Exhibit 9.1
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "AGREEMENT"), dated as of October 15,
2002, among Golfsmith International Holdings, Inc., a Delaware corporation (the
"COMPANY"), Atlantic Equity Partners III, L.P., a Delaware limited partnership
(the "INVESTOR"), and the Management Stockholders (defined as those signatories
listed under the heading "Management Stockholders" on the signature pages
hereto, or who subsequently execute a Management Stockholder Joinder, each
individually, a "MANAGEMENT STOCKHOLDER" and collectively, the "MANAGEMENT
STOCKHOLDERS"). The Investor and the Management Stockholders are collectively
referred to as the "STOCKHOLDERS" and individually as a "STOCKHOLDER".
Capitalized terms used herein are defined in Annex I attached hereto.
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of
September 23, 2002, among the Company, Golfsmith International, Inc., a Delaware
corporation ("GOLFSMITH"), and BGA Acquisition Corporation, a Delaware
corporation, (as amended or otherwise modified from time to time, the "MERGER
AGREEMENT"), certain Stockholders will receive Stockholder Shares; and
WHEREAS, as a condition precedent to the merger contemplated by the Merger
Agreement (the "MERGER") and the consummation of the other transactions in
connection therewith, the Company and the Stockholders, respectively, have
agreed to enter into this Agreement for the purpose of, among other things, (i)
imposing restrictions on certain Transfers of Stockholders Shares, (ii)
establishing the composition of the Company's board of directors (the "BOARD"),
and (iii) establishing certain other rights and obligations between the Company
and the Stockholders regarding the Stockholder Shares and other securities of
the Company;
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
SECTION 1. RESTRICTIONS ON TRANSFER.
(a) Retention of Shares.
(i) No Management Stockholder shall sell, transfer, pledge, assign or
otherwise dispose of (whether with or without consideration and
whether voluntarily or involuntarily or by operation of law)
("TRANSFER") any interest in any Stockholder Shares except (x) in
compliance with Section 1(b) of this Agreement, (y) pursuant to
Section 1(c), Section 1(d) or Section 3 of this Agreement or (z)
in a Public Sale or a Sale of the Company (each of the exceptions
listed in the subsections (y) and (z) of this paragraph shall
hereinafter be referred to as an "EXEMPT TRANSFER").
(ii) The Investor shall not Transfer any interest in any Stockholder
Shares except to the extent permitted by Section 1(c) or an Exempt
Transfer.
(iii) Anything contained herein to the contrary notwithstanding, no
Transfer of Stockholder Shares pursuant to this Section 1 (other
than with respect to a Sale of the Company or a Transfer pursuant to
Section 1(d) of this Agreement) shall be made for any consideration
other than cash or Marketable Securities payable upon consummation
of such Transfer, unless such consideration is approved, in writing,
by the Investor.
(b) Procedures for Transfers by Management Stockholders; Rights
of First Refusal.
(i) Prior to making any Transfer other than an Exempt Transfer, any
Management Stockholder desiring to transfer Stockholder Shares
(the "TRANSFERRING MANAGEMENT STOCKHOLDER") shall give prior
written notice (the "MANAGEMENT STOCKHOLDER SALE NOTICE") to the
Company and the Investor stating such Transferring Management
Stockholder's bona fide intention to transfer such Stockholder
Shares (the "MANAGEMENT STOCKHOLDER OFFERED SHARES"). The
Management Stockholder Sale Notice shall disclose in reasonable
detail the identity of the prospective transferee(s), the number
of Stockholder Shares to be transferred and the terms and
conditions of the proposed Transfer. The Transferring Management
Stockholder shall not consummate any Transfer until 30 days after
the Management Stockholder Sale Notice has been given to the
Company and the Investor, unless the parties to the Transfer have
been finally determined pursuant to this Section 1(b) prior to
the expiration of such 30-day period.
(ii) Upon receipt of the Management Stockholder Sale Notice, the Company
shall have the irrevocable option to purchase all or any portion of
the Management Stockholder Offered Shares to be transferred by the
Transferring Management Stockholder upon the same terms and
conditions as those set forth in the Management Stockholder Sale
Notice. Such option shall be exercisable by delivery of a written
notice of such election to the Transferring Management Stockholder
and the Investor within 15 days after the Management Stockholder
Sale Notice has been given to the Company.
(iii) If the Company elects not to exercise its option to participate in
the purchase of the Management Stockholder Offered Shares (or elects
to purchase less than all of the Management Stockholder Offered
Shares), the Investor may elect to purchase all, but not less than
all, of the Management Stockholder Offered Shares not purchased by
the Company upon the same terms and conditions as those set forth in
the Management Stockholder Sale Notice by giving written notice of
such election to the Transferring Management Stockholder within 30
days after the Management Stockholder Sale Notice has been given to
the Investor.
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(iv) Unless the Company and the Investor have collectively elected to
purchase all of the Management Stockholder Offered Shares, the
Transferring Management Stockholder may transfer (subject to all
other provisions and requirements of this Agreement) to the
transferee(s) specified in the Management Stockholder Sale Notice
all of the Management Stockholder Offered Shares at a price and on
terms no more favorable to the transferee(s) thereof than specified
in the Management Stockholder Sale Notice during the 30-day period
immediately following the expiration of the 30-day notice period
required in Section 1(b)(iii); provided, that any such transferee(s)
shall execute, prior to consummation of such Transfer, a joinder in
the manner described in Section 8 below. In the event that the
Management Stockholder Offered Shares are not transferred by the
Transferring Management Stockholder during such subsequent 30-day
period, the right of the Transferring Management Stockholder to
transfer such Management Stockholder Offered Shares shall expire and
the obligations of this Section 1(b) shall be reinstated.
(v) All other provisions of this Section 1(b) notwithstanding, if the
Board reasonably determines in good faith, that a prospective
transferee is a Competitor, the Transferring Management Stockholder
shall not transfer its Stockholder Shares to such prospective
transferee.
(c) Co-Sale Rights with Respect to Investor's Shares.
(i) In the event that the Investor proposes to make a Transfer of
Stockholder Shares (other than pursuant to an Exempt Transfer),
the Investor shall give at least 30 days prior written notice (an
"INVESTOR SALE NOTICE") to the Management Stockholders, which
notice shall include the terms and conditions of such proposed
Transfer, including the identity of each prospective transferee,
and confirm that the offer to purchase such Stockholder Shares is
irrevocable for at least 30 days. Each Management Stockholder
may, within 30 days of the receipt of the Investor Sale Notice,
give written notice (a "TAG-ALONG NOTICE") to the Investor, which
notice shall indicate that such party (each, a "TAG-ALONG
STOCKHOLDER") wishes to participate in such proposed Transfer and
shall specify the number of Stockholder Shares such Tag-Along
Stockholder desires to include in such proposed Transfer. If a
Tag-Along Stockholder gives the Investor a timely Tag-Along
Notice, the Investor shall use all reasonable efforts to cause
each prospective transferee to agree to acquire all Stockholder
Shares identified in such Tag-Along Stockholder's Tag-Along
Notice (the "TAG-ALONG SHARES") upon the same terms and
conditions as set forth in the Investor Sale Notice. If a
Management Stockholder fails to give the Investor a timely
Tag-Along Notice with respect to the Transfer proposed in the
Investor Sale Notice, such party shall thereafter forfeit its
right to participate in such proposed Transfer. The Investor may
transfer the Stockholder Shares specified in the Investor Sale
Notice on the terms and conditions set forth in the Investor Sale
Notice for a period of 60 days after expiration of the time
period during which the Management Stockholders could have
exercised their rights under this Section l(c).
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(ii) If such prospective transferee will not acquire all of the Tag-Along
Shares upon such terms, then the Investor may elect either to cancel
such proposed Transfer or to allocate the maximum number of
Stockholder Shares that each prospective transferee is willing to
purchase among the Investor and the Tag-Along Stockholders based on
each such party's relative percentage ownership of the Company (on a
Fully-Diluted Basis). For the avoidance of doubt, if the prospective
transferee is not willing to purchase such Tag-Along Shares pursuant
to the terms of this Section 1(c), then the Investor shall not
transfer any Stockholder Shares to such prospective transferee.
(iii) If a Tag-Along Stockholder elects to sell less than its allocable
number of Stockholder Shares in accordance with the foregoing
paragraph, then such number of Stockholder Shares elected not to be
sold shall be allocated among the Investor and the remaining
Tag-Along Stockholders based on each such party's relative
percentage ownership of the Company (on a Fully-Diluted Basis).
(iv) Notwithstanding anything to the contrary contained in this Section
1(c), the restrictions on Transfer set forth in this Section l(c)
shall not apply with respect to any Exempt Transfer by the Investor.
(d) Permitted Transfers of Stockholder Shares; Restrictions on
Transfers of Stockholder Shares.
(i) The restrictions contained in Section 1(b) shall not apply with
respect to any Transfer of Stockholder Shares to any member of a
Management Stockholder's Family Group.
(ii) The provisions contained in Section 1(c) shall not apply with
respect to any Transfer of Stockholder Shares by the Investor to (A)
any employee or director of the Company, the Investor or First
Atlantic Capital Ltd. or (B) any member of Investor's Group.
