CUSIP NO. 67069D 10 8 13D PAGE 7 OF 7 PAGES
Exhibit 1
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (this "Agreement"), is made as of
December 20, 2002, by and among HJM Holdings, LLC, a Delaware limited liability
company (the "LLC"), NewSpring Ventures, L.P., a Delaware limited partnership
("NSV"), and such other parties as may from time to time join in this Agreement
with the written consent of the LLC and NSV and the other parties hereto, if
any, by executing a joinder substantially similar to Exhibit A (each of NSV and
such other parties that execute a joinder hereto, collectively, the "Other
Investors," and, collectively with the LLC and NSV, the "Stockholders").
Background
Each of the Stockholders has purchased shares of the common stock of
Nutri/System, Inc, a Delaware corporation (the "Company"), pursuant to the
Purchase Agreements (the "Common Stock");
The Stockholders desire to provide for certain rights and
obligations in respect of, among other things, the voting of the shares of
Common Stock which each of them currently own or control; and
The execution and delivery of this Agreement by the LLC and the
Other Investors that are signatories to this Agreement as of the date hereof is
a pre-condition and material inducement for each of them to purchase the shares
of Common Stock purchased by them.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions. For convenience and brevity, certain terms used in this
Agreement are defined immediately below instead of when first used in this
Agreement. Each defined term used in this Agreement has been identified by
capitalizing the first letter in such term.
"Board" means the board of directors of the Company.
"Change of Control Transaction" means any of the following: (a) a
merger, consolidation, exchange or other business combination or transaction
involving the Company if all of the stockholders of the Company immediately
prior to the effective date of such merger, consolidation, exchange or other
business combination or transaction collectively have, as a result of such
transaction, ownership of voting securities representing less than 50% of the
total voting power of the surviving corporation following such merger,
consolidation, exchange or other business combination or transaction; (b) a sale
or other direct or indirect disposition of all or substantially all the assets
of the Company; or (c) a liquidation or dissolution of the Company.
"Common Stock" is defined in the Background section.
"Company" is defined in the Background section.
"Company Matter" means a matter, other than a Special Company Matter
or one set forth in Section 2.1, that requires the approval of the stockholders
of the Company.
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"Company Matter Authorization" means a writing substantially in the
form of Exhibit B, indicating the direction of voting that the Other Investors
desire to take with respect to the shares of Common Stock that it owns or
controls.
"Company Matter Majority" means the direction of voting prescribed
by more than 50% of the aggregate Voting Rights of the Other Investors and each
member of the LLC as set forth on the LLC Voting Certificate and any Company
Matter Authorizations properly submitted pursuant to this Agreement or the
Operating Agreement, as appropriate.
"Liquidity Transaction" means a permitted sale by the LLC (or its
members upon the distribution of such shares) and the Other Investors prior to
the termination of this Agreement where the following conditions have been
satisfied: (a) such permitted sale shall only pertain to and cover shares of
Common Stock registered under the Securities Act of 1933; (b) as to the LLC, all
of the shares of Common Stock that are to be subject to its proportionate right
of sale may be sold directly by the LLC, distributed to its members as freely
tradable shares or some combination thereof; and (c) no stockholder (or member
of the LLC in the event of a distribution of shares by the LLC to its members)
shall be obligated to sell its, his or her shares of Common Stock in, or as a
result of, the Liquidity Transaction.
"LLC" means HJM Holdings, LLC, a Delaware limited liability company.
"LLC Special Matter Voting Certificate" is defined in Section
2.3(b).
"LLC Voting Certificate" is defined in Section 2.2(b).
"Notice Trigger" means (a) the receipt by the LLC of a written
notice from the Company or a stockholder of the Company of a meeting (annual,
special or otherwise) where any matter is to be submitted to a vote of the
stockholders of the Company or an action is to be taken by a written consent of
the Stockholders of the Company or (b) the submission by the LLC of a matter to
the stockholders of the Company in accordance with the Company's by-laws and
applicable law, whether such submission relates to a meeting of the stockholders
or an action to be taken by a written consent of the stockholders of the
Company.
