Exhibit 4.7
SECURITIES HOLDERS AGREEMENT
Dated as of
August 4, 1998
among
PENHALL INTERNATIONAL CORP.
BRUCKMANN, XXXXXX, XXXXXXXX & CO., L.P.
and
MANAGEMENT STOCKHOLDERS
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I REPRESENTATIONS, WARRANTIES AND COVENANTS OF PENHALL........................................ 2
1.1 Representations, Warranties and Covenants of Penhall........................................ 2
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH STOCKHOLDER............................... 3
2.1 Representations, Warranties and Covenants of Each Stockholder............................... 3
2.2 Legend...................................................................................... 4
2.3 Limitation on Repurchase of Securities...................................................... 4
ARTICLE III OTHER COVENANTS AND REPRESENTATIONS......................................................... 5
3.1 Financial Statements and Other Information.................................................. 5
3.2 Sale of Penhall or any of the Companies..................................................... 5
3.3 Tag-Along Rights............................................................................ 6
ARTICLE IV CORPORATE ACTIONS.......................................................................... 10
4.1 Articles of Incorporation and By-Laws...................................................... 10
4.2 Directors.................................................................................. 10
4.3 Right to Remove Certain of Penhall's Directors.............................................. 11
4.4 Right to Fill Certain Vacancies in Penhall's Board.......................................... 11
4.5 Subsidiaries Governance..................................................................... 11
4.6 Management Rights........................................................................... 11
4.7 Confidentiality............................................................................. 12
ARTICLE V ADDITIONAL RESTRICTIONS ON TRANSFERS OF SECURITIES HELD BY MANAGEMENT STOCKHOLDERS.......... 14
5.1 Certain Definitions......................................................................... 14
5.2 Restrictions on Transfer.................................................................... 28
5.3 Options..................................................................................... 30
5.4 Right of First Refusal on Transfer of Management Stockholder Securities..................... 34
5.5 Purchaser Representative.................................................................... 35
5.6 Involuntary Transfers....................................................................... 36
5.7 Covenant Not to Compete..................................................................... 38
5.8 Obligations of J&J Investments, LLC and Xxxxxxx Xxxxx Xxxxxxxxxx Revocable Trust............ 39
ARTICLE VI REGISTRATION RIGHTS......................................................................... 40
i
ARTICLE VII MISCELLANEOUS............................................................................... 40
7.2 Survival of Representations and Warranties.................................................. 40
7.3 Successors and Assigns; Entire Agreement.................................................... 40
7.4 Separability................................................................................ 41
7.5 Notices..................................................................................... 41
7.6 Governing Law............................................................................... 42
7.7 Headings.................................................................................... 42
7.8 Counterparts................................................................................ 42
7.9 Further Assurances.......................................................................... 42
7.10 Remedies.................................................................................... 42
7.11 Party No Longer Owning Securities........................................................... 43
7.12 No Effect on Employment..................................................................... 43
7.13 Pronouns.................................................................................... 43
ii
DEFINITIONS
-----------
Term As Defined in Section
---- ---------------------
Accepting Tag-Along Holder 3.3 (b)
Accumulated Dividends 5.1 (a)
Adjusted Book Value 5.1 (b)
Affiliate 3.3 (f)
Agreement Preamble
Approved Sale 3.2 (a)
Asset Sale 5.1 (c)
Associate 3.3 (f)
Bank Credit Facility 5.1 (d)
Board Resolution 5.1 (e)
Book Value 5.1 (f)
Borrowing Base 5.1 (g)
BRS Preamble
BRS Affiliates 3.3 (a)
BRS Associates 3.3 (a)
BRS Entities Preamble
BRS Partner 3.3 (a)
BRS Permitted Transferee 3.3 (a)
BRS Stockholders Preamble
Capital Stock 5.1 (h)
Capitalized Lease Obligations 5.1 (i)
Cash Equivalents 5.1 (j)
Cause 5.1 (k)
Common Stock Background
Company, Companies Background
Competitive Business 5.7
Confidential Information 4.7 (b)
Consolidated EBITDA 5.1 (l)
Consolidated Interest Expense 5.1 (m)
Consolidated Net Income 5.1 (n)
Consolidated Non-cash Charges 5.1 (o)
Controlling, controlled by, under 3.3 (f)
common control with
Currency Agreement 5.1 (p)
Default 5.1 (q)
Disqualified Capital Stock 5.1 (r)
iii
Escrow Amount 3.3 (c) (i)
Escrow Notice 3.3 (c) (ii)
Event of Default 5.1 (s)
Exchange Notes 5.1 (t)
Foreign Subsidiary 5.1 (u)
GAAP 5.1 (v)
Guarantee 5.1 (w)
Guarantor 5.1 (x)
HSI Acquisition 5.1 (y)
Indebtedness 5.1 (z)
Indenture 5.1 (aa)
Initial Notes 5.1 (ab)
Initial Public Offering 3.3 (d)
Initial Purchasers 5.1 (ac)
Interest Swap Obligations 5.1 (ad)
Investment 5.1 (ae)
Involuntarily Transferred 5.6 (a)
Securities
Involuntary Transfer Notice 5.6 (a)
Issue Date 5.1 (af)
Junior Subordinated Notes 5.1 (ag)
Lien 5.1 (ah)
Liquidation Preference 5.1 (ai)
Management Stockholder 5.2
Management Stockholders Preamble
Merger Agreement Background
Xxxxx'x 5.1 (j)
New Credit Facility 5.1 (aj)
Nonvolitional Event 5.6 (a)
Notes 5.1 (ak)
Obligations 5.1 (al)
Offeror 5.4 (a)
Option Period 5.1 (am)
Option Purchase Price 5.3 (c)
Option Securities 5.1 (an)
Options 5.3 (a) (ii)
Original Cost 5.1 (ao)
Penhall Preamble
Penhall Company Background
Permitted Indebtedness 5.1 (ap)
Permitted Investments 5.1 (aq)
iv
Permitted Transferee 5.1 (ar)
Person 5.1 (as)
PRC Background
Preferred Stock Background
Preferred Stock Company 5.3 (c)
Value
Preferred Valuation Amount 5.3 (c)
Private Exchange Notes 5.1 (at)
Purchase Money Obligations 5.1 (au)
Purchase Number 5.3 (c)
Purchase Option 5.3 (a) (i)
Put Option 5.3 (a) (ii)
Qualified Capital Stock 5.1 (av)
Refinance, Refinanced 5.1 (aw)
Refinancing
Refinancing Indebtedness 5.1 (ax)
Registration Rights Agreement 5.1 (ay)
Representatives 4.7 (b)
Restricted Payment 5.1 (az)
Restricted Security 5.1 (ba)
Restricted Subsidiary 5.1 (bb)
Sale and Leaseback Transaction 5.1 (bc)
Securities Background
Securities Act 2.1 (c)
Series A Preferred Stock Background
Series B Preferred Stock Background
Significant Transfer 3.3 (a)
Stockholder(s) Preamble
Subsidiary 5.1 (bd)
S&P 5.1 (j)
Tag-Along Acceptance Notice 3.3 (b)
Tag-Along Right 3.3 (a)
Tag-Along Rightholders 3.3 (a)
Tag-Along Sale Notice 3.3 (b)
Tag-Along Seller 3.3 (b)
Termination Date 5.3 (a)(i)
Territory 5.7
Transactions 5.1 (be)
Transfer 5.1 (bf)
Transfer Notice 5.4 (a)
Transfer Offer 5.4 (a)
v
Transfer Securities 5.4 (a)
Transferees 3.2 (a)
Transferor Stockholder 5.1 (aq)
Trustee 5.1 (bg)
Unexercised Right Notice 3.3 (b)
Unexercised Securities 3.3 (b)
Unrestricted Subsidiary 5.1 (bh)
Weighted Average Life to 5.1 (bi)
Maturity
vi
SECURITIES HOLDERS AGREEMENT
SECURITIES HOLDERS AGREEMENT, dated as of August 4, 1998 (the
"Agreement"), by and among (1) PENHALL INTERNATIONAL CORP., an Arizona
corporation formerly known as Phoenix Concrete Cutting, Inc. ("Penhall"), (2)
BRUCKMANN, XXXXXX, XXXXXXXX & CO., L.P., a Delaware limited partnership ("BRS"),
the individuals and entities listed on Exhibit A hereto as the BRS Stockholders
(the "BRS Stockholders" and, together with BRS and their respective BRS
Permitted Transferees, the "BRS Entities") and (3) the individuals and entities
listed on Exhibit A hereto as "Management Stockholders" (such individuals and
entities, together with their Permitted Transferees, the "Management
Stockholders"). The BRS Entities and the Management Stockholders are sometimes
referred to hereinafter individually as a "Stockholder" and collectively as the
"Stockholders."
Background
----------
A. Pursuant to an Amended and Restated Agreement and Plan of Merger,
dated as of August 3, 1998 (the "Merger Agreement"), by and among BRS, Penhall
Acquisition Corp., an Arizona corporation, Penhall, Penhall Rental Corp., a
California corporation formerly known as Penhall International, Inc. ("PRC") and
the stockholders identified on the signature pages thereto, and a Securities
Purchase Agreement, dated as of August 4, 1998, by and among the BRS Entities
and Penhall, each of the BRS Entities acquired (i) the number of shares of
Common Stock, par value $.01 per share (the "Common Stock"), of Penhall set
forth opposite its name on Exhibit A hereto, (ii) the number of shares of 13%
Series A Cumulative Preferred Stock, par value $.01 per share ("Series A
Preferred Stock"), of Penhall set forth opposite its name on Exhibit A hereto
and (iii) the number of shares of 13% Series B Cumulative Preferred Stock, par
value $.01 per share ("Series B Preferred Stock" and, together with the Series A
Preferred Stock, the "Preferred Stock"), of Penhall set forth opposite its name
on Exhibit A hereto.
B. Pursuant to the Merger Agreement and a Securities Purchase
Agreement, dated as of August 4, 1998, by and among Penhall and the stockholders
identified on the signature pages thereto, each of the Management Stockholders
acquired (i) the number of shares of Common Stock of Penhall set forth opposite
his or her name on Exhibit A hereto, and (ii) the number of shares of Series B
Preferred Stock of Penhall set forth opposite his or her name on Exhibit A
hereto.
C. As used herein, the term "Companies" shall mean, collectively, (i)
PRC, (ii) Penhall Company, a California corporation ("Penhall Company"), and
(iii) any future direct or indirect subsidiary of Penhall included in the
consolidated financial statements of Penhall, and the term "Company" shall be
construed accordingly. As used herein, the term "Securities" shall mean the
Common Stock, the Series A Preferred Stock and the Series B Preferred Stock now
and hereafter held by any Stockholder, including shares of Common Stock, Series
A Preferred Stock, Series B Preferred Stock and all other securities of Penhall
(or a successor to Penhall) received on account of ownership of the Common
Stock, the Series A Preferred Stock or the Series B Preferred Stock including
all securities issued in connection with any merger, consolidation, stock
dividend, stock distribution, stock split, reverse stock split, stock
combination, recapitalization, reclassification, subdivision, conversion or
similar transaction in respect thereof. A reference to any class of Securities
shall be deemed to include reference to all Securities issued in respect
thereof.
D. The Stockholders and Penhall wish to set forth certain agreements
regarding their future relationships and their rights and obligations with
respect to the Securities.
Terms
-----
In consideration of the mutual representations, warranties and
covenants contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
2
ARTICLE I
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF PENHALL
--------------------
1.1 Representations, Warranties and Covenants of Penhall. Penhall
represents and warrants to, and covenants and agrees with, each of the
Stockholders as follows:
(a) Penhall is a corporation validly existing and in good standing
under the laws of the State Arizona.
(b) Penhall has full corporate power and corporate authority to
make, execute, deliver and perform this Agreement and to carry out all of the
transactions provided for herein.
(c) Penhall has taken such corporate action as is necessary or
appropriate to enable it to perform its obligations hereunder, and this
Agreement constitutes the legal, valid and binding obligation of Penhall,
enforceable against Penhall in accordance with the terms hereof.
(d) As of the date hereof, the authorized capital stock of Penhall
consists of (i) 5,000,000 shares of Common Stock, of which 1,000,000 shares are
issued and outstanding and (ii) 250,000 shares of preferred stock, par value
$0.01 per share, of which (A) 25,000 shares have been designated as Series A
Preferred Stock, of which _______ shares are issued and outstanding, (B) 50,000
shares have been designated as Series B Preferred Stock, of which _______ shares
are issued and outstanding and (C) 10,000 shares have been designated as 10.5%
Senior Exchangeable Preferred Stock, par value $.0.01 per share (the "Senior
Exchangeable Preferred Stock"), all of which are issued and outstanding. Except
as set forth herein or in the Amended and Restated Articles of Incorporation of
Penhall, as of the date hereof, (x) there are no rights, subscriptions,
warrants, options, conversion rights, or agreements of any kind outstanding to
purchase from Penhall, or otherwise require Penhall to issue, any shares of
capital stock of Penhall or securities or obligations of any kind convertible
into or exchangeable for any shares of capital stock of Penhall; (y) Penhall is
not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock; and (z) the
Securities and the Senior Exchangeable Preferred Stock constitute all of the
outstanding shares of Penhall's capital stock.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF EACH STOCKHOLDER
-----------------------------
3
2.1 Representations, Warranties and Covenants of Each Stockholder. Each
of the Stockholders severally represents and warrants to, and covenants and
agrees with, Penhall that:
(a) Such Stockholder has full legal right, capacity, power and
authority (including the due authorization by all necessary corporate action in
the case of corporate Stockholders) to enter into this Agreement and to perform
such Stockholder's obligations hereunder without the need for the consent of any
other person or entity; and this Agreement has been duly authorized, executed
and delivered and constitutes the legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with the terms
hereof.
