EXHIBIT 10.31
XXXXXXXX MANUFACTURING COMPANY, INC.
AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS................................................ 2
1.1 Definitions................................................ 2
ARTICLE 2 CORPORATE GOVERNANCE....................................... 5
2.1 Board of Directors......................................... 5
2.2 Removal.................................................... 5
2.3 Termination of Rights and Obligation....................... 6
ARTICLE 3 RESTRICTIONS ON TRANSFER................................... 6
3.1 General.................................................... 6
3.2 Legend on Securities....................................... 6
3.3 Permitted Transferees...................................... 7
ARTICLE 4 PREEMPTIVE RIGHTS; RIGHTS OF FIRST
OFFER; RIGHTS TO JOIN IN SALE;
REPURCHASE RIGHT AND DRAG ALONG
RIGHTS..................................................... 7
4.1 Preemptive Rights.......................................... 7
4.2 Rights of First Offer on Transfer of Equity Securities..... 9
4.3 Right to Join in Sale...................................... 11
4.4 Repurchase Right........................................... 11
4.5 Right to Compel Participation in Certain Transactions...... 12
4.6 Mandatory Repurchase....................................... 13
4.7 Improper Transfer and Termination of Article 4 Provisions.. 14
ARTICLE 5 REGISTRATION RIGHTS........................................ 14
5.1 Incidental Registration.................................... 14
5.2 Holdback Agreements........................................ 15
5.3 Registration Procedures.................................... 16
5.4 Indemnification by the Issuer.............................. 18
5.5 Indemnification by Participating Holders................... 18
5.6 Conduct of Indemnification Proceedings..................... 19
5.7 Contribution............................................... 20
5.8 Participation in Public Offering........................... 21
5.9 Size of Initial Public Offering............................ 21
5.10 Form S-3 Registrations..................................... 21
ARTICLE 6 CONVERSION OF SERIES B AND SERIES C
PREFERRED STOCK............................................ 22
6.1 Right to Convert........................................... 22
6.2 Mechanics of Conversion.................................... 24
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ARTICLE 7 MISCELLANEOUS.............................................. 24
7.1 Debt Approval Right........................................ 24
7.2 Transaction and Advisory Fees.............................. 25
7.3 Termination of Prior Agreements............................ 25
7.4 Entire Agreement........................................... 25
7.5 Binding Effect; Benefit.................................... 25
7.6 Assignability.............................................. 25
7.7 Amendment; Waiver; Termination............................. 26
7.8 Notices.................................................... 26
7.9 Headings................................................... 27
7.10 Counterparts............................................... 28
7.11 Applicable Law............................................. 28
7.12 Specific Enforcement....................................... 28
7.13 Arbitration................................................ 28
7.14 Receipt of Information..................................... 29
7.15 Distributions.............................................. 29
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AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT
THIS AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT (the "Agreement")
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is entered into as of September 19, 1997, by and among Xxxxxxxx Manufacturing
Company, Inc., a Texas corporation (the "Issuer"), Dogloo, Inc., a California
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corporation ("Dogloo"), Westar Capital, a California limited partnership
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("Westar Capital"), Westar Capital II, LLC, a Delaware limited liability company
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("Westar LLC"), HBI Financial Inc. a Washington corporation ("HBI" and together
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with Westar Capital and Westar LLC, "Westar"), Enterprise Partners III, L.P., a
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Delaware limited partnership ("Enterprise III"), Enterprise Partners III
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Associates, L.P., a Delaware limited partnership ("Enterprise III Associates"),
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Enterprise Partners IV, L.P., a Delaware limited partnership ("Enterprise IV"),
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Enterprise Partners IV Associates, L.P., a Delaware limited partnership
("Enterprise IV Associates" and together with Enterprise III, Enterprise III
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Associates and Enterprise IV, "Enterprise Funds"), Xxxxxxx X. Xxxxxxx III
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("Xxxxxxx"), and the other securityholders of the Issuer who are or become
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parties hereto (the "Other Securityholders"). Westar Capital, Westar LLC,
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Enterprise III, Enterprise III Associates, Enterprise IV, Enterprise IV
Associates and HBI are sometimes hereinafter referred to individually as an
"Investor" and collectively as the "Investors."
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R E C I T A L S
WHEREAS, pursuant to the Stock Purchase and Exchange Agreement dated
as of September 22, 1995 among certain of the parties hereto and Xxxxxxx X.
Xxxxxx (the "Stock Purchase Agreement"), Westar, Enterprise III, Enterprise III
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Associates, Enterprise IV, Enterprise IV Associates and HBI, acquired securities
of Dogloo;
WHEREAS, certain of the Other Securityholders had previously entered
into Common Stock Subscription Agreements, Repurchase Agreements and Buy-Sell
Agreements (collectively, the "Security Agreements") with Dogloo and desired to
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terminate such Security Agreements and supersede them with a Securityholders
Agreement in consideration for the execution and delivery of the Stock Purchase
Agreement and a Securityholders Agreement dated September 22, 1995 by Dogloo and
the Investors and the consummation of the transactions contemplated therein by
the parties thereto and such transactions were consummated and the
Securityholders Agreement was executed;
WHEREAS, certain of the parties hereto and Xxxxxxxx X. Xxxxxxxx, Xx.
and Xxxx Xxxxxxx Xxxxxxxx (collectively, the "Doskocils") are parties to a
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Stockholders Agreement (the "DMC Stockholders Agreement") dated as of July 1,
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1997, as amended, that was entered into at the same time as was that certain
Recapitalization Agreement by and among Enterprise III, Enterprise III
Associates, Enterprise IV, Enterprise IV Associates, Enterprise Management
Partners Corporation, Enterprise Partners Texas Company, L.L.C., the Doskocils,
Bed Rock International, Inc., Issuer and Spectrum Polymers, Ltd.; and
WHEREAS, Dogloo plans to merge with and into Issuer with Issuer as the
surviving corporation (the "Merger") and all of the parties hereto desire to
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enter into this Agreement to amend and restate the existing Securityholders
Agreement dated September 22, 1995 and to govern certain of their rights, duties
and obligations in respect of the capital stock of the Issuer after consummation
of the Merger;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto covenant and
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. (a) The following terms, used herein, have the
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following meanings (except as modified by any provision of this Agreement):
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; provided, that no securityholder of the Issuer shall be deemed an
Affiliate of any other securityholder solely by reason of any investment in the
Issuer. For the purpose of this definition, the term "control" (including with
correlative meanings, the terms "controlling" "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"Articles of Incorporation" means the articles of incorporation of the
Issuer, as amended from time to time.
"Board" means the board of directors of the Issuer.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Texas are authorized by law to close.
"Bylaws" means the Bylaws of the Issuer, as amended from time to time.
"Common Stock" shall mean the common stock of the Issuer.
"Equity Securities" means Common Stock, securities convertible into or
exchangeable for Common Stock, and options, warrants and other rights to acquire
Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Fully Diluted" means, with respect to Common Stock and without
duplication, all outstanding shares of, and all shares issuable in respect of
securities convertible into or exchangeable for, Common Stock, stock
appreciation rights or options, warrants and other irrevocable rights to
purchase or subscribe for Common Stock or securities convertible into or
exchangeable for Common Stock and any Person shall be deemed to own such number
of Fully Diluted shares of Common Stock as such Person has the right to acquire
from any other Person (including the Issuer).
"Indebtedness" means any indebtedness for borrowed money created,
incurred, assumed or guaranteed by the Issuer, whether now existing or hereafter
arising, under any working capital or other credit agreement or facility with a
commercial bank, insurance company or other recognized financial institution or
incurred in connection with any past or future acquisitions by the Issuer,
including, without limitation, any sale/leaseback financing on equipment or real
property of the Issuer.
"Initial Public Offering" means the initial firmly underwritten public
offering after the date hereof of Common Stock pursuant to an effective
registration statement under the Securities Act.
"Percentage Ownership" means, with respect to any Securityholder or
any group of Securityholders at any time, (i) the number of shares of Fully
Diluted Common Stock that such Securityholder or group of Securityholders owns
at such time, divided by (ii) the total number of shares of Fully Diluted Common
Stock at such time.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Registrable Stock" means all shares of Common Stock owned by any
Securityholder until (i) a registration statement covering such shares of Common
Stock has been declared effective by the SEC and such shares have been disposed
of pursuant to such effective registration statement or (ii) such shares are
sold under circumstances in which all of the applicable conditions of Rule 144
(or any similar rule then in force) under the Securities Act are met or such
shares may be sold pursuant to Rule 144(k) (or any similar rule then in force.
"Registration Expenses" means (i) all registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws, (iii)
printing expenses, (iv) reason-able fees and disbursements of one counsel for
the Issuer and the Selling Securityholder(s) and customary fees and expenses for
independent certified public accountants retained by the Issuer, (v) fees and
expenses in connection with any review of underwriting arrangements by the
National Association of Securities Dealers, Inc. (the "NASD") and (vi) fees and
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disbursements of underwriters customarily paid by issuers or sellers of
securities, but shall not include any underwriting fees, discounts or
commissions attributable to the sale of
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Registrable Stock, or any out-of-pocket expenses of the holders of Registrable
Stock or any fees and expenses of underwriter's counsel.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securityholder" means each Person (other than the Issuer) who shall
be a party to this Agreement, whether in connection with the execution and
delivery hereof as of the date hereof, pursuant to Section 7.6 or otherwise so
long as such Person shall "beneficially own" (as such term is defined in Rule
13d-3 under the Exchange Act) any Equity Securities of the Issuer.
"Series B Preferred Stock" means the Series B Preferred Stock of the
Issuer, such shares representing shares of Dogloo Series A Preferred Stock that
were converted into shares of Series B Preferred Stock as part of the Merger.
"Series C Preferred Stock" means the Series C Preferred Stock of the
Issuer, such shares representing shares of Dogloo Series B Preferred Stock that
were converted into shares of Series C Preferred Stock of the Issuer as part of
the Merger.
"Shareholders' Equity" means an amount equal to (i) total assets of
the Issuer, less (ii) total liabilities of the Issuer as set forth in the most
recent financial statements of the Issuer.
"Third Party" means a prospective purchaser of shares from a
Securityholder in a bona-fide, arm's-length transaction.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
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Advisory Fee 7.2
beneficially own 1.1(a)
Call Period 4.4
control 1.1(a)
Disposing Securityholder 4.3(a)
Doskocils Recitals
Xxxxxxxx Transferees 3.1(b)
Drag Along Sellers 4.5(a)
EBITDA 4.4(a)
EBITDA Multiple 4.4(a)
Eligible Securityholder 4.1
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First Delivery Date 4.4(b)
First Offer Terms 4.2(a)
Indemnified Party 5.6
Indemnifying Party 5.6
Mandatory Repurchase Notice 4.6(a)
Maximum Offering Size 5.1(b)
Merger Recitals
NASD 1.1(a)
Notice of Intention 4.2(a)
Notice of Issuer's Exercise 4.2(b)
Notice of Offeree Securityholder Exercise 4.2(b)
Offered Securities 4.2(a)
Other Securityholders Preamble
Participating Holder 4.3(b)
Permitted Transferee 3.3
Private Transaction 3.1(b)
Repurchase Price 4.4(a)
Restriction Termination 3.1(a)
Sale Proposal 4.2(a)
Second Delivery Date 4.4(b)
Section 4.1 Notice 4.1
Section 4.5 Transaction 4.5
Section 4.5 Sale Price 4.5
Security Agreements Recitals
Selling Securityholder 4.2(a)
Senior Debt 6.1
Series C Redemption Price 6.1
Stock Purchase Agreement Recitals
Subordinated Debt 6.1
Transfer 3.1(a)
ARTICLE 2
CORPORATE GOVERNANCE
2.1 Board of Directors. Subject to Section 2.3, each Securityholder
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entitled to vote for the election of directors to the Board agrees that he or it
will vote his or its securities or execute consents, as the case may be, and
take all other necessary action (including causing the Issuer to call a special
meeting of shareholders) to ensure that Xxxxxxx X. Xxxxxxx is elected to the
Board of Directors of the Issuer.
2.2 Removal. Each Securityholder agrees that if, at any time during
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the term of this Agreement, it is then entitled to vote for the removal of
directors of the Issuer, it will not vote any of its securities in favor of the
removal of Xx. Xxxxxxx unless Mr.
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Xxxxxxx shall have consented to such removal in writing or the rights of Xx.
Xxxxxxx to a Board seat have been terminated in accordance with Section 2.3
hereof.
2.3 Termination of Rights and Obligation. The right of Xxxxxxx to be
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a member of the Board pursuant to this Agreement shall terminate at such time as
Xxxxxxx ceases to own at least ten percent (10%) of the Fully Diluted Common
Stock of the Issuer.
ARTICLE 3
RESTRICTIONS ON TRANSFER
3.1 General. (a) Subject to subsection (b) below, until the earlier
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of (i) March 1, 2001 or (ii) consummation of an Initial Public Offering (the
earlier of (i) or (ii) is hereinafter referred to as the "Restriction
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Termination"), Xxxxxxx may not, directly or indirectly, sell, assign, transfer,
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grant a participation in, pledge or otherwise dispose of ("Transfer") any Equity
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Securities, except transfers permitted by Section 3.3.
(b) Prior to the consummation of an Initial Public Offering, no
Securityholder may transfer any Equity Securities except (i) transfers permitted
by Section 3.3, (ii) transfers upon exercise of registration rights pursuant to
Article 5, and (iii) subject to Sections 4.2 and 4.3, transfers to any other
Person in any Private Transaction; provided, that no Equity Securities may be
transferred pursuant to clauses (i) or (iii) hereof to any Person, other than
Xxxxxxxx or a Xxxxxxxx Transferee (as those terms are defined in the DMC
Stockholders Agreement as it may be amended from time to time), unless such
Person shall have agreed in writing to be bound by the terms of this Agreement.
As used herein, "Private Transaction" means any transfer not covered by clause
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(i) or (ii) above.
(c) No Securityholder may transfer any Equity Securities at any time
except in compliance with applicable federal and state securities laws.
