EXHIBIT 4.4
STOCKHOLDER'S AGREEMENT
This STOCKHOLDER'S AGREEMENT, dated as of February 28, 2005 (this
"AGREEMENT"), is made and entered into by and among Source Interlink Companies,
Inc., a Missouri corporation ("SOURCE") and AEC Associates, L.L.C., a Delaware
limited liability company ("AEC ASSOCIATES" or "STOCKHOLDER").
RECITALS
A. Concurrently with the execution of this Agreement, Source, Alligator
Acquisition, LLC, a Delaware limited liability company whose sole member is
Source ("MERGER SUB"), and Alliance Entertainment Corp., a Delaware corporation
(the "COMPANY"), have entered into an Agreement and Plan of Merger (the "MERGER
Agreement"), which provides for the merger (the "MERGER") of the Company with
and into Merger Sub.
B. Pursuant to the Merger, among other things, all of the issued and
outstanding shares of capital stock of the Company ("COMPANY CAPITAL STOCK")
will be converted into the right to receive shares of the common stock, par
value $0.01 per share, of Source ("SOURCE COMMON STOCK"), all upon the terms and
subject to the conditions set forth in the Merger Agreement.
C. Pursuant to the Merger, Stockholder will receive, as consideration for
the Merger, 17,685,568 shares of Source Common Stock ("CONSIDERATION SHARES"),
upon the terms and subject to the conditions set forth in the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement:
(a) "AFFILIATE" or "AFFILIATE" shall have the meaning provided in Rule
144(a)(1) under the Securities Act.
(b) "BOARD" means the Board of Directors of Source.
(c) "BENEFICIAL OWNERSHIP" or "BENEFICIAL OWNER" and similar
variations have the meaning provided in Rule 13d-3 under the Exchange Act.
References to ownership of Voting Securities hereunder mean record or beneficial
ownership.
(d) "BUSINESS" means the business of distribution and fulfillment of
prepackaged, physical VHS, CDs or DVDs containing audio or video files or other
prepackaged, physical product containing audio or video files, provided, however
the foregoing shall not include videogames.
(e) "BUSINESS DAY" means any day except a Saturday, Sunday or other
day on which commercial banks in New York are authorized by law to close.
(f) "CLOSING" means the date of the consummation of the Merger.
(g) "COMPANY" has the meaning set forth in the recitals hereto.
(h) "COMPANY CAPITAL STOCK" has the meaning set forth in the recitals
hereto.
(i) "CONSIDERATION SHARES" has the meaning set forth in the recitals
hereto.
(j) "DEMAND MANAGING UNDERWRITER" has the meaning set forth in Section
4.2(c).
(k) "DEMAND MARKET CUT-BACK" has the meaning set forth in Section
4.2(d).
(l) "DEMAND REGISTRABLE SECURITIES" has the meaning set forth in
Section 4.1(a).
(m) "DEMAND REGISTRATION STATEMENT" has the meaning set forth in
Section 4.1(a).
(n) "DEMAND REQUEST" has the meaning set forth in Section 4.1(a).
(o) A Person shall be deemed to have effected a "DISPOSITION" of a
security if such Person, directly or indirectly, (i) offers to sell, contracts
to sell, makes any short sale of, or otherwise sells, disposes of, distributes,
loans, gifts, pledges, assigns, encumbers or grants any options or rights with
respect to, such security or any interest therein or any security convertible
into or exchangeable or exercisable for any such security, (ii) enters into any
swap, hedge or other arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of such security, or (iii) enters into any
agreement or understanding with respect to the foregoing.
(p) "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.
(q) "GROUP" or "GROUP" shall have the meaning provided in Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder,
but shall exclude any institutional underwriter purchasing Voting Securities in
connection with an underwritten registered offering for purposes of a
distribution of such securities.
(r) "INDEMNIFIED PARTY" has the meaning set forth in Section 4.5(c).
(s) "INDEMNIFYING PARTY" has the meaning set forth in Section 4.5(c).
(t) "INITIAL LOCK-UP PERIOD" means the period ending at 12:01 a.m.
(New York City time) on the three-month anniversary following the Closing.
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(u) "LEGENDED SECURITIES" has the meaning set forth in Section 3.2.
(v) "LOCK-UP EXCEPTIONS" has the meaning set forth in Section 3.1(a).
(w) "MERGER" has the meaning set forth in the recitals hereto.
(x) "MERGER AGREEMENT" has the meaning set forth in the recitals
hereto.
(y) "MERGER SUB" has the meaning set forth in the recitals hereto.
(z) "MINIMUM HOLDING DATE" has the meaning set forth in Section 2.3
hereto.
(aa) "PERSON" shall mean any Person, individual, corporation,
partnership, trust, limited liability company or other non-governmental entity
or any governmental agency, court, authority or other body (whether foreign,
federal, state, local or otherwise).
(bb) "PIGGYBACK REGISTRABLE SECURITIES" has the meaning set forth in
Section 4.2(a).
(cc) "PIGGYBACK REGISTRATION STATEMENT" has the meaning set forth in
Section 4.2(a).
(dd) "PIGGYBACK REQUEST" has the meaning set forth in Section 4.2(a).
(ee) "PIGGYBACK UNDERWRITING AGREEMENT" has the meaning set forth in
Section 4.2(b).
(ff) "PUBLIC OFFERING LOCK-UP" has the meaning set forth in Section
4.8.
(gg) "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(hh) "REGISTRABLE SECURITIES" means (i) the Consideration Shares and
(ii) any securities issued in respect of the foregoing as a result of any stock
split, stock dividend, recapitalization, or similar transaction.
(ii) "SCHEDULE 13D" means, with respect to Stockholder, that certain
Schedule 13D under the Exchange Act required to be filed with respect to such
Stockholder's ownership, beneficially or of record, of Source Securities.
(jj) "SEC" means the United States Securities and Exchange Commission
or any other United States federal agency administering the Securities Act.
(kk) "SECURITIES ACT" means the United States Securities Act of 1933,
as amended.
(ll) "SOURCE" has the meaning set forth in the preamble hereto.
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(mm) "SOURCE COMMON STOCK" has the meaning set forth in the recitals
hereto.
(nn) "SOURCE SECURITIES" means any shares of capital stock of Source,
including without limitation Source Common Stock, and any options, warrants,
convertible securities or other rights to acquire any shares of capital stock of
Source or securities or instruments exchangeable or exercisable for, or
convertible into, shares of capital stock of Source.
