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EXHIBIT 10.5
COMPANY AND STOCKHOLDERS AGREEMENT
By and Among
MS ACQUISITION LIMITED,
a Texas Limited Partnership,
RICHMONT MARKETING SPECIALISTS INC.
a Delaware corporation,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
AND
▇▇▇▇ ▇. ▇▇▇▇▇▇
Dated as of October 7, 1997
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TABLE OF CONTENTS
1. Term ............................................................1
2. Transfer of Shares of Capital Stock..............................1
3. Legends; Opinion of Counsel .....................................5
4. Tag Along Rights.................................................5
5. Come Along Obligation............................................7
6. Put Right........................................................8
7. Additional Equity; Certain Other Matters........................10
8. Voting Agreement; Board Representation; Expenses................11
9. Certain Company Options to Repurchase...........................12
10. Representations and Warranties by Each Management Stockholder...12
11. Representations and Warranties of the Company and the
Management Stockholders.........................................14
12. Representations and Warranties of Majority Stockholder..........15
13. Survival of Representations and Warranties......................17
14. Indemnification.................................................17
15. Notices.........................................................20
16. Severability....................................................21
17. Complete Agreement..............................................21
18. Counterparts....................................................21
19. Arbitration and Choice of Law...................................21
20. Remedies........................................................22
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21. Successors and Assigns..........................................22
22. Amendments......................................................23
23. Termination of Restrictions.....................................23
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COMPANY AND STOCKHOLDERS AGREEMENT
This Company and Stockholders Agreement (this "Agreement"), dated as of
October 7, 1997, is by and among MS Acquisition Limited, a Texas limited
partnership (the "Majority Stockholder"), Richmont Marketing Specialists Inc., a
Delaware corporation (the "Company"), and the Stockholders of the Company listed
on Exhibit A attached hereto (collectively, the "Management Stockholders" and,
individually, a "Management Stockholder").
PRELIMINARY STATEMENTS
A. Each of the Management Stockholders and the Majority Stockholder owns
that number of the outstanding shares of common stock, $.01 par value per share
("Common Stock"), of the Company set forth beside its name on Exhibit B hereto.
B. The Management Stockholders and the Majority Stockholder desire to
enter into this Agreement to set forth certain material terms governing their
relationship as stockholders of the Company.
NOW, THEREFORE, in consideration of the premises and the respective mutual
agreements, covenants, representations and warranties herein contained, and for
other good, valid and binding consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
STATEMENT OF AGREEMENT
1. Term. This Agreement, and the rights and obligations of the parties
pursuant to the terms hereof, shall be binding upon the parties hereto for a
period extending from the date hereof through April 2, 2021, unless earlier
terminated in accordance with Section 23 hereof (the "Term"), provided, however,
that notwithstanding the foregoing, the agreement to vote shares of the
Company's capital stock (the "Capital Stock") pursuant to Section 8 hereof shall
be binding upon the parties hereto for a period extending from the date hereof
through April 2, 2006, unless earlier terminated in accordance with Section 23
hereof. Upon the expiration of the Term, this Agreement and the rights and
obligations of the parties hereunder shall terminate and have no force and
effect.
2. Transfer of Shares of Capital Stock.
(a) Restrictions on Transfer of Capital Stock by Management
Stockholders. Each of the Management Stockholders agrees that, except as
otherwise expressly provided below, without the prior written consent of the
Majority Stockholder (each of such consensual transactions being termed an
"Exempt Transfer"), he will not assign, sell, transfer, pledge or otherwise
dispose of or transfer ("Transfer") any shares of his Capital Stock or any
interest therein.
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(b) Permitted Transfers of Capital Stock by the Majority
Stockholder. Notwithstanding anything in this Agreement to the contrary, the
Majority Stockholder may Transfer all or part of the Capital Stock owned by the
Majority Stockholder or acquired by the Majority Stockholder pursuant to the
terms of this Agreement (the "Majority Stockholder Shares") to any of its
Affiliates (as defined below) without compliance with the terms hereof, or to
any Non-Affiliate (as defined below), provided that it shall have complied with
the provisions of Section 4 hereof to the extent applicable.
(c) Permitted Transfers of Capital Stock by Management Stockholders.
Notwithstanding anything in this Agreement to the contrary, each of the
Management Stockholders has the right to Transfer certain shares of his Capital
Stock to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") pursuant to that certain warrant (the
"▇▇▇▇▇▇▇▇ Warrant") dated as of even date herewith; provided that (i) such
Transfer is consummated in accordance with the terms of the ▇▇▇▇▇▇▇▇ Warrant as
in effect on the date hereof and (ii) ▇▇▇▇▇▇▇▇ executes and delivers to the
Company an instrument in writing pursuant to which he agrees to be bound by all
of the restrictions and obligations (but none of the rights or benefits) set
forth herein as fully as if he were named as a Management Stockholder herein.
(d) Permitted Family Transfers.
(i) Notwithstanding anything in this Agreement to the
contrary, but subject to the terms of Section 2(d)(iii) below, each of the
Management Stockholders, any permitted individual transferee of the Majority
Stockholder and ▇▇▇▇▇▇▇▇ (collectively, the "Family Transferors") shall have the
right to Transfer any or all of their respective shares of Capital Stock at any
time during the term hereof to (i) each of such Family Transferor's spouse or
(ii) any of each of such Family Transferor's direct lineal descendants
(collectively, "Lineal Descendants"), or (iii) any partnership or trust, (x) the
general partner or trustee, as the case may be, of which is the Family
Transferor making the Transfer and (y) each partner or beneficiary of which, as
the case may be, is the spouse or a Lineal Descendant of the Family Transferor
making the Transfer.
(ii) Any Transfer pursuant to Section 2(d)(i) above or Section
2(d)(iii) below shall be deemed to have been made in accordance with the terms
thereof (1) only if the transferee of such Transfer executes and delivers an
instrument in writing pursuant to which all of the obligations and restrictions
set forth herein (including, without limitation, all restrictions on Transfer)
shall apply to such transferee, and, (2) (subject to the terms of Section
2(d)(iii) below), only so long as the Family Transferor making such Transfer
retains voting control of the shares of Capital Stock being transferred pursuant
thereunder pursuant to a voting trust agreement, or pursuant to such Management
Stockholder's capacity as trustee or general partner of the trust or
partnership, as the case may be.
(iii) In addition to, and not in limitation of, the right of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") to transfer his shares of Capital Stock pursuant
to Section 2(d)(i) above, and notwithstanding anything in this Section 2(d) to
the contrary, ▇▇▇▇▇▇▇▇ shall have the right to (1) Transfer at any time during
the term hereof to any Lineal Descendants or any partnership or trust
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each partner or beneficiary of which, as the case may be, is the spouse or a
Lineal Descendant of the Family Transferor making the Transfer (such partnership
or trust hereinafter referred to as a "Family Entity"), up to 2,841 shares of
Capital Stock, including any voting rights relating thereto and (2) Transfer to
any Lineal Descendants or Family Entity any or all of his shares of Capital
Stock so long as the Majority Stockholder or ▇▇▇▇▇▇▇▇ retains voting control of
the shares being Transferred.
(e) First Refusal Rights.
(i) Majority Stockholder's Right of First Refusal. In the
event, at any time after the date of this Agreement, any Management Stockholder
or his transferee desires to Transfer any of his shares of Capital Stock, such
party shall first offer such shares of such Capital Stock for sale to the
Majority Stockholder, at the same price and upon the same terms (or terms as
similar as reasonably possible) upon which he is proposing to dispose of such
Capital Stock, pursuant to a written notification setting forth all material
terms of the proposed transaction (the "Right of First Refusal Notice"), a copy
of which shall, to the extent reasonably practicable, be simultaneously
delivered to the Company and each of the other Management Stockholders. If the
Majority Stockholder desires to exercise such right of first refusal with
respect to all, but not less than all, of the offered shares, the Majority
Stockholder shall notify the Management Stockholder or his transferee in writing
within thirty (30) days after receipt of the Right of First Refusal Notice. In
the event the Majority Stockholder does not exercise its right of first refusal,
such Management Stockholder or transferee shall then offer such shares to the
Company as provided in Section 2(e)(ii) below. In the event the Company does not
exercise its right of first refusal, such Management Stockholder or transferee
shall then offer such shares to each of the other Management Stockholders as
provided in Section 2(e)(iii) below. If neither the Majority Stockholder, nor
the Company, nor any other Management Stockholder exercises its right of first
refusal, the Management Stockholder or transferee desiring to Transfer shares of
Capital Stock shall have thirty (30) days following the expiration of each of
the Majority Stockholder Right of First Refusal Period (as defined below), the
Company Right of First Refusal Period (as defined below), and the Management
Stockholders' Right of First Refusal Period (as defined below) within which to
dispose of such shares to the transferee named in the Right of First Refusal
Notice, provided that such Transfer be on the same terms offered to the Majority
Stockholder and the Company.
