EXHIBIT 10.3
DRESSER, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and entered into
effective as of April 10, 2001 by and among Dresser, Inc., a Delaware
corporation (the "Company"), DEG Acquisitions, LLC, a Delaware limited liability
company (the "Control Stockholder"), Dresser Industries, Inc., a Delaware
corporation ("DI") and wholly owned subsidiary of Halliburton Company, a
Delaware corporation ("Halliburton"), and each of the individual employees who
become parties hereto from time to time in accordance with the terms hereof (the
"Employee Stockholders"). The Employee Stockholders, the Control Stockholder, DI
and any other person made party to this Agreement are collectively referred to
herein as the "Stockholders".
RECITALS
A. The Company heretofore entered into an Agreement and Plan of Merger
(the "Merger Agreement") between DEG Acquisition Corp., a Delaware corporation
("Transitory Merger Sub"), and the Company, which Merger Agreement has become
effective.
B. As a result of the transactions contemplated by the Merger
Agreement, the Control Stockholder has acquired from the Company an aggregate of
9,700,000 shares of the Company's Class A Common Stock, par value $0.001 (the
"Class A Common Stock"), and 300,000 shares of the Company's Class B Common
Stock, par value $0.001 per share (the "Class B Common Stock," and collectively
with the Class A Common Stock, the "Common Stock").
C. As a result of the transactions contemplated by the Merger Agreement,
DI has retained an aggregate of 537,408 shares of Class A Common Stock.
D. As contemplated elsewhere herein, the Company may agree to issue, and
issue, additional shares of Common Stock to employees and grant stock options to
employees, in which event such employees shall become parties hereto as Employee
Stockholders.
E. After giving effect to the transactions described in these recitals,
Exhibit A attached to this Agreement sets forth the holders of the issued and
outstanding Common Stock of the Company and the number of shares held by each.
F. A true and correct copy of the Company's Amended and Restated
Certificate of Incorporation and Bylaws are attached as Exhibits B and C,
respectively.
G. The Stockholders desire to set forth certain understandings with
respect to their holdings of Common Stock, as set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. CONFLICTS.
1.1 Potential Conflicts. Each Stockholder and the Company acknowledges
that:
(a) The Control Stockholder or one or more subsidiaries (other than
the Company and its subsidiaries) or other affiliates or members of the Control
Stockholder (other than the Company, its subsidiaries and their respective
officers and directors not nominated, directly or indirectly, by the Control
Stockholder) (the Control Stockholder and any such subsidiary or affiliate being
collectively referred to herein as an "Interested Party") may engage in material
business transactions with the Company, subject to the provisions of Section 1.6
herein.
(b) Directors, officers, and employees of an Interested Party may
serve as directors or officers of the Company.
(c) One or more Interested Parties may now or in the future engage
in the same or similar lines of business or other business activities as those
in which the Company may engage.
(d) One or more Interested Parties may exercise a controlling
influence over business, policy and strategic decisions of the Company.
1.2. Scope of Business of the Company and its Controlled Affiliates. The
Company hereby renounces any interest or expectancy in any business opportunity
that does not consist exclusively of a portion or all of the Designated
Business. For this purpose, the Designated Business consists of the businesses
conducted by the Company and its controlled affiliates as described in that
certain Offering Memorandum dated April 4, 2001 prepared and distributed by the
Company.
1.3 Corporate Opportunities. The Company and each Stockholder recognize
that the Interested Parties and individuals who are directors, officers and
employees of one or more Interested Parties and are designated by the Interested
Parties to serve as directors and officers of the Company and its controlled
affiliates ("Designees") (a) participate and will continue to participate,
directly and through affiliates, in businesses that compete with, or are
substantially the same as, the Designated Business, (b) may have interests in,
participate with, and serve as directors, officers or employees of other persons
engaged in businesses that compete with, or are substantially the same as, the
Designated Business and (c) may develop business opportunities for the
Interested Parties. The Company and each Stockholder (i) acknowledge and agree
that neither the Interested Parties nor their Designees shall be restricted or
prohibited by the relationship between the Interested Parties and the Designees,
on the one hand, and the Company, on the other, or by service of a Designee as a
director or officer of the Company from engaging in any businesses that compete
with, or are substantially the same as, the Designated Business or in any other
business, regardless of whether such business activity is in direct or indirect
competition with the Designated Business of the Company, (ii) acknowledge and
agree that, as long as their activities are conducted in accordance with the
standards set forth in Section 1.4 hereof, neither any Interested Party nor any
Designee shall have any obligation to offer the Company or any of its controlled
affiliates any business opportunity, (iii) renounce any
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interest or expectancy in any business opportunity pursued by any Interested
Party in accordance with the standards set forth in Section 1.4 hereof and (iv)
waive any claim that any business opportunity pursued by an Interested Party or
any Designee in accordance with the standards set forth in Section 1.4 hereof
constitutes a corporate opportunity of the Company or any of its controlled
affiliates that should have been presented to the Company.
1.4 Standards for Separate Conduct of Business. The Interested Parties and
their Designees shall be deemed to meet the standards set forth in this Section
1.4 if the business of the Interested Parties is conducted through the use of
their own personnel and assets and not with the substantial involvement of any
personnel (other than the Designees) or material amount of assets of the
Company. Without limiting the foregoing, such standards will be met with respect
to a business opportunity if (a) it is identified by or presented to personnel
of an Interested Party or a Designee and developed and pursued substantially
through the use of the personnel (including any Designee) and assets of one or
more Interested Parties (and not based on confidential information disclosed by
or on behalf of the Company in or during the course of a Designee's relationship
with the Company), and (b) it did not come to the attention of such Designee
solely in, and as a direct result of, his or her capacity as a director or
officer of the Company; provided, however, that (i) if such opportunity is
separately identified by an Interested Party or separately presented to an
Interested Party other than such Designee, the Interested Parties shall be free
to pursue such opportunity even if it also came to the Designee's attention
solely as a result of and in his or her capacity as a director or officer of the
Company and (ii) if such opportunity is presented to or identified by a Designee
other than solely as a result of and in his or her capacity as a director or
officer of the Company, the Interested Parties shall be free to pursue such
opportunity even if it also came to the Designee's attention as a result of and
in his or her capacity as a director or officer of the Company. Nothing in this
Agreement shall be interpreted to allow a Designee to pursue a business
opportunity in the Designated Business solely for his or her personal benefit
(as opposed to the benefit of an Interested Party).
