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STOCKHOLDERS AGREEMENT
NORTEK HOLDINGS, INC.
Dated as of [ ], 2002
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TABLE OF CONTENTS
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ARTICLE I
RESTRICTIONS ON TRANSFER OF COMPANY STOCK...........................................................2
1.1 General Restriction on Transfer by Stockholders................................2
1.2 Permitted Transferees..........................................................2
ARTICLE II
RIGHTS OF MANAGEMENT TO SELL........................................................................5
2.1 Management Stockholders' Right to Sell.........................................5
2.2 Notice.........................................................................5
2.3 Payment........................................................................6
2.4 Termination of Right to Sell...................................................6
2.5 Postponement, etc..............................................................6
ARTICLE III
PURCHASES BY THE COMPANY............................................................................7
3.1 Right to Purchase Shares from Management Stockholders..........................7
3.2 Notice.........................................................................8
3.3 Payment........................................................................8
3.4 Postponement, etc..............................................................8
ARTICLE IV
PURCHASE PRICE......................................................................................9
4.1 Fair Market Value..............................................................9
(a) Appraisal.............................................................9
(b) Fair Market Value.....................................................9
(c) Notice to Stockholders...............................................10
(d) Withdrawal of Exercise Following Appraisal...........................10
4.2 Carrying Value................................................................10
4.3 Certain Defined Terms.........................................................11
(a) Cause................................................................11
(b) Good Reason..........................................................11
(c) Disability...........................................................12
ARTICLE V
PROHIBITION ON PURCHASES................................................................................13
5.1 Prohibited Purchases...............................................................13
ARTICLE VI
SALES TO THIRD PARTIES..................................................................................15
6.1 General............................................................................15
6.2 Intentionally Omitted..............................................................15
6.3 Agreements to Be Bound.............................................................15
6.4 Involuntary Transfers..............................................................15
6.5 Tag and Drag Along Rights..........................................................16
(a) Tag-Along Rights..........................................................16
(b) Drag-Along Rights.........................................................19
(c) Attorney Fees.............................................................23
ARTICLE VII
REGISTRATION RIGHTS.....................................................................................23
7.1 Registration Rights................................................................23
ARTICLE VIII
CHARTER DOCUMENTS AND BOARD OF DIRECTORS................................................................23
8.1 Charter Documents..................................................................23
8.2 Board of Directors.................................................................23
ARTICLE IX
TERMINATION.............................................................................................28
9.1 Cessation of Ownership of Company Stock............................................28
9.2 Other Termination Events...........................................................28
ARTICLE X
MISCELLANEOUS PROVISIONS................................................................................29
10.1 Stock Certificate Legend...........................................................29
10.2 Option Plan........................................................................29
10.3 New Management Stockholders........................................................29
10.4 Fee................................................................................30
10.5 Certain Transactions...............................................................30
10.6 No Other Arrangements or Agreements................................................30
10.7 Amendment and Modification.........................................................31
10.8 Assignment.........................................................................31
10.9 Recapitalizations, Exchanges, etc. Affecting the Company Stock.....................32
10.10 Transfer of Company Stock..........................................................32
10.11 Further Assurances.................................................................33
10.12 Governing Law......................................................................33
10.13 Invalidity of Provision............................................................33
10.14 Notices............................................................................33
10.15 Headings; Execution in Counterparts................................................34
10.16 Entire Agreement; Effect on Certain Other Agreements...............................34
10.17 Injunctive Relief..................................................................35
10.18 Attorneys' Fees....................................................................35
10.19 Third Party Beneficiaries..........................................................35
10.20 Sales to Competitors...............................................................35
10.21 Improper Transfer..................................................................36
10.22 Third Party Investors..............................................................36
10.23 Persons............................................................................36
10.24 Options............................................................................36
10.25 Xxxxxxx............................................................................36
10.26 Other Agreements...................................................................37
10.27 Company Stock......................................................................37
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of [ ], 2002, among Nortek Holdings,
Inc., a Delaware corporation (the "Company"),* Xxxxx Investment Associates VI,
L.P., a Delaware limited liability partnership ("KIA VI"), KEP VI, LLC, a
Delaware limited liability company ("KEP VI"),** Third Party Investors (as
defined in Section 10.21 herein) and the stockholders and optionholders of the
Company listed in the Schedule of Management Stockholders attached hereto
(such management stockholders and optionholders, together with any persons who
become parties to this Agreement pursuant to Sections 10.2 and 10.3 of this
Agreement and each of their respective permitted transferees who agree to be
bound by the terms of this Agreement in accordance with Sections 1.2(b) and
6.3 hereof, are referred to herein, collectively, as the "Management
Stockholders"). Such Schedule shall be updated from time to time to include
each Management Stockholder who becomes a party to this Agreement after the
date hereof. KEP VI and KIA VI, together with their affiliates and
transferees, in each case, to the extent they own stock of the Company, are
hereinafter referred to collectively as the "Xxxxx Group" and the Xxxxx Group,
the Third Party Investors and the Management Stockholders are hereinafter
referred to collectively as the "Stockholders".
WHEREAS, the Company, Nortek, Inc., a Delaware corporation and a
direct wholly owned subsidiary of the Company ("Nortek"), and K Holdings,
Inc., a Delaware corporation, entered into an Agreement and Plan of
Recapitalization dated as of June 20, 2002 (the "Recapitalization Agreement"),
pursuant to which the parties agreed, upon the terms and subject to the
conditions set forth therein, to consummate the Transactions (as defined
therein);
WHEREAS, after the consummation of the Transactions on the date
hereof (the "Closing"), the Company shall have (i) [ ] shares of class A
common stock, par value $1.00 per share, of the Company (the "Common Stock")
issued and outstanding, of which [ ] shares of Common Stock will be owned by
Third Party Investors and [ ] shares of Common Stock will owned by Management
Stockholders and (ii) [ ] shares of series B convertible preference stock, par
value $1.00 per share, of the Company (the "Series B Preference Stock," and,
together with the Common Stock, the "Company Stock") issued and outstanding,
of which [ ] shares will be owned by the Xxxxx Group; and
_______________
* Since this Agreement will be executed at Closing, after the Holding
Company Merger has been completed, Nortek has not been included as a
party to this Agreement
** It is currently expected that, as permitted under the
Recapitalization Agree ment, K Holdings will assign its right to
acquire equity of the Company to these Xxxxx entities.
WHEREAS, the Stockholders believe it to be in their respective best
interests and in the best interests of the Company that they enter into this
Agreement providing for certain rights and restrictions with respect to the
shares of Company Stock owned by them or their permitted transferees.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, the parties hereto agree as follows:
ARTICLE I
RESTRICTIONS ON TRANSFER
OF COMPANY STOCK.
1.1 General Restriction on Transfer by Stockholders. (a) Prior to the
closing of a bona fide public offering pursuant to an effective registration
statement, other than a registration statement on Form S-4 or S-8 or any
successor forms and other than a registration statement registering the sale
of shares of Common Stock only to employees of the Company (a "Registration"),
under the Securities Act of 1933 (the "Act"), filed after the Closing that
covers shares of Common Stock (an "IPO"), no shares of Company Stock now or
hereafter owned by any Stockholder or any interest therein may, directly or
indirectly, be sold, assigned, mortgaged, transferred, pledged, hypothecated
or otherwise disposed of or transferred (collectively "Transferred"), except
for (i) Transfers pursuant to Section 1.2 to the applicable transferees
specified therein (a "Permitted Transferee"), (ii) sales of shares of Company
Stock to the Company or to members of the Xxxxx Group, or to their designees
pursuant to Article II or III or (iii) Transfers by any member of the Xxxxx
Group to any Person of shares of Company Stock, provided that such Transfers
shall comply with Article VI to the extent expressly provided therein.
(b) The period of time from the date of this Agreement until the
consummation of an IPO shall hereinafter be referred to as the "Restricted
Period".
1.2 Permitted Transferees. (a) Subject to paragraph (b) of this
Section 1.2:
(i) Subject to Section 6.5(a), the members of the Xxxxx
Group may Transfer any shares of Company Stock or any interest
therein or their rights to subscribe for the same to any of their
affiliates (as defined in Section 1.2(c)); and
(ii) any Management Stockholder may Transfer any shares of
Company Stock or any interest therein or his rights to subscribe for
the same, if any, (A) to a trust, partnership, limited liability
company or corporation the beneficiaries, partners, members or
stockholders of which are such Management Stockholder, his spouse,
parents, members of his immediate family or his lineal descendants,
provided that the foregoing shall be subject to the limitation that
the Company's Board of Directors (the "Board") acting in good faith
does not conclude that such Transfer together with all other
Transfers made after the Closing could result in or create a
"significant risk" that the Company may become subject to, or after
any Registration will continue by reason thereof to be subject to,
the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or the registration
requirements of the Investment Company Act of 1940 (the "40 Act") and
provided, further that a Management Stockholder shall give advance
notice to the Company in the event of any Transfer to any permitted
transferee set forth in this clause (A), (B) in case of his death, by
will, by transfer in trust or by the laws of intestate succession to
executors, trustees, administrators, testamentary trustees, legatees
or beneficiaries, or (C) with the prior written consent of the Board
and the Xxxxx Group, to any transferee.
In addition to the foregoing, any transferee of a Stockholder described above
may Transfer shares of Company Stock back to such Stockholder or to another
Permitted Transferee of such Stockholder. For the purposes of this Section
1.2, a "significant risk", as referred to above, shall be deemed to arise when
the number of "holders of record" (as determined in accordance with the
Exchange Act and the rules and regulations thereunder or the registration
requirements of the 40 Act) is greater than 80% of the number of "holders of
record" that would cause the application or continued application of the
informational requirements of the Exchange Act under the then existing
circumstances.
(b) Any Transfer of shares of Company Stock made pursuant to
paragraph (a) of this Section 1.2 to a Permitted Transferee shall be permitted
and shall be effective only if such Permitted Transferee shall agree in
writing to be bound by the terms and conditions of this Agreement in the same
manner and capacity as its transferor, unless such Permitted Transferee is
already a Stockholder, pursuant to an instrument of assumption reasonably
satisfactory in form and substance to the Company and the Xxxxx Group.
(c) An "affiliate" of, or a person "affiliated" with, a specified
person, is a person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, the person specified. In addition, in the case of any member of the
Xxxxx Group, the term "affiliate" shall be deemed to include, without
limitation, (1) any partner of such member of the Xxxxx Group or (2) any
limited partner of any blind investment fund organized by or at the direction
of the Xxxxx Group (collectively, the "Xxxxx Funds") or (3) any director,
officer, partner or employee of Xxxxx & Company, L.P. ("Xxxxx") or any of its
affiliates (excluding any limited partner of the Xxxxx Funds), any individual
retirement account of any such partner, director, officer or employee, any
family member of any such partner, director, officer or employee, or any trust
or family partnership for the benefit of any such partner, director, officer
or employee or family member thereof. In the case of the Third Party
Investors, affiliate shall be deemed to include any partner or member of such
Person or any director, officer or employee of such Person, any individual
retirement account of any such partner, director, officer or employee, any
family member of any such partner, director, officer or employee or any trust
or family partnership for the benefit of any such partner, director, officer
or employee or family member thereof. For purposes of Section 6.5(a) hereof,
Permitted Transferees shall exclude (i) any Person specified in clause (2)
above (other than any such person who is also described in clause (3) above),
except with respect to a Transfer for value involving a liquidation of a Xxxxx
Fund or a redemption, in whole or in part, of a limited partner's interest in
a Xxxxx Fund, (ii) any Xxxxx Fund other than KIA VI or KEP VI and (iii) the
Company or any of its subsidiaries.
(d) Any action to be taken under this Agreement by members of the
Xxxxx Group may be taken on their behalf by the members of the Xxxxx Group
holding a majority of the Company Stock held by the Xxxxx Group in the
aggregate or by such other person as is designated by such majority holders to
act on behalf of the Xxxxx Group.
ARTICLE II
RIGHTS OF MANAGEMENT TO SELL
2.1 Management Stockholders' Right to Sell. Subject to the provisions
of this Article II and Article V, each Management Stockholder (other than the
persons set forth on Exhibit B hereto) shall have the right to sell to the
Company, and the Company shall have the obligation to purchase (or, in the
event that such purchase is not made by the Company, members of the Xxxxx
Group (or their designee(s), which designees shall become parties hereto in
accordance with the terms hereof) shall have the option, but not the
obligation, within 10 days of such failure to purchase by the Company, to
purchase) from such Management Stockholder, all, but not less than all, of
such Management Stockholder's shares of Company Stock:
(a) at the fair market value of such shares, as determined pursuant
to Section 4.1 ("Fair Market Value") if the employment of such Management
Stockholder with the Company and all subsidiaries thereof is terminated as a
result of (i) the retirement of such Management Stockholder upon or after
reaching the age of 65 or, if different, the Company's normal retirement age
("Retirement"), (ii) the death or Disability (as defined in Section 4.3) of
such Management Stockholder, (iii) the termination by the Company of such
employment of such Management Stockholder without Cause (as defined in Section
4.3), or (iv) the resignation of such Management Stockholder for Good Reason
(as defined in Section 4.3); and
(b) at the lesser of (i) the Fair Market Value of such shares, and
(ii) the Carrying Value (as defined in Section 4.2) of such shares if such
Management Stockholder's employment with the Company and all subsidiaries
thereof is terminated as a result of the resignation of such Management
Stockholder without Good Reason; provided, however that no Management
Stockholder shall have the right to sell such Management Stockholder's shares
to the Company in the circumstances specified in this clause (b) unless such
Management Stockholder is party to an employment agreement with the Company
that expressly provides for the right to sell such shares to the Company in
such circumstances.
2.2 Notice. If any Management Stockholder intends to sell shares of
Company Stock pursuant to Section 2.1, he (or his estate, as the case may be)
shall give the Company and the Xxxxx Group notice of such intention not more
than 30 days or, in the case of a termination under clause (ii) of Section
2.1(a), 90 days, after the occurrence of the event giving rise to such
Management Stockholder's right to sell his shares of Company Stock and shall
therein specify the number of shares of Company Stock such Management
Stockholder owns and, subject to Section 2.3, is selling to the Company.
2.3 Payment. (a) Subject to Article V and Section 2.5, payment for
shares of Company Stock sold by a Management Stockholder pursuant to Section
2.1 shall be made on the date that is the 15th business day following the date
of the determination of Fair Market Value pursuant to Section 4.1 or the
determination of Carrying Value pursuant to Section 4.2, as applicable.
(b) Any payments based on Fair Market Value required to be made by
the Company under this Section 2.3 shall accrue interest at 6% simple interest
per annum from the date of the exercise of the right to sell set forth in this
Article II (or in the case of shares acquired upon the exercise of employee
stock options, which shares have been held for less than six months from the
exercise of such options and are sold pursuant to clause (i), (iii) or (iv) of
Section 2.1(a) (the "Delayed Sale Shares"), from the six-month anniversary of
such exercise of such options (such date, the "Delayed Sale Share
Anniversary")) to the date the Company (or the Xxxxx Group or their
designee(s)) makes such payments.
2.4 Termination of Right to Sell. A Management Stockholder's right to
sell to the Company and the Company's obligation to purchase such Management
Stockholder's shares of Company Stock pursuant to Section 2.1 shall terminate
on the closing of an IPO.
2.5 Postponement, etc. The date of payment and closing of any
purchase and sale under this Article II may be postponed to the extent
necessary to permit such purchase and sale under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the regulations
promulgated thereunder (the "HSR Act"). No party shall be required to
consummate any purchase and sale under this Article II until such time as such
transaction would not cause such party to violate applicable law, other than
violations which would not have a direct or indirect material adverse effect
on such party. Notwithstanding anything to the contrary in this Article II, in
no event shall any sale of Delayed Sale Shares occur prior to the Delayed Sale
Share Anniversary; provided, that in the event that Delayed Sale Shares are to
be sold, then (x) the Company (or the members of the Xxxxx Group, or their
designee(s), which designees shall become parties hereto in accordance with
the terms hereof), as the case may be) will, at its option, either delay the
purchase of all shares held by such Management Stockholder or delay only the
purchase of the Delayed Sale Shares, until a date that shall not be earlier
than the Delayed Sale Share Anniversary and (y) if pursuant to the foregoing
clause (x) the purchase of all shares held by such Management Stockholder is
delayed, then notwithstanding Section 2.3(b) above, no interest shall accrue
prior to the Delayed Sale Share Anniversary with respect to any shares held by
such Management Stockholder.
