EXHIBIT 10.4
[EXECUTION COPY]
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STOCKHOLDERS AGREEMENT
AND
SUBSCRIPTION AGREEMENT
AMONG
LESLIE'S POOLMART, INC.
GREEN EQUITY INVESTORS II, L.P.
XXXXXXX X. XXXXXXX
XXXXXXX X. XXXXXXXX
XXXX XXXXXXXX
XXXXX X. XXXXXXXXX
THE TRUSTEES OF THE XXXXXXXXX FAMILY TRUST
OCCIDENTAL PETROLEUM CORPORATION
AND
THE STOCKHOLDERS IDENTIFIED ON THE SIGNATURE PAGES
TABLE OF CONTENTS
Page
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1. REPRESENTATIONS AND WARRANTIES.......................................... 2
(a) Company Representations............................................. 2
(b) Stockholder Representations and Warranties.......................... 2
2. SUBSCRIPTION FOR COMMON STOCK; CALL OPTION.............................. 3
(a) Common Stock Subscription........................................... 3
(b) Call Option......................................................... 4
3. COMPLIANCE WITH SECURITIES LAW.......................................... 4
4. TRANSFERS OF SECURITIES................................................. 4
(a) Prohibition on Transfers............................................ 4
(b) Transfer Procedure; Right of First Refusal.......................... 4
(c) Transfers to Related Transferees.................................... 6
(d) Legend on Certificates.............................................. 6
(e) Transfers in Violation of this Agreement............................ 7
5. COMPANY CALL OPTION..................................................... 7
(a) Call Purchase Event and Purchase Price.............................. 7
(b) Exercise of Call Option............................................. 8
6. REGISTRATION RIGHTS..................................................... 8
(a) Demand Registration Rights.......................................... 8
(b) Piggyback Registration Rights; Cutbacks............................. 9
(c) Expenses of Registration............................................ 11
(d) Registration Procedures............................................. 11
(e) Indemnification..................................................... 14
(f) Holdback Amount..................................................... 17
(g) Assignment and Assumption........................................... 17
(h) Stock Option Plans.................................................. 17
7. DRAG-ALONG SALES AND TAG-ALONG SALES.................................... 18
(a) Drag-Along Sales.................................................... 18
(b) Optional Participation in Sales of Common Stock (Tag-Along Sales)... 19
(c) Obligations of Drag-Along Sellers................................... 20
8. TERMINATION AND LAPSE OF RIGHTS AND RESTRICTIONS; APPLICATIONS TO OTHER
STOCK AND ADJUSTMENTS................................................... 20
(a) Termination of Provisions........................................... 20
(b) Application......................................................... 20
9. ELECTION OF DIRECTORS................................................... 20
10. CERTAIN ADDITIONAL AGREEMENTS........................................... 21
(a) Right to Participate in Securities Issuances........................ 21
(b) Right to Participate in Equity Repurchases.......................... 21
(c) Affiliate Transactions.............................................. 22
(d) Change of Control Transactions...................................... 22
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(e) Information............................................................. 22
11. NOTICES................................................................. 22
12. GENERAL................................................................. 23
13. ADDITIONAL CLASS II STOCKHOLDERS........................................ 24
14. ARBITRATION............................................................. 25
(a) Scope............................................................... 25
(b) Deposition.......................................................... 25
(c) JAMS................................................................ 25
(d) Selection of Arbitrator............................................. 25
(e) Governing Law....................................................... 25
(f) Procedures.......................................................... 26
(g) Award............................................................... 26
15. DEFINITIONS............................................................. 26
ANNEX A COMMON STOCK CAPITAL STRUCTURE.......................................A-1
ANNEX B TERMS OF NQ OPTION PLAN..............................................B-1
ANNEX C TERMS OF INCENTIVE STOCK OPTION PLAN.................................C-1
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STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "AGREEMENT") is entered into as of June
___, 1997, by and among (i) Leslie's Poolmart, Inc., a Delaware corporation (the
"COMPANY"), (ii) Green Equity Investors II, L.P., a Delaware limited partnership
("GEI"), (iii) Xxxxxxx X. Xxxxxxxx, Xxxx Xxxxxxxx, Xxxxxxx X. Xxxxxxx, Xxxxx X.
