EXHIBIT 10.25
MANAGEMENT AGREEMENT
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MANAGEMENT AGREEMENT dated as of October 15, 1996 among Cambridge
Industries Holdings, Inc., a Delaware corporation (the "Company"), Cambridge
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Industries, Inc., a Delaware corporation ("Cambridge"), and Xxxxxx Xxxxxx
("Executive"). ---------
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The Company and Executive desire to enter into an agreement pursuant to
which Executive will purchase and the Company will sell 757.58 shares of the
Company's Class L Common Stock, par value $.01 per share (the "Class L Common"),
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and 3,030.30 shares of the Company's Class A Common Stock, par value $.01 per
share (the "Class A Common"; the Class L Common and the Class A Common are
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hereinafter sometimes referred to collectively as the "Common Stock"). All of
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such shares of Common Stock acquired by Executive are referred to herein as the
"Executive Stock". In addition, the Company desires to grant to Executive
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options to acquire 8,750 shares of Class A Common, which options shall be
divided into three grants, one grant for 2,500 shares of Class A Common (the
"Tranche I Option"), one grant for 1,250 shares of Class A Common (the "Tranche
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II Option") and one grant for 5,000 shares of Class A Common (the "Tranche III
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Option"). The Tranche I Option, the Tranche II Option and the Tranche III Option
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are hereinafter referred to individually as an "Option" and collectively as the
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"Options".
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The parties hereto agree as follows:
STOCK AND OPTION PROVISIONS
1. Purchase and Sale of Stock.
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(a) Closing. As of the date hereof, Executive will purchase, and the
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Company will sell, 757.58 shares of Class L Common at a price per share of
$1,306.80 and 3,030.30 shares of Class A Common at a price per share of $3.30,
for an aggregate purchase price of $1,000,000. The Company will deliver to
Executive a certificate or certificates representing such shares of Executive
Stock, and, upon the receipt of such certificate(s), Executive will deliver to
the Company a check or wire transfer of funds in the aggregate amount of
$500,000 and a promissory note in the form of Annex A attached hereto in an
aggregate principal amount of $500,000 (the "Executive Note"). Executive's
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obligations under the Executive Note will be secured by a pledge of 50% of the
shares of Executive Stock to the Company, and in connection therewith, Executive
will enter into a pledge agreement in the form of Annex B attached hereto.
(b) Representations and Warranties. In connection with the purchase
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and sale of the Executive Stock hereunder, Executive represents and warrants to
the Company that:
(i) The Executive Stock to be acquired by Executive pursuant to
this Agreement will be acquired for Executive's own account and not with a
view to, or intention of, distribution thereof in violation of the
Securities Act of 1933, as amended (the "1933 Act"), or any applicable
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state securities laws, and the Executive Stock will not be disposed of in
contravention of the 1933 Act or any applicable state securities laws.
(ii) Executive is an executive officer of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his investment
in the Executive Stock for an indefinite period of time because the
Executive Stock has not been registered under the 1933 Act and, therefore,
cannot be sold unless subsequently registered under the 1933 Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of Executive
Stock and has had full access to such other information concerning the
Company as he has requested. Executive has reviewed, or has had an
opportunity to review, a copy of that certain Amended and Restated
Refinancing Agreement, dated as of November 17, 1995, between the Company
and certain of its stockholders, and Executive is familiar with the
transactions contemplated thereby. Executive has also reviewed, or has had
an opportunity to review the Company's Certificate of Incorporation and
bylaws and the loan agreements, notes and related documents with the
Company's and its Subsidiaries' (as defined below) lenders.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.
2. Stock Options.
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(a) Tranche I Option.
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(i) Tranche I Option Grant. The Company hereby grants to Executive the
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Tranche I Option to purchase up to 2,500 shares of Class A Common Stock
("Tranche I Option Shares"), at a price per share of $3.30 (the "Tranche I
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Price"). The Tranche I Price and the number of Tranche I Option Shares will be
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equitably adjusted for any stock split, stock dividend, reclassification or
recapitalization of the Company which occurs subsequent to the date of this
Agreement. The Tranche I Option will expire on the earlier of the tenth
anniversary of the date hereof or the date of termination of Executive's
employment with the Company or a Subsidiary for any reason (the earlier of such
dates, the "Expiration Date"), provided that Executive will have 30 days after
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the Expiration Date to exercise the Tranche I Option Shares which are then
exercisable pursuant to paragraph 1(a)(ii) below. The Tranche I Option is not
intended to be an "incentive stock option" within the meaning of Section 422A of
the Internal Revenue Code.
(ii) Exercisability. On each date set forth below, the Tranche I Option
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will have vested and become exercisable with respect to the percentage of
Tranche I Option Shares set forth opposite such date if Executive is employed by
the Company or a Subsidiary on such date:
Date Cumulative Percentage
---- of Tranche I Option Shares
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Vested
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February 1, 1996 20%
August 1, 1996 60%
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February 1, 1997 100%
; provided that, upon the occurrence of (i) an Approved Sale (as defined below),
or (ii) (A) the Company (or its successor as a result of merger, consolidation,
reorganization or sale) becoming a reporting company under the Securities
Exchange Act of 1934 as a result of the registration of its common equity
securities thereunder (the "IPO") and (B) the persons listed on Schedule A
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attached hereto (the "Investors") and their affiliates collectively ceasing to
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own at least 50% of the aggregate number of shares of Common Stock that they own
on the date hereof (as adjusted for stock splits, stock dividends and
recapitalization and for exchanges in connection with a merger, consolidation,
reorganization or sale) (the earlier of the events described in clauses (i) and
(ii), an "Acceleration Event"), the Tranche I Option will become fully vested
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and exercisable with respect to all of the Tranche I Option Shares.
(iii) Procedure for Exercise. At any time after the Tranche I Option has
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become exercisable with respect to any Tranche I Option Shares and on or prior
to 30 days after the Expiration Date, Executive may exercise the Tranche I
Option with respect to the Tranche I Option Shares above by delivering written
notice of exercise to the Company, together with (a) written acknowledgment that
Executive has read and has been afforded an opportunity to ask questions of
management of the Company regarding all financial and other information provided
to Executive regarding the Company and (b) payment in full by delivery of a
cashier's or certified check in the amount of the Tranche I Price with respect
to such Tranche I Option Shares plus the amount, if any, of any additional
federal and state income taxes required to be withheld by reason of the exercise
of the Tranche I Option. As a condition to any exercise of the Tranche I Option,
Executive will permit the Company to deliver to him all financial and other
information regarding the Company and its subsidiaries which it believes
necessary to enable Executive to make an informed investment decision.
(b) Tranche II Option and Tranche III Option.
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(i) Tranche II Option and Tranche III Option Grants. The Company hereby
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grants to Executive (A) the Tranche II Option to purchase up to 1,250 shares of
Class A Common (the "Tranche II Option Shares"), with an exercise price per
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share (the "Tranche II Price") of $447.13, and (B) the Tranche III Option to
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purchase up to 5,000 shares of Class A Common (the "Tranche III Option Shares"),
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with an exercise price per share (the "Tranche III Price") of $807.13. The
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number of Tranche II Option Shares, the Tranche III Option Shares, the Tranche
II Price, and the Tranche III Price will be equitably adjusted for any stock
split, stock dividend, reclassification or recapitalization of the Company which
occurs subsequent to the date of this Agreement. The Tranche II Option and the
Tranche III Option will expire on the Expiration Date, provided Executive will
have 30 days after the Expiration Date to exercise the Tranche II Option and the
Tranche III Option. Neither the Tranche II Option nor the Tranche III Option is
intended to be an "incentive stock option" within the meaning of Section 422A of
the Internal Revenue code.
