STOCKHOLDERS AGREEMENT
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THIS STOCKHOLDERS AGREEMENT (the "Agreement") is entered into as of April
9, 1998, among THE UNION LABOR LIFE INSURANCE COMPANY, a Maryland corporation
("Investor"), JD AMERICAN WORKWEAR, INC., a Delaware corporation (the
"Company"), and Xxxxx X. XxXxxxx, Xxxxxx X. Xxxx, Xxxxxxx X. Xxxxxxxx, Xxxxxx
XxXxxxx, Xxxxxx Xxxxxxxx and Xxxxxxx XxXxxxx (each a "Holder," and,
collectively, "Holders"). For purposes of this Agreement, all capitalized terms
shall have the meanings ascribed to such terms in the Securities Purchase
Agreement (defined below) unless otherwise defined herein.
RECITALS
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A. Concurrently with entering into this Agreement, the Company and
Investor are entering into a Securities Purchase Agreement of even date
herewith (the "Securities Purchase Agreement") under which Investor is agreeing
to purchase 2,500 shares of the Company's Series B 12% Cumulative Convertible
Preferred Stock, $.001 par value per share (the "Preferred Stock"), and a
detached ten-year Stock Purchase Warrant to purchase 799,000 shares of Common
Stock (the "Warrant").
B. Each Holder is the record and beneficial owner of the number of
shares of Common Stock set forth opposite the name of such Holder on Exhibit A
hereto (as to any Holder, its "Holder Shares").
C. Investor is unwilling to provide equity financing to the Company
unless each Holder is willing to subject its Holder Shares to the restrictions
contained in this Agreement and make the covenants contained herein, and it is
a condition to the performance of Investor's obligations under the Securities
Purchase Agreement that the Company and each Holder enter into this Agreement.
D. Each Holder acknowledges that having Investor provide equity
financing to the Company pursuant to the Securities Purchase Agreement will
directly benefit such Holder as a result of its ownership of Holder Shares and,
accordingly, that such Holder is entering into this Agreement to induce
Investor to provide equity financing to the Company under the Securities
Purchase Agreement.
A G R E E M E N T
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NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Definitions.
(a) Unless otherwise expressly defined herein or the context
otherwise requires, the capitalized terms appearing herein shall have the
respective meanings assigned to them in the Securities Purchase Agreement.
(b) Unless the context otherwise requires, the terms defined in
this Section 1 shall have the meanings herein specified for all purposes of
this Agreement, applicable to both the singular and plural forms of any of the
terms herein defined.
"Holder Shares" shall mean, with respect to a Holder, (i) the
number of shares of Common Stock set forth opposite such Holder's name on
Exhibit A hereto, (ii) all Common Stock hereafter acquired by such Holder, and
(iii) all shares issued by the Company on or in respect of the shares referred
to in the preceding clauses (i) and (ii) including, without limitation, by way
of dividend, subdivision, combination, reclassification, recapitalization,
reorganization or otherwise.
"Purchased Shares" shall mean (i) the Preferred Stock and Warrant
and all Common Stock issued upon conversion or exercise thereof, and (ii) all
other shares of Common Stock hereafter acquired by Investor, and (iii) all
shares issued by the Company on or in respect of the shares referred to in the
preceding clauses (i) and (ii) including, without limitation, by way of a
dividend, subdivision, combination, reclassification, recapitalization,
reorganization or otherwise.
"Transfer" shall mean any sale, pledge, assignment, encumbrance or
other transfer or disposition of any shares of Common Stock to any other
Person, whether directly, indirectly, voluntarily, involuntarily, by operation
of law, pursuant to judicial process or otherwise.
2. Covenant Against Certain Transfers; Representation and Warranty.
(a) Each Holder covenants and agrees with Investor that except as
permitted in this Agreement it will not Transfer any or all of the Holder
Shares held by it.
(b) Prior to a Qualified Offering, each Holder may sell the
Holder Shares owned by it for a cash price of not less than $7.50 per share
(which price shall be proportionately adjusted for subdivisions and
combinations of the outstanding shares of Common Stock) so long as the Company
has its Right of First Refusal with respect to such sale as provided in Section
4 hereof and Investor has the Right of Second Refusal and Co-Sale Rights with
respect to such sale as provided in Section 5 hereof.
(c) The minimum price requirement appearing in Section 2(b) shall
expire on the second anniversary of the Closing Date under the Securities
Purchase Agreement.
(d) Each Holder for itself, represents and warrants that (i) such
Holder is the record and beneficial owner of all shares of Common Stock set
forth opposite such Holder's name on Exhibit A hereto, and (ii) such Holder has
no beneficial ownership of or economic interest in any Common Stock other than
as shown opposite its name on Exhibit A.