3.2 Legend on Securities. (a) In addition to any other legend that
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may be required, each certificate for Equity Securities or any other securities
of the Issuer that is issued to any Securityholder shall bear a legend
addressing the restrictions imposed on transfer of the shares in substantially
the form set forth below or that is otherwise satisfactory in form to the
Issuer. To the extent that the share certificates have an existing legend that
requires modification, the securityholder shall surrender the certificate to the
Issuer so that an appropriate legend may be placed on the certificate or a new
certificate issued with such legend.
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
SUCH SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION OR NO-ACTION LETTER
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ISSUED BY THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT. THIS
SECURITY IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE SECURITYHOLDERS AGREEMENT, COPIES OF WHICH MAY BE OBTAINED
UPON REQUEST FROM XXXXXXXX MANUFACTURING COMPANY, INC. AND ANY SUCCESSOR
THERETO."
(b) If any Equity Securities or other securities of the Issuer cease
to be subject to any and all restrictions on transfer set forth in this
Agreement, the Issuer shall, upon the written request of the holder thereof,
issue to such holder without charging therefor a new certificate evidencing such
Equity Securities or other securities of the Issuer without the second sentence
of the legend required by Section 3.2(a) endorsed thereon.
3.3 Permitted Transferees. Notwithstanding anything in this
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Agreement to the contrary, any Securityholder may at any time transfer any or
all of its Equity Securities to one or more of its Permitted Transferees without
the consent of the Board or any other Securityholder or group of Securityholders
and without compliance with Sections 4.2 and 4.3, so long as (i) such Permitted
Transferee shall have agreed in writing to be bound by the terms of this
Agreement, including, with respect to the Other Securityholders, Section 4.4,
and (ii) the transfer to such Permitted Transferee is not in violation of
applicable federal or state securities laws. For purposes of this Section 3.3,
"Permitted Transferee" means (A) the Issuer, (B) with respect to any Investor,
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any Affiliate or partner thereof, (C) (x) a Securityholder's spouse or (y) a
Securityholder's siblings or lineal descendants, so long as the Securityholder
retains the right to vote the Equity Securities being transferred, (D) a Person
who acquires Equity Securities from any Securityholder pursuant to a will or the
laws of descent and distribution, and (E) any trust the beneficiaries of which
consist only of a Securityholder and/or such Securityholder's spouse, siblings
and lineal descendants, so long as such Securityholder retains the right to vote
such Equity Securities, (F) any Investor, and (G) Xxxxxxxx or a Xxxxxxxx
Transferee (as those terms are defined in the DMC Stockholders' Agreement as it
may be amended from time to time).
ARTICLE 4
PREEMPTIVE RIGHTS; RIGHTS OF FIRST OFFER;
RIGHTS TO JOIN IN SALE; REPURCHASE RIGHT AND
DRAG ALONG RIGHTS
4.1 Preemptive Rights. The Issuer shall provide to each
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Securityholder who beneficially owns at least ten percent (10%) (5% in the case
of Xxxxxxx) of the Fully Diluted Common Stock (an "Eligible Securityholder")
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with a written notice (a "Section 4.1 Notice") of any proposed issuance by the
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Issuer of Equity Securities at least fifteen (15) days prior to the proposed
issuance date. Such notice shall specify the price at which the Equity
Securities are to be issued and the other material terms of the issuance. Each
of Enterprise
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III Associates, Enterprise IV and Enterprise IV Associates shall be deemed to be
an "Eligible Securityholder" for purposes of this Agreement as long as
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Enterprise Funds own sufficient shares of Equity Securities to qualify as an
Eligible Securityholder. Each of Westar Capital, Westar LLC and HBI shall be
deemed to be an "Eligible Securityholder" for purposes of this Agreement as long
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as Westar own sufficient shares of Equity Securities to qualify as an Eligible
Securityholder. Each Eligible Securityholder shall be entitled to purchase, at
the price and on the terms specified in such Section 4.1 Notice, the Equity
Securities proposed to be issued on a pro rata basis based upon such Eligible
Securityholder's Percentage Ownership. Each Eligible Securityholder may
exercise its rights under this Section 4.1 by delivering written notice of its
election to purchase Equity Securities to the Issuer within fifteen (15) days of
receipt of the Section 4.1 Notice. A delivery of such a written notice (which
notice shall specify the number of shares (or amount) of Equity Securities to be
purchased by each Eligible Securityholder) shall constitute a binding agreement
of such Eligible Securityholder to purchase, at the price and on the terms
specified in the Section 4.1 Notice, the number of shares (or amount) of Equity
Securities specified in such written notice. The Issuer shall have one hundred
twenty (120) days from the date of the Section 4.1 Notice to consummate the
proposed issuance of any or all of such Equity Securities which have not been
elected to be purchased by the Eligible Securityholders in accordance with this
Section 4.1 at the price and upon terms that are not materially less favorable
to the Issuer than those specified in the Section 4.1 Notice. At the
consummation of such issuance, the Issuer shall issue certificates representing
the Equity Securities to be purchased by the Eligible Securityholders receiving
a Section 4.1 Notice registered in the name of such Eligible Securityholders,
against payment thereby of the purchase price for such Equity Securities. If the
Issuer proposes to issue Equity Securities after such 120-day period, it shall
again comply with the procedures set forth in this Section 4.1.
This Section 4.1 shall not apply to issuances of Equity Securities (i)
to employees, directors and consultants of the Issuer or any Affiliate or
subsidiary of the Issuer pursuant to employee stock option, stock purchase or
other benefit plans or arrangements approved by the Board (including, without
limitation, upon the exercise of employee stock options), (ii) in connection
with an Initial Public Offering, (iii) in connection with any bona fide, arm's-
length restructuring of outstanding debt of the Issuer or any Affiliate or
subsidiary of the Issuer, (iv) in connection with any transaction the purpose of
which is other than to raise financing, or (v) in connection with any bona fide,
arm's-length direct or indirect merger, acquisition, purchase of assets or
similar transaction, unless, with respect to (iii), (iv) and (v) above, any
Investor will, in connection with such transactions, acquire Equity Securities,
(vi) the exercise or release from escrow of the Warrants (as defined in that
certain Securities Purchase Agreement (herein so called) dated as of July 1,
1997 among the Issuer and Xxxxxxxx Funding, Inc., NationsBridge, L.L.C.,
(Xxxxxxxx Funding, Inc. and NationsBridge LLC are referred to herein as the
"Bridge Lenders") and (vii) to lenders other than Westar or Enterprise Funds or
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their Affiliates in connection with any refinancing of Issuer indebtedness. In
any instance in which Xxxxxxx has delivered written notice electing to purchase
Equity Securities pursuant to this Section 4.1, Xxxxxxx shall be entitled to pay
the purchase price of such Equity Securities by exchanging shares of Series B
Preferred Stock then held by Xxxxxxx and which are subject to redemption on the
next Series B Redemption
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Date or Dates, valued at the then existing Series B Redemption Price (as defined
in the Articles of Incorporation), less all accrued and unpaid dividends with
respect to such Series B Preferred Stock to be exchanged (which shall be paid to
Xxxxxxx on the immediately succeeding dividend payment date); provided, that
Xxxxxxx shall have no right to pay the purchase price of such Equity Securities
in connection with the exercise of his preemptive rights pursuant to this
Section 4.1 by exchanging Subordinated Debt (as defined in Section 6.1 below)
received in exchange for the Series B Preferred Stock held by Xxxxxxx. The
Issuer shall not be under any obligation to consummate any proposed issuance of
Equity Securities, regardless of whether it shall have delivered a Section 4.1
Notice in respect of such proposed issuance.
4.2 Rights of First Offer on Transfer of Equity Securities. (a)
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Except for the transfer of Equity Securities to a Permitted Transferee, if at
any time any Securityholder shall desire to sell or otherwise dispose of
(including by gift) Equity Securities (such Securityholder being referred to
herein as a "Selling Securityholder"), such Selling Securityholder shall deliver
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written notice of its desire to sell Equity Securities (a "Notice of
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Intention"), accompanied by a copy of a proposal relating to such sale (the
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"Sale Proposal"), to each Eligible Securityholder as well as the Issuer, setting
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forth such Selling Securityholder's desire to make such sale, the number and
class of Equity Securities proposed to be transferred (the "Offered Securities")
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and the cash price (or the non-cash consideration) at which such Selling
Securityholder proposes to sell the Offered Securities and other terms
applicable thereto (the "First Offer Terms").
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(b) Upon receipt of the Notice of Intention, the Issuer shall have
the first right to purchase in whole but not in part, all of the Offered
Securities on the First Offer Terms by delivering a written notice ("Notice of
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Issuer's Exercise") to the Selling Securityholder within fifteen (15) days after
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receipt of the Notice of Intention and the Eligible Securityholders receiving
the Sale Proposal (the "Offeree Securityholders") each shall have the right to
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offer to purchase on the First Offer Terms up to its pro rata share of the
Offered Securities or in such other proportion as the Offeree Securityholders
may agree by delivering written notice ("Notice of Offeree Securityholder
--------------------------------
Exercise") to the Selling Securityholder and the Issuer within fifteen (15) days
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of receipt of the Notice of Intention. In the event the Issuer does not exercise
its right to purchase the Offered Securities pursuant to this Section 4.2(b),
those Offeree Securityholders which have delivered a Notice of Offeree
Securityholder Exercise within fifteen (15) days of their receipt of the Notice
of Intention electing to purchase their pro rata share of the Offered Securities
shall be entitled to purchase their pro rata shares (based upon the Fully
Diluted Common Stock held by each such electing Offeree Securityholder compared
to the Fully Diluted Common Stock held by all such electing Offeree
Securityholders). The Issuer shall not purchase any Offered Securities if at
such time the Issuer has not redeemed for any reason all shares of Series B
Preferred Stock then required to have been redeemed by it or the Issuer is not
then current on Subordinated Debt received in exchange for shares of Series B
Preferred Stock.
(c) In the event that the Issuer exercises its rights to purchase all
of the Offered Securities or any Offeree Securityholder exercises its rights to
purchase any or all of
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the Offered Securities in accordance with Section 4.2(b) then the Selling
Securityholder must sell the Offered Securities to the Issuer or such Offeree
Securityholder within thirty (30) days from the date of delivery of the Notice
of Issuer Exercise or the last Notice of Offeree Exercise timely received, as
applicable; provided, that the Selling Securityholder shall not be required to
sell the Offered Securities unless the Issuer and the Offeree Securityholders
acquire all of the Offered Securities.
(d) If all notices required to be given pursuant to Subsections
4.2(a) through (c) have been duly given and the Issuer and the Offeree
Securityholders determine not to exercise their respective options to purchase
the Offered Securities on the First Offer Terms or determine to purchase less
than all of the Offered Securities, then the Selling Securityholder shall have
the right, for a period of ninety (90) calendar days from the expiration of the
applicable option period pursuant to Section 4.2(b) with respect to such Sale
Proposal to sell to any Third Party the Offered Securities on terms not
materially less favorable to the Selling Securityholder than those specified in
the First Offer Terms.
(e) Upon the consummation of any such purchase and sale pursuant to
Section 4.2(c), the Selling Securityholder shall deliver certificates evidencing
the Offered Securities sold duly endorsed, or accompanied by written instruments
of transfer in form satisfactory to the purchaser thereof duly executed by the
Selling Securityholder, free and clear of any liens, against delivery of the
purchase price provided in the First Offer Terms payable in the manner specified
in the First Offer Terms.
(f) In the event that the Issuer and the Offeree Securityholders do
not exercise their options to purchase the Offered Securities, and the Selling
Securityholder shall not have sold all of the Offered Securities to a Third
Party Purchaser for any reason before the expiration of the ninety (90) day
period described above, such Selling Securityholder shall not give another
Notice of Intention pursuant to Section 4.2(a) for a period of ninety (90)
calendar days after such ninety (90) day period.
(g) In the event the Selling Securityholder (other than Xxxxxxxx
Xxxxxxxx) proposes to sell or otherwise dispose of (including by gift) any part
of the Offered Securities for consideration other than cash, the Sale Proposal
shall include the fair market value of the securities or the proposed non-cash
consideration (as determined in good faith by the Board) and the Issuer or any
Offeree Securityholder which exercises its option to purchase Offered Securities
pursuant to Section 4.2(b), shall be entitled to pay the purchase price in
either cash or a non-cash consideration equivalent to the value or the non-cash
consideration described in the Sale Proposal.
(h) In consideration of this Agreement and acknowledgment of the
Issuer's offer to purchase the shares of Dogloo Common Stock held by certain
minority stockholders of Dogloo in connection with the Merger, each of parties
hereto hereby waives any and all rights of first offer to purchase such shares
which it may have had under the Securityholders Agreement dated as of September
22, 1995.
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4.3 Right to Join in Sale. (a) Notwithstanding anything to the
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contrary contained herein, if any Eligible Securityholder proposes to sell,
dispose of or otherwise transfer Equity Securities pursuant to Section 4.2
(other than a transfer to a Permitted Assignee) (a "Disposing Securityholder"),
------------------------
such Disposing Securityholder shall refrain from effecting the consummation
thereof, each Other Securityholder shall have been afforded the opportunity to
join in such sale on a pro rata basis, as hereinafter provided. For purposes of
this Section 4.3, Xxxxxxx shall be deemed to be an Eligible Securityholder for
so long as he continues to hold any Equity Securities, provided, that in the
event Xxxxxxx holds less than five percent (5%) of the Fully Diluted Common
Stock and elects to join in such sale, the Disposing Securityholder shall have
the right to purchase or otherwise sell in a transaction effected pursuant to
this Section 4.3, all Equity Securities then held by Xxxxxxx. In addition, for
purposes of this Section 4.3, Xxxxxxxx and each Xxxxxxxx Transferee (as those
terms are defined in the DMC Stockholders Agreement as it may be amended from
time to time) shall be deemed to be "Other Securityholders" and entitled to the
---------------------
benefits of this Section 4.3.
