EXHIBIT 10.2
THE DERBY CYCLE CORPORATION
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is made this 14th day of May, 1998 by and among:
(1) THE DERBY CYCLE CORPORATION (dba Raleigh USA Bicycle Company), a
corporation organized and existing under the laws of the State of Delaware,
having its registered office at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000
(the "Company");
(2) DERBY FINANCE S.a.r.l., a corporation (societe a responsibilite
limitee) incorporated under the laws of the Grand Duchy of Luxembourg, with its
registered office at 00 xxx xx xx Xxxxxxxx, X-0000 Xxxxxxxxxx, Grand Duchy of
Luxembourg ("DFS");
(3) DC CYCLE, L.L.C., a limited liability company organized and
existing under the laws of the State of Delaware, having its registered office
at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 ("Cycle LLC"); and
(4) PERSEUS CYCLE, L.L.C., a limited liability company organized and
existing under the laws of the State of Delaware, having its registered office
at Xxxxx 000, 0000 "X" Xxxxxx XX, Xxxxxxxxxx, X.X. 00000 ("Perseus").
WHEREAS, DFS, Perseus and Cycle LLC are the owners of the respective
numbers of shares of the Company's Common Stock and Preferred Stock (as each
such term is defined in Section 1 of this Agreement) set forth in Exhibit A;
WHEREAS, DFS, Perseus and Cycle LLC wish to set forth certain
agreements with respect to the voting and transfer of their shares of the
Company's Common Stock and Preferred Stock;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties hereto agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
set out in this Section 1:
"Affiliate" shall mean, with respect to any Person, each other Person
which is directly or indirectly controlling, controlled by or under common
control with such Person.
"Approval Amount" shall mean (i) five million dollars ($5,000,000)
with respect to acquisitions of shares or assets by the Company and/or its
Subsidiaries; (ii) ten million dollars ($10,000,000) with respect to (A) any
disposition or series of related dispositions of assets or shares
of the Company or its Subsidiaries and (B) any individual or series of related
capital expenditures by the Company or its Subsidiaries occurring in any one
fiscal year; and (iii) fifteen million dollars ($15,000,000) with respect to the
incurrence of new debt or similar obligations (or the settlement or compromise
of obligations in such amounts) by the Company or its Subsidiaries (other than
borrowings under revolving credit facilities, provided that such facilities have
been approved by the Board of Directors).
"Approved Sale" shall have the meaning set forth in Section 11(a)
hereof.
"Board of Directors" shall mean, unless otherwise specified, the Board
of Directors of the Company.
"Cash" shall mean cash and cash equivalents (with amounts deposited in
a Cash escrow deemed as Cash).
"Cause" shall mean (i) the commission by such member of the Board of
Directors of a felony or a crime involving moral turpitude, (ii) the commission
by such member of the Board of Directors of any other act or omission involving
dishonesty, disloyalty or fraud (A) with respect to the Company or any of its
Subsidiaries or any of their employees, customers or suppliers, or (B) adversely
affecting the reputation or standing of the Company or any of its Subsidiaries
or (iii) gross negligence or willful misconduct by such member of the Board of
Directors with respect to the Company or any of its Subsidiaries.
"Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Company as in effect from time to time (a copy of the
Certificate of Incorporation, as amended and restated on the date hereof, is
attached to this Agreement as Exhibit B and made a part hereof).
"Chairman" shall mean the chairman of the Board of Directors.
"Class A Common Stock" shall mean the shares of common stock, Class A,
of the Company, par value $.01 per share, authorized by the Certificate of
Incorporation and such other common equity of the Company into which the Class A
Common Stock shall be converted.
"Class B Common Stock" shall mean the shares of common stock, Class B,
of the Company, par value $.01 per share, authorized by the Certificate of
Incorporation.
"Closing Date" shall mean the date of the closing of the transactions
contemplated by the Recapitalization Agreement.
"Common Stock" shall mean the Class A Common Stock and the Class B
Common Stock.
"Converted Common" shall mean Class A Common Stock which can be
acquired under clause (ii) of Sections 4B and 4D of Part B of Article Four of
the Certificate of Incorporation.
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"Cycle Shareholders" shall mean Cycle LLC and its Permitted
Transferees; provided that a Cycle Shareholder should not be considered a Cycle
Shareholder unless it is controlled by (directly or indirectly) Xxxxxx.
"DCC Share Option Agreement" shall mean that certain DCC Share Option
Agreement by and among the Company, DFS, Cycle LLC, Perseus and Raleigh
Industries of Canada Limited dated May 14, 1998.
"Deemed Common Stock" shall mean the Class A Common Stock and the
shares of Class A Common Stock issuable upon conversion of the Series A
Preferred Stock in accordance with the terms of the Certificate of Incorporation
(for purposes of this Agreement, such shares of Class A Common Stock shall be
deemed to be outstanding), provided that Deemed Common Stock shall not include
Converted Common.
"Derby International" shall mean Derby International Corporation, S.A.
"Derby Group" shall mean the Company, together with all present or
future Subsidiaries of the Company (so long as they remain Subsidiaries).
"Designee" shall mean any wholly-owned Subsidiary of the Company which
is designated by the Company, in its sole discretion, under the provisions of
Section 9(a) hereof.
"DFS Shareholders" shall mean DFS and its Permitted Transferees;
provided that a DFS Shareholder shall not be considered a DFS Shareholder unless
it is controlled by (directly or indirectly) The International Heart Foundation
Trust.
"dollars" shall mean the currency of the United States of America.
"Eligible Group" shall mean the DFS Shareholders, so long as the DFS
Shareholders own at least 5% of the voting power of the outstanding capital
stock of the Company, the Cycle Shareholders, so long as the Cycle Shareholders
own at least 5% of the voting power of the outstanding capital stock of the
Company and the Perseus Shareholders so long as (i) the Perseus Shareholders own
any shares of capital stock of the Company and (ii) Xxxxx X. Xxxxx controls,
directly or indirectly, Perseus.
"Employee" shall mean any individual who is employed by a member of
the Derby Group or any individual whose services are made available to a member
of the Derby Group on a full-time (or substantially full-time) basis under the
terms of an agreement between a member of the Derby Group and any Person which
is not a member of the Derby Group.
"Exchange Agreements" shall have the meaning ascribed to it in Section
3.2(b)(viii) of the Recapitalization Agreement.
"Exempt Transfer" shall mean, with respect to any Shareholder, (a)
Transfers of Class A Common Stock by such Shareholder after the date of this
Agreement that in the aggregate do not
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exceed 25% of the Class A Common Stock held by such Shareholder on the date of
this Agreement, (b) Transfers of Series A Preferred Stock by such Shareholder
after the date of this Agreement that in the aggregate do not exceed 25% of the
Series A Preferred Stock held by such Shareholder on the date of this Agreement,
(c) a Public Sale, (d) a purchase, redemption or conversion of Preferred Stock
as provided in the Certificate of Incorporation and (e) Transfers permitted
under Section 7 hereof.
"Family Trust" shall have the meaning set forth in Section 7 of this
Agreement.
"Financing Documents" shall have the meaning set forth in the
Recapitalization Agreement.
"Implied Class B Purchase Price" shall mean the amount per share of
Class B Common Stock that would be distributed in respect of such share of Class
B Common Stock if the Company were liquidated and distributions were made
pursuant to Part D of Article Four of the Certificate of Incorporation of an
amount equal to the sum of (i) the product of (a) the price per share of Deemed
Common Stock payable in a Proposed Disposition or an Approved Sale, as
applicable, and (b) the number of outstanding shares of Deemed Common Stock and
(ii) an amount, when added to the amount determined pursuant to clause (i) of
this definition, that would have yielded proceeds to the Deemed Common Stock
equal to the amount determined under clause (i) of this definition upon a
liquidation of the Company pursuant to Part D of Article Four of the Certificate
of Incorporation.
"Initial DFS Shares" shall mean the shares of Common Stock acquired by
DFS on or prior to the Closing Date (without duplication), and those shares
which affiliates of DFS are entitled to acquire pursuant to the Exchange
Agreements and those shares of Common Stock distributed to DFS pursuant to the
adjustment mechanism in Sections 4 and 5 of the DCC Share Option Agreement but
shall not mean any Shares redeemed from DFS pursuant to such sections.
"Initial Cycle Shares" shall mean collectively the shares of Common
Stock and Series A Preferred Stock acquired by Cycle LLC on the Closing Date.
"Initial Perseus Shares" shall mean the shares of Common Stock
acquired by Perseus on the Closing Date.
"Initial Public Offering" shall mean a public offering and sale of the
Company's equity securities (i) pursuant to an effective registration statement
under the Securities Act if immediately thereafter the Company has publicly held
equity securities listed on a national securities exchange or the NASD automated
quotation system or (ii) made on any recognized stock exchange in any country
which is a member of the Organization of Economic Cooperation and Development.
