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EXHIBIT 10.13
EXECUTION
SHAREHOLDERS AGREEMENT
among
KIRKLAND HOLDINGS L.L.C.,
XXXXXXXX'X, INC.,
AFFILIATES OF XXXXXXXX'X INC.,
CAPITAL RESOURCE LENDERS II, L.P.,
ALLIED CAPITAL CORPORATION,
ALLIED CAPITAL CORPORATION II,
THE MARLBOROUGH CAPITAL INVESTMENT FUND, L.P.,
CAPITAL TRUST INVESTMENTS, LTD.,
XXXX XXXXXXXX,
XXXXXX XXXXXXXX,
XXXXX XXXXX,
AND
XXXXXX XXXXXXXX
Dated as of June 12, 1996
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TABLE OF CONTENTS
Sections Page
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1. Certain Defined Terms......................................................................... 3
2. Prohibited Transfers.......................................................................... 10
3. Preemptive Rights............................................................................. 12
4. Third Party Offers to Shareholders; Participation Rights...................................... 15
5. Stock Splits, Etc............................................................................. 19
6. Joinder Requirements.......................................................................... 19
7. Failure to Deliver Shares..................................................................... 21
8. Termination................................................................................... 22
9. Registration Rights........................................................................... 22
10. Financial Reports and Information............................................................. 22
11. Company Governance Provisions................................................................. 23
12. Specific Performance.......................................................................... 27
13. Legend........................................................................................ 28
14. Notices....................................................................................... 28
15. Entire Agreement and Amendments............................................................... 30
16. Expenses...................................................................................... 31
17. Dividends..................................................................................... 31
18. Amendment to Charter.......................................................................... 31
19. Company Joinders.............................................................................. 31
20. Governing Law; Successors and Assigns......................................................... 32
21. Waivers....................................................................................... 32
22. Severability.................................................................................. 32
23. Captions...................................................................................... 32
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Sections Page
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24. Counterparts.................................................................................. 32
25. Attorney's Fees............................................................................... 32
26. Parties Benefitted............................................................................ 33
27. Successors and Assigns........................................................................ 33
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SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (the "Agreement") is made
as of this 12th day of June, 1996, by and among
- KIRKLAND HOLDINGS L.L.C., a Delaware limited
liability company ("Holdings"),
- XXXXXXXX'X, INC., a corporation incorporated under
Tennessee law ("Kirkland's" or the
"Representative"),
- the other corporations listed on the signature pages
hereto (such other corporations, together with
Kirkland's, being herein referred to individually as
a "Company" and collectively as the "Companies"),
- Capital Resource Lenders II, L.P. ("CRL"),
- Allied Capital Corporation and Allied Capital
Corporation II (collectively, "Allied"),
- The Marlborough Capital Investment Fund, L.P.
("Marlborough"),
- Capital Trust Investments, Ltd. ("Capital Trust"
and together with CRL, Allied, and Marlborough,
the "Mezzanine Warrant Holders",
- XXXX XXXXXXXX,
- XXXXXX XXXXXXXX,
- XXXXX XXXXX, and
- XXXXXX XXXXXXXX (Xxxx Xxxxxxxx, Xxxxxx Xxxxxxxx,
Xxxxx Xxxxx and Xxxxxx Xxxxxxxx being herein referred
to collectively as the "Individual Investors").
WHEREAS, on April 26, 1996, Holdings, the Companies and the
Individual Investors executed a Recapitalization Agreement (the
"Recapitalization Agreement"). Capitalized terms used but not defined herein
have the meanings set forth in the Recapitalization Agreement;
WHEREAS, pursuant to the Recapitalization Agreement, the
Companies have filed amendments to their charters in preparation for the
Preliminary Recapitalization and the Recapitalization. The amended charter of
each Company provides that the authorized capital of such Company consists of
500,000 shares of common stock, no par value (the "Common Stock") and 100,000
shares of Preferred Stock, of which Preferred Stock 68,400 shares are designated
as Class A Preferred Stock (the
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"Class A Preferred Stock") and 31,600 shares are designated as Class B Preferred
Stock (the "Class B Preferred Stock"). The amended charters of all Group A
Companies and Group B Companies also provide that the authorized capital of each
Group A and Group B Company includes 20,000 shares of Preferred Stock which are
designated as Class C Preferred Stock (the "Class C Preferred Stock", and
collectively with the Class A Preferred Stock and the Class B Preferred Stock,
the "Preferred Stock"); and
WHEREAS, the 500,000 shares of authorized Common Stock have
been designated as Voting Common Stock ("Voting Common Stock" and with Voting
Preferred Stock (defined herein), "Voting Stock") and Non-Voting Common Stock,
depending on whether the Company is a Group A Company, Group B Company, Group C
Company or Group D Company; and
WHEREAS, of the 31,600 shares of authorized Class B Preferred
Stock of each Group C Company and Group D Company, 21,800 have been designated
as Voting Class B Preferred Stock ("Voting Class B Preferred Stock") and 9,800
have been designated as Non-Voting Class B Preferred Stock ("Non-Voting Class B
Preferred Stock"); and
WHEREAS, the 31,600 shares of authorized Class B Preferred
Stock of each Group A Company and Group B Company have been designated simply as
Class B Preferred Stock and do not carry voting rights; and
WHEREAS, on the date hereof, Holdings owns a 68.4% interest
and each of the Individual Investors owns a 7.9% interest in the outstanding
Common Stock of each Company (whether voting or non-voting); and
WHEREAS, on the date hereof, the Class A Preferred Stock of
each Company is owned by Holdings; the Class B Preferred Stock of each Company
is owned by the Individual Investors according to the following percentages:
Xxxxxx Xxxxxxxx, 25%; Xxxx Xxxxxxxx, 25%; Xxxxxx Xxxxxxxx, 25% and Xxxxx Xxxxx,
25%; and the Class C Preferred Stock is owned by the Individual Investors in the
following percentages: Xxxxxx Xxxxxxxx, 8.3033%; Xxxx Xxxxxxxx, 39.5839%; Xxxxxx
Xxxxxxxx, 37.7225%; and Xxxxx Xxxxx, 14.3903%; and
WHEREAS, in connection with the Company's execution of the
Senior Subordinated Note and Warrant Purchase Agreement dated on or about the
date hereof (the "Mezzanine Purchase Agreement"), pursuant to which the
Mezzanine Warrant Holders have loaned a total of $20,000,000 in subordinated
debt to the Companies, the Mezzanine Warrant Holders have received (i) warrants
to purchase up to 11,905 shares of Common Stock, subject to adjustment in
accordance with the terms of such warrants ("Mezzanine Warrants" and the shares
subject to the Mezzanine Warrants, the "Warrant
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Shares") and (ii) warrants to purchase up to an additional 4,817 shares of
Common Stock, subject to adjustment in accordance with the terms of such
warrants, the exercisability of which is contingent upon the timing of certain
events and the valuation of the Companies as evidenced by such event (the
"Mezzanine Contingent Warrants" and the shares subject to the Mezzanine
Contingent Warrants, the "Contingent Warrant Shares"); and
WHEREAS, options to purchase 7,143 shares of Common Stock,
subject to adjustment in accordance with the terms of the Option Agreements
governing such options (the "Option Agreements"), have been granted to the
Management Investors, each having the option under the Option Agreements to
purchase one-third of such shares (the "Option Shares"); and
WHEREAS, as an inducement to completion of the transactions
contemplated by the Recapitalization Agreement and the mezzanine financing
discussed above, Holdings, the Companies, the Mezzanine Warrant Holders and the
Individual Investors have agreed to provide for certain restrictions with
respect to the ownership and transfer of the shares of Stock owned by them and
certain rights incident to the ownership of shares of Stock pursuant to this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and undertakings of the Companies set forth below, the
parties hereto, intending to be legally bound hereby, agree with each other as
follows:
1. Certain Defined Terms. Capitalized terms used in
this Agreement have the meanings set forth in this Section 1, or are defined in
the provisions of this Agreement identified in this Section 1.
(a) "Adjusted Common Equity Percentage" shall
mean, with respect to a Shareholder, such Shareholder's Common Equity Percentage
calculated without taking Offered Shares into account.
(b) "Advent" shall mean Advent International
Corporation, a Delaware corporation, and any Affiliate of Advent
International Corporation.
(c) "Affiliate" of a Person shall mean any
Person which, directly or indirectly, controls, is controlled by, is under
common control with, or under a common management agreement with, such Person.
For purposes hereof (i) each Mezzanine Investor shall be deemed to be an
Affiliate of each other Mezzanine Investor, (ii) the partners or shareholders of
a Mezzanine Investor shall be deemed to be Affiliates of that Mezzanine Investor
(but only to the extent of their pro rata interest therein), (iii) the members
of Holdings shall be
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considered to be Affiliates of Holdings (but only to the extent of their pro
rata interest therein).
(d) "Agreement" means this Shareholders
Agreement, as the same may be amended from time to time in accordance herewith.
(e) "Board Expansion Right" shall mean the right
granted to the holders of the Class A Preferred Stock pursuant to Section 5.4(c)
of the Recapitalization Agreement to elect two (2) additional directors to the
Boards of Directors of the Companies.
(f) "Bona Fide Offer" shall mean a bona fide
written offer from any Person other than any of the Companies to purchase any
Securities owned by a Shareholder; provided, that if such offer includes an
offer to purchase any Preferred Stock, the offer must set forth the aggregate
stated value of Preferred Stock which the offeror desires to purchase, which may
be accepted through the sale of shares of either Class A Preferred Stock, Class
B Preferred Stock or Class C Preferred Stock having an aggregate stated value
equal to the amount set forth.
(g) "Class A Preferred Amendment" shall mean the
amendment to the Companies' Articles or Certificates of Incorporation and Bylaws
effected pursuant to Section 5.4(b) of the Recapitalization Agreement and
pursuant to which the special voting rights and restrictions of the Class A
Preferred Stock, Class B Preferred Stock and Class C Preferred Stock are
eliminated, the Non-Voting Common Stock becomes voting stock, and after which no
Preferred Stock and all Common Stock will have voting rights, except as required
by law.
