Exhibit 10.7
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AMENDED AND RESTATED
SHAREHOLDERS AGREEMENT
AMONG
RED XXXXX GOURMET BURGERS, INC.
SKYLARK COMPANY, LTD
RR INVESTORS, LLC
RR INVESTORS II, LLC
XXXXXXX X. XXXXXX
AND
CERTAIN OTHER SHAREHOLDERS
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Dated as of August 9, 2001
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Table of Contents
Page
1. Definitions ......................................................... 1
2. Holding Co. Board of Directors ...................................... 5
(a) Constitution of the Board ..................................... 5
(b) Board Action .................................................. 7
(c) Committees .................................................... 9
(d) Expenses ...................................................... 9
(e) Directors Insurance ........................................... 9
(f) Board of Subsidiaries ......................................... 9
(g) Operating Co. Board of Directors .............................. 9
3. Restrictions on Transfer of Covered Shares .......................... 10
(a) Transfer of Covered Shares .................................... 11
(b) First Refusal Right ........................................... 11
(c) Permitted Transfers ........................................... 12
(d) Termination of Restrictions ................................... 13
(e) Securities Laws ............................................... 13
(f) Prohibited Transfer ........................................... 13
(g) Improper Transfer ............................................. 14
4. Right to Compel Sale or Public Offering ............................. 14
(a) Right to Compel Sale or Public Offering ....................... 14
(b) Compelled Sale ................................................ 14
(c) Compelled Sale Notice ......................................... 15
(d) Rule 506 ...................................................... 17
(e) Public Offering ............................................... 18
(f) Appraisal Option .............................................. 18
5. The Holding Company's Right to Purchase Covered Shares Upon
Involuntary Transfer ................................................ 19
6. Pre-emptive Rights .................................................. 20
7. Legend .............................................................. 20
8. Transfer or Issuance ................................................ 21
(a) Transfer ...................................................... 21
(b) Issuance ...................................................... 21
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9. Representation and Warranty of Shareholders ......................... 21
10. Miscellaneous ....................................................... 21
(a) Amendment and Waiver .......................................... 21
(b) Information Rights ............................................ 21
(c) Severability .................................................. 22
(d) Entire Agreement .............................................. 22
(e) Successors and Assigns ........................................ 22
(f) Counterparts .................................................. 22
(g) Remedies ...................................................... 22
(h) Notices ....................................................... 23
(i) Governing Law ................................................. 25
(j) Descriptive Headings .......................................... 25
(k) Termination ................................................... 25
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AMENDED AND RESTATED
SHAREHOLDERS AGREEMENT
This AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (this "Agreement") is
made and entered into this 9 day of August, 2001 by and among Red Xxxxx Gourmet
Burgers, Inc., a Delaware corporation (the "Holding Company"), the Persons,
including Skylark Company, Ltd., a Japan corporation ("Skylark"), listed in
Schedule A (the "Skylark Holders"), RR Investors, LLC, a Virginia limited
liability company ("Investors I"), RR Investors II, LLC, a Virginia limited
liability company ("Investors II" and together with Investors I, "Investors"),
Xxxxxxx X. Xxxxxx ("Xxxxxx") and each of the Persons listed in Schedule B hereto
(together with Xxxxxx, the "Xxxxxx Group") and each of the Persons listed in
Schedule C hereto (the "Existing Shareholders"). The Skylark Holders, Investors,
the Xxxxxx Group, the Existing Shareholders and the Option Executives, and their
respective successors and permitted assigns (including any Related Transferees),
are collectively referred to as the "Shareholders" and individually as a
"Shareholder."
On May 11, 2000, Red Xxxxx International, Inc., a Nevada corporation
and a wholly owned subsidiary of the Holding Company (the "Operating Company"),
and the Shareholders entered into that certain Shareholders Agreement (the
"Shareholders Agreement") to, among other things, provide for the governance of
the Operating Company and to specify and limit the manner and terms upon which
the Covered Shares (as hereinafter defined) shall or may be transferred.
On January 23, 2001, the Operating Company, the Holding Company and
Red Xxxxx Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary
of the Holding Company ("RRMS"), entered into a Merger Agreement (the "Merger
Agreement") to provide for a corporate reorganization of the Operating Company
whereby RRMS would be merged with and into the Operating Company (the "Merger"),
with (a) the Operating Company continuing as the surviving corporation of such
merger, and (b) each outstanding share (or any fraction thereof) of the common
stock of the Operating Company being converted in such merger into a like number
of shares of the common stock of the Holding Company, par value $0.001 per
share.
Concurrently with the consummation of the Merger in accordance with
the terms of the Merger Agreement, the parties hereto desire to amend and
restate, in its entirety, the Shareholders Agreement in order to add the Holding
Company as a party hereto in substitution of the Operating Company, to provide
for the governance of the Holding Company and to specify and limit the manner
and terms upon and by which the Covered Shares shall or may be transferred.
The parties to this Agreement hereby agree as follows:
1. Definitions. Terms defined in this Agreement shall have the meaning
ascribed to them in this Agreement, in addition, as used in this Agreement, the
following terms shall have the following respective meanings, whether used in
the singular or the plural:
"Affiliate" of any Person means any other Person directly or
indirectly controlling (including all directors and officers of such Person) or
controlled by or under direct or indirect common control with such Person. For
the purposes of this definition, "control", when used with respect to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Appraisal Purchasers" has the meaning set forth in Section 4(f)(ii).
"Appraisal Shares" has the meaning set forth in Section 4(f)(i).
"Bona Fide Offer" has the meaning set forth in Section 3(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Richmond, Virginia, New York, New York, or Denver,
Colorado are authorized by law to close.
"Common Shares" means the Holding Company's common stock, $0.001 par
value.
"Compelled Sale" has the meaning set forth in Section 4(a).
"Control Transfer" means one or a series of related transactions as a
result of which (i) any Third Party, or group of Third Parties acting in
concert, acquires, directly or indirectly, a majority of the Holding Company's
Voting Shares (on a Fully-Diluted Basis), (ii) the Holding Company consolidates
with or merges into or with, or effects any plan of share exchange with, any
Person and after giving effect to such consolidation or merger or plan of share
exchange any Third Party or group of Third Parties acting in concert owns,
directly or indirectly, a majority of the Voting Shares of the Person (on a
Fully-Diluted Basis) surviving such consolidation or merger or (iii) in one
transaction or a series of related transactions, all or substantially all of the
assets of the Holding Company and its Subsidiaries are sold, leased, exchanged
or otherwise transferred as an entirety to any Third Party or group of Third
Parties acting in concert (the "Acquiring Persons") and after giving effect to
such transaction any Third Party or group of Third Parties acting in concert
owns, directly or indirectly, a majority of the Voting Shares of the Acquiring
Persons (on a Fully-Diluted Basis).
"Covered Shares" means, without duplication, (A) the Common Shares
purchased or otherwise acquired by the Shareholders, which as of a date of
determination are outstanding, (B) the Underlying Shares (or the instrument
pursuant to which such Underlying Shares are issuable) which as of such date are
outstanding (or, in the case of such instrument, may at such time be exercised),
and (C) any equity securities referred to in clauses (A) and (B) above issued or
issuable directly or indirectly with respect to the Shares, which as of such
date are outstanding, by way of share dividend or share split or in connection
with a combination of shares, recapitalization, merger, consolidation, plan of
share exchange or other reorganization. For purposes of this Agreement, a Person
will
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be deemed to be a holder or owner of Covered Shares whenever such Person has the
right, other than pursuant to the terms of this Agreement, to acquire such
Covered Shares (by conversion, exercise of warrant or option or otherwise, but
disregarding any legal restrictions (other than imposed pursuant to this
Agreement) upon the exercise of such right), whether or not such right has been
exercised. As to any particular shares constituting Covered Shares, such shares
will cease to be Covered Shares when they have been sold pursuant to a Public
Sale.
"Duly Endorsed" means duly endorsed in blank by the Person or Persons
in whose name a share certificate is registered or accompanied by a duly
executed share assignment separate from the certificate with, in the case of a
Person other than the Skylark Holders, Investors and the Xxxxxx Group, the
signature(s) thereon guaranteed by a commercial bank or trust company or a
member of a national securities exchange or of the National Association of
Securities Dealers, Inc.
"Executive Stock Options" means the options to purchase Common Shares
awarded to Option Executives pursuant to the Stock Option Plans.
"Fair Market Value" per Common Share means, as of any date, the fair
market value per Common Share as of such date, calculated on a Fully-Diluted
Basis and determined in good faith by the Holding Co. Board of Directors.
