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Exhibit 10.16
EMPLOYEE STOCKHOLDERS' AGREEMENT
This Employee Stockholders' Agreement (this "Agreement") is entered
into this 23rd day of April, 1998 by and among Xxxxxx Products Corp., a
Massachusetts corporation (the "Company"), those persons listed as the Employee
Stockholders on the signature pages hereof (the "Employee Stockholders"), and
those Additional Stockholders" who acquire Shares of capital stock of the
Company as described in Section 3.12 hereof. The Employee Stockholders, and the
Additional Stockholders are sometimes collectively referred to herein as the
"Stockholders."
WHEREAS, the Company intends to issue Shares of its Common Stock, $.001
per value per share ("Common Stock") to certain of its employees whether
pursuant to Stock Purchase Agreements, or Stock Option Agreements with such
Employees;
WHEREAS, it is a condition to the issuance of such Common Stock that
such Stockholders enter into this Agreement; and
WHEREAS, each of the Stockholders desires to enter into this Agreement
for the purpose of regulating certain aspects of the Stockholders' relationships
with regard to the Company and certain restrictions on the Common Stock owned by
the Stockholders; and
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
Definitions
For the purpose of this Agreement, the following terms shall be defined
as follows:
"Additional Stockholders" shall have the meaning set forth in Section
3.12.
"Affiliate" shall mean a specified person, corporation or other entity
which, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under common control with, the corporation or other
entity specified and when used with respect to the Company or any Subsidiary of
the Company, shall include any holder of at least 5% of the capital stock, or
any officer or director, of the Company.
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"Associates" (i) when used to indicate a relationship with any Person
shall mean, (a) any corporation or organization of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities, (b) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person who has the same home as such Person, is a parent, aunt or uncle,
sibling, spouse, in-law, child, niece or nephew or grandchild of such Person, or
the spouse of any of them, or (ii) when used to indicate a relationship with the
Company , shall also mean a director or officer of the Company or any
Subsidiary. Neither the Company nor any of its Subsidiaries shall be deemed an
Associate of any Stockholder.
"Berkshire Representatives" shall have the meaning as set forth in
Section 2.4.
"Berkshire Stockholder" shall mean the Persons identified as Berkshire
Stockholders in the Existing Stockholders' Agreement and their Permitted
Transferees.
"Board" or "Board of Directors" shall mean the Board of Directors of
the Company as the same shall be constituted from time to time.
"Call Event" shall have the meaning as set forth in Section 2.2(a).
"Call Group" shall have the meaning as set forth in Section 2.2(a).
"Call Notice" shall have the meaning as set forth in Section 2.2(a).
"Call Option" shall have the meaning as set forth in Section 2.2(a).
"Call Price" shall have the meaning as set forth in Section 2.2(c).
"Call Securities" shall have the meaning as set forth in Section
2.2(b).
"Cause" shall have the meaning as set forth below, except with respect
to any Stockholder who is employed by the Company or one of its Subsidiaries
pursuant to an effective written employment agreement between the Company and/or
one of its Subsidiaries and such Stockholder, in which even the definition of
"Cause" as set forth in such employment agreement shall be deemed to be the
definition of "Cause" herein solely for such Stockholder and only for so long as
such employment agreement remains effective.
In all other events, the term "Cause" shall mean that the Board of
Directors of the Company has determined, in its reasonable judgment, that any
one or more of the following has occurred:
(i) the Stockholder shall have been convicted of, or shall have pleaded
guilty or nolo contendere to, any felony or any crime involving dishonesty or
moral turpitude;
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(ii) the Stockholder shall have committed any fraud, embezzlement,
misappropriate of funds, breach of fiduciary duty or act or dishonesty;
(iii) the Stockholder shall have willfully failed to perform his duties
and responsibilities to the Company and its Affiliates, including any action as
directed by the Board of Directors of the Company (other than by reason of
disability), and such failure or refusal shall have continued for a period of
ten (10) days following written notice from the Board of Directors of the
Company;
(iv) the Stockholder shall have breached in any respect any of the
provisions of this Agreement or any other agreement between the Stockholder and
the Company; or
(v) the Stockholder shall have engaged in conduct likely to make the
Company or any of its Affiliates subject to civil or criminal liabilities other
than those arising from the Company's normal business activities.
"Change in Control" shall mean any transaction in which (i) any person,
or any two or more persons acting as a group, and all affiliates of such person
or persons, who prior to such time owned Shares representing less than fifty
percent (50%) of the voting power at elections for the Board of Directors of the
Company, shall acquire, whether by purchase, exchange, tender offer, merger,
consolidation or otherwise, such additional Shares of the Company's Capital
Stock in one or more transactions, or series of transactions, such that
following such transaction or transactions, such person or group and affiliates
beneficially own fifty percent (50%) or more of the voting power at elections
for the Board of Directors of the Company or any successor or (ii) all or
substantially all of the assets of the Company are sold other than in the
ordinary course of business.
"Closing" shall have the meaning set forth in Section 2.1(e).
