1
EXHIBIT 10.4
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (this "Agreement") is made and entered
into as of May 9, 1997, by and among Colorado Prime Holdings, Inc., a Delaware
corporation (the "Company"), Xxxxxx Equity Investors III, L.P., a Delaware
limited partnership ("Xxxxxx"), and certain other shareholders of the Company
listed on Exhibit A hereto (individually, a "Manager" and collectively, the
"Managers").
WITNESSETH:
WHEREAS, pursuant to a Stock Purchase Agreement dated as of May 9, 1997
(the "Stock Purchase Agreement"), by and among Colorado Prime Acquisition Corp.
("XXXX"), Xxxxxx and the Managers, Xxxxxx and the Managers purchased from XXXX,
as of May 9, 1997, 150,000 shares of the common stock, par value $0.01 per
share, of XXXX (the "Common Stock");
WHEREAS, pursuant to a Merger Agreement, dated as of March 25, 1997,
between Xxxxxx and KPC Holdings Corporation ("Holdings"), simultaneously with
the transactions contemplated by the Stock Purchase Agreement, XXXX will be
merged with and into Holdings, following which Holdings will be the surviving
corporation, each share of Common Stock shall be converted into a share of
common stock of Holdings (and from and after such time shall be the "Common
Stock" for all purposes hereunder), and Holdings shall be renamed Colorado Prime
Holdings, Inc.
WHEREAS, in connection with such purchase of Common Stock, the Company,
Xxxxxx and the Managers have determined that it is in their respective best
interests to enter into, and perform under, this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the covenants set
forth herein and intending to be legally bound hereby, the parties hereto agree
as follows:
2
-2-
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, in addition to terms defined elsewhere
herein, the following terms when used herein shall have the following meanings:
1.1 "Affiliate," with respect to a party, shall mean (i) any Person
that directly, or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under Common Control with, such party or (ii) a general
partner, limited liability company manager or similar Control person of such
party.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Business Day" shall mean any calendar day which is not a Saturday,
Sunday or legal holiday or a day on which banking institutions in the State of
New York are permitted or required to be closed.
1.4 "Company Indemnitees" shall have the meaning ascribed to such term
in Section 6.5(b) herein.
1.5 "Company Notice" shall have the meaning ascribed to such term in
Section 3.2 herein.
1.6 "Company Period" shall have the meaning ascribed to such term in
Section 3.2 herein.
1.7 "Company's 1997 Stock Option Plan" shall have the meaning ascribed
to such term in Section 11.15 herein.
1.8 "Consummation Notice" shall have the meaning ascribed to such term
in Section 4.3 herein.
1.9 "Control" (including "Controlling," "Controlled by," and "under
Common Control with") shall
3
-3-
mean the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
1.10 "CPC" shall mean Colorado Prime Corporation, a Delaware
Corporation and a wholly-owned subsidiary of the Company.
1.11 "Declination Notice" shall have the meaning ascribed to such term
in Section 3.2 herein.
1.12 "Disability" shall mean (i) incapacity due to physical or mental
illness or injury where the Manager shall have been absent from his full time
duties at CPC for four (4) consecutive months; or (ii) the Manager's health
should become impaired to an extent that makes the continued performance of his
duties at CPC hazardous to his physical or mental health or his life, provided
that the Manager shall have furnished CPC with a written statement from a
qualified doctor to such effect and provided further, that, at CPC's request
made within thirty (30) days of the date of such written statement, the Manager
shall submit to an examination by a doctor selected by CPC who is reasonably
acceptable to the Manager or the Manager's doctor and such doctor shall have
concurred in the conclusion of the Manager's doctor.
1.13 "Drag-Along Notice" shall have the meaning ascribed to such term
in Section 5.2 herein.
1.14 "Drag-Along Sale" shall have the meaning ascribed to such term in
Section 5.1(a) herein.
1.15 "Drag-Along Sale Date" shall have the meaning ascribed to such
term in Section 5.2 herein.
1.16 "Election Period" shall have the meaning ascribed to such term in
Article 8 herein.
1.17 "Election Notice" shall have the meaning ascribed to such term in
Article 8 herein.
4
-4-
1.18 "Equity Securities" shall mean (i) any securities of the Company
having voting rights with respect to the election of the Board not contingent
upon default, including, but not limited to, shares of Common Stock, (ii) any
securities evidencing any voting equity ownership interest in the Company, and
(iii) any securities convertible into or exercisable or exchangeable for any of
the foregoing securities.
1.19 "Exercising Party" shall have the meaning ascribed to such term in
Article 8 herein.
1.20 "Family Members," with respect to an individual, shall mean such
individual's spouse, parents, siblings and children.
1.21 "Final Prospectus" shall have the meaning ascribed to such term in
Section 6.5(a) herein.
1.22 "Good Cause" shall mean a termination based on a Manager's (i)
willful misconduct or gross negligence in the performance or intentional
nonperformance (continuing for ten (10) days after receipt of written notice of
need to cure) of any of the Manager's material duties and responsibilities for
CPC; (2) willful dishonesty, fraud, alcohol or illegal drug abuse, or misconduct
with respect to the business or affairs of CPC, which materially and adversely
affects the operations, prospects or reputation of CPC; or (3) conviction of a
felony or other crime involving moral turpitude.
1.23 "Good Reason" shall mean the continuance of any of the following
after ten (10) days prior written notice by the Manager to CPC and to Xxxxxx,
specifying the basis for such Manager's having Good Reason to terminate such
Manager's employment with CPC:
(i) a material adverse change in the Manager's status, title,
position or responsibilities with CPC;
(ii) the assignment to the Manager of any
5
-5-
duties materially and adversely inconsistent with the Manager's
position at CPC as of the date of this Agreement (or such other
position to which he may be promoted);
(iii) the Manager's removal from, or failure to be reappointed
or reelected to, the Manager's position under such Manager's written
employment agreement (if applicable), except where a Manager's
employment with CPC under such a written employment agreement has been
terminated by such Manager's death, Disability, or for Good Cause; or
(iv) any other material breach by CPC of a Manager's written
employment agreement (if applicable), including the regular failure to
pay the Manager on a timely basis the amounts to which he is entitled
under such a written employment agreement.
1.24 "Indemnitees" shall have the meaning ascribed to such
term in Section 6.5(a) herein.
1.25 "Indemnified Party" shall have the meaning ascribed to
such term in Section 6.5(c) herein.
1.26 "Indemnifying Party" shall have the meaning ascribed to
such term in Section 6.5(c) herein.
1.27 "Indenture" shall mean the Indenture dated as of May 9,
1997, by and among CPC and the Bank of New York, as Indenture Trustee,
relating to the Notes.