(ii) Company's Right of First Refusal. If the Majority
Stockholder does not exercise its right of first refusal described in Section
2(e)(i) with respect to all, but not less than all, of the offered shares within
the first thirty (30) day period described above (the "Majority Stockholder
Right of First Refusal Period"), the Management Stockholder or his transferee
shall then offer such shares of Capital Stock for sale to the Company, at the
same price and upon the same terms (or terms as similar as reasonably possible)
upon which he is proposing to dispose of such Capital Stock, pursuant to a Right
of First Refusal Notice. If the Company desires to exercise such right of first
refusal with respect to all, but not less than all, of the offered shares, it
shall notify the Management Stockholder or his transferee in writing within
fifteen (15) days after receipt from the offering Management Stockholder that
the Majority Stockholder had declined its right of first refusal hereunder.
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(iii) Management Stockholders' Right of First Refusal. If the
Company does not exercise its right of first refusal described in Section
2(e)(ii) with respect to all, but not less than all, of the offered shares
within the fifteen (15) day period described in the immediately preceding
paragraph (the "Company Right of First Refusal Period"), the Management
Stockholder or his transferee shall then offer such shares of Capital Stock for
sale to each of the other Management Stockholders, at the same price and upon
the same terms (or terms as similar as reasonably possible) upon which he is
proposing to dispose of such Capital Stock, pursuant to a Right of First Refusal
Notice. If any Management Stockholder desires to exercise such right of first
refusal with respect to all, but not less than all, of the offered shares, he
shall notify the Management Stockholder or his transferee in writing within
fifteen (15) days after receipt from the offering Management Stockholder that
the Company had declined his right of first refusal hereunder. In the event more
than one (1) Management Stockholder notifies the Management Stockholder or his
transferee desiring to Transfer that he desires to exercise its right of first
refusal described in this Section 2(e)(iii) with respect to all, but not less
than all, of the offered shares (each such Management Stockholder desiring to
exercise his right of first refusal pursuant hereto hereinafter referred to as
an "Exercising Management Stockholder") within the fifteen (15) day period
described in the immediately preceding sentence (the "Management Stockholders'
Right of First Refusal Period"), then each such Exercising Management
Stockholder who so notifies the Management Stockholder or his transferee shall
purchase a pro rata portion of the offered shares based on such Exercising
Management Stockholder's proportionate ownership of the aggregate number of
shares of Capital Stock then held by all of the Exercising Management
Stockholders.
(iv) Valuation of Non-Cash Consideration. In the event the
consideration for the Capital Stock as disclosed in the Right of First Refusal
Notice is other than cash, a promissory note or a combination thereof, the price
for such Capital Stock shall be the value of that consideration as agreed to by
the Management Stockholder on the one hand and Majority Stockholder, the
Company, or the Exercising Management Stockholders, as the case may be, on the
other hand, or, if no agreement can be reached as to the valuation of such
consideration, the fair market value of such consideration as determined by two
appraisers (one appointed by the Management Stockholder and one appointed by the
Majority Stockholder or the Company, as the case may be). In the event the two
appraisers are unable to agree on a fair market value within 20 days after they
are appointed and further negotiations, in the opinion of either of the
appraisers, would not result in an agreement, the fair market value of the
consideration shall be the average of the appraised values of the two
appraisers; provided, however, that if the appraised values of the two
appraisers differ by more than ten percent (10%) of the higher of the two
appraised values, the two respective appointed appraisers shall select a third
appraiser who shall independently, within 20 days after his appointment, make a
determination of the value of the consideration, and the average of the
appraised values of the three appraisers shall be the purchase price and shall
be binding on the parties hereto. The Majority Stockholder, the Company or the
Exercising Management Stockholders, as the case may be, and the Management
Stockholder whose Capital Stock is subject to the Right of First Refusal Notice,
shall each bear the cost of their respective appraisers and shall share the cost
equally of the third appraiser, if any. Notwithstanding anything herein to the
contrary, if an appraisal is used to determine the value of the consideration
pursuant to this Section 2(e)(iv), the time periods provided for in
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Sections 2(e)(i), (2(e)(ii) and 2(e)(iii) shall be tolled from the time of the
initial appointment of the two appraisers until a final appraised value is
determined pursuant to this Section 2(e)(iv).
3. Legends; Opinion of Counsel.
(a) The certificates representing the Capital Stock will bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF
1933, OR ANY APPLICABLE STATE SECURITIES LAWS, AND ANY SALE, TRANSFER,
PLEDGE OR OTHER TRANSFER OR DISPOSITION THEREOF MAY BE MADE ONLY (I) IN A
TRANSACTION REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR (II) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE
AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT
REASONABLY SATISFACTORY TO IT. IN ADDITION, ANY SALE, ASSIGNMENT,
TRANSFER, PLEDGE OR OTHER TRANSFER OR DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY AND SUBJECT TO THE TERMS
AND PROVISIONS OF A COMPANY AND STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER
7, 1997, BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS THEREOF AND A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF OCTOBER 7, 1997, BETWEEN THE
COMPANY AND MS ACQUISITION LIMITED. AMONG OTHER THINGS, SUCH COMPANY AND
STOCKHOLDERS AGREEMENT INCLUDES A BINDING RIGHT OF FIRST REFUSAL, VARIOUS
RESTRICTIONS ON VOTING, TRANSFER AND CERTAIN OTHER PROVISIONS INCLUDING,
WITHOUT LIMITATION, SUBSTANTIAL ENCUMBRANCES AND RESTRICTIONS ON
ALIENABILITY OF SHARES. THE COMPANY WILL FURNISH A COPY OF THE COMPANY AND
STOCKHOLDERS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT TO THE RECORD
HOLDER OF THIS CERTIFICATE WITHOUT CHARGE ON REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
(b) No holder of Capital Stock may Transfer any Capital Stock
(except pursuant to an effective registration statement under the Securities Act
of 1933) without first delivering to the Company an opinion of counsel
reasonably acceptable in form and substance to the Company and its counsel that
registration under the Securities Act of 1933 is not required in connection with
such Transfer.
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4. Tag Along Rights.
(a) Subject to the provisions of Section 4(g) hereof, the Majority
Stockholder shall not, except as set forth below, in any twelve (12) month
period, directly or indirectly Transfer, in a single transaction or series of
related transactions, to any party that is not an Affiliate of the Majority
Stockholder ("Non-Affiliate") or group of Non-Affiliates (the "Tag Along
Transferee"), the Majority Stockholder Shares representing, on a fully diluted
basis, more than 5% of the Majority Stockholder Shares, unless the terms and
conditions of such Transfer shall include on a pro-rata basis an offer to the
Management Stockholders at the same price and on the same terms (or terms as
similar as reasonably possible) as the offer made to the Majority Stockholder by
the Tag Along Transferee (the "Tag Along Right"). For purposes of this
Agreement, "Affiliate" shall mean, with respect to any party, any other party
which, directly or indirectly, controls, is controlled by, or is under common
control with, such party. For purposes of this definition of "Affiliate",
"control" shall mean the power, direct or indirect, (i) to vote or direct the
voting power of at least ten percent (10%) or more of the outstanding shares of
voting securities of a party, or (ii) to direct or cause the direction of the
management and policies of a party, by ownership of voting securities, general
partnership interest or otherwise.