(iii) The rights and restrictions contained in this Agreement shall
continue to be available and applicable to the Stockholder Shares
after any such Transfer permitted under this Section 1(d); and the
transferees of such Stockholder Shares shall agree in writing in
advance with the parties hereto to be bound by and comply with the
provisions of this Agreement affecting the Stockholder Shares so
transferred (and to execute the appropriate joinder agreement
pursuant to Section 8 hereof) and to be deemed a Stockholder for all
purposes of this Agreement.
SECTION 2. ADDITIONAL RESTRICTIONS ON TRANSFER OF STOCKHOLDER SHARES.
(a) Legend. The certificates representing the Stockholder Shares
shall bear a legend substantially similar in all material respects to the
following:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED ON OCTOBER __, 2002, HAVE NOT BEEN REGISTERED UNDER ANY STATE
SECURITIES
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LAWS OR THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER
AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCKHOLDERS AGREEMENT
AMONG THE COMPANY AND CERTAIN STOCKHOLDERS DATED AS OF OCTOBER __,
2002, AS AMENDED. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
(b) Opinion of Counsel. Unless the requirements of this Section 2(b)
are waived by the Company with respect to a Transfer, no Stockholder may
consummate a Transfer of any Stockholder Shares to any person that is not a
party to this Agreement (except pursuant to an effective registration statement
under the Securities Act) without first delivering to the Company, if requested
by the Company, an opinion of counsel reasonably acceptable in form and
substance to the Company that neither registration nor qualification under the
Securities Act and applicable state securities laws is required in connection
with such Transfer.
(c) Transfers In Violation of Agreement. Any Transfer or attempted
Transfer of any Stockholder Shares (or in case of the Investor, the Transferee
Partnership) in violation of any provision of this Agreement shall be void, and
the Company shall not record such Transfer on its books or treat any purported
transferee of such Stockholder Shares as the owner of such stock for any
purpose.
(d) Pledges and Realization. Notwithstanding any other provision of
this Agreement to the contrary, a Management Stockholder may not pledge any
Stockholder Shares except to the Company without the prior written consent of
the Investor.
(e) Competitors. Notwithstanding any other provision of this
Agreement to the contrary, no Transfer of Stockholder Shares (other than
pursuant to a Public Sale or a Sale of the Company) shall be made to any Person
that the Board reasonably determines in good faith is a Competitor.
SECTION 3. SALE OF THE COMPANY.
(a) Approved Sale. If (i) a majority of the Board and the Investor
approve a Sale of the Company (an "APPROVED SALE") and (ii) the holders of
Stockholder Shares will receive cash or Marketable Securities or any combination
thereof in connection with such Sale of the Company, then all of the remaining
holders of Stockholder Shares shall consent to and raise no objections to or
against the Approved Sale. If the Approved Sale is structured as a (i) merger or
consolidation of the Company or sale of all or substantially all of the assets
of the Company (determined on a consolidated basis), each holder of Stockholder
Shares shall waive any
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dissenter's rights, appraisal rights or similar rights in connection with such
merger, consolidation or asset sale, or (ii) sale of Shares, the holders of
Stockholder Shares shall agree to sell their Stockholder Shares on the terms and
conditions approved by the Board and the holders of a majority of the voting
power of the Shares. The holders of Stockholder Shares shall take all necessary
and desirable actions, as reasonably directed by the Investor, in connection
with the consummation of the Approved Sale including, but not limited to, the
execution of such agreements and such instruments and other actions reasonably
necessary to effectuate the allocation and distribution of the aggregate
consideration upon the Approved Sale as set forth in Section 3(b).
(b) Conditions to the Obligations of Holders of Stockholder Shares
with respect to an Approved Sale. The obligations of the holders of Stockholder
Shares with respect to an Approved Sale are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, all of the
holders of Shares shall receive the same proportion (without giving effect to
any tax consequences of the Approved Sale to such holders) of the aggregate
consideration from such Approved Sale that such holder would have received if
such aggregate consideration had been distributed by the Company in complete
liquidation, (ii) if any holders are given an option as to the form and amount
of consideration to be received, each holder of Shares will be given the same
option, (iii) subject to the terms and conditions of any stock option plan or
similar equity-based incentive or benefit plan of the Company adopted and
approved by the Board and any applicable stock option, unit or warrant agreement
or other similar agreement, all holders of rights to acquire Shares (to the
extent such rights are vested) shall be given an opportunity to either (A)
exercise such rights prior to the consummation of the Approved Sale and
participate in such Approved Sale as holders of Shares or (B) upon the
consummation of the Approved Sale, receive in exchange for such rights
consideration equal to the amount determined by multiplying (1) the
consideration a holder of such Shares would receive in connection with the
Approved Sale less the exercise price per Share by (2) the number of Shares
represented by such rights, and (iv) no Stockholder will be entitled to receive
any economic benefits with respect to such Stockholder's Shares (other than in
connection with market rate benefits pursuant to such Stockholder's employment
with or engagement by the Company) which are not made available on a pro rata
basis to all the other Stockholders (except that this provision shall not apply
to market rate fees for advisory, accounting, legal or other services rendered
for or on behalf of the Company by a Stockholder who has been engaged by the
Board for such purpose); (v) no Stockholder shall be obligated to make any
out-of-pocket expenditure prior to the consummation of the Approved Sale
(excluding modest expenditures for postage, copies, etc.) and no Stockholder
shall be obligated to pay any portion of the expenses incurred in connection
with a consummated Approved Sale (costs incurred by or on behalf of a
Stockholder for its sole benefit will not be considered costs of the transaction
hereunder); and (vi) no Stockholder shall be required to provide any
representations, warranties or indemnities (other than pursuant to an escrow of
consideration proportionate to the amount receivable under this Section 3) in
connection with the Approved Sale, other than those representations, warranties
and indemnities concerning each Stockholder's valid ownership of shares of
capital stock, free of all liens and encumbrances (other than those arising
under applicable securities laws), and each Stockholder's authority, power, and
right to enter into and consummate such purchase or merger agreement without
violating any other agreement to which such Stockholder is a party or its assets
are bound.
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SECTION 4. REPURCHASE OF OUTSTANDING SHARES.
(a) Repurchase of Outstanding Shares Upon a Repurchase Event.
(i) For a period of 90 days after the occurrence of a Repurchase Event,
the Company shall have the right but not the obligation to purchase
all or any portion of the outstanding Stockholder Shares (the
"REPURCHASE SHARES") held by the applicable Management Stockholder
and his or her transferees pursuant to Section l(d) (collectively,
the "SELLING GROUP") pursuant to the terms of this Section 4.
(ii) During such 90 day period, the Company may elect to purchase any or
all of the Repurchase Shares by providing written notice of such
election (the "REPURCHASE NOTICE") to the Selling Group, which
notice shall include the number of Repurchase Shares held by the
Selling Group that the Company intends to repurchase and a
determination of the Fair Market Value of the Repurchase Shares as
of the date of that the Repurchase Notice is delivered; provided,
however, that in the event that the Company is not able to purchase
any or all of the Repurchase Shares in the fiscal year in which the
Repurchase Notice is delivered due to the restrictions set forth in
Section 4(c), below, then the Fair Market Value of the Repurchase
Shares shall be determined as of each date that such shares are
actually purchased pursuant to Section 4(c). Unless otherwise
provided in an employment agreement between the Company and the
applicable Management Stockholder, in the event of a Repurchase
Event caused by the termination of such Management Stockholder for
Cause, the Repurchase Shares may be purchased at a price equal to
the lower of the Original Cost thereof and the Fair Market Value.
For all other Repurchase Events, the purchase price shall be the
Fair Market Value at the time such shares are actually purchased.
For purposes of this Section 4(a), if a Repurchase Event for Fair
Market Value occurs within 90 days prior to a Public Offering or a
Sale of the Company, the Company shall pay to the Selling Group the
excess, if any, of (a) either, (i) in the case of a Sale of the
Company, the amount the Repurchase Shares would have otherwise been
entitled to receive in such Sale of the Company or (ii) in the case
of a Public Offering, the price per share to the Public multiplied
by the number of Repurchase Shares, less (b) the amount paid by the
Company for such Repurchase Shares.
(iii) The number of Repurchase Shares to be purchased by the Company shall
first be satisfied to the extent possible from the Repurchase Shares
held by the Management Stockholder at the time of transmittal by the
Company of the Repurchase Notice. If the number of Repurchase Shares
then held by the Management Stockholder is less than the total
number of Repurchase Shares the Company has elected to purchase, the
Company shall purchase the remaining Repurchase Shares elected to be
purchased from the other members of the Selling Group pro rata
(determined as nearly as practicable to the nearest share) according
to the number of Repurchase Shares held by such other members of the
Selling Group at the time of transmittal of the Repurchase Notice.
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(b) Repurchase Upon Death of Management Stockholder. In the event of
the death of any Management Stockholder (including a death that occurs while the
Management Stockholder is employed or retained by the Company or an Affiliate
thereof) (a "DECEDENT"), the provisions of Section 4(a) shall apply as if a
Repurchase Event had occurred, provided, however, that (i) the Repurchase Notice
required to be delivered by the Company to the Selling Group shall be delivered
to the personal representative of the Decedent promptly after being appointed as
such, (ii) the Management Stockholder, for purposes of Section 4(a), shall be
the Decedent's personal representative and (iii) the Selling Group shall include
the Decedent and his transferees pursuant to Section 1(d). The Company may, at
its option, maintain life insurance on the life of any Management Stockholder
for the purpose of financing the acquisition of all or a portion of the
Stockholder Shares being repurchased from such Management Stockholder pursuant
to this Section 4(b). The proceeds of any such life insurance (the "LIFE
INSURANCE PROCEEDS") shall be payable to the Company. Each Management
Stockholder agrees to reasonably cooperate with the Company in connection with
obtaining any such life insurance.
