EXHIBIT 10.6
T.K.G. ACQUISITION CORP.
STOCKHOLDERS AGREEMENT
(COMMON STOCK AND PREFERRED STOCK)
Stockholders Agreement, dated as of this 29th day of February,
1996, by and among Warburg, Xxxxxx Ventures, L.P., a Delaware limited
partnership ("Warburg"); the individuals whose names and addresses appear from
time to time on Schedule I hereto (the "Management Investors"); the persons
whose names and addresses appear from time to time on Schedule II hereto (the
"Non-Management Investors," and, together with the Management Investors, the
"Third Party Investors" and, together with Warburg and the Management Investors,
the "Investors"); and T.K.G. Acquisition Corp., a Delaware corporation (the
"Company"). Certain terms used in this Agreement are defined in Section 8
hereof.
R E C I T A L S
---------------
WHEREAS, certain of the Investors, pursuant to the terms of certain
subscription agreements with the Company (collectively, the "Subscription
Agreements"), have agreed to purchase shares of the Common Stock, par value $.01
per share, of the Company (the "Common Stock") and the Series A 12%
Participating Convertible Preferred Stock, par value $1.00 per share, of the
Company (the "Preferred Stock"); and
WHEREAS, the Investors and the Company desire to promote their mutual
interests by agreeing to certain matters relating to the operations of the
Company and the disposition and voting of the shares of Common Stock and
Preferred Stock purchased by the Investors pursuant to the Subscription
Agreements, together with any other shares of Common Stock or Preferred Stock
acquired by them (other than shares of Common Stock issued under the T.K.G.
Acquisition Corp. 1996 Stock Incentive Plan (as it may be amended from time, the
"Stock Plan")) (collectively, the "Shares").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. COVENANTS OF THE PARTIES
------------------------
(a) Legends. The certificates evidencing the Shares acquired by the
-------
Investors pursuant to the Subscription Agreements or their permitted transferees
will bear the following legend reflecting the restrictions on the transfer of
such securities contained in this Agreement:
"The securities evidenced hereby are subject to the terms of that
certain Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, by and among the Company and certain
holders of the Common Stock and Preferred Stock, including certain
restrictions on transfer and rights of first refusal. A copy of such
Stockholders Agreement has been filed with the Secretary of the
Company and is available upon request."
(b) Election of Directors.
---------------------
(i) As of the date hereof, the Board of Directors of the Company (the
"Board") will consist of Xxxxxx X. Xxxxxxx ("Staniar"), Xxxx X. Xxxxx ("Xxxxx"),
Xxxx X. Xxxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx X. Xxxxxx and Xxxxxxx Xxx. From and
after the date hereof, the Investors and the Company shall take all action
within their respective power, including but not limited to, the voting of all
shares of capital stock of the Company owned by them, required to cause the
Board to consist of six members or such other number as the Board may from time
to time establish, and at all times throughout the term of this Agreement to
include (A) that number of Warburg Directors as shall constitute a majority of
the Board, or, at Warburg's written election, which election shall be
irrevocable, as shall constitute one director less than a majority of the Board,
(B) Staniar, who shall be entitled to be a member of the Board until termination
of his employment in accordance with the terms of the Staniar Employment
Agreement, and (C) Xxxxx, who shall be entitled to be a member of the Board
until termination of his employment in accordance with the terms of the Xxxxx
Employment Agreement.
(ii) From the later of the date on which the Company completes an Initial
Public Offering and the date (the "Lender Board Requirement Termination Date")
when the Company's lenders no longer require that Warburg Directors constitute a
majority of the Board: (i) for as long as Warburg owns beneficially at least 50%
of the outstanding shares of Common Stock or Preferred Stock, the Company and
each Investor will nominate and use its best efforts to have four Warburg
Directors elected to the Board, (ii) for as long as Warburg owns beneficially at
least 25% of the outstanding shares of Common Stock or Preferred Stock, the
Company and each Investor will nominate and use its best efforts to have three
Warburg Directors elected to the Board, (iii) for as long as Warburg owns
beneficially at least 15% of the outstanding shares of Common Stock or Preferred
Stock, the Company and each Investor will nominate and use its best efforts to
have two Warburg Directors elected to the Board and (iv) for as long as Warburg
owns beneficially at least 5% of the outstanding shares of Common Stock or
Preferred Stock, the Company and each Investor will nominate and use its best
efforts to have one Warburg Director elected to the Board.
2
(c) Replacement Directors. In the event that any Warburg Director is
---------------------
unable to serve, or once having commenced to serve, is removed or withdraws from
the Board (a "Withdrawing Director"), such Withdrawing Director's replacement
(the "Substitute Director") will be designated by Warburg. A Warburg Director
may be removed, with or without cause, by Warburg, and Warburg shall thereafter
have the right to nominate a replacement for such director. The Investors and
the Company agree to take all action within their respective power, including
but not limited to, the voting of all shares of capital stock of the Company
owned by them, to cause the election of such Substitute Director promptly
following his or her nomination pursuant to this Section 1(c).
(d) Subscription Right. If at any time after the date hereof, except
------------------
for (i) grants or issuances of equity securities pursuant to the Stock Plan or
any other incentive plan for the Company's or any of its Subsidiaries' directors
or employees (collectively, "Plan Stock") and (ii) securities issuable upon
exercise of previously issued warrants, options or other rights to acquire
equity securities or upon conversion of previously issued securities convertible
into equity securities, the Company proposes to sell equity securities of any
kind (the term "equity securities" shall include for these purposes any
warrants, options or other rights to acquire equity securities and debt
securities convertible into equity securities) of the Company, then, as to each
Investor who holds shares of capital stock of the Company, the Company shall:
(i) give written notice setting forth in reasonable detail (1)
the designation and all of the terms and provisions of the securities
proposed to be issued (the "Proposed Securities"), including, where
applicable, the voting powers, preferences and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof and interest rate and maturity; (2) the price and
other terms of the proposed sale of such securities; (3) the amount of
such securities proposed to be issued; and (4) such other information as
may be reasonably required in order to evaluate the proposed issuance;
and
(ii) offer to sell to each such Investor a portion of the
Proposed Securities equal to a percentage determined by dividing (x) the
number of shares of Preferred Stock then held by such Investor (and if no
shares of Preferred Stock are outstanding, then the number of shares of
Common Stock (other than Plan Stock)) by (y) the total number of shares
of Preferred Stock then outstanding (and if no shares of Preferred Stock
are outstanding, then the number of shares of Common Stock (other than
Plan Stock)).
