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Exhibit 10.7
STOCKHOLDERS' AGREEMENT
BY AND AMONG
CMP MEDIA INC.,
XXXXXX X. XXXXX AND XXXXXXXXX X. XXXXX
AND
XXXXXX X. XXXXX
DL&A
NOVEMBER 27, 1996
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TABLE OF CONTENTS
PAGE
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ARTICLE I - CONFIDENTIALITY; NON-COMPETITION
SECTION 1.1 Protection of Company's Business Interests................ 2
SECTION 1.2 Non-Disclosure and Non-Use of Confidential Information.... 3
SECTION 1.3 Protection from Unfair Competition........................ 4
SECTION 1.4 Prior Notice; Opportunity to Cure......................... 6
SECTION 1.5 Other Covenants........................................... 8
SECTION 1.6 Confidentiality of Agreement.............................. 9
SECTION 1.7 Relief for Breach......................................... 10
SECTION 1.8 Separate Covenants........................................ 10
ARTICLE II - REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations of the Company............................ 11
SECTION 2.2 Representations of Xxx.................................... 11
SECTION 2.3 Representations of Xxxxx and Lilo......................... 12
ARTICLE III - TRANSFERABILITY OF SHARES AT TIME WHEN COMPANY IS
PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 3.1 General Restriction on Transfer........................... 12
SECTION 3.2 Sale After December 31, 2005.............................. 13
SECTION 3.3 Sale After Death or Permanent Disability.................. 13
SECTION 3.4 Sale After Termination of Employment or Competition....... 14
SECTION 3.5 Purchase Price of Restricted Shares
(a) Price to be Paid for Restricted Shares.................... 14
(b) Determination of Fair Market Value........................ 15
(c) Payment of Purchase Price................................. 16
(i) Lump Sum or Installments............................ 16
(ii) Initial Installment................................ 16
(iii) Cash Flow Limitations............................. 17
(d) Closing of Transaction.................................... 18
SECTION 3.6 Assignment and Delegation by the Company to
Class B Stockholders.............................................. 19
SECTION 3.7 Tag-Along Rights -- Drag Along Rights..................... 19
ARTICLE IV - TRANSFERABILITY OF SHARES AT TIME COMPANY SHARES ARE
PUBLICLY TRADED
SECTION 4.1 General Restriction on Transfer........................... 21
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SECTION 4.2 Sale on or before December 31, 2005
(a) Minimum Market Capitalization.............................. 21
(b) Maximum Number of Shares................................... 22
SECTION 4.3 Sale After December 31, 2005.............................. 22
SECTION 4.4 Sale After Death or Permanent Disability.................. 22
SECTION 4.5 Sale After Competition.................................... 24
SECTION 4.6 Tender, Merger, Consolidation............................. 25
SECTION 4.7 Compliance with Securities Laws........................... 25
ARTICLE V - FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 5.1 Changes in Capital Structure.............................. 26
SECTION 5.2 Redemption of Class B Stock............................... 26
ARTICLE VI - PROCEDURE TO BE FOLLOWED IN CASE OF DISMISSAL FOR CAUSE............ 27
ARTICLE VII - RESOLUTION OF DISPUTES
SECTION 7.1 Arbitration............................................... 28
SECTION 7.2 Equitable Remedies........................................ 28
ARTICLE VIII - DEFINITIONS...................................................... 29
ARTICLE IX - MISCELLANEOUS
SECTION 9.1 Legend on Certificates.................................... 34
SECTION 9.2 Permitted Transferees; Representative and Successors
In Interest....................................................... 35
SECTION 9.3 Further Assurances........................................ 36
SECTION 9.4 S Corporation............................................. 37
SECTION 9.5 Credit Facilities......................................... 38
SECTION 9.6 Other Transfers........................................... 38
SECTION 9.7 Entire Agreement; Binding Effect.......................... 39
SECTION 9.8 Amendment................................................. 39
SECTION 9.9 Applicable Law............................................ 39
SECTION 9.10 Severability.............................................. 39
SECTION 9.11 No Waiver................................................. 40
SECTION 9.12 Notices................................................... 40
SECTION 9.13 Assignment................................................ 42
SECTION 9.14 Survival.................................................. 42
SECTION 9.15 Gender and Number......................................... 42
SECTION 9.16 Dates..................................................... 42
SECTION 9.17 Headings.................................................. 43
SECTION 9.18 Counterparts.............................................. 43
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STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement, made and entered into on this 27th day of
November, 1996, by and among CMP Media Inc., a Delaware corporation (the
"Company"), Xxxxxx X. Xxxxx ("Xxx"), Xxxxxx X. Xxxxx ("Xxxxx"), and Xxxxxxxxx X.
Xxxxx ("Lilo").
W I T N E S S E T H:
WHEREAS, Xxx is a key senior executive of the Company; and
WHEREAS, Xxxxx and Lilo are major stockholders of the Company; and
WHEREAS, the Company, Xxxxx and Lilo desire to create substantial
incentives for Xxx to (i) cause the Company to grow continuously and
successfully in sales, profits and profitability, (ii) take a long-term view of
the Company's future, (iii) help the Company attain its long-term goals,
including its diversity goals as set forth in its corporate Principles, and (iv)
remain with the Company for the long term; and
WHEREAS, to create such incentives, Xxxxx and Lilo desire to provide
Xxx with the opportunity to purchase shares of the Company's Class A Common
Stock from them, and Xxx desires to have the opportunity to purchase such shares
of Class A Common Stock from Xxxxx and Lilo; and
WHEREAS, as an inducement to Xxxxx and Lilo to sell him shares of the
Company's Class A Common Stock and as a condition to the closing of such sale,
Xxx desires to enter simultaneously therewith into this Agreement with the
Company, Xxxxx and Lilo;
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NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the parties, the parties hereto hereby represent,
warrant, covenant and agree, as follows:
ARTICLE I
CONFIDENTIALITY; NON-COMPETITION
Xxx hereby accepts and agrees to the provisions of this Article I and
acknowledges that such provisions are necessary and appropriate for the
reasonable protection of Xxxxx and Lilo's interests and the Company's property,
investments, business relationships, economic advantages and goodwill.
SECTION 1.1. PROTECTION OF COMPANY'S BUSINESS INTERESTS.
As a Key Senior Executive, Xxx has been intimately involved in the
management of all aspects of the business of the Company and its Affiliates and
has been a major strategist in planning and implementing its business expansion.
In the course of his long employment with the Company, Xxx has developed special
skills, knowledge and abilities in the publishing field which are of a uniquely
personal nature. He has also acquired detailed knowledge of the internal
operations of the Company and its Affiliates and highly confidential information
concerning the national and international business of the Company and its
Affiliates. In addition, he has been afforded the opportunity to develop special
relationships of confidence and trust with the customers, suppliers,
consultants, employees, officers, directors and stockholders of the Company and
its Affiliates. Because of his continuing responsibilities with the Company and
its Affiliates,
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including his involvement in strategic planning and the evaluation of proposed
investments, it is expected that Xxx will continue to be entrusted with
confidential information and will continue to have the opportunity to develop
such special relationships. The parties acknowledge and agree that the Company
and Xxxxx and Lilo would be unfairly and irreparably damaged if Xxx were to take
any of such skills, knowledge, information or relationships, which he has
acquired and developed during the course of his employment with the Company, and
use them to the detriment of the Company and its Affiliates.
SECTION 1.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
(a) Xxx represents, warrants, covenants and agrees that, without the
Company's express or implied consent while employed or, after termination,
without the prior written consent of the Company's chief executive officer or
the Board of Directors, he will not willfully or knowingly at any time directly
or indirectly disclose, communicate or divulge, or use for the benefit of
himself or of any third party, any of the business or trade secrets or other
confidential information of the CMP Group including, solely by way of
illustration but not of limitation, their business strategies, business plans,
budgets, pricing, selling techniques, marketing techniques, operating systems,
financial systems, financial data, procedures, manuals, confidential reports,
personnel records, potential acquisitions, potential business expansions, credit
and financial data of their suppliers and of their present and prospective
customers, data about competitors, new product-development initiatives, custom
research and new product or service concepts and marketing strategy.