"Common Stock" shall mean the Company's Common Stock, $.001 par value,
that the Company may be authorized to issue from time to time, any other
securities of the Company into which such Common Stock may hereafter be changed
or for which such Common Stock may be exchanged after giving effect to the terms
of such change or exchange (by way of reorganization, recapitalization, merger,
consolidation or otherwise) and shall also include any Common Stock of the
Company hereafter authorized and any capital stock of the Company of any other
class hereafter authorized which is not preferred as to dividends or
distribution of assets in liquidation over any other class of capital stock of
the Company and which has ordinary voting power for the election of directors of
the Company.
"Common Stock Equivalents" shall mean all Shares of Common Stock (i)
owned or (ii) issuable upon exercise of Performance Options (to the extent
earned and vested) and Time Options (to the extent vested), held by each
Stockholder.
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"Company" shall mean Xxxxxx Products Corp., a Massachusetts
corporation, and its successors and assigns.
"Designated Employee" or "Designated Employees" shall have the meaning
as set forth in Section 2.2(e).
"Determination Date" shall mean the earliest date on which the Company
shall have consummated (i) a Public Offering or (ii) a sale of all or
substantially all of the capital stock, assets or business of the Company.
"Disability" shall mean permanent disability within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended, unless
otherwise defined in a separate written employment agreement between the Company
and/or one of its Subsidiaries and the person whose disability is in question.
"Existing Stockholders' Agreement" shall mean the Stockholders'
Agreement dated as of November 27, 1997 by and among the Company and certain of
the holders of Common Stock, as amended from time to time.
"Fair Market Value" shall mean, the fair value per share of the
applicable Shares as of the applicable date on the basis of a sale of such
Shares in an arms length private sale between a willing buyer and a willing
seller, neither acting under compulsion. In determining such Fair Market Value,
no discount shall be taken for constituting a minority interest and no upward
adjustment or discount shall be taken relating to the fact that the Shares in
question are subject to the restrictions and entitled to the rights provided
hereunder. Such Fair Market Value shall be determined in good faith by the Board
of Directors of the Company.
"Good Reason" shall have the meaning as set forth below except with
respect to any Stockholder who is employed by the Company or one of its
Subsidiaries pursuant to an effective written employment agreement between the
Company and/or one of its Subsidiaries and such Stockholder in which event the
definition of "Good Reason" as set forth in such employment agreement shall be
deemed to be the definition of "Good Reason" herein solely for such Stockholder
and only for so long as such employment agreement remains effective.
In all other events, the term "Good Reason" shall mean (i) a change of
more than forty (40) miles in the location of the Company's offices where the
employee is located or (ii) a material change in the nature or scope of the
employee's authorities, status, powers, functions, duties, responsibilities, or
reporting relationships that is determined by the employee in good faith to be
adverse to those existing before such change;
"Investment Price" shall mean an amount per Share equal to the price
per Share paid for such Share at the time of initial purchase thereof (subject
to appropriate adjustments for stock splits, recapitalizations and the like).
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"Involuntary Transfer" shall have the meaning as set forth in Section
2.1(i).
"Management Representatives" shall have the meaning as set forth in
Section 2.4.
"Management Stockholders" shall mean the persons identified as
Management Stockholders in the Existing Stockholders' Agreement and their
Permitted Transferees thereunder.
"Offer Price" shall have the meaning as set forth in Section 2.1(a).
"Offered Shares Electing Stockholders" shall have the meaning as set
forth in Section 2.1(c).
"Option Period" shall have the meaning as set forth in Section 2.1(b).
"Other Stockholders" shall mean any Person who is a stockholder of the
Company, and a party to the Existing Stockholders' Agreement.
"Outside Representatives" shall have the meaning as set forth in
Section 2.4.
"Performance Options" shall mean, collectively, the options, granted to
certain Stockholders under the Company's 1997 Stock Option Plan, to purchase
Shares of the Company's Common Stock, the number of earned Shares of which is
subject to the attainment of certain performance targets as determined by the
Board of Directors of the Company, on the terms set forth therein.
"Permitted Transfer" shall mean:
(a) a Transfer of Shares by any Stockholder who is a natural
person to (A) such Stockholder's spouse, children, grandchildren,
parents or siblings, (B) a trust for the benefit of any of them or (C)
a limited partnership or limited liability company whose sole partners
or members, as the case may be, are any of the persons described in
clause (A) or clause (B);
(b) a Transfer of Shares by a Stockholder upon death to such
Stockholder's legal representatives, heirs, or legatees, provided that
such Stockholder immediately prior to death was not an employee of the
Company so that such Stockholder's Shares are subject to the provisions
of Section 2.2 of this Agreement; or
(c) a Transfer of Shares by a Stockholder or Permitted
Transferee to the Voting Trustee pursuant to the Voting Trust Agreement
referred to in Section 2.6 hereof.
No Permitted Transfer shall be effective unless and until the
transferee of the Shares so transferred, if such transferee is not
already a party to this Agreement,
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executes and delivers to the Company an executed counterpart of this
Agreement in accordance with the terms of Section 3.12 hereof. No
Permitted Transfer shall conflict with or result in any violation of a
judgment, order, decree, statute, law, ordinance, rule or regulation.
"Permitted Transferee" shall mean any person or entity who shall have
acquired and who shall hold Shares pursuant to a Permitted Transfer described
above.
"Person" shall mean an individual, corporation, partnership, trust, or
unincorporated association, or a government or any agency or political
subdivision thereof.