3
Each such Investor must exercise its purchase rights hereunder within ten (10)
days after receipt of such notice from the Company. If all of the Proposed
Securities offered to such Investors are not fully subscribed by such Investors,
the remaining Proposed Securities will be reoffered to those Investors
purchasing their full allotment upon the terms set forth in this Section 1(d)
(with an allocation based on the respective percentages of the aggregate number
of shares of Preferred Stock held by such Investors and, if no shares of
Preferred Stock are outstanding, then of the aggregate number of shares of
Common Stock (other than Plan Stock)), until all such Proposed Securities are
fully subscribed for or until all such Investors have subscribed for all such
Proposed Securities which they desire to purchase, except that such Investors
must exercise their purchase rights within five days after receipt of all such
reoffers. To the extent that the Company offers two or more securities in
units, Investors must purchase such units as a whole and will not be given the
opportunity to purchase only one of the securities making up such unit.
Upon the expiration of the offering periods described above, the Company
will be free to sell such Proposed Securities that the Investors have not
elected to purchase during the ninety (90) days following such expiration on
terms and conditions no more favorable to the purchasers thereof than those
offered to such holders. Any Proposed Securities offered or sold by the Company
after such 90-day period must be reoffered to the Investors pursuant to this
Section 1(d). The election by an Investor not to exercise its subscription
rights under this Section 1(d) in any one instance shall not affect its right
(other than in respect of a reduction in its percentage holdings) as to any
subsequent proposed issuance. Any sale of such securities by the Company
without first giving the Investors the rights described in this Section 1(d)
shall be void and of no force and effect.
(e) Additional Investors. The parties hereto acknowledge that, subject
--------------------
to the terms hereof, certain employees of the Company or its Subsidiaries or
other investors may become shareholders of the Company after the date hereof and
that each such employee or other investor will be required, as a condition to
the issuance of shares of Common Stock or Preferred Stock to them, to execute a
Joinder Agreement in the form attached hereto as Exhibit A (the "Joinder
Agreement"). Upon execution of a Joinder Agreement, each such employee or other
investor shall be deemed to be a Management Investor (with respect to employees
of the Company or its Subsidiaries) or a Non-Management Investor (with respect
to additional investors who are not employees of the Company or its
Subsidiaries) under this Agreement and shall be entitled to all of the rights
and benefits afforded to, and shall be subject to all the obligations of, such
Investors hereunder.
4
2. TRANSFER OF STOCK
-----------------
(a) Resale of Securities. Without the approval of the Board, no Third
--------------------
Party Investor shall Transfer any Shares, or any beneficial interest therein,
other than in accordance with the provisions of this Section 2. Any Transfer or
purported Transfer made in violation of this Section 2 shall be null and void
and of no effect.
(b) Rights of First Refusal. No Third Party Investor shall Transfer
-----------------------
any Shares, or any beneficial interest therein (except (i)(x) to an Affiliate of
such Investor or to members of such Third Party Investor's immediate family or
trusts for the benefit of such Investor or such Third Party Investor's immediate
family, and (y) upon the death of any Management Investor, to his or her
respective executors, administrators, or testamentary trustees; to a corporation
or partnership, the sole stockholders or limited or general partners of which
include only such Management Investor and members of such Management Investor's
immediate family; a transfer from a Management Investor's trust or other
transferee back to such Management Investor; a transfer to the legal guardian of
a disabled Management Investor or of a Management Investor's disabled immediate
family member, provided in each instance in this clause (i) that such transferee
--------
executes and delivers to the Company and Warburg a Joinder Agreement, or (ii) to
Warburg or an Affiliate thereof), unless the Third Party Investor desiring to
make the Transfer (hereinafter referred to as the "Transferor") shall have first
made the offers to sell to the Company and then to Warburg as contemplated by
Section 2(c) through 2(i), and such offers shall not have been accepted.
(c) Offer by Transferor. Copies of the Transferor's offer shall be
-------------------
given to the Company and Warburg and shall consist of an offer to sell to the
Company or, failing its election to purchase, then to Warburg, all of the shares
then proposed to be transferred by the Transferor (the "Subject Shares")
pursuant to a bona fide offer of a third party, to which copies shall be
attached a statement of intention to Transfer to such third party, the name and
address of the prospective third party transferee, the number of shares of
Common Stock and/or Preferred Stock involved in the proposed Transfer and terms
of such Transfer.
(d) Acceptance of Offer. (i) Within 10 days after the receipt of the
-------------------
offer described in Section 2(c), the Company may, at its option, elect to
purchase all, but not less than all, of the Subject Shares. The Company shall
exercise such option by giving notice thereof to the Transferor and to Warburg
within such 10 day period.
(ii) In the event that the Company does not exercise its option to
purchase the Subject Shares within such 10 day period, Warburg may exercise its
election to purchase all, but
5
not less than all, of the Subject Shares by giving notice thereof to the
Transferor and to the Company within 10 days after receipt of notice from the
Transferor in accordance with Section 2(c) to the effect that the Company did
not exercise its option to purchase.
(iii) In either event, the notice required to be given by the
purchasing party (the "Purchaser") shall specify a date for the closing of the
purchase which shall not be more than 30 days after the date of the giving of
such notice.
(e) Purchase Price. The purchase price per share for the Subject
--------------
Shares shall be the price per share offered to be paid by the prospective
transferee described in the offer, which price shall be paid in cash or, if so
provided in the offer of the prospective transferee, cash plus deferred payments
of cash in the same proportions, and with the same terms of deferred payment as
therein set forth.
(f) Consideration Other Than Cash. If the offer of Subject Shares
-----------------------------
under this Section 2 is for consideration other than cash or cash plus deferred
payments of cash, the Purchaser shall pay the cash equivalent of such other
consideration. If the Transferor and the Purchaser cannot agree on the amount
of such cash equivalent within 10 days after the beginning of the 10-day period
under Section 2(d)(i), any of such parties may, by 3 days' written notice to the
other, initiate appraisal proceedings under Section 2(g) for determination of
the cash equivalent.
(g) Appraisal Procedure. If any party shall initiate an appraisal
-------------------
procedure to determine the amount of the cash equivalent of any consideration
for Subject Shares under Section 2(f), then the Transferor, on the one hand, and
the Purchaser, on the other hand, shall each promptly appoint as an appraiser an
individual who shall be a member of a reputable valuation firm. Each appraiser
shall, within 30 days of appointment, separately investigate the value of the
consideration for the Subject Shares as of the proposed transfer date and shall
submit a notice of an appraisal of that value to each party. Each appraiser
shall be instructed to determine such value without regard to income tax
consequences to the Transferor as a result of receiving cash rather than other
consideration. If, upon the completion of the initial appraisals (the "Earlier
Appraisals"), the higher appraised value of such consideration is not more than
110% of the lower appraised value of such consideration, the average of the two
appraisals on a per share basis shall be controlling as the amount of the cash
equivalent. If the higher appraised value is more than 110% of the lower
appraised value, the appraisers, within 10 days of the submission of the last
appraisal, shall appoint a third appraiser who shall be member of a reputable
valuation firm. The third appraiser shall, within 30 days of his appointment,
appraise the value of the consideration for the
6
Subject Shares (without regard to the income tax consequences to the Transferor
as a result of receiving cash rather than other consideration) as of the
proposed transfer date and submit notice of his appraisal to each party. The
value determined by the third appraiser shall be controlling as the amount of
the cash equivalent unless the value is greater than the two Earlier Appraisals,
in which case the higher of the two Earlier Appraisals will control, and unless
that value is lower than the two Earlier Appraisals, in which case the lower of
the two Earlier Appraisals will control. If any party fails to appoint an
appraiser or if one of the two initial appraisers fails after appointment to
submit his appraisal within the required period, the appraisal submitted by the
remaining appraiser shall be controlling. The cost of the foregoing appraisals
shall be shared one-half by the Transferor and one-half by the Purchaser.
