EXHIBIT 10.29
STOCKHOLDERS' AGREEMENT
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This Stockholders' Agreement (this "Agreement"), dated as of July 1,
1997, is by and among the parties listed on the signature pages hereto (together
with persons who become parties hereto pursuant to Section XV.A herein, the
"Stockholders") and Xxxxxxxx Manufacturing Company, Inc., a Texas corporation,
and its successors, whether by operation of law or otherwise (the "Company").
RECITALS
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WHEREAS, the Company has issued and outstanding shares of its common
stock, no par value ("Common Stock"), including any securities into which such
Common Stock may subsequently be changed by merger, recapitalization, exchange
offer, charter amendment or otherwise ("Company Stock");
WHEREAS, the parties hereto desire to enter into this Agreement for
the purpose of regulating certain aspects of their relationship with regard to
their ownership of Company Stock on and after the date hereof;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
Section I. Authorization.
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Each Stockholder hereby represents and warrants to the Company and
to each other that it has full power and authority to execute, deliver and
perform its obligations under this Agreement. The execution and delivery of this
Agreement has been duly and validly authorized, and all necessary action has
been taken, to make this Agreement a valid and binding obligation of such
Stockholder, enforceable in accordance with its terms, except that the
enforcement hereof may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
The Company hereby represents and warrants to each Stockholder that
it has full power and authority to execute, deliver and perform its obligations
under this Agreement. The execution and delivery of this Agreement has been duly
and validly authorized, and all necessary action has been taken, to make this
Agreement a valid and binding obligation of the Company, enforceable in
accordance with its terms, except that the enforcement hereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and to general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).
Section II. Certain Covenants of the Company.
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If the Company becomes legally required to do so, it will register
the Company Stock under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and will keep effective such registration and will
timely file such information, documents and reports as the Securities and
Exchange Commission (the "Commission") may require or prescribe under Section 13
of the Exchange Act. From and after the effective date of the registration
statement filed by the Company under the Securities Act of 1933, as amended (the
"Act"), the Company will timely file such information, documents and reports as
the Commission may require or prescribe under Section 13 or 15(d) (whichever is
applicable) of the Exchange Act. Immediately upon becoming subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will forthwith upon request furnish any Stockholder (i) a written statement by
the Company that it has complied with such reporting requirements, (ii) a copy
of the most recent annual or quarterly report of the Company, and (iii) such
other reports and documents filed by the Company with the Commission as such
Stockholder may reasonably request. The Company acknowledges and agrees that the
purposes of the requirements contained in this Section II are to enable any such
Stockholder to comply with the current public information requirements contained
in Rule 144 and Rule 144A under the Act, should such Stockholder desire to
dispose of any of the Company Stock without registration under the Act, in
reliance upon Rule 144 or Rule 144A (or any other similar exemptive provision).
Section III. Rights of First Offer.
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A. Except as provided in Section VII below, before any shares of
Company Stock, or any beneficial interest therein, may be sold, transferred or
assigned (including transfer by operation of law) or pledged, hypothecated or
encumbered by Xxxxxxxx Xxxxxxxx or Xxxx Xxxxxxx Xxxxxxxx (for purposes of this
Agreement, Xxxxxxxx and Xxxx Xxxxxxxx are referred to, individually and
collectively, as "Xxxxxxxx") or any person or party to whom Xxxxxxxx or a
transferee of Xxxxxxxx sells, transfers or assigns Company Stock, other than
pursuant to an effective registration statement under the Act or Sections IV or
V hereof (a "Xxxxxxxx Transferee"), such shares shall first be offered to the
Company as set forth below.
X. Xxxxxxxx or a Xxxxxxxx Transferee, as applicable, shall deliver
a notice (the "Notice") to the Company and to Enterprise Partners III, L.P., a
Delaware limited partnership ("EPIII"), which notice to EPIII shall be
considered notice to EPIII, Enterprise Partners III Associates, L.P., a Delaware
limited partnership ("EPIIIA"), Enterprise Partners IV, L.P., a Delaware limited
partnership ("EPIV"), Enterprise Partners IV Associates, L.P., a Delaware
limited partnership ("EPIVA"), Enterprise Management Partners Corporation, a
California corporation ("EMPC"), (EMPC, EPIII, EPIIIA, EPIV and EPIVA shall be
referred to collectively herein as "ENTERPRISE PARTNERS"), stating (i) his bona
fide intention to sell or transfer such shares, (ii) the number of shares
proposed to be sold or transferred (the "Noticed Shares"), and (iii) the price
for which he proposes to sell or transfer the Noticed Shares (in the case of a
transfer not involving a sale such price shall be deemed to be fair
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market value of the Noticed Shares as determined pursuant to Section III.D
hereof) and the terms of payment of that price and other terms and conditions of
sale. Xxxxxxxx and each Xxxxxxxx Transferee hereby agrees, except as provided
in Section III.E. below, not to effect, or attempt to effect, any sale or other
transfer for value of Company Stock other than for money, an obligation to pay
money or Marketable Securities "Marketable Securities" means securities (i) of a
class or series listed or traded on the New York Stock Exchange, American Stock
Exchange, or the Nasdaq National Market System and (ii) which, as a matter of
law, shall at the time of acquisition be freely saleable in unlimited quantities
by each person acquiring such securities to the public, either pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(including a current prospectus which is available for delivery), or without the
necessity of such registration. Xxxxxxxx or any Xxxxxxxx Transferee may not
give a Notice to the Company and EPIII on behalf of Enterprise Partners more
than one time during any period of 12 consecutive months.
C. For a period of fifteen (15) days after receipt of the Notice,
the Company (or its assignee or assignees) shall have the right to purchase all,
but not less than all, of the Noticed Shares. The price per share of the Noticed
Shares purchased by the Company pursuant to this Section III.C shall be, in the
case of a sale, the price per share as set forth in the Notice and, in the case
of a transfer not involving a sale, the fair market value of such shares
determined pursuant to Section III.D hereof, and the purchase shall be on the
same terms and subject to the same conditions as those set forth in the Notice.
If the Company (including its assignee or assignees) elects not to purchase all
the Noticed Shares, it shall give written notice within the 15 day period
following receipt of the Notice, and for a period of 15 days after receipt of
the aforementioned notice from the Company (the "Second Notice Period"),
Enterprise Partners (or the assignee or assignees of any Enterprise Partners
entity) shall have the right to purchase all, but not less than all, of the
Noticed Shares on the same terms and conditions as set forth in the Notice. The
allocation of Noticed Shares among the entities comprising Enterprise Partners
shall be determined by agreement among such entities. The price per share shall
be, in the case of a transfer not involving a sale, the fair market value of
such shares determined pursuant to Section III.D hereof, and the purchase shall
be on the same terms and subject to the same conditions as though set forth in
the Notice. If the Company, Enterprise Partners or its assignee(s) determine to
purchase the Noticed Shares, it shall so notify Xxxxxxxx or the Xxxxxxxx
Transferee, as applicable, in writing prior to the end of the Second Notice
Period, stating the time and place of closing. The closing of a purchase
pursuant to this Section III.C. shall take place within 20 days after such
notice is first delivered and all consideration shall be payable in cash at a
single closing. Any election of the Company or Enterprise Partners to purchase
or not to purchase any Noticed Shares pursuant to this Section III shall not be
rescinded by the Enterprise Partners without the prior written consent of
Xxxxxxxx or a Xxxxxxxx Transferee, as the case may be.
