Exhibit 10.3
INVESTOR STOCKHOLDERS AGREEMENT
INVESTOR STOCKHOLDERS AGREEMENT dated as of May 22, 1997 (this
"Agreement") among SCOTSMAN HOLDINGS, INC., a Delaware corporation (the
"Company"), CYPRESS MERCHANT BANKING PARTNERS L.P., a Delaware limited
partnership ("Cypress Onshore"), CYPRESS OFFSHORE PARTNERS L.P., a Cayman
Islands limited partnership ("Cypress Offshore" and, together with Cypress
Onshore, the "Cypress Group"), SCOTSMAN PARTNERS, L.P., a Texas limited
partnership ("Scotsman Partners" and, together with the Cypress Group, the
"Investor Group Stockholders"), ODYSSEY PARTNERS, L.P., a Delaware limited
partnership ("Odyssey"), XXXXX X. XXXXXXX, an individual ("BPG" and, together
with Odyssey, the "Existing Stockholders"), and BT INVESTMENT PARTNERS, INC.
("BTIP" and, together with the Investor Group Stockholders and the Existing
Stockholders, the "Stockholders").
WHEREAS, the Company, the Investor Group Stockholders and/or certain
of their Affiliates (as defined below), Odyssey, BPG and certain other persons
are parties to a Recapitalization Agreement dated as of April 11, 1997, as
amended, supplemented or otherwise modified (the "Recapitalization Agreement"),
which provides for a recapitalization of the Company pursuant to which the
Investor Group Stockholders will own shares of Common Stock (as defined below)
of the Company as described below;
WHEREAS, a condition to the consummation of the transactions
contemplated by the Recapitalization Agreement is the execution and delivery by
the Company, the Investor Group Stockholders and Odyssey of this Agreement; and
WHEREAS, as of the date hereof, as a result of the consummation of
the transactions contemplated by the Recapitalization Agreement: (i) Cypress
Onshore owns 675,401 shares of Common Stock (as defined below); (ii) Cypress
Offshore owns 34,982 shares of Common Stock; (iii) Scotsman Partners owns
710,383 shares of Common Stock; (iv) Odyssey owns 96,741 shares of Common Stock;
(v) BPG owns 41,469 shares of Common Stock; and (vi) BTIP owns 54,644 shares of
Common Stock;
NOW, THEREFORE, in consideration of the mutual promises and
agreements set forth herein, the adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
1.1 Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
The term "control" means, with respect to any Person, the power to direct or
cause the direction of the management or policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Amended Existing Stockholders Agreement" means the Second Amended
and Restated Stockholders' and Optionholders' Agreement dated as of the date
hereof to which the Company, the Investor Group Stockholders and certain other
stockholders of the Company are parties as of the date hereof, as the same may
be amended, supplemented or otherwise modified from time to time.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or day on
which the Company's principal offices are not open generally for business.
"Charter Documents" means the Certificate of Incorporation and the
Bylaws of the Company as amended through the date hereof.
"Common Stock" means the common stock, par value $.01 per share, of
the Company or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Convertible Security" means any security of the Company which is
convertible into or exercisable or exchangeable for Common Stock, whether or not
the conversion, exercisability or exchangeability of such security is subject to
the passage of time or any event or contingency.
"Fully Diluted Shares" means, with respect to any Stockholder at any
time, a number of shares of Common Stock equal to the sum of (i) the number of
such Stockholder's Shares plus (ii) the number of shares of Common Stock that
such Stockholder would acquire upon the conversion, exercise or exchange of all
Convertible Securities then owned by such Stockholder.
"Individual Permitted Transferee" means, with respect to a
Stockholder who is an individual, a Person to whom any of the following
Transfers is made:
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(i) Transfer upon the death of such Stockholder to such
Stockholder's spouse or descendants (including adopted children and
stepchildren, if any), or to such Stockholder's executor, administrator or
testamentary or inter vivos trustee;
(ii) a Transfer to such Stockholder's spouse or descendants
(including adopted children and stepchildren, if any), or a trust, the
sole income beneficiaries of which, or a corporation, partnership or
limited liability company, the sole stockholders, limited and/or general
partners or members, as the case may be, of which, include only such
Stockholder, such Stock holder's spouse and/or such Stockholder's
descendants (including adopted children and stepchildren, if any);
(iii) a Transfer to the legal guardian of such Stockholder, if
such Stockholder shall be or become disabled; or
(iv) a Transfer not covered by clause (i), (ii) or (iii) above
that is approved by each of the Cypress Group and Scotsman Partners, in
its sole discretion, prior to the consummation thereof;
provided that, in the event of death or disability of any Person to whom a
Transfer is made pursuant to clause (i), (ii), (iii) or (iv) above, the term
"Individual Permitted Transferee" shall include:
(x) in the case of such Person's death, such Person's spouse
or descendants (including adopted children and stepchildren, if any), or
such Person's executor, administrator or testamentary or inter vivos
trustee; and
(y) in the case of such Person's disability, such
Person's legal guardian.
"Initial Public Offering" means the Company's initial Public
Offering of shares of Common Stock.
"IPO Effectiveness Date" means the date upon which the SEC declares
effective the Registration Statement relating to the Initial Public Offering.
"Line of Business" means the leasing, sale, delivery and
installation of mobile office units, storage units, modular buildings, portable
buildings and other services and business operations complementary or incidental
thereto.
"Other Agreement" means each agreement (other than this Agreement)
to which the Company and one or more of its stockholders is a party containing
terms regarding the matters in Article II and/or Article V hereof with respect
to the shares
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of Common Stock owned or acquired by such stockholders, including without
limitation the Amended Existing Stockholders Agreement.
"Outstanding Fully Diluted Shares" means, at any time, a number of
shares of Common Stock equal to the sum of (i) the number of shares of Common
Stock then outstanding plus (ii) the number of shares of Common Stock that would
be outstanding immediately after giving effect to the conversion, exercise or
exchange of all Convertible Securities then outstanding.
"Permitted Transferee" means, with respect to any Stockholder, a
Person to whom or to which such Stockholder is permitted to Transfer Shares
pursuant to Section 2.2(a), and includes, with respect to any Stockholder who is
an individual, an Individual Permitted Transferee of such Stockholder, except
that, for purposes of Sections 2.3 and 2.4, a Permitted Transferee shall not
include a Person to whom or to which such Stockholder is permitted to Transfer
Shares pursuant to clause (v) of Section 2.2(a).
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental body or other entity of any
kind.
"Public Offering" means any offer for sale of Common Stock pursuant
to an effective Registration Statement filed under the Securities Act.
"Registration Statement" means a registration statement filed
pursuant to the Securities Act.
"Rule 144" means Rule 144 under the Securities Act, or any successor
rule.
"SEC" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC thereunder.
"Shares" means, with respect to any Stockholder, all outstanding
shares, whether now owned or hereafter acquired, of Common Stock owned by such
Stockholder.
"Transfer Restriction Period" means the period beginning on the date
hereof and ending on (and including) the date which is the fifth anniversary of
the date hereof.
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ARTICLE II
LIMITATIONS ON TRANSFER
2.1 General Restrictions on Transfer. (a) Each Stockholder agrees
that such Stockholder shall not, either directly or indirectly, offer, sell,
transfer, assign, mortgage, hypothecate, pledge, create a security interest in
or lien upon, encumber, donate, contribute, place in trust, or otherwise
voluntarily or involuntarily dispose of (any of the foregoing actions, to
"Transfer" and, any offer, sale, transfer, assignment, mortgage, hypothecation,
pledge, security interest or lien, encumbrance, donation, contribution, placing
in trust or other disposition, a "Transfer") any Shares, or any interest
therein, except in a transaction that is specifically permitted by this
Agreement.
(b) Any attempt to Transfer any Shares, or any interest
therein, which is not in compliance with this Agreement shall be null and void
ab initio, and neither the Company nor any transfer agent shall give any effect
in the Company's stock records to such attempted Transfer.
(c) Notwithstanding any other provision of this Agreement, no
Transfer may be made pursuant to this Agreement unless:
(i) such Transfer complies in all respects with the appli
cable provisions of this Agreement and applicable federal and state
securities laws, including, without limitation, the Securities Act;
(ii) except in the case of a Transfer pursuant to a Public
Offering or Rule 144, the Transferee agrees in writing with the Company
and the other Stockholders to be bound by the terms and conditions of this
Agreement with respect to the Shares Transferred to such Transferee to the
same extent as the Stockholder who originally held such Shares is or was
bound hereby (whereupon such Transferee shall be entitled to the same
rights as such Stockholder who originally held such Shares had with
respect to such Shares and shall be deemed to be a Stockholder (including,
if applicable, an Investor Group Stockholder) for all purposes hereunder
with respect to such Shares);
(iii) if requested by the Company, in its sole discretion,
an opinion of counsel to such transferring Stockholder shall be supplied
to the Company, at such transferring Stockholder's expense, to the effect
that such Transfer complies with applicable federal and state securities
laws; and
(iv) each of the Cypress Group and Scotsman Partners either
(A) reasonably determines that such Transfer will not result in (1) a
default or event of default with respect to any indebtedness of the
Company or
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any of its subsidiaries, (2) any other event requiring or permitting any
indebtedness of the Company or any of its subsidiaries to become due and
payable prior to its stated date of maturity or (3) any other event
requiring the Company or any of its subsidiaries to make an offer to
purchase or to redeem any indebtedness of the Company or any of its
subsidiaries or permitting any holder of any such indebtedness to sell to
the Company or to cause the Company to redeem any such indebtedness, in
each case prior to its stated maturity, or (B) each of the Cypress Group
and Scotsman Partners waives in its sole discretion its right to make a
determination under clause (A) above.