(b) Prior to the transfer pursuant to Section 4.3(a) of any Equity
Securities held by a Disposing Securityholder, the Other Securityholders may
elect to participate in the contemplated transfer by delivering written notice
to the Disposing Securityholder and the Issuer within thirty (30) calendar days
after receipt of the offer from the Disposing Securityholder. If any Other
Securityholder has elected to participate in such sale (each a "Participating
-------------
Holder"), the Disposing Securityholder and each Participating Holder will be
------
entitled to sell in the contemplated sale Equity Securities equal to the product
of (i) the Fully Diluted Common Stock represented by the Equity Securities held
by such Disposing Securityholder or such Participating Holder, as the case may
be, divided by the Fully Diluted Common Stock held by the Disposing
Securityholder and all Participating Holders times (ii) the Fully Diluted Common
Stock to be sold in the contemplated sale. The Disposing Securityholder agrees
to use its best efforts to obtain the agreement of the prospective transferee to
the participation of the Participating Holders in the contemplated transfer and
agrees not to transfer any Securities to the prospective transferee if such
prospective transferee declines to allow such participation. Such purchase
shall be made at the same price and on such other terms and conditions as the
prospective transferee has offered the Disposing Securityholder; provided, that
the purchase price with respect to any warrant shall be equal to such purchase
prices less the exercise price then applicable upon exercise of such warrant
under the term thereof.
4.4 Repurchase Right. (a) If any Other Securityholder (other than
----------------
Xxxxxxx) who is an employee of the Issuer shall cease to be an employee of the
Issuer (whether as a result of resignation, retirement, death, permanent
disability or termination by the Company for any reason or no reason
whatsoever), the Issuer shall have the right during a sixty (60) day period
after such cessation or termination (the "Call Period") to repurchase, and such
-----------
Other Securityholder or its Permitted Transferees shall be obligated to sell to
the Issuer, all Equity Securities held by such Other Securityholder or which
have been transferred by such Other Securityholder to a Permitted Transferee at
a price equal to the Repurchase Price (as defined below). The right of the
Issuer to repurchase such Equity Securities pursuant to this Section 4.4 shall
terminate upon the expiration of the Call Period. If the Issuer elects to
11
exercise its repurchase rights pursuant to this Section 4.4, such repurchase
shall be consummated immediately upon payment of the Repurchase Price by check
or promissory note pursuant to Section 4.4(b) below. For purposes of this
Agreement, "Repurchase Price" means the greater of:
----------------
1. The product of (A) the quotient of (i) the EBITDA Multiple less
the principal amount of Indebtedness outstanding and the aggregate redemption
values of all then outstanding series of preferred stock divided by (ii) the
number of Shares of Fully Diluted Common Stock, and (B) the number of Equity
Securities held by the Other Securityholder; and
2. An amount (including principal and interest) which the Other
Securityholder would have received if he or she had invested the Original Price
(as defined in the Stock Purchase Agreement) at seven percent (7%) compounded
(on an annual basis) interest for the time that such Other Securityholder held
his or her Equity Securities.
For purposes of this Section 4.4, "EBITDA" means net income of the Issuer
------
for the Issuer's most recent fiscal year for which audited financial statements
are available plus interest expense, income tax expense, depreciation expense
and amortization expense as set forth in such audited financial statements. The
EBITDA shall be determined by the Issuer's independent public accountants, whose
determination shall be conclusive, absent manifest error. For purposes of this
Section 4.4, "EBITDA Multiple" means EBITDA multiplied by a factor of five (5).
---------------
(b) If the amount due to any Other Securityholder or its Permitted
Transferees for the repurchase of Equity Securities pursuant to this Section 4.4
exceeds fifty thousand dollars ($50,000), the Issuer may, in its discretion,
elect to pay such amount in three (3) equal annual installments, the first
installment to be made within thirty (30) days of the date of delivery of the
certificates representing the repurchased Equity Securities (the "First Delivery
--------------
Date"), the second installment to be paid on the first anniversary date of the
----
First Delivery Date (the "Second Delivery Date") with interest accruing from the
--------------------
First Delivery Date at the prime rate of the Issuer's primary bank lender, and
the third installment to be paid on the second anniversary of the First Delivery
Date, with interest accruing from the Second Delivery Date at the prime rate of
the Issuer's primary bank lender.
4.5 Right to Compel Participation in Certain Transactions. (a) If a
-----------------------------------------------------
majority in interest (based upon ownership of Fully Diluted Common Stock by the
Eligible Securityholders) of the Eligible Securityholders (the "Drag Along
----------
Seller(s)") should propose to transfer all shares of Common Stock that they own
---------
or have the right to acquire to any Third Party, or propose to consummate a
combination transaction with a Third Party by means of any transaction or series
of transactions (including, without limitation, any reorganization, merger or
consolidation), or propose to sell all or substantially all of the Issuer's
assets to a Third Party (any such stock sale, combination transaction or asset
sale, a "Section 4.5 Transaction"), the Drag Along Seller(s) may require all but
-----------------------
not less than all Other Securityholders (other than Xxxxxxx) to participate in
such stock transfer and/or to vote
12
their shares in favor of such transaction. The Drag Along Seller(s) shall
provide written notice of such Section 4.5 Transaction to all other
Securityholders (a "Section 4.5 Notice") and a copy of the agreement pursuant to
------------------
which such transaction is to be effected. The Section 4.5 Notice shall identify
the Third Party, and, in the case of a stock sale, the number of shares of
Common Stock subject to the Section 4.5 Transaction, the consideration per share
of Common Stock for which a transfer is proposed to be made (the "Section 4.5
-----------
Sale Price") and all other material terms and conditions of the Section 4.5
----------
Transaction. In the case of a stock sale, each Securityholder shall be required
to participate in the Section 4.5 Transaction on the terms and conditions set
forth in the Section 4.5 Notice and to tender all of his, her or its Securities
as set forth below. The price of such transfer shall be the Section 4.5 Sale
Price in the case of shares of Common Stock, and in the case of securities
convertible into Common Stock shall be the Section 4.5 Sale Price multiplied by
the number of shares of Common Stock into which such securities are convertible.
In the case of a stock sale, within ten (10) Business Days following the date of
the Section 4.5 Notice, each Securityholder shall deliver to a representative of
the Drag Along Seller(s) designated in the Section 4.5 Notice certificates or
other documents representing all Securities held by such Securityholders, duly
endorsed, together with all other documents required to be executed in
connection with such Section 4.5 Sale or, if such delivery is not permitted by
applicable law, an unconditional agreement to deliver such securities pursuant
to this Section 4.5(a) at the closing for such Section 4.5 Sale against delivery
to Securityholder of the consideration therefor. If any Securityholder should
fail to deliver such certificates or other documents to the Drag Along
Seller(s), the Issuer shall cause the books and records of the Issuer to show
that such Securities are bound by the provisions of this Section 4.5(a) and that
such Securities shall be transferred to the Third Party immediately upon
surrender for transfer.
(b) In the case of a stock sale, promptly after the consummation of
the transfer of Securities of the Drag Along Seller(s), and all other
Securityholders, the Drag Along Seller(s) shall give notice thereof to the other
Securityholders, shall remit to such Securityholders who have surrendered their
certificates or other documents, as the case may be, the total consideration for
the Securities transferred pursuant hereto and shall furnish such other evidence
of the completion and time of completion of such transfer and the terms thereof
as may be reasonably requested.
4.6 Mandatory Repurchase.
--------------------
(a) Subject to the terms and conditions of this Agreement, the Issuer
agrees to repurchase the Securities held by the Other Securityholders in
accordance with the terms of this Section 4.6. Each Other Securityholder who
desires to exercise his or her rights under this Section 4.6 must elect to
effectuate such repurchase by giving the Issuer written notice thereof (the
"Mandatory Repurchase Notice") no earlier than January 1, 2000, and not later
----------------------------
than June 30, 2000 with respect to Other Securityholders as of the date hereof
and, with respect to any persons who become parties hereto after the date hereof
the application and timing of the provisions of this Section 4.6 shall be
specified by agreement between the Issuer and such persons.
13
(b) The price per share to be paid by the Issuer shall be the
Repurchase Price; provided, that for purposes of this Section 4.6, EBITDA
Multiple shall mean EBITDA multiplied by a factor of five (5).
(c) The Issuer's obligation to repurchase the Securities held by the
Other Securityholders who exercise their right hereunder is subject to the
following conditions precedent: (i) the Securities shall not be subject to any
lien, encumbrance, pledge, or other interest of any third party, and shall not
have been transferred in violation of applicable law, or the restrictions on
transfer imposed by this Agreement; (ii) the repurchase of such Securities shall
not violate any loan covenant or other provision of any document or agreement
evidencing Indebtedness existing on or after the date hereof; and (iii) the
repurchase shall not violate applicable laws restricting corporate distributions
to shareholders.
(d) The closing of the mandatory repurchase shall be no earlier than
thirty (30) and no later than ninety (90) days following June 30, 2000. The
Repurchase Price shall be paid in cash at the closing. Each Other
Securityholder exercising its rights hereunder shall surrender the original
certificate evidencing the Securities and shall sign such stock assignments and
other documents as the Issuer may reasonably request in order to effectuate the
transfer.
4.7 Improper Transfer and Termination of Article 4 Provisions. Any
---------------------------------------------------------
attempt to transfer any securities of the Issuer not in compliance with this
Agreement shall be null and void and neither the Issuer nor any transfer agent
shall give any effect in the Issuer's records to such attempted transfer. The
provisions of this Article 4 shall terminate upon the consummation of an Initial
Public Offering.
ARTICLE 5
REGISTRATION RIGHTS
5.1 Incidental Registration. (a) If the Issuer proposes to register
-----------------------
any of its Common Stock under the Securities Act (other than a registration, (A)
on Form S-8 or S-4 or any successor or similar forms, (B) relating to Common
Stock issuable upon exercise of employee stock options, employee stock purchases
or in connection with any employee benefit or similar plan of the Issuer or (C)
in connection with a direct or indirect merger, acquisition or other similar
transaction) whether or not for sale for its own account, it will each such
time, subject to the provisions of Section 5.1(b) hereof, give prompt written
notice at least thirty (30) days prior to the anticipated filing date of the
registration statement relating to such registration to each holder of
Registrable Stock, which notice shall set forth such holders rights under this
Section 5.1 and shall offer all such holders of Registrable Stock the
opportunity to include in such registration statement such number of shares of
Registrable Stock as each such holder may request. Upon the written request of
any such holder of Registrable Stock made within fifteen (15) days after the
receipt of notice from the Issuer (which request shall specify the number of
shares of Registrable Stock intended to be disposed of by such holder), the
Issuer will use its best efforts to effect the registration under
14
the Securities Act of all Registrable Stock which the Issuer has been so
requested to register by such holders, to the extent requisite to permit the
disposition of the Registrable Stock so to be registered; provided, that (i) if
such registration involves an Underwritten Public Offering, all such holders
requesting to be included in the Issuer's registration must sell their
Registrable Stock to the underwriters selected as provided in Section 5.3(f) on
the same terms and conditions as apply to the Issuer, and (ii) if, at any time
after giving written notice of its intention to register any stock pursuant to
this Section 5.1(a) and prior to the effective date of the registration
statement filed in connection with such registration, the Issuer shall determine
for any reason not to register such stock, the Issuer shall give written notice
to all such holders and, thereupon, shall be relieved of its obligation to
register any Registrable Stock in connection with such registration. The Issuer
will pay all Registration Expenses in connection with each registration of
Registrable Stock requested pursuant to this Section 5.1. In addition, for
purposes of this Section 5.1, Xxxxxxxx and each Xxxxxxxx Transferee (as those
terms are defined in the DMC Stockholders Agreement as it may be amended from
time to time) shall be deemed to be a "Securityholder" (and thus a holder of
"Registrable Stock" to the extent such person or persons own Common Stock) and
entitled to the benefits of this Section 5.1.
(b) If a registration pursuant to this Section 5.1 involves an
Underwritten Public Offering and the managing underwriter advises the Issuer
that, in its view, the number of shares of Common Stock which the Issuer and any
holder of Registrable Stock intend to include in such registration exceeds the
largest number of securities which can be sold without having an adverse effect
on such offering, including the price at which such securities can be sold (the
"Maximum Offering Size"), the Issuer will include in such registration, in the
---------------------
following priority, up to the Maximum Offering Size:
(i) first, so much of the Common Stock proposed to be registered by
the Issuer as would not cause the offering to exceed the Maximum Offering
Size;
(ii) second, all Registrable Stock requested to be included in such
registration by any holder thereof pursuant to this Section 5.1 (allocated,
if necessary for the offering not to exceed the Maximum Offering Size, pro
rata among such holders on the basis of the relative number of shares of
Registrable Stock so requested to be included in such registration).
5.2 Holdback Agreements. If any registration of Registrable Stock
-------------------
shall be in connection with an Underwritten Public Offering, each holder of
Registrable Stock hereby agrees not to effect any public sale or distribution,
including any sale pursuant to Rule 144, or any successor provision, under the
Securities Act, of any Registrable Stock, and not to effect any such public sale
or distribution of any other Common Stock of the Issuer or of any stock
convertible into or exchangeable or exercisable for any Common Stock of the
Issuer (in each case, other than as part of such Underwritten Public Offering)
during the fourteen (14) days prior to the effective date of such registration
statement (except as part of such registration) or during the period after such
effective date that such managing underwriter and the Issuer shall agree.
15
5.3 Registration Procedures. Whenever holders of Registrable Stock
-----------------------
request that any Registrable Stock be registered pursuant to Section 5.1 hereof
(or if Xxxxxxx exercises his rights pursuant to Section 5.10 hereof), the Issuer
will, subject to the provisions of such Section, use its best efforts to effect
the registration and the sale of such Registrable Stock in accordance with the
intended method of disposition thereof as quickly as practicable, and in
connection with any such request:
(a) The Issuer will as expeditiously as possible prepare and file
with the SEC a registration statement on any form for which the Issuer then
qualifies (other than registrations pursuant to Section 5.10 which shall be on
Form S-3) or which counsel for the Issuer shall deem appropriate and which form
shall be available for the sale of the Registrable Stock to be registered
thereunder in accordance with the intended method of distribution thereof, and
use its best efforts to cause such filed registration statement to become and
remain effective for a period of not less than ninety (90) days (or such shorter
period in which all of the Registrable Stock of the holders thereof included in
such registration statement shall have actually been sold thereunder) and not
more than one hundred eighty (180) days.
