EXHIBIT 10.28
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
This AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT dated as of this
2nd day of October, 2001 (this "Agreement"), amends and restates that certain
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Shareholders' Agreement dated as of November 24, 1998 (as previously amended,
the "Shareholders' Agreement"), by and among FRESH ENTERPRISES, INC., a
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California corporation (the "Company"), and the holders of the issued and
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outstanding capital stock of the Company listed on Schedule A attached hereto
(referred to individually as a "Shareholder" and collectively as the
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"Shareholders"), and is made and entered into with reference to the following
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facts:
RECITALS
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WHEREAS, the Company issued and sold an aggregate of 2,727,941 shares
of Series A Convertible Preferred Stock pursuant to that certain
Recapitalization Agreement dated as of October 12, 1998;
WHEREAS, the Company issued and sold an aggregate of 2,153,507 shares
of Series B Convertible Preferred Stock pursuant to that certain Stock Purchase
Agreement dated as of April 28, 2000;
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") and the Shareholders have authorized the creation and issuance of up
to 1,351,405 shares of Series C Convertible Preferred Stock, which shall be sold
to the purchasers listed on Schedule B attached hereto pursuant to that certain
Stock Purchase Agreement dated as of the date hereof;
WHEREAS, the Board of Directors and the Shareholders desire to amend
and restate the Shareholders' Agreement in connection with the sale and issuance
of the Series C Convertible Preferred Stock in order to include the holders of
such stock therein;
WHEREAS, the Company and the Shareholders desire to enter into this
Agreement in order to govern certain aspects of the relationship among the
Shareholders and the relationship between the Shareholders and the Company.
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements herein contained and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereby agree
as follows:
1. Definitions. As used in this Agreement, the following terms shall
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have the following meanings:
a. Affiliate shall have the meaning set forth for such term in the
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Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. Without limiting the
foregoing, all directors and officers of a Person that is a corporation shall be
deemed Affiliates of such Person for all purposes hereunder.
b. Business Days shall mean all days other than Saturday or Sunday or
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any day on which banking institutions in New York, New York are authorized or
obligated by law to close.
x. Xxxxxxxxx shall mean Xxxxxxxxx-Xxxxx Partners III, L.P., Xxxxxxxxx
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Partners IV, L.P., Xxxxxxxxx Partners IV-A, L.P., Xxxxxxxxx Partners IV-B, L.P.,
each a Delaware limited partnership, Xxxxxxxxx Partners IV Offshore, L.P.,
Xxxxxxxxx Partners IV Special Purpose, L.P., each a Cayman Islands limited
partnership and their Affiliates.
d. Change of Control shall mean an event or series of events by which
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any "person" or "group" (as such terms are defined in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than
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Xxxxxxxxx or its Affiliates, becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than
25% of the shares of Common Stock outstanding, Series A Stock outstanding on an
as converted basis, Series B Stock outstanding on an as converted basis, and
Series C Stock outstanding on an as converted basis, upon consummation of such
event.
e. Common Stock shall mean (i) the Common Stock of the Company, no par
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value per share, (ii) any other capital stock of the Company into which such
Common Stock is converted, exchanged, reclassified or reconstituted, (iii) any
warrants or options exercisable for any of the foregoing and (iv) any right to
receive any of the foregoing other than upon conversion of any security
convertible into any of the foregoing.
f. Grumman Hill shall mean Grumman Hill Investments III, L.P, a
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Delaware limited partnership.
g. Line of Business shall mean the business conducted by the Company as
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of the date hereof which is limited to operating and franchising quick service
restaurants in a manner consistent with the operations on the date hereof.
h. Xx. Xxxxxxxxxx shall mean Xxxxxxx X. Xxxxxxxxxx.
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i. Xx. Xxxxxxx shall mean Xxxxx Xxxxxxx.
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j. Xx. Xxxxxxxx shall mean Xxxxx X. Xxxxxxxx.
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k. Oak Investment shall mean Oak Investment Partners VIII Limited
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Partnership.
l. Person shall mean any individual, corporation (including any
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non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union or
other entity or governmental body.
m. Preferred Stock shall mean collectively, the shares of Series A
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Stock, Series B Stock, and Series C Stock.
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n. Qualified Initial Public Offering shall mean an underwritten public
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offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), of shares of Common Stock, (i)
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the aggregate gross proceeds of which equal or exceed $25,000,000, (ii) the per
share offering price of which equals or exceeds $20.00 and (iii) which is
underwritten by a nationally recognized investment bank; provided, however, that
the per share offering price referred to above shall be adjusted to reflect the
effect of any stock split or any subdivision, reclassification or combination of
or with respect to outstanding shares of Common Stock after the date of the
Agreement.
o. Series A Stock shall mean the Series A Convertible Preferred Stock
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of the Company, without par value, or any other capital stock of the Company
into which such stock is reclassified or reconstituted.
p. Series B Stock shall mean the Series B Convertible Preferred Stock
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of the Company, without par value, or any other capital stock of the Company
into which such stock is reclassified or reconstituted.
q. Series C Stock shall mean the Series C Convertible Preferred Stock
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of the Company, without par value, or any other capital stock of the Company
into which such stock is reclassified or reconstituted.
r. Shares shall mean (i) any shares of Common Stock, (ii) any shares of
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Series A Stock, (iii) any shares of Series B Stock, (iv) any shares of Series C
Stock, (v) any shares of any other capital stock of the Company, and (vi) any
securities convertible into, or exchangeable or exercisable for, any of the
foregoing, in each case, at any time outstanding.
s. Test Period shall mean the period commencing on the date of this
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Agreement and concluding upon the earlier to occur of the date (i) that the
Company's fiscal year 2004 ends, or (ii) that a registration statement relating
to the initial public offering of shares of the Company's common stock becomes
effective.
t. Voting Securities shall mean any shares of capital stock of the
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Company entitling the holders thereof to vote on any matter submitted to the
Shareholders for vote.
2. Restrictions on Sale or Transfer of Shares.
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a. General Prohibition. No Shareholder shall sell, assign, transfer,
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give, pledge, encumber or in any way dispose of (collectively, "Transfer") any
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Shares, or enter into an agreement to Transfer any Shares (other than an
agreement which is expressly subject to compliance with the provisions of this
Section 2), unless (i) such Shareholder has complied with the provisions of this
Section 2; (ii) the transferee of any such Shares has agreed to be bound by the
terms of, and become a party to, this Agreement, in which event Schedule A
hereto shall automatically be amended to add such transferee as a Shareholder
hereunder, and if applicable, to remove the transferring Shareholder; and (iii)
the proposed transferee of any Shares, other than a transferee who is a Related
Party, has demonstrated to the reasonable satisfaction of the Company that such
transferee is an "accredited investor" as defined in Rule 501 promulgated under
the Securities Act. Any purported Transfer in violation of any provision of this
Agreement shall be void and ineffective and shall not operate to Transfer any
interest or title to the purported
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transferee. The prohibitions set forth in this Section 2(a) shall include, but
shall not be limited to, unless specifically permitted hereunder, any agreement
to limit, restrict or grant any voting rights with respect to any Shares.
Notwithstanding anything to the contrary contained herein, neither Section 2(a)
nor Section 2(b) hereof shall prohibit any Shareholder from transferring any
preemptive rights to subscribe for and purchase shares under Section 3 hereof to
any other Shareholder or any Related Party of such Shareholder or any other
Shareholder.
b. Shareholders' Right of First Offer.