(h) "Closing" shall mean the closing of the
transactions contemplated by the Recapitalization Agreement.
(i) "Common Equity Percentage" shall mean, as to
any Shareholder, the percentage that (i) the outstanding shares of Common Stock
then owned by such Shareholder and any shares of Common Stock issuable upon
exercise of any warrants (including any Mezzanine Warrants or Mezzanine
Contingent Warrants) or Options, in each case which are fully vested and then
owned by such Shareholder, is of (ii) the aggregate outstanding number of shares
of Common Stock then owned by all of the Shareholders plus all shares of Common
Stock issuable upon exercise of any warrants (including any Mezzanine Warrants
or Mezzanine Contingent Warrants) or Options, in each case which are fully
vested and then owned by any Shareholder.
(j) "Common Shares" shall mean issued and
outstanding shares of Common Stock.
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(k) "Common Stock" shall mean the common stock,
par value $.01 per share, of each of the Companies.
(l) "Consulting Agreement" shall mean the
Consulting Agreement by and between Xxxxxx Xxxxxxxx and the Companies and dated
on or about the date hereof.
(m) "Counterpart" shall mean a counterpart to
this Agreement in the form of Exhibit A hereto, pursuant to the execution of
which a Person shall become bound by all of the terms and conditions to this
Agreement.
(n) "Equity" means all initial capital
contributed to all of the Companies by the Shareholders as of the date hereof,
including in the form of continuing ownership as well as subsequent capital
contributions by the Shareholders. For all purposes hereof (i) the Equity shall
be considered to have a value of Forty-five Million Dollars ($45,000,000) as of
the date hereof and shall be deemed to have been contributed to the Company on
the date hereof; (ii) shares of capital stock shall be valued without regard to
voting rights, and (iii) the Class C Preferred Stock shall not be considered
Equity.
(o) "Excluded Securities" shall mean,
collectively:
(i) the Option Shares, Warrant Shares
and Contingent Warrant Shares;
(ii) Common Stock to be issued as a
stock dividend;
(iii) Shares of any class of a Company's
capital stock to be issued upon any subdivision, combination, stock split or
reverse stock split of all the outstanding shares of such class of capital stock
of a Company;
(iv) Any securities to be issued by a
Company pursuant to the acquisition by a Company of any Person by means of
merger, stock purchase, reorganization, purchase of substantially all the assets
or otherwise in which such Company, or its shareholders of record immediately
prior to the effective date of such transaction, directly or indirectly, own at
least a majority of the voting power of the acquired or resulting entity after
such transaction; provided, that such recipient(s) of shares of Stock execute(s)
a Counterpart and agree(s) to be bound by the terms and conditions hereof; and
(v) Any securities to be issued
pursuant to a Public Offering.
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(p) "Fully Diluted Common Stock" means the
number of Common Shares plus the number of shares of Common Stock issuable upon
conversion or exercise of other outstanding securities of the Companies.
(q) "Group A Companies" shall mean Company Nos.
100, 123, 125, 126 and 128 through 204, such Companies being those which
commenced business prior to May 1, 1995 in which Xxxx Xxxxxxxx, Xxxxxx Xxxxxxxx,
Xxxxx Xxxxx and Xxxxxx Xxxxxxxx owned 37.5%, 37.5%, 15% and 10%, respectively,
of the issued and outstanding common stock (measured prior to giving effect to
any of the transactions contemplated by the Recapitalization Agreement).
(r) "Group B Companies" shall mean Company Nos.
205 through 214, such Companies being those which commenced business after April
30, 1995 but before January 1, 1996 in which Xxxx Xxxxxxxx, Xxxxxx Xxxxxxxx,
Xxxxx Xxxxx and Xxxxxx Xxxxxxxx owned 37.5%, 37.5%, 15% and 10%, respectively,
of the issued and outstanding common stock (measured prior to giving effect to
any of the transactions contemplated by the Recapitalization Agreement).
(s) "Group C Companies" shall mean Company Nos.
101 through 104, 107, 109 through 111, 115 through 120, 122 and 127, which are
all of the Companies other than Group A, B or D Companies. Group C Companies are
the Companies in which the shares of the Individual Investors were not owned in
the same percentages as the shares of the Group A, B or D Companies prior to the
Recapitalization.
(t) "Group D Companies" shall mean Company Nos.
215 through 224, such Companies being those commencing business in 1996.
(u) "Management Investors" shall mean Kirkland,
Xxxxx Xxxxx and Xxxxxx Xxxxxxxx.
(v) "Mezzanine Investor" shall mean any
Mezzanine Warrant Holder or any other Person who holds, from time to time, any
Mezzanine Warrants, Mezzanine Contingent Warrants, Warrant Shares or Contingent
Warrant Shares, and who is or who becomes a party to this Agreement pursuant to
the terms hereof.
(w) "Management Agreements" shall mean those
letter agreements providing for employment of the Management Investors with the
Companies and dated on or about the date hereof.
(x) "Management Pledge Agreement" shall mean the
Management Pledge Agreement executed by the Individual Investors
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in favor of the First National Bank of Boston, as Administrative Agent, on the
date hereof.
(y) "Options" shall mean incentive stock or non-
qualified options granted pursuant to the Stock Option Plan as in effect on the
date hereof, including without limitation the Options granted to the Management
Investors to purchase the Option Shares.
(z) "Parent Pledge Agreement" shall mean the
Parent Pledge Agreement executed by Holdings in favor of The First National Bank
of Boston, as Administrative Agent, on the date hereof.
(aa) "Permitted Transferee" shall mean, with
respect to any Individual Investor (i) such Person's spouse, (ii) any lineal
descendant of such Person, (iii) spouses of such lineal descendants, (iv) trusts
for the benefit of any such spouse, lineal descendant or spouse of a lineal
descendant, or (v) organizations exempt from federal income taxation under
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, provided
that such 501(c)(3) organizations shall only constitute Permitted Transferees
where the Individual Investor Transfers Stock to such organization for purposes
of permitting such organization either to (x) register and sell such Stock in a
Public Offering, or (y) sell such Stock to either a Non-Selling Shareholder or a
Third Party Offeror pursuant to Section 4 hereof.
(ab) "Person" shall mean an individual, a sole
proprietorship, a corporation, a partnership, limited liability company, limited
liability partnership, a joint venture, an association, a trust, or any other
entity or organization, including a government or a political subdivision,
agency or instrumentality thereof.
(ac) "Preferred Stock" shall mean the Class A
Preferred Stock, the Class B Preferred Stock and, where applicable, the Class C
Preferred Stock, of each of the Companies.
(ad) "Public Offering" shall mean the sale of
shares of Common Stock in a registered underwritten public offering resulting in
gross proceeds to the Companies of at least Thirty Million Dollars
($30,000,000), if Holdings and the Individual Investors realize a Rate of Return
of at least thirty-five percent (35%) on their Equity, after taking into account
the amount and timing of all capital contributions (and distributions) to (from)
the Companies by (to) Holdings and the Individual Investors.
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(ae) "Recapitalization" shall mean the
Recapitalization as defined in the Recapitalization Agreement.
(af) "Recapitalization Agreement" shall mean the
Recapitalization Agreement, dated April 26, 1996, among Holdings, the Companies
and the Individual Investors.
(ag) "Rate of Return" shall mean the internal
rate of return for the investment by the Shareholders in the Equity. In the
context of a Public Offering, Rate of Return shall be calculated based on the
amount that would be realized by the Shareholders if all Shareholders then sold
their Common Stock and Class A Preferred Stock and Class B Preferred Stock and
realized (A) for their Common Stock the price per share at which Common Stock is
sold in the Public Offering (before commissions but after other transaction
expenses) and (B) for their Class A Preferred Stock or Class B Preferred Stock,
its aggregate stated value plus all accrued and unpaid dividends.
(ah) "Securities" shall mean all shares of
capital stock, options, warrants, notes, bonds or other equity or debt
securities offered or sold by the Companies from time to time on or after the
date hereof.
(ai) "Shareholder" shall mean any Person who
holds, from time to time, any Shares, Mezzanine Warrants or Contingent Mezzanine
Warrants, and who or which is or becomes a party to this Agreement pursuant to
the terms hereof.
(aj) "Shares" shall mean and include all issued
and outstanding shares of Common Stock or Preferred Stock now owned or hereafter
acquired by the Shareholders.
(ak) "Stock" shall mean and include all shares of
Common Stock and Preferred Stock of each of the Companies, including without
limitation, shares of Common Stock issued, issuable or transferable on the
exercise of Options, Mezzanine Warrants, Contingent Mezzanine Warrants, or other
rights to acquire shares of Common Stock or on the conversion or exchange of
securities convertible into or exchangeable for Common Stock, and all other
securities of any of the Companies which may be issued in exchange for or in
respect of shares of Common Stock or Preferred Stock (whether by way of stock
split, stock dividend, combination, reclassification, reorganization or any
other means).
(al) "Stock Option Plan" shall mean any Stock
Option Plan adopted by the Companies on the date hereof providing for the
issuance of the shares of Common Stock to certain employees of the Companies or
such Companies' subsidiaries.
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(am) "Transfer" shall mean any transfer of Stock,
whether by sale, assignment, gift, will, devise, bequest, operation of the laws
of descent and distribution, or in trust, pledge, hypothecation, mortgage,
encumbrance or other disposition. The verb to "Transfer" shall mean to sell,
assign, give, transfer (including by gift, will, devise, bequest, or operation
of laws of descent and distribution, or in trust), pledge, hypothecate,
mortgage, encumber or dispose of.
