EXHIBIT 10.27
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement") is entered into
effective as of March 14, 2000, by and among Tactica International, Inc., a
Nevada corporation ("Company"), Xxxxx of Xxxx, LLC, a Nevada limited liability
company ("HoT"), Avi Sivan ("Sivan"), Prem Atma Xxxxxxxxxxx ("Xxxxxxxxxxx"),
Xxxxxxx Xxxxxx ("Xxxxxx"), APA International, LLC, a Delaware limited liability
company ("APA," together with Sivan, Xxxxxxxxxxx and Xxxxxx, the "Founding
Group") and each other holder of record of Securities (as defined in Article 1
below) who has executed this Agreement or a separate agreement to be bound by
the terms of this Agreement, whether such separate agreement is executed on the
date of this Agreement or some earlier or later date (HoT, the members of the
Founding Group and such other holders of record of Securities are sometimes
referred to in this Agreement collectively as the "Stockholders" and each
individually as a "Stockholder").
PRELIMINARY STATEMENTS
A. The Stockholders own Securities.
B. The Company and the Stockholders have agreed to impose certain
restrictions on the transferability of the Securities.
C. The Stockholders have agreed to vote their Securities in accordance
with the terms set forth in this Agreement.
D. The parties hereto have agreed to certain other matters provided in
this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have the
respective meanings indicated:
"Affected Stockholder" means any Stockholder who undergoes a Buyout
Event or Buy Back Event, as the case may be.
"Affiliate" has the meaning provided in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" shall have the meaning provided in the introductory
paragraph of this Agreement.
"Appraised Value" means, as to any Securities or non-monetary
consideration, the fair market value of such Securities or non-monetary
consideration as determined by an Independent Financial Expert selected by the
board of directors of the Company; provided, however, if the Subject Stockholder
shall object to such determination within ten days after being notified thereof
by the Company, such Subject Stockholder shall within such ten-day period select
an Independent Financial Expert to determine the fair market value of such
Securities or non-monetary consideration on behalf of the Subject Stockholder.
In the event that the Independent Financial Experts selected by the Company, on
the one hand, and the Subject Stockholder on the other hand, cannot agree on the
fair market value of such Securities or non-monetary consideration, then the two
Independent Financial
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Experts shall mutually select a third Independent Financial Expert to determine
the fair market value of such Securities or non-monetary consideration, and the
value selected by such third firm shall be binding on all of the parties hereto.
Each such Independent Financial Expert may use any customary method of
determining fair market value. The cost of the Independent Financial Expert
selected by the Company shall be paid by the Company (unless the Subject
Stockholder accepts the determination of the Company's Independent Financial
Expert, in which event such Subject Stockholder shall pay one-half the cost of
such expert or, if there is more than one such Subject Stockholder, such cost
shall be allocated equally among all such Subject Stockholders), the cost of the
Independent Financial Expert, if any, selected by the Subject Stockholder shall
be paid by such Subject Stockholder, and the cost of the Independent Financial
Expert, if any, mutually selected by the two Independent Financial Experts
appointed by the Company, on the one hand, and the Subject Stockholder on the
other hand, shall be paid one-half by the Company and one-half by such Subject
Stockholder. Notwithstanding the foregoing, the Company, HoT and the Subject
Stockholder may determine the Appraised Value without retaining an Independent
Financial Expert, which determination shall be binding upon all of the parties
hereto. Notwithstanding anything herein to the contrary, any calculation of
Appraised Value of Securities shall be made (a) based on what on willing buyer
and willing seller not under compulsion to sell or buy would pay for such
Securities and further assuming all of the Company's securities are sold in a
single transaction and/or (b) without consideration of a minority discount or
any restrictions applicable to such Securities under this Agreement.
Notwithstanding anything herein to the contrary, upon a rescission of a Call or
Put pursuant to Sections 4.1(c) or 4.2(c) respectively, the party or parties
rescinding such election shall be responsible for all costs of all Independent
Financial Experts and shall reimburse all costs of Independent Financial Experts
borne by the Company and the other parties in determining the Appraised Value.
"Associate" has the meaning provided in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Average Trading Price" means the average of the closing sale price of
a share of Parent Common Stock on Nasdaq, as reported by Nasdaq, for the 20
consecutive trading days ending one trading day immediately preceding the date
of the Exit Exchange Closing.
"Bankrupt Stockholder" means any Stockholder (a) that (i) makes a
general assignment for the benefit of creditors; (ii) files a voluntary
bankruptcy petition; (iii) becomes the subject of an order for relief or is
declared insolvent in any federal or state bankruptcy or insolvency proceedings;
(iv) files a petition or answer seeking for such Stockholder a reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any law; (v) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against such Stockholder
in a proceeding of the type described in subclauses (i) through (v) of this
clause (a); or (vi) seeks, consents to, or acquiesces in the appointment of a
trustee, receiver, or liquidator of such Stockholder's or of all or any
substantial part of such Stockholder's properties; or (b) against which, a
proceeding seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any law has been commenced and
120 days have expired without dismissal thereof or with respect to which,
without such Stockholder's consent or acquiescence, a trustee, receiver, or
liquidator of such Stockholder or of all or any substantial part of such
Stockholder's properties has been appointed and 90 days have expired without the
appointment's having been vacated or stayed, or 90 days have expired after the
date of expiration of a stay, if the appointment has not previously been
vacated.
"Buy Back Closing" shall have the meaning provided in Section 8.3.
"Buy Back Event" shall have the meaning provided in Section 8.1.
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"Buyout Closing" shall have the meaning provided in Section 5.7.
"Buyout Event" means (a) the death of a Stockholder, (b) any event in
which a Stockholder becomes a Bankrupt Stockholder or (c) the divorce or other
termination of the marital relationship of a Stockholder or the death of a
spouse of a Stockholder and, in connection therewith, such Stockholder does not
succeed to, or otherwise acquire, such Securities of such spouse.
"Call" shall have the meaning provided in Section 4.1.
"Call Notice" shall have the meaning provided in Section 4.1.
"Closing" shall have the meaning provided in Section 2.7.
"Common Stock" means the Company's Common Stock, par value $.01 per
share, and shares of stock or other securities of any class resulting from the
reclassification, split, combination or other change thereof, dividends of
securities paid thereon and securities of any other issuer received in exchange
for such Common Stock in connection with any merger, consolidation,
reorganization or acquisition involving the Company.
"Common Stock Equivalents" means, at any time, rights, warrants,
options, convertible securities or indebtedness, exchangeable securities or
indebtedness, or other rights, which, at such time, are exercisable for or
convertible or exchangeable into, directly or indirectly, Common Stock and
securities immediately convertible into Common Stock at such time, such Common
Stock Equivalents being measured for purposes of this Agreement by the number of
shares of Common Stock that a Stockholder is entitled to acquire pursuant to the
terms thereof at the time in question.
"Company" shall have the meaning provided in the introductory paragraph
of this Agreement.
"Compelled Sale Transfer Notice" shall have the meaning provided in
Section 6.2.
"Compelled Sale Transfer Offer" shall have the meaning provided in
Section 6.1.
"Consolidated" shall mean when used with reference to any financial
term in this Agreement, the amounts signified by such term for all the Company
and its subsidiaries determined on a consolidated basis in accordance with GAAP.
Unless otherwise specified herein, references to "consolidated" financial
statements or data of the Company includes consolidation with its subsidiaries
in accordance with GAAP.
"Control Transfer" shall have the meaning provided in Section 6.1.
"Disposition" means any sale, transfer, encumbrance, gift, donation,
assignment, pledge, hypothecation or other disposition of any Securities or any
interest therein, whether voluntary or involuntary, and whether during a
Stockholder's lifetime or upon or after his death, including, but not limited
to, any Disposition by operation of law, by court order, by judicial process or
by foreclosure, levy or attachment.
"Disposition Notice" shall have the meaning provided in Section 2.1.
"Exchange" shall have the meaning provided in Section 9.1.
"Exchanging Stockholder" shall have the meaning provided in Section
9.1.
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"Exchange Percentage" means the quotient, when expressed as a
percentage, equal to (a) the number of Securities of the Exchanging Stockholders
subject to an Exit Notice for which Parent has elected to purchase pursuant to
Section 9.2, divided by (b) the total number of Securities of the Exchanging
Stockholders subject to such Exit Notice.
"Exit Exchange Closing" shall have the meaning provided in Section 9.3.
"Exit Notice" shall have the meaning provided in Section 9.1.
"Exit Transaction" means the sale of the Company pursuant to which any
Person or group (as defined under Section 3(d)(3) of the Securities Exchange
Act) of Persons acquires (a) 100% of the outstanding Securities of the Company
or (b) all or substantially all of the Company's assets, in each case whether
accomplished directly or indirectly and whether accomplished by purchase of
Securities, asset purchase, merger, recapitalization, reorganization or other
transaction; provided, however, a Exit Transaction shall not be deemed to
include a Control Transfer, which shall be governed by Article 6.
"Exit Transaction Notice" shall have the meaning provided in Section
7.2.
"Founding Group" shall have the meaning provided in the introductory
paragraph of this Agreement.
"Founding Group Pledge Agreements" means those certain Pledge
Agreements dated on or about the date hereof by and between HoT and each member
of the Founding Group, pursuant to which the Securities held by such members
have been pledged to HoT as security for indebtedness owing by such member of
the Founding Group to HoT.
"Full Buyout Purchaser" shall have the meaning provided in Section 5.5.
"Full Founding Group Buyout Purchaser" shall have the meaning provided
in Section 5.3.
"Full Founding Group Purchaser" shall have the meaning provided in
Section 2.2.
"Full Purchaser" shall have the meaning provided in Section 2.4.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time.
"HoT" shall have the meaning provided in the introductory paragraph of
this Agreement.
"Independent Financial Expert" means any reputable investment bank,
accounting firm, or appraiser which (a) is experienced in making determinations
such as the Appraised Value, (b) does not (and whose directors, officers,
employees, Affiliates and stockholders do not) have a material direct or
indirect financial interest in the Company or any Stockholder or in any
Affiliate of the Company or any Stockholder, (c) has not been, and at the time
it is called upon to give independent financial advice to the Company or any
Stockholder, is not (and none of whose directors, officers, employees,
Affiliates or stockholders is) a promoter, director, or officer of the Company
or any Stockholder or any Affiliate of the Company or any Stockholder and (d)
does not provide any advice or opinions to the Company or any Stockholder or any
Affiliate of the Company or any Stockholder except as an Independent Financial
Expert. The Independent Financial Expert may be compensated by the Company
and/or any Stockholder for opinions or services it provides as an Independent
Financial Expert.
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"Loan Agreement" means that certain Loan Agreement dated as of the date
hereof by and between HoT and the Company, as amended, restated or otherwise
modified from time to time.
"Media Efficiency Ratio" shall mean, as of any date of determination
and with respect to any product of the Company, the quotient of (a) the Net
Revenues of such product during the immediately preceding month of the date of
determination, divided by (b) the Media Expenditures incurred in respect of such
product during the immediately preceding month of the date of determination.
"Media Expenditures" shall mean with respect to any product of the
Company, the television media costs and expenses of the Company and its
subsidiaries incurred in connection with such product, in each case as
determined on a Consolidated basis in accordance with GAAP applied on an accrual
basis and otherwise consistent with the past practice of the Company.
