Exhibit 10.4
SECOND AMENDED AND RESTATED MANAGEMENT
STOCKHOLDERS' AND OPTIONHOLDERS' AGREEMENT
SECOND AMENDED AND RESTATED MANAGEMENT STOCKHOLDERS' AND
OPTIONHOLDERS' AGREEMENT dated as of May 22, 1997 among SCOTSMAN HOLDINGS, INC.,
a Delaware corporation (the "Company"), CYPRESS MERCHANT BANKING PARTNERS L.P.,
a Delaware limited partnership ("Cypress Onshore"), CYPRESS OFFSHORE PARTNERS
L.P., a Cayman Islands limited partnership ("Cypress Offshore"), SCOTSMAN
PARTNERS, L.P., a Texas limited partnership ("Scotsman Partners" and, together
with Cypress Onshore and Cypress Offshore, the "Investor Group"), the parties
identified as the Management Stockholders on Schedule I to this Agreement or on
the signature pages of this Agreement, each of whom at the time he or she
becomes a party hereto is an officer and/or key employee of the Company or one
or more of its subsidiaries (individually, a "Management Stockholder" and,
collectively, the "Man agement Stockholders") and the Permitted Transferees (as
defined herein) of the Management Stockholders who become parties to this
Agreement pursuant to the terms and provisions contained herein.
Any Affiliate (as defined herein) of a Stockholder in the Investor
Group which is or becomes a stockholder is referred to herein as an "Investor
Group Affiliate" and, together with the Investor Group, as "Investor Group
Holders"; and the Management Stockholders, together with the Investor Group
Holders, are referred to herein, collectively, as the "Stockholders".
WHEREAS, the Company acquired all the outstanding capital stock of
The Scotsman Group, Inc. (now known as Xxxxxxxx Scotsman, Inc.), a Maryland
corporation ("Scotsman"), pursuant to a Stock Purchase Agreement among First
Interstate Bank of California, as Successor Trustee to the Trkja Family Trust,
Xxxxx X. Xxxxxxx, Scotsman and the Company dated as of November 8, 1993 (the
"Purchase Agreement") and an Exchange Agreement between the Company and Xxxxx X.
Xxxxxxx dated November 8, 1993 (the "Exchange Agreement");
WHEREAS, this Agreement constitutes an amended and restated version
of the Amended and Restated Management Stockholders' and Optionholders'
Agreement dated as of June 6, 1994 (as in effect on the date hereof, the
"Original Agreement"), to which, among other parties, the Company and each
Management Stockholder that is an original party hereto is a party, and is being
entered into in connection with a Recapitalization Agreement dated as of April
11, 1997 (as amended, supplemented or otherwise modified, the "Recapitalization
Agreement") among the Company, the Investor Group and/or certain of their
Affiliates, Odyssey Partners, L.P. and certain other stockholders of the
Company;
WHEREAS, the Company desires to give certain officers and key
employees of the Company the opportunity to participate directly in the equity
of the Company and to create in key employees an increased interest in and a
greater concern for the welfare of the Company through the continued ownership
of shares of common stock of the Company, par value $.01 per share (the
"Shares");
WHEREAS, in furtherance of the above purpose, the Company has
adopted an Employee Stock Option Plan (the "Plan") providing for the granting to
employees of the Company and its subsidiaries of options ("Options") which may
be exercised to purchase Shares, upon the condition that prior to the grant or
exercise of any Option such employee shall have executed and delivered or
otherwise be a party to this Agreement; and
WHEREAS, the parties hereto deem it in their best interests to enter
into this Agreement to set forth their respective obligations in connection with
their investments in the Shares of the Company;
NOW, THEREFORE, in consideration of the agreements and mutual
covenants contained herein, the parties, intending to be legally bound hereby,
agree as follows:
ARTICLE I
LIMITATIONS ON TRANSFER
SECTION 1.1 General Restrictions on Transfer. (a) Each Management
Stockholder agrees that he or she shall not during the term of this Agreement
either directly or indirectly offer, sell, transfer, assign, mortgage,
hypothecate, pledge, create a security interest in or lien upon, encumber,
donate, contribute, place in trust, or otherwise voluntarily or involuntarily
dispose of (collectively, "Transfer") any Shares, or any interest therein,
except in a transaction which (i) is specifically permitted by this Agreement
and (ii) complies with the Securities Act (as defined in Article VII hereof).
(b) Any attempt to Transfer any Shares or any interest therein
which is not in compliance with this Agreement shall be null and void, and
neither the Company nor any transfer agent shall give any effect in the
Company's stock records to such attempted Transfer.
SECTION 1.2 Permitted Transfers. (a) Subject to Section 1.2(b), each
Management Stockholder may Transfer Shares to a Permitted Transferee (as defined
in Article VII hereof) at any time more than six (6) months after the date of
acquisition of such Shares.
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(b) Not less than 15 Business Days prior to any proposed
Transfer of any Shares or any interest therein by a Management Stockholder to
any Permitted Transferee (other than a transfer upon death of a Shareholder),
the holder of such Shares shall give written notice to the Company of such
holder's intention to effect such Transfer, setting forth the manner and
circumstances of the proposed transfer in reasonable detail. Any Transfer to a
Permitted Transferee may be effected only if the Company shall have received,
together with the notice referred to above, if any: (i) if requested by the
Company, an opinion of counsel reasonably satisfactory to the Company addressed
to the Company to the effect that the proposed Transfer of Shares or such
interest therein may be effected without registration under the Securities Act,
(ii) if requested by the Company, representation letters that contain
representations in form and substance reasonably satisfactory to the Company to
ensure compliance with the provisions of the Securities Act, and (iii) such
letters and other documentation in form and substance reasonably satisfactory to
the Company from each such Permitted Transferee stating such Permitted
Transferee's agreement to be bound by the terms of this Agreement. Each
certificate evidencing Shares or interests therein transferred as provided in
this Section 1.2 shall bear the legend set forth in Section 8.1 of this
Agreement.
