STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT, dated as of February 7, 1997
(the "Stockholders Agreement"), is entered into by and among
Search Capital Group, Inc., a Delaware corporation ("Search"),
and the undersigned holders (the "Stockholders") of shares of
the common stock, $.001 par value, of MS Financial, Inc. (the
"MS Financial Stock"), MS Diversified Corporation, a
Mississippi corporation ("MSD"), MS Financial Services, Inc., a
Mississippi corporation and a wholly-owned subsidiary of MSD
("MSDSub"), and Xxxxxx Xxxxx Xxxxxx Xxxxxx Fund IV, L.P. ("GTCR
IV").
RECITALS
Search, Search Capital Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Search ("Newco"),
and MS Financial, Inc., a Delaware corporation ("MS
Financial"), propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement";
capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Merger Agreement),
pursuant to which Newco would be merged (the "Merger") with and
into MS Financial and each outstanding share of MS Financial
Stock would be converted into the right to receive that number
of shares of Search Common Stock, $.01 par value per share
("Search Common Stock"), specified in the Merger Agreement;
As a condition of its entering into the Merger Agreement,
Search has required each Stockholder to agree, and each
Stockholder has agreed, to enter into this Stockholders
Agreement.
Prior to the date hereof, Search and the Stockholders had
no agreement, arrangement or understanding (as defined in
Section 203 of the Delaware Statutes) for the purpose of
acquiring, holding, voting or disposing of shares of Search
Common Stock.
AGREEMENT
In consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable
consideration, including the inducement of Search and Newco to
consummate the Merger pursuant to the Merger Agreement, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Representations and Warranties of the Stockholders. Each
Stockholder represents and warrants, severally and not jointly,
to Search as follows:
1.1 Ownership of Securities. Such Stockholder is the
record and beneficial owner of the number of shares of MS
Financial Stock set forth immediately beneath such
Stockholder's name on the signature page(s) to this
Stockholders Agreement (the "Existing Securities," and together
with any shares of MS Financial Stock or other securities of MS
Financial hereafter acquired by the Stockholder prior to the
Merger, whether upon exercise of options, conversion of
convertible securities, purchase, exchange or otherwise, the
"Subject Securities"). On the date hereof, such Stockholder
does not own any securities of MS Financial other than the
Existing Securities. The Stockholder has sole voting power and
sole power to issue instructions with respect to the voting of
the Existing Securities, sole power of disposition, sole power
of exercise or conversion and the sole power to demand
appraisal rights, in each case with respect to all of the
Existing Securities and, on the date of the MS Financial
Stockholders Meeting, will have sole voting power and sole
power to issue instructions with respect to the voting of all
of such Stockholder's Subject Securities, sole power of
disposition, sole power of exercise or conversion and the sole
power to demand appraisal rights, in each case with respect to
all of such Stockholder's Subject Securities.
1.2 Power; Binding Agreement. Such Stockholder has full
legal partnership, or corporate, as the case may be, capacity,
power and authority to enter into and perform all of such
Stockholder's obligations under this Stockholders Agreement.
The execution, delivery and performance of this Stockholders
Agreement by such Stockholder will not violate any other
agreement to which such Stockholder is a party, including,
without limitation, any trust agreement, voting agreement,
stockholders agreement or voting trust. This Stockholders
Agreement has been duly and validly executed and delivered by
such Stockholder and constitutes a valid and binding agreement
of such Stockholder, enforceable against such Stockholder in
accordance with its terms, except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors'
rights generally, and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
1.3 No Conflicts. No filing with, and no permit,
authorization, consent or approval of, any Governmental
Authority is necessary for the execution of this Stockholders
Agreement by such Stockholder and the consummation by such
Stockholder of the transactions contemplated hereby, and
neither the execution and delivery of this Stockholders
Agreement by such Stockholder nor the consummation by such
Stockholder of the transactions contemplated hereby, nor
compliance by such Stockholder with any of the provisions
hereof, conflicts or will conflict with, or results or will
result in, any breach of any applicable partnership or other
organizational documents applicable to such Stockholder or
(with or without notice or lapse of time or both) a default (or
give rise to any third-party right of termination,
cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or
obligation of any kind to which such Stockholder is a party or
by which such Stockholder's properties or assets may be bound
or, to the best of such Stockholders' knowledge, violate any
Law applicable to such Stockholder or any of such Stockholder's
properties or assets.
1.4 No Liens. Except to the extent set forth below in
Section 6.3, the Existing Securities are, and as of the
Effective Time the Subject Securities will be, free and clear
of all liens, claims, security interests, proxies, voting
trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any encumbrances
arising hereunder.
1.5 Disclosure of Contracts. Except as disclosed in the
Schedules to the Merger Agreement, there are no contracts,
agreements and arrangements to which (a) GTCR and MS Financial
and/or its Subsidiary are parties and (b) MSD and/or MSD Sub
and MS Financial and/or its Subsidiary are parties.
1.6 Access to Securities Information. Search has made
available to each Stockholder a copy of all Search SEC Reports
and such other documents and information as have been requested
by such Stockholder in connection with the issuance of the
Search Common Stock to such Stockholder in the Merger
(collectively the "Search Disclosure Documents"). In addition,
Search has made available to such Stockholder those officers or
representatives of Search as are necessary to respond to any
questions such Stockholder may reasonably have regarding Search
and the Search Common Stock. Such Stockholder (a) has such
knowledge, sophistication, experience, and net worth such that
such Stockholder is capable of evaluating the merits and risks
of an investment in the Search Common Stock, (b) fully
understands the nature, scope, and duration of the limitations
on transfer contained in this Stockholders Agreement, and (c)
can bear the economic risk of any investment in the Search
Common Stock. Such Stockholder has had an adequate opportunity
to ask questions and receive answers (and has asked such
questions and received answers to its satisfaction) from the
officers of Search concerning the business, operations and
financial condition of Search and/or the Search SEC Reports.
Stockholder has no contract, undertaking, agreement or
arrangement, written or oral, with any other person to sell,
transfer or grant participations in any shares of Search Common
Stock to be acquired by Stockholder in the Merger and is not
acquiring the Search Common Stock with a view to its
distribution. In addition, Stockholder understands and agrees
to abide by the nature of the restrictions imposed by Rule 145
promulgated by the SEC under the Securities Act as well as the
other restrictions imposed by this Stockholders Agreement.
2. Agreement to Vote Shares Prior to Merger. At every
meeting of the stockholders of MS Financial called with respect
to any of the following, and at every adjournment thereof, and
on every action or approval by written consent of the
stockholders of MS Financial with respect to any of the
following, each Stockholder, severally and not jointly, agrees
that it shall vote all the Subject Securities that it owns,
directly or beneficially, on the record date of any such vote
as follows: (a) in favor of the Merger, the adoption, execution
and delivery of the Merger Agreement and the approval of the
terms thereof and the Transactions; (b) against any action or
agreement that would result in a breach in any material respect
of any covenant, representation, or warranty or any other
obligation or agreement of MS Financial under the Merger
Agreement; (c), except as otherwise agreed to in writing in
advance by Search, against any of the following actions (other
than the Merger and the Transactions), which shall be known as
an "Alternate Transaction": (i) any extraordinary corporate
transaction, such as a merger, consolidation or other business
combination involving MS Financial or its Subsidiary; or (ii)
a sale, lease or transfer of a material amount of assets of MS
Financial, its Subsidiary or any Securitization Trust, or a
reorganization, recapitalization, dissolution or liquidation of
MS Financial or its Subsidiary, or any purchase or redemption
of MS Financial Stock from the Stockholder or any other
Stockholder; and (d) against (i) any change in the majority of
the Board of Directors of MS Financial, (ii) any material
change in the present capitalization of MS Financial or any
amendment of MS Financial's Restated Certificate of
Incorporation, or (iii) any other material change in MS
Financial's corporate structure or business.
3. IRREVOCABLE PROXY. EACH STOCKHOLDER HEREBY, SEVERALLY AND
NOT JOINTLY, GRANTS TO, AND APPOINTS NEWCO AND THE TREASURER OF
NEWCO IN HIS CAPACITY AS AN OFFICER OF NEWCO, AND ANY
INDIVIDUAL WHO SHALL HEREAFTER SUCCEED TO SUCH OFFICE OF NEWCO
AND ANY OTHER DESIGNEE OF NEWCO, AND EACH OF THEM INDIVIDUALLY,
SUCH STOCKHOLDER'S PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER
OF SUBSTITUTION) TO VOTE OR ACT BY WRITTEN CONSENT WITH RESPECT
TO SUCH STOCKHOLDER'S SUBJECT SECURITIES IN ACCORDANCE WITH
SECTION 2 HEREOF. THIS PROXY IS COUPLED WITH AN INTEREST AND
SHALL BE IRREVOCABLE FOR THE TERM OF THIS STOCKHOLDERS
AGREEMENT, AND EACH STOCKHOLDER WILL TAKE SUCH FURTHER ACTION
AND EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO
EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY
PROXY PREVIOUSLY GRANTED BY IT WITH RESPECT TO THE SUBJECT
SECURITIES.
