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THE XXX. XXXXXX' BRAND, INC.
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STOCKHOLDERS' AGREEMENT
among
THE XXX. XXXXXX' BRAND, INC.
and
ITS STOCKHOLDERS
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Dated as of September 19, 1996
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STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of September 19,
1996, among THE XXX. XXXXXX' BRAND, INC., a Delaware corporation (the
"Company"), XXX. XXXXXX' HOLDING COMPANY, INC., a Delaware corporation
("Holdco"), HARVARD PRIVATE CAPITAL HOLDINGS, INC., a Massachusetts corporation
("Harvard"), such other persons to become parties to this Agreement as described
herein, and, for the purposes of Section 4.4 and Section 5 only, Capricorn
Investors II, L.P., a Delaware limited partnership ("Capricorn").
W I T N E S S E T H:
WHEREAS, pursuant to a Licensing Assets Purchase Agreement, dated as of
August 7, 1996, among Xxx. Xxxxxx Development Corporation, a Delaware
corporation ("MFD"), the Company and Capricorn, the Company has purchased
certain assets specified therein;
WHEREAS, pursuant to a Common Stock and Senior Subordinated Note
Purchase Agreement (the "Harvard Agreement"), dated September 19, 1996, Harvard
has as of the date of this Agreement purchased 249.9 shares of common stock par
value $.01 per share of the Company (the "Common Stock");
WHEREAS, as of the date of this Agreement, Holdco owns 50.1% of the
outstanding shares of Common Stock and all of the shares of Series A 10%
Cumulative Accruing Preferred Stock, par value $.01 per share of the Company
(the "Preferred Stock"), and Harvard owns 49.9% of the outstanding shares of
Common Stock;
WHEREAS, the parties hereto deem it in their best interests and in the
best interests of the Company to provide consistent and uniform management for
the Company and desire to enter into this Agreement in order to effectuate that
purpose and to set forth their respective rights and obligations in connection
with their investment in the Company; and
WHEREAS, the parties hereto also desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the shares of Common
Stock, and to provide for certain rights and obligations in respect thereto as
hereinafter provided;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Affiliate" means as to any Person (a) any Person which directly or
indirectly controls, is controlled by, or is under common control with such
Person, (b) any Person who is a director, officer, partner or principal of such
Person or of any Person which directly or indirectly controls, is controlled by,
or is under common control with such Person, and (c) any individual who is a
member of the immediate family of any Person described in clause (a) or clause
(b) above. For purposes of this definition, "control" of a Person shall mean the
power, direct or indirect, (i) to vote or direct the voting of 5% or more of the
Voting Stock of such Person or (ii) to direct or cause the direction of the
management and policies of such Person whether by ownership of Capital Stock, by
contract or otherwise.
"Agreement" means this Agreement as in effect on the date hereof and as
hereafter from time to time amended, modified or supplemented in accordance with
the terms hereof.
"Board of Directors" means the Board of Directors of the Company as
from time to time hereafter constituted.
"By-Laws" means the By-Laws of the Company in effect on the date
hereof, substantially in the form of Exhibit A hereto, and as hereafter further
amended in accordance with the terms hereof and pursuant to applicable law.
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock of any Person, including, without limitation, shares of
preferred or preference stock, (ii) all partnership interests (whether general
or limited) in any Person which is a partnership, (iii) all membership interests
or limited liability company interests in any limited liability company, and
(iv) all equity or ownership interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company as in effect on the date hereof, substantially in the form of
Exhibit B hereto, and as hereafter from time to time amended, modified,
supplemented or restated in accordance with the terms hereof and pursuant to
applicable law.
"Fair Market Value" means the fair market value of shares of Common
Stock as determined from time to time by the Board of Directors as evidenced by
a resolution thereof.
"New Securities" shall mean any authorized but unissued equity
securities and any treasury shares of the Company and all rights, options, or
warrants to purchase equity securities of any type whatsoever; provided,
however, that the term "New Securities" does not include (i) securities
outstanding as of the date hereof; (ii) equity securities issued pursuant to any
stock split or stock dividend; (iii) equity securities or other securities
exercisable for or convertible into equity securities issued pursuant to any
public offering or issuable upon exercise or conversion of such securities; and
(iv) equity securities or other securities exercisable for or convertible into
equity securities issued pursuant to a business combination involving the
Company but not involving Capricorn, Holdco or any of their Affiliates.
"Offered Securities" has the meaning specified in Section 4.l(a).
"Person" means an individual or a corporation, association,
partnership, limited liability company, joint venture, organization, business,
trust or any other entity or organization, including a government or any
subdivision or agency thereof.