(oo) "STOCKHOLDER" has the meaning set forth in the preamble hereto.
(pp) "STOCKHOLDER GROUP MEMBER" shall mean AEC Associates, L.L.C. and
those of its Affiliates and members and Persons who file Schedule 13Ds or
Schedule 13Gs pursuant to the Exchange Act as a Group with Stockholder.
(qq) "SUPERMAJORITY BOARD APPROVAL" means (i) the approval of at least
75% of the total number of members of the Board or (ii) the unanimous written
consent of the Board.
(rr) "SUSPENSION CONDITION" has the meaning set forth in Section
4.3(f).
(ss) "SUSPENSION PERIOD" has the meaning set forth in Section 4.3(f).
(tt) "VOTING SECURITIES" means any securities of Source entitled, in
the ordinary course, to vote in the election of directors of Source, and any
options, warrants, convertible securities or other rights to acquire any
securities of Source or securities or instruments exchangeable or exercisable
for, or convertible into, securities of Source; provided that Voting Securities
shall not include stockholder rights or other comparable securities that acquire
such voting rights only upon the happening of a trigger event or comparable
contingency and which can only be transferred together with the securities to
which they attach. References herein to meetings of holders of Voting Securities
shall include meetings of any class or type thereof.
All capitalized terms used and not defined herein shall have the respective
meanings assigned to such terms in the Merger Agreement.
ARTICLE 2
VOTING AND RELATED COVENANTS
2.1 Board Composition. At the Effective Time, the Board will be comprised
of eleven directors, to consist of six members of the Board designated by Source
(including the current Chairman and Chief Executive Officer of Source, S. Xxxxxx
Xxxxxx and one other director, Xxxxx Xxxxxxx) before the mailing of the Proxy
Statement/Prospectus, three of whom must be "independent" under the rules of the
NASD and the SEC with respect to Source (the "SOURCE DESIGNATED DIRECTORS") and
five individuals designated by the Company (three of whom must be "independent"
under the rules of the NASD and the SEC with respect to Source) before the
mailing of the Proxy Statement/Prospectus (the "COMPANY DESIGNATED DIRECTORS").
Such directors shall be initially appointed as follows: (A) three Company
Designated Directors to the class whose term expires at the 2005 annual meeting
of Source shareholders, (B) one Company
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Designated Director and three Source Designated Directors to the class whose
term expires at the 2006 annual meeting of Source shareholders and (C) one
Company Designated Director and three Source Designated Directors to the class
whose term expires at the 2007 annual meeting of Source shareholders. If any
Source Designated Director or Company Designated Director shall be unable or
unwilling to serve as a director at the Effective Time, the party that
designated such individual as indicated above shall designate another individual
to serve in such individual's place.
2.2 Committees. As soon as reasonably practicable following the Effective
Time, the Board will take all actions necessary to cause the membership of each
its standing committees (i) to include one Company Designated Director and (ii)
to be comprised of a majority of Source Designated Directors, each to the extent
that such individual's membership on a given committee is permitted by the
applicable rules and regulations of the SEC and NASDAQ.
2.3 Bylaws. The Board shall amend its Bylaws effective at the Effective
Time, to, among other things, (i) provide that the Board shall consist of
between three (3) and eleven (11) directors, with the exact number to be
specified by resolution approved by Supermajority Board Approval; (ii) provide
that the consummation of a Change of Control (as defined in Article XI of the
Merger Agreement) or any further amendment to the Bylaws shall require
Supermajority Board Approval; (iii) until the date on which Stockholder and the
Stockholder Group Members own less than 10% in the aggregate of the outstanding
Source Common Stock (the "MINIMUM HOLDING DATE"), provided that if any Company
Designated Director (as defined below) or Stockholder Designated Director is
unable to fulfill his or her term in office, for whatever reason, either as a
result of death, resignation, retirement or removal, then the remaining Company
Designated Directors and the Stockholder Designated Directors shall have the
exclusive right to designate an individual to fill such vacancy; and (iv) until
the Minimum Holding Date, provide that if any Source Designated Director is
unable to fulfill his or her term in office, for whatever reason, either as a
result of death, resignation, retirement or removal, then the remaining Source
Designated Directors shall have the exclusive right to designate an individual
to fill such vacancy (the "BYLAWS AMENDMENT").
2.4 Right to Designate Certain Directors. Until the Minimum Holding Date,
at every annual or special meeting of Source shareholders at which any directors
are to be elected and at every adjournment or postponement thereof, and every
action of approval by written consent of stockholders of Source with respect to
such meeting, Stockholder shall have the right to designate an individual or
individuals of its choice as a nominee for election to the Board (the
"STOCKHOLDER DESIGNATED DIRECTOR(S)") for any seat that was last occupied or
vacated by a Company Designated Director or a Stockholder Designated Director;
provided, however, that Stockholder shall not have a right to designate any
additional individual pursuant to this Section 2.4 if the effect of which would
result in the Stockholder Designated Directors constituting a percentage
representation on the Board exceeding the percentage ownership in the aggregate
of Stockholder and the Stockholder Group Members of then outstanding Source
Common Stock. Source and Stockholder agree that Stockholder will exercise its
designation rights for the 2005 annual meeting of Source shareholders to
designate three individuals for election at that meeting. Source agrees that it
will not place any other nominees on the ballot for the 2005 annual meeting of
Source shareholders for election as a director unless required by law.
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2.5 Committees. On and after the 2005 annual meeting of Source
shareholders and until the first annual meeting of Source shareholders after the
Minimum Holding Date, the Board will take all actions necessary to cause the
membership of each its standing committees (i) to include at least one Company
Designated Director or Stockholder Designated Director, and (ii) to be comprised
of a majority of Source Designated Directors, each to the extent that such
individual's membership on a given committee is permitted by the applicable
rules and regulations of the SEC and NASDAQ and consented to by the individual.
2.6 Independence. To the extent that a Company Designated Director or
Stockholder Designated Director is an "independent" director or otherwise fills
a requirement by virtue of his or her credentials that is required by the SEC or
NASDAQ and is unable to fulfill his or her term in office, for whatever reason,
either as a result of death, resignation, retirement or removal, then any
replacement or successor to such director's seat shall also have the credentials
required to qualify as "independent" or fill such other requirement.