(ii) Exercisability. On each of February 1, 1997 and February 1, 1998,
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50% of the Tranche II Option and 50% of the Tranche III Option will have vested
and become exercisable if Executive is employed by the Company or a Subsidiary
on such date; provided that, upon the occurrence of an Acceleration Event, the
Tranche II Option and the Tranche III Option will become fully vested and
exercisable with respect to all of the Tranche II Option Shares and Tranche III
Option Shares.
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(iii) Procedure for Exercise. At any time after the Tranche II Option
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and Tranche III Option have become exercisable with respect to any Tranche II
Option Shares or Tranche III Option Shares, respectively, and on or prior to 30
days after the Expiration Date, Executive may exercise all or a portion of the
Tranche II Option and the Tranche III Option by delivering written notice of
exercise to the Company together with (A) a written acknowledgment that
Executive has read, and has been afforded an opportunity to ask questions of
management of the Company regarding all financial and other information provided
to Executive regarding the Company, and (B) payment in full by delivery of a
cashier's or certified check in the amount of the Tranche II Price with respect
to the Tranche II Option and the Tranche III Price with respect to the Tranche
III Option plus the amount, if any, of any additional federal and state income
taxes required to be withheld by reason of the exercise of such Options. As a
condition to any exercise of the Tranche II Option and the Tranche III Option,
Executive will permit the Company to deliver to him all financial and other
information regarding the Company and its Subsidiaries which it believes
necessary to enable Executive to make an informed investment decision.
c. Securities Laws Restrictions. Executive represents that when
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Executive exercises the Options he will be purchasing Option Shares for
Executive's own account and not on behalf of others. Executive understands and
acknowledges that federal and state securities laws govern and restrict
Executive's right to offer, sell or otherwise dispose of any Option Shares
unless Executive's offer, sale or other disposition thereof is registered under
the 1933 Act and state securities laws or, in the opinion of the Company's
counsel, such offer, sale or other disposition is exempt from registration
thereunder. Executive agrees that he will not offer, sell or otherwise dispose
of any Option Shares in any manner which would: (i) require the Company to file
any registration statement (or similar filing under state law) with the
Securities and Exchange Commission or to amend or supplement any such filing or
(ii) violate or cause the Company to violate the 1933 Act, the rules and
regulations promulgated thereunder or any other state or federal law. Executive
further understands that the certificates for any Option Shares Executive
purchases will bear the legend set forth in paragraph 6 hereof or such other
legends as the Company deems necessary or desirable in connection with the 1933
Act or other rules, regulations or laws.
d. Non-Transferability of Options. The Options are personal to
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Executive and are not transferable by Executive except to Permitted Transferees
pursuant to paragraph 5 below. Only Executive or Permitted Transferees or
their respective estates or heirs are entitled to exercise the Options.
e. Effect of Transfers in Violation of Agreement. The Company will not
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be required (i) to transfer on its books any Option Shares which have been sold
or transferred in violation of any of the provisions set forth in this
Agreement, or (ii) to treat as owner of such shares, to accord the right to vote
as such owner or to pay dividends to any transferee to whom such shares have
been transferred in violation of this Agreement.
f. Delivery of Shares. The date on which Executive has delivered to the
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Company the items required under paragraph 2(a)(iii), as to the Tranche I
Option, and under paragraph 2(b)(iii), as to the Tranche II Option and the
Tranche III Option, is referred to herein as the "Exercise Date". Certificates
for Option Shares purchased upon exercise of the Options shall be delivered by
the Company to Executive within five business days after the Exercise Date.
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g. Date of Issuance. The Option Shares issuable upon the exercise of
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the Options shall be deemed to have been issued to Executive at the Exercise
Date, and Executive shall be deemed for all purposes to have become the record
holder of such Option Shares at the Exercise Date.
h. Fully Paid. The issuance of certificates for Option Shares upon
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exercise of the Options shall be made without charge to Executive for any
issuance tax in respect thereof or other cost incurred by the Company in
connection with such exercise. Each Option Share issuable upon exercise of the
Options shall, upon payment of the exercise price therefor, be fully paid and
nonassessable and free from all liens and charges with respect to the issuance
thereof.
i. Book Transfer. The Company shall not close its books against the
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transfer of any Option Shares issued or issuable upon the exercise of the
Options in any manner which interferes with the timely exercise of the Options.
j. Filings. The Company shall assist and cooperate with Executive to
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make any required governmental filings or obtain any governmental approvals
prior to or in connection with any exercise of the Options (including, without
limitation, making any filings required to be made by the Company).
k. Conditional Exercise. Any exercise by Executive of all or any portion
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of the Options in connection with an Acceleration Event may, at the election of
Executive, be conditioned upon the consummation of the Acceleration Event in
which case such exercise shall not be deemed to be effective until the
consummation of such Acceleration Event.
l. Reservation. The Company shall at all times reserve and keep
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available out of its authorized but unissued shares of Class A Common solely for
the purpose of issuance upon the exercise of the Options, such number of shares
of Class A Common as are issuable upon the exercise of all outstanding Options.
All Option Shares which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges.
The Company shall take all such actions as may be necessary to assure that all
such Option Shares may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance).
3. Repurchase Option.
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(a) Definitions. The following terms are defined as follows:
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"Cause" means (i) the willful failure (other than by reason of Disability)
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by Executive to substantially perform the duties reasonably requested or
reasonably prescribed by the Board of Directors of the Company (the "Board")
which are not inconsistent with Executive's position as President and Chief
Executive Officer of the Company and Cambridge and the continuation of such
conduct for five (5) business days after receipt by Executive of written notice
from the Board stating the nature of such conduct; (ii) the engaging by
Executive in conduct which is materially injurious to the Company, Cambridge or
any of their Subsidiaries and the continuation of such conduct for five (5)
business days after the receipt by Executive of written notice from the Board
stating the nature of the injurious conduct; or (iii) Executive's conviction of
a felony involving moral turpitude. For purposes of this definition of "Cause",
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no act or failure to act shall be deemed "willful" unless knowingly done, or
omitted to be done, not in good faith and without reasonable belief that the
action or omission was in
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the best interests of the Company, Cambridge or their Subsidiaries.
"Disability" means Executive's inability, whether mental or physical,
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to perform the normal duties of Executive's position for six (6) consecutive
months. If Cambridge and Executive are unable to agree as to whether Executive
is Disabled, the question will be decided by a physician selected jointly by
Cambridge and Executive, at the expense of Cambridge, whose decision will be
conclusive and binding.
"Fair Market Value" of each share of Executive Stock means the market
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value agreed upon by Executive and the Board; provided that the Fair Market
Value of Option Shares which have not been exercised will be reduced by the
exercise price of such Options (but in any event not below zero). If Executive
and the Board are unable to agree upon the market value within ten days after a
Termination Date (as defined below), then the Executive and the Company will
jointly select a mutually acceptable business appraiser whose determination will
be binding. If Executive and the Board are unable to agree upon an appraiser
within five (5) days after the expiration of the ten-day period for their
jointly determining the market value, then within such five-day period Executive
and the Board each shall appoint an appraiser and the two appraisers so
appointed shall within ten (10) days thereafter select a third appraiser who
shall serve as the sole appraiser. The appraiser shall determine the market
value of a share of Executive Stock without any discount for transfer
restrictions, lack of liquidity, the fact that a minority interest is being
evaluated, or the fact that Executive will no longer be employed by Cambridge;
provided, however, the appraiser shall not include in his determination any
premium attributable to publicly traded companies because their stock is
publicly traded unless the Common Stock is then publicly traded. Any appraiser
appointed or selected hereunder shall not (and the directors, officers,
employees and affiliates of the appraiser shall not) have a direct or a material
indirect financial interest in the Company or its Subsidiaries. All fees of any
appraiser(s) retained pursuant to this provision shall be borne by the Company.
