyed with an appropriate
assurance that any and all copies thereof have been destroyed, or shall
be retained by the receiving Party subject to the confidentiality,
non-disclosure and use restrictions of this Clause 15.
(7) A Shareholder shall not be in breach of this Clause by virtue of any
Director passing to the Shareholder which appointed him any information
he receives as a Director of the Company, but nothing contained in this
Agreement shall require such disclosure where the Director's fiduciary
duty to the Company would be breached as a result.
16. Duration
(1) Subject to Clause 2, this Agreement shall remain in force until the
earliest of:
(a) the date on which this Agreement is terminated by agreement of all Parties;
(b) the failure to enter into the Concession Agreement within twelve (12)
months of the signing of the Shareholders' Agreement; or
(c) ______ the termination of the Concession Agreement and all rights and
obligations of the Company arising as a result of such termination have
been discharged.
(2) ______ Subject to sub-clause (3), a Shareholder will cease to have any
further rights or obligations under this Agreement on ceasing to hold
any Shares.
(3) ______ Clauses 12, 15, 16 and 17 shall continue to apply to a
Shareholder notwithstanding that it has ceased to hold any Shares.
Sub-clause (2) shall not affect any of the rights or liabilities of any
Parties in connection with any breach of this Agreement which may have
occurred before that Shareholder ceased to hold any Shares.
17. Disputes
(1) ______ The Parties shall in good faith and using their best efforts
take all steps as may be necessary to settle any dispute amicably
through negotiations and other constructive discussions.
(2) ______ If the Dispute has not been settled in the manner described
above then, upon the application of an affected Party, All disputes
arising in connection with the present Agreement shall be finally
settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by one arbitrator if the amount in
dispute is less than US$1 Million and three arbitrators if the amount
in dispute is US$1 Million or more appointed in accordance with the
said Rules. The venue for the Arbitration shall be London, U.K. and the
arbitration shall be conducted in the English language.
18. Announcements
Neither Party shall make or permit any person connected with it to make
any announcement concerning this Agreement or any ancillary matter
without the express written consent of the other Party.
19. Notices
(1) ______ Any notice or other document to be served under this Agreement
may be delivered or sent by first class recorded delivery post, or
facsimile process to the Party to be served at its address appearing in
this Agreement or at such other address as it may have notified to the
other Parties in accordance with this Clause.
(2) Any notice or document given in accordance with sub-clause (1) shall be
deemed to have been received:
(a) if delivered or sent by post, then, at the actual time of delivery: or
(b) if by facsimile process, then, when actually received,
provided that, a notice or document given in accordance with the above
but actually received on a non-working day or after business hours in
the place of receipt will only be deemed to be received on the next
working day in that place.
20 Costs
(1) ______ Each party shall pay the costs and expenses incurred by it in
connection with the entering into and completion of this Agreement.
(2) All figures stated in this Agreement are exclusive of value added tax (if
any).
21. Severability
The provisions contained in each clause and sub-clause of this
Agreement shall be enforceable independently of each of the others and
its validity shall not be affected if any of the others is invalid. If
any of those provisions is void but would be valid if some part of the
provision were deleted, the provision in question shall apply with such
modification as may be necessary to make it valid.
22. General
(1) ______ The Parties agree, as between themselves, that they shall
procure the convening of all meetings, the giving of all waivers and
consents and the passing of all resolutions and shall otherwise
exercise all powers and rights available to them in order to give
effect to the provisions of this Agreement.
(2) ______ Without prejudice to the generality of sub-clause (1), the
Parties agree, as between themselves, that, if any provisions of the
Articles at any time conflict with any provisions of this Agreement,
the provisions of this Agreement shall, to the extent legally possible,
prevail and the Shareholders shall exercise all powers and rights
available to them to procure the amendment of the Articles to the
extent necessary to permit the Company and its affairs to be regulated
as provided in this Agreement. In case of a conflict between the
provisions of Kuwaiti law and this Agreement, then to the extent
allowable by Kuwaiti law, this Agreement will prevail.
(3) ______ Except as expressly provided in this Agreement or in any Project
Agreement determined by the Parties, none of the rights or obligations
under this Agreement may be assigned or transferred without the prior
written consent of all the Parties. For the avoidance of doubt, the
Parties expressly intend by this Agreement that their respective rights
and obligations may be assigned to wholly owned Affiliates, provided
that such transfers shall be subject to and in full compliance with the
provisions of the Concession Agreement and Kuwaiti Laws.