3. Legend on Certificates. The Company and all Holders shall cause all
certificates evidencing shares of Common Stock now or hereafter held by the
Holders to bear substantially the following legend:
"The shares represented by this certificate are subject
to the rights of Union Labor Life Insurance Company
under the terms of a Stockholders Agreement, among JD
American Workwear, Inc., Holders of shares of Common
Stock of JD American Workwear, Inc. and Union Labor
Life Insurance Company, a copy of which is on file at
the principal office of JD American Workwear, Inc. and
will be furnished upon request to the holder of record
of the shares represented by this certificate."
4. The Company's Right of First Refusal. Before any shares of Common
Stock may be Transferred by any Holder, such shares of Common Stock shall first
be offered to the Company, as set forth below.
(a) If a Holder desires to Transfer any shares of Common Stock
owned by him, the Transferring Holder shall deliver a notice (the "Sale
Notice") to the Company and to the Investor stating (i) its bona fide intention
to Transfer such shares of Common Stock in the transaction described in the
Sale Notice, (ii) the number of shares of Common Stock proposed to be
Transferred (the "Noticed Securities"), (iii) the price at which it proposes to
Transfer the Noticed Securities (in the case of a Transfer not involving a
sale, such price shall be deemed to be fair market value of the Noticed
Securities as determined pursuant to Section 4(c)) hereof and the terms of
payment of that price and other terms and conditions of sale, and (iv) the name
and address of the proposed purchaser or transferee. Such Holder shall not
effect any Transfer for value of the shares of Common Stock other than for
money (United States dollars) or an obligation to pay money (United States
dollars).
(b) For a period of thirty (30) days after receipt of the Sale
Notice, the Company shall have the right to purchase all of the Noticed
Securities. The purchase price per share of Common Stock of the Noticed
Securities purchased by the Company pursuant to this Section 4 shall be, in the
case of a sale, the price per share of Common Stock set forth in the Sale
Notice and, in the case of a Transfer not involving a sale, the fair market
value of such shares of Common Stock determined pursuant to Section 4(c)
hereof, and the purchase shall be on the same terms and subject to the same
conditions as those set forth in the Sale Notice. The right to purchase shall
be exercisable by the Company by giving written notice (the "Company Notice")
to the selling Holder and the Investor within the 30-day period described
above, specifying the number of shares of Common Stock to be purchased.
(c) In the case of a Transfer of shares of Common Stock not
involving a sale, if the Company and the Transferring Holder do not reach
agreement on the fair market value thereof, then such fair market value shall
be determined in good faith by an independent and qualified investment banker
or appraisal firm selected by the Board. This determination will be final and
binding upon all parties and persons claiming under or through them. The fees
and expenses of such banker or appraisal firm shall be borne equally by the
Company and the Transferring Holder.
(d) If the Company fails or refuses to purchase any or all of the
Common Stock specified in the Notice, the Company shall give Investor written
notice thereof, specifying the number of shares of Common Stock that it has not
purchased (the "Designated Notice").
5. Investor's Rights of Second Refusal and Co-Sale Rights.
(a) Right of Second Refusal. Before any Noticed Securities not
purchased by the Company pursuant to Section 4 hereof may be Transferred by any
Holder, such Noticed Securities shall first be offered to Investor, as set
forth below. If the provisions of Section 4 are terminated as provided in the
proviso to Section 10(j), then the provisions of Section 4(a) shall be
applicable mutatis mutandis to this Section 5.
(i) For a period of thirty (30) days after receipt of the
Designated Notice, Investor shall have the right to purchase all of the Noticed
Securities not purchased by the Company pursuant to Section 4 hereof (the
"Remaining Securities"). The purchase price per share of Common Stock of the
Remaining Securities purchased by Investor pursuant to this Section 5 shall be,
in the case of a sale, the price per share of Common Stock set forth in the
Sale Notice and, in the case of a Transfer not involving a sale, the fair
market value of such shares of Common Stock determined pursuant to Section
4(a)(c) hereof unless the Company shall not have purchased any part of the
Noticed Securities, and the purchase shall be on the same terms and subject to
the same conditions as those set forth in the Sale Notice. The right to
purchase shall be exercisable by written notice to the Transferring Holder
within the 30-day period described above, specifying the number of shares of
Common Stock to be purchased.
(ii) In the case of a Transfer of shares of Common Stock not
involving a sale, if the Company shall not have purchased any part of the
Noticed Securities and if Investor and the Transferring Holder do not reach
agreement on the fair market value thereof, then such fair market value shall
be determined in good faith by an independent and qualified investment banker
or appraisal firm selected by the Board. This determination will be final and
binding upon all parties and persons claiming under or through them. The fees
and expenses of such banker or appraisal firm shall be borne equally by the
Company and the Transferring Holder.
(b) Right of Co-Sale. If the Company does not elect to purchase
all of the Noticed Securities to which the Sale Notice refers as described in
Section 4(a) hereof, and Investor does not elect to purchase all of the
Remaining Securities, if any, pursuant to Section 5(a) hereof, then Investor
shall have the right, exercisable upon written notice to the selling Holder
within thirty (30) days of the date of the original Sale Notice described in
Section 4(a), to participate in such Transfer of shares of Noticed Securities
at the same price and on the same terms and conditions. Such notice shall
indicate the number of shares of Common Stock the Investor wishes to Transfer
under its right to participate.