The Company promptly shall make available to the appraiser all financial and
other information reasonably requested by the appraiser and shall otherwise
cooperate with the appraiser. The appraiser shall render his written report of
the Fair Market Value to the Company and Executive within thirty (30) days after
his appointment. Pursuant to MCLA '600.5001, the parties agree that a judgment
of any Michigan circuit court may be rendered upon any such determination of the
appraiser. Except as otherwise provided herein, the Fair Market Value shall be
determined as of the Termination Date.
"Good Reason" means the occurrence, without Executive's express written
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consent, of any of the following circumstances:
(i) the assignment to Executive of any duties inconsistent with
Executive's status as President and Chief Executive Officer of the Company
and Cambridge, a substantial adverse alteration in the nature or status of
Executive's responsibilities from those in effect immediately prior to such
assignment of duties, Executive's removal from any office specified in
paragraph 14 hereof or the transfer of any of Executive's responsibilities
to one or more other persons;
(ii) any reduction by Cambridge in the Base Salary as in effect
from time to time;
(iii) the failure by Cambridge to pay or provide to Executive
within seven (7) days of a written demand any amount of Base Salary, bonus
or any benefit which is due, owing and payable pursuant to the terms of any
applicable arrangement or policy or pursuant to the terms hereof, or to pay
any portion of an installment of deferred compensation due under any
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deferred compensation program of Cambridge; or
(iv) the failure by Cambridge to continue to provide Executive
with benefits substantially similar, in the aggregate, to Cambridge's life,
medical, dental, health, accident or disability insurance plans in which
Executive is participating as of the date hereof.
"LIBO Rate" means the rate per annum (rounded upwards, if necessary, to
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the nearest 1/16 of 1%) quoted by NBD Bank, N.A. at approximately 10:00 a.m.
London time (or as soon thereafter as practicable) for the offering by Bankers
Trust Company to leading banks in London interbank market of United States
Dollar deposits having a term of three months, as quoted on February 1, 1996 for
the period from the date hereof until January 31, 1997, and as quoted on each
February 1st (or as soon thereafter as practicable) hereafter for each year
thereafter from February 1, 1997, and each successive February 1st,
respectively, to the next January 31st.
"Option Shares" means collectively the Tranche I Option Shares, the
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Tranche II Option Shares and the Tranche III Option Shares which have been
issued or which are issuable. For purposes of this paragraph 3 and paragraph 4
below, issued Options Shares will be deemed to be Executive Stock.
"Original Value" of each share of Executive Stock will be equal to
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$1,306.80 for each share of Class L Common, and the original purchase price paid
by Executive (which shall include the exercise price paid for Option Shares) for
shares of Class A Common (as proportionally adjusted for all stock splits, stock
dividends and other recapitalizations affecting the Class L Common or the Class
A Common, as the case may be, subsequent to the date hereof); provided that the
Original Value of Option Shares which have not been exercised will be equal to
zero.
"Subsidiary" means any corporation of which shares of stock having a
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majority of the general voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through its Subsidiaries.
"Without Cause" means the termination of Executive's employment by
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Cambridge for any reason other than for Cause (as defined herein), Disability
(as defined herein) or death.
(b) Repurchase Option. In the event that Executive is no longer employed
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by the Company, any of its Subsidiaries or any joint venture in which the
Company or any of its Subsidiaries have an equity interest (a "Joint Venture")
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for any reason (the date of such termination being referred to herein as the
"Termination Date"), all (but no less than all) of the Executive Stock, whether
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held on the Termination Date or obtained by exercise of the Options after the
Termination Date and whether held by Executive or one or more Permitted
Transferees (as defined in paragraph 4 below), will be subject to repurchase by
the Company and the Investors pursuant to the terms and conditions set forth in
this paragraph 3 (the "Repurchase Option").
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(c) Termination for Cause. If Executive is no longer employed by the
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Company or any of its Subsidiaries as a result of Executive's termination for
Cause, then on or after the Termination Date, the Company may elect to purchase
all (but not less than all) of the Executive Stock at a price per share equal to
the lower of its Original Value or the Fair Market Value thereof.
(d) Voluntary Termination Prior to February 1, 1998. If Executive is no
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longer employed by the Company or any of its Subsidiaries as a result of
Executive's voluntary termination (other than
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for Good Reason or due to Disability) prior to February 1, 1998, then on or
after the Termination Date, the Company may elect to purchase all (but not less
than all) of (1) the Unvested Executive Stock (as defined below) of Executive at
a price per share equal to the lower of its Original Value or the Fair Market
Value thereof and (2) the Vested Executive Stock (as determined below) of
Executive at a price per share equal to the Fair Market Value thereof. For the
purpose of determining the purchase price of Executive Stock upon such voluntary
termination, on each date set forth below (each a "Vesting Date" and,
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collectively, the "Vesting Dates"), the percentage set forth opposite such date
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of each class of Executive Stock owned by Executive will vest and become "Vested
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Executive Stock" if, as of each such date, Executive is still employed by the
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Company, any of its Subsidiaries or any Joint Venture:
Date Cumulative Percentage
---- of Tranche I Option Shares
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Vested
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February 1, 1997 50%
February 1, 1998 100%
Executive Stock which is not Vested Executive Stock will be treated as "Unvested
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Executive Stock" hereunder.
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(e) Termination Other than for Cause. If Executive is no longer employed
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by the Company or any of its Subsidiaries due to (i) Executive's death, (ii)
Disability of Executive, (iii) termination of Executive by the Company Without
Cause, (iv) termination of Executive's employment by Executive for Good Reason,
or (v) voluntary termination of Executive's employment by Executive on or after
February 1, 1998, the Company may elect to purchase all (but not less than all)
of the Executive Stock at a price per share equal to the Fair Market Value
thereof.
(f) Repurchase Procedures. The Company may elect to exercise the right to
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purchase all (but not less than all) of the shares of Executive Stock pursuant
to the Repurchase Option only by delivering written notice (the "Repurchase
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Notice") to the holder or holders of the Executive Stock within 30 days after
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the Termination Date giving rise to the Repurchase Option (the "Repurchase
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Option"). The Repurchase Notice will set forth the number of shares of Executive
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Stock to be acquired from such holder(s), the aggregate consideration to be paid
for such shares and the time and place for the closing of the transaction.
(g) Investor Rights.
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(i) If for any reason the Company does not elect to purchase all
of the Executive Stock pursuant to the Repurchase Option, the Investors
will be entitled to exercise the Repurchase Option, only in the manner set
forth in this paragraph 3, for the Executive Stock the Company has not
elected to purchase (the "Available Shares"). As soon as practicable, but
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in any event within ten (10) days after the Termination Date, the Company
will deliver written notice (the "Option Notice") to the Investors setting
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forth the number of Available Shares and the price for each Available
Share.
(ii) Each of the Investors will initially be permitted to purchase
its pro rata share
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(based upon the number of shares of Common Stock then held by such
Investors) of the Available Shares. Each Investor may elect to purchase any
number of the Available Shares (subject to the preceding sentences) by
delivering written notice to the Company within 10 days after receipt of
the Option Notice from the Company (such 10-day period being referred to
herein as the "Investor Election Period").
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(iii) As soon as practicable but in any event within five (5) days
after the expiration of the Investor Election Period, the Company will, if
necessary, notify the Investors electing to purchase Available Shares of
any Available Shares which Investors have elected not to purchase and each
of the electing Investors will be entitled to purchase the remaining
Available Shares on the same terms as described above (the "Second Option
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Notice"); provided that if in the aggregate such Investors elect to
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purchase more than the remaining Available Shares, such remaining Available
Shares purchased by each such Investor will be reduced on a pro rata basis
based upon the number of shares of Common Stock then held by such
Investors. Each Investor may elect to purchase any of the remaining
Available Shares available to such Investor by delivering written notice to
the Company within 5 days after the delivery of the Second Option Notice
(with such 5-day period referred to herein as the "Second Investor Election
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Period").