(4) ______ This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same
agreement, and any party may enter into this Agreement by executing a
counterpart.
(5) The Parties agree that the working language of the Parties shall be
English.
(6) ______ The Parties agree that it is their policy to comply with all
applicable laws and mandatory requirements of any applicable
governmental body in connection with the Project. Each Party will
indemnify the other Parties against any fines, costs or damages
incurred by the others as a result of a Party's failure to so comply.
(7) ______ The Parties acknowledge that certain laws, including the U.S.
Foreign Corrupt Practices Act and Kuwaiti Penal Law prohibit any person
from making any payment of money or giving other valuable
consideration, directly or indirectly, to obtain or retain business or
to influence improperly or unlawfully any decision or judgement of any
official or any governmental body or political party or candidate for
political office or any other person, in connection with the subject
matter of this Agreement or in connection with any contracts or
dealings with third parties associated with the Project. The Parties
agree to comply fully with these obligations.
(8) ______ Except to the extent (if any) expressly stated to the contrary,
no Party to this Agreement is (and this Agreement shall not constitute
any Party as) the partner or agent of the others or of their
Affiliates. No Party is authorized to bind the others or to incur
liabilities or to make representations on their behalf or on behalf of
their Affiliates.
(9) ______ Except to the extent expressly described in this Agreement, the
Parties do not have a fiduciary relationship, each Party is free to act
as it considers appropriate, and is not restricted from engaging for
its own account, by itself or with others, in any business or activity
of any nature whatever.
(10) No variation of any of the terms of this Agreement will be effective unless
it is made in writing and signed by the Parties.
(11) _____ (1) Third Party Indemnification. Each Party shall indemnify,
defend and hold harmless the other Party with respect to any and all
claims made against any of them by any party or parties claiming, by or
through such indemnifying Party, an interest in this Agreement, the
Project or the Company or entitlement to payment of fees or
reimbursement of costs in connection with the Project to which interest
or claim the other Party or its representatives have not consented.
(2) Except for:
(a) the obligations of a Party to make payments relating to the shared costs as
set forth in Schedule 4;
(b) the indemnification obligations of a Party in sub-clause 11(1); and
(c) the gross negligence or wilful misconduct of a Party resulting in a breach
of this Agreement,
in no event shall either Party or its Affiliates have any
liability to the other Party or its Affiliates, or to the
Company, for any loss or damage arising out of or in connection
with this Agreement.
(3) ___ In no event shall any Party or its Affiliates be liable under
this Agreement to the other Party or its Affiliates or to the
Company for consequential, incidental, or indirect loss or
damages. The releases from liability and limitations on liability
set forth in this clause shall extend to the directors, officers,
employees, agents, partners and Affiliates of such Party and
their respective directors, officers, employees and agents.
(12) _____ The Parties agree that they will modify this Shareholders
Agreement to accommodate any changes necessary as a result of changes
in the Concession Agreement.
(13) _____ Kharafi and Ionics envisage a payment to them of a success fee
conditional on Financial Close which will be paid in the proportion to
each of the Parties' individual equity commitment in the Company under
this Agreement. The success fee shall be paid to the Parties by the
Company from the funds made available to the Company from the lenders
and equity investors at Financial Close.
(14) _____ The Company will enter into two EPC contracts, one with Kharafi /
Bechtel Joint Venture, and the second EPC contract with Ionics and
Kharafi joint venture (collectively, the "EPC Agreements"). The Company
will enter into a "Ductile Iron Pipe Supply Agreement" with Kharafi for
the supply of the ductile iron pipelines.
(15) _____ The Company will enter into an agreement with an Affiliate of
Kharafi to contract for O&M services for the Project; the Affiliate of
Kharafi which is to provide the O&M services for the Project will
sub-contract to Ionics by O&M Subcontract (or such other contractual
arrangement as the Parties deem appropriate) for Micro Filtration and
Reverse Osmosis system O&M services (collectively, the "O&M
Agreements").
(16) _____ Each of the Parties shall bear its own costs of the activities
carried out in relation to the development phase of the Project prior
to the Effective Date. However, certain services provided by the
Parties prior to the Effective date shall be deemed to be shared costs
as referred to in sub-clauses (a) and (b).