"Pro Rata Portion" means, with reference to any Shareholder at any
time, a fraction, the numerator of which is the number of shares of Common Stock
then issued and outstanding and held by such Shareholder, and the denominator of
which is the aggregate number of shares of Common Stock then issued and
outstanding and held by the Shareholders taken together.
"Securities Act" means, as of any date, the Securities Act of 1933, as
amended, or any similar Federal statute then in effect and superseding such act,
and any reference to a particular section thereof shall include a reference to
the comparable section, if any, of any such similar Federal statute, and the
rules and regulations thereunder.
"Shareholder" means, (i) Harvard, (ii) Holdco and (iii) each transferee
who becomes a party to or bound by the provisions of this Agreement in
accordance with the terms hereof, in each case for so long as such person
continues to hold shares of Common Stock.
"Subsidiary" means, as to any Person, another Person of which
outstanding Voting Stock having the power to elect a majority of the members of
the board of directors (or comparable body or authority performing similar
functions) of such other Person are at the time owned, directly or indirectly
through one or more intermediaries, or both, by such first Person.
"Voting Stock" means Capital Stock of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to vote for
the election of corporate directors (or Persons performing similar functions).
Section 2. Management.
Section 2.1. Board of Directors; Shareholders.
(a) Subject to the terms of this Agreement and the Certificate of
Incorporation and the By-Laws, the business and affairs of the Company shall be
managed by the Board of Directors, which will initially consist of four
directors designated as follows: (i) Holdco shall be entitled to designate two
directors (the "Holdco Directors"); and (ii) Harvard shall be entitled to
designate two directors (the "Harvard Directors"). For so long as Harvard owns
shares of Common Stock, the Board of Directors shall consist of four members.
(b) Each Shareholder agrees to vote its shares of Voting Stock of the
Company for the removal of any director upon the request of the person who
designated such director and shall not vote any of its shares of Voting Stock of
the Company for the removal of any director under any other circumstance. In the
event that any director is unwilling or unable (by reason of death, resignation
or otherwise) to serve as such or is removed in accordance with the terms of
this Section 2.1(b), then the Shareholders, prior to the transaction of any
other business by the Shareholders or the Board of Directors, shall elect the
successor or replacement to such director upon the nomination of the person who
designated such director.
(c) A quorum for any meeting of the Board of Directors shall consist of
two directors (a "Quorum of the Board"), one of which shall be a Holdco Director
and one of which shall be a Harvard Director. No action may be taken by the
Board of Directors at any meeting unless a Quorum of the Board is present at the
time such action is taken. Resolutions of the Board of Directors shall be
adopted only by the affirmative vote of the majority of directors present at a
meeting at which a Quorum of the Board is present. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting if all members of the Board of Directors
or of such committee, as the case may be, consent in writing to the taking of
such action.
Section 2.2. Authority of Board of Directors. The Board of Directors
shall have and exercise all of the powers belonging or pertaining to the
Company, excepting only as to such matters as by law, or the Certificate of
Incorporation or the By-Laws, that require the action of the Shareholders.
Section 2.3. No Conflict with Agreement. Each Shareholder shall vote
its shares of Voting Stock of the Company, and shall take all actions necessary,
to ensure that the Certificate of Incorporation and By-Laws do not, at any time,
conflict with the provisions of this Agreement.
Section 3. Transfers of Shares of Common Stock and Preferred Stock.
Section 3.1. Restrictions on Transfer. Each Shareholder agrees that it
will not, directly or indirectly, offer, sell, transfer, assign or otherwise
dispose of (or make any exchange, gift, assignment or pledge of) (collectively,
for purposes of Sections 3 and 4 only, a "transfer") any of its shares of
Preferred Stock or Common Stock (or options, warrants or rights that may be
hereafter issued to such Shareholder) except as permitted under the Securities
Act and other applicable securities laws and such transferring Shareholder shall
furnish to the Company a certificate or, if reasonably requested by the Company,
an opinion of counsel, in either case reasonably satisfactory in form and
substance to the Company and its counsel, that such transfer is permitted under
the Securities Act and other applicable securities laws; provided, however, that
no such certificate or opinion of counsel shall be required in connection with a
transfer of shares of Common Stock pursuant to Sections 4.1, 4.4 or 4.5 hereof.
Each such transferee shall execute the agreement referred to in Section 3.2(b)
hereof. The provisions of this Agreement shall be applied to the shares of
Common Stock acquired by any such transferee in the same manner and to the same
extent as such provisions were applicable to such shares of Common Stock in the
hands of such transferring Shareholder. Any reference in this Agreement to a
Shareholder shall be deemed to include such Shareholder and his transferees.