ARTICLE III
PURCHASES BY THE COMPANY
3.1 Right to Purchase Shares from Management Stockholders. Subject to
all provisions of this Article III, the Company shall have the right to
purchase (and, if the Company does not exercise such right by giving notice
within the 45-day period referred to in Section 3.2, the members of the Xxxxx
Group (or their designee(s), which designees shall become parties hereto in
accordance with the terms hereof) shall have the right by giving notice not
later than the end of the succeeding 10-day period to purchase) from a
Management Stockholder (other than the persons set forth on Exhibit B hereto),
and such Management Stockholder shall have the obligation to sell to the
Company (or the members of the Xxxxx Group or their designee(s) if such right
is exercised by the Xxxxx Group or their designee(s)), all, but not less than
all, of such Management Stockholder's shares of Company Stock:
(a) at the Fair Market Value of such shares if such Management
Stockholder's employment with the Company and all subsidiaries thereof is
terminated as a result of (i) the termination by the Company of such
employment without Cause, (ii) the resignation of such Management Stockholder
for Good Reason, (iii) the Retirement of such Management Stockholder, or (iv)
the death or Disability of such Management Stockholder;
(b) at the lesser of (i) the Fair Market Value of such shares, and
(ii) the Carrying Value of such shares if such Management Stockholder's
employment with the Company and all subsidiaries thereof is terminated as a
result of the resignation of such Management Stockholder without Good Reason;
and
(c) at the lesser of the Fair Market Value and Carrying Value of such
shares, if such Management Stockholder's employment with the Company and all
subsidiaries thereof is terminated as a result of the termination by the
Company of such employment with Cause.
3.2 Notice. If the Company desires to purchase shares of Company
Stock from a Management Stockholder pursuant to Section 3.1, it shall notify
such Management Stockholder (or his estate, as the case may be) not more than
45 days after the occurrence of the event giving rise to the Company's right
to acquire such Management Stockholder's shares of Company Stock. If the
Company does not deliver such notice within such 45-day period and the members
of the Xxxxx Group (or their designee(s)) desires to purchase such shares,
then the members of the Xxxxx Group (or their designee(s)) shall notify such
Management Stockholder (or his estate, as the case may be) not later than the
end of the succeeding 10-day period.
3.3 Payment. (a) Subject to Section 3.4 and Article V, payment for
shares of Company Stock purchased pursuant to Section 3.1 shall be made on the
date that is the 15th business day following the date of the determination of
Fair Market Value pursuant to Section 4.1 or the determination of Carrying
Value pursuant to Section 4.2, as applicable.
(b) Any payments based on Fair Market Value required to be made by
the Company under this Section 3.3 shall accrue interest at 6% simple interest
per annum on the amounts not paid from the date of the exercise of the right
to purchase set forth in this Article III (or in the case of shares acquired
upon the exercise of employee stock options, which shares have been held for
less than six months from the exercise of such options and are purchased
pursuant to clause (i), (ii) or (iii) of Section 3.1(a) (the "Delayed Purchase
Shares"), from the six-month anniversary of such exercise of such options
(such date, the "Delayed Purchase Share Anniversary")) to the date the Company
(or the members of the Xxxxx Group or their designee(s)) makes such payments.
3.4 Postponement, etc. The date of payment and closing of any
purchase and sale under this Article III may be postponed to the extent
necessary to permit such purchase and sale under the HSR Act. No party shall
be required to consummate any purchase and sale under this Article III until
such time as such transaction would not cause such party to violate applicable
law, other than violations which would not have a direct or indirect material
adverse effect on such party. Notwithstanding anything to the contrary in this
Article III, in no event shall any purchase of Delayed Purchase Shares occur
prior to the Delayed Purchase Share Anniversary; provided, that in the event
that Delayed Purchase Shares are to be purchased, then (x) the Company (or the
members of the Xxxxx Group or their designee(s)), as the case may be) will, at
its option, either delay the purchase of all shares held by such Management
Stockholder or delay only the purchase of the Delayed Purchase Shares, until a
date that shall not be earlier than the Delayed Purchase Share Anniversary and
(y) if pursuant to the foregoing clause (x) the purchase of all shares held by
such Management Stockholder is delayed, then notwithstanding Section 3.3(b)
above, no interest shall accrue prior to the Delayed Purchase Share
Anniversary with respect to any shares held by such Management Stockholder.
ARTICLE IV
PURCHASE PRICE
4.1 Fair Market Value.
(a) Appraisal. The Company shall, at the request of the Xxxxx Group,
engage, to the extent practicable, on an annual basis or otherwise from time
to time as required, an independent valuation consultant or appraiser of
recognized national standing (an "Appraiser") satisfactory to the Xxxxx Group
and the Company (it being agreed that Houlihan, Lokey, Xxxxxx & Zukin, Inc. is
satisfactory to the Xxxxx Group and the Company) to appraise the Fair Market
Value of the shares of Company Stock as of the last day of the fiscal year
then most recently ended or as of any more recent date (the "Appraisal Date")
and to prepare and deliver a report to the Company describing the results of
such appraisal (the "Appraisal").
(b) Fair Market Value. For the purposes of this Agreement, the "Fair
Market Value" of any share of Company Stock being purchased by or sold to the
Company, the Xxxxx Group or their respective designees, pursuant to this
Agreement shall be the fair market value of the entire Company Stock equity
interest of the Company taken as a whole, divided by the number of outstanding
shares of Company Stock, all calculated on a fully diluted basis, without
additional premiums for control or discounts for minority interests or
restrictions on transfer, and shall be determined by Appraisal as of the
applicable date of termination of employment with the Company (or in the case
of Delayed Sale Shares or Delayed Purchase Shares, on the last day of the
month in which the Delayed Sale Share Anniversary or the Delayed Purchase
Share Anniversary occurs) or the date of transfer to an Involuntary Transferee
(as defined in Section 6.4) (each of such dates, a "Determination Date"),
which Appraisal the Company shall have caused to have been undertaken, in
accordance with Section 4.1(a), promptly but no later than 30 days following
(i) the date of receipt by the Company of the notice described in Section 2.2
(in the case of purchases of Company Stock pursuant to Article II), (ii) the
date on which the Company gives the notice described in Section 3.2 (in the
case of purchases by the Company of Company Stock pursuant to Article III) or
the date on which the Xxxxx Group gives the notice described in Section 3.1
(in the case of purchases of Company Stock by the members of the Xxxxx Group
(or their designees) pursuant to Section 3.2) and (iii) the date of receipt by
the Company of the Notice described in Section 6.4 or the time by which the
Xxxxx Group have to exercise their rights under Section 6.4 (in each case, the
case of purchases of Company Stock pursuant to Section 6.4) and
notwithstanding the foregoing, (iv)(a) the Delayed Sale Share Anniversary, in
the case of Delayed Sale Shares or (b) the Delayed Purchase Share Anniversary,
in the case of Delayed Purchase Shares; provided, however, that the Fair
Market Value will be determined as of the most recent existing Appraisal
unless (i) in the Company's judgment there has been a material change in the
Company, its operations or its value since such existing Appraisal or the
Board determines that a new appraisal is advisable, in which case the Company
may, in its sole discretion, order an additional Appraisal or (ii) a
determination of Fair Market Value is being made with respect to (x) Delayed
Sale Shares or Delayed Purchase Shares or (y) shares acquired upon the
exercise of employee stock options which shares have been held for at least
six months from the exercise of such options and the most recent existing
Appraisal occurred during the first six months that such shares were held,
then the Company shall order an additional Appraisal under Section 4.1(a) for
the purpose of determining the Fair Market Value of such shares; provided
further, that, until the one year anniversary of the date hereof, the Fair
Market Value shall be equal to the Redemption Price (as defined in the
Recapitalization Agreement) and no such Appraisal need be undertaken.
(c) Notice to Stockholders. After notice has been given pursuant to
Section 2.2, 3.2 or 6.4, the Company shall promptly deliver a copy of the
letter as to value included with the most recent existing Appraisal or any
Appraisal thereafter received, as the case may be, to the Xxxxx Group and to
each Stockholder whose Company Stock is to be purchased pursuant to Section
2.1, 2.6, 3.1, 3.5 or 6.4.
(d) Withdrawal of Exercise Following Appraisal. Any party to this
Agreement who has exercised its option either to purchase or sell shares of
Company Stock, pursuant to Article II or Article III, may withdraw its notice
or demand to purchase or sell such shares within 10 business days following
the receipt of the letter referred to in Section 4.1(c) or the determination
of the Fair Market Value as set forth in Section 4.1(b).
4.2 Carrying Value. For the purposes of this Agreement, "Carrying
Value" of any share of Company Stock being purchased by the Company shall be
equal to the price paid by the selling Management Stockholder for any such
share ("Cost"), less the amount of dividends paid to such Management
Stockholder in respect of any such share. Notwithstanding anything to the
contrary herein, (i) in the case of any share of Common Stock that was issued
in exchange for any share of Series B Preference Stock outstanding prior to
the Closing pursuant to the Share Exchange (as defined in the Recapitalization
Agreement), Cost shall be deemed to be the Redemption Price, and the Carrying
Value shall be calculated as set forth above commencing from the date of the
Closing through the date of purchase by the Company pursuant to Article II or
III and (ii) in the case of any share of Common Stock that was issued upon the
exercise of any stock option issued prior to the Closing or issued in exchange
for option issued prior to the Closing ("Pre-existing Option"), Cost shall be
deemed to be the Redemption Price and the Carrying Value shall be calculated
as set forth above.
4.3 Certain Defined Terms. As used in this Agreement, the following
terms shall have the meanings ascribed to them below (which meanings shall be
independent of and unaffected by the meanings of similar terms used in any
employment contracts between the Company and Management Stockholders, in the
event such latter meanings differ from those following):
(a) Cause. With respect to any Management Stockholder who is party to
an employment agreement with the Company, the term "Cause", if defined in such
employment agreement, shall have the meaning set forth therein. For all other
purposes, the term "Cause" used in connection with a termination of employment
of a Management Stockholder shall mean a termination of such Management
Stockholder's employment by the Company or any of its subsidiaries due to (i)
the continued willful failure, after reasonable advance written notice
specifying details of such failure, by such Management Stockholder
substantially to perform his duties with the Company or any of its
subsidiaries (other than any such failure resulting from incapacity due to
reasonably documented physical or mental illness), or (ii) the engaging by
such Management Stockholder in fraudulent, willful or bad faith conduct that
causes, or in the good faith judgment of the Board may cause, harm (financial
or otherwise) material to the Company or any of its subsidiaries or harm
material to the conduct of such Management Stockholder's employment,
including, without limitation, the improper or unlawful disclosure of material
secret, proprietary or confidential information of the Company or any of its
subsidiaries.
(b) Good Reason. With respect to any Management Stockholder who is
party to an employment agreement with the Company, the term "Good Reason", if
defined in such employment agreement, shall have the meaning set forth
therein. For all other purposes, a termination of a Management Stockholder's
employment with the Company or any of its subsidiaries shall be for "Good
Reason" if such Management Stockholder voluntarily terminates his employment
with the Company or any of its subsidiaries as a result of either of the
following:
(i) without the Management Stockholder's prior consent, a
material reduction by the Company or any of its subsidiaries in his
current salary, other than any such reduction which is part of a
general salary reduction or other concessionary arrangement affecting
all employees or affecting the group of employees of which the
Management Stockholder is a member; or
(ii) the taking of any action by the Company or any of its
subsidiaries that would substantially diminish the aggregate value of
the benefits provided him under the Company's or any such
subsidiary's medical, health, accident, disability, life insurance,
thrift and retirement plans in which he was participating on the date
of his execution of this Agreement, other than any such reduction
which is (A) required by law, (B) implemented in connection with a
general concessionary arrangement affecting most employees or
affecting substantially the entire group of employees of which the
Management Stockholder is a member, (C) generally applicable to all
beneficiaries of such plans or (D) a result of a decrease in the
value of the Company or its equity; or
(iii) a substantial and material reduction in his then
current duties, authority or responsibilities.
(c) Disability. With respect to any Management Stockholder who is
party to an employment agreement with the Company, the term "Disability", if
defined in such employment agreement, shall have the meaning set forth
therein. For all other purposes, the termination of the employment of any
Management Stockholder by the Company or any of its subsidiaries shall be
deemed to be by reason of a "Disability" if, as a result of such Management
Stockholder's incapacity due to reasonably documented physical or mental
illness, such Management Stockholder shall have been unable for more than six
months within any 12 month period to perform his duties with the Company or
any of its subsidiaries on a full time basis and within 30 days after written
notice of termination has been given to such Management Stockholder, such
Management Stockholder shall not have returned to the full time performance of
his duties. The date of termination in the case of a termination for
"Disability" shall be the last day of the aforementioned 30-day period.
ARTICLE V
PROHIBITION ON PURCHASES
5.1 Prohibited Purchases. Notwithstanding anything to the contrary
herein, the Company shall not be obligated to purchase any shares of Company
Stock from a Management Stockholder pursuant to Section 2.1 and shall not
exercise any right to purchase shares from Management Stockholders pursuant to
Section 3.1, in each case, to the extent (i) the Company is prohibited from
purchasing such shares (or incurring debt to finance the purchase of such
shares), or the Company is unable to obtain funds to pay for such shares from
a subsidiary of the Company, in any case by reason of any debt instruments,
including, but not limited to, the Nortek Indentures, the Bridge Facility and
the Bank Facility (each as defined below) or other agreements (collectively,
the "Agreements") entered into by the Company or any of its subsidiaries or by
applicable law, (ii) an event of default under any Agreement has occurred and
is continuing or a condition exists which would, with notice or lapse of time
or both, result in an event of default under any Agreement or (iii) the
purchase of such shares (including the incurrence of any debt which in the
judgment of the Board is necessary to finance such purchase) or the
distribution of funds to the Company by a subsidiary thereof to pay for such
purchase (A) could in the judgment of the Board result in the occurrence of an
event of default under any Agreement or create a condition which would or
might, with notice or lapse of time or both, result in an event of default
under any Agreement, (B) would, in the judgment of the Board, be imprudent in
view of the financial condition (present or projected) of the Company and its
subsidiaries, taken as a whole, or the anticipated impact of the purchase (or
of the obtaining of funds to permit the purchase) of such shares on the
Company's or any of its subsidiaries' ability to meet their respective
obligations, including under any Agreement, or to satisfy and make their
planned capital and other expenditures and projections or (C) could, in the
judgment of the Board, constitute a fraudulent conveyance or transfer by the
Company or a subsidiary thereof or render the Company or a subsidiary thereof
insolvent under applicable law or violate limitations in applicable corporate
law on repurchases of stock or payment of dividends or distributions. If
shares of Company Stock which the Company has the right or obligation to
purchase on any date exceed the total amount permitted to be purchased on such
date pursuant to the preceding sentence (the "Maximum Amount"), the Company
shall purchase on such date only that number of shares of Company Stock up to
the Maximum Amount (and shall not be required to purchase more than the
Maximum Amount) in such amounts as the Board shall in good faith determine,
applying the following order of priority:
(a) first, the shares of Company Stock of all Management Stockholders
whose shares of Company Stock are being purchased by the Company by reason of
termination of employment due to death or Disability up to the Maximum Amount
and, to the extent that the number of shares of Company Stock that the Company
is obligated to purchase from such Management Stockholders in the aggregate
exceeds the Maximum Amount, such shares of Company Stock, up to the Maximum
Amount, pro rata among such Management Stockholders on the basis of the number
of shares of Company Stock held by each of such Management Stockholders that
the Company is obligated or has the right to purchase;
(b) second, to the extent that the Maximum Amount is in excess of the
amount the Company purchases pursuant to clause (a) above, the shares of
Company Stock of all Management Stockholders whose shares of Company Stock are
being purchased by the Company by reason of termination of employment without
Cause or due to Retirement or resignation for Good Reason up to the Maximum
Amount and, to the extent that the number of shares of Company Stock that the
Company is obligated to purchase from such Management Stockholders in the
aggregate exceeds the Maximum Amount, such shares of Company Stock, up to the
Maximum Amount, pro rata among such Management Stockholders on the basis of
the number of shares of Company Stock held by each of such Management
Stockholders that the Company is obligated or has the right to purchase; and
(c) third, to the extent the Maximum Amount is in excess of the
amounts the Company purchases pursuant to clauses (a) and (b) above, the
shares of Company Stock of all other Management Stockholders whose shares of
Company Stock are being purchased by the Company up to the Maximum Amount and,
to the extent that the number of shares of Company Stock that the Company is
obligated to purchase from such Management Stockholders in the aggregate
exceeds the Maximum Amount, the shares of Company Stock, up to the Maximum
Amount, of such Management Stockholders in such order of priority and in such
amounts as the Board in its sole discretion shall in good faith determine to
be appropriate under the circumstances.