"Nasdaq" means the NASDAQ National Market.
"Net Appraised Value" means, with respect to any Exchanging
Stockholder, the difference of (a) the Appraised Value (as calculated within 30
days of the date of the applicable Exit Exchange Closing) of all Securities of
such Exchanging Stockholder that are subject to the Exit Notice, and (b) the
amount that such Exchanging Stockholder owes to the Company or HoT as of the
Exit Exchange Closing.
"Net Income (Loss)" means, for any period, the net income (or loss),
after deducting all operating expenses, provisions for taxes and reserves
(including reserves for deferred income tax) and all other proper deductions, of
the Company for such period (taken as a single accounting period) determined on
a Consolidated basis in conformity with GAAP, including any income or loss of
any Person accrued prior to the date such Person becomes a subsidiary of the
Company or is merged into or consolidated with the Company or all or
substantially all of such Person's assets are acquired by the Company.
"Net Revenues" means, for any period of determination, the gross sale
amounts from third party customers for sales by the Company and its subsidiaries
of their products, less slotting, buy backs, free goods, returns and discounts
for such period, in each case as determined on a Consolidated basis in
accordance with GAAP applied on an accrual basis and otherwise consistent with
the past practice of the Company.
"New Securities" means any capital stock of the Company whether now or
hereafter authorized, and all rights, options or warrants to purchase capital
stock of the Company, and securities or indebtedness of any type whatsoever that
are, or may become, convertible into or exchangeable for capital stock of the
Company and any units consisting of securities or indebtedness and capital stock
of the Company or rights, options or warrants therefor.
"Offered Securities" shall have the meaning provided in Section 2.1.
"Parent" shall mean Xxxxx of Xxxx Limited, a Bermuda company.
"Parent Common Stock" means the common shares, par value $.10 per
share, of Xxxxx of Xxxx Limited, a Bermuda company.
"Partial Buyout Purchaser" shall have the meaning provided in Section
5.5.
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"Partial Founding Group Buyout Purchaser" shall have the meaning
provided in Section 5.3.
"Partial Founding Group Purchaser" shall have the meaning provided in
Section 2.2.
"Partial Purchaser" shall have the meaning provided in Section 2.4.
"Permitted Disposition" means:
(a) A Disposition of the community property or common law
interest of a Stockholder's spouse in all or any part of the
Securities to such Stockholder upon the death of such spouse;
(b) A Disposition of the community property or common law
interest of a Stockholder's spouse in all or any part of the
Securities to such Stockholder in connection with the divorce
or termination of the marital relationship of the Stockholder
and the Stockholder's spouse;
(c) A Disposition resulting from a Stockholder's bona fide
pledge of all or a portion of his Securities as security for
indebtedness of such Stockholder incurred contemporaneously
with the making of such pledge, provided that the pledgee
shall, prior to the Disposition of Securities, execute and
deliver a written agreement which is approved by the Company,
to the effect that prior to foreclosing or otherwise realizing
upon the Securities so pledged as a result of a default in the
payment or other terms of the obligation secured by such
pledged Securities, the pledgee will offer to sell such
Securities to the Company and the Stockholders (other than the
pledging Stockholder) as if the pledgee were a Stockholder
proposing to make a Disposition of the Securities in the
manner stated in Article 2 herein and the pledging Stockholder
shall be bound by and shall join in the conveyance of the
pledged Securities so purchased by the Company and/or the
other Stockholders;
(d) A Disposition by HoT or its Affiliates as a result of the
foreclosure or realization upon the Securities pledged by any
member of the Founding Group to HoT or its Affiliates pursuant
to the Founding Group Pledge Agreements as security for
indebtedness owing by such member of the Founding Group to HoT
or its Affiliates;
(e) A Disposition of Securities by HoT to one or more
Affiliates of HoT or to any executive officer of HoT or its
Affiliates, provided that each transferee shall, prior to the
Disposition of Securities to such transferee, execute and
deliver a written agreement which is approved by the Company
to the effect that any Securities so disposed of shall
continue to be subject to all of the provisions of this
Agreement;
(f) A Disposition by any member of the Founding Group to any
other member of the Founding Group; and
(g) A Disposition made pursuant to the terms of this
Agreement.
"Person" means any natural person, corporation, unincorporated
organization, trust, joint-stock company, joint venture, association, company,
limited or general partnership, any government, or any agency or political
subdivision of any government.
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"Preemptive Share" means, in any particular instance, the proportion
which the number of shares of Common Stock owned by a Stockholder bears to the
total number of shares of Common Stock outstanding, assuming for this purpose
that all Common Stock Equivalents owned by such Stockholder and all other
outstanding Common Stock Equivalents have been fully exercised, exchanged or
converted.
"Print Media Expenditures" means all newspaper, magazine, catalog and
other print medium advertising costs and expenses of the Company and its
subsidiaries, in each case as determined on a consolidated basis in accordance
with GAAP applied on an accrual basis and otherwise consistent with the past
practice of the Company.
"Pro Rata Part" means, in any particular instance, the proportion which
the number of shares of Common Stock owned by a Stockholder (assuming for this
purpose that all Common Stock Equivalents owned by such Stockholder have been
fully exercised, exchanged, or converted) bears to the aggregate number of
shares of Common Stock owned by (a) for purposes of Section 2.2, 2.4 and Section
5.3, all Stockholders (assuming for this purpose that all Common Stock
Equivalents owned by all of the Stockholders have been fully exercised,
exchanged or converted) then holding an option to purchase Securities under
Section 2.2, 2.4 or Section 5.3 and (b) for purposes of Article 3, all
Stockholders (assuming for this purpose that all Common Stock Equivalents owned
by all of the Stockholders have been fully exercised, exchanged or converted).
"Purchase Agreement" means that certain Purchase Agreement dated as of
March 14, 2000, among HoT and the Founding Group.
"Put" shall have the meaning provided in Section 4.2.
"Put/Call Closing" shall have the meaning provided in Section 4.3.
"Put Notice" shall have the meaning provided in Section 4.2.
"Registration Statement" shall have the meaning provided in Section
9.4.
"Remaining Holder " shall have the meaning provided in Section 6.1.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Common Stock, Common Stock Equivalents and any
other securities of the Company of any class or character whatsoever, whether
now or hereafter authorized and outstanding.
"Securities Act" means the Securities Act of 1933, together with any
amendments thereto and rules and regulations thereunder and any similar federal
statute, rules or regulations in force in the future.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Selling Stockholder" shall have the meaning provided in Section 2.1.
"Stockholder" or "Stockholders" shall have the meaning provided in the
introductory paragraph of this Agreement.
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"Subject Stockholder" means a Selling Stockholder, an Affected
Stockholder, or other Stockholder whose Securities are subject to a Call, Put or
an Exchange in accordance with this Agreement.
"Substitute Director" shall have the meaning provided in Section 11.2.
"Total Shares" shall have the meaning provided in Article 3.
"Third Party" shall have the meaning provided in Section 6.1.
"Triggering Event" shall have the meaning provided in Section 11.1.
"Withdrawing Director" shall have the meaning provided in Section 11.2.
2. RESTRICTIONS ON CERTAIN DISPOSITIONS.
2.1. Right of First Refusal. A Stockholder shall not make or suffer any
Disposition (other than a Permitted Disposition) of all or any part of his
Securities, whether now owned or hereafter acquired, except in accordance with
the terms of this Agreement, and any purported Disposition not made in
compliance with this Agreement shall be void and of no force and effect. Each
time a Stockholder proposes to make or suffers any Disposition of all or any
portion of his Securities (other than a Permitted Disposition) pursuant to an
unconditional bona fide third party offer, a gift by such Stockholder, or
otherwise, such Stockholder, or in the event of his death or incapacity, any
other appropriate Person (the "Selling Stockholder"), shall promptly so inform
the Company and all other Stockholders by notice in writing (the "Disposition
Notice") stating the number or amount of Securities that are the subject of such
proposed Disposition (the "Offered Securities"), the name and address of the
proposed transferee and the other terms and conditions of such proposed
Disposition, including any consideration proposed to be received for the Offered
Securities (and, if the proposed Disposition is to be wholly or partly for
consideration other than cash or an indebtedness of any Person, the Disposition
Notice shall state the amount of the cash consideration, if any, and shall
describe all non-monetary consideration). By giving the Disposition Notice, the
Selling Stockholder shall be deemed to have granted to the Company and the
Stockholders (other than the Selling Stockholder) an option to purchase the
Offered Securities (a) if such Disposition is pursuant to a bona-fide third
party offer, at the same consideration and on the same payment terms as are set
forth in the Disposition Notice (except that any portion of the consideration
set forth in the Disposition Notice which is not cash or indebtedness of the
transferee shall be payable in cash at the Appraised Value thereof as of the
date of the Disposition Notice) and (b) if such Disposition is other than
pursuant to a bona-fide third party offer, at a price equal to the Appraised
Value of the Offered Securities. The Company shall notify the Stockholders
promptly upon its receipt of any final determination of Appraised Value.
Notwithstanding the foregoing, compliance with this Article shall not be
required in the case of a Call or Put, which are governed by Article 4, a Buyout
Event, a Control Transfer, an Exit Transaction, a Buy Back Event, or an
Exchange, which are governed by Articles 5, 6, 7, 8 and 9, respectively.
2.2. Intention to Exercise by Members of the Founding Group. If the
Offered Securities are Securities held by a member of the Founding Group, each
remaining member of the Founding Group (other than the Selling Stockholder)
shall have until the 30th day following such Stockholder's receipt of any
Disposition Notice or the final determination of Appraised Value related to
Offered Securities or any non-monetary consideration referenced in the
Disposition Notice, whichever is later, to notify the Company and the other
Stockholders of the number or amount of such Offered Securities that such
Stockholder desires to purchase. The failure of any member of the Founding Group
to submit any notice within the applicable period shall constitute an election
on the part of such member of the Founding Group not to purchase any of the
Offered Securities to which the requisite notice pertained. In the event all of
the members of the Founding Group (other than the Selling
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Stockholder) elect to purchase all or more than all of their respective Pro Rata
Parts of the Offered Securities, then each member of the Founding Group (other
than the Selling Stockholder) shall be obligated to purchase such Stockholder's
Pro Rata Part of the Offered Securities. In the event any member of the Founding
Group (other than the Selling Stockholder) elects to purchase none or less than
all of such Stockholder's Pro Rata Part of the Offered Securities, then (x) each
Stockholder who elected to purchase less than all of such Stockholder's Pro Rata
Part of the Offered Securities ("Partial Founding Group Purchaser") shall be
obligated to purchase the number or amount of Offered Securities indicated in
such Partial Founding Group Purchaser's notice pursuant to this Section and (y)
each Stockholder who elected to purchase all or more than all of such
Stockholder's Pro Rata Part of the Offered Securities ("Full Founding Group
Purchaser") shall be obligated to purchase the lesser of (i) the number or
amount of Offered Securities indicated in such Full Founding Group Purchaser's
notice pursuant to this Section or (ii) such Full Founding Group Purchaser's Pro
Rata Part of the Offered Securities plus a number or amount of Offered
Securities equal to the product of (A) the difference between the number or
amount of Offered Securities constituting the Partial Founding Group Purchasers'
aggregate Pro Rata Parts of the Offered Securities minus the aggregate number or
amount of Offered Securities that Partial Founding Group Purchasers elected to
purchase, multiplied by (B) a fraction the numerator of which shall be the
number or amount of Offered Securities that such Full Founding Group Purchaser
elected to purchase in excess of his Pro Rata Part of the Offered Securities and
the denominator of which shall be the aggregate number or amount of Offered
Securities that all Full Founding Group Purchasers elected to purchase in excess
of the Full Founding Group Purchasers' aggregate Pro Rata Parts of the Offered
Securities.