XxXxxxxxx and Xxxxxxx X. XxXxxxxxx, T.R.U.A. DTD 3/15/90 The XxXxxxxxx Family
Trust (collectively referred to as the "HPA GROUP") and (iv) Occidental
Petroleum Corporation, a Delaware corporation ("OCCIDENTAL," and together with
GEI and the HPA Group, the "CLASS I STOCKHOLDERS") and the individual
stockholders named on the signature pages hereto (the "CLASS II STOCKHOLDERS").
WHEREAS, on the date hereof the Company has consummated a merger (the
"MERGER") with Poolmart USA Inc., a Delaware corporation ("POOLMART"), pursuant
to which certain of the outstanding shares of common stock of the Company, $.001
par value per share (which authorized class of stock is hereinafter called
"COMMON STOCK"), remained outstanding and the shares of capital stock of
Poolmart were converted into capital stock of the Company; and
WHEREAS, concurrently with the Merger, GEI acquired 1,055,172 shares of
Common Stock, the HPA Group collectively retained 359,505 shares of Common
Stock, Occidental acquired 28,000 shares of Exchangeable Cumulative Redeemable
Preferred Stock, Series A of the Company (the "PREFERRED STOCK") and warrants
(the "WARRANTS") to purchase 252,996 shares of Common Stock, subject to
adjustment (the "WARRANT SHARES"), certain of the Class II Stockholders are
subscribing for Common Stock and certain of the Class II Stockholders will
acquire certain nonqualified options and incentive stock options, as described
on Annex B and Annex C, respectively (collectively, the "OPTIONS" and the Common
Stock issuable upon exercise thereof, the "OPTION SHARES"); and
WHEREAS, the Company and the Class I and Class II Stockholders
(collectively, the "STOCKHOLDERS") desire to enter into certain agreements
concerning their holdings of Common Stock, Warrants, Warrant Shares, Options and
Option Shares (collectively, together with such additional shares of Common
Stock, Options or securities exercisable for or convertible into Common Stock as
they may hereafter acquire, the "SECURITIES");
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Representations and Warranties.
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(a) Company Representations. The Company hereby represents and
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warrants to the Class I and Class II Stockholders as follows:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has
full corporate power and authority to carry on its business as and where it
is now being conducted. The Company
has full corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of the Company. This Agreement has been duly executed and delivered by
the Company. This Agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforceability is considered in
a proceeding at law or in equity).
(ii) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will violate or
conflict with (A) any provision of the Certificate of Incorporation or
Bylaws of the Company, or (B) any agreement, indenture, undertaking,
permit, license or other instrument to which the Company is a party or by
which it or any of its properties may be bound or affected, other than such
violations and conflicts which are not reasonably likely to (1) prevent or
materially delay consummation of the transactions contemplated by this
Agreement or (2) prevent the Company from performing its obligations under
this Agreement.
(iii) The Company has no outstanding capital stock or securities
convertible into or exchangeable or exercisable for any shares of its
capital stock, nor any outstanding rights to subscribe for or to purchase,
or any options for the purchase of, or any agreement providing for the
issuance (contingent or otherwise) of any shares of its capital stock or
any securities convertible into or exchangeable or exercisable for any
shares of its capital stock, other than the Preferred Stock and the
Securities.
(b) Stockholder Representations and Warranties.
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(i) Each Stockholder hereby severally and not jointly
represents and warrants that if it is an entity, it is a corporation,
limited partnership, trust or other entity duly organized and validly
existing under the laws of its state of organization.
(ii) Each Stockholder hereby severally and not jointly
represents and warrants that it has full power and authority and, in the
case of an individual, legal and fiduciary capacity to execute, deliver and
perform this Agreement and to consummate the transactions contemplated
hereby. This Agreement constitutes a legal, valid and binding obligation of
such Stockholder, enforceable against such Stockholder in accordance with
its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforceability is considered in
a proceeding at law or in equity).
(iii) Each of the Class II Stockholders hereby severally and
not jointly represents and warrants that (A) as a result of his
relationship with the Company and experience in financial matters, is able
to evaluate the acquisition of Common Stock and
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Options, the business and proposed capital structure of the Company and the
risks inherent therein; (B) has been given the opportunity to obtain any
additional information or documents, and to ask questions and receive
answers, from the officers and representatives of the Company to the extent
necessary to evaluate the risks and merits of an investment in the Company;
(C) has determined that the acquisition of Common Stock and Options is
consistent both in nature and amount, with his overall investment program
and financial condition, and that his financial condition is such that he
can afford to bear the economic risk of holding unregistered Securities for
which there is no market and acknowledges that he may suffer a complete
loss of such investment.
