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EXHIBIT 10.27
XXXXX MICROCOMPUTER PRODUCTS, INC.
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT ("Shareholders' Agreement"), is made as of
the 16th day of April, 1996, by and among XXXXXX X. XXXXX, a resident of the
State of Georgia (individually, and not including any successor, the "Principal
Shareholder"), the persons or entities listed on Schedule 1 hereto (the
"Investors") (hereinafter the Principal Shareholder and the Investors are
sometimes referred to collectively as the "Shareholders" and individually as a
"Shareholder"), and XXXXX MICROCOMPUTER PRODUCTS, INC., a Georgia corporation
(hereinafter referred to as the "Company").
R E C I T A L S:
WHEREAS, the Company is a duly organized and existing corporation under
the laws of the State of Georgia;
WHEREAS, the Shareholders, contemporaneously with the execution and
delivery of this Shareholders' Agreement, acquired and have voting control in
respect of (A) an aggregate of 4,943,221 shares of the Common Stock, no par
value, of the Company (the "Common Stock"), which constitute 96.9% of the issued
and outstanding shares of Common Stock of the Company on the date hereof and (B)
an aggregate of 4,900,000 shares of Series A Preferred Stock of the Company (the
"Series A Preferred Stock") which constitute all of the issued and outstanding
preferred stock of the Company on the date hereof, in each case as set forth
with respect to each Shareholder on Schedule 1 to this Shareholders' Agreement;
and
WHEREAS, the Shareholders wish to enter into this Shareholders'
Agreement pursuant to Section 14-2-731 of the Georgia Business Corporation Code
for the purposes of defining their respective rights and obligations with
respect to the Stock (as hereinafter defined) and making certain provisions for
the regulation of the Company's affairs;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by all parties, it is agreed as
follows:
1. DEFINITIONS AND OWNERSHIP.
1.1 DEFINITIONS. As used in this Shareholders' Agreement, the following
terms shall have the following meanings:
(a) "Acquisition Offer" shall mean a bona fide offer
to the Company, on arm's length terms, subject to conditions
and obligations on the part of the seller(s) that are usual
and customary in similar transactions, that provides for
ratable treatment of the Shareholders (but may take into
account the rights and
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preferences of the Preferred Shares), and which would result
in the sale of the Company, including by a sale of stock or
exchange of shares or acquisition of all or substantially all
of the assets, subject to all or substantially all
liabilities, of the Company, or the merger, consolidation or
reorganization of the Company with or into any other
corporation or corporations in which the Company would not be
the surviving entity (other than a mere reincorporation
transaction).
(b) "Affiliate" shall mean with respect to a Person,
any other Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under
common control with such first Person.
(c) "Anti-Dilution Warrant" shall mean the warrant
issued to Rinzai pursuant to the Merger Agreement and referred
to therein as the "Warrant."
(d) "Balance" shall have the meaning ascribed to that
term in Section 2.4 of this Shareholders' Agreement.
(e) "Board of Directors" shall mean the board of
directors of the Company, as constituted from time to time.
(f) "Board Warrants" shall mean any warrants for the
purchase of Common Stock of to up to six percent (6%) of the
Stock of the Company issued and outstanding immediately after
the Closing Date on a fully diluted basis (but without giving
effect to the Board Warrants or the options provided for in
Section 10.4 of this Shareholders' Agreement) issued from time
to time pursuant to the Company's existing Directors'
Incentive Stock Plan or any successor warrant issuance plan.
(g) "CEO" shall have the meaning ascribed to that
term in Section 10.6(a) of this Shareholders' Agreement.
(h) "Chairman" shall mean the Chairman of the Board
of Directors of the Company.
(i) "Closing Date" shall mean the date on which the
transactions contemplated by the Merger Agreement are
consummated and shall have the same meaning as the phrase
"date of the Closing" used in the Merger Agreement.
(j) "Common Stock" shall mean the $0.01 par value per
share voting common stock of the Company.
(k) "Convertible Promissory Note" shall have the
meaning ascribed to that term in Section 10.5 of this
Shareholders' Agreement.
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(l) "Director" shall mean a Person who is at the time
in question a member of the Board of Directors.
(m) "Employee Plan" shall mean the Company's Profit
Sharing, Savings and Stock Plan.
(n) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(o) "Exercise Notice" shall mean written notice,
which shall be irrevocable, by or on behalf of any Shareholder
or the Company, as applicable, entitled to exercise an option
or election to purchase all or any Offered Shares pursuant to
Article 2 hereof or to exercise such Shareholder's co-sale
rights pursuant to Article 3 hereof, given to any Transferor
or selling Shareholder, or its representative, within the
acceptance period, specifying a date for the closing of the
purchase, if applicable, which closing date shall conform to
the applicable requirements of Article 2 or 3, as the case may
be, and such notice shall specify the number of Offered Shares
which the purchasing Shareholder or the Company, as the case
may be, elects to purchase or in respect of which such
Shareholder wishes to exercise co-sale rights.
(p) "Expiration Date" shall have the meaning ascribed
to that term in Section 2.2 of this Shareholders' Agreement.
(q) "GAAP" shall have the meaning ascribed to that
term in Section 10.1 of this Shareholders' Agreement.
(r) "Holder" shall mean any Person owning or having
the right to acquire Registrable Securities or any assignee
thereof in accordance with Section 9.12 hereof.
(s) "Hong Kong Group" shall mean the group of
Shareholders consisting of Rolling Profit Holdings Limited,
and Kaifa Technology (H.K.) Limited, and any Permitted
Transferee of such Shareholder.
(t) "Initial Public Offering" shall mean the first
public offering of Common Stock, which shall be pursuant to an
effective registration statement under the Securities Act
covering the offer and sale of the Common Stock and shall be
underwritten on a firm commitment basis.
(u) "Initiating Holders" shall have the meaning
ascribed to that term in Section 9.1 of this Shareholders'
Agreement.
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(v) "Investors" shall mean those persons or entities
set forth on Schedule 1 hereto, who are sometimes individually
referred to herein as an "Investor."
(w) "Liquidity Notice" shall have the meaning
ascribed to that term in Section 8.2(a) of this Shareholders'
Agreement.
(x) "Merger Agreement" shall mean that certain Xxxxx
Microcomputer Products, Inc. Agreement and Plan of Merger
dated as of April 12, 1996, by and among the Company, the
Principal Shareholder, and the Investors, as amended on the
date hereof, and as the same may be modified or amended from
time to time hereafter.
(y) "New Securities" shall mean any Stock whether
now authorized or not, and rights, options, or warrants to
purchase Stock, and securities of any type whatsoever that
are, or may become, convertible into Stock; PROVIDED, HOWEVER,
that the term "New Securities" does not include (1) the
Preferred Shares, the Convertible Promissory Notes or the
Warrants; (2) securities issuable upon conversion or exercise
of the Preferred Shares, the Convertible Promissory Notes or
the Warrants; (3) securities offered to the public pursuant to
a registration statement filed under the Securities Act; (4)
securities issued pursuant to the acquisition by the Company
of another corporation, whether by merger, purchase of
substantially all of the assets of such corporation, purchase
or exchange of shares of such corporation, or other
reorganization whereby the Company owns not less than
fifty-one percent (51%) of the voting power of such
corporation; (5) securities issued to lending or leasing
institutions approved by the Board of Directors; (6) an
aggregate of 6% of the number (as of the date of this
Shareholders' Agreement) of outstanding shares of Stock issued
to employees and officers of the Company or to others pursuant
to plans, arrangements and agreements approved by the Board of
Directors; or (7) shares of Stock issued in connection with
any stock split, stock dividend, or recapitalization by the
Company.
(z) "Non-Offering Shareholders" shall have the
meaning ascribed to that term in Section 2.2 of this
Shareholders' Agreement.
(aa) "Offer" shall have the meaning ascribed to that
term in Section 2.1 of this Shareholders' Agreement.
(bb) "Offer Date" shall have the meaning ascribed to
that term in Section 2.2 of this Shareholders' Agreement.
(cc) "Offered Shares" shall mean any and all shares
of Stock required or desired to be offered for sale by a
Shareholder to any other Shareholder or
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Shareholders or the Company pursuant to the terms of this
Shareholders' Agreement and, if the "Offered Shares"
constitute all of the shares owned by an Investor, such term
may include and refer to any Anti-Dilution Warrant held by
such Person.
(dd) The phrase "owned or controlled" (or corollary
phrases) when used in this Shareholders' Agreement to describe
a Person's rights with respect to shares of Stock shall mean
that such Person has voting control over such shares, PROVIDED
that shares of Stock held in the Employee Plan shall not be
deemed to be "owned or controlled" by the trustee of the
Employee Plan at any time when the Principal Shareholder is
such trustee.
(ee) "Permitted Transferee" shall mean (i) as to the
Principal Shareholder, any transferee contemplated by Section
7.2, 7.3 or 7.4 and (ii) as to the Investors, any respective
transferee contemplated by Section 7.5, 7.6 or 7.7, PROVIDED
that in each case any other provisions of Article 7 applicable
to such transferee or to a transfer to such transferee are
complied with.
(ff) "Person" shall mean any natural person,
corporation, partnership, venture, joint venture, association,
or other entity whatsoever.
(gg) "Plan" shall mean the Second Amended and
Restated Plan of Reorganization dated July 20, 1995, as
modified, as confirmed by an order of the United States
Bankruptcy Court for the Northern District of Georgia entered
March 8, 1996 and an Order in Aid of Confirmation entered
April __, 1996.
(hh) "Preferred Shares" shall mean the issued and
outstanding shares of Series A Preferred Stock.
(ii) "Principal Shareholder Successor" shall mean for
purposes of Article 12, the single natural person who is a
Permitted Transferee of the Principal Shareholder and who at
the time in question exercises voting control over all shares
owned or controlled by the Principal Shareholder and his
Permitted Transferees.
(jj) "Proportion" shall mean, with respect to any
Shareholder entitled to purchase Offered Shares, the
proportion of the total number of such Offered Shares which
the total number of shares of Stock owned by each Shareholder
(or by the Principal Shareholder and his Permitted
Transferees) entitled to purchase Offered Shares bears to the
total number of shares of Stock owned by all Shareholders (or
by the Principal Shareholder and his Permitted Transferees)
entitled to purchase Offered Shares.
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(kk) "Register," "registered," and "registration"
shall mean a registration effected by preparing and filing a
registration statement or similar document in compliance with
the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(ll) "Registrable Securities" shall mean (1) the
Common Stock issuable or issued upon conversion of the
Preferred Shares or upon exercise of the Warrants, (2) shares
of Common Stock held by the Principal Shareholder as of the
date of this Shareholders' Agreement, and (3) any Common Stock
of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, such securities,
excluding in all cases, however, any Registrable Securities
sold by a Person in a transaction in which its registration
rights are not assigned.
