Exhibit 7
AMENDED AND RESTATED
INVESTORS' AGREEMENT
dated
as of
March 29, 1999
among
XXXXXX SCIENTIFIC INTERNATIONAL, INC.,
XXXXXX X. XXX EQUITY FUND III, L.P.,
THL-CCI LIMITED PARTNERSHIP,
THL FOREIGN FUND III, L.P.,
THL FSI EQUITY INVESTORS, L.P.,
DLJ MERCHANT BANKING PARTNERS II, L.P.,
DLJ MERCHANT BANKING PARTNERS II - A, L.P.,
DLJ OFFSHORE PARTNERS II, X.X.,
XXX XXXXXXXXXXX XXXXXXXX, X.X.,
XXX DIVERSIFIED PARTNERS - A, L.P.,
DLJ MILLENNIUM PARTNERS, L.P.
DLJ MILLENNIUM PARTNERS - A, L.P.,
DLJMB FUNDING II, INC.,
UK INVESTMENT PLAN 1997 PARTNERS,
DLJ EAB PARTNERS, X.X.,
XXX XXX XX, X.X.,
XXX FIRST ESC, L.P.,
CHASE EQUITY ASSOCIATES, L.P.,
XXXXXXX XXXXX KECALP L.P. 1997,
KECALP INC.,
ML IBK POSITIONS, INC.
AND
CERTAIN OTHER PERSONS NAMED HEREIN
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS.........................................................2
Section 1.1 Definitions............................................2
ARTICLE II
CORPORATE GOVERNANCE AND MANAGEMENT................................13
Section 2.1 Composition of the Board..............................13
Section 2.2 Removal...............................................13
Section 2.3 Vacancies.............................................14
Section 2.4 Action by the Board...................................14
Section 2.5 Conflicting Charter or Bylaw
Provision...............................15
ARTICLE III
RESTRICTIONS ON TRANSFER...........................................15
Section 3.1 General...............................................15
Section 3.2 Legends...............................................16
Section 3.3 Permitted Transferees; Transfers by
THL Entities............................16
Section 3.4 Restrictions on Transfers by
Institutional Shareholders. ...........17
Section 3.5 Restrictions on Transfers by
Management Shareholders.................18
Section 3.6 Company Right of First Refusal........................19
Section 3.7 Notifications Regarding Transfers.....................20
ARTICLE IV
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS; PREEMPTIVE RIGHTS......................20
Section 4.1 Rights to Participate in Transfer.....................20
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Page
----
Section 4.2 Right to Compel Participation in
Certain Transfers.......................23
Section 4.3 Preemptive Rights.....................................26
Section 4.4. Certain Other Purchases of Equity
Securities..............................29
ARTICLE V
REGISTRATION RIGHTS................................................30
Section 5.1 Demand Registration...................................30
Section 5.2 Piggyback Registration................................34
Section 5.3 Holdback Agreements...................................35
Section 5.4 Registration Procedures...............................36
Section 5.5 Indemnification by the Company........................40
Section 5.6 Indemnification by Participating
Shareholders............................41
Section 5.7 Conduct of Indemnification
Proceedings.............................43
Section 5.8 Contribution..........................................44
Section 5.9 Participation in Public Offering......................46
Section 5.10 Cooperation by the Company............................46
Section 5.11 No Transfer of Registration Rights....................46
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS...................................46
Section 6.1 Confidentiality.......................................46
Section 6.2 Reports...............................................48
Section 6.3 Limitations on Subsequent
Registration............................48
Section 6.4 Limitation on Purchase of Equity
Securities..............................49
ARTICLE VII
MISCELLANEOUS......................................................51
Section 7.1 Entire Agreement......................................51
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Section 7.2 Binding Effect; Benefit...............................51
Section 7.3 Assignability.........................................51
Section 7.4 Amendment; Waiver; Termination........................51
Section 7.5 Notices...............................................52
Section 7.6 Headings..............................................55
Section 7.7 Counterparts..........................................55
Section 7.8 Applicable Law........................................55
Section 7.9 Specific Performance..................................55
Section 7.10 Consent to Jurisdiction; Expenses.....................55
Section 7.11 Representative........................................56
Section 7.12 Severability..........................................59
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AMENDED AND RESTATED
INVESTORS' AGREEMENT
AMENDED AND RESTATED AGREEMENT (this "Agreement") dated as of March 29,
1999 among (i) Xxxxxx Scientific International, Inc. (the "Company"), (ii)
Xxxxxx X. Xxx Equity Fund III, L.P. ("THL"), certain individuals associated
with THL listed on Schedule I attached hereto, THL-CCI Limited Partnership
("THL-CCI"), THL Foreign Fund III, L.P. and THL FSI Equity Investors, L.P.
("THL/FSI" and collectively with THL, the individuals listed on Schedule I,
THL-CCI, and THL Foreign Fund III, L.P., the "THL Entities"), (iii) DLJ
Merchant Banking Partners II, L.P. ("DLJMB"), DLJ Offshore Partners II, C.V.,
DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., DLJ Merchant Banking
Partners II - A, L.P., DLJ Diversified Partners - A, L.P., DLJ Millennium
Partners, L.P., DLJ Millennium Partners - A, L.P., UK Investment Plan 1997
Partners, DLJ EAB Partners, L.P., DLJ ESC II, L.P., and DLJ First ESC, L.P.
(collectively the "DLJ Entities"), (iv) Chase Equity Associates, L.P. ("Chase
Equity"), (v) Xxxxxxx Xxxxx KECALP L.P. 1997, KECALP INC., and ML IBK
Positions, Inc., (collectively, the "Xxxxxxx Xxxxx Entities" and, together with
each other entity listed in clauses (iii) and (iv), the "Institutional
Shareholders" and, collectively with (ii), the "Equity Investors") and (vi)
certain other Persons listed on the signature pages hereof (including the trust
pursuant to the Trust Agreement, dated of even date herewith, between the
Company and Mellon Bank, N.A., as trustee (the "Rabbi Trust")) (the "Management
Sharehold ers" and individually, along with the THL Entities, DLJ Entities,
Chase Equity, and Xxxxxxx Xxxxx Entities, each a "Shareholder") and such other
parties who may become parties of this Agreement pursuant to the terms hereof.
W I T N E S S E T H :
WHEREAS, the parties hereto entered into an investors' agreement, dated as
of January 21, 1998 (the "Original Agreement"), to govern certain of their
rights, duties and obligations after consummation of the Merger (as defined
below); and
WHEREAS, the parties hereto desire to amend and restate the Original
Agreement in its entirety as set forth below; and
WHEREAS, pursuant to the Subscription Agreement (as defined below) the
Equity Investors acquired securities of FSI Merger Corp. ("FSI"); and
WHEREAS, pursuant to the terms of the Merger Agreement (as defined below),
FSI was merged with and into the Company, with the Company as the surviving
corporation (the "Merger"); and
WHEREAS, pursuant to the Merger, the stock of FSI held by the Equity
Investors was converted into stock of the Company; and
WHEREAS, pursuant to the Merger, the Management Shareholders retained
shares of stock of the Company; and
WHEREAS, upon the Merger and pursuant to the Equity Investors' commitment
to purchase cumulative preferred stock of the Company, warrants to purchase
common stock of the Company were issued to the Equity Investors; and
WHEREAS, pursuant to the Rabbi Trust and any stock or option plan,
Management Shareholders hold shares of stock of the Company; and
WHEREAS, the parties hereto may obtain additional shares of stock of the
Company in the future;
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. (a) The following terms, as used herein,
have the following meanings:
"Adverse Person" means any Person whom the Board reasonably determines is
a competitor or a potential competitor of the Company or its Subsidiar ies.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person, provided that no securityholder of the Company shall be deemed an
Affiliate of any other securityholder solely by reason of any investment in the
Company. For the purpose of this definition, the term "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as used with
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respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"Applicable Law," with respect to any Person, means all provisions of all
laws, statutes, ordinances, rules, regulations, permits, certificates or orders
of any Governmental Authority applicable to such Person or any of its assets or
property or to which such Person or any of its assets or property is subject,
and all judgments, injunctions, orders and decrees of all courts and
arbitrators in proceedings or actions in which such Person is a party or by
which it or any of its assets of properties is or may be bound or subject.
"beneficially own" shall have the meaning set forth in Rule 13d-3 of the
Exchange Act.
"Board" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"Closing Date" means January 21, 1998.
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company, non-voting common stock, par value $.01 per share, of the Company
and any stock into which such common stock and non-voting common stock may
thereafter be converted or changed.
"Demand Registration" means collectively, a THL Demand Registration, an
Institutional Shareholder Demand Registration, or a Management Shareholder
Demand Registration.
"Derivatives" shall mean options, warrants (including the Equity Warrants)
or other rights to acquire any Equity Securities of the Company.
"Equity Investors" means the Institutional Shareholders and the THL
Entities.
"Equity Securities" means the Common Stock and preferred stock, securities
convertible into or exchangeable for Common Stock or preferred stock,
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Derivatives, and any other equity security issued by the Company. In connection
with any reference to a class of Equity Securities which does not specify
whether such class is voting or non-voting, voting Common Stock and non-voting
Common Stock shall be treated as the same class of Equity Securities to the
extent that such voting and non-voting Common Stock have identical terms other
than with respect to voting rights.
"Equity Warrants" means warrants to purchase Common Stock pursuant to the
Equity Warrant Acquisition Agreement.
"Equity Warrant Acquisition Agreement" means the Common Stock Warrant
Acquisition Agreement, of even date herewith, among the Company, the
Institutional Shareholders and the THL Entities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Federal Reserve Board" means The Board of Governors of the United States
Federal Reserve System.
"Fully Diluted" means, with respect to any class of Equity Securities, all
outstanding shares of such class and all shares issuable in respect of
securities convertible into or exchangeable for such class, stock appreciation
rights or options, warrants and other irrevocable rights to purchase or
subscribe for such class or securities convertible into or exchangeable for
such class; provided, that no Person shall be deemed to own such number of
Fully Diluted shares of such class as such Person has the right to acquire from
any Person other than the Company.
"Initial Ownership" means, with respect to any class of Equity Securi-
ties, the number of shares of such class of Equity Securities beneficially
owned and (without duplication) which such Persons had the right to acquire
from any Person as of January 21, 1998, or in the case of any Person that shall
become a party to this Agreement on a later date, as of such date, taking into
account any stock split, stock dividend, reverse stock split or similar event.
"Initial Public Offering" means the first sale after January 21, 1998 of
Common Stock pursuant to an effective registration statement under the
Securities Act (other than a registration statement on Form S-8 or any
successor form).
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"Merger Agreement" means the Second Amended and Restated Agreement and
Plan of Merger, as amended, dated as of November 14, 1997, by and between the
Company and FSI.
"New Common Securities" means the Common Stock, whether now authorized or
not, any rights, options or warrants to purchase Common Stock and any
indebtedness or stock of the Company which is convertible into Common Stock (or
which is convertible into a security which is, in turn, convertible into Common
Stock) issued after January 21, 1998; provided, that the term "New Common
Securities" does not include (i) such Equity Securities issued as a stock
dividend to all holders of Common Stock pro rata or upon any subdivision or
combination of shares of Common Stock; (ii) shares of Common Stock issued upon
exercise of Derivatives outstanding on January 21, 1998; (iii) shares of Common
Stock issued to Xxxxxxx X. Xxxxxxx (or entities designated by Xx. Xxxxxxx who
become upon such issuance a party to this Agreement in accordance with Section
7.3(a) and (b)) in exchange for up to $7,500,000 in cash; and (iv) Equity
Securities issued in connection with a THL Exchange.
"New Preferred Securities" means any preferred stock, whether now
authorized or not, any rights, options or warrants to purchase preferred stock
and any indebtedness or stock of the Company which is convertible into
preferred stock (or which is convertible into a security which is, in turn,
convertible into preferred stock) issued after January 21, 1998; provided, that
the term "New Preferred Securities" does not include such Equity Securities
issued as a stock dividend to all holders of preferred stock pro rata or upon
any subdivision or combination of shares of preferred stock and (ii) shares of
preferred stock issued upon exercise of Derivatives outstanding on January 21,
1998.
"Non-THL Shareholders" means all Shareholders other than the THL Entities.
"Percentage Ownership" means, with respect to any Shareholder at any time,
(i) the number of Fully Diluted shares of Common Stock that such Shareholder
beneficially owns (and, without duplication, has the right to acquire from any
Person) at such time, divided by (ii) the total number of Fully Diluted shares
of Common Stock at such time.
