Exhibit 4.1
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STOCKHOLDERS' AGREEMENT
BY AND AMONG
GENERAC PORTABLE PRODUCTS, INC.,
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.,
AND
OTHER STOCKHOLDERS
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DATED AS OF JULY 9, 1998
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TABLE OF CONTENTS
PAGE
1. General; Definitions.......................................................1
(a) General.......................................................1
(b) Definitions...................................................2
2. Board of Directors.........................................................5
(a) Composition...................................................5
(b) Expenses; Insurance...........................................6
(c) Certain Unfilled Vacancies....................................6
(d) Termination...................................................6
3. Conflicting Certificate or By-Law Provisions...............................7
4. Conflicting Agreements.....................................................7
5. Actions Consistent with Agreement..........................................7
6. Restrictions on Transfer of Stockholder Shares and Tag-along Rights........7
(a) Transfer of Stockholder Shares................................7
(b) First Offer Right.............................................7
(c) Tag-along Rights..............................................9
(d) Permitted Transferee.........................................10
(e) Termination of Restrictions..................................10
7. Management and Control....................................................11
(a) General......................................................11
(b) Limitation on Certain Actions by the Company.................11
(c) Periodic and Other Reports...................................11
(d) Termination of Restrictions..................................11
8. Sale of the Company/Come-along Right......................................11
(a) Approved Sales...............................................12
(b) Conditions...................................................12
(c) Requirements.................................................12
(d) Termination of Restrictions..................................12
9. Participation/Preemptive Rights...........................................12
(a) Grant of Rights..............................................12
(b) Termination of Rights........................................13
10. Demand Registration Rights................................................13
(a) Requests for Registration....................................13
(b) Long-Form Registrations......................................13
(c) Short-Form Registrations.....................................14
(d) Priority on Demand Registrations.............................14
(e) Restrictions on Demand Registrations.........................14
(f) Selection of Underwriters....................................14
11. Piggyback Registrations...................................................15
(a) Right to Piggyback...........................................15
(b) Piggyback Expenses...........................................15
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(c) Priority on Primary Registration.............................15
(d) Other Registrations..........................................15
12. Holdback/Lock-Up Agreements...............................................15
(a) Stockholder Restriction......................................15
(b) Company Restriction..........................................16
13. Registration Procedures...................................................16
14. Registration Expenses.....................................................18
(a) Definition...................................................18
(b) Counsel Expenses.............................................19
(c) Other Expenses...............................................19
15. Indemnification...........................................................19
(a) Company Indemnification......................................19
(b) Stockholder Obligations......................................19
(c) Procedure....................................................20
(d) Survival.....................................................20
16. Participation in Underwritten Registrations...............................20
17. Other Provisions Regarding Registration Rights............................20
(a) Restriction..................................................20
(b) No Obligation................................................21
(c) Reporting....................................................21
18. Legend....................................................................21
19. Insider Transactions......................................................21
20. Amendment and Waiver......................................................21
21. Severability..............................................................22
22. Entire Agreement..........................................................22
23. Successors and Assigns....................................................22
24. Counterparts..............................................................22
25. Remedies..................................................................22
26. Notices...................................................................23
27. Governing Law; Consent to Jurisdiction....................................23
28. Descriptive Headings......................................................23
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GENERAC PORTABLE PRODUCTS, INC.
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT (this "Agreement"), is made as of July 9,
1998, by and among Generac Portable Products, Inc., a Delaware corporation (the
"COMPANY"), The Beacon Group III - Focus Value Fund, L.P., a Delaware limited
liability company ("BEACON"), and the other stockholders of the Company listed
on the signature pages hereof (the "OTHER STOCKHOLDERS") (Beacon, together with
the Other Stockholders, collectively, the "STOCKHOLDERS", and each individually,
a "STOCKHOLDER").
R E C I T A L S:
WHEREAS, pursuant to the Subscription Agreements, dated as of the date
hereof, by and between the Company and each of the Other Stockholders (as the
same may be amended from time to time, collectively, the "SUBSCRIPTION
AGREEMENTS"), the Other Stockholders' are, among other things, collectively
subscribing to purchase shares of the Common Stock, $0.01 par value, of the
Company (the "COMMON STOCK");
WHEREAS, as of the date hereof and upon the consummation of the
transactions contemplated by the Subscription Agreements pursuant to the terms
thereof, the Stockholders shall each own the number of shares of Common Stock
set forth opposite such Stockholder's name on Schedule I attached hereto; and
WHEREAS, the Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition of
the Board of Directors of the Company (the "BOARD"), (ii) assuring continuity in
the management and ownership of the Company and (iii) limiting the manner and
terms by which the Common Stock and certain other equity securities of the
Company owned by the Stockholders may be transferred.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and undertakings of the parties hereto, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as of the date hereof as follows:
1. GENERAL; DEFINITIONS
(a) GENERAL. References in this Agreement to "Sections" and
"Schedules" are to sections and schedules herein and hereto unless otherwise
indicated. Unless otherwise set forth herein, references in this Agreement to
any document, instrument or agreement (including, without limitation, this
Agreement) (i) shall include all exhibits, schedules, annexes and other
attachments thereto, (ii) shall include all documents, instruments or agreements
issued or executed in replacement thereof and (iii) shall mean such document,
instrument or agreement, or replacement or predecessor thereto, as amended,
modified or supplemented from time to time in accordance with its terms and in
effect at any given time. Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular and
plural.
(b) DEFINITIONS. Unless otherwise defined herein, capitalized
terms used in this Agreement shall have the meanings set forth in this Section
1(b).
"AFFILIATE" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by, or under common
control with, such Person. For purposes of this definition, "control"
means the ownership, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether
through the ownership or control of voting interests, by contract or
otherwise.
"APPROVED SALE" has the meaning set forth in Section 8(a).
"BEACON DIRECTOR" has the meaning set forth in Section
2(a)(ii).
"BOARD" has the meaning set forth in the fourth Recital.
"BYLAWS" has the meaning set forth in Section 2(c).
"CERTIFICATE" has the meaning set forth in Section 3.
"CHANGE IN CONTROL" means any sale or issuance or series of
related sales or issuances of the capital stock of the Company, or any
merger or consolidation involving the Company, immediately after which
any Person or group of Persons acting in concert (including officers
and directors of the Company) other than Beacon and/or any of its
Affiliates, holds the voting power to elect a majority of the Board or
holds beneficial ownership of a majority of the Company's issued and
outstanding voting capital stock.
"COMMON STOCK" has the meaning set forth in the first Recital.