(iv) Each of GEI, the HPA Group and each Class II Stockholder
hereby severally and not jointly represents and warrants that (A) the
Securities acquired by GEI, the HPA Group and each Class II Stockholder are
being acquired for such Stockholder's own account for investment, without
any present intention of selling or further distributing the same, (B) such
Stockholder acknowledges that the no liquid trading market currently exists
or is expected to exist in the foreseeable future and as a result, such
Stockholder may be unable to sell any of the Securities for an indefinite
period of time and (C) such Stockholder acknowledges that the Company has
no obligation, except as set forth in Section 6 hereof, to register any of
the Securities.
(v) Each member of the HPA Group represents and warrants that
he or it is an accredited investor within the meaning of Regulation D under
the Act.
Each Stockholder acknowledges that the Company is relying upon the truth and
accuracy of the above representations to a material degree in effectuating the
transactions contemplated hereby.
2. Subscription for Common Stock; Call Option.
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(a) Common Stock Subscription(a).Common Stock Subscription. Each
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Class II Stockholder reflected as a purchaser of Common Stock on the signature
pages hereto (a "PURCHASER") severally agrees to purchase, and the Company
agrees to sell to such Purchaser, the number of shares of Common Stock set forth
opposite his or her name on Annex A hereto, at the purchase price of $14.50 per
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share (collectively, the "Subscription Stock"). Each Purchaser severally agrees
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to make payment for the Subscription Stock by delivery to the Company of a
certified check or wire transfer in the amount of the purchase price therefore.
(b) Call Option. Each Class II Stockholder severally agrees that the
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Company and certain other Stockholders shall have a call ("Call Option") in
respect of the Subscription Stock, as well as in respect of the Non-Qualified
Options described on Annex B hereto (the "NQ OPTIONS") and shares issued upon
the exercise thereof (collectively, "Callable Securities"). As to each holder of
Callable Securities, the Call Option shall apply only to (i) two-thirds of all
of such holder's Callable Securities if the Call Option is exercised before the
first anniversary of the date hereof, and (ii) one-third of the holder's
Callable Securities of each category if the Call Option is exercised on or after
the first anniversary of the date hereof but before the second anniversary of
the date hereof. Except as expressly provided in this Section 2(b), the Call
Option
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shall not otherwise apply to Subscription Stock, NQ Options or shares issued
upon the exercise thereof. Subscription Stock, NQ Options and shares issuable
upon the exercise thereof that are Callable Securities are respectively
hereinafter referred to as "Call Option Stock," "Call NQ Options" and "Call
Option Shares."
3. Notice of Transfer; Compliance with Securities Law. In addition to the
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other applicable restrictions provided in this Agreement, each Stockholder
(other than Occidental) agrees that prior to effecting any Transfer of any
Securities (other than a Transfer to the Company) such Stockholder will give not
less than 15 days' advance written notice to the Company describing the manner
of such proposed Transfer. Each Stockholder further agrees that he or it will
not effect such proposed Transfer until either (A) such Stockholder has provided
to the Company, if so requested by the Company, an opinion of counsel reasonably
satisfactory in form and substance to the Company that such proposed Transfer is
exempt from registration under the Act and any applicable state securities laws,
or (B) a registration statement under the Act covering such proposed Transfer
has been filed by the Company and become effective under the Act and compliance
with applicable state securities laws has been effected and in each case other
than in respect of the Warrants or the Warrant Shares, the Company's independent
public accountants have advised the Company that it is not reasonably likely
that such Transfer will necessitate a new basis for accounting for the Company.
Each Stockholder also agrees that he or it will not Transfer any Securities
except in compliance with the registration requirements of the Act (or an
exemption therefrom), and the relevant state securities laws applicable to the
Stockholder's actions.
4. Transfers of Securities.
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(a) Prohibition on Transfers. Each of the members of the HPA Group
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and each of the Class II Stockholders hereby agrees that such Stockholder will
not Transfer any Securities (or any interest therein) now or hereafter at any
time owned by such Stockholder, except for Transfers permitted pursuant to this
Section 4, Section 5 or Section 7 of this Agreement (each such Transfer being a
"PERMITTED TRANSFER").