(mm) "Registrable Securities then outstanding" shall
mean the number of shares of Common Stock outstanding which
are Registrable Securities and the number of shares of Common
Stock issuable pursuant to the exercise of warrants, options
or other rights and the conversion of convertible securities
which are exercisable for or convertible into Registrable
Securities.
(nn) "Rinzai" shall mean Rinzai Limited, a Hong Kong
company, and any Permitted Transferee;
(oo) "SEC" shall mean the Securities and Exchange
Commission.
(pp) "Securities Act" shall mean the Securities Act
of 1933, as amended.
(qq) "Singapore Group" shall mean the group of
Shareholders consisting of Lao Hotel (H.K.) Limited, Saliendra
Pte. Ltd. and S.P. Quek Investments, and any Permitted
Transferee of such Shareholders.
(rr) "Senior Financing" shall have the meaning
ascribed to that term in Section 10.5(a)(v) of this
Shareholders' Agreement.
(ss) "Stock" shall mean the Common Stock, the
Preferred Shares (on an as-converted basis) and any other
capital stock of the Company issued hereafter.
(tt) "Target IPO" shall mean an Initial Public
Offering initiated on the basis of a pre-offering valuation of
the Company by the underwriter engaged to manage the offering
of not less than One Hundred Fifty Million Dollars (US
$150,000,000) and estimated aggregate gross proceeds to the
Company of not less than Twenty Five Million Dollars (US
$25,000,000).
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(uu) "Terms" shall have the meaning ascribed to that
term in Section 2.2 of this Shareholders' Agreement.
(vv) "Transfer" shall have the meaning ascribed to
that term in Section 2.1 of this Shareholders' Agreement.
(ww) "Transferee" shall have the meaning ascribed to
that term in Section 2.2 of this Shareholders' Agreement.
(xx) "Transferor" shall have the meaning ascribed to
that term in Section 2.1 of this Shareholders' Agreement.
(yy) "Violation" shall have the meaning ascribed to
that term in Section 9.9 of this Shareholders' Agreement.
(zz) "Voting Trust" shall mean the Xxxxx
Microcomputer Products, Inc. Voting Trust Agreement dated
April 16, 1996, by and among the Principal Shareholder, the
Company, the Trustee named therein (the "Trustee") and such
other Shareholders (as defined therein) as may from time to
time be parties thereto, as such agreement may be amended,
modified, supplemented, or restated in accordance with the
terms thereof and hereof and in effect from time to time.
(aaa) "Warrants" shall mean the Anti-Dilution Warrant
and the Board Warrants.
1.2 CAPITALIZATION OF THE COMPANY. Unless changed by action of the
requisite majority of the Shareholders in accordance with Section 10.3 of this
Shareholders' Agreement, the authorized capital stock of the Company shall
consist of 10,000,000 shares of Series A Preferred Stock and 100,000,000 shares
of Common Stock.
2. REQUIRED OFFER PRIOR TO SALE AND OTHER RESTRICTIONS.
2.1 REQUIRED OFFER PRIOR TO SALE. No Shareholder may sell, give,
bequeath, pledge, assign, transfer or encumber in any manner whatsoever (all
such dispositions being hereinafter referred to as a "transfer" or "disposition"
and shall be deemed included in the verb "to dispose") any share of Stock or any
Anti-Dilution Warrant to any Person for a period of two (2) years after the date
of this Shareholders' Agreement, except for dispositions permitted under Section
7. After the expiration of such two (2) year period, no Shareholder may transfer
any share of Stock or any Anti-Dilution Warrant to any Person, except for
transfers or dispositions permitted under Section 7, unless the Shareholder
seeking to make the transfer (the "Transferor") shall first have made the
written offer to sell described in Section 2.2 below (the "Offer") and that
Offer has not
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been accepted pursuant to the terms of this Shareholders' Agreement, nor shall
any Investor transfer any Anti-Dilution Warrant other than in connection with a
transfer of Offered Shares.
2.2 OFFER BY TRANSFEROR. The Offer referred to in Section 2.1 shall be
given by the Transferor to the Company and to each of the other Shareholders
(herein the "Non-Offering Shareholders") and shall consist of a written Offer to
sell all the Offered Shares of Stock which the Transferor then intends to
dispose of, to which Offer shall be attached a statement of intention to dispose
of the Offered Shares pursuant to a bona fide offer from a prospective purchaser
or purchasers (the "Transferee"), a description of the contemplated disposition,
the name and address of each bona fide Transferee, the number of shares of Stock
involved in and other terms (the "Terms") of the proposed disposition. The Terms
shall include, without limitation, the purchase price per Offered Share offered
by each Transferee and the manner in which such purchase price shall be paid to
the Transferor. Such Offer shall be signed by the Transferor and shall remain
irrevocable until the earlier of (a) the time at which all of the Offered Shares
are accepted by the Company or the Non-Offering Shareholders, as provided in
Sections 2.3 and 2.4 or (b) one hundred twenty (120) days after the "Offer
Date," which date shall be the date on which a notice is given to the Company
and such Non-Offering Shareholders in accordance with the terms of Section 14.2
of this Shareholders' Agreement. The date on which the Offer becomes revocable
is referred to herein as the "Expiration Date."
2.3 ACCEPTANCE OF OFFER BY THE COMPANY. The Company may, at its option
exercised within sixty (60) days after the Offer Date, elect to purchase all or
any portion of the Offered Shares on the Terms (with the designees of the
selling Shareholder abstaining on any vote of the Board of Directors of the
Company with respect to such purchase). If and to the extent the Company does
not accept the Offer in accordance with this Section 2.3 with respect to all of
the Offered Shares, the Offered Shares may be disposed of in accordance with
Section 2.4. The Company shall exercise its option under this Section 2.3 by
giving an Exercise Notice. The Exercise Notice shall be in accordance with the
Terms. Any purchase by the Company of one hundred percent (100%) of the Offered
Shares shall be completed not later than ninety (90) days after the Offer Date
(subject to any extension of time required to permit necessary governmental or
regulatory filings, notices or approvals).
2.4 ACCEPTANCE OF OFFER BY SHAREHOLDERS. If and to the extent the
Company does not accept the Offer with respect to all of the Offered Shares in
accordance with the provisions of Section 2.3, the remaining Offered Shares
shall be deemed to be offered to the Non-Offering Shareholders and each
Non-Offering Shareholder may, at its option exercised within ten (10) days after
(i) the last day of the exercise period pursuant to Section 2.3 or, if earlier
(ii) the date on which the Company notifies the Shareholders of its election to
purchase less than all (or none) of the Offered Shares, elect to purchase not
more than its Proportion of the remaining Offered Shares. Each Non-Offering
Shareholder who exercises its option to purchase its Proportion of the Offered
Shares shall do so by giving an Exercise Notice. In the event that any such
Non-Offering Shareholder gives an Exercise Notice covering less than its
Proportion of the Offered Shares available to be purchased by Non-Offering
Shareholders (such shares not covered by Exercise Notices being referred to as
the "Balance"), each of the Non-Offering Shareholders that
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timely delivered an Exercise Notice covering its full Proportion of the Offered
Shares available to be purchased by Non-Offering Shareholders, may, by a second
Exercise Notice delivered within ten (10) days after the expiration of the first
ten (10) day period referred to above, elect to purchase up to that number of
Offered Shares that is equal to the product of the Balance multiplied by a
fraction, the numerator of which shall be such Non-Offering Shareholder's
Proportion of the number of Offered Shares first made available for purchase by
Non-Offering Shareholders pursuant to this Section 2.4, and the denominator of
which shall be the total number of such Offered Shares covered by the first
Exercise Notices timely delivered by all Non-Offering Shareholders which
purchased their respective full Proportions. If, after the expiration of the
second ten (10) day period any Offered Shares remain available to be purchased,
any Non-Offering Shareholder which has timely delivered Exercise Notices
covering the maximum number of Offered Shares available to it, may notify the
Company, within five (5) days after the expiration of such second ten (10) day
period of its desire to purchase additional Offered Shares, specifying the
maximum number of such Offered Shares it is willing to purchase. If more than
one such notice is received by the Company, the number of additional Offered
Shares shall be allocated to the Non-Offering Shareholders delivering such
notices in the same proportion as their respective offers bear to the total
number of Offered Shares available in the third and final round.
2.5 PURCHASES BY COMPANY AND SHAREHOLDERS. If the Company and the
Non-Offering Shareholders together, or the Non-Offering Shareholders (or any of
them) alone, elect to purchase 100% of the Offered Shares, the sale and purchase
of such shares shall be completed not later than one hundred and five (105) days
after the Offer Date (subject to any extension of time required to permit
necessary governmental or regulatory filings, notices or approvals). The
Transferor shall not be obligated to sell any Offered Shares to the Company or
to any Non-Offering Shareholder unless the Company and/or the Non-Offering
Shareholders have agreed to purchase, and purchase, 100% of the Offered Shares.
"Completion" of any sale pursuant to this Article 2 shall mean, at a minimum,
delivery by the selling Shareholder to each purchaser of certificate(s)
representing the number of shares of Stock to be sold, in form for transfer by
delivery, and payment by each purchaser of the purchase price therefor in
accordance with the Terms, or as may otherwise be agreed by the parties.
3. CO-SALE RIGHTS.
3.1 CO-SALE RIGHTS OF NON-OFFERING SHAREHOLDER. If the Company and the
Non-Offering Shareholders do not accept the Offer with respect to all of the
Offered Shares in accordance with the provisions of Sections 2.3 and 2.4, each
Non-Offering Shareholder may, by an Exercise Notice given to the Transferor not
earlier than ninety (90) days and not later than one hundred and twenty (120)
days after the Offer Date, elect to participate in such sale on the same terms
and conditions as the Terms pursuant to the formula set forth in Section 3.2 of
this Shareholders' Agreement. To the extent that a Non-Offering Shareholder
elects so to participate in such sale, the number of shares of Stock that the
Transferor may sell in the transaction shall be correspondingly reduced.
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3.2 SHARES ELIGIBLE FOR CO-SALE. Each Non-Offering Shareholder may sell
all or any part of that number of shares of Stock held by it or him, equal to
the product obtained by multiplying (i) the aggregate number of shares of Stock
covered by the Offer by (ii) a fraction (A) the numerator of which is the number
of shares of Stock (on an as-converted basis for all Preferred Shares) owned by
such Non-Offering Shareholder at the date of the Offer and (B) the denominator
of which shall be the sum of the total number of shares of Stock owned by the
Transferor at the date of the Offer and the total number of shares of Common
Stock (on an as-converted basis for all Preferred Shares) owned at the date of
the Offer by all Non-Offering Shareholders that desire to participate in such
sale pursuant to this Article 3.