"COMPANY ASSIGNMENT" has the meaning set forth in Section
6(b)(i).
"CONTROLLING INTEREST" has the meaning set forth in Section
7(b).
"DEMAND REGISTRATION" has the meaning set forth in Section
10(a).
"ELIGIBLE OFFERING" means an offer by the Company to sell to
investors (including, but not limited to, Stockholders) for cash shares
of Common Stock, or any security
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convertible into or exchangeable for, or carrying rights or options to
purchase, shares of Common Stock, as the case may be, other then an
offering of securities by the Company:
(i) in connection with any merger of, or acquisition by,
the Company;
(ii) registered under the Securities Act; or
(iii) pursuant to any employee benefit plan.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934,
as amended from time to time.
"FIVE PERCENT OWNER" means any person that owns five percent
or more of all issued and outstanding Common Stock on a fully-diluted
basis.
"INDEPENDENT THIRD PARTY" means any Person that, immediately
prior to the contemplated transaction, is not a Five Percent Owner, is
not an Affiliate of any Five Percent Owner, is not the spouse or
descendant (by birth or adoption) of any Five Percent Owner and is not
a trust for the benefit of any Five Percent Owner and/or such other
Persons.
"IPO" means the initial Public Offering.
"ALIEN" means any mortgage, lien, pledge, claim, charge,
security interest, option, restriction of use or transfer, easement,
title defect or other adverse claim of ownership or use or encumbrance
of any kind (including, without limitation, any conditional or
installment sale or other title retention agreement), any lease in the
nature thereof or the filing of, or agreement to, give any financing
statement.
"LONG-FORM REGISTRATION" has the meaning set forth in Section
10(a).
"MINORITY STOCKHOLDER" means, at the time of any determination
thereof, any Stockholder that holds less than 50% of the Common Stock
held in the aggregate by all the Stockholders.
"NASD" means the National Association of Securities Dealers,
Inc.
"NASDAQ" means the National Association of Securities Dealers,
Inc. Automated Quotations System.
"NON-SELLING STOCKHOLDER" has the meaning set forth in Section
6(b)(i).
"OFFERED SHARES" has the meaning set forth in Section 6(b)(i).
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"PARTICIPANTS" has the meaning set forth in Section 6(c).
"PERMITTED TRANSFEREE" means an Affiliate of a Stockholder.
"PERSON" means any individual, corporation, partnership, joint
venture, trust, association, unincorporated organization, other entity
or governmental body,
"PIGGYBACK REGISTRATION" has the meaning set forth in Section
11(a).
"PROPORTIONATE PERCENTAGE" means, with respect to any
Stockholder as of any date, the result (expressed as a percentage)
obtained by dividing (i) the number of shares of Common Stock held by
the Stockholder, by (ii) the number of shares of Common Stock then
issued and outstanding.
"PUBLIC OFFERING" means an offering by the Company to the
public of Common Stock.
"PUBLIC SALE" means any distribution of Stockholder Shares or
other equity securities of the Company or any securities convertible
into or exchangeable or exercisable for such securities to the public
pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the
provisions of Rule 144 promulgated under the Securities Act (or any
rule promulgated to take the place of, or to have the same effect as,
Rule 144).
"PURCHASING STOCKHOLDER" has the meaning set forth in Section
6(b)(i).
"PUT" has the meaning set forth in Section 8(e).
"PUT NOTICE" has the meaning set forth in Section 8(e).
"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten
Public Offering registered under the Securities Act of shares of Common
Stock having an aggregate offering price of at least $100 million.
"REDEMPTION PRICE" has the meaning set forth in Section 8(e).
"REGISTRABLE SECURITIES" means all shares of Stockholder
Shares held by any Stockholder, except those Stockholder Shares that,
after the Common Stock has been registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended, can be sold by such
Stockholder to the public in accordance with Rule 144(k) promulgated
under the Securities Act.
"REGISTRATION" has the meaning set forth in Section 10(a).
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"REGISTRATION EXPENSES" has the meaning set forth in Section
14(a).
"SALE OF THE COMPANY" means the sale to an Independent Third
Party or group of Independent Third Parties of (i) capital stock of the
Company possessing the voting power under normal circumstances to elect
a majority of the Board (whether by merger, consolidation or sale or
transfer of the Company's capital stock) or (ii) all or substantially
all of the Company's assets determined on a consolidated basis.
"SEC" means the U.S. Securities and Exchange Commission.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended from time to time.
"SELLING STOCKHOLDER" has the meaning set forth in Section
6(b)(i).
"SELLER's Notice" has the meaning set forth in Section
6(b)(i).
"SHORT-FORM REGISTRATION" has the meaning set forth in Section
10(a).
"STOCKHOLDER SHARES" means (i) Common Stock, (ii) any equity
securities of the Company issued directly or indirectly with respect to
Common Stock held by any Stockholder or transferee thereof by way of
stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization
and (iii) any other shares of any class or series of capital stock of
the Company held by a Stockholder or transferee thereof.
"SUBSCRIPTION AGREEMENT" has the meaning set forth in the
first Recital.
"THIRD-PARTY PURCHASE NOTICE" has the meaning set forth in
Section 6(b)(iii).
"THIRD-PARTY PURCHASER" has the meaning set forth in Section
6(b)(iii).
"TRANSFER" has the meaning set forth in Section 6(a).
2. BOARD OF DIRECTORS.
(a) COMPOSITION. From and after the date hereof and until the
provisions of this Section 2 cease to be effective, each Stockholder shall vote
all of such Stockholder's Stockholder Shares and any other voting security of
the Company over which such Stockholder has voting control and shall take, at
the Company's expense, all such actions within such Stockholder's control as may
be necessary to cause its Shares to be so voted (whether in such Stockholder's
capacity as a stockholder, director, member of the Board or a committee thereof,
officer of the Company or otherwise, and including, without limitation,
attendance at meetings in person or by
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proxy for purposes of obtaining a quorum and execution of written consents in
lieu of meetings), and the Company shall take all necessary and desirable
actions within its control (including, without limitation, calling special board
and stockholder meetings), so that:
(i) The number of directors comprising the Board shall be
seven (7);
(ii) At least four (4) members of the Board shall be
representatives designated by Beacon (the "BEACON DIRECTOR[S]");
(iii) The chief executive officer of the Company shall be a
member of the Board;
(iv) The removal from the Board (with or without cause) of
any Beacon Director shall be only at Beacon's written request, and
under no other circumstances;
(v) In the event that any representative designated under
this Section 2 to serve as a member of the Board by Beacon for any
reason ceases to serve as a member of the Board during such director's
term of office, the resulting vacancy on the Board shall be filled by
an individual designated by Beacon as provided hereunder, within 30
days following the creation of such vacancy; and
(vi) Beacon shall use all reasonable efforts to ensure
that none of its designees is engaged as an officer, director or
control person of a Person that is in competition with the Company and
that none of its designees possesses a pecuniary or similar interest in
any of the Company's business or assets (other than ownership of
Stockholder Shares) of such a pervasive nature as to hamper materially
such designee's ability to impartially take part in the Board's general
deliberations concerning the Company's business and prospects.
