SECURITIES PURCHASE AND HOLDERS AGREEMENT
dated as of
April 22, 1999
by and among
Xxxxxxx-Xxxxx Group, Inc.,
399 Venture Partners, Inc.,
and
The Additional Investors Signatory Hereto
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS..................................................... 2
ARTICLE II ISSUANCE OF SHARES TO 399 VENTURE AND CONTINUING MANAGEMENT
INVESTORS; REDEMPTION OF CERTAIN STOCK.............................. 7
2.1. Securities.................................................... 7
2.2. Closing....................................................... 8
2.3. Conditions to 399 Venture's and Management Investor's
Obligations................................................... 8
2.4. Conditions to the Company's Obligations....................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 10
3.1. Representations and Warranties of the Company................. 10
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH INVESTOR..... 11
4.1. Representations, Warranties and Covenants of Each Investor.... 11
4.2. Legends....................................................... 12
4.3. Management Investor Representations and Warranties............ 13
4.4. Representations and Warranties of 399 Venture................. 14
4.5. Restrictions on Transfers of Securities....................... 14
4.6. Certain Sales by Xxxxxxx...................................... 16
4.7. Termination of Restrictions................................... 17
4.8. Notation...................................................... 17
4.9. Limitation on Repurchase of Company Stock..................... 17
4.10. Future Sales.................................................. 17
4.11. Reliance...................................................... 18
ARTICLE V OTHER COVENANTS AND REPRESENTATIONS............................. 18
5.1. Observers' Rights............................................. 18
5.2. Financial Statements and Other Information.................... 19
5.3. Regulatory Compliance Cooperation............................. 19
5.4. Small Business Administration Forms........................... 20
5.5. Economic Impact............................................... 20
5.6. SBA Access.................................................... 20
5.7. Sale of the Company........................................... 20
5.8. Tag-Along Rights.............................................. 21
5.9. Covenant Not To Compete or Solicit............................ 24
5.10. Preemptive Rights............................................. 25
5.11. Right to Join in Purchase..................................... 26
ARTICLE VI CORPORATE ACTIONS.............................................. 27
6.1. Certificate of Incorporation and Bylaws....................... 27
6.2. Directors and Voting Agreements............................... 27
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6.3. Right to Remove Designated Directors.......................... 28
6.4. Right to Fill Certain Vacancies in Company's Board............ 28
6.5. Rights upon Disability or Death of Xxxxxxx.................... 29
6.5. Committee Members; Directors of Company Subsidiaries.......... 29
6.6. Amendment of Certificate and Bylaws........................... 29
6.7. Termination of Designation Rights............................. 29
6.8. Future Sales of Securities.................................... 30
ARTICLE VII ADDITIONAL RESTRICTIONS ON TRANSFERS OF SECURITIES HELD BY
MANAGEMENT INVESTORS................................................ 30
7.1. Restrictions on Transfer...................................... 30
7.2. Purchase Option............................................... 31
7.3. Company's Right of First Refusal.............................. 33
7.4. Involuntary Transfers......................................... 34
7.5. Lapse......................................................... 34
ARTICLE VIII REGISTRATION RIGHTS; PREFERRED STOCKHOLDERS AGREEMENT;
INDEMNIFICATION..................................................... 35
8.1. Registration Rights........................................... 35
8.2. Preferred Stockholders Agreement.............................. 35
8.3. Indemnification for Certain Liabilities....................... 35
ARTICLE IX MISCELLANEOUS.................................................. 36
9.1. Purchaser Representative...................................... 36
9.2. Section 83(b) Elections....................................... 36
9.3. Amendment and Modification.................................... 36
9.4. Waiver of Fiduciary Duties and Corporate Opportunity;
Acknowledgment................................................ 37
9.4. Survival...................................................... 37
9.5. Successors and Assigns; Entire Agreement...................... 37
9.6. Separability.................................................. 37
9.7. Notices....................................................... 38
9.8. Governing Law................................................. 39
9.9. Waiver of Jury Trial.......................................... 39
9.10. Acknowledgment Of Management Investors........................ 39
9.11. No Effect on Employment....................................... 40
9.12. Headings...................................................... 40
9.13. Counterparts.................................................. 40
9.14. Further Assurances............................................ 40
9.15. Termination................................................... 40
9.16. Remedies...................................................... 40
9.17. Party No Longer Owning Securities............................. 40
9.18. Pronouns...................................................... 40
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SECURITIES PURCHASE AND HOLDERS AGREEMENT
SECURITIES PURCHASE AND HOLDERS AGREEMENT, dated as of April 22, 1999 (the
"Agreement"), by and among Xxxxxxx-Xxxxx Group, Inc., a Delaware corporation
(the "Company"), 399 Venture Partners, Inc., a Delaware corporation ("399
Venture"), the individuals, including Xxxxxxx X. Xxxxxxx, Xx. ("Xxxxxxx"),
signatory hereto who are designated on Schedule 1-A(A) hereto as Continuing
Management Investors (the "Continuing Management Investors"), and the
individuals, designated on Schedule 1-B hereto as Purchasing Management
Investors who are signatory to this Agreement or who following the date hereof
execute a joinder to this Agreement (the "Purchasing Management Investors"). The
Purchasing Management Investors and Continuing Management Investors are
sometimes referred to hereinafter individually as a "Management Investor" and
collectively as the "Management Investors." 399 Venture and the Management
Investors and each other person who becomes a party to this Agreement by
executing a joinder hereto are sometimes referred to hereinafter individually as
an "Investor" and collectively as the "Investors."
Background
A. The Company, 399 Venture, and Xxxxxxx are the parties to an Exchange
Agreement dated as of April 22, 1999 (the "Exchange Agreement"). At the closing
of the several transactions contemplated by the Exchange Agreement and this
Agreement (the "Exchange Closing"), certain of the outstanding stock of
Xxxxxxx-Xxxxx, Inc. a Delaware corporation ("Xxxxxxx-Xxxxx"), owned by Xxxxxxx
and his Affiliates will have been redeemed by Xxxxxxx-Xxxxx for cash and the
balance of such shares will have been acquired by the Company in exchange for a
combination of Shares (as hereinafter defined). In addition, the Continuing
Management Investors shall have submitted to the Company for redemption the
number and kinds of securities set forth on Schedule 1-A(B) in return for the
respective amounts set forth opposite such Continuing Management Investor's name
on Schedule 1-A(B).
B. As of the Exchange Closing, the authorized capital stock of the Company
will consist of shares of (i) Class A Common Stock, par value $.01 per share
("Class A Common Stock"), (ii) Class B Common Stock, par value $.01 per share
("Class B Common Stock" and, collectively with the Class A Common Stock, the
"Common Stock"), (iii) 12% Series A Senior Cumulative Compounding Preferred
Stock, par value $.01 per share ("Series A Preferred Stock"), and (iv) Series B
Junior Preferred Stock, par value $.01 per share ("Series B Preferred Stock",
collectively with the Series A Preferred Stock, the "Preferred Stock"). The
Common Stock and Preferred Stock are sometimes referred to hereinafter
individually and collectively as the "Shares."
C. Pursuant to this Agreement each Continuing Management Investor will
exchange the securities of Xxxxxxx-Xxxxx held by such Continuing Management
Investor set forth opposite such Continuing Management Investor's name on
Schedule 1-A(A) and described as Rollover Securities in exchange for the number
and kind of Shares set forth opposite such Continuing Management Investor's name
on Schedule 1-A(A) and described as Exchanged Shares.
D. On the date hereof, the Company has adopted the 1999 Restricted Stock
Purchase Plan, the form of which is attached hereto as Exhibit A (the
"Restricted Stock Plan"). On the date hereof, certain Continuing Management
Investors are exchanging the options set forth opposite their respective names
on Schedule 1-C hereto (collectively, the "Rollover Options") for the number of
options to purchase the number and kinds of securities of RCGI as are set forth
on Schedule 1-C hereto and designated as "Exchanged Options" (the "Exchanged
Options"). In addition, following the date hereof and from time to time, each of
the Purchasing Management Investors will purchase from the Company Class A
Common Stock pursuant to the Restricted Stock Plan (such Shares being the
"Incentive Shares") in the amounts set forth opposite such Purchasing Management
Investor's name on Schedule 1-B, to be appended hereto at the time of such
purchase and thereafter amended from time to time to reflect additional
Purchasing Management Investors. No Purchasing Management Investor shall
purchase Incentive Shares unless such Purchasing Management Investor is or
becomes a party to this Agreement.
E. As used herein, the term "Securities" shall mean (i) the shares of
Common Stock (including any Incentive Shares) held by any party hereto, (ii) all
other securities of the Company (or a successor to the Company) received on
account of ownership of Common Stock, including all securities issued in
connection with any merger, consolidation, stock dividend, stock distribution,
stock split, reverse stock split, stock combination, recapitalization,
reclassification, subdivision, conversion or similar transaction in respect
thereof and (iii) all other equity securities (other than Preferred Stock) of
the Company or a successor to the Company owned at any time hereafter by such
party, whether acquired from the Company, an Investor or otherwise.
F. The Investors and the Company wish to set forth certain agreements
regarding their future relationships and their rights and obligations with
respect to the Securities.
Terms
In consideration of the mutual covenants contained herein and intending to
be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Adjusted Book Value Price" has the meaning set forth in Section
7.2(a)(ii)(C)(2) of this Agreement.
"Adjusted Book Value Price Percentage" has the meaning set forth in Section
7.3(a)(iii) of this Agreement.
"Adjusted Cost Price" has the meaning set forth in Section 7.2(a)(ii)(B)(1)
of this Agreement.
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"Affiliate" has the meaning set forth in Rule 12b-2 of the Rules
promulgated under the Exchange Act.
"Agreement" has the meaning set forth in the Preamble of this Agreement.
"Approved Sale" has the meaning set forth in Section 5.7(b) of this
Agreement.
"Assurance of Compliance" has the meaning set forth in Section 5.4 of this
Agreement.
"Called Shares" has the meaning set forth in Section 7.2(a)(iii) of this
Agreement.
"Cash Redemption Amount" has the meaning set forth in Section 2.1 of this
Agreement.
"Cause," when used in connection with the termination of a Management
Investor's employment with the Company or any of its Subsidiaries, means such
Management Investor's (A) willful and continued failure to perform such
Management Investor's duties, after written notice of such failure, which
failure has not been corrected within the 30-day period after written notice has
been given; (B) the willful commission by such Management Investor of acts that
are dishonest and demonstrably and materially injurious to the Company or any of
its Subsidiaries, monetarily or otherwise; (C) conviction of a felony; (D)
failure to perform such Management Investor's duties at a satisfactory level as
determined by a majority of the members of the Board of Directors in good faith,
which failure has not been corrected within the 90-day period after written
notice has been given; or (E) material breach of any of the covenants of this
Agreement.
"Class A Common Stock" has the meaning set forth in Background Section B of
this Agreement.
"Class B Common Stock" has the meaning set forth in Background Section B of
this Agreement.
"Closing" has the meaning set forth in Section 2.2 of this Agreement.
"Combination Offering" has the meaning set forth in Section 5.10(d) of this
Agreement.
"Common Stock" has the meaning set forth in Background Section B of this
Agreement.
"Company" means Xxxxxxx-Xxxxx Group, Inc., a Delaware corporation, except
that when used in Article VII, "Company" means the Company and all other
entities of which the Company from time to time owns, directly or indirectly,
50% or more of the stock or assets.
"Continuing Management Investors" has the meaning set forth in the Preamble
of this Agreement.
"399 Venture" has the meaning set forth in the Preamble of this Agreement.
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"399 Venture Co-Investor" has the meaning set forth in Section 4.5(d)(iv)
of this Agreement.
"399 Venture Designees" has the meaning set forth in Section 6.2(a)(ii).
"399 Venture Securities" has the meaning set forth in Section 2.1(c) of
this Agreement.
"ESOP" has the meaning assigned to such term in Section 8.3 of this
Agreement.
"Escrow Amount" has the meaning set forth in Section 5.6(d)(i) of this
Agreement.
"Escrow Notice" has the meaning set forth in Section 5.6(d)(ii) of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agreement" has the meaning set forth in Background Section A of
this Agreement.
"Exchanged Shares" has the meaning set forth in Section 2.1 of this
Agreement.
"Good Reason" means the failure of the Company or Xxxxxxx-Xxxxx to pay a
Management Investor the compensation provided by the Company on the date hereof
or, in the case of Xxxxxxx, pursuant to his employment agreement with the
Company and Xxxxxxx-Xxxxx, as it may be amended from time to time.
"Incentive Shares" means the shares of Common Stock owned by each
Purchasing Management Investor designated as Incentive Shares on Schedule 1-B to
be appended hereto, as it may be amended from time to time, and all other
securities of the Company (or a successor to the Company) (i) received on
account of ownership of such shares, including any and all incentive securities
issued in connection with any merger, consolidation, stock dividend, stock
distribution, stock split, reverse stock split, stock combination,
recapitalization, reclassification, subdivision, conversion or similar
transaction in respect thereof or (ii) acquired pursuant to the Restricted Stock
Plan; provided that in no event shall Incentive Shares include any Securities
issuable upon the exercise of an Exchanged Option.