(a) ______ As soon as practical the Parties shall agree an Initial
Operating Budget for shared costs to be incurred in relation
to the Project as set forth in Schedule 4.
(b) ______ The shared costs will be met by the Parties in
proportion to their equity commitment under this Agreement. In
the event that additional Investors are admitted to the
Company, they also shall pay their proportionate amount of
shared costs, including shared costs previously incurred.
23. Whole Agreement
(1) ______ This Agreement, including the Schedules annexed hereto and
documents incorporated by reference, contains the whole Agreement
between the Parties relating to the transactions contemplated by this
Agreement.
(2) ______ Each of the Parties acknowledges that, in agreeing to enter into
this Agreement, it has not relied on any representation, warranty,
collateral contract or other assurance (except those set out in this
Agreement and the documents referred to in it) made by or on behalf of
any other party before the signature of this Agreement. Each of the
Parties waives all rights and remedies which, but for this sub-clause,
might otherwise be available to it in respect of any such
representation, warranty, collateral contract or other assurance,
provided that nothing in this clause shall limit or exclude any
liability for fraud.
24. Governing Law
This Agreement is governed by and shall be construed in accordance with
laws of Kuwait.
AS WITNESS the hands of the duly authorised officers of the Parties on the date
which appears first on page 1.
Signed /s/ Marzouk N. Al-Kharafi
For and on behalf of Mohammed Abdul Mohsin al Kharafi
(or its wholly owned Affiliate)
Name Marzouk N. Al-Kharafi
Position Assistant Director General
Signed /s/ Edward J. Cichon
For and on behalf of Ionics, Incorporated
(or its wholly owned Affiliate)
Name Edward J. Cichon
Position Vice President
SCHEDULE 1
RESERVED MATTERS
General
1. Alter the Articles.
2. Create, issue, increase, decrease, purchase or redeem the Company's share
or loan capital.
3. Pass any resolution for merger, consolidation or winding up the Company.
4. Apply for the appointment of a receiver or an administrator over the
Company's assets.
Accounts and financial
5. Appoint or change the Auditors.
6. Alter the Company's accounting reference date.
Commercial
7. Form any subsidiary or acquire shares in any company or participate in, or
terminate any participation in, any partnership or joint venture.
8. Reorganise or change the nature or scope of the Company's business.
9. Dispose of all or substantially all of the Company Assets.
General
10. ____ Any form of or material amendment, waiver, consent, variation or
other modification to any provision of this Agreement, or the Project
Agreements related to the Project and/or referenced in this Agreement.
(For purposes of this clause 10, the term "material", as it is used,
refers to any amendment, waiver, consent, variation or other modification
which is not in the usual course of business or which is prejudicial to
the rights and interests of the Company.)
Accounts and financial
11. Other than in the normal course of business, incur expenditure exceeding
US$150,000 on capital account.
Commercial
12. Amend terms of the Loan Agreement
13. Create or redeem any mortgage, charge, debenture or other security.
14. Enter into any abnormal or unusual contract or commitment, including any
which:
(a) is outside the ordinary course of business;
(b) would involve a total outlay over the term of the contract in excess of
US$150,000.
Taxation
15. Make any voluntary claim, disclaimer, surrender, election or consent for
tax purposes.
Property
16. Grant any lease or third party rights in respect of the Company's property
other than in the normal course of business.
17. Transfer or dispose of the Company's property other than in the normal
course of business.
18. Create any interest over the Company's property (including a security
interest) other than in the normal course of business.
Intellectual property
19. ____ Assign, licence, transfer, dispose of or create any security
interest over, or otherwise deal with any of the Company's intellectual
property.
20. Apply for registration of any intellectual property.
21. Allow any registration of intellectual property to lapse or be cancelled.
22. ____ Prosecute any infringement action against parties other than
partners, or defend any action for revocation or cancellation or any
other challenge to the validity of any intellectual property.
23. Accept any restriction on the use of the Company's intellectual property.
Employees
24. ____ Change the terms and conditions of employment of any Director or
senior employee of the Company (a "senior employee" being an employee
with a gross annual salary in excess of ____________ US$75,000).