(b) Any and all materials of or concerning the CMP Group or their
business or affairs, including without limitation files, memoranda, notes,
correspondence, lists, records, video reproductions, computer tapes and disks,
design and other documents, and
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data storage and retrieval materials (and all copies, compilations and summaries
thereof), and any and all property of the CMP Group, including without
limitation equipment, software, keys, business cards and credit cards, that are
in Dan's custody or control shall be delivered to the Company at the time Dan's
employment with the Company terminates for any reason. Xxx shall not destroy any
such materials or property, shall not retain any copies thereof and shall
certify in writing to the Company upon request that all such materials and
property have been delivered to the Company.
SECTION 1.3. PROTECTION FROM UNFAIR COMPETITION.
(a) For as long as Xxx is employed by the CMP Group and for the greater
of (i) a period of two (2) years after termination of his employment or (ii) as
long as Xxx or any Permitted Transferee owns any Restricted Shares, Xxx shall
not engage in competition with the CMP Group. For the purposes of this
Agreement, Xxx shall be deemed to engage in competition with the CMP Group if
Xxx does any of the following, whether or not in exchange for consideration,
without the Company's express or implied consent while employed or without the
Company's prior written consent after termination:
(A) On his own behalf or on behalf of any other person or entity, (1)
participates or is involved in or has direct responsibility for the day-to-day
management or operation of a Directly Competitive Business, an Indirectly
Competitive Business or any material function thereof (E.G., advertising,
circulation, production and the like); (2) owns, in whole or in part,
beneficially or of record, directly or indirectly, an equity interest (or an
interest convertible into equity) in a Directly Competitive Business or a Direct
Competitor; (3) renders services as a director, officer, employee, consultant,
advisor, agent or independent sales representative to a Direct Competitor; or
(4) renders services as a director, officer, employee, consultant, advisor,
agent or independent sales representative to an Indirect Competitor unless Xxx
has no responsibility for or
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participation or involvement in any Indirectly Competitive Business of such
Indirect Competitor, provided, however, that Xxx xxx have supervisory, advisory,
consulting or sales-representative responsibility over an Indirectly Competitive
Business if the revenue of all Indirectly Competitive Businesses of such
Indirect Competitor over which Xxx has such responsibility represents no more
than fifteen percent (15%) of the total revenue over which Xxx has such
responsibility.
(B) Solicits the service of any employee of the CMP Group for Dan's own
benefit or for the benefit of any person or entity other than the CMP Group, or
induces or helps to induce any such employee to leave employment with the CMP
Group.
(C) Assists, induces or helps any employee or former employee of the
CMP Group or any other person or entity to engage in competition with the CMP
Group or any of its business activities, provided that the giving of a favorable
reference by Xxx on behalf of such former employee shall not be prohibited by
this clause (C).
(D) Employs or causes any person or entity other than the CMP Group to
employ any former employee of the CMP Group within one (1) year after the
resignation of such former employee from the CMP Group.
(E) Willfully induces or attempts to induce any customer, supplier or
contractor of the Company to terminate any agreement or arrangement with the
Company, or willfully induces or attempts to induce any customer, supplier or
contractor, or any potential customer, supplier or contractor, of the Company
not to enter into any agreement or arrangement with the Company.
(F) Communicates publicly (other than pursuant to subpoena in a legal
proceeding) or to the press, or writes or produces for publication in any
medium, on the subject of, or with express or implied reference to, the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees in their capacities as such.
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For the purpose hereof, "implied reference" shall mean a reference that does not
expressly name the CMP Group or any of their former, current or future
stockholders, directors, officers or employees but that nevertheless would be
understood by the average reader or audience-member to refer thereto. It shall
not be deemed a violation of this clause (F) if, after the termination of his
employment with the Company, Xxx responds to inquiries from the public or the
press solely by stating, in form or substance, "I do not discuss any matters
relating to CMP; please address your inquiries directly to the company" or Xxx
communicates the fact that he was formerly employed by the Company and
identifies the positions he held and the dates thereof.
(b) Notwithstanding the provisions of paragraph (a) of this Section
1.3, Xxx shall not be deemed to be engaged in competition with the CMP Group
solely by reason of Dan's ownership of (i) an equity interest of less than
one-half of one percent (0.5%) in the securities of a Direct Competitor or
Indirect Competitor listed for trading on a national securities exchange or
quoted in the National Market List of NASDAQ or (ii) an interest in a mutual or
other investment fund which owns an interest in a Direct Competitor or Indirect
Competitor, provided that Xxx has no influence or control over the selection of
such fund's investment decisions.
SECTION 1.4. PRIOR NOTICE; OPPORTUNITY TO CURE.
(a) Xxx shall give the Company written notice at least twenty (20)
Business Days before entering into any relationship or transaction, or engaging
in any activity, or taking or omitting to take any action, which might
reasonably be deemed a breach of any provision of Section 1.2 or Section 1.3,
such notice to include full and complete particulars as to the proposed
relationship, transaction, activity, action or omission, the
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services or duties contemplated and such other facts and circumstances as are
reasonably necessary for the Company to make an informed decision. The Company
shall advise Xxx in writing, within ten (10) Business Days after such notice is
given, of the Board of Directors' determination as to whether such relationship,
transaction, activity, action or omission would materially breach any of the
provisions of Section 1.2 or Section 1.3. In the event that, for reasons not
within his control, Xxx gives the Company less than twenty (20) Business Days'
prior written notice, the Company will endeavor in good faith to advise Xxx of
the Board of Directors' determination in less than ten (10) Business Days after
such notice is given, provided that the Company's failure to advise Xxx in less
than ten (10) Business Days shall not be deemed to constitute consent to such
relationship, transaction, activity, action or omission and shall not give rise
to any liability of the Company to Xxx or to any third party.
(b) Once the Company has advised Xxx in writing that the Board of
Directors has determined that a proposed relationship, transaction, activity,
action or omission would not materially breach any of the provisions of Section
1.2 or Section 1.3, and Xxx has thereupon entered into such relationship or
transaction or has begun to engage in such activity or to take or omit to take
such action, the Board of Directors shall have no right to reverse or otherwise
modify its determination; provided, however, that if the nature, scope or terms
of such relationship, transaction, activity, action or omission are to be
modified after such determination is made, then in accordance with paragraph (a)
hereof Xxx shall give the Company prior written notice of such modification and
the Company shall advise him in writing, within ten (10) Business Days after
such notice is given, of the Board of Directors' determination as to whether
such relationship, transaction, activity, action or omission, as so modified,
would materially breach any of the provisions of Section 1.2 or Section 1.3.
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(c) In the event that, without having given the Company prior notice
pursuant to paragraphs (a) or (b) hereof, Xxx enters into any relationship or
transaction or begins to engage in any activity or to take or omit to take any
action that the Board of Directors determines is a material breach of any of the
provisions of Section 1.2 or Section 1.3, the Company shall give Xxx written
notice of such determination and, if such breach is continuing, an opportunity
to cure such breach before the Company seeks remedy or relief by judicial
process or arbitration or exercises its rights under Section 3.4(b), and before
Xxxxx or Lilo exercises his or her rights under Section 4.5. The opportunity to
cure shall be sixty (60) days to the extent such continuing breach consists of
holding an ownership interest in a competitive business and fifteen (15) days
with respect to any other continuing breach.
SECTION 1.5. OTHER COVENANTS.
(a) For as long as Xxx or any Permitted Transferee owns any Restricted
Shares, Xxx shall, if requested by the Company, provide information, testimony
and assistance in connection with the prosecution or defense of any claims by or
against the Company arising out of matters of which he acquired knowledge while
an employee of the Company. The Company shall reimburse Xxx for all reasonable
out-of-pocket expenses he incurs in rendering such assistance.
(b) For as long as Xxx or any Permitted Transferee owns any Restricted
Shares, Xxx shall not willfully make any oral or written statement which
reflects adversely upon the character, honesty, credit, efficiency or business
practices of the CMP Group or its former, current or future stockholders,
directors, officers or employees in their capacities as such.