Holdco shall not transfer any shares of Preferred Stock except (i) to any
Affiliate of Holdco or (ii) following the earlier to occur of (A) the payment in
full of the note (the "Note") issued by the Company pursuant to the Harvard
Agreement or (B) the exchange of the Note into a note issued by Holdco as
contemplated by the Harvard Agreement.
Section 3.2. Endorsement of Certificates.
(a) Upon the execution of this Agreement, in addition to any other
legend that the Company may deem advisable under the Securities Act and certain
state securities laws, all certificates representing shares of issued and
outstanding shares of Common Stock or Preferred Stock that are subject to any of
the provisions of this Agreement shall be endorsed at all times as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND ARE
TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS'
AGREEMENT DATED AS OF SEPTEMBER 19, 1996, AMONG THE COMPANY AND ITS
STOCKHOLDERS. A COPY OF THE ABOVE-REFERENCED AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SAID
ACT.
(b) Except as otherwise expressly provided in this Agreement, all
certificates representing shares of Common Stock or Preferred Stock hereafter
issued to or acquired by any of the Shareholders or their successors or assigns
shall bear the legends set forth above, and the shares of Common Stock or
Preferred Stock represented by such certificates shall be subject to the
applicable provisions of this Agreement. The obligations of a party hereto shall
be binding upon any transferee to whom shares of Common Stock or Preferred Stock
are transferred by such party, whether or not such transfer is permitted under
the terms of this Agreement. Prior to consummation of any such transfer, such
party shall cause the transferee to execute an agreement in form and substance
reasonably satisfactory to the other parties hereto, providing that such
transferee shall be bound by and shall fully comply with the terms of this
Agreement. Prompt notice shall be given to the Company and each Shareholder by
the transferor of any transfer of any shares of Common Stock or Preferred Stock.
Section 3.3. Improper Transfer. Any attempt to transfer or encumber any
shares of Common Stock or Preferred Stock other than in accordance with the
terms of this Agreement shall be null and void and neither the Company nor any
transfer agent of such securities shall give any effect to such attempted
transfer or encumbrance in its stock records.
Section 4. Rights of First Refusal; Drag-Along Rights; Tag-Along Rights;
Preemptive Rights.
Section 4.1. Transfers by Shareholders.
(a) If, at any time following the date hereof, a Shareholder other than
Holdco (the "Selling Shareholder") receives a bona fide offer, which it desires
to accept (a "Transfer Offer"), to purchase any shares of Common Stock (or
options, warrants or rights to subscribe for or purchase shares of Common Stock)
owned by it, then the Selling Shareholder shall cause the Transfer Offer to be
reduced to writing and shall deliver written notice of such Transfer Offer (a
"Transfer Notice"), accompanied by a copy of such Transfer Offer, to the other
Shareholders (individually and collectively referred to as the "Other
Shareholders") and the Company, setting forth the identity of the offeror, the
number of shares of Common Stock (or options, warrants, or rights to subscribe
for or purchase shares of Common Stock) proposed to be transferred (the "Offered
Securities"), the price per security contained in the Transfer Offer (the
"Transfer Offer Price Per Security"), and all other terms applicable thereto.
The Transfer Notice shall also contain an irrevocable offer by the Selling
Shareholder to sell the Offered Securities to the Other Shareholders and the
Company at a price equal to the Transfer Offer Price Per Security and upon
substantially the same terms as contained in the Transfer Offer. In the event
that the form of consideration specified in the Transfer Offer is other than
cash, the Other Shareholders and the Company shall have the option of paying the
Transfer Offer Price Per Security in cash in an amount equal to the fair market
value of such consideration unless it is reasonably practicable to deliver
substantially identical consideration, in which case the purchaser may so
deliver. Fair market value shall be determined by a nationally recognized
investment banking firm mutually acceptable to the parties, unless they agree
otherwise.
(b) Upon receipt of the Transfer Notice, the Company shall then have
the irrevocable right to accept such offer at the Transfer Offer Price Per
Security and on the other terms specified in the Transfer Offer with respect to
all or any portion of the Offered Securities; provided, however, that in the
event the Company does not purchase any or all of the Offered Securities, the
Other Shareholders shall have the irrevocable right to purchase such unpurchased
Offered Securities (including any such Offered Securities not purchased by such
Other Shareholders hereunder) in proportion to each of such Other Shareholder's
Pro Rata Portion until all of such Offered Securities are purchased or until no
Other Shareholder desires to purchase any more Offered Securities. The rights of
each of the Other Shareholders and the Company pursuant to this Section 4.1(b)
shall be exercisable by the delivery of notice to the Selling Shareholder (the
"Notice of Exercise"), within 30 calendar days from the date of delivery of the
Transfer Notice. The Notice of Exercise shall state the total number of shares
of the Offered Securities as to which each of the Other Shareholders or the
Company, as the case may be, is accepting under the offer, without regard to
whether or not the Company purchases any Offered Securities. A copy of such
Notice of Exercise shall also be delivered by the Other Shareholders to the
Company. The rights of the Other Shareholders and the Company pursuant to this
Section 4.1(b) shall terminate if unexercised 30 calendar days after the date of
delivery of the Transfer Notice.