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(i) If any Shareholder or Related Party (as defined below) (such
persons being hereinafter referred to collectively as the "Seller") desires to
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Transfer any or all of the Shares or any rights to Shares held by such Seller
(the "Transfer Stock") to any person other than pursuant to an Exempt Transfer
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(as defined in Section 2(e) below), such Seller shall reduce to writing (the
"Transfer Notice") the terms pursuant to which such Seller desires to Transfer
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such Transfer Stock (a "Transfer Offer"). Such Transfer Notice shall identify
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the Transfer Stock, the consideration for the Transfer Stock, the identity of
any third party offeror, and all the other terms and conditions of such Transfer
Offer. The Seller shall provide the Transfer Notice to the Company and the
Company shall promptly, but in no event later than five (5) Business Days
following receipt of the Transfer Notice from the Seller, provide written notice
(dated the day such written notice is given) of such Transfer Offer to all other
Shareholders (the "Transfer Offerees"). The Transfer Notice shall constitute an
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irrevocable offer by the Seller (a "First Offer") to sell the Transfer Stock to
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the Transfer Offerees at a price equal to the price and upon substantially the
same terms as the terms contained in such Transfer Notice. The Transfer Offerees
shall have the irrevocable right and option (the "Right of First Offer"),
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exercisable as provided below, to accept the First Offer (subject to the
priorities and pro rata adjustments set forth below) as to any or all Shares of
the Transfer Stock. Each Transfer Offeree that desires to exercise such option
with respect to a First Offer shall provide the Seller with an irrevocable
written notice (the "Initial Notice") specifying the number of Shares of the
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Transfer Stock which such Transfer Offeree is requesting to purchase pursuant to
such First Offer (including the maximum number of Shares in excess of such
Transfer Offeree's pro rata portion of the Transfer Stock (the "Excess Shares"),
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which such Transfer Offeree agrees to purchase), which shall be binding on said
Transfer Offeree for the number of Shares in such notice of acceptance, or the
lesser number of Shares if so allocated pursuant to Section 2(b)(ii), within
twenty (20) Business Days after the date of the Transfer Notice (the "Initial
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Notice Period"), and shall simultaneously provide a copy to the Company. The
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Company shall promptly distribute such notice of acceptance to all other
Transfer Offerees.
(ii) Subject to the Seller's rights pursuant to Section 2(b)(vi)
hereof, the allocation of Transfer Stock to Transfer Offerees pursuant to a
First Offer shall be made as follows:
(A) Each Transfer Offeree is entitled to purchase a number of
Shares of the Transfer Stock pro rata with all other Transfer Offerees based on
the respective holdings (on a fully diluted basis) of Shares of each Transfer
Offeree as of the date of such First Offer.
(B) If every Transfer Offeree requests to purchase a number of
Shares of Transfer Stock equal to or greater than such Transfer Offeree's pro
rata portion, then each
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Transfer Offeree shall be entitled to only receive such Transfer Offeree's pro
rata portion of the Transfer Stock.
(C) If such First Offer is undersubscribed and any Transfer
Offeree requests to purchase a number of Shares equal to or less than its
respective pro rata portion of the Transfer Stock, each Transfer Offeree shall
(x) first, be entitled to receive the number of Shares of Transfer Stock
requested for purchase by such Transfer Offeree or, if less, the number of
Shares of Transfer Stock equal to such Transfer Offeree's pro rata portion of
the Transfer Stock, and (y) second, with respect to any Transfer Offeree
requesting Excess Shares, receive that number of additional Shares equal to the
lesser of (1) the number of Excess Shares such Transfer Offeree requested and
(2) such Transfer Offeree's allocable portion of the Excess Shares based on the
respective number of Shares held by each Transfer Offeree who requested Excess
Shares, applied on an iterative basis to the extent that any such Transfer
Offeree's request shall be satisfied in full without all Excess Shares being
allocated.
(iii) If any First Offer is undersubscribed, the Company shall
promptly so notify in writing (the "Second Notice") the Transfer Offerees and
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the Seller, specifying details of the initial subscription, and each Transfer
Offeree who elected to purchase at least its full pro rata portion of the Shares
specified in the Transfer Notice, and the Company shall have the irrevocable
right and option (subject to the priorities set forth below), exercisable for
ten (10) Business Days after the date of the Second Notice (the "Second Notice
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Period") to purchase those shares of Transfer Stock (the "Second Notice Transfer
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Stock") not previously accepted during the Initial Notice Period. Shares of
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Second Notice Transfer Stock shall be allocated (i) first, to the Transfer
Offerees requesting to purchase Second Notice Transfer Stock in the same manner
as Shares of Transfer Stock are required to be allocated to Transfer Offerees as
provided in Section 2(b)(ii) above and (ii) second, if such Transfer Offerees do
not request to purchase all of the Second Notice Transfer Stock, to the Company.
(iv) Subject to the Seller's rights under Section 2(b)(vi), the
closing of the purchases of the Transfer Stock by the Transfer Offerees, and, if
applicable, the Company, that have exercised the options granted pursuant to
this Section 2(b) shall take place at the principal office of the Company on the
date specified in the First Offer or the sixtieth (60th) calendar day after the
expiration of the Initial Notice Period, whichever is later, or, if a Second
Notice Period is required, on the date specified in the First Offer or the
sixtieth (60th) calendar day after the expiration of the Second Notice Period,
whichever is later. At such closing, such Transfer Offerees and, if applicable,
the Company shall deliver a certified check or checks in the appropriate amount
to the Seller against delivery of certificates representing the Transfer Stock
so purchased, duly endorsed in blank for transfer or accompanied by a stock
power duly executed in blank. In the event that the consideration specified in
the First Offer is other than cash, then such Transfer Offerees, and, if
applicable, the Company, may, at their option, deliver at such closing cash, in
lieu of such other consideration, in an amount equal to the fair market value of
such other consideration (as agreed upon by the parties or as determined by an
independent appraisal pursuant to procedures to be agreed upon by the parties).
(v) If any shares of the Transfer Stock allocated to an accepting
Transfer Offeree are not purchased by such Transfer Offeree or, if applicable,
the Company (collectively, the "Transfer Default Stock"), any or all such shares
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of Transfer Default Stock may be purchased
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by the other accepting Transfer Offerees, and, if applicable, the Company (the
"Default Offerees"), but only within ten (10) Business Days after the Company
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gives prompt notice of the availability of such Transfer Default Stock,
allocated among such Default Offerees in the manner as Shares of Transfer Stock
are required to be allocated pursuant to Section 2(b)(ii) above. In the event
that all shares of such Transfer Default Stock are not purchased by the Default
Offerees within such period, the Company shall have the right to purchase any or
all of such shares not purchased by the Default Offerees, but only within five
(5) Business Days after the expiration of such ten (10) Business Day period.
Nothing herein shall limit the Seller's legal or equitable remedies against any
such defaulting Transfer Offeree. If the Default Offerees choose not to purchase
all of the Transfer Default Stock, the Seller shall have the rights set forth in
Section 2(b)(vi) with respect to the Shares of Transfer Default Stock not so
purchased.
(vi) (A) Notwithstanding the acceptance by any Transfer Offeree who
commits to purchase a portion of the Transfer Stock or the Second Notice
Transfer Stock, pursuant to Section 2(b)(i) or Section 2(b)(iii) hereof,
respectively, if at the end of the Second Notice Period the Transfer Offerees
and the Company shall have collectively agreed to purchase less than all of the
Transfer Stock covered thereby (the "Partial Purchase Commitment"), the Seller
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shall immediately notify the Company and the accepting Transfer Offerees as to
whether or not it shall accept such Partial Purchase Commitment (the "Notice of
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Partial Purchase Commitment"). If such Partial Purchase Commitment is accepted,
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the closing for such purchase of a portion of such Transfer Stock shall take
place pursuant to Section 2(b)(iv) hereof. Upon acceptance by the Seller of the
Partial Purchase Commitment, the Seller shall have the right within the time
hereinafter specified to Transfer any Transfer Stock not included in the Partial
Purchase Commitment to any person at a price not less than and on terms no more
favorable than were in the Transfer Notice. If the Seller determines not to
Transfer any Transfer Stock pursuant to the Partial Purchase Commitment, the
Seller shall have the right within the time hereinafter specified to Transfer
any or all of the Transfer Stock to any person at a price not less than and on
terms no more favorable than contained in the Transfer Notice. If the Company
notifies the Seller that neither the Company nor any Transfer Offeree has agreed
to purchase any portion of the Transfer Stock, or the Seller has accepted a
Partial Purchase Commitment and desires to Transfer the remaining Transfer
Stock, or if there is a Partial Purchase Commitment and the Seller elects not to
accept such Partial Purchase Commitment, then, in any such case, the Seller
shall have ninety (90) calendar days from the date of such Notice of Partial
Purchase Commitment, as applicable (the "Sales Period"), in which to Transfer
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any or all of the Transfer Stock to any person at a price not less than and on
terms no more favorable than were contained in the Transfer Notice.
(B) No sale may be made to any third party pursuant to this clause
(vi) unless such third party agrees in writing, in form and substance reasonably
acceptable to the Company, to be bound by the provisions of this Agreement.
Promptly after any sale pursuant to this Section 2(b), the Seller shall notify
the Company of the consummation thereof and shall furnish such evidence of the
completion (including time of completion) of such sale and of the terms thereof
as the Company may reasonably request. If, at the termination of the Sales
Period, the Seller has not completed the sale of all the Transfer Stock, such
Seller shall no longer be permitted to Transfer such Transfer Stock pursuant to
this Section 2(b) without again fully complying with the provisions of this
Section 2(b), and all the restrictions on sale, transfer or
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assignment contained in this Agreement shall again be in effect with respect to
all such Seller's Transfer Stock.
c. Bring-Along Rights.