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SECTION 1.6. CONFIDENTIALITY OF AGREEMENT.
The terms and conditions of this Agreement shall be kept confidential
by the parties, and none of the parties shall disclose them to any non-party
unless such disclosure is necessitated by (a) legal and/or financial
requirements of the Company, in which case the form of such disclosure shall
first be mutually agreed upon by the Company and Xxx, or (b) any arbitration or
other legal proceeding contesting or seeking to enforce any provision or
interpretation of this Agreement (including any deposition or testimony that
either party provides in connection therewith), regardless of whether such
proceeding is initiated by Xxx or the Company. Except as provided in the
preceding sentence, and without limiting the generality of the foregoing, Xxx
shall not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way relating to
execution of this Agreement or the events (including any negotiations) which led
to its execution, and Xxx specifically agrees that he shall not disclose
information regarding this Agreement to any current or former employees of the
Company other than those expressly authorized by the Company to have knowledge
hereof. Without limiting the comprehensive confidentiality agreed to, Xxx xxx
disclose this Agreement to his attorneys, financial advisors and members of his
and his spouse's immediate families, provided he informs them of this
confidentiality provision and they agree to abide by it. Xxx hereby agrees that
any disclosure by him of any of the terms and conditions of this Agreement in
violation of the foregoing shall constitute and be treated as a material breach
of this Agreement and Xxx shall be responsible for damages occasioned thereby,
including but not limited to reasonable attorneys' fees incurred by the Company
to enforce this Section 1.6.
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SECTION 1.7. RELIEF FOR BREACH.
Xxx acknowledges and agrees that any breach or anticipatory breach by
him of any of the provisions of this Article I would cause the Company
irreparable injury not compensable by monetary damages alone and that,
accordingly, in any such event, the Company shall be entitled to injunctions,
both preliminary and permanent, enjoining or restraining such breach or
anticipatory breach (and Xxx hereby consents to the issuance thereof without
bond by any court of competent jurisdiction), in addition to monetary damages in
such amount as the evidence may show and such other remedies as may be available
at law or in equity. In addition, in the event of any material breach by Xxx of
any of the provisions of Section 1.2 or Section 1.3, Xxx xxx be required to sell
to the Company or the holders of the Class B Stock or to Xxxxx and Lilo any or
all of the Restricted Shares then owned by Xxx, in accordance with the
provisions of Section 3.4, Section 3.6 or Section 4.5, as applicable; provided,
however, that Xxx shall not be required to sell such Restricted Shares unless
and until the Company has first complied with its obligations under Section 1.4.
SECTION 1.8. SEPARATE COVENANTS.
Xxx understands and agrees that the covenants contained in this Article
I constitute a series of separate covenants, one for each applicable state in
the United States and the District of Columbia, and one for each applicable
foreign country. If in any judicial proceeding a court shall hold unenforceable
any of the separate covenants included in this Article I, then such
unenforceable covenant or covenants shall be deemed limited as necessary or
eliminated from the provisions of this Article I for the purpose of such
proceeding to the extent necessary to permit the remaining separate covenants of
this
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Article I to be enforced in such proceeding, and to permit such unenforceable
covenant or covenants to be enforced as limited.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to Xxx that (a) it has full
legal right, power and authority to enter into this Agreement and to consummate
the transactions herein contemplated; (b) the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action; (c) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(d) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which the Company is subject or by which it is bound.
SECTION 2.2. REPRESENTATIONS OF XXX.
Xxx hereby represents and warrants to each of the Company, Xxxxx and
Lilo that (a) he has full legal right, power and authority to enter into this
Agreement and to consummate the transactions herein contemplated; (b) this
Agreement constitutes the valid and binding obligation of Xxx, enforceable in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency or
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similar laws affecting creditors' rights generally and by general principles of
equity; and (c) neither this Agreement nor the consummation of the transactions
herein contemplated will conflict with, violate or infringe any legal
restriction, contract or instrument to which Xxx is subject or by which he is
bound.
SECTION 2.3 REPRESENTATIONS OF XXXXX AND LILO.
Each of Xxxxx and Lilo hereby represents and warrants to Xxx that (a)
each of them has full legal right, power and authority to enter into this
Agreement and to consummate the transactions herein contemplated; (b) this
Agreement constitutes the valid and binding obligation of each of them,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(c) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which either of them is subject or by which either of
them is bound.
ARTICLE III
TRANSFERABILITY OF SHARES AT TIME WHEN
COMPANY IS PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 3.1. GENERAL RESTRICTION ON TRANSFER.
At any time when the Company is privately held and there is no public
market for the Class A Stock, Xxx shall not, voluntarily or involuntarily, by
operation of law or otherwise, sell, mortgage, pledge, hypothecate, assign as
security, grant or permit to exist or continue a security interest in, or in any
way transfer by gift, will, trust or intestate
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succession any of the Restricted Shares, except to a Permitted Transferee as
provided in Section 9.2(a) or except as specifically provided in this Article
III. Any attempt by Xxx to do any of the aforementioned acts or otherwise to
alienate or dispose of any Restricted Shares, except in accordance with this
Agreement, shall be null and void.
SECTION 3.2. SALE AFTER DECEMBER 31, 2005.
During each and any calendar year beginning with the calendar year
2006, Xxx shall have the right, exercisable upon notice to the Company given
during the first three (3) months of such calendar year, to require the Company
to purchase up to five hundred twenty-eight (528) shares of his Class A Stock
(which number of shares equals approximately one percent (1%) of the number of
shares of the Company's Common Stock issued and outstanding as of the date
hereof), including both Restricted Shares and Option Shares, at the price
provided in Section 3.5 (a).
SECTION 3.3. SALE AFTER DEATH OR PERMANENT DISABILITY.
In the event that Dan's employment with the Company terminates as a
result of his death or the Company terminates his employment by reason of his
Permanent Disability (whether before or after December 31, 2005), then and in
that event, notwithstanding the provisions of Section 3.2, the parties shall
have the following rights:
(a) RIGHTS OF XXX TO SELL. Xxx or his representative and/or successors
in interest shall have the right, exercisable upon notice to the Company given
no later than one hundred eighty (180) days after such termination of employment
occurs and/or during the first three (3) months of any succeeding calendar year,
to require the Company to purchase any or all of the Restricted Shares then
owned by Xxx or his successors in interest, at the price provided in Section 3.5
(a).
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(b) RIGHTS OF COMPANY TO PURCHASE. The Company shall have the right,
exercisable upon notice to Xxx or his representative and/or successors in
interest given during the first three (3) months of the third calendar year
after the year in which such termination of employment occurs and/or during the
first three (3) months of any succeeding calendar year, to require Xxx or his
representative and/or successors in interest to sell to the Company any or all
of the Restricted Shares then owned by Xxx or any successor in interest, at the
price provided in Section 3.5 (a).
SECTION 3.4. SALE AFTER TERMINATION OF EMPLOYMENT OR COMPETITION.
In the event that (a) Dan's employment with the Company terminates for
any reason other than death or Permanent Disability or (b) Xxx materially
breaches any of the provisions of Section 1.2 or Section 1.3 (whether before or
after the termination of his employment for any reason) and, if the Company has
given him notice to cure, fails to cure such breach on a timely basis, then and
in that event, in addition to any rights that Xxx has under Section 3.2, the
Company shall have the right, exercisable upon notice to Xxx given at any time
or times after such event occurs (whether before or after December 31, 2005), to
require Xxx to sell to the Company any or all of the Restricted Shares then
owned by Xxx, at the price provided in Section 3.5 (a). The death or Permanent
Disability of Xxx occurring subsequent to the termination of his employment or
such breach of any of the provisions of Section 1.2 or Section 1.3 shall not
modify or affect the rights and obligations of the parties as set forth in this
Section 3.4.
SECTION 3.5. PURCHASE PRICE OF RESTRICTED SHARES.