For purposes of this Agreement, (x) "Nortek Indentures" shall mean the
indentures related to the following notes of Nortek: (1) 8 7/8% senior notes
due August 1, 2008; (2) 9 1/8% senior notes due September 1, 2007; (3) 9 1/4%
senior notes due March 15, 2007; and (4) 9 1/8% senior subordinated notes due
June 15, 2011 and (y) the "Bridge Facility" shall mean the bridge facility to
be provided pursuant to the commitment letter, dated as of June 20, 2002, by
and among Xxxxx, UBS AG, Stamford Branch and UBS Warburg LLC. The "Bank
Facility" shall mean the bank facility to be provided pursuant to the
commitment letter, dated as of May 31, 2002 by and among Nortek, Fleet Capital
Corporation and Fleet Securities, Inc.
Notwithstanding anything to the contrary contained in this Agreement,
if the Company is unable to make any payment when due to any Management
Stockholder under this Agreement by reason of this Article V, the Company
shall make such payment at the earliest practicable date permitted under this
Article V and any such payment shall accrue simple interest (or if such
payment is accruing interest at such time, shall continue to accrue interest)
at 6% per annum from the date such payment is due and owing to the date such
payment is made; provided, however, that such interest shall be reduced by the
amount of any interest otherwise accruing on such payment by the Company by
reason of the definition of "Carrying Value" set forth in Section 4.2. All
payments of interest accrued hereunder shall be paid only at the date of
payment by the Company for the shares of Company Stock being purchased.
ARTICLE VI
SALES TO THIRD PARTIES
6.1 General. An "Excluded Transaction" shall mean any Transfer
pursuant to an IPO.
6.2 Intentionally Omitted.
6.3 Agreements to Be Bound. Notwithstanding anything contained in
this Section 6, any Transfer (other than in connection with a transaction
which constitutes a Change in Control (as defined herein)) to a third party or
any Involuntary Transfer (as defined in Section 6.4) to an Involuntary
Transferee (as defined in Section 6.4) shall be permitted under the terms of
this Agreement only if such third party or Involuntary Transferee, as the case
may be, shall agree in writing to be bound by the terms and conditions of this
Agreement in the same manner and capacity as its transferor pursuant to an
instrument of assumption reasonably satisfactory in form and substance to the
Company; it being understood that any transferee of a member of the Xxxxx
Group shall constitute a member of the Xxxxx Group for all purposes of this
Agreement, including Section 1.2(d) hereof.
6.4 Involuntary Transfers. In the case of any transfer of title or
beneficial ownership of shares of Company Stock, other than an Excluded
Transfer, upon default, foreclosure, forfeit, divorce, court order, or
otherwise than by a voluntary decision on the part of a Stockholder (an
"Involuntary Transfer"), the Company shall have the right to purchase such
shares pursuant to this Section 6.4 or, if the Company fails to exercise such
right, the Xxxxx Group (or its designees, which designees shall become parties
hereto in accordance with the terms hereof) shall have such right. Upon the
Involuntary Transfer of any shares of Company Stock, such Stockholder shall
promptly (but in no event later than two days after such Involuntary Transfer)
furnish written notice (the "Notice") to the Company and the Xxxxx Group
indicating that the Involuntary Transfer has occurred, specifying the name of
the person to whom such shares have been transferred (the "Involuntary
Transferee") and giving a detailed description of the circumstances giving
rise to, and stating the legal basis for, the Involuntary Transfer. Upon the
receipt of the Notice, and for 30 days thereafter, the Company (or its
designee(s)) shall have the right (and in the event the Company fails to
exercise such right within such 30 day period then, until the later of (i)
five days from the end of such 30 day period and (ii) 10 days from the day the
Xxxxx Group receives notification from the Company that it is declining to
exercise such right, the Xxxxx Group (and its designee(s)) shall have the
right) to purchase, and the Involuntary Transferee shall have the obligation
to sell, all, but not less than all, of the shares of Company Stock acquired
by the Involuntary Transferee for a purchase price equal to (subject to the
following paragraph) the lesser of (i) the Fair Market Value of such shares of
Company Stock on the date of transfer to the Involuntary Transferee and (ii)
the amount of the indebtedness or other liability that gave rise to the
Involuntary Transfer plus the excess, if any, of the Carrying Value of such
shares of Company Stock over the amount of such indebtedness or other
liability that gave rise to the Involuntary Transfer.
Notwithstanding the foregoing, the Board may, for good cause shown by
the Stockholder who made the Involuntary Transfer, determine that payment of a
purchase price equal to the Fair Market Value of such shares of Company Stock
on the date of transfer to the Involuntary Transferee would be appropriate
under the circumstances, and direct that payment be made in such amount.
6.5 Tag and Drag Along Rights.
(a) Tag-Along Rights. None of the members of the Xxxxx Group shall,
in any one transaction or any series of related transactions, Transfer for
value any shares of Company Stock in an amount which when taken together with
all previous (or substantially simultaneous) Transfers by all of the members
of the Xxxxx Group would exceed 5% of the Company Stock held by all such
members of the Xxxxx Group at the time of the transaction in question (which
in the case of a series of related transactions is the most current
transaction in such series), except pursuant to an Excluded Transaction, a
Transfer to a Permitted Transferee (as limited by Section 1.2(c)) or pursuant
to Section 6.5(b), to the Company or any of its subsidiaries or to any third
party or parties (a "Third Party"), unless the Management Stockholders, the
Third Party Investors, and their respective Permitted Transferees
(collectively, the "Offerees"), are offered the right, at the option of each
Offeree, to include in such Transfer to the Third Party such number of shares
of Company Stock owned by each such Offeree as determined in accordance with
this Section 6.5(a). If any member of the Xxxxx Group receives from a Third
Party a bona fide offer or offers to Transfer, or proposes to Transfer to a
Third Party, shares of its or their Company Stock, in excess of such 5%
threshold, such member (the "Transferor") shall give written notice (the
"Tag-Along Notice") to each of the Offerees, setting forth the consideration
per share to be paid by such Third Party and the other material terms and
conditions of such transaction. The Tag-Along Notice shall offer the Offerees
the opportunity to participate in the proposed Transfer of shares to the Third
Party according to the terms and conditions of this Section 6.5(a) and for the
same type of consideration and for an amount of consideration per share not
less than that offered to the Transferor by the Third Party and on terms and
conditions (other than, in the case of members of the Xxxxx Group, any
management, advisory or transaction fees payable to them or their affiliates)
no less favorable to such Offerees than the terms and conditions offered to
the Transferor by the Third Party. At any time within 15 days after its
receipt of the Tag-Along Notice, each of the Offerees may irrevocably (but
subject to the terms and conditions of such offer) accept the offer included
in the Tag-Along Notice for up to such number of shares of Company Stock as is
determined in accordance with the provisions of this Section 6.5(a) by
furnishing written notice of such acceptance to the Transferor. Promptly
following such acceptance by an Offeree, each such Offeree shall deliver to
the Transferor the certificate or certificates representing the shares of
Company Stock to be Transferred pursuant to such offer by such Offeree,
together with a limited power-of-attorney authorizing the Transferor to sell
or otherwise dispose of such shares of Company Stock pursuant to the proposed
Transfer to the Third Party. In addition, each such Offeree shall also execute
all other documents required to be executed in connection with such
transaction; provided, that in the event that (x) the Offeree is required to
provide any representations or warranties in connection with such transaction,
each Offeree shall only be required to represent and warrant as to its or his
title to its or his Company Stock to be Transferred and such holder's
authority, power, and right to enter into and consummate such transaction
without violating any other agreement or legal requirement and other matters
relating to such holder, or (y) the Offeree is required to provide any
indemnities in connection with such transaction (other than in respect of
representations and warranties referenced to in the preceding clause (x)),
then each Offeree shall only be required to provide the same indemnities as
the Xxxxx Group and shall not be liable for more than his or its pro rata
share (based upon the amount of consideration to be received by all Offerees
and the Transferor in such transaction) of any liability for indemnity and
such liability shall not exceed the total purchase price received by such
Offeree in such transaction; provided that, with respect to the foregoing
representations or warranties in the preceding clause (x) above given by the
Offerees, an Offeree may be liable for any and all losses resulting from a
breach of such representations or warranties and there shall be no cap by
reason of this Agreement on the liability of the relevant Offeree with respect
to breaches of such representations or warranties.
Each Offeree who shall have irrevocably accepted the offer in the Tag
Along Notice shall have the right to participate in the proposed Transfer to
the Third Party by Transferring in connection therewith shares of Company
Stock equal to the product of (x) the total number of shares to be acquired by
the Third Party, times (y) a fraction, the numerator of which shall be the
total number of shares of Company Stock owned by such Offeree, and the
denominator of which shall be the total number of shares of Company Stock
owned by the Xxxxx Group plus the total number of shares of Company Stock
owned by all Offerees that have accepted the offer included in the Tag-Along
Notice. The maximum number of shares of Company Stock that may be Transferred
by each Offeree to the Third Party in accordance with this Section 6.5(a)
shall be the total number of shares of Company Stock then owned by such
Offeree.
If within 15 days after the receipt of the Tag-Along Notice, any
Offeree has not accepted the offer contained in the Tag-Along Notice, such
Offeree will be deemed to have waived any and all rights with respect to, or
to participate in, the Transfer of Company Stock described in the Tag-Along
Notice. The Transferor shall have 45 days following such delivery in which to
Transfer Company Stock held by it plus any Company Stock of any Offerees who
accept the offer described in the Tag-Along Notice in accordance with the
provisions of this Section 6.5(a), in the aggregate not more than the amount
of Company Stock described in the Tag-Along Notice, for an amount and type of
sales price consideration per share not more favorable to the Transferor than
was set forth in the Tag-Along Notice, provided that the type of consideration
to be received by the Transferor may be different than the type set forth in
the Tag-Along Notice so long as (i) it is not materially more favorable to the
Transferor than to the Offerees and (ii) if the consideration to be received
by the Offerees is different than that set forth in the Tag Along Notice, each
Offeree may rescind its acceptance of the offer contained in the Tag Along
Notice within five days of receipt of notice of such change in the type of
consideration; provided further, that no recision shall effect the number of
shares which each accepting Offeree shall have the right to Transfer pursuant
to the preceding paragraph and the Transferor may increase the number of
shares to be Transferred by it by the number of shares subject to such
rescission. If, at the end of 60 days following the delivery of the Tag-Along
Notice, the Transferor has not completed the Transfer of Company Stock of the
Transferor and Company Stock of any Offeree, the Transferor shall return to
such Offeree all certificates representing shares of Company Stock which such
Offeree delivered for Transfer pursuant to this Section 6.5(a), and all the
restrictions on sale or other disposition contained in this Agreement with
respect to Company Stock owned by the Transferor shall again be in effect,
including the requirement to give notice hereunder.
Except as may otherwise be agreed to by Xxxxxxx X. Xxxxxx ("RLB")
with respect to Management Stockholders, all Offerees whose shares of Company
Stock are to be Transferred in accordance with this Section 6.5(a) shall
receive the consideration in respect of their shares substantially
simultaneously with the receipt by the Transferor of the consideration in
respect of the shares of Company Stock of the Transferor.
For purposes of this Section 6.5(a) only, all stock options held by
each Offeree which are exercisable at the time of delivery of the Tag-Along
Notice, or which would become exercisable by reason of the Transfer after
giving effect to this Section 6.5(a), shall be treated as Company Stock
hereunder (including, without limitation, for purposes of determining the
extent to which an Offeree may participate in a proposed Transfer pursuant to
the second paragraph of this Section 6.5(a)); provided, that each Offeree, in
order to participate in any proposed Transfer in this Section 6.5(a), shall
exercise any such stock options held by such Offeree the shares of Company
Stock in respect of which such Offeree desires to Transfer pursuant to this
Section 6.5(a), in accordance with the terms and subject to the conditions of
applicable stock option plan, prior to the consummation of any such Transfer
pursuant to this Section 6.5(a); provided, further, that, to the extent
practicable and to the extent doing so would not adversely affect the Company,
the Transferor or the ability to consummate the Transfer, the Transferor and
the Company shall use their reasonable efforts to cause any such proposed
Transfer to be structured so as to facilitate the delivery to any Offeree
holding stock options of the difference between the per share consideration
being paid in such Transfer and the exercise price in respect of each such
stock options being Transferred pursuant to this Section 6.5(a) (in lieu of
the delivery of the exercise price in respect of such stock options to the
Company).
(b) Drag-Along Rights. If any member or members of the Xxxxx Group
shall, individually or collectively, propose to Transfer at least 75% of all
shares of Company Stock collectively owned by the Xxxxx Group at the time of
the transaction in question to a Third Party, then (in addition to the rights
of the Management Stockholders, the Third Party Investors, and their
respective Permitted Transferees to participate in such Transfer pursuant to
Section 6.5(a) hereof) the members of the Xxxxx Group, may, at their option,
require the Management Stockholders, the Third Party Investors, and their
respective Permitted Transferees (collectively, the "Remaining Holders") to
include in such Transfer to the Third Party such number of shares of Company
Stock owned by each of them, as determined in accordance with this Section
6.5(b); provided that if the members of the Xxxxx Group send the Drag-Along
Notice referred to below, Section 6.5(a) shall not apply to the Transfer.
The members of the Xxxxx Group shall give written notice (the "Drag-
Along Notice") of the exercise of their rights pursuant to this Section 6.5(b)
to each of the Remaining Holders, setting forth the sales price consideration
per share to be paid by the Third Party and the other material terms and
conditions of such transaction, including the number of shares to be included
therein. The Drag-Along Notice shall state that the Remaining Holders shall be
required to participate in the proposed Transfer of shares to the Third Party
according to the terms and conditions of this Section 6.5(b) and for the same
type of consideration and for an amount of consideration per share not less
than that offered to any member of the Xxxxx Group by the Third Party and on
terms and conditions (other than, in the case of members of the Xxxxx Group,
any management, advisory or transaction fees payable to them or their
affiliates) no less favorable to such Remaining Holders than the terms and
conditions offered to any member of the Xxxxx Group by the Third Party. Within
15 days following the receipt of the Drag-Along Notice, each of the Remaining
Holders shall deliver to a representative of the Xxxxx Group designated in the
Drag-Along Notice certificates representing all shares of Company Stock held
by such Remaining Holder, duly endorsed, together with all other documents
required to be executed in connection with such transaction. In the event that
any Remaining Holder should fail to deliver such certificates to the Xxxxx
Group, the Company shall cause the books and records of the Company to show
that such shares are bound by the provisions of this Section 6.5(b) and that
such shares may be Transferred only to the Third Party.
Each Remaining Holder shall be required to participate in the
proposed Transfer to the Third Party by Transferring in connection therewith
shares of Company Stock equal to the product of (x) the total number of shares
to be acquired by the Third Party, times (y) a fraction, the numerator of
which shall be the total number of shares of Company Stock owned by such
Remaining Holder, and the denominator of which shall be the total number of
shares of Company Stock owned by the Xxxxx Group plus the total number of
shares of Company Stock owned by all Remaining Holders in the aggregate. The
maximum number of shares of Company Stock that may be Transferred by each
Remaining Holder to the Third Party in accordance with this Section 6.5(b)
shall be the total number of shares of Company Stock then owned by such
Remaining Holder.
If, within 90 days after the members of the Xxxxx Group gave the
Drag-Along Notice, they shall not have completed the Transfer of all the
shares of Company Stock of the Xxxxx Group and the Remaining Holders in
accordance with this Section 6.5(b), the Xxxxx Group shall return to each of
the Remaining Holders all certificates representing shares of Company Stock
that such Remaining Holder delivered for Transfer pursuant hereto and that
were not purchased pursuant to this Section 6.5(b); provided that the Xxxxx
Group shall be permitted, but not obligated, to complete the sale by all
non-defaulting Remaining Holders if one or more of the Remaining Holders
default; provided further that completion of the sale by the Xxxxx Group
and/or such Remaining Holders shall not relieve a defaulting Remaining Holder
of liability for its breach.
