Exhibit 10.1
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STOCKHOLDERS AGREEMENT
Dated as of December 29, 1994
By and Among
24 HOUR FITNESS, INC.,
THE MDC ENTITIES,
and
THE MANAGEMENT STOCKHOLDERS
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TABLE OF CONTENTS
Page
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ARTICLE I CERTAIN DEFINITIONS........................................ 2
ss. 1.1 Certain Definitions........................................ 2
ARTICLE II TRANSFER OF SHARES......................................... 3
ss. 2.1 Restrictions............................................... 3
ss. 2.2 Permitted Transfers........................................ 4
ss. 2.3 Sales by MDC Subject to Tag-Along Rights................... 5
ss. 2.4 Grant to MDC of Bring-Along Rights......................... 7
ss. 2.5 Call Upon Termination of Management Stockholder's
Employment................................................. 7
ss. 2.6 Registration Rights........................................ 10
ARTICLE III BOARD OF DIRECTORS OF THE COMPANY.......................... 12
ss. 3.1 Board of Directors......................................... 12
ss. 3.2 Election................................................... 13
ARTICLE IV MISCELLANEOUS.............................................. 13
ss. 4.1 Entire Agreement........................................... 13
ss. 4.2 Captions................................................... 13
ss. 4.3 Counterparts............................................... 13
ss. 4.4 Notices.................................................... 13
ss. 4.5 Successors and Assigns..................................... 15
ss. 4.6 GOVERNING LAW.............................................. 15
ss. 4.7 Submission to Jurisdiction................................. 15
ss. 4.8 Benefits Only to Parties................................... 16
ss. 4.9 Termination................................................ 16
ss. 4.10 Publicity.................................................. 17
ss. 4.11 Confidentiality............................................ 17
ss. 4.12 Fee; Expenses.............................................. 18
ss. 4.13 Amendments; Waivers........................................ 18
SCHEDULE A
(i)
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of December 29,
1994, by and among 24 Hour Fitness, Inc., a Delaware corporation (the
"Company"), XxXxxx De Leeuw & Co. III, L.P., a California limited partnership,
XxXxxx De Leeuw & Co. Offshore (Europe) III, L.P., a Bermuda limited
partnership, MDC Management Co., Inc., a California corporation and Gamma Fund
LLC, a California limited liability company (each individually, an "MDC Entity",
collectively the "MDC Entities" and collectively together with their Related
Persons (as such term is defined in Section 1.1), "MDC"), the individuals listed
on Schedule A attached hereto under the heading "Management Stockholders" (each
individually, a "Management Stockholder" and collectively, the "Management
Stockholders," it being understood that any other member of the management of
the Company who becomes a stockholder of the Company (including through the
receipt of Restricted Shares (as defined below)) shall be a Management
Stockholder) (each of MDC and the Management Stockholders is hereinafter
referred to as a "Stockholder", it being understood and agreed that any holder
of Common Stock of the Company (including, without limitation, any party to a
Success Participation Fee Letter with the Company that elects to acquire Common
Stock of the Company pursuant to the terms thereof) during the term of this
Agreement shall become a party to this Agreement and shall be referred to within
the term "Stockholder").
W I T N E S S E T H :
WHEREAS, MDC and the Management Stockholders own shares of Common
Stock, par value $.001 per share, of the Company (the "Common Stock"); and
WHEREAS, the Stockholders each desire to grant to the others certain
rights in connection with the shares of Common Stock now or hereafter owned by
them (collectively, with any shares of Common Stock hereafter issued by the
Company during the term of this Agreement the "Shares") as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
ss. 1.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) "Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For purposes of
this definition, "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise.
(b) "business day" shall mean any day except a Saturday, a Sunday or
other day on which commercial banks are required or authorized to close in
New York, New York.
(c) "Call Shares" shall mean collectively (i) restricted shares of
the Common Stock granted, or (ii) shares of the Common Stock received upon
the exercise of options granted, to certain key employees of the Company
(or the Company's Subsidiaries) pursuant to the Company's 1994 Stock
Option and Stock Award Plan except that shares of Common Stock received
upon exercise of options granted to Xxxx X. Xxxxxxx, Xxxxxxx X. X. Xxxxxxx
and Xxxxxxx X. Xxxxxxx on the date hereof shall not constitute "Call
Shares".
(d) "IPO" shall mean an initial public offering of the Common Stock.
(e) "Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and
a government or other department or agency thereof.
(f) "Related Persons" shall mean with respect to the MDC Entities,
any partnership with the same controlling general partner as any of the
MDC Entities and any of the partners of any of the MDC Entities which
receive Shares upon a distribution to any such partners by any such MDC
Entity; provided that, notwithstanding the above XxXxxx De Leeuw & Co.
(Offshore) (Asia) III, L.P.,
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a Bermuda limited partnership, shall be deemed to be a "Related Person"
for purposes of this definition when such limited partnership is formed.