"Fully-Diluted Basis" means, without duplication, all outstanding
Common Shares and all Underlying Shares.
"Funded Debt" means, as of any date, without duplication, with respect
to any Person, (i) all indebtedness for borrowed money or for the deferred
purchase of property, (ii) the face amount of all letters of credit, banker's
acceptances and other credit facilities issued for the account of such Person
and, without duplication, all drafts drawn thereunder, (iii) all indebtedness
secured by any lien on any property owned by such Person, to the extent
attributable to such Person's interest in such property even though such Person
has not assumed or become liable for the payment thereof, (iv) lease obligations
of such Person which, in accordance with generally acceptable accounting
principles, should be capitalized, (v) obligations with respect to any
conditional sale agreement or title retention agreement and (vi) guarantees by
such Person of the Funded Debt of another Person, but excluding in each case
trade and other accounts payable in the ordinary course of business.
"Holding Co. Board of Directors" means the board of directors of the
Holding Company.
"HSR Act" means the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Involuntary Transfer" means any transfer of title or beneficial
ownership of Covered Shares (other than a transfer pursuant to Section
3(c)(iii)) upon default, foreclosure, forfeit, divorce, court order, or
otherwise than upon a voluntary decision on the part of a Shareholder.
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"Offeror" has the meaning set forth in Section 3(b).
"Operating Company" means Red Xxxxx International, Inc., a Nevada
corporation and a wholly owned subsidiary of the Holding Company.
"Operating Co. Board of Directors" means the board of directors of the
Operating Company.
"Option Executives" means employees of the Holding Company or its
Subsidiaries who are awarded Executive Stock Options.
"Permitted Transferee" means the holder of Covered Shares where such
shares were acquired pursuant to a transfer permitted by Section 3(c) hereof.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association or organization, joint venture, government or department or agency
thereof, or other entity of whatever nature.
"Public Offering" means any sale of Common Shares pursuant to a
registered public offering under the Securities Act.
"Public Sale" means any Public Offering or any sale of Common Shares to
the public pursuant to Rule 144 effected through a broker or dealer.
"Qualified Public Offering" means a Public Sale of Common Shares which,
when aggregated with all previous Public Sales of Common Shares, results in at
least 20% of the Common Shares outstanding on a Fully-Diluted Basis being held
by Persons other than Shareholders and their respective Affiliates and gross
proceeds of at least $30 million.
"Related Transferee" has the meaning set forth in Section 3(c).
"Rule 144" means Rule 144 promulgated by the Securities and Exchange
Commission under the Securities Act as such rule may be amended from time to
time, or any similar rule then in force.
"Securities Act" means the United States Securities Act of 1933, as
amended from time to time.
"Securities and Exchange Commission" means the United States Securities
and Exchange Commission and includes any federal governmental body or agency
succeeding to the functions thereof.
"Senior Debt Facility" means the credit facility of the Operating
Company pursuant to and substantially in accordance with that certain Loan
Agreement, dated as of September 6, 2000, by and among the Operating Company,
FINOVA Capital Corporation, and certain financial institutions from time to time
parties thereto, as the
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same shall be amended, amended and restated, supplemented, restructured or
otherwise modified from time to time (in whole or in part and without limitation
as to terms, conditions or covenants and without regard to the principal amount
thereof) and in effect, including all related notes, collateral documents,
guaranties, instruments and agreements entered into in connection therewith, and
any successive restructurings, renewals or refundings thereof.
"Shareholder" has the meaning set forth in the Recitals.
"Skylark Holders" means the Persons listed in Schedule A.
"Stock Option Plans" means the Holding Company's Employee Stock
Option Plan, 1990, Employee Stock Option Plan, 1996 and the 2000 Management
Performance Common Stock Option Plan pursuant to which options to purchase
Common Shares are to be awarded to certain employees of the Holding Company or
its Subsidiaries and any other stock option plan or other equity-based employee
benefit plans approved by the Holding Co. Board of Directors after the date of
this Agreement.
"Subsidiary" means, with respect to any Person, any corporation of
which an aggregate of 50% or more of the outstanding share capital or capital
stock having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether, at the time, capital stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time, directly or
indirectly, owned by such Person and/or one or more Subsidiaries of such Person.
"Third Party" means a Person who was not (i) a party to this
Agreement immediately after the date hereof, (ii) a Permitted Transferee of a
transferor who was, or whose predecessor in interest was, a party to this
Agreement immediately after the date hereof or (iii) an Affiliate of the Holding
Company or any Shareholder or (iv) an employee of the Holding Company or any of
its Subsidiaries on the date such person became a Shareholder.
"Underlying Shares" means, as the context requires, all Common
Shares issuable upon exercise of any then outstanding options (including the
Executive Stock Options), warrants, convertible or exchangeable securities or
other similar instruments or rights.
"Voting Shares" means shares of the class or classes having
general voting power under ordinary circumstances to elect at least a majority
of the board of directors of a corporation (irrespective of whether or not at
the time shares of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
2. Holding Co. Board of Directors.
(a) Constitution of the Board. Each Shareholder shall appear in
person or by proxy at any annual or special meeting of shareholders for the
purpose of obtaining a
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quorum and shall vote or cause the vote of the Covered Shares and any other
Voting Shares of the Holding Company over which he or it has voting control,
either in person or by proxy, and will take all other necessary or desirable
action within his control (whether in his capacity as a shareholder, director or
officer of the Holding Company or otherwise), and the Holding Company shall take
all necessary or desirable action within its control, in order to cause:
(i) the Holding Co. Board of Directors to consist of five members;
(ii) so long as the Skylark Holders, their Affiliates and the Skylark
Holders' or their Affiliates' Related Transferees hold collectively at least a
number of Common Shares equal to 90% of the Common Shares held by them as of May
11, 2000 (as such number is equitably adjusted to reflect stock splits, stock
dividends, recapitalizations and reclassifications), the election of two
directors designated by the Skylark Holders, and so long as the Skylark Holders,
their Affiliates and the Skylark Holders' or their Affiliates' Related
Transferees hold collectively at least a number of Common Shares equal to 50% of
the Common Shares held by them as of May 11, 2000 (as such number is equitably
adjusted to reflect stock splits, stock dividends, recapitalizations and
reclassifications), the election of one director designated by the Skylark
Holders ("Skylark Directors");
(iii) so long as Investors, its Affiliates and Investors' or its
Affiliates' Related Transferees hold collectively at least a number of Common
Shares equal to 90% of the Common Shares held by them as of May 11, 2000 (as
such number is equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and reclassifications), the election of two directors
designated by Investors, and so long as Investors, its Affiliates and Investors'
or its Affiliates' Related Transferees hold collectively at least a number of
Common Shares equal to 50% of the Common Shares held by them as of May 11, 2000
(as such number is equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and reclassifications), the election of one director
designated by Investors ("Investors Directors"); provided that so long as
Investors is entitled to -------- designate one or more directors pursuant to
this Section 2(a)(iii) and Quad-C Partners V, L.P., a Delaware limited
partnership, directly or indirectly holds any Common Shares, it shall be
entitled to designate one of the Investors Directors;
(iv) so long as he is the Chief Executive Officer of the Holding
Company and holds at least a number of Executive Stock Options and/or Common
Shares equal to 90% of the Executive Stock Options and Common Shares held by him
as of May 11, 2000 (as such number is equitably adjusted to reflect stock
splits, stock dividends, recapitalizations and reclassifications), the election
of Xxxxxx as a director; provided that in the event Xxxxxx ceases to be the
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Chief Executive Officer of the Holding Company, so long as the Xxxxxx Group
holds at least a number of Executive Stock Options and/or Common Shares equal to
90% of the Executive Stock Options and Common Shares held by them as of May 11,
2000 (as such number is equitably adjusted to reflect stock splits, stock
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dividends, recapitalizations and reclassifications), the election of one
director designated by the Xxxxxx Group;
(v) so long as Skylark, Investors, Xxxxxx or the Xxxxxx Group is
entitled to designate directors pursuant to this Section 2(a), the removal, with
or without cause, of any director designated by the Skylark Holders, Investors,
Xxxxxx or the Xxxxxx Group, as the case may be, only at the respective written
request of the Skylark Holders, Investors, Xxxxxx or the Xxxxxx Group, as the
case may be; and
(vi) in the event that any director designated by the Skylark Holders ,
Investors or the Xxxxxx Group pursuant to this Section 2(a) ceases for any
reason to serve as a member of the Holding Co. Board of Directors during his
term of office, the resulting vacancy on the Holding Co. Board of Directors to
be filled by a representative designated by the Skylark Holders, Investors or
the Xxxxxx Group, as the case may be, hereunder (so long as the Skylark Holders,
Investors or the Xxxxxx Group, as the case may be, is entitled to designate the
director pursuant to this Section 2).
