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[EXECUTION COPY]
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FORM OF STOCKHOLDERS AGREEMENT
DATED AS OF NOVEMBER 29, 1999
AMONG
XXXXXXX CORPORATION
AND
CERTAIN OF ITS STOCKHOLDERS
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TABLE OF CONTENTS
Page
Section 1. Representations and Warranties.............................. 1
Section 2. Preemptive Rights........................................... 2
(a) Issuance.................................................... 2
(b) Sale and Reoffer............................................ 2
(c) Exceptions.................................................. 2
(d) Termination................................................. 3
Section 3. Board of Directors.......................................... 3
(a) Composition................................................. 3
(b) Meetings.................................................... 4
(c) Board Seat Termination...................................... 4
(d) Special Board Vote Required for Certain Actions............. 5
(e) Additional Directors........................................ 7
(f) Management Agreement........................................ 9
Section 4. Restrictions on Transfer of Stockholder Shares.............. 10
(a) Common Stock and Warrants................................... 10
(b) Preferred Stock............................................. 10
(c) Transferee's Rights......................................... 10
Section 5. Right of First Offer........................................ 10
(a) First Offer Right........................................... 11
(b) Irrevocable Offer........................................... 11
(c) Company Exercise Period..................................... 11
(d) Stockholder Exercise Period................................. 11
(e) The Closing................................................. 11
(f) Delivery Against Payment.................................... 12
(g) No Closing.................................................. 12
Section 6. Right of First Refusal...................................... 12
(a) Right of First Refusal...................................... 12
(i) First Refusal Right................................ 12
(ii) Irrevocable Offer.................................. 12
(iii) Company Exercise Period............................ 13
(iv) Stockholder Exercise Period........................ 13
(v) The Closing........................................ 13
(vi) Delivery Against Payment........................... 13
Section 7. Tag-Along Rights............................................ 14
(a) Common Stock................................................ 14
(b) Preferred Stock............................................. 14
(c) Warrants.................................................... 15
(d) Allocation of Purchase Price................................ 16
(e) Termination................................................. 16
Section 8. Common Put.................................................. 16
(a) Common Put.................................................. 16
(b) Closing..................................................... 17
(c) Acquisition Company Control................................. 17
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(d) Delivery Against Payment.................................... 18
(e) Fair Market Value........................................... 18
(f) Termination................................................. 21
Section 9. The JG Put.................................................. 21
(a) JG Put...................................................... 21
(b) Withdrawn Put............................................... 21
(c) Closing..................................................... 21
(d) Delivery Against Payment.................................... 22
(e) Termination................................................. 22
Section 10. Call Arrangements........................................... 22
(a) The Call.................................................... 22
(b) The Closing................................................. 22
(c) Delivery Against Payment.................................... 22
(d) Limitation.................................................. 23
(e) Termination................................................. 23
Section 11. Governance.................................................. 23
(a) Charter and Bylaws.......................................... 23
(b) Liquidation, Bankruptcy, Etc................................ 23
(c) Sale or Issuance of Securities.............................. 23
(d) Dividends................................................... 23
(e) Redemptions................................................. 24
(f) Mergers..................................................... 24
Section 12. Financial Statements and Other Information.................. 24
(a) Quarterly Reports........................................... 24
(b) Fiscal Reports.............................................. 24
(c) Additional Reports.......................................... 25
(d) Annual Budget............................................... 25
(e) Defaults and Control Events................................. 25
(f) Other Information........................................... 26
(g) Fair Presentation........................................... 26
Section 13. Inspection of Property...................................... 26
Section 14. Sale of Company............................................. 26
(a) Cooperation................................................. 26
(b) Purchaser Representative.................................... 27
(c) Costs....................................................... 27
(d) Termination................................................. 27
Section 15. Registration Rights......................................... 27
(a) Demand Rights............................................... 27
(i) Request for Registration........................... 27
(ii) Long-Form Registrations............................ 28
(iii) Short-Form Registrations........................... 28
(iv) Priority on Demand Registrations................... 28
(v) Restrictions on Long-Form Registrations............ 28
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(vi) Selection of Underwriters.......................... 29
(vii) Other Registration Rights.......................... 29
(b) Piggyback Registrations..................................... 29
(i) Right to Piggyback................................. 29
(ii) Piggyback Expenses................................. 29
(iii) Priority on Primary Registrations.................. 29
(iv) Priority on Secondary Registrations................ 30
(v) Selection of Underwriters.......................... 30
(vi) Other Registrations................................ 30
(c) Holdback Agreements......................................... 30
(d) Registration Procedures..................................... 31
(e) Registration Expenses....................................... 33
(f) Indemnification............................................. 33
(g) Participation in Underwritten Registrations................. 35
Section 16. Restrictive Legend; Additional Restriction on Transfer.... 35
Section 17. Transfer.................................................. 35
Section 18. Definitions............................................... 36
Section 19. Calculation of Percentages................................ 47
Section 20. Transfers in Violation of Agreement....................... 47
Section 21. Effectiveness and Termination............................. 47
Section 22. Amendment and Waiver...................................... 47
Section 23. Severability.............................................. 48
Section 24. Entire Agreement.......................................... 48
Section 25. Successors and Assigns.................................... 48
Section 26. Counterparts.............................................. 48
Section 27. Remedies.................................................. 48
Section 28. Notices................................................... 49
Section 29. GOVERNING LAW............................................. 49
Section 30. Business Days............................................... 50
Section 31. Descriptive Headings........................................ 50
Section 32. Expenses.................................................... 50
Section 33. Further Assurances.......................................... 50
Section 34. Construction................................................ 50
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Schedule I -- Torque Acquisition Co., L.L.C. and its Permitted Transferees
Schedule II -- Management Stockholders and their Permitted Transferees
Schedule III -- Xxxxxxx Foundation and its Permitted Transferees
Schedule IV -- Management Subscription Agreement Term Sheet
Schedule V -- Terms of New Management Option Plan
Schedule VI -- Management Agreement
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STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made as of
November 29, 1999, by and among Xxxxxxx Corporation, a Delaware corporation (the
"Company"), the Person listed on Schedule I attached hereto and its Permitted
Transferees ("Acquisition Company"), the Voting Trust and each of the Persons
listed on Schedule II attached hereto and each of their Permitted Transferees
(together with employees of the Company, spouses, children and other immediate
family members of employees of the Company, trusts, individual retirement
accounts or other savings vehicles formed for the benefit of the employee of the
Company or such employee's spouse, children or other immediate family members
who execute an agreement to enter into and be bound by all of the terms and
conditions of this Agreement subsequent to the date hereof, the "Management
Stockholders") and the Person listed on Schedule III hereto and its Permitted
Transferees (the "Foundation"). Acquisition Company, the Management
Stockholders, the Foundation, the Voting Trust and any other Person who becomes
a party to this Agreement after the date hereof are collectively referred to as
the "Stockholders" and individually as a "Stockholder." Capitalized terms used
herein are defined in Section 18 hereof.
Pursuant to the Merger Agreement, subject to certain
exceptions, shares of common stock, par value $1.00 per share, of the Company
(i) held by Management Stockholders shall be converted into shares of common
stock, par value $1.00 per share, of the Company after the Merger (the "Common
Stock") which shall be immediately deposited into the Voting Trust and the
Voting Trust shall become a party hereto as a Management Stockholder, (ii) held
by Acquisition Company or Merger Subsidiary shall be converted into shares of
Common Stock, shares of Series A Cumulative Redeemable Preferred Stock, par
value $1.00 per share, of the Company (the "Preferred Stock") and warrants to
purchase Common Stock (the "Warrants," and together with the Common Stock and
the Preferred Stock, the "Securities"), and (iii) held by the Foundation shall,
with respect to approximately 202,000 shares, be converted into Common Stock
with respect to approximately 60,000 shares, be converted into Preferred Stock
and Warrants, and with respect to the Foundation's remaining shares, be
converted into, at the Foundation's election, either Merger Consideration (as
defined in the Merger Agreement) or a combination of Merger Consideration and
Securities, subject to certain limitations. For all purposes of this Agreement,
shares of Common Stock beneficially owned by a Management Stockholder through
the Voting Trust and represented by voting trust certificates shall be deemed to
be owned by such Management Stockholder.
This Agreement will become effective upon consummation of the
Merger. The Company and the Stockholders desire to enter into this Agreement for
the purposes, among others, of (a) assuring continuity in the management and
ownership of the Company and (b) limiting the manner and terms by which the
Securities may be transferred. Therefore, the parties hereto hereby agree as
follows:
Section 1. Representations and Warranties. Each Stockholder
represents and warrants that (a) this Agreement has been duly authorized,
executed and delivered by such Stockholder and constitutes the valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms, and (b) such Stockholder has not granted and is not a
party to any proxy, voting trust (other than the Voting Trust) or other
agreement which is
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inconsistent with, conflicts with or violates any provision of this Agreement.
No holder of Securities shall grant any proxy or become party to any voting
trust (other than the Voting Trust or proxies that may be granted to approve the
Merger) or other agreement which is inconsistent with, conflicts with or
violates any provision of this Agreement.
Section 2. Preemptive Rights.
(a) Issuance. Except as set forth in Sections 2(b) and (c)
below, the Company will not issue, sell or otherwise transfer for consideration
to any Stockholder or any Affiliate of any Stockholder (an "Issuance") any
Equity Interests (or securities convertible into or exercisable or exchangeable
for Equity Interests) unless, at least 15 days prior to such Issuance, the
Company notifies each Stockholder in writing of the Issuance (including the
price and all of the other terms and conditions thereof) (the "Preemptive Right
Notice") and grants to all Stockholders the right (the "Preemptive Right") to
subscribe for and purchase a portion of such additional Equity Interests so
issued, at the same price and on the same terms as issued in the Issuance, equal
to the quotient determined by dividing (i) the number of shares of Common Stock
owned by such Stockholder (taking into account all shares of Common Stock
underlying Warrants and Existing Options owned by such Stockholder) by (ii) the
total number of shares of Common Stock outstanding (taking into account all
shares of Common Stock underlying Warrants and Existing Options).
Notwithstanding the foregoing, if the Stockholder or its Affiliates entitled to
purchase or receive such Equity Interests in the Issuance is required to also
purchase other securities of the Company, the Stockholders exercising their
Preemptive Right pursuant to this Section 2 shall also be required to purchase
the same combination of securities (on the same terms and conditions) that the
Stockholder or its Affiliates is required to purchase. The Preemptive Right may
be exercised by such Stockholder at any time by written notice to the Company
received by the Company within 30 days after receipt by such Stockholder of the
Preemptive Right Notice (the "Preemptive Right Period"). The closing of the
purchase and sale pursuant to the exercise of the Preemptive Right shall occur
not less than 30 days after the Company receives notice of the exercise of the
Preemptive Right and concurrently with the closing of the Issuance.
(b) Sale and Reoffer. During the 30 days following the
Preemptive Right Period, the Company shall be entitled to sell such Equity
Interests that the Stockholders elected not to purchase pursuant to the
Preemptive Right on terms and conditions no more favorable to the purchasers
thereof than those offered to such Stockholders. Any Equity Interests proposed
to be offered or sold by the Company to a Stockholder or its Affiliates after
such 30-day period shall be subject to the Preemptive Right.
(c) Exceptions. Notwithstanding the foregoing, the Preemptive
Right shall not apply to (i) issuances of Equity Interests (or securities
convertible into or exchangeable for, or options to purchase, Equity Interests),
pro rata to all Stockholders, as a dividend on, subdivision of or other
distribution in respect of outstanding capital stock of the Company, (ii) the
issuance of Equity Interests upon conversion, exchange or redemption of any
outstanding convertible or exchangeable securities and (iii) the issuance of
Equity Interests (or securities convertible into or exchangeable for, or options
to purchase, Equity Interests) upon the exercise of any outstanding options or
warrants, including any options issued or to be issued under the New Option
Plan.
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(d) Termination. The provisions of this Section 2 will
immediately terminate upon the consummation of a Qualified IPO.
Section 3. Board of Directors.
(a) Composition. From and after the Closing and until the date
when either Acquisition Company or the Voting Trust ceases to have a
representative on the Board (as defined below), Acquisition Company and the
Voting Trust (pursuant to Section 8(b) of the Voting Trust Agreement) each shall
vote all of its Stockholder Shares and any other voting securities of the
Company over which such Stockholder has voting control and shall take all other
necessary or desirable actions within its control (whether in the capacity as a
stockholder, director, member of a board committee or officer of the Company or
otherwise, and including, without limitation, attendance at meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings), and the Company shall take all necessary and desirable
actions within its control (including, without limitation, calling special board
and stockholder meetings), so that:
(i) upon consummation of the Merger the initial authorized
number of directors on the Company's board of directors (the "Board")
shall be established at five (5) directors; and effective immediately
upon the designation of the Acquisition Company Independent Director
and the Voting Trust Independent Director, the authorized number of
directors of the Board shall be increased to seven (7).
(ii) subject to Section 3(c), the following persons shall
be elected to the Board:
(A) three (3) representatives designated by the
Voting Trust; provided that two (2) of such representatives shall
include the two most senior members of management of the Company (who
currently are the Chief Executive Officer and the Chief Operating
Officer of the Company) (collectively, the "Voting Trust Directors");
(B) two (2) representatives designated by Acquisition
Company (collectively, the "Acquisition Company Directors"); and
(C) within one year after the Closing, the Voting
Trust and Acquisition Company will each select one independent director
who is not an Affiliate of any of the Stockholders, to serve as
independent directors of the Board (the "Voting Trust Independent
Director" and the "Acquisition Company Independent Director,"
respectively, and, together, the "Independent Directors"); provided,
however, that the Voting Trust Independent Director shall be reasonably
acceptable to Acquisition Company, and the Acquisition Company
Independent Director shall be reasonably acceptable to the Voting
Trust. Acquisition Company shall have the exclusive right to remove any
Acquisition Company Independent Director and the right, subject to
reasonable acceptance by the Voting Trust, to replace such Acquisition
Company Independent Director. The Voting Trust shall have the exclusive
right to remove any Voting Trust Independent Director and, subject to
the
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reasonable acceptance by Acquisition Company, to replace such Voting
Trust Independent Director. Upon the initial selection of the Voting
Trust Independent Director and the Acquisition Company Independent
Director as provided herein, each shall simultaneously become members
of the Board; provided, however, in the event that either the Voting
Trust or Acquisition Company has not selected the initial Voting Trust
Independent Director or the initial Acquisition Company Independent
Director, respectively, on or prior to the first anniversary of the
date of this Agreement, the Independent Director who has been selected
shall become a member of the Board effective as of the first
anniversary of the date of this Agreement, and the other Independent
Director shall become a member of the Board effective immediately
following his or her selection.
(iii) if the Board forms one or more committees of the
Board, such committee shall, in each case, include at least one
Acquisition Company Director, and no Voting Trust Director who is also
a member of management shall be a member of the Audit Committee;
(iv) the removal from the Board (with or without cause) of
any Voting Trust Director or any Acquisition Company Director shall be
only upon the written request of the Person originally entitled to
designate such director pursuant to Section 3(a)(ii); provided that, if
any Person entitled to designate a director pursuant to Section
3(a)(ii) ceases to have the right to designate such director, such
director shall be removed promptly after such Person ceases to have the
right to designate such director; and
(v) in the event that any representative designated
hereunder for any reason ceases to serve as a member of the Board
during his or her term of office, the resulting vacancy on the Board
shall be filled by a representative designated by the Person originally
entitled to designate such director pursuant to Section 3(a)(ii) (so
long as such Person continues to be entitled to designate a director
pursuant to Section 3(a)(ii)).
(b) Meetings. There shall be at least four (4) meetings of the
Board during every fiscal year, and at least one meeting shall be held in each
calendar quarter during the Company's fiscal year. The Company shall pay all
out-of-pocket expenses incurred by each director in connection with attending
regular and special meetings of the Board and any committee thereof.
(c) Board Seat Termination.