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(i) If (a) one or more Sellers at any time, or from time to time,
in one transaction or in a series of related transactions, propose to Transfer
(other than in an Exempt Transfer) to a third party (a "Third Party") a number
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of Shares representing (after giving effect to the conversion or exercise of all
Shares convertible into or exercisable for shares of Common Stock) sixty-seven
percent (67%) or more of the aggregate number of shares of Common Stock then
outstanding on a fully diluted basis; and (b) such Sellers have complied with
Section 2(b) hereof with respect to such proposed Transfer to such Third Party
and are entitled to proceed with such Transfer, then the Sellers shall have the
right (the "Bring-Along Right"), but not the obligation, to cause each of the
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other Shareholders (the "Other Shareholders") to tender to the Third Party for
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purchase, on the same terms and conditions as apply to the Sellers in the
transaction in which such Shares are to be purchased, all Shares held by such
Other Shareholders; provided, however, that in no event will the Other
Shareholders be compelled to tender their Shares for consideration other than
(i) cash or (ii) marketable securities listed on a national securities exchange
or the Nasdaq National Market System.
(ii) If any Sellers elect to exercise their Bring-Along Right under
this Section 2(c), then such Sellers shall so notify the Company and the Other
Shareholders in writing (the "Bring-Along Notice"). Each Bring-Along Notice
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shall set forth (i) the name of the Third Party and the number of Shares
proposed to be Transferred, (ii) the address of the Third Party, (iii) the
proposed amount and form of consideration and terms and conditions of payment
offered by the Third Party, and any other material terms pertaining to the
Transfer (the "Third Party Terms"), and (iv) that the Third Party has been
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informed of the rights provided for in this Section 2(c) and has agreed to
purchase Shares in accordance with the terms hereof. The Bring-Along Notice
shall be given at least thirty (30) calendar days before the closing of the
proposed Transfer.
(iii) Upon the giving of a Bring-Along Notice, each Other
Shareholder shall be entitled and obligated to sell the number of Shares set
forth therein to the Third Party on the Third Party Terms; provided, however,
that neither the Sellers nor any Other Shareholder shall be obligated to
consummate the sale of any Shares if the Third Party does not purchase all
Shares which the Shareholders are entitled to sell pursuant hereto.
(iv) At the Closing of any Transfer pursuant to this Section 2(c),
the Third Party shall remit to each Shareholder the consideration for the total
sales price of the Shares of such Shareholder sold pursuant hereto, against
delivery by such Shareholder of certificate(s) for such Shares duly endorsed in
blank for transfer or accompanied by stock power(s) duly executed in blank, and
the compliance by such Shareholder with all other conditions to closing
generally applicable to the Sellers and all Other Shareholders selling shares in
such transaction.
(v) Nothing contained in this Section 2(c) shall prohibit any
party from exercising its respective rights under the Warrant Agreement between
the Company and Imperial
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Bank; provided, however, nothing contained herein or in the Warrant Agreement
shall give the holders of such Warrants any priority over the rights of the
holders of the Preferred Stock.
d. Tag-Along Rights.
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(i) If (a) one or more Sellers at any time, or from time to time,
in one transaction or in a series of related transactions, propose to Transfer
to a Third Party (other than in an Exempt Transfer) a number of Shares
representing (after giving effect to the conversion or exercise of all Shares
convertible into or exercisable for shares of Common Stock) twenty-five percent
(25%) or more of the aggregate number of shares of Common Stock then outstanding
on a fully diluted basis; and (b) such Sellers have complied with Section 2(b)
hereof with respect to such proposed Transfer to such Third Party and are
entitled to proceed with such Transfer, then each of the Shareholders other than
the Sellers (collectively, the "Tag-Along Shareholders") shall have the right
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(the "Tag-Along Right") to require the proposed purchaser to purchase from such
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Tag-Along Shareholder up to the number of Shares not to exceed the number
derived by multiplying the total number of Shares to be purchased by the
proposed purchaser(s) in such transaction(s) by a fraction, the numerator of
which is the total number of Shares owned by such Tag-Along Shareholder, and the
denominator of which is the total number of Shares owned by the Sellers and all
Tag-Along Shareholders. Any Shares purchased from Tag-Along Shareholders
pursuant to this Section 2 shall be paid for in cash, at the same price per
share and upon the same terms and conditions as such proposed Transfer by the
Seller (the "Transfer Terms").
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(ii) The Sellers shall promptly notify the Tag-Along Shareholders
in the event the Sellers propose to make a Transfer giving rise to the Tag-Along
Right, and shall furnish the Tag-Along Shareholders with the Transfer Terms and
a copy of any written offer or agreement pertaining thereto. The Tag-Along Right
may be exercised by any Tag-Along Shareholder by delivery of a written notice to
each Seller proposing to sell Shares (the "Tag-Along Notice") within ten (10)
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Business Days following its receipt of such notice from such Seller. The
Tag-Along Notice shall state the amount of Shares that such Tag-Along
Shareholder proposes to include in such Transfer to the proposed purchaser (not
to exceed the number determined as aforesaid). In the event that the proposed
purchaser does not purchase the specified number of Shares from the Tag-Along
Shareholders on the Transfer Terms, and subject to the same terms and conditions
as are applicable to the Sellers in such transaction, then the Sellers shall not
be permitted to sell any Shares to the proposed purchaser in the proposed
Transfer.
(iii) Notwithstanding the foregoing, except as provided in this
Section 2(d)(iii), the Transfer Terms shall provide that the same price per
Share will be payable, regardless of the class or series of Share being sold. If
the proposed purchaser of the Shares is unwilling to pay the same price per
Share regardless of the class or series of Shares being sold, as provided in the
immediately preceding sentence, then upon notice of such fact to the Sellers
(the "Price Notice"), the Sellers and the Tag-Along Shareholders shall retain an
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investment banker, who shall be acceptable to the Sellers and the Tag-Along
Shareholders who hold a majority of the Shares of each class and series proposed
to be sold, for purposes of valuing each class or series of Shares proposed to
be sold. The costs associated with the engagement of such investment banker
shall be borne pro rata by the Sellers and the Tag-Along Shareholders in
proportion to the aggregate value of Shares being sold by each. The written
determination of such values by such
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investment banker shall be binding upon the Sellers and the Tag-Along
Shareholders. If, after additional good faith negotiations, if necessary, the
value per Share for any class or series of Shares determined by such investment
banker is greater than the price per Share that the proposed purchaser is
willing to pay for such class or series, then such Seller or Tag-Along
Shareholder may withdraw some or all of his Shares from the proposed Transfer,
and the remaining Sellers and Tag-Along Shareholders shall be permitted to sell
their Shares to the proposed purchaser in the proposed Transfer on the Transfer
Terms. If the value per Share for any class or series of Shares determined by
such investment banker is less than the price at which any Seller or Tag-Along
Shareholder is willing to sell his Shares, then such Seller or Tag-Along
Shareholder may withdraw some or all of his Shares from the proposed Transfer,
and the remaining Sellers and Tag-Along Shareholders shall be permitted to sell
their Shares to the proposed purchaser in the proposed Transfer on the Transfer
Terms. If such price is equal to or more than the value per Share for each class
or series proposed to be sold as determined by such investment banker, then the
sale may proceed on the proposed terms.
e. Exempt Transfer. As used herein, the term "Exempt Transfer" shall
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mean (i) Transfers by any Shareholder to its respective Related Parties (as
defined in Section 2(f)), (ii) Transfers by any of a Shareholder's Related
Parties to such Shareholder, (iii) a Transfer by a Shareholder upon death of
such Shareholder by inheritance or operation of law to the heirs or devises of
such Shareholders, (iv) Transfers by any Shareholder or any of the Shareholder's
Related Parties to any other person pursuant to an effective registration
statement under the Securities Act, (v) Transfers which are approved in writing
by all Shareholders, and (vi) Transfers by a Shareholder of Shares as collateral
security for loans made to such Shareholder, the proceeds of which are used by
the transferring Shareholder in the exercise of such Shareholder's rights under
Section 2 or Section 3 of this Agreement, provided, however, that (A) no such
Transfer (except as set forth in clauses (iv) and (vi) above shall be an Exempt
Transfer unless the transferee agrees in writing to be bound by this Agreement
as a Shareholder with respect to the shares received by such transferee and (B)
the foreclosure upon any lien, pledge or security interest granted pursuant to
an Exempt Transfer described in clause (vi) and any Transfer of such Shares
subsequent to such foreclosure shall not constitute an Exempt Transfer and shall
be subject to all provisions of this Agreement, including, without limitation,
the provisions of this Section 2.
f. Related Party. As used herein, the term "Related Party" with respect
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to any Shareholder means, as of the time of any Transfer: (i) any person or
entity that, directly or indirectly, through one or more intermediaries, has
voting control of, or is under common voting control with, such Shareholder;
(ii) with respect to individuals, such Shareholder's spouse, parents, children,
siblings and/or grandchildren; (iii) a trust, corporation, partnership or other
entity, whose beneficiaries, shareholders, partners, or owners, or other Persons
which hold a controlling interest in such Shareholder, consist of such
Shareholder and/or such other Persons referred to in the immediately preceding
clause (i) or (ii); (iv) with respect to any Shareholder which is a partnership
or a limited liability company, such Shareholders' partners and retired
partners, or members and retired members, in an amount that is pro rata with
their respective ownership or other interests; and (v) with respect to Oak
Investment, Oak VIII Affiliates Fund, L.P.