(b) The each Management Stockholder shall be entitled to sell to the
Tag Along Transferee the number of shares of Capital Stock held by such
Management Stockholder equaling the number derived as follows:
(X) x (A)
---
B
where X equals the number of shares of Capital Stock then owned by such
Management Stockholder, A equals the total number of Majority Stockholder Shares
to be transferred to the Tag Along Transferee and B equals the total number of
Majority Stockholder Shares.
(c) The Majority Stockholder shall notify each Management
Stockholder in writing promptly upon receipt of any proposed transfer of the
Majority Stockholder Shares which is subject to the Tag Along Right. Such notice
(the "Initial Tag Along Notice") shall set forth: (i) the name and address of
the Tag Along Transferee, the number of shares of Capital Stock proposed to be
transferred thereto, (ii) the date on which such transfer is proposed to be
effected, (iii) the proposed amount and form of consideration and terms and
conditions of payment offered by such Tag Along Transferee (the "Tag Along
Terms") and (iv) that such Tag Along Transferee has been informed of the Tag
Along Right.
(d) The Tag Along Right may be exercised by a Management Stockholder
by delivery of a written notice to the Majority Stockholder (the "Tag Along
Acceptance Notice") within 30 days following the receipt of the Initial Tag
Along Notice from the Majority Stockholder. The Tag Along Acceptance Notice
shall state the number of shares of Capital Stock that the Management
Stockholder wishes to transfer to the Tag Along Transferee.
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(e) Upon delivery of a Tag Along Acceptance Notice, each such
Management Stockholder shall be obligated to sell to the Tag Along Transferee on
the Tag Along Terms the number of shares of Capital Stock set forth in the Tag
Along Acceptance Notice; provided, however, that neither the Majority
Stockholder nor any of the Management Stockholders shall consummate the sale of
any shares of Capital Stock offered by it if the Tag Along Transferee does not
purchase all of the shares from the Majority Stockholder and the Management
Stockholders that the Majority Stockholder and the Management Stockholders are
entitled and desire to sell to the Tag Along Transferee pursuant to the terms
hereof. After expiration of the 30-day period referred to above without
acceptance by a Management Stockholder, if the provisions of this Section 4
shall have been complied with in all respects, the Majority Stockholder shall
have the right for a 90-day period to transfer such the Majority Stockholder
Shares to the Tag Along Transferee on the Tag Along Terms without further notice
to the Management Stockholders.
(f) At the closing of the transfer to any Tag Along Transferee, the
Tag Along Transferee shall remit to the Management Stockholders the
consideration for the total sales price of the Capital Stock of the Management
Stockholders sold pursuant hereto, against delivery by the Management
Stockholders of certificates for such Capital Stock, duly endorsed or with duly
executed stock powers, and the Management Stockholders shall comply with any and
all other applicable conditions to closing.
(g) Notwithstanding the other restrictions of this Section 4, the
Majority Stockholder may, at any time, Transfer (in one or more Transfers,
including, without limitation, Transfers to Non-Affiliates permitted by Section
4(a) hereof that are not subject to the Tag Along Right) up to an aggregate of
50% of the Majority Stockholder Shares to a Non-Affiliate without such Transfer
being subject to the Tag Along Right; provided, that the voting rights regarding
all such Majority Stockholder Shares so Transferred shall be granted by the
transferee to ▇▇▇▇ ▇▇▇▇▇▇ pursuant to an irrevocable voting agreement with a
term of at least ten years; provided, further, that a copy of such voting
agreement shall be provided to the Company and the Management Stockholders prior
to the Transfer.
5. Come Along Obligation.
(a) Subject to the terms of this Section 5, if, pursuant to a bona
fide offer made by a Non-Affiliate, the Majority Stockholder desires to sell all
of its shares of Capital Stock and rights to acquire shares of Capital Stock,
each of the Management Stockholders shall be obligated to sell all, but not less
than all, of his shares of Capital Stock and rights to acquire shares of Capital
Stock to such purchaser (the "Come Along Transferee") on the terms and
conditions approved by the Majority Stockholder with respect to its own shares
of Capital Stock (the "Come Along Obligation"). The Company and each of the
Management Stockholders will take all necessary actions, and actions reasonably
deemed desirable by the Majority Stockholder, in connection with the
consummation of the sale to the Come Along Transferee of the remaining issued
and outstanding Capital Stock held by each such Management Stockholder.
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(b) The Majority Stockholder shall notify each Management
Stockholder in writing of any proposed transfer of shares which is subject to
the Come Along Obligation. Such notice (the "Come Along Notice") shall set
forth: (i) the date on which such transfer is proposed to be effected, and (ii)
the proposed amount and form of consideration and terms and conditions of
payment offered by such Come Along Transferee (the "Come Along Terms").
(c) Upon delivery of the Come Along Notice (provided that the
closing shall occur no earlier than 30 days thereafter), each Management
Stockholder shall be obligated to sell to the Come Along Transferee on the Come
Along Terms all of the shares of Capital Stock then owned, held or otherwise
controlled by such Management Stockholder and all rights to acquire shares of
Capital Stock.
(d) At the closing of the transfer of Capital Stock to any Come
Along Transferee, the Come Along Transferee shall remit to the Management
Stockholders the consideration for the total sales price of the Capital Stock of
the Management Stockholders and the rights to acquire Capital Stock sold
pursuant to the Come Along Obligation set forth herein, against delivery by the
Management Stockholders of certificates for such Capital Stock and certificates
evidencing such rights to acquire stock, all duly endorsed or with duly executed
powers, and the Management Stockholders shall comply with any and all other
applicable conditions to closing; provided however, that in no case shall the
Management Stockholders' indemnification obligations exceed their respective pro
rata amount of the applicable sales price.
6. Put Right.
(a) Put Mechanics.
(i) Subject to the provisions of Section 6(a)(ii) below, at
any time during the first fifteen (15) days of each fiscal quarter of the
Company occurring after December 31, 2000, but prior to December 31, 2003 (each
such fifteen (15) day period hereinafter referred to as a "Put Window"), each
Management Stockholder who at such time is not an employee of the Company or
Marketing Specialists Sales Company ("MSSC") (a "Put Stockholder") shall have
the option to sell to the Company, and thereupon the Company shall have the
obligation to purchase, all of the shares, of the Capital Stock which such
Management Stockholder then owns ("Remaining Shares") at the price described
below (such option to sell and reciprocal obligation to purchase are hereinafter
referred to as the "Put," and each Put Stockholder who elects to exercise the
Put is hereinafter referred to as a "Put Optionee").
(ii) Notwithstanding the above, at any time during which
shares of Capital Stock are traded on a national exchange (including, without
limitation, NASDAQ) and the Remaining Shares in question may be sold in such
public market, then such Put Stockholder shall no longer have the right to
exercise the Put with respect to such Remaining Shares.
(iii) To exercise the Put, the Put Optionee shall deliver
during a Put Window a written notice (the "Put Notice") to the Company notifying
the Company of his desire to
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exercise the Put. The closing (the "Put Closing") for the purchase by the
Company of such Put Optionee's Remaining Shares shall occur at the Company's
principal office, or at such other place as shall be mutually agreeable to the
Put Optionee and the Company, on the seventy-fifth day after the end of the
immediately preceding Put Window (such date of closing hereinafter referred to
as the "Put Closing Date"). At the Put Closing, the Put Optionee shall deliver a
duly and validly executed certificate making, for the benefit of the Company,
customary representations and warranties, including but not limited to
representations as to good title, no encumbrances, no conflicts, authority and
capacity, and no consents or commissions.