2.7 Voting. Without Supermajority Board Approval:
(a) Until the date immediately following the 2007 annual meeting of
Source shareholders at which directors are elected (the "2007 ANNUAL MEETING")
and provided that Source and the Board have complied with the agreements set
forth in Section 2.1 hereof, (i) Stockholder shall take such action as may be
required so that all Voting Securities beneficially owned by Stockholder from
time to time are voted in favor of electing such nominees for the Board as the
Board (or the nominating and corporate governance committee of the Board if such
authority has been delegated to such committee) may recommend; (ii) Stockholder,
as a holder of Voting Securities, shall be present, in Person or by proxy, at
all meetings of the stockholders of Source at which any directors are to be
elected so that all Voting Securities beneficially owned by Stockholder from
time to time may be counted for the purposes of determining the presence of a
quorum at such meetings; and (iii) except as permitted in Section 2.1 with
regard to the right to designate individuals to fill positions occupied, or
intended to be occupied, by certain Company Designated Directors, Stockholder
shall not take any action, directly or indirectly, intended to remove or that
will result in removing any director from the Board.
(b) The foregoing provisions shall also apply to the execution by
Stockholder of any written consent in lieu of a meeting of holders of Voting
Securities to the extent permitted by the Bylaws of Source.
2.8 Source agrees to take all reasonable actions (including to the extent
necessary, calling a special meeting of the Board) in order to ensure that the
composition of the Board is as set forth in Section 2.1 and 2.2 and to ensure
that Stockholder is able to exercise the rights set forth in this Article II;
provided however, the Board shall not be required to take action to overturn any
action duly taken by the shareholders of Source.
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ARTICLE 3
RESTRICTIONS ON TRANSFER OF SECURITIES;
COMPLIANCE WITH SECURITIES LAWS
3.1 Restrictions on Transfer.
(a) During the Initial Lock-Up Period, Stockholder covenants and
agrees that it shall not effect any Disposition with respect to any
Consideration Shares, subject to the following exceptions for Dispositions (the
"LOCK-UP EXCEPTIONS"):
(i) to any Person or group approved in writing in advance by
Supermajority Board Approval;
(ii) to any Stockholder Group Members, subject to Section 3.1(d)
below; and
(iii) in response to a tender offer or exchange offer made by
Source or recommended by the Board, or pursuant to a merger, consolidation or
other business combination involving Source approved by Supermajority Board
Approval.
(b) Following the expiration of the Initial Lock-Up Period, the
following restrictions on transfer shall apply, in each case subject to the
continued application of the Lock-Up Exceptions:
(i) at the expiration of the Initial Lock-Up Period, Stockholder
may effect Dispositions of up to 33 1/3% of the Consideration Shares;
(ii) at the six-month anniversary following the Closing,
Stockholder may effect Dispositions of up to 66 2/3% of the Consideration
Shares; and
(iii) at the nine-month anniversary following the Closing,
Stockholder may effect Dispositions of all of the Consideration Shares.
(c) Any Disposition by Stockholder of any Source Securities shall be
subject in each case to compliance with the Securities Act, including, if
applicable, Rules 144 and 145 under the Securities Act, and, if applicable, the
reasonable requirements of Source's transfer agent with respect to sales of
securities pursuant to Rule 144 and 145 under the Securities Act.
(d) Notwithstanding anything in this Agreement to the contrary,
beginning upon the Closing and through the 2007 Annual Meeting, Stockholder
covenants and agrees that it shall not make any Disposition:
(i) to any Stockholder Group Members unless such Stockholder
Group Member(s) agree(s) in writing (in form reasonably acceptable to Source)
prior to such Disposition to hold such Source Securities subject to all the
rights and obligations of Stockholder under this Agreement; and
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(ii) in either case without Supermajority Board Approval, to: (A)
any Person or group that has (1) announced or commenced an unsolicited offer for
any Voting Securities, (2) publicly initiated, proposed or otherwise solicited
Source stockholders for the approval of one or more stockholder proposals with
respect to Source or (3) publicly made, or in any way participated in, any
solicitation of proxies (or written consents), or otherwise become a
"PARTICIPANT" in a "SOLICITATION," or assist any "PARTICIPANT" in a
"SOLICITATION" (as such terms are defined under the Exchange Act) in opposition
to the recommendation or proposal of the Board; or (B) any Person or group known
to Stockholder at the time of the Disposition to be accumulating stock on behalf
of or acting in concert with any Person or group contemplated by clause (A) of
this Section 3.1(d).
3.2 Restrictive Legends. Any certificate or certificates representing the
Consideration Shares and any securities issued in respect of the Consideration
Shares as a result of any stock split, stock dividend, recapitalization, or
similar transaction (collectively, the "LEGENDED SECURITIES") and any other
Source Securities hereafter acquired by Stockholder shall be stamped or
otherwise imprinted with a legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO VOTING
OBLIGATIONS AND RESTRICTIONS ON TRANSFER, INCLUDING ANY SALE, PLEDGE
OR OTHER HYPOTHECATION, WHICH RESTRICTIONS ARE SET FORTH IN A
STOCKHOLDER'S AGREEMENT BETWEEN THE ISSUER AND AEC ASSOCIATES, L.L.C.,
A COPY OF WHICH MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
ISSUER AT THE ISSUER'S PRINCIPAL EXECUTIVE OFFICES.
Stockholder consents to Source making a notation on its records and giving
instructions to any transfer agent of the Legended Securities in order to
implement the restrictions on transfer established in this Article 3.
3.3 Procedures for Certain Transfers. Each certificate evidencing Legended
Securities shall bear the restrictive legend set forth in Section 3.2 above,
except that the legend and the stock transfer instructions and record notations
with respect to such Legended Securities shall be removed upon the earlier to
occur of (x) a transfer in accordance with the provisions of this Article 3 that
does not require the transferee to be bound by this Agreement, and (y)
expiration of the restrictions on transfer set forth in Section 3.1.