(b) Such Management Stockholder's residence address and social
security number are as set forth below such Management Stockholder's signature
to this Agreement.
(c) Such Stockholder will not effect a Transfer (as defined in
Section 5.1) of any Securities except in compliance with the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act")
(and applicable state securities laws) or pursuant to an available exemption
therefrom, and, without limiting the foregoing, will not effect a Transfer of
any Securities prior to the lapse of such period of time following acquisition
thereof as may be required to comply with applicable state securities laws.
2.2 Legend. The certificates representing the Securities, including
certificates issued upon any voluntary or involuntary transfer of such
Securities, unless such transfer is pursuant to a registered public offering of
the Securities or the conditions specified in Section 5.2 hereof are satisfied,
shall bear the following legend in addition to any other legend required under
applicable law:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE TRANS FERRED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OR STATE SECURITIES LAWS OR AN OPINION OF COUNSEL,
SATISFACTORY TO PENHALL INTERNATIONAL CORP., THAT SUCH REGISTRATION IS
NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE
TERMS AND CONDITIONS OF A SECURITIES HOLDERS AGREEMENT BY AND AMONG
PENHALL INTERNATIONAL CORP. AND THE STOCKHOLDERS SPECIFIED THEREIN, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF PENHALL
INTERNATIONAL CORP. THE SALE, TRANSFER OR OTHER DISPOSITION OF THE
SECURITIES IS SUBJECT TO THE TERMS OF SUCH AGREEMENT AND THE
SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH.
4
2.3 Limitation on Repurchase of Securities. Each Management Stockholder
understands that Penhall has entered into certain financing agreements which
contain prohibitions, restrictions and limitations on the ability of Penhall to
purchase any of the Securities and to pay dividends on the Common Stock, Series
A Preferred Stock and Series B Preferred Stock. Notwithstanding the foregoing,
Penhall agrees to act in good faith to obtain waivers of such prohibitions,
restrictions and limitations.
ARTICLE III
OTHER COVENANTS AND REPRESENTATIONS
-----------------------------------
3.1 Financial Statements and Other Information. So long as BRS owns any
of the Securities, Penhall shall deliver to BRS:
(a) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of Penhall,
consolidated balance sheets of Penhall and its subsidiaries as of the end of
such period, and consolidated statements of income and cash flows of Penhall and
its subsidiaries for the period then ended prepared in conformity with GAAP (as
defined under Section 5.1) applied on a consistent basis, except as otherwise
noted therein, and subject to the absence of footnotes and to year-end
adjustments; and
(b) as soon as available and in any event within 90 days after the
end of each fiscal year of Penhall, a consolidated balance sheet of Penhall and
its subsidiaries as of the end of such year, and consolidated statements of
income and cash flows of Penhall and its subsidiaries for the year then ended
prepared in conformity with GAAP applied on a consistent basis, except as
otherwise noted therein, together with an auditor's report thereon of a firm of
established national reputation.
3.2 Sale of Penhall or any of the Companies.
---------------------------------------
(a) If the Board of Directors of Penhall and holders of at least a
majority of Penhall's Common Stock then outstanding approve the sale of Penhall
or any of the Companies to an unaffiliated third person (whether by merger,
consolidation, reorganization, sale of all or substantially all of its assets or
sale of a majority of the outstanding capital stock) (an "Approved Sale"), each
Stockholder and his or its transferees (including Permitted Transferees)
("Transferees") will consent to, vote for, and raise no objections against, and
waive dissenters and appraisal rights (if any) with respect to, the Approved
Sale, and will sell all of his or its Securities in such Approved Sale upon the
terms and conditions approved by the Board of Directors of Penhall and the
holders of a majority of the Common Stock then outstanding.
5
Each Stockholder and Transferee will take all reasonably necessary and desirable
actions in connection with the consummation of an Approved Sale.
(b) The obligations of each of the Stockholders and the
Transferees with respect to an Approved Sale are subject to the satisfaction of
the conditions that: (i) upon the consummation of the Approved Sale, all of the
Stockholders and the Transferees will receive the same form and amount of
consideration per share of the applicable Securities (and, for purposes of
clarification, the Series A Preferred Stock and the Series B Preferred Stock
shall be treated as the same applicable Security), or if any holder of
Securities is given an option as to the form and amount of consideration to be
received, all Stockholders and Transferees will be given the same option, (ii)
the terms of the Approved Sale shall not include any provisions subjecting a
Stockholder or its Transferees to any indemnification obligation or other
liability beyond the value of the consideration received in the Approved Sale by
such Stockholder or Transferees and (iii) all Stockholders and Transferees shall
be subject to the same form of indemnification obligation under the terms of the
Approved Sale.
3.3 Tag-Along Rights.
----------------
(a) Except as otherwise provided in Section 3.3(e), BRS and each
BRS Entity who or which receives shares from BRS after the date hereof as a BRS
Permitted Transferee covenant and agree with the other Stockholders and their
Transferees and assigns that it will not effect a Transfer of shares of Common
Stock and/or Preferred Stock in any transaction that constitutes a "Significant
Transfer" (as hereinafter defined) unless all other Stockholders and their
Transferees and assigns (collectively, the "Tag-Along Rightholders") are offered
an equal opportunity (the "Tag-Along Right") to participate in such transaction
or transactions on a pro rata basis (based on the number of shares of Common
Stock or Preferred Stock, as the case may be, outstanding on a fully-diluted
basis) and on identical terms. As used herein, a "Significant Transfer" means a
Transfer, which either alone or taken together with all prior Transfers by BRS
and BRS Entities to any person or persons other than a BRS Permitted Transferee
(as hereinafter defined), involves one-third (1/3) or more of the shares of
Common Stock or Preferred Stock held by BRS on the date hereof. A "BRS Permitted
Transferee" shall mean, (A) any other BRS Entity or other Stockholder, (B) any
general partner of a BRS Entity (a "BRS Partner") and any corporation,
partnership or other entity that is an Affiliate (as hereinafter defined) of any
BRS Entity or BRS Partner (collectively, "BRS Affiliates"), (C) any managing
director, director, general partner, limited partner, officer or employee of any
BRS Entity or any BRS Affiliate, or any spouse, lineal descendant or immediate
family member of any BRS Entity or any heir, executor, administrator,
testamentary trustee, legatee or beneficiary of a BRS Entity or any of the
foregoing persons
6
described in this clause (C) (collectively, "BRS Associates") and (D) any trust,
the beneficiaries of which, or any corporation, limited liability company or
partnership, the stockholders, members or general and limited partners of which
include only BRS Entities, BRS Affiliates, or BRS Associates.
(b) Prior to any sale of Common Stock and/or Preferred Stock
subject to the provisions of Section 3.3(a), the seller (the "Tag-Along Seller")
shall notify Penhall in writing of the proposed sale. Such notice (the
"Tag-Along Sale Notice") shall set forth: (i) the number of shares of Common
Stock and/or Preferred Stock subject to the proposed sale; (ii) the name and
address of the proposed purchaser; and (iii) the proposed amount and form of
consideration and terms and conditions of payment offered by such proposed
purchaser. Penhall shall promptly, and in any event within ten days, mail or
hand deliver or cause to be mailed or hand delivered the Tag-Along Sale Notice
to the Tag-Along Rightholders. Each Tag-Along Rightholder may exercise the
Tag-Along Right by delivery of a written notice (the "Tag-Along Acceptance
Notice") to the Tag-Along Seller and Penhall within thirty days of the date
Penhall mailed or caused to be mailed the Tag-Along Sale Notice. The Tag-Along
Acceptance Notice shall state the number of shares of Common Stock and/or
Preferred Stock that the Tag-Along Rightholder proposes to include in the
proposed sale. Penhall shall deliver notice (the "Unexercised Right Notice") to
all Stockholders, within ten (10) days following the thirty-day period specified
above, of any Tag-Along Rightholder not exercising his, her or its right to
include Securities in the proposed sale. All other Stockholders (including
without limitation the BRS Entities and the Tag-Along Seller) shall have the
opportunity to sell additional Securities in an aggregate amount equal to the
amount of Securities as to which any Tag-Along Rightholder shall not have
exercised a Tag- Along Right (the "Unexercised Securities"), on a pro rata basis
(based on the number of shares of Common Stock or Preferred Stock, as the case
may be, outstanding on a fully-diluted basis, but excluding from such
determination the Unexercised Securities). Any Stockholder exercising his, her
or its right to sell additional Securities in accordance with the foregoing
sentence must do so by delivering to the Tag-Along Seller a Tag- Along
Acceptance Notice within ten (10) days following delivery by Penhall of the
Unexercised Right Notice. If no Tag-Along Acceptance Notice is received during
the thirty-day period referred to above, the Tag-Along Seller shall have the
right for a 90-day period to effect the proposed sale of shares of Common Stock
and/or Preferred Stock on terms and conditions no more favorable than those
stated in the Tag-Along Sale Notice. Any Stockholder delivering a Tag-Along
Acceptance Notice shall participate in the proposed transaction as set forth in
Section 3.3(a). Concurrently with the consummation of the Significant Transfer,
the Tag-Along Seller shall (i) notify each Tag-Along Rightholder who has
delivered a Tag-Along Acceptance Notice (an "Accepting Tag-Along Holder"), (ii)
remit to the Accepting Tag-Along Holder the
7
aggregate consideration for the shares of Common Stock and/or Preferred Stock to
be sold by the Accepting Tag-Along Holders in the Significant Transfer as
contemplated pursuant to Section 3.3(a) hereof, and (iii) furnish such other
evidence of the completion and time of completion of the Significant Transfer
and the terms thereof as may be reasonably requested by the Accepting Tag-Along
Holders.
(c) (i) Notwithstanding the other requirements of this Section
3.3, a Tag-Along Seller may sell Common Stock and/or Preferred Stock at any time
without complying with the requirements of Section 3.3(b) so long as the
Tag-Along Seller deposits into escrow with a nationally recognized financial
institution at the time of sale that amount of consideration received in the
sale equal to the "Escrow Amount." As used herein, the "Escrow Amount" shall
equal that amount of consideration that all Tag-Along Rightholders would have
been entitled to receive if they had the opportunity to participate in the sale
on a pro rata basis, determined as if each Tag-Along Rightholder (A) delivered a
Tag-Along Acceptance Notice to the Tag-Along Seller in the time period set forth
in Section 3.3(b) and (B) proposed to include all of her, his or its shares of
Common Stock and/or Preferred Stock in such sale.
(ii) The Tag-Along Seller shall notify Penhall in writing
of a sale pursuant to this Section 3.3(c) no later than the date of such sale.
Such notice (the "Escrow Notice") shall set forth the information required in
the Tag- Along Sale Notice, and in addition, such notice shall state the name of
the escrow agent and, if the consideration (in whole or in part) for the sale
was cash, then the account number of the escrow account. Penhall shall promptly,
and in any event within ten days, mail or cause to be mailed the Escrow Notice
to each Tag-Along Rightholder. Such Tag-Along Rightholder may exercise the
Tag-Along Right by delivery to the Tag-Along Seller and Penhall, within thirty
days of the date Penhall mailed or caused to be mailed the Escrow Notice, of (A)
a written notice specifying the number of shares of Common Stock and/or
Preferred Stock it proposes to sell and (B) the certificates for such Common
Stock and/or Preferred Stock, with stock powers duly endorsed in blank and with
signatures guaranteed. Penhall shall deliver an Unexercised Right Notice to all
Stockholders, within ten (10) days following the thirty-day period specified
above, of any Tag-Along Rightholder not exercising his, her or its right to
include Securities in the sale. All other Stockholders (including without
limitation the BRS Entities and the Tag-Along Seller) shall have the opportunity
to include additional Securities in the sale in an aggregate amount equal to the
amount of the Unexercised Securities, on a pro rata basis (based on the number
of shares of Common Stock or Preferred Stock, as the case may be, outstanding on
a fully-diluted basis, but excluding from such determination the Unexercised
Securities). Any Stockholder exercising his, her or its right to include
additional Securities
8
in the sale in accordance with the foregoing sentence must do so by delivering
to the Tag-Along Seller, within ten (10) days following delivery by Penhall of
the Unexercised Right Notice, (A) a written notice specifying the additional
number of shares of Common Stock and/or Preferred Stock it proposes to sell and
(B) the certificates for such Common Stock and/or Preferred Stock, with stock
powers duly endorsed in blank and with signatures guaranteed.