1.5 Competing Activities. Except as otherwise expressly provided in an
agreement between the Company and an Interested Party, any Interested Party and
its officers, directors, agents, shareholders, members, partners, affiliates and
subsidiaries, may engage or invest independently or with others, in any business
activity of any type or description, including without limitation those that
might be the same as or similar to the Designated Business and without limiting
the foregoing, the Stockholders acknowledge that:
(a) (i) First Reserve Corporation, a Delaware corporation ("First
Reserve" or "FRC"), manages each of First Reserve Fund VIII, L.P., a Delaware
limited partnership and First Reserve Fund IX, L.P., a Delaware limited
partnership, which are members of the Control Stockholder, and manages other
investment limited partnerships, and
(ii) Odyssey Investment Partners, LLC ("Odyssey") manages
Odyssey Investment Partners Fund, L.P., a Delaware limited partnership, Odyssey
Coinvestors, LLC, a Delaware limited liability company, and DI Coinvestment,
LLC, a Delaware limited liability company, which are members of the Control
Stockholder, and manages other investment limited partnerships,
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all of which may from time to time compete, directly or indirectly, with the
Company, and that such Interested Parties may in their sole discretion pursue
such competing businesses without disclosure of such competition to the
Company); and
(b) neither the Company, any subsidiary of the Company, nor any
other stockholder of the Company shall have any right in or to such business
activities or ventures or to receive or share in any income or proceeds derived
therefrom.
1.6 Transactions with Affiliates. Except for the payment of fees and the
reimbursement of expenses in connection with the Control Stockholder's
acquisition of Common Stock on the date hereof, until the consummation of the
Company's Initial Public Offering (as hereinafter defined), the Company and its
subsidiaries will not enter into any transaction or series of similar
transactions with any affiliates of the Company unless: (i) in the case of
transactions in excess of $10 million but less than $50 million, the Company
obtains a resolution of the Board of Directors of the Company approved by a
majority of Disinterested Directors certifying as to the fairness of the
transaction; or (ii) in the case of transactions (A) in excess of $50 million or
(B) pursuant to which fees are paid to such affiliate (other than sales of
products and services in the ordinary course of business), the Company obtains,
in addition to the approval of a majority of Disinterested Directors, a fairness
opinion from a nationally recognized investment banking firm selected by the
Disinterested Directors. In addition to the foregoing, (i) if all of the
transactions entered into after the date hereof among the Company or its
subsidiaries, on the one hand, and with First Reserve and its affiliates (the
"FRC Affiliate Group"), on the other hand, (other than the acquisition by the
Company of Entech Industries, Inc., a Delaware corporation, and LVF Holding
Corporation, a Delaware corporation, both of which are controlled by First
Reserve) in the aggregate exceed $50 million, then the Company will not enter
into any subsequent transactions with the FRC Affiliate Group unless the Company
obtains a resolution of the Board of Directors of the Company approved by a
majority of Disinterested Directors certifying as to the fairness of the
transaction, and (ii) if all of the transactions entered into after the date
hereof among the Company or its subsidiaries, on the one hand, and with Odyssey
and its affiliates (the "Odyssey Affiliate Group"), on the other hand, in the
aggregate exceed $50 million, then the Company will not enter into any
subsequent transactions with the Odyssey Affiliate Group unless the Company
obtains a resolution of the Board of Directors of the Company approved by a
majority of Disinterested Directors (which majority shall include the
affirmative vote of at least one director appointed by FRC) certifying as to the
fairness of the transaction. Without limiting the foregoing, term "Disinterested
Directors" shall mean (a) with respect to any transaction with the FRC Affiliate
Group, the directors other than those nominated by FRC and (b) with respect to
any transaction with the Odyssey Affiliate Group, the directors other than those
nominated by Odyssey. For purposes of this Section 1.6, the dollar amount of any
transaction shall be determined by reference, in the case of any transaction to
be performed by one or the other party entirely through the payment of cash, to
the amount of cash so required or, in the case of any other transaction, to the
fair value of any property or services conveyed or rendered by one or the other
party, as determined by a majority of the Disinterested Directors, together with
the amount of any cash required to be paid by such party.
For purposes of this Agreement, the Company's Initial Public Offering shall
mean the first firmly underwritten public offering by the Company of shares of
Common Stock representing at least 5% of the outstanding Common Stock (on a
fully diluted basis after giving
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effect to such offering) in which the Company receives proceeds, in the
aggregate, of not less than $100,000,000 before deduction of underwriters'
commissions and expenses.
2. REGISTRATION RIGHTS.
2.1 Definitions. For purposes of this Section 2:
(a) Registration. The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act of 1933, as amended
(the "Securities Act"), and the declaration or ordering of effectiveness of such
registration statement.
(b) Registrable Securities. The term "Registrable Securities" means
all shares of Common Stock now held or hereinafter acquired by a Stockholder;
provided, however, that the term "Registrable Securities" shall exclude any
Common Stock sold by a person in a transaction in which rights under this
Section 2 are not assigned in accordance with this Agreement or any Common Stock
sold in a public offering, whether sold pursuant to Rule 144 promulgated under
the Securities Act, or in a registered offering, or otherwise.
(c) Registrable Securities Then Outstanding. The number of shares of
"Registrable Securities then outstanding" shall mean the number of shares of
Common Stock of the Company that are Registrable Securities and (l) are then
issued and outstanding or (2) are then issuable pursuant to an exercise or
conversion of securities exercisable or convertible into Common Stock.
(d) Holder. For purposes of this Section 2, the term "Holder" means
any Stockholder owning of record Registrable Securities or any permitted
assignee of record of such Registrable Securities to whom rights under this
Section 2 have been duly assigned in accordance with this Agreement.
(e) SEC. The term "SEC" or "Commission" means the U.S. Securities and
Exchange Commission.
2.2 Demand Registration.
(a) Request by Control Stockholder. At any time after the Initial
Public Offering of the Company's Common Stock, if the Company shall receive a
written request from the Control Stockholder or DI (a "Requesting Stockholder")
that the Company file a registration statement under the Securities Act
(including a "shelf" registration statement on Form S-3 or any successor form
pursuant to Rule 415) covering the registration of Registrable Securities
pursuant to this Section 2.2 (a "Demand Notice"), then the Company shall, within
ten (10) business days of the receipt of such written request, give written
notice of such request ("Request Notice") to all Holders, including the Control
Stockholder or DI, as the case may be, and, in addition to any obligations under
Section 2.3, use its best efforts to effect, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the
Requesting Stockholder requests to be registered in the Demand Notice, subject
only to the limitations of this Section 2.2 and the rights of other Holders
pursuant to Section 2.3; provided that the Company shall not be obligated to
effect any such registration until 180 days after the effective date of the
registration statement
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pertaining to the Company's Initial Public Offering; and provided, further, that
the Company shall not be obligated to effect any such registration if the
Company has, within the six (6) month period preceding the date of the Demand
Notice, already effected a registration under the Securities Act pursuant to (i)
this Section 2.2 or (ii) Section 2.3 in which the Requesting Stockholder
participated, other than a registration from which all or a portion of the
Registrable Securities of the Requesting Stockholder were excluded pursuant to
the provisions of Section 2.3(a).