(c) In the event that the Other Shareholders or the Company exercise
their rights to purchase all of the Offered Securities in accordance with
Section 4.1(b) hereof, then the Selling Shareholder must sell such Offered
Securities to the Other Shareholders or the Company, as the case may be, at the
Transfer Offer Price Per Security and on the other terms specified in the
Transfer Offer.
(d) For purposes of this Section 4, any Person who has failed to give
notice of the election of an option hereunder within the specified time period
will be deemed to have waived its rights with respect thereto on the day
immediately following the last day of such period.
Section 4.2. Transfer of Offered Securities to Third Parties. If all
notices required to be given pursuant to Section 4.1 hereof have been duly given
and the Other Shareholders and the Company offer to purchase fewer than all of
the Offered Securities pursuant to the provisions hereof, then the Selling
Shareholder shall have the right, subject to compliance by the Selling
Shareholder with the provisions of Section 3.2(b) hereof for a period of 120
calendar days from the earlier of (i) the expiration of the option period
pursuant to Section 4.1 hereof with respect to such Transfer Offer or (ii) the
date on which the Selling Shareholder receives notice from the Other
Shareholders and the Company that they will not exercise the option granted
pursuant to Section 4.1 hereof, to sell to any third party that is not an
Affiliate of the Selling Shareholder the Offered Securities at a price per
Offered Security of not less than 100% of the Transfer Offer Price Per Security
and on substantially the other terms specified in the Transfer Offer.
Section 4.3. Purchase of Offered Securities. The consummation of any
purchase and sale pursuant to Section 4.1 hereof shall take place on such date,
not later than 30 calendar days after the expiration of the option period
pursuant to Section 4.1 hereof with respect to such option, as the Other
Shareholders or the Company, as the case may be, shall select. Prior to the
consummation of any sale pursuant to Section 4.1 hereof, the Selling Shareholder
shall comply with Section 3.2(b) hereof. Upon the consummation of any such
purchase and sale, the Selling Shareholder shall deliver certificates
representing the Offered Securities sold duly endorsed, free and clear of any
liens, against delivery of the Transfer Offer Price Per Security for each of the
Offered Securities purchased by certified or bank check, wire transfer or, in
the case of non-cash consideration, such other manner reasonably acceptable to
the parties.
Section 4.4. Drag-Along Rights.
(a) If Holdco approves or authorizes a sale or exchange, whether
directly or pursuant to a merger, consolidation or otherwise (the "Company
Sale"), of at least a majority of the then outstanding Common Stock in a bona
fide arm's-length transaction to a third party that is not an Affiliate of
Holdco or of the Company (an "Independent Third Party"), then Holdco shall have
the right, subject to all the provisions of this Section 4.4 (the "Drag-Along
Right"), to require each of the other Shareholders to (i) if such Company Sale
is structured as a sale of stock, sell, transfer and deliver or cause to be
sold, transferred and delivered to such Independent Third Party all shares of
Common Stock, and other transferable options, warrants or rights to subscribe
for or purchase Common Stock (the "Other Rights"), owned by them; provided,
however, that if Holdco agrees to sell less than all (the "Amount") of its
shares of Common Stock to such Independent Third Party, each of the other
Shareholders shall only be required to sell, transfer and deliver to such
Independent Third Party an amount of shares of Common Stock and Other Interests
equal to the shares of Common Stock, and Other Interests, owned by it multiplied
by a fraction the numerator of which is the Amount and the denominator of which
is the total amount of shares of Common Stock, and Other Interests, owned by
Holdco, or (ii) if such Company Sale is structured as a merger, consolidation or
other transaction requiring the consent or approval of the Company's
shareholders, vote such Shareholder's shares of Voting Stock in favor thereof,
and otherwise consent to and raise no objection to such transaction, and waive
any dissenters' rights, appraisal rights or similar rights that such Shareholder
may have in connection therewith; and, in any such event, except to the extent
otherwise provided in subsection (c) of this Section 4.4, each such other
Shareholder shall agree to and shall be bound by the same terms, provisions and
conditions (including, without limitation, provisions in respect of
indemnification) in respect of the Company Sale as are applicable to Holdco. The
provisions of Sections 4.1 through 4.3 hereof, inclusive, shall not apply to any
transactions to which this Section 4.4 applies.
