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EXHIBIT 10.13
INVESTORS' RIGHTS AGREEMENT
This INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made and entered
into this 25th day of September, 1996, by and among Xxxxxx Xxxxx & Associates,
Inc. (the "Company"), the shareholders of the Company whose names appear on the
signature pages hereto (each, individually, a "Shareholder," and collectively,
the "Shareholders"), J. Xxxxxxxxxxx Xxxxx, Trustee of the RB Trust Dated June
28, 1993 (the "Trustee"), J. Xxxxxxxxxxx Xxxxx and Xxxxxxx X. Xxxxx. Messrs.
Xxxxx, Xxxxx and the Trustee are referred to individually herein as "Investor"
and collectively as "Investors."
BACKGROUND
A. The execution of this Agreement is a condition to the consummation
of the transactions contemplated by that certain Securities Purchase Agreement
(the "Securities Purchase Agreement") dated as of September 25, 1996 by and
among the Company, the Shareholders and Investors pursuant to which Investors
have agreed to purchase certain shares of the Company's common stock ("Common
Stock") from the Shareholders.
B. Xxxxxx X. Xxxxx ("Xxxxx"), one of the Shareholders, is a founder of
the Company.
C. In consideration of the benefits to be derived from the consummation
of the transactions contemplated by the Securities Purchase Agreement, the
Company and the Shareholders (including Xxxxx, who is entering into certain
agreements which the other Shareholders are not entering into) desire to enter
into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and for good and valuable consideration, the adequacy and
receipt of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Certain Covenants.
1.1 Inspection Rights. So long as Investors together own at
least 40% of the Common Stock initially purchased by Investors pursuant to the
Securities Purchase Agreement ("Investors' Initial Holdings"), the Company shall
permit each Investor, at such Investor's expense, to visit and inspect the
Company's properties, to examine its books of account and records and to discuss
the Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested.
1.2 Annual Audits. Promptly following the execution of this
Agreement, the Board of Directors of the Company shall select and retain one of
the six largest independent accounting firms in the United States to become the
Company's independent
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accountants. So long as Investors hold at least 40% of Investors' Initial
Holdings, the Company's financial statements for each fiscal year ending after
the date hereof shall be audited by such accounting firm or such other firm
meeting the criteria set forth above as may be selected by the Board of
Directors.
1.3 Information Rights. So long as Investors own at least 40%
of Investors' Initial Holdings, the Company shall deliver to each Investor the
following financial statements:
(a) As soon as practicable, but in any event within
120 days after the end of each fiscal year of the Company, an audited balance
sheet, income statement, and statement of cash flows for such fiscal year, each
in reasonable detail;
(b) As soon as practicable, but in any event within 30
days after the end of each month of each fiscal year of the Company, an
unaudited balance sheet, income statement and statement of cash flows as of the
end of such month, each in reasonable detail;
(c) Within 30 days prior to the beginning of each
fiscal year, the Company shall provide each Investor with a copy of the
Company's operating plan for such fiscal year, which shall (i) include the
Company's budget for each quarter of the upcoming fiscal year, (ii) forecast
operating profit, cash flow and capital expenditures and (iii) reflect all
material changes proposed for the Company's business; and
(d) Such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as such
Investor may from time to time request.
1.4 Key Man Life Insurance. Subject to the 30 day grace period
set forth in Section 4.9 of the Securities Purchase Agreement, so long as
Investors own at least 40% of Investors' Initial Holdings, the Company shall
maintain in effect guaranteed renewable, key man term life insurance policies,
each in a policy amount of $2,000,000, insuring the life of Xxxxxx X. Xxxxx and
the life of Xxx Xxxxxxxx. Such policies shall name the Company as the
beneficiary. The Company shall not cancel either policy or change the
beneficiary of either policy without the express written consent of Investors.
2. Co-Sale Agreement with Xxxxx.
2.1 Sales by Xxxxx. In the event that Xxxxx at any time
receives a bona fide offer (a "Purchase Offer") from any person to purchase no
less than 15% of the capital stock of the Company owned by him, his spouse, or
any trust or family partnership formed by him or his wife for the benefit of
themselves or any member or members of their family (collectively, the "Xxxxx
Affiliates"), then Xxxxx shall promptly notify each Investor who is a
shareholder of the Company of the terms and conditions of such Purchase Offer
(the "Offer Notice").
