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EXHIBIT 10.39
STOCKHOLDERS' AGREEMENT
DATED AS OF OCTOBER 15, 1997
between
K & F INDUSTRIES, INC.
and the
STOCKHOLDERS IDENTIFIED HEREIN
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STOCKHOLDERS' AGREEMENT dated as of October 15, 1997, between
K & F INDUSTRIES, INC. (formerly known as Opus Acquisition
Corporation), a Delaware corporation (the "Company"), XXXXXXX X.
XXXXXXXX ("BLS") and XXXXXX BROTHERS MERCHANT BANKING PORTFOLIO
PARTNERSHIP L.P. ("LBMB"), XXXXXX BROTHERS OFFSHORE INVESTMENT
PARTNERSHIP L.P. ("LBOI"), XXXXXX BROTHERS OFFSHORE INVESTMENT
PARTNERSHIP - JAPAN L.P. ("LBOIJ"), and XXXXXX BROTHERS CAPITAL
PARTNERS II, L.P. ("LBCP," and collectively with LBMB, LBOI, LBOIJ,
"LBP").
Each of the parties to this Agreement (other than the Company) and
any other Person who shall become a party to or agree to be bound by the terms
of this Agreement after the date hereof is sometimes hereinafter referred to as
a "Stockholder." This Agreement replaces the Amended and Restated Stockholders
Agreement dated as of September 2, 1994 by and among the Company and the
stockholders referred to therein and shall become effective (the "Effective
Date") on the date hereof.
The parties hereto desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of the shares of stock (the "Stock")
of the Company, including both issued and outstanding shares of Stock as well as
shares of Stock which may be issued hereafter, and to provide for certain rights
and obligations in respect thereto as hereinafter provided.
Accordingly, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
"Affiliate" shall mean, with respect to any Person, any other
Person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person.
"Alternative Investment Bank" shall have the meaning set forth in
Section 6.1(b).
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"Appraisal Request" shall have the meaning set forth in Section 6.1(a).
"Appraised Value" shall have the meaning set forth in Section 6.1(a).
"BLS" shall have the meaning set forth in the preamble of this
Agreement.
"BLS Group" shall have the meaning set forth in Section 3.1.
"Board of Directors" shall mean the Board of Directors of the Company.
"Buyer's Notice" shall have the meaning set forth in Section 4.1(a).
"By-laws" shall mean the by-laws of the Company, in the form of Exhibit
A hereto, as amended from time to time.
"Charitable Institution" shall mean an organization described in
section 501(c)(3) of the Code.
"Charter" shall mean the Restated Certificate of Incorporation of the
Company, in the form of Exhibit B hereto, as amended from time to time.
"Charter Documents" shall have the meaning set forth in Section 9.3(a).
"Closing Date" shall have the meaning set forth in Section 7.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Equivalents" shall mean outstanding shares of Common Stock and
shares of Common Stock issuable upon the exercise of outstanding options or
rights to acquire Common Stock or upon conversion of outstanding convertible
securities whether or not vested, exercisable, or convertible at the time of
determination.
"Common Stock" shall have the meaning set forth in the preamble of this
Agreement.
"Company" shall have the meaning set forth in the preamble of this
Agreement.
"Effective Date" shall have the meaning set forth in the preamble of
this Agreement.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"First Investment Bank" shall have the meaning set forth in Section
6.1(b).
"First Offerees" shall have the meaning set forth in Section 4.1(b).
"Initial Public Offering" shall mean the Company's initial sale of
Stock pursuant to an effective registration statement under the Securities Act
(other than a registration statement on Form S-4 or Form S-8 or otherwise
relating to shares of Stock issuable under any employee benefit plan of the
Company or issued in connection with the sale of any debt securities of the
Company).
"LBP" shall have the meaning set forth in the preamble of this
Agreement.
"Xxxxxx Group" shall have the meaning set forth in Section 3.1.
"Offer Price" shall have the meaning set forth in Section 4.1(a).
"Offered Shares" shall have the meaning set forth in Section 4.1(a).
"Offeree Group" shall have the meaning set forth in Section 4.1(b).
"Offerees" shall have the meaning set forth in Section 4.1(b).
"Other Party" shall have the meaning set forth in Section 6.2(a).
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, association, joint stock company, unincorporated organization or
a government or any agency or political subdivision thereof.
"Put-Sale Group" shall have the meaning set forth in Section 6.2(a).
"Put-Sale Notice" shall have the meaning set forth in Section 6.2(a).
"Rule 144 Open Market Transaction" shall mean any sale of shares of
Stock in an open market transaction under Rule 144 of the Securities Act (or any
successor rule) if such sale is in compliance with the requirements of such
Rule.
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"SEC" shall mean the Securities and Exchange Commission.
"Second Offerees" shall have the meaning set forth in Section 4.1(b).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in Section 4.1(a).
"Seller's Notice" shall have the meaning set forth in Section 4.1(a).
"Stock" shall have the meaning set forth in the preamble to this
Agreement.