The obligations of the Remaining Holders pursuant to this Section
6.5(b) are subject to the satisfaction of the following conditions:
(i) if any Stockholder is given an option as to the form and
amount of consideration to be received, all Stockholders will be
given the same option;
(ii) no Remaining Holder shall be required to make any
out-of-pocket expenditure prior to the consummation of such
transaction (excluding expenditures for its own postage, copies, etc.
and the fees and expenses of its own counsel and other advisors
retained by it, which amounts shall be the sole responsibility of
such Remaining Holder in any event (other than pursuant to Section
6.5(c) herein)), and no Remaining Holder shall be obligated to pay
more than its or his pro rata share (based upon the consideration to
be received in such transaction) of expenses (in comparison to the
amount of expenses being borne by all other holders participating in
a Transfer pursuant to this Section 6.5(b)) incurred by the Company
or for the benefit of all Stockholders, provided that a Remaining
Holder's liability for its or his pro rata share of such allocated
expenses shall in no event exceed the total purchase price received
by such Remaining Holder in such transaction; and
(iii) in the event that (x) the Remaining Holders are
required to provide any representations or warranties in connection
with such transaction, each Remaining Holder shall only be required
to represent and warrant as to its or his title to its or his Stock
to be Transferred and such holder's authority, power, and right to
enter into and consummate such transaction without violating any
other agreement or legal requirement and other matters relating to
such holder, or (y) the Remaining Holders are required to provide any
indemnities in connection with such transaction (other than in
respect of representations and warranties referenced to in the
preceding clause (x)), then each Remaining Holder shall only be
required to provide the same indemnities as the Xxxxx Group and shall
not be liable for more than his or its pro rata share (based upon the
amount of consideration to be received in such transaction by all
Remaining Holders and members of the Xxxxx Group) of any liability
for indemnity and such liability shall not exceed the total purchase
price received by such Remaining Holder in such transaction; provided
that, with respect to the foregoing representations or warranties in
the preceding clause (x) given by the Remaining Holders, a Remaining
Holder may be liable for any and all losses resulting from a breach
of such representations or warranties and there shall be no cap by
reason of this Agreement on the liability of the relevant Remaining
Holder with respect to breaches of such representations or
warranties.
To the extent practicable, all Remaining Holders whose shares of
Company Stock are to be Transferred in accordance with this Section 6.5(b)
shall receive the consideration in respect of their shares substantially
simultaneously with the receipt by the Xxxxx Group of the consideration in
respect of the shares of Company Stock of the Xxxxx Group Transferred, except
that all Management Stockholders whose shares of Company Stock are to be
Transferred in accordance with this Section 6.5(b) shall receive the
consideration in respect of their shares (except as may be agreed to between
the Company and RLB on behalf of such Management Stockholders) simultaneously
with the receipt by the Transferor of the consideration in respect of the
shares of Company Stock of the Transferor.
For purposes of this Section 6.5(b) only, all stock options held by
each Remaining Holder which are fully exercisable at the time of the
Drag-Along Notice, or which would become exercisable by reason of the Transfer
after giving effect to this Section 6.5(b), shall be treated as Company Stock
(including, without limitation, for purposes of determining the extent to
which a Remaining Holder is required to participate in a proposed Transfer
pursuant to the third paragraph of this Section 6.5(b)); and each Remaining
Holder in connection with the exercise of drag-along rights by the Xxxxx Group
pursuant to this Section 6.5(b) shall immediately prior to such proposed
Transfer exercise any such stock options held by such Remaining Holders, the
shares of Company Stock in respect of which are required to be Transferred
pursuant to this Section 6.5(b), in accordance with the terms and subject to
the conditions of the applicable stock option plan, prior to the consummation
of any such Transfer pursuant to this Section 6.5(b); provided, further, that,
to the extent practicable and to the extent doing so would not adversely
affect the Company, any member of the Xxxxx Group or the ability to consummate
the Transfer, the Xxxxx Group and the Company shall use their reasonable
efforts to cause any such proposed Transfer to be structured so as to
facilitate the delivery to any Remaining Holder holding stock options of the
difference between the per share consideration being paid in such Transfer and
the exercise price in respect of each such stock options being Transferred
pursuant to this Section 6.5(b) (in lieu of the delivery of the exercise price
in respect of such stock options to the Company).
(c) Attorney Fees. The Company shall pay the reasonable fees and
expenses of one counsel selected by the Management Stockholders holding a
majority of the shares of Company Stock held in the aggregate by all
Management Stockholders (and reasonably acceptable to the Xxxxx Group) to
represent the Management Stockholders in each Transfer of shares of Company
Stock held by them pursuant to Sections 6.5(a) or 6.5(b) hereof.
ARTICLE VII
REGISTRATION RIGHTS AGREEMENT
7.1 Registration Rights. Concurrently with the execution of this
Agreement the parties hereto are also entering into a registration rights
agreement (the "Registration Rights Agreement") in the form attached as
Exhibit A. The parties hereto agree that any additional members of the Xxxxx
Group, Third Party Investors and Management Stockholders who become parties
hereto shall also be added as parties thereto.
ARTICLE VIII
CHARTER DOCUMENTS AND
BOARD OF DIRECTORS
8.1 Charter Documents. The Company has previously furnished to the
Stockholders copies of its certificate of incorporation and by-laws, each as
in effect on the date hereof (the "Charter Documents"). From and after the
date hereof, each Stockholder shall vote its shares of voting stock of the
Company, at any regular or special meeting of stockholders of the Company or
in any written consent executed in lieu of such a meeting of stockholders, and
shall take all actions necessary, to ensure that the Charter Documents do not,
at any time, conflict with the provisions of this Agreement.
8.2 Board of Directors. (a) Subject to provisions of Section 8.2(i)
below, the Stockholders agree and understand that immediately following the
consummation of the Transactions, the Board will consist of a number of
directors between five and eleven (as determined by the Xxxxx Group), two of
whom shall be designated by RLB and the remainder of whom shall be persons
designated by the Xxxxx Group (and who may be members of the Xxxxx Group or
affiliates thereof); provided that if RLB designates himself as a director he
shall have the right to serve as Chairman of the Board so long as he is a
director; provided further, that RLB's rights pursuant to this Section 8.2
(other than Section 8.2(i)), shall terminate as such time as he no longer owns
in excess of [10%] of the outstanding shares of Common Stock of the Company
(such percentage to be computed by including as outstanding Common Stock all
outstanding options, calculated on a treasury method basis). Immediately
following the consummation of the Transactions, subject to the preceding
sentence, the number of directors of the Company and the persons who will
serve as such shall be determined in accordance with the Charter Documents and
applicable law and may change from time to time.
(b) The Stockholders shall vote their shares of voting stock to
implement the foregoing, and to elect the directors nominated in accordance
with Section 8.2(i), at any regular or special meeting of the stockholders of
the Company called for the purpose of filling positions on the Board, or in
any written consent executed in lieu of such a meeting of stockholders, and
shall take all lawful actions as may be reasonably necessary to ensure the
election to the Board of the Nominees. The nominees of the Xxxxx Group and
RLB, including nominees pursuant to Section 8.2(i) hereof, are referred to
herein as the "Xxxxx Nominees" and the "Xxxxxx Nominees", respectively, and
are collectively referred to herein as the "Nominees" and individually as a
"Xxxxx Nominee", "Xxxxxx Nominee" or "Nominee", as the case may be. Subject to
any applicable rules to the contrary of the Securities and Exchange Commission
or any national securities exchange or NASDAQ, RLB shall have the right to
participate in all committees of the Board, except the audit committee, so
long as he is a member of the Board.
To effectuate the provisions of Section 8.2, the Secretary of the
Company, or if there be no Secretary such other officer of the Company as the
Board may appoint to fulfill the duties of Secretary (the "Secretary"), shall
not record any vote or consent contrary to or inconsistent with the terms of
this Section 8.2(a) and 8.2(b).
(c) If, prior to his or her election to the Board pursuant to Section
8.2(a), 8.2(b) or 8.2(i), any Xxxxx Nominee or Xxxxxx Nominee shall be unable
or unwilling to serve as a director of the Company, the members of the Xxxxx
Group or RLB, as the case may be, shall be entitled to nominate a replacement
(the selection of which shall be consistent with Section 8.2(a), 8.2(b) or
8.2(i), as applicable) who shall then be a Nominee for purposes of this
Section 8.2. If, following election to the Board pursuant to Section 8.2(a),
8.2(b) or 8.2(i), any Nominee shall resign or be removed or be unable to serve
for any reason prior to the expiration of his or her term as a director of the
Company, the members of the Xxxxx Group, if such Nominee was a Xxxxx Nominee,
or RLB, if such Nominee was a Xxxxxx Nominee, shall within 30 days of such
event, notify the Board in writing of a replacement Nominee (the selection of
which shall be consistent with Section 8.2(a), 8.2(b) or 8.2(i), as
applicable), and each Stockholder shall vote its shares of voting stock, at
any regular or special meeting called for the purpose of filling positions on
the Board, or in any written consent executed in lieu of such meeting of
stockholders, and shall take all actions necessary (including, without
limitation, using its best efforts to cause its Nominee(s) to elect such
replacement Nominee as herein provided), to ensure the election to the Board
of such replacement Nominee to fill the unexpired term of the Nominee whom
such new Nominee is replacing. If the members of the Xxxxx Group shall fail to
so notify the Board with respect to any Xxxxx Nominee, the Board, in its sole
discretion, may nominate any other person to fill the vacancy. Any Xxxxx
Nominee may be removed by the Xxxxx Group, except that with respect to reasons
other than for Cause (as defined in Section 8.2(e)) a Xxxxx Nominee nominated
pursuant to Section 8.2(i) hereof may be removed prior to an Elimination Event
only if the holders of a majority of the outstanding shares of Series B
Preference Stock consent in writing to such removal (and no meeting of
stockholders need to be held to effect any such removal), and any Xxxxxx
Nominee may be removed by RLB, except that with respect to reasons other than
for Cause, a Xxxxxx Nominee nominated pursuant to Section 8.2(i) hereof may be
removed prior to an Elimination Event only if the holders of a majority of the
outstanding shares of Common Stock consent in writing to such removal (and no
meeting of stockholders need to be held to effect any such removal), and each
Stockholder hereby agrees to vote all of the shares of voting stock owned or
held of record by such Stockholder for, or to take all actions by written
consent in lieu of any such meeting, necessary to cause, any such removal.
(d) If the Xxxxx Group so requests, each Stockholder hereby agrees to
vote all of the shares of voting stock owned or held of record by such
Stockholder for, or to take all actions by written consent in lieu of any such
meeting necessary to cause, the removal (with or without cause) of any
director designated by RLB and elected pursuant to Section 8.2 (other than
Section 8.2(i)) if during such director's term as director, RLB ceases to own
in excess of [10]% of the outstanding shares of Common Stock of the Company
(such percentage to be computed by including as outstanding Common Stock all
outstanding options, calculated on a treasury method basis).
(e) Each Stockholder hereby agrees that any director shall be removed
with Cause only if the holders of a majority of the outstanding shares of
voting stock held by Stockholders consent in writing to such removal (and no
meeting of stockholders need to be held to effect any such removal); provided,
however, that with respect to any Independent director elected pursuant to
Section 8.2(i) hereof, such director may be removed for Cause only if the
holders of a majority of the outstanding shares of either Series B Preference
Stock or Common Stock, depending upon whether RLB or the Xxxxx Group nominated
such director, consent in writing to such removal (and no meeting of
stockholders need to be held to effect any such removal). Solely for the
purposes of this Section 8.2(e), "Cause" shall mean the commission by a
director of an act of fraud or embezzlement against the Company or any of its
subsidiaries or a conviction for a felony (or a plea of nolo contendere or
guilty plea thereto) of such director.
(f) In order to effectuate the provisions of this Article VIII, each
Stockholder hereby agrees that when any action or vote is required to be taken
by such Stockholder pursuant to this Agreement, such Stockholder shall use its
reasonable best efforts, if a special or annual meeting of stockholders of the
Company is not called, to execute or cause to be executed a consent in writing
in lieu of any such meetings pursuant to Section 228(a) of the General
Corporation Law of the State of Delaware to effectuate such stockholder
action.
(g) In order to effectuate the provisions of this Section 8.2 and in
addition to and not in lieu of Sections 8.2(a) through (f) hereof, the
Management Stockholders and Third Party Investors (and any of their respective
Permitted Transferees thereof which own Common Stock subject to this
Agreement) hereby grant to the Xxxxx Group a proxy to vote at any annual or
special meeting of stockholders all of the shares of voting stock owned or
held of record by such stockholder and subject to this Agreement solely for
(i) the election of all directors designated in accordance with Section 8.2(a)
and Section 8.2(i) and (ii) the removal of directors in accordance with
Sections 8.2(c), 8.2(d) and 8.2(e).
(h) With respect to any business combination, merger, consolidation,
stock swap or sale of all or substantially all of the assets of the Company or
similar transaction involving the Company, if the members of the Xxxxx Group
so direct and such transaction results in a Change in Control (as defined
below), then each of the Stockholders shall use its respective best efforts to
vote in favor of such proposed transaction all of the shares of Common Stock
owned or held of record by such Stockholder, at each regular or special
meeting of the stockholders of the Company called for the purpose of voting on
such matter, or in any written consent executed in lieu of such a meeting of
stockholders, and shall take all actions reasonably necessary, to ensure that
all necessary stockholder approvals for such transaction are obtained;
provided that (A) the conditions set forth in subclauses (i), (ii) and (iii)
of the third to last paragraph of Section 6.5(b) hereof are satisfied with
respect to such transaction and (B) such Stockholder is to receive the same
type and amount of consideration per share not less than that to be received
by the members of the Xxxxx Group and on terms and conditions (other than, in
the case of members of the Xxxxx Group, any management, advisory or
transaction fees payable to them or their affiliates) no less favorable to
such Stockholders than the terms and conditions to be received by the members
of the Xxxxx Group in the transaction.
(i) Notwithstanding anything herein to the contrary, until the
occurrence of the Elimination Event (as defined in the certificate of
designation with respect to the Series B Preference Stock (the "Nortek
Holdings COD")), the Stockholders agree and understand that (i) the Board of
Directors shall consist of five directors (or such other number of directors
as is agreed to between the Xxxxx Group and RLB), (ii) RLB, on behalf of the
holders of Common Stock, shall nominate 51% of the number of directors to be
elected at any meeting duly called to elect directors generally; provided,
however, that if 51% of such number of directors is not a whole number, then
RLB shall be entitled to nominate the next higher whole number of directors to
be elected at such meeting; provided further that at least one-third (or such
next higher whole number) of the number of such RLB nominated directors shall
be Independent (as defined in the Charter Amendment (as defined in the
Recapitalization Agreement)) and any such Independent director nominated by
RLB shall be subject to the approval of the Xxxxx Group, such approval not to
be unreasonably withheld, (iii) the Xxxxx Group, on behalf of the holders of
Series B Preference Stock, shall be entitled to nominate the remaining
directors to be elected at such meeting for the election of directors
generally; provided, however, that at least one-half (or such next higher
whole number) of the number of such Xxxxx nominated directors shall be
Independent and any such Independent director nominated by the Xxxxx Group
shall be subject to the approval of RLB, such approval not to be unreasonably
withheld, (iv) the parties hereto (including, without limitation, the Company)
shall take such actions as are necessary so that the Board of Directors of
Nortek is comprised entirely of the same individuals as the Board of Directors
of Nortek Holdings, (v) the Xxxxx Group or RLB, as the case may be, shall
inform the other party upon becoming aware that their Independent director
Nominee is not Independent; and (vi) if the Person serving as an Independent
Xxxxx Nominee or Independent Xxxxxx Nominee ceases to be Independent of Xxxxx
or RLB, as the case may be, during the time such Person is serving as a
director, then at the request of the other party, the Xxxxx Group or RLB, as
the case may be, shall reasonably promptly replace such Person as a director
with another nominee who satisfies any applicable independence requirements.
Upon the occurrence of an Elimination Event, this clause 8.2(i) shall have no
further force and effect and the provisions of Section 8.2(a) and 8.2(b)
(other than the references to Section 8.2(i) therein) shall immediately apply
and each Stockholder agrees to take all actions necessary to cause the Board
of Directors to be constituted in accordance therewith at such time, and from
and after such time one of the Xxxxxx Nominees (selected by RLB prior thereto,
or if not so selected by RLB, such Xxxxxx Nominee that is Independent) shall
be deemed a Xxxxx Nominee for all purposes of this Agreement (including,
without limitation, for purposes of removal).
(j) Whenever any Person is elected to the Board in accordance with
this Agreement, the parties hereto agree that they shall use their best
efforts to cause their Nominees on the Board to take such action, to the
extent they are reasonably able to do so, in connection with such election to
avoid the occurrence of a "Change of Control" under the Nortek Notes
Indentures (as defined in the Recapitalization Agreement).