2.2 Certain Permitted Transfers. (a) Subject to Sections 2.1(c) and
2.2(b), each Stockholder may Transfer Shares:
(i) in the case of Scotsman Partners, to any of the
following partners of Scotsman Partners: FW Scotsman Investors, L.P.,
Arbor Scotsman, L.P., FW Strategic Partners, L.P. or Group 31, Inc. (each
a "Designated Partner"; Scotsman Partners, together with each Designated
Partner that owns, from time to time, Shares, are referred to herein,
collectively, as the "SP Group");
(ii) to a bank or other financial institution in a bona
fide pledge transaction to secure indebtedness of such Stockholder to such
bank or other financial institution; provided, however, that no more than
70% of such Stockholder's Shares at any time may be subject to such pledge
transactions; and, provided, further, that any further Transfer of the
Shares subject to such pledge transactions to or at the direction of the
pledgee thereof, other than to the Stockholder who pledged such Shares or
a Permitted Transferee of such Stockholder, shall be subject to the
provisions of Section 2.3;
(iii) if such Stockholder is an Investor Group Stockholder
only, to (A) another Investor Group Stockholder or (B) a Person to whom or
to which such other Investor Group Stockholder may Transfer Shares under
clause (i), (ii), (iv) or (v) of this Section 2.2(a) (with respect to each
Investor Group Stockholder, the Permitted Transferees under this clause
(iii) are referred to as its "Clause (iii) Permitted Transferees");
(iv) if such Stockholder is an individual, to an Individual
Permitted Transferee; or
(v) with the prior written consent of each of the Cypress
Group and Scotsman Partners.
(b) In the event that any Stockholder wishes to Transfer
Shares in a transaction permitted by Section 2.2(a), such Stockholder shall give
written notice to the Company and the other Stockholders of its intention to
make
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such Transfer not less than 10 days prior to effecting such Transfer, which
notice shall state the name and address of each Permitted Transferee to whom
such Transfer is proposed and the number of Shares proposed to be Transferred to
such Permitted Transferee.
2.3 Right of First Offer. (a) After the Transfer Restriction Period,
if any Stockholder or Stockholders (each a "Selling Stockholder" and,
collectively, the "Selling Stockholders") shall desire to sell Shares to any
Person other than a Permitted Transferee of such Selling Stockholders (a "Third
Party Purchaser"), then such Selling Stockholders shall first offer the Investor
Group Stockholders which are not Selling Stockholders (the "Offeree
Stockholders") the right to purchase such Shares (the "Offered Shares") by
sending written notice (the "Offering Notice") to the Company and the Offeree
Stockholders, which notice shall (i) state the number of Offered Shares, (ii)
state the proposed purchase price per Share (the "Offer Price") and all other
material terms and conditions of such sale and (iii) if applicable, be
accompanied by any written offer from the Third Party Purchaser; provided,
however, that the Selling Stockholders shall not be obligated to make such offer
to the Offeree Stockholders if the Transfer (if consummated) is made pursuant to
Section 2.5. Upon delivery of the Offering Notice, the offer made therein to the
Offeree Stockholders shall be irrevocable unless and until the first offer
rights provided for therein shall have been waived or shall have expired in
accordance with this Agreement.
(b) Subject to Section 2.3(d), each Offeree Stockholder shall
have the right, but not the obligation, to purchase at the Offer Price (and
otherwise upon the same terms and conditions as those set forth in the Offering
Notice) all but not less than all of its pro rata portion of the Offered Shares,
in the proportion that the number of Shares owned by such Offeree Stockholder
bears to the total number of Shares owned by all Offeree Stockholders. Such
right of each Offeree Stockholder shall be exercisable by written notice to the
Selling Stockholders with copies to the Company given within 30 days after
receipt of the Offering Notice (the "Notice Period"). Failure by an Offeree
Stockholder to respond within the Notice Period shall be regarded as a rejection
of the offer made pursuant to the Offering Notice. Each Offeree Stockholder that
elects to purchase its full pro rata portion of the Offered Shares is referred
to in this Section 2.3 as a "Section 2.3 Participating Stockholder."
(c) The Selling Stockholders shall, promptly after the end of
the Notice Period, notify (the "Last-Chance Notice") all Section 2.3
Participating Stockholders whether the Offered Shares have been fully subscribed
for, and, if not, the number of Offered Shares not subscribed for (the
"Remaining Offered Shares"). Subject to the further provisions of this Section
2.3(c), each Section 2.3 Participating Stockholder shall have the right to
purchase all, but not less than all, of the Remaining Offered Shares. The right
of each Section 2.3 Participating Stockholder to purchase the Remaining Offered
Shares shall be exercisable by written notice delivered to the Selling
Stockholders, with a copy to the Company, given within 10
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days after receipt of the Last-Chance Notice. If more than one Section 2.3
Participating Stockholder timely elects to exercise its right to purchase the
Remaining Offered Shares, the right to purchase the Remaining Offered Shares
shall (unless the Section 2.3 Participating Stockholders shall otherwise agree)
be allocated pro rata among the Section 2.3 Participating Stockholders electing
to purchase the Remaining Offered Shares, in the proportion that the number of
Shares owned by each such Section 2.3 Participating Stockholder bears to the
total number of Shares owned by all Section 2.3 Participating Stockholders that
elect to purchase the Remaining Offered Shares. A failure of any Section 2.3
Participating Stockholder to exercise such right within such 10-day period shall
be regarded as a waiver of its right to purchase the Remaining Offered Shares as
provided herein.
(d) Notwithstanding anything in this Section 2.3 to the
contrary, the right of the Offeree Stockholders and/or the Section 2.3
Participating Stockholders to purchase the Offered Shares pursuant to this
Section 2.3 shall be exercisable only if the Offeree Stockholders and/or the
Section 2.3 Participating Stockholders collectively agree to purchase all, but
not less than all, of the Offered Shares.
(e) The closing of the purchase of Offered Shares by the
Section 2.3 Participating Stockholders herein shall be held at the principal
office of the Company at 11:00 a.m., local time, on the 20th day after the
giving of the LastChance Notice (or, if each of the Offeree Stockholders is a
Section 2.3 Participating Stockholder, then on the 40th day following the date
of the Offering Notice), or at such other time and place as the parties to the
transaction may agree. The sale of the Offered Shares to the Section 2.3
Participating Stockholders hereunder shall otherwise be on customary terms and
conditions (but in any event in accordance with the terms of the Offering
Notice).
(f) Unless the Section 2.3 Participating Stockholders elect to
purchase all of the Offered Shares pursuant to this Section 2.3, the Selling
Stock holders may sell all but not less than all, of the Offered Shares at a
price per Share equal to or greater than the Offer Price and otherwise on terms
and conditions that are in the aggregate not materially more favorable to the
Third Party Purchaser than the terms and conditions set forth in the Offering
Notice and the written offer, if any, delivered therewith pursuant to Section
2.3(a). Any such sale shall be bona fide and made within 100 days of the date of
the Offering Notice (or, if none of the Offeree Stockholders is a Section 2.3
Participating Stockholder, then within 70 days of the Offering Notice). In the
event that such sale is not consummated within such applicable period for any
reason, then the restrictions provided for herein shall again become effective,
and no Transfer of such Offered Shares may be made thereafter by the Selling
Stockholders without again offering the same to the Offeree Stockholders in
accordance with this Section 2.3.
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(g) Notwithstanding anything to the contrary in this
Agreement, the provisions of this Section 2.3 shall not be applicable to any
Transfer proposed to be made by a Selling Stockholder pursuant to a Public
Offering or pursuant to Rule 144.
(h) Any Offeree Stockholder may, with respect to any Offering
Notice, with the prior written consent of each of the Investor Group
Stockholders in each instance, at any time assign any or all of its rights under
this Section 2.3 to the Company with respect to such Offering Notice, in which
event the Company shall have the right, but not the obligation, to purchase the
Offered Shares on the same terms and subject to the same conditions as such
Offeree Stockholder may do so under this Section 2.3. No such assignment shall
be binding upon any Selling Stockholder unless and until notice thereof shall
have been provided to such Selling Stockholder, whereupon, without further
action by any Person, unless otherwise set forth in the instrument of assignment
and reflected in such notice to such Selling Stockholder, such Offeree
Stockholder shall be relieved of all obligations it may have under this Section
2.3 to such Selling Stockholder with respect to the Offered Shares subject to
such assignment. Any such Assignment shall not extend any of the time periods
set forth in this Section 2.3.
2.4 Tag-Along Right. (a) After the Transfer Restriction Period, if
any Selling Stockholders shall desire to sell Shares to any Third Party
Purchaser (a "Proposed Sale"), then, in addition to making the offer required by
Section 2.3, such Selling Stockholders shall offer the other Stockholders which
are not Selling Stockholders (the "Tag-Along Stockholders") the right to
participate in the Proposed Sale with respect to a number of Shares determined
as provided in this Section 2.4 by sending written notice (the "Tag-Along
Notice") to the Company and the Tag-Along Stockholders, which notice shall (i)
state the number of Shares proposed to be sold in such Proposed Sale by such
Selling Stockholders (the "Proposed Sale Shares"), (ii) state the proposed
purchase price per Proposed Sale Share (the "Tag-Along Price") and all other
material terms and conditions of such Proposed Sale and (iii) if applicable, be
accompanied by any written offer from the Third Party Purchaser; provided,
however, that the Selling Stockholders shall not be obligated to deliver a
Tag-Along Notice if the Transfer (if consummated) is made pursuant to Section
2.5.
(b) Each Tag-Along Stockholder shall have the right to require
the Selling Stockholder to cause the Third Party Purchaser to purchase from such
Tag-Along Stockholder at the Tag-Along Price (and otherwise upon the same terms
and conditions as those set forth in the Tag-Along Notice) a number of Shares
owned by such Tag-Along Stockholder (such Tag-Along Stockholder's "Tag-Along
Shares") not in excess of the product of (i) the total number of Proposed Sale
Shares, times (ii) a fraction, the numerator of which is the total number of
Shares owned by such Tag-Along Stockholder and the denominator of which is equal
to the sum of (x) the total number of Shares owned by the Selling Stockholders
and the Tag-Along Stockholders, plus (y) the total number of shares of Common
Stock, if any, owned by
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stockholders of the Company (other than the Stockholders) who or which have
tagalong rights to participate in the Proposed Sale pursuant to any Other
Agreement approved by the Board of Directors in accordance with Section 4.5.