"Public Offering" shall mean the first issuance of Shares of Common
Stock by the Company pursuant to a public distribution in which the Common Stock
of the Company shall be listed and traded on a national exchange or on the
NASDAQ National Market System.
"Schedule" shall refer to the Schedule of Stockholders attached hereto
as Exhibit A.
"Seller" shall have the meaning as set forth in Section 2.3(a).
"Shares" shall mean all (i) Shares of Common Stock held by
Stockholders, Additional Stockholders or Other Stockholders from time to time,
(ii) Shares of Common Stock subsequently held by Permitted Transferees who
acquire them in one or more permitted Transfers, or (iii) securities of the
Company issued in exchange for, upon reclassification of, or as a distribution
in respect of, any of the foregoing. Shares shall also include any voting trust
certificates evidencing Shares deposited or transferred to the Voting Trustee
pursuant to the Voting Trust Agreement.
"Stockholder" shall have the meaning as set forth in the first
paragraph of this Agreement.
"Subsidiary" with respect to any entity (the "parent") shall mean any
corporation, firm, association or trust of which such parent, at the time in
respect of which such term is used, (i) owns directly or indirectly more than
fifty percent (50%) for the equity or beneficial interest, on a consolidated
basis, and (ii) owns directly or controls with power to vote, indirectly through
one or more Subsidiaries, Shares of capital stock or beneficial interest having
the power to cast for the election of directors, trustees, managers or other
officials having powers analogous to that of the directors of a corporation.
Unless otherwise specifically indicated, when used herein the term Subsidiary
shall refer to a direct or indirect Subsidiary of the Company.
"Take Along Group" shall have the meaning as set forth in Section
2.3(a).
"Third Party" shall mean any person other than the Company.
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"Time Options" shall mean, collectively, the time vested options,
granted to certain Stockholders under the Company's 1997 Stock Option Plan, to
purchase Shares of the Company's Common Stock on the terms set forth therein.
"Transfer" shall mean to transfer, sell, assign, pledge, hypothecate,
give, create a security interest in or lien on, place in trust (voting or
otherwise), assign or in any other way encumber or dispose of, directly or
indirectly and whether or not by operation of law or for value, any Shares.
"Transfer Notice" shall have the meaning as set forth in Section
2.1(a).
"Transferring Stockholder" shall have the meaning as set forth in
Section 2.1(g).
"Voluntary Termination" shall include a voluntary termination of
employment with the Company by a Stockholder in the absence of a Good Reason,
except as otherwise specified in an effective written agreement between the
Company and/or one of its Subsidiaries and such Stockholder. The term Voluntary
Termination shall not include termination of employment due to death or
permanent disability.
"Voting Trust Agreement" shall have the meaning set forth in Section
2.5.
"Voting Trustee" shall have the meaning set forth in Section 2.5.
ARTICLE II
Covenants and Conditions
2.1 Restrictions on Transfers; Right of First Refusal. No Stockholder
may Transfer all or any part of the Shares owned by any of them to anyone other
than a Permitted Transferee except in accordance with the following procedures:
(a) If at any time a Stockholder desires to Transfer Shares to anyone
other than a Permitted Transferee (each, an "Offeror"), such Offeror shall give
notice of such offer (the "Transfer Notice") to the Company. The Transfer Notice
shall state the terms and conditions of such offer, including the name of the
prospective purchaser, the proposed purchase price per share of such Shares (the
"Offer Price"), payment terms (including a description of any proposed non-cash
consideration), the type of disposition and the number of such Shares to be
transferred ("Offered Shares"). The Transfer Notice shall further state (i) that
the Company may acquire, in accordance with the provisions of this Agreement,
any of the offered Shares for the price and upon the other terms and conditions,
including deferred payment (if applicable), set forth therein, and (ii) that the
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Company may not purchase any of such Offered Shares unless the Company purchases
all of such Offered Shares.
(b) For a period of thirty (30) business days after receipt of the
Transfer Notice (the "Option Period"), the Company may, by notice in writing to
the Offeror delivering such Transfer Notice, elect in writing to purchase all,
but not less than all, of the Offered Shares at the Offer Price. The closing of
the purchase of Offered Shares pursuant to Section 2.1(b) or Section 2.1(c), as
the case may be, shall take place at the principal office of the Company on the
tenth (10th) day after the expiration of the Option Period. At such Closing, the
Company shall deliver to the Offeror against delivery of certificates duly
endorsed and stock powers representing the Offered Shares being acquired by the
Company, the Offer Price, on the same terms as set forth in the Transfer Notice
(including any non-cash consideration described therein), payable in respect of
the Offered Shares being purchased by the Company. All of the foregoing
deliveries will be deemed to be made simultaneously and none shall be deemed
completed until all have been completed.
(c) Notwithstanding anything set forth in this Section 2.1 to the
contrary, prior to the termination of the Option Period, the Board of Directors
may, in its sole discretion, elect to assign the Company's right to purchase the
Offered Shares pursuant to this Section 2.1 to the Other Stockholders pursuant
to the provisions of Section 2.1(c) of the Existing Stockholders Agreement,
provided that the Company and any of the Other Stockholders to whom the Company
assigns its right to purchase shall collectively purchase all, but not less than
all, of the Offered Shares.