(b) Underwriting. If the Requesting Stockholder intends to distribute
the Registrable Securities covered by its request by means of an underwritten
offering, then it shall so advise the Company as a part of the Demand Notice,
and the Company shall include such information in the Request Notice. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by the Requesting Stockholder and
such Holder) as provided herein. The Company and all Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Requesting Stockholder. All
Holders, whether or not they are participating in such offering, and the Company
agree not to effect any sale, transfer, assignment, pledge or conveyance of
(including, without limitation, taking any short position in) the Common Stock
(or any securities of the Company exchangeable or convertible into Common Stock)
during (i) the 90-day period (or such longer period required by the underwriters
of such offering) beginning on the effective date of a registration statement
filed by the Company (except pursuant to the registration effected thereby), or
(ii) any period in which trading in the Company's securities is restricted
pursuant to Company xxxxxxx xxxxxxx policies; provided, however, that none of
DI, FRC or Odyssey shall be subject to the restrictions imposed by clause (ii)
of this Section during any period in which it has not designated any of the
directors of the Company and is otherwise not affiliated with the Company.
Notwithstanding any other provision of this Section 2.2 or Section 2.3, if the
managing underwriter(s) determine(s) in good faith that marketing factors
require a limitation of the number of securities to be underwritten, then the
Company shall so advise all Holders of Registrable Securities that would
otherwise be registered and underwritten pursuant hereto, and the managing
underwriter(s) may exclude shares of the Registrable Securities from the
registration and the underwriting, and the number of shares that will be
included in the registration and the underwriting shall be allocated, first to
the Requesting Stockholder and to each of the Holders requesting inclusion of
their Registrable Securities in such registration statement pursuant to Section
2.3 on a pro rata basis based on the total number of Registrable Securities
requested for inclusion in the registration by the Requesting Stockholder and
each such Holder, and second to the Company. No other shares may be included
(other than by the Company or by the Holders pursuant to Section 2.3) without
the Requesting Stockholder's consent.
(c) Maximum Number of Demand Registrations. The Company shall be
obligated to effect only one (1) such registration pursuant to this Section 2.2
for DI, and the Company shall be obligated to effect only six (6) such
registrations pursuant to this Section 2.2 for the Control Stockholder;
provided, however, that, if the number of Registrable Securities that the
Requesting Stockholder is permitted to offer under this Section 2.2 is reduced
by more than
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50% of the amount such Requesting Stockholder requested to be registered in the
Initial Demand Notice as a result of the application of Section 2.2(b), the
initial request shall not reduce the number of requests permitted by this
Section 2.2(c) pursuant to Section 2.2(a). A Registration shall be effected for
purposes of this Section 2.2(c) when and if a registration statement is declared
effective by the Commission and the distribution of securities thereunder has
been completed without the occurrence of any stop order or proceeding relating
thereto suspending the effectiveness of the Registration.
(d) Deferral. Notwithstanding the foregoing, if the Company shall
furnish to the Requesting Stockholder a certificate signed by the President or
Chief Executive Officer of the Company stating that, in the good faith judgment
of the Board, it would be materially detrimental to the Company and its
stockholders for such registration statement then to be filed, the Company shall
have the right to defer such filings and, by notice to the Requesting
Stockholder, to require the Requesting Stockholder to withdraw its Demand Notice
and to refrain from delivering another Demand Notice for a period of not more
than ninety (90) days after receipt of the request of the initial Demand Notice;
provided, however, that the Company may not utilize this right more than twice
in any twelve (12) month period.
(e) Expenses. All expenses incurred in connection with any
registration pursuant to this Section 2.2, including without limitation all
federal and "blue sky" registration, filing and qualification fees, printer's
and accounting fees, fees and disbursements of counsel for the Company, and fees
and expenses of one counsel to the Holders (selected by the Holder including
Registrable Securities in such registration statement that holds the greatest
number of Registrable Securities) shall be borne by the Company. Each Holder
participating in a registration pursuant to this Section 2.2 shall, in the case
of a firmly underwritten offering, bear such Holder's proportionate share (based
on the total number of shares sold in such registration other than for the
account of the Company) of all discounts, commissions or other amounts payable
to underwriters in connection with such offering by the Holders and, in the case
of any other offering, bear the entire amount of discounts, commissions and
other amounts payable to underwriters or brokers attributable to Registrable
Securities sold by such Holder pursuant to such registration. Notwithstanding
the foregoing, the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to this Section 2.2 if the registration
request is subsequently withdrawn at the request of the Requesting Stockholder,
unless the Requesting Stockholder agrees that such registration constitutes the
use by it of one (1) demand registration pursuant to this Section 2.2; provided,
however, that, if at the time of such withdrawal, the Requesting Stockholder has
learned of a material adverse change in the condition, business, or prospects of
the Company not known to the Requesting Stockholder at the time of its request
for such registration and has withdrawn its request for registration with
reasonable promptness after learning of such material adverse change, then the
Requesting Stockholder shall not be required to pay any of such expenses and
such registration shall not constitute the use of a demand registration pursuant
to this Section 2.2.
2.3 Piggyback Registrations. The Company shall promptly notify all Holders
of Registrable Securities in writing (a "Piggyback Notice") prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (including, without limitation,
registration statements relating to secondary offerings of securities of the
Company, whether pursuant to Section 2.2 or otherwise, but excluding
registration
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statements relating to any employee benefit plan, an acquisition or a corporate
reorganization) and will afford each such Holder an opportunity to include in
such registration statement all or any part of the Registrable Securities then
held by such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by such Holder
shall within ten (10) days after receipt of the Piggyback Notice, so notify the
Company in writing and in such notice shall inform the Company of the number of
Registrable Securities such Holder wishes to include in such registration
statement.