(g) "Subsidiary" shall mean, with respect to any Person, any
corporation, association or other business entity of which more than 50%
of the total voting power of shares of capital stock or other equity
interests entitled (without regard to the occurrence of any contingency)
to vote in the election of directors or other managing authority thereof
is at the time owned or controlled, directly or indirectly, by such Person
and its Subsidiaries.
(h) "Vested Stock Options" shall mean vested stock options for the
Common Stock granted to certain key employees of the Company pursuant to
the Company's 1994 Option and Stock Award Plan except that the options
granted to Xxxx X. Xxxxxxx, Xxxxxxx X. X. Xxxxxxx and Xxxxxxx X. Xxxxxxx
on the date hereof shall not constitute "Vested Stock Options" for
purposes of this definition.
ARTICLE II
TRANSFER OF SHARES
ss. 2.1 Restrictions. (a) No Stockholder shall sell, assign, pledge,
or in any manner, transfer any of the Shares or any right or interest therein,
to any Person (each such action, a "Transfer") except as permitted by this
Agreement.
(b) From and after the date hereof, all stock certificates
representing Shares held by any of the Stockholders shall bear a legend which
shall state as follows:
The shares represented by this certificate are subject to certain
restrictions against transfer set forth in a Stockholders Agreement dated
as of December 29, 1994. A copy of such Stockholders Agreement has been
filed in the registered office of the Company in the State of Delaware,
where the same may be inspected daily during business hours.
(c) In addition to the legend required by Section 2.1(b) above, all
stock certificates representing Shares held by any of the Stockholders shall
bear a legend which shall state as follows:
The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and such
shares may not be offered, sold, pledged or otherwise transferred except
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(1) pursuant to an exemption from, or in a transaction not subject to, the
registration requirements under the Securities Act or (2) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any State of the United
States.
(d) In addition to the legends required by Sections 2.1(b) and (c)
above, all stock certificates representing Call Shares shall bear a legend which
shall state as follows:
The shares represented by this certificate are also subject to the
Management Call as described in Section 2.5 of the Stockholders Agreement
referred to above.
Any Call Shares transferred by a Management Stockholder in a Permitted Transfer
described in Section 2.2(a)(i) or (ii) shall remain Call Shares of the
transferee and certificates representing such shares shall bear the legend
required by this Section 2.1(d).
(e) Promptly upon execution and delivery of this Agreement, each
Stockholder shall deliver to the Secretary of the Company all certificates then
held by such Stockholder representing Shares which do not have such legends
affixed thereto as are required by Section 2.1 above. The Company shall cause
such legends to be affixed promptly to each of such certificates and such
certificates to be returned promptly to the registered holder thereof. The
Company agrees that it will not cause or permit the Transfer of any Shares to be
made on its books unless the Transfer is permitted by this Agreement and has
been made in accordance with the terms hereof.
ss. 2.2 Permitted Transfers. (a) Notwithstanding anything to the
contrary contained herein, a Stockholder may at any time effect any of the
following Transfers (each a "Permitted Transfer" and each transferee, a
"Permitted Transferee"):
(i) A Stockholder's Transfer of any or all Shares owned by such
Stockholder following such Stockholder's death by will or intestacy to
such Stockholder's legal representative, heir or legatee.
(ii) A Stockholder's Transfer of any or all Shares owned by such
Stockholder as a gift or gifts during such Stockholder's lifetime to such
Stockholder's spouse, children, grandchildren or a trust or other legal
entity for the benefit of any Stockholder or any of the foregoing,
provided that such Stockholder retains voting control of the Shares so
transferred.
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(iii) A corporate Stockholder's Transfer of all Shares owned by it
(i) pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of
such corporate Stockholder or (ii) pursuant to a sale of all or
substantially all of the stock or assets of such Stockholder.
(iv) With respect to any MDC Entity, a Transfer of any or all Shares
owned by it to its Related Person.
(v) A Transfer by a Stockholder which is made pursuant to Section
2.3, 2.4, 2.5 or 2.6 hereof.
(vi) A Transfer by a Stockholder to the Company.
(b) In any such Transfer referred to above in Section 2.2(a) (other
than a Sale of the Business as provided in Section 2.5 or a public offering
pursuant to Section 2.6 hereof in each of which events this Agreement shall
terminate in accordance with the provisions of Section 4.9 hereof), the
Permitted Transferee shall receive and hold such Shares subject to the
provisions of this Agreement as if such Permitted Transferee were an original
signatory hereto and shall be deemed to be a party to this Agreement.
ss. 2.3 Sales by MDC Subject to Tag-Along Rights. (a) In the event
that MDC proposes to effect a Transfer (other than a Permitted Transfer
described in Section 2.2(a) (iv) above) of any of the Shares owned by it (the
"MDC Stock"), then MDC shall promptly give written notice (the "MDC Notice") to
the Company and the other Stockholders at least thirty days prior to the closing
of such Transfer. The MDC Notice shall describe in reasonable detail the
proposed Transfer including, without limitation, the name of, and the number of
shares of MDC Stock to be purchased by, the transferee, the purchase price of
each share of MDC Stock to be sold, any other significant terms of such sale and
the date such proposed sale is expected to be consummated, it being understood
that if such proposed Transfer by MDC is in (i) an IPO or (ii) a public offering
pursuant to a registration statement filed under Section 2.6, the subsequent
provisions of this Section 2.3 shall not apply.