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g. Opinion of Counsel. Notwithstanding any provision herein to the
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contrary, no Shareholder shall Transfer any Shares unless such Shareholder shall
first obtain an opinion of counsel satisfactory to the Company to the effect
that such Transfer is either exempt from the registration provisions of the
Securities Act or that the Securities Act is inapplicable to such Transfer.
3. Preemptive Rights. In the event that the Company desires to issue
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any Shares in an offering that is not required to be registered under the
Securities Act or any applicable state securities law (a "Private Offering"),
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the Company must first offer to sell the Shares proposed to be issued in such
Private Offering in accordance with this Section 3 on the same terms and
conditions as the sale of Shares or other securities in such proposed Private
Offering.
The offer (the "Preemptive Right Notice") by the Company to the
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Shareholders shall be dated, shall be in writing and shall set forth the full
details of the proposed Private Offering, including, but not limited to, the
consideration to be paid, and all other details, terms and conditions related to
the proposed Private Offering.
From and after the time that the Shareholders receive the Preemptive
Right Notice, each Shareholder shall have the right, exercisable by giving
written notice to the Company of such Shareholder's intent to exercise such
right within thirty (30) Business Days of the Preemptive Right Notice, to
subscribe for and purchase a number of Shares subject to the Preemptive Right
Notice, on the terms set forth in the Preemptive Right Notice, such that, after
giving effect to the issuance of Shares subject to the Preemptive Right Notice
and the exercise of the rights of each Shareholder set forth in this Section 3
(including, for the purpose of this calculation, the issuance of Common Stock
upon conversion, exchange or exercise of any securities convertible,
exchangeable or exercisable into shares of Common Stock to be issued in such
Private Offering), the shares of Common Stock owned by such Shareholder (after
giving effect to the conversion of any securities held by such Shareholder
convertible into Common Stock) shall represent the same percentage of the
outstanding shares of Common Stock owned by such Shareholder prior to the
consummation of such Private Offering (after giving effect to the conversion of
any securities held by such Shareholder convertible into Common Stock, provided,
however, that all warrants and options shall not be included in the calculation
of the ownership percentage of each Shareholder). If any Shareholder fails to
give written notice of such Shareholder's election to exercise the rights of
such Shareholder set forth in this Section 3 within thirty (30) Business Days of
the date of the Preemptive Right Notice, such Shareholder shall be deemed to
have waived the rights granted to such Shareholder under this Section 3 with
respect to the Shares so offered under such Preemptive Right Notice.
Each Shareholder that has exercised its right to purchase Shares
pursuant to this Section 3 shall, within sixty (60) calendar days from the date
of the Preemptive Right Notice, purchase the Shares or other securities subject
to the Preemptive Right Notice in accordance with the terms of this Section 3.
Notwithstanding the foregoing, the rights provided for in this Section
3 shall not apply to: (i) any issuance to employees or directors of the Company
of Common Stock or non-transferable options to purchase Common Stock under a
bona fide employee benefits plan adopted by the Board of Directors of the
Company, to the extent that the aggregate amount of all such Shares of
-10-
Common Stock issued on or after November 24, 1998 and issuable pursuant thereto
(including any Shares of Common Stock issuable upon any exercise of any options
issued pursuant thereto) do not represent more than 1,725,000 shares of Common
Stock (as adjusted to reflect any stock split or any subdivision,
reclassification, combination of or with respect to outstanding shares of Common
Stock or any similar transaction); or (ii) any issuance or sale of any Shares to
any person or entity if: (a) the Board of Directors unanimously approves such
issuance or sale; and (b) the holders of at least 67% of the outstanding shares
of Common Stock, Series A Stock, Series B Stock and Series C Stock held by
persons or entities who are parties to this Agreement, voting together on an
as-converted basis, approve such issuance or sale.
The Board of Directors of the Company shall have the right and option
to require, on a case-by-case basis, that as a condition precedent to the
exercise of any option or warrant or the purchase or other acquisition of any
Shares, any Person must (i) agree in writing to be bound by this Agreement as a
Shareholder with respect to the Shares received by such person or entity, and
(ii) execute a joinder to this Agreement satisfactory in form and substance to
the Company, in which event Schedule A hereto shall automatically be amended to
add such Person.
4. Voting; Board of Directors; Executive Officers.
----------------------------------------------
a. Number of Directors. Except as otherwise provided herein, at all
-------------------
times during which this Agreement remains in effect, the Board of Directors
shall consist of seven (7) directors, except as set forth in this Section 4.
b. Election of Directors. Each Shareholder hereby agrees at all times
---------------------
during which this Agreement remains in effect to vote all Shares held by such
Shareholder entitled to vote upon the election of directors of the Company as
follows:
(i) for the election to the Board of Directors of one (1)
individual to be designated by Xxxxxxxxx;
(ii) for the election to the Board of Directors of one (1)
individual to be designated by Grumman Hill;
(iii) for the election to the Board of Directors of one (1)
individual to be designated by Oak Investment;
(iv) for the election to the Board of Directors of one (1)
individual to be designated by Xx. Xxxxxxxxxx;
(v) for the election to the Board of Directors of one (1)
individual to be designated by Xx. Xxxxxxxx;
(vi) for the election to the Board of Directors of one (1)
individual to be designated by Xx. Xxxxxxx; and
(vii) for the election to the Board of Directors of one (1)
individual to be designated by a majority of the directors elected pursuant to
Section 4(b)(i) - (iii) and who is not
-11-
an Affiliate or Related Person of any Shareholder (the "Independent Director").
--------------------
The Independent Director shall be elected by the holders of Preferred Stock.
The entitlement of Xxxxxxxxx to designate a director shall terminate at
the time that Xxxxxxxxx'x ownership of Voting Securities of the Company is
reduced to less than twenty-five percent (25%) of the Voting Securities of the
Company owned in aggregate by Xxxxxxxxx on the date of this Agreement. The term
of office of the Xxxxxxxxx director shall expire at the time of a Qualified
Initial Public Offering if thereafter Xxxxxxxxx holds less than ten percent
(10%) of the Shares owned in the aggregate by Xxxxxxxxx on the date of this
Agreement.
The entitlement of Grumman Hill to designate a director shall terminate
at the time that Grumman Hill's ownership of Voting Securities of the Company is
reduced to less than fifty percent (50%) of the Voting Securities of the Company
owned in aggregate by Grumman Hill on the date of this Agreement. The term of
office of the Grumman Hill director shall expire at the time of a Qualified
Initial Public Offering if thereafter Grumman Hill holds less than ten percent
(10%) of the Shares owned in the aggregate by Grumman Hill on the date of this
Agreement.
The entitlement of Oak Investment to designate a director shall
terminate at the time that Oak Investment's ownership of Voting Securities of
the Company is reduced to less than fifty percent (50%) of the Voting Securities
of the Company owned in aggregate by Oak Investment on the date of this
Agreement. The term of office of the Oak Investment director shall expire at the
time of a Qualified Initial Public Offering if thereafter Oak Investment holds
less than ten percent (10%) of the Shares owned in the aggregate by Oak
Investment on the date of this Agreement.
The entitlement of Xx. Xxxxxxxxxx to designate a director, and the term
of office of such director shall terminate at the time that Xx. Xxxxxxxxxx is no
longer employed by the Company. The entitlement of Xx. Xxxxxxxx to designate a
director, and the term of office of such director shall terminate at the time
that Xx. Xxxxxxxx is no longer retained as a consultant by the Company. The
entitlement of Xx. Xxxxxxx to designate a director, and the term of office of
such director shall terminate upon the earlier to occur of the date (i) that Xx.