(i) If Acquisition Company owns less than the Preferred
Minimum Threshold and less than the Acquisition Company Second Minimum
Share Amount, then Acquisition Company shall no longer be entitled to
designate the Acquisition Company Independent Director. If Acquisition
Company owns less than the Preferred Minimum Threshold and owns less
than the Acquisition Company First Minimum Share Amount, then
Acquisition Company shall no longer be entitled to designate one of the
Acquisition Company Directors to the Board. If Acquisition Company owns
less than the Preferred Minimum Threshold and less than 10% of the
shares of Common Stock (including shares of Common Stock underlying the
Warrants) that it owned as of the Closing, then Acquisition
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Company shall no longer be entitled to designate its remaining
Acquisition Company Director to the Board and the provisions of this
Section 3 immediately shall terminate.
(ii) If the Management Stockholders beneficially own a
number of shares of Common Stock (including shares of Common Stock
underlying Existing Options) that is less than 66 2/3% of the shares of
Common Stock (including shares of Common Stock underlying Existing
Options) that they owned immediately after the Closing, then the Voting
Trust shall no longer be entitled to designate the Voting Trust
Independent Director; provided that as soon as possible such seat on
the Board shall be filled by the appointment of a person who is
reasonably acceptable to both the Voting Trust and Acquisition Company.
If the Management Stockholders beneficially own a number of shares of
Common Stock (including shares of Common Stock underlying Existing
Options) that is less than 50% of the shares of Common Stock (including
shares of Common Stock underlying Existing Options) that they owned
immediately after the Closing, then the Voting Trust shall no longer be
entitled to designate one of its three Voting Trust Directors. If the
Management Stockholders beneficially own a number of shares of Common
Stock (including shares of Common Stock underlying Existing Options)
that is less than 25% of the shares of Common Stock (including shares
of Common Stock underlying Existing Options) they owned immediately
after the Closing, then the Voting Trust shall no longer be entitled to
designate one of its two remaining Voting Trust Directors. If the
Management Stockholders beneficially own a number of shares of Common
Stock (including shares of Common Stock underlying Existing Options)
that is less than 10% of the shares of Common Stock (including shares
of Common Stock underlying Existing Options) they owned immediately
after the Closing, then the Voting Trust shall no longer be entitled to
designate its remaining Voting Trust Director to the Board and the
provisions of this Section 3 shall immediately terminate.
(d) Special Board Vote Required for Certain Actions. Except
upon the occurrence and during the continuance of a Control Event (during which
time all of the following matters shall be subject to the approval of a majority
of the members of the Board), a Special Board Vote shall be required for the
Board to approve and authorize any of the following:
(i) for the Company or any of its Subsidiaries to make any
material change in the Company's or any of its Subsidiaries' line of
business as of the Closing or enter into any new line of business;
(ii) for the Company or any of its Subsidiaries to incur
any indebtedness for borrowed money other than amounts which are
permitted by or are borrowed pursuant to the Credit Agreement;
provided, however, that a Special Board Vote shall not be required with
respect to the incurrence of indebtedness for borrowed money to make
payments pursuant to the Common Put or the Call or a mandatory
redemption of the Preferred Stock, (x) if Acquisition Company does not
own any Equity Interests of the Company immediately after the
incurrence of such indebtedness or (y) if and as long as (A) the
financial covenants of such indebtedness are no more restrictive than
the financial covenants contained in the Credit Agreement, (B) the
terms for amortization of principal and payment of interest of such
indebtedness are no more onerous than such terms in the Credit
Agreement, (C) the other
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terms of such indebtedness in the aggregate are no less favorable to
the Company than the terms set forth in the Credit Agreement and (D)
the Company's pro forma ratio of Total Net Debt to EBITDA immediately
following such incurrence would not be greater than the Company's ratio
of Total Net Debt to EBITDA at Closing;
(iii) to amend or modify any material provision of the
Credit Agreement (for this purpose, any modification to a financial
covenant or payment obligation shall be deemed material to the Credit
Agreement) or seek and obtain any material waiver or consent required
thereunder; provided, however, that a Special Board Vote shall not be
required with respect to any such amendment, modification, waiver or
consent necessary to make payments pursuant to the Common Put or the
Call or a mandatory redemption of the Preferred Stock, (A) if
Acquisition Company does not own any Equity Interests of the Company
immediately after such amendment, modification, waiver or consent or
(B) if and as long as any such amendments or modifications comply with
the provisions set forth in Section 3(d)(ii)(y)(A)-(D);
(iv) to adopt any stock option, restricted stock or other
equity-based compensation plan other than the Management Option Plans
(such other plans, together with the Management Option Plans, shall
hereafter be referred to as the "Option Plans"), amend any Option
Plans, or grant any award under any Option Plans to the Top Executives;
(v) to approve any amendment or change to any of the terms
of any employment arrangements of the Top Executives in effect
immediately before the Closing (the "Existing Employment Arrangements")
(other than an amendment or change that increases the compensation or
other economic benefit of such Top Executive in an amount not greater
than $5,000 in any calendar year), the termination of any Existing
Employment Arrangements or the terms of any employment arrangements of
any of the Top Executives after the Closing or increase the
compensation (including salary, bonus or fringe benefits) paid to any
of the Top Executives, other than annual salary increases required
under the Existing Employment Arrangements or annual salary increases
that are not more than 6% of the immediately preceding annual salary
and are consistent with past practice;
(vi) to sell, assign, transfer, convey or otherwise
dispose of any assets, securities (other than the Warrants, Existing
Options, options issued under the New Option Plan and the Common Stock
underlying the foregoing) or businesses (other than disposition of
inventory, receivables or other working capital in the ordinary course
of business) unless the sale price of all such dispositions in any
calendar year is less than $7,500,000 in the aggregate;
(vii) to make any acquisition requiring payments in an
amount, when coupled with any and all debt and other liabilities
(whether contingent or otherwise, to the extent quantifiable) assumed
in such acquisition, exceeding $7,500,000 in the aggregate in any
calendar year;
(viii) to terminate or replace any of the Top Executives;
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(ix) to adopt or modify (in any material manner) or
intentionally materially deviate from the Annual Operating Plan;
(x) to enter into transactions with any Affiliate
(including Acquisition Company or its Affiliates or any individual who
is an Acquisition Company Director or a Voting Trust Director or any of
the Top Executives), provided that this clause (x) shall not apply to
transactions among and between the Company and its Wholly Owned
Subsidiaries, the Common Put, the Call, the JG Put, grants or exercises
of options issued under the Option Plans, the repurchase of certain
shares of Common Stock by the Company on the terms set forth in the
Management Subscription Term Sheet attached hereto as Schedule IV
(other than the exercise of a call with respect to shares of Common
Stock held by a Top Executive), the repurchase by the Company of
certain New Options and shares of Common Stock issued upon the exercise
thereof on the terms set forth in the Terms of New Management Option
Plan attached hereto as Schedule V, the exercise of the Warrants, the
payment of transaction fees and management fees to Acquisition Company
or any of its Affiliates pursuant to agreements in effect as of the
Closing, redemptions of the Preferred Stock, extensions of
full-recourse loans to the employees of the Company or a Wholly Owned
Subsidiary not exceeding $350,000 principal amount in the aggregate the
sole purpose of which is to enable such employees to pay their
respective tax liabilities in connection with the transactions
contemplated by the Merger Agreement, and compensation, benefits and
severance payments to employees of the Company and its Subsidiaries;
(xi) to change the size or composition of the Board or any
committee of the Board, create any new committee of the Board or change
the functions or procedures relating to any such committee;
(xii) to take any action specified in Section 11(a)-(f)
without a Majority Vote; or
(xiii) to establish or acquire any Subsidiaries, other
than any Wholly Owned Subsidiary and other than the acquisition of an
interest in a Subsidiary that would otherwise be permitted pursuant to
clause (vii) above.
(e) Additional Directors.
(i) So long as Acquisition Company owns at least the
Preferred Minimum Threshold and the Acquisition Company Second Minimum
Share Amount, upon the occurrence of a Control Event, each of the
Stockholders (other than the Foundation) shall vote all of its
Stockholder Shares and any other voting securities of the Company over
which such Stockholder has voting control and shall take all other
necessary or desirable actions within its control (whether in the
capacity as a stockholder, director, member of a board committee or
officer of the Company or otherwise, and including, without limitation,
attendance at meetings in person or by proxy for purposes of obtaining
a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary and desirable actions within its
control (including, without limitation, calling special board and
stockholder meetings), so that the Acquisition Company
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Directors shall comprise a majority of the Board and Acquisition Company shall
become the voting trustee of the Voting Trust, pursuant to Section 7(e) of the
Voting Trust Agreement with the right to vote all of the Common Stock held by
the Voting Trust.
(ii) A "Control Event" means:
(A) on a latest twelve month basis at the end of any
two consecutive quarters or at the end of three of any five consecutive
quarters, the ratio of total Invested Capital in the Company
(consisting of Total Net Debt, the Redemption Price of the Preferred
Stock and all paid-in capital with respect to the Common Stock
("Invested Capital")) at the end of such period to EBITDA for such
period is greater than 7.0 to 1.0;
(B) there is a default on the payment of or an
acceleration of interest or principal on any indebtedness of the
Company or any of its Subsidiaries for borrowed money where the
aggregate principal amount of such indebtedness is in excess of $10
million;
(C) the Company fails to satisfy its obligations
(regardless of whether any contractual or other restrictions apply or
whether funds are legally available therefor) with respect to (1) the
Acquisition Company Common Put, or (2) the Call, or (3) the mandatory
redemption, pursuant to the Certificate of Incorporation, of any shares
of Preferred Stock held by Acquisition Company;
(D) the Company has engaged in any material unlawful
act that has the effect of causing material injury to the Company or
its relationships with its customers, suppliers or employees; provided,
however, that, for purposes of this Section 3(e)(ii)(D), such Control
Event shall be deemed not to have occurred if (1) an Acquisition
Company Director voted in favor of such act at a meeting of the Board
or a board of directors of a Subsidiary or any committee of the Board
or such Subsidiary and such Acquisition Company Director was fully
apprised of the relevant facts relating to the authorization of such
act or (2) such material act is unlawful solely due to a strict
liability statute or law (e.g., environmental) and such unlawful act
was not the result of gross negligence;
(E) the Company has taken any action in contravention
of the Special Board Vote requirements as set forth in Section 3(d) or
the Majority Vote requirement set forth in Section 11; or
(F) if any two of Xxxxx X. Xxxxxxx, Xxxxx X. Xxxxx
and Xxxx X. Xxxxxxxx (together, "Key Persons") no longer actively serve
the Company as the Chairman or Chief Executive Officer, President and
Chief Operating Officer and Vice President-Finance, respectively;
provided, however, that, for purposes of giving effect to this Section
3(e)(ii)(F) only, before determining the existence of a Control Event,
if, within one year of the departure of any of the Key Persons, (1) any
other individual is selected to replace any of the Key Persons (a
"Replacement"), and (2) such Replacement is acceptable to Acquisition
Company in its sole discretion, then a Control Event shall be deemed
not to have occurred.
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(iii) A Control Event shall commence upon the delivery by
Acquisition Company to the Company and the Foundation of written
notice, within six (6) months of the date Acquisition Company actually
became aware of such Control Event, specifying the Control Event. No
Control Event shall occur unless Acquisition Company notifies the
Company and the Foundation in writing within six (6) months of the date
Acquisition Company actually became aware of such Control Event.
(iv) Any Control Event described in Section 3(e)(ii)(A) or
3(e)(ii)(B) shall cease to exist ("Cured") at such time as the Company
has for two consecutive quarters on a last twelve months basis at the
end of each such quarter, earned the greater of (x) $35 million of
EBITDA and (y) EBITDA which produces a ratio of Invested Capital in the
Company to EBITDA of less than or equal to 6.0 to 1.0.
(v) When a Control Event described in Section 3(e)(ii)(A)
and 3(e)(ii)(B) has been Cured and so long as no other Control Event
has occurred and is continuing, (A) the right to vote the Common Stock
under the Voting Trust shall revert to the voting trustees under the
Voting Trust pursuant to Section 7(e) of the Voting Trust Agreement,
(B) the number of members of the Board shall be decreased to the number
of members of the Board immediately prior to such Control Event and (C)
the Board shall be comprised of the members of the Board immediately
prior to such Control Event. Each of the Stockholders (other than the
Foundation) shall vote all of its Stockholder Shares and any other
voting securities of the Company over which such Stockholder has voting
control and shall take all other necessary or desirable actions within
its control (whether in the capacity as a stockholder, director, member
of a board committee or officer of the Company or otherwise, and
including, without limitation, attendance at meetings in person or by
proxy for purposes of obtaining a quorum and execution of written
consents in lieu of meetings), and the Company shall take all necessary
and desirable actions within its control (including, without
limitation, calling special board and stockholder meetings), in order
to effectuate the provisions of this Section 3(e)(v).
(vi) If any Management Stockholder has committed an act
that would constitute Cause and is not promptly terminated by the
Company after it becomes aware of such an act, a Control Event shall be
deemed to have occurred and be continuing until such Management
Stockholder has been terminated; provided, however, that Acquisition
Company shall become voting trustee of the Voting Trust upon the
occurrence of such a Control Event only if and only for so long as
reasonably necessary to cause, and only for the purpose of causing, the
termination of such Management Stockholder.
(f) Management Agreement. Acquisition Company and the Voting
Trust (pursuant to Section 8(b) of the Voting Trust Agreement) each shall vote
all of its Stockholder Shares and any other voting securities of the Company
over which such Stockholder has voting control and shall take all other
necessary or desirable actions within its control (whether in the capacity as a
stockholder, director, member of a board committee or officer of the Company or
otherwise, and including, without limitation, attendance at meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings), and the Company shall take all necessary and desirable
actions within its control (including, without limitation, calling special board
and stockholder meetings), so that immediately after the Closing the Company
enters into a management agreement with Vestar Capital Partners in the form
attached hereto as Schedule VI.
Section 4. Restrictions on Transfer of Stockholder Shares.
(a) Common Stock and Warrants.
(i) Prior to the third anniversary of the date hereof, a
Management Stockholder may Transfer Common Stock only (A) if such Management
Stockholder is exercising a Tag-along Right or a Warrant Tag-along Right
initiated by Acquisition Company or, to the extent
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that Acquisition Company exercises its Tag-along Rights or a Warrant Tag-along
Right in connection with a Transfer initiated by the Foundation, or (B) pursuant
to a Permitted Transfer.
(ii) On or after the third anniversary of the date hereof,
a Management Stockholder may Transfer Common Stock (A) to a Permitted Transferee
or in connection with a Tag-along Right or Warrant Tag-along Right, or (B) if
and to the extent such Transfer and all previous Transfers (other than Transfers
described in clause (A)) in the aggregate equals an amount which is not greater
than 25% of (1) the shares of Common Stock (including Common Stock underlying
Existing Options) held by such Stockholder immediately after the Closing and (2)
the shares of Common Stock acquired by such Stockholder after the Closing. Any
Transfer permitted by this Section 4(a)(ii) (other than a Transfer to a
Permitted Transferee) shall be subject to a Tag-along Right and the provisions
of Section 6.
(iii) At any time after the Closing, each of Acquisition
Company and the Foundation may Transfer its Common Stock or Warrants, and any
such Transfer (unless it is to a Permitted Transferee or made pursuant to a
Tag-along Right or a Warrant Tag-along Right, as the case may be, or, in the
case of the Foundation, pursuant to a Special Foundation Transfer or a Special
Foundation Transfer Without Consideration) shall be subject only to a Tag-along
Right or a Warrant Tag-along Right, as the case may be, and the provisions of
Section 5.
(b) Preferred Stock. Subject to Section 7(b), at any time
after the Closing, each of Acquisition Company and the Foundation may Transfer
its Preferred Stock.
(c) Transferee's Rights. No transferee of Stockholder Shares,
Preferred Stock or Warrants who is not a Permitted Transferee shall be entitled
to any rights hereunder except for Tag-along Rights and the registration rights
provided by Section 15(b) and no such transferee shall have any obligations
hereunder except the obligations set forth in Section 14 with respect to such
Transferred Securities. Notwithstanding the foregoing, no transferee of
Stockholder Shares, Preferred Stock or Warrants in a Public Sale or pursuant to
a Board Approved Sale will have any rights or obligations hereunder.
Section 5. Right of First Offer.
