Exhibit 4.2
THIS SHAREHOLDERS AGREEMENT, dated as of December 1, 2003 (this
"Agreement"), by and among GSRWB, Inc., a Delaware company (the "Company"), the
holders (the "Series A Preferred Stockholders") of shares of Series A Preferred
Stock (as hereinafter defined) set forth on Schedule A attached hereto, the
holder (the "Series B Preferred Stockholder") of shares of Series B Preferred
Stock (as hereinafter defined) set forth on Schedule B attached hereto, the
holders (the "Series C Preferred Stockholders", and together with the Series A
Preferred Stockholders and the Series B Preferred Stockholders, the "Preferred
Stockholders") of shares of Series C Preferred Stock (as hereinafter defined)
set forth as Schedule C attached hereto, and the holders (the "Common
Stockholders", and together with the Preferred Stockholders, the "Stockholders")
of shares of Common Stock (as hereinafter defined) set forth on Schedule D
attached hereto.
WITNESSETH
THAT WHEREAS, as of the date hereof the Common Stockholders are the
record and beneficial owners of shares of common stock, par value $.01 per
share, of the Company (the "Common Stock");
WHEREAS, as of the date hereof the Series A Preferred Stockholders are
the record and beneficial owners of shares of Series A Convertible Preferred
Stock, par value $1.00 per share, of the Company (the "Series A Preferred
Stock"), representing in the aggregate, all of the issued and outstanding shares
of Series A Preferred Stock of the Company;
WHEREAS, as of the date hereof the Series B Preferred Stockholders are
the record and beneficial owners of shares of Series B Convertible Preferred
Stock, par value $1.00 per share, of the Company (the "Series B Preferred
Stock"), representing in the aggregate, all of the issued and outstanding shares
of Series B Preferred Stock of the Company;
WHEREAS, as of the date hereof the Series C Preferred Stockholders are
the record and beneficial owners of shares of Series C Convertible Preferred
Stock, par value $1.00 per share, of the Company (the "Series C Preferred Stock"
and together with the Series A Preferred Stock and Series B Preferred Stock, the
"Preferred Stock" and together with the Common Stock, the "Stock"), representing
in the aggregate, all of the issued and outstanding shares of Series C Preferred
Stock of the Company;
WHEREAS, pursuant to the Agreement of Merger and Acquisitions, dated
July 31, 2003 (the "Reorganization Agreement"), by and among the Company, The
Roaring Water Bay Spirits Group Limited, a company incorporated under the laws
of Ireland ("RWBS Group"), The Roaring Water Bay Spirits Marketing and Sales
Company Limited, a company incorporated under the laws of Ireland ("RWBS M&S"),
Xxxxxxx Xxxxxx, an Irish citizen, Xxxxx Xxxxxx, an Irish citizen, Carbery Milk
Products Limited, a company incorporated under the laws of Ireland and Xxxxx
Investments Limited, a company incorporated under the laws of Ireland, Great
Spirits Company, LLC, a Delaware limited liability company and Great Spirits
Corp., a Delaware corporation, the
Company was established to effect the Reorganization (as defined in the
Reorganization Agreement); all terms not otherwise defined herein shall have the
meanings given to such terms in the Reorganization Agreement; and
WHEREAS, the Stockholders and the Company desire to establish certain
terms, provisions and conditions with respect to (i) restrictions on the
transfer by the Stockholders of shares of the Stock, (ii) certain matters
relating to the corporate governance of the Company, (iii) registration rights
in favor of the Stockholders to have their respective share holdings registered
with the Commission (as hereinafter defined) under certain circumstances, and
(iv) preemptive rights in favor of certain Stockholders to acquire additional
shares of Stock which the Company may issue from time to time in the future.
In consideration of the mutual promises and covenants hereinafter set
forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 For the purposes of this Agreement, the following terms
shall be defined as follows:
"Affiliations" shall have the meaning set forth in Section 4.3(c)
hereof.
"Agreement" shall have the meaning set forth in the Preamble.
"As-Converted Basis" means the number of fully paid and nonassessable
shares of Common Stock obtained upon the conversion and surrender of shares of
Preferred Stock in accordance with, and subject to the terms, of the Certificate
of Designations.
"Closing Date" shall have the meaning set forth in Section 4.3(c)
hereof.
"Certificate of Designations" means the Certificate of Designations
filed by the Company with the Secretary of State of Delaware establishing the
Preferred Stock.
"Commission" means the Securities and Exchange Commission or any
entity succeeding to any or all of its functions under the Securities Act or the
Exchange Act.
"Common Stock" shall have the meaning set forth in the recitals.
"Common Stockholders" shall have the meaning set forth in the
preamble.
"Company" shall have the meaning set forth in the Preamble.
"Consideration" shall have the meaning set forth in Section 4.3(f)
hereof.
"DGCL" shall have the meaning set forth in Section 2.1 hereof.
"Director" shall have the meaning set forth in Section 6.1(a) hereof.
"Disagreeing Holders" shall have the meaning set forth in Section
4.3(f) hereof.
"Drag-Along Notice" shall have the meaning set forth in Section 4.3(c)
hereof.
"Drag-Along Purchaser" shall have the meaning set forth in Section
4.3(a) hereof.
"Drag-Along Right" shall have the meaning set forth in Section 4.3(a)
hereof.
"Dragged Holder" shall have the meaning set forth in Section 4.3(a)
hereof.
"Dragged Shares" shall have the meaning set forth in Section 4.3(a)
hereof.
"Equity Securities" shall have the meaning set forth in Section 4.1(a)
hereof.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
"Final Determination" shall have the meaning set forth in Section
4.3(f) hereof.
"GS" means Great Spirits Corp., a Delaware corporation.
"GS Director" shall have the meaning set forth in Section 6.1(a).
"Indemnified Party" shall have the meaning set forth in Section 5.4(c)
hereof.
"Indemnifying Party" shall have the meaning set forth in Section
5.4(c) hereof.
"Initial Public Offering" means the initial public offering of shares
of Stock pursuant to a registration under the Securities Act covering the offer
and sale of shares of such Stock for the account of the Company (which shares
following the offering will be listed on, or the Company will have met the
listing requirements for, The New York Stock Exchange, The American Stock
Exchange or the Nasdaq Stock Market) from which the aggregate gross proceeds to
the Company are $10,000,000 or more.
"Inspectors" shall have the meaning set forth in Section 5.3(h)
hereof.
"Offered Securities" shall mean the number of shares of Stock proposed
to be transferred under Section 4.2 by the Selling Stockholders.
"Offered Stockholder" shall have the meaning set forth in Section
4.1(a) hereof.
"Percentage of Offered Securities" shall have the meaning set forth in
Section 4.2 hereof.
"Person" means an individual, company, limited liability company,
limited liability partnership, partnership, trust, or unincorporated
association, or a government or any agency or political subdivision thereof.
"Preferred Seller" shall have the meaning set forth in Section 4.3(a)
hereof.
"Preferred Stock" shall have the meaning set forth in the recitals.
"Preferred Stockholders" shall have the meaning set forth in the
preamble.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities" means the series of shares of Preferred
Stock, Common Stock or other securities issued or issuable with respect to the
series of shares of Preferred Stock or Common Stock upon any stock split, stock
dividend, recapitalization, or similar event; provided, however, that such
series of shares of Preferred Stock or Common Stock or other securities shall
only be treated as Registrable Securities if and so long as they have not been
(a) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction or (b) sold in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale.