2.3. Intention to Exercise by Company. If the Offered Securities are
not Securities held by a member of the Founding Group, within 30 days of
Company's receipt of any Disposition Notice or the final determination of
Appraised Value related to the Offered Securities or any non-monetary
consideration referenced in the Disposition Notice, whichever is later, the
Company shall notify the Stockholders of the number or amount of Offered
Securities that it desires to purchase. If the Offered Securities are Securities
held by a member of the Founding Group, the Company shall have until the 30th
day following either (a) its receipt of all notices to be provided by members of
the Founding Group pursuant to Section 2.2, or (b) the failure of any member of
the Founding Group to provide such notice within the applicable time period, as
applicable, to notify the Stockholders of the number or amount of remaining
Offered Securities that it desires to purchase. The failure of the Company to
submit any such notice within the applicable period shall constitute an election
on its part not to purchase any of the Offered Securities to which the requisite
notice pertained.
2.4. Intention to Exercise by Other Stockholders. If the Company fails
to exercise its option to purchase all of the remaining Offered Securities, each
Stockholder (other than the Selling Stockholder and Stockholders who had an
option to purchase the Offered Securities pursuant to Section 2.2) shall have
until the 30th day following either (a) such Stockholder's receipt of the notice
to be provided by the Company pursuant to Section 2.3 or (b) the Company's
failure to provide such notice within the applicable time period, as applicable,
to notify the Company of the number or amount of remaining Offered Securities
that such Stockholder desires to purchase. The failure of any Stockholder to
submit any notice within the applicable period shall constitute an election on
the part of such Stockholder not to purchase any of the Offered Securities to
which the requisite notice pertained. In the event all of the Stockholders
(other than the Selling Stockholder and Stockholders who had an option to
purchase the Offered Securities pursuant to Section 2.2) elect to purchase all
or more than all of their respective Pro Rata Parts of the remaining Offered
Securities, then each Stockholder (other than the Selling Stockholder and
Stockholders who had an option to purchase the Offered Securities pursuant to
Section 2.2) shall be obligated to purchase such Stockholder's Pro Rata Part of
the remaining Offered Securities. In the event any Stockholder (other than the
Selling Stockholder and Stockholders who had an option to purchase the Offered
Securities pursuant to Section 2.2) elects to purchase none or less than all of
such Stockholder's Pro Rata Part of the remaining Offered Securities, then (x)
each Stockholder who elected to purchase less than all of such
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Stockholder's Pro Rata Part of the remaining Offered Securities ("Partial
Purchaser") shall be obligated to purchase the number or amount of Offered
Securities indicated in such Partial Purchaser's notice pursuant to this Section
and (y) each Stockholder who elected to purchase all or more than all of such
Stockholder's Pro Rata Part of the remaining Offered Securities ("Full
Purchaser") shall be obligated to purchase the lesser of (i) the number or
amount of Offered Securities indicated in such Full Purchaser's notice pursuant
to this Section or (ii) such Full Purchaser's Pro Rata Part of the remaining
Offered Securities plus a number or amount of Offered Securities equal to the
product of (A) the difference between the number or amount of Offered Securities
constituting the Partial Purchasers' aggregate Pro Rata Parts of the remaining
Offered Securities minus the aggregate number or amount of Offered Securities
that Partial Purchasers elected to purchase, multiplied by (B) a fraction the
numerator of which shall be the number or amount of Offered Securities that such
Full Purchaser elected to purchase in excess of his Pro Rata Part of the
remaining Offered Securities and the denominator of which shall be the aggregate
number or amount of Offered Securities that all Full Purchasers elected to
purchase in excess of the Full Purchasers' aggregate Pro Rata Parts of the
remaining Offered Securities. In the event that the Stockholders (other than the
Selling Stockholder and Stockholders who had an option to purchase the Offered
Securities pursuant to Section 2.2) do not elect to purchase the remaining
Offered Securities, then the Company may, at its election, purchase all such
remaining Offered Securities.
2.5. Manner of Exercise. Upon determination of the number of Offered
Securities to be purchased by the Company and the Stockholders (other than the
Selling Stockholder), the Company, on its behalf and, if applicable, on behalf
of the Stockholders who are purchasing Offered Securities, shall give notice of
exercise or nonexercise to the Selling Stockholder and all other Stockholders
within 15 days following the expiration of the last option capable of being
exercised pursuant to Sections 2.2, 2.3 or 2.4.
2.6. Requirement to Purchase All Offered Securities. Notwithstanding
any other provision of this Agreement, in no event shall any Selling Stockholder
be required to sell any of the Offered Securities to the Company and/or the
other Stockholders unless, within the period provided, the Selling Stockholder
has been notified that all the Offered Securities will be purchased by the
Company or the other Stockholders or both. If either or both the Company and the
other Stockholders do not elect to purchase all the Offered Securities, then
neither the Company nor the other Stockholders shall have any right or
obligation to purchase any of the Offered Securities.
2.7. Closing. The closing of the purchase and sale of Securities that
are being purchased and sold under this Article (the "Closing") shall take place
at the Company's principal executive offices on the 10th day following the date
of delivery of the notice of acceptance by the Company and the Stockholders
pursuant to Section 2.5 (or if such date is a Saturday, Sunday or legal holiday
in the state where such offices are located, the first day thereafter that is
not a Saturday, Sunday or legal holiday) at 10:00 a.m., local time; provided,
however, that if a Person whose Securities are being sold is deceased or
mentally incompetent, the Closing shall be delayed as long as is necessary to
allow the legal representative, executor or administrator of the Person whose
Securities are to be sold to qualify properly as such in order that such legal
representative, executor or administrator shall have all necessary authority to
convey such Securities. At the Closing, the parties shall take all action
necessary to convey such Securities to be transferred in accordance with this
Agreement, free of all liens and encumbrances (other than as set forth in this
Stockholders Agreement and, with respect to the members of the Founding Group,
the lien granted to HoT pursuant to the Founding Group Pledge Agreements), all
as reasonably determined by the Company.
2.8. Failure to Exercise. If the Company and/or the Stockholders (other
than the Selling Stockholder) do not elect to purchase all of the Offered
Securities within the period provided, then, subject to Article 3, all of such
Offered Securities may be disposed of by the Selling Stockholder to the
prospective transferee named in the
10
Disposition Notice, for the price and on the terms and conditions set forth in
the Disposition Notice, at any time within 90 days after the expiration of the
period provided for in the notice of the Company to be delivered pursuant to
Section 2.5, provided that each transferee shall, prior to the Disposition of
the Offered Securities to such transferee, execute and deliver to the Company a
valid and binding agreement, satisfactory to the Company, to become a
Stockholder under this Agreement. Each party hereto who becomes a Selling
Stockholder agrees to grant to the Company full access to all records of the
Selling Stockholder to determine to its satisfaction the terms of any
Disposition pursuant to this Section to any transferee named in the Disposition
Notice. Any Securities not so disposed of within such 90 day period shall remain
subject to all of the provisions of this Agreement.
3. TAG-A-LONG RIGHTS. If the Company and the Stockholders other than the Selling
Stockholder do not elect to purchase the Offered Securities in accordance with
Article 2, then in each case involving the sale (other than in Permitted
Dispositions) by one or more Stockholders of Common Stock or Common Stock
Equivalents representing (in the aggregate) in excess of 5% of the total
outstanding Common Stock (assuming for such purpose that all Common Stock
Equivalents have been fully exercised, exchanged or converted) in a single
transaction or series of related transactions, each Stockholder shall have the
right to participate in the Disposition set forth in each applicable Disposition
Notice (other than a Disposition described in Section 2.1(b) herein) in a manner
such that each Stockholder (including the Selling Stockholder) will be entitled
to sell up to his Pro Rata Part of the total number of shares of Common Stock
(assuming for this purpose that all Common Stock Equivalents are exercised,
exchanged, or converted) to be transferred in the proposed Disposition, as
stated in the Disposition Notice (the "Total Shares"). Each Stockholder (other
than the Selling Stockholder) shall have until the 10th day following such
Stockholder's receipt of the notice to be provided by the Company pursuant to
Section 2.4 herein to notify the Selling Stockholder of his election to
participate in such Disposition pursuant to this Article. The failure of any
Stockholder to submit such notice within the applicable period shall constitute
an election on the part of such Stockholder not to participate in such
Disposition. The Selling Stockholder's portion of the Total Shares shall be
reduced to the extent necessary to permit the other Stockholders to exercise
their rights under this Article 3. If any Stockholder elects to sell less than
his Pro Rata Part of the Total Shares, the Selling Stockholder shall be entitled
to take up the deficiency. The Disposition shall not be consummated by the
Selling Stockholder unless, simultaneously therewith, each other Stockholder who
has notified the Selling Stockholder of such other Stockholder's election to
participate in such Disposition is permitted to sell his Pro Rata Part of the
Total Shares (or such lesser amount of the Total Shares as such other
Stockholder may desire) to the transferee stated in the Disposition Notice for
the consideration and on the terms set forth in the Disposition Notice.
4. PUT AND CALL AGREEMENTS.
4.1. Call. Each member of the Founding Group hereby grants to HoT the
right and option, exercisable by giving notice upon the terms and conditions and
in the manner hereinafter provided, to purchase from the members of the Founding
Group and/or their transferees all (but not less than all) of the Securities
held by all such Persons, upon the following terms and conditions (the "Call"):
(a) At any time on or after the second anniversary of the date
hereof through and including the later of (i) the fifth anniversary of
the date hereof or (ii) if the Call is prohibited from being exercised
by reason of the provisions of Sections 6.1 or 7.1, then 30 days after
the expiration of the applicable period provided in Sections 6.2(b) or
7.1, as the case may be, HoT may purchase from the members of the
Founding Group and/or their transferees the Securities held by all such
Persons for an amount in cash equal to the Appraised Value of such
Securities.
11
(b) HoT may exercise the Call by delivering to the Company and
the members of the Founding Group and/or their transferees written
notice of exercise thereof, which shall set forth HoT's and/or its
transferees' estimate of the Appraised Value of such Securities (the
"Call Notice").
(c) Notwithstanding anything herein to the contrary, if in
calculating the Appraised Value of the Securities subject to the Call
it is determined that the final Appraised Value of such Securities is
5% or more than the Appraised Value set forth in the Call Notice, HoT
may, at its option, rescind its election to exercise the Call within
five days after the determination of such final Appraised Value.