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2.2 Investors' Sale Rights. Each Investor shall have the right,
exercisable upon written notice to Xxxxx within 30 days after receipt of the
Offer Notice to participate in the proposed sale of Common Stock pursuant to the
terms and conditions of such Purchase Offer. To the extent any Investor
exercises such right of participation in accordance with the terms and
conditions set forth below, the number of shares of Common Stock which the Xxxxx
Affiliates may sell pursuant to such Purchase Offer shall be correspondingly
reduced. The right of participation of Investors shall be subject to the
following terms and conditions:
(a) Each Investor may sell all or any part of that
number of shares of Common Stock equal to the product obtained by multiplying
(i) the aggregate number of shares of Common Stock covered by the Purchase Offer
by (ii) a fraction the numerator of which is the number of shares of Common
Stock at the time owned by such Investor and the denominator of which is the sum
of the number of shares of Common Stock at the time owned by the Xxxxx
Affiliates plus the number of shares of Common Stock owned by such Investor.
(b) Each Investor shall deliver to Xxxxx for transfer
to the proposed purchaser one or more certificates, properly endorsed for
transfer, which represent the number of shares of Common Stock which such
Investor elects to sell pursuant to this Section 2.2. Xxxxx shall promptly
thereafter remit to such Investor that portion of the sale proceeds to which
such Investor is entitled by reason of such Investor's participation in the
sale.
(c) This Section 2 shall not apply with respect to
sales of shares of Common Stock by any Xxxxx Affiliates to any employee of the
Company.
3. Xxxxx' Take Along Rights. In the event that Xxxxx agrees to sell or
exchange (by merger or otherwise) all of the shares of Common Stock held by the
Xxxxx Affiliates in a bona fide arm's-length transaction to a person or entity
not otherwise affiliated with any Shareholder ("Third Party"), then upon the
written demand of Xxxxx (which demand shall contain all of the information
provided to be set forth in a notice pursuant to Section 2 above), Investors
shall sell to such Third Party all of the shares of Common Stock held by them at
the same price and on the same terms and conditions as those applicable to the
Xxxxx Affiliates.
4. Rights Upon Issuance of Additional Securities.
4.1 Procedure. So long as any Investor is a shareholder of the
Company, if the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock (collectively, "New Shares"), the Company shall first make an offering of
such New Shares to such Investor(s) in accordance with the following provisions:
(a) The Company shall deliver a notice by certified
mail (the "Notice") to such Investor(s) stating (i) its bona fide intention to
offer such New Shares, (ii) the
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number of such New Shares to be offered, and (iii) the price and terms, if any,
upon which it proposes to offer such New Shares.
(b) Each such Investor, may, by written notice to the
Company delivered within 20 days of the receipt of the Notice, elect to
purchase, at the price and on the terms specified in the Notice, up to that
portion of such New Shares which equals the proportion that the number of shares
of Common Stock held by such Investor bears to the total number of shares of
Common Stock of the Company then outstanding.
(c) The Company may, during the 30-day period
following the expiration of the period provided in Section 3.1(b), offer such
New Shares not purchased by Investors to any person or persons at a price not
less than, and upon terms no more favorable to such person than those specified
in the Notice. If the Company does not enter into an agreement for the sale of
such New Shares within such period, or if such agreement is not consummated
within 45 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such New Shares shall not be offered unless first
reoffered to Investors in accordance herewith.
4.2 Permitted Issuances. The provisions of this Section 3 shall
not be applicable to the issuance of New Shares in connection with any merger,
consolidation, asset purchase, stock exchange or employee incentive plan.
5. Investors' Put Option. Shareholders hereby grant to each Investor a
put option (the "Put Option") with respect to all shares held now or hereafter
by such Investor, which becomes exercisable in the event either the Company or
the Shareholders enter into any transaction without the consent of such Investor
which involves the sale of the Company, whether pursuant to a merger,
consolidation, sale of assets, sale or exchange of stock or otherwise ("Sale
Transaction"), in which the per share price received by such Investor (or
effectively received in the case of a sale of assets) (the "Sale Price") is less
than the per share price paid by such Investor pursuant to the Securities
Purchase Agreement, adjusted for any subsequent stock splits, stock dividends or
stock combinations (the "Initial Purchase Price"). Upon notice of any Investor's
exercise of the Put Option, the Shareholders shall purchase a pro rata (in
accordance with such shareholder's stock ownership) portion of the shares of
Common Stock tendered by such Investor at a purchase price equal to the Initial
Purchase Price multiplied by the number of shares of Common Stock tendered. Such
purchase price may be paid contemporaneously with and from funds obtained by the
Shareholders in such Sale Transaction.