(b) Calculation of Put Price. The price per share to be paid to the
Put Optionee at the Put Closing (the "Put Price") shall be the product of:
consolidated earnings (excluding extraordinary, non-recurring or discretionary
expenses, as determined in the good faith determination of the Board of
Directors of the Company) before interest, taxes, depreciation and amortization
calculated in accordance with GAAP consistently applied ("EBITDA") of the
Company for the four (4) fiscal quarters immediately preceding the Put Notice
times a multiple which, in light of generally recognized, then prevailing market
and industry conditions, fairly reflects the value of the Company, minus the
present value of the Company's funded debt, on a consolidated basis, at the date
of calculation divided by the number of then issued and outstanding shares of
Capital Stock. In calculating EBITDA, the EBITDA of the Company shall be deemed
to include the full year EBITDA of any entity acquired by the Company or its
subsidiaries during such four (4) fiscal quarters. In the event that the Company
and the Put Optionee cannot agree as to the calculation of the Put Price within
sixty (60) days after the giving of the Put Notice, then the matter shall be
referred to Price Waterhouse L.L.P. (Dallas Office) ("PW") who shall calculate
the Put Price. In the event the Put Optionee or the Company disagrees with the
Put Price calculated by PW, then the matter shall be referred to Ernst & Young,
L.L.P. ("E&Y") who shall calculate the Put Price. If the calculations rendered
by PW and E&Y differ by no more than ten percent (10%), the Put Price shall be
the average of the two such calculations. If the calculations differ by more
than ten percent (10%), PW and E&Y shall immediately, but in no event more than
five (5) days following delivery of E&Y's calculations, jointly appoint a third
accounting firm (the "Third Appraiser"). The Third Appraiser shall, within ten
(10) days of its appointment, render its calculation of the Put Price, and the
average of the calculations of the Put Price of PW, E&Y and the Third Appraiser
shall be the Put Price and shall be final and binding upon the Company and the
Put Optionee. The Company shall bear the cost of PW, the Put Optionee shall bear
the cost of E&Y, and the Company and the Put Optionee shall each pay one-half of
the cost of the Third Appraiser. To the extent not already reflected in the pro
forma component of EBITDA as calculated pursuant to the foregoing provisions of
this Section 6(b), in the event of any reorganization, recapitalization, split,
merger, stock split, stock dividend, combination or exchange of shares, issuance
of other securities in exchange for Capital Stock or any other change in the
outstanding securities of the Company that results in a change in the number or
the kind of shares of Capital Stock or securities convertible into Capital
Stock, the amount to be paid per share by the Company shall be adjusted so that
the total amount of consideration to be paid by the Company to each Put
Optionee, upon exercise of the Put, is identical to the consideration that would
have been paid if such event had not occurred.
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(c) Payment of Put Price. To the extent that the Company has
available cash therefor as determined in good faith by the Board of Directors of
the Company, taking into account such factors as limitations imposed by
applicable law, the amount of cash revenues then required for the Company's
operations and acquisition strategy and such other factors as the Board, in its
sole and exclusive judgment, deems appropriate ("Available Cash"), it shall pay
the Put Price in cash. In the event the Put Price exceeds Available Cash, the
Company shall pay such excess in the form of a promissory note, which promissory
note (i) shall have substantially the terms described on Exhibit C hereto and
(ii) shall be secured by a pledge of that portion of the Remaining Shares not
purchased for cash. Available Cash, if any, shall be allocated to each Put
Optionee who exercises during a given Put Window on a pro-rata basis.
(d) Put Closing. On the Put Closing Date, the Company shall pay to
the Put Optionee an amount equal to the Put Price multiplied by the number of
Remaining Shares for which the Put is exercised. Simultaneously, the Put
Optionee shall deliver to the Company certificates representing such Remaining
Shares, together with duly executed stock powers endorsed to the Company or such
other assignments or instruments of conveyance and transfer, in form and
substance satisfactory to the Company and its counsel, as shall be effective to
vest in the Company all right, title and interest in and to such Remaining
Shares.
(e) Death or Disability. Notwithstanding the terms of this Section
6, in the event of any Management Stockholder's Disability (as defined below) or
death, then upon such Disability or death and thereafter during the term hereof,
the legal guardian or representative of such Management Stockholder shall have
the right to exercise the Put with respect to the shares of Capital Stock then
beneficially owned by such Management Stockholder in accordance with the above
terms of this Section 6; provided, however, that for purposes of this Section
6(e), the Put Window shall be deemed the first fifteen (15) days of the second
full fiscal quarter of the Company occurring after the Disability or death, as
the case may be. "Disability", (i) with respect to any Management Stockholder
who was employed by the Company or MSSC immediately prior to such event, shall
have been deemed to occur at such time as the Executive becomes subject to
Disability under that certain Employment Agreement (the "Employment Agreement")
dated as of April 2, 1996 by and between such Management Stockholder and MSSC
and (ii) with respect to any Management Stockholder who was not employed by the
Company or MSSC immediately prior to such event, shall have been deemed to occur
when such Management Stockholder becomes physically or mentally disabled to such
an extent that, in the opinion of a physician employed by the Company or MSSC or
the Management Stockholder, (x) he is no longer able to perform significant
decision-making duties, (y) such disability cannot be reasonably accommodated
and (z) such disability is reasonably expected to continue for more than six
additional months; provided, that in the case of any Disability under clause
(ii) above, the Company or MSSC or the Management Stockholder may contest any
decision made by a physician employed by the other party by employing its or his
own physician for such purpose; provided, further, that in the event the two
physicians so retained disagree, such physicians shall jointly nominate a third
physician for the purpose of rendering an opinion with respect to such
Disability, which opinion shall be binding upon the parties hereto.
14
7. Additional Equity; Certain Other Matters.
(a) Additional Equity. Within 30 days of the date of the good faith
determination (taking into account the availability of bank and other debt
financing and availability of equity financing from sources other than the
Majority Stockholder and its Affiliates) of the Board of Directors of the
Company that the Company requires additional equity capital, the Majority
Stockholder shall have the right to purchase additional shares ("Additional
Shares") of Common Stock from the Company at the Additional Equity Price (as
defined below) by delivering the amount of such Additional Equity Price to the
Company on the applicable purchase date by wire transfer in immediately
available funds to an account designated in writing by the Company at least two
business days prior to such purchase date. Each amount so invested by the
Majority Stockholder (unless agreed otherwise by the Majority Stockholder and at
least two of the Management Stockholders) shall be invested in increments of
$1,000,000. The "Additional Equity Price" shall be equal to $1,000,000 for the
number of shares of Common Stock required to increase the Majority Stockholder's
proportionate ownership of the Capital Stock outstanding on the date of purchase
by one percent. (For example, (i) if the Majority Stockholder owns, in
aggregate, 65% of the total number of shares of the then outstanding Capital
Stock and invests an additional $1,000,000 in newly issued shares of Common
Stock under the terms of this Section 7(e), the Company shall issue to the
Majority Stockholder that number of shares of Common Stock required to increase
the Majority Stockholder's proportionate ownership of the Capital Stock to 66%
of the total number of shares of the Capital Stock outstanding immediately
following such purchase and (ii) if the Majority Stockholder owns, in aggregate,
65% of the total number of shares of the then outstanding Capital Stock and
invests an additional $3,000,000 in newly issued shares of Common Stock under
the terms of this Section 7(e), the Company shall issue to the Majority
Stockholder that number of shares of Common Stock required to increase the
Majority Stockholder's proportionate ownership of the Capital Stock to 68% of
the total number of shares of the Capital Stock outstanding immediately
following such purchase.)
(b) Successors and Assigns. The provisions of this Section 7 shall
be enforceable against the respective successors and assigns of the parties
hereto and against the spouses of the Management Stockholders, who shall execute
a Consent set forth after the signature page of this Agreement.
(c) HSR Clearance. If the Majority Stockholder or the Company or any
Management Stockholder is required to file ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Notification and
Report Forms under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act") with respect to the sale or purchase of any Capital
Stock by any party pursuant to Section 6 or Section 7, as the case may be, of
this Agreement such party shall promptly make such filings and the time periods
provided in Section 6 or Section 7, as the case may be, shall be extended until
the second business day after the Majority Stockholder, the Company and/or the
Management Stockholders, as applicable, receives written notice from the Federal
Trade Commission or the Department of Justice that the applicable waiting period
under the HSR Act has expired or been terminated (or until the expiration of
such waiting period if no such written notice is received).
