Exhibit 4.7
EXECUTION COPY
SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
Second Amended and Restated Stockholders Agreement (the "AGREEMENT")
dated as of November ___, 2001 among (i) COLOR SPOT NURSERIES, INC., a Delaware
corporation (the "COMPANY"), (ii) KCSN ACQUISITION COMPANY, L.P., a Delaware
limited partnership ("KCSN"), (iii) XXXXXX EQUITY CAPITAL CORPORATION, a
Delaware corporation ("XXXXXX"), (iv) XXXXXXX X. XXXXXXXX, XXXXX X. XXXXXXXX and
the other current or former members of management of the Company who have
executed this Agreement or have otherwise agreed to be bound by the provisions
hereof (the "MANAGEMENT STOCKHOLDERS") and (v) TCW Shared Opportunity Fund II,
L.P., TCW/Crescent Mezzanine Partners, L.P., TCW/Crescent Mezzanine Trust and
TCW/Crescent Mezzanine Investment Partners, L.P. (collectively, "TCW"), State
Treasurer of the State of Michigan, Custodian of the Michigan Public Schools
Employees' Retirement System, State Employees' Retirement System and Michigan
State Police Retirement System ("Michigan") and Ares Leveraged Investment Fund,
L.P. ("Ares," and together with TCW and Michigan, the "TCW Stockholders" and,
together with KCSN, Xxxxxx and the Management Stockholders, the "STOCKHOLDERS").
WHEREAS, certain of the Stockholders originally entered into a
Stockholders Agreement effective as of December 31, 1996 (the "ORIGINAL
STOCKHOLDERS AGREEMENT"); and
WHEREAS, certain of the Stockholders and the Company entered into the
First Amended and Restated Stockholders Agreement, dated as of November __, 1997
("FIRST AMENDED STOCKHOLDERS AGREEMENT"); and
WHEREAS, in accordance with Section 12 of the First Amended
Stockholders Agreement, the Company, KCSN, Xxxxxx and the holders of a majority
of the outstanding Management Stock have agreed to amend and restate the First
Amended Stockholders Agreement pursuant to the terms hereof.
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement, the
following terms have the indicated meanings:
"AFFILIATE" of a person means any other person controlling, controlled
by or under common control with such person, whether by ownership of voting
securities, by contract or otherwise, and in the case of KCSN shall include any
member of KCSN and in the case of the Company shall include any officer or
director of the Company.
"APPROVED STOCK PLAN" means, collectively, all contracts, plans or
agreements which have been approved by the Company's Board of Directors
(including the Company's 1997 Stock Option Plan) pursuant to which securities
representing up to an aggregate of 15% of the
Common Stock outstanding on a fully-diluted basis may be issued to employees,
officers, directors, consultants or other service providers of the Company or
its subsidiaries.
"CAUSE" means (i) the commission by the Management Stockholder of theft
or embezzlement of Company property or other acts of dishonesty or criminal
conduct harmful in any significant respect to the business, property or
reputation of the Company or the commission by the Management Stockholder of
other acts harmful in any significant respect to the business, property or
reputation of the Company; (ii) the commission by the Management Stockholder
while an employee of the Company or its Affiliates of an act determined in good
faith by the Company's Board of Directors to amount to gross, willful or wanton
negligence of the Management Stockholder's duties under the terms of his or her
employment; (iii) the refusal by the Management Stockholder while an employee of
the Company or its Affiliates to perform, or substantial neglect of, the duties
assigned to the Management Stockholder by the Company; (iv) any significant
violation by the Management Stockholder of any statutory or common law duty of
loyalty to the Company; or (v) a material breach by the Management Stockholder
of his or her employment agreement (if any) with the Company. The determination
of Cause shall be made in good faith by the Board of Directors after written
notice to the Management Stockholder and, in the case of conduct described in
clause (iii), (iv) or (v) above, a reasonable opportunity to cure such conduct.
"COMMON STOCK" means, collectively, the Company's Common Stock, $.01
par value, and the Company's Nonvoting Common Stock, $.01 par value.
"FAIR MARKET VALUE" as of any date means the per-share value of the
Common Stock determined under the following formula: (i) the product of the
amount of the Company's earnings before interest, taxes, depreciation and
amortization (calculated for the 12-month period preceding the date of
determination) multiplied by five, less (ii) all long-term debt (including,
without limitation, the average outstanding amounts under any revolving credit
facility of the Company for the 12 months preceding the date of determination),
divided by (iii) the total number of the then-outstanding shares of Common
Stock, determined as if all then-outstanding "in the money" options (whether or
not vested), warrants and other rights exercisable, convertible or exchangeable
into shares of Common Stock had been exercised, converted or exchanged (as the
case may be) and all consideration payable in connection with such exercise,
conversion or exchange had in fact been paid.