(a) First Offer Right. If, at any time after the Closing,
Acquisition Company or the Foundation (each a "Selling Holder") proposes to
Transfer shares of Common Stock or Warrants to any Person other than the Company
or a Wholly Owned Subsidiary (other than to a Permitted Transferee, or pursuant
to the Common Put, the Call, a Tag-along Right, a Warrant Tag-along Right or a
Special Foundation Transfer Without Consideration), then such Selling Holder
will, not fewer than forty-five (45) days prior to making such Transfer, give
notice (the "Transfer Notice") to the Company (and the Company shall promptly
provide notice to the other Stockholders) specifying (i) the number of shares of
Common Stock or Warrants proposed to be Transferred (the "Offered Securities"),
and (ii) the price (the "Offered Price") and the other terms and conditions upon
which such Selling Holder proposes to Transfer such Offered Securities. After
receipt of a Transfer Notice by the other Stockholders, the Selling Holder shall
in a timely manner provide any other Stockholder with any written information
regarding the proposed Transfer as reasonably requested by such Stockholder.
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(b) Irrevocable Offer. The Transfer Notice will constitute an
irrevocable offer (for the time periods set forth in Section 5(c) and Section
5(d)) to Transfer the Offered Securities to the Company and the other
Stockholders at the Offered Price and on the terms specified in the Transfer
Notice (the "Offer to Sell").
(c) Company Exercise Period. The Company will have fifteen
(15) days after its receipt of the Transfer Notice (the "Company Exercise
Period") during which to notify the Selling Holder and the other Stockholders in
writing of its election to purchase all or any portion of the
Offered Securities (an "Acceptance Notice").
(d) Stockholder Exercise Period. If the Company has not
elected to purchase all of the Offered Securities, then each other Stockholder
will have thirty (30) days after receipt of the Transfer Notice (the
"Stockholder Exercise Period") during which to notify the Selling Holder and the
Company in writing (such written notice, also an "Acceptance Notice") of its
irrevocable election to purchase all or any portion of the Offered Securities
not specified in the Acceptance Notice (such shares, the "Reoffered
Securities"). Any Stockholder who delivers an Acceptance Notice shall be
referred to herein as a "Purchasing Stockholder." If more than one Purchasing
Stockholder elects to purchase the Reoffered Securities, then the Reoffered
Securities shall be sold to the Purchasing Stockholders pro rata based upon the
number of shares of Common Stock then owned by such Purchasing Stockholders
(taking into account shares of Common Stock underlying the Warrants and Existing
Options) or in such other manner as the Purchasing Stockholders may mutually
agree.
(e) The Closing. Upon the delivery of the Acceptance
Notice(s), the Company or the Purchasing Stockholders, as the case may be, and
the Selling Holder shall be firmly bound to consummate the purchase and sale of
the applicable Offered Securities in accordance with the Transfer Notice, the
Acceptance Notice(s) and the terms hereof. Subject to the provisions hereof,
within sixty (60) days after the Selling Holder's delivery of the last Transfer
Notice, the Company or the Purchasing Stockholders, as the case may be, shall
purchase and the Selling Holder shall sell the applicable Offered Securities at
a mutually agreeable time and place (the "Offered Securities Closing").
(f) Delivery Against Payment. At the Offered Securities
Closing, the Selling Holder shall deliver to the Company or the Purchasing
Stockholders, as the case may be, certificates representing the Offered
Securities, free and clear of any liens or encumbrances and duly endorsed in
blank or accompanied by duly executed forms of assignment, to be purchased by
the Company or the Purchasing Stockholders, as the case may be, and the Company
or the Purchasing Stockholders, as the case may be, shall pay to the Selling
Holder the purchase price of such Offered Securities by cashier's or certified
check or by wire transfer of immediately available funds to an account
designated by each such Selling Holder.
(g) No Closing. If neither the Company nor the other
Stockholders elects to purchase all of the Offered Securities in accordance with
Sections 5(c) and 5(d), then the Selling Holder may Transfer all of the Offered
Securities, at a price which is not less than the Offered Price specified in the
Transfer Notice and on other terms and conditions which are not materially more
favorable in the aggregate to any transferee thereof than those specified in the
Transfer Notice, to
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any Person, but only to the extent that such Transfer occurs within one-hundred
and twenty (120) days after expiration of the Stockholder Exercise Period. Any
Stockholder Shares not Transferred within such 120-day period will be subject to
the provisions of this Section 5 upon subsequent Transfer.
Section 6. Right of First Refusal.
(a) Right of First Refusal. Subject to Section 4(a)(i) hereof:
(i) First Refusal Right. If, at any time after the third
anniversary of the date hereof, any of the Management Stockholders (each a
"Transferring Holder") proposes to Transfer shares of Common Stock to any Person
other than the Company or a Wholly Owned Subsidiary pursuant to a bona fide
third-party offer (other than pursuant to a Permitted Transfer, a Tag-along
Right or a Warrant Tag-along Right), then such Transferring Holder will, not
fewer than forty-five (45) days prior to making such Transfer, give notice (the
"First Refusal Right Notice") to the Company (and the Company shall promptly
provide notice to the Other Stockholders) specifying (A) the number of shares of
Common Stock to be Transferred (the "Offered Stock"), (B) the price (the
"Price") and the other terms and conditions upon which such Transferring Holder
proposes to Transfer such Offered Stock, and (C) with specificity, the proposed
transferee(s). After receipt of a First Refusal Right Notice by the other
Stockholders, the Transferring Holder shall in a timely manner provide any other
Stockholder with any written information regarding the proposed Transfer as
reasonably requested by such Stockholder.
(ii) Irrevocable Offer. The First Refusal Right Notice
will constitute an irrevocable offer (for the time periods set forth in Section
6(a)(iii) and Section 6(a)(iv)) to Transfer all of the Offered Stock to the
Company and the other Stockholders at the Price and on the terms specified in
the First Refusal Right Notice (the "Offer for Sale"), except that if the
proposed Transfer is to be wholly or partly for consideration other than cash,
then the Offer for Sale will constitute an offer to Transfer the Offered Stock
to the Company and the other Stockholders for a cash purchase price equal to the
amount of cash (if any) specified in the First Refusal Right Notice, plus the
Fair Market Value at the date of the First Refusal Right Notice of such non-cash
consideration.
(iii) Company Exercise Period. The Company will have
fifteen (15) days after its receipt of the First Refusal Right Notice (the
"Company Refusal Exercise Period") during which to notify the Transferring
Holder and the other Stockholders in writing of its election to purchase all or
any portion of the Offered Stock (a "Notice of Acceptance").
(iv) Stockholder Exercise Period. If the Company has not
elected to purchase all of the Offered Stock during the Company Refusal Exercise
Period, then each other Stockholder will have thirty (30) days after receipt of
the First Refusal Right Notice (the "Stockholder Refusal Exercise Period")
during which to notify the Transferring Holder and the Company in writing (such
written notice, also a "Notice of Acceptance") of its election to purchase all
or any portion of the Offered Stock (such shares, the "Reoffered Stock"). Any
Stockholder who delivers a Notice of Acceptance shall be referred to herein as a
"Purchaser Stockholder." If more than one Purchaser Stockholder elects to
purchase the Reoffered Stock, then the Reoffered Stock
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shall be sold to the Purchaser Stockholders pro rata based upon the number of
shares of Common Stock then owned by such Purchaser Stockholders (taking into
account shares of Common Stock underlying the Warrants and Existing Options) or
in such other manner as the Purchaser Stockholders may agree.
(v) The Closing. Upon the delivery of the Notice of
Acceptance, the Company or the Purchaser Stockholders, as the case may be, and
the Transferring Holder shall be firmly bound to consummate the purchase and
sale of the applicable Offered Stock in accordance with the First Refusal
Transfer Notice, the Notice of Acceptance and the terms hereof. Subject to the
provisions hereof, within forty-five (45) days after the Transferring Holder's
receipt of the last Acceptance Notice, the Company or the Purchaser
Stockholders, as the case may be, shall purchase and the Transferring Holder
shall sell the applicable Offered Stock at a mutually agreeable time and place
(the "Offered Stock Closing").
(vi) Delivery Against Payment. At the Offered Stock
Closing, the Transferring Holder shall deliver to the Company or the Purchaser
Stockholders, as the case may be, certificates representing the Offered Stock,
free and clear of any liens or encumbrances and duly endorsed in blank or
accompanied by duly executed forms of assignment, to be purchased by the Company
or the Purchaser Stockholders, as the case may be, and the Company or the
Purchaser Stockholders, as the case may be, shall pay to the Transferring Holder
the purchase price for such Offered Stock by cashier's or certified check or by
wire transfer of immediately available funds to an account designated by each
such Transferring Holder.
(vii) No Closing. If neither the Company nor the other
Stockholders elects to purchase all of the Offered Stock in accordance with
Sections 6(a)(iii) and 6(a)(iv) then the Transferring Holder may Transfer all of
the Offered Stock, at a price which is not less than the price specified in the
First Refusal Transfer Notice and on other terms and conditions which are not
materially more favorable in the aggregate to any transferee thereof than those
specified in the First Refusal Transfer Notice, to any Person specified in the
applicable First Refusal Transfer Notice, but only to the extent that such
Transfer occurs within one-hundred and twenty (120) days after expiration of the
Stockholder Refusal Exercise Period. Any Stockholder Shares not Transferred
within such 120-day period will be subject to the provisions of this Section 6
upon subsequent Transfer.
Section 7. Tag-Along Rights.
(a) Common Stock. Notwithstanding the other restrictions on
transfer contained in this Agreement, at least forty five (45) days prior to any
Transfer (other than pursuant to the Common Put, the JG Put, the Call, a
Permitted Transfer, a Special Foundation Transfer, a Special Foundation Transfer
Without Consideration , a Transfer of less than one thousand (1,000) shares or a
Transfer pursuant to Sections 5 or 6 hereof) to any Person (other than the
Company or a Wholly Owned Subsidiary) of Common Stock by a Stockholder (the
"Transferring Stockholder"), the Transferring Stockholder shall deliver a
written notice (the "Sale Notice") to the Company (and the Company shall
promptly deliver the Sale Notice to each of the other Stockholders), specifying
in reasonable detail the number of shares of Common Stock to be Transferred, the
proposed terms, and
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conditions of the proposed Transfer and the identity of the prospective
transferee(s) (which notice may be the same notice and given at the same time as
the Transfer Notice under Section 5(a), where applicable). Upon receipt of the
Sale Notice from the Company, each of the other Stockholders (the "Tag-along
Stockholders") shall have a right (a "Tag-along Right") to participate in the
contemplated Transfer by delivering written notice (the "Tag-along Notice"),
specifying the number of shares of Common Stock to be Transferred, to the
Transferring Stockholder and the Company within 30 days after receipt by the
Stockholders of the Sale Notice. If any Tag-along Stockholder has elected to
participate in such Transfer, the Transferring Stockholder and each such
electing Tag-along Stockholder shall be entitled to sell in the contemplated
Transfer, at the same price per share and on the same terms, a number of shares
of Common Stock equal to the product of (i) the percentage of Common Stock held
by such Person (taking into account shares of Common Stock underlying the
Warrants and Existing Options) and (ii) the number of shares of Common Stock to
be sold in the contemplated Transfer. The Transferring Stockholder shall use
commercially reasonable efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Tag-along Stockholders in the
contemplated Transfer, and no Transferring Stockholder shall Transfer any shares
of Common Stock to any prospective transferee(s) if such transferee(s) refuses
to allow the full participation of the Tag-along Stockholders as set forth
herein. Notwithstanding the foregoing, if Acquisition Company does not exercise
its Tag-along Right with respect to a Sale Notice given by the Foundation, no
other Stockholder shall have a Tag-along Right with respect thereto.
(b) Preferred Stock. At least forty five (45) days prior to
any Transfer of Preferred Stock by any Stockholder (each a "Preferred
Transferor") to any Person other than the Company or a Wholly Owned Subsidiary
(other than pursuant to redemptions of Preferred Stock pursuant to the
Certificate of Incorporation of the Company, a Permitted Transfer, a Special
Foundation Transfer, a Special Foundation Transfer Without Consideration, a
Public Sale or the Call), the Preferred Transferor shall deliver a written
notice (the "Preferred Sale Notice") to the Company (and the Company shall
promptly deliver the Preferred Sale Notice to the other holders of Preferred
Stock), specifying in reasonable detail the number of shares of Preferred Stock
to be Transferred, the proposed terms, and conditions of the proposed Transfer
and the identity of the prospective transferee(s). Upon receipt of the Preferred
Sale Notice, each of the other holders of Preferred Stock (the "Tag-along
Preferred Stockholders") shall have a right (a "Preferred Tag-along Right") to
participate in the contemplated Transfer by delivering written notice (the
"Preferred Tag-along Notice") to the Preferred Transferor and the Company
within 30 days after receipt by the Tag-along Preferred Stockholders of the
Preferred Sale Notice. If any Tag-along Preferred Stockholder has elected to
participate in such Transfer, the Preferred Transferor and each such electing
Tag-along Preferred Stockholder shall be entitled to sell in the contemplated
Transfer, at the same price per share and on the same terms, a number of shares
of Preferred Stock equal to the product of (i) the percentage of Preferred Stock
held by such Person and (ii) the number of shares of Preferred Stock to be sold
in the contemplated Transfer. The Preferred Transferor shall use commercially
reasonable efforts to obtain the agreement of the prospective transferee(s) to
the participation of the Tag-along Preferred Stockholders in the contemplated
Transfer, and no Preferred Transferor shall Transfer any shares of Preferred
Stock to any prospective transferee(s) if such transferee(s) refuses to allow
the full participation of the Tag-along Preferred Stockholders as set forth
herein.
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(c) Warrants.
(i) At least forty five (45) days prior to any Transfer of
Warrants by Acquisition Company or the Foundation (each a "Warrant Transferor")
to any Person other than the Company or a Wholly Owned Subsidiary, the Warrant
Transferor shall deliver a written notice (the "Warrant Sale Notice") to the
Company (and the Company shall deliver the Warrant Sale Notice to the other
holders of Warrants and other Stockholders), specifying in reasonable detail the
number of shares of Warrants to be Transferred, the proposed terms and
conditions of the proposed Transfer and the identity of the prospective
transferee(s). Upon receipt of the Warrant Sale Notice, each of the other
holders of Warrants and, in the manner provided in Section 7(c)(ii) below, each
Management Stockholder (the "Tag-along Warrant Holders") shall have a right (a
"Warrant Tag-along Right") to participate in the contemplated Transfer by
delivering written notice (the "Warrant Tag-along Notice") to the Warrant
Transferor and the Company within 30 days after receipt by the Tag-along Warrant
Holders of the Warrant Sale Notice. If any Tag-along Warrant Holder has elected
to participate in such Transfer, the Warrant Transferor and each such electing
Tag-along Warrant Holder shall be entitled to sell in the contemplated Transfer,
at the same price per Warrant and on the same terms, a number of Warrants equal
to the product of (A) the percentage of outstanding Warrants held by such Person
and (B) the number of Warrants to be sold in the contemplated Transfer. The
Warrant Transferor shall use commercially reasonable efforts to obtain the
agreement of the prospective transferee(s) to the participation of the Tag-along
Warrant Holders in the contemplated Transfer, and no Warrant Transferor shall
Transfer any Warrants to any prospective transferee(s) if such transferee(s)
refuses to allow the full participation of the Tag-along Warrant Holders as set
forth herein. Notwithstanding the foregoing, if Acquisition Company does not
exercise its Warrant Tag-along Right with respect to a Warrant Sale Notice given
by the Foundation, no Management Stockholder shall have a Warrant Tag-along
Right with respect thereto.
(ii) Each Management Stockholder shall have a right to
participate in the Warrant Tag-along Right by delivering written notice (the
"Management Warrant Tag-along Notice") to the Warrant Transferor and the Company
within 30 days after receipt of the Warrant Sale Notice. In order to allow the
Management Stockholders to participate in a Transfer of Warrants pursuant to
Section 7(c)(i) above, each Management Stockholder shall have the right to write
and sell, at the same price that the Warrants are being transferred as set forth
in the Warrant Sale Notice, a call entitling the purchaser to purchase shares of
Common Stock then owned by such Management Stockholder. Each such call (a
"Tag-along Call") shall have the same exercise price and other terms and
conditions as the Warrants, except that the Tag-along Call shall expire five
years from the date of issuance of the Tag-along Call or such later date as
determined by the affirmative vote of the holders of a majority of the Warrants.