(b) Board Action.
(i) At all meetings of the Holding Co. Board of Directors, a majority
of the number of the directors then in office, including in any case at least
one Skylark Director and at least one Investors Director, shall constitute a
quorum for the transaction of business thereat. Except as expressly otherwise
provided in this Agreement, the vote of a majority of the directors present at a
meeting of the Holding Co. Board of Directors with respect to which notice
thereof pursuant to the by-laws of the Holding Company as in effect on the date
hereof shall have been duly given and at which a quorum is present shall be the
act of the Holding Co. Board of Directors.
(ii) During the term of this Agreement, (A) so long as Investors, its
Affiliates and Investors' or its Affiliates' Related Transferees hold in excess
of 25% of the outstanding Voting Securities of the Holding Company, without the
approval of at least one Investors Director, and (B) so long as Skylark
guarantees or provides other similar credit support for any of the long-term
debt of the Holding Company or its Subsidiaries, without the approval of at
least one Skylark Director, neither the Holding Company nor any of its
Subsidiaries shall:
(A) enter into or make material modifications to any agreement
or transaction or series of related transactions with any Affiliate;
(B) effect a recapitalization or an increase or reduction in the
amount of its equity securities or the creation of any additional class
of capital stock or the issuance of additional shares of capital stock
or securities convertible into, exchangeable for or granting the right
to acquire (with or without the payment of consideration) capital stock
other
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than pro rata among the holders of Common Shares except pursuant to the
exercise of Executive Stock Options;
(C) acquire (including by merger) stock or assets of another
Person that will not be operated as a "Red Xxxxx" restaurant or a
reasonable extension, development or expansion thereof or ancillary
thereto;
(D) except as approved in connection with the Annual Budget (as
defined below) under clause (I) or (J), acquire (including by merger)
stock or assets of another Person that will be operated as a "Red
Xxxxx" restaurant or a reasonable extension, development or expansion
thereof or ancillary thereto for a purchase price in excess of $7
million;
(E) sell, lease, exchange, transfer or otherwise dispose of,
directly or indirectly, in a single transaction or series of related
transactions, a significant portion of the assets of the Holding
Company or any of its Subsidiaries;
(F) except as permitted under clause (C) or (D) above, merge,
consolidate or effect a share exchange with, or sell all or any
significant portion of the outstanding capital stock to, any other
Person;
(G) incur or guaranty any material Funded Debt in excess of $5
million or any modifications or amendment to any agreement governing
the extension or guaranty thereof (other than the incurrence under the
terms of the Senior Debt Facility or any agreement previously approved
by the Holding Co. Board of Directors or the Operating Co. Board of
Directors or the incurrence of Funded Debt permitted under any such
agreement);
(H) enter into or acquire a business that is not (1)
substantially in the business conducted by the Holding Company or any
of its Subsidiaries on the date hereof or (2) a reasonable extension,
development or expansion thereof or ancillary thereto;
(I) approve the annual operating and capital expenditure budget
(the "Annual Budget");
(J) expend, or commit to expend, in any fiscal year of the
Holding Company, capital expenditures materially in excess of the
amount provided in the Annual Budget;
(K) commence a voluntary case or consent to the entry of an
order for relief against it in an involuntary case under Chapter 7 or
Chapter 11 of the United States Bankruptcy Code; or
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(L) other than amendments permitted by the second proviso of the
first sentence of Section 11(a), amend this Agreement or the
Certificate of Incorporation of the Holding Company in a manner which
would adversely affect the rights and obligations of Investors, the
Skylark Holders or the Xxxxxx Group, as the case may be, or amend the
by-laws of the Holding Company in a manner that is in conflict with the
applicable provisions of this Agreement;
provided that during the continuance of any period in which a default
--------
exists under the Senior Debt Facility which would entitle the lenders
thereunder or the holders thereof to accelerate the obligations of the
borrower thereunder, all action of the Holding Co. Board of Directors shall
require the affirmative vote of at least one Investors Director and one
Skylark Director if at such time Investors and/or the Skylark Holders, as
the case may be, are entitled to exercise approval rights pursuant to this
Section 2(b)(ii); provided further that so long as the Skylark Holders,
-------- ------
their Affiliates and the Skylark Holders' or their Affiliates' Related
Transferees hold in excess of 25% of the outstanding Voting Securities of
the Holding Company, neither the Holding Company nor any of its
Subsidiaries shall take the actions set forth in clause (C) or clause (H)
above without the approval of at least one Skylark Director; provided
--------
further that in the event of conflict between the provisions of this
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Section 2(b)(ii) and the provisions of Section 4 hereof, the provisions of
Section 4 shall control.
(c) Committees. The Holding Co. Board of Directors may establish
committees, including an Executive Committee, which shall have such authority as
shall be delegated by the Holding Co. Board of Directors from time to time. So
long as the Skylark Holders, their Affiliates and the Skylark Holders' or their
Affiliates' Related Transferees hold collectively at least 25% of the Common
Shares or Skylark guarantees or provides other similar credit support for any of
the long-term debt of the Holding Company or any of its Subsidiaries, at least
one Skylark Director shall be a member of each committee. So long as Investors,
its Affiliates or Investors' and its Affiliates' Related Transferees hold
collectively at least 25% of the Common Shares, at least one director designated
by Investors shall be a member of each committee.
(d) Expenses. The Holding Company will pay the reasonable out-of-pocket
expenses incurred by each director in connection with attending the meetings of
the Holding Co. Board of Directors and any committee thereof.
(e) Directors Insurance. The Holding Company will provide errors and
omissions insurance for the benefit of the directors of the Holding Company.
(f) Board of Subsidiaries. The provisions of this Section 2 shall also be
applicable to the board of directors of each of the principal operating
Subsidiaries of the Holding Company, including, without limitation, the
Operating Co. Board of Directors; provided, however, that the provisions of
-------- ------
Section 2(g) below shall apply only to the Operating Co. Board of Directors.
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(g) Operating Co. Board of Directors. Notwithstanding anything to the
contrary herein, the Holding Company, as the sole shareholder of the Operating
Company, shall take all necessary or desirable action within its control, in
order to cause:
(i) the Operating Co. Board of Directors to consist of three
members;
(ii) so long as the Skylark Holders, their Affiliates and the
Skylark Holders' or their Affiliates' Related Transferees hold
collectively at least a number of Common Shares equal to 50% of the
Common Shares held by them as of May 11, 2000 (as such number is
equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and reclassifications), the election of one director
designated by the Skylark Holders;
(iii) so long as Investors, its Affiliates and Investors' or its
Affiliates' Related Transferees hold collectively at least a number of
Common Shares equal to 50% of the Common Shares held by them as of May
11, 2000 (as such number is equitably adjusted to reflect stock splits,
stock dividends, recapitalizations and reclassifications), the election
of one director designated by Investors; provided that so long as
--------
Quad-C Partners V, L.P., a Delaware limited partnership, directly or
indirectly holds any Common Shares, it shall be entitled to designate
such director;
(iv) so long as he is the Chief Executive Officer of the
Operating Company and holds at least a number of Executive Stock
Options and/or Common Shares equal to 90% of the Executive Stock
Options and Common Shares held by him as of May 11, 2000 (as such
number is equitably adjusted to reflect stock splits, stock dividends,
recapitalizations and reclassifications), the election of Xxxxxx as a
director; provided that in the event Xxxxxx ceases to be the Chief
--------
Executive Officer of the Operating Company, so long as the Xxxxxx Group
holds at least a number of Executive Stock Options and/or Common Shares
equal to 90% of the Executive Stock Options and Common Shares held by
them as of May 11, 2000 (as such number is equitably adjusted to
reflect stock splits, stock dividends, recapitalizations and
reclassifications), the election of one director designated by the
Xxxxxx Group;
(v) so long as Skylark, Investors, Xxxxxx or the Xxxxxx Group
is entitled to designate directors pursuant to this Section 2(g), the
removal, with or without cause, of any director designated by the
Skylark Holders, Investors, Xxxxxx or the Xxxxxx Group, as the case may
be, only at the respective written request of the Skylark Holders,
Investors, Xxxxxx or the Xxxxxx Group, as the case may be; and
(vi) in the event that any director designated by the Skylark
Holders , Investors or the Xxxxxx Group pursuant to this Section 2(g)
ceases for any reason to serve as a member of the Operating Co. Board
of Directors during his term of office, the resulting vacancy on the
Operating Co. Board of Directors to be filled by a representative
designated by the Skylark Holders, Investors or the Xxxxxx
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Group, as the case may be, hereunder (so long as the Skylark Holders,
Investors or the Xxxxxx Group, as the case may be, is entitled to
designate the director pursuant to this Section 2(g)).