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(iv) As soon as practicable but in any event within five (5)
business days after the expiration of the Investor Election Period or the
Second Investor Election Period (if any) the Company will, if necessary,
notify the holder(s) of Executive Stock as to the number of shares of
Executive Stock being purchased from the holder(s) by the Investors (the
"Supplemental Repurchase Notice"). At the time the Company delivers a
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Supplemental Repurchase Notice to the holder(s) of Executive Stock, the
Company will also deliver to each electing Investor written notice setting
forth the number of shares of Executive Stock the Company and each Investor
will acquire, the aggregate purchase price to be paid and the time and
place of the closing of the transaction.
(h) Closing. The closing of the transactions contemplated by this
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paragraph 3 will take place on the date designated by the Company in the
Repurchase Notice or the Supplemental Repurchase Notice, as the case may be,
which date will not be more than 60 days after the delivery of such notice. The
Company and/or the Investors, as the case may be, will pay for the Executive
Stock to be purchased pursuant to the Repurchase Option by cash or certified or
cashier's check made payable to the holders of such Executive Stock. The
aggregate purchase price of the Executive Stock shall be reduced by (i) the
amount of outstanding principal and interest accrued, if any, on the Executive
Note (which Executive Note then shall be deemed paid in full), and (ii) the
aggregate exercise price of any Option Shares then vested and exercisable
pursuant to paragraph 2 of this Agreement which are included in the Executive
Stock. The Company and/or the Investors, as the case may be, will receive
customary representations and warranties from each seller regarding the sale of
the Executive Stock, including but not limited to the representation that such
seller has good and marketable title to the Executive Stock to be transferred
free and clear of all liens, claims and other encumbrances other than as may
arise under this Agreement and the other agreements referenced herein.
4. Sale of Executive Stock to the Company.
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(a) Termination of Employment. In the event that (i) Executive is no
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longer employed by
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the Company, any of its Subsidiaries or any Joint Venture due to (A) Executive's
death, (B) Disability of Executive, (C) termination of Executive's employment by
the Company Without Cause, (D) termination of Executive's employment by
Executive for Good Reason, or (E) voluntary termination of Executive's
employment by Executive on or after February 1, 1998, and (ii) neither the
Company nor the Investors has delivered timely a Repurchase Notice or
Supplemental Repurchase Notice for all such shares of Executive Stock held by
Executive and any Permitted Transferees(s) of Executive Stock ("Qualified
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Holder(s)"), then Executive and each Qualified Holder shall have the right to
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sell to the Company (the "Sell Option") and the Company shall have the
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obligation to purchase all (but not less than all) of the shares of Executive
Stock at a price per share equal to the Fair Market Value thereof.
(b) Exercise of Rights. Executive (or his heirs or estate) and each
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Qualified Holder may only exercise the rights described above by delivering
written notice (the "Sell Notice") to the Company within 30 days after the
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expiration of the later of the Investor Election Period or the Second Investor
Election Period. The Company shall give the Executive written notice of the
expiration of the Investor Election Period and the Second Investor Election
Period, if any. The Sell Notice will set forth the number of shares of the
Executive Stock to be sold to the Company and the basis for the computation
thereof, the number of shares to be purchased at Fair Market Value and/or
Original Value, and the time and place for closing of the transaction which
shall be at the Company's principal place of business within ten (10) days after
the receipt by the Company of the Sell Notice from Executive (and/or the
Qualified Holder) or, if later, within ten (10) days after the receipt by
Executive and/or the Qualified Holder) and the Company of the appraiser's
written report of the Fair Market Value. The aggregate purchase price of the
Executive Stock subject to the Sell Notice will be reduced by the amount of
outstanding principal and interest accrued, if any, on the Executive Note (which
Executive Note then shall be deemed paid in full) and the aggregate exercise
price of any Options which are included in the Executive Stock. The Company will
purchase all but not less than all of the shares of Executive Stock subject to
the Sell Notice by delivery to the holder(s) of the Executive Stock being
repurchased of cash or a certified or cashier's check in an amount equal to the
amount of cash paid by Executive in connection with the initial purchase of
Executive Stock plus any cash payments made by Executive on the Executive Note
or in connection with the exercise of any Option. The balance of the purchase
price will be paid by the Company by the issuance of its subordinated promissory
note (the "Subordinated Note") which will (i) be payable over three years in
-----------------
quarterly installments, (ii) bear interest at the LIBO Rate plus 3% per annum,
and (iii) be paid on a current basis so long as the Senior Obligations are not
in default. The obligations of the Company under the Subordinated Note will be
subordinate to the payment by the Company of all indebtedness of the Company to
(i) Bankers Trust Company, as Bank Agent, under the Credit Agreement dated as of
November 17, 1995 amended and restated as of March 1, 1996 among the Company,
Cambridge, Bankers Trust Company and the other Banks signatory thereto, (ii)
Xxxx Capital V Mezzaine Fund, L.P. and BCIP Trust Associates, L.P.
(collectively, the "Xxxx Funds") under the Senior Subordinated Credit Agreement
----------
dated as of December 14, 1995, as amended, by and among Cambridge and the Xxxx
Funds, (iii) the Xxxx Funds under the Junior Subordinated Credit Agreement dated
as of March 1, 1996 by and among the Company and the Xxxx Funds, (iv) Gencorp,
Inc. under the Senior Subordinated Credit Agreement dated as of March 1, 1996 by
and among the Company and Gencorp, Inc, and (v) any and all renewals or
refinancing thereof made by the Company with unaffiliated institutional lenders
(collectively, the "Senior Obligations"). Notwithstanding anything to the
------------------
contrary in the Subordinated Note, or in the related subordination agreement,
the principal of and all interest accrued on the Subordinated Note will be due
and payable in full on the earlier of (i) February 1, 2003, (ii) upon the
occurrence of an Acceleration Event or (iii) upon the occurrence of a redemption
of, or dividend on, the Company's equity securities (other than a repurchase of
equity securities of a manager (other than
-10-
Xxxxxxx Xxxxxxxx) in connection with the termination of such person's employment
with the Company or its Subsidiaries).
(c) Limitation on Sell Option. The Company will be required to purchase
-------------------------
shares of the Executive Stock under the Sell Option only to the extent of its
funds legally available for the purchase of shares of its capital stock and only
to the extent that such purchase would not violate the provisions of any loan
agreement relating to the Senior Obligations which is binding upon the Company
as of the date hereof; provided, however, in the event that Company is unable to
complete its purchase of all of the Executive Stock due to the restrictions of
any such loan agreement or indenture, the Company at a minimum shall purchase
that amount of Executive Stock having a purchase price equal to the amount then
outstanding under the Executive Note and, as to the balance of the Executive
Stock, the Company agrees to undertake in good faith all reasonable efforts to
obtain the consent of its lender(s) to permit the purchase of the Executive
Stock and agrees to complete its purchase of the balance of the Executive Stock
as soon as it is permitted to do so. The purchase price for the balance of the
Executive Stock not purchased because the Company did not have sufficient funds
legally available for the purchase of shares of its capital stock or because of
restrictions contained in any loan agreement or indenture of the Company shall
be the higher of (i) the amount that would have been due had the Company been
able to complete the purchase upon the initial exercise of the Sell Option, and
(ii) the price that would be due assuming the Termination Date is the date the
Company gives written notice to Executive that it is now permitted to complete
the purchase of the balance of the Executive Stock.