4. Representations and Warranties of Search.
4.1 Power; Binding Agreement. Search has full corporate
power and authority to enter into and perform all of Search's
obligations under this Stockholders Agreement. This
Stockholders Agreement has been duly and validly executed and
delivered by Search and constitutes a valid and binding
agreement of Search, enforceable against Search in accordance
with its terms, except that (i) such enforcement may be subject
to applicable bankruptcy, insolvency or other similar laws, now
or hereafter in effect, affecting creditors' rights generally,
and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.2 No Conflicts. No filing with, and no permit,
authorization, consent or approval of, any Governmental
Authority is necessary for the execution of this Stockholders
Agreement by Search and the consummation by Search of the
transactions contemplated hereby, and neither the execution and
delivery of this Stockholders Agreement by Search nor the
consummation by Search of the transactions contemplated hereby,
nor compliance by Search with any of the provisions hereof,
conflicts or will conflict with, or results or will result in,
any breach of any organizational documents applicable to Search
or (with or without notice or lapse of time or both) a default
(or give rise to any third-party right of termination,
cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or
obligation of any kind to which Search is a party or by which
Search's properties or assets may be bound or violate any
order, writ, injunction, decree, judgment, order, statute, rule
or regulation applicable to Search or any of Search's
properties or assets.
5. Covenants of Each Stockholders Prior to Merger. Each
Stockholder, severally and not jointly, hereby agrees and
covenants that prior to the Effective Time:
5.1 No Solicitation. Such Stockholder shall not, directly
or indirectly, solicit, initiate or encourage (including by way
of furnishing information) or respond to any inquiries or the
making of any proposal by any person or entity (other than
Search or any Search Affiliate) with respect to MS Financial or
any Securitization Trust that constitutes or could reasonably
be expected to lead to an Alternative Transaction. If any
Stockholder receives any such inquiry or proposal, then it
shall promptly inform Search of the terms and conditions, if
any, of such inquiry or proposal and the identity of the person
making it. Such Stockholder will immediately cease and cause to
be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore that
constitutes or could reasonably be expected to lead to an
Alternative Transaction.
5.2 Restriction on Transfer, Proxies and Noninterference.
Such Stockholder shall not, except as contemplated by this
Stockholders Agreement: (i) directly or indirectly offer for
sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or
other arrangement or understanding with respect to, or consent
to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of
such Stockholder's Subject Securities; (ii) grant any proxies
or powers of attorney with respect to any of such Stockholder's
Subject Securities; (iii) deposit any of such Stockholder's
Subject Securities into a voting trust or enter into a voting
agreement with respect to any of such Stockholder's Subject
Securities; or (iv) take any action that would make any
representation or warranty contained herein untrue or incorrect
or have the effect of preventing or disabling such Stockholder
from performing its obligations under this Stockholders
Agreement.
5.3 Waiver of Appraisal Rights. Such Stockholder shall
not assert and hereby waives any rights of appraisal or rights
to dissent from the Merger that such Stockholder may hold or
possess.
5.4 Release of All Claims Against MS Financial. Such
Stockholder shall not pursue or make any claim such Stockholder
has or may possess against MS Financial or any of the
directors, officers or other employees of MS Financial and
agrees to sign a release at or prior to the Closing, in
substantially the form attached hereto as Exhibit 5.4,
releasing all claims such Stockholder has or may possess
against MS Financial and MS Financial's directors, officers and
other employees for all acts, actions, events or occurrences
arising or occurring at any time to and including the Effective
Time and (b) terminating all contracts described in Section 1.5
above, except for (i) those agreements specifically described
in Section 15.1 below, (ii) the Merger Agreement, (iii) the
Related Documents and (iv) those contracts that Search requests
not be terminated.
5.5 Performance by MS Financial. Each Stockholder shall
cause MS Financial to comply with the provisions of Section 5.4
of the Merger Agreement.
6. Additional Covenants of Stockholders. Each Stockholder,
severally and not jointly, hereby agrees and covenants as
follows:
6.1 Non-Solicitation of Employees/Customers.
(a) Scope. From the date hereof until the
expiration of the period of two (2) years following the
Effective Time (the "Restrictive Period"), it will not,
directly or indirectly, (i) solicit or attempt to induce
any employee of Search or MS Financial to leave the
employment of either such employer, or (ii) solicit or
otherwise encourage any customer, client, borrower,
lender, supplier, vendor, or dealer of MS Financial,
Search or any Subsidiary of Search or MS Financial to
cease or discontinue doing business with either MS
Financial or Search or any Subsidiary of Search or MS
Financial.
(b) Reasonableness of Restraints. Each Stockholder
agrees that the covenants contained in this Section 6.1
are independent and severable covenants from the other
covenants contained in this Stockholders Agreement. Each
Stockholder agrees that the period of time and other
limitations set forth in the aforesaid covenants are
reasonable and acceptable to such Stockholder. Each
Stockholder agrees that the covenants in this Section 6.1
are necessary to protect the legitimate business interests
of Search and the Surviving Corporation. If a Stockholder
violates, or threatens to violate, this Section 6.1, such
Stockholder will cause irreparable injury to Search and
the Surviving Corporation that may not be capable of being
remedied by monetary damages. Therefore, with respect to
each and every breach or violation by such Stockholder of
any of the covenants in this Section 6.1, Search, in
addition to all other remedies, shall be entitled to
enjoin the continuance thereof and may, with notice to
such Stockholder, apply to any court of competent
jurisdiction for entry of an immediate restraining order
or injunction. Notwithstanding the foregoing, Search shall
be entitled to recover all damages which Search and/or the
Surviving Corporation suffer due to any violation of this
Section 6.1 which shall include all profits related to
such Stockholder's violation of any term or condition of
this Section 6.1. Search and/or the Surviving Corporation
may pursue either or both of the remedies (injunction and
damages) described above concurrently or consecutively in
any order, as to any such breach or violation, and the
pursuit of one of such remedies at any time will not be
deemed an election of remedies or waiver of the right to
pursue the other of such remedies. It is agreed that if a
specific covenant in this Section 6.1 is not enforceable
in a specific state, that same covenant may be enforced in
all other states in which it is enforceable. Any judgment
prohibiting enforcement of a covenant herein in a specific
state shall not prohibit enforcement of that covenant in
any other state. It is expressly recognized and agreed
that in the event any covenant of this Section 6.1 be held
invalid or unenforceable by a court of competent
jurisdiction, that the same shall not affect any other
covenant of this Section 6.1, and that the remaining
covenants in this Section 6.1 shall remain in full force
and effect. If the invalidity or unenforceability of any
covenant in this Section 6.1 is due to the
unreasonableness of the restrictions imposed by any of
said covenants or is due to any other reasons, said
covenants shall nevertheless be effective for such period
of time, for such geographical area and for such
restrictions, and subject to such other terms and
conditions as may be determined to be reasonable by a
court of competent jurisdiction. The parties hereto
expressly authorize and direct the court to make any
revisions to the restrictions that are necessary in order
to make them enforceable (such judicial revisions shall
apply only to the state affected by the judgment unless
Search consents to applying the judicial revisions to all
states).
6.2 Tax Representations. Each Stockholder covenants
that, at or immediately prior to the Effective Time, it will
execute and deliver to Search and MS Financial a letter in
substantially the form of Exhibit 6.2 hereto. Each Stockholder
acknowledges that the representations made in such letter will
be relied upon by counsel in opining that the Merger
constitutes a reorganization within the meaning of Section
368(a) of the Internal Revenue Code. In addition, for purposes
of maintaining shareholder continuity of interest in the
ownership of the Surviving Corporation as a reorganization
within the meaning of Section 368(a) of the Internal Revenue
Code, and except as set forth below, no Stockholder shall be
permitted to transfer pursuant to Section 7 below more than
fifty percent (50%) of the Search Common Stock such Stockholder
receives as a result of the Merger for a period of twenty-four
(24) months. Notwithstanding the prohibitions contained in
the immediately preceding sentence: (a) if, under the Internal
Revenue Code of 1986, as amended, or the regulations
promulgated thereunder ("Treasury Regulations"), the
shareholder continuity of interest criteria for a tax-free
reorganization can be satisfied notwithstanding a greater or
lesser change of ownership, or a change of ownership during a
shorter or longer holding period, than is required by the
immediately preceding sentence, the minimum percentage of
ownership and/or holding period required to satisfy said
continuity of interest criteria shall become the minimum
percentage of ownership and/or holding period which must be
satisfied by each Stockholder in their respective holdings of
Search Common Stock, and (b) a Transfer may occur not in
accordance with the prohibitions of the immediately preceding
sentence if (i) Search receives an opinion of tax counsel
satisfactory to Search that a Transfer may occur without
jeopardizing the shareholder continuity of interest criteria
for a tax-free reorganization, (ii) said opinion is rendered to
and for the benefit of Search, and (iii) said tax opinion is
rendered at no cost to Search.