3. Restrictions on Transfer of Covered Shares.
(a) Transfer of Covered Shares. No Shareholder will, voluntarily or
involuntarily, directly or indirectly, sell, transfer, assign, pledge, donate,
or otherwise encumber or dispose of any interest in any Covered Shares (a
"Transfer") except (i) pursuant to a Transfer to the Holding Company, a Public
Sale, a Compelled Sale pursuant to the provisions of Section 4, or to a
Permitted Transferee pursuant to Section 3(c), or (ii) pursuant to the
provisions of Section 3(b). (The Transfers described in Section 3(a)(i) are
referred to as "Exempt Transfers" and all other Transfers are referred to as
"Non-Exempt Transfers.").
(b) First Refusal Right.
(i) If any Shareholder (an "Offeror") shall receive a written
offer from a third party (the "Bona Fide Offer") to purchase any of its
Covered Shares that would constitute a Non-Exempt Transfer and desires
to accept the same, then, at least 25 Business Days before making any
such Non-Exempt Transfer (the "First Offer Election Period"), the
Transferor will deliver a written notice accompanied by a copy of the
Bona Fide Offer (the "First Offer Notice") to the Holding Company and
to all other Shareholders (the "Offerees"). The First Offer Notice will
specify the proposed number of Covered Shares to be the subject of such
Transfer (the "Offered Shares") and disclose in reasonable detail the
proposed terms and conditions of the Transfer. Unless otherwise agreed
by the Offeror, the purchase price for any such Transfer must be
payable solely in cash at the closing of the transaction. For purposes
of this Section 3(b), the value of any securities or other non-cash
consideration to be received by the Offeror as part of the Non-Exempt
Transfer shall be established by an independent appraisal or an opinion
of a nationally recognized investment banking or valuation firm
obtained at the expense of the Offeror.
(ii) The Holding Company and the Offerees shall have the right
to purchase all (but not less than all) of the Offered Shares, at the
price and on the terms specified in the First Offer Notice (the "First
Offer Right") by delivering written notice of such election (the "First
Offer Election Notice") to the Offeror as provided in this Section
3(b)(ii). Within 25 Business Days after receipt of the First Offer
Notice (the "Election Period"), the Holding Company shall give written
notice to the Offeror and the Offerees of the number of Offered Shares
it has elected to purchase. If the Holding Company does not elect to
purchase all of the Offered Shares within the Election Period, the
Offerees, within five Business Days after the expiration of the
Election Period, shall give written notice to the Holding Company and
the Offeror of the number of Offered Shares they have elected to
purchase. Each Offeree shall be entitled to elect to purchase his pro
rata portion of the Offered Shares that the Holding Company has not
elected to
11
purchase, and if any Offeree does not elect to purchase his pro rata
portion of the Offered Shares, each electing Offeree shall be entitled
to purchase all of the remaining Offered Shares; provided that if in
--------
the aggregate such Offerees elect to purchase more than the remaining
Offered Shares, such remaining Offered Shares purchased by each such
electing Offeree will be reduced on a pro rata basis. The pro rata
basis will be based on the number of Common Shares then held by such
Offeree.
(iii) If the Holding Company and the Offerees have elected to
purchase all Offered Shares, the transfer of such shares will be
consummated as soon as practicable (but in any event within 25 Business
Days) after the later of (i) the delivery of the First Offer Election
Notice by the Holding Company if it has elected to purchase all of the
Offered Shares, or (ii) the delivery of the First Offer Election Notice
by the Offerees if they alone, or together with the Holding Company,
have elected to purchase all of the Offered Shares. If the Holding
Company and the Offerees have not elected to purchase all of the
Offered Shares, the Transferor may, within 90 days after the expiration
of the First Offer Election Period, transfer all (but not less than
all) such Offered Shares to one or more Third Parties at the same or
higher price and on terms not more favorable in the aggregate to the
transferee(s) than offered to the Offerees in the First Offer Notice;
provided, that prior to such Transfer, such transferees shall have
--------
agreed in writing to be bound by the provisions of this Agreement and
shall have delivered to the Holding Company an executed counterpart of
this Agreement. Any Offered Shares not transferred within such 90-day
period will be subject to the provisions of this Section 3 upon
subsequent transfer.
(iv) Notwithstanding the foregoing, unless the Offeror shall
have consented to the purchase of less than all of the Offered Shares,
no Offeree may purchase any Offered Shares unless all of the Offered
Shares are to be purchased.
(c) Permitted Transfers. The restrictions contained in this Section 3
will not apply with respect to:
(i) any Transfer by a Shareholder that is a corporation,
partnership, limited liability company or unincorporated association
which is a distribution in kind to all of its shareholders, partners or
members in accordance with the terms of the applicable governing
instruments;
(ii) any Transfer by will or otherwise pursuant to the laws of
succession, distribution and descent;
(iii) any Transfer by the Skylark Holders or Investors to any
employee or Affiliate of the Skylark Holders or Investors or of an
Affiliate thereof, or to the spouse or children of any such employee or
a family limited partnership, a trust or trusts or other similar entity
solely for the benefit of such employee and /or such employee's spouse
or children;
12
(iv) any Transfer to an Affiliate of the transferor;
(v) any Transfer required by a regulatory authority having
jurisdiction over the transferor; and
(vi) any Transfer by a Shareholder to that Shareholder's spouse
or children or to a family limited partnership, a trust or trusts or
other similar entity solely for the benefit of that Shareholder and/or
that Shareholder's spouse or children;
provided, that the restrictions contained in this Section 3 will continue to be
--------
applicable to the Covered Shares after any such Transfer, and before any such
Transfer is effected the transferees of such Covered Shares shall agree in
writing to be bound by all the provisions of this Agreement and shall execute
and deliver to the Holding Company a counterpart of this Agreement. The
transferee of Covered Shares under Sections 3(c)(i), 3(c)(ii), 3(c)(iii),
3(c)(iv) and 3(c)(vi) is referred to as a "Related Transferee" of the transferor
under such Section. In the event that following any Transfer by either Investors
or the Skylark Holders pursuant to this Section 3(c), such transferor ceases to
exist as a legal entity, then such disappearing transferor (or its successor(s),
as the case may be) and all of its Related Transferees shall designate in
writing a single representative who shall be authorized to act under this
Agreement for and on behalf of such disappearing entity and its respective
Related Transferees, as applicable.
(d) Termination of Restrictions. The restrictions on the Transfer of
Covered Shares set forth in this Section 3 will continue with respect to each
Covered Share until, in the case of the restriction contained in Section 3(e),
the date on which such Covered Share has been transferred in a Public Sale, and
in the case of all other restrictions, the earlier of (i) the date on which such
Covered Share has been transferred in a Public Sale or (ii) the date this
Agreement is terminated pursuant to Section 11(k) hereof.
(e) Securities Laws. In addition to any other restriction on Transfer
herein, each Shareholder agrees that (i) subject to the terms and conditions of
this Agreement, prior to making any Transfer of any of the Covered Shares, the
Shareholder will give notice to the Holding Company describing the manner of
such proposed Transfer and, if required by the Holding Company, (ii) the
Shareholder will not effect any Transfer until either: (A) the Shareholder has
delivered to the Holding Company an opinion, in a form acceptable to the Holding
Company, of securities counsel acceptable to the Holding Company to the effect
that no registration of the Covered Shares under the Securities Act or
registration or qualification under the securities or "blue sky" laws of any
state or province is required in connection with such proposed Transfer, or (B)
a registration statement under the Securities Act covering such proposed
Transfer has been filed by the Holding Company with the Securities and Exchange
Commission and has become effective under the Securities Act and compliance with
applicable state and provincial securities or "blue sky" laws has been effected.
(f) Prohibited Transfer. Notwithstanding anything herein to the
contrary, except pursuant to a Compelled Sale or a Control Transfer approved by
the Holding Co.
13
Board of Directors, Covered Shares may not be Transferred to any Person that
directly, or indirectly through one or more Affiliates, is engaged in a business
similar to the business conducted by the Holding Company or any of its
Subsidiaries or is a competitor of the Holding Company or any of its
Subsidiaries.