(b) Transfer Procedure; Right of First Refusal. If any member of
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the HPA Group or any of the Class II Stockholders shall have received a bona
fide arm's-length written offer (a "BONA FIDE OFFER") which such Stockholder
desires to accept from an independent party unrelated to such Stockholder (the
"OUTSIDE PARTY") for the purchase of Securities for consideration consisting
entirely of cash (it being understood that no sale for any other consideration
would be a Permitted Transfer), then such Stockholder shall give a notice in
writing (the "OPTION NOTICE") to each Class I Stockholder and the Company
setting forth such desire, which notice shall set forth at least the name and
address of the Outside Party and the price and terms of the Bona Fide Offer and
be accompanied by a copy of the Bona Fide Offer. Upon the giving of such Option
Notice, the Company, and to the extent the Company elects not to do so, the
respective Stockholders set forth in the following sentence (each an "ELECTING
STOCKHOLDER") shall have an option to purchase all, but not less than all, of
the Securities specified in the Option Notice, such option to be exercised
within 30 days after the giving of such Option Notice by giving a counter-notice
(the "ELECTION NOTICE") to the Stockholder. If the Stockholder sending an Option
Notice is (i) a Class II Stockholder, then GEI, Occidental and the HPA Group
shall be
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entitled to be Electing Stockholders; or (ii) a member of the HPA
Group, then GEI, Occidental and the other members of the HPA Group shall be
entitled to be Electing Stockholders. Where more than one Electing Stockholder
desires to participate in a purchase pursuant to an Option Notice, such
Stockholders shall participate, pro rata based upon their respective Equity
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Ownership (but in the case of Occidental, Fully Diluted Ownership) in the
Company, with the portion attributable to Stockholders declining to be Electing
Stockholders being redistributed to the remaining Stockholders pro rata based
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upon their respective Equity Ownership in the Company (but in the case of
Occidental, Fully Diluted Ownership), it being understood that the Company may
elect to purchase up to all of the Securities and any remainder shall be
prorated as aforesaid. The Company and, if applicable, the Electing Stockholders
shall be severally obligated to purchase, and the Stockholder shall be obligated
to sell, the Securities covered by such Election Notice at the cash price and
terms indicated in the Bona Fide Offer, provided that the closing of the
purchase by the Electing Stockholder shall be held on a business day within 30
days after the giving of the Election Notice at 10:30 a.m., California time, at
the principal executive office of the Company, or at such other time and place
as may be mutually agreed to by the Stockholder, the Company and, if applicable,
the Electing Stockholders. If an Election Notice is not timely given by the
Company and/or one or more Electing Stockholders within the period specified
above after an Option Notice has been given, the Stockholder thereafter, at any
time within a period of four months from the giving of such Option Notice, may
Transfer all (but not less than all) of the Securities covered by such Option
Notice to the Outside Party at the cash price and terms contained in the Bona
Fide Offer; provided, however, that such Outside Party and such Securities
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shall thereafter be subject to and bound by all of the provisions of this
Agreement as if such party were a Class II Stockholder except as otherwise
provided in Section 6(g) and, as a condition precedent to the completion of such
Transfer of Securities to such Outside Party, shall execute and deliver to the
Company a written consent to such effect in form and substance satisfactory to
the Company; and provided, further, however, that to the extent that the
Stockholder has not so Transferred such Securities to the Outside Party within
such four-month period, then such Securities thereafter shall continue to be
subject to all of the restrictions contained in this Agreement. Any election in
any instance by the Company or any Stockholder entitled to be Electing
Stockholders not to exercise its rights under this clause (b) shall not
constitute a waiver of such rights with respect to any other actual or proposed
Transfer of Securities.
(c) Transfers to Related Transferees. Notwithstanding anything to
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the contrary contained in clauses (a) and (b) of this Section 4, each member of
the HPA Group and Class II Stockholder may Transfer Securities to a Related
Transferee provided that such Related Transferee shall first (i) execute a
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written consent in form and substance satisfactory to the Company to be bound by
all of the applicable provisions of this Agreement, and (ii) give a duplicate
original of such consent to the Company. In the event of any Transfer by a
member of the HPA Group or any Class II Stockholder to a Related Transferee of
all or any part of his or its Securities (or in the event of any subsequent
Transfer by any such Related Transferee to another Related Transferee of the
Stockholder), such Related Transferee shall receive and hold such Securities
subject to the terms of this Agreement and the rights and obligations hereunder
of a Stockholder as though such Securities were still owned by the transferor
Stockholder, and such Related Transferee shall be deemed to be such transferor
Stockholder for the purposes of this Agreement. If the Related Transferee
acquired Securities from a Stockholder, such Related
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Transferee shall be entitled to participate, collectively with the Stockholders
of the same group, in the registration rights provided for in Section 6 hereof.