(b) If Holdco desires to exercise Drag-Along Rights, it shall give
written notice to the other Shareholders (the "Drag-Along Notice") of the
Company Sale, setting forth the name and address of the transferee, the date on
which such transaction is proposed to be consummated (which shall be not less
than 30 days after the date such Drag-Along Notice is given), and the proposed
amount and form of consideration and terms and conditions of payment offered by
such transferee, including, without limitation, the material terms of any debt
or equity securities proposed to be included as part of such consideration,
identifying the issuer or issuers thereof. If such consideration includes any
non-cash consideration, such notice shall also state the fair market value of
such non-cash consideration and shall describe in reasonable detail the method
by which such value shall have been determined.
(c) Except as contemplated by Section 4.4(d) hereof, the obligations of
the Shareholders in respect of a Company Sale under this Section 4.4 are subject
to the satisfaction of the following conditions: (i) upon the consummation of
the Company Sale, the same form of consideration and the same portion of the
aggregate consideration realized upon such Company Sale shall be paid or
distributed in respect of each share of Common Stock then issued and outstanding
(except as contemplated by the proviso to Section 4.4 (a) hereof); (ii) if any
Shareholder is given an option as to the form and amount of consideration to be
received, each Shareholder will be given the same option; (iii) each holder of
then currently exercisable rights to acquire shares of Common Stock will be
given a reasonable opportunity to exercise such rights prior to the consummation
of the Company Sale and thereby to participate in such sale as a holder of such
Common Stock; (iv) the maximum liability of any Shareholder for indemnification
in respect of all matters arising pursuant to or in connection with the Company
Sale shall not exceed the net proceeds received by such Shareholder from such
Company Sale; and (v) no Shareholders shall be required to make general
representations or warranties regarding the financial condition, business,
assets or affairs of the Company and its Subsidiaries.
(d) Any Drag-Along Notice given to Harvard shall include a valuation of
the fair market value of each of the Company and Holdco. Such valuation shall be
made by a nationally recognized investment banking firm. Harvard shall have the
right to exercise its right to exchange its shares of Common Stock into shares
of common stock of Holdco (the "Holdco Common Stock")for 20 days following
receipt by Harvard of a Drag-Along Notice.
(e) If Capricorn approves or authorizes a sale or exchange, whether
directly or pursuant to a merger, consolidation or otherwise, of at least a
majority of the then outstanding Holdco Common Stock (the "Holdco Company Sale")
in a bona fide arm's-length transaction to a third party that is not an
Affiliate of Capricorn or of Holdco (the "Holdco Independent Third Party"), then
Capricorn shall have the right (the "Exchange Right") to require Harvard and its
direct or indirect transferees to exchange all of their shares of Common Stock
into shares of Holdco Common Stock. If Capricorn desires to exercise the
Exchange Right, it shall give written notice to Harvard and such transferees
(the "Exchange Notice") of the Holdco Company Sale in addition to any drag-along
notice required under the Stockholders' Agreement among Holdco and its
Stockholders. Harvard and such transferees shall be required to exchange their
Common Stock into Holdco Common Stock immediately upon receipt by Harvard and
such transferees of the Exchange Notice; provided, however, that the exchange
rate shall be increased to the extent that the fair market value of the shares
of Holdco Common Stock issuable to Harvard and such transferees upon the
exercise of the Exchange Right (before such increase) is less than the fair
market value of the shares of Common Stock of the Company to be exchanged by
Harvard and such transferees pursuant to the Exchange Right, in each case
determined by reference to Harvard's or such transferees' proportionate Common
Stock interest in Holdco or the Company, as the case may be, without any
minority discount.
(f) Any Exchange Notice given to Harvard and its direct or indirect
transferees shall include a valuation of the fair market value of the shares of
Common Stock to be exchanged by Harvard and such transferees pursuant to the
Exchange Right and the fair market value of the shares of Holdco Common Stock to
be acquired by Harvard and such transferees pursuant to the Exchange Right, in
each case determined by reference to Harvard's or such transferees'
proportionate Common Stock interest in Holdco or the Company, as the case may
be, without any minority discount or discount relating to lack of free
transferability. Such valuation shall be made by a nationally recognized
investment banking firm which shall value the enterprise value of the Company.
Section 4.5. Tag-Along Rights.
(a) Notwithstanding anything in this Agreement to the contrary, except
in the case of (i) transfers by Holdco to an Affiliate of Holdco, and (ii)
transactions where Drag-Along Rights are exercised pursuant to Section 4.4
hereof, Holdco shall refrain from effecting any transfer of the Common Stock
unless, prior to the consummation thereof, the other Shareholders shall have
been afforded the opportunity to join in such sale on a pro rata basis and the
holder or holders of the Senior Subordinated Note of the Company initially
issued to Harvard on September 19, 1996 (the "Note") have been afforded an
opportunity to sell such Note, as hereinafter provided in this Section 4.5.
