EXHIBIT 99.06
MEMBERS AGREEMENT
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THIS MEMBERS AGREEMENT (this "Agreement") is made as of May __, 2000,
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between Zecal Technology, LLC, a Delaware limited liability company (the
"Company"), each of the Members listed on the Schedule of Members attached
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hereto and, solely for purposes of agreeing to Sections 9, 10 and 24 hereof,
Heartland Technology, Inc., a Delaware corporation ("HTI"). Capitalized terms
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used but not otherwise defined herein are defined in Section 7 hereof or in the
LLC Agreement referred to below.
The Company and the Members desire to enter into this Agreement for
the purposes of, among others, inducing the Members to enter into the Company's
Limited Liability Company Agreement dated as of the date hereof (the "LLC
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Agreement"), to establish the composition of the Company's Board and to restrict
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the sale, assignment, transfer, encumbrance or other disposition of the Company
Interests.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Board of Managers.
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(a) From and after the date hereof and until the provisions of this
Section 1 cease to be effective, each Member shall vote all of its Company
Interests and any other voting interests of the Company over which such
Member has voting control and shall take all other necessary or desirable
actions within its control (whether in its capacity as a Member, manager,
member of a committee of the board or officer of the Company or otherwise
and including, without limitation, attendance at meetings in person or by
proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings) and the Company shall take all necessary or desirable
actions within its control (including, without limitation, calling special
Board and Member meetings), in order to cause:
(i) the election to the Board of:
(A) two representatives (the "LZ Directors") designated by
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LZ Partners, LLC ("LZ");
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(B) two representatives (the "Zecal Directors") designated
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by Zecal Corp. ("Zecal"); and
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(C) the Company's chief executive officer (as such person
may be appointed by the Board from time to time), as a
non-voting member of the Board.
(ii) the appointment of each member of the Board to each
committee of the Board and to the board of directors (or equivalent) and each
committee of each Subsidiary of the Company.
(b) In the event that any representative designated hereunder by LZ
or Zecal for any reason ceases to serve as a member of the Board during his
term of office (including by reason of the removal of any such
representative (with or without cause) by the Person entitled to appoint
such representative), the resulting vacancy on the Board shall be filled by
a representative designated by LZ or Zecal, as the case may be, as provided
in Section 1(a) above.
(c) Notwithstanding any provision contained herein or in the
Company's LLC Agreement to the contrary, only the LZ Directors (or, the
board members appointed by LZ, in the event the provisions of this Section
1 have otherwise been terminated), as a separate group as permitted by
Section 18-404(b) of the Delaware Limited Liability Company Act, shall be
entitled to consider and vote upon (i) the Company's exercise of any of its
rights or remedies (including, without limitation, any exercise of any
right to indemnification) or the performance of any of its obligations
pursuant to the Asset Purchase Agreement or (ii) any prepayment or
repayment of the Guaranty in advance of the scheduled maturity or required
payment of such guaranty obligations, but, in the case of this clause (ii),
only after (A) the occurrence of any Insolvency Event (as defined below),
(B) any demand for payment of the Guaranty by Xxxxx Fargo (as defined
below) or any exercise by Xxxxx Fargo or attempt by Xxxxx Fargo to exercise
any of its rights or remedies under the Guaranty or (C) if necessary or
desirable for the Company to obtain other financing which the LZ Directors
reasonably believe to be in the best interests of the Company.
Each Board representative shall have one vote on all matters
submitted to the Board (whether the consideration of such matter is taken
at a meeting, by written consent or otherwise), excluding, for the
avoidance of doubt, the Company's chief executive officer, in his or her
capacity as a non-voting member of the Board pursuant to Section 1(a)(i)(C)
hereof. The affirmative vote (whether by proxy or otherwise) of members of
the Board holding a majority of the votes of all members of the Board shall
be the act of the Board, it being agreed and understood that (subject to
the terms of Section 5.5(b) of the LLC Agreement) in the event of a Board
deadlock on any matter before the Board, the affirmative vote of the
holders of not less than a majority of the Company Interest shall be the
act of the Company.