(g) Improper Transfer. Any attempt to Transfer any Covered Shares
which is not in accordance with this Agreement shall be null and void, and the
Holding Company shall not give any effect to such attempted Transfer in the
share records of the Holding Company.
4. Right to Compel Sale or Public Offering.
(a) Right to Compel Sale or Public Offering.
(i) In the event that at the time of the notice referred to in
paragraph (c) of this Section 4 there shall not have been a Qualified
Public Offering and Investors and its Affiliates and Investors' and its
Affiliates' Related Transferees continue to hold at least 25% of the
outstanding Common Shares, after April 30, 2005, Investors shall be
entitled to give notice to the Holding Company, the Skylark Holders and
Xxxxxx that it (the "Compelling Holder") proposes either (i) to make a
Control Transfer (whether pursuant to a share sale, plan of share
exchange, merger, consolidation, or sale, lease, exchange or transfer
of all or substantially all of the assets of the Holding Company and
its Subsidiaries) (the "Compelled Sale") or (ii) to cause the Holding
Company to effect a Public Offering.
(ii) In the event that at the time of the notice referred to in
paragraph (c) of this Section 4 there shall not have been a Qualified
Public Offering and the Skylark Holders and their Affiliates and the
Skylark Holders' and their Affiliates' Related Transferees continue to
hold at least 25% of the outstanding Common Shares, after April 30,
2005, the Skylark Holders shall be entitled to give notice to the
Holding Company, Investors and Xxxxxx that it (the "Compelling Holder")
proposes either (i) to make a Control Transfer (whether pursuant to a
share sale, plan of share exchange, merger, consolidation, or sale,
lease, exchange or transfer of all or substantially all of the assets
of the Holding Company and its Subsidiaries) (the "Compelled Sale") or
(ii) to cause the Holding Company to effect a Public Offering.
(iii) In the event that at the time of the notice referred to in
paragraph (c) of this Section 4, (A) Xxxxxx is not the Chief Executive
Officer of the Holding Company and the Operating Company, (B) there
shall not have been a Qualified Public Offering and (C) the Xxxxxx
Group and their Related Transferees continue to hold at least 10% of
the outstanding Common Shares, after April 30, 2005, Xxxxxx shall be
entitled to give notice to the Holding Company, Investors and the
Skylark Holders that it (the "Compelling Holder") proposes either (i)
to make a Control Transfer (whether pursuant to a share sale, plan of
share exchange, merger, consolidation, or sale, lease, exchange or
transfer of all or substantially all
14
of the assets of the Holding Company and its Subsidiaries) (the
"Compelled Sale") or (ii) to cause the Holding Company to effect a
Public Offering.
(b) Compelled Sale. In the event the Compelling Holder elects to make
a Control Transfer, the Compelling Holder shall have the right, exercisable as
set forth below, to require the Holding Company and each of the other
Shareholders (the "Compelled Holders") to sell the number of Covered Shares
(including Underlying Shares and whether vested or unvested) then held by them
calculated as follows:
(i) The number of Covered Shares which the Compelling Holder
may require each Compelled Holder to sell shall be determined by the
Compelling Holder, but shall be no greater than the product of (A) the
total number of Covered Shares (including Underlying Shares) proposed
to be sold in the Control Transfer (including Covered Shares of any
Compelled Holders proposed to be so sold), times (B) a fraction, the
numerator of which shall be the total number of Covered Shares
(including Underlying Shares) then held by such Compelled Holder, and
the denominator of which shall be the total number of the then
outstanding Covered Shares (calculated on a Fully-Diluted Basis) (such
product, the "Maximum Compelled Sale"). Notwithstanding the foregoing,
each Compelled Holder shall be entitled, at its election, to include in
the Compelled Sale at least such number of Covered Shares held by such
Compelled Holder multiplied by the fraction, the numerator of which
shall be the number of Covered Shares proposed to be sold by the
Compelling Holder and the denominator of which shall be the total
number of Covered Shares held by the Compelling Holder.
(ii) Subject to the last sentence of Section 4(c)(iii), the
consideration to be received by the Compelled Holder for Covered Shares
sold pursuant to this Section 4 shall be the same consideration per
share to be received by the Compelling Holder, and the terms and
conditions of such sale by the Compelled Holders shall be the same as
those upon which the Compelling Holders sell their Covered Shares.
Notwithstanding anything contained in this Section 4, the Compelling Holders
shall have full and absolute discretion to effect or not to effect a sale of
Covered Shares pursuant to this Section 4, and there shall be no liability on
the part of the Compelling Holder to any Compelled Holder if such sale is not
consummated for whatever reason.
(c) Compelled Sale Notice. The Compelling Holder shall cause the
terms of the Compelled Sale to be reduced to writing and shall provide written
notice (the "Compelled Sale Notice") of such Compelled Sale to the other
Shareholders as follows:
(i) The Compelled Sale Notice shall contain written notice of
the exercise of the Compelling Holder's rights pursuant to Section 4(a)
hereof, setting forth the consideration per share to be paid by the
purchaser in such Control Transfer (and in the event the consideration
consists in part or in whole of consideration other than cash, a
description of the non-cash component of the
15
consideration, together with the Compelling Holders' reasonable
estimate (supported by an independent appraisal or opinion of a
nationally recognized investment banking or valuation firm) of the fair
market value of such non-cash component), the other terms and
conditions of the Compelled Sale, and the number of Covered Shares with
respect to which such Compelling Holder are exercising their rights
under this Section 4. Seven Business Days before the date the
Compelling Holder has advised the Compelled Holders is the expected
date of execution of the agreement pursuant to which the Compelled Sale
is to be effected, but not sooner than ten Business Days after delivery
of the notice, each Compelled Holder shall deliver to the Holding
Company, to be held for sale, or return in the event the Compelled Sale
is not consummated, upon the terms of this Section 4, the certificate
or certificates representing Covered Shares held by such Compelled
Holder, Duly Endorsed, together with a limited power-of-attorney
authorizing the Compelling Holder or any one of them to take all
actions necessary to sell or otherwise dispose of the Covered Shares to
be sold pursuant to such Compelled Sale. In the event that a Compelled
Holder should fail to deliver such certificate or certificates as
aforesaid, the Holding Company shall cause the books and records of the
Holding Company to show that such Covered Shares are bound by the
provisions of this Section 4(b) and that such Covered Shares shall be
Transferred only to the purchaser in such Control Transfer upon
surrender for Transfer by the Compelled Holder thereof.
(ii) During the course of negotiating and prior to effecting a
Compelled Sale, the Compelling Holder shall consult with such of the
Compelled Holders whose representatives are members of the Holding Co.
Board of Directors and shall keep them informed with respect to
developments relating to the Compelled Sale.
(iii) Each Compelled Holder agrees to cooperate in consummating
the Compelled Sale, including, without limitation, by executing and
becoming a party to the sale agreement and all other appropriate
related agreements, delivering share certificates and other instruments
for such Covered Shares Duly Endorsed for transfer, free and clear of
all liens and encumbrances, and voting or consenting in favor of such
transaction (to the extent a vote or consent is required) and raising
no objection against and taking any other necessary or appropriate
action in furtherance thereof, including the execution and delivery of
any other appropriate agreements, certificates, instruments and other
documents and granting identical indemnification rights (either
directly to the purchaser or pursuant to the provisions of a
contribution agreement) pro rata based upon the number of shares sold
by such Shareholder in the Compelled Sale; provided that, without the
--------
written consent of a particular Shareholder, the amount of such
Shareholder's indemnity shall not exceed the gross proceeds received by
such Shareholder in such sale except with respect to indemnification
which arises from misrepresentation or breach with respect to title to
such Shareholder's securities or the authority of such Shareholder with
respect to the Compelled Sale. If the Compelled Sale is structured as a
merger or share exchange, each Compelled
16
Holder agrees to waive any dissenters, appraisal or similar rights in
connection with such merger or share exchange.
(iv) Promptly after the consummation of the sale of Covered
Shares of the Compelling Holder and Compelled Holders pursuant to this
Section 4, the Compelling Holder shall give notice thereof to the
Compelled Holders, shall remit to the Compelled Holders the total sales
price of the Covered Shares of the Compelled Holders sold pursuant
thereto (after deduction of the Compelled Holders' proportionate share
of (A) the expenses associated with such sale, (B) amounts paid into
escrow or held back, in the reasonable determination of the Compelling
Holder, for indemnification or post-closing expenses, and (C) amounts
subject to post-closing purchase price adjustments, based on the number
of Covered Shares sold by the Compelled Holders in relation to the
total number of Covered Shares being sold pursuant to this Section 4).