(c) Payment of Purchase Price. Subject to the restrictions contained
in the Company's and its subsidiaries' debt and equity financing documents and
applicable law, the Company shall pay the purchase price pursuant to Section
4(a) or (b) (the "PURCHASE PRICE") in cash, up to an aggregate of $500,000 per
fiscal year. In addition, if necessary, the Company shall use its commercially
reasonable efforts to cause additional amounts of cash to be available to fund
any additional Purchase Price payable in any such fiscal year. To the extent the
Purchase Price is not paid in its entirety in the fiscal year in which the
applicable Repurchase Notice is delivered, within 30 days following the
beginning of each of the succeeding fiscal years any remaining portion of the
Purchase Price (as calculated in accordance with Section 4(a)(ii)) shall be paid
to the extent of cash available for such payments pursuant to the first two
sentences of this Section 4(c); provided, however, that all payments under this
Section 4 shall be made in order of priority based upon the date on which the
applicable Repurchase Notice was delivered.
(d) Restrictions on Repurchases. Anything contained in this
Agreement to the contrary notwithstanding, (i) all repurchases of outstanding
Stockholder Shares by the Company pursuant to this Section 4 shall be subject to
applicable restrictions contained in federal law and the law of any other
applicable jurisdiction and in the Company's debt and equity financing
agreements and (ii) if any such restrictions prohibit or otherwise delay the
repurchase of the Repurchase Shares or any payment of money in connection
therewith pursuant to this Section 4 which the Company is otherwise entitled or
required to make, the Company may make such repurchases or such payments as soon
as it is permitted to do so without violating such restrictions.
(e) Options. In the event that following a Repurchase Event a
Management Stockholder continues to hold stock options or other securities
convertible into Shares that remain exercisable by their terms, then the
restrictions on Transfer contained in Section 1 and Section 2 shall continue to
apply to any Stockholder Shares thereafter issued upon exercise of such stock
options or other securities, and the Company shall have a continuing right to
repurchase in accordance with this Section 4 any Shares thereafter issued as if
a Repurchase Event occurred on the date such Shares were issued under such stock
options or other securities.
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(f) Mandatory Repurchase. If either a Public Offering or a Sale of
the Company has not occurred within ten years after a Repurchase Event for any
Management Stockholder, the Company shall, at the option of the Management
Stockholder (or the personal representative of any Decedent) and within 90 days
following such ten year period, purchase for cash all of the outstanding
Stockholder Shares then held by the applicable Management Stockholder and his or
her Selling Group. The purchase price for such Stockholder Shares shall be the
Fair Market Value at the time of such purchase.
(g) Consents and Approvals. In the event that Stockholder Shares are
repurchased pursuant to this Section 4, the Selling Group and the purchasers
thereof and their respective successors, assigns and representatives shall use
commercially reasonable efforts to assist the Company to obtain, at the sole
cost and expense of the Company, all required third-party, governmental and
regulatory consents and approvals (including, without limitation, any actions
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended) and shall use commercially reasonable efforts to facilitate
consummation of such repurchase in a timely manner.
(h) Exclusions from Repurchase Right. For purposes of this Section
4, the term "Management Stockholder" shall not be deemed to include either Xxxx
Xxxx or Xxxxx Xxxx or, with respect only to Shares transferred to them, directly
or indirectly, from Xxxx Xxxx or Xxxxx Xxxx, any member of their Family Groups
(collectively, the "PAULS").
SECTION 5. REGISTRATION RIGHTS.
(a) Registration of Investor's Shares. If at any time after the
execution of this Agreement and at such time or times as the Investor shall in
writing state that it desires to sell Stockholder Shares in the public
securities markets and requests the Company to effect the registration under the
Securities Act of such Stockholder Shares, the Company shall promptly use its
reasonable best efforts to effect the registration under the Securities Act and
any other applicable securities laws (including without limitation the execution
of an undertaking to file post-effective amendments, appropriate qualification
under applicable "blue sky" or state securities laws, if any, and appropriate
compliance with applicable regulations issued under the Securities Act) of the
Stockholder Shares which the Company has been so requested to register.
(b) Piggyback Registration. If (x) the Company at any time (or from
time-to-time) proposes for any reason to register Shares under the Securities
Act (other than pursuant to an initial Public Offering or a registration on Form
S-4 or Form S-8 promulgated under the Securities Act or any successor forms
thereto) whether for its own account (the "COMPANY SHARES") or the account of
any other Stockholder or (y) the Investor at any time exercises the rights
granted to it pursuant to Section 5(a) to have the Company register Shares held
by the Investor (the "INVESTOR SHARES"), the Company shall give written notice
to all Stockholders of its intention to so register such Shares at least 30 days
before the initial filing of such registration statement, and upon the written
request by any Stockholder, delivered to the Company within 20 days after
delivery of any such notice by the Company (which request shall specify the
number of Shares proposed to be included in such registration and shall state
that such Stockholder desires to sell such Shares in the public securities
markets), the Company shall use its reasonable best efforts to cause all such
Shares to be included in such registration on the same terms and
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conditions as the Shares otherwise being sold in such registration. The number
of requests permitted by the Stockholders pursuant to this Section 5(b) shall be
unlimited. Notwithstanding anything in this Section 5(b) to the contrary, if the
managing underwriter advises the Company that the inclusion of some or all of
the Shares requested to be included in such registration would interfere with
the successful marketing (including pricing) of the Company Shares or the
Investor Shares, as applicable, to be registered by the Company, then:
(i) with respect to a registration initiated pursuant to clause (x) of
the first sentence of Section 5(b) the number of Company Shares,
Investor Shares and Shares held by Management Stockholders to be
included in any such registration shall be included in the following
order:
(A) first, the Company Shares;
(B) second, the Investor Shares; and
(C) third, on a pro-rata basis based on each applicable
Management Stockholder's respective percentage ownership of the
Company on a Fully Diluted Basis, the Shares requested by each such
Management Stockholder to be included in such registration; and
(ii) with respect to a registration initiated pursuant to clause (y) of
the first sentence of Section 5(b), the number of Investor Shares
and Shares held by Management Stockholders to be included in any
such registration shall be included in the following order:
(A) first, the Investor Shares; and
(B) second, on a pro-rata basis based on each applicable
Management Stockholder's respective percentage ownership of the
Company on a Fully Diluted Basis, the Shares requested by each such
Management Stockholder to be included in such registration.
(c) Registrations on Form S-3. At such time as the Company shall
have qualified for the use of Form S-3 promulgated under the Securities Act or
any successor form thereto, the Investor and the Pauls shall each have the right
to request in writing that the Company effect registration of such Person's
Shares on Form S-3 or such successor form (including pursuant to an "Evergreen"
shelf registration pursuant to Rule 415), which request or requests shall (i)
specify the number of Shares intended to be sold or disposed of and the holders
thereof and (ii) state the intended method of disposition of such Shares. The
number of requests permitted pursuant to this Section 5(c) shall be unlimited;
provided, however, that no such request may be made by any Stockholder more than
once in any six month period and any such request must be for a number of
Stockholder Shares with an aggregate market value of not less than $1,000,000.
(d) Holdback Agreement.
(i) If the Company at any time shall register Shares under the
Securities Act (including any registration pursuant to this
Section 5) for sale to the public, the
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Investor and the Management Stockholders shall not sell publicly,
make any short sale of, grant any option for the public purchase of,
or otherwise dispose publicly of, any Stockholder Shares (other than
those Shares included in such registration pursuant to this Section
5) without the prior written consent of the Company, for a period as
shall be determined by the relevant managing underwriters, which
period shall begin not more than 10 days prior to the effectiveness
of the registration statement pursuant to which such public offering
shall be made and shall not last more than 180 days after the
effective date of such registration statement and all Stockholders
shall be treated the same; provided, however, that other than with
respect to the Company's initial Public Offering of Common Stock,
the Company shall not require the Investor or any Management
Stockholder to comply, and the Investor and such Management
Stockholder shall not be required to comply, with the provisions of
this Section 5(d) if the managing underwriter does not request the
Investor or such Management Stockholders to be subject to the
provisions of this Section 5(d); provided, further, however, that
the Company shall use commercially reasonable efforts to request
that the managing underwriters do not require the Investor and such
Management Stockholder to be subject to the provisions of this
Section 5(d), and to minimize the amount of time in which the
Investor and the Management Stockholders may be subject to the
provisions of this Section 5(d) for public offerings of Common Stock
other than the Company's initial Public Offering of Common Stock.
The Company shall use its commercially reasonable best efforts to
obtain the agreement of any Person permitted to sell shares of stock
in a registration to be bound by and to comply with this Section
5(d) as if such Person were the Investor or a Management Stockholder
hereunder. Any release by the Company or an underwriter of Investor
from the above restrictions shall have no effect unless the Pauls
are also released from such restrictions to the same extent.