D. In the case of a transfer of shares of Company Stock not
involving a sale, the fair market value of the shares shall be determined by
agreement between the Company and the transferor or, if they are unable to
agree, by an independent appraiser of national standing mutually agreed upon by
the parties. The appraiser's determination will be final and binding upon all
parties and persons claiming under or through them. If the parties
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are unable to agree upon the selection of an independent appraiser within 15
days after notice by one party that agreement on the fair market value has not
been reached, then within 10 days thereafter the parties shall each select an
appraiser of national standing and within 10 days after such selection, the
appraisers shall mutually agree upon a third appraiser of national standing.
The average of the two appraisals that are the closest to each other shall, in
such case, be the fair market value and such valuation shall be final and
binding upon all parties and persons claiming through them. The cost of any
appraiser mutually selected will be paid by the Company and the transferor and
the cost of any other appraiser used shall be paid by the party selecting such
appraiser. Anything in this Section III.D to the contrary notwithstanding, if
Xxxxxxxx or a Xxxxxxxx Transferee is not satisfied with the determination of
fair market value, Xxxxxxxx or the Xxxxxxxx Transferee may elect not to proceed
with the proposed transfer of shares of Company Stock not involving a sale and
retain such shares under this Agreement.
E. If the Company (and/or any assignees of the Company) and/or
Enterprise Partners (and/or any assignees of any Enterprise Partners entity) do
not elect to purchase all of the Noticed Shares of Company Stock to which the
Notice refers as provided in Section III.B hereof, then none of the Noticed
Shares shall be purchased (unless Xxxxxxxx or the Xxxxxxxx Transferee elects
otherwise), and Xxxxxxxx or the Xxxxxxxx Transferee, as the case may be, may
sell or transfer all (but not less than all) of the Noticed Shares to any
purchaser or transferee at, in the case of a sale, the price specified in the
Notice or at a higher price, provided that such sale or transfer is consummated
within 120 days after the later of (i) determination by the Company not to
purchase the Noticed Shares to which the Notice refers and (ii) the
determination by Enterprise Partners (or the assignee or assignees of any
Enterprise Partners entity) not to purchase the Noticed Shares to which the
Notice refers.
Section IV. Tag-Along Rights.
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A. If any Stockholder (other than Xxxxxxxx or a Xxxxxxxx
Transferee) or any of such Stockholders' Affiliates (collectively, the "Selling
Group"), at any time or from time to time, enters into an agreement to transfer,
sell or otherwise dispose of, directly or indirectly (a "Tag-Along Sale"), any
shares of Company Stock or any interest therein, then Xxxxxxxx and each Xxxxxxxx
Transferee shall, as a group, have the right, but not the obligation, to
participate in such Tag-Along Sale (and to displace the Selling Group to the
extent of such participation) by selling in total up to the number of shares of
Company Stock (the "Xxxxxxxx Allotment") equal to the product of (i) the total
number of shares of Company Stock proposed to be sold or otherwise disposed of
by the Selling Group in the Tag-Along Sale multiplied by (ii) a fraction, the
numerator of which shall equal the aggregate number of shares of Company Stock
owned by Xxxxxxxx and each then existing Xxxxxxxx Transferee immediately prior
to the Tag-Along Sale and the denominator of which shall equal the sum of: (A)
the aggregate number of shares of Company Stock owned by members of the Selling
Group who have elected to participate in such Tag-Along Sale immediately prior
to the Tag-Along Sale; and (B) the aggregate number of shares of Company Stock
owned by
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Xxxxxxxx and each then-existing Xxxxxxxx Transferee immediately prior to the
Tag-Along Sale.
B. Any such sale by Xxxxxxxx or any Xxxxxxxx Transferee shall be on
the same terms and conditions as the proposed Tag-Along Sale by the Selling
Group; provided, however, that Xxxxxxxx or any Xxxxxxxx Transferee shall share
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pro rata, based upon the number of shares being sold by each (i) in any
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indemnity liabilities to the proposed transferee or purchaser in the Tag-Along
Sale (other than representations made by either Xxxxxxxx, a Xxxxxxxx Transferee
or Seller Group with respect to themselves, including representations as to
unencumbered ownership of and ability to transfer the shares being sold of any
other seller in the Tag-Along Sale, which shall be the sole responsibility of
such other seller) and (ii) in any escrow for the purpose of satisfying any such
indemnity liabilities.
C. The foregoing notwithstanding, Section IV.A shall not apply to
(i) any transfer, sale or other disposition of shares of Company Stock solely
among Enterprise Partners and its Affiliates, (ii) any distribution by
Enterprise Partners or its Affiliates to their partners, or (iii) any merger or
consolidation of Company with or into another corporation or a sale of all or
substantially all of the assets of the Company followed by its dissolution,
provided that, in each case, all shares of Company Stock subject to this
Agreement are treated the same in any such transaction, any then outstanding
shares of the Company's Series A Preferred Stock are not exchanged for or
converted into shares of Preferred Stock with rights, preferences and privileges
superior to those of the existing shares of Series A Preferred Stock and in the
case of (i) and (ii) such transferees shall become parties hereto and be bound
hereby in accordance with Section XIV.
D. The Selling Group members participating in a Tag-Along Sale or a
representative of the Selling Group designated by the Selling Group (the
"Selling Group Representative") shall promptly provide Xxxxxxxx with written
notice (the "Tag-Along Sale Notice") not more than 60 nor less than 15 days
prior to the proposed date of the Tag-Along Sale (the "Tag-Along Sale Date").
In order to facilitate the prompt delivery of the Tag-Along Sale Notices, the
Company hereby covenants to provide the Selling Group members participating in a
Tag-Along Sale or the Selling Group Representative, as the case may be, access
to stock record books of the Company. Each Tag-Along Sale Notice shall set
forth: (i) the name and address of each proposed transferee or purchaser of
shares of Company Stock in the Tag-Along Sale; (ii) the name and address of each
Selling Group member participating in the Tag-Along Sale and the number of
shares of Company Stock proposed to be transferred or sold by each such Selling
Group member; (iii) the proposed amount and form of consideration to be paid for
such shares and the terms and conditions of payment offered by each proposed
transferee or purchaser, (iv) the aggregate number of shares of Company Stock
held of record as of the close of business on the date of the Tag-Along Sale
Notice (the "Tag-Along Notice Date") by Xxxxxxxx or any Xxxxxxxx Transferee and
the aggregate number of shares of Company Stock outstanding on the Tag-Along
Notice Date; (v) the aggregate number of shares of Company Stock held of record
as of the Tag-Along Notice Date by the Selling Group; (vi) the maximum number of
shares of Company Stock that Xxxxxxxx and each Xxxxxxxx Transferee is entitled
to include in
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the Tag-Along Sale assuming Xxxxxxxx and each Xxxxxxxx Transferee elected to
participate in the Tag-Along Sale and elected to sell the maximum number of
shares of Company Stock allowed; (vii) the number of shares of Company Stock
constituting the Xxxxxxxx'x Allotment; (viii) confirmation that the proposed
purchase or transferee has been informed of the "Tag-Along Rights" provided for
herein and has agreed to purchase shares of Company Stock in accordance with the
terms hereof; and (ix) the Tag-Along Sale Date.