(b) Each Stockholder shall have the right, exercisable upon
irrevocable written notice to MDC within twenty days after receipt of the MDC
Notice, to participate in such sale of MDC Stock on the same terms and
conditions as set forth in the MDC Notice, including, without limitation, the
making of all representations, warranties, indemnifications (including
participating in any escrow arrangements) and similar agreements, and to sell
all or any portion of the number of the Shares owned by it as
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determined in accordance with the calculation set forth below. Each Stockholder
other than MDC electing to participate in the sale described in the MDC Notice
(each a "Participant") shall indicate in its notice of election to MDC the
maximum number of its Shares it desires to sell in such sale. Each such
Participant shall be entitled to sell a "pro rata portion" of such maximum
number. To the extent one or more of the Stockholders exercise such right of
participation in accordance with the terms and conditions set forth in this
Section 2.3, the number of shares of MDC Stock that MDC may sell in the
transaction shall be correspondingly reduced. For purposes of this Section 2.3,
"pro rata portion" shall mean for each Participant the number of Shares
determined by multiplying (i) the total number of Shares owned by such
Participant by (ii) a fraction the numerator of which is the number of Shares of
MDC Stock proposed to be sold in the MDC Notice and the denominator of which is
the sum of (A) the total number of Shares owned by MDC immediately prior to the
sale proposed in the MDC Notice and (B) the total number of Shares desired to be
sold by all of the Participants electing to participate in the sale. Not later
than five days prior to the date scheduled for such sale, MDC shall provide
notice to each Participant of the "pro rata portion" of Shares to be sold by
such Participant in such sale.
(c) Any Participant shall effect its participation in the sale by
delivering on the date scheduled for such sale to MDC for delivery to the
prospective transferee one or more certificates, in proper form for transfer,
which represent the number of Shares which such Participant is entitled to sell
in accordance with this Section 2.3. Such stock certificate or certificates that
any Participant delivers to MDC shall be delivered on such date to such
transferee in consummation of the sale of the Shares pursuant to the terms and
conditions specified in the MDC Notice, and MDC shall concurrently therewith
remit to each such Participant that portion of the sale proceeds to which such
Participant is entitled by reason of its participation in such sale. MDC's sale
of Shares in any sale proposed in an MDC Notice shall be effected on the terms
and conditions set forth in such MDC Notice.
(d) The exercise or non-exercise of the rights of the Stockholders
hereunder to participate in one or more sales of Shares made by MDC shall not
adversely affect their rights to participate in subsequent sales of Shares
subject to this Section 2.3.
(e) In no event shall MDC receive special consideration or a control
premium in connection with any sale contemplated by this Section 2.3; provided,
however, that it is understood that MDC shall be entitled to receive a
reasonable transaction fee payable upon the closing of any sale contemplated by
this Section 2.3 if MDC provides services in connection with such sale that
would customarily be provided
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by a third party financial advisor. Any such transaction fee shall be approved
by the Company's board of directors.
ss. 2.4 Grant to MDC of Bring-Along Rights. (a) Each time the
Stockholders of the Company meet, or act by written consent in lieu of meeting,
for the purpose of approving a "Sale of the Business" (as such term is
hereinafter defined), each Stockholder agrees to vote all of its Shares, and to
sell all of its shares, as directed by MDC. In order to effect the foregoing
covenant, each Stockholder hereby grants to MDC with respect to all of such
Stockholder's Shares an irrevocable proxy (which is deemed to be coupled with an
interest) for the term of this Agreement with respect to any Stockholder vote or
action by written consent to effect the Sale of the Business. As used herein,
"Sale of the Business" shall mean any transaction or series of transactions
(whether structured as a stock sale, merger, consolidation, reorganization,
asset sale or otherwise) negotiated on an arm's-length basis, which results in
the sale or transfer of all or substantially all of the assets or shares of
capital stock of the Company to an unaffiliated bona fide third party in which
all consideration payable to holders of the Common Stock is distributed pro rata
pursuant to stock ownership.