ARTICLE 4
REGISTRATION RIGHTS
4.1 Demand Registration.
(a) If at any time after the expiration of the Initial Lock-Up Period
and prior to the termination of registration rights pursuant to Section 4.10,
Source shall receive from
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Stockholder (or any assignee that Stockholder specifically designates may
provide such notice) a written request (a "DEMAND REQUEST") that Source effect
the registration under the Securities Act of all or any part of any of the
Registrable Securities that are then free from the restrictions on transfer
contained in Section 3.1(b) above (the "DEMAND REGISTRABLE Securities"), then
Source shall then use commercially reasonable efforts to cause the Demand
Registrable Securities to be registered as soon as reasonably practicable after
receipt of such Demand Request; provided, however, that such Demand Registrable
Securities are to be offered and sold pursuant to a firmly committed
underwritten offering led by a nationally recognized investment banking firm. In
connection with the Demand Request, Source shall prepare and file with the SEC
as soon as reasonably practicable after receipt of the Demand Request, and shall
use its commercially reasonable efforts to cause to become effective as soon as
practicable thereafter, a registration statement (a "DEMAND REGISTRATION
STATEMENT") to effect such registration. The Demand Request shall (i) specify
the number of Demand Registrable Securities intended to be offered and sold by
Stockholder pursuant thereto and (ii) contain the undertaking of Stockholder to
provide all such reasonable information and materials and take all such
reasonable actions as may be required under applicable laws in order to permit
Source to comply with all applicable requirements of the Securities Act, the
Exchange Act and the rules and regulations of the SEC thereunder, and to obtain
any desired acceleration of the effective date of such Demand Registration
Statement. (b) The procedures to be followed by Source and Stockholder, and the
respective rights and obligations of Source and Stockholder, with respect to the
preparation, filing and effectiveness of the Demand Registration Statement and
the distribution of Registrable Securities pursuant to the Demand Registration
Statement under this Section 4.1 are set forth in Section 4.3.
4.2 Piggyback Registration.
(a) If prior to the termination of Stockholder's registration rights
pursuant to Section 4.10, Source shall determine to register any of its Common
Stock under the Securities Act (other than (i) registration statements relating
to employee, consultant or director compensation or incentive arrangements,
including employee benefit plans, (ii) registration statements pursuant to Rule
415 under the Securities Act or any successor rule with similar effect or (iii)
any registration statement on Form S-4 with respect to any merger, consolidation
or acquisition), then Source will promptly give Stockholder written notice
thereof and include in such registration statement (a "PIGGYBACK REGISTRATION
STATEMENT"), and in any underwriting involved therein, if any, all Registrable
Securities that are then free from the restrictions on transfer contained in
Section 3.1(b) above (the "PIGGYBACK REGISTRABLE SECURITIES") specified in a
written request made by Stockholder (a "PIGGYBACK Request") within twenty (20)
days after receipt of such written notice from Source provided, however, that
delivery of a Piggyback Request shall not be valid if the Piggyback Registration
Statement is expected to be declared effective during the Initial Lockup Period.
(b) If the Piggyback Registration Statement of which Source gives
notice is for an underwritten offering, Source shall so advise Stockholder as a
part of the written notice given pursuant to Section 4.2(a). In such event, the
right of Stockholder to registration pursuant to this Section 4.2 shall be
conditioned upon the agreement of such Stockholder to participate in such
underwriting to the extent provided herein. Upon the request of the managing
underwriter, Stockholder, if it has made a Piggyback Request, shall (together
with Source and any other
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holders distributing Securities pursuant to such Piggyback Registration
Statement, if any) enter into an underwriting agreement (the "PIGGYBACK
UNDERWRITING AGREEMENT") in customary form with the underwriter or underwriters
selected for such underwriting by Source.
(c) Notwithstanding any other provision of this Agreement, if the
managing underwriters of any underwritten offering as to which Stockholder has
made a Piggyback Request shall advise Source in writing (with a copy of any such
notice to Stockholder) that, in its opinion, the distribution of all or a
specified portion of the Piggyback Registrable Securities, after including all
the shares proposed to be offered by Source and all the shares of any other
Persons entitled to registration rights with respect to such Piggyback
Registration Statement, will affect the price, timing or distribution of such
securities by such underwriters and therefore require a limitation of the number
of Piggyback Registrable Securities to be underwritten, Source may exclude
Piggyback Registrable Securities. The securities that are entitled to be
included in the underwritten offering shall be allocated as follows: (i) first,
to Source for securities being sold for its own account, (ii) second, to Hilco
Capital LP and such other Warrantholders, as defined in and in accordance with
that certain Warrantholders Rights Agreement, dated as of October 30, 2003, to
the extent required by such agreement, (iii) to Stockholder and (iv) to the
other holders of Source Securities requesting to include Source Securities in
such registration statement based on the pro rata percentage of Source
Securities held by such holders. Notwithstanding the foregoing, Source shall use
commercially reasonable efforts to allocate securities entitled to be included
in an underwritten offering among the other holders of Source Securities
requesting to include Source Securities pursuant to the agreement referenced in
clause (ii) above with the Piggyback Registrable Securities held by Stockholder
on a pro rata basis. Source shall not enter into any agreement or extend any
current agreement with a holder of Source Securities that would conflict with
the priority of allocation set forth herein or provide for a prior right in any
underwriting to such holder over Stockholder.
(d) If Stockholder does not agree to the terms of any such
underwriting, Stockholder shall be excluded from registering any of its Source
Securities pursuant to the subject Piggyback Registration Statement by written
notice from Source or the underwriter. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
(e) Except to the extent specifically provided in this Section 4.2,
the procedures to be followed by Source and Stockholder, and the respective
rights and obligations of Source and Stockholder, with respect to the
distribution of any Piggyback Registrable Securities by Stockholder pursuant to
any Piggyback Registration Statement filed by Source shall be as set forth in
the Piggyback Underwriting Agreement, or any other agreement or agreements
governing the distribution of such Piggyback Registrable Securities pursuant to
such Piggyback Registration Statement.
(f) Notwithstanding the foregoing, nothing in this Section 4.2, or any
other provision of this Agreement, shall be construed to limit the right of
Source, in its reasonable discretion: (i) to delay, suspend or terminate the
filing of any Piggyback Registration Statement; (ii) to delay the effectiveness
of any Piggyback Registration Statement; (iii) to reduce the number of
securities to be distributed pursuant to any Piggyback Registration Statement;
or (iv) to withdraw such Piggyback Registration Statement.
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4.3 Registration Procedures, Rights and Obligations. The procedures to be
followed by Source and Stockholder, and the respective rights and obligations of
Source and Stockholder, with respect to the preparation, filing and
effectiveness of the Demand Registration Statement and the distribution of
Registrable Securities pursuant thereto, are as follows:
(a) Stockholder shall not be entitled to make, in the aggregate, more
than three (3) Demand Requests; provided, however, that any Demand Request that:
(A) does not result in the corresponding Demand Registration Statement being
declared effective by the SEC; (B) is withdrawn by Stockholder following the
imposition of an order by the SEC with respect to the corresponding Demand
Registration Statement; (C) is withdrawn at the request of Stockholder as a
result of the exercise by Source of its suspension rights pursuant to Sections
4.3(e) or the occurrence of events set forth in Section 4.3(f) or 4.3(g); or (D)
if the transactions contemplated in an underwriting agreement entered into in
connection with such registration are not consummated, other than by reason of
some act or omission by Stockholder, shall not count as a Demand Request. Any
Demand Request that is withdrawn by Stockholder for any reason other than as set
forth in the previous sentence shall count as a Demand Request. No Demand
Request shall require that a Demand Registration Statement be declared effective
until after the expiration of the Initial Lock-Up Period.
