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EXHIBIT 10.7
ANTI-DILUTION AGREEMENT
THIS ANTI-DILUTION AGREEMENT (this "Agreement") is dated as of February
27, 1998, by and among SGH Holdings, Inc., a Delaware corporation (the
"Corporation"), ▇▇▇▇▇ Enterprises, L.P., a Georgia limited partnership
("▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, an
individual ("▇▇▇▇▇▇▇"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇, an individual ("▇▇▇▇") (Hurst,
McLendon, ▇▇▇▇▇▇▇ and ▇▇▇▇, each a "Shareholder" and collectively, the
"Shareholders").
RECITALS
WHEREAS, the Shareholders are the owners of the common stock, par value
$.0001 per share ("Stock"), of Corporation; and
WHEREAS, the Shareholders have, from time to time, made agreements
providing for dilution protection in connection with the acquisition of shares
of stock owned by a Shareholder which protection has not been memorialized; and
WHEREAS, the Shareholders desire to memorialize the dilution protection
provisions agreed upon by, between and among the Shareholders; and
WHEREAS, the Shareholders agree that any such dilution protection
provisions shall cease, terminate and expire upon execution of this Agreement
except as expressly set forth herein; and
WHEREAS, the Corporation has previously issued the 1994 Warrant (as
defined herein) granting the holder thereof the right to purchase from the
Corporation up to 640 shares of Stock; and
WHEREAS, the Corporation has issued the 1997 Warrant (as defined
herein) granting the holders thereof the right to purchase from the Corporation
up to 459 shares of Stock; and
WHEREAS, the parties furthermore desire to memorialize the rights of
the parties as Shareholders if and to the extent that the 1994 Warrant is
exercised and/or the 1997 Warrant is exercised.
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto mutually agree
as follows:
1. Confirmation of Issued and Outstanding Stock as of June 12, 1997.
Notwithstanding anything to the contrary contained in this Agreement, any other
agreement between the Corporation and its Shareholders and/or the Stock Ledger
and Minute Book of the Corporation, the parties hereto
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agree and confirm that as of June 12, 1997, the following Shareholders owned the
number of shares of Stock set forth opposite their names.
Shareholders Number of Shares Percentage
------------ ---------------- ----------
▇▇▇▇▇ 875 87.5%
▇▇▇▇▇▇▇▇ 105 10.5%
▇▇▇▇▇▇▇ ▇▇ 2.0%
----- -----
Total 1,000 100.0%
2. Confirmation of the Sale by the Company and Issuance to ▇▇▇▇ of
Shares of Stock from the Corporation. The parties hereto confirm that on and as
of September, 1997, the Corporation issued to ▇▇▇▇ 20.4 shares of Stock of the
Corporation representing at the time of the issuance a 2% interest in the Stock
of the Corporation owned by ▇▇▇▇ which Stock has been subscribed to and fully
paid for by ▇▇▇▇.
3. Confirmation of Transfer from ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ to ▇▇▇▇▇▇▇.
Simultaneously with the sale and issuance by the Corporation of the Shares to
▇▇▇▇ in Section 2 above, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, pursuant to an agreement with
▇▇▇▇▇▇▇ relating to dilution protection, confirm the transfer to ▇▇▇▇▇▇▇ of .4
shares of Stock in order to preserve for ▇▇▇▇▇▇▇ at such time of transfer, a 2%
interest in the Stock of the Corporation. Said .4 shares of Stock which were
transferred from ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ collectively were transferred individually
as follows:
▇▇▇▇▇ .328
▇▇▇▇▇▇▇▇ .072
----
Total .400
Subsequent to the transfer by ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ of such .4 shares of
Stock to ▇▇▇▇▇▇▇ the Shareholders owned the amount of stock set forth opposite
their names.