X. Xxxxxxxx or any Xxxxxxxx Transferee shall provide written notice
(the "Tag-Along Notice") to the Selling Group Representative, no less than five
(5) days prior to the Tag-Along Sale Date. The Tag-Along Notice shall set forth
the number of shares of Company Stock, if any, that Xxxxxxxx or any Xxxxxxxx
Transferee desires to include in the Tag-Along Sale (which shall not exceed
Xxxxxxxx'x Allotment). The Tag-Along Notice shall also specify the aggregate
number of additional shares of Company Stock owned of record as of the Tag-Along
Notice Date by Xxxxxxxx or any Xxxxxxxx Transferee, if any, which Xxxxxxxx or
any Xxxxxxxx Transferee desires also to include in the Tag-Along Sale
("Additional Shares") in the event there is an aggregate under subscription for
the Xxxxxxxx Allotment. In the event there is an aggregate under subscription
by Xxxxxxxx or any Xxxxxxxx Transferee for the entire Xxxxxxxx Allotment, the
Selling Group member(s) participating in the Tag-Along Sale shall apportion the
unsubscribed shares of Company Stock to Stockholders (other than members of the
Selling Group) whose Tag-Along Notices specified an amount of Additional Shares,
which apportionment shall be on a pro rata basis among such Stockholders in
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accordance with the number of Additional Shares specified by all such
Stockholders in their Tag-Along Notices.
F. The participating members of the Selling Group shall determine
the aggregate number of shares of Company Stock to be sold by each participating
Stockholder in any given Tag-Along Sale in accordance with the terms hereof, and
the Tag-Along Notices given by Xxxxxxxx and each Xxxxxxxx Transferee shall
constitute their binding respective agreements to sell such shares on the terms
and conditions applicable to such sale (including the requirements of this
Section IV).
G. If a Tag-Along Notice is not received by the Selling Group
Representative from Xxxxxxxx or any Xxxxxxxx Transferee prior to the five (5)
day period specified above, the Selling Group members shall have the right to
sell or otherwise transfer the number of shares of Company Stock specified in
the Tag-Along Sale Notice to the proposed purchaser or transferee without any
participation of Xxxxxxxx or any Xxxxxxxx Transferee, but only on the terms and
conditions stated in such Tag-Along Sale Notice and only if such sale occurs on
a date within five business days of the Tag-Along Sale Date.
H. The provisions of this Section IV shall apply regardless of the
form of consideration received in the Tag-Along Sale.
I. "Affiliate" of a specified person means any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control," when used with respect to
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any person, means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and serving as a general partner of a
limited partnership investment fund shall be presumed to be "control" of that
fund; and the terms "controlling" and "controlled" have meanings correlative to
the foregoing.
Section V. Drag-Along Rights.
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A. In the event the Stockholders (other than Xxxxxxxx or a Xxxxxxxx
Transferee) desire to accept an offer from any person (other than any Affiliate
of such parties) to purchase 75% of the outstanding shares of Company Stock then
owned by such Stockholders, then provided such Stockholders at such time own at
least a majority of the Company's then outstanding Common Stock, each of the
other Stockholders shall sell, and shall cause any Affiliate of it to sell all
shares of Company Stock held by it or such Affiliate pursuant to such offer to
purchase (the "Drag-Along Sale"). All holders of Company Stock in such Drag-
Along Sale (i) shall receive the same consideration per share of Company Stock,
shall be subject to the same terms and conditions of sale and shall otherwise be
treated equally or, where appropriate, pro rata based upon the number of shares
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of Company Stock held by each stockholder and (ii) shall execute such documents
and take such actions as may be reasonably required by the Selling Group
Representative provided that Xxxxxxxx and any Xxxxxxxx Transferee shall not be
required (i) to make any representation to the buyer other than with respect to
title to their shares, (ii) to participate in any indemnity liabilities to the
purchaser in the Drag Along sale or (iii) in any escrow for the purpose of
satisfying any such indemnity liability or otherwise.
B. The Selling Group Representative shall promptly provide each
Stockholder with written notice (the "Sale Notice") not more than 60 nor less
than 15 days prior to the date of the Drag-Along Sale (the "Drag-Along Sale
Date"). Each Sale Notice shall set forth: (i) the name and address of each
proposed transferee or purchaser of shares of Company Stock in the Drag-Along
Sale; (ii) the proposed amount and form of consideration to be paid for such
shares and the terms and conditions of payment offered by each proposed
transferee or purchaser, (iii) confirmation that the proposed purchaser or
transferee has been informed of the Drag-Along Rights provided for herein and
has agreed to purchase shares of Company Stock in accordance with the terms
hereof; and (iv) the Drag-Along Sale Date.
C. The provisions of this Section V shall apply regardless of the
form of consideration received in the Drag-Along Sale, and if any non-cash
consideration is proposed in the Drag-Along Sale to each member of the Selling
Group, each Stockholder shall accept its pro rata share of such non-cash
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consideration for the Company Stock based upon its proportional ownership of
shares of Company Stock.
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Section VI. Preemptive Rights; AntiDilution.
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The Company shall provide Xxxxxxxx (provided Xxxxxxxx beneficially
owns at least fifty percent (50%) of the shares of Company Stock owned by
Xxxxxxxx on the date hereof (as equitably adjusted for any subsequent stock
split, stock combination or recapitalization), and each other Stockholder who
beneficially owns at least two percent (2%) of the fully diluted Company Stock
(each, an "Eligible Stockholder")) with a written notice (a "Section VI Notice")
of any proposed issuance by the Company of an equity security (Common Stock,
securities convertible into or exchangeable for Common Stock, and option,
warrants and other rights to acquire Common Stock) at least 15 days prior to the
proposed issuance date. Such notice shall specify the price at which the equity
securities are to be issued and the other material terms of the issuance.
EPIIIA and EPIVA each shall be deemed to be an "Eligible Stockholder" for
purposes of this Agreement as long as EPIII or EPIV is an Eligible Stockholder.