4.2. Put. HoT hereby grants to the members of the Founding Group and/or
their transferees the right and option, exercisable by giving notice upon the
terms and conditions and in the manner hereinafter provided, to require HoT to
purchase from the members of the Founding Group and/or their transferees all
(but not less than all) of the Securities held by all such Persons (the "Put"),
upon the following terms and conditions:
(a) At any time on or after the second anniversary of the date
hereof through and including the later of (i) the fifth anniversary of
the date hereof or (ii) if the Put is prohibited from being exercised
by reason of the provisions of Sections 6.1 or 7.1, then 30 days after
the expiration of the applicable period provided in Sections 6.2(b) or
7.1, as the case may be, the members of the Founding Group and/or
their transferees may require HoT to purchase the Securities held by
all such Persons for an amount in cash equal to the Appraised Value of
such Securities.
(b) The members of the Founding Group and/or their transferees
may exercise the Put by delivering to the Company and HoT and/or its
transferees written notice of exercise thereof, which shall set forth
such members' and/or their transferees' estimate of the Appraised Value
of such Securities (the "Put Notice").
(c) Notwithstanding anything herein to the contrary, if in
calculating the Appraised Value of the Securities subject to the Put it
is determined that the final Appraised Value of such Securities is less
than the Appraised Value set forth in the Put Notice by 5% or more, the
members of the Founding Group and/or their transferees may, at their
option, rescind their election to exercise the Put within five days
after the determination of such final Appraised Value.
4.3. Closing. The closing of the purchase and sale of the Call or Put
(the "Put/Call Closing") shall take place at the Company's principal executive
offices on the 180th day following the Call Notice or Put Notice, as the case
may be (or if such applicable date is a Saturday, Sunday or legal holiday in the
state where such offices are located, the first day thereafter that is not a
Saturday, Sunday or legal holiday) at 10:00 a.m., local time. At the Put/Call
Closing, the parties shall take all necessary action to convey such Securities
to be transferred in accordance with this Article, free of all liens and
encumbrances (other than as set forth in this Stockholders Agreement and, with
respect to the members of the Founding Group, the lien granted to HoT pursuant
to the Founding Group Pledge Agreements), all as reasonably determined by the
Company. Each Stockholder agrees that if and when such Stockholder becomes
entitled to any amounts pursuant to this Article, any amounts that such
Stockholder owes to the Company or HoT shall be deducted from the amounts
otherwise payable to such Stockholder at the Put/Call Closing and paid directly
to the Company or HoT, as applicable.
5. BUYOUT OPTION.
5.1. Death; Bankruptcy of a Stockholder. If a Stockholder shall die or
become a Bankrupt Stockholder, the Affected Stockholder (or his representative)
shall promptly give notice thereof to the Company
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and the other Stockholders. The Company and the other Stockholders shall have
the option to acquire the Securities of the Affected Stockholder in accordance
with Sections 5.3, 5.4 and 5.5, at a price equal to the Appraised Value of such
Securities. The Company shall notify the Stockholders promptly upon its receipt
of any final determination of Appraised Value.
5.2. Death of a Spouse of Stockholder; Divorce. If a divorce or other
termination of marital relationship of a Stockholder shall occur or if a spouse
of a Stockholder dies, the Affected Stockholder (or his representative) shall
promptly give notice thereof to the Company and the other Stockholders. The
Affected Stockholder shall have the option to acquire the Securities of the
Affected Stockholder's spouse or former spouse (or his or her representative),
by notifying such spouse or former spouse (or his or her representative) of such
exercise within 90 days following the occurrence of the Buyout Event. If the
Affected Stockholder does not exercise his right, then the Company and the other
Stockholders shall have the option to acquire the Securities of the Affected
Stockholder's spouse or former spouse (or his or her representative) in
accordance with Sections 5.3, 5.4 and 5.5, at a price equal to the Appraised
Value of such Securities. The Company shall notify the Stockholders promptly
upon its receipt of any final determination of Appraised Value.
5.3. Intention to Exercise by Members of the Founding Group. If the
Affected Stockholder is a member of the Founding Group and either (a) such
Affected Stockholder fails to acquire the Securities of the Affected
Stockholder's spouse or former spouse (or his or her representative) in
accordance with Section 5.2, or (b) the Affected Stockholder dies or is a
Bankrupt Stockholder, then each remaining member of the Founding Group whose
Securities are not subject to a Buyout Event shall have until the 60th day
following such Stockholder's receipt of the notice required pursuant to Section
5.1 or 5.2 to notify the Company and the other Stockholders of the number or
amount of the Securities of such Affected Stockholder or Affected Stockholder's
spouse or former spouse (or his or her representative), as the case may be, that
such Stockholder desires to purchase. The failure of any member of the Founding
Group to submit any notice within the applicable period shall constitute an
election on the part of such member of the Founding Group not to purchase any of
such Securities to which the requisite notice pertained. In the event all of the
such remaining members of the Founding Group elect to purchase all or more than
all of their respective Pro Rata Parts of such Securities, then each such member
of the Founding Group shall be obligated to purchase such Stockholder's Pro Rata
Part of such Securities. In the event any such member of the Founding Group
elects to purchase none or less than all of such Stockholder's Pro Rata Part of
such Securities, then (x) each Stockholder who elected to purchase less than all
of such Stockholder's Pro Rata Part of such Securities ("Partial Founding Group
Buyout Purchaser") shall be obligated to purchase the number or amount of such
Securities indicated in such Partial Founding Group Buyout Purchaser's notice
pursuant to this Section and (y) each Stockholder who elected to purchase all or
more than all of such Stockholder's Pro Rata Part of such Securities ("Full
Founding Group Buyout Purchaser") shall be obligated to purchase the lesser of
(i) the number or amount of such Securities indicated in such Full Founding
Group Buyout Purchaser's notice pursuant to this Section or (ii) such Full
Founding Group Buyout Purchaser's Pro Rata Part of such Securities plus a number
or amount of such Securities equal to the product of (A) the difference between
the number or amount of such Securities constituting the Partial Founding Group
Buyout Purchasers' aggregate Pro Rata Parts of the such Securities minus the
aggregate number or amount of such Securities that Partial Founding Group Buyout
Purchasers elected to purchase, multiplied by (B) a fraction the numerator of
which shall be the number or amount of such Securities that such Full Founding
Group Buyout Purchaser elected to purchase in excess of his Pro Rata Part of
such Securities and the denominator of which shall be the aggregate number or
amount of such Securities that all Full Founding Group Buyout Purchasers elected
to purchase in excess of the Full Founding Group Buyout Purchasers' aggregate
Pro Rata Parts of such Securities.
5.4. Intention to Exercise by Company. If the Affected Stockholder is
not a member of the Founding Group, then within 180 days of Company's receipt of
the notice required pursuant to Section 5.1 or 5.2, the
13
Company shall notify the Stockholders of the number or amount of the Securities
of the Affected Stockholder or the Affected Stockholder's spouse or former
spouse (or his or her representative), as the case may be, that it desires to
purchase. If the Affected Stockholder is a member of the Founding Group, the
Company shall have until the 120th day following either (a) its receipt of all
notices to be provided by members of the Founding Group pursuant to Section 5.3,
or (b) the failure of any member of the Founding Group to provide such notice
within the applicable time period, as applicable, to notify the Stockholders of
the number or amount of remaining Securities of the Affected Stockholder or the
Affected Stockholder's spouse or former spouse (or his or her representative),
as the case may be, that it desires to purchase. The failure of the Company to
submit any such notice within the applicable period shall constitute an election
on its part not to purchase any of the Securities to which the requisite notice
pertained.
5.5. Intention to Exercise by Other Stockholders. If the Company fails
to exercise its option to purchase all of such remaining Securities, each
Stockholder (other than Stockholders whose Securities are subject to a Buyout
Event or who had an option to purchase Securities pursuant to Section 5.3) shall
have until the 30th day following either (a) such Stockholder's receipt of the
notice to be provided by the Company pursuant to Section 5.4 or (b) the
Company's failure to provide such notice within the applicable time period, as
applicable, to notify the Company of the number or amount of such remaining
Securities of the Affected Stockholder or the Affected Stockholder's spouse or
former spouse (or his or her representative), as the case may be, that such
Stockholder desires to purchase. The failure of any Stockholder to submit any
notice within the applicable period shall constitute an election on the part of
such Stockholder not to purchase any of such Securities to which the requisite
notice pertained. In the event all of such Stockholders elect to purchase all or
more than all of their respective Pro Rata Parts of such remaining Securities,
then each such Stockholder shall be obligated to purchase such Stockholder's Pro
Rata Part of the such remaining Securities. In the event any such Stockholder
elects to purchase none or less than all of such Stockholder's Pro Rata Part of
such remaining Securities, then (x) each Stockholder who elected to purchase
less than all of such Stockholder's Pro Rata Part of such remaining Securities
("Partial Buyout Purchaser") shall be obligated to purchase the number or amount
of such Securities indicated in such Partial Buyout Purchaser's notice pursuant
to this Section and (y) each Stockholder who elected to purchase all or more
than all of such Stockholder's Pro Rata Part of such remaining Securities ("Full
Buyout Purchaser") shall be obligated to purchase the lesser of (i) the number
or amount of such Securities indicated in such Full Buyout Purchaser's notice
pursuant to this Section or (ii) such Full Buyout Purchaser's Pro Rata Part of
such remaining Securities plus a number or amount of such Securities equal to
the product of (A) the difference between the number or amount of such
Securities constituting the Partial Buyout Purchasers' aggregate Pro Rata Parts
of such remaining Securities minus the aggregate number or amount of such
Securities that Partial Buyout Purchasers elected to purchase, multiplied by (B)
a fraction the numerator of which shall be the number or amount of such
Securities that such Full Buyout Purchaser elected to purchase in excess of his
Pro Rata Part of such remaining Securities and the denominator of which shall be
the aggregate number or amount of such Securities that all Full Buyout
Purchasers elected to purchase in excess of the Full Buyout Purchasers'
aggregate Pro Rata Parts of such remaining Securities. In the event that such
Stockholders do not elect to purchase such remaining Securities, then the
Company may, at its election, purchase all such remaining Securities.
5.6. Manner of Exercise. Upon determination of the number of Securities
to be purchased by the Company and the other Stockholders, the Company, on its
behalf and, if applicable, on behalf of the Stockholders who are purchasing
Securities, shall give notice of exercise or nonexercise to the Affected
Stockholder (or his or her representative) and all other Stockholders within 15
days following the expiration of the last option capable of being exercised
pursuant to Sections 5.3, 5.4 or 5.5.
5.7. Closing. The closing of the purchase and sale of Securities that
are being purchased and sold under this Article (the "Buyout Closing") shall
take place at the Company's principal executive offices on the 10th
14
day following the date of delivery of the notice of acceptance by the Company
pursuant to Section 5.6 (or if such date is a Saturday, Sunday or legal holiday
in the state where such offices are located, the first day thereafter that is
not a Saturday, Sunday or legal holiday) at 10:00 a.m., local time; provided,
however, that if a Person whose Securities are being sold is deceased or
mentally incompetent, the Buyout Closing shall be delayed as long as is
necessary to allow the legal representative, executor or administrator of the
Person whose Securities are to be sold to qualify properly as such in order that
such legal representative, executor or administrator shall have all necessary
authority to convey such Securities. At the Buyout Closing, the parties shall
take all action necessary to convey such Securities to be transferred in
accordance with this Agreement, free of all liens and encumbrances (other than
as set forth in this Stockholders Agreement and, with respect to the members of
the Founding Group, the lien granted to HoT pursuant to the Founding Group
Pledge Agreements), all as reasonably determined by the Company. Each
Stockholder agrees that if and when an Affected Stockholder (or his legal
representative, executor or administrator) becomes entitled to any amounts
pursuant to this Article, any amounts that such Affected Stockholder owes to the
Company shall be deducted from the amounts otherwise payable to such Stockholder
at the Buyout Closing and paid directly to the Company.