(c) In addition, any Management Stockholder may Transfer
Shares (i) pursuant to an effective registration statement under the Securities
Act, or (ii) in compliance with Rule 144 ("Rule 144") promulgated under the
Securities Act, provided that no such sales may occur until after the
consummation of the initial public offering of the equity of the Company (an
"IPO"). Notwithstanding any other provision contained in this Agreement, a
Management Stockholder may not Transfer any Shares (other than pursuant to
Section 2.1 hereof or to a Permitted Transferee pursuant to Section 1.2(a)
hereof) until the earlier to occur of (i) 15 months after an IPO, or (ii) the
day after the date on which the Investor Group Holders shall have disposed of
Shares constituting more than 33-1/3% of the Original Shares (as defined in
Article VII) and, thereafter, the aggregate number of Shares which a Management
Stockholder may Transfer (other than pursuant to Section 2.1 hereof or to a
Permitted Transferee pursuant to Section 1.2(a) hereof) in any calendar year
shall not exceed 25% of the sum of the number of Shares (if any) acquired by
such Management Stockholder pursuant to the Subscription Agreement between the
Company and such Management Stockholder plus the total number of Shares (if any)
acquired by such Management Stockholder pursuant to the exercise of Options.
SECTION 1.3 Right of First Refusal. (a) After the expiration of the
Transfer Restriction Period (as defined in Article VII hereof) and subject to
Section 1.2(c) hereof, in respect of a Share, a Management Stockholder (the
"Selling Holder") may Transfer such Share to any Third Party (as defined in
Article VII hereof), pursuant to a bona fide offer for consideration consisting
of cash, securities, or a combination thereof (an "Offer"), provided that such
Management Stockholder shall first give a right of first refusal to purchase
such Share (the "Right of First Refusal") to the Investor Group and, if and to
the extent that the Investor Group fails to
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exercise such right, the Management Stockholder shall thereupon give the Right
of First Refusal to the Company.
(b) In connection with any Offer, the Selling Holder shall be
deemed to have offered his or her Shares, first to the Investor Group and second
to the Company, at the same price and otherwise substantially upon the same
terms as such Offer. If the consideration proposed to be paid pursuant to such
Offer consists in whole or in part of securities, the cash equivalent value of
such securities shall be determined by the Board of Directors in good faith,
which determination shall be final. The Board of Directors shall deliver a
notice to the Selling Holder and the Investor Group setting forth such
determination within 15 days after the Company shall have received the Offer
Notice defined in Section 1.3(c).
(c) The Selling Holder shall deliver a written notice (the
"Offer Notice") to the Investor Group and the Company (i) setting forth the
terms of any Offer, (ii) offering to the Investor Group the right to purchase
the Shares proposed to be sold pursuant to such Offer, and (iii) offering the
Company the right to purchase such Shares if and to the extent that the Investor
Group declines to exercise such right. Prior to the expiration of the 20-day
period commencing on the date of the Selling Holder's notice, the Investor Group
shall deliver a notice advising the Selling Holder and the Company whether or
not and to what extent the Investor Group is exercising its Right of First
Refusal. If the Investor Group fails to timely exercise the Right of First
Refusal, the Company shall, prior to the expiration of the 30-day period
commencing on the date of the Offer Notice, deliver a written notice advising
the Selling Holder and the Investor Group whether or not the Company is
exercising its Right of First Refusal. Notwithstanding anything to the contrary
herein, the Investor Group may exercise the Right of First Refusal for a portion
and not all of the Shares proposed to be sold pursuant to the Offer, provided
that the Company exercises the Right of First Refusal as to the balance of such
Shares. If both the Investor Group and the Company fail to timely exercise their
respective Rights of First Refusal for a number of Shares which, in the
aggregate, is equal to the total number of Shares proposed to be sold pursuant
to the Offer, the Selling Holder may thereafter Transfer such Shares to the
Third Party, but only pursuant to terms not less favorable to the Selling Holder
than the terms of the Offer as set forth in the Offer Notice.
(d) The closing of the purchases of the Shares by the Investor
Group or the Company pursuant to this Section 1.3 shall take place at the
principal executive offices of the Company prior to the expiration of the 90-day
period commencing on the date of the Offer Notice. At such closing, the
purchaser shall deliver a certified check or checks in the appropriate amount to
the Selling Holder against delivery of certificates representing the Shares so
purchased, duly endorsed in blank by the person or persons in whose name the
stock certificate is registered or accompanied by a duly executed stock
assignment separate from the certificate with the signature(s) thereon
guaranteed by a commercial bank or trust company or a
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member of a national securities exchange or of the National Association of
Securities Dealers, Inc.
(e) At the Investor Group's election, the Investor Group's
Right of First Refusal may be exercised by the Investor Group Holders in such
proportion as the Investor Group shall direct; provided, however, that, if the
Investor Group shall not so direct in its exercise notice, then the Investor
Group's Right of First Refusal shall be deemed to have been exercised such that
each Investor Group Holder will acquire from the Selling Holder a number of
Shares equal to (i) the number of Shares subject to the Investor Group's Right
of First Refusal multiplied by (ii) a fraction, the numerator of which is the
number of Shares owned by such Investor Group Holder and the denominator of
which is the total number of Shares owned by all Investor Group Holders.