Each Management Stockholder's Warrant Tag-along Notice shall specify the number
of Tag-along Calls such Management Stockholder intends to write and sell, which
shall not exceed the number of shares of Common Stock then owned by such
Management Stockholder. All Tag-along Calls specified in all Management
Stockholders' Warrant Tag-along Notices shall be deemed to be outstanding
Warrants for purposes of Section 7(c)(i) above. Each Management Stockholder
writing and selling Tag-along Calls pursuant to this Section 7(c) shall, at the
closing of such sale, deposit with the Company, as escrow agent, stock
certificates (or voting trust certificates) representing the number of shares of
Common Stock underlying such Tag-along Calls. Upon such deposit, the Company
shall assume the obligations of the writer of the Tag-along
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Call to the holder thereof. As escrow agent, the Company shall: (A) upon
exercise of a Tag-along Call, deliver the certificates representing the shares
deliverable upon such exercise to the holder of such Tag-along Call, receive
payment from the holder of the exercise price payable upon such exercise, and
remit such payment to the Management Stockholder who wrote and sold such
Tag-along Call; and (B) upon expiration of an unexercised Tag-along Call,
redeliver the certificates representing the shares underlying such Tag-along
Call which were not purchased on exercise thereof to the Management Stockholder
who wrote and sold such Tag-along Call.
(d) Allocation of Purchase Price. For purposes of determining
the consideration payable to a Stockholder exercising a Tag-along Right, a
Preferred Tag-along Right or a Warrant Tag-along Right, if (i) any Stockholder
Shares are to be Transferred together with any shares of Preferred Stock or
Warrants, (ii) any shares of Preferred Stock are to be Transferred together with
any Stockholder Shares or Warrants or (iii) any Warrants are to be Transferred
together with any shares of Preferred Stock or Stockholder Shares, the purchase
price, if any, for such combination of Securities shall be allocated as provided
in the agreement between the Transferring Stockholder, the Preferred Transferor
or the Warrant Transferor (as the case may be) and the prospective transferee;
provided, however, that the portion of the purchase price allocated to shares of
Preferred Stock shall not exceed the aggregate Redemption Price of such shares
of Preferred Stock.
(e) Termination. This Section 7 shall immediately terminate
upon the consummation of a Qualified IPO.
Section 8. Common Put.
(a) Common Put.
(i) Acquisition Company shall have the right to require
the Company to purchase at Fair Market Value Common Stock and/or Warrants
representing up to 50% on or after the sixth anniversary of the date hereof and
up to 100% on or after the seventh anniversary of the date hereof of the number
of shares of Common Stock and Warrants (based on the number of underlying
shares) owned by Acquisition Company immediately after the Closing (the
"Acquisition Company Common Put"), by delivering a written notice to the
Company, the Foundation and Xxxxx X. Xxxxxxx specifying the number of shares of
Common Stock and/or Warrants to be purchased (the "Acquisition Company Put
Notice"). The number of shares of Common Stock and/or Warrants specified in an
Acquisition Company Put Notice, expressed as a percentage of the number of
shares of Common Stock and Warrants (based on the underlying shares) owned by
Acquisition Company immediately after the Closing, is referred to herein as the
"Applicable Percentage."
(ii) Upon receipt of an Acquisition Common Put Notice, the
Foundation and Xxxxx X. Xxxxxxx each shall have the right to require the Company
to purchase at Fair Market Value Common Stock and/or Warrants (in the case of
the Foundation) and Common Stock and/or Existing Options (in the case of Xxxxx
X. Xxxxxxx) representing no more than the Applicable Percentage of the number of
shares of Common Stock and Warrants (based on the number of underlying shares)
(in the case of the Foundation) and of Common Stock and Existing Options (based
on the number of underlying shares) (in the case of Xxxxx X. Xxxxxxx) owned by
it or him
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immediately after the Closing (the "Stockholder Put" and, together with the
Acquisition Company Common Put, the "Common Put"), by delivery of written notice
to the Company and Acquisition Company within forty-five (45) days of receipt of
such Acquisition Company Put Notice specifying the number of shares of Common
Stock and/or Warrants (in the case of the Foundation) and the number of shares
of Common Stock and/or Existing Options (in the case of Xxxxx X. Xxxxxxx) to be
purchased (the "Stockholder Put Notice").
(iii) In each case, the number of shares of Common Stock
and/or Warrants that Acquisition Company or the Foundation has the right to
require the Company to purchase pursuant to this Section 8(a), and the number of
shares of Common Stock and/or Existing Options that Xxxxx X. Xxxxxxx has the
right to require the Company to purchase pursuant to this Section 8(a), shall be
reduced by the number of shares of Common Stock and Warrants (in the case of
Acquisition Company and the Foundation) and of Common Stock and Existing Options
(in the case of Xxxxx X. Xxxxxxx) previously transferred by it or him (including
pursuant to this Section 8(a)), except to Permitted Transferees and except
pursuant to a Special Foundation Transfer Without Consideration.
(b) Closing. Subject to the provisions of this Section 8,
within one-hundred and eighty (180) days after receipt of the Acquisition
Company Put Notice, the Company shall purchase, and Acquisition Company, the
Foundation and Xxxxx X. Xxxxxxx, as the case may be, shall sell, the number of
the shares of Common Stock, Warrants, and Existing Options specified in the
Acquisition Company Put Notice and the Stockholder Put Notice, as the case may
be, at a time and place determined by Acquisition Company (the "Put Closing").
(c) Acquisition Company Control. If Acquisition Company has
delivered the Acquisition Company Put Notice and if the Foundation or Xxxxx X.
Xxxxxxx has delivered the Stockholder Put Notice but the Company cannot satisfy
all of its obligations under this Section 8, then Acquisition Company shall be
entitled to determine whether there shall be a Put Closing and if so, the terms
and conditions thereof; provided, however, that if there is a Put Closing for
less than the total number of shares of Common Stock, Warrants and Existing
Options specified in the Acquisition Company Put Notice and Stockholder Put
Notice (the "Put Shares"), then the Put Shares shall be repurchased by the
Company pro rata based on the number of shares of Common Stock (including shares
of Common Stock issuable upon exercise of the Warrants and Existing Options)
held by each such Stockholder. Furthermore, if (i) Acquisition Company provides
written notice to the Company objecting to the determination of Fair Market
Value by the Appraiser within 20 days after receipt of written notice of such
determination or (ii) a Control Event occurs and is continuing prior to the Put
Closing, then the Acquisition Company Put Notice shall be deemed withdrawn for
all purposes (the "Withdrawn Put"). The withdrawal of the Acquisition Company
Put Notice shall automatically cause the withdrawal of the Stockholder Put
Notice, and the Foundation and Xxxxx X. Xxxxxxx shall have no further right to
participate in such Common Put except as otherwise provided in Section 9(b). In
the event of a Withdrawn Put pursuant to clause (i) immediately above,
Acquisition Company shall pay all of the costs and expenses of the Appraiser and
will not be permitted to exercise the Acquisition Company Common Put during the
six-month period immediately following the Notice of Xxxxxxxxxx.
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(x) Delivery Against Payment. At the Put Closing, Acquisition
Company, the Foundation and Xxxxx X. Xxxxxxx, as the case may be, shall deliver
to the Company certificates and other instruments representing the Put Shares to
be repurchased by the Company free and clear of all liens and encumbrances and
duly endorsed in blank or accompanied by duly executed forms of assignment, and
the Company shall pay to Acquisition Company, the Foundation and Xxxxx X.
Xxxxxxx, as the case may be, the purchase price thereof by cashier's or
certified check or by wire transfer of immediately available funds to an account
designated by each such Stockholder; provided that the Company may satisfy its
obligations with respect to the Common Put by causing another Person to purchase
the shares of Common Stock specified in each of the Acquisition Company Put
Notice and Stockholder Put Notice (the "Third-party Purchase"); and, further
provided, that (i) the purchase price of any Third-party Purchase is equal to
the Fair Market Value, (ii) the third-party purchaser is afforded only the
rights hereunder that would be afforded to a Person who is not a Permitted
Transferee of Acquisition Company, the Foundation or Xxxxx X. Xxxxxxx, as the
case may be, (iii) Acquisition Company, the Foundation and Xxxxx X. Xxxxxxx, as
the case may be, shall not be required to give any representations or
indemnities in connection therewith, other than those relating to the ownership
of such shares of Common Stock and the absence of any liens, etc., thereon and
(iv) the Company shall agree to indemnify Acquisition Company, the Foundation or
Xxxxx X. Xxxxxxx, as the case may be, against any and all claims of any kind or
nature made by such third-party purchaser in connection with the Transfer to
such third-party purchaser.
(e) Fair Market Value. "Fair Market Value" means:
(i) with respect to the Securities and Existing Options
subject to the Common Put, the JG Put and the Call (the "Valued Securities"),
the proportional value of such Valued Securities (less the exercise price in the
case of Warrants and Existing Options) to the fair market value of all of the
Company's outstanding Common Stock on a fully-diluted basis (other than Common
Stock underlying unvested options and the Preferred Stock), determined on a
going-concern basis as between a willing buyer and a willing seller (deemed, to
the extent reasonable in the circumstances, to have been brought together
through an orderly auction process) and taking into account all relevant factors
determinative of value, including the proceeds payable upon the exercise of all
options, warrants and convertible securities (other than unvested options and
the Preferred Stock) and any deductions available as a result of such exercise;
provided, however, that no discount shall be applied because of illiquidity of
the Valued Securities, because the Valued Securities are held by a holder of
less than 50% of the voting stock of the Company, because the Valued Securities
are subject to transfer restrictions or because the Warrants are not immediately
exercisable into Common Stock or because Existing Options are exercisable for
non-voting securities of the Company. Fair Market Value shall be determined by
mutual agreement of the Company and the holders of a majority of the Valued
Securities (based on Common Stock and Common Stock underlying securities
convertible into Common Stock) (the "Majority Holders") within ten (10) days of
receipt of the Acquisition Company Put Notice, the Stockholder Put Notice or the
JG Put Notice, as applicable (the "Ten-day Period"). If the Company and the
Majority Holders are unable to agree on determination of Fair Market Value prior
to the last day of the Ten-day Period, then the Company and the Majority Holders
shall each select, within ten (10) days of the last day of the Ten-day Period, a
nationally recognized investment banking firm qualified to make such
determination, and such investment banking firms shall together select, within
two (2) days of the last day of the Ten-day
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Period, a third nationally recognized and qualified investment banking firm to
make such determination (the "Appraiser"). The Appraiser shall make its Fair
Market Value determination by employing the methodology described above and
shall submit a written report setting forth such Fair Market Value to the
Company and the Majority Holders within 30 days of the Appraiser's engagement.
Except as set forth in the last sentence of Section 8(c), all expenses related
to such determination shall be borne by the Company, and the determination of
the Appraiser shall be final and binding upon all parties. Such final
determination of Fair Market Value shall in no event be determined later than 60
days after the date giving rise to such determination. The Company agrees to
provide the Appraiser customary indemnification and the parties owning Valued
Securities agree to release the Appraiser from any liability.
(ii) with respect to non-cash consideration received in a
transaction subject to the Right of First Refusal set forth in Section 6,
(A) if on the date on which Fair Market Value is
being determined, such non-cash consideration is a security listed on a
national securities exchange or is quoted in the NASDAQ National Market
System, the Fair Market Value of such security will be the average last
sale price, regular way, determined over the succeeding 20 trading
days, of such security on the principal national securities exchange on
which such security may at the time be listed, or, if there has been no
sale on any such exchange during the succeeding 20 trading-day period,
the average of the highest bid and lowest asked prices on such
exchange, averaged over such period, or, if on any day such security is
not so listed, the average of the representative bid and asked prices
quoted in the NASDAQ National Market System as of 4:00 p.m., New York
time on each day, averaged over the succeeding 20 trading days; and
(B) if on the date as of which Fair Market Value is
being determined, such security is not listed on a national securities
exchange or quoted in the NASDAQ National Market System, the Fair
Market Value shall be an amount equal to the fair market value of such
security determined jointly in good faith by the Transferring Holder
and the Purchaser Stockholders holding a majority of the Securities
held by all Purchaser Stockholders; provided that if the Transferring
Holder and such Purchaser Stockholders cannot so agree, then such value
shall be determined by an independent investment banking firm of
national reputation (a "Qualified Investment Bank") utilizing valuation
techniques then commonly used for the valuation of such investment
interests, which Qualified Investment Bank will be selected by the
Transferring Holder and the expenses of which will be borne by the
Transferring Holder. The Transferring Holder shall provide the
Purchaser Stockholders with a copy of the valuation provided by such
Qualified Investment Bank, which valuation shall describe in reasonable
detail the methods and calculations used by such Qualified Investment
Bank, and such valuation shall be final and binding on the parties
unless the Purchaser Stockholders holding a majority of the Securities
held by all Purchaser Stockholders notify the Transferring Holder
within ten (10) days of receipt of such valuation that such valuation
is not
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satisfactory to such Purchaser Stockholders, in which case such
Purchaser Stockholders shall be entitled to select another Qualified
Investment Bank which shall perform a valuation on the basis described
above at such Purchaser Stockholders' expense. The Purchaser
Stockholders shall provide the Transferring Holder with a copy of the
valuation provided by the Purchaser Stockholders' Qualified Investment
Bank, which valuation shall describe in reasonable detail the methods
and calculations used by such Qualified Investment Bank, within thirty
(30) days of the date on which the Transferring Holder delivered the
valuation of its Qualified Investment Bank to the Purchaser
Stockholders. If the valuation delivered by the Qualified Investment
Bank engaged by the Purchaser Stockholders is not greater by ten
percent (10%) or more than the valuation of the Qualified Investment
Bank engaged by the Transferring Holder, then the valuation of the
Qualified Investment Bank engaged by the Transferring Holder shall be
final and binding on the parties. If the valuation delivered by the
Qualified Investment Bank engaged by the Purchaser Stockholders is
greater by ten percent (10%) or more than the valuation of the
Qualified Investment Bank engaged by the Transferring Holder, the
valuation of the Qualified Investment Bank engaged by the Purchaser
Stockholders shall be final and binding on the parties unless within
ten (10) days of receipt of a copy of the valuation provided by the
Qualified Investment Bank engaged by the Purchaser Stockholders, the
Transferring Holder notifies the Purchaser Stockholders that it desires
the engagement of a third Qualified Investment Bank. If the
Transferring Holder so notifies the Purchaser Stockholders, the
Qualified Investment Bank initially engaged by the Transferring Holder
and the Qualified Investment Bank engaged by the Purchaser Stockholders
shall designate a third Qualified Investment Bank within ten (10) days
of such notice from the Transferring Holder and such third Qualified
Investment Bank shall perform and deliver to the Transferring Holder
and the Purchaser Stockholders within twenty (20) days of its
designation a valuation on the basis described above which shall in all
cases be final and binding on the parties. The expenses of such third
Qualified Investment Bank shall be borne by the Transferring Holder.
(f) Termination. This Section 8 (other than clause (e)(ii)
thereof) shall immediately terminate upon the consummation of a Qualified IPO.
Section 9. The JG Put.
(a) JG Put. Xxxxx X. Xxxxxxx shall have the right to require
the Company to purchase at Fair Market Value Common Stock and/or Existing
Options representing the following percentages of the number of shares of Common
Stock and Existing Options (based on the number of underlying shares) owned by
him immediately after the Closing during the following periods:
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PERCENTAGE 90 DAYS COMMENCING WITH
25% Sixth anniversary of date hereof
50% Seventh anniversary of date hereof
75% Eighth anniversary of date hereof
100% Ninth anniversary of date hereof
Each such right (a "JG Put") shall be exercisable by giving written notice to
the Company within the applicable period set forth above specifying the number
of shares of Common Stock and/or Existing Options to be purchased by the Company
(the "JG Put notice"). In each case, the number of shares of Common Stock and/or
Existing options that Xxxxx X. Xxxxxxx has the right to require the Company to
purchase pursuant to this Section 9(a) shall be reduced by (i) the number of
shares of Common Stock and Existing Options which he previously Transferred
(including pursuant to this Section 9(a) or Section 9(b)) except to Permitted
Transferees and (ii) the number of shares of Common Stock which he could have
actually Transferred, but elected not to Transfer, in a transaction previously
consummated pursuant to Section 7 or 8(a). Notwithstanding the foregoing, Xxxxx
X. Xxxxxxx'x right to require the Company to purchase shares of Common Stock and
Existing Options pursuant to this Section 9(a) shall be suspended if, and as
long as, a Control Event as defined in clauses (A) through (E) of Section
3(f)(ii) has occurred and is continuing.