(iii) Promptly after the expiration of the thirtieth day
after Penhall has mailed or caused to be mailed the Escrow Notice, or, promptly
after the expiration of the tenth day after Penhall has delivered the
Unexercised Right Notice, as the case may be, (A) the Tag-Along Seller shall
purchase that number of shares of Common Stock and/or Preferred Stock as the
Tag-Along Seller would have been required to include in the sale had the
Tag-Along Seller complied with the provisions of Section 3.3(b), (B) all shares
of Common Stock and/or Preferred Stock not required to be purchased by the
Tag-Along Seller shall be returned to the Tag-Along Rightholders thereof and (C)
all remaining funds and other consideration held in escrow shall be released to
the Tag-Along Seller. If the Tag-Along Seller received consideration other than
cash in his, her or its sale, the Tag-Along Seller shall purchase the shares of
Common Stock and/or Preferred Stock tendered by paying to the Tag-Along
Rightholders the same non-cash consideration and cash in the same proportion as
received by the Tag-Along Seller in the sale. The Tag-Along Seller shall pay all
costs and expenses of the escrow agent, and any interest on the Escrow Amount
shall accrue to the benefit of Penhall.
(d) The Tag-Along Rights provided pursuant to this Section 3.3
shall terminate on the one hundred eightieth (180th) day following an Initial
Public Offering, or upon a distribution by BRS of all the Securities to its
partners. An "Initial Public Offering" shall mean the sale by Penhall in an
underwritten public offering made pursuant to an effective registration
statement under the Securities Act of Common Stock for gross offering proceeds
of at least $30 million.
(e) Notwithstanding anything to the contrary, a Tag-Along Seller
may make any of the following sales without offering the Tag-Along Rightholders
the opportunity to participate: (a) sales pursuant to an effective registration
statement under the Securities Act; and (b) sales pursuant to an Approved Sale.
(f) As used herein, "Affiliate" of any person means any person,
directly or indirectly, controlling, controlled by or under common control with
such person, and includes any person who is an officer, director or employee of
such person and any person who would be deemed to be an "affiliate" or an
"associate" of such person, as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended. As used in this definition, "controlling" (including,
9
with its correlative meanings, "controlled by" and "under common control with")
means possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through owner ship of securities,
partnership or other ownership interests, by contract or otherwise).
ARTICLE IV
CORPORATE ACTIONS
4.1 Articles of Incorporation and By-Laws. Each Stockholder has
reviewed the Amended and Restated Articles of Incorporation and By-Laws of
Penhall in the forms attached hereto as Exhibits B-1 and B-2, respectively, and
hereby approves and ratifies the same.
4.2 Directors. (a) Each Stockholder and Permitted Transferee agrees
that it shall take, at any time and from time to time, all action necessary
(including voting the Common Stock owned by him, her or it, calling special
meetings of stockholders and executing and delivering written consents) to
ensure that the Board of Directors of Penhall is composed at all times of no
less than three and no more than seven persons (with the exact number to be
determined by BRS from time to time). If the Board of Directors is composed of
three or four persons, then one individual shall be designated by the Management
Stockholders holding a majority of the Common Stock owned by the Management
Stockholders (who shall be, subject to the rights of the Management Stockholders
under Section 4.3, Xxxx X. Xxxxxx for so long as he is President of Penhall) and
the remainder shall be designated by BRS. If the Board of Directors is composed
of five or more persons, then two individuals shall be designated by the
Management Stockholders holding a majority of the Common Stock owned by the
Management Stockholders (who shall be, subject to the rights of the Management
Stockholders under Section 4.3, Management Stockholders and officers of Penhall
during the term of their directorship) and the remainder shall be designated by
BRS.
(b) Each Stockholder agrees to take all necessary action to cause
the Board of Directors of Penhall to be as set forth in Section 4.2(a)
(including, without limitation, voting or causing to be voted or acting by
written consent with respect to, all shares of Common Stock entitled to be voted
thereon now or hereafter owned or held by such Stockholder in favor of such
persons) and to act itself (if a member of the Board of Directors) or cause its
nominee (if any) on the Board of Directors to vote or act by written consent to
cause the Board of Directors of Penhall to be as set forth in Section 4.2(a).
(c) Pursuant to the authority of Section 10-704 of the Arizona
Business Corporation Act, the Stockholders, being all
10
of the shareholders of Penhall entitled to vote, do hereby dispense with the
formality of a meeting and approve and ratify the election of the following
persons as the directors of Penhall to hold office until the next annual meeting
of stockholders and until their respective successors shall have been elected
and qualified or until resignation, removal or death as provided in the Bylaws
of Penhall and this Agreement:
Xxxxxx X. Xxxxxx XX
Xxxxx X. Xxxxxxxxx
Xxxx X. Xxxxxx
4.3 Right to Remove Certain of Penhall's Directors. Each of BRS and the
Management Stockholders holding a majority of the Common Stock owned by the
Management Stockholders, as the case may be, may request that any director
designated by it be removed (with or without cause) by written notice to the
other Stockholders, and, in any such event, each Stockholder shall promptly
consent in writing or vote or cause to be voted all shares of Common Stock now
or hereafter owned or controlled by it for the removal of such person as a
director. In the event any person ceases to be a director, such person shall
also cease to be a member of any committee of the Board of Directors of Penhall.
4.4 Right to Fill Certain Vacancies in Penhall's Board. In the event
that a vacancy is created on Penhall's Board of Directors at any time by the
death, disability, retirement, resignation or removal (with or without cause) of
a director designated by BRS or the Management Stockholders holding a majority
of the Common Stock owned by the Management Stockholders, as the case may be, or
if otherwise there shall exist or occur any vacancy on Penhall's Board of
Directors in a directorship subject to designation by BRS or the Management
Stockholders holding a majority of the Common Stock owned by the Management
Stockholders, as the case may be, such vacancy shall not be filled by the
remaining members of Penhall's Board of Directors, but each Stockholder hereby
agrees promptly to consent in writing or vote or cause to be voted all shares of
Common Stock now or hereafter owned or controlled by it to elect that individual
designated to fill such vacancy and serve as a director, as shall be designated
by BRS or the Management Stockholders holding a majority of the Common Stock
owned by the Management Stockholders, as the case may be.
4.5 Subsidiaries Governance. Each Stockholder agrees that the
board of directors of each of the Companies shall be comprised of one individual
designated by BRS (so long as the BRS Entities continue to own at least 50% of
the Common Stock held by BRS Entities on the date hereof). Each Stockholder
agrees to vote all of its Securities and to cause its representatives on the
Board of Directors of Penhall, subject to their fiduciary duties, to vote and
take other appropriate action to effectuate the agreement set forth in this
Sections 4.5 in respect of each of the Companies.
11
4.6 Management Rights. For so long as BRS Entities own in the aggregate
at least 30% of the outstanding Common Stock on a fully diluted basis and there
has not been an Initial Public Offering:
(a) Right of Consultation. BRS shall have the right, and Penhall
shall cause each of the Companies to grant to BRS the right, to consult with and
advise the management of Penhall and its subsidiaries, at any time or from time
to time, on all matters relating to the operation of Penhall and its
subsidiaries, including, without limitation, significant changes in management
personnel and compensation or employee benefits, the introduction of new
products or new lines of business, important acquisitions or dispositions of
plant and equipment, significant research and development programs, the purchase
or sale of important patents, trademarks, licenses and concessions, and the
proposed compromise of any significant litigation.
(b) Observation Rights. BRS shall have the right, and Penhall
shall cause each of the Companies to grant to BRS the right, to have its
representatives (in addition to its representatives that are directors) attend
meetings of the Board of Directors (and committees thereof) of Penhall and each
of the Companies. Penhall shall give, or shall cause each of the Companies to
give, as appropriate, to BRS (i) at least three days' notice of each regular
meeting of the Board of Directors of Penhall and each of the Companies, (ii)
such notice as is practicable under the circumstances to enable BRS's
representatives to attend each special or emergency meeting of the Board of
Directors of Penhall and each of the Companies, (iii) on or prior to the date of
each meeting of the Board of Directors of Penhall and each of the Companies all
information given to the directors at such meeting and (iv) within 90 days
following each meeting of the Board of Directors of Penhall and each of the
Companies, copies of the minutes of such meeting.
(c) Inspection and Access. In addition to the reporting
requirements set forth in Section 3.1 hereof, Penhall shall provide to BRS
Entities true and correct copies of all quarterly and annual financial reports
of each of the Companies and budgets prepared by or on behalf of Penhall and of
each of the Companies, and such other documents, reports, financial data and
other information as BRS Entities may reasonably request. Penhall shall permit
any authorized representatives designated by BRS Entities to visit and inspect
any of the properties of Penhall or any of its subsidiaries, including its and
their books of account (and to make copies and take extracts therefrom), and to
discuss its and their affairs, finances and accounts with its and their officers
and their current and prior independent public accountants (and by this
provision Penhall authorizes such accountants to discuss with such
representatives the affairs, finances and accounts of Penhall and its
subsidiaries, whether or not a
12
representative of Penhall is present), all at such reasonable times and as often
as BRS Entities may reasonably request.
4.7 Confidentiality. (a) Each Stockholder hereby agrees that
Confidential Information (as defined below) has been and will be made available
to him or it in connection with such Stockholder's interest in Penhall and its
subsidiaries. Each Stockholder agrees that he or it will not use the
Confidential Information in any way that is reasonably likely to result in a
material detriment to the business of Penhall and its subsidiaries. Each
Stockholder further acknowledges and agrees that he or it will not disclose any
Confidential Information to any person; provided that Confidential Information
may be disclosed (i) to such Stockholder's Representatives (as defined below) in
the normal course of the performance of their duties, (ii) to the extent
required by applicable statute, law, rule or regulation (including complying
with any oral or written questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process to which an
Stockholder is subject) or by GAAP, (iii) to any third party to whom such
Stockholder is contemplating a transfer of his or its Securities, provided that
such transfer would not be in violation of the provisions of this Agreement and
as long as such third party is advised of the confidential nature of such
information and agrees to be bound by a confidentiality agreement in form and
substance reasonably satisfactory to Penhall and substantially similar to the
provisions hereof or (iv) if the prior consent of the Board of Directors of
Penhall shall have been obtained. Nothing contained herein shall prevent the use
of Confidential Information in connection with the assertion or defense of any
claim by or against Penhall or any Stockholder.
(b) "Confidential Information" means any information concerning
Penhall, its financial condition, business, subsidiaries, operations or
prospects in the possession of or to be furnished to any Stockholder or
Stockholder representative in his or its capacity as a shareholder of Penhall or
Stockholder representative or pursuant to this Agreement or by virtue of his or
its present or former position as, or right to designate, a director of Penhall;
provided that the term "Confidential Information" does not include information
which (a) was or becomes generally available publicly other than as a result of
a disclosure by an Stockholder or his or its partners, directors, officers,
employees, agents, counsel, investment advisers, consultants or representatives
(all such persons being collectively referred to as "Representatives") in
violation of this Section 4.7 or (b) was or becomes available to such
Stockholder on a nonconfidential basis from a source other than Penhall, any
regulatory entity or a Stockholder or his or its Representatives, provided that
such source is or was (at the time of receipt of the relevant information) not,
to the best of such Stockholder's knowledge,
13
bound by a confidentiality agreement with Penhall or another person.
ARTICLE V
ADDITIONAL RESTRICTIONS ON TRANSFERS OF
SECURITIES HELD BY MANAGEMENT STOCKHOLDERS
------------------------------------------
5.1 Certain Definitions. The terms defined below shall have the
following meanings:
(a) "Accumulated Dividends" mean, with respect to any share of
Preferred Stock, the dividends that have accumulated on such share as of such
specific date for dividend periods ending on or prior to such date and that have
not previously been paid in cash;
(b) "Adjusted Book Value" means (i) in the case of the Common
Stock, Original Cost plus the amount of increase, if any, or less the amount of
decrease, if any, in Book Value per share of Common Stock calculated as of the
end of the fiscal quarter immediately preceding the employee's Termination Date
(as defined in Section 5.3(a)) as compared to the Book Value per share of Common
Stock calculated as of the date hereof and after giving effect to the
recapitalization of Penhall pursuant to the Merger Agreement (it being
understood that in calculating such Book Value, any reductions in Book Value
attributable to after tax interest expense or dividends on preferred stock,
including the Series A Preferred Stock, Series B Preferred Stock and Senior
Exchangeable Preferred Stock, shall be disregarded), and (ii) in the case of the
Series B Preferred Stock, the aggregate Liquidation Preference applicable to the
Series B Preferred Stock;
(c) "Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by Penhall
or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than Penhall or a Restricted Subsidiary of
Penhall of (a) any Capital Stock of any Restricted Subsidiary of Penhall; or (b)
any other property or assets of Penhall or any Restricted Subsidiary of Penhall
other than in the ordinary course of business; provided, however, that Asset
Sales shall not include (i) a transaction or series or related transactions for
which Penhall or its Restricted Subsidiaries receive aggregate consideration of
less than $1,000,000, (ii) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of Penhall as permitted under
Section 5.01 of the Indenture, (iii) disposals or replacements of obsolete or
outdated equipment in the ordinary course of business and (iv) a disposition
consisting of a
14
Permitted Investment or Restricted Payment permitted under Section 4.10 of the
Indenture.