Shareholders Number of Shares Percentage
------------ ---------------- ----------
▇▇▇▇▇ 874.672 85.72%
▇▇▇▇▇▇▇▇ 104.928 10.28%
▇▇▇▇▇▇▇ 20.4000 2.00%
▇▇▇▇ 20.4000 2.00%
---------- ------
Total 1,020.4000 100.00%
4. Confirmation of Transfer from ▇▇▇▇▇ to ▇▇▇▇. Subsequent to the sale
and issuance by the Corporation of the shares of Stock to ▇▇▇▇ in Section 2
above, and the transfer by ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇ of the shares of Stock
set forth in Section 3 above, ▇▇▇▇▇ hereby confirms
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the transfer and sale to ▇▇▇▇ of 25.5 Shares after which transfer ▇▇▇▇ owns 4.5%
of the issued and outstanding shares of Stock of the Corporation. Subsequent to
the transfer by ▇▇▇▇▇ of such 25.5 shares of Stock to ▇▇▇▇, the Shareholders own
the amount of Stock set forth opposite their names.
Shareholders Number of Shares Percentage
------------ ---------------- ----------
▇▇▇▇▇ 849.172 83.22%
▇▇▇▇▇▇▇▇ 104.928 10.28%
▇▇▇▇▇▇▇ 20.400 2.00%
▇▇▇▇ 45.900 4.50%
-------- ------
Total 1,020.40 100.00%
5. Confirmation of the Transfer from ▇▇▇▇▇ to ▇▇▇▇▇▇▇▇. Subsequent to
the sale and issuance by the Corporation of the shares of Stock to ▇▇▇▇
described in Section 2 above, the transfer by ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇ of
the shares of Stock set forth in Section 3 above and the transfer by ▇▇▇▇▇ to
▇▇▇▇ of the Shares set forth in Section 4 above, ▇▇▇▇▇ confirms the transfer and
sale to ▇▇▇▇▇▇▇▇ of 5.1 shares of Stock representing .5% of the issued and
outstanding Shares of the Corporation. Subsequent to the transfer by ▇▇▇▇▇ to
▇▇▇▇▇▇▇▇ of such 5.1 shares of Stock (and as of the date hereof), the
Shareholders own the amount of Stock set forth opposite their names.
Shareholders Number of Shares Percentage
------------ ---------------- ----------
▇▇▇▇▇ 844.072 82.72%
▇▇▇▇▇▇▇▇ 110.028 10.78%
▇▇▇▇▇▇▇ 20.400 2.00%
▇▇▇▇ 45.900 4.50%
-------- ------
Total 1,020.40 100.00%
6. Transfer From ▇▇▇▇▇ to ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Subsequent to the
Exercise of the 1994 Warrant. In the event that the holder of the 1994 Warrant
exercises its warrant to purchase 640 shares of Stock (the "94 Shares"), then
▇▇▇▇▇, pursuant to an agreement with ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ relating to dilution
protection, shall transfer 67.2 shares of Stock to ▇▇▇▇▇▇▇▇ and 12.4 shares of
Stock of the Corporation to ▇▇▇▇▇▇▇. Subsequent to such exercise and transfer
the Shareholders shall own the amount of Stock set forth opposite their name.
Shareholder Number of Shares Percentage
----------- ---------------- ----------
▇▇▇▇▇ 764.4720 44.04%
▇▇▇▇▇▇▇▇ 177.228 10.67%
▇▇▇▇▇▇▇ 32.800 1.97%
▇▇▇▇ 45.900 2.76%
94 Shares 640.000 38.55%
--------- ------
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Total 1,660.400 100.00%
6. Issuance by the Corporation of Shares of Stock to ▇▇▇▇ Upon Exercise
of the 1994 Warrant and Exercise of the 1997 Warrant. In the event that the
holder of the 1994 Warrant exercises its warrant to purchase the 94 Shares and
the holders of the 1997 Warrant exercise their warrants to purchase 459 shares
of Stock (the "97 Shares"), then the Corporation pursuant to an agreement with
▇▇▇▇ shall issue to ▇▇▇▇ 22.1 shares of Stock in order to preserve for ▇▇▇▇ the
2% interest in the Stock purchased by him pursuant to the transaction set forth
in Section 2 of this Agreement. Subsequent to the issuance by the Corporation to
▇▇▇▇ of such 22.1 shares of Stock and assuming the complete exercise and
issuance of the 94 Shares and the 97 Shares, the Shareholders shall own the
amount of Stock set forth opposite their respective names.