(b) Source shall prepare and file with the SEC such amendments and
supplements to the Demand Registration Statement and prospectus used in
connection therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all Demand
Registrable Securities proposed to be distributed pursuant to the Demand
Registration Statement until such time as all Demand Registrable Securities
registered pursuant to the Demand Registration Statement have been sold.
(c) In connection with an underwritten offering pursuant to the Demand
Registration Statement, Stockholder shall select a nationally recognized
investment banking firm to serve as lead manager of such offering. Such manager
is hereinafter referred to as the "DEMAND MANAGING UNDERWRITER." Source shall,
together with Stockholder, enter into an underwriting agreement with the Demand
Managing Underwriter, which agreement may contain representations, warranties,
indemnities and agreements then customarily included by an issuer in
underwriting agreements with respect to secondary distributions under demand
registration statements.
(d) Notwithstanding any other provision of this Agreement, the number
of Demand Registrable Securities proposed to be distributed by Stockholder
pursuant to an underwritten offering may be limited by the Demand Managing
Underwriter if it shall advise Source in writing (with a copy of any such notice
to Stockholder) that, in its opinion, the distribution of all or a specified
portion of the Demand Registrable Shares will affect the price, timing or
distribution of such Securities (a "DEMAND MARKET CUT-BACK"). The securities
that are entitled to be included in the underwritten offering shall be allocated
first to Stockholder and thereafter among other holders of Source Securities
requesting to include such Source Securities in such registration statement
based on the pro rata percentage of Source Securities held by such holders.
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(e) Notwithstanding any other provisions of this Agreement, in the
event that Source receives a Demand Request at a time when Source (i) shall have
filed, or has a bona fide intention to file, a registration statement with
respect to a proposed public offering of equity or equity-linked securities, or
(ii) has commenced, or has a bona fide intention to commence, a public offering
of equity or equity-linked securities pursuant to an existing effective shelf or
other registration statement, then Source shall be entitled to suspend, for a
period of up to ninety (90) days after the receipt by Source of such Demand
Request, the filing of the Demand Registration Statement. If Source shall so
postpone the filing of the Registration Statement and if Stockholder within
thirty days after receipt of the notice of postponement advises Source in
writing that such Stockholder has determined to withdraw such request for
registration, then such Demand Registration shall be deemed to be withdrawn and
Source shall pay all expense in connection with such withdrawn request.
Notwithstanding the foregoing, Source shall not be permitted to defer requested
registration in reliance on this Section 4.2(e) more than once in any twelve
month period.
(f) Notwithstanding any other provision of this Agreement, in the
event that Source determines that (i) non-public material information regarding
Source exists, the immediate disclosure of which would be detrimental to Source;
(ii) the prospectus constituting a part of any registration statement covering
the distribution of any Registrable Securities, at a time when a prospectus
relating thereto is required to be delivered under the Securities Act, contains
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; or
(iii) an offering of Registrable Securities would materially interfere with any
proposed material acquisition, disposition or other similar corporate
transaction or event involving Source (each of the events or conditions referred
to in clauses (i), (ii) and (iii) of this sentence is hereinafter referred to as
a "SUSPENSION CONDITION"), then Source shall have the right to suspend, for a
maximum period of 30 days (the "SUSPENSION PERIOD"), (A) the filing or
effectiveness of any Demand Registration Statement or (B) any distribution of
Registrable Securities pursuant to any effective registration statement. Source
will as promptly as practicable provide written notice to Stockholder when a
Suspension Condition arises and when it ceases to exist. Upon receipt of notice
from Source of the existence of any Suspension Condition, Stockholder shall
forthwith discontinue efforts during the Suspension Period to: (i) cause Source
to file or cause any Demand Registration Statement to be declared effective by
the SEC (in the event that such Demand Registration Statement has not been
filed, or has been filed but not declared effective, at the time Stockholder
receives notice that a Suspension Condition has arisen); or (ii) offer or sell
Registrable Securities (in the event that such registration statement has been
declared effective at the time Stockholder receives notice that a Suspension
Condition has arisen). In the event that Stockholder has previously commenced or
was about to commence the distribution of Registrable Securities pursuant to a
prospectus under an effective registration statement, then Source shall, as
promptly as practicable, make available to Stockholder (and to each underwriter,
if any, participating in such distribution) an amendment or supplement to such
prospectus. If so directed by Source, Stockholder shall deliver to Source all
copies, other than permanent file copies then in Stockholder's possession, of
the most recent prospectus covering such Registrable Securities at the time of
receipt of such notice. Notwithstanding the foregoing, Source shall not be
permitted to defer requested registration in reliance on this Section 4.2(f)
more than five times, and the aggregate Suspension Period for all requests shall
not exceed forty-five days in any twelve month period.
12
(g) Source shall promptly notify Stockholder of any stop order issued
or, to Source's knowledge, threatened to be issued by the SEC with respect to
any registration statement covering Registrable Securities, and will use its
commercially reasonable efforts to prevent the entry of such stop order or to
remove it if entered at the earliest possible date.
(h) Source shall furnish to Stockholder (and any underwriter in
connection with any underwritten offering) such number of copies of any
prospectus (including any preliminary prospectus and any amended or supplemented
prospectus), in conformity with the requirements of the Securities Act, as
Stockholder (and such underwriters) shall reasonably request in order to effect
the offering and sale of any Registrable Securities to be offered and sold.
(i) Source shall use commercially reasonable efforts to register or
qualify the Demand Registrable Securities covered by the Demand Registration
Statement under the state securities or "blue sky" laws of such states as
Stockholder may reasonably request; provided, however, that Source shall not be
required to take any action that would subject it to the general jurisdiction of
the courts of any jurisdiction in which it is not so subject or to qualify as a
foreign corporation in any jurisdiction where Source is not so qualified.
(j) Source shall furnish to Stockholder and to each underwriter
engaged in the underwritten offering of Demand Registrable Securities, a signed
counterpart, addressed to Stockholder or such underwriter, of (i) an opinion or
opinions of counsel to Source and (ii) a comfort letter or comfort letters from
Source's independent public accountants, each in customary form and covering
such matters of the type customarily covered by opinions or comfort letters, as
the case may be, as Stockholder or the Demand Managing Underwriter may
reasonably request.