(b) Withdrawn Put. In the Event of a Withdrawn Put, Xxxxx X.
Xxxxxxx shall have the right to exercise the JG Put by delivering written notice
(the "Withdrawn Put Notice") to the Company and Acquisition Company within 30
days of the Withdrawn Put, specifying the number of shares of Common Stock and
Existing Options to be purchased.
(c) Closing. Subject to the provisions hereof, within
one-hundred twenty (120) days after receipt of the JG Put Notice or the
Withdrawn Put Notice, as the case may be, the Company shall purchase, and Xxxxx
X. Xxxxxxx shall sell, the number of shares of Common Stock and Existing Options
specified in the JG Put Notice or the Withdrawn Put Notice, as the case may be,
at a mutually agreeable time and place (the "JG Put Closing").
(d) Delivery Against Payment. At the JG Put Closing, Xxxxx X.
Xxxxxxx shall deliver to the Company certificates representing the shares of
Common Stock and Existing Options to be repurchased by the Company free and
clear of all liens and encumbrances and duly endorsed in blank or accompanied by
duly executed forms of assignment, and the Company shall pay to Xxxxx X. Xxxxxxx
the purchase price therefore by cashier's check or certified check or by wire
transfer of immediately available funds to an account designed by Xxxxx X.
Xxxxxxx; provided that, if and to the extent the JG Put is prohibited by any
provision of the Credit Agreement or any other agreement, the amount that cannot
be paid in cash and the delivery of the corresponding number of shares of Common
Stock and/or Existing Options shall be deferred until such payment is not
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prohibited by any provision of the Credit Agreement or any other agreement. The
Company agrees to use commercially reasonable efforts to obtain any waiver,
modification, amendment or refinancing (if practicable) in order to fully
satisfy its payment obligations under this Section 9.
(e) Termination. This Section 9 shall immediately terminate
upon the consummation of a Qualified IPO.
Section 10. Call Arrangements.
(a) The Call. After the exercise of the Acquisition Company
Common Put for at least the Acquisition Company First Minimum Share Amount and
so long as Acquisition Company owns less than the Preferred Minimum Threshold,
the Company shall have the right to purchase all (but not less than all) of the
Stockholder Shares, Preferred Stock and Warrants owned by Acquisition Company
(the "Call") by delivering written notice to Acquisition Company within 60 days
of the Company's receipt of the Acquisition Company Put Notice (the "Call
Notice"); provided, however, that the Company shall have no right to exercise
the Call as a result of the Withdrawn Put, and each Call and Call Notice shall
be deemed to be withdrawn upon the occurrence of a Withdrawn Put; provided,
further, if the Company provides written notice to Acquisition Company objecting
to the determination of Fair Market Value by the Appraiser within twenty (20)
days after written notice of such determination, the Call Notice shall be deemed
withdrawn for all purposes. The Company may satisfy its obligations with respect
to the Call by causing another Person to purchase the Stockholder Shares, the
Preferred Stock and the Warrants owned by Acquisition Company if, in connection
with such purchase, (i) the purchase price paid by such other Person is equal to
the Call Price, (ii) Acquisition Company is neither required to give any
representations or indemnities to such Person, other than those relating to the
ownership of the Securities and the absence of any liens etc. thereon, and (iii)
the Company indemnifies Acquisition Company against any and all claims of any
kind or nature made by such third party in connection with the Transfer to such
other Person.
(b) The Closing. Within one-hundred eighty (180) days after
delivery of the Acquisition Company Put, the Company shall purchase or cause to
be purchased, and Acquisition Company shall sell, the Stockholder Shares,
Preferred Stock and Warrants as set forth in the Call Notice at a mutually
agreeable time and place (the "Call Closing").
(c) Delivery Against Payment. At the Call Closing, Acquisition
Company shall deliver to the Company or third party designated by the Company
duly executed instruments transferring title to the Stockholder Shares,
Preferred Stock and Warrants to the Company or third party designated by the
Company free and clear of all liens and encumbrances, against payment of the
appropriate Call Price by cashier's or certified check payable to Acquisition
Company or by wire transfer of immediately available funds to an account
designated by Acquisition Company.
(d) Limitation. Notwithstanding the foregoing, if Acquisition
Company exercises the Acquisition Company Common Put for shares of Common Stock
(including shares of Common Stock underlying the Warrants) in an amount greater
than the Acquisition Company First Minimum Share Amount but less than the
Acquisition Company Second Minimum Share Amount, then the
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Company shall be permitted to exercise the Call if, but only if, the payment of
the Call Price (excluding any transactional fees, management fees or similar
fees paid to Acquisition Company or any of its Affiliates) would provide
Acquisition Company with an annualized Internal Rate of Return equal to or
greater than 25% on the amount invested by Acquisition Company in any Equity
Interests of the Company.
(e) Termination. This Section 10 shall immediately terminate
upon the consummation of a Qualified IPO.
Section 11. Governance. Until the consummation of a Qualified
IPO, without a Majority Vote:
(a) Charter and Bylaws. The Company shall not, nor shall it
permit any Subsidiary to, amend the Certificate of Incorporation or bylaws (or
equivalent governing documents) of the Company or any Subsidiary of the Company,
except for administrative immaterial amendments made in the ordinary course of
business;
(b) Liquidation, Bankruptcy, Etc. The Company shall not adopt
any plan or proposal for liquidation, dissolution, reorganization or
recapitalization of the Company or any of its Subsidiaries or commence any case
or action seeking relief under any laws relating to bankruptcy, insolvency,
conservatorship or relief of debtors with respect to the Company or any of its
Subsidiaries;
(c) Sale or Issuance of Securities. The Company shall not, nor
shall it permit any Subsidiary to, authorize, issue or sell any equity
securities or other capital stock, or rights or securities convertible into or
exercisable or exchangeable for any class or series of capital stock of the
Company or any of its Subsidiaries (other than options issued under Management
Option Plans and the Warrants, the Preferred Stock or Common Stock issued upon
exercise or conversion, as the case may be, of such options, the Existing
Options, the Warrants or the Preferred Stock, and other than issuances by a
Wholly Owned Subsidiary to the Company or another Wholly Owned Subsidiary);
(d) Dividends. The Company shall not, nor shall it permit any
Subsidiary to, directly or indirectly declare or pay any dividends or make any
distributions upon any of its capital stock, except for (i) dividends payable in
Common Stock issued upon the outstanding Common Stock, (ii) accrual or payment
of dividends on, or redemptions of, Preferred Stock pursuant to theterms of the
Certificate of Incorporation, (iii) payments in connection with the Common Put,
JG Common Put, the Call and the terms of the Call Option and Put Option, and
(iv) dividends by Wholly Owned Subsidiaries;
(e) Redemptions. The Company shall not directly or indirectly
redeem, purchase or otherwise acquire, or permit any Subsidiary that is not a
Wholly Owned Subsidiary to redeem, purchase or otherwise acquire, any of the
Company's or any of such Subsidiary's capital stock or other equity securities
(including, without limitation, warrants, options and other rights to acquire
such capital stock or other equity securities) other than the Preferred Stock
pursuant to the terms of
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the Certificate of Incorporation and the Common Put, the Call Option, the Put
Option, the JG Put and the Call; or
(f) Mergers. The Company shall not merge or consolidate with,
or enter into any business combination or joint venture with, any Person or
permit any Subsidiary to merge or consolidate with, or enter into any business
combination with, any Person (other than the Company or a Wholly Owned
Subsidiary of the Company) or enter into any agreement to do any of the
foregoing.
Section 12. Financial Statements and Other Information. So
long as Acquisition Company or the Foundation, as the case may be, owns any
Stockholder Shares, Preferred Stock or Warrants:
(a) Quarterly Reports. The Company shall deliver to
Acquisition Company and the Foundation as soon as available but in any event
within forty-five (45) days after the end of each quarterly accounting period in
each fiscal year, unaudited consolidating and consolidated statements of income
and cash flows of the Company and its subsidiaries for such quarterly period and
for the period from the beginning of the fiscal year to the end of such quarter,
and unaudited consolidating and consolidated balance sheets of the Company and
its subsidiaries as of the end of such quarterly period, setting forth in each
case comparisons to the Company's annual budget and to the corresponding period
in the preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently applied,
subject to the absence of footnote disclosures and to normal year-end
adjustments for recurring accruals, and shall be certified by the Company's
chief financial officer.
(b) Fiscal Reports. The Company shall deliver to the
Stockholders within ninety (90) days after the end of each fiscal year,
unaudited consolidating and audited consolidated statements of income and cash
flows of the Company and its Subsidiaries for such fiscal year, and unaudited
consolidating and audited consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, together with, in each case,
comparisons to the Company's annual budget and to the preceding fiscal year, all
prepared in accordance with GAAP, consistently applied, and accompanied by (i)
with respect to consolidated portion of such statements, an audit opinion
containing no exceptions or qualifications (except for qualifications regarding
specified contingent liabilities) of an independent accounting firm of
recognized national standing, (ii) a certificate from such accounting firm,
addressed to the Board, stating that in the course of its examination nothing
came to its attention that caused it to believe that there was any default by
the Company or anySubsidiary thereof in the fulfillment of or compliance with
any of the terms, covenants, provisions or conditions of any other material
agreement to which the Company or any Subsidiary is a party or, if such
accountants have reason to believe any default by the Company or any Subsidiary
thereof exists, a certificate specifying the nature and period of existence
thereof, and (iii) a copy of such firm's annual management letter, if any, to
the Board.
(c) Additional Reports. The Company shall deliver to
Acquisition Company and the Foundation promptly upon receipt thereof, any
additional reports, management letters or other detailed information concerning
significant aspects of the Company's operations or financial affairs given
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to the Company by its independent accountants (and not otherwise contained in
other materials provided hereunder).
(d) Annual Budget. The Company shall deliver to Acquisition
Company and the Foundation at least fifteen (15) days but not more than ninety
(90) days prior to the beginning of each fiscal year, an annual budget for the
Company and its subsidiaries for such fiscal year and, promptly upon preparation
thereof, any other significant budgets prepared by the Company and any revisions
of such annual or other budgets, and, within forty-five (45) days after any
quarterly period in which there is a material adverse deviation from the annual
budget, a letter from the Company's chief executive officer or chief financial
officer explaining the deviation and what actions the Company has taken and
proposes to take with respect thereto. Each annual budget delivered pursuant to
this Section 12(d) shall be prepared in a manner that is consistent with GAAP
and shall include (i) an income statement prepared on an accrual basis which
shall show in reasonable detail in accordance with past practice the revenues
and expenses projected for the Company's business as a whole and for each of the
Company's operating segments on a quarterly basis for the forthcoming fiscal
year, (ii) a balance sheet which shall show in reasonable detail in accordance
with past practice the assets and liabilities projected for the Company's
business as a whole and for each of the Company's operating segments on a
quarterly basis for the forthcoming fiscal year, (iii) a cash flow statement
which shall show in reasonable detail in accordance with past practice the
receipts and disbursements projected for the Company's business as a whole and
for each of the Company's operating segments on a quarterly basis for the
forthcoming fiscal year and the amount of any corresponding cash deficiency or
surplus, (iv) the projected capital requirements, if any, including any
contemplated borrowings of the Company, and (v) a proposed business plan for the
forthcoming fiscal year which shall show in reasonable detail in accordance with
past practice the proposed business operations of the Company as a whole and for
each of the Company's operating segments, including staffing levels, and
operating strategy of the Company.
(e) Defaults and Control Events. The Company shall deliver to
Acquisition Company and the Foundation promptly (but in any event within five
(5) Business Days) after the discovery or receipt of (i) notice of any default
under any material agreement to which it or any of its subsidiaries is a party
or any other material adverse change, event or circumstance affecting the
Company or any Subsidiary thereof (including, without limitation, the filing of
any material litigation against the Company or any Subsidiary thereof or the
existence of any dispute with any Person which involves a reasonable likelihood
of such litigation being commenced) or (ii) the occurrence of any Control Event,
a letter from the Company's chief executive officer or chief financial officer
specifying the nature and period of existence thereof and what actions the
Company and its subsidiaries have taken and propose to take with respect
thereto.
(f) Other Information. The Company shall deliver to
Acquisition Company and the Foundation with reasonable promptness, such other
information and financial data concerning the Company and its subsidiaries as
any Person entitled to receive information under this Section 12 may reasonably
request.
(g) Fair Presentation. Each of the financial statements
referred to in Sections 12(a) and 12(b) shall fairly present the consolidated
financial position and results of operations and
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cash flows of the Company as of the dates and for the periods stated therein,
subject in the case of the unaudited financial statements to changes resulting
from normal year-end adjustments for recurring accruals in accordance with GAAP.
Section 13. Inspection of Property. The Company shall permit
any representative of Acquisition Company or the Foundation (so long as
Acquisition Company or the Foundation, as the case may be, owns any Stockholder
Shares, Preferred Stock or Warrants) upon reasonable notice and during normal
business hours to (a) visit and inspect any of the properties of the Company and
its subsidiaries, (b) examine the corporate and financial records of the Company
and its subsidiaries and make copies thereof or extracts therefrom and (c)
discuss the affairs, finances and accounts of any such corporations with the
directors, officers, key employees and independent accountants of the Company
and its subsidiaries. The presentation of an executed copy of this Agreement by
any representative of Acquisition Company or the Foundation to the Company's
independent accountants shall constitute the Company's permission to its
independent accountants to participate in discussions with such representative
and, in connection therewith, the Company shall execute all customary releases
Section 14. Sale of Company.
(a) Cooperation. After the occurrence of a Control Event or in
connection with a Sale of the Company that has been authorized by a Special
Board Vote at such time as at least one Acquisition Company Director and one
Voting Trust Director are serving on the Board and each has voted in favor of
such Sale of the Company, each holder of Stockholder Shares, Preferred Stock and
Warrants will vote for, consent to and raise no objections to any Sale of the
Company. Each holder of Stockholder Shares, Preferred Stock and Warrants will,
to the maximum extent permitted by applicable law, waive any dissenters' rights,
appraisal rights or similar rights in connection with such Sale of the Company,
and if such Sale of the Company is a sale of stock, each holder of such
Stockholder Shares, Preferred Stock and Warrants will agree to sell (including,
without limitation, by executing definitive agreements with respect thereto) up
to all shares of Stockholder Shares, Preferred Stock and Warrants on the terms
and conditions approved by the Board; provided that such sale is to a Person not
affiliated with Acquisition Company, and provided further that the terms and
conditions of such transaction applicable to each Stockholder with respect to
such Stockholder Shares, Preferred Stock and Warrants are the same as those
applicable to Acquisition Company and to the Stockholder holding the largest
number of Stockholder Shares, Preferred Stock and Warrants. Subject to the
immediately preceding proviso, each holder of Stockholder Shares, Preferred
Stockand Warrants will take all necessary or desirable actions in connection
with the consummation of the Sale of the Company as requested by the Board or
the Company.
(b) Purchaser Representative. If the Company or the holders of
the Company's securities enter into any negotiation or transaction for which
Rule 506 under the Securities Act (or any similar rule then in effect)
promulgated by the Securities and Exchange Commission may be available with
respect to such negotiation or transaction (including a merger, consolidation or
other reorganization), the holders of Stockholder Shares will, at the request of
the Company, appoint a purchaser representative (as such term is defined in Rule
501 under the Securities Act) reasonably acceptable to the Company. If any
holder of Stockholder Shares appoints a purchaser representative designated by
the Company, the Company will pay the fees of such purchaser representative, but
if
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any holder of Stockholder Shares declines to appoint the purchaser
representative designated by the Company, such holder will appoint another
purchaser representative, and such holder will be responsible for the fees of
the purchaser representative so appointed.
