STOCKHOLDERS' AGREEMENT
By and Among
CHI ENERGY, INC.
and
EACH OF THE STOCKHOLDERS OF CHI ENERGY, INC.
Dated as of _______ __, 1997
STOCKHOLDERS' AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.............................................................. 1
ARTICLE II
PARTIES; REPRESENTATIONS AND WARRANTIES.................................. 4
Section 0.1 Representations of Each Signing Stockholder...... 4
Section 0.2 Additional Parties............................... 5
ARTICLE III
TRANSFER RESTRICTIONS.................................................... 5
Section 0.3 General Restrictions on Transfer................. 5
Section 0.4 Permitted Transfers.............................. 5
Section 0.5 Tag-Along Rights................................. 6
Section 0.6 Rights to Compel Sale............................ 9
Section 0.7 Deliveries at Closing; Method
of Payment of Purchase Price..................... 10
Section 0.8 Company Cooperation.............................. 11
Section 0.9 Legend on Certificates........................... 11
ARTICLE IV
CORPORATE GOVERNANCE..................................................... 12
Section 0.10 Initial Board; Number of Directors............... 12
Section 0.11 Nomination and Election of Directors............. 12
Section 0.12 Removal of Directors............................. 14
Section 0.13 Vacancies........................................ 14
ARTICLE V
MISCELLANEOUS............................................................ 15
Section 0.14 Effectiveness.................................... 15
Section 0.15 Waiver and Amendment............................. 15
Section 0.16 Termination...................................... 16
Section 0.17 Notices.......................................... 16
Section 0.18 Applicable Law and Time of Essence............... 16
Section 0.19 Descriptive Headings, Etc. ...................... 16
Section 0.20 Counterparts..................................... 17
Section 0.21 Successors, Assigns and Transferees.............. 17
Section 0.22 Severability..................................... 17
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT (this "Agreement") is made as of
__, 1997, by and among CHI Energy, Inc., a Xxxx xxxx corporation (the
"Company"), and each of the stockholders of the Company.
W I T N E S S E T H:
WHEREAS, the Plan of Reorganization, dated as of ______ __,
1997, of Consolidated Hydro, Inc., confirmed by order of the United States
Bankruptcy Court for the District of Delaware (the "Plan") provides that the
Company shall enter into an agreement with all of its stockholders to provide
for certain rights and obligations between and among them and subsequent holders
of certain of the Company's securities with respect to the Company; and
WHEREAS, the Company and the Stockholders (as defined below),
being the holders of substantially all of the outstanding common equity of the
Company, wish to enter into this Agreement to provide for certain rights and
obligations between and among them and subsequent holders of certain of the
Company's securities with respect to the Company;
NOW, THEREFORE, in consideration of the premises and mutual
agreements, covenants and provisions contained herein, and other good and
valuable consideration, the receipt and suf ficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
"Agreement" shall have the meaning specified in the
preamble hereof.
"Board of Directors" shall mean the board of directors
of the Company.
"Company" shall mean CHI Energy, Inc., a Delaware
corporation.
"Company Class B Warrant" shall mean any Series B warrant,
issued by the Company pursuant to the Plan, to purchase Shares.
"Company Class C Warrant" shall mean any Series C warrant,
issued by the Company pursuant to the Plan, to purchase Shares.
"Company Management Option" shall mean any option, issued by the Company to any
employee of the Company, to purchase Shares.
"Company Warrant" shall mean any Company Class B War
rant and/or Company Class C Warrant.
"Compelling Stake" shall mean, in connection with any proposed
Compelled Sale, 66-2/3% or more of the Shares outstanding at the time such sale
is proposed.
"Director" shall mean a duly elected member of the
Board of Directors.
"In-the-Money Company Warrant" shall mean, in connection with
any Tag-Along Sale, a Company Warrant having an exercise price less than the
value of the per share consideration to be received by the most favored Selling
Stockholder in the Tag-Along Sale.
"In-the-Money Company Management Option" shall mean, in
connection with any Tag-Along Sale, a Company Management Options having an
exercise price less than the value of the per share consideration to be received
by the most favored Selling Stockholder in the Tag-Along Sale.
"MS" shall mean Xxxxxx Xxxxxxx & Co., a _______ corporation.
"MS Director" shall mean a Director designated for nomination
or appointment pursuant to Article IV of this Agree ment by MS or an MS
Nomination Successor.
"Plan" shall mean that certain Plan of Reorganization, dated
as of ______ __, 1997, of Consolidated Hydro, Inc., as confirmed by the
bankruptcy court of the United States.
"Remaining Stockholders" shall mean, in connection with any
Compelled Sale, every Stockholder that is not a Compelling Stockholder.
"SB" shall mean, collectively, Swiss Bank Corporation,
London Branch, and Swiss Bank Corporation Restructuring &
Recovery Fund.
