STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT dated December 29, 1997 among XXXXXX
TECHNOLOGIES, INC., a North Carolina corporation (the "Company"), XXXXXX X.
XXXXXX ("X. Xxxxxx"), XXXXXXX X. XXXXXX ("X. Xxxxxx")(each of X. Xxxxxx and X.
Xxxxxx, a "Xxxxxx Stockholder" and, collectively, the "Frisby Stockholders"),
and MUSI INVESTMENTS S.A., a Luxemburg societe anonyme ("MUSI") (each of the
Frisby Stockholders and MUSI, a "Stockholder" and, collectively, the
"Stockholders").
RECITALS
X. X. Xxxxxx owns 1,419,643 shares of Common Stock, X. Xxxxxx owns
1,419,643 shares of Common Stock and MUSI owns 441,327 shares of Common Stock,
which shares, collectively, constitute 100% percent of the outstanding capital
stock of the Company.
B. The Company and the Stockholders believe it would be in their mutual
best interest to ensure a degree of continuity of management and ownership of
and certain rights in respect of the Company by imposing certain restrictions
and obligations on the ownership, retention and disposition of the capital stock
of the Company.
NOW, THEREFORE, the parties hereto agree as follows:
I. DEFINITIONS
1.1. Definitions.
(a) Capitalized terms used herein which are not otherwise
defined herein shall have the meaning ascribed to them in the Purchase
Agreement. In addition to the terms defined elsewhere herein, the following
terms have the following meanings when used herein with initial capital letters:
"Agreement" means this agreement, as the same may be amended from time
to time.
"Board of Directors" means the Board of Directors of the Company.
"Closing Date" means the date hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $0.001 per share, of
the Company.
"Convertible Preferred Stock" means the convertible preferred stock of
the Company as more particularly described in that certain Certificate of
Designation, attached as Exhibit A to the Purchase Agreement.
"Director" means a member of the Board of Directors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Frisby Permitted Transferee" means, with respect to any Frisby
Stockholder, (i) any spouse or lineal descendant of such Frisby Stockholder,
(ii) any trust (or equivalent estate planning entity) where all of the
beneficial interest is held by such Frisby Stockholder and/or his spouse and/or
lineal descendants, or (iii) any other Frisby Stockholder; provided, however,
that each such transferee will be a Frisby Permitted Transferee for purposes of
this Agreement only if such transferee shall have executed and delivered to each
of MUSI and the Company an instrument reasonably satisfactory to MUSI pursuant
to which such transferee will have agreed to be bound by all of the terms of
this Agreement applicable to its transferor.
"Frisby Stockholder Group" means each of the Frisby Stockholders or any
Frisby Permitted Transferee.
"Initial Public Offering" means the first Public Offering of equity
securities of the Company.
"Public Offering" means any primary or secondary public offering of
equity securities of the Company pursuant to an effective registration statement
under the Securities Act, other than pursuant to a registration on Form S-4 or
Form S-8 or any successor or similar form.
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"Pro Rata" means, with respect to any offer including Securities, an
offer based on the relative percentages of Securities then held by all of the
holders of Securities to whom such offer is made.
"Purchase Agreement" means the Purchase Agreement dated as of the date
hereof between the Company and MUSI.
"Registrable Securities" means shares of Common Stock; provided that
such securities will cease to be Registrable Securities when and to the extent
that (i) a registration statement relating to such securities shall have been
declared effective by the Commission and such securities shall have been
disposed of pursuant to such effective registration statement, (ii) such
Registrable Securities have been transferred to a party in violation of this
Agreement,(iii) such Registrable Securities have ceased to be outstanding, or
(iv) such Registrable Securities are sold without registration pursuant to Rule
144.
"Registration Expenses" means all (i) registration and filing fees with
the Commission, (ii) fees and expenses of compliance with state securities or
blue sky laws (including reasonable fees and disbursements of a qualified
independent underwriter, if any, counsel in connection therewith and the
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing expenses, (iv)
internal expenses of the Company (including, without limitation, all salaries
and expenses of officers and employees performing legal or accounting duties),
(v) fees and expenses of counsel and independent public accountants for the
Company, (vi) fees and expenses of any additional experts retained by the
Company in connection with such registration, (vii) fees and expenses of listing
the Registrable Securities, if any, (viii) rating agency fees, (ix) transfer
taxes, and (x) reasonable fees and expenses of one counsel for the selling
Stockholders.
"Rule 144" means Rule 144 under the Securities Act, as such rule may be
amended from time to time.
"Securities" means the Common Stock and Convertible Preferred Stock.
"Third Party" means a prospective purchaser of the Securities in an
arm's-length transaction where such purchaser is not the Company, an Affiliate
of the Company or an Affiliate of any Stockholder or a Frisby Permitted
Transferee.
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"Transferee" means any Person to whom any Stockholder Transfers any
Securities (other than in a sale pursuant to an effective registration statement
or without registration pursuant to Rule 144) in accordance with this Agreement
and who agrees to be bound by and to comply with all applicable provisions of
this Agreement.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as a principal in connection with a distribution of such Registrable
Securities and not as part of such dealer's market-making activities.