(d) If the Company or the Other Stockholders, as the case may be, do
not elect to purchase all of the Offered Shares, all, but not less than all, of
the Offered Shares may be transferred, but only in accordance with Sections
2.1(e) and 2.1(f) and the terms of the Transfer Notice, within sixty (60) days
after expiration of the Option Period, after which, if the Offered Shares have
not been Transferred, all restrictions contained herein shall again be in full
force and effect.
(e) Five (5) days prior to the closing of the purchase of any Offered
Shares pursuant to Section 2.1(d) hereof (the "Closing"), the Offeror shall
notify the Company of the disposition of the Offered Shares, including the name
of each purchaser and the number of Shares bought by each purchaser. The Closing
shall take place no later than sixty (60) days after the expiration of the
Option Period. At such Closing, each purchaser of Offered Shares shall deliver
to the Offeror against delivery of certificates duly endorsed and stock powers
representing the Offered Shares being acquired by such purchaser, the Offer
Price, on the same terms as set forth in the Transfer Notice (including any
non-cash consideration described therein), payable in respect of the Offered
Shares being purchased by such purchaser. All of the foregoing deliveries will
be deemed to be made simultaneously and none shall be deemed completed until all
have been completed.
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(f) Any transfer of Shares pursuant to Section 2.1 shall remain subject
to the Transfer restrictions of this Agreement and each intended transferee
pursuant to this Section shall execute and deliver to the Company a counterpart
of this Agreement, which shall evidence such transferee's agreement that the
Shares intended to be transferred shall continue to be subject to this Agreement
and that as to such Shares the transferee shall be bound by the restrictions of
this Agreement as a Stockholder hereunder.
(g) Any Stockholder who is the subject of an Involuntary Transfer (as
defined below) the "Transferring Stockholder"), shall notify the Company in
writing within ten (10) days of such Involuntary Transfer but the failure to
give such notice shall not affect the rights of the parties hereunder. Upon the
Company's receipt of such notice, the Company shall treat the Involuntary
Transfer as an offer under this Section 2.1. The Company shall act upon the
deemed offer under this Section within the time period and following the
applicable procedures set forth in this Section 2.1, with the date of the deemed
offer being the later of the date of the Company's receipt of written notice
setting forth the existence of such an Involuntary Transfer and the date of such
Involuntary Transfer, such later date being the date of notification for the
purpose of Section 2.1.
(h) The purchase price for the Share being transferred as a result of
an Involuntary Transfer under Sections 2.1(g) shall be fair market value, as
fair market value is agreed to by the Company and the transferee in each such
Involuntary Transfer, or if no such agreement is reached, as determined by an
independent appraiser selected by the Company and reasonably acceptable to the
transferee in such Involuntary Transfer. All costs of any appraisal under this
Section 2.1(h) shall be paid by the transferee.
(i) For purposes this Agreement, the term "Involuntary Transfer" shall
mean any involuntary sale, transfer, encumbrance or other disposition (other
than as a result of the death of the Stockholder) by or in which any Stockholder
shall be deprived or divested of any right, title or interest in or to any
Shares, including without limitation, any levy of execution, transfer in
connection with any bankruptcy, reorganization, insolvency or similar
proceedings or any transfer to a public officer or agency pursuant to any
abandoned property or escheat law. A Transfer pursuant to Section 2.2 hereof
shall not be deemed to be an Involuntary Transfer.
(j) The provisions of this Section 2.1 shall not apply to a Transfer of
Shares which (i) is a Permitted Transfer (ii) is pursuant to Section 2.2 or
(iii) is pursuant to Section 2.3.
2.2 Call by the Company
(a) If the employment of a Stockholder by the Company or any of its
Subsidiaries shall terminate (a "Call Event") for any reason then the Company
shall have the right to purchase (the "Call Option"), by delivery of a written
notice (the "Call Notice") to such terminated Stockholder no later than one
hundred twenty (120) days after the date of such Call Event, and such
Stockholder and such Stockholder's Permitted Transferees (the "Call Group")
shall be required to sell all (but not less than all) of the
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Call Securities (as defined below) at a price per share equal to the Call Price
(as defined below) of such Call Securities as of the date the Call Notice is
delivered.
(b) For purposes of this Section 2.2, the term "Call Securities" shall
mean all of the Shares, vested Time Options and vested and earned Performance
Options which are owned by the members of the Call Group on the date of such
Call Event.
(c) For purposes of this Section 2.2, the term "Call Price" shall mean
(i) with respect to Shares,
(A) in the event of a termination of a Stockholder's
employment (i) by the Company without Cause, (ii) by virtue of death or
Disability or (iii) by Voluntary Termination after the fifth
anniversary of the date hereof, the Fair Market Value of such Shares;
and
(B) in the event of a termination of a Stockholder's
employment (i) by the Company with Cause, (ii) by Voluntary Termination
prior to the fifth anniversary of the date hereof, the lower of (x) the
Investment Price of such Shares and (y) the Fair Market Value of such
Shares.
(ii) with respect to any vested Time Options, the difference
between (x) the Call Price, as determined above for the Shares
acquirable upon exercise of such option, payable in respect of such
Shares minus (y) the exercise price of such vested Time Options.
Notwithstanding the foregoing, any Time Option will terminate to the
extent set forth in the option agreement pursuant to which such Time
Option was granted.