"IRR" shall have the meaning set forth in the Certificate of
Incorporation.
"Payment Inflows" shall have the meaning set forth in the Certificate
of Incorporation.
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"Payment Outflows" shall have the meaning set forth in the Certificate
of Incorporation.
"Permitted Transferee" shall mean any Family Trust, Qualified
Affiliate or a transferee under and pursuant to the provisions of Section 8(d)
of this Agreement.
"Perseus" shall mean Perseus Cycle, L.L.C., a Delaware limited
liability company.
"Perseus Director" shall mean the members of the Board of Directors,
if any, appointed by the Perseus Shareholders, pursuant to Section 3(a).
"Perseus Shareholders" shall mean Perseus and its Permitted
Transferees; provided that a Perseus Shareholder shall not be considered a
Perseus Shareholder unless it is controlled by (directly or indirectly) Perseus
Capital, L.L.C.
"Person" shall mean an individual, trust, partnership, company,
corporation or other legal entity.
"Preferred Stock" shall mean the Series A Preferred Stock and the
Series B Preferred Stock.
"Proposed Disposition" shall have the meaning set forth in Section
8(a) hereof.
"Public Sale" shall mean any sale of Common Stock (i) pursuant to an
offering registered under the Securities Act, (ii) made pursuant to Rule 144
promulgated under the Securities Act or any successor provision serving the same
purpose, or (iii) made on any recognized stock exchange in any country which is
a member of the Organization of Economic Cooperation and Development.
"Recapitalization Agreement" shall mean a certain Recapitalization
Agreement, dated March 10, 1998, by and among the Company, Derby International,
Perseus, Cycle LLC and DFS, as amended.
"Rule 144 Public Sale" shall mean any sale of securities to the public
pursuant to an offering made pursuant to Rule 144 promulgated under the
Securities Act or any successor provision.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior RIC Shares" shall mean the Class A Preferred Shares of Raleigh
Industries of Canada Limited as defined in the Exchange Agreements.
"Series A Preferred Stock" shall mean the shares of the Preferred
Stock, Series A, of the Company, par value $.01 per share, authorized by the
Certificate of Incorporation.
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"Series B Preferred Stock" shall mean the shares of the Preferred
Stock, Series B, of the Company, par value $.01 per share, authorized by the
Certificate of Incorporation.
"Shares" shall mean the issued shares of Common Stock and Preferred
Stock of the Company from time to time.
"Shareholder" shall mean DFS, Perseus and Cycle LLC, their Permitted
Transferees, and such other Persons to the extent provided in Section 6(b).
"Shareholder Group" shall mean any of the DFS Shareholders, the Cycle
Shareholders or the Perseus Shareholders, as applicable.
"Shareholder Group Shares" shall mean the sum of the total number of
shares of Class A Common Stock and the total number of shares of Series A
Preferred Stock held by each Shareholder, and any Shares held by Derby
International acquired pursuant to the Exchange Agreements.
"Simultaneous Offer" shall have the meaning set forth in Section 9(a)
of this Agreement.
"Simultaneous Offer Date" shall have the meaning set forth in Section
9(a) of this Agreement.
"Subsidiary" shall mean a corporation (or equivalent legal entity
under the law of any country) of which the Company owns directly or indirectly
more than fifty percent (50%) of the shares the holders of which are ordinarily
and generally, in the absence of contingencies or special arrangements, entitled
to vote for the election of directors (or the equivalent governing body of the
corporation).
"Term of this Agreement" shall mean the period beginning on the date
of this Agreement and continuing until the earliest of (i) the date there no
longer are at least two (2) Shareholder Groups owning Shareholder Group Shares,
(ii) the date more than fifty percent (50%) of the outstanding Deemed Common
Stock is beneficially owned by a Person or Persons who are not Shareholders, and
(iii) upon the consummation of an Approved Sale.
"Xxxxxx" shall mean Xxxxxx Equity Investors III, L.P.
"Transfer" shall have the meaning set forth in Section 2(a) of this
Agreement.
"Transfer Notice" and "Transferor" shall have the meanings set forth
in Section 8(a) of this Agreement.
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2. TRANSFER OF SHARES
(a) Restriction on Transfer of Shares
During the Term of this Agreement, no Shareholder shall be entitled to
sell, transfer, assign, pledge, charge or otherwise encumber ("Transfer") any
interest in the Shares to any Person other than the Company, and the Company
shall not register any Transfer of any of the Shares from a Shareholder to any
Person (other than the Company), unless such Transfer is made in accordance with
the terms and conditions of this Agreement.
(b) Restrictions to be Endorsed on Certificates
Each Shareholder shall acquire the Shares subject to all of the
rights, obligations and restrictions provided for in the Certificate of
Incorporation and this Agreement. Each share certificate issued to a
Shareholder or to any Person to whom a Shareholder sells, assigns or otherwise
transfers Shares (other than in a Public Sale) shall be endorsed with a legend
in substantially the following terms:
"THE SHARES OF [COMMON STOCK/PREFERRED STOCK] OF THE DERBY
CYCLE CORPORATION (THE "COMPANY") REPRESENTED BY THIS
CERTIFICATE ARE ENTITLED TO CERTAIN RIGHTS AND ARE SUBJECT
TO CERTAIN RESTRICTIONS, INCLUDING RESTRICTIONS ON THE
TRANSFER THEREOF, CONTAINED IN THE CERTIFICATE OF
INCORPORATION OF THE COMPANY AND/OR SPECIFIED IN THE
SHAREHOLDERS' AGREEMENT AMONG THE COMPANY AND THE HOLDERS OF
THE SHARES OF THE COMPANY DATED MAY 14, 1998 (AND ALL
AMENDMENTS THERETO), COPIES OF WHICH ARE AVAILABLE AT THE
REGISTERED OFFICE OF THE COMPANY. THE SHARES OF THE COMPANY
REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERABLE UPON
THE BOOKS OF THE COMPANY UNLESS AND UNTIL ALL OF THE TERMS
AND CONDITIONS OF THE CERTIFICATE OF INCORPORATION AND THE
SHAREHOLDERS' AGREEMENT (AND ALL AMENDMENTS THERETO) HAVE
BEEN COMPLIED WITH."
3. DIRECTORS OF THE COMPANY AND ITS SUBSIDIARIES
(a) Nomination and Election of Directors of the Company
The following persons have been appointed as directors of the Company
for the period ending with the annual general meeting of shareholders of the
Company for the fiscal year ending December 31, 1998:
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Xxxx X. Finden-Xxxxxx Xxxxx H. Pearl
A. Xxxxxx Xxxxxxxxx Xx. Xxxxxx X. Xxxxxxx
Xxxxxxxx X. Xxxxx Xxxx X. Xxxxxxxxxx
Xxxx Xxxxx
Each of the Shareholders shall vote all of the Shares owned by such Shareholder
that are entitled to vote on matters submitted to the stockholders of the
Company in favor of the appointment to the Board of Directors of each Person
nominated by the DFS Shareholders, the Perseus Shareholders and the Cycle
Shareholders in accordance with the following:
(i) for so long as the Cycle Shareholders hold Shares representing:
(1) not less than sixty percent (60%) of the aggregate voting power of the
Initial Cycle Shares (for this purpose, loss in voting power attributable
to dilution resulting from the issuance of Shares by the Company to any
Person shall be ignored); or (2) greater voting power than the Shares held
by the DFS Shareholders, then;
(A) the Board of Directors shall consist of seven (7) directors;
and
(B) (x) the DFS Shareholders shall have the right at all times to
nominate two (2) persons for appointment as members of the Board of
Directors of the Company; (y) the Cycle Shareholders shall have the
right at all times to nominate four (4) persons for appointment as
members of the Board of Directors of the Company; and (z) the Perseus
Shareholders shall have the right at all times to nominate one (1)
person for appointment as a member of the Board of Directors of the
Company; provided, however, that if the Perseus Shareholders are no
longer part of the Eligible Group, then the Shareholder Group that
holds a majority of the voting power of the Shares held by the
Eligible Group shall be entitled to nominate such person as a member
of the Board of Directors; or
(ii) at such time as the Cycle Shareholders hold Shares representing:
(1) less than sixty percent (60%) of the aggregate voting power of the
Initial Cycle Shares (for this purpose, loss in voting power attributable
to dilution resulting from the issuance of Shares by the Company to any
Person shall be ignored); and (2) voting power equal to or less than the
voting power of the Shares held by the DFS Shareholders (such occurrence
being referred to as the "Trigger Event"), then:
(A) the Board of Directors shall consist of seven (7) directors;
and
(B) (x) the Shareholder Group, if any, that holds a majority of
the voting power of the Shares held by the Eligible Group shall be
entitled to nominate and elect four directors, the Shareholder Group
that holds the second largest amount of the voting power of the Shares
held by the Eligible Group shall be entitled to nominate and elect two
directors, and the Shareholder Group that holds the smallest amount of
the voting power of the Shares held by the Eligible Group shall be
entitled to nominate and elect one director; provided that if the
Eligible Group only consists of
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any two of the DFS Shareholders, the Cycle Shareholders and the
Perseus Shareholders, then the Shareholder Group that holds a majority
of the voting power of the Shares held by the Eligible Group shall be
entitled to nominate and elect four directors and the Shareholder
Group and the Shareholder Group that holds the second largest amount
of the voting power of the Shares held by the Eligible Group shall be
entitled to nominate and elect three directors, and, provided further,
that if the Eligible Group only consists of any one of the DFS
Shareholders, the Cycle Shareholders and the Perseus Shareholders,
then such Shareholder Group shall be entitled to nominate and elect
seven directors; and (y) if no Shareholder Group hold a majority of
the voting power of the Shares held by the Eligible Group, then the
Shareholder Group that holds the largest amount of the voting power of
the Shares held by the Eligible Group shall be entitled to nominate
and elect three directors, the Shareholder Group that holds the second
largest amount of the voting power of the Shares held by the Eligible
Group shall be entitled to nominate and elect three directors and the
Shareholder Group that holds the smallest amount of the voting power
of the Shares held by the Eligible Group shall be entitled to nominate
and elect one director; provided that if the difference between the
percentage voting power of the two Shareholder Groups holding the
least amount of the voting power of the Shares held by the Eligible
Group (expressed as a percentage of the total voting power of Shares
held by the Eligible Group) is less than ten percentage points, then
each of such Shareholder Groups shall be entitled to nominate and
elect two directors; and
(iii) if, at any time after the Trigger Event, the number of seats on
the Board of Directors of the Company that the Eligible Group is entitled to
nominate and elect is changed (including, for example, upon an Initial Public
Offering, in connection with the offer and sale of equity securities of the
Company to new investors or otherwise), then the number of seats shall be
allocated among the Eligible Group in proportion (as close as practicable) to
the respective voting power held by each Shareholder Group; and
(iv) if prior to a Trigger Event, the number of seats on the Board of
Directors of the Company that the Eligible Group is entitled to nominate and
elect is changed (including, for example, upon an Initial Public Offering, in
connection with the offer and sale of equity securities of the Company to new
investors or otherwise), then the number of seats which each Shareholder Group
is entitled to nominate shall be adjusted proportionately so as to achieve (as
close as practicable) the same proportion of nominees for each Shareholder Group
as applicable prior to such change.