In connection with the any such sale, except as provided below, the
Compelling Holder shall not receive consideration or benefits (except
that in the event Investors is the Compelling Holder, Affiliates of
Investors may receive customary investment banking fees) which are not
shared pro rata among the Compelling Holder and the Compelled Holders.
Notwithstanding anything contained in this Section 4, in the event that
all or a portion of the purchase price of the Covered Shares being sold
pursuant to the Compelled Sale consists of non-cash consideration, the
Compelling Holder selling Covered Shares pursuant thereto may, at their
option, deliver to the Compelled Holders, in lieu of such non-cash
consideration allocable to the Covered Shares being sold pursuant to
the Compelled Sale, cash in an amount equal to the fair market value of
such non-cash consideration, as determined by an independent investment
banking firm or other nationally recognized appraisal firm acceptable
to the Compelling Holder and the Compelled Holders; provided, that if
--------
either (1) such non-cash consideration allocable to the Covered Shares
being sold pursuant to the Compelled Sale may not in the opinion of the
Compelling Holder be transferred lawfully without a Compelled Holder
effecting a regulatory compliance (including, without limitation,
preparation, registration or pre-registration of disclosure
documentation) or (2) such non-cash consideration allocable to the
Covered Shares being sold pursuant to the Compelled Sale may not, in
the opinion of the Compelled Holder, lawfully be held by such Compelled
Holder, the fair market value of such non-cash consideration, as
determined by an independent nationally recognized investment banking
firm or other nationally recognized appraisal firm acceptable to the
Compelling Holder and the Compelled Holders, shall be paid to such
Compelled Holder in lieu of such non-cash consideration.
(d) Rule 506. If the Holding Company or the Compelling Holder enters
into any negotiation or transaction for which Rule 506 under the Securities Act
(or any similar rule then in effect) promulgated by the Securities and Exchange
Commission or other securities regulatory authority may be available with
respect to such negotiation or transaction (including a merger, consolidation or
other reorganization), the Compelled Holders will, at the request of the
Compelling Holder, appoint a purchaser representative (as such term is defined
in Rule 501 under the Securities Act) reasonably acceptable to
17
the Compelling Holder. If any Compelled Holder appoints the purchaser
representative designated by the Compelling Holder, the Holding Company will pay
the fees of such purchaser representative, but if any Compelled Holder declines
to appoint the purchaser representative designated by the Compelling Holders,
such Compelled Holder will appoint another purchaser representative (reasonably
acceptable to the Compelling Holder), and such Compelled Holder will be
responsible for the fees of the purchaser representative so appointed.
(e) Public Offering. In the event the Compelling Holder elects to
cause the Holding Company to effect a Public Offering, the Compelling Holder
shall have the rights of the Requesting Holder pursuant to section 2(a) of the
Registration Rights Agreement, dated as of May 11, 2000, among the Holding
Company, the Skylark Holders, Investors, Xxxxxx and certain other holders of
Common Shares, as amended, and the additional right to cause the Holding Company
to include in such registration statement and issue and sell in the Public
Offering pursuant thereto such number of Common Shares as the Compelling Holder
shall determine in addition to such number of Common Shares it elects to include
therein for its own account.
(f) Appraisal Option.
(i) Notwithstanding the foregoing, within 20 Business Days
after receipt of the Compelled Sale Notice or a notice of Public
Offering, the Skylark Holders and/or Xxxxxx, in the case of a Compelled
Sale Notice by Investors, Investors and/or Xxxxxx, in the case of a
Compelled Sale Notice by the Skylark Holders, and the Skylark Holders
and/or Investors, in the case of a Compelled Sale Notice by Xxxxxx, may
cause the Holding Company to engage a nationally recognized independent
investment banking firm or other nationally recognized appraisal firm
selected by it that is acceptable to the Compelling Holder and the
Compelled Holders (the "Appraisal Firm") to issue a report (the
"Appraisal Report") within thirty days setting forth its determination
of the price at which a Compelled Sale or Public Offering, as the case
may be, of the Holding Company could be effected for cash and the net
before tax proceeds that would be distributable to the holders of the
Holding Company's equity securities from such Compelled Sale or Public
Offering (the "Appraised Value"). Once the Appraised Value has been
determined as contemplated by the preceding sentence of this Section
4(f), a copy thereof shall be delivered to Investors, the Skylark
Holders and Xxxxxx. Within ten days after receipt of the Appraisal
Report, the Compelling Holder shall give notice to the Skylark Holders,
Xxxxxx and/or Investors, as the case may be, and the Holding Company
whether or not it wishes to proceed with the Compelled Sale or Public
Offering. If the Compelling Holder gives notice that it does not wish
to proceed with the Compelled Sale or Public Offering, notice thereof
shall be given to the Shareholders, and the Compelling Holder shall not
be entitled give notice of a new Compelled Sale or Public Offering
pursuant to this Section 4 until at least 180 days after it gave the
notice not to proceed contemplated by this sentence. If the Compelling
Holder gives notice that it wishes to proceed with the Compelled Sale
or Public Offering, subject to paragraph (ii) of this Section 4(f), the
Skylark Holders, Xxxxxx and/or
18
Investors and/or their respective Related Transferees, as the case may
be, shall have the right, for a period of thirty calendar days after
receipt of such notice, to give notice to the Compelling Holder of its
or their election to purchase (either alone, with the Holding Company,
or with other Persons designated by it or them, as the case may be)
from the Compelling Holder and its Affiliates and their Related
Transferees at a closing within thirty days after the date of such
notice all, but not less than all (unless the Compelling Holder shall
otherwise consent), of the equity securities of the Holding Company
held by the Compelling Holder and its Affiliates and their Related
Transferees (the "Appraisal Shares") for a total consideration equal to
the net before tax proceeds that would have been distributed to the
Compelling Holder and its Affiliates and their Related Transferees in
exchange for the Appraisal Shares based upon the Appraisal Report, in
which event the Compelling Holder and its Affiliates and their Related
Transferees shall be obligated to sell the Appraisal Shares to the
purchaser at the closing. In the event the Skylark Holders, Xxxxxx
and/or Investors, as the case may be, and their respective Related
Transferees do not give notice to purchase, or the purchase is not
closed, within the thirty-day period set forth herein, the Compelling
Holder shall be entitled to proceed with the Compelled Sale or Public
Offering pursuant to this Section 4.
(ii) Pursuant to paragraph (i) of this Section 4(f), the
Skylark Holders, Xxxxxx and/or Investors, as the case may be, and their
respective Related Transferees either acting alone or with other
Persons designated by them (the "Appraisal Purchasers") shall be
entitled to purchase their pro rata portion of the Appraisal Shares and
if any of the Appraisal Purchasers do not elect to purchase their pro
rata portion of the Appraisal Shares then the other Appraisal
Purchasers shall be entitled to purchase all of the remaining Appraisal
Shares; provided that if in the aggregate such other Appraisal
--------
Purchasers elect to purchase more than the remaining Appraisal Shares,
such remaining Appraisal Sharers purchased by each such electing
Appraisal Purchaser will be reduced on a pro rata basis. Pro rata shall
be based upon the number of Common Shares then held by the Appraisal
Purchasers.
5. The Holding Company's Right to Purchase Covered Shares Upon
Involuntary Transfer. In the event of any Involuntary Transfer of Covered
Shares, the Holding Company shall have the right (which right shall be
assignable as determined by the Holding Co. Board of Directors) to purchase such
Covered Shares pursuant to this Section 5. Upon the Involuntary Transfer of any
Covered Shares of any Shareholder, such Shareholder shall promptly (but in no
event later than two Business Days after such Involuntary Transfer) furnish
written notice to the Holding Company indicating that the Involuntary Transfer
has occurred, specifying the name of the Person to whom such Covered Shares have
been Transferred (the "Involuntary Transferee") and giving a detailed
description of the circumstances giving rise to, and stating the legal basis
for, the Involuntary Transfer. Upon the receipt of such notice, and for 90 days
thereafter (or at any time in the event such notice has not been given), the
Holding Company shall have the right to purchase, and the Involuntary Transferee
shall have the obligation to sell, all or any portion of the Covered Shares
acquired by the Involuntary Transferee for a
19
purchase price equal to the lesser of (i) the Fair Market Value of such Covered
Shares on the date of Transfer to the Involuntary Transferee and (ii) the amount
of the indebtedness or other liability that gave rise to the Involuntary
Transfer plus the excess, if any, of the cost per share of such Covered Shares
over the amount of such indebtedness or other liability that gave rise to the
Involuntary Transfer. Notwithstanding the foregoing, the Holding Co. Board of
Directors may, for good cause shown by the Shareholder who made the Involuntary
Transfer, determine that payment of a purchase price equal to the Fair Market
Value of such Covered Shares on the date of Transfer to the Involuntary
Transferee, if higher than the price determined pursuant to clause (ii) above,
would be appropriate under the circumstances and direct that payment be made in
such amount.