"Registration Expenses" means all expenses incurred by the Company in
complying with Section 5.2 hereof, including all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursement, of counsel
for the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company) and any other expenses incurred in connection with a registration under
this Agreement other than Selling Expenses.
"Reorganization Agreement" shall have the meaning set forth in the
recitals.
"Restricted Securities" means the securities of the Company required
to bear the legend set forth in Section 8.1 hereof.
"RWBS Director" shall have the meaning set forth in Section 6.1(a)
hereof.
"RWBS Group" shall have the meaning set forth in the recitals.
"RWBS Holder" shall have the meaning set forth in Section 6.1(a)
hereof.
"RWBS M&S" shall have the meaning set forth in the recitals.
"RWBS Shareholder Agreements" shall have the meaning set forth in
Section 8.15 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" means all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Stockholders and all fees and disbursements of not more than one counsel for
the Stockholders to be selected by the holders of a majority of the shares of
Preferred Stock (or shares of Common Stock that were formerly Preferred Stock)
participating in an offering.
"Selling Stockholder" shall have the meaning set forth in Section
4.2(a) hereof.
"Series A Director" shall have the meaning set forth in Section 6.1(a)
hereof.
"Series B Director" shall have the meaning set forth in Section 6.1(a)
hereof.
"Series C Director" shall have the meaning set forth in Section 6.1(a)
hereof.
"Series A Preferred Stockholders" shall have the meaning set forth in
the Preamble.
"Series B Preferred Stockholders" shall have the meaning set forth in
the Preamble.
"Series C Preferred Stockholders" shall have the meaning set forth in
the Preamble.
"Series A Preferred Stock" shall have the meaning set forth in the
recitals.
"Series B Preferred Stock" shall have the meaning set forth in the
recitals.
"Series C Preferred Stock" shall have the meaning set forth in the
recitals.
"Stock" shall have the meaning set forth in the recitals.
"Stockholders" shall have the meaning set forth in the recitals.
"Tag-Along Rightholder" shall have the meaning set forth in Section
4.2(a) hereof.
"Third Party Purchaser" shall have the meaning set forth in Section
4.2(a) hereof.
"Transfer" means to transfer, sell, assign, pledge, hypothecate,
bequeath, give, create a security interest in, or lien on, place in trust
(voting or otherwise), assign or in any other way encumber or dispose of,
directly or indirectly and whether or not by operation of law or for value, any
series of shares of Preferred Stock or Common Stock.
ARTICLE II
OFFICES
Section 2.1 Registered Office. The registered office in Delaware
required by the Delaware General Corporation Law (the "DGCL") shall be as set
forth in the Certificate of Incorporation until such time as the registered
office is changed in accordance with the DGCL.
Section 2.2 Principal Place of Business. The principal places of
business for the transaction of the business of the Company shall be 00-00 Xxxxx
Xxxxxx, Xxxxx X, Xxxx Xxxx, Xxx Xxxx 00000 and/or such other place as the Board
of Directors of the Company shall determine.
Section 2.3 Other Offices. The Board of Directors of the Company may
at any time establish other business offices within or without the State of
Delaware.
ARTICLE III
CONFIDENTIALITY AND TRANSFERS
Section 3.1 Confidentiality.
(a) Each Stockholder hereby agrees that all financial and other
information about the Company, or other information of a proprietary nature,
disclosed to such Stockholder at any time in connection with this Agreement or
otherwise shall be kept confidential by such Stockholder and shall not be
disclosed to any person or used by such Stockholder (other than on a
confidential basis to the Company's officers, directors, or employees) except:
(i) with the prior written consent of the Company; (ii) as may be required by
applicable law, court process or other obligations pursuant to any listing
agreement with any national securities exchange; or (iii) such information which
is or becomes generally available other than as a result of a violation of this
provision.
(b) In the event of a breach or a threatened breach by any Stockholder
of the provisions herein, the Company shall be entitled to an injunction
restraining such
Stockholder from such breach. Nothing contained in this Section 3.1 or
elsewhere; in this Agreement shall be construed as prohibiting the Company from
pursuing any other remedies available at law or equity for such breach or
threatened breach of this Agreement nor limiting the amount of damages
recoverable in the event of a breach or a threatened breach by any Stockholder
of the provisions herein.
(c) Notwithstanding Section 8.5, the obligations set forth in this
Section shall be continuing and shall survive the termination of this Agreement
or the Company and the Transfer by a Stockholder of all of its Stock.
Section 3.2 Transferees to Remain Subject to Agreement. Any transfer
of shares of Stock by any party to this Agreement made in compliance with this
Agreement shall remain subject to this Agreement and each intended transferee
shall execute and deliver to the Company a counterpart of this Agreement, which
shall evidence such transferee's agreement that the shares of Stock intended to
be transferred shall continue to be subject to, and receive the benefits of,
this Agreement and that as to such shares the transferee shall be bound by the
restrictions of, and receive the benefits of, this Agreement as if such
transferee were an original party hereto, standing in the position of its
transferor.
Section 3.3 Transfer of Shares Upon Death. Upon the death of any
Stockholder the shares of Stock held by such Stockholder at any time of her or
his death may be bequeathed pursuant to the provisions of the will of such
Stockholder or distributed pursuant to the laws of intestate succession to any
descendant by blood or adoption of a Stockholder; provided, however, that it
shall be a condition to each such transfer that the transferee become a party to
this Agreement with respect to the shares of Stock so transferred and from after
such date each such transferee shall be deemed to be a Stockholder for all
purposes of this Agreement.
Section 3.4 Transfers in Violation of Agreement Void. No purported
sale, assignment, transfer, pledge, encumbrance, gift, transfer in trust (voting
or other) or other disposition of, or creation of a security interest in, or
lien on, any shares of Stock by any Stockholder or other holder thereof in
violation of the provisions of this Agreement shall be valid and the Company
shall not record the transfer of any such shares of Stock on the books of the
Company and the holders of such shares of Stock shall not be entitled to vote or
participate in any dividends or other distributions made by the Company (if
otherwise entitled thereto). The foregoing restrictions are in addition to, and
not in lieu of, any other remedies, legal or equitable, available to the Company
to enforce such provisions under this Agreement.
Section 3.5 Transfer of Shares by Operation of Law. Any person who
becomes the holder of any shares of Stock or the possessor of any certificate
representing shares of Stock by virtue of any judicial process (other than a
probate or similar proceeding upon the death of a Stockholder), attachment,
bankruptcy, receivership, execution or judicial sale shall immediately offer all
such shares of Stock to the Company or its designee whenever requested by the
Company to do so, provided such request is made by the Company within 90 days of
the date the Company receives actual notice of
any of the foregoing events. The purchase price for shares of Stock or interests
therein acquired by the Company pursuant to the provisions of this Section 3.5
shall be the fair market value, as determined by the Company's regular
independent accountants.
Section 3.6 Restrictions on Transfer of Shares. Except as otherwise
expressly provided in this Agreement, none of the Stockholders shall during
his/her lifetime or upon his/her death shall, assign, transfer, pledge, create a
security interest in, or lien on, encumber, place in trust (voting or other) or
otherwise dispose of, all or any part of his/her shares of Stock.
Section 3.7 Reservation of Rights. Any failure of the Company or the
Stockholders to exercise any option to purchase any interest granted pursuant to
this Agreement or any waiver by the Company or the Stockholders of any
restrictions imposed with respect to any transfers of any interest hereunder
shall not, as to any future transfer of a specified interest (either voluntary
or by operation of law), discharge the interest from any restrictions herein
contained unless such waiver expressly so provides.
ARTICLE IV
PREEMPTIVE AND DISPOSITION RIGHTS
Section 4.1 Preemptive Rights.