Xxxxxxx' aggregate percentage ownership of Voting Securities of the Company is
reduced to less than ten percent (10%) of the percentage ownership of Voting
Securities of the Company, or (ii) that a registration statement relating to the
initial public offering of shares of the Company's common stock becomes
effective. Following the termination of the term of office of the director
designated by Xx. Xxxxxxx, a majority of the remaining directors shall designate
one individual who is not an Affiliate or Related Person of any Shareholder as
the replacement to Xx. Xxxxxxx, and each Shareholder shall vote all of its
Shares in a manner to cause such vacancy to be filled by the individual so
designated by the remaining directors.
In the event that any vacancy occurs on the Board of Directors because
of death, disability, resignation, retirement or removal of any director
selected by either Xxxxxxxxx, Grumman Hill or Oak Investment (an "Investor
--------
Director") during the period in which this Agreement remains in effect, each
--------
Shareholder shall vote all of its Shares in a manner to cause such vacancy to be
filled so as to give effect to the foregoing provisions of Section 4(b). Any
action taken by the Board of Directors after the occurrence of any vacancy due
to the death, disability, resignation, retirement or removal of any Investor
Director (other than any action as
-12-
may be necessary to fill such vacancy) until such vacancy is filled in
accordance with the foregoing provisions of this Section 4 shall be subject to
the unanimous approval of the remaining Investor Directors.
In the event that any vacancy occurs on the Board of Directors because
of death, disability, resignation, retirement or removal of either Xx.
Xxxxxxxxxx or Xx. Xxxxxxxx for any reason during the period in which this
Agreement remains in effect, each Shareholder shall vote all of its Shares in a
manner to cause such vacancy to be filled by an individual to be designated by a
majority of the remaining directors. Such designated director shall be either a
member of management of the Company or an independent director. In the event
that any vacancy occurs on the Board of Directors because of death, disability,
resignation, retirement or removal of Xx. Xxxxxxx during the period in which Xx.
Xxxxxxx is entitled to designate a director, each Shareholder shall vote all of
its Shares in a manner to cause such vacancy to be filled by an individual to be
designated by Xx. Xxxxxxx or his duly appointed representative and approved
(such approval shall not be unreasonably withheld) by a majority of the
remaining directors.
In the event that as of the end of any semi-annual period during the
Test Period, the Company's consolidated Earnings Before Interest, Taxes,
Depreciation, and Amortization ("EBITDA"), as reflected in the Company's
------
unaudited financial statements and computed on a twelve (12) month trailing
basis, falls twenty percent (20%) or more below the EBITDA for such period set
forth in the projections schedule delivered to the purchasers of shares of
Series C Stock pursuant to that certain Stock Purchase Agreement dated as of the
date hereof, the Investor Directors shall have the right, but not the
obligation, to initiate the removal of the Independent Director by a majority
vote of the Investor Directors. Promptly after such majority vote of the
Investor Directors, the Company shall send a notice seeking the approval of such
removal to all of the holders of Preferred Stock. Each Shareholder shall vote
all of its Shares in a manner to cause such Independent Director to be removed
from the Board of Directors. Following such removal, a majority of the Investor
Directors shall designate any person of their choosing, including, if desired, a
Related Person or Affiliate of a Shareholder, as the replacement to the
Independent Director, and each Shareholder shall vote all of its Shares in a
manner to cause such vacancy to be filled by the individual so designated by the
Investor Directors.
Any election necessary to fill any vacancy on the Board of Directors
shall be held as soon as practicable after the occurrence of any such vacancy,
but in any event within twenty (20) Business Days after the occurrence thereof.
c. Committees of the Board. The parties hereto agree that, at all times
-----------------------
during the term of this Agreement, at least one of the Investor Directors
designated by Xxxxxxxxx shall be a member of all key committees of the board of
directors of the Company, including without limitation the real estate, audit
and compensation committees. The parties hereto agree that, at all times during
the term of this Agreement, they shall cause the size of any such key committees
of the Board of Directors to be constituted by no more than three members of the
Board of Directors.
d. Compensation of Directors. During the term of this Agreement, each
-------------------------
member of the Board of Directors shall receive reimbursement by the Company for
all reasonable out-of-pocket expenses, including, without limitation, travel
expenses, incurred by such director in
-13-
connection with the performance of such director's duties, and the Independent
Director shall also receive reasonable director compensation as approved by the
Board of Directors.
e. Voting Rights of Common Stock Pledged to the Company. Each
----------------------------------------------------
Shareholder hereby agrees at all times during which this Agreement remains in
effect to vote any Pledged Shares held by such Shareholder in the same manner as
the holders of a majority of the Voting Securities on all matters on which such
Shareholder is entitled to vote. For purposes of this Section 4(e), "Pledged
Shares" shall mean all shares of Common Stock that are pledged to, or used as
collateral for or to secure any loan or other obligation by a Shareholder to the
Company.
5. Covenants of the Company. So long as this Agreement is in effect,
------------------------
the Company covenants and agrees as follows:
a. Financial Statements and Other Information.
------------------------------------------
(i) The Company and its subsidiaries shall maintain correct and
complete books and records of accounts in which full and correct entries will be
made of all its business transactions pursuant to a system of accounting
established and administered in accordance with generally accepted accounting
principles ("GAAP") consistently applied to the extent applicable, and set aside
----
on its books all such proper accruals and reserves as shall be required under
GAAP consistently applied. The Company shall retain one of the "Big Four"
accounting firms for the purpose of auditing its financial statements and
reports for each fiscal year.
(ii) The Company shall deliver to each holder of at least five
percent (5%) of the then outstanding Voting Securities of the Company:
(1) As soon as available after the end of each fiscal year, and in
any event within ninety (90) calendar days thereafter, (i) a balance sheet of
the Company and its subsidiaries, if any, as at the end of such fiscal year, and
consolidated statements of income and retained earnings and consolidated
statements of changes in cash flows of the Company and its subsidiaries, if any,
for such year, setting forth in each case in comparative form the corresponding
figures for the previous fiscal year, all prepared in accordance with GAAP
consistently applied and accompanied by a report and opinion thereon by the
Company's independent certified public accountants, which audit report shall
state that such consolidated financial statements present fairly in all material
respects the financial position as of such date and results of operations and
cash flows for the periods indicated, all in conformity with GAAP; and (ii) a
schedule setting forth the number, class and series of all authorized shares of
stock of the Company, the number, class and series of issued and outstanding
stock of the Company, the name of each record holder of any such stock and the
number, class and series of such stock held by each such holder.
(2) As soon as available after the end of the first fiscal quarter
of the Company after the date hereof, and in any event within forty-five (45)
calendar days after the end of each of the first three fiscal quarters of each
fiscal year, an unaudited balance sheet of the Company and its subsidiaries, if
any, as of end of such quarter, and unaudited statements of income, retained
earnings, and changes in cash flows of the Company and its subsidiaries, if any,
for such period and the fiscal year to date, setting forth in comparative form
the corresponding
-14-
figures for the corresponding fiscal quarter of the previous fiscal year, in
each case prepared in accordance with GAAP (subject to normal year-end
adjustments and without footnote disclosure) and certified on behalf of the
Company by its chief accounting officer.
(3) As soon as available after the end of each month, and in any
event within thirty (30) calendar days after the end of each month, an unaudited
balance sheet of the Company and its subsidiaries, if any, as of end of such
month, and unaudited statements of income of the Company and its subsidiaries,
if any, in each case prepared in accordance with GAAP (subject to normal
year-end adjustments and without footnote disclosure) and certified on behalf of
the Company by its chief accounting officer.
(4) Thirty (30) calendar days prior to the end of each fiscal year
of the Company, a business plan (the "Budget") which (i) forecasts ahead at
------
least one year the Company's projected costs, revenues, income, balance sheet
and cash flow on a monthly basis, (ii) forecasts ahead at least one year the
capital requirements necessary to reasonably expand the Company.