15
8. Voting Agreement; Board Representation; Expenses.
(a) The Board of Directors of the Company (the "Board") shall be
composed of seven members, three of whom (▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇) have been nominated by ▇▇▇▇▇▇▇▇ and four of whom (▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇) have been nominated by the Majority
Stockholder.
(b) If any of the nominated directors ceases to be a director for
any reason, including death, resignation, removal or otherwise, the party who
originally nominated such director shall have the right to nominate another
person to serve as a director, subject to the same approval requirements as set
forth in (a) above, and the parties hereto shall take all actions necessary to
have such nominee elected as a director.
9. Certain Company Options to Repurchase.
(a) Repurchase Upon Termination for Cause. In the event (i) any
Management Stockholder's employment with the Company or MSSC is terminated for
Cause (as defined in the applicable Employment Agreement ) then the Company
shall have the irrevocable and exclusive option, but not the obligation, to
purchase all or any portion of such Management Stockholder's shares at a price
equal to the Put Price described in Section 6(b) above, except that the multiple
to be applied to the Company's EBITDA shall be conclusively deemed to be: (1)
5.5 if the relevant event occurs before March 31, 1998; and (2) 5.25 if the
relevant event occurs after March 31, 1998 (the "Repurchase Price"). As soon as
reasonably practicable after the applicable Termination Date (as defined in the
Employment Agreement) but in no event later than ninety (90) days after such
Termination Date, the Company shall deliver to such Management Stockholder
written notice (the "Termination Repurchase Notice") setting forth all of the
material terms relating to the repurchase of the shares of Capital Stock under
this Section 9(a).
(b) Repurchase Upon Divorce, Bankruptcy, Disability or Death. In the
event of the Disability of any Management Stockholder or the transfer of any
Management Stockholder's shares of Capital Stock to a third party (the
"Automatic Transferee") by operation of law pursuant to or otherwise in
connection with any Management Stockholder's divorce, bankruptcy, or death, then
the Company shall have the irrevocable and exclusive option, but not the
obligation, to purchase all or any portion of the shares of Capital Stock then
held by such Management Stockholder (in the case of such Management
Stockholder's Disability) or held by such Automatic Transferee at a price equal
to the applicable Repurchase Price. As soon as reasonably practicable after the
date of the event described in the first sentence of this Section 9(b), but in
no event later than ninety (90) days after such date, the Company shall deliver
to such Management Stockholder (or legal representative thereof) or Automatic
Transferee (or legal representative thereof), as applicable, written notice (the
"Automatic Repurchase Notice") setting forth all of the material terms relating
to the repurchase of the shares of Capital Stock under this Section 9(b).
(c) Repurchase Closing. The closing (the "Repurchase Closing") for
the repurchase by the Company of shares of Capital Stock pursuant to Section
9(a) or Section 9(b) above
16
shall occur at the Company's principal office thirty (30) days after delivery of
the Termination Repurchase Notice or Automatic Repurchase Notice, as the case
may be. At the Repurchase Closing, the Management Stockholder (or legal
representative thereof) or the Automatic Transferee (or legal representative
thereof), as the case may be, shall deliver a duly and validly executed
certificate making, for the benefit of the Company, customary representations
and warranties.
10. Representations and Warranties by Each Management Stockholder. Each
Management Stockholder, with respect only to himself and not with respect to any
other Management Stockholder (and in the case of any representation or warranty
set forth below relating solely to ▇▇▇▇▇▇▇▇ and Watt, only ▇▇▇▇▇▇▇▇ and Watt
severally), hereby covenants with, represents and warrants to the Majority
Stockholder that the following shall be true, correct and complete on the date
hereof and as of the date of the Put Closing, the closing of any other
transactions pursuant to which such Management Stockholder Transfers any shares
of Capital Stock to the Majority Stockholder or the Company and the closing of
any transactions pursuant to the Tag Along Right or the Come Along Obligation:
(a) Shares Subject to Transfer. Any Remaining Shares, Put Option
Shares or other shares Transferred by any Management Stockholder pursuant to
this Agreement (including, without limitation, shares Transferred in connection
with the Tag Along Right or Come Along Obligation) will, as of the consummation
of such Transfer, be owned of record and beneficially by such Management
Stockholder, free and clear of any Encumbrance, except for any restrictions on
Transfer imposed hereunder or under applicable state and federal securities
laws. Except as provided for herein, there are no Encumbrances whatsoever, fixed
or contingent, that directly or indirectly, (i) provide for the Transfer of any
of the shares of Capital Stock held by such Management Stockholder to be
Transferred pursuant to the Tag Along Right, Come Along Obligation, Put Option,
any interest therein or any rights with respect thereto, or relate to the
voting, disposition, exercise, conversion or control of such shares, or (ii)
obligate such Management Stockholder to grant, offer or enter into any of the
foregoing.
(b) No Conflicts. The execution and delivery of this Agreement by
such Management Stockholder, the consummation of the transactions contemplated
hereby (including, without limitation, the consummation of any transactions
pursuant to the Tag Along Right or the Come Along Obligation) by such Management
Stockholder and the exercise of the Put by such Management Stockholder pursuant
to the provisions of Section 6 hereof will not conflict with or violate any
agreement, law, rule, regulation, ordinance, order, writ, injunction, judgment
or decree applicable to or binding on such Management Stockholder.
(c) Authority. Such Management Stockholder has all requisite right,
power and authority and has full legal capacity and is competent to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Management Stockholder and constitutes a legal, valid and binding obligation of
such Management Stockholder, enforceable against him in accordance with its
terms, except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization or other
17
laws and judicial decisions of general application relating to or affecting the
enforcement of creditors' rights generally or by general equitable principles.
(d) No Consents or Approvals. Such Management Stockholder is not
required to submit any notice, report or other filing with any governmental or
regulatory authority or instrumentality, and no waiver, consent, approval or
authorization of any governmental or regulatory authority or any other person is
required to be obtained or made by such Management Stockholder, in connection
with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby.
(e) No Community Property Interest. None of the shares of Capital
Stock to be Transferred by ▇▇▇▇▇▇▇▇ or Watt pursuant to any transaction
contemplated hereby are subject to any community property interest or other
proprietary interest to which any spouse, whether former or present, of either
▇▇▇▇▇▇▇▇ or Watt, is entitled.
11. Representations and Warranties of the Company and the Management
Stockholders.
The Company and the Management Stockholders, to the extent any such party
is party to a transaction contemplated hereby, hereby jointly and severally
represent and warrant to the Majority Stockholder that the following shall be
true, correct and complete on the date hereof and as of the date of the Put
Closing, the closing of any other transactions pursuant to which such Management
Stockholder Transfers any shares of Capital Stock to the Majority Stockholder or
the Company and the closing of any transactions pursuant to the Tag Along Right
or the Come Along Obligation:
(a) Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to own, lease and
operate the properties used in its business and to carry on its business as now
being conducted. The Company is duly qualified to do business and in good
standing as a foreign corporation in the states and jurisdictions where
qualification as a foreign corporation is required.
(b) Shares Subject to Transfer. Any shares Transferred by the
Company pursuant to this Agreement will, as of the consummation of such
Transfer, be newly issued or owned of record and beneficially by the Company,
free and clear of any Encumbrance (as defined below) (including any restrictions
relating to treasury stock), except for any restrictions on Transfer imposed
hereunder or under applicable state and federal securities laws. Except as
provided for herein, there are no Encumbrances whatsoever, fixed or contingent,
that directly or indirectly, (i) provide for the Transfer of any of the
Additional Shares, any interest therein or any rights with respect thereto, or
relate to the voting, disposition, exercise, conversion or control of such
shares, or (ii) obligate the Company to grant, offer or enter into any of the
foregoing. Except as provided for herein and except for any restrictions on
transfer under applicable state and federal securities laws, upon any closing of
the purchase by the Majority Stockholder of Additional Shares, the Majority
Stockholder will acquire valid and indefeasible title to the Additional Shares,
respectively, free and clear of any Encumbrance. "Encumbrance" means any
security interest, pledge, option, lien, claim, commitment, proxy, equity,
18
right, restriction on transfer or encumbrance of any nature whatsoever, except
for such restrictions as may be imposed by NationsBank of Texas, N.A., under and
in connection with that certain Credit Agreement dated as of February 12, 1997
between NationsBank of Texas, N.A. and MSSC.