(b) EXPENSES; INSURANCE. The Company shall pay the reasonable
out-of-pocket expenses incurred by each member of the Board in connection with
attending the meetings of the Board and any committee thereof. So long as any
Beacon Director serves on the Board and for three years thereafter, the Company
shall maintain directors indemnity insurance coverage reasonably satisfactory to
Beacon.
(c) CERTAIN UNFILLED VACANCIES. If a vacancy on the Board subject
to Section 2(a)(v) remains unfilled for more than 30 days, the election of an
individual to such directorship shall be accomplished in accordance with the
Bylaws of the Company (the "BYLAWS") and applicable law.
(d) TERMINATION. The provisions of this Section 2 shall terminate
automatically and be of no further force and effect upon the occurrence of a
Qualified Public Offering or at the time Beacon and its Permitted Transferees in
the aggregate cease to hold twenty-five percent (25) or more of all issued and
outstanding shares of Common Stock.
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3. CONFLICTING CERTIFICATE OR BY-LAW PROVISIONS. No Stockholder
shall take any action that will cause the Certificate of Incorporation of the
Company (the "CERTIFICATE") and the Bylaws to be amended to conflict with the
provisions of this Agreement (including, without limitation, voting such
Stockholder's Stockholder Shares and any other voting security of the Company
over which such Stockholder has voting control to amend the Certificate and the
Bylaws). Notwithstanding the foregoing, to the extent the Certificate or the
Bylaws do at any time conflict with the provisions of this Agreement, this
Agreement, to the extent permitted by applicable law, shall prevail and be the
binding agreement among the Stockholders and the Company.
4. CONFLICTING AGREEMENTS. Each Stockholder hereby represents to
the other Stockholders and the Company that on the date hereof such Stockholder
has not granted a proxy and is not a party to any voting trust or other
agreement that is inconsistent with or conflicts with the provisions of this
Agreement. No Stockholder during the term hereof shall grant any proxy or become
party to any voting trust or other agreement that is inconsistent with or
conflicts with the provisions of this Agreement. No Stockholder shall act, for
any reason, as a member of a group or in concert or enter into any agreement or
arrangement with any other Person in connection with the acquisition,
disposition or voting of Stockholder Shares in any manner that is inconsistent
with the provisions of this Agreement.
5. ACTIONS CONSISTENT WITH AGREEMENT. Neither the Company nor any
Stockholder shall circumvent this Agreement by taking any action through an
Affiliate that would be prohibited under this Agreement if such action had been
taken by the Company or such Stockholder.
6. RESTRICTIONS ON TRANSFER OF STOCKHOLDER SHARES AND TAG-ALONG
RIGHTS.
(a) TRANSFER OF STOCKHOLDER SHARES. No Minority Stockholder shall
sell, transfer, assign, pledge, hypothecate or otherwise dispose of (a
"TRANSFER") any interest in any of such Minority Stockholder's Stockholder
Shares except pursuant to a Public Sale or the provisions of this Section 6 or
as otherwise permitted or required in accordance with the terms hereof.
(b) FIRST OFFER RIGHT. (i) If a Minority Stockholder desires to
sell any of such Minority Stockholder's Stockholder Shares (other than to a
Permitted Transferee in accordance with Section 6(d), pursuant to a Public Sale
or as otherwise permitted or required in accordance with the terms hereof), then
such Minority Stockholder (the "SELLING STOCKHOLDER") shall give a written
notice (the "SELLER's Notice") to the Company and each other Stockholder (the
"NON-SELLING STOCKHOLDERS") identifying the number and class(es) of Stockholder
Shares to be sold (the "OFFERED SHARES"), the proposed method of sale, and the
price and other material terms and conditions of such proposed sale. The Company
may elect to assign its right to purchase the Offered Shares to the Non-Selling
Stockholders on a pro rata basis (based on the number of Stockholder Shares held
by the Non-Selling Stockholders) within ten days following receipt of the
Seller's Notice from the Selling Stockholder (the "COMPANY ASSIGNMENT"). Within
30 days following receipt of the Seller's Notice from the Selling Stockholder,
the Company (or, in the event the Company Assignment is made, the Non-Selling
Stockholders), shall have the right to
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elect to purchase all (but not less than all) of the Offered Shares on
substantially the same terms and subject to substantially the same conditions as
those specified in the Seller's Notice, exercisable by delivery to the Selling
Stockholder of a written notice electing to purchase the Offered Shares. In the
event the Company Assignment is made and any Non-Selling Stockholder fails to
elect to participate in the Selling Shareholder's sale of Offered Shares
pursuant to this Section 6(a)(i), (A) at the end of such 30-day period the
Selling Stockholder shall give notice of such failure to the Non-Selling
Stockholders who did so elect (the "PURCHASING STOCKHOLDERS") and (B) the
Purchasing Stockholders each shall have ten days from the date such notice was
given to agree to purchase such Non-Selling Stockholder's pro rata share of the
unsubscribed portion of Offered Shares.
(ii) If the Company (or, in the event the Company
Assignment is made, the Purchasing Stockholders) elects to purchase all of the
Offered Shares, a closing shall be held on such date, occurring within 60 days
after the date on which the Company (or, in the event the Company Assignment is
made, the date on which the final Purchasing Stockholder) delivered notice of
purchase election to the Selling Stockholder pursuant to Section 6(b)(i)
(subject to extension to permit any applicable governmental reviews or to obtain
any necessary governmental approvals or to comply with applicable waiting
periods), as is designated by the Company (or, in the event the Company
Assignment is made, the Purchasing Stockholders) upon ten days' prior written
notice, which notice may be given contemporaneously with or subsequent to the
date on which such election has been made, or if such a date is not so
designated, on such sixtieth day (or the next succeeding business day, if such
sixtieth day is not a business day). The Selling Stockholder shall, not later
than the date set for such closing, deliver to the Company (or, in the event the
Company Assignment is made, the Purchasing Stockholders), and the Company (or,
in the event the Company Assignment is made, the Purchasing Stockholders) shall
accept, certificates for such Offered Shares (which Offered Shares shall be free
and clear of any Lien of any kind other than those Liens created by the Company
(or, in the event the Company Assignment is made, the Purchasing Stockholders)),
properly endorsed for transfer, or accompanied by properly executed instruments
of transfer, together with appropriate documentation of the corporate action
necessary to effect the transfer, including, without limitation, any requisite
transfer tax stamps or other evidence of payment of any applicable transfer
taxes or similar fees.