(b) In furtherance of its covenants in Section 2.4(a), each
Stockholder hereby agrees to cooperate fully with MDC and the purchaser in any
such Sale of the Business and, to execute and deliver all documents (including
purchase agreements) and instruments as MDC and the purchaser request to effect
such Sale of the Business, including, without limitation, the making of all
representations, warranties and indemnifications (including participating in any
escrow arrangements) and similar arrangements, but excluding employment
agreements and covenants not to compete (the determination of whether or not to
enter into any such agreements being in the sole and absolute discretion of each
Stockholder). MDC agrees that upon such Sale of the Business each Stockholder
will receive its pro rata share of the consideration paid by the purchaser
determined on the basis of such Stockholder's Share ownership.
(c) In no event shall MDC receive special consideration or a control
premium in connection with a sale contemplated by this Section 2.4; provided,
however, that it is understood that MDC shall be entitled to receive a
reasonable transaction fee payable upon the closing of any such sale by this
Section 2.4 if MDC provides services in connection with such sale that would
customarily be provided by a third party financial advisor. Any such transaction
fee shall be approved by the Company's board of directors.
ss. 2.5 Call Upon Termination of Management Stockholder's
Employment. (a) Notwithstanding any other provision of this Agreement to the
contrary, upon the
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death, disability, retirement or termination of employment (each a "Call Event")
of any Management Stockholder employed immediately prior to such Call Event by
the Company or any of the Company's Subsidiaries, the Company shall, on the
terms and subject to the conditions set forth in this Section 2.5, have the
right (the "Management Call"), at the option of the Company, to purchase all but
not less than all of the Call Shares and Vested Stock Options held by such
Management Stockholder, and any Permitted Transferee of Call Shares or Vested
Stock Options of such Management Stockholder pursuant to Section 2.2(a)(i) or
(ii), by delivering written notice to such Management Stockholder or his or her
Permitted Transferees, within 60 days after the occurrence of the Call Event, at
the prices set forth below.
(b) If the employment of a Management Stockholder is terminated upon
death, disability, termination or resignation after a date which is five years
from the date hereof or voluntary retirement from full-time employment with the
Company or its Subsidiaries at age 59-1/2 or greater after a minimum of five
years continuous full-time employment with the Company or its Subsidiaries since
the initial date of employment, then the offering price for the Call Shares or
Vested Stock Options offered to the Company pursuant to this Section 2.5 shall
be equal to the fair market value of such Shares or Vested Stock Options at such
time as determined in good faith by the Board of Directors of the Company
(without discount for lack of marketability or minority interest).
(c) If the employment of a Management Stockholder is terminated (i)
by the Company or any Subsidiary of the Company without "cause" (as hereinafter
defined) or (ii) as a result of the resignation of such Management Stockholder
either (A) with the consent of the Company or (B) for "good reason" (as
hereinafter defined), in the case of both clauses (i) and (ii), prior to a date
which is five years from the date hereof then the offering price for the Call
Shares and Vested Stock Options offered to the Company pursuant to this Section
2.5 shall be an amount equal to the greater of (i) the purchase price originally
paid for such Shares and Vested Stock Options by such Management Stockholder and
(ii) the Book Value of such Shares and Vested Stock Options. For purposes of
this Section 2.5, "Book Value" per Share shall mean an amount equal to the book
value per share of the Company after consummation of the transaction
contemplated by the Purchase Agreement dated as of the date hereof by and among
the Company and the Stockholders (as defined therein), plus or minus, as the
case may be, the positive or negative changes in the stockholders' equity per
share of Common Stock of the Company (calculated in accordance with generally
accepted accounting principles, consistently applied) from the date of the
consummation of this Agreement until the last day of the month immediately
preceding the month in which the Call Event occurs. "Book Value" per Vested
Stock Option shall mean the "Book Value"
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per share (as calculated above) less the exercise price in respect of such
Vested Stock Option. For purposes of this Section 2.5 "good reason" shall mean
the occurrence of any of the following events, except for the occurrence of such
an event in connection with the termination of a Management Stockholder's
employment by the Company or any of its Subsidiaries for cause: (i) a
significant reduction in the authorities, duties or responsibilities of such
Management Stockholder; or (ii) a reduction in base salary, the reduction or
discontinuance of any incentive compensation plan or the taking of any action
which materially adversely affects such Management Stockholder's participation
in or benefits under any fringe benefit provided to such Management Stockholder;
provided that the actions referred to in clause (ii) above (other than with
respect to a reduction in base salary) shall not constitute "good reason" events
if such actions were taken by the Company or its Subsidiaries as part of an
overall plan by the Company or its Subsidiaries and made applicable to the same
extent to all executives of the Company or its Subsidiaries.