There shall be no further Transfer of such Securities by a Related Transferee
except between and among such Related Transferee, the original Stockholder and
other Related Transferees, or except as otherwise permitted by this Agreement.
(d) Legend on Certificates. Each certificate of the Company issued
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to represent any of the Securities shall bear the following (or substantially
equivalent) legends on the face or reverse side thereof, to the extent
applicable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (I) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE
UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION
FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES LAW,
RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING RULE 144, PROVIDED AN
OPINION OF COUNSEL IS FURNISHED TO THE COMPANY, IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE
SECURITIES LAW IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSFER COMPLIES WITH THE APPLICABLE PROVISIONS OF THE STOCKHOLDERS
AGREEMENT DATED AS OF JUNE 11, 1997, A COPY OF WHICH IS ON FILE AT THE
OFFICES OF THE COMPANY.
Any stock certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon the
completion of a public offering) shall also bear such (or substantially
equivalent) legends, unless the Security represented by such certificate is no
longer subject to the provisions of this Agreement and, in the opinion of
counsel for the Company, the Security represented thereby need no longer be
subject to restrictions pursuant to the Act or applicable state securities law.
(e) Transfers in Violation of this Agreement. The Company shall not
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be required to record on its books and records, or otherwise to recognize or
facilitate, any Transfer of Securities in violation of this Agreement, nor shall
the Company be required to issue any certificate for Securities Transferred in
violation of this Agreement.
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5. Company "Call" Option.
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(a) Call Purchase Event and Purchase Price. Upon the termination
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of a Class II Stockholder's employment with the Company or its subsidiaries for
any reason (including, without limitation, the voluntary termination, dismissal,
involuntary termination, Retirement, death or Permanent Disability of the
Stockholder) (a "CALL PURCHASE EVENT"), the Company, and to the extent the
Company elects not to do so and, in the case of the NQ Options, such purchase
may otherwise be made pursuant to the NQ Option Plan, GEI, Xxxxxxx X. Xxxxxxxx
and Xxxxx X. XxXxxxxxx (or any Related Transferee of the latter) (collectively
the "PURCHASING GROUP") may, collectively and pro rata based upon their
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respective Equity Ownership in the Company, exercise the Call Option by written
notice (a "PURCHASE NOTICE") delivered to the Class II Stockholder within 90
days after such Call Purchase Event, elect to purchase, and, upon the giving of
such notice, the Company, and if applicable, the Purchasing Group shall be
severally obligated to purchase and the Class II Stockholder (and the Related
Transferees, if any, of the Class II Stockholder) (in each case, the "SELLER")
shall be obligated to sell all, or any lesser portion indicated in the Purchase
Notice, of the Callable Securities owned at the time of the Call Purchase Event
by the Seller, for consideration calculated as to each share of Call Option
Stock and each Call Option Share or Call NQ Option, as the case may be, as
follows:
(i) in the case of voluntary termination by a Class II
Stockholder holding Call NQ Options, an amount equal to the difference
between the cash consideration per share paid in the Merger and the
exercise price of the Call NQ Option; or
(ii) in the case of any other termination (including without
limitation dismissal, involuntary termination, death, Retirement or
Permanent Disability ("OTHER TERMINATION"), of a Class II Stockholder
holding Call NQ Options, the difference between the higher of (A) the cash
consideration per share paid in the Merger and (B) the Fair Market Value of
the underlying shares on the date of the Call Purchase Event, and the
exercise price of the Call NQ Option; or
(iii) in the case of voluntary termination by a Class II
Stockholder holding Call Option Stock, the purchase price therefor; or
(iv) in the case of Other Termination of a Class II
Stockholder holding Call Option Stock, the higher of the Fair Market Value
thereof on the date of the Call Purchase Event and the purchase price paid
by the holder therefor; or
(v) in the case of voluntary termination by a Class II
Stockholder holding Call Option Shares, an amount equal to the cash
consideration per share paid in the Merger; or
(vi) in the case of Other Termination of a Class II
Stockholder holding Call Option Shares, the higher of the Fair Market Value
of such shares on the date of the Call Purchase Event and the amount
payable pursuant to clause (v) above.