5.8. Failure to Exercise. If the Company and/or the other Stockholders
do not elect to purchase all of the Securities of the Affected Stockholder or
the Affected Stockholder's spouse or former spouse (or his or her
representative) within the applicable period provided in this Article, then any
Disposition of (a) the community property or common law interest of such
Affected Stockholder or Affected Stockholder's spouse in such Securities upon
the death of such Affected Stockholder or Affected Stockholder's spouse or (b)
such Securities in connection with the divorce or termination of the marital
relationship of such Affected Stockholder and Affected Stockholder's spouse to
such Affected Stockholder, Affected Stockholder's spouse or the heirs or
devisees of such Affected Stockholder or Affected Stockholder's spouse, shall be
permitted under this Agreement; provided that each transferee shall, prior to
the Disposition of such Securities to such transferee, execute and deliver to
the Company a valid and binding agreement, satisfactory to the Company, to
become a Stockholder under this Agreement.
6. COME-A-LONG RIGHTS.
6.1. Come-A-Long Rights. At any time on or after the first anniversary
of the date hereof, if any Stockholder or group of Stockholders controlling more
than 50% of the Common Stock on a fully diluted basis acting separately as a
class shall propose to make a transfer (a "Control Transfer") on an arm's-length
basis to an unrelated third party desiring to acquire 100% of the Securities (on
a fully diluted basis) of the Company (the "Compelled Sale Transfer Offer") for
an amount equal to or greater than US$30,000,000.00, then such Stockholder or
Stockholders shall have the right, exercisable as set forth below, to require
all of the remaining Stockholders and their transferees that are bound by this
Agreement (the "Remaining Holders") to sell all shares of any class of
Securities (other than Securities that are not Common Stock or Common Stock
Equivalents which the board of directors of the Company elects to exclude from
the provisions of this Article) to the third party to whom the transfer is
proposed to be made (the "Third Party"). If the Stockholder or Stockholders
initiating the sale, exercise the right in connection with a Control Transfer as
provided by this Article, (a) neither the Company nor any Stockholder shall have
a right of first refusal pursuant to Article 2 in connection with such transfer
and (b) none of HoT, the members of the Founding Group or their respective
transferees shall have the right to exercise the Put or Call provided in Article
4 or an Exchange provided in Article 9 until the expiration of the applicable
time period specified in Section 6.2(b). The consideration to be received by the
Remaining Holders for each share of any class of Securities sold pursuant to
this Article shall be the same consideration per share of such class to be
received by the Stockholder or Stockholders initiating the sale (or, if the
Stockholder initiating the sale shall not own any such Securities of the class
owned by the Remaining Holders, an amount calculated based upon the number of
shares of Common Stock receivable upon conversion or exchange of such Securities
15
of such class), and the terms and conditions of such sale by the Remaining
Holders shall be the same as those upon which the Stockholder or Stockholders
initiating the sale sell their Securities.
6.2. Notice. (a) The Stockholder or Stockholders shall cause the
Compelled Sale Transfer Offer to be reduced to writing and shall provide a
written notice (the "Compelled Sale Transfer Notice") of such Compelled Sale
Transfer Offer to each of the Remaining Holders. The Compelled Sale Transfer
Notice shall contain written notice of the exercise of the Stockholder's or
Stockholders' rights pursuant to Section 6.1, setting forth the consideration
per share to be paid by the Third Party and the other terms and conditions of
the Compelled Sale Transfer Offer. Within 20 days following the date of the
Compelled Sale Transfer Notice, each of the Remaining Holders shall deliver to
the Stockholder or Stockholders designated in the Compelled Sale Transfer Notice
certificates representing the Securities (except as contemplated above in this
Article) held by such Remaining Holder, duly endorsed (and in the case of
options or warrants, after exercise thereof), together with all other documents
required to be executed in connection with such Compelled Sale Transfer Offer
or, if such delivery is not permitted by applicable law, an unconditional
agreement to deliver such certificates pursuant to this Article at the closing
for such Compelled Sale Transfer Offer against delivery to such Remaining Holder
of the consideration therefor, to the extent permitted by applicable law. In the
event that a Remaining Holder should fail to deliver such certificates as
aforesaid, the Company shall cause the books and records of the Company to show
that such Securities are bound by the provisions of this Article and that such
Securities shall be transferred only to the Third Party upon surrender for
transfer by the Remaining Holder thereof.
(b) If within 150 days (or such longer period not exceeding
210 days as may be necessary to comply with any applicable provisions of any
insurance regulatory authority, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended or other applicable regulatory requirements) after the
Stockholder or Stockholders give the Compelled Sale Transfer Notice, they have
not completed the sale of all the Securities to be transferred, the Stockholder
or Stockholders shall return to each of the Remaining Holders all certificates
representing Securities that such Remaining Holder delivered for sale pursuant
hereto, and all the restrictions on sale or other disposition contained in this
Agreement with respect to Securities owned by the Stockholder or Stockholders
and Remaining Holders shall again be in effect.
(c) Promptly after the consummation of the sale of Securities
of the Stockholder or Stockholders and Remaining Holders pursuant to this
Article, the Stockholder or Stockholders shall give notice thereof to the
Remaining Holders, shall remit to each of the Remaining Holders the net proceeds
of the sale of the Securities of such Remaining Holders sold pursuant thereto,
and shall furnish such other evidence of the completion and time of completion
of such sale or other disposition and the terms thereof as may be reasonably
requested by such Remaining Holders.
6.3. Costs. Each Stockholder will bear such Stockholder's pro-rata
share (based on such Stockholder's share of the aggregate proceeds paid in such
Control Transfer) of the costs of any Control Transfer pursuant to a Control
Transfer to the extent such costs are incurred for the benefit of all
Stockholders and are not otherwise paid by the Company or the acquiring party.
Costs incurred by Stockholders at their option and on their own behalf and
income and other taxes incurred by a Stockholder as a result of the transactions
hereunder will not be considered costs of the transaction hereunder and will be
borne by the Stockholder or Stockholders incurring such costs or taxes. Except
for the foregoing, no Stockholder shall be obligated to bear any material costs
in connection with any Control Transfer.
16
7. EXIT TRANSACTIONS.
7.1. Exit Transaction. If at any time following the first anniversary
of the date hereof, any Stockholder or group of Stockholders controlling more
than 50% of the Common Stock on a fully diluted basis acting separately as a
class shall propose to initiate an Exit Transaction with an unrelated third
party desiring to consummate an Exit Transaction where the fair market value of
the aggregate consideration paid or payable in connection therewith is equal to
or greater than US$30,000,000.00, then such Stockholder shall have the right,
exercisable as set forth below, to require all remaining Stockholders and their
transferees bound by this Agreement to participate in such Exit Transaction. In
connection with any such Exit Transaction, each Stockholder will consent to and
raise no objections against such Exit Transaction and (a) if the Exit
Transaction is structured as or includes (i) a merger, consolidation,
reorganization or recapitalization of the Company, each Stockholder shall waive
any dissenters rights, appraisal rights or similar rights in connection with
such merger, consolidation, reorganization or recapitalization of the Company
and shall vote in favor of such merger, consolidation, reorganization or
recapitalization and shall take all actions reasonably necessary to consummate
such merger, consolidation, reorganization or recapitalization, or (ii) a sale
of assets, each Stockholder shall waive any dissenters rights, appraisal rights
or similar rights in connection with such sale of assets and shall vote in favor
of such sale and any subsequent liquidation of the Company or other distribution
of the proceeds therefrom, and (b) each Stockholder shall take all reasonably
necessary or desirable actions in connection with the consummation of the Exit
Transaction as are reasonably requested by the Stockholder or Stockholders
initiating such Exit Transaction. If the Stockholder or Stockholders initiating
the Exit Transaction, exercise the right in connection with a Exit Transaction
as provided by this Article, (i) neither the Company nor any Stockholder shall
have a right of first refusal pursuant to Article 2 in connection with such Exit
Transaction and (ii) none of HoT, the members of the Founding Group or their
respective transferees shall have the right to exercise the Put or Call provided
in Article 4 or an Exchange provided in Article 8 until the expiration of the
150 days (or such longer period not exceeding 210 days as may be necessary to
comply with any applicable provisions of any insurance regulatory authority, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended or other
applicable regulatory requirements) after the Stockholder or Stockholders give
the Exit Transaction Notice. Following the expiration of such 150 day or 210 day
period, as applicable, all the restrictions on sale or other disposition
contained in this Agreement with respect to Securities owned by the Stockholder
or Stockholders shall again be in effect. If the Exit Transaction is structured
as or includes a merger, consolidation, reorganization or recapitalization of
the Company, the consideration to be received by all Stockholders for each share
of any class of Securities sold pursuant to this Article shall be the same
consideration per share of such class to be received by the Stockholder or
Stockholders initiating the Exit Transaction (or, if the Stockholder initiating
the Exit Transaction shall not own any such Securities of the class owned by the
other Stockholders, an amount calculated based upon the number of shares of
Common Stock receivable upon conversion or exchange of such Securities of such
class), and the terms and conditions of such Exit Transaction by the Stockholder
or Stockholders initiating such Exit Transaction shall be the same as those upon
the other Stockholders.
7.2. Notice. The Stockholder or Stockholders shall cause the Exit
Transaction to be reduced to writing and shall provide a written notice (the
"Exit Transaction Notice") of such Exit Transaction to each of the other
Stockholders. The Exit Transaction Notice shall contain written notice of the
exercise of the Stockholder's or Stockholders' rights pursuant to Section 7.1,
setting forth the consideration to be paid for the Company's assets or
Securities and the other terms and conditions of the Exit Transaction.
7.3. Purchaser Representative. If the Company or the Stockholders enter
into any transaction for which Rule 506 (or any similar rule then in effect)
promulgated by the SEC may be available with respect to such negotiation or
transaction (including a merger, consolidation or other reorganization), the
Stockholders who are not accredited investors (as such term is defined in Rule
501 promulgated by the SEC) will, at the request of the Company, appoint a
purchaser representative (as such term is defined in Rule 501 promulgated by the
SEC) reasonably acceptable to the Company. If any Stockholder appoints a
purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any Stockholder declines to
17
appoint the purchaser representative designated by the Company such Stockholder
will appoint another purchaser representative, and such Stockholder will be
responsible for the fees and expenses of the purchaser representative so
appointed.
7.4. Costs. Each Stockholder will bear such Stockholder's pro-rata
share (based on such Stockholder's share of the aggregate proceeds paid in such
Exit Transaction) of the costs of any Exit Transaction pursuant to an Exit
Transaction to the extent such costs are incurred for the benefit of all
Stockholders and are not otherwise paid by the Company or the acquiring party.