Each Eligible Stockholder shall be entitled to purchase, at the price and on the
terms specified in such Section VI Notice, the equity securities proposed to be
issued on a pro rata basis based upon such Eligible Stockholder's Percentage
Ownership (Eligible Stockholder's Percentage Ownership means, with respect to
any Stockholder at any time (i) the number of shares of fully diluted Company
Stock that such Stockholder owns at such time prior to the proposed issuance,
divided by (ii) the total number of shares of fully diluted Company Stock at
such time prior to the proposed issuance). Each Eligible Stockholder may
exercise its rights under this Section VI by delivering written notice of its
election to purchase equity securities to the Company within fifteen (15) days
of receipt of the Section VI Notice. A delivery of such a written notice (which
notice shall specify the number of shares (or amount) of equity securities to be
purchased by each Eligible Stockholder) shall constitute a binding agreement of
such Eligible Stockholder to purchase, at the price and on the terms specified
in the Section VI Notice, the number of shares (or amount) of equity securities
specified in such written notice. The Company shall have one hundred twenty
(120) days from the date of the Section VI Notice to consummate the proposed
issuance of any or all of such equity securities which have not been elected to
be purchased by the Eligible Stockholders in accordance with this Section VI at
the price and upon terms that are substantially the same as those specified in
the Section VI Notice. At the consummation of such issuance, the Company shall
issue certificates representing the equity securities to be purchased by the
Eligible Stockholders receiving a Section VI Notice registered in the name of
such Eligible Stockholders, against payment therefore of the purchase price for
such equity securities. If the Company proposes to issue equity securities
after such 120-day period, it shall again comply with the procedures set forth
in this Section VI.
The first paragraph of this Section VI shall not apply to issuances
of equity securities (i) to employees, directors and consultants of the Company
or any Affiliate or subsidiary of the Company pursuant to employee stock option,
stock purchase or other benefit plans or arrangements (including, without
limitation, the exercise of options) provided that the recipient of such options
or other such rights is not an Affiliate or employee of Enterprise Partners or
its Affiliates (other than the Company), (ii) in connection with an initial
public offering, (iii) in connection with any restructuring of outstanding debt
of the
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Company or any Affiliate or subsidiary of the Company that is approved by a
majority of the Board, (iv) in connection with any acquisition of the stock or
substantially all of the assets of a corporation, partnership, limited liability
company, or operating division for strategic business purposes, (v) the
conversion of outstanding convertible securities into shares of Company Stock,
(vi) the exercise or release from escrow of the Warrants (as defined in that
certain Securities Purchase Agreement (herein so called) dated as of July 1,
1997 among the Company and Xxxxxxxx Funding, Inc., NationsBridge, L.L.C.,
(Xxxxxxxx Funding, Inc. and NationsBridge LLC are referred to herein as the
"Bridge Lenders") and (vii) to lenders other than Enterprise Partners or its
Affiliates in connection with any refinancing of Company indebtedness. The
Company shall not be under any obligation to consummate any proposed issuance of
equity securities, regardless of whether it shall have delivered a Section VI
Notice in respect of such proposed issuance.
In the event that any Warrants issued to any Bridge Lenders or any
of their respective assignees are exercised, the Company shall, as an
antidilution measure for the benefit of Xxxxxxxx, promptly thereafter issue to
Xxxxxxxx for $1.00, such number of shares of Company Stock as are required to
maintain Xxxxxxxx'x ownership interest (without regard to the shares of Company
Stock issuable upon the conversion of shares of Series A Preferred Stock
outstanding on the date of Closing of the funding transactions contemplated by
the Securities Purchase Agreement and the Warrants but after taking into account
all shares of Company Stock then outstanding or issuable upon the exercise of
any then outstanding options, stock purchase rights or other convertible
instruments). For example, if on the date of the exercise of such Warrants, the
shares of Company Stock owned by Xxxxxxxx represent on such basis of
calculation, a 25% ownership interest in the Company, then the Company would
issue to Xxxxxxxx that number of shares of Company Stock that would, after
giving effect to the exercise of such Warrants, maintain a 25% ownership
interest for Xxxxxxxx with such ownership calculated on the basis of the
outstanding shares of Company Stock (including shares actually issued upon the
exercise of the Warrants, shares issuable upon the exercise of any then
outstanding options, stock purchase rights or other convertible instruments but
excluding the shares issuable upon the conversion of shares of Series A
Preferred Stock). Notwithstanding the foregoing, the antidilution protection
afforded Xxxxxxxx by this paragraph shall terminate and be of no further force
and effect concurrent with and will have no application to the completion by the
Company of an acquisition of or a business combination with another business
principally engaged in supplying products to the pet industry with annual
revenues in excess of $25 million (the "Acquisition").
Section VII. Registration Rights.
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Each of the Stockholders shall have the registration rights
provided in the Registration Rights Agreement attached hereto as Exhibit A,
which Registration Rights Agreement is hereby incorporated herein as if set
forth in full in this Agreement. Execution and delivery of this Agreement shall,
without further act of any of the parties, constitute execution and delivery of
the Registration Rights Agreement.
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Section VIII. Exempt Transfers.
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The provisions of Section III shall not apply to a transfer of any
Company Stock by Xxxxxxxx or any Xxxxxxxx Transferee, either during his lifetime
or on death by will or intestacy, to (i) his ancestors, descendants, spouse,
brothers, sisters, nephews or nieces or (ii) any custodian or trustee or
executor, administrator or other personal representative for the account or
benefit of such Stockholder or such Stockholder's ancestors, descendants,
spouse, brothers, sisters, nephews or nieces; provided, that the transferee
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shall acknowledge and agree, in a writing satisfactory to the Company, to be
bound by the terms of this Agreement and shall execute and deliver to the
Company a joinder as set forth in Exhibit B to such effect.
Section IX. Restriction on Public Sale: Rule 144.
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Anything to the contrary herein notwithstanding, in the event that
at any time the Company files a registration statement with respect to an
underwritten public offering under the Act in which any class of the Company's
equity securities is offered, each Stockholder hereby agrees to be bound by, and
subject to, the same restrictions on the sale or distribution of any shares of
Company Stock (which shares, for the purposes of this Section IX, shall include
any and all voting securities received by such Stockholder as a stock dividend,
stock split or other recapitalization or similar distribution on or in respect
of the shares of Company Stock) or any of the Company's other equity securities,
or of any securities convertible into or exchangeable for such securities, as
required by the underwriters for such offering and agreed to by each of the
Enterprise Partners entities. Enterprise Partners shall give written notice of
such restrictions to the other Stockholders.
If any of the shares of Company Stock are disposed of in
accordance with Rule 144 under the Act, the selling Stockholder shall deliver to
the Company at or prior to the time of such disposition an executed copy of Form
144 (if required by Rule 144) and such other documentation as the Company may
reasonably require in connection with such sale.
Section X. Register of Securities; Removal of Restrictions on Transfer.
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A. Register of Securities. The Company or its duly appointed
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agent shall maintain registers for the shares of Company Stock in which it shall
register the issue and sale of all such shares. The Company may issue stop
transfer instructions to such agent and make similar notations in such register
to ensure that all transfers of such securities are made in accordance with this
Agreement. All transfers of such securities shall be recorded on the register
maintained by the Company or its agent, and the Company shall be entitled to
regard the registered holder of such securities as the actual holder thereof
until the Company or its agent is required to record a transfer of such
Securities on its register. Subject to the other provisions of this Agreement
restricting or prohibiting transfers, the Company or its agent shall be required
to record any such transfer when it receives the security to be transferred
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duly and properly endorsed by the registered holder thereof or by its attorney
duly authorized in writing.