Other capitalized terms used in this Agreement have the
definitions set forth in the following sections:
Capitalized Term Section
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10-Day Period 3(d)
30-Day Exercise Period 4(c)
30-Day Period 3(b)
90-Day Period 3(f)
Accepting Shareholders 3(d)
Allied Preamble
Class A Preferred Stock Preamble
Class B Preferred Stock Preamble
Class C Preferred Stock Preamble
Companies Preamble
Company Notice 4(b)
Company Option Period 4(b)
Contingent Warrant Shares Preamble
CRL Preamble
CT Preamble
Exercise Notice 4(c)
Fair Market Value 6(d)
Final Purchase Notice 4(f)
Final Remaining Shares 4(g)(iv)
First Option 4(c)
First Refusal Notice 4(a)
Holdings Preamble
Initiating Holders 6(a)
Kirkland's Preamble
Individual Investors Preamble
Marlborough Preamble
Mezzanine Contingent Warrants Preamble
Mezzanine Purchase Agreement Preamble
Mezzanine Warrant Holders Preamble
Mezzanine Warrants Preamble
Non-Selling Shareholders 4(a)
Non-Voting Class B Preferred Stock Preamble
Notice of Acceptance 3(c)
Notice of Refused Securities 3(c)
Offer 3(b)
Offered A/B Preferred Shares 4(g)(ii)(B)
Offered C Preferred Shares 4(g)(ii)(C)
Offered Common Shares 4(g)(ii)(A)
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Offered Shares 4(a)
Option Agreements Preamble
Option Shares Preamble
Outside Offer 3(f)
Participating Shareholder 4(g)(i)
Participation Right 4(g)(ii)
Preemptive Offer 3(a)
Preferred A/B Value 4(g)(ii)(B)
Preferred C Value 4(g)(ii)(C)
Preferred Initiating Holders 6(b)
Preferred Purchase Percentage 6(b)
Preferred Stock Preamble
Purchase Percentage 6(a)
Purchasers 4(g)(i)
Recapitalization Agreement Preamble
Refused Securities 3(c)
Remaining Offered Shares 4(b)
Representative Preamble
Second Option 4(c)
Selling Shareholder 4(a)
Third Party Offer Terms 4(b)
Third Party Offeror 4(f)
Transferred Companies 7
Transferring Shareholder 7
Unpurchased Remaining Offered Shares 4(c)
Unpurchased Remaining Shares Notice 4(c)
Voting Class B Preferred Stock Preamble
Voting Common Stock Preamble
Voting Preferred Stock 11(a)(ii)
Voting Stock Preamble
Warrant Shares Preamble
2. Prohibited Transfers.
(a) Each Shareholder hereby agrees that it shall
not Transfer all or any of his or its Stock except to the Companies which
originally issued the Stock or as expressly provided in this Agreement. No
Transfer shall be effective and the Companies shall not, and shall not be
compelled to, recognize any Transfer or record any Transfer on their books made
other than in accordance with the terms of this Agreement, or issue any
certificate representing any Stock to any Person who has received such Stock in
a Transfer made other than in accordance with the terms of this Agreement or to
any Person who has not delivered to it an executed Counterpart.
(b) Each Shareholder shall be permitted to
Transfer its Stock to any Affiliate of such Shareholder without compliance with
Section 4 hereof, provided that any such transferee shall, as a condition to
such Transfer, execute a Counterpart and thereafter the transferee shall be
treated as a Shareholder for all purposes under this Agreement; and provided
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further that if the Notes (as defined in the Mezzanine Agreement) shall be
bearing interest at thirteen and one-half percent (13.5%) pursuant to Section
2.06(b) of the Mezzanine Agreement, then, until such Notes shall be redeemed,
Holdings shall not be permitted to transfer any of its Common Stock except to
its members and then only if the members agree in writing to be bound by the
terms of Section 2.06(b) of the Mezzanine Agreement (imposing transfer
restrictions).
(c) Each Individual Investor shall be permitted
to Transfer all or any of his Stock to such Individual Investor's Permitted
Transferees without compliance with Section 4 hereof, provided that such
Permitted Transferee executes a Counterpart, and, except in the case of a
Transfer occasioned as a result of the death of an Individual Investor:
(i) notwithstanding such Transfer, the
Individual Investor making such Transfer shall remain jointly and severally
liable for any breach by the Permitted Transferee of the provisions of this
Agreement; and
(ii) any Individual Investor who
Transfers any or all of his Voting Stock to a Permitted Transferee shall, except
with the consent of the holders of a majority of the Shares other than the
Shares of the Transferring Individual Investor, retain the right to vote the
transferred Stock on any matter on which such Stock is entitled to vote under
the provisions of the applicable Company's Certificate of Incorporation.
(d) Nothing in this Section 2, shall be
construed to restrict the merger of any two or more Companies with each other,
notwithstanding that such a merger may be deemed to cause a Transfer of Stock,
provided such merger does not cause any material change in the aggregate
ownership of Stock.
(e) Notwithstanding this Section 2, the
Individual Investors and Holdings shall be permitted to pledge their shares in
favor of The First National Bank of Boston, as Administrative Agent, pursuant to
the Management Pledge Agreement and the Parent Pledge Agreement, both dated the
date hereof.
(f) Notwithstanding this Section 2, any
Individual Investor shall be permitted to pledge his shares of Class C Preferred
Stock to a lender to the pledging Individual Investor provided that (i) prior to
completing the pledge, the lender undertakes in a writing (in form and substance
acceptable to the lender and the Companies) delivered to the Companies that (A)
such lender is prohibited from selling or syndicating all, or any portion of the
debt obligation secured by the pledge, and (B) in the event of any default on
the debt secured by such pledge, all or any portion of the pledged shares (as
determined by the
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Companies) may be purchased by the Companies for a price equal to the lowest of
(1) the aggregate Stated Value of the shares being purchased, (2) the Fair
Market Value (as determined under procedures comparable to those set forth in
Section 6(d) hereof with decisions as to choice of the valuation determiner
being made by the Representative and the lender) of the shares being purchased,
or (3) the unpaid principal, plus accrued interest, plus all other amounts
accrued and owing to the lender in respect of such indebtedness, secured by the
pledge, (ii) if Xxxxxx Xxxxxxxx is the borrower and pledgor, the Consulting
Agreement will terminate in the event the Companies exercise their right to
purchase, as set forth in section (i)(B) of this section (f), and the pledged
shares are not delivered to the Companies concurrently with the purchase, (iii)
if any other Individual Investor is the borrower and pledgor, the Management
Agreement of such Individual Investor will terminate in the event the Companies
exercise their right to purchase, as set forth in section (i)(B) of this section
(f), and the pledged shares are not delivered to the Companies concurrently with
the purchase, and (iv) the lender is an institution normally engaged in the
business of making commercial loans.
3. Preemptive Rights.
(a) Except in the case of Excluded Securities,
no Company shall issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, any Securities unless (i)
such Company shall have first offered (the "Preemptive Offer") to sell such
Securities to the Company's Shareholders on the terms set forth herein and (ii)
all other Companies simultaneously undertake identical action (except, if
applicable, as to the amount of Securities proposed to be sold by such other
Company) and make identical Preemptive Offers. Each Shareholder shall have a
preemptive right to purchase up to such Shareholder's Common Equity Percentage
of such Securities. Each Shareholder may assign all or any part of its rights
and responsibilities with respect to such Offer (as defined below) to an
Affiliate. Such Affiliate or Affiliates which are such assignees shall
thereafter be deemed to be such assigning Shareholder (to the extent of such
assignment) for purposes of applying this Section 3 to such Preemptive Offer.
Each such Affiliate shall agree in writing, as a condition to such assignment,
to execute a Counterpart in the event of a purchase of Securities pursuant to
such assignment.
(b) The Companies shall deliver to each
Shareholder written notice of the Preemptive Offer, specifying the price and
terms and conditions of the offer, including without limitation, the minimum and
maximum limits on the amount of Securities proposed to be sold by the Companies
pursuant to the offer (the "Offer"), and the Common Equity Percentage applicable
to the Shareholder receiving such notice. The
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Preemptive Offer by its terms shall remain open and irrevocable for a period of
thirty (30) days from the date such notice is given (the "30-Day Period").
(c) If a Shareholder desires to purchase
Securities pursuant to the Preemptive Offer, such Shareholder shall evidence his
or its intention to accept the Preemptive Offer by delivering a written notice
to the Representative, signed by the Shareholder, setting forth the percentage
of the Securities (not exceeding such Shareholder's Common Equity Percentage of
such Securities) that the Shareholder elects to purchase (the "Notice of
Acceptance"). Provided the minimum number of Securities set forth in the
Preemptive Offer has been sold after conclusion of all procedures set forth in
this Section 3, then, upon closing of the Preemptive Offer, each Shareholder
shall be obligated to buy the percentage set forth in such Shareholder's Notice
of Acceptance times the number of Securities being sold at such closing. No
Company shall be permitted to sell at such closing (or any subsequent closing
with respect to which the procedures set forth in this Section 3 have not again
been followed, except as provided in this Section 3) more than the maximum
number of Securities set forth in the Preemptive Offer. The Notice of Acceptance
must be given, if at all, prior to the end of the 30-Day Period. Within five (5)
days following the end of the 30-Day Period, the Representative shall give
written notice (the "Notice of Refused Securities") to the Shareholders setting
forth the percentage of Securities for which a Notice of Acceptance was not
received (the "Refused Securities").
(d) If the Shareholders give Notices of
Acceptance to the Representative prior to the end of the 30-Day Period
indicating their intention to purchase, in the aggregate, less than the maximum
amount of Securities set forth in the Preemptive Offer, each Shareholder giving
a Notice of Acceptance ("Accepting Shareholders") shall be entitled to purchase
by an additional Notice of Acceptance given to the Representative within ten
(10) days after the date the Notice of Refused Securities is given (the "10-Day
Period"), that proportion of the Refused Securities which the Common Equity
Percentage of such Accepting Shareholder (prior to the Offer) bears to the
Common Equity Percentage of all Accepting Shareholders.
(e) If the Shareholders give Notices of
Acceptance prior to the end of the 30-Day Period or 10-Day Period, as
applicable, indicating their intention to purchase, in the aggregate, at least
the minimum amount of Securities set forth in the Preemptive Offer, the
Representative shall schedule a closing of the sale of the Securities to occur
on a date not more than sixty (60) days nor less than twenty (20) days after the
termination of the 30-Day Period or 10-Day Period, as applicable. Upon the
closing of the sale of the Securities, each
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Accepting Shareholder shall purchase those Securities for which it tendered a
Notice of Acceptance upon the terms specified in the Offer.