ARTICLE IX
TERMINATION
9.1 Cessation of Ownership of Company Stock. Any party to, or Person
who is subject to, this Agreement which ceases to own shares of Company Stock
or any interest therein shall cease to be a party to, or Person who is subject
to, this Agreement and thereafter shall have no rights or obligations
hereunder.
9.2 Other Termination Events. Notwithstanding anything to the
contrary contained herein, every provision of this Agreement, other than the
provisions contained in Article VII and Section 10.4, shall terminate upon the
earlier of (i) the closing of an IPO and (ii) a Change in Control; provided,
however, that in the event that following any such Change in Control any
Stockholder (other than a Third Party Investor) continues to own in excess of
25% of the equity in the Company held by it immediately after the Closing (as
defined in the Recapitalization Agreement), such Stockholder shall continue to
have any rights it had prior to such Change in Control pursuant to Sections
6.5(a) and 6.5(b) hereof and such Sections shall survive such Change in
Control for so long as any such Stockholder continues to have such stated
percentage of equity in the Company held by it immediately after the Closing.
For purposes of this Agreement, a "Change in Control" shall mean the earlier
to occur of (i) such time as the Xxxxx Group, (A) no longer owns at least 25%
of the shares of Company Stock held by it immediately after Closing and (B) in
the aggregate owns a lesser number of shares of Company Stock than that of at
least one other stockholder and its affiliates of the Company or (ii) any
business combination, merger, consolidation, stock swap, stock sale or sale of
all or substantially all of the assets of the Company or similar transaction
involving the Company in which (A) the Stockholders cease to own 50% of either
the outstanding voting power and Company Stock of the Company or the surviving
entity and (B) at least one other stockholder and its affiliates of the
Company owns in excess of 50% of the number of outstanding shares of Company
Stock held in the aggregate by the Xxxxx Group.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Stock Certificate Legend. A copy of this Agreement shall be
filed with the Secretary of the Company and kept with the records of the
Company. Each certificate representing shares of Company Stock owned by the
Stockholders shall bear upon its face the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS (A) IN COMPLIANCE WITH
THE STOCKHOLDERS AGREEMENT, DATED AS OF [ ], 2002 AND (B) UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
UNLESS, IN THE OPINION OF COUNSEL TO THE HOLDER, WHICH COUNSEL MUST
BE, AND THE FORM AND SUBSTANCE OF WHICH OPINION ARE, SATISFACTORY TO
THE ISSUER, SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION,
TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS
OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS."
All Stockholders shall be bound by the requirements of such legend to
the extent that such legend is applicable. Upon a registration under the Act
of any shares of Company Stock or sale of any shares of Company Stock pursuant
to Rule 144 or any other exemption from registration where the removal of the
legend is appropriate, the certificate representing such shares shall be
replaced, at the expense of the Company, with certificates not bearing the
legend required by this Section 10.1.
10.2 Option Plan. If the Company establishes a stock option plan (the
"Option Plan") the Company shall have the right, but not the obligation, to
require that optionees thereunder be required to become parties to this
Agreement upon exercise of options granted thereunder and that they will be
"Management Stockholders" hereunder with respect to such shares.
10.3 New Management Stockholders. Each of the Stockholders hereby
agrees that the Company may require that any employee of the Company or any of
its subsidiaries who after the date of this Agreement is offered shares of
Company Stock or employee stock options shall, as a condition precedent to the
acquisition of such shares of Company Stock or options, become a party to this
Agreement by executing the same and delivering it to the Company at its
address specified in Section 10.14. Upon such execution and delivery, such
employee shall be a "Management Stockholder" for all purposes of this
Agreement.
10.4 Fee. The parties hereto acknowledge and agree that at the
Closing Xxxxx will be paid a fee of $1.5 million and that the Company and
Xxxxx will enter into a financial advisory agreement and related
indemnification agreement (which agreements may be amended from time to time
in accordance with Section 10.5 hereof to the extent applicable) pursuant to
which Xxxxx will provide financial advisory services to the Company each year
following the Closing until the Company and Xxxxx mutually agree to terminate
such arrangement.
10.5 Certain Transactions. The Xxxxx Group agrees that, except as
contemplated hereby or by the Recapitalization Agreement or by any of the
other agreements contemplated hereby or thereby, during such time as RLB owns
in excess of [5%] of the outstanding shares of Company Stock of the Company
(such percentage to be computed by including as outstanding Company Stock all
outstanding options, calculated on a treasury method basis), without the prior
approval of either (i) RLB or (ii) a majority of the members of the Board who
are not officers, directors (excluding outside directors of portfolio
companies) or employees of Xxxxx or any of its affiliates, the Company shall
not (x) effect any transactions between the Company and any member of the
Xxxxx Group or any of their affiliates, (y) Transfer any equity securities of
any subsidiary of the Company to any member of the Xxxxx Group or any of their
affiliates, or (z) Transfer any assets of the Company or any subsidiary of the
Company to any member of the Xxxxx Group or any of their affiliates, other
than, in any case of clauses (x) and (z), purchases and sales of inventory in
the ordinary course of business and other customary commercial transactions on
an arms' length basis involving portfolio companies of Xxxxx and its
affiliated investment funds.
10.6 No Other Arrangements or Agreements. Except for the Voting
Agreement and the Exchange Agreements (each as defined in the Recapitalization
Agreement), each Management Stockholder hereby represents and warrants to each
other Stockholder that, except, if applicable, for any option plan of the
Company and the written options issued thereunder, he has not entered into or
agreed to be bound by any other arrangements or agreements of any kind with
any other party with respect to the shares of Company Stock, including, but
not limited to, arrangements or agreements with respect to the acquisition,
disposition or voting of shares of Company Stock (whether or not such
agreements and arrangements are with the Company, other Stockholders or
holders of Company Stock that are not parties to this Agreement). Except for
the Voting Agreement and the Exchange Agreements, each of the members of the
Xxxxx Group and each other Stockholder represents and warrants to each other
Stockholder that it has not entered into or agreed to be bound by any voting
agreements with respect to its shares of Company Stock.
10.7 Amendment and Modification. This Agreement may be amended,
modified or supplemented only with the written consent of (i) the Xxxxx Group
and (ii) if such amendment modifies (A) any provision of this Agreement (x) in
a manner substantially adverse to the Management Stockholders, the
Stockholders owning a majority of the outstanding Company Stock (such
percentage to be computed by including as outstanding Company Stock all
outstanding options, calculated on a treasury method basis) owned by all
Management Stockholders and (y) in a manner substantially adverse to the Third
Party Investors, the Stockholders owning a majority of the outstanding Company
Stock (such percentage to be computed by including as outstanding Company
Stock all outstanding options, calculated on a treasury method basis) owned by
all Third Party Investors (B) any other Section of this Agreement, the Company
and Stockholders owning a majority of the outstanding Company Stock.
Notwithstanding anything to the contrary herein, the Xxxxx Group may add any
additional third party to this Agreement or eliminate any such additional
third party (other than any third party that is part of the Xxxxx Group) from
this Agreement as the Xxxxx Group sees fit, subject to the consent of such
affected party. Upon receipt of the consents required by this Section 10.7,
the Company shall notify all Stockholders promptly after such amendment,
modification or supplement shall take effect.
10.8 Assignment.*** The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns; provided, however, that
none of the Company, the Third Party Investors or any Management Stockholder
shall assign any of its rights or obligations pursuant to this Agreement
without the prior written consent of the Xxxxx Group and, for so long as the
Management Stockholders own in excess of 10% of the outstanding shares of
Company Stock of the Company (such percentage to be computed by including as
outstanding Company Stock all outstanding options, calculated on a treasury
method basis), the members of the Xxxxx Group shall not assign its rights or
obligations pursuant to this Agreement, other than to its Permitted
Transferees and to persons who agree to be bound by this Agreement, without
the prior written consent of the Management Stockholders owning a majority of
the Company Stock owned by all Management Stockholders at such time. In the
case of Permitted Transferees, third parties and Involuntary Transferees, such
Permitted Transferees, third parties or Involuntary Transferees, as the case
may be, shall be deemed the Stockholder hereunder for purposes of obtaining
the benefits or enforcing the rights of such Stockholder hereunder; provided,
however, that no Permitted Transferee, third party or Involuntary Transferee,
as the case may be, shall derive any rights under this Agreement unless and
until such Permitted Transferee, third party or Involuntary Transferee, as the
case may be, has delivered to the Company a valid undertaking to become, and
becomes, bound by the terms of this Agreement to which the transferring
Stockholder is subject.
_________________
*** It is understood that this Agreement shall be appropriately modified
consis tent with Section 8.5 (b) of the Recapitalization Agreement in
the event that the Recapitalization Agreement is modified pursuant to
such provision.
10.9 Recapitalizations, Exchanges, etc. Affecting the Company Stock.
Except as otherwise provided herein, the provisions of this Agreement shall
apply to the full extent set forth herein with respect to (i) the shares of
Company Stock and (ii) any and all shares of capital stock of the Company or
any successor or assign of the Company (whether by merger, consolidation, sale
of assets or otherwise), which may be issued in respect of, in exchange for,
or in substitution for the shares of Company Stock by reason of any stock
dividend, split, reverse split, combination, recapitalization,
reclassification, merger, consolidation or otherwise. Except as otherwise
provided herein, this Agreement is not intended to confer upon any person,
except for the parties hereto, any rights or remedies hereunder.
10.10 Transfer of Company Stock. If at any time the Company purchases
any shares of Company Stock pursuant to this Agreement, the Company may pay
the purchase price determined under this Agreement for the shares of Company
Stock it purchases by wire transfer of funds or Company check in the amount of
the purchase price, and upon receipt of payment of such purchase price or,
pursuant to Section 2.3, Section 3.3 or Article V, any portion thereof, the
selling Stockholder shall deliver to the Company the certificates representing
the number of shares of Company Stock being purchased in a form suitable for
transfer, duly endorsed in blank, and free and clear of any lien, claim or
encumbrance. In the event that any Stockholder refuses or otherwise fails to
deliver, in accordance with the preceding sentence, certificates representing
the number of shares of Company Stock being purchased, the shares of Company
Stock purchased from such Stockholder shall (notwithstanding such refusal or
failure) be deemed, upon receipt by such Stockholder of the purchase price
therefor, to not be outstanding for any purposes. Notwithstanding anything in
this Agreement to the contrary, the Company shall not be required to make any
payment for shares of Company Stock purchased hereunder until delivery to it
of the certificates representing such shares. If the Company is purchasing
less than all the shares of Company Stock represented by a single certificate,
the Company, after making such purchase, shall deliver to the selling
Stockholder a certificate for any unpurchased shares of Company Stock.
10.11 Further Assurances. Each party hereto or Person subject hereto
shall do and perform or cause to be done and performed all such further acts
and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto or Person
subject hereto may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
10.12 Governing Law. This Agreement and the rights and obligations of
the parties hereunder and the persons subject hereto shall be governed by, and
construed and interpreted in accordance with, the law of the State of
Delaware, without giving effect to the choice of law principles thereof.
10.13 Invalidity of Provision. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including
that provision, in any other jurisdiction.
10.14 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement to any
party hereunder shall be in writing and deemed given upon (i) receipt, when
delivered via personal delivery, (ii) transmitter's confirmation of a receipt
of a facsimile transmission, when delivered via such transmittal, (iii)
confirmed delivery by a standard overnight carrier or (iv) receipt, as
evidenced by certification or registration, when mailed in the United States
by certified or registered mail at the following addresses (or at such other
address for a party as shall be specified by notice given hereunder):
(a) If to the Company, to it at:
Nortek Holdings, Inc.
00 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Xxxxx & Company, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, XX
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) If to a Management Stockholder, as listed on the signature
page hereto, or, if not so listed, to it at its address as
reflected in the stock records of the Company, or as such
Management Stockholder shall designate to the Company in
writing, with a copy to Xxxxx at its address indicated
below (provided that any such designation shall be
effective only upon receipt thereof).
(c) If to a member of the Xxxxx Group, to it at:
c/x Xxxxx & Company, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, XX
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(d) If to a Third Party Investor, as listed on the signature
page hereto, or, if not so listed, to it at its address as
reflected in the stock records of the Company, or as such
Third Party Investor shall designate to the Company in
writing, with a copy to Xxxxx at its address indicated
above (provided that any such designation shall be
effective only upon receipt thereof).
10.15 Headings; Execution in Counterparts. The headings and captions
contained herein are for convenience and shall not control or affect the
meaning or construction of any provision hereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and which together shall constitute one and the same instrument.
10.16 Entire Agreement; Effect on Certain Other Agreements. This
Agreement, the Registration Rights Agreement, the Option Plan, the RLB
Employment Agreement, the Preemptive Rights Agreement, the Holding Company
Merger Agreement and the Exchange Agreements (each, if not defined herein, as
defined in the Recapitalization Agreement) with the Company entered into by
the Management Stockholders embody the entire agreement and understanding of
the parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants or
undertakings relating to the shares of Company Stock, other than those
expressly set forth or referred to herein, in the Registration Rights
Agreement, or in any Exchange Agreements with the Company or any option plan
of the Company or any written option issued thereunder. This Agreement
supersedes all prior agreements and understandings among the parties with
respect to such subject matter.
10.17 Injunctive Relief. The shares of Company Stock cannot readily
be purchased or sold in the open market, and for that reason, among others,
the Company and the Stockholders shall be irreparably damaged in the event
this Agreement is not specifically enforced. Each of the parties therefore
agrees that in the event of a breach of any provision of this Agreement, the
aggrieved party may elect to institute and prosecute proceedings in any court
of competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of this Agreement. Such remedies shall, however, be
cumulative and not exclusive, and shall be in addition to any other remedy
which the Company or the Stockholders may have. Each Stockholder hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts in New York and Delaware for the purposes of any suit, action or other
proceeding arising out of or based upon this Agreement or the subject matter
hereof. Each Stockholder hereby consents to service of process by mail made in
accordance with Section 10.14.
10.18 Attorneys' Fees. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover such reasonable attorneys' fees and other
costs incurred in that action or proceeding, in addition to any other relief
to which it or they may be en titled, as may be ordered in connection with
such proceeding.
10.19 Third Party Beneficiaries. The headings and captions contained
herein are for convenience of reference only and shall not control or affect
the meaning or construction of any provisions hereof. Except as otherwise
expressly provided herein, the covenants, agreements and other provisions
contained in this Agreement are for the sole benefit of the parties hereto and
their permitted successors and assigns, and they shall not be construed as
conferring, and are not intended to confer, any rights, remedies or other
benefits hereunder on any other persons. Neither this Agreement nor any
purchase or sale of Company Stock shall create, or be construed or deemed to
create, any right of employment in favor of a Management Stockholder or any
other person by the Company or any subsidiary of the Company.
10.20 Sales to Competitors. Notwithstanding anything to the con trary
in this Agreement (other than Section 6.5(a) and 6.5(b)), the Third Party
Investors may not, without the prior written consent of the Xxxxx Group and
the Company, Transfer any shares of Company Stock that the Third Party
Investors beneficially own to any Person that competes with or is engaged in
any lines of business of the Company whether or not so competing or engaged in
the same geographic area as the Company.
10.21 Improper Transfer. Any attempt to Transfer any shares of
Company Stock not in material compliance with this Agreement shall be null and
void and neither the Company nor any transfer agent shall give any effect in
the Company's stock records to such attempted Transfer.
10.22 Third Party Investors. Each of the Stockholders hereby agrees
that the Company may require that any party, other than an employee of the
Company or any of its subsidiaries (who is dealt with in Section 10.3), who
immediately prior to or substantially contemporaneously with the Closing
purchases shares of Company Stock (or shares which were converted into Company
Stock in the Transactions), shall become a party to this Agreement by
executing the same and delivering it to the Company at its address specified
in Section 10.14. For all purposes of this Agreement, upon such execution and
delivery, such party shall be deemed to be a "Third Party Investor" and
collectively, with other similar persons, the "Third Party Investors."
10.23 Persons. For all purposes of this Agreement, "Person" means an
individual, corporation, partnership, limited liability partnership, limited
liability company, association, trust or any unincorporated organization.
10.24 Options. Except as otherwise expressly provided herein, any
Management Stockholder who owns any options to acquire Company Stock will not
have any rights or obligations with respect thereto under this Agreement prior
to the exercise of such options.