(b) The Issuer will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to each
holder of Registrable Stock and each underwriter, if any, of the Registrable
Stock covered by such registration statement copies of such registration
statement as proposed to be filed, and thereafter the Issuer will furnish to
such holder and underwriter, if any, such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto and documents incorporated by reference therein), the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such holder or underwriter may
reasonably request in order to facilitate the disposition of the Registrable
Stock owned by such holder.
(c) After the filing of the registration statement, the Issuer will
promptly notify each holder holding Registrable Stock covered by such
registration statement of any stop order issued or threatened by the SEC and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
(d) The Issuer will use its best efforts to (i) register or qualify
the Registrable Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdictions in the United States as any
holder holding such Registrable Stock reasonably (in light of such holder's
intended plan of distribution) requests and (ii) cause such Registrable Stock to
be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of the
Issuer and do any and all other acts and things that may be reasonably necessary
or advisable to enable such holder to consummate the disposition of the
Registrable Stock owned by such holder; provided, that the Issuer will not be
required to (A) qualify generally to do business in any jurisdiction where it
would not otherwise be required to
16
qualify but for this paragraph (d), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(e) The Issuer will immediately notify each holder holding such
Registrable Stock covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Stock, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and promptly
prepare and make available to each such holder and file with the SEC any such
supplement or amendment.
(f) The Issuer may select, in its sole discretion, the underwriter or
underwriters in connection with any Underwritten Public Offering as it may deem
appropriate. The Issuer will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Stock, including the engagement of a "qualified independent
underwriter" in connection with the qualification of the underwriting
arrangements with the NASD.
(g) The Issuer will otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
shareholders, as soon as reasonably practicable, an earnings statement covering
a period of twelve (12) months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of the Securities Act.
The Issuer may require each holder of Registrable Stock included in a
registration statement to promptly furnish in writing to the Issuer such
information regarding the distribution of the Registrable Stock as the Issuer
may from time to time reasonably request and such other information as may be
legally required in connection with such registration.
Each such holder agrees that, upon receipt of any notice from the
Issuer of the happening of any event of the kind described in Section 5.3(e)
hereof, such holder will forthwith discontinue disposition of Registrable Stock
pursuant to the registration statement covering such Registrable Stock until
such holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 5.3(e) hereof, and, if so directed by the Issuer, such
holder will deliver to the Issuer all copies, other than any permanent file
copies then in such holder's possession, of the most recent prospectus covering
such Registrable Stock at the time of receipt of such notice. In the event that
the Issuer shall give such notice, the Issuer shall extend the period during
which such registration statement shall be maintained effective (including the
period referred to in Section 5.3(a) hereof) by the number of days during the
period from and including the date of the giving of notice pursuant to Section
5.3(e) hereof to the date when the Issuer shall make available to such holder a
17
prospectus supplemented or amended to conform with the requirements of Section
5.3(e) hereof.
5.4 Indemnification by the Issuer. The Issuer agrees to indemnify
-----------------------------
and hold harmless each holder holding Registrable Stock covered by a
registration statement, its officers, directors and agents, and each Person, if
any, who controls such holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Stock (as amended or supplemented if the
Issuer shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission so made in strict conformity with
information furnished in writing to the Issuer by such holder or on such
holder's behalf expressly for use therein; provided that with respect to any
untrue statement or omission or alleged untrue statement or omission made in any
preliminary prospectus, or in any prospectus, as the case may be, the indemnity
agreement contained in this paragraph shall not apply to the extent that any
such loss, claim, damage, liability or expense results from the fact that a
current copy of the prospectus (or, in the case of a prospectus, the prospectus
as amended or supplemented) was not sent or given to the Person asserting any
such loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Registrable Stock concerned to such Person if it
is determined that the Issuer has provided such prospectus and it was the
responsibility of such holder to provide such Person with a current copy of the
prospectus (or such amended or supplemented prospectus, as the case may be) and
such current copy of the prospectus (or such amended or supplemented prospectus,
as the case may be) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. The Issuer also agrees to indemnify any
underwriters of the Registrable Stock, their officers and directors and each
person who controls such underwriters on substantially the same basis as that of
the indemnification of the holders provided in this Section 5.4.
5.5 Indemnification by Participating Holders. (a) Subject to
----------------------------------------
Section 5.5(b), each holder holding Registrable Stock included in any
registration statement agrees, severally but not jointly, to indemnify and hold
harmless the Issuer, its officers, directors and agents and each Person, if any,
who controls the Issuer within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuer to such holder, but only (i) with respect to
information furnished in writing by such holder or on such holder's behalf
expressly for use in any registration statement or prospectus relating to the
Registrable Stock, or any amendment or supplement thereto, or any preliminary
prospectus or (ii) to the extent that any loss, claim, damage, liability or
expense described in Section 5.4 results from the fact that a current copy of
the prospectus (or, in the case of a prospectus, the prospectus as amended or
supplemented) was not sent or given to-the Person asserting any such loss,
claim, damage,
18
liability or expense at or prior to the written confirmation of the sale of the
Registrable Stock concerned to such Person if it is determined that it was the
responsibility of such holder to provide such Person with a current copy of the
prospectus (or such amended or supplemented prospectus, as the case may be) and
such current copy of the prospectus (or such amended or supplemented prospectus,
as the case may be) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. Subject to Section 5.5(b), each such holder also
agrees to indemnify and hold harmless underwriters of the Registrable Stock,
their officers and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the Issuer
provided in this Section 5.5. As a condition to including Registrable Stock in
any registration statement filed in accordance with Article 5 hereof, the Issuer
may require that it shall have received an undertaking reasonably satisfactory
to it from any underwriter to indemnify and hold it harmless to the extent
customarily provided by underwriters with respect to similar securities.
(b) No holder of Registrable Stock shall be liable under Section
5.5(a) for any damage thereunder in excess of the net proceeds realized by such
holder in the sale of the Registrable Stock of such holder.
5.6 Conduct of Indemnification Proceedings. In case any proceeding
--------------------------------------
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to this Article 5,
such Person (an "Indemnified Party") shall promptly notify the Person against
-----------------
whom such indemnity may be sought (the "Indemnifying Party") in writing and the
------------------
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party, and shall assume the
payment of all fees and expenses; provided that the failure of any Indemnified
Party so to notify the Indemnifying Party shall not relieve the Indemnifying
Party of its obligations hereunder except to the extent that the Indemnifying
Party is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) in the
reasonable judgment of such Indemnified Party representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the Indemnified
Parties. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any and all losses, claims, damages, liabilities and expenses or
liability (to the extent stated above) by reason of such settlement or judgment.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened
19
proceeding in respect of which any Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability arising out of such proceeding.
5.7 Contribution. If the indemnification provided for in this
------------
Article 5 is held by a court of competent jurisdiction to be unavailable to the
Indemnified Parties in respect of any losses, claims, damages or liabilities
referred to herein, then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (i)
as between the Issuer and the holders holding Registrable Stock covered by a
registration statement on the one hand and the underwriters on the other, in
such proportion as is appropriate to reflect the relative benefits received by
the Issuer and such holders on the one hand and the underwriters on the other,
from the offering of the Registrable Stock, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits but also the relative fault of the Issuer and such
holders on the one hand and of such underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (ii) as
between the Issuer on the one hand and each such holder on the other, in such
proportion as is appropriate to reflect the relative fault of the Issuer and of
each such holder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Issuer and such holders on the one hand and such underwriters on the other shall
be deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Issuer and such holders bear to the total underwriting discounts
and commissions received by such underwriters, in each case as set forth in the
table on the cover page of the prospectus. The relative fault of the Issuer and
such holders on the one hand and of such underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuer and such holders
or by such underwriters. The relative fault of the Issuer on the one hand and
of each such holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Issuer and the holders of Registrable Stock agree that it would
not be just and equitable if contribution pursuant to this Section 5.7 were
determined by pro rata allocation (even if the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages or liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in
20
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.7, no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Stock underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no holder shall be
required to contribute any amount in excess of the amount by which the net
proceeds realized on the sale of the Registrable Stock of such holder exceeds
the amount of any damages which such holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Each holder's obligation to contribute pursuant to this
Section 5.7 is several in the proportion that the proceeds of the offering
received by such holder bears to the total proceeds of the offering received by
all such holders and not joint.
5.8 Participation in Public Offering. No Person may participate in
--------------------------------
any Underwritten Public Offering hereunder unless such Person (a) agrees to sell
such Person's securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and consistent with the provisions of this
Agreement in respect of registration rights.
5.9 Size of Initial Public Offering. The Issuer agrees that in the
-------------------------------
event of any Initial Public Offering, Issuer shall use its reasonable best
efforts to cause the proceeds of the Initial Public Offering to be sufficient in
amount to allow the Series B Preferred Stock to be redeemed in full and, to the
extent sufficient to do so, redeem (or prepay in the case of Subordinated Debt)
the Series B Preferred Stock.
5.10 Form S-3 Registrations. (a) In case the Issuer shall receive a
----------------------
written request from Xxxxxxx that the Issuer effect a registration on Form S-3
with respect to the Registrable Stock owned by Xxxxxxx or his Permitted
Transferees, the Issuer will, as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of
Xxxxxxx'x Registrable Stock as is specified in such request, together with all
or such portion of the Registrable Stock of any other holder or holders joining
in such request as are specified in a written request given within fifteen (15)
days after receipt of written notice from the Issuer; provided, that the Issuer
shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 5.10: (i) if Form S-3 is not available for
such offering; (ii) if Xxxxxxx or his Permitted Transferees, collectively,
propose to sell Registrable Stock at an aggregate price to the public (net of
any underwriters' discounts or commissions) of less than Five Million Dollars
($5,000,000); (iii) if the Issuer shall furnish to Xxxxxxx a certificate signed
by the President of the Issuer stating that in the good faith judgment of the
Board, it would be seriously detrimental to the Issuer and its shareholders for
such Form S-3 registration to be effected at such time, in which event the
21
Issuer shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than 120 days after receipt of the request of
Xxxxxxx under this Section 5.10; provided, that the Issuer shall not utilize the
right set forth in this clause (iii) more than once in any twelve (12) month
period; (iv) if the Issuer has, within the twelve (12) month period preceding
the date of such request, already effected one (1) registration on Form S-3 for
Xxxxxxx pursuant to this Section 5.10; or (v) in any particular jurisdiction in
which the Issuer would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance; or (vi) prior to the expiration of the lockup
period following the Issuer's Initial Public Offering.
(b) Subject to the foregoing, the Issuer shall file a Form S-3
registration statement covering the Registrable Stock so requested to be
registered as soon as practicable after receipt of the request or requests of
Xxxxxxx and the other holders of Registrable Stock. All expenses in excess of
Thirty Thousand Dollars ($30,000), which shall be paid by Xxxxxxx and the other
holders of Registrable Stock participating in such registration, incurred in
connection with the registrations effected pursuant to this Section 5.10 (other
than underwriting discounts and commissions), including, without limitation, all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for Xxxxxxx and the holders of
Registrable Stock and counsel for the Issuer, shall be paid by the Issuer.
ARTICLE 6
CONVERSION OF SERIES B AND SERIES C PREFERRED STOCK
6.1 Right to Convert. Subject to (i) the terms and conditions of any
----------------
loan covenant or other provision for the benefit of the holders of Senior Debt
contained in any document or agreement evidencing or otherwise related to Senior
Debt, (ii) the right of setoff set forth in Section 9.4 of the Stock Purchase
Agreement, and (iii) all applicable laws (including, without limitation, the
Texas Business Corporation Act), shares of Series B Preferred Stock and Series C
(provided that, for purposes of the Series C Preferred Stock only, all holders
thereof must consent) shall be convertible, in whole or in part, at the option
of the holder thereof, at any time after the date of issuance of such shares and
on or prior to the date notice is received from the Issuer of the redemption
thereof, at the office of the Issuer or any transfer agent for such stock, into
subordinated debt ("Subordinated Debt") in the original aggregate principal
-----------------
amount, in the case of the conversion of Series B Preferred Stock, equal to the
product of (a) the Series B Redemption Price (as defined in the Articles of
Incorporation) (less the accrued and unpaid dividends per share other than any
dividends in arrears) and (b) the number of shares of Series B Preferred Stock
to be so converted, and in the case of the Series C Preferred Stock, equal to
the product of (x) the Series C Redemption Price (as defined in the Articles of
Incorporation) (less the accrued and unpaid dividends per share other than any
dividends in arrears) and (y) the number of shares of Series C Preferred Stock
to be so converted. Holders of Series B or C Preferred Stock shall provide each
other holder of Series B or C Preferred Stock fifteen (15) days prior written
notice prior to converting shares of Series C Preferred Stock pursuant to this
Section 6.1.
22
Any such Subordinated Debt shall accrue simple interest at the rate of ten
percent (10%) per annum and shall be evidenced by the Subordinated Promissory
Notes in the forms attached hereto as Appendix A-2 (for the conversion of Series
B Preferred Stock) and A-3 (for the conversion of Series C Preferred Stock).
Installments of principal and accrued interest in respect of the Subordinated
Debt shall be due and payable thereon on the same terms and conditions as the
payment of dividends and redemption payments on the Series B Preferred Stock and
the Series C Preferred Stock as the case may by would otherwise have been paid
with respect to such Preferred Stock upon redemption thereof. Any accrued and
unpaid dividends which are not in arrears at the time of any conversion of
Series C Preferred Stock or Series C Preferred Stock pursuant to this Section
6.1 shall be converted to accrued interest to become due and payable on the date
of the first installment of principal and interest under the applicable
promissory note evidencing the Subordinated Debt. The Subordinated Debt shall
be and by exercising its rights under this Section 6.1 the holder of Series A
Preferred Stock or Series C Preferred Stock, as the case may be, agrees that
such Subordinated Debt shall be subordinate and junior in all respects,
including, without limitation, to right of payment and security to Senior Debt.