(ii) The Company may impose stop-transfer instructions with respect to
the Stockholder Shares of the Investor and each Management
Stockholder (and the securities of every other Person subject to the
restrictions set forth in Section 5(d)(i)) until the end of such
period.
(e) Cooperation. In the event that a majority of the Board and the
Investor approve a Public Offering, the Stockholders will provide all reasonably
requested cooperation in connection with the consummation of such Public
Offering. The Company shall cooperate in any Public Offering including
participating in customary roadshows and conference calls, participating in the
preparation of the registration statement, providing any underwriter and any
selling stockholder and their counsel with access to the agreements and
information regarding the Company customarily provided in connection with a
Public Offering.
(f) Expenses. All expenses (other than underwriting discounts and
commissions relating to the Shares, as provided in the last sentence of this
Section 5(f)) incurred by the Company in complying with this Section 5,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.), fees and expenses of complying with securities and blue sky laws,
printing expenses, fees and expenses of the Company's counsel and accountants
and reasonable fees and
- 11 -
expenses of the Stockholders in providing the cooperation requested by the Board
under Section 5(e), including but not limited to, the fees and expenses of one
counsel to the Stockholders (the "REGISTRATION EXPENSES"), shall be paid by the
Company; provided, however, that all underwriting discounts and selling
commissions applicable to the Shares shall be borne by the Stockholder selling
such Stockholder Shares.
(g) Indemnification.
(i) In connection with any registration of any Stockholder Shares
under the Securities Act pursuant to this Agreement, the Company
shall indemnify and hold harmless each holder of Stockholder
Shares, its partners, members, directors, officers and
Affiliates, and each underwriter, broker or any other Person
acting on behalf of the holders of Stockholder Shares and each
other Person, if any, who controls any of the foregoing Persons
(within the meaning of the Securities Act) against any losses,
claims, damages or liabilities, joint or several (or actions in
respect thereof), to which any of the foregoing Persons may
become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue
statement or allegedly untrue statement of a material fact
contained in the registration statement under which such
Stockholder Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein or
otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification
of any Stockholder Shares, or arise out of or are based upon the
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, with respect to any prospectus,
necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or any
violation by the Company of the Securities Act or state
securities or blue sky laws applicable to the Company and
relating to action or inaction required of the Company in
connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse the
holders of Stockholder Shares, such underwriter, such broker and
such other Person acting on behalf of the holders of Stockholder
Shares and each such controlling Person for any legal or other
expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss,
claim, damage, liability or action (including any legal or other
expenses incurred) arises out of or is based upon an untrue
statement of a material fact or allegedly untrue statement of a
material fact or omission or alleged omission to state a material
fact made in said registration statement, preliminary prospectus,
final prospectus, amendment, supplement or document incident to
registration or qualification of any Stockholder Shares in
reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by
the holders of Stockholder Shares or their counsel or underwriter
specifically for use in the preparation thereof and the Company
did not know at the time, or could not have known after making
due inquiry and exercising due diligence which a prudent
businessperson
- 12 -
should have made or exercised, that such written information
contained such untrue statement or allegedly untrue statement of a
material fact or omission or alleged omission to state a material
fact.
(ii) In connection with any registration of Stockholder Shares under the
Securities Act pursuant to this Agreement, each holder of
Stockholder Shares shall severally, and not jointly, indemnify and
hold harmless (in the same manner and to the same extent as set
forth in the preceding paragraph of this Section 5(g)) the Company,
each director of the Company, and each officer of the Company who
shall sign such registration statement, each underwriter, broker or
other Person acting on behalf of the holders of Stockholder Shares
and each Person who controls any of the foregoing Persons (within
the meaning of the Securities Act) with respect to any untrue
statement or allegedly untrue statement of a material fact or
omission or alleged omission to state a material fact from such
registration statement, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission,
any amendment or supplement thereto or any document incident to
registration or qualification of any Stockholder Shares if such
statement or omission was made in reliance upon and in conformity
with written information furnished to the Company or such
underwriter by such holder of Stockholder Shares specifically for
use in connection with the preparation of such registration
statement, preliminary prospectus, final prospectus, amendment,
supplement or document and the Company did not know at the time, or
could not have known after making due inquiry and exercising due
diligence which a prudent businessperson should have made or
exercised, that such written information contained such untrue
statement or allegedly untrue statement of a material fact or
omission or alleged omission to state a material fact; provided,
however, that the maximum amount of liability in respect of such
indemnification shall be limited to an amount equal to the net
proceeds actually received by such holder of Stockholder Shares from
the sale of Stockholder Shares effected pursuant to such
registration.
(iii) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the
preceding paragraphs of this Section 5(g) such indemnified party
will, if a claim in respect thereof is made against an indemnifying
party, give written notice to the latter of the commencement of such
action. The failure of any indemnified party to notify an
indemnifying party of any such action shall not relieve the
indemnifying party from any liability in respect of such action that
it may have to such indemnified party on account of this Section
5(g), except to the extent the indemnifying person is materially
prejudiced thereby by the delay. In case any such action is brought
against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any
legal or other expenses subsequently incurred by the indemnified
party in connection with the defense
- 13 -
thereof; provided, however, that if the claim seeks only an
injunction or other equitable relief or if separate legal counsel is
reasonably required due to conflicts relating to one or more
material legal or equitable defenses available to such indemnified
party which are additional to or conflict with those available to
the indemnifying party, or that such claim or litigation involves or
could have an effect upon matters beyond the scope of the indemnity
agreement provided in this Section 5(g), the indemnifying party
shall not have the right to assume the defense of such action on
behalf of such indemnified party (but shall have the right to
participate therein with counsel of its choice at its expense) and
such indemnifying party shall reimburse such indemnified party and
any Person controlling such indemnified party for that portion of
the fees and expenses of any counsel retained by the indemnified
party which is reasonably related to the matters covered by the
indemnity agreement provided in this Section 5(g). If the
indemnifying party is not entitled to, or elects not to, assume the
defense of a claim, it will not be obligated to pay the fees and
expenses of more than one counsel in any jurisdiction with respect
to such claim.
(iv) If the indemnification provided for in this Section 5(g) is held by
a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage, liability
or action referred to herein, then the indemnifying party, in lieu
of indemnifying such indemnified party hereunder, shall contribute
to the amounts paid or payable by such indemnified party as a result
of such loss, claim, damage, liability or action in such proportion
as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in
connection with the statements or omissions which resulted in such
loss, claim, damage, liability or action as well as any other
relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount to be paid
or payable by a party as a result of the this Section 5(g)(iv) shall
be deemed to include any legal or other fees, charges or expenses
reasonably incurred by such party in connection with any
investigation or proceeding; provided, however, that the sum of (A)
the amount to be contributed by any holder of Stockholder Shares
pursuant to this Section 5(g)(iv) and (B) the amount to be
indemnified by any holder of Stockholder Shares pursuant to Section
5(g)(ii) shall be limited to the net proceeds (after deducting the
underwriters' discounts and commissions) received by such Person in
the offering. The parties agree that it would not be just and
equitable if contribution pursuant hereto were determined by pro
rata allocation or by any other method or allocation which does not
take account of the equitable considerations referred to herein. No
Person guilty of fraudulent misrepresentation shall be entitled to
contribution from any Person to the extent such claim sought to be
indemnified hereunder relates exclusively to such fraudulent
misrepresentation.
- 14 -
(h) Underwriting Agreement. No holder of Stockholder Shares may
participate in any underwritten registration hereunder unless such holder (x)
agrees to sell such holder's securities on the basis provided in any
underwriting arrangements and (y) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents reasonably and
customarily required for such a holder under the terms of such underwriting
arrangements. Any Stockholder may withdraw from any registration statement or
any underwriting until the underwriting agreement is signed, subject to the
provisions of Section 5(f) above.