6. Voting Agreement.
6.1 Election of Directors. So long as each Investor is a
shareholder of the Company, (i) such Investor shall vote all of the shares of
Series A Common Stock held of record by such Investor to elect to the Company's
Board of Directors (A) three directors (the "Common Directors") nominated by the
holders of a majority of the outstanding shares of Series A Common Stock, other
than shares owned by Investors (a "Majority of the Voting
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Shareholders"), and (B) one director nominated with the mutual approval of the
Trustee and a Majority of the Voting Shareholders (a "Mutually Agreed Upon
Director"); and (ii) each Shareholder shall vote all of the shares of Series A
Common Stock held of record by such Shareholder to elect to the Company's Board
of Directors (A) one director nominated by the Trustee, in his sole discretion,
and (B) the Mutually Agreed Upon Director. The Company shall use its best
efforts to ensure that there are no more and no less than five authorized
directors at all times. In the event the Trustee and a Majority of the Voting
Shareholders are not able to agree upon a person to serve as the Mutually Agreed
Upon Director, only four directors shall be elected and there shall be a vacancy
on the Board of Directors.
6.2 Filling Vacancies on the Board of Directors. In the event
any vacancy is created on the Board of Directors, whether through the
resignation, death or removal of a Director, such vacancy shall be filled in the
same manner as such Director was originally elected.
6.3 Board Meetings and Committees. Investors and the
Shareholders shall cause the Board of Directors to meet at least once per
quarter. The Board of Directors shall at all times provide for a compensation
committee and an audit committee and the representative of the Board nominated
by the Trustee shall at all times serve on each such committee.
6.4 Best Efforts to Cause Articles of Incorporation and Bylaws
to be Consistent with this Section 5. The Company and the Shareholders shall at
all times ensure that the Company's Articles of Incorporation and Bylaws are not
inconsistent with the provisions of this Agreement.
7. Other Covenants
7.1 Distributions. From and after January 1, 1997, the Company
shall make cash distributions in the form of dividends to its shareholders,
including Investors, no less than annually in an amount at least equal to the
"Net For Dividend" amount for the applicable period, computed in a manner
consistent with the manner in which the "Net For Dividend" amount was computed
in calendar 1994 and 1995. In no event shall any such distribution be made which
would (i) leave the Company with inadequate working capital to conduct its
business immediately following such distribution, or (ii) violate any provision
of any credit agreement or other contract to which the Company is a party or by
which the Company is bound.
7.2 Compensation of Key Employees. From and after January 1,
1997, Xxxxxx X. Xxxxx, Xxxxx X. Xxxxx and Xxx Xxxxxxxx shall receive a base
salary as set forth on Schedule 7.2 attached hereto and Xx. Xxxxxxxx shall be
entitled to receive an incentive bonus as set forth on such Schedule 7.2. Such
compensation shall not be materially increased without the unanimous approval
of the Board of Directors.
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8. Miscellaneous.
8.1 Assignment of Rights. The rights of any Investor under this
Agreement may be assigned by such Investor, or any permitted assignee or
transferee of such Investor, to any assignee or transferee of shares of Common
Stock, provided that the Company is furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such rights are being assigned or transferred within a reasonable time
after such assignment or transfer. Notwithstanding the foregoing, an Investor or
permitted assignee or transferee shall not assign or transfer any shares of
Common Stock or any rights granted under this Agreement to (i) any person or
entity which does not meet the requirements of a permitted shareholder of a
subchapter S corporation, (ii) any competitor, former or current client of the
Company, or (iii) any other person or entity to which the Company has a
reasonable objection.
8.2 Termination of Rights. The rights of Investors and Xxxxx
under this Agreement shall terminate upon the consummation of, and the
provisions of Sections 2, 3 and 4 shall not apply with respect to shares of
Common Stock sold in an underwritten public offering of the Company's Common
Stock.
8.3 Prohibited Transfers. Any transfer or purported transfer of
any Common Stock in contravention of any provision of this Agreement shall be
void and the Company shall take all actions necessary to prevent such transfer
from taking place, including imposing stop transfer instructions as to such
shares.
8.4 Legends. Each certificate representing shares of capital
stock of the Company now or hereafter owned by Investors or the Shareholders
shall be endorsed with the following legend:
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO THE TERMS AND CONDITIONS OF AN INVESTORS' RIGHTS
AGREEMENT. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF XXXXXX XXXXX & ASSOCIATES, INC.