(a) Underwriting. If a registration statement referred to in the
Piggyback Notice is for an underwritten offering, then the Company shall so
advise the Holders of Registrable Securities. In such event, the right of any
such Holder to include Registrable Securities in such a Registration pursuant to
this Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting as provided herein. All Holders proposing to distribute their
Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting. With respect to the Company's
Initial Public Offering or any other offering in which the Company is
registering securities, all Holders, whether or not they are participating in
such offering, hereby agree not to effect any sale, transfer, assignment, pledge
or conveyance of (including, without limitation, taking any short position in)
the Common Stock (or any securities of the Company exchangeable or convertible
into Common Stock) during (i) the 90-day period beginning on the effective date
of a registration statement filed by the Company (except as part of that
Registration), or (ii) any period in which trading in the Company's securities
is restricted pursuant to Company xxxxxxx xxxxxxx policies; provided, however,
that none of DI, FRC or Odyssey shall be subject to the restrictions imposed by
clause (ii) of this Section during any period in which it has not designated any
of the directors of the Company and is otherwise not affiliated with the
Company. Notwithstanding any other provision of this Agreement, if the managing
underwriter(s) determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the Company shall so
advise all Holders of Registrable Securities that would otherwise be registered
and underwritten pursuant hereto, and the managing underwriter(s) may exclude
shares of the Registrable Securities from the registration and the underwriting,
and the number of shares that will be included in the registration and the
underwriting shall be allocated as set forth in Section 2.2, or, if the
underwriting is not pursuant to Section 2.2, first to the Company, and second,
to each of the Holders requesting inclusion of their Registrable Securities in
such registration statement on a pro rata basis based on the total number of
Registrable Securities requested for inclusion in the registration by each such
Holder. If any Holder disapproves of the terms of any such underwriting, such
Holder may elect to withdraw therefrom by written notice to the Company and the
underwriter(s), delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For both (i) any Holder that is a partnership, the Holder and the
partners and retired partners of such Holder, or the estates and family members
of any such partners and retired partners and any trusts for the benefit of any
of the foregoing persons, and (ii) any Holder that is a corporation, the Holder
and all corporations that are affiliates of such Holder, shall be deemed to be a
single "Holder," and any pro rata reduction with respect to such "Holder" shall
be based upon the aggregate amount of
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shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
(b) Expenses. All expenses incurred in connection with a registration
pursuant to this Section 2.3 (excluding underwriters' and brokers' discounts and
commissions relating to shares sold by the Holders, which shall be borne by each
Holder of such shares), including without limitation all federal and "blue sky"
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of one counsel for Holders (selected by the Holder including
Registrable Securities in such registration statement that holds the greatest
number of Registrable Securities), and fees and disbursements of counsel for the
Company, shall be borne by the Company.
(c) Not Demand Registration. Registration pursuant to this Section
2.3 shall not be deemed to be a demand registration as described in Section 2.2,
unless the Requesting Stockholder specifically elects otherwise in writing.
Except as otherwise provided herein, there shall be no limit on the number of
times the Holders may request registration of Registrable Securities under this
Section 2.3.
2.4 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Agreement the Company
shall, as expeditiously as reasonably possible:
(a) Registration Statement. Prepare and file with the SEC a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective and to
keep any such registration statement effective for so long as required by the
Securities Act to complete the distribution.
(b) Amendments and Supplements. Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.
(c) Prospectuses. Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Blue Sky. Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) Underwriting. In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement in usual
and customary form (including indemnification provisions), with the managing
underwriter(s) of such offering. Each
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Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notification. Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(g) Opinion and Comfort Letter. Furnish, at the request of any Holder
requesting registration of Registrable Securities or of any underwriter in
connection herewith, on the date or dates requested by such Holder, (i) an
opinion, dated as of such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities and (ii) a "comfort" letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of Registrable
Securities.
(h) Road Shows. To the extent reasonably requested by a Requesting
Stockholder, cause the appropriate members of the management and employees to
participate in meetings, diligence sessions, and road shows.
2.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2 or 2.3
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect timely the
Registration of their Registrable Securities.
2.6 Indemnification. If any Registrable Securities are included in a
registration statement under Sections 2.2 or 2.3:
(a) By the Company. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers and directors of
each Holder, any underwriter (as defined in Section 2(11) of the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended, (the "Exchange Act"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"):
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(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(ii) 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
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any federal or state securities law
or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any federal or state securities law in connection with
the offering covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 2.6(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company, which consent
shall not be unreasonably withheld, nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent (and
only to the extent) that it arises out of or is based upon a Violation that
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder, partner,
officer, director, underwriter or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which the Company or any such director, officer, controlling person,
underwriter or other such Holder, partner or director, officer or controlling
person of such other Holder may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, underwriter or other Holder, partner, officer, director or controlling
person of such other Holder in connection with investigating or defending any
such loss, claim, damage, liability or action: provided, however, that the
indemnity agreement contained in this subsection 2.6(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; and provided, further, that the total
amounts payable in indemnity by a Holder under
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this Section 2.6(b) in respect of any Violation shall not exceed the net
proceeds received by such Holder in the registered offering out of which such
Violation arises.
(c) Notice. Promptly after receipt by an indemnified party under this
Section 2.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.6, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of
liability to the indemnified party under this Section 2.6 only to the extent the
indemnifying party is prejudiced as a result thereof, and the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 2.6.
(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of the Company and Holders are subject to the condition that, insofar
as they relate to any Violation made in a preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the amended prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any person if a copy of
the Final Prospectus was timely furnished to the indemnified party 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.
(e) Contribution. To provide for just and equitable contribution, if
an indemnified party makes a claim for indemnification pursuant to Section 2.6
(subject to the limitations hereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Stockholders from the
offering of the Registrable Securities or (ii) if the allocation provided in
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and Stockholders in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Stockholders shall be deemed to be in the same proportion as
the total net proceeds from the offering and sale of the Registrable Securities
(before deducting expenses) received by the
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Company and the Stockholders, bears to the total price to the public of the
Registrable Securities. The relative fault of the Company and the Stockholders
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or the alleged
omission to state a material fact relates to information supplied by the Company
or the Stockholders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Stockholders agree that it would not be just and equitable if
contribution pursuant to this Section 2.6(e) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 2.6, no Stockholder shall be
required to contribute more in the aggregate than the aggregate net proceeds
received by such Stockholder in the registered offering out of which such
contribution obligation arises. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Survival. The obligations of the Company and Holders under this
Section 2.6 shall survive until the first anniversary of the expiration of all
applicable statutes of limitation or extensions of such statutes.
2.7 Termination of the Company's Obligations. The Company shall have no
obligations pursuant to Sections 2.2 or 2.3 with respect to any Registrable
Securities proposed to be sold by a Holder in a registration pursuant to Section
2.2 or 2.3 if, in the reasonable opinion of counsel to the Company, addressed to
such Holder, all such Registrable Securities held by such Holder could be sold
in a single transaction in reliance upon Rule 144 promulgated under the
Securities Act.