(a) PRICE TO BE PAID FOR RESTRICTED SHARES. The purchase price for any
Restricted Shares to be purchased pursuant to this Article III shall be the Fair
Market
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Value of such Restricted Shares, except that the purchase price for any
Restricted Shares to be purchased by reason of Dan's material breach of any of
the provisions of Section 1.2 or Section 1.3 shall be the lower of the Original
Price of such Restricted Shares or the Fair Market Value of such Restricted
Shares.
(b) DETERMINATION OF FAIR MARKET VALUE. Within sixty (60) days after
Xxx has given the Company notice of intent to sell Restricted Shares or the
Company has given Xxx notice of intent to purchase Restricted Shares pursuant to
this Article III, the Company and Xxx shall negotiate in good faith in an effort
to reach mutual agreement as to the Fair Market Value of such Restricted Shares.
If the Company and Xxx are unable to reach agreement as to the Fair Market Value
of such Restricted Shares within such 60-day period, the Fair Market Value of
such Restricted Shares shall be determined by an appraisal process as follows.
Each of the Company and Xxx shall designate, within thirty (30) days after the
conclusion of the 60-day negotiation period referred to above, an independent
and experienced appraiser familiar with the business in which the Company is
then engaged (each individually an "Appraiser" and collectively the
"Appraisers"). The Appraisers shall be instructed to complete their respective
determinations of the Fair Market Value of such Restricted Shares and to deliver
their written reports on such determinations no later than sixty (60) days after
both of such Appraisers have been appointed. If the determination of one of the
Appraisers does not exceed the determination of the other Appraiser by more than
fifteen percent (15%) of the lower of the two determinations, the Fair Market
Value of such Restricted Shares shall be equal to the average of the two
determinations. If the higher determination exceeds the lower determination by
more than fifteen percent (15%) of the lower determination, then the two
Appraisers shall jointly appoint a third, independent and similarly experienced
Appraiser within fifteen (15) days after both of such two Appraisers have
delivered their
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reports. Such third Appraiser shall deliver his report on his determination of
the Fair Market Value of such Restricted Shares within sixty (60) days after his
appointment, and his determination of Fair Market Value shall be conclusive and
binding on the parties for all purposes hereof. The cost of all such appraisals
shall be borne one-half by the Company and one-half by Xxx.
(c) PAYMENT OF PURCHASE PRICE.
(i) LUMP SUM OR INSTALLMENTS. The purchase price for Restricted Shares
shall be paid by the Company in full at the closing or, at the election of the
Company, in equal annual installments, together with interest payable quarterly
at the rate of interest announced publicly on the first day of each calendar
quarter by a major United States money market bank, selected by the Company, as
such bank's base rate, over a number of years to be determined by the Company
but in no event exceeding five (5) years if the purchase is pursuant to Section
3.2, or ten (10) years if the purchase is pursuant to Section 3.3 or Section
3.4.
(ii) INITIAL INSTALLMENT. In the event the Company elects to pay for
Restricted Shares hereunder on an installment basis, all annual installments
shall be equal in principal amount except as follows:
(A) The initial installment for any such sale of Restricted Shares,
other than a sale occurring by reason of Dan's death, Dismissal For Cause or
breach of any of the provisions of Section 1.2 or Section 1.3, shall be not less
than the amount, if any, of Dan's additional income tax liability (federal,
state and local) actually occasioned as a result of such sale, provided that
such amount shall have been certified to the Company in writing by Dan's tax
accountant.
(B) The initial installment for the first sale of shares of Class A
Stock that Xxx makes under this Agreement or the Option Agreement, other than a
sale
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occurring by reason of Dan's death, Dismissal For Cause or breach of any of
the provisions of Section 1.2 or Section 1.3, shall be at least (1) the amount
due under clause (A) above plus the amount of one million dollars ($1,000,000)
or (2) if less, the total purchase price for such Restricted Shares.
(C) The initial installment for any sale of Restricted Shares occurring
by reason of Dan's death shall be not less than the amount of the estate and
succession tax liability (federal and state) occasioned as a result of the
inclusion of the Restricted Shares in Dan's estate (giving effect to any
deferral permitted by law or regulation in the payment thereof) together with
any and all costs and expenses of administration of Dan's estate as reasonably
estimated by Dan's representative, all as certified to the Company in writing by
Dan's representative.
(iii) CASH FLOW LIMITATIONS. Notwithstanding any other provision of
this Article III, in the event that the amount due from the Company in payment
for Restricted Shares purchased hereunder (including both principal and
interest) in any one fiscal year of the Company (other than a purchase occurring
by reason of Dan's death) exceeds fifty percent (50%) of the Company's Free Cash
Flow for the preceding year, then and in that event the Company in its sole
discretion may elect to defer payment of any portion of such principal and/or
interest to the extent that payment would require the Company to pay more than
fifty percent (50%) of its Free Cash Flow for such preceding year, provided that
any such deferred amounts shall continue to earn interest as described in
Section 3.5 (c)(i) until paid; and provided further that in any event all
principal and interest shall be paid in full no later than five (5) years or ten
(10) years, as the case may be, after the date of the closing. If, in the same
fiscal year, the Company is also required to pay any persons or entities other
than Xxx for shares of Class A Stock that such persons or entities acquired from
Xxxxx and/or Lilo as of the date hereof or pursuant to
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options granted by the Company and/or is required to make payment to Xxx and/or
any other persons under any comparable long-term senior executive compensation
plan in effect from time to time, the amounts due to such other persons or
entities in such fiscal year shall be aggregated with the amount due with
respect to the Restricted Shares in such fiscal year and, if the aggregate
amount due exceeds fifty percent (50%) of the Company's Free Cash Flow for the
preceding fiscal year, then and in that event the Company in its sole discretion
may elect to defer payment of any portion of such aggregate amount (principal
and/or interest) to the extent that it would exceed fifty percent (50%) of the
Company's Free Cash Flow for the preceding year, and payments and deferments
shall be effected among Xxx and such other persons or entities in proportion to
the amounts (both principal and interest) then due and owing to each, subject to
any provisions in such plans as to priority of payment.
(d) CLOSING OF TRANSACTION. The closing of any purchase of Restricted
Shares hereunder shall be held no later than ninety (90) days after the final
determination of the Fair Market Value of such Restricted Shares, at such time
and place as the Company may reasonably designate. At the closing, Xxx shall
deliver or cause to be delivered to the Company the stock certificates
representing such Restricted Shares, duly endorsed for transfer in blank or with
duly executed stock powers attached, and with signature guaranteed, in exchange
for which the Company shall deliver to Xxx the amount of the purchase price then
due, together with the Company's promissory note evidencing the Company's
obligation to pay the balance, if any, of the purchase price in accordance with
the terms of Section 3.5(c). All payments to Xxx hereunder shall be made in cash
or by Company check, bank draft or wire transfer.
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SECTION 3.6. ASSIGNMENT AND DELEGATION BY THE COMPANY TO CLASS B
STOCKHOLDERS.
The Company shall have the right, exercisable upon notice to Xxx, to
assign any or all of its rights and/or delegate any or all of its obligations
under this Article III to the holders of the Class B Stock, in proportion to
their respective ownership interests or as they may otherwise unanimously agree,
provided that the Company shall not be relieved of its obligation to purchase
from Xxx in accordance herewith any Restricted Shares duly tendered and not
purchased and paid for by such holders of the Class B Stock.
SECTION 3.7. TAG-ALONG RIGHTS -- DRAG-ALONG RIGHTS.