-11-
5. Restrictions on Transfer.
------------------------
(a) Transfer of Executive Stock and Option Shares. Executive will not
---------------------------------------------
sell, pledge or otherwise transfer any interest in any shares of Executive Stock
or Option Shares, except pursuant to (i) the provisions of paragraphs 1, 2, 3,
4, 8 and 10 hereof, (ii) the provisions of paragraph 5(b) below, or (iii)
pursuant to the Registration Agreement, dated as of November 17, 1995, as
amended, among the Company and its stockholders.
(b) Certain Permitted Transfers. The restrictions contained in this
---------------------------
paragraph 5 will not apply with respect to transfers of Executive Stock or
Option Shares (i) pursuant to applicable laws of descent and distribution, (ii)
among Executive's Family Group (as defined below) or (iii) any charitable
remainder trust (as such term is defined under Section 664 of the Internal
Revenue Code of 1986, as amended), provided that the restrictions contained in
this paragraph 5 will continue to be applicable to the Executive Stock or Option
Shares after any such transfer and the transferees of such Executive Stock shall
agree in writing to be bound by the provisions of this Agreement. "Family Group"
------------
means Executive's spouse and descendants (whether natural or adopted), and any
trust solely for the benefit of, or any corporation, limited liability company
or partnership (foreign or domestic) solely owned by, Executive and/or
Executive's spouse and/or descendants. Any transferee of Executive Stock
pursuant to a transfer in accordance with the provisions of this subparagraph
5(b) is herein referred to as a "Permitted Transferee". Upon the transfer of
--------------------
Executive Stock or Option Shares pursuant to this paragraph 5(b), the Permitted
Transferee(s) will deliver a written notice (the "Transfer Notice") to the
---------------
Company. The Transfer Notice will disclose in reasonable detail the identity of
the Permitted Transferee(s).
6. Additional Restrictions on Transfer.
-----------------------------------
(a) The certificates representing the Executive Stock and Option Shares
will bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
---
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS
SET FORTH IN A MANAGEMENT AGREEMENT BETWEEN THE ISSUER (THE
"COMPANY") AND A CERTAIN EMPLOYEE OF THE COMPANY DATED AS OF
-------
OCTOBER __, 1996, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.
(b) No holder of Executive Stock or Options Shares may sell, transfer
or dispose of any Executive Stock or Option Shares (except pursuant to an
effective registration statement under the
-12-
1933 Act) without first delivering to the Company an opinion of counsel
reasonably acceptable in form and substance to the Company (which counsel shall
be reasonably acceptable to the Company) that registration under the 1933 Act is
not required in connection with such transfer.
7. Definition of Executive Stock and Option Shares. For purposes of
-----------------------------------------------
the Repurchase Option and the Sell Option under this Agreement, Executive Stock
will include shares of Common Stock issuable upon exercise of any vested Options
held by Executive or his Permitted Transferee, whether or not such vested
Options have been exercised. For all purposes of this Agreement, Executive Stock
and Option Shares will continue to be Executive Stock and Option Shares in the
hands of any holder other than Executive (except for the Company, the Investors
and purchasers pursuant to an offering registered under the 1933 Act or
purchasers pursuant to a Rule 144 transaction), and each such other holder of
Executive Stock and Option Shares will succeed to all rights and obligations
attributable to Executive as a holder of Executive Stock and Option Shares
hereunder. Executive Stock and Option Shares will also include shares of the
Company's capital stock issued with respect to shares of Executive Stock and
Option Shares by way of a stock split, stock dividend or other recapitalization.
8. Sale of the Company.
-------------------
(a) If the Board and the holders of a majority of the shares of Common
Stock then outstanding approve 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 of the Company's outstanding capital stock (whether by merger,
recapitalization, consolidation, reorganization, combination or otherwise) to an
Independent Third Party (as defined below) or group of Independent Third Parties
(collectively an "Approved Sale"), each holder of Executive Stock or Option
-------------
Shares will vote for, consent to and raise no objections against such Approved
Sale. If the Approved Sale is structured as (i) a merger or consolidation, each
holder of Executive Stock or Options Shares will waive any dissenters rights,
appraisal rights or similar rights in connection with such merger or
consolidation or (ii) sale of stock, each holder of Executive Stock or Option
Shares will agree to sell all of his shares of Executive Stock or Options Shares
and rights to acquire shares of Executive Stock or Option Shares on the terms
and conditions approved by the Board and the holders of a majority of the
Executive Stock or Option Shares then outstanding. Each holder of Executive
Stock or Option Shares will take all necessary or desirable actions in
connection with the consummation of the Approved Sale as requested by the
Company. "Independent Third Party" means any person or entity who, immediately
-----------------------
prior to the contemplated transaction, does not own in excess of 10% of the
Company's Common Shares on a fully-diluted basis (a "10% Owner"), who is not
---------
controlling, controlled by or under common control with any such 10% Owner and
who is not the spouse or descendent (by birth or adoption) of any such 10% Owner
or a trust for the benefit of such 10% Owner and/or such other persons or
entities.
(b) The obligations of the holders of Common Stock with respect to the
Approved Sale of the Company are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Sale, each holder of
Common Stock will receive the same form of consideration and the same portion of
the aggregate consideration that such holders of Common Stock would have
received if such aggregate consideration had been distributed by the Company in
complete liquidation pursuant to the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights
-13-
to acquire shares of a class of Common Stock (including Options which become
vested and exercisable upon an Approved Sale) will be given an opportunity to
exercise such rights prior to the consummation of the Approved Sale and
participate in such sale as holders of such class of Common Stock.
(c) If the Company or the holders of the Company's securities enter
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Stock and
Option Shares 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 holder of Executive Stock or Option Shares appoints a
purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any holder of Executive Stock or
Option Shares declines to appoint the purchaser representative designated by the
Company such holder will appoint another purchaser representative, and such
holder will be responsible for the fees of the purchaser representative so
appointed.
(d) Executive and the other holders of Executive Stock and Option
Shares (if any) will bear their pro-rata share (based upon the number of shares
sold) of the costs of any sale of Executive Stock and Option Shares pursuant to
an Approved Sale to the extent such costs are incurred for the benefit of all
holders of Common Stock and are not otherwise paid by the Company or the
acquiring party. Costs incurred by Executive and the other holders of Executive
Stock and Option Shares on their own behalf will not be considered costs of the
transaction hereunder.
9. Public Offering. In the event that the Board and the holders of a
---------------
majority of the shares of Common Stock then outstanding approve an initial
public offering and sale of Common Stock (a "Public Offering") pursuant to an
---------------
effective registration statement under the 1933 Act, as amended, the holders of
Executive Stock and Option Shares will take all necessary or desirable actions
in connection with the consummation of the Public Offering. In the event that
such Public Offering is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the Common Stock structure
will adversely affect the marketability of the offering, each holder of
Executive Stock and Option Shares will consent to and vote for a
recapitalization, reorganization and/or exchange of the Common Stock into
securities that the managing underwriters, the Board and holders of a majority
of the shares of Common Stock then outstanding find acceptable and will take all
necessary or desirable actions in connection with the consummation of the
recapitalization, reorganization and/or exchange; provided that the resulting
securities reflect and are consistent with the rights and preferences set forth
in the Company's Certificate of Incorporation as in effect immediately prior to
such Public Offering and this Agreement.