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(b) Exercise of Call Option. In the event the Company and/or any
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Class I Stockholder elects not to participate in the purchase of Callable
Securities pursuant to the Call Option, all remaining Purchasing Group
Stockholders desiring so to participate may do so, pro rata amongst such
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remaining Purchasing Group Stockholders based upon their respective Equity
Ownership in the Company, or in any other proportion as they may agree. The
closing for all purchases and sales of Callable Securities pursuant to this
Section 5 shall be at the principal executive offices of the Company at 10:30
a.m., California time, on the 60th day after the giving of the applicable
Purchase Notice. The purchase price for the purchase and sale of Callable
Securities shall be paid in cash, by certified or official bank check. The
Seller(s) of Callable Securities sold pursuant to this Section 5 shall cause
such Securities to be delivered to the Purchasing Group or the Company at the
relevant closing free and clear of all liens, charges or encumbrances of any
kind. Such Seller(s) shall take all actions as the Purchasing Group or the
Company shall request as necessary to vest in the members of the Purchasing
Group and/or the Company at such closing such Callable Securities, free and
clear of all liens, charges and encumbrances incurred, voluntarily or
involuntarily, by or through Seller(s).
6. Registration Rights.
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(a) Demand Registration Rights. At any time on or after January 00,
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0000, xxxx xx (x) XXX, (xx) the HPA Group collectively, and (iii) Occidental
shall be entitled, respectively, to request a registration (a "DEMAND
REGISTRATION") of any of its Registrable Securities, and at such time as the
Company qualifies for registration of securities on Form S-3 or any successor
short-form, one additional registration that remains effective for a period of
at least 180 days on such form. In such event, the Company shall:
(i) as soon as reasonably practicable, and at its expense as
set forth in Section 6 hereof, effect such registration and all such
qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of the Class
I Stockholder's Registrable Securities as are specified in such request on
the form specified in such request covering the Registrable Securities;
(ii) use its best efforts to cause such registration to
become and remain effective, as soon as practicable after receipt of the
request of the Class I Stockholder, for the period necessary to effectuate
the distribution contemplated by the Class I Stockholder; and
(iii) at the request of the Class I Stockholder or the
Manager, enter into and perform its obligations under an underwriting or
purchase agreement (the "UNDERWRITING AGREEMENT") in customary form for
secondary offerings of common stock, and otherwise reasonably acceptable to
the parties, with the Manager (acting for itself and/or a group of
syndicate of underwriters) and the Class I Stockholder.
Notwithstanding the foregoing, the Company shall be entitled to delay any such
Demand Registration if (x) the Company has determined in good faith that in view
of pending negotiations or other material developments regarding the Company not
otherwise required to be made public, disclosure of such information is not in
the best interest of the Company (in which case the delay
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in filing a Demand Registration may not exceed 90 days); or (y) the Company has
initiated discussions with an underwriter regarding the sale of securities of
the same class or convertible into the same class as the Registrable Securities
in a registered primary public offering, in which case the Demand Registration
may be delayed for up to 120 days from the effectiveness of such primary public
offering, provided that the Company may not invoke the provision of clause (x)
for more than an aggregate of 180 days in any twelve-month period, and may not
invoke the delay in clause (y) more than once in any such period. In addition,
to the extent a Demand Registration is a "shelf" registration, the Company may
interrupt such registration for the reasons set forth above for no more than 90
days, provided that sales under such shelf registration shall in all events be
permitted for an aggregate of 180 days if requested by the Stockholder.