(a) Subsequent Offerings. Subject to applicable securities laws, each
Stockholder holding 62,500 (as adjusted for stock splits and dividends paid in
shares) or more of the outstanding shares of Stock on an As-Converted Basis, if
applicable (with the shares of Stock of each of the RWBS Holders being
aggregated for purposes of achieving such threshold) (each an "Offered
Stockholder") shall have a right of first refusal to purchase its pro rata share
of all Equity Securities (as hereinafter defined) (the allocation of shares
among the RWBS Holders to be pro rata based upon the Equity Securities held by
the RWBS Holders unless otherwise agreed by them), that the Company may, from
time to time, propose to sell and issue after the date of this Agreement, other
than the Equity Securities excluded by Section 4.1(c) hereof. Each Offered
Stockholder's pro rata share is equal to the ratio of (a) the number of shares
of Stock (including all shares of Stock issued or issuable upon the conversion
of outstanding warrants or options or other rights to purchase shares of Stock
or securities convertible into or exercisable for shares of Stock but excluding
any shares of Stock issuable pursuant to any anti-dilution provisions that may
be applicable to such Stockholder's interest as set forth in a separate
agreement) which an Offered Stockholder is deemed to be a holder immediately
prior to the issuance of such Equity Securities to (b) the total number of
outstanding shares of Stock (including all shares of Stock issued or issuable
upon the exercise of any outstanding warrants or options or other rights to
purchase shares of Stock or securities convertible into or exercisable for
shares of Stock, but excluding any shares of Stock issuable pursuant to any
anti-dilution provisions that may be applicable to such Stockholder's interest
as set forth in a separate agreement or pursuant to any other similar provision
effecting the Company) immediately prior to the issuance of the Equity
Securities. The term "Equity Securities" shall mean (i) any share or interest in
the
Company, (ii) any security convertible into or exercisable or exchangeable for,
with or without consideration, any share or interest (including any option to
purchase such convertible security), (iii) any security carrying any warrant or
right to subscribe to or purchase any share, interest or other security or (iv)
any such warrant or right.
(b) Exercise of Rights. If the Company proposes to issue any Equity
Securities, it shall give the Offered Stockholders written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. The Offered
Stockholders shall have fifteen (15) days from the giving of such notice to
agree to purchase its pro rata share of the Equity Securities for the price and
upon the terms and conditions specified in the notice by giving written notice
to the Company and stating therein the quantity of Equity Securities to be
purchased.
(c) Excluded Securities. The rights of first refusal established by
this Section 4.1 shall have no application to any of the following Equity
Securities:
(i) (a) shares issuable upon conversion of the Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock of the Company, (b)
shares of Common Stock issued or issuable as a dividend or distribution on
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
of the Company; (c) shares of Common Stock issued or issuable by reason of a
dividend, stock split, split-up or other distribution on Common Stock, (d) any
shares of Common Stock (including options or warrants to purchase shares of
Common Stock) issued to financial institutions in connection with commercial
credit arrangements approved by the Board of Directors of the Company, (e) any
Awards (as defined in the Plan) with respect to shares of Common Stock issued
pursuant to the Plan and the option to purchase 10,000 shares of Common Stock
issued to Xxx. Xxxx X'Xxxxxx and (f) shares of Common Stock issued upon
conversion of the RW Notes;
(ii) shares or interests issued or issuable pursuant to any
rights or agreements, options, warrants or convertible securities outstanding as
of the date of this Agreement; and shares or interests issued pursuant to any
such rights or agreements granted after the date of this Agreement;
(iii) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, strategic alliance, acquisition or
similar business combination approved by the Board of Directors of the Company;
(iv) any Equity Securities issued in connection with any
recapitalization or similar event by the Company;
(v) any Equity Securities that are issued by the Company pursuant
to a registration statement filed under the Securities Act;
(vi) any Equity Securities issued in connection with strategic
transactions involving the Company and other entities, including joint ventures,
manufacturing, marketing or distribution arrangements; provided that the
issuance of shares therein has been approved by the Board of Directors of the
Company; and
(vii) any shares issued by the Company pursuant to any
anti-dilution provisions that may be applicable to such Stockholder's interest
as set forth in a separate agreement.
Section 4.2 Tag-Along Rights.
(a) If Stockholders ("the Selling Stockholders") are transferring a
number of shares of Stock equal to 50% or more of the then outstanding shares of
Stock (on an As-Converted Basis) in a single transaction or a series of
transactions to a third party (a "Third Party Purchaser"), then each of the RWBS
Holders (the "Tag-Along Rightholders") shall have the right to sell to the Third
Party Purchaser, upon the terms and conditions set forth in the notice to the
Company provided for in (ii) below, up to that percentage of shares of Stock (on
an As-Converted Basis) held by such Tag-Along Rightholder as is equal to that
percentage determined by dividing (i) the total number of shares of Stock (on an
As-Converted Basis) proposed to be transferred by Selling Stockholders by (ii)
the total number of shares of Stock (on an As-Converted Basis) then outstanding
(the quotient of (i) and (ii), being the "Percentage of Offered Securities");
provided, however, the total number of shares of Stock (on an As-Converted
Basis)a Tag-Along Rightholder shall be entitled to sell shall be inclusive of
the number of shares of Stock proposed to be sold by such RWBS Holder if also
acting in the capacity of a Selling Stockholder. The RWBS Holders may allocate
their tag-along rights pursuant to this Section 4.2 among themselves by mutual
agreement; provided the Tag-Along Rightholders shall not be entitled pursuant to
this Section 4.2 to sell to a Third Party Purchaser a greater number of shares
of Stock than the number of shares of Stock collectively held by the Tag-Along
Rightholders multiplied by the Percentage of Offered Securities. The Selling
Stockholders and the Tag-Along Rightholders shall effect the sale of the Offered
Securities as follows: the Tag-Along Rightholders shall sell up to the number of
Offered Securities permitted to be sold pursuant to this Section 4.2 and the
number of Offered Securities to be sold to the Third Party Purchaser shall be
reduced pro-rata among the Selling Shareholders.
(i) For purposes of this Section 4.2, unless otherwise expressly
set forth therein, all shares of Stock then outstanding shall be deemed to have
been converted into shares of Common Stock on an As-Converted Basis.
(ii) In order to exercise its right to sell shares of Stock to a
Third Party Purchaser pursuant to this Section 4.2, a Tag-Along Rightholder must
agree to make, severally and not jointly, substantially the same
representations, warranties, covenants and indemnities with respect to the title
and ownership of its shares of Stock to be sold as a Selling Stockholder agrees
to make in connection with the proposed sale by it of Offered Securities to a
Third Party Purchaser. Each Selling Stockholder shall give notice to each
Tag-Along Rightholder of each proposed sale by it of Offered Securities which
gives rise to the rights of the Tag-Along Rightholders set forth in this Section
4.2, at least thirty (30) days prior to the proposed consummation of the
proposed sale, setting
forth the name of the Selling Stockholder, the number of Offered Securities, the
name and address of the proposed Third Party Purchaser, the proposed amount and
form of consideration and the terms and conditions offered by the Third Party
Purchaser, the percentage of shares of Stock that the Tag-Along Rightholder may
sell to the Third Party Purchaser (determined in accordance with Section 4.2
assuming that all Tag-Along Rightholders exercise their rights pursuant to this
Section 4.2), and a representation that such Third Party Purchaser has been
informed of the tag-along rights provided for in this Section 4.2 and has agreed
to purchase shares of Stock in accordance with the terms of this Section 4.2.