8.5 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties.
8.6 Governing Law. This Agreement shall be interpreted and
enforced in accordance with, and its validity and performance shall be governed
by, the laws of the State of California without regard to its principles of
choice of law.
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8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.8 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience of reference only and are not to be
considered in construing or interpreting this Agreement.
8.9 Notices. Unless otherwise expressly provided herein, any
notice required or permitted under this Agreement shall be given in writing and
shall be deemed effectively given (i) by telecopier at the number indicated for
such party on the signature page to the Stock Purchase Agreement upon receipt of
confirmation thereof, (ii) upon personal delivery to the party to be notified or
(iii) four (4) days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the party to be
notified at the address or number indicated for such party on the signature page
to the Stock Purchase Agreement, or at such other telecopier number or address
as such party may designate by advance written notice to the other parties.
8.10 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only with
the written consent of the party against which such amendment or waiver is to be
enforced.
8.11 Severability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Agreement or affect the
application of such provision to other persons or circumstances, and the parties
hereto agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be deemed to have been stricken from this Agreement
and the remainder of this Agreement will have the same force and effect as if
such part or parts had never been included herein. Any such finding or
invalidity or unenforceability shall not prevent the enforcement of such
provision in any other jurisdiction to the maximum extent permitted by
applicable law.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"INVESTORS" THE "COMPANY"
XXXXXX XXXXX & ASSOCIATES, INC.
/s/ J. XXXXXXXXXXX XXXXX
----------------------------------- By:
J. Xxxxxxxxxxx Xxxxx, Trustee of ---------------------------------
the RB Trust Dated June Xxxxxx X. Xxxxx, President and
28, 1993. Chief Executive Officer
Address:
0000 Xxxx Xxxxxx, 0xx Xxxxx
/s/ J. XXXXXXXXXXX XXXXX Xxxxxxx Xxxxx, XX 00000
----------------------------------- Telecopier No.: (000) 000-0000
J. XXXXXXXXXXX XXXXX
THE "SHAREHOLDERS"
/s/ XXXXXXX X. XXXXX
-----------------------------------
XXXXXXX X. XXXXX
Address: ----------------------------------------
000 X. Xxxxx Xxx., 29th Floor Xxxxxx X. Xxxxx, Co-trustee of the Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000 Xxxxx and Xxxxx Xxxxxx Revocable Trust,
Telecopier No.: (000) 000-0000 Dated June 24, 1992
-----------------------------------------
Xxxxx X. Xxxxx, Co-trustee of the Xxxxxx
Xxxxx and Xxxxx Xxxxxx Revocable Trust,
Dated June 24, 1992
Address:
0 Xxxxxx
Xxxxxx, XX 00000
Telecopier No.: (714)_____________
Telecopier No.:
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"INVESTORS" THE "COMPANY"
XXXXXX XXXXX & ASSOCIATES, INC.
----------------------------------- By: /s/ XXXXXX X. XXXXX
J. Xxxxxxxxxxx Xxxxx, Trustee of ---------------------------------
the RB Trust Dated June Xxxxxx X. Xxxxx, President and
28, 1993. Chief Executive Officer
Address:
0000 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx Xxxxx, XX 00000
----------------------------------- Telecopier No.: (000) 000-0000
J. XXXXXXXXXXX XXXXX
THE "SHAREHOLDERS"
-----------------------------------
XXXXXXX X. XXXXX
/s/ XXXXXX X. XXXXX
Address: ----------------------------------------
000 X. Xxxxx Xxx., 29th Floor Xxxxxx X. Xxxxx, Co-trustee of the Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000 Xxxxx and Xxxxx Xxxxxx Revocable Trust,
Telecopier No.: (000) 000-0000 Dated June 24, 1992
/s/ XXXXX X. XXXXX
-----------------------------------------
Xxxxx X. Xxxxx, Co-trustee of the Xxxxxx
Xxxxx and Xxxxx Xxxxxx Revocable Trust,
Dated June 24, 1992
Address:
0 Xxxxxx
Xxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Telecopier No.:
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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/s/ XXXXXXX X. XXXXXXXX
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Xxxxxxx X. Xxxxxxxx, Co-trustee of the K. and
X. Xxxxxxxx Revocable Trust Dated September
1, 1994
/s/ XXXXX X. XXXXXXXX
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Xxxxx X. Xxxxxxxx, Co-trustee of the K. and X.