3.3 PARTICIPATION. Each Non-Offering Shareholder shall effect its
participation in a sale by promptly delivering to Transferor for transfer to the
prospective purchaser one or more certificates, properly endorsed for transfer,
which represent the number of shares of Common Stock which such Non-Offering
Shareholder elects to sell or that number of Preferred Shares which (on an
as-converted basis) is convertible into the number of shares of Common Stock
which such Non-Offering Shareholder elects to sell. The Transferor shall hold
such shares for such Non-Offering Shareholder pending the consummation of the
sale transaction.
3.4 TRANSFER OF STOCK. The stock certificate or certificates that each
Non-Offering Shareholder delivers to the Transferor pursuant to Section 3.3
shall be transferred to the prospective purchaser upon the consummation of the
sale of the Stock pursuant to the Terms and any and all purchase agreements
agreed to by the parties, and the Transferor shall concurrently therewith remit
to such Non-Offering Shareholder that portion of the sale proceeds to which such
Non-Offering Shareholder is entitled by reason of its participation in such
sale. To the extent that any prospective purchaser refuses to purchase Stock
from a Non-Offering Shareholder, the Transferor shall not sell to such
prospective purchaser any shares of Stock unless and until, simultaneously with
such sale, the Transferor shall purchase from such Non-Offering Shareholder
(pursuant to the Terms) that number of shares of Stock which such Non-Offering
Shareholder had the right, pursuant to this Article 3, to sell to such
prospective purchaser.
4. SALE OF OFFERED SHARES TO TRANSFEREE.
If the Non-Offering Shareholders and the Company do not elect to
purchase all of the Offered Shares in accordance with the terms of Sections 2.3
and 2.4 and the Non-Offering Shareholders do not elect to exercise their co-sale
rights in accordance with the terms of Article 3, the Transferor shall not be
obligated to sell any of the Offered Shares to the Non-Offering Shareholders or
the Company or to reduce the number of Offered Shares which such Transferor may
sell in accordance with Article 3 and shall be entitled to dispose of all of the
Offered Shares to the Transferee on the Terms, PROVIDED that such disposition is
consummated within one hundred fifty (150) days (subject to any extension of
time required to permit necessary governmental or regulatory filings, notices or
approvals) after the Offer Date and the Transferee executes a counterpart of
this Shareholders' Agreement and agrees to remain bound by all terms of this
Shareholders' Agreement. Any proposed transfer on terms and conditions other
than the Terms, as well as any subsequent proposed transfer of any Stock by such
Shareholder, shall again
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be subject to the rights of the Company and the Non-Offering Shareholders and
shall require compliance by Transferor with the procedures described in Articles
2 and 3.
5. RIGHT OF FIRST REFUSAL WITH RESPECT TO NEW SECURITIES.
The Company hereby grants to each Shareholder, the right of first
refusal to purchase, pro rata, all (or any part) of any New Securities that the
Company may from time to time propose to sell and issue. Such Shareholder's pro
rata share, for purposes of this right of first refusal, is the ratio of the
number of shares of Stock (on an as-converted basis) held by such Shareholder as
compared to the total number of outstanding shares of Stock (on an as-converted
basis). This right of first refusal shall be subject to the following
provisions:
(a) In the event that the Company proposes to
undertake an issuance of New Securities, it shall give each
Shareholder written notice of its intention, describing the
type of New Securities, the price, and the general terms upon
which the Company proposes to issue the same. Each Shareholder
shall have twenty (20) days from the date such notice is given
to agree to purchase its pro rata share of such New Securities
for the price and upon the general terms specified in the
notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased. Each
purchasing Shareholder shall have a right of overallotment
such that if any Shareholder fails to exercise its right
hereunder to purchase its pro rata portion of New Securities,
the Company shall so notify the purchasing Shareholders and
the purchasing Shareholders may, upon notice given within ten
(10) days after the date on which they are notified that
additional New Securities are available, purchase the New
Securities otherwise allocable to any nonpurchasing
Shareholder on a pro rata basis (based on the number of shares
of Stock (on an as converted basis) held by such
Shareholders).
(b) If the Shareholders fail timely to exercise such
right of first refusal as to 100% of the New Securities
proposed to be issued, then the Company shall have one hundred
twenty (120) days after the expiration of the applicable
exercise period(s) provided in subsection (a) above to sell
the New Securities at a price and upon general terms no more
favorable to the purchasers thereof than were specified in the
Company's notice to the Shareholders of such proposed
issuance. In the event the Company has not sold the New
Securities within such one hundred twenty (120) day period,
the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to the
Shareholders in the manner provided above.
6. EFFECTS OF NON-PARTICIPATION
The exercise or non-exercise of the rights of any Shareholder or the
Company under Article 2, 3 or 5 to participate in one or more sales of shares of
Stock made by the Company or
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any Shareholder shall not adversely affect such Shareholder's or the Company's
right, as applicable, to participate in subsequent sales of shares of Stock
subject to Article 2, 3 or 5.
7. PERMITTED TRANSFERS.
The restrictions on transfer provided in Articles 2 and 3 shall be
inapplicable to:
7.1 Transfers involving public sales pursuant to a registration
statement filed under the Securities Act;
7.2 Transfers of shares of Stock by a Shareholder to his spouse or
children, or to one or more trusts revocable only by him, limited partnerships,
limited liability companies or similar entities established by such Shareholder,
in each case created for the direct benefit of himself, his spouse or his
children and in which he, his spouse and children are the only interest holders;
7.3 Transfers of shares of Stock between a Shareholder and his guardian
or conservator;
7.4 Transfers of shares of Stock of a deceased Shareholder to his heirs
or legal representatives;
7.5 Transfers of shares of Stock from a Shareholder to an Affiliate of
such Shareholder;
7.6 Transfers of shares of Stock from one member of the Hong Kong Group
to another member of the Hong Kong Group; or
7.7 Transfers of shares of Stock from Rinzai or one member of the
Singapore Group to another member of the Singapore Group or to Rinzai.
PROVIDED, that any such transfer is to a "Permitted Transferee" of such Person;
and PROVIDED FURTHER, HOWEVER, that, in the case of any such transfer other than
under Section 7.1, (a) the shares of Stock in the hands of such transferees
shall remain subject to the terms of this Shareholders' Agreement and, as a
condition precedent to such transfer, such transferee, if requested by the
Company or by any other party hereto, shall sign a counterpart of this
Shareholders' Agreement, (b) all such transfers of shares by the Principal
Shareholder shall be to, or shall result in voting control of all transferred
shares being exercisable by, a single natural person and (c) all such transfers
of shares by an Investor may, if of one hundred percent (100%) of its shares,
include any Anti-Dilution Warrant then held by it, and shall be to, or shall
result in voting control of all transferred shares being exercisable by, a
single Affiliate of such Investor, respectively.
In addition, any Shareholder may transfer shares of Common Stock to
a tax-exempt charitable organization subsequent to the second anniversary of the
date of this Shareholders'
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Agreement and such shares in the hands of any such transferee shall not be
subject to the terms of this Shareholders' Agreement other than the provisions
of Article 2 as applicable to any proposed sale of shares of Stock by such
organization, of Section 8.2 insofar as the provisions of either such Section
require a sale of shares of Stock by such shareholder, and of Section 14.1
hereof.
Any Shareholder making any such transfer will promptly notify
the Company and each other Shareholder thereof, and Schedule 1 hereto shall be
amended promptly after the giving of any such notice.
8. CERTAIN RIGHTS OF INVESTORS AND THE PRINCIPAL SHAREHOLDER.
8.1 At any time after the fourth (4th) anniversary of the date of this
Shareholders' Agreement, when Rinzai is a shareholder of the Company and an
Initial Public Offering has not been completed, Rinzai may, with the full
cooperation of the Company and the other Shareholders, and utilizing the
resources of the Company, retain, subject to the approval of the Board of
Directors of the Company, which approval shall not be unreasonably withheld, a
reputable investment banker or other appropriate professional advisor on behalf
of the Company to seek an Acquisition Offer from a third party (the customary
fees of which investment banker or other professional will be paid by the
Company) and in the event that such investment banker or other professional is
successful in soliciting an Acquisition Offer then the terms of Section 8.2 of
this Shareholders' Agreement shall apply; PROVIDED, HOWEVER, that the customary
fees of such investment banker or professional, which may be based on a
successful sale of the Company as an entirety, shall be borne by each
Shareholder ratably according to its respective shareholdings if the shares of
Stock held by Rinzai are purchased by other Shareholders pursuant to Section 8.2
of this Shareholders' Agreement.
8.2 (a) If at any time after the fourth (4th) anniversary of the date
of this Shareholders' Agreement, when Rinzai is a shareholder of the Company and
no Initial Public Offering has been completed, an Acquisition Offer (whether or
not solicited as contemplated by Section 8.1) is made by a third party and
Rinzai desires to accept such Acquisition Offer in accordance with its terms, it
shall notify the Company and the other Shareholders in writing (a "Liquidity
Notice") of such desire and shall provide to the Company and the other
Shareholders any and all information as to such Acquisition Offer that Rinzai
may have that has not been delivered to the other parties by the offeror. Any
Liquidity Notice shall include a prominent caption or other conspicuous
reference to this Section 8.2(a) and state that it is a "Liquidity Notice."
(b) Within thirty (30) days after the giving of a Liquidity Notice,
each of the other Shareholders shall advise the Company and Rinzai of his or its
desire to accept such Acquisition Offer or to reject it. Unless all of the other
Shareholders desire to accept such Acquisition Offer, then within forty (40)
days after the giving of the Liquidity Notice, the Company shall advise Rinzai
and the other Shareholders of the number of shares, if any, of Stock held by
Rinzai that the Company desires to purchase. If this number of shares is less
than one
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hundred percent (100%) of the number of shares of Stock owned by Rinzai, then
each of the other Shareholders may purchase any remaining shares of Rinzai
ratably in accordance with their ownership of Stock. If any of the other
Shareholders is entitled to but declines so to purchase Rinzai's shares of
Stock, the purchasing Shareholders, as the case may be, may purchase all such
remaining shares. The Shareholders shall advise Rinzai of his or its election so
to purchase shares from Rinzai by written notice given not later than fifty (50)
days after the giving of the Liquidity Notice.
(c) If the Company and the other Shareholders do not,
collectively, so elect to purchase one hundred percent (100%) of the shares of
Stock owned by Rinzai, then all Shareholders will be deemed to have accepted the
Acquisition Offer and each of the Shareholders will, if Board of Directors
approval is required for the transaction, cause the members of the Board of
Directors of the Company appointed by them, respectively, to vote in favor of
acceptance of the Acquisition Offer, and, together with any Shareholder
transferee that is a charitable organization subject to the provisions of
Article 7, will sell the shares of Stock or otherwise perform the obligations of
shareholders of the Company under and pursuant to such documents as may govern
the consummation of the Acquisition Offer.