6
-6-
1.28 "IPO Event" shall mean the consummation of an
underwritten public offering, pursuant to an effective registration
statement under the Securities Act, that is underwritten by one or more
nationally-recognized investment banking firms and results in the
Company receiving not less than $25,000,000 in aggregate cash proceeds
from such offering.
1.29 "Manager's Cost" shall mean the dollar amount that such
Manager would have received pursuant to the Merger Agreement for such
Manager's shares of Management Common Stock of Holdings had such
Manager not exchanged such shares for shares of Common Stock pursuant
to the Stock Purchase Agreement.
1.30 "Manager's Representative" shall have the meaning
ascribed to such term in Section 8.1 herein.
1.31 "Market Value" shall mean, as of any date prior to an IPO
Event, seven and one-half (7.5) times consolidated EBIT of CPC for the
four preceding fiscal quarters for which financial statements have been
delivered to the holders of the Notes in accordance with the terms of
Section 4.12 of the Indenture, minus the aggregate amount of
outstanding indebtedness of CPC as of the last day of such four fiscal
quarters.
1.32 "Merger Agreement" shall mean the merger agreement, dated
as of March 25, 1997, between Xxxxxx and Holdings.
1.33 "Notes" shall mean the $100,000,000 12 1/2% Senior Notes
of Colorado Prime Corporation due 2004.
1.34 "Operating Income Projections" shall have the meaning
ascribed to such term in Schedule 5.2 to the Merger Agreement.
7
-7-
1.35 "Option" shall have the meaning ascribed to such term in
Section 11.15 herein.
1.36 "Optionees" shall have the meaning ascribed to such term in
Section 11.15 herein.
1.37 "Permitted Transfer" shall mean a Transfer of Common Stock by
a Shareholder to (i) one or more Family Members of such Shareholder or
(ii) a trust solely for the benefit of one or more Family Members of
such Shareholder; provided that, prior to any such Transfer, each
transferee shall agree in writing, in a form satisfactory to the
Company and Xxxxxx, that such transferee shall receive and hold such
Common Stock subject to the provisions of this Agreement.
1.38 "Permitted Transferee" shall mean any Person receiving Common
Stock pursuant to a Permitted Transfer and any such Permitted
Transferee shall be included within the definition of "Shareholder" for
purposes of this Agreement.
1.39 "Person" shall mean an individual, partnership, corporation,
business trust, joint stock company, trust unincorporated association,
joint venture, or other entity of whatever nature.
1.40 "Pro Rata Share" shall mean the holder's pro rata share of
the outstanding Equity Securities which shall be a fraction calculated
by dividing (i) the number of shares of Common Stock held by the holder
as of the applicable date plus the number of shares of Common
8
-8-
Stock issuable upon conversion, exercise or exchange of all other
outstanding Equity Securities held by the holder as of the applicable
date, by (ii) the total number of shares of Common Stock outstanding as
of such date plus the total number of shares of Common Stock issuable
upon conversion, exercise or exchange of all other outstanding Equity
Securities as of such date.
1.41 "Register," "Registered" and "Registration" as used herein
shall refer to a registration of Registrable Securities effected by
filing with the SEC a registration statement in compliance with the
Securities Act and the declaration or ordering by the SEC of
effectiveness of such registration statement.
1.42 "Registrable Securities" shall mean shares of Common Stock
issued pursuant to the Stock Purchase Agreement, shares of Common Stock
issued pursuant to the Company's 1997 Stock Option Plan or any other
stock option plan or employee benefit or other incentive plan which may
be adopted by the Company after the date hereof and shares of Common
Stock issued to a Shareholder upon the exercise of any options or upon
the exercise of any preemptive rights granted by the Company with
respect to any shares of Common Stock. As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities
when (i) such securities shall have been registered under the
Securities Act, the registration statement with respect to the sale of
such securities shall have become effective under the Securities Act
and such securities shall have been disposed of pursuant to such
effective registration statement, (ii) such securities shall have been
distributed pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act, (iii) such securities shall have been
otherwise transferred, if new certificates or other evidence of
ownership for them not bearing a legend restricting further transfer
and not subject to any stop transfer order or other restrictions on
transfer shall have been delivered by the Company, and subsequent
disposition of such securities shall not require
9
-9-
Registration or qualification of securities under the Securities Act or
any state securities laws then in force, or (iv) such securities shall
cease to be outstanding.
1.43 "Retirement" shall mean a Manager's retirement upon the later
of (i) such Manager attaining the age of sixty-five (65), or (ii) two
(2) years after the date of this Agreement.
1.44 "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
1.45 "Shareholders" shall mean Xxxxxx, each Manager, each
Permitted Transferee, and any other Person that becomes a holder of
Equity Securities and agrees in writing to be bound by and comply with
the terms of this Agreement.
1.46 "Tag-Along Notice" shall have the meaning ascribed to such
term in Section 4.2 herein.
1.47 "Tag-Along Period" shall have the meaning ascribed to such
term in Section 4.2 herein.
1.48 "Tag-Along Shareholder" shall have the meaning ascribed to
such term in Section 4.2 herein.
1.49 "Xxxxxx Notice" shall have the meaning ascribed to such term
in Section 3.3 herein.
1.50 "Xxxxxx Period" shall have the meaning ascribed to such term
in Section 3.3 herein.
1.51 "Transfer" shall mean any actual or proposed disposition of
all or a portion of an interest (legal or equitable) by any means,
direct or indirect, absolute or conditional, voluntary or involuntary,
including, but not
10
-10-
limited to, by sale, assignment, put, transfer, pledge, hypothecation,
mortgage or other encumbrance, court order, operation of law,
distribution, settlement, exchange, waiver, abandonment, gift,
alienation, bequest or disposal.
1.52 "Transfer Notice" shall have the meaning ascribed to such
term in Section 4.1 herein.
1.53 "Warrants" shall mean the warrants to purchase Common Stock
of the Company issued by the Company in connection with the sale of the
Notes.
1.54 "Without Cause" shall mean a Manager's termination by CPC
other than for Good Cause or as a result of a Manager's death or
Disability.
ARTICLE 2
GENERAL TRANSFERABILITY RESTRICTIONS
None of the Mangers or their Permitted Transferees shall Transfer
or cause or permit to be Transferred any Equity Securities owned or
controlled by such Shareholder, except pursuant to Permitted Transfers
and other Transfers carried out in compliance with this Agreement, and
any purported Transfer in violation hereof shall be null and void.