The tag-along rights provided by this Section 4.2 must be exercised by the
Tag-Along Rightholder wishing to sell its shares of Stock within thirty (30)
days following receipt of the notice required by the preceding sentence, by
delivery of a written notice to the Selling Stockholder indicating the Tag-Along
Rightholder's wish to exercise its rights and specifying the number of shares of
Stock (up to the maximum number of shares of Stock owned by the Tag-Along
Rightholder permitted to be sold to the Third Party Purchaser) it wishes to
sell; provided, however, that the Tag-Along Rightholder may waive its rights
under this Section 4.2 prior to the expiration of the thirty (30)-day period by
giving written notice to the Selling Stockholder, with a copy to the Company.
The failure of a Tag-Along Rightholder to respond within the thirty (30)-day
period shall be deemed to be a waiver of the Tag-Along Rightholder's rights
under this Section 4.2. If a Tag-Along Rightholder decides to sell a number of
shares which is less than the maximum number of shares permitted to be sold by
it pursuant to this Section 4.2 or if a Tag-Along Rightholder fails to close its
sale of shares of Stock to the Third Party Purchaser for any reason, then the
Selling Stockholder may sell to the Third Party Purchaser the number of shares
of Stock as the Tag-Along Rightholder failed to sell to the Third Party
Purchaser. However, if the Third Party Purchaser fails to purchase shares of
Stock from any Tag-Along Rightholder that has properly exercised its tag-along
rights pursuant to this Section 4.2, then the Selling Stockholder shall not be
permitted to consummate the proposed sale of the Offered Securities, and any
proposed attempted sale shall be null and void and the Company shall not
register the proposed transfer.
Section 4.3 Drag-Along Rights.
(a) At any time following the third anniversary of the date hereof, if
any Stockholder or Stockholders holding in the aggregate at least eighty percent
(80%) of the shares of Stock, on an As-Converted Basis (collectively, the
"Preferred Seller") desire to Transfer to a Third Party Purchaser (for purposes
of this Section 4.3, the "Drag-Along Purchaser") all of the shares of Stock then
owned by the Preferred Seller, the Preferred Seller shall have the right (the
"Drag-Along Right"), notwithstanding any other provision of this Agreement but
subject to Section 4.3(d), to require that each other Stockholder (each, a
"Dragged Holder") sell to the prospective purchaser that percentage of its
shares of Stock (the "Dragged Shares") as is required in order for the
prospective purchaser to purchase the aggregate number of shares of Stock to be
purchased by it (as set forth in the Drag-Along Notice referred to below). Such
sale by the Dragged Holders shall be made by them pro rata on the basis of their
respective fully diluted holdings of shares of Stock, for the same consideration
per share and otherwise on the same terms and conditions upon which the
Preferred Seller is selling its shares of Stock, subject to and in accordance
with the following terms and conditions.
(b) For purposes of this Section 4.3, unless otherwise expressly set
forth herein, all shares of Stock then outstanding shall be deemed to have been
converted into shares of Common Stock on an As-Converted Basis.
(c) In order to exercise its rights under this Section 4.3, the
Preferred Seller shall give notice to the Company and each Dragged Holder (a
"Drag-Along Notice") at least thirty (30) days prior to the date of proposed
consummation of the proposed sale (the "Closing Date"), which notice shall state
that the Preferred Seller proposes to sell Offered Securities and intends to
exercise its Drag-Along Right, shall set forth the name of the Preferred Seller,
the number of Offered Securities and that such number constitutes all of the
Preferred Seller's Shares, the number of Dragged Shares, the name and address of
the proposed Drag-Along Purchaser, the proposed amount and form of consideration
and the terms and conditions offered by the Drag-Along Purchaser, shall specify
the Closing Date to be within sixty (60) days of the provision of the Drag-Along
Notice, shall include a representation that such Drag-Along Purchaser has been
informed of the Drag-Along Rights provided for in this Section 4.3 and has
agreed to purchase shares of Stock in accordance with this Section 4.3 and shall
fully describe any existing or proposed affiliations or contractual
relationships between the Preferred Seller and the Drag-Along Purchaser (the
"Affiliations").
(d) Subject to Section 4.3(f) below, at least ten (10) days prior to
the Closing Date, each Dragged Holder shall deliver to the Preferred Seller: (i)
a limited power-of-attorney authorizing the Preferred Holder to dispose of the
Dragged Shares on the terms contained in the Drag-Along Notice; and (ii) one or
more certificates which represent the number of shares of Common Stock which the
Dragged Holder is being required to sell pursuant the Drag-Along Right.
Additionally, each Dragged Holder agrees to make, severally and not jointly,
substantially the same representations, warranties, covenants and indemnities as
the Preferred Seller agrees to make in connection with the proposed sale by it
of Offered Securities to a Drag-Along Purchaser; provided, however, that no
Dragged Holder shall, without its or his prior consent, have to (x) make any
representation or warranty that they in good faith believe to be untrue, (y)
agree to any covenant that (1) obligates that Dragged Holder to undertake a
future performance that will not be required of the Preferred Seller or the
other Dragged Holders, (2) it in good faith believes impossible to perform or
(3) relates to the Dragged Holder's non-competition with the Company's business,
or (z) agrees to indemnification relating to the status, actions or shares of
Stock of any other Stockholder. The documents delivered to the Preferred Seller
by each Dragged Holder as provided above shall be held in escrow by the
Preferred Seller pending the closing of the transaction.
(e) The Preferred Seller shall consummate the sale of shares of Stock
by the Preferred Seller and all Dragged Holders on the terms and conditions, and
on or within ten (10) days of the Closing Date set forth in the Drag-Along
Notice or within twenty (20) days of the Final Determination (as defined in
Section 4.3(f) below). If the proposed sale is not consummated in accordance
with the foregoing, the Preferred Seller shall return to the Dragged Holders all
stock certificates and other documents furnished by them to the Preferred Seller
in contemplation of the sale of shares of Stock pursuant to the Drag-Along
Right, and all restrictions on the transfer of shares of Stock by the
Preferred Seller contained in this Agreement shall again be in effect.
Simultaneously with the closing of the proposed sale in accordance with the
foregoing, the Preferred Seller shall notify each Dragged Holder of the closing
and shall cause the purchaser to remit directly to each Dragged Holder that
portion of the sale proceeds to which such Dragged Holder is entitled by reason
of its participation in the sale.
(f) Notwithstanding the foregoing, in the event that a majority of the
Board of Directors of the Company determines in good faith that the Affiliations
present a potential conflict of interest vis-a-vis the proposed amount and form
of consideration (the "Consideration"), and any Dragged Holder objects to the
Consideration (the "Disagreeing Holders"), then the Preferred Seller and the
Drag-Along Purchaser, on the one hand, and the Disagreeing Holders, on the other
hand, shall each designate a representative, and such representatives will meet
and use their best efforts to reach an agreement on the appropriate amount and
form of consideration. If they reach an agreement of the revised amount and form
of consideration (a "Final Determination"), then the proposed sale shall proceed
in accordance with that Final Determination. If the representatives so
designated are unable to reach such an agreement, then the Preferred Seller and
the Drag-Along Purchaser may either determine not to proceed with the proposed
sale or may submit a list of at least three independent appraisers each of which
is a recognized independent expert experienced in valuing businesses similar or
related to the principal business of the Company. The Disagreeing Holders shall
select one of the independent appraisers set forth on such list. The independent
appraiser so selected will determine the appropriate amount and form of
consideration and its determination thereof will be final and binding on all
parties concerned (such determination, also a "Final Determination") and the
proposed sale shall proceed in accordance with the Final Determination. The
Company and the Drag-Along Purchaser will provide the independent appraiser so
selected with all information about the Company and the Consideration which such
independent appraiser reasonably deems necessary for determining the fair value
of the Consideration. The fees and expenses of the appraisal process (including
those of the independent appraiser) will be paid by the Company. The Company may
require that the independent appraiser keep confidential any non-public
information received as a result of this paragraph pursuant to reasonable
confidentiality arrangements.