(5) Promptly, upon preparation thereof, any other budgets that the
Company may prepare and any revisions of the Company's Budget.
b. Right to Inspection, Etc. The Company shall, upon reasonable prior
-------------------------
written notice, make available to any Shareholder owning at least five percent
(5%) of the then outstanding Voting Securities of the Company (i) all corporate
and business financial records of the Company and its subsidiaries, if any, for
inspection and copying at the Company's offices by any officer, employee, agent,
attorney or accountant designated by each such Shareholder; and (ii) the
officers and employees of the Company and its subsidiaries and its independent
accountants for interviews by each such Shareholder (or any of such designees of
such Shareholder) concerning the affairs and finances of the Company and its
subsidiaries, if any. Such inspection, copying, and interviews may be made by
each such Shareholder (or any of such Shareholder's designees) at any time
during normal business hours or at such other times as may be reasonably
requested, but in no event more than once a quarter.
Each such Shareholder and its agents and representatives, in exercising
its rights of inspection, copying, interviewing and attendance of board meetings
hereunder, shall maintain the confidentiality of all financial and other
confidential information of the Company acquired by it in exercising such rights
and shall use such information right fairly, and in compliance with applicable
state and federal securities laws. This right shall not apply to or be
assignable to any person or entity that competes with the Company or that would
obtain a competitive advantage from disclosure of such information.
c. Transactions Requiring a Super-Majority Vote of Series A Stock,
---------------------------------------------------------------
Series B Stock, and Series C Stock. In addition to any vote or consent of
----------------------------------
shareholders required by law or by the Amended and Restated Articles of
Incorporation of the Company, so long as at least fifty percent (50%) of the
originally issued shares of Preferred Stock (calculated on an as-converted
basis) remains outstanding, and except as set forth below, the affirmative vote
of the holders of at least sixty percent (60%) of the holders of Preferred Stock
then outstanding, voting together as a
-15-
single class on an as-converted basis, either in writing without a meeting or by
vote at any meeting called for the purpose, shall be necessary for effecting,
validating or permitting:
(i) any initial public offering other than a Qualified Initial
Public Offering;
(ii) any (1) consolidation or merger involving the Company or its
subsidiary (other than a consolidation or merger in which the Company is the
surviving entity and no change in the capital stock or ownership of the Company
occurs), (2) reclassification or recapitalization of any capital stock of the
Company or any subsidiary, (3) dissolution, liquidation, or winding up of the
Company or any subsidiary, (4) sale of all or substantially all of the assets of
the Company or any subsidiary, or (5) Change of Control;
(iii) change in the Company's Line of Business;
(iv) any amendment, alteration or repeal of any of the provisions
of (1) the Amended and Restated Articles of Incorporation of the Company; (2)
the by-laws of the Company or any subsidiary; or (3) this Agreement;
(v) any authorization, issuance or creation of, or increase in
the authorized amount of, any shares of capital stock of the Company (other than
for options issued in connection with stock option plans approved by the
affirmative vote of a majority of the holders of Preferred Stock, voting
together as a class on an as-converted basis, then outstanding);
(vi) the incurrence of, or agreement to incur, any indebtedness
which would result in a debt to equity ratio at the time the indebtedness is
incurred (after giving effect to such incurrence) of greater than 1:1, as
measured based upon the consolidated balance sheet of the Company and the
Company's subsidiaries prepared as of the last day of the immediately preceding
month, with a pro forma adjustment for the Indebtedness incurred by, and any
equity invested in, the Company and its subsidiaries since such date;
(vii) any loan, advance or guarantee to, or for the benefit of, or
any sale, lease, transfer or disposition of any of the properties or assets of
the Company or its subsidiaries to, or for the benefit of, or any purchase or
lease of any property or assets from, or the execution, performance or amendment
of any contract, agreement or understanding with, or for the benefit of, any
Affiliate of the Company or its subsidiaries other than in the ordinary course
of business consistent with the past practice of the Company or its
subsidiaries; provided, however, that this clause (vii) shall not apply to (A)
any payment pursuant to the terms of contracts or agreements existing on the
date hereof or (B) transactions in the ordinary course of business consistent
with the past practice of the Company or its subsidiaries involving individually
or in the aggregate no more than $100,000 per year which transactions shall have
been promptly reported to the Board of Directors of the Company;
(viii) any declaration or payment of any dividends on or any
declaration or making of any other distribution, directly or indirectly, through
subsidiaries or otherwise, on account of any capital stock of the Company or the
setting apart of any sum for any such purpose except as set forth in the
Certificate of Determination; provided, however, that this clause (viii) shall
not apply to the repurchase by the Company of warrants and warrant shares
pursuant to the terms of the Warrant Agreement between the Corporation and
Imperial Bank;
-16-
(ix) any termination or hiring of senior officers of the Company
(including the Chairman, President, Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer);
(x) any acquisition or transaction or series of related
transactions by the Company or any subsidiary having a value greater than $1
million (measured by the fair market value at the date of such transaction); and
(xi) any agreement to do any of the foregoing.
If at any time either Xxxxxxxxx, Grumman Hill or Oak Investment
individually owns in excess of sixty percent (60%) of the Preferred Stock then
outstanding, then the affirmative vote of the holders of at least seventy
percent (70%) of the Preferred Stock then outstanding, voting together as a
single class on an as-converted basis, shall be necessary for effecting,
validating or permitting any of the actions set forth in this Section 5(c)
(except with respect to actions set forth in Section 5(c)(ii)(3), in which case
the affirmative vote of 66 2/3% of the Preferred Stock then outstanding, voting
together as a single class on an as-converted basis, shall be necessary).
6. Remedies for Breach.
-------------------
a. General. If any Shareholder under this Agreement fails to give a
-------
notice, make an offer, sell Shares of the Company, close a sale or do any other
act required of such Shareholder under this Agreement, then, if the failure
continues for ten (10) Business Days after notice to the Shareholder in default
(the "Defaulting Shareholder") by the Company or one of the non-defaulting
----------------------
Shareholders, the Company or such non-defaulting Shareholders, or any one of
them, may institute and maintain a proceeding to compel the Defaulting
Shareholder's specific performance of this Agreement. The remedy of specific
performance shall be in addition to any and all of the remedies at law or in
equity including, but not limited to, injunctive relief and an action for
damages, to which any Shareholder of the Company may be entitled.
b. No Personal Liability. No Shareholder shall have any personal
---------------------
liability for any debts of the Company that may be created as a result of this
Agreement unless otherwise agreed to in writing by such Shareholder.
7. Legend on Stock Certificates. Each Shareholder agrees that the
----------------------------
certificates representing Shares subject to the provisions of this Agreement
shall be endorsed as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
-------------------------------------------------------------
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
---------------------------------------------------------------
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
-------------------------------------------------------------
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
------------------------------------------------------------------
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO
------------------------------------------------------------------
AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT
--------------------------------------------------------------------
OR SUCH LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
----------------------------------------------------------------
SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN AN
-----------------------------------------------
-17-
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT DATED AS OF OCTOBER 2,
--------------------------------------------------------------------
2001. A COPY OF SUCH AGREEMENT MAY BE OBTAINED FROM THE COMPANY UPON
--------------------------------------------------------------------
REQUEST."
---------
8. Miscellaneous.
-------------
a. Termination. This Agreement shall terminate upon the occurrence of
-----------
the earliest of the following to occur: (i) the mutual written consent of each
party hereto, or (ii) the consummation of a Qualified Initial Public Offering.
Upon such termination all rights and obligations of the parties hereto shall
terminate.
b. Notices. All notices, demands and other communications provided for
-------
or permitted hereunder shall be made in writing and shall be delivered by
registered or certified first-class mail, return receipt requested, courier
service or personal delivery to the Company at its principal office and to the
Shareholders at the addresses or facsimile numbers set forth on Schedule 1
hereto or to such other addresses or facsimile number, as applicable, as any
party hereto may designate to the other in writing. All such notices and
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; when delivered by courier, if delivered by commercial
overnight courier service; when mailed, five Business Days after being deposited
in the mail, postage prepaid; when delivered by facsimile transmission, upon
confirmation of receipt.
c. Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the parties hereto, their successors, heirs, personal
representatives and assigns.
d. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, without regard to the
principles of conflicts of law of such state.
e. Severability. If any provision of this Agreement is invalid or
------------
unenforceable, such invalidity shall not invalidate or render unenforceable any
other part of this Agreement, but the Agreement shall be construed as not
containing the particular provision or provisions held to be invalid or
unenforceable, and the rights and obligations of the parties hereto shall be
construed and enforced accordingly.
f. Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original and all of which taken together, shall
constitute one and the same instrument.
g. Headings. Section numbers and headings are provided for convenience
--------
only and for no other purpose. Such headings shall have no effect upon the terms
of this Agreement including, but not limited to, the limitation or expansion of
any provision hereof.
h. Amendment. The Agreement and any of the terms hereof (except as
---------
provided below) may only be amended, changed, waived or discharged by an
instrument in writing signed by the holders of at least 70% of the outstanding
shares of Series A Stock, Series B Stock, Series C Stock and Common Stock,
voting together as a class on an as-converted basis; provided,
-18-
however, that Sections 2(d) - (f) may only be amended, changed, waived or
discharged by an instrument in writing signed by all the parties hereto; and,
provided further, however, that Section 3 and Section 4(b) hereof may only be
amended, changed, waived or discharged by an instrument in writing signed by the
holders of at least 90% of the outstanding shares of Series A Stock, Series B
Stock, Series C Stock and Common Stock, voting together as a class on an
as-converted basis.