B. Removal of Transfer Restrictions. Any legend endorsed on a
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certificate evidencing shares of Company Stock and the stop transfer
instructions and record notations with respect to such shares shall be removed
and the Company shall issue a certificate without such legend to the holder of
such shares of Company Stock (i) if such Shares are registered under the Act, or
(ii) if a notification under Regulation A under the Act is in effect with
respect thereto, or (iii) if such shares may be sold under Rule 144 or Rule 144A
under the Act.
C. Legends. In addition to any legends required by securities
-------
laws, each stock certificate evidencing shares of Company Stock shall bear a
legend in substantially the following form until such legends may be removed in
accordance with this Agreement:
"The shares represented by this certificate are subject to a Stockholders'
Agreement dated as of July 1, 1997, which contains restrictions on
transfer, rights of first offer, tag-along rights, drag-along rights,
certain registration rights and certain lock up agreements. A copy of said
Stockholders' Agreement may be obtained from the Company by the holder of
such certificate."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED BY THE HOLDER SOLELY FOR ITS OWN ACCOUNT FOR THE PURPOSE OF
INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION OF ANY THEREOF. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 ("ACT") OR STATE SECURITIES LAWS AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT OR AN
EXEMPTION THEREFROM."
Section XI. Board of Directors.
------------------
For so long as Xxxxxxxx (and/or trusts for the benefit of their
immediate family) own at least fifty (50%) of the Company Stock owned by
Xxxxxxxx on the date hereof (as equitably adjusted for any subsequent stock
split, stock combination or recapitalization), each other Stockholder a party
hereto agrees to vote for the election (or execute a written consent for the
election) of Xxxxxxxx Xxxxxxxx or Xxxxxx X. Xxxxxxxx (as determined by Xxxxxxxx
Xxxxxxxx or in the event of his death, Xxxxxx X. Xxxxxxxx) as a director of the
Company or its successor.
Section XII. Enforcement.
-----------
The parties acknowledge that the remedy at law for any breach or
violation of the provisions of Sections IV, VI, VII, XI and XII hereof shall be
inadequate and that, in the event of any such breach or violation, the Company
and/or the Stockholders shall be entitled
11
to injunctive relief in addition to any other remedy, at law or in equity, to
which it may be entitled.
Section XIII. Violation of Transfer Provisions.
--------------------------------
The Company shall not be required (i) to transfer on its books any
shares of Company Stock which shall have been sold, transferred, assigned or
pledged in violation of any of the provisions set forth in this Agreement, or
(ii) to treat as owner of such shares of Company Stock or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred.
Section XIV. General Provisions.
------------------
A. After-Acquired Shares. All of the provisions of this
---------------------
Agreement apply to (i) all of the shares of Company Stock now owned or which may
be transferred hereafter to, or owned of record or beneficially by, any
Stockholder and (ii) all securities and instruments (A) received by a
Stockholder as a dividend on or other payment made to holders of Company Stock
with respect to their Company Stock, or (B) issued in connection with a split of
Company Stock or as a result of any exchange for or reclassification of Company
Stock or a reorganization, recapitalization, consolidation or merger. Any person
or entity who does not presently own but subsequently acquires or receives
shares of Company Stock from a Stockholder shall become a party to and be bound
by the Agreement and shall execute a Joinder substantially in the form attached
hereto as Exhibit B. In addition, any person or entity who does not presently
own but subsequently acquires shares of Company Stock may become a party to and
bound by all or any portion of this Agreement by executing a Joinder
substantially in the form attached hereto as Exhibit B.
B. Rights and Obligations of Transferees. If a Stockholder
-------------------------------------
transfers any or all of its shares of Company Stock to any person, such person
(including, but not limited to, partnerships, corporations, limited liability
companies or trusts) and each subsequent transferee shall have, except as
otherwise provided herein, the same rights hereunder (including pursuant to
Exhibit A) as are given to the Stockholder, and shall be subject to the same
obligations as are imposed upon, the Stockholder by the terms hereof (and all
references herein to a Stockholder shall include such transferee), unless
otherwise provided herein. The Company will not record any transfer of Company
Stock that was made in violation of any provision of this Agreement. Xxxxxxxx,
and each Xxxxxxxx Transferee as a condition to receipt of Company Stock, each
hereby agree to vote for any Acquisition approved by the Board of Directors and
hereby agree not to exercise any dissenter rights they may have with respect to
such Acquisition; provided that the Company has complied with all laws in
connection with such Acquisition.
C. Owner of Stockholder Shares. The person in whose name shares of
---------------------------
Company Stock are registered in the stock books of the Company may be treated as
the owner thereof for all purposes, including without limitation, for the giving
of notices under this Agreement.
12
D. Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given and made and served either by personal delivery
to the person for whom it is intended or if deposited, postage prepaid,
registered or certified mail, return receipt requested, in the United States
mail:
(1) if to any Stockholder, addressed to such Stockholder at
its address as shown on the stock register maintained by the
Company, or at such other address as such Stockholder may specify by
written notice to the Company; or
(2) if to the Company, Xxxxxxxx Manufacturing Company, Inc.,
0000 Xxxxxxx, Xxxxxxxxx, Xxxxx 00000, Attention: President
Each such notice, request, consent or other communication shall be deemed to
have been given upon receipt thereof or, if sooner, five (5) business days after
such has been deposited in the mail as described above. The addresses for the
purposes of this Section XV, may be changed by giving written notice of such
change in the manner provided herein for giving notice. Unless and until such
written notice is received, the address provided herein shall be deemed to
continue in effect for all purposes hereunder.
E. Choice of Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws, and not the laws of conflicts of
laws, of the State of Texas.
F. Severability. The parties hereto agree that the terms and
------------
provisions in this Agreement are reasonable and shall be binding and enforceable
in accordance with the terms hereof and, in any event, that the terms and
provisions of this Agreement shall be enforced to the fullest extent permissible
under law. In the event that any term or provision of this Agreement shall for
any reason be adjudged to be unenforceable or invalid, then such unenforceable
or invalid term or provision shall not affect the enforceability or validity of
the remaining terms and provisions of this Agreement, and the parties hereto
hereby agree to replace such unenforceable or invalid term or provision with an
enforceable and valid arrangement which in its economic effect shall be as close
as possible to the unenforceable or invalid term or provision.
G. Parties in Interest. All the terms and provisions of this
-------------------
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not.
H. Modification, Amendment and Waiver. Except for modifications or
----------------------------------
amendments which make only clarifying changes or which do not increase any
Stockholder's obligations hereunder or deprive any Stockholder of a benefit
hereunder, no modification or amendment of any provision of this Agreement shall
be effective against the Company or any Stockholder unless approved in writing
by each party hereto. The failure at any time to
13
enforce any of the provisions of this Agreement shall in no way be construed as
a waiver of such provisions and shall not affect the right of any of the parties
thereafter to enforce each and every provision hereof in accordance with its
terms. The parties hereto acknowledge that in connection with the Acquisition
it may be necessary to modify this Agreement so that this Agreement and any
existing shareholder agreement pertaining to the business that is the subject of
the Acquisition work together satisfactorily and, accordingly, the parties
hereto agree to negotiate in good faith mutually acceptable amendments to this
agreement in connection with the Acquisition.