10.25 Xxxxxxx. Nortek Holdings and Nortek, jointly and severally,
agree to indemnify and hold RLB harmless from any and all claims, liabilities,
losses, damages, expenses, amounts paid in settlement and any and all other
amounts incurred or payable by RLB or on RLB's behalf in connection with or
arising out of the letter from The Xxxxxxx Group, Ltd., dated May 22, 2001
(the "Xxxxxxx Letter") or any matter to which the Xxxxxxx Letter refers.
Nortek Holdings and Nortek, jointly and severally, agree to advance expenses
to RLB upon demand in connection with RLB's investigation and defense of any
matter with respect to which RLB is entitled to indemnification as provided in
this Section 10.25.
10.26 Other Agreements. Nothing in this Agreement shall limit the
ability of the Company to enter into any agreement with any Management
Stockholder or any other employee with respect to the purchase and/or sale of
the shares of Company Stock and/or options exercisable into Company Stock on
terms different than as set forth in this Agreement.
10.27 Company Stock. All references herein to a number or percentage
of shares of Common Stock or Company Stock held by a Person shall be
calculated by treating the shares of Common Stock underlying all shares of
Series B Preference Stock as being outstanding (regardless of whether such
shares could be converted into Common Stock at such time) other than for
purposes of Article VIII hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
NORTEK HOLDINGS, INC.
By: _________________________________
Name:
Title:
XXXXX INVESTMENT
ASSOCIATES VI, L.P.
By: Xxxxx XX VI, LLC,
General Partner
By: _________________________________
Managing Member
KEP VI, LLC
By: _________________________________
General Partner
[Management Stockholders]
By: _________________________________
The undersigned, by its signature below hereby becomes a party to the
Stockholders Agreement, dated as of [ ], 2002, among Nortek Holdings, Inc. and
certain of its stockholders (the "Stockholders Agreement") pursuant to Section
10.3 thereof and agrees to be bound by the terms of the Stockholders Agreement
and, for all purposes thereof, to be a "Management Stockholder".
IN WITNESS WHEREOF, the undersigned has executed this instrument as
of the ____ day of _______, 2002.
___________________________
Signature
___________________________
Print Name
Exhibit A
---------
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of ____________,
among Nortek Holdings, Inc., a Delaware corporation (the "Company"), Xxxxx
Investment Associates VI, L.P., a Delaware limited partnership ("KIA VI"),
KEP VI, LLC, a Delaware limited liability company ("KEP VI", and, together
with KIA VI, the "Xxxxx Parties"), the Third Party Investors (as defined in
the Stockholders Agreement (as defined below)), and those employees of the
Company or its subsidiaries listed on Schedule 1 hereto (collectively, the
"Management Stockholders"). The Xxxxx Parties, the Third Party Investors
and the Management Stockholder are hereinafter referred to collectively as
the "Stockholders." Capitalized terms used herein without definition are
defined in Section 10.
WHEREAS, the Stockholders have purchased or,
simultaneously with the execution of this Agreement, are purchasing shares
of Company Stock;
WHEREAS, concurrently with the execution of this
Agreement, the Company, the Xxxxx Parties, the Management Stockholders and
the Third Party Investors are entering into a stockholders agreement to
which this Agreement is attached as Exhibit A thereto (the "Stockholders
Agreement"); and
WHEREAS, the parties hereto wish to set forth certain
rights and obligations with respect to the registration of the shares of
Common Stock under the Securities Act.
NOW, THEREFORE, in consideration of the mutual covenants
and obligations set forth in this Agreement, the parties hereto agree as
follows:
1. Registrations Upon Request.
1.1 Requests by the Xxxxx Parties.
(a) At any time, the Xxxxx Parties, on behalf of the
Xxxxx Group (as defined in the Stockholders Agreement), shall have the
right to make up to six (6) separate requests that the Company effect the
registration (which may at the option of the Xxxxx Parties be effected as a
"shelf registration") under the Securities Act of the offer and sale of all
or a portion of the Registrable Securities owned by members of the Xxxxx
Group, each such request to specify the intended method or methods of
disposition thereof; provided, however, that the Company shall not be
required to effect a registration relating to an underwritten offering
pursuant to this Section 1.1 until a period of 120 days shall have elapsed
from the effective date of the most recent registration relating to an
underwritten offering. A request made by the Xxxxx Parties shall not be
counted for purposes of the request limitations set forth above: (a) if the
Xxxxx Parties, on behalf of the Xxxxx Group, determine in their good faith
judgment to withdraw the proposed registration of the offer and sale of any
Registrable Securities requested to be registered pursuant to this Section
1.1 due to marketing or regulatory reasons; (b) the registration statement
relating to any such request is not declared effective within 90 days of
the date such registration statement is first filed with the Commission;
(c) if, within 180 days after the registration relating to any such request
has become effective, such registration is interfered with by any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and the Company fails to have
such stop order, injunction or other order or requirement removed,
withdrawn or resolved to the reasonable satisfaction of the Xxxxx Parties
within 30 days after the occurrence of any such interference; (d) if more
than 10% of the Registrable Securities requested by the Xxxxx Parties to be
included in the registration are not so included pursuant to Section 1.5;
or (e) the conditions to closing specified in the underwriting agreement or
purchase agreement entered into in connection with the registration
relating to any such request are not satisfied (other than as a result of a
default or breach thereunder by the Xxxxx Group). Upon any such request,
the Company will promptly, but in any event within 15 days of such request,
give written notice of such request to all holders of Registrable
Securities and thereupon the Company will, subject to Section 1.5, use its
best efforts to effect the prompt registration under the Securities Act of:
(i) the offer and sale of the Registrable
Securities which the Company has been so requested to register by
the Xxxxx Parties on behalf of the Xxxxx Group; and
(ii) the offer and sale of all other Registrable
Securities which the Company has been requested to register by the
holders thereof by written request given to the Company by such
holders within 15 days after the giving of such written notice by
the Company to such holders,
all to the extent required to permit the disposition of the Registrable
Securities so to be registered in accordance with the intended method or
methods of disposition of the Xxxxx Group.
(b) Notwithstanding the foregoing, if the Company shall
at any time furnish to each proposed seller of Registrable Securities a
certificate signed by the President of the Company stating that the Company
has pending or in process a material transaction (including a financing
transaction), the disclosure of which would, in the good faith judgment of
the Board, materially and adversely affect the Company, the Company may
defer the filing (but not the preparation) of a registration statement to
be filed pursuant to this Section 1.1 for up to 60 days (but the Company
shall use its best efforts to complete the transaction and file the
registration statement as soon as possible).
1.2 Request by Xxxxxxx X. Xxxxxx.
(a) Following the later of (i) such time as Xxxxxxx X.
Xxxxxx ("RLB") ceases to be CEO (as defined in the Stockholders Agreement)
and (ii) the one year anniversary of an IPO (as defined in the Stockholders
Agreement), RLB shall have the right to make two requests that the Company
effect the registration under the Securities Act of the offer and sale of
all or a portion of the Registrable Securities owned by him, such request
to specify the intended method or methods of disposition thereof; provided,
however, that the Company shall not be required to effect a registration
relating to an underwritten offering pursuant to this Section 1.2 until a
period of 120 days shall have elapsed from the effective date of the most
recent registration relating to an underwritten offering; provided,
further, that the RLB shall not be entitled to have such registration
effected by means of a "shelf" registration unless the effectiveness of
such "shelf" registration is limited in duration to 180 days; provided
further, that, at any time when the fair market value of the Common Stock
and all options held by RLB in the aggregate falls below $20 million (such
fair market value to be based on the average of the closing prices of the
Common Stock on any exchange on which the Common Stock is listed or on
NASDAQ for the 10 trading days preceding any date of determination and to
take into account the exercise price of options), RLB shall not have the
right to request the registration of the offer and sale of such Registrable
Securities if such registration is not required under the Securities Act to
permit the immediate disposition of all such shares on any exchange on
which the Common Stock is listed or on NASDAQ. A request made by RLB shall
not be counted for purposes of the request limitation set forth above: (a)
if RLB determines in his good faith judgment to withdraw the proposed
registration of the offer and sale of any Registrable Securities requested
to be registered pursuant to this Section 1.2 due to marketing or
regulatory reasons; (b) the registration statement relating to any such
request is not declared effective within 90 days of the date such
registration statement is first filed with the Commission; (c) if, within
180 days after the registration relating to any such request has become
effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and the Company fails to have
such stop order, injunction or other order or requirement removed,
withdrawn or resolved to RLB's reasonable satisfaction within 30 days after
the occurrence of any such interference; (d) the conditions to closing
specified in the underwriting agreement or purchase agreement entered into
in connection with the registration relating to any such request are not
satisfied (other than as a result of a default or breach thereunder by
RLB); or (e) if more than 10% of the Registrable Securities requested by
RLB to be included in the registration are not so included pursuant to
Section 1.5. Upon any such request, the Company will promptly, but in any
event within 15 days of such request, give written notice of such request
to all holders of Registrable Securities and thereupon the Company will,
subject to Section 1.5, use its best efforts to effect the prompt
registration under the Securities Act of:
(i) the offer and sale of the Registrable
Securities which the Company has been so requested to register by
RLB, and
(ii) the offer and sale of all other Registrable
Securities which the Company has been requested to register by the
holders thereof by written request given to the Company by such
holders within 15 days after the giving of such written notice by
the Company to such holders,
all to the extent required to permit the disposition of the Registrable
Securities so to be registered in accordance with the intended method or
methods of disposition of RLB; provided, however, that RLB shall not be
entitled to have such registration effected by means of a "shelf"
registration unless the effectiveness of such "shelf" registration is
limited in duration to 180 days.
(b) Notwithstanding the foregoing, if the Company shall
at any time furnish to each proposed seller of Registrable Securities a
certificate signed by the President of the Company stating that the Company
has pending or in process a material transaction (including a financing
transaction), the disclosure of which would, in the good faith judgment of
the Board, materially and adversely affect the Company, the Company may
defer the filing (but not the preparation) of a registration statement to
be filed pursuant to this Section 1.2 for up to 60 days (but the Company
shall use its best efforts to complete the transaction and file the
registration statement as soon as possible).
(c) Any rights exercisable by the Management Stockholders
under this Agreement shall be exercisable solely by a majority in interest
of the Management Stockholders; provided, however, that so long as RLB is
CEO, any rights exercisable by Management Stockholders shall be exercisable
solely by RLB on their behalf, unless the Company consents otherwise. The
Company shall be entitled to deal exclusively with the party or parties
having the right to act on behalf of the Management Stockholders at any
given time and to rely on such party's or parties' consent, waiver or other
action as the consent, waiver or other action of all of the Management
Stockholders.
1.3 Registration Statement Form. A registration requested
pursuant to Sections 1.1 or 1.2 shall be effected by the filing of a
registration statement on a form determined by the Company; provided that
S-1 type information may be included therein if the managing underwriter
states in writing that it believes that it would be beneficial for the
marketing of the offering.
1.4 Expenses. The Company will pay all Registration
Expenses in connection with any registration requested under Section 1.1 or
1.2, including the reasonable fees and expenses of one counsel selected by
the Management Stockholders by a majority vote (and reasonably acceptable
to the Company); provided that each seller of Registrable Securities shall
pay all Registration Expenses to the extent required to be paid by such
seller under applicable law and all underwriting discounts and commissions
and transfer taxes, if any.
1.5 Priority in Demand Registrations. If a registration
pursuant to Section 1.1 or 1.2 involves an underwritten offering, and the
managing underwriter (or, in the case of an offering which is not
underwritten, a nationally recognized investment banking firm) shall advise
the Company in writing (with a copy to each Person requesting registration
of the offer and sale of Registrable Securities) that, in its opinion, the
number of securities requested and otherwise proposed to be included in
such registration exceeds the number which can be sold in such offering
without materially and adversely affecting the offering price, the Company
will include in such registration to the extent of the number which the
Company is so advised can be sold in such offering without such material
adverse effect, first, the Registrable Securities of the Xxxxx Group, the
Third Party Investors and the Management Stockholders on a pro rata basis
(based on the number of shares of Registrable Securities owned by each such
Stockholder), and second, the securities, if any, being sold by the
Company. Notwithstanding the foregoing, the Management Stockholders (and
any successor managers of the Company and its subsidiaries) will not be
entitled to participate in any such registration requested by the Xxxxx
Parties to the extent that the managing underwriter (or, in the case of an
offering that is not underwritten, a nationally recognized investment
banking firm) shall determine in good faith and in writing (with a copy to
each affected Person requesting registration of Registrable Securities),
that the participation of management would adversely affect the
marketability or offering price of the securities being sold in such
registration, it being understood that the Company will include in such
registration that number of shares of the Management Stockholders, if any,
which can be sold in such offering without adversely affecting the
marketability or offering price of the other securities to be sold in such
registration. In the event of any such determination under this Section
1.5, the Company shall give the affected holders of Registrable Securities
notice of such determination and in lieu of the notice otherwise required
under Sections 1.1 or 1.2, as the case may be. The Xxxxx Parties shall use
their commercially reasonable best efforts to persuade the managing
underwriter not to make or to minimize the determination set forth in the
second preceding sentence of this Section 1.5.
1.6 No Company Initiated Registration. After receipt of
notice of a requested registration pursuant to Section 1.1 or 1.2, the
Company shall not initiate, without the consent of the Xxxxx Parties, in
the case of Section 1.1 or RLB in the case of Section 1.2, a registration
of the offer and sale of any of its equity securities for its own account
until 90 days after such registration has been terminated or declared
effective (unless advised by the managing underwriter that a longer period,
not to exceed 180 days, is required, or such shorter period as the managing
underwriter for any underwritten offering may agree), except for
transactions of a type described in clauses (iii) and (iv) of Section 5(b).
2. Incidental Registrations. If the Company at any time
proposes to register the offer and sale of any of its equity securities
under the Securities Act (other than pursuant to (x) an employee equity
compensation plan, including an option plan, or (y) an acquisition,
strategic or business combination transaction), then the Company will give
prompt written notice to all such holders of Registrable Securities
regarding such proposed registration. Upon the written request of any such
holder made within 15 days after the receipt of any such notice (which
request shall specify the number of Registrable Securities intended to be
disposed of by such holder and the intended method or methods of
disposition thereof), the Company will use its best efforts to effect, in
connection with such proposed registration by the Company, the registration
under the Securities Act of the offer and sale of such Registrable
Securities on a pro rata basis (based on the number of Registrable
Securities owned by each such Stockholder) in accordance with such intended
method or methods of disposition, provided that:
(a) (i) if such registration shall be in connection with
an IPO, the Company shall not include any Registrable Securities in such
proposed registration if the Board shall have determined, after
consultation with the managing underwriter for such offering, that it is
not in the best interests of the Company to include any Registrable
Securities in such registration and (ii) the Company shall not include any
Registrable Securities of any Management Stockholder in any proposed
registration pursuant to this Section 2 to the extent that the managing
underwriter (or, in the case of an offering that is not underwritten, a
nationally recognized investment banker) shall determine in good faith that
the participation of such Management Stockholder would adversely affect the
offering and provided, further, that in the event of any such determination
under subsection (i) or (ii), the Company shall give the affected holders
of Registrable Securities notice of such determination and in lieu of the
notice otherwise required by the first paragraph of this Section 2. The
Company shall use its commercially reasonable best efforts to persuade the
managing underwriter not to make or to minimize the determination set forth
in the preceding sentence of this 2.1(a);
(b) if, at any time after giving written notice (pursuant
to this Section 2) of its intention to register the offer and sale of
equity securities and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register the offer and sale of such equity
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon,
shall not be obligated to register the offer and sale of any Registrable
Securities in connection with such registration (but shall nevertheless pay
the Registration Expenses in connection therewith), without prejudice,
however, to the rights of the Xxxxx Parties, on behalf of the Xxxxx Group,
or RLB to request that a registration be effected under Section 1.1 or 1.2,
as the case may be;
(c) if, in connection with a registration pursuant to
this Section 2, the managing underwriter of such registration (or, in the
case of an offering that is not underwritten, a nationally recognized
investment banking firm) shall advise the Company in writing (with a copy
to each holder of Registrable Securities requesting registration thereof)
that the number of securities requested and otherwise proposed to be
included in such registration exceeds the number which can be sold in such
offering without materially and adversely affecting the offering price,
then in the case of any registration pursuant to this Section 2, the
Company will include in such registration to the extent of the number which
the Company is so advised can be sold in such offering without such
material adverse effect, first, the securities, if any, being sold by the
Company in such registration for its own account and second, the
Registrable Securities of the Xxxxx Group, the Third Party Investors and
the Management Stockholders being sold by them in such registration
pursuant to this Section 2, on a pro rata basis (based on the number of
shares of Registrable Securities owned by each such Stockholder);
(d) the Company will pay all Registration Expenses in
connection with each registration of the offer and sale of Registrable
Securities requested pursuant to this Section 2, including the reasonable
fees and expenses of one counsel selected by the Management Stockholders
(and reasonably acceptable to the Company); provided that each seller of
Registrable Securities shall pay all Registration Expenses to the extent
required to be paid by such seller under applicable law and all
underwriting discounts and commissions and transfer taxes, if any. No
registration effected under this Section 2 shall relieve the Company from
its obligation to effect registrations under Sections 1.1 and 1.2;
(e) notwithstanding the intended method or methods
specified by a holder of Registrable Securities, in the event that the
registration giving rise to the registration rights in this Section 2 is to
be effected pursuant to an underwritten offering, then such method of
distribution shall be pursuant to such underwritten offering and in the
event that the registration giving rise to the registration rights in this
Section 2 is to be effected pursuant to a "shelf" registration, then such
method of distribution shall be pursuant to such "shelf" registration, and
the duration thereof shall not be longer than that of such "shelf"
registration.