9. Confidential and/or Proprietary Information. The Shareholders will
-------------------------------------------
have access to confidential information consisting of Company trade secrets,
data, business methods, trade dress and know-how, including, but not limited to,
the Company's customers or accounts and all Company customer lists, sales
information, employee lists, financial records and information with respect to
the business of the Company (the "Confidential and/or Proprietary Information").
All of the Confidential and/or Proprietary Information shall be the sole and
exclusive property of the Company and none of the Confidential and/or
Proprietary Information shall, without the express written consent of the
Company, (a) be disclosed by a Shareholder to a third party other than persons
associated with the Shareholders or a Related Party and such persons' financial
and legal advisors; or (b) used by any Shareholder or Related Party for any
purpose other than in connection with such persons' investment in the Company
and Company purposes.
-19-
IN WITNESS WHEREOF, the undersigned parties have duly executed and
delivered this Agreement as of the date first above written.
FRESH ENTERPRISES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxxxxx
President and Chief Executive Officer
XXXXXXXXX-XXXXX PARTNERS III, L.P.,
a Delaware limited partnership
By: Xxxxxxxxx-Xxxxx Managing Partner III,
L.L.C.
Its General Partner
By: /s/ Xxxxx X. Xxxx, Xx.
---------------------------------
Xxxxx X. Xxxx, Xx.
Authorized Person
XXXXXXXXX PARTNERS IV, L.P.
a Delaware limited partnership
By: Xxxxxxxxx Managing Partner IV,
L.L.C.,
Its General Partner
By: CP4 Principals, L.L.C.,
Its Managing Member
By: /s/ Xxxxx X. Xxxx, Xx.
---------------------------------
Xxxxx X. Xxxx, Xx.
Authorized Person
XXXXXXXXX PARTNERS IV-A, L.P.
a Delaware limited partnership
By: Xxxxxxxxx Managing Partner IV,
L.L.C.,
Its General Partner
By: CP4 Principals, L.L.C.,
Its Managing Member
By: /s/ Xxxxx X. Xxxx, Xx.
---------------------------------
Xxxxx X. Xxxx, Xx.
Authorized Person
-20-
XXXXXXXXX PARTNERS IV-B, L.P.
a Delaware limited partnership
By: Xxxxxxxxx Managing Partner IV, L.L.C.,
Its General Partner
By: CP4 Principals, L.L.C.,
Its Managing Member
By: /s/ Xxxxx X. Xxxx, Xx.
__________________________________
Xxxxx X. Xxxx, Xx.
Authorized Person
XXXXXXXXX PARTNERS IV OFFSHORE, L.P.
a Cayman Islands limited partnership
By: Xxxxxxxxx Managing Partner IV, L.L.C.,
Its General Partner
By: CP4 Principals, L.L.C.,
Its Managing Member
By: /s/ Xxxxx X. Xxxx, Xx.
__________________________________
Xxxxx X. Xxxx, Xx.
Authorized Person
XXXXXXXXX PARTNERS IV SPECIAL PURPOSE, L.P.
a Cayman Islands limited partnership
By: Xxxxxxxxx Managing Partner IV, L.L.C.,
Its General Partner
By: CP4 Principals, L.L.C.,
Its Managing Member
By: /s/ Xxxxx X. Xxxx, Xx.
__________________________________
Xxxxx X. Xxxx, Xx.
Authorized Person
-21-
XXXXXXXXX-BAJA PARTNERS, L.L.C.,
a Delaware limited liability company
By: Xxxxxxxxx Partners IV Management
Company, L.L.C.
Its Managing Member
By: /s/ Xxxxx X. Xxxx, Xx.
__________________________________
Xxxxx X. Xxxx, Xx.
Authorized Person
GRUMMAN HILL INVESTMENTS III, L.P.,
a Delaware limited partnership
By: Grumman Hill Group, L.L.C.
Its General Partner
By: /s/ Xxxxx X. Xxxxxx
__________________________________
Xxxxx X. Xxxxxx
Authorized Person
OAK INVESTMENT PARTNERS VIII LIMITED
PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxxxxxx
______________________________________
Xxxxxx X. Xxxxxxxxx, Managing
Member of Oak Associates VIII, LLC,
the General Partner of
Oak Investment Partners VIII,
Limited Partnership
-22-
OAK VIII AFFILIATES FUND LIMITED
PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxxxxxx
______________________________________
Xxxxxx X. Xxxxxxxxx
Managing Member of Oak VIII
Affiliates LLC,
the General Partner of
Oak VIII Affiliates Fund
Limited Partnership
/s/ Xxxxxx X. Xxxxx
______________________________________
Xxxxxx X. Xxxxx
/s/ Xxxxxxx X. Xxxxxxxxxx
______________________________________
Xxxxxxx X. Xxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxx
______________________________________
Xxxxx X. Xxxxxxxx, individually and as
trustee of the Xxxxx X. Xxxxxxxx
Separate Property Trust
/s/ Xxxxx Xxxxxxx
______________________________________
Xxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxxx
______________________________________
Xxxxx X. Xxxxxxx
/s/ Xxxx Yonkich
______________________________________
Xxxx Yonkich
/s/ Xxxxxxx Yonkich
______________________________________
Xxxxxxx Yonkich
/s/ Xxxxx X. Xxxxxx
______________________________________
Xxxxx X. Xxxxxx
/s/ Xxxxxxx X. XxXxxxx
______________________________________
Xxxxxxx X. XxXxxxx
IMPERIAL BANK
By: /s/ Xxxxx Xxxxxxxxxxx
______________________________________
Name:
Title:
-23-
THE XXXXX AND XXXXXX XXXX FAMILY TRUST
By: /s/ Xxxxx X. Xxxx /s/ Xxxxxx X. Xxxx
______________________________________
Name: Xxxxx X. Xxxx
Title: Trustee
XXXX & XXXXX XXXXXXX LIVING TRUST
By: /s/ Xxxx Xxxxxxx
______________________________________
Name: Xxxx Xxxxxxx
Title: Trustee
By: /s/ Xxxxx X. Xxxxxxx
______________________________________
Name: Xxxxx X. Xxxxxxx
Title: Trustee
/s/ Xxxxx Xxxxxx
______________________________________
Xxxxx Xxxxxx
/s/ Xxxx Xxxxxx
______________________________________
Xxxx Xxxxxx
/s/ Xxx Xxxxx
______________________________________
Xxx Xxxxx
JKG ENTERPRISE GROUP MONEY PURCHASE
PENSION PLAN FBO XXXX XXXXXXXXXX
By: /s/ Xxxx Xxxxxxxxxx
______________________________________
Xxxx Xxxxxxxxxx, Trustee
-24-
Schedule A
----------
Xxxxxxxxx-Xxxxx Partners III, X.X.
Xxxxxxxxx Partners IV, X.X.
Xxxxxxxxx Partners IV-A, X.X.
Xxxxxxxxx Partners IV-B, X.X.
Xxxxxxxxx Partners IV Offshore, X.X.
Xxxxxxxxx Partners IV Special Purpose, X.X.
Xxxxxxxxx-Baja Partners, L.L.C.
Grumman Hill Investments III, L.P.
Oak Investments Partners VIII, L.P.
Oak VIII Affiliates Fund, L.P.
Xxxxxx Xxxxx
Xxxx Xxxxxxxxxx
Xxxx Xxxxxxxxxx, Trustee, JKG Enterprise Group Money Purchase Pension Plan FBO
Xxxx Xxxxxxxxxx
Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx Separate Property Trust
Xxxxx and Xxxxx Xxxxxxx
Xxxx and Xxxxxxx Yonkich
Xxxxx X. Xxxxxx
Xxxxxxx X. XxXxxxx
The Xxxxx and Xxxxxx Xxxx Family Trust
The Xxxxx & Xxxxx Xxxxxxx Living Trust
Cyrus and Xxxx Xxxxxx
Xxxxxx X. Xxxxx
Imperial Bank
A-1
Schedule B
----------
Xxxxxxxxx Partners IV, X.X.