10. Participation Rights.
--------------------
(a) At least 30 days prior to any sale or exchange (a "Transfer") of
--------
any class of Common Stock by an Investor (other than a Transfer among the
Investors or their affiliates or to an employee of the Company or its
Subsidiaries), such Investor (the "Transferring Stockholder") will deliver a
------------------------
written notice (the "Sale Notice") to the Company and the holders of such class
-----------
of Executive Stock and Option Shares (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 to the Transferring
Stockholder within 30 days after delivery of the Sale Notice. If any Other
Stockholders have elected to participate in such Transfer, the Transferring
Stockholder and such Other Stockholders will be entitled to sell in
-14-
the contemplated Transfer, at the same price and on the same terms, a number of
shares of such class of Common Stock equal to the product of (i) the quotient
determined by dividing the number of shares of such class of Common Stock
(including vested Option Shares but not including any other unexercised stock
options) owned by such person by the aggregate number of shares of such class of
Common Stock (including vested Option Shares but not including any other
unexercised stock options and treating the Class A Common, the Class L Common
and the Company's Class P Common Stock, par value $.01 per share, as a single
class) owned by the Transferring Stockholder, the Other Stockholders and other
stockholders participating in such sale and (ii) the number of shares of such
class of Common Stock to be sold in the contemplated Transfer.
(b) The Transferring Stockholder will use reasonable efforts to obtain
the agreement of the prospective transferee(s) to the participation of the Other
Stockholders in any contemplated Transfer, and the Transferring Stockholder will
not Transfer any of its securities to the prospective transferee(s) unless (i)
the prospective transferee(s) agrees to allow the participation of the Other
Stockholders or (ii) the Transferring Stockholder agrees to purchase the number
of such class of securities from the Other Stockholders which the Other
Stockholders would have been entitled to sell pursuant to the last sentence of
paragraph (a) above at the same price and terms as the Transferring Stockholder
sold its shares.
11. Preemptive Rights.
-----------------
(i) If the Company authorizes the issuance or sale of any of its
securities (other than as a dividend on the outstanding Common Stock) to any of
the Investors, the Company shall first offer to sell to Executive a portion of
such stock or securities equal to the quotient determined by dividing (A) the
number of shares of Common Stock and vested Options held by Executive by (B) the
total number of shares of Common Stock outstanding and issuable upon exercise of
all vested and exercisable Options. Executive 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 such other Persons (including
the Investors). The purchase price for all stock and securities offered to
Executive shall be payable in cash by delivery of a cashier's, personal or
certified check or by wire transfer of immediately available funds.
(ii) In order to exercise its purchase rights hereunder, Executive must
within 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 holder's percentage allotment deliver a
written notice to the Company describing its election hereunder.
(iii) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the Executive
has not elected to purchase during the 90 days following such expiration on
terms and conditions no more favorable to the purchasers thereof than those
offered to Executive. Any stock or securities offered or sold by the Company to
any of the Investors after such 90-day period must be reoffered to Executive
pursuant to the terms of this paragraph.
(iv) The rights under this paragraph shall terminate upon the
effectiveness of a registration statement filed by the Company with the
Securities and Exchange Commission under the 1933 Act with respect to an
offering of Common Stock; provided that if the registration statement is
withdrawn or abandoned before any shares of Common Stock are sold thereunder,
the provisions of this
-15-
paragraph shall remain in effect.
12. Termination of Provisions Relating to Executive Stock and Option
----------------------------------------------------------------
Shares. The provisions of paragraphs 3, 4, 5 and 8 will terminate upon the first
------
to occur of (i) an Approved Sale, or (ii) (A) the Company (or its successor as a
result of merger, consolidation, reorganization or sale) becoming a reporting
company under the Securities Exchange Act of 1934 as a result of the
registration of its common equity securities thereunder and (B) the Investors
and their affiliates collectively ceasing to own at least 50% of the aggregate
number of shares of Common Stock that they own on the date hereof (as adjusted
for stock splits, stock dividends and recapitalization and for exchanges in
connection with a merger, consolidation, reorganization or sale).
EMPLOYMENT PROVISIONS
13. Employment. Cambridge shall employ Executive, and Executive hereby
----------
accepts employment with Cambridge, upon the terms and conditions set forth in
this Agreement. The term of employment shall commence as of February 1, 1996 and
shall continue in effect until February 1, 1998 (the "Employment Period");
-----------------
provided however, on February 1, 1998 and on the first (1st) day of each
successive six-month anniversary thereof, the Employment Period shall
automatically be extended for an additional period of six (6) months unless
Cambridge or Executive shall have notified the other party in writing not less
than sixty (60) days prior to the commencement date of any such extension of
Cambridge's or Executive's intention not to so extend the Employment Period.
14. Position and Duties.
-------------------
(a) During the Employment Period, Executive shall serve as the
President and Chief Executive Officer of the Company and Cambridge and shall
have the normal duties, responsibilities and authority of the President and
Chief Executive Officer, subject to the power of the Board to expand or limit
such duties, responsibilities and authority (not inconsistent with Executive's
position as President and Chief Executive Officer) and to override actions of
the President and Chief Executive Officer.
(b) Executive shall report to the Board, and Executive shall devote his
best efforts and substantially all of his business time and attention (except
for permitted vacation periods and reasonable periods of illness or other
incapacity) to the business and affairs of the Company and its Subsidiaries.
Executive shall perform his duties and responsibilities to the best of his
abilities in a diligent, trustworthy, businesslike and efficient manner. Nothing
herein shall prohibit Executive from devoting his time to civic and community
activities or managing personal investments, as long as the foregoing do not
interfere with the performance of his duties hereunder or detract from his
devoting substantially all of his working time to the business and affairs of
the Company.
15. Base Salary and Benefits.
------------------------
(a) During the Employment Period, Executive's base salary shall be
$50,000 per month during February and March 1996 and thereafter shall be
$475,000 per annum or such higher rate as the Board may designate from time to
time (the "Base Salary"), which salary shall be payable in regular installments
-----------
in accordance with Cambridge's general payroll practices and shall be subject to
customary withholding. In addition, during the Employment Period, Executive and
his spouse shall be entitled to participate in all of the Company's and its
Subsidiaries' employee benefit programs for which senior
-16-
executive employees of the Company and its Subsidiaries and their spouses are
generally eligible, and the Company shall make premium payments in an amount not
in excess of $21,000 per year with respect to a whole life insurance policy in
the amount of $700,000 to be obtained by Executive subsequent to the date
hereof.
(b) Cambridge shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this Agreement
which are consistent with the Cambridge's policies in effect from time to time
with respect to travel, entertainment and other business expenses (including
commuting expenses to and from Rhode Island and/or Florida and lodging in
Michigan), subject to Cambridge's requirements with respect to reporting and
documentation of such expenses. Cambridge shall provide Executive with an
automobile and pay or reimburse Executive for all maintenance and operating
expenses incurred.
(c) In addition to the Base Salary, the Board will award a bonus (the
"Bonus") to Executive of between 30% (if 85% of Base Case Earnings (as defined
-----
below) target is achieved) and 60% (if Base Case Earnings target is achieved)
and 110% (if Stretch Case Earnings (as defined below) target is achieved) of the
Base Salary following the end of each fiscal year during the Employment Period
based upon the Company and its Subsidiaries on a combined basis achieving
mutually agreed upon earnings target's during such year. The Bonus will be paid
within 30 days following receipt by the Company of its audited financial
statements for such fiscal year. The Bonus for fiscal year 1996 and for the last
fiscal year of the Employment Period will be pro rated for the time during which
Executive is employed during such fiscal year and will be a minimum of $150,000
for fiscal year 1996. The Bonus will be calculated for each fiscal year of the
Company as follows:
(A) If the Company's and its Subsidiaries' Earnings are below
85% of the Company's target Base Case Earnings for the applicable
fiscal year, no Bonus shall be paid to Executive for that fiscal year.
(B) If the Company's and its Subsidiaries' Earnings are between 85%
and 100% of the Company's target Base Case Earnings for the applicable
fiscal year, Executive's Bonus will vary proportionately between 30% of
his annual Base Salary, in the event 85% of such target Base Case
Earnings amount is achieved, and 60% of his annual Base Salary, in the
event 100% of such target Base Case Earnings amount is achieved.