3. SALES BY STOCKHOLDERS.
3.1 Restrictions on Transfer; Notice of Sales.
(a) Absolute Restriction. Except for Permitted Transfers (as defined
in Section 3.6) and transfers effected in accordance with Section 3.5 (provided
that, in the case of such transfer effected in accordance with Section 3.5, DI
shall have a co-sale right pursuant to Section 3.3), no Stockholder shall sell,
transfer, assign, pledge or otherwise dispose of, directly or indirectly,
through the sale of interests in any holding company or otherwise ("Transfer")
any shares of the capital stock of the Company now held or hereafter acquired by
such Stockholder ("Stock") prior to April 10, 2003.
(b) Sale Only In Accordance With This Section. No Stockholder shall
Transfer any shares of Stock, other than by means of a Permitted Transfer (as
defined in Section 3.6) or a Transfer effected in accordance with Section 3.2,
Section 3.3, Section 3.4, Section 3.5 or Section 4, during the period beginning
on April 10, 2003 and ending on the day prior to the
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effective date of the registration statement pertaining to the Company's Initial
Public Offering. If any Stockholder (the "Seller") proposes to Transfer any
Stock, then the Seller shall promptly give written notice (the "Notice") to the
Company and the other Stockholders at least thirty-five (35) business days prior
to the closing of such sale or transfer (or, in the case of a Transfer pursuant
to Section 3.2, forty-five (45) days). In addition to any requirements of
Section 3.2, the Notice shall describe in reasonable detail the proposed sale or
transfer including, without limitation, the number of shares of Stock to be sold
or transferred, the nature of such sale or transfer, the consideration to be
paid, and, if known, the name and address of each prospective purchaser or
transferee.
3.2 Right of First Refusal.
(a) At least forty-five (45) days prior to DI making any Transfer
(other than a Permitted Transfer), either directly or indirectly, of any shares
of the Company's capital stock (such shares, the "Offer Shares"), DI shall
deliver the Notice to the Company and the other Stockholders.
(b) Upon receipt of the Notice, the Company may elect to purchase all
(or a portion) of the Offer Shares specified in the Notice at the price and on
the terms specified therein by delivering written notice of such election to DI
and the other Stockholders within ten (10) days after the delivery of the
Notice. If the Company has not elected to purchase all of the Offer Shares
within such ten-day period, the other Stockholders may elect to purchase their
pro rata share of the available Offer Shares (which shall be the same as the
number contained in the Notice less any such Offer Shares the Company has
elected to purchase) at the price and on the terms specified therein by
delivering written notice of such election to the Company and DI within twenty
(20) days after delivery of the Notice. Any Offer Shares not elected to be
purchased by the end of such 20-day period shall be reoffered for the ten-day
period prior to the expiration of the Notice by DI on a pro rata basis to the
Stockholders who have elected to purchase their pro rata share. If the Company
or any other Stockholders have elected to purchase all of the Offer Shares from
DI, the transfer of such shares shall be consummated within fifteen (15) days
after the expiration of the initial 30-day period. If the Company and the other
Stockholders have not elected to purchase all of the Offer Shares being offered,
then neither the Company nor the other Stockholders may purchase any of the
Offer Shares and DI may transfer all of the Offer Shares to one or more third
parties at a price not less than the price per share specified in the Notice and
on other terms no more favorable to the transferees than offered to the Company
and the Stockholders in the Notice. The purchase price specified in any Notice
shall be payable solely in cash at the closing of the transaction or in
installments over time, and no capital stock of the Company held by a Holder may
be pledged except on terms and conditions satisfactory to a majority in interest
of the Stockholders.
(c) The right of first refusal established by this Section 3.2 shall
terminate on the effective date of the registration statement pertaining to the
Company's Initial Public Offering.
3.3 Co-Sale Right.
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(a) If any Seller holding more than 5% of the outstanding Common
Stock (or equivalent) of the Company desires to Transfer Stock (other than a
Permitted Transfer), then such Seller shall deliver the Notice to all of the
Stockholders. Each Stockholder shall have the pro rata right, based on the total
number of shares of Common Stock held by such Stockholder, exercisable upon
written notice to the Seller within fifteen (15) days after receipt of the
Notice, to participate in such Transfer of Stock on the same terms and
conditions, up to the total number of shares of Stock included in the Notice. To
the extent Stockholders exercise such right of participation (each a "Co-Sale
Stockholder") the number of shares of Stock that the Seller may sell or
otherwise dispose of in the Transfer shall be correspondingly reduced so that
the maximum number of shares of Stock sold or otherwise disposed of in the
Transfer by the Seller or a Co-Sale Stockholder under this Section 3.3 shall be
the number found by multiplying the total number of shares included in the
Notice, as delivered under this Section 3.3, by a fraction the numerator of
which is the total number of shares owned by the Seller or such Co-Sale
Stockholder, as the case may be (on a fully diluted basis) and the denominator
of which is the total number of shares owned by the Seller and all Co-Sale
Stockholders exercising such rights in the aggregate (on a fully diluted basis).
Each Co-Sale Stockholder shall effect its participation in the Transfer by
promptly delivering to Seller for transfer to the prospective purchaser one or
more certificates, properly endorsed for transfer, that represent the number of
shares of Stock which such Co-Sale Stockholder elects to sell. The Seller will
use its best efforts to obtain the agreement of the prospective transferee(s) to
the participation of the Co-Sale Stockholders in the contemplated Transfer and
will not Transfer any Stock to the prospective transferee(s) if such
transferee(s) refuses to allow the participation of the Co-Sale Stockholders, or
refuses to become a party to this Agreement as a Stockholder.
(b) The co-sale right established by this Section 3.3 shall terminate
upon the effective date of the registration statement pertaining to the
Company's Initial Public Offering. In addition, notwithstanding anything in
Section 3.3(a) to the contrary, no Employee Stockholder shall have any rights
under Section 3.3 with respect to any sale or transfer by DI.
3.4 Further Sales. To the extent the Company, the Control Stockholder and
the other Stockholders do not exercise their rights under Sections 3.2, or 3.3
with respect to the sale of Stock subject to the Notice, the Seller may, not
later than one hundred twenty (120) days following the first delivery to the
Company and the other Stockholders of the Notice, conclude a Transfer of the
Stock covered by the Notice and (i) in the case of Section 3.2, not elected to
be purchased by the Company or the Stockholders on terms and conditions no less
favorable to the Seller than those described in the Notice or (ii) in the case
of Section 3.3, not excluded from the Transfer by virtue of the participation
therein by Co-Sale Stockholders on the terms and conditions set forth in the
Notice. Any proposed Transfer on terms and conditions less favorable to the
Seller than those described in the Notice (in the case of a Transfer subject to
Section 3.2) or more favorable to the Seller than those described in the Notice
(in the case of a Transfer subject to Section 3.3) or any proposed transfer of
any Stock by the Seller after such one hundred twenty day period, shall again be
subject to the co-sale rights and rights of first refusal of the Stockholders
and shall require compliance by the Seller with the procedures described in this
Section 3. Notwithstanding the foregoing, no Transfer of the Stock shall be
effective unless such transferee agrees to be bound by the terms of this
Agreement as a Stockholder.