(h) Closing of Purchase. The closing of the purchase shall take place
-------------------
at the office of the Company or such other location as shall be mutually
agreeable and the purchase price, to the extent comprised of cash, shall be paid
at the closing, and cash equivalents and documents evidencing any deferred
payments of cash permitted pursuant to Section 2(e) above shall be delivered at
the closing. At the closing, the Transferor shall deliver to the Purchaser the
certificates evidencing the Subject Shares to be conveyed, duly endorsed and in
negotiable form with all the requisite documentary stamps affixed thereto.
(i) Release from Restriction; Termination of Rights. If the offer to
-----------------------------------------------
sell is neither accepted by the Company nor by Warburg, the Transferor may make
a bona fide Transfer to the prospective transferee named in the statement
attached to the offer in accordance with the agreed upon terms of such Transfer,
provided, that (A) such Transfer shall be made only in strict accordance with
--------
the terms therein stated and (B) the transferee executes and delivers to the
Company and Warburg a copy of the Joinder Agreement. If the Transferor shall
fail to make such Transfer within sixty (60) days following the expiration of
the time hereinabove provided for the election by Warburg or, in the event the
Purchaser revokes an election to purchase the Subject Shares pursuant to Section
2(f), within sixty (60) days of the date of such notice of revocation, such
Shares shall again become subject to all the restrictions of this Section 2.
3. RIGHT OF CO-SALE.
----------------
(a) In the event that Warburg intends to Transfer (i) shares of
Common Stock which, together with any previous sales of shares of Common Stock
by Warburg, represent more than fifteen percent (15%) of the issued and
outstanding shares of Common Stock on a cumulative basis or (ii) shares of
Preferred Stock which, together with any previous sales of shares of Preferred
Stock by Warburg, represent more than fifteen percent (15%) of the issued and
outstanding shares of Preferred Stock on a cumulative basis (in each case other
than to an Affiliate of
7
Warburg or pursuant to a distribution of such shares to its partners), Warburg
shall notify each other Investor holding shares of such class of stock, in
writing, of such Transfer and its terms and conditions (the "Proposed Sale").
Within 10 days of the date of such notice, each Investor that wishes to
participate in the Proposed Sale shall so notify Warburg in writing (a "Transfer
Notice"). In the event Warburg fails to receive a Transfer Notice from any
Investor within such 10-day period, such Investor shall be deemed to have
declined to participate in the Proposed Sale. Each Investor delivering a
Transfer Notice shall have the right to sell, at the same price and on the same
terms as Warburg, that number of shares of Common Stock or Preferred Stock, as
the case may be, equal to the number of shares of Common Stock or Preferred
Stock, as the case may be, the third party proposes to purchase multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
or Preferred Stock (other than Plan Stock), as the case may be, issued and owned
by such Investor and the denominator of which shall be the aggregate number of
shares of Common Stock or Preferred Stock (other than Plan Stock), as the case
may be, issued and owned by Warburg and each other Investor (including such
Investor exercising its rights under this Section 3). Nothing contained herein
shall obligate Warburg to consummate the Proposed Sale or limit Warburg's right
to amend or modify the terms of the Proposed Sale in any respect; provided that
the Investors are offered the opportunity to participate in the Proposed Sale on
such amended or modified terms.
(b) Notwithstanding anything contained in this Section 3, in the event
that all or a portion of the consideration to be paid in the Proposed Sale
consists of securities and the sale of such securities to Investors would
require either a registration under the Securities Act or the preparation of a
disclosure document pursuant to Regulation D under the Securities Act (or any
successor regulation) or a similar provision of any applicable state securities
law, then, at the option of Warburg, the Third Party Investors may receive, in
lieu of such securities, the fair market value of such securities in cash, as
determined in good faith by the Board unless (i) the holders of a majority of
the shares other than those held by Warburg or its Affiliates or (ii) Management
Investors holding a majority of shares held by Management Investors shall
request an appraisal, in which case the appraisal procedure set forth in Section
2(g) shall be followed as closely as practicable, with such majority holders
(which shall include Management Investors holding a majority of such shares held
by Management Investors), on the one hand, and Warburg, on the other hand, each
appointing an appraiser meeting the qualifications set forth in said Section
2(g).
8
4. DRAG-ALONG RIGHT
----------------
(a) If at any time and from time to time after the date of this
Agreement, the holder or holders of a majority of the outstanding shares of
voting capital stock of the Company (the "Proposed Transferors") wish to
Transfer in a bona fide arms' length sale all shares of Common Stock and
Preferred Stock then owned by them to any Person or Persons who are not
Affiliates of the Proposed Transferors (for purposes of this Section 4(a), the
"Proposed Transferee"), the Proposed Transferors shall have the right (the
"Drag-Along Right") to require each Investor to sell to the Proposed Transferee
all shares of Common Stock and Preferred Stock (for the same per share
consideration received by the Proposed Transferor for each such class of capital
stock) then held by the Investors, subject to purchase by the Proposed
Transferee. Each Investor agrees to take all steps necessary to enable him or
it to comply with the provisions of this Section 4(a), including, if necessary,
voting any shares of Common Stock and Preferred Stock in favor of the
transaction with the Proposed Transferee (whether effected as a merger or
otherwise) to facilitate the Proposed Transferors' exercise of a Drag-Along
Right.
(b) To exercise a Drag-Along Right, the Proposed Transferors shall
give each Investor a written notice (for purposes of this Section 4, a "Drag-
Along Notice") containing (i) the number of shares of Common Stock and Preferred
Stock that the Proposed Transferee proposes to acquire from the Proposed
Transferors, (ii) the name and address of the Proposed Transferee, and (iii) the
proposed purchase price, terms of payment and other material terms and
conditions of the Proposed Transferee's offer. Each Investor shall thereafter
be obligated to sell the shares of Common Stock (and, if applicable, Preferred
Stock) subject to such Drag-Along Notice, provided that the sale to the Proposed
--------
Transferee is consummated within 120 days of delivery of the Drag-Along Notice.