"Investor" and "Investors" have the meanings set forth in the Preamble of
this Agreement.
"Xxxxxxx" has the meaning set forth in the Preamble of this Agreement.
"Xxxxxxx Designees" has the meaning set forth in Section 6.2(a)(i).
"Management Investor" and "Management Investors" have the meanings set
forth in the Preamble of this Agreement.
"Observers" has the meaning set forth in Section 5.1 of this Agreement.
"Offer Notice" has the meaning set forth in Section 4.6 of this Agreement.
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"Offered Securities" has the meaning set forth in Section 4.6 of this
Agreement.
"Option Purchase Price" has the meaning set forth in Section 7.2(a)(ii)(A)
of this Agreement.
"Permitted Transferee" has the meaning set forth in Section 4.5(d) of this
Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, firm, association, joint venture, joint stock company, trust or
other entity, or any government or regulatory administrative or political
subdivision or agency, department or instrumentality thereof.
"Preferred Stock" has the meaning set forth in Background Section B of this
Agreement.
"Preferred Stockholders Agreement" has the meaning set forth in Section 8.2
of this Agreement.
"Public Offering" means a successfully completed firm-commitment
underwritten public offering (other than a Unit Offering, as hereinafter
defined) pursuant to an effective registration statement under the Securities
Act in respect of the offer and sale of shares of Common Stock for the account
of the Company and any stockholder selling shares of Common Stock resulting in
aggregate net proceeds to the Company in such offering of not less than $20
million.
"Purchase Number" has the meaning set forth in Section 7.2(a)(ii) of this
Agreement.
"Purchase Option" has the meaning set forth in Section 7.2(a) of this
Agreement.
"Purchasing Management Investors" has the meaning set forth in the Preamble
of this Agreement.
"Redemption Shares" has the meaning set forth in Section 2.1 of this
Agreement.
"Registration Rights Agreement" has the meaning set forth in Article VIII
of this Agreement.
"Regulatory Problem" has the meaning set forth in Section 5.3 of this
Agreement.
"Regulatory Sale" has the meaning set forth in Section 5.8(f) of this
Agreement.
"Restricted Investor" has the meaning set forth in Section 4.5 of this
Agreement.
"Restricted Stock Plan" has the meaning set forth in Background Section D
of this Agreement.
"Reverse Stock Split" has the meaning assigned to such term in Section 8.3
of this Agreement.
"Rights Holder" has the meaning set forth in Section 5.10 of this
Agreement.
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"Rollover Securities" has the meaning set forth in Background Section C of
this Agreement.
"Xxxxxxx-Xxxxx" has the meaning set forth in set forth in Background
Section A of this Agreement.
"Xxxxxxx-Xxxxx Shares" means the shares of common stock, par value $.01 per
share, of Xxxxxxx-Xxxxx outstanding as of the Closing and all such shares
issuable upon the exercise of options outstanding on the Closing Date.
"Sale Notice" has the meaning set forth in Section 7.3 of this Agreement.
"SBA" has the meaning set forth in Section 3.1(g) of this Agreement.
"SEC" has the meaning set forth in Section 3.1(h) of this Agreement.
"Securities" has the meaning set forth in Background Section E of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" has the meaning set forth in Background Section
B of this Agreement.
"Series B Preferred Stock" has the meaning set forth in Background Section
B of this Agreement.
"Shares" has the meaning set forth in Background Section B of this
Agreement.
"Size Status Declaration" has the meaning set forth in Section 5.4 of this
Agreement.
"Subordinated Note" has the meaning set forth in Section 4.10(b) of this
Agreement.
"Subsequent Offering" has the meaning set forth in Section 7.2(a)(iii)(A)
of this Agreement.
"Subsidiary" means, as to any Person, any corporation or other entity more
than 50% of whose stock of any class or classes or other rights having by the
terms thereof ordinary voting power to elect a majority of the directors (or
persons exercising similar functions) of such corporation or other entity
(irrespective of whether or not at the time stock of any class or classes of
such corporation or other entity shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person and/or
one or more Subsidiaries of such Person.
"Tag-Along Acceptance Notice" has the meaning set forth in Section 5.8(b)
of this Agreement.
"Tag-Along Right" has the meaning set forth in Section 5.8 (a) of this
Agreement.
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"Tag-Along Rights Holders" has the meaning set forth in Section 5.8(a) of
this Agreement.
"Tag-Along Sale Notice" has the meaning set forth in Section 5.8(b) of this
Agreement.
"Tag-Along Seller" has the meaning set forth in Section 5.8(b) of this
Agreement.
"Termination Date" has the meaning set forth in Section 7.2(a) of this
Agreement.
"Transfer" has the meaning set forth in Section 4.5(b) of this Agreement.
"Transfer Date" has the meaning set forth in Section 7.4 of this Agreement.
"Transfer Notice" has the meaning set forth in Section 4.6 of this
Agreement.
"Unit Offering" means an underwritten public offering of a combination of
debt securities and equity securities of the Company (or warrants or exchange
rights to purchase equity securities) in which not more than 15% of the gross
proceeds received for the sale of such securities is attributed to such equity
securities.
"83(b) Election" has the meaning set forth in Section 9.2 of this
Agreement.
ARTICLE II
ISSUANCE OF SHARES TO 399 VENTURE AND CONTINUING MANAGEMENT INVESTORS;
REDEMPTION OF CERTAIN STOCK
2.1. Exchange and Redemption of Xxxxxxx-Xxxxx Securities. (a) At the
Closing, each Continuing Management Investor (other than Xxxxxxx and his Family
Members) shall exchange the Xxxxxxx-Xxxxx Shares set forth opposite such
Person's name on Schedule 1-A(A) and described as Rollover Securities (the
"Rollover Securities") for the number of shares of Class A Common Stock and of
Series A and Series B Preferred Stock set forth opposite such Continuing
Management Investor's name on Schedule 1-A(A) (collectively, the "Exchanged
Shares").
(b) At the Closing, each Continuing Management Investor (other than
Xxxxxxx) shall submit for redemption to Xxxxxxx-Xxxxx the number and kind
of securities set forth opposite such Person's name on Schedule 1-A(B) (the
"Redemption Shares") and shall receive an amount in cash as specified on
Schedule 1-A(B) (the "Cash Redemption Amounts").
(c) At the Closing, 399 Venture shall purchase from the Company,
400,000 shares of Class A Common Stock, 1,191,600 shares of Class B Common
Stock, and 474,504 shares of Series A Preferred Stock (collectively, the
"399 Venture Securities"). The purchase price for the Securities purchased
pursuant to this Section 2.1(b) shall be $1.00 per share of Common Stock
and $100 per share of Preferred Stock.
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2.2. Closing. The closing of the transfer of the Shares purchased by 399
Venture and exchanged by the Continuing Investors hereunder (the "Closing") will
take place at the same location and on the same date as the Exchange Closing. At
the Closing, (a) the Company shall deliver to 399 Venture certificates
evidencing the number of shares of Securities to be purchased by 399 Venture
against payment of the purchase price of $26,771,525 by wire transfer of
immediately available funds or by certified check, (b) Xxxxxxx-Xxxxx shall
deliver to the Continuing Management Investors the Cash Redemption Amounts and
the Continuing Management Investors shall deliver to Xxxxxxx-Xxxxx certificates
evidencing such redeemed shares, in appropriate form for cancellation by
Xxxxxxx-Xxxxx, and (c) the Company shall deliver to the Continuing Management
Investors the certificates evidencing the Exchanged Shares, and the Continuing
Management Investors shall deliver to the Company certificates evidencing such
Investor's Rollover Securities, duly executed for transfer in blank or
accompanied by Stock Powers duly executed in blank. The Cash Redemption Amounts
shall be delivered by wire transfer of immediately available funds or by
certified or cashier's check.
2.3. Conditions to 399 Venture's and Management Investor's Obligations. The
obligation of 399 Venture to purchase and pay for the 399 Venture Securities and
of each Management Investor to exchange his Rollover Securities for the
Exchanged Shares at the Closing is subject to the satisfaction on or prior to
the Closing of the following conditions:
(a) The representations and warranties of the Company set forth in
Article III shall be true and correct in all material respects on and as of
the Closing as though then made, and all covenants of the Company required
to be performed on or prior to the Closing shall have been performed in all
material respects.
(b) The Company's Certificate of Incorporation and Bylaws shall be
substantially in the forms of Exhibits B and C, respectively.
(c) The Company shall have delivered to each of 399 Venture and the
Continuing Management Investors certificates for the Exchanged Shares
issued pursuant to Section 2.2 and Xxxxxxx-Xxxxx shall have delivered the
Cash Redemption Amounts to the Continuing Management Investors.
(d) No preliminary or permanent injunction or order, decree or ruling
of any nature issued by any court or governmental agency of competent
jurisdiction, nor any statute, rule, regulation or executive order
promulgated or enacted by any federal, state or local governmental
authority, shall be in effect, that would prevent the consummation of the
transactions contemplated by this Agreement or the Exchange Agreement.
(e) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not violate the Company's
Certificate of Incorporation or Bylaws, any applicable laws or orders,
regulations, rules or requirements of a court, public body or authority by
which the Company is bound.
(f) All corporate and other proceedings, if any, taken or to be taken
by the Company in connection with the transactions contemplated hereby to
be consummated at the Closing and all documents incident thereto shall be
8
reasonably satisfactory in form and substance to 399 Venture and the
Continuing Management Investors and 399 Venture and the Continuing
Management Investors shall have received from the Company all such
counterpart originals or certified or other copies of such documents as
they may reasonably request.
(g) All conditions to the closing under the Stock Purchase Agreement
dated as of January 21, 1999 among IMC Global Inc., a Delaware corporation,
The Vigoro Corporation, a Delaware corporation, and the Company, as amended
on April 13, 1999, shall have been satisfied or waived.
2.4. Conditions to the Company's Obligations. The obligations of the
Company to issue the 399 Venture Securities to 399 Venture and the Exchanged
Shares to each Continuing Management Investor as set forth herein at the Closing
are subject to the satisfaction on or prior to the Closing of the following
conditions:
(a) The representations and warranties of 399 Venture and each
Continuing Management Investor set forth in Article IV shall be true and
correct in all material respects at and as of the Closing as though then
made, and all covenants of each Investor required to be performed at or
prior to the Closing shall have been performed in all material respects.
(b) No preliminary or permanent injunction or order, decree or ruling
of any nature issued by any court or governmental agency of competent
jurisdiction, nor any statute, rule, regulation or executive order
promulgated or enacted by any federal, state or local governmental
authority, shall be in effect, that would prevent the consummation of the
transactions contemplated by this Agreement or the Exchange Agreement.
(c) All corporate and other proceedings, if any, taken or to be taken
by 399 Venture and the Continuing Management Investors in connection with
the transactions contemplated hereby to be consummated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Company, and the Company shall have received from 399
Venture and each Continuing Management Investor all such counterpart
originals or certified or other copies of such documents as it may
reasonably request.
(d) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not violate any applicable
laws or orders, regulations, rules or requirements of a court, public body
or authority by which 399 Venture or any Continuing Management Investor is
bound.
(e) 399 Venture shall have paid or shall pay concurrently the purchase
price required of it pursuant to this Article II, and 399 Venture shall
have purchased or shall simultaneously purchase the 399 Venture Securities
pursuant to this Article II and each Continuing Management Investor shall
have delivered or shall deliver simultaneously the certificates
representing such Management Investor's Rollover Securities in the form
required by Section 2.2.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. Representations and Warranties of the Company. The Company represents
and warrants to each of the Investors as follows:
(a) The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware.
(b) The Company has full corporate power and corporate authority to
make, execute, deliver and perform this Agreement and to carry out all of
the transactions provided for herein.
(c) The Company has taken such corporate action as is necessary or
appropriate to enable it to perform its obligations hereunder, and this
Agreement constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with the terms
hereof.
(d) The Shares, when issued in accordance with the terms of this
Agreement and the Exchange Agreement, will be validly issued, fully paid
and non-assessable.
(e) Upon consummation of the Closing, the authorized capital stock of
the Company will consist of (i) 2,200,000 shares of Class A Common Stock,
of which 768,426 will be issued and outstanding, (ii) 2,000,000 shares of
Class B Common Stock, of which 1,191,600 will be issued and outstanding,
(iii) 675,000 shares of Series A Preferred Stock, of which 607,140 will be
issued and outstanding, and (iv) 100,000 shares of Series B Preferred
Stock, of which 74,874 will be issued and outstanding. Except as set forth
in Section 3.1(f) and as otherwise set forth herein, as of the Closing
there will be no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase from the Company,
or otherwise require the Company to issue, any shares of capital stock of
the Company or securities or obligations of any kind convertible into or
exchangeable for any shares of capital stock of the Company; the Company
will not be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock;
and the Shares will constitute all of the outstanding shares of the
Company's capital stock.