(b) Except as otherwise provided herein, any right or action
that may be taken at the election of the Frisby Stockholder Group will be taken
by a representative of the Frisby Stockholder Group (the "Frisby Group
Representative") on behalf thereof. The initial Frisby Group Representative will
be X. Xxxxxx. Upon the death or permanent disability of X. Xxxxxx, the Xxxxxx
Stockholder Group may designate a successor Frisby Group Representative upon
vote of the members thereof holding a majority of the Common Stock not held by
X. Xxxxxx or his estate; provided, however, that (i) if no such successor is so
designated within 30 calendar days from such death or permanent disability, such
successor will be a member of the Frisby Stockholder Group designated by MUSI
and (ii) in the event that no Person is acting as the Frisby Group
Representative as of the time any action is otherwise to be taken hereunder by
the Frisby Group Representative or the Frisby Stockholder Group, such action may
be taken on behalf of the entire Frisby Stockholder Group by written action or
consent of the holders of a majority of shares of Common Stock then held by the
members of the Frisby Stockholder Group. Any change in the Frisby Group
Representative will become effective upon notice in accordance with Section 6.3.
(c) For purposes of this Agreement, any action or consent
contemplated to be taken or given by MUSI and its permitted Transferees will be
effective if taken or given, as the case may be, by MUSI or its permitted
Transferees which own the largest portion of the Securities owned by MUSI and
all of its permitted Transferees as of the relevant time.
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II. RIGHTS AND OBLIGATIONS WITH
RESPECT TO TRANSFER
2.1. Transfers. Until the fifth anniversary of the Closing
Date, no Frisby Stockholder may offer, sell, assign, grant a participation in,
pledge or otherwise transfer ("Transfer") any interest in any of its Common
Stock without the prior written consent of MUSI, other than (i) to any Frisby
Permitted Transferee, (ii) as provided in Articles II or III of this Agreement,
or (iii) in sales made pursuant to an effective registration statement or
without registration pursuant to Rule 144 after the Initial Public Offering.
2.2. Restrictive Legend. (a) Each certificate representing
Securities owned by any Stockholder will include the following legend (in
addition to such legends as may be appropriate under applicable securities
laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCKHOLDERS AGREEMENT, DATED AS OF
[INSERT THE DATE OF THIS AGREEMENT], AS FROM TIME TO TIME AMENDED, A COPY OF
WHICH MAY BE OBTAINED FROM XXXXXX TECHNOLOGIES, INC.
(b) Each certificate representing Securities owned by any
Stockholder or any Transferee thereof (other than shares that have been sold
pursuant to an effective registration statement under the Securities Act or in
accordance with Rule 144 under the Securities Act) will (unless otherwise
permitted by the provisions of Section 2.2(c)) include a legend substantially as
follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM.
(c) Any Stockholder may, upon providing evidence (which, if
required by the Company, may include an opinion of counsel) reasonably
satisfactory to the Company, that such Securities either are not "restricted
securities" (as defined in Rule 144) or may be sold pursuant to Rule 144(k),
exchange the certificate representing such Securities for a new certificate that
does not bear a legend relating to restrictions under the securities laws.
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2.3. Third Party Transfers. (a) If any Stockholder desires to
Transfer any of its Securities (other than pursuant to a Public Offering) to a
Third Party (a "Selling Stockholder"), such Selling Stockholder may not effect
such Transfer of such Securities (the "Offered Stock") to a Third Party (a
"Third Party Sale") unless such Stockholder complies with this Section 2.3.
(b) Prior to consummating a Third Party Sale, the Selling
Stockholder will deliver to each other Stockholder (the "Non-Offering
Stockholders") a written notice (an "ROFO Offer Notice") specifying (i) the
aggregate amount of cash consideration (the "Offer Price") for which the Selling
Stockholder proposed to sell the Offered Stock in such proposed Third Party
Sale, (ii) the identity and name of the purchaser, and if applicable, such
purchaser's ultimate beneficial owner(s), in such Third Party Sale, and (iii)
all other material terms of such proposed Third Party Sale. If a Non-Offering
Stockholder delivers to the Selling Stockholder a written notice (an "Acceptance
Notice") within 20 Business Days following the delivery of the ROFO Offer Notice
(such 20 Business Day period being referred to herein as the "ROFO Acceptance
Period") stating that the Non-Offering Stockholder is willing to purchase all of
the Offered Stock for the Offer Price and on the other terms set forth in the
Offer Notice, the Selling Stockholder will sell all (but not less than all) of
the Offered Stock to such Non-Offering Stockholder and such Non-Offering
Stockholder will purchase such Offered Stock from the Selling Stockholder, on
the terms and subject to the conditions set forth below; provided, however, that
if more than one Non-Offering Stockholder so notifies the Selling Stockholder
within the ROFO Acceptance Period that it is willing to purchase all of the
Offered Stock for the Offer Price and on the terms set forth in the Offer
Notice, the Offered Stock and the Offer Price will be allocated among such
Non-Offered Stockholders (each, a "Purchasing Stockholder") proportionately
based upon their respective percentage ownership interest in the Company or as
may otherwise be specified by such Purchasing Stockholders.