"XXXXXX STOCK" means Stockholder Shares held by Xxxxxx and its
transferees giving effect to the conversion of the Note held by such persons.
"INDEPENDENT THIRD PARTY" means any person who does not own in excess
of 10% of the Common Stock on a fully-diluted basis, who is not controlling,
controlled by or under common control with any such 10% owner of Common Stock
and who is not the spouse, ancestor or descendant (by birth or adoption) of any
such 10% owner of Common Stock.
"INVESTOR STOCK" means Stockholder Shares held by KCSN, its Affiliates
and their respective transferees.
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"MANAGEMENT STOCK" means Stockholder Shares held by the Management
Stockholders and their respective Permitted Transferees, including without
limitation all shares acquired pursuant to the exercise of Options.
"NOTE" means the Company's 8.0% Convertible Subordinated Note
originally issued to Xxxxxx Equity Capital Corporation.
"OPTIONS" means options to purchase shares of Common Stock granted
pursuant to the Company's 1997 Stock Option Plan.
"OPTION STOCK" means Management Stock acquired upon exercise of Options
granted pursuant to the Company's 1997 Stock Option Plan.
"ORIGINAL COST" means a Management Stockholder's average original
purchase price per share of Option Stock acquired from the Company and held by
such Management Stockholder, as reflected in the records of the Company.
"SALE OF THE COMPANY" means the acquisition of beneficial ownership of
a majority or more of the outstanding voting securities of the Company by any
person or "group" (as that term is used in Regulation 13D under the Securities
Exchange Act of 1934) other than stockholders of the Company as of the date
hereof and their respective Affiliates.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES A PREFERRED STOCK" means 13% Series A Cumulative Preferred
Stock of the Company.
"SERIES B PREFERRED STOCK" means the 13% Series B Cumulative Preferred
Stock of the Company.
"STOCKHOLDER SHARES" means (i) all shares of Common Stock held or
deemed to be held by the Stockholders, including all shares of Common Stock
acquired pursuant to exercise of Options or conversion of the Note, and (ii) all
shares of Common Stock or other securities issued or issuable directly or
indirectly with respect to the securities referred to in clause (i) by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. Stockholder
Shares shall cease to be such when they have been sold (x) pursuant to a
registered public offering under the Securities Act, or (y) to the public
pursuant to Rule 144 under the Securities Act or any successor provision.
"TCW STOCK" means the Stockholders Shares held by the TCW Stockholders.
"VESTED OPTIONS" means Options that are exercisable by the holder
thereof on the date of determination.
SECTION 2. REPURCHASE ON TERMINATION OF EMPLOYMENT.
(a) REPURCHASE OPTION. Upon the termination of a Management
Stockholder's employment by the Company and its subsidiaries:
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(i) if such termination is for any reason other than for Cause
(A) the Company may elect to repurchase all but not less than all of
the Management Stock and Vested Options held by such Management
Stockholder and its Permitted Transferees at a cash price per share
equal to Fair Market Value (as of the date of termination) and, in the
case of Vested Options, the excess of Fair Market Value (as of the date
of termination) over the exercise price per share under such Options,
and (B) all Options held by such Management Stockholder other than
Vested Options shall be automatically cancelled; and
(ii) if such termination is for Cause (A) the Company may
elect to repurchase all but not less than all of the Management Stock
held by such Management Stockholder and its Permitted Transferees at a
cash price per share equal to Fair Market Value (as of the date of
termination) or, in the case of Option Stock, the lesser of Fair Market
Value (as of the date of termination) or Original Cost, and (B) all
Options held by such Management Stockholder (whether or not vested)
shall be automatically cancelled.
(b) REPURCHASE OBLIGATION. In the event of termination of a Management
Stockholder's employment with the Company due to death or permanent disability
(as determined in good faith by the Board of Directors), the Management
Stockholder (or his estate or personal representative) may require the Company
to repurchase all or any portion of the Management Stock (other than Option
Stock) held by such Management Stockholder and his Permitted Transferees at a
cash price per share equal to Fair Market Value as of the date of termination,
which purchase price shall be payable in four equal annual installments on the
date of closing of such repurchase and on the three succeeding anniversaries of
such date. The portion of the purchase price not paid at closing will bear
interest at the applicable federal rate for medium-term obligations, and will
become due and payable upon consummation of the Company's initial public
offering under the Securities Act or a Sale of the Company. Notwithstanding any
other provision of this Section 2, the Company shall not be obligated to
repurchase Management Stock pursuant to this Section 2(b) to the extent that
such repurchase is not permitted pursuant to the terms of any of the Company's
indebtedness for borrowed money or by applicable corporate law. In the event of
a restriction on the purchase of Management Stock, the Company shall purchase
the maximum amount of Management Stock that it is able to purchase consistent
with such restriction and shall exercise reasonable commercial efforts (in no
event to require the refinancing of the Company's indebtedness or the payment of
money) to remove such restriction and, upon such removal, the Company shall
purchase the balance of such Management Stock.