Xxxxxxxx Revocable Trust Dated September 1, 1994
Address:
Telecopier No.:
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Xxxxxx Xxxx, Co-trustee of the Xxxxxx and
Xxxxx Xxxx Trust Dated February 26, 1990
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Xxxxx Xxxx, Co-trustee of the Xxxxxx and Xxxxx
Xxxx Trust Dated February 26, 1990
Address:
Telecopier No.:
(SIGNATURES CONTINUE ON FOLLOWING PAGE]
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Xxxxxxx X. Xxxxxxxx, Co-trustee of the K. and
X. Xxxxxxxx Revocable Trust Dated September
1, 1994
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Xxxxx X. Xxxxxxxx, Co-trustee of the K. and X.
Xxxxxxxx Revocable Trust Dated September 1, 1994
Address:
Telecopier No.:
/s/ XXXXXX XXXX
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Xxxxxx Xxxx, Co-trustee of the Xxxxxx and
Xxxxx Xxxx Trust Dated February 26, 1990
/s/ XXXXX XXXX
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Xxxxx Xxxx, Co-trustee of the Xxxxxx and Xxxxx
Xxxx Trust Dated February 26, 1990
Address:
Telecopier No.:
(SIGNATURES CONTINUE ON FOLLOWING PAGE]
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/s/ XXXXXX X. XXXXXXXXXXX
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Xxxxxx X. Xxxxxxxxxxx, Trustee of the
Heinsheimer Living Trust Dated July 17, 1968
Address:
Telecopier No.:
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XXXX X. XXXXXXXXXX
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XXXX X. XXXXXXXXXX
Address:
Telecopier No.:
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XXXXXXX X. XXXXXXX
Address:
Telecopier No.:
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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Xxxxxx X. Xxxxxxxxxxx, Trustee of the
Heinsheimer Living Trust Dated July 17, 1968
Address:
Telecopier No.:
/s/ XXXX X. XXXXXXXXXX
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XXXX X. XXXXXXXXXX
/s/ XXXX X. XXXXXXXXXX
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XXXX X. XXXXXXXXXX
Address:
Telecopier No.:
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XXXXXXX X. XXXXXXX
Address:
Telecopier No.:
(SIGNATURES CONTINUE ON FOLLOWING PAGE]
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Xxxxxx X. Xxxxxxxxxxx, Trustee of the
Heinsheimer Living Trust Dated July 17, 1968
Address:
Telecopier No.:
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XXXX X. XXXXXXXXXX
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XXXX X. XXXXXXXXXX
Address:
Telecopier No.:
/s/ XXXXXXX X. XXXXXXX
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XXXXXXX X. XXXXXXX
Address:
Telecopier No.:
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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/s/ XXXXXXXX X. XXXXXXX /s/ XXXXXXX X. XXXXXXX
---------------------------------- ---------------------------------
Xxxxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx, Trustee of
the Collart Family Trust
Address:
Telecopier No.:
---------------------------------
XXXXXXX X. XXXXXXXX
---------------------------------
XXXXX XXX XXXXXXXX
Address:
Telecopier No.:
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XXXXXXXXX X. XXXXX
---------------------------------
XXXXXXXXX XXX XXXXXXXX
Address:
Telecopier No.:
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/s/ XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx, Co-trustee of the
Collart Family Living Trust
/s/ XXXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxxx X. Xxxxxxx, Co-trustee of the
Collart Family Living Trust
Address:
Telecopier No.:
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XXXXXXX X. XXXXXXXX
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XXXXX XXX XXXXXXXX
Address:
Telecopier No.:
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XXXXXXXXX X. XXXXX
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XXXXXXXXX XXX XXXXXXXX
Address:
Telecopier No.:
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Xxxxxxx X. Xxxxxxx, Co-trustee of the
Collart Family Living Trust
--------------------------------------
Xxxxxxxx X. Xxxxxxx, Co-trustee of the
Collart Family Living Trust
Address:
Telecopier No.:
/s/ XXXXXXX X. XXXXXXXX
--------------------------------------
XXXXXXX X. XXXXXXXX
/s/ XXXXX XXX XXXXXXXX
--------------------------------------
XXXXX XXX XXXXXXXX
Address:
Telecopier No.:
/s/ XXXXXXXXX X. XXXXX
--------------------------------------
XXXXXXXXX X. XXXXX
/s/ XXXXXXXXX XXX XXXXXXXX
--------------------------------------
XXXXXXXXX XXX XXXXXXXX
Address:
Telecopier No.:
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