(d) The provisions of this Section 1 (other than Section 1(c)) shall
terminate upon the first to occur of (i) any of Zecal, HTI or P.G. Design
shall be or become insolvent, or admit in writing its inability to pay its
debts as they mature, or make an assignment for the benefit of creditors;
or any of Zecal, HTI or P.G. Design shall apply for or consent to the
appointment of any receiver, trustee, or similar officer for it or for all
or any substantial part of its property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of
any of Zecal, HTI or P.G. Design, as the case may be; or any of
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Zecal, HTI or P.G. Design shall institute (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding relating to it under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise)
against any of Zecal, HTI or P.G. Design (except for, and only so long as,
any such proceeding in which Zecal, HTI or P.G. Design is the "debtor in
possession," as defined in (S)1101(1) of the U.S. Bankruptcy Code, unless
not less than a majority of the LZ Directors, acting in good faith,
determine that any such "debtor in possession" proceeding has or could
reasonably be expected to result in the loss of 10% or more of the
Company's annual net sales or EBITDA or has or could reasonably be expected
to result in the loss of any third party financing which would otherwise be
available to the Company or has or could reasonably be expected to
jeopardize an important business relationship or business order); or any
judgment, writ, warrant of attachment or execution or similar process shall
be issued or levied against a substantial part of the property of any of
Zecal, HTI or P.G. Design (any of the foregoing, an "Insolvency Event"),
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(ii) a foreclosure by Xxxxx Fargo Business Credit, Inc. ("Xxxxx Fargo")
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pursuant to which Xxxxx Fargo or any successor-in-interest thereto acquires
all or any portion of the Company Interest currently held by Zecal (a "Bank
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Acquisition Event"), (iii) HTI's or Zecal's failure to consummate the Put
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transactions required by Section 9 hereof, (iv) Zecal's failure to fulfill
its obligations under the buy-sell arrangements in Section 10 hereof to
consummate a purchase or sale of Company Interests when obligated to do so,
(v) the consummation of a Liquidity Event or (vi) the consummation of an
IPO. Upon any such termination of this Section 1, the members of the
Company's Board shall be appointed in accordance with the Delaware Act (as
defined in the LLC Agreement) and, for purposes of clarification, the
holders of not less than a majority of the Company Interest shall be
entitled to appoint each member of the Company's Board upon any termination
of this Section 1.
2. Restrictions on Transfer of Company Interests.
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(a) Transfer of Company Interests. No holder of Company Interests
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shall sell, transfer, assign, pledge or otherwise dispose of (whether with
or without consideration and whether voluntarily or involuntarily or by
operation of law) any interest in (a "Transfer") such holder's Company
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Interests, except pursuant to (i) Section 2(b) hereof, (ii) a Public Sale,
(iii) a Liquidity Event pursuant to Section 6 or (iv) Section 9 or 10
hereof; provided that the applicable requirements of Sections 3 and 4 (if
any) are also satisfied. Notwithstanding anything to the contrary contained
herein, the Members agree and acknowledge that Zecal shall be permitted to
pledge the Company Interest held by it to Xxxxx Fargo in support of Zecal's
obligations pursuant to that certain Credit Agreement dated as of December
31, 1998, as amended, by and between Xxxxx Fargo and P.G. Design and that
nothing herein shall preclude Xxxxx Fargo from foreclosing upon, and
acquiring, all or any portion of such Company Interest.
(b) Permitted Transfers. The restrictions contained in this Section 2
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shall not apply with respect to any Transfer of Company Interests in the
case of any Person (i) pursuant to applicable laws of descent and
distribution or among such Person's Family
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Group,(ii) in the case of LZ, among its Affiliates or (iii) in the case of
Zecal, among HTI or any of its wholly-owned Subsidiaries (transferees
permitted pursuant to clauses (i),(ii) and (iii) above and the last
sentence of Section 2(a) above are collectively referred to herein as
"Permitted Transferees"); provided that the restrictions contained in this
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Section 2 shall continue to be applicable to such Company Interests after
any such Transfer; and provided further that the applicable requirements
specified in Sections 3 and 4 in connection with such Transfer shall have
been satisfied. A Person's "Family Group" means such Person's (or if such
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Person is not an individual then such Person shall refer to the ultimate
individual beneficial owners of such Person) spouse and descendants
(whether natural or adopted) and any trust or other vehicle formed solely
for the benefit of such Person and/or any of such Person's spouse and/or
descendants.
(c) Termination of Restrictions. The restrictions set forth in this
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Section 2 shall continue with respect to all Company Interests until the
earlier of (i) the consummation of a Liquidity Event pursuant to Section 6
or (ii) the consummation of an IPO. If the consummation of a Transfer
pursuant to this Section 2 would cause a Liquidity Event to occur, the
provisions of Section 6 (as opposed to this Section 2) shall control such
Transfer.
3. Additional Restrictions on Transfer.
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(a) Restrictive Legend. The Company Interests have not been
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registered under the Securities Act and, therefore, in addition to the
other restrictions on Transfer contained in this Agreement, cannot be sold
unless subsequently registered under the Securities Act or an exemption
from such registration is then available. The LLC Agreement will contain a
restrictive legend describing the transfer restrictions set forth in this
Agreement.
(b) Opinion of Counsel. No holder of Company Interests may Transfer
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any Company Interests (except pursuant to an effective registration
statement under the Securities Act, pursuant to Section 5 or 6 hereof or to
an Affiliate) without first delivering to the Company (unless waived by the
Board) an opinion of counsel (reasonably acceptable in form and substance
to the Board) that neither registration nor qualification under the
Securities Act and applicable state securities laws is required in
connection with such Transfer.