(b) Directors to be Elected Annually; Removal
All members of the Board of Directors shall be elected or re-elected
annually and shall serve until their respective successors are elected. The
removal from the Board of Directors (with or without Cause) of any Person
appointed under Section 3(a) hereof by the DFS Shareholders, the Cycle
Shareholders or the Perseus Shareholders shall be at the DFS Shareholders', the
Cycle Shareholders' or the Perseus Shareholders' written request, respectively,
but only upon such written
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request and under no other circumstances (except as otherwise required by this
Agreement, by law or by the other members of the Board of Directors for Cause).
In the event that any Person designated under Section 3(a) hereof by the DFS
Shareholders, the Cycle Shareholders or the Perseus Shareholders for any reason
ceases to serve as a member of the Board of Directors, the resulting vacancy on
the Board of Directors shall be filled by a Person designated or appointed by
the same Shareholder that designated or appointed the Person that will no longer
serve on the Board of Directors (or by such other Person then entitled to
designate and elect such member in accordance with Section 3(a)(ii)).
(c) Quorum for Meetings of the Board of Directors
At all meetings of the Board of Directors, a majority of the members
shall constitute a quorum for the transaction of business.
(d) Meetings of the Board of Directors
Meetings of the Board of Directors may be convened by the Chairman and
shall be called at the request of any two (2) members of the Board of Directors.
Notice of any meeting of the Board of Directors shall be given to each Director
in person, by letter or by telephone, telex, telefax or other electronic means
so that such notices are received by each member of the Board of Directors not
less than five (5) days before the date of the meeting, unless such notice is
waived by all members of the Board of Directors. All notices of meetings of the
Board of Directors shall state in reasonable detail the business to be
transacted at such meetings.
(e) Action by the Directors without a Meeting
The Board of Directors may take action without a meeting by unanimous
written consent expressed in one or more documents, letters or telefaxes.
(f) Board of Directors of Subsidiaries
The Board of Directors of each Subsidiary shall be nominated and
elected by the Board of Directors of the Company.
(g) Termination of DFS Voting Rights
The right of the DFS Shareholders to nominate and remove members of
the Board of Directors under this Section 3 shall terminate if (1) the DFS
Shareholders are no longer part of the Eligible Group or (2) during the lifetime
of A. Xxxxxx Xxxxxxxxx ("AEG"), AEG ceases to be the chairman of either DFS or
Derby International; provided however, that if AEG dies or is physically or
mentally disabled, then this right of the DFS Shareholders to nominate and elect
directors pursuant to this Section 3 shall continue and the DFS Shareholders
shall be entitled to nominate, elect and remove directors pursuant to Section 3
hereof if and only if at least one of the directors that the DFS Shareholders
are entitled to nominate and elect is a person who is independent from and not a
shareholder, director or employee of DFS, Derby International or The
International
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Heart Foundation Trust or any of their Affiliates, is experienced in business
matters and is reasonably acceptable to the Cycle Shareholders and the Perseus
Shareholders.
(h) Termination of Cycle LLC Voting Rights
The right of the Cycle Shareholders to nominate and remove members of
the Board of Directors under this Section 3 shall terminate if (1) Xxxxxx shall
own and control, directly or indirectly, less than 51% of the outstanding voting
and equity interests in the Cycle Shareholders or (2) the Cycle Shareholders are
no longer part of the Eligible Group.
(i) Termination of Perseus Voting Rights
The right of the Perseus Shareholders to nominate and remove members
of the Board of Directors under this Section 3 shall terminate if Perseus is no
longer a member of the Eligible Group.
(j) Reallocation of Nominees
In the event that either the Cycle Shareholders or the DFS
Shareholders lose their rights to nominate directors under Sections 3(g) and
3(h) above, the Shareholder Group owning stock with the largest amount of voting
power on such date shall succeed to the right to nominate such directors, except
to the extent otherwise provided in Section 3(a)(ii) hereof.
4. APPOINTMENT OF AUDITORS
During the Term of this Agreement, for each fiscal year of the Company
and each of the Subsidiaries which begins after December 31, 1997, each
Shareholder shall vote all of the Shares held by such Shareholder which are
entitled to vote thereon in favor of the election of any recognized accounting
firm of international standing nominated by a majority of the Board of Directors
of the Company as auditor for the Company.
5. PRINCIPAL CORPORATE ACTION BY THE COMPANY AND SUBSIDIARIES
(a) Corporate Action by the Company not in the Ordinary Course of Business
During the Term of this Agreement but only for so long as (1) the DFS
Shareholders own at least 9% of the voting power of the outstanding Shareholder
Group Shares and at least 6% of the voting power of the outstanding capital
stock of the Company, (2) the Cycle Shareholders own at least 15% of the voting
power of the outstanding Shareholder Group Shares and at least 10% of the voting
power of the outstanding capital stock of the Company and (3) no Shareholder
Group owns more than 82.5% of the voting power of the outstanding Shareholder
Group Shares, the Company shall not take any of the following actions unless (I)
if the provisions of Section 3(a)(ii) are not then operative, such action is
approved by the affirmative vote of a majority of the Board of Directors of the
Company, which majority must include either a director nominated by the Perseus
Shareholders or a director nominated by the DFS Shareholders or (II) if the
provisions of
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Section 3(a)(ii) are then operative, such action is approved by the
affirmative vote of five members of the Board of Directors of the Company:
(i) make any material change in the nature of the business of the
Company and the Subsidiaries, taken as a whole;
(ii) purchase, acquire, manage or launch any new business or any part
of a new business, or purchase or acquire more than five percent (5%) of
the shares or other securities of any Person (other than a Person which is
a Subsidiary before the date of such purchase or acquisition), for a total
consideration in excess of the Approval Amount or the equivalent thereof in
any other currency;
(iii) make any investment of any kind in any corporation, company,
firm or business enterprise controlled by one or more Shareholders or their
Affiliates (other than a member of the Derby Group) or employees of the
Shareholder s or their Affiliates (other than a member of the Derby Group);
(iv) purchase or lease any fixed assets or property from any
Shareholder or Employee or any of their Affiliates (other than from a
member of the Derby Group);
(v) lend any money, make any guarantee or pledge the credit of the
Company (or the credit of any Subsidiary) to or for the benefit of any
Person other than a member of the Derby Group, except in the ordinary
course of business of the Company;
(vi) enter into any plan of liquidation or dissolution;
(vii) sell, lease, charge or encumber any of the assets, revenues or
property, tangible or intangible, or transfer or dispose of all or any
substantial part of the undertaking, assets or revenue of the Company or
any of its Subsidiaries for total consideration exceeding the Approval
Amount, except: (A) in the ordinary course of business and on arm's-length
terms; or (B) if the assets, revenues or undertakings are not material to
the business of the Derby Group, taken as a whole, provided such
transaction is on arm's-length terms; or (C) to, or in favor of, a member
of the Derby Group;
(vi) amalgamate or merge with any other company or business
enterprise (other than a member of the Derby Group);
(ix) enter into any plan of reorganization or recapitalization which
results in a change of ownership of the outstanding Shares (other than with
a member of the Derby Group);
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(x) pay any dividends or distributions to Shareholders,
except in accordance with the terms and conditions of this
Agreement;
(xi) incur any liability, commitment or obligation, or
settle or compromise any claim, which is not otherwise
specifically described above and which is out of the ordinary
course of business of the Derby Group for an amount in excess of
the Approval Amount or the equivalent thereof in any other
currency;
(xii) issue or sell any shares of Class A Common Stock
(other than shares not subject to the Preemptive Rights as
described in Section 12(a) of this Agreement) for no
consideration or for a consideration less than the fair market
value thereof (as such fair market value is determined in good
faith by the Company's independent auditors); or
(xiii) take steps or omit to take steps which will result in
the termination of the rights to use the Derby trademark in any
jurisdiction under that certain Trademark License Agreement of
even date herewith.