"Stockholder" shall have the meaning set forth in the preamble of this
Agreement.
"Third Offerees" shall have the meaning set forth in Section 4.1(b).
"Transfer" shall have the meaning set forth in Section 2.1.
"Transferee" shall have the meaning set forth in Section 2.1.
2. CERTAIN RESTRICTIONS ON TRANSFERS
2.1. Transfers in Accordance with this Agreement.
No Stockholder shall, directly or indirectly, (i) transfer, sell,
assign, pledge, hypothecate, encumber, or otherwise dispose of any Stock to any
Person or (ii) enter into any swap, participation or other arrangement that
transfers to another Person, in whole or in part, any of the economic
consequences of ownership of shares of Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of shares of
Stock, in cash or otherwise (any such act being referred to as a "Transfer" and
any Person acquiring Stock from a Stockholder and any subsequent transferee of
any such Person is referred to as a "Transferee" of such Stockholder), unless
such Transfer is permitted under Section 3.1. The Company shall not register
upon its books any Transfer of Stock by a Stockholder to any Person except a
Transfer in accordance with this Agreement.
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2.2. Certain Stockholders.
Each Stockholder that is an entity that was formed for the purpose of
acquiring Stock or that has no substantial assets other than such Stock or
interests therein agrees that (a) its shares of common stock or instruments
reflecting equity interests therein (and the shares of common stock or
instruments of any similar entities that control it) will note the restrictions
on Transfer contained in this Agreement as if they were Stock and (b) no shares
of stock or other equity interests in any such entities may be transferred to
any Person other than in accordance with the terms of this Agreement as if such
stock or other equity interests were Stock.
2.3. Agreement to be Bound.
No Transfer of Stock (other than Transfers pursuant to the registration
rights included in Exhibit C, Rule 144 Open Market Transactions or any other
bona fide registered public offering) shall be effective (and the Company shall
not transfer on its books any such Common Stock) unless (i) the certificates
representing such Stock issued to the Transferee shall bear the legends provided
in Article 8, if required by such Section, and (ii) the Transferee (if not
already a party hereto) shall have executed and delivered to the Company, as a
condition precedent to such Transfer, an instrument or instruments in form and
substance reasonably satisfactory to the Company confirming that the Transferee
agrees to be bound by the terms of this Agreement.
3. CERTAIN PERMITTED TRANSFERS
3.1. Certain Permitted Transfers. None of the restrictions contained in
this Agreement with respect to Transfers of Stock (other than those set forth in
Sections 2.3 and this Section 3.1) shall apply:
(a) to any Transfer (including by gift) by BLS:
(i) to any spouse or descendants (collectively, "relatives") of BLS;
(ii) to a trust of which there are no beneficiaries other than (A)
BLS, (B) relatives of BLS or (C) a charitable institution or
organization;
(iii) to any partnership, corporation or limited liability company
of which there are no partners, stockholders or members, as applicable,
other than BLS or relatives of BLS;
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(iv) to a legal representative or guardian of BLS or a relative of
BLS if BLS or such relative becomes mentally incompetent; or
(v) to any person by will or by the laws of descent.
provided that any such Transferee listed in clauses (i) through (v) above agrees
that, notwithstanding the terms of this Section 3.1, such Transferee shall not
thereafter Transfer such Stock to any Person to whom BLS would not be permitted
to Transfer such Stock pursuant to the terms of this Agreement;
(b) to any Transfer of Stock by BLS or any member of the BLS Group to
BLS, any member of the BLS Group or any individual who is then employed by, a
consultant to or a director of the Company or any of its subsidiaries, or any
individual who is then a consultant or advisor to BLS with respect to the
investment by BLS in the Company (such individuals, together with the persons or
entities listed in clauses (i) through (v) of subsection (a) above, the "BLS
Group");
(c) to any Transfer of Stock by LBP or any member of the Xxxxxx Group
(i) to any employee, consultant and advisor of any member of the
Xxxxxx Group or its Transferees;
(ii) to any trust, partnership or similar entity established by LBP
for the purpose of holding Stock on behalf of the partners of LBMB,
LBOI, LBOIJ or LBCP, provided that the trustees or general partners (or
persons serving similar functions) of any such trust or other entity
are employees or directors of LBP or any of its Affiliates (who shall
be reasonably acceptable to BLS);
(iii) to (A) any general partner of LBMB, LBOI, LBOIJ or LBCP, (B)
any wholly-owned subsidiary of any such general partner or (C) any
partnership for which such general partner or its wholly-owned
subsidiary is the sole general partner; provided, that any such
partner, subsidiary or partnership shall be reasonably acceptable to
BLS; or
(iv) to any third party after March 3, 2001, subject to compliance
with Sections 2, 4, 5, 6 and 9.1(g) hereof (such third party, together
with LBP and the entities listed above in clauses (i), (ii) and (iii)
of this subsection (c), the "Xxxxxx Group");
provided, that any such Transferee agrees that, notwithstanding the terms of
this Section 3.1, it shall not thereafter Transfer such Stock to any Person to