"SB Director" shall mean a Director designated for nomination
or appointment pursuant to Article IV of this Agree ment by SB or an SB
Nomination Successor.
"Shares" shall mean, collectively, the shares of Class A
Common Stock, par value $.01 per share, of the Company, and Class B Common
Stock, par value $.01 per share, of the Company (including Shares issued by the
Company upon the proper exercise of the Company Warrants and the Company
Management Options), and (b) shares of capital stock of the Company issued by
the Company in respect of or in exchange for shares of such common stock in
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connection with any stock dividend or distribution, stock split-up,
recapitalization, subdivision, recombination or exchange by the Company
generally of shares of such common stock.
"Signing Stockholders" shall mean the persons or en
tities who are signatories to this Agreement.
"Stockholder" shall mean any person to whom or which Shares
are issued pursuant to the Plan, and any person who becomes the holder of Shares
subsequent to the date of this Agreement upon exercise of any Company Class B
Warrant, Company Class C Warrant or Company Management Option, and any Permitted
Transferee.
"Tag-Along Purchaser" shall mean the party or group of related
parties acquiring Shares in a Tag-Along Sale.
"Tag-Along Sale" shall mean a transaction or series of
substantially contemporaneous related transactions or con tractually related
transactions in which Selling Stockholders propose to Transfer to a Tag-Along
Purchaser a number of Shares which, taken together with any Shares sold in such
transaction or related transactions, constitute 50% or more of the Shares then
outstanding.
"Tag-Along Stockholder" shall mean, in connection with any
Tag-Along Sale, each Stockholder (including Stockholder who becomes such upon
exercise of Company Warrants or Company Management Options at any time prior to
the fifth business day prior to the Tranfer Date) that is not a Selling
Stockholder.
"Transfer Date" shall mean the Original Transfer Date, or if
any New Transfer Date occurs, the latest occurring New Transfer Date.
"Whole Board" shall mean the number of Directors the Board of
Directors would have assuming no vacancies.
In addition, the following capitalized terms used herein shall
have the meanings ascribed to them in the section of the text indicated below:
"Cause" Section 4.3(b)
"Company Nominees" Section 4.2(a)
"Compelled Sale" Section 3.4(a)
"Compelled Sale Agreement" Section 3.4(a)
"Compelled Sale Closing" Section 3.4(d)
"Compelled Sale Date" Section 3.4(b)
"Compelled Sale Notice" Section 3.4(b)
"Compelled Sale Price" Section 3.4(a)
"Compelled Sale Purchaser" Section 3.4(a)
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"Compelled Sale Termination Date" Section 3.4(b)
"Compelling Stockholders" Section 3.4(a)
"Designee" Section 4.4(b)
"Election Meeting" Section 4.2(a)
"Included Shares" Section 3.3(e)
"Maximum Number" Section 3.3(b)
"MS Nomination Successor" Section 3.2(b)
"MS Nominees" Section 4.2(a)
"MS Vacancy" Section 4.1(a)
"New Transfer Date" Section 3.3(d)
"New Transfer Notice" Section 3.3(d)
"New Vacancy Designee" Section 4.4(c)
"Nominating Stockholder" Section 4.3(b)
"Officer Nominees" Section 4.2(a)
"Optionholder" Section 2.2
"Original Transfer Date" Section 3.3(c)
"Original Transfer Notice" Section 3.3(c)
"Outside Nominees" Section 4.2(a)
"Remaining Stockholders" Section 3.4(a)
"SB Nominees" Section 4.2(a)
"SB Nomination Successor" Section 3.2(b)
"SB Vacancy" Section 4.1(a)
"Sale Percentage" Section 3.3(b)
"Selling Stockholders" Section 3.3(a)
"Tag Along Allotment" Section 3.3(b)
"Tag-Along Notice" Section 3.3(e)
"Tag-Along Purchaser" Section 3.3(a)
"Transfer" Section 3.1
"Transfer Allotment" Section 3.3(b)
"Transfer Date" Section 3.3(c)
"Transfer Notice" Section 3.3(c)
"Warrantholder" Section 2.2
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ARTICLE II
PARTIES; REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations of Each Signing Stock holder. Each
Signing Stockholder represents and warrants to the Company and to each other
Signing Stockholder that (i) such Stockholder has full right, power and
authority (and, in the case of any natural person, such person has the legal
capacity) to execute and deliver this Agreement and to perform such Signing
Stockholder's obligations hereunder; and (ii) this Agreement has been duly
authorized, executed and delivered by such Signing Stockholder and is valid,
binding and enforceable against such Signing Stockholder in accordance with its
terms.