"Permitted Transferee" means (i) in the case of Institutional Share
holders (A) the Company, (B) any THL Entity, (C) any general or limited partner
or
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shareholder of such Shareholder, and any corporation, partnership or other
entity that is an Affiliate of such Shareholder (collectively, "Shareholder
Affiliates"), (D) any general partner, limited partner, employee, officer or
director of such Shareholder or a Shareholder Affiliate, or any spouse, lineal
descendant (whether natural or adopted), sibling, parent, heir, executor,
administrator, testamentary trustee, lifetime trustee, legatee or beneficiary
of any of the foregoing persons described in this clause (d) (collectively,
"Shareholder Associates"), and (E) any trust, the beneficiaries of which, or
any corporation, limited liability company or partnership, stockholders,
members or general or limited partners of which include only such Shareholder,
such Shareholder Affiliates or Shareholder Associates; provided, however, that
in order for any of the parties identified in clauses (C), (D) or (E) to be a
Permitted Transferee in connection with a Transfer (or series of related
Transfers) in excess of 2.5% of such Institutional Shareholder's Initial
Ownership of the class of Equity Securities to be transferred, such party must
be acceptable to THL, which acceptance may not be unreasonably withheld and
which acceptance shall not be required for the Transfer by KECALP Inc. of all
of its Equity Securities to Xxxxxxx Xxxxx KECALP International L.P. 1997, a
Cayman Islands limited partnership; provided, further, however, that the
foregoing proviso shall not be applicable if the number of Shares of a class of
Equity Securities to be Transferred by an Institutional Shareholder pursuant to
clause (C), (D) or (E), together with all other Transfers of such class of
Equity Securities by such Institutional Shareholder and its Permitted
Transferees pursuant to any of such clauses, is less than (I) the aggregate
number of Shares of such class of Equity Securities Transferred by the THL
Entities and their THL Designated Transferees in accordance with clause (A) or
(B) of the definition of "THL Designated Transferees" multiplied by (II) such
Institutional Shareholders' Initial Proportionate Equity Interest of such
class, treating for purposes of this proviso the Equity Warrants as part of the
class of Common Stock, or
(ii) in the case of a Management Shareholder (A) the Company, (B) any THL
Entity, (C) a spouse or lineal descendant (whether natural or adopted),
sibling, parent, heir, executor, administrator, testamentary trustee, lifetime
trustee, legatee or beneficiary of any of such Management Shareholder, (D) any
trust, the beneficiaries of which, or any corporation, limited liability
company or partnership, stockholders, members or general or limited partners of
which include only the Persons named in clause (B) or (C), (E) bona fide
financial institutions, to the extent that such transfer is in connection with
a pledge in connection with a borrowing arrangement unrelated to a constructive
or synthetic sale, such as any hedge, sale or purchase of any derivative
security or other action (other than Transfers expressly permitted by the terms
hereof) having the effect of reducing a Management Share-
6
holder's economic interest in Equity Securities or reducing a Management Share-
holder's exposure to a decrease in fair market value of Equity Securities, or
other similar transaction involving such Management Shareholder's Equity
Securities, or (F) a charitable institution as defined in Section 501(c) of the
Internal Revenue Code of 1986, as amended, which receives a bona fide gift of
Shares, which when aggregated with all other Transfers of Shares of such class
of Equity Securities by such Management Shareholder and its Permitted
Transferees pursuant to this clause (F) does not exceed 10% of such Management
Shareholders' Initial Ownership of such class of Equity Securities.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Primary Executives" means the following Management Shareholders: Xxxx X.
Xxxxxxxx and Xxxx X. Xxxxxxx.
"Public Offering" means any primary or secondary public offering of shares
of Common Stock pursuant to an effective registration statement under the
Securities Act other than pursuant to a registration statement filed in
connection with a transaction of the type described in Rule 145 of the
Securities Act or for the purpose of issuing securities pursuant to an employee
benefit plan.
"Qualifying Public Offering" means a Public Offering yielding aggregate
gross proceeds of at least $50,000,000.
"Registrable Securities" means at any time, with respect to any
Shareholder or its Permitted Transferees, any shares of Common Stock then owned
by such Shareholder or its Permitted Transferees until (i) a registration
statement covering such securities has been declared effective by the SEC and
such securities have been disposed of pursuant to such effective registration
statement, (ii) such securities are sold under circumstances in which all of
the applicable conditions of Rule 144 (or any similar provisions then in force)
under the Securities Act are met or (iii) such securities are otherwise
Transferred, the Company has delivered a new certificate or other evidence of
ownership for such securities not bearing the legend required pursuant to this
Agreement and such securities may be resold without subsequent registration
under the Securities Act.
7
"Registration Expenses" means (i) all registration and filing fees, (ii)
fees and expenses of compliance with securities or blue sky laws (including
reason able fees and disbursements of counsel in connection with blue sky
qualifications of the securities registered), (iii) printing expenses, (iv)
internal expenses of the Company (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), (v) reasonable fees and disbursements of counsel for the Company and
customary fees and expenses for independent certified public accountants
retained by the Company (including expenses relating to any comfort letters or
costs associated with the delivery by independent certified public accountants
of a comfort letter or comfort letters requested pursuant to Section 5.4(h)
hereof), (vi) the reasonable fees and expenses of any special experts retained
by the Company in connection with such registration, (vii) reasonable fees and
expenses of up to one counsel for the Shareholders participating in the
offering, (viii) fees and expenses in connection with any review of
underwriting arrangements by the National Association of Securities Dealers,
Inc. (the "NASD") including fees and expenses of any "qualified independent
underwriter" and (ix) fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but shall not include any underwriting
fees, discounts, commissions or transfer taxes attributable to the sale of
Registrable Securities, or any out-of-pocket expenses (except as set forth in
clause (vii) above) of the Shareholders or any fees and expenses of
underwriter's counsel.
"Regulated Stockholder" shall mean Chase Equity Associates, L.P. and any
other Stockholder (i) that is subject to the provisions of Regulation Y or
Regulation K of the Federal Reserve Board, 12 C.F.R. Part 225 (or any
successor to such Regulations) and (ii) that holds Equity Securities of the
Company and (iii) that has provided written notice to the Company of its status
as a "Regulated Stockholder" hereunder.
"Regulatory Problem" means any set of facts or circumstance wherein it has
been asserted by any governmental regulatory agency (or a Regulated Stock-
holder reasonably believes that there is a risk of such assertion) that such
Regulated Stockholder is not entitled to acquire, own, hold or control, or
exercise any significant right (including the right to vote) with respect to,
any Equity Securities of the Company or any subsidiary of the Company.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
8
"Shareholder" means each Person (other than the Company but including the
Equity Investors and the Management Shareholders) who is or shall become a
party to this Agreement, whether in connection with the execution and delivery
of the Original Agreement or this Agreement, pursuant to Section 7.3 or
otherwise, so long as such Person shall beneficially own any Equity Securities.
"Shares" means shares of Common Stock and other Equity Securities held by
the Shareholders on January 21, 1998 or acquired thereafter, but excluding any
Derivatives.
"Subscription Agreement" means each Subscription Agreement dated as of
January 21, 1998 between FSI and each of the Equity Investors.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"THL Designated Transferee" means (A) any general or limited partner of
the THL Entities (a "THL Partner"), and any corporation, partnership, or other
entity which is an Affiliate of the THL Entities or any THL Partner
(collectively, the "THL Affiliates"), (B) any managing director, general
partner, director, limited partner, officer or employee of the THL Entities or
a THL Affiliate, or the heirs, executors, administrators, testamentary
trustees, lifetime trustees, legatees or beneficiaries of any of the foregoing
Persons referred to in this clause (B) (collectively, "THL Associates"), (C) a
charitable institution as defined in Section 501(c) of the Internal Revenue
Code of 1986, as amended, which receives a bona fide gift by a THL Individual
of Shares (D) a bank, financial institution or other lender which receives a
bona fide pledge by a THL Individual of Shares, and (E) any trust, the
beneficiaries of which, or any corporation, limited liability company or
partnership, the stockholders, members or general or limited partners of which
include only the THL Entities, THL Affiliates, THL Associates, their spouses or
their lineal descen dants. The term "THL Entities," to the extent the THL
Entities shall have Transferred any of its Shares to "THL Designated
Transferees," shall mean the THL Entities and the THL Designated Transferees of
the THL Entities, taken together, and any right or action that may be exercised
or taken at the election of the THL Entities may be exercised or taken at the
election of the THL Entities and such THL Designated Transferees, unless
otherwise restricted by the THL Entity engaging in such a transfer.
9
"THL Individuals" means the Persons listed on Schedule I and Schedule II.
"Underwritten Public Offering" means a firmly underwritten public offering
of Registrable Securities of the Company pursuant to an effective registration
statement under the Securities Act.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Cause 2.2
Confidential Information 6.1(b)
DLJ Entities Representative 7.11(b)
Drag-Along Notice 4.2(b)
Drag-Along Notice Period 4.2(b)
Drag-Along Portion 4.2(a)
Drag-Along Rights 4.2(a)
Drag-Along Sale 4.2(a)
Drag-Along Sale Price(s) 4.2(b)
ethical wall 6.1(a)
Holders 5.1(b)
Indemnified Party 5.7
Indemnifying Party 5.7
Initial Proportionate
Equity Interest 3.4
Inspectors 5.4(g)
Institutional Shareholder
Demand Registration 5.1(g)
Management Representative 7.11(d)
Management Transfer 3.5(a)
Maximum Offering Size 5.1(e)
Xxxxxxx Xxxxx Entities
Representative 7.11(c)
New Securities 4.3(a)
Nominee 2.3(a)
Offer Price 3.6(a)
Offered Shares 3.6(a)
10
Offeror 3.6(a)
Option Period 3.6(a)
Piggyback Registration 5.2(a)
Preemptive Rights Notice 4.3(a)
Preemptive Rights Portion 4.3(a)
Primary Executive Demand
Registration 5.1(h)
Records 5.4(g)
Representatives 6.1(b)
Shareholder 7.3(a)
Tag-Along Notice 4.1(b)
Tag-Along Notice Period 4.1(b)
Tag-Along Offer 4.1(b)
Tag-Along Person 4.1(a)
Tag-Along Portion 4.1(b)
Tag-Along Response Notice 4.1(b)
Tag-Along Right 4.1(b)
Tag-Along Sale 4.1(a)
Tag-Along Shareholder 4.1(a)
Third Party Purchase Notice 4.4
Third Party Purchase Portion 4.4
THL Demand Registration 5.1(a)
THL Entities Representative 7.11(a)
THL Entity Shareholder 7.3(d)
THL Exchange 3.3
Threshold Percentage 4.1(a)
Transfer 3.1(a)
Transfer Notice 3.6(a)
Trigger Date 6.4
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ARTICLE II
CORPORATE GOVERNANCE AND MANAGEMENT
Section 2.1 Composition of the Board. The Board shall consist of at least
nine, but no more than ten, members (two of which shall be individuals which
are not "Affiliates" or "Associates" (as those terms are used within the
meaning of Rule 12b-2 of the General Rules and Regulations under the Exchange
Act) of any Shareholder or its Affiliates), of whom four shall be nominated by
THL, one shall be nominated by DLJMB, one shall be Xxxx X. Xxxxxxxx and one
shall be Xxxx X. Xxxxxxx. Each Shareholder entitled to vote for the election of
directors to the Board agrees that it will vote its shares of Common Stock or
execute consents, as the case may be, and take all other necessary action
(including causing the Company to call a special meeting of shareholders) in
order to ensure that the composition of the Board is as set forth in this
Section 2.1; provided that, no Shareholder shall be required to vote for
another Shareholder's nominee or Xx. Xxxxxxxx or Xx. Xxxxxxx if the number of
shares of Common Stock held by (i) Xx. Xxxxxxxx and Xx. Xxxxxxx collectively,
or (ii) such other Shareholder making the nomination collectively with its
Affiliates, as applicable, is, at the close of business on the day preceding
such vote or execution of consents, less than 10% of such party's or parties'
Initial Ownership of shares of Common Stock on a Fully Diluted basis; and,
provided further, that for so long as Messrs. Xxxxxxxx and Xxxxxxx collectively
own 10% or more of their collective Initial Ownership of shares of Common Stock
on a Fully Diluted basis, designees nominated by THL and the Equity Investors
shall be selected in good faith after consultation with Messrs. Xxxxxxxx and
Xxxxxxx, which consultation shall involve a consideration of Messrs. Xxxxxxxx
and Xxxxxxx'x views relating to the Company. The initial Board after the
execution of this Agreement shall consist of the individuals listed on Schedule
III hereto.
Section 2.2 Removal. Each Shareholder agrees that if, at any time, it is
then entitled to vote for the removal of directors of the Company, it will not
vote any of its shares of Common Stock in favor of the removal of any director
who shall have been designated or nominated pursuant to Section 2.1 unless such
removal shall be for Cause or such director or the Person(s) entitled to
designate or nominate such director shall have consented to such removal in
writing, provided that if the Persons entitled to designate or nominate any
director pursuant to Section 2.1 shall request the removal, with or without
Cause, of such director in writing, such Shareholder shall vote its shares of
Common Stock in favor of such removal. Removal for "Cause" shall mean removal
of a director because of such director's (a) willful and continued
12
failure substantially to perform his duties with the Company in his established
position, (b) willful conduct which is injurious to the Company or any of its
Subsidiaries, monetarily or otherwise, or (c) conviction for, or guilty plea
to, a felony or a crime involving moral turpitude.