(c) Authority, Approvals and Consents. The Company has the corporate
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
and approved by the Board of Directors of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize and approve
this Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by, and constitutes a legal, valid and binding
obligation of, the Company, enforceable against the Company in accordance with
its terms, except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws and judicial decisions of
general application relating to or affecting the enforcement of creditors'
rights generally or by general equitable principles. The execution, delivery and
performance of this Agreement by the Company and the Management Stockholders and
the consummation of the transactions contemplated hereby do not and will not:
(i) contravene any provisions of the Certificate of
Incorporation or Bylaws of the Company;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result in
the modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any material agreement of the Company or its
subsidiaries (a "Company Agreement") or require any consent or waiver of any
party to any Company Agreement;
(iii) result in the creation of any Encumbrance upon, or any
person obtaining any right to acquire, any properties, assets or rights of the
Company (other than the rights of the Majority Stockholder, the Management
Stockholders and the Company set forth herein);
(iv) violate or conflict with any laws, ordinances, codes,
rules, regulations, standards, judgments and other requirements of all
governmental, administrative or judicial entities applicable to the Company or
any of its businesses or properties; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority.
(d) Disclosure. Neither the Company nor any Management Stockholder
has knowledge of any information contained in this Agreement that contains any
untrue statement of material fact or omits to state any material fact required
to be stated in order to make the statements made herein not misleading.
19
(e) No Commission. The Company has not employed any broker, agent or
finder in connection with any transaction contemplated by this Agreement. The
Company hereby indemnifies the Majority Stockholder against any liability for a
broker's commission, finder's fee or any other fee of any description incurred
by the Company with respect to any transaction contemplated by this Agreement.
12. Representations and Warranties of the Majority Stockholder. The
Majority Stockholder, to the extent it is a party to a transaction contemplated
hereby, represents and warrants to each of the Management Stockholders and to
the Company that the following shall be true, correct and complete on the date
hereof and as of the date of the Put Closing, the closing of the purchase by
Majority Stockholder of the Additional Shares, or closing of any other
transactions pursuant to which the Majority Stockholder Transfers, or receives
the Transfer of, any shares of Capital Stock (including, without limitation, the
closing of any transactions pursuant to the Tag Along Right or the Come Along
Obligation):
(a) Organization of the Majority Stockholder. The Majority
Stockholder is a limited partnership duly organized under the laws of the State
of Texas and is validly existing under the laws of the State of Texas.
(b) Organization of General Partner. MSSC Acquisition Corporation
("Acquisition Corporation") is a corporation duly incorporated under the laws of
the State of Delaware and is validly existing and in good standing under the
laws of the State of Delaware. Acquisition Corporation is duly qualified to do
business in Texas.
(c) Authority. Acquisition Corporation, as general partner of the
Majority Stockholder, has full corporate power and authority on behalf of the
Majority Stockholder to execute and deliver this Agreement and to cause the
Majority Stockholder to perform its obligations hereunder. The Majority
Stockholder has all requisite power and authority to execute and deliver this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance by the Majority Stockholder of this Agreement have been duly
authorized by all necessary partnership action of the Majority Stockholder, and
by all corporate action of Acquisition Corporation on behalf of the Majority
Stockholder. This Agreement has been duly executed and delivered by Acquisition
Corporation on behalf of the Majority Stockholder to the Management Stockholders
and the Company, and constitutes a valid, binding and enforceable obligation of
the Majority Stockholder, enforceable against it in accordance with its terms,
except to the extent the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other laws and judicial decisions of general
application relating to or affecting the enforcement of creditors' rights
generally or by general equitable principles.
20
(d) No Conflict; No Consents or Approvals.
(i) The execution, delivery and performance of this Agreement
by the Majority Stockholder and the grant and exercise of the Put and the
purchase of the Additional Shares pursuant to the provisions of Section 6 and
Section 7 hereof will not (i) conflict with, violate or result in a breach of
any provision of the Limited Partnership Agreement of the Majority Stockholder
or of the corporate charter or bylaws of Acquisition Corporation, (ii) conflict
with or violate any law, rule, regulation, ordinance, order, writ, injunction,
judgment or decree applicable to the Majority Stockholder or Acquisition
Corporation, or by which any of their respective properties or assets are bound
or (iii) conflict with, or result in any breach of or constitute a violation or
default of (or which upon notice or lapse of time or both would result in such a
conflict, breach, violation or default) under any material note, bond,
indenture, mortgage, agreement, contract or other instrument to which the
Majority Stockholder is a party or by which the Majority Stockholder or any of
its properties or assets are bound. No waiver, approval, authorization, order,
license, permit, franchise or consent of or registration, declaration,
qualification or filing with any governmental agency or authority is required to
be obtained by the Majority Stockholder in connection with the execution,
delivery and performance of this Agreement.
(ii) No waiver, approval, authorization, order, license,
permit, franchise or consent of or registration, declaration, qualification,
notice to or filing with any governmental, administrative or judicial agency or
authority is required to be obtained by the Majority Stockholder in connection
with the execution, delivery and performance of this Agreement.
13. Survival of Representations and Warranties. All representations and
warranties made pursuant to or in connection with this Agreement shall survive
for eighteen (18) months after the closing of each and any transaction
consummated in connection with this Agreement; provided, however, that (a) the
representations and warranties set forth in Sections 10(a), 10(c) and 11(b)
shall survive indefinitely. The expiration of any survival period shall not bar
or otherwise affect the subsequent revival and survival of the representations
and warranties made pursuant to or in connection with this Agreement in
accordance with the immediately preceding sentence.
14. Indemnification.
(a) Indemnification by Management Stockholders. Subject to the terms
of this Section 14, each Management Stockholder shall severally, and not
jointly, indemnify and hold harmless the Majority Stockholder, its officers,
directors, employees and controlling persons (hereinafter collectively referred
to as the "Majority Stockholder Group") from any liability, damage, loss,
penalty, cost or expense incurred by any member of the Majority Stockholder
Group, whether incurred directly by such member or indirectly through its
proportionate ownership of the Company (including, without limitation,
reasonable attorneys fees and costs of investigating and defending against
lawsuits, complaints, actions or other pending or threatened litigation) after
receiving full credit for the amount of any payments actually received as a
result of insurance coverage (being hereafter referred to in this Section 14 as
"Majority Stockholder Costs") arising from or attributable to any breach or
multiple breaches of any representation, warranty or agreement made by such
21
Management Stockholder herein; provided, however, that the obligation of each
such Management Stockholder to indemnify the Majority Stockholder Group for such
Majority Stockholder Costs shall be effective only if, and only to the extent
that, the aggregate amount of such Majority Stockholder Costs exceeds the amount
set forth in the first column beside such Management Stockholder's name on
Exhibit D hereto (such amount being termed the "Management Stockholder's Basket
Amount"), and then only to the extent such amount exceeds such Management
Stockholder's Basket Amount.
(b) Indemnification by the Company. Subject to the terms of this
Section 14, the Company shall indemnify and hold harmless the Majority
Stockholder Group from any Majority Stockholder Costs arising from or
attributable to any breach or multiple breaches of any representation, warranty
or agreement made by the Company herein; provided, however, that the obligation
of the Company to indemnify the Majority Stockholder Group for such Majority
Stockholder Costs shall be effective only if, and only to the extent that, the
aggregate amount of such Majority Stockholder Costs exceeds two hundred fifty
thousand dollars ($250,000) (such $250,000 being termed the "Company's Basket
Amount") and then only to the extent such amount exceeds the Company's Basket
Amount.
(c) Management Stockholder's Limitation on Liability.