(f) the Company shall have no obligation under this
Section 2 to use its best efforts to effect any registration of any shares
of Registrable Securities which any Third Party Investor or Management
Stockholder (other than RLB) has requested be registered, unless shares of
Registrable Securities owned by members of the Xxxxx Group shall be
included in such registration or unless the Xxxxx Parties determine
otherwise;
(g) the Company shall not be required to effect any
registration of Registrable Securities under this Section 2 incidental to
the registration of any of its securities in connection with mergers,
acquisitions, exchange offers, subscription offers, dividend reinvestment
plans or stock option or other executive or employee benefit or
compensation plans; and
(h) in the event of an underwritten IPO covering shares
of Common Stock for the account of the Company, the Xxxxx Parties shall
have the right by written notification to the Company at any time to
convert such registration into a registration of shares of Registrable
Securities pursuant to and governed by the provisions of Section 2.1.
3. Registration Procedures. If and whenever the Company
is required to use its best efforts to effect the registration of the offer
and sale of any Registrable Securities under the Securities Act as provided
in Sections 1.1, 1.2 and 2, the Company will promptly:
(a) prepare, and as soon as practicable, but in any event
within 60 days thereafter, file with the Commission, a registration
statement with respect to the offer and sale of such Registrable
Securities, make all required filings with the NASD or applicable
securities exchange and use its best efforts to cause such registration
statement to become effective as soon as practicable;
(b) prepare and promptly file with the Commission such
amendments and post-effective amendments and supplements to such
registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for so long
as is required to comply with the provisions of the Securities Act and to
complete the disposition of all securities covered by such registration
statement in accordance with the intended method or methods of disposition
thereof, but in no event for a period of more than six months after such
registration statement becomes effective;
(c) furnish copies of all documents proposed to be filed
with the Commission in connection with such registration to (i) (x) counsel
selected by the Xxxxx Parties in the case of a registration pursuant to
Section 1.1, (y) counsel selected by RLB in the case of registration
pursuant to Section 1.2 and (z) in all other circumstances, counsel
selected by the Xxxxx Parties and, if different, counsel selected by the
holders of a majority of the Registrable Securities to be sold in such
registration, and, in each case, which counsel may also be counsel to the
Company and (ii) each seller of Registrable Securities (or in the case of
the initial filing of a registration statement, within five business days
of such initial filing) and such documents shall be subject to the review
of any such counsel referred to in clause (i) above. The Company shall not
file any registration statement or any amendment or post-effective
amendment or supplement to such registration statement or the prospectus
used in connection therewith to which such counsel shall have reasonably
objected in writing on the grounds that such amendment or supplement does
not comply (explaining why) in all material respects with the requirements
of the Securities Act or of the rules or regulations thereunder;
(d) furnish to each seller of Registrable Securities,
without charge, such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits and documents filed therewith) and such number of
copies of the prospectus included in such registration statement (including
each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents, as
such seller may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such seller in accordance with the
intended method or methods of disposition thereof;
(e) use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may be
necessary or advisable to enable such seller to consummate the disposition
of such Registrable Securities in such jurisdictions in accordance with the
intended method or methods of disposition thereof, provided that the
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it is not
so qualified, subject itself to taxation in any jurisdiction wherein it is
not so subject, or take any action which would subject it to general
service of process in any jurisdiction wherein it is not so subject;
(f) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies, authorities or
self-regulatory bodies as may be necessary by virtue of the business and
operations of the Company to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities in accordance
with the intended method or methods of disposition thereof;
(g) furnish to the Xxxxx Parties, on behalf of the Xxxxx
Group, and to RLB, if requested by him in connection with a registration
pursuant to Section 1.2:
(i) an opinion of counsel for the Company
experienced in securities law matters, dated the effective date of
the registration statement (and, if such registration includes an
underwritten public offering, the date of the closing under the
underwriting agreement); and
(ii) a "comfort" letter (unless the registration
is pursuant to Section 2 and such a letter is not otherwise being
furnished to the Company), dated the effective date of such
registration statement (and if such registration includes an
underwritten public offering, dated the date of the closing under
the underwriting agreement), signed by the independent public
accountants who have issued an audit report on the Company's
financial statements included in the registration statement,
covering such matters as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and such other matters as Xxxxx
or RLB, as applicable, may reasonably request;
(h) notify each seller of any Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of
the happening of any event or existence of any fact as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing, and, as promptly as is practicable, prepare and furnish to such
seller a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(i) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, an earnings statement of the Company (in
form complying with the provisions of Rule 158 under the Securities Act)
covering the period of at least 12 months, but not more than 18 months,
beginning with the first month after the effective date of such
registration statement;
(j) notify each seller of any Registrable Securities
covered by such registration statement (i) when the prospectus or any
prospectus supplement or post-effective amendment has been filed, and, with
respect to such registration statement or any post-effective amendment,
when the same has become effective, (ii) of any request by the Commission
for amendments or supplements to such registration statement or to amend or
to supplement such prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness
of such registration statement or the initiation of any proceedings for
that purpose and (iv) of the suspension of the qualification of such
securities for offering or sale in any jurisdiction, or of the institution
of any proceedings for any of such purposes;
(k) use every reasonable effort to obtain the lifting of
any stop order that might be issued suspending the effectiveness of such
registration statement at the earliest possible moment;
(l) use its best efforts (i) (A) to list such Registrable
Securities on any securities exchange on which the equity securities of the
Company are then listed or, if no such equity securities are then listed,
on an exchange selected by the Company, if such listing is then permitted
under the rules of such exchange, or (B) if such listing is not
practicable, to secure designation of such securities as a NASDAQ "national
market system security" within the meaning of Rule 11Aa2-1 under the
Exchange Act or, failing that, to secure NASDAQ authorization for such
Registrable Securities, and, without limiting the foregoing, to arrange for
at least two market makers to register as such with respect to such
Registrable Securities with the NASD, and (ii) to provide a transfer agent
and registrar for such Registrable Securities not later than the effective
date of such registration statement and to instruct such transfer agent (A)
to release any stop transfer order with respect to the certificates with
respect to the Registrable Securities being sold and (B) to furnish
certificates without restrictive legends representing ownership of the
shares being sold, in such denominations requested by the sellers of the
Registrable Securities or the lead underwriter;
(m) enter into such agreements and take such other
actions as the sellers of Registrable Securities or the underwriters
reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities, including, without limitation, preparing for,
and participating in, such number of "road shows" and all such other
customary selling efforts as the underwriters reasonably request in order
to expedite or facilitate such disposition;
(n) furnish to any holder of such Registrable Securities
such information and assistance as such holder may reasonably request in
connection with any "due diligence" effort which such seller deems
appropriate; and
(o) use its best efforts to take all other steps
necessary to effect the registration of such Registrable Securities
contemplated hereby.
As a condition to its registration of the offer and sale
of Registrable Securities of any prospective seller, the Company may
require such seller of any Registrable Securities as to which any
registration is being effected to execute powers-of-attorney, custody
arrangements and other customary agreements appropriate to facilitate the
offering and to furnish to the Company such information regarding such
seller, its ownership of Registrable Securities and the disposition of such
Registrable Securities as the Company may from time to time reasonably
request in writing and as shall be required by law in connection therewith.
Each such holder agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously
furnished to the Company by such holder not materially misleading.
The Company agrees not to file or make any amendment to
any registration statement with respect to any Registrable Securities, or
any amendment of or supplement to the prospectus used in connection
therewith, which refers to (in a capacity as a selling stockholder) any
seller of any Registrable Securities covered thereby by name, or otherwise
identifies such seller as the holder of any Registrable Securities, to
which counsel to the sellers may reasonably object, without the prior
written consent of such seller, which consent shall not be unreasonably
withheld.
Each holder of Registrable Securities agrees that upon
receipt of any notice from the Company of the happening of any event of the
kind described in Section 3(h), such holder will promptly discontinue such
holder's disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such holder's receipt
of the copies of the supplemented or amended prospectus contemplated by
Section 3(h). If so directed by the Company, each holder of Registrable
Securities will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, in such holder's possession of
the prospectus covering such Registrable Securities at the time of receipt
of such notice. In the event that the Company shall give any such notice,
the period mentioned in Section 3(a) shall be extended by the number of
days during the period from and including the date of the giving of such
notice to and including the date when each seller of any Registrable
Securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by Section
3(h).
4. Underwritten Offerings.
4.1 Underwriting Agreement. If requested by the
underwriters for any underwritten offering pursuant to a registration
requested under Section 1.1, 1.2 or 2, the Company shall enter into an
underwriting agreement with the underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the
underwriters and to the Xxxxx Parties (unless the Xxxxx Group is not
participating in such registration, in which case, counsel to the holders
of a majority of the Registrable Securities to be distributed by such
underwriter). Any such underwriting agreement shall contain such
representations and warranties by the Company and such other terms and
provisions as are customarily contained in agreements of this type,
including, without limitation, indemnities to the effect and to the extent
provided in Section 8. The holders of all of the Registrable Securities to
be distributed by such underwriter shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and the agreements on the part of, the
Company to and for the benefit of such underwriters be made to and for the
benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement shall also be conditions precedent to the
obligations of such holders of Registrable Securities. No underwriting
agreement (or other agreement in connection with such offering) shall
require the members of the Xxxxx Group, the Management Stockholders or the
Third Party Investors in their respective capacities as stockholders and/or
controlling persons, to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, the ownership of such
holder's Registrable Securities and such holder's intended method or
methods of disposition and any other representation required by law or to
furnish any indemnity to any Person which is broader than the indemnity
furnished by such holder pursuant to Section 8.2. No holder of Registrable
Securities shall have the right not to enter into an underwriting agreement
described in this Section 4.1 unless it shall have notified the Company
prior to any "road show" for such offering or, if no such "road show" is
contemplated, prior to such time as the Company may reasonably determine.
4.2 Selection of Underwriters. If the Company at any time
proposes to register any of its securities under the Securities Act for
sale for its own account pursuant to an underwritten offering, the Company
will have the right to select the managing underwriter (which shall be of
nationally recognized standing) to administer the offering; provided,
however, that any selection must be approved by the Xxxxx Parties, on
behalf of the Xxxxx Group, if the Xxxxx Group at such time owns at least
10% of the number of shares of Company Stock they own on the date hereof.
Notwithstanding the foregoing sentence, whenever (i) a registration
requested pursuant to Section 1.1 is for an underwritten offering, the
Xxxxx Parties, on behalf of the Xxxxx Group, will have the right to select
the managing underwriter (which shall be of nationally recognized standing)
to administer the offering, and (ii) whenever a registration requested
under Section 1.2 is for an underwritten offering, RLB shall have the right
to select the managing underwriter (which shall be of nationally recognized
standing), but only with the approval of the Xxxxx Parties and the Company,
such approval not to be unreasonably withheld.
4.3 Block Sales. If the Xxxxx Group, as part of a plan of
distribution pursuant to an offer and sale of Registrable Securities under
Section 1.1 hereof, effects a registered block sale with one or more market
professionals, RLB shall have the right to participate in such a sale on a
pro rata basis with the Xxxxx Group (such percentage to be computed by
including as outstanding Common Stock all outstanding options, calculated
on a treasury method basis).
5. Holdback Agreements.
(a) If and whenever the Company proposes to register the
offer and sale of any of its equity securities under the Securities Act for
its own account (other than pursuant to (x) an employee equity compensation
plan, including an option plan, or (y) an acquisition, strategic or
business combination transaction) or is required to use its best efforts to
effect the registration of the offer and sale of any Registrable Securities
under the Securities Act pursuant to Section 1.1, 1.2 or 2, each holder of
Registrable Securities agrees by acquisition of such Registrable Securities
not to effect any sale or distribution, including any sale pursuant to Rule
144 under the Securities Act, or to request registration under Section 1.1
or 1.2, as the case may be, of any Registrable Securities within seven days
prior to and 90 days (unless advised by the managing underwriter that a
longer period, not to exceed 180 days, is required, or such shorter period
as the managing underwriter for any underwritten offering may agree) after
the effective date of the registration statement relating to such
registration, except as part of such registration or, in the case that the
offer and sale of Registrable Securities above is underwritten or is a
registered block sale effected by the Xxxxx Group, then only except as part
of such underwritten sale or block sale. If requested by such managing
underwriter, each holder of Registrable Securities agrees to execute an
agreement to such effect with the Company and consistent with such managing
underwriter's customary form of holdback agreement.
(b) The Company agrees not to effect any sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities within seven days
prior to and 90 days (unless advised in writing by the managing underwriter
that a longer period, not to exceed 180 days, is required, or such shorter
period as the managing underwriter for any underwritten offering may agree)
after the effective date of any registration statement filed pursuant to
Section 1.1 or 1.2 (except (i) as part of such registration, (ii) as
permitted by the related underwriting, (iii) pursuant to an employee equity
compensation plan, including an option plan, or (iv) pursuant to an
acquisition, strategic or business combination transaction. In addition,
upon the request of the managing underwriter, the Company shall use its
best efforts to cause each holder (other than any holder already subject to
Section 5(a)) of its equity securities or any securities convertible into
or exchangeable or exercisable for any of such securities, whether
outstanding on the date of this Agreement or issued at any time after the
date of this Agreement (other than any such securities acquired in a public
offering), to agree not to effect any such sale or distribution of such
securities during such period, except as part of any such registration if
permitted, and to cause each such holder to enter into an agreement to such
effect with the Company and consistent with such managing underwriter's
customary form of holdback agreement.
6. Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement registering
the offer and sale of Registrable Securities under the Securities Act, the
Company will give counsel to the holders of such Registrable Securities so
to be registered the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give
such counsel access to the financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries and
opportunities to discuss the business of the Company with its officers and
the independent public accountants who have issued audit reports on its
financial statements in each case as shall be reasonably requested by such
counsel in connection with such registration statement.
7. No Grant of Future Registration Rights. The Company
shall not grant any other demand or incidental registration rights to any
other Person without the prior written consent of the Xxxxx Parties, so
long as the Xxxxx Group continues to own at least 10% of the number of
shares of Company Stock that the Xxxxx Group owns on the date hereof. If
the Company grants any other demand registration rights to any other
person, RLB shall have the same participation rights in such registration
as the members of the Xxxxx Group.
8. Indemnification.
8.1 Indemnification by the Company. In the event of any
registration of the offer and sale of any Registrable Securities pursuant
to this Agreement, the Company will indemnify, defend and hold harmless (a)
each seller of such Registrable Securities, (b) the directors, members,
stockholders, officers, partners, employees, agents and Affiliates of such
seller, (c) each Person who participates as an underwriter in the offering
or sale of such securities and (d) each person, if any, who controls
(within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) any of the foregoing against any and all losses, claims,
damages or liabilities (or actions or proceedings in respect thereof),
jointly or severally, directly or indirectly, based upon or arising out of
(i) any untrue statement or alleged untrue statement of a fact contained in
any registration statement under which the offer and sale of such
Registrable Securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein or used in connection with the offering of securities covered
thereby, or any amendment or supplement thereto, or (ii) any omission or
alleged omission to state a fact required to be stated therein or necessary
to make the statements therein not misleading; and the Company will
reimburse each such indemnified party for any legal or any other expenses
reasonably incurred by them in connection with enforcing its rights
hereunder or under the underwriting agreement entered into in connection
with such offering or investigating, preparing, pursuing or defending any
such loss, claim, damage, liability, action or proceeding, except insofar
as any such loss, claim, damage, liability, action, proceeding or expense
arises out of or is based upon an untrue statement or omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such seller
expressly for use in the preparation thereof. Such indemnity shall remain
in full force and effect, regardless of any investigation made by such
indemnified party and shall survive the transfer of such Registrable
Securities by such seller. If the Company is entitled to, and does, assume
the defense of the related action or proceedings provided herein, then the
indemnity agreement contained in this Section 8.1 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability,
action or proceeding if such settlement is effected without the consent of
the Company (which consent shall not be unreasonably withheld or delayed).