(a) In the event the Controlling Stockholders of the Company determine
to dispose of all or a portion of their shares of Common Stock, with the result
that they will no longer control the Company, then and in that event the Company
shall give Xxx a notice (a "Tag-Along Notice") of such proposed sale (a
"Tag-Along Sale") and the material terms of the Tag-Along Sale (the "Material
Terms") no later than thirty (30) days prior to the consummation of the
Tag-Along Sale. If, within twenty (20) days after a Tag-Along Notice is given to
Xxx (or within ten (10) days after any notice of a change in the Material Terms
is given to Xxx), the Company receives from Xxx a written request (a "Tag-Along
Request") to include in the Tag-Along Sale any of the Restricted Shares held by
him, such Restricted Shares (in the same proportion as the total number of
shares of the Common Stock held by the Controlling Stockholders bears to the
number of shares being sold by the Controlling Stockholders) shall be included
in the Tag-Along Sale on the same terms and conditions and subject to the same
obligations as the sale by the Controlling Stockholders, taking into account the
proportionate ownership of the Controlling Stockholders and Xxx. The Company
shall give Xxx prompt notice of any change in the Material Terms and, in such
event, Xxx shall have the opportunity, for a
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period of ten (10) days after such notice has been given, to submit a Tag-Along
Request if Xxx did not previously submit a Tag-Along Request or to withdraw or
modify a Tag-Along Request previously made.
(b) Dan's rights hereunder to participate in a Tag-Along Sale shall be
contingent on Dan's compliance with each of the provisions hereof, Dan's
acceptance of a proportionate delegation of any duties or obligations related to
the Tag-Along Sale, including any indemnification obligations, and Dan's
execution of such documents in connection with the Tag-Along Sale as may be
reasonably requested by the Controlling Stockholders.
(c) In connection with any proposed sale of shares of Common Stock by
the Controlling Stockholders to a non-affiliated person or entity in an
arms-length transaction, if Xxx has not exercised his rights to sell Restricted
Shares as contemplated under paragraph (a) of this Section 3.7, the Company
shall have the right, exercisable upon notice to Xxx, to require that Xxx sell
to the purchaser of the shares of the Controlling Stockholders the same
proportion of the Restricted Shares then owned by Xxx as are being sold by the
Controlling Stockholders, on the same terms and conditions and subject to the
same obligations including any indemnification obligations, as the sale by the
Controlling Stockholders, taking into account the proportionate ownership of the
Controlling Stockholders and Xxx. Xxx agrees that he will cooperate with the
Company and the Controlling Stockholders in taking all such actions, including
executing all such documentation, as the Company and/or the Controlling
Stockholders may reasonably request.
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ARTICLE IV
TRANSFERABILITY OF SHARES AT TIME COMPANY SHARES ARE PUBLICLY TRADED
SECTION 4.1. GENERAL RESTRICTION ON TRANSFER.
In the event that shares of the Class A Stock become listed on a
national securities exchange or quoted in the National Market List of NASDAQ,
then and in that event the provisions of Article III shall cease to be
operative, and Xxx shall not, voluntarily or involuntarily, by operation of law
or otherwise, sell, mortgage, pledge, hypothecate, assign as security, grant or
permit to exist or continue a security interest in, or in any way transfer by
gift, will, trust or intestate succession any of the Restricted Shares, except
to a Permitted Transferee as provided in Section 9.2(a) or except as
specifically provided in this Article IV. Any attempt by Xxx to do any of the
aforementioned acts or otherwise to alienate or dispose of any Restricted
Shares, except in accordance with this Agreement, shall be null and void.
SECTION 4.2. SALE ON OR BEFORE DECEMBER 31, 2005.
Except as otherwise provided in Section 4.4 and Section 4.6, from
January 1, 1998 through December 31, 2005, Xxx shall have the right to sell
Restricted Shares on the public market, subject to the following conditions:
(a) MINIMUM MARKET CAPITALIZATION. Xxx xxx not sell any Restricted
Shares under this Section 4.2 unless the market capitalization of the Company as
of the Business Day immediately preceding the date of sale is greater than three
hundred forty million dollars ($340,000,000). The market capitalization of the
Company shall be determined by multiplying the Fair Market Value of a share of
Class A Stock by the total number of shares of the Common Stock then issued and
outstanding.
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(b) MAXIMUM NUMBER OF SHARES.
(i) The maximum number of shares of Class A Stock (including both
Restricted Shares and Option Shares) that Xxx xxx sell in any single calendar
year shall be five hundred twenty-eight (528) shares of Class A Stock (which
number of shares equals approximately one percent (1%) of the number of shares
of the Company's Common Stock issued and outstanding as of the date hereof); and
(ii) the maximum number of Restricted Shares that may be included in
such shares of Class A Stock sold in any single calendar year shall be the
smaller of (A) the number of Restricted Shares whose Fair Market Value as of the
Business Day immediately preceding the date of sale does not exceed $500,000 or
(B) fifty-three (53) Shares (which number equals approximately 1/10 of one
percent (0.1%) of the number of shares of the Company's Common Stock issued and
outstanding as of the date hereof).
SECTION 4.3. SALE AFTER DECEMBER 31, 2005.
Except as otherwise provided in Section 4.4 and Section 4.6, after
December 31, 2005, Xxx shall have the right to sell Restricted Shares on the
public market, provided only that the maximum number of shares of Class A Stock
(including both Restricted Shares and Option Shares) that Xxx xxx sell in any
single calendar year shall be five hundred twenty-eight (528) shares of Class A
Stock (which number of shares equals approximately one percent (1%) of the
number of shares of the Company's Common Stock issued and outstanding as of the
date hereof).
SECTION 4.4. SALE AFTER DEATH OR PERMANENT DISABILITY.
(a) Notwithstanding the provisions of Section 4.2, in the event that
Dan's employment terminates as a result of his death or the Company terminates
his
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employment by reason of his Permanent Disability, then and in that event (i)
the pre-condition to sales on or before December 31, 2005, which is set forth in
Section 4.2(a) with respect to the Company's minimum market capitalization,
shall not apply, and Xxx and/or his representative and/or his successors in
interest shall have the right to sell Restricted Shares pursuant to Section 4.2
on or before December 31, 2005 irrespective of the market capitalization of the
Company; and (ii) the limitation set forth in Section 4.2(b)(ii) shall not apply
and, instead, the maximum number of Restricted Shares that may be included in
the shares of Class A Stock sold in any calendar year by Xxx and/or his
representative and/or successors in interest, as a group, shall be two hundred
sixty-four (264) Restricted Shares.
(b) Notwithstanding the provisions of Section 4.2, Section 4.3 and
Section 4.4 (a)(ii), in the event that Dan's employment terminates as a result
of his death, Dan's representative and/or successors in interest shall have the
right to sell in any calendar year up to such number of shares of Class A Stock
(including both Restricted Shares and Option Shares) as shall equal the greater
of (i) the number of such shares that is permitted to be sold under Section 4.2
or Section 4.3, as applicable, or (ii) the number of such shares that is
necessary in order for the proceeds of such sale to equal the amount of the
estate and succession tax liability (federal and state), including any interest
thereon, due in such year as a result of the inclusion of such shares of Class A
Stock in Dan's estate (giving effect to any deferral permitted by law or
regulation in the payment thereof), together with any and all costs and expenses
of administration of Dan's estate for such year as reasonably estimated by Dan's
representative, all as certified to the Company in writing by Dan's
representative.
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SECTION 4.5. SALE AFTER COMPETITION.
In the event that Xxx materially breaches any of the provisions of
Section 1.2 or Section 1.3 (whether before or after the termination of his
employment for any reason) and, if the Company has given him notice to cure,
fails to cure such breach on a timely basis, then and in that event, in addition
to any other rights that the parties have under this Article IV, Xxxxx and Lilo
shall have the following rights:
(a) Each of Xxxxx and Lilo shall have the right, exercisable upon
notice to Xxx given at any time or times after such event occurs, to require Xxx
to sell back to him or her, as the case may be, all of the Restricted Shares
then owned by Xxx which he purchased from Xxxxx or Lilo, as the case may be,
under the Share Purchase Agreement. The purchase price for Restricted Shares
re-purchased hereunder shall be the lower of (i) the Original Price of such
Restricted Shares or (ii) the Fair Market Value of such Restricted Shares as of
the date of such notice.
(b) If Xxxxx and/or Lilo exercise any rights hereunder, the closing of
their respective purchases of Restricted Shares shall be held no later than
ninety (90) days after their respective notices of exercise are given and at
such time and place as they may reasonably designate. At the closing, Xxx shall
deliver or cause to be delivered to Xxxxx and/or Lilo, as the case may be, the
stock certificates representing such Restricted Shares, duly endorsed for
transfer in blank or with duly executed stock powers attached, and with
signature guaranteed, in exchange for which the purchasers shall deliver to Xxx
the full amount of their respective purchase prices in cash or by check, bank
draft or wire transfer.