8.3 Each sale pursuant to Section 8.2 of this Shareholders'
Agreement shall be on the following terms and conditions:
(a) The purchase price shall be a price per share
equal to that of the Acquisition Offer (PROVIDED that Rinzai
agrees to accept cash in lieu of non-cash property
contemplated by such Acquisition Offer to be transferred as
part of the purchase price thereunder, in an amount equivalent
to the fair market value of any such non-cash property, as
such fair market value is determined by a reputable,
qualified, independent appraiser, selected by Rinzai and
acceptable to the purchasing Shareholder(s) in their
reasonable judgment);
(b) The obligations of Rinzai with respect to such
sale shall be substantially similar to those contained in the
Acquisition Offer;
(c) The sale shall be consummated within sixty (60)
days (subject to any extension of time required to permit
necessary governmental or regulatory filings, notices or
approvals) after the date of the Liquidity Notice (or on or
before such later closing date as may be contemplated by the
Acquisition Offer); and
(d) Any or all of the Shareholders, as applicable,
shall and shall cause the Company to (if applicable),
simultaneously with the receipt of the certificate or
certificates for the shares to be sold by Rinzai pursuant to
this Article 8, pay the aggregate purchase price therefor, as
specified in this Article 8, in immediately available funds by
wire transfer to an account maintained with a United States
bank, as designated by Rinzai, or by other means acceptable to
Rinzai and such purchasers.
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8.4 No Shareholder shall have any obligation to solicit or accept,
other than from Xxxxxx X. Xxxxx as Principal Shareholder or from his guardian or
the executor or administrator of his estate, in either case, as the Person who
has succeeded to the Principal Shareholder's rights and obligations hereunder,
any request or instruction under this Shareholders' Agreement, including,
without being limited to, this Article 8 or Article 9.
9. REGISTRATION RIGHTS.
9.1 Request for Registration. If the Company shall receive at any time
after the completion of an Initial Public Offering, a written request from
Holders holding at least twenty percent (20%) of the Registrable Securities then
outstanding (the "Initiating Holders") that the Company file a registration
statement under the Securities Act on Form S-1 covering the registration of the
Registrable Securities then outstanding and such registration would cover sales
having an anticipated aggregate offering price, net of underwriting discounts
and commissions, equal to or more than Ten Million Dollars (US $10,000,000),
then the Company shall, within twenty-one (21) days after receipt thereof, give
written notice of such request to all Holders and shall, subject to the
limitations of subsections 9.1(a), (b) and (c), file as soon as practicable a
registration statement under the Securities Act covering all Registrable
Securities which the Holders request to be registered within twenty (20) days
after the date such notice is given by the Company in accordance with Section
14.2.
(a) Notwithstanding the foregoing, the Company shall
not be obligated to take any action to effect any such
registration pursuant to this Section 9.1:
(i) in any particular jurisdiction in
which the Company would be required to execute a
general consent to service of process in effecting
such registration, unless the Company is already
subject to service in such jurisdiction and except as
may be required by the Securities Act;
(ii) if the Company shall have initiated a
registration pursuant to this Section 9.1 within the
preceding six (6) month period;
(iii) if the Company shall have initiated at
the request of such Initiating Holder(s) at least one
such registration pursuant to this Section 9.1 which
has been declared or ordered effective;
(iv) if the Initiating Holders propose to
dispose of shares of Registrable Securities which may
be immediately registered on Form S-3 pursuant to a
request made under Section 9.11 hereof; or
(v) at any time after five (5) years
immediately following completion of the Initial
Public Offering.
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(b) Subject to the foregoing subsection 9.1(a), the
Company shall file a registration statement as soon as
possible after receipt of the request or requests of the
Initiating Holders under this Section 9.1 and the Company
shall have the right, subject to the other provisions of this
Section 9.1, to participate therein; PROVIDED, HOWEVER, that
if the Company shall furnish to such Initiating Holders within
thirty (30) days of receipt of such request a certificate
signed by the CEO of the Company stating that in the good
faith judgment of the Board of Directors of the Company it
would be detrimental to the Company and its shareholders for
such registration statement to be filed on or before the date
filing would be required and it is therefore essential to
defer the filing of such registration statement, the Company
shall have the right to defer such filing to a date not later
than one hundred eighty (180) days after receipt of such
request; PROVIDED, FURTHER, that notwithstanding anything to
the contrary herein, the Company shall not be obligated to
effect a registration pursuant to this Section 9.1 during the
period starting with the date of the Initial Public Offering
and ending on the date one hundred eighty (180) days following
the Initial Public Offering, PROVIDED that the Company employs
all reasonable efforts to cause such registration statement to
become effective and the Company's estimate of the date of
filing such registration statement is made in good faith.
(c) The underwriting shall be managed by a reputable
underwriter or underwriters selected by the Initiating
Holders, which selection shall be subject to the consent of
the Company, which consent shall not be unreasonably withheld,
and the Company shall have the right, subject to the other
provisions of this subsection (c), to participate therein. The
right of any Holder to registration pursuant to Section 9.1
shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting. The Company shall (together
with all Holders proposing to distribute their securities
through such underwriting) enter into an underwriting
agreement in customary form with the underwriter or
underwriters selected as provided above. Notwithstanding any
other provision of this Section 9.1, if the underwriters
advise the Initiating Holders and the Company in writing that
marketing factors require a limitation of the number of shares
to be underwritten and that the total amount of securities
that all Holders (Initiating and non-Initiating) and the
Company request pursuant to this Section 9.1(c) to be included
in such offering exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of
the offering, the Company shall so advise all Holders and all
of the shares to be included in the registration shall be
allocated among all Holders requesting inclusion (Initiating
and non-Initiating) pro rata according to the total amount of
securities requested to be included in such registration owned
by each Holder requesting inclusion (Initiating or
non-Initiating) or in such other proportions as shall be
mutually agreed by such selling shareholders, and only if all
of the shares requested to be included by Holders are
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included after giving effect to such allocation shall any
shares requested by the Company to be included be included.
If any Person does not agree to the terms of any such underwriting, it
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If
shares are so withdrawn from the registration, the Company shall then offer to
all Persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the Persons requesting additional inclusion pro rata
according to the total amount of securities requested to be included in such
registration owned by each such Person or in such other proportions as shall be
mutually agreed by such selling shareholders.
9.2 COMPANY REGISTRATION. If at any time after the date of this
Shareholders' Agreement the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders other than the
Holders) any of its stock or other securities under the Securities Act in
connection with the public offering of such securities solely for cash (other
than a registration relating solely to the sale of securities to participants in
a Company stock plan, or a registration relating to shares to be issued in
connection with the acquisition of another company, or a registration on any
form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder made within thirty (30) days after the Company shall have given such
notice in accordance with Section 14.2, the Company shall, subject to the
provisions of Section 9.7, use all reasonable efforts to cause to be registered
under the Securities Act all of the Registrable Securities that each such Holder
has requested to be registered.
9.3 OBLIGATIONS OF THE COMPANY. Whenever required under this Article 9
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use
all reasonable efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to one
hundred twenty (120) days;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus
used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by
such registration statement;
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(c) Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and
such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned
by them;
(d) Use all reasonable efforts to register and
qualify the securities covered by such registration statement
under such other securities or blue sky laws of such
jurisdictions as shall be reasonably requested by the Holders,
PROVIDED, HOWEVER, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process
in any such states or jurisdictions; and
(e) Enter into and perform its obligations under an
underwriting agreement, in usual and customary form, with the
managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
9.4 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Article 9 that
the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be reasonably and customarily required
to effect the registration of the Registrable Securities.
9.5 EXPENSES OF DEMAND REGISTRATION. All expenses in connection with
the registrations initiated pursuant to Section 9.1 hereof and made or ordered
effective, other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Section
9.1, including (without limitation) all registration, filing and qualification
fees, printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements (not to exceed US $50,000) of
one counsel for the selling Holders, shall be borne by the Company; PROVIDED,
HOWEVER, that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 9.1 if the registration
request is subsequently withdrawn at the request of the Holders (Initiating or
non-Initiating) holding a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses).
9.6 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 9.2 for each Holder (which right may be assigned as provided
in Section 9.12), including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the reasonable fees and disbursements (not to exceed US $50,000) of
one counsel for the selling Holders selected by them, but excluding underwriting
discounts and commissions relating to Registrable Securities.
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9.7 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 9.2 to include any of the Holders'
securities in such underwriting unless such Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
the Company, and then only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
shareholders to be included in an offering (other than a registration effected
pursuant to Section 9.1) exceeds the amount of securities to be sold other than
by the Company that the underwriters reasonably believe compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of Registrable Securities which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling shareholders according to
the total amount of securities requested to be included therein owned by each
selling shareholder or in such other proportions as shall mutually be agreed to
by such selling shareholders).
If any Person does not agree to the terms of any such underwriting, it
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. If shares are so
withdrawn from the registration, the Company shall then offer to all Persons who
have retained the right to include securities in the registration the right to
include additional securities in the registration in an aggregate amount equal
to the number of shares so withdrawn, with such shares to be allocated among the
Persons requesting additional inclusion pro rata according to the total amount
of securities requested to be included in such registration owned by each such
Person or in such other proportions as shall be mutually agreed by such selling
shareholders.
For purposes of the immediately preceding paragraph concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners, and any trusts for the benefit of any of
the foregoing Persons shall be deemed to be a single "selling shareholder," and
any pro rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder," as defined in
this sentence.
9.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 9.
9.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Article 9:
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(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers,
directors, partners, employees and legal counsel of each
Holder, and each Person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Securities
Act, the Exchange Act or any other federal or state law, rule
or regulation insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or
violations (collectively, a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact
contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein
not misleading in light of the circumstances in which they
were made, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law;
and the Company will reimburse each such Holder, officer,
director, partner, employee, legal counsel, underwriter or
controlling Person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action or enforcing
these indemnification provisions, as such expenses are
incurred; PROVIDED, HOWEVER, that the indemnity agreement
contained in this subsection 9.9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent
of the Company, nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to
the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with
such registration by any such Holder.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of
its directors and officers, its legal counsel, each Person, if
any, who controls the Company within the meaning of the
Securities Act, and any other Holder selling securities in
such registration statement or any of such other Holder's
directors, officers, employees, legal counsel or any Person
who controls such Holder, against any losses, claims, damages
or liabilities (joint or several) to which the Company or any
such director, officer, employee, legal counsel, or
controlling Person, or other such Holder or director, officer,
employee, legal counsel or controlling Person of such other
Holder may become subject, under the Securities Act, the
Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with
written information furnished by such Holder
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expressly for use in connection with such registration; and
each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director,
officer, employee, legal counsel, controlling Person, other
Holder, or officer, director, employee, legal counsel, or
controlling Person of such other Holder in connection with
investigating or defending any such loss, claim, damage,
liability, or action or enforcing these indemnification
provisions, as such expenses are incurred; PROVIDED, HOWEVER,
that the indemnity agreement contained in this subsection
9.9(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such
settlement is effected without the consent of the indemnifying
Holder.