Section 2.2 Additional Parties. The Company shall include as a
provision of each warrant agreement relating to each Company Warrant and of each
option agreement relating to each Company Management Option that acceptance and
exercise of such Company Warrant or Company Management Option constitutes the
agreement of the holder thereof to become a party to and to be bound by this
Agreement upon the acquisition of Shares by such Warrantholder or Optionholder
upon exercise of such Company Warrant or Company Management Option.
ARTICLE III
TRANSFER RESTRICTIONS
Section 3.1 General Restrictions on Transfer. No Stockholder
shall, directly or indirectly, sell, offer for sale, transfer, assign, pledge,
hypothecate or otherwise dispose of any Shares or any right thereto or interest
therein (any such trans action, other than by operation of law, a "Transfer") at
any time except in compliance with applicable federal and state securities laws
and in compliance with this Agreement.
Section 3.2 Permitted Transfers. (a) Subject to Section 3.1, a
Stockholder may Transfer Shares at any time to any party, provided that upon
acceptance of such transferred Shares, and by virtue of the Transfer and this
Agreement, the party to whom such Transfer is to be made shall become bound by
all the terms of this Agreement to the same extent as a Stockholder is so bound.
Any party to whom such Transfer has been made consistent with the provisions of
this Article III (any such Transfer, a "Permitted Transfer") is herein referred
to as a "Permitted Transferee" and, after the consummation of such Permitted
Transfer, such Permitted Transferee shall be deemed a Stockholder for purposes
of this Agreement.
(b) MS or SB may assign to any Permitted Transferee part or
all of MS's or SB's rights, respectively, to designate Directors and fill
certain vacancies on the Board of Directors pursuant to Sections 4.2 and 4.4 of
this Agreement (such trans
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feree, an "MS Nomination Successor" or an "SB Nomination Suc cessor", as the
case may be); provided, however, that the total number of Directors with respect
to which MS and all XX Xxxxxx tion Successors together, and SB and all SB
Nomination Successors together, shall have designation and vacancy filling
rights, respectively, shall not exceed the lesser of (i) two and (ii) the number
of Directors with respect to which MS and the MS Nomination Successors, or SB
and the SB Nomination Successors, as the case may be, shall have rights pursuant
to Sections 4.2(b) and 4.2(c); and provided, further, that no assignment of any
of MS's or SB's rights pursuant to this paragraph shall be effective or
recognized by the Company unless set forth in a written agreement between MS or
SB, as the case may be, and the prospective MS Nomination Successor or SB
Nomination Successor, as the case may be; and provided, further, that neither MS
nor SB shall enter into a written agreement with any party that, when taken
together with any other written agreement or agreements entered into by MS or
SB, respectively, would grant rights with respect to the designation or
nomination of Directors or the filling of vacancies on the Board of Directors
inconsistent with or in excess of those provided for in this Section 3.2(b) and
in Section 4.2(b). The assignor of any assignment described in this Section
3.2(b) shall give written notice of such assignment, including the identity of
the assignee, to the Company no later than two business days after such
assignment is effected.
Section 3.3 Tag-Along Rights. (a) In the event any Stockholder
or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) of
Stockholders proposes to Transfer Shares in a Tag-Along Sale (the "Selling
Stockholders"), each Tag-Along Stockholder shall be afforded the opportunity to
participate therein in accordance with this Section 3.3.
(b) In connection with each Tag-Along Sale, each Tag- Along
Stockholder shall have the right to Transfer to the Tag- Along Purchaser a
number of Shares (a "Tag Along Allotment") held by such Tag-Along Stockholder
equal to the total number of Shares held by such Tag-Along Stockholder
multiplied by the Sale Percentage (as defined below), such Transfer to be upon
identical terms and conditions as those of the most favored Selling Stockholder
in the Tag-Along Sale and at a price equal to the greater of (1) the price to be
paid to the most favored Selling Stockholder in the Tag Along Sale or (2) a
fraction the numerator of which shall be the aggregate consideration paid by the
Tag- Along Purchaser for all of the Shares, if any, purchased by it in any
related transaction constituting a part of the Tag-Along Sale or in any other
transaction occurring during the 60 days immediately preceding the date the
Original Transfer Notice (as defined below) is sent, and the denominator of
which shall be the total number of Shares purchased by the Tag-Along purchaser
during such 60-day period. "Sale Percentage" shall be a fraction
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the numerator of which shall be the total number of Shares to be acquired by the
Tag-Along Purchaser in the Tag-Along Sale (the "Maximum Number") and the
denominator of which shall be the total number of Shares held collectively by
the Selling Stockholders and the Tag-Along Stockholders on the date the
Tag-Along Sale is consummated.