(i) Exchange Act Compliance. From the Registration Date or such
earlier date as a registration statement filed by the Company pursuant to the
Exchange Act relating to any class of the Company's securities shall have become
effective, the Company shall use its reasonable best efforts to comply with all
of the reporting requirements of the Exchange Act applicable to it (whether or
not it shall be required to do so, but specifically excluding Section 14 of the
Exchange Act if not then applicable to the Company) and shall use its reasonable
best efforts to comply with all other public information reporting requirements
of the Commission which are conditions to the availability of Rule 144 for the
sale of the Common Stock. The Company shall cooperate with the Investor in
supplying such information as may be necessary for the Investor to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
(j) Registration Procedures. Whenever registration of Shares has
been requested pursuant to Section 5 of this Agreement, the Company shall use
its reasonable best efforts to effect the registration and sale of such Shares
in accordance with the intended method of distribution thereof as quickly as
practicable, and in connection with any such request, the Company shall, as
expeditiously as possible:
(i) prepare and file with the Commission a Registration Statement on
any form for which the Company then qualifies or which counsel
for the Company shall deem appropriate and which form shall be
available for the sale of such Shares in accordance with the
intended method of distribution thereof, and cause such
Registration Statement to become effective; provided, however,
that (x) before filing a Registration Statement or prospectus or
any amendments or supplements thereto, the Company shall provide
counsel selected by the Holders holding a majority of the Shares
being registered in such registration ("HOLDERS' COUNSEL") with
an adequate and appropriate opportunity to review and comment on
such Registration Statement and each prospectus included therein
(and each amendment or supplement thereto) to be filed with the
Commission, subject to such documents being under the Company's
control, and (y) the Company shall notify the Holders' Counsel
and each seller of Shares of any stop order issued or threatened
by the Commission and take all action required to prevent the
entry of such stop order or to remove it if entered;
(ii) prepare and file with the Commission such amendments and supplements
to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement
effective for the lesser of (x) 180 days and (y) such shorter period
which will terminate when all Shares covered by
- 15 -
such Registration Statement have been sold; provided, that if the
Stockholders have requested that an S-3 Registration be for an
offering on a continuous basis pursuant to Rule 415 under the
Securities Act, then the Company shall keep such Registration
Statement effective until all Shares covered by such Registration
Statement have been sold (up to a maximum of 12 months) and shall
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement
during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration
Statement;
(iii) furnish to each seller of Shares, prior to filing a Registration
Statement, at least one copy of such Registration Statement as is
proposed to be filed, and thereafter such number of copies of such
Registration Statement, each amendment and supplement thereto (in
each case including all exhibits thereto), and the prospectus
included in such Registration Statement (including each preliminary
prospectus) and any prospectus filed under Rule 424 under the
Securities Act as each such seller may reasonably request in order
to facilitate the disposition of the Shares owned by such seller;
(iv) register or qualify such Shares under such other securities or "blue
sky" laws of such jurisdictions as any seller of Shares may request,
and to continue such qualification in effect in such jurisdiction
for as long as permissible pursuant to the laws of such
jurisdiction, or for as long as any such seller requests or until
all of such Shares are sold, whichever is shortest, and do any and
all other acts and things which may be reasonably necessary or
advisable to enable any such seller to consummate the disposition in
such jurisdictions of the Shares owned by such seller; provided,
however, that the Company shall not be required to (x) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 5(j)(iv), (y)
subject itself to taxation in any such jurisdiction or (z) consent
to general service of process in any such jurisdiction;
(v) notify each seller of Shares at any time when a prospectus
relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such Registration
Statement contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and the
Company shall promptly prepare a supplement or amendment to such
prospectus and furnish to each seller of Shares a reasonable
number of copies of such supplement to or an amendment of such
prospectus as may be necessary so that, after delivery to the
purchasers of such Shares, such prospectus shall not contain an
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading;
- 16 -
(vi) enter into and perform customary agreements (including an
underwriting agreement in customary form with such underwriter, if
any, selected as provided in Section 5) and take such other actions
as are prudent and reasonably required in order to expedite or
facilitate the disposition of such Shares, including causing its
officers to participate in "road shows" and other information
meetings organized by such underwriter;
(vii) make available at reasonable times for inspection by any seller of
Shares, any managing underwriter participating in any disposition
of such Shares pursuant to a Registration Statement, Holders'
Counsel and any attorney, accountant or other agent retained by any
such seller or any managing underwriter (each, an "INSPECTOR" and
collectively, the "INSPECTORS"), all pertinent financial and other
pertinent records, pertinent corporate documents and properties of
the Company and its subsidiaries (collectively, the "RECORDS") as
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's and its
subsidiaries' officers, directors and employees, and the
independent public accountants of the Company, to supply all
information reasonably requested by any such Inspector in
connection with such Registration Statement. Records that the
Company determines, in good faith, to be confidential and which it
notifies the Inspectors are confidential shall not be disclosed by
the Inspectors (and the Inspectors shall confirm their agreement in
writing in advance to the Company if the Company shall so request)
unless (x) the disclosure of such Records is necessary, in the
Company's judgment, to avoid or correct a misstatement or omission
in the Registration Statement, (y) the release of such Records is
ordered pursuant to a subpoena or other order from a court of
competent jurisdiction after exhaustion of all appeals therefrom or
(z) the information in such Records was known to the Inspectors on
a non-confidential basis prior to its disclosure by the Company or
has been made generally available to the public. Each seller of
Shares agrees that it shall, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice
to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(viii) if such sale is pursuant to an underwritten offering, obtain "cold
comfort" letters dated the effective date of the Registration
Statement and the date of the closing under the underwriting
agreement from the Company's independent public accountants in
customary form and covering such matters of the type customarily
covered by "cold comfort" letters as Holders' Counsel or the
managing underwriter reasonably requests;
(ix) furnish, at the request of any seller of Shares on the date such
securities are delivered to the underwriters for sale pursuant to
such registration or, if such securities are not being sold through
underwriters, on the date the Registration Statement with respect
to such securities becomes effective, an opinion, dated such date,
of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the
seller making such
- 17 -
request, covering such legal matters with respect to the
registration in respect of which such opinion is being given as the
underwriters, if any, and such seller may reasonably request and
are customarily included in such opinions;
(x) comply with all applicable rules and regulations of the Commission,
and make available to its security holders, as soon as reasonably
practicable but no later than fifteen (15) months after the
effective date of the Registration Statement, an earnings statement
covering a period of twelve (12) months beginning after the
effective date of the Registration Statement, in a manner which
satisfies the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder;
(xi) cause all such Shares to be listed on each securities exchange
(including The NASDAQ Stock Market) on which similar securities
issued by the Company are then listed, provided that the applicable
listing requirements are satisfied;
(xii) keep Holders' Counsel advised as to the initiation and progress
of any registration under Section 5 hereunder;
(xiii) cooperate with each seller of Shares and each underwriter
participating in the disposition of such Shares and their
respective counsel in connection with any filings required to be
made with the applicable national securities exchange; and
(xiv) take all other steps reasonably necessary to effect the
registration of the Shares contemplated hereby.
SECTION 6. PREEMPTIVE RIGHTS.
(a) If the Company authorizes the issuance and sale of any New
Shares (including, without limitation, convertible debt), the Company shall
first offer to sell to the Investor and the Pauls (each, an "ELIGIBLE
STOCKHOLDER" and collectively, the "ELIGIBLE STOCKHOLDERS") a portion of such
New Shares equal to the percentage determined by dividing (1) the number of
Stockholder Shares held by such Eligible Stockholder immediately prior to such
proposed issuance, by (2) the number of Shares deemed outstanding immediately
prior to such proposed issuance, on a Fully-Diluted Basis, and held by all such
Eligible Stockholders. Each Eligible Stockholder shall be entitled to purchase a
portion of such New Shares at the same price and on the same terms as such New
Shares are to be offered. In the event an Eligible Stockholder elects not to
exercise or to exercise only a portion of its rights granted under this Section
6(a), the other Eligible Stockholders shall be entitled to purchase (in addition
to the New Shares such electing Eligible Stockholders are otherwise entitled to
purchase pursuant to this Section 6(a)) the securities offered to such
non-electing Eligible Stockholder on a pro rata basis based on each such
electing Eligible Stockholder's percentage ownership of the Company on a Fully
Diluted Basis.
(b) Each Eligible Stockholder must elect to exercise its purchase
rights hereunder within 30 days after receipt of written notice from the Company
describing in reasonable detail the New Shares being offered, the purchase price
thereof (if known), the payment terms and such holder's percentage allotment.
- 18 -
(c) During the 90 days following the expiration of the 30-day
offering period described above, the Company shall be free to sell such New
Shares that the Eligible Stockholders have not elected to purchase, on terms and
conditions no more favorable to the purchasers thereof than those offered to
such Eligible Stockholders. Any New Shares offered or sold by the Company after
such 90-day period must be reoffered to the Eligible Stockholders pursuant to
the terms of this Section 6.
(d) The provisions of this Section 6 shall not apply to
Excluded Securities.
SECTION 7. ELECTION OF DIRECTORS.
(a) Each Stockholder hereby covenants and agrees that for so long as
the Investor holds more than 25% of the voting capital stock of the Company, at
each annual meeting of the Stockholders of the Company, and at each special
meeting of the Stockholders of the Company called for the purpose of electing
directors of the Company, and at any time at which holders of any Stockholder
Shares shall have the right to vote for or consent in writing to the election of
directors of the Company, then, and in each such event, the Investor shall be
entitled to nominate all of the directors of the Company, other than the
director nominated pursuant to Sections 7(b) (each an "INVESTOR DIRECTOR"). In
furtherance of the foregoing, the number of directors nominated by the Investor
pursuant to this paragraph (a) shall in all events exceed a majority of the
Board. Each Stockholder shall so vote all of the Stockholder Shares owned by it,
or consent in writing with respect to such Stockholder Shares, to cause the
election of each Investor Director to the Board. In the event that any vacancy
in the Board is created by the removal, resignation or death of an Investor
Director, the Investor shall be entitled to appoint, and each Stockholder hereby
covenants and agrees to vote all of its Stockholder Shares owned by it, or
consent in writing with respect to such Stockholder Shares to so appoint, such
Investor Director's successor. The initial Board shall be comprised of seven
directors. The number of directors constituting the Board, and the number of
Investor Directors, may be increased or decreased (but not below five members)
at any time at the sole discretion of the Investor.