6. Pre-emptive Rights. Each Shareholder hereby waives any
pre-emptive right it may have to subscribe for or purchase Common Shares issued
to Investors pursuant to the Subscription Agreement and with respect to any
Common Shares which may be issued by the Holding Company in the future.
7. Legend. Each certificate evidencing Covered Shares and each
certificate issued in exchange for or upon the transfer of any Covered Shares
(if such shares remain Covered Shares upon such transfer) will be stamped or
otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OR WILL BE
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"), OR ANY STATE SECURITIES OR "BLUE
SKY" LAW, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE ACT AND SUCH BLUE
SKY LAWS AND UNTIL THE ISSUER OF SUCH SECURITIES SHALL HAVE RECEIVED
THE WRITTEN OPINION OF COUNSEL ACCEPTABLE TO IT TO THAT EFFECT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT DATED AS OF __________ __,
2001, AMONG RED XXXXX GOURMET BURGERS, INC. (THE " HOLDING COMPANY")
AND SHAREHOLDERS THEREOF, AS THE SAME MAY BE AMENDED FROM TIME TO TIME,
PURSUANT TO THE TERMS OF WHICH THE TRANSFER OF SUCH SECURITIES IS
RESTRICTED. SUCH AGREEMENT ALSO PROVIDES FOR VARIOUS OTHER LIMITATIONS
AND OBLIGATIONS, AND ALL OF THE TERMS THEREOF ARE INCORPORATED BY
REFERENCE HEREIN. A COPY OF SUCH SHAREHOLDERS AGREEMENT WILL BE
FURNISHED WITHOUT CHARGE BY THE HOLDING COMPANY TO THE HOLDER HEREOF
UPON WRITTEN REQUEST.
The legend set forth in the first paragraph above shall be removed from
the certificates evidencing any shares which are sold in a Public Sale.
20
The legend set forth in the second paragraph above shall be removed
from the certificates evidencing any shares which cease to be Covered Shares.
8. Transfer or Issuance.
(a) Transfer. Prior to transferring any Covered Shares (other than in a
Public Sale, a sale in connection with an initial Public Offering, or a Control
Transfer) to any Person, the Transferring Shareholder will cause the prospective
transferee to execute and deliver counterparts of this Agreement to the Holding
Company.
(b) Issuance. Prior to the issuance of any Common Shares or any right
with respect thereto to any Person who is not a party to this Agreement, the
Holding Company will cause such Person to execute and deliver counterparts of
this Agreement to the Holding Company.
9. Representation and Warranty of Shareholders. Each of the
Shareholders hereby represents and warrants (i) that it is not a party to any
contract or agreement (other than subscription agreements or agreements with its
Affiliates), including any voting trust or other voting arrangement, whereby (A)
any of the Covered Shares or any interest therein held by such party on the date
hereof is to be offered, sold, assigned, pledged, hypothecated, or otherwise
transferred (as used in this Section 9 only, a "transfer") or (B) any Person has
been granted any rights inconsistent or in conflict with the provisions of this
Agreement and (ii) that no such party has any present intention so to transfer
any Covered Shares or any interest therein to any Person other than Permitted
Transferees.
10. Miscellaneous.
(a) Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement will be
effective against the Holding Company or the Shareholders, unless such
modification, amendment or waiver is approved in writing by the Holding Company
if it is to be effective against the Holding Company, or by the holders of a
majority of the Covered Shares if it is to be effective against the
Shareholders; provided, that any amendment, modification or waiver which
--------
adversely affects the rights and obligations of any Shareholder in any material
respect (an "Affected Holder") shall also require the approval of the Affected
Holder; provided further that this Agreement may be amended by the Holding
-------- -------
Company and the holders of a majority of the Common Shares to add as parties
hereto Persons who in the future become shareholders of the Holding Company or
of securities convertible into or exchangeable for Covered Shares as permitted
by the terms of this Agreement. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
(b) Information Rights. The Holding Company will furnish to each
Shareholder, so long as such Shareholder and its Affiliates holds at least ten
percent of
21
the outstanding shares of any class of Voting Shares, the following information:
(i) within 15 days after the end of each four week accounting period of the
Holding Company, the summary consolidated financial statements of the Holding
Company (certified by the chief financial officer of the Holding Company) for
such period, accompanied by a copy of the report, if any, provided by management
to the Holding Co. Board of Directors, discussing the revenues and operations of
the Holding Company and its Subsidiaries for such period; (ii) within 90 days
after the end of each fiscal year of the Holding Company, its annual audited
consolidated financial statements, accompanied by the report thereon by the
Holding Company's independent accountants, accompanied by a copy of the report,
if any, provided by management to the Holding Co. Board of Directors, discussing
the revenues and operations of the Holding Company and its Subsidiaries for such
year; (iii) promptly after filing, copies of any documents filed by the Holding
Company or its Subsidiaries with the Securities and Exchange Commission; (iv)
promptly after mailing or otherwise sending to its senior lenders, copies of all
materials so mailed or sent thereto; and (v) any other information such Investor
reasonably shall request.
(c) Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) Entire Agreement. Except as otherwise expressly set forth herein, this
document embodies the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(e) Successors and Assigns.
(i) This Agreement will bind and inure to the benefit of and be
enforceable by the Holding Company and its successors and assigns and the
Shareholders, any subsequent holders of Covered Shares and the respective
heirs, administrators, executors, representatives, successors and permitted
assigns of each of them, so long as they hold Covered Shares.
(ii) By subscribing to this Agreement, each Person that becomes a
holder of Covered Shares hereby agrees, as of the date such Person becomes
a holder of Covered Shares, to be bound by all of the terms and provisions
hereof, which provisions shall be binding upon the heirs, executors,
administrators, successors and permitted assigns of such Person.
(f) Counterparts. This Agreement may be executed in separate counterparts
each of which will be an original and all of which taken together will
constitute one and the same agreement.
22
(g) Remedies. The Shareholders will be entitled to enforce their rights
under this Agreement specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages will not be an adequate remedy for any breach
of the provisions of this Agreement and that any Shareholder may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief in order to enforce or prevent any
violation of the provisions of this Agreement.
(h) Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed effective and given upon actual delivery if presented
personally, one Business Day after the date sent if sent by prepaid telegram,
overnight courier services, telex or by facsimile transmission, or five Business
Days if mailed by certified or registered mail, return receipt requested and
postage prepaid, which shall be addressed to the following addresses:
If to the Holding Company:
Red Xxxxx Gourmet Burgers, Inc.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
X.X.X.
Attention: Xxxxxxx X. Xxxxxx
and Xxxx X. Xxxxx
Facsimile: 000-000-0000
with a copy to:
O'Melveny & Xxxxx LLP
610 Newport Center Drive, 00/xx/ Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
X.X.X.
Attention: Xxxxxx X. Xxxxx
Facsimile: 000-000-0000
If to Skylark or the Skylark Holders, to:
00X Xxxxx-Xxxxx Xxxxxxxx
0-00-0 Xxxxx Xxxxxxxx-xx
Xxxxx
XXXXX
Attention: Tasuku Chino
Facsimile: 03 (3349) 8244
23
with a copy to:
O'Melveny & Xxxxx LLP
610 Newport Center Drive, 00/xx/ Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
X.X.X.
Attention: Xxxxxx X. Xxxxx
Facsimile: 000-000-0000
If to Investors, to:
RR Investors, LLC
RR Investors II, LLC
c/o Quad-C, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxxxxxx, Xxxxxxxx 00000
X.X.X.
Attention: Xxxxxx X. Xxxxxx, Xx.
Facsimile: 000-000-0000
with a copy to:
McGuire, Woods, Battle & Xxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
X.X.X.
Attention: Xxxxxx X. Xxxxxxx
Facsimile: 000-000-0000
If to Xxxxxx, to:
Xxxxxxx X. Xxxxxx
Red Xxxxx Gourmet Burgers, Inc.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
X.X.X.
Facsimile No.: 000-000-0000
24
with a copy to:
Powers & Xxxxxxxx, X.X.
0000 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
X.X.X.
Attention: Xxxxx Xxxxxxxx
and Xxxxxx Xxxxxx
Facsimile No.: 000-000-0000
If to any other Shareholder:
to the address specified in the corporate records of the Holding
Company.