(iii) In the event that the Company (or, in the event the
Company Assignment is made, the Non-Selling Stockholders) does not elect to
purchase all of the Offered Shares in accordance with Section 6(b)(i), the
Selling Stockholder shall be free to sell the Offered Shares to any Person other
than the Company (the "THIRD-PARTY PURCHASER") at a price no less than and upon
terms and conditions no more favorable than the price, terms and conditions set
forth in the Seller's Notice. Such sale shall be consummated within 60 days
after the date on which the Company (or, in the event the Company Assignment is
made, the last of the Non-Selling Stockholders) declined to exercise the option
to purchase the Offered Shares in accordance with Section 6(a)(i); PROVIDED,
HOWEVER, that if the sale to the Third-party Purchaser is not consummated within
such 60-day period, the Selling Stockholder shall be required to offer such
Offered Shares to the Company and the Non-Selling Stockholders again in
accordance with this
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Section 6(b) and Section 6(c) before any disposition may occur. Notwithstanding
the foregoing, no sale to a Third-party Purchaser shall be effected earlier than
the 30th day following the delivery of a notice (the "THIRD-PARTY PURCHASE
NOTICE") by the Selling Stockholder to the Company and the Non-Selling
Stockholders setting forth the specific price, terms and conditions of the sale
to be consummated with the Third-party Purchaser.
(c) TAG-ALONG RIGHTS. (i) Notwithstanding any other provision
hereof, in addition to the rights stated in Section 6(b), in the event that the
Company, or, in the event the Company Assignment is made, the Non-Selling
Stockholders do not elect to purchase all of the Offered Shares in accordance
with Section 6(b)(i), each Non-Selling Stockholder that is a Minority
Stockholder shall have the right, exercisable upon written notice to the Selling
Stockholder within ten days after receipt of the Third-party Purchase Notice, to
participate in the proposed sale of Offered Shares under Section 6(b)(iii), in
an amount up to such Non-Selling Stockholder's pro rata share of Stockholder
Shares, on the same terms and subject to the same conditions set forth in the
Third-party Purchase Notice.
(ii) If Beacon desires to sell any of its Stockholder
Shares (other than to a Permitted Transferee in accordance with Section 6(d),
pursuant to a Public Sale or as otherwise permitted or required in accordance
with the terms hereof) to a Third-party Purchaser, then Beacon shall give a
Seller's Notice to the Non-Selling Stockholders identifying the Stockholder
Shares to be sold, the proposed method of sale, and the price and other material
terms and conditions of Beacon's proposed sale. Each Non-Selling Stockholder
shall have the right, exercisable upon written notice to Beacon within 10 days
after receipt of Beacon's Seller's Notice, to participate in the sale by Beacon
of its Stockholder Shares, in a percentage of such Non-Selling Stockholder's
Stockholder Shares equal to the same percentage of Beacon's Stockholder Shares
being sold by Beacon, at the same price, on the same terms and subject to the
same conditions as set forth in Beacon's Seller's Notice. If the sale by Beacon
and those Non-Selling Stockholders that elect to participate is not consummated
within 90 days following the delivery of Beacon's Seller's Notice, a
participating Non-Selling Stockholder shall be free to withdraw its Stockholder
Shares from the sale.
(iii) To the extent any of the Non-Selling Stockholders
exercises a tag-along right pursuant to Sections 6(c)(i) or 6(c)(ii), the number
of Stockholder Shares proposed to be sold by Beacon or the Selling Stockholder,
as the case may be, shall be correspondingly reduced. If any Non-Selling
Stockholder fails to elect to fully participate in Beacon's or the Selling
Stockholder's sale pursuant to this Section 6(c), Beacon or the Selling
Stockholder, as the case may be, shall give notice of such failure to the
remaining Non-Selling Stockholders who did so elect (the "PARTICIPANTS"). The
Participants each shall have 10 days from the date such notice was given to
agree to sell such Participant's pro rata share of the unsubscribed portion of
Stockholder Shares proposed to be sold.
(iv) Each Participant shall effect its participation in
the sale by delivering to an escrow agent mutually acceptable to the
Participants and the Selling Stockholder or Beacon, as
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the case may be, no later than the expiration of such 10-day period
certificate(s) representing the number of Stockholder Shares that such
Participant elects to sell to a Third-party Purchaser, free and clear of any
Lien of any kind other than those Liens created by the Selling Stockholder or
Beacon, as the case may be, properly endorsed in blank for transfer, or
accompanied by properly executed instruments of transfer, together with
appropriate documentation of the corporate action necessary to effect the
transfer, including, without limitation, any requisite transfer tax stamps or
other evidence of payment of any applicable transfer taxes or similar fees.
(v) The stock certificates that the Participants deliver
to the Selling Stockholder or Beacon, as the case may be, pursuant to this
Section 6(c) shall be transferred to the Third-party Purchaser in consummation
of the sale of Stockholder Shares pursuant to the terms and conditions specified
in the Third-party Purchase Notice. In the event such sale is so consummated,
the Participants' stock certificates shall be transferred from such escrow agent
to such Third-party Purchaser and the Selling Stockholder or Beacon, as the case
may be, shall concurrently therewith remit to each Participant that portion of
the sale proceeds to which such Participant is entitled by reason of its
participation in such sale. To the extent that the Third-party Purchaser refuses
to purchase Stockholder Shares from any Participant exercising its tag-along
rights hereunder, the Selling Stockholder or Beacon, as the case may be, shall
not transfer to such Third-party Purchaser Stockholder Shares unless and until,
simultaneously with such sale, the Selling Stockholder or Beacon, as the case
may be, purchases such Participant's Stockholder Shares from such Participant.
In the event such a sale is not consummated within the time periods contemplated
by Section 6(b)(iii) or Section 6(c)(ii), whichever is applicable, the
Participants' stock certificates shall be returned to the Participants upon the
expiration thereof and the Selling Stockholder or Beacon, as the case may be,
shall not thereafter transfer any of its Stockholder Shares without first
complying with Section 6(b), if applicable, and this Section 6(c).