(f) Regardless of whether the Shareholders
tender Notices of Acceptance pursuant to subsection (c) and (d) of this Section
3 for at least the minimum amount of Securities set forth in the Offer within
the 30-Day Period or the 10-Day Period, as applicable, any remaining Refused
Securities may be sold for a period of ninety (90) days after the expiration of
the 30-Day Period or 10-Day Period, as applicable (the "90-Day Period"), to any
other Person or Persons (including without limitation, executive officers of any
Company), upon terms and conditions which are in all material respects
(including without limitation, price, form of consideration, payment period and
interest rates) the same as those set forth in the Preemptive Offer. The closing
of the sale of such Refused Securities (which shall include full payment to the
Companies in cash or notes in accordance with the terms of such offer (the
"Outside Offer")) shall take place not more than thirty (30) days after the
expiration of such 90-Day Period and not less than twenty (20) days after notice
of said closing shall have been given by the Representative to each Accepting
Shareholder. In the event Accepting Shareholders gave Notices of Acceptance for
less than the minimum number of Securities set forth in the Preemptive Offer,
provided the Refused Securities agreed to be purchased plus the Securities for
which Accepting Shareholders gave Notices of Acceptance exceeds such minimum,
then at the same time as the closing of the sale of Refused Securities, each
Accepting Shareholder shall purchase those Securities for which it tendered a
Notice of Acceptance upon the terms specified in the Preemptive Offer.
(g) (i) If at least the minimum amount of
the Securities set forth in the Preemptive Offer and the Outside Offer are not
agreed to be purchased within the 90-Day Period, the Representative may rescind
all Notices of Acceptance tendered by Shareholders by providing written notice
of such rescission to each Accepting Shareholder and the Companies shall not
sell any Securities pursuant to the Outside Offer.
(ii) Any Securities as to which Notices
of Acceptance are rescinded, and any Refused Securities not purchased in the
Outside Offer may not be sold or otherwise disposed of until they are again
offered to the Shareholders under the procedures specified in subsections (a)
through (g) hereof.
(h) The transferability of Securities purchased
by any Shareholder or other Person pursuant to this Section 3 shall be subject
to the terms and conditions set forth in this Agreement and any Person who is
not then a Shareholder and who purchases Securities shall execute a Counterpart
as a condition
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precedent to such purchase. The obligation of any Shareholder to purchase such
Securities is further conditioned upon the preparation of a purchase agreement
embodying the terms of the Preemptive Offer or Outside Offer which shall be
reasonably satisfactory in form and substance to the Representative and its
counsel, and such Shareholder or other purchaser and such Shareholder's or other
purchaser's counsel.
4. Third Party Offers to Shareholders; Participation
Rights.
(a) If any Shareholder (a "Selling Shareholder")
receives a Bona Fide Offer to purchase part or all of the Selling Shareholder's
Stock in all (and not less than all) of the Companies ("Offered Shares") which
it desires to accept, it must give written notice ("First Refusal Notice") to
the Representative and comply with this Section 4 before accepting such Bona
Fide Offer. Any Bona Fide Offer offering to purchase less than all a
Shareholder's Stock shall either be rejected or be an offer to purchase the same
percentage of Stock of each Company. The First Refusal Notice shall identify the
third party purchaser and the terms of the Bona Fide Offer to purchase the
Offered Shares. The Representative shall, within five (5) days of receipt of the
First Refusal Notice, provide copies thereof to all other Shareholders (the
"Non-Selling Shareholders") and shall simultaneously notify each Non-Selling
Shareholder of such Non-Selling Shareholder's Adjusted Common Equity Percentage.
The Companies and the Non-Selling Shareholders shall have the options and rights
set forth in this Section 4. Each Shareholder may assign all or any part of its
rights and obligations with respect to such Bona Fide Offer to an Affiliate.
Such Affiliate or Affiliates who are such assignees shall thereafter be deemed
to be such assigning Shareholder (to the extent of such assignment) for purposes
of applying this Section 4 to such Bona Fide Offer. Each Affiliate shall agree
in writing, as a condition to such assignment, to execute a Counterpart, in the
event of a purchase of Offered Shares pursuant to such assignment.
(b) For a period of up to thirty (30) days after
receipt of the First Refusal Notice ("Company Option Period") each of the
Companies shall have the right to purchase up to all of the Offered Shares which
it has issued at the price and on the other terms and conditions contained in
the Bona Fide Offer (the "Third Party Offer Terms"). Unless all of the Companies
exercise such right, none of the Companies shall exercise such right. The
Representative shall notify the Selling Shareholder within the Company Option
Period whether the Companies will exercise such right, such notice (the "Company
Notice") specifying the amount of Offered Shares to be purchased by the
Companies, if any (any remaining amount being the "Remaining Offered Shares"). A
notice by the Companies that they will purchase Offered Shares is herein
referred to as a "Company Purchase Notice.") The Company Option
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Period shall expire on the thirtieth day after the First Refusal Notice or the
date the Representative gives a Company Notice indicating that the Companies
will not purchase any Offered Shares.
(c) Each Non-Selling Shareholder shall have the
option (the "First Option") to purchase up to such Non-Selling Shareholder's
Adjusted Common Equity Percentage of the Remaining Offered Shares (provided it
is the same percentage in each of the Companies), on the Third Party Offer
Terms. The First Option may be exercised by giving written notice (an "Exercise
Notice") to the Selling Shareholder within thirty (30) days after the expiration
of the Company Option Period (the "30-Day Exercise Period"). The Exercise Notice
given by a Non-Selling Shareholder shall state the number of Offered Shares (up
to such Non-Selling Shareholder's Adjusted Common Equity Percentage of the
Remaining Offered Shares) which such Non-Selling Shareholder is willing to
purchase. Within five (5) days following expiration of the 30-Day Exercise
Period, the Selling Shareholder shall give a written notice ("Unpurchased
Remaining Shares Notice") to the Non-Selling Shareholders setting forth the
number of Remaining Offered Shares for which an Exercise Notice was not received
("Unpurchased Remaining Offered Shares"). Any Non-Selling Shareholder who
exercised its option under this Section 4(b) to purchase such Non-Selling
Shareholders' entire Adjusted Common Equity Percentage of the Remaining Offered
Shares, shall have an option ("Second Option") to purchase such amount of the
Unpurchased Remaining Offered Shares as such Non-Selling Shareholders shall
agree upon or, failing such agreement, that proportion of the Unpurchased
Remaining Offered Shares which such Non-Selling Shareholder's Common Equity
Percentage bears to the aggregate Common Equity Percentage of all such
Non-Selling Shareholders. A Non-Selling Shareholder shall exercise the Second
Option, if at all, by giving a written second Exercise Notice to the Selling
Shareholder within fifteen (15) days after the Selling Shareholder shall have
given the Unpurchased Remaining Shares Notice relating to the Unpurchased
Remaining Offered Shares.
(d) Unless otherwise agreed to by the Selling
Shareholder, all Company Purchase Notices and Exercise Notices given by the
Companies and Non-Selling Shareholders shall be deemed rescinded if all of the
Offered Shares are not to be purchased pursuant thereto.
(e) If the Companies or Non-Selling Shareholders
shall have given Company Purchase Notices or Exercise Notices as to all of the
Offered Shares, all certificates for the Offered Shares shall be delivered to
the purchaser(s) thereof, duly endorsed for transfer, at a closing held within
not more than thirty (30) days nor less than twenty (20) days after the last
such Exercise Notice is given at the then principal office of the Representative
or such other place as the Selling Shareholder and
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the Companies (if the Companies are purchasers) and Non-Selling Shareholders who
are purchasers of such Offered Shares shall agree.
(f) If all of the Offered Shares are not agreed
to be purchased by the Companies and Non-Selling Shareholders, then, within ten
(10) days after the earlier of (i) the expiration of the applicable periods in
which Non-Selling Shareholders could have exercised the First Option or, if
applicable, the Second Option, or (ii) the date on which the Non-Selling
Shareholders shall have declined in writing to purchase all of the Offered
Shares, the Selling Shareholder shall give notice to all Non-Selling
Shareholders and the Representative of the Offered Shares not intended to be
purchased pursuant to the operation of Section 4(b) (c) and (d) (the "Final
Purchase Notice"). For a period of thirty (30) days after the date the Final
Purchase Notice is given, the Selling Shareholder may, subject to Section 4(g)
and 4(h) below, sell the Offered Shares to the Person who made the Bona Fide
Offer ("Third Party Offeror"); provided, however, that such Offered Shares are
sold to the Third Party Offeror upon the Third Party Offer Terms, and that such
Third Party Offeror executes a Counterpart. If the Selling Shareholder elects
not to rescind Company Purchase Notices and Exercise Notices pursuant to Section
4(d) hereof, the sale of Offered Shares to the Companies and the purchasing
Non-Selling Shareholders shall take place at the closing of the sale of the
balance of the Offered Shares to the Third Party Offeror and, unless such
Non-Selling Shareholders otherwise agree, shall be conditioned on the occurrence
of said closing. If the Selling Shareholder wishes to sell all or any part of
the Offered Shares on terms other than the Third Party Offer Terms or does not
sell such Offered Shares on the Third Party Offer Terms within the
aforementioned thirty (30) day period, the Selling Shareholder shall be
obligated to make new offers and re-offers to the Companies and the Non-Selling
Shareholders, in accordance with this Section 4, before it shall be permitted to
Transfer its Shares, or any part thereof, to any Person.