(c) At the time any Tag-Along Sale is proposed, the Selling
Stockholders shall give written notice to each Tag-Along Stockholder of its
right to sell Shares hereunder (the "Original Transfer Notice"), which notice
shall identify the proposed Tag- Along Purchaser and state the Maximum Number of
Shares to be acquired by the Tag-Along Purchaser in the Tag-Along Sale, an
estimate of the Sale Percentage (based on the number of Shares that would be
outstanding as of the date such notice is sent assuming the exercise of all
In-the-Money Company Warrants and In-the-Money Company Management Options), the
proposed transfer price (including the form and terms of any non-cash
consideration to be received in connection therewith), the proposed consummation
date of any such Transfer (the "Original Transfer Date") and any other material
terms and conditions of the pro posed Transfer. The Original Transfer Notice
shall be accom panied by a complete and correct copy of any offer to, or
agreement with, the Selling Stockholders by the Tag-Along Pur chaser to purchase
such Shares. The Original Transfer Notice shall be provided to the Tag-Along
Stockholders not less than 30 days prior to the Original Transfer Date. The
Selling Stockholders shall supply a copy of the Original Transfer Notice to the
Company at the same time that it is furnished to the Tag- Along Stockholders.
The Company shall provide a copy of the Original Transfer Notice to each holder
of an In-the-Money Company Warrant and each holder of an In-the-Money Company
Management Option not later than the 25th day prior to the Original Transfer
Date, it being understood that holders of In- the-Money Company Warrants and
In-the-Money Company Management Options who excercise such warrants or options
prior to the fifth business day prior to the Transfer Date shall be Tag-Along
Stockholders with respect to all Shares held by them as of such day and shall be
permitted to participate in the Tag-Along Sale with respect to such Shares by
complying with all of the provisions of this Section 3.3 that are applicable to
Tag-Along Stockholders.
(d) In the event of any change in the consideration to be paid
by the Tag-Along Purchaser or any change in any other material term or condition
of the Tag-Along Sale, a new transfer notice (a "New Transfer Notice") shall be
provided to the Tag- Along Stockholders (with a copy to the Company) and a new
transfer date (a "New Transfer Date") shall be set, which New Transfer Date
shall be not less than 30 days next following the date such New Transfer Notice
is provided to the Tag-Along
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Stockholders; provided, however, that in the event of an increase in the
consideration to be received by the Selling Stockholders and the Tag-Along
Stockholders, a New Transfer Notice shall be provided to the Tag-Along
Stockholders but no New Transfer Date need be set, and the Tag-Along Sale may be
consummated on the Original Transfer Date, so long as the New Transfer Notice is
provided to the Tag-Along Stockholders not later than the seventh day prior to
the Original Transfer Date, or, if such New Transfer Notice is provided to the
Tag-Along Stockholders on or after the seventh day prior to the Original
Transfer Date, the New Transfer Notice may specify a New Transfer Date, which
date shall not be fewer than seven days from the date the New Transfer Notice is
provided to the Tag-Along Stockholders, and the Tag-Along Sale may be
consummated on such New Transfer Date. The Company shall provide a copy of the
New Transfer Notice to holders of In-the- Money Company Warrants and
In-the-Money Company Options not later than the 25th day prior to the New
Transfer Date.
(e) Each Tag-Along Stockholder that wishes to par ticipate in
the Tag-Along Sale shall provide written notice (or oral notice confirmed in
writing) (the "Tag-Along Notice") to the Selling Stockholders not less than two
business days prior to the Transfer Date. The Tag-Along Notice shall set forth
the number of Shares ("Included Shares") that such Tag-Along Stockholder elects
to include in the Transfer, which number shall not exceed such Tag-Along
Stockholder's Tag-Along Allotment; provided, however, that the number of
Included Shares for any Tag-Along Notice that fails to set forth a number of
Included Shares, or sets forth a number of Included Shares in excess of such
Tag- Along Stockholder's Tag-Along Allotment, shall be deemed to be such
Tag-Along Stockholder's Tag-Along Allotment. The Tag-Along Notices given by the
Tag-Along Stockholders shall constitute their binding agreements to sell such
Shares on the terms and conditions applicable to the Tag-Along Sale.
(f) At the consummation of the Tag-Along Sale, the Tag-Along
Purchaser shall accept Transfer of (i) from each Tag- Along Stockholder, upon
the terms and at the price set forth in paragraph (b), the number of Included
Shares indicated on such Tag-Along Stockholder's timely received Tag-Along
Notice, and (ii) from the Selling Stockholders a number of shares equal to the
difference between the Maximum Number and the aggregate number of Included
Shares indicated on all timely received Tag- Along Notices.
(g) No Tag-Along Stockholder shall be required to make any
representations and warranties to any person in connection with a Tag-Along Sale
except that Tag-Along Stockholders may be required to make such representations
and warranties as are made by all of the Selling Stockholders, to the extent
applicable to a particular Tag-Along Stockholder.