Section 2.3 Vacancies. If, as a result of death, disability, retirement,
resignation, removal (with or without Cause) or otherwise, there shall exist or
occur any vacancy on the Board:
(a) the Shareholder(s) entitled under Section 2.1 to nominate such
director whose death, disability, retirement, resignation or removal
resulted in such vacancy, may, subject to the provisions of Section 2.1,
nominate another individual (the "Nominee") to fill such vacancy and serve
as a director of the Company;
(b) subject to Section 2.1, each Shareholder then entitled to vote
for the election of the Nominee as a director of the Company agrees that
it will vote its shares of Common Stock, or execute a written consent, as
the case may be, in order to ensure that the Nominee be elected to the
Board; and
(c) in the case of removal of either of the Primary Executives from
the Board, the other Primary Executive, if he is still a member of the
Board, shall be entitled to nominate an individual to fill the resulting
vacancy, and the provisions of Section 2.3(b) shall apply to the election
of such nominee.
Section 2.4 Action by the Board. (a) A quorum of the Board shall consist
initially of three directors; provided that THL shall have the right, subject
to applicable law or regulation, in its sole discretion, until such time as THL
owns less than 25% of its Initial Ownership of shares of Common Stock, to
increase or decrease the number of directors necessary to constitute a quorum.
(b) All actions of the Board shall require the affirmative vote of at
least a majority of the directors at a duly convened meeting of the Board at
which a quorum is present or the unanimous written consent of the Board;
provided that, in the event there is a vacancy on the Board and an individual
has been nominated to fill such vacancy, the first order of business shall be
to fill such vacancy.
Section 2.5 Conflicting Charter or Bylaw Provision. Each Share holder
shall vote its shares of Common Stock, and shall take all other actions reason-
13
ably necessary, to ensure that the Company's certificate of incorporation and
bylaws (copies of which are attached hereto as Exhibits A and B) facilitate and
do not at any time conflict with any provision of this Agreement.
ARTICLE III
RESTRICTIONS ON TRANSFER
Section 3.1 General. (a) Each Equity Investor understands and agrees that
the shares of Common Stock purchased pursuant to the Subscription Agreement and
the Equity Warrants received pursuant to the Equity Warrant Acquisition Agree-
ment have not been registered under the Securities Act and are restricted
securities. Each Shareholder agrees that it will not, directly or indirectly,
sell, assign, transfer, grant a participation in, pledge or otherwise dispose
of ("Transfer") any Shares or Equity Warrants (or solicit any offers to buy or
otherwise acquire, or take a pledge of any Shares or Equity Warrants) except in
compliance with the Securities Act and the terms and conditions of this
Agreement.
(b) Any attempt by any Shareholder to Transfer any Shares or Equity
Warrants not in compliance with this Agreement shall be null and void and the
Company shall not, and shall cause any transfer agent not to, give any effect
in the Company's stock records to such attempted Transfer.
(c) Notwithstanding anything herein to the contrary, except as may be
otherwise set forth in the applicable instrument, Derivatives (other than the
Equity Warrants) shall be transferable only by will, law of descent or
distribution or pursuant to Section 4.2 hereof.
Section 3.2 Legends. (a) In addition to any other legend that may be
required, each certificate for Shares that is issued to any Shareholder shall
bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT
IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL LIMITA-
TIONS OR RESTRICTIONS ON TRANSFER AS SET FORTH IN THE INVESTORS' AGREEMENT
DATED AS OF JANUARY 21, 1998, COPIES OF WHICH
14
MAY BE OBTAINED UPON REQUEST FROM XXXXXX SCIENTIFIC INTERNATIONAL INC. OR ANY
SUCCESSOR THERETO."
(b) If any Shares shall cease to be Registrable Securities under clause
(i) or clause (ii) of the definition thereof, the Company shall, upon the
written request of the holder thereof, issue to such holder a new certificate
evidencing such Shares without the first sentence of the legend required by
Section 3.2(a) endorsed thereon. If any Shares cease to be subject to any and
all limitations or restrictions on Transfer set forth in this Agreement, the
Company shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such Shares without the second sentence of
the legend required by Section 3.2(a) endorsed thereon.
Section 3.3 Permitted Transferees; Transfers by THL Entities; Exchanges by
THL Entities. Notwithstanding anything in this Agreement to the contrary, (a)
any Non-THL Shareholder may at any time Transfer any or all of its Shares or
Equity Warrants to one or more of its Permitted Transferees so long as (i) such
Permitted Transferee shall have agreed in writing to be bound by the terms of
this Agreement pursuant to Section 7.3 and (ii) the Transfer to such Permitted
Transferee is not in violation of applicable federal or state securities laws
and (b) any THL Entity may at any time Transfer any or all of its Shares or
Equity Warrants to any third party (including THL Designated Transferees) so
long as (i) the Transfer is in compliance with Section 4.1 hereof, (ii) if the
transferee is to be treated as a THL Designated Transferee, such transferee
shall have agreed in writing to be bound by the terms of this Agreement
pursuant to Section 7.3 and (iii) the Transfer is not in violation of
applicable federal or state securities laws. Any THL Entity may at any time
exchange (a "THL Exchange") with the Company any or all of its voting Equity
Securities on a share-for-share basis for shares of an equivalent class of
non-voting Equity Securities of the Company, which non-voting Equity Securities
shall have substantially the rights, preferences and limitations as set forth
in the form of certificate of designation attached hereto as Exhibit C. The
Company agrees to take all such actions, subject to Applicable Law, as are
reasonably requested by any THL Entity to effectuate a THL Exchange.
Section 3.4 Restrictions on Transfers by Institutional Shareholders.
Except as provided in Section 3.3, each Institutional Shareholder and each
Permitted Transferee of such Institutional Shareholder may Transfer its Shares
and Equity Warrants only as follows:
15
(i) in a Transfer made in compliance with Section 4.1 or 4.2;
(ii) in a Public Offering in connection with the exercise of its
rights under Article 5 hereof;
(iii) following the earlier to occur of (A) the date on which the
Percentage Ownership of such Institutional Shareholder and its Permitted
Transferees is less than 25% of its Initial Ownership of shares of Common
Stock and (B) the seventh anniversary of the Closing Date, to any Person
other than any Adverse Person; or
(iv) in a Transfer made after an Initial Public Offering in
compliance with Rule 144 under the Securities Act; provided, however,
notwithstanding the foregoing, the Institutional Shareholder may not
Transfer an aggregate number of Shares of such class of Equity Securities
that, together with all prior Transfers of such class by such
Institutional Shareholder and its Permitted Transferees pursuant to one or
more Rule 144 Transfers, represents more than (A) the aggregate number of
Shares of such class Transferred by the THL Entities and their THL
Designated Transferees (other than, in either case, to THL Designated
Transferees) multiplied by (B) such Institutional Shareholders' Initial
Proportionate Equity Interest of such class; provided, further, that, for
purposes of this subsection (iv), the Equity Warrants shall be treated as
part of the class of shares of Common Stock and the calculations described
herein shall include the number of shares of Common Stock issuable upon
exercise of such Equity Warrants. The "Initial Proportionate Equity
Interest" of a party is such party's Initial Ownership of such class
divided by the Initial Ownership of THL of such class.
Section 3.5 Restrictions on Transfers by Management Shareholders. (a)
Except as provided in Section 3.3, each Management Shareholder and each
Permitted Transferee of such Management Shareholder may Transfer its Shares
only as follows or as set forth in Section 3.5(b):
(i) in a Transfer made in compliance with Section 4.1 or 4.2;
(ii) in a Public Offering in connection with the exercise of its
rights under Article 5 hereof;
16
(iii) in a Transfer made after an Initial Public Offering in
compliance with Rule 144 under the Securities Act; provided, however,
notwithstanding the foregoing, the Management Shareholder may not Transfer
an aggregate number of Shares of any class of Equity Securities that,
together with all prior Transfers of such class by such Management
Shareholder and its Permitted Transferees pursuant to one or more Rule 144
Transfers, represents more than (A) the aggregate number of Shares of such
class Transferred by the THL Entities and their THL Designated Transferees
(other than, in either case, to THL Designated Transferees) multiplied by
(B) such Management Shareholders' Initial Proportionate Equity Interest
of such class;
(iv) following the tenth anniversary of the Closing Date to any Third
Party other than an Adverse Person; or
(v) subject to Section 3.6, a Transfer by a Management Shareholder
to another Management Shareholder (a "Management Transfer").
(b) Each Management Shareholder and each Permitted Transferee of such
Management Shareholder may Transfer its Shares to any Person other than an
Adverse Person upon the occurrence of a Qualifying Public Offering.
Section 3.6 Company Right of First Refusal. (a) If a Management
Shareholder (an "Offeror") desires to Transfer Shares to another Management
Shareholder pursuant to the provisions of Section 3.5(a)(v):
(i) such Offeror shall give notice of such offer (the "Transfer
Notice") to the Company. The Transfer Notice shall state the terms and
conditions of such offer, including the name of the prospective purchaser,
the proposed purchase price per share of such Shares (the "Offer Price"),
payment terms (including a description of any proposed non-cash
consideration), the type of disposition and the number of such Shares to
be transferred ("Offered Shares"). The Transfer Notice shall further state
that the Company may acquire, in accordance with the provisions of this
Agreement, any of the Offered Shares for the price and upon the other
terms and conditions, including deferred payment (if applicable), set
forth therein.
(ii) For a period of ten Business Days after receipt of the Transfer
Notice (the "Option Period"), the Company may, by notice in writing to the
Offeror delivering such Transfer Notice, elect in writing to purchase all,
but
17
not less than all, of the Offered Shares at the Offer Price. The closing
of the purchase of Shares pursuant to Section 3.5, shall take place at the
principal office of the Company on the tenth day after the expiration of
the Option Period. At such Closing, the Company shall deliver to the
Offeror, against delivery of certificates duly endorsed and stock powers
representing the Shares being acquired by the Company, the Offer Price, on
the same terms as set forth in the Transfer Notice (including any non-cash
consideration described therein), payable in respect of the Shares being
purchased by the Company. All of the foregoing deliveries will be deemed
to be made simultaneously, and none shall be deemed completed until all
have been completed.
(b) The provisions of Section 3.6(a) shall not apply to a Management
Shareholder (other than a Primary Executive) if such Management Shareholder
Transfers Shares aggregating, with all other prior Transfers of Shares by such
Management Shareholder, an amount less than 25% of such Management Share-
holder's Initial Ownership.
Section 3.7 Notifications Regarding Transfers. To the extent that either
an Institutional Shareholder proposes a Transfer pursuant to Section 3.4(iv) or
a Management Shareholder proposes a Transfer pursuant to Section 3.5(a)(iii),
such Shareholder shall provide notice to THL at least five Business Days prior
to the proposed Transfer Date of the number of Shares proposed to be
Transferred. Not less that two Business Days prior to the proposed Transfer
Date, THL shall notify such Shareholder of whether the Transfer is believed to
be permitted based on the formulas set forth in Section 3.4(iv) or 3.5(a)(iii),
as applicable.
ARTICLE IV
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS; PREEMPTIVE RIGHTS
Section 4.1 Rights to Participate in Transfer. (a) If the THL Entities
propose to Transfer (a "Tag-Along Sale") shares of a class of Equity
Securities, other than Transfers of shares of such class (i) in a Public
Offering pursuant to the exercise of their rights under Article 5, (ii) to any
THL Designated Transferee, (iii) up to the Threshold Percentage or (iv) in a
THL Exchange, the Non-THL Shareholders may, at their option, elect to exercise
their rights under this Section 4.1 (each such Shareholder, a "Tag-Along
Person"); provided, however, that the exception set forth in clause (iii) shall
not apply to the Primary Executives. The "Threshold Percentage"
18
shall equal 5% in the aggregate of the THL Entities' Initial Ownership of such
class of Equity Securities.
(b) In the event of a proposed Transfer in accordance with paragraph (a)
above, THL shall provide each Non-THL Shareholder written notice of the terms
and conditions of such proposed Transfer ("Tag-Along Notice") at least 10 days
prior to such proposed Transfer and offer each Tag-Along Person the opportu
nity to participate in such sale. The Tag-Along Notice shall identify the
number of shares of such class of Equity Securities to be sold in the Tag-Along
Sale ("Tag-Along Offer"), the price at which the Transfer is proposed to be
made, and all other material terms and conditions of the Tag-Along Offer,
including the form of the proposed agreement, if any. From the date of the
Tag-Along Notice, each Tag-Along Person shall have the right (a "Tag-Along
Right"), exercisable by written notice ("Tag-Along Response Notice") given to
THL within 5 Business Days (the "Tag-Along Notice Period"), to request that THL
include in the proposed Transfer the number of shares of such class of Equity
Securities held by such Tag-Along Person as is specified in such notice;
provided that if the aggregate number of shares of such class of Equity
Securities proposed to be sold by the THL Entities and all Tag-Along Persons in
such transaction exceeds the number of shares of such class of Equity
Securities which can be sold on the terms and conditions set forth in the
Tag-Along Notice, then only the Tag-Along Portion of shares of the THL Entities
and each Tag-Along Person shall be sold pursuant to the Tag-Along Offer.