whom such transferor Stockholder
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would not be permitted to Transfer such Stock pursuant to the terms of this
Agreement;
(d) after an Initial Public Offering approved by the Board of Directors
of the Company, to any Transfer of Stock for cash pursuant to the registration
rights included in Exhibit C or any other bona fide registered public offering;
provided that notwithstanding the terms of this Section 3.1(d), any Transfer of
Stock not made in a broad distribution to the general public, whether pursuant
to a registered public offering or otherwise, shall be subject to the rights of
first offer contained in Section 4.1 and the tag-along rights contained in
Section 5.2;
(e) after an Initial Public Offering approved by the Board of Directors
of the Company, to any Transfer of Stock for cash pursuant to Rule 144 Open
Market Transactions occurring after an Initial Public Offering; provided that
notwithstanding the terms of this Section 3.1(e), any Transfer of Stock not made
in a broad distribution to the general public, whether pursuant to a Rule 144
Open Market Transaction or otherwise, shall be subject to the rights of first
offer contained in Section 4.1 and the tag-along rights contained in Section
5.2;
(f) to any Transfer of Common Stock consisting of the pledge of Stock
by any Stockholder to a commercial bank, savings and loan institution or any
other lending institution as security for a bona fide loan or loans provided
that upon any foreclosure such pledgee shall assume and be bound by all the
terms of this Agreement;
(g) to any Transfer of Stock pursuant to the put-sale rights set forth
in Section 6.2; or
(h) to any Transfer of Stock acquired on the open market.
4. RIGHTS OF FIRST OFFER
4.1. Transfers to Third Parties; Rights of First Offer.
(a) Subject in all respects to the restrictions on transfer set forth
in Section 2.1 and compliance with Section 2.3 and 3.1, if at any time any
Stockholder desires to Transfer any Stock then owned by such Stockholder to any
third party pursuant to Sections 3.1(c)(iv), the proviso to Section 3.1(d), the
proviso to Section 3.1(e) and (in the case of a foreclosure or similar action
following a pledge) (f), such Stockholder shall first comply with the rights of
first offer contained in this Section 4.1. Such Stockholder shall give written
notice to the Company stating that such Stockholder desires to make such
Transfer, the number of shares of Stock proposed to be Transferred and the cash
price per share that such Stockholder proposes to be paid for such shares of
Stock.
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For purposes of this Agreement, any notice stating a Stockholder's
desire to Transfer Common Stock pursuant to this Section 4.1 is referred to as a
"Seller's Notice"; the Common Stock covered by any Seller's Notice is referred
to as the "Offered Shares"; the Stockholder giving the Seller's Notice is
sometimes referred to as the "Seller"; the price per share which the Stockholder
proposes to be paid therefor (or, in the case of a registered public offering,
the midpoint of the range of prices proposed therefor) is referred to as the
"Offer Price"; and any notice given by the Company or any Stockholder pursuant
to which the Company or such Stockholder (as the case may be) elects to purchase
Offered Shares and that states (i) the maximum number of such Offered Shares
that the Company or such Stockholder (as the case may be) elects to purchase,
(ii) that the election made in such notice is irrevocable and (iii) that the
Company or such Stockholder (as the case may be) shall purchase any number of
Offered Shares up to such maximum number at the Offer Price in cash is referred
to as a "Buyer's Notice." Each Seller's Notice shall constitute an irrevocable
offer by the Seller to the Company and/or the other Stockholders, as the case
may be, of the Offered Shares at the Offer Price. The Company shall mail a copy
of any Seller's Notice (together with a description of the offering procedures
hereunder) to each Stockholder of the Company within 5 days of the receipt
thereof.
(b) Offered Shares offered by any Seller pursuant to this Section
4.1 shall be offered to the Company (it being understood that the exercise by
the Company of its rights under this Section 4.1 shall be subject to the terms
of the Company's By-Laws) and other Stockholders in the following order:
(i) in the case of any offer by BLS, first to the Company and second
to all other Stockholders who are not BLS Transferees;
(ii) in the case of any offer by any other member of the BLS Group
or any other Transferee of BLS, first to BLS, second to the Company and
third to the other Stockholders; and
(iii) in the case of any offer by any member of the Xxxxxx Group or
any Transferee of any member of the Xxxxxx Group, first to the other
members of the Xxxxxx Group, second to the Company and third to the
other Stockholders.
The first Person or group to whom Offered Shares are so offered is
called the "First Offerees"; the second such Person or group is called the
"Second Offerees"; and the third such Person or group, if any, is called the
"Third Offerees." Each such Person or group is called an "Offeree Group" and all
such Persons and groups are called the "Offerees."
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(c) Within 10 days after the date of mailing by the Company of the
Seller's Notice, the First Offerees may elect to purchase Offered Shares at the
Offer Price in a Buyer's Notice to the Seller, with a copy to the Company.