ARTICLE II
TAKE-ALONG SALE
SECTION 2.1 Take-Along Right. If the Investor Group Holders intend
to privately Transfer to any Third Party (the "Purchaser") 100% of the Shares
held by them, then each Management Stockholder, including any Permitted
Transferee of a Management Stockholder (collectively with the Management
Stockholders, the "Take-Along Holders") shall be required, at the election of
the Investor Group, to Transfer (a "Take-Along Sale") all Shares then held by
such Management Stockholder or Permitted Transferee ("Take-Along Shares") to
such Third Party, for the same consideration, and on the same terms and
conditions, if any, upon which the Investor Group Holders propose to dispose of
their Shares. In the event of a Take-Along Sale, Options which are not
theretofore exercisable shall become exercisable by reason of such transaction
only to the extent provided in the instrument evidencing the grant of such
Options.
SECTION 2.2 Notice. The Investor Group Holders shall deliver to each
Take-Along Holder written notice (the "Take-Along Notice") of any sale to be
made pursuant to Section 2.1 above, which notice shall set forth the
consideration to be paid by the Purchaser for each Share and the other terms and
conditions, if any, of such transaction. Within 15 Business Days after the date
of the Take-Along Notice, each such Take-Along Holder shall promptly deliver to
the Investor Group certificates representing its Take-Along Shares, duly
endorsed, in proper form for transfer, together with a limited power-of-attorney
authorizing the Investor Group to dispose of such Take-Along Shares to the
Purchaser and to execute all other documents required to be executed in
connection with such transaction. Pending consummation of the Take-Along Sale,
the Investor Group shall promptly notify the Take-Along Holders of any changes
in the proposed timing for the Take-Along Sale and any other material
developments in connection therewith.
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SECTION 2.3 Transfer. (a) If, within 180 Business Days after the
date of the Take-Along Notice, no transfer of the Take-Along Shares in
accordance with the provisions of Section 2.1 shall have been completed, the
Investor Group shall promptly return to the Take-Along Holder, in proper form,
all certificates representing the Take-Along Shares and the limited
powers-of-attorney previously delivered by the Take-Along Holder to the Investor
Group.
(b) Promptly after the consummation of the transfer of Take-
Along Shares pursuant to Section 2.1, the Investor Group shall remit or cause to
be remitted to the Take-Along Holders their respective consideration with
respect to the Take-Along Shares and shall furnish such other evidence of the
completion and time of completion of such transfer and the terms and conditions,
if any, thereof as may reasonably be requested by the Take-Along Holder.
(c) The provisions of this Article II shall remain in effect,
notwithstanding any return to a Take-Along Holder of any Take-Along Shares as
provided in Section 2.3(a).
ARTICLE III
TAG-ALONG PARTICIPATION
SECTION 3.1 Tag-Along Rights. (a) If the Investor Group Holders
intend to privately Transfer to any Third Party (the "Tag-Along Purchaser"), in
one transaction or a series of transactions, Shares constituting in the
aggregate more than 33-1/3% of the total number of Original Shares, then the
Investor Group shall permit each Management Stockholder, at its option, to
Transfer, for the same consideration, and on the same terms and conditions, if
any, upon which the Investor Group Holders intend to Transfer such Shares, a
number of Shares then owned by such Management Stockholder determined in
accordance with Section 3.1(b) (the "Tag-Along Shares").
(b) (i) Except as provided in Section 3.1(b)(ii), each
Management Stockholder shall have the right, pursuant to Section 3.1(a),
to sell pursuant to the offer by the Tag-Along Purchaser, a number of
Shares equal to the product of (A) the excess of (1) the total number of
Shares to be purchased by the Tag-Along Purchaser from the Investor Group
Holders (after giving effect to the tag-along rights of any stockholder in
the Company other than a Management Stockholder) over (2) the number of
Shares which constitutes, in the aggregate, 33-1/3% of the total number of
Original Shares (the "Threshold Amount"), and (B) a fraction, the
numerator of which shall be the total number of Shares owned by such
Management Stockholder and the denominator of which shall be the excess of
(x) the total number of Shares owned by the Investor Group Holders and all
the Management Stockholders in the aggregate over (y) the Threshold
Amount.
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(ii) If, in the transaction described in Section 3.1(a),
the Investor Group Holders would sell Shares which represent 51% or more
of the outstanding voting power of all outstanding shares of capital stock
of the Company, each Management Stockholder shall have the right, pursuant
to Section 3.1(a), to sell pursuant to the offer by the Tag-Along
Purchaser, a number of Shares equal to the product of (A) the total number
of Shares to be purchased by the Tag-Along Purchaser from the Investor
Group Holders (after giving effect to the tag-along rights of any
stockholder in the Company other than a Management Stockholder) and (B) a
fraction, the numerator of which shall be the total number of Shares owned
by such Management Stockholder and the denominator of which shall be the
total number of Shares owned by the Investor Group Holders and all the
Management Stockholders in the aggregate.
SECTION 3.2 Notice. Not less than 15 Business Days prior to any
proposed Transfer pursuant to Section 3.1, the Investor Group, on behalf of the
Investor Group Holders, shall deliver to each Management Stockholder written
notice thereof (the "Tag-Along Notice"), which notice shall set forth the
consideration to be paid by the Tag-Along Purchaser and the other terms and
conditions, if any, of such transaction. If any Management Stockholder elects to
Transfer some or all of the Tag-Along Shares pursuant to Section 3.1, then such
Management Stockholder shall so notify the Investor Group within 10 Business
Days after the date of the Tag-Along Notice, and, at the Investor Group's
request not less than two Business Days prior to the proposed Transfer, the
Management Stockholder shall deliver to the Investor Group certificates
representing such Tag-Along Shares, duly endorsed, in proper form for Transfer,
together with a limited power-of-attorney authorizing the Investor Group to
transfer the Tag-Along Shares to the Tag-Along Purchaser and to execute all
other documents required to be executed in connection with such transaction.