ARTICLE V
REGISTRATION RIGHTS
Section 5.1 Notice of Piggy-Back Registration.
(a) If at any time or from time to time after the Company has
completed an Initial Public Offering, the Company shall determine to register
any of its shares of Stock, either for its own account or the account of a
Stockholder other than (x) a registration relating solely to employee benefit
plans, (y) a registration relating solely to a Commission Rule 145 transaction
or (z) a registration in connection with an Initial Public Offering, the Company
will:
(i) promptly give to each Stockholder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests made within 30 days after receipt of such written notice from the
Company by any Stockholder.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Stockholders as a part of the written notice given
pursuant to this Section 5.1. In such event, the right of any Stockholder to
registration pursuant to this Section 5.1 shall be conditioned upon such
Stockholder's participation in such underwriting and the inclusion of
Registrable Securities in the underwriting to the extent provided herein. All
Stockholders proposing to distribute their securities through such underwriting
shall (together with the Company and the Stockholders distributing their shares
of Stock through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters also be made to and for
their benefit and that any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement also be conditions
precedent to their obligations. No Stockholder other than a Stockholder who,
together with its Affiliates (within the meaning of Rule 12b-2 under the
Exchange Act), owns at least a majority of the outstanding Stock of the Company
(on as As-Converted Basis, if applicable) shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Stockholder and its ownership of the shares of Stock being registered on its
behalf and such Stockholder's intended method of distribution and any other
representation required by law. Notwithstanding any other provision of this
Section 5.1, if the managing underwriter determines that marketing factors
require a limitation of the number of shares of Stock to be underwritten, the
managing underwriter may limit the number of Registrable Securities to be
included in the registration and underwriting (up to the exclusion of all
Registrable Securities), on a pro rata basis based on the total number of shares
of Stock (including Registrable Securities) (on an As-Converted Basis) requested
to be included in such registration. To facilitate the allocation of Stock in
accordance with the above provisions, the Company or the underwriters may round
the number of shares of Stock allocated to any Stockholder to the nearest 10
shares of Stock. If any Stockholder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice to the
Company and the managing underwriter.
(c) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section
5.1(c) prior to the effectiveness of such registration, whether or not any
Stockholder has elected to include his Stock in such registration.
(d) Registrable Securities. If at any time shares of Stock are to be
included in a registration pursuant to this Section 5.1, the securities to be
registered shall be the underlying shares of Common Stock into which such shares
of Preferred Stock are convertible. Prior to any sale of Stock pursuant to any
such registration, such Stock shall immediately be converted into Common Shares.
Section 5.2 Expenses of Registration. All Registration Expenses
incurred in connection with any registration pursuant to Section 5.1 shall be
borne by the Company. Unless otherwise agreed, other Selling Expenses relating
to any series of shares of Stock registered on behalf of the Stockholders shall
be borne by the applicable Stockholders of the registered Stock included in such
registration pro rata on the basis of the number of shares of Stock registered
on behalf of the Company, the other Stockholders distributing their shares of
Stock under such registration and the applicable Stockholders.
Section 5.3 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 5.1, the Company will keep each
Stockholder advised in writing as to the initiation of each registration and as
to the completion thereof. At its expense the Company will:
(a) prepare and file with the Commission a registration statement with
respect to such Shares and use its reasonable best efforts to cause such
registration statement to become and remain effective until the distribution
described in the registration statement has been completed;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all Stock
covered by such registration statement;
(c) promptly notify each Stockholder and the underwriter or
underwriters, if any:
(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been filed
and, with respect to such registration statement or any post-effective amendment
thereto, when the same has become effective;
(ii) of any written comments from the Commission with respect to
any filing referred to in clause (i) or of any written request by the Commission
for amendments or supplements to such registration statement or prospectus;
(iii) of the notification to the Company by the Commission of its
initiation of any proceeding with respect to the issuance by the Commission of,
or of the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement; and
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable Securities for
sale under the applicable securities or blue sky laws of any jurisdiction;
(d) furnish to the Stockholders participating in such registration and
to the underwriters of the shares of Stock being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as the Stockholders and such underwriters
may reasonably request in order to facilitate the public offering of such Stock;
(e) use its reasonable best efforts to register and qualify the shares
of Stock covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by the
Stockholders and to keep such registration or qualification in effect or so long
as such registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable such Stockholder to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Stockholder; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act;
(f) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering; provided that each
Stockholder participating in such underwriting shall also enter into and perform
its obligations under such an agreement;
(g) notify each Stockholder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such Stockholder promptly prepare and
furnish to such Stockholder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares of Stock, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(h) make available for inspection by any Stockholder, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant, or other agent retained by such Stockholder or
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company reasonably necessary
to enable the Inspectors to exercise their
due diligence responsibility, and cause the Company's officers, directors and
employees to supply all information reasonable requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement, and permit the Inspectors to participate in the preparation of such
registration statement and any prospectus contained therein and any amendment or
supplement thereto;
(i) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed; and
(j) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the affective date of such
registration.
Section 5.4 Indemnification.
(a) The Company will indemnify each Stockholder, each of its officers
and directors and partners, and each Person controlling such Stockholder within
the meaning of Section 15 of the Securities Act, with respect to which
registration has been effected pursuant to Section 5.1, and each underwriter, if
any, and each Person who controls any underwriter within the meaning of Section
15 of the Securities Act, against all Losses (or actions in respect thereof),
including any Losses incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, preliminary prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration, or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation or any
alleged violation by the Company of any rule or regulation promulgated under the
Securities Act or the Exchange Act or any state securities law applicable to the
Company in connection with any such registration, and the Company will reimburse
each such Stockholder, each of its officers and directors, and each Person
controlling such Stockholder, each such underwriter and each Person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating, preparing or defending any such Losses, as
such expenses are incurred, provided that the Company will not be liable in any
such case to the extent that any such Losses arise out of or are based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Company, by an instrument duly executed by such Stockholder, controlling Person
or underwriter and stated to be specifically for use therein. The Company shall
also indemnify each other Person who participates (including as an underwriter)
in the offering or sale of Registrable Securities, their officers, directors and
partners, and each other Person, if any, who controls any such participating
Person within the meaning of the Securities Act to the same extent as provided
above with respect to sellers of Registrable Securities.
(b) Each Stockholder will, if Registrable Securities held by such
Stockholder are included in the securities as to which such registration is
being effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each Person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act, and each other such Stockholder,
each of its officers and directors and each Person controlling such Stockholder
within the meaning of Section 15 of the Securities Act, against all Losses (or
actions in respect; thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Stockholders, such directors, officers, Persons, underwriters
or control Persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such Losses, as such expenses are
incurred, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such Stockholder and stated to
be specifically for use therein; provided, however, that the obligations of each
of Stockholders hereunder shall be limited to an amount equal to the net
proceeds to such Stockholder of shares of Stock sold as contemplated herein.
Such Stockholders shall also indemnify each other Person who participates
(including as an underwriter) in the offering or sale of Registrable Securities,
their officers and directors and each other Person, if any, who controls any
such participating Person within the meaning of the Securities Act to the same
extent as provided above with respect to the Company.