(C) If the Company's and its Subsidiaries' Earnings are between
100% of the Company's target Base Case Earnings and 100% of the
Company's target Stretch Case Earnings (as defined below) for the
applicable fiscal year, Executive's Bonus will vary proportionately
between 60% of his annual Base Salary, in the event 100% of such target
Base Case Earnings amount is achieved, and 110% of his annual Base
Salary, in the event 100% of such target Stretch Case Earnings amount
is achieved.
For purposes of this Agreement, the term "Earnings" means, for the Company and
--------
its Subsidiaries on a combined basis, earnings before interest, taxes,
depreciation, amortization (including amortization of any acquisition or
financing related costs),1 management bonuses, non-cash OPEB charges and foreign
exchange gains or losses, but after cash OPEB charges and any one-time cash
charges in connection with an acquisition which were charged against purchase
accounting reserves and before the reversal of reserves set up in conjunction
with the Gencorp acquisition or gains or losses associated with the Gencorp
purchase price adjustment to the extent reflected in earnings, all as determined
in accordance
-17-
with generally accepted accounting principles consistently applied. The terms
"Base Case Earnings" and "Stretch Case Earnings" shall mean the forecasted
------------------ ---------------------
Earnings of the Company and its Subsidiaries on a combined basis which, for
fiscal year 1996, are in the amounts set forth below:
Base Case Earnings Stretch Case Earnings
$52,200,0002 $54,800,000
The Company and Executive agree to jointly establish the Base Case Earnings for
each fiscal year subsequent to the 1996 fiscal year no later than the
commencement of such fiscal year based upon the Company's budget for each fiscal
year. Stretch Case Earnings for future fiscal years shall be set at 110% of Base
Case Earnings for such fiscal year.
16. Termination of Employment. Executive's employment may be terminated
-------------------------
by either Cambridge or Executive by giving a Notice of Termination, as defined
in subsection (a) of this paragraph 16. If Executive's employment should
terminate prior to the expiration of the Employment Period (as it may be
extended) Executive's entitlement to benefits shall be determined in accordance
with paragraph 17 hereof.
(a) Notice of Termination. Any termination of Executive's employment by
---------------------
Cambridge or by Executive shall be communicated by written Notice of Termination
to the other party hereto in accordance with paragraph 22 hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which shall
---------------------
indicate the specific termination provision in this Agreement relied upon, if
any, and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated.
17. Compensation Upon Termination. Upon termination of Executive's
-----------------------------
employment with Cambridge prior to expiration of the Employment Period (as it
may be extended), Executive shall be entitled to the following benefits and the
payment of such benefits will constitute Executive's sole and exclusive remedy
with respect to the termination of Executive's employment:
(a) If Executive's employment is terminated for Disability, Executive
shall receive until the end of the Employment Period all compensation payable to
Executive under Cambridge's disability and medical plans and programs, as in
effect on the Termination Date. After the end of the Employment Period,
Executive's benefits shall be determined under Cambridge's retirement, insurance
and other compensation programs then in effect in accordance with the terms of
such programs, provided that such terms shall not be less advantageous to
Executive than the terms of such programs in effect as of the date hereof.
(b) If Executive's employment shall be terminated (i) by Cambridge for
Cause or (ii) by Executive other than for Good Reason, Cambridge shall pay
Executive his full Base Salary through the Termination Date, at the rate in
effect at the time Notice of Termination is given, plus all other amounts to
which Executive is entitled under any compensation or benefit plans of Cambridge
at the time such payments are due, and Cambridge and the Company shall have no
further obligations to Executive under this paragraph 17.
(c) If Executive's employment shall be terminated by reason of
Executive's death, Cambridge shall pay Executive's estate or designated
beneficiary (as designated by Executive by
-18-
written notice to Cambridge, which designation shall remain in effect for the
remainder of the Employment Period and any extensions thereof until revoked or a
new beneficiary is designated, in either case by written notice to Cambridge)
the full Base Salary through the Termination Date plus any Bonus earned
(determined by prorating the Bonus that otherwise would have been due based upon
the actual results for the full fiscal year for the portion of the fiscal year
occurring prior to the date of Executive's death), plus all other amounts to
which Executive is entitled under any compensation or benefit plans of Cambridge
at the date of Executive's death, and Cambridge and the Company shall have no
further obligation to Executive, Executive's beneficiaries or Executive's estate
under this paragraph 17.
(d) If Executive's employment shall be terminated (I) by Cambridge
Without Cause or (II) by Executive for Good Reason, then Executive shall be
entitled to the benefits provided below:
(i) Cambridge shall pay Executive his full Base Salary through
the Termination Date at the rate in effect at the time Notice of
Termination is given (or, if greater, at the rate in effect 30 days
prior to the time Notice of Termination is given), plus all other
amounts to which Executive is entitled under any compensation or
benefit plans of Cambridge, including without limitation, any Bonus
earned (determined by prorating the Bonus that otherwise would have
been due based upon actual results for the full fiscal year for the
portion of the fiscal year occurring prior to the Termination Date), at
the time such payments are due;
(ii) in lieu of any further Base Salary and Bonus payments to
Executive for periods subsequent to the Termination Date, Cambridge
shall pay to Executive his full Base Salary at the rate in effect
immediately prior to the time Notice of Termination is given (or, if
greater, at the rate in effect 30 days prior to the time Notice of
Termination is given), at the time such payments otherwise would be
due, (1) if the Termination Date occurs prior to the expiation of the
initial Employment Period, for the balance of the initial Employment
Period plus six (6) months, or (2) if the Termination Date occurs after
the expiration of the initial Employment Period, for six (6) months;
Executive shall not be required to mitigate the amount of any payment
provided for in subsection (d) of this paragraph 17 by seeking other
comparable employment or otherwise;
(iii) until the end of the Employment Period, Executive will
continue to participate in all other compensation and benefit plans
(including perquisites) in which Executive was participating prior to
the time Notice of Termination is given, or comparable plans
substituted therefor; provided, however, that if Executive is
ineligible, (e.g., by operation of law or the terms of the applicable
plan to continue to participate in any such plan) Cambridge will
provide Executive with a comparable level of compensation or benefits;
and
(iv) Cambridge shall also pay to Executive all reasonable
legal fees and expenses incurred by Executive in contesting or
disputing any such termination or in seeking to obtain or enforce any
right or benefit provided by this paragraph 17 if such termination is
determined by the arbitrator to have been for Good Reason or Without
Cause.
(e) In addition to all other amounts payable to Executive under this
paragraph 17, Executive shall be entitled to receive all benefits payable to
Executive pursuant to the terms of any plan or agreement of Cambridge relating
to retirement benefits.
-19-
MISCELLANEOUS PROVISIONS
18. Confidential Information. Executive acknowledges that the
------------------------
information, observations and data obtained by him during the course of his
employment with the Company or any of its Subsidiaries concerning the business
or affairs of the Company and its Subsidiaries are the property of the Company
and its Subsidiaries, including without limitation, information regarding
manufacturing, production, procurement, sales, marketing, promotions, bids,
financial matters, production costs, pricing, customers, customer lists,
customer requirements and contemplated transactions. Therefore, Executive agrees
that he will not disclose to any unauthorized person or use for his own account
any of such information, observations or data without the Board's written
consent, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result of
Executive's acts or omissions to act. Executive agrees to deliver to the Company
at the termination of his employment, or at any other time the Company may
request, all memoranda, notes, plans, records, reports and other documents (and
copies thereof) relating to the business of the Company and its Subsidiaries
which he may then possess or have under his control.