(k) Source shall use commercially reasonable efforts to cause all
Demand Registrable Securities to be listed on each securities exchange on which
similar securities of Source are then listed.
(l) Source shall take all such other actions reasonably necessary to
permit the Demand Registrable Securities held by Stockholder to be registered
and disposed of in accordance with the methods of disposition described herein.
(m) Upon request from Stockholder, Source shall use commercially
reasonable efforts to assist in the marketing of the Registrable Securities,
including, for example, by participating in roadshow presentations with
potential investors, and such other methods as Source shall reasonably determine
in its sole discretion, and the cost of such efforts shall be paid by
Stockholder unless Source is also marketing Source Securities for its own
account at such time.
4.4 Expenses. Subject to Section 4.5, Source shall pay all registration
expenses, other than underwriting or selling discounts and commissions, in
connection with any registration statements that are initiated pursuant to
Sections 4.1 or 4.2 of this Agreement, including, without limitation, all SEC,
National Association of Securities Dealers, Inc., listing, and blue sky
registration and filing fees, printing expenses, transfer agents' and
registrars' fees, fees and
13
expenses of counsel for Source and those of Source's independent auditors.
Subject to Section 4.5, Stockholder shall pay (i) with respect to any
registration pursuant to Sections 4.1 and 4.2, the fees and expenses of counsel
for Stockholder, (ii) all underwriting discounts and selling commissions with
respect to the Registrable Securities sold by it pursuant to such registration
statement; and (iii) any other expenses incurred by it other than those that are
to be paid by Source in accordance with the immediately preceding sentence.
4.5 Indemnification.
(a) In the case of any offering registered pursuant to this Section 4,
to the extent permitted by law, Source will indemnify and hold harmless
Stockholder, its Affiliates and officers and directors of Stockholder, any
underwriter (as defined in the Securities Act) of such offering and each other
Person, if any, who controls such Persons within the meaning of Section 15 of
the Securities Act against any losses, claims, damages or liabilities, joint or
several, to which any such Persons may be subject, under the Securities Act or
any other statute or at common law or otherwise, and to reimburse any of such
Persons for any legal or other expenses reasonably incurred by them in
connection with investigating any claims or defending against any actions,
insofar as such losses, claims, damages or liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement under which such Registrable Securities
were registered under the Securities Act pursuant to this Section 4, the
prospectus contained therein (during the period that Source is required to keep
such prospectus current), or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading, provided Source shall not
be liable insofar as such losses, claims, damages or liabilities arise out of or
are based upon any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon information furnished in writing to Source by
Stockholder, its Affiliates or any underwriter for Stockholder specifically for
use therein. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such holder or any such director,
officer, affiliate, partner, underwriter or controlling person and shall survive
the transfer of such securities by such holder.
(b) By requesting registration under this Section 4, Stockholder
agrees, if Registrable Securities held by it are included in the securities as
to which such registration is being effected, to indemnify and to hold harmless
Source, its Affiliates and their respective directors and officers and each
Person, if any, who controls such Persons within the meaning of Section 15 of
the Securities Act against any losses, claims, damages or liabilities, joint or
several, to which any of such Persons may be subject, under the Securities Act
or any other statute or at common law or otherwise, and to reimburse any of such
Persons for any legal or other expenses incurred by them in connection with
investigating any claims or defending against any actions, to the extent such
losses, claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact in the registration statement under which such Registrable
Securities were registered under the Securities Act pursuant to this Section 4,
any prospectus contained therein, or any amendment or supplement thereto, and
which is made in reliance upon information furnished in writing to Source by
Stockholder, its Affiliates or any underwriter for Stockholder specifically for
inclusion therein. In no event shall the liability of Stockholder hereunder be
14
greater in amount than the dollar amount of the net proceeds received by such
Stockholder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Each party entitled to indemnification under this Section 4.5 (the
"INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has knowledge of any claim as to which indemnity may be sought, and shall permit
the Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld or delayed), and the Indemnified Party may participate in such defense
at its own expense, and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 4.5 unless such failure is materially
prejudicial to the Indemnifying Party's ability to defend such claim. No
Indemnifying Party (i) in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation, or (ii)
shall be liable for amounts paid in any settlement if such settlement is
effected without the consent of the Indemnifying Party.
(d) If the indemnification provided for in the preceding subdivision
of this Section 4.5 is unavailable to an Indemnified Party in respect of any
expense, loss, claim, damage or liability referred to therein, then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such expense, loss, claim, damage or liability (i) in such proportion as is
appropriate to reflect the relative benefits received by Source on the one hand
and the holder or underwriter, as the case may be, on the other from the
distribution of the Registrable Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of Source on the one hand and of the holder or
underwriter, as the case may be, on the other in connection with the statements
or omissions which resulted in such expense, loss, damage or liability, as well
as any other relevant equitable considerations. The relative benefits received
by Source on the one hand and the holder or underwriter, as the case may be, on
the other in connection with the distribution of the Registrable Securities
shall be deemed to be in the same proportion as the total net proceeds received
by Source from the initial sale of the Registrable Securities by Source to the
purchaser bear to the gain realized by Stockholder or the underwriting discounts
and commissions received by the underwriter, as the case may be. The relative
fault of Source on the one hand and of Stockholder or underwriter, as the case
may be, on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission to
state a material fact relates to information supplied by Source, by Stockholder
or by the underwriter and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided that the foregoing contribution agreement shall not inure to the
benefit of any Indemnified Party if indemnification would be unavailable to such
Indemnified Party by reason of the proviso contained in the first sentence of
subdivision (a) of this Section 4.5, and in no event shall the obligation of any
Indemnifying Party to contribute under this subdivision (d) exceed the amount
that such Indemnifying Party would have been obligated to pay by way of
15
indemnification if the indemnification provided for under subdivisions (a) or
(b) of this Section 4.5 had been available under the circumstances.
Source and the holders of the Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this subdivision (d)
were determined by pro rata allocation (even if the holders and any underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph and subdivision (c) of this Section
4.5. The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
4.6 Issuances by Source or Other Holders. As to the registration or
distribution referred to in Section 4.1, additional shares of Source Securities
to be sold for the account of Source or other holders may be included therein;
provided, however, that the inclusion of such Source Securities in such
registration or distribution may be conditioned or restricted in accordance with
the allocation set forth in Section 4.3(d) if, in the written opinion of the
Demand Managing Underwriter, price, timing or distribution factors require a
limitation of the number of shares to be underwritten.