"Permitted Transfer" means any direct or indirect transfer of Common
Stock by a Stockholder to an affiliate of such Stockholder as well as any
distribution of Common Stock by the LLC to its members or NSV to its limited
partners; provided, that, unless such transfer is in connection with a
distribution pursuant to a Liquidity Transaction (in which case no joinder shall
be required), such transferee executes the joinder attached hereto as Exhibit A.
"Pro-Rata Share" means, with respect to any Stockholder, the
percentage of shares of Common Stock owned by such Stockholder in relation to
the aggregate amount of shares of Common Stock owned by all Stockholders.
"Prohibited Transfer" is defined in Section 3.
"Purchase Agreements" means (a) the Stock Purchase Agreement between
the LLC, NSV and Xxxxx X. Xxxxxxx, (b) the Stock Purchase Agreement between the
LLC, NSV, Xxxxxxx X. Xxxxxxx, Xx. and HPF Holdings, Inc. or (c) the Stock
Purchase Agreement between the LLC, NSV, Xxxxxx X. Xxxxxxxx and CRX Investments
I, L.P., in each case as entered into on the date hereof.
"Receiving Stockholder" is defined in Section 4.
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"Response Period" means such reasonable period of time, given the
particular circumstances, set forth in a notice sent by the LLC to the Other
Investors relating the delivery of Company Matter Authorization in connection
with either a Company Matter or a Special Company Matter; provided, that unless
otherwise agreed by the Other Investors, such period of time shall not be less
than three business days, and no earlier than (a) the day of the meeting of the
members of the LLC, if any, called to consider the Company Matter or Special
Company Matter, as the case may be, or (b) the date on which the members of the
LLC are required to return written authorizations of any such matter pursuant to
the terms of the operating agreement of the LLC.
"Special Company Matter" means a Change of Control Transaction or a
Liquidity Transaction.
"Special Company Matter Authorization" means a notice substantially
in the form of Exhibit C, indicating the manner of voting that the Other
Investors desire to take with respect to the shares of Common Stock that it owns
or controls.
"Special Company Matter Majority" means the direction of voting
prescribed by more than 75% of the aggregate Voting Rights of the Other
Investors and each member of the LLC as set forth on the LLC Special Matter
Voting Certificate and any Special Company Matter Authorizations properly
submitted pursuant to this Agreement or the Operating Agreement, as appropriate.
"Term" is defined in Section 5.1.
"Voting Rights" with respect to any party, means the number of
voting rights set forth next to such party's name on Schedule B, as may be
amended from time to time.
2. Voting Agreement.
2.1 Board.
(a) Composition. During the Term, each of the Stockholders shall use
its best efforts (which standard shall not require NSV, the LLC, or any other
party hereto to violate any applicable law or regulation) to cause the Board to
be comprised of no more than seven members.
(b) Nominations. During the Term, each of the Stockholders shall, in
advance of (x) the mailing of a proxy statement for a stockholders' meeting at
which directors are to be elected or (y) a meeting of stockholders at which
directors are to be elected and for which a proxy statement was not distributed,
use its best efforts (which standard shall not require NSV, the LLC or any other
party hereto to violate any applicable law or regulation) to cause the Board to
nominate for election:
(i) two individuals to be designated by the LLC; and
(ii) two individuals to be designated by NSV
to serve on the Board for a period of one year and until his or her successor is
duly elected.
(c) Election. Each Stockholder shall use its best efforts (which
standard shall not require NSV, the LLC, or any other party hereto to violate
any applicable law or regulation), including by
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voting or acting by written consent, with respect to all shares of Common Stock
that it owns or controls, to cause the designees of the LLC and NSV to be
elected to the Board.
2.2 Company Matters. Subject to Sections 2.1 and 2.3, during the
Term, each of the Stockholders shall vote, in any matter requiring action by the
Company's stockholders, all shares of Common Stock that it owns as set forth
below.