If the sale is not consummated within such 120-day period, then each Investor
shall no longer be obligated to sell such shareholder's shares pursuant to that
specific Drag-Along Right but shall remain subject to the provisions of this
Section 4.
(c) Notwithstanding anything contained in this Section 4, in the
event that all or a portion of the purchase price consists of securities and the
sale of such securities to the Investors would require either a registration
under the Securities Act or the preparation of a disclosure document pursuant to
Regulation D under the Securities Act (or any successor regulation) or a similar
provision of any applicable state securities law, then, at the option of the
Proposed Transferors, the Third Party Investors may receive, in lieu of such
securities, the fair market value of such securities in cash, as determined in
good faith by the Board unless (i) the Third Party Investors holding a majority
of the shares or (ii) Management Investors holding a majority of shares held by
9
Management Investors shall request an appraisal, in which case the appraisal
procedure set forth in Section 2(g) shall be followed as closely as practicable,
with such majority holders (which shall include Management Investors holding a
majority of such shares held by Management Investors), on the one hand, and
Warburg, on the other hand, each appointing an appraiser meeting the
qualifications set forth in Section 2(g).
5. INFORMATION AS TO COMPANY AND RELATED COVENANTS
-----------------------------------------------
(a) Investor Financial Information. From and after the date hereof,
------------------------------
the Company shall deliver to each Investor owning more than 5% of the issued and
outstanding shares of Common Stock or Preferred Stock (except for the annual
reports referred to in (a)(ii) below, which shall be delivered to each Investor
as long as such Investor owns any shares of Common Stock or Preferred Stock):
(i) Quarterly Statements. As soon as practicable, and in any event
--------------------
within 45 days after the close of each of the first three fiscal quarters of
each fiscal year of the Company, a consolidated balance sheet, statement of
income and statement of changes in cash flow of the Company and its Subsidiaries
(as hereinafter defined) as of the close of such quarter and the portion of the
Company's fiscal year ending on the last day of such quarter, all in reasonable
detail and prepared in accordance with U.S. generally accepted accounting
principles, consistently applied, subject to audit and year end adjustments,
setting forth in each case in comparative form the figures for the comparable
period of the previous year;
(ii) Annual Statements. As soon as practicable after the end of each
-----------------
fiscal year of the Company, and in any event within 120 days thereafter, a copy
of the consolidated balance sheet, and consolidated statements of income,
stockholders' equity and changes in cash flow of the Company and its
Subsidiaries for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and accompanied
by an opinion thereon of independent certified public accountants of recognized
national standing selected by the Company, which opinion shall state that such
financial statements fairly present the financial position and results of
operations of the Company and its Subsidiaries on a consolidated basis and have
been prepared in accordance with U.S. generally accepted accounting principles
consistently applied (except for changes in application in which such
accountants concur) and that the examination of such accountants has been made
in accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records and such other auditing procedures
as were considered necessary in the circumstances.
(b) Director Materials. The Company shall prepare and deliver to each
------------------
director of the Company:
10
(i) Monthly Financial Statements. As soon as practicable, and in any
----------------------------
event within 30 days after the close of each of month of each fiscal year of the
Company, a consolidated balance sheet, statement of income and statement of
changes in cash flow of the Company and its Subsidiaries as of the close of each
month and the portion of the Company's fiscal year ending on the last day of
such month, all in reasonable detail and prepared in accordance with U.S.
generally accepted accounting principles, consistently applied, subject to audit
and year end adjustments, setting forth in each case in comparative form the
figures for the comparable period of the previous year;
(ii) Business Plan; Projections. Prior to the commencement of each
--------------------------
fiscal year of the Company, an annual business plan of the Company and
projections of operating results, prepared on a monthly basis, and a three-year
business plan of the Company and projections of operating results. Within 45
days of the close of each fiscal quarter of the Company, the Company shall
provide its directors with a comparison of actual year-to-date results with the
corresponding budgeted figures;
(iii) Audit Reports. Promptly upon receipt thereof, one copy of each
-------------
other financial report and internal control letter submitted to the Company by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Company and its Subsidiaries; and
(iv) Requested Information. With reasonable promptness, the Company
---------------------
shall furnish each director with such other data and information as from time to
time may be reasonably requested.
The Company acknowledges that its obligations under this Section 5(b)
shall not limit the rights of its directors under applicable law to obtain
information and other materials from the Company.
(c) Inspection. From and after the date hereof, the Company will
----------
permit each Investor owning more than 5% of the issued and outstanding shares of
Common Stock or Preferred Stock, its nominee, assignee or its representative to
visit and inspect any of the properties of the Company, to examine all its books
of account, records, reports and other papers not contractually required of the
Company to be confidential or secret, to make copies and extracts therefrom, and
to discuss its affairs, finances and accounts with its officers, directors, key
employees and independent public accountants or any of them (and by this
provision the Company authorizes said accountants to discuss with said Investor,
its nominee, assign and representatives the finances and affairs of the Company
and its Subsidiaries), all at such reasonable times and as often as may be
reasonably requested.
11
(d) Confidentiality. As to so much of the information and other
---------------
material furnished under or in connection with this Agreement (whether furnished
before, on or after the date hereof) as constitutes or contains confidential
business, financial or other information of the Company or its Subsidiaries,
each Investor covenants for itself and its directors, officers, partners and
stockholders that it will use due care to prevent its respective officers,
directors, employees, counsel, accountants and other representatives from
disclosing such information to persons other than their respective authorized
employees, counsel, accountants, stockholders, partners, limited partners and
other authorized representatives; provided, however, that the Investor may
-------- -------
disclose or deliver any information or other material disclosed to or received
by the Investor should such disclosure or delivery be required by law.
6. REGISTRATION RIGHTS
-------------------
(a) Definitions. As used in this Section 6:
(i) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act;
(ii) the term "Holder" shall mean any holder of Registrable
Securities;
(iii) the term "Initiating Holder" shall mean Warburg;
(iv) the terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement;
(v) the term "Registrable Securities" means (A) the shares of Common
Stock and Preferred Stock issued to the Investors pursuant to the Subscription
Agreements, dated as of February 29, 1996, between each of such Investors and
the Company, (B) any additional shares of Common Stock or Preferred Stock
acquired by the Investors (other than pursuant to the Stock Plan or any other
incentive plan), (C) any shares of Common Stock issued in exchange for, or upon
the conversion of, Preferred Stock and (D) any capital stock of the Company
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of, the shares of Common Stock or Preferred Stock referred to
in clause (A), (B) or (C) above;
(vi) "Registration Expenses" shall mean (x) all expenses incurred by
the Company in compliance with Sections 6(b) and (c) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company blue sky fees and expenses and the
12
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company) and (y) all reasonable fees and
disbursements of counsel for each of the Holders; and
(vii) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
(b) Requested Registration.