(d) If the employment of a Management Stockholder is terminated by
the Company or any Subsidiary "for cause" or as a result of the resignation of
such Management Stockholder without the consent of the Company, other than for
"good reason" as defined in Section 2.5(c) above, in each case, prior to a date
which is five years from the date hereof, then the offering price for the Call
Shares or Vested Stock Options held by such Management Stockholder offered to
the Company pursuant to this Section 2.5 shall be an amount equal to the lesser
of (i) the purchase price originally paid for such Shares and Vested Stock
Options by such Management Stockholder and (ii) the Book Value (as previously
defined) of such Shares and Vested Stock Options. For purposes of this Section
2.5, a Stockholder shall be deemed to have been terminated "for cause" if his
employment was terminated for: (i) embezzlement, theft or other misappropriation
of any property of the Company or any Subsidiary, (ii) gross or willful
misconduct resulting in substantial loss to the Company or any Subsidiary or
substantial damage to the reputation of the Company or any Subsidiary, (iii) any
act involving moral turpitude which if the subject of a criminal proceeding
could reasonably result in a conviction for a felony involving moral turpitude,
fraud or misrepresentation, (iv) gross neglect of his assigned duties to the
Company or any Subsidiary, (v) gross breach of his fiduciary obligations to the
Company or any Subsidiary, (vi) a breach of his covenant not to compete
contained in Article IV of the Purchase Agreement, or (vii) any chemical
dependence which materially affects the performance of his duties and
responsibilities to the Company or any Subsidiary.
(e) If the Company shall elect to exercise the Management Call in
accordance with this Section 2.5, the closing of the purchase by the Company
shall take place no later than 45 days after the exercise of the Management
Call, which time in the
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case of the death of a Management Stockholder may be extended to provide for
probate of such Stockholder's estate. On the date scheduled for such closing,
the price for the Shares subject to the Management Call, determined in
accordance with this Section 2.5, shall be paid in full to the Management
Stockholder holding such Shares (including, if applicable, such Shares held by
any Permitted Transferee of such Management Stockholder pursuant to Section
2.2(a)(i) or (ii)) by the Company against delivery of a certificate or
certificates, as the case may be, representing the purchased Shares in proper
form for transfer. In connection with such closing, such Management Stockholder
shall warrant to the Company good and marketable title to the purchased Shares,
free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever except those under this Agreement.
ss. 2.6 Registration Rights. (a) If the Company intends (other than
in connection with an IPO) to register Shares on Form X-0, Xxxx X-0 or Form S-3
or any corresponding form applicable at the time under the Securities Act as
then in effect (or any similar statute then in effect), the Company will give
written notice to each Stockholder of its intention to do so, at least 15 days
prior to the time of the filing of any registration statement or qualification
papers, and at the written request of any Stockholder given within 10 days after
receipt of any such notice (which request shall specify the number of Shares
intended to be sold or disposed of by such Stockholder and shall describe the
nature of any proposed sale or other disposition thereof which may include a
distribution over a reasonable period of time), the Company will use its best
efforts to cause such Shares to be registered or qualified to the extent
required (in the opinion of the Company's counsel) to permit the sale or other
disposition thereof (in accordance with the methods described by such
Stockholder) (such right of each Stockholder to participate in the proposed
offering, a "piggy-back right"). The number of Shares that any Stockholder
intends to sell shall be subject to underwriters' cutbacks resulting from the
underwriters' conclusion that the inclusion of all of the Shares requested to be
included in the proposed offering would materially adversely affect the
distribution of Shares in such offering or the market price of the Company's
Common Stock if such Common Stock is publicly traded. Such underwriters'
cutbacks shall be made on a pro rata basis by multiplying the number of Shares
that each Stockholder desires to sell in the proposed offering by a fraction the
numerator of which shall be the number of Shares that the underwriters deem
appropriate to sell in the proposed offering and the denominator of which shall
be the total number of Shares that all of the Stockholders initially desire to
sell in the proposed offering.
(b) All out-of-pocket expenses, disbursements and fees in connection
with any action to be taken under this Section 2.6 shall be borne by the
Company, including the reasonable fees and expenses of one counsel for all
participating
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Stockholders except in connection with a registration on Form S-3 (or such
corresponding form applicable at the time under the Securities Act) in which
case the fees and expenses of counsel, if any, for participating Stockholders
shall be for each participating Stockholder's own account, provided that the
foregoing expenses shall in no event include the underwriters' discount in
connection with an offering.