(b) Piggyback Registration Rights; Cutbacks. Each time the Company
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proposes to register under the Act (other than registration (A) on Forms S-4 or
S-8 or any successor forms thereto, or (B) filed in connection with an exchange
offer) securities of the same class as any of the Registrable Securities, the
Company shall give written notice of such proposed registration (a "REGISTRATION
NOTICE") to each Class I Stockholder and Class II Stockholder at least 20 days
prior to the filing thereof. Each Registration Notice shall indicate that the
recipient has the right (subject to the provisions of this Section 6) to propose
that its Registrable Securities be included in such registration. Each Class I
Stockholder and Class II Stockholder shall have the right to propose that a
number of its Registrable Securities be included in such registration by written
notice given to the Company within fifteen (15) days after the giving of such
Registration Notice. Subject to the provisions of this Section 6, the Company
shall include all such Registrable Securities in such registration; provided,
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however, that:
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(i) if the registration is in whole or part an underwritten
primary registration on behalf of the Company (whether or not it is also in
part a Demand Registration or other secondary registration on behalf of any
Company securityholders) and the managing underwriters of such offering
determine that the aggregate amount of securities of the Company which all
Stockholders and all other Company securityholders pursuant to future
contractual rights to participate in such registration (such other Company
securityholders, "FUTURE PARTICIPANTS") propose to include in such
registration exceeds the maximum amount of securities that should be
included therein, the Company will include in such registration, first, the
-----
shares which the Company proposes to sell and second, securities to be sold
------
for the account of any Class I Stockholder and Xxxxxx Xxxxx ("Xxxxx") pro
---
rata among such Stockholders, and third, securities to be sold for the
---- -----
account of the Class II Stockholders, pro rata among the Class II
--- ----
Stockholders and fourth, the other securities to be sold for the account of
------
Future Participants, pro rata among such Future Participants, in each case
--- ----
on the basis of the relative Equity Ownership of the parties who have
requested that securities owned by them be so included (it being agreed and
understood, however, that such underwriters shall have the right to
eliminate entirely the participation in such registration of all
Stockholders and Future Participants);
(ii) if the registration is pursuant to an underwritten
Demand Registration and the managing underwriters determine that the
aggregate amount of securities which all Stockholders and all Future
Participants propose to include in such registration exceeds the maximum
amount of securities that should be included therein, the Company will
9
include in such registration, first, the securities to be sold for the
-----
account of the Class I Stockholders and Xxxxx, pro rata among such
--- ----
Stockholders, second, securities to be sold for the account of the Company,
------
if any, third, securities to be sold for the account of the Class II
-----
Stockholders, pro rata among the Class II Stockholders and fourth,
--- ---- ------
securities to be sold for the account of the Future Participants electing
to include securities in such registration, pro rata among such Future
--- ----
Participants, in each case, on the basis of their relative Equity Ownership
(it being agreed and understood, however, that such underwriters shall have
the right to eliminate entirely the participation therein of the Company
and all such Future Participants not entitled to demand inclusion of
securities in such registration);
(iii) if the registration is pursuant to an underwritten
secondary registration other than as described in clause (ii) above on
behalf of Future Participants and the managing underwriters determine that
the aggregate amount of securities which all Future Participants and
Stockholders propose to include in such registration exceeds the maximum
number of securities that should be included therein, the Company will
include in such registration first, the securities to be sold for the
-----
account of the Future Participants, pro rata among the Future Participants,
--- ----
second, securities to be sold for the account of
------
the Company, if any, third, securities to be sold for the account of the
-----
Class I Stockholder and Xxxxx, pro rata among such Stockholders and fourth,
--- ---- ------
securities to be sold for the account of the Class II Stockholders, in each
case, on the basis of their relative Equity Ownership (it being agreed and
understood, however, that such underwriters shall have the right to
eliminate the participation therein of the Company and the Stockholders
entirely unless, on the date of such secondary registration, any Class I
Stockholder electing to participate in such registration shall not
theretofore have completed one Demand Registration in which all of the
Registrable Securities it sought to include were sold, in which case any
such Class I Stockholder may convert such registration into one governed by
clause (ii) above);
(iv) in the event that, as a result of the provisions of
Section 6(b)(i) or (ii), a group of Stockholders which has exercised its
right to request a Demand Registration is unable to register all of the
Registrable Securities as to which the request was made, such Stockholder
shall not be considered to have utilized a Demand Registration under
Section 6(a); and.
(v) in exercising the rights of Stockholders in respect of
Registrable Securities in this Section 6, Stockholders comprising the
holders of the Demand Registrations enumerated in clauses (i) through (iii)
of Section 6(a) shall be treated as an individual party to this Agreement
for such purpose and, if more than one Stockholder has or succeeds to such
rights, such Stockholders collectively shall exercise such rights and make
all determinations hereunder acting by majority-in-interests based upon
their respective ownership of Registrable Securities.