(f) The Company has reserved for issuance pursuant to the Restricted
Stock Plan 239,980 shares of Class A Common Stock, 14,795 shares of Series
A Preferred Stock and 8,320 shares of Series B Preferred Stock. Any current
or future employee purchasing Class A Common Stock pursuant to the
Restricted Stock Plan who is not a party to this Agreement shall be
required, as a condition of such purchase, to execute an agreement pursuant
to which such employee agrees to be bound by the terms and provisions of
this Agreement applicable to such employee, and any shares purchased
pursuant to the Restricted Stock Plan shall be deemed to be Incentive
Shares hereunder.
(g) The Company is a "small business concern," as that term is defined
in the Small Business Investment Act of 1958, as amended, and in the
10
regulations of the Small Business Administration ("SBA") promulgated
thereunder. The information set forth in the SBA Forms 480, 652 and Part A
of Form 1031 regarding the Company and its Affiliates, when delivered to
the Investors, will be accurate and complete.
(h) Neither the Company nor any person acting on its behalf has
offered to sell or sold any of the shares by any form of general
solicitation such as would violate Rule 502(c) promulgated by the
Securities and Exchange Commission (the "SEC") under the Securities Act.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF EACH INVESTOR
4.1. Representations, Warranties and Covenants of Each Investor. Each of
the Investors severally represents and warrants to, and covenants and agrees
with, the Company that:
(a) Such Investor has full legal right, power and authority (including
the due authorization by all necessary corporate action in the case of
corporate Investors) to enter into this Agreement and to perform such
Investor's obligations hereunder without the need for the consent of any
other Person; and this Agreement has been duly authorized, executed and
delivered and constitutes the legal, valid and binding obligation of such
Investor enforceable against such Investor in accordance with the terms
hereof.
(b) The Securities are being received by such Investor for investment
for his or its own account and not with a view to any distribution thereof
that would violate the Securities Act, or the applicable securities laws of
any state; and such Investor will not distribute the Securities in
violation of the Securities Act or the applicable securities laws of any
state.
(c) Such Investor understands that the Securities have not been
registered under the Securities Act or the securities laws of any state and
may not be reoffered or sold unless subsequently registered under the
Securities Act and any applicable state securities laws or unless an
exemption from such registration becomes or is available.
(d) Such Investor is financially able to hold the Securities for
long-term investment, believes that the nature and amount of the Securities
being purchased are consistent with such Investor's overall investment
program and financial position, and recognizes that there are substantial
risks involved in the purchase of the Securities.
(e) Such Investor confirms that (i) such Investor is familiar with the
business of the Company, (ii) such Investor has had the opportunity to ask
questions of officers and directors of the Company and to obtain (and that
such Investor has received to such Investor's satisfaction) such
information about the business and financial condition of the Company as
such Investor has reasonably requested, and (iii) such Investor, is an
"accredited investor" within the meaning of Rule 501(a) promulgated under
the Securities Act.
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4.2. Legends. (a) All certificates representing Securities shall bear the
following legends in addition to any other legend required under applicable law:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS A REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH SHARES IS
EFFECTIVE OR UNLESS THE COMPANY IS IN RECEIPT OF AN OPINION OF
COUNSEL SATISFACTORY TO IT TO THE EFFECT THAT SUCH SHARES MAY BE
SOLD WITHOUT REGISTRATION UNDER THE ACT AND SUCH LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
THE TERMS AND CONDITIONS OF A SECURITIES PURCHASE AND HOLDERS
AGREEMENT BY AND AMONG THE COMPANY AND THE HOLDERS SPECIFIED
THEREIN, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY. THE SALE, TRANSFER OR OTHER DISPOSITION OF
THE SECURITIES IS SUBJECT TO THE TERMS OF SUCH AGREEMENT AND THE
SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH.
(b) In addition to the legends required by Section 4.2(a) above, the
following legend shall appear on certificates representing Incentive
Shares, provided, that the Company's failure to cause certificates
representing Incentive Shares to bear such legend shall not affect the
Company's Purchase Option described in Section 7.2 herein:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT FOR A
PERIOD OF TIME TO A PURCHASE OPTION OF THE COMPANY APPLICABLE TO
"INCENTIVE SHARES" AS DESCRIBED IN THE SECURITIES PURCHASE AND HOLDERS
AGREEMENT BY AND AMONG THE COMPANY AND THE HOLDERS SPECIFIED THEREIN, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
4.3. Management Investor Representations and Warranties. Each Management
Investor severally represents and warrants to the Company that:
(a) such Management Investor's residence, business address, business
and residence telephone numbers and social security number are as set forth
below such Management Investor's signature to this Agreement; and
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(b) in formulating the decision to (i) exchange such Management
Investor's Rollover Securities for the Exchanged Shares, (ii) submit the
Redemption Shares set forth opposite such Management Investor's name on
Schedule 1-A(B) for the Cash Redemption Amounts specified thereon, and
(iii) enter into this Agreement, such Management Investor has relied solely
upon the independent investigation of the Company's business and upon
consultations with such Management Investor's legal and financial advisers
with respect to this Agreement and the nature of such Management Investor's
investment; and that in entering into this Agreement no reliance was placed
upon any representations or warranties other than those contained in this
Agreement. Each Management Investor acknowledges having received and read
the Confidential Offering Memorandum of RCGI dated April 16, 1999 relating
to its $200,000,000 10.25% First Mortgage Notes due 2009.
(c) The Management Investor has good and valid title to the Rollover
Securities being exchanged by such Management Investor and Redemption
Shares being submitted for redemption by such Management Investor, free and
clear of all liens, claims, mortgages, securities interests, options,
charges, restrictions (including, without limitation, rights of first
refusal and similar rights) and other encumbrances (collectively,
"Encumbrances") of any kind. The certificates representing the Rollover
Securities are duly endorsed in blank or accompanied by stock powers duly
endorsed in blank in proper form for transfer, passing good and valid title
to the Rollover Securities to RCGI, free and clear of all Encumbrances,
other than those arising from acts of RCGI. The Rollover Securities and the
Redemption Shares are not subject to any voting trust agreement or other
contract, agreement, arrangement, commitment or understanding restricting
or otherwise relating to voting or disposition of the Rollover Securities
and the Redemption Shares.
(d) Each Continuing Management Investor acknowledges and agrees that
such Management Investor's Rollover Options shall be irrevocably
surrendered and exchanged for such Investor's Exchanged Options and that
the Exchanged Options shall have the terms and conditions contained in the
stock option agreement between the Company and such Continuing Management
Investor entered into as of the Closing Date, the form of which is appended
to this Agreement as Exhibit F. Each Continuing Management Investor forever
releases and discharges the Company and Xxxxxxx-Xxxxx forever from any
claims in respect of Common Stock of Xxxxxxx-Xxxxx or any other claims or
liabilities arising with respect to such Investor's Rollover Options.
4.4. Representations and Warranties of 399 Venture. 399 Venture represents
and warrants to, and covenants and agrees with the Company that, 399 Venture
qualifies as an "accredited investor" within the meaning of Rule 501(a) of
Regulation D under the Securities Act, and has such knowledge and experience in
financial and business matters that 399 Venture is capable of evaluating the
merits and risks of its purchase of the Securities.
4.5. Restrictions on Transfers of Securities. The following restrictions on
Transfer shall apply to all Securities owned by any Restricted Investor until
the completion of a Public Offering. As used herein, "Restricted Investor" shall
mean any Investor or Permitted Transferee except a Permitted Transferee by
virtue of Section 4.5(d)(iii) hereof:
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(a) No Restricted Investor shall Transfer (other than in connection
with a redemption or purchase by the Company) any Securities unless (i)
such Transfer is to a Permitted Transferee and (ii) such Transfer complies
with the provisions, if applicable, of Sections 5.7 and 5.8, this Section
4.5 and, in addition, in the case of Securities held by Management
Investors, the applicable provisions of Article VII of this Agreement.
(b) No Restricted Investor may effect any Transfer of Securities
unless the transferee (other than a Permitted Transferee under Section
4.5(d)(iii)) executes an agreement pursuant to which such transferee agrees
to be bound by the terms and provisions of this Agreement applicable to the
transferor (except as otherwise specifically provided herein). Any
purported Transfer in violation of this Agreement shall be null and void
and of no force and effect and the purported transferee shall have no
rights or privileges in or with respect to the Company. As used herein,
"Transfer" means the making of any sale, exchange, assignment,
hypothecation, gift, security interest, pledge or other encumbrance, or any
contract therefor, any voting trust or other agreement or arrangement with
respect to the transfer of voting rights or any other beneficial interest
in any of the Securities, the creation of any other claim thereto or any
other transfer or disposition whatsoever, whether voluntary or involuntary,
affecting the right, title, interest or possession in or to such
Securities.
(c) Prior to any proposed Transfer of any Securities, the holder
thereof shall give written notice to the Company describing the manner and
circumstances of the proposed Transfer accompanied by a written opinion of
legal counsel, addressed to the Company and the transfer agent, if other
than the Company, and reasonably satisfactory in form and substance to each
addressee, to the effect that the proposed Transfer of the Securities may
be effected without registration under the Securities Act and applicable
state securities laws. Each certificate evidencing the Securities
transferred shall bear the legends set forth in Section 4.2(a) and, if
applicable, the legend set forth in Section 4.2(b), except that such
certificate shall not bear the legends set forth in Section 4.2(a) if the
opinion of counsel referred to above is to the further effect that such
legend is not required in order to establish compliance with any provision
of the Securities Act or applicable state securities laws.
(d) As used herein, "Permitted Transferee" shall mean:
(i) in the case of any Investor or Permitted Transferee who is a
natural person, (x) such person's spouse or children or grandchildren
(in each case, natural or adopted), any trust for the sole benefit of
such person and such person's spouse or children or grandchildren (in
each case, natural or adopted), any charitable trust the grantor of
which is an Investor or Permitted Transferee, or any corporation or
partnership in which the direct and beneficial owner of all of the
equity interests is such individual person or such person's spouse or
children or grandchildren (in each case, natural or adopted) (or any
trust solely for the benefit of such persons), collectively "Family
Members" or (y) any organization exempt from federal income taxation
under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended;
(ii) in the case of any Investor or Permitted Transferee who is,
in each case, a natural person, the heirs, executors, administrators
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or personal representatives upon the death of such person or upon the
incompetency or disability of such person for purposes of the
protection and management of such person's assets;
(iii) any Person if such Person takes such Securities pursuant to
a sale in connection with a Public Offering or following a Public
Offering in open market transactions or under Rule 144 under the
Securities Act;
(iv) in the case of 399 Venture or any Permitted Transferee of
399 Venture, (A) Citibank N.A., Citicorp or CitiGroup or any Affiliate
of any of the foregoing entities; (B) any employee or director of any
of the foregoing entities, or any trust, partnership or other entity
established for the benefit of such officers, employees or directors
(each, a "399 Venture Co-Investor"); or (C) any qualified
institutional buyer (as such term is defined in Rule 144A under the
Securities Act) organized under the laws of the United States or any
State thereof, provided that the Transfer to such qualified
institutional buyer shall be subject to the provisions of Section 5.8
hereof;
(v) in the case of 399 Venture or any Permitted Transferee of 399
Venture, any Person if such Person takes such Securities pursuant to a
Transfer required in connection with any Regulatory Problem, as
provided in Section 5.3 below, provided, however, that the transfer to
such Person shall be subject to the provisions of Section 5.8 hereof;
or
(vi) in the case of any Investor or Permitted Transferee, any
Person approved by the Company as evidenced by a resolution duly
adopted by at least a majority of the Board of Directors or the
holders of a majority of the outstanding Common Stock then held by the
Investors (including shares held by the transferor), provided,
however, that the transfer to such Person shall be subject to the
provisions of Section 5.8 hereof.
(e) As long as this Agreement is in effect and except in the case of
an Approved Sale or a Public Offering, (i) Xxxxxxx and his direct or
indirect transferees shall not transfer any shares of Common Stock unless
such transferee agrees in writing to vote all of the Securities transferred
to comply with all of the provisions of Sections 6.1 through 6.7 below, and
(ii) 399 Venture and its direct or indirect transferees shall not transfer
any shares of Common Stock unless such transferee agrees in writing to
comply with all of the provisions of Sections 6.2 through 6.8 below;
provided, however, that if 399 Venture and its Co-Investors transfer, in
one or more related transactions, 50% or more of the Common Stock held by
399 Venture and its Co-Investors as of the Closing Date, the transferee or
transferees thereof shall be required to agree in writing to vote all of
the Securities transferred to such Persons for the Xxxxxxx Designees
pursuant to Sections 6.2(a)(i), 6.3, 6.4(a) and the proviso to Section 6.7
(and any designee pursuant to Section 6.5) and with the covenants set forth
in Section 5.7(a), but shall not be subject to any additional restrictions
or requirements with respect to voting.