Such right of each Tag-Along Stockholder shall be exercisable by written notice
to the Selling Stockholders with copies to the Company given within 10 Business
Days after receipt of the Tag-Along Notice (the "Tag-Along Notice Period"),
which notice shall state the number of Tag-Along Shares that such Tag-Along
Stockholder elects to sell in the Proposed Sale, if less than the maximum number
of such Tag-Along Stockholder's Tag-Along Shares; provided that, if such notice
shall not state a number of Tag-Along Shares, then such Tag-Along Stockholder
will be deemed to have elected to sell the maximum number of such Tag-Along
Stockholder's Tag-Along Shares. Failure by a Tag-Along Stockholder to respond
within the Tag-Along Notice Period shall be regarded as a rejection of the offer
made pursuant to the Tag-Along Notice. Each Tag-Along Stockholder that elects to
sell any or all of such Tag-Along Shareholder's Tag-Along Shares is referred to
in this Section 2.4 as a "Participating Tag-Along Stockholder" and the number of
Tag-Along Shares elected, or deemed to be elected, by such Tag-Along Stockholder
to be sold as provided above is referred to in this Section 2.4 as such
Tag-Along Stockholder's "Participating Tag-Along Shares". The number of Shares
to be sold by the Selling Stockholders in the Proposed Sale shall be reduced by
the aggregate number of Participating Tag-Along Shares to be sold pursuant to
this Section 2.4 by all Participating Tag-Along Stockholders.
(c) At the request of the Selling Stockholders made not less
than two Business Days prior to the proposed Transfer, a Participating Tag-Along
Stockholder shall deliver to the Selling Stockholders certificates representing
such Participating Tag-Along Stockholder's Participating Tag-Along Shares, duly
endorsed, in proper form for Transfer, together with a limited power-of-attorney
authorizing the Selling Stockholders to transfer such Participating Tag-Along
Shares to the Tag-Along Purchaser and to execute all other documents required to
be executed in connection with such transaction.
(d) If no Transfer of the Tag-Along Shares in accordance with
the provisions of this Section 2.4 shall have been completed within the
applicable period contemplated by Section 2.3(e) or 2.3(f), then the Selling
Stockholders shall promptly return to the Participating Tag-Along Stockholder,
in proper form, all certificates representing such Participating Tag-Along
Stockholder's Participating TagAlong Shares and the limited power-of-attorney
previously delivered by such Participating Tag-Along Stockholder to the Selling
Stockholders.
(e) The closing of the sale of the Participating Tag-Along
Shares by the Participating Tag-Along Stockholders shall be held at the same
place and time as the closing of the sale by the Selling Stockholders in the
Proposed Sale. Promptly after the consummation of the Transfer of the
Participating Tag-Along Shares pursuant to this Section 2.4, each Participating
Tag-Along Stockholder shall receive (i) the consideration with respect to the
Participating Tag-Along Shares so
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Transferred and (ii) such other evidence of the completion of such Transfer and
the terms and conditions (if any) thereof as may reasonably be requested by such
Participating Tag-Along Stockholder.
(f) The provisions of this Section 2.4 shall remain in effect,
notwithstanding any return to any Participating Tag-Along Stockholder of
Participating Tag-Along Shares as provided in Section 2.4(d).
(g) Notwithstanding anything to the contrary in this
Agreement, the provisions of this Section 2.4 shall not be applicable to any
Transfer proposed to be made by a Selling Stockholder pursuant to a Public
Offering or pursuant to Rule 144.
(h) If the Offeree Stockholders elect to purchase Offered
Shares pursuant to Section 2.3, then the number of Offered Shares originally
proposed to be Transferred by a Selling Stockholder pursuant to such Section 2.3
shall be reduced by the aggregate number of Participating Tag-Along Shares to be
sold pursuant this Section 2.4 by all Participating Tag-Along Stockholders. In
such event, such Participating Tag-Along Shares shall be deemed to be Offered
Shares and the Participating Tag-Along Stockholders shall be deemed to be
Selling Stockholders for purposes of Section 2.3, without any requirement of
such Participating Tag-Along Stockholders to deliver an Offering Notice pursuant
to Section 2.3(a).
2.5 Bring-Along Right. (a) In the event that one or more Selling
Stockholders owning at least 60% of the number of outstanding shares of Common
Stock receives a bona fide offer from a Third Party Purchaser to purchase
(including a purchase by merger) at least 90% of the Outstanding Fully Diluted
Shares, the Selling Stockholders may send written notice (a "Buyout Notice") to
the Company and the other Stockholders notifying the other Stockholders that
they will be required to sell the same percentage (which percentage shall be
specified in such Buyout Notice) (the "Designated Percentage") of their Fully
Diluted Shares in such sale.
(b) Upon receipt of a Buyout Notice, each Stockholder
receiving such notice shall be obligated:
(i) to sell the Designated Percentage of such
Stockholder's Shares in the transaction (including a sale or merger)
contemplated by the Buyout Notice on the same terms and conditions as the
Selling Stockholders;
(ii) to sell the Designated Percentage of such
Stockholder's Convertible Securities (which shall be calculated based on
the number of shares of Common Stock issuable upon conversion, exercise or
exchange of such Convertible Securities) in the transaction (including a
sale or merger) contemplated by the Buyout Notice on the same terms and
conditions as
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Selling Stockholders, subject to appropriate adjustment to reflect terms
of such Convertible Security with respect to conversion, exercise or
exchange thereof into shares of Common Stock;
(iii) to provide for the payment by such Stockholder of such
Stockholder's pro rata portion of all costs associated with such
transaction, in the proportion that the number of Fully Diluted Shares
owned by such Stockholder bears to the number of Outstanding Fully Diluted
Shares; and
(iv) otherwise to take all necessary action to cause the
consummation of such transaction, including voting its Shares in favor of
such transaction and not exercising any appraisal rights in connection
therewith.
(c) Each Stockholder further agrees to (i) take all actions
(including executing documents) in connection with the consummation of the
proposed transaction as may reasonably be requested of it by the Selling
Stockholders and (ii) appoint the Selling Stockholders as its attorneys-in-fact
to do the same on its behalf.
(d) In the event a contract with respect to the transaction
contemplated by the Buyout Notice has not been entered into within the 90 days
after the date of delivery of the Buyout Notice, the obligations of the
Stockholders under this Section 2.5 with respect to such Buyout Notice shall
terminate, subject, however, to the right of the Selling Stockholders to deliver
a further Buyout Notice.
ARTICLE III
RIGHT TO PARTICIPATE IN CERTAIN ISSUANCES OF CAPITAL STOCK
3.1 Right to Participate in New Issuance. If the Company determines
to issue any capital stock or any security convertible into or exercisable or
exchangeable for capital stock, including without limitation any Convertible
Security, to any stockholder of the Company (including a Stockholder) (other
than capital stock to be issued (i) in connection with an employee stock option
plan or other bona fide employment compensation arrangement that is approved by
the Company's Board of Directors, (ii) pursuant to a stock split or stock
dividend, (iii) pursuant to the exercise of any option, warrant or convertible
security (including without limitation any Convertible Security) theretofore
issued, (iv) as consideration in connection with a bona fide acquisition by the
Company or any of its subsidiaries or (v) pursuant to the Initial Public
Offering) (each such issuance not excluded by the immediately preceding
parenthetical being herein referred to as a "New Issuance"), then the Company
shall notify the Stockholders of the proposed New Issuance. Such notice shall
specify the number and class of securities to be issued, the rights, terms and
privileges thereof and the estimated price at which such securities will be
issued.
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3.2 Exercise of Right. By written notice to the Company given within
15 days of being notified of such New Issuance, each Stockholder shall be
entitled to purchase that percentage of the New Issuance determined by dividing
(a) the total number of Shares owned by such Stockholder by (b) the total number
of Shares then owned by all Stockholders. If any such Stockholder does not fully
subscribe for the number or amount of shares of capital stock or securities
convertible into or exercisable or exchangeable for capital stock that it is
entitled to purchase pursuant to this Article III, the Company shall notify the
Stockholders of the same and each Stockholder participating in such purchase to
the full extent provided for in the preceding sentence shall have the right to
purchase that percentage of the New Issuance not so subscribed for, based on a
fraction, the numerator of which is the total number of Shares then owned by
such fully participating Stockholder and the denominator of which is the total
number of Shares then owned by all fully participating Stockholders who elect to
purchase such un-subscribed securities. Such right shall be exercisable within
15 days following the receipt of the notice delivered pursuant to the previous
sentence. To the extent the Stockholders do not elect to purchase all of the
securities proposed to be offered and sold in the New Issuance, the Company may
issue those securities not so subscribed for, provided that such sales are
consummated within 120 days after the Stockholders' rights hereunder have
expired or been waived.
3.3 Closing. The closing of the New Issuance shall be held at such
time as the Company shall designate in writing to the Stockholders that elect to
purchase securities in the New Issuance pursuant to this Article III not fewer
than five Business Days prior to the date of such closing, at the Company's
principal offices, or at another place designated by the Company in writing to
such Stockholders in such notice.
ARTICLE IV
CORPORATE GOVERNANCE AND CERTAIN OTHER ACTIONS
4.1 General. Each Stockholder shall vote its Shares at any regular
or special meeting of stockholders of the Company, or in any written consent
executed in lieu of such a meeting of stockholders, and shall take all other
actions necessary, to give effect to the provisions of this Agreement
(including, without limitation, Sections 4.2 and 4.5 hereof), and to ensure that
the Charter Documents do not, at any time hereafter, conflict in any respect
with the provisions of this Agreement.