19. Inventions and Patents. Executive agrees that all inventions,
----------------------
innovations or improvements in the Company's or any of its Subsidiaries' or
joint venture partner's method of conducting its business (including new
contributions, improvements, ideas and discoveries, whether patentable or not)
conceived or made by him during his employment with the Company or any of its
Subsidiaries or joint venture partners belong to the Company, its Subsidiaries
or such joint venture partners, whether so made during working hours or
otherwise. Executive will promptly disclose such inventions, innovations or
improvements to the Board and perform all actions reasonably requested by the
Board to establish and confirm such ownership.
20. Other Businesses. As long as Executive is employed by the Company,
----------------
any of its Subsidiaries or any Joint Venture, Executive agrees that he will not,
except with the express written consent of the Board and except with respect to
Xxxxxx Metal Group, Inc., St. Jude Capital Corp., Community Bank of Naples and
Flexmedics Corporation, become engaged in, or render services for, any business
other than the business of the Company, any of its Subsidiaries or any joint
venture in which the Company or any of its Subsidiaries have an equity interest.
21. Noncompete. If prior to the expiration of the Employment Period,
----------
Executive (a) voluntarily terminates his employment with the Company or any of
its Subsidiaries other than for Good Reason or is terminated by the Company or
any of its Subsidiaries for Cause or (b) is terminated by the Company or any of
its Subsidiaries Without Cause or Executive voluntarily terminates his
employment for Good Reason, then, for a period of 12 months after the
Termination Date, with respect to a termination pursuant to clause (a) and, for
a period equal to the lesser of 12 months or the length of time for which
Executive receives severance compensation at least equal to Executive's Base
Salary in connection with such termination, after the Termination Date, with
respect to a termination pursuant to clause (b), Executive will not (i) directly
or indirectly own, manage, control, participate in, consult with or render
services for any other person or entity engaged in any business similar to the
business conducted by the Company, any of its Subsidiaries or any Joint Venture
at the Termination Date (and as contemplated to be conducted by the Company
pursuant to any then binding agreement of the Company to acquire the business of
another entity), during the Employment Period in any geographic area in which
the Company, any of its Subsidiaries or any Joint Venture conducted such
business, and (ii) have any interest directly or indirectly in any such
business, provided that nothing
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herein will prevent Executive from owning in the aggregate not more than five
percent of the outstanding stock of any class of a corporation which is publicly
traded, so long as Executive has no participation in the management of such
corporation. If Executive's employment is terminated for any reason, whether by
the Company or by Executive, then for a period of 24 months after the
Termination Date, Executive will not (i) attempt to hire or procure or hire the
services of any person employed (at the Termination Date or at any date within
24 months thereof) by the Company, any of its Subsidiaries or any Joint Venture,
or (ii) induce or attempt to induce any customer or other business relation of
the Company into any business relationship which might harm the Company, any of
its Subsidiaries or any Joint Venture without the prior written consent of the
Board.
22. Notices. Any notice provided for in this Agreement must be in
-------
writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
Investors at the addresses indicated in the Company's records and to the other
recipients at the address indicated below:
To the Company and Cambridge:
Cambridge Industries Holdings, Inc.
000 Xxxxxx Xxxxx Xxxxx
Xxxxxxx Xxxxxxx, XX 00000
Attention: Board of Directors
with a copy to:
Xxxx Capital, Inc.
Xxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxx
Xxxxxx Xxxxxx
Xxxxxx X. Xxxx
To Executive:
Xxxxxx Xxxxxx
000 Xxxxxxxxxx Xxx
Xxxxxx, XX 00000
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
23. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement (including without limitation any of
the provisions of paragraph 21 hereof) is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
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24. Complete Agreement. This Agreement embodies the complete
------------------
agreement and understanding among the parties and supersedes and preempts
any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
25. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
26. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Executive, the Company, the
Investors and their respective successors and assigns, provided that Executive
may not assign any of his rights or obligations, except as expressly provided by
the terms of this Agreement.
27. Governing Law. All issues concerning the enforceability, validity
-------------
and binding effect of this Agreement will be governed by and construed in
accordance with the laws of the State of Michigan, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Michigan or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of Michigan. Notwithstanding the
foregoing, the parties acknowledge that the Company is a Delaware corporation
and the corporate law of the State of Delaware will be applied to the Company
and its stockholders.
28. Remedies. The parties hereto agree and acknowledge that money
--------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto will have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity, to enforce
the provisions of this Agreement.
29. Arbitration.
-----------
(a) Arbitration. In the event of disputes between the parties with
-----------
respect to the terms and conditions of this Agreement, such disputes shall be
resolved by and through an arbitration proceeding to be conducted under the
auspices of the American Arbitration Association (or any like organization
successor thereto) at Detroit, Michigan. Such arbitration proceeding shall be
conducted in as expedited a manner as is then permitted by the commercial
arbitration rules (formal or informal) of the American Arbitration Association,
and the arbitrator or arbitrators in any such arbitration shall be persons who
are expert in the subject matter of the dispute. Both the foregoing agreement of
the parties to arbitrate any and all such claims, and the results,
determination, finding, judgment and/or award rendered through such arbitration,
shall be final and binding on the parties to this Agreement and may be
specifically enforced by legal proceedings, and, pursuant to MCLA 600.5001, the
parties agree that a judgment of any Michigan circuit court may be rendered upon
any arbitration award rendered pursuant to this Section 29. The parties agree
and acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may, in his or its sole
discretion, ask for specific performance and/or injunctive relief in order to
enforce or prevent any violations of the provisions of this Agreement.
(b) Procedure. Such arbitration may be initiated by written notice from
---------
either party to the other which shall be a compulsory and binding proceeding on
each party. The arbitration shall be
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conducted before a panel of three arbitrators selected in accordance with the
rules of the American Arbitration Association. Except as provided in paragraph
17(d)(iv) hereof, the costs of said arbitrators and the arbitration shall be
borne equally by the parties hereto and each party shall bear separately the
cost of their respective attorneys, witnesses and experts in connection with
such arbitration. Time is of the essence of this arbitration procedure, and the
arbitrators shall be instructed and required to render their decision within ten
(10) days following completion of the arbitration.
(c) Venue and Jurisdiction. Any and all legal proceedings to enforce
----------------------
this Agreement, (including any action to compel arbitration hereunder or to
enforce any award or judgment rendered thereby), shall be governed in accordance
with this paragraph 29.
30. Effect of Transfers in Violation of Agreement. The Company will not
---------------------------------------------
be required (a) to transfer on its books any shares of Executive Stock which
have been sold or transferred in violation of any of the provisions set forth in
this Agreement or (b) to treat as owner of such shares, to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
have been transferred in violation of this Agreement.
31. Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived only with the prior written consent of the Company, the
Investors who hold 60% of the Common Stock held by the Investors and Executive;
provided, however, that in the event that such amendment or waiver would
adversely affect an Investor or group of Investors in a manner different than
any other Investors, then such amendment or waiver will require the consent of
such Investor or a majority of the Common Shares held by such group of Investors
adversely affected.
32. Third Party Beneficiaries. The parties hereto acknowledge and
-------------------------
agree that the Investors are third party beneficiaries of this Agreement. This
Agreement will inure to the benefit of and be enforceable by the Investors and
their respective successors and assigns.
33. Registration Agreement. Executive hereby agrees to become bound by,
----------------------
and subject to, the terms and conditions of that certain Registration Agreement
dated as of November 17, 1995, as amended, by and among the Company and it
stockholders (the "Registration Agreement"). The Company hereby acknowledges
----------------------
that the shares of Executive Stock are Management Registrable Securities (as
such term is defined in the Registration Agreement).
* * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
CAMBRIDGE INDUSTRIES HOLDINGS, INC.
By: /signature appears here/
--------------------------------
Title
------
CAMBRIDGE INDUSTRIES, INC.
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By: /signature appears here/
------------------------------------
Title:
---------------------------------
----------------------------------------
Xxxxxx Xxxxxx
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