(c) To the extent, if any, that Xxxxx and Lilo have not exercised their
rights to purchase any or all of Dan's Restricted Shares in accordance with
paragraph (a) of this
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Section 4.5, Xxx shall continue to have the right to sell such unpurchased
Restricted Shares subject to and in accordance with the other provisions of this
Article IV.
(d) Each of Xxxxx and Lilo shall have the right, exercisable upon
notice to Xxx, to assign any or all of his or her rights and/or delegate any or
all of his or her obligations under this Section 4.5 to the holders of the Class
B Stock or their children, in proportion to the respective ownership interests
of the holders of the Class B Stock or as they may otherwise unanimously agree.
(e) In the event that the Company makes a determination that Xxx has
not materially breached any of the provisions of Section 1.2 or Section 1.3,
such determination shall be binding upon Xxxxx and Lilo for the purposes of this
Agreement.
SECTION 4.6. TENDER, MERGER, CONSOLIDATION.
In the event the Controlling Stockholders of the Company determine to
dispose all or a portion of their shares of Common Stock in a tender, merger,
consolidation or similar type of transaction, with the result that they no
longer control the Company, then and in that event, Xxx shall have the right,
but not the obligation, to dispose of a proportionate number of shares of his
Class A Stock in any such transaction.
SECTION 4.7. COMPLIANCE WITH SECURITIES LAWS.
Neither Xxx nor his representative will sell or attempt to sell any
shares of Class A Stock under this Article IV except in accordance with all
applicable federal and state securities laws, all applicable rules and
regulations of the Securities and Exchange Commission, and any applicable
underwriters' limitations and restrictions.
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ARTICLE V
FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 5.1. CHANGES IN CAPITAL STRUCTURE.
If the Company hereafter declares a dividend payable in, or subdivides
or combines, shares of the Class A Stock, or if the Company engages in a
recapitalization, reorganization, merger, consolidation, split-up, transfer of
assets, combination or exchange of shares of Common Stock, or if any other event
shall occur which in the judgment of the Board of Directors calls for action by
way of adjusting the number of Restricted Shares, the Board of Directors shall
forthwith take such action as in its judgment shall be necessary or appropriate
to preserve Dan's rights with respect to the Restricted Shares substantially
proportionate to his rights existing prior to such event. The decision of the
Board of Directors with respect to any matter referred to in this Section 5.1
shall be conclusive and binding upon Xxx. Nothing in this Agreement is intended
to preserve Dan's equity interest in the Company against dilution resulting from
the issuance of securities by the Company in the future.
SECTION 5.2. REDEMPTION OF CLASS B STOCK.
If and when any shares of the Class B Stock owned by any member of the
Leeds Family are redeemed by the Company in accordance with the terms and
provisions of the Shareholders' Agreement, then, in order to ensure that Dan's
percentage interest in the Company will remain the same as his interest would
have been but for such redemption (the "Class B Stock Redemption"), the Company
shall, promptly following the Class B Stock Redemption, redeem at a price equal
to their par value (currently $.10 per share) a number of the Restricted Shares
such that (a) the ratio of (i) the number of Restricted
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Shares outstanding immediately after such redemption of Restricted Shares (the
"Class A Stock Redemption") to (ii) the total number of shares of Common Stock
outstanding immediately after the Class A Stock Redemption is the same as (b)
the ratio of (i) the number of Restricted Shares outstanding immediately prior
to the Class B Stock Redemption to (ii) the total number of shares of Common
Stock outstanding immediately prior to the Class B Stock Redemption.
ARTICLE VI
PROCEDURE TO BE FOLLOWED IN CASE OF
DISMISSAL FOR CAUSE
In the event the Company terminates Dan's employment as a Dismissal For
Cause, the Company shall give Xxx at least ten (10) Business Days' prior written
notice specifying in reasonable detail the specific conduct of Xxx that it
considers grounds for Dismissal For Cause and the specific provision of the
definition of "Dismissal For Cause" upon which it relies. Dan's employment with
the Company shall terminate as of the tenth Business Day after such notice is
given, or such other date as the parties mutually agree. Should Xxx dispute the
basis for such termination in a written notice given to the Company on or before
his termination date, the parties shall meet and endeavor to resolve the dispute
amicably within twenty (20) Business Days after Dan's notice is given. If they
cannot so resolve the dispute within such twenty (20) Business Days after Dan's
notice is given, Xxx and the Company shall submit the dispute to binding
arbitration in accordance with Section 7.1. The decision rendered in such
arbitration shall be final and binding on both Xxx and the Company for all
purposes. If the arbitrators determine that the Company did not have a proper
basis on which to terminate Dan's employment as a
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Dismissal For Cause within the meaning of this Agreement, the termination of
Dan's employment shall be treated for all purposes of this Agreement as a
Dismissal Without Cause. In addition to any other rights which a party may have,
the party prevailing in such arbitration proceeding shall be entitled to recover
from the losing party any and all of the expenses incurred by the prevailing
party in such proceeding, including reasonable attorney's fees.
ARTICLE VII
RESOLUTION OF DISPUTES
SECTION 7.1. ARBITRATION.
Except as provided in Section 7.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
SECTION 7.2. EQUITABLE REMEDIES.
Notwithstanding the provisions of Section 7.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may
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be necessary, in the petitioner's judgment, in order to more effectively or
expeditiously obtain personal jurisdiction over the respondent.
ARTICLE VIII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliates" shall mean all entities controlling, controlled by or
under common control with the Company.
"Appraiser" or "Appraisers" shall have the meaning specified in Section
3.5(b).
"Board Of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day on which the Company is scheduled to
be open for business.
"Class A Stock" shall mean the Class A Common Stock of the Company.
"Class A Stock Redemption" shall have the meaning specified in Section
5.2.
"Class B Stock" shall mean the Class B Common Stock of the Company.
"Class B Stock Redemption" shall have the meaning specified in Section
5.2.
"Closing Price" shall mean the last-quoted price at which shares of
Class A Stock were traded at the close of business on a national securities
exchange or NASDAQ on any day on which shares of the Class A Stock were publicly
held.
"CMP Business" shall mean any publication, product, service or business
(a) which the CMP Group publishes, produces, provides or engages in or (b) which
the CMP Group has a bona fide plan or intention to publish, produce, provide or
engage in within the succeeding 12-month period, the research and development of
which the CMP Group
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has devoted substantive time and attention to, and which plan or intention Xxx
has actual knowledge of before he engages in any activity competitive with such
CMP Business as contemplated by clause (A) of Section 2.3(a).
"CMP Group" shall mean the Company or any of its Affiliates.
"Common Stock" shall mean all the classes of the Common Stock of the
Company collectively.
"Controlling Stockholders" shall mean the members of the Leeds Family
who hold shares of capital stock of the Company collectively representing a
majority of the votes that may be cast on any matter on which stockholders of
the Company shall be entitled to vote.
"Direct Competitor" shall mean a business enterprise that produces or
operates, or owns directly or indirectly an interest of twenty percent (20%) or
more in, one or more Directly Competitive Businesses.
"Directly Competitive Business" shall mean any competitive publication,
product, service or business (a) the target audience of which is substantially
the same as the target audience of a CMP Business or (b) forty percent (40%) or
more of the annual revenue of which is derived from substantially the same
customers as a CMP Business derives twenty percent (20%) or more of its annual
revenue.