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3.5 Rights to Compel Transfer.
(a) If a Stockholder or Stockholders or any of their affiliates
holding, individually or collectively, more than 50% of the outstanding Stock
(collectively, the "selling Stockholder"), proposes to make a Transfer to any
person or entity (other than the Control Stockholder) that, (i) upon completion
of such Transfer, would hold, directly or indirectly, more than 50% of the
outstanding Stock on a fully diluted basis and (ii) is not an affiliate of such
Stockholder, then such Stockholder shall have the right, exercisable as set
forth below, to require all of the other Stockholders (the "Remaining
Stockholders") to sell, directly or indirectly, any or all of the Common Stock
(as well as, at the election of the selling Stockholder, any securities
convertible into or exercisable for Common Stock, and any other equity interest
of the Company (the "Stock Rights")) then owned by such Remaining Stockholders
(the "Transfer Stock") to the proposed transferee (the "Acquiror") in the same
pro rata amount (determined based upon the relative direct or indirect ownership
of shares of Common Stock) as is being sold by the selling Stockholder and for
the same consideration per share of Common Stock as is being paid to the selling
Stockholder and on the same terms as are applicable to the selling Stockholder
(the "Compelled Transfer"). The purchase price for each vested Stock Right in
any such Transfer shall equal the "spread" between the exercise price for such
vested Stock Right and the purchase price per share of Stock. The terms and
conditions of the Compelled Transfer shall be as set forth in the applicable
purchase agreement between the selling Stockholder and the Acquiror.
(b) The selling Stockholder shall cause the terms of the Compelled
Transfer to be reduced to writing and shall provide a written notice (the
"Compelled Transfer Notice") of such Compelled Transfer to the Company and the
Company shall provide such Compelled Transfer Notice to the Remaining
Stockholders. The Compelled Transfer Notice shall contain written notice of the
exercise of the selling Stockholder's rights pursuant to Section 3.5(a) hereof,
setting forth the consideration to be paid by the Acquiror for each share of
Stock and each Stock Right and the other terms and conditions of the Compelled
Transfer. Within 20 calendar days following the date of receipt of the Compelled
Transfer Notice, each of the Remaining Stockholders shall deliver to the selling
Stockholder certificates representing the Stock required to be transferred and
instruments representing Stock Rights required to be transferred, duly endorsed,
together with all other documents required to be executed in connection with
such Compelled Transfer or, if such delivery is not permitted by applicable law,
an unconditional agreement to deliver such certificates pursuant to this Section
3.5(b) at the closing for such Compelled Transfer against delivery to such
Remaining Stockholder of the consideration therefore. Such certificates shall be
held by the selling Stockholder in escrow for the benefit of the appropriate
Remaining Stockholder. If a Remaining Stockholder should fail to deliver such
certificates as described herein, the Company shall cause the books and records
of the Company to show that such Stock and Stock Rights are bound by the
provisions of this Section 3.5(b) and that such Stock and Stock Rights shall be
transferred only to the Acquiror upon surrender for Transfer by the Remaining
Stockholder thereof.
(c) If, within 150 calendar days (or such longer period not exceeding
210 calendar days as may be necessary to comply with any applicable provisions
of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, or to
obtain other required regulatory approval) after the selling Stockholder gives
the Compelled Transfer Notice, they have not completed the sale of all the
Transfer Stock, the selling Stockholder shall return to each of the
16
Remaining Stockholders all certificates representing Stock and instruments
representing Stock Rights that such Remaining Stockholders delivered for sale
pursuant hereto, and all the restrictions on sale or other disposition contained
in this Agreement with respect to such Stock and the Stock owned by the selling
Stockholder shall again be in effect.
(d) Upon the consummation of the Compelled Transfer, the selling
Stockholder shall give notice thereof to the Remaining Stockholders, and shall
(or shall cause the Acquiror to) remit promptly to each of the Remaining
Stockholders a net amount with respect to the Stock and Stock Rights of such
Remaining Stockholders sold pursuant thereto, after deducting a pro rata portion
of any related out-of-pocket fees and expenses, and shall furnish such other
evidence of the completion and time of completion of such sale or other
disposition and the terms thereof as may be reasonably requested by such
Remaining Stockholders.
(e) The right to compel Transfers established by this Section 3.5
shall terminate upon the effective date of the registration statement pertaining
to the Company's Initial Public Offering.
3.6 Permitted Transfers. The following shall be considered "Permitted
Transfers," and not subject to the restrictions of this Section 3, provided the
transferee thereof (the "Permitted Transferee") agrees to become a party to and
be bound by the provisions of this Agreement as a Stockholder: (a) Transfers to
the Company approved in advance by the Board, (b) Transfers among the members of
the Control Stockholder and from the Control Stockholder to its members, (c)
Transfers by DI to affiliates of DI, (d) Transfers by an Employee Stockholder to
another Employee Stockholder with the approval of the Board, (e) Transfers or
gifts by Employee Stockholders for bona fide estate planning purposes, (f)
Transfers effected pursuant to an effective registration statement filed
pursuant to the Securities Act, or (g) after the Company's Initial Public
Offering, Transfers of securities registered under the Exchange Act sold in
reliance upon an exemption under the Securities Act.
4. REPURCHASE OF SHARES AND RIGHT TO PUT SHARES TO THE COMPANY.
4.1 Right to Put Shares to the Company Upon Termination of Employment.
Each Employee Stockholder has the right to cause the Company to purchase all or
part of the shares of Stock (but not Stock Rights) of the Company held by such
Employee stockholder (the "Put Shares") at the Repurchase Price (as such term is
defined in Section 4.4) (the "Put Right") pursuant to the terms set forth in the
"Executive Employment Agreement" entered into between each Employee Stockholder
and the Company. If a Terminated Stockholder (as hereinafter defined) elects to
exercise his/her Put Right, the Terminated Stockholder shall deliver written
notice of such intention to the Company (the "Put Notice") on or prior to the
date that is nine months following the date on which the Terminated
Stockholder's employment with the Company was terminated (such nine-month period
shall be the "Put Period"). Upon delivery of the Put Notice, the Terminated
Stockholder shall immediately transfer and deliver to the Company the number of
Put Shares specified in the Put Notice, and the Company shall, so long as and to
the extent permitted by the financing agreements of the Company, pay the
Repurchase Price for such Put Shares in cash in immediately available funds
within ten (10) business days of delivery of the Put Notice. The purchase of the
Put Shares shall be deemed to have occurred
17
upon delivery of the Repurchase Price, notwithstanding any failure by the
Terminated Stockholder to deliver share certificates representing the Put Shares
or any dispute regarding the Repurchase Price. Notwithstanding anything herein
or in an Executive Employment Agreement to the contrary, the Company shall not
be obligated to purchase any Stock of an Employee Stockholder that has not been
held by such Employee Stockholder for a period of at least six months. Any Stock
underlying a Stock Right shall not be deemed to be "held" until the full
purchase price therefore has been paid to the Company. For purposes of this
Section 4, a "Terminated Stockholder" shall mean any Employee Stockholder upon
the termination of employment or consulting relationship of such Stockholder.