Shareholder Number of Shares Percentage
----------- ---------------- ----------
94 Shares 640.0000 29.88%
97 Shares 459.0000 21.43%
▇▇▇▇ 68.0000 3.17%
▇▇▇▇▇▇▇ 32.8000 1.53%
▇▇▇▇▇▇▇▇ 177.2280 8.27%
▇▇▇▇▇ 764.4720 35.69%
---------- ------
Total 2,141.5000 100.00%
7. Transfer from ▇▇▇▇▇ to ▇▇▇▇ Subsequent to the Exercise of the 1994
Warrant and the 1997 Warrant. In the event that the holder of the 1994 Warrant
exercises its warrant to purchase the 94 Shares and the holders of the 1997
Warrant exercise their warrant to purchase the 97 Shares, then ▇▇▇▇▇, pursuant
to an agreement with ▇▇▇▇ relating to dilution protection, shall transfer
28.3675 Shares of the Corporation to ▇▇▇▇ in order to preserve the 2.5 % in the
Stock previously transferred by ▇▇▇▇▇ to ▇▇▇▇ pursuant to the provisions of
Section 4 of this Agreement. Subsequent to the transfer by ▇▇▇▇▇ to ▇▇▇▇ of such
28.3675 shares of Stock, the Shareholders shall own the amount set forth
opposite their respective names.
Shareholders Number of Shares Percentage
------------ ---------------- ----------
▇▇▇▇▇ 736.1045 34.37%
▇▇▇▇▇▇▇▇ 177.2280 8.27%
▇▇▇▇▇▇▇ 32.8000 1.53%
94 Shares 640.0000 29.88%
97 Shares 459.0000 21.43%
▇▇▇▇ 96.3675 4.50%
---------- ------
Total 2,141.5000 100.00%
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8. Transfer from ▇▇▇▇▇ to ▇▇▇▇▇▇▇▇ Subsequent to the Exercise of the
1994 Warrant and the 1997 Warrant. In the event that the holder of the 1994
Warrant exercises its warrant to purchase the 94 Shares and the holders of the
1997 Warrant exercise their warrants to purchase the 97 Shares then ▇▇▇▇▇,
pursuant to an agreement with ▇▇▇▇▇▇▇▇ relating to dilution protection, shall
transfer 5.495 shares of Stock in the Corporation to ▇▇▇▇▇▇▇▇ in order to
preserve the .5% interest in the Stock sold by ▇▇▇▇▇ to ▇▇▇▇▇▇▇▇ pursuant to
Section 5 hereof. Subsequent to the transfer by ▇▇▇▇▇ to ▇▇▇▇▇▇▇▇ of such 5.495
shares of Stock, the Stockholders shall own the amount of Stock set forth
opposite their respective names.
Shareholders Number of Shares Percentage
------------ ---------------- ----------
▇▇▇▇▇ 730.6095 34.12%
▇▇▇▇▇▇▇▇ 182.7230 8.53%
▇▇▇▇▇▇▇ 32.8000 1.53%
94 Shares 640.0000 29.89%
97 Shares 459.0000 21.43%
▇▇▇▇ 96.3675 4.50%
---------- ------
Total 2,141.5000 100.00%
9. Transfer from ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇ Subsequent to the
Exercise of the 1994 Warrant and the 1997 Warrant. In the event that the holder
of the 1994 Warrant exercises its warrant to purchase the 94 Shares and the
holders of the 1997 Warrant exercise their warrants to purchase the 97 Shares,
then ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, pursuant to an agreement with ▇▇▇▇▇▇▇ relating to
dilution protection, shall transfer to ▇▇▇▇▇▇▇ 10.03 shares of Stock. Said 10.03
shares of Stock shall be transferred from respective parties as follows: ▇▇▇▇▇
shall transfer 8.2246 shares of Stock and ▇▇▇▇▇▇▇▇ shall transfer 1.8054 shares
of Stock.
Subsequent to the transfer by ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ of such 10.03 Shares
to ▇▇▇▇▇▇▇, the Shareholders shall own the amount of Stock set forth opposite
their respective names.