For purposes of this Section 6.1 "Senior Debt" shall mean all principal of,
-----------
premium and interest (including, without limitation, any interest which accrues
(or which would accrue but for such case, proceeding or other action) after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of Issuer (whether or not such interest is allowed
or allowable as a claim in such case, proceeding or other action)) on any
indebtedness created, incurred, assumed or guaranteed by Issuer and its
subsidiaries (present or future), whether now existing or hereafter arising, due
or to become due, absolute or contingent, liquidated or unliquidated, determined
or undetermined, under any working capital or other credit agreement or facility
with a commercial bank, insurance company, other recognized financial
institution, any debt issued to the public pursuant to a private placement or
registration statement filed with and declared effective by the Securities and
Exchange Commission, any debt incurred in connection with any past or future
acquisitions by the Issuer and its subsidiaries (present and future), and any
sale/leaseback financing on equipment or real property of the Issuer or its
subsidiaries (present and future) and, solely in the case of the conversion of
Series C Preferred Stock, "Senior Debt" shall include, in addition to the above
described "Senior Debt," any debt of Issuer resulting from time to time from the
conversion of Series B Preferred Stock. Without limiting the generality of the
foregoing, "Senior Debt" shall also include the principal of, premium, if any,
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on, and all other amounts owing in respect of, the Issuer's Senior Subordinated
Notes due 2007 issued pursuant to the Indenture between the Issuer and the
trustee, including any debt securities issued in exchange for such notes (the
"Senior Subordinated Notes") and shall also include such amounts owing
(including principal, premium, if any, interest (including interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law)) under the credit agreement by and among the Issuer,
NationsBanc Capital Markets, Inc. and Xxxxxxxxx, Xxxxxx & Xxxxxxxx, as arrangers
and syndication agents, certain
23
lending parties thereto, and NationsBank of Texas, N.A., as agent, as it may be
amended from time to time (the "Senior Credit Facility").
6.2 Mechanics of Conversion. Before any holder of Series B Preferred
-----------------------
Stock or Series C Preferred Stock shall be entitled to convert shares of Series
B Preferred Stock or Series C Preferred Stock into Subordinated Debt, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Issuer or of any transfer agent for Series B Preferred
Stock or Series C Preferred Stock, respectively, and shall give written notice
to the Issuer at its principal corporate office, of the election to convert the
same. The Issuer shall, as soon as practicable thereafter, execute and deliver
to such holder or to the nominee or nominees of such holder, all documents
reasonably requested by such holder evidencing the Subordinated Debt with such
additional terms, if any, as are reasonably agreed upon by the Issuer and such
holder; provided, that such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series B Preferred Stock or Series C Preferred Stock to be converted.
In the event of a conversion of their shares of Series B Preferred Stock or
Series C Preferred Stock pursuant to this Article 6, the holder of the Series B
Preferred Stock or Series C Preferred Stock being converted shall enter into
such agreements and other documents as may be required by the holders of Senior
Debt, on or after the date of conversion, in order to evidence the subordination
of the Subordinated Debt to the Senior Debt as a condition to the conversion
thereof. In the event that the holder or holders of Series B and/or Series C
Preferred Stock elect to convert shares of Series B or Series C Preferred Stock,
as the case may be, and (i) the assets or retained earnings of the Issuer shall
be insufficient to permit the conversion of all such shares, or (ii) Issuer is
otherwise restricted from converting all such shares, the Issuer shall first
convert the maximum number of shares of Series B Preferred Stock that it is
otherwise permitted to convert (the "Convertible B Shares") and second shall
--------------------
convert the maximum number of Series B Preferred Stock that it is otherwise
permitted to convert (the "Convertible C Shares"). Each holder of Series B or
--------------------
Series C Preferred Stock shall be entitled to convert his or its pro rata share
of the Convertible B or Convertible C shares, as the case may be, based on the
number of shares of Series B or Series C held by such Securityholder compared to
the total number of shares of Series A or Series B Preferred Stock outstanding.
Notwithstanding anything else set forth in this Article 6, no holder of Series B
or Series C Preferred Stock shall have the right to convert shares of Series B
or Series C Preferred Stock more than once in any three (3) month period.
ARTICLE 7
MISCELLANEOUS
7.1 Debt Approval Right. Subject to that certain Agreement, executed
-------------------
by Xxxxxxx as of May 27, 1997, by and among Dogloo, Xxxxxxx, Westar, Enterprise
III, Enterprise III Associates and HBI, (the "Xxxxxxx Agreement"), so long as
-----------------
Xxxxxxx continues to hold any shares of Series B Preferred Stock or Subordinated
Debt issued upon the conversion of Series B Preferred Stock with an aggregate
principal amount in excess of Two Million Two Hundred Thousand Dollars
($2,200,000), the Issuer shall not, without the prior
24
written consent of Xxxxxxx, incur any additional Indebtedness which would cause
the Debt to Equity Ratio to exceed three point five (3.5).
7.2 Transaction and Advisory Fees. The parties to this Agreement
-----------------------------
hereby acknowledge and agree that Westar shall be permitted to charge the Issuer
a monthly advisory fee (the "Advisory Fee"), which may be determined and
------------
modified from time to time by the Board.
7.3 Termination of Prior Agreements. With the exception of the
-------------------------------
Xxxxxxx Agreement, which will remain in full force and effect, upon the
consummation of the Merger and not before then, any prior subscription
agreement, buy-sell agreement, repurchase agreement or other agreement
pertaining to the purchase and sale of shares of the Issuer or Dogloo after the
date hereof between such Securityholder and the Issuer, Dogloo or any other
party, including that certain Securityholders Agreement dated September 22,
1995, shall be deemed to be terminated and this Agreement shall be effective and
shall be deemed to have superseded such agreements.
7.4 Entire Agreement. With the exception of the Xxxxxxx Agreement,
----------------
which will remain in full force and effect, this Agreement constitutes the
entire agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.
7.5 Binding Effect; Benefit. This Agreement shall inure to the
-----------------------
benefit of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto and their respective heirs, successors, legal representatives
and permitted assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, except that, for purposes of Sections 4.3 and 5.1,
herein, the Doskocils and each Xxxxxxxx Transferee (as those terms are defined
in the DMC Stockholders' Agreement as it may be amended from time to time) are
intended beneficiaries.
7.6 Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Issuer or any Securityholder provided that this provision
shall not preclude or prohibit any successor entity from succeeding to the
benefits and obligations hereof. Any Securityholder who ceases to beneficially
own any Equity Securities shall cease to be bound by the terms hereof; provided,
that any Person acquiring Equity Securities who is required by the terms of this
Agreement to become a party hereto shall execute and deliver to Issuer an
agreement to be bound by this Agreement and shall henceforth be a
"Securityholder." Any Securityholder who ceases to beneficially own any Equity
Securities shall cease to be bound by the terms hereof (other than Sections 5.5,
5.6, and 5.7).
25
7.7 Amendment; Waiver; Termination. (a) No provision of this
------------------------------
Agreement may be waived except by an instrument in writing executed by the party
against whom the waiver is to be effective. No provision of this Agreement may
be amended or otherwise modified except by an instrument in writing executed by
the Issuer with the approval of the Board and Securityholders holding or having
the right to acquire at least a majority of the Fully Diluted Common Stock.
Sections 3.1, 3.3, 4.3 and 5.1 herein may not be amended or otherwise modified
to adversely affect the Doskocils or any Xxxxxxxx Transferee (as those terms are
defined in the DMC Stockholders' Agreement as it may be amended from time to
time) without the written consent of the Doskocils or such Xxxxxxxx Transferee.
(b) This Agreement, other than Article V hereof, shall terminate on
the earlier to occur of (i) the closing of an underwritten initial public
offering of common stock by the Issuer (or any successor entity) of Company
Stock pursuant to a registration statement declared effective under the Act,
(ii) the first time at which any equity securities of the Company (or any
successor entity) have been registered under Section 12(b) or 12(g) of the
Exchange Act, (iii) as a result of or at any time after any transfer of Issuer
(or any successor entity) Common Stock in connection with a sale of the Issuer,
whether such sale is effected by merger, consolidation, sale of assets or sale
or exchange of stock representing at least fifty percent (50%) of the voting
power of the stock of the Issuer (in terms of number of votes for the election
of directors), or (iv) unless otherwise consented to by the lenders, the
foreclosure of the pledge of Issuer's Common Stock made pursuant to the Credit
Agreement dated July 1, 1997 and related loan documents, as amended. A merger
effected to reincorporate the Issuer shall not be considered a sale of the
Issuer and shall not terminate this Agreement. The provisions of Article V
hereof shall terminate on the third anniversary of the termination of the other
provisions of this Agreement.
(c) In addition, any amendment, modification or termination of any
provisions of this Agreement that would materially adversely affect any
Investor, Xxxxxxx or any other Securityholder may be effected only with the
consent of such effected party.
7.8 Notices. All notices and other communications given or made
-------
pursuant hereto or pursuant to any other agreement among the parties, unless
otherwise specified, shall be in writing and shall be deemed to have been duly
given or made if sent by fax (with confirmation in writing), delivered
personally or sent by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the fax number or address set forth below
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made upon
receipt:
If to the Issuer: Xxxxxxxx Manufacturing Company, Inc.
0000 Xxxxxxx
Xxxxxxxxx, Xxxxx 00000
Attention: President
Fax: (817)
26
If to Westar, to: Westar Capital
Westar LLC
000 Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx, General Partner
Fax: (000) 000-0000
If to Enterprise III, IV
or Enterprise III or IV
Associates: Enterprise Partners III, L.P.
Enterprise Partners III Associates, L.P.
Enterprise Partners IV, L.P.
Enterprise Partners IV Associates, L.P.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, General Partner
Fax: (000) 000-0000
If to HBI, to: HBI Financial, Inc.
x/x Xxxxx & Xxxxx
Xxx Xxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
With a copy, in each case,
to: O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: J. Xxx Xxxxxx, Esq.
Fax: (000) 000-0000
If to Xxxxxxx, to: Xxxxxxx X. Xxxxxxx, III
00000 Xxxxx Xxxxx
Xxxx Xxxxxxxx, XX 00000
Any Person who becomes a Securityholder shall provide its address and fax number
to the Issuer, which shall promptly provide such information to each other
Securityholder.
7.9 Headings. The headings contained in this Agreement are for
--------
convenience only and shall not affect the meaning or interpretation of this
Agreement.
27
7.10 Counterparts. This Agreement may be executed any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
7.11 Applicable Law. This Agreement shall be governed by, and
--------------
construed in accordance with, the laws of the State of Texas, without regard to
the conflicts of law rules of such state.
7.12 Specific Enforcement. Each party hereto acknowledges that the
--------------------
remedies at law of the other parties for a breach or threatened breach of this
Agreement would be inadequate and, in recognition of this fact, any party to
this Agreement, without posting any bond, and in addition to all other remedies
which may be available, shall be entitled to obtain equitable relief in the form
of specific performance, a temporary restraining order, a temporary or permanent
injunction or any other equitable remedy which may then be available.
7.13 Arbitration. All claims, disputes and other matters in question
-----------
arising out of, or relating to, this Agreement or the performance thereof shall
be submitted to, and determined by, arbitration if good faith negotiations among
the parties hereto, if any, does not resolve such claim, dispute or other
matter. Such arbitration shall proceed in accordance with the then-current
rules for arbitration as established by Judicial Arbitration Mediation Services,
Inc./ENDISPUTE ("JAMS"), unless the parties hereto mutually agree otherwise, and
----
pursuant to the following procedures:
(a) The parties to the dispute shall each appoint an arbitrator from
the JAMS panel of retired judges, and those party-appointed arbitrators shall
appoint an arbitrator from the JAMS panel of retired judges within ten (10)
days. If the party-appointed arbitrators fail to appoint an arbitrator within
ten (10) days, such arbitrator shall be appointed by JAMS in accordance with its
rules.
(b) Reasonable discovery shall be allowed in arbitration.
(c) All proceedings before the arbitrators shall be held in Orange
County, California. The governing law shall be as specified in Section 7.11.
(d) The award rendered by the arbitrators shall be final and
binding, and judgment may be entered in accordance with applicable law and in
any court having jurisdiction thereof.
(e) The award rendered by the arbitrators shall include (i) a
provision that the prevailing party in such arbitration recover its costs
relating to the arbitration and reasonable attorneys' fees from the other party,
(ii) the amount of such costs and fees, and (iii) an order that the losing party
pay the fees and expenses of the arbitrators.
28
7.14 Receipt of Information. The Other Securityholders acknowledge
----------------------
and agree that the Issuer has afforded each Other Securityholder and his or her
advisors (i) full and complete access to all information with respect to the
Issuer, its business and financial condition to the extent that such information
was possessed by the Issuer or could be acquired by the Issuer without
unreasonable effort or expense, that such Other Securityholder and his or her
advisors deem necessary in order to evaluate the merits and risks of the
transactions contemplated by this Agreement and (ii) an opportunity to ask
questions of the Issuer's officers and representatives regarding the Issuer, its
business and financial condition and this Agreement.
7.15 Distributions. Each of the Investors and Xxxxxxx and Xxxxxx (as
-------------
investors and holders of Common Stock and Preferred Stock) and each of the Other
Securityholders hereby consents and approves the "distributions to its
shareholders" (as such term is defined in Section 166 of the California General
Corporation Law and Section 1.02 A(8) of the Texas Business Corporations Act) to
be made by Issuer as part of the transactions contemplated by the Merger,
including purchases of Dogloo Common Stock, cash payments made in connection
with the cancellation of certain Dogloo stock options, and the redemption of
Issuer Common Stock, Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock.