4.2 Optional Repurchase Upon Termination of Employment. Each Employee
Stockholder agrees that the Company shall have the right (but not the
obligation, other than as set forth in Section 4.1 and any Executive Employment
Agreement) to repurchase all or part of the shares of Stock or vested Stock
Rights of the Company held by such Employee Stockholder (the "Repurchase
Shares") at the Repurchase Price upon the termination of employment or
consulting relationship of such Stockholder, after giving effect to the
operation of Section 4.1.
4.3 Procedure for Repurchase. If the Company elects to purchase the
Repurchase Shares, and to the extent such Repurchase Shares have not yet been
repurchased pursuant to Section 4.1, the Company shall deliver written notice of
such intention to the Terminated Stockholder on or prior to the last day of the
first full calendar month following the expiration of the Put Period (without
giving effect to any waiver of the Put Period prior thereto) (the "Notice of
Repurchase"). Upon delivery of the Notice of Repurchase, the Terminated
Stockholder shall immediately transfer and deliver to the Company the number of
Repurchase Shares specified in the Notice of Repurchase, and the Company shall
pay the Repurchase Price for such Repurchase Shares in cash in immediately
available funds within six months of delivery of the Notice of Repurchase. The
purchase of the Repurchase Shares shall be deemed to have occurred upon delivery
of the Repurchase Price, notwithstanding any failure by the Terminated
Stockholder to deliver share certificates representing the Repurchase Shares or
any dispute regarding the Repurchase Price.
4.4 Repurchase Price. The "Repurchase Price" for Repurchase Shares or Put
Shares shall be the fair market value of the Repurchase Shares or the Put
Shares, as the case may be, as determined in the good faith judgment of the
Board, provided, however that the Repurchase Price for Stock Rights shall be the
fair market value of the shares underlying the Stock Rights less any applicable
exercise price. The fair market value shall be determined using the same method
of valuation that First Reserve Fund IX, L.P. uses for purposes of reporting to
its limited partners, with appropriate discount applied to Put or Repurchase
Shares or shares underlying Stock Rights representing a minority ownership
position. The Board shall determine fair market value as of the last day of the
month in which the employment of the Terminated Stockholder is terminated.
Notwithstanding the foregoing, if the Company's right to repurchase shares under
this Section 4 arises as a result of the termination of employment of the
Terminated Stockholder described in Section 3.4 of the Executive Employment
Agreement of such Terminated Stockholder, then the Repurchase Price shall be
determined without regard to any discount attributable to minority ownership.
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4.5 Disputes as to Repurchase Price. In the event of any dispute regarding
the Repurchase Price, the Terminated Stockholder will irrevocably transfer the
Put and/or Repurchase Shares to the Company as set forth in Sections 4.1 and 4.3
above and the Company shall pay the Repurchase Price for the Put or Repurchase
Shares (as determined by the Board) within ten (10) business days of the Put
Notice or the Notice of Repurchase (as the case may be). In such event, the
Terminated Stockholder may elect to use an investment bank selected by the Board
to determine the Repurchase Price. If the Repurchase Price as finally determined
by such investment bank is less than 115% of the Repurchase Price determined by
the Board, the Terminated Stockholder shall pay the fees of such investment
bank. The Company or the Terminated Stockholder, as the case may be, shall pay
the difference between the value determined by the Board and the value finally
determined by the investment bank.
4.6 Unvested Stock Rights. Any unvested Stock Right shall not be
repurchased pursuant to this Section 4 (except as may be required pursuant to an
Executive Employment Agreement), and shall terminate as set forth in the
respective agreements granting such right.
5. ASSIGNMENT, AMENDMENT AND TERMINATION.
5.1 Assignment.
(a) General. Notwithstanding anything herein to the contrary,
the rights of a Stockholder hereunder may be assigned in connection with any
Transfer in accordance with this Agreement; provided, however, that no party may
be assigned any of the foregoing rights and no Transfer shall be permitted
unless (i) the Company is given written notice by the assigning party at the
time of such assignment stating the name and address of the assignee and
identifying the securities of the Company as to which the rights in question are
being assigned and (ii) any such assignee shall have agreed to be subject to all
the terms and conditions of this Agreement, including without limitation the
provisions of this Section 5.
(b) Repurchase Rights. The Company may assign its rights under
Section 4 to the Control Stockholder.
5.2 Amendment of Rights; Termination.
(a) Amendment. Subject to Section 7.10, any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with the written consent of Stockholders holding not less than sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of Common Stock subject
to this Agreement held by Stockholders (not on a fully diluted basis). Any
amendment or waiver effected in accordance with this Section 5.2 shall be
binding upon the Stockholders, each Holder, each permitted successor or assignee
of such Stockholder or Holder and the Company. In addition, Employee
Stockholders holding a majority of shares of Common Stock (on a fully diluted
basis) held by Employee Stockholders may amend or waive any provision of this
Agreement on behalf of all Employee Stockholders ("Employee Stockholder
Approval"). In addition, this Agreement may be amended in any manner by the
Control Stockholder and the Company in connection with a reorganization or
recapitalization in which members of the Control Stockholder become stockholders
of the Company, provided such
19
amendment does not materially and adversely effect any of the other parties
hereto. Notwithstanding the foregoing, no amendment or waiver shall be effective
as to an Employee Stockholder unless (a) there is Employee Stockholder Approval,
or (b) such amendment or waiver does not disproportionately and adversely affect
such Employee Stockholder or the Employee Stockholders as a group.
(b) Termination. This Agreement may be terminated with the written
consent of the Stockholders holding not less than sixty-six and two-thirds
percent (66 2/3%) of the shares of Common Stock subject to this Agreement;
provided such consent must include the consent of DI at any time prior to the
Initial Public Offering, or so long as they own at least 1% of the outstanding
shares. Notwithstanding the foregoing, this Agreement may not be terminated as
to Employee Stockholders in connection with a transaction that would give
Employee Stockholders rights under Section 3 or 4 of this Agreement without
Employee Stockholder Approval.