(b) Each Stockholder hereby covenants and agrees that, for so long
as the Pauls hold more than 50% of the Common Stock issued to them at the
Closing (as defined in the Merger Agreement), at each annual meeting of the
stockholders of the Company, and at each special meeting of the stockholders of
the Company called for the purpose of electing directors of the Company, and at
any time at which holders of any Stockholder Shares shall have the right to vote
for or consent in writing to the election of directors of the Company, then, and
in each such event, the Pauls shall be entitled to nominate either Xxxx Xxxx or
Xxxxx Xxxx or any natural person who is a member of their Family Group to the
Board and each Stockholder shall so vote all of the Stockholder Shares owned by
it, or consent in writing with respect to such Stockholder Shares, to cause the
election of such director to the Board. In the event that any vacancy in the
Board is created by the removal, resignation or death of such director, the
Pauls shall be entitled to appoint, and each Stockholder hereby covenants and
agrees to vote all of its Stockholder Shares owned by it, or consent in writing
with respect to such Stockholder Shares to so appoint, such director's
successor; provided, however, that such director's successor shall be either
Xxxx Xxxx or Xxxxx Xxxx or any natural person who is a member of their Family
Group. In addition, for so long as the Pauls hold more than 50% of the Common
Stock issued to them at the Closing, the Pauls shall have the right to designate
one additional person to attend each meeting of the
- 19 -
Board as an observer and such observer shall be furnished a copy of the minutes
and other records of all meetings and other actions taken by the Board and its
committees and all written material given to directors in connection with such
meeting at the same time as such materials and information are given to the
directors; provided, however, that such observer shall be either Xxxx Xxxx or
Xxxxx Xxxx or any natural person who is a member of their Family Group.
(c) The Company shall reimburse each director of the Company, or his
or her designee, for all reasonable travel and accommodation expenses incurred
by such director in connection with the performance of his or her duties as a
director. The Company shall, and each Stockholder shall use reasonable
commercial efforts to cause the Board to cause the Company to, maintain a
directors' liability insurance policy that is reasonably acceptable to the
Investor.
SECTION 8. JOINDER; ADDITIONAL SHARES.
(a) Any transferee of Stockholder Shares from a Management
Stockholder (other than a transferee in a Public Sale) shall, as a condition to
such Transfer, become an additional Management Stockholder for purposes of this
Agreement, and if such transferee is not already bound hereby as a Management
Stockholder, such transferee shall execute and deliver to the Company a
Management Stockholder Joinder. In the event of such Transfer, the term
"Management Stockholder" shall refer to the Management Stockholders and such
transferees collectively.
(b) Any transferee of Stockholder Shares from the Investor (other
than a transferee in a Public Sale) shall, as a condition to such Transfer,
become an additional Investor for all purposes of this Agreement, and such
Stockholder Shares shall be deemed to be owned by the Investor for purposes of
this Agreement (except with respect to Section 7) and such transferee shall
execute and deliver to the Company an Investor Joinder. Any such transferee
shall be entitled to the rights, privileges, and obligations of the Investor
pursuant to this Agreement, or such lessor rights and privileges as determined
by the Investor and such transferees as set forth in an agreement or instrument
executed in connection with such Transfer. In the event of such Transfer, the
term "Investor" shall refer to the Investor and such transferees collectively.
(c) Any Transfer of Stockholder Shares to a transferee not
contemplated in paragraph (a) above (other than a Public Sale) shall, as a
condition to such Transfer, become an additional Stockholder for purposes of
this Agreement and execute a joinder to become a party hereto with the same (or
fewer) rights and the same obligations as such transferor.
(d) In the event additional Shares are issued by the Company to any
Person at any time during the term of this Agreement, either directly or upon
the exercise or exchange of securities of the Company exercisable for or
exchangeable into Shares, such additional Shares shall, as a condition to such
issuance, become subject to the terms and provisions of this Agreement.
(e) In the event Shares are issued by the Company to any employee of
the Company or to any member of such employee's Family Group at any time during
the term of this Agreement, either directly or upon the conversion, exercise or
exchange of securities of the
- 20 -
Company convertible into or exercisable or exchangeable for Shares, such
employee or member of the Family Group thereof, as a condition to receiving such
Shares, shall agree to execute and deliver to the Company the Management
Stockholder Joinder and to be deemed a Management Stockholder hereunder and
agree that such Shares will be subject to the terms and provisions of this
Agreement applicable to Shares held by Management Stockholders.
(f) No transferee of Stockholder Shares pursuant to a Public Sale
shall become a party to this Agreement, nor shall such transferee have any
rights or be subject to any obligations under this Agreement, by reason of such
transferee's acquisition of such Stockholder Shares.
SECTION 9. CLOSING OF TRANSFERS.
Sales of Stockholder Shares by any Stockholder to the Company or to
any other Stockholder or Stockholders under the terms of this Agreement shall be
made at the offices of the Company on a Business Day selected by the purchaser
and the seller (subject to the provisions above with respect to closings of
Transfers under Section 4). Delivery of certificates or other instruments
evidencing such Stockholder Shares duly endorsed for transfer, and free and
clear of any liens, claims or encumbrances other than this Agreement and
restrictions imposed by federal or state securities laws, shall be made on such
date against payment of the purchase price therefor.
SECTION 10. CONSENT OF SPOUSES.
If requested by the Company, each Stockholder who is an individual
shall cause his or her spouse, as applicable, to execute and deliver a separate
consent and agreement in form and substance reasonably acceptable to the Company
(a "SPOUSAL CONSENT"). The signature of a spouse on a Spousal Consent shall not
be construed as making such spouse an owner of Stockholder Shares or a party to
this Agreement except as may otherwise be set forth in such consent. Each
Stockholder who is an individual will certify his or her marital status to the
Company at the Company's request.
SECTION 11. NO CONFLICTING AGREEMENTS.
No Stockholder shall enter into any agreements or arrangements of
any kind with any Person with respect to any Stockholder Shares on terms
inconsistent with the provisions of this Agreement (whether or not such
agreements or arrangements are with other Stockholders or with Persons that are
not parties to this Agreement), including, but not limited to, agreements or
arrangements with respect to the acquisition or disposition of Stockholder
Shares in a manner that is inconsistent with this Agreement.
- 21 -
SECTION 12. FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry out
the provisions of this Agreement and the consummation of the transactions
contemplated hereby.
SECTION 13. TERMINATION.
(a) The provisions of this Agreement specified below shall terminate
and, except as otherwise expressly provided herein, shall be of no further force
or effect and shall not be binding upon any party hereto, at the times specified
below:
(i) all provisions of this Agreement, other than Section 5 and Section
14, shall terminate upon a Sale of the Company (provided, that
Section 5 shall terminate with respect to any Stockholder to the
extent the consideration received in the Sale of the Company by such
Stockholder consists solely of cash or Marketable Securities);
(ii) all provisions of this Agreement shall terminate upon the first to
occur of (A) the dissolution, liquidation or winding-up of the
Company, (B) the approval of such termination by the Company, the
Investor and the holders of more than 50% of the Shares held by the
Management Stockholders and (C) twenty years following the date of
the Agreement; and
(iii) all provisions of this Agreement, other than Sections 5, 8, 9, 10,
11, 12, 13, and 14, shall terminate concurrently with a Public
Offering.
(b) As to any particular Stockholder, this Agreement shall no longer
be binding or of further force or effect as to such Stockholder, except as noted
below or otherwise expressly provided herein, as of the date such Stockholder
has transferred all such Stockholder's interest in the Company's securities and
the transferee(s) of such securities, if required by this Agreement, shall have
become a party hereto; provided, however, that no such termination shall be
effective if such Stockholder is in breach of this Agreement.
SECTION 14. GENERAL PROVISIONS.
(a) Amendment; Waiver and Release. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this Agreement
shall be effective unless such modification, amendment or waiver is approved in
writing by (i) the Company, (ii) the Investor and (iii) a majority in interest
of the Management Stockholders. Subject to the foregoing, the consent of the
Management Stockholders shall not be required to modify, amend, or waive any
portion of this Agreement if such modification, amendment, or waiver does not
adversely affect the rights or obligations of the Management Stockholders
contained in this Agreement. The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
- 22 -
(b) Severability. It is the desire and intent of the parties hereto
that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
(c) Entire Agreement. Except as otherwise expressly set forth
herein, this document and the documents and agreements referenced herein embody
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.
(d) Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and permitted
successors, assigns, representatives, heirs and estate of each of them, so long
as they hold Stockholder Shares. None of the provisions hereof shall create, or
be construed or deemed to create, any right of employment in favor of any Person
by the Company or any of its subsidiaries. This Agreement is not intended to
create any third party beneficiaries, except with respect to the rights of the
parties indemnified pursuant to Section 5(g) hereof.
(e) Counterparts; Facsimile Signatures. 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. Facsimile
counterpart signatures to this Agreement shall be acceptable and binding.
(f) Remedies. The Company and the 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 or any 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 security) in order to enforce or prevent any violation of the provisions
of this Agreement.
(g) Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, transmitted via facsimile
(transmission confirmed), mailed first class mail (postage prepaid) or sent by a
reputable overnight courier service (charges prepaid) to the Company at the
address set forth below (with a copy to the Company's advisers
- 23 -
and counsel at the addresses set forth below) and to any Stockholder at the
address indicated on Annex II attached hereto and to any subsequent holder of
Stockholder Shares subject to this Agreement at such address as indicated by the
Company's records, or at such address or to the attention of such other person
as the recipient party has specified by prior written notice to the sending
party. Notices will be deemed to have been given hereunder and received when
delivered personally, when received if transmitted via facsimile, five Business
Days after deposit in the U. S. mail and one Business Day after deposit with a
reputable overnight courier service.