29
COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
XXXXXXXX MANUFACTURING COMPANY, INC.,
a Texas corporation
By: /s/ XXXXX X. XXXXXXX
-------------------------------------
Xxxxx X. Xxxxxxx
Its: President and Chief Executive Officer
DOGLOO, INC.,
a California corporation
By: /s/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx
Its: Executive Vice President
WESTAR CAPITAL
By: Westar Capital Associates,
a limited partnership
Its: General Partner
By: /s/ XXXX X. XXXXX
-------------------------------------
Xxxx X. Xxxxx
Its: General Partner
WESTAR CAPITAL II, LLC
By: Westar Capital Associates II, LLC
Its: Member
By: /s/ XXXX X. XXXXX
-------------------------------------
Xxxx X. Xxxxx
Its: Member
30
ENTERPRISE PARTNERS III, L.P.
By: Enterprise Management Partners III,
L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxx
Its: General Partner
ENTERPRISE PARTNERS III ASSOCIATES, L.P.
By: ENTERPRISE MANAGEMENT PARTNERS III,
L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxx
Its: General Partner
ENTERPRISE PARTNERS IV, L.P.
By: Enterprise Management Partners IV,
L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxx
Its: General Partner
ENTERPRISE PARTNERS IV ASSOCIATES, L.P.
By: ENTERPRISE MANAGEMENT PARTNERS IV,
L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxx
Its: General Partner
HBI FINANCIAL, INC.
By: /s/ XXXXXXX X. XXXXXXX
-----------------------------------
Xxxxxxx X. Xxxxxxx
Its: Executive Vice President
/s/ XXXXXXX X. XXXXXXX III
-----------------------------------------
Xxxxxxx X. Xxxxxxx III
OTHER SECURITYHOLDERS:
_______________________________________________________
Xxxxxxx X. Xxxxxx
Xxxxxx Family Trust
By: _________________________________________________
Xxxxxxx X.X. Xxxxxx, Trustee
_______________________________________________________
Xxxx X. Xxxxxxxx
_______________________________________________________
Xxxxxxx X. Xxxxxx
_______________________________________________________
Xxxxx Xxxxxxx
_______________________________________________________
Xxxxx X. Xxxxxxxx
_______________________________________________________
Xxxxxxx X. Xxxxxx
CONSENT OF SPOUSE
-----------------
The undersigned spouse of ______________ has read and hereby approves
the Amended and Restated Securityholders Agreement. The undersigned hereby
agrees to be bound by the terms and conditions of such Agreement, including,
without limitation, the right of the Issuer and the Securityholders to purchase
any and all interest or right the undersigned may have in Securities of the
Issuer pursuant to community property laws, marital property rights or other
laws. All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Amended and Securityholders Agreement.
DATED: _________, 1997 _____________________________________________
[Print Name]
_____________________________________________
[Signature]
Appendix A-2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, OR TRANSFERRED EXCEPT
IN COMPLIANCE THEREWITH.
XXXXXXXX MANUFACTURING COMPANY, INC.
SUBORDINATED NOTE
Arlington, Texas
$__________________ _________________
FOR VALUE RECEIVED, Xxxxxxxx Manufacturing Company, Inc., a Texas
corporation ("DMC"), promises to pay to the order of _________________
---
("________"), his, her or its registered successors and assigns (the "Holder"),
------
in lawful money of the United States of America, the principal sum of
___________________________________ ($________), or such lesser amount as shall
then equal the outstanding principal amount hereof, with simple interest
(computed on the basis of a 365-day year) on the unpaid principal balance hereof
accruing from the date hereof (the "Effective Date") at ten percent (10%) per
--------------
annum simple interest both principal and interest to be payable as provided
herein.
It is the intent of DMC and Holder in the making and acceptance of this
Note to contract in strict compliance with the usury laws of the State of Texas
(including any superseding federal law), if and to the extent applicable. In
the event Holder shall collect monies which are deemed to constitute interest in
excess of that permitted to be charged by the laws of the State of Texas
(including any superseding federal law), if and to the extent applicable, all
such sums so deemed to constitute interest in excess of the maximum lawful
interest rate shall be credited as of the date of collection to the payment of
principal. Any sums collected by Holder which exceed the amount of the
remaining principal and accrued interest hereunder shall be returned to DMC.
This Note is one of the Subordinated Promissory Notes into which the Series
B Preferred Stock of DMC may be converted as referred to in Section 6.1 of that
Amended and Restated certain Securityholders Agreement (the "Agreement") entered
---------
into as of ____________, 1997, by and among DMC, Westar Capital, Westar LLC,
Enterprise Partners III, L.P., Enterprise Partners III Associates, Enterprise
Partners IV, L.P., Enterprise Partners III Associates, L.P., HBI Financial,
Inc., Xxxxxxx X. Xxxxxxx III, Xxxxxxx X. Xxxxxx and the other securityholders
party thereto. The original principal amount of this Note shall be determined
in accordance with the provisions of Section 6.1 of the Agreement.
1
The following is a statement of the rights of the Holder of this Note and
the conditions to which this Note is subject, and to which the Holder hereof, by
the acceptance of this Note, agrees:
1. Definitions
-----------
The following terms shall have the following respective meanings:
"Bankruptcy Law" means Xxxxx 00, Xxxxxx Xxxxxx Code or any similar
--------------
Federal or State law for the relief of debtors.
"Corporate Transactions" means (a) the combination of DMC with another
----------------------
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation); or (b) a sale
of all or substantially all of the assets of DMC; unless DMC's shareholders of
------
record as constituted immediately prior to such combination or sale will,
immediately after such acquisition or sale (by virtue of securities issued as
consideration for this corporation's acquisition or sale or otherwise) hold at
least 50% of the voting power of the surviving or acquiring entity.
"Custodian" means any receiver, trustee, assignee, liquidator or
---------
similar official under any Bankruptcy Law.
"Senior Debt" means all principal of, premium and interest (including,
-----------
without limitation, any interest which accrues (or which would accrue but for
such case, proceeding or other action) after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of DMC (whether or not such interest is allowed or allowable as a
claim in such case, proceeding or other action)) on any indebtedness created,
incurred, assumed or guaranteed by DMC and its subsidiaries (present or future),
whether now existing or hereafter arising, due or to become due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, under any
working capital or other credit agreement or facility with a commercial bank,
insurance company, other recognized financial institution, any debt issued to
the public pursuant to a private placement or a registration statement filed
with and declared effective by the Securities and Exchange Commission, any debt
incurred in connection with any past or future acquisitions by DMC and its
subsidiaries (present or future), and any sale/leaseback financing on equipment
or real estate of DMC. Without limiting the generality of the foregoing,
"Senior Debt" shall also include the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all other amounts owing in respect of, DMC's Senior Subordinated Notes due 2007
issued pursuant to the Indenture between DMC and the trustee, including any debt
securities issued in exchange for such notes (the "Senior Subordinated Notes")
and shall also include such amounts owing (including principal, premium, if any,
interest (including interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law)) under
the credit agreement by and among DMC, NationsBanc Capital Markets, Inc. and
Xxxxxxxxx, Lufkin & Xxxxxxxx, as arrangers and syndication agents,
2
certain lending parties thereto, and NationsBank of Texas, N.A., as agent, as it
may be amended from time to time (the "Senior Credit Facility").
2. Payments.
--------
2.1 Payments of Principal and Interest.
----------------------------------
(a) Subject to the terms and conditions of this Note, the
principal then outstanding hereunder, together with all accrued and unpaid
interest thereon, shall be due and payable upon the consummation of (i) a
Corporate Transaction or (ii) an initial public offering of DMC's Common Stock.
(b) Interest payments shall be paid on March 1 of each year
commencing March 1, ____ at the sole discretion of the Board of Directors of
DMC.
2.2 Place of Payments. All payments required to be made hereunder to
-----------------
the Holder shall be made on the due date by crediting before 11:00 a.m. Texas
time, by federal funds bank wire transfer, such bank account in such bank in the
United States as the Holder may previously have designated in writing to DMC.
If any day upon which principal and/or interest of this Note is payable is a day
other than a business day (being a day other than a Saturday, Sunday, or a day
on which banking institutions in Dallas, Texas are authorized or obligated by
law or executive order to close), payment of the principal and/or interest then
due may be made on the next succeeding business day with the same force and
effect as if it had been made on the due date; provided, that this Note shall
continue to bear interest at the contractual rate until the actual date of
payment.
2.3 Optional Prepayments. The principal amount of this Note may be
--------------------
prepaid at any time in whole or in part without penalty or premium; provided,
that all interest accrued and unpaid to the prepayment date is paid
simultaneously therewith; and, provided further, that no prepayment can be made
unless all of the Series B and Series C Preferred Stock has been redeemed and
the debt issued upon the conversion of the Series A Preferred Stock, if any, has
been paid in full. DMC shall notify the Holder of its intention to prepay this
Note, in whole or in part, by giving notice at least two (2) business days
before the proposed payment date and any such notice, once given, shall be
irrevocable. Any payment made pursuant to this Section 2.3 shall be applied,
first, to interest accrued and unpaid to the date of such prepayment and,
second, to the then outstanding principal amount of this Note.
3. Events of Default and Remedies.
------------------------------
3.1 Events of Default. Each of the following events shall constitute
-----------------
an event of default (individually, an "Event of Default"; collectively, "Events
---------------- ------
of Default"):
----------
(a) DMC shall default in the due and punctual payment of all or
any part of the principal of this Note, or accrued interest thereon when and as
such principal and interest shall become due and payable, whether by
acceleration or otherwise, and such default
3
shall continue for a period of ten (10) business days after the Holder has given
DMC written notice of such default;
(b) DMC, pursuant to or within the meaning of any Bankruptcy
Law, (i) files a voluntary petition in bankruptcy or a petition or answer
seeking reorganization, to effect a plan or other arrangement with creditors or
any other relief; (ii) consents to the entry of an order for relief against it
in an involuntary case; (iii) consents to the appointment of a Custodian of it
or for all or substantially all of its property; or (iv) makes a general
assignment for the benefit of its creditors; or
(c) A court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against DMC in an involuntary
case; (ii) appoints a Custodian of DMC for all, or substantially all its
property; or (iii) orders the liquidation of DMC, and in any such case the order
or decree remains in effect for ninety (90) days.
3.2 Remedies. If an Event of Default shall occur and be continuing,
--------
the Holder or Holders of this Note may, subject to Section 4 below, declare, by
notice in writing given to DMC, the entire unpaid principal amount of this Note
together with interest accrued thereon, to be immediately due and payable, in
which case this Note shall become immediately due and payable, both as to
principal and interest, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived.
3.3 Suits for Enforcement. Subject to Section 4 below, at any time
---------------------
after this Note is declared to be due and payable, the Holder of this Note may
proceed to protect and enforce its rights either by suit in equity or by action
at law, or both, whether for specific performance of any covenant or agreement
contained in this Note, or the Holder of this Note may proceed to enforce any
other legal or the equitable right as the Holder of such Note. No remedy is
intended to be exclusive, and each remedy shall be cumulative.
4. Subordination.
-------------
4.1 Payment of Note Subordinated to Senior Debt. DMC and the Holder
-------------------------------------------
agree for the benefit of the Senior Debt that all indebtedness evidenced by this
Note, including principal, premium, if any, and interest, and all other amounts
payable to the Holder hereunder (collectively, the "Subordinated Debt") shall,
-----------------
to the extent hereinafter set forth, be subordinate and junior to all Senior
Debt in all respects.
4.2 No Payments With Respect to Note in Certain Circumstances.
---------------------------------------------------------
Unless and until all principal of, premium, if any, and interest on, and all
other obligations of DMC under, any Senior Debt shall have been paid in full and
all commitments to extend Senior Debt shall have terminated, neither DMC nor any
of its subsidiaries or affiliates shall make, and the Holder shall not demand,
accept or receive, or attempt to collect or commence any legal proceedings to
collect, any direct or indirect payment (in cash or property or by setoff,
exercise of contractual or statutory rights or otherwise) of or on account of
any amount payable on or with respect to this Note (excluding the accrual of
interest hereon) or any interest herein; provided that this Section 4.2 shall
not prevent the payment in cash of principal and interest on this Note
4
(excluding the accrual of interest hereon), but only if (i) both before and
after giving effect to such payment, no default ("Payment Default") in payment
---------------
of any principal of or premium or interest on any Senior Debt or payment of
dividends on Series B or Series C Preferred Stock or redemption of Series B
Preferred Stock shall have occurred and be continuing and (ii) (A) so long as
any Senior Debt remains outstanding, the holders thereof shall have not
determined (and notified DMC of its determination) that there has occurred a
material adverse change, or development involving a prospective change, in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of DMC and its subsidiaries, taken as a whole, since the
respective dates as of which such Senior Debt is incurred; and (B) DMC shall not
have received written notice from holders of any Senior Debt that a default
(other than a Payment Default) under any Senior Debt shall have occurred and be
continuing, or that such payment on this Note would result in such a default,
permitting such holders to accelerate the maturity thereof; provided, that in
the case of this clause (ii), the period (a "Payment Blockage Period") during
-----------------------
which such payments on this Note shall be prohibited shall commence on the date
of receipt of such notice and end on the earliest of (x) 179 days thereafter,
(y) the date on which such default shall have been waived in writing or cured
and (z) the date on which the benefits of this clause (ii) shall have been
waived in writing by such Senior Debt lender or lenders. Notwithstanding
anything in clause (ii) to the contrary, in no event will a Payment Blockage
Period extend beyond 179 days from the date payment on this Note was due. Any
payment under this Note not permitted by this Section 4.2 to be paid shall be
deemed to not have been due and payable on such date and the failure to make
such payment shall not constitute an Event of Default hereunder.
4.3 Initiation of Actions. Unless and until all principal of,
---------------------
premium, if any, and interest on, and all other obligations of DMC under, the
Senior Debt shall have been paid in full and all commitments to extend Senior
Debt shall have terminated, the Holder will not commence or maintain any action,
suit or any other legal or equitable proceeding against DMC, or join with any
creditor in any such proceeding, under any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar law, unless the holders of Senior
Debt shall also join in bringing such proceeding; provided, that the foregoing
shall not prohibit the Holder from filing a proof of claim or otherwise
participating in any such proceeding not commenced by it.