Costs incurred by Stockholders at their option and on their own behalf and
income and other taxes incurred by a Stockholder as a result of the transactions
hereunder will not be considered costs of the transaction hereunder and will be
borne by the Stockholder or Stockholders incurring such costs or taxes. Except
for the foregoing, no Stockholder shall be obligated to bear any material costs
in connection with any Exit Transaction.
7.5. Waiver of Appraisal or Dissenters Rights. EACH STOCKHOLDER HEREBY
WAIVES ANY APPRAISAL RIGHTS OR DISSENTER'S RIGHTS RELATED TO AN EXIT TRANSACTION
TO WHICH SUCH STOCKHOLDER MAY OTHERWISE BE ENTITLED, WHETHER UNDER NEVADA
REVISED STATUTES, NEVADA LAW OR OTHERWISE.
8. BUY BACK.
8.1. Buyback. (a) Any Stockholder who is or becomes an employee of the
Company or HoT, or any of their respective Affiliates, agrees that, if such
Stockholder shall voluntarily cease to be an employee of the Company or HoT, or
any Affiliate (other than for "Good Reason") or such Stockholder's employment is
terminated "for cause" (as each of those terms are defined in the respective
employment agreements with such Stockholders) (each, a "Buy Back Event"), the
Company shall have an option to purchase any Securities then owned by such
former employee Stockholder free of all liens and encumbrances (other than as
set forth in this Stockholders Agreement and, with respect to the members of the
Founding Group, the lien granted to HoT pursuant to the Founding Group Pledge
Agreements), by notifying the terminated Stockholder of such exercise within 90
days following such Stockholder's termination. The failure of the Company to
submit any such notice within the applicable period shall constitute an election
on its part not to purchase any of such Securities to which the requisite notice
pertained.
(b) If Xxxxxx shall, without the prior written consent of the Company
and HoT, directly or indirectly, own, manage, operate, join, control or
participate in or be connected with, anywhere in the United States, as an
officer, employee, agent, consultant, sales representative, partner,
stockholder, or director of any business enterprise which is, directly or
indirectly, in competition with any products sold or distributed by the Company
or any of its subsidiaries (also a Buy Back Event), Xxxxxx shall promptly give
notice thereof to the Company and HoT. HoT shall have the option to acquire all
(but not less than all) of the Securities of Xxxxxx free of all liens and
encumbrances (other than as set forth in this Stockholders Agreement and, with
respect to the members of the Founding Group, the lien granted to HoT pursuant
to the Founding Group Pledge Agreements), by notifying Xxxxxx of such exercise
within 90 days following HoT's receipt of Xxxxxx'x notice pursuant to this
subsection. If Xxxxxx shall incur a Buy Back Event without giving the notice
required by this subsection, notice shall be deemed to have been given to the
Company and HoT as of the date HoT first learns of such Buy Back Event.
8.2. Purchase Price. The purchase price for Securities being purchased
pursuant to this Article shall be paid in cash and shall be an amount in cash
equal to the Appraised Value of such Securities as of (a) the date of
termination of such former employee Stockholder's employment or (b) as of the
date HoT notifies Xxxxxx of its intention to acquire his Securities pursuant to
Section 8.1(b), as applicable.
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8.3. Closing. The closing of the purchase and sale of Securities that
are being purchased and sold under this Article (the "Buy Back Closing") shall
take place at the Company's principal executive offices on the 10th day
following the date of delivery of the notice of acceptance by the Company
pursuant to Section 8.1 (or if such date is a Saturday, Sunday or legal holiday
in the state where such offices are located, the first day thereafter that is
not a Saturday, Sunday or legal holiday) at 10:00 a.m., local time; provided,
however, that if a Person whose Securities are being sold is deceased or
mentally incompetent, the Buy Back Closing shall be delayed as long as is
necessary to allow the legal representative, executor or administrator of the
Person whose Securities are to be sold to qualify properly as such in order that
such legal representative, executor or administrator shall have all necessary
authority to convey such Securities. At the Buy Back Closing, the parties shall
take all action necessary to convey such Securities to be transferred in
accordance with this Agreement, free of all liens and encumbrances (other than
as set forth in this Stockholders Agreement and, with respect to the members of
the Founding Group, the lien granted to HoT pursuant to the Founding Group
Pledge Agreements), all as reasonably determined by the Company. Each
Stockholder agrees that if and when such Stockholder becomes entitled to any
amounts pursuant to this Article, any amounts that such Stockholder owes to the
Company or HoT shall be deducted from the amounts otherwise payable to such
Stockholder at the Buy Back Closing and paid directly to the Company or HoT, as
applicable.
9. EXIT EXCHANGE RIGHTS.
9.1. Exchange. Subject to terms and conditions of Articles 6 and 7 and
this Article, at any time after the expiration of the last to expire of the
periods set forth in Sections 4.1(a) and 4.2(a) until the second anniversary of
the date thereof, the members of the Founding Group (but not less than all, and,
in the case of the death of a Founding Group member, his representative) (the
"Exchanging Stockholders") then owning Securities shall have the option,
exercisable by giving written notice of the exercise thereof to HoT ("Exit
Notice"), to require HoT to exchange (each, an "Exchange") all or any portion of
their Securities for cash equal to the aggregate Net Appraised Value of all
Exchanging Stockholders' Securities subject to such Exit Notice; provided,
however, that (a) the members of the Founding Group (and, in the case of the
death of a Founding Group member, his representative) shall collectively be
entitled to request not more than two Exchanges, and (b) immediately following
the closing of, and after giving effect to, the first Exchange, HoT and its
Affiliates (other than the Company) shall own either all of such Founding Group
members' Securities or at least 80% of all outstanding Securities and 80% of all
outstanding Securities having voting rights. Each Exit Notice shall be signed by
all Founding Members (and, in the case of the death of a Founding Group member,
his representative) and shall specify the number of Securities requested to be
subject to the Exchange.
9.2. Exchange of Parent Stock. Notwithstanding anything herein to the
contrary, with respect to any Exchange, at any time prior to the Exit Exchange
Closing, Parent shall be entitled, at its option, to purchase from the
Exchanging Stockholders all or any portion of the Securities subject to the
applicable Exit Notice by giving written notice of the exercise thereof to HoT
and the Exchanging Stockholders, which notice shall specify the value or number
of Securities that Parent desires to purchase or number of shares of Parent
Common Stock that Parent desires to deliver. Parent's obligation under this
Section shall be satisfied by Parent delivering to each Exchanging Stockholder
at the Exit Exchange Closing that number of fully paid and non-assessable shares
of Parent Common Stock equal to the quotient of (a) the Exchange Percentage of
the Net Appraised Value of the Securities of such Exchanging Stockholder,
divided by (b) the Average Trading Price. No fractional shares shall be issued
by reason of an Exchange. All calculations of the number of shares of Parent
Common Stock to be issued to each Exchanging Stockholder shall be rounded to the
nearest whole share. Upon exercise by Parent of the right to acquire the
Exchanging Stockholders' Securities pursuant to this Section 9.2, the amount of
cash to be paid by HoT at the Exit Exchange Closing pursuant to Sections 9.1 and
9.3 shall be deemed to be reduced by an amount equal to the Exchange Percentage
of the Net Appraised Value.
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9.3. Closing. The closing of an Exchange (the "Exit Exchange Closing")
shall take place at the Company's principal executive offices on a date mutually
acceptable to HoT and the Exchanging Stockholders but in any event not later
than the 180th day following the date of receipt of the Exit Notice by HoT (or
if such date is a Saturday, Sunday or legal holiday in the state where such
offices are located, the first day thereafter that is not a Saturday, Sunday or
legal holiday); provided, however, that if a Person whose Securities are subject
to an Exchange is deceased or mentally incompetent, the Exit Exchange Closing
shall be delayed as long as is necessary to allow the legal representative,
executor or administrator of the Person whose Securities are to be exchanged to
qualify properly as such in order that such legal representative, executor or
administrator shall have all necessary authority to convey such Securities. At
the Exit Exchange Closing, HoT shall deliver to each Exchanging Stockholder the
cash calculated pursuant to Section 9.1 and Parent shall deliver to each
Exchanging Stockholder the number of shares of Parent Common Stock to be
delivered to such Exchanging Stockholder as determined pursuant to Section 9.2,
which, in the aggregate, shall be equal to the aggregate Net Appraised Value of
all Exchanging Stockholders' Securities subject to the Exit Notice. The parties
shall take all action necessary to convey such Securities to be transferred in
accordance with this Agreement, free of all liens and encumbrances (other than
as set forth in this Stockholders Agreement and, with respect to the members of
the Founding Group, the lien granted to HoT pursuant to the Founding Group
Pledge Agreements), all as reasonably determined by the Company. Any amounts
owing by the Exchanging Stockholder to HoT or the Company and deducted from the
determination of cash or in determining the number of shares of Parent Common
Stock to be delivered to a Stockholder upon an Exchange in accordance with this
Article shall be deemed to be in satisfaction of the amounts owing by such
Stockholder to HoT or the Company, as the case may be, and shall be paid to HoT
or the Company, as applicable, at the Exit Exchange Closing.
9.4. Registration Statement. If, pursuant to an Exchange, Parent Common
Stock is issued to Exchanging Stockholders:
(a) On or before the expiration of 15 days following the Exit
Exchange Closing, HoT shall use its reasonable efforts to prepare and
file with the SEC a registration statement on Form S-3 (the
"Registration Statement") for the shares of Parent Common Stock to be
issued to the Exchanging Stockholders in accordance with Section 9.2
and will cause the Registration Statement to become effective at the
earliest practical date after the Exit Exchange Closing. Each of HoT
and the Exchanging Stockholders shall pay their own expenses incurred
in connection with the Registration Statement, including, without
limitation, the fees and disbursements of their respective counsel,
accountants, and other representatives, except that HoT shall pay any
printing, filing, and other fees and expenses incurred in connection
therewith. The Exchanging Stockholders shall furnish all information
concerning the Exchanging Stockholders as HoT may reasonably request in
connection with such actions and the preparation of the Registration
Statement. HoT shall maintain the effectiveness of the Registration
Statement for the earliest of (i) two (2) years, (ii) when the shares
of Parent Common Stock will no longer be considered "restricted stock"
within the meaning of Rule 144 of the Securities Act, and when any
restrictive legend can be removed, and (iii) once the Exchanging
Stockholders sell all shares of Parent Common Stock to be issued to the
Exchanging Stockholders and registered under the Registration
Statement. HoT shall take any necessary actions under state "blue sky"
laws consistent with federal registration.
(b) HoT will cause the shares of its common stock included in
the Registration Statement to qualify for quotation on Nasdaq.
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(c) HoT shall notify the Exchanging Stockholders if HoT
obtains actual knowledge of the happening of any event or the existence
of any fact that would require the making of any changes in or
amendments or supplements to the Registration Statement, any
post-effective amendment thereto, the prospectus, any prospectus
supplement or any document incorporated therein by reference so that,
as of such date, the Registration Statement and the prospectus do not
contain any untrue statement of a material fact and do not omit to
state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the prospectus, in the
light of the circumstances under which they were made) not misleading.