(c) In the event of any registration under the provisions of this
Section 2.6, the Company, to the extent permitted by law, will indemnify any
Stockholder participating in such registration, its respective officers and
directors, if any, and each Person, if any, who controls such Stockholder within
the meaning of Section 15 of the Securities Act, against all losses, claims,
damages and liabilities caused by any untrue statement of a material fact
contained in the registration statement or prospectus (and as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading and
will reimburse such Stockholder, its officers and directors and any Person, if
any, who controls such Stockholder within the meaning of Section 15 of the
Securities Act, against any legal or other expenses reasonably incurred by such
Stockholder, officer, director or Person in connection with investigating or
defending any such losses, claims, damages and liabilities, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission contained in information furnished in writing to the Company by such
Stockholder participating in such registration or by underwriters expressly for
use therein. The obligation of the Company under this Section 2.6 to register
securities for any of the Stockholders shall be subject to the condition that
each such Stockholder and the underwriters involved in the offering shall
furnish to the Company in writing such information as shall be reasonably
requested by the Company for use in connection with the preparation of any such
registration statement or prospectus and, to the extent permitted by law, shall
indemnify the Company, its directors and officers, any other underwriter, the
other Stockholders participating in such registration and each Person, if any,
who controls the Company, any other underwriter or such other Stockholders,
within the meaning of Section 15 of the Securities Act, against all losses,
claims, damages and liabilities caused by any untrue statement or omission
contained in information so furnished in writing to the Company by such
Stockholder or such underwriter expressly for use therein.
(d) If the indemnification provided for in this Section 2.6 from the
indemnifying party is unavailable to any indemnified party hereunder in respect
of any losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or
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liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party under this Section 2.6 as a result of the
losses, claims, damages and liabilities referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this Section
2.6(d) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to herein.
(e) As expeditiously as possible after the effectiveness of any
registration statement pursuant to this Section 2.6 and prior to such date as
shall be certified to the Company as the date upon which the Transfer
contemplated by such registration statement will be effected by any
participating Stockholder, the Company will deliver in exchange for certificates
representing Shares so registered bearing the legends set forth in Section 2.1,
certificates therefor not bearing such legends as shall be required to effect
such Transfer. In the event that the proposed Transfer is not made as
contemplated by any such participating Stockholder, by acceptance thereof such
Stockholder shall be deemed to have agreed that it will deliver such
certificates not bearing such legends to the Company in exchange for new
certificates bearing the legends set forth in Section 2.1 if the Company shall
request and the Company agrees that it will make such exchange.
(f) The registration rights provided in this Section 2.6 shall
terminate after an IPO as to any Stockholder which can immediately sell all of
its Shares in a single sale pursuant to Rule 144 under the Securities Act.
(g) Each of the Stockholders agrees that in connection with any
public offering, such Stockholder will not, without the prior written consent of
the Company, directly or indirectly, offer to sell, sell, contract to sell
(including, without limitation, any short sale), grant any option for the sale
of, acquire any option to dispose of, or otherwise dispose of any Shares for a
period of 180 days following the date of the consummation of such public
offering.
-12-
ARTICLE III
BOARD OF DIRECTORS OF THE COMPANY
ss. 3.1 Board of Directors. (a) Each Stockholder agrees to vote all
of the Shares held by such Stockholder so as to elect and maintain a Board of
Directors of the Company (the "Board") composed of the following: (i) two
persons designated by the Managing Stockholders (who initially shall be Messrs.
Xxxxxxx and Mastrov), (ii) two persons designated by XxXxxx De Leeuw & Co. III,
L.P., (iii) one person designated by XxXxxx De Leeuw & Co. Offshore (Europe)
III, L.P., (iv) as soon as practicable following the date of this Agreement, one
person designated by XxXxxx De Leeuw & Co. III, L.P., in consultation with the
Management Stockholders, who shall be unaffiliated with the Company, and (v) as
soon as practicable following the date of this Agreement, one person designated
by XxXxxx De Leeuw & Co. Offshore (Europe) III, L.P., in consultation with the
Management Stockholders, who shall be unaffiliated with the Company.
(b) In the event that any director designated by any Stockholder for
any reason ceases to serve as a director during his term of office, the
resulting vacancy on the Board shall be filled by a director designated by the
Managing Stockholders or by the MDC Entity who designated such vacating
director.
ss. 3.2 Election. Promptly upon the execution and delivery of this
Agreement, the Stockholders shall each execute a written stockholders consent
substantially in the form of Exhibit A attached hereto for purposes of electing
directors to the Board.
ARTICLE IV
MISCELLANEOUS
ss. 4.1 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior arrangements or understandings (whether written or
oral) with respect thereto.
ss. 4.2 Captions. The Article and Section captions used herein are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
-13-
ss. 4.3 Counterparts. For the convenience of the parties, any number
of counterparts of this Agreement may be executed by the parties hereto and each
such executed counterpart shall be deemed to be an original instrument.
ss. 4.4 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and
delivered by personal delivery, overnight courier, telecopier or registered or
certified mail, return-receipt requested and postage prepaid addressed as
follows:
If to the Company, to:
24 Hour Fitness, Inc.
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
with copies to MDC and White & Case
if to MDC, to:
c/x XxXxxx De Leeuw & Co.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000 or (000) 000-0000
if to White & Case, to:
White & Case
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Tel.: (000) 000-0000
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Fax: (000) 000-0000
if to any of the Management Stockholders, to the addresses set forth
opposite each of their names on Schedule A attached hereto,
with a copy to Wilson, Sonsini, Xxxxxxxx & Xxxxxx:
Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Tel.: (000) 000-0000
Fax: (000) 000-0000
or to such other address as any such party hereto may, from time to time,
designate in writing to all other parties hereto, and any such communication
shall be deemed to be given, made or served as of the date so delivered or, in
the case of any communication delivered by mail, as of the date so received.