6.3 Pledged Stock. MSD has pledged 1,250,000 shares of
the Existing Securities (the "Pledged Existing Securities") to
Trustmark National Bank ("Lienholder"), and Lienholder has
agreed to release the Pledged Existing Securities from its lien
and accept Search Common Stock as substitute collateral
following the Effective Time provided that Lienholder receives
as promptly as possible after the Effective Time certificates
representing the shares of Search Common Stock MSD are entitled
to receive pursuant to the Merger in respect of the Pledged
Existing Securities. At all times that such Search Common
Stock is pledged to Lienholder, MSD shall retain the right to
vote said Search Common Stock in accordance with and subject to
the terms of this Stockholders Agreement. MSD shall take all
actions necessary to satisfy the terms of this Section 6.3 at
or prior to Closing.
7. Search Common Stock Transfer; Sale.
7.1 Transfer Restrictions.
(a) No Stockholder shall Transfer any part of such
Stockholder's Search Common Stock except as set forth in
Section 6.3 and this Section 7. All Transfers shall be
subject to such limitations as are applicable under
Section 6.2 above. Each Stockholder covenants and agrees
that such Stockholder shall not Transfer or permit the
Transfer of any part or all of such Stockholder's Search
Common Stock for a period of one-hundred eighty (180) days
from and after the Effective Time, except as may be
required pursuant to Section 12 below (the "Lock-Up
Period"). Each Stockholder further covenants,
acknowledges and agrees that as an Affiliate of MS
Financial and/or Search, such Stockholder will not
Transfer, or make any offer or agreement to Transfer with
respect to, any shares of Search Common Stock that the
Stockholder acquires in connection with the Merger, except
(i) in a transaction permitted pursuant to Rule 145
promulgated by the SEC under the Securities Act or (ii)
pursuant to a valid registration statement under the
Securities Act.
(b) The Transfer during the term of this
Stockholders Agreement of some portion or all of a
Stockholder's Search Common Stock to its stockholders or
partners shall be permitted, provided, that (i) any such
Transfer shall be made only in accordance with the terms
of this Stockholders Agreement and federal and state
securities Law after the end of the Lock-Up Period, (ii)
the recipient(s) of such Search Common Stock pursuant to a
Transfer described in this Section 7.1(b) agree not to
Transfer the shares of Search Common Stock distributed to
them until the expiration of two years from the Effective
Time without Search's prior written consent, provided,
that if at the time of Transfer such Stockholder owns less
than 5% of the issued and outstanding shares of Search
Common Stock, this clause (ii) shall not apply, (iii)
certificates representing shares of Search Common Stock
Transferred shall bear a legend setting forth the
restriction referred to in subsection (b)(ii) and such
other restrictions as are applicable under federal and
state securities Law, (iv) any such Transfer shall not
affect the Merger as constituting a tax-free
reorganization under Section 368(a) of the Code, and (v)
such Stockholder shall pay for all of the costs and
expenses associated with any such Transfer described in
this Section 7.1(b). If required in order to comply with
applicable federal and state securities Law, Search will
register the shares of Search Common Stock with the SEC
which such Stockholder proposes to distribute to its
stockholders or partners at such Stockholder's expense.
7.2 Rule 145. From and after the end of the Lock-Up
Period and for so long as is necessary in order to permit each
Stockholder to sell the Search Common Stock held by such
Stockholder pursuant to Rule 145 promulgated by the SEC under
the Securities Act, Search will use its reasonable efforts to
file on a timely basis all reports required to be filed by it
pursuant to the Exchange Act, and the rules and regulations
thereunder, as the same shall be in effect at the time,
referred to in paragraph (c) of Rule 144 under the Securities
Act, in order to permit such Stockholder to sell, transfer or
otherwise dispose of the Search Common Stock held by it
pursuant to the terms and conditions of Rule 145.
7.3 Legends. Each Stockholder also understands and
agrees that stop transfer instructions will be given to
Search's transfer agent with respect to certificates evidencing
the Search Common Stock such Stockholder may acquire pursuant
to the Merger and that there will be placed on the certificate
evidencing the Search Common Stock such Stockholder may acquire
pursuant to the Merger legends stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE OFFERED, SOLD, PLEDGED, EXCHANGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES
ACT OF 1933 AND THE OTHER CONDITIONS SPECIFIED IN
THAT CERTAIN STOCKHOLDERS AGREEMENT DATED FEBRUARY 7,
1997 AMONG SEARCH CAPITAL GROUP, INC., AND THE
STOCKHOLDERS, A COPY OF WHICH STOCKHOLDER AGREEMENT
WILL BE MAILED TO THE HOLDER HEREOF WITHOUT CHARGE
WITHIN FIVE DAYS AFTER RECEIPT OF WRITTEN REQUEST
THEREFOR."
Search agrees to notify the transfer agent of the removal of
such stop transfer instructions and legend upon (i) the
transfer of the Search Common Stock represented by such
certificate pursuant to a Registration Statement under the
Securities Act or in accordance with the applicable provisions
of Rule 145 under the Securities Act (including, without
limitation, paragraph (d) thereof), (ii) the expiration of the
restrictive period set forth in Rule 145(d), or (iii) the
delivery by Stockholder to Search of a copy of a letter from
the staff of the SEC, or an opinion of counsel in form and
substance reasonably satisfactory to Search, to the effect that
the shares subject thereto may be offered and sold without
registration under the Securities Act.
7.4 Escrow Legend. The Stockholders acknowledge and
agree that even after removal of the legend described in
Section 7.3 on the certificates representing the Search Common
Stock, the legend required by the Escrow Agreement shall remain
on any certificates representing shares of Search Common Stock
which are held by the Escrow Agent. Search agrees to remove
promptly the escrow legend by delivery of substitute
certificates without such legend upon the proper release of the
aforesaid Search Common Stock from escrow.
7.5 Stockholder Registration Rights. Pursuant to the
terms of this Section 7.5, the Stockholders are being granted
certain demand and "piggyback" registration rights in
connection with the Search Common Stock they receive pursuant
to the Merger. Section 7.5(a) provides for certain demand
registration rights, Section 7.5(b) provides for certain
piggyback registration rights, and Section 7.5(d) provides
Search with certain rights upon receiving a demand for a
registration, namely (1) proceeding with such registration, (2)
postponing such registration, and (3) purchasing the shares of
Search Common Stock requested to be included in such
registration.
(a) Demand Registrations. Subject to Section 7.5(d)
below, at any time after the end of the Lock-Up Period and
so long as such Stockholder either (y) is subject to Rule
145(d)(1) in respect of the Search Common Stock acquired
by such Stockholder pursuant to the Merger, or (z) holds
at least 5% of the issued and outstanding shares of Search
Common Stock, the Stockholders, as holders of the
Registrable Securities may request one, but not more than
one, registration under the Securities Act of all or part
of their Registrable Securities on Form S-1 or any similar
long-form registration ("Long-Form Registrations"), or, if
Search is eligible for same, on Forms S-2 or S-3 or any
similar short-form registration ("Short-Form
Registrations"), for which Search will pay all
registration expenses, provided that the expected
aggregate net cash proceeds to all sellers of Registrable
Securities in any underwritten offering is not less than
$5 million. The Stockholders (either jointly or
severally)collectively will be entitled to request only
one (1) registration under this Section 7.5(a). A
registration will not count as the one permitted
registration until it has become effective; provided,
that if, within 60 days after it has become effective, the
offering of Registrable Securities pursuant to such
registration is interfered with by any stop order,
injunction or other order or requirement of the SEC or
other governmental agency or court, such registration will
be deemed not to have been effected. The registration
under this Section 7.5(a) shall be, at the option of the
Stockholders after consultation with Search, either (w) a
shelf registration which Search agrees to keep effective
for a period of not less than ninety (90) days, or (x) an
underwritten registration. Search shall have the right to
select the investment banker(s) and manager(s) to
administer any underwritten offering, subject to the
consent of the Stockholder whose shares are being
registered thereunder, which consent shall not be
unreasonably withheld. The registration requested
pursuant to this Section 7.5(a) is referred to herein as a
"Demand Registration." The Demand Registration will be a
Short-Form Registration whenever Search is permitted to
use any applicable short form.