(b) Prohibitions on Action by Subsidiaries
During the Term of this Agreement but only for so long as (1) the DFS
Shareholders own at least 9% of the voting power of the outstanding Shareholder
Group Shares and at least 6% of the voting power of the outstanding capital
stock of the Company, (2) the Cycle Shareholders own at least 15% of the voting
power of the outstanding Shareholder Group Shares and at least 10% of the voting
power of the outstanding capital stock of the Company and (3) no Shareholder
Group owns more than 82.5% of the voting power of the outstanding Shareholder
Group Shares, the Company and each of the Shareholders shall take such action as
may be necessary or appropriate (by voting the Shares held by such Shareholder,
by causing action to be taken by the Board of Directors of the Company or any
Subsidiary, or otherwise) to prevent any Subsidiary from taking the following
actions unless (I) if the provisions of Section 3(a)(ii) are not then operative,
such action is approved by the affirmative vote of a majority of the Board of
Directors of the Company, which majority must include either a director
nominated by the Perseus Shareholders or a director nominated by the DFS
Shareholders or (II) if the provisions of Section 3(a)(ii) are then operative,
such action is approved by the affirmative vote of five members of the Board of
Directors of the Company:
(i) make any material change in the nature of the business
of such Subsidiary; or
(ii take any of the actions described in clauses (ii)
through (xiii) of Section 5(a).
-13-
(c) Cycle Shareholders Exit and Distress Situations.
Sections 5(a) and 5(b) shall not apply and only a simple majority vote
of the members of the Board of Directors of the Company shall be required to
approve any action by the Company or any Subsidiary:
(i) during the period that a payment default under the
Financing Documents is not cured or after any acceleration of
Indebtedness under the Financing Documents;
(ii) during the period that an event of default under the
Financing Documents resulting from unpaid judgments, the
insolvency of the Company, the filing for bankruptcy protection
(whether voluntary or involuntary) or similar event until such
event of default is cured;
(iii) during any period during which the financial covenants
under the Financing Documents are not satisfied, resulting in a
default under such documents, provided that the provisions of
Sections 5(a) and 5(b) hereof shall continue to apply to the sale
of any Principal Subsidiary (as defined in the Recapitalization
Agreement) or the actions described in Sections 5(a)(vii) and
(viii) until such default continues for two consecutive fiscal
quarters of the Company;
(iv) in connection with or in order to effect a transaction
in which a majority of the Cycle Shareholders' equity interest in
the Company is being exchanged for cash or other property or in
which a dividend or other distributions outside the ordinary
course of business is being paid pro rata (based upon the
ownership of Deemed Common Stock) by the Company; and
(v) in connection with or in order to effect the completion
of one or more Public Sales as a part of a course of action for
the sale of a majority of the Cycle Shareholders' equity interest
in the Company; provided that following completion of the Initial
Public Offering, Common Stock having a market value of at least
$40 million, or stock equal to at least twenty-five percent (25%)
of the outstanding common equity of the Company will be publicly-
traded.
(d) Affiliated Transactions.
Notwithstanding anything to the contrary herein, the Company and its
Subsidiaries shall not enter into any transaction with, or make any payments to,
any Shareholder or its Affiliates (other than the Company or its Subsidiaries)
or the officers, directors, employees or shareholders of any of them unless the
Parties to such transaction have received the prior written approval of the
Shareholder Group (with respect to Perseus, Cycle LLC and DFS) not a party to
such transaction, provided that such approval shall not be required if such
transaction is contemplated by this Agreement or the Certificate of
Incorporation.
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6. CONDITIONS OF CERTAIN TRANSFERS
(a) It shall be a condition of any transaction permitted under Section 7 or
8(d) of this Agreement, other than a Public Sale or a Transfer described in
clause (a)(ii) of Section 7 hereof, that any Person to whom any interest in the
Shares has been issued, sold, transferred, assigned, pledged, charged or
otherwise encumbered shall, on the date on which such Person becomes entitled to
any interest in the Shares, become a party to this Agreement, and thereupon be
deemed to be a "Shareholder" for all purposes hereof, by executing a counterpart
of this Agreement and by entering into valid and binding obligations to perform
all of the executory terms and provisions of this Agreement applicable to such
Person.
(b) It shall be a condition of any Transfer permitted under this Agreement
(other than a Transfer pursuant to Section 7 of this Agreement, to the Company
or in a Public Sale), that any Person to whom any interest in the Shares has
been issued, sold, transferred, assigned, pledged, charged or otherwise
encumbered shall, on the date on which such Person becomes entitled to any
interest in the Shares, become a party to this Agreement, and thereupon be bound
by this Agreement as a "Shareholder" for purposes of Sections 2, 3(a), 11(a)
through (d), 13, and 14(b) hereof, by executing a counterpart of this Agreement
and by entering into valid and binding obligations to perform all of the
executory terms and provisions of this Agreement applicable to such Person
pursuant to such Sections; provided, however, that such Person shall have none
of the rights of a Shareholder under this Agreement (other than rights
incidental to the obligations contained in such Sections).
7. CERTAIN PERMITTED TRANSFERS OF SHARES
(a) Subject to the condition contained in Section 6(a) of this Agreement,
(i) any Shareholder who is an individual may at any time sell, assign or
otherwise transfer all or part of the Shares owned by such Shareholder to or
among any trust or trusts established for the benefit of such Shareholder or the
spouse, issue, siblings or parents of such Shareholder (a "Family Trust") and
for purposes of Sections 3, 8, 9, 10, 11 and 12 of this Agreement, any Shares
held by a Family Trust shall be treated as if they were still owned by the
Shareholder who sold, assigned or otherwise transferred such Shares to the
Family Trust, (ii) at any time after an Initial Public Offering, Perseus or
Xxxxxx may distribute Shares to their members or partners without consideration
pro rata in accordance with the terms of the partnership agreement of Xxxxxx
Equity Investors III, L.P. or the limited liability company agreement of Perseus
Capital, L.L.C., as the case may be, and (iii) any Shares owned by any
Shareholder who is not an individual may be sold, assigned or transferred to any
Affiliate of such Shareholder (a "Qualified Affiliate"); provided, however, any
subsequent Transfer, whether direct or indirect, of an interest in a Qualified
Affiliate to a Person that is not an Affiliate transferor or shall be deemed to
be a Transfer of the Shares held by such Qualified Affiliate subject to the
terms and conditions of this Agreement and, upon such subsequent transfer, such
Qualified Affiliate shall no longer be deemed to be a Shareholder for purposes
of this Agreement except to the extent provided in Section 6(b) hereof or a DFS
Shareholder, Cycle Shareholder or Perseus Shareholder, as the case may be.
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(b) Any Transfer permitted under Section 7(a) hereof shall not relieve the
transferor of any liabilities and obligations it has under the Recapitalization
Agreement. In connection with, and as a condition to, any Transfer under
clauses (i) and (iii) of Section 7(a) hereof, the transferee must agree to
assume such obligations of the transferor under the Recapitalization Agreement.