----------------------
(i) Request for Registration. If the Company shall receive from the
------------------------
Initiating Holder, at any time, a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities, the
Company will:
(A) promptly give written notice of the proposed registration to
all other Holders of Registrable Securities of the same class as the
Registrable Securities specified in such request; and
(B) as soon as practicable, use all reasonable efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act) as
may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of the same class as the Registrable Securities
specified in such request of any Holder or Holders joining in such request
as are specified in a written request received by the Company within 10
business days after written notice from the Company is given under Section
6(b)(i)(A) above; provided that the Company shall not be obligated to
--------
effect, or take any action to effect, any such registration pursuant to
this Section 6(b):
(x) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless
the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act or applicable rules or
regulations thereunder;
(y) (i) With respect to a request for registration of shares
of Common Stock, after the Company has effected two (2) such
registrations pursuant to this Section 6(b) requested by the
13
Initiating Holder and (ii) with respect to a request for registration
of shares of Preferred Stock, after the Company has effected two (2)
such registrations pursuant to this Section 6(b) requested by the
Initiating Holder, and, in each case, such registrations have been
declared or ordered effective and the sales of such Registrable
Securities shall have closed; or
(z) If the Registrable Securities requested by all Holders
to be registered pursuant to such request do not have an anticipated
aggregate public offering price (before any underwriting discounts and
commissions) of at least $25,000,000.
The registration statement filed pursuant to the request of the
Initiating Holder may, subject to the provisions of Section 6(b)(ii) below,
include other securities of the Company which are held by officers or directors
of the Company, or which are held by Persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but the Company's right to include any of its securities in any such
registration shall be subject to the limitations set forth in Section 6(b)(ii)
below.
The registration rights set forth in this Section 6 shall be
assignable, in whole or in part, to any permitted transferee of the Shares,
provided such transferee executes and delivers to the Company and Warburg a
Joinder Agreement.
(ii) Underwriting. If the Initiating Holder intends to distribute
------------
the Registrable Securities covered by its request by means of an underwriting,
it shall so advise the Company as a part of its request made pursuant to Section
6(b).
If officers or directors of the Company holding shares of Common Stock
(other than Registrable Securities) shall request inclusion in any registration
pursuant to Section 6(b), or if holders of securities of the Company other than
Registrable Securities who are entitled, by contract with the Company or
otherwise, to have securities included in such a registration (the "Other
Shareholders") request such inclusion, the Holders shall offer to include the
securities of such officers, directors and Other Shareholders in the
underwriting and may condition such offer on their acceptance of the further
applicable provisions of this Section 6. The Holders whose shares are to be
included in such registration and the Company shall (together with all officers,
directors and Other Shareholders proposing to distribute their securities (in
each case, other than Registrable Securities) through such underwriting) enter
into an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by the Initiating
Holder and reasonably acceptable to the Company. Notwithstanding any other
provision of this Section 6(b), (i) if
14
the representative advises the Holders in writing that marketing factors require
a limitation on the number of shares to be underwritten, then the securities of
the Company held by officers or directors (other than Registrable Securities) of
the Company and the securities held by Other Shareholders shall be excluded from
such registration to the extent so required by such limitations and (ii) if the
representative advises the Holders in writing that marketing factors require a
limitation on the number of shares to be sold by officers and directors of the
Company, the securities of the Company held by such officers or directors
(including Registrable Securities) shall be excluded from such registration to
the extent so required by such limitations. If, after the exclusion of such
shares, further reductions are still required, the number of shares included in
the registration by each Holder shall be reduced on a pro rata basis (based on
the number of shares held by the respective Holders) by such minimum number of
shares as is necessary to comply with such request. No Registrable Securities or
any other securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If
any officer, director or Other Shareholder who has requested inclusion in such
registration as provided above disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Initiating Holder. The securities so withdrawn shall
also be withdrawn from registration. If the underwriter has not limited the
number of Registrable Securities or other securities to be underwritten, the
Company may include its securities for its own account in such registration if
the representative so agrees and if the number of Registrable Securities and
other securities which would otherwise have been included in such registration
and underwriting will not thereby be limited.
(iii) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting the filing of a registration statement pursuant to this
Section 6(b), a certificate signed by the President or Chief Executive Officer
of the Company stating that in the good faith judgment of the Board of Directors
of the Company, it would be seriously detrimental to the Company and its
stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for a period of not more than 120 days
after receipt of the request of the Initiating Holder; provided, however, that
-------- -------
the Company may not utilize this right more than once in any twelve (12) month
period.
(c) Company Registration.
--------------------
(i) If the Company shall determine to register any of its equity
securities either for its own account or for the account of a security holder or
holders, other than a registration relating solely to employee benefit plans, or
a registration relating solely to a Commission Rule 145
15
transaction, or a registration on any registration form which does not permit
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of
Registrable Securities, the Company will:
(A) promptly give to each of the Holders a written notice thereof
(which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky
or other state securities laws); and
(B) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities (of the same class of equity
securities being registered under such registration statement) specified in
a written request or requests, made by the Holders within ten business days
after receipt of the written notice from the Company described in clause
(i) above, except as set forth in Section 6(c)(ii) below. Such written
request may specify all or a part of the Holders' Registrable Securities of
the same class of equity securities being registered under such
registration statement.
(ii) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders as a part of the written notice
given pursuant to Section 6(c)(i)(A). In such event, the right of each of the
Holders to registration pursuant to this Section 6(c) shall be conditioned upon
such Holders' participation in such underwriting and the inclusion of such
Holders' Registrable Securities (of the same class of equity securities being
registered under such registration statement) in the underwriting to the extent
provided herein. The Holders whose shares are to be included in such
registration shall (together with the Company and the Other Shareholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 6(c), if the representative
determines that marketing factors require a limitation on the number of shares
to be underwritten, the Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: The securities of the Company held by officers,
directors and Other Shareholders of the Company (in each case, other than
Registrable Securities) and, if required by the representative of the
underwriters, the securities of the Company held by officers and directors of
the Company (including Registrable Securities), shall be excluded from such
registration and underwriting to the extent required by such limitation, and,
16
if a limitation on the number of shares is still required, the number of shares
that may be included in the registration and underwriting by each of the Holders
shall be reduced, on a pro rata basis (based on the number of shares held by
such Holder), by such minimum number of shares as is necessary to comply with
such limitation. If any of the Holders or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(iii) Number and Transferability. Each of the Holders shall be
--------------------------
entitled to have its shares included in an unlimited number of registrations
pursuant to this Section 6(c). The registration rights granted pursuant to this
Section 6(c) shall be assignable, in whole or in part, to any permitted
transferee of the Shares, provided such transferee executes and delivers to the
Company and to Warburg a Joinder Agreement.