(iii) with respect to
(A) any vested and earned Performance Options, the
difference between (x) the Call Price, as determined
above for the Shares acquirable upon exercise of such
Option, payable in respect of such Shares minus (y)
the exercise price of such vested and earned
Performance Options; and
(B) any vested Performance Options which are called
pursuant to this section prior to a Determination
Date (so that it is not known how many, if any, of
such vested Performance Options will be earned), the
difference between (x) the Call Price, as determined
above for the Shares acquirable upon exercise of
such option, payable in respect of such Shares minus
(y) the exercise price of such vested and earned
Performance Options; provided that Fair Market Value
for such purpose shall be equal to the lesser of (A)
the Fair Market Value of the Shares acquirable upon
exercise of such option as of the date of the Call
Event and (B) the Fair Market
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Value of the Shares acquirable upon exercise of such
option as of the Determination Date.
(d) The closing of any purchase of Call Securities by the Company
pursuant to Section 2.2(a) shall take place at the principal office of the
Company no later than the 180th day after the Call Event, or solely with respect
to Performance Options for which a Determination Date has not occurred, no later
than the 5th day of after the Determination Date. At such closing, the Company
shall deliver to the Call Group consideration in an amount equal to the
aggregate Call Price payable in respect of such Call Securities against delivery
of (i) original stock certificates and stock powers duly endorsed in favor of
the Company representing the Call Securities and (ii) an executed agreement, in
form reasonably satisfactory to the Company, evidencing the cancellation of any
vested Time Options and vested and earned Performance Options purchased at such
closing. The Company, at its option, may pay the consideration for such Call
Securities in the form of a bank or certified check or wire transfer. If the
call Event is due to the termination of the Stockholder for Cause and the
Company is unable to exercise its Call Option by payment of the Call Price in
cash because such payment would cause the Company or any Subsidiary to be in
violation of applicable law or in default under or otherwise in violation of the
terms of, or limited by the ceiling in the availability or credit advances
under, any loan, credit or investment agreements or promissory notes to which
the Company or any Subsidiary is a party (a "Default"), the Company may exercise
such Call Option, at its sole election, and pay the Call Price by delivery of a
five year promissory note issued by the Company bearing interest at a fixed rate
of interest per annum equal to the applicable federal rate on the date of
issuance for notes of that maturity, such interest to be payable quarterly in
arrears, which note shall be prepayable without premium or penalty, and
subordinated to all other funded debt of the Company and its Subsidiaries on
terms reasonably satisfactory to the holders of such funded debt (each a
"Company Note", and collectively, the "Company Notes"). If the Company shall
issue a Company Note as payment of the Call Price, the Company shall not be
obligated to make any payment of principal or interest due under a Company Note
if the Company or any Subsidiary is at the time of the delivery of such payment,
or would be upon delivery of such payment and as a consequence thereof, in
Default. In the event the Company cannot make payments of principal and interest
due under a Company Note because it is in Default, the Company will undertake to
make payment of principal and interest due under such Company Note at such time
as the Company is no longer in Default and would not be so in Default by virtue
of the delivery of such Company Note or any payment of principal and interest
due under such Company Note as contemplated herein.
(e) Notwithstanding anything set forth in this Section 2.2 to the
contrary, prior to the exercise by the Company of its Call Option to purchase
Call Securities pursuant to this Section 2.2, the Board of Directors of the
Company may designate one or more new or existing employees of the Company or
any Subsidiary (individually a "Designated Employee" and collectively, the
"Designated Employees") or an Other Stockholder who shall have the right, but
not the obligation, to exercise the Call Option and to acquire, in lieu of the
Company, some or all (as determined by the Company) of the Call Securities that
the Company is entitled to purchase from the Call Group hereunder, on the same
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terms and conditions as set forth in Section 2.2(d) which apply to the purchase
of Call Securities by the Company. Concurrently with any such purchase of Call
Securities by any such Designated Employee, such Designated Employee shall
execute a counterpart of this Agreement, whereupon such Designated Employee
shall be deemed a "Stockholder" and shall have the same rights and be bound by
the same obligations as other Stockholders hereunder.
(f) If neither the Company nor any Designated Employee or Other
Stockholder elects to exercise the Call Option and deliver a Call Notice within
120 days of a Call Event, then the Call Option provided in this Section 2.2
shall terminate but the Stockholder and his Permitted Transferees shall continue
to hold such Call Securities pursuant to all of the other provisions of this
Agreement and other applicable agreements (including without limitation, any
restrictions on the vesting of stock options).