(d) "Bank Credit Facility" means the New Credit
Facility and any other agreement or agreements between Penhall and/or one or
more of the Guarantors and a financial institution or institutions, providing
for the making of loans, on a term or revolving basis, the issuance of letters
of credit and/or the creation of bankers' acceptances.
(e) "Board Resolution" means, with respect to any
Person, a copy of a resolution certified by the Secretary or an Assistant
Secretary of such Person to have been duly adopted by the Board of Directors of
such Person and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
(f) "Book Value", which shall be determined in
accordance with GAAP as applied by Penhall in the preparation of its regular
financial statements, means, at any particular balance sheet date, total assets
minus the sum of (x) total liabilities and (y) the aggregate Liquidation
Preference applicable to all outstanding preferred stock, including the Series A
Preferred Stock, Series B Preferred Stock and Senior Exchangeable Preferred
Stock; and, notwithstanding any generally accepted accounting principle that may
be to the contrary, Book Value per share of Common Stock shall be determined by
dividing the result so obtained by the total number of shares of Common Stock
outstanding as of the end of the fiscal quarter immediately preceding the
employee's Termination Date, calculated on a fully diluted basis assuming the
exercise in full of all outstanding warrants, options or other convertible
securities.
(g) "Borrowing Base" means the sum of (i) 85% of
the net book value of the accounts receivable of Penhall and the
Restricted Subsidiaries of Penhall and (ii) 50% of the net book value of the
inventory of Penhall and the Restricted Subsidiaries of Penhall.
(h) "Capital Stock" means (i) with respect to any
Person that is a corporation, any and all shares, interests, participations or
other equivalents (however designated and whether or not voting) of corporate
stock, including each class of common stock and preferred stock of such Person
and including any warrants, options or rights to acquire any of the foregoing
and instruments convertible into any of the foregoing, and (ii) with respect to
any Person that is not a corporation, any and all partnership or other equity
interests of such Person.
(i) "Capitalized Lease Obligations" means, as to
any Person, the obligations of such Person under a lease that are required to be
classified and accounted for as capital lease
15
obligations under GAAP and, for purposes of this definition, the amount of such
obligations at any date shall be the capitalized amount of such obligations at
such date, determined in accordance with GAAP.
(j) "Cash Equivalents" means (i) marketable
direct obligations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States, in each case maturing within one year from the
date of acquisition thereof; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either Standard & Poor's Corporation ("S&P")
or Xxxxx'x Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing
no more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250,000,000; (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above; and (vi) investments
in money market funds which invest substantially all their assets in securities
of the types described in clauses (i) through (v) above.
(k) "Cause", when used in connection with the
termination of a Management Stockholder's employment with Penhall or any of the
Companies, means that the Management Stockholder shall have, in the judgment of
a majority of the board of directors of Penhall or the relevant Company: (i)
committed a felony adversely affecting such Management Stockholder's ability to
carry on his normal duties, or committed an act of fraud, embezzlement or theft
in connection with his duties with Penhall or such Company or in the course of
his employment with Penhall or such Company; (ii) wrongfully caused significant
damage to property of Penhall or such Company; (iii) engaged in conduct which
constitutes a material violation of published corporate policy of Penhall or
such Company, (iv) been convicted of a criminal offense (whether felony or a
misdemeanor) the nature of which renders him unfit to serve in his present
capacity with Penhall or such Company; or (v) persistently failed to adequately
perform his duties and responsibilities assigned in connection with his
employment with Penhall or such Company by either the board of directors or a
superior executive officer of Penhall or such Company;
16
(l) "Consolidated EBITDA" means, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
Penhall and its Restricted Subsidiaries paid or accrued in accordance with GAAP
for such period (other than income taxes attributable to extraordinary, unusual
or nonrecurring gains or losses or taxes attributable to sales or dispositions
outside the ordinary course of business), (B) Consolidated Interest Expense, (C)
Consolidated Non-cash Charges, less any non-cash items increasing Consolidated
Net Income for such period, (D) fees and expenses of the HSI Acquisition and the
Transactions, including but not limited to capitalization of costs and expenses
related thereto, and (E) non-recurring severance and transaction costs incurred
in connection with any acquisition, all as determined on a consolidated basis in
accordance with GAAP for Penhall and its Restricted Subsidiaries.
(m) "Consolidated Interest Expense" means, for
any period, the sum of, without duplication: (i) the aggregate of the interest
expense of Penhall and its Restricted Subsidiaries for such period determined on
a consolidated basis in accordance with GAAP (excluding any accrued and unpaid
interest on the Junior Subordinated Notes; provided, that such interest is not
payable in cash prior to the maturity of the Notes), including without
limitation, (a) any amortization of debt discount and amortization or write-off
of deferred financing costs, (b) the net costs under Interest Swap Obligations,
(c) all capitalized interest and (d) the interest portion of any deferred
payment obligation; and (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by Penhall and
its Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
(n) "Consolidated Net Income" means, for any
period, the aggregate net income (or loss) of Penhall and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, that aggregate net income (or loss) of Penhall and its
Restricted Subsidiaries for such period shall be determined before any reduction
in respect of accrued and unpaid preferred stock dividends and before any
reduction for accrued and unpaid interest on the Junior Subordinated Notes that
is not payable in cash prior to the maturity of the Notes; and provided,
however, that there shall be excluded from aggregate net income (or loss) of
Penhall and its Restricted Subsidiaries for such period (a) after-tax gains or
losses from Asset Sales (less fees and expenses related thereto) or abandonments
or reserves relating thereto, (b) after-tax items classified as extraordinary or
nonrecurring gains or losses, (c) the net income (but not loss) of any
Restricted Subsidiary of Penhall to the extent that the declaration of dividends
or similar distributions by that Restricted Subsidiary of that income is
restricted by a contract, operation of law or otherwise, except to
17
the extent of cash dividends or distributions paid to Penhall or to a Restricted
Subsidiary of Penhall by such Restricted Subsidiary, (d) the net income (or
loss) of any Person, other than a Restricted Subsidiary of Penhall, except to
the extent of cash dividends or distributions paid to Penhall or to a Restricted
Subsidiary of Penhall by such Person, (e) any restoration to income of any
contingency reserve, except to the extent that provision for such reserve was
made out of Consolidated Net Income accrued at any time following the Issue
Date, and (f) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued).
(o) "Consolidated Non-cash Charges" means, for
any period, the aggregate depreciation, amortization and other non-cash charges
or expenses of Penhall and its Restricted Subsidiaries reducing Consolidated Net
Income of Penhall and its Restricted Subsidiaries for such period, determined on
a consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
(p) "Currency Agreement" means any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect Penhall or any Restricted Subsidiary of Penhall
against fluctuations in currency values.
(q) "Default" means an event or condition the
occurrence of which is, or with the lapse of time or the giving of notice or
both would be, an Event of Default.
(r) "Disqualified Capital Stock" means that
portion of any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of the
holder thereof, in each case on or prior to the final maturity date of the
Notes, other than Capital Stock of Penhall which certain management stockholders
have the right to put to Penhall pursuant to the terms hereof.
(s) "Event of Default" has the meaning provided
in Section 6.01 of the Indenture.
(t) "Exchange Notes" means the 12% Senior Notes
due 2006, Series B to be issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement or, with respect to Initial Notes issued under
the Indenture subsequent to the Issue Date pursuant to Section 2.02 of the
Indenture, a registration rights agreement substantially identical to the
Registration Rights Agreement.
18
(u) "Foreign Subsidiary" means any Subsidiary of
Penhall which (i) is not organized under the laws of the United States, any
state thereof or the District of Columbia and (ii) conducts substantially all of
its business operations in a country other than the United States of America.
(v) "GAAP" means generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States, which are in effect
as of the Issue Date.
(w) "Guarantee" means the guarantee of the Notes
by the Guarantors.
(x) "Guarantor" means (i) each of the
Subsidiaries of Penhall on the Issue Date and (ii) each of Penhall's Restricted
Subsidiaries that in the future executes a supplemental indenture in which such
Restricted Subsidiary agrees to be bound by the terms of the Indenture as a
Guarantor; provided that any Person constituting a Guarantor as described above
shall cease to constitute a Guarantor when its respective Guarantee is released
in accordance with the terms of the Indenture. Notwithstanding the above, no
direct or indirect Foreign Subsidiary of the Company will be considered a
Guarantor.
(y) "HSI Acquisition" means the acquisition by
Penhall Company of substantially all of the assets of Highway
Services Inc. prior to the Issue Date.
(z) "Indebtedness" means with respect to any
Person, without duplication, (i) all Obligations of such Person for borrowed
money, (ii) all Obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all Capitalized Lease Obligations of such
Person, (iv) all Obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all Obligations
under any title retention agreement (but excluding trade accounts payable and
other accrued liabilities arising in the ordinary course of business that are
not overdue by 90 days or more or are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted), (v) all
Obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (vi) guarantees and other
contingent obligations in respect of Indebtedness referred to in clauses (i)
through (v) above and clause (viii) below, (vii) all Obligations of any other
Person of the type referred to in clauses (i) through (vi) which are secured by
any Lien on any property or asset of such Person, the amount of such Obligation
being deemed to
19
be the lesser of the fair market value of such property or asset or the amount
of the Obligation so secured, (viii) all Obligations under currency agreements
and interest swap agreements of such Person, and (ix) all Disqualified Capital
Stock issued by such Person with the amount of Indebtedness represented by such
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed repurchase price, but
excluding accrued dividends, if any. For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
the Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock. The amount of Indebtedness of any Person at
any date shall be the outstanding balance on such date of all unconditional
Obligations as described above, and the maximum liability upon the occurrence of
the contingency giving rise to the Obligation, on any contingent Obligations at
such date; provided, however, that the amount outstanding at any time of any
Indebtedness incurred with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP.
(aa) "Indenture" means the Indenture, dated as of
August 1, 1998, between Penhall Acquisition Corp. and the
Trustee, as amended or supplemented from time to time in
accordance with the terms thereof.
(ab) "Initial Notes" means, collectively, (i) the
12% Senior Notes due 2006, Series A, of Penhall issued on the Issue Date and
(ii) one or more series of 12% Senior Notes due 2006 that are issued under the
Indenture subsequent to the Issue Date pursuant to Section 2.02 of the
Indenture, in each case for so long as such securities constitute Restricted
Securities.
(ac) "Initial Purchasers" means BT Alex. Xxxxx
Incorporated and Credit Suisse First Boston Corporation.
(ad) "Interest Swap Obligations" means the
obligations of any Person pursuant to any arrangement with any other Person,
whereby, directly or indirectly, such Person is entitled to receive from time to
time periodic payments calculated by applying either a floating or a fixed rate
of interest on a stated notional amount in exchange for periodic payments made
by such other Person calculated by applying a fixed or a floating rate of
interest on the same notional amount and shall include, without
20
limitation, interest rate swaps, caps, floors, collars and similar agreements.
(ae) "Investment" means, with respect to any
Person, any direct or indirect loan or other extension of credit (including,
without limitation, a guarantee) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any Person. "Investment" shall exclude
extensions of trade credit by Penhall and its Restricted Subsidiaries on
commercially reasonable terms in accordance with normal trade practices of
Penhall or such Restricted Subsidiary, as the case may be.
(af) "Issue Date" means the date of original
issuance of the 12% Senior Notes due 2006, Series A, of Penhall.
(ag) "Junior Subordinated Notes" means Penhall's
10.5% Junior Subordinated Notes due 2007 which may be issued in exchange for
Senior Exchangeable Preferred Stock.
(ah) "Lien" means any lien, mortgage, deed of
trust, pledge, security interest, charge or encumbrance of any kind (including
any conditional sale or other title retention agreement, any lease in the nature
thereof and any agreement to give any security interest).
(ai) "Liquidation Preference" means, on any specific
date, with respect to any share of Series A Preferred Stock or Series B
Preferred Stock, the sum of (i) $1,000 per share plus (ii) the Accumulated
Dividends with respect to such share;
(aj) "New Credit Facility" means the Credit
Agreement dated as of the Issue Date, between Penhall, the lenders party thereto
in their capacities as lenders thereunder and Bankers Trust Company, as
Administrative Agent and Credit Suisse First Boston, as Syndication Agent,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder or adding or deleting
Restricted Subsidiaries of Penhall as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
21
(ak) "Notes" mean, collectively, the Initial
Notes, the Private Exchange Notes, if any, and the Exchange Notes, treated as a
single class of securities, as amended or supplemented from time to time in
accordance with the terms of the Indenture, that are issued pursuant to the
Indenture.