(i) Priority on Demand Registrations. Within
fifteen (15) days after Search has provided the
requesting Stockholder with the "Section 7.5(d)
Notice" (as defined in section 7.5(d) below)
indicating its intention to proceed with a
registration as provided under subparagraphs (i) or
(ii) of Section 7.5(d), Search will give written
notice of such request to the Stockholders and will
include in such Demand Registration all Registrable
Securities with respect to which Search has received
written requests for inclusion therein within fifteen
(15) days after the receipt of Search's notice. If
the managing underwriter of the Demand Registration
advises Search in writing that in its opinion the
number of Registrable Securities and other securities
requested to be included exceeds the number of
Registrable Securities and other securities which can
estimated public offering price for the Registrable
Securities, Search will include in such registration
(1) the Registrable Securities of the Stockholder(s)
which initiated the Demand Registration, (2)
Registrable Securities of the other Stockholders
requested to be included in such registration, if
any, and (3) other securities requested to be
included in such registration pro rata among the
respective holders thereof on the basis of their
securities requested to be included therein.
(ii) Restrictions on Registrations. Search will
not be obligated to effect any Demand Registration
within six months after the effective date of a
registration in which the holders or Registrable
Securities were given piggyback rights pursuant to
Section 7.5(b) below and in which there was no
reduction in the number of Registrable Securities
requested to be included.
(iii) Registrable Securities. As to any
particular Registrable Securities, the securities
held by a Stockholder will cease to be Registrable
Securities at such time as said Stockholder is either
no longer subject to Rule 145(d)(1) or owns less than
5% of the issued and outstanding shares of Search
Common Stock. For purposes of this Stockholders
Agreement, a Person will be deemed to be a holder of
Registrable Securities whenever such Person has the
right to acquire such Registrable Securities (by
conversion or otherwise, but disregarding any legal
restrictions upon the exercise of such right),
whether or not such acquisition has actually been
effected. Notwithstanding the foregoing, in the
event of any Transfer of Registrable Securities which
is permitted under this Agreement, then such shares
shall continue to be "Registrable Securities" for
purposes of this Agreement, provided, that if any
Transfer is made by a Stockholder to its stockholders
or partners pursuant to Section 7.1(b) above, and a
Demand Registration request is made pursuant to this
Section 7.5, it shall be the obligation of such
Transferring Stockholder to obtain from its
stockholders or partners (as the case may be) at its
expense all information required by Search (acting in
a commercially reasonable manner) necessary to
prepare such registration statement and the
Stockholders indemnification obligations under
Section 7.5(c)(vi)(2) shall include such information
as if the information related to the Stockholder
obtaining it from its stockholders or partners
(b) "Piggyback" Registration Rights.
(i) Beginning with the end of the Lock-Up
Period and continuing until such time as said
Stockholder is either no longer subject to Rule
145(d)(1) or owns less than 5% of the issued and
outstanding shares of Search Common Stock, at any
time that Search intends to file a registration
statement under the Securities Act for purposes of a
public offering, (including, but not limited to,
registration statements relating to secondary
offerings of securities of Search, but excluding
registration statements relating to employee benefit
plans and corporate reorganizations), Search shall
notify that Stockholder in writing of its intent to
file such registration statement at least twenty (20)
days prior to the filing thereof and will afford each
Stockholder an opportunity to include in such
registration statement all or part of such
Stockholder's Registrable Securities. Each
Stockholder desiring to include in any such
registration statement all or any part of its
Registrable Securities shall, within ten (10) days
after receipt of the above-mentioned notice from
Search, so notify Search in writing. Such
Stockholder's notice shall state the intended method
of disposition of the Registrable Securities by such
Stockholder. If a Stockholder decides not to include
all of its Registrable Securities in a registration
statement thereafter filed by Search, such
Stockholder shall nevertheless continue to have the
right to include any of its Registrable Securities in
any subsequent registration statement or registration
statements as may be filed by Search with respect to
offerings of its securities, all upon the terms and
conditions set forth herein.
(ii) All Stockholders proposing to distribute
their Registrable Securities pursuant to the
registration statement shall enter into an
underwriting agreement in customary form with the
underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision
hereof, if the underwriter determines in good faith
that marketing factors require a limitation of the
number of shares to be underwritten, the number of
shares that may be included in the underwriting shall
be allocated, first, to Search; and second, to the
Stockholders and other stockholders having
registration rights on a pro rata basis based on the
total number of shares of Registrable Securities held
by the Stockholders and such other stockholders. No
such reduction shall reduce the securities being
offered by Search for its own account to be included
in the registration and underwriting.
(c) General Provisions Relating to Registration.
(i) Fees. Search shall bear all fees and
expenses incurred in connection with the
registrations under this Section 7.5, including
without limitation all registration, filing,
qualification, printers' and accounting fees, fees
and disbursements of counsel to Search, except as set
forth in Section 7.1(b). The Stockholders shall bear
all underwriting discounts and commissions.
(ii) Copies. Search shall also furnish to the
Stockholders such number of copies of the
registration statement and the prospectus included
therein (including each preliminary prospectus) as
such persons may reasonably request in order to
facilitate the sale or other disposition of the
Search Common Stock covered by such registration
statement.
(iii) Blue Sky. Search shall use commercially
reasonable efforts to register or qualify the Search
Common Stock covered by such registration statement
under Blue Sky Laws in those states chosen by Search,
and in the states of Mississippi, Texas, Illinois and
New York to the extent legally required; if a
Stockholder desires for Search to register or qualify
the Search Common Stock in another Blue Sky
jurisdiction, such Stockholder shall pay for the fees
and expenses incurred in connection therewith.
(iv) Inspection. Search shall make available
for inspection by the Stockholders, and any attorney,
accountant, or other agent retained by each
Stockholder, all financial and other records,
pertinent corporate documents, and properties of
Search, and cause Search's officers, directors, and
employees to supply all information reasonably
requested by each such Stockholder or any such
attorney, accountant, or agent in connection with
such registration statement.
(v) Stockholder Information. In connection with
any registration pursuant to this Section 7.5, each
Stockholder will furnish to Search in writing such
information with respect to itself and the proposed
distribution by it of Search Common Stock as shall be
reasonably requested by Search in order to assure
compliance with federal and applicable state
securities laws. Search shall immediately notify the
Stockholders at any time of the happening of any
event as a result of which the prospectus contained
in such registration statement, as then in effect,
includes an untrue statement of material fact or
omits to state any material fact required to be
stated therein or necessary to make the statements
therein not misleading in light of the circumstances
then existing.
(vi) Reciprocal Indemnification.
(1) By Search. If any of a Stockholder's
Registrable Securities is registered under the
Securities Act pursuant to this Agreement,
Search will indemnify and hold harmless such
Stockholder against any losses, claims, damages,
or liabilities, to which such Stockholder may
become subject under the Securities Act or
otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of
any material fact contained in any registration
under which any of such Stockholder's
Registrable Securities were registered under the
Securities Act pursuant to this Agreement, any
preliminary prospectus or final prospectus
contained therein, or any amendment or
supplement thereof, or arise out of or are based
upon the omission or alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements
therein not misleading, or any violation by
Search of any rule or regulation promulgated
under the Securities Act applicable to Search
and relating to action or inaction by Search in
connection with any such registration, and will
reimburse such Stockholder for any legal or
other expenses reasonably incurred by them in
connection with investigating or defending any
such loss, claim, damage, liability or action;
provided, however, that Search will not be
liable in any such case if and to the extent
that any such loss, claim, damage, or liability
arises out of or is based upon an untrue
statement or alleged untrue statement or
omission or alleged omission made in such
registration statement or amendment or
supplement thereto or in any such preliminary,
final or summary prospectus in reliance upon and
in conformity with written information with
respect to such Stockholder furnished to Search
by such Stockholder for use in the preparation
thereof.
(2) By Stockholders. If any of a
Stockholder's Registrable Securities is
registered under the Securities Act pursuant to
this Agreement, such Stockholder (and its
underwriter, if any) shall indemnify and hold
harmless Search against any losses, claims,
damages, or liabilities, to which Search may
become subject under the Securities Act or
otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of
any material fact contained in any registration
under which any of such Stockholder's
Registrable Securities were registered under the
Securities Act pursuant to this Agreement, any
preliminary prospectus or final prospectus
contained therein, or any amendment or
supplement thereof, or arise out of or are based
upon the omission or alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements
therein not misleading, made in reliance upon
and in conformity with written information with
respect to such Stockholder furnished to Search
by such Stockholder for use in the preparation
of such registration statement, preliminary,
final or summary prospectus or amendment or
supplement, or a document incorporated by
reference into any of the foregoing, or any
violation by such Stockholder of any rule or
regulation promulgated under the Securities Act
applicable to such Stockholder and relating to
action or inaction by such Stockholder in
connection with any such registration. Such
Stockholder will reimburse Search for any legal
or other expenses reasonably incurred by Search
in connection with investigating or defending
any such loss, claim, damage, liability or
action.