SECTION 3.3 Transfer. (a) If, within 90 Business Days after delivery
by the Tag-Along Shareholder to the Investor Group of the certificates and
related documents described in Section 3.2, no transfer of the Shares held by
the Investor Group Holders and Tag-Along Shares in accordance with the
provisions of this Article III shall have been completed, then the Investor
Group shall promptly return to the Management Stockholder, in proper form, all
certificates representing the Tag-Along Shares and the limited power-of-attorney
previously delivered by the Management Stockholders to the Investor Group.
(b) Promptly after the consummation of the transfer of the
Tag-Along Shares pursuant to Section 3.1, the Investor Group shall remit or
cause to be remitted to each Management Stockholder the consideration with
respect to the Tag-Along Shares so transferred and shall furnish such other
evidence of the completion of such transfer and the terms and conditions (if
any) thereof as may reasonably be requested by the Management Stockholder.
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(c) The provisions of this Article III shall remain in effect,
notwithstanding any return to any Management Stockholder of Tag-Along Shares as
provided in Section 3.3(a).
ARTICLE IV
CERTAIN SALES UPON TERMINATION OF EMPLOYMENT
SECTION 4.1 Surrender of Shares and Options to the Company. (a) Upon
the occurrence during the term of this Agreement of any of the events set forth
in clause (i), (ii), (iii) or (iv) below (each, a "Termination Event"), the
Company may elect, by delivering the notice required under Section 4.1(e), to
require each Management Stockholder and such Management Stockholder's Permitted
Transferees (A) to sell to the Company all or a portion of the Shares owned by
such Management Stockholder and such Management Stockholder's Permitted
Transferees, in accordance with Section 4.2, and (B) to surrender to the Company
for cancellation all or a portion of the Options held by such Management
Stockholder and such Management Stockholder's Permitted Transferees, in
accordance with Section 4.2:
(i) the termination of such Management Stockholder's
employment due to the death or Disability of such Management Stockholder;
(ii) the voluntary termination by such Management
Stockholder of his or her employment with the Company (and any subsidiary
or affiliate of the Company);
(iii) the termination by the Company of such Management
Stockholder's employment with the Company (and any subsidiary or affiliate
of the Company) for Cause; or
(iv) the termination by the Company of such Man agement
Stockholder's employment with the Company (and any subsidiary or affiliate
of the Company) without Cause.
(b) The Repurchase Price for each Share purchased in
connection with the occurrence of an event specified in Sections 4.1(a)(i) or
(iv) shall be equal to Fair Market Value; provided that, until the first
anniversary of the date hereof, such Repurchase Price shall be $91.50.
(c) The Repurchase Price for each Share purchased in
connection with the occurrence of an event specified in Sections 4.1(a)(ii) or
(iii) shall be equal to the lower of (x) $91.50 or (y) Fair Market Value;
provided, however, that from and after the fifth anniversary of the date of
purchase of such Share by the Management Stockholder, such Repurchase Price
shall be equal to Fair Market Value;
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provided, further, that, until the first anniversary of the date hereof, such
Repurchase Price shall be $91.50.
(d) The amount payable to a Management Stockholder or his or
her Permitted Transferee in respect of each Option which is surrendered and
cancelled pursuant to Section 4.1 in connection with a Termination Event (the
"Option Cancellation Price") shall be the product of (i) the excess of (A) the
Repurchase Price per Share that would have been payable for the Shares subject
to such Option were such Option to have been exercised on the date of such
Termination Event over (B) the exercise price per Share payable pursuant to such
Option and (ii) the number of Shares for which such Option was exercisable at
the date of the Termination Event.
(e) Upon the occurrence of any Termination Event with respect
to any Management Stockholder, the Company shall deliver written notice (the
"Repurchase Notice") to such Management Stockholder and such Management
Stockholder's Permitted Transferees within 60 days after such occurrence,
specifying whether the Company elects to exercise its right to require such
Management Stockholder and such Management Stockholder's Permitted Transferees
to sell their Shares to the Company pursuant to this Section 4.1 and to
surrender to the Company for cancellation their Options (which right need not be
exercised for all such Options). If the Company elects to exercise its right to
require such sale or surrender, as the case may be, the Company shall specify
the Repurchase Price for each such Share and the Option Cancellation Price for
each such Option in the Repurchase Notice and consummate such transactions in
accordance with Section 4.2.
(f) For purposes of this Agreement, the Fair Market Value of a
Share shall be determined in accordance with Section 4.3.
SECTION 4.2 Method of Repurchase. (a) If the Company elects to
exercise its right to require any Management Stockholder and such Management
Stockholder's Permitted Transferees to sell Shares and surrender Options
pursuant to Section 4.1, the Shares subject to repurchase (collectively, the
"Surrendered Shares") shall be repurchased and the Options subject to surrender
and cancellation (collec tively, the "Surrendered Options") shall be surrendered
and cancelled on a date (the "Repurchase Date") no later than 60 days after the
date of the Repurchase Notice. On the Repurchase Date, the Management
Stockholder and such Management Stockholder's Permitted Transferees selling such
Surrendered Shares or delivering such Surrendered Options (collectively, the
"Sellers") shall deliver to the Company the certificate or certificates
representing the Shares owned by such Sellers on such date and any documentation
requested by the Company to evidence the surrender and cancellation of the
Surrendered Options, against delivery by the Company to such Sellers of the
Repurchase Price and the Option Cancellation Price in cash; provided, however,
that if the Company in good faith determines that its ability to pay all or any
portion of the Repurchase Price or the Option Cancellation Price in cash may be
restricted or limited under debt or other agreements to which the Company or any
of
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its affiliates is a party, the Company shall issue and deliver a promissory note
(a "Payment Note") with the terms set forth in Section 4.2(b). All certificates
for Surrendered Shares shall be duly endorsed in favor of the Company by the
Seller in whose name such certificate or certificates is registered or
accompanied by a duly executed stock or security assignment in favor of the
Company with the signature(s) thereon guaranteed by a commercial bank or trust
company or a member of a national securities exchange or the National
Association of Securities Dealers, Inc. If any Seller shall fail to deliver such
certificate or certificates to the Company within the time required, the Company
shall cause its books and records to show that the Surrendered Shares are bound
by the provisions of this Section 4.2 and that the Surrendered Shares, until
transferred to the Company, shall not be entitled to any proxy, dividend or
other rights from the date by which such certificate or certificates should have
been delivered to the Company.