(al) "Obligations" means all obligations for
principal, premium, interest, penalties, fees, matured indemnifications,
reimbursements, damages and other liabilities payable under the documentation
governing any Indebtedness.
(am) "Option Period" means, as to a particular
Management Stockholder, (i) in the event such Management Stockholder does not
incur a Termination Date (as defined in Section 5.3(a)) on or prior to the later
of the fifth (5th) anniversary of the date hereof and the one hundred eightieth
(180th) day following an Initial Public Offering, the period beginning on the
date hereof and ending on (and including) the later of the fifth (5th)
anniversary of the date hereof and the one hundred eightieth (180th) day
following an Initial Public Offering, and (ii) in the event such Management
Stockholder incurs a Termination Date on or prior to the later of the fifth
(5th) anniversary of the date hereof and the one hundred eightieth (180th) day
following an Initial Public Offering, the period beginning on the date hereof
and ending on (and including) the date which is 120 days after the later of such
Termination Date or the date Penhall receives the notice of termination of such
Management Stockholder referred to in Section 5.3(a);
(an) "Option Securities" mean the Securities of
Penhall other than the Common Stock of Penhall designated as "Non-option Common
Stock" in Exhibit C hereto.
(ao) "Original Cost" for each share of Common
Stock or Series B Preferred Stock means (i) in the case of the Common Stock,
$1.00 per share for shares acquired on the date hereof, or the purchase price
per share for shares acquired subsequent to the date hereof (adjusted for any
stock dividend payable upon, or subdivision or combination of, the Common Stock)
and (ii) in the case of the Series B Preferred Stock, $1,000 (adjusted for any
subdivision or combination of the Series B Preferred Stock);
(ap) "Permitted Indebtedness" means, without
duplication, each of the following:
(i) Indebtedness under the Notes and the Guarantees thereof;
(ii) Indebtedness incurred pursuant to any Bank Credit
Facility in an aggregate principal amount at any time outstanding not
to exceed an amount equal to (x) $20 million plus (y) the greater of
(i) $30 million, less the amount of
22
any required permanent repayments of Bank Credit Facilities made in
accordance with Section 4.15 of the Indenture (which are accompanied by
a corresponding permanent commitment reduction thereunder) or (ii) the
Borrowing Base;
(iii) other Indebtedness of Penhall and its Restricted
Subsidiaries outstanding on the Issue Date;
(iv) Interest Swap Obligations of Penhall covering
Indebtedness of Penhall or any of its Restricted Subsidiaries and
Interest Swap Obligations of any Restricted Subsidiary of Penhall
covering Indebtedness of such Restricted Subsidiary; provided, however,
that such Interest Swap Obligations are entered into to protect Penhall
and its Restricted Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with the Indenture to the extent
the notional principal amount of such Interest Swap Obligation does not
exceed the principal amount of the Indebtedness to which such Interest
Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided that in
the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of Penhall and its
Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary of Penhall to
Penhall or to a Restricted Subsidiary of Penhall for so long as such
Indebtedness is held by Penhall or a Restricted Subsidiary of Penhall,
in each case subject to no Lien (other than a Lien in connection with a
Bank Credit Facility) held by a Person other than Penhall or a
Restricted Subsidiary of Penhall; provided that if as of any date any
Person other than Penhall or a Restricted Subsidiary of Penhall owns or
holds any such Indebtedness or holds a Lien in respect of such
Indebtedness (other than a Lien in connection with a Bank Credit
Facility), such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of Penhall to a Restricted Subsidiary of
Penhall for so long as such Indebtedness is held by a Restricted
Subsidiary of Penhall, in each case subject to no Lien (other than a
Lien in connection with the a Bank Credit Facility); provided that (a)
any Indebtedness of Penhall to any Restricted Subsidiary of Penhall is
unsecured and subordinated in right of payment, pursuant to a written
agreement, to Penhall's obligations under the Indenture and the Notes
and (b) if as of any date any Person other than a Restricted Subsidiary
of Penhall owns or holds any such
23
Indebtedness or any Person holds a Lien in respect of such Indebtedness
(other than a Lien in connection with a Bank Credit Facility), such
date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by Penhall;
(viii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary course
of business; provided, however, that such Indebtedness is extinguished
within five business days of incurrence;
(ix) Indebtedness of Penhall or any of its Restricted
Subsidiaries represented by letters of credit for the account of
Penhall or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations
in connection with self-insurance or similar requirements in the
ordinary course of business;
(x) Refinancing Indebtedness;
(xi) additional Indebtedness of Penhall and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $5,000,000
at any one time outstanding (which may, but need not, be incurred under
a Bank Credit Facility);
(xii) Obligations in respect of performance and surety bonds
and completion guarantees provided by Penhall or any Restricted
Subsidiary of Penhall in the ordinary course of business, in accordance
with customary industry practice, in amounts and for purposes customary
in Penhall's industry;
(xiii) Indebtedness arising from agreements of Penhall or a
Restricted Subsidiary of Penhall providing for adjustment of purchase
price, earn out or other similar obligations, in each case, incurred or
assumed in connection with the disposition of any business, assets or a
Restricted Subsidiary of Penhall or any of its Restricted Subsidiaries,
other than guarantees of Indebtedness incurred by any Person acquiring
all or any portion of such business, assets or Restricted Subsidiary
for the purpose of financing such acquisition; provided that the
maximum assumable liability in respect of all such Indebtedness shall
at no time exceed the gross proceeds actually received by Penhall and
its Restricted Subsidiaries in connection with such disposition;
(xiv) Guarantees of Indebtedness permitted to be incurred
under the Indenture and guarantees of third-party loans to employees or
officers of Penhall or its Restricted Subsidiaries permitted by clause
(vii) of the definition of "Permitted Investments;"
24
(xv) Capitalized Lease Obligations and Purchase Money
Obligations of Penhall or any of its Restricted Subsidiaries in an
aggregate principal amount not to exceed $5,000,000 at any one time
outstanding;
(xvi) Indebtedness of Penhall or any of its Restricted
Subsidiaries that is subordinate to the Notes and is incurred in order
to repurchase Capital Stock of Penhall from employees, officers or
directors of Penhall or any of its Subsidiaries upon the death,
disability or termination of employment of such employees, officers or
directors or as otherwise required by existing employment agreements in
an aggregate principal amount not to exceed $1,000,000 in any calendar
year; and
(xvii) Indebtedness incurred as a result of accrued and unpaid
interest being added to the principal amount of the Junior Subordinated
Notes in accordance with the terms of such Junior Subordinated Notes;
provided that such interest is not payable in cash prior to the
maturity of the Notes.
(aq) "Permitted Investments" means (i) Investments
by Penhall or any Restricted Subsidiary of Penhall in any Person that is or will
become immediately after such Investment a Restricted Subsidiary of Penhall or
that will merge or consolidate into Penhall or a Restricted Subsidiary of
Penhall, (ii) Investments in Penhall by any Restricted Subsidiary of Penhall;
provided that any Indebtedness evidencing such Investment is unsecured and
subordinated in right of payment, pursuant to a written agreement, to Penhall's
obligations under the Notes and the Indenture; (iii) Investments in cash and
Cash Equivalents; (iv) Currency Agreements and Interest Swap Obligations entered
into in the ordinary course of Penhall's or its Restricted Subsidiaries'
businesses and otherwise in compliance with the Indenture; (v) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; (vi) Investments made by Penhall or its Restricted
Subsidiaries as a result of consideration received in connection with an Asset
Sale made in compliance with Section 4.15 of the Indenture; (vii) loans and
advances to, or guarantees of third-party loans to, employees and officers of
Penhall and its Restricted Subsidiaries for relocation expenses and purchasing
Capital Stock of Penhall not in excess of $2.0 million at any one time
outstanding; (viii) Investments the payment for which consists exclusively of
Qualified Capital Stock of Penhall; (ix) guarantees of Indebtedness permitted to
be incurred under the Indenture; and (x) additional Investments not to exceed
$2.5 million at any time outstanding.
(ar) "Permitted Transferee" means in the case of
any Management Stockholder (a "Transferor Stockholder"), (A) Penhall or
25
any BRS Entity, (B) any spouse or lineal descendant (natural or adopted) of a
Management Stockholder, or any executor, administrator or testamentary trustee
(in their capacity as such) of a Management Stockholder and (C) any trust, the
beneficiaries of which, or any corporation, limited liability company or
partnership, the stockholders, members or general and limited partners of which
include only such Transferor Stockholder and his or her spouse or lineal
descendants (natural or adopted).
(as) "Person" means an individual, partnership,
corporation, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
(at) "Private Exchange Notes" has the meaning set
forth in the Registration Rights Agreement.
(au) "Purchase Money Obligations" of any Person
means any obligations of such Person or any of its Subsidiaries to any seller or
any other person incurred or assumed in connection with the purchase,
installation, construction or improvement of real or personal property to be
used in the business of such Person or any of its Subsidiaries within 180 days
of such purchase, installation, construction or improvement.
(av) "Qualified Capital Stock" means any Capital
Stock that is not Disqualified Capital Stock.
(aw) "Refinance" means, in respect of any security
or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem,
defease or retire, or to issue a security or Indebtedness in exchange or
replacement for, such security or Indebtedness in whole or in part. "Refinanced"
and "Refinancing" shall have correlative meanings.
(ax) "Refinancing Indebtedness" means any
Refinancing by Penhall or any Restricted Subsidiary of Penhall of Indebtedness
incurred in accordance with Section 4.12 of the Indenture (other than pursuant
to clause (ii), (iv), (v), (vi), (vii), (viii), (ix), (xii), (xiii), (xiv) or
(xvi) of the definition of Permitted Indebtedness), in each case that does not
(1) result in an increase in the aggregate principal amount of Indebtedness of
such Person as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by Penhall in
connection with such Refinancing) or (2) create Indebtedness with (A) a Weighted
Average Life to Maturity that is less than the Weighted Average Life to Maturity
of the Indebtedness being Refinanced or (B) a final maturity earlier than the
final maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness solely of Penhall, then such
Refinancing Indebtedness shall be Indebtedness solely of
26
Penhall and (y) if such Indebtedness being Refinanced is subordinate or junior
to the Notes, then such Refinancing Indebtedness shall be subordinate to the
Notes at least to the same extent and in the same manner as the Indebtedness
being Refinanced.
(ay) "Registration Rights Agreement" means the
Registration Rights Agreement dated as of the Issue Date among Penhall, the
Guarantors and the Initial Purchasers.
(az) "Restricted Payment" shall have the meaning
set forth in Section 4.10 of the Indenture.
(ba) "Restricted Security" has the meaning assigned
to such term in Rule 144(a)(3) under the Securities Act.
(bb) "Restricted Subsidiary" of any Person means any
Subsidiary of such Person which at the time of determination is not an
Unrestricted Subsidiary.
(bc) "Sale and Leaseback Transaction" means any
direct or indirect arrangement with any Person or to which any such Person is a
party, providing for the leasing to Penhall or a Restricted Subsidiary of any
property, whether owned by Penhall or any Restricted Subsidiary at the Issue
Date or later acquired, which has been or is to be sold or transferred by
Penhall or such Restricted Subsidiary to such Person or to any other Person from
whom funds have been or are to be advanced by such Person on the security of
such property.
(bd) "Subsidiary", with respect to any
Person, means (i) any corporation of which the outstanding Capital Stock having
at least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly or
indirectly, by such Person or (ii) any other Person of which at least a majority
of the voting interest under ordinary circumstances is at the time, directly or
indirectly, owned by such Person.
(be) "Transactions" shall have the meaning set
forth in the Offering Memorandum dated July 28, 1998 relating to the 12% Senior
Notes due 2006 of Penhall.
(bf) "Transfer" means the making of any sale,
exchange, assignment, hypothecation, gift, security interest, pledge or other
encumbrance, or any contract therefor, any voting trust or other agreement or
arrangement with respect to the transfer of voting rights (including any proxy
or similar arrangement (whether or not revocable)) or any other beneficial
interest in any of the Securities, the creation of any other claim thereto or
any other transfer or disposition whatsoever, whether voluntary or involuntary,
affecting the right, title, interest or possession in or to such Securities.
27
(bg) "Trustee" means the party named as such in the
Indenture until a successor replaces it in accordance with the provisions of the
Indenture and thereafter means such successor.