4.2 Election of Directors. (a) Each Investor Group Stockholder
agrees that, except as the Investor Group Stockholders may otherwise agree in
writing, the number of directors constituting the entire Board of Directors
shall be
13
eight (or seven, if the Chairman of the Board of Directors and the President of
the Company shall be the same individual), comprised of the following
individuals:
(i) three individuals designated by the Cypress Group;
(ii) three individuals designated by the SP Group;
(iii) the individual then serving as the Chairman of the
Board of Directors of the Company; and
(iv) the individual then serving as the President of the
Company.
(b) If as a result of Section 4.4, either the Cypress Group or
the SP Group is entitled to designate a lesser number of directors than it is
entitled on the date hereof to designate pursuant to Section 4.2(a), then each
Investor Group Stockholder shall vote its Shares to cause the number of
directors constituting the entire Board of Directors to be reduced by the number
of directors that the Cypress Group or the SP Group is no longer entitled to
designate.
4.3 Removal and Replacement. Each of the Cypress Group and the SP
Group shall be entitled at any time and for any reason (or for no reason) to
designate any or all of its designees on the Board of Directors for removal, and
the Cypress Group and the SP Group, acting in accordance with clause (l) of
Section 4.5, shall be entitled at any time and for any reason (or for no reason)
to designate any of the directors designated under Section 4.2(a)(iii) or
4.2(a)(iv) for removal. Subject to Section 4.4, if at any time a vacancy is
created on the Board of Directors by reason of the death, removal or resignation
of any director, then:
(i) in the case of a director designated pursuant to
Section 4.2(a)(i) or (ii), the Cypress Group or the SP Group shall, as
soon as practicable thereafter, designate a replacement director and, as
soon as practicable thereafter, each of the Investor Group Stockholders
shall take action, including, if necessary, the voting of its Shares, to
elect or cause the election by the Board of Directors of such replacement
director in accordance with Section 4.2(a)(i) or (ii), as the case may be;
and
(ii) in the case of a director designated pursuant to
Section 4.2(a)(iii) or (iv), the Board of Directors shall, as soon as
practicable thereafter (and subject to clause (l) of Section 4.5), except
as the Investor Group Stockholders may otherwise agree in writing,
designate a new Chairman of the Board or President, as the case may be, of
the Company and, as soon as practicable thereafter, each of the Investor
Group Stockholders shall take action, including, if necessary, the voting
of its Shares, to elect such new
14
Chairman of the Board or President, as the case may be, as a director in
accordance with Section 4.2(a)(iii) or (iv), as the case may be.
Subject to Section 4.4, if at any time a vacancy is created on the Board of
Directors by reason of the death, removal or resignation of any director
designated pursuant to Section 4.2(a)(i) or (ii), then the Board of Directors
shall not conduct any business (other than business incident to the designation
and election of a replacement director in accordance with this Section 4.3)
until a replacement director has been designated by the Cypress Group or the SP
Group, as the case may be; provided that the foregoing restriction on the
transaction of business shall terminate five days after the creation of such
vacancy if no such replacement director has been designated.
4.4 Reduction in Number of Directors. Notwithstanding anything
herein to the contrary:
(i) (A) from and after the date that the Cypress Group and its
Permitted Transferees (other than its Clause (iii) Permitted Transferees)
own in the aggregate Shares representing 5% or more but less than 20% of
the outstanding Common Stock, the Cypress Group shall be entitled to
designate one director for election or removal pursuant to Section 4.2(a)
or 4.3, and (B) from and after the date that the Cypress Group and such
Permitted Transferees own in the aggregate Shares representing less than
5% of the outstanding Common Stock, the Cypress Group shall no longer be
entitled to designate any directors for election or removal pursuant to
Section 4.2(a) or 4.3; and
(ii) (A) from and after the date that Scotsman Partners and
its Permitted Transferees (other than its Clause (iii) Permitted
Transferees) own in the aggregate Shares representing 5% or more but less
than 20% of the outstanding Common Stock, the SP Group shall be entitled
to designate one director for election or removal pursuant to Section
4.2(a) or 4.3, and (B) from and after the date that Scotsman Partners and
such Permitted Transferees own in the aggregate Shares representing less
than 5% of the outstanding Common Stock, the SP Group shall no longer be
entitled to designate any directors for election or removal pursuant to
Section 4.2(a) or 4.3.
4.5 Super-Majority Approvals. Notwithstanding anything to the
contrary contained in this Agreement, until such time as either the Cypress
Group or the SP Group no longer has the right to designate three directors
pursuant to Section 4.2(a), each of the following actions (the "Super-Majority
Actions") shall require the approval of at least two directors designated by the
Cypress Group and at least two directors designated by the SP Group:
(a) any amendment or modification of any of the Charter
Documents;
15
(b) any merger, consolidation, amalgamation, recapitalization
or other form of business combination (other than any acquisition that would be
permitted under clause (d) below) involving the Company or any subsidiary of the
Company;
(c) any sale, conveyance, lease, transfer or other disposition
of all or substantially all of the assets of the Company;
(d) any single acquisition or series of related acquisitions
of assets, including stock (whether by purchase, merger or otherwise), involving
gross consideration in excess of $5 million;
(e) any change in the Company's Line of Business, whether by
acquisition of assets or otherwise;
(f) any issuance of or agreement to issue, or any repurchase,
redemption or other acquisition or agreement to repurchase, redeem or otherwise
acquire, any shares of capital stock of the Company or any of its subsidiaries
or rights of any kind convertible into or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its subsidiaries, or any
option, warrant or other subscription or purchase right with respect to shares
of capital stock;
(g) (i) any filing by the Company of a Registration Statement
to register Common Stock or Convertible Securities, other than any filing upon
the demand or request of a security holder of the Company in accordance with
this Agreement or any Other Agreement approved by the Board of the Directors
pursuant to clause (ii) below, and (ii) the entering into or amendment of any
Other Agreement (it being agreed that the Amended Existing Stockholders
Agreement as in effect on the date of this Agreement has been approved for
purposes hereof);
(h) any declaration or making of any dividend or other payment
or distribution on account of any shares of capital stock of the Company
(whether in cash or property), other than regular dividends on preferred stock
of the Company issued in accordance with clause (f) above;
(i) any incurrence or guarantee of indebtedness by the Company
or any of its subsidiaries, other than indebtedness outstanding under the 9-
7/8% Senior Notes due 2007 of Xxxxxxxx Scotsman, Inc. or incurred pursuant to
the Credit Agreement dated as of May 22, 1997 among Xxxxxxx Scotsman, Inc., the
Company, the several lenders from time to time parties thereto and BT Commercial
Corporation, as agent for the lenders thereunder, or any refinancing or
replacement of any thereof; provided that, in the case of any refinancing or
replacement thereof, the aggregate amount of indebtedness or (without
duplication) guarantees of indebtedness outstanding or that may be borrowed
thereunder is not thereby increased;
16
(j) the creation, incurrence or assumption of any security
interests, liens or other encumbrances upon any properties or assets of the
Company or its subsidiaries, other than liens securing or permitted by the
indebtedness referred to in clause (i) above;
(k) the adoption after the date hereof of the Company's annual
operating budget and capital budget, or the amendment of either thereof;
provided that, if, for any fiscal year of the Company, management of the Company
shall have presented its proposed annual operating budget or capital budget (the
"Management Operating Budget" and the "Management Capital Budget," respectively)
to the Board of Directors for approval and the Board of Directors shall not have
taken action to approve or disapprove an annual operating budget or capital
budget within 30 days following such presentation (or such longer period as the
Board of Directors, acting in accordance with this Section 4.5, shall
determine), then the Management Operating Budget or the Management Capital
Budget, as the case may be, shall be deemed to be the Company's annual operating
budget or capital budget, as the case may be, for such fiscal year; provided,
further, that, notwithstanding the approval or adoption (pursuant to the
immediately preceding proviso) of an annual operating budget or capital budget
pursuant to this clause (k) that contains or refers to one or more other
Super-Majority Actions under this Section 4.5, each such Super-Majority Action
shall require separate approval, in each specific instance, under this Section
4.5;
(l) the election or other designation or the removal of (i)
the Chairman of the Board of Directors or (ii) the President of the Company;
(m) except to the extent required under applicable law, the
adoption or entering into of any new (or the amendment or other increase, or
acceleration of payment or vesting of the amounts payable or to become payable
under any existing) bonus, incentive compensation, deferred compensation,
severance, profit sharing, stock option, stock purchase, insurance, pension,
retirement or other employee benefit plan, agreement or arrangement; provided
that approval under this clause (m) shall not be required if such action is
approved by a majority of the members of a duly authorized Committee of the
Board of Directors constituted in accordance with Section 4.6;
(n) the entering into of any transaction, or the amendment or
modification of any existing transaction, between the Company or any of its
subsidiaries and any Affiliate of the Company (including any Investor Group
Stockholder) other than transactions pursuant to an employee stock option plan
or other bona fide employment compensation arrangement that is approved by the
Board of Directors in accordance with clause (m) above or is in effect on the
date hereof;
(o) any change in the Company's certified public accountants
from Ernst & Young LLP, or any successor of Ernst & Young LLP;
17
(p) the settlement of any litigation to which the Company or
any of its subsidiaries is a party involving the payment by the Company or its
subsidiaries of an aggregate amount greater than $5 million or involving the
consent to any injunctive or similar relief; and
(q) the commencement by the Company or any of its subsidiaries
of proceedings under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or the making by the Company or
any of its subsidiaries of a general assignment for the benefit of its
creditors.