Notwithstanding any other provision in this Agreement, (i) the obligation of
each Management Stockholder to indemnify the Majority Stockholder Group pursuant
to Section 14(a) against any Majority Stockholder Costs sustained by reason of
any claim made under Section 14(a) shall be limited to claims as to which
Majority Stockholder has given to such Management Stockholder written notice
thereof on or prior to the expiration of the applicable period for which the
applicable representation or warranty is intended to survive as stated in
Section 13, and (ii) in no event shall the aggregate Majority Stockholder Costs
for which any Management Stockholder is deemed liable pursuant to the indemnity
provisions contained in Section 14(a) exceed the amount set forth in the second
column beside such Management Stockholder's name on Exhibit D hereto.
(d) Company's Limitation on Liability. Notwithstanding any other
provision in this Agreement, (i) the obligation of the Company to indemnify the
Majority Stockholder Group pursuant to Section 14(b) against any Majority
Stockholder Costs sustained by reason of any claim made under Section 14(b)
shall be limited to claims as to which the Majority Stockholder has given to the
Company written notice thereof on or prior to the expiration of the applicable
period for which the applicable representation or warranty is intended to
survive as stated in Section 13, and (ii) in no event shall the aggregate
Majority Stockholder Costs for which the Company is deemed liable pursuant to
the indemnity provisions contained in Section 14(b) exceed eight million five
hundred thousand dollars ($8,500,000); provided, however, that in the event any
breach giving rise to the Company's obligation to indemnify the Majority
Stockholder Group occurs or is deemed to occur upon or after the purchase by
Majority Stockholder of the Additional Shares, the aggregate Majority
Stockholder Costs for which the Company is liable pursuant to the indemnity
provisions contained in Section 14(b) shall be limited to eight million five
hundred thousand dollars plus the purchase price for such shares.
22
(e) Indemnification by the Majority Stockholder. The Majority
Stockholder shall indemnify and hold harmless each of the Management
Stockholders and the Company and its officers, directors, employees and
controlling persons from any liability, damage, loss, penalty, cost or expense
incurred by the Management Stockholders or the Company (including, without
limitation, reasonable attorneys' fees and costs of investigating and defending
against lawsuits, complaints, actions or other pending or threatened litigation)
after receiving full credit for the amount of any payments actually received as
a result of insurance coverage (being hereafter referred to in this Section 15
as "Seller Costs" and, together with Majority Stockholder Costs, "Costs")
arising from or attributable to any breach or multiple breaches of any
representation, warranty or agreement made by the Majority Stockholder herein;
provided, however, that the obligation of the Majority Stockholder to indemnify
the Management Stockholders or the Company for such Seller Costs shall be
effective only if, and only to the extent that, the aggregate value of such
Seller Costs exceeds two hundred fifty thousand dollars ($250,000) and then only
with respect to such excess amount.
(f) The Majority Stockholder's Limitation on Liability.
Notwithstanding any other provision in this Agreement, (i) the obligation of the
Majority Stockholder to indemnify the Management Stockholders or the Company
pursuant to Section 14(e) against any Seller Costs sustained by reason of any
claim made under Section 14(e) shall be limited to claims as to which any
Management Stockholder or the Company, as the case may be, has given to the
Majority Stockholder written notice thereof on or prior to the expiration of the
applicable period for which the applicable representation or warranty is
intended to survive as stated in Section 13, and (ii) in no event shall the
aggregate Seller Costs for which the Majority Stockholder is deemed liable
pursuant to the indemnity provisions contained in Section 14(e) exceed eight
million five hundred thousand dollars ($8,500,000); provided, however, that in
the event any breach giving rise to the Majority Stockholder's obligation to
indemnify the Company or any of the Management Stockholders occurs or is deemed
to occur upon or after the purchase by the Majority Stockholder of the
Additional Shares, the aggregate Seller Costs for which the Majority Stockholder
is liable pursuant to the indemnity provisions contained in Section 14(e) shall
be limited to eight million five hundred thousand dollars plus the purchase
price for such shares.
(g) Priority of Indemnification. The Majority Stockholder Group
shall seek to recover on any claim for indemnification hereunder (except for any
claim for indemnification hereunder against a Management Stockholder arising
from or attributable to the breach by such Management Stockholder of his
representations and warranties in Section 10 hereof) in the following priority:
first, from the Company, and second, only in the event, and only to the extent,
that the Company is unable to satisfy a valid claim for indemnification
hereunder within a reasonable time, from the Management Stockholders. To the
extent that the Company, prior to satisfying a valid claim for indemnification
hereunder, has utilized all or part of the Company's Basket Amount, each
Management Stockholder's Basket Amount shall be reduced in proportion to the
percentage of the Company's Basket Amount so utilized. Any payment by the
Company on a valid claim for indemnification hereunder shall take into account
that the Majority Stockholder owns a portion of the equity of the Company and
such payment shall, therefore, be increased in accordance with the following
formula:
23
Company Payment = Claim Amount/ (1 - Majority Stockholder's Equity
Percentage)
where "Company Payment" means the amount payable by the Company on a valid claim
for indemnification hereunder, "Claim Amount" means the amount due on a valid
claim for indemnification hereunder, after application of the Company Basket,
and "Majority Stockholder's Equity Percentage" means the percentage interest of
the Majority Stockholder in the equity capital of the Company on a fully diluted
basis expressed as a decimal.
(h) Notwithstanding any provision herein, in the Stock Purchase
Agreement dated as of April 2, 1996 among MSSC, the Majority Stockholder and the
Management Stockholders (the "Stock Purchase Agreement") or in the
indemnification provisions that survive the termination of the Amended and
Restated Company and Shareholders Agreement dated as of November 7, 1996 among
MSSC, the Majority Stockholder and the Management Stockholders (the "Former
Shareholders Agreement"), in the event a valid claim is subject to
indemnification under both this Section 14 and the indemnity provisions set
forth in the Stock Purchase Agreement or the Former Shareholders Agreement (the
"Other Indemnity Provisions"), the party entitled to such indemnification may
elect to make such claim under this Section 14 or under one (but not both) of
the Other Indemnity Provisions, but shall not be entitled to make any such claim
under both this Section 14 and either of the Other Indemnity Provisions.
(i) Procedures for Third-Party Claims. Promptly after the assertion
by any third party of any claim against any party entitled to be indemnified
under this Section 14 (the "Indemnitee") that, in the judgment of such
Indemnitee, may result in the incurrence by such Indemnitee of Costs for which
such Indemnitee would be entitled to indemnification pursuant to this Agreement,
such Indemnitee shall deliver to the other party hereto (the "Indemnitor") a
written notice describing in reasonable detail such claim and such Indemnitor
may participate in and, at its option, assume the defense of the Indemnitee
against such claim (including the employment of counsel, who shall be reasonably
satisfactory to such Indemnitee, and the payment of expenses). Any Indemnitee
shall have the right to employ separate counsel in any such action or claim and
to participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the Indemnitor unless (i) the Indemnitor shall
have failed, within a reasonable time after having been notified by the
Indemnitee of the existence of such claim as provided in the preceding sentence,
to assume the defense of such claim, (ii) the employment of such counsel has
been specifically authorized in writing by the Indemnitor, or (iii) the named
parties to any such action (including any impleaded parties) include both such
Indemnitee and the Indemnitor and such Indemnitee shall have been advised in
writing by such counsel that there may be conflicting interests between the
Indemnitee and the Indemnitor in the legal defense thereof. No Indemnitor shall
be liable to indemnify any Indemnitee for any compromise or settlement of any
such action or claim effected without the consent of the Indemnitor.
15. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by recognized
overnight delivery service or facsimile transmission to the parties at the
following addresses or at such other addresses as shall be specified by like
notice:
(a) if to the Majority Stockholder:
24
MS Acquisition Limited
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Simon, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company:
Richmont Marketing Specialists Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to a Management Stockholder, to his address or facsimile
number listed on Exhibit A:
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on the fourth calendar day after posting, in the case of
notice so given by recognized overnight delivery service, on the date of actual
delivery and, in the case of notice so given by facsimile transmission or
personal delivery, on the date of actual transmission or, as the case may be,
personal delivery.
25
16. Severability. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal,
valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties hereto shall be construed and enforced accordingly.