(bh) "Unrestricted Subsidiary" of any Person means
(i) any Subsidiary of such Person that at the time of determination shall be or
continue to be designated an Unrestricted Subsidiary by the Board of Directors
of such Person in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, Penhall or any Restricted Subsidiary of Penhall;
provided that (x) Penhall certifies to the Trustee that such designation
complies with Section 4.10 of the Indenture and (y) each Subsidiary to be so
designated and each of its Subsidiaries has not at the time of designation, and
does not thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to which
the lender has recourse to any of the assets of Penhall or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation, Penhall is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12
of the Indenture and (y) immediately before and immediately after giving effect
to such designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
(bi) "Weighted Average Life to Maturity" means, when
applied to any Indebtedness at any date, the number of years obtained by
dividing (a) the then outstanding aggregate principal amount of such
Indebtedness into (b) the sum of the total of the products obtained by
multiplying (i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (ii) the number of years (calculated to
the nearest one-twelfth) which will elapse between such date and the making of
such payment.
5.2 Restrictions on Transfer. (a) Notwithstanding anything to the
contrary contained herein, until (i) the later to occur of (x) the fifth (5th)
anniversary of the date hereof and (y) the one hundred eightieth (180th) day
following an Initial Public Offering or, if earlier, (ii) the one hundred
eightieth (180th) day following an Initial Public Offering, no Management
Stockholder nor
28
his Permitted Transferees shall effect a Transfer of any Securities other than
(i) pursuant to Section 3.2 in connection with an Approved Sale, (ii) pursuant
to Section 3.3 in connection with the exercise of Tag-Along Rights, (iii)
pursuant to Section 5.3 in connection with the Options (as hereinafter defined),
(iv) pursuant to the Registration Rights Agreement under Article VI, (v) with
the consent of Penhall (as evidenced by a resolution duly adopted by at least a
majority of the non-employee members of Penhall's Board of Directors) or (vi) to
a Permitted Transferee of the Transferor Stockholder in question. Following the
Option Period, each Management Stockholder and his Permitted Transferees agree
that none of them will effect a Transfer of any Securities without first
complying with the provisions of Section 5.4 hereof, if then in effect.
In exercising the consent and approval provided for in clause (iv)
above, Penhall may employ its sole discretion in evaluating the nature of the
proposed transferee and Penhall may impose such conditions on Transfer as it
deems appropriate in its sole discretion, including, but not limited to,
requirements that the transferee be an employee of Penhall or its subsidiaries
and that the transferee purchase the Management Stockholder's (or his Permitted
Transferee's) Securities as a "Management Stockholder" subject to the
restrictions of this Agreement and, in particular, this Article V. In the event
any Transfer is authorized pursuant to clause (iv) above or proposed to be made
to a Permitted Transferee (other than Penhall or a BRS Entity) under clause (v)
above, each such transferee shall take such Securities subject to and be fully
bound by the terms of this Agreement with the same effect as if it were a party
hereto and, without limiting the foregoing, such Transfer shall not be made or
effective unless the purported transferee executes an agreement, in form and
substance satisfactory to Penhall, pursuant to which such transferee shall agree
to be bound as a "Management Stockholder" by the terms and conditions of this
Agreement and such other provisions as Penhall may determine. Any purported
Transfer in violation of this Section 5.2 shall be null and void and of no force
and effect and the purported transferee shall have no rights or privileges in or
with respect to Penhall. Notwithstanding the foregoing provisions, each
Management Stockholder agrees that he or it will not effect a Transfer of any
Securities except in compliance with the registration requirements of the
Securities Act (and applicable state securities laws) or pursuant to an
available exemption therefrom, and, without limiting the foregoing, will not
effect a Transfer of any Securities prior to the lapse of such period of time
following acquisition thereof as may be required to comply with applicable state
securities laws.
(b) Prior to any proposed Transfer of any
Securities pursuant to clauses (iv) and (v) of subparagraph (a) above, the
holder thereof shall give written notice to Penhall describing the manner and
circumstances of the proposed Transfer
29
accompanied, if requested by Penhall, by a written opinion of legal counsel
reasonably satisfactory to Penhall, addressed to Penhall and the transfer agent,
if other than Penhall, and reasonably satisfactory in form and substance to each
addressee, to the effect that the proposed Transfer of the Securities may be
effected without registration under the Securities Act and applicable state
securities laws. Each certificate evidencing the Securities transferred shall
bear the legend set forth in Section 2.2, except that such certificate shall not
bear such legend if the opinion of counsel referred to above is to the further
effect that such legend is not required in order to establish compliance with
any provision of the Securities Act or applicable state securities laws.
(c) A notation will be made in the appropriate
transfer records of Penhall with respect to the restrictions on Transfer of the
Securities referred to in this Agreement.
5.3 Options.
(a) General Terms. In the event that on or prior
to the later of the fifth (5th) anniversary of the date hereof and the one
hundred eightieth (180th) day following an Initial Public Offering, any
Management Stockholder shall cease to be employed by Penhall or any of the
Companies for any reason (including, but not limited to, death, temporary or
permanent disability, retirement, resignation or termination by Penhall or such
Company with or without Cause), other than by reason of a leave of absence
approved by Penhall or such Company, such Management Stockholder or such
Management Stockholder's Permitted Transferees (or, in the case of death, his or
their estate) shall give prompt notice to Penhall of such termination of
employment, and:
(i) Penhall, or one or more designee(s)
selected by a majority of the members of the Board of Directors of Penhall,
shall have the right and option (the "Purchase Option"), at any time within 120
days from the later of the effective date of such termination of employment (the
"Termination Date") and the date of Penhall's receipt of aforesaid notice, to
purchase from such Management Stockholder, or such Management Stockholder's
Permitted Transferees, as the case may be, any or all of the Option Securities
then owned by such Management Stockholder and such Management Stockholder's
Permitted Transferees at the Option Purchase Price (as hereinafter defined); and
(ii) such Management Stockholder shall have
the right and option (the "Put Option" and, together with the Purchase Option,
the "Options") to require Penhall, at any time within 120 days after the
Termination Date, to purchase from such Management Stockholder any or all of the
Option Securities then owned by such Management Stockholder at the Option
Purchase Price. Penhall or its designee(s) shall give notice to the terminated
Management Stockholder (or such Management Stockholder's Permitted
30
Transferees) of its intention to exercise the Purchase Option not later than
within 120 days after the later of the Termination Date or the date of Penhall's
receipt of the aforesaid notice. The Termination Date for a Permitted Transferee
shall be the Termination Date with respect to the Management Stockholder who
first acquired the Option Securities held by such Permitted Transferee. A
terminated Management Stockholder shall give notice to Penhall of his intention
to exercise the Put Option not later than within 120 days after the Termination
Date.
(b) Exercise of Options. The Options shall be
exercised, in the case of the Purchase Option, by written notice to the
terminated Management Stockholder and Permitted Transferees signed by an officer
of Penhall on behalf of Penhall or by its designee(s), as the case may be, and,
in the case of the Put Option, by written notice to Penhall signed by the
terminated Management Stockholder or Permitted Transferees, prior to the end of
the 120-day period. Such notice shall set forth the number of shares of Option
Securities desired to be purchased or sold and shall set forth a time and place
of closing which shall be no earlier than 10 days and no later than 60 days
after the date such notice is sent. At such closing, the seller shall deliver
the certificates evidencing the number of shares of Option Securities to be
purchased by or sold to Penhall and/or its designee(s), accompanied by stock
powers duly endorsed in blank or duly executed instruments of transfer, and any
other documents that are necessary to transfer to Penhall and/or its designee(s)
good title to the Option Securities to be transferred, free and clear of all
pledges, security interests, liens, charges, encumbrances, equities, claims and
options of whatever nature other than those imposed under this Agreement, and
concurrently with such delivery, Penhall and/or its designee(s) shall deliver to
the seller the full amount of the Option Purchase Price for such Option
Securities.
(c) Option Purchase Price. If the Management
Stockholder shall cease to be employed by Penhall or any of the Companies by
reason of termination without Cause, the "Option Purchase Price" for the Common
Stock and/or Series B Preferred Stock to be purchased from such Management
Stockholder or such Management Stockholder's Permitted Transferees pursuant to
the Options (such number of shares of Common Stock and/or such number of shares
of Series B Preferred Stock, each being referred to as the "Purchase Number")
shall equal the price calculated as set forth in the table below opposite the
applicable Termination Date of such Management Stockholder:
31
Option
If the Termination Date Occurs: Purchase Price
------------------------------- --------------
On or prior to the first Original Cost
anniversary of the date multiplied by the
hereof Purchase Number
After the first anniversary Original Cost
of the date hereof, and on or multiplied by
prior to the second anniversary 80% of the Purchase
of the date hereof Number, plus Adjusted Book
Value multiplied by 20% of the
Purchase Number
After the second anniversary of Original Cost multiplied
the date hereof, and on or by 60% of the Purchase Number,
prior to the third anniversary plus Adjusted Book Value
of the date hereof multiplied by 40% of the
Purchase Number
After the third anniversary of Original Cost
the date hereof, and on or multiplied by 40% of the
prior to the fourth anniversary Purchase Number, plus
of the date hereof Adjusted Book Value
multiplied by 60% of the
Purchase Number
After the fourth anniversary of Original Cost
the date hereof, and on or prior multiplied by 20% of the
to the fifth anniversary of the Purchase Number, plus
date hereof Adjusted Book Value
multiplied by 80% of the
Purchase Number
After the fifth anniversary of Adjusted Book Value
the date hereof multiplied by the Purchase
Number
If the Management Stockholder shall cease to be employed by
Penhall or any of the Companies because of death or temporary or permanent
disability, the Option Purchase Price for all shares of Common Stock and/or
Series B Preferred Stock to be purchased from the Management Stockholder (and
such Management Stockholder's Permitted Transferees) pursuant to the Options
shall equal the Adjusted Book Value multiplied by the Purchase Number.
Notwithstanding anything to the contrary contained herein, if
the Management Stockholder shall cease to be employed by Penhall or any of the
Companies for any reason other than termination without Cause, death or
disability (including, but not limited to, termination for Cause or voluntary
termination by the
32
Management Investor), the Option Purchase Price for all shares of Common Stock
and/or Series B Preferred Stock to be purchased from the Management Stockholder
(and such Management Stockholder's Permitted Transferees) pursuant to the
Options shall equal the Original Cost multiplied by the Purchase Number.
Notwithstanding anything to the contrary contained herein, if
Penhall's Consolidated EBITDA growth rate, measured for the period from the date
hereof to the end of the fiscal quarter immediately preceding a Termination
Date, shall be less than 5% per annum compounded annually, Penhall shall not be
obligated to pay Adjusted Book Value for any shares, and the Options shall be
exercisable (i) in the case of Common Stock, at the lesser of Original Cost and
Adjusted Book Value and (ii) in the case of Preferred Stock, at the lesser of
Original Cost and the Preferred Valuation Amount (as defined below). For
purposes of this paragraph, the "Preferred Valuation Amount" shall be an amount
per share equal to the Preferred Stock Company Value (as defined below) divided
by the total number of shares of Preferred Stock outstanding. The "Preferred
Stock Company Value" shall be an amount equal to the difference of (x) the
product of Penhall's Consolidated EBITDA for the latest full twelve month period
multiplied by (A) 6.5 for the period from the date hereof until February 4, 2000
or (B) 6 for the period from and after February 4, 2000, less (y) the total
amount of outstanding indebtedness of Penhall.
Penhall will make payment for shares purchased from the
Management Investor following a Termination Date (a) in cash if the aggregate
amount owed as the result of the exercise of the Options is less than $500,000
or (b) if such amount is $500,000 or more, in cash or, at Penhall's option, by
means of a promissory note substantially in the form attached as Exhibit D
hereto; provided, however, that Penhall shall have the option to make such
payment by means of a promissory note regardless of the aggregate amount owed if
the Purchase Option or the Put Option has been exercised with respect to a
Management Stockholder who has voluntarily terminated his employment or has been
terminated for Cause.
(d) Notwithstanding the foregoing, Penhall shall
not be obligated to purchase shares to the extent that (a) such purchase would
be illegal under applicable law, or (b) such purchase would result in a default
or an event of default (with or without the giving of notice, the passage of
time or both) under the terms of any indebtedness for borrowed money, it being
understood that Penhall will act in good faith to obtain waivers of any such
provisions.
(e) The Options will lapse upon the earliest to
occur of (i) the expiration of the Option Period with respect to all Securities
held by Management Stockholders, (ii) the 180th day following an Initial Public
Offering and (iii) a transfer of
33
Securities by BRS as to which Tag-Along Rights apply, but only with respect to
Securities sold pursuant to such Tag-Along Rights.
5.4 Right of First Refusal on Transfer of Management
Stockholder Securities.
(a) Right of First Refusal. In the event that
any time after the expiration of the Option Period, a Management Stockholder (or
his Permitted Transferees) receives a bona fide offer (a "Transfer Offer") to
purchase any or all of the Securities (the "Transfer Securities") then owned by
the Management Stockholder (or his Permitted Transferees) from any person (the
"Offeror") which the Management Stockholder (or his Permitted Transferees)
wishes to accept, then the Management Stockholder (and his Permitted
Transferees) shall give Penhall and the other Stockholders written notice
thereof ("Transfer Notice"), which Transfer Notice shall state in reasonable
detail all material terms of such proposed sale or other transfer, the identity
of the Offeror, the price or other consideration for which the Securities are
proposed to be sold or transferred, and the number of Securities to be sold or
transferred, and shall also contain an irrevocable offer to sell the Transfer
Securities to Penhall at the price and on the terms contained in the Transfer
Offer. After its receipt of the Transfer Notice, Penhall and/or its designee(s)
shall have the right and option to purchase all, but not less than all (unless
other Stockholders purchase the remainder), of the Transfer Securities at the
price and on the terms of the Transfer Offer set forth in the Transfer Notice.