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(c) The consummation of any purchase of any Offered Stock by a
Purchasing Stockholder pursuant to this Section 2.3 (the "ROFO Closing") will
occur not earlier than 10 calendar days nor later than 120 calendar days
following the delivery of the Acceptance Notice (the intervening period being
referred to herein as the "ROFO Closing Period") at the principal executive
offices of the Company. At the ROFO Closing, (i) the Selling Stockholder will
deliver to the Purchasing Stockholder one or more certificates evidencing all of
the Offered Stock duly endorsed for transfer to the Purchasing Stockholder,
together with such other duly executed instruments or documents as may
reasonably be required to permit the Purchasing Stockholder to acquire the
Offered Stock free and clear of any claims, liens, pledges, options,
encumbrances, security interests, commitments and other restrictions of any kind
(collectively, "Encumbrances"), except for Encumbrances created by this
Agreement, federal or state securities laws, the Purchasing Stockholder or
specified in the Offer Notice, and (ii) the Purchasing Stockholder will deliver
to the Selling Stockholder by wire transfer to an account designated by the
Selling Stockholder an amount in immediately available funds equal to the Offer
Price. In the event that any Third Party Sale provides that a portion of the
Offer Price is to be paid over time, as a condition to the obligation of the
Selling Stockholder to sell the Offered Stock, the Purchasing Stockholder will
provide the Selling Stockholder with suitable collateral as security for such
future payment obligations.
(d) If no Acceptance Notice relating to a proposed Third Party
Sale shall have been delivered to the Selling Stockholder prior to the
expiration of the ROFO Acceptance Period, if the Non-Offering Stockholders shall
not have delivered to the Selling Stockholder, prior to the expiration of the
ROFO Acceptance Period, written confirmation of the Non-Offering Stockholder's
intent not to purchase the Offered Shares ("Stockholder Rejection Notice"), or
if the ROFO Closing fails to occur prior to the expiration of the ROFO Closing
Period (unless the Purchasing Stockholder was ready, willing and able prior to
the expiration of the ROFO Closing Period to consummate the transaction to be
consummated by the Purchasing Stockholder at the ROFO Closing or the Purchasing
Stockholder was not so ready, willing and able to consummate the transaction to
be so consummated by the Purchasing Stockholder at the ROFO Closing as a result
of the Selling Stockholder's failure reasonably to cooperate in good faith with
the efforts of the Purchasing Stockholder to consummate such transaction), the
Selling Stockholder may consummate the proposed Third Party Sale in accordance
with this Section 2.3(d).
(e) The Selling Stockholder may consummate a Third Party Sale
that it is otherwise entitled to consummate pursuant to this Section 2.3(d)
only:
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(i) during the 60 calendar day period immediately following
the sooner to occur of (x) the expiration of the ROFO Acceptance Period
(in the event that no Acceptance Notice was timely delivered to the
Selling Stockholder), or (y) the Selling Stockholder's receipt of the
Stockholder Rejection Notice from the Non-Offering Stockholder, or the
60 calendar day period immediately following the expiration of the ROFO
Closing Period (in the event that an Acceptance Notice was timely
delivered to the Selling Stockholder but the ROFO Closing failed to
timely occur),
(ii) at a price at least equal to the Offer Price, and
(iii) upon non-price terms no less favorable to the Selling
Stockholder than those set forth in the Offer Notice.
(f) This Section 2.3 shall, with respect to MUSI, terminate
and be of no further force and effect upon expiration of the "lock-up" period to
which the Stockholders agree to be bound in connection with the Initial Public
Offering and, with respect to the Frisby Stockholder Group, continue in effect
after the expiration of such "lock-up" until the fifth anniversary of the date
hereof.
(g) Shares of Securities acquired by a Third Party pursuant to
a Third Party Sale shall no longer subject to the restrictions contained in this
Section 2.3.
2.4. Improper Transfer. (a) Any attempt to Transfer any
Securities not in compliance with this Agreement will be null and void and
neither the Company nor any transfer agent of the Company will register, or
otherwise recognize in the Company's records, any such improper Transfer. Any
cost or loss incurred as a result of any such attempt to transfer shall be borne
by the Stockholder who attempted such improper Transfer.
(b) No Stockholder will enter into any transaction or series
of transactions for the purpose or with the effect of, directly or indirectly,
denying or impairing the rights or obligations of any Person under this
Agreement, and any such transaction will be null and void and, to the extent
that such transaction requires any action by the Company, it will not be
registered or otherwise recognized in the Company's records or otherwise.
2.5. Transferees. Except as otherwise specifically provided
herein, any and all provisions of this Agreement which apply to the Stockholders
will apply with equal force to any Transferee.
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III. REGISTRATION RIGHTS
3.1. Required Registration. (a) In the event that the Company
has not completed an Initial Public Offering of Common Stock prior to the third
anniversary of this Agreement, MUSI or the Frisby Group Representative, on
behalf of the Frisby Stockholder Group, may require the Company, by providing it
with a written request, to register under the Securities Act all or part of the
Registrable Securities of such Stockholder (a "Required Registration"). Such
request will specify the number of shares of Registrable Securities proposed to
be offered for sale by such Stockholder and will also specify the intended
method of disposition thereof.
(b) If the Stockholder so elects, the offering of the
Stockholder's Registrable Securities pursuant to the Required Registration will
be in the form of an underwritten offering. The Board of Directors will select
the managing Underwriter and any additional underwriters in connection with the
offering.