(c) Transfers to HTI's Shareholders. Notwithstanding any provision in
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this Agreement to the contrary, Zecal shall not be permitted to Transfer
all or any portion of the Company Interest held by it to HTI's shareholders
except in accordance with this Section 3(c). At any time not less than 180
days after an IPO or any other registered public offering on behalf of the
Company or any of its securityholders, Zecal shall be permitted to
distribute, as a stock dividend to HTI's shareholders, all or any portion
of its Company Interest. In order to ensure an orderly distribution of and
market for such securities, as a condition to any such dividend to HTI's
shareholders, 50% of such securities may not be resold or otherwise
transferred (including pursuant to Rule 144) by HTI's shareholders until
180 days after any such distribution by Zecal or HTI. Zecal shall notify
the Company not less than ten business days prior to any distribution, so
that the Company can issue
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appropriate instructions to its transfer agent implementing the
restrictions described in this Section 3(c).
4. Transfer. Prior to Transferring any Company Interests (other
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than pursuant to Section 3(c), a Liquidity Event pursuant to Section 6, a Public
Sale or an IPO), the Transferring holder of Company Interests shall cause the
prospective Transferee to be bound by this Agreement, the LLC Agreement (if the
prospective Transferee is admitted as a substituted member pursuant to the LLC
Agreement), the Registration Agreement, the Asset Purchase Agreement (in the
case of Zecal), and any other agreements executed by holders of Company
Interests relating to such Company Interests in the aggregate (collectively, the
"Other Agreements"), and to execute and deliver to the Company and the other
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holders of Company Interests counterparts of this Agreement, the LLC Agreement
(if the prospective Transferee is admitted as a substituted member pursuant to
the LLC Agreement), the Registration Agreement, the Asset Purchase Agreement (in
the case of Zecal) and the applicable Other Agreements. Any Transfer or
attempted Transfer of any Company Interests in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer on
its books or treat any purported Transferee of such Company Interests as the
owner of such securities for any purpose.
5. Public Offering.
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(a) If (i) at any time the Board approves a public offering of any of
the Company Interests to be registered under the Securities Act, (ii) the
holders of not less than a majority of the Company Interests (the
"Requisite Holders") otherwise request the Company to make a public
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offering of equity interests of the Company pursuant to the Registration
Agreement or (iii) the holders of not less than 30% of the Company
Interests (the "Minority Holders") request the Company to make a public
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offering of equity interests of the Company and the following conditions
exist (or would exist upon the consummation of such public offering): (A)
the aggregate market capitalization of the Company, based upon the price
per share to be paid by the public for such interests, would be at least
$300,000,000; (B) the offering price per share to be paid by the public for
such interests in such public offering implies a fifteen times (15.0x)
multiple of projected EBITDA for the twelve month period immediately
following such public offering and (C) such public offering shall be
underwritten by any one or more of Xxxxxxx Xxxxx, Xxxxxx Xxxxxxx, Xxxxxxx
Xxxxx or another top tier, New York-based investment bank, then the Members
and the Company will take all necessary or desirable actions in connection
with the consummation of such registered offering approved by the Board
and, to the extent not inconsistent therewith, the Requisite Holders or the
Minority Holders, as the case may be. It is the intent of the parties
hereto that immediately prior to the initial registered offering of Company
Interests, whether or not pursuant to the immediately preceding sentence
and whether pursuant to a sale by the Company or by any Member, (i) a
Delaware corporation will be incorporated (the "Entity"), (ii) the Company
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Interests will be recapitalized or reorganized (whether by merger,
exchange, contribution, a combination of the foregoing or otherwise) at the
Board's election into (A) a single class of common stock of the Entity or
(B) classes of capital stock of the Entity, in either case which have the
same relative rights and preferences as such Company Interests and (iii)
each
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Member hereby agrees that it will consent to and vote for a
recapitalization, reorganization or exchange of the existing Company
Interests into capital stock of the Entity that the Board finds acceptable
(consistent with the requirements of clause (ii) above) and will take all
necessary or desirable actions in connection with the consummation of the
recapitalization, reorganization or exchange. Without limiting the
generality of the foregoing, each holder of Company Interests hereby waives
any dissenters rights, appraisal rights or similar rights in connection
with such recapitalization, reorganization or exchange. The securities to
be so held by the Members will be allocated among the Members (or
additional securities will be issued to one or more Members) so that,
immediately after such recapitalization, reorganization or exchange, each
Member holds securities having an aggregate value equal to the amount which
such Member would have received if, immediately prior to such
recapitalization, reorganization or exchange, the Company had distributed
to its Members an aggregate amount equal to the aggregate value of the
securities which are to be held by all Members immediately after such
recapitalization, reorganization or exchange in a complete liquidation
pursuant to the rights and preferences set forth in the Company's LLC
Agreement immediately prior to such recapitalization, reorganization or
exchange, with each share of such securities, if any, offered to the public
as part of such offering having a "value" for such purposes equal to the
price per share of sales to the public as part of such offering.