Shareholders Number of Shares Percentage
------------ ---------------- ----------
▇▇▇▇▇ 722.3849 33.73%
▇▇▇▇▇▇▇▇ 180.9176 8.45%
▇▇▇▇▇▇▇ 42.8300 2.00%
94 Shares 640.0000 29.89%
97 Shares 459.0000 21.43%
▇▇▇▇ 96.3675 4.50%
---------- ------
Total 2,141.5000 100.00%
10. Additional Shares Purchased by ▇▇▇▇ from the Company. The
Corporation has granted to ▇▇▇▇ the option to purchase certain additional shares
of Stock (the "New Issue Shares") pursuant to an Incentive Stock Option
Agreement (the "Option Agreement") to ▇▇▇▇ which, upon
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issuance, will vest in ▇▇▇▇ up to an additional 2% of the shares of Stock. In
the event that the sale by the Corporation of such shares of Stock to ▇▇▇▇
occurs, and if at such time the 1994 Warrant and/or 1997 Warrant has not been
exercised, then the Corporation, pursuant to an agreement with ▇▇▇▇, shall issue
to ▇▇▇▇ additional shares of Stock (the "Additional Shares"), as set forth in
the Option Agreement.
11. Transfer from ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇ Subsequent to the
Purchase of New Issue Shares by ▇▇▇▇ from the Corporation and the Issuance of
Additional Shares to ▇▇▇▇ by the Corporation. In the event that the Corporation
sells or issues additional shares of Stock of the Corporation to ▇▇▇▇ as New
Issue Shares and/or Additional Shares in accordance with the provisions of
Section 10, then in that event, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, pursuant to an agreement
with ▇▇▇▇▇▇▇ relating to dilution protection, shall transfer to ▇▇▇▇▇▇▇ so many
shares of Stock (the "▇▇▇▇▇▇▇ Shares") in order for ▇▇▇▇▇▇▇ to maintain his 2%
interest in the Stock subsequent to the issuance by the Corporation of the New
Issue Shares and/or the Additional Shares. The number of ▇▇▇▇▇▇▇ Shares required
to be transferred by ▇▇▇▇▇ to ▇▇▇▇▇▇▇ shall be the product of the ▇▇▇▇▇▇▇ Shares
multiplied by .82%. The number of ▇▇▇▇▇▇▇ Shares required to be transferred by
▇▇▇▇▇▇▇▇ to ▇▇▇▇▇▇▇ shall be the product of the ▇▇▇▇▇▇▇ Shares multiplied by
.18%.
Subsequent to the issuance by the Corporation of the New Issue Shares and the
Additional Shares and assuming the full exercise of ▇▇▇▇ ▇▇▇▇▇▇▇ and the ▇▇▇▇
▇▇▇▇▇▇▇ and subsequent to the transfer obligation of all shares of Stock set
forth herein the Shareholders shall own the amount of Stock set apart their
respective names.
Shareholders Number of Shares Percentage
------------ ---------------- ----------
▇▇▇▇▇ 721.6339 32.99%
▇▇▇▇▇▇▇▇ 180.7526 8.26%
▇▇▇▇▇▇▇ 43.7460 2.00%
94 Shares 640.0000 29.25%
97 Shares 459.0000 20.98%
▇▇▇▇ 142.1675 6.50%
---------- ------
Total 2,187.3000 100.00%
12. Partial Exercise. In the event of a partial exercise of the 1994
Warrant or the 1997 Warrant, any shares of Stock to be issued pursuant to any
section set forth herein upon the exercise of the respective Warrant in full
shall be reduced by multiplying the shares of Stock to be issued upon complete
exercise of the respective Warrant by a fraction, (a) the numerator of such, in
the case of the 1994 Warrant, will be the number of shares of Stock issued
pursuant to the exercise of the ▇▇▇▇ ▇▇▇▇▇▇▇ and the denominator of which shall
be 640; and (b) the numerator of such, in the case
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of the 1997 Warrant, will be the number of shares of Stock issued pursuant to
the exercise of the ▇▇▇▇ ▇▇▇▇▇▇▇ and the denominator of which shall be 459. It
is specifically the intent of the parties that after partial or full exercise of
the 1994 Warrant and/or the 1997 Warrant, the shares of Stock to be transferred
hereunder to ▇▇▇▇ by the Corporation are the amount necessary to preserve the 2%
interest purchased by ▇▇▇▇ from the Corporation as set forth in Section 2 hereof
after the issuance of the 94 Shares and/or 97 Shares; and the shares of Stock to
be transferred by ▇▇▇▇▇ to ▇▇▇▇ are the amount necessary to preserve the 2.5%
interest purchased by ▇▇▇▇ from ▇▇▇▇▇ as set forth in Section 4 hereof after the
issuance of the 94 Shares and/or 97 Shares; and the shares of Stock to be
transferred hereunder to ▇▇▇▇ by the Corporation are the amount necessary to
preserve the interest (up to 2%) purchased by ▇▇▇▇ from the Corporation as set
forth in Section 10 hereof after issuance of the 94 Shares and/or 97 Shares; and
the shares of Stock to be transferred by ▇▇▇▇▇ to ▇▇▇▇▇▇▇▇ are the amount
necessary to preserve the .5% interest purchased by ▇▇▇▇▇▇▇▇ from ▇▇▇▇▇ as set
forth in Section 5 hereof after the issuance of the 94 Shares and/or 97 Shares;
and the shares of Stock to be transferred hereunder by ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ to
preserve the 2% interest owned by ▇▇▇▇▇▇▇ as set forth in Sections 3, 6, 9 and
11 hereof after the issuance of the 94 Shares and/or 97 Shares.