17. Complete Agreement. This Agreement and the Exhibits hereto embody the
complete agreement and understanding among the parties regarding the subject
matter hereof and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
18. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
19. Arbitration and Choice of Law. The parties hereto shall in good faith
negotiate to resolve amicably any dispute, controversy or claim (collectively,
"Controversy") arising out of, relating to, or in connection with, this
Agreement. In the event such Controversy is not resolved amicably within sixty
(60) days from the date that notice is delivered in respect of such Controversy,
such Controversy shall be settled by arbitration to the exclusion of all other
procedures. The parties hereto agree that any such Controversy shall be
submitted to three arbitrators selected from the panels of arbitrators of the
American Arbitration Association ("AAA") and shall be governed by the Commercial
Arbitration Rules of the AAA, as amended and in effect on the date a demand for
arbitration is filed with the AAA. Any demand for arbitration shall specify a
dollar amount of damages sought. The arbitrators shall be governed by and shall
apply the substantive law of the State of Texas (without giving effect to the
rules of conflict of laws thereof) in making their award and their ruling shall
be binding and conclusive upon the parties hereto. Any arbitration shall occur
in the city of Dallas, Texas and judgment upon the award rendered may be entered
in any court of competent jurisdiction. Notwithstanding the foregoing, the
parties will obtain the agreement of arbitrators to the following: (i) the
arbitrators shall provide a written ruling, stating in separate sections the
findings of fact and conclusions of law on which their ruling is based; and (ii)
their ruling shall be due no later than ninety (90) days after their final
hearing and within nine (9) months after commencement of the arbitration.
20. Remedies. The parties acknowledge and agree that the breach of the
provisions of this Agreement by any of the Management Stockholders or the
Majority Stockholder could not be adequately compensated with monetary damages,
and the parties hereto agree, accordingly, that injunctive relief and specific
performance shall be appropriate remedies to enforce the provisions of this
Agreement and waive any claim or defense that there is an adequate remedy at law
for such breach; provided, however, that nothing herein shall limit the remedies
available and all remedies herein are in addition to any remedies available at
law or otherwise.
21. Successors and Assigns. The provisions of this Agreement, including
without limitation all of the restrictions of, and rights relating to, Transfers
of shares of Capital Stock, shall
26
be enforceable against the respective successors and assigns of the parties
hereto and against the spouses of the Management Stockholders (and any such
spouse who holds a community property interest in shares of Capital Stock shall
execute a consent set forth after the signature page of this Agreement), except
to the extent that such enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws and judicial decisions of general application
relating to or affecting the enforcement of creditors' rights generally or by
general equitable principles. This Agreement may not be assigned by a party
without the prior written consent of the other parties hereto; provided, that
the benefits and obligations under this Agreement may be assigned to an
Affiliate of the Majority Stockholder if the Majority Stockholder guarantees the
performance of the assignee, and such Affiliate confirms in writing to the
Management Stockholders that such Affiliate assumes all obligations of the
Majority Stockholder hereunder and makes all the covenants of the Majority
Stockholder contained in this Agreement. Subject to the preceding sentence, all
the terms and provisions of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective permitted successors and
assigns of the parties hereto. This Agreement shall not run to the benefit of or
be enforceable by any person other than a party to this Agreement and, subject
to the second sentence of this Section 21, its successors and assigns. Nothing
in this Section 21 shall impose any restriction on the ability of the Majority
Stockholder to assign its shares of Capital Stock free of the benefits of this
Agreement provided that no such assignment will relieve the Majority Stockholder
of any of its obligations under this Agreement.
22. Amendments. This Agreement may be amended only by a written agreement
signed by the party against whom enforcement is sought.
23. Termination of Restrictions. This Agreement shall terminate on the
earliest to occur of (i) the effective date of an initial public offering of the
Company's Capital Stock, (ii) the date the Company is merged or consolidated
with or into a new surviving company and the holders of the Company's voting
securities (on a fully-diluted basis) immediately prior to the merger or
consolidation own less than a majority of the ordinary voting power to elect
directors of the new surviving company (on a fully-diluted basis) immediately
subsequent to the merger or consolidation, (iii) the date of a sale of all, or
substantially all, of the Company's assets or capital stock in any transaction
or series of related transactions, (iv) the mutual consent of the parties or
(iv) the last day of the Term.
Signature Page Follows
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
RICHMONT MARKETING SPECIALISTS INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
MS ACQUISITION LIMITED
By: MSSC ACQUISITION CORPORATION,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President and Chief
Financial Officer
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
28
The undersigned, spouse of ▇▇▇▇ ▇. ▇▇▇▇▇▇, a Management Stockholder (as
defined in the foregoing Agreement) executing the foregoing Agreement, hereunto
subscribes her name in evidence of her agreement and consents to the provisions
regarding the disposition of the Capital Stock of Richmont Marketing Specialists
Inc. referred to in the foregoing Agreement, and to all other provisions
thereof.
Effective as of the day and year first above written.
/s/ P. ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
P. ▇▇▇▇▇ ▇▇▇▇▇▇
29
The undersigned, spouse of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a Management Stockholder (as
defined in the foregoing Company and Stockholders Agreement) executing the
foregoing Agreement, hereunto subscribes her name in evidence of her agreement
and consents to the provisions regarding the disposition of the Capital Stock of
Richmont Marketing Specialists Inc. referred to in the foregoing Agreement, and
to all other provisions thereof.
Effective as of the day and year first above written.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
30
EXHIBIT A
Names and Addresses of
Management Stockholders
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT A- Solo Page
31
EXHIBIT B
Name and Address of Number of Shares of
Stockholders Common Stock
------------ ------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 25,842
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 16,826
▇▇▇▇ ▇. ▇▇▇▇▇▇ 6,193
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 6,193
MS Acquisition Limited 82,581
-------
TOTAL 137,635
EXHIBIT B- Solo Page
32
EXHIBIT C
Terms Relating to Put Option Promissory Note
1. Maturity Date: Three (3) years from the date of issue;
2. Interest Rate: (a) Escalating rate as follows:
(i) at all times during the period commencing on
the date of issue of the Promissory Note to
and including the last day of the fourth
full fiscal quarter after the issuance of
the Promissory Note (the "First Period") the
interest rate shall be equal to the Prime
Rate (as defined below) per annum;
(ii) at all times during the period commencing
after the First Period to and including the
last day of the eighth full fiscal quarter
after the issuance of the Promissory Note
(the "Second Period"), the interest rate
shall be equal to the Prime Rate (as defined
below) plus 200 basis points per annum; and
(iii) at all times during the period commencing on
the Second Period to and including maturity,
the interest rate shall be equal to the
Prime Rate (as defined below) plus 250 basis
points per annum.
"Prime Rate" shall mean a fluctuating interest
rate per annum as in effect from time to time,
which interest rate per annum shall at all times
be equal to the rate of interest announced
publicly, from time to time (whether or not
charged in each instance) by The Chase Manhattan
Bank ("Bank"), in New York, New York, as bank's
base rate or general reference rate. Should Bank,
during the time during which the Promissory Note
is outstanding, abolish or abandon the practice of
announcing or publishing a Prime Rate, then the
Prime Rate used during the remaining term of the
Promissory Note shall be that interest rate or
other general reference rate then in effect at
Bank, which, from time to time, in the reasonable
judgement of the Company, most effectively
approximates the initial definition of the "Prime
Rate."
(b) Interest shall be payable quarterly.
3. Amortization: Principal shall be amortized quarterly.
-1-
33
4. Subordination The Promissory Note shall be subordinated to all
other funded debt of the Company.
-2-
34
EXHIBIT D
MANAGEMENT STOCKHOLDERS' BASKET AMOUNTS
AND INDEMNIFICATION LIMITS
Name Basket Amount Indemnification Limit
---- ------------- ---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $128,893 $ 5,413,522
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 83,899 3,523,778
▇▇▇▇ ▇. ▇▇▇▇▇▇ 18,604 781,350
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 18,604 781,350
---------- -------------
TOTAL $250,000 $10,500,000
EXHIBIT D - Solo Page