(g) (i) If a Non-Selling Shareholder does
not exercise its First Option or if such exercise is rescinded pursuant to
Section 4(d) above, such Non-Selling Shareholder may elect to participate (each
Shareholder so electing being herein a "Participating Shareholder") in the
Selling Shareholder's sale of Remaining Offered Shares to the Companies and the
Non-Selling Shareholders whose Company Purchase Notices and Exercise Notices
have not been rescinded (if any) and the Third Party Offeror (collectively, the
"Purchasers"), in accordance with this subsection (g);
(ii) Each such Participating Shareholder
shall have the right ("Participation Right") to Transfer to the Purchasers on
the Third Party Offer Terms:
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(A) if the Offered Shares include
Common Stock (the "Offered Common Shares"), a number of shares of Common Stock
equal to the product of the number of Offered Common Shares times a fraction,
the numerator of which is the Common Equity Percentage of such Participating
Shareholder and the denominator of which is the aggregate Common Equity
Percentage of all Participating Shareholders and the Selling Shareholder. The
number of shares of Common Stock to be sold by the Selling Shareholder to the
Purchasers shall be reduced by the number of shares of Common Stock to be sold
to the Purchasers by a Participating Shareholder pursuant to the exercise of a
Participation Right; and
(B) if the Offered Shares include
Class A Preferred Stock or Class B Preferred Stock (the "Offered A/B Preferred
Shares," and the aggregate stated value of the Offered A/B Preferred Shares
being herein referred to as the "Preferred A/B Value"), a number of shares of
Class A Preferred Stock or Class B Preferred Stock (without regard to voting
rights) having an aggregate stated value equal to the product of the Preferred
A/B Value times a fraction, the numerator of which is the aggregate stated value
of the shares of Class A Preferred Stock or Class B Preferred Stock owned by
such Participating Shareholder and the denominator of which is the sum of the
Preferred A/B Value and the aggregate stated value of all shares of Class A
Preferred Stock and Class B Preferred Stock owned by all Participating
Shareholders and the Selling Shareholder. The number of Offered A/B Preferred
Shares to be sold by the Selling Shareholder to the Purchasers shall be reduced
by the number of Offered A/B Preferred Shares having an aggregate stated value
equal to the aggregate stated value of the shares of Class A Preferred Stock or
Class B Preferred Stock to be sold to the Purchasers by Participating
Shareholders pursuant to the exercise of Participation Rights;
(C) if the Offered Shares include
Class C Preferred Stock (the "Offered C Preferred Shares," and the aggregate
stated value of the Offered C Preferred Shares being herein referred to as the
"Preferred C Value"), a number of shares of Class C Preferred Stock (without
regard to voting rights) having an aggregate stated value equal to the product
of the Preferred C Value times a fraction, the numerator of which is the
aggregate stated value of the shares of Class C Preferred Stock owned by such
Participating Shareholder and the denominator of which is the sum of the
Preferred C Value and the aggregate stated value of all shares of Class C
Preferred Stock owned by all Participating Shareholders and the Selling
Shareholder. The number of Offered C Preferred Shares to be sold by the Selling
Shareholder to the Purchasers shall be reduced by the number of Offered C
Preferred Shares having an aggregate stated value equal to the aggregate stated
value of the shares of Class C Preferred
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Stock to be sold to the Purchasers by Participating Shareholders pursuant to the
exercise of Participation Rights;
(iii) The Participation Right shall be
exercised, if at all, by the Participating Shareholder giving written notice of
exercise of the Participation Right to the Selling Shareholder and each of the
other Non-Selling Shareholders within fifteen (15) days after the Final Purchase
Notice is given pursuant to Section 4(f);
(iv) If the Selling Shareholder would
retain ownership of Offered Shares by reason of the exercise of Participation
Rights (such remaining shares being herein the "Final Remaining Shares"), the
Selling Shareholder may either (i) rescind all exercises of Participation
Rights, reject the Bona Fide Offer and retain ownership of the Offered Shares,
or (ii) negotiate with the Purchasers to purchase the Final Remaining Shares on
the Third Party Offer Terms or terms less advantageous to the Selling
Shareholder than the Third Party Offer Terms. Any such sale of the Final
Remaining Shares to the Purchasers shall not be subject to the provisions of
Sections 2 or 4 of this Agreement, except the obligation on the part of the
Third Party Offeror to execute a Counterpart. A Transfer of Shares pursuant to
the exercise of a Participation Right shall not be subject to the provisions of
Sections 2 and 4 of this Agreement.
(h) Notwithstanding anything to the contrary
contained in this Section 4, (i) any Transfer permitted by Section 2 hereof
shall not be restricted by this Section 4, (ii) any sale of Stock in connection
with a Public Offering, or pursuant to the provisions of Rule 144 of the
Securities Act of 1933, as amended, shall not be restricted by this Section 4.
5. Stock Splits, Etc. If there shall be any change in
the Stock of a Company as a result of any merger, consolidation, reorganization,
recapitalization, stock dividend, split-up, combination or exchange of Shares,
or otherwise, the provisions of this Agreement shall apply with equal force to
additional and/or substitute Securities, if any, received by each Shareholder in
exchange for or by virtue of its ownership of Shares.
6. Joinder Requirements.
(a) If at any time holders (the "Initiating
Holders") of a majority of the outstanding shares of Common Stock desire to sell
at least a majority of the outstanding shares of Common Stock to a prospective
purchaser which is not an Affiliate of any of such holders at a per share price
of at least ninety percent (90%) of the Fair Market Value (as defined in Section
6(d) below), and the purchaser of such Shares requires, as a condition of the
sale, that the purchaser acquire more than a
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majority of the outstanding shares of the Common Stock (the percentage of Common
Stock sought to be purchased by the purchaser being herein referred to as the
"Purchase Percentage"), then (i) all of the holders of Mezzanine Warrants shall
be required to exercise the Purchase Percentage of their Mezzanine Warrants and
sell such Mezzanine Warrant Shares, and (ii) all Management Investors or other
holders of Options shall be required to exercise the Purchase Percentage of
their vested Options and sell the Shares purchased pursuant to such exercise,
and (iii) all of the Shareholders (including the Initiating Holders) shall be
required to sell the Purchase Percentage (and shall not sell more than the
Purchase Percentage) of their Stock (as constituted after such exercise of
Mezzanine Warrants), to the purchaser on the same price and other terms and
conditions as those offered to the Initiating Holders.
(b) If at any time holders ("Preferred
Initiating Holders") of at least a majority of the outstanding shares of
Preferred Stock desire to sell at least a majority of the outstanding Preferred
Stock to a prospective purchaser which is not an Affiliate of any of such
holders, and the purchaser of such Preferred Stock requires, as a condition of
the sale, that the purchaser acquire more than a majority of the outstanding
shares of Preferred Stock of all Shareholders (the percentage of Preferred Stock
sought to be purchased by the purchaser being herein referred to as the
"Preferred Purchase Percentage"), then all of the Shareholders shall be required
to sell the Preferred Purchase Percentage of their Preferred Stock to the
purchaser on the same price and other terms and conditions as those offered to
the Preferred Initiating Holders.
(c) For purposes of Section 6(b), the term
"Preferred Stock" shall not include the Class C Preferred Stock. Any sale of
Common Stock or Preferred Stock pursuant to this Section 6, including the sale
by the Initiating Holders or Preferred Initiating Holders, shall not be subject
to the provisions of Sections 2 and 4 of this Agreement.
(d) For purposes of this Agreement, "Fair Market
Value" of a share of Stock shall mean such value as determined by an investment
banking firm mutually acceptable to both the Board of Directors of the Company
and holders of a majority of Stock being involuntarily required to join in the
sale under Section 6 hereof. In the event an investment banking firm cannot be
mutually agreed upon, such value shall be a value per share of Stock as
determined by a nationally recognized firm engaged in the business of (among
other things) valuing privately held businesses, which is not an Affiliate of
the Company, any director of the Company, or any of the Shareholders, and which
is selected by the mutual agreement of the holders of a majority of the Stock
being involuntarily required to join in the sale under Section 6 hereof. If such
holders are unable to agree, then
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holders of the Mezzanine Warrants and the Management Investors shall agree on
one appraiser, and if they cannot agree the Mezzanine Warrant holders shall
select one appraiser and the Management Investors shall select one appraiser.
The appraiser or appraisers so selected shall determine the Fair Market Value.
An average of all appraisals shall be the Fair Market Value if more than one
appraisal is used. If the Fair Market Value is more than ninety percent (90%) of
the sale price, the fees paid to the investment banking firm or appraiser or
appraisers for determining the Fair Market Value shall be borne by the holders
of Stock who are being required to involuntarily join the sale under Section
6(a). Otherwise, such cost shall be borne by the Initiating Holders.
7. Failure to Deliver Shares. If a Shareholder (the
"Transferring Shareholder") becomes obligated to Transfer any Stock to any of
the Companies or to another Shareholder pursuant to this Agreement (including a
Transfer to another Shareholder for purposes of Transfer to another purchaser
pursuant to Section 6 or otherwise) and fails to deliver such Stock in
accordance with the terms of this Agreement, the Company or Companies whose
Stock the Transferring Shareholder is obligated to transfer (the "Transferred
Companies") or such other Shareholder, as the case may be, may, at its or their
option, in addition to all other remedies it may have, either (i) send to the
Transferring Shareholder the purchase price for such Stock as is herein
specified, or (ii) deposit such amount with a trustee or escrow agent for the
benefit of the Transferring Shareholder for release upon delivery of such Stock
to the trustee or escrow agent in accordance with the terms of this Agreement.
Thereupon, the Transferred Companies, upon written notice to the Transferring
Shareholder, (a) shall cancel on its books the certificate or certificates
representing the Stock so required to be transferred by the Transferring
Shareholder and (b) shall issue, in lieu thereof, in the name of the Transferred
Companies, such other Shareholder or purchaser, as the case may be, a new
certificate or certificates representing such Stock; provided, however, the
Transferred Companies shall be under no obligation to so cancel and issue Stock
unless the other Shareholder or purchaser, as the case may be, delivers to the
Transferred Companies its agreement to indemnify, defend and hold harmless the
Transferred Companies, its officers and employees, successors and assigns, from
any and all losses, claims, damages or liabilities (or actions in respect
thereof) to which the Transferred Companies may become subject as a result of,
arising out of, or based upon the Transferred Companies so canceling and issuing
Stock, and such other Shareholder or purchaser, as the case may be, shall
reimburse the Transferred Companies for any legal or other expenses reasonably
incurred by the Transferred Companies in connection therewith. All of the
Transferring Shareholder's rights in and to such Stock shall terminate as of the
date of such Notice.