(c) Costs. Each of the holders of Stockholder Shares,
Preferred Stock and Warrants will bear their pro rata share (based upon the
number of Stockholder Shares, Preferred Stock and Warrants sold) of the costs of
any sale of Stockholder Shares, Preferred Stock and Warrants pursuant to a Sale
of the Company to the extent such costs are incurred for the benefit of all or
substantially all holders of Stockholder Shares, Preferred Stock and Warrants
and are not otherwise paid by the Company or the acquiring party. Costs incurred
by each holder of Stockholder Shares, Preferred Stock and Warrants on its own
behalf will not be considered costs of the transaction.
(d) Termination. This Section 14 shall immediately terminate
upon the consummation of a Qualified IPO.
Section 15. Registration Rights.
(a) Demand Rights.
(i) Request for Registration. At any time after a
Public Offering of Common Stock, each of Acquisition Company, on the one hand,
and the Management Stockholders and the Foundation, on the other hand, holding a
majority of their Registrable Securities may request registration under the
Securities Act of all or any portion of their Registrable Securities on Form S-1
or any similar long-form registration ("Long-Form Registrations"), and each of
Acquisition Company, on the one hand, and the Management Stockholders and the
Foundation, on the other hand, holding at least a majority of their Registrable
Securities may request registration under the Securities Act of all or any
portion of their Registrable Securities on Form S-2 or S-3 or any similar
short-form registration ("Short-Form Registrations") if available. All
registrations requested pursuant to this Section 15(a)(i) are referred to herein
as "Demand Registrations." Each request for a Demand Registration shall specify
the approximate number of Registrable Securities requested to be registered and
the anticipated per share price range for such offering. Within ten (10) days
after receipt of any such request, the Company shall give written notice of such
requested registration to all other holders of Registrable Securities and,
subject to the terms of Section 15(a)(iv), shall includein such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within fifteen (15) days after the receipt of the
Company's notice.
(ii) Long-Form Registrations. Each of Acquisition
Company, on the one hand, and the Management Stockholders and the Foundation, on
the other hand, holding a majority of their Registrable Securities shall be
entitled to request three Long-Form Registrations in which the Company shall pay
all Registration Expenses ("Company-paid Long-Form Registrations"). A
registration shall not count as one of the permitted Long-Form Registrations
until it has become effective, and neither the last nor any subsequent
Company-paid Long-Form Registration shall count as one of the permitted
Long-Form Registrations unless the holders of Registrable Securities are able
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to register and sell at least 75% of the Registrable Securities requested to be
included in such registration; provided that in any event the Company shall pay
all Registration Expenses in connection with any registration initiated as a
Company-paid Long-Form Registration whether or not it has become effective and
whether or not such registration has counted as one of the permitted
Company-paid Long-Form Registrations.
(iii) Short-Form Registrations. In addition to the
Long-Form Registrations provided pursuant to Section 15(a)(ii), the holders of
Registrable Securities shall be entitled to request an unlimited number of
Short-Form Registrations in which the Company shall pay all Registration
Expenses. Demand Registrations shall be Short-Form Registrations whenever the
Company is permitted to use any applicable short form and if the managing
underwriters (if any) agree to the use of a Short-Form Registration. After the
Company has become subject to the reporting requirements of the Securities
Exchange Act, the Company shall use its best efforts to make Short-Form
Registrations available for the sale of Registrable Securities.
(iv) Priority on Demand Registrations. The Company
shall not include in any Demand Registration any securities which are not
Registrable Securities without a Majority Vote. If a Demand Registration is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold therein without adversely affecting the marketability of the
offering, the Company shall include in such registration prior to the inclusion
of any securities which are not Registrable Securities the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold without adversely affecting the marketability of the offering, pro
rata among the respective holders thereof on the basis of the amount of
Registrable Securities owned by each such holder.
(v) Restrictions on Long-Form Registrations. The
Company shall not be obligated to effect any Long-Form Registration within
one-hundred eighty (180) days after the effective date of a previous Long-Form
Registration. The Company may postpone for up to one-hundred eighty (180) days
the filing or the effectiveness of a registration statement for a Demand
Registration if the Company by Special Board Vote determines that such Demand
Registration would reasonably be expected to have a material adverse effect on
any proposal or plan by the Company or any of its Subsidiaries to engage in any
acquisition of assets (other than in the ordinarycourse of business) or any
merger, consolidation, tender offer, reorganization or similar transaction;
provided that, in such event, the holders of Registrable Securities initially
requesting such Demand Registration shall be entitled to withdraw such request
and, if such request is withdrawn, such Demand Registration shall not count as
one of the permitted Demand Registrations hereunder and the Company shall pay
all Registration Expenses in connection with such registration. The Company may
delay a Demand Registration hereunder only once in any twelve-month period.
(vi) Selection of Underwriters. The holders of a
majority of the Registrable Securities included in any Demand
Registration/Long-Form Registration shall have the right to select the
investment banker(s) and manager(s) to administer the offering, subject to the
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Company's approval, by a majority vote of the Board, which shall not be
unreasonably withheld or delayed.
(vii) Other Registration Rights. The Company
represents and warrants that it is not a party to, or otherwise subject to, any
other agreement granting registration rights to any other Person with respect to
any securities of the Company. Except as provided in this Agreement, the Company
shall not grant to any Persons the right to request the Company to register any
Equity Interests of the Company without a Majority Vote; provided that the
Company may grant rights to other Persons to (A) participate in Piggyback
Registrations so long as such rights are subordinate to the rights of the
holders of Registrable Securities with respect to such Piggyback Registrations
as set forth in Sections 15(b)(iii) and 15(b)(iv) and (B) request registrations
so long as the holders of Registrable Securities are entitled to participate in
any such registrations with such Persons pro rata on the basis of the number of
shares owned by each such holder.
(b) Piggyback Registrations.
(i) Right to Piggyback. Whenever the Company proposes
to register any of its securities under the Securities Act (other than pursuant
to a Demand Registration or on Forms S-4 or S-8) and the registration form to be
used may be used for the registration of Registrable Securities (a "Piggyback
Registration"), the Company shall give prompt written notice to all holders of
Registrable Securities of its intention to effect such a registration and,
subject to the terms of Sections 15(b)(iii) and 15(b)(iv), shall include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within twenty (20) days after
the receipt of the Company's notice.
(ii) Piggyback Expenses. The Registration Expenses of
the holders of Registrable Securities shall be paid by the Company in all
Piggyback Registrations.
(iii) Priority on Primary Registrations. If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such registration (A) first, the securities the Company proposes to sell, (B)
second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basisof the number of shares owned by each such holder, and (C) third, other
securities requested to be included in such registration.
(iv) Priority on Secondary Registrations. If a
Piggyback Registration is an underwritten secondary registration on behalf of
holders of the Company's securities, and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering, the
Company shall include in such registration (A) first, the securities requested
to be included therein by the holders requesting such registration and the
Registrable Securities requested to be included in such registration, pro rata
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among the holders of such securities on the basis of the number of securities
owned by each such holder, and (B) second, other securities requested to be
included in such registration.
(v) Selection of Underwriters. If any Piggyback
Registration is an underwritten offering, the selection of investment banker(s)
and manager(s) for the offering must be approved by the holders of a majority of
the Registrable Securities included in such Piggyback Registration. Such
approval shall not be unreasonably withheld or delayed.
(vi) Other Registrations. If the Company has
previously filed a registration statement with respect to Registrable Securities
pursuant to Section 15(a) or pursuant to this Section 15(b), and if such
previous registration has not been withdrawn or abandoned, the Company shall not
file or cause to be effected any other registration of any of its equity
securities or securities convertible or exchangeable into or exercisable for its
equity securities under the Securities Act (except on Forms S-4 or S-8 or any
successor form), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of at least one-hundred eighty (180)
days has elapsed from the effective date of such previous registration.
(c) Holdback Agreements.
(i) Each holder of Registrable Securities shall not
effect any public sale or distribution (including sales pursuant to Rule 144) of
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven (7) days prior
to and the 90-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Securities are included (except as part of such underwritten
registration), unless the underwriters managing the Public Offering otherwise
agree.
(ii) The Company (A) shall not effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven (7) days prior
to and during the 90-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-8 or any successor form), unless the underwriters managing the Public
Offering otherwise agree, and (B) shall cause each holder of at least 5% (on a
fully-diluted basis) of its Common Stock, or any securities convertible into or
exchangeable or exercisable for Common Stock, purchased from the Companyat any
time after the date of this Agreement (other than in a Public Offering) to agree
not to effect any public sale or distribution (including sales pursuant to Rule
144) of any such securities during such period (except as part of such
underwritten registration, if otherwise permitted), unless the underwriters
managing the Public Offering otherwise agree.
(d) Registration Procedures. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall use its best efforts to
effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof (including the
registration of Warrants held by a holder of Registrable Securities requesting
registration as to which the Company has
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received reasonable assurances that only Registrable Securities shall be
distributed to the public), and pursuant thereto the Company shall as
expeditiously as possible:
(i) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents shall be subject to the review and comment of such counsel);
(ii) notify each holder of Registrable Securities of
the effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange 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 180 days 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 by the sellers thereof set forth in such registration statement;
(iii) furnish to each seller of Registrable
Securities such number of copies of such registration statement, each amendment
and supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such seller
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;
(iv) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be required
to (A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 15(d)(iv), (B) subject
itself to taxation in any such jurisdiction or (C) consent to general service of
process in any such jurisdiction);
(v) notify each seller of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and, at the request of any such seller, the Company
shall prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
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(vi) cause all such Registrable Securities to be
listed on each securities exchange on which similar securities issued by the
Company are then listed and, if not so listed, to be listed on the NASD
automated quotation system as such with respect to such Registrable Securities
with the NASD;
(vii) provide a transfer agent and registrar for all
such Registrable Securities not later than the effective date of such
registration statement;
(viii) enter into such customary agreements
(including underwriting agreements in customary form) and take all such other
actions as the holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities (including effecting a stock
split or a combination of shares);
(ix) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors, employees and independent accountants to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(xi) permit any holder of Registrable Securities
which holder, in its sole and exclusive judgment, might be deemed to be an
underwriter or a controlling person of the Company, to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included;
(xii) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any common stock included in such registration statement for
sale in any jurisdiction, the Company shall use its best efforts promptly to
obtain the withdrawal of such order; and
(xiii) obtain a cold comfort letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by cold comfort letters as the holders
of a majority of the Registrable Securities being sold reasonably
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request (provided that such Registrable Securities constitute at least 10% of
the securities covered by such registration statement).
(e) Registration Expenses.
(i) All expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
fees and disbursements of custodians, and fees and disbursements of counsel for
the Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
as provided in this Agreement, except that the Company shall, in any event, pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance and the expenses and fees for listing the securities to be registered
on each securities exchange on which similar securities issued by the Company
are then listed or on the NASD automated quotation system.
(ii) In connection with each Demand Registration and
each Piggyback Registration, the Company shall reimburse the holders of
Registrable Securities included in such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities initially requesting such registration and for the
reasonable fees and disbursements of each additional counsel retained by any
holder of Registrable Securities for the purpose of rendering a legal opinion on
behalf of such holder in connection with any underwritten Demand Registration or
Piggyback Registration.
(iii) To the extent Registration Expenses are not
required to be paid by the Company, each holder of securities included in any
registration hereunder shall pay those Registration Expenses allocable to the
registration of such holder's securities so included, and any Registration
Expenses not so allocable shall be borne by all sellers of securities included
in such registration in proportion to the aggregate selling price of the
securities to be so registered.
(f) Indemnification.
(i) The Company agrees to indemnify, to the extent
permitted by law, each holder of Registrable Securities, its officers and
directors and each Person who controls suchholder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such holder expressly for
use therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering,
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the Company shall indemnify such underwriters, their officers and directors and
each Person who controls such underwriters (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
the holders of Registrable Securities.
(ii) In connection with any registration statement in
which a holder of Registrable Securities is participating, each such holder
shall furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, shall indemnify the
Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder; provided that the obligation
to indemnify shall be individual, not joint and several, for each holder and
shall be limited to the net amount of proceeds received by such holder from the
sale of Registrable Securities pursuant to such registration statement.
(iii) Any Person entitled to indemnification
hereunder shall (A) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification (provided that the failure
to give prompt notice shall not impair any Person's right to indemnification
hereunder to the extent such failure has not prejudiced the indemnifying party)
and (B) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party. If
such defense is assumed, the indemnifying party shall not be subject to any
liability for any settlement made by the indemnified party without its consent
(but such consent shall not be unreasonably withheld). An indemnifying party who
is not entitled to, or elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
(iv) The indemnification provided for under this
Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified partyor any officer, director or
controlling Person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
the Company's indemnification is unavailable for any reason.
(g) Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
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powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification obligations to the Company or the underwriters with respect
thereto, except as otherwise provided in Section 15(f).
Section 16. Restrictive Legend; Additional Restriction on
Transfer. Each certificate evidencing Securities and each certificate issued in
exchange for or upon the transfer of any Securities (if such Securities remain
Stockholder Shares after such transfer) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS PURSUANT TO A STOCKHOLDERS AGREEMENT,
DATED AS OF NOVEMBER 29, 1999 AMONG THE ISSUER OF SUCH
SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S
STOCKHOLDERS, AS AMENDED AND MODIFIED FROM TIME TO TIME. A
COPY OF SUCH STOCKHOLDERS AGREEMENT SHALL BE FURNISHED WITHOUT
CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST."
The Company shall imprint such legend on certificates evidencing Securities
outstanding as of the date hereof. The legend set forth above shall be removed
from the certificates evidencing any Securities if such Securities cease to be
subject to this Agreement.
Section 17. Transfer. Prior to transferring any Securities
(other than pursuant to a Public Sale or a Board Approved Sale) to any Permitted
Transferee or any Person who is not a Permitted Transferee as contemplated by
Section 4(c), the Transferring Stockholder shall cause the prospective
transferee to be bound by this Agreement or the applicable provisions of this
Agreement and to execute and deliver to the Company and the other Stockholders a
counterpart of this Agreement.
Section 18. Definitions.
"Acceptance Notice" has the meanings set forth in Sections
5(c) and 5(d).
"Acquisition Company" has the meaning set forth in the
preface.
"Acquisition Company Common Put" has the meaning set forth in
Section 8(a).
"Acquisition Company Directors" has the meaning set forth in
Section 3(a)(ii)(B).
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"Acquisition Company First Minimum Share Amount" means shares
of Common Stock (including shares of Common Stock underlying the Warrants) in an
amount equal to 25% of the number of shares of Common Stock (including shares of
Common Stock underlying the Warrants) that the Acquisition Company held
immediately after the Closing.
"Acquisition Company Independent Director" has the meaning set
forth in Section 3(a)(ii)(C).
"Acquisition Company Put Notice" has the meaning set forth in
Section 8(a).
"Acquisition Company Second Minimum Share Amount" means shares
of Common Stock (including shares of Common Stock underlying the Warrants) in an
amount equal to 50% of the number of shares of Common Stock (including shares of
Common Stock underlying the Warrants) that the Acquisition Company held
immediately after the Closing.
"Affiliate" means, when used with reference to a specified
Person, any Person that directly or indirectly controls or is controlled by or
is under common control with the specified Person. As used in this definition,
"control" (including, with its correlative meanings, "controlled by" and "under
common control with") shall mean possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise); provided, however, unless otherwise specified herein, the term
"Affiliate" shall not include the limited partners of the Acquisition Company or
the officers or directors of any portfolio company of Affiliates of Acquisition
Company (other than employees of Affiliates of Acquisition Company).
"Agreement" has the meaning set forth in the preface.
"Annual Operating Plan" means the annual operating plan for
the calendar year 2000, which has been delivered to and acknowledged by
Acquisition Company prior to the date hereof, and, for each 12-month period
thereafter, the annual budget and business plan delivered to Acquisition Company
pursuant to Section 12(d) and approved by a Special Board Vote; provided,
however, that if a Special Board Vote is not obtained, then the Annual Operating
Plan shall be the Annual Operating Plan that last obtained a Special Board Vote
or, if no annual budget and business plan obtained a Special Board Vote, then
the aforementioned annual operating plan for the calendar year 2000.
"Applicable Percentage"has the meaning set forth in Section
8(a)(i).
"Appraiser" has the meaning set forth in Section 8(e).