4.6. Certain Sales by Xxxxxxx. (a) Notwithstanding any other provision of
this Agreement, at such time as Xxxxxxx is no longer the chief executive officer
of the Company, Xxxxxxx, and his Family Members shall be free, at any time and
from time to time, to sell up to 50%, in the aggregate, of the Common Stock
collectively owned by them as of the time he is no longer the chief executive
officer of the Company, subject to the provisions of this Section 4.6. If
Xxxxxxx, no longer being the chief executive officer of the Company, decides to
make such a sale, he shall give written
15
notice (the "Transfer Notice") to the Company of the number of shares of Common
Stock he wishes to sell (the "Offered Securities"). The Company may offer to
purchase all (but not less than all) of the Offered Securities by delivering a
written notice (the "Offer Notice") of such offer (the "Offer") to Xxxxxxx
within 60 days after receipt of the Transfer Notice. The Offer Notice will set
forth the terms and conditions on which the Company will purchase the Offered
Securities. Xxxxxxx shall give the Company written notice of his acceptance or
rejection of the Offer within 30 days of receipt of the Offer Notice.
(b) If the Company offers to purchase the Offered Securities and
Xxxxxxx accepts the Offer, the closing of the purchase and sale of the
Offered Securities shall be held at the place and the date to be
established by the Company, which in no event shall be less than ten or
more than 15 days from the date on which Xxxxxxx delivers his acceptance of
the Offer. At such closing, Xxxxxxx shall deliver the certificates
evidencing the number of shares of Offered Securities to be purchased by
the Company, accompanied by stock powers duly endorsed in blank or duly
executed instruments of transfer, and any other documents that are
necessary to transfer to the Company 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 shall deliver to Xxxxxxx the full amount of the
purchase price for the Offered Securities in cash or certified or bank
cashier's check.
(c) If the Company makes no offer (for any reason including without
limitation those set forth in Section 4.9), or does not make a timely offer
to purchase all of the Offered Securities or Xxxxxxx elects not to accept
the Offer, Xxxxxxx may sell the Offered Securities to a third party;
provided, however, that (i) if the Company shall have made timely delivery
of the Offer Notice pursuant to Section 4.6(a) above, such sale shall be at
a price no less than the price specified in the Offer Notice and on other
terms no more favorable to such third party than those specified in the
Offer Notice and (ii) such sale shall take place during the 120-day period
immediately following the last date on which Xxxxxxx could have accepted
the Offer. Any shares of the Offered Securities not transferred within such
120-day period will be subject to the provisions of this Section 4.6 upon
subsequent transfer.
(d) The provisions of Section 5.8 shall apply to any sale pursuant to
this Section 4.6, provided, however, that for the purposes of this Section
4.6 only, the Tag-Along Rights of those Investors who elect to exercise
such rights shall, if necessary, be reduced pro rata in proportion to such
Investors' relative investments in the then outstanding Common Stock to
ensure that the Common Stock sold by the Tag-Along Rights Holders
constitute not more than 50% of the Common Stock being sold.
4.7. Termination of Restrictions. The restrictions on transfers of Common
Stock contained in Sections 4.5 and 4.6 above shall terminate on the
consummation of a Public Offering.
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4.8. Notation. A notation will be made in the appropriate transfer records
of the Company with respect to the restrictions on transfer of the Securities
referred to in this Agreement.
4.9. Limitation on Repurchase of Company Stock. Each Investor understands
that concurrently with the issuance of the Shares, the Company is entering into
certain financing agreements which will contain prohibitions, restrictions and
limitations on the ability of the Company to purchase any of the Securities and
to pay dividends on the Securities.
4.10. Future Sales. (a) Each Management Investor understands and agrees
that 399 Venture may in the future transfer, subject to the terms and conditions
of this Agreement, shares of Common Stock to a third party. In addition, future
investors in the Company may receive debt securities or preferred stock senior
in liquidation preference and dividend payment rights, with a higher dividend
rate or other terms more favorable than those of the Securities.
(b) Each Management Investor understands and agrees that 399 Venture
may elect to transfer, in whole or in part, the $10,000,000 subordinated
note issued to 399 Venture on the Closing Date (the "Subordinated Note"),
and 399 Venture shall have the right to transfer the Subordinated Note, in
whole or in part, to any Person. In connection with such transfer, 399
Venture may elect to have the Company repurchase part or all of the
Subordinated Note and reissue the aggregate amount so repurchased to such
Person designated by 399 Venture, either as shares of Series A Preferred
Stock or as an additional Subordinated Note, as 399 Venture may designate
in writing. No Tag-Along Rights of any Investors shall apply to the
transactions described in this Section 4.10(b) with respect to transaction
with Affiliates of 399 Venture.
(c) Each Management Investor understands and agrees that in the
future, in addition to the provisions of Section 4.10(b), 399 Venture may
elect to transfer, in whole or in part, the equity or debt securities held
by 399 Venture, and 399 Venture may elect to so transfer such securities by
requiring the Company (i) to repurchase or redeem the securities designated
by 399 Venture to be repurchased or redeemed and (ii) to reissue to such
Person or Persons designated by 399 Venture in writing the aggregate amount
so repurchased or redeemed by the Company from 399 Venture. No Tag-Along
Rights of any Investors pursuant to Section 5.8 shall apply to the
foregoing transfers; however, to the extent that the Persons designated by
399 Venture in the foregoing clause (ii) are not an Affiliate of 399
Venture or any fund organized by an Affiliate of 399 Venture, each Investor
who would have been a Tag-Along Rights Holder had Section 5.8 applied to
the foregoing transactions shall have the right to require 399 Venture to
purchase that number of shares of Common Stock from such Investor as 399
Venture would have been required to include in the transfer had the
transfer been subject to Section 5.8.
4.11. Reliance. Each Investor acknowledges that the Company and each of the
other Investors is entering into this Agreement in reliance upon such Investor's
representations and warranties and other covenants and agreements contained
herein.
17
ARTICLE V
OTHER COVENANTS AND REPRESENTATIONS
5.1. Observers' Rights. So long as 399 Venture or its Affiliates own at
least 5% of the Common Stock outstanding, if no employee of 399 Venture or its
Affiliates is a member of the Company's Board of Directors, 399 Venture shall
have the right to designate two observers (the "Observers") to attend meetings
of the Company's Board of Directors and committees thereof. If at least one
employee of 399 Venture or its Affiliates is a member of the Company's Board of
Directors, 399 Venture shall have the right to designate one Observer to attend
meetings of the Company's Board of Directors and committees thereof. The
Observers shall not have the right to vote on any matter presented to the Board
of Directors or any committee thereof. The Company shall give each Observer
written notice of each meeting of the Board of Directors and committees thereof
at the same time and in the same manner as the members of the Board of Directors
or such committee receive notice of such meetings, and the Company shall permit
each Observer to attend as an observer all meetings of its Board of Directors
and committees thereof. Each Observer shall be entitled to receive all written
materials and other information given to the directors in connection with such
meetings at the same time such materials and information are given to the
directors, and each Observer shall keep confidential such materials and
information and any other confidential information discussed at any meeting of
the Board of Directors. If the Company proposes to take any action by written
consent in lieu of a meeting of its Board of Directors or a committee thereof,
the Company shall give written notice thereof to each Observer prior to the
effective date of such consent. The Company shall provide to each Observer all
written materials and other information given to the directors in connection
with such action by written consent at the same time such materials and
information are given to the directors, and each Observer shall keep such
materials and information confidential. The Company shall pay the reasonable
out-of-pocket expenses of each Observer incurred in connection with attending
such meetings.
5.2. Financial Statements and Other Information. So long as 399 Venture
owns any of the Securities, the Company shall deliver to 399 Venture:
(a) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Company,
consolidated balance sheets of the Company and its subsidiaries as of the
end of such period, and consolidated statements of income and cash flows of
the Company and its subsidiaries for the period then ended prepared in
conformity with generally accepted accounting principles applied on a
consistent basis, except as otherwise noted therein, and subject to the
absence of footnotes and to year-end adjustments;
(b) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, a consolidated and consolidating
balance sheet of the Company and its subsidiaries as of the end of such
year, and consolidated and consolidating statements of income and cash
flows of the Company and its subsidiaries for the year then ended prepared
in conformity with generally accepted accounting principles applied on a
consistent basis, except as otherwise noted therein, together with an
auditor's report thereon of a firm of established national reputation; and
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(c) copies of any other reports, financial statements, certificates or
other documents required to be delivered to the agent for the Company's
bank group pursuant to the terms of any credit agreement then in effect.
5.3. Regulatory Compliance Cooperation. So long as 399 Venture or its
Affiliates beneficially own any of the Securities, 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 shares of any class of its
capital stock or any securities convertible into or exchangeable for any shares
of any class of its capital stock, the Company shall give 399 Venture at least
30 days prior written notice of such pending action. Upon the written request of
399 Venture made within 20 days after its receipt of any such notice, stating
that after giving effect to such action 399 Venture would have a Regulatory
Problem (as described below), the Company will defer taking such action for such
period (not to extend beyond 90 days after 399 Venture's receipt of the
Company's original notice) as 399 Venture requests to permit it and its
Affiliates to reduce the quantity of Securities held by it and its Affiliates in
order to avoid the Regulatory Problem. In addition, the Company will not be a
party to any merger, consolidation, recapitalization or other transaction
pursuant to which 399 Venture would be required to take any voting securities,
or any securities convertible into voting securities, which would reasonably be
expected to cause 399 Venture to have a Regulatory Problem. For purposes of this
paragraph, a Person will be deemed to have a "Regulatory Problem" when such
Person and such person's Affiliates own, control or have power over (or such
Person believes that there is a substantial risk of an assertion that such
Person and such Person's Affiliates own, control or have power over) a greater
quantity of securities of any kind issued by the Company than are permitted to
be owned by such Person under any requirement of any governmental authority
applicable to such Person.
5.4. Small Business Administration Forms.
Prior to and after the Closing, the Company shall, if requested by 399
Venture or any Permitted Transferee of 399 Venture, execute Forms 480 ("Size
Status Declaration") and 652-D ("Assurance of Compliance") of the Small Business
Administration and any other documents that may be required by the Small
Business Administration or any other governmental agency having jurisdiction
over the activities of 399 Venture, or which 399 Venture or such Permitted
Transferee may reasonably require in connection therewith.
5.5. Economic Impact. Promptly after the end of each fiscal year (but in
any event prior to February 28 of each year), the Company shall provide to 399
Venture a written assessment, in form and substance satisfactory to 399 Venture,
of the economic impact of 399 Venture's financing hereunder, specifying the
full-time equivalent jobs created and retained, and the impact of the financing
on the revenues and profits of the Company's business and on taxes paid by the
Company and its employees.
5.6. SBA Access. The Company agrees that 399 Venture and any SBA examiner
shall have the rights of access and information specified in 13 C.F.R. 107.620
(1996) (and any successor provision).
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5.7. Sale of the Company.
(a) For a period of three years following the Closing, so long as the
Company has not consummated a Public Offering, 399 Venture and its
Permitted Transferees (other than any Permitted Transferees pursuant to
Section 4.5(d)(iii)) will not vote in favor of (at a duly called and duly
held meeting of stockholders or the Board of Directors, as the case may be,
of the Company) or consent in writing to the merger, consolidation or sale
(by any means) of all or substantially all of the assets of the Company or
any similar transaction, in any one transaction or series of related
transactions, without the prior written consent of Xxxxxxx.
(b) Subject to Section 5.7(a), so long as the Company has not
consummated a Public Offering, if holders of at least a majority of the
Common Stock (including voting and non-voting shares voting as a single
class) then outstanding and the Board of Directors vote in favor of (at a
duly called and duly held meeting of stockholders or the Board of
Directors, as the case may be, of the Company) or consent in writing to the
merger or consolidation of the Company or the sale of all or substantially
all of its assets or sale of all of the outstanding capital stock or any
other similar transaction (provided such holders include Xxxxxxx if Xxxxxxx
and his Family Members collectively own at least 50% of the outstanding
Common Stock held by them as of the Closing) (any of the foregoing, an
"Approved Sale"), (i) each Restricted Investor will consent to, vote for,
and raise no objections against, and waive dissenters and appraisal rights
(if any) with respect to, the Approved Sale, and (ii) if the Approved Sale
includes a sale of Securities, each Restricted Investor will agree to sell
and will be permitted to sell all of such Restricted Investor's Securities
on the same terms and conditions as are offered to and approved by the
holders of a majority of the Common Stock then outstanding. Each Restricted
Investor will take all necessary and desirable actions in connection with
the consummation of an Approved Sale, including, without limitation, the
execution of any stock purchase, escrow or other similar agreement which
may be required.
(c) The obligations of each of the Investors with respect to an
Approved Sale are subject to the satisfaction of the conditions that upon
the consummation of the Approved Sale all of the Investors and Permitted
Transferees will receive the same form and amount of consideration per
share of Common Stock, or if any holder of Common Stock is given an option
as to the form and amount of consideration to be received, all Investors
and Permitted Transferees will be given the same option.