(c) Promptly after receipt by an indemnified party
under this Section 9.9 of notice of the commencement of any
action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 9.9, give to
the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an
indemnified party shall have the right to retain its own
counsel at its own expense if it so desires. Notwithstanding
the foregoing, if the indemnified party and the indemnifying
party have conflicting interests with respect to the action so
that joint counsel for them would be inappropriate (as
determined by counsel to the indemnified party and counsel to
the indemnifying party), then the indemnifying party shall pay
reasonable fees and expenses of one counsel to the indemnified
party. Each indemnified party shall give reasonably prompt
notice to each indemnifying party or parties of any action or
proceeding commenced against it in respect of which indemnity
may be sought hereunder, but the failure to deliver written
notice to the indemnifying party within a reasonable time of
the commencement of any such action, shall not relieve such
indemnifying party of any liability to the indemnified party
under this Section 9.9, unless the indemnifying party is
materially prejudiced by such failure to give notice.
(d) If the indemnification provided for in this
Section 9.9 is held by a court of competent jurisdiction to be
unavailable to an indemnified party or insufficient to hold
harmless an indemnified party under subsection (a), (b), or
(c) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a
result of the losses, claims, damages or liabilities referred
to in subsection (a), (b), or (c) above, in such proportion as
is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified
party on the other in connection with the action, statement or
omission that resulted in such claims, as well as other
equitable considerations. The relative fault shall be
determined with reference to, among other things, whether the
untrue statement or alleged omission to state a material fact
relates to
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information supplied by the indemnifying party or such
indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing
provisions of this Section 9.9, a Holder of Registrable
Securities shall not, as an indemnifying party, be required to
contribute any amount in excess of (x) the amount by which the
total price at which the Registrable Securities sold by such
indemnifying party were offered to the public exceeds (y) the
amount of any damages which such indemnifying party has
otherwise been required to pay by reason of such action,
untrue or alleged untrue statement or omission or alleged
omission. The Company and each Holder of Registrable
Securities agrees that it would not be just and equitable if
contribution pursuant to this Section 9.9(d) were determined
by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations
referred to above in this Section 9.9(d). The amount paid or
payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to above in this
Section 9.9(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in
connection with investigation or defense of any such action or
claim which is the subject of this subsection (d) or
enforcement of these contribution provisions.
(e) The obligations of the Company and Holders under
this Section 9.9 shall survive the completion of any offering
of Registrable Securities in a registration statement under
this Article 9, and otherwise.
9.10 REPORTS UNDER SECURITIES EXCHANGE ACT. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration, the Company agrees that if it becomes a reporting company under
the Exchange Act, to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all
times after ninety (90) days after the effective date of the
first registration statement filed by the Company for the
offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports
and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the
reporting requirements of SEC Rule 144 (at any time after
ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities
Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), and (ii) a copy of
the most recent
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annual or quarterly report of the Company and such other
reports and documents so filed by the Company.
9.11 FORM S-3 REGISTRATION. In case the Company shall receive
written request or requests from a Holder that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to
all other Holders; and
(b) 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 such portion of such Holder's or Holders'
Registrable Securities as are specified in such request,
together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such
request as are specified in a written request made within
thirty (30) days after the Company shall have given such
notice pursuant to Section 14.2 hereof; PROVIDED, HOWEVER,
that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this
Section 9.11: (i) if Form S-3 is not available for such
offering by the Holders; (ii) if the Holders, together with
the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at any aggregate
price to the public of less than Five Million Dollars (US
$5,000,000); (iii) if the Company shall furnish to the Holders
a certificate signed by the CEO stating that in the good faith
judgment of the Board of Directors it would be seriously
detrimental to the Company and its stockholders for such Form
S-3 Registration to be effected at such time, in which event
the Company shall have the right to defer the filing of the
Form S-3 Registration Statement for a period of not more than
one hundred eighty (180) days after receipt of the request of
the Holder or Holders under this Section 9.11; PROVIDED,
HOWEVER, that the Company shall not utilize this right more
than once in any 12 month period; (iv) if the Company within
the nine month period preceding the date of such request,
already has effected one registration on Form S-3 for the
Holders pursuant to this Section 9.11 or within the 48 month
period preceding the date of such request already has effected
five such registrations and other similar provisions granting
rights to the registration on Form S-3; or (v) in any
particular jurisdiction in which the Company 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.
Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered (including securities which the Company wishes to
issue), as soon as practicable after receipt of the request or requests
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of the Holders. All expenses, other than underwriting discounts and commissions,
incurred in connection with the registrations pursuant to this Section 9.11,
including (without limitation) all other registration, filing, qualification,
printer's and accounting fees shall be borne by the Company. Registrations
effected pursuant to this Section 9.11 shall not be counted as demands for
registration effected pursuant to Section 9.1 of this Shareholders' Agreement.
9.12 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Article 9 may be assigned by
a Holder to a transferee or assignee who has lawfully received the shares in
accordance with all applicable laws and regulations and with respect to
Registrable Securities other than Board Warrants, the terms of this
Shareholders' Agreement and, if applicable, is a Shareholder as defined
hereunder or a partner or equity holder of a Shareholder (or a third party duly
authorized to act on behalf of a Shareholder or its partners or equity holders),
PROVIDED that such partner or equity holder has appointed such Shareholder (or
such duly authorized third party) as its lawful attorney-in-fact to receive
notices, vote and otherwise make binding decisions under the terms of this
Article 9; PROVIDED, HOWEVER, in each case, the Company is, within a reasonable
period of time after such transfer, given written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and PROVIDED, FURTHER, that such
assignment shall be effective only if (i) immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and (ii) the transferee agrees to be bound
by the terms of this Article 9. Any provisions of this Shareholders' Agreement
to the contrary notwithstanding, a transferee shall have no rights of a Holder
under Section 9.1 of this Shareholders' Agreement unless such transferee
receives from a Shareholder that is a party to this Shareholders' Agreement as
of its date, one hundred percent (100%) of the shares of Stock held by such
Shareholder as of the date of this Shareholders' Agreement (as diluted, other
than by disposition by such Shareholder).
9.13 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Article 9
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of at least seventy percent (70
%) of the Registrable Securities. Any amendment or waiver effected in accordance
therewith shall be binding upon each holder of any securities purchased under
this Shareholders' Agreement at the time outstanding (including securities into
which such securities are convertible), each future holder of all such
securities, and the Company.
9.14 TERMINATION OF REGISTRATION RIGHTS. The Company's obligations
pursuant to this Article 9 shall terminate five (5) years after the date of
consummation of the Initial Public Offering.
9.15 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that it
shall not, to the extent requested by the Company and an underwriter of Common
Stock (or other securities) of the Company, sell or otherwise transfer or
dispose of any securities of the Company (other than securities registered in
the offering) whether or not acquired by such Holder under this Shareholders'
Agreement during a reasonable and customary period of time (not to exceed
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one hundred eighty (180) days), as agreed to by the Company and the
underwriters, following the effective date of a registration statement of the
Company filed under the Securities Act; PROVIDED, HOWEVER, that:
(a) such agreement shall be applicable only to the
first registration statement of the Company which covers
shares (or securities) to be sold on its behalf to the public
in an underwritten offering; and
(b) all officers and directors of the Company,
holders of 5% or more of the Company's issued and outstanding
capital stock and all other Persons with registration rights
(whether or not pursuant to this Shareholders' Agreement)
similarly agree not to sell or transfer.
In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of each Holder (and the
shares or securities of every other Person subject to the foregoing restriction)
until the end of such reasonable and customary period.
10. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS.
10.1 FINANCIAL STATEMENTS. The Company shall deliver to each
Shareholder (i) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company as of the end of such year, and a
cash flow statement, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied, and certified by an independent public accounting firm
selected by the Company's Board of Directors, and a copy of such independent
public accounting firm's auditor's letter to the management of the Company; (ii)
within thirty (30) days after the end of each month, an unaudited statement of
operations, cash flow analysis and balance sheet for and as of the end of such
month; (iii) within thirty (30) days of the end of each quarter, an unaudited
statement of operations, cash flow analysis and balance sheet for and as of the
end of such quarter, in reasonable detail; such quarterly statements shall also
compare actual performance to budget and to the prior year's comparable period;
and (iv) not later than a date to be determined by the Board of Directors of the
Company for each fiscal year, the annual business plan of the Company, prepared
on a monthly basis, approved by the Board of Directors of the Company.
10.2 SHAREHOLDER INSPECTION. The Company shall permit each Shareholder,
at such Shareholder's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Shareholder; PROVIDED, HOWEVER, that the Company shall not be
obligated pursuant to this Section 10.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information unless a non-disclosure agreement, satisfactory to the Company in
its reasonable judgment, has been executed and delivered by the relevant
Shareholder.
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10.3 NEGATIVE COVENANTS.
(a) The Company shall not, without the prior consent
or approval of the holders of at least seventy percent (70%)
of the Stock then outstanding:
(i) amend the Company's Articles of
Incorporation or Bylaws; or
(ii) take any action which results in the
merger, consolidation or reorganization with or into
any other corporation or corporations (other than a
mere reincorporation transaction) or a sale of all or
substantially all of the assets of the Company; or
(iii) take any action which results in the
voluntary dissolution or liquidation of the Company;
or
(iv) redeem any shares of the Company's
capital stock (other than as contemplated in
connection with the Employee Plan or Article 2 or 8
of this Shareholders' Agreement) or create or
reclassify any obligation or security convertible
into or exchangeable for, or having any option rights
to purchase, any equity security or in any manner
issue any additional shares of capital stock of the
Company other than in the Target IPO, upon conversion
of any Convertible Promissory Note, or upon exercise
of any Warrant or any option granted under the
employee option plan contemplated by Section 10.4
hereof; or
(v) approve an Initial Public Offering,
other than a Target IPO; or
(vi) select the Company's outside auditor;
or
(vii) declare or pay any dividend (other
than a dividend payable ratably to all shareholders
in shares of Stock) in respect of any Stock.