"Tag-Along Portion" means, with respect to any class of Equity Securities, the
number of shares of such class held (or, without duplication, that such
Shareholder has the right to acquire from any Person) by the Tag-Along Person
or THL, as the case may be, multiplied by a fraction, the numerator of which is
the maximum number of shares of such class subject to the Tag-Along Offer and
the denominator of which is the aggregate number of shares of such class on a
Fully Diluted basis owned by all Shareholders. In the event the THL Entities
shall propose to Transfer a number of shares of such class in excess of the
Threshold Percentage, the Tag-Along Portion shall be calculated with respect to
all of the shares proposed to be Transferred by the THL Entities. To the extent
that the Tag-Along Notice provides that shares of Common Stock and Equity
Warrants will be transferred (i) the Equity Warrants and the Common Stock shall
be treated as part of a single class of Equity Securities and, if applicable,
Equity Warrants are referred to in this Section 4.1 as "shares" of such class,
(ii) the calculations described in this Section 4.1 with respect to such
Tag-Along Notice shall include the number of shares of Common Stock issuable
upon exercise of such Equity Warrants and (iii) the allocation between Equity
Warrants and shares of Common Stock subject to the Tag-Along Rights will be
proportional to the allocation of the number of Shares
19
subject to the Tag-Along Notice as compared with the number of Equity Warrants
subject to the Tag-Along Notice.
(c) If the Tag-Along Persons exercise their Tag-Along Rights hereunder,
each Tag-Along Person shall deliver, together with its Tag-Along Response
Notice, to THL the certificate or certificates representing the Shares of such
Tag-Along Person to be included in the Transfer, together with a limited
power-of-attorney authorizing THL to Transfer such Shares on the terms set
forth in the Tag-Along Notice. It is understood that to the extent THL can do
so without affecting the other terms on which the Tag-Along Sale is proposed to
be made, THL will seek to exclude from the terms of such Tag-Along Sale any
material restrictions on the ability, following such Tag-Along Sale, of any
Tag-Along Person to conduct its business in a manner consistent with past
practice. Delivery of such certificate or certificates representing the shares
to be Transferred and the limited power-of-attorney authorizing THL to
Transfer such shares shall constitute an irrevocable acceptance of the
Tag-Along Offer by such Tag-Along Persons. If, at the end of a 120 day period
after such delivery, THL has not completed the Transfer of all such shares on
substantially the same terms and conditions set forth in the Tag-Along Notice,
THL shall return to each Tag-Along Person the limited power-of-attorney (and
all copies thereof) together with all certificates representing the shares
which such Tag-Along Person delivered for Transfer pursuant to this Section
4.1.
(d) Concurrently with the consummation of the Tag-Along Sale, THL shall
notify the Tag-Along Persons thereof, shall remit to the Tag-Along Persons the
total consideration (by bank or certified check) for the Shares of the Tag-
Along Persons Transferred pursuant thereto, and shall, promptly after the
consummation of such Tag-Along Sale furnish such other evidence of the
completion and time of completion of such Transfer and the terms thereof as may
be reasonably requested by the Tag-Along Persons.
(e) If at the termination of the Tag-Along Notice Period any Tag-Along
Person shall not have elected to participate in the Tag-Along Sale, such
Tag-Along Person will be deemed to have waived its rights under Section 4.1(a),
with respect to the Transfer of its securities pursuant to such Tag-Along Sale.
(f) If any Tag-Along Person declines to exercise its Tag-Along Rights or
elects to exercise its Tag-Along Rights with respect to less than such Tag-
Along Person's Tag-Along Portion, the THL Entities shall be entitled to
Transfer, pursuant to the Tag-Along Offer, a number of shares held by the THL
Entities equal
20
to the number of shares constituting the portion of such Tag-Along Person's
Tag-Along Portion with respect to which Tag-Along Rights were not exercised.
(g) THL may sell, on behalf of the THL Entities and any Tag-Along Person
who exercises the Tag-Along Rights pursuant to this Section 4.1, the shares
subject to the Tag-Along Offer on the terms and conditions set forth in the
Tag-Along Notice within 120 days of the date on which Tag-Along Rights shall
have been waived, exercised or expire.
Section 4.2 Right to Compel Participation in Certain Transfers. (a) If (i)
the THL Entities propose to Transfer not less than 50% of their Initial
Ownership of Common Stock to a Third Party in a bona fide sale or (ii) the THL
Entities propose a Transfer in which the shares of Common Stock to be
Transferred by Shareholders constitute more than 50% of the outstanding shares
of Common Stock (a "Drag-Along Sale"), THL may at its option require all
Shareholders to sell all Equity Securities proposed to be sold therein
("Drag-Along Rights") then held by every Non-THL Shareholder, and (subject to
and at the closing of the Drag-Along Sale) to compel to exercise all, but not
less than all, of the Derivatives (whether then vested or unvested) held by
every Non-THL Shareholder and to sell all of the Shares received upon such
exercise to such Third Party, for the same consideration and otherwise on the
same terms and conditions as the THL Entities; provided, that any Non-THL
Shareholder who holds Derivatives the exercise price per share of which is
greater than the per share price at which the Shares are to be sold to the
Third Party may, if required by THL to exercise such Derivatives, in place of
such exercise, submit to irrevocable cancellation thereof without any liability
for payment of any exercise price with respect thereto; provided, further,
that, upon such Drag-Along Sale, the Primary Executives shall have the right,
but not the obligation, to require the Equity Investors to, at THL's option,
either arrange for the purchase by a third party or purchase directly all of
the Shares held by such Primary Executive as a condition to consummation of
such Drag-Along Sale and, in which case the number of shares to be sold by each
Equity Investor will be reduced on a proportional basis. The number of shares
of each class of Equity Securities to be sold by each Non-THL Shareholder will
be the Drag-Along Portion of the shares of such class that such Non-THL
Shareholder owns. "Drag-Along Portion" means, with respect to any Non-THL
Shareholder and any class of Equity Securities, the number of Shares of such
class of Equity Securities beneficially owned by such Non-THL Shareholder
multiplied by a fraction, the numerator of which is the number of shares of
such class of Equity Securities proposed to be sold by the THL Entities on
behalf of the THL Entities and the Non-THL Shareholders (as reduced by the
number of shares of such class of Equity Securities to be sold by the
21
Primary Executives in excess of their pro rata interest) and the denominator of
which is the total number of shares of such class of Equity Securities
beneficially owned by the Shareholders. In the event the Drag-Along Sale is not
consummated with respect to any shares acquired upon exercise of Derivatives,
such Derivatives shall be deemed not to have been exercised or cancelled, as
applicable. To the extent the Drag-Along Sale relates to Derivatives, and THL
determines not to compel the exercise thereof, the Derivatives shall be treated
as a separate class of Equity Securities and, if applicable, Derivatives are
referred to in this Section 4.2 as "shares" of such class.
(b) THL shall provide written notice of such Drag-Along Sale to the
Non-THL Shareholders (a "Drag-Along Notice") not later than the fifteenth day
prior to the proposed Drag-Along Sale. The Drag-Along Notice shall identify the
Transferee, the number of shares of any class of Equity Securities, the
consideration for which a Transfer is proposed to be made for each class of
Equity Securities (the "Drag-Along Sale Price(s)") and all other material terms
and conditions of the Drag-Along Sale. Subject to Section 4.2(d), each Non-THL
Shareholder shall be required to participate in the Drag-Along Sale on the
terms and conditions set forth in the Drag-Along Notice and to tender all its
Shares as set forth below. It is understood that to the extent THL can do so
without affecting the other terms on which the Drag-Along Sale is proposed to
be made, THL will seek to exclude from the terms of such Drag-Along Sale any
material restrictions on the ability, following such Drag-Along Sale, of any
Non-THL Shareholder to conduct its business in a manner consistent with past
practice. The price(s) payable in such Transfer shall be the Drag-Along Sale
Price(s). Not later than the tenth day following the date of the Drag-Along
Notice (the "Drag-Along Notice Period"), each of the Non-THL Shareholders shall
deliver to a representative of THL designated in the Drag-Along Notice
certificates representing all the Shares beneficially owned and held by such
Non-THL Shareholder, duly endorsed, (or evidence of title and ownership of any
Derivative which are subject to the Drag-Along Sale but which are not exercised
in connection therewith) together with all other documents required to be
executed in connection with such Drag-Along Sale, or if such delivery is not
permitted by applicable law, an unconditional agreement to deliver such shares
pursuant to this Section 4.2 at the closing for such Drag-Along Sale against
delivery to such Non-THL Shareholder of the consideration therefor. If a
Non-THL Shareholder should fail to deliver such certificates to THL, the
Company shall cause the books and records of the Company to show that such
shares are bound by the provisions of this Section 4.2 and that such shares
shall be Transferred to the purchaser of the shares immediately upon surrender
for Transfer by the holder thereof.
22
(c) The THL Entities shall have a period of 90 days from the date of
receipt of the Drag-Along Notice to consummate the Drag-Along Sale on the terms
and conditions set forth in such Drag-Along Sale Notice. If the Drag-Along Sale
shall not have been consummated during such period, THL shall return to each of
the Non-THL Shareholders all certificates or other evidence of title and
ownership representing shares that such Non-THL Shareholder delivered for
Transfer pursuant hereto, together with any documents in the possession of THL
executed by the Non-THL Shareholder in connection with such proposed Transfer,
and all the restrictions on Transfer contained in this Agreement or otherwise
applicable at such time with respect to shares owned by the Non-THL
Shareholders shall again be in effect.
(d) Concurrently with the consummation of the Transfer of shares pursuant
to this Section 4.2, THL shall give notice thereof to all Shareholders, shall
remit to each of the Shareholders who have surrendered their certificates or
other evidence of title and ownership the total consideration (by bank or
certified check) for the shares Transferred pursuant hereto and shall furnish
such other evidence of the completion and time of completion of such Transfer
and the terms thereof as may be reasonably requested by such Shareholders.
(e) Notwithstanding any provision of this Agreement to the contrary, in
the event the terms on which a Drag-Along Sale is proposed to be made shall
include a provision which materially and adversely affects the ability of any
Non-THL Shareholder to compete in any line of business or geographic area, such
Non-THL Shareholder shall not be required to participate in the Drag-Along Sale
on the terms and conditions set forth in the Drag-Along Notice. In the event
any Shareholder shall elect, pursuant to the preceding sentence, not to
participate in the Drag-Along Sale, THL Entities and their THL Designated
Transferees shall have the right to purchase, and such Shareholder shall be
obligated to sell to the THL Entities and their THL Designated Transferees such
Shareholder's shares, at the Drag-Along Sale Price(s) and on substantially the
same terms (other than any such non-compete provision), not later than
immediately prior to the consummation of the Drag-Along Sale. Except as
provided above, in connection with any Drag-Along Sale, all Shareholders shall
be subject to (i) the same terms and conditions of sale and (ii) the same
indemnity, contribution, hold-back, escrow or similar obligations.
Section 4.3 Preemptive Rights. (a) The Company shall provide each
Shareholder with a written notice (a "Preemptive Rights Notice") of any
proposed issuance by the Company of Equity Securities (other than the issuance
of Equity Securities in connection with a THL Exchange) at least 10 days prior
to the proposed
23
issuance date. Such notice shall specify the price at which the Equity
Securities are to be issued and the other material terms of the issuance.
(i) In the event the Company shall issue any New Common Securities or
New Preferred Securities (collectively, the "New Securities") to any third
party (including any Shareholder) prior to a Qualifying Public Offering,
the THL Entities and each Management Shareholder shall be entitled to
purchase, at the price and on the terms at which such New Securities are
proposed to be issued and specified in such Preemptive Rights Notice, the
THL Entities' or such Management Shareholder's Preemptive Rights Portion
of such class of the New Securities proposed to be issued. "Preemptive
Rights Portion" means, with respect to New Common Securities, the pro rata
portion of New Common Securities proposed to be issued by the Company,
which amount shall be based upon such Shareholder's Initial Ownership of
shares of Common Stock as a percentage of the sum of the Initial Ownership
of shares of Common Stock of (A) the THL Entities, (B) all Institutional
Shareholders and (C) all Management Shareholders and, with respect to New
Preferred Securities, the pro rata portion of New Preferred Securities
proposed to be issued by the Company, which amount shall be based upon
such Shareholder's Initial Ownership of shares of Preferred Stock as a
percentage of the sum of the Initial Ownership of shares of Preferred
Stock of (A) the THL Entities and (B) all Institutional Shareholders.
(ii) In the event that the Company shall issue any New Securities to
any third party (including any Shareholder) following a Qualifying Public
Offering, the THL Entities shall be entitled to purchase, at the price and
on the terms at which such New Securities are proposed to be issued and
specified in such Preemptive Rights Notice, the THL Entities' Preemptive
Rights Portion of such class of the New Securities proposed to be issued.
(iii) In the event the THL Entities propose to purchase any New
Securities from the Company pursuant to Section 4.3(a)(i) or (ii) or
otherwise, the THL Entities may elect to purchase any or all of their
Preemptive Rights Portion in the form of non-voting New Securities on the
same terms and conditions as would have been available to purchase shares
of voting New Securities.