(b) Notwithstanding the foregoing, any such recapitalization,
reorganization or exchange will be structured and implemented in the manner
contemplated by Section 12.7 of the LLC Agreement.
6. Liquidity Event.
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(a) The Company shall seek to effectuate a Liquidity Event upon the
request of Members holding not less than a majority of the Company
Interests (the "Majority Holder").
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(b) From and after the time (if any) when the Board or the Majority
Holder have informed each of the Members that it desires to effectuate a
Liquidity Event, the Company and each holder of Company Interests shall (i)
cooperate in good faith to effectuate such Liquidity Event and (ii) consent
to and raise no objections against, and take all necessary or desirable
actions in connection with, the consummation of such Liquidity Event,
including those reasonably requested by the Seller (as defined below).
Without limiting the generality of the foregoing, subject to the terms set
forth in this Section 6, (i) each holder of Company Interests hereby waives
any dissenters rights, appraisal rights or similar rights in connection
with such Liquidity Event and (ii) if all or any portion of any such
Liquidity Event is structured as a sale of interests, each holder of
Company Interests shall agree to sell any or all of his or its interests
and rights to acquire interests on the terms and conditions approved by the
Seller. The Person seeking to effectuate such Liquidity Event (i.e., the
Board or the Majority Holder) is referred to herein as the "Seller."
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(c) In connection with any Liquidity Event (whether by sale, merger,
recapitalization, reorganization, consolidation, combination or otherwise)
pursuant to this
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Section 6, each holder of Company Interests who holds Company Interests
immediately prior to such Liquidity Event shall receive the same form of
consideration and the same portion of the aggregate consideration that such
holder of Company Interests would have received if the aggregate
consideration paid by the Buyer in connection with closing such Liquidity
Event (the "Aggregate Consideration") had been paid directly to the Company
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and then distributed by the Company (i) pursuant to Section 4.1(a) of the
LLC Agreement (and after giving effect to any transfer taxes payable in
connection with such Liquidity Event, the amount of which will be paid
directly to the persons owing such taxes), if such Liquidity Event is
structured in the manner contemplated by Section 12.7 of the LLC Agreement
or otherwise as a sale of equity interests or similar transaction or (ii)
in all other cases in a complete liquidation pursuant to the terms of the
LLC Agreement as in effect immediately prior to such Liquidity Event (but
without the Company paying any amounts in such liquidation with respect to
any obligations that are being assumed by the Buyer in connection with such
Liquidity Event, and after giving effect to any transfer taxes payable in
connection with such Liquidity Event, the amount of which will be paid
directly to the persons owing such taxes). Each holder of Company Interests
shall take all necessary or desirable actions in connection with the
receipt of the Aggregate Consideration from such Liquidity Event as is
requested by the Seller to effectuate the foregoing.
(d) The Company will pay the costs of any sale of Company Interests
pursuant to a Liquidity Event to the extent such costs are incurred for the
benefit of all holders of Company Interests and are not otherwise paid by
the acquiring party, but including in any event the reasonable fees and
disbursements of one counsel chosen by the Majority Holder. Costs incurred
by any holder of Company Interests on its own behalf will not be considered
costs of the transaction under this Section 6.
(e) The provisions of this Section 6 shall terminate upon the
consummation of the first to occur of an IPO or a Liquidity Event.
(f) Notwithstanding the foregoing, any such Liquidity Event will be
structured and implemented in the manner contemplated by Section 12.7 of
the LLC Agreement.
7. Certain Definitions.
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"Affiliate" is defined in the LLC Agreement.
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"Asset Purchase Agreement" means that certain Asset Purchase
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Agreement, dated as of the date hereof, by and among the Company, HTI and Zecal
Corp., as the same may be amended or modified from time to time.
"Board" is defined in the LLC Agreement.
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"Buyer" is the person or persons purchasing the Company.
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"Company Interest" is defined in the LLC Agreement.
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"Equity Interests" is defined in the LLC Agreement.
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"GAAP" is defined in the LLC Agreement.
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"Guaranty" is defined in the LLC Agreement.
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"Invested Capital" is defined in the LLC Agreement.
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"IPO" is defined in the LLC Agreement.
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"Letter Agreement" means that certain Letter Agreement, dated as of
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the date hereof, between Xxxxx Fargo Business Credit, Inc. and the Company.
"Liquidity Event" is defined in the LLC Agreement.
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"LLC Interest Purchase Agreement" means that certain LLC Interest
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Purchase Agreement, dated as of the date hereof, between the Company and LZ.