(c) If, in connection with the Required Registration, the
Company or any other Stockholders also propose to sell securities and the
managing Underwriter of an offering described in this Section 3.1 advises the
Company, the requesting Stockholder and such other Stockholders in writing that
the success or pricing of the offering would be materially and adversely
affected by the inclusion of all of the securities requested to be included,
then the Company will include in such registration (i) first, the Registrable
Securities requested to be included by the Stockholder who made the Required
Registration, (ii) second, the securities the Company proposes to offer for
sale, which number of securities to be registered will be reduced to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount recommended by such managing Underwriter, and (iii)
third, such number of Registrable Securities as the other Stockholders propose
to offer for sale and the managing Underwriter recommends be included in such
offering, allocated pro rata among such Stockholders.
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3.2. MUSI Demand Registrations. (a) At any time and from time
to time following the eighteen month anniversary of the Initial Public Offering,
MUSI may make written requests for registration under the Securities Act of all
or part of MUSI's Registrable Securities (a "MUSI Demand Registration");
provided, however, that the Company will not be obliged to effect a MUSI Demand
Registration on more than two (2) occasions. Such request will specify the
number of shares of Registrable Securities proposed to be sold and will also
specify the intended method of disposition thereof.
(b) If MUSI so elects, the offering of the MUSI Registrable
Securities pursuant to such MUSI Demand Registration will be in the form of an
underwritten offering. MUSI will select the managing Underwriter(s) and any
additional participants in connection with the offering.
(c) If, in connection with any MUSI Demand Registration, the
Company or any other Stockholder also proposes to sell securities and the
managing Underwriter of an offering described in this Section 3.2 advises the
Company, MUSI and the other Stockholders in writing that the success or pricing
of the offering would be materially and adversely affected by the inclusion of
all of the securities requested to be included, then the Company will include in
such registration (i) first, the Registrable Securities MUSI proposes to offer
for sale, which number of securities will be reduced to the extent necessary to
reduce the total amount of securities to be included in the offering to the
amount recommended by such managing Underwriter, (ii) second, the securities the
Company proposes to offer for sale, which number of securities will be reduced
to the extent necessary to reduce the total amount of securities to be included
in the offering to the amount recommended by such managing Underwriter and (iii)
third, the Registrable Securities the other Stockholders propose to offer for
sale and the managing Underwriter recommends be included in such offering,
allocated pro rata among such Stockholders.
(d) Notwithstanding the foregoing provisions of this Section
3.2, in the event the Company receives notice of a MUSI Demand Registration, the
Company may elect once, and only once, by written notice to MUSI within 20 days
after receipt of such notice, to proceed with a registration of Common Stock for
the Company's account in lieu of proceeding with the MUSI Demand Registration,
in which case the provisions of Section 3.3 (and not this Section 3.2) will
apply. If the Company exercises the right described in the preceding sentence,
MUSI will not be deemed (for purposes of determining the number of future MUSI
Demand Registrations that may be demanded under the terms of this Agreement) to
have exercised the right to request a MUSI Demand Registration unless at least
50% of the Registrable Securities that MUSI desired to include in such
registration were included pursuant to Section 3.3
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(e) Notwithstanding any other provision hereof, MUSI will not
initiate a demand registration unless it proposes to include therein Registrable
Securities which it believes in good faith to have a value of at least $500,000.
3.3. Piggy-Back Registration. (a) If the Company proposes to
file a registration statement under the Securities Act with respect to an
offering of any shares of Common Stock (i) for its own account (other than a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the Commission)) or (ii) for the account of any holders of its
securities, then the Company will give written notice of such proposed filing to
the holders of Registrable Securities as soon as practicable (provided that
holders of Registrable Securities will be given such notice not less than 20
calendar days prior to the deadline set by the Company for electing to include
Registrable Securities in such offering), and such notice will offer such
holders the opportunity, subject to the limitations provided in Section 3.3(b),
to register such number of shares of Registrable Securities as such Stockholders
may request on the same terms and conditions as the registration of the
Company's or such other holders' securities.
(b) Notwithstanding anything contained herein, if the managing
Underwriter of an underwritten offering under this Section 3.3 advises the
Company in writing that the success or pricing of the offering would be
materially and adversely affected by the inclusion of all of the securities
requested to be included, then the Company will include in such registration (i)
first, the securities the Company proposes to offer for sale and (ii) second,
the number of other securities of the Company (including, without limitation,
Registrable Securities) so requested to be included which in the opinion of the
managing Underwriter can be sold, allocated pro rata among the Stockholders
proposing to offer Registrable Securities for sale.
(c) A request by MUSI or the Frisby Stockholder Group to
include Registrable Securities in a proposed underwritten offering pursuant to
this Section 3.3 will not be deemed to be a request for a demand registration
pursuant to Sections 3.1 or 3.2.
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IV. REGISTRATION PROCEDURES
4.1. Filings; Information. Whenever MUSI or the Frisby
Stockholder Representative (the "Registering Stockholder") request that any
Registrable Securities be registered pursuant to Article III, the Company will
use its best efforts to effect the registration of such Registrable Securities
as promptly as is practicable, and in connection with any such request:
(a) The Company will as expeditiously as possible prepare and
file with the Commission a registration statement on any form for which the
Company then qualifies and which counsel for the Company deems appropriate and
available for the sale of the Registrable Securities to be registered thereunder
in accordance with the intended method of distribution thereof, and use its best
efforts to cause such filed registration statement to become and remain
effective for a period of not less than 90 days; provided, however, that if the
Company furnishes to the Registering Stockholder a certificate signed by the
Company's Chief Executive Officer, President or any Vice-President stating that
in his good faith judgment it would be detrimental or otherwise disadvantageous
to the Company or its stockholders for such a registration statement to be filed
as expeditiously as possible, the Company will have a period of not more than 90
calendar days within which to file such registration statement measured from the
date of the Company's receipt of the Registering Stockholder's request for
registration in accordance with Article III.