(c) REPURCHASE PROCEDURE. The Company may exercise its option to
purchase Management Stock and Vested Options pursuant to Section 2(a) by
delivery to the Management Stockholder, within 30 days after the termination of
such Management Stockholder's employment, of a written notice specifying the
number of shares of Management Stock and/or Vested Options to be repurchased.
The Management Stockholder (or his estate or personal representative) may
exercise his option to require the Company to repurchase Management Stock
pursuant to Section 2(b) by delivery to the Company, within 30 days after the
termination of such Management Stockholder's employment, of a written notice
specifying the number of shares of Management Stock to be repurchased. The
closing of any repurchase of securities pursuant to this Section 2 shall take
place not later than 90 days following the termination of the
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Management Stockholder's employment. The shares of Management Stock to be
repurchased by the Company shall be satisfied (i) first, from the shares of
Management Stock held by the Management Stockholder at the time of delivery of
the Repurchase Notice and (ii) second, if the number of such shares is less than
the number of shares to be repurchased by the Company, from the shares of
Management Stock held by the Permitted Transferees of such Management
Stockholder in such proportions as shall be determined by the Management
Stockholder.
SECTION 3. RESTRICTIONS ON TRANSFER.
(a) PROHIBITION ON TRANSFERS. No Management Stock may be sold,
transferred, pledged or otherwise disposed of (including by gift) except in
accordance with this Section 3. No Management Stock may be transferred without
the prior written consent of the Company, which will not be unreasonably
withheld.
(b) RIGHT OF FIRST REFUSAL.
(i) Not less than 30 days prior to any proposed transfer of
Management Stock, the transferring Management Stockholder shall deliver
to KCSN, the TCW Stockholders and the other Management Stockholders a
written notice (the "OFFER NOTICE") specifying in reasonable detail the
number of shares to be transferred, the identity of the transferee(s),
the price (which shall be payable solely in cash) and the other terms
and conditions of the proposed transfer. KCSN, the TCW Stockholders and
the other Management Stockholders may elect to purchase all but not
less than all of the Management Stock proposed to be transferred upon
the terms and conditions specified in the Offer Notice by delivering to
the transferring Management Stockholder a written notice of such
election within the 20-day period following its receipt of the Offer
Notice (the "ELECTION PERIOD"). Each electing Stockholder shall be
entitled to purchase its pro rata share of the Management Stock covered
by the Offer Notice (based on its percentage ownership of the Common
Stock on a fully-diluted basis) and, in the event that less than all
the Stockholders elect to purchase their pro rata shares, the remaining
shares shall be reoffered to the electing Stockholders for a period of
10 days following the Election Period and shall be purchased by the
electing Stockholders in proportion to the numbers of shares requested
to be purchased by them in excess of their pro rata shares. The
purchase of such shares by KCSN, the TCW Stockholders and/or the other
Management Stockholders shall be consummated within 30 days following
expiration of the Election Period.
(ii) In the event that KCSN, the TCW Stockholders and/or the
other Management Stockholders do not elect to purchase the Management
Stock described in the Offer Notice, during the 30-day period following
expiration of the Election Period, the transferring Management
Stockholder may transfer such Management Stock to the transferee(s)
specified in the Offer Notice on terms no more favorable to such
transferee(s) than those specified in the Offer Notice. Any shares of
Management Stock not transferred within such 30-day period shall again
be subject to Section 3(b)(i) in connection with any proposed transfer
thereof.
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(c) CERTAIN PERMITTED TRANSFERS. Sections 3(a) and 3(b) shall not apply
to transfers of Management Stock (i) pursuant to Sections 5, 6 or 7 hereof, or
(ii) within a Management Stockholder's family group (including by will or
pursuant to applicable laws of descent and distribution); provided that, in
connection with any transfer pursuant to this clause (ii), each transferee (a
"PERMITTED TRANSFEREE") agrees in writing to be bound by the provisions of this
Agreement. Any shares of Management Stock transferred to a Permitted Transferee
shall continue to be Management Stock for purposes of this Agreement. A
Management Stockholder's "FAMILY GROUP" means such Management Stockholder's
spouse and lineal descendants (whether natural or adopted) and any trust formed
and maintained solely for the benefit of such Management Stockholder, such
Management Stockholder's spouse and/or such Management Stockholder's lineal
descendants.