I. Integration. This Agreement, together with Exhibits A and B
-----------
hereto, constitutes the entire agreement of the parties with respect to the
specific subject matter hereof (e.g, transfer restrictions, rights of first
offer, tag-along rights, drag-along rights and registration rights) and thereof
and supersedes all prior agreements and negotiations with respect thereto.
J. Headings and Pronouns. The headings of the sections and
---------------------
paragraphs of this Agreement have been inserted for convenience of reference
only and do not constitute a part of this Agreement. Whenever used herein,
words importing the singular shall include the plural and words importing the
masculine shall include the feminine and neuter, and vice versa, unless the
context otherwise requires.
K. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
L. Termination. This Agreement, other than Section VII hereof,
-----------
shall terminate on the earlier to occur of (i) the closing of an underwritten
initial public offering of common stock by the Company (or any successor entity)
of Company Stock pursuant to a registration statement declared effective under
the Act, (ii) the first time at which any equity securities of the Company (or
any successor entity) have been registered under Section 12(b) or 12(g) of the
Exchange Act or (iii) as a result of or at any time after any transfer of the
Company (or any successor entity) Common Stock in connection with a sale of the
Company, whether such sale is effected by merger, consolidation, sale of assets
or sale or exchange of stock representing at least fifty percent (50%) of the
voting power of the stock of the Company (in terms of number of votes for the
election of directors) if, as a result thereof, neither Enterprise Partners nor
any Affiliate of Enterprise Partners retains any Company Stock or (iv) the
foreclosure of the pledge of Company Stock made pursuant to the Credit Agreement
dated as of July 1, 1997 and related loan documents, as amended, modified or
supplemented from time to time or any successor agreements. A merger effected
to reincorporate the Company shall not be considered a sale of the Company and
shall not terminate this Agreement. The provisions of Section VIII hereof shall
terminate on the fifth anniversary of the termination of the other provisions of
this Agreement.
14
M. Further Restriction on Transfer. Notwithstanding any other
-------------------------------
provision of this Agreement, Xxxxxxxx and each Xxxxxxxx Transferee hereby agrees
not to make any transfer of Company Stock, including pursuant to Section VII
hereof, for a period of two years from the date hereof unless prior to making
such transfer the independent auditors of DMC have confirmed to DMC that the
proposed transfer to be made will not adversely effect the recapitalization
accounting treatment applied to the transaction that are the subject of that
certain Recapitalization Agreement dated July 1, 1997 by and among Enterprise
Partners, Xxxxxxxx, Bed Rock International, Inc. and DMC.
15
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders' Agreement as of the day and year first above written.
BUYERS:
ENTERPRISE PARTNERS III, L.P.
By: Enterprise Management Partners III, L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
------------------------------------------
Xxxxxxx X. Xxxxxx
Its: General Partner
ENTERPRISE PARTNERS III ASSOCIATES, L.P.
By: Enterprise Management Partners III, L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
------------------------------------------
Xxxxxxx X. Xxxxxx
Its: General Partner
ENTERPRISE PARTNERS IV, L.P.
By: Enterprise Management Partners IV, L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
------------------------------------------
Xxxxxxx X. Xxxxxx
Its: General Partner
16
ENTERPRISE PARTNERS IV ASSOCIATES, L.P.
By: Enterprise Management Partners IV, L.P.
Its: General Partner
By: /s/ XXXXXXX X. XXXXXX
-----------------------------------------
Xxxxxxx X. Xxxxxx
Its: General Partner
ENTERPRISE MANAGEMENT PARTNERS CORPORATION
By: /s/ XXXXXXX X. XXXXXX
------------------------------------------------
Xxxxxxx X. Xxxxxx
Its: President
SELLERS:
/s/ XXXXXXXX X. XXXXXXXX, XX.
---------------------------------------------------
Xxxxxxxx X. Xxxxxxxx, Xx.
/s/ XXXX XXXXXXX XXXXXXXX
---------------------------------------------------
Xxxx Xxxxxxx Xxxxxxxx
17
XXXXXXXX MANUFACTURING COMPANY, INC.
By: /s/ XXXXXX X. XXXXXXXXX
------------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
----------------------------------------------
Title: Vice President
---------------------------------------------
18
Exhibit A
REGISTRATION RIGHTS AGREEMENT
Section 1. Definitions.
-----------
Terms defined in the foregoing Stockholders' Agreement (the
"Agreement") are used as therein defined unless otherwise defined in this
Exhibit A. As used herein, the following terms shall have the meanings
indicated:
"Commission" means the Securities and Exchange Commission, or any
other federal agency then administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in affect from time to time.
Section 2. Piggy-Back Registration.
-----------------------
If at any time the Company proposes to register (other than a
registration (1) on Form S-8 or any successor form thereto; (2) of debt or
convertible debt securities of the Company; (3) of preferred stock of the
Company; (4) of securities for the purpose of consummating any acquisition by
the Company including a registration on Form S-4 (or any successor form thereto)
or (5) shares of Company Stock pursuant to the exercise of demand registration
rights with respect to the Warrants) any public offering of shares of its
capital stock solely for cash under the Securities Act, the Company will give
written notice to each Stockholder of its intention to do so at least 15 days
prior to the anticipated filing date of such registration statement.
A. In the event of an underwritten public offering identified
above:
(1) The Company shall provide written notice and shall afford
each Stockholder an opportunity to elect to include in such
registration all or any part of the shares of Company Stock then
owned by such Stockholder. Each Stockholder shall have 10 days after
receipt of the Company's notice to notify the Company in writing of
the number of shares of Company Stock (the "Elected Shares") which
such Stockholder elects to include in the offering, which number may
not be subsequently changed (regardless of the reason) unless the
Company permits a change in its sole and absolute discretion. The
Elected Shares shall be included in the registration to the extent
permitted by the managing underwriter in its sole discretion, after
consultation with the Company; provided, however, that the managing
-------- -------
underwriter may prohibit all or a portion of the Elected Shares from
being included in the proposed offering if it determines that the
inclusion of such shares would adversely
A-1
effect the marketing of the primary shares being offered by the
Company; and provided, further, that if the Company agrees to
-------- -------
increase the number of shares included in the offering for any
Stockholder, it must offer to increase the number of shares included
for all Stockholders, pro rata as their interests may appear. If the
aggregate number of Elected Shares that each such electing
Stockholder and any other holders of securities of the Company
possessing registration rights desire to include in such filing
exceeds the number of Shares allowed by the managing underwriter
(the "Permissible Secondary Shares"), then such Stockholder shall be
entitled to include that number of shares of Company Stock that
bears the same ratio to the number of Permissible Secondary Shares
as the number of Elected Shares of Company Stock that Stockholder
desires to include bears to the number of Elected Shares that all
eligible holders of securities desire to include. Such
representative may increase or decrease the number of Permissible
Secondary Shares at any time until all shares of Company Stock
included in such registration shall have been sold by such
underwriters.