The Company's address is:
Golfsmith International Holdings, Inc.
c/o First Atlantic Capital, Ltd.
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000; and
King & Spalding
1185 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Xxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(h) Governing Law. This agreement will be governed by and construed
in accordance with the laws of the state of Delaware (except to the extent such
matters are governed by the Delaware general corporation law), without giving
effect to any choice of law or conflicting provision or rule (whether of the
state of Delaware or any other jurisdiction) that would cause the laws of any
jurisdiction other than the state of Delaware to be applied. In furtherance of
the foregoing, the internal law of the state of Delaware will control the
interpretation and construction of this agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
(i) Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim arising out of or relating to this agreement.
(j) Jurisdiction and Venue.
(i) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself or himself and its or his property, to the
nonexclusive jurisdiction of any Delaware state court or federal
court of the United States of America sitting in New Castle
County and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or for
recognition or
- 24 -
enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in any
such Delaware state court or, to the extent permitted by law, in any
such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
(ii) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent that it or he may legally and effectively do
so, any objection that it or he may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or
relating to the Agreement in any Delaware state or federal court
sitting in New Castle County. Each of the parties hereto irrevocably
waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding
in any such court.
(iii) The parties further agree that the mailing by certified or
registered mail, return receipt requested, of any process required
by any such court shall constitute valid and lawful service of
process against them, without the necessity for service by any other
means provided by law.
(k) Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
(l) Construction. Where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. The language used in this Agreement shall
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any Party.
(m) Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice-versa.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
- 25 -
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement on the day and year first above written.
GOLFSMITH INTERNATIONAL HOLDINGS, INC.
By: /s/ XXXX X. XXXXXX
-------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President
ATLANTIC EQUITY PARTNERS III, L. P.
By: Atlantic Equity Associates III, L.P.,
its General Partner
By: Atlantic Equity Associates III, LLC,
its General Partner
By: Buaron Capital Corporation III, LLC,
its Managing Member
By: /s/ XXXXXXX XXXXXX
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
S-1 Stockholders Agreement
MANAGEMENT STOCKHOLDERS
/s/ XXXX XXXX
-----------------------------------------
Name: Xxxx Xxxx
/s/ XXXXX XXXX
-----------------------------------------
Name: Xxxxx Xxxx
/s/ XXXX XXXXXX
-----------------------------------------
Name: Xxxx Xxxxxx
/s/ XXX XXXXXXXX
-----------------------------------------
Name: Xxx Xxxxxxxx
/s/ XXXX XXXXX
-----------------------------------------
Name: Xxxx Xxxxx
/s/ XXX XXXXX
-----------------------------------------
Name: Xxx Xxxxx
/s/ XXXXX XXXXX
-----------------------------------------
Name: Xxxxx Xxxxx
/s/ XXXXX XXXXXXX
-----------------------------------------
Name: Xxxxx Xxxxxxx
/s/ XXXXXXXX XXXXX
-----------------------------------------
Name: Xxxxxxxx Xxxxx
S-2 Stockholders Agreement
/s/ XXXX XXXXXX
-----------------------------------------
Name: Xxxx Xxxxxx
/s/ XXXX XXXXXXXX
-----------------------------------------
Name: Xxxx Xxxxxxxx
/s/ XXXX XXXXXX
-----------------------------------------
Name: Xxxx Xxxxxx
/s/ XXX XXXXXX
-----------------------------------------
Name: Xxx Xxxxxx
/s/ XXX XXXXX
-----------------------------------------
Name: Xxx Xxxxx
/s/ XXXX XXXXX
-----------------------------------------
Name: Xxxx Xxxxx
/s/ XXXXXX X. XXXXXXX
-----------------------------------------
Name: Xxxxxx Xxxxxxx
/s/ XXXXX XXXXXXX
-----------------------------------------
Name: Xxxxx Xxxxxxx
/s/ XXX XXXXXXXXX
-----------------------------------------
Name: Xxx Xxxxxxxxx
/s/ XXXXXXXX XXXXXXX
-----------------------------------------
Name: Xxxxxxxx Xxxxxxx
X-0 Stockholders Agreement
/s/ XXXXX XXXXXX
-----------------------------------------
Name: Xxxxx X. Xxxxxx
/s/ XXXX XXXXX
-----------------------------------------
Name: Xxxx Xxxxx
/s/ XXXXX XXXXX
-----------------------------------------
Name: Xxxxx Xxxxx
/s/ ART XXXX
-----------------------------------------
Name: Art Xxxx
/s/ XXXXXX XXXXXXX
-----------------------------------------
Name: Xxxxxx Xxxxxxx
S-4 Stockholders Agreement
ANNEX I
DEFINITIONS
"AFFILIATE" means, with respect to any Person, (a) for purposes of
an individual, a spouse, parent, sibling or descendant of such Person or a
spouse, parent, sibling or descendant of a director, officer, or partner of such
Person and (b) any other Person that, directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, another Person. The term "CONTROL" includes, without limitation, the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"APPROVED SALE" has the meaning set forth in Section 3(a).
"BOARD" has the meaning set forth in the Preamble.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
on which banking institutions located in New York, New York are authorized by
law or other governmental action to be closed.
"CAUSE" (i) with respect to a Management Stockholder that is a party
to an employment agreement with the Company or any Affiliate of the Company,
shall have the meaning ascribed to it or as intended in such employment
agreement and (ii) with respect to a Management Stockholder that is not a party
to an employment agreement, shall mean:
(a) such Management Stockholder's (i) fraud, (ii) embezzlement, or
(iii) misappropriation of funds, in each case involving or against the
Company or any of its subsidiaries or affiliates,
(b) such Management Stockholder's indictment for or conviction
for any felony or any crime which involves dishonesty or a breach of
trust,
(c) such Management Stockholder's gross negligence or willful
misconduct with respect to the Company or any of its subsidiaries or
affiliates which causes material detriment to the Company or any of its
subsidiaries, including any violation of the United States' Foreign
Corrupt Practices Act of 1977, as amended,
(d) the debarment of such Management Stockholder from engaging in
contracting or sub-contracting activities with the United States
Government if such debarment is the result of a final determination by an
agency of such government that such Management Stockholder knowingly acted
in a manner justifying such debarment,
(e) such Management Stockholder commits a material violation of the
Company's code of ethics, or any similar statement or policy setting forth
reasonable standards for employee conduct of which such Management
Stockholder had prior notice, which the Board reasonably determines makes
him or her no longer able or fit to fulfill his or her responsibilities as
a management employee of the Company,
(f) such Management Stockholder, after fair and reasonable notice
from the Board of Directors, fails to fulfill his or her responsibilities
as a management employee and such failure is not cured within 30 days
after written notice thereof is given to the Management Stockholder by the
Board,
(g) such Management Stockholder engages in any material breach of
the terms of his or her employment and such breach is not cured within 30
days after written notice thereof is given to the Management Stockholder
by the Company, or
(h) such Management Stockholder is censured by any agency of the
United States Government or fails to satisfy any requirement of any agency
of the United States Government which the Board reasonably determines has
a material and adverse effect on his or her ability to fulfill his or her
responsibilities as a management employee of the Company.
"COMMON STOCK" means shares of the Company's common stock, $.001 par
value per share.
"COMPANY" has the meaning set forth in the Caption.
"COMPANY SHARES" has the means set forth in Section 5(b).
"COMPETITOR" means any Person that owns and operates any business
that directly competes with the primary business of the Company or any of the
Company's direct or indirect subsidiaries. Any member of any Person's Family
Group or Group shall be deemed to be a Competitor if such Person would be a
Competitor pursuant to the preceding sentence.
"DECEDENT" has the meaning set forth in Section 4(b).
"ELIGIBLE STOCKHOLDER(S)" has the meaning set forth in Section 6(a).
"EQUIVALENT NONVOTING SECURITY" means, with respect to any security
issued or to be issued by any Person, a security of such Person that is
identical in rights and benefits to such security, except that (a) the
equivalent security shall not be entitled to vote on any matter on which holders
of voting securities of such Person are entitled to vote, other than as required
by applicable law or with respect to any amendment or repeal of any provision of
the organizational documents of such Person or any other agreement or instrument
pursuant to which the equivalent security was issued which provision
specifically affects such equivalent security and (b) the equivalent security
shall be convertible in a one-to-one ratio into the first security.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 or any
successor federal statute, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, all as the same shall be in effect
from time to time.
"EXCLUDED SECURITIES" means (A) Shares or other securities issued in
connection with a pro rata stock dividend, stock split or recapitalization, (B)
Shares or other securities or options to acquire Shares or other securities of
the Company issued to employees, directors of the Company or direct or indirect
subsidiaries of the Company, (C) Shares or other securities
I-2
issued upon the conversion or exercise of any option or warrant to acquire
Shares or other Share equivalents, (D) Shares or other securities issued in an
initial Public Offering, (E) Shares issued in connection with an "equity
kicker," which are issued to one or more independent financial institutions or
investment banks which are not Affiliates of the Company or the Investor in
connection with issuances of subordinated debt or preferred stock to such third
party for the purpose of an acquisition or in connection with issuances of
senior debt, and (F) Shares or other securities issued to Persons in connection
with the acquisition of a business or part thereof in which such Persons own
equity (whether by purchase of capital stock, merger, assets or otherwise).