(iv) In the event the THL Entities propose to purchase any New
Securities from the Company pursuant to 4.3(a)(i) or (ii) or otherwise,
(A)
24
prior to a Qualifying Public Offering, each Institutional Shareholder, and
(B) following a Qualifying Public Offering, each Non-THL Shareholder shall
be entitled to purchase, at the price and on the terms at which the THL
Entities propose to purchase such New Securities and specified in such
Preemptive Rights Notice, such Shareholder's Preemptive Rights Portion of
such class of the New Securities proposed to be issued in the transaction
giving rise to the THL Entities' proposed purchase of New Securities;
provided, however, such Shareholders shall not be entitled to purchase New
Securities unless the THL Entities complete the purchase of New Securities
in accordance with the Preemptive Rights Notice.
A Shareholder may exercise its rights under this Section 4.3 by delivering
written notice of its election to purchase New Securities to the Company, THL
and each Non-THL Shareholder within five days of receipt of the Preemptive
Rights Notice. A delivery of such a written notice (which notice shall specify
the number of New Securities to be purchased by the Shareholder submitting such
notice) by such Shareholder shall constitute a binding agreement of such
Shareholder to purchase, subject to the purchase by THL of its portion of such
New Securities, at the price and on the terms specified in the Preemptive
Rights Notice, the number of New Securities specified in such Shareholder's
written notice.
(b) In the event any Non-THL Shareholder declines to exercise its
preemptive rights under this Section 4.3 or elects to exercise such rights with
respect to less than such Shareholder's Preemptive Rights Portion, the THL
Entities shall have the right to purchase, or any Non-THL Shareholder
designated by THL shall have the right to purchase, from the Company the number
of New Securities constituting the Preemptive Rights Portion with respect to
which such Non-THL Shareholder shall not have exercised its preemptive rights.
(c) In the case of any issuance of New Securities, the Company shall have
90 days from the date of the Preemptive Rights Notice to consummate the
proposed issuance of any or all of such New Securities which the Shareholders
have not elected to purchase at the price and upon terms that are not
materially less favorable to the Company than those specified in the Preemptive
Rights Notice. At the consummation of such issuance, the Company shall issue
certificates representing the New Securities to be purchased by each
Shareholder exercising preemptive rights pursuant to this Section 4.3
registered in the name of such Shareholder, against payment by such Shareholder
of the purchase price for such New Securities. If the
25
Company proposes to issue New Securities after such 90-day period, it shall
again comply with the procedures set forth in this Section.
(d) Notwithstanding the foregoing, no Shareholder shall be entitled to
purchase New Securities as contemplated by this Section 4.3 in connection with
issuances of New Securities (i) to employees of the Company or any Subsidiary
pursuant to employee benefit plans or arrangements approved by the Board
(including upon the exercise of employee stock options), or (ii) in connection
with any bona fide, arm's-length restructuring or refinancing of outstanding
indebtedness (including convertible indebtedness) of the Company or any
Subsidiary. The Company shall not be under any obligation to consummate any
proposed issuance of New Securities, regardless of whether it shall have
delivered a Preemptive Rights Notice in respect of such proposed issuance.
(e) The Company will use its reasonable best efforts to provide the
Preemptive Rights Notice at least 15 Business Days prior to any proposed
issuance of New Securities. In the event it is impracticable to provide the
Preemptive Rights Notice at least 15 Business Days prior to such issuance, any
Shareholder may offer to finance or arrange to finance the purchase by any
other Shareholder of such other Shareholder's Preemptive Rights Portion and
such financing or arranging Shareholder shall be entitled to receive as
compensation for such services reasonable and customary fees and expenses. No
Shareholder shall be under any obligation to provide or arrange such financing
for any other Shareholder.
Section 4.4. Certain Other Purchases of Equity Securities. In the event,
at any time after the date hereof and prior to the Trigger Date, the THL
Entities shall acquire any Equity Securities (other than Equity Securities
acquired in a THL Exchange) from any Person other than the Shareholders, THL
shall deliver, within five Business Days of the date of such acquisition, a
notice to each Equity Investor (a "Third Party Purchase Notice") specifying the
class of Equity Securities, the number of shares of such class acquired and the
weighted average of price per share paid by the THL Entities. Such Third Party
Purchase Notice shall constitute an offer to each such Shareholder to purchase
such Shareholder's Third Party Purchase Portion of the number of shares of such
class acquired by the THL Entities. A Shareholder may exercise its rights under
this Section 4.4 by delivering written notice of its election to purchase its
Third Party Purchase Portion within ten days of receipt of the Third Party
Purchase Notice. A delivery of such written notice (which shall specify the
number of shares of such class of Equity Securities to be purchased by the
Shareholder submitting such notice) by such Shareholder shall constitute a
binding agreement of
26
such Shareholder to purchase, at the price and on the terms specified in the
Third Party Purchase Notice, the number of shares of a class of Equity
Securities specified in such notice. At the consummation of the Transfer of the
shares of a class of Equity Securities purchased by the THL Entities to any
Shareholder that has exercised its right hereunder, the THL Entities shall
deliver to such Shareholder certificates or other evidence of title and
ownership representing the shares such class of Equity Securities to be
purchased against payment by such Shareholder of the purchase price for such
shares of Equity Securities. "Third Party Purchase Portion" means, with respect
to any Shareholder at any time, the number of shares of the class of Equity
Securities purchased by the THL Entities in a transaction subject to Section
4.4, multiplied by a fraction, the numerator of which is (i) the number of
shares of such class of Equity Securities on a Fully Diluted basis that such
Shareholder beneficially owns at such time, and the denominator of which is
(ii) the total number of shares of such class of Equity Securities on a Fully
Diluted basis beneficially owned at such time by all Equity Investors. To the
extent the Third Party Purchase Notice relates to Derivatives, such Derivatives
shall be treated as a separate class of Equity Securities and, if applicable,
Derivatives are referred to in this Section 4.4 as "shares" of such class.
ARTICLE V
REGISTRATION RIGHTS
Section 5.1 Demand Registration. (a) If the Company shall receive a
written request by THL that the Company effect the registration under the
Securities Act of all or a portion of the THL Entities' Registrable Securities,
and specifying the intended method of disposition thereof, then the Company
shall promptly give written notice of such requested registration (a "THL
Demand Registration") at least five days prior to the anticipated filing date
of the registration statement relating to such THL Demand Registration to the
Non-THL Shareholders and thereupon will use its best efforts to effect, as
expeditiously as possible, the registration under the Securities Act of:
(i) the Registrable Securities of the THL Entities which the Company
has been so requested to register; and
(ii) subject to the restrictions set forth in Section 5.2, all other
Registrable Securities of the same class as that to which THL's request
relates
27
for which an effective Piggyback Registration (as such term is defined in
Section 5.2) request has been made;
provided, that subject to Section 5.1(d) hereof, the Company shall not be
obligated to effect more than six THL Demand Registrations. In no event will
the Company be required to effect more than one THL Demand Registration within
any four-month period.
(b) Promptly after the expiration of the 2-day period referred to in
Section 5.2(a) hereof, the Company will notify all the Shareholders to be
included in the THL Demand Registration (the "Holders") of the other Holders
and the number of Registrable Securities requested to be included therein. THL
may, at any time prior to the effective date of the registration statement
relating to such registration, revoke such request, without liability to any of
the other Holders, by providing a written notice to the Company revoking such
request, in which case such request, so revoked, shall not be considered a THL
Demand Registration.
(c) The Company will pay all Registration Expenses in connection with any
THL Demand Registration.
(d) A registration requested pursuant to this Section 5.1 shall not be
deemed to have been effected (i) unless the registration statement relating
thereto (A) has become effective under the Securities Act and (B) has remained
effective for a period of at least 180 days (or such shorter period in which
all Registrable Securities of the Holders included in such registration have
actually been sold thereunder); provided, that if after any registration
statement requested pursuant to this Section 5.1 becomes effective (x) such
registration statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or other governmental agency or court and
(y) less than 75% of the Registrable Securities included in such registration
statement has been sold thereunder, such registration statement shall not be
considered a THL Demand Registration, or (ii) if the Maximum Offering Size (as
defined below) is reduced in accordance with Section 5.1(e) such that less than
66 2/3% of the Registrable Securities of the THL Entities sought to be included
in such registration are included.
(e) If a THL Demand Registration involves an Underwritten Public Offering
and the managing underwriter shall advise the Company and THL that, in its
view, (i) the number of shares of Registrable Securities requested to be
included in such registration (including any securities which the Company
proposes to
28
be included which are not Registrable Securities) or (ii) the inclusion of some
or all of the shares of Registrable Securities owned by the Holders, in any
such case, exceeds the largest number of shares which can be sold without
having an adverse effect on such offering, including the price at which such
shares can be sold (the "Maximum Offering Size"), the Company will include in
such registration, in the priority listed below, up to the Maximum Offering
Size:
(A) first, all Registrable Securities requested by THL to be
registered and all Registrable Securities requested to be included in such
registration by any other Holder pursuant to an effective Piggyback
Registration request (allocated, if necessary for the offering not to
exceed the Maximum Offering Size, pro rata among the THL Entities and
such Holders on the basis of the relative number of Registrable Securities
held by such Share holder); and
(B) second, any securities proposed to be registered by the Company.
provided, however, that in such case, any Holder may elect to withdraw such
Holder's Registrable Securities from the registration.
(f) Upon written notice to THL, the Company may postpone effecting a
registration pursuant to this Section 5.1 on one occasion during any period of
six consecutive months for a reasonable time specified in the notice but not
exceeding 90 days (which period may not be extended or renewed), if (i) an
investment banking firm of recognized national standing shall advise the
Company and THL in writing that effecting the registration would materially and
adversely affect an offering of securities of the Company the preparation of
which had then been commenced or (ii) the Company has a bona fide business
reason for determining that it is in possession of material non-public
information the disclosure of which during the period specified in such notice
the Company believes, in its reasonable judgment, would not be in the best
interests of the Company.
(g) After the Company has effected two Demand Registrations pursuant to
this Section 5.1 of Common Stock, the Institutional Shareholders, upon request
of such Institutional Shareholders owning a majority of the Shares acquired by
such Institutional Shareholders on the Closing Date, may request that the
Company register shares of Registrable Securities then owned by such
Institutional Shareholders (an "Institutional Shareholder Demand
Registration"). In no event will the Company
29
be required to effect more than one such Institutional Shareholder Demand
Registration. The provisions of this Article 5 shall apply, mutatis mutandis,
to any such Institutional Shareholder Demand Registration.
(h) After the Transfer of Shares of Common Stock representing more than
20% of the Shares collectively owned by the Equity Investors of the Initial
Ownership on a Fully Diluted basis owned by such Equity Investors, the Primary
Executives may request that the Company register Shares which are Registrable
Securities then owned by them (a "Primary Executive Demand Registration"). In
no event will the Company be required to effect more than three such Primary
Executive Demand Registrations. The provisions of this Article 5 shall apply,
mutatis mutandis, to any such Primary Executive Demand Registration; provided,
that, notwithstanding anything to the contrary herein, (i) no Primary Executive
Demand Registrations may be made during the six month period following the
Effective Time or within six months after the effective date any other
registration statement (other than registration statement on From S-4 or S-8 or
similar form), and (ii) the Company must use its best efforts to effect such
Primary Executive Demand Registration as soon as practicable, but in no event
later than 120 days following the date of the demand.
Section 5.2 Piggyback Registration. (a) If the Company proposes to
register any Equity Securities under the Securities Act, whether or not for
sale for its own account (including pursuant to a Demand Registration), in
connection with a public offering (other than a public offering pursuant to a
registration statement filed in connection with a transaction of the type
described in Rule 145 of the Securities Act or for the purpose of issuing
securities pursuant to an employee benefit plan) it will each such time,
subject to the provisions of Section 5.2(b) hereof, give prompt written notice
at least five days prior to the anticipated filing date of the registration
statement relating to such registration to all Shareholders and their
respective Permitted Transferees (or, in the case of a Demand Registration to
all Shareholders and their Permitted Transferees other than the Shareholder
making the demand), which notice shall set forth such Shareholders' rights
under this Section 5.2 and shall offer all Shareholders the opportunity to
include in such registration statement such number of shares of Common Stock as
each such Shareholder may request (a "Piggyback Registration"). Upon the
written request of any such Shareholder made within 2 days (one of which shall
be a Business Day) after the receipt of notice from the Company (which request
shall specify the number of Registrable Securities intended to be disposed of
by such Shareholder), the Company will use its reasonable best efforts to
effect the registration under the Securities Act of all Registrable Securities
which the
30
Company has been so requested to register by such Shareholders, to the extent
requisite to permit the disposition of the Registrable Securities so to be
registered; provided, that (i) if such registration involves an Underwritten
Public Offering, all such Shareholders requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected as provided in Section 5.4(f) on the same terms and
conditions as apply to the Company or the other selling Shareholder, as
applicable, and (ii) if, at any time after giving written notice of its
intention to register on its own behalf any stock and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such stock, the
Company shall give written notice to all such Shareholders and, thereupon,
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration. No registration effected under this Section
5.2 on behalf of the Company shall relieve the Company of its obligations to
effect a Demand Registration, to the extent required by Section 5.1 hereof. The
Company will pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to this Section 5.2.