(3) Procedure. Promptly after receipt by
an indemnified party of notice of the
commencement of any action for which
indemnification may be obtained hereunder, the
indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying
party hereunder, notify the indemnifying party
in writing thereof; but the omission to so
notify the indemnifying party shall not relieve
the indemnifying party from any liability which
the indemnifying party may have to the
indemnified party other than under this Section
7.5(c) and, in any event, only to the extent the
indemnifying party has been materially
prejudiced by the indemnified party's failure to
provide the indemnifying party with such notice.
In case any such action shall be brought against
the indemnified party, the indemnifying party
shall be entitled to participate in and, to the
extent the indemnifying party shall agree that
it is liable to the indemnified party for
indemnification hereunder, to assume and
undertake the defense thereof with counsel of
the indemnifying party's own choosing, and,
after notice from the indemnifying party to the
indemnified party of the indemnifying party's
election so to assume and undertake the defense
thereof and of its agreement that it is liable
for indemnification hereunder, the indemnifying
party shall not be liable to the indemnified
party under this Section 7.5(c) for any legal
expenses subsequently incurred by indemnified
party in connection with the defense thereof
other than reasonable costs of investigation and
of liaison with counsel so elected; provided,
however, that if the defendants in any such
action include both the indemnifying party and
the indemnified party, and the indemnified party
shall have reasonably concluded that there may
be reasonable defenses available to the
indemnified party which are different from or
additional to those available to the
indemnifying party or if the interests of
indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying
party, the indemnified party shall have the
right to select separate counsel, satisfactory
to the indemnifying party in its commercially
reasonable discretion, and to assume such legal
defenses and otherwise to participate in the
defense of such action, with the reasonable
expenses and fees of such separate counsel and
other expenses related to such participation to
be reimbursed by the indemnifying party as
incurred.
(d) Search's Rights in the Event of a Demand
Registration. In the event the Stockholder(s) delivers a
request for a Demand Registration pursuant to Section
7.5(a), Search shall have a fifteen (15)- day period to
notify the requesting Stockholder(s) in writing (a
"Section 7.5(d) Notice") of Search's intent to proceed
under either subparagraph (i), (ii), or (iii) of this
Section 7.5(d), as follows:
(i) Prompt Registration. Search shall proceed
with the filing of the registration statement
pursuant to such Demand Registration, and shall file
such registration statement with the SEC within
thirty (30) days from the date the Section 7.5(d)
Notice was delivered to the Stockholder, and shall
use all reasonable efforts to have the SEC declare
the registration statement effective as soon as
practicable thereafter.
(ii) Delayed Registration. If Search reasonably
concludes that the filing of a registration statement
would require disclosure of material information
which Search has a bona fide business purpose for
preserving confidential, Search's Section 7.5(d)
Notice may so inform the requesting Stockholder, in
which case Search may delay the registration but, in
any event, shall file such registration statement
with the SEC within sixty (60) days from the date the
Section 7.5(d) Notice was delivered to the
Stockholder, and shall use all reasonable efforts to
have the SEC declare the registration statement
effective as soon as practicable thereafter.
(iii) Purchase of Search Common Stock. If a
Demand Registration request is received, in lieu of
proceeding with the registration as provided in
Sections 7.5(d)(i) or 7.5(d)(ii) above, Search shall
thereupon have the right to purchase, or cause a
third party designated by Search to purchase, all,
but not less than all, of the Stockholder's Search
Common Stock identified in the such Demand
Registration request. If Search or the designated
third party exercises Search's right to purchase,
Search shall notify the Stockholder of the same
within fifteen (15) days of receipt of such Demand
Registration request. If Search or the designated
third party does not timely exercise Search's right
to purchase, such right shall lapse and be null and
void with respect to the number of shares of
Registrable Securities described in such Demand
Registration request. The purchase price for the
Registrable Securities identified in such Demand
Registration request shall be in cash and in an
amount agreed to by the parties and such purchase
shall be consummated within thirty (30) days from the
date the Section 7.5(d) Notice is delivered to the
Stockholder. If, however, the parties are unable to
agree on the purchase price within fifteen (15) days
from the date the Section 7.5(d) Notice is delivered,
then Search must proceed under clause (i) or (ii)
above.
8. Standstill Provisions.
8.1 Standstill Covenants of Stockholders. For the period
of time set forth below in Section 13.2, and subject to Section
9 below, the Stockholders severally covenant that the
Stockholders shall not, and the Stockholders shall cause each
Stockholder Affiliate (and each such Affiliate's own affiliates
and associates) not to:
(a) No Acquisition of Additional Search Securities:
acquire, offer or propose to acquire, or agree to acquire,
directly or indirectly, alone or in concert with any other
Person, by purchase, exchange, gift or otherwise, any
Search Securities or direct or indirect rights, warrants
or options to acquire (through purchase, exchange,
conversion or otherwise) any Search Securities, or any
securities issued in connection with any merger,
consolidation, sale of assets, combination or otherwise to
which Search or any Search Affiliate is a party, other
than the Search Common Stock which such Stockholder
acquires pursuant to the Merger or which Search issues to
such Affiliate as part of an employment or other
arrangement with Search or Newco.
(b) No Proxy Solicitation: (i) make, or in any way
participate in, directly or indirectly, alone or in
concert with others, any "solicitation" of "proxies" (as
such terms are defined or used in Regulation 14A under the
Exchange Act, as in effect at the Effective Time) or
become a "participant" in any "election contest" (as such
terms are defined or used in Rule 14a-11 under the
Exchange Act) with respect to Search or any Search
Affiliate; or (ii) seek to advise or influence any Person
with respect to the voting of any Search Securities, or
(iii) initiate, propose or otherwise solicit Search
Securities holders for the approval of one or more
stockholders' or other securities holders' proposals or
induce or attempt to induce any other Person to initiate
any stockholder or other securities holder proposal.
(c) No Formation of a Group; No Influence: take any
action, alone or in concert with any other Person, to (i)
form, join or in any way participate in a Group with
respect to any Search Securities; (ii) acquire or affect
the control of Search or any Search Affiliate; (iii)
control or influence the management, Board of Directors,
policies or affairs of Search or any Search Affiliate; or
(iv) participate in or encourage any Persons to take any
action which is prohibited to be taken by the Stockholders
or any Stockholder Affiliate pursuant to this Stockholders
Agreement.
(d) No Election of Directors: other than for Xxxxx
Xxxxxx Xx., or any replacement MSD designee to Search's
Board of Directors approved by Search's management (acting
in a commercially reasonable manner) if Xx. Xxxxxx is
unable or unwilling to serve on Search's Board of
Directors, vote their shares for the election of any
director to Search's Board of Directors not approved by
the management of Search.
(e) No Statements: publicly propose any transaction
with respect to Search or any Search Affiliate, including
but not limited to a tender offer for voting securities of
Search, or a merger or other business combination, sale or
transfer of assets, liquidation or other corporate
transaction by Search or any Search Affiliate, or any
demand, request or proposal to amend, waive or terminate
any provision of this Stockholders Agreement.
(f) No Shopping: alone, or in concert with any other
Person, solicit, encourage, entertain or discuss with any
Person, any proposal with respect to Search or any Search
Affiliate, including but not limited to, a business
combination or other transaction with, or a change of
control of, Search or any Search Affiliate; provided,
however, that the terms of this Section 8.1(f) shall not
apply to any efforts by a Stockholder to Transfer all or
any part of its Search Common Stock, subject to the terms
of Section 6.2 of this Stockholders Agreement.
(g) No Tender Offers: make, solicit, encourage,
discuss or participate in, alone or in concert with any
other Person, a tender offer for or exchange for any
Search Securities.
(h) No Asset Acquisition Offers: acquire, offer to
acquire or agree to acquire, directly or indirectly, alone
or in concert with any other Person, by purchase, exchange
or otherwise (i) all or a substantial portion of the
assets, tangible and/or intangible, of Search and/or any
Search Affiliate, or (ii) direct or indirect rights,
warrants or options to acquire any assets of Search and/or
any Search Affiliate.
(i) No Financing: arrange, or in any way
participate in or encourage, directly or indirectly, alone
or in concert with any other Person, any financing for the
purchase, exchange, acquisition or transfer of any assets
of Search or any Search Affiliate or any of the Search
Securities.
(j) No Call of Meeting: alone or in concert with any
other Person (i) call, or seek to call, any meeting of
Search's shareholders, noteholders, securities holders
and/or other creditors, or (ii) in connection with such
meeting make any request to examine, copy or make extracts
from any of Search's books, records, or list of
shareholders.
(k) No Announcement: announce an intention to do, or
enter into any agreement, arrangement or understanding
with any other Person to do, any of the actions restricted
or prohibited under this Section 8, including but not
limited to announcing a change in their intent, purpose,
plans or proposals with respect to either Search, any
Search Affiliate or any of the Search Securities.