4.4 Note Subordinated on Dissolution, Liquidation, Reorganization,
--------------------------------------------------------------
Etc. In the event of any insolvency or bankruptcy proceedings, and any
----
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to DMC or its creditors, in their capacity as
creditors of DMC, or to substantially all of its property, and in the event of
any proceedings for voluntary liquidation, dissolution or other winding up of
DMC, whether or not involving insolvency or bankruptcy, then:
(a) The holders of the Senior Debt shall first be entitled to
receive payment in full of the principal thereof, premium, if any, interest and
all other amounts payable thereon (accruing before and after the commencement of
the proceedings, whether or not allowed or allowable as a claim in such
proceedings) before the Holder is entitled to receive any payment on account or
in respect of Subordinated Debt; and
5
(b) Any payment or distribution of assets of any kind or
character, whether in cash, property or securities to which the Holder would be
entitled, but for the provisions of this Note, shall be paid or distributed by
the liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or other trustee or agent, directly to the holders of Senior Debt and any other
representative on behalf of the holders of Senior Debt to the extent necessary
to make payment in full of all amounts of Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of the
Senior Debt.
4.5 Payment Over to Senior Debt. Should any payment or distribution
---------------------------
or security or the proceeds of any thereof be collected or received by the
Holder in respect to the Subordinated Debt, at a time when the payment thereof
by DMC is prohibited by the terms of this Note, the Holder will forthwith
deliver the same to a representative on behalf of the holders of Senior Debt for
the equal and ratable benefit of the holders of the Senior Debt in precisely the
form received (except for the endorsement or the assignment of or by the Holder
where necessary) for application to payment of all Senior Debt in full, after
giving effect to any concurrent payment or distribution to the holders of Senior
Debt and, until so delivered, the same shall be held in trust by the Holder as
the property of the holders of the Senior Debt.
4.6 Subrogation to Rights of Holders of Senior Debt. The Holder
-----------------------------------------------
shall not be subrogated to the rights of the holders of the Senior Debt to
receive payments or distributions of assets of DMC until all amounts payable
with respect to the Senior Debt shall be paid in full, and, for the purposes of
such subrogation, no payments or distributions to the holders of the Senior Debt
of any cash, property or securities to which the Holder would be entitled except
for these provisions shall, as between DMC, its creditors other than the holders
of the Senior Debt, and the Holder of this Note, be deemed to be a payment by
DMC to or on account of the Senior Debt. The subordination provisions of this
Note are and are intended solely for the purpose of defining the relative rights
of the Holder, on the one hand, and the holders of the Senior Debt, on the other
hand. Subject to the payment in full of all of the Senior Debt, the Holder of
this Note shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of DMC
applicable to the Senior Debt until all amounts owing on the Subordinated Debt
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the Holder of cash, property, securities or other assets by
virtue of the subrogation herein provided which otherwise would have been made
to the holders of the Senior Debt shall, as between DMC, its creditors other
than the holders of Senior Debt and the Holder of this Note, be deemed to be a
payment to or on account of the Subordinated Debt. The Holder agrees that, in
the event that all or any part of any payment made on account of the Senior Debt
is recovered from the holders of Senior Debt as a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law, any
payment or distribution received by the Holder on account of the Subordinated
Debt at any time after the date of the payment so recovered, whether pursuant to
the right of subrogation provided for in this Note or otherwise, shall be deemed
to have been received by the Holder in trust as the property of the holders of
the Senior Debt and the Holder shall forthwith deliver the same to a
representative on behalf of the holders of the Senior Debt for the equal and
ratable benefit of the holders of the Senior Debt for application to payment of
all Senior Debt in full.
6
4.7 Waiver of Notice. The Holder of this Note hereby waives any and
----------------
all notice in respect of the Senior Debt, present or future, and agrees and
consents that without notice to or assent by any holder or holders of the
Subordinated Debt:
(a) the obligations and liabilities of DMC or any other party
or parties for or upon the Senior Debt (or any promissory note, security
document or guaranty evidencing or securing the same) may, from time to time, in
whole or in part, be renewed, extended, modified, amended, restated,
accelerated, compromised, supplemented, terminated, sold, exchanged, waived or
released;
(b) the holders of the Senior Debt may exercise or refrain from
exercising any right, remedy or power granted by or in connection with any
agreements relating to the Senior Debt; and
(c) any balance or balances of funds with any holders of the
Senior Debt at any time standing to the credit of DMC may, from time to time, in
whole or in part, be surrendered or released;
all as the holders of the Senior Debt may deem advisable and all without
impairing, abridging, diminishing, releasing or affecting the subordination of
the Subordinated Debt to the Senior Debt provided for herein.
4.8 Provisions Solely to Define Relative Rights. Nothing contained
-------------------------------------------
in the subordination provisions of this Note is intended to or shall impair, as
between DMC, its creditors other than the holders of the Senior Debt, and the
Holder, the obligation of DMC, which is absolute and unconditional, to pay to
the Holder the principal of, premium, if any, and interest on this Note, as and
when the same shall become due and payable (except as otherwise provided in this
Note) in accordance with its terms, or is intended to or shall affect the
relative rights of the Holder and other creditors of DMC other than the holders
of the Senior Debt.
4.9 Reliance by Holders of Senior Debt. The Holder of this Note
----------------------------------
acknowledges and agrees that the holders of the Senior Debt have relied upon and
will continue to rely upon the subordination provided for herein in entering
into the agreements relating to Senior Debt and in extending credit to DMC
pursuant thereto. No present or future holder of Senior Debt shall be
prejudiced in its right to enforce the subordination contained herein in
accordance with the terms hereof by any act or failure to act on the part of DMC
or the Holder. The subordination provisions contained herein are for the
benefit of the holders of the Senior Debt from time to time and, so long as any
Senior Debt is outstanding under any agreement, may not be rescinded, cancelled
or modified in any way without the prior written consent thereto of holders of a
majority in aggregate principal amount of Senior Debt.
4.10 Court Order. Notwithstanding anything to the contrary in this
-----------
Note, upon any payment or distribution of assets of DMC in any proceedings for
reorganization, insolvency, liquidation, dissolution or other winding up, the
Holder shall be entitled to rely upon any final order or decree made by any
court of competent jurisdiction in which any such proceedings are pending for
the purpose of ascertaining the persons entitled to participate in such payment
or
7
distribution, the holders of the Senior Debt and other debt of DMC, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto.
4.11 Binding Upon Successors and Assigns. The subordination
-----------------------------------
provisions hereof shall be binding upon any holder of Subordinated Debt and upon
the successors and assigns of the Holder; and all references herein to the
Holder shall be deemed to include any successor or successors, whether immediate
or remote, to the Holder.
4.12 Undertaking. By its acceptance of this Note, the Holder hereof
-----------
agrees to execute and deliver such documents as may be reasonably requested from
time to time by DMC or the holders of any Senior Debt in order to implement the
foregoing provisions of this Section 4.
5. Miscellaneous
-------------
5.1 Waiver. DMC hereby waives diligence, presentment, demand,
------
protest and any other notices of any kind in the enforcement of this Note, save
as otherwise specifically provided herein.
5.2 Notices. All notices and waivers hereunder shall be in writing
-------
and shall be given, in the case of DMC, at Xxxxxxxx Manufacturing Company, Inc.,
c/o Westar Capital, 000 Xxxxx Xxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxx, Xxxxxxxxxx
00000, Attention Xxxx X. Xxxxx (or such other address as may have been notified
to the Holder in accordance with the provisions of this section) and, in the
case of the Holder, to Holder at _____________________________ ______________
(or such other address as it may have notified to DMC in accordance with the
provisions of this section).
5.3 No Course of Dealing. No course of dealing between DMC and the
--------------------
Holder of this Note or any delay on the part of the Holder in exercising any
rights under this Note shall operate as a waiver thereof.
5.4 Severability. If any one or more of the provisions contained in
------------
this Note shall be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired.
5.5 Governing Law. The terms of this Note shall be governed by the
-------------
laws of the State of California applicable to agreements entered into, to be
wholly performed in and among residents exclusively of, Texas.
8
5.6 Waiver and Amendment. Any provision of this Note may be amended,
--------------------
waived, or modified upon the written consent of DMC and the holder of this Note.
XXXXXXXX MANUFACTURING COMPANY, INC.
By: ________________________________________
[ ]
Its: President
9
Appendix A-3
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, OR TRANSFERRED EXCEPT
IN COMPLIANCE THEREWITH.
XXXXXXXX MANUFACTURING COMPANY, INC.
SUBORDINATED NOTE
Arlington, Texas
$__________________ _________________
FOR VALUE RECEIVED, Xxxxxxxx Manufacturing Company, Inc., a Texas
corporation ("DMC"), promises to pay to the order of _________________
---
("________"), his, her or its registered successors and assigns (the "Holder"),
------
in lawful money of the United States of America, the principal sum of
___________________________________ ($________), or such lesser amount as shall
then equal the outstanding principal amount hereof, with simple interest
(computed on the basis of a 365-day year) on the unpaid principal balance hereof
accruing from the date hereof (the "Effective Date") at ten percent (10%) per
--------------
annum simple interest both principal and interest to be payable as provided
herein.
It is the intent of DMC and Holder in the making and acceptance of this
Note to contract in strict compliance with the usury laws of the State of Texas
(including any superseding federal law), if and to the extent applicable. In
the event Holder shall collect monies which are deemed to constitute interest in
excess of that permitted to be charged by the laws of the State of Texas
(including any superseding federal law), if and to the extent applicable, all
such sums so deemed to constitute interest in excess of the maximum lawful
interest rate shall be credited as of the date of collection to the payment of
principal. Any sums collected by Holder which exceed the amount of the
remaining principal and accrued interest hereunder shall be returned to DMC.
This Note is one of the Subordinated Promissory Notes into which the Series
C Preferred Stock of DMC may be converted as referred to in Section 6.1 of that
certain Amended and Restated Securityholders Agreement (the "Agreement") entered
---------
into as of ____________, 1997, by and among DMC, Westar Capital, Westar LLC,
Enterprise Partners III, L.P., Enterprise Partners III Associates, L.P., HBI
Financial, Inc., Xxxxxxx X. Xxxxxxx III, Xxxxxxx X. Xxxxxx and the other
securityholders party thereto. The original principal amount of this Note shall
be determined in accordance with the provisions of Section 6.1 of the Agreement.
1
The following is a statement of the rights of the Holder of this Note and
the conditions to which this Note is subject, and to which the Holder hereof, by
the acceptance of this Note, agrees:
1. Definitions
-----------
The following terms shall have the following respective meanings:
"Bankruptcy Law" means Xxxxx 00, Xxxxxx Xxxxxx Code or any similar
--------------
Federal or State law for the relief of debtors.
"Corporate Transactions" means (a) the combination of DMC with another
----------------------
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation); or (b) a sale
of all or substantially all of the assets of DMC; unless DMC's shareholders of
------
record as constituted immediately prior to such combination or sale will,
immediately after such acquisition or sale (by virtue of securities issued as
consideration for this corporation's acquisition or sale or otherwise) hold at
least 50% of the voting power of the surviving or acquiring entity.
"Custodian" means any receiver, trustee, assignee, liquidator or
---------
similar official under any Bankruptcy Law.
"Senior Debt" means all principal of, premium and interest (including,
-----------
without limitation, any interest which accrues (or which would accrue but for
such case, proceeding or other action) after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of DMC (whether or not such interest is allowed or allowable as a
claim in such case, proceeding or other action)) on any indebtedness created,
incurred, assumed or guaranteed by DMC and its subsidiaries (present or future),
whether now existing or hereafter arising, due or to become due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, under any
working capital or other credit agreement or facility with a commercial bank,
insurance company, other recognized financial institution, any debt issued to
the public pursuant to a private placement or a registration statement filed
with and declared effective by the Securities and Exchange Commission, any debt
incurred in connection with any past or future acquisitions by DMC and its
subsidiaries (present or future), and any sale/leaseback financing on equipment
or real estate of DMC. Without limiting the generality of the foregoing,
"Senior Debt" shall also include the principal of, premium, if any, interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on, and
all other amounts owing in respect of, DMC's Senior Subordinated Notes due 2007
issued pursuant to the Indenture between DMC and the trustee, including any debt
securities issued in exchange for such notes (the "Senior Subordinated Notes")
and shall also include such amounts owing (including principal, premium, if any,
interest (including interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law)) under
the credit agreement by and among DMC, NationsBanc Capital Markets, Inc. and
Xxxxxxxxx, Lufkin & Xxxxxxxx, as arrangers and syndication agents,
2
certain lending parties thereto, and NationsBank of Texas, N.A., as agent, as it
may be amended from time to time (the "Senior Credit Facility").
2. Payments.
--------
2.1 Payments of Principal and Interest.
----------------------------------
(a) Subject to the terms and conditions of this Note, the
principal then outstanding hereunder, together with all accrued and unpaid
interest thereon, shall be due and payable upon the consummation of (i) a
Corporate Transaction or (ii) an initial public offering of DMC's Common Stock.
(b) Interest payments shall be paid on March 1 of each year
commencing March 1, ____ at the sole discretion of the Board of Directors of
DMC.
2.2 Place of Payments. All payments required to be made hereunder to
-----------------
the Holder shall be made on the due date by crediting before 11:00 a.m. Texas
time, by federal funds bank wire transfer, such bank account in such bank in the
United States as the Holder may previously have designated in writing to DMC.
If any day upon which principal and/or interest of this Note is payable is a day
other than a business day (being a day other than a Saturday, Sunday, or a day
on which banking institutions in Dallas, Texas are authorized or obligated by
law or executive order to close), payment of the principal and/or interest then
due may be made on the next succeeding business day with the same force and
effect as if it had been made on the due date; provided, that this Note shall
continue to bear interest at the contractual rate until the actual date of
payment.