With respect to the matters set forth in such notice, HoT shall, as
promptly as reasonably practicable thereafter, prepare and file with
the SEC and furnish a supplement or amendment to such prospectus or
Registration Statement so that such prospectus or Registration
Statement will not contain any untrue statement or a material fact or
omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading. Each Exchanging Stockholder agrees that, upon receipt of
any notice from HoT of the happening of any event of the kind described
above, each Exchanging Stockholder will forthwith discontinue
disposition of Parent Common Stock pursuant to the Registration
Statement until such Exchanging Stockholder's receipt of the copies of
the supplemented or amended prospectus, or until it is advised in
writing by HoT that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, and, if so directed by
HoT, each Exchanging Stockholder will deliver to HoT (at HoT's expense)
all copies, other than permanent file copies, then in such Exchanging
Stockholder's possession of the prospectus covering such Parent Common
Stock at the time of receipt of such notice.
(d) Each Exchanging Stockholder shall notify HoT prior to
effecting any sale of Parent Common Stock pursuant to the Registration
Statement.
9.5. Termination. The rights and obligations of HoT and the other
Stockholders under this Article shall terminate at such time as HoT and its
Affiliates (other than the Company) own less than 50% of the issued and
outstanding Common Stock. The rights of the members of the Founding Group under
this Article are non-transferable except by reason of death and may only be
exercised by the members of the Founding Group and, in the case of the death of
such member, his representative. If a member of the Founding Group or, in the
case of the death of such member, his representative, ever ceases to be the
owner of Securities prior to the Exit Exchange Closing, the rights of such
member or representative and the obligations of HoT with respect to such member
shall cease with respect to this Article.
10. PREEMPTIVE RIGHTS.
10.1. Grant of Right. The Company hereby grants to each Stockholder the
preemptive right to purchase up to such Stockholder's Preemptive Share of any
New Securities which the Company may, from time to time, propose to sell or
issue.
10.2. Exercise of Right. In the event the Company proposes to undertake
an issuance or sale of New Securities, it will give each Stockholder written
notice of its intention, describing the type of New Securities, and the price
and the general terms upon which the Company proposes to issue or sell the same.
Each Stockholder will have 30 days from the date such notice is given to give
the Company written notice of such Stockholder's election to purchase all or any
portion of the Stockholder's Preemptive 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; provided, however, that if the price so specified is payable in whole
or in part in property (which term shall include the securities of any other
issuer) other than cash, then
21
Stockholders who desire to exercise their preemptive rights shall pay cash, in
lieu of such property, at the fair market value of such property as determined
by the Company's board of directors in good faith. Any Stockholder who does not
give such notice within such 30-day period shall be deemed to have waived his or
its preemptive rights with respect to such New Securities, provided the Company
consummates the issuance thereof within 120 days after the expiration of such
30-day period at a price equal to or higher than the price specified in the
notice given to the Stockholders by the Company under this Section.
10.3. Termination. Notwithstanding the foregoing provisions of this
Article, this Article shall terminate at such time as (a) no member of the
Founding Group owns any Securities and (b) neither HoT nor any of its Affiliates
owns any Securities.
11. VOTING AGREEMENT.
11.1. Board of Directors. Each Stockholder agrees that such Stockholder
shall vote all Securities having voting rights now or hereafter owned by such
Stockholder at any meeting of Stockholders of the Company and in whatever other
manner is necessary to ensure that (a) prior to the occurrence of a Triggering
Event, the board of directors of the Company shall at all times consist of four
members, two of whom shall be designees of HoT and two of whom shall be
designees of the Founding Group and (b) from and after the occurrence of a
Triggering Event, the board of directors of the Company shall at all times
consist of five members, three of whom shall be designees of HoT and two of whom
shall be designated by the Founding Group. If any member of the Founding Group
who is or becomes an employee of the Company or HoT, or any of their respective
Affiliates, shall voluntarily cease to be an employee of the Company or HoT, or
any Affiliate (other than for "Good Reason") or such Stockholder's employment is
terminated "for cause" (as each of those terms are defined in the respective
employment agreements with such Stockholders), such former employee shall
thereafter resign from and be ineligible to serve on the board of directors of
the Company. For purposes hereof, the term "Triggering Event" shall mean the
Company's failure to achieve two or more financial covenants set forth in
Section 6.11 of the Loan Agreement in each month during any three consecutive
months during the term of this Agreement.
11.2. Vacancies. In the event that any director (the "Withdrawing
Director") designated by HoT or the Founding Group pursuant to Section 11.1 is
unable to serve or, once having commenced serving, withdraws from (or otherwise
ceases serving on) the board of directors of the Company, such Withdrawing
Director's replacement (the "Substitute Director") on the board of directors of
the Company shall be selected by the Stockholder designating such Withdrawing
Director. Each of the Stockholders agrees to vote all Securities having voting
rights now or hereafter owned by them for the election to the board of directors
of the Company of such Substitute Director.
11.3. Board Committees. The Company hereby agrees that neither it nor
its board of directors shall form, create or appoint any committee (including,
without limitation, an executive committee) of its board of directors unless (a)
prior to the occurrence of a Triggering Event, an equal number of HoT's and the
Founding Group's respective designees on the Company's board of directors are
appointed and maintained as members of such committee and (b) from and after the
occurrence of a Triggering Event, a majority of the members appointed and
maintained on such committee are HoT's designees on the Company's board of
directors and at least one of the Founding Group's designees on the Company's
board of directors is appointed and maintained as a member of such committee.
11.4. Stockholder Approval Required. Without limiting the other
covenants and provisions hereof, each Stockholder covenants and agrees that it
and the Company, except upon the prior written consent of each of (a) HoT and
its Affiliates (other then the Company) then holding Securities having voting
rights and (b) the
22
holders of a majority of all outstanding Securities having voting rights then
held by all members of the Founding Group, shall not (and shall not cause any
directors to):
(a) Issue, agree to issue, reserve for issuance, or authorize
the issuance of (i) any additional Securities, whether presently or
hereafter authorized and whether authorized and unissued shares or
treasury shares, (ii) any Security convertible into or exchangeable for
any Securities, or (iii) any options, warrants or rights to acquire any
Securities; provided, however, that this subsection shall not apply if
HoT has determined in good faith that an additional cash investment is
reasonably required by the Company and HoT is not obligated to loan
such additional amounts to the Company pursuant to the Loan A
Commitment (as defined in the Loan Agreement);
(b) Cause the Company to be liquidated or dissolved except in
connection with an Exit Transaction;
(c) Cause the Company to be merged or consolidated with
another corporation except in connection with an Exit Transaction;
(d) Cause the sale, assignment, lease, or other disposal of
all or substantially all of the assets of the Company except in
connection with an Exit Transaction;
(e) Cause the Company to move its offices from New York, New
York;
(f) Prior to a Triggering Event, appoint an executive
committee or any other committee of the Board of Directors of the
Company;
(g) Make any material change in the nature of its business as
carried out at the date hereof;
(h) Except for the transactions contemplated by this Agreement
and in connection with the Purchase Agreement and the Loan Agreement,
enter into any transaction, including, without limitation, any loans or
extensions of credit or royalty agreements, with any of its officers,
directors or Affiliates, any officer or director of any of its
Affiliates, or any Associate of any of its Affiliates, officers or
directors; and
(i) Declare or pay any dividends, purchase, redeem, retire, or
otherwise acquire for value any of its Securities (or rights, options
or warrants to purchase any of its Securities) now or hereafter
outstanding, return any capital to its Stockholders, or make any
distribution of assets on account of the Securities to its
Stockholders, provided however, that nothing herein contained shall
prevent the Company from purchasing any Securities of the Company
pursuant to the terms hereof.
11.5. Amendment of Charter or Bylaws. The Articles of Incorporation
and/or Bylaws of the Company may be amended and/or restated in accordance with
the provisions thereof and in accordance with applicable law; provided, however,
that any amendment to the Articles of Incorporation or Bylaws of the Company
adversely affecting any member of the Founding Group or HoT or any of its
Affiliates (other than the Company) must be consented to in writing by each such
Stockholder adversely affected.
11.6. Approval Required of HoT. Without limiting the other covenants
and provisions hereof, each Stockholder covenants and agrees that it and the
Company, except upon the prior written consent of HoT and its Affiliates (other
then the Company) then holding Securities having voting rights, shall not (and
shall not cause any directors to):
23
(a) Cause the Company to make capital expenditures greater
than $100,000 individually or greater than $300,000 in the aggregate
during any fiscal year of the Company;
(b) Cause the Company to make inventory purchases greater than
$100,000 in respect of any new product;
(c) After the incurrence of $100,000 of Media Expenditures per
product, cause the Company to make any Media Expenditure with respect
to any product, if at the date of the determination and after giving
effect to such Media Expenditure, the Media Efficiency Ratio with
respect to such product would at such date of determination be less
than 1.80;
(d) Cause the Company to make Print Media Expenditures greater
than (i) $50,000 in any month during the Company's fiscal year 2000 or
(ii) $75,000 in any month during the Company's fiscal year 2001; or
(e) Make any payments or distributions of any nature
whatsoever to, or incur any indebtedness, directly or indirectly, in
respect of, any member of the Founding Group or any of its Affiliates
and Related Persons (as defined in the Purchase Agreement) except for
payments of (i) salary and benefits as provided in the Employment
Agreements dated the date hereof between Company and Sivan and
Xxxxxxxxxxx and (ii) reimbursement of travel and entertainment expenses
incurred on behalf of the Company and in accordance with travel and
entertainment policies of the Company.
11.7. Termination. Notwithstanding the foregoing, the provisions of
this Article shall terminate at such time as (a) members of the Founding Group
collectively own less than 20% of all outstanding Securities having voting
rights or (b) HoT and its Affiliates (other than the Company) own less than 20%
of all outstanding Securities having voting rights.
12. OBLIGATION OF STOCKHOLDER'S SPOUSE. The spouse of each Stockholder joins in
the execution of this Agreement to evidence his or her knowledge of its
existence, and his or her acknowledgment that he or she agrees to the provisions
of this Agreement, and that he or she desires to bind his or her interest, if
any, in the Securities to the performance of this Agreement. Accordingly, each
Stockholder's spouse agrees that in the event of his or her death or the death
of the Stockholder, or upon the divorce of such spouse and such Stockholder, or
the occurrence of any other event as herein provided, the covenants made in this
Agreement shall be, and hereby are, accepted as binding on him or her
individually and upon all Persons ever to claim under him or her. However, the
foregoing is not intended to, and shall not be construed as, conferring or
creating any interest in Securities in the spouse of any Stockholder.