2.3 Take Along.
(a) If any of the Other Stockholders, individually or collectively
(referred to herein as the "Take-Along Group"), determine to sell or exchange
(in a business combination or otherwise) more than 50% of the then outstanding
Shares (including vested Time Options and vested and earned Performance Options)
in one or a series of bona fide arms-length transactions to a Third Party, then
upon five (5) days written notice by the Take-Along Group to each Stockholder,
which notice shall include reasonable details of the proposed sale or exchange
including the proposed time and place of closing the consideration to be
received by the Take-Along Group (such notice being referred to as the "Sale
Requests"), each Stockholder (each, a "Seller") shall be obligated to, and shall
sell, transfer and deliver, or cause to be sold, transferred and delivered to
such Third Party on the same terms as the Take-Along Group, that number of
Shares owned by such Seller as shall equal the product of (A) a fraction, the
numerator of which is the number of Common Stock Equivalents proposed to be
transferred by the Take-Along Group as of the date of such Sale Request and the
denominator of which is the aggregate number of Common Stock Equivalents
actually owned as of the date of such Sale Request by the Take-Along Group,
multiplied by (B) the number of Common Stock Equivalents actually owned as the
date of such Sale Request by such Seller. Each Seller shall (i) deliver
certificates for all of its Shares at the closing of the proposed Transfer, free
and clear of all claims, liens and encumbrances and (ii) if stockholder approval
of the transaction is required, vote his Shares in favor thereof.
(b) The provisions of this Section 2.3 shall not apply to a Permitted
Transfer.
2.4 Corporate Governance.
(a) Voting. At each annual meeting of the Stockholders and at each
special meeting of the Stockholders called for the purpose of electing directors
of the Company, and at any time at which stockholders of the Company shall have
the right to, or shall, vote for directors of the Company, then, and in each
event, the Stockholders hereby agree
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to attend each meeting in person or by proxy and hereby agree to vote stock of
the Company and Shares of the Company now owned or hereafter acquired by him,
her or it (whether at a meeting or by written consent in lieu there) (i) so that
the Company's Board of Directors shall be designated as set forth herein, (ii)
to fix the number of members of the Board at seven (7) and (iii) to elect and
thereafter to continue in office as a Director of the Company the following: (i)
two (2) Directors shall be persons nominated by the Berkshire Stockholders (who
shall initially be Xxxxxxx Xxxxx and Xxxxx Xxxxxx) collectively the "Berkshire
Representatives"); (ii) three (3) Directors shall be persons nominated by the
Management Shareholders (who shall initially be Jordan X. Xxxx, Xxxxxxx
Xxxxxxxxxx and Xxxxxxx X. Xxxxx) (collectively, the "Management
Representatives") and (iii) two (2) Directors shall be persons who are not
employees or officers of the Company, one of whom shall be nominated by the
Berkshire Stockholders (subject to the reasonably approval of the Management
Stockholders) and one of whom shall be nominated by the Management Stockholders
(subject to the reasonable approval of the Berkshire Stockholders) (collectively
the "Outside Representatives"). A vacancy in either of the directorships to be
occupied by a Berkshire Representative shall be filled only by vote or written
consent of a majority in interest of the Berkshire Stockholders; a vacancy in
any of the directorships to be held by the Management Representatives shall be
filled only by vote or written consent of a majority in interest of the
Management Stockholders; and a vacancy in the he directorships to be held by the
Outside Representatives shall be filled only by vote or written consent of the
stockholders who nominated such Outside Representative (subject to approval as
set forth in clause (iii) above).
(b) Board Expansion. So long as either (i) the Berkshire Stockholders
shall own at least forty percent (40%) of the Shares (including vested Time
Options and vested and earned Performance Options) or (ii) the Berkshire
Stockholders collectively own more Shares (including vested Time Options and
vested and earned Performance Options) than the Management Stockholders or any
other single stockholder, the Berkshire Stockholders may at any time require, by
written notice to the other Stockholders (the "Increase Notice"), that the
number of directors constituting the Board of Directors be increased by two (2).
The Berkshire Stockholders shall have the right to designate such additional
directors. If the Increase Notice is given by the Berkshire Stockholders, the
nomination of the Outside Representatives as set forth in Section 2.5(a)(iii)
above shall no longer require the approval of the other stockholders. Each
Stockholders agrees that such Stockholder and its Permitted Transferees shall
take all action as may be necessary or appropriate, including without
limitation, the voting of all Shares owned by them, to so increase the number of
directors constituting the Board of Directors and to select the directors so
designated by the Berkshire Stockholders.
2.5 Voting Provision. At the request of the Company, the Purchaser will
deposit and transfer all the Shares purchased thereunder to a Voting Trustee,
pursuant to the Voting Trust Agreement in the form of Exhibit A attached hereto.
2.6 Confidentiality. Each Stockholder shall maintain the
confidentiality of any confidential and proprietary information of the Company
("Proprietary Information")
14
using the same standard of care as it applies to its own confidential
information, except for any Proprietary Information which is publicly available
or a matter of public knowledge generally. Nothing herein shall prevent any
Stockholder from using Proprietary Information to monitor its investment in the
Company or to enforce its rights under this Agreement or from disclosing a
summary of Proprietary Information to the partners of such Stockholder as to the
performance of the Company.
ARTICLE III
3.1 Remedies. Notwithstanding the provisions of Section 3.19 hereof,
the parties to this Agreement acknowledge and agree that the covenants of the
Company and the Stockholders set forth in this Agreement may be enforced in
equity by a decree requiring specific performance. In the event of a breach of
any material provision of this Agreement, the aggrieved party will be entitled
to institute and prosecute a proceeding in any court of competent jurisdiction
to enforce specific performance of such provision, as well as to obtain damages
for breach of this Agreement. Without limiting the foregoing, if any dispute
arises concerning the sale or other disposition of any of the Shares subject to
this Agreement or concerning any other provisions hereof or the obligations of
the parties hereunder, the parties to this Agreement agree that an injunction
may be issued in connection therewith (including, without limitation,
restraining the sale or other disposition of such Shares or rescinding any such
sale or other disposition). Such remedies shall be cumulative and non-exclusive
and shall be in addition to any other rights and remedies the parties may have
under this Agreement or otherwise.