(d) Form S-3. Following the Initial Public Offering the Company shall
--------
use its best efforts to qualify for registration on Form S-3 for secondary
sales. After the Company has qualified for the use of Form S-3, Holders of
Registrable Securities shall have the right to request unlimited registrations
on Form S-3 (such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended method of
disposition of shares by such holders), subject only to the following:
(i) The Company shall not be required to effect a registration
pursuant to this Section 6(d) unless the Holder or Holders of Registrable
Securities requesting registration propose to dispose of shares of Registrable
Securities having an aggregate price to the public (before deduction of
underwriting discounts and expenses of sale) of more than $5,000,000.
(ii) The Company shall not be required to effect a registration
pursuant to this Section 6(d) within 180 days of the effective date of the most
recent registration pursuant to this Section 6(d) in which securities held by
the requesting Holder could have been included for sale or distribution.
(iii) The Company shall not be required to effect a registration
pursuant to this Section 6(d) if the Company shall furnish to the Holders a
certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement. In such event, the Company
shall have the right to defer the filing of the registration statement no more
than once during any twelve (12) month period for a period of not more than one
hundred
17
twenty (120) days after receipt of the request of the Holder or Holders under
this Section 6(d).
(iv) The Company shall not be obligated to effect any registration
pursuant to this Section 6(d) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act or applicable rules or regulations thereunder.
The Company shall give written notice thereof to all Holders of
Registrable Securities within five (5) days of the receipt of a request for
registration pursuant to this Section 6(d) and shall provide a reasonable
opportunity for other Holders of Registrable Securities to participate in the
registration, provided that if the registration is for an underwritten offering,
the terms of Section 6(b)(ii) shall apply to all participants in such offering.
Subject to the foregoing, the Company will use its best efforts to effect
promptly the registration of all shares of Registrable Securities on Form S-3 to
the extent requested by the Holder or Holders thereof for purposes of
disposition.
(e) Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Section 6 (whether or not such registration, qualification or compliance is
effectuated) shall be borne by the Company, and all Selling Expenses shall be
borne by the Holders of the securities so registered (or proposed to be
registered) pro rata on the basis of the number of their shares so registered
(or proposed to be registered).
(f) Registration Procedures. In the case of each registration
-----------------------
effected by the Company pursuant to Section 6, the Company will keep the
Holders, as applicable, advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company
will:
(i) keep such registration effective for a period of one hundred
twenty (120) days or until the Holders, as applicable, have completed the
distribution described in the registration statement relating thereto, whichever
first occurs; provided, however, that (A) such 120-day period shall be extended
for a period of time equal to the period during which the Holders, as
applicable, refrain from selling any securities included in such registration in
accordance with provisions in Section 6(j) hereof; and (B) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the
18
Securities Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a post-
effective amendment which (y) includes any prospectus required by Section
10(a)(3) of the Securities Act or (z) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (y) and (z) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement; and
(ii) furnish such number of prospectuses and other documents incident
thereto as each of the Holders, as applicable, from time to time may reasonably
request.
(g) Indemnification.
---------------
(i) The Company will indemnify each of the Holders, as applicable,
each of its officers, directors and partners, and each person controlling each
of the Holders, with respect to each registration which has been effected
pursuant to this Section 6, and each underwriter, if any, and each person who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each of
the Holders, each of its officers, directors and partners, and each person
controlling each of the Holders, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by any Holder with respect to such Holder
or underwriter with respect to such underwriter and stated to be specifically
for use therein.
(ii) Each of the Holders will, if Registrable Securities held by it
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
19
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act and the rules and
regulations thereunder, each Other Shareholder and each of their officers,
directors, and partners, and each person controlling such Other Shareholder
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact with respect to such Holder contained in any such
registration statement, prospectus, offering circular or other document made by
such Holder, or any omission (or alleged omission) to state therein a material
fact with respect to such Holder required to be stated therein or necessary to
make the statements by such Holder therein not misleading, and will reimburse
the Company and such Other Shareholders, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder with respect to such Holder and stated
to be specifically for use therein; provided, however, that the obligations of
each of the Holders hereunder shall be limited to an amount equal to the
proceeds to such Holder of securities sold as contemplated herein.
(iii) Each party entitled to indemnification under this Section 6(g)
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or any litigation resulting
therefrom shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of counsel shall be at the expense of the Indemnifying Party),
and provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 6 unless the Indemnifying Party is materially prejudiced
thereby. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
20
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
(iv) If the indemnification provided for in this Section 6(g) is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(v) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with any underwritten public offering contemplated by
this Agreement are in conflict with the foregoing provisions, the provisions in
such underwriting agreement shall be controlling.
(vi) The foregoing indemnity agreement of the Company and Holders is
subject to the condition that, insofar as they relate to any loss, claim,
liability or damage made in a preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the Commission at the time the
registration statement in question becomes effective or the amended prospectus
filed with the Commission pursuant to Commission Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
underwriter if a copy of the Final Prospectus was furnished to the underwriter
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
(vii) Any indemnification payments required to be made to an
Indemnified Party under this Section 6(g) shall be made as the related claims,
losses, damages, liabilities or expenses are incurred.
21
(h) Information by the Holders. Each of the Holders and each Other
--------------------------
Shareholder holding securities included in any registration, shall furnish to
the Company such information regarding such Holder or Other Shareholder and the
distribution proposed by such Holder or Other Shareholder as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this Section
6. Neither Warburg nor any Non-Management Investor shall be required, in
connection with any underwriting arrangements entered into in connection with
any registration, to provide any information, representations or warranties, or
covenants with respect to the Company, its business or its operations, and such
Investors shall not be required to provide any indemnification with respect to
any registration statement except as specifically provided for in Section
6(g)(ii) hereof.
(i) Rule 144 Reporting.
------------------
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of the restricted
securities to the public without registration, the Company agrees to:
(A) make and keep public information available as those terms
are understood and defined in Rule 144, at all times from and after
ninety (90) days following the effective date of the first registration
under the Securities Act filed by the Company for an offering of its
securities to the general public;
(B) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act at any time after it has
become subject to such reporting requirements; and
(C) so long as the Holder owns any Registrable Securities,
furnish to the Holder upon request, a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any
time from and after ninety (90) days following the effective date of the
first registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed as the Holder
may reasonably request in availing itself of any rule or regulation of
the Commission allowing the Holder to sell any such securities without
registration.
22
(j) "Market Stand-off" Agreement. Each of the Holders agrees, if
----------------------------
requested by the Company and an underwriter of Common Stock or Preferred Stock
(or other securities) of the Company, not to sell or otherwise transfer or
dispose of any shares of Common Stock or Preferred Stock (or other securities)
of the Company held by such Holder during the 90-day period (or such longer
period if requested by such underwriter, up to 180 days) following the effective
date of a registration statement of the Company filed under the Securities Act,
provided that:
(i) such agreement only applies to the first such registration
statement of the Company which includes securities to be sold on the Company's
behalf to the public in an underwritten offering; and
(ii) all officers and directors of the Company enter into similar
agreements.