4.7 Information by Stockholder. Stockholder shall furnish to Source such
information regarding Stockholder in the distribution of Registrable Securities
proposed by Stockholder as Source may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Article 4.
4.8 Market Standoff Agreement. For so long as Stockholder and any
Stockholder Group Member own beneficially or of record, in the aggregate, ten
percent (10%) or more of the outstanding Source Securities, in connection with
the public offering of any Source Securities, Stockholder agrees that, upon the
request of Source or the underwriters managing any underwritten offering of
Source's Securities, Stockholder shall agree in writing (the "PUBLIC OFFERING
LOCK-UP") that neither Stockholder nor any Stockholder Group Member will effect
any Disposition of any Consideration Shares without the prior written consent of
Source and such underwriters for the same period as agreed to by all of Source's
directors. Stockholder agrees that Source may instruct its transfer agent to
place stop-transfer notations in its records to enforce the provisions of the
Public Offering Lock-Up contained in this Section 4.8.
16
4.9 Restrictions on Transfer. Notwithstanding anything in this Article 4,
any Disposition by Stockholder of Source Securities, whether by way of a
registered offering or otherwise, shall comply with the restrictions on transfer
set forth in Section 3.1.
4.10 Termination. The provisions of this Article 4 with respect to
registration rights shall terminate on the date when all Registrable Securities
owned beneficially and/or of record by Stockholder may immediately be sold under
Rule 144(k) or by any assignee of Stockholder under Rule 144 in any ninety day
period.
ARTICLE 5
INTENTIONALLY LEFT BLANK
ARTICLE 6
NONCOMPETITION
6.1 Stockholder Covenants Not to Compete.
(a) Stockholder acknowledges that due to the nature of Stockholder's
association with the Company, Stockholder has confidential and proprietary
information relating to the Company and the Business.
(b) During the period which shall commence on the Closing and
terminate on the earlier of the second (2nd) anniversary of the Closing or the
Minimum Holding Date (the "RESTRICTED PERIOD"), Stockholder shall not engage in
or participate in the Business by directly or indirectly owning, managing,
operating, controlling or otherwise engaging or participating in, or being
connected as an owner, partner, principal, guarantor, advisor, member of the
board of directors of, employee of, independent contractor for or consultant to
or otherwise rendering any direct or indirect service for any company that
derives more than 15% of its revenues from the Business.
(c) Notwithstanding the foregoing provisions of Section 6.1(b) and the
restrictions set forth therein, Stockholder may own securities in any publicly
held corporation that is covered by the restrictions set forth in Section
6.1(b), but only to the extent that Stockholder does not own beneficially and/or
of record, in the aggregate, more than five percent (5%) of the outstanding
common stock of such corporation.
(d) The restrictions set forth in Section 6.1(b) shall apply to North
America (the "BUSINESS AREA").
6.2 Nonsolicitation of Employees or Consultants. During the Restricted
Period, Stockholder shall not, without the prior written consent of Source,
directly or indirectly hire, retain or solicit or request, cause or induce
(other than in all instances through a general advertisement or solicitation not
directed at an individual) to leave the employ of, or terminate such person's
relationship with the Company or its successor or any subsidiary thereof, any
person who is at the time, or at any time during the 12 months prior hereto had
been, an
17
employee of, a consultant to or a service provider of or independent contractor
for the Company or its successor or any subsidiary thereof, devoting
substantially all of his or her time to the Company or its successor or any
subsidiary thereof.
6.3 Nonsolicitation of Customers. During the Restricted Period,
Stockholder shall not, directly or indirectly, solicit, induce or attempt to
induce any existing customer of the Company or its successor or any subsidiary
thereof to cease doing business in whole or in part with the Company or its
successor or any subsidiary thereof, as the case may be, with respect to the
Business or intentionally disparage the business reputation of the Company or
its successor or any subsidiary thereof (or any member of the management team or
board of any thereof).
6.4 Nondisclosure and Nonuse of Confidential Information. Stockholder
shall not disclose or use at any time any Confidential Information (as defined
below), of which Stockholder is or becomes aware, whether or not such
information is developed by it. Stockholder shall take all appropriate steps to
safeguard Confidential Information and to protect it against disclosure, misuse,
espionage, loss and theft. As used in this Agreement, the term "CONFIDENTIAL
INFORMATION" means all information of a confidential or proprietary nature
(whether or not specifically labeled or identified as "confidential"), in any
form or medium, which relates to the Company or its successor or any subsidiary
thereof or any of their respective business relations and business activities.
Confidential Information does not include information which (i) is or becomes
generally available to the public other than as a result of a breach of this
Agreement, (ii) was within Stockholder's possession prior to its being furnished
to Stockholder by or on behalf of the Company or its successor or any subsidiary
thereof, provided that the source of such information was not known by
Stockholder to be bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company or
its successor or any subsidiary thereof, (iii) is or becomes available to
Stockholder on a non-confidential basis from a source other than the Company or
its successor or any subsidiary thereof or any of their representatives,
provided that such source was not known by Stockholder to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Company or its successor or any subsidiary
thereof or any other party with respect to such information, (iv) is disclosed
by the Company or its successor or any subsidiary thereof or Source to a third
party without a duty of confidentiality, (v) is independently developed by
Stockholder without use of Confidential Information, (vi) is disclosed under
operation of law, or (vii) is disclosed by Stockholder or their representatives
with the Company's or its successor's or any subsidiary's thereof or Source's
prior written approval. The obligation under this Section 6.4 shall terminate
two years after the Restricted Period.
6.5 Separate Covenants. This Section 6 shall be deemed to consist of a
series of separate covenants, one for each line of business carried on by the
Business and each county, state, province, country or other region included in
the Business Area. The parties expressly agree that the character, duration and
geographical scope of this Section 6 are reasonable in light of the
circumstances as they exist on the date upon which the Agreement has been
executed.
18
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties of Source.
(a) Existence and Power. Source is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation.
(b) Authorization. The execution, delivery and performance of this
Agreement by Source have been duly authorized by all necessary corporate action
on the part of Source. This Agreement constitutes the legal, valid and binding
agreement of Source, enforceable against Source in accordance with its terms,
except as such enforcement may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles, regardless of whether such enforceability is considered in
a proceeding at law or in equity.