(l) No Creditor Actions; Bankruptcy: alone, or in
concert with any other Person, (i) communicate with any of
Search's creditors regarding Search or any Search
Affiliate; (ii) file, or initiate the filing of any
bankruptcy petition against Search or any Search
Affiliate; or (iii) take any other action which has a
material negative effect on Search's financial condition.
8.2 Permitted Communications. Notwithstanding any of the
foregoing, each of the Stockholders may (i) file any documents
required by the SEC and (ii) respond to any legal subpoena
requiring the production of documents relating to, or governed
by the terms of, this Stockholders Agreement, provided that
such Stockholder shall provide Search with notice of the
subpoena, including the information requested thereunder,
immediately following its receipt of such subpoena.
9. Search Board Designee. Nothing contained in this
Stockholders Agreement shall be construed as preventing Xxxxx
Xxxxxx, Xx. (or any replacement for Xx. Xxxxxx if Xx. Xxxxxx is
unable or unwilling to serve on Search's Board of Directors)
from serving on Search's Board of Directors and taking any
necessary action as a Director of Search which he is required
to take to fulfill his fiduciary duty as a Director of Search.
10. Indemnification by Stockholders.
10.1 Indemnification. Each Stockholder, for such
Stockholder and its successors and assigns (individually, an
"Indemnifying Party" and collectively, the "Indemnifying
Parties"), covenants and agrees to indemnify, defend, protect
and hold harmless Search, Newco and the Surviving Corporation
and their respective officers, directors, employees, successors
and assigns (individually, a "Search Indemnified Party" and
collectively "Search Indemnified Parties") from, against and in
respect of:
(a) all liabilities, losses, claims, damages,
punitive damages, causes of action, lawsuits,
administrative proceedings (including informal
proceedings), investigations, audits, demands,
assessments, adjustments, judgments, settlement payments,
deficiencies, penalties, fines, interest (including
interest from the date of such damages) and costs and
expenses (including without limitation reasonable
attorneys' fees and disbursements of every kind, nature
and description) (collectively, "Claims") suffered,
sustained, incurred or paid by the Search Indemnified
Parties in connection with, resulting from or arising out
of, directly or indirectly:
(i) any Securities Claim, as that term is
defined in the document listed as the last item on
Schedule 3.19 to the Merger Agreement, whether or not
such Claim is covered by that document; or
(ii) item 7 on Schedule 3.7 of the Merger
Agreement (the "Texas Litigation"), or claims alleged
or substantiated by other individuals which are based
upon the same events or occurrences as have been
alleged in the Texas Litigation, to the extent that
all Claims incurred in connection therewith exceed
$400,000; or
(b) any and all Claims incident to any of the
foregoing or to the enforcement of this Section 10.
(c) The Stockholders' obligations as Indemnifying
Parties under this Stockholders Agreement shall be joint
and several. Subject to Section 10.3(a)(ii) below, the
Stockholders' respective obligations as Indemnifying
Parties under this Section 10 shall be limited to the
amount of Search Common Stock deposited into the General
Escrow Fund on behalf of the Stockholders pursuant to
Section 12.1 below.
(d) Notwithstanding anything to the contrary in this
Section 10, if (i) any Claim governed by this Section 10
which arises or accrues prior to Closing is reflected in
the Most Recent Financial Statements (as defined in
Section 1.2(g) of the Merger Agreement, and (ii) a
purchase price adjustment occurs pursuant to Section
1.2(g) of the Merger Agreement, then all such Claims, to
the extent reflected in the Most Recent Financial
Statements, shall not be subject to indemnification by the
Indemnifying Parties pursuant to this Section 10.
10.2 Notice of Claims
(a) Any Search Indemnified Party seeking
indemnification hereunder shall give to the Indemnifying
Party a notice (a "Claim Notice") describing in reasonable
detail the facts giving rise to any Claim and shall
include in such Claim Notice (if then known) the amount or
the method of computation of the amount of such Claim;
provided, that a Claim Notice in respect of any action at
law or suit in equity by or against a third person as to
further, that failure to give such notice shall not
relieve the Indemnifying Party of its obligations
hereunder except to the extent it shall have been
materially prejudiced by such failure.
(b) After the giving of any Claim Notice pursuant
hereto, the amount of indemnification to which a Search
Indemnified Party shall be entitled under this Section 10
shall be determined, to the extent feasible: (i) by the
written agreement between the Search Indemnified Party and
the Indemnifying Party; (ii) by a binding nonappealable
award in an arbitration proceeding; (iii) by a final
judgment or decree of any court of competent jurisdiction;
or (iv) by any other means to which the Search Indemnified
Party and the Indemnifying Party shall agree. The
judgment or decree of a court shall be deemed final when
the time for appeal, if any, shall have expired and no
appeal shall have been taken or when all appeals taken
shall have been finally determined. Notwithstanding the
foregoing, unless the Indemnifying Parties dispute the
coverage of the Claim by this Section 10, the Search
Indemnified Party shall be entitled to receive from the
Escrow Fund its costs and expenses incurred regarding
investigating and defending any such Claim regardless of
whether the parties have agreed to the exact amount of
indemnification coverage as set forth above in this
Section 10.2(b).
10.3 Third Person Claims.
(a) (i) Subject to Section 10.3(b), the Search
Indemnified Party shall have the right to conduct and
control, through counsel of its choosing, the
defense, compromise or settlement of any third person
claim, action or suit (a "Third Person Claim")
against such Search Indemnified Party as to which
indemnification will be sought hereunder, and in any
such case the Indemnifying Party shall cooperate in
connection therewith and shall furnish such records,
information and testimony and attend such
conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested by the
Search Indemnified Party in connection therewith;
provided, that the Indemnifying Party may
participate, through counsel chosen by it and at its
own expense, in the defense of any such Third Person
Claim as to which the Search Indemnified Party has so
elected to conduct and control the defense thereof;
and provided, further, that the Search Indemnified
Party shall not, without the written consent of the
Indemnifying Party (which consent shall not be
unreasonably withheld), pay, compromise or settle any
such Third Person Claim, except that no such consent
shall be required if, following a written request
from the Search Indemnified Party, the Indemnifying
Party shall fail, within fifteen (15) days after the
making of such request, to acknowledge and agree in
writing that, if such Third Person Claim shall be
adversely determined, such Indemnifying Party has an
obligation to provide indemnification hereunder to
such Search Indemnified Party.
(ii) Provided the Indemnifying Party has
acknowledged its indemnification obligation pursuant
to Section 10.3(a)(i) above, in respect of a Third
Party Claim and if the Search Indemnified Party
obtains a preliminary settlement from a third party
regarding such Third Person Claim, the Search
Indemnified Party shall submit such preliminary
settlement, including the proposed settlement amount,
to the Indemnifying Party for approval. If such
preliminary settlement is rejected by the
Indemnifying Party, and subsequently such Third Party
Claim is settled by the Indemnifying Party, the
amount by which the settlement reached by the
Indemnifying Party is equal to the proposed
settlement amount shall be paid to the Search
Indemnified party from Escrow, and any excess amount
of the settlement reached by the Indemnifying shall
be paid to the Search Indemnified Party in an
equivalent amount of Search Common Stock by the
Indemnifying Party within one business day after the
date of the settlement. Any such excess payment
shall not be subject to the maximum limit in the
Escrow Fund.
(iii) Notwithstanding the foregoing, the
Search Indemnified Party shall have the right to pay,
settle or compromise any such Third Person Claim
without the Indemnifying Party's consent, provided
that in such event the Search Indemnified Party shall
waive any right to indemnity therefor hereunder
unless such consent is unreasonably withheld.
(b) If any Third Person Claim is solely for money
damages within the escrow amount or will have no
continuing effect in any material respects on the business
of the Surviving Corporation, then the Indemnifying Party
shall have the right to conduct and control, through
counsel of its choosing, the defense, compromise or
settlement of any such Third Person Claim if the
Indemnifying Party has acknowledged and agreed in writing
that, if the same is adversely determined, the
Indemnifying Party has an obligation to provide
indemnification to the Search Indemnified Parties in
connection therewith; provided, that the Search
Indemnified Party may participate, through counsel chosen
by it and at its own expense, in the defense of any such
Third Person Claim, provided, that in such event the
Search Indemnified Party shall waive any right to
indemnity therefor hereunder unless the Search Indemnified
Party shall have sought the consent of the Indemnifying
Party to such payment, settlement or compromise and such
consent was unreasonably withheld, in which event no Claim
therefor hereunder shall be waived.