(b) The Company will, if requested, prior to filing such
registration statement or any amendment or supplement thereto, furnish to the
Registering Stockholder and each applicable managing Underwriter, if any, copies
thereof, and thereafter furnish to the Registering Stockholder and each such
Underwriter, if any, such number of copies of such registration statement,
amendment and supplement thereto (in each case including all exhibits thereto
and documents incorporated by reference therein) and the prospectus included in
such registration statement (including each preliminary prospectus) as the
Registering Stockholder or each such Underwriter may reasonably request in order
to facilitate the sale of the Registrable Securities.
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(c) After the filing of the registration statement, the
Company will promptly notify the Registering Stockholder of any stop order
issued or, to the Company's knowledge, threatened to be issued by the Commission
and take all reasonable actions required to prevent the entry of such stop order
or to remove it if entered.
(d) The Company will endeavor to qualify the Registrable
Securities for offer and sale under such other securities or blue sky laws of
such jurisdictions in the United States as the Registering Stockholder
reasonably requests; provided, however, that the Company will not be required to
(i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subsection (d), (ii) subject
itself to taxation in any such jurisdiction, or (iii) consent to general service
of process in any such jurisdiction.
(e) The Company will as promptly as is practicable notify the
Registering Stockholder at any time when a prospectus relating to the sale of
the Registrable Securities is required by law to be delivered in connection with
sales by an Underwriter or dealer, of the occurrence of any event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and promptly make available to the Registering Stockholder
and to the Underwriters any such supplement or amendment. The Registering
Stockholder agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in the preceding sentence, the
Registering Stockholder will forthwith discontinue the offer and sale of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until receipt by the Registering Stockholder and the
Underwriters of the copies of such supplemented or amended prospectus and, if so
directed by the Company, the Registering Stockholder will deliver to the Company
all copies, other than permanent file copies then in the Registering
Stockholder's possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event the
Company gives such notice, the Company will extend the period during which such
registration statement will be contained effective as provided in Section 4.1(a)
by the number of days during the period from and including the date of the
giving of such notice to the date when the Company will make available to the
Registering Stockholder such supplemented or amended prospectus.
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(f) The Company will enter into customary agreements
(including an underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or facilitate the sale
of such Registrable Securities.
(g) The Company will furnish to the Registering Stockholder
and to each Underwriter a signed counterpart, addressed to the Registering
Stockholder or such Underwriter, of (i) an opinion or opinions of counsel to the
Company and (ii) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering such matters
of the type customarily covered by opinions or comfort letters, as the case may
be, as the Registering Stockholder or the managing Underwriter may reasonably
request.
(h) The Company will make generally available to its security
holders, as soon as reasonably practicable, an earnings statement covering a
period of 12 months, beginning within three months after the effective date of
the registration statement, which earnings statement will satisfy the provisions
of Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(i) The Company will use its reasonable efforts to cause all
such Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed or, if not so listed,
on a national securities exchange.
The Company may require the Registering Stockholder promptly
to furnish in writing to the Company such information regarding the Registering
Stockholder, the plan of distribution of the Registrable Securities and other
information as the Company may from time to time reasonably request or as may be
legally required in connection with such registration.
4.2. Registration Expenses. Registration Expenses incurred in
connection with any registration made or requested to be made pursuant to
Article III will be borne by the Company, whether or not any such registration
statement becomes effective, to the extent permitted by applicable law. The
Registering Stockholder will pay, on a pro rata basis, any underwriting fees,
discounts or commissions attributable to the sale of the Registrable Securities.
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4.3. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Stockholder registering shares pursuant to
Article III, its officers and directors, and each Person, if any, who controls
each such Stockholder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities and expenses caused by any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or supplemented if
the Company will have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
furnished in writing to the Company by or on behalf of such Stockholder
expressly for use therein; provided, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus will not inure to the
benefit of any Stockholder if a copy of the current prospectus was not provided
to the applicable purchaser by such Stockholder and such current copy of the
prospectus would have cured the defect giving rise to such loss, claim, damage,
liability or expense. The Company also agrees to indemnify any Underwriters of
the Registrable Securities, their officers and directors and each Person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Stockholders provided in this Section 4.3.
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4.4. Indemnification by Stockholders. Any Stockholder
registering shares pursuant to Article III agrees, severally but not jointly, to
indemnify and hold harmless the Company, its officers and Directors and each
Person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Stockholder, but only with
reference to information related to such Stockholder furnished in writing by or
on behalf of such Stockholder expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or
supplement thereto or any preliminary prospectus; provided, however, that in no
event will the liability of any Stockholder under this Section 4.4 be greater in
amount than the dollar amount of the proceeds received by such Stockholder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. Each such Stockholder also agrees to indemnify and hold harmless any
Underwriters of the Registrable Securities, their officers and directors and
each Person who controls such Underwriters on substantially the same basis as
provided for in the underwriting agreement relating to such offering.