"Board" has the meaning set forth in Section 3(a)(i).
"Board Approved Sale" means any Sale of the Company approved
by a Special Board Vote at such time as at least one Acquisition Company
Director and one Voting Trust Director are serving on the Board and each such
Director votes in favor of such Sale of the Company.
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"Call" has the meaning set forth in Section 10(a).
"Call Closing" has the meaning set forth in Section 10(b).
"Call Notice" has the meaning set forth in Section 10(a).
"Call Option" has the meaning set forth in Schedule IV
attached hereto.
"Call Price" means, with respect to the Preferred Stock, the
aggregate Redemption Price of the Preferred Stock owned by Acquisition Company
and, with respect to the Common Stock and Warrants held by Acquisition Company,
the Fair Market Value.
"Cause" means the termination of employment of any Management
Stockholder who is an employee of the Company or any of its Subsidiaries due to
(a) the willful failure by such Management Stockholder to perform such
Management Stockholder's duties or breach of such Management Stockholder's
employment agreement, in each case to the extent such failure or breach has not
been cured within 10 days after a written demand for performance is delivered to
such Management Stockholder by the Board, which demand specifically identifies
the manner in which the Board believes that such Management Stockholder has not
performed such Management Stockholder's duties or breached such Management
Stockholder's employment agreement, (b) such Management Stockholder's willful
failure to comply in any material respect with the lawful directive of the Board
or such Management Stockholder's superior officer(s), (c) the engaging by such
Management Stockholder in gross negligence or the willful engaging by such
Management Stockholder in any other conduct, in each case, which is demonstrably
and materially injurious to the Company or its Subsidiaries, monetarily or
otherwise, or (d) the conviction of such Management Stockholder of (i) a felony
or crime involving dishonesty or fraud or (ii) a crime involving moral turpitude
which would materially injure relationships with customers, suppliers or
employees of the Company or otherwise cause a material injury to the Company.
"Certificate of Incorporation" means the amended and restated
certificate of incorporation of the Company in effect immediately after the
Closing.
"Closing" means the Effective Time of the Merger as defined in
the Merger Agreement.
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Common Put" has the meaning set forth in Section 8(a).
"Common Stock" has the meaning set forth in the recitals.
"Company" has the meaning set forth in the preface.
"Company Exercise Period" has the meaning set forth in Section
5(c).
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"Company Option Plans" means any of the Company's stock option
plans existing immediately prior to the Closing.
"Company-paid Long-Form Registrations" has the meaning set
forth in Section 15(a)(ii).
"Company Refusal Exercise Period" has the meaning set forth in
Section 6(a)(iii).
"Control Event" has the meaning set forth in Section 3(e)(ii).
"Credit Agreement" means that certain Credit Agreement, dated
the date of the completion of the Offer (as such term is defined in the Merger
Agreement), among the Company and the other parties thereto, and any
refinancings thereof approved by Special Board Vote.
"Cured" shall have the meaning set forth in Section 3(e)(iv).
"Demand Registrations" has the meaning set forth in Section
15(a)(i)
"EBITDA" means the consolidated net income of the Company and
its Subsidiaries for the relevant period:
(a) plus (without duplication and to the extent involved in
computing such consolidated net income) (i) the sum of (A) the interest
expense of the Company and its Subsidiaries for such period, on a
consolidated basis, including, without limitation, (1) amortization of
debt discount, (2) the net cost under interest rate contracts
(including amortization of debt discount), (3) the interest portion of
any deferred payment obligation and (4) accrued interest, plus (B) the
interest component of any liability in respect of a capital lease that
would at such time be required to be capitalized on the consolidated
balance sheet of the Company and its Subsidiaries in accordance with
GAAP, paid or accrued or scheduled to be paid or accrued by the Company
and its Subsidiaries during such period, plus (C) the aggregate amount
of all fees, including but not limited to facility fees, agency fees,
letter of credit fees and commitment fees incurred by the Company and
its Subsidiaries during such period in respect of indebtedness,
determined on a consolidated basis in accordance with GAAP plus (D)
management fees (whether payable upon consummation of the Merger or
thereafter) and other related transaction fees in connection with the
Merger; provided,however, that any dividends with respect to the
Preferred Stock shall not be considered for purposes of this
definition, (ii) provision for taxes on income or profits and (iii)
non-cash employee and officer stock and stock option compensation
expenses, depreciation, amortization (including amortization of
goodwill and other intangibles), and other non-cash items, and
(b) minus (without duplication and to the extent involved in
computing such consolidated net income) (i) any net gains (or plus net
losses), together with any transaction costs and sales and transfer
taxes and similar taxes in connection with any sale of assets other
than sales of assets acquired and held for resale in the ordinary
course of business, (ii) any
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non-cash or extraordinary gains (or plus losses) (iii) the amount of
any cash payments related to non-cash charges and benefits that were
added back or deducted in determining EBITDA in any prior period and
(iv) interest income.
provided, however, that the net income (loss) of any other Person
acquired after the date of this Agreement in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded (to the extent otherwise included).
All of the foregoing will be determined in accordance with
GAAP.
"Equity Interests" means capital stock of the Company and all
warrants, options or other rights to acquire capital stock of the Company
(including any debt security that is convertible into or exchangeable for
capital stock of the Company).
"Existing Employment Arrangements" has the meaning set forth
in Section 7(e)(v).
"Existing Options" means options to purchase shares of Common
Stock of the Company outstanding immediately after the Closing to the extent
such options were outstanding immediately prior to the Closing.
"Fair Market Value" has the meaning set forth in Section 8(e).
"First Refusal Right Notice" has the meaning set forth in
Section 6(a)(i).
"Foundation" has the meaning set forth in the preface.
"GAAP" means generally accepted accounting principles in the
United States, consistently applied.
"Internal Rate of Return" means the annual interest rate
which, when used to calculate the net present value of investment inflows and
outflows as of the date of determination based upon the actual timing (except as
provided below) of investment inflows and outflows, causes such net present
value to equal zero. In making such a determination, the value of freely
tradeable marketable securities shall be the average of the closing prices of
the sales of such securities on all securities exchanges on which such
securities may at the time be listed, or, if there have been nosales on any such
exchange on any day, the average of the
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45
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 PM,
Eastern Time, or, if on any day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days, consisting of the day on which the Internal
Rate of Return is being determined and the 20 consecutive trading days prior to
such day.
"Invested Capital" has the meaning set forth in Section
3(e)(ii)(A).
"Issuance" has the meaning set forth in Section 2(a).
"JG Common Put Date" has the meaning set forth in Section
9(a).
"JG Put" has the meaning set forth in Section 9(a).
"JG Put Closing" has the meaning set forth in Section 9(c).
"JG Put Notice" has the meaning set forth in Section 9(a).
"Key Persons" has the meaning set forth in Section
3(e)(ii)(F).
"Liquidation Value" means the original cost of the Preferred
Stock as of the Closing.
"Long-Form Registrations" has the meaning set forth in Section
15(a)(i).
"Majority Holders" has the meaning set forth in Section 8(e).
"Majority Vote" means the affirmative vote of the holders of a
majority of the Common Stock, including the affirmative vote of both Acquisition
Company and the Voting Trust; provided that (a) the affirmative vote of
Acquisition Company shall no longer be required if Acquisition Company owns less
than the Preferred Minimum Threshold and owns less than 25% of the Common Stock
(including shares of Common Stock underlying the Warrants) that it held
immediately after the Closing and (b) the affirmative vote of the Voting Trust
shall no longer be required if the Management Stockholders own less than 50% of
the Common Stock (including shares of Common Stock underlying Existing Options)
that they owned immediately after the Closing.
"Management Option Plans" means Company Option Plans and the
New Option Plan.
"Management Stockholders" has the meaning set forth in the
preface.
"Management Warrant Tag-along Notice" has the meaning set
forth in Section
7(c)(ii).
"Merger" has the meaning set forth in the Merger Agreement.
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46
"Merger Agreement" initially means that certain draft merger agreement
to be entered into by and among the Company, Acquisition Company and Merger
Subsidiary, the form of which has been submitted to a special committee of the
Board on the date hereof and upon execution by all parties to such draft merger
agreement or any definitive merger agreement among such parties, "Merger
Agreement" shall refer to such executed merger agreement.
"Merger Subsidiary" has the meaning set forth in the Merger Agreement.
"New Options" means those options issued under the New Option Plan.
"New Option Plan" means the Company's stock option plans adopted by the
Board immediately after the Closing, the terms of which are set forth on
Schedule V attached hereto.
"Notice of Acceptance" has the meaning set forth in Section 6(a)(iii).
"Notice of Withdrawal" has the meaning set forth in Section 8(c)
"Offer to Sell" has the meaning set forth in Section 5(b).
"Offer for Sale" has the meaning set forth in Section 6(a)(ii).
"Offered Price" has the meaning set forth in Section 5(a).
"Offered Securities" has the meaning set forth in Section 5(a).
"Offered Securities Closing" has the meaning set forth in Section 5(e).
"Offered Stock" has the meaning set forth in Section 6(a)(i).
"Offered Stock Closing" has the meaning set forth in Section 6(a)(v).
"Option Plans" has the meaning set forth in Section 3(d)(iv).
"Permitted Transfer" means (a) with respect to Acquisition Company:
Transfers (i) to and among its Affiliates and officers and employees of such
Affiliates (and, after a Qualified IPO, to the limited partners of any direct or
indirect parent or Affiliate of Acquisition Company), without restriction
(provided that such transfers do not violate federal or state securities laws);
(ii) to family and family trusts of the Persons referred to in clause (a)(i)
above (provided that such transfers do not violate federal or state securities
laws); (iii) pursuant to a Public Sale, a Tag-along Right, a Warrant Tag-along
Right, the Common Put or the Call; or (iv) pursuant to a Board Approved Sale;
(b) with respect to the Foundation: Transfers (i) to and among its Affiliates,
employees and directors (other than any Affiliate, employee or director who is
one of the Top Executives or other members of management of the Company),
without restriction (provided that such transfers do not violate federal or
state securities laws); (ii) to family and family trusts of the Persons referred
to in clause (b)(i) above (provided that such transfers do not violate federal
or state securities laws); (iii) pursuant
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to a Public Sale, a Tag-along Right, a Warrant Tag-along Right, or the Common
Put; and (iv) pursuant to a Board Approved Sale; and (c) with respect to
Management Stockholders: Transfers (i) upon the death of the holder and certain
other estate planning transfers during the holder's lifetime and to family and
family trusts of such Management Stockholder (provided that such transfers do
not violate federal or state securities laws and such transferees agree to be
bound by the terms hereof); (ii) pursuant to a Public Sale, a Tag-along Right, a
Warrant Tag-along Right, or the Common Put; (iii) pursuant to a Board Approved
Sale; (iv) pursuant to the Call Option or the Put Option; and (v) to other
Management Stockholders (provided that such transfers do not violate federal or
state securities laws); and (d) with respect to any Stockholder: Transfers to
the Company or a Wholly Owned Subsidiary.
"Permitted Transferee" means any Person (other than the Company or a
Wholly Owned Subsidiary) to whom a Stockholder Transfers Stockholder Shares or
Warrants in a Permitted Transfer, other than pursuant to a Public Sale or Board
Approved Sale, and who agrees to become a party to, and be bound by and subject
to, all of the terms and conditions set forth (a) herein to which such
Stockholder was bound immediately prior to such Transfer and (b) in the case of
a Management Stockholder, the Voting Trust Agreement.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Piggyback Registration" has the meaning set forth in Section 15(b)(i).
"Preemptive Right" has the meaning set forth in Section 2(a).
"Preemptive Right Notice" has the meaning set forth in Section 2(a).
"Preemptive Right Period" has the meaning set forth in Section 2(a).
"Preferred Minimum Threshold" means a number of shares of Preferred
Stock representing 10% of the number of shares of Preferred Stock held by
Acquisition Company immediately after the Closing (taking into account stock
splits, recapitalizations and other similar events).
"Preferred Sale Notice" has the meaning set forth in Section 7(b).
"Preferred Stock" has the meaning set forth in the recitals.
"Preferred Tag-along Notice" has the meaning set forth in Section 7(b).
"Preferred Tag-along Right" has the meaning set forth in Section 7(b).
"Preferred Transferor" has the meaning set forth in Section 7(b).
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48
"Price" has the meaning set forth in Section 6(a)(i).
"Public Offering" means the sale in an underwritten public offering
registered under the Securities Act of Equity Interests of the Company.
"Public Sale" means any sale pursuant to a registered public offering
under the Securities Act or any sale to the public under Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"Purchaser Stockholder" has the meaning set forth in Section 6(a)(iv).
"Purchasing Stockholder" has the meaning set forth in Section 5(d).
"Put Closing" has the meaning set forth in Section 8(b).
"Put Option" has the meaning set forth in Schedule V attached hereto.
"Put Shares" has the meaning set forth in Section8(c).
"Qualified IPO" means one or more Public Offerings of Common Stock,
other than an offering made solely in connection with a business acquisition or
combination or an employee benefit plan, but only if the aggregate gross
proceeds received by the Company and/or its stockholders in such Public Offering
or Offerings in the aggregate are in excess of $100 million.
"Redemption Price" shall mean with respect to a share of Preferred
Stock, a price equal to the Liquidation Value thereof, together with any and all
accrued but unpaid dividends thereon; provided, however, in the event a
redemption of Preferred Stock occurs prior to the fifth anniversary of the
Closing Date, the Redemption Price shall be equal to the Redemption Price set
forth in Part II Section 5(a) of the Certificate of Incorporation.
"Registrable Securities" means (a) any shares of Common Stock held by
the Stockholders immediately following the Closing, (b) any shares of Common
Stock issued upon conversion of Preferred Stock, (c) any shares of Common Stock
issued pursuant to the exercise of vested options under the Option Plans; (d)
any shares of Common Stock issued pursuant to the exercise of the Warrants, and
(e) the Warrants. As to any particular Registrable Securities, such securities
will cease to be Registrable Securities when they have been (i) Transferred in a
Public Sale or (ii) otherwise transferred and new certificates for them not
bearing the legend set forth in Section 16 hereof shall have been delivered by
the Company and subsequent disposition of such securities shall not require
registration or qualification of such securities under the Securities Act or
such state securities or blue sky laws then in force. For purposes of this
Agreement, a Person will be deemed to be a holder of Registrable Securities
whenever such Person has the right to acquire such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been affected.
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49
"Registration Expenses" has the meaning set forth in Section 15(e)(i).
"Reoffered Securities" has the meaning set forth in Section 5(d).
"Reoffered Stock" has the meaning set forth in Section 6(a)(iv).
"Replacement" has the meaning set forth in Section 3(e)(ii)(F).
"Sale Notice" has the meaning set forth in Section 7(a).
"Sale of the Company" means (a) a sale of all or substantially all of
the consolidated assets of the Company or (b) the transfer or other disposition
of more than 50% of the outstanding Common Stock of the Company, in each case,
in a single transaction or series of related transactions, whether accomplished
by stock purchase, asset purchase, merger, recapitalization, reorganization or
other transaction.
"Securities" has the meaning set forth in the recitals.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Selling Holder" has the meaning set forth in Section 5(a).
"Short-Form Registrations" has the meaning set forth in Section
15(a)(i).
"Special Board Vote" means the approval of at least a majority of the
Board, including the affirmative vote of at least one Acquisition Company
Director so long as Acquisition Company owns at least the Preferred Minimum
Threshold and the Acquisition Company Second Minimum Share Amount, and at least
one Voting Trust Director, so long as the Management Stockholders beneficially
own a number of shares of Common Stock (including shares of Common Stock
underlying Existing Options) that is at least 662/3% of the shares of Common
Stock (including shares of Common Stock underlying Existing Options) they held
in the aggregate immediately after the Closing.
"Special Foundation Transfer" means a Transfer by the Foundation of its
Securities (a) to any other Person to preserve the Foundation's tax status as a
private charitable foundation or to avoid adverse tax consequences, including
without limitation, any excess business holding tax and (b) for a qualified
purpose as described in Section 501(c)(3) of the Code.
"Special Foundation Transfer Without Consideration" means a
Transfer by the Foundation without consideration for a qualified purpose as
described in Section 501(c)(3) of the Code.