(c) Compliance. The execution, delivery and performance of this
Agreement by Source requires no action by or in respect of, or filing with, any
governmental or non-governmental body, agency or official or any other Person
other than as required by any applicable requirements of the Securities Act, the
Exchange Act and other filings or notifications that are immaterial to the
consummation of the transactions contemplated hereby.
(d) Non-contravention. The execution, delivery and performance of
this Agreement by Source does not and will not (a) violate the internal
governance documents of Source, (b) violate any applicable law, rule,
regulation, judgment, injunction, order or decree binding upon Source or (c)
constitute a default under any material agreement or other instrument binding
upon Source.
7.2 Representations and Warranties of AEC Associates.
(a) Existence and Power. AEC Associates is a limited liability
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation.
(b) Authorization. The execution, delivery and performance of this
Agreement by AEC Associates have been duly authorized by all necessary corporate
action on the part of AEC Associates. This Agreement constitutes the legal,
valid and binding agreement of AEC Associates, enforceable against AEC
Associates in accordance with its terms, except as such enforcement may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles, regardless of whether such
enforceability is considered in a proceeding at law or in equity.
(c) Compliance. The execution, delivery and performance of this
Agreement by AEC Associates requires no action by or in respect of, or filing
with, any governmental or non-governmental body, agency or official or any other
Person other than as required by any
19
applicable requirements of the Exchange Act and other filings or notifications
that are immaterial to the consummation of the transactions contemplated hereby.
(d) Non-contravention. The execution, delivery and performance of
this Agreement by AEC Associates does not and will not (a) violate the internal
governance documents of AEC Associates, (b) violate any applicable law, rule,
regulation, judgment, injunction, order or decree binding upon AEC Associates or
(c) constitute a default under any material agreement or other instrument
binding upon AEC Associates.
(e) AEC Associates Ownership of Source Securities. On the date hereof
and immediately prior to the Closing, without giving effect to the transactions
contemplated by the Merger Agreement, neither AEC Associates nor any Affiliate
of AEC Associates beneficially owns any Source Securities.
(f) AEC Associates Ownership of Source Common Stock. As of the
Effective Time, AEC Associates shall lawfully own of record and/or beneficially
that number of shares of Source Common Stock set forth on Exhibit A hereto, free
and clear of any mortgage, pledge, security interest, encumbrance, charge or
other lien (whether arising by contract or operation of law).
ARTICLE 8
MISCELLANEOUS
8.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, mailed by registered
or certified mail (return receipt requested) or sent via facsimile to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Source, to:
Source Interlink Companies, Inc.
00000 Xxxxxxxxx Xxxxxx Xxxx.,
Xxxxx 000
Xxxxxx Xxxxxxx, Xxxxxxx 00000
Attention: S. Xxxxxx Xxxxxx, Chairman and Chief Executive Officer
Facsimile: 000-000-0000
with copies to:
Source Interlink Companies, Inc.
00000 Xxxxxxxxx Xxxxxx Xxxx.,
Xxxxx 000
Xxxxxx Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq., General Counsel
Facsimile: 000-000-0000
and
20
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxxx
Fax: 000-000-0000
(b) if to AEC Associates, to:
AEC Associates, L.L.C.
0000 Xxxx Xxxxxx Xxxx.
Xxx Xxxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Xxxxxx Xxxxxxx-Xxxxx
Facsimile: (000) 000-0000
8.2 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears (i) the words "HEREIN," "HEREOF" and "HEREUNDER" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision. Neither this Agreement
nor any uncertainty or ambiguity herein shall be construed or resolved against
any party, whether under any rule of construction or otherwise. No party to this
Agreement shall be considered the draftsman. The parties hereto acknowledge and
agree that this Agreement has been reviewed, negotiated and accepted by all
parties and their attorneys and shall be construed and interpreted according to
the ordinary meaning of the words used so as fairly to accomplish the purposes
and intentions of the parties hereto.
8.3 Entire Agreement. This Agreement (including the documents and
instruments referred to herein and the exhibits and schedules attached hereto)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
8.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS,
INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS
21
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED
WHOLLY WITHIN SUCH STATE.
8.5 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
8.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement. 8.7 Parties in Interest. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto and nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement except as specifically provided in Section 4.5. For
the purposes of Articles 5 and 6 of this Agreement only, Source and Stockholder
hereby acknowledge and agree that the Company is an intended third-party
beneficiary of this Agreement and, with respect to Articles 5 and 6 of this
Agreement only, the Company shall be entitled to enforce this Agreement as if it
were expressly named as a party hereto.
8.8 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only as broad as is enforceable.
8.9 Equitable Relief. The parties hereto agree that the remedies at law
for any breach of the terms of this Agreement are inadequate. Accordingly, the
parties hereto consent and agree that an injunction may be issued to restrain
any breach or alleged breach of such provisions. The parties hereto agree that
terms of this Agreement shall be enforceable by a decree of specific
performance. Such remedies shall be cumulative and not exclusive, and shall be
in addition to any other remedies that the parties may have at law or in equity.
8.10 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties; provided however, Stockholder may assign its right, interests and
obligations pursuant to Article 4 of this Agreement to or for the benefit of any
affiliates or members of Stockholder who acquire any Consideration Shares in
accordance with the terms of this Agreement and agree in writing with Source to
be bound by the provisions hereof as if originally the Stockholder unless
otherwise provided for herein. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns. Additionally,
22
notwithstanding the foregoing or anything to the contrary contained in this
Agreement, Source is specifically permitted to consummate the Reincorporation of
Source into the State of Delaware. Stockholder shall not engage in any
transaction or series of transactions in which another entity becomes the owner
of more than 50% of its equity securities unless the acquiror or the ultimate
parent entity shall have executed and delivered to Source an agreement
confirming that such acquiror and/or ultimate parent entity shall, upon
consummation of such transaction or series of transactions, cause the relevant
party to be bound to Section 6.1.
[Signature page follows]
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
SOURCE INTERLINK COMPANIES, INC.
By: /s/ S. Xxxxxx Xxxxxx
------------------------------------
Name: S. Xxxxxx Xxxxxx
Title: Chairman and Chief Executive
Officer
AEC ASSOCIATES, L.L.C.
By: /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Vice President and Secretary
[SIGNATURE PAGE TO STOCKHOLDER'S AGREEMENT]
EXHIBIT A
STOCKHOLDER OWNERSHIP OF SOURCE COMMON STOCK
RECORD BENEFICIAL
------ ----------
17,685,568 shares 17,685,568 shares
of common stock of common stock