4.5. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) is instituted involving
any Person in respect of which indemnity may be sought pursuant to Section 4.3
or Section 4.4, such Person will promptly notify the Person against whom such
indemnity may be sought in writing and the indemnifying party upon request of
the indemnified party will retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and will pay the fees and
disbursements of such counsel related to the proceeding; provided, however, that
the failure to so notify the indemnifying party shall not relieve the
indemnifying party from any liability that it may otherwise have to such
indemnified person, except to the extent the indemnifying person shall have been
materially prejudiced by such failure. In any such proceeding, any indemnified
party will have the right to retain its own counsel, but the fees and expenses
of such counsel will be at the expense of such indemnified party unless (a) the
indemnifying party and the indemnified party have mutually agreed to the
retention of such counsel or (b) the named parties to any such proceeding
(including any impleaded parties) include both the indemnified party and the
indemnifying party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them, in
which case the fees and expenses of such counsel will be paid by the Company. It
is understood that the indemnifying party will not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all such indemnified parties, and
that all such fees and expenses will be reimbursed as they are incurred. In the
case of the retention of any such separate firm for the indemnified parties,
such firm will be designated in writing by the indemnified parties. The
indemnifying party will not be liable for any settlement of any proceeding
effected without its consent, but if settled with such consent, or if there be a
final judgment for the plaintiff, the indemnifying party will indemnify and hold
harmless such indemnified parties from and against any loss or liability (to the
extent stated above) by reason of such settlement or judgment.
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4.6. Contribution. (a) If the indemnification provided for
herein is for any reason unavailable to the indemnified parties in respect of
any losses, claims, damages or liabilities referred to herein, then each such
indemnifying party, in lieu of indemnifying such indemnified party, will
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Company, the Stockholders and
any Underwriter in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the Company, Stockholders
registering shares pursuant to Article III and the Underwriter will be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
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(b) The Company and each Stockholder registering shares of
Common Stock pursuant to Article III agree that it would not be just and
equitable if contribution pursuant to this Section 4.6 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding subsection.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
subsection will be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.6, no Underwriter will be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Stockholder
registering shares pursuant to Article III will be required to contribute any
amount in excess of the amount by which the total price at which the Registrable
Securities of such Stockholder were offered to the public (less underwriters'
discounts and commissions) exceeds the amount of any damages which such
Stockholder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
4.7. Participation in Underwritten Registrations. No Person
may participate in any underwritten registration hereunder unless such Person
(a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, lock-up agreements and other
documents reasonably required under the terms of such underwriting arrangements
and these registration rights.
4.8. Rule 144. The Company will file any reports required to
be filed by it under the Securities Act and the Exchange Act and will take such
further action as any Stockholder may reasonably request to the extent required
from time to time to enable the Stockholders to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144, as such Rule may be amended from time to time,
or other appropriate rule or regulation adopted by the Commission. Upon the
request of any Stockholder, the Company will deliver to the Stockholder a
written statement as to whether the Company has complied with such reporting
requirements.
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4.9. Restrictions on Public Sale by Holders of Registrable
Securities. If and to the extent requested by the Company, in the case of a
non-underwritten Public Offering, and if and to the extent requested by the
managing Underwriter or Underwriters, in the case of an underwritten Public
Offering, each of the Stockholders agree not to effect, except as part of such
registration, any sale of the shares of Securities or a similar security of the
Company, or any securities convertible into or exchangeable or exercisable for
such Securities during such time period to which the Company agrees not to
effect any sale of securities in connection therewith, or to which the
Registering Stockholder agrees if the Company does not include any securities
therein. In addition, each of the Stockholders agrees to execute any customary
lock-up agreement reasonably requested by the managing Underwriter to confirm
its agreement in accordance with the preceding sentence, but only if identical
lock-up agreements are required of all principal Stockholders. Without limiting
the generality of the foregoing, MUSI agrees that it and any of its transferees
will, in connection with the Initial Public Offering, enter into a lock-up
agreement for a period of up to eighteen months or, if MUSI does not exercise
its option and acquire the Option Shares, twenty-four months.
V. CERTAIN ARRANGEMENTS
5.1. Board of Directors. (a) Immediately upon execution of
this Agreement, the Stockholders will (i) elect those individuals set forth on
Schedule 5.1 as Directors of the Company, and (ii) cause the Board of Directors
to adopt the By-laws in the form of Exhibit 5.1. Thereafter, each Stockholder
agrees to vote all shares of Securities as to which it has voting rights for the
election as Directors of the Company of (i) one persons designated from time to
time by MUSI and (ii) four persons designated from time to time by the Xxxxxx
Group Representative.
(b) Each of the Stockholders further agrees to vote all the
shares of Securities with respect to which it has voting rights, and to cause
all persons designated by it as Directors to vote (i) in favor of the removal
from the Board of Directors, upon notice to the other Stockholders, of any
person or persons designated by MUSI or the Xxxxxx Group Representative, as the
case may be, and to elect to the unexpired term of each Director so removed
another person designated by MUSI or the Xxxxxx Group Representative, as the
case may be, and (ii) in the event of any vacancy on the Board of Directors by
reason of death or resignation, to elect to such unexpired term another person
designated in accordance with Section 5.1(a) by the Stockholder that designated
the deceased or resigned Director.