(i) Investor may sell all or any part of that number of
shares equal to the product obtained by multiplying (x) the aggregate number of
Noticed Securities covered by the Sale Notice (as reduced by any purchases
pursuant to Section 4(a) or Section 5(a) hereof) by (y) a fraction, the
numerator of which is the number of shares of Common Stock owned by Investor at
the time of the Transfer (assuming for this purpose that Investor's holdings
include all shares of Common Stock underlying the Preferred Stock and Warrant
or other warrants then held by Investor) and the denominator of which is the
total number of shares of Common Stock owned by the selling Holder and Investor
at the time of the Transfer.
(ii) If Investor elects to participate in the sale pursuant
to this Section 5(b), it shall effect its participation in the sale by
delivering to the prospective purchaser one or more certificates, properly
endorsed for transfer, which represent the number of shares of Common Stock
which Investor elects to sell in consummation of the sale of the Common Stock
pursuant to the terms and conditions specified in the Sale Notice, and the
purchaser shall concurrently therewith remit to Investor that portion of the
sales proceeds to which Investor is entitled by reason of its participation in
such sale. To the extent that any prospective purchaser prohibits Holder's
implied assignment of rights to participate in such sale or otherwise refuses
to purchase shares from Investor or interferes with Investor exercising its
rights of co-sale hereunder, the selling Holder shall not sell to such
prospective purchaser any Common Stock unless and until, simultaneously with
such sale, the selling Holder shall purchase such shares from Investor at the
same price and on the same terms and conditions specified in the Sale Notice.
(c) Closing if Rights Not Exercised. If Investor does not elect
to purchase or participate in the sale of all of the Noticed Securities to
which the Sale Notice refers, then the selling Holder may Transfer all (but not
less than all) of the Noticed Securities to any purchaser or transferee named
in the Sale Notice at, in the case of a sale, the price specified in the Sale
Notice and on other terms and conditions not materially more favorable to the
transferor than those described in the Sale Notice, provided that (i) such
Transfer is consummated within ninety (90) days of the date of the Sale Notice
to the Company and (ii) any purchaser or transferee named in the Sale Notice
shall agree to be bound by all the terms and conditions of, and to take upon
itself the undertakings of the transferor pursuant to, this Agreement. Any
proposed Transfer at a price greater than the price specified in the Sale
Notice or on terms and conditions materially more favorable to the transferor
than those described in the Sale Notice, as well as any subsequent proposed
Transfer of any shares of Common Stock by a selling Holder, shall again be
subject to the right of first refusal of the Company and the rights of second
refusal and co-sale of Investor and shall require compliance by the selling
Holder with the procedures described in this Section 5.
(d) Excepted Transactions. Notwithstanding anything contained
herein to the contrary, the provisions of Sections 2, 4 and 5 hereof shall not
apply to (i) any Transfer to ancestors, descendants or spouse or to a trust for
the benefit of such Persons or a Holder, or (ii) any bona fide gift, or (iii)
any Transfer to an entity that is wholly owned, and will remain wholly owned,
by such Holder (or such Holder and one or more of the individuals referred to
in the preceding clause (i)); provided that (1) as a condition precedent to any
Transfer made pursuant to one of the exemptions provided in clause (i), (ii) or
(iii), (A) the Transferring Holder shall inform the Company and Investor of
such Transfer or gift prior to effecting it, and (B) the transferee or donee
shall furnish the Company and Investor with a written agreement to be bound by
and comply with all provisions of Sections 2, 3, 4, 5 and 7 hereof and such
Transferred shares of Common Stock shall remain "shares of Common Stock" and
"Holder Shares" hereunder, and such transferee or donee shall be treated as a
"Holder" for all purposes of this Agreement, (2) in the case of a Transfer in
trust, such Holder shall become the trustee or, with such Holder's spouse, a
co-trustee of such trust, (3) in the case of a Transfer not in trust, as a
condition precedent to such Transfer such Holder shall retain an irrevocable
proxy to vote the Transferred Common Stock and (4) in the case of a Transfer
described in clause (iii), as a condition precedent to the Transfer all holders
of equity or other ownership interests in such entity shall enter into an
agreement with Investor, which shall be mutually satisfactory to Investor and
the transferee, under which the outstanding equity or other ownership interests
in such transferee shall be subjected to the same restrictions against Transfer
that appear in Sections 2, 3, 4, 5 and 7 of this Agreement.
(e) Transfers in Violation. Any attempted Transfer of any shares
of Common Stock in violation of the provisions of this Agreement shall be null
and void, and the Company shall not in any way give effect to any such
impermissible Transfer.