8.2 Indemnification by the Sellers. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 1.1, 1.2 or 2 that the
Company shall have received an undertaking satisfactory to it from each of
the prospective sellers of such Registrable Securities to indemnify and
hold harmless, severally, not jointly, in the same manner and to the same
extent as set forth in Section 8.1, the Company, its directors, officers,
employees, agents and each person, if any, who controls (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) the
Company with respect to any statement or alleged statement in or omission
or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or
any amendment or supplement thereto, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company by such seller in such
seller's capacity as a selling stockholder expressly for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. The Company and
the holders of the Registrable Securities hereby acknowledge and agree
that, unless otherwise expressly agreed to in writing by such holders, the
only information furnished or to be furnished to the Company by such
holders in their capacities as selling stockholders for use in any
registration statement or prospectus relating to the Registrable Securities
or in any amendment, supplement or preliminary materials associated
therewith are statements specifically relating to (a) transactions between
such holder and its Affiliates, on the one hand, and the Company, on the
other hand, (b) the beneficial ownership of shares of Common Stock by such
holder and its Affiliates and (c) the name and address of such holder. If
any additional information about such holder or the plan of distribution
(other than for an underwritten offering) is required by law to be
disclosed in any such document, then such holder shall not unreasonably
withhold its agreement referred to in the immediately preceding sentence of
this Section 8.2. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any
such director, officer or controlling Person and shall survive the transfer
of such Registrable Securities by such seller. The indemnity agreement
contained in this Section 8.2 shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, action or proceeding if such
settlement is effected without the consent of such seller (which consent
shall not be unreasonably withheld or delayed). The indemnity provided by
each seller of Registrable Securities under this Section 8.2 shall be
limited in amount to the net amount of proceeds actually received by such
seller from the sale of Registrable Securities pursuant to such
registration statement.
8.3 Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section
8, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the indemnifying
party of the commencement of such action or proceeding, provided that the
failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under the preceding
paragraphs of this Section 8, except to the extent that the indemnifying
party is materially prejudiced by such failure to give notice. In case any
such action is brought against an indemnified party, the indemnifying party
will be entitled to participate therein and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the extent
that it may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof except for the reasonable fees and expenses of any counsel retained
by such indemnified party to monitor such action or proceeding.
Notwithstanding the foregoing, if such indemnified party reasonably
determines, based upon advice of independent counsel, that a conflict of
interest may exist between the indemnified party and the indemnifying party
with respect to such action and that it is advisable for such indemnified
party to be represented by separate counsel, such indemnified party may
retain other counsel, reasonably satisfactory to the indemnifying party, to
represent such indemnified party, and the indemnifying party shall pay all
reasonable fees and expenses of such counsel. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of
such indemnified party, which consent shall not be unreasonably withheld,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect of such claim or litigation.
8.4 Other Indemnification. Indemnification similar to
that specified in the preceding paragraphs of this Section 8 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration (other
than under the Securities Act) or other qualification of such Registrable
Securities under any federal or state law or regulation of any governmental
authority.
8.5 Indemnification Payments. Any indemnification
required to be made by an indemnifying party pursuant to this Section 8
shall be made by periodic payments to the indemnified party during the
course of the action or proceeding, as and when bills are received by such
indemnifying party with respect to an indemnifiable loss, claim, damage,
liability or expense incurred by such indemnified party.
8.6 Other Remedies. If for any reason the foregoing
indemnity is unavailable, or is insufficient to hold harmless an
indemnified party, other than by reason of the exceptions provided therein,
then the indemnifying party shall contribute to the amount paid or payable
by the indemnified party as a result of such losses, claims, damages,
liabilities, actions, proceedings or expenses in such proportion as is
appropriate to reflect the relative benefits to and faults of the
indemnifying party on the one hand and the indemnified party on the other
in connection with the offering of Registrable Securities (taking into
account the portion of the proceeds of the offering realized by each such
party) and the statements or omissions or alleged statements or omissions
which resulted in such loss, claim, damage, liability, action, proceeding
or expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall
be determined by reference to, among other things, whether the untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statements or
omissions. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding the provisions of this Section 8, no
indemnifying party shall be required to contribute pursuant to this Section
8 any amount in excess of the sum of (i) any amounts paid pursuant to
Section 8 and (ii) net proceeds received and retained by such indemnifying
party from the sale of its Registrable Securities covered by the
registration statement filed pursuant hereto, it being understood that (x)
net proceeds, in the case of both the Xxxxx Group and the Management
Stockholders, shall be calculated, if the Xxxxx Group so elects, after (1)
in the case of the Xxxxx Group, deducting therefrom the price paid by the
Xxxxx Group or its affiliates to acquire the equity securities of the
Company pursuant to the Recapitalization Agreement and the Exchange
Agreements and (2) in the case of the Management Stockholders, deducting
therefrom the price paid by the Management Stockholders to acquire the
equity securities of the Company pursuant to the Recapitalization Agreement
and the Exchange Agreements or pursuant to the exercise of options (which
price, in any event, shall be deemed to be equal to the Redemption
Consideration (as defined in the Recapitalization Agreement)) and (y)
insofar as such net proceeds have been distributed by any indemnifying
party to its partners, stockholders or members, the amount of such
indemnifying party's contribution hereunder shall be limited to the net
proceeds which it actually recovers from its partners, stockholders or
members based upon their relative fault and that to the extent that such
indemnifying party has not distributed such net proceeds, the amount such
indemnifying party's contribution hereunder shall be limited by the
percentage of such net proceeds which corresponds to the percentage equity
interests in such indemnifying party held by those of its partners,
stockholders or members who have been determined to be at fault. No party
shall be liable for contribution under this Section 8.6 except to the
extent and under such circumstances as such party would have been liable
for indemnification under this Section 8 if such indemnification were
enforceable under applicable law.
9. Representations and Warranties. Each Stockholder
represents and warrants to the Company and each other Stockholder that:
(i) such Stockholder has the power, authority
and capacity (or, in the case of any Stockholder that is a
corporation, limited liability company or limited partnership, all
corporate, limited liability company or limited partnership power
and authority, as the case may be) to execute, deliver and perform
this Agreement;
(ii) in the case of a Stockholder that is a
corporation, limited liability company or limited partnership, the
execution, delivery and performance of this Agreement by such
Stockholder has been duly and validly authorized and approved by
all necessary corporate, limited liability company or limited
partnership action, as the case may be;
(iii) this Agreement has been duly and validly
executed and delivered by such Stockholder and constitutes a valid
and legally binding obligation of such Stockholder, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally and general principles of
equity; and
(iv) the execution, delivery and performance of
this Agreement by such Stockholder does not and will not violate
the terms of or result in the acceleration of any obligation under
(A) any material contract, commitment or other material instrument
to which such Stockholder is a party or by which such Stockholder
is bound or (B) in the case of a Stockholder that - is a
corporation, limited liability company or limited partnership, the
certificate of incorporation, certificate of formation,
certificate of limited partnership, by-laws, limited liability
company agreement or limited partnership agreement, as the case
may be.
10. Definitions. For purposes of this Agreement, the
following terms shall have the following respective meanings:
Affiliate: a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, the Person specified.
Board: the board of directors of the Company.
Commission: the Securities and Exchange Commission.
Common Stock: the Class A Common Stock of the Company,
par value $1.00 per share.
Company Stock: as defined in the Stockholders Agreement.
Exchange Act: the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations
thereunder which shall be in effect at the time.
IPO: as defined in the Stockholders Agreement.
Xxxxx Group: as defined in the Stockholders Agreement.
NASD: National Association of Securities Dealers, Inc.
NASDAQ: the Nasdaq National Market.
Permitted Transferee: as defined in Section 11.2 herein.
Person: an individual, corporation, partnership, limited
liability company, joint venture, association, trust or other entity or
organization, including a government or political subdivision or an agency
or instrumentality thereof.
Registrable Securities: the shares of Common Stock
beneficially owned (within the meaning of Rule 13d-3 of the Exchange Act)
by the Xxxxx Group, the Third Party Investors, the Management Stockholders
or the Permitted Transferees. As to any particular shares of Common Stock,
such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (ii)
a registration statement on Form S-8 with respect to the resale of such
securities shall have become effective under the Securities Act, (iii) they
shall have been sold to the public pursuant to Rule 144 under the
Securities Act, (iv) they shall have been otherwise transferred other than
to a Permitted Transferee or a member of the Xxxxx Group and subsequent
disposition of them shall not require registration or qualification of them
under the Securities Act or any similar state law then in force or (v) they
shall have ceased to be outstanding.
Registration Expenses: all expenses incident to the
Company's performance of or compliance with any registration pursuant to
this Agreement, including, without limitation, (i) registration, filing and
NASD fees, (ii) fees and expenses of complying with securities or blue sky
laws, (iii) fees and expenses associated with listing securities on an
exchange or NASDAQ, (iv) word processing, duplicating and printing
expenses, (v) messenger and delivery expenses, (vi) transfer agents',
trustees', depositories', registrars' and fiscal agents' fees, (vii) fees
and disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters, (viii) reasonable fees and disbursements of any one counsel
retained by the sellers of Registrable Securities, which counsel shall be
designated in the manner specified in Section 3(c) and (ix) any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting discounts and commissions and
transfer taxes, if any.
Securities Act: the Securities Act of 1933 or any
successor federal statute, and the rules and regulations thereunder which
shall be in effect at the time.
Series B Preference Stock: the series B convertible
preference stock, par value $1.00 per share, of the Company.
Stockholders Agreement: as defined in the Preamble of
this Agreement.
11. Miscellaneous.
11.1 Rule 144, etc. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of
the Securities Act relating to any class of equity securities, the Company
will file the reports required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations adopted by the
Commission thereunder, and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such rule
may be amended from time to time, or (b) any successor rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
11.2 Successors, Assigns and Transferees. This Agreement
shall be binding upon and insure to the benefit of the parties hereto and
their respective successors and permitted assigns under this Section 11.2.
Provided that an express assignment shall have been made, and the assignee
has executed a joinder agreement agreeing to be bound by all of the
assignor's obligations hereunder, including, without limitation, Section 5
hereof, copies of which shall have been delivered to the Company, the
provisions of this Agreement which are for the benefit of a holder of
Registrable Securities shall be for the benefit of and enforceable by any
subsequent holder of any Registrable Securities, provided that such
transferee acquires such Registrable Securities in accordance with the
terms of the Stockholders' Agreement ("Permitted Transferees").
Notwithstanding anything herein to the contrary, each Management
Stockholder must exercise all rights hereunder on behalf of any of its
Permitted Transferees, if applicable, and all other parties hereto shall be
entitled to deal exclusively with the Management Stockholder and rely on
the consent, waiver or any other action by the Management Stockholder as
the consent, waiver or other action, as the case may be, of any such
Permitted Transferees of such Management Stockholder.
11.3 Stock Splits. Each holder of Registrable Securities
agrees that it will vote to effect a stock split, reverse stock split, or
combination, or recapitalization having a similar effect, with respect to
any Registrable Securities in connection with any registration of any
Registrable Securities hereunder, or otherwise, if the managing underwriter
shall advise the Company in writing (or, in connection with an offering
that is not underwritten, if an investment banker shall advise the Company
in writing) that in its opinion such a stock split, reverse stock split,
recapitalization or combination would facilitate or increase the likelihood
of success of the offering. The Company shall cooperate in all respects in
effecting any such stock split, reverse stock split, recapitalization or
combination.
11.4 Amendment and Modification. This Agreement may be
amended, modified or supplemented by the Company with the written consent
of the Xxxxx Parties and a majority (by number of shares) of any other
holders of Registrable Securities whose interests would be adversely
affected by such amendment.
11.5 Additional Management Stockholder. Notwithstanding
anything in this Agreement to the contrary, the Company may, only with the
consent of the Xxxxx Parties, admit additional Management Stockholders to
this Agreement and amend Schedule 1 accordingly, provided that (a) any such
Management Stockholder(s) holds Registrable Securities, (b) has become a
party to the Stockholders Agreement and (c) has executed and delivered a
joinder agreement and such other agreements or documents as may reasonably
be requested by the Company and the Xxxxx Parties.
11.6 Governing Law. This Agreement and the rights and
obligations of the parties hereunder and the persons subject hereto shall
be governed by, and construed and interpreted in accordance with, the law
of the State of Delaware, without giving effect to the choice of law
principles thereof.
11.7 Invalidity of Provision. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction
shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of this
Agreement, including that provision, in any other jurisdiction.
11.8 Notices. All notices, requests, demands, letters,
waivers and other communications required or permitted to be given under
this Agreement shall be in writing and shall be deemed to have been duly
given if (a) delivered personally, (b) mailed, certified or registered mail
with postage prepaid, (c) sent by next-day or overnight mail or delivery or
(d) sent by fax, as follows:
(i) If to the Company, to it at:
Fax:
Attention:
with a copy to the Xxxxx Parties at its address set
forth in (iv) below.
(ii) If to a Management Stockholder, as provided on
Schedule 1.
(iii) If to [name of Third Party Investor], to it at:
Fax:
Attention:
(iv) If to the Xxxxx Parties, to it at:
Xxxxx & Company
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
Attention: Xxxxx X. Xxxxxxx, XX, Esq.
General Counsel
or to such other person or address as any party shall specify by notice in
writing to the Company. All such notices, requests, demands, letters,
waivers and other communications shall be deemed to have been received (w)
if by personal delivery on the day after such delivery, (x) if by certified
or registered mail, on the fifth business day after the mailing thereof,
(y) if by next-day or overnight mail or delivery, on the day delivered or
(z) if by fax, on the next day following the day on which such fax was
sent, provided that a copy is also sent by certified or registered mail.
11.9 Headings; Execution in Counterparts. The headings
and captions contained herein are for convenience and shall not control or
affect the meaning or construction of any provision hereof. This Agreement
may be executed in any number of counterparts, each of which shall be
deemed to be an original and which together shall constitute one and the
same instrument.
11.10 Injunctive Relief. Each of the parties recognizes
and agrees that money damages may be insufficient and, therefore, in the
event of a breach of any provision of this Agreement the aggrieved party
may elect to institute and prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to enjoin the continuing
breach of this Agreement. Such remedies shall, however, be cumulative and
not exclusive, and shall be in addition to any other remedy which such
party may have.
11.11 Term. This Agreement shall be effective as of the
date hereof and shall continue in effect thereafter until the earlier of
(a) its termination by the consent of the parties hereto or their
respective successors in interest and (b) the date on which no Registrable
Securities remain outstanding. No termination of this Agreement shall
effect any indemnification obligations hereunder arising prior to such
termination.
11.12 Further Assurances. Subject to the specific terms
of this Agreement, each of the Company and the Stockholders shall make,
execute, acknowledge and deliver such other instruments and documents, and
take all such other actions, as may be reasonably required in order to
effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby.
11.13 Entire Agreement. This Agreement, together with the
Stockholders' Agreement and the Exchange Agreements (as defined in the
Stockholders' Agreement), is intended by the parties hereto as a final
expression of their agreement and intended to be a complete and exclusive
statement of their agreement and understanding in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
11.14 Company Stock. All references herein to a number or
percentage of shares of Common Stock or Company Stock held by a Person
shall be calculated by treating the shares of Common Stock underlying all
shares of Series B Preference Stock as being outstanding (regardless of
whether such shares could be converted into Common Stock at such time).
IN WITNESS WHEREOF this Agreement has been signed by each
of the parties hereto, and shall be effective as of the date first above
written.
NORTEK HOLDINGS, INC.
By:__________________________________
Name:
Title:
XXXXX INVESTMENT ASSOCIATES VI, L.P.
By: Xxxxx XX VI, LLC,
its General Partner
By:__________________________________
Managing Member
KEP VI, LLC
By:__________________________________
Managing Member
-------------------------------------
[Name of Management Stockholder]
-------------------------------------
[Name of Management Stockholder]
-------------------------------------
[Name of Third Party Investor]