5.2. Certain Board Actions. The parties agree that without the
prior unanimous approval of the Directors designated by MUSI and the Xxxxxx
Group Representative, the Company will not:
(a) amend its charter or By-laws;
(b) effect an Initial Public Offering which provides for the
issuance of more than 1,900,000 shares of Common Stock (without giving
effect to any shares of Common Stock to be offered pursuant to the
Underwriter's over-allotment option) or at a price per share not within
the range set forth in the Barington Agreement;
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(c) other than as contemplated by the Purchase Agreement and
the Ancillary Agreements, make or enter into any contract or commitment
involving the payment of money, provision of services or the lending of
any funds to any Stockholder or any Affiliate of any Stockholder other
than in the ordinary course of business;
(d) make or enter into or amend any employment agreement,
bonus or severance arrangement with any Xxxxxx Stockholder;
(e) issue, grant, deliver, sell, redeem or purchase any shares
of the Company's capital stock or any options or warrants with respect
to any such shares of the Company's capital stock other than (i)
pursuant to the Option Agreement, (ii) pursuant to any Public Offering
of capital stock,(iii) as contemplated by clause 5.2(j) below or (iv)
any other issuances which, in the aggregate, do not exceed three
percent (3%) of the Company's capital stock on a fully-diluted basis;
(f) acquire any asset costing in excess of $250,000 or make or
agree to make any capital expenditure in excess of $250,000;
(g) merge or consolidate with any other Person or sell all or
substantially all of the assets of the Company;
(h) acquire all or substantially all of the assets of another
Person or enter into a partnership or joint venture with another
Person, which acquisition, partnership or joint venture has a
transaction value in excess of $250,000.
(i) incur any indebtedness for borrowed money in excess of
$500,000 or guarantee any such indebtedness or sell any debt securities
of the Company or guarantee any debt securities of any Person;
(j) adopt any employee stock option plan, or any stock
appreciation, phantom stock, profit participation or similar agreement
or arrangement other than an employee stock option plan containing
those terms set forth in Schedule 5.2;
(k) sell, mortgage, pledge, dispose or transfer all or a
material portion of the Company's assets or business, other than
licensing agreements or arrangements entered into in the ordinary
course of business;
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(l) make or enter into, amend or modify in any respect, any
term or provision of any contract, commitment, arrangement or
transaction involving Barington Capital Group, L.P. or Triangle
Research and Development Corporation;
(m) purchase any real property;
(n) dissolve, liquidate, recapitalize or reorganize the
Company;
(o) commence any case, proceeding or other action relating to
bankruptcy or reorganization of the Company;
(p) distribute income or assets or declare any dividends; or
(q) enter into new lines of business.
Subject to the requirement of any applicable law, a Director's
status as an "interested director" with respect to any matter enumerated above
shall not preclude such Director from participating in, and voting on, such
matter.
5.3. Financial Information. From and after the date hereof,
the Company will transmit to MUSI copies of all financial information and other
information concerning the Company's operations at the same time such financial
and other information is given to the Directors. Without limiting the foregoing,
the Company will provide MUSI by facsimile monthly financial statements and
other financial information prepared for management on a regular basis, material
business transaction information and such other information concerning the
Company as may be reasonably requested by MUSI from time to time.
5.4. Key Man Insurance. The Company agrees to acquire and
maintain a "Key Man" insurance policy in the amount of at least $2,500,000 (the
"Insurance Amount") in respect of X. Xxxxxx with the Company to be named as
beneficiary under such policy. The Insurance Amount shall be adjusted from time
to time as the Board of Directors shall deem necessary or desirable.
21
5.5. Confidentiality Obligation. MUSI agrees that the
provisions of that certain Confidentiality Agreement dated November 14, 1997
(the "Confidentiality Agreement") between Dott. Xxxx Xxxxxxx Antivari and Ernst
& Young LLP shall apply to MUSI with respect to all information provided to it
pursuant to Section 5.3 of this Agreement as though MUSI were a party to such
Confidentiality Agreement. In addition, prior to the disclosure to MUSI of any
trade secrets, know-how or other confidentiality and proprietary intellectual
property rights of the Company, MUSI will enter into an appropriate
confidentiality and non-disclosure agreement with the Company.
5.6. LIDC Guaranty. In the event that the Company is required
to make any payment to the Long Island Development Corporation ("LIDC") pursuant
to that certain guaranty dated as of December 4, 1994 made by the Company in
favor of LIDC, X. Xxxxxx agrees to reimburse the Company the entire amount of
any such payment.
VI. MISCELLANEOUS
6.1. Headings. The headings in this Agreement are for
convenience of reference only and will not control or affect the meaning or
construction of any provisions hereof.
6.2. Entire Agreement. This Agreement, the Purchase Agreement
and the Option Agreement constitute the entire agreement between the parties
with respect to the subject matter of this Agreement. This Agreement, the
Purchase Agreement and the Option Agreement supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement, the Purchase Agreement and the Option
Agreement. None of this Agreement, the Purchase Agreement or any Option
Agreement is intended to confer upon any Person other than the parties hereto
and thereto any rights or remedies hereunder or thereunder. In the event of any
conflict between the provisions of this Agreement and that certain Shareholder
Agreement dated as of December 10, 1997 by and among the Company, X. Xxxxxx, and
X. Xxxxxx, the applicable provisions of this Agreement will prevail.
22
6.3. Notices. Any notice, request, instruction or other
document required or permitted to be given hereunder by any party hereto to
another party hereto will be in writing and will be given to such party at its
address set forth in Annex I attached hereto, with, in the case of the Company,
a copy sent to Secretary, Xxxxxx Technologies, Inc. at its principal executive
offices or, in the case of a Transfer permitted hereunder, to the address of the
Transferee specified by it upon notice given in accordance with the terms
hereof, or to such other address as the party to whom notice is to be given may
provide in a written notice to the party giving such notice, a copy of which
written notice will be on file with the Secretary of the Company. Each such
notice, request or other communication will be effective (i) if given by
certified mail, 72 hours after such communication is deposited in the mails with
certified postage prepaid addressed as aforesaid, (ii) one Business Day after
being furnished to a nationally recognized overnight courier for next Business
Day delivery, and (iii) on the date sent if sent by electronic facsimile
transmission, receipt confirmed.