6. LEGEND.
Each certificate representing shares of capital stock of the Company now or
hereafter owned by a Stockholder shall be endorsed with the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN
INVESTOR RIGHTS AGREEMENT BY AND AMONG THE STOCKHOLDER, THE CORPORATION AND
CERTAIN HOLDERS OF SHARES OF STOCK OF THE CORPORATION. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION.
20
7. GENERAL PROVISIONS.
7.1. Notices. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications made pursuant to this Agreement shall
be in writing and shall be conclusively deemed to have been duly given (a) when
hand delivered to the other party; (b) when received when sent by facsimile at
the address and number set forth below; (c) three business days after deposit in
the U.S. mail with first class or certified mail, return receipt requested,
postage prepaid and addressed to the other party as set forth below; or (d) the
next business day after deposit with a national overnight delivery service,
postage prepaid, addressed to the parties as set forth below with
next-business-day delivery guaranteed, provided that the sending party receives
a confirmation of delivery from the delivery service provider.
To the Control Stockholder:
DEG Acquisitions, LLC
c/o First Reserve Corporation
000 X. Xxxxxx Xxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx
Fax Number: (000) 000-0000
and
DEG Acquisitions, LLC
c/o Odyssey Investment Partners
Managing Principal
000 Xxxx Xxx.
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx
Fax Number: (000) 000-0000
with a copy to
First Reserve Corporation
600 Xxxxxx, No. 6000
Xxxxxxx, Xxxxx 00000
Attn: Xxx X. Xxxxx
Fax Number: (000) 000-0000
21
and a copy to:
First Reserve Corporation
0000 Xxxxxxxxxx Xx., Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Fax Number: (000) 000-0000
To the Company:
0000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Fax Number: (000) 000-0000
With a copy to the General Counsel at the same address.
To Dresser Industries, Inc.:
Dresser Industries, Inc.
x/x Xxxxxxxxxxx Xxxxxxx
0000 Xxxxxxx Xxxxx
000 Xxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attn: General Counsel
To any of the Employee Stockholders:
To the address of record for the Company
Each person making a communication hereunder by facsimile shall promptly
confirm by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication. A party
may change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section 7.1 by giving the other party written
notice of the new address in the manner set forth above.
7.2 Entire Agreement; Interpretation; Termination of Prior Agreements.
This Agreement, together with all the Exhibits hereto, constitutes and contains
the entire agreement and understanding of the parties with respect to the
subject matter hereof (other than any restrictions on transfer and repurchase
rights contained in subscription agreements, employment agreements or stock
option agreements between the Company and the Employee Stockholders, and other
than the Sponsor Rights Agreement) and supersedes any and all prior
negotiations, correspondence, agreements, understandings, duties or obligations
between the parties respecting the subject matter hereof.
22
7.3 Governing Law. This Agreement shall be governed by and construed
exclusively in accordance with the internal laws of the State of Delaware,
excluding that body of law relating to conflict of laws and choice of law.
7.4 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, then such provision(s) shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision(s) were so excluded and shall be enforceable in accordance with
its terms.
7.5 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
permitted successors and assigns, any rights or remedies under or by reason of
this Agreement.
7.6 Successors and Assigns. Subject to the provisions of Section 5.1, the
provisions of this Agreement shall inure to the benefit of, and shall be binding
upon, the successors and permitted assigns of the parties hereto.
7.7 Captions. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
7.8 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.9 Actions to Effectuate Agreement. Each party to this Agreement agrees
to take all actions within its power (including voting shares of capital stock )
to give effect to the terms of this Agreement. In the event of any inconsistency
between this Agreement, on the one hand, and the Certificate of Incorporation or
Bylaws of the Company, on the other hand, the provisions of this Agreement shall
control, and each Stockholder of the Company shall vote his or its capital stock
in such manner as to effectuate any and all amendments to the Certificate of
Incorporation or Bylaws of the Company that may be necessary in order to bring
the Amended and Certificate of Incorporation and Bylaws of the Company into
conformity with the provisions of this Agreement. The vote of any Stockholder of
the Company in violation of the provisions of this Agreement shall be void and
shall be ignored by the Company. In connection therewith, each Stockholder
hereby grants an irrevocable proxy with full power of substitution to Xxxxxxx X.
Xxxxxxxx and Xxxxxx X. Xxxxxxx for purposes of voting all shares of capital
stock subject to this Agreement at any meeting of stockholders or in any action
by written consent of stockholders in any manner necessary to give effect to the
provisions of this Agreement, it being acknowledged that such proxy is coupled
with an interest under this Agreement.
7.10 New Stockholders to Become Parties. Either the Company or the Control
Stockholder may cause each new stockholder of the Company (including those
becoming a Stockholder by virtue of being granted an option to purchase Common
Stock or exercising a stock option granted by the Company, and including any
Permitted Transferee) to become a party to this Agreement as a "Stockholder"
without the consent of any party other than the Control Stockholder. At each
such time as a new party becomes a Stockholder under this
23
Agreement, the Company or the Control Stockholder shall so notify each other
Stockholder, which notice shall include the name and address of such
Stockholder.
7.11 Arbitration. Any controversy, dispute, or claim arising out of, in
connection with, or in relation to, the interpretation, performance or breach of
this Agreement, including, without limitation, the validity, scope, and
enforceability of this section, may at the election of any Stockholder be solely
and finally settled by arbitration conducted in New York, New York, by and in
accordance with the then existing rules for commercial arbitration of the
American Arbitration Association, or any successor organization. Judgment upon
any award rendered by the arbitrator(s) may be entered by the State or Federal
Court having jurisdiction thereof. Any of the parties may demand arbitration by
written notice to the other and to the American Arbitration Association ("Demand
for Arbitration"). The parties intend that this agreement to arbitrate be valid,
enforceable and irrevocable.
24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
DRESSER, INC.
By: /s/ XXXXX X. XXXXXXX
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
DEG AcquIsitions, LLC
By: FIRST RESERVE FUND VIII, L.P.,
a Delaware limited partnership, its
manager
By: First Reserve GP VIII, L.P.
a Delaware limited partnership, its
general partner
By: First Reserve Corporation,
a Delaware corporation,
its general partner
By: /s/ XXXXXX X. XXXXXXX
----------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
DRESSER INDUSTRIES, INC.
By: /s/ XXXXX X. XXXXXX
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: Sr. Vice President