2.3 Optional Prepayments. The principal amount of this Note may be
--------------------
prepaid at any time in whole or in part without penalty or premium; provided,
that all interest accrued and unpaid to the prepayment date is paid
simultaneously therewith; and, provided further, that no prepayment can be made
unless all of the Series B and Series C Preferred Stock has been redeemed and
the debt issued upon the conversion of the Series B Preferred Stock, if any, has
been paid in full. DMC shall notify the Holder of its intention to prepay this
Note, in whole or in part, by giving notice at least two (2) business days
before the proposed payment date and any such notice, once given, shall be
irrevocable. Any payment made pursuant to this Section 2.3 shall be applied,
first, to interest accrued and unpaid to the date of such prepayment and,
second, to the then outstanding principal amount of this Note.
3. Events of Default and Remedies.
------------------------------
3.1 Events of Default. Each of the following events shall constitute
-----------------
an event of default (individually, an "Event of Default"; collectively, "Events
---------------- ------
of Default"):
----------
(a) DMC shall default in the due and punctual payment of all or
any part of the principal of this Note, or accrued interest thereon when and as
such principal and interest shall become due and payable, whether by
acceleration or otherwise, and such default
3
shall continue for a period of ten (10) business days after the Holder has given
DMC written notice of such default;
(b) DMC, pursuant to or within the meaning of any Bankruptcy
Law, (i) files a voluntary petition in bankruptcy or a petition or answer
seeking reorganization, to effect a plan or other arrangement with creditors or
any other relief; (ii) consents to the entry of an order for relief against it
in an involuntary case; (iii) consents to the appointment of a Custodian of it
or for all or substantially all of its property; or (iv) makes a general
assignment for the benefit of its creditors; or
(c) A court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against DMC in an involuntary
case; (ii) appoints a Custodian of DMC for all, or substantially all its
property; or (iii) orders the liquidation of DMC, and in any such case the order
or decree remains in effect for ninety (90) days.
3.2 Remedies. If an Event of Default shall occur and be continuing,
--------
the Holder or Holders of this Note may, subject to Section 4 below, declare, by
notice in writing given to DMC, the entire unpaid principal amount of this Note
together with interest accrued thereon, to be immediately due and payable, in
which case this Note shall become immediately due and payable, both as to
principal and interest, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived.
3.3 Suits for Enforcement. Subject to Section 4 below, at any time
---------------------
after this Note is declared to be due and payable, the Holder of this Note may
proceed to protect and enforce its rights either by suit in equity or by action
at law, or both, whether for specific performance of any covenant or agreement
contained in this Note, or the Holder of this Note may proceed to enforce any
other legal or the equitable right as the Holder of such Note. No remedy is
intended to be exclusive, and each remedy shall be cumulative.
4. Subordination.
-------------
4.1 Payment of Note Subordinated to Senior Debt. DMC and the Holder
-------------------------------------------
agree for the benefit of the Senior Debt that all indebtedness evidenced by this
Note, including principal, premium, if any, and interest, and all other amounts
payable to the Holder hereunder (collectively, the "Subordinated Debt") shall,
-----------------
to the extent hereinafter set forth, be subordinate and junior to all Senior
Debt in all respects.
4.2 No Payments With Respect to Note in Certain Circumstances.
---------------------------------------------------------
Unless and until all principal of, premium, if any, and interest on, and all
other obligations of DMC under, any Senior Debt shall have been paid in full and
all commitments to extend Senior Debt shall have terminated, neither DMC nor any
of its subsidiaries or affiliates shall make, and the Holder shall not demand,
accept or receive, or attempt to collect or commence any legal proceedings to
collect, any direct or indirect payment (in cash or property or by setoff,
exercise of contractual or statutory rights or otherwise) of or on account of
any amount payable on or with respect to this Note (excluding the accrual of
interest hereon) or any interest herein; provided that this Section 4.2 shall
not prevent the payment in cash of principal and interest on this Note
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(excluding the accrual of interest hereon), but only if (i) both before and
after giving effect to such payment, no default ("Payment Default") in payment
---------------
of any principal of or premium or interest on any Senior Debt or payment of
dividends on Series B or Series C Preferred Stock or redemption of Series B
Preferred Stock shall have occurred and be continuing and (ii) (A) so long as
any Senior Debt remains outstanding, the holders thereof shall have not
determined (and notified DMC of its determination) that there has occurred a
material adverse change, or development involving a prospective change, in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of DMC and its subsidiaries, taken as a whole, since the
respective dates as of which such Senior Debt is incurred; and (B) DMC shall not
have received written notice from holders of any Senior Debt that a default
(other than a Payment Default) under any Senior Debt shall have occurred and be
continuing, or that such payment on this Note would result in such a default,
permitting such holders to accelerate the maturity thereof; provided, that in
the case of this clause (ii), the period (a "Payment Blockage Period") during
-----------------------
which such payments on this Note shall be prohibited shall commence on the date
of receipt of such notice and end on the earliest of (x) 179 days thereafter,
(y) the date on which such default shall have been waived in writing or cured
and (z) the date on which the benefits of this clause (ii) shall have been
waived in writing by such Senior Debt lender or lenders. Notwithstanding
anything in clause (ii) to the contrary, in no event will a Payment Blockage
Period extend beyond 179 days from the date payment on this Note was due. Any
payment under this Note not permitted by this Section 4.2 to be paid shall be
deemed to not have been due and payable on such date and the failure to make
such payment shall not constitute an Event of Default hereunder.
4.3 Initiation of Actions. Unless and until all principal of,
---------------------
premium, if any, and interest on, and all other obligations of DMC under, the
Senior Debt shall have been paid in full and all commitments to extend Senior
Debt shall have terminated, the Holder will not commence or maintain any action,
suit or any other legal or equitable proceeding against DMC, or join with any
creditor in any such proceeding, under any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar law, unless the holders of Senior
Debt shall also join in bringing such proceeding; provided, that the foregoing
shall not prohibit the Holder from filing a proof of claim or otherwise
participating in any such proceeding not commenced by it.
4.4 Note Subordinated on Dissolution, Liquidation, Reorganization,
-------------------------------------------------------------
Etc. In the event of any insolvency or bankruptcy proceedings, and any
----
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to DMC or its creditors, in their capacity as
creditors of DMC, or to substantially all of its property, and in the event of
any proceedings for voluntary liquidation, dissolution or other winding up of
DMC, whether or not involving insolvency or bankruptcy, then:
(a) The holders of the Senior Debt shall first be entitled to
receive payment in full of the principal thereof, premium, if any, interest and
all other amounts payable thereon (accruing before and after the commencement of
the proceedings, whether or not allowed or allowable as a claim in such
proceedings) before the Holder is entitled to receive any payment on account or
in respect of Subordinated Debt; and
5
(b) Any payment or distribution of assets of any kind or
character, whether in cash, property or securities to which the Holder would be
entitled, but for the provisions of this Note, shall be paid or distributed by
the liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or other trustee or agent, directly to the holders of Senior Debt and any other
representative on behalf of the holders of Senior Debt to the extent necessary
to make payment in full of all amounts of Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of the
Senior Debt.
4.5 Payment Over to Senior Debt. Should any payment or distribution
---------------------------
or security or the proceeds of any thereof be collected or received by the
Holder in respect to the Subordinated Debt, at a time when the payment thereof
by DMC is prohibited by the terms of this Note, the Holder will forthwith
deliver the same to a representative on behalf of the holders of Senior Debt for
the equal and ratable benefit of the holders of the Senior Debt in precisely the
form received (except for the endorsement or the assignment of or by the Holder
where necessary) for application to payment of all Senior Debt in full, after
giving effect to any concurrent payment or distribution to the holders of Senior
Debt and, until so delivered, the same shall be held in trust by the Holder as
the property of the holders of the Senior Debt.
4.6 Subrogation to Rights of Holders of Senior Debt. The Holder
-----------------------------------------------
shall not be subrogated to the rights of the holders of the Senior Debt to
receive payments or distributions of assets of DMC until all amounts payable
with respect to the Senior Debt shall be paid in full, and, for the purposes of
such subrogation, no payments or distributions to the holders of the Senior Debt
of any cash, property or securities to which the Holder would be entitled except
for these provisions shall, as between DMC, its creditors other than the holders
of the Senior Debt, and the Holder of this Note, be deemed to be a payment by
DMC to or on account of the Senior Debt. The subordination provisions of this
Note are and are intended solely for the purpose of defining the relative rights
of the Holder, on the one hand, and the holders of the Senior Debt, on the other
hand. Subject to the payment in full of all of the Senior Debt, the Holder of
this Note shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of cash, property or securities of DMC
applicable to the Senior Debt until all amounts owing on the Subordinated Debt
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the Holder of cash, property, securities or other assets by
virtue of the subrogation herein provided which otherwise would have been made
to the holders of the Senior Debt shall, as between DMC, its creditors other
than the holders of Senior Debt and the Holder of this Note, be deemed to be a
payment to or on account of the Subordinated Debt. The Holder agrees that, in
the event that all or any part of any payment made on account of the Senior Debt
is recovered from the holders of Senior Debt as a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law, any
payment or distribution received by the Holder on account of the Subordinated
Debt at any time after the date of the payment so recovered, whether pursuant to
the right of subrogation provided for in this Note or otherwise, shall be deemed
to have been received by the Holder in trust as the property of the holders of
the Senior Debt and the Holder shall forthwith deliver the same to a
representative on behalf of the holders of the Senior Debt for the equal and
ratable benefit of the holders of the Senior Debt for application to payment of
all Senior Debt in full.
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4.7 Waiver of Notice. The Holder of this Note hereby waives any and
----------------
all notice in respect of the Senior Debt, present or future, and agrees and
consents that without notice to or assent by any holder or holders of the
Subordinated Debt:
(a) the obligations and liabilities of DMC or any other party or
parties for or upon the Senior Debt (or any promissory note, security document
or guaranty evidencing or securing the same) may, from time to time, in whole or
in part, be renewed, extended, modified, amended, restated, accelerated,
compromised, supplemented, terminated, sold, exchanged, waived or released;
(b) the holders of the Senior Debt may exercise or refrain from
exercising any right, remedy or power granted by or in connection with any
agreements relating to the Senior Debt; and
(c) any balance or balances of funds with any holders of the
Senior Debt at any time standing to the credit of DMC may, from time to time, in
whole or in part, be surrendered or released;
all as the holders of the Senior Debt may deem advisable and all without
impairing, abridging, diminishing, releasing or affecting the subordination of
the Subordinated Debt to the Senior Debt provided for herein.
4.8 Provisions Solely to Define Relative Rights. Nothing contained
-------------------------------------------
in the subordination provisions of this Note is intended to or shall impair, as
between DMC, its creditors other than the holders of the Senior Debt, and the
Holder, the obligation of DMC, which is absolute and unconditional, to pay to
the Holder the principal of, premium, if any, and interest on this Note, as and
when the same shall become due and payable (except as otherwise provided in this
Note) in accordance with its terms, or is intended to or shall affect the
relative rights of the Holder and other creditors of DMC other than the holders
of the Senior Debt.
4.9 Reliance by Holders of Senior Debt. The Holder of this Note
----------------------------------
acknowledges and agrees that the holders of the Senior Debt have relied upon and
will continue to rely upon the subordination provided for herein in entering
into the agreements relating to Senior Debt and in extending credit to DMC
pursuant thereto. No present or future holder of Senior Debt shall be
prejudiced in its right to enforce the subordination contained herein in
accordance with the terms hereof by any act or failure to act on the part of DMC
or the Holder. The subordination provisions contained herein are for the
benefit of the holders of the Senior Debt from time to time and, so long as any
Senior Debt is outstanding under any agreement, may not be rescinded, cancelled
or modified in any way without the prior written consent thereto of holders of a
majority in aggregate principal amount of Senior Debt.
4.10 Court Order. Notwithstanding anything to the contrary in this
-----------
Note, upon any payment or distribution of assets of DMC in any proceedings for
reorganization, insolvency, liquidation, dissolution or other winding up, the
Holder shall be entitled to rely upon any final order or decree made by any
court of competent jurisdiction in which any such proceedings are pending for
the purpose of ascertaining the persons entitled to participate in such payment
or
7
distribution, the holders of the Senior Debt and other debt of DMC, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto.
4.11 Binding Upon Successors and Assigns. The subordination
-----------------------------------
provisions hereof shall be binding upon any holder of Subordinated Debt and upon
the successors and assigns of the Holder; and all references herein to the
Holder shall be deemed to include any successor or successors, whether immediate
or remote, to the Holder.
4.12 Undertaking. By its acceptance of this Note, the Holder hereof
-----------
agrees to execute and deliver such documents as may be reasonably requested from
time to time by DMC or the holders of any Senior Debt in order to implement the
foregoing provisions of this Section 4.
5. Miscellaneous
-------------
5.1 Waiver. DMC hereby waives diligence, presentment, demand,
------
protest and any other notices of any kind in the enforcement of this Note, save
as otherwise specifically provided herein.
5.2 Notices. All notices and waivers hereunder shall be in writing
-------
and shall be given, in the case of DMC, at Xxxxxxxx Manufacturing Company, Inc.,
c/o Westar Capital, 000 Xxxxx Xxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxx, Xxxxxxxxxx
00000, Attention Xxxx X. Xxxxx (or such other address as may have been notified
to the Holder in accordance with the provisions of this section) and, in the
case of the Holder, to Holder at ___________________________________________
(or such other address as it may have notified to DMC in accordance with the
provisions of this section).
5.3 No Course of Dealing. No course of dealing between DMC and the
--------------------
Holder of this Note or any delay on the part of the Holder in exercising any
rights under this Note shall operate as a waiver thereof.
5.4 Severability. If any one or more of the provisions contained in
------------
this Note shall be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired.
5.5 Governing Law. The terms of this Note shall be governed by the
-------------
laws of the State of California applicable to agreements entered into, to be
wholly performed in and among residents exclusively of, Texas.
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5.6 Waiver and
----------
Amendment. Any provision of this Note may be amended, waived, or modified upon
---------
the written consent of DMC and the holder of this Note.
XXXXXXXX MANUFACTURING COMPANY, INC.
a Texas corporation
By: ________________________________
[ ]
Its: President
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