(a) Upon a Notice Trigger relating to a Company Matter, the LLC
promptly shall transmit notice of any such Company Matter, setting forth the
Response Period together with a request for a Company Matter Authorization, to
each of the Other Investors in accordance with the notice provisions of Section
5.2. The LLC shall take no action (other than to poll its members for voting
instructions) with respect to any Company Matter during the Response Period.
During the Response Period, each Other Investor may elect to submit a Company
Matter Authorization to the LLC. Any Company Matter Authorization received by
the LLC after the Response Period shall not be counted for purpose of
calculating the Company Matter Majority.
(b) Within three business days following the expiration of the
Response Period, the LLC shall deliver a certificate (the "LLC Voting
Certificate") to the Other Investors (A) indicating the manner of voting or
other action prescribed by those members of the LLC that properly cast a vote
with respect to a Company Matter and (B) attaching or otherwise including copies
of the Company Matter Authorizations received by the LLC during the Response
Period. Each of the Stockholders shall vote the shares of Common Stock owned or
controlled by it in the manner prescribed by the Company Matter Majority.
2.3 Special Company Matters. During the Term, each of the
Stockholders shall vote on any Special Company Matter, all the shares of Common
Stock that it is entitled to vote as set forth below.
(a) Upon a Notice Trigger relating to a Special Company Matter, the
LLC promptly shall transmit notice of such Special Company Matter, setting forth
the Response Period together with a request for a Special Company Matter
Authorization, to each of the Other Investors in accordance with the notice
provisions of Section 5.2. The LLC shall take no action (other than to poll its
members for voting instructions) with respect to any Special Company Matter
during the Response Period. During the Response Period, each Other Investor may
elect to submit a Special Company Matter Authorization to the LLC. Any Special
Company Matter Authorization received by the LLC after the Response Period shall
not be counted for purpose of calculating the Special Company Matter Majority.
(b) Within three business days following the expiration of the
Response Period, the LLC shall deliver a certificate (the "LLC Special Matter
Voting Certificate") to the Other Investors (A) indicating the manner of voting
or other action prescribed by each of the members of the LLC with respect to a
Special Company Matter and (B) attaching or otherwise including copies of the
Special Company Matter Authorizations received by the LLC during the Response
Period. Each of the Stockholders shall vote the shares of Common Stock owned or
controlled by it in the manner prescribed by the Special Company Matter
Majority.
(c) In the event that a Liquidity Transaction is approved by the
Stockholders, then each of the Stockholders shall be entitled to sell that
amount of shares of Common Stock up to an amount equal to the total amount of
Common Stock to be sold in the Liquidity Transaction multiplied by such
Stockholders' Pro-Rata Share.
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3. Prohibitions on Transfer. Except for Permitted Transfers, no
Stockholder shall, directly or indirectly, sell, assign, hypothecate, pledge,
encumber or otherwise transfer to any person or entity or grant any interest in
any shares of Common Stock that it owns or controls (in each case, a "Prohibited
Transfer"). Any Prohibited Transfer or other transfer in violation of any
provision of this Agreement shall be void and ineffectual and shall not operate
to transfer any interest or title to the purported transferee.
4. Other Agreements. In the event that either of the LLC or NSV,
receives monies (the "Receiving Stockholder") as a result of payments relating
to or stemming from a Purchase Agreement to the exclusion of the non-Receiving
Stockholder, such Receiving Stockholder shall share the proceeds of such payment
with the non-Receiving Stockholder party to the Purchase Agreement on a pro-rata
basis calculated based upon the number of shares of Common Stock each party
purchased pursuant to the Purchase Agreement at issue. The covenants set forth
in this Section 4 shall survive any termination of this Agreement and shall
continue to be in full force and effect until such time as none of the parties
hereto have any rights to receive any indemnification payments under any of the
Purchase Agreements.
5. General.
5.1 Term; Termination. The term of this Agreement (the "Term") shall
be from the date hereof until the date on which this Agreement is terminated as
set forth below. This Agreement shall terminate and be of no further force and
effect without any further action being required by any party hereto immediately
upon the occurrence of any of the following events:
(a) the second anniversary of the date hereof;
(b) the written consent of each of the Stockholders; or
(c) upon the approval of a Liquidity Transaction, if at the time of
such Liquidity Transaction those shares of Common Stock held by the LLC and the
Other Investors after a permitted sale (assuming, at the time of the vote for
the Liquidity Transaction, that all shares of Common Stock subject to the
permitted sale are sold) would be less than 50% of the then outstanding Common
Stock of the Company.