6. Tag-Along Rights.
(a) If Investor enters into an agreement to transfer, sell or
otherwise dispose of all of the Purchased Shares (a "Tag-Along Sale"), then
each Holder shall have the right, but not the obligation, to participate in
such Tag-Along Sale by selling up to the number of shares of Common Stock (the
"Maximum Tag-Along Shares of Common Stock") equal to the product of (i) the
total number of Purchased Shares proposed to be sold or otherwise disposed of
by Investor (but with the Preferred Stock and Warrant deemed to have been
converted and exercised in full), multiplied by (ii) a fraction, the numerator
of which shall equal the aggregate number of Holder Shares owned by the Holders
immediately prior to the Tag-Along Sale and the denominator of which shall
equal the sum of (A) the aggregate number of shares of Common Stock owned by
the Holders who have elected to participate in such Tag-Along Sale, plus (B)
the aggregate number of Purchased Shares owned by Investor (but with the
Preferred Stock and Warrant deemed to have been converted and exercised in
full) immediately prior to the Tag-Along Sale. Any such sale by any Holder
shall be on the same terms and conditions as the proposed Tag-Along Sale by
Investor; provided, however, that (1) in the event that the purchaser or
transferee is purchasing warrants, the sales price of the warrants shall be
adjusted for the subscription price payable upon exercise of such warrants, and
(2) all Holders shall share pro rata, based upon the number of shares of Common
Stock being sold by each (x) in all transaction expenses, (y) in any indemnity
liabilities to the proposed transferee or purchaser in the Tag-Along Sale
(other than representations as to unencumbered ownership of and ability to
transfer the shares of Common Stock being sold of any other seller in the
Tag-Along Sale, which shall be the sole responsibility of such other seller),
and (z) in any escrow for the purpose of satisfying any such indemnity
liabilities.
(b) Investor shall promptly provide each Holder with written
notice (the "Tag-Along Sale Notice") not more than sixty (60) nor less than
thirty (30) days prior to the proposed date of the Tag-Along Sale (the
"Tag-Along Sale Date"). In order to facilitate the prompt delivery of the
Tag-Along Sale Notices, the Company hereby covenants to provide Investor access
to the record books of the Company. Each Tag-Along Sale Notice shall set forth
(i) the name and address of each proposed transferee or purchaser of Purchased
Shares in the Tag-Along Sale; (ii) the number of Purchased Shares proposed to
be transferred or sold by Investor (expressed in number of shares of Common
Stock issuable upon conversion or exercise of the Purchased Shares to the
extent they have not been converted and exercised in full); (iii) the proposed
amount and form of consideration to be paid for such Purchased Shares and the
terms and conditions of payment offered by each proposed transferee or
purchaser; (iv) the aggregate number of shares of Common Stock held of record
as of the close of business on the date of the Tag-Along Sale Notice (the
"Tag-Along Notice Date") by the Holder to whom the notice is sent and the
aggregate number of shares of Common Stock outstanding on the Tag-Along Notice
Date; (v) the aggregate number of Purchased Shares held of record as of the
Tag-Along Notice Date by Investor (expressed in number of shares of Common
Stock issuable upon conversion or exercise of the Purchased Shares, to the
extent they have not been converted and exercised in full); (vi) the maximum
number of shares of Common Stock that the Holder to whom the notice is sent is
entitled to include in the Tag-Along Sale, assuming that each Holder elected to
participate in the Tag-Along Sale and elected to sell the maximum number of
shares of Common Stock owned by such Holder; (vii) the Tag-Along Sale Date; and
(viii) confirmation that, with respect to the shares of Common Stock to be
received by the proposed transferee or purchaser, the proposed transferee or
purchaser agrees in writing to be bound by, and covenants that each transferee
of all such shares of Common Stock shall be bound by, the provisions of this
Agreement as if it were Investor and a party hereto.
(c) Each Holder shall provide written notice (the "Tag-Along
Notice") to Investor as to its decision to participate in the Tag-Along Sale no
less than fifteen (15) days prior to the Tag-Along Sale Date. The Tag-Along
Notice shall set forth the number of shares of Common Stock, if any, that such
Holder desires to include in the Tag-Along Sale (which shall not exceed such
Holder's Maximum Tag-Along Shares of Common Stock). The Tag-Along Notice shall
also specify the aggregate number of additional shares of Common Stock owned of
record as of the Tag-Along Notice Date by such Holder, if any, which such
Holder desires also to include in the Tag-Along Sale ("Additional Shares of
Common Stock") in the event there is an aggregate undersubscription for the
entire Maximum Tag-Along Shares of Common Stock. In the event there is an
aggregate undersubscription by the Holders for the entire Maximum Tag-Along
Shares of Common Stock, Investor shall apportion the unsubscribed Maximum
Tag-Along Shares of Common Stock to Holders whose Tag-Along Notices specified
an amount of Additional Shares of Common Stock, which apportionment shall be on
a pro rata basis among such Holders in accordance with the number of Additional
Shares of Common Stock specified by all such Holders in their Tag-Along
Notices.