(b) The Company shall not, without the prior consent
or approval of the holders of at least seventy percent (70%)
of the Stock then outstanding:
(i) approve the establishment or the
closing of any facility having (or to employ) more
than twenty (20) employees; or
(ii) purchase, sell, license or lease any
asset of the Company having a value in excess of the
greater of Three Million Dollars (US $3,000,000) or
one percent (1%) of the consolidated net revenue of
the
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Company for the twelve (12) months preceding such
purchase, sale or lease.
10.4 INCENTIVE OPTIONS. As soon as practicable after the Closing
Date, the Company will adopt an incentive option plan for officers and employees
(other than the Principal Shareholder) and shall reserve for issuance under such
plan options covering an aggregate of six percent (6%) of the Stock of the
Company issued and outstanding immediately after the Closing Date on a fully
diluted basis (but without giving effect to any Board Warrants or the options
provided for in this Section 10.4). The detailed terms and provisions of such
option plan and options shall be as set forth in the operative documents as
approved by the Board of Directors; PROVIDED that, at a minimum, no such options
shall be exercisable other than for Common Stock or other than in connection
with an Initial Public Offering or a merger of the Company in which the Company
is not the surviving entity.
10.5 SHAREHOLDER LOANS.
(a) Subject to the right of the Principal Shareholder
to participate pursuant to the terms of Section 10.5(b) of
this Shareholders' Agreement, the Investors agree to lend to
the Company in the aggregate up to Thirteen Million Dollars
(US $13,000,000) with each Investor agreeing to lend the
amount indicated on Schedule 2 hereto within thirty (30) days
after receipt of a request in writing from the Chairman
specifying the amount of the loan required by the Company;
PROVIDED, HOWEVER, that:
(i) the Company shall be permitted to make
no more than three such requests and that the
aggregate amount outstanding at any one time in
respect of all such requests shall in no event exceed
the amount set forth on Schedule 2 with respect to
each Investor;
(ii) all amounts in respect of which the
Company requests loans pursuant to this Section 10.5
shall be allocated ratably to the Investors (and to
the Principal Shareholder, to the extent that the
Principal Shareholder participates in such loan
pursuant to Section 10.5(b) of this Shareholders'
Agreement);
(iii) each loan made pursuant to this
Section 10.5 shall be evidenced by a Convertible
Subordinated Promissory Note which shall be (A) as to
Seven Million Dollars ($7,000,000) in aggregate
principal amount borrowed, substantially in the form
attached as Exhibit B-1 to this Shareholders'
Agreement and (B) as to Six Million Dollars
($6,000,000) in aggregate principal amount borrowed,
substantially in the form of Exhibit B-2 to this
Shareholders' Agreement (each a "Convertible
Promissory Note") and shall be subject to the terms
and conditions, including, without limitation, the
conversion rights, set forth therein;
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(iv) no material breach of any agreement,
obligation or condition contained in this
Shareholders' Agreement to be performed or observed
by the Company or the Principal Shareholder shall
have occurred and be continuing, PROVIDED that, if
the existence of such a material breach is to be
asserted as excusing the obligation to make loans
hereunder, then the Investor asserting a breach shall
have given the Company and each other party to this
Shareholders' Agreement notice of the existence of
such breach and requested that such breach be cured
as a condition to such Person's obligations under
this Section 10.5 and more than twenty (20) days
shall have elapsed without such breach being remedied
(or the effect thereof waived by such Investor);
(v) no "event of default" under and as
defined in the Company's principal working capital
financing agreement (with the CIT Group/Credit
Finance, Inc. in an amount available to be borrowed
of up to Seventy Million U.S. Dollars ($70,000,000)
(the "Senior Financing"), arising out of the
financial condition or performance of the Company,
and that cannot be remedied by application of the
total amount then available to be borrowed by the
Company pursuant to this Section 10.5, shall have
occurred and be continuing;
(vi) the execution, delivery and
performance of each Convertible Promissory Note by
the Company shall have been duly authorized by all
necessary corporate action on the part of the
Company;
(vii) the proceeds of such loans will be
applied exclusively to (A) pay claims of creditors
against the Company in accordance with the Plan
including "disputed claims" as such disputed claims
are resolved and liquidated, (B) pay any amount then
due and payable to Xxxxxx Xxxxx arising out of the
purchase or redemption of her shares of Common Stock,
or (C) provide working capital and for other general
business purposes of the Company (other than
repayment of the Convertible Promissory Notes),
PROVIDED that in the case of loans evidenced by
Convertible Promissory Notes in the form of Exhibit
B-1, use of proceeds for such purposes shall be
subject to the approval of the Board of Directors of
the Company (which approval shall not be unreasonably
withheld); and
(viii) upon the making of each such loan,
the Chairman shall deliver to each Investor a
certificate dated as of the date of funding
certifying that the conditions set forth in
subparagraphs (ii) through (vii) of this Section 10.5
have been fulfilled as of the date of the making of
each such loan.
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(b) The Principal Shareholder shall have the right,
but not the obligation to participate with the Investors
ratably in accordance with the number of shares of Stock then
owned or controlled by each of them in any loan the proceeds
of which are to be applied (and are applied) as provided in
subsection 10.5(a)(vii)(C) of this Shareholders' Agreement.
(c) Notwithstanding any other provision of this
Shareholders' Agreement, no Investor shall have any obligation
to make any loans pursuant to this Section 10.5 after the
first anniversary of the Closing Date.
(d) The discretion to determine, consistent with
applicable standards of conduct and subject to the other terms
of this Agreement,
(i) that any loan requested hereunder
evidenced by a Convertible Promissory Note shall be
evidenced by such a Note in the form of Exhibit B-1
or B-2 and
(ii) whether repayment of all or any part of
the principal of loans evidenced by Convertible
Promissory Notes shall be made in accordance with the
terms of such Notes, including whether such repayment
shall be applied to Notes in the form of Exhibit B-1
or B-2,
is expressly delegated to the Chairman acting in complete
compliance with his fiduciary duties as an officer of the
Company in making such determinations (which fiduciary duties
to the Company shall not be altered or influenced in any way
by such Chairman's position as a shareholder of the Company),
PROVIDED that the Shareholders acknowledge that no such
repayment shall be made if an "event of default" exists at the
time such repayment is to be made (or would exist after giving
effect to such repayment) under the Senior Financing.
10.6 CHIEF EXECUTIVE OFFICER.
The Shareholders will implement the following procedure as
promptly as is practicable after the Closing Date:
(a) Promptly (and in any event within ten (10) days
after the Closing Date if no chief executive officer ("CEO")
has been appointed by the Board), a committee of the Board of
Directors of the Company, consisting of three members, with
one member appointed by each of Rinzai, the Principal
Shareholder and a majority of the other Board members, shall
be appointed to assist in recruiting and interviewing
prospective president and CEO candidates to be formally
nominated by the Chairman to the Board, subject to the prior
approval of the Investors holding a majority of the Preferred
Shares, which approval will not be unreasonably withheld, for
appointment by the Board to such position. The
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qualifications, objectives and responsibilities of the CEO
will include at least the items set forth on the description
attached hereto as Exhibit C.
(b) If a CEO has not been appointed by the Board
acting on a nomination initiated by the Chairman within ninety
(90) days after the Closing Date, then the Investors, acting
jointly, shall thereafter have the right, subject to approval
by the Chairman, to determine which CEO candidates are
formally nominated for appointment by the Board. Such
candidates may be identified by the Board committee, any
Shareholder, the Chairman, or any executive recruiter employed
by or on behalf of any of the foregoing, PROVIDED only that if
the Investors owning a majority of the Preferred Shares have
agreed on a candidate who substantially fulfills the
requirements inherent in the description attached as Exhibit C
and whom they wish formally to nominate, they will first
advise the Chairman and request his approval (which approval
shall not be unreasonably withheld). If the Chairman rejects
the first two such candidates, he shall approve any third
candidate so selected to be nominated or, if he prefers one of
the two candidates previously rejected and that candidate is
still available and willing to accept such position, the
Chairman may approve such previously rejected candidate.
(c) The Company shall enter into an employment
agreement with the CEO, the terms of such employment agreement
to be subject to the approval of the Investors owning a
majority of the Preferred Shares, which approval shall not be
unreasonably withheld PROVIDED that the description of the
position of CEO set forth in such contract is substantially
identical to the description attached hereto as Exhibit C, and
the prior approval of the Investors owning a majority of the
Preferred Shares shall be required for any amendment or
modification of such contract (or any contract with any
successor CEO during the 24-month period following the Closing
Date) the effect of which is to reduce the objectives and
responsibilities of such position.
(d) Any CEO appointed pursuant to this procedure may
be removed only by the Board of Directors.
(e) In the event of a vacancy in the CEO position
(including any vacancy existing on the Closing Date), so long
as Rinzai is a Shareholder of the Company, Rinzai shall in its
sole discretion be entitled to appoint an interim CEO until
such position can be filled either in accordance with the
terms of this Section 10.6 or by a vote of the Board of
Directors of the Company in the event that the terms of this
Section 10.6 are no longer applicable.
If a chief financial officer of the Company is appointed at any time after the
Closing Date, the foregoing procedure (but with reference to an appropriate
position profile for chief financial
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officer) shall apply also to such appointment. The above procedure shall apply
to the first and any successor CEO and CFO appointed during the term hereof.
10.7 CERTAIN OTHER SHAREHOLDER AGREEMENTS. Without limiting any
agreements between the Shareholders contained elsewhere in this Shareholders'
Agreement or in any other document entered into after the date hereof, the
Shareholders agree expressly as follows:
(a) Each Shareholder will cause the members of the
Board of Directors designated by it or him to vote in favor of
a Target IPO, if requested by either of Rinzai or the
Principal Shareholder (or their Permitted Transferees), and to
vote to adopt the employee incentive option plan as set forth
in Section 10.4 hereof;
(b) Each Shareholder will cause the members of the
Board designated by it or him to vote in favor of retention of
any reputable investment banker or other appropriate
professional proposed by Rinzai in accordance with the
provisions of Section 8.1 of this Shareholders' Agreement.
(c) Each Shareholder will cause the members of the
Board of Directors designated by it or him to vote in favor of
and/or ratify the appointment of any interim CEO appointed by
Rinzai in accordance with Section 10.6(e) hereof.
(d) In connection with the completion of any Initial
Public Offering, vote in favor of amending the articles or
certificate of incorporation of the Company and the bylaws of
the Company to delete any "supermajority" voting provisions
contained therein.
(e) Immediately following the closing on the Closing
Date, the Shareholders will hold a meeting at which, among
other things, Directors will be elected, and immediately
thereafter, the Directors will hold their initial meeting at
which, among other things, Xxxxxx X. Xxxxx' resignation as
President of the Company will be accepted, he will be
appointed as the Chairman and the employment agreement between
him and the Company in the form attached to the Merger
Agreement as Exhibit F will be ratified and confirmed, and any
other officers of the Company will be appointed or reappointed
or confirmed in their positions, as appropriate.