(d) If the First Offerees elect to purchase none of, or less than all
of, the Offered Shares, then the Company shall give written notice to the Second
Offerees not later than three days after the expiration of the 10-day period set
forth in Section 4.1(c), which notice shall specify the Offer Price and the
number of remaining Offered Shares available for purchase by the Second
Offerees. The Second Offerees may elect to purchase Offered Shares at the Offer
Price in a Buyer's Notice to the Seller, with a copy to the Company, within 10
days following mailing of the notice from the Company.
(e) If the First Offerees and the Second Offerees elect to purchase
none of, or less than all of, the Offered Shares, then the Company shall give
written notice to the Third Offerees (if applicable) not later than three days
after the expiration of the 10-day period set forth in Section 4.1(d), which
notice shall specify the Offer Price and the number of remaining Offered Shares
available for purchase by the Third Offerees. The Third Offerees may elect to
purchase Offered Shares at the Offer Price in a Buyer's Notice to the Seller,
with a copy to the Company, within 10 days following mailing of the notice from
the Company.
(f) If the Offerees fail to elect to purchase all the Offered Shares
within the time periods specified in this Section 4.1, then the Seller (i) shall
be under no obligation to sell any of the Offered Shares to the Company or any
Stockholder, unless the Seller so elects, and (ii) may, within a period of three
months from the date of the Seller's Notice, sell all or any Offered Shares to
one or more third parties for cash at a price per share not less than the Offer
Price and on other terms which are no more favorable to the purchaser than those
set forth in the Seller's Notice.
(g) In the event of an oversubscription to purchase Offered Shares in
connection with notice given under Sections 4.1(c), the proviso to Section
3.1(d) or the proviso to Section 3.1(e) hereof, each Offeree which delivered a
Buyer's Notice thereunder shall be permitted to purchase its pro rata share of
the Offered Shares. Such pro rata share shall equal the product of (i) the
fraction, the numerator of which shall be the number of Offered Shares such
Offeree offered to purchase pursuant to its Buyer's Notice delivered under
Sections 4.1(c), the proviso to Section 3.1(d) or the proviso to Section 3.1(e),
as applicable, and the denominator of which shall be the aggregate number of
Offered Shares all Offerees offered to purchase under Sections 4.1(c), the
proviso to Section 3.1(d) or the proviso to Section 3.1(e), as applicable, times
(ii) the aggregate number of Offered Shares available to be purchased under
Sections 4.1(c),
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the proviso to Section 3.1(d) or the proviso to Section 3.1(e), as applicable.
4.2. Subsequent Transfers.
If the Company and the Stockholders do not elect to purchase all the
Offered Shares at the Offer Price in cash and the Seller shall not have
Transferred the Offered Shares to any Transferee prior to the expiration of the
three month period specified in Section 4.1(f), then the rights of first offer
under this Article 4 shall again apply in connection with any subsequent
Transfer or offer to Transfer by such Seller.
5. PUBLIC OFFERING; TAG-ALONG RIGHTS
5.1. Registration Rights.
Following the occurrence of an Initial Public Offering approved by the
Board of Directors, the Company hereby grants to each Stockholder the
registration and other rights set forth in, and each Stockholder agrees to
comply with the terms and conditions contained in, Exhibit C hereto.
5.2. Tag-Along Right.
(a) Subject in all respects to the restrictions on transfer set forth
in Section 2.1 and compliance with Sections 2.3 and 3.1, if, at any time, any
Stockholder (or group of Stockholders acting in concert) (individually, the
"Original Selling Stockholder") proposes to Transfer shares of Common Stock (or
options or rights to acquire Common Stock or securities convertible into Common
Stock) to any Person or group of Persons (the "Proposed Purchaser") in any
transaction or series of related transactions pursuant to Sections 3.1(c)(iv),
the proviso to Section 3.1(d) and the proviso to Section 3.1(e), the Original
Selling Stockholder shall afford each other Stockholder (each, a "Tag-Along
Stockholder") the opportunity to participate proportionately in such Transfer in
accordance with this Section 5.2. Each Stockholder (including the Original
Selling Stockholder) electing to participate in such sale shall have the right
to Transfer the same percentage of the total number of Common Equivalents
proposed to be transferred as such Stockholder holds of the total outstanding
Common Equivalents. The Original Selling Stockholder shall give notice to the
other Stockholders of their right to sell Common Equivalents hereunder (the
"Tag-Along Notice") which notice shall state the number of shares of Common
Equivalents proposed to be Transferred, the proposed offering price and any
other material terms and conditions of the Transfer.
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(b) Within 10 days after the date of delivery of a Tag-Along Notice,
any Stockholder may elect to participate in such Transfer pursuant to the terms
and conditions of such Notice in a notice given to the Original Selling
Stockholder; provided, however, that the only representations and warranties
which such Tag-Along Stockholder shall be required to give shall be
representations and warranties comparable to those which the Original Selling
Stockholder is required to give.