(d) Investor shall determine the aggregate number of shares of
Common Stock to be sold by each participating Holder in any given Tag-Along
Sale in accordance with the terms hereof, and the Tag-Along Notices given by
the Holders shall constitute their binding respective agreements to sell such
shares of Common Stock on the terms and conditions applicable to such sale
(including the requirements of this Section 6).
(e) If a Tag-Along Notice is not received by Investor in the
Tag-Along Sale from a Holder within the fifteen (15) day period specified
above, Investor shall have the right to sell or otherwise transfer the number
of Purchased Shares specified in the Tag-Along Sale Notice to the proposed
purchaser or transferee without any participation by such Holder, but only on
the terms and conditions stated in such Tag-Along Sale Notice and only if such
sale occurs on a date within ninety (90) days of the Tag-Along Sale Date.
(f) The provisions of this Section 6 shall apply regardless of
the form of consideration received in the Tag-Along Sale.
(g) Notwithstanding anything herein to the contrary, the
provisions of this Section 6 shall not apply to any Transfer from Investor to
any entity that is an Affiliate of Investor.
(h) If any Holder has Transferred any Common Stock in a
transaction described in clause (i), (ii) or (iii) of Section 5(d), the
transferee (an "Exempt Transferee") shall have the same right to participate in
a Tag-Along Sale upon the same terms, conditions and restrictions that apply to
such Holder or would apply to such Holder (if such Holder either does not
exercise its Tag-Along Rights or no longer holds Common Stock). Any Tag-Along
Sale Notice given to a Holder shall be deemed to have been effectively given to
its Exempt Transferee when given to such Holder.
(i) For the purpose of computing the number of shares of Common
Stock held by Investor or any Holder all shares of Common Stock underlying any
warrant or Series B Preferred Stock (or other convertible securities) held of
record by such Person shall be deemed owned by such Person.
(j) To the extent that Investor is obligated to make any payment
upon the exercise of any warrant held by it or is entitled to receive any
payment upon exercise of any warrant or conversion of any security held by it
that is convertible into Common Stock, the price it receives in the Tag-Along
Sale may be less than the price per share of Common Stock received by any
Holder (to adjust for the subscription price payable upon the exercise of any
warrant or upon the conversion of any convertible security) or may be greater
than the price per share of Common Stock received by any Holder (to adjust for
any amount receivable by Investor upon exercise of such warrant or conversion
of such convertible security).
7. Drag-Along Rights.
(a) If Investor, either alone or with any other Person,
determines to accept an offer from any Person (other than a Person that is an
Affiliate of Investor) to purchase any Purchased Shares and as a result of such
purchase (and the sale of Holder Shares to such Person as provided in this
Section 7) the offeror will have the ability to elect a majority of the members
of the Board, then, at the request of Investor, each Holder shall sell all
shares of Common Stock held by such Holder pursuant to such offer to purchase
(the "Drag-Along Sale"). All Holders of shares of Common Stock in such
Drag-Along Sale (i) shall receive the same consideration per share of Common
Stock, shall be subject to the same terms and conditions of sale and shall
otherwise be treated equally or, where appropriate, pro rata based upon the
number of shares of Common Stock, as the case may be, held by each Holder, and
(ii) shall execute such documents and take such actions as may be reasonably
required by Investor. For purposes of Drag-Along Sales, the number of shares
owned by each Holder shall include all shares underlying any options, warrants
and/or any other securities exercisable, convertible or exchangeable for Common
Stock (the "Convertible Securities"), which Convertible Securities will be
exercised by the Holder thereof immediately prior to and contingent upon
consummation of the Drag-Along Sale; provided, however, that at the option of
the holder of any Convertible Securities it may sell rather than exercise the
Convertible Securities (x) at a reduced price per share of Common Stock
equivalent that takes into account any amount payable by such holder to effect
such exercise, and (y) at an increased price per share of Common Stock
equivalent that takes into account any amount receivable by such holder upon
such exercise.
(b) Subject to the proviso in Section 7(a), any such sale by any
Holder shall be on the same terms and conditions as the proposed Drag-Along
Sale by Investor; provided, however, that all Holders shall share pro rata,
based upon the number of shares of Common Stock being sold by each (i) in all
transaction expenses (to the extent not borne by the Company), (ii) in any
indemnity liabilities to the purchaser in the Drag-Along Sale (other than
representations as to unencumbered ownership of and ability to transfer the
shares of Common Stock being sold of any other seller in the Drag-Along Sale,
which shall be the sole responsibility of such other seller), and (iii) in any
escrow for the purpose of satisfying any such indemnity liabilities.