(f) So long as Rinzai is a Shareholder, the Voting
Trust will not be terminated (other than in accordance with
its terms) nor the terms thereof amended or modified without
the prior approval of Rinzai.
(g) The Principal Shareholder and the Company agree
that effective upon Xxxxxx Xxxxxxx Xxxxx (or any successor)
ceasing to be a shareholder of the Company, the 1988
Shareholder Agreement (as defined in the Merger Agreement)
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shall without further action by any party hereto, terminate
and be of no further force or effect.
11. LEGEND.
Upon execution of this Shareholders' Agreement, each Shareholder shall
deliver to the Secretary of the Company all certificates evidencing shares of
Stock then owned by him or it, which certificates shall be stamped or endorsed
with a legend in substantially the following form:
TRANSFER RESTRICTED
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER CONTAINED IN A SHAREHOLDERS' AGREEMENT DATED AS OF APRIL 16, 1996 (THE
"AGREEMENT") AMONG XXXXX MICROCOMPUTER PRODUCTS, INC. (THE "COMPANY") AND THE
SHAREHOLDERS (AS DEFINED THEREIN) AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED,
ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE THEREWITH. A COPY OF
THE AGREEMENT IS ON FILE AT THE OFFICES OF THE COMPANY AND MAY BE OBTAINED
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE PRESIDENT OF THE COMPANY.
IN ADDITION, THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD OR OFFERED FOR SALE AND NO TRANSFER OF THEM WILL BE MADE BY THE COMPANY OR
ITS TRANSFER AGENT IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
and the Secretary of the Company shall further cause all certificates evidencing
issued shares of Stock not owned by Shareholders to be stamped or endorsed with
a legend substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.
THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR OFFERED
FOR SALE AND NO TRANSFER OF THEM WILL BE MADE BY THE COMPANY OR ITS TRANSFER
AGENT IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
Any legend endorsed on a certificate pursuant to this Section 11 shall be
removed (i) if Stock represented by such certificate shall have been registered
or otherwise lawfully sold in a public transaction or (ii) if the holder of such
Stock shall have provided the Company with an opinion
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from counsel, in form and substance acceptable to the Company and from attorneys
reasonably acceptable to the Company, stating that a public sale, transfer or
assignment of such Stock may be made without registration.
12. BOARD OF DIRECTORS.
12.1 ELECTION. The Board of Directors shall initially consist of
seven (7) members. Directors shall be elected as hereinafter set forth. Subject
to the provisions of Section 12.2 of this Shareholders' Agreement, each of the
Shareholders shall vote (or cause to be voted) all of the shares of Stock owned
or controlled by him or it so as to provide for the election to the Board of
Directors, at any annual or special meeting called for such purpose, of (i) the
Principal Shareholder and one individual designated by the Principal Shareholder
or the Principal Shareholder Successor (or two (2) individuals designated by the
Principal Shareholder Successor if the Principal Shareholder is deceased or
incompetent); (ii) two (2) individuals designated by Rinzai; (iii) one (1)
individual designated jointly by the Singapore Group; (iv) one (1) individual
designated by the Hong Kong Group who shall be nominated by Kaifa Technology
(H.K.) Limited as long as it is a Shareholder; and (v) the CEO of the Company
(but not any interim CEO). Each Shareholder and the Principal Shareholder
Successor agrees to vote to remove any Director at the request of the
Shareholder or the Principal Shareholder Successor that designated such
Director. The rights of the Principal Shareholder and each Investor so to
designate Directors shall inure to the benefit of any transferee pursuant to
Article 4 hereof from such Shareholder (or from the Principal Shareholder
Successor or, as to the Investor, from any Permitted Transferee) of all (but not
less than all) of the shares of Stock originally issued to such Shareholder (as
the same may have been converted and adjusted for stock splits, combinations and
other similar events). Any Shareholder who owns at least two percent (2%) of the
issued and outstanding Stock, calculated on a fully diluted basis, and who does
not have the right to nominate a Board member as provided above, shall have the
right to receive notice of and attend all Board meetings for observation
purposes, but shall not have the right to vote or otherwise participate therein
nor to attend any meeting, or portion thereof, declared by the Board, upon
advice of counsel, to be a closed meeting for executive session; and provided,
further, that any such Shareholder who does not attend any such meeting shall
have the right to receive copies of any minutes or resolutions approved by the
Board at such meeting.
12.2 ALTERATION OR TERMINATION OF PROVISIONS UNDER CERTAIN
CIRCUMSTANCES.
(a) If at any time the number of shares of Stock
owned or controlled by any of the Principal Shareholder, the
Principal Shareholder Successor or Rinzai (or by any Article 4
transferee of any thereof who is entitled, pursuant to the
provisions of Section 12.1, to designate Directors) shall be
less than twenty percent (20%) of the then outstanding shares
of Stock by reason of any sale or other disposition made by
such Shareholder or the Principal Shareholder Successor, as
the case may be, then (i) such Shareholder or the Principal
Shareholder Successor, as the case may be, shall be entitled
to designate only one Director in accordance with Section 12.1
and shall forthwith cause the resignation of one of the two
Directors at the time holding office in the Company by reason
of the designation thereof by such Shareholder or the
Principal Shareholder Successor, respectively, and (ii) the
Bylaws of the Company shall promptly be amended so as to
implement the foregoing provisions. If at any time the number
of shares of Stock owned or controlled by any of the Principal
Shareholder, the Principal Shareholder Successor, Rinzai, the
Hong Kong Group or the Singapore Group (or by any Article 4
transferee of any thereof who is entitled, pursuant to the
provisions of Section 12.1, to designate Directors) shall be
less than eight percent (8%) of the then outstanding shares of
Stock by reason of any sale or other disposition made by such
Shareholder or the
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Principal Shareholder Successor, as the case may be, then (i)
such Shareholder or the Principal Shareholder Successor, as
the case may be, shall not be entitled to designate any
Directors in accordance with Section 12.1 and shall forthwith
cause the resignation of the Director or Directors at the time
holding office in the Company by reason of the designation
thereof by such Shareholder or the Principal Shareholder
Successor, respectively, and (ii) the Bylaws of the Company
shall promptly be amended so as to implement the foregoing
provisions.
(b) If at any time the Principal Shareholder and his
Permitted Transferees, the Employee Plan and Rinzai, or any
Investor (or the Hong Kong Group or the Singapore Group) if
such Investor (or group of Investors) has acquired more than
twenty percent (20%) of the Company's outstanding Stock, are
the only shareholders of the Company, then the number of
Directors shall be reduced to five (5), a quorum of the
Directors shall be reduced to three (3), and each of the
Principal Shareholder and Rinzai, or such Investor or group of
Investors, as the case may be, shall be entitled in accordance
with Section 12.1 to designate two (2) members of the Board of
Directors and such members acting jointly shall designate the
fifth (5th) member, PROVIDED that from and after such time as
any Investor or group of Investors owns at least fifty-five
percent (55%) of the outstanding shares (and the Principal
Shareholder and his Permitted Transferees and the Employee
Plan own the remainder), such Investor or group of Investors
shall be entitled to designate three (3) such Directors and
the Principal Shareholder shall be entitled to designate two
(2) such directors. The Bylaws of the Company shall be
promptly amended so as to implement the foregoing provisions.
12.3 INDEMNIFICATION. The Articles of Incorporation or Bylaws of
the Company shall, at all times during which any Affiliate or employee of any
Shareholder serves as a member of the Board provide for limitations on the
liability of the Directors and indemnification of the Directors to the fullest
extent permitted under applicable law. To the extent not prohibited by law, in
the event that any Shareholder who is a Director or any Affiliate or employee of
a Shareholder who is a Director shall be made or threatened to be made a party
to any action, suit or proceeding with respect to which any such Shareholder or
Director may be entitled to indemnification solely in such capacity by the
Company pursuant to this Shareholders' Agreement or the Bylaws, or otherwise,
all such Directors, as a group, shall be entitled to be represented in such
action, suit or proceeding by one counsel of their choice and the expenses of
such representation shall be reimbursed by the Company on a monthly basis upon
submission of such invoices. Promptly after election of any director, the
Company will enter into an appropriate indemnification agreement with such
Director; PROVIDED, HOWEVER, that except with respect to proceedings to enforce
rights of indemnification, the Company shall indemnify any such Director for his
expenses incurred in connection with a successful proceeding (or part thereof)
initiated by such Director in such capacity only if such proceeding (or part
thereof) was authorized by the Board of Directors.
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13. SPECIFIC PERFORMANCE.
The Shareholders and the Company acknowledge and agree that the
recovery of money damages will not constitute an adequate remedy for breach of
the provisions of this Shareholders' Agreement. Accordingly, the parties agree
that the provisions of this Shareholders' Agreement may be specifically enforced
against them and transferees of securities of the Company which are subject to
this Shareholders' Agreement (in addition to any other remedies available for
breach of this Shareholders' Agreement), and the parties (for themselves and, in
the case of the Shareholders, transferees of their securities of the Company),
hereby waive the defense in any equitable proceeding that there is an adequate
remedy at law for any such breach.
14. MISCELLANEOUS.
14.1 TERMINATION. This Shareholders' Agreement shall continue until the
first to occur of (a) the tenth (10th) anniversary of this Shareholders'
Agreement or (b) the completion of the Initial Public Offering; PROVIDED,
HOWEVER, that the provisions of Articles 2 and 3 shall survive the occurrence of
an Initial Public Offering until the tenth (10th) anniversary of the date hereof
with respect to private sales (or series of related sales) of Stock for amounts
in the aggregate greater than Ten Million Dollars (US$10,000,000) and the
provisions of Article 9 shall survive the occurrence of an Initial Public
Offering until the fifth (5th) anniversary thereof.
14.2 NOTICES. All notices, approvals, consents, requests and other
communications that any party is required or elects to give hereunder shall be
in writing and shall be deemed to have been given (a) upon personal delivery
thereof, including by appropriate courier service, five (5) days after delivery
to the courier or, if earlier, upon delivery against a signed receipt therefor
or (b) upon transmission by facsimile or telecopier, which transmission is
confirmed, in either case addressed to the party to be notified at the address
set forth below or at such other address as such party shall have notified the
other parties hereto, by notice given in conformity with this Section 14.2:
The Company: Xxxxx Microcomputer Products, Inc.