(c) If the Proposed Purchaser is acquiring Common Equivalents in a
single transaction from more than one Stockholder or in a series of related
transactions from one or more Stockholders, (i) the price per share or Common
Equivalent shall be the highest of the prices, and the other terms and
conditions of the Transfer shall be the most favorable of the terms and
conditions, offered by the Proposed Purchaser to any Stockholder at or prior to
the consummation of such Transfer and (ii) the form of consideration shall be
the same for all Common Equivalents Transferred in such Transfer.
(d) Any Tag-Along Stockholder exercising Tag-Along rights hereunder
with respect to any Common Equivalent other than shares of Common Stock shall
convert or exercise such Common Equivalent into or for Common Stock prior to the
consummation of any Transfer hereunder.
(e) Any Original Selling Stockholder that proposes to Transfer shares
of Common Stock under this Section 5 shall comply with the Rights of First Offer
provisions set forth in Section 4 hereto. Any sale or purchase by an Original
Selling Stockholder and a Tag-Along Stockholder shall occur simultaneously.
(f) Any Transfer by the Original Selling Stockholder subject to this
Section 5.2 shall be made within three months of the date of the Tag-Along
Notice and shall be made substantially in accordance with the terms and
conditions described in such Tag-Along Notice. If the Original Selling
Stockholder shall not have effected the Transfer prior to the expiration of such
three-month period, the tag-along rights under this Section 5.2 shall again
apply in connection with any subsequent Transfer or offer to Transfer by such
Original Selling Stockholder.
6. PUT-SALE OPTION
6.1. Appraisal.
(a) From and after the earlier to occur of (i) five (5) years after the
Effective Date, (ii) six (6) months after the death of BLS or (iii) upon the
resignation or retirement of BLS as Chairman or Chief Executive Officer of the
Company, the BLS Group (acting with the approval of the holders of a majority of
the Common Stock held by all members of the Group) and the Xxxxxx
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Group (acting with the approval of the holders of a majority of the Common Stock
held by all members of the Group) may, by notice (an "Appraisal Request") to the
other party, request an appraisal of the value of the common equity of the
Company (the "Appraised Value"); provided, that upon any transfer made pursuant
to Section 3.1(c)(iv) hereof, the Xxxxxx Group's Rights pursuant to this Section
6.1 and Section 6.2 shall terminate and shall no longer be available to the
Xxxxxx Group, any member of the Xxxxxx Group or any transferee thereof. The BLS
Group, the Xxxxxx Group and the Company shall cause such appraisal to be
completed within 30 days of delivery of the Appraisal Request according to the
procedures set forth in Section 6.1(b) and (c).
(b) The Appraised Value shall be determined jointly by LBP and a
nationally recognized investment bank selected by the BLS Group (the "First
Investment Bank") or, if the Xxxxxx Group and the First Investment Bank fail to
agree on an Appraised Value within 15 days of delivery of the Appraisal Request,
by another nationally recognized investment bank selected jointly by the Xxxxxx
Group and the BLS Group (the "Alternative Investment Bank"). Any Appraised Value
as determined by any Alternative Investment Bank shall be between the values
determined by the Xxxxxx Group and the First Investment Bank.
(c) The Appraised Value shall be the value of the Company's common
equity (assuming conversion of all Common Equivalents to Common Stock) that
would be realized in a private sale of the Company as an entirety with a
reasonable amount of time available to negotiate and consummate such sale;
provided that the Appraised Value shall not be less than the value offered in
any bona fide proposal to acquire the Company or its assets that may have been
received prior to the date upon which the Appraised Value shall be determined.
(d) The Company shall give the Xxxxxx Group, the First Investment Bank
and any Alternative Investment Bank access to the books, records and personnel
of the Company and shall pay all fees and expenses of the appraisers incurred in
connection with the Appraisal.
6.2. Put-Sale Right.
(a) Within 15 days after the Appraised Value has been established,
either the BLS Group or the Xxxxxx Group (the "Put Party") may, at its sole
option, deliver written notice (the "Put-Sale Notice") to the other party (the
"Other Party") and the Company of its desire to sell all of the Common Stock
owned by the Put Party and any Transferees thereof designated by the Put Party
(the "Put-Sale Group") from among the Put Party and their Transferees. The
purchase price for the shares of Stock shall be an amount equal to the pro rata
share (based on Common Equivalents) of the Appraised Value of the Common Stock
subject to such put.
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(b) The Other Party shall have 135 days following receipt of the
Put-Sale Notice to make binding arrangements (including full financing
commitments) for the purchase for cash of the Stock of the Put-Sale Group by the
Other Party or a third party designated by the Other Party. The closing of such
purchase shall be no later than 30 days following the execution of such binding
arrangements, subject to extension with the written consent of the Put Party,
which consent will not be unreasonably withheld. During such 135-day period, the
Other Party shall either (i) use its best efforts to arrange for the prompt
purchase of the Stock or (ii) notify the Put Party as soon as the Other Party
determines that it will not or can not purchase, nor arrange for a third party
to purchase, the Stock held by the Put-Sale Group.