5.8. Tag-Along Rights.
(a) Except in the case of a Public Offering or a Transfer to a
Permitted Transferee (excluding a Transfer pursuant to Section
4.5(d)(iv)(C), Section 4.5(d)(v) or Section 4.5(d)(vi)), no Restricted
Investor will effect a Transfer of shares of Common Stock unless all other
Investors and their Permitted Transferees and assigns (collectively, the
"Tag-Along Rights Holders") are offered an equal opportunity (the
"Tag-Along Right") to participate in such transaction or transactions on a
pro rata basis as set forth in Section 5.8(b) (subject to the provisions of
Section 5.8(f)) and on identical terms.
(b) Prior to any sale of Common Stock subject to these provisions, the
seller (the "Tag-Along Seller") shall notify the Company in writing of the
20
proposed sale. Such notice (the "Tag-Along Sale Notice") shall set forth
(i) the number of shares of Common Stock (the "Tag-Along Shares") subject
to the proposed sale; (ii) the name and address of the proposed purchaser;
and (iii) the proposed amount of consideration and terms and conditions of
payment offered by such proposed purchaser. Each Tag-Along Rights Holder
shall have the right to sell a percentage of the Tag-Along Shares equal to
the percentage of the outstanding shares of Common Stock then held by such
Tag-Along Rights Holder. The Company shall promptly, and in any event
within ten days, deliver or caused to be delivered (by guaranteed overnight
courier service, if available) the Tag-Along Sale Notice to the Tag-Along
Rights Holders. Each Tag-Along Rights Holder may exercise the Tag-Along
Right by delivery of a written notice (the "Tag-Along Acceptance Notice")
to the Tag-Along Seller within ten days of the date the Tag-Along Sale
Notice was delivered to such courier service or the United States Postal
Service, as the case may be. The Tag-Along Acceptance Notice shall state
the number of shares of Common Stock that the Tag-Along Rights Holder
proposes to include in the proposed sale, and the number of Tag-Along
Shares to be sold by the Tag-Along Seller shall be reduced by such amount.
If no Tag-Along Acceptance Notice is received during the ten-day period
referred to above, Tag-Along Seller shall have the right for a 120-day
period to effect the proposed sale of the Tag-Along Shares on terms and
conditions no more favorable to the transferee than those stated in the
Tag-Along Sale Notice.
(c) Each Tag-Along Rights Holder acknowledges and agrees that 399
Venture or a Permitted Transferee of 399 Venture may grant similar
"tag-along" rights to other Persons and, in such event, such other Persons
shall be offered an equal opportunity to participate in such transaction or
transactions to the same extent as such Tag-Along Rights Holders hereunder
and shall be included in the calculation of the pro rata basis upon which
such Tag-Along Rights Holders may participate in such transaction or
transactions.
(d) (i) Notwithstanding the requirements of this Section 5.8, a
Tag-Along Seller may sell Common Stock at any time without complying with
the requirements of Section 5.8(b) so long as the Tag-Along Seller deposits
into escrow with an independent third party at the time of sale that amount
of consideration received in the sale equal to the "Escrow Amount." As used
herein, the "Escrow Amount" shall equal that amount of consideration as all
Tag-Along Rights Holders would have been entitled to receive if they had
the opportunity to participate in the sale on a pro rata basis, determined
as if each Tag-Along Rights Holder (A) delivered a Tag-Along Notice to the
Tag-Along Seller in the time period set forth in Section 5.8(b) and (B)
proposed to include all of such Tag-Along Rights Holder's shares of Common
Stock in such sale.
(ii) The Tag-Along Seller shall notify the Company in writing of
the proposed sale pursuant to this Section 5.8(d) no later than the
date of such sale. Such notice (the "Escrow Notice") shall set forth
the information required in the Tag-Along Sale Notice, and in
addition, such notice shall state the name of the escrow agent and, if
the consideration (in whole or in part) for the sale was cash, then
the account number of the escrow account. The Company shall promptly,
and in any event within ten days, deliver or caused to be delivered
(by guaranteed overnight courier service, if available) the Escrow
Notice to each Tag-Along Rights Holder. Such Tag-Along Rights Holder
may exercise the tag-along right by delivery to the Tag-Along Seller,
within ten days of the date (the "Escrow Notice Delivery Date") the
21
Escrow Notice was delivered to such courier service or the United
States Postal Service, as the case may be, of (A) a written notice
specifying the number of shares of Common Stock it proposes to sell;
and (B) the certificates for such Common Stock, with stock powers duly
endorsed in blank and with signatures guaranteed.
(iii) Promptly after the expiration of the tenth day after the
Escrow Notice Delivery Date, (A) the Tag-Along Seller shall purchase
that number of shares of Common Stock as the Tag-Along Seller would
have been required to include in the sale had the Tag-Along Seller
complied with the provisions of Section 5.8(b), (B) all shares of
Common Stock not required to be purchased by the Tag-Along Seller
shall be returned to the Tag-Along Rights Holders thereof and (C) all
funds and other consideration held in escrow shall be released to the
Tag-Along Seller. If the Tag-Along Seller received consideration other
than cash in such Tag-Along Seller's sale, the Tag-Along Seller shall
purchase the shares of Common Stock tendered by paying to the
Tag-Along Rights Holders non-cash consideration and cash in the same
proportion as received by the Tag-Along Seller in the sale.
(e) Notwithstanding anything herein to the contrary, a Tag-Along
Seller may make any of the following sales without offering the Tag-Along
Rights Holders the opportunity to participate: (i) sales to a Permitted
Transferee (except pursuant to Section 4.5(d)(iv)(C), 4.5(d)(v) or
4.5(d)(vi)); (ii) sales to officers and directors of the Company which in
the aggregate do not exceed 5% of the outstanding shares of Common Stock;
(iii) sales pursuant to an effective registration statement under the
Securities Act; (iv) sales pursuant to an Approved Sale; (v) sales pursuant
to Section 5.8(h) below; and (f) sales other than those specified in the
foregoing (i) through (v) which in the aggregate do not exceed 5% of the
Common Stock outstanding held by the Tag-Along Seller as of the date
hereof. In addition, any repurchase of Common Stock by the Company pursuant
to Section 4.10(b) and (c) shall not be subject to this Section 5.8.
(f) Notwithstanding any other provision of this Agreement if any
Transfer is a Transfer (a "Regulatory Sale") made to cure a Regulatory
Problem, as set forth in Section 5.3, each Tag-Along Rights Holder shall
have the right to sell to the proposed transferee the same percentage of
the total number of shares of Common Stock outstanding then owned by such
Tag-Along Rights Holder as the percentage of the total number of shares of
Common Stock outstanding then owned by the Tag-Along Seller. If the total
number of shares of Common Stock proposed to be Transferred in a Regulatory
Sale by the Tag-Along Seller and those Tag-Along Rights Holders exercising
their Tag-Along Rights exceeds the maximum number of shares of Common Stock
that the proposed transferee is willing to purchase or otherwise acquire,
then the number of shares of Common Stock to be Transferred shall be
allocated among the Tag-Along Seller and such Tag-Along Rights Holders
(with rounding to avoid fractional shares) in proportion to the number of
outstanding shares of Common Stock that each of them then owns; provided,
however, that in no event shall the number of shares of Common Stock to be
Transferred by 399 Venture or its Affiliates be reduced below that number
necessary to cure the Regulatory Problem in question.
(g) The Tag-Along Rights provided pursuant to this Section 5.8 shall
terminate upon the earlier of (i) a Public Offering or sale of the Company;
and (ii) the day after the date on which 399 Venture and its Permitted
22
Transferees that are not natural persons own less than 5% of the Common
Stock owned by 399 Venture on the Closing Date.
(h) Notwithstanding anything to the contrary herein, if any Restricted
Investor receives a Tag-Along Sale Notice and does not elect to exercise
his Tag-Along Right with respect to the Transfer contemplated by such
notice, such Restricted Investor may sell those shares of Common Stock
which such Restricted Investor could have sold pursuant to such Tag-Along
Right to a third party without compliance with Sections 4.5(a), 5.8 or 7.1.
5.9. Covenant Not To Compete or Solicit.
(a) In consideration of the opportunity to participate in the equity
of the Company, each Management Investor (other than Xxxxxxx, Xxxxxxxx
Xxxxx and Xxxxx Xxxxxxx) covenants and agrees that:
(i) for one (1) year after termination of such Management
Investor's employment with the Company or any of its Subsidiaries,
neither such Management Investor nor any of such Management Investor's
Affiliates shall engage, directly or indirectly, in lines of business
similar to the business of the Company or any of its Subsidiaries
anywhere in the United States. Each Management Investor and the
Company agree that the foregoing covenant is intended to prohibit each
Management Investor from engaging in such activities, as the case may
be, as owner, creditor (except as a trade creditor in the ordinary
course of business), partner, stockholder, lender, officer, director,
manager, employee, contractor or agent for any person, firm or
corporation (except (x) with respect to the Company or (y) as a holder
of equity or debt securities in a corporation which has a class of
securities that is publicly traded on a stock exchange or the
recognized over-the-counter market, and then only to the extent of
owning not more than two percent (2%) of the issued and outstanding
debt or equity securities of such corporation); and
(ii) no Management Investor or any of such Management Investor's
Affiliates shall (x) solicit, employ, retain as a consultant,
interfere with or attempt to entice away from the Company or any of
its Subsidiaries or any successor to any of them any individual who is
employed or retained by the Company or any Subsidiary or any successor
to any of them or (y) engage in or participate in any effort or act to
induce any customers, suppliers, associates or independent contractors
of the Company or any Subsidiary or any successor to any of them to
cease doing business or their association with the Company or any
Subsidiary or any successor to any of them.
(b) Each Management Investor acknowledges and agrees that the remedy
at law for any breach, or threatened breach, of any of the provisions of
this Section 5.9 will be inadequate and, accordingly, each Management
Investor covenants and agrees that the Company shall, in addition to any
other rights and remedies which the Company may have, be entitled to
equitable relief, including injunctive relief, and to the remedy of
specific performance with respect to any breach or threatened breach of
such covenant, as may be available from any court of competent
jurisdiction. Such right to obtain equitable relief may be exercised, at
23
the option of the Company, concurrently with, prior to, after, or in lieu
of, the exercise of any other rights or remedies which the Company may have
as a result of any such breach or threatened breach.
(c) In the event that the provisions of this Section 5.9 shall be
determined by a court of competent jurisdiction to be unenforceable under
applicable law as to that jurisdiction (the parties agreeing that such
decision shall not be binding, res judicata or collateral estoppel in any
other jurisdiction) for any reason whatsoever, then any such provision or
provisions shall not be deemed void, but the parties hereto agree that such
limits may be modified by the court and that such covenant contained in
this Section 5.9 shall be amended in accordance with such modifications, it
being specifically agreed by each Management Investor and the Company that
it is their continuing desire that this covenant be enforced to the full
extent of its terms and conditions or if a court finds the scope of the
covenant unenforceable, the court should redefine the covenant so as to
comply with applicable law.
5.10. Preemptive Rights. (a) Subject to the terms of this Section 5.10, if
the Company proposes to issue any equity securities, other than in a Public
Offering or transaction described in Section 5.10(d) or (e) below, the Company
shall first offer in writing to sell to each Investor who (i) is then a
stockholder of the Company and (ii) holds one percent or more of the outstanding
shares of Common Stock, calculated on a fully diluted basis (collectively, the
"Rights Holders"), such Rights Holder's pro rata share of the proposed issue of
such equity securities, at the same price and on the same terms at which the
Company proposes to sell such issue to others. For purposes hereof, a Rights
Holder's "pro rata share" of an issue of equity securities shall be that number
which is equal to the product of (i) the number of equity securities proposed to
be issued, times (ii) a fraction, the numerator of which is the number of
outstanding shares of Common Stock held by the Rights Holder, calculated on a
fully-diluted basis, and the denominator of which is the aggregate number of
outstanding shares of Common Stock, calculated on a fully-diluted basis. As used
in this Section 5.10, "equity security" means any capital stock of the Company,
any security convertible or exchangeable (with or without consideration) into or
for any capital stock of the Company, any security carrying any warrant, option
or right to subscribe to or to purchase any capital stock of the Company, or any
warrant, option or right to purchase any capital stock of the Company. As used
in this Section 5.10, "calculated on a fully-diluted basis" means calculated on
a pro forma basis assuming the exercise of all options, warrants or other rights
for Common Stock (or securities convertible into or exchangeable for Common
Stock) and the conversion or exchange of all securities convertible into or
exchangeable for Common Stock.
(b) The Company's offer shall describe the equity security proposed to
be issued by the Company, specifying the quantity, the price and payment
terms. Each Rights Holder shall have 15 days from receipt of such offer to
accept the offer in writing, which acceptance may be as to all or any part
of the Rights Holder's pro rata share of such issue. The closing of the
sale of the portion of the equity securities subscribed for under this
Section 5.10(b) shall be held on a date acceptable to the Company and the
applicable Rights Holder, but in no case more than 45 days after the date
of the Company's offer to the Rights Holder.