SECTION 4. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) STOCK LEGEND. The certificates representing Stockholder Shares that
have been issued prior to the date hereof shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON _______________, ____, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF ANY EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS
SET FORTH IN A STOCKHOLDERS AGREEMENT DATED AS OF DECEMBER 31, 1996,
AMONG COLOR SPOT NURSERIES, INC. AND CERTAIN STOCKHOLDERS THEREOF, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF AT
THE COMPANY'S PRINCIPAL PLACE OF BUSINESS.
The certificates representing Stockholder Shares that are issued on and
after the date hereof shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON _______________, ____, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF ANY EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS
SET FORTH IN THE SECOND AMENDED AND
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RESTATED STOCKHOLDERS AGREEMENT DATED AS OF NOVEMBER __, 2001, AMONG
COLOR SPOT NURSERIES, INC. AND CERTAIN STOCKHOLDERS THEREOF, A COPY OF
WHICH MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS.
(b) OPINION OF COUNSEL. No holder of Stockholder Shares may sell,
transfer or dispose of any such stock (other than pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company upon its request an opinion of counsel reasonably acceptable in form and
substance to the Company that registration under the Securities Act is not
required in connection with such transfer.
SECTION 5. SALE OF THE COMPANY. If the holders of a majority
of the Investor Stock then outstanding approve the sale of the Company to an
Independent Third Party, whether by merger, consolidation, sale of all or
substantially all of its assets, sale of all of the outstanding Common Stock
or otherwise (an "APPROVED SALE"), the Stockholders (other than the TCW
Stockholders) shall consent to and raise no objections against such Approved
Sale (including exercising any rights of appraisal) and shall take all
necessary and desirable actions in their capacities as stockholders in
connection with the consummation of such Approved Sale. If the Approved Sale
is structured as a sale of stock, the Stockholders (other than the TCW
Stockholders) shall agree to sell all of their shares of Common Stock and
rights to acquire shares of Common Stock on the terms and conditions approved
by the holders of a majority of the Investor Stock then outstanding. The
obligations of the Stockholders (other than the TCW Stockholders) with
respect to any Approved Sale are subject to the condition that, upon the
consummation of such Approved Sale, all of the holders of Common Stock will
receive the same form and amount of consideration per share of Common Stock,
or if any holders are given an option as to the form and amount of
consideration to be received, all holders will be given the same option. In
connection with an Approved Sale, each holder of Vested Options or Notes may
elect to exercise such Options or convert such Notes and participate in the
Approved Sale as a holder of Common Stock or, in lieu of the exercise of
Options, to receive in exchange for such Options the excess of the
consideration per share of Common Stock receivable in such Approved Sale over
the exercise price per share under such Options.
SECTION 6. PARTICIPATION RIGHTS. Not less than 30 days prior
to any proposed transfer of Common Stock by KCSN or any Affiliate of KCSN,
such transferring Stockholder shall deliver to the other Stockholders a
written notice (the "SALE NOTICE") specifying in reasonable detail the
identity of the proposed transferee(s) and the terms and conditions of the
proposed transfer. Each other Stockholder may elect to participate in the
proposed transfer by delivering to the transferring Stockholder a written
notice of such election within the 20-day period following delivery of the
Sale Notice. If any Stockholders elect to participate in such transfer, the
transferring Stockholder and each participating Stockholder will be entitled
to sell in such proposed transfer, at the same price and on the same terms, a
number of shares of Common Stock equal to the product of (i) the quotient
determined by dividing the percentage of the Common Stock then held by the
transferring Stockholder or such participating Stockholder, as the case may
be, by the aggregate percentage of Common Stock held by all participating
holders of Common Stock, multiplied by (ii) the number of shares of Common
Stock to be sold in such proposed transfer. For purposes of this Section 6,
each participating Stockholder shall be
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deemed to hold all shares of Common Stock acquirable pursuant to the exercise of
Vested Options or the conversion of Notes then held by such Stockholder. The
participating Stockholders shall pay a pro rata portion of the transaction
expenses associated with such transfer. This Section 6 shall not apply to
transfers to Affiliates of KCSN (provided that such Affiliates shall continue to
be bound by the terms hereof).