4.6 Committees of the Board of Directors. Subject to applicable law,
the Board of Directors may establish such committees of the Board of Directors
as the Board of Directors shall determine to be appropriate or convenient;
provided that, unless the Investor Group Stockholders otherwise agree in
writing, no such committee shall be established unless it is comprised solely of
an equal number of directors designated by each of the Cypress Group and
Scotsman Partners; and, provided, further, that no such committee may approve
any Super-Majority Action, other than the Super-Majority Action referred to in
Section 4.5(m).
4.7 Certain Other Actions. The Cypress Group and Scotsman Partners
hereby agree that, with respect to any notice, consent, authorization or other
action pursuant to the Amended Existing Stockholders Agreement or pursuant to
the Recapitalization Agreement to be made, given or taken by the Investor Group
Stockholders or their Affiliates, acting jointly, the Cypress Group and Scotsman
Partners shall not make, give or take any such notice, consent, authorization or
other action unless each of the Cypress Group and Scotsman Partners, or their
respective Affiliates agrees with the other in writing to do so. In the event
the Cypress Group and Scotsman Partners, or their respective Affiliates, are
unable to agree thereon, then no such notice, consent, authorization or other
action shall be made, given or taken by the Investor Group Stockholders.
4.8 Fees to Certain Affiliates. The Company shall not, and shall not
permit any of its subsidiaries to, enter into any agreement providing for the
payment of any management, consulting, advisory or other similar fees or other
amounts to, or pay any such management, consulting, advisory or similar fees or
other amounts to, any Investor Group Stockholder or any Affiliate of any
Investor Group Stockholder unless such agreement or payment is on terms not
materially less favorable to the Company or its subsidiary (taking into account
all the facts and circumstances of the transaction) than the terms that the
Company or its subsidiary
18
would be able to obtain in a similar, bona fide transaction with a third party;
provided that the foregoing shall not be applicable to any payment to a security
holder of the Company in such capacity or to any payment contemplated by the
Recapitalization Agreement.
ARTICLE V
REGISTRATION RIGHTS
5.1 Certain Defined Terms. As used in this Article V, the
following terms shall have the meanings set forth below:
"Demand Holder" means:
(i) the Cypress Group, so long as they own, in the
aggregate, at least 20% of the number of Shares owned by them on the date
hereof;
(ii) the SP Group, so long as they own, in the aggregate,
at least 20% of the number of Shares owned by them on the date hereof;
(iii) any Person to whom or to which a Demand Holder under
clause (i) or (ii) above shall transfer the right to request one or more
registrations under Section 5.2(a), so long as such transferee owns
Registrable Securities representing more than 10% of the outstanding
shares of Common Stock; provided that (A) the acquisition of the
Registrable Securities by such Person has been effected in accordance with
all applicable provisions of this Agreement; (B) the transferring Demand
Holder shall give the Company written notice at or prior to the time of
such transfer stating the name and address of the transferee and
identifying the securities with respect to which the rights under this
Agreement are being transferred; (C) such transferee shall agree in
writing, in form and substance reasonably satisfactory to the Company, to
be bound hereby; and (D) immediately following such transfer, the further
disposition of such securities by such transferee is limited or restricted
under Rule 144; provided, further, that, prior to the consummation of the
Initial Public Offering, no Person shall become a Demand Holder under this
clause (iii) unless such Person shall have become the Holder of all
Registrable Securities formerly owned by the transferring Demand Holder;
and
(iv) the Existing Stockholders, acting through the holders
of a majority of the Shares held by Existing Stockholders, provided that
all the Existing Stockholders' Registrable Securities are not, at the time
a request for registration pursuant to Section 5.2(a) is given by them,
eligible for sale by
19
them under Rule 144(k); and provided, further, that the Existing
Stockholders shall not be Demand Holders until 180 days after the IPO
Effectiveness Date.
"Holder" means any holder of Registrable Securities.
"Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a Registration Statement or
similar document in compliance with the Securities Act and the declaration or
ordering of effectiveness of such Registration Statement or document.
"Registrable Security" means, at any time, (i) any shares of Common
Stock held by a Stockholder or any other stockholder of the Company who has
registration rights with respect to such shares at such time pursuant to an
Other Agreement, (ii) any Convertible Security held by a Stockholder or any
other stockholder of the Company who has registration rights with respect to a
Convertible Security at such time pursuant to an Other Agreement and (iii) any
shares of Common Stock issuable upon conversion, exercise or exchange of any
such Convertible Security. For purposes of this Agreement, any Registrable
Securities shall cease to be Registrable Securities when (A) a Registration
Statement covering such Registrable Securities has been declared effective and
such Registrable Securities have been disposed of pursuant to such effective
Registration Statement, (B) such Registrable Securities shall have been disposed
of pursuant to Rule 144, (C) such Registrable Securities are sold by a Person in
a transaction in which the rights under the provisions of this Agreement are not
assigned, or (D) such Registrable Securities shall cease to be outstanding.
"Registration Expenses" means the expenses described in Section 5.7.
5.2 Demand Registration. (a) At any time and from time to time after
the earlier to occur of (i) the expiration of the Transfer Restriction Period
and (ii) the consummation by the Company of the Initial Public Offering, any
Demand Holder may request (the "Requesting Demand Holder"), subject to this
Article V, in a written notice to the Company that the Company file a
Registration Statement (or a similar document pursuant to any other statute then
in effect corresponding to the Securities Act) covering the registration of all
or a portion of such Requesting Demand Holder's and its Permitted Transferees'
Registrable Securities in the manner specified in such notice.
(b) Following receipt of any notice under Section 5.2(a), the
Company shall within ten days notify all other Holders of such request in
writing (together with any other information required by an Other Agreement) and
thereafter, as expeditiously as possible, use its reasonable efforts to cause to
be filed for registration under the Securities Act all Registrable Securities
that the Requesting Demand Holders and such other Holders have, within 15
Business Days after their receipt of such notice, requested to be registered in
accordance with the manner of
20
disposition specified in such notice by the Requesting Demand Holders; provided
that the Company shall not be required to register Registrable Securities
pursuant to:
(A) more than three Registration Statements in response
to requests pursuant to Section 5.2(a) by the Cypress Group and its
transferees that become Demand Holders under clause (iii) of the
definition thereof;
(B) more than three Registration Statements in response
to requests pursuant to Section 5.2(a) by Scotsman Partners, the
Designated Partners and the transferees thereof that become Demand Holders
under clause (iii) of the definition thereof; or
(C) more than one Registration Statement in response to
a request pursuant to Section 5.2(a) by the Existing Stockholders, acting
through the holders of a majority of the Shares held by Existing
Stockholders.
(c) if the Requesting Demand Holder intends to have the
Registrable Securities distributed by means of an underwritten offering, the
Company shall include such information in the written notice referred to in
Section 5.2(b). In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwritten offering and the inclusion of such
Holder's Registrable Securities in the underwritten offering to the extent
provided below. All Holders proposing to distribute Registrable Securities
through such underwritten offering shall enter into an underwriting agreement in
customary form with the underwriter or underwriters. The managing underwriter or
underwriters shall be selected by the Company, with the consent of the
Requesting Demand Holder, which consent shall not be unreasonably withheld. No
Holder shall be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Holder, the statements contained in the
Registration Statement that were supplied by such Holder in writing expressly
for inclusion therein, the Registrable Securities of such Holder and such
Holder's intended method of distribution and any other representations required
by law or reasonably required by the underwriters. If any Holder of Registrable
Securities disapproves of the terms of the underwriting, such Holder may elect
to withdraw all its Registrable Securities by written notice to the Company, the
managing underwriter and the Requesting Demand Holders. The securities so
withdrawn also shall be withdrawn from registration.
(d) Notwithstanding any provision of this Agreement to the
contrary, the Company shall not be required to effect a registration pursuant to
this Section 5.2 during the period starting with the date of filing by the
Company of, and ending on the date 180 days following the effective date of, (i)
any other Registration Statement requested under this Section 5.2 or (ii) any
other Registration Statement pertaining to a Public Offering of securities for
the account of the Company or on
21
behalf of Stockholders or stockholders under any Other Agreement, in each case
which the Demand Holders have been entitled to join pursuant to Section 5.3.
(e) A registration requested pursuant to this Section 5.2
shall not be deemed to have been effected for purposes of the proviso to Section
5.2(b) unless (i) the Registration Statement with respect thereto has been
declared effective by the SEC, (ii) such Registration Statement has remained
effective for the period set forth in Section 5.5(b), and (iii) the offering of
Registrable Securities pursuant to such registration is not subject to any stop
order, injunction or other similar order or requirement of the SEC; provided
that, if, with respect to any request for registration pursuant to this Section
5.2, the Requesting Demand Holder shall have withdrawn such request prior to the
Registration Statement with respect thereto being declared effective by the SEC,
then, notwithstanding clause (i) above, except if the withdrawal is due to
material adverse information relating specifically to the Company which the
Requesting Demand Holder did not know and reasonably should not have known,
unless and until such Requesting Demand Holder shall have paid or provided for
the payment of all Registration Expenses, such registration shall be deemed to
have been effected for purposes of the proviso to Section 5.2(b); provided,
further, that, if (A) with respect to any request for registration pursuant to
this Section 5.2, the Requesting Demand Holder shall have withdrawn such request
prior to the Registration Statement with respect thereto being declared
effective by the SEC and (B) with respect to any two previous requests for
registration pursuant to this Section 5.2, such Requesting Demand Holder shall
have withdrawn such requests prior to the Registration Statements with respect
thereto being declared effective by the SEC, then, notwithstanding clause (i)
above, whether or not such Requesting Demand Holder shall have paid or provided
for the payment of the Registration Expenses with respect to such request or any
previous requests, such registration shall be deemed to have been effected for
purposes of the proviso to Section 5.2(b).