(c) In the event that the Other Party is unable or chooses not to
arrange for and consummate the purchase of the Put-Sale Group's Stock within the
time periods set forth in Section 6.1(b), then the BLS Group and the Xxxxxx
Group shall cause the Company to be sold as an entirety if such sale can be
arranged yielding proceeds at least equal to the Appraised Value. The BLS Group,
the Xxxxxx Group and the Company shall proceed in good faith and use their best
efforts to sell the Company as an entirety as promptly as practicable and in any
event within six months of the expiration of the time periods set forth in
Section 6.1(b), subject to extension with the written consent of the BLS Group
and the Xxxxxx Group, which consent will not be unreasonably withheld. If it
becomes apparent, in the Put Party's reasonable judgment, that the Company can
not be sold at the Appraised Value, then the Put Party, at its sole option, may
reduce the price for which the Company is being offered by up to 10% of the
Appraised Value. Any sale of the Company as an entirety hereunder shall include
all Stockholders and the proceeds thereof shall be allocated among the
Stockholders in accordance with their Stock ownership in the Company based on
Common Equivalents.
7. CLOSING
7.1. Closing.
Any selling Stockholder and any Stockholders who are purchasing or
selling any shares of Stock pursuant to Articles 4, 5 or 6 shall mutually
determine a closing date (the "Closing Date") which, subject to any applicable
regulatory waiting periods, shall not be more than 30 days after the last notice
is given with respect to such purchase or after the expiration of the last
notice period applicable to such purchase. The closing shall be held at 10:00
a.m., local time, on the Closing Date at the principal office of the Company, or
at such other time or place as the parties mutually agree.
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7.2. Deliveries at Closing; Method of Payment of Purchase Price.
On the Closing Date, any selling Stockholder shall deliver (1)
certificates representing the shares of Stock being sold, free and clear of any
lien, claim or encumbrance, (2) any documents representing options, rights or
convertible securities being sold, and (3) such other documents, including
evidence of ownership and authority, as the purchasers may reasonably request.
The purchase price shall be paid by delivery of a cashier's check, certified
check or wire transfer.
8. LEGEND
A copy of this Agreement shall be filed with the Secretary of the
Company and kept with the records of the Company. Each of the Stockholders
hereby agrees that each outstanding certificate representing shares of Stock
issued to any Stockholder, or any certificate issued in exchange for any
similarly legended certificate, shall, unless sold pursuant to a bona fide
registered public offering or pursuant to a Rule 144 Open Market Transaction,
bear a legend reading substantially as follows:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO
REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THIS SECURITY ALSO IS SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN A SECURITIES PURCHASE AGREEMENT AND
AN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, BETWEEN THE
HOLDER HEREOF AND THE COMPANY, COPIES OF WHICH MAY BE OBTAINED
FROM THE COMPANY. NO TRANSFER OF SUCH SHARES WILL BE MADE ON
THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH AGREEMENTS.
9. CERTAIN VOTING AND OTHER AGREEMENTS
9.1. Board of Directors of the Company.
(a) Subject to Section 9.1(f) hereof, the Board of Directors shall
initially be comprised of 9 members, of which the BLS Group shall be entitled,
but not required, to designate the majority (i.e., five (5)) of the members (the
"BLS Nominees") of the Board of Directors, and the Xxxxxx Group shall be
entitled, but not required, to designate three (3) of the members (the "LBP
Nominees"). Each of the Stockholders agrees to vote its shares
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of Common Stock, at any regular or special meeting of the stockholders of the
Company called for the purpose of filling positions on the Board of Directors,
or in any written consent executed in lieu of such a meeting of stockholders,
and agrees to take all actions necessary, to ensure the election to the Board of
Directors of the LBP Nominees and the BLS Nominees as described herein.
(b) The Company and each Stockholder hereby agrees to use its best
efforts to call, or cause the appropriate officers and directors of the Company
to call, a special meeting of stockholders of the Company and to vote all of the
shares of Common Stock owned or held of record by such Stockholder for, or to
take all actions by written consent in lieu of any such meeting necessary to
cause, the removal (with or without cause) of any LBP Nominee if LBP (or any
Affiliate thereof designated by LBP) requests such director's removal for any
reason or any BLS Nominee if BLS requests such director's removal for any
reason. LBP and its Affiliates and BLS shall have the right to designate a new
nominee in the event any LBP Nominee or BLS Nominee, as applicable, shall be so
removed or vacate his directorship for any reason. The number of Directors that
shall constitute the entire Board of Directors may be increased or decreased
from time to time in accordance with the terms and provisions of this Agreement
and the by-laws.