(b) Prior to consummation of such proposed transfer, Holdco shall cause
the person or group that proposes to acquire such shares (the "Proposed
Purchaser") to offer in writing (the "Purchase Offer") to purchase shares of
Common Stock (or shares of Common Stock into which any employee stock options
are then exercisable) owned by the other Shareholders, such that the number of
shares of such Common Stock (or shares of Common Stock into which any employee
stock options are then exercisable) so offered to be purchased from the other
Shareholders shall be equal to the product obtained by multiplying the aggregate
number of shares of Common Stock proposed to be purchased by the Proposed
Purchaser by such other Shareholder's Pro Rata Portion. If the Purchase Offer is
accepted by any other Shareholder, then the number of shares of Common Stock to
be sold to the Proposed Purchaser by Holdco, shall be reduced by the aggregate
number of shares of Common Stock to be purchased by the Proposed Purchaser from
such other Shareholder pursuant thereto. Such purchase shall be made on the same
terms and conditions as the Proposed Purchaser shall have offered to purchase
shares of Common Stock to be sold by Holdco (net, in the case of any options,
warrants or rights, of any amounts required to be paid by the holder upon
exercise thereof). The other Shareholders shall have 30 days from the date of
receipt of the Purchase Offer during which to accept such Purchase Offer, and
the closing of such purchase shall occur within 30 days after such acceptance or
at such other time as the other Shareholders and the Proposed Purchaser may
agree. Prior to consummation of such proposed transfer, Holdco shall also cause
the Proposed Purchaser to offer in writing to purchase the Note from the holder
or holders thereof for a cash purchase price equal to the principal amount of
such Note then outstanding and all accrued and unpaid interest thereon.
Section 4.6. Preemptive Rights.
(a) The Company hereby grants to Harvard and its direct or indirect
transferees a preemptive right to purchase any New Securities that the Company
may, from time to time, propose to issue and sell. Such preemptive right shall
allow Harvard and such transferees to purchase their respective Pro Rata
Portions (determined immediately prior to such issuance and sale of New
Securities) of the New Securities proposed to be issued. The preemptive right
granted hereunder shall terminate if unexercised within 30 days after receipt of
the notice described in Section 4.6(b) below.
(b) In the event that the Company proposes to undertake an issuance of
New Securities, it shall give Harvard and its direct or indirect transferees'
written notice of its intention ("New Issue Notice"), describing the number of
New Securities, the purchase price therefor (which shall be payable solely in
cash), and the terms upon which the Company proposes to issue the same. Harvard
and such transferees shall have 30 calendar days from the date the New Issue
Notice is received by it to determine whether to purchase all or any portion of
their respective Pro Rata Portions of such New Securities for the purchase price
and upon the terms specified in the New Issue Notice by giving written notice to
the Company, stating therein the quantity of New Securities to be purchased.
Section 5. Miscellaneous.
Section 5.1. Inspection Rights. Each Shareholder that holds 5% or more
of the shares of Common Stock at the time outstanding, shall have the right,
upon reasonable prior notice to the Company, to visit and inspect the properties
of the Company and its Subsidiaries and to examine and copy (at its own expense)
their books of record and accounts, and to discuss their affairs, finances, and
accounts with their officers and their current and prior independent public
accountants, all at such times (during normal business hours) as such
Shareholder may reasonably request. The foregoing rights are in addition to, and
are not intended to limit, any rights that the Shareholders may have under the
law of the State of Delaware, including Sections 219 and 220 of the Delaware
General Corporation Law.
Section 5.2. Confidentiality. All materials and information obtained by
any Shareholder pursuant to Section 5.1 hereof shall be kept confidential and
shall not be disclosed to any third party except (a) as has become generally
available to the public (other than through disclosure by such Shareholder in
contravention of this Agreement), (b) to such Shareholder's directors, officers,
trustees, partners, employees, agents, and professional consultants on a need to
know basis, (c) to any other holder of shares of Common Stock, (d) to any Person
to which such Shareholder offers to sell or transfer any shares of Common Stock,
provided that the prospective transferee shall agree to be bound by the
provisions of this Section 5.2, (e) in any report, statement, testimony or other
submission to any governmental authority having or claiming to have jurisdiction
over such Shareholder, or (f) in order to comply with any law, rule, regulation,
or order applicable to such Shareholder, or in response to any summons, subpoena
or other legal process or formal or informal investigative demand issued to such
Shareholder in the course of any litigation, investigation or administrative
proceeding.