(c) Each party entitled to indemnification under this Section 5.4(c)
(an "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that an Indemnified Party (together with all
other Indemnified Parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 5.4(c) unless the failure to give such notice is materially prejudicial
to an Indemnifying Party's ability to defend such action. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party,
which consent shall not be unreasonably withheld, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified Party
of a release from all liability in respect to such claim or litigation.
(d) If the indemnity and reimbursement obligation provided for in any
paragraph of this Section 5.4(d) is unavailable or insufficient to hold harmless
an Indemnified Party in respect of any Losses (or actions or proceedings in
respect thereof) referred to therein, then the Indemnifying Party shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such Losses (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and the Indemnified Party on the other hand in connection with
statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this paragraph were to be determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in this paragraph. The amount paid by an Indemnified Party as a
result of the Losses referred to in the first sentence of this paragraph shall
be deemed to include any legal and other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any Loss which
is the subject of this paragraph.
No Indemnified Party guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) or deceptive or manipulative
sales practices (within the meaning of Section 10(b) of the Exchange Act or Rule
10b-5 promulgated thereunder) shall be entitled to contribution from the
Indemnifying Party if the Indemnifying Party was not guilty of such fraudulent
misrepresentation or deceptive or manipulative sales practices.
Section 5.5 Certain Limitations. The prospective sellers shall not
have the right to participate in a registration under Section 5.1 if the
prospective sellers receive a written opinion of counsel for the Company, in
substance and authorship acceptable to the prospective sellers, together with a
confirming opinion of counsel selected by such prospective sellers, which
opinion shall be paid for by the Company, that such prospective sellers may make
such transfer of all Stock (if applicable) in a public sale which will be in
compliance with all applicable securities laws concerning transfer of
non-registered securities. If the right to transfer Stock publicly is not
available to any one of the prospective sellers as described in the preceding
sentence, such prospective seller will have the right to participate in or
request a registration under Section 5.1.
Section 5.6 [Intentionally Left Blank].
Section 5.7 Information by Stockholder. The Stockholders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Stockholder or the Registrable Securities held
by them and the distribution proposed by such Stockholders as the Company may
reasonably request in writing and as shall be required in connection with any
registration referred to in Section 5.1.
Section 5.8 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the shares of Stock
of the Company, the Company agrees to use its reasonable best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements); and
(c) so long as the Stockholders own any Restricted Securities, to
furnish to the Stockholders forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the Initial Public
Offering), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company as a Stockholder may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Stockholder to
sell any such securities without registration.
Section 5.9 Transfer of Registration Rights. The rights to cause the
Company to register securities granted the Stockholders under Sections 5.1 may
be assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by the Stockholders; provided that (a) such
transfer may otherwise be effected in accordance with applicable securities laws
and this Agreement, (b) notice of such assignment is given to the Company and
(c) if the transfer is to a transferee who is not an affiliate of the
transferring Stockholder, such transferee or assignee acquires from the
Stockholders at least 25% of the shares of Stock (on an As-Converted Basis, if
applicable) held by the Stockholders as of the date hereof.
Section 5.10 Standoff Agreement. Each Stockholder agrees in connection
with any registration of the Company's shares of Stock (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), upon request of the Company or the underwriters managing
any underwritten
offering of the shares of the Company's Stock, not to sell, make any short sale
of, loan, pledge (or otherwise encumber or hypothecate), grant any option for
the purchase of, or otherwise directly or indirectly dispose of any Registrable
Securities (other than those included in the registration) without the prior
written consent of the Company and such managing underwriters for such period of
time, not to exceed 180 days, as the Board of Directors of the Company
establishes pursuant to its good faith negotiations with such managing
underwriters.
Section 5.11 Termination of Rights. The rights of any particular
Series A Stockholder or Series B Stockholder to cause the Company to register
securities under Section 5.1 shall terminate with respect to such Stockholder on
the later of (a) the second anniversary of the effective date of the Company's
Initial Public Offering and (b) the date upon which such Stockholder ceases to
be an Affiliate under Rule 144 of the Securities Act; provided that in no event
shall such period be beyond five (5) years after an Initial Public Offering. The
rights of any particular Series C Stockholder to cause the Company to register
securities under Section 5.1 shall terminate with respect to such Stockholder on
the second anniversary of the effective date of the Company's Initial Public
Offering.
ARTICLE VI
MANAGEMENT; BOARD OF DIRECTORS AND OFFICERS
Section 6.1 Election of Board of Directors and Officers; Management.
(a) The Board of Directors currently consists of Messrs. Xxxx Xxxxxxx,
Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, T. Xxxxxx Xxxxxxxx, and Xxxx X. Xxxxxxxxxx, III,
until their respective successors have been elected and qualified (or until
their respective resignation or removal). Promptly after the closing of the
Reorganization, the Stockholders shall elect a new Board of Directors of the
Company, which shall consist of nine directors (each, a "Director"). The
Directors shall be designated as follows: (i) six of the Directors shall be
elected annually by the Stockholders by a plurality of the votes of the shares
of Stock voting on an As-Converted Basis; provided, however, that the
Stockholders agree to vote their shares of Stock in favor of the election of (x)
Xxxx Xxxxxxx, T. Xxxxxx Xxxxxxxx and an individual to be named by Xx. Xxxxxxx,
each as a Director (the "GS Directors") and (y) three nominees (the "RWBS
Directors") designated by the Stockholders who were the former holders of shares
of RWBS Group (the "RWBS Holders") (i.e., Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxx
Investments Limited and Carbery Milk Products Limited), (ii) one Director shall
be elected annually by the Series A Preferred Stockholders by a plurality of the
votes of shares of Series A Preferred Stock voting (the "Series A Director"),
(iii) one Director shall be elected annually by the Series B Preferred
Stockholders holding shares of Series B Preferred Stock by a plurality of the
votes of shares of Series B Preferred Stock voting (the "Series B Director"),
and (iv) one Director shall be elected annually by the Series C Preferred
Stockholders holding shares of Series C Preferred Stock by a plurality of the
votes of shares of Series C Preferred Stock voting (the "Series C Director").
The Board of Directors shall act by a vote of the majority present and a quorum
for the transaction of business by the Board of Directors shall be a majority of
the Directors. Any vacancy in the Board of Directors shall be filled
by the election of a new Director by the remaining Directors; provided that (a)
a GS Director's seat shall be filled by the remaining GS Directors, (b) the
Series A Director's seat shall be filled by the Series A Preferred Stockholders
by a plurality of the votes of the shares of Series A Preferred Stock voting,
(c) the Series B Director's seat shall be filled by the Series B Preferred
Stockholders by a plurality of the votes of the shares of Series B Preferred
Stock voting, (d) the Series C Director's seat shall be filled by the Series C
Preferred Stockholders holding Series C Preferred Stock by a plurality of the
votes of the shares of Series C Preferred Stock voting, and (e) the RW
Director's seat shall be filled by the remaining RWBS Directors. The Company
shall (i) provide at least three (3) business days notice of any Board of
Directors meeting in accordance with the Company's Bylaws and (ii) call at least
four (4) Board of Director's meetings annually.
(b) The Stockholders shall use their best efforts to cause the Board
of Directors of the Company to establish an Operating Committee, an Audit
Committee and a Compensation Committee of the Board of Directors of the Company.