11. RESERVED.
12. Escrows Of Search Common Stock.
12.1 General Escrow. Subject to Section 12.2, upon the
Closing, that number of shares of Search Common Stock to be
delivered pursuant to Section 1.3 of the Merger Agreement to or
for the account of the Stockholders having a value, based on
the Valuation Period Market Value, equal to Two Million Five
Hundred Thousand Dollars ($2,500,000) (the "Escrow Fund") shall
be delivered to the Escrow Agent to be held by the Escrow Agent
pursuant to the Escrow Agreement, a copy of which is attached
as Schedule 12.1. The parties hereto, and the Escrow Agent,
shall execute the Escrow Agreement at Closing. The portion of
the Escrow Fund to be delivered to the Escrow Agent for the
account of each Stockholder shall be equal to the ratio that
the Merger Consideration received by that Stockholder bears to
the aggregate Merger Consideration receivable by all of the
Stockholders. The Escrow Agent shall hold all of the Escrow
Fund pursuant to the Escrow Agreement and shall distribute the
same pursuant to the terms of the Escrow Agreement, joint
instructions signed by Search and the Stockholders, or pursuant
to court order. The Escrow Agreement shall provide that
subject to the existence of an indemnification claim or Pending
Claim, the Escrow Agent shall, commencing 12 months from the
Effective Time and continuing every six (6) months thereafter,
transfer to the Stockholders from the Escrow Fund pro rata an
amount equal to twenty-five percent (25%) of the original
number of shares of Search Common Stock constituting the Escrow
Fund (as adjusted for stock splits, etc.) not reserved for such
indemnification claim or Pending Claim. To the extent there is
an indemnification claim, the Escrow Agent shall transfer to
Search shares of Search Common Stock to the extent necessary to
satisfy the indemnification claims in accordance with Section
10 and the Escrow Agreement. If there are any Pending Claims
existing at the time the Escrow Agent would otherwise make an
interim or the final distribution according to the provisions
of this Section 12.1, the parties hereto shall attempt to
negotiate the value of such Pending Claims. If a value has
been agreed upon by the parties hereto, the Escrow Agent shall
retain 1.5 times the agreed upon value for disposition upon the
determination of liabilities in regard to the Pending Claims.
If the parties are not able to agree to a value of the Pending
Claims, then the Escrow Agent shall retain all of the
securities remaining in the Escrow Fund until final resolution
of the Pending Claims. Upon the final resolution of any
Pending Claims, the Escrow Agent shall distribute any shares of
Search Common Stock, including dividends, remaining in Escrow.
12.2 Adjustment of Escrow Fund Size. Notwithstanding
anything to the contrary in Section 12.1, if Search, acting in
a commercially reasonable manner, believes it is necessary to
increase the size of the Escrow Fund prior to Closing, based on
the likelihood or magnitude of Claims, it shall notify the
Stockholders of the same and the amount of the proposed
increase, in any event at least ten days prior to Closing. The
maximum amount of the increase to the Escrow Fund which can be
proposed by Search pursuant to this Section 12.2 shall be One
Million Dollars ($1,000,000.00). If the Stockholders agree
with the proposed increase, additional Search Common Stock
shall be contributed to the Escrow Fund at Closing pro rata by
or on behalf of the Stockholders. If, however, the Stockholders
dispute in whole or part the amount of the proposed increase in
the Escrow Fund, they shall notify Search of such dispute, in
which event Search and the Stockholders shall attempt to
reasonably resolve their differences prior to Closing. If the
Stockholders and Search are unable to reconcile their
differences, the parties shall follow the procedures set forth
below in Section 16.7.
12.3 Stockholders Receive Benefit of Value Increase. If
the value of the Search Common Stock held in the Escrow Fund
(but not in the Tax Holdback Fund set forth in Section 12.4)
increases above the value of the Escrow Fund as of Closing (not
including any additional contribution of Search Common Stock to
the Escrow Fund which may occur pursuant to Section 12.2
above), the Stockholders shall be entitled to receive the
benefit of any such increase in the value of the Escrow Fund in
excess of the original Escrow Fund value. For example, if
500,000 shares of Search Common Stock valued at $5.00 per share
is contributed to the Escrow Fund at Closing, and at the time
of the final distribution by the Escrow Agent the parties agree
that Pending Claims exist totalling $2.5 Million, and the value
of the Search Common Stock has increased to $10.00 per share,
250,000 shares of Search Common Stock shall be retained in
Escrow to satisfy the Pending Claims, and the remaining 250,000
shares shall be distributed to the Stockholders pro rata. (The
foregoing example ignores the interim distributions to the
Stockholders pursuant to 12.1.) Conversely, if the value of the
Escrow Fund decreases below the original Escrow Fund value, the
Stockholders shall not be obligated to contribute any
additional shares of Search Common Stock to the Escrow Fund to
restore the Escrow Fund to its original value.
12.4 Tax Holdback Escrow. MS Financial has represented to
Search that MS Financial is entitled to receive a total of $6.3
million of income tax refunds from the Internal Revenue Service
and various state taxing authorities, in regard to which MS
Financial has already reflected on the Current Balance Sheet an
income tax receivable of at least $4,000,000. As assurance
that such income tax refunds will be collected by MS Financial
or the Surviving Corporation, upon the Closing, that number of
shares of Search Common Stock to be delivered pursuant to
Section 1.3 of the Merger Agreement to or for the account of
the Stockholders having a value, based on the Valuation Period
Market Value, equal to Two Million Three Hundred Thousand
Dollars ($2,300,000) (the "Tax Holdback Fund") shall be
delivered to the Escrow Agent to be held by the Escrow Agent
pursuant to Escrow Agreement. The portion of the Tax Holdback
Fund to be delivered to the Escrow Agent for the account of
each Stockholder shall be equal to the ratio that the Merger
Consideration received by that Stockholder bears to the
aggregate Merger Consideration receivable by all of the
Stockholders. The Escrow Agent shall hold all of the Tax
Holdback Fund pursuant to the relevant provisions of the Escrow
Agreement and shall distribute the same pursuant to the terms
of the Escrow Agreement, joint instructions signed by Search
and the Stockholders, or pursuant to court order. On a
quarterly basis, shares of Search Common Stock held in the Tax
Holdback Fund shall be released from escrow in an amount that
is determined by multiplying (i) the number of shares of Search
Common Stock originally transfered into the Tax Holdback Fund
at the Closing by (ii) the fraction determined by dividing (A)
the total dollar amount of income tax refunds received by MS
Financial or the Surviving Corporation in excess of $4,000,000
by (B) $2,300,000 and (b) subtracting from the product the
total number of shares of Search Common Stock, if any,
previously released from the Tax Holdback Escrow Fund pursuant
to this sentence. It is agreed by the parties that upon
receipt by the Surviving Corporation of the full income tax
refund, the Escrow Agent shall make the final distribution from
the Tax Holdback Fund; provided, however, that, if any portion
of the income tax refund has not been received by MS Financial
or the Surviving Corporation by the first annual anniversary of
the Closing, all of the remaining Search Common Stock held in
the Tax Holdback Fund shall revert to Search; provided,
further, that, to the extent that any portion of the income tax
refund is received by the Surviving Corporation subsequent to
such reversion, Search shall transfer to the Stockholders
either, at Search's option, cash in the amount of any portion
of the income tax refund so received or that number of shares
of Search Common Stock that would have been released from
escrow pursuant to this Section 12.4 had such portion of the
income tax refund been received prior to first annual
anniversary of the Closing.
13. Term; Termination.
13.1 General Rule. Except as set forth below in
Section 13.2, this Stockholders Agreement and the
obligations of each Stockholder hereunder shall terminate
on the first to occur of (i) the termination of the Merger
Agreement in accordance with the terms of such Merger
Agreement (including, without limitation, the termination
of the Merger Agreement pursuant to Section 7.1(h)
thereof); or (ii) if the Merger Agreement is not
terminated and the Merger is consummated, then on the
third (3rd) anniversary of the Effective Time. If this
Stockholders Agreement is terminated, each party shall
bear its own expenses with respect to this Stockholders
Agreement.
13.2 Exceptions. Notwithstanding Section 13.1 above,
(a) Section 8 shall terminate on the earlier of (i) two
years after the Effective Time, and (ii) when the amount
of Search Common Stock which that Stockholder owns is less
than five percent (5%) of all of the issued and
outstanding Search Common Stock; and (b) Sections 10 and
12 shall terminate upon full distribution of the Escrow
Fund pursuant to the terms of Section 12.1 and the Escrow
Agreement.
14. Defined Terms. Terms used herein but not otherwise defined
shall have the meanings set forth in the Merger Agreement.
Notwithstanding the foregoing, for purposes of this
Stockholders Agreement, the following terms shall have the
following definitions:
"Group" has the same meaning as the term "group" set
forth in Section 13(d)(3) of the Exchange Act.
"Pending Claim" shall mean any Claim governed by Section
10 which has not been resolved as of any interim or final
distribution date under Section 12.1.
"Registrable Securities" means (i) any Search Common Stock
held by the Stockholders and (ii any securities issued or
issuable with respect to the Search Common Stock referred
to in clause (i) by way of a stock dividend or stock split
or in connection with a combination of shares,
recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of Search
Common Stock held by persons holding securities described
in clauses (i) or (ii) above.