(b) Each Payment Note shall (i) be payable to the order of the
Seller, (ii) be issued and dated as of the Repurchase Date applicable to the
transfer of the Surrendered Shares or the Surrendered Options by such Seller,
(iii) be in a principal amount equal to that portion of the Repurchase Price of
such Surrendered Shares or the Option Cancellation Price for the Surrendered
Options that the Company has determined it is unable to pay in cash pursuant to
Section 4.2(a), (iv) mature on the first anniversary of the latest date of final
maturity of any debt securities issued by the Company in connection with the
Permanent Financing (as defined in Article VII hereof) or, if earlier, upon the
first to occur of a sale of all or substantially all of the assets of the
Company, a merger, consolidation, exchange or similar combination of the Company
with another entity (unless the Company is the surviving entity) or the
dissolution, liquidation, bankruptcy or insolvency of the Company, (v) be
secured by a pledge of the repurchased Shares and (vi) provide for the
acceleration of payment thereof, to the extent permitted by applicable debt and
other agreements, so as to provide level amortization over a five year period.
Each Payment Note shall bear interest in respect of the unpaid principal amount
of such Payment Note from the Repurchase Date to the maturity date thereof at
the rate of interest publicly announced by Bankers Trust (or the bank which is
then acting as the agent bank for the Company or Scotsman) in New York City from
time to time as its Prime Rate, compounded semi-annually. Interest shall be
payable semi-annually in cash, to the extent permitted under debt or other
agreements to which the Company or any of its Affiliates is a party, but
otherwise shall accrue and be payable at maturity or shall be payable
semi-annually in additional Payment Notes. Each Payment Note shall be expressly
subordinated to all debt of the Company. Payments on the Payment Notes shall be
made in equal proportion among all the holders of Payment Notes.
SECTION 4.3 Determination of Fair Market Value. (a) After the
Closing Date and prior to the first anniversary thereof, the Fair Market Value
per Share shall be $11.76, as such amount shall be adjusted to reflect any
subsequent subdivision, combination or reclassification of the Shares.
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(b) Except as provided in Section 4.3(d), from and after the
first anniversary of the Closing Date, if any Management Stockholder and such
Management Stockholder's Permitted Transferees are entitled to receive the Fair
Market Value for the Shares held by such Management Stockholder and such
Management Stockholder's Permitted Transferees in connection with a Termination
Event (or are entitled to receive the Option Cancellation Price based on the
Fair Market Value of the Shares subject to the Option), the Board shall
determine in good faith in the manner described in Section 4.3(c) the fair
market value of each Share and the fair market value as so determined shall be
the "Fair Market Value" for each Share for purposes of Section 4.1.
(c) If the Shares are not listed on a national securities
exchange in the United States on any date on which the Fair Market Value per
Share is to be determined, and a public market does not otherwise exist for the
Shares on such date, the Fair Market Value per Share shall be equal the amount
determined by dividing (i) the excess of (A) 6.5 times the consolidated net
income of the Company and its subsidiaries, determined in accordance with
generally accepted accounting principles, consistently applied, and determined
before reduction for interest, amortization of goodwill and intangibles,
depreciation and taxes, for the last four reported fiscal quarters of the
Company immediately preceding the fiscal quarter in which the termination of
employment occurred, over (B) the amount of all outstanding Indebtedness of the
Company and its subsidiaries at the end of the reported fiscal quarter of the
Company immediately preceding the date of such termination of employment by (ii)
the total number of Shares outstanding at the date of such determination, on a
fully diluted basis after giving effect to the exercise in full of all
outstanding options and the conversion or exercise of all Convertible
Securities; provided, however, that the determination of the Fair Market Value
per Share shall be subject to adjustment by the Board of Directors in its sole
discretion to take into account extraordinary transactions and other factors. If
the Shares are listed on a national securities exchange in the United States on
any date on which the Fair Market Value per Share is to be determined, the Fair
Market Value per Share shall be deemed to be the average of the last sales price
for Shares for the thirty (30) trading days immediately preceding the date of
the Termination Event. If a public market exists for the Shares on any date on
which the Fair Market Value per Share is to be determined, but the Shares are
not listed on a national securities exchange in the United States on such date,
the Fair Market Value per Share shall be deemed to be the average of the mean
between the closing bid and asked quotations in the over-the-counter market for
the thirty (30) trading days immediately preceding the date of the Termination
Event.
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ARTICLE V
PROXY
Each Management Stockholder hereby irrevocably constitutes and
appoints the Investor Group as his or her proxy coupled with an interest to
attend all the meetings of the stockholders of the Company or any continuation
or adjournment thereof to be held during the term of this Agreement and to
execute written consents of stockholders, with full power to vote and act in his
or her name, place and xxxxx, in the same manner, to the same extent and with
the same effect that such Management Stockholder might if personally present
thereat, giving the Investor Group full power of substitution.