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(a) The provisions of this Section 3.3 shall not apply to any Transfers pursuant
to an underwritten public offering, whether by the Company or a Stockholder or
group of Stockholders.
Section 3.4 Rights to Compel Sale. (a) In the event any
Stockholder or group of Stockholders holding a Compelling Stake (the "Compelling
Stockholders") shall enter into a written agreement with an unaffiliated party
(a "Compelled Sale Purchaser") to sell solely for cash or securities listed on a
U.S. national securities exchange or included for quotation in a U.S.
inter-dealer quotation system of a registered national securities association
all, but not less than all, of the then outstanding Shares in a bona fide
transaction (a "Compelled Sale Agreement"), the Compelling Stockholders shall
have the right, subject to the terms and conditions set forth below, to require
each of the Remaining Stockholders to sell all, but not less than all, of the
Shares held by each such Remaining Stockholder (a "Compelled Sale"). Subject to
the terms and conditions set forth below, the Remaining Stockholders shall, and
hereby agree to, sell such Shares on the same terms and conditions as the most
favored Compelling Stockholder sells its Shares pursuant to the Compelled Sale
Agreement and at a consideration per Share (the "Compelled Sale Price") equal to
the greater of (i) the consideration to be received by the most favored
Compelling Stockholder pursuant to the Compelled Sale Agreement and (ii) the
greatest consideration received by any Compelling Stockholder in any transaction
between such Compelling Stockholder and the Compelled Sale Purchaser during the
60-day period preceding the date the Compelled Sale Notice (as defined below) is
given.
(b) Within two business days following execution of any
Compelled Sale Agreement, the Compelling Stockholders shall provide each
Remaining Stockholder with written notice thereof (the "Compelled Sale Notice").
The Compelled Sale Notice shall attach a copy of the Compelled Sale Agreement
and shall set forth: (i) the name and address of the Compelled Sale Purchaser;
(ii) the Compelled Sale Price and the terms and conditions of payment offered by
the Compelled Sale Purchaser; and (iii) all other material terms of such
Compelled Sale, including the pro posed consummation date of the Compelled Sale
(the "Compelled Sale Date"), which shall be not less than 20 days following the
delivery of the Compelled Sale Notice, and the outside termina tion date of the
Compelled Sale Agreement (the "Compelled Sale Termination Date"), which shall be
not more than 180 days fol lowing the delivery of the Compelled Sale Notice. In
the event of any change in the consideration to be paid, or any material change
to any of the terms or conditions of the Compelled Sale, a new Compelled Sale
Notice shall be provided to the Remaining Stockholders, and the Compelled Sale
Closing (as defined below) shall not occur earlier than the 20th day subsequent
to the date on which such new Compelled Sale Notice is provided.
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(c) Subject to the satisfaction or waiver of the terms and conditions of the
Compelled Sale Agreement (other than any condition relating to the delivery of
Shares by the Remaining Stockholders), the Compelled Sale shall occur at a
closing (the "Compelled Sale Closing") on the Compelled Sale Date during normal
business hours at a time and place reasonably designated by the Compelling
Stockholders and the Compelled Sale Purchaser; provided that if the Compelled
Sale Closing shall not have occurred on or prior to the Compelled Sale
Termination Date, the Remaining Stockholders will be released from their
obligations under this Section 3.4, unless and until the Compelling Stock
holders deliver a new Compelled Sale Notice in compliance with this Section 3.4.
(d) No Remaining Stockholder shall be required to make any
representations and warranties to any person in connection with such Compelled
Sale except as to (i) good title and the absence of liens with respect to such
Remaining Stockholder's Shares, (ii) the corporate or other existence of such
Remaining Stockholder and (iii) the authority for and the validity and binding
effect of, and the absence of any conflicts under the charter documents and
material agreements of such Remaining Stockholder as to, any agreements entered
into by such Remaining Stockholder in connection with such Transfer. The
Remaining Stockholders shall not be required to provide any indemnities in
connection with such Transfer except for a breach of such representations and
warranties.
(e) In lieu of a sale of Shares, the Compelled Sale may be
accomplished by, and the Compelled Sale Agreement may provide for, a merger,
consolidation or other business combina tion permitted by Delaware law.
(f) In the event the Compelled Sale is accomplished in any
manner permitted by this Section 3.4 that would otherwise give rise to
appraisal, dissenters' or other similar rights under any applicable law, no
Stockholder shall take any action to exercise, enforce or perfect such rights,
if any, and each Stockholder hereby expressly waives (on behalf of itself and
any transferee or other successor) all such rights.