Section 5.3. Successors and Assigns. Except as otherwise provided
herein, all the terms and provisions of this Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the respective
successors and assigns of the parties hereto. No Shareholder may assign any of
its rights hereunder to any Person other than a transferee that has complied in
all respects with the requirements of this Agreement (including, without
limitation, Section 3.2 hereof). The Company may not assign any of its rights
hereunder to any other Person. If any transferee of any Shareholder shall
acquire any shares of Common Stock or Preferred Stock in any manner, whether by
operation of law or otherwise, such shares shall be held subject to all of the
terms of this Agreement, and by taking and holding such shares such Person shall
be entitled to receive the benefits of and be conclusively deemed to have agreed
to be bound by and to comply with all of the terms and provisions of this
Agreement.
Section 5.4. Amendment and Modification: Waiver of Compliances; Conflicts.
(a) This Agreement may be amended only by a written instrument duly
executed by all of the Shareholders. In the event of the amendment or
modification of this Agreement in accordance with its terms, the Shareholders
shall cause the Board of Directors to meet within 30 calendar days following
such amendment or modification or as soon thereafter as is practicable for the
purpose of adopting any amendment to the Certificate of Incorporation and
By-Laws that may be required as a result of such amendment or modification to
this Agreement, and, if required, proposing such amendments to the Shareholders
entitled to vote thereon, and the Shareholders agree to vote in favor of such
amendments.
(b) Except as otherwise provided in this Agreement, any failure of any
of the parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
(c) In the event of any conflict between the provisions of this
Agreement and the provisions of any other agreement, the provisions of this
Agreement shall govern and prevail.
Section 5.5. Notices. All notices and other communications provided for
hereunder shall be in writing and delivered by hand or sent by first class mail
or sent by telecopy (with such telecopy to be confirmed promptly in writing sent
by first class mail), sent as follows:
(i) If to Holdco, addressed to:
Xxx. Xxxxxx' Holding Company, Inc.
c/o Capricorn Investors II, L.P.
00 Xxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Telecopy: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx
Telecopy: (000) 000-0000
(ii) If to the Company, addressed to:
The Xxx. Xxxxxx' Brand, Inc.
c/o Capricorn Investors II, L.P.
00 Xxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Telecopy: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx
Telecopy: (000) 000-0000
(iii) If to Harvard, addressed to:
Harvard Private Capital Holdings, Inc.
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx
Telecopy: (000) 000-0000
with a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxx Xxxx
Telecopy: (000) 000-0000
or to such other address or addresses or telecopy number or numbers as any of
the parties hereto may most recently have designated in writing to the other
parties hereto by such notice. All such communications shall be deemed to have
been given or made when so delivered by hand or sent by telecopy, or three
business days after being so mailed.
Section 5.6. Entire Agreement: Governing Law.
(a) This Agreement and the other writings referred to herein or
delivered pursuant hereto which form a part hereof contain the entire agreement
among the parties hereto with respect to the subject transactions contemplated
hereby and supersede all prior oral and written agreements and memoranda and
undertakings among the parties hereto with regard to this subject matter. The
Company represents to the Shareholders that the rights granted to the holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted or obligations accepted under any other agreement (including the
Certificate of Incorporation) to which the Company is a party. Neither the
Company nor any Subsidiary of the Company will hereafter enter into any
agreement with respect to its equity or debt securities which is inconsistent
with the rights granted to any Shareholder under this Agreement without
obtaining the prior written consent of such Shareholder.
(b) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO THE CHOICE OF
LAW PRINCIPLES THEREOF).
Section 5.7. Injunctive Relief. The Shareholders acknowledge and agree
that a violation of any of the terms of this Agreement will cause the
Shareholders irreparable injury for which an adequate remedy at law is not
available. Therefore, the Shareholders agree that each Shareholder shall be
entitled to, an injunction, restraining order or other equitable relief from any
court of competent jurisdiction, restraining any Shareholder from committing any
violations of the provisions of this Agreement.
Section 5.8. Availability of Agreement. For so long as this Agreement
shall be in effect, this Agreement shall be made available for inspection by any
Shareholder upon request at the principal executive offices of the Company.
Section 5.9. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 5.10. Recapitalizations, Exchanges, Etc. Affecting the Shares
of Common Stock; New Issuances. The provisions of this Agreement shall apply, to
the full extent set forth herein with respect to the shares of Common Stock and
to any and all equity or debt securities of the Company or any successor or
assign of the Company (whether by merger, consolidation, sale of assets, or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of, such equity or debt securities and shall be appropriately
adjusted for any stock dividends, splits, reverse splits, combinations,
reclassifications, recapitalizations, reorganizations and the like occurring
after the date hereof.
Section 5.11. Counterparts. 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.
Section 5.12. Arbitration.