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8. Termination. Except as provided in Section 15
hereof, this Agreement shall terminate upon (i) the consummation of a Public
Offering or (ii) the earlier mutual agreement of Shareholders having an
aggregate Common Equity Percentage of at least eighty percent (80%).
9. Registration Rights. The Shareholders shall have
the registration and other rights set forth in the Registration Rights Agreement
dated the date hereof and among the parties hereto.
10. Financial Reports and Information.
(a) Within ninety (90) days after the end of
each fiscal year of the Companies, for so long as this Agreement shall be in
effect, the Companies agree to furnish each of the Shareholders with audited
consolidated and consolidating financial statements of the Companies for such
fiscal year (showing comparison to the prior fiscal year) which shall include a
statement of income and retained earnings for each such fiscal year, a balance
sheet as at the last day thereof, and a statement of cash flows prepared in
accordance with generally accepted accounting principles consistently applied,
and accompanied by the report, without qualification, of the Companies'
independent certified public accountants (which shall be of recognized national
standing), including such accountant's management letters to the Companies and a
breakdown of all the Shareholders of each Company, listing next to each
Shareholder's name, the Shareholder's Common Equity Percentage.
(b) If for any period any Company shall have any
subsidiary or subsidiaries whose accounts are consolidated with those of such
Company, then in respect of such period the financial statements delivered
pursuant to the foregoing Section 11(a) shall be the consolidated financial
statements of such Company and all such consolidated subsidiaries.
(c) Promptly upon becoming available, copies of
all financial statements, reports, press releases, notices, proxy statements and
other documents sent by any of the Companies to their lenders or released to the
public and copies of all regular and periodic reports, if any, filed by the
Companies with the Securities and Exchange Commission or any securities
exchange.
(d) Upon request from any Shareholder including
any Selling Shareholder to any of the Companies, such Company shall disclose to
such Shareholder, in writing, the name and address of such Shareholder (as it
then appears on the records of the Company) and such Shareholder's Common Equity
Percentage.
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11. Company Governance Provisions.
(a) Unless and until holders of Class A
Preferred Stock exercise the Board Expansion Right or effect the Class A
Preferred Amendment, each Company's Board of Directors shall have nine (9)
seats, at least seven (7) of which shall be filled at all times. The Members of
the Board of Directors shall be elected in the following manner:
(i) If seven (7) directors of the
Company's Board of Directors are appointed, the holders of a majority of the
outstanding shares of Voting Common Stock, shall have the special and exclusive
right at all times to elect three (3) directors to the Board of Directors of
each Company. To the extent all nine (9) of the directors of the Company's Board
of Directors are appointed, such holders shall have the special and exclusive
right at all times to elect four (4) directors to the Board of Directors of each
Company (in either event, the directors appointed under this Section 11(a)(i)
shall be referred to herein as the "Holdings Representatives"). A Holdings
Representative shall not be subject to removal, other than for cause, unless
such removal is approved by a majority of all the votes entitled to be cast in
an election for such directors by the holders of the Voting Common Stock. A
majority of the Holdings Representatives shall have the right to make all
determinations concerning the taking of action by the Companies to enforce the
Companies' rights under the Recapitalization Agreement.
(ii) If seven (7) directors of the
Company's Board of Directors are appointed, the holders of outstanding shares of
Voting Class B Preferred Stock and Class C Preferred Stock ("Voting Preferred
Stock"), voting as a separate voting group, shall have the special and exclusive
right at all times to elect four (4) directors to the Board of Directors of each
Company. To the extent all nine (9) directors of the Company's Board of
Directors are appointed, such holders shall have the special and exclusive right
at all times to elect five (5) directors to the Board of Directors of each
Company (in either event, the directors appointed under this Section 11(a)(ii)
shall be referred to herein as "Management Representatives"). Any Management
Representative shall not be subject to removal, other than for cause, unless
such removal is approved by a majority of all the votes entitled to be cast in
an election for such directors by the holders of the Voting Preferred Stock.
(iii) If only seven (7) directors of a
Company's initial Board of Directors are appointed, either the holders of a
majority of the outstanding shares of Voting Common Stock or the holders of the
Voting Preferred Stock may, at any time, appoint an additional director to the
Board of Directors of the Company. If Holdings on the one hand, or the holders
of the
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Voting Preferred Stock on the other hand, appoint an additional director under
this Section 11(a)(iii), the other must appoint an additional director to the
Board of Directors such that the Board of Directors shall then consist of nine
(9) directors.
(iv) Unless an individual nominated to
serve on the Board of Directors of the Kirkland Companies hereunder expressly
agrees in writing otherwise, such nomine shall not be deemed to be the deputy of
or otherwise required to discharge his or her duties on such Boards under the
direction of, or with special attention to the interests of, the person
designating such nominee to serve on the Boards.
(b) The initial board of directors shall be
comprised of the following individuals and each Shareholder agrees to vote such
Shareholder's Shares accordingly:
(i) The Holding Representatives shall
be:
(A) Xxxxx X. Xxxxxxxx
(B) Xxxx X. Xxxxxx
(C) Xxxxxxxxx X. XxXxxxx
(ii) The Management Representatives
shall be:
(A) X. Xxxxxx Xxx, III
(B) Xxxx Xxxxxxxx, Chairman
(C) Xxxxxx Xxxxxxxx
(D) Xxxxx Xxxxx
(c) From and after the date hereof, each
Shareholder agrees to vote (including by execution of a written consent or in
any other manner permitted by law and each of the Companies' certificate or
articles of incorporation and by-laws) all of his or its Shares over which he or
it has voting control, and will take all other necessary or desirable actions
within his or its control, and the Companies will take all necessary or
desirable actions within its control, in order to cause:
(i) the election to the Board of
Directors of each Company of the Holdings Representatives, such directors to be
nominated by Holdings, as follows:
(A) one (1) (if seven (7) seats
are filled on the Board) or two (2) (if all nine (9) seats are filled on the
Board) representatives designated by Advent International Corporation, but only
for so long as investment funds affiliated
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with Advent International Corporation have a Common Equity Percentage (directly
or indirectly through Holdings) of at least fifteen percent (15%).
(B) one representative designated by
Capital Trust, but only for so long as Capital Trust (or any of its Affiliates)
has (directly or indirectly through Holdings) a Common Equity Percentage of at
least two percent (2%), or holds $900,000 aggregate principal amount of Senior
Subordinated Notes (as defined in the Mezzanine Agreement); and
(C) one representative designated by
CRL (or if CRL distributes any of its Warrant Shares to any of its partners, by
a majority in interest of the holders of such Warrant Shares, or if CRL
transfers its Warrant Shares, by the holder of the highest aggregate principal
amount of the Senior Subordinated Notes (as defined in the Mezzanine Agreement)
owned by CRL, its successors or assigns), but only for so long as CRL (or any of
its partners) has a Common Equity Percentage of at least three percent (3%).
(ii) the election to the Board of
Directors of each Company of the Management Representatives, such directors to
be nominated by the holders of Class B Preferred Stock and Class C Preferred
Stock, as follows:
(A) One (1) representative
designated by Xxxx Xxxxxxxx, so long as he remains an employee (or retired
employee) of the Companies and he has a Common Equity Percentage of at least
four percent (4%) of the outstanding shares of Common Stock;
(B) One (1) representative
designated by Xxxxx Xxxxx, so long as he remains an employee (or retired
employee) of the Companies and he has a Common Equity Percentage of at least
four percent (4%) of the outstanding shares of Common Stock;
(C) One (1) representative
designated by Xxxxxx Xxxxxxxx, so long as he remains an employee (or retired
employee) of the Companies and he has a Common Equity Percentage of at least
four percent (4%) of the outstanding shares of Common Stock;
(D) One (1) representative
designated by SSM/Kirkland Equity Partners, L.P. but only for so long as such
entity (or any of its partners) has a Common Equity Percentage (directly or
indirectly through Holdings) of at least two percent (2%);
(E) If and only if all nine (9)
seats are to be filled on the Board, one (1) individual designated by
-25-
29
the majority decision of the Management Investors, which person shall be an
individual unrelated to any of the investors in Holdings and any of the
Mezzanine Investors.
(iii) the removal from the Board of any
representative designated as provided in this Section 11(c) upon the express
written request of the designator thereof or upon the failure of any of the
thresholds specified in Section 11(c) with respect to such particular
designator; and
(iv) in the event that any representative
designated as provided in this Section 11(c) for any reason ceases to serve as a
member of the Board of Directors of any of the Companies during his term of
office, the resulting vacancy on each Board to be filled by a representative
designated by the person who or which designated the ceasing director; provided
that if such person ceases to serve as a member of the Board of Directors
because the designator thereof ceases to meet the thresholds set forth in
Section 11(c), such vacancy shall be filled as required by the bylaws of the
Companies, as amended from time to time.
(d) Nothing herein shall diminish the rights of the
holders of the Class A Preferred Stock set forth in Section 5.4 of the
Recapitalization Agreement and all Shareholders agree to vote their Stock to
cause compliance with such provisions.
(e) The initial director designated in Section
11(b)(i)(A) or his successor elected pursuant to Section 11(c)(i)(A) shall be
the director whose approval is required pursuant to Section 14 of Article III of
the bylaws of the Companies (as required pursuant to Section 5.7 of the
Recapitalization Agreement).
(f) If the Company receives a written notice requesting
that any action be taken to implement the provisions of this Section 11, the
Companies and each Shareholder agree promptly to take such action as may be
necessary so to implement such provisions in accordance with this Section,
including, without limitation, the calling of a special meeting, the voting of
Shares, the execution of written consents or any other necessary action in
connection therewith.
(g) Absent cause, neither the Company nor the
Shareholders will take any action to remove any Board representative designated
pursuant to Section 11(c) without the advance written consent of the Person who
or which designated that director.
(h) The Companies shall cause (i) the number of directors
of each Company to be the same at all times and (ii) any person serving as a
director or a member of a committee of
-26-
30
the Board of Directors of any Company to also serve concurrently as a director
of each other Company. Each of Capital Trust and CRL shall, at all times that it
has a right to designate directors pursuant to Section 11(c)(i)(B) or (C)
hereof, have a representative on each committee of the Board of Directors of
each of the Companies unless, and only for so long as, it waives in writing such
right with respect to a specific committee.