Section 3.5 Deliveries at Closing; Method of Payment
of Purchase Price. (a) At the closing of any Tag-Along Sale or Compelled Sale,
each Tag-Along Stockholder or Remaining Stockholder, as the case may be, shall
deliver to the Tag-Along Purchaser or the Compelled Sale Purchaser, as the case
may be, against delivery of the purchase price for the Shares being sold by it,
(i) certificates appropriately endorsed and representing the Shares being sold,
if any, free and clear of any lien, claim or encumbrance, and (ii) such other
documents, including, without limitation, executed stock powers and evidence of
ownership and authority, as the purchasers may reasonably request. The
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purchase price shall be paid by wire transfer of immediately available funds to
the bank account designated by each Tag-Along Stockholder or Remaining
Stockholder, as the case may be, or by certified check if the amount payable to
the recipient thereof is less than $1,000,000.
(b) If any Remaining Stockholder fails to deliver certificates
representing its Shares as required by this Section 3.5 and the Compelled Sale
in question is consummated, then such Remaining Stockholder shall not be
entitled to the consideration it is to receive under this Section 3.5 until it
cures such failure (provided that after curing such failure it shall be so
entitled to such consideration without interest). Such Remaining Stockholder
shall, until such failure is cured, hold such certificates in trust for the
Compelled Sale Purchaser, who shall be deemed to be the beneficial owner of the
Shares represented by such certificates.
Section 0.23 Company Cooperation. At any time the Company is
not filing periodic reports with the United States Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended, the
Company shall cooperate with the Stockholders and make available on a timely
basis such information as the Stockholders may reasonably request (to the extent
that such information can be provided without unreasonable expense or disruption
of the Company's affairs) to facilitate a Transfer of 5% or more of the issued
and outstanding Shares to any prospective bona fide Permitted Transferee. The
Company shall provide to each Stockholder consolidated financial statements for
the Company and its subsidiaries, prepared in accordance with generally accepted
accounting practices as in effect from time to time, for each fiscal year and
each of the first three fiscal quarters of each fiscal year.
Section 3.7 Legend on Certificates. Each certificate
representing Shares shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE
PROVISIONS OF A STOCKHOLDERS' AGREEMENT (THE "STOCKHOLDERS'
AGREEMENT") DATED AS OF
__, 1997 (A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF CHI ENERGY, INC. AND WILL BE MAILED TO
A STOCKHOLDER WITHOUT CHARGE WITHIN FIVE DAYS AFTER
RECEIPT BY CHI ENERGY, INC. OF A WRITTEN REQUEST
THEREFOR FROM SUCH STOCKHOLDER). NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
BE MADE EXCEPT AS OTHERWISE PROVIDED IN SUCH
STOCKHOLDERS' AGREEMENT. IN ADDITION, THE STOCKHOLD
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ERS' AGREEMENT CONTAINS CERTAIN RESTRICTIONS AND
AGREEMENTS WITH RESPECT TO THE VOTING OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE.
ARTICLE IV
CORPORATE GOVERNANCE
Section 4.1 Initial Board; Number of Directors. (a) The number
----------------------------------
of Directors constituting the Whole Board initially shall be seven. The initial
Board of Directors shall consist of the five individuals listed below, and two
vacancies, one to be filled at any time by MS in accordance with Section 4.4(b)
(the "MS Vacancy") and one to be filled at any time by SB in accordance with
Section 4.4(b) (the "SB Vacancy"). The five initial Directors shall be Xxxxx X.
Xxxxxxx, Xxxxxx X. Xxxxx, ____________, Xxxxxxx Xxxxxxx and Xxxxx XxXxxxxxx. For
purposes of Section 4.2, Messrs. Xxxxxxx and Xxxxx will be considered Officer
Nominees, Mr. will be considered an Outside Nominee, Xx. Xxxxxxx will be
considered an MS Nominee and Xx. XxXxxxxxx will be considered an SB Nominee.
Each Director shall serve as a Director until his death, disability, resignation
or removal or until his successor shall thereafter have been duly elected and
qualified in accordance with the provisions of this Agreement.
(a) For so long as this Agreement is in effect, no Stockholder
shall vote in favor of or consent to any change in the number of Directors
constituting the Whole Board.
4.2 Nomination and Election of Directors. (a) The Company and
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the Stockholders agree that the following procedures shall govern the nomination
and election of Directors of the Company:
(i) At each meeting of the Company's stock
holders at which Directors are to be elected (each, an
"Election Meeting"), subject to paragraph (b) below, the
Company shall nominate each of the following (col lectively,
the "Company Nominees"), and no others: up to two individuals
designated by MS and/or an MS Nomination Successor (the "MS
Nominees"), up to two individuals designated by SB and/or an
SB Nomination Successor (the "SB Nominees"), two individuals
designated by majority vote of the Whole Board, both of whom
shall be executive officers of the Company (the "Officer
Nominees"), and one individual(the "Outside Nominee")
designated by the number of directors constituting the Whole
Board less one, which individual shall not be, and shall not
have been during the three years immediately preceding the
date of the relevant Election Meeting, employed by, a director
of, or otherwise affiliated with the Company (except as the
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incumbent Outside Nominee) or any of its affiliates or
MS or SB or any of their respective affiliates.