ARTICLE VI
PIGGYBACK REGISTRATION RIGHTS
(a) Once the Investor Group Holders shall have disposed of
Shares constituting more than 33-1/3% of the total number of Original Shares, if
the Company at any time proposes to register Common Stock on behalf of the
Investor Group, the Company shall give written notice each such time to each
Management Stockholder who is then employed by the Company or whose employment
theretofore shall have been terminated for any reason, other than termination by
the Company for Cause or voluntary termination by such Management Stockholder
(and the Permitted Transferees of such Management Stockholders) of its intention
to do so. Upon the written request of any such Management Stockholder or
Permitted Transferee (a "Participating Management Stockholder") given within 15
Business Days after receipt of any such notice by such Management Stockholder or
Permitted Transferee (stating the amount of Common Stock to be disposed of by
the Participating Management Stockholder), the Company shall include the Common
Stock intended to be disposed of in a registration statement under the
Securities Act so as to permit the disposition by the Participating Management
Stockholder of the Common Stock so registered; provided, however, that the
number of Shares which may be sold by a Participating Management Stockholder
pursuant to any such registration statement may not exceed the product of (A)
the total number of Shares then owned by such Participating Management
Stockholder and (B) a fraction, the numerator of which shall be the total number
of Shares intended to be disposed of by the Investor Group Holders pursuant to
such registration statement and the denominator of which shall be the total
number of Shares then owned by the Investor Group Holders.
(b) Notwithstanding any provision of this Article VI to the
contrary, if the registration of which the Company gives notice pursuant to
Article VI(a) is for an underwritten offering and the managing underwriter or
underwriters determine in good faith that the total amount of Common Stock
proposed to be included in such offering is such as to adversely affect the
success of such offering,
12
then the Company shall include in such registration the amount of Common Stock
which the Company is so advised can be sold in such offering as follows: (i) if
such registration includes a primary registration, (A) first, Common Stock the
Company proposed to be included in such registration, and (B) second, Common
Stock requested to be included in such registration, pro rata among the holders
of such Common Stock in proportion to the number of shares of Common Stock
sought to be registered by each holder (which, in the case of a Participating
Management Stockholder, shall have been limited to the amount permitted by
paragraph (a) of this Article VI), or (ii) if such registration is exclusively a
secondary registration, then the number of shares of Common Stock shall be
reduced or limited pro rata among the Participating Management Stockholder and
the other holders of Common Stock in proportion to the number of shares of
Common Stock sought to be registered by each holder (which, in the case of a
Participating Management Stockholder, shall have been limited to the amount
permitted by paragraph (a) of this Article VI), to the extent necessary to
reduce the total amount of Common Stock to be included in such offering to the
amount recommended by such managing underwriter or underwriters.
ARTICLE VII
DEFINITIONS
Capitalized terms used herein and not otherwise defined herein shall
have the following meanings:
"Affiliate" means, with respect to any Person, any other person
which, directly or indirectly, controls, is controlled by or is under common
control with such person. For purposes of the preceding sentence, "control"
shall include the power to vote or direct the voting of more than fifty percent
(50%) of the voting shares, general partnership interests or other voting equity
interests of a person. Any partner ship or limited liability company in which a
Stockholder in the Investor Group or an Investor Group Affiliate is a general
partner or member, as the case may be, shall be an Affiliate of the Investor
Group.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Business Day" means any day except a Saturday, Sunday orother day
on which commercial banks in the City of New York or the State of Maryland are
authorized by law to close.
"Cause," when used in connection with any Management Stockholder,
shall mean (i) with respect to a Management Stockholder who is a party to a
written employment agreement with the Company, which agreement contains a
definition of "for cause" or "cause" (or words of like import) for purposes of
termination of employment thereunder by the Company, "for cause" or "cause" as
defined in the
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most recent of such agreements, or (ii) in all other cases, that one or more of
the following has occurred: (A) any intentional or willful failure by such
Management Stockholder to substantially perform his or her employment duties
which shall not have been corrected within thirty days following written notice
of the duties which such Management Stockholder has failed to substantially
perform, (B) any engaging by such Management Stockholder in misconduct which is
significantly injurious to the Company or any of its subsidiaries or affiliates,
(C) any breach by such Management Stockholder of any representation, warranty or
covenant contained in the Subscription Agreement executed by such Management
Stockholder or the representations, warranties or covenants contained in the
instrument pursuant to which an Option is granted to such Management Stockholder
under the Plan or (D) such Management Stockholder's conviction of or entry of a
plea of nolo contendere in respect of any felony, or of a misdemeanor which
results in or is reasonably expected to result in economic or reputational
injury to the Company or any of its subsidiaries or affiliates.
"Closing" has the meaning ascribed to it in the Purchase Agreement.
"Closing Date" shall mean the date on which the acquisition of
Scotsman by the Company was consummated.
"Convertible Security" shall mean any security that is convertible
into the common stock of the Company and any security that represents an option,
warrant or other right to purchase shares of common stock of the Company.
"Disability," when used in connection with any Management
Stockholder, means the inability (as determined by the Board in its sole
discretion) of such Management Stockholder, as a result of incapacity due to
physical or mental illness or disability, to perform his duties with the Company
for six consecutive months or shorter periods aggregating six months during any
twelve-month period.
"Fair Market Value" means, at any time, the fair market value of a
Share as determined in accordance with the provisions set forth in Section 4.3.
"Indebtedness" means any indebtedness of the Company or its
subsidiaries, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimburse ment agreements in respect thereof) or representing the
balance deferred and unpaid of the purchase price of any property (including
capital lease obligations) or represent ing any obligations of the Company or
its subsidiaries under interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and other agreements or
arrangements designed to protect the Company or its subsidiaries against
fluctuations in interest rates, except any such balance that constitutes an
accrued expense or trade payable, and also includes, to the extent not otherwise
included, the guarantee of items which would be included within this definition
and any reserves for extraordinary items or liabilities.