(b) If a registration pursuant to this Section 5.2 involves an
Underwritten Public Offering (other than in the case of an Underwritten Public
Offering resulting from a Demand Registration, in which case the provisions
with respect to priority of inclusion in such offering set forth in Section
5.1(e) shall apply) and the managing underwriter advises the Company that, in
its view, the number of shares of Common Stock which the Company and the
selling Shareholders intend to include in such registration exceeds the Maximum
Offering Size, the Company will include in such registration, in the following
priority, up to the Maximum Offering Size:
(i) first, so much of the Equity Securities proposed to be registered
for the account of the Company as would not cause the offering to exceed
the Maximum Offering Size; and
(ii) second, all Registrable Securities requested to be included in
such registration by any Shareholder pursuant to an effective Piggyback
Registration request (allocated, if necessary for the offering not to
exceed the Maximum Offering Size, pro rata among such Shareholders on the
basis of the relative number of shares of Registrable Securities held by
such Shareholder).
Section 5.3 Holdback Agreements. With respect to each and every firmly
Underwritten Public Offering, each Shareholder (collectively with all of its
31
Affiliates which are Shareholders) owning Shares representing more than 1% of
the then outstanding Shares (including Shares which would be held upon any
conversion or exercise of rights) agrees, and their Permitted Transferees will
agree, not to offer or sell any Shares (except for Shares, if any, sold in that
Public Offering) during the period which commences on the 14th day prior to the
effective date of the applicable registration statement for a public offering
of Shares (except as part of such registra tion) and ends on the earlier of:
(i) 180 days after the effective date of the registration statement or (ii) any
such shorter period as the Company and the lead managing underwriter of an
Underwritten Public Offering agree.
Section 5.4 Registration Procedures. Whenever Shareholders request that
any Registrable Securities be registered pursuant to Section 5.1 or 5.2 hereof,
the Company will, subject to the provisions of such Sections, use its best
efforts, or reasonable best efforts, as the case maybe, to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof as quickly as practicable, and in any
event within 60 days of the date of demand and in connection with any such
request:
(a) The Company will as expeditiously as possible prepare and file
with the SEC a registration statement on any form selected by counsel for
the Company and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
intended method of distribution thereof, and use its best efforts to cause
such filed registration statement to become and remain effective for a
period of not less than 180 days (or such shorter period in which all of
the Registrable Securities of the Holders included in such registration
statement shall have actually been sold thereunder).
(b) The Company will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to
each Shareholder and each underwriter, if any, of the Registrable
Securities covered by such registration statement copies of such
registration statement as proposed to be filed, and thereafter the Company
will furnish to such Shareholder and underwriter, if any, such number of
copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto and documents
incorporated by reference therein), the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents as such Shareholder or underwriter may reasonably request
in order to facilitate the disposition of the Registrable
32
Securities owned by such Shareholder. Each Shareholder shall have the
right to request that the Company modify any information contained in such
registration statement, amendment and supplement thereto pertaining to
such Shareholder and the Company shall use its reasonable best efforts to
comply with such request; provided, however, that the Company shall not
have any obligation to so modify any information if so doing would cause
the prospectus to contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
(c) After the filing of the registration statement, the Company will
(i) cause the related prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule
424 under the Securities Act, (ii) comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement during the applicable
period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement or supplement to
such prospectus and (iii) promptly notify each Shareholder holding
Registrable Securities covered by such registration statement of any stop
order issued or threatened by the SEC or any state securities commission
under state blue sky laws and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
(d) The Company will use its best efforts to (i) register or qualify
the Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions in the United
States as the Managing Underwriter or any Shareholder or Shareholders
holding such Registrable Securities reasonably (in light of such
Shareholder's intended plan of distribution) requests and (ii) cause such
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company and do any and all other acts and
things that may be reasonably necessary or advisable to enable such
Shareholder to consummate the disposition of the Registrable Securities
owned by such Shareholder; provided, however, that the Company will not be
required to (A) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this paragraph (d),
(B) subject itself to taxation in any such
33
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(e) The Company will immediately notify each Shareholder holding such
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 occurrence of an event requiring the preparation of
a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and promptly prepare and make
available to each such Shareholder and file with the SEC any such
supplement or amendment.
(f) In connection with (i) (A) any THL Demand Registration or (B) any
registration by the Company of Registrable Securities, the Company shall
appoint the underwriter or underwriters chosen by THL and (ii) (A) any
Institutional Shareholder Demand Registration or (B) any Primary Executive
Demand Registration, the Company shall appoint the underwriter or under-
writers chosen by Shareholders holding the majority of the Registrable
Securities to be registered; provided, that the underwriter or
underwriters identified in accordance with clauses (ii)(A) and (ii)(B)
shall be reasonably acceptable to the Company. The Company will enter into
customary agreements (including an underwriting agreement in customary
form) and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities,
including the engagement of a "qualified independent underwriter" in
connection with the qualification of the underwriting arrangements with
the NASD.
(g) Upon execution of confidentiality agreements in form and sub-
stance reasonably satisfactory to the Company, the Company will make
available for inspection by any Shareholder and any underwriter
participating in any disposition pursuant to a registration statement
being filed by the Company pursuant to this Section 5.4 and any attorney,
accountant or other professional retained by any such Shareholder or
underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably requested by any such
Person, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any Inspectors in
connection with such registration statement.
34
(h) The Company will furnish to each such Shareholder and to each
such underwriter, if any, a signed counterpart, addressed to such
underwriter and the participating Shareholders, of (i) an opinion or
opinions of counsel to the Company and (ii) a comfort letter or comfort
letters from the Company's independent public accountants, each in
customary form and covering such matters of the type customarily covered
by opinions or comfort letters, as the case may be, as a majority of such
Shareholders or the managing underwriter therefor reasonably requests.
(i) The Company will otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC and the relevant state
blue sky commissions, and make available to its securityholders, as soon
as reasonably practicable, an earnings statement covering a period of 12
months, beginning within three months after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(j) The Company may require each such Shareholder to promptly furnish
in writing to the Company information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably
request and such other information as may be legally required in
connection with such registration.
(k) Each such Shareholder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 5.4(e) hereof, such Shareholder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Shareholder's
receipt of the copies of the supplemented or amended prospectus
contemplated by Section 5.4(e) hereof, and, if so directed by the Company,
such Shareholder will deliver to the Company all copies, other than any
permanent file copies then in such Shareholder's possession, of the most
recent prospectus covering such Registrable Securities at the time of
receipt of such notice. In the event that the Company shall give such
notice, the Company shall extend the period during which such registration
statement shall be maintained effective (including the period referred to
in Section 5.4(a) hereof) by the number of days during the period from and
including the date of the giving of notice pursuant to Section 5.4(e)
hereof to the date when the Company shall make available to such Share-
35
holder a prospectus supplemented or amended to conform with the require-
ments of Section 5.4(e) hereof.
(l) The Company will use its best efforts to list such Registrable
Securities on any securities exchange on which the Common Stock is then
listed or on NASDAQ if the Common Stock is then quoted on NASDAQ not later
than the effective date of such registration statement.
Section 5.5 Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Shareholder holding Registrable Securities
covered by a registration statement, its officers, directors, employees,
partners and agents, and each Person, if any, who controls such Shareholder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (and officers, directors, employees, partners and agents of such
controlling Persons) from and against any and all losses, claims, damages,
joint or several liabilities or expenses (including reasonable attorneys' fees
and expenses and reasonable costs of investigation) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Securities (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission so made in
strict conformity with information furnished in writing to the Company by such
Shareholder or on such Shareholder's behalf expressly for use therein; provided
that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, or in any final
prospectus, as the case may be, the indemnity agreement contained in this
paragraph shall not apply to the extent that any such loss, claim, damage,
liability or expense results from the fact that a current copy of the final
prospectus (or, in the case of a final prospectus, the final prospectus as
amended or supplemented) was not sent or given to the Person asserting any such
loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Registrable Securities concerned to such
Person if it is determined that the Company has provided such current copy of
such final prospectus (or such amended or supplemented prospectus, as the case
may be) to such Shareholder in a timely manner prior to such sale and it was
the responsibility of such Shareholder under the Securities Act to provide such
Person with a current copy of the prospectus (or such amended or
36
supplemented prospectus, as the case may be) and such current copy of the final
prospectus (or such amended or supplemented prospectus, as the case may be)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. The Company also agrees to indemnify any underwriters of the
Registrable Securities, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Shareholders provided in this Section 5.5.
Section 5.6 Indemnification by Participating Shareholders. Each
Shareholder holding Registrable Securities included in any registration
statement agrees, severally but not jointly, to indemnify and hold harmless the
Company, its officers, directors and agents and each Person (other than such
Shareholder) if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to such Shareholder, but
only (i) with respect to information furnished in writing by such Shareholder
or on such Shareholder's behalf expressly for use in any registration statement
or prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus or (ii) to the extent that
any loss, claim, damage, liability or expense described in Section 5.5 results
from the fact that a current copy of the final prospectus (or, in the case of a
prospectus, the prospectus as amended or supplemented) was not sent or given to
the Person asserting any such loss, claim, damage, liability or expense at or
prior to the written confirmation of the sale of the Registrable Securities
concerned to such Person if it is determined that it was the responsibility of
such Shareholder to provide such Person with a current copy of the final
prospectus (or such amended or supple mented prospectus, as the case may be)
supplemented prospectus, as the case may be) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. Each such Shareholder
shall be prepared, if required by the underwriting agreement, to indemnify and
hold harmless underwriters of the Registrable Securities, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Company provided in this
Section 5.6. As a condition to including Registrable Securities in any
registration statement filed in accordance with Article 5 hereof, the Company
may require that it shall have received an undertaking reasonably satisfactory
to it from any underwriter to indemnify and hold it harmless to the extent
customarily provided by underwriters with respect to similar securities.
No Shareholder shall be liable under Section 5.6 for any damage thereunder
in excess of the net proceeds realized by such Shareholder in the sale of the
Registrable Securities of such Shareholder.
37
Section 5.7 Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to this Article 5,
such Person (an "Indemnified Party") shall promptly notify the Person against
whom such indemnity may be sought (the "Indemnifying Party") in writing and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to such Indemnified Party, and shall assume
the payment of all fees and expenses; provided that the failure of any
Indemnified Party so to notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent that the
Indemnifying Party is materially prejudiced by such failure to notify. In any
such proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) in
the reasonable judgment of such Indemnified Party representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the
Indemnified Parties. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any and all losses, claims, damages, liabilities and
expenses or liability (to the extent stated above) by reason of such settlement
or judgment. No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability arising out of such proceeding.
Section 5.8 Contribution. If the indemnification provided for in this
Article 5 is held by a court of competent jurisdiction to be unavailable to the
Indemnified Parties in respect of any losses, claims, damages or liabilities
referred to herein, then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of
38
such losses, claims, damages or liabilities (i) as between the Company and the
Shareholders holding Registrable Securities covered by a registration statement
and their related Indemnified Parties on the one hand and the underwriters and
their related Indemnified Parties on the other, in such proportion as is
appropriate to reflect the relative benefits received by the Company and such
Shareholders on the one hand and the underwriters on the other, from the
offering of the Shareholders' Registrable Securities, or if such allocation is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits but also the relative fault of the
Company and such Shareholders on the one hand and of such underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between the Company and their related Indemnified
Parties on the one hand and each such Shareholder and their related Indemnified
Parties on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of each such Shareholder in connection with
such statements or omissions, as well as any other relevant equitable
considerations. The relative benefits received by the Company and such
Shareholders on the one hand and such underwriters on the other shall be deemed
to be in the same proportion as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and such Shareholders bear to the total underwriting discounts
and commissions received by such underwriters, in each case as set forth in the
table on the cover page of the prospectus. The relative fault of the Company
and such Shareholders on the one hand and of such underwriters on the other
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 Company and
such Shareholders or by such underwriters. The relative fault of the Company on
the one hand and of each such Shareholder on the other 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 such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Shareholders agree that it would not be just and
equitable if contribution pursuant to this Section 5.8 were determined by pro
rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages or liabilities referred to in the
immediately preceding paragraph shall be
39
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5.8 no underwriter shall be required to contribute
any amount in excess of the underwriting discount applicable to securities
purchased by such underwriter in such offering, less the aggregate amount of
any damages which such underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission, and
no Shareholder shall be required to contribute any amount in excess of the
amount by which the net proceeds realized on the sale of the Registrable
Securities of such Shareholder exceeds the amount of any damages which such
Shareholder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Each Shareholder's obligation to
contribute pursuant to this Section 5.8 is several in the proportion that the
proceeds of the offering received by such Shareholder bears to the total
proceeds of the offering received by all such Shareholders and not joint.
Section 5.9 Participation in Public Offering. No Person may partici xxxx
in any Underwritten Public Offering hereunder unless such Person (a) agrees to
sell such Person's securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and the provisions
of this Agreement in respect of registration rights.
Section 5.10 Cooperation by the Company. In the event any
Shareholder shall Transfer any Registrable Securities pursuant to Rule 144A
under the Securities Act, the Company shall cooperate, to the extent
commercially reasonable, with such Shareholder and shall provide to such
Shareholder such information as such Shareholder shall reasonably request.