3.2 Entire Agreement; Amendment; Waiver. This Agreement, together with
the Schedule hereto, sets forth the entire understanding of the parties, and
supersedes all prior agreements and all other arrangements and communications,
whether oral or written, with respect to the subject matter hereof. The Schedule
may be amended to reflect changes in the composition of the Stockholders and
changes in stock ownership that may occur from time to time as a result of
Permitted Transfers or Transfers permitted under Article II hereof. Amendments
to the Schedule reflecting Permitted Transfers or Transfers permitted under
Article II hereof shall become effective when a copy of the Agreement as
executed by any new transferee, are filed with the Company, except as otherwise
provided in Section 3.12 hereof. Any other amendments to, or the termination of,
this Agreement shall require the prior written consent of the Company, a
majority of interest of the Berkshire Stockholders and a majority in interest of
the Stockholders. Notwithstanding any provisions to the contrary contained
herein, any party may waive any rights with respect to which such party is
entitled to the benefits under this Agreement. No waiver of or consent to any
departure from any provision of this Agreement shall be effective unless signed
in writing by the party entitled to the benefit thereof.
3.3 Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision were omitted.
15
3.4 Notices. All notices and other communications necessary or
contemplated under this Agreement shall be in writing and shall be delivered in
the manner specified herein or in the absence of such specification, shall be
deemed to have been duly given three business days after mailing by certified
mail, when delivered by hand upon confirmation of receipt by telecopy, or one
day after sending by overnight delivery service, to the respective addresses of
the parties set forth below:
(a) For notices an communications to the Stockholders, to their
respective addresses set forth in the Schedule,
(b) for notices and communications to the Company and the Berkshire
Stockholders:
Xxxxxx Products Corp.
000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
Posternak, Xxxxxxxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, P.C.
Facsimile: (000) 000-0000
and to: Berkshire Partners, LLC
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
By notice complying with the foregoing provisions of this Section 3.4, each
party shall have the right to change the mailing address for future notices and
communications to such party.
3.5 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and to their respective
transferees, successors and assigns; provided, however, that the rights under
this Agreement may not be assigned except as expressly provided herein, it being
understood that the Company's rights hereunder may be assigned by the Company to
any corporation which is the surviving entity in a merger, consolidation or like
event involving the Company. No such assignment shall relieve an assignor of its
obligations hereunder.
3.6 Governing Law. This Agreement shall be governed by the law of The
Commonwealth of Massachusetts (regardless of the laws that might otherwise
govern
16
under applicable Massachusetts principles of conflicts of law) as to all
matters, including but not limited to matters of validity, construction, effect,
performance and remedies.
3.7 Termination. Without affecting any other provision of this
Agreement requiring termination of any rights in favor of any Stockholder,
Permitted Transferee or any other transferee of Shares, the provisions of
Article II of this Agreement shall terminate as to such Stockholder, Permitted
Transferee or other transferee, as the case may be, no longer owns any Shares;
provided, that termination pursuant to this Section 3.7 shall only occur in
respect of a Stockholder after all Permitted Transferees in respect thereof also
no longer own any Shares. Notwithstanding the foregoing, this Agreement shall
terminate upon the consummation of the first Public Offering; provided that the
Company shall be obligated to consummate the purchase of any vested and earned
performance Options which have been called for purchase pursuant to Section 2.2.
3.8 Recapitalizations, Exchanges, Etc. The provisions of this Agreement
shall apply, to the full extent set forth herein with respect to Shares, to any
and all Shares of capital stock of the Company or any successor or assign of the
Company (whether by merger, consolidations, sale of assets or otherwise) which
may be issued in respect of, in exchange for, or in substitution of the Shares,
by reason of a stock dividend, stock split, stock issuance, reverse stock split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise.
3.9 Action Necessary to Effectuate the Agreement. The parties hereto
agree to take or cause to be taken all such corporate and other action as may be
necessary to effect the intent and purposes of this Agreement.
3.10 Purchase for Investment; Legend on Certificate. Each of the
parties acknowledges that all of the Shares held by such party are being (or
have been) acquired for investment and not with a view to the distribution
thereof and that no transfer, hypothecation or assignment of Shares may be made
except in compliance with applicable federal and state securities laws. All the
certificates of Shares of the Company which are now or hereafter owned by the
Stockholders and which are subject to the terms of this Agreement shall have
endorsed in writing, stamped or printed, thereon the following legend:
"TRANSFER RESTRICTED
The securities represented by this
Certificate have not been registered under
the Securities Act of 1933, as amended,
and may not be sold, offered for sale,
pledged or hypothecated in the absence of
an effective registration statement as to
the securities under said Act or an
opinion of counsel satisfactory to the
Company and its counsel that such
registration is not required.