(f) Notwithstanding any provision of this Section 5.2, if the
registration of which the Company gives notice pursuant to Section 5.2(b) is for
an underwritten offering and the managing underwriter or underwriters determine
in good faith that the total amount of Registrable Securities proposed to be
included in such offering is such as to adversely affect the success of such
offering, then the Company shall include in such registration the amount of
Registrable Securities which the Company is so advised can be sold in such
offering and the number of Registrable Securities of each Holder (including the
Demand Holders) seeking to have Registrable Securities registered in such
offering shall be reduced or limited pro rata among all such Holders (including
the Demand Holders) in the proportion that the number of Registrable Securities
sought to be registered by each such Holder bears to the total number of
Registrable Securities sought to be registered by all such Holders; provided
that, if the Requesting Demand Holder is not able to sell at least 50% of the
Registrable Securities it requested to be registered pursuant to this Section
5.2 because of the foregoing provisions of this Section 5.2(f) and such
Requesting Demand Holder has no other rights to request registration pursuant to
Section 5.2(a), such Requesting
22
Demand Holder (so long as it remains a Demand Holder) shall continue to have the
right to request one more registration statement to be filed on its behalf
pursuant to Section 5.2(a).
5.3 Incidental "Piggyback" Registration. (a) Subject to Section 5.8,
if at any time the Company determines that it shall file a Registration
Statement under the Securities Act (other than a Registration Statement on a
Form S-4 or S-8 or any successor or similar forms) with respect to its Common
Stock or any Convertible Security, the Company shall each such time promptly
give each Holder written notice of such determination setting forth the date on
which the Company proposes to file such Registration Statement and advising each
Holder of its right to have Registrable Securities included in such registration
and of any other information required by an Other Agreement applicable to such
Registrable Securities. Upon the written request of any Holder received by the
Company no later than 15 Business Days after receipt of the Company's notice,
the Company shall use its reasonable efforts to cause to be included for
registration under the Securities Act all of the Registrable Securities that
such Holder has so requested to be registered; provided that if, at any time
after giving written notice of its intention to register securities for sale by
the Company and prior to the effective date of the Registration Statement filed
in connection with such registration, the Company shall determine for any reason
not to proceed with the proposed registration of such securities, then the
Company may, at its election, give written notice of such determination to each
Holder of Registrable Securities and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any Demand
Holder to request such registration to be effected as a registration under
Section 5.2.
(b) Notwithstanding the provisions of Section 5.3(a), if the
registration of which the Company gives notice pursuant to Section 5.3(a) is for
an underwritten offering and the managing underwriter or underwriters determine
in good faith that the total amount of Registrable Securities and other
securities of the Company proposed to be included in such offering is such as to
adversely affect the success of such offering, then the Company shall include in
such registration the amount of securities which the Company is so advised can
be sold in such offering as follows:
(i) if such registration includes a registration of shares
of Common Stock or Convertible Securities to be offered for sale by the
Company, the Company shall include in such registration, first, all such
shares of Common Stock and Convertible Securities that the Company
proposed to be included in such registration, and, second, the Registrable
Securities requested to be included in such registration, pro rata among
the Holders in the proportion that the number of Registrable Securities
sought to be registered by
23
each Holder bears to the total number of Registrable Securities sought to
be registered by all Holders; and
(ii) if such registration is exclusively a registration of
Registrable Securities to be offered for sale by Holders and not by the
Company, then the number of Registrable Securities to be included in such
registration shall be reduced or limited in the same manner as provided in
Section 5.2(f) so that only those Registrable Securities which the Company
is so advised can be sold in such offering are included in such
registration.
(c) Notwithstanding the provisions of Section 5.3(a), if the
Registration Statement the Company determines to file is for its Initial Public
Offering, no Holder shall be permitted to include its Registrable Securities in
such Registration Statement, and the Company shall not be required to comply
with the provisions of Sections 5.3(a) and (b), unless the Company, in its sole
discretion, determines to permit Registrable Securities to be registered
pursuant to such Registration Statement (in which case the Holders will have the
right to participate in such Registration Statement in accordance with this
Section 5.3), without prejudice, however, to the rights of any Demand Holder to
request registration under Section 5.2.
5.4 No "Shelf" Registration Under Rule 415. Notwithstanding any
provision of this Agreement to the contrary, the Company shall not be required
to effect any registration of Registrable Securities pursuant to this Agreement
for sale on a delayed or continuous basis in reliance on Rule 415 of the
Securities Act, or any successor rule, unless the Company, in its sole
discretion, determines to permit such a registration.
5.5 Obligations of the Company. (a) Whenever required under Section
5.2 or Section 5.3 to use its reasonable efforts to effect the registration of
any Registrable Securities, the Company shall, as expeditiously as practicable:
(i) prepare and file with the SEC a Registration Statement
with respect to such Registrable Securities and use its reasonable efforts
to cause such Registration Statement to become and remain effective for
the period of the distribution contemplated thereby determined as provided
in Section 5.5(b);
(ii) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such Registration Statement, and furnish to the
Holders of such Registrable Securities copies of any such amendments and
supplements prior to their being used or filed with the SEC;
24
(iii) furnish to the Holders of such Registrable Securities
such numbers of copies of the Registration Statement and the prospectus
included therein (including each preliminary prospectus and any amendments
or supplements thereto in conformity with the requirements of the
Securities Act) and such other documents and information as they may
reasonably request and make available for inspection by the parties
referred to in Section 5.5(a)(iv) below such financial and other
information and books and records of the Company, and cause the officers,
directors, employees, counsel and independent certified public accountants
of the Company to respond to such inquiries, as shall be reasonably
necessary, in the judgment of the respective counsel referred to in such
Section, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act;
(iv) provide (A) the Holders of the Registrable Securities to
be included in such Registration Statement, (B) the underwriters (which
term, for purposes of this Agreement, shall include a person deemed to be
an underwriter within the meaning of Section 2(11) of the Securities Act),
if any, thereof, (C) the sales or placement agent, if any, therefor, (D)
counsel for such underwriters or agent, and (E) not more than one counsel
for all the Holders of such Registrable Securities, the opportunity to
participate in the preparation of such Registration Statement, each
prospectus included therein or filed with the SEC, and each amendment or
supplement thereto;
(v) use its reasonable efforts to register or qualify the
Registrable Securities covered by such Registration Statement under such
securities or blue sky laws of such jurisdictions within the United States
and Puerto Rico as shall be reasonably appropriate for the distribution of
such Registrable Securities; provided, however, that the Company shall not
be required in connection therewith or as a condition thereto to register
or qualify to do business in, or to file a general consent to service of
process in any jurisdiction wherein it would not but for the requirements
of this Section 5.5(a)(v) be obligated to do so, or to take any action
that would subject it to taxation in an amount greater than it would be
subject but for the requirements of this paragraph; and provided, further,
that the Company shall not be required to qualify such Registrable
Securities in any jurisdiction in which the securities regulatory
authority requires that any Holder submit its Registrable Securities to
the terms, provisions and restrictions of any escrow, lockup or similar
agreement(s) for consent to sell Registrable Securities in such
jurisdiction unless such Holder agrees to do so;
(vi) promptly notify the selling Holders of Registrable
Securities, the sales or placement agent, if any, therefor and the
managing underwriter or underwriters, if any, thereof and confirm such
advice in writing, (A) when such Registration Statement or the prospectus
included therein or any prospectus amendment or supplement or
post-effective
25
amendment has been filed, and, with respect to such Registration Statement
or any post-effective amendment, when the same has become effective, (B)
of any comments by the SEC or by any Blue Sky or securities commissioner
or regulator of any state with respect thereto or any request by the SEC
for amendments or supplements to such Registration Statement or prospectus
or for additional information, (C) of the issuance by the SEC of any stop
order suspending the effectiveness of such Registration Statement or the
initiation or threatening of any proceedings for that purpose, (D) if at
any time the representations and warranties of the Company contained in
any underwriting agreement or other customary agreement cease to be true
and correct in all material respects or (E) of the receipt by the Company
of any notification with respect to the suspension of the qualification of
the Registrable Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose;
(vii) use its reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of such Registration Statement or
any post-effective amendment thereto at the earliest practicable date;
(viii) promptly notify each selling Holder of Registrable
Securities, at any time when a prospectus relating to such Registrable
Securities is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included or
incorporated by reference in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make, in
light of the circumstances under which they were made, the statements
therein not misleading, and at the request of any such Holder promptly
prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make, in light of the circumstances under which they were made, the
statements therein not misleading;
(ix) furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to Section 5.2 or Section
5.3, if the method of distribution is by means of an underwriting, on the
date that the Registrable Securities are delivered to the underwriters for
sale pursuant to such registration, or if such Registrable Securities are
not being sold through underwriters, on the date that the Registration
Statement with respect to such Registrable Securities becomes effective,
(A) a signed opinion, dated such date, of the independent legal counsel
representing the Company for the purpose of such registration, addressed
to the underwriters, if any, and if such Registrable Securities are not
being sold through underwriters, then to the
26
Holders making such request, as to such matters as such underwriters or
the Holders holding a majority of the Registrable Securities included in
such registration, as the case may be, may reasonably request and as would
be customary in such a transaction; and (B) letters, dated such date and
the date the offering is priced, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and if
such Registrable Securities are not being sold through underwriters, then
to the Holders making such request and, if such accountants refuse to
deliver such letters to such Holders, then to the Company (x) stating that
they are independent certified public accountants within the meaning of
the Securities Act and that, in the opinion of such accountants, the
financial statements and other financial data of the Company included or
incorporated by reference in the Registration Statement or the prospectus,
or any amendment or supplement thereto, comply as to form in all material
respects with the applicable accounting requirements of the Securities Act
and (y) covering such other financial matters (including information as to
the period ending not more than five (5) business days prior to the date
of such letters) with respect to the registration in respect of which such
letter is being given as such underwriters or the Holders holding a
majority of the Registrable Securities included in such registration, as
the case may be, may reasonably request and as would be customary in such
a transaction;
(x) enter into customary agreements (including if the
method of distribution is by means of an underwriting, an underwriting
agreement in customary form, including, without limitation, customary
indemnification provisions substantially consistent with Section 5.10 and,
to the extent required by the underwriters, customary lockup provisions
substantially consistent with Section 5.11) and take such other actions as
are reasonably required in order to expedite or facilitate the disposition
of the Registrable Securities to be so included in the Registration
Statement;
(xi) use its reasonable efforts to obtain the consent or
approval of each governmental agency or authority, whether federal, state
or local, which may be required to effect registration or the offering or
sale in connection therewith or to enable the selling Holder or Holders to
offer, or to consummate the disposition of, their Registrable Securities;
(xii) cooperate with the Holders of the Registrable
Securities and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall conform to the
requirements of the principal securities exchange or market on which the
Registrable Securities are then listed or admitted to trading and shall
not bear any restrictive legends; and, in the case of an underwritten
offering, enable such Registrable Securities to be in such denominations
and registered in such names as the managing underwriters may
27
request at least two business days prior to any sale of the Registrable
Securities;
(xiii) otherwise comply with all applicable rules and
regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, but not later than eighteen months after
the effective date of the Registration Statement, an earnings statement
covering the period of at least twelve months beginning with the first
full month after the effective date of such Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
(xiv) use its reasonable efforts to list the Registrable
Securities covered by such Registration Statement with any securities
exchange or quotation system on which the Common Stock is then listed or
quoted; and
(xv) use its reasonable efforts to make available the
executive officers of the Company to participate with the Holders of
Registrable Securities and any underwriters in any "road shows" or other
selling efforts that may be reasonably requested by the Holders in
connection with the methods of distribution for the Registrable
Securities.