8. RIGHT OF FIRST OFFER
(a) Transfer Notice to Board of Directors
Except as otherwise permitted under Section 7 of this Agreement or in
connection with a Public Sale, no Shareholder shall sell, transfer, assign,
pledge, charge or otherwise encumber all or any part of such Shareholder's
interest in the Class A Common Stock or the Series A Preferred Stock (any such
action being referred to as a "Proposed Disposition"), unless such Shareholder
(a "Transferor") shall give a written notice (the "Transfer Notice") to the
other Shareholders stating that the Transferor wishes to make a Proposed
Disposition. The Transfer Notice shall state the material terms of the Proposed
Disposition, including the number of Shares to be sold and the cash purchase
price per Share and, if known at such time, the name(s) of any proposed
transferee(s). The delivery of the Transfer Notice to the other Shareholders
shall constitute an offer to sell in accordance with the provisions of this
Section 8 all (but not less than all) of the Class A Common Stock and the Series
A Preferred Stock covered in such Transfer Notice (the "Offered Shares") on the
same terms, including the same price, as specified in such Transfer Notice on a
date not earlier than thirty (30) days and not later than sixty (60) days after
the date of the Transfer Notice.
(b) Response from Other Shareholders
Within thirty (30) days after the date of receipt of a Transfer
Notice, the Other Shareholders shall give notice to the Transferor indicating
such Shareholder's willingness to purchase the Offered Shares. If the Offered
Shares are accepted for purchase by more than one Shareholder, the Offered
Shares shall be allocated among such accepting Shareholders pro rata based on
their respective ownership of Deemed Common Stock. Once accepted by a
Shareholder (and subject to the foregoing pro ration) such agreement between the
Transferor and such Shareholder(s) shall become unconditional.
(c) Disposals in the Event of Non-Acceptance of Offered Shares
If the Offered Shares are not accepted by one or more of the other
Shareholders under Section 8(b) hereof: (i) the Transferor may withdraw the
Transfer Notice; or (ii) the Transferor may make the Proposed Disposition of the
whole (but not part) of the Offered Shares on terms no less favorable to the
Transferor than those set out in the Transfer Notice, provided that the price
per Offered Share received in the actual sale can be as little as ninety-five
percent (95%) of the cash price specified in the Transfer Notice, provided
further, that if the entire price per Offered Share received in the actual sale
is not in cash, then the Company's independent auditors shall determine the
value of the non-cash consideration received in the actual sale of the Offered
Shares in order to determine whether the aggregate price per Offered Share
received in the actual sale exceeds or is equal to ninety-five percent (95%) of
the cash price per Offered Share specified in the Transfer
-16-
Notice. Any Proposed Disposition permitted by this Section 8(c) may be made at
any time within one hundred and ninety (190) days after the date of the Transfer
Notice.
(d) Special Provision
Subject to the fulfilment of the condition contained in Section 6(a)
of this Agreement, the provisions of Sections 8(a) through 8(c) hereof shall not
apply to any transfer of any Shares from a Shareholder to his estate upon death,
to his heirs by operation of the laws of intestacy, to his heirs or legatees
under the terms of a will or codicil or to any legal representative of such
Shareholder who is appointed by a court of law in the event of the incapacity of
such Shareholder (and such estate, heirs, legatees or legal representative may
acquire and hold good and valid title to any such Shares so transferred without
payment of consideration, subject to fulfilment of the condition contained in
Section 6(a) of this Agreement).
(e) Waiver of Right of First Offer
Notwithstanding anything to the contrary, if the approval of the
Perseus Director is required for any Proposed Disposition pursuant to Section
11(e), then the provisions of Sections 8(a) through 8(c) hereof shall not apply.
9. ACTION IN THE EVENT OF TRANSFERS NOT PERMITTED BY THIS AGREEMENT
(a) Events Resulting in a Simultaneous Offer
If any of the following events shall occur, each Shareholder involved
in such event shall be deemed to have made a simultaneous offer (the
"Simultaneous Offer") to sell to the Company or its Designee all of the Shares
owned by such Shareholder on the date on which the event occurs (the
"Simultaneous Offer Date"):
(i) a Shareholder takes any action or makes any attempt to Transfer
any Shares, or omits to take any action that would prevent a Transfer of
any Shares, owned by such Shareholder except in accordance with the terms
and conditions of this Agreement and the Certificate of Incorporation;
(ii) any order, judgment or decree is made by a court having
jurisdiction in the matter adjudging a Shareholder bankrupt or insolvent;
(iii) any order, judgment or decree is made by a court having
jurisdiction in the matter which results in the appointment of a receiver,
liquidator, trustee or assignee in bankruptcy or insolvency of a
Shareholder (or his or its property), and such order, judgment or decree
shall have continued undischarged or unstayed for a period of sixty (60)
days;
(iv) a Shareholder institutes proceedings to be adjudicated a
voluntary bankrupt, or consents to the filing of a bankruptcy or insolvency
petition against such
-17-
Shareholder or consents to the appointment of a receiver, liquidator,
trustee or assignee in bankruptcy or insolvency of such Shareholder (or his
or its property), or makes an assignment for the benefit of creditors;
(v) any judgment is obtained in any legal or equitable proceeding
against a Shareholder and a sale of all or any part of the Shares is
threatened under legal process as a result of such judgment, or any
execution process is issued against any such Shareholder or any Shares
owned by him or it, or any other form of legal proceeding or process is
instituted as a result of which any Shares are threatened to be sold and
such execution is not dismissed, discontinued or stayed within a period of
ninety (90) days from the occurrence thereof;
provided that the Shareholder involved in the event which causes the
Simultaneous Offer shall have ninety (90) days from the Simultaneous Offer Date
to cure the event which caused such Simultaneous Offer.
(b) Purchase Price
(i) The price for each Share for which a Simultaneous Offer is deemed
to be made in accordance with Section 9(a)(i) shall be the lesser of (i) eighty
percent (80%) of the fair market value of such Share (as determined by the
independent auditors of the Company in good faith) and (ii) the book value of
such Share, in each case as of the Simultaneous Offer Date, plus interest at the
"Base Rate" for dollars of Citibank N.A., in effect from time to time, from the
Closing Date (or, if later, the date of purchase or issue of such Shares) until
the Simultaneous Offer Date.
(ii) The purchase price for each Share for which a Simultaneous Offer
is deemed to be made in accordance with any of Section 9(a)(ii) through (v)
shall be determined as follows: (A) the price for each share of Common Stock
shall be $800.00, plus interest at the "Base Rate" for dollars of Citibank N.A.,
in effect from time to time, from the Closing Date (or, if later, the date of
purchase or issue of such Shares) until the Simultaneous Offer Date; (B) the
price for each share of Series A Preferred Stock shall be $1,200, plus interest
at the "Base Rate" for dollars of Citibank N.A., in effect from time to time,
from the Closing Date (or, if later, the date of purchase or issue of such
Shares) until the Simultaneous Offer Date; and (C) the price for each share of
Series B Preferred Stock shall be $800, plus interest at the "Base Rate" for
dollars of Citibank N.A., in effect from time to time, from the Closing Date
(or, if later, the date of purchase or issue of such Shares) until the
Simultaneous Offer Date.
(c) Payment of Purchase Price
The price to be paid for each Share purchased pursuant to this Section
9 shall be paid in dollars at the registered office of the Company sixty (60)
days after the date on which the Board of Directors gives notice to the relevant
Shareholder of the Company's intent to purchase such Common Stock, and any
member of the Board of Directors of the Company is hereby authorized to take all
action necessary to carry out on behalf of the Shareholders concerned the
transfer of all Shares included in the Simultaneous Offer.
-18-
(d) Extension of Simultaneous Offer
Within thirty (30) days after the date on which the Board of Directors
learn of the event which causes the Simultaneous Offer to be made, the Board of
Directors may, but shall not be required to, extend the Simultaneous Offer as to
all or part of any Shares included in the Simultaneous Offer to all of the other
Shareholders pro rata based upon the Payment Outflows made by each such
Shareholder in respect of the Shares held by such Shareholder on the
Simultaneous Offer Date, and such other Shareholders may purchase the Shares so
offered in place of the Company or its Designee. Acceptance of such offer must
be made and the sale must be completed within twenty-one (21) days and thirty
(30) days, respectively, after the date on which the Board of Directors extends
the offer to the other Shareholders pursuant to this Section 9(d).