(c) Investor shall promptly provide each Holder with written
notice (the "Sale Notice") not more than sixty (60) nor less than thirty (30)
days prior to the scheduled date of the Drag-Along Sale (the "Drag-Along Sale
Date"). Each Sale Notice shall set forth: (i) the name and address of each
proposed transferee or purchaser of shares of Common Stock in the Drag-Along
Sale; (ii) the proposed amount and form of consideration to be paid for such
shares of Common Stock and the terms and conditions of payment offered by each
proposed transferee or purchaser; (iii) confirmation that the proposed
purchaser or transferee has been informed of the "Drag-Along Rights" provided
for herein and has agreed to purchase shares of Common Stock (or, if requested
by Investor or a Holder, Convertible Securities) in accordance with the terms
hereof; and (iv) the Drag-Along Sale Date.
(d) The provisions of this Section 7 shall apply regardless of
the form of consideration received in the Drag-Along Sale, and if any non-cash
consideration is proposed for shares of Common Stock in the Drag-Along Sale,
each Holder shall accept its pro rata share of such non-cash consideration for
the shares of Common Stock based on its proportional ownership of shares of
Common Stock sold in such Drag-Along Sale.
(e) Each Exempt Transferee shall be obligated to sell all Common
Stock held by it in the Drag-Along Sale on the same terms and conditions that
apply to the Holder from whom it acquired Common Stock or would apply to such
Holder (in the case of a Holder who no longer holds Common Stock). Any
Drag-Along Sale Notice given to a Holder shall be deemed to have been
effectively given to its Exempt Transferee when given to such Holder.
(f) Each Holder and each Exempt Transferee shall execute such
documentation and take such further action as shall be requested in good faith
by Investor in order to effectuate the timely completion of the Drag-Along
Sale.
8. Holders' Non-Competition and Non-Solicitation Covenants.
(a) Each Holder hereby covenants and agrees with the Company and
Investor that, for the period beginning on the date hereof and ending on the
fifth (5th) anniversary of the Closing Date under the Securities Purchase
Agreement (the "Covenant Period") (provided, however, that such period shall be
extended automatically by and for the duration of any period of time during
which such Holder is in violation of any provision hereof), such Holder shall
not, directly or indirectly, acting alone or as a member of a partnership,
limited liability company or other business entity or as a holder of any
security of any class (other than as holder of less than one percent (1%) of
the outstanding amount of any security listed on a national securities exchange
or designated as a Nasdaq National Market security by the National Association
of Securities Dealers, Inc.) or as an officer, director, partner, employee,
consultant, agent or representative of or as an advisor or lender to any
corporation or other business entity:
(i) engage in any business within any geographic territory
in which the Company is conducting business during the Covenant Period, which
business is in direct competition with any business conducted by the Company at
any time during the Covenant Period;
(ii) request, induce or attempt to influence any customer or
supplier of the Company at any time during the Covenant Period to limit,
curtail or cancel its business with the Company; or
(iii) request, induce or attempt to influence any officer,
director or employee, of the Company at any time during the Covenant Period to
(x) terminate his, her or its employment or business relationship with the
Company or (y) commit any act that, if committed by Holder, would constitute a
breach of any provision hereof.
(b) The provisions of clauses (i), (ii) and (iii) above are
separate and distinct commitments independent of each of the other such
clauses. Each Holder agrees that neither the Company nor Investor has an
adequate remedy at law for any breach or threatened or attempted breach by
Holder of the covenants and agreements set forth in Section 8(a) hereof, and,
accordingly, such Holder also agrees that the Company and Investor may, in
addition to the other remedies that may be available to either of them under
this Agreement or at law, commence proceedings in equity for an injunction
temporarily or permanently enjoining such Holder from breaching or threatening
or attempting any such breach of any covenant or agreement set forth in Section
8(a) hereof, and with respect to any such proceeding in equity, it shall be
presumed that the remedies at law available to the Company and Investor would
be inadequate and that they would suffer irreparable harm as a result of the
violation of any provision hereof by such Holder. The prevailing party or
parties in any proceeding in equity or at law commenced in respect of this
Agreement shall be entitled to recover from the non-prevailing party or parties
to such proceeding all reasonable fees, costs and expenses (including
reasonable fees and disbursements of counsel) incurred in connection with such
proceeding and any appeals therefrom.
(c) The parties hereto acknowledge and agree that if the scope or
duration of any covenant set forth in Section 8(a) hereof is deemed by any
court to be overly broad, the court may reduce the scope thereof to that which
it deems reasonable under the circumstances. If any one or more provisions
hereof are held to be invalid or unenforceable, the validity and enforceability
of the remaining provisions shall not be affected thereby.
9. Holders' Confidentiality Covenant.
(a) Each Holder hereby agrees that such Holder will maintain in
confidence and not disclose, divulge or otherwise communicate to others or use
for any purpose, except as may be necessary to perform such Holder's duties as
an employee of or consultant to the Company, where applicable, any Confidential
Information (as hereinafter defined) except as expressly set forth in Section
9(c) hereof. Each Holder agrees (i) to cause each of its employees, directors,
officers or advisors to whom any Confidential Information of the Company has
been divulged or communicated to keep such Confidential Information strictly
confidential and to not disclose, divulge or communicate the same to any other
Person or use for any purpose, except as provided in Section 9(c), and (ii) to
be responsible for any disclosure or misuse of Confidential Information by such
employees, directors, officers or advisors.