24
(c) In the event any Rights Holder does not subscribe for all of the
issue of equity securities offered to such Rights Holder pursuant to this
Section 5.10, the Company may sell the portion of the securities not
subscribed for at a price no less favorable to the Company than that
specified in such offer and on payment terms no less favorable to the
Company than those specified in such offer. However, if such sale is not
consummated within 120 days after the date the offer pursuant to Section
5.10(a) was made, the Company shall not sell such securities without again
complying with this Section 5.10.
(d) Notwithstanding the foregoing, the provisions of this Section 5.10
shall not be applicable to the issuance of shares of Common Stock (i) upon
the conversion of shares of one class of Common Stock into shares of
another class; (ii) as a dividend on all the outstanding shares of Common
Stock; (iii) in any transaction in respect of a Security that is available
to all holders of such Security on a pro rata basis, provided that for
purposes of this clause (iii), all classes of Common Stock shall be treated
as a single security; (iv) in connection with grants of stock or options to
employees, consultants or directors of the Company; (v) to an Affiliate of
399 Venture in connection with the repurchase by the Company of equity or
debt securities of the Company held by 399 Venture in accordance with
Section 4.10; (vi) in an offering or sale of securities pursuant to a
registration statement filed with, and declared effective by, the
Securities and Exchange Commission pursuant to the Securities Act; (vii) in
an offering or sale of securities pursuant to Rule 144A promulgated under
the Securities Act; or (viii) to the sellers of an acquired business; or
(ix) in an offering or sale of securities pursuant to a Unit Offering or
other offering of a combination of Common Stock and other equity or debt
securities of the Company (each such Unit or other offering, a "Combination
Offering"), provided, however, that a Rights Holder may participate in a
Combination Offering pursuant to this Section 5.10 if such Rights Holder
purchases his or its "proportionate share" of each security offered in such
offering. For purposes hereof, "proportionate share" shall mean that the
purchase price paid by such Rights Holder is allocated to each class of
such offered securities in the same proportion as the aggregate purchase
price for such class bears to the aggregate price of all securities
constituting such Combination Offering.
(e) The preemptive rights granted by this Section 5.10 shall expire
upon the consummation of a Public Offering.
5.11. Right to Join in Purchase.
(a) Subject to the terms of this Section 5.11, if any of Xxxxxxx or
his Affiliates or 399 Venture or any Person controlled by 399 Venture (each
of the foregoing a "Purchase Rights Holder"), is offered the opportunity to
purchase equity securities of the Company held by any other stockholder of
the Company (the "Offeror"), the Purchase Rights Holder receiving such
offer (the "Offeree") shall give the other Purchase Rights Holder (the
"Participant") the opportunity to participate in such sale by promptly
submitting a written notice to the Participant setting forth the number of
equity securities offered by the Offeror and the terms and conditions for
the purchase and sale thereof (the "Offer Notice"). The Participant shall
have the right, exercisable within the shorter of 15 days after receipt of
the Offer Notice or the date (if any) on which the offer described in the
Offer Notice expires by its terms, to purchase all or a portion of the
Participant's pro rata share of the proposed issue of such equity
25
securities, at the same price and on the same terms specified in the Offer
Notice and on the date specified for purchase therein.
(b) For purposes hereof, a Participant's "pro rata share" of equity
securities being sold by an Offeror shall be that number which is equal to
the product of (i) the number of equity securities being sold by an
Offeror, times (ii) a fraction, the numerator of which is the number of
outstanding shares of Common Stock held by the Purchase Rights Holder,
calculated on a fully-diluted, as converted basis, and the denominator of
which is the aggregate number of outstanding shares of Common Stock,
calculated on a fully-diluted, as converted basis. As used in this Section
5.11, "equity security" means any capital stock of the Company, any
security convertible or exchangeable (with or without consideration) into
or for any capital stock of the Company, any security carrying any warrant,
option or right to subscribe to or to purchase any capital stock of the
Company, or any warrant, option or right to purchase any capital stock of
the Company. As used in this Section 5.11, "calculated on a fully-diluted
basis" means calculated on a pro forma basis assuming the exercise of all
options, warrants or other rights for Common Stock (or securities
convertible into or exchangeable for Common Stock) and the conversion or
exchange of all securities convertible into or exchangeable for Common
Stock.
(c) To the extent that a Participant does not exercise its right to
purchase the equity securities being sold by the Offeror, the other
Purchase Rights Holder may purchase the portion of the equity securities
not so purchased at the same price and on the same terms specified in the
Offer Notice and on the date specified for purchase therein.
(d) To the extent that the sale of equity securities by the Offeror is
not consummated for any reason within 120 days after the date of the Offer
Notice, the provisions of this Section 5.11 shall again apply with respect
to any further sales by the Offeror of the equity securities not so
purchased.
(e) Notwithstanding any contrary provision of this Agreement, the
provisions of this Section 5.11 shall not be applicable to the purchase of
any equity securities (i) by a Purchase Rights Holder pursuant to the terms
of any equity security of the Company or any other security, put or call
option, pledge, right, warrant, convertible or exchangeable security or
other similar instrument, agreement or arrangement in effect on the date of
this Agreement which is set forth on the Disclosure Schedules, or (ii) by
399 Venture from any of its Affiliates.
(f) The rights and obligations set forth in this Section 5.11 shall
terminate upon the consummation of a Public Offering.
ARTICLE VI
CORPORATE ACTIONS
6.1. Certificate of Incorporation and Bylaws. Each Investor has reviewed
the Certificate of Incorporation of the Company and the Bylaws of the Company in
the forms attached hereto as Exhibits A and B, respectively, and hereby approves
and ratifies the same.
26
6.2. Directors and Voting Agreements. (a) Each Investor shall take, at any
time and from time to time, all action necessary (including, without limitation,
voting the Class A Common Stock owned by such Investor, calling special meetings
of stockholders and executing and delivering written consents) to ensure that
the Board of Directors of the Company is composed at all times of up to five
persons, determined as follows: (i) two individuals designated by Xxxxxxx (the
"Xxxxxxx Designees"); (ii) two individuals designated by 399 Venture (the "399
Venture Designees"); and (iii) one individual (the "Independent Director")
designated by the vote of a majority of the other four directors. The initial
directors named pursuant to this Section 6.2 shall be:
Designator Director
Xxxxxxx Xxxxxxx
Xxxxxxxx X. Xxxxx
399 Venture Xxxxxx X. XxXxxxxxxx
(b) The Board of Directors shall consist of five members, provided,
however, that if the Board of Directors determines in good faith that it is in
the best interests of the Company to increase the number of directors, and
Xxxxxxx and 399 Venture agree to such increase in writing, then the number of
directors shall be increased to such number as the Board of Directors shall
determine.
6.3. Right to Remove Designated Directors. If (i) 399 Venture shall request
the removal of any 399 Venture Designee, (ii) Xxxxxxx shall request the removal
of any Xxxxxxx Designee, or (iii) either of 399 Venture or Xxxxxxx request the
removal of the Independent Director, in each case (either with or without cause)
by written notice to the other, the other party shall promptly consent in
writing or vote or cause to be voted all Securities entitled to vote thereon now
or hereafter owned or controlled by him or it, as the case may be, for the
removal of such person as a director. In the event any person ceases to be a
director, such person shall also cease to be a member of any committee of the
Board of Directors of the Company.
6.4. Right to Fill Certain Vacancies in Company's Board.
(a) In the event that a vacancy is created on the Company's Board of
Directors at any time by the death, disability, retirement, resignation or
removal (with or without cause) of a 399 Venture Designee or a Xxxxxxx
Designee, or if otherwise there shall exist or occur any vacancy on the
Company's Board of Directors in a directorship subject to designation by
399 Venture or Xxxxxxx, such vacancy shall not be filled by the remaining
members of the Company's Board of Directors but each Investor hereby agrees
promptly to consent in writing or vote or cause to be voted all shares of
Common Stock entitled to vote thereon now or hereafter owned or controlled
by it to elect that individual designated to fill such vacancy and serve as
a 399 Venture Designee or a Xxxxxxx Designee, as the case may be.
(b) In the event that such vacancy is created by the death,
disability, retirement, resignation or removal (with inherent cause) of an
Independent Director, such vacancy shall be filled by a majority vote of
the remaining four directors.
27
6.5. Rights upon Disability or Death of Xxxxxxx. In the event of the
disability or death of Xxxxxxx, (a) Xxxxxxx rights under Section 6.2(a)(i) shall
terminate, (b) the Board of Directors shall thereafter be composed of four
persons (plus any increases in the number of directors pursuant to Section
6.2(b)), (c) the executor of Xxxxxxx' estate or his attorney-in-fact, as the
case may be, shall have the right to appoint one director to the Board of
Directors following the execution and delivery by such executor or
attorney-in-fact of a joinder to this Agreement which binds such person to the
obligations imposed upon Xxxxxxx under this Agreement, and (d) upon execution
and delivery of such joinder, the executor or attorney-in-fact shall be entitled
to exercise Xxxxxxx' rights under this Article VI excluding those set forth in
Section 6.2(a)(i). Each Investor hereby agrees to consent in writing or vote or
cause to be voted all shares of Common Stock entitled to vote thereon now or
hereafter owned or controlled by it to elect that individual appointed by such
executor or attorney-in-fact in accordance with the foregoing provisions.
6.6. Committee Members; Directors of Company Subsidiaries. The Company
shall take, and each of the Investors agrees that such Investor shall cause the
Company to take, at any time and from time to time, all action necessary
(including voting all shares of common stock of any Subsidiary of the Company,
calling special meetings of stockholders and executing and delivering written
consents) to ensure that all committees of the Board of Directors of the
Company, the Boards of Directors of all Subsidiaries of the Company and any
committees of such Boards are identical to the Board of Directors of the
Company.
6.7. Amendment of Certificate and Bylaws. Each Investor agrees that it
shall not consent in writing or vote or cause to be voted any shares of Common
Stock now or hereafter owned or controlled by it in favor of any amendment,
repeal, modification, alteration or rescission of, or the adoption of any
provision in, the Company's Certificate of Incorporation or Bylaws inconsistent
with this Agreement unless 399 Venture consents in writing to such action or
votes or causes to be voted all of the shares of Common Stock held by 399
Venture in favor of such action; provided that, 399 Venture shall not consent to
any amendment which would adversely affect Xxxxxxx' right to designate a
director to the Company's Board of Directors or remove or fill any vacancy
created with respect to, any director designated by Xxxxxxx' as set forth in
Article VI of this Agreement.
6.8. Termination of Designation Rights.
(a) The rights and obligations of 399 Venture, as set forth in Section
6.2 through 6.7 above, shall terminate upon the earlier of (i) the date the
Company consummates a Public Offering or (ii) the date when 399 Venture and
its Permitted Transferees (other than Permitted Transferees pursuant to
Section 4.5(d)(iii)), and their respective Affiliates no longer own at
least 50% of (x) the Common Stock owned by 399 Venture as of the Closing,
minus (y) the Common Stock transferred by 399 Venture to 399 Venture
Co-Investors (which sales shall be made consistent with 399 Venture's
customary policies with respect to sales to 399 Venture Co-Investors).
(b) The rights and obligations of Xxxxxxx, as set forth in Section 6.2
through 6.7 above, shall terminate upon the earlier of (i) the date the
Company consummates a Public Offering or (ii) the date when Xxxxxxx and his
Permitted Transferees (other than Permitted Transferees pursuant to Section
28
4.5 (d)(iii) no longer own at least 50% of the Common Stock owned by
Xxxxxxx as of the Closing.
(c) The rights and obligations set forth in Section 6.2 through 6.7
above of any executor or attorney-in-fact under Section 6.5 above shall
terminate upon the earlier of (i) the date the Company consummates a Public
Offering or (ii) the date when Xxxxxxx (or his estate) and his or its
Permitted Transferees (other than Permitted Transferees pursuant to Section
4.5(d)(iii)) no longer own in the aggregate at least 50% of the Securities
owned by Xxxxxxx as of the Closing.
(d) It is hereby acknowledged and agreed that the rights to designate
directors as set forth in Section 6.2 through 6.7 above have been granted
to 399 Venture and Xxxxxxx, respectively, pursuant to this Agreement, and
such rights may not be transferred by either of them to any transferee
(other than pursuant to Section 6.5, or in the case of 399 Venture, to a
corporate Affiliate), including any Permitted Transferee, but shall be
exercised only by 399 Venture and Xxxxxxx, respectively, until terminated
pursuant to this Section 6.8.
6.9. Future Sales of Securities. If 399 Venture shall propose the sale of
additional debt or equity securities by the Company to any Person and the Board
of Directors should fail to approve such sale, such sale, the terms and issuance
of such securities, and the use of proceeds may be approved by the vote of the
holders of a majority of the outstanding Class A Common Stock, such vote to be
taken upon ten days' written notice to the holders of the Class A Common Stock.
To the extent that the Company uses the proceeds of such sale to repurchase any
of its equity securities, each holder of such securities may, with respect to
such repurchase, exercise the Tag-Along Right set forth in Section 5.8, pursuant
to the procedures set forth in Section 5.8(b), and any additional tag-along
rights which such holder may have. If any such holder does not exercise his or
its Tag-Along Right in full, 399 Venture shall have right to assume such right
with respect to the number of unpurchased shares.