11
-11-
ARTICLE 3
RIGHTS OF FIRST REFUSAL
Prior to an IPO Event, before any Equity Securities owned or
Controlled by a Manager or a Permitted Transferee of a Manager (a
"Selling Shareholder") may be Transferred (other than in a Permitted
Transfer or a Transfer pursuant to Article 4 or 5 hereof), the Selling
Shareholder shall first comply with the following procedures with
respect to such Equity Securities:
3.1 Notice. The Selling Shareholder shall first deliver a written
notice (a "Shareholder Notice") to the Company and Xxxxxx stating (i)
that the Selling Shareholder wishes to Transfer such Equity Securities,
(ii) the number and type of Equity Securities proposed to be
Transferred and (iii) the price and other material terms of the
proposed Transfer. The Shareholder Notice shall be accompanied by a
certificate of the Selling Shareholder certifying that it has received
from a Person not Affiliated with such Selling Shareholder a bona fide
offer to acquire such Equity Securities in cash at such price and on
such terms as are set forth in the Shareholder Notice and shall
identify such Person.
3.2 Company Right. Within thirty (30) days after receipt of a
Shareholder Notice (the "Company Period"), the Company may elect, by
delivering to the Selling Shareholder and to Xxxxxx a written notice (a
"Company Notice") of its election to purchase all or any part of the
Equity Securities to which the Shareholder Notice refers, on the same
terms and conditions specified in such Shareholder Notice. If the
Company does not elect to purchase any of such Equity Securities, the
Company shall send a notice to such effect to the Selling Shareholder
and to Xxxxxx prior to the end of the Company Period (a "Declination
Notice").
12
-12-
3.3 Xxxxxx Right. If the Company does not elect to purchase during
the Company Period any or all of the Equity Securities to which the
Shareholder Notice refers, then Xxxxxx may elect, by delivering to the
Selling Shareholder a written notice (a "Xxxxxx Notice") within thirty
(30) days after Xxxxxx'x receipt of the Company Notice or the
Declination Notice, as applicable (the "Xxxxxx Period") of its election
to purchase, on the same terms and conditions specified in the
Shareholder Notice, any or all of the amount of such Equity Securities
that the Company has not elected to purchase.
3.4 Consummation. If the Company and/or Xxxxxx elects to acquire
Equity Securities pursuant to this Article 3, the Company, Xxxxxx and
the Selling Shareholder shall consummate the sale and purchase of such
Equity Securities within sixty (60) days after the date that the
Company or Xxxxxx has received the Shareholder Notice, the Company
Notice or the Declination Notice, as the case may be.
3.5 Selling Shareholder Right. To the extent the Company and
Xxxxxx do not exercise their respective rights under this Article 3
within the specified time periods, the Selling Shareholder may Transfer
the Equity Securities specified in its Shareholder Notice (and not
purchased by the Company or Xxxxxx) to the Person specified in such
Shareholder Notice at the price and on the terms specified in such
notice, provided that such Transfer is consummated within sixty (60)
days after the end of the Xxxxxx Period. If the Transfer of all of such
Equity Securities is not consummated within such time period, then the
Selling Shareholder must again comply with the provisions of this
Article 3 with respect to such of the Equity Securities which have not
been Transferred timely prior to their subsequent Transfer.
13
-13-
ARTICLE 4
TAG-ALONG RIGHTS
Until the later of (i) May 9, 1999, or (ii) the date of an IPO
Event or, if earlier, the date when Xxxxxx'x Pro Rata Share is less
than fifty-one percent (51%), Xxxxxx shall not engage in a transaction
(including a merger, consolidation or similar business combination)
that involves the Transfer by Xxxxxx to a Person unaffiliated with
Xxxxxx (a "Third Party") of Common Stock representing greater than
fifty percent (50%) of the outstanding Common Stock (other than a
"Drag-Along Sale" as defined in Article 5 below and other than a
Transfer to one or more Affiliates of Xxxxxx) without first offering
the Shareholders the right to participate in such Transfer in the
following manner:
4.1 Notice. Xxxxxx shall first deliver a written notice (a
"Transfer Notice") to the Shareholders stating (i) Xxxxxx'x wish to
Transfer Common Stock to a Third Party, (ii) the number of shares of
Common Stock proposed to be Transferred and (iii) the price and the
other general terms of the proposed Transfer. Such notice may be
provided before Xxxxxx has identified a purchaser or purchasers for
such Common Stock.
4.2 Shareholders Right. Each Shareholder may elect, by delivering
to Xxxxxx a written notice (a "Tag-Along Notice") of its election
within fifteen (15) days after receipt of the Transfer Notice (the
"Tag-Along Period"), to participate in Xxxxxx'x Transfer of Common
Stock on the same terms and conditions specified in the Transfer
Notice. The Tag-Along Notice shall specify the maximum number of Common
Stock shares that the Shareholder (a "Tag-Along Shareholder") elects to
Transfer, which number shall not exceed the product (rounded down to
14
-14-
the nearest whole number) of (x) the total number of shares to be
acquired by the Third Party as set forth in the Tag-Along Notice,
multiplied by (y) a fraction, (1) the numerator of which shall be the
number of shares of Common Stock owned by such Tag-Along Shareholder as
of the date of the Tag-Along Notice and (2) the denominator of which
shall be the aggregate number of outstanding shares of Common Stock
owned on such date by all Shareholders; provided that any share amounts
so determined shall be rounded to avoid fractional shares.
4.3 Consummation.
(a) At least ten (10) days prior to the consummation of a
Transfer by Xxxxxx described in a Transfer Notice and not before the
earlier of (x) the end of the Tag-Along Period and (y) the receipt by
Xxxxxx of a Tag-Along Notice from each Shareholder, Xxxxxx shall
provide written notice (a "Consummation Notice") to each Tag-Along
Shareholder stating (i) the identity of the Third Party transferee,
(ii) the number of shares of Common Stock that such Tag-Along
Shareholder will be entitled to sell to such Third Party pursuant to
this Article 4, and (iii) the date the Transfer is contemplated to be
consummated. At least five (5) days prior to the date of such
consummation, each Tag-Along Shareholder shall deliver to Xxxxxx for
Transfer to the Third Party one or more certificates, properly endorsed
for Transfer, which represent the number of shares of Common Stock such
Tag-Along Shareholder is entitled to sell as provided in the
Consummation Notice. The certificate(s) delivered to Xxxxxx by each
Tag-Along Shareholder shall be Transferred to the Third Party
identified in the Consummation Notice, as part of the consummation of
the Transfer of Common Stock pursuant to the terms and conditions
specified in the Transfer Notice and the Consummation Notice. Upon
receipt of
15
-15-
the proceeds of the Transfer, Xxxxxx shall promptly remit to each
Tag-Along Shareholder that portion of such proceeds to which such
Tag-Along Shareholder is entitled by reason of such Shareholder's
participation in such Transfer.