(2) The inclusion in such filing of shares of Company Stock
shall be upon the condition that such electing Stockholder sells his
shares of Company Stock to the underwriters on the same terms and
conditions as the other selling holders.
(3) The Company shall afford each Stockholder the right to
participate in each underwritten registration.
B. To include any shares of Company Stock in any such
registration, each Stockholder shall:
(1) cooperate with the Company in preparing each such
registration and execute all such customary agreements as any
representative of the underwriters may deem reasonably necessary in
favor of the underwriters;
(2) promptly supply the Company with all information,
documents, and customary representations and agreements as the
underwriters or the Company may deem reasonably necessary in
connection with such registration; and
(3) agree in writing not to sell or transfer any shares of the
capital stock of the Company not included in such registration
during such period beginning prior to the filing and ending after
the effective date of such registration without the underwriters' or
the Company's consent as is reasonably requested by the
underwriters' provided that Xxxxxxxx and each Xxxxxxxx Transferee
hereby agrees to be bound by any such restriction as is agreed to by
each of the Enterprise Partner entities participating in the
offering.
A-2
C. Anything herein to the contrary notwithstanding, the Company
shall not, other than with respect to the Demand Registration, have any
obligation to the Stockholders if the Board of Directors of the Company
determines, for any reason, not to complete any proposed public offering of its
securities.
Section 3. Demand Registration.
-------------------
A. Request for Registration. If the Company has consummated an
initial public offering (the "IPO") pursuant to the Securities Act, Xxxxxxxx or
any Xxxxxxxx Transferee may on or after the first anniversary of the IPO make a
written request for registration under the Securities Act ("DEMAND
REGISTRATION") of all or part of such Stockholder's shares of Company Stock;
provided that (i) the fair market value of the shares of Company Stock proposed
to be registered has a value (based on the closing average closing price of the
Company Stock during the twenty trading days prior to notice of the demand) in
excess of $5,000,000, (ii) the Company Stock proposed to be registered may not,
in the opinion of counsel to the Company, be sold under Rule 144 (as such rule
may be amended from time to time) without a limitation as to volume or with a
volume limitation that exceeds the shares of Company Stock proposed to be sold,
and (iii) the Company shall not be obligated to effect more than one Demand
Registration. Such request will specify the number of shares of Company Stock
proposed to be sold and will also specify the intended method of disposition
thereof. Within 15 days after receipt of such request, the Company will give
written notice of such registration request to all other Stockholders and other
security holders of the Company entitled to participate in such registration and
include in such registration all shares of Company Stock with respect to which
the Company has received written requests for inclusion therein from
Stockholders or other shareholders thereof within 15 days after receipt by such
Stockholder or other security holders of the Company's notice. Each such
request will also specify the aggregate number of shares of Company Stock to be
registered and the intended method of disposition thereof.
B. Effective Registration and Expenses. A registration will not
count as the Demand Registration until it has become effective (unless the
Stockholders demanding such registration withdraw the Shares of Company Stock to
be registered, in which case such demand will count as a Demand Registration
unless the Stockholders of such Registrable Securities agree to pay all
Registration Expenses (as hereinafter defined)).
Section 4. Expenses.
--------
Except as provided in Section 3 above, the costs and expenses (other
than underwriting discounts or commissions and fees for counsel to the
Stockholders, if any) of all registrations and qualifications under the
Securities Act incurred pursuant to this Registration Rights Agreement, and of
all other actions that the Company is required to take or effect pursuant to the
registration rights granted hereby , shall be paid by the Company (including,
without limitation, all registration and filing fees, printing expenses, costs
of special audits
A-3
incident to or required by any such registration, fees and disbursements of
counsel for the Company and blue sky fees and expenses).
Section 5. Registration Procedures.
-----------------------
Whenever Xxxxxxxx or a Xxxxxxxx Transferee has requested that any
shares of Company Stock be registered pursuant to Section 3 hereof, the Company
will use all reasonable efforts to effect the registration of such shares of
Company Stock as promptly as reasonably practicable, and in connection with any
such request, the Company will as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement on any form for which the Company then qualifies or which counsel
for the Company shall deem appropriate and which form shall be available
for the sale of the shares of Company Stock to be registered thereunder,
and use all reasonable efforts to cause such filed registration statement
to become effective as promptly as reasonably practicable; provided that if
the Company shall furnish to Xxxxxxxx or the Xxxxxxxx Transferee requesting
registration a certificate signed by the Chief Executive Officer of the
Company stating that in his good-faith judgment it would be significantly
disadvantageous to the Company or its shareholders for such a registration
statement to be filed as expeditiously as reasonably possible, the Company
shall have a period of not more than 180 days within which to file such
registration statement measured from the date of receipt of the request in
accordance with Section 3; and provided (i) that before filing a
registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to counsel selected by Xxxxxxxx or the
Xxxxxxxx Transferee requesting registration copies of all such documents
proposed to be filed, which documents will be subject to the review of such
counsel, and (ii) that after the filing of the registration statement, the
Company will promptly notify Xxxxxxxx and any Xxxxxxxx Transferee
participating in the offering of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 270 days or such shorter
period which will terminate when all shares of Company Stock covered by
such registration statement have been sold (but not before the expiration
of the 90-day period referred to in Section 4(3) of the Securities Act and
Rule 174 thereunder, if applicable) and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the
intended methods of disposition set forth in such registration statement;
(c) furnish to Xxxxxxxx and each Xxxxxxxx Transferee
participating in the offering, prior to filing the registration statement
or prospectus or any
A-4
amendment or supplement thereto, if requested, copies of such registration
statement as proposed to be filed, and thereafter furnish to Xxxxxxxx and
each Xxxxxxxx Transferee participating in the offering such number of
copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus
included in such registration statement (including each preliminary
prospectus) and such other documents as Xxxxxxxx and each Xxxxxxxx
Transferee participating in the offering may reasonably request in order to
facilitate the disposition of the shares of Company Stock owned by Xxxxxxxx
and each Xxxxxxxx Transferee participating in the offering.