ARTICLE VII
ADDITIONAL RESTRICTIONS ON TRANSFERS OF
SECURITIES HELD BY MANAGEMENT INVESTORS
7.1. Restrictions on Transfer. In addition to any restrictions on Transfer
-------------------------
imposed by Section 4.5, no Management Investor shall effect a Transfer of any
-----------
Securities (other than a Transfer to a Permitted Transferee pursuant to Sections
--------
4.5(d)(i) or 4.5(d)(ii), 4.5(d)(iii) or 4.5(d)(vi) and other than pursuant to
--------- ---------- ----------- ----------
Section 5.7 or 5.8). In the event of such a Transfer to a Permitted Transferee,
for purposes of determining the applicability of the Purchase Option of the
Company described in Section 7.2 herein and, if applicable, the amount of the
-----------
Option Purchase Price for Incentive Shares purchased under such Purchase Option,
reference shall be made to the Termination Date of the Management Investor who
first owned the Incentive Shares transferred in such Transfer. In exercising the
consent and approval described in the first sentence of this Section 7.1, 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 the Company and that the transferee
29
purchase the Management Investor's Securities as a "Management Investor" subject
to the restrictions of this Article VII. 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.
7.2. Purchase Option.
----------------
(a) General Terms. In the event that on or prior to the fifth
-------------
anniversary of the Closing, any Management Investor shall cease to be
employed by the Company (whether as a consultant, director or employee) for
any reason (including, but not limited to, death, temporary or permanent
disability, retirement at age 65 or more under the Company's normal
retirement policies, resignation or termination by the Company with or
without Cause), such Management Investor (or such Management Investor's
heirs, executors, administrators, transferees, successors or assigns) shall
give prompt notice to the Company of such termination (except in the case
of termination by the Company with or without Cause), and the Company, or
one or more designee(s) selected by a two-thirds majority of the members of
the Board of Directors, shall have the right and option at any time within
90 days after the later of the effective date of such termination of
employment (the "Termination Date") or the date of the Company's receipt of
------------------
the aforesaid notice, to purchase from such Management Investor, or such
Management Investor's heirs, executors, administrators, transferees,
successors or assigns, as the case may be, any or all of the Incentive
Shares then owned by such Management Investor and such Management
Investor's Permitted Transferees (pursuant to Section 4.5(d)(i) or
---------
4.5(d)(ii)) at a purchase price equal to the Option Purchase Price. The
-----------
Company or its designee(s) shall give notice to the terminated Management
Investor (or such Management Investor's heirs, executors, administrators,
transferees, successors or assigns) of its intention to purchase Incentive
Shares at any time not later than 90 days after the Termination Date. (The
right of the Company and its designee(s) set forth in this Section 7.2 to
purchase a terminated Management Investor's Incentive Shares is hereinafter
referred to as the "Purchase Option").
(i) Exercise of Purchase Option. The Purchase Option shall be
exercised by written notice to the terminated Management Investor (or
such Management Investor's heirs, executors, administrators,
transferees, successors or assigns) signed by an officer of the
Company (whether as a consultant, director or employee) on behalf of
the Company or by its designee(s), as the case may be. Such notice
shall set forth the number of Incentive Shares desired to be purchased
and shall set forth a time and place of closing which shall be no
earlier than ten days and no later than 60 days after the date such
notice is sent. At such closing, the seller shall deliver the
certificates evidencing the number of Incentive Shares to be purchased
by the Company and/or its designee(s), accompanied by stock powers
duly endorsed in blank or duly executed instruments of transfer, and
any other documents that are necessary to transfer to the Company
and/or its designee(s) good title to such of the Incentive Shares 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 and/or its designee(s) shall deliver
to the seller the full amount of the Option Purchase Price for such
Incentive Shares in cash or by certified or bank cashier's check.
30
(ii) Option Purchase Price. (A) If the Management Investor shall
be terminated by the Company without Cause, resign with Good Reason or
shall cease to be employed by the Company by reason of death, normal
retirement at age 65 or more under the Company's normal retirement
policies, or temporary or permanent disability, the "Option Purchase
Price" for the Incentive Shares to be purchased from such Management
Investor or such Management Investor's Permitted Transferees pursuant
to the Purchase Option (such number of Incentive Shares being the
"Purchase Number") shall equal the price calculated as set forth in
the table below opposite the applicable Termination Date of such
Management Investor:
If the Termination Date Occurs: Option Purchase Price
On or prior to the first anniversary of Adjusted Cost Price multiplied by
the Closing the Purchase Number
After the first anniversary of the Adjusted Cost Price multiplied by
Closing, and on or prior to the second 80% of the Purchase Number, plus
anniversary of the Closing Adjusted Book Value Price
multiplied by 20% of the Purchase
Number
After the second anniversary of the Adjusted Cost Price multiplied by
Closing, and on or prior to the third 60% of the Purchase Number, plus
anniversary of the Closing Adjusted Book Value Price
multiplied by 40% of the Purchase
Number
After the third anniversary of the Adjusted Cost Price multiplied by
Closing, and on or prior to the fourth 40% of the Purchase Number, plus
anniversary of the Closing Adjusted Book Value Price
multiplied by 60% of the Purchase
Number
After the fourth anniversary of the Adjusted Cost Price multiplied by
Closing, and on or prior to the fifth 20% of the Purchase Number, plus
anniversary of the Closing Adjusted Book Value Price
multiplied by 80% of the Purchase
Number
(B) If the Management Investor shall cease to be employed by the
Company (whether as a consultant, director or employee) for any reason
other than those set forth in clause (A) of this Section 7.2(a)(ii)
(including, but not limited to, as the result of voluntary resignation
(other than for Good Reason) or termination for Cause), the Option
Purchase Price for all Incentive Shares to be purchased from the
Management Investor (and such Management Investor's Permitted
Transferees) pursuant to the Purchase Option shall equal the Adjusted
Cost Price multiplied by the Purchase Number.
(C) As used herein:
(1) "Adjusted Cost Price" for each Incentive Share means the
price paid by such Management Investor per share (adjusted for
any stock dividend payable upon, or subdivision or combination
of, the Common Stock); and
31
(2) "Adjusted Book Value Price" for each Incentive Share
means the greater of (i) the Adjusted Cost Price or (ii) the fair
market value of such Incentive Share, as determined in good
faith, without regard to any discount applicable to a minority
holding or due to lack of liquidity, by the Board of Directors of
the Company and provided, however, that if any of the Common
Stock is traded on a national securities exchange or reported on
the National Association of Securities Dealers, Inc. Automated
Quotation System, then the "Adjusted Book Value Price" shall
equal for each Incentive Share the closing price per share of
Common Stock on such exchange or as so reported on the Management
Investor's Termination Date.
7.3. Company's Right of First Refusal. If a Management Investor or such
Management Investor's Permitted Transferees proposes to sell any or all of such
Management Investor's or Permitted Transferee's Incentive Shares to a third
party in a bona fide transaction (except for sales pursuant to Sections 5.7 or
5.8), and provided such transaction is permitted under any applicable
restrictions set forth in Sections 4.5 and 7.1 herein, the Management Investor,
or such Management Investor's Permitted Transferees, may not Transfer such
Incentive Shares without first offering to sell such Incentive Shares to the
Company pursuant to this Section 7.3.
The Management Investor, or such Management Investor's Permitted
Transferees, shall deliver a written notice (a "Sale Notice") to the Company
describing in reasonable detail the Incentive Shares 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 a designee
selected by a two-thirds majority of the members of the Board of Directors of
the Company, shall have the right and option to purchase all (but not less than
all) of the Incentive Shares being offered at the price and on the terms of the
proposed Transfer set forth in the Sale Notice. Within 10 days after receipt of
the Sale Notice, the Company shall notify such Management Investor, or such
Management Investor's Permitted Transferees, whether or not it or its designee
wishes to purchase any or all of the offered Incentive Shares.
If the Company or its designee elects to purchase the offered Incentive
Shares, the closing of the purchase and sale of such Incentive Shares shall be
held at the place and on the date established by the Company in its notice to
the Management Investor, or such Management Investor's Permitted Transferees, in
response to the Sale Notice, which in no event shall be less than ten or more
than 30 days from the date of such notice. In the event that the Company or its
designee does not elect to purchase all the offered Incentive Shares, the
Management Investor, or such Management Investor's Permitted Transferees, may,
subject to the other provisions of this Agreement, Transfer the offered
Incentive Shares 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 could
have elected to purchase the offered Incentive Shares. Any such Incentive Shares
not transferred within such 180-day period will be subject to the provisions of
this Section 7.3 upon subsequent Transfer.
7.4. Involuntary Transfers. In the event that Incentive Shares owned by any
Management Investor, or such Management Investor's Permitted Transferees, shall
32
be subject to sale or other Transfer (the date of such sale or Transfer shall
hereinafter be referred to as the "Transfer 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 Investor, or
such Management Investor's Permitted Transferees, 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 Incentive Shares are
proposed to be transferred, and the number of shares of Common Stock 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 a designee selected by a majority of the members of the Board of
Directors of the Company excluding the affected Management Investor or Permitted
Transferee and any director designated by such Investor, shall have the right
and option to purchase all, but, not less than all of such Incentive Shares
which right shall be exercised by written notice given by the Company 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. Any purchase pursuant to this Section 7.4 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 Incentive
Shares, the price to be paid by the Company shall be the Option Purchase Price
that would have been applicable hereunder pursuant to Section 7.2(a)(ii)(A) had
the date of such proposed Transfer of the Incentive Shares been the Management
Investor's Termination Date. The closing of the purchase and sale of such
Incentive Shares shall be held at the place and the date to be established by
the Company, which in no event shall be less than ten or more than 60 days from
the date on which the Company gives notice of its election to purchase the
Incentive Shares. At such closing, the Management Investor, or such Management
Investor's Permitted Transferees, shall deliver the certificates evidencing the
number of shares of Common Stock to be purchased by the Company, accompanied by
stock powers duly endorsed in blank or duly executed instruments of transfer,
and any other documents that are necessary to transfer to the Company 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 shall deliver to the Management
Investor, or such Management Investor's Permitted Transferees, the full amount
of the purchase price for such Incentive Shares in cash by certified or bank
cashier's check.
7.5. Lapse. The provisions of Sections 7.1, 7.3 and Section 7.4 shall
terminate immediately after consummation of an Approved Sale.
ARTICLE VIII
REGISTRATION RIGHTS; PREFERRED STOCKHOLDERS AGREEMENT;
INDEMNIFICATION
8.1. Registration Rights. The Investors shall have registration rights with
respect to the Shares as set forth in the Registration Rights Agreement among
the parties hereto and dated as of the date hereof, the form of which is
attached hereto as Exhibit D (the "Registration Rights Agreement"). Each of the
33
Investors and their Permitted Transferees agrees not to effect any public sale
or distribution of any securities of the Company during the periods specified in
the Registration Rights Agreement, except as permitted by the Registration
Rights Agreement, and each such Investor agrees to be bound by the rights of
priority to participate in offerings as set forth therein.
8.2. Preferred Stockholders Agreement. The Investors shall have the rights
with respect to the Preferred Stock set forth in the Preferred Stockholders
Agreement, dated of even date herewith, by and among the Investors who hold
Preferred Stock and attached hereto as Exhibit E (the "Preferred Stockholders
Agreement"). Each Investor party to the Preferred Stockholders Agreement
acknowledges and agrees that a breach by such Investor of the covenants and
obligations applicable to such Investor under the Preferred Stockholders
Agreement shall constitute a breach of such Investor's covenants and obligations
under this Agreement.
8.3. Indemnification for Certain Liabilities. Each Continuing Management
Investor acknowledges that, on the Closing Date and in connection with the
Closing of the transactions contemplated by this Agreement, Xxxxxxx-Xxxxx
effected a reverse stock split (the "Reverse Stock Split") pursuant to which the
10,097.732 outstanding shares of Common Stock held of record by the
Xxxxxxx-Xxxxx Employee Savings and Investment Plan (the "ESOP") were converted
into the right to receive $2,877,853.62 as cash in lieu of fractional shares.
Each Continuing Management Investor other than Xxxxxxx and his Family Members,
severally and not jointly and in proportion to such Management Investor's
relative Common Stock ownership percentage, shall indemnify and hold harmless
the Company, 399 Venture and Xxxxxxx-Xxxxx, and their respective officers,
directors, shareholders, employees and Affiliates from and against any claims by
the ESOP, the trust of the ESOP or any ESOP participant or beneficiary of any
such participant, for any payments following the Closing Date in connection with
the Reverse Stock Split, provided, that the Continuing Management Investors
(other than Xxxxxxx and his Family Members) aggregate liability pursuant to this
Section 8.3 shall not exceed the $184,658.00 contributed by the Continuing
Management Investors to an escrow account established for such purpose as of the
Closing Date (together with any interest accrued thereon). A Continuing
Management Investor's relative Common Stock ownership percentage shall be a
fraction, the numerator of which is the number of shares of Common Stock issued
by the Company to such Continuing Management Investor at the Closing and the
denominator of which is the number of shares of Common Stock issued by the
Company to all of the Continuing Management Investors at the Closing.