(d) PERMITTED TRANSFEREE. The provisions of Sections 6(a), 6(b)
and 6(c) shall not apply with respect to any Transfer of Stockholder Shares by
any Stockholder to any of its Permitted Transferees. Any such Transfer to such
Permitted Transferee shall not relieve the Stockholder of its obligations under
this Agreement with respect to the Stockholder Shares so Transferred. Such
Permitted Transferee shall reassign such Stockholder Shares to such Stockholder
if such Permitted Transferee is no longer an Affiliate of such Stockholder.
(e) TERMINATION OF RESTRICTIONS. The restrictions on the Transfer
of Stockholder Shares set forth in this Section 6 shall continue with respect to
each Stockholder Share until the date on which such Stockholder Share has been
transferred in a Public Sale or upon the consummation of a Qualified Public
Offering. Accordingly, prior to the consummation of a Qualified Public Offering,
notwithstanding any other provision hereof, no Transfer of any Stockholder
Shares (other than pursuant to a Public Sale) shall be permitted until the
proposed transferee of such Shareholder Shares shall have agreed in a written
agreement acceptable to the Company, prior to such Transfer, that such
transferee shall be bound by all the applicable terms and provisions hereof, and
shall have executed and delivered to the Company and each Non-Selling
Stockholder an originally executed counterpart of such agreement, which shall
become effective upon the
10
subsequent consummation of such Transfer. Any attempt to Transfer any
Stockholder Shares in a manner that does not comply with this Agreement shall be
null and void, and neither the Company nor any transfer agent of such
Stockholder Shares shall be required to (and the Company shall not) give any
effect to such attempted Transfer on its records. The Company shall take all
actions that are necessary to cause such transfer agent not to give effect to
any such attempted Transfer. Each Stockholder shall take all actions that are
necessary to cause the Company and such transfer agent not to give effect to any
such attempted Transfer.
7. MANAGEMENT AND CONTROL.
(a) GENERAL. The business and affairs of the Company shall be
managed, controlled and operated in accordance with the Certificate, the By-laws
and this Agreement.
(b) LIMITATION ON CERTAIN ACTIONS BY THE COMPANY. Without the
prior affirmative vote of the Stockholders who hold a percentage of the issued
and outstanding Stockholder Shares equal to or greater than a majority of the
issued and outstanding Common Stock held at the time by all Stockholders (a
"CONTROLLING Interest"), the Company shall not:
(A) adopt or effect any plan of sale, merger, consolidation,
dissolution, reorganization or recapitalization of the Company;
(B) offer for sale or sell all or substantially all of the
assets of the Company;
(C) amend or restate the Certificate or the Bylaws otherwise
than in conformity with this Agreement;
(D) redeem any shares of capital stock of the Company other
than pursuant to Section 6 or on a pro rata basis among all
Stockholders; or
(E) change the type of business activities in which the
Company is engaged.
(c) PERIODIC AND OTHER REPORTS. The Company, at its expense. shall
cause to be delivered to each Stockholder such financial statements and reports
as Beacon may reasonably request from time to time.
(d) TERMINATION OF RESTRICTIONS. The rights and obligations
hereunder of the parties hereto set forth in this Section 7 shall terminate upon
the consummation of a Qualified Public Offering.
8. SALE OF THE COMPANY/COME-ALONG RIGHT.
(a) APPROVED SALES. If the Board and the Stockholders holding a
Controlling Interest in the Stockholder Shares approve a Sale of the Company
(the "APPROVED SALE") then each
11
Stockholder shall vote for, consent to, and raise no objections against, such
Approved Sale. If the Approved Sale is structured as (i) a merger or
consolidation, each Stockholder shall waive any dissenters rights, appraisal
rights or similar rights in connection with such merger or consolidation or (ii)
a sale of stock, each Stockholder shall agree to sell all of such Shareholder's
Stockholder Shares and rights to acquire Stockholder Shares on the terms and
conditions approved by the Board and the Stockholders holding a Controlling
Interest. Each Stockholder shall take all actions, at the Company's expense,
reasonably requested by the Company in order to consummate the Approved Sale.
(b) CONDITIONS. The obligations of the Stockholders with respect
to the Approved Sale of the Company are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Sale, all
Stockholders holding a class of Stockholder Share shall receive the same form of
consideration and the same amount of consideration per Stockholder Share with
respect to such class of Stockholder Share; and (ii) if any Stockholder is given
an option as to the form and amount of consideration to be received with respect
to a class of Stockholder Shares held by such Stockholder, each Stockholder
holding such class shall be given the same option with respect to such class.
(c) REQUIREMENTS. Any Stockholder required by the provisions of
this Section 8 to transfer Stockholder Shares in connection with, or otherwise
to consent to, an Approved Sale shall not be required to make any
representations and warranties to any Person in connection with such Approved
Sale except as to (i) good title and the absence of Liens with respect to such
Stockholder's Stockholder Shares, if applicable, (ii) the corporate or other
existence of such Stockholder and (iii) the authority for, the validity and
binding effect of, and the absence of any conflicts under the charter documents,
if applicable, and material agreements of such Stockholder as to, any agreements
entered into by such Stockholder in connection with such Approved Sale. No
Stockholder shall be required to provide any indemnities in connection with such
Approved Sale except for indemnities in respect of damages resulting from a
breach of such representations and warranties.
(d) TERMINATION OF RESTRICTIONS. The rights and obligations
hereunder of the parties hereto set forth in Sections 8(a), 8(b) and 8(c) shall
terminate upon the consummation of a Qualified Public Offering.
9. PARTICIPATION/PREEMPTIVE RIGHTS.
(a) GRANT OF RIGHTS. The Company hereby grants to each Stockholder
the right to purchase such Stockholder's Proportionate Percentage of any future
Eligible Offering. The Company shall, before issuing any securities pursuant to
an Eligible Offering, give written notice thereof to each Stockholder. Such
notice shall specify the security or securities the Company proposes to issue
and the consideration that the Company intends to receive therefor. For a period
of 30 days following the date of such notice, each Stockholder shall be
entitled, by written notice to the Company, to elect to purchase all or any part
of such Proportionate Percentage of such
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Stockholder of the securities being sold in the Eligible Offering; PROVIDED,
HOWEVER, that if two or more securities shall be proposed to be sold as a "unit"
in an Eligible Offering, any such election must relate to such unit of
securities. If elections pursuant to this Section 9(a) shall not be made with
respect to any securities included in an Eligible Offering within such 30-day
period, then the Company may issue such securities to investors, but only for a
consideration payable in cash not less than, and otherwise on terms no more
favorable to the investors than, that set forth in such written notice of the
Company and only within 90 days after the end of such 30-day period. In the
event that any such offer is accepted by a Stockholder, such Stockholder shall
purchase from the Company for the consideration and on the terms set forth in
such written notice of the Company, the securities that such Stockholder shall
have elected to purchase.