"Dismissal For Cause" shall mean the termination of Dan's employment
with the Company by the Board of Directors for (i) the willful and continued
failure of Xxx substantially to perform his duties as an officer and employee of
the Company or comply with the written policies of the Company after the Company
has delivered to Xxx a written demand for substantial performance or compliance
that specifies such failure in reasonable detail; (ii) illegal conduct or gross
misconduct by Xxx, in either case that is willful and results (or is reasonably
likely to result) in material damage to the business or
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reputation of the Company; or (iii) the resignation by Xxx from his employment
following his act or omission which would constitute grounds for Dismissal For
Cause hereunder. No act or failure to act on the part of Xxx (other than
non-compliance with lawful instructions given to Xxx by the Company) shall be
considered "willful" unless it is done or omitted to be done by him in bad faith
or without reasonable belief that his action or omission was in the best
interests of the Company. Any act or failure to act that is pursuant to
resolution duly adopted by the Board of Directors shall be conclusively presumed
to be done or omitted to be done by Xxx in good faith and in the best interests
of the Company.
"Dismissal Without Cause" shall mean the termination of Dan's
employment by the Company on any grounds other than grounds for Dismissal For
Cause or as a result of his Permanent Disability.
"Fair Market Value" shall mean the fair market value of a share of
Class A Stock, which shall be the Closing Price on the trading day immediately
preceding the date of determination of fair market value or, if the Company is
privately held, the best estimate of the fair market value of a share of Class A
Stock as of the last day of the month immediately preceding the month in which
notice to buy or sell a share of Class A Stock is given, as determined with
reference to publicly held companies comparable to the Company.
"Financial Statements" shall mean the combined or consolidated
financial statements of the Company and its Affiliates prepared in accordance
with generally accepted accounting principles and audited by the Company's
independent certified public accountants.
"Free Cash Flow" of the Company with respect to any fiscal year shall
mean the combined or consolidated net income of the Company for such year as
reflected in the
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Financial Statements, adjusted so as (a) to exclude the amount, if any, that, in
determining such combined or consolidated net income, represented (i) an expense
for depreciation and/or amortization or (ii) a provision or credit for federal,
state, local or foreign income taxes; and (b) to include the amount, if any, of
cash payments that the Company actually made in such fiscal year (i) for
federal, state, local and foreign income taxes owed by the Company (and, if the
Company is an S Corporation, in distributions to its stockholders for the
payment of federal, state, local and foreign taxes owed by such stockholders
with respect to the Company's income), (ii) for capital expenditures, (iii)
pursuant to the Company's 1988 Equity Appreciation Plan or (iv) as required
under the terms of the Company's then-existing financing arrangements to reduce
the principal amount of indebtedness. The Company's determination of Free Cash
Flow shall be conclusive and binding for all purposes of this Agreement provided
that the Company's certified public accountants render a written opinion that
such determination presents fairly, in all material respects, the Free Cash Flow
of the Company as herein defined. (A hypothetical illustration of the
calculation of Free Cash Flow is set forth on Schedule VIII hereto.)
"Indirect Competitor" shall mean a business enterprise that does not
produce or operate, or own directly or indirectly an interest in, any Directly
Competitive Businesses but produces or operates, or owns directly or indirectly
an interest of twenty percent (20%) or more in, one or more Indirectly
Competitive Businesses.
"Indirectly Competitive Business" shall mean any competitive or
potentially competitive publication, product, service or business which derives
from twenty percent (20%) to but not including forty percent (40%) of its annual
revenue from substantially the same customers as a CMP Business derives twenty
percent (20%) or more of its annual revenue.
"Key Senior Executive" shall mean a Company employee holding a position
of responsibility comparable to that currently titled President of International
(but in any
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case a level of responsibility no lower than the position currently titled Vice
President/Group Publisher).
"Leeds Family" shall mean Xxxxxx X. Xxxxx, Xxxxxxxxx X. Xxxxx, Xxxxxxx
X. Xxxxx, Xxxxxxx X. Leeds, Xxxxxx X. Xxxxx, Xxxx Xxxxx-Leeds and Xxxxxxxx
Xxxxx-Xxxxxxxx.
"Negative Pledge Agreement" shall mean that certain Negative Pledge
Agreement originally dated as of July 15, 1993 by and among Xxxxx, Lilo and
Fleet National Bank (f/k/a/ Shawmut Bank Connecticut, National Association), as
most recently amended and confirmed by Gerry, Lilo, Xxx and Xxxxxxx X. Xxxxx to
Fleet National Bank and The Chase Manhattan Bank on November 14, 1996.
"Option Agreement" shall mean that certain Option Agreement entered
into as of the date hereof by and between the Company and Xxx.
"Option Shares" shall mean the shares of Class A Stock owned by Xxx
pursuant to the Option Agreement.
"Original Price" shall mean the per-share price at which Xxx shall have
purchased the Restricted Shares from Xxxxx and Lilo, as adjusted to take into
account any changes in the Company's capital structure and any stock redemptions
that may have occurred subsequent to the purchase of such Restricted Shares by
Xxx hereunder.
"Permanent Disability" shall mean a physical or mental impairment, as a
result of which Xxx shall have been unable, with or without reasonable
accommodation, to perform the essential functions of his employment position for
a period of at least sixteen (16) weeks during any 12-month period.
"Permitted Transferee" shall mean a spouse, child, or grandchild of
Xxx, or an entity (e.g., a trust, corporation or partnership) in which Xxx has
the majority voting interest and of which the beneficiaries are a spouse and/or
one or more children or grandchildren of Xxx.
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"Restricted Shares" shall mean the shares of Class A Stock which Xxx
shall have purchased from Xxxxx and Lilo pursuant to the Share Purchase
Agreement, plus any additional shares of Class A Stock that may be issued from
time to time with respect to such Restricted Shares as a result of any changes
in the Company's capital structure as contemplated in Section 5.1, and less any
Restricted Shares that may be canceled or redeemed from time to time as a result
of any such changes in the Company's capital structure or of any stock
redemptions as contemplated in Section 5.2.
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement entered into as of the date hereof by and among Xxxxx, Lilo and Xxx.
"Shareholders' Agreement" shall mean that certain Shareholders'
Agreement entered into as of June 30, 1991 by and among the Company, certain of
the Affiliates and the members of the Leeds Family.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. LEGEND ON CERTIFICATES.
Upon the execution of this Agreement, each certificate evidencing any
of the Restricted Shares held by Xxx shall be endorsed as follows:
The shares of stock evidenced by this certificate are subject to the
restrictions of and are transferable only upon compliance with the
provisions of a certain Stockholders' Agreement entered into by and
among Xxxxxx X. Xxxxx, Xxxxxxxxx X. Xxxxx, Xxxxxx X. Xxxxx and the
Company. A copy of such Agreement is on file in the office of the
Company.
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In addition, all such certificates shall bear such other legends as, in the
opinion of the Company's counsel, are necessary or appropriate to ensure
compliance with all applicable federal and state securities laws.
SECTION 9.2. PERMITTED TRANSFEREES; REPRESENTATIVE AND SUCCESSORS IN
INTEREST.
(a) PERMITTED TRANSFEREES. Subject to Section 9.4 but notwithstanding
any other provision of this Agreement, Xxx shall be permitted to sell, give or
bequeath all or any portion of the Restricted Shares or interest therein, or
pass such Restricted Shares or interest by means of intestate succession or
otherwise, either outright or in trust, to a Permitted Transferee, provided that
such transfer shall be implemented in a manner acceptable to legal counsel for
the Company. In case of any such transfer by Xxx, each Permitted Transferee
shall receive and hold the transferred Restricted Shares subject to all the
terms and conditions of this Agreement, and there shall be no further transfer
of such Restricted Shares except by such Permitted Transferee to another
Permitted Transferee in accordance with the terms of this Agreement. Before Xxx
transfers any Restricted Shares to a Permitted Transferee, and before any
Permitted Transferee transfers any Restricted Shares to another Permitted
Transferee, Xxx or the transferring Permitted Transferee, as the case may be,
shall give the Company written notice of such intended transfer. Any Permitted
Transferee shall, to the extent of the Restricted Shares transferred, succeed to
all the rights and obligations of the transferor under this Agreement and shall
become bound by all the terms and conditions hereof; provided that, as a
condition precedent to a Permitted Transferee's exercising any rights under this
Agreement and to the Company's obligation to change its records to reflect the
record ownership of such Restricted Shares in the name of such Permitted
Transferee, the Permitted Transferee shall execute such documents and
instruments as may reasonably be required by legal counsel to the
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Company. Unless otherwise expressly provided in this Agreement, any reference
herein to a right or obligation of Xxx to sell or receive payment for any shares
of Class A Stock shall be deemed to refer equally to any Permitted Transferee,
and any limitations herein with respect to the number or category of shares of
Class A Stock which Xxx shall have a right or obligation to sell in any calendar
year shall apply to Xxx and all Permitted Transferees as a group.