(i) Each Shareholder agrees to vote (including by
execution of a written consent or in any other manner permitted by law and each
of the Companies' respective certificate or articles of incorporation and by
laws) all of his or its Shares over which he or it has voting control, and will
take all other necessary or desirable actions within his or its control, and the
Companies will take all necessary or desirable action within its control, to
cause (i) from and after any exercise of the Board Expansion Right, the Board of
Directors of each of the Companies to be comprised of two (2) more directors
than it is then comprised of, with the original seven (7) or nine (9), as
applicable, elected as provided in Section 11(c) hereof and two (2) additional
representatives designated by Advent International Corporation; and (ii) from
and after the effectiveness of the Class A Preferred Amendment, the Board of
Directors of each of the Companies to be comprised of not less than seven (7)
members, provided that at least seven (7) members of the Board after any
increase in the number of Board seats shall be representatives of Shareholders
(if threshold ownership percentages are met) as contemplated by subsections (A)
(for one (1) director), (B) and (C) of Section 11(c)(i), and (A), (B), (C) and
(D) of Section 11(c)(ii).
(j) The Class A Preferred Amendment shall be effected no
later than the date the Companies and each of the Shareholders engage an
investment banking firm to undertake an offering of Common Stock or similar
affirmative steps are taken by the Companies to cause a public market to exist
for the Common Stock.
12. Specific Performance. Because of the unique character of the
shares of Stock, the Companies will be irreparably damaged if this Agreement is
not specifically enforced. Should any dispute arise concerning the Transfer of
Stock, an injunction may be issued restraining any Transfer pending the
determination of such controversy. In the event of any controversy concerning
the right or obligation to Transfer any such Stock, such right or obligation
shall be enforceable in a court of equity by a decree of specific performance.
Such remedy shall be cumulative and not exclusive, and shall be in addition to
any other remedy which the Companies or the other Shareholders of the Companies
may have.
-27-
31
13. Legend. Each certificate evidencing any of the
Shares shall bear a legend substantially as follows:
"The shares represented by this certificate are subject to
restrictions on transfer and may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of
except in accordance with and subject to all the terms and
conditions of a certain Shareholders Agreement dated as of
June 12, 1996, among the Company, certain affiliates of the
Company and their shareholders, a copy of which the Company
will furnish to the holder of this certificate upon request
and without charge."
14. Notices. All notices and other communications
hereunder shall be in writing and shall be given to the person either personally
or by sending a copy thereof by first class or express mail, postage prepaid, or
by telegram (with messenger service specified), telex or TWX (with answer back
received) or courier services, charges prepaid, or by telecopier, to such
party's address (or to such party's telex, TWX, telecopier or telephone number).
If the notice is sent by mail, it shall be deemed to have been to the person
entitled thereto five (5) business days after being deposited in the United
States mail, and if the notice is sent by telegraph or courier services, it
shall be deemed to have been given to the person entitled thereto one (1)
business day after deposited with a telegraph office or courier service for
delivery to that person or, in the case of telex, TWX or telecopy when
dispatched.
If to Holdings, to:
Kirkland Holdings L.L.C.
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopy No.: (000)000-0000
With a copy to:
Pepper, Xxxxxxxx & Xxxxxxx
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000)000-0000
-28-
32
If to the Management Investors or any Company (including the
Representative), to:
Xxxxxxxx'x, Inc.
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxxxx
Telecopy No.: (000)000-0000
With a copy to:
Baker, Donelson, Bearman & Xxxxxxxx
20th Floor
First Tennessee Building
000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx, Esq.
Telecopy No.: (000)000-0000
If to Xxxxxx Xxxxxxxx, to:
CBK, Ltd.
000 Xxxx Xxxxxxxx
Xxxxx Xxxx, Xxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telecopy No.: (000)000-0000
With a copy to:
Xxxxx, Tarrant & Xxxxx
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxxxx, Esquire
Telecopy No.: (000)000-0000
If to Mezzanine Warrant Holders, to:
Capital Resource Lenders II, L.P.
00 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxxxx X. XxXxxxx
Telecopy No.: (000)000-0000
-29-
33
Allied Capital Corporation
and
Allied Capital Corporation II
0000 X Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx Xxxxxxxxx
Telecopy No.: (000)000-0000
The Marlborough Capital Investment Fund, L.P.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
Telecopy No.: (000)000-0000
Capital Trust Investments, Ltd.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telecopy No.: (000)000-0000
With a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Xx., Esquire
Telecopy No.: (000)000-0000
Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the party entitled to receive such notice.
15. Entire Agreement and Amendments. This Agreement
constitutes the entire agreement of the parties with respect to the subject
matter hereof and, except as provided in clause (i) of Section 8 hereof, neither
this Agreement nor any provision hereof may be waived, modified, amended or
terminated except by a writing duly executed by holders of Stock having an
aggregate Common Equity Percentage of at least eighty percent (80%), and, if the
waiver, modification, amendment or termination would affect the rights or
obligations of a holder of Preferred Stock, by holders of at least eighty
percent (80%) of the aggregate stated value of the class of Preferred Stock so
affected; provided, that (i) until the termination of this Agreement pursuant to
clause (i) of Section 8 hereof, and except as otherwise provided by operation of
the terms of Section 11 hereof, the right of any Shareholder to nominate a
director in accordance with the provisions of Section 11 hereof may not be
-30-
34
modified, amended or terminated without the consent of such Shareholder, (ii)
any such waiver, amendment or modification shall affect all Shareholders equally
unless the Shareholder affected differently shall have specifically approved the
waiver, amendment or modification, and (iii) the terms and provisions of this
Section 15 shall not be modified or amended without the prior written consent of
each of the Shareholders. To the extent any term or other provision of any other
indenture, agreement or instrument by which any party hereto is bound conflicts
with this Agreement, this Agreement shall have precedence over such conflicting
term or provision. In the event Holdings dissolves, each of the members of
Holdings shall execute a Counterpart to this Agreement and shall thereafter be
deemed to be a Shareholder hereunder for all purposes of this Agreement.
16. Expenses. The Companies shall reimburse the Shareholders
for expenses incurred by them (or by the members of Holdings to the extent such
expenses are to be paid by Holdings), including the reasonable expenses of
counsel, in connection with (i) the negotiation, preparation, execution and
delivery of this Agreement, the Operating Agreement of Holdings, and the
Agreements of Limited Partnership of CT/Kirkland Equity Partners, L.P.,
Marlborough/Kirkland Equity Partners, L.P., TCW/Kirkland Equity Partners, L.P.
and SSM/Kirkland Equity Partners, L.P., or (ii) the administration of such
entities, including the filing of tax returns and preparation of financial
reports provided that the expenses reimbursed under clause (ii) above shall not
exceed $5,000 per year.
17. Dividends. Each Company shall not allow the payment of
dividends on the Class A Preferred Stock or the Class B Preferred Stock unless
and until any and all payments required to be made by the Company under the
Management Agreements have been paid to the Management Investors and any and all
payments required to be made by the Company under the Consulting Agreement shall
have been made to Xxxxxx Xxxxxxxx.
18. Amendment to Charter. From and after the date hereof, each
Shareholder agrees to vote all of his or its shares over which he or it has
voting control, and will take all other necessary or desirable actions within
his or its control, and the Companies will take all necessary or desirable
actions within its control, in order to cause an amendment to the Companies'
charter to increase the authorized Common Stock of the Companies upon exercise
by holders of Class A Preferred Stock and/or Class B Preferred Stock of their
rights to convert such stock into shares of Common Stock.
19. Company Joinders. The Companies and Shareholders
shall cause all future companies formed in connection with the expansion of the
Companies' operations (i) to be owned either by Xxxxxxxx'x, Inc. or by the
Shareholders in the same manner as
-31-
35
Group D Companies, and (ii) if owned by the Shareholders, to become parties to
this Agreement and the Registration Rights Agreement. Kirkland's specifically
agrees that it shall not transfer any of the capital stock of any such future
subsidiaries without either following the provisions of Section 4 hereof or
obtaining the prior approval of Shareholders having an aggregate Common Equity
Percentage of at least eighty percent (80%).
20. Governing Law; Successors and Assigns. This Agreement
shall be construed and enforced in accordance with Delaware law and shall be
binding upon the parties hereto and their respective successors and assigns. The
parties hereto agree that any action to enforce this Agreement may be properly
brought in any court within the State of Delaware or in the United States
District Court for the District of Delaware, and the parties hereto agree that
the courts of the State of Delaware and the United States District Court for the
District of Delaware shall have jurisdiction with respect to the subject matter
hereof and the person of the parties hereto.
21. Waivers. The failure of any party to insist upon strict
performance of any of the terms or conditions of this Agreement will not
constitute a waiver of any of its rights hereunder.
22. Severability. If any provision of this Agreement is held
illegal, invalid, or unenforceable, such illegality, invalidity, or
unenforceability will not affect any other provision hereof. This Agreement
shall, in such circumstances, be deemed modified to the extent necessary to
render enforceable the provisions hereof.
23. Captions. Captions are for convenience only and are not
deemed to be part of this Agreement.
24. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
25. Attorney's Fees. In the event of litigation of any dispute
or controversy arising from, in, under or concerning this Agreement or any
amendment hereof, including, without limiting the generality of the foregoing,
any claimed breach hereof or thereof, the prevailing party in such action shall
be entitled to recover from the other party in such action, such sum
-32-
36
as the court shall fix as reasonable attorney's fees incurred by
such prevailing party.
26. Parties Benefitted. Nothing in this Agreement, express or
implied, is intended to confer upon any third party any rights, remedies,
obligations or liabilities.
27. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
personal representatives, successors and assigns.
[SPACE INTENTIONALLY LEFT BLANK]
-33-
37
IN WITNESS WHEREOF, the parties have executed this
Shareholders Agreement under seal on the date first above written.