(b) In connection with a Transfer pursuant to this Article 4,
each Tag-Along Shareholder shall be required to make representations
and warranties regarding the Common Stock that such Shareholder
proposes to Transfer identical to those required to be made by Xxxxxx,
including, but not limited to, such Shareholder's ownership of and
authority to Transfer such Common Stock and the absence of any liens or
other encumbrances on such stock.
(c) Notwithstanding anything to the contrary contained in this
Article 4, Xxxxxx shall have no liability to any Shareholder (i) if the
sale of Common Stock pursuant to this Article 4 is not consummated for
any reason whatsoever, or (ii) with respect to any of the terms or
provisions of such sale of Common Stock. Whether a sale of Common Stock
to a Third Party pursuant to this Article 4 is effected is in the sole
and absolute discretion of Xxxxxx.
4.4 Securities Laws. Notwithstanding anything to the contrary in
this Article 4, Xxxxxx shall have no obligation to permit a
Shareholder, and no Shareholder shall have a right, to participate as a
Tag-Along Shareholder in a Xxxxxx Transfer of Common Stock if such
Shareholder's Transfer (i) would not be exempt from all registration
requirements under federal and state securities laws or (ii) would
violate, or cause Xxxxxx'x Transfer to violate, any applicable federal
or state laws.
16
-16-
ARTICLE 5
DRAG-ALONG RIGHTS
5.1 Drag-Along Sale. (a) If, prior to an IPO Event, Xxxxxx, in its
sole discretion, determines to accept an offer from a Third Party to
purchase all of the Equity Securities then held by the Shareholders, or
such lesser number as will result in the Third Party owning fifty-one
percent (51%) or more of Equity Securities, then Xxxxxx may, at its
option, require each other Shareholder to include in such Transfer to
the Third Party such number of Equity Securities owned by each of them
as determined in this Article 5 (the "Drag-Along Sale"). All sellers of
Equity Securities in such Drag-Along Sale (i) shall receive the same
consideration per Equity Security and shall be subject to the same
terms and conditions of sale as the Transfer by Xxxxxx of its Equity
Securities and (ii) shall execute such documents and take such actions
as may be reasonably required by Xxxxxx. For the purposes of this
Article 5, the consideration received for any option held by a
Shareholder included in a Drag-Along Sale shall equal (x) the
difference between the price per share of Common Stock to be acquired
by a Third Party in such Drag-Along Sale minus (y) $100.00.
(b) Each Shareholder shall be required to participate in the
proposed Drag-Along Sale by Transferring in connection therewith Equity
Securities equal to the product of (x) the total number of Equity
Securities to be acquired by the Third Party, multiplied by (y) a
fraction, the numerator of which shall be the total number of Equity
Securities owned by such Shareholder, and the denominator of which
shall be the total number of Equity Securities owned by all
Shareholders.
17
-17-
5.2 Drag-Along Notice. Xxxxxx shall provide each Shareholder with
written notice (the "Drag-Along Notice") of a Drag-Along Sale at least
fifteen (15) days prior to the contemplated date of consummation of
such sale (the "Drag-Along Sale Date"). Each Drag-Along Notice shall
set forth: (i) the identity of the Third Party transferee in the
Drag-Along Sale, (ii) the price and the other general terms of the
proposed Transfer and (iii) the Drag-Along Sale Date.
5.3 Form of Consideration. The provisions of this Article 5 shall
apply regardless of the form of consideration received in the
Drag-Along Sale, and any form of consideration received pursuant to the
terms of the Drag-Along Sale shall be allocated among the transferors
of Equity Securities pro rata based upon each transferor's percentage
ownership of the Equity Securities sold in the Drag-Along Sale.
5.4 Consummation.
(a) At least three (3) Business Days prior to the contemplated
date of consummation of a Drag-Along Sale, each Shareholder shall
deliver to Xxxxxx for Transfer to the Third Party one or more
certificates, properly endorsed for Transfer, which represent the
Equity Securities held by such Shareholder required to be transferred
in the Drag-Along Sale. The certificate(s) delivered to Xxxxxx by each
Shareholder shall be Transferred to the Third Party transferee
identified in the Drag-Along Notice as part of the consummation of the
Drag-Along Sale. Upon receipt of the proceeds of the Drag-Along Sale,
Xxxxxx shall promptly remit to each Shareholder that portion of such
proceeds to which such Shareholder is entitled by reason of such
Shareholder's participation in such sale.
18
-18-
(b) In connection with a Drag-Along Sale, each Shareholder
shall be required to make representations and warranties regarding the
Equity Securities that such Shareholder Transfers in such sale
identical to those being made by Xxxxxx, including, but not limited to,
such Shareholder's ownership of and authority to Transfer such Equity
Securities and the absence of any liens or other encumbrances on such
Equity Securities.
(c) Notwithstanding anything to the contrary contained in this
Article 5, Xxxxxx shall have no liability to any Shareholder (i) if the
sale of Equity Securities pursuant to this Article 5 is not consummated
for any reason whatsoever, or (ii) with respect to any of the terms or
provisions of such sale of Equity Securities. Whether a sale of Equity
Securities to a Third Party pursuant to this Article 5 is effected is
in the sole and absolute discretion of Xxxxxx.
ARTICLE 6
REGISTRATION RIGHTS AND PROCEDURES.
6.1 Piggyback Registration Rights. If at any time the Company
proposes to Register any of its Common Stock in connection with an IPO
Event or, if at any time prior to the second anniversary of the closing
of such IPO Event, the Company proposes to effect a subsequent primary
offering, whether or not for sale for its own account, in a manner
which would permit the Registration of Registrable Securities for sale
to the public under the Securities Act, the Company will, subject to
Section 6.2 hereof, give written notice to the Shareholders of its
intention to do so and of the Shareholders' rights under this Article 6
prior to the anticipated filing date of the registration statement
relating to such Registration. Such
19
-19-
notice shall offer the Shareholders the opportunity to include in such
registration statement such number of Registrable Securities as the
Shareholders may request. Upon the written request of the Shareholders,
made within 20 Business Days after the receipt of the Company's notice
(which request shall specify the number of Registrable Securities
intended to be disposed of by the Shareholders), the Company will use
commercially reasonable efforts to effect the Registration (and
qualification under any applicable state securities or Blue Sky laws)
of all Registrable Securities which the Shareholders shall have
requested Registration thereof, to the extent required to permit the
disposition (in accordance with such intended methods thereof) of the
Registrable Securities so requested to be Registered; provided that:
(i) if such Registration involves an underwritten offering, the
Shareholders wishing to participate must sell their Registrable
Securities to the underwriters selected by the Company on the same
terms and conditions as apply to the Company or any other selling
security holder (or on equivalent terms and conditions, if the
Shareholders hold different securities from those being sold by the
Company or such other selling security holder), including, without
limitation, executing and delivering such underwriting agreements or
other
20
-20-
related agreements to which the Company or any such other selling
security holder has agreed to execute and deliver;
(ii) if, at any time after giving written notice of its intention
to Register any securities pursuant to this Section 6.1 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 Register such securities, the Company shall give written notice to
the Shareholders and, thereupon, shall be relieved of its obligation to
Register any Registrable Securities in connection with such
Registration;
(iii) if a Registration pursuant to this Section 6.1 involves an
underwritten offering, the Shareholders or parties requesting to be
included in such Registration may elect, in writing at least 10 days
prior to the effective date of the registration statement filed in
connection with such Registration, not to Register such securities in
connection with such Registration; and
(iv) the Company shall not be required to effect any Registration
of Common Stock under this Section 6.1 incidental to the Registration
of any of its securities in connection with mergers, acquisitions,
exchange offers, subscription offers, the Warrants, dividend
reinvestment plans, the Company's 1997 Stock Option Plan or other
executive or employee benefit or compensation claims (including,
without limitation, any registration of securities on a Form S-4 or S-8
registration statement or any successor or similar forms).