If requested by the underwriters, the Holders shall execute a separate
agreement to the foregoing effect. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing
restriction until the end of said 90-day period (or such longer period if
requested by the underwriter, up to 180 days). The provisions of this Section
6(j) shall be binding upon any transferee who acquires Registrable Securities,
whether or not such transferee is entitled to the registration rights provided
hereunder.
(k) Termination. The registration rights set forth in this Section 6
-----------
shall not be available to any Holder if, in the opinion of counsel to the
Company, all of the Registrable Securities then owned by such Holder could be
sold in any 90-day period pursuant to Rule 144 under the Securities Act (without
giving effect to the provisions of Rule 144(k)). The Company will arrange for a
provision to the transfer agent for such shares of an opinion of counsel in
connection with any such sale under Rule 144.
7. TERMINATION. The Agreement shall terminate:
-----------
(a) upon the closing of the Initial Public Offering, except for the
provisions of Sections 1(b)(i), 1(b)(ii), 1(c), 5(d) and 6, any election made by
Warburg pursuant to Section 1(b)(i) or 9(d) and any election made by NationsBanc
Investment Corp. pursuant to Section 9(d), which shall remain in full force and
effect following the closing of the Initial Public Offering, provided, however,
that Section 1(b)(i) shall terminate upon the later of the closing of an Initial
Public Offering and the Lender Board Requirement Termination Date; or
(b) on the date on which (i) Warburg, (ii) the holder or holders of a
majority of the shares of Common Stock (other than Plan Stock and other than
those shares held by Warburg or its Affiliates), which shall include Management
Investors holding
23
a majority of such shares held by Management Investors, and (iii) during such
time that the Preferred Stock is convertible into Common Stock, the holder or
holders of a majority of the shares of Preferred Stock (other than those shares
held by Warburg or its Affiliates), which shall include Management Investors
holding a majority of such shares held by Management Investors, shall have
agreed in writing to terminate this Agreement.
Notwithstanding anything in this Agreement to the contrary, if a
Management Investor's employment with the Company and its Subsidiaries is
terminated, whether by such Management Investor or by the Company, whether with
or without cause or whether due to the death or disability, all rights (other
than his rights under Section 6) of such Management Investor under this
Agreement (but not the obligations) shall be terminated.
8. INTERPRETATION OF THIS AGREEMENT
--------------------------------
(a) Terms Defined. As used in this Agreement, the following terms
-------------
have the respective meaning set forth below:
Affiliate: any person or entity, directly or indirectly, controlling,
---------
controlled by or under common control with such person or entity.
Exchange Act: the Securities Exchange Act of 1934, as amended.
------------
Initial Public Offering: the completion of an underwritten initial
-----------------------
public offering for shares of Common Stock pursuant to a registration statement
under the Securities Act resulting in net proceeds to the Company and/or any
selling shareholders of not less than $25,000,000.
Xxxxx Employment Agreement: the Employment Agreement, dated as of
--------------------------
February 29, 1996, between Xxxxx and the Company.
Person: an individual, partnership, joint-stock company, corporation,
------
limited liability company, trust or unincorporated organization, and a
government or agency or political subdivision thereof.
Security, Securities: as defined in Section 2(1) of the Securities
--------------------
Act.
Securities Act: the Securities Act of 1933, as amended.
--------------
Staniar Employment Agreement: the Employment Agreement, dated as of
----------------------------
February 29, 1996, between Staniar and the Company.
Subsidiary: a corporation of which the Company owns, directly or
----------
indirectly, more than fifty percent 50% of the Voting Stock.
24
Transfer: any sale, assignment, pledge, hypothecation, or other
--------
disposition or encumbrance, whether or not for consideration.
Voting Stock: securities of any class or classes of a corporation the
------------
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
Warburg Directors: any director of the Company, including a
-----------------
Substitute Director, designated by Warburg pursuant to a provision of this
Agreement.
(b) Accounting Principles. Where the character or amount of any asset
---------------------
or amount of any asset or liability or item of income or expense is required to
be determined or any consolidation or other accounting computation is required
to be made for the purposes of this Agreement, this shall be done in accordance
with U.S. generally accepted accounting principles at the time in effect, to the
extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
(c) Directly or Indirectly. Where any provision in this Agreement
----------------------
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
(d) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State.
(e) Section Headings. The headings of the sections and subsections of
----------------
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
9. MISCELLANEOUS
-------------
(a) Notices.
-------
(i) All communications under this Agreement shall be in writing and
shall be delivered by hand or mailed by overnight courier or by registered or
certified mail, postage prepaid:
(A) if to any of the Management Investors, at the address of such
Management Investor shown on Schedule I, or at such other address as the
Management Investor may have furnished the Company in writing;
(B) if to Warburg, at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxxx X. Xxxxxx, or at such
25
other address as Warburg may have furnished the Company in writing;
(C) if to the Company, to T.K.G. Acquisition Corp., c/o Warburg,
Xxxxxx Ventures, L.P., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxxx X. Xxxxxx, or at such other address as it may have furnished
in writing to each of the Investors; and
(D) if to any of the Non-Management Investors, at the address of such
Non-Management Investor shown on Schedule II, or at such other address as the
Non-Management Investor may have furnished the Company in writing.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand, on the date of such delivery; if mailed by courier, on the
first business day following the date of such mailing; and if mailed by
registered or certified mail, on the third business day after the date of such
mailing.
(b) Reproduction of Documents. This Agreement and all documents
-------------------------
relating thereto, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed, (ii) documents received by each
Investors pursuant hereto and (iii) financial statements, certificates and other
information previously or hereafter furnished to each Investor, may be
reproduced by each Investor by an photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and each Investor may
destroy any original document so reproduced. All parties hereto agree and
stipulate that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by each
Investor in the regular course of business) and that any enlargement, facsimile
or further reproduction of such reproduction shall likewise be admissible in
evidence.
(c) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties.
(d) Entire Agreement; Amendment and Waiver. This Agreement and the
--------------------------------------
Subscription Agreements constitute the entire understanding of the parties
hereto relating to the subject matter hereof and supersede all prior
understandings among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of (i) Warburg, (ii) the holder or holders of a majority of the
shares of Common Stock (other than Plan Stock and other than those shares held
by Warburg or its Affiliates), which shall include Management Investors holding
a majority of such shares held by Management Investors, and (iii) during such
time that the Preferred Stock is convertible into Common Stock,
26
the holder or holders of a majority of the shares of Preferred Stock (other than
those shares held by Warburg or its Affiliates), which shall include Management
Investors holding a majority of such shares held by Management Investors.