(ii) No Stockholder shall make any nomination at
an Election Meeting.
(iii) Each Stockholder agrees to vote (or exe
cute a consent with respect to) all Shares over which it may
exercise voting power in favor of the election as a Director
of each Company Nominee.
(b) In the event that at any time the voting power of the
Shares held collectively by MS and any MS Nomination Successor or held
collectively by SB and any SB Nomination Suc
cessor, respectively, is less than 15% but not less than 7% of the total voting
power of the Shares then outstanding, the number of Directors MS and any MS
Nomination Successor or SB and any SB Nomination Successor, as the case may be,
shall have the right to designate for nomination shall be reduced to one. At
such time, MS or SB, as the case may be, shall cause one of the MS Directors or
SB Directors, as the case may be, to resign, and the Board of Directors shall
act to fill the vacancy caused by such resignation with a person meeting the
qualifications of an Officer Nominee or an Outside Nominee in accordance with
Section 4.4(c) of this Agreement, or, if the MS Vacancy or SB Vacancy, as the
case may be, shall not be filled at such time, MS or SB shall not cause any MS
Director or SB Director, as the case may be, to resign, but the Board of
Directors shall fill such MS Vacancy or SB Vacancy, as the case may be, with a
person meeting the qualifications of an Officer Nominee or an Outside Nominee in
accordance with Section 4.4(c) of this Agreement.
(c) In the event that at any time the voting power of the
Shares held collectively by MS and any MS Nomination Successor or held
collectively by SB and any SB Nomination Suc cessor, respectively, is less than
7% of the total voting power of the Shares then outstanding, MS and any MS
Nomination Suc cessor or SB and any SB Nomination Successor, as the case may be,
shall no longer have the right to designate individuals for nomination. At such
time, MS or SB, as the case may be, shall cause any remaining MS Directors or SB
Directors, as the case may be, to resign, and the Board of Directors shall act
to fill the vacancy caused by such resignation in accordance with the Bylaws as
then in effect.
4.3 Removal of Directors. (a) Except as provided in
--------------------
subparagraph (b) below, Directors may be removed in accordance with the Bylaws
as then in effect.
(b) No Stockholder shall take any action to remove, or to vote
in favor of or to consent to the removal of any MS Director or SB Director,
except that (1) any Stockholder may take action to remove any such director for
Cause (as defined below)
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and (2) upon request of the Nominating Stockholder of any MS Director or SB
Director, with or without cause, and at any time, each Stockholder immediately
shall consent in writing to the removal of such MS Director or SB Director, as
the case may be. The term "Nominating Stockholder" means any of MS, SB or any MS
Nomination Successor or SB Nomination Successor who shall have designated the
relevant MS Director or SB Director for nomination by the Company. Removal for
"Cause" shall mean removal of a Xx xxxxxx because of such Director's (i) willful
and continued failure to perform substantially his duties with the Company in
such Director's established position, (ii) willful misconduct which is
significantly injurious to the Company monetarily or otherwise, (iii) abuse of
any illegal drug or other controlled substance or habitual intoxication, (iv)
conviction for, or guilty plea (or plea of nolo contendere) to, a crime
involving moral turpitude or (v) conviction for, or guilty plea (or plea of nolo
contendere) to, a felony.
4.4 Vacancies. (a) Except as provided in paragraph (b) and
---------
paragraph (c) below, vacancies on the Board of Directors shall be filled in
accordance with the Bylaws as then in effect.
(b) At any time, and without prior notice, MS or SB may
request that the MS Vacancy or the SB Vacancy, respectively, be filled and, in
connection therewith, MS or SB, respectively, shall designate an individual to
fill each such vacancy (each, a "Designee"), and the remaining Directors, prior
to conducting any other business, shall act to appoint each Designee as
Director. If the remaining Directors fail to appoint any Designee as Director,
or if the remaining Directors fill any such vacancy otherwise than with the
Designee in accordance with the foregoing sentence, the Stockholders shall
immediately cause a special meeting of stockholders to be called, or shall act
by written consent without a meeting, for the purpose of removing such person
and/or filling such vacancy with the Designee, and each Stockholder agrees to
vote all of the Shares which such Stockholder is entitled to vote at such
meeting, or to execute a written consent in respect of all such Shares, as the
case may be, in favor of removing, if necessary, any such vacancy filled with a
person who is not a Designee and in favor of the election of such Designee.