"Member" is defined in the LLC Agreement.
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"Person" is defined in the LLC Agreement.
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"P.G. Design" means P.G. Design Electronics, Inc., a Delaware
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corporation.
"Preferred Company Interests" is defined in the LLC Agreement.
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"Public Sale" is defined in the LLC Agreement.
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"Registration Agreement" means that certain Registration Agreement,
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dated as of the date hereof, between the Company and its Members.
"Securities Act" means the Securities Act of 1933, as amended, and
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applicable rules and regulations thereunder, and any successor to such statute,
rules or regulations. Any reference herein to a specific section, rule or
regulation of the Securities Act shall be deemed to include any corresponding
provisions of future law.
"Subsidiary" is defined in the LLC Agreement.
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8. Financial Statements. At any time prior to the consummation of an
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IPO or a Liquidity Event, the Company will deliver to each holder of Company
Interests:
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(a) no later than thirty (30) days after the end of each monthly
accounting period of the Company in each fiscal year, unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such monthly period and for the period from the beginning
of the fiscal year to the end of such month, and unaudited consolidated
balance sheets of the Company and its Subsidiaries as of the end of such
monthly period, setting forth in each case comparisons to the Company's
annual budget, and to the corresponding period in the preceding fiscal year
(all of which statements shall be prepared in accordance with GAAP);
(b) no later than forty-five (45) days after the end of each
quarterly accounting period of the Company in each fiscal year, unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such quarterly period and for the period from the
beginning of the fiscal year to the end of such quarter, and unaudited
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such quarterly period, setting forth in each case comparisons to the
Company's annual budget, and to the corresponding period in the preceding
fiscal year (all of which statements shall be prepared in accordance with
GAAP);
(c) no later than forty-five (45) days after the end of each
quarterly accounting period of the Company in each fiscal year, a revised
copy of the annual budget of the Company and its Subsidiaries, updated to
reflect the Company's actual operating results to date and other data
impacting the assumptions used to prepare the Company's annual budget; and
(d) no later than ninety (90) days after the end of each fiscal year
of the Company, consolidated statements of income and cash flows of the
Company for such fiscal year, and consolidated balance sheets of the
Company as of the end of such fiscal year, setting forth in each case
comparisons to the Company's annual budget, and to the preceding fiscal
year, and a calculation of Adjusted EBITDA (as defined in Section 9(a)),
all prepared in accordance with GAAP, and accompanied by an unqualified
opinion of such independent accounting firm of recognized national standing
approved by the Board.
9. Put Arrangements.
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(a) At any time during each Put Exercise Period (as defined below),
if the Company's actual Adjusted EBITDA is less than 80% of the Adjusted
EBITDA targets set forth in a separate writing delivered at the closing of
the Asset Purchase Agreement by signature of an officer of Zecal and
countersigned by a LZ Director (for either the year ended December 31,
2001, the year ended December 31, 2002 or the two year period ended
December 31, 2002), the holders of Preferred Company Interests (other than
HTI or any of its Affiliates) shall have the right (but not the obligation)
to require HTI to repurchase all or any portion of such holder's Preferred
Company Interests at the Put Price (the "Put") by delivering a written
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notice to HTI specifying the amount of Preferred Company Interests to be
purchased (the "Put Notice"). Each "Put Exercise Period" shall be the 90-
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day period
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following the delivery of the Company's annual audited consolidated
financial statements to the Members for each fiscal year of the Company
commencing with the year ended December 31, 2001 and ending with the year
ended December 31, 2002, but in any event each Put Exercise Period shall
begin no later than 90 days after the end of each such fiscal year.
"Adjusted EBITDA" means (i) the Company's consolidated pretax income for
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the relevant accounting period, plus the amount of interest expense for
such period, plus the amount of the provision for depreciation and
amortization for such period, all determined on a consolidated basis in
accordance with GAAP, consistently applied minus (ii) the Company's net
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change in Working Capital for the relevant accounting period, determined on
a consolidated basis in accordance with GAAP, consistently applied.
"Working Capital" means the Company's consolidated current assets minus its
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consolidated current liabilities (excluding the effects of cash and cash
equivalents and the current portion of Indebtedness for Borrowed Money (as
defined in the Asset Purchase Agreement)), determined in accordance with
GAAP, consistently applied.
(b) Subject to the provisions hereof, no later than 120 days after
delivery of the Put Notice, HTI shall purchase and the holders of Preferred
Company Interests electing to Put such interests (the "Electing Holders")
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shall sell the amount of such holders' Preferred Company Interests
specified in the Put Notice at a mutually agreeable time and place (the
"Put Closing").