"Search Affiliate" means each "affiliate" or "associate"
of Search (as such terms are defined in Rule 12b-2 under
the Exchange Act as of the Effective Time), whether or not
such Person is such an Affiliate as of the Effective Time,
and each officer, director, employee, shareholder,
consultant, agent, representative, successor and assign,
of either Search or any Search Affiliate; excluding,
however, each of the Stockholders and any Stockholder
Affiliate.
"Search Securities" means all common stock (including but
not limited to the Search Common Stock issued to the
Stockholders pursuant to the Merger), preferred stock,
options, warrants, notes, and debentures (whether senior
or subordinated, secured or unsecured, convertible or
nonconvertible), and any other securities, which have been
issued prior to the Effective Time and/or which are issued
during the term of this Stockholders Agreement, by Search
or any member of the Search Group.
"Stockholder Affiliate" means each "affiliate" or
"associate" of a Stockholder (as such terms are defined in
Rule 12b-2 under the Exchange Act as of the Effective
Time), whether or not such Person is such an Affiliate as
of the Effective Time, and each officer, director,
employee, shareholder, consultant, agent, representative,
successor and assign, of either a Stockholder or any
Stockholder Affiliate; excluding, however, Search and any
Search Affiliate.
"Transfer" means to pledge, sell, hypothecate, give,
exchange, assign, convey or otherwise transfer.
15. MSD Agreements.
15.1 Trademark; Sublease; MIS. MSD hereby covenants and
agrees that: (a) a modified, royalty free license agreement
reasonably acceptable to Search related to use of the "MS" logo
and trademark will be entered into at or prior to Closing
between itself as Licensor and MS Financial as Licensee
effective as of the Effective Time; (b) the Office Building
Sublease Agreement dated as of January 1, 1994 by and between
MSD as sublandlord and MS Financial as subtenant shall not be
modified or amended prior to the Effective Time and shall
terminate at the end of its current term on October 31, 1997;
and (c) the Data Processing Hardware System Service Agreement
dated January 1, 1994 between MSD and MS Financial, as amended,
will be further amended to provide that it will terminate
ninety (90) days after the Effective Time at no cost to Search
other than obligations existing in said agreement on the date
this Stockholders Agreement is signed.
15.2 MSDSub Obligations. MSD covenants and agrees to take
all action necessary to cause MSDSub to perform all of its
agreements, covenants and obligations under this Stockholders
Agreement. MSD shall be liable for any breach of any
representation, warranty, covenant or agreement of MSDSub and
for any breach of this covenant.
16. Miscellaneous.
16.1 Notices. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed
to have been duly given or made if and when delivered
personally or by overnight courier or sent by electronic
transmission, with confirmation received, to the telecopy
numbers specified below:
If to MSD or
MSDSub: MS Diversified Corporation
000 X. Xxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
Attention: Xxxxx X. Xxxxxx, Xx.
President and CEO
If to GTCR IV: Golder, Thoma, Cressy, Rauner, Inc.
0000 Xxxxx Xxxxx
Xxxxxxx, XX 00000-0000
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
Attention: Xxxx Xxxxxxxx
If to Search
or Newco: Search Capital Group, Inc.
000 X. Xxxxx Xxxxxx, Xxxxx 000, X.X. 000
Xxxxxx, XX 00000-0000
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
Attention: Xxxxxx X. Xxxxx,
Chairman, President & CEO and
Xxxxx Xxxxxxxxxx, Executive Vice
President and General Counsel
With a copy
to: Riezman & Blitz, P.C.
000 X. Xxxxxxx, 00xx Xxxxx
Xx. Xxxxx, XX 00000
Telecopier No.: 314-727-6458
Telephone No.: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
or to such other address or telecopy number as any party may
have furnished to the other parties in writing in accordance
herewith.
16.2 Assignment; Benefits. The rights and obligations of
Search hereunder may be assigned, in whole or in part, to Newco
or any other direct wholly-owned subsidiary of Search, to the
extent and for so long as it remains a direct wholly-owned
subsidiary of Search. Other than as permitted in the preceding
sentence, this Stockholders Agreement may not be assigned by
any party hereto without the prior written consent of the other
parties. This Stockholders Agreement shall be binding upon, and
shall inure to the benefit of, Search and its successors and
permitted assigns.
16.3 Specific Performance. The parties hereto agree that
irreparable harm would occur in the event that any of the
provisions of this Stockholders Agreement were not performed in
accordance with its specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this
Stockholders Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States or any
state thereof having jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in
equity.
16.4 Amendment. This Stockholders Agreement may not be
amended or modified, except by an instrument in writing signed
by or on behalf of each of the parties hereto. This
Stockholders Agreement may not be waived by either party
hereto, except by an instrument in writing signed by or on
behalf of the party granting such waiver.
16.5 Governing Law. This Stockholders Agreement shall be
governed by and construed in accordance with the internal laws
of the State of Delaware.
16.6 Counterparts. This Stockholders Agreement may be
executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same agreement.
16.7 Dispute Resolution. Unless otherwise provided
herein, in the event that any dispute shall arise in connection
with this Agreement, the parties hereto shall agree on the use
of a form of alternate dispute resolution for the resolution of
such dispute. If the parties are unable to agree on the form
of alternate dispute resolution, then such dispute shall be
finally settled by arbitration by three (3) arbitrators in
Dallas, Texas, pursuant to the Commercial Arbitration Rules
then pertaining of the American Arbitration Association, it
being the intent of the parties that such arbitration shall be
concluded as promptly as reasonably practicable. If such an
arbitration occurs, the arbitrators shall be required to award
reasonable attorneys' fees and expenses to the prevailing
party, which shall be paid by the non-prevailing party in cash
or its ready equivalent. Judgment upon the award may be
entered in any court having jurisdiction. If any dispute
arises regarding Articles 10 and/or 12 hereof, and Search is
the prevailing party, the required award of attorneys' fees and
expenses shall not be governed or limited by the maximum limit
of the Escrow Fund, nor shall the amount of such attorneys fees
and expenses be credited against the Escrow Fund in any manner.
* * * * *
IN WITNESS WHEREOF, this Stockholders Agreement has been
executed by or on behalf of each of the parties hereto, all as
of the date first above written.
SEARCH CAPITAL GROUP, INC.
("Search")
By:/s/ Xxxxxx X. Xxxxx
Title: President/CEO
MS FINANCIAL SERVICES, INC.
("MSDSub")
By: /s/ Xxxxx Xxxxxx
Title: President
Shares of MS Financial Stock Owned:
3,070,000
MS DIVERSIFIED CORPORATION
("MSD")
By: /s/ Xxxxx Xxxxxx
Title: President
Shares of MS Financial Stock Owned:
1,250,000
GOLDER, THOMA, XXXXXX, XXXXXX FUND IV,
L.P.
("GTCR IV")
By: GTCR IV, L.P., its General Partner
By: Golder, Thoma, Cressy, Rauner,
Inc., its General Partner
By: /s/ Xxxxx X. Xxxxxxx
Authorized Officer:
Shares of MS Financial Stock Owned:
3,720,000
EXHIBIT 5.4 TO STOCKHOLDERS AGREEMENT
[FORM OF STOCKHOLDER-MS FINANCIAL RELEASE]
EXHIBIT 6.2 TO STOCKHOLDERS AGREEMENT
February ___, 1997
Search Capital Group, Inc.
000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000-0000
Ladies and Gentlemen:
We are providing this letter to you pursuant to Section
6.2 of the Stockholders Agreement dated as of February 7, 1997
between us and Search (the "Stockholders Agreement").
Capitalized terms used herein and not defined have the meanings
assigned to them in the Stockholders Agreement.
We hereby represent that, as of the Effective Time, we (i)
have no present plan to engage in any sale, exchange, transfer,
pledge, disposition or short sale of Search Common Stock
received in the Merger (or any other transaction which would
result in a reduction in the risk of ownership of Search Common
Stock received in the Merger), and (ii) acknowledge the
restrictions placed on our ability to transfer the Search
Common Stock imposed by Section 6.2 of the Stockholders
Agreement
Immediately prior to the Effective Time, we own, of record
and beneficially, no shares of Search Common Stock.
Xxxxxx & Xxxxx, LLP, tax counsel to MS Financial, may rely
on these representations in rendering its opinion to Search and
MS Financial to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, and Search may rely on these
representations in making any representation to each such
counsel for the purpose of such counsel rendering its opinion.
Very truly yours,
MSDIVERSIFIED, INC.
By:__________________
Title:
MS FINANCIAL SERVICES, INC.
("MSDSub")
By:__________________________
Title:_______________________
GOLDER, THOMA, XXXXXX, XXXXXX FUND IV,
L.P.
By: GTCR IV, L.P., its General Partner
By: Golder, Thoma, Cressy, Rauner,
Inc., its General Partner
By:
Authorized Officer