6.2 Limitations on Shares Included In Piggyback Registrations. If
the Registration of which the Company gives notice pursuant to Section
6.1 herein is for an underwritten
21
-21-
offering, only securities that are to be included in the underwriting
may be included in the Registration. Notwithstanding any provision of
Section 6.1 herein, if the underwriter determines that marketing
factors require a limitation on the number of shares of Registrable
Securities to be underwritten or on the identity of the selling
shareholders in the case of any Registration for an IPO Event that
includes a secondary offering, the underwriter may exclude or otherwise
limit the number of shares of Registrable Securities to be included in
the registration and underwriting. The Company shall so advise the
Shareholders, and the number of shares of Registrable Securities that
may be included in the Registration and underwriting shall, subject to
the agreement of the underwriters, be allocated among the Shareholders
and, as further provided in the Agreement, all other Shareholders in
proportion, as nearly as practicable, to the respective numbers of
shares of Registrable Securities which all such Shareholders initially
requested to be included in the Registration. No Registrable Securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such Registration. If any Shareholder
disapproves of any such underwriting, such Shareholder may elect to
withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities and/or other securities so
withdrawn from such underwriting shall be withdrawn from such
Registration, and the number of Shares of the remaining Shareholders
shall, if they have been cut back pursuant to this section 6.2, be
increased pro rata in the aggregate amount so withdrawn.
6.3 Expenses. The Company will pay all Registration expenses,
including legal fees and expenses of the Company, in connection with
each Registration of Registrable Securities pursuant
22
-22-
to this Article 6, except that each Shareholder having shares of the
Company's capital stock Registered pursuant to this Article 6 shall pay
all fees and expenses of such Shareholder's counsel and the
underwriting discounts, commissions and similar fees, and transfer
taxes applicable to the Registrable Securities of such Shareholder
included in such Registration.
6.4 Restrictions on Public Sale by Shareholders and the Company.
In connection with any offering of any securities of the Company,
including, without limitation, any offering contemplated by this
Article 6, each Shareholder agrees that, whether or not such
Shareholder's Registrable Securities are included in such Registration,
it will consent and agree to comply with any "hold back" restriction,
relating to Common Stock or any other securities of the Company then
owned by such Shareholder, that may be reasonably requested by the
underwriter(s) or placement or other selling agent(s) of such offering.
Without limitation to the foregoing, each Shareholder shall, upon
request by such underwriters or agent(s), agree not to effect any
public sale or distribution, including any sale pursuant to Rule 144
under the Securities Act, of any Registrable Securities, and not to
effect any such public sales or distribution of any other equity
securities of the Company or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in
each case, other than as part of such underwritten public offering)
during the 30 days prior to, and the 180 day period beginning on, the
effective date of such registration statement (or such lesser period as
such underwriter(s) or placement or other selling agent(s) may permit)
(except as part of such Registration).
23
-23-
6.5 Indemnification. (i) To the extent permitted by law, the
Company shall indemnify the Shareholders upon requesting or joining in
a Registration, each agent, officer and director of Xxxxxx, each Person
Controlling Xxxxxx, and each underwriter and selling broker of the
securities so Registered (collectively, "Indemnitees") against all
claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering
circular or other document incident to any registration, qualification
or compliance (or in any related registration statement, notification
or the like) or 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 in the light of the circumstances in
which they were made, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the
Company and relating to an action or inaction required of the Company
in connection with any such registration, qualification or compliance,
and shall reimburse each such Indemnitee for all legal and other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability is caused by any
untrue statement or omission so made in conformity with written
information relating to any such Indemnitees furnished by such
Indemnitees and except that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged
omission) made in the preliminary prospectus but eliminated or remedied
in the amended prospectus on file with
24
-24-
the SEC at the time the registration statement becomes effective or in
the amended prospectus filed with the SEC pursuant to Rule 424(b) (the
"Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any Indemnitee, if a copy of the Final Prospectus was not
furnished to the Person asserting the loss, liability, claim or damage
at or prior to the time such furnishing is required by the Securities
Act; provided, further, that this indemnity shall not be deemed to
relieve any underwriter of any of its due diligence obligations; and
provided, further, that the indemnity agreement contained in this
Section 6.5(i) shall not apply to amounts paid in settlement of any
such claim, loss, damage, liability or action if such settlement is
effected without the consent of the Company, which consent shall not be
unreasonably withheld.
(ii) To the extent permitted by law, each Shareholder upon
requesting or joining in a Registration shall indemnify the Company,
each other Shareholder and their respective officers, directors and
Affiliates and their respective successors (collectively, the "Company
Indemnities") against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document incident to any
Registration, qualification or compliance (or in any related
registration statement, notification or the like) or 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 in the light of the circumstances in which they were made
and shall reimburse the Company Indemnitees for all legal and other
expenses reasonably incurred in connection with
25
-25-
investigating or defending any such claim, loss, damage, liability or
action; provided, however, that the indemnification pursuant to this
Section 6.5(ii) shall apply only if (and only to the extent that) such
statement or omission was made in reliance upon and in conformity with
written information relating to such Shareholder (including, without
limitation, written negative responses to inquiries) furnished to the
Company, the other Shareholders or the underwriter or placement agent
and except that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) made in the
preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration statement
becomes effective or in the Final Prospectus, such indemnity agreement
shall not inure to the benefit of any Company Indemnitees if a copy of
the Final Prospectus was not furnished to the Person asserting the
loss, liability, claim or damage at or prior to the time such
furnishing is required by the Securities Act; provided, further, that
this indemnity shall not be deemed to relieve any underwriter of any of
its due diligence obligations; provided, further, that the indemnity
agreement contained in this Section 6.5(ii) shall not apply to amounts
paid in settlement of any such claim, loss, damage, liability or action
if such settlement is effected without the consent of such Shareholder,
which consent shall not be unreasonably withheld; and provided,
further, that the obligations of the Shareholder shall be limited to an
amount equal to the proceeds received by such Shareholder from the sale
of its Registrable Securities in such Registration, unless such claim,
loss, damage, liability or action resulted from such Shareholder's
fraudulent misconduct.