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
(i) Governing Law. The corporation laws of the State of Delaware will
govern all questions concerning the relative rights of the Holding Company and
the Shareholders. All other questions concerning the construction, validity and
interpretation of this Agreement will be governed by and construed in accordance
the internal law of the State of Colorado, without giving effect to any choice
of law or conflict of law provisions (whether of the State of Colorado or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Colorado.
(j) Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(k) Termination. The provisions of this Agreement will terminate
automatically and be of no further force and effect upon the earlier to occur of
(i) the consummation of a Qualified Public Offering or (ii) the consummation of
a Control Transfer. Notwithstanding the foregoing, in the event the Holding
Company enters into an agreement to merge with or into any other Person or
adopts any other plan of recapitalization, consolidation, reorganization or
other restructuring transaction as a result of which the Shareholders and their
respective Permitted Transferees shall own less than a majority of the
outstanding voting power of the entity surviving such transaction, this
Agreement shall terminate.
[Remainder of page intentionally left blank]
25
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Shareholders Agreement on the day and year first above written.
RED XXXXX GOURMET BURGERS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx
President
SKYLARK COMPANY, LTD.
By:_______________________________________
Name:
Title:
KIWAMU YOKOKAWA
__________________________________________
Kiwamu Yokokawa
GAISHOKU SYSTEM KENKYUJO
COMPANY, LTD.
By:_______________________________________
Name:
Title:
HIBARI GUAM CORPORATION
By:_______________________________________
Name:
Title:
RR INVESTORS, LLC
By:_______________________________________
Xxxxxx X. Xxxxxx, Xx.
President
S-1
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Shareholders Agreement on the day and year first above written.
RED XXXXX GOURMET BURGERS, INC.
By:_______________________________________
Xxxxxxx X. Xxxxxx
President
SKYLARK COMPANY, LTD.
By: /s/Yasutaka Ito
---------------------------------------
Name: Yasutaka Ito
Title: President
KIWAMU YOKOKAWA
/s/ Kiwamu Yokokawa
------------------------------------------
Kiwamu Yokokawa
GAISHOKU SYSTEM KENKYUJO
COMPANY, LTD.
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: President
HIBARI GUAM CORPORATION
By: /s/ Xxxxxxxx Xxxxxxxxx
---------------------------------------
Name: XXXXXXXX XXXXXXXXX
Title: PRESIDENT
RR INVESTORS, LLC
By:_______________________________________
Xxxxxx X. Xxxxxx, Xx.
President
S-1
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Shareholders Agreement on the day and year first above written.
RED XXXXX GOURMET BURGERS, INC.
By:_______________________________________
Xxxxxxx X. Xxxxxx
President
SKYLARK COMPANY, LTD.
By:_______________________________________
Name:
Title:
KIWAMU YOKOKAWA
__________________________________________
Kiwamu Yokokawa
GAISHOKU SYSTEM KENKYUJO
COMPANY, LTD.
By:_______________________________________
Name:
Title:
HIBARI GUAM CORPORATION
By:_______________________________________
Name:
Title:
RR INVESTORS, LLC
By: /s/ Xxxxxx X. Xxxxxx, Xx.
---------------------------------------
Xxxxxx X. Xxxxxx, Xx.
President
S-1
RR INVESTORS II, LLC
By: /s/ Xxxxxx X. Xxxxxx, Xx.
-------------------------------------------
Xxxxxx X. Xxxxxx, Xx.
President
XXXXXXX X. XXXXXX
______________________________________________
Xxxxxxx X. Xxxxxx
THE XXXXXXX XXXXXX
INTERVIVOS TRUST
______________________________________________
Xxxxxxx X. Xxxxxx, as trustee of The Xxxxxxx
X. Xxxxxx Intervivos Trust
THE XXXXXX X. XXXXXX
INTERVIVOS TRUST
______________________________________________
Xxxxxx X. Xxxxxx, as trustee of The Xxxxxx
X. Xxxxxx Intervivos Trust
XXXXXXX X. XXXXX
______________________________________________
Xxxxxxx X. Xxxxx
XXXXXX XXXXXXX
______________________________________________
Xxxxxx Xxxxxxx
SHAMROCK INVESTMENT COMPANY
S-2
RR INVESTORS II, LLC
By:___________________________________________
Xxxxxx X. Xxxxxx, Xx.
President
XXXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxx
THE XXXXXXX XXXXXX
INTERVIVOS TRUST
______________________________________________
Xxxxxxx X. Xxxxxx, as trustee of The Xxxxxxx
X. Xxxxxx Intervivos Trust
THE XXXXXX X. XXXXXX
INTERVIVOS TRUST
______________________________________________
Xxxxxx X. Xxxxxx, as trustee of The Xxxxxx
X. Xxxxxx Intervivos Trust
XXXXXXX X. XXXXX
______________________________________________
Xxxxxxx X. Xxxxx
XXXXXX XXXXXXX
______________________________________________
Xxxxxx Xxxxxxx
SHAMROCK INVESTMENT COMPANY
S-2
RR INVESTORS II, LLC
By:___________________________________________
Xxxxxx X. Xxxxxx, Xx.
President
XXXXXXX X. XXXXXX
______________________________________________
Xxxxxxx X. Xxxxxx
THE XXXXXXX XXXXXX
INTERVIVOS TRUST
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxx, as trustee of The Xxxxxxx
X. Xxxxxx Intervivos Trust
THE XXXXXX X. XXXXXX
INTERVIVOS TRUST
/s/ Xxxxxx X. Xxxxxx
----------------------------------------------
Xxxxxx X. Xxxxxx, as trustee of The Xxxxxx
X. Xxxxxx Intervivos Trust
XXXXXXX X. XXXXX
______________________________________________
Xxxxxxx X. Xxxxx
XXXXXX XXXXXXX
______________________________________________
Xxxxxx Xxxxxxx
SHAMROCK INVESTMENT COMPANY
S-2
RR INVESTORS II, LLC
By:___________________________________________
Xxxxxx X. Xxxxxx, Xx.
President
XXXXXXX X. XXXXXX
______________________________________________
Xxxxxxx X. Xxxxxx
THE XXXXXXX XXXXXX
INTERVIVOS TRUST
______________________________________________
Xxxxxxx X. Xxxxxx, as trustee of The Xxxxxxx
X. Xxxxxx Intervivos Trust
THE XXXXXX X. XXXXXX
INTERVIVOS TRUST
______________________________________________
Xxxxxx X. Xxxxxx, as trustee of The Xxxxxx
X. Xxxxxx Intervivos Trust
XXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxx
----------------------------------------------
Xxxxxxx X. Xxxxx
XXXXXX XXXXXXX
/s/ Xxxxxx Xxxxxxx
----------------------------------------------
Xxxxxx Xxxxxxx
SHAMROCK INVESTMENT COMPANY
S-2
/s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Name:
Title:
XXXXXX X. XXXXXX
/s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxx
XXXXXXX XXXXXX
/s/ Xxxxxxx Xxxxxx
-------------------------------------------
Xxxxxxx Xxxxxx
XXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx
X.X. XXXXX, XX.
/s/ Xxxxxx X. Xxxxxx for X.X. Xxxxx, Xx.
-------------------------------------------
LV. Xxxxx, Xx.
XXXXXX X. XXXXXX
___________________________________________
Xxxxxx X. Xxxxxx
S-3
___________________________________________
Name:
Title:
XXXXXX X. XXXXXX
___________________________________________
Xxxxxx X. Xxxxxx
XXXXXXX XXXXXX
___________________________________________
Xxxxxxx Xxxxxx
XXXXXXX X. XXXXX
___________________________________________
Xxxxxxx X. Xxxxx
X.X. XXXXX, XX.
___________________________________________
LV. Xxxxx, Xx.
XXXXXX X. XXXXXX
/s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxx
S-3
Schedule A
Skylark Holders
---------------
Skylark Company, Ltd.
Kiwamu Yokokawa
Gaishoku System Kenkyujo Company, Ltd.
Hibari Guam Corporation
Schedule B
Xxxxxx Group
------------
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx Intervivos Trust
Xxxxxx X. Xxxxxx Intervivos Trust
Xxxxxxx X. Xxxxx
Xxxxxx Xxxxxxx
Shamrock Investment Company, a Washington general partnership
Xxxxxx X. Xxxxxx
Xxxxxxx Xxxxxx
Xxxxxxx X. Xxxxx
X.X. Xxxxx, Xx.
Schedule C
Existing Shareholders
---------------------
Xxxxxx X. Xxxxxx