14
"Original Shares" means the maximum aggregate number of Shares
acquired by the Investor Group and their Affiliates during the 90-day period
commencing on the date hereof (or the corresponding number of Shares resulting
from any anti-dilutive adjustment thereto), without giving effect to the
conversion or exercise of any Convertible Security then held by the Investor
Group or any of its Affiliates and excluding any equity security of the Company
which may be acquired by reason of (i) the conversion or exercise of a
Convertible Security or (ii) the exchange or contribution by the Investor Group
or any of its Affiliates of indebtedness previously issued by the Company.
"Permanent Financing" means the 9 1/2% Senior Secured Notes due 2000
or such other permanent financing as is issued by Scotsman or any of its
affiliates to refinance the previously outstanding 11.31% Notes of Scotsman
(including without limitation the debt securities issued by the Company and/or
Scotsman in connection with the transactions contemplated by the
Recapitalization Agreement).
"Permitted Transferee" means, with respect to any Management
Stockholder, a Person to whom any of the following transfers are made:
(i) a transfer upon the death of such Management
Stockholder to such Management Stockholder's spouse or descendants
(including adopted children and stepchildren, if any), or to his executor,
administrator or testamentary or inter vivos trustee;
(ii) a transfer in compliance with applicable federal
and state securities laws to a Management Stockholder's spouse or
descendants (including adopted children and stepchildren, if any), or a
trust, the sole income beneficiaries of which, or a corporation or a
partnership, the sole stockholders or limited or general partners of
which, include only such Management Stockholder, such Management
Stockholder's spouse and/or such Management Stockholder's descendants
(including adopted children and stepchildren, if any);
(iii) a transfer to the legal guardian of a disabled
Management Stockholder; or
(iv) a transfer (including a hypothecation) not covered
by clause (i), (ii) or (iii) above that the Board of Directors, in its
sole discretion, approves prior to the consummation thereof, provided that
such transfer is in compliance with applicable federal and state
securities laws;
provided that, in the event of death or disability of any Person to whom a
transfer is made pursuant to clause (i), (ii), (iii) or (iv) above, the term
"Permitted Transferee" shall include:
15
(x) in the case of such Person's death, such Person's spouse
or descendants (including adopted children and stepchildren, if any), or
such Person's executor, administrator or testamentary or inter vivos
trustee; or
(y) in the case of such Person's disability, such Person's
legal guardian.
"Person" means any individual, corporation, partnership, trust,
unincorporated organization or government or political department or agency
thereof or other entity.
"Repurchase Price" means, with respect to any Surrendered Shares,
the applicable price at which such Shares are to be repurchased pursuant to
Section 4.1.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Third Party" means a prospective purchaser of Shares in an arm's-
length transaction from a Shareholder where such purchaser is not an Affiliate
of such Shareholder.
"Transfer Restriction Period" in respect of a Share owned by a
Management Stockholder (or his or her Permitted Transferee) means the period
commencing on the date of purchase of such Share by such Management Stockholder
and ending on the fifth anniversary of such date.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Share Certificates. (a) The Shareholders agree that each
certificate representing the Shares now or hereafter held by a Management
Stockholder shall be endorsed with a legend in substantially the following form:
"The securities represented by this certificate are subject to a
certain Agreement, dated as of November 9, 1993, which provides, among
other things, for certain restrictions on the (i) voting and (ii) sale,
transfer, pledge, hypothecation, or other disposition of the securities
represented by this certificate. A copy of such Agreement is on file at
the principal offices of the Company and will be furnished upon request to
the purchaser or prospective purchaser of the securities represented by
this certificate."
16
(b) Notwithstanding Section 8.1(a), if, after the date hereof,
a new certificate or certificates representing Shares held by a Management
Stockholder shall be issued by the Company, then each such new certificate shall
be endorsed with a legend substantially in the following form in lieu of the
legend referred to in Section 8.1(a):
"The securities represented by this certificate are subject to a
certain Second Amended and Restated Management Stockholders' and
Optionholders' Agreement dated as of May 22, 1997, as the same may be
further amended, supplemented or otherwise modified from time to time in
accordance with its terms, which provides, among other things, for certain
restrictions on the (i) voting and (ii) sale, transfer, pledge,
hypothecation, or other disposition of the securities represented by this
certificate. A copy of such Agreement is on file at the principal offices
of the Company and will be furnished upon request to the purchaser or
prospective purchaser of the securities represented by this certificate."
SECTION 8.2 After-Acquired Shares. The provisions of this Agreement
shall apply to all Shares and Options now owned or hereafter issued or
transferred to, or acquired by, a Management Stockholder or any of its
Affiliates in any fashion, including but not limited to any Shares received by
way of a dividend, additional issuance, purchase, exchange, split-up,
recapitalization, reclassification, or conversion of Shares, any corporate
reorganization, or any other transaction, including the exercise of an Option
granted under the Plan.
SECTION 8.3 Equitable Relief. It is hereby acknowledged that
irreparable harm would occur in the event that any of the provisions of this
Agreement were not performed fully by the undersigned in accordance with the
terms specified herein, and that monetary damages are an inadequate remedy for
breach of this Agreement because of the difficulty of ascertaining and
quantifying the amount of damage that will be suffered by the parties relying
hereon in the event that the undertakings and provisions contained in this
Agreement were breached or violated. Accordingly, each party hereto shall be
entitled to an injunction or injunctions to restrain, enjoin, and prevent
breaches of the undertakings and provisions hereof and to enforce specifically
the undertakings and provisions hereof in any court of the United States or any
state having jurisdiction over the matter, it being understood that such
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available at law or in equity.