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(c) At the Put Closing, the Electing Holders shall deliver to HTI
duly executed instruments of assignment conveying title to such Electing
Holder's interests to be purchased by HTI, free and clear of all liens, and
HTI shall deliver each such Electing Holder the Put Price by wire transfer
of immediately available funds to an account designated by each such
Electing Holder. In the event HTI fails to consummate the Put transactions
required by this Section 9, Zecal shall lose its right to appoint directors
to the Board pursuant to Section 1 of this Agreement, and the election of
such directors shall be accomplished in accordance with the Delaware Act
(as defined in the LLC Agreement).
(d) The "Put Price" of each Electing Holder's Preferred Company
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Interests shall mean the purchase price paid therefor plus interest
thereon, at a rate of 10% per annum, compounded monthly, from the date such
interests were purchased to (but not including) the date HTI actually makes
payment for such interests.
(e) Notwithstanding any other provision in this Section 9, the right
of the holders of the Preferred Company Interests to exercise the Put
hereunder shall terminate upon the consummation of the first to occur of a
Liquidity Event or an IPO.
10. Buy-Sell Arrangements.
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(a) At any time on or after January 1, 2001 (or at any time after the
date hereof, in the event of an Insolvency Event or Bank Acquisition Event,
as defined in Section 1(d) hereof), either LZ or Zecal (the "Proposed
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Seller") may offer (any such offer shall specify
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that it is pursuant to this Section 10(a)), in writing (the "Offer"), to
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sell all or any portion of its Company Interests to the other group (Zecal
or LZ, as the case may be, and hereinafter referred to as the "Proposed
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Buyer"), specifying the aggregate price therefor, and the price for each 1%
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interest in the Company (the price of each 1% interest in the Company
hereinafter referred to as the "Target Price"). The Proposed Buyer must
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accept or reject the Offer no later than thirty (30) days after receipt of
the Offer. If the Proposed Buyer accepts the Offer, it shall deliver the
Proposed Seller an irrevocable acceptance notice (the "Acceptance Notice")
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stating that the Proposed Buyer agrees to purchase all (but not less than
all) of the Proposed Seller's offered Company Interests at the aggregate
Target Price therefor (in cash, payable in immediately available funds,
denominated in U.S. dollars) on a date which shall not be later than 90
days after receipt of the Offer, and such purchase of all (but not less
than all) of the Proposed Seller's offered Company Interests shall be
consummated no later than 90 days after receipt of the Offer. If the
Proposed Buyer rejects the Offer (and such rejection shall be deemed to
occur on the 30th day after receipt of the Offer, if no written acceptance
or rejection of the Offer is delivered by the Proposed Buyer on or prior to
such date), then the Proposed Seller must purchase all (but not less than
all) of the Proposed Buyer's Company Interests at the aggregate Target
Price therefor (in cash, payable in immediately available funds,
denominated in U.S. dollars) on a date which shall not be later than 90
days after receipt of the Offer, and such purchase of all (but not less
than all) of the Proposed Buyer's Company Interests shall be consummated no
later than 90 days after receipt of the Offer. In the event Zecal fails to
fulfill its obligations under this Section 10 to consummate a purchase or
sale of Company Interests when obligated to do so, Zecal shall lose the
right to appoint directors to the Board pursuant to Section 1 of this
Agreement, and the election of directors shall be accomplished in
accordance with the Delaware Act. HTI unconditionally guarantees Zecal's
obligations pursuant to this Section 10, it being understood that HTI's
guarantee is a guarantee of payment.
(b) Notwithstanding any other provision in this Section 10, at any
time, either party may offer (any such offer shall specify that it is
pursuant to this Section 10(b)), in writing, to sell any portion of its
Company Interests to the other party, and in such event, the parties may
(but shall not be obligated to) negotiate mutually agreeable terms for the
purchase and sale of any such offered Company Interests.
(c) Notwithstanding any other provision in this Section 10, each
party's rights and obligations under this Section 10 shall terminate upon
the consummation of the first to occur of a Liquidity Event or an IPO.
11. Additional Financing.
--------------------
(a) If, at any time prior to the first to occur of a Liquidity Event
or an IPO, the Company is deemed, in accordance with the terms of this
Section 11, to require additional financing and the Board, as of the date
of such Call Notice (as defined below), has not consummated a third party
financing, any Member holding more than 25% of the aggregate Company
Interest may issue a written request to each of the Members for additional
funds
-11-
for the Company, by delivery of written notice to each such Member at the
address for such Person in the Company's books and records (the "Call
----
Notice"), which notice shall describe the proposed amount of the additional
------
financing, the proposed closing date of the additional financing (which
shall be no later than 15 business days after the delivery of the Call
Notice) and, as provided in paragraph 11(c) hereof, the proposed type of
financing (i.e., equity or debt financing). Within 15 business days after
the delivery of the Call Notice, each Member shall have the preemptive
right (but not the obligation) to provide all, but not less than all, of
such Member's pro rata share of such financing, according to their
respective Company Interests, in accordance with this Section 11.