"Stockholder" and "Stockholders" have the meaning set forth in the
preface.
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50
"Stockholder Exercise Period" has the meaning set forth in Section
5(d).
"Stockholder Put" has the meaning set forth in Section 8(a).
"Stockholder Put Notice" has the meaning set forth in Section 8(a).
"Stockholder Refusal Exercise Period" has the meaning set forth in
Section 6(a)(iv).
"Stockholder Shares" means (a) any Common Stock purchased or otherwise
acquired by any Stockholder, (b) any capital stock or other equity securities
issued or issuable directly or indirectly with respect to the Common Stock
referred to in clause (a) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization and (c) any other shares of any class or series of
capital stock of the Company held by a Stockholder; provided that, for purposes
of Section 3 hereof, Stockholder Shares shall not include any non-voting stock.
As to any particular shares constituting Stockholder Shares, such shares shall
cease to be Stockholder Shares when they have been sold in a Public Sale.
"Stockholders" has the meaning set forth in the preface.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (a) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (b) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
the limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing member or general partner of
such limited liability company, partnership, association or other business
entity.
"Tag-along Call" has the meaning set forth in Section 7(c)(ii).
"Tag-along Notice" has the meaning set forth in Section 7(a).
"Tag-along Preferred Stockholders" has the meaning set forth in Section
7(b).
"Tag-along Right" has the meaning set forth in Section 7(a).
"Tag-along Stockholders" has the meaning set forth in Section 7(a).
"Tag-along Warrant Holders" has the meaning set forth in Section
7(c)(i).
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"Ten-day Period" has the meaning set forth in Section 7(e).
"Third-party Purchase" has the meaning set forth in Section 8(d).
"Top Executives" means the five most highly compensated executive
officers of the Company, including, in any event, Xxxxx X. Xxxxxxx, Xxxxx X.
Xxxxx, Xxxxxx X. Xxxxx, Xxxx X. Xxxxxxxx and Xxxx Xxxxxx.
"Total Net Debt" has the meaning set forth in Schedule V attached
hereto.
"Transfer" means any voluntary or involuntary, direct or indirect,
sale, transfer, conveyance, assignment, pledge, hypothecation, gift, delivery or
other disposition and, with respect to Transfers of Common Stock by the
Foundation or any Management Stockholder, shall include the certificates issued
pursuant to the Voting Trust.
"Transfer Notice" has the meaning set forth in Section 5(a).
"Transferring Holder" has the meaning set forth in Section 6(a)(i).
"Transferring Stockholder" has the meaning set forth in Section 7(a).
"Valued Securities" has the meaning set forth in Section 8(e).
"Vestar" means Vestar Capital Partners IV, L.P.
"Voting Trust" means the voting trust established by the Voting Trust
Agreement.
"Voting Trust Agreement" means the Voting Trust Agreement, dated the
date of the Closing, among certain stockholders of the Company and the Company.
"Voting Trust Directors" has the meaning set forth in Section
3(a)(ii)(A).
"Voting Trust Independent Director" has the meaning set forth in
Section 3(a)(ii)(C).
"Warrant Sale Notice" has the meaning set forth in Section 7(c)(i).
"Warrant Tag-along Notice" has the meaning set forth in Section
7(c)(i).
"Warrant Tag-along Right" has the meaning set forth in Section 7(c)(i).
"Warrant Transferor" has the meaning set forth in Section 7(c)(i).
"Warrants" has the meaning set forth in the recitals.
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52
"Wholly Owned Subsidiary" means a corporation, limited liability
company, partnership, association or other business entity wholly owned
(exclusive of nominee shares or director qualifying shares), directly or
indirectly, by the Company.
"Withdrawn Put" has the meaning set forth in Section 8(c)
"Withdrawn Put Notice" has the meaning set forth in Section 9(b).
Section 19. Calculation of Percentages. When calculating the percentage
of Common Stock owned by any Stockholder for any purpose hereunder, all shares
of Common Stock underlying Existing Options and the Warrants shall be included
whether or not any of the Existing Options or Warrants have been exercised or
are exercisable, the certificates issued (including subsequent issuances)
pursuant to the Voting Trust Agreement shall be treated as Common Stock and
subject to all the rights and obligations included herein and the shares of
Common Stock owned by the Management Stockholders shall include the shares of
Common Stock held by the Voting Trust.
Section 20. Transfers in Violation of Agreement. Any Transfer or
attempted Transfer of any Securities in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares or Warrants
as the owner of such shares for any purpose.
Section 21. Effectiveness and Termination. This Agreement shall be
binding upon (i) Acquisition Company when executed by Acquisition Company and
each of the Management Stockholders listed on the signature pages hereto, (ii)
each Management Stockholder when executed (or when a joinder to this Agreement
is executed) by such Management Stockholder and by Acquisition Company, and
(iii) each other party when executed by such party. All rights and obligations
under this Agreement shall come into effect immediately after the Closing;
provided however, that until such time as the Foundation has executed this
Agreement, the Foundation shall have no rights or obligations hereunder and the
provisions hereof shall be reformed, construed and enforced in a manner to give
full force and effect to the rights and obligations of the other parties hereto
as if the Foundation was not a party to this Agreement. This Agreement shall
terminate on the first to occur of the Sale of the Company in which Acquisition
Company Transfers all of its Securities or other securities of the Company, the
consummation of the Call, and (c) the termination of the Merger Agreement in
accordance with its terms, and (d) December 29, 1999, if the Merger Agreement
has not been executed on or before such date; provided, however, that the
provisions of Section 15(f) shall survive the termination of this Agreement
indefinitely.
Section 22. Amendment and Waiver. Except as otherwise provided herein,
no modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company and the holders of 66
2/3% of each class of Equity Interests; provided that in the event that such
modification, amendment, action or waiver (or any action with the effect of
amending, modifying or waiving) would adversely affect Acquisition Company, the
Management Stockholders or the Foundation in a manner different than the other
Stockholders or otherwise
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53
reduce or diminish any rights that are applicable to Acquisition Company, the
Management Stockholders or the Foundation unless the same rights applicable to
the other Stockholders are reduced or diminished in the same manner, then such
modification, amendment or waiver will require the consent of Acquisition
Company, the Management Stockholders and/or the Foundation, as applicable.
Notwithstanding anything herein to the contrary, from the date hereof until the
Closing, any amendment, modification or waiver made in accordance with the terms
of this Section 22 shall require the affirmative approval of Acquisition
Company. The failure of any party to 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 such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
Section 23. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
Section 24. Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
Section 25. Successors and Assigns. Except as otherwise provided herein
and subject to Sections 4(c) and 17 hereof, this Agreement shall bind and inure
to the benefit of and be enforceable by the Company and its successors and
assigns and the Stockholders and any subsequent holders of Stockholder Shares
and the respective successors and assigns of each of them, so long as they own
Stockholder Shares.
Section 26. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
Section 27. Remedies. The Company, Acquisition Company, the Management
Stockholders and the Foundation shall be entitled to enforce their rights under
this Agreement specifically, to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights existing in their
favor. The parties hereto agree and acknowledge that money damages would not be
an adequate remedy for any breach of the provisions of this Agreement and that
the Company, any of Acquisition Company, the Management Stockholders or the
Foundation may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief
(without posting a bond or other security) in order to enforce or prevent any
violation of the provisions of this Agreement.
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54
Section 28. Notices. Any notice provided for in this Agreement shall be
in writing and shall be either personally delivered, or sent by certified mailed
(return receipt requested) or sent by reputable overnight courier service
(charges prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the schedules hereto and to any subsequent
holder of Stockholder Shares subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices shall be deemed to have been given hereunder when
delivered personally, received by certified mail and one day after deposit with
a reputable overnight courier service. The Company's address is:
Xxxxxxx Corporation
0000 Xxxxxxxxxx Xxxxxx
P. O. Box 22970
Rochester, N.Y. 14692
Attention: Secretary
with copies to: (which shall not constitute notice to the Company)
Vestar Capital Partners
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, X.X. 00000
Attention: Sander X. Xxxx
and
Xxxxxxxx & Xxxxx
000 00xx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
and
Gleason Foundation
0000 Xxxxxxxxxx Xxxxxx
P. O. Box 22970
Rochester, N.Y. 14692-2970
Attention: Secretary
Section 29. GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF DELAWARE
SHALL GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE
COMPANY AND ITS STOCKHOLDERS. ALL OTHER ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS AGREEMENT AND
THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY
CHOICE OF
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55
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE.
Section 30. Business Days. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in New York City, the time period shall automatically be extended to the
Business Day immediately following such Saturday, Sunday or legal holiday.
Section 31. Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
Section 32. Expenses. The Company agrees to pay, and hold each of
Acquisition Company, the Management Stockholders and the Foundation harmless
against liability for the payment of, (a) their respective fees and expenses
(including the fees and expenses of their respective counsel and other advisors)
arising in connection with the preparation, execution, interpretation,
administration, and monitoring of, and enforcement of its rights under this
Agreement, (b) the fees and expenses incurred with respect to any amendments or
waivers (whether or not the same become effective) under or in respect of this
Agreement and (c) stamp and other taxes and filing fees which may be payable in
respect of the execution and delivery of this Agreement or conversion of
Stockholder Shares from time to time.
Section 33. Further Assurances. In connection with any Sale of the
Company structured to achieve pooling of interest accounting treatment, the
Stockholders will take such actions as reasonably requested by the Board in
order to achieve and maintain pooling of interests accounting treatment.
Section 34. Construction. References herein to this Agreement and any
other agreement shall be references to such agreement, as amended, modified,
supplemented or waived from time to time.
[END OF PAGE LEFT INTENTIONALLY BLANK]
[SIGNATURE PAGES FOLLOW]
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56
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement on the day and year first above written.
XXXXXXX CORPORATION
-------------------------------
Name:
Title:
TORQUE ACQUISITION CO., L.L.C.
-------------------------------
Name:
Title:
MANAGEMENT STOCKHOLDERS:
-------------------------------
Xxxxx X. Xxxxxxx
-------------------------------
Xxxxx X. Xxxxxxx
-------------------------------
Xxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx
-------------------------------
Xxxx X. Xxxxxxxx
-------------------------------
Xxxx X. Xxxxxx
57
----------------------------------------------------
Xxxx X. Xxxxxxxx, Custodian for Xxxxx Xxxxxxxx under
the New York Uniform Gift to Minors Act
----------------------------------------------------
Xxxx X. Xxxxxxxx, Custodian for Xxxxxxxxx X. Xxxxxxxx
under the New York Uniform Gift to Minors Act
The GST Exempt Trust for the benefit of Xxxxx X.
Xxxxxxx under Article Third (F) of the Trust under
Agreement dated March 8, 1989, with Xxxxxxxx X.
Xxxxxxx
----------------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Successor Trustee
The Non-Exempt Trust for the benefit of Xxxxx X.
Xxxxxxx under Article Third (F) of the Trust under
Agreement dated March 8, 1989, with Xxxxxxxx X.
Xxxxxxx
----------------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Successor Trustee
----------------------------------------------------
Xxxx X. Xxxxxxx
58
XXXXXXX FOUNDATION
By:
--------------------------------------------------
Name:
Title:
THE VOTING TRUST
By:
--------------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Voting Trustee
By:
--------------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Voting Trustee
By:
--------------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Voting Trustee
[Signature Page to Stockholders Agreement]
59
Acceptance Notice ......................................................... 11
Acquisition Company ....................................................... 1
Acquisition Company Directors ............................................. 3
Acquisition Company First Minimum Share Amount ............................ 36
Acquisition Company Independent Director .................................. 3
Acquisition Company Second Minimum Share Amount ........................... 36
Affiliate ................................................................. 36
Agreement ................................................................. 1
Annual Operating Plan ..................................................... 36
Appraiser ................................................................. 19
Board ..................................................................... 3
Board Approved Sale ....................................................... 37
Call ...................................................................... 22
Call Closing .............................................................. 22
Call Notice ............................................................... 22
Call Option ............................................................... 37
Call Price ................................................................ 37
Cause ..................................................................... 37
Closing ................................................................... 37
Common Stock .............................................................. 1
Company ................................................................... 1
Company Exercise Period ................................................... 11
Company Option Plans ...................................................... 38
Company Refusal Exercise Period ........................................... 13
Company-paid Long-Form Registrations ...................................... 28
Control Event ............................................................. 8
Credit Agreement .......................................................... 38
Cured ..................................................................... 9
Demand Registrations ...................................................... 27
Equity Interests .......................................................... 39
Existing Employment Arrangements .......................................... 6
Existing Options .......................................................... 39
Fair Market Value ......................................................... 18
First Refusal Right Notice ................................................ 12
Foundation ................................................................ 1
Internal Rate of Return ................................................... 39
Invested Capital .......................................................... 8
Issuance .................................................................. 2
JG Put Closing ............................................................ 21
Key Persons ............................................................... 8
Liquidation Value ......................................................... 40
Long-Form Registrations ................................................... 27
Majority Holders .......................................................... 19
Majority Vote ............................................................. 40
Management Option Plans ................................................... 40
Management Stockholders ................................................... 1
60
Management Warrant Tag-along Notice ....................................... 15
New Option Plan ........................................................... 41
Notice of Acceptance ...................................................... 13
Offer for Sale ............................................................ 12
Offer to Sell ............................................................. 11
Offered Price ............................................................. 11
Offered Securities ........................................................ 11
Offered Securities Closing ................................................ 11
Offered Stock ............................................................. 12
Offered Stock Closing ..................................................... 13
Option Plans .............................................................. 6
Permitted Transfer ........................................................ 41
Permitted Transferee ...................................................... 42
Person .................................................................... 42
Piggyback Registration .................................................... 29
Preemptive Right .......................................................... 2
Preemptive Right Notice ................................................... 2
Preemptive Right Period ................................................... 2
Preferred Minimum Threshold ............................................... 42
Preferred Sale Notice ..................................................... 14
Preferred Stock ........................................................... 1
Preferred Tag-along Notice ................................................ 15
Preferred Tag-along Right ................................................. 15
Preferred Transferor ...................................................... 14
Price ..................................................................... 12
Public Offering ........................................................... 43
Public Sale ............................................................... 43
Purchaser Stockholder ..................................................... 13
Purchasing Stockholder .................................................... 11
Put Closing ............................................................... 17
Put Option ................................................................ 43
Put Shares ................................................................ 17
Qualified IPO ............................................................. 43
Redemption Price .......................................................... 43
Registrable Securities .................................................... 43
Registration Expenses ..................................................... 33
Reoffered Securities ...................................................... 11
Reoffered Stock ........................................................... 13
Replacement ............................................................... 8
Sale Notice ............................................................... 14
Sale of the Company ....................................................... 44
Securities ................................................................ 1
Securities Act ............................................................ 44
Selling Holder ............................................................ 11
Short-Form Registrations .................................................. 27
Special Board Vote ........................................................ 44
Special Foundation Transfer ............................................... 44
61
Special Foundation Transfer Without Consideration ......................... 44
Stockholder Exercise Period ............................................... 11
Stockholder Refusal Exercise Period ....................................... 13
Stockholder Shares ........................................................ 45
Stockholders .............................................................. 1
Subsidiary ................................................................ 45
Tag-along Notice .......................................................... 14
Tag-along Preferred Stockholders .......................................... 15
Tag-along Right ........................................................... 14
Tag-along Stockholders .................................................... 14
Tag-along Warrant Holders ................................................. 15
Ten-day Period ............................................................ 19
Third-party Purchase ...................................................... 18
Top Executives ............................................................ 46
Total Net Debt ............................................................ 46
Transfer .................................................................. 46
Transfer Notice ........................................................... 11
Transferring Holder ....................................................... 12
Transferring Stockholder .................................................. 14
Valued Securities ......................................................... 18
Vestar .................................................................... 46
Voting Trust .............................................................. 46
Voting Trust Agreement .................................................... 46
Voting Trust Directors .................................................... 3
Voting Trust Independent Director ......................................... 3
Warrant Sale Notice ....................................................... 15
Warrant Tag-along Notice .................................................. 15
Warrant Tag-along Right ................................................... 15
Warrant Transferor ........................................................ 15
Warrants .................................................................. 1
Withdrawn Put ............................................................. 18
Withdrawn Put Notice ...................................................... 21