10. RIGHTS ON CERTAIN DISPOSITIONS
(a) At least 30 days prior to any Transfer of Class A Common Stock or
Series A Preferred Stock by any Shareholder, the transferring Shareholder (the
"Selling Shareholder") will deliver written notice (the "Sale Notice") to the
Company and all other Shareholders who hold Common Stock and Preferred Stock
(the "Other Stockholders"), specifying in reasonable detail the identity of the
prospective transferee(s) and the terms and conditions of the Transfer. The
Other Stockholders may elect to participate in the contemplated Transfer by
delivering written notice (the "Election Notice") to the Selling Shareholder
within 10 days after delivery of the Sale Notice. If any Other Stockholders
have elected to participate in such Transfer, the Selling Shareholder and each
such Other Stockholders will be entitled to sell in the contemplated Transfer
(A) a number of shares (in the case of each Other Stockholder, not to exceed the
number specified in such Other Stockholder's Election Notice) of (1) Deemed
Common Stock equal to the product of the Selling Percentage (as defined below)
and the number of shares of Deemed Common Stock owned by such Person, (2) Class
B Common Stock equal to product of the Selling Percentage and the number of
shares of Class B Common Stock owned by such Person, (3) Converted Common (if
any) equal to the product of the Selling Percentage and the number of shares of
Converted Common such Person could acquire under Section 4D(ii) of Part B of
Article IV of the Certificate of Incorporation at the purchase price provided
below and (4) Series B Preferred Stock equal to the product of the Selling
Percentage and the number of shares of Series B Preferred Stock owned by such
Person plus (B) a pro rata share (based upon the ownership of Shares) of the
Shares requested to be sold in the Sale Notice and the Election Notices but not
otherwise allocated to the Selling Shareholder and the Other Stockholders under
clause (A) above. The Selling Shareholder will not Transfer any of its shares
of Class A Common Stock or Series A Preferred Stock to the prospective
transferee(s) unless simultaneously with such Transfer, the prospective
transferee or transferees purchase from the Other Stockholders all of the shares
of Common Stock, Preferred Stock and Converted Common, as the case may be, which
the Other Stockholders are entitled to sell to such prospective transferee(s)
pursuant to this Section 10(a) and subject to the terms and conditions of
Section 10(c) hereof. The "Selling Percentage" means the percentage derived by
dividing (x) the number of shares of Deemed Common Stock being offered for sale
by the Selling Shareholder by (y) the number of shares of Deemed Common Stock
outstanding as of the date of the Sale Notice. None of the provisions of
Section 10 hereof shall apply to an Exempt Transfer.
-19-
(b) In the event that:
(i) a Shareholder wishes to make a Proposed
Disposition of Shares pursuant to Section 8 of this Agreement
(other than a transaction permitted by Section 7 of this
Agreement); and
(ii) such Proposed Disposition complies with all of
the terms and conditions of Section 8; and
(iii) after the Proposed Disposition (taking into
account the exercise of any rights of other Shareholders under
this Section 10), Shareholders on the date on which the notice of
such Proposed Disposition is received, will own, in the
aggregate, less than fifty-one percent (51%) of the voting power
of the outstanding capital stock of the Company,
then the Persons who have given notice of the Proposed Disposition shall obtain
from any Person to or with which the Proposed Disposition is to be made, an
offer to each Shareholder to acquire all of their Shares.
(c) The terms and conditions applicable to the Shares to be sold by
the Other Shareholders under this Section 10 are as follows: (i) with respect to
the Class A Common Stock owned by such Shareholder, at the same price applicable
to, and on terms and subject to conditions substantially identical to those
offered in the Proposed Disposition with respect to, the Deemed Common Stock,
(ii) with respect to the Series B Preferred Stock owned by such Shareholder, on
terms and subject to conditions substantially identical to those offered in the
Proposed Disposition, and at a price per share equal to the Liquidation Amount
(as defined in the Certificate of Incorporation) thereof plus all accrued and
accumulated but unpaid dividends thereon, and (iii) with respect to the Class B
Common Stock owned by such Shareholder, at a price per share equal to the
Implied Class B Purchase Price, and on terms and subject to conditions
substantially identical to those offered in the Proposed Disposition.
Notwithstanding the foregoing, in the event that all of the outstanding equity
securities of the Company are to be sold in a Proposed Disposition, each
Shareholder shall be paid, in respect of the Shares held by such Shareholder,
the amount that such Shareholder would have received if such aggregate
consideration payable in such Proposed Disposition had been distributed by the
Company in complete liquidation pursuant to the rights and preferences set forth
in Part D of Article Four of the Certificate of Incorporation.
11. APPROVED SALE
(a) Obligation to "Go Along"
Subject to Sections 5(a) and 5(c) of this Agreement, if the Board of
Directors of the Company approves a sale of all or substantially all of the
Company's assets determined on a consolidated basis or a sale of all or
substantially all (i.e., greater than 66 2/3%) of the Company's outstanding
capital stock (whether by sale of stock, merger, recapitalization,
consolidation, reorganization, combination or otherwise) to any Person or group
of Persons (collectively an
-20-
"Approved Sale"), each Shareholder will consent to and raise no objections
against such Approved Sale. If the Approved Sale is structured as (i) a merger
or consolidation, each Shareholder will waive any dissenter's rights, appraisal
rights or similar rights in connection with such merger or consolidation or (ii)
sale of stock, each Shareholder will agree to sell all of its Shares and rights
to acquire Shares on the terms and conditions approved by the Board of Directors
of the Company. Each Shareholder will take all reasonable actions in connection
with the consummation of the Approved Sale as requested by the Company.
(b) Conditions
The obligations of the Shareholders with respect to an Approved Sale
are subject to the satisfaction of the condition that upon the consummation of
the Approved Sale; (A) all of the Class A Common Stock to be sold in such
Approved Sale shall be sold at the same price applicable to, and on terms and
subject to conditions substantially identical to those applicable to, the Deemed
Common Stock in such Approved Sale, (B) all of the Series B Preferred Stock to
be sold in such Approved Sale shall be sold on the same terms (other than with
respect to price) and subject to conditions substantially identical to those
applicable to the Deemed Common Stock in such Approved Sale, and at a price per
share equal to the Liquidation Amount (as defined in the Certificate of
Incorporation) thereof plus all accrued and accumulated but unpaid dividends
thereon, and (C) all of the Class B Common Stock to be sold in such Approved
Sale shall be sold at a price per share equal to the Implied Class B Purchase
Price, and on terms (other than with respect to price) and subject to conditions
substantially identical to those applicable to the Deemed Common Stock in such
Approved Sale. Notwithstanding the foregoing, in the event that all of the
outstanding equity securities of the Company are to be sold in an Approved Sale,
each Shareholder shall be paid, in respect of the Shares held by such
Shareholder, the amount that such Shareholder would have received if such
aggregate consideration payable in such Approved Sale had been distributed by
the Company in complete liquidation pursuant to the rights and preferences set
forth in Part D of Article Four of the Certificate of Incorporation.
(c) Appointment of Purchaser Representative
If the Company or a Shareholder enters into any negotiation or
transaction for which Rule 506 (or any similar rule then in effect) promulgated
under the Securities Act may be available with respect to such negotiation or
transaction (including a merger, consolidation or other reorganization), each
Shareholder will, at the request of the Company, appoint a purchaser
representative (as such term is defined in Rule 501) reasonably acceptable to
the Company. If any Shareholder appoints a purchaser representative designated
by the Company, the Company will pay the fees of such purchaser representative.
If any Shareholder declines to appoint the purchaser representative designated
by the Company such Shareholder will appoint another purchaser representative,
and such Shareholder will be responsible for the fees of the purchaser
representative so appointed. This Section 11(c) shall apply only to
Shareholders that are required to appoint a purchaser representative under
Regulation D (or any successor regulation then in effect) promulgated under the
Securities Act.
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(d) Costs
Shareholders will bear their pro-rata share (based upon the proceeds
to be received by each Shareholder) of the costs of any sale of Shares pursuant
to an Approved Sale to the extent such costs are incurred for the benefit of all
Shareholders and are not otherwise paid by the Company or the acquiring party.
For purposes of this Section 11(d), costs incurred in exercising reasonable
efforts to take all necessary actions for the consummation of an Approved Sale
in accordance with Section 11(a) hereof shall be deemed to be for the benefit of
all Shareholders. Costs incurred by Shareholders on their own behalf will not be
considered costs of the transaction hereunder.