(b) For purposes of Section 5.5(a), and with respect to
registration required pursuant to Section 5.2, (i) the period of distribution of
Registrable Securities in a firm commitment underwritten public offering shall
be deemed to extend until each underwriter has completed the distribution of all
securities purchased by it and (ii) the period of distribution of Registrable
Securities in any other registration shall be deemed to extend until the earlier
of the sale of all Registrable Securities covered thereby and 180 days (or such
shorter period as may be required in the underwriting agreement) after the
effective date thereof.
(c) Each Holder of Registrable Securities agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5.5(a)(viii), such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 5.5(a)(viii)
and, if so directed by the Company, such Holder will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice; provided, however, that any
period of time during which a Holder must discontinue disposition of Registrable
Securities shall not be included in the determination of a period of
distribution for purposes of Section 5.5(b).
5.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the
28
Holders participating in a registration shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them, and
the intended method of disposition of such securities as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.
5.7 Expenses of Registration. Except as otherwise provided in
Section 5.2, all fees, costs and expenses incurred in connection with each
registration or attempted registration pursuant to Section 5.2 or 5.3, excluding
underwriters' discounts and commissions, but including without limitation all
registration, filing and qualification fees, word processing, duplicating,
printers' and accounting costs and fees (including the expenses of any special
audits or "cold comfort" letters required by or incident to the Company's
performance of its obligations under Section 5.5), fees of the National
Association of Securities Dealers, Inc. (the "NASD"), listing fees, fees and
expenses of complying with state securities or blue sky laws, fees and
disbursements of counsel for the Company, fees and disbursements of underwriters
customarily paid by the issuers or sellers of securities and fees and expenses
of the Holders participating therein (including counsel to the Holders), shall
be paid by the Company; provided that the Company shall not be required to pay
the fees and expenses of more than one counsel for all Holders participating
therein.
5.8 Underwriting Requirements. In connection with any underwritten
offering, the Company shall not be required under Section 5.3 to include
Registrable Securities in such underwritten offering unless the Holders of such
Registrable Securities accept the terms of the underwriting of such offering
that have been reasonably agreed upon between the Company, the Requesting Demand
Holder and the underwriters selected in accordance with this Agreement.
5.9 Rule 144 Information. With a view to making available the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees that, after such time as the Company shall have consummated the Initial
Public Offering:
(a) it will make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act;
(b) use its reasonable efforts to file with the SEC in a
timely manner all reports and other documents required to be filed by the
Company under the Securities Act and the Exchange Act;
(c) furnish to each Holder of Registrable Securities forthwith
upon written request (i) a written statement by the Company as to its compliance
with the reporting requirements of Rule 144, the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of the Company,
and (iii) such other reports and documents so filed by the Company as such
Holder may reasonably request in availing itself of Rule 144; and
29
(d) it will, upon the reasonable request of a Stockholder that
would be a Demand Holder but for the ability of such Stockholder to dispose of
Registrable Securities under Rule 144(k), provide reasonable cooperation in
connection with the marketing of a "block" transfer of Registrable Securities by
such Person pursuant to Rule 144; provided that the Company shall not be
required to expend an unreasonable amount of time or effort in connection
therewith and shall be reimbursed for its out-of-pocket expenses, if any,
incurred in connection therewith (it being agreed that the Company shall not be
required to participate in any "road show" in connection with any such block
transfer).
5.10 Indemnification. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) The Company shall indemnify and hold harmless each Holder,
such Holder's directors and officers, and each person, if any, who controls such
Holder within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) to which they may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
proceedings in respect thereof) arise out of or are based on any untrue or
alleged untrue statement of a material fact contained in such Registration
Statement, preliminary prospectus, final prospectus or amendments or supplements
thereto or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company shall
not be liable to any Holder, or such Holder's directors or officers or
controlling persons, in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in connection with such Registration Statement, preliminary prospectus,
final prospectus or amendments or supplements thereto, in conformity with
written information relating to such Holder furnished to the Company by such
Holder expressly for inclusion therein in connection with such registration;
and, provided, further, that as to any preliminary prospectus or any final
prospectus this indemnity agreement shall not inure to the benefit of any
Holder, or such Holder's directors or officers or controlling persons, on
account of any losses, claims, damages or liability arising from the sale of
Registrable Securities to any person by such Holder if such Holder or its
representatives failed to send or give a copy of the final prospectus or a
prospectus supplement, as the case may be (excluding documents incorporated by
reference therein), as the same may be amended or supplemented, to that person
within the time required by the Securities Act, and the untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact in such preliminary prospectus or final prospectus was
corrected in the final prospectus or such prospectus supplement, as the case may
be (excluding documents incorporated by reference therein), unless
30
such failure resulted from non-compliance by the Company with Section 5.5(c).
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any such Holder, or such Holder's
directors or officers or controlling persons, and shall survive the transfer of
such securities by such Holder.
(b) Each Holder requesting or joining in a registration,
severally and not jointly, shall indemnify and hold harmless the Company, each
of its directors and officers and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to the Holders but only with reference to written information relating to such
Holder furnished to the Company by such Holder expressly for inclusion in
connection with such registration; provided, however, that the liability of each
Holder hereunder shall not exceed the net proceeds received by such Holder from
the sale of Registrable Securities covered by such registration.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either Section 5.10(a) or (b), such person
(the "indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by the Holders, in the case
of parties indemnified pursuant to Section 5.10(a), and by the Company, in the
case of parties indemnified pursuant to Section 5.10(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there shall be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and
31
expenses of counsel as contemplated by the second and third sentences of this
Section 5.10(c), the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(d) If the indemnification provided for in Section 5.10(a) or
(b) shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 5.10(a) or 5.10(b) in respect of any loss,
claim, damage, liability or action referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage, liability or action, in such proportion as shall be appropriate
to reflect the relative fault of the Company on the one hand and such Holders on
the other with respect to the statements or omissions which resulted in such
loss, claim, damage, liability or action, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or such Holders, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Holders agree that it would not be just and
equitable if contributions pursuant to this Section 5.10(d) were to be
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage,
liability or action, referred to above in this Section 5.10(d) shall be deemed
to include, for purposes of this Section 5.10(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5.10(d), no Holder shall be required to contribute any amount in excess
of the amount of the net proceeds received by such Holder from the sale of
Registrable Securities covered by such Registration Statement. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
5.11 Lockup. (a) Each Holder (other than an Existing
Stockholder) shall, in connection with any registration of the Company's
securities,
32
upon the request of the Company or the underwriters managing any underwritten
offering of such securities, agree in writing not to effect any sale,
disposition or distribution of any Registrable Securities (other than those
included in the registration) without the prior written consent of the Company
or the underwriter for such period of time (not to exceed 180 days) from the
effective date of such registration as the Company or the underwriters may
specify.
(b) Each Existing Stockholder shall, in connection with the
first three registrations of the Company's securities (including the Initial
Public Offering) after the date hereof, upon the request of the Company or the
underwriters managing any underwritten offering of such securities, agree in
writing not to effect any sale, disposition or distribution of any Registrable
Securities (other than those included in the registration) without the prior
written consent of the Company or the underwriter for such period of time (not
to exceed (i) in the case of the Initial Public Offering, 180 days or (ii) in
the case of each of the first two registrations of the Company's securities
effected after the Initial Public Offering, 90 days, or, in either case referred
to in clause (i) or (ii) above, such shorter period of time as the Investor
Group Stockholders shall agree not to effect any sale, disposition or
distribution of any Registrable Securities (other than those included in the
registration)) from the effective date of such registration as the Company or
the underwriters may specify.
(c) The provisions of Sections 5.11(a) and (b) shall not be
applicable to any Holder, including any Existing Stockholder, that owns less
than 2% of the outstanding shares of Common Stock.
5.12 Transfer of Certain Registration Rights. The registration
rights (other than the right of a Demand Holder to request registration under
Section 5.2, which shall be transferable only in accordance with the definition
thereof) of any Holder under this Agreement with respect to the Registrable
Securities of such Holder may be transferred to any Person who acquires any
Registrable Securities of such Holder; provided that (i) the transfer of the
Registrable Securities to such Person is made in accordance with all applicable
provisions of this Agreement; (ii) the transferring Holder shall give the
Company written notice at or prior to the time of such transfer stating the name
and address of the transferee and identifying the securities with respect to
which the rights under this Agreement are being transferred; (iii) such
transferee shall agree in writing, in form and substance reasonably satisfactory
to the Company, to be bound as a Holder by the provisions of this Article V; and
(iv) immediately following such transfer, the further disposition of such
securities by such transferee is restricted under the Securities Act.