Xxxxxxxxx Partners IV-A, X.X.
Xxxxxxxxx Partners IV-B, X.X.
Xxxxxxxxx Partners IV Offshore, X.X.
Xxxxxxxxx Partners IV Special Purpose, X.X.
Xxxxxxxxx-Baja Partners, L.L.C.
Grumman Hill Investments III, L.P.
Oak Investment Partners VIII, L.P.
Oak VIII Affiliates Fund, L.P.
The Xxxxx & Xxxxx Xxxxxxx Living Trust
Cyrus and Xxxx Xxxxxx
Xxxxxxx X. XxXxxxx
Xxxxx X. Xxxxxx
Xxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxxxxx
Xxxxxx X. Xxxxx
The Xxxxx & Xxxxxx Xxxx Family Trust
B-1
AMENDMENT NO. 1
TO
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT,
dated as of April 19, 2002 (this "Amendment"), amends that certain Amended and
---------
Restated Shareholders' Agreement dated as of October 2, 2001 (the "Shareholders'
-------------
Agreement"), among Fresh Enterprises, Inc., a California corporation (the
---------
"Company"), and the holders of the issued and outstanding capital stock of the
-------
Company listed on Schedule A to the Shareholders' Agreement (collectively, the
"Shareholders"), and is made and entered into with reference to the following
------------
facts (all capitalized terms not otherwise defined herein have the respective
meanings assigned to them in the Shareholders' Agreement):
WHEREAS, the definition of Qualified Initial Public Offering in the
Shareholders' Agreement contains a minimum per share offering price;
WHEREAS, the Board has concluded that disclosure regarding such minimum
share price in the registration statement would be problematic and could have a
negative effect on the underwriters' attempts to market the offering;
WHEREAS, the Board has determined that the designation of such minimum
share price in the Shareholders' Agreement is unnecessary since substantially
the same protections can be obtained through a requirement that the initial
public offering be authorized by all three Investor Directors; and
WHEREAS, the Board and the undersigned Shareholders have therefore
concluded that it is in the best interests of the Company and the Shareholders
to amend the Shareholders' Agreement to redefine Qualified Initial Public
Offering.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereby agree as follows:
1. Amendment to Shareholders' Agreement. Section 1(n) is hereby amended
------------------------------------
in its entirety to read as follows:
"Qualified Initial Public Offering shall mean an underwritten public
---------------------------------
offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), of shares
--------------
of Common Stock that is approved by a majority of the Board of
Directors, including all three (3) Investor Directors."
2. Notices. All notices, demands and other communications provided for
-------
under this amendment shall be in writing and shall be delivered in accordance
with Section 8(b) of the Shareholders' Agreement.
3. Jurisdiction and Integration. This Amendment shall be governed by
----------------------------
and construed in accordance with the laws of the State of California, without
regard to the principles
1
of conflicts of law of such state. This Amendment, together with the
Shareholders' Agreement, contains the entire understanding between the parties
hereto relating to the subject matter hereof and supersedes any prior
understandings and agreements, whether oral or written, among the parties
respecting such subject matter.
4. Binding Agreement; Counterparts. This Amendment shall be binding
-------------------------------
upon the parties hereto, their successors, assigns and legal representatives.
This Amendment may be executed in several counterparts, all of which together
shall constitute one and the same agreement, binding on all of the parties,
notwithstanding that all of the parties are not signatories to the original or
same counterparts.
5. Full Force and Effect. Except as expressly amended by this
---------------------
Amendment, the Shareholders' Agreement shall continue in full force and effect
in accordance with the provisions thereof. As used in the Shareholders'
Agreement, "hereinafter," "hereto," "hereof," and other words of similar import
shall, unless the context otherwise requires, mean the Shareholders' Agreement
as amended by this Amendment. In the event of any conflict or inconsistency
between the terms and conditions of the Shareholders' Agreement and the terms
and conditions of this Amendment, the terms and conditions of this Amendment
shall control.
IN WITNESS WHEREOF, the undersigned parties have duly executed and
delivered this Amendment as of the date first above written.
FRESH ENTERPRISES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
_______________________________
Xxxxxxx X. Xxxxxxxxxx
President and Chief Executive Officer
XXXXXXXXX-XXXXX PARTNERS III, L.P.,
a Delaware limited partnership
By: Xxxxxxxxx-Xxxxx Managing Partner III,
L.L.C.
Its: General Partner
By: /s/ Xxxxx X. Xxxx, Xx.
_________________________________
Xxxxx X. Xxxx, Xx.
Authorized Person
2
XXXXXXXXX PARTNERS IV, L.P.
a Delaware limited partnership
By: Xxxxxxxxx Managing Partner IV,
L.L.C.,
Its General Partner
By: CP4 Principals, L.L.C.,
Its Managing Member
By: /s/ Xxxxx X. Xxxx Xx.
---------------------------------
Xxxxx X. Xxxx Xx.
Authorized Person
XXXXXXXXX PARTNERS IV OFFSHORE, L.P.
a Cayman Islands limited partnership
By: Xxxxxxxxx Managing Partner IV,
L.L.C.,
Its General Partner
By: CP4 Principals, L.L.C., its
Managing Member
By: /s/ Xxxxx X. Xxxx Xx.
---------------------------------
Xxxxx X. Xxxx Xx.
Authorized Person
XXXXXXXXX PARTNERS IV SPECIAL PURPOSE,
L.P.
a Cayman Islands limited partnership
By: Xxxxxxxxx Managing Partner IV,
L.L.C.,
Its General Partner
By: CP4 Principals, L.L.C.,
Its Managing Member
By: /s/ Xxxxx X. Xxxx Xx.
---------------------------------
Xxxxx X. Xxxx Xx.
Authorized Person
3
XXXXXXXXX-BAJA PARTNERS, L.L.C.,
a Delaware limited liability company
By: Xxxxxxxxx Partners IV Management
Company, L.L.C.
Its Managing Member
By: /s/ Xxxxx X. Xxxx Xx.
---------------------------------
Xxxxx X. Xxxx Xx.
Authorized Person
GRUMMAN HILL INVESTMENTS III, L.P.,
a Delaware limited partnership
By: Grumman Hill Group, L.L.C.
Its: General Partner
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Xxxxx X. Xxxxxx
Authorized Person
OAK INVESTMENT PARTNERS VIII LIMITED
PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxxx
Managing Member of Oak Associates
VIII, LLC, the General Partner of Oak
Investment Partners VIII, Limited
Partnership
OAK VIII AFFILIATES FUND LIMITED
PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxxx
Managing Member of Oak VIII
Affiliates LLC, the General Partner
of Oak VIII Affiliates Fund Limited
Partnership
4
/s/ Xxxxxx X. Xxxxx
__________________________________________
Xxxxxx X. Xxxxx
/s/ Xxxxxxx X. Xxxxxxxxxx
__________________________________________
Xxxxxxx X. Xxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxx
__________________________________________
Xxxxx X. Xxxxxxxx, individually and as
trustee of the Xxxxx X. Xxxxxxxx Separate
Property Trust
/s/ Xxxxx Xxxxxxx
__________________________________________
Xxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxxx
__________________________________________
Xxxxx X. Xxxxxxx
/s/ Xxxx Yonkich
__________________________________________
Xxxx Yonkich
/s/ Xxxxxxx Yonkich
__________________________________________
Xxxxxxx Yonkich
/s/ Xxxxx X. Xxxxxx
__________________________________________
Xxxxx X. Xxxxxx
/s/ Xxxxxxx X. XxXxxxx
__________________________________________
Xxxxxxx X. XxXxxxx
IMPERIAL BANK
By: _____________________________________
Name:
Title:
5
THE XXXXX AND XXXXXX XXXX FAMILY TRUST
By: _____________________________________
Name: Xxxxx X. Xxxx
Title: Trustee
XXXX & XXXXX XXXXXXX LIVING TRUST
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
Title: Trustee
By: Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Trustee
/s/ Xxxxx Xxxxxx
------------------------------------------
Xxxxx Xxxxxx
/s/ Xxxx Xxxxxx
------------------------------------------
Xxxx Xxxxxx
/s/ Xxx Xxxxx
------------------------------------------
Xxx Xxxxx
JKG ENTERPRISE GROUP MONEY PURCHASE
PENSION PLAN FBO XXXX XXXXXXXXXX
By: /s/ Xxxx Xxxxxxxxxx
-------------------------------------
Xxxx Xxxxxxxxxx, Trustee
6