(a) Any disagreement, dispute, controversy or claim arising
out of or relating to this Agreement or the transactions contemplated hereby,
including, without limitation, the interpretation hereof and any breach,
termination or invalidity hereof, shall be settled exclusively and finally (i)
through good faith negotiation of the parties for a period not in excess of 30
days and (ii) in the event such negotiations do not yield a settlement within
such 30-day period, by arbitration (irrespective of the magnitude thereof, the
amount in controversy or whether such matter would otherwise be considered
justiciable or ripe by a court or arbitral tribunal).
(b) The arbitration shall be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association (the
?Arbitration Rules?), except as those rules conflict with the provisions of this
Section 5.12, in which event the provisions of this Section 5.12 shall control.
(c) The arbitral tribunal shall consist of three arbitrators
chosen in accordance with the Arbitration Rules. The arbitration shall be
conducted in New York City. Any submission of a matter for arbitration shall
include joint written instructions of the parties requiring the arbitral
tribunal to render a decision resolving the matters submitted within 60 days
following the submission thereof.
(d) Any decision or award of the arbitral tribunal shall be
final and binding upon the parties to the arbitration proceeding. The parties
agree that the arbitral award may be enforced against the parties to the
arbitration proceeding or their assets wherever they may be found and that a
judgment upon the arbitral award may be entered in any court having jurisdiction
thereof.
(e) All out-of-pocket costs and expenses incurred by any party
in connection with the resolution of any disagreement, dispute, controversy or
claim pursuant to this Section 5.12, including, but not limited to, reasonable
attorney?s fees and disbursements, shall be borne by the party incurring the
same; provided, however, that the arbitral tribunal shall have the discretion to
declare any party as the ?prevailing party? with respect to one or more of the
issues that were the subject of the arbitration and to require the other parties
to the arbitration to reimburse such ?prevailing party? for some or all of its
costs and expenses incurred in connection with such proceeding.
(f) The costs of the arbitral tribunal shall be divided evenly
between the parties, unless there is a ?prevailing party,? in which case the
arbitral tribunal may allocate more or all of such costs to the party thereto
that is not the ?prevailing party?.
(g) This Section 5.12 shall not prohibit or limit in any way
any party from seeking or obtaining preliminary or interim injunctive or other
equitable relief from a court for a breach or alleged breach of any of the
covenants and agreements of another party contained in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
THE XXX. XXXXXX' BRAND, INC.
By:/s/Xxxxx X. Xxxxxx
Name:Xxxxx X. Xxxxxx
Title:President/CEO
HARVARD PRIVATE CAPITAL
HOLDINGS, INC.
By:/s/
Name:
Title:
By:
Name:
Title:
XXX. XXXXXX' HOLDING COMPANY,INC.
acting on behalf agent, bailee, or ot
CAPRICORN INVESTORS II, L.P.
By Capricorn Holdings L.L.C,
General Partner
By:/s/Xxxxxxx X. Xxxxxxx
Name:Xxxxxxx X. Xxxxxxx
Title:Manager
TABLE OF CONTENTS
(Not Part of Agreement)
Section Heading Page
1. Certain Definitions...................................................................... 2
2. Management............................................................................... 4
2.1. Board of Directors; Shareholders.............................................. 4
2.2. Authority of Board of Directors............................................... 5
2.3. No Conflict with Agreement.................................................... 5
3. Transfers of Shares of Common Stock and Preferred Stock.............................. 5
3.1. Restrictions on Transfer........................................................5
3.2 Endorsement of Certificates................................................... 6
3.3. Improper Transfer.............................................................. 7
4. Rights of First Refusal; Drag-Along Rights; Tag-Along Rights; Preemptive Rights........... 7
4.1. Transfers by Shareholders..................................................... 7
4.2. Transfer of Offered Securities to Third Parties................................ 9
4.3. Purchase of Offered Securities................................................. 9
4.4. Drag-Along Rights............................................................. 10
4.5. Tag-Along Rights.............................................................. 13
4.6. Preemptive Rights............................................................. 14
5.
Miscellaneous
14
5.1. Inspection Rights............................................................. 14
5.2. Confidentiality............................................................... 15
5.3. Successors and Assigns........................................................ 15
5.4. Amendment and Modification: Waiver of Compliances; Conflicts.................. 16
5.5. Notices....................................................................... 16
5.6. Entire Agreement: Governing Law............................................... 18
5.7. Injunctive Relief............................................................. 18
5.8. Availability of Agreement..................................................... 18
5.9. Headings...................................................................... 18
5.10. Recapitalizations, Exchanges, Etc. Affecting the Shares of Common
Stock; New Issuances.......................................................... 19
5.11. Counterparts.................................................................. 19
5.12. Arbitration 19