ARTICLE IX
MISCELLANEOUS
9.1. Purchaser Representative. If the Company or any Investor enters into
any negotiation or transaction, including an Approved Sale, for which Rule 506
(or any similar rule then in effect) promulgated by the SEC under the Securities
Act may be available with respect to such negotiation or transaction (including
a merger, consolidation or other reorganization), each Management Investor will,
at the request of the Company, appoint a purchaser representative (as such term
is defined in Rule 501(h) promulgated by the SEC under the Securities Act)
reasonably acceptable to the Company. If any Management Investor appoints the
34
purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any Management Investor declines
to appoint the purchaser representative designated by the Company such
Management Investor will appoint another purchaser representative (reasonably
acceptable to the Company), and such Management Investor will be responsible for
the fees of the purchaser representative so appointed.
9.2. Section 83(b) Elections. Each Management Investor shall make the
election (the "83(b) Election") to include in such Management Investor's income,
in the year such Management Investor receives the Incentive Shares, the excess,
if any, of the fair market value of the Incentive Shares on the date such shares
are acquired (determined without regard to restrictions which lapse) over the
price paid per Incentive Share, pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended, in the manner and within the time period
specified by the regulations promulgated thereunder. EACH MANAGEMENT INVESTOR
ACKNOWLEDGES THAT (1) SUCH MANAGEMENT INVESTOR ALONE IS RESPONSIBLE FOR FILING
WITH THE INTERNAL REVENUE SERVICE, BY THE APPLICABLE DEADLINE, ALL APPLICABLE
FORMS REQUIRED TO EFFECT THE 83(B) ELECTION, (2) NO EXTENSION OF THE 83(B)
ELECTION DEADLINE WILL BE AVAILABLE UNDER LAW AND (3) ADVERSE TAX CONSEQUENCES
MAY RESULT TO SUCH MANAGEMENT INVESTOR IF THE 83(B) ELECTION IS NOT TIMELY MADE.
9.3. Amendment and Modification. This Agreement may be amended or modified,
or any provision hereof may be waived, provided that such amendment,
modification or waiver is set forth in a writing executed by (i) the Company,
(ii) 399 Venture (so long as 399 Venture and its Permitted Transferees (other
than Permitted Transferees pursuant to Section 4.5 (d)(iii)) own in the
aggregate at least 5% of the outstanding Common Stock on a fully diluted basis),
(iii) Xxxxxxx (so long as Xxxxxxx and his Permitted Transferees (other than
Permitted Transferees pursuant to Section 4.5 (d)(iii)) own in the aggregate at
least 5% of the outstanding Common Stock on a fully diluted basis) and (iv) the
holders of a majority of the outstanding Common Stock on a fully diluted basis
(including Shares owned by 399 Venture and its Affiliates) held by the
Investors; provided, however, that without the approval of the holders of a
majority of the outstanding Common Stock then held by Management Investors, (A)
the provisions of this Agreement cannot be amended to treat Management Investors
differently than the other Investors and (B) the provisions of Sections 5.6, 9.3
and Article VII of this Agreement may not be amended or modified to the
detriment of Management Investors. No course of dealing between or among any
Persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any Person under or by reason of this Agreement.
9.4. Waiver of Fiduciary Duties and Corporate Opportunity; Acknowledgment.
(a) Nothing in this Agreement shall be construed so as to limit the
ability of 399 Venture, Citicorp Venture Capital Ltd. or any of their
respective Affiliates to make investments in any other business entity
(including without limitation a business entity that competes with the
Company) in the ordinary course of their respective businesses.
(b) Without limiting the generality of the above, to the fullest
extent permitted by any applicable law, the doctrine of corporate
opportunity, or any other analogous doctrine, shall not apply with respect
35
to 399 Venture or any of its respective affiliates. In particular, (i) 399
Venture and its Affiliates shall have the right to engage in business
activities, whether or not in competition with the Company or the Company's
business activities, without consulting any Investor or any other
stockholder and (ii) 399 Venture shall have no obligation to any Investor
or any other stockholder with respect to any opportunity to acquire
property or make investments at any time.
(c) Each party to this Agreement expressly acknowledges and agrees
that 399 Venture's representations, covenants and other agreements
contained herein apply only to 399 Venture and Citicorp Venture Capital
Ltd., and not to any of their respective affiliates or shareholders,
including, without limitation, Citibank N.A., Citicorp or CitiGroup.
9.5. Survival. All representations, warranties, covenants and agreements
set forth in this Agreement will survive the execution and delivery of this
Agreement, the Closing, and the consummation of the transactions contemplated
hereby and by the Exchange Agreement, regardless of any investigation made by an
Investor or on its behalf.
9.6. Successors and Assigns; Entire Agreement. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns and
executors, administrators and heirs. This Agreement, together with the
Registration Rights Agreement and the Preferred Stockholders Agreement, and each
other agreement referenced herein which contains terms incorporated by reference
into this Agreement, sets forth the entire agreement and understanding among the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among them.
9.7. Separability. In the event that any provision of this Agreement or the
application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
9.8. Notices. All notices provided for or permitted hereunder shall be made
(except as otherwise provided herein) in writing by hand delivery, registered or
certified first-class mail, facsimile (with confirmation of receipt) or air
courier guaranteeing overnight delivery to the other party at the following
addresses (or at such other address as shall be given in writing by any party to
the others):
If to the Company, to:
Xxxxxxx-Xxxxx Group, Inc.
Xxxxxxx-Xxxxx, Inc.
00 Xxxxxxxxxxx Xxxxx Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Fax (000) 000-0000
36
with required copies to:
399 Venture Partners, Inc.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy number: (000) 000-0000
Attention: Xxxxxx X. XxXxxxxxxx
Xxxxxxx-Xxxxx Group, Inc.
Xxxxxxx-Xxxxx, Inc.
00 Xxxxxxxxxxx Xxxxx Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Fax (000) 000-0000
If to 399 Venture, to:
399 Venture Partners, Inc.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy number: (000) 000-0000
Attention: Xxxxxx X. XxXxxxxxxx
with a required copy to:
Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Telecopy number: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
If to the Management Investors or any of them, to the business addresses
(or residence address if no business address is indicated) listed on the
signature page of this Agreement or joinder to this Agreement.
All such notices shall be deemed to have been duly given: when delivered by
hand, if personally delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if sent by
facsimile; and on the next business day, if timely delivered to an air courier
guaranteeing overnight delivery.
9.9. Governing Law. The validity, performance, construction and effect of
this Agreement shall be governed by and construed in accordance with the
internal law of Delaware, without giving effect to principles of conflicts of
law.
37
9.10. Waiver of Jury Trial. Each of the parties to this Agreement waives,
to the fullest extent permitted by law, any right to trial by jury of any claim,
demand, action or cause of action (i) arising under this Agreement or (ii) in
any way connected with or related or incidental to the dealings of the parties
hereto in respect of this Agreement or any of the transactions related hereto,
in each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise. Each of the parties to this Agreement agrees and
consents that any such claim, demand, action or cause of action shall be decided
by court trial without a jury and that the parties to this Agreement may file an
original counterpart of a copy of this Agreement with any court as written
evidence of the consent of the parties hereto to the waiver of the right to
trial by jury.
9.11. ACKNOWLEDGMENT OF MANAGEMENT INVESTORS. EACH MANAGEMENT INVESTOR
ACKNOWLEDGES THAT SUCH MANAGEMENT INVESTOR IS A SOPHISTICATED BUSINESSPERSON WHO
WAS ADEQUATELY REPRESENTED BY COUNSEL DURING NEGOTIATIONS REGARDING THE
PROVISIONS OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE PROVISIONS
RESTRICTING THE TRANSFER OF SECURITIES BY MANAGEMENT INVESTORS SET FORTH IN
SECTION 4.5 AND ARTICLE VII, AND SPECIFICALLY SECTION 7.2, WHICH SETS FORTH THE
COMPANY'S PURCHASE OPTION WITH RESPECT TO INCENTIVE SHARES. EACH MANAGEMENT
INVESTOR ACKNOWLEDGES THAT ANY PROPERTY RIGHT THAT SUCH MANAGEMENT INVESTOR HAS
IN INCENTIVE SHARES IS SUBJECT IN ALL RESPECTS TO THE COMPANY'S PRIOR RIGHT TO
REPURCHASE SUCH INCENTIVE SHARES AS PROVIDED IN ARTICLE VII. EACH MANAGEMENT
INVESTOR FURTHER ACKNOWLEDGES THAT IF THE COMPANY EXERCISES ITS PURCHASE OPTION
SUCH MANAGEMENT INVESTOR'S INCENTIVE SHARES COULD BE PURCHASED BY THE COMPANY AT
A PRICE THAT IS LESS THAN THE FAIR MARKET VALUE OF SUCH SECURITIES AT THE TIME
OF SUCH EXERCISE.
9.12. No Effect on Employment. Nothing herein contained shall confer on any
Management Investor the right to remain in the employ of the Company or any of
its subsidiaries or Affiliates.
9.13. Headings. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.
9.14. Counterparts. This Agreement may be executed in two or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same instrument. Xxxxxxx is signing this
Agreement in his own capacity and for his Family Members who hold shares of
Xxxxxxx-Xxxxx Inc.
9.15. Further Assurances. Each party shall cooperate and take such action
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
38
9.16. Termination. Unless sooner terminated in accordance with its terms,
this Agreement shall terminate on April 22, 2009.
9.17. Remedies. In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The parties
agree that the provisions of this Agreement shall be specifically enforceable,
it being agreed by the parties that the remedy at law, including monetary
damages, for breach of such provision will be inadequate compensation for any
loss and that any defense in any action for specific performance that a remedy
at law would be adequate is waived.
9.18. Party No Longer Owning Securities. If a party hereto ceases to own
any Securities, such party will no longer be deemed to be an Investor or
Management Investor for purposes of this Agreement.
9.19. Pronouns. Whenever the context may require, any pronouns used herein
shall be deemed also to include the corresponding neuter, masculine or feminine
forms.
39
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase and Holders Agreement as of the day and year first above written.
XXXXXXX-XXXXX GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Chief Executive Officer
399 VENTURE PARTNERS, INC.
By: /s/ Xxxxxx X. XxXxxxxxxx
---------------------------------------
Name: Xxxxxx X. XxXxxxxxxx
Title: Vice President
MANAGEMENT INVESTORS:
/s/ Xxxxxxx X. Xxxxxxx, Xx.
------------------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx.
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Xxxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxxx X. Xxxxx
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
40
/s/ G. Xxxxxxx Xxxxxxxx
------------------------------------
Name: G. Xxxxxxx Xxxxxxxx
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Xxxxxx Xxxxx
------------------------------------
Name: Xxxxxx Xxxxx
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Xxx Xxxx
------------------------------------
Name: Xxx Xxxx
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Xxxx X. Fitter
------------------------------------
Name: Xxxx X. Fitter
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
41
/s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxx
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxx as Trustee of the
Xxxxxxx Irrevocable Trust for Xxxxxx
/s/ Xxxx Xxxxxxx Xxxxxx
------------------------------------
/s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx Xxxxxx and Xxxxx X. Xxxxxxx
as Co-Trustees of the Xxxxxxx
Irrevocable Sprinkle Trust
42
/s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
/s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
43
Schedule 1-A(A)
Continuing Management Investors
Amount and Kind of
Xxxxxxx-Xxxxx Securities
Name of Management Being Exchanged Amount and Kind of
Investor ("Rollover Securities") Exchange Shares
------------------ ------------------------ ------------------
Section 1-A(B)
Redemption by Xxxxxxx-Xxxxx
Amount and Kind of
Securities of
Xxxxxxx-Xxxxx Submitted
Name of Investor for Redemption Cash Redemption Amounts
---------------- ----------------------- -----------------------
Schedule 1-B
Purchasing Management Investors
Schedule 1-C
Options
Each Exchanged Option shall be exercisable for that kind and number of
securities and that amount of cash (each in the respective proportional amounts)
that would have been received by such Management Investor had he exercised the
Rollover Options immediately prior to the Closing and the Management Redemption
(as defined in the Exchange Agreement).
Each Exchanged Option shall be exercisable until April 22, 2009, and shall
not be terminable by the Company for any reason, terminable upon the death,
disability or termination of employment of such Management Investor, or subject
to any repurchase option by the Company for any reason.
The following table sets forth the name of each Continuing Management
Investor and the number of Exchanged Options to which the terms of this
Agreement and this Schedule 1-C apply.
Name Rollover Options Exercise Price Exchange Options
---- ---------------- -------------- ----------------
EXHIBIT A
RESTRICTED STOCK PURCHASE PLAN
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
XXXXXXX-XXXXX GROUP, INC.
EXHIBIT C
BYLAWS
OF
XXXXXXX-XXXXX GROUP, INC.
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
EXHIBIT E
PREFERRED STOCKHOLDERS AGREEMENT
EXHIBIT F
FORM OF STOCK OPTION AGREEMENT