Section 5.11 No Transfer of Registration Rights. None of the rights of
Shareholders under this Article 5 shall be assignable by any Shareholder to any
Person acquiring securities of such Shareholder in any Public Offering or
pursuant to Rule 144A of the Securities Act.
40
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS
Section 6.1 Confidentiality. (a) Each Shareholder hereby agrees that
Confidential Information (as defined below) furnished and to be furnished to it
was and will be made available in connection with such Shareholder's investment
in the Company. Each Shareholder agrees that it will use the Confidential
Information only in connection with its investment in the Company and not for
any other purpose. Each Shareholder further acknowledges and agrees that it
will not disclose any Confidential Information to any Person; provided that
Confidential Information may be disclosed (i) to such Shareholder's
Representatives (as defined below) in the normal course of the performance of
their duties or to any financial institution providing credit to such
Shareholder, (ii) to the extent required by applicable law, rule or regulation
(including complying with any oral or written questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process to which a Shareholder is subject; provided that such
Shareholder gives the Company prompt notice of such request(s), to the extent
practicable, so that the Company may seek an appropriate protective order or
similar relief (and the Shareholder shall cooperate with such efforts by the
Company, and shall in any event make only the minimum disclosure required by
such law, rule or regulation)), (iii) to any Person to whom such Shareholder is
contemplating a Transfer of its Shares (provided that such Transfer would not
be in violation of the provisions of this Agreement and as long as such
potential Transferee is advised of the confidential nature of such information
and agrees to be bound by a confidentiality agreement in form and substance
satisfactory to the Company (it being understood that a confidentiality
agreement consistent with the provisions hereof shall be satisfactory to the
Company)) or (iv) if the prior written consent of the Board shall have been
obtained. Nothing contained herein shall prevent the use (subject, to the
extent possible, to a protective order) of Confidential Information in
connection with the assertion or defense of any claim by or against the Company
or any Shareholder. Notwithstanding the foregoing, each Shareholder or
Affiliate of a Shareholder who engages principally in the business of effecting
or recommending transactions, either as a principal or as agent on behalf of
third parties, in, relating to or involving securities (including public
securities of the Company or its subsidiaries) and including, without
limitation, transactions in which such Shareholder or Affiliate may act as an
investment advisor, an investment company, a broker or dealer in securities, an
underwriter or placement agent of securities, a market maker, a specialist, an
arbitrageur, a block positioner or a provider of securities research, may
engage in such activities with respect to securities
41
of the Company so long as, prior to engaging in any such activities (i) such
Shareholder has established an effective "ethical wall" between individuals
receiving Confidential Information and those individuals (including Affiliates)
involved in effectuating trades or other transactions involving such securities
of the Company or its subsidiaries, which "ethical wall" is designed to prevent
any transfer, directly or indirectly, of Confidential Information and (ii) such
purchases, sales, dealings or other transactions are made only in accordance
with such "ethical wall" policies and procedures in accordance with applicable
law, rule or regulation.
(b) "Confidential Information" means any information concerning the
Company and Persons which are or become its subsidiaries or the financial
condition, business, operations or prospects of the Company and Persons which
are or become its subsidiaries in the possession of or furnished to any Share-
holder (including, without limitation by virtue of its present or former right
to designate a director of the Company); provided that the term "Confidential
Information" does not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by a Shareholder
or its partners, directors, officers, employees, agents, counsel, investment
advisers or representatives (all such persons being collectively referred to as
"Representatives") in violation of the Merger Agreement or this Agreement, (ii)
is or was available to such Shareholder on a nonconfidential basis prior to its
disclosure to such Shareholder or its Representatives by the Company or (iii)
was or becomes available to such Shareholder on a non-confidential basis from a
source other than the Company, provided that such source is or was (at the time
of receipt of the relevant information) not, to the best of such Shareholder's
knowledge, bound by a confidentiality agreement with (or other confidentiality
obligation to) the Company or another Person.
Section 6.2 Reports. The Company will furnish all the Equity Investors
with the quarterly and annual financial reports that the Company is required to
file with the Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act promptly after the filing thereof or, in the
event the Company is not required to file such reports, quarterly and annual
reports containing the same information as would be required in such reports on
the date that such reports would otherwise be filed.
Section 6.3 Limitations on Subsequent Registration. The Company shall not
enter into any agreement with any holder or prospective holder of any
securities of the Company (a) which conflicts with the provision of Article V,
(b) that would allow such holder or prospective holder to include such
securities in any
42
registration filed pursuant to Section 5.1 or 5.2 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities would not reduce the amount of the Registrable Securities of
the Shareholders included therein or (c) on terms otherwise more favorable than
this Agreement.
Section 6.4 Limitation on Purchase of Equity Securities. Until the earlier
to occur of (i) the seventh anniversary of the Closing Date or (ii) the date on
which at least 40% of the outstanding Common Stock on a Fully Diluted basis of
the Company is held by Persons other than the Shareholders (the "Trigger
Date"), no Non-THL Shareholder shall acquire any Equity Securities except if
(A) with respect to each Institutional Shareholder, such Shareholder may
acquire Equity Securities in a purchase of Equity Securities pursuant to
Section 4.3 or 4.4 hereof, (B) with respect to each Management Shareholder,
such Shareholder may acquire Equity Securities either in a purchase of Equity
Securities pursuant to Section 4.3 or 4.4 hereof or in any other transaction so
long as THL has been notified at least five Business Days in advance and if
given a reasonable opportunity to consult with such Shareholder prior to the
purchase or (C) in a Transfer from any other Non-THL Shareholder which is other-
wise permitted under the terms of Article 3 hereof.
Section 6.5 Regulated Stockholders.
(a) If a Regulated Stockholder determines that it has a Regulatory
Problem, the Company agrees to take all such actions, subject to Applicable
Law, as are reasonably requested by such Regulated Stockholder (i) to
effectuate and facilitate any transfer by such Regulated Stockholder of any
Equity Securities of the Company then held by such Regulated Stockholder to any
Person designated by such Regulated Stockholder, (ii) to permit such Regulated
Stockholder (or any Affiliate of such Regulated Stockholder) to exchange all or
any portion of the voting Equity Securities then held by such Person on a
share-for-share basis for shares of a class of non-voting Equity Securities of
the Company, which non-voting Equity Securities, except that such new Equity
Securities shall be non-voting and shall be convertible into voting Equity
Securities on such terms as are requested by such Regulated Stockholder in
light of regulatory considerations then prevailing, and (iii) to continue and
preserve the respective allocation of the voting interests with respect to the
Company provided for in this Agreement and with respect to such Regulated
Stockholder's ownership of the Company's voting Equity Securities. Such actions
may include, without limitation, (x) entering into such additional agreements
as are reasonably requested by such Regulated Stockholder to permit any
Person(s) designated by such Regulated Stock-
43
holder to exercise any voting power which is relinquished by such Regulated
Stockholder upon any exchange of voting Equity Securities for non-voting
Equity Securities of the Company, and (y) entering into such additional
agreements, adopting such amendments to the charter documents of the Company
and taking such additional actions as are reasonably requested by such
Regulated Stockholder in order to effectuate the intent of the foregoing.
(b) If a Regulated Stockholder has the right or opportunity to acquire any
of the Company's Equity Securities from the Company, any Stockholder or any
other Person (as the result of a preemptive offer, pro rata offer or
otherwise), at such Regulated Stockholder's request, the Company will offer to
sell (or if the Company is not the seller, to cooperate with the seller and
such Regulated Stockholder to permit such seller to sell) such non-voting
Equity Securities on the same terms as would have existed had such Regulated
Stockholder acquired the Equity Securities so offered and immediately requested
their exchange for non-voting Equity Securities pursuant to clause (a) above.
(c) The Company agrees not to amend or waive the voting or other
provisions of this Agreement or the Company's charter documents if such
amendment or waiver would cause any Regulated Stockholder to have a Regulatory
Problem; provided that any such Regulated Stockholder notifies the Company that
it would have a Regulatory Problem promptly after it has notice of such
amendment or waiver.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Entire Agreement. This Agreement, the Merger Agreement, the
Subscription Agreement and the Equity Warrant Acquisition Agreement constitute
the entire agreement among the parties with respect to the subject matter
hereof and thereof and supersede all prior and contemporaneous agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof and thereof.
Section 7.2 Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any Person other
than the parties hereto,
44
and their respective heirs, successors, legal representatives and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
Section 7.3 Assignability. (a) Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company or any Shareholder; provided that any Person
acquiring shares of Common Stock who is required by the terms of this Agreement
to become a party hereto shall execute and deliver to the Company an agreement
to be bound by this Agreement and shall thenceforth be a "Shareholder."
(b) Any Permitted Transferee of a Management Shareholder who shall become
a party hereto shall be deemed a "Management Shareholder."
(c) Any Permitted Transferee of an Institutional Shareholder who shall
become a party to this Agreement shall be deemed an "Institutional
Shareholder."
Section 7.4 Amendment; Waiver; Termination. (a) No provision of this
Agreement may be waived except by an instrument in writing executed by the
party against whom the waiver is to be effective. No provision of this
Agreement may be amended or otherwise modified except by an instrument in
writing executed by the Company with approval of the Board of Directors and
holders of at least 50% of the shares of Common Stock held by the parties to
this Agreement at the time of such proposed amendment or modification.
Notwithstanding the foregoing or any other provision of this Agreement, THL may
at any time, including after completion of a Qualifying Public Offering, and
without any other action by any other party, effectuate an amendment to this
Agreement to delete in its entirety Section 4.3(a); provided, however, that if
THL causes such Section to be deleted, so long as the THL Entities own at least
10% of their Initial Ownership of shares of Common Stock, the THL Entities
shall not purchase any New Securities from the Company unless the Company
offers each Non-THL Shareholder the right to participate in the purchase of
such New Securities in accordance with Section 4.3(a)(iii) as if it continued
to be in effect.
(b) In addition, any amendment or modification of any provision of this
Agreement that would adversely affect THL may be effected only with the consent
of THL.
45
(c) In addition, any amendment or modification of any provision of this
Agreement that would adversely affect any (i) Institutional Shareholder may be
effected only with the consent of such Institutional Shareholders holding at
least 66 2/3% of the shares of Common Stock held by such Institutional
Shareholders or (ii) Management Shareholder may be effected only with the
consent of the Management Shareholders (which must include the Primary
Executives) holding at least 50% of the shares of Common Stock held by the
Management Shareholders.
(d) This Agreement shall terminate on January 21, 2008 unless earlier
terminated.
Section 7.5 Notices. (a) All notices and other communications given or
made pursuant hereto or pursuant to any other agreement among the parties,
unless otherwise specified, shall be in writing and shall be deemed to have
been duly given and received when sent by fax (with confirmation in writing via
first class U.S. mail) or delivered personally or on the third Business Day
after being sent by registered or certified U.S. mail (postage prepaid, return
receipt requested) to the parties at the fax number or address set forth below
or at such other addresses as shall be furnished by the parties by like notice:
(i) if to the Company, to:
Xxxxxx Scientific International, Inc.
Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxxxxx 00000
Attention: Xxxx X. XxXxxxx, Esq.
Fax: (000) 000-0000
(ii) if to a Management Shareholder who holds Equity Securities
exclusively through the Rabbi Trust, to such Shareholder's attention
at the following address:
Mellon Bank
1 Mellon Bank Building
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Fax: (000)000-0000
46
(iii) if to any other Management Shareholder, to such Shareholder's
attention at the following address:
Xxxxxx Scientific International, Inc.
Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxxxxx 00000
Fax: (000) 000-0000
(iv) if to a THL Associate, to such Shareholder's attention at the
following address:
Xxxxxx X. Xxx Company
00 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
(v) if to any other Shareholder, to such Shareholder at the address
specified by such Shareholder on the signature pages of this Agree-
ment.
Any Shareholder may change its notice address by providing notice to the
Company with a copy, in the case of the Non-THL Shareholders, to
Xxxxxx X. Xxx Company
00 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. XxXxxx
Fax: (000) 000-0000
47
Any Person who becomes a Shareholder shall provide its address and fax
number to the Company, which shall promptly provide such information to each
Non-THL Shareholder.
(b) Notices required to be given pursuant to Sections 5.1(a) and 5.1(b)
and Section 5.2 by the Company shall be deemed given only if such notices are
also be given telephonically and by fax to the following persons (or any other
individual the respective entities may designate in writing to the Company to
replace such person):
(i) for the benefit of the THL Entities, to Xxxxxxx X. XxXxxx (tel:
000-000-0000; fax: 000-000-0000), with a copy to Xxxx X. Xxxxxxx (tel:
000-000-0000; fax: 000-000-0000);
(ii) for the benefit of the Management Shareholders, to Xxxx XxXxxxx
(tel: 000-000-0000; fax: 000-000-0000), with a copy to Xxxx Xxxxx (tel:
000-000-0000; fax: 000-000-0000);
(iii) for the benefit of the DLJ Entities, to Xxxxxxxx Xxxx (tel:
000-000-0000; fax: 000-000-0000) and Xxxx Xxxxxxx (tel: 000-000-0000; fax:
000-000-0000), with a copy to Xxxxxx X. Xxxxx, Xx. (tel: 000-000-0000;
fax: 000-000-0000);
(iv) for the benefit of Chase Equity, to Xxxxx Xxxxxxxx (tel:
000-000-0000; fax: 000-000-0000), with a copy to Xxxx X. Xxxxxx (tel: 212-
000-0000; fax 000-000-0000);
(v) for the benefit of the Xxxxxxx Xxxxx Entities, to Xxxxxx Xxxxx
(tel: 000-000-0000; fax: 000-000-0000) and Xxxxxxxx Xxxxxx (tel: 212-449-
9812; fax: 000-000-0000), with a copy to Xxxxxxx Xxxxxxxxx (tel: 212-449-
2973; fax: 000-000-0000).