(b) As used herein, the term "Confidential Information" refers to
any and all financial, technical, commercial or other information concerning
the business and affairs of the Company, whether prepared by employees, agents
or advisors of the Company or otherwise, that has heretofore been, or may
hereafter be, provided to any Holder, irrespective of the form or source of the
communication, including, without limitation, business plans, product
development plans, product pricing, information about actual or prospective
customers or suppliers, computer programs, codes, technical information, data,
reports, know-how, patent positioning, financial information, analyses,
compilations, market data, studies and plans. The term "Confidential
Information"does not include information which (i) at the time of disclosure or
thereafter is generally available to or known by the public otherwise than by
reason of a Holder's disclosure thereof in violation of this Section 9, or (ii)
becomes available to a Holder on a nonconfidential basis from a source other
than the Company or its agents; provided that such Holder, after due inquiry,
had no reason to believe that such source was bound by a confidentiality
agreement with the Company.
(c) In the event that any Holder or Person to whom any Holder
furnishes Confidential Information as permitted by this Agreement receives a
request to disclose all or any part of the information contained in the
Confidential Information under the terms of a subpoena, order, civil
investigative demand or similar process issued by a court of competent
jurisdiction or by a governmental body or agency, subject to the following
sentence, such Holder agrees (i) to notify the Company immediately of the
existence, terms and circumstances surrounding such a request, (ii) to consult
with the Company on the advisability of taking legally available steps to
resist or narrow such request, (iii) if disclosure of such information is
required, to furnish only that portion of the Confidential Information which,
in the opinion of counsel for such Holder, such Holder is legally compelled to
disclose and to advise Company as far in advance of such disclosure as is
possible so that the Company may seek an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the
Confidential Information, and (iv) not to oppose actions by the Company to
obtain an appropriate protective order or reliable assurance that confidential
treatment will be accorded the Confidential Information. Nothing in this
Section 9 shall prevent Holder from disclosing Confidential Information to his
or her counsel, the court and witnesses in connection with Holder's enforcement
of its rights under this Agreement.
10. Miscellaneous.
(a) Construction. As used in this Agreement, the masculine,
feminine or neuter gender, and the singular or plural shall be deemed to
include the others or other whenever and wherever the context so requires.
(b) Waivers and Amendments. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only by the
written consent of: (i) as to the Company, only by the Company by action
authorized by the Board, (ii) as to Investor, only by Investor, and (iii) as to
the Holders, by Holders holding more than fifty percent (50%) in interest of
the Holder Shares held by all Holders. Any amendment or waiver effected in
accordance with clauses (i), (ii) and (iii) of this Section 10(b) shall be
binding upon the Company, Investor, and the Holders and their respective
successors and assigns. No waiver by any party of the breach of any term or
provision contained in this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
the Agreement.
(c) Entire Agreement; Assignment of Rights. This Agreement, the
Stock Purchase Agreement and the written agreements referenced therein
constitute the entire agreement among the parties hereto relative to the
subject matter hereof. Any previous agreement among the parties relative to the
specific subject matter hereof is superceded by this Agreement; provided, that
nothing herein contained shall in any manner negate any provision of the
Securities Purchase Agreement or any other written agreement referred to in the
Securities Purchase Agreement. 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.
(d) Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing (including
telecopy or similar writing) and shall be given,
if to the Company to:
JD American Workwear, Inc.
00 Xxx Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
Attention: Xx. Xxxxx X. XxXxxxx, President and
Chief Executive Officer
Telecopier: (000) 000-0000
with a copy to
Xxxxxx X. XxXxxxx, Esq.
Reed, Smith, Xxxx & XxXxxx LLP
Xxx Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Telecopier: (000) 000-0000
if to Investor to:
Union Labor Life Insurance Company
000 Xxxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xx. Xxxxxxx X. Xxxxx, Senior Vice President
Telecopier: (000) 000-0000
with a copy to:
Xxxx X. Xxxxxx, Esq.
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telecopier: (000) 000-0000
if to any Holder at the address or to the telecopier number set
forth beneath such Holder's name on the signature page(s) to this
Agreement, with a copy to Xxxxxx X. XxXxxxx, Esq., as provided
above,
or to such other address or telecopier number as such party may specify for the
purpose of notice to the other party or parties to this Agreement, as the case
may be. A copy of any notice to Investor or any Holder shall also be given to
each other Holder. Any notice, request, consent or other communication
hereunder shall be deemed to have been given and received on the day on which
it is delivered (by any means including personal delivery, overnight air
courier, United States mail) or telecopied (or, if such day is not a business
day or if the notice, request, consent or communication is not telecopied
during business hours of the intended recipient, at the place of receipt, on
the next following business day).