"EXEMPT TRANSFER" has the meaning set forth in Section l(a)(i).
"FAIR MARKET VALUE" of a Share (or any security or other debt or
equity instrument convertible into or exercisable for a Share) means that value
(on a Fully-Diluted Basis) that the Board determines in good faith through any
reasonable valuation method that a Share might change hands between a willing
buyer and a willing seller, neither being under any compulsion to buy or to sell
and both having reasonable knowledge of the relevant facts. If a Management
Stockholder, acting in good faith, disagrees with the Fair Market Value
determination by the Board, within 10 business days following the delivery of
notice of such Fair Market Value to the such Management Stockholder, such
Management Stockholder may request that the Fair Market Value be determined by
an independent valuation firm. Such independent valuation firm shall be chosen
jointly by the Company and the Management Stockholder, each in their reasonable
determination. The determination of the Fair Market Value by such independent
valuation firm shall be the final Fair Market Value. If the final Fair Market
Value as determined by the independent valuation firm is more than 110% of the
Fair Market Value determined by the Board, the Company shall pay the fees and
expenses of such independent valuation firm. If the final Fair Market Value as
determined by the independent valuation firm is less than or equal to 110% of
the Fair Market Value determined by the Board, the Management Stockholder shall
pay the fees and expenses of such independent valuation firm.
"FAMILY GROUP" means an individual's descendants (whether natural or
adopted), such individual's spouse, such individual's spouse's descendants
(whether natural or adopted), any trust, limited partnership, limited liability
company or other entity established for the benefit of any of the foregoing
persons (whether natural or adopted) for estate planning purposes.
"FULLY-DILUTED BASIS" means in the case of any calculation of the
number of Shares deemed outstanding, that effect is given to (A) all Shares
outstanding at the time of determination, (B) all Shares issuable upon the
exercise of any option, warrant or other right outstanding at the time of
determination and (C) all Shares issuable upon the exercise of any conversion or
exchange right contained in any security outstanding at the time of
determination that is convertible into or exchangeable for Shares.
I-3
"GOLFSMITH" has the meaning set forth in the Preamble.
"GROUP" means:
(i) in the case of any Stockholder that is a partnership, (A) such
partnership and any of its limited or general partners, (B) any
corporation or other business organization to which such partnership shall
sell all or substantially all of its assets or with which it shall be
merged and (C) any Affiliate of such partnership;
(ii) in the case of any Stockholder that is a corporation, (A) such
corporation, (B) any corporation or other business organization to which
such corporation shall sell or transfer all or substantially all of its
assets or with which it shall be merged and (C) any Affiliate of such
corporation; and
(iii) in the case of any Stockholder that is a limited liability
company, (A) such limited liability company and any of its members, (B)
any corporation or other business organization to which such limited
liability company shall sell all or substantially all of its assets or
with which it shall be merged and (C) any Affiliate of such limited
liability company.
"HOLDERS' COUNSEL" has the meaning set forth in Section 5(j).
"INSPECTOR(S)" has the meaning set forth in Section 5(j).
"INVESTOR" has the meaning set forth in the Caption.
"INVESTOR DIRECTOR" has the meaning set forth in Section 7(a).
"INVESTOR JOINDER" means a joinder agreement, substantially in the
form of Exhibit B hereto, by which a Person becomes an additional Investor.
"INVESTOR SALE NOTICE" has the meaning set forth in Section 1(c)(i).
"INVESTOR SHARES" has the meaning set forth in Section 5(b).
"LIFE INSURANCE PROCEEDS" has the meaning set forth in Section 4(b).
"MANAGEMENT STOCKHOLDER JOINDER" means a joinder agreement,
substantially in the form of Exhibit A hereto, by which a Person becomes an
additional Management Stockholder.
"MANAGEMENT STOCKHOLDER OFFERED SHARES" has the meaning set forth in
Section 1(b)(i).
"MANAGEMENT STOCKHOLDER SALE NOTICE" has the meaning set forth in
Section 1(b)(i).
"MANAGEMENT STOCKHOLDERS" has the meaning set forth in the Caption.
I-4
"MARKETABLE SECURITIES" means readily marketable securities
registered under the Securities Act which are issued by a company whose stock is
traded on the New York Stock Exchange, the American Stock Exchange or which is
traded "over the counter" and for which quotations are published by the National
Association of Securities Dealers Automated Quotation System and has a market
value equal to at least $250,000,000.
"MERGER" has the meaning set forth in the Preamble.
"MERGER AGREEMENT" has the meaning set forth in the Preamble.
"NEW SHARES" means any Shares or other equity securities issued by
the Company or any other securities or units convertible into or exercisable or
exchangeable for Shares or other equity securities of the Company.
"ORIGINAL COST" means the per share price paid by a Stockholder
(which would include the value of the rollover units received in connection with
the Merger in exchange for stock options), as adjusted for stock splits, reverse
stock splits, stock combinations and similar events.
"PAULS" has the meaning set forth in Section 4(h).
"PERSON" shall be construed broadly and shall include, without
limitation, an individual, a partnership, an investment fund, a limited
liability company, a corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"PUBLIC OFFERING" means the sale, in an underwritten public offering
registered under the Securities Act, of the Company's Common Stock.
"PUBLIC SALE" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or subsequent to the
Company registering any stock under the Securities Act to the public through a
broker, dealer or market maker (pursuant to the provisions of Rule 144 adopted
under the Securities Act or otherwise).
"PURCHASE PRICE" has the meaning set forth in Section 4(c).
"RECORDS" has the meaning set forth in Section 5(j).
"REGISTRATION DATE" means the date upon which the registration
statement pursuant to which the Company shall have initially registered shares
of Common Stock under the Securities Act for sale to the public shall have been
declared effective.
"REGISTRATION EXPENSES" has the meaning set forth in Section 5(f).
"REPURCHASE EVENT" means with respect to a Management Stockholder,
the termination of the employer-employee relationship between the Company and
each of its direct or indirect subsidiaries, on the one hand, and the Management
Stockholder, on the other hand, for any reason whatsoever, other than death of
such Management Stockholder.
I-5
"REPURCHASE NOTICE" has the meaning set forth in Section 4(a)(ii).
"REPURCHASE SHARES" has the meaning set forth in Section 4(a)(i).
"RULE 144" means Rule 144 promulgated under the Securities Act or
any successor rule thereto or any complementary rule thereto (such as Rule
144A).
"SALE OF THE COMPANY" means the sale of the Company to one or more
independent third parties which are not Affiliates of the Investor or the
Company, pursuant to which such party or parties acquire (i) beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of all of the capital stock of the Company (whether by merger, consolidation,
tender offer or other business combination transaction) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as the same may
be amended or supplemented from time to time, or any successor statute, and the
rules and regulations thereunder, as the same are from time to time in effect.
"SELLING GROUP" has the meaning set forth in Section 4(a)(i).
"SHARES" means shares of the Company's Common Stock.
"SPOUSAL CONSENT" has the meaning set forth in Section 10.
"STOCKHOLDER" has the meaning set forth in the Caption, and shall
include all permitted successors or assigns of Stockholder Shares.
"STOCKHOLDER SHARES" means (i) any Shares purchased or otherwise
acquired by any Stockholder, (ii) any equity securities issued or issuable
directly or indirectly with respect to the Shares referred to in clause (i)
above, (iii) any options, units or other securities convertible into or
exercisable or exchangeable for Shares or (iv) any Shares issued upon the
conversion or exercise of any securities referred to in clause (iii). As to any
particular Stockholder Shares, such Shares will cease to be Stockholder Shares
when they have been (i) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them or (ii)
sold to the public through a broker, dealer or market maker pursuant to Rule 144
under the Securities Act.
"TAG-ALONG NOTICE" has the meaning set forth in Section 1(c)(i).
"TAG-ALONG SHARES" has the meaning set forth in Section 1(c)(i).
"TRANSFER" has the meaning set forth in Section 1(a)(i).
"TRANSFERRING MANAGEMENT STOCKHOLDER" has the meaning set forth in
Section l(b)(i).
I-6
ANNEX II
SCHEDULE OF ADDRESSES
NAME OF STOCKHOLDER COPY OF NOTICE STOCKHOLDER SHARES
------------------- -------------- ------------------
II-1
EXHIBIT A
MANAGEMENT STOCKHOLDER JOINDER
By execution of this Management Stockholder Joinder, the undersigned
agrees to become a party to that certain Stockholders Agreement, dated as of
____________, 2002, as amended, among __________. The undersigned shall have all
the rights, and shall observe all the obligations, applicable to a Management
Stockholder.
Name:__________________________
Address for Notices: with copies to:
_______________________________ _______________________________
_______________________________ _______________________________
_______________________________ _______________________________
_______________________________ _______________________________
Signature:_________________________
Date:______________________________
A-1
EXHIBIT B
INVESTOR JOINDER
By execution of this Investor Joinder, the undersigned agrees to
become a party to that certain Stockholders Agreement, dated as of
_________________, 2002, as amended, among __________. The undersigned shall
have all the rights, and shall observe all the obligations, applicable to an
Investor.
Name:
Address for Notices: with copies to:
_______________________________ _______________________________
_______________________________ _______________________________
_______________________________ _______________________________
_______________________________ _______________________________
Signature: _______________________
Date:_____________________________
B-1