The Operating Committee shall consist of Messrs. Xxxx Xxxxxxx, Xxxxx Xxxxxx,
Xxxxxxx Xxxxxx and T. Xxxxxx Xxxxxxxx. Each of the Audit Committee's and the
Compensation Committee's membership shall consist of three Directors, one of
which shall be a GS Director, one of which shall be a RWBS Director and one of
which shall be a Series A Director, Series B Director or Series C Director. The
Audit Committee and the Compensation Committee shall have all of the ordinary
duties of a like committee of a Board of Directors and, in the case of the
Compensation Committee, shall have the authority to grant awards under the Stock
Option Plan.
(c) The Stockholders shall use their best efforts to cause the Board
of Directors of the Company to elect the following persons to the respective
offices of the Company set forth beside their respective names, to serve in such
capacity until their respective successors have been elected and have qualified
(or until their earlier resignation or removal):
Name Officers
---- --------
Xxxx Xxxxxxx President and Chief Executive Officer
Xxxxxxx Xxxxxx Executive Vice President and Managing Director
Xxxxx Xxxxxx Executive Vice President and Managing Director
T. Xxxxxx Xxxxxxxx Executive Vice President and Managing Director
Xxxx X. Xxxxxxxxxx, III Secretary
(d) The affairs of the Company shall be managed subject to the general
oversight of the Board of Directors of the Company and day-to-day conduct of the
business shall be conducted by the officers.
Section 6.2 Vacancies: Resignations.
(a) A vacancy among the officers shall be deemed to exist in case of
the death, mental incompetence, physical incapacity, bankruptcy, resignation or
removal of any officer, or if the Board of Directors of the Company fails at any
annual or special meeting at which any officer or officers are elected, to elect
the fully authorized number of officers to be voted for at that meeting.
(b) Any officer may resign effective upon giving thirty (30) days'
written notice to the Board of Directors of the Company, unless the notice
specifies a later time for the effectiveness of such resignation. The Board of
Directors of the Company shall have power to elect a successor to take office
when the resignation is to become effective.
Section 6.3 Director Vote Required.
The Stockholders hereby agree that notwithstanding anything to the
contrary set forth in the Certificate of Incorporation or Bylaws of the Company,
the Directors shall not be entitled to authorize any of the following
transactions without the affirmative vote of (i) seven (7) Directors during the
first two (2) years following the date of this Agreement, and (ii) at least
two-thirds (66 2/3%) of the total number of Directors thereafter:
(i) the merger or consolidation of the Company;
(ii) the incurrence of any indebtedness resulting in total
indebtedness on a consolidated basis being in excess of $15,000,000;
(iii) undertaking any material transaction outside of the
Company's ordinary course of business, including any such transaction with an
officer, director or any holder of five percent (5%) or more of the outstanding
Stock of the Company;
(iv) issuance of additional equity securities of the Company
(including common and preferred stock) which would have aggregate anticipated
net proceeds (when taken together with net proceeds for all equity securities
issued by the Company following the date of this Agreement) in excess of
$10,000,000 following the date of this Agreement (excluding the net proceeds of
the Series C Preferred Stock);
(v) dissolution or winding up of the Company or any of its
operating subsidiaries; and
(vi) the sale or lease by the Company or any of its operating
subsidiaries of all or substantially all of its property.
ARTICLE VII
FINANCIAL STATEMENTS
Section 7.1 Financial Statements. The Company shall maintain, and
shall cause each of its subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit the preparation of financial statements in conformity with GAAP (provided
that monthly financial statements shall not be required to have footnote
disclosure and are subject to normal year-end adjustments). The Company shall
deliver to each of the Stockholders in form and detail reasonably satisfactory
to the Stockholders:
(a) as soon as available, but not later than one hundred twenty (120)
days after the end of each fiscal year, a copy of the audited consolidated
balance sheet of the Company as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such fiscal year, setting forth in each case (other than shareholders'
equity) in comparative form the figures for the previous fiscal year commencing
with fiscal year 2003, and accompanied by the opinion of any
nationally-recognized independent public accounting firm. The independent
auditors shall report on the fair presentation, in all material respects, of the
Company's consolidated financial statements for the fiscal year then ended in
conformity with generally accepted accounting principles. The scope of such
audit shall not be restricted or limited in any material portion by the Company.
The independent auditor shall identify any changes in accounting principles that
have a material effect on comparability with the prior year's consolidated
financial statements;
(b) as soon as available, but not later than sixty (60) days after the
end of each fiscal month of each year, a copy of the unaudited consolidated
balance sheets of the Company and each of its subsidiaries, and the related
consolidated statements of income and cash flows as of the end of such month and
for the portion of the fiscal year then ended, all certified on behalf of
Company by an appropriate authorized person as being complete and correct and
fairly presenting, in accordance with GAAP, the financial position and the
results of operations of the Company and the subsidiaries, subject to normal
year-end adjustments and absence of footnote disclosure; and
(c) concurrently with the delivery of the financial statements
referred to in clause (a) above, to the extent not included in such financial
statements, a copy of the unaudited consolidating balance sheets of the Company
and each of its subsidiaries, and the related consolidating statements of income
and cash flows for such fiscal year, all certified on behalf of Company by an
appropriate authorized person as being complete and correct and fairly
presenting, in accordance with GAAP, the financial position and the results of
operations of the Company and the subsidiaries.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Restrictive Legend. All certificates for shares of Stock
shall bear, in addition to any other legend required by the Certificate of
Incorporation or Bylaws of the Company, the following notice conspicuously
marked on the face or back thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR WITH ANY
SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED
STATES, AND MAY ONLY BE SOLD, RESOLD, PLEDGED, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE LAWS
OF THE STATES, TERRITORIES AND POSSESSIONS OF THE UNITED STATES GOVERNING THE
OFFER AND SALE OF SECURITIES AND ONLY (1) OUTSIDE THE UNITED STATES TO A PERSON
OTHER THAN A U.S. PERSON (AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) IN ACCORDANCE WITH RULES 901 THROUGH 905 AND THE PRELIMINARY
NOTES OF REGULATION S UNDER THE SECURITIES ACT, (2) TO A PERSON WHOM THE HOLDER
OF THE SECURITIES REPRESENTED HEREBY REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3)
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (4)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT. THE
HOLDER, BY ITS ACCEPTANCE OF THIS CERTIFICATE OR THE SECURITIES REPRESENTED
HEREBY, AS THE CASE MAY BE, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE
FOREGOING RESTRICTIONS. HEDGING TRANSACTIONS INVOLVING THE SECURITIES
REPRESENTED HEREIN MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
THE TRANSFER RESTRICTIONS AND OTHER PROVISIONS OF THE SHAREHOLDERS AGREEMENT,
DATED AS OF DECEMBER 1, 2003 (THE "SHAREHOLDERS AGREEMENT"), BY AND AMONG
GSRWB, INC. (THE "COMPANY"), CERTAIN OF THE SERIES A CONVERTIBLE PREFERRED
STOCKHOLDERS OF THE COMPANY, CERTAIN OF THE SERIES B CONVERTIBLE PREFERRED
STOCKHOLDERS OF THE COMPANY, CERTAIN OF THE SERIES C CONVERTIBLE PREFERRED
STOCKHOLDERS OF THE COMPANY AND CERTAIN OF THE COMMON STOCKHOLDERS OF THE
COMPANY AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT AS PROVIDED THEREIN."
Section 8.2 Entire Agreement, Amendment, Captions; Severability. This
Agreement sets forth the entire understanding of the parties, and supersedes all
prior agreements, arrangements and communications, whether oral or written, with
respect to the subject matter hereof. Any amendment, revision or termination of
this Agreement, which would adversely affect the rights of the Stockholders in
any material way, shall require the agreement of the Company and the prior
written consent of a majority of each
of the series of outstanding shares of Stock. Captions appearing in this
Agreement are for convenience only and shall not be deemed to explain, limit or
amplify the provisions hereof. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if the invalid
or unenforceable provision were omitted.