(b) TERMINATION OF RIGHTS. The rights and obligations hereunder of
the parties hereto set forth in this Section 9 shall terminate upon the
consummation of a Qualified Public Offering.
10. DEMAND REGISTRATION RIGHTS.
(a) REQUESTS FOR REGISTRATION. At any time after the earlier of
the IPO or the fourth anniversary of the date of this Agreement, Beacon may
request registration under the Securities Act of all or part of its Registrable
Securities on Form S-1 or any similar long-form registration ("LONG-FORM
REGISTRATIONS"); PROVIDED that the expected offering price of such Registrable
Securities is in excess of $25,000,000. Notwithstanding the foregoing, if the
Company and the securities meet the eligibility requirements for such forms,
Stockholders holding Registrable Securities with an expected offering price in
excess of $10,000,000 may request registration under the Securities Act of all
or part of such Stockholder's Registrable Securities on Form S-3 or any
successor to such Form ("SHORT-FORM REGISTRATIONS", together with Long-Form
Registrations, collectively, "REGISTRATIONS". All Registrations requested
pursuant to this Section 10(a) are referred herein as "DEMAND REGISTRATIONS."
Each request for a Demand Registration shall specify the approximate number of
Registrable Securities requested to be registered and the expected per share
price range, if any, for such offering. Within ten days after receipt of any
such request, the Company shall give written notice of such requested
registration to all other holders of Registrable Securities and shall include in
such registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 15 days after the
delivery of such written notice of the Company.
(b) LONG-FORM REGISTRATIONS. The Company shall pay all
Registration Expenses for two of the Long-Form Registrations that Beacon is
entitled to request. A registration shall not count as one of the permitted
Long-Form Registrations until it has become effective, and no Long-Form
Registration shall count as one of the permitted Long-Form Registrations unless
Beacon is able to register and sell at least 75% of the Registrable Securities
requested to be included in such Registration; PROVIDED that in any event the
Company shall pay all Registration Expenses in connection with two Long-Form
Registrations that become effective and any other registrations initiated as a
Long-Form Registration prior to the effectiveness of the second Long-Form
13
Registration that do not become effective as such. All Long-Form Registrations
shall be underwritten registrations.
(c) SHORT-FORM REGISTRATIONS. The Company shall pay all
Registration Expenses for all eligible Short-Form Registrations that are not
underwritten registrations and all Registration Expenses for three eligible
Short Form Registrations that is an underwritten registration.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not
include in any Demand Registration any securities that are not Stockholder
Shares without the prior written consent of the Stockholders holding a majority
of the Stockholder Shares included in such registration. If a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Stockholder Shares
and, if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Stockholder Shares and other securities, if any,
that can be sold in an orderly manner in such offering within a price range
acceptable to the Stockholders holding a majority of the Stockholder Shares
requesting registration, the Company shall include in such registration prior to
the inclusion of any securities that are not Stockholder Shares the number of
Stockholder Shares requested to be included that in the opinion of such
underwriters can be sold in an orderly manner within the price range of such
offering, pro rata among the respective holders thereof on the basis of the
amount of Stockholder Shares owned by each such holder.
(e) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company shall not be
obligated to effect any Demand Registration within six months (i) after the
effective date of a previous underwritten registration of equity securities, or
(ii) if the managing underwriter, the SEC, the Securities Act or the form on
which the registration statement is to be filed, would require the conduct of an
audit other than the regular audit conducted by the Company at the end of its
fiscal year, in which case the filing may be delayed until the completion of
such regular audit (unless the Stockholder agrees to pay the expenses of the
Company in connection with such an audit other than such regular audit). The
Company may postpone for up to six months the filing or the effectiveness of a
registration statement for a Demand Registration if the Company notifies the
Stockholders that such Demand Registration would reasonably be expected to have
an adverse effect on any proposal or plan by the Company or any of its
subsidiaries; PROVIDED that in such event, the Stockholder initially requesting
such Demand Registration shall be entitled to withdraw such request and, if such
request is withdrawn, such Demand Registration shall not count as one of the
permitted Demand Registrations hereunder and the Company shall pay all
Registration Expenses in connection with such registration.
(f) SELECTION OF UNDERWRITERS. Stockholders holding a majority of
the Registrable Securities requesting registration pursuant to this Section 10
shall have the right to select the investment banker(s) and manager(s) to
administer the offering, subject to the approval of the Company, which shall not
be unreasonably withheld.
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11. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register
any of its securities under the Securities Act (other than pursuant to a Demand
Registration (with respect to which the provisions of Section 10 shall apply), a
transaction described under Rule 145 promulgated under the Securities Act or in
connection with a registration on Form S-8 or any successor form) and the
registration form to be used may be used for the registration of Registrable
Securities (a "PIGGYBACK REGISTRATION"), the Company shall give prompt written
notice to all Stockholders holding Registrable Securities of its intention to
effect such a registration and shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 days after the delivery of such written
notice of the Company.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
Stockholders holding Registrable Securities shall be paid by the Company in all
Piggyback Registrations.
(c) PRIORITY ON PRIMARY REGISTRATION. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering without adversely affecting the
marketability of the offering, the Company shall include in such registration
(i) first, the securities the Company proposes to sell, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the Stockholders holding such Registrable Securities on the basis of the
number of shares owned by each such Stockholder, and (iii) third, other
securities requested to be included in such registration.
(d) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
Section 10 or pursuant to this Section 11, and if such previous registration has
not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least six months has elapsed from the effective date of such
previous registration.
12. HOLDBACK/LOCK-UP AGREEMENTS.
(a) STOCKHOLDER RESTRICTION. No Stockholder shall effect any
Public Sale during the 15-day period prior to, and for such period as the
managing underwriters of a registered Public Offering of securities of the
Company shall demand (with such period not to exceed 180 days) following, the
effective date of any registration statement (other than on Form S-8 or any
successor form), except as part of such underwritten registered Public Offering,
unless such managing underwriters otherwise agree. The Company shall provide
information to the
15
Stockholders as to its reasonable expectation of the approximately date of
effectiveness of any registration statement.
(b) COMPANY RESTRICTION. The Company shall (i) not effect any
Public Sale during the seven days prior to, and during the 90-day period
beginning on, the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form),
unless the underwriters managing such registered Public Offering otherwise
agree, and (ii) use its best efforts to cause each holder of at least five
percent (on a fully diluted basis) of its Common Stock, or any securities
convertible into or exchangeable or exercisable for Common Stock, purchased from
the Company at any time after the date of this Agreement (other than in a
registered Public Offering) to agree not to effect any Public Sale during such
period (except as part of such underwritten registered Public Offering, if
otherwise permitted), unless the underwriters managing the registered Public
Offering otherwise agree.
13. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company shall furnish to the counsel selected by the Stockholders holding a
majority of the Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which documents shall be
subject to the review and consent of such counsel);
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
that terminates upon the earlier of (i) the sale of all shares covered by such
registration statement or (ii) nine months from the date such registration
statement is declared effective, and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(c) furnish to each Stockholder selling Registrable Securities
thereunder such number of copies of such registration statement, each amendment
and supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such
Stockholder may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Stockholder;
16
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any Stockholder reasonably requests and do any and all other acts and things
that may be reasonably necessary or advisable to enable such Stockholder to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Stockholder (provided that the Company shall not be required to
(i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 13(d), (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) notify each Stockholder selling such Registrable Securities,
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the occurrence of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such Stockholder, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on NASDAQ and, if listed on NASDAQ,
use its best efforts to secure designation of all such Registrable Securities
covered by such registration statement as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 under the Exchange Act or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(g) provide a transfer agent, registrar and a CUSIP number for all
such Registrable Securities not later than the effective date of such
registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) make available for inspection by any Stockholder selling
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such Stockholder or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors, employees and independent accountants to
supply all information reasonably requested by any such Stockholder,
underwriter, attorney, accountant or agent in connection with such registration
statement, PROVIDED, HOWEVER, that any such records, documents,
17
properties or information that are designated by the Company in writing as
confidential shall be kept confidential by such requesting Person unless
disclosure by such Person is required by court or administrative order;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to the Stockholders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months beginning with the first day of the Company's first full
calendar quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder;
(k) permit any Stockholder holding Registrable Securities that, in
such Stockholder's sole and exclusive judgment, might be deemed to be an
underwriter or a controlling person of the Company, to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material furnished to the Company in writing that in the
reasonable judgment of such Stockholder and such Stockholder's counsel should be
included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Registrable Securities included in such a registration statement for sale in
any jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal or such order; and
(m) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the Stockholders holding a
majority of the Registrable Securities being sold reasonably request.
14. REGISTRATION EXPENSES.
(a) DEFINITION. All expenses incident to the Company's
performance of, or compliance with, Sections 10 and 11, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts,
commissions, and transfer taxes) and other Persons retained by the Company (all
such expenses, "REGISTRATION EXPENSES"), shall be borne as provided in this
Agreement, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on NASDAQ.
18
(b) COUNSEL EXPENSES. In connection with each Demand
Registration covered by Sections 10(b) and (c) and each Piggyback Registration,
the Company shall reimburse the Stockholders holding Stockholder Shares covered
by such registration for the reasonable fees and disbursements of one counsel
chosen by the Stockholders holding a majority of the Stockholder Shares
initially requesting such registration.
(c) OTHER EXPENSES. To the extent Registration Expenses
are not required to be paid by the Company, each holder of securities included
in any registration hereunder shall pay those Registration Expenses allocable to
the registration of such holder's securities so included, and any Registration
Expenses not so allocable shall be borne by all sellers of securities included
in such registration in proportion to the aggregate selling price of the
securities to be so registered.
15. INDEMNIFICATION.
(a) COMPANY INDEMNIFICATION. In the event of any
registration of any securities of the Company pursuant to Section 10 or 11, the
Company shall indemnify, to the extent permitted by law, each participating
Stockholder, their officers and directors and each Person who controls such
Stockholder (within the meaning of the Securities Act), as applicable, against
all losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Stockholder expressly
for use therein or by such Stockholder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such Stockholder with a sufficient number of
copies of the same. In connection with an underwritten offering, the Company
shall indemnify such underwriters, their officers and directors and each Person
that controls such underwriters (within the meaning of the Securities Act) to
the same extent as provided above with respect to the indemnification of the
participating Stockholders.
(b) STOCKHOLDER OBLIGATIONS. In connection with any
registration statement in which a Stockholder holding Registrable Securities is
participating, each such Stockholder shall furnish to the Company in writing
such powers of attorney, custody agreements and letters of direction and other
information and affidavits concerning such Stockholder as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall, severally and not
jointly, indemnify the Company, its directors and officers and each Person that
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make
19
the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished
in writing by such Stockholder expressly for use therein, provided that the
obligation to indemnify shall be individual to each such Stockholder and will be
limited to the net amount of proceeds received by such Stockholder from the sale
of Registrable Securities pursuant to such registration statement.
(c) PROCEDURE. Any party hereto entitled to
indemnification hereunder shall (i) give prompt written notice to the
indemnifying party of any claim with respect to which such indemnified party
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to such
indemnified party. If such defense is assumed, such indemnifying party shall not
be subject to any liability for any settlement made by the indemnified party
without such indemnifying party's consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any such indemnified party a conflict of interest may exist between such
indemnified party and any other indemnified parties with respect to such claim.
(d) SURVIVAL. The indemnification provided for under this
Section 15 shall remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling person of such indemnified party and shall survive the transfer of
securities.
16. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No party hereto
may participate in any registration hereunder that is underwritten unless such
party (i) agrees to sell such party's securities on the basis provided in any
underwriting arrangements approved by such Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements; PROVIDED that no
stockholder participating in any underwritten registration shall be required to
make any representations or warranties to the Company or the underwriters other
than representations and warranties regarding such Stockholder and such
Stockholder's intended method of distribution.
17. OTHER PROVISIONS REGARDING REGISTRATION RIGHTS.
(a) RESTRICTION. Except as provided in this Agreement and
until the consummation of a Qualified Public Offering, the Company shall not
grant to any Persons the right to request that the Company register any equity
securities of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, PROVIDED, that the Company may grant rights to
other Persons to participate in Piggyback Registrations so long as such rights
are subordinate to the rights of the Stockholders with respect to such Piggyback
Registrations.
20
(b) NO OBLIGATION. Notwithstanding anything to the
contrary in any previous agreement or security, the Company shall have no
obligations to any Stockholder with respect to the registration of any
Stockholder Shares, except as provided in this Agreement.
(c) REPORTING. The Company shall, when and as applicable,
use its best efforts to: (i) file in a timely manner all reports and other
document required to be filed by it under the Securities Act, the Exchange Act
and the rules and regulations promulgated thereunder necessary to permit sales
under Rule 144 promulgated under the Securities Act, and the Company shall take
such further reasonable action (not requiring the expenditure of any
out-of-pocket costs) to the extent required from time to time to enable
Stockholders to sell Stockholder Shares without registration under the
Securities Act within the limitations of the exemptions provided by (A) Rule 144
promulgated under the Securities Act or (B) any similar rule or regulation
hereafter adopted by the SEC and (ii) promptly furnish to each Stockholder a
copy of all such reports and documents. Upon the request of a Stockholder, the
Company shall deliver to such Stockholder a written statement as to whether it
has complied with such requirements.
18. LEGEND. Each certificate evidencing Stockholder Shares shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT
TO, AND TRANSFERABLE ONLY UPON COMPLIANCE WITH THE
PROVISIONS OF, (1) THE STOCKHOLDERS' AGREEMENT, DATED
AS OF JULY 9, 1998, BY AND AMONG GENERAC PORTABLE
PRODUCTS, INC. (THE "COMPANY"), THE BEACON GROUP III
- FOCUS VALUE FUND, L.P. AND THE OTHER STOCKHOLDERS
OF THE COMPANY REFERENCED THEREIN AND (2) THE
CERTIFICATE OF INCORPORATION OF THE COMPANY, A COPY
OF WHICH AGREEMENT AND CERTIFICATE IS ON FILE AT THE
REGISTERED OFFICE OF THE COMPANY LOCATED AT 0 XXXXXXX
XXX, XXXXXXXXX, XX 00000.
19. INSIDER TRANSACTIONS. Any transactions between the Company and
its officers, directors, Stockholders or their Affiliates, including, without
limitation, any sales of capital stock or assets of the Company to any such
Person, shall be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties on an arm's length basis and shall
require the approval of a majority of disinterested members of the Board.
20. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement that has
the effect of reducing the rights of the Company or any Stockholder or
increasing the obligations of the Company or any Stockholder shall be effective
against the Company or such Stockholder without the prior written consent of the
Company or such Stockholder. The failure of any party hereto to enforce any of
21
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
21. 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 invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
22. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this document embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among
such parties, written or oral, that may have related to the subject matter
hereof in any way.
23. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares. Nothing expressed or implied
in this Agreement is intended to, or shall confer upon, any Person other than
the parties hereto and their respective successors and permitted assignees, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. The Company shall not assign any rights, remedies, obligations or
liabilities hereunder without the unanimous written consent of the Stockholders.
24. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
25. REMEDIES. The Company and the Stockholders shall be entitled
to enforce their rights under this Agreement (including, but not limited to,
their respective right to recover damages by reason of any breach of any
provision of this Agreement) and to exercise all other rights existing in their
favor. The parties hereto hereby agree and acknowledge that money damages may
not be an adequate remedy for any breach of the provisions of this Agreement and
that the Company and the Stockholders may in its sole discretion apply to any
court of law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.
22
26. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class (postage
prepaid) or sent by reputable overnight courier service (charges prepaid) to the
Company at the address set forth below and to a Stockholder at such address as
indicated by the Company's records, or at such address or to the attention of
such other Person as the recipient party has specified by prior written notice
to the sending party. Notices shall be deemed to have been given hereunder when
delivered personally, three business days after deposit in the U.S. mail and two
business days after deposit with a reputable overnight courier service. The
Company's address is:
Generac Portable Products, Inc.
0 Xxxxxxx Xxx
Xxxxxxxxx, XX 00000
27. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall
be governed by and interpreted in accordance with the laws of the State of
Delaware, without giving effect to any choice of law or conflict of law
provision or rule that would cause the application of the laws of any
jurisdiction other than the State of Delaware. The parties hereto consent to the
jurisdiction of the State and federal courts located in the State of Delaware.
28. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
[Signatures On Next Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or representatives thereunto duly
authorized as of the date first above written.
GENERAC PORTABLE PRODUCTS, INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Secretary and Treasurer
THE BEACON GROUP III - FOCUS VALUE
FUND, L.P.
By Beacon Focus Value Investors, LLC
its General Partner
By Focus Value GP, Inc.
its sole member
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Managing Director
BT CAPITAL INVESTORS, L.P.
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxx X. Xxxx
Title: Managing Director
CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM
By: /s/ Xxxxx Xxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxxx
SQUAM LAKE INVESTORS III, L.P.
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Treasurer of GPI, Inc.,
general partner of stockholder
SUNAPEE SECURITIES, INC.
By: /s/ Xxxx Xxxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Treasurer
TASK HOLDINGS LIMITED
By: /s/ Xxx X. Xxxxx
-------------------------------------
Name: Xxx X. Xxxxx
Title: Vice President
XXXXXXXX XXXX PRIVATE EQUITY
PARTNERS, LP
By HLSP Investment Management LLC
its General Partner
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Member
XXXXXXXX XXXX PRIVATE EQUITY
FUND, PLC
By HLSP Investment Management LLC
its General Partner
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Managing Member
XXXXXXXXX FAMILY LIMITED
PARTNERSHIP
By its General Partner
By: /s/ Eugene R.E. Xxxxxxxxx
-------------------------------------
Name: Eugene R.E. Xxxxxxxxx
CAPITAL D'AMERIQUE CDPQ INC.
By: /s/ Xxxxxxxx Xxxx
-------------------------------------
Name: Xxxxxxxx Xxxx
/s/ XXXXXX X. XXXX
----------------------------------------
XXXXXX X. XXXX
/s/ XXXXXXX X. VAN DEUREN
----------------------------------------
XXXXXXX X. VAN DEUREN
/s/ XXXXXX R.E. XXXXXXXXX
----------------------------------------
XXXXXX R.E. XXXXXXXXX
SCHEDULE I
COMMON STOCK OWNERSHIP
Number of Shares
of
Stockholder Common Stock
----------- ----------------
The Beacon Group III - Focus
Value Fund, L.P. 5,470.909
Task Holdings Limited 309.091
California Public Employees'
Retirement System 1,931.818
BT Capital Investors, L.P. 386.364
Squam Lake Investors III, L.P. 74.182
Sunapee Securities, Inc. 3.091
Xxxxxxxx Xxxx Private Equity Partners, LP 48.828
Xxxxxxxx Xxxx Private Equity Fund, PLC 105.718
Xxxxxxxxx Family Limited Partnership 23.182
Xxxxxx X. Xxxx 77.273
Xxxxxxx X. Van Deuren 7.727
Eugene R.E. Xxxxxxxxx 23.182
Capital d'Amerique CDPQ Inc. 571.818