(b) The Company shall be deemed to require additional financing upon
a Board finding thereof and, notwithstanding any Board finding to the
contrary, if any one of the following conditions exists at the time a Call
Notice is delivered: (i) the Company's cash balance is less than $500,000,
(ii) the Company has failed or is likely to fail to pay its debts or
obligations as they have or will become due and payable or (iii) the cash
flow projections in the budget prepared by the Company (as such projections
may be adjusted from time to time) reasonably indicate a need for
additional financing during any succeeding six-month period (excluding, for
purposes hereof, any discretionary, rather than required capital
expenditures).
(c) Any such financing provided to the Company by the Members
pursuant to this Section 11 shall, if each Member is providing a pro rata
percentage (according to their respective Company Interests) of such
funding, be in the form of additional Preferred Company Interests
representing a percentage of all of the Company Interests equal to a
fraction, the numerator of which shall be the dollar amount of Preferred
Company Interests purchased pursuant hereto and the denominator of which
shall be the aggregate dollar amount of the Company's Invested Capital
immediately following the purchase of such additional Preferred Company
Interests (the "Derived Percentage") or, if any Member declines to provide
------------------
all of its pro rata percentage of such funding, in the form of either (at
the election of each funding Member): (i) a first priority senior secured
loan bearing interest at the rate of 20% per annum (or such lesser rate as
may be permitted under applicable usury law), compounded monthly and
containing such other terms and conditions mutually agreed to by the
Company and such funding Member or (ii) additional Preferred Company
Interests representing a percentage of all of the Company Interests equal
to the Derived Percentage. If any Member declines to provide all of its pro
rata percentage of any funding described in this Section 11, each Member
providing any such funding shall receive warrants exercisable for a dollar
amount of additional Preferred Company Interests equal to two times (2.0x)
the dollar amount of the financing provided by such funding Member pursuant
to the preceding sentence of this Section 11 (the "Warrants"); provided
--------
that this provision for Warrants shall not apply with respect to up to
$1.45 million of financing used to satisfy the Company's obligations under
the Guaranty provided solely by LZ or solely by Zecal. Such Warrants shall
be exercisable for a period of five years from the date such financing is
consummated pursuant to this Section 11 and the exercise price of such
Warrants shall be equal to the dollar amount thereof. Such Warrants shall
be exercisable for a percentage of the Company
-12-
Interests equal to the dollar amount of such Warrants divided by the total
dollar amount of the Company's Invested Capital from time to time (assuming
exercise of such Warrants).
(d) After receiving a Call Notice, a Member wishing to exercise the
preemptive rights granted by this Section 11 must give written notice to
the Company and the Member issuing the Call Notice, within five (5)
business days after delivery of the Call Notice (the "Election Period"),
---------------
that such Member irrevocably agrees to subscribe for all (but not less than
all) of its pro rata portion of the additional financing described in the
Call Notice. As soon as practicable, but in any event within three (3)
business days after the expiration of the Election Period, the Company and
the Member issuing the Call Notice will, if necessary, notify the Members
exercising their preemptive rights to provide additional financing of any
unsubscribed additional financing which Members have elected not to provide
and each of the electing Members will be entitled (but not obligated) to
subscribe for the remaining additional financing described in the Call
Notice (the "Second Call Notice"); provided that if in the aggregate such
------------------
Members elect to subscribe for more than the remaining additional
financing, such remaining additional financing subscribed for by each such
Member will be reduced on a pro rata basis based upon the respective
Company Interests then held by such Members. Each Member may elect to
subscribe for any of the remaining additional financing available to such
Member by delivering written notice to the Company and the Member issuing
the Call Notice within two (2) business days after the delivery of the
Second Call Notice (with such two (2) business day period referred to
herein as the "Second Election Period").
----------------------
(e) As soon as practicable but in any event within two (2) business
days after the expiration of the Election Period or the Second Election
Period (if any), the Company and the Member issuing the Call Notice will
provide written notice (the "Closing Notice") to the electing Members as to
--------------
the total amount of additional financing to be provided to the Company by
such Member and the time and place of the closing of the transaction (which
will in any event be no later than 15 business days after the issuance of
the Call Notice).
(f) The closing of the transactions contemplated by this Section 11
will take place on the date designated in the Closing Notice. The Members
electing to provide such additional financing shall provide such funds by
delivery of a certified check or bank check or by wire transfer of
immediately available funds. The Company and the electing Members will
enter into definitive financing documentation customary for financing
transactions of the type described in this Section 11 and each electing
Member shall receive customary representations, warranties, covenants and
indemnities from the Company in connection with such financing.
Notwithstanding anything to the contrary contained in this Agreement, the
rights and obligations set forth in this Section 11 shall not be
transferable by either party and may only be performed or exercised by such
party.