Within 30 days after receipt of the Transfer Notice, Penhall and/or its
designee(s) shall notify such Management Stockholder (or his Permitted
Transferees) whether or not it wishes to purchase the Transfer Securities and,
if so, indicating the number of Transfer Securities desired to be purchased.
In the event that Penhall and/or its
designee(s) does not elect to purchase all such Transfer Securities, the selling
Management Stockholder (or his Permitted Transferees) shall give notice of such
failure to the other Stockholders, and the other Stockholders shall thereupon
have the right and option to purchase in the aggregate all, but not less than
all, the Transfer Securities not to be purchased by Penhall and/or its
designee(s) and may give notice to the selling Management Stockholder (or his
Permitted Transferees) (with a copy to Penhall) of such intention at any time
not later than 30 days after the date on which such notice is sent by the
selling Management Stockholder (or his Permitted Transferees) to such other
Stockholders. Each electing Stockholder's notice shall indicate the number of
Transfer Securities it desires to purchase. If the other Stockholders elect to
purchase an aggregate number of Transfer Securities in excess of the number of
Transfer Securities which Penhall and/or its designee(s) did not elect to
purchase, the Transfer Securities shall be allocated among the other
Stockholders
34
who desire to purchase such Transfer Securities in accordance with the
allocation provisions which are set forth in Section 5.3(a)(i). Promptly upon
determining the number of the selling Management Stockholder's Securities which
each purchasing Stockholder will purchase and the purchase price therefor,
Penhall shall send notices thereof to the selling Management Stockholder and
each of the purchasing Stockholders.
(b) Exercise and Nonexercise of Right of First
Refusal. Exercise of the option provided for in Section 5.4(a) shall be effected
by the giving of written notice to the Management Stockholder (and his Permitted
Transferees) by Penhall (on its own behalf and/or on behalf of its designee(s),
as the case may be), signed by an officer of Penhall, and, if applicable, the
other Stockholders, prior to the end of the period during which the option is
exercisable (and such notice shall be effective when given). If Penhall and/or
its designee(s) and the other Stockholders in the aggregate elect to purchase
all of the Transfer Securities, the closing of the purchase and sale of the
Transfer Securities pursuant to any such option exercise shall be held at such
place and such date to be established by Penhall in the later of its notice to
the selling Management Stockholder in response to the Transfer Notice and its
notice to the other Stockholders of the allocation of the number of Transfer
Securities which such Stockholders are to purchase, which in no event shall be
earlier than 10 days or later than 60 days from the date of such notice.
In the event Penhall and/or its designee(s) and the other
Stockholders fail to exercise the purchase option provided for in Section
5.4(a), then, subject to the other provisions of this Agreement, for a period of
45 days, the Transfer Securities may be sold or transferred by or an behalf of
the Management Stockholder (or his Permitted Transferees) to the Offeror
specified in the Transfer Notice at a price not less than the price per
Securities specified therein and otherwise on terms no less favorable to the
Management Stockholder and no more favorable to the Offeror than those contained
in the Transfer Notice.
(c) The options provided for in Section 5.4(a)
will lapse upon the one hundred eightieth (180th) day following an Initial
Public Offering.
5.5 Purchaser Representative. If Penhall or any Stockholder
enters into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities and Exchange Commission under
the Securities Act may be available with respect to such negotiation or
transaction (including a merger, consolidation or other reorganization), each
Stockholder will, at the request of Penhall, appoint a purchaser representative
(as such term is defined in Rule 501(h) promulgated by the Securities and
Exchange Commission under the Securities Act)
35
reasonably acceptable to Penhall. If any Stockholder appoints the purchaser
representative designated by Penhall, Penhall will pay the fees of such
purchaser representative, but if any Stockholder declines to appoint the
purchaser representative designated by Penhall, such Stockholder will appoint,
at his own expense, another purchaser representative (reasonably acceptable to
Penhall).
5.6 Involuntary Transfers.
---------------------
(a) Option to Purchase. In the event that the
Securities owned by a Management Stockholder (or his Permitted Transferees)
shall be subject to sale or other transfer by reason of any of the following
events (a "Nonvolitional Event"): (i) bankruptcy or insolvency proceedings,
whether voluntary or involuntary, or (ii) a divorce (whether in connection with
a settlement of the divorce or entry of a decree or judgment of divorce), or
(iii) distraint, levy, execution or other involuntary transfer, then the
Management Stockholder (and his Permitted Transferees) shall give Penhall
written notice thereof ("Involuntary Transfer Notice") promptly upon the
occurrence of such Nonvolitional Event, which Involuntary Transfer Notice shall
state the terms of such proposed sale or other transfer, the identity of the
proposed purchaser or other transferee, the price or other consideration, if
readily determinable, for which the Securities are proposed to be sold or
transferred, and the number of Securities to be sold or transferred (the
"Involuntarily Transferred Securities"). After its receipt of the Involuntary
Transfer Notice or, failing such receipt, after Penhall otherwise obtains actual
knowledge of such a proposed sale or other transfer, Penhall and/or its
designee(s) shall have the right and option to purchase all, but not less than
all, of the Involuntarily Transferred Securities, such option to be exercisable
at any time within 120 days after receipt of the Involuntary Transfer Notice or,
failing such receipt, after Penhall otherwise obtains actual knowledge of such a
proposed sale or other transfer.
In the event that Penhall and/or its
designee(s) does not elect to purchase all such Involuntarily Transferred
Securities, the Management Stockholder (or his Permitted Transferees) shall give
notice of such failure to the other Stockholders, and the other Stockholders
shall thereupon have the right and option to purchase in the aggregate all, but
not less than all, the Involuntarily Transferred Securities not to be purchased
by Penhall and/or its designee(s) and may give notice to the Management
Stockholder (or his Permitted Transferees) (with a copy to Penhall) of such
intention at any time not later than 45 days after the date on which such notice
is sent by the selling Management Stockholder (or his Permitted Transferees) to
such other Stockholders. Each electing Stockholder shall indicate the number of
Involuntarily Transferred Securities it desires to purchase.
36
If the other Stockholders elect to purchase an aggregate
number of Involuntarily Transferred Securities in excess of the number of
Involuntarily Transferred Securities which Penhall and/or its designee(s) did
not elect to purchase, the Involuntarily Transferred Securities shall be
allocated among the other Stockholders who desire to purchase such Involuntarily
Transferred Securities in proportion to the number of Involuntarily Transferred
Securities (on a fully diluted basis) owned by each of them; provided that no
such other Stockholder shall become bound to purchase a number of offered
Involuntarily Transferred Securities greater than the number of shares of
Involuntarily Transferred Securities it or he had elected to purchase. If the
foregoing allocation procedure does not allocate all the Involuntarily
Transferred Securities (because one or more Stockholders would otherwise have
been allocated more than the number of shares of Involuntarily Transferred
Securities it or he elected to purchase), then the remaining such shares of
Involuntarily Transferred Securities shall be allocated among the other
Stockholders who desire to purchase such Involuntarily Transferred Securities in
proportion to the number of shares of Involuntarily Transferred Securities (on a
fully diluted basis) owned by each of them, and such allocation procedure shall
continue until all such Involuntarily Transferred Securities shall have been
allocated. Promptly upon determining the number of the Involuntarily Transferred
Securities which each purchasing Stockholder will purchase and the purchase
price thereof, Penhall shall send notices thereof to the Management Stockholder
and each of the purchasing Stockholders.
(b) Purchase Price. Any purchase pursuant to the
foregoing option contained in Section 5.6(a) shall be at the lowest of (i) the
price applicable to such proposed sale or transfer, (ii) if during the Option
Period, at the applicable Option Purchase Price set forth under Section 5.2(c)
multiplied by the number of Involuntarily Transferred Securities if such
Management Stockholder shall be employed by Penhall or any of the Companies at
the time of such Involuntary Transfer or shall not be employed by Penhall or any
of the Companies by reason of termination without Cause, death or disability and
(iii) if during the Option Period, at Original Cost multiplied by the number of
Involuntarily Transferred Securities if such Management Stockholder shall not be
employed by Penhall or any or the Companies at the time of such Involuntary
Transfer by any reason other than termination without Cause, death or
disability.
(c) Exercise and Nonexercise of Option. Exercise
of the option provided for in Section 5.6(a) shall be effected by the giving of
written notice to the Management Stockholder (and his Permitted Transferees) and
the proposed purchaser or transferee by Penhall (on its own behalf and/or on
behalf of its designee(s), as the case may be), signed by an officer of Penhall,
and, if applicable, by the purchasing Stockholders prior to the end of the
37
period during which the option is exercisable (and such notice shall be
effective when given). The closing of the purchase and sale of the Involuntarily
Transferred Securities pursuant to any such option exercise shall be held at
such place and such date to be established by Penhall, which in no event shall
be less than 10 or more than 60 days from the date of such notice.
In the event Penhall and/or its designee(s) or the other
Stockholders fail to exercise the purchase option provided for in Section
5.6(a), then the Involuntarily Transferred Securities may be sold or transferred
by or on behalf of the Management Stockholder (and his Permitted Transferees) on
the terms contained in the Involuntary Transfer Notice, but the transferee or
purchaser shall be subject to all of the obligations contained in this Agreement
which were applicable to the Management Stockholder in respect of the
Involuntarily Transferred Securities and, without limiting the generality of the
foregoing, if the Management Stockholder incurs a Termination Date on or prior
to the expiration of the Option Period, the Purchase Option contained in Section
5.3 hereof shall apply to the Involuntarily Transferred Securities at the
applicable Option Purchase Price.
5.7 Covenant Not to Compete. Each Management Stockholder
hereby agrees that during the term of his employment by Penhall or any of the
Companies and for the period specified opposite such Management Stockholder's
name on Exhibit E hereto after the Management Stockholder has incurred a
Termination Date for any reason other than termination without Cause, such
Management Stockholder shall not, directly or indirectly, as owner, partner,
agent, employee, consultant or otherwise, (i) engage in any business in the
Territory (as defined below) which provides services or sells or leases products
similar or equivalent to the products or services provided or sold on the date
hereof by Penhall or any of the Companies (a "Competitive Business") or (ii)
solicit, attempt to solicit for employment or otherwise engage the services of,
or become associated in any Competitive Business with, any person who was an
employee, officer or director of Penhall or any of the Companies at any time
during the twelve (12) months preceding the date of this Agreement.
Notwithstanding the foregoing, the provisions of this Section 5.7 shall not
apply to any Management Stockholder incurring a Termination Date in the event
that Penhall fails to purchase the Securities of such Management Stockholder
when obligated to purchase such Securities under Section 5.3 after the exercise
by such Management Stockholder of the Put Option. For purposes of this
Agreement, "Territory" shall mean each and every county located in the states of
California, Arizona, Nevada, Minnesota, Alabama, Arkansas, Colorado, Delaware,
Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, New
Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma,
Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah,
38
Virginia, Washington, West Virginia, Wisconsin, Wyoming, and all other counties
of other states of the United States or foreign jurisdictions in which Penhall
or any of the Companies has conducted business, or during the period applicable
to any Management Stockholder, shall have conducted business. None of the
foregoing shall prevent any Management Stockholder from owning up to 5% of the
outstanding equity of a publicly-traded company or from making indirect
investments through an investment partnership or other investment entity in any
corporation, partnership, limited liability company or other person or entity.
The parties agree that to the extent any provision or portion
of this Section 5.7 shall be held, found or deemed to be unreasonable, unlawful
or unenforceable by a court of competent jurisdiction, then any such provision
or portion shall be deemed to be modified to the extent necessary in order that
any such provision or portion shall be legally enforceable to the fullest extent
permitted by applicable law; and the parties do further agree that any court of
competent jurisdiction shall, and the parties hereto do hereby expressly
authorize, require and empower any court of competent jurisdiction to, enforce
any such provision or portion in order that any such provision or portion shall
be enforced to the fullest extent permitted by applicable law.
As the violation by a Management Stockholder of the provisions
of this Section 5.7 would cause irreparable injury to Penhall and the Companies,
and there is no adequate remedy at law for such violation, Penhall shall,
notwithstanding anything to the contrary herein, have the right in addition to
any other remedies available, at law or in equity, to seek to enjoin such
Management Stockholder in a court of equity from violating such provisions. Each
Management Stockholder hereby waives any and all defenses he or she may have on
the ground of lack of jurisdiction or competence of the court to grant an
injunction or other equitable relief, or otherwise. The existence of this right
shall not preclude any other rights and remedies at law or in equity which
Penhall may have. The prevailing party in any enforcement action or court
proceeding under this Section 5.7 shall be entitled to the extent permitted by
law to reimbursement from the other party for all of the prevailing party's
costs, expenses and attorneys' fees.