17
The securities represented by this
Certificate are subject to the terms and
conditions, including certain restrictions
on transfer, of an Employee Stockholders'
Agreement dated as of the date of this
Agreement, as amended from time to time,
and none of such securities, or any
interest therein, shall be transferred,
pledged, encumbered or otherwise disposed
of except as provided in that Agreement. A
copy of the Employee Stockholders'
Agreement is on file with the Secretary of
the Company and will be mailed to any
properly interested person without charge
within five (5) days after receipt of a
written request."
All Shares shall also bear all legends required by federal and state
securities laws.
3.11 Effectiveness of Transfers. All Shares transferred by a
Stockholder (other than pursuant to an effective registration statement under
the Securities Act or pursuant to a Rule 144 Transaction) shall, except as
otherwise expressly stated herein, be held by the Transferee thereof pursuant to
this Agreement. Such Transferee shall, except as otherwise expressly stated
herein, have all the rights and be subject to all of the obligations of a
Stockholder under this Agreement (as though such party had so agreed pursuant to
Section 3.12 hereof) automatically and without requiring any further act by such
transferee or by any parties to this Agreement. Without affecting the preceding
sentence, if such transferee is not a Stockholder on the date of such transfer,
then such a transferee, as a condition to such transfer, shall confirm such
transferee's obligation hereunder in accordance with Section 3.12 hereof. No
Shares shall be transferred on the Company's books and records, and no transfer
of Shares shall be otherwise effective, unless any such transfer is made in
accordance with the terms and conditions of this Agreement, and the Company is
hereby authorized by all the Stockholders to enter appropriate stop transfer
notations on its transfer records to give effect to this Agreement.
3.12 Additional Stockholders. Subject to the restrictions on transfers
of Shares contained herein, any person or entity who is not already a
Stockholder or an Other Stockholder and who acquires Shares from a Stockholder
or a Permitted Transferee hereunder shall, on or before the transfer or issuance
to it of Shares, sign a counterpart to this Agreement in form reasonably
satisfactory to the Company and shall thereby become a party to this Agreement
to be bound hereunder as a Stockholder. Each such "Additional Stockholder" shall
be listed on the Schedule, as amended from time to time.
3.13 No Waiver. No course of dealing and no delay on the part of any
party hereto in exercising any right, power or remedy conferred by this
Agreement shall operate as waiver there of or otherwise prejudice such party's
rights, powers and remedies. No single or partial exercise of any rights, powers
or remedies conferred by this Agreement shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
18
3.14 Counterpart. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original but all of which together
shall constitute one and the same instrument, and all signatures need not appear
on any one counterpart.
3.15 Headings. All headings and captions in this Agreement are for
purposes of reference only and shall not be construed to limit or affect the
substance of this Agreement.
3.16 Number; Gender. When the context so requires, the singular shall
include the plural and the plural shall include the singular and the gender or
any pronoun shall include the other gender.
3.17 Consent to Jurisdiction. The Company and each of the Stockholders,
by its or his execution hereof, (i) hereby irrevocably submit to the exclusive
jurisdiction of the state courts of The Commonwealth of Massachusetts for the
purposes of any claim or action arising out of or based upon this Agreement or
relating to the subjection matter hereof, (ii) hereby waive, to the extent not
prohibited by applicable law, and agree not to assert by way of motion, as a
defense or otherwise, in any such claim or action, any claim that it or he is
not subject personally to the jurisdiction of the above-named courts, that its
or his property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named court is improper, or that this Agreement
or the subject matter hereof may not enforced in or by such court, and (iii)
hereby agrees not to commence any claim or action arising out of or based upon
this Agreement or relating to the subject matter hereof other than before the
above-named courts nor to make any motion or take any other action seeking or
intending to cause the transfer or removal of any such claim or action to any
court other than the above-named courts whether on the grounds of inconvenient
forum or otherwise. The Company and each of the Stockholders hereby consent to
service of process in any such proceeding in any manner permitted by
Massachusetts law, and agree that service of process by registered or certified
mail, return receipt requested, at its address specified pursuant o Section 3.4
hereof is reasonably calculated to give actual notice.
3.18 Costs and Expenses. The Company shall pay its own costs and
expenses incurred in connection with this Agreement, and any and all other
documents furnished pursuant hereto or in connection herewith.
3.19 Arbitration. Except as provided in Section 3.1, any dispute,
controversy or claim arising out of, in connection with, or in relation to this
Agreement or any breach thereof shall be finally settled by arbitration in
Boston, Massachusetts, pursuant to the rules then in effect of the American
Arbitration Association. Any award shall be final, binding and conclusive upon
the parties and a judgment upon the award rendered thereon may be entered in any
court having jurisdiction thereof. In any such arbitration action, the part
which is determined in the arbitration proceeding to be breaching parties, the
arbitrator shall assign the responsibility for the payment of such costs based
upon the relative nature and extent of the breach by each such party.
19
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
XXXXXX PRODUCTS CORP.
By: /s/ Jordan X. Xxxx
--------------------------------------
Name: Jordan X. Xxxx
Title: President
The undersigned Voting Trustee hereby agrees that he will hold all
Shares deposited with him on and subject to the provisions of this Agreement,
and will vote all such Shares in accordance with the provisions of Section 2.4
hereof.
/s/ Jordan X. Xxxx
--------------------------------------
Jordan X. Xxxx, as Voting Trustee
STOCKHOLDERS:
[Counterpart Signature Pages Omitted]