(c) Subject to Section 9.1(b) hereof, each Stockholder hereby agrees
that, at any time it is then entitled to vote for the election or removal of
directors, it will not vote in favor of the removal of any LBP Nominee or BLS
Nominee unless such removal shall be for Cause otherwise than as required by
Section 9.1(b) hereof. For the purposes of this Section 9.1(c), "Cause" shall
mean the willful and continued failure by a director substantially to perform
duties as a director of the Company, the willful engaging by a director in
conduct which is demonstrably and materially injurious to the Company, or the
director's conviction of any crime constituting a felony.
(d) The Company covenants that it will not, without the consent of LBP,
take any action requiring (under the Company's by-laws) the approval of at least
one LBP Nominee if the only LBP Nominees approving such action are Persons whose
removal from the Board of Directors LBP has requested at or prior to the time of
such action; provided, that any consent heretofore granted by the LBP Nominees
and any action heretofore authorized by the Board of Directors or otherwise
currently in effect shall remain in full force and effect.
(e) The initial LBP Nominees shall be Xxxx Xxxxxxxxxx, Xxxxx Xxxxx and
Xxxxx Xxxxxx. LBP acknowledges and agrees that it will consult BLS with respect
to any future LBP Nominees designated to replace the initial LBP Nominees with a
view towards ensuring a harmonious Board of Directors.
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(f) BLS and LBP agree that the member of the Board not otherwise
appointed by BLS or LBP shall initially be Xxxxxx Xxxxxx.
(g) In the event that BLS shall have died, retired or resigned as
Chairman or Chief Executive Officer, or become incapable of acting as chairman
of the Board of Directors of the Company for 180 consecutive days due to
physical or mental illness, the BLS Group and the Xxxxxx Group will each have
the right to designate 50% of the Board of the Directors; provided, that upon
the occurrence of any transfer pursuant to Section 3.1(c)(iv) hereof, the rights
of the Xxxxxx Group pursuant to this Section 9.1(g) shall terminate and shall no
longer be available to the Xxxxxx Group, any member of the Xxxxxx Group or any
transferee thereof.
9.2. Chairman of the Board.
In the event that BLS shall have died, retired or resigned as Chairman
or Chief Executive Officer, or become incapable of acting as chairman of the
Board of Directors of the Company for 180 consecutive days due to physical or
mental illness, the successor chairman of the Board shall be selected by the
Board of Directors.
9.3. Charter and By-laws.
(a) Exhibits A and B set forth copies of the Company's Charter and
By-laws, each in the form in effect on the date hereof (the "Charter
Documents").
(b) The Company covenants that it will act in accordance with the
Charter Documents and will not (subject to Section 9.1(d)), without the approval
of an LBP Nominee then in office, amend either of the Charter Documents. Each
Stockholder shall vote its Common Stock at any regular or special meeting of
stockholders of the Company or in any written consent executed in lieu of such a
meeting of stockholders, and shall take all actions necessary to ensure that the
Charter Documents do not, at any time, conflict with the provisions of this
Agreement and (unless otherwise specified by LBP) to ensure that the Charter
Documents continue to provide as specified in Exhibits A or B, as applicable.
9.4. Certain Stock-Related Compensation Plans.
Each of the Stockholders agrees to vote all of the shares of Common
Stock entitled to vote owned or held of record by such stockholder to approve
any and all Stock-related employee compensation plans of the Company provided
any such plan has been approved by the Board of Directors in accordance with the
By-laws of the Company.
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10. NO IMPLIED RIGHT TO EMPLOYMENT
Neither this Agreement nor any provision hereof nor any action taken or
omitted to be taken hereunder shall be deemed to create or confer on any
Stockholder who is an employee of the Company or any Affiliate any right to be
retained in the employ of the Company or any Affiliate thereof, or to interfere
with or limit in any way the right of the Company or any Affiliate thereof to
terminate the employment of such Stockholder at any time.
11. TERMINATION
11.1. Termination.
(a) Except as provided in subsection (b) below, this Agreement shall
terminate after a public offering as a result of which more than 75% of the then
outstanding shares of Common Equivalents, after giving effect to such offering,
have been sold to the public pursuant to one or more effective registration
statements under the Securities Act or are otherwise owned by Persons other than
Stockholders; provided that the registration rights contained in Exhibit C
hereto shall continue with respect to any remaining shares of Common Stock held
by the Stockholders for so long as they hold such shares.
(b) The provisions contained in Article 9 shall terminate on the tenth
anniversary of the date hereof.
12. MISCELLANEOUS
12.1. Recapitalization, Exchanges, etc., Affecting the Common Stock.
The provisions of this Agreement shall (a) apply to the full extent set
forth herein with respect to the shares of Stock and (b) as appropriate with
respect to any and all shares of capital stock of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in exchange for, or in
substitution for the shares of Stock, by reason of any stock dividend, split,
reverse split, combination, recapitalization, reclassification, merger,
consolidation or otherwise. In the event of any change in capitalization of the
Company, as a result of any stock split, stock dividend or stock combination,
the provisions of this Agreement shall be appropriately adjusted.
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12.2. Injunctive Relief.