(c) If at any time after the date hereof a vacancy is created
on the Board of Directors as a result of the death, disability, removal or
resignation of any one or more MS Direc tors or SB Directors, the Nominating
Stockholder of each Director whose death, disability, removal or resignation
caused a vacancy shall be entitled to designate a another individual (each, a
"New Vacancy Designee") to fill each such vacancy, and the remaining Directors,
prior to conducting any other business, shall act to elect each New Vacancy
Designee as Director. If the remaining
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Directors fail to elect any New Vacancy Designee as Director, or if the
remaining Directors fill any such vacancy otherwise than with the New Vacancy
Designee in accordance with the foregoing sentence, the Stockholders shall
immediately cause a special meeting of stockholders to be called, or shall act
by written consent without a meeting, for the purpose of removing such person
and/or filling such vacancy with the New Vacancy Designee, and each Stockholder
agrees to vote all of the Shares which such Stockholder is entitled to vote at
such meeting, or to execute a written consent in respect of all such Shares, as
the case may be, in favor of removing, if necessary, any such vacancy filled
with a person who is not a New Vacancy Designee and in favor of the election of
such New Vacancy Designee.
ARTICLE V
MISCELLANEOUS
Section 5.1 Effectiveness. As provided in Section __ of the
-------------
Plan, this Agreement shall become effective on the later of the Effective Date
(as defined in the Plan) and the first date on which holders of not less than
66-2/3% of the Shares issued pursuant to the Plan execute this Agreement.
Section 5.2 Waiver and Amendment. (a) Any party hereto may
--------------------
waive its rights under this Agreement at any time, provided that any agreement
on the part of any such party to any such waiver shall be valid only if set
forth in an instrument in writing signed by such party.
(b) Except as otherwise required by law, this Agreement may be
amended at any time, but only by a written instrument signed by Stockholders
holding not less than 66-2/3% of the total voting power of the Shares then
outstanding.
Section 5.3 Termination. Unless extended in a writing signed
-----------
by all of the Stockholders, this Agreement shall terminate on and be of no force
or effect from and after the first occurrence of any of the following events:
(i) the consummation of a Tag-Along Sale or a Compelled Sale (including
consummation of a Compelled Sale accomplished by merger, consolidation or sale
of substantially all of the Company's assets) pursuant to Section 3.3 or Section
3.4, respectively, of this Agreement, or (ii) the first date on which no party
has the right to nominate a director pursuant Section 4.2(b) of this Agreement.
In addition, this Agreement may be terminated (x) at any time by a written
instrument signed by Stockholders holding not less than 66-2/3% of the total
voting power of the Shares then outstanding, or (y) in connection with an
underwritten public sale (whether by the Company or any Stockholder or group of
Stockholders) of 20% or more of the number of Shares then outstanding, by a
written instrument signed by Stockholders holding not less than a ma
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jority of the Shares outstanding immediately prior to such public
sale.
Section 5.4 Notices. All notices and other communi cations
-------
provided for herein shall be dated and in writing and shall be deemed to have
been duly given when delivered, if delivered personally, or when deposited in
the mail if sent by registered or certified mail, return receipt requested,
postage prepaid and when received if delivered otherwise, to the party to whom
it is directed to the address of such Stockholder, War rantholder, or
Optionholder as shown in the stock record book or other records of the Company
or at such other address as the parties hereto shall have specified by notice in
writing to the other parties.
Section 5.5 Applicable Law and Time of Essence. The laws of
----------------------------------
the State of Delaware shall govern the interpretation, validity and performance
of the terms of this Agreement, re gardless of the law that might be applied
under principles of conflicts of law. Time shall be of the essence with respect
to this Agreement and of every part hereof.
Section 5.6 Descriptive Headings, Etc. The headings in this
-------------------------
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning of terms contained herein. Unless the context of this
Agreement otherwise requires, (i) words of any gender shall be deemed to include
each other gender; (ii) words using the singular or plural number shall also
include the plural or singular number, respectively; and (iii) references to
"hereof," "herein," "hereby" and similar terms shall refer to this entire
Agreement.
Section 5.7 Counterparts. This Agreement may be executed in
------------
multiple counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
Section 5.8 Successors, Assigns and Transferees. This
-----------------------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, assigns and transferees except to the
extent that the terms of this Agreement limit or otherwise restrict the
transferability of any rights or obligations hereunder.
Section 5.9 Severability. In the event that any one or more of
------------
the provisions, paragraphs, words, clauses, phrases or sentences contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining
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provisions, paragraphs, words, clauses, phrases or sentences hereof shall not be
in any way impaired, it being intended that all rights, powers and privileges of
the parties hereto shall be enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, each of the undersigned has exe cuted this
Agreement or caused this Agreement to be executed on its behalf as of the date
first above written.
CHI ENERGY, INC.
By:
Name:
Title:
STOCKHOLDERS:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
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