(e) Perseus Approval
Notwithstanding anything to the contrary, if the consideration to be
received by the Shareholders in an Approved Sale is other than Cash, then the
approval of the Perseus Director shall be required unless any one of the
following conditions are met:
(i) the IRR on each of the Shareholder Groups' investment
in Class A Common Stock (including for this purpose, Class A
Common Stock issuable upon conversion of the Series A Preferred
Stock) shall be more than twenty percent (20%) based solely on
the Cash portion of the total Payment Inflows received prior to
the date of such Approved Sale and to be received upon
consummation of such Approved Sale in respect of such investment;
(ii) (A) the Cash portion of the consideration to be
received in such Approved Sale exceeds fifty percent (50%) of the
total value of such consideration, (B) the non-Cash portion of
the consideration to be received in such Approved Sale is in the
form of securities of another Person that has consolidated net
worth at least equal to at least $500,000,000, and (C) Perseus
and DFS shall each have the ability to sell or otherwise
liquidate such securities of such other Person pursuant to puts,
calls or other such devices within three years of the
consummation of the Approved Sale; and
(iii) the Cash portion of the consideration to be received
in such Approved Sale exceeds ninety percent (90%) of the total
value of such consideration;
(iv) the IRR on the total investment of the Cycle
Shareholders in the Company would be less than twenty percent
(20%) after taking into account all Payment Inflows to be
received by the Cycle Shareholders in such Approved Sale (where
any notes included in such Payment Inflows are valued at their
face value and any securities included in such Payment Inflows
are valued without applying any discount of any nature);
(v) if the consideration received by the Shareholders is
in the form of securities of another Person, the market
capitalization (as determined in the Board
-22-
of Directors' good faith judgement) of such Person is (or prior
to giving effect to the Approved Sale is) greater than eight
hundred million dollars ($800,000,000); or
(vi) each of the Perseus Shareholders and the DFS
Shareholders can sell or otherwise liquidate any consideration it
receives which is in the form of securities of another company,
corporation or other legal entity within nine (9) months after
the consummation of the Approved Sale under Rule 144 Public Sales
(based on the trading volume of such securities at the time the
Approved Sale was approved by the Board of Directors) taking into
account the ability to exercise any demand registration rights
granted to the Perseus Shareholders or the DFS Shareholders in
such Approved Sale;
provided that this Section 11(e) shall not apply if there are no Perseus
Directors elected to the Board of Directors.
12. PREEMPTIVE RIGHTS
(a) Right to Purchase
Except for the issuance of Common Stock (and/or securities exercisable
for or convertible into Common Stock) (i) to the Company's or its Subsidiaries'
directors or employees (other than an Affiliate of any Shareholder) in their
capacity as such, (ii) in connection with an Approved Sale, (iii) in connection
with any merger, consolidation, acquisition of stock, acquisition of assets,
business combination or similar transaction permitted by this Agreement, (iv)
pursuant to a Public Sale (v) to any providers of debt financing to the Company
or any of its Subsidiaries, (vi) upon the conversion or exercise of securities
convertible or exchangeable into or containing options or rights to acquire
Common Stock or in connection with the issuance of Shares pursuant to the
Exchange Agreements, (vii) pursuant to any adjustments required under Section 7A
or 7B of Part B of the Certificate of Incorporation, or (viii) the issuance of
Common Stock to the holders of Class A Common Stock in connection with a
subdivision or combination of Class A Common Stock, a reverse stock split or a
stock dividend payable solely in shares of Class A Common Stock, in each case if
each holder of Class A Common Stock receives Common Stock proportionate to its
ownership of Class A Common Stock in connection with the transaction described
in this clause (viii), the Company shall first offer to sell to each Shareholder
a portion of such stock or securities determined based on the relative voting
power of the Shares held by such Shareholder; provided, however, that if such
Shareholders do not subscribe for the total amount of stock or securities
offered to such Shareholders, then the holders of shares of Class B Common
Stock or Series B Preferred Stock shall be entitled to subscribe for such
unsubscribed for stock or securities pro rata, based on the Payment Outflows
made by each such holder in respect of its Class B Common Stock and Series B
Preferred Stock. Each Shareholder shall be entitled to purchase such stock or
securities at the most favorable price and on the most favorable terms as such
stock or securities are to be offered to any other Person. The purchase price
for all stock and securities offered to each Shareholder shall be payable in
cash by wire transfer of immediately available funds or if such Common Stock is
being offered to Persons not a party to this Agreement on such other terms as
offered to such Persons.
-23-
(b) Exercise of Right
In order to exercise its purchase rights hereunder, each Shareholder
must deliver a written notice to the Company describing its election hereunder
within thirty (30) days after receipt of written notice from the Company
describing in reasonable detail the stock or securities being offered, the
purchase price thereof, the payment terms and such Shareholder's percentage
allotment.
Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the
Shareholders have not elected to purchase during the one hundred ninety (190)
days following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to Shareholders. Any stock or securities
offered or sold by the Company to any Person after such 190-day period must be
reoffered to the Shareholders pursuant to the terms of this Section 12.
13. GENERAL PROVISION WITH RESPECT TO SHARE TRANSFERS
The Company shall not register any transfer of any Shares from any
Shareholder to any Person unless such transfer is made pursuant to the terms and
conditions of this Agreement and the Certificate of Incorporation. The Company
shall take all lawful action necessary or appropriate to implement the
provisions of this Agreement and the Certificate of Incorporation and to prevent
the acquisition, disposition or transfer by a Shareholder of any Shares except
in accordance with the terms and conditions of this Agreement and the
Certificate of Incorporation. Such action may include (but shall not be limited
to) the execution and delivery of all instruments and documents and the taking
of all such other action as the Company may deem reasonably necessary or
appropriate, on behalf of and in the name of any Shareholder, in order to carry
out the terms, provisions and purposes of this Agreement and the Certificate of
Incorporation. Each Shareholder hereby appoints the Company his or its agent or
attorney-in-fact for the purpose of taking any action provided for in this
Section 13. The power given by the Shareholders to the Company pursuant to this
Section 13 shall survive the death or bankruptcy of any Shareholder and may be
revoked only with the written consent of the Company.
14. BOOKS AND RECORDS; CONFIDENTIALITY
(a) Maintenance of Accounts, Books and Records
The Company shall take the following action with respect to financial
record-keeping, and the Company shall cause its Subsidiaries to take
corresponding action appropriate to local conditions and requirements:
(i) maintain books, records and accounts which, in
reasonable detail, accurately and fairly reflect the transactions
of the Company or such Subsidiary and dispositions of the assets
and liabilities of the Company or such Subsidiary; and
(ii) devise and maintain a system of internal accounting
controls sufficient to provide reasonable assurances that:
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(A) transactions are executed in accordance with
management's general or specific authorization;
(B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with
generally accepted accounting principles or any other
criteria applicable to such statements and to maintain
accountability for assets;
(C) access to assets is permitted only in accordance
with management's general or specific authorization; and
(D) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(b) Confidentiality
Each Shareholder covenants and agrees that he or it will not (and, in
the case of a corporate, limited liability or partnership Shareholder, shall use
its best efforts to procure that its directors, members, officers, partners,
employees or agents will not), at any time during the Term of this Agreement or
thereafter, communicate or disclose to any unauthorized person or use for his or
its own account or business any information, observations, data, written
materials, records or documents which are prepared or obtained by such
Shareholder or which come into his or its possession during the Term of this
Agreement and which relate to the performance by the Derby Group of its business
or affairs. The obligations contained in this Section 14(b) (i) shall not apply
in the event and to the extent that the information, observations, data, written
materials, records or documents referred to in this Section 14(b) become
generally known to or available for use by the public other than by an act or
omission of a Shareholder in violation of the terms of this Agreement, (ii) are
disclosed to the Shareholder's auditors, lenders, professional advisors or, in
the case of a corporate Shareholder, its directors, officers, shareholders and
warrant holders, or in the case of a Shareholder that is a partnership or
limited liability company to its partners or members, as the case may be
(subject in each case to the terms of the first parenthetical clause in this
Section 14(b), or (iii) to potential transferees of any Shares (provided that
such potential transferee agrees to be bound by the provisions of this Section
14(b)). The obligations of each of the Shareholders under this Section 14(b)
shall not be affected by any sale, assignment, transfer or other disposition of
the Shares and shall survive the termination of this Agreement. In the event
that any Shareholder is required by a governmental agency or otherwise by law to
disclose any information relating to the Derby Group, the Shareholder shall
provide the Company with prompt notice of such request, including a description
of the request and the information to be disclosed, so that the Company may seek
an appropriate protective order and/or waive the Shareholder's compliance with
the provisions of this Section 14(b). If, in the absence of a protective order
or the receipt of a waiver from the Company, the Shareholder is nonetheless, in
the written opinion of the Shareholder's legal advisers, compelled to disclose
information concerning the Derby Group to any court or other tribunal or else
stand liable for contempt or suffer other censure or penalty, the Shareholder
may disclose such information to such tribunal without liability under this
Agreement; provided, however, that the Shareholder shall
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give the Company notice of the information to be so disclosed as far in advance
of its disclosure as is practicable, and the Shareholder shall use his or its
best efforts to obtain an order or other reliable assurance that confidential
treatment will be accorded to such portion of the information required to be
disclosed as the Company designates.
15. ADDITIONAL ACTION
Each party to this Agreement shall execute and deliver such other
documents and do such other acts and things as may be necessary or desirable to
carry out the terms, provisions and purposes of this Agreement.
16. AMENDMENTS
No amendment, interpretation or waiver of any of the provisions of
this Agreement shall be effective unless made in writing and signed by the
parties to this Agreement.
17. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which shall constitute one agreement, and each such counterpart shall be deemed
to have been made, executed and delivered on the date set out at the head of
this Agreement, without regard to the dates or times when any such counterparts
may actually have been made, executed or delivered.