25. Employ or dismiss any senior employee.
SCHEDULE 2
REPRESENTATIONS AND WARRANTIES
1. Status
It is a With Limited Liability company duly organised and validly
existing under the laws of its country of incorporation.
2. Powers
It has the power to enter into and perform its obligations under this
Agreement and each of the other documents referred to in this Agreement
to which it is a party.
3. Consents
It has all necessary consents, licences and approvals in connection
with the entry into and performance of its obligations under this
Agreement and (if applicable) as a shareholder in the Company.
4. Non-violation of law etc.
Its entry into this Agreement and performance of its obligations under
this Agreement, including those actions taken prior with respect to and
leading up to the execution of this Agreement, has not violated or
conflicted with and do not and will not violate or conflict with or
exceed any limit imposed by (i) any law or regulation to which it is
subject, including the Kuwaiti Penal Law and the U.S. Foreign Corrupt
Practices Act, to which the Parties acknowledge applicability in
accordance with sub-clause 22(7), (ii) its memorandum and articles of
association or other applicable constitutional documents or (iii) any
other agreement, instrument or undertaking binding upon it.
SCHEDULE 3
CONTINUING OBLIGATIONS
1. Business Plan
The Company shall prepare for the approval of the Shareholders a
Business Plan for the coming Financial Year of the Company which it
shall submit to the Shareholders not less than thirty (30) days before
the end of the current Financial Year of the Company. Each Business
Plan shall include:
(a) a projected balance sheet and profit and loss account;
(b) an estimate of working capital requirements;
(c) an operating budget; and
(d) a report on the Company's performance during the current Financial
Year of the Company.
2. Information
The Company shall provide each Shareholder with:
(a) quarterly accounts and progress reports within three weeks of the
end of each quarter period in the Agreed Form or as otherwise agreed by the
Shareholders;
(b) ______ audited accounts of the Company and each of its
subsidiaries (if any), and audited consolidated accounts of
the Company and its subsidiaries (if any) within three months
of the end of each Financial Year of the Company; and
(c) ______ such further information as each Shareholder may from
time to time reasonably require as to all matters relating to
the businesses or affairs or the financial position of the
Company and its subsidiaries (if any).
The provisions with respect to reporting may be modified pursuant to
the reporting requirements under the Loan Agreements. The Parties agree
to not unnecessarily duplicate any reporting requirements.
3. Board meetings
The Shareholders shall procure that meetings of the Directors are held
at least 4 times a year.
4. Accounting records
The Company and each of its subsidiaries (if any) shall maintain
accurate and complete accounting and other financial records and shall
procure that such accounting records are, during normal business hours,
available for inspection by each Shareholder or its respective
authorised representatives.
5. Insurance
The Company and each of its subsidiaries (if any) shall insure with a
reputable insurance office with suitable ratings from an established
rating organisation and keep so insured at all times:
(a) all its assets against such risks and in the manner and
to the extent as shall be in accordance with good
commercial practice with regard to assets of the same kind
in comparable circumstances; and
(b) itself in respect of any accident, damage, injury,
third party loss, loss of profits and other risks and in the
manner and to an extent as shall be in accordance with good
commercial practice with regard to a business of the same kind
as that of the Company or, if there are any, subsidiary
concerned.
6. Compliance with Project Agreements and Loan Agreement
The Shareholders shall procure that the Company complies with its
obligations under the Project Agreements and the Loan Agreement and
other financing and security arrangements to which the Company is a
party.
7. Ownership of Shares
If other Investors are admitted to the Company, the Shareholders shall
retain in the aggregate at least 51% of the equity ownership of the
Company.
SCHEDULE 4
SHARED COSTS
- Company incorporation fees, etc.
- Bid Budget
- Third party legal counsel to the Company
- Third party financial advisor to the Company
- Other third party consultant(s) to the Company
- Operational costs.
- Concession Company costs
Exhibit 10.2
AMENDMENT AGREEMENT NO. 2
TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDMENT AGREEMENT NO. 2 (this "Amendment"), is made as of May
14, 2001, by and among IONICS, INCORPORATED (the "Borrower"), a Massachusetts
corporation having its principal place of business at 65 Grove Street,
Watertown, Massachusetts 02472, FLEET NATIONAL BANK (referred to herein as
"FNB"), with offices at 100 Federal Street, Boston, Massachusetts 02110, and the
other banking institutions listed on Schedule 1 to the Credit Agreement (as
hereinafter defined) (FNB and such other banking institutions being collectively
referred to herein as the "Banks" and each a "Bank") and FNB as agent for the
Banks (the "Agent").