Section 7.6 Headings. The headings contained in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
48
Section 7.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
Section 7.8 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the conflicts of laws rules of such state.
Section 7.9 Specific Performance. Each party hereto acknowledges that the
remedies at law of the other parties for a breach or threatened breach of this
Agreement would be inadequate and, in recognition of this fact, any party to
this Agreement, without posting any bond, and in addition to all other remedies
which may be available, shall be entitled to obtain equitable relief in the
form of specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy which may then be available.
Section 7.10 Consent to Jurisdiction; Expenses. (a) Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Agreement or the transactions contemplated
hereby shall be brought in any Federal Court sitting in the State of Delaware
or any Delaware State court sitting in Delaware, and each of the parties hereby
consents to the exclusive jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party by any method provided in Section
7.5 shall be deemed effective service of process on such party and consents to
the personal jurisdiction of any Federal Court sitting in the State of
Delaware, or any Delaware State court sitting in Delaware.
(b) In any dispute arising under this Agreement among any of the parties
hereto, the costs and expenses (including, without limitation, the reasonable
fees and expenses of counsel) incurred by the prevailing party shall be paid by
the party that does not prevail.
Section 7.11 Representative.
49
(a) Each THL Entities hereby designates and appoints (and each Permitted
Transferee of each such THL Entities is hereby deemed to have so designated and
appointed) each of Xxxxxxx X. XxXxxx, Xxxxx Xxxxxxxx and Xxxx Xxxxxx, as his
attorney-in-fact with full power of substitution for each of them (the "THL
Entities' Representative"), to serve as the representative of each such person
to perform all such acts as are required, authorized or contemplated by this
Agreement to be performed by such person and hereby acknowledges that the THL
Entities' Representative shall be the only person authorized to take any action
so required, authorized or contemplated by this Agreement by each such person.
Each such person further acknowledges that the foregoing appointment and
designation shall be deemed to be coupled with an interest and shall survive
the death or incapacity of such person. Each such person hereby authorizes (and
each such Permitted Transferee shall be deemed to have authorized) the other
parties hereto to disregard any notice or other action taken by such person
pursuant to this Agreement except for the THL Entities' Representative. The
other parties hereto are and will be entitled to rely on any action so taken or
any notice given by the THL Entities' Representative and are and will be
entitled and authorized to give notices only to the THL Entities' Represen-
tative for any notice contemplated by this Agreement to be given to any such
person. A successor to the THL Entities' Representative may be chosen by a
majority in interest of the THL Entities' Shareholders, provided that notice
thereof is given by the new THL Entities' Representative to the Company and to
each Non-THL Shareholder.
(b) Each DLJ Entities hereby designates and appoints (and each Permitted
Transferee of each such DLJ Entities' is hereby deemed to have so designated
and appointed) DLJ Merchant Banking II, Inc., as his attorney-in-fact with full
power of substitution for each of them (the "DLJ Entities' Representative"), to
serve as the representative of each such person to perform all such acts (other
than voting of shares of Common Stock) as are required, authorized or
contemplated by this Agreement to be performed by such person and hereby
acknowledges that the DLJ Entities' Representative shall be the only person
authorized to take any action so required, authorized or contemplated by this
Agreement by each such person. Each such person hereby authorizes (and each
such Permitted Transferee shall be deemed to have authorized) the other parties
hereto to disregard any notice or other action taken by such person pursuant to
this Agreement except for the DLJ Entities' Representative. The other parties
hereto are and will be entitled to rely on any action so taken or any notice
given by the DLJ Entities' Representative and are and will be entitled and
authorized to give notices only to the DLJ Entities' Representative for any
notice contemplated by this Agreement to be given to any such person. A
successor
50
to the DLJ Entities' Representative may be chosen by a majority in interest of
the DLJ Entities' Shareholders, provided that notice thereof is given by the
new DLJ Entities' Representative to the Company and to each other DLJ Entity
Shareholder.
(c) Each Xxxxxxx Xxxxx Entities hereby designates and appoints (and each
Permitted Transferee of each such Xxxxxxx Xxxxx Entities is hereby deemed to
have so designated and appointed) KECALP Inc., as his attorney-in-fact with
full power of substitution for each of them (the "Xxxxxxx Xxxxx Entities
Representative"), to serve as the representative of each such person to perform
all such acts as are required, authorized or contemplated by this Agreement to
be performed by such person and hereby acknowledges that the Xxxxxxx Xxxxx
Entities Representative shall be the only person authorized to take any action
so required, authorized or contem plated by this Agreement by each such person.
Each such person further acknowledges that the foregoing appointment and
designation shall be deemed to be coupled with an interest and shall survive
the death or incapacity of such person. Each such person hereby authorizes (and
each such Permitted Transferee shall be deemed to have authorized) the other
parties hereby to disregard any notice or other action taken by such person
pursuant to this Agreement except for the Xxxxxxx Xxxxx Entities
Representative. The other parties hereto are and will be entitled to rely on
any action so taken or any notice given by the Xxxxxxx Xxxxx Entities
Representative and are and will be entitled and authorized to give notices only
to the Xxxxxxx Xxxxx Entities Representative for any notice contemplated by
this Agreement to be given to any such person. A successor to the Xxxxxxx Xxxxx
Entities Representative may be chosen by a majority in interest of the Xxxxxxx
Xxxxx Entities' Shareholders, provided that notice thereof is given by the new
Xxxxxxx Xxxxx Entities Representative to the Company and to each other Xxxxxxx
Xxxxx Entity Shareholder.
(d) Each Management Shareholder hereby designates and appoints (and each
Permitted Transferee of each such Management Shareholder is hereby deemed to
have so designated and appointed) Xxxx X. Xxxxxxx, as his attorney-in-fact
with full power of substitution for each of them (the "Management Representa-
tive"), to serve as the representative of each such person to perform all such
acts as are required, authorized or contemplated by this Agreement to be
performed by such person and hereby acknowledges that the Management
Representative shall be the only person authorized to take any action so
required, authorized or contemplated by this Agreement by each such person.
Each such person further acknowledges that the foregoing appointment and
designation shall be deemed to be coupled with an interest and shall survive
the death or incapacity of such person. Each such person hereby authorizes (and
each such Permitted Transferee shall be deemed to have authorized)
51
the other parties hereby to disregard any notice or other action taken by such
person pursuant to this Agreement except for the Management Representative. The
other parties hereto are and will be entitled to rely on any action so taken or
any notice given by the Management Representative and are and will be entitled
and authorized to give notices only to the Management Representative for any
notice contemplated by this Agreement to be given to any such person. A
successor to the Management Representative may be chosen by a majority in
interest of the Management Shareholders, provided that notice thereof is given
by the new Management Representative to the Company and to each other
Management Shareholder.
Section 7.12 Severability. If one or more provisions of this Agreement
are held to be unenforceable to any extent under applicable law, such provision
shall be interpreted as if it were written so as to be enforceable to the
maximum possible extent so as to effectuate the parties' intent to the maximum
possible extent, and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms to the maximum extent permitted by law.
52
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
XXXXXX SCIENTIFIC INTERNATIONAL, INC.
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President and
General Counsel
53
THL Equity Shareholders:
XXXXXX X. XXX EQUITY FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, as General Partner
By: THL Equity Trust III,
as General Partner
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title:
XXXXXX X. XXX FOREIGN FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, as General Partner
By: THL Equity Trust III,
as General Partner
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title:
54
THL FSI EQUITY INVESTORS, L.P.
By: THL Equity Advisors III Limited Part
nership, as General Partner
By: THL Equity Trust III,
as General Partner
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title:
THL-CCI LIMITED PARTNERSHIP
By: THL Investment Management Corp.
as General Partner
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title:
Management Shareholders:
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxxx
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
DLJ Entities' Shareholders:
DLJ MERCHANT BANKING PARTNERS II, L.P.
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
DLJ MERCHANT BANKING PARTNERS II-A, L.P.
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
DLJ OFFSHORE PARTNERS II, C.V.
By: DLJ Merchant Banking II, Inc.,
as advisory general partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
DLJ DIVERSIFIED PARTNERS, L.P.
By: DLJ Diversified Partners, Inc.,
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
DLJ DIVERSIFIED PARTNERS - A, L.P.
By: DLJ Diversified Partners, Inc.,
as managing general partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
DLJ MILLENNIUM PARTNERS, L.P.
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
DLJ MILLENNIUM PARTNERS - A, L.P.
By: DLJ Merchant Banking II, Inc.,
as managing general partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
DLJMB FUNDING II, INC.
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
UK INVESTMENT PLAN 1997 PARTNERS
By: Xxxxxxxxx, Lufkin & Xxxxxxxx Inc.,
as general partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
DLJ EAB PARTNERS, L.P.
By: DLJ LBO Plans Management Corporation,
as managing general partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
DLJ ESC II, L.P.
By: DLJ LBO Plans Management Corporation,
as general partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
DLJ FIRST ESC, L.P.
By: DLJ LBO Plans Management Corporation,
as general partner
By: /s/ Xxxx X. Xxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxx
Title:
The address for each of the DLJ
Entities listed above is:
c/o DLJ Merchant Banking II, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx
Title:
Address:
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxxxx Xxxxx Entities:
ML IBK POSITIONS, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title:
KECALP INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title:
XXXXXXX XXXXX KECALP L.P. 1997
By: KECALP Inc., as general partner
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title:
The address for each of the Xxxxxxx
Xxxxx Entities listed above is:
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Individual Shareholders:
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxx
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Name: The 1995 Harkins Gift Trust
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Money Purchase Pension Plan
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
By: /s/ X. Xxxxxx Xxxx
----------------------------------------
Name: X. Xxxxxx Xxxx
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxx
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxxx Family Limited
Partnership
By: /s/ Xxxxxxx X. XxXxxx
----------------------------------------
Name: Xxxxxxx X. XxXxxx
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
By: /s/ Xxxxxx X. Xxxxx, Xx.
----------------------------------------
Name: Xxxxxx X. Xxxxx, Xx.
By: /s/ Xxxx X. Xxxxx
----------------------------------------
Name: Xxxx X. Xxxxx
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
By: /s/ Xxxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxxx X. Xxxxxx
By: /s/ Xxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxxx
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: THL-CCI Limited Partnership
By: Xxxxx X. Master
Title: Vice President
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxx
By: /s/ Xxxxxxxx X. Xxxxx
----------------------------------------
Name: First Trust Co. FBO
Xxxxxxxx X. Xxxxx
By: /s/ Xxxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxx
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
AMENDED AND RESTATED
INVESTORS' AGREEMENT
COUNTERPART SIGNATURE PAGE
By: /s/ Mellon Bank, as Trustee
----------------------------------------
MELLON BANK, NA, as Trustee Mellon Bank,
NA, solely in its capacity as Trustee
for XXXXXX SCIENTIFIC INTERNATIONAL INC.
TRUST DATED JANUARY 21, 1998 (as
directed by XXXXXX SCIENTIFIC
INTERNATIONAL INC.) and not in its
individual capacity
SCHEDULE I
CERTAIN NAMED INDIVIDUAL SHAREHOLDERS OF THL
Xxxxx X. Xxxxxxx
The 1995 Harkins Gift Trust
Xxxxxx X. Xxxxxxxx Money Purchase Pension Plan (Xxxxx)
Xxxxx X. Xxxxxx
X. Xxxxxx Xxxx
Xxxxx X. Xxxxxxxx
Xxxxxxxx Family Limited Partnership
Xxxxxxx X. XxXxxx
Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxx, Xx.
Xxxx X. Xxxxx
Xxxxxx X. Xxxxxxxxx
Xxxx X. Xxxxxx
Xxxxxxxx X. Xxxxxx
Xxxx X. Xxxxxxxx
Wenty X. Xxxxxx
Xxxxxx X. Xxxxxxx
First Trust Co. FBO Xxxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
Xxxxx Xxxxxx
Xxxxxxx X. Xxxxxxx
SCHEDULE II
THL INDIVIDUALS
Xxxxxx X. Xxx
Xxxxxxx X. Xxx
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxxx
Xxxxx Xxxxxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxx
Xxxxxx & Co. for Xxxxxx Xxxxxx Xxx 1988 Irrevocable Trust
Xxxxxx & Co. for Xxxxxxx Xxxxxxx Xxx 1988 Irrevocable Trust
THL Investment Management Corp.