SECTION 7. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION. At any time not less than 180 days after the
consummation of the Company's initial public offering of Common Stock under the
Securities Act, (i) the holders of a majority of the then-outstanding Investor
Stock shall have the right to require the Company to effect up to four
registrations of their Common Stock on Form S-1 under the Securities Act and, if
available, unlimited registrations on Form S-2 or S-3 under the Securities Act,
(ii) the holders of a majority of the then-outstanding TCW Stock shall have the
right to require the Company to effect up to two registrations of their Common
Stock on Form S-1 under the Securities Act and, if available, unlimited
registrations of their Common Stock on Form S-2 or S-3 under the Securities Act
and (iii) the holders of a majority of the then-outstanding Xxxxxx Stock shall
have the right to require the Company to effect one registration of their Common
Stock under the Securities Act on Form S-1 or, if available, on Form S-2 or S-3
(any such registration, a "DEMAND REGISTRATION"). Upon receipt of any request
for a Demand Registration, the Company shall give prompt written notice of such
request to each Stockholder, and shall include in such Demand Registration all
Stockholder Shares with respect to which the Company has received written
requests for inclusion therein within 30 days after the delivery of the
Company's notice, including shares covered by Vested Options or Notes to the
extent that the Company receives appropriate assurances that such Options will
be exercised or such Notes will be converted upon effectiveness of such
registration. If other securities are included in any Demand Registration that
is not an underwritten offering, all Stockholder Shares included in such
offering shall be sold prior to the sale of any of such other securities. If
other securities are included in any Demand Registration that is an underwritten
offering, and the managing underwriter for such offering advises the Company
that in its opinion the number of securities to be included exceeds the number
of securities which can be sold in such offering without adversely affecting the
marketability thereof, the Company will include in such registration all
Stockholder Shares requested to be included therein prior to the inclusion of
any securities that are not Stockholder Shares. If the number of Stockholder
Shares requested to be included in such registration exceeds the number of
securities which in the opinion of such underwriter can be sold without
adversely affecting the marketability of such offering, such Stockholder Shares
shall be included pro rata among the holders thereof based on the percentage of
the outstanding Stockholder Shares held by each such Stockholder (assuming the
exercise of all Vested Options and conversion of all Notes). The Company shall
have the right to select the investment banker(s) and manager(s) to administer
any Demand Registration that is an underwritten offering, subject to the
approval of the holders of a majority of the Stockholder Shares to be included
in such Demand Registration. If, as a result of inclusion of Stockholder Shares
other than Investor Stock, TCW Stock or Xxxxxx Stock in any Demand Registration
initiated by such holders, the holders of Investor Stock, TCW Stock or Xxxxxx
Stock (as applicable) are unable to sell at least 80% of the Investor Stock, TCW
Stock or Xxxxxx Stock requested to be included in such registration, such
registration shall not count as one of the Demand Registrations afforded the
holders of Investor Stock, TCW Stock or Xxxxxx Stock under this Section 7(a).
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(b) COMPANY REGISTRATION. In the event that the Company proposes to
register any Common Stock under the Securities Act in connection with a public
offering (other than a Demand Registration) on any form (other than Form S-4 or
Form S-8) that would legally permit the inclusion of Stockholder Shares, the
Company shall give each of the Stockholders written notice thereof as soon as
practicable but in no event less than 30 days prior to such registration, and
shall include in such registration all Stockholder Shares requested in writing
to be included therein, including shares covered by Vested Options or Notes to
the extent that the Company receives appropriate assurances that such Options
will be exercised or such Notes will be converted upon effectiveness of such
registration, subject to the limitations set forth in this Section 7(b). If in
connection with such proposed registration the managing underwriter for such
offering advises the Company that the number of Stockholder Shares requested to
be included therein exceeds the number of shares that can be sold in such
offering, any shares to be sold by the Company or pursuant to a demand
registration under the Warrant Agreement dated as of December 24, 1997 in such
offering shall have priority over any Stockholder Shares, and the number of
Stockholder Shares to be included by a Stockholder in such registration shall be
reduced pro rata on the basis of the numbers of shares of Common Stock held by
such Stockholder (assuming the exercise of all Vested Options and conversion of
all Notes) and all other holders of the Company's securities exercising similar
registration rights.
(c) COSTS OF REGISTRATION. The Company shall bear the costs of each
registration in which Stockholders participate pursuant to this Section 7,
including the reasonable fees and expenses of one counsel for the selling
Stockholders (to be selected by the holders of a majority of the Stockholder
Shares to be included in such registration) but excluding any underwriting
discounts or commissions on the sale of Stockholder Shares or the fees and
expenses of any additional counsel retained by the Stockholders. As a condition
to the inclusion of Stockholder Shares in any registration, the participating
Stockholder and the Company shall execute an underwriting agreement or similar
agreement in a form reasonably acceptable to the Company and the underwriter(s),
if any, for such offering containing customary indemnification and holdback
provisions. Notwithstanding the foregoing, no Stockholder shall be required to
incur indemnification obligations (whether several or joint and several) which
is in excess of the net proceeds received by such Stockholder pursuant to such
registration or relates to information not supplied by such Stockholder for
inclusion in the registration statement.