5.8 Obligations of J&J Investments, LLC and Xxxxxxx Xxxxx
Xxxxxxxxxx Revocable Trust. Notwithstanding anything to the contrary contained
herein, the obligations of J&J Investments, LLC and Xxxxxxx Xxxxx Xxxxxxxxxx
Revocable Trust under this Agreement shall be the obligations of Xxxx X. Xxxxxx
and M. Xxxxx Xxxxxxxxxx (including, without limitation, under Article V),
respectively, and such obligations (including, without limitation, under Article
V) shall be determined with reference to the employment of Xxxx X. Xxxxxx and M.
Xxxxx Xxxxxxxxxx, respectively.
39
ARTICLE VI
REGISTRATION RIGHTS
-------------------
The Stockholders shall have registration rights with respect
to the Common Stock as set forth in the Registration Rights Agreement attached
hereto as Exhibit F (the "Registration Rights Agreement"). Each of the
Stockholders agrees not to effect any public sale or distribution of any
securities of Penhall during the periods specified in the Registration Rights
Agreement, except as permitted thereby, and each such Stockholder agrees to be
bound by the rights of priority to participate in offerings as set forth
therein.
ARTICLE VII
MISCELLANEOUS
-------------
7.1 Amendment and Modification. This Agreement may be amended
or modified, or any provision hereof may be waived, provided that such
amendment, modification or waiver is set forth in a writing executed by (i)
Penhall, (ii) BRS (so long as BRS Entities and its Permitted Transferees own in
the aggregate at least 5% of the outstanding Common Stock on a fully diluted
basis) and (iii) the holders of a majority of the outstanding Common Stock on a
fully diluted basis (including Common Stock owned by the BRS Entities) held by
the Stockholders; provided, however, that, without the approval of the holders
of a majority of the outstanding Common Stock then held by the Management
Stockholders, (x) the provisions of this Agreement cannot be amended to treat
the Management Stockholders differently than the other Stockholders and (y) the
provisions of this Agreement may not be amended or modified to the detriment of
the Management Stockholders. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to modify, amend
or discharge any part of this Agreement or any rights or obligations of any
person under or by reason of this Agreement.
7.2 Survival of Representations and Warranties. The
representations and warranties set forth in Section 2.1 of this Agreement will
survive the execution and delivery of this Agreement, regardless of any
investigation made by an Stockholder or on its behalf. No other representations,
warranties or covenants set forth herein shall so survive.
7.3 Successors and Assigns; Entire Agreement. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns and executors, administrators and heirs; provided, however, that except
as set forth in this Agreement, no party may assign, delegate or otherwise
transfer any
40
of its rights or obligations under this Agreement. This Agreement sets forth the
entire agreement and understanding among the parties as to the subject matter
hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
7.4 Separability. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
7.5 Notices. All notices provided for or permitted hereunder
shall be made in writing by hand-delivery, registered or certified first-class
mail, telex, telecopier or air courier guaranteeing overnight delivery to the
other party at the following addresses (or at such other address as shall be
given in writing by any party to the others):
If to Penhall, to:
Penhall International Corp.
c/o Bruckmann, Xxxxxx, Xxxxxxxx & Co., Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx XX
with a required copy to:
Penhall International Corp.
c/o Penhall Rental Corp.
0000 Xxxxxxx Xxx
Xxxxxxx, XX 00000
Attn: Xxxx Xxxxxx
Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: G. Xxxxxx X'Xxxxxxx, Esq.
If to any BRS Entity, to:
Bruckmann, Xxxxxx, Xxxxxxxx & Co., Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx XX
41
with a required copy to:
Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: G. Xxxxxx X'Xxxxxxx, Esq.
If to the Management Stockholders or any of them,
to their addresses as listed in the books of Penhall or the relevant Company.
All such notices shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
7.6 Governing Law. The validity, performance, construction and
effect of this Agreement shall be governed by and construed in accordance with
the internal law of California, without giving effect to principles of conflicts
of law.
7.7 Headings. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect its meaning, construction or effect. Unless otherwise
specified, section references herein refer to sections of this Agreement and
schedules and exhibits refer to schedules and exhibits attached hereto.
7.8 Counterparts. This Agreement may be executed in two or
more counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same instrument.
7.9 Further Assurances. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
7.10 Remedies. In the event of a breach or a threatened
breach by any party to this Agreement of its obligations under this Agreement,
any party injured or to be injured by such breach, in addition to being entitled
to exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The parties
agree that the provisions of this Agreement shall be specifically enforceable,
it being agreed by the parties that the remedy at law, including monetary
damages, for breach of such provision will be inadequate compensation for any
loss and that any defense in any
42
action for specific performance that a remedy at law would be adequate is
waived.
7.11 Party No Longer Owning Securities. If a party hereto
ceases to own any Securities, such party will no longer be deemed to be a
Stockholder or Management Stockholder for purposes of this Agreement.
7.12 No Effect on Employment. Nothing herein contained shall
confer on any Management Stockholder the right to remain in the employ of
Penhall or any of the Companies or any of its subsidiaries or Affiliates.
7.13 Pronouns. Whenever the context may require, any pronouns
used herein shall be deemed also to include the corresponding neuter, masculine
or feminine forms.
43
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
PENHALL INTERNATIONAL CORP.
By:/s/Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx
President
BRUCKMANN, XXXXXX, XXXXXXXX & CO., L.P.
By: BRS Partners, Limited Partnership,
the general partner,
By: BRSE Associates, Inc., its general
partner
By:/s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxx
BRS STOCKHOLDERS
*
-------------------------------------------
Name: Xxxxx X. Xxxxxxxxx
SS#: ###-##-####
Residence Address:
000 Xxxx 00xx Xxxxxx, Xxx. 0X
Xxx Xxxx, XX 00000
*
-------------------------------------------
Name: Xxxxxx X. Xxxxxx XX
SS#: ###-##-####
Residence Address:
000 Xxxxxxxxxx Xxxx
Xxx Xxxxxx, XX 00000
44
*
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
SS#: ###-##-####
Residence Address:
000 Xxxx Xxxxxx, Xxx. 0X
Xxx Xxxx, XX 00000
*
-------------------------------------------
Name: Xxxxxx Xxxxxxxxx
SS#: ###-##-####
Residence Address:
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
*
-------------------------------------------
Name: H. Xxxxxx Xxxxxxxx
SS#: ###-##-####
Residence Address:
Xxx Xxxxxx Xxxxx Xxxxx
Xxx Xxxx, XX 00000
*
-------------------------------------------
Name: Xxxxx Xxxxx
SS#: ###-##-####
Residence Address:
000 Xxxx 00xx Xxxxxx, Xxx. #0X
Xxx Xxxx, XX 00000
*
-------------------------------------------
Name: Xxxx X. Xxxxxxxx
SS#: ###-##-####
Residence Address:
00 X. 0xx Xxxxxx
Xxx Xxxx, XX 00000
BCB PARTNERSHIP
By: Xxxxx X. Xxxxxxxxx, General Partner
By: *
----------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: General Partner
45
NAZ PARTNERSHIP
By: Xxxxx Xxxxx, General Partner
By: *
----------------------------------------
Name:
Title:
BT XXXX XXXXX
CUSTODIAN FBO
XXXX X. XXXXXXXX XXX
By: Xxxx X. Xxxxxxxx
By: *
----------------------------------------
Name:
Title:
*
-------------------------------------------
Name: Xxxxxxxx Xxxxxx
SS#:
Residence Address:
*
-------------------------------------------
Name: X. Xxxx Xxxxxxx
XX#:
Residence Address:
*
-------------------------------------------
Name: Xxxxx Xxxxxx
SS#:
Residence Address:
*
-------------------------------------------
Name: Xxxxxx Xxxxxxxx
SS#:
46
Residence Address:
*
-------------------------------------------
Name: Xxxxxx Xxxxxxx
SS#:
Residence Address
*By:/s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Attorney-in-Fact
Name: Xxxxxxx X. Xxxxxxx
47
MANAGEMENT STOCKHOLDERS
-----------------------
/s/ Xxxx X. Xxxx
--------------------------------
Name: Xxxx X. Xxxx
SS#: ###-##-####
Residence Address:
0000 Xxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
/s/ C. Xxxxxx Xxxx
--------------------------------
Name: C. Xxxxxx Xxxx
SS#: ###-##-####
Residence Address:
#0 Xxxxxxxxx
Xxxx Xx Xxxx, XX 00000
/s/ Xxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxx
SS#: ###-##-####
Residence Address:
00000 Xxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
/s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
SS#: ###-##-####
Residence Address:
00000 X. Xxxxxx Xxx
Xxxxxxxxx Xxxxx, XX 00000
/s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
SS#: ###-##-####
Residence Address:
0000 X. Xxxxxxx Xxxx
Xxxxxxx, XX 00000
/s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
SS#:
Residence Address:
48
/s/ Xxxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxxx X. Xxxxxxx
SS#:###-##-####
Residence Address:
0000 X. Xxxxxxxx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
/s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
SS#: ###-##-####
Residence Address:
0000 Xxxxxx Xx.
Xxx Xxxxx, XX 00000
/s/ Xxxx X. Xxxxx
--------------------------------
Name: Xxxx X. Xxxxx
SS#: ###-##-####
Residence Address:
0000 Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
/s/ Xxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
SS#: ###-##-####
Residence Address:
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Name: Xxxx X. Xxxxx
--------------------------------
Name: Xxxx X. Xxxxx
SS#: ###-##-####
Residence Address:
0000 Xxxxxxx Xx.
Xxxxxxx, XX 00000
/s/ Xxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxx
SS#: ###-##-####
Residence Address:
00000 Xxxxxx Xxxxx
Xxxx Xxxxx, XX 00000
49
/s/ Xxxx XxXxxx
--------------------------------
Name: Xxxx XxXxxx
SS#: ###-##-####
Residence Address:
0000 Xxxxxxxxx Xxx
Xxxxxxxxx, XX 00000
/s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxx
SS#: ###-##-####
Residence Address:
00000 XX Xxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
/s/ Xxxxx X. Xxxx
--------------------------------
Name: Xxxxx X. Xxxx
SS#: ###-##-####
Residence Address:
000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxxxx, XX 00000
XXXXXXX LIVING TRUST
DATED OCTOBER 5, 1995
By: /s/ XXXXXX X. XXXXXXX
------------------------------
XXXXXX X. XXXXXXX
Trustee
By: /s/ XXXXX X. XXXXXXX
------------------------------
XXXXX X. XXXXXXX
Trustee
/s/ Xxxxxxx X. Reel
---------------------------------
Name: Xxxxxxx X. Reel
SS#: ###-##-####
50
Residence Address:
00000 Xxxxxx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
XXXXXXX XXXXX XXXXXXXXXX REVOCABLE
TRUST
By: /s/ Xxxxxxx Xxxxx Xxxxxxxxxx
---------------------------------
Xxxxxxx Xxxxx Xxxxxxxxxx
Trustee
/s/ Xxxx X. Xxxxxx
------------------------------------
Name: Xxxx X. Xxxxxx
SS#:
Residence Address:
J&J Investments, LLC
A Nevada Limited Liability Company
By: /s/ Xxxxx Xxxxxxx
---------------------------------
Xxxxx Xxxxxxx
General Manager
/s/ Xxxxx Xxxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxxx
SS#: ###-##-####
Residence Address:
0000 X. 00xx Xx.
Xxxxxx, XX 00000
/s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
SS#: ###-##-####
Residence Address:
00000 Xxxxxx Xxxxx
Xx Xxxx, XX 00000
/s/ Xxxxxx X. Frame
------------------------------------
Name: Xxxxxx X. Frame
SS#: ###-##-####
Residence Address:
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
51
/s/ Xxxxx X. Xxxx
------------------------------------
Name: Xxxxx X. Xxxx
SS#:
Residence Address:
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
/s/ Xxxx X. Xxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxx
SS#: ###-##-####
Residence Address:
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
/s/ P. Xxxx Xxxxxx
------------------------------------
Name: P. Xxxx Xxxxxx
SS#: ###-##-####
Residence Address:
00 Xxxxxx Xxxxxx
Xxxxxxx Xxxx, XX 00000
/s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
SS#: ###-##-####
Residence Address:
00000 Xxxxx
Xxxxxxx Xxxxx, XX 00000
/s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
SS#: ###-##-####
Residence Address:
/s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
SS#: ###-##-####
Residence Address:
000 Xxxxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000
52
/s/ Xxxx Xxxxxx
------------------------------------
Name: Xxxx Xxxxxx
SS#: ###-##-####
Residence Address:
0000 Xxxxx Xxxx
Xxxxx Xxxxxxxx, XX 00000
/s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
SS#: ###-##-####
Residence Address:
000-000 000xx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
53