ss. 4.5 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Company, the Stockholders and their respective
heirs, devisees, legal representatives, successors, permitted assigns and other
permitted transferees. The rights of a Stockholder under this Agreement may not
be assigned or otherwise conveyed by any Stockholder except in connection with a
Transfer of Shares which is in compliance with this Agreement; provided,
however, the rights of MDC under Sections 2.3, 2.4 and 3.1 are not assignable
other than as a result of a Permitted Transfer described in Section 2.2(a)(iv).
ss. 4.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO SUCH STATE'S CHOICE OF LAW PROVISIONS.
ss. 4.7 Submission to Jurisdiction. (a) Each of the parties hereto
hereby irrevocably acknowledges and consents that any legal action or proceeding
brought with respect to any of the obligations arising under or relating to this
Agreement shall be brought in the courts of the State of New York or in the
United States District Court for the Southern District of New York, as the party
bringing such action or proceeding may elect, and each of the parties hereto
hereby irrevocably submits to and accepts with
-15-
regard to any such action or proceeding, for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Subject to Section 4.7(b), the foregoing shall not limit the rights of
any party to serve process in any other manner permitted by law. The foregoing
consents to jurisdiction shall not constitute general consents to service of
process in the State of New York for any purpose except as provided above and
shall not be deemed to confer rights on any Person other than the respective
parties to this Agreement.
(b) Each of the parties hereto hereby waives any right it may have
under the laws of any jurisdiction to commence by publication any legal action
or proceeding with respect to this Agreement. To the fullest extent permitted by
applicable law, each of the parties hereto hereby irrevocably waives the
objection which it may now or hereafter have to the laying of the venue of any
suit, action or proceeding arising out of or relating to this Agreement in any
of the courts referred to in Section 4.7(a) and hereby further irrevocably
waives any claim that any such court is not a convenient forum for any such
suit, action or proceeding.
(c) The parties hereto agree that any judgment obtained by any party
hereto or its successors or assigns in any action, suit or proceeding referred
to above may, in the discretion of such party (or its successors or assigns), be
enforced in any jurisdiction, to the extent permitted by applicable law.
(d) The parties hereto agree that the remedy at law for any breach
of this Agreement may be inadequate and that should any dispute arise concerning
the sale or disposition of any Shares or the voting thereof or any other similar
matter hereunder, this Agreement shall be enforceable in a court of equity by an
injunction or a decree of specific performance. Such remedies shall, however, be
cumulative and nonexclusive, and shall be in addition to any other remedies
which the parties hereto may have.
(e) The parties hereto agree that the prevailing party or parties,
as the case may be, in any action, suit, arbitration or other proceeding arising
out of or with respect to this Agreement or the transactions contemplated hereby
shall be entitled to reimbursement of all costs of litigation, including
reasonable attorneys' fees, from the non-prevailing party. For purposes of this
Section 4.7(e), each of the "prevailing party" and the "non-prevailing party" in
any action, suit, arbitration or other proceeding shall be the party designated
as such by the court, arbitrator or other appropriate official presiding over
such action, suit, arbitration or other proceeding, such determination to be
made as a part of the judgment rendered thereby.
-16-
ss. 4.8 Benefits Only to Parties. Nothing expressed by or mentioned
in this Agreement is intended or shall be construed to give any Person, other
than the parties hereto and their respective successors or permitted assigns,
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and permitted
assigns, and for the benefit of no other Person.
ss. 4.9 Termination. This Agreement shall terminate upon the
happening of any one of the following events:
(a) the voluntary or involuntary dissolution of the Company;
(b) the Sale of the Business as provided in Section 2.4;
(c) the consummation of an IPO, except that (i) the rights of the
Stockholders under Section 2.6 shall survive such termination and (ii) the
rights of the Stockholders under Section 2.3 (other than for a sale in the
open market pursuant to Rule 144 of the Securities Act) shall survive such
termination until the earlier of (a) three years from the date of the IPO
and (b) the time MDC shall no longer own at least 25% of the Company's
common stock; and
(d) if this Agreement has not been renewed or extended by a written
instrument on or prior to the tenth anniversary of the date of this
Agreement;
provided, however, the provisions of Section 4.11 shall survive any termination
of this Agreement.
ss. 4.10 Publicity. Except as otherwise required by applicable laws
or regulations, none of the parties hereto shall issue or cause to be issued any
press release or make or cause to be made any other public statement in each
case relating to or connected with or arising out of this Agreement or the
matters contained herein, without obtaining the prior approval of MDC and the
Company to the contents and the manner of presentation and publication thereof.
ss. 4.11 Confidentiality. Each of the parties hereto hereby agrees
that throughout the term of this Agreement it shall keep (and shall cause its
directors, officers, employees, representatives and outside advisors and its
affiliates to keep) all non-public information relating to the Company
(including any such information received prior to the date hereof) confidential
except information which (i) becomes known to
-17-
such Stockholder from a source, other than the Company, its directors, officers,
employees, representatives or outside advisors, which source is not obligated to
the Company to keep such information confidential or (ii) becomes generally
available to the public through no breach of this Agreement by any party hereto.