13. FAILURE TO COMPLY. If any Disposition (other than a Permitted Disposition)
is purported to be made or suffered without the giving of the Disposition Notice
required by this Agreement or complying with Article 5, such purported
Disposition shall be void ab initio and of no force and effect. However, without
prejudice to the rights of the Company and the other Stockholders to treat such
Disposition as void, the Securities which are the subject of such purported
Disposition shall be deemed to have been offered to, and an option to purchase
such Securities shall be deemed to have been granted to, the Company and the
Stockholders (other than the Stockholder making or suffering such Disposition)
pursuant to this Agreement as of the date the Company first learns of such
purported Disposition, and the Secretary of the Company shall forthwith notify
all Stockholders of such Disposition and the date of such notice shall be deemed
the date of the Company's receipt of the
24
applicable Disposition Notice or notice required by Article 5 and thereafter the
provisions of Articles 2 and 3 or Article 5, as applicable, herein shall be
fully effective as to such Securities as if such Disposition Notice or notice
required by Article 5 had actually been delivered, provided that the Appraised
Value shall be determined as if the Disposition Notice or notice required by
Article 5 had been given on the date the purported Disposition was made or
Buyout Event occurred or as if the Disposition Notice or notice required by
Article 5 had been given on the date on which the Company learns of such
Disposition, whichever determination results in a lower Appraised Value. In
enforcing this provision, the Company may hold and refuse to transfer any
Securities or any certificate therefor tendered to it for transfer in addition
to, and without prejudice to, any and all other rights or remedies which may be
available to it.
14. RIGHT OF OFFSET. Notwithstanding any other provisions of this Agreement,
whenever the Company is to pay any sum to any Stockholder, any amounts that such
Stockholder owes the Company may be deducted from that sum before payment.
15. TERMINATION. This Agreement shall automatically terminate upon the happening
of any of the following events:
(a) the voluntary or involuntary dissolution of the Company;
(b) the elimination, by death, Disposition of Securities or otherwise,
of all but one Person or entity as a Stockholder;
(c) the mutual agreement of the Company and the vote of holders of at
least 75% of all outstanding Securities having voting rights; provided, however,
until the earliest of (i) the exercise of the Put right or Call right pursuant
to Article 4 or the Exchange pursuant to Article 9, (ii) the last to expire of
the periods set forth in Sections 4.1(a), 4.2(a) and 9.1(a), and (iii) the date
that the members of the Founding Group or HoT and its Affiliates (other than the
Company) no longer own any Securities, termination pursuant to this subsection
shall also require the agreement of each of (A) HoT and its Affiliates (other
than the Company) then holding Securities having voting rights and (B) members
of the Founding Group then holding Securities having voting rights; or
(d) The closing of a firm commitment, underwritten initial public
offering of the Company's capital stock by the Company to the general public,
pursuant to a registration statement that is declared effective under the
Securities Act of 1933, as amended.
16. REPRESENTATION OF STOCKHOLDERS. Each Stockholder hereby represents and
warrants to the Company and each other Stockholder that, as of the date of such
Stockholder's execution of this Agreement, he is the record and beneficial owner
of the Securities set forth immediately below the name of such Stockholder on
the signature pages hereof, free and clear of all liens, claims, encumbrances
and equities of every kind and character whatsoever other than, with respect to
the members of the Founding Group, the pledge of such Persons' Securities to HoT
as security for the indebtedness owed by such Person to HoT pursuant to the
Founders Group Pledge Agreements.
17. LEGEND. Each Stockholder agrees that any certificates representing
Securities shall be legended to assure the enforceability of this Agreement, by
bearing the following legend on the reverse side of the certificate (as well as
a reference in bold-face type to such legend on the face of the certificate):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A STOCKHOLDERS AGREEMENT DATED MARCH 14, 2000, AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT AS
25
THEREIN PROVIDED. THE STOCKHOLDERS AGREEMENT ALSO INCLUDES A VOTING
AGREEMENT OF THE PARTIES THERETO. THE CORPORATION WILL FURNISH A COPY
OF SUCH AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT
CHARGE ON REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS
OR REGISTERED OFFICE."
18. MISCELLANEOUS.
18.1. Captions; Arrangements; References. The headings, captions and
arrangements used herein are, unless specified otherwise, for convenience only
and shall not be deemed to limit, amplify or modify the terms hereof nor affect
the meaning thereof. Whenever herein the singular number is used, the same shall
include the plural where appropriate, and vice versa; and words of any gender
herein shall include each other gender where appropriate. The words "herein,"
"hereof," and "hereunder," and other words of similar import refer to this
Agreement as a whole and not to any particular part or subdivision hereof.
Reference herein to "Articles" and "Sections" are to articles and sections of
this Agreement.
18.2. Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. All notices, requests, demands,
claims, and other communications hereunder will be in writing and shall be
deemed duly given (a) when sent if by confirmed facsimile; (b) the next business
day if by overnight delivery; or (c) five business days after the date when sent
if by registered or certified mail, return receipt requested, postage prepaid,
and addressed to the intended recipient as set forth on the signature pages of
this Agreement (or at such other address as such party may designate by written
notice to all other parties in accordance herewith). Any party may send any
notice, request, demand, claim or other communication hereunder to the intended
recipient at the address set forth above using any other means (including
personal delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail or electronic mail), but no such notice, request, demand, claim or
other communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any party may change the address
to which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other parties notice in the manner provided in
this Agreement.
18.3. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF
ANY JURISDICTION OTHER THAN THE STATE OF TEXAS EXCEPT TO THE EXTENT THE LAWS OF
THE STATE OF NEVADA APPLY TO MATTERS OF CORPORATE GOVERNANCE OF THE COMPANY. Any
legal action or proceeding with respect to this Agreement shall be brought in
any Texas state or federal court sitting in El Paso County, Texas, and, by
execution and delivery of this Agreement, the Company and each Stockholder
hereby accepts for itself and in respect of his or its Securities, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Company and each
Stockholder hereby irrevocably waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.
18.4. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and permitted assigns.
This Agreement shall be binding upon and inure to the benefit of each other
signatory hereto and his respective heirs, representatives, successors, and
permitted assigns, and any receiver, trustee in bankruptcy or representative of
the creditors of each such Person. Except as specifically permitted herein, no
party hereto may assign his rights or obligations hereunder without the consent
26
of the Company and a majority of the shares of Common Stock then subject to this
Agreement. Any assignment in violation of the foregoing shall be null and void.
If a Stockholder ever ceases to be the owner of Securities, he shall have no
rights hereunder unless and until he again becomes an owner of Securities
(provided that the foregoing shall in no event affect the applicability of the
provisions of this Agreement to the Disposition of Securities by such
Stockholder). In the event HoT consummates a Disposition of all of its remaining
Securities to a non-Affiliate of HoT in compliance with the terms and conditions
hereof (including, without limitation, Article 4), all of HoT's duties and
obligations hereunder shall, effective upon such consummation, terminate and be
of no further force or effect; provided, however, that Article 4 and Article 9
herein shall continue to be enforceable by or against any such transferee.
Parent shall be deemed to be an express third party beneficiary to this
Agreement.
18.5. Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of each such illegal,
invalid or unenforceable provision there shall be added automatically as a part
of this Agreement a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
18.6. Amendments. This Agreement may be amended, at any time and from
time to time in whole or in part, or terminated, only by an instrument in
writing, duly executed by the Company and the vote of holders of at least 75% of
all outstanding Securities having voting rights; provided, however, until the
earliest of (ii) the closing of the Put or Call pursuant to Article 4 or the
second Exchange pursuant to Article 9, (ii) the last to expire of the periods
set forth in Sections 4.1(a), 4.2(a) and 9.1(a), and (iii) the date that the
members of the Founding Group or HoT and its Affiliates (other than the Company)
no longer own any Securities, any amendments to the provisions of Articles 4
and/or 9 shall require the mutual agreement of (A) HoT and its Affiliates (other
than the Company) then holding Securities having voting rights and (B) members
of the Founding Group then holding Securities having voting rights.
18.7. Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. It is not necessary that
each Stockholder execute the same counterpart, so long as identical counterparts
are executed by the Company and each Stockholder.
18.8. Execution of Documents. Whenever Securities are purchased
pursuant to this Agreement, the seller or sellers and the buyer or buyers shall
do all things and execute and deliver all documents and make all transfers as
may be necessary to consummate such purchase in accordance with the applicable
provisions of this Agreement.
18.9. Continuation of Rights. The failure or refusal of a party hereto
to exercise any right granted in this Agreement with respect to any Securities
shall not be deemed a waiver of the right to exercise future rights which may
arise hereunder with respect to such Securities.
18.10. Enforcement. It is specifically agreed and understood that
monetary damages would not adequately compensate the Company and the
non-breaching Stockholders for the breach of this Agreement and this Agreement
shall therefore be specifically enforceable, and any breach or threatened breach
of this Agreement shall be the proper subject of a temporary or permanent
injunction or restraining order. Further, each party hereto
27
and his successors, heirs, representatives and assigns waive any claim or
defense that there is an adequate remedy at law for such breach or threatened
breach.
18.11. Costs. In the event attorneys' fees or other costs are incurred
to secure performance of any of the obligations herein provided for, or to
establish damages for the breach thereof, or to obtain any other appropriate
relief, whether by way of prosecution or defense, the prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and costs
incurred therein.
18.12. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, discussions, and understandings other than the
Purchase Agreement, which shall continue in full force and effect.
18.13. Cumulative Rights. The rights of the Company under this
Agreement are cumulative and in addition to all similar and other rights of the
Company under other agreements with the Stockholders and others.
28
The parties have executed and delivered this Agreement as of
the date indicated in the first sentence of this Agreement.
COMPANY:
TACTICA INTERNATIONAL, INC.
By:
------------------------------------------------
Name: Avi Sivan
Title: President
Address: 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Mr. Avi Sivan, President
Facsimile: (000) 000-0000
with a copy to:
Xxxxx of Xxxx, LLC
c/o Xxxxx of Xxxx Texas Corporation
One Xxxxx of Xxxx Xxxxx
Xx Xxxx, Xxxxx 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
STOCKHOLDERS:
XXXXX OF XXXX, LLC
By:
------------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President and Chief Executive Officer
Address: c/o Xxxxx of Xxxx Texas
Corporation
One Xxxxx of Xxxx Xxxxx
Xx Xxxx, Xxxxx 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
29
---------------------------------------------------
Avi Sivan
Address: 00 Xxxxxxx Xxxx
Xxxxx Xxxx, Xxx Xxxx 00000
Facsimile:
-----------------------------------------
---------------------------------------------------
Xxxx Xxxxxxxxxxx
Address: 000 Xxxxxx Xxxxxx, 0X
Xxx Xxxx, Xxx Xxxx 00000
Facsimile:
-----------------------------------------
--------------------------------------------------
Xxxxxxx Xxxxxx
Address: 000 Xxx Xxxx
Xxxxxxxxxx, Xxx Xxxx
00000
Facsimile:
-----------------------------------------
APA INTERNATIONAL, LLC
By:
-----------------------------------------------
Name: Xxxx Xxxxxxxxxxx
Title: Member
Address: c/o Tactica International, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Mr. Avi Sivan, President
Facsimile: (000) 000-0000
30
The spouse of each Stockholder who is not otherwise a party to this
Agreement has executed this Agreement as of the date indicated below for the
purposes of (a) indicating her understanding of and agreement with the
provisions of this Agreement and (b) binding her interest, if any, in the
Securities of such Stockholder to the provisions of this Agreement.
Date: March __, 2000 ------------------------------------------
Xxxxxx Sivan, Spouse of Avi Sivan
Date: March __, 2000 ------------------------------------------
Xxxxx Xxxxx, Spouse of Xxxx Xxxxxxxxxxx
Date: March __, 2000 ------------------------------------------
Xxxxx Xxxxxx, Xxxxxx xx Xxxxxxx Xxxxxx
00