WHEREAS, the Borrower, the Banks and the Agent are parties to that
certain Second Amended and Restated Credit Agreement, dated as of July 28, 2000
(as amended by Amendment Agreement No. 1, dated as of March 1, 2001, and as
further amended and in effect from time to time, the "Credit Agreement"),
pursuant to which the Banks, upon certain terms and conditions, have made loans
to the Borrower; and
WHEREAS, the Agent and the Borrower are parties to a certain fee letter
agreement, dated July 28, 2000 (the "Fee Letter"), pursuant to which certain
fees have and are to be paid by the Borrower to the Agent;
WHEREAS, the Borrower has requested and the Banks and the Agent have
agreed, on the terms and subject to the conditions set forth herein, to amend
the Credit Agreement and the Fee Letter;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ss.1. ______ Defined Terms. Capitalized terms which are used herein
without definition and which are defined in the Credit Agreement shall have the
same meanings herein as in the Credit Agreement.
ss.2. Amendment of Credit Agreement. The Credit Agreement is hereby
--------- -- ------ ---------
amended as follows:
(a) ______ Section 2.3 of the Credit Agreement is amended by deleting
the date "May15, 2001" set forth therein and substituting the date
"September 30, 2001" therefor.
(b) Section 8 of the Credit Agreement is amended by adding the following
newss.8.17 at the end ofss.8:
8.17 Interest Rate Protection. The Borrower will, no later than
September 30, 2001, implement interest rate protection
arrangements in an amount and on terms and conditions otherwise
satisfactory to the Agent.
ss.3.Amendment of Schedule 1 to Credit Agreement. Schedule 1 of the Credit
Agreement is --------- ----------------------- --------- -------- -
amended by deleting Schedule 1 in its entirety and substituting the
attached Schedule 1 therefor. -------- - -------- -
ss.4.Amendment to Fee Letter. The Fee Letter is hereby amended by deleting
each reference to --------- ------------- the date "May 15, 2001" in
the second paragraph of such Letter and substituting the date
"September 30, 2001" therefor.
ss.5.Effectiveness. This Amendment shall be effective as of May 14, 2001,
subject to the ------------- satisfaction of the following conditions:
(a) Delivery. The Borrower, the Banks and the Agent shall have
executed and delivered - -------- to the Agent this Amendment.
(b) ______ Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Amendment and all documents
incident thereto shall be reasonably satisfactory in substance and form to
the Banks and the Agent, and the Agent shall have received all information
and such counterpart originals or certified or other copies of such
documents as the Agent may reasonably request.
ss.6. ______ Termination of Escrow Arrangements; Release of Security
Documents. Upon giving effect to this Amendment, the parties agree that the
escrow arrangements set forth in the Escrow Agreement shall be terminated and
that the Escrow Agent shall be directed by the Agent to deliver the Security
Documents to the Borrower. Any security interest evidenced by the Security
Documents which would have become effective upon the occurrence of a Triggering
Event shall be automatically terminated and the Agent shall hold no security
interest in any of the assets of the Borrower.
ss.7.Representations and Warranties. The Borrower represents and warrants
to the Banks and the --------------- --- ---------- Agent as follows:
(a) ______ Representations and Warranties in Credit Agreement.
___ The representations and warranties of the Borrower contained in the
Credit Agreement, (i) were true and correct in all material respects
when made, and (ii) except to the extent such representations and
warranties by their terms are made solely as of a prior date, continue
to be true and correct in all material respects on the date hereof.
(b) ______ Authority, Etc. The execution and delivery by the
Borrower of this Amendment and the performance by the Borrower of all
of its agreements and obligations under this Amendment (i) are within
the corporate authority of the Borrower, (ii) have been duly authorized
by all necessary corporate proceedings by the Borrower, (iii) do not
conflict with or result in any breach or contravention of any provision
of law, statute, rule or regulation to which the Borrower is subject or
any judgment, order, writ, injunction, license or permit applicable to
the Borrower, and (iv) do not conflict with any provision of the
corporate charter or by-laws of, or any agreement or other instrument
binding upon, the Borrower.