SECTION 8.4 Notices. Any and all notices, designations, consents,
offers, acceptances, or any other communication provided for herein shall be
made in writing by hand-delivery, first-class mail (registered or certified,
with return receipt requested), telecopier, or overnight air courier
guaranteeing next day delivery in the case of any Shareholder, effective upon
receipt, to the address of the party appearing
17
under its name below (or to such other address as may be designated in writing
by such party):
If to the Company:
Scotsman Holdings, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: President
If to the Investor Group:
Cypress Merchant Banking Partners L.P.
Cypress Offshore Partners L.P.
c/o The Cypress Group L.L.C.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx
-and-
Scotsman Partners, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxx and Xxx Xxxxxx
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
If to a Management Stockholder:
To the address of such
Management Stockholder
shown in the stock transfer
records of the Company.
SECTION 8.5 Amendment. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by the Company, the Investor Group and the Management Stockholders (or
their Permitted Transferees) holding collectively at the time of such amendment
or waiver at least 51% of the aggregate Shares held by all Management
Stockholders
18
(and their Permitted Transferees). Notwithstanding the foregoing, any Management
Stockholder may be released from all of his or her obligations hereunder, and
thereupon shall cease to be a party hereto for any purpose, with the written
agreement of the Company and the Investor Group; provided that such Management
Stockholder shall have executed and delivered to the Company and the Investor
Group a stockholders' and optionholders' agreement in form and substance
satisfactory to such Management Stockholder, the Company and the Investor Group.
SECTION 8.6 Termination. This Agreement may be terminated at any
time by an instrument in writing signed by the parties hereto. Notwithstanding
the previous sentence, this Agreement shall terminate on the first to occur of
(i) December 16, 2003, or (ii) such time as the Investor Group or other Investor
Group Holders shall cease to own, in the aggregate, at least 5% of the number of
Shares owned by the Investor Group on the date hereof.
SECTION 8.7 Waiver. No failure or delay on the part of any or all of
the parties hereto in exercising any right, power, or privilege hereunder, and
no course of dealing between the parties, shall operate as a waiver thereof nor
shall any single or partial exercise of any right, power, or privilege hereunder
preclude the simultaneous or later exercise of any other right, power, or
privilege. The rights and remedies herein expressly provided are cumulative and
not exclusive of any rights and remedies which any or all of the parties would
otherwise have.
SECTION 8.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
SECTION 8.9 Governing Law. This Agreement shall be governed and
construed in accordance with the law of the State of Delaware without giving
effect to the conflict of laws provisions thereof.
SECTION 8.10 Benefit and Binding Effect. This Agreement shall be
binding upon and shall inure to the benefit of each of the parties and their
respective successors and permitted assigns.
SECTION 8.11 Severability. Whenever possible, each provision of this
Agreement shall 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 prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
SECTION 8.12 Convertible Securities. (a) In determining, for
purposes of this Agreement (including, without limitation, Section 1.2(c),
Article III and Article VI), the percentage of the Original Shares which the
Investor Group Holders shall have sold or otherwise disposed of in a transaction
or series of related
19
transactions, there shall not be taken into account (i) the sale by one or more
of the Investor Group Holders of any Convertible Security, (ii) the redemption
of any Convertible Security held by one or more of the Investor Group Holders,
or (iii) the sale or redemption of any equity security of the Company which one
or more of the Investor Group Holders may have acquired by reason of (A) the
conversion or exercise of a Convertible Security or (B) the exchange or
contribution by any Investor Group Holders of indebtedness previously issued by
the Company.
(b) The Management Stockholders acknowledge and agree that the
Investor Group Holders may cause the Company to (i) issue new equity or
indebtedness, which may constitute a Convertible Security, having terms which
are sufficient to produce net proceeds to the Company sufficient to permit the
repurchase or redemption in full of any Convertible Securities which the
Investor Group Holders may have acquired incident to the recapitalization of the
Company occurring as of the date hereof and (ii) use the proceeds of any such
issuance to effect the redemption or repurchase described in clause (i) of this
paragraph.
Section 8.13 Entire Agreement. This agreement supersedes any other
agreement, whether written or oral, that may have been made or entered into
between the parties hereto and constitutes the entire agreement by the parties
related to the matters specified herein.
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21
Section 8.14 Actions by Investor Group. With respect to any notice,
consent, authorization or other action pursuant to this Agreement to be made,
given or taken by the Investor Group, the Company and each Management
Stockholder shall be entitled to rely upon any such notice, consent,
authorization or action made, given or taken by any Stockholder in the Investor
Group, and any such notice, consent, authorization or other action shall
thereafter be binding upon each Stockholder in the Investor Group.
IN WITNESS WHEREOF, the parties hereto have signed and delivered
this Agreement as of the date first above written.
SCOTSMAN HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
CYPRESS MERCHANT BANKING PARTNERS
L.P.
By: Cypress Associates L.P., its
general partner
By: Cypress Merchant Banking Partners
L.L.C., its general partner
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Member
CYPRESS OFFSHORE PARTNERS L.P.
By: Cypress Associates L.P., its
general partner
By: Cypress Merchant Banking Partners
L.L.C., its general partner
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Member
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SCOTSMAN PARTNERS, L.P.
By: Group 31, Inc. its
general partner
By: /s/ Xxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
23
SIGNATURE PAGE TO SECOND AMENDED AND RESTATED
MANAGEMENT STOCKHOLDERS' AND OPTIONHOLDERS' AGREEMENT
The undersigned has read this Second Amended and Restated Management
Stockholders' and Optionholders' Agreement, dated as of May 22, 1997, and hereby
agrees to be bound by the terms thereof applicable to a Management Stockholder
(as defined therein).
IN WITNESS WHEREOF, the undersigned has signed and delivered this
Agreement as of __________, ____.
------------------------------
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SCHEDULE I
MANAGEMENT STOCKHOLDERS