26
-26-
(iii) Each party entitled to indemnification hereunder (an
"Indemnified Party") shall give notice to the party required to provide
indemnification (an "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party (at
its expense) to assume the defense of any claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or litigation, shall be
satisfactory to the Indemnified Party, and the Indemnified Party may
participate in such defense at such party's expense, and provided,
further, that the omission by any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 6.5 except to the extent that the
omission results in a failure of actual notice to the Indemnifying
Party and such Indemnifying Party is damaged materially and adversely
solely as a result of the failure of the Indemnified Party to give
notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that
either (i) does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation or (ii)
contains any finding of a violation of law by an Indemnified Party.
(iv) The reimbursement required by this Section 6.5 shall be made
by periodic payments during the course of the investigation or defense,
as and when bills are received or expenses are incurred.
(v) If the indemnification provided for in this Section 6.5 is
unavailable to an
27
-27-
Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect the relative fault of the Company and the Shareholders in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations including the relative benefits received by
the Company and the Shareholders. The relative benefits received by the
Company on the one hand, and the Shareholders, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting expenses) to the Company bear to the
total net proceeds from the offering (before deducting expenses) to the
Shareholders. The relative fault of the Company and the Shareholders
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or the Shareholders and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(vi) The Company and the Shareholders agree that it would not be
just and equitable if contribution pursuant to this Section 6.5 were
determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to
in the immediately
28
-28-
preceding paragraph. The amount paid or payable by an Indemnified Party
as a result of the losses, claims, damages and liabilities referred to
in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, 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 6.5, the Shareholders shall not be
required to contribute any amount in excess of the proceeds received by
the Shareholders from the sale of Registrable Securities covered by any
registration statement filed pursuant hereto. 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.
(vii) The obligations under this Section 6.5 shall survive the
completion of any offering of Registrable Securities in a registration
statement under this Agreement or otherwise.
6.6 Cooperation by Prospective Sellers. (i) The Shareholders shall
furnish to the Company such information as the Company may reasonably
require from the Shareholders in connection with the registration
statement (and the prospectus included therein). The Shareholders may
not participate in any offering unless the Shareholders (A) agree to
sell their Registrable Securities to be sold on the basis provided in
any agreement governing the offering and (B) complete and execute all
questionnaires, indemnities, underwriting agreements and other
documents required in connection with the offering.
(ii) The Shareholders will not (until further notice by the
Company) effect sales thereof (or deliver a prospectus to any
purchaser) after receipt of telegraphic or written notice from the
Company to suspend sales to permit the Company to correct or update a
29
-29-
registration statement or prospectus. In connection with any offering,
the Shareholders will not use any offering document, offering circular
or other offering materials with respect to the offer or sale of
Registrable Securities, other than the prospectuses provided by the
Company and any documents incorporated by reference therein.
ARTICLE 7
ANTIDILUTION PROTECTION
Upon any change in the outstanding Common Stock by reason of any
stock dividend, split-up (or reverse stock split), recapitalization,
reclassification, reorganization, reincorporation, combination or
exchange of shares, merger, consolidation, liquidation or similar
change in corporate structure, the Board shall provide for a
substitution for or adjustment in (i) the number of Equity Securities
held by each Shareholder, (ii) the number and class of shares subject
to outstanding options, (iii) the exercise price of outstanding
options, and (iv) the aggregate number and class of shares that may be
issued under the Company's 1997 Stock Option Plan.
ARTICLE 8
DISPOSITION OF STOCK
UPON MANAGER'S TERMINATION
8.1 If an IPO Event has not occured, upon the termination of a
Manager's employment with the Company, such Manager's Common Stock
shall be subject to disposition as set forth in this Article 8. For the
purposes of this Article 8 only, the term "Common Stock" shall mean (x)
a Manager's Common Stock plus (y) a Manager's options granted pursuant
to the Company's 1997
30
-30-
Stock Option Plan if then vested and exercisable for Common Stock.
(i) If the Manager's employment with the Company has been
terminated as a result of the Manager's death, Disability or
Retirement, the Company shall purchase, and the Manager or Manager's
estate as the case may be, shall sell such Manager's Common Stock at
the higher of either the Manager's Cost or Market Value as of the date
of termination.
(ii) If the Manager's employment with the Company has been
terminated as a result of either the Manager's resigning without Good
Reason or the Manager's being terminated for Good Cause, the Company
shall have the option to purchase the Manager's Common Stock at the
lower of either the Manager's Cost or Market Value as of the date of
termination.
(iii) If the Manager's employment with the Company has been
terminated as a result of either the Manager's being terminated Without
Cause or the Manager's resigning for Good Reason and, as of the date of
such termination or resignation, the Company has achieved its Operating
Income Projections for the aggregate of the immediately preceding four
fiscal quarters for which financial statements have been delivered to
the holders of the Notes in accordance with the terms of Section 4.12
of the Indenture, the Manager shall have the option to cause the
Company to purchase the Manager's Common Stock at the higher of the
Manager's Cost or Market Value.
(iv) If the Manager's employment with the Company has been
terminated as a result of either the Manager's being terminated Without
Cause or the Manager's resigning for Good Reason and, as of the date of
such termination or resignation, the Company did not achieve its
31
-31-
Operating Income Projections for the aggregate of the immediately
preceding four fiscal quarters for which financial statements have been
delivered to the holders of the Notes in accordance with the terms of
Section 4.12 of the Indenture, the Company shall have the option to
purchase the Manager's Common Stock at the higher of the Manager's Cost
or Market Value.