(c) ______ Enforceability of Obligations. ___ This Amendment,
and the Credit Agreement as amended hereby, constitute the legal, valid
and binding obligations of the Borrower enforceable against in
accordance with their respective terms. Immediately prior to and after
giving effect to this Amendment, no Default or Event of Default exists
under the Credit Agreement or any other Loan Document.
ss.8. ______ No Waiver. Except as otherwise expressly provided for in
this Amendment, nothing in this Amendment shall extend to or affect in any way
any of the Borrower's obligations or any of the rights and remedies of the Banks
or the Agent in respect of the Credit Agreement arising on account of the
occurrence of any Event of Default, all of which are expressly preserved.
ss.9. ______ Miscellaneous Provisions. (a) Except as otherwise
expressly provided by this Amendment, all of the terms, conditions and
provisions of the Credit Agreement shall remain the same. It is declared and
agreed by each of the parties hereto that the Credit Agreement, as amended
hereby, shall continue in full force and effect, and that this Amendment and the
Credit Agreement shall be read and construed as one instrument.
(b) ______ THIS AMENDMENT IS INTENDED TO TAKE EFFECT AS AN AGREEMENT
UNDER SEAL AND SHALL BE CONSTRUED ACCORDING TO AND GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS.
(c) ______ This Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute but one
instrument. In making proof of this Amendment it shall not be necessary to
produce or account for more than one counterpart signed by each party hereto by
and against which enforcement hereof is sought.
(d) ______ The Borrower hereby agrees to pay to the Agent, on demand by
the Agent, all reasonable out-of-pocket costs and expenses incurred or sustained
in connection with the preparation of this Amendment (including reasonable legal
fees).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
an agreement under seal of the date first written above.
IONICS, INCORPORATED
By: /s/Daniel M. Kuzmak
-------------------------------
Name: Daniel M. Kuzmak
Title: CFO
FLEET NATIONAL BANK, individually and as Agent
By: /s/John C. Dunne
-------------------------------
John C. Dunne, Senior Vice President
RATIFICATION OF GUARANTY
Each of the undersigned Guarantors hereby acknowledges and consents to
the foregoing Amendment No. 2 as of May 14, 2001, and agrees that the applicable
Guaranty from such Guarantor in favor of the Agent for the benefit of the Agent
and the Banks and all other Loan Documents to which each of the Guarantors are a
party remain in full force and effect, and each of the Guarantors confirms and
ratifies all of its obligations thereunder.
AQUA COOL ENTERPRISES, INC.
By: /s/Theodore G. Papastavros
Name: Theodore G. Papastavros
Title: Treasurer
AQUA DESIGN, INC.
By: /s/Edward J. Cichon
Name: Edward Cichon
Title: President
FIDELITY PUREWATER, INC.
By: /s/Anthony Di Paola
Name: Anthony Di Paola
Title: Treasurer
FIDELITY WATER SYSTEMS, INC.
By: /s/Anthony Di Paola
Name: Anthony Di Paola
Title: Treasurer
IONICS KOREA, INC.
By: /s/Arthur L. Goldstein
Name: Arthur L. Goldstein
Title: President
IONICS LIFE SCIENCES, INC.
By: /s/Theodore G. Papastavros
Name: Theodore G. Papastavros
Title: Treasurer
IONICS ULTRAPURE WATER CORPORATION
By: /s/Stephen Korn
Name: Stephen Korn
Title: Secretary
RESOURCES CONSERVATION CO. INTERNATIONAL
By: /s/Stephen Korn
Name: Stephen Korn
Title: Secretary
SEPARATION TECHNOLOGY INC.
By: /s/Stephen Korn
Name: Stephen Korn
Title: Secretary
SIEVERS INSTRUMENTS, INC.
By: /s/Stephen Korn
Name: Stephen Korn
Title: Secretary
-2-
SCHEDULE 1
Bank Commitments
---------------------------------------- -----------------------------------
Banks Commitment
---------------------------------------- -----------------------------------
Fleet National Bank $65,000,000 through 9/29/01
100 Federal Street
Boston, Massachusetts 02110 $50,000,000 as of 9/30/01
Attn: John C. Dunne, Senior Vice
President
Percentage: 100%
---------------------------------------- -----------------------------------