6.4. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflict of laws rules of such state.
6.5. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction will not affect the validity,
legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this Agreement,
including any such provision, in any other jurisdiction, it being intended that
all rights and obligations of the parties hereunder will be enforceable to the
fullest extent permitted by law.
6.6. Termination; Termination of Rights. This Agreement may be
terminated at any time by an instrument in writing signed by the Company and
Stockholders owning at least 90% of the Securities. At such time as any
Stockholder owns 25% or less of the Securities owned by such Stockholder on the
date hereof, all of such Stockholder's rights hereunder, including without
limitation such Stockholder's rights under Articles II and III, will terminate;
provided, however, that all of such Stockholder's obligations hereunder will
remain in full force and effect.
6.7. Successors, Assigns and Transferees. The provisions of
this Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns. Except as
expressly contemplated hereby, neither this Agreement nor any provision hereof
will be construed so as to confer any right or benefit upon any Person other
than the parties to this Agreement and their respective successors and permitted
assigns.
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6.8. Amendments; Waivers. (a) No failure or delay on the part
of any party in exercising any right, power or privilege hereunder will operate
as a waiver thereof, nor will any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided will be cumulative and not
exclusive of any rights or remedies provided by law.
(b) Neither this Agreement nor any term or provision hereof
may be amended or waived except by an instrument in writing signed, in the case
of an amendment or waiver, by the Company and Stockholders owning at least 90%
of the Common Stock.
6.9. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument.
6.10. Remedies. The parties hereby acknowledge that money
damages would not be adequate compensation for the damages that a party would
suffer by reason of a failure of any other party to perform any of the
obligations under this Agreement. Therefore, each party hereto agrees that
specific performance is the only appropriate remedy under this Agreement and
hereby waives the claim or defense that any other party has an adequate remedy
at law.
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6.11. Consent to Jurisdiction. Each of the Stockholders and
the Company irrevocably submits to the non-exclusive jurisdiction of any court
located in the Borough of Manhattan or the United States Federal Court sitting
in the Southern District of New York over any suit, action or proceeding arising
out of or relating to this Agreement. Each of the Stockholders and the Company
consents to process being served in any such suit, action or proceeding by
serving a copy thereof upon the agent for service of process, provided that to
the extent lawful and possible, written notice of such service will also be
mailed to such Stockholders or the Company, as the case may be. Each of the
Stockholders and the Company agrees that such service will be deemed in every
respect effective service of process upon such Stockholders or the Company, as
the case may be, in any such suit, action or proceeding and will be taken and
held to be valid personal service upon such Stockholder or the Company, as the
case may be. Nothing in this subsection will affect or limit any right to serve
process in any manner permitted by law, to bring proceedings in the courts of
any jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction. Each of the Stockholders and the Company
waives any right it may have to assert the doctrine of forum non conveniens or
to object to venue to the extent any proceeding is brought in accordance with
this Section 6.11.
6.12. Termination Upon Initial Public Offering. Upon an
Initial Public Offering, the parties will effect an amendment to this Agreement
to provide for the deletion of clauses (a), (b), (c), (d), (f), (g), (h), (i),
(k), (l), (m), (p) and (q) of Section 5.2 of this Agreement and any other
appropriate amendments to Articles II, III and V of this Agreement.
6.13. Termination of Certain Right. MUSI's right to designate
Directors pursuant to Section 5.1 and MUSI's rights under Section 2.3 shall
terminate if (a) Dott. Xxxx Xxxxxxx Antivari ceases to own, directly or
indirectly, a majority of the voting securities of MUSI, or (b) MUSI transfers
fifty percent (50%) or more of its Securities to one or more Permitted
Transferees.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
XXXXXX TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman & Chief Executive Officer
STOCKHOLDERS:
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
MUSI INVESTMENTS S.A.
By: /s/ Xxxx Xxxxxxx Antivari
------------------------------------
Name: Dott. Xxxx Xxxxxxx Antivari
Title: President
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Schedule 5.1
Initial Directors of the Company
Avv. Pietro Xxxxxxxxxx Xxxxx
X. Xxxxxx
X. Xxxxxx
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Schedule 5.2
Employee Stock Option Terms
Amount of Option Shares: Not more than 10% of the Company's Capitol Stock, on
a fully diluted basis.
Vesting: Proportionate vesting over a minimum of 36 months
(credit for prior periods of employment).
Exercise Price: Based on a fair market value as determined by the
Board of Directors.
Repurchase: Prior to Initial Public Offering, Company has right
to re-purchase upon termination of participant's
employment at then fair market value.
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