13. No Further Agreements. The parties hereto furthermore agree that no
party is entitled to, has bargained for and will receive any dilution protection
subsequent to the execution of this Agreement, except as expressly set forth
herein, including without limitation, any protection with regard to the issuance
of shares upon the exercise of any warrants granted in connection with certain
Bridge Notes and/or Exchange Notes or Warrants issued in connection with any
further equity or debt offerings.
14. Cancellation of Other Agreements. Any agreements relating to any of
the parties hereto in connection with to the issuance of stock, dilution
thereof, percentage maintenance agreements or any other rights relative to
issuance or entitlement to stock of the Corporation (including, without
limitation, that certain Restricted Stock Grant Agreement dated February, 1995
among the Corporation, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇) are hereby rescinded in toto and this
Agreement sets forth the full understanding relative to the rights of the
Shareholders hereunder.
15. Definitions:
(a) 1994 Warrant means, the Stock Purchase Warrant dated as of
October 3, 1994 issued by the Corporation to Mesirow Capital Partners VI
pursuant to the Note and Warrant Purchase Agreement dated as of October 3, 1994
between the Corporation and Mesirow Capital Partners VI.
(b) 1997 Warrant means, the Stock Purchase Warrant dated June
12, 1997 issued by the Corporation to Mesirow Capital Partners VII (and
subsequent partially assigned to Mesirow Capital Partners VI) pursuant to the
Note and Warrant Purchase Agreement dated June 12, 1997 between the Corporation
and Mesirow Capital Partners VII, as amended (the "Warrant Purchase Agreement")
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(c) All other capitalized terms used herein, if not expressly
defined herein shall have the meanings ascribed to them in either the Warrant
Purchase Agreement or a certain Second Amended and Restated Stockholders
Agreement dated as of February 27, 1998 between and among the Corporation and
each of certain stockholders listed on the Schedule of Stockholders attached to
such Agreement as such Agreement has been amended from time to time.
16. Miscellaneous.
(a) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto, their respective
successors, personal representatives, heirs and assigns.
(b) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
(c) Descriptive Headings. The headings of the sections of this
Agreement are for convenience only and shall not constitute a part hereof.
(d) GOVERNING LAW - DELAWARE. IT IS THE INTENTION OF THE
PARTIES HERETO THAT THIS AGREEMENT AND THE RIGHTS, OBLIGATIONS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. WHENEVER POSSIBLE EACH
PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER, AS TO BE
EFFECTIVE AND VALID UNDER DELAWARE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT
SHALL BE PROHIBITED BY OR INVALID UNDER SUCH APPLICABLE LAW, SAID PROVISION
SHALL BE INEFFECTIVE TO THE EXTENT OF THE PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF THE PROVISION OR THE REMAINING PROVISIONS OF THIS
AGREEMENT.
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(e) Entire Agreement. This Agreement and other documents
specifically referred to herein which form a part hereof, contain the entire
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties, covenants or
undertakings, other than those expressly set forth herein.
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement as of the 27th day of February, 1998.
SGH HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
▇▇▇▇▇ ENTERPRISES, L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, General Partner
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
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