(v) Except as provided in Section 8.1(vi) below, a party
exercising an option under this Article 8, (an "Exercising Party")
shall provide written notice (an "Election Notice") of the Exercising
Party's election to the party entitled to receive such Election Notice
within sixty (60) days of the date of the termination giving rise to
such election (the "Election Period"). Failure to provide an Election
Notice within the Election Period shall cause any options subject to
such election to irrevocably lapse. If an Election Notice results in
the sale of a Manager's Common Stock to the Company pursuant to this
Article 8, the Company and the selling Manager shall consummate the
sale and purchase of such Manager's Common Stock within sixty (60) days
after the date that the Company or the Manager, as the case may be, has
received the Election Notice from the Exercising Party. Such a sale
shall be consummated (x) upon delivery to the Company by the Manager
one or more certificates, properly endorsed for transfer, which
represent the number of shares specified in the applicable Election
Notice, and (y) upon delivery to the Manager by the Company the amount,
in cash, to which such Manager is entitled pursuant to the Election
Notice and this Article 8; provided, however, that any sale of
Manager's Common Stock pursuant to a Manager's Retirement under Section
8.1(i) above shall be consummated within two (2) years after the date
that the Company has received the applicable Election Notice from the
Exercising Party. Such a sale shall be consummated (x)
32
-32-
upon delivery to the Company by the Manager one or more certificates,
properly endorsed for transfer, which represent one-half (1/2) the
number of shares subject to such a sale within one (1) year after the
date that the Company has received the Election Notice from the
Exercising Party, with the remaining shares to be delivered within two
(2) years from the date the Company received such Election Notice; and
(y) upon delivery to the Manager by the Company, within one (1) year
after the date that the Company has received the applicable Election
Notice from the Exercising Party, the amount, in cash, which represents
one-half (1/2) the amount such Manager is entitled pursuant to the
Election Notice and this Article 8, with the remaining amount, in cash,
to be delivered within two (2) years from the date the Company received
the applicable Election Notice.
(vi) Any sale of Manager's Common Stock pursuant to Article
8.1(i), other than a sale upon a Manager's Retirement, shall be
consummated as follows: The Manager, or the Manager's legal
representative (the "Manager's Representative"), as the case may be,
shall notify the Company of the Manager's Disability or death within
ninety (90) days of such Disability or death. Thereafter, within thirty
(30) days of receiving such notice, (x) the Company shall deliver to
the Manager, or the Manager's Representative, the amount, in cash, to
which such Manager is entitled pursuant to Section 8.1(i) and (y) the
Manager, or the Manager's Representative, shall deliver to the Company
one or more certificates, properly endorsed for transfer, representing
the number of shares purchased by the Company under this
Section 8.1(i).
(vii) Notwithstanding any provision of this Agreement to the
contrary, no Manager shall have any rights with respect to such
Manager's employment with the Company beyond those rights
33
-33-
set forth in such Manager's written employment agreement. Any Manager
without such a written employment agreement shall be considered an
employee-at-will.
ARTICLE 9
MANAGER'S ACKNOWLEDGMENTS
Each Manager acknowledges that such Manager has carefully read and
considered all of the terms of this Agreement, that Xxxxxx has made a
substantial investment in the Company's business and that the
provisions of this Agreement are reasonable and necessary for the
Company's and Xxxxxx'x protection. Each Manager further acknowledges
that damages at law will not be a measurable or adequate remedy for
breach of the covenants contained in is Agreement, and accordingly each
Manager consents to the entry by any court of competent jurisdiction of
any order enjoining such Manager from violating any such covenants. The
parties hereto further agree that if, in any judicial proceeding, a
court should refuse to enforce any covenants set forth herein because
of their term or geographical scope, then such covenants shall be
deemed to be modified to permit their enforcement to the maximum extent
permitted by law.
ARTICLE 10
TERMINATION
All rights and obligations set forth in this Agreement, to the
extent not previously terminated, shall terminate on May 9, 2007.
ARTICLE 11
MISCELLANEOUS
34
-34-
11.1 Legend. All certificates evidencing Equity Securities shall bear a
legend indicating the existence of the restrictions imposed hereby and a stop
transfer order may be placed with respect to such securities. The legend
referred to in the preceding sentence shall be substantially in the following
form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE SECURITIES LAW
OF ANY JURISDICTION AND MAY NOT BE TRANSFERRED UNTIL (A) A REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT AND SUCH APPLICABLE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO OR (B) IN THE OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH SECURITIES ACT AND
SUCH APPLICABLE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TRANSFER
RESTRICTIONS AND OTHER TERMS OF A SHAREHOLDERS' AGREEMENT DATED AS OF MAY 9,
1997, AMONG COLORADO PRIME HOLDINGS, INC. AND CERTAIN SHAREHOLDERS THEREOF AND
MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SUCH AGREEMENT. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF COLORADO PRIME CORPORATION AND
WILL BE FURNISHED UPON REQUEST TO THE HOLDER OF RECORD OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE.
11.2 Amendment. Except as otherwise expressly set forth in this
Agreement, this Agreement may be
35
-35-
amended or supplemented only by the written agreement of the Company, Xxxxxx and
the Managers.
11.3 No Waiver of Rights. No failure or delay on the part of any party
in the exercise of any power or right hereunder shall operate as a waiver
thereof. No single or partial exercise of any right or power hereunder shall
operate as a waiver of such right or power or of any other right or power. The
waiver by any party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach hereunder.
Except as otherwise expressly provided herein, all rights and remedies existing
under this Agreement are cumulative with, and not exclusive of, any rights or
remedies otherwise available.
11.4 Entire Agreement; Successors; Third Parties. This Agreement
contains the entire agreement among the parties with respect to the transactions
contemplated hereby and supersedes all prior arrangements or understandings with
respect thereto, written or oral. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors, heirs, executors, administrators and permitted assigns.
Except as specifically set forth herein, nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities.
11.5 No Assignment. No party hereto may assign any of its rights or
obligations under this Agreement to any other Person without the written consent
of Xxxxxx, in the case of any assignment by any Manager, or a numerical majority
of the Managers, in the case of any assignment by Xxxxxx, except that Xxxxxx may
assign part or all of its rights and obligations hereunder to one or more
Affiliates of Xxxxxx and any Manager may assign to one or more Permitted
Transferees of such Manager.
36
-36-
11.6 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
by facsimile or sent by overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
If to the Company to:
Colorado Prime Holdings, Inc.
0 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, X.X. 00000
Attention: Secretary
Facsimile: (000) 000-0000
With a required copy to Xxxxxx
If to Xxxxxx:
Xxxxxx Equity Investors III, L.P.
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: V. Xxxxx Xxxxxx
Facsimile: (000) 000-0000
With a required copy to:
Xxxxxx & Xxxxxx
000 Xxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
If to any of the Managers, to:
Xxxxxxx Xxxxxxxxxx & Xxxxxx, LLP
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx Xxxxxxx
Facsimile: (000) 000-0000
37
-37-
If to a Manager, to the address set forth beneath the signature of such Manager
on the signature page hereof. Notices and other communications to parties
joining this Agreement after the date hereof shall be addressed in accordance
with the information received from the Company pursuant to the provisions of
this Agreement.