(d) INITIAL PUBLIC OFFERING. Notwithstanding any other provision of
this Section 7, (i) the Company shall not be required to include Stockholder
Shares in a registration that relates to the Company's initial public offering
of Common Stock if no Investor Stock is sold in such offering, and (ii) the
Company shall not be required to include in any registration pursuant to this
Section 7 any Stockholder Shares (other than any Investor Stock, Xxxxxx Stock or
TCW Stockholders in the case of a Demand Registration) that are then eligible
for transfer pursuant to Rule 144 under the Securities Act or may otherwise be
freely transferred without registration under the Securities Act.
SECTION 8. PREEMPTIVE RIGHTS. If the Company or any
subsidiary of the Company proposes to issue any shares of capital stock or
other equity securities (other than (i) issuances by a subsidiary of the
Company to the Company, (ii) issuances to persons that are not Affiliates of
the Company, (iii) issuances to a third party lender in connection with a
debt financing from such lender, (iv) issuances pursuant to the Approved
Stock Plan, (v) issuances of Common Stock upon
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the exercise or conversion of options, warrants or convertible securities that
were originally issued to non-Affiliates or pursuant to the Approved Stock Plan
or (vi) issuances, if any, of Common Stock (or warrants or other rights to
acquire the same or upon the exercise of any such warrants or rights), of up to
an aggregate of 49% of the Company's Common Stock (on a fully diluted basis) to
any holder of the Company's Series A Preferred Stock in consideration for any
amendment to the Series A Preferred Stock Certificate of Designation or in
consideration for such holder's agreement to participate in the Company's senior
credit facility as contemplated and provided for in the Letter Agreements dated
the date hereof among the Company, KCSN, TCW and Ares), each Stockholder shall
have the right of first refusal to purchase a portion of such securities equal
to such Stockholder's percentage interest in the Common Stock on a fully-diluted
basis (giving effect to the exercise of all Vested Options and the conversion of
all outstanding Notes) immediately prior to such issuance. The Company shall
give each Stockholder at least 30 days' prior written notice of any such
proposed issuance setting forth in reasonable detail the proposed terms and
conditions thereof and shall offer to each Stockholder the opportunity to
purchase such securities at the same price, on the same terms, and at the same
time as the securities are proposed to be issued by the Company; provided,
however, that if such securities are to be sold for non-cash consideration, the
Board of Directors shall make a good faith determination of the fair value of
such non-cash consideration and the Stockholders shall be entitled to pay such
value in cash. A Stockholder may exercise its right of first refusal by delivery
of an irrevocable written notice to the Company not more than 20 days after
delivery of the Company's notice. The obligation of the Stockholders exercising
their rights pursuant to this Section 8 to purchase and pay for securities shall
be conditioned upon the consummation of the proposed issuance by the Company.
SECTION 9. CORPORATE GOVERNANCE.
(a) BOARD OF DIRECTORS. Each Stockholder agrees to vote all securities
of the Company over which such Stockholder has voting control and to take all
other necessary or desirable actions within its control (whether as a
stockholder, director 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) the Company shall have a Board of Directors comprised of
no more than nine members (or such greater number of members as may be
required to enable the holders of the Company's Series B Preferred
Stock to elect the number of directors to which they are entitled
pursuant to the Series B Certificate of Designation);
(ii) the following persons shall be elected to the Board of
Directors:
(A) Xxxxxxx X. Xxxxxxxx, for so long as he holds
Common Stock representing 1% of the outstanding Common Stock ;
(B) The President of the Company;
(C) Four representatives designated by KCSN;
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(D) One independent director reasonably acceptable to
KCSN (initially Xxxx X. Xxxxxxx);
(E) One representative designated by a majority of
the holders of the Series A Preferred Stock; and
(F) One representative designated by the holders of a
majority of the Series B Preferred Stock (or such greater
number of representatives as such holders may be entitled to
designate pursuant to the Series B Certificate of
Designation).
(iii) in the case of clauses (ii)(C), (D), (E) and (F), in the
event that any director for any reason ceases to serve as a member of
the Board during his term of office, the resulting vacancy on the Board
shall be filled by the Stockholders entitled to designate such director
as provided in this Section 9 and not by a vote of the Stockholders
generally; and
(iv) if the Stockholders fail to designate a representative to
fill a directorship pursuant to the terms of this Section 9, such
directorship shall remain vacant until filled by the Stockholders
entitled to designate such director.
(b) OBSERVER RIGHTS. Prior to the Company's initial public offering
under the Securities Act, so long as Xxxxxx holds any Notes or Common Stock
representing 2% or more of the then-outstanding Common Stock, Xxxxxx shall be
entitled to designate a non-voting observer to attend all meetings of the Board
of Directors either in person, by telephone or by teleconference (if available).