CAPITAL RESOURCE LENDERS II, L.P., by
CAPITAL RESOURCE PARTNERS II, L.P., its
General Partner
By: Xxxxxx X. Xxxxxxxx
-----------------------------------
Title: General Partner
ALLIED CAPITAL CORPORATION
By: Xxxxx Xxxxxxxxx
-----------------------------------
Title: SVP
--------------------------------
ALLIED CAPITAL CORPORATION II
By: Xxxxx Xxxxxxxxx
-----------------------------------
Title: SVP
--------------------------------
THE MARLBOROUGH CAPITAL INVESTMENT FUND,
L.P., by MARLBOROUGH CAPITAL MANAGEMENT,
L.P., its general partner,
By: /s/ Xxxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxxx Xxxxxx, its authorized
partner
[EXECUTIONS CONTINUED]
-34-
38
CAPITAL TRUST INVESTMENTS, LTD.
By: Xxxx X. Xxxxxx
-----------------------------------
Title: Attorney-in-Fact
--------------------------------
KIRKLAND HOLDINGS L.L.C.
By: Xxxxx Xxxxxxxx
-----------------------------------
Title:
--------------------------------
ATTEST: XXXXXXXX'X, INC.
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxx Xxxxxxxx
-------------------------- -----------------------------------
Title: VP/Sec Title: President
----------------------- --------------------------------
[EXECUTIONS CONTINUED]
-35-
39
Corporate Name
--------------
101 Kirkland's of Carolina, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx, Xxxxxxxx Mall, Inc.
103 Kirkland's of Tennessee, Inc.
104 K. C. Corp. Inc.
107 Kirkland's of Greensboro, Four Seasons Mall, Inc.
109 Kirkland's of Fayetteville, Cross Creek Mall, Inc.
110 Kirkland's of Wilmington, Independence Mall, Inc.
111 Kirkland's III, Jackson-Metro Center, Inc.
000 Xxxxxxxx'x xx Xxxxxxx, Xxxxxxxxx, Laurelwood Shopping Center, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx, Xxxxxxxxxxx, Northpark Mall, Inc.
116 Kirkland's of Knoxville, East Towne Mall, Inc.
117 Kirkland's of Huntsville, Madison Square Mall, Inc.
000 Xxxxxxxx'x xx Xxxxxx Xxxx Xxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx, Xxxxxxx Hollow Mall, Inc.
120 Kirkland's of Birmingham, Riverchase Galleria, Inc.
122 Kirkland's of XxxxxXxxxxx Xxxx, Xxxxxx Xxxxx, Xxxxx Xxxxxxxx, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxx, Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxx Xxxxxx xx Xxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxx, Xxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxx, Xxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxxx Xxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxxx Xxxx, Xxxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxx Xxxxxxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxx xx Xxxxxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxxx Xxxx, Xxxxx, XX, Inc.
135 Kirkland's of Dayton Mall, Dayton, OH, Inc.
000 Xxxxxxxx'x xx Xxxxxx Xxxxxx, Xxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxx Xxxxxx Xxxx, Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxx Xxxx Xxxxxx, Xxxxxx, XX, Inc.
139 Kirkland's of Chesterfield Towne Center, Richmond, VA, Inc.
000 Xxxxxxxx'x xx Xxxx Xxxxx, Xxxxxx Xxxx, XX, Inc.
141 Kirkland's of Montgomery Mall, Montgomery, AL, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxx, Xxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxx, Xxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxx Xxxx, Xxxxxxxxx, XX, Inc.
146 Kirkland's of Hickory Ridge Mall, Memphis, TN, Inc.
000 Xxxxxxxx'x xx Xxxxxxx Xxxxxx Xxxx, Xxxxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx XxXxxx Xxxx, Xxxxxx Xxxx, XX, Inc.
150 Kirkland's of River Ridge Mall, Lynchburg, VA, Inc.
151 Kirkland's of Bel Air Mall, Mobile, AL, Inc.
152 Kirkland's of The Mall at Xxxxxx Crossing, Tupelo, MS, Inc.
000 Xxxxxxxx'x xx Xxxxxxx Xxxx, Xxxxx Xxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxxxx, Xxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxx-Xxxxxx Xxxx, Xxxxxxxxxx, XX, Inc.
156 Kirkland's of Xxx Xxxx xx xxx Xxxxxxx, Xxxxxxxxxxxx, XX, Inc.
-36-
40
# Corporate Name
- --------------
157 Kirkland's of Xxxxxxxx Xxxx, Xxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxx, Xxx Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxxx, Xxxxxxxxx, X.X., Inc.
160 Kirkland's of Xxxx Xxxxxxx Xxxx, Xxxxxxx, X.X., Inc.
161 Kirkland's of Cool Springs Galleria, Nashville, TN, Inc.
162 Kirkland's of Kenwood Towne Centre, Cincinnati, OH, Inc.
163 Kirkland's of St. Louis Galleria, St. Louis, MO, Inc.
164 Kirkland's of Wiregrass Commons Mall, Dothan, AL, Inc.
000 Xxxxxxxx'x xx Xxxxxxx Xxxx, Xxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx, Xxxxxxxx, XX, Inc.
167 Kirkland's of Acadiana Mall, Lafayette, LA, Inc.
000 Xxxxxxxx'x xx Xxxxx Xxxxxxx Xxxx, Xxxxxx Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxx Xxxxxxx, Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxx Xxxx Xxxx, Xxxxxxx, XX, Inc.
171 Kirkland's of Charleston Town Center, Charleston, W. VA, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxxx, Xx. Xxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxx Xxxxx Xxxx, Xxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxx Xxxxx Xxxx, Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx'x Xxxxxx Xxxx, Xxxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxx Xxxxx Xxxx, Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxx, Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxxxx Xxxx, Xxxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxx Xxxxxx Xxxx, Xxxxxxxx Xxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxx Xxxx Xxxx, Xxxxxx Xxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxx Xx. Xxxxxxx, Xxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxx Xxxxx Xxxx, Xxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxx Xxxxxx, Xxx Xxxxxxx, XX, Inc.
186 Kirkland's of Xxx Xxxx xx Xxxxxxx Xxxx, Xxxxxxx Xxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxx, Xx. Xxxxx, IN, Inc.
000 Xxxxxxxx'x xx Xxxxx Xxxxxx Xxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxx, Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxx Xxxxxxx Xxxxxx, Xxxxxxx, XX, Inc.
191 Kirkland's of Xxx Xxxx xx Xxxxxxxxx Xxxxxxx, Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xx. Xxxxxxx Xxxxx Xxxxxx, Xxxxxxx, XX Inc.
000 Xxxxxxxx'x xx Xxxxxxx Xxxx, Xxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxx Xxxxxx Xxxx, Xxxxxxx, XX, Inc.
195 Kirkland's of The Parks at Arlington, Ft. Worth, TX, Inc.
196 Kirkland's of Xxxxx Xxxx Xxxx, Xxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xx. Xxxxx Xxxxxx, Xx. Xxxxx, XX, Inc.
198 Kirkland's of Turtle Creek Mall, Hattiesburg, MS, Inc.
000 Xxxxxxxx'x xx Xxx Xxxxxxxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxx Xxxx Xxxxxx, Xxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxx Xxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxxx Xxxx, Xxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxx Xxxx Xxxx, Xxxx Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxx Xxxx Xxxx, Xxxxxx Xxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxx Xxxx Xxxx, Xxxxxxxx, XX, Inc.
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41
# Corporate Name
- --------------
206 Kirkland's of Xxxxxxxx Xxxx Xxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxxxx Xxxx, Xxxxxxx, X.X., Inc.
208 Kirkland's of Xxx Xxxxxx Xxxx, Xxxx Xxxxx, X.X., Inc.
209 Kirkland's of Xxx Valley Mall, Chicago, IL, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxx Xxxxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxx, Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxx, Xxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxx Xxxxxx Xxxxx, Xxxxxx Xxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxxx, XX., Inc.
000 Xxxxxxxx'x xx Xxxxxxx Xxxx, Xxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxxx Xxxx, Xxxxx Xxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxx, Xxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxx, Xxxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxx Xxxx, Xxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxxx Xxxx, Xxxxxxxxxxx, XX, Inc.
000 Xxxxxxxx'x xx Xxxxxxxxxx Xxxx, Xxxxx, XX, Inc.
By: /s/ Xxxx Xxxxxxxx
----------------------------
Title: President
--------------------------
ATTEST:
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------
Title: VP/Sec
--------------------------
-38-
42
/s/ Xxxx Xxxxxxxx
-----------------------------
XXXX XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------
XXXXXX XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------
XXXXXX XXXXXXXX
/s/ Xxxxx Xxxxx
-----------------------------
XXXXX XXXXX
[END OF SIGNATURES]
-39-
43
EXHIBIT A
TO
SHAREHOLDERS AGREEMENT
COUNTERPART
THIS INSTRUMENT forms part of the Shareholders Agreement (the
"Agreement") made as of the __th day of June, 1996, among Kirkland Holdings
L.L.C., Xxxxxxxx'x, Inc., affiliates of Xxxxxxxx'x, Inc., Xxxx Xxxxxxxx, Xxxxxx
Xxxxxxxx, Xxxxx Xxxxx, Xxxxxx Xxxxxxxx, Capital Resource Lenders II, L.P.,
Allied Capital Corporation, Allied Capital Corporation II, The Marlborough
Capital Investment Fund, L.P. and Capital Trust Investments, Ltd., and any
additional Shareholders of the Companies (as defined in the Agreement), from
time to time, which Agreement permits execution by counterpart. The undersigned
hereby acknowledges having received a copy of the said Agreement (which is
annexed hereto as Schedule I) and having read the said Agreement in its
entirety, and for good and valuable consideration, receipt and sufficiency of
which is hereby acknowledged, hereby agrees that the terms and conditions of the
said Agreement shall be binding upon the undersigned as a Shareholder and such
terms and conditions shall inure to the benefit of and be binding upon the
undersigned and its successors and permitted assigns.
IN WITNESS WHEREOF, the undersigned has executed this
instrument this ____ day of ___________, 199 .
_________________________________
(Signature of Shareholder)
_________________________________
(Name in block letters)
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