It is hereby agreed and acknowledged that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of such failure, an aggrieved person will be irreparably damaged and will not
have an adequate remedy at law. Any such person shall, therefore, be entitled to
injunctive relief, including specific performance to enforce such obligation,
without the posting of any bond, and if any action should be brought in equity
to enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.
12.3. Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, and their respective successors and assigns; provided that
(i) except as expressly provided herein, neither this Agreement nor any rights
or obligations hereunder may be transferred by the Company and (ii) no rights of
any Stockholder under this Agreement may be assigned except that any Stockholder
may transfer its rights and obligations hereunder, in whole or in part, to a
Transferee in connection with a Transfer of Stock made in compliance with all of
the provisions of this Agreement to a Person who is or thereby becomes a
Stockholder. If any Stockholder shall acquire additional Stock, such Stock
shall, except as expressly provided herein, be held subject to all of the terms
of this Agreement.
12.4. Amendment; Waiver.
This Agreement may be amended (i) by a written instrument signed by the
Company and by Stockholders holding an aggregate of at least 80% of the Common
Equivalents held by the Stockholders and, in the case of any provision of any
amendment that adversely affects any Stockholder or all of the members of any
group of Stockholders differently from any of the other Stockholders, the
written consent of such Stockholder or members of such group of Stockholders
holding an aggregate of at least 75% of the Common Equivalents held by such
group of Stockholders, respectively, or (ii) by a written instrument signed by
BLS and LBP.
No provision of this Agreement may be waived orally, but only by a
signed, written instrument. Stockholders shall be bound from and after the date
of the receipt of a written notice from the Company setting forth such amendment
or waiver by a consent authorized by this Section, whether or not the Common
Stock shall have been marked to indicate such consent.
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12.5. Notices.
Except as otherwise provided in this Agreement, notices and other
communications under this Agreement shall be in writing (including a writing
delivered by facsimile transmission) and shall be deemed to have been duly given
if delivered personally, or sent prepaid, or by overnight courier guaranteeing
next day delivery, or by telex or telecopier, addressed to the Company at 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (telecopier (000) 000-0000) or to BLS
care of Loral Space & Communications Ltd., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (telecopier (000) 000-0000), in either case with a copy thereof to
X'Xxxxxxxx, Graev & Karabell, LLP at 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 Attention: Xxxxxx X'Xxxxxxxx (telecopier (000) 000-0000) and to the other
parties at the "Address for Notices" specified below its name on Schedule I
hereto. Each Stockholder, by written notice given to the Company in accordance
with this Section 13.5 may change the address to which such notice or other
communications are to be sent to such Stockholder. All such notices and
communications shall be deemed to have been received on the date of delivery
thereof if delivered by hand, on the next day after the sending thereof if by
overnight courier, when answered back if telexed, and when receipt is
acknowledged if telecopied. Whenever pursuant to this Agreement any notice is
required to be given by such Stockholder to any other Stockholder or
Stockholders, such Stockholder may request from the Company a list of addresses
of all Stockholders of the Company, which list shall be promptly furnished to
such Stockholder.
12.6. Inspection.
So long as this Agreement shall be in effect, this Agreement and any
amendments hereto shall be made available for inspection by a Stockholder at the
principal offices of the Company.
12.7. Applicable Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to the conflicts of law
principles thereof.
12.8. Headings; References.
Article, section and paragraph headings are inserted herein for
convenience and do not form a part of this Agreement. All section, paragraph,
exhibit and schedule references are to this Agreement, unless otherwise
expressly provided.
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12.9. Integration.
This Agreement and the documents referred to herein or delivered
pursuant hereto contain the entire understanding of the parties with respect to
the subject matter hereof.
12.10. Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdictions.
12.11. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one such counterpart.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date set forth above.
K & F INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President
/s/ Xxxxxxx X. Xxxxxxxx
--------------------------------
XXXXXXX X. XXXXXXXX
XXXXXX BROTHERS MERCHANT BANKING
PORTFOLIO PARTNERSHIP L.P.
By: /s/ Xxxx X. Xxxxxxxxxx
----------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Senior Vice President of
General Partner
XXXXXX BROTHERS OFFSHORE
INVESTMENT PARTNERSHIP L.P.
By: /s/ Xxxx X. Xxxxxxxxxx
----------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Authorized Signatory
XXXXXX BROTHERS OFFSHORE
INVESTMENT PARTNERSHIP - JAPAN L.P.
By: /s/ Xxxx X. Xxxxxxxxxx
----------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Authorized Signatory
XXXXXX BROTHERS CAPITAL PARTNERS
II, L.P.
By: /s/ Xxxx X. Xxxxxxxxxx
----------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: Vice President of General
Partner
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SCHEDULE I
Addresses for Notices
Xxxxxx Brothers Capital Partners II, X.X.
Xxxxxx Brothers Merchant Banking Portfolio Partnership X.X.
Xxxxxx Brothers Offshore Investment Partnership X.X.
Xxxxxx Brothers Offshore Investment Partnership - Japan L.P.
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxxxx
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