(d) use all reasonable efforts to register or qualify such
shares of Company Stock under such other securities or blue sky laws of
such jurisdictions in the United States as reasonably (in light of the
intended plan of distribution) requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable Xxxxxxxx
and each Xxxxxxxx Transferee participating in the offering to consummate
the disposition in such jurisdictions of the shares of Company Stock owned
by Xxxxxxxx and each Xxxxxxxx Transferee participating in the offering;
provided that the Company will not be required to (i) qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (d), (ii) subject itself to taxation in any
such jurisdiction or (iii) consent to general service of process in any
such jurisdiction;
(e) use all reasonable efforts to cause such shares of Company
Stock to be registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and operations
of the Company, any Affiliate or any subsidiary to enable Xxxxxxxx or the
Xxxxxxxx Transferee participating in the offering thereof to consummate the
disposition of such shares of Company Stock;
(f) notify Xxxxxxxx and Xxxxxxxx Transferee participating in the
offering, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the occurrence of an event requiring
the preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Shares of Company Stock,
such prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading and promptly make available
to Xxxxxxxx or the Xxxxxxxx Transferee participating in the offering any
such supplement or amendment;
(g) make available for inspection by Xxxxxxxx and any Xxxxxxxx
Transferee participating in the offering and any attorney, accountant or
other professional retained by Xxxxxxxx and any Xxxxxxxx Transferee
participating in the offering (collectively, the "INSPECTORS"), all
financial and other records, pertinent corporate documents and properties
of the Company, any Affiliate and any subsidiary (collectively, the
"RECORDS") as shall be reasonably necessary to enable them to
A-5
exercise their due diligence responsibility, and cause the officers,
directors and employees of the Company and its subsidiaries to supply all
information reasonably requested by any such Inspectors in connection with
such registration statement. Records which the Company determines, in good
faith, to be confidential and any Records which it notifies the Inspectors
are confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such registration statement or (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction. Xxxxxxxx and each Xxxxxxxx Transferee
participating in the offering agree that information obtained by them as a
result of such inspections shall be deemed confidential and shall not be
used by it as the basis for any market transactions in the securities of
the Company, its Affiliates or its subsidiaries unless and until such
information is made generally available to the public. Xxxxxxxx and each
Xxxxxxxx Transferee participating in the offering further agree that they
will, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company at
its expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential; and
(h) otherwise use all reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as reasonably practicable, an
earnings statement covering a period of twelve months, beginning within
three months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
The Company may require Xxxxxxxx and each Xxxxxxxx Transferee
participating in the offering to promptly furnish in writing to the Company such
information regarding the distribution of the shares of Company Stock as it may
from time to time reasonably request and such other information as may be
legally required or reasonably requested in connection with such registration.
Xxxxxxxx and each Xxxxxxxx Transferee participating in the offering
agree that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 5(f) hereof, they will forthwith
discontinue disposition of shares of Company Stock pursuant to the registration
statement covering such shares of Company Stock until receipt of the copies of
the supplemented or amended prospectus contemplated by Section 5(f) hereof, and,
if so directed by the Company, will deliver to the Company all copies, other
than permanent file copies then in their possession, of the most recent
prospectus covering such shares of Company Stock at the time of receipt of such
notice. In the event the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective by the number of days during the period from and including the date of
the giving of notice pursuant to Section 5(f) hereof to and excluding the date
when the Company shall make available to the Doskocils and any
A-6
Xxxxxxxx Transferee participating in the offering the prospectus supplemented or
amended to conform with the requirements of Section 5(f) hereof.
Section 6. Indemnification and Contribution.
--------------------------------
(a) In the event of any registration under the Securities Act of
any offering including shares of Company Stock, the Company hereby agrees to
indemnify and hold harmless each Stockholder, and each other person or entity
that controls such Stockholder and each such Stockholder's officers, directors
and employees, against any losses, claims, damages or liabilities, joint or
several, to which such Stockholder and/or person or entity 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
upon (i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which shares of Company Stock were
registered under the Securities Act, in any preliminary prospectus or final
prospectus contained therein or any amendment or supplement thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(iii) any failure or alleged failure of the Company to comply with any
applicable statute, rule or regulation in connection with the registration
statement or the offering, and will reimburse such Stockholder and/or such
person or entity for any legal or other expenses reasonably incurred by such
Stockholder and/or such person or entity as such expenses are incurred in
connection with investigating or defending any such loss, claim, damage,
liability or proceeding; provided, that the Company will not be liable in any
--------
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, said
preliminary or final prospectus or said amendment or supplement in reliance upon
and in strict conformity with written information furnished by such Stockholder
specifically for use in the preparation thereof.
(b) In the event of any registration under the Securities Act of
any offering including shares of Company Stock, each Stockholder, severally and
not jointly, hereby agrees to indemnify and hold harmless the Company, and each
other person, if any, who controls the Company within the meaning of the
Securities Act and each other person (including each underwriter, and each other
person, if any, who controls such underwriter) who participates in the offering
of such Company Stock against any losses, claims, damages or liabilities, joint
or several to which the Company, such controlling person or such participating
person 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 upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement under which an offering of such Company Stock was registered under the
Securities Act, in any preliminary prospectus or final prospectus contained
therein, or in any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material
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fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company and each such controlling person
or participating person for any legal or other expenses reasonably incurred by
the Company or such controlling person or participating person as such expenses
are incurred in connection with investigating or defending any such loss, claim,
damage, liability or proceeding; provided that each Stockholder will be liable
--------
in any such case only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
said preliminary or final prospectus or said amendment or supplement in reliance
upon and in strict conformity with written information furnished by such
Stockholder in his capacity as such specifically for use in the preparation
thereof.
(c) If the indemnification provided for in this Section 6 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the 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, liabilities or expenses in such
proportion as is appropriate to indemnified parties in connection with the
actions which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(c) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
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.
(d) Whenever a claim shall arise for indemnification under this
Section 6, the indemnified party shall promptly notify the indemnifying party of
such claim and, when known, the facts constituting the basis for such claim. In
the event of any such claim for indemnification resulting from or in connection
with a claim or legal proceeding by a third party, the indemnifying party may,
at its sole cost and expense, assume the defense thereof. If an indemnifying
party assumes the defense of any such claim or legal proceeding, the
indemnifying party shall be entitled to select counsel reasonably acceptable to
the indemnified party and take all steps necessary in the defense thereof;
provided, however, that no settlement shall be made without the prior written
-------- -------
consent of the indemnified party, which
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shall not be unreasonably withheld (it being understood that the indemnified
party may not withhold consent to any settlements involving only a monetary
payment where the indemnifying party is ready, willing and able to pay such
amount); and provided, further, that the indemnified party may, at its own
-------- -------
expense, participate in any such proceeding with the counsel of its choice. If
the indemnifying party does not assume the defense of any such claim or
litigation in accordance with the terms hereof, the indemnified party may defend
against such claim or litigation in such manner as it may deem appropriate,
including, without limitation, settling such claim or litigation (after giving
notice of the same to the indemnifying party) on such terms as the indemnified
party may deem appropriate, and the indemnifying party will promptly indemnify
the indemnified party in accordance with the provisions of this Section 6.
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Exhibit B
JOINDER
Reference is made to the Stockholders' Agreement (the "Agreement")
dated as of May __, 1997, among Enterprise Partners III, L.P., and certain other
parties listed on the signature page thereto. All capitalized terms used but
not otherwise defined herein shall have the meanings ascribed to such terms in
the Agreement.
The undersigned is the holder of [______ SHARES OF COMMON STOCK]
(the "Securities"). The undersigned hereby joins the Agreement as a party
thereto with respect to Company Stock, entitled to the rights and benefits of,
and subject to the obligations of, a party thereto with respect to Company
Stock.
The undersigned's address for notices is _____________
________________________________________________________________.
Dated this ____ day of _________, 19__.
By:_________________________________
Name:_______________________________
Its:________________________________
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