(b) REPRESENTATIVE AND SUCCESSORS IN INTEREST. Except as may be
otherwise specifically provided in this Agreement, in the event of Dan's death
or incapacity his representative and/or successors in interest shall succeed to
all his rights and obligations under this Agreement and be bound by all the
terms and conditions hereof, and they shall be entitled to exercise such rights,
and shall be required to fulfill such obligations, in the same manner and to the
same extent that Xxx would have been so entitled or required but for his death
or incapacity.
SECTION 9.3. FURTHER ASSURANCES.
Each of the parties hereto, upon request of another party, shall take
all such actions and execute and deliver all such further instruments of sale,
assignment, conveyance, transfer and exchange, and all such other documents and
agreements, as may be necessary or appropriate to assure, complete and evidence
the full and effective sale, assignment, transfer, conveyance and exchange of
the Restricted Shares as herein required and as may otherwise be necessary or
appropriate to comply with the terms and conditions of this Agreement. In the
event a party shall not take all such actions or execute or deliver all such
further instruments, then and in that event each such party hereby appoints the
Company such party's agent and attorney-in-fact for the purpose of executing and
delivering (a) any and all documents necessary to convey and/or exchange the
Restricted
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Shares pursuant to the provisions of this Agreement, any conveyance or exchange
so made fully divesting the party whose interest is so conveyed of all right,
title or equity in or to the Restricted Shares formerly owned by such party, and
(b) any and all other documents, instruments, agreements and other writings
necessary to effectuate the terms of this Agreement. The powers of attorney
herein granted, being coupled with an interest, are irrevocable and shall not be
revoked by the death, dissolution or incapacity of any party hereto or for any
other reason. Each party hereto hereby releases any other party who conveys or
exchanges the Restricted Shares formerly owned by such party as provided in this
Section 9.3 from any and all claims and liabilities for or resulting from the
conveying or exchanging of such Restricted Shares.
SECTION 9.4. S CORPORATION.
It is intended that for federal income tax purposes the Company will
continue to qualify as an "S Corporation" as defined in Section 1361 of the
Internal Revenue Code or any successor provision of the federal income tax laws.
Accordingly, the Company and Xxx shall execute and keep in full force and effect
the consent described in Section 1362(a)(2) of the Internal Revenue Code or any
successor provision until such time as the Company and the Controlling
Stockholders determine not to continue to qualify the Company as an S
Corporation. In addition, notwithstanding the provisions of any other Section of
this Agreement, no transfer of any shares of Class A Stock shall be made to any
person or entity, nor shall Xxx by action or inaction cause any circumstances to
exist, which would disqualify the Company as an S Corporation.
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SECTION 9.5. CREDIT FACILITIES.
It is understood and acknowledged that one or more banks or lending
institutions of the Company may from time to time require, as a condition to
extending or continuing to extend credit to the Company, that persons who are
both stockholders and members of management of the Company execute and deliver
to such banks or lending institutions certain assurances and agreements such as
the Negative Pledge Agreement. For as long as he is a Key Senior Executive, Xxx
shall, if requested by the Company, promptly take all such actions and execute
and deliver all such documents containing such assurances and agreements (other
than personal guarantees) as may be reasonably required by such banks or lending
institutions, on the same basis and in substantially the same form and manner as
other persons who are both stockholders and members of management of the
Company.
SECTION 9.6. OTHER TRANSFERS.
In the event of any transfer of any Restricted Shares by Xxx, his
representative, any successor in interest or any Permitted Transferee, by
operation of law (other than transfers occasioned by an individual's death) or
court order, including but not limited to any foreclosure, adjudication in
bankruptcy, appointment of a receiver of the assets of Xxx, or xxxx and
execution, Xxx shall give immediate notice thereof to the Company, including in
such notice the date and circumstances of such transfer and the name and address
of the transferee. Xxxxx and Lilo or their designees, at their option, upon
giving sixty (60) days' prior written notice to such transferee, shall have the
right to purchase such Restricted Shares at the Original Price. The purchase
price for any such Restricted Shares shall be paid in full at the closing, which
shall not be later than thirty (30) Business Days after such notice to purchase
is given, at such time and place as the purchaser(s) may designate.
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SECTION 9.7. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties
with respect to the subject matter hereof and replaces and supersedes any and
all prior agreements, written or oral, between the parties relating to the
Restricted Shares (except for the Option Agreement to the extent its terms are
not inconsistent herewith). No promises, agreements or representations with
respect to the matters herein contained shall be binding upon any of the parties
unless set forth herein. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, representatives, successors
and permitted assigns.
SECTION 9.8. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 9.9. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law, and in accordance with and
consistent with the Company's election to be treated as an S Corporation.
SECTION 9.10 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law and
the Company's S
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Corporation election, but if any provisions hereof shall be prohibited by or
invalid under any such law or the Company's S Corporation election, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating or nullifying the remainder of such provision or any other
provision of this Agreement.
SECTION 9.11. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
SECTION 9.12. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered to an individual
party or to an authorized officer of a corporate party, whether by messenger,
courier or other person, (b) on the second Business Day after the date it is
sent by certified or registered mail, return receipt requested, or (c) on the
next Business Day after the date it is sent via telefacsimile (provided it is
actually received and is not materially illegible), as follows:
If to the Company:
CMP Media Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: President
Fax: (000) 000-0000
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with a copy to:
CMP Media Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
If to Xxx:
Xxxxxx X. Xxxxx
c/o CMP Media Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
with a copy to Xxx at his last known address as reflected on the
records of the Company
If to Xxxxx:
Xxxxxx X. Xxxxx
c/o CMP Media Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
If to Lilo:
Xxxxxxxxx X. Xxxxx
c/o CMP Media Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
or to such other mail or facsimile address as the recipient party shall have
last designated by notice given to the other in accordance herewith.
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SECTION 9.13. ASSIGNMENT.
Except as expressly provided in this Agreement, no party may assign any
rights or delegate any obligations or liabilities hereunder without the prior
written consent of the other parties, except that each of Xxxxx and Lilo may
assign any of his or her rights and delegate any of his or her obligations or
liabilities to the other, and the Company may assign any of its rights and
delegate any of its duties to an entity that controls, is controlled by or is
under common control with the Company; provided, however, that no such
assignment or delegation shall relieve such assignor from his, her or its
obligations or liabilities hereunder.
SECTION 9.14. SURVIVAL.
This Agreement shall survive any merger, sale or other disposition of
the Company.
SECTION 9.15. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to
one gender shall include the other genders, and references herein to the plural
shall include the singular.
SECTION 9.16. DATES.
If any date referenced in this Agreement falls on a day that is not a
Business Day, the next succeeding Business Day shall be deemed substituted for
such date.
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SECTION 9.17. HEADINGS.
The headings herein are for convenience of reference only and shall not
be considered in construing this Agreement.
SECTION 9.18. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed as an original and all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the individual parties have executed this Agreement
and the Company has caused this Agreement to be executed by an officer thereunto
duly authorized on the day and year first above written.
CMP MEDIA INC.
By /s/ XXXXXXX X. XXXXX
---------------------------
Name: XXXXXXX X. XXXXX
Title: President
Attest:
/s/XXXXXX X. XXXXXXXXX
------------------------------
(CORPORATE SEAL)
/s/XXXXXX X. XXXXX
-----------------------------
XXXXXX X. XXXXX
/s/XXXXXXXXX X. XXXXX
-----------------------------
XXXXXXXXX X. XXXXX
/s/XXXXXX X. XXXXX
-------------------------------
XXXXXX X. XXXXX
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