All deliveries of notice shall be deemed effective when received by the
Persons entitled to such receipt or when delivery has been attempted but refused
by such Person or Persons. Any party may change the Persons or addresses to
which such deliveries shall be made with respect to such party by delivering
notice thereof to the other parties hereto in accordance with this Section 11.6.
11.7 Captions. The captions contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.8 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
11.9 Governing Law and Venue. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Delaware applicable to agreements made and entirely to be performed
within such jurisdiction without reference to its conflicts of laws provisions.
The party bringing any action under this Agreement shall be entitled to choose
only the federal courts or state courts of the State of Delaware or the State of
New York, sitting in the Borough of Manhattan, as the venue for such action, and
each party consents to the sole and exclusive jurisdiction of the court chosen
in such manner for such action.
11.10 Severability. The provisions of this Agreement are severable, and
the unenforceability of
38
-38-
any provision of this Agreement shall not affect the enforceability of the
remainder of this Agreement. The parties acknowledge that it is their intention
that if any provision of this Agreement is determined by a court to be invalid,
illegal or unenforceable as drafted, that provision should be construed in a
manner designed to effectuate the purpose of that provision to the greatest
extent possible under applicable law.
11.11 Specific Performance. The rights of the parties under this
Agreement are unique and the failure of a party to perform its obligations
hereunder would irreparably harm the other parties hereto. Accordingly, the
parties shall, in addition to such other remedies as may be available at law or
in equity, have the right to enforce their rights hereunder by actions for
specific performance and/or injunctive relief to the extent permitted by law.
11.12 Further Assurances. Each of the parties hereto agrees to execute
all such further instruments and documents and to take all such further action
as any other party may reasonably require in order to effectuate the terms and
purposes of this Agreement.
11.13 Publicity. No party shall issue any press release or undertake
any publicity concerning this Agreement or any of the transactions contemplated
hereby without the prior written consent of Xxxxxx.
11.14 Books, Records and Reports. Within 120 days of the end of each
fiscal year, the Company shall mail to each Shareholder a report setting forth
an audited balance sheet as of the end of such fiscal year and audited
statements of income and source and use of funds for such fiscal year of the
Company, and any other information the Company deems necessary or desirable. If
requested by a Shareholder, the Company will furnish quarterly financial
statements to such Shareholder as soon as they become available.
11.15 The Company's 1997 Stock Option Plan. The parties hereto agree
that as soon as practicable
39
-39-
after the Closing Date, but in no event later than May 31, 1997, the Company
will establish a stock option plan (the "Company's 1997 Stock Option Plan")
pursuant to which certain employees of the Company (the "Optionees") shall be
issued options (the "Options") to acquire the 31,600 allocated shares of the
Company. Under the Company's 1997 Stock Option Plan, (i) one-third of the
Options shall vest ratably over five years based upon service; (ii) one-third of
the Options shall vest over a five year period based upon achievement of
Operating Income for that fiscal year as projected in the Xxxxxxx Sachs
Memorandum dated December 1996. If the Company fails to achieve performance
objectives in one year by less than $500,000, the Options will vest to the
extent of one-half of the amount of the Options that would have vested if the
Operating Income objectives had been achieved. If in the subsequent year, total
Operating Income for that year and the prior year or years equals or exceeds the
total projected in the Xxxxxxx Xxxxx Memorandum dated December 1996 for that and
the prior year or years, the Optionees will be vested for each of the included
years; and (iii) one-third of the Options will vest if Xxxxxx achieves a cash
Internal Rate of Return of at least forty percent (40%) achieved without taking
into account any payment made to Optionees from such Options.
-- END OF PAGE --
[signatures appear on the following pages]
40
-40-
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed as of the day and year first
above written.
COLORADO PRIME HOLDINGS, INC.
By: /s/ V. Xxxxx Xxxxxx
_________________________
XXXXXX EQUITY INVESTORS III, L.P.
By: TC Equity Partners, L.L.C.,
its General Partner
By: /s/ Xxxxxxxx Xxxxx
______________________
MANAGERS:
/s/ Xxxxxxx X. Xxxxxxxxx
______________________________
Xxxxxxx X. Xxxxxxxxx
0 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
/s/ Xxxxxxx Xxxxxxx
_______________________________
Xxxxxxx Xxxxxxx
000 Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
41
-41-
/s/ Xxxxxx Xxxxxx
_______________________________
Xxxxxx Xxxxxx
000 Xxxx 00xx Xxxxxx, Xxx. 00X
Xxx Xxxx, Xxx Xxxx 00000
/s/ Xxxxxxx XxXxxxxx
_______________________________
Xxxxxxx XxXxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
/s/ Xxxxx Xxxxxxxxx
/s/ Xxxxxxxxx Xxxxxxxxx
________________________________
Xxxxx Xxxxxxxxx &
Xxxxxxxxx Xxxxxxxxx
0000 Xxxxxxx Xxxxxx X.
Xxxxxx Xxxxx, Xxxxxxx 00000
/s/ Xxxxxx Xxxxxx
________________________________
Xxxxxx Xxxxxx
000 Xxxx Xxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
/s/ Xxxxxxx Xxxxx
________________________________
Xxxxxxx Xxxxx
00 Xxxxxxxx Xxxx
Xxxx Xxxxxxxxx, Xxx Xxxx 00000
00
-00-
/x/ Xxxxxxxx Xxxxxxx
_______________________________
Xxxxxxxx Xxxxxxx
0 Xxxxx Xxxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000
/s/ Xxxxxxx Xxxxxxxxx
_______________________________
Xxxxxxx Xxxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxx 00000
/s/ Xxxx Xxxxxxxxx
_______________________________
Xxxx Xxxxxxxxx
Xxx Xxxxxxxx Xxxxxx
Xxxxx, Xxx Xxxx 00000
/s/ Xxxxxx Xxxxxx
_______________________________
Xxxxxx Xxxxxx
Xxx Xxxxxxxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
43
-43-
/s/ Xxxx XxXxxx
_______________________________
Xxxx XxXxxx
00000 Xxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
/s/ Xxxxxx X. Xxx
_______________________________
Xxxxxx X. Xxx
000 Xxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx 00000
/s/ Xxxxxx X. Xxxxx
_______________________________
Xxxxxx X. Xxxxx
0000 Xxxxxxxxx Xxxx., Xxx. 000
Xxxxxxxx, Xxxxxxxxxxxx 00000
44
EXHIBIT A
Managers:
Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxxxxx XxXxxxxx
Xxxxx Xxxxxxxxx
& Xxxxxxxxx Xxxxxxxxx
Xxxxxx Xxxxxx
Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxx
Xxxxxx Xxxxxx
Xxxx XxXxxx
Xxxxxx X. Xxx
Xxxxxx X. Xxxxx
__________________________