The reasonable travel expenses of such observer incurred in attending meetings
shall be reimbursed by the Company to the same extent that expenses of directors
are reimbursed. In the event that Xxxxxx is entitled to observation rights
pursuant to this Section 9(b), the Company shall give Xxxxxx copies of all
notices of meetings of the Board of Directors, all actions to be taken by
unanimous written consent and all other written materials provided to members of
the Board in their capacities as directors concurrently with delivery of such
materials to members of the Board. Notwithstanding the foregoing, the Company
may exclude Xxxxxx'x observer from any meeting of the Board (or portion thereof)
or restrict access to any materials if the Company believes upon the advice of
counsel that such exclusion or restriction is necessary to preserve the
Company's attorney-client privilege. In no event shall Xxxxxx'x representative
be deemed a member of the Board for any purpose or be charged with any of the
duties or obligations (fiduciary or otherwise) imposed upon members of the
Board.
(c) INCONSISTENT PROVISIONS. To the extent that any provision of the
Company's Certificate of Incorporation or by-laws is inconsistent with the
provisions of this Agreement, the Stockholders agree to take all actions
necessary to effect such amendments to the Certificate of Incorporation or
by-laws as may be necessary and appropriate to give full effect to the
provisions of this Agreement.
SECTION 10. ASSIGNMENT OF RIGHTS; REPRESENTATIONS ON SALE. The
Company may assign to one or more third parties its right to repurchase
shares of Management Stock pursuant to Section 2, subject only to compliance
with applicable securities laws. The purchasers of
11
Management Stock pursuant to Sections 2 and 3 shall be entitled to receive
customary representations and warranties from the seller regarding the seller's
good title to, and freedom from liens, encumbrances and restrictions on the sale
of, such Management Stock.
SECTION 11. TRANSFERS IN VIOLATION OF AGREEMENT. Any transfer
or attempted transfer of any Stockholder Shares in violation of this
Agreement shall be void, and the Company shall not be obligated to record
such transfer on its books or treat any purported transferee of such
Stockholder Shares as the owner of such shares for any purpose.
SECTION 12. AMENDMENT AND WAIVER. Except as otherwise provided
herein, no amendment or waiver of any provision of this Agreement shall be
effective against the Company, KCSN, Xxxxxx, the TCW Stockholders or the
Management Stockholders unless such amendment or waiver is approved in
writing by the Company, KCSN, Xxxxxx, the holders of at least a majority of
the TCW Stock, or the holders of at least a majority of the then-outstanding
Management Stock, as the case may be. The failure of any party to enforce any
provision of this Agreement shall not be construed as a waiver of such
provision and shall not affect the right of such party thereafter to enforce
each provision of this Agreement in accordance with its terms.
SECTION 13. SEVERABILITY. 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 any other provision or 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 14. ENTIRE AGREEMENT. Except as otherwise expressly
set forth herein, this document 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 15. SUCCESSORS AND ASSIGNS. This Agreement shall bind
and inure to the benefit of and be enforceable by the Company, KCSN, Xxxxxx,
the TCW Stockholders and their respective successors and transferees, and by
the Management Stockholders and their Permitted Transferees, in each case so
long as such persons hold Stockholder Shares.
SECTION 16. COUNTERPARTS. This Agreement may be executed in
separate counterparts each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 17. REMEDIES. The Company, KCSN, Xxxxxx, the TCW
Stockholders and the Management Stockholders 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 may not be an adequate remedy for any breach of the provisions
of this Agreement and that the Company, KCSN, Xxxxxx, any TCW Stockholder or
any Management Stockholder 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
12
security) in order to enforce or prevent any violation of the provisions of this
Agreement. In the event of any legal proceedings seeking to enforce any rights
or obligations under this Agreement, the prevailing party shall be entitled to
recover its attorneys fees and costs in connection with such proceeding from the
non-prevailing party.
SECTION 18. NOTICES. Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, or sent by
telecopy (confirmed in writing) or sent by reputable overnight courier
service for next-day delivery (charges prepaid) to the Company, KCSN, Xxxxxx
or the TCW Stockholders at their respective addresses set forth below and to
any other recipient at the address indicated on the schedules hereto and to
any subsequent holder of Management Stock 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 will be deemed to have been
given hereunder when delivered personally, on the date of transmission if
sent by confirmed telecopy (or on the next business day if transmission is
not made on a business day) or on the next business day after deposit with a
reputable overnight courier service.
The Company's address is:
Color Spot Nurseries, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: President
With copies to:
Xxxxxxxxxx Hyatt & Xxxxxx, P.C.
000 00xx Xxxxxx - Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxxxx X. Xxxxxx, Esq.
KCSN's address is:
c/o Kohlberg & Co., L.L.C.
000 Xxxxx Xxxxxx
Xx. Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
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Xxxxxx'x address is:
Xxxxxx Equity Capital Corporation
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
the TCW Stockholders' addresses are:
TCW Shared Opportunity Fund II, L.P.