0000 Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
Telecopy: (000) 000-0000
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with a required copy to:
G. Xxxxxx Xxxxxxx
Parker, Johnson, Xxxx & Xxxxxxxx
0000 Xxxxxxxxx Xxxxxx, X.X.,
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Kaifa: Kaifa Technology (H.K.) Limited
2201 Hong Kong Worsted Xxxxx Industrial Building
31-39 Wo Xxxx Xxxx Street
Xxxx Xxxxx, New Territories
Hong Kong
Attention: Xx. Xxx Man Chi, President
Telecopy: (000) 0000-0000
with a required copy to:
Xxxxxx Xxxx & Company
00/X, Xxx Xxxxxxxx Xxxxxx
0 Xxxxxxxxx Xxxxx
Xxxxxxx
Xxxx Xxxx
Attention: Xx. Xxxxxx Xxxxxxx
Telecopy: (000) 0000-0000
RPH: Rolling Profit Holdings Limited Wongs: Xxxx'x International (Holdings) Limited
Arion Commercial Center Xxxx'x Industrial Centre
Third Floor, Room 304 180 Xxx Xxx Street
0-00 Xxxxx'x Xxxx Xxxx Xxxx Xxxx
Xxxx Xxxx Xxxxxxx
Attention: President Hong Kong
Telecopy: (000) 0000-0000 Attention: President
Telecopy: (000) 0000-0000
with a required copy in either case to:
Xxxxxxx, Xxxxxx & Bruiniers
000 Xxxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Telecopy: (000) 000-0000
Acma: Acma Limited Rinzai Limited
or Rinzai 00 Xxxxxx Xxxx Xxxx c/o Acma Limited
Singapore 2261 00 Xxxxxx Xxxx Xxxx
Attention: President Singapore 2661
Telecopy: 000 00 000-0000 Attention: President
Telecopy: 000 00 000-0000
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Xxxxxxx: Xxxxxxx GTS Limited Lao Hotel (H.K.) Limited
or Lao 000 Xxxx Xxxxxx # 02-00 x/x Xxxxxxx XXX Xxxxxxx
Xxxxx: Xxxxxxxxx 000000 000 Xxxx Xxxxxx # 00-00
Xxxxxxxxx: Xx. Xxxxxx Xxx Xxxxxxxxx 000000
Telecopy: 000 00 000-0000 Attention: Xx. Xxxxxx Xxx
Telecopy: 000 00 000-0000
GK: XX Xxx Holdings Limited Saliendra Pte Ltd.
or 00 Xxxxxxx Xxxxx c/o XX Xxx Holdings Limited
Saliendra Pte #00-00 Xxxxx Xxxxx 00 Xxxxxxx Xxxxx
Xxxxxxxxx 000000 #00-00 Xxxxx Xxxxx
Xxxxxxxxx: Xx. Xxx Xxxxx Xxxx Xxxxxxxxx 000000
Telecopy: 000 00 000-0000 Attention: Xx. Xxx Teong Sang
Telecopy: 000 00 000-0000
S.P.: S.P. Quek Investments Limited
x/x Xxxx Xxxxxxx
00 Xxxxxx Xxxx Xxxx
Xxxxxxxxx 000000
Attention: President
Telecopy: 000 00 000-0000
with a required copy in the case of any notice to Rinzai, Xxx Hotel (H.K.)
Limited, Xxxxxxx GTS Limited, XX Xxx Holdings Limited, Saliendra Pte Ltd., or
S.P. Quek Investments Limited to:
Xxxxxxx Xxxxx Xxxx & Black, LLP
00 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx, Esq.
Telecopy: (000) 000-0000
Xxxxxx Xxxxx: Xxxxxx X. Xxxxx
0000 Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
Telecopy: (000) 000-0000
14.3 GOVERNING LAW. This Shareholders' Agreement shall be governed by
and construed under the laws of the State of Georgia without reference to its
conflicts of law principles. Any action brought hereunder shall be heard by a
court sitting in Xxxxxx County, Georgia.
14.4 COUNTERPARTS. This Shareholders' Agreement may be executed in one
or more counterparts, including counterparts transmitted by telecopier or
telefax, all of which shall be considered one and the same agreement. Facsimile
copies with signatures of the parties to this Shareholders' Agreement, or their
duly authorized representatives, shall be legally binding and enforceable. All
such facsimile copies are declared as originals and accordingly admissible in
any jurisdiction or tribunal having jurisdiction over any matter relating to
this Shareholders' Agreement.
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14.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Shareholders' Agreement are used for convenience only and are not to be
considered in construing or interpreting this Shareholders' Agreement.
14.6 AMENDMENTS AND WAIVERS. Except as expressly provided in Section
9.13 hereof, no amendment to this Shareholders' Agreement shall be effective
unless it is in writing and is signed by all the parties hereto, and no waiver
of any provision of this Shareholders' Agreement or consent to any departure by
any party from the terms hereof, shall in any event be effective unless in
writing and signed by the party or parties against whom such waiver or consent
is asserted and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose recited therein.
14.7 SEVERABILITY. If one or more provisions of this Shareholders'
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Shareholders' Agreement and the balance of this
Shareholders' Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
14.8 ENTIRE AGREEMENT. This Shareholders' Agreement, the Merger
Agreement and the other documents and agreements delivered pursuant hereto and
thereto constitute the full and entire understanding and agreement among the
parties with regard to the subjects hereof and thereof and supersedes any prior
agreements (including any memorandum of understanding or letters of intent)
between the parties regarding the subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have set forth their hand and
seal effective as of the date first above written.
SHAREHOLDERS:
/s/ G. Xxxxxx Xxxxxxx /s/ Xxxxxx X. Xxxxx
------------------------------- -----------------------------------
Witness Xxxxxx X. Xxxxx
RINZAI LIMITED:
By: /s/ Chou Kong Seng
--------------------------------
Name: Chou Kong Seng
------------------------------
Title: Authorized Signatory
-----------------------------
KAIFA TECHNOLOGY (H.K.) LIMITED:
By: /s/ Tam Man Chi
--------------------------------
Name: Tam Man Chi
------------------------------
Title: President
-----------------------------
ROLLING PROFIT HOLDINGS LIMITED
By: /s/ Xxxxxxx X. X. Xxxx
--------------------------------
Name: Xxxxxxx X. X. Xxxx
------------------------------
Title: Director
-----------------------------
LAO HOTEL (H.K.) LIMITED
By: /s/ Low Check Xxxxx
--------------------------------
Name: Low Check Xxxxx
------------------------------
Title: Director
-----------------------------
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SALIENDRA PTE LTD.
By: /s/ Xx. Xxx Teong Sang
--------------------------------
Name: Xx. Xxx Xxxxx Xxxx
------------------------------
Title: Director
-----------------------------
S.P. QUEK INVESTMENTS LIMITED
By: /s/ Sim Pin Quek
--------------------------------
Name: Sim Pin Quek
------------------------------
Title: Director
-----------------------------
"COMPANY"
[CORPORATE SEAL]
ATTEST: XXXXX MICROCOMPUTER PRODUCTS, INC.
By: By: /s/ Xxxxxx X. Xxxxx
------------------------- --------------------------------
Secretary Name: Xxxxxx X. Xxxxx
Title: President
-40-
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The undersigned, Acma Limited, the sole shareholder of Rinzai
Limited, is made a party hereto as the guarantor and joint obligor of all
obligations, covenants and agreements of Rinzai Limited hereunder.
ACMA LIMITED
By: /s/ Xxx Xxxxx
-------------------------------------------
Name: Xxx Xxxxx
-----------------------------------------
Title: Managing Director
----------------------------------------
The undersigned, Xxxx'x International (Holdings) Limited, the
sole shareholder of Rolling Profit Holdings, Ltd., is made a party hereto as the
guarantor and joint obligor of all obligations, covenants and agreements of
Rolling Profit Holdings, Ltd. hereunder.
XXXX'X INTERNATIONAL (HOLDINGS) LIMITED
By: /s/ Xxxxxxx X. X. Xxxx
-------------------------------------------
Name: Xxxxxxx X. X. Xxxx
-----------------------------------------
Title: Director and Group Financial Controller
----------------------------------------
The undersigned X.X. Xxx Holdings Limited, the sole
shareholder of Saliendra Pte Ltd., is made a party hereto as the guarantor and
joint obligor of all obligations, covenants and agreements of Saliendra Pte Ltd.
hereunder.
X.X. XXX HOLDINGS LIMITED
By: /s/ Xx. Xxx Xxxx Xxxx
-------------------------------------------
Name: Xx. Xxx Xxxx Xxxx
-----------------------------------------
Title: Managing Director
----------------------------------------
The undersigned Xxxxxxx GTS Limited, the sole shareholder of
Lao Hotel (H.K.) Limited, is made a party hereto as the guarantor and joint
obligor of all obligations, covenants and agreements of Lao Hotel (H.K.) Limited
hereunder.
XXXXXXX GTS LIMITED
By: /s/ Xxxxxx Xxx Xxxx Xxxx
-------------------------------------------
Name: Xxxxxx Xxx Xxxx Xxxx
-----------------------------------------
Title: Director
----------------------------------------
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SCHEDULE 1
List of Investors
Rinzai Limited
Kaifa Technology (H.K.)Limited
Rolling Profit Holdings, Limited
Lao Hotel (H.K.) Limited
Saliendra Pte Ltd.
S.P. Quek Investments Limited
List of Shareholders
Number
Shareholder Name Class of Shares of Shares
---------------- ---------------- ---------
Xxxxxx X. Xxxxx Common Stock 4,943,221
Rinzai Limited Preferred Shares 2,817,500
Kaifa Technology Preferred Shares 816,667
(H.K.) Limited
Rolling Profit Holdings Preferred Shares 408,333
Limited
Lao Hotel (H.K.) Limited Preferred Shares 367,500
Saliendra Pte Ltd. Preferred Shares 245,000
S.P. Quek Investments Preferred Shares 245,000
Pte Ltd.
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SCHEDULE 2
Shareholder Loans
Aggregate Convertible Convertible
Amount Note B-1 Note B-2
-------------------------------------------
Rinzai Limited $7,475,000 $4,025,000 $3,450,000
Lao Hotel (H.K.) Limited $ 975,000 $ 525,000 $ 450,000
Saliendra Pte Ltd. $ 650,000 $ 350,000 $ 300,000
S.P. Quek Investments Pte Ltd. $ 650,000 $ 350,000 $ 300,000
Kaifa Technology (H.K.) Limited $2,166,667 $1,166,667 $1,000,000
Rolling Profit Holdings Limited $1,083,333 $ 583,333 $ 500,000
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LIST OF EXHIBITS
Exhibit A Intentionally Omitted
Exhibit B-1 Form of Convertible Subordinated Promissory Note ($7,000,000 Aggregate)
Exhibit B-2 Form of Convertible Subordinated Promissory Note ($6,000,000 Aggregate)
Exhibit C CEO Position Profile
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