Section 8.3 Enforcement. The parties to this Agreement, in addition to
all other remedies allowed by law for its enforcement, expressly consent to an
order for its specific performance in any court having jurisdiction. All costs
and expenses (including attorneys' fees) incurred by any Stockholder or the
Company in connection with enforcing any provision of this Agreement shall be
reimbursed by the defaulting or violating Stockholder or the Company, as the
case may be.
Section 8.4 Severability. If any provision of this Agreement is held
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity or enforceability of any of the other provisions hereof, all of
which provisions are hereby declared severable.
Section 8.5 Termination. This Agreement shall terminate upon the
earlier to occur of (i) the consent of the Stockholders holding not less than
eighty-five (85%) of the outstanding shares of Stock (on an As-Converted Basis),
and (ii) the closing of an Initial Public Offering, provided, however, that upon
the occurrence of (ii) above, the provisions of Article V shall survive
notwithstanding the termination of this Agreement. Notwithstanding anything
contained herein to the contrary and without affecting any other provision of
this Agreement requiring termination of any rights in favor of any series of
shares of Preferred Stock or Common Stock or any other permitted transferee of
shares of Preferred Stock or Common Stock, this Agreement shall terminate and be
of no further force or effect as to such Stockholder or permitted transferee,
when, pursuant to and in accordance with this Agreement, such Stockholder or
permitted transferee, as the case may be, no longer owns any shares of any
series of Preferred Stock or Common Stock.
Section 8.6 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties to this Agreement in separate
counterparts, each of which counterparts when so executed will be deemed to be
an original and all of which taken together will constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement via telephone facsimile transmission will be effective as delivery of
a manually executed counterpart of this Agreement.
Section 8.7 Remedies. The parties to this Agreement acknowledge and
agree that the covenants of the Company and the Stockholders set forth in this
Agreement may be enforced in equity by a decree requiring specific performance.
Without limiting the foregoing, if any dispute arises concerning the sale or
other disposition of any of the Stockholders subject to this Agreement, the
parties to this Agreement agree that an injunction may be issued restraining the
sale or other disposition of such Preferred Stockholders or rescinding any such
sale or other disposition, pending resolution of such
controversy. Such remedies shall be cumulative and non-exclusive and shall be in
addition to any other rights and remedies the parties may have under this
Agreement.
Section 8.8 Notices. All notices and other communications necessary or
contemplated under this Agreement shall be in writing and shall be delivered in
the manner specified herein or, in the absence of such specification, shall be
deemed to have been duly given (i) upon receipt when delivered by hand, (ii) one
day after sending by overnight delivery service, or (iii) upon receipt of
confirmation of successful transmission when delivered by mean of facsimile, to
the respective addresses of the Stockholders set forth below their signatures
below and to the Company at:
GSRWB, Inc.
00-00 Xxxxx Xxxxxx, Xxxxx X
Xxxx Xxxx, Xxx Xxxx 00000
By notice complying with the foregoing provisions of this Section 8.8, each
party shall have the right to change the mailing address for future notices and
communications to such party.
Section 8.9 Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties thereto and to their
respective transferees, successors, assigns, heirs and administrators; provided,
however, that the rights under this Agreement may not be assigned except as
expressly provided herein. No such assignment shall relieve an assignor of its
obligations hereunder.
Section 8.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
ENFORCED UNDER AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR
RULE THEREOF.
Section 8.11 Recapitalizations, Exchanges, Etc. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to all
series of Preferred Stock and Common Stock, to any and all shares of the Company
or any successor or assign of the Company (whether by merger, consolidation,
sale of assets or otherwise) which may be issued in respect of, in exchange for,
or in substitution of Preferred Stock or Common Stock, by reason of a stock
dividend, stock split, stock issuance, reverse stock split, combination,
recapitalization, reclassification, merger, consolidation or otherwise. Upon the
occurrence of any such events, amounts hereunder shall be appropriately
adjusted.
Section 8.12 Disputes and Waiver of Jury Trial. THE PARTIES HEREBY
AGREE THAT ANY DISPUTE WHICH MAY ARISE BETWEEN THEM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT SHALL BE ADJUDICATED BEFORE A COURT LOCATED IN
NEW YORK CITY AND THEY HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK LOCATED IN NEW YORK, AND OF THE FEDERAL
COURTS IN THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY ACTION OR LEGAL
PROCEEDING COMMENCED BY ANY PARTY, AND IRREVOCABLY WAIVE ANY OBJECTION THEY NOW
OR HEREAFTER MAY HAVE RESPECTING THE VENUE OF ANY SUCH ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT OR RESPECTING THE FACT THAT SUCH COURT IS AN
INCONVENIENT FORUM, RELATING TO OR ARISING OUT OF THIS AGREEMENT, AND CONSENT TO
THE SERVICE OF PROCESS IN ANY SUCH ACTION OR LEGAL PROCEEDING BY MEANS OF
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, IN CARE OF THE ADDRESS
SET FORTH BELOW OR SUCH OTHER ADDRESS AS THE UNDERSIGNED SHALL FURNISH IN
WRITING TO THE COMPANY. THE PARTIES HERETO EACH HEREBY IRREVOCABLY WAIVE ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
Section 8.13 Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against either party. Except
as otherwise expressly provided in this Agreement, the following rules of
interpretation apply to this Agreement: (a) nouns, pronouns and verbs shall be
construed as masculine, feminine, neuter, singular or plural, whichever shall
be; applicable; (b) "or" and "either" are not exclusive and "include" and
"including" are not limiting; (c) a reference to any agreement or other contract
includes permitted supplements and amendments; (d) a reference to a law includes
any amendment or modification to such law and any rules or regulations issued
thereunder; (e) a reference to generally accepted accounting principles refers
to United States generally accepted accounting principles; (f) a reference in
this Agreement to a Section, shall refer to the corresponding provision of this
Agreement; and (g) capitalized terms used and not defined in the Schedules
attached to this Agreement shall have the meanings set forth in this Agreement.
The parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
Section 8.14 No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or this Agreement, or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of the provisions of this Agreement.
Section 8.15 Terminating Effect. Upon execution and delivery of this
Agreement by of the parties hereto, the Shareholder Agreements, dated December
17, 1997 and July 1, 2002 (the "RWBS Shareholder Agreements"), respectively,
among the RWBS Holders shall be deemed to be terminated, it being understood
that the termination of the RWBS Shareholder Agreements shall not be deemed to
terminate the (i) License Agreement, dated as of September 1, 2002, by and
between Terra Limited and The Roaring Water Bay Spirits Company Limited; (ii)
Bottling and Services Agreement,
dated as of September 1, 2002, by and between Terra Limited and The Roaring
Water Bay Spirits Company Limited; (iii) Supply Agreement, dated as of January
19, 1998, by and between Carbery Milk Products Limited and The Roaring Water Bay
Spirits Company Limited; and (iv) Distribution Agreement, by and between Xxxxxx
Wholesale Limited and The Roaring Water Bay Spirits Company Limited.
IN WITNESS WHEREOF, each of the parties hereto have executed this Shareholders
Agreement as of the date first above written.
GSRWB, Inc.
By: /s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
Title: Chairman of the Board and President
Conformed Signature Pages and Schedules A, B, C, and D are available upon
request from GSRWB, Inc.