5.13 Selection of Counsel. In connection with any registration of
Registrable Securities pursuant to Sections 5.2 or 5.3, the Holders of a
majority of the Registrable Securities covered by any such registration may
select one counsel to represent all Holders of Registrable Securities covered by
such registration.
33
ARTICLE VI
AFTER-ACQUIRED SECURITIES
Except as otherwise provided in Section 8.9(b), all of the
provisions of this Agreement shall apply to all of the Shares now owned or that
may be issued or transferred hereafter to a Stockholder in consequence of any
additional issuance, purchase, exchange or reclassification of any of the Shares
(including without limitation, upon the exercise of any option or warrant),
corporate reorganization, or any other form of recapitalization, consolidation,
merger, share split or share dividend, or that are acquired by a Stockholder in
any other manner, and, in the case of any such event, appropriate adjustment
shall be made to any number of Shares or Registrable Securities hereunder to
take account of such event.
ARTICLE VII
STOCK CERTIFICATE LEGEND
7.1 Share Certificates. (a) The Shareholders agree that each
certificate representing the Shares now or hereafter held by a Stockholder shall
be endorsed with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A CERTAIN INVESTOR STOCKHOLDERS AGREEMENT DATED AS OF MAY 22, 1997, AS THE
SAME MAY BE AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME
IN ACCORDANCE WITH ITS TERMS, WHICH PROVIDES, AMONG OTHER THINGS, FOR
CERTAIN RESTRICTIONS ON THE (I) VOTING AND (II) SALE, TRANSFER, PLEDGE,
HYPOTHECATION, OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES
OF THE COMPANY AND WILL BE FURNISHED UPON REQUEST TO THE PURCHASER OR
PROSPECTIVE PURCHASER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE."
ARTICLE VIII
MISCELLANEOUS
8.1 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice
34
shall be deemed given when so delivered personally, telecopied or sent by
certified, registered or express mail or, if mailed, five days after the date of
deposit in the United States mail, as follows:
If to the Company:
Scotsman Holdings, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: President
If to the Cypress Group:
Cypress Merchant Banking Partners L.P.
Cypress Offshore Partners L.P.
c/o The Cypress Group L.L.C.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
If to Scotsman Partners:
Scotsman Partners, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxx and Xxx Xxxxxx
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
35
If to Odyssey:
Odyssey Partners, L.P.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx
with a copy to:
Weil, Gotshal & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Simeon Gold, Esq.
If to BPG:
Xx. Xxxxx X. Xxxxxxx
c/o Scotsman Holdings, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
with a copy to:
Piper & Xxxxxxx
Xxxxxxx Center South
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxxxxxx, Esq.
If to BTIP:
BT Investment Partners, Inc.
1 Bankers Trust Plaza
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxx
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
36
Any party may, by notice given in accordance with this Section 8.1, designate
another address or person for receipt of notices hereunder.
8.2 Financial Information. The Company will promptly furnish to each
of the Holders copies of the monthly "Presidents Report" containing unaudited
financial information or comparable monthly financial information, in any case
to the extent provided to the Company's Board of Directors in the ordinary
course of business, it being understood and agreed that (a) the Holders shall
hold such information in strict confidence and (b) the Holders shall execute and
deliver to the Company such supplemental confidentiality undertakings with
respect to such information as the Company may reasonably request at any time
and from time to time.
8.3 Authority and Effect of Agreement. Each of the Company and each
Stockholder represents and warrants to the other parties as follows: (a) such
party has all requisite power, authority and legal capacity to enter into this
Agreement and perform such party's obligations hereunder; (b) if such party is a
corporation or partnership, the execution and delivery of this Agreement by such
party and the performance of such party's obligations hereunder have been duly
authorized by all necessary corporate or partnership action, as the case may be,
on the part of such party; and (c) this Agreement has been duly executed and
delivered by and (assuming this Agreement constitutes a valid and binding
agreement of the other parties) constitutes a valid and binding obligation of
such party, enforceable against such party in accordance with its terms, except
to the extent enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to or affecting creditors' rights
generally.
8.4 Amendment and Waiver. (a) Any amendment, supplement or
modification of or to any provision of this Agreement, any waiver of any
provision of this Agreement, and any consent to any departure by any party from
the terms of any provision of this Agreement, shall be effective:
(i) only if it is made or given in writing and signed by (A)
Investor Group Stockholders holding at least 75% of the Shares owned
by all Stockholders and (B) each of the Cypress Group and Scotsman
Partners, so long as it holds at least 50% of the Shares owned by it
on the date hereof; and
(ii) only in the specific instance and for the specific
purpose for which made or given;
provided that no such amendment, supplement or modification of or to any
provision of this Agreement, waiver of any provision of this Agreement, or
consent to any departure by any party from the terms of any provision of this
Agreement, shall be effective as to any Stockholder which shall not have
consented thereto in writing if the rights of such Stockholder under (x) Article
I, II, III, V or VI, (y) Section 4.8 or (z)
37
this proviso to Section 8.4(a) shall have been adversely affected thereby in any
material respect; and, provided, further, that the provisions of Article IV
(other than Sections 4.1 and 4.8) may be amended by the unanimous written
consent of the Investor Group Stockholders.
(b) No failure or delay on the part of any party hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the parties
hereto at law, in equity or otherwise.
8.5 Specific Performance. The parties hereto intend that each of the
parties has the right to seek damages or specific performance in the event that
any other party hereto fails to perform such party's obligations hereunder.
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.
8.6 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
8.7 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
8.8 Entire Agreement. This Agreement supersedes any other agreement,
whether written or oral, that may have been made or entered into between the
parties hereto, and constitutes the entire agreement by the parties hereto,
related to the matters specified herein.
8.9 Term of Agreement. (a) This Agreement shall become
effective upon the execution hereof and shall terminate upon the earlier of:
(i) the consummation by the Company of the Initial Public
Offering; and
(ii) ten years from the date hereof or such earlier date as
the Stockholders shall unanimously agree in writing to terminate this
Agreement;
38
provided, however, that the provisions of Article V shall survive any such
termination until such time as there shall no longer be any Registrable
Securities owned by any Demand Holder.
(b) Notwithstanding Section 8.9(a), this Agreement shall
terminate permanently as to any Stockholder at such time as such Stockholder no
longer owns any Shares; provided that any Permitted Transferee or other Person
that holds any Shares previously held by a Stockholder and has agreed to be
bound hereby in accordance with the terms hereof in connection with the Transfer
to such Permitted Transferee or other Person shall continue to be bound hereby
as a Stockholder with respect to such Shares.
8.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
8.11 Consent to Jurisdiction and Service of Process. Any claim
arising out of or relating to this Agreement may be instituted in Federal or
State court in the State of Delaware (unless personal or subject matter
jurisdiction cannot be obtained therein), and each party agrees not to assert,
by way of motion, as a defense or otherwise, in any such claim, that it is not
subject personally to the jurisdiction of such court, that the claim is brought
in an inconvenient forum, that the venue of the claim is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.
Each party further irrevocably submits to the jurisdiction of such courts in any
such claim. Any and all service of process and any other notice in any such
claim shall be effective against any party if given personally or by registered
or certified mail, return receipt requested, or by any other means of mail that
requires a signed receipt, postage prepaid, mailed to such party as herein
provided. Nothing herein contained shall be deemed to affect the right of any
party to serve process in any manner permitted by law or to commence legal
proceedings or otherwise against any other party in any other jurisdiction.
8.12 Further Assurances. Each of the parties shall, and shall cause
their respective Affiliates to, execute such instruments and take such action as
may be reasonably required or desirable to carry out the provisions hereof and
the trans actions contemplated hereby.
8.13 Successors and Assigns; Power of Certain Representatives. (a)
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns; provided that the provisions
of Article IV, other than Section 4.1, shall inure to the benefit of the
Investor Group Stockholders and their Permitted Transferees only. This Agreement
is not assignable except in connection with a Transfer of Shares in accordance
with this Agreement,
39
except that Scotsman Partners may assign its rights hereunder to Group 31, Inc.,
its general partner.
(b) With respect to the Cypress Group and the SP Group, each
party hereunder shall be entitled to rely on any notice, consent, waiver,
approval or action given or taken by Stockholders within the Cypress Group or
the SP Group, as the case may be, which represent that they then own a majority
of the Shares owned by the Cypress Group or the SP Group, as the case may be,
and any such notice, consent, waiver, approval or action so given or made shall
be binding upon the Cypress Group or the SP Group, as the case may be.
8.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
40
IN WITNESS WHEREOF, the parties hereto have signed and delivered
this Agreement as of the date first above written.
SCOTSMAN HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
CYPRESS MERCHANT BANKING PARTNERS
L.P.
By: Cypress Associates L.P.,
its general partner
By: Cypress Merchant Banking Partners L.L.C.,
its general partner
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Member
CYPRESS OFFSHORE PARTNERS L.P.
By: Cypress Associates L.P.,
its general partner
By: Cypress Merchant Banking Partners L.L.C.,
its general partner
By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Member
41
SCOTSMAN PARTNERS, L.P.
By: Group 31, Inc., its general partner
By: /s/ Xxxxx X. Xxxxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
ODYSSEY PARTNERS, L.P.
By: /s/ Xxxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxx
Title: General Partner
/s/ Xxxxx X. Xxxxxxx
---------------------------------------
XXXXX X. XXXXXXX
BT INVESTMENT PARTNERS, INC.
By: /s/ Xxxxxxx X. Xxxxx, III
---------------------------------------
Name: Xxxxxxx X. Xxxxx, III
Title: Managing Director
42