18. ASSIGNMENT BY THE PARTIES
This Agreement shall be binding upon and shall inure to the benefit of
each party, his heirs and legal representatives or its or his successors or
assigns, except that the obligations of each party under this Agreement may only
be assigned or transferred in conjunction with a sale, assignment or transfer of
the Shares owned by such party which is permitted by the terms and conditions of
this Agreement.
19. ENFORCEMENT
The failure to enforce or to require the performance at any time of
any of the provisions of this Agreement shall in no way be construed to be a
waiver of such provisions, and shall not affect either the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
each and every provision in accordance with the terms of this Agreement.
20. ENTIRE AGREEMENT
This Agreement contains the entire agreement of the parties with
respect to the subject matter of this Agreement and supersedes all prior
agreements between the parties, whether written or oral, with respect to the
subject matter of this Agreement.
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21. EXHIBITS AND HEADINGS
The exhibits to this Agreement are an integral part hereof. The
headings of Sections and subsections are used for convenience only and shall not
affect the meaning or construction of the contents of this Agreement.
22. GOVERNING LAW
THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL ISSUES CONCERNING THE
RELATIVE RIGHTS OF THE COMPANY AND THE SHAREHOLDERS. ALL OTHER ISSUES
CONCERNING THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE CO-
EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY,
OVER ANY LAWSUIT UNDER THIS AGREEMENT AND WAIVES ANY OBJECTION BASED ON VENUE OR
FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN. EACH PARTY
HEREBY WAIVES THE NECESSITY FOR PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL (RETURN RECEIPT REQUESTED), WITH A COPY ALSO BEING SENT BY
FACSIMILE (WITH RECEIPT CONFIRMED), IN EACH CASE DIRECTED TO SUCH PARTY AT ITS
ADDRESS SET FORTH IN AND WITH COPIES SENT AS REQUIRED BY, SECTION 23 BELOW, AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED ON THE DATE OF ACTUAL RECEIPT.
EACH PARTY HEREBY CONSENTS TO SERVICE OF PROCESS AS AFORESAID. NOTHING
CONTAINED IN THIS SECTION 22 WILL PROHIBIT PERSONAL SERVICE IN LIEU OF THE
SERVICE BY MAIL CONTEMPLATED HEREIN.
23. NOTICES
All notices, demands or other communications under this Agreement
shall be given or made in writing, and shall be delivered personally, sent by
certified or registered air mail (with return receipt requested) or sent by
telefax or courier service, addressed to the other party at the address set out
in Exhibit C to this Agreement or at such other address as may be designated by
notice from such party to each other party, provided that any notice, demand or
other communication which is sent by telefax shall also be confirmed by airmail
in the manner provided for above. Any notice, demand or other communication
given or made by mail in the manner prescribed in this Section 23 shall be
deemed to have been received five (5) days after the date of mailing. Any
notice, demand or other communication given or made by telefax in the manner
provided for in this
-27-
Section 23 shall be deemed to have been received when actually received by the
addressee or five (5) days after the date of mailing of the confirmation,
whichever is earlier.
24. PARTNERSHIP OR AGENCY
Nothing in this Agreement shall be deemed to constitute a partnership
or joint venture between the parties. Except as expressly provided for, nothing
contained in this Agreement shall authorize any party to act as agent or
representative of any other party or to authorize any party to assume or create
any obligations on behalf of any other party.
25. SUCCESSORS OF THE COMPANY
This Agreement shall be binding upon and shall inure to the benefit of
the Company and any successor of the Company, and any such successor shall be
deemed substituted for the Company under the provisions of this Agreement. For
purposes of this Section 25, the term "successor" shall mean any Person which at
any time, whether by purchase, merger, assignment or otherwise, acquires all or
substantially all of the assets or business of the Company.
26. SEVERABILITY
If any severable provision of this Agreement is held to be invalid or
unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgment, and the
Agreement shall be carried out as nearly as possible according to its original
terms and intent.
27. SPECIAL PROVISIONS UPON AN INITIAL PUBLIC OFFERING
(a) The parties hereto agree that, notwithstanding any other provision
herein to the contrary, if in connection with the Initial Public Offering the
sole or managing underwriter thereof advises the Company that in its opinion the
continuation of any provision contained in this Agreement would adversely affect
the distribution of the securities being offered in the Initial Public Offering,
the price that will be paid in such Initial Public Offering or the marketability
thereof, then the parties shall amend this Agreement to the extent requested by
such sole or managing underwriter to prevent such effect and this Agreement, as
so amended, shall continue thereafter in full force and effect. The parties
further agree that, notwithstanding the foregoing, each of the parties hereto
shall use commercially reasonable efforts to cause all of this Agreement to
remain in effect following an Initial Public Offering.
(b) Each party to this Agreement agrees to take all such actions as may be
reasonably required to cause each share of Class A Common Stock outstanding
immediately prior to an Initial Public Offering (including Class A Common Stock
acquired pursuant to Section 2B of Part C of the Certificate of Incorporation)
to be converted in connection with the closing of the Initial Public Offering,
on a share for share basis, into shares of the common equity securities of the
Company offered in the Initial Public Offering.
-28-
(c) The parties hereto agree that in connection with the Initial Public
Offering each such party shall take all such actions as are reasonably requested
by the sole or managing underwriter thereof in connection with such Initial
Public Offering, including without limitation, entering into customary
standstill agreements or other agreements that may be reasonably required of the
Company's stockholders to facilitate such Initial Public Offering.
28. SEVERABILITY
If any provision of this Agreement is held to be invalid or unenforceable
by any judgement of a tribunal of competent jurisdiction, the remainder of the
provisions of this Agreement shall not be affected by such judgement, and the
understanding of the parties embodied in this Agreement shall be carried out as
nearly as possible according to their original terms and intent.
29. SENIOR RIC SHARES
For all purposes of this Agreement, the DFS Shareholders (without
duplication) shall be deemed to own any securities of the Company which would be
acquired in exchange for the Senior RIC Shares under the Exchange Agreement, and
such shares shall be deemed outstanding capital stock of the Company as of May
14, 1998. The parties hereto agree that, in the event any matter is submitted
to the Shareholders for their approval, the DFS Shareholders shall be deemed to
own any voting securities of the Company which can be obtained in exchange for
the Senior RIC Shares pursuant to the Exchange Agreement. For purposes of
determining whether any such matter has been approved by the requisite number of
votes, such voting securities shall be deemed outstanding, and the votes of such
securities shall be counted. Any Shares issued to DICSA pursuant to the
Exchange Agreements shall be deemed to have been issued as of May 14, 1998. The
Company agrees to take all actions necessary to effect the Transactions
described in the Exchange Agreements, including, without limitation, consenting
to and waiving any restrictions on redemptions or the issuance of new Shares at
less than fair market value.
* * * * *
-29-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date and year set out at the head of this Agreement.
THE DERBY CYCLE CORPORATION
By:_______________________________
Name:
Title:
THE SHAREHOLDERS
DERBY FINANCE S.A.R.L.
By:_______________________________
Name:
Title:
DC CYCLE, L.L.C.
By:_______________________________
Name:
Title:
PERSEUS CYCLE, L.L.C.
By:_______________________________
Name:
Title:
SHAREHOLDERS
SHARES OF SHARES OF SHARES OF SHARES OF
CLASS A CLASS B PREFERRED PREFERRED
COMMON COMMON STOCK, STOCK,
NAME STOCK STOCK SERIES A SERIES B
----------------------
Derby Finance S.a.r.l. 21,700 0 0 3,000
DC Cycle, L.L.C. 12,500 0 25,000 0
Perseus Cycle, L.L.C. 10,000 0 0 0
----------- ---------- --------- ---------
TOTAL SHARES OUTSTANDING 44,200 0 25,000 3,000
EXHIBIT A
TO THE SHAREHOLDERS' AGREEMENT FOR
THE DERBY CYCLE CORPORATION
-31-
ADDRESSES FOR NOTICES
CERTIFICATE OF INCORPORATION
EXHIBIT B
TO THE SHAREHOLDERS' AGREEMENT FOR
THE DERBY CYCLE CORPORATION
-32-
ADDRESSES FOR NOTICES
Derby Finance S.a.r.l.
00, xxx xx xx Xxxxxxxx
X-0000 Xxxxxxxxxx
Grand Duchy of Luxembourg
Telefax:
DC Cycle, L.L.C.
c/x Xxxxxx Capital Partners
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxxx X. Xxxxx
Telefax: x0-000-000-0000
Perseus Cycle, L.L.C.
Xxxxx 000
0000 Xxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxx
Telefax: x0-000-000-0000
EXHIBIT C
TO THE SHAREHOLDERS' AGREEMENT FOR
THE DERBY CYCLE CORPORATION
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