5.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
overnight courier (with confirmation of receipt) or sent via facsimile to the
parties at the address or facsimile number for such party set forth beneath such
party's name on Schedule A. Notice given by telecopier shall be effective upon
actual receipt if received during the hours of 9 AM to 5 PM on a business day,
or at the beginning of the recipient's next business day after receipt if not
received during the recipient's normal business hours. All notices by telecopier
shall be confirmed promptly after transmission in writing by certified mail or
personal delivery. Any party may change any address or facsimile number to which
notice is to be given to it by giving notice as provided above of such change of
address or facsimile number.
5.3 Successors and Assigns. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
5.4 Severability. In the event one or more of the provisions of this
Agreement should, for any reason be held to be invalid, illegal or
unenforceable, such provisions shall be excluded from this Agreement and the
balance of this Agreement shall be interpreted as if such provision had never
been contained herein.
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5.5 Entire Agreement; Amendments and Waivers. This Agreement
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof. Other than with respect to amendments to Schedule A
(which requires the consent of the LLC and NSV) and Schedule B (which requires
only notice and the providing of a reasonable level of supporting detail), any
amendment or modification of this Agreement shall be effective only if approved
by the members of the LLC and the Other Investors in a manner similar to that
necessary to approve a Special Company Matter. Any waiver hereunder of any of
the rights of any party hereto shall be effective only if evidenced by a written
instrument executed by the party against whom such waiver is to be enforced.
5.6 Interpretation. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, the part the whole, (b) references to any gender include
all genders, (c) "including" has the inclusive meaning frequently identified
with the phrase "but not limited to" and (d) references to "hereunder" or
"herein" relate to this Agreement. Any determination as to whether a situation
is material shall be made by taking into account the effect of all other
provisions of this Agreement that contain a qualification with respect to
materiality so that the determination is made after assessing the aggregate
effect of all such situations. The section and other headings contained in this
Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
Section, subsection, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
5.7 Governing Law. The construction, validity and interpretation of
this Agreement will be governed by the internal laws of the State of Delaware
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware. Each party hereto each hereby irrevocably (a) submits itself to the
non-exclusive jurisdiction of the state and federal courts sitting in the State
of Delaware and (b) waives the right and hereby agrees not to assert by way of
motion, as a defense or otherwise in any action, suit or other legal proceeding
brought in any such court, any claim that it, he or she is not subject to the
jurisdiction of such court, that such action, suit or proceeding is brought in
an inconvenient forum or that the venue of such action, suit or proceeding is
improper. Each party hereto also irrevocably and unconditionally consents to the
service of any process, pleadings, notices or other papers in a manner permitted
by the notice provisions of Section 4.2. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
5.8 Counterparts. This Agreement may be executed in two or more
counterparts (delivery of which may occur via facsimile), each of which shall be
binding as of the date first written above, and, when delivered, all of which
shall constitute one and the same instrument. A facsimile signature or
electronically scanned copy of a signature shall constitute and shall be deemed
to be sufficient evidence of a party's execution of this Agreement, without
necessity of further proof. Each such copy shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
5.9 Remedies. The parties hereto shall have all remedies for breach
of this Agreement available to them as provided by law or equity. Without
limiting the generality of the foregoing, the parties agree that in addition to
any other rights and remedies available at law or in equity, the parties shall
be entitled to obtain specific performance of the obligations of each party to
this Agreement and immediate injunctive relief and that, in the event any action
or proceeding is brought in equity or to enforce the same, no party will urge,
as a defense, that there is an adequate remedy at law.