Each of the parties hereto agrees that such non-public information (a) shall be
communicated only to those of its directors, officers, employees,
representatives, outside advisors and affiliates who need to know such
non-public information and (b) will not be used by such party or its directors,
officers, employees, representatives, outside advisors or affiliates either to
compete with the Company or to conduct itself in a manner inconsistent with the
antitrust laws of the United States or any state. Notwithstanding the foregoing,
a party hereto may disclose non-public information if required to do so by a
court of competent jurisdiction or by any governmental agency; provided,
however, that prompt notice of such required disclosure be given to the Company
prior to the making of such disclosure so that the Company may seek a protective
order or other appropriate remedy. In the event that such protective order or
other remedy is not obtained, the party hereto required to disclose the
non-public information will disclose only that portion which such party is
advised by opinion of counsel is legally required to be disclosed and will
request that confidential treatment be accorded such portion of the non-public
information.
ss. 4.12 Fee; Expenses. The parties hereto acknowledge that MDC
Management Company III, L.P. and MDC Management Co., Inc. (collectively the "MDC
Management Entities") (or their respective successors or assigns) shall receive
from the Company or its Subsidiaries a transaction fee of $1,000,000 on the date
of this Agreement and except as otherwise provided in the Management Services
Agreement, dated as of the date hereof, between the Company and the MDC
Management Entities, an ongoing management fee of $350,000 per annum adjusted
upward by $100,000 each year thereafter until such ongoing management fee shall
equal $750,000 per annum, in each case plus reimbursement for its out-of-pocket
expenses. The Company shall reimburse each of the respective board
representatives who are not employees of the Company for their travel and
out-of-pocket expenses incurred in connection with their serving on the
Company's board of directors.
ss. 4.13 Amendments; Waivers. No provision of this Agreement may be
amended, modified or waived without approval of 66-2/3% of the holders of the
Common Stock; provided that no such amendment or waiver of a provision of this
Agreement which adversely affects the rights of any of the Management
Stockholders in a manner that does not adversely affect all other Stockholders
equally may be made without such Management Stockholders' consent; provided that
the Management Stockholders shall be considered as a group with the
determination by the holders of a majority
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of the outstanding Shares held by the Management Stockholders to be binding on
all Management Stockholders.
ss. 4.14 Acknowledgment. The parties hereto acknowledge the
obligations of the Company and its wholly-owned subsidiary, H.E.C. Investments,
Inc. under certain Success Participation Fee Letters entered into from time to
time between the Company and H.E.C. Investments, Inc. and the Holders defined
therein and the rights of such Holders under this Agreement.
-19-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first set forth above.
24 HOUR FITNESS, INC.
By
--------------------------------
Name:
Title:
XxXXXX De LEEUW & CO. III, L.P.
By MDC Management Company III,
L.P., its general partner
By
--------------------------------
Title: General Partner
XxXXXX De LEEUW & CO. OFFSHORE
(EUROPE) III, L.P.
By MDC Management Company IIIE,
L.P., its general partner
By
--------------------------------
Title: General Partner
-20-
MDC MANAGEMENT CO., INC.
By
--------------------------------
Title:
GAMMA FUND, LLC
By
--------------------------------
Title:
THE MANAGEMENT STOCKHOLDERS
----------------------------------
Name: Xxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X.X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
-21-
SCHEDULE A
Stockholder
MDC:
XxXxxx De Leeuw & Co. III, X.X.
XxXxxx De Leeuw Offshore
(Europe) III, L.P.
MDC Management Co. Inc.
Gamma Fund, LLC
Management Stockholders:
Xxxx X. Xxxxxxx
000 Xxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Xxxxxxx X. X. Xxxxxxx
0000 Xxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxx
Xxxxxx X0X 0X0
Xxxxxxx X. Xxxxxxx
00000 Xxx Xxxx
Xxxxxx, XX 00000-0000
Xxxxx Xxxxxx
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxxx Xxxxxxx
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxxxx Xxxxxxx
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxxx Xxxxxxxx
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxx Xxxxx
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
SCHEDULE A
Page 2
Xxxxxxx Xxxxxxx
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxxxx Xxxxxx
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxx Xxxxx
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxx Xxxxx
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxx Xxxx
c/o 24 Hour Nautilus
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