12. Monitoring Expenses. The Company shall reimburse each of LZ and
-------------------
Zecal for their respective reasonably incurred actual out-of-pocket third party
expenses incurred by either LZ or Zecal in monitoring their respective
investments in the Company (which shall not, in any
-13-
event, include any internal expenses, including, without limitation, any
salaries or expenses of any officer, director or employee of either such party
or its Affiliates). This Section 12 shall terminate upon the first to occur of
(i) the consummation of a Liquidity Event or an IPO or (ii) as to any particular
party, upon the first date such party ceases to hold 10% or more of the
aggregate Company Interest.
13. Amendment and Waiver. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Members unless such modification, amendment
or waiver is approved in writing by Members holding not less than a majority of
the Company Interests. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
14. Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
15. Entire Agreement. This Agreement, those documents expressly
----------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
16. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and permitted assigns and the Members and any
subsequent holders of Company Interests and the respective successors and
permitted assigns of each of them, so long as they hold Company Interests.
Notwithstanding any provision in this Agreement to the contrary, Company
Interests shall cease to be Company Interests for purposes of this Agreement
when they have been disposed of in a Public Sale or repurchased by the Company
or any Subsidiary.
17. Counterparts. This Agreement may be executed in separate
------------
counterparts each of which will be an original and all of which taken together
will constitute one and the same agreement.
18. Remedies. Any Person having rights under any provision of this
--------
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any
-14-
breach of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement. Nothing contained in this Agreement will be
construed to confer upon any Person who is not a signatory hereto any rights or
benefits, as a third party beneficiary or otherwise.
19. Notices. Any notice provided for in this Agreement will be in
-------
writing and will be either personally delivered, or received by certified mail,
return receipt requested, or sent by reputable overnight courier service
(charges prepaid) to the Company at the address set forth below and to any other
recipient and to any subsequent holder of Company Interests subject to this
Agreement at such address as indicated by the Company's records, or at such
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party. Notices will be deemed
to have been given hereunder when delivered personally, three days after deposit
in the U.S. mail and one day after deposit with a reputable overnight courier
service. The Company's address is:
To the Company:
--------------
Zecal Technology, LLC
c/o Lamb Partners
000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx X. Xxxxx
With a copy to:
Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
and to:
Heartland Technology, Inc.
000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxx, Esq.
20. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Delaware or any other
-15-
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware. Any dispute relating hereto shall be heard in
the state or federal courts of Delaware, and the parties agree to jurisdiction
and venue therein.
21. Descriptive Headings; Interpretation. The descriptive headings
------------------------------------
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. Whenever required by the context, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation. Reference to any
agreement, document or instrument means such agreement, document or instrument
as amended or otherwise modified from time to time in accordance with the terms
thereof, and, if applicable, hereof. Without limiting the generality of the
immediately preceding sentence, no amendment or other modification to any
agreement, document or instrument that requires the consent of any Person
pursuant to the terms of this Agreement or any other agreement (including the
LLC Agreement) will be given effect hereunder unless such Person has consented
in writing to such amendment or modification. The use of the words "or,"
"either" and "any" shall not be exclusive.
22. Delivery by Facsimile. This Agreement and any signed agreement or
---------------------
instrument entered into in connection with this Agreement or contemplated
hereby, and any amendments hereto or thereto, to the extent signed and delivered
by means of a facsimile machine, shall be treated in all manner and respects as
an original agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof delivered
in person. At the request of any party hereto or to any such agreement or
instrument, each other party hereto or thereto shall re-execute original forms
thereof and deliver them to all other parties. No party hereto or to any such
agreement or instrument shall raise the use of a facsimile machine to deliver a
signature or the fact that any signature or agreement or instrument was
transmitted or communicated through the use of a facsimile machine as a defense
to the formation of a contract and each such party forever waives any such
defense.
23. No Strict Construction. The parties hereto have participated
----------------------
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
24. Undertaking of HTI. HTI agrees that it shall guarantee each and
------------------
every one of the Zecal's obligations under this Agreement and the other
agreements and transactions contemplated herein.
* * * * *
-16-
IN WITNESS WHEREOF, the parties hereto have executed this Members
Agreement on the day and year first above written.
ZECAL TECHNOLOGY, LLC
By:_______________________________
Its:______________________________
ZECAL CORP.
By:_______________________________
Its:______________________________
LZ PARTNERS, LLC
By:_______________________________
Its:______________________________
SOLELY FOR PURPOSES OF AGREEING TO BE BOUND BY
SECTIONS 9, 10 and 24 HEREOF:
HEARTLAND TECHNOLOGY, INC.
By:_______________________________
Its:______________________________
SCHEDULE OF MEMBERS
-------------------
Zecal Corp.
c/o Heartland Technology, Inc.
000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
LZ Partners, LLC
c/o Lamb Partners
000 X. Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx
-18-