Without limiting the foregoing, at any time, by written notice to the Company,
(I) Warburg may elect, which election shall be irrevocable, (A) to limit its
rights to vote the shares of Common Stock and Preferred Stock held by it to the
lesser of (i) 50.0% of the voting rights of the Common Stock and Preferred Stock
outstanding and (ii) the voting rights of the Common Stock and Preferred Stock
held by it, or (B) to waive any or all rights it may have under this Agreement;
provided, that, unless such election shall expressly state to the contrary, such
election shall not apply to any shares that are Transferred by Warburg and (II)
NationsBanc Investment Corp. may elect, which election shall be irrevocable, (A)
to limit its rights to vote the shares of Common Stock and Preferred Stock held
by it to the lesser of (i) 5.0% of the voting rights of the Common Stock and
Preferred Stock outstanding and (ii) the voting rights of the Common Stock and
Preferred Stock held by it, or (B) to waive any or all rights it may have under
this Agreement; provided, that, unless such election shall expressly state to
the contrary, such election shall not apply to any shares that are Transferred
by NationsBanc Investment Corp.
(e) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
27
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement as of the date first above written.
T.K.G. ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxx
_______________________________
Name: Xxxxxx X. Xxxxxxx
Title: Chairman of the Board and
Chief Executive Officer
WARBURG, XXXXXX VENTURES, L.P.
By: Warburg, Xxxxxx & Co.,
General Partner
By: /s/ Xxxxxxx X. Xxxxxx
_______________________________
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
NON-MANAGEMENT INVESTOR:
NATIONSBANC INVESTMENT CORP.
By: /s/ Xxx X. Xxxxx
________________________________
Name: Xxx X. Xxxxx
Title: Senior Vice President
MANAGEMENT INVESTORS:
[Signatures on following pages]
Signature Page to Stockholders Agreement (Common Stock and Preferred
Stock), dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg,
-------- --
Xxxxxx Ventures, L.P. and certain other stockholders, including the Management
Investor
set forth below.
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
Signature Page to Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Xxxxxx
-------- --
Ventures, L.P. and certain other stockholders, including the Management Investor
set forth below.
/s/ Xxxx X. Xxxxx
-----------------------------------
Xxxx X. Xxxxx
Signature Page to Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Xxxxxx
-------- --
Ventures, L.P. and certain other stockholders, including
the Management Investor
set forth below.
/s/ Xxxxxxxx Xxxxxxxxx
-----------------------------------
Xxxxxxxx Xxxxxxxxx
Signature Page to Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Xxxxxx
Ventures, L.P. and certain other stockholders, including the Management Investor
set forth below.
/s/ Xxxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxxx X. Xxxxxxx
Signature Page to Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Xxxxxx
Ventures, L.P. and certain other stockholders, including the Management Investor
set forth below.
/s/ Xxxxxx X. Xxxxx
-----------------------------------
Xxxxxx X. Xxxxx
Signature Page to Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Xxxxxx
-------- --
Ventures, L.P. and certain other stockholders, including the Management Investor
set forth below.
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxx
Signature Page to Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Xxxxxx
-------- --
Ventures, L.P. and certain other stockholders, including the Management Investor
set forth below.
/s/ Xxxxxx X. Xxxxxx
-----------------------------------
Xxxxxx X. Xxxxxx
Signature Page to Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Xxxxxx
-------- --
Ventures, L.P. and certain other stockholders, including the Management Investor
set forth below.
/s/ Xxxxxx X. Xxxxx
-----------------------------------
Xxxxxx X. Xxxxx
Signature Page to Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Xxxxxx
Ventures, L.P. and certain other stockholders, including the Management Investor
set forth below.
/s/ Xxxxx X. XxXxxx
-----------------------------------
Xxxxx X. XxXxxx
Signature Page to Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Xxxxxx
-------- --
Ventures, L.P. and certain other stockholders, including the Management Investor
set forth below.
/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxxx
Signature Page to Stockholders Agreement (Common Stock and Preferred Stock),
dated as of February 29, 1996, among T.K.G. Acquisition Corp., Warburg, Xxxxxx
-------- --
Ventures, L.P. and certain other stockholders, including the Management Investor
set forth below.
/s/ Xxxx X. Xxxxxxxxx
-----------------------------------
Xxxx X. Xxxxxxxxx
SCHEDULE I
Management Investors
--------------------
Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxxxx 00
00000 Xxxxxxxx
Xxxxxxx
Xxxxxxxx X. Xxxxxxx
0000 X. Xxxxxxxxx
Xxxxxxx, Xxxxxxx 00000
Xxxxxx X. Xxxxx
0 Xxxx 00xx Xxxxxx, Xxx. 0X
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxxx X. Xxxxxxxx
000 Xxxxxxx Xxxx Xx.
Xxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxx X. Xxxxxx
000 Xxxxxxx Xxx.
Xxxxxxxxx, Xxxxxxxxxx 00000
Xxxxxx X. Xxxxx
0000 Xxxxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Xxxx X. Xxxxx
x/x X. Xxxxxx Xxxxxx, Xxx.
Xxxxx Xxxxxxx & Xxxxxxxxx
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Xxxxx X. XxXxxx
0000 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxxx X. Xxxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Xxxx X. Xxxxxxxxx
000 Xxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxx X. Xxxxxxx
00 Xxxxxxx Xxxx
Xx-Xx-Xxx, Xxx Xxxxxx 00000
SCHEDULE II
Non-Management Investors
------------------------
NationsBanc Investment Corp.
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxx Xxxxx
EXHIBIT A
---------
JOINDER AGREEMENT
-----------------
Joinder Agreement, dated as of this ____ day of February, 1996, by and
among T.K.G. Acquisition Corp., a Delaware corporation (the "Company"), and the
undersigned (the "Investor").
Reference is made to that certain Stockholders Agreement (Common Stock
and Preferred Stock) (the "Stockholders Agreement"), dated as of February 29,
1996, by and among T.K.G. Acquisition Corp., Warburg, Xxxxxx Ventures, L.P. and
the other holders of Common Stock and Preferred Stock from time to time party
thereto, as the same may from time to time be amended.
By executing this Joinder Agreement, the Investor hereby agrees to be
bound by the terms of the Stockholders Agreement as if he were an original
signatory to such Agreement and shall be deemed to be a [Non-]Management
Investor thereunder.
[insert for corporations only: The Investor hereby represents and
warrants that (i) it is a corporation duly organized, validly existing and in
good standing under the laws of ____________ and has the power and authority to
------------
execute and deliver this Agreement and perform its obligations hereunder, (ii)
the execution, delivery and performance of this Agreement has been authorized by
the board of directors of the Investor and no other approval or authorization is
necessary and (iii) the execution, delivery and performance of this Agreement
does not conflict with or violate the terms of its Certificate of Incorporation
or By-laws or any agreement to which it is a party or may be bound.]
IN WITNESS WHEREOF, the parties hereto have executed this Joinder
Agreement as of the date first above written.
------------------------------
Name:
Agreed to and Accepted by:
T.K.G. ACQUISITION CORP.
_____________________________
Name:
Title:
