EXHIBIT (c)(2)
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ENVIROTEST SYSTEMS CORP.
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
Dated as of April 10, 1992
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TABLE OF CONTENTS
Page
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Section 1. Transfers of Shares, Options or Warrants . . . . . . . . .
Section 2. Rights of First Offer . . . . . . . . . . . . . . . . . .
Section 3. Rights of Inclusion . . . . . . . . . . . . . . . . . . . 1
Section 4. Rights to Compel Sale . . . . . . . . . . . . . . . . . . 1
Section 5. Corporate Governance . . . . . . . . . . . . . . . . . . . 1
Section 6. Registration Rights . . . . . . . . . . . . . . . . . . . 2
Section 7. Transfers of Management Shares . . . . . . . . . . . . . . 4
Section 8. Purchase Rights . . . . . . . . . . . . . . . . . . . . . 5
Section 9. Put Rights . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 10. Financial Information . . . . . . . . . . . . . . . . . . 6
Section 11. Regulatory Matters . . . . . . . . . . . . . . . . . . . . 6
Section 12. Voting Shares . . . . . . . . . . . . . . . . . . . . . . 6
Section 13. Share and Warrant Certificates . . . . . . . . . . . . . . 6
Section 14. Equitable Relief . . . . . . . . . . . . . . . . . . . . . 6
Section 15. Arbitration . . . . . . . . . . . . . . . . . . . . . . . 6
Section 16. Compliance with Securities Laws . . . . . . . . . . . . . 6
Section 17. Irrevocable Proxy . . . . . . . . . . . . . . . . . . . . 6
Section 18. Call of Senior Subordinated Notes . . . . . . . . . . . . 6
Section 19. Additional Share Issuance to New Investors . . . . . . . . 6
Section 20. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 6
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Schedule I - SCHEDULE OF STOCKHOLDERS
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AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT, dated as of April 10, 1992
(the "Agreement"), by and among ENVIROTEST SYSTEMS CORP., a Delaware
corporation (the "Company"), Georgetown Partners Limited Partnership, a
Maryland limited partnership ("Georgetown"), Gnitrow Ltd., a company
organized under the laws of the United Kingdom ("PITA"), Equico Capital
Corporation, a Delaware corporation ("ECC"), Amoco Venture Capital Company, a
Delaware corporation ("Amoco"), UNC Ventures II, L.P., a Delaware limited
partnership ("UNC II"), UNC Ventures, Inc., a Delaware corporation ("UNC
Ventures" and, collectively with UNC II, "UNC"), MESBIC Ventures, Inc., a Texas
corporation ("MESBIC"), Internationale Nederlanden (U.S.) Finance
Corporation, a Delaware corporation ("NMB"), Skopbank, a Finnish banking
corporation ("Skopbank"), Apollo Investment Fund, L.P., a Delaware limited
partnership ("Apollo"), Chemical Equity Associates, a California limited
partnership ("CVP"), and each of the individuals listed on the Schedule of
Securityholders attached hereto as Schedule I, as such schedule may be
amended by the Company from time to time to include members of the management
of the Company or its Affiliates who hereafter acquire shares of capital
stock of the Company or options to purchase such shares (the "Management
Stockholders"). Georgetown, PITA, ECC, Amoco, UNC, MESBIC, NMB, Skopbank,
Apollo, CVP, the New Investors and the Management Stockholders are
collectively referred to herein as the "Stockholders" and individually as a
"Stockholder." Amoco, UNC and MESBIC are collectively referred to herein as
the "Investor Group." Apollo and CVP are collectively referred to herein as
the "New Investors." Except as otherwise provided herein, references to
Georgetown, PITA, ECC, Amoco, UNC, MESBIC, NMB, Skopbank, Apollo, CVP, the
New Investors and the Management Stockholders shall include any and all
Permitted Transferees (as defined in Section 1(h) hereof) of such parties.
References to the Stockholders shall include any Permitted Transferees of the
Stockholders.
WHEREAS, the Company is authorized to issue 30,000 shares of Class A Common
Stock, par Value $.01 per share (the "Class A Common Stock"), of which an
aggregate of 1,318.91 shares are currently issued and outstanding, and 30,000
shares of Class B Common Stock, par value $.01 per share, of which an aggregate
of 262.43 shares are currently issued and outstanding (the "Class B Common
Stock" and
collectively with the Class A Common Stock, the "Common Stock"). (As used
herein, the term "Shares" means (i) currently issued and outstanding shares
of Class A Common Stock and Class B Common Stock, (ii) SHARES OF COMMON
STOCK, issued after the date hereof upon conversion of currently outstanding
shares of Common Stock or upon the exercise of currently outstanding Options
(as defined below) or Warrants (as defined below), (iii) Additional Shares
(as defined below) and shares of Common Stock issued upon the exercise of
Additional Warrants (as defined below), and (iv) securities issued with
respect to any additional issuance upon, or exchange or reclassification of,
SHARES, or any other form of recapitalization, consolidation, merger, share
split, or share dividend with respect to Shares);
WHEREAS, the Company has issued to NMB and Skopbank warrants (the
"Warrants") to purchase up to 1,720.32 shares of Class B Common Stock, pursuant
to the Warrant Agreement, dated as of April 10, 1992 (the "Warrant Agreement"),
among NMB, Skopbank and the Company;
WHEREAS, included among the Shares are the 2,599.14 shares of Class B
Common Stock issued to the New Investors (all Shares held by the New Investor,
including any Shares that may hereafter be acquired are referred to herein as
its "New Investor Shares");
WHEREAS, the Company has issued to Georgetown and the Management
Stockholders options to purchase up to 1,077.51 shares of Common Stock and may,
in its direction, issue to members of management of the Company or its
Affiliates additional options to purchase shares of Common Stock (collectively,
the "Options");
WHEREAS, each Stockholder is the record and beneficial owner of the number
of Shares, Options or Warrants, appearing opposite his or its name on Schedule
I, free and clear of all options, liens, encumbrances or charges of any kind
(collectively, "Liens"), except as provided herein and in the Warrant Agreement;
WHEREAS, certain of the parties hereto have entered into that certain
Stockholders' Agreement, dated as of December 21, 1990 (the "Prior Stockholders'
Agreement"), which they desire to amend and restate in its entirety by this
Agreement;
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NOW, THERFORE, the parties hereto agree as follows:
1. TRANSFERS OF SHARES, OPTIONS OR WARRANTS.
(a) Each Stockholder agrees that, except in a transaction or
transactions specifically permitted or required by this Section 1 or Sections 4
or 7 of this Agreement, he or it shall not, either directly or indirectly,
transfer, sell, assign, mortgage, hypothecate, pledge, create a security
interest in or lien upon, encumber, give, place in trust, or otherwise
voluntarily or involuntarily dispose of (collectively, "transfer") any of the
Shares, Options or Warrants held by such Stockholder, including Shares, Options
or Warrants that may hereafter be acquired by such Stockholder, unless such
stockholder complies with the provisions of Section 2, 3 and 16 and, in the case
of Management Stockholders, Section 7 hereof.
(b) TRANSFER OF SHARES, OPTIONS, OR WARRANTS TO AFFILIATES.
Subject to Sections 1(c), 1(h) and 16, and, with respect to Management
Stockholders, Section 7, each Stockholder may, without the consent of any of
the other parties hereto and without complying with the provisions of
Sections 2 and 3 hereof, directly or indirectly, transfer Shares, Options or
Warrants to any Affiliate of such Stockholder, or, if such Stockholder is an
individual, pursuant to the laws of descent and distribution. In the event
of any such transfer, except as otherwise provided herein, a transferee or
subsequent transferee of a Stockholder shall be entitled to the rights and
privileges provided to such Stockholder herein and shall be bound and
obligated to the extent of such Stockholder by the provisions hereof.
As used herein, "Affiliate" shall mean (i) any person directly or
indirectly controlling, controlled by, or under common control with, another
person, (ii) a person owning or controlling 51% or more of the outstanding
voting securities of such other person, (iii) any officer, director, partner or
employee of such other person, (iv) with respect to each of Georgetown, Apollo
and CVP, any employee thereof, any partner thereof, any partner of any partner
thereof, or any person directly or indirectly controlled by, or under common
control with, any general partner thereof, and (v) any parent, spouse or child
(or any trust for the benefit of any parent, spouse or child) of any of the
foregoing.
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(c) RESTRICTIONS ON GEORGETOWN SHARES OR OPTIONS. Notwithstanding
anything to the contrary contained in this Agreement, Georgetown agrees that it
shall not (i) directly or indirectly, transfer any of the shares or Options held
by Georgetown if such disposition would constitute a default or Event of Default
under the Credit Agreement (as defined therein) or constitute a Change of
Control under the Indenture (as defined therein) or (ii) transfer in any respect
its Director Rights (as hereinafter defined). Georgetown hereby agrees that
Xxxxxxx X. Xxxxxxxxx is and will remain in control of Georgetown.
(d) CERTAIN DEFINITIONS. As used herein,
(i) "Credit Agreement" shall mean that certain Credit Agreement,
dated as of March 30, 1992, by and among Xxxxxxxx Test Systems, Inc. ("HTS"),
the guarantors named therein, the banks party thereto, and International
Nederlanden Bank N.V., New York Branch, as Agent, or any refinancing or
restatement thereof,
(ii) "Indenture" shall mean that certain Indenture, dated as of
April 10, 1992, by and among HTS, the guarantors named therein and the trustee
named therein,
(iii) "Senior Subordinated Notes shall mean the 13 1/2%
Senior Subordinate Notes due 2000 issued under the Indenture,
(iv) a Stockholder's "Director Rights" shall mean the specific
rights, if any, of such Stockholder to designate, nominate or remove directors
in accordance with Section 5 hereof,
(v) a Stockholder's "Representative Rights" shall mean the
specific rights, if any, of a Stockholder to appoint a representative to attend
meetings of the Company's Board of Directors in accordance with Section 5
hereof, and
(vi) "person" shall mean any individual, partnership,
corporation, joint venture, association, joint-stock company, trust,
unincorporated organization, union, business association, firm, government or
agency or political subdivision thereof, or other entity,
(vii) "control", with respect to any person, shall mean the
power to direct the management and
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policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
(e) TRANSFERS BY PITA. Subject to Sections 1(h) and 16 and without
complying with the provisions of Section 2 or 3 hereof, PITA may at any time and
from time to time transfer any or all of its Shares and, at its option, in
connection therewith, its Director Rights, to any person (other than any person
that directly competes with HTS). For the purposes hereof, PITA or any
transferee of PITA to whom PITA's Director Rights shall have been assigned being
herein referred to as the "PITA Investor."
(f) TRANSFERS BY NMB, SKOPBANK, THE APOLLO INVESTOR AND THE CVP
INVESTOR. Subject to Sections 1(h) and 16, and without complying with the
provisions of SECTION 2 or 3 hereof, (i) NMB and Skopbank may, at any time and
from time to time, transfer any or all of the Warrants, shares or Class B Common
Stock issuable upon the exercise of the Warrants, shares of Class A Common Stock
issuable upon conversion of such shares of Class B Common Stock or shares of
Class B Common Stock issuable upon conversion of such Class A Common Stock (all
such shares being referred to herein as "Warrant Shares") to any person, (ii)
each of the New Investors may at any time and from time to time, transfer any or
all of its New Investor Shares and, at its option, in connection therewith, its
Directors Rights or Representative Rights, as the case may be, to any person,
PROVIDED that such New Investor also transfers in connection therewith not less
than 25% of the aggregate principal amount of Senior Subordinated Notes then
outstanding, (iii) each of the New Investors may, at any time and from time to
time, transfer any or all of its New Investor Shares in one transaction or in
series of related transactions; PROVIDED that such New Investor also transfers
in connection therewith not less than $2,500,000 aggregate principal amount of
Senior Subordinated Notes; and (iv) if required by applicable law or regulation,
either of the New Investors may transfer any or all of its New Investor Shares
to any person or persons (with or without its Representative Rights but without
its Director Rights), PROVIDED that such New Investor shall have provided prior
written notice of such requirement to the Company. Apollo or any transferee of
Apollo to whom Apollo's Director Rights shall have been assigned being herein
referred to as the "Apollo Investor," and CVP or any transferee of CVP to whom
CVP's Repre-
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sentative Rights shall have been assigned being herein referred to as the "CVP
Investor."
(g) OTHER TRANSFERS. Without limiting the provisions of Sections 1(c)
and 1(f) hereof, each of ECC, the Investor Group, the Apollo Investor, and
the CVP Investor may, subject to Sections 1(h), 3 and 16, transfer Shares or
Options owned by it without complying with the rights of first offer set
forth in Section 2 hereof; PROVIDED, HOWEVER, that in the event that the ECC,
the Investor Group, the Apollo Investor, or the CVP Investor shall so
Transfer any Shares or Options pursuant to this Section 1(g), any Director
Rights that it may have shall terminate and be of no further force or effect
and, thereafter, the holders (the "Majority Independent Stockholders") of a
majority of the Shares then held by Stockholders other than Stockholders who
continue to have Director Rights (the "Independent Shares") shall have the
Director Rights that formerly belonged to the Stockholder or Stockholders
whose Director Rights were terminated by operation of this Section 1(g).
(h) CONDITION TO PERMITTED TRANSFERS. As a condition to any transfer
permitted pursuant to this Section 1 (other than Section 1(i), each
transferee that is not a party hereto shall, prior to such transfer, agree in
writing to be bound by all of the provisions of this Agreement applicable to
the transferor and no such transferee shall be permitted to make any transfer
other than in accordance with the terms of this Agreement. Any transferee of
Shares, Options or Warrants pursuant to a transaction permitted by this
Section 1 shall be referred to as a "Permitted Transferee." Except as
otherwise provided herein, each Permitted Transferee shall be entitled to the
rights and privileges, including the right to transfer Shares, Options or
Warrants, and shall be bound and obligated to the extent of the original
transferor Stockholder under this Agreement.
(i) TRANSFER RESTRICTIONS. The provisions of Section 1, 2, 3 and 7 of this
Agreement shall not apply to any transfer pursuant to a Public Offering of
Registrable Securities (as such terms are hereinafter defined) made pursuant to
Section 6(b) or 6(c) hereof.
2. RIGHTS OF FIRST OFFER.
(a) Except as provided in Section 1 and with respect to Management
Stockholders, Section 7 hereof,
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any Stockholder (a "Selling Stockholder") who desires to transfer (x) any or
all of its or his Shares or Options or (y) any or all of its or his Shares or
Options together with any of the Company's 13 1/2 % Subordinated Notes due
2000 (the "Junior Subordinated Notes") (the securities to be transferred
being referred to herein as the "Sale Securities") to a third party purchaser
or purchasers shall first offer to sell such Sale Securities to the other
Stockholders (the "Offeree Stockholders") in their Proportionate Percentage
(as defined in Section 2 (d) hereof), at a price determined in the sole
discretion of such Selling Stockholder (an "Offer"). Each such Offer shall
be made by written notice to the Company and the Offeree Stockholders. Upon
receipt of such notice, each Offeree Stockholder shall have 30 days (the
"Offer Period") to offer to purchase from the Selling Stockholder all, but
not less than all, of the Offeree Stockholder's Proportionate Percentage of
the Sale Securities, at the cash price determined by the Selling Stockholder
and upon the terms and conditions set forth in clauses (i) through (vi) of
the definition of Firm Offer below. If an Offeree Stockholder elects to
accept an Offer, it or he shall make a Firm Offer within the Offer Period by
providing written notice thereof to the Selling Stockholder, with copies
thereof to the Company and each of the other Offeree Stockholders. A Firm
Offer shall be irrevocable for a period of 30 days. As used herein, "Firm
Offer" means a written all cash offer for the purchase of the Sale Securities:
(i) Requiring no representations or warranties from the
Company or the Selling Stockholder other than representations from
such Selling Stockholder that it or he has the corporate or
individual authority to sell such Sale Securities, is the sole owner
of such Sale Securities, and has good and valid title to such Sale
Securities, free and clear of any and all Liens, and the sale of such
Sale Securities, does not violate any agreement to which he or it is
a party or by which he or it is bound ("Customary Limited
Representations");
(ii) Containing no conditions other than a financing
condition (in which case the offer must be accompanied by a
non-refundable deposit equal to at least 5% of the proposed purchase
price and financing commitments from financial institutions in the
business of providing
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acquisition financing that are subject only to customary conditions);
(iii) Requiring no continuing obligations on the part of the
Selling Stockholder;
(iv) In the case of an Offer without the financing
condition, accompanied by demonstrated capacity to finance the
transaction;
(v) Providing for the purchase of the Offeree's
Proportionate Percentage of the Sale Securities; and
(vi) Including an absolute release by the Offeree
Stockholder of the Selling Stockholder and its Affiliates from any and
all claims arising out of their investment in, and activities
relating to, the Company.
(b) If any Offer is not accepted by an Offeree Stockholder, then a
succeeding Offer or Offers for the sale and all Sale Securities as to which
there was no such acceptance shall thereafter be deemed to have been made by
the Selling Stockholder to those Offeree Stockholders who accepted the
preceding Offer, in their Proportionate Percentage, at the same price and
upon the same terms and conditions at which they were offered to the initial
Offeree Stockholders, until such time as all Offers pursuant to Section 2(a)
hereof and this Section 2(b) are accepted or the time within which acceptance
is required has expired and no Offer made during such period is accepted.
Each successive Offer hereunder shall be deemed to have been made immediately
upon the expiration of the period of the prior Offers, and each Offeree
Stockholder shall have a period of five business days after the commencement
of each Offer within which to accept the Offer, which acceptance must be for
all and not part of the Offeree Stockholder's Proportionate Percentage of the
Sale Securities so offered. If an Offeree elects to accept any Offer made
pursuant to this Section 2(b), it or he shall signify its or his acceptance
within the applicable 5 business day period by providing written notice
thereof in the form of a Firm Offer to the Selling Stockholder, with copies
thereof to the Company and each of the other Stockholders. The Company shall
maintain records of each successive Offer and the Sale Securities accepted
for purchase pursuant thereto, and shall apprise
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each Stockholder of the status thereof upon request. No acceptance of
any offer made by an Offeree Stockholder pursuant to Section 2(a) hereof or
this Section 2(b) shall be effective unless Offers are accepted by one or
more of the Offeree Stockholders for all of the Sale Securities being offered.
Upon the receipt of Firm Offers for all of the Sale Securities, the
Selling Stockholder shall notify each Offeree Stockholder who has made a Firm
Offer (a "Committed Stockholder") of a closing date selected by the Selling
Stockholder (the "Closing Date"), which shall be no earlier than 60 nor later
than 75 days after the Selling Stockholder made its initial written offer.
If one or more Committed Stockholders shall fail or be unable to close on the
purchase of their portion of the Sale Securities on the Closing Date, such
closing shall nevertheless occur with the other Committed Stockholders. In
addition to any rights and remedies the Selling Stockholder may have against
a defaulting Committed Stockholder, (x) a defaulting Committed Stockholder
will forfeit any deposit given to the Selling Stockholder and (y) a
defaulting Committed Stockholder shall not be entitled to participate in the
rights provided by this Section 2 for a period of 12 months after such
default.
(c) If all of the Sale Securities offered pursuant to the
provisions of this Section 2 are not accepted for purchase by the Offeree
Stockholders during the respective offering periods provided in this Section
2 or are not purchased as provided in this Section 2, the Selling Stockholder
shall have the right to sell all (but not less than all) of the Sale
Securities to any purchaser or purchasers at a price, whether in cash,
securities or otherwise, having a value no less than 95% of the offering
price, and upon such other terms and conditions as the Selling Stockholder
may elect, free from the restrictions of this Section 2 (but subject to
Section 3 hereof) in a bona fide transaction or transactions during a period
of 120 days after the date that the last Offer expires under this Section 2.
Any Securities not sold pursuant to the immediately preceding sentence prior
to the expiration of 120-day period referred to therein shall once again be
subject to the rights of first offer set forth in this Section 2.
(d) As used herein, the term "Proportionate Percentage" shall mean,
with respect to any Offeree Stockholder entitled to receive a particular
Offer, a percentage (expressed as a decimal fraction rounded to the nearest
one-
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hundredth) obtained by dividing (x) the number of Shares owned by such
Stockholder (including the underlying Shares of any Options or Warrants owned
by such Stockholder) by (y) the aggregate number of Shares owned by all
Offeree Stockholders (including the underlying Shares of any Options or
Warrants owned by such Stockholders) entitled to receive such offer.
3. RIGHTS OF INCLUSION. Except as provided in Section 1 and, with
respect to Management Stockholders, Section 7 hereof:
(a) No Stockholder or Stockholders shall, in any one transaction or
any series of related transactions (except a sale to other Stockholders
pursuant to Section 2(b) hereof), transfer to a third party more than 10% of
the Shares unless the terms and conditions of such transfer include an offer
to each of the other Stockholders to include, at the option of each of the
other Stockholders, in such transfer, a number of Shares, Warrants or Options
owned by the other Stockholders determined in accordance with subsection 3(c)
below. If any Stockholders (the "Offeree Stockholders") receive a bona fide
offer from a third party to purchase or otherwise acquire a number of Shares
or Options equal to at least 10% of the Shares, which offer the Offeree
Stockholders intend to accept, the Offeree Stockholders shall then cause the
third party's offer to be reduced to writing (which writing shall include an
offer to purchase or otherwise acquire Shares, Warrants or Options from any
of the other Stockholders according to the terms and conditions of Sections
3(b) and 3(c) hereof) and shall send written notice of the third party's
offer (the "Notice") to each of the other Stockholders. The Notice shall be
accompanied by a true and correct copy of the third party's offer. At any
time within 15 days after receipt of the Notice, each of the other
Stockholders may accept the offer included in the Notice for up to such
number of Shares, Warrants or Options as is determined in accordance with the
provisions of Section 3(c) below by furnishing written notice of such
acceptance to the Offeree Stockholder and the third-party offeror. Any
Stockholder who accepts such offer may indicate in his written notice, if he
or it so elects, his or its desire to sell a number of Shares, Warrants or
Options in excess of his Proportionate Percentage share thereof, stating the
maximum number of Shares, Warrants or Options in excess of such Proportionate
Percentage which such Stockholder desires to sell (such Stockholder's "Excess
Amount"), which amount, together with
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such Proportionate Percentage, shall not exceed the lesser of (i) the total
number of Shares, Options and Warrants owned by such Stockholder and (ii) the
total number of Shares, Options and Warrants offered to be purchased by a
third party purchaser.
(b) If within 15 days after the receipt of the Notice any of the other
Stockholders has not accepted the offer contained in the Notice, such party
shall be deemed to have waived any and all rights with respect to the sale or
other disposition of Shares, Warrants or Options described in the Notice.
(c) The Shares, Warrants or Options to be sold pursuant to this Section
3 shall be purchased by the third party purchaser in the following order of
priority: (i) first, from each Stockholder (including the Stockholder
initiating the sale of securities) who has elected to participate in the sale
pursuant to subsection 3(a), in accordance with his respective Proportionate
Percentage of the total number of Shares, Warrants or Options to be acquired
by the third party; (ii) second, to the extent any Stockholder has declined
to sell a number of Shares, Warrants or Options proposed to be transferred
equal to his Proportionate Percentage of Shares, Warrants or Options to be
acquired, then from the Offeree Stockholder and the other Stockholders, in
accordance with the Excess Amount indicated in their respective notices or
determined in accordance with the following sentence (unless such amount
exceeds the aggregate number of Shares, Warrants or Options proposed to be
sold to such third party, in which event the Excess Amounts of such
Stockholders shall be reduced according to their respective Proportionate
Percentage). For the purposes hereof, the Offeree Stockholder's Excess
Amount shall be deemed to be the lesser of (x) the difference between the
number of Shares then owned by the Offeree Stockholder and such Stockholder's
Proportionate Percentage of the total number of Shares, Options and Warrants
offered to be purchased by the third party, and (y) the total number of
Shares, Options and Warrants offered to be purchased by such Third Party
Purchaser less such Proportionate Percentage.
(d) The purchase from the Stockholders pursuant to this Section 3 shall
be on the same terms and conditions, including the per share price and the
date of transfer, as are received by the Offeree Stockholder and stated in
the Notice provided to the other Stockholders;
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PROVIDED, HOWEVER, that no other Stockholders shall be required to make any
representations or warranties in connection with such sale except Customary
Limited Representations.
(e) The Offeree Stockholder shall notify the Company and the other
Stockholders who have exercised their inclusion rights pursuant to this
Section 3 within five days of the end of the 15-day period referred to in
subsection 3(b), of the number of Shares, Warrants or Options each
Stockholder has been allocated to sell pursuant to subsection 3(c). Each
other Stockholder, within five days of receipt of such notice, shall deliver
to the Offeree Stockholder the certificate or certificates representing the
Shares, Warrants or Options, to be sold pursuant to such offer by such
Stockholder, together with a limited power-of-attorney authorizing the
Offeree Stockholder to sell or otherwise dispose of the Shares, Warrants or
Options to be sold pursuant to the terms of such third party's offer.
(f) Simultaneously with the consummation of transfer of the Shares,
Warrants or Options of the Offeree Stockholder, the Offeree Stockholder shall
notify the Company and the other Stockholders who have exercised their
inclusion rights pursuant to Section 3 that the consummation of such
transaction has occurred and shall promptly, but in any event not later than
3 business days thereafter, remit to such Stockholders the total sales price
of the Shares, Warrants or Options of such Stockholders sold pursuant
thereto, net of such Stockholder's pro rata share of all out-of-pocket fees,
expenses and costs incidental to such sale (collectively, "Sale Expenses")
other than those payable to an Affiliate of any Offeree Stockholder, and
shall furnish such other evidence of the completion and time of completion of
such transfer and the terms thereof as may be reasonably requested by such
Stockholders.
(g) To the extent that no other Stockholders have exercised their
rights of inclusion pursuant to this Section 3, the Offeree Stockholder shall
have 90 days in which to transfer not more than the number of Shares,
Warrants or Options described in the Notice, on terms and conditions not more
favorable to the Offeree Stockholder than those set forth in the Notice.
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4. RIGHTS TO COMPEL SALE.
(a) If Stockholders entitled to vote at least 54% of the then
outstanding Voting Shares (as defined in Section 12 hereof) propose to sell
in any transaction or any series of related transactions all of the Shares,
Options and Warrants) to a third party (other than to an Affiliate of an
Offeror Stockholder (as defined below)) in an arm's-length transaction, such
Offeror Stockholders may require all but not less than all of the remaining
Stockholders to sell all but not less than all the Shares, Options and
Warrants owned by them to such third party for the same per share
consideration (equitably adjusted to take into account the exercise price of
any Options or Warrants) and otherwise on the terms and conditions provided in
this Section 4; PROVIDED, HOWEVER, that (A) Georgetown shall be one of such
Offeror Stockholders, (B) if the Sale Date (as defined below) is prior to the
second anniversary of the date hereof, the New Investors shall both be
Offeror Stockholders, and (C) if the Sale Date is on or after the second
anniversary of the date hereof, either (1) the New Investors shall both be
Offeror Stockholders or (2) the aggregate sale price (net of Sale Expenses)
would result in a cumulative annual rate of return (compounded semiannually)
to each of the New Investors from the date hereof through the Sale Date equal
to the following: (x) 35%, if such sale occurs after the second anniversary
of the date hereof but prior to the fifth anniversary of the date hereof, and
(y) 25%, if such sale occurs on or after the fifth anniversary of the date
hereof (it being understood that one or more of the other Stockholders may
agree to increase the net proceeds payable to the New Investors on such sale
by an amount sufficient to satisfy the conditions set forth in clause (2)
above).
If Stockholders entitled to vote at least 70% of the then outstanding
Voting Shares propose to sell in any transaction or any series of related
transactions all of the Shares, Options and Warrants to a third party (other
than to an Affiliate of an Offeror Stockholder) in an arm's-length transaction,
such Offeror Stockholders may require all but not less than all of the remaining
Stockholders to sell all but not less than all the Shares, Options and Warrants
owned by them to such third party for the same consideration per share and
otherwise on the terms and conditions provided in this Section 4; PROVIDED,
HOWEVER, that (A) if the sale occurs on or before the second anniversary of the
date hereof and Xxxxxxx X. Xxxxxxxxx is Chairman of the Company,
13
Georgetown shall be one of such Offeror Stockholders and (B) if such sale occurs
prior to the fourth anniversary of the date hereof, either (i) the New Investors
shall both be Offeror Stockholders or (ii) the aggregate sale price (net of Sale
Expenses) would result in a cumulative annual rate of return (compounded
semiannually) to each of the New Investors from the date hereof through the Sale
Date equal to the following: (x) 35%, if such sale occurs prior to the first
anniversary of the date hereof, (y) 30%, if such sale occurs on or after the
first anniversary of the date hereof but prior to the second anniversary of the
date hereof, and (z) 25%, if such sale occurs on or after the second anniversary
of the date hereof but prior to the fourth anniversary of the date hereof (it
being understood that one or more of the other Stockholders may agree to
increase the net proceeds payable to the New Investors on such sale by an amount
sufficient to satisfy the conditions set forth in clause (2) above).
As used in this Section 4, the term "Offeror Stockholders" means
Stockholders with the requisite percentage of Voting Shares who compel a sale
pursuant to this Section 4(a).
(b) At the option of the Offeror Stockholders, any sale of the Company
permitted by Section 4(a) hereof may be structured as a merger, consolidation or
sale of all or substantially all of the consolidated assets of the Company, and
each Stockholder hereby agrees, to the fullest extent permitted by applicable
law, to vote all of the Shares it is entitled to vote in favor of such
transaction. Notwithstanding any provision of this Agreement to the contrary,
the Company shall be prohibited from any merger, consolidation or sale of all or
substantially all of its assets if such transaction would not be permitted under
this Section 4 if structured as a sale of Shares.
(c) For purpose of Section 4(a) hereof, the return to a New Investor
shall be equal to the greater of:
(i) the return that would be obtained by an investor
calculated solely on (A) New Money Investments (as defined below)
by such New Investor and any of its Affiliates on or after the date
hereof but on or prior to the Sale Date, (B) all cash paid on or after
the date hereof but on or prior to the Sale Date by the Company or a
third party on the Sale Date to
14
holders of such New Money Investments, whether or not then owned by such
New Investor, including cash payments in respect of principal of, or
premium or interest on, New Money Investments constituting Indebtedness
("New Money Debt") and cash dividends and distributions with respect to
New Money Securities constituting equity ("New Money Equity") (but
excluding any funds relating thereto escrowed pursuant to clause (e)
below), and (C) New Money Debt held by the holders of the New Money
Investments immediately following the Sale Date, valued at the lesser
of par and accreted value, PROVIDED that such holders have
agreed to receive such New Money Debt; or
(ii) the return to such New Investor calculated solely on (A) cash
investments made on or after the date hereof but on or prior to the Sale
Date by such New Investor or any of its Affiliates in the Company or any of
its subsidiaries ("New Money Investments") (whether debt, equity or
otherwise, and including the cash exercise or conversion price of any
exchangeable or convertible securities), including the purchase of Shares,
and Senior Subordinated Notes on the date hereof, (B) all cash actually
received on or after the date hereof but on or prior to the Sale Date by
such New Investor and its Affiliates with respect to New Money Investments,
including cash payments with respect to principal of, or premium or
interest on, New Money Debt and cash dividends and distributions with
respect to New Money Equity (but excluding any funds escrowed pursuant to
clause (e below), and (C) New Money Debt held by such New Investor
immediately following the Sale Date, valued at the lesser of par and
accreted value; PROVIDED, that such New Investor has agreed to receive
such New Money Debt.
Upon the request of the Offeror Stockholders, which request includes the
terms of the proposed sale transaction, the Company or the New Investors will
calculate the cumulative annual rates of return in accordance with clauses (i)
or (ii) above, respectively, and promptly furnish to each other and such Offeror
Stockholders their calculations thereof in reasonable detail.
(d) The Offeror Stockholders shall send written notice of the exercise
of their rights pursuant to this Section 4 to each of the remaining Stockholders
(the "Drag-Along Notice") setting forth the consideration per
15
share to be paid by a third party purchaser and the other terms and conditions
of the transaction. Within 10 days following the date of the Drag-Along Notice,
each of the remaining Stockholders shall either attend the closing of the sale
and deliver, or deliver to a representative of the Offeror Stockholders
designated in the notice, certificates representing the Shares, Options and
Warrants held by such Stockholder, duly endorsed, together with all other
documents required to be executed in connection with such transactions. If a
remaining Stockholder should fail to deliver such certificates to the Offeror
Stockholders, the Company shall cause the books and records of the Company to
show that such Shares, Options or Warrants are bound by the provisions of this
Section 4 and that such Shares, Options or Warrants shall be transferred only to
the third party purchaser upon surrender for transfer by the holder thereof.
Simultaneously with the consummation of the sale of the Shares, Options and
Warrants of the Offeror Stockholders and the Shares, Options and Warrants of the
remaining Stockholders pursuant to this Section 4, the Offeror Stockholders
shall promptly, but in any event not later than 3 business days thereof, remit
to each of the other Stockholders the total sales price of the Shares, Options
or Warrants of such Stockholder sold pursuant thereto, net of such Stockholder's
pro rata share of all out-of-pocket Sale Expenses other than those payable to an
Affiliate of any Offeror Stockholder, and shall furnish such other evidence of
the completion and time of completion of such sale or other disposition and the
terms thereof as may be reasonably requested by such Stockholders.
(e) The purchase from the Stockholders pursuant to this Section 4
shall be on the same terms and conditions (including the per share price
(equitably adjusted to take into account the exercise price of any Options or
Warrants) and the date of transfer (the "Sale Date")) as are to be received by
the Offeror Stockholders, which terms and conditions shall be stated in the Drag
Along Notice (PROVIDED, HOWEVER, that if any securities are to be received by
the Stockholders in connection with such sale, each Stockholder will have the
right to receive non-voting securities on the terms provided in the Company's
Certificate of Incorporation and Section 11 hereof); and (ii) no other
Stockholder shall be required to make any representations or warranties in
connection with such sale other than Customary Limited Representations. The
agreement of sale may set aside a pro-rata portion of the proceeds
16
payable with respect to the Shares, Options and Warrants of the Company in
escrow, upon terms satisfactory to the Offeror Stockholders, as a source of
indemnification to be provided to the purchaser(s). Upon termination of such
escrow, each Stockholder shall be entitled to receive his or its pro-rata share
of any funds remaining in escrow, after the payment of all indemnity claims, the
fees and expenses of the escrow agent and the out-of-pocket expenses of any
representative of the Stockholders pursuant to the escrow agreement in
connection with the administration of the escrow and the settlement, compromise
and/or defense of any claims made against the escrow.
5. CORPORATE GOVERNANCE.
(a) NUMBER OF DIRECTORS. Except as required by law in any foreign
jurisdiction or with the unanimous consent of all of the directors of the
Company, the Company and each of the Stockholders agree to take such action,
including the voting of the Class A Shares owned or controlled by such
Stockholder, as may be necessary to cause the Company and each of its wholly-
owned subsidiaries to be managed by a Board of Directors consisting of nine
members, in accordance with the provisions of this Section 5. For purposes of
this Section 5, except as the context otherwise requires, references to
directors or to the Board of Directors shall include directors and the Board of
Directors of the Company and each of its wholly-owned subsidiaries.
(b) INITIAL BOARD OF DIRECTORS. If the Board of Directors on the
date hereof shall not consist of Xxxxxxx X. Xxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx
Xxxxxxxxx, Xxxxxxx X. Xxxxxxx, Xx., one person nominated by GEORGETOWN, one
person nominated by the PITA INVESTOR, one person nominated by ECC, one
person nominated by the holders of a majority of the Shares held by the INVESTOR
GROUP, (the "Investor Group Majority") and one person nominated by the APOLLO
INVESTOR, then immediately after the date hereof, the Stockholders shall take
such action and cause the then directors to take such action as may be necessary
so as to cause the Board of Directors to consist of the foregoing nine members.
(c) SUBSEQUENT NOMINATIONS. Subject to Section 5(g) hereof, the
Stockholders shall, at any time that directors are to be elected, take such
action as may be necessary to nominate or to cause the Board of Directors to
nominate and recommend, as the proposed members of the Board
17
of Directors, (i) five persons designated by Georgetown (each a
"Georgetown Director"); PROVIDED, HOWEVER, that (A) if Xx. Xxxxxxx shall, for
any reason, cease serving as a director, Georgetown shall consult with the
PITA Investor, the New Investors and ECC prior to designating his successor
(and thereafter, prior to designating any further successors to the
directorship initially held by Xx. Xxxxxxx) and (B) if there is a Change of
Control (as defined in the Indenture) or Xxxxxxx X. Xxxxxxxxx shall cease to
control Georgetown (a "Change of Control Event"), the number of persons to be
designated by Georgetown pursuant to this clause (i) shall be reduced from
five to three (or, if a Phase II Event has occurred, from four to three);
(ii) one person designated by ECC (the "ECC Director"); (iii) one person
designated by the PITA Investor (the "PITA Director"); (iv) one person
designated by the Investor Group; and (v) one person designated by the
Apollo Investor; PROVIDED, HOWEVER, if a Change of Control Event shall
occur, the number of persons to be designated by the Apollo Investor
pursuant to this clause (v) shall be increased from one to three (each
director designated by the Apollo Investor, an "Apollo Director"). Each of
the Stockholders agrees that (x) Amoco, UNC and MESBIC shall each have the
right to appoint a single representative to attend, at the Company's expense,
but not to vote as a director at, meetings of the Board of Directors
(referred to herein as the Investor Group's "Representative Rights") and (y)
CVP shall have the right to appoint a single representative to attend, at the
Company's expense, but not to vote as a director at, meetings of the Board of
Directors (referred to herein as CVP's "Representative Rights"). The Company
shall provide prior notice of all meetings of the Board of Directors to each
such representative and shall provide to such representative all information
and documents provided to directors in advance of any meeting of the Board of
Directors.
(d) REMOVAL. After the date hereof, Georgetown shall be entitled
at any time with or without cause to designate any Georgetown Director for
removal as a director; the PITA Investor shall be entitled at any time with
or without cause to designate any PITA Director for removal as a director;
ECC shall be entitled at any time with or without cause to designate any ECC
Director for removal as a director; the Investor Group Majority shall be
entitled at any time with or without cause to designate any Investor Group
Director for removal as director; and the Apollo Investor shall be entitled
at any time with or without cause
18
to designate any Apollo Director for removal as director. The Company
and Stockholders agree to take such action, and to cause the remaining
directors to take such action, within five (5) days after any such
designation, as is necessary to remove a director designated for removal
in accordance with the foregoing.
(e) FILLING VACANCIES. If at any time a vacancy is created on the
Board of Directors by reason of the death, removal or resignation of any
director, the Company and Stockholders agree to take such action, and to
cause the remaining directors to take such action, within twenty days after
such occurrence, to approve and elect a person to fill such vacancy, which
person shall be designated for election as a director by Georgetown, if the
person who has ceased to be a director was a Georgetown Director (but if the
person who has ceased to be a director is Xx. Xxxxxxx or any successor to the
directorship initially held by Xx. Xxxxxxx, Georgetown shall consult with
ECC, the PITA Investor and the New Investors prior to filling such vacancy);
by ECC, if the person who has ceased to be a director was an ECC Director; by
the PITA Investor, if the person who has ceased to be a director was a PITA
Director; by the Investor Group Majority, if the person who has ceased to be
a director was an Investor Group Director; or by the Apollo Investor, if the
person who ceased to be a director was an Apollo Director.
(f) COVENANT TO VOTE. Each Stockholder shall vote (including, if
applicable, pursuant to written consent) the shares of Class A Common Stock
owned or controlled by such Stockholder upon all matters submitted to a vote of
the stockholders of the Company in conformity with the specific terms and
provisions of this Agreement. Without limiting the foregoing, each Stockholder
shall vote the shares of Class A Common Stock owned or controlled by him or it
(i) at each annual or special meeting of stockholders called for the purpose of
voting on the election or removal of directors and (ii) by consensual action of
stockholders with respect to the election or removal of directors, in favor of
the election or removal of the directors designated in accordance with this
Section 5. The Company shall vote, or cause to be voted, the capital stock of
its subsidiaries in conformity with the specific terms and provisions hereof.
(g) COVENANT DEFAULTS. In the event any of the following events
shall occur: (i) three Covenant
19
Defaults (as hereinafter defined) within a period of two years, (ii) any
default in the payment of principal or interest under the Credit Agreement or
the Indenture that has not been cured or waived within 15 days after the same
is due and payable (without consideration of any applicable grace period),
(iii) the acceleration of any amount due and payable under the terms and
provisions of the Credit Agreement or the Indenture, (iv) any material
default under the Credit Agreement or the Indenture that has not been cured
or waived within 90 days after the notice thereof, or (v) a declaration under
the Credit Agreement or the Indenture of an Event of Default (in each case as
defined therein), and upon the election in writing of each of ECC (after
consultation with UNC, Amoco and MESBIC), the PITA Investor and the Apollo
Investor (after consultation with the CVP Investor) within 180 days after
having received notice of such defaults or such acceleration, as the case may
be (a "Phase II Event"), unless a Change of Control Event has occurred, the
Stockholders shall take such action, and shall cause the directors to take
such action, as may be necessary, to remove one Georgetown Director (chosen
by Georgetown) and to replace such director with a director chosen by a
majority of the remaining directors.
Each of the Stockholders agrees that following a Phase II Event (x) CVP
shall retain its Representative Rights and (y) in addition to the continuing
Director Rights hereunder of PITA and the Investor Group, each of the PITA
Investor, UNC, Amoco and MESBIC shall have the right to appoint a single
representative to attend at the Company's expense, but not to vote as a
director at, meetings of the Board of Directors (herein referred to as its
"Representative Rights"). The Company shall provide prior notice of all
meetings of the Board of Directors to each such representative and shall
provide to such representative all information and documents provided to
directors in advance of any meeting of the Board.
As used herein, "Covenant Default" shall mean (A) a breach of a financial
covenant under the Credit Agreement (it being understood and agreed that the
breach of more than one financial covenant at any one time shall be deemed
one Covenant Default for purposes hereof); or (B) any other material breach
of the Credit Agreement or the Indenture, in each case whether or not such
default or breach has been waived or the Credit Agreement or the Indenture,
as the case may be, has been amended to cure such breach or default; PROVIDED,
HOWEVER, that a Covenant Default shall not include
20
any waiver under or amendment of the Credit Agreement or the Indenture, as
the case may be, intended generally (i) to cause the financial covenants or
other provisions thereof to reflect more accurately the business of the
Company (but not to change such covenants as a result of poor business or
financial performance), or (ii) to cure any default or breach that is not
material in nature; or (C) a breach of this Agreement wilfully caused by
Georgetown that has a material and adverse effect on one or more
Stockholders.
(h) SUPERMAJORITY PROVISIONS.
(i) Prior to a Phase II Event, without the approval of the
Board of Directors, given by (x) unanimous written consent of the directors,
(y) the affirmative vote at any regular or special meeting of the Board of
Directors of the Company of at least 6 directors or (z) if for any reason
fewer than 6 persons shall be serving on the Board of Directors, the
affirmative vote of all the directors then in office, the Company shall not
permit, and the Company shall not permit any subsidiary to permit:
(A) the issuance of capital stock or securities
convertible or exchangeable into, or rights to acquire, additional capital
stock (collectively, "Capital Stock"), other than pursuant to the Warrant
Agreement, the Warrants, the Additional Warrants, Section 8 or 19 hereof,
the Options and the conversion of any Class A Shares or Class B Shares
into the other class of Common Stock;
(B) dividends on, distributions with respect to, or
repurchases or redemptions of, Capital Stock, except (1) as provided in the
Warrant Agreement, as in effect on the date hereof, and (2) stock
repurchases from any employees of the Company upon the termination of
such employee's employment with the Company, subject to the satisfaction
of each of the following conditions on the date of such purchase and after
giving effect thereto: (x) no default under the Credit Agreement or the
Indenture shall have occurred and be continuing; (y) the aggregate amount
paid in any 12-month period in connection with such purchases shall not
exceed $250,000; and (z) the aggregate amount paid in connection with all
such purchases shall not exceed $750,000;
21
(C) the sale, lease or other disposition of assets
in a single transaction or related series of transactions in excess of the
greater of $2,500,000 or 18% of the consolidated stockholders' equity of
the Company and its subsidiaries;
(D) the purchase, lease or other acquisition of
assets in a single transaction or related series of transactions in excess
of the greater of $2,500,000 or 18% of the consolidated stockholders'
equity of the Company and its subsidiaries;
(E) the amendment, alteration, modification or
repeal of the Certificate of Incorporation or the by-laws of the Company or
of any subsidiary;
(F) the merger, consolidation or other business
combination, or sale of all or substantially all of the assets of the
Company or of any subsidiary;
(G) the incurrence of Indebtedness (as defined in
the Indenture) in excess of the greater of $1,000,000 or 18% of the
consolidated stockholders' equity of the Company and its subsidiaries other
than (x) as contemplated by a capital expenditure budget approved pursuant
to clause (x) below and (y) letters of credit or other financing of
ordinary course of business transactions;
(H) (i) changes in or amendments of the Options or
the Management Services Agreement between Georgetown and the Company, dated
as of April 10, 1992 (the "Management Agreement") or (ii) any transactions
between the Company or any of its subsidiaries and any Affiliate of the
Company other than (x) transactions pursuant to the Management Agreement,
(y) transactions contemplated hereby, and (z) transactions with any
subsidiary of the Company;
(I) entering into any new line of business other
than the business engaged in by the Company or any of its subsidiaries as
at
22
the date hereof or ceasing to be engaged in any line of business engaged
in by the Company or any of its subsidiaries as at the date hereof;
(J) material amendments or modifications of the
Credit Agreement, the UT Leases (as such term is defined in the Credit
Agreement), the Warrant Agreement, the Warrants or the Options;
(K) the approval or amendment of the Company's
annual operating and capital budgets;
(L) investments in corporations, partnerships,
trusts or other entities that are not subsidiaries of the Company other
than Cash Equivalents (as defined in the Indenture);
(M) any refinancing, substitution or renewal of the
Credit Agreement;
(N) if at any time Gross Profit (as defined below)
for the Trailing Four Quarter Period (as defined in the Indenture) is
less than or equal to the product of (i) 70% and (ii) Fiscal 1992 Gross
Profit, the incurrence of selling, general and administrative expenses
during any quarter in excess of those provided for in the operating
budget approved pursuant to clause (K) above. For purposes of this
clause (N), "Gross Profit" means, for any period, the difference of (i)
the amount which, in accordance with GAAP, is set forth opposite the
caption "Contract Revenue" on the Company's consolidated income statement
for such period and (ii) the amount which, in accordance with GAAP, is
set forth opposite the caption "Cost of Revenues" on such consolidated
income statement for such period;
(O) the appointment of any committee of the Board of
Directors;
(P) change any accounting policy or practice other
than as mandated by generally accepted accounting principles then in effect;
and
23
(Q) after a Change of Control Event, the appointment
or election of a chief executive officer of the Company.
(ii) Regardless of whether a Phase II Event has
occurred, without the prior written consent or the affirmative vote at a
meeting of Stockholders (whether or not called in accordance with the
Delaware General Corporation Law or applicable by-laws) entitled to vote at
least 71% of the Non-Management Voting Shares (as defined in Section 12
hereof), the Company shall not, and shall not permit any of its subsidiaries
to, (x) take any actions referred to in subparagraphs (A), (B), (C), (D),
(E), (F), (H), (I), (J), (L) (M) or (N) of Section 5(h)(i), (y) incur
indebtedness in excess of the greater of $2,500,000 or 18% of the
consolidated stockholders' equity of the Company and its subsidiaries (other
than as set forth in clauses (x) and (y) of subparagraph (G) above), or (z)
sell or otherwise dispose of, in a single transaction or related series of
transactions, more than 40% of the book value or fair market value of the
consolidated assets of the Company and its subsidiaries; provided, however,
that if a Change of Control Event shall have occurred, action requiring
approval pursuant to this Section 5(h)(ii) (other than with respect to
Sections 5(h)(i)(J) and (M), which shall continue to require the
affirmative vote of holders of at least 71% of the Non-Management Voting
Shares) shall require the affirmative vote of either of (1) holders of at
least 80% of the Non-Management Voting Shares or (2) holders of at least 96%
of the Non-Management Voting Shares other than Non-Management Voting Shares
then owned or controlled by Georgetown. For purposes of this Section 5(h)
(ii), in the event any Stockholder entitled to vote on any matter pursuant to
this Section 5(h)(ii) shall abstain from such vote, all Non-Management
Voting Shares held by such Stockholder shall be deemed to have been voted on
such matter in the same manner as the majority of the Non-Management Voting
Shares voted on such matter.
6. REGISTRATION RIGHTS
(a) The following definitions shall apply with respect to
this Section 6:
(i) "Holders" shall mean any person (other than the
Company) who is or shall become a party to this Agreement and any
combination
24
of them, and the term "Holder" shall mean any such person.
(ii) "Public Offering" shall mean a bona fide public offering,
whether or not underwritten, of equity securities or any securities
convertible into or exchangeable into equity securities of the Company
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act").
(iii) "Registrable Securities" shall mean the Shares (it being
understood and agreed that a Holder of Warrants or Options shall be deemed to
be the holder of the Registrable Securities for which such Warrants or
Options are exercisable); PROVIDED, HOWEVER, that any such share shall cease
to be a Registrable Security if and when (x) a Registration Statement with
respect to the disposition of such share shall have become effective under
the Securities Act and such share shall have been disposed of pursuant to
such effective registration statement or (y) such share shall have been sold
in a public transaction exempt from registration pursuant to Rule 144
promulgated under the Securities Act ("Rule 144"). The Company shall take
such action as is necessary to enable the Holder of any Warrants or Options
that are exercisable into Registrable Securities to exercise such Warrants or
Options simultaneously with their sale pursuant to a Public Offering or, at
the request of such Holder, to cause such Warrants or Options to be purchased
by the underwriters in an underwritten Public Offering as hereinafter
provided.
(iv) "Registration Statement" shall mean any registration
statement of the Company that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the prospectus
included therein, any amendment or supplement thereof, including
posteffective amendments, all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such Registration
Statement.
25
(v) "Company Securities" shall mean any equity securities or any
securities convertible into or exchangeable for equity securities proposed to
be issued and sold by the Company pursuant to a Registration Statement.
(vi) "SEC" shall mean the United States Securities and Exchange
Commission.
(vii) "NASD" shall mean the National Association of Securities
Dealers, Inc.
(viii) "Warrant Registration Event" shall mean the earlier to
occur of (A) the date on which the Company first becomes subject to the
reporting requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and (B) the date on which the
Company shall have failed to purchase all of the Warrants and/or Warrant
Shares set forth in a Put Notice pursuant to, and in accordance with, Section
9 of the Warrant Agreement; PROVIDED that no Warrant Registration event
described in clause (B) above shall be deemed to have occurred prior to the
fourth anniversary of the date hereof.
(b) DEMAND REGISTRATIONS.
(i) Upon the written request of one or more Holders holding in
the aggregate at least 50% of the Registrable Securities (the "Initiating
Holders") requesting that the Company effect the registration of such
Initiating Holders' Registrable Securities under the Securities Act (which
request shall specify the Registrable Securities so requested to be
registered, the proposed amounts thereof and the intended method of
disposition), the Company shall promptly give written notice of such
requested registration to all Holders and, as expeditiously as reasonably
possible, use its best efforts to effect the registration under the
Securities Act of the Registrable Securities that the Company has been so
requested to register, for disposition in accordance with the intended method
of disposition stated in such request. The Company shall not be obligated to
effect any registration pursuant to this Section 6(b)(i) (A) before April
10, 1996,
26
(B) during the 90 day period commencing on the effective date
of an underwritten primary offering of the Company's equity
securities (or such longer period reasonably required by the managing
underwriter(s) of such offering), or (C) after the Company has
effected one such registration pursuant to this Section 6(b)(i).
(ii) At any time after the occurrence of a WARRANT
REGISTRATION EVENT, upon the request of one or more Holders of
a majority of the shares of Common Stock subject to the Warrants
and Warrant Shares that constitute Registrable Securities requesting
that the Company effect the registration of such Holders' Registrable
Securities under the Securities Act (which request shall specify
the Registrable Securities so requested to be registered, the
proposed amounts thereof and the intended method of disposition),
the Company shall as expeditiously as reasonably possible, use its
best efforts to effect the registration under the Securities Act
of the Registrable Securities that the Company has been so requested
to register for disposition in accordance with the intended method
of disposition stated in such request (the "Bank Demand Registration").
The Company shall not be obligated to effect more than one
registration pursuant to this Section 6(b)(ii). Prior to any
Holders requesting a Bank Demand Registration, the Holders proposing
to make such request shall give at least 30 days notice thereof to
each of the other Holders of Warrants and the Warrant Shares and
such other Holders shall have the right to participate in such
request and, subject to Section 6(e), the Bank Demand Registration.
If either (A) a Registration Statement in respect of a
Bank Demand Registration is not filed with the SEC on or prior
to 90 days after request pursuant to this clause (ii) (the "File
Date") or (B) the Company shall not have used its best efforts to
cause a Registration Statement in respect of a Bank Demand
Registration requested pursuant to this clause (ii) to become
effective and such Registration Statement has not become effective
on or prior to 120 days after such request (the "Effectiveness Date")
(the Filing Date, in the case of clause (A) above or the
27
Effective Date, in the case of clause (B) above, being referred
to herein as the "Event Date"), then the Company agrees to pay,
as liquidated damages, and not as a penalty, to Holders requesting
the Bank Demand Registration (in proportion to the Registrable
Securities requested to be registered by such Holders) the
aggregate sum of $6,250 per week, PROVIDED, HOWEVER, that such
liquidated damages will, in each case, cease to accrue on and after
the date (x) a Registration Statement in respect of the Bank Demand
Registration is filed, with respect to liquidated damages for
failure to file by the Filing Date, or (y) the date a Registration
Statement in respect of the Bank Demand Registration is declared
effective, with respect to liquidated damages for failure to be
declared effective by the Effective Date; PROVIDED, HOWEVER, that
no liquidated damages shall accrue during the period referred to in
6(b)(v) below.
(iii) At any time after April 10, 1995, upon the request
of one or more Holders holding in the aggregate at least 51% of the
NEW INVESTOR SHARES that constitutes Registrable Securities requesting
that the Company effect the registration of such Holders' Registrable
Securities under the Securities Act (which request shall specify the
Registrable Securities so requested to be registered, the proposed
amounts thereof and the intended method of disposition), the Company
shall as expeditiously as reasonably possible, use its best efforts
to effect the registration under the Securities Act of the Registrable
Securities that the Company has been so requested to register, for
disposition in accordance with the intended method of disposition
stated in such request (a "New Investor Demand Registration").
The Company shall not be obligated to effect (A) more than one
registration pursuant to this Section 6(b)(iii) before April 10,
1996, or (B) more than a total of two registrations pursuant to this
Section 6(b)(iii).
(iv) A registration requested pursuant to this Section 6(b)
shall not be deemed to have been effected (w) unless it has been
declared effective by the SEC, PROVIDED that a registration that
does not become effective after the Company has filed a Registration
Statement
28
with respect thereto solely by reason of the refusal to
proceed of the Initiating Holders shall be deemed to have
been effected by the Company at the request of such Initiating
Holders unless the Initiating Holders shall have elected to pay all
registration expenses referred to in Section 6(j)(ii) hereof
in connection with such registration, (x) if, after becoming
effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the SEC or other
governmental agency or court for any reason other than a
misrepresentation or an omission by the Initiating Holders,
(y) if the conditions to closing specified in the purchase agreement
or underwriting agreement, if any, entered into in connection with
such registration are not satisfied other than by reason of some
wrongful act or omission, or act or omission in bad faith, by such
Initiating Holders or (z) unless in the case of the Bank Demand
Registration or a New Investor Demand Registration, at least
100% of the Registrable Securities requested to be included therein
shall have been registered.
(v) The Company may postpone, for up to ninety (90) days, the
filing or the effectiveness of a Registration Statement for a
registration requested pursuant to this Section 6(b) if the Board of
Directors reasonably believes the requested registration would have a
material adverse effect on, or interfere in any material respect with,
any proposal or plan by the Company to engage in any public financing
or any material pending corporate development or transaction, including,
without limitation, a material acquisition of assets (other than in
the ordinary course of business), any tender offer or any merger,
consolidation or other similar transaction material to the Company
and its subsidiaries taken as a whole. In no event shall the Company
exercise its rights under this Section 6(b)(v) more than once
(A) during any six-month period or (B) in respect of the same proposal,
plan, development or transaction.
(c) PIGGYBACK REGISTRATION. If, at any time, the Company proposes to
file a registration statement in connection with a Public Offering (other than
(A) a
29
registration statement on Form S-4 or S-8, or any similar form which is a
successor to said Forms, or (B) a registration statement filed in connection
with an exchange offer or an offering of securities solely to the Company's
existing stockholders) that may be used for the registration of any of the
Registrable Securities (a "Piggyback Registration Statement"), then the Company
shall give written notice of such proposed filing at least 30 days before the
anticipated filing date of such Piggyback Registration Statement to all Holders,
offering such Holders the opportunity to include in such Piggyback
Registration Statement such amount of Registrable Securities as
they may request. Each Holder desiring to have Registrable Securities
registered pursuant to this Section 6(c) shall advise the Company in writing
within 20 days after the date of receipt of the Company's notice (which request
shall set forth the amount of Registrable Securities for which registration is
requested). Subject to Section 6(e), the Company shall include in any such
Piggyback Registration Statement all Registrable Securities so requested to be
included. No registration effected pursuant to a request or requests referred
to in this Section (6)(c) shall be deemed to have been effected pursuant to
Section 6(b).
If the Company shall previously have received a request for
registration pursuant to Section 6(b) or pursuant to this Section 6(c), and if
such previous registrations shall not have been withdrawn or abandoned, the
Company will not effect any registration of any Company Securities under the
Securities Act (other than a registration on Form S-4 or Form S-8, or any
similar form which is a successor to any of said Forms) until a period of three
months shall have elapsed from the effective date of such previous registration,
and the Company will so provide in any registration rights agreements hereafter
entered into with respect to any of its securities.
The Company shall have the right to discontinue, without liability to
any Holder, any registration under this Section 6(c) at any time prior to the
effective date of such registration if the registration of other securities
giving rise to such registration under this Section 6(c) is discontinued; but no
such discontinuation shall preclude an immediate or subsequent request for
registration pursuant to Section 6(b).
(d) CERTAIN LIMITATIONS ON REGISTRATION RIGHTS. The Company, in
its sole discretion, shall select
30
the underwriter or underwriters, including the managing or lead underwriter
or underwriters, who are to undertake any offering of securities with respect
to which Holders have registration rights pursuant to Section 6(c) hereof and
shall have the right to approve (such approval not to be unreasonably
withheld) the underwriter or underwriters, including the managing or lead
underwriter or underwriters, who are to undertake any offering of securities
with respect to which the Holders have registration rights pursuant to Section
6(b) hereof. In the case of a registration under Section 6(b), if the
Holders of a majority of the Registrable Securities to be included therein
have determined to enter into an underwriting agreement in connection
therewith, or, in the case of a registration under Section 6(c), if the Board
of Directors of the Company or holders of securities initially requesting or
demanding such registration have determined to enter into an underwriting
agreement in connection therewith, all Registrable Securities to be included
in any such registration shall be subject to such underwriting agreement
(providing it is customary and reasonable) and no person may participate in
any such registration unless such person agrees to sell such person's
Registrable Securities on the basis provided in the underwriting arrangements
approved by such Holders, the Board of Directors of the Company or such
holders, as the case may be, and completes and/or executes all customary
questionnaires, indemnities, underwriting agreements and other reasonable
documents that must be executed under the terms of such underwriting
arrangements; PROVIDED, HOWEVER, that, if pursuant to their rights set forth
in this Section 6, NMB or Skopbank participate in any underwritten Public
Offering hereunder, upon the request of NMB and/or Skopbank, as the case may
be, in order to permit it or them to participate in such underwritten Public
Offering notwithstanding any legal or regulatory prohibition on its or their
exercise of Warrants and/or ownership of Shares, the underwriting agreement
shall provide that, unless prohibited by applicable law or regulation, the
underwriter or underwriters shall be required to purchase from NMB or
Skopbank, as applicable, at the closing of such Public Offering, Warrants
representing the number of Registrable Securities to be sold by NMB and/or
Skopbank, as the case may be, for a purchase price equal to the public
offering price per share of such Registrable Securities minus (A) the
underwriters discount or commission applicable to such Registrable Securities
and (B) the exercise price of such Warrants.
31
(e) ALLOCATION OF SECURITIES INCLUDED IN REGISTRATION STATEMENT.
In the case of a registration pursuant to Section 6(b)(i), (ii) or (iii)
that is underwritten, if the managing underwriter of such offering shall
advise the Company and the Holders electing (pursuant to Section 6(b)) to
include Registrable Securities in the Registration Statement, in writing,
that (A) the total amount of securities requested to be included therein
creates a substantial risk that the proceeds or price per unit that will be
derived from such registration will be reduced or (B) the number of
securities to be registered exceeds the amount of securities that can be
reasonably sold in such offering, the Company shall include in such
registration: (x) first, all Registrable Securities requested to be included
in such registration pursuant to Section 6(b)(i), or with respect to
registrations pursuant to Sections 6(b)(ii) or (iii) all Registrable
Securities constituting Warrant Shares or New Investor Shares (as applicable)
requested to be included in such registration pursuant to Section 6(b)(ii)
or (iii), as the case may be (unless such amount exceeds the amount which
such underwriter advises can be sold, in which case the Company shall include
in such registration such maximum amount allocated pro rata among the Holders
of such Registrable Securities based upon the percentage of Shares then owned
such Holders), (y) second, with respect to any registrations pursuant to
Section 6(b)(ii) and (iii), any other Registrable Securities requested to be
included in such registration pursuant to Section 6(c) hereof (unless such
amount exceeds the amount which such underwriter advises can be sold, in
which case the Company shall include in such registration such maximum amount
allocated pro rata among the Holders of such Registrable Securities based
upon the percentage of Registrable Securities then owned by such Holders),
and (z) third, according to such priorities as the Company may agree with the
holders of other securities seeking to participate in any registration
pursuant to provisions of registration rights permitted by Section 6(i)
hereof.
In the case of any other underwritten registration pursuant to which
Holders are entitled to include Registrable Securities pursuant to Section
6(c), if the managing underwriter shall advise the Company and the Holders
electing (pursuant to Section 6(c) hereof) to include Registrable Securities
in the Piggyback Registration Statement, in writing, that (A) the inclusion
in any registration of some or all of the Registrable Securities
32
sought to be registered by the Holders requesting such registration and the
other securities sought to be registered creates a substantial risk that the
proceeds or price per unit that will be derived from such registration will
be reduced or (B) the number of securities to be registered is too large a
number to be reasonably sold, then (x) the number of Company Securities
sought to be registered shall first be included in such registration and (y)
the number of securities sought to be registered for each Holder of
Registrable Securities shall be reduced pro rata, based upon the percentage
of Registrable Securities then owned by such Holders.
(f) LIMITATIONS ON SALE OR DISTRIBUTION OF SECURITIES. If a
registration under Section 6(b) or 6(c) hereof shall be in connection with an
underwritten public offering, each Holder agrees not to effect any public
sale or distribution, including any sale pursuant to Rule 144 or Rule 144A
under the Securities Act, of any equity securities or of any security
convertible into or exchangeable or exercisable for any equity security of
the Company (other than as part of such underwritten public offering) within
ten days before or 90 days after the effective date of such Registration
Statement.
(g) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
will not effect or permit to occur any combination or subdivision of shares
that would adversely affect the ability of the Holder of any Registrable
Securities to include such Registrable Securities in any registration
contemplated by this Agreement or the marketability of such Registrable
Securities in any such registration.
(h) RULE 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act,
the Company will timely file the reports required to be filed by it under the
Securities Act or the Exchange Act (including but not limited to the reports
under Sections 13 and 15(d) of the Exchange Act referred to in Rule 144(c)
(1)) and the rules and regulations adopted by the SEC thereunder (or, if the
Company is not required to file such reports, will, upon the request of any
Holder, make publicly available other information), and will take such
further action as any Holder may reasonably request, all to the extent
required from time to time to enable such Holder to sell his or its
33
Shares or Warrants, as the case may be, without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule
144 or Rule 144A under the Securities Act, as such Rules may be amended from
time to time, or (ii) any similar rules or regulations hereafter adopted by
the SEC. Upon the request of any Holder, the Company will deliver to such
Holder a written statement as to whether it has complied with such
requirements.
(i) REGISTRATION RIGHTS TO OTHERS. If the Company shall at any
time after the date hereof provide to any holder of any securities of the
Company rights with respect to the registration of such securities under the
Securities Act, such rights shall not be in conflict with the rights provided
in this Section 6 or more favorable to the grantee than the rights provided
in Section 6(b)(i).
(j) GENERAL PROVISIONS. The following provisions shall apply in
connection with any Holder's Registrable Securities proposed to be included
in a Registration Statement under Section 6(b) or 6(c) hereof:
(i) Each Holder shall promptly provide the Company with such
information as it shall reasonably request, in writing, and that is
available to such Holder in order to prepare the Registration
Statement and related prospectus, including (without limitation)
information regarding each such Holder's plan of distribution.
(ii) All reasonable and necessary expenses in connection with
the preparation of such Registration Statement and related prospectus
and, except as set forth below, the sale of securities contemplated
thereby, including, without limitation, (A) any and all legal,
accounting (including the expenses of any audit and/or "comfort"
letter) and filing fees (including expenses associated with filings
required to be made with the NASD (including, if applicable, the fees
and expenses of any "qualified independent underwriter" and its
counsel, as may be required by the rules and regulations of the
NASD)), (B) blue sky fees and expenses, (C) word processing,
printing and duplicating expenses and (D) all other fees and expenses
customarily paid by issuers or sellers of securities (but not
including fees and disbursements of financial
34
experts retained by any Holder and not underwriting discounts and
commissions attributable to the Registrable Securities registered in
the registration) shall be borne by the Company; PROVIDED, HOWEVER,
that the Company shall bear the expenses of only one counsel to the
Holders, which counsel shall be chosen by the Holders of a majority of
the Registrable Securities requesting registration pursuant to Section
6(b) or, if none, by the Holders of a majority of the Registrable
Securities included in such registration (as defined below).
(iii) In connection with the Company's registration
obligations pursuant to Section 6(b) and Section 6(c) hereof, the
Company shall use its best efforts to permit the sale of such
Registrable Securities in accordance with the intended method or
methods of distribution thereof, and pursuant thereto, the Company
shall as expeditiously as possible:
(A) prepare and file with the SEC, as soon as practicable,
but in no event later than 90 days after any request in the case of
a Registration pursuant to Section 6(b), a Registration Statement
or Registration Statements relating to the applicable registration
on any appropriate form under the Securities Act, which form shall
be available for the sale of the Registrable Securities in
accordance with the intended method or methods of a distribution
thereof and shall include all financial statements (including, if
applicable, financial statements of any subsidiary of the Company
that shall have guaranteed any indebtedness of the Company)
required by the SEC to be filed therewith, cooperate and assist in
any filings required to be made with the NASD and use its best
efforts to cause such Registration Statement to become and remain
effective; PROVIDED that before filing a Registration Statement or
prospectus or any amendments or supplements thereto, the Company
shall furnish to the Holders of the Registrable Securities covered
by such Registration Statement and the underwriters, if any, copies
of all such documents proposed to be filed, which documents shall
be subject to the reasonable review of such
35
Holders and underwriters and the Company shall not file any such
Registration Statement or prospectus or any amendments or supplements
thereto to which the Holders of a majority of the shares covered by
such Registration Statement shall reasonably object, in writing, on a
timely basis;
(B) prepare and file with the SEC such
amendments and post-effective amendments to the Registration
Statement as may be necessary to keep the Registration Statement
effective for twelve (12) months, or such shorter period
terminating when all Registrable Securities covered by such
Registration Statement have been sold; cause the prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities
Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance
with the intended method or methods of distribution by the sellers
thereof set forth in such Registration Statement or supplement to
the prospectus the Company shall not be deemed to have used its
best efforts to keep a Registration Statement effective during the
applicable period if it voluntarily takes any action that would
result in selling Holders of the Registrable Securities covered
thereby not being able to sell such Registrable Securities during
that period unless such action is required under applicable law;
(C) notify the selling Holders of Registrable Securities
and the managing underwriters, if any, promptly, and (if requested
by any such person) confirm such advice in writing, (1) when the
prospectus or any prospectus supplement or post-effective amendment
has been filed, and, with respect to the Registration Statement or
any post-effective amendment, when the same has become effective,
(2) of any request by the SEC for amendments or supplements to the
Registration Statement or the prospectus or for additional
information, (3) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of
36
any proceedings for that purpose, (4) if at any time the
representations and warranties of the Company contemplated by
paragraph (N) below cease to be true and correct, (5) of the receipt
by the Company of any notification with respect to the suspension of
the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceedings for
such purpose, (6) of the happening of any event that makes any
statement made in the Registration Statement, the prospectus or any
document incorporated therein by reference untrue or which requires
the making of any changes in the Registration Statement, the
prospectus or any document incorporated therein by reference in order
to make the statements therein not misleading and (7) of the
Company's reasonable determination that a post-effective amendment to
a Registration Statement would otherwise be required;
(D) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Registration
Statement, or the lifting of any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities
for sale in any jurisdiction, at the earliest possible moment;
(E) if requested by the managing underwriter or
underwriters or a Holder of Registrable Securities being sold in
connection with an underwritten offering, promptly incorporate in a
prospectus supplement or post-effective amendment such information
as the managing underwriters and the Holders of a majority of the
Registrable Securities being sold reasonably agree should be
included therein relating to the plan of distribution with respect
to such Registrable Securities, including, without limitation,
information with respect to the amount of Registrable Securities
being sold to such underwriters, the purchase price being paid
thereof or by such underwriters and with respect to any other terms
of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; and make all
required filings of such prospectus supplement or post-effective
amendment as soon as notified of the
37
matters to be incorporated in such prospectus supplement or post-
effective amendment;
(F) furnish to each selling Holder of Registrable
Securities and each managing underwriter, without charge, at least
one signed copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(G) deliver to each selling Holder of Registrable
Securities and the underwriters, if any, without charge, as many
copies of the prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such persons may
reasonably request; the Company consents to the use of the
prospectus or any amendment or supplement thereto by each of the
selling Holders of Registrable Securities and the underwriters, if
any, in connection with the offering and sale of the Registrable
Securities covered by the prospectus or any amendment or supplement
thereto;
(H) prior to any Public Offering of Registrable Securities,
register or qualify or cooperate with the selling Holders of
Registrable Securities, the underwriters, if any, and their respective
counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue
sky laws of such jurisdictions as any seller or underwriter reasonably
requests in writing and keep each such registration or qualification
(or exemption therefrom) effective during the period such Registration
Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by the
Registration Statement; PROVIDED, HOWEVER, that the Company shall not
be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction
where it is not
38
then so subject or subject the Company to any tax in any such
jurisdiction where it is not then so subject;
(I) cooperate with the selling Holders of Registrable
Securities and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificate shall not bear
any restrictive legends and shall be in a form eligible for deposit
with the Depository Trust Company; and enable such Registrable
Securities to be in such denominations and registered in such names
as the managing underwriters may request at least two business days
prior to any sale of Registrable Securities to the underwriters;
(J) use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition
of such Registrable Securities;
(K) upon the occurrence of any event contemplated by
paragraph (C)(6) or (C)(7) above, prepare a supplement or
post-effective amendment to the Registration Statement or the
related prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable
Securities, the prospectus will not contain an untrue statement of
a material fact or omit to state any material fact necessary to
make the statements therein not misleading;
(L) cause all Registrable Securities covered by the
Registration Statement to be either listed on each securities
exchange or quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System on which similar
securities issued by the Company are then listed or quoted if
requested by the Holders of a
39
majority of such Registrable Securities or the managing underwriters,
if any;
(M) not later than the effective date of the applicable
Registration, provide a CUSIP number for all Registrable Securities
and provide the applicable trustees or transfer agents with printed
certificates for the Registrable Securities that are in a form
eligible for deposit with Depositary Trust Company;
(N) enter into such customary agreements (including an
underwriting agreement) and take all such other actions in
connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection,
whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration,
(1) make such representations and warranties to the Holders of such
Registrable Securities and to the underwriters, if any, in form,
substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings; (2) obtain opinions
of counsel to the Company and updates thereof, which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, addressed to
each Selling Holder or Registrable Securities and each underwriter,
if any, covering the matters customarily covered in opinions
requested in underwritten offerings; (3) obtain "cold comfort"
letters and updates thereof from the Company's independent
certified public accountants addressed to each Selling Holder of
Registrable Securities and each underwriter, if any, such letters
to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by accountants in
connection with underwritten offerings; (4) if an underwriting
agreement is entered into, the same shall set forth in full the
indemnification provisions and procedures of Section 6(1) hereof
with respect to all parties to be indemnified pursuant to said
Section; and (5) the Company shall deliver such documents and
certificates as may be requested by the Holders of a majority of
the Registrable Securities being sold and the
40
managing underwriters, if any, to evidence compliance with paragraph
(K) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The above shall be done at each closing under such underwriting or
similar agreement or as and to the extent required thereunder;
(O) make available for inspection by a representative of the
Holders of a majority of the Registrable Securities, any underwriter
participating in any disposition pursuant to such registration, and
any attorney or accountant retained by the sellers of Registrable
Securities or such underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all
information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such
registration; provided that any records, information or documents that
are designated by the Company in writing as confidential shall be kept
confidential by such persons unless (i) disclosure of such information
is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii) disclosure of
such information, based upon the advice of counsel to such person and
notice thereof to the Company, is required by law, (iii) such
information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard by such person or (iv)
such information becomes available to such person from a source other
than the Company or another person known by such persons to be under a
similar obligation of confidentiality to the Company;
(P) otherwise comply with all applicable rules and
regulations of the SEC, and make generally available to its security
holders, earnings statements satisfying the provisions of Section 11(a)
of the Securities Act, no later than forty-five (45) days after the
end of any 12-month period (or ninety (90) days, if such period is a
fiscal year) (1) commencing at the end of any fiscal quarter in which
Registrable Securities are
41
sold to underwriters in a firm or best efforts underwritten offering,
or (2) if not sold to underwriters in such an offering, beginning with
the first month of the Company's first fiscal quarter commencing after
the effective date of the Registration Statement, which statements
shall cover said 12-month periods; and
(Q) promptly prior to the filing of any document that is
to be incorporated by reference into the Registration Statement or
prospectus (after initial filing of the Registration Statement),
provide copies of such document to counsel to the selling Holders of
Registrable Securities and to the managing underwriters, if any; make
the Company's representatives available for discussion of such
document and make such changes in such document (other than any
exhibits thereto) prior to the filing thereof as counsel for such
underwriters may reasonably request.
(iv) Each Holder of Registrable Securities agrees by acquisition
of such Registrable Securities that, upon receipt of any notice from
the Company of the happening of any event of the kind described in
paragraph (K) hereof, such Holder shall forthwith discontinue
disposition of Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by
paragraph (K) hereof, or until it is advised in writing (the "Advice")
by the Company that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filings that are
incorporated by reference in the prospectus, and, if so directed by the
Company, such Holder shall deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time periods regarding the
maintenance of the effectiveness of any Registration Statement in
Section 6(b) and 6(c) hereof shall be extended by the number of days
during the period from and including the date of the giving of such
notice pursuant to Section 6(j)(iii)(C)(6) hereof to and including
the date
42
when each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemented or amended
prospectus contemplated by paragraph (K) hereof or the Advice.
(k) INDEMNIFICATION.
(i) If any Registrable Securities are registered or qualified
for sale under the Securities Act pursuant to the provisions of Section
6(b) or 6(c) hereof, the Company shall indemnify and hold harmless each
Holder thereby offering such Registrable Securities for sale (a
"Seller"), and each underwriter of such Registrable Securities, and each
other person, if any, who controls any such Seller or underwriter within
the meaning of the Securities Act, to the fullest extent lawful, from
and against any and all losses, claims, damages or liabilities (or
actions in respect thereof) joint or several, to which such Seller or
underwriter or controlling person may become subject under the
Securities Act or the applicable securities laws or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof), as incurred, arise out of or are based upon (A) any untrue
statement or alleged untrue statement of any material fact contained in
any Registration Statement under which such Registrable Securities were
registered or qualified under applicable securities laws, any
preliminary prospectus or final prospectus relating to such Registrable
Securities, or any amendment or supplement thereto, or (B) the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or (C) any violation by the Company or any of its employees
or agents of any rule or regulation under applicable securities laws or
other laws applicable to the Company, or (D) any action or inaction by
the Company in connection with any such registration or qualification of
Registrable Securities as contemplated hereby; and the Company shall
reimburse each such Seller, underwriter, and each such controlling
person for all reasonable out-of-pocket costs (including reasonable
out-of-pocket costs of preparation and
43
reasonable attorneys' fees) and other expenses reasonably incurred by such
Seller or underwriter or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission in such Registration
Statement, such preliminary prospectus, such final prospectus or such
amendment or supplement thereto (i) in reliance upon and in conformity
with written information relating to such Seller or underwriter or
controlling person furnished to the Company by any Seller or underwriter
or controlling person specifically and expressly for use in the
preparation thereof; or (ii) if such untrue statement or alleged untrue
statement, omission or alleged omission is completely corrected in an
amendment or supplement to the prospectus and the Seller, underwriter or
controlling person thereafter fails to deliver such prospectus as so
amended or supplemented prior to or concurrently with the sale of the
Registrable Securities to the person asserting such loss, claim, damage
or liability after the Company has furnished such holder with a
sufficient number of copies of the same.
(ii) If any Registrable Securities are registered or
qualified for sale under the Securities Act pursuant to the provisions
of Section 6(b) or 6(c) hereof, each Seller agrees severally, and not
jointly, to indemnify and hold harmless the Company, each other Seller,
each person who controls the Company or any other Seller within the
meaning of the Securities Act, and each officer and director of such
controlling persons from and against any losses, claims, damages or
liabilities, joint or several, to which the Company, such controlling
person or any such officer or director may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement of any material fact contained in any
Registration Statement under which
44
such Registrable Securities were registered or qualified under the
Securities Act, any preliminary prospectus or final prospectus relating
to such securities, or any amendment or supplement thereto, or arise out
of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, which untrue statement or omission was made
therein in reliance upon and in conformity with written information
relating to such Seller furnished to the Company by such Seller or
controlling person specifically for use in connection with the
preparation thereof or arise out of or are based upon any violation by
such Seller of any rule or regulation under the Securities Act, and
shall reimburse the Company, such controlling person of the Company and
each such officer or director of such controlling person for any legal
or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action. In no event shall the liability of a Seller of Registrable
Securities hereunder be greater in amount than the dollar amount of the
net proceeds received upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
(iii) Promptly after receipt by a person entitled to
indemnification under this Section 6(k) (an "indemnified party") of
notice of the commencement of any action, claim or proceeding as to
which indemnity may be sought hereunder, such indemnified party shall,
if a claim for indemnification hereunder in respect thereof is to be
made against any other party hereto (an "indemnifying party"), give
written notice to such indemnifying party of the commencement of such
action, claim or proceeding, but the omission so to notify the
indemnifying party will not relieve it from any liability that it may
have to any indemnified party otherwise than pursuant to the provisions
of this Section 6(k) and shall also not relieve the indemnifying party
of its obligations under this Section 6(k) except to the extent that the
omission results in a failure of actual timely notice to the
indemnifying party and such indemnifying party is damaged as a result of
the
45
failure to give timely notice. In case any such action, claim or
proceeding is brought against an indemnified party, and such indemnified
party notifies an indemnifying party of the commencement thereof, the
indemnifying party shall be entitled (at its own expense) to participate
in and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense, with
counsel reasonably satisfactory to such indemnified party, of such
action, claim or proceeding. Any such indemnified party shall have the
right to employ separate counsel in any such action, claim or proceeding
and to participate in the defense thereof, but, if the indemnifying
party has assumed the defense thereof, the fees and expenses of such
counsel shall be the expenses of such indemnified party unless (a) the
indemnifying party has agreed to pay such fees and expenses; or (b) the
indemnifying party shall have failed to promptly assume the defense of
such action, claim or proceeding and to employ counsel reasonably
satisfactory to the indemnified party; or (c) the named parties to any
such action, claim or proceeding (including any impleaded parties)
include both such indemnified party and the indemnifying party or an
Affiliate of the indemnifying party, and such indemnified party shall
have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party or such Affiliate (in which case, if
such indemnified party notifies the indemnifying party in writing that
it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the
defense thereof, it being understood, however, that the indemnifying
party shall not, in connection with any one such action, claim or
proceeding or separate but substantially similar or related actions,
claims or proceedings in the same jurisdiction, arising out of the same
general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties,
unless in the reasonable judgment of any such indemnified party a
conflict of interest may
46
exist between such indemnified party and any other of such indemnified
parties with respect to such action, claim or proceeding, in which event
the indemnifying party shall be obligated to pay the fees and expenses
of such additional counsel or counsels). The indemnifying party shall
not be liable for any settlement of any such action, claim or proceeding
effected without its written consent, which consent shall not be
unreasonably withheld. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending action, claim or proceeding in respect of which any indemnified
party is a party and is entitled to indemnity hereunder, unless such
settlement includes an unconditional release of such indemnified party
from all liability or claims that are the subject matter thereof.
(iv) If for any reason the indemnification provided for in this
Section 6(k) is unavailable to an indemnified party or insufficient to
hold it harmless as contemplated by this Section 6(k), then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage, liability,
cost or expense in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party
and the indemnifying party, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any losses, claims,
damages, liabilities, costs and expenses shall be deemed to include any
legal or other fees or expenses reasonably incurred by such
47
party in connection with any investigation or action, claim or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(k)(iv) were determined by pro
rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section
6(k)(iv), an indemnifying party that is a selling Holder of Registrable
Securities shall not be required to contribute any amount in excess of
the dollar amount of the proceeds received by such Holder with respect
to the sale of any Registrable Securities. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
7. TRANSFERS OF MANAGEMENT SHARES.
(a) CERTAIN DEFINITIONS. The terms defined below shall have the
following meanings when used in this Section 7:
(i) "Acquisition" shall mean the purchase of all the issued
and outstanding shares of Xxxxxxxx Test Systems, Inc. ("HTS") by Xxxxxxxx
Acquisition Corp. ("Acquisition Corp."), a wholly owned subsidiary of
the Company, and the subsequent merger of Acquisition Corp. with and
into HTS.
(ii) "Applicable Closing Date" shall mean (A) with respect
to Shares or Options acquired by a Management Stockholder prior to the
date hereof (including Shares hereafter acquired upon the exercise of such
Options), the Initial Closing Date, and (B) with respect to Shares or
Options acquired by a Management Stockholder after the date hereof, the
Closing Date.
(iii) "Cause," when used in connection with the termination
of a Management Stockholder's employment with Holdings, means the
Management Stockholder (A) shall have willfully failed to perform any of
his material obligations
48
or shall have demonstrated willful misconduct in the performance of his
duties to Holdings or shall have willfully failed to follow the
instructions of the Board and shall have failed to cure such failure
within thirty (30) days after receiving written notice thereof from the
Board; or (B) shall have consistently performed his duties to Holdings
in a negligent fashion; or (C) shall have committed any act of fraud,
theft or dishonesty against Holdings; or (D) the Employee shall be
convicted of (or plead NOLO CONTENDERE to) any felony, fraud or
embezzlement.
(iv) "Closing Date" means the date of this Agreement.
(v) "Holdings" means the Company and all other entities in which
the Company from time to time owns, directly or indirectly, 50% or more
of the stock or assets.
(vi) "Initial Closing Date" means December 21, 1990.
(b) RESTRICTIONS ON TRANSFER. No Management Stockholder shall
effect a transfer of any Shares or Options prior to the third
anniversary of the Applicable Closing Date other than (i) pursuant to
Section 7(c) in connection with the Purchase Option (as hereinafter
defined), (ii) pursuant to Section 4, (iii) pursuant to Section 7(c) in
connection with a merger, consolidation, sale of assets, sale of stock
or similar business combination transaction approved by the Board of
Directors and stockholders of the Company, (iv) in connection with a
Public Offering in which the Management Stockholder is entitled to
participate pursuant to Section 6 hereof or (v) with the consent of the
Company (as evidenced by a resolution duly adopted by at least a
majority of the nonemployee members of the Company's Board of
Directors). In exercising the consent and approval provided for in
clause (v), the Company may employ its sole discretion in evaluating the
nature of the proposed transferee and the Company may impose such
conditions on transfer as it deems appropriate in its sole discretion,
including but not limited to requirements that the transferee be an
employee of Holdings and that the transferee purchase the Management
Stockholder's Shares as a "Management Stockholder" subject to the
restrictions of this Section 7. In the event any transfer is authorized
pursuant to clause (v)
49
to an employee of Holdings as a "Management Stockholder," such employee
shall execute an agreement, in form and substance satisfactory to the
Company, pursuant to which such employee shall agree to be bound by such
terms and conditions hereof, and such other provisions as the Company
may determine, and upon such execution such employee shall be entitled
to the benefit of such provisions hereof and such other provisions as
the Company determines and are set forth in such agreement. The
foregoing provisions of this Section shall not preclude a transfer of
any Shares or Options by a Management Stockholder by will or the laws of
descent and distribution on account of the death of such Management
Stockholder; PROVIDED, HOWEVER, that the executors, administrators,
heirs and transferees of such Management Stockholder shall agree in
writing to be subject to and bound by all of the terms and conditions
hereof, including without limitation Section 7 hereof; and PROVIDED
FURTHER, upon the death of any Management Stockholder after the third
anniversary of the Applicable Closing Date, such Stockholder's Shares or
Options that are transferred by will or the laws of descent and
distribution shall no longer be subject to the provisions of this
Section 7. Any purported transfer in violation of this Agreement shall
be null and void and of no force and effect and the purported
transferees shall have no rights or privileges in or with respect to the
Company; PROVIDED, HOWEVER, following the third anniversary of the
Applicable Closing Date, the restrictions on transfer contained in this
Section 7 shall be of no further force and effect.
(c) PURCHASE OPTION.
(i) GENERAL TERMS. In the event that prior to the third
anniversary of the Applicable Closing Date, any Management
Stockholder shall cease to be employed by Holdings for any reason
(including, without limitation, death, disability, resignation or
termination by Holdings with or without Cause), other than by
reason of a leave of absence approved by Holdings, such Management
Stockholder (or his heirs, executors, administrators, transferees,
successors or assigns) shall give prompt notice to the Company of
such termination of employment, and the Company, or if the Company
is prohibited by law or has insufficient funds to effect such
repurchase, each of the other Stockholders, shall have the right
and option at any time within 60 days after
50
the later of the effective date of such termination of employment
(the "Termination Date") or the date on which the Company receives
such notice, to purchase from such Management Stockholder, or his
heirs, executors, administrators, transferees, successors or
assigns, as the case may be, (i) any or all of the Shares or
Options then owned by such Management Stockholder at a purchase
price equal to the Option Purchase Price (as hereinafter defined)
and/or (ii) any or all of the outstanding principal amount of the
Junior Subordinated Notes then owned by such Management
Stockholder at face value plus accrued interest. If, pursuant to
the immediately preceding sentence, the Company is unable to
purchase Shares or Options, the Company shall give prompt notice
to the other Stockholders of the availability of such Shares or
Options for purchase in accordance with this Section (c)(i). If,
in accordance with the first sentence of this Section (c)(1), the
other Stockholders elect to purchase more Shares or Options than
the amount of Shares or Options such Management Stockholder owns,
the Stockholders so electing shall purchase the Shares and/or
Options PRO RATA in accordance with the number of Shares owned by
such Stockholders. The Company may give notice to the terminated
Management Stockholder of its intention to purchase such Shares or
Options at any time not later than 60 days after the later of the
Termination Date or the date on which the Company receives such
notice of such termination. (The right of the Company or the
other Stockholders, as applicable, set forth in this Section 7(c)
to purchase a terminated Management Stockholder's Shares or
Options is hereinafter collectively referred to as the "Purchase
Option"). A Stockholder's agreement to assume such obligation
will relieve the Company of its obligations under Section 7(c)(i)
(C) with regard to the particular Management Stockholder and such
Management Stockholder shall have no recourse against the Company
under Section 7(c)(i)(c).
(A) EXERCISE OF PURCHASE OPTION. The Purchase Option
shall be exercised by written notice to such Management
Stockholder (or his heirs, executors, administrators, transferees,
51
successors or assigns) signed by an officer of the Company on behalf
of the Company or the Stockholders, as applicable, and shall set
forth the number of Shares or Options desired to be purchased. Such
notice shall set forth a time and place of closing no earlier than
10 days and no later than 30 days after the date of notice is
sent. At such closing, the seller shall deliver certificates
evidencing the number of Shares or Options to be purchased by each
buyer, accompanied by stock powers duly endorsed in blank or duly
executed instruments of transfer with the signature guaranteed by
a member firm of the New York Stock Exchange, Inc. or a commercial
bank or trust company organized under the laws of the United
States or any state thereof, and any other documents that are
necessary to transfer to the buyer good title to the Shares or
Options to be transferred, free and clear of all pledges, security
interests, liens, charges, encumbrances, equities, claims and
options of whatever nature other than those imposed under this
Agreement, and concurrently with such delivery, buyer(s) shall
deliver to the seller the full amount of the Option Purchase Price
for such Shares or Options in cash by certified or bank cashier's
check.
(B) OPTION PURCHASE PRICE. Subject to Section 7(c)(i)(D)
below, the "Option Purchase Price" for (i) Shares to be purchased
from a Management Stockholder pursuant to the Purchase Option
(such number of Shares, the "Purchase Number") shall equal the
price calculated as set forth in the table below opposite the
applicable Termination Date of such Management Stockholder and
(ii) Options to be purchased from a Management Stockholder shall
be equal to the Option Purchase Price applicable to the underlying
shares of Common Stock (in accordance with (i) above) less the
exercise price of such Options:
52
If the Shares Were Acquired
by the Management Stockholder
Prior to the Closing Date and Option
the Termination Date Occurs: Purchase Price
----------------------------- --------------
On or prior to the second Adjusted Cost Price
anniversary of the Initial multiplied by 66-2/3% of the
Closing Date Purchase Number, plus
Adjusted Book Value Price
multiplied by 33-1/3% of the
Purchase Number
After the second anniversary Adjusted Cost Price
of the Initial Closing Date, multiplied by 33-1/3% of the
and on or prior to the third Purchase Number, plus
anniversary of the Initial Adjusted Book Value Price
Closing Date multiplied by 66-2/3% of the
Purchase Number
On or prior to the first Adjusted Cost Price
anniversary of the Closing multiplied by 100% of the
Date Purchase Number
After the first anniversary Adjusted Cost Price
of the Closing Date, and on multiplied by 66-2/3% of the
or prior to the second Purchase Number, plus
anniversary of the Closing Adjusted Book Value Price
Date multiplied by 33-1/3% of the
Purchase Number
After the second anniversary Adjusted Cost Price
of the Closing Date, and on multiplied by 33-1/3% of the
or prior to the third Purchase Number, plus
anniversary of the Closing Adjusted Book Value Price
Date multiplied by 66-2/3% of the
Purchase Number
As used herein, "Adjusted Cost Price" for each Share means the
lesser of (i) the original purchase price per Share (adjusted for any
stock dividend payable upon, or subdivision or combination of, the
Common Stock) and (ii) the "Adjusted Book Value Price" for each Share;
"Adjusted Book Value Price" for each Share means the consolidated net
worth of the Company per common share (adjusted to reflect the pro
forma exercise in full of any dilutive securities) reflected in the
Company's audited consolidated
53
financial statements as of the end of the fiscal year next preceding
the Termination Date; PROVIDED, HOWEVER, that for purposes of
determining such price there shall be restored to the net worth as
reflected on such audited financial statements (a) the effects of
amortization of the excess of cost over net assets of businesses
acquired recorded as intangible assets (but excluding goodwill) and
deferred charges resulting from purchase accounting adjustments
pursuant to Accounting Principles Board Opinion Nos. 16 and 17
resulting from the Acquisition (but only to the extent of the
incremental amount by which such intangible assets and deferred
charges exceed the intangible assets and deferred charges that existed
on the books of HTS immediately prior to the Acquisition), (b) the
depreciation charges resulting from the revaluation of HTS' assets to
current fair market value in connection with the Acquisition (but only
to the extent of the incremental amount by which such depreciation
charges exceed the depreciation charges that existed on the books of
HTS immediately prior to the Acquisition), and (c) the effects of
amortization of the excess of cost over net assets of businesses
acquired recorded as goodwill resulting from purchase accounting
adjustments pursuant to Accounting Principles Board Opinion Nos. 16
and 17 resulting from the Acquisition; and PROVIDED, FURTHER, that at
any time after the Company has effected a Public Offering of its
Common Stock, then the "Adjusted Book Value Price" shall equal the
average of the last reported prices for which Common Stock was sold
prior to the close of business on each of the last ten business days
prior to the Termination Date.
(C) ADJUSTMENTS TO OPTION PURCHASE PRICE. If the Company
or another Stockholder, as applicable, exercises the Purchase Option
with respect to any or all of the Shares or Options of any Management
Stockholder whose employment with Holdings was terminated without
Cause (the "Called Shares"), and if within six months after the
closing pursuant to such exercise of the Purchase Option by the
Company or such other Stockholder
(1) the Company is merged into, consolidated with or otherwise
combined with or acquired by another person or entity, or there is a
liquidation of the Company, or there is a Public Offering (a
"Subsequent Offering") of the Company's Common Stock pursuant to an
effective
54
Registration Statement under the Securities Act in which other
Management Stockholders participate as selling stockholders (other
than (1) a registration statement on Form S-8 or any successor forms
or any other registration statement relating to a special offering to
Holdings' employees or (2) a registration statement relating to a Unit
Offering (as hereinafter defined)); and
(2) the per share consideration received by the stockholders of the
Company in such transaction, or the per share net proceeds received
for the Company's Common Stock in the Subsequent Offering, as the case
may be (in each case after being adjusted downward to reflect what the
per share consideration or per share net offering proceeds, as the
case may be, would have been had the Shares of such terminated
Management Stockholder purchased by the Company or its designee
pursuant to the Purchase Option been outstanding on the date of the
closing of such transaction or Subsequent Offering) exceed the
Adjusted Book Value Price used in calculating the Option Purchase
Price pursuant to the exercise of the Purchase Option,
then such Management Stockholder shall be entitled to receive from the
Company or the other Stockholder, as applicable, an amount per share equal to
such excess multiplied by the applicable Adjusted Book Value Price percentage
within 30 days after the closing of any such transaction or Subsequent
Offering; PROVIDED, HOWEVER, that in the case of a Subsequent Offering in
which such Management Stockholder would have been entitled to sell fewer than
the number of shares equal to the Purchase Number multiplied by the
applicable Adjusted Book Value Price percentage based upon the rights and
restrictions in Section 6 hereof, the amount of any payment under this
provision shall be proportionately reduced to reflect the number of shares
the Management Stockholder would have been entitled to sell in the Subsequent
Offering.
As used herein, a "Unit Offering" shall mean a Public Offering of a
combination of debt and equity securities of the Company in which (i) not
more than 10% of the gross proceeds received for the sale of such securities
is attributed to such equity securities, and (ii) after giving effect to such
offering, the Company does not have a class of equity securities required to
be registered under the Exchange Act.
55
(D) SALE IN PUBLIC OFFERING. Nothing herein shall prevent any
Management Stockholder from selling Shares or Options in any Public Offering
to which the provisions of Section 6 are applicable; PROVIDED, HOWEVER, that
(i) if less than all of such Management Stockholder's Shares are sold in such
offering, for purposes of any subsequent calculation hereunder of the Option
Purchase Price, the Option Purchase Price for Shares shall equal: (a) the
Adjusted Cost Price multiplied by the product of the applicable Adjusted Cost
Price percentage and the Adjusted Purchase Number (as defined below), plus
(b) the Adjusted Book Value Price multiplied by the product of the applicable
Adjusted Book Value Price percentage and the Adjusted Purchase Number, less
(c) the product of the Publicly-Sold Stock (as defined below) and the
Adjusted Book Value Price, where: (x) "Publicly-Sold Stock" means the total
number of shares of Stock previously sold by the respective Management
Stockholder in a Public Offering, (y) "Adjusted Purchase Number" means the
sum of the Purchase Number and the Publicly-Sold Stock, and (z) the Option
Purchase Price at all times shall equal or exceed the product of the Adjusted
Cost Price and the Purchase Number; and (ii) this section shall continue to
apply in accordance with its terms to all Shares not sold in any such Public
Offering.
(E) In the event that the Company does not agree to purchase any
Shares or Options pursuant to this Section 7(c) within the 60-day period set
forth in subsection (i), such Shares or Options shall then be offered to the
other Stockholders pursuant to the terms and provisions of Section 2 hereof.
(ii) COMPANY'S FIRST REFUSAL RIGHT. In the event that, prior to the
third anniversary of the date hereof, (x) a Management Stockholder is no
longer employed by Holdings; (y) the Company or another Stockholder, as
applicable, has declined to exercise the Purchase Option with respect to any
of such Management Stockholder's Shares or Options; and (z) the Management
Stockholder thereafter proposes to sell any or all of such Shares to a third
party in a bona fide transaction, the Management Stockholder may not transfer
such Shares without first offering to sell
56
them to the Company and the other Stockholders pursuant to this
Section 7(b).
The Management Stockholder shall deliver a written notice (a "Sale
Notice") to the Company describing in reasonable detail the Shares or Options
being offered, the name of the offeree, the purchase price requested and all
other material terms of the proposed transfer. Upon receipt of the Sale
Notice, the Company, or if the Company is prohibited by law or has
insufficient funds to elect such purchase, the other Stockholders, shall have
the right and option to purchase all, but not less than all, of the Shares or
Options being offered at the price and on the terms of the proposed transfer
set forth in the Sale Notice; PROVIDED, HOWEVER, that if the Company is
unable to purchase Shares or Options hereby, it shall give prompt notice of
such fact to the other Stockholders; and PROVIDED, FURTHER, if, in accordance
with this sentence, the other Stockholders elect to purchase more Shares or
Options than the amount of Shares or Options such Management Stockholder
owns, the Stockholders so electing shall purchase the Shares and/or Options
PRO RATA in accordance with the number of Shares owned by such Stockholders.
Within 30 days after receipt of the Sale Notice, the Company or the other
Stockholders, as applicable, shall notify such Management Stockholder whether
or not it wishes to purchase all the offered Shares or Options.
If the Company or the other Stockholders, as applicable, elect to
purchase all the offered Shares or Options, the closing of the purchase and
sale of such Shares or Options shall be held at the place and on the date
established by the Company or the other Stockholders, as applicable, in its
notice to the Management Stockholder in response to the Sale Notice, which in
no event shall be less than 10 or more than 30 days from the date of such
notice. In the event that the Company or the other Stockholders, as
applicable, do not elect to purchase all the offered Shares or Options, the
Management Stockholder may, subject to the other provisions of this
Agreement, transfer the offered Shares or Options to the offeree specified in
the Sale Notice at a price no less than the price specified in the Sale
Notice and on other terms no more favorable to the transferee(s) thereof than
specified in the Sale Notice during the 180-day period immediately following
the last date on which the Company or the other Stockholders, as applicable,
could have elected to purchase the offered securities. Any such securities
not transferred within such
57
180-day period will be subject to the provisions of this Section 7(c)(ii)
upon subsequent transfer.
(d) INVOLUNTARY TRANSFERS. In the event that the Shares or
Options owned by any Management Stockholder shall be subject to sale or other
transfer (the date of such sale or transfer shall hereinafter be referred to
as the "Transfer Date") prior to the third anniversary of the Applicable
Closing Date by reason of (i) bankruptcy or insolvency proceedings, whether
voluntary or involuntary, or (ii) distraint, levy, execution or other
involuntary transfer, then such Management Stockholder shall give the Company
written notice thereof promptly upon the occurrence of such event stating the
terms of such proposed transfer, the identity of the proposed transferee, the
price or other consideration, if readily determinable, for which the Shares
or Options are proposed to be transferred, and the number of Shares or
Options to be transferred. After its receipt of such notice or, failing such
receipt, after the Company otherwise obtains actual knowledge of such a
proposed transfer, the Company, or if the Company is prohibited by law or has
insufficient funds to elect such purchase, the other Stockholders, shall have
the right and option to purchase all, but not less than all of such Shares or
Options which right shall be exercised by written notice given by the Company
or other Stockholders, as applicable, to such proposed transferor within 60
days following the Company's receipt of such notice or, failing such receipt,
the Company's obtaining actual knowledge of such proposed transfer; PROVIDED,
HOWEVER, that if the Company is unable to purchase Shares or Options hereby,
it shall give prompt notice of such fact to the other Stockholders; and
PROVIDED, FURTHER, if, in accordance with this sentence, the other
Stockholders elect to purchase more Shares or Options than the amount such
Management Stockholder owns, the Stockholders so electing shall purchase the
Shares or Options PRO RATA in accordance with the number of Shares owned by
such Stockholders. Any purchase pursuant to this Section 7(d) shall be at
the price and on the terms applicable to such proposed transfer. If the
nature of the event giving rise to such involuntary transfer is such that no
readily determinable consideration is to be paid for the transfer of the
Shares or Options, the price to be paid by the Company or the other
Stockholders, as applicable, shall be the Option Purchase Price that would
have been applicable hereunder had the Management Stockholder incurred a
Termination Date as of the date of such proposed transfer for the Shares.
The closing of the purchase and sale of Shares or
58
Options shall be held at the place and the date to be established by the
Company or the other Stockholders, as applicable, which in no event shall be
less than 10 or more than 30 days from the date on which the Company or the
other Stockholders, as applicable, give notice of its election to purchase
Shares or Options. At such closing, the Management Stockholder shall deliver
certificates evidencing the number of shares of Stock to be purchased by the
Company or the other Stockholders, as applicable, accompanied by stock or
bond powers, as the case may be, duly endorsed in blank or duly executed
instruments of transfer, in either case with the signature guaranteed by a
member firm of the New York Stock Exchange, Inc. or a commercial bank or
trust company organized under the laws of the United States or any state
thereof, and any other documents that are necessary to transfer to the
Company or the other Stockholders, as applicable, good title to such of the
securities to be transferred, free and clear of all pledges, security
interests, liens, charges, encumbrances, equities, claims and options of
whatever nature other than those imposed under this Agreement, and
concurrently with such delivery, the Company or the other Stockholders, as
applicable, shall deliver to the Management Stockholder the full amount of
the purchase price for such securities in cash by certified or bank cashier's
check.
(e) RIGHTS GRANTED NOT TO AFFECT EMPLOYMENT. Neither this
Agreement nor the rights granted to any Management Stockholder hereunder
shall confer, or be construed to confer, upon any Management Stockholder any
right to continue in the employment of Holdings.
8. PURCHASE RIGHTS.
If the Company proposes to issue or sell any shares of its Common Stock
or Common Stock Equivalents (as hereinafter defined), the Company shall, not
later than fifteen (15) business days prior to the consummation of such
transaction, notify in writing each Stockholder of such transaction. Such
notice shall describe the proposed sale or issuance, identify the proposed
purchaser, and contain an offer to each Stockholder to sell to such
Stockholder, at the same price and for the same consideration to be paid by
the proposed purchaser, such Stockholder's PRO RATA portion (which shall be
such Stockholder's percentage ownership of the Common Stock outstanding on a
fully diluted basis) of the Common Stock or Common Stock Equivalents to be
issued or sold. If any Stockholder to which an offer was required to
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be made pursuant to the preceding sentence fails to accept such offer within
fifteen (15) business days after its receipt thereof, the Company may proceed
for a period of 90 days with such proposed issuance or sale of the securities
offered to such Stockholder, free of any right on the part of such
Stockholder under this Section 8 in respect thereof.
This Section 8 shall not apply to: (A) grants of employee stock options
or stock purchase rights; (B) sales or issuances of Common Stock or Common
Stock Equivalents pursuant to the Warrant Agreement or upon exercise of
employee stock options, employee stock purchase rights, the Warrants, the
Options or any conversion of Class A Common Stock or Class B Common Stock
into the other class of Common Stock; (C) securities sold pursuant to a
Public Offering; (D) securities distributed ratably to all holders of Common
Stock and Common Stock Equivalents on a per share equivalent basis (which
shall be such Stockholders' percentage of the Common Stock outstanding on a
fully diluted basis) or (E) issuances pursuant to Section 19 hereof.
"Common Stock Equivalents" shall mean rights, warrants, options,
convertible securities, exchangeable securities, or other rights, exercisable
for or convertible or exchangeable into, directly or indirectly, common stock
of the Company and securities convertible or exchangeable into common stock
of the Company, whether at the time of issuance, upon the passage of time, or
upon the occurrence of some future event.
9. PUT RIGHTS. Without the prior written consent of the holders of 70%
of the Voting Shares (which holders shall include (i) CVP so long as it
continues to own not less than 80% of the Shares owned by it on the date
hereof and (ii) Apollo so long as it continues to own not less than 80% of
the Shares owned by it on the date hereof), the holders of Warrants and
Warrant Shares shall not be entitled to require that the Company purchase,
and the Company shall not purchase any Warrants or Warrant Shares described
in a Put Notice delivered pursuant to Section 9 of the Warrant Agreement;
PROVIDED, HOWEVER, that this Section shall not be construed to prevent
holders of Warrants or Warrant Shares from delivering a Put Notice (as
defined in Section 9 of the Warrant Agreement) or to prevent the occurrence
of a Warrant Registration Event or in any way limit the registration rights
hereunder of the holders of any Warrants or Warrant Shares following the
occurrence of a Warrant Registration Event.
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10. FINANCIAL INFORMATION. The Company agrees to provide to each
Stockholder all financial information that is required to be delivered by the
Company pursuant to the Credit Agreement. Unless otherwise required by
applicable law, each Stockholder shall, at all times, keep confidential and
not divulge, furnish or make accessible to anyone (other than to its
attorneys, accountants and other investment advisors, on a confidential
basis, and any prospective Permitted Transferee who is not a direct
competitor of the Company or any of its subsidiaries, as long as such
Transferee agrees to be subject to a confidentiality agreement reasonably
acceptable to the Company) such financial information to the extent not
already generally known to the public. In the event that the Credit
Agreement is terminated for any reason, the Company shall provide to each
Stockholder financial information similar to that required by the Credit
Agreement at the same times, to the extent practicable, as that required by
the Credit Agreement.
11. REGULATORY MATTERS.
(a) REGULATORY COMPLIANCE COOPERATION.
(i) If a Stockholder determines that it has a Regulatory
Problem (as defined below), the Company agrees to take all such actions as
are reasonably requested by such Stockholder (x) to effectuate and facilitate
any transfer by such Stockholder of any Securities (as defined below) of the
Company then held by such Stockholder to any person designated by such
Stockholder, (y) to permit such Stockholder (or any Affiliate of such
Stockholder) to exchange all or any portion of the voting Securities then
held by such person on a share-for-share basis for shares of a class of
non-voting Securities of the Company, which non-voting Securities shall be
identical in all respects to such voting Securities, except that such new
Securities shall be non-voting and shall be convertible into voting
Securities on such terms as are requested by such Purchaser in light of
regulatory considerations then prevailing, and (z) to continue and preserve
the respective allocation of the voting interests with respect to the Company
provided for in this Agreement and with respect to such Stockholder's
ownership of the Company's voting Securities. Such actions may include,
without limitation, (x) entering into such additional agreements as are
reasonably requested by such Stockholder to permit any Person(s) designated
by such Stockholder to exercise any voting power which is relinquished by
such Stockholder upon any exchange of voting
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Securities for non-voting Securities of the Company and (y) entering into such
additional agreements, adopting such amendments to the Certificate of
Incorporation and by-laws of the Company and taking such additional actions
as are reasonably requested by such Stockholder in order to effectuate the
intent of the foregoing. Each Stockholder agrees to cooperate with the
Company in complying with this Section 11(a), including, without limitation,
voting to approve amending the Company's Certificate of Incorporation in a
manner reasonably requested by the Stockholder requesting such amendment.
(ii) If a purchaser has the right or opportunity to acquire
any of the Company's Securities from the Company, any Stockholder or any
other Person (as the result of a preemptive offer, pro rata offer or
otherwise), at such Stockholder's request the Company will offer to sell (or
if the Company is not the seller, to cooperate with the seller and such
Stockholder to permit such seller to sell) such non-voting Securities on the
same terms as would have existed had such Stockholder acquired the Securities
so offered and immediately requested their exchange for non-voting Securities
pursuant to paragraph (i) above.
(iii) Before the Company redeems, purchases or otherwise
acquires, directly or indirectly, or converts or takes any action with
respect to the voting rights of, any Securities, the Company shall give
written notice of such pending action to each Stockholder. Upon the written
request of any Stockholder made within 10 days after its receipt of any such
notice stating that after giving effect to such action such Stockholder would
have a Voting Regulatory Problem, the Company shall defer taking such action
for such period (not to extend beyond 30 days after such Stockholder's
receipt of the Company's original notice) as such Stockholder requests to
permit it and its Affiliates to reduce the quantity of the Company's
Securities they own in order to avoid the Regulatory Problem. In addition,
the Company shall not be a party to any merger, consolidation,
recapitalization or other transaction pursuant to which any Stockholder would
be required to take any voting Securities, or any Securities convertible
into, or exchangeable or exercisable for, voting Securities, which might
reasonably be expected to cause such Purchaser to have a Voting Regulatory
Problem.
(iv) In the event that any subsidiary of the Company ever
offers to sell any of its Securities, then
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the Company will cause such subsidiary to enter into agreements with each
Stockholder substantially similar to this Section 11.
(b) COVENANT NOT TO AMEND. The Company and each Stockholder agree
not to amend or waive the voting or other provisions of this Agreement or the
Company's Certificate of Incorporation if such amendment or waiver would
cause any Stockholder to have a Voting Regulatory Problem, provided that any
such Stockholder notifies the Company that it would have a Voting Regulatory
Problem promptly after it has notice of such proposed amendment or waiver.
(c) CERTAIN DEFINITIONS. As used in this Section 11:
"REGULATORY PROBLEM" means (i) any set of facts or
circumstances wherein it has been asserted by any governmental
regulatory agency (or a Stockholder believes that there is a
substantial risk of such assertion) that such Stockholder is not
entitled to hold, or exercise any significant right with respect
to, the Securities or (ii) a Voting Regulatory Problem.
"SECURITIES" means with respect to any Person, such
Person's capital stock or any options, warrants or other securities
that are directly or indirectly convertible into, or exercisable or
exchangeable for, such Person's capital stock. Whenever a
reference herein to Securities is referring to any derivative
Securities, the rights of a Stockholder shall apply to such
derivative Securities and all underlying Securities directly or
indirectly issuable upon conversion, exchange or exercise of such
derivative securities.
"VOTING REGULATORY PROBLEM" shall exist when a
Person and such Person's affiliates would own, control or have
power over a greater quantity of Securities of any kind issued by
the Company or any other entity than are permitted under any
requirement of any governmental authority.
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12. VOTING SHARES.
(a) Whenever this Agreement requires the consent of a specified
percentage of Voting Shares, each Stockholder shall be entitled to one vote
per Voting Share, PROVIDED that the holders of Non-Voting Shares shall not
have any right to vote such Shares and Apollo (or its express assignee, but
not necessarily its Permitted Transferees) shall be entitled to a number of
extra votes equal to the number of Non-Voting Shares.
To determine whether such specified percentage was obtained, the number
of votes cast shall be divided by the total number of Voting Shares. (For
example, if the number of votes casted equals 51 and the number of Voting
Shares equals 100, then the consent of 51% of the Voting Shares shall be
deemed to have been obtained.)
(b) As used in this Agreement, the following terms shall have the
meanings set forth below:
"CONVERSION EVENT" shall have the meaning set forth in the Certificate
of Incorporation of the Company.
"CVP SHARES" on any date means all Shares outstanding on such date that
are held by CVP or its Affiliates; provided that such Shares shall cease to
be CVP Shares immediately upon their transfer pursuant to a Conversion Event.
"CVP VOTING SHARES" on any date means the lesser of (a) the number of
Voting Shares outstanding on such date, MULTIPLIED BY the Legally Permitted
Percentage and (b) the number of CVP Shares outstanding on such date.
"LEGALLY PERMITTED PERCENTAGE" means 4.99%, or such greater or lesser
percentage that CVP reasonably determines (and notifies the Company) would
result in the maximum number of CVP Voting Shares held by all holders thereof
to equal the maximum number of CVP Voting Shares that CVP and its Affiliates
may own, control or have the power to vote under any law, regulation, rule or
other requirement of any governmental authority at the time applicable to CVP
or its Affiliates.
"NON-MANAGEMENT VOTING SHARES" means all Voting Shares other than Voting
Shares owned by Management Stockholders on the date hereof.
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"NON-VOTING SHARES" on any date means the total number of CVP Shares
outstanding on such date MINUS the total number of CVP Voting Shares
outstanding on such date.
"VOTING SHARES" on any date means, solely for purposes of this
Agreement, all Shares outstanding on such date held by a Stockholder and all
Shares issuable to any Stockholder upon the exercise of any Options; provided
that Voting Shares shall exclude any Shares issued or issuable upon exercise
of the Warrants.
13. SHARE AND WARRANT CERTIFICATES.
(a) RESTRICTIVE ENDORSEMENT. Each certificate representing the
Shares or Warrants now or hereafter held by a Stockholder subject to this
Agreement shall be stamped with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF APRIL 10, 1992, A COPY
OF WHICH IS ON FILE AT THE OFFICES OF THE COMPANY AND WILL BE FURNISHED TO ANY
PROSPECTIVE PURCHASERS ON REQUEST. BY ACCEPTANCE OF THIS CERTIFICATE, EACH
HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS OF THE STOCKHOLDERS'
AGREEMENT."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS
OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS
THEREFROM."
Each Stockholder agrees that he will deliver all certificates for Shares,
Options or Warrants owned by him to the Company for the purpose of affixing such
legend thereto.
(b) REPLACEMENT CERTIFICATES. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
certificate representing Shares, Options or Warrants issued hereunder and of a
bond or other indemnity reasonably satisfactory to the Company and upon
reimbursement to the Company of all reasonable expenses incident thereto, and
upon surrender of such certificate, if mutilated, the Company will make and
deliver a new certificate of like tenor in lieu of such
65
lost, stolen, destroyed or mutilated certificate; PROVIDED, HOWEVER, that a
Stockholder shall not be required to post any bond (but such Stockholder may
be required to enter into an indemnity agreement reasonably satisfactory to
the Company) if such Stockholder certifies that a Share, Option or Warrant
has been lost, destroyed or wrongfully taken and demands that the Company
issue and, if applicable, the transfer agent countersign a replacement
certificate.
14. EQUITABLE RELIEF. The parties hereto agree and declare that legal
remedies may be inadequate to enforce the provisions of this Agreement and
that equitable relief, including specific performance and injunctive relief,
may be used to enforce the provisions of this Agreement.
15. ARBITRATION. Any controversy arising under, out of, in connection
with, or relating to, this Agreement, and any amendment hereof, or the breach
hereof, shall be determined and settled by arbitration in New York, New York,
by a person or persons mutually agreed upon, or in the event of a
disagreement as to the selection of the arbitrator or arbitrators, in
accordance with the rules then obtaining of the American Arbitration
Association. Any award rendered therein shall specify the findings of fact
of the arbitrators and the reasons for such award, with the reference to and
reliance on relevant law. Any such award shall be final and binding on each
and all of the parties thereto and their personal representatives, and
judgment may be entered thereon in any court having jurisdiction thereof.
16. COMPLIANCE WITH SECURITIES LAWS. Each Stockholder hereby
acknowledges and agrees that the Shares, Options and Warrants have not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act and any applicable state
securities laws or unless an exemption from such registration is available.
Notwithstanding anything to the contrary contained herein, the Company may
require, as a condition precedent to any transfer of Shares, Options or
Warrants permitted hereby, the delivery by the transferor of an opinion of
counsel, reasonably satisfactory to the Company, to the effect that such
transfer is permitted under the Securities Act and any applicable state
securities laws.
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17. IRREVOCABLE PROXY.
(a) Each Management Stockholder hereby appoints and constitutes
Xxxxxxx X. Xxxxxxxxx as his attorney-in-fact, with full power of substitution
and with full power and authority to:
(i) vote all Voting Shares owned by such Management Stockholder,
either in person or by proxy at any stockholders' meeting, or by
any written consent, in whatever manner such attorney-in-fact, in
his sole discretion, deems appropriate (and, in any event, in any
manner required by this Agreement); and
(ii) vote all such Voting Shares held by such Management
Stockholder to approve or disapprove of any action, consent,
amendment or waiver presented for consideration of the Stockholders
pursuant to this Agreement or otherwise.
Each Management Stockholder ratifies and approves all acts of any such
attorney-in-fact taken in good faith. No such attorney-in-fact shall be
liable for any acts or omissions nor for any error in judgment or mistake of
fact or law; PROVIDED, that each attorney-in-fact will be liable for any such
act, omission, error or mistake to the extent resulting from his own actions
taken in bad faith. This power, being coupled with an interest, is
irrevocable; PROVIDED, HOWEVER, this power shall terminate and be of no
further force or effect following a Change of Control Event.
18. CALL OF SENIOR SUBORDINATED NOTES. Without the consent of the
Apollo Investor, the Company agrees not to redeem any of the Senior
Subordinated Notes pursuant to the Indenture prior to the third anniversary
of the date hereof.
19. ADDITIONAL SHARE ISSUANCE TO NEW INVESTORS. If, pursuant to
Section 4(e) of the Warrant Agreement, the Company shall issue additional
Warrants (the "Additional Warrants"), the Company shall, concurrently with
such issuance, at the option of any New Investor, sell, issue and deliver to
such New Investor, at a purchase price of $.01 per share, such additional
number of shares of Class B Common Stock (the "Additional Shares") necessary
to cause the number of New Investor Shares and Additional Shares owned by
such New Investor to equal (after giving effect to the issuance of the
Additional Warrants and the Additional
67
Shares) the same percentage of the then outstanding fully-diluted shares of
Common Stock as the New Investor Shares owned by such New Investor equal to the
number of fully-diluted shares of Common Stock outstanding immediately prior to
the issuances of the Additional Warrants and the Additional Shares. The Company
and NMB agree that Section 4(e) of the Warrant Agreement shall, subject to the
terms thereof, be interpreted to provide NMB with an additional 3% of the fully-
diluted shares of Common Stock outstanding after giving effect to the issuance
of the Additional Warrants and the Additional Shares.
20. MISCELLANEOUS.
(a) NOTICES. Any and all notices, designations, consents, offers,
acceptances, or any other communication provided for herein shall be made by
hand delivery, first-class mail (registered or certified, return receipt
requested), telex, telecopier, or overnight air courier guaranteeing next day
delivery: (i) in the case of the Company, to Envirotest Systems Corp., c/o
Georgetown Partners, 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, XX, 00000
(Attention: Xxxxxxx Xxxxxxxxx) and (ii) in the case of any Stockholder, to
the address of the party appearing under his name on the Schedule of
Stockholders attached hereto (or to such other address as may be designated
by such party). Except as otherwise provided in this Agreement, each such
notice shall be deemed given at the time delivered by hand, if personally
delivered; five business days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next business day after timely delivery
to the courier, if sent by overnight air courier guaranteeing next day
delivery.
(b) AMENDMENT. The provisions of this Agreement may be amended by
the approval of the holders of at least 90% of the Voting Shares.
Notwithstanding the foregoing, (i) the amendment or waiver of Section 11
shall also require the consent of CVP, ECC, NMB and Skopbank; (ii) the prior
written consent of NMB shall be required with respect to any amendment to any
Section of this Agreement (other than Section 5) to the extent that the
rights of NMB or Skopbank as a holder of Warrants or Warrant Shares would be
adversely affected; (iii) the provisions of Section 9 may be amended or
waived only by the approval of the holders required to consent to action
thereunder; and (iv) the amendment or waiver of any provision hereof with
respect to
68
a matter that relates to the rights of a particular Stockholder but not all
Stockholders generally (including, without limitation, the provisions
relating to a Stockholder's Director Rights or Representative Rights) shall
not be amended without such Stockholder's written consent. Notwithstanding
the foregoing, no consent of any Stockholder shall be required in connection
with any amendment hereof to add any person or entity as a Stockholder.
(c) TERMINATION. Sections 1, 2, 3, 4, 5, 7, 8, 10, 15, 17 and 18 of
this Agreement shall terminate on the earlier to occur of (i) ten (10) years
from the date hereof or (ii) the registration of any of the Company's equity
securities under the Securities Act (other than a registration on Form S-4 or
Form S-8, or any similar form which is a successor to any of said Forms).
Section 9 hereof shall terminate twelve (12) years from the date hereof.
(d) WAIVER. No failure or delay on the part of the Stockholders
or any of them in exercising any right, power or privilege hereunder, and no
course of dealing between the Company and the Stockholders or any of them
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 the Stockholders or any of them would otherwise have. No
notice to or demand on the Company in any case shall entitle the Company to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Stockholders or any of them to take
any other or further action in any circumstances without notice or demand.
(e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
(f) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(g) BENEFIT AND BINDING EFFECT. This Agreement shall be binding upon
and shall inure to the benefit of
69
the Company, its successors and assigns, and each of the Stockholders, and their
respective executors, administrators and personal representatives and heirs and
assigns. In the event that any part of this Agreement shall be held to be
invalid or unenforceable, the remaining parts hereof shall nevertheless continue
to be valid and enforceable as though the invalid portions were not a part
hereof.
(h) ENTIRE AGREEMENT. This Agreement (and, with respect to the
Warrants, the Warrant Agreement) contains the entire understanding of the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements, discussions and understandings, including, without limitation,
the Prior Stockholders' Agreement.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
ENVIROTEST SYSTEMS CORP.
By:
------------------------------
Name:
Title:
GEORGETOWN PARTNERS LIMITED
PARTNERSHIP
By: DHE PARTNERS
its General Partner
By: ROCKSPRING MANAGEMENT,
its General Partner
By:
------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President
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EXHIBIT B
FORM OF GUARANTY
For value received, Envirotest Systems Corp., a Delaware corporation,
HTS Holdings, Inc., a Delaware corporation, SD-Scicon, Inc., a Delaware
corporation and Systems Control, Inc., a Delaware corporation, jointly and
severally, hereby unconditionally guarantee to the Holder of the Security
upon which this Guaranty is endorsed the due and punctual payment, on a
limited and subordinated basis, of the principal of and interest on such
Security when and as the same shall become due and payable according to the
terms of such Security and Article Twelve of the Indenture. The Guaranty of
the Security upon which this Guaranty is endorsed will not become effective
until the Trustee signs the certificate of authentication on such Security.
HTS Holdings, Inc. Envirotest Systems Corp.
By:____________________________ By:____________________________
Attest:____________________________ Attest:____________________________
SD-Scicon, Inc. Systems Control, Inc.
By:____________________________ By:____________________________
Attest:____________________________ Attest:____________________________
B-1