(e) Severability. Should any one or more of the provisions of
this Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement,
shall be given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby.
(f) Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
(g) Choice of Law. It is the intention of the parties that the
internal substantive laws, and not the laws of conflicts, of New York shall
govern the enforceability and validity of this Agreement, the construction of
its terms and the interpretation of the rights and duties of the parties.
(h) Expenses. Except as provided in the Securities Purchase
Agreement or below, each party shall be responsible for all of its own fees and
expenses arising or incurred in connection with this Agreement and consummation
of the transactions contemplated hereby.
(i) Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
(j) Term. This Agreement shall commence upon the date hereof and
shall terminate upon the tenth anniversary of the date hereof; provided, that
Sections 4 and 5(b) shall terminate upon the expiration of the underwriters'
lock-up period in connection with a Qualified Offering.
(k) Further Assurances.
(i) Each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable legal
requirements or otherwise, to make effective the transactions contemplated by
this Agreement.
(ii) If at any time Investor believes in good faith that any
further action is necessary or desirable on the part of the Company or any
Holder or Holders to carry out the purposes of this Agreement, each of the
Holders and the Company, as the case may be, shall, as requested by Investor in
writing, take or cause to be taken all such necessary or convenient action and
execute, and deliver and file, or cause to be executed, delivered and filed,
all necessary or convenient documentation.
(l) Non-Reliance on Investor and its Counsel. Each Holder
acknowledges and agrees that it is being represented in connection with this
Agreement by Reed, Smith, Xxxx & XxXxxx LLP, and such Holder has not received
any information or advice from, and is not relying upon any statement made by
Investor or Investor's special counsel, Paul, Hastings, Xxxxxxxx & Xxxxxx LLP,
in entering into or in connection with this Agreement or the transactions
contemplated hereby.
(m) Expenses of Enforcement. If any party seeks to enforce its
rights under this Agreement against another party, the prevailing party in any
arbitration, litigation or dispute shall be entitled to receive from the party
or parties against which it has prevailed the reasonable fees and expenses
incurred by the prevailing party in connection therewith including, without
limitation, the reasonable fees and expenses of counsel, advisors and expert
witnesses.
(n) Further Enforcement Matters. Each party hereby agrees that
each other party shall be entitled to equitable relief, including an injunction
and specific performance, in the event of any breach of the provisions of this
Agreement, in addition to all other remedies available at law or in equity.
Each party further agrees to waive, and to use its best efforts to cause its
officers, directors, employees and agents to waive, any requirement for the
securing or posting of any bond in connection with such remedy. Each party also
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the United States of America located in the
District of Columbia for any actions, suits or proceedings arising out of or
relating to this Agreement or any matter contemplated hereby, and each party
agrees not to commence any action, suit or proceeding related thereto except in
such courts. Each party further agrees that service of any process, summons,
notice or document by United States mail, registered or certified, to its
address set forth or referred to in Section 10(d) shall be effective service of
process for any action, suit or proceeding against the party being served in
any such court. Each party hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of or relating to this Agreement, in the courts of the United States of America
located in the District of Columbia, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
(o) Authorship of Documents. This Agreement shall not be
construed for or against any party by reason of authorship or alleged
authorship of any provisions hereof or by reason of the status of the
respective parties.
[SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT]
IN WITNESS WHEREOF, the parties have caused this Stockholders Agreement
to be duly executed as of the day and year first above written.
JD AMERICAN WORKWEAR, INC.
By: /s/ XXXXX X. XXXXXXX
Xxxxx X. XxXxxxx, President and
Chief Executive Officer
UNION LABOR LIFE INSURANCE COMPANY
By: /s/ XXXXXXX X. XXXXXXXX
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President--Investments
HOLDERS
/s/ XXXXX X. XXXXXXX /s/ XXXXXX X. XXXX
Xxxxx X. XxXxxxx Xxxxxx X. Xxxx
Address:__________________________ Address:__________________________
__________________________________ __________________________________
__________________________________ __________________________________
/s/ XXXXXXX X. XXXXXXXX /s/ XXXXXX XXXXXXX
Xxxxxxx X. Xxxxxxxx Xxxxxx XxXxxxx
Address:__________________________ Address:__________________________
__________________________________ __________________________________
__________________________________ __________________________________
/s/ XXXXX XXXXXXXX /s/ XXXXXXX XXXXXXX
Xxxxx Xxxxxxxx Xxxxxxx XxXxxxx
Address:__________________________ Address:__________________________
__________________________________ __________________________________
__________________________________ __________________________________
EXHIBIT A
Number of Shares of
Name of Holder Common Stock Held
------------------- -------------------
Xxxxx X. XxXxxxx 587,500 shares
Xxxxxx X. Xxxx 50,000 shares
Xxxxxxx X. Xxxxxxxx 0 shares
Xxxxxx XxXxxxx 48,000 shares
Xxxxxxx XxXxxxx 48,000 shares
Xxxxx Xxxxxxxx 62,500 shares