TCW/Crescent Mezzanine Partners, L.P
TCW/Crescent Mezzanine Trust
TCW/Crescent Mezzanine Investment Partners, L.P.
000000 Xxxxx Xxxxxx Xxxx.
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention:_______________________________
Telecopy: (000) 000-0000
State Treasurer of the State of Michigan
c/o TWC
000000 Xxxxx Xxxxxx Xxxx.
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention:_______________________________
Telecopy: (000) 000-0000
Ares Leveraged Investment Fund, L.P.
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telecopy: (000) 000-0000
SECTION 19. GOVERNING LAW. The corporate law of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and
not the law of conflicts, of California.
SECTION 20. DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
14
SECTION 21. SPOUSAL CONSENT. By his or her signature on this
Agreement, each spouse of a Management Stockholder agrees to be bound by the
provisions hereof to the extent of such spouse's interest in any Stockholder
Shares and further agrees (i) in the event of the death of such spouse, the
surviving Management Stockholder shall succeed to such deceased spouse's
interest in the Stockholder Shares held by such Management Stockholder on the
date of death, (ii) in the event of separation or dissolution of marriage,
the Management Stockholder shall have the right to purchase the spouse's
interest in the Stockholder Shares held by such Management Stockholder at
Fair Market Value (as defined in Section 1), and (iii) any decree of divorce
or dissolution of marriage, separate maintenance agreement or property
settlement between any Management Stockholder and his or her spouse shall
include a provision granting such Management Stockholder such spouse's entire
interest in the Stockholder Shares held by such Management Stockholder as
part of the division of the community property or separate property of the
marriage.
SECTION 22. PRIOR AGREEMENTS. All prior stockholders'
agreements between the Company, Xxxxxx and the Management Stockholders are
hereby terminated and shall be of no further force and effect.
SECTION 23. TERMINATION; SURVIVAL. This Agreement (other than
Sections 5, 7 and 9 hereof) shall terminate and be of no further force and
effect upon consummation of the Company's initial public offering of Common
Stock under the Securities Act. This Agreement shall terminate in its
entirety on the tenth anniversary of the date hereof.
* * * * *
15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COLOR SPOT NURSERIES, INC.
By: __________________________________
Name:
Title:
KCSN ACQUISITION COMPANY, L.P.
By KCSN Management Company, L.P.
Its General Partner
By KCSN G.P., Inc.
Its General Partner
By:_______________________________________
Xxxx Xxxxxxxx
Vice President
XXXXXX EQUITY CAPITAL CORPORATION
By: __________________________________
Name:
Title:
TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW Investment Management Company,
Its Investment Manager
By:________________________________________
Name:_____________________________
Title:____________________________
16
TCW/CRESCENT MEZZANINE PARTNERS, L.P
TCW/CRESCENT MEZZANINE TRUST
TCW/CRESCENT MEZZANINE INVESTMENT
PARTNERS, L.P.
By: TCW/Crescent Mezzanine, L.L.C.
Its Investment Manager
By:________________________________________
Name:_____________________________
Title:____________________________
STATE TREASURER OF THE STATE OF
MICHIGAN, CUSTODIAN OF THE MICHIGAN
PUBLIC SCHOOLS EMPLOYEES'
RETIREMENT SYSTEM, STATE EMPLOYEES'
RETIREMENT SYSTEM AND MICHIGAN
STATE POLICE RETIREMENT SYSTEM
By:________________________________________
Name:_____________________________
Title:____________________________
ARES LEVERAGED INVESTMENT FUND, L.P.
By:________________________________________
Name:_____________________________
Title:____________________________
17
MANAGEMENT STOCKHOLDERS:
------------------------------------------
Xxxxxxx X. Xxxxxxxx
Spouse:
--------------------------
------------------------------------------
Xxxxx Xxxxxxxx
Spouse:
--------------------------
------------------------------------------
Xxxx X. Xxxxxxx
Spouse:
--------------------------
------------------------------------------
Xxxx Xxxxxxx
Spouse:
--------------------------
------------------------------------------
Xxxxxx X. Xxxxxxxx
Spouse:
--------------------------
------------------------------------------
Xxxxxxx X. Xxxxxx
Spouse:
--------------------------
------------------------------------------
Xxxxxx X. Xxxxxxx
Spouse:
--------------------------
18
------------------------------------------
Xxx Xxxxxxxxx
Spouse:
--------------------------
------------------------------------------
Xxxx Xxxxxx
Spouse:
--------------------------
------------------------------------------
Xxxx Xxxxx
Spouse:
--------------------------
------------------------------------------
Xxxx Xxxxxxxx
Spouse:
--------------------------
------------------------------------------
Xxxx Xxxxxxx
Spouse:
--------------------------
------------------------------------------
Xxxxxx Xxxxx
Spouse:
--------------------------
19