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5.10 Injunctive Relief. It is acknowledged that it will be
impossible to measure the damages that would be suffered by any party if another
party fails to comply with the provisions of this Agreement and that in the
event of any such failure, the non-defaulting party will not have an adequate
remedy at law. The non-defaulting party shall, therefore, be entitled to obtain
specific performance of any defaulting party's obligations hereunder and to
obtain immediate injunctive relief. The defaulting party shall not argue, as a
defense to any proceeding for such specific performance or injunctive relief,
that the non-defaulting party has an adequate remedy at law.
5.11 Reorganization. The provisions of this Agreement shall apply to
any shares or other securities resulting from any stock split or reverse split,
stock dividend, reclassification, subdivision, consolidation or reorganization
of any shares or other equity securities of the Company.
[Signature Page(s) Follow]
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IN WITNESS WHEREOF, the parties have executed this Stockholders'
Agreement on the day and year indicated above.
HJM HOLDINGS, LLC
By:
--------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
NEWSPRING VENTURES, L.P.
By: Progress Capital II, L.P.
its General Partner
By: Progress Capital II, Inc.
its General Partner
By:
---------------------------
Name:
Title:
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EXHIBIT A
Form of Joinder to Stockholders' Agreement
This Joinder to Stockholders' Agreement (this "Joinder") is made as of the
_____ day of _________, ________ by ____________ (the "Stockholder") in favor of
the Stockholders. Each of the capitalized terms that are used and not otherwise
defined herein shall have the meaning ascribed to such terms in that certain
Stockholders' Agreement dated December [___], 2002 by and between HJM Holdings
LLC, a Delaware limited liability company, and NewSpring Ventures, L.P., a
Delaware limited partnership, as the same shall be amended from time to time
(the "Stockholders' Agreement")
Background
The Stockholder is a holder of shares of Common Stock (the "Shares"). In
connection with the purchase of the Shares, the Stockholder and the Stockholders
desire that the Stockholder be deemed to be a "Stockholder" under the
Stockholders' Agreement and be subject to the terms and conditions thereof.
NOW, THEREFORE, in consideration of the rights and privileges to be
conferred upon the Stockholder under the Stockholders' Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
that the Stockholder is hereby joined as a party to the Stockholders' Agreement
and is deemed to be a "Stockholder" for all purposes under such Stockholders'
Agreement.
This Joinder may be executed in multiple counterparts, each of which shall
constitute an original and all of which shall constitute one and the same
document.
IN WITNESS WHEREOF, the parties hereto have executed this Joinder as of
the date first written above.
HJM HOLDINGS, LLC
By:
--------------------------
Name:
Title:
NEWSPRING VENTURES, L.P.
By:
---------------------------
Name:
Title:
------------------------------
[Joining Party]
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EXHIBIT B
Form of Company Matter Authorization
[Name of applicable Other Investor]
[X] Please xxxx your votes as in this example
1. Proposal to [description of proposal]. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Proposal to [description of proposal]. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. [Repeat as necessary, depending on number FOR AGAINST ABSTAIN
of proposals upon which a vote is required] [ ] [ ] [ ]
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF COMPANY MATTER WITH
RESPECT TO THE MATTERS DESCRIBED ABOVE AND REQUEST FOR A COMPANY MATTER
AUTHORIZATION IN CONNECTION THEREWITH PURSUANT TO THE STOCKHOLDERS' AGREEMENT.
Signature: Date:
By:
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Name:
Title:
Note: This Company Matter Authorization must be signed by an authorized person
of the recipient.
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EXHIBIT C
Form of Special Company Matter Authorization
[Name of applicable Other Investor]
[X] Please xxxx your votes as in this example
1. Proposal to [description of proposal]. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Proposal to [description of proposal]. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. [Repeat as necessary, depending on number FOR AGAINST ABSTAIN
of proposals upon which a vote is required] [ ] [ ] [ ]
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL COMPANY
MATTER WITH RESPECT TO THE MATTERS DESCRIBED ABOVE AND REQUEST FOR A SPECIAL
COMPANY MATTER AUTHORIZATION IN CONNECTION THEREWITH PURSUANT TO THE
STOCKHOLDERS' AGREEMENT.
Signature: Date:
By:
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Name:
Title:
Note: This Special Company Matter Authorization must be signed by an authorized
person of the recipient.
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