(c) Expenses of Registration. Whether or not any registration
------------------------
statement prepared and filed pursuant to Section 6(a) or (b) hereof is declared
effective by the SEC (except where a Demand Registration is terminated,
withdrawn or abandoned at the written request of a
10
Class I Stockholder solely due to market conditions), the Company shall pay all
expenses incident to the Company's performance of or compliance with the
registration requirements of this Agreement, including, without limitation, the
following: (A) all SEC registration and filing fees and expenses; (B) the filing
fees incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of Registrable Securities; (C)
any and all expenses incident to its performance of, or compliance with, this
Agreement, including, without limitation, any allocation of salaries and
expenses of the Company personnel or other general overhead expenses of the
Company, or other expenses for the preparation of historical and pro forma
financial statements; (D) fees and expenses incurred in connection with the
listing of Registrable Securities on each securities exchange or the NASDAQ
Stock Market, as applicable, on which securities of the same class are then
listed; (E) all transfer and/or exchange agent and registrar fees; (F) fees and
expenses in connection with the qualification of the Registrable Securities
under securities or "blue sky" laws including reasonable fees and disbursements
of counsel for the underwriters in connection therewith; (G) mailing and
printing expenses relating to the registration and distribution of Registrable
Securities; (H) messenger and delivery expenses relating to the registration and
distribution of Registrable Securities; (I) fees and out-of-pocket expenses of a
single counsel for the selling Stockholders (in each registration) and (J) fees
and out-of-pocket expenses of counsel for the Company and its independent
certified public accountants (including the expenses of any audit, review and/or
"cold comfort" letters) and other persons, including special experts, retained
by the Company (collectively, clauses (A) through (J), "REGISTRATION EXPENSES");
provided, however, that the Company shall not be required to pay, and each
-------- -------
Selling Stockholder shall pay, any discounts, commissions or fees of
underwriters, selling brokers and dealers relating to the distribution of the
Registrable Securities by it.
(d) Registration Procedures. In the case of each registration
-----------------------
effected by the Company pursuant to this Agreement, the Company shall keep the
participating Stockholders advised in writing as to the initiation of each
registration and as to the completion thereof. The Company shall (i) permit the
participating Stockholders, the Manager, if any, and their respective counsel to
make such investigation of the Company as they may reasonably request, (ii)
furnish to the participating Stockholders, the Manager and their respective
counsel drafts of the registration statement and all amendments thereto, all
prospectuses and supplements thereof prior to filing with the SEC and consider
their comments and suggestions with respect to such documents, and (iii) not
file any such registration statement, amendment, prospectus or supplement to
which the participating Stockholders or the Manager shall reasonably object. At
its expense, the Company shall:
(i) keep such registration effective and current as required
by law for such period necessary to permit the participating Stockholders
to complete the distribution described in the registration statement
relating thereto, or for such period as may be agreed to in the
Underwriting Agreement;
(ii) prepare and file with the SEC such amendments, post-
effective amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to comply with
the provisions of the Securities Act and the Underwriting Agreement and to
keep such registration statement effective and
11
current as required by law for that period of time specified above, in each
case exclusive of any period during which the prospectus used in connection
with such registration shall not comply with the requirements of Section 10
of the Securities Act, and respond as promptly as practicable to any
comments received from the SEC with respect to such registration statement
or any amendment thereto;
(iii) furnish such number of copies of the registration
statement, each amendment thereto, each preliminary prospectus,
prospectuses, supplements and incorporated documents and other documents
incident thereto as the participating Stockholders or the Manager from time
to time may reasonably request;
(iv) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the participating
Stockholders and the Manager shall reasonably request, and do any and all
other acts and things which may be necessary or desirable to enable the
participating Stockholders and the Manager to consummate the offering and
disposition of Registrable Securities in such jurisdictions; provided,
--------
however, that the Company shall not, by virtue of this Agreement, be
-------
required to qualify generally to do business as a foreign corporation,
subject itself to taxation, or consent to general service of process, in
any jurisdiction wherein it would not, but for the requirements of this
clause (iv), be obligated to be qualified;
(v) notify the participating Stockholders and the Manager
promptly and, if requested by any such person, confirm such notification in
writing, (A) when a prospectus or any prospectus supplement has been filed
with the SEC, and, with respect to a registration statement or any post-
effective amendment thereto, when the same has been declared effective by
the SEC, (B) of any request by the SEC for amendments or supplements to a
registration statement or related prospectus, or for additional
information, (C) of the issuance by the SEC of any stop order or the
initiation of any proceedings for such or a similar purpose (and the
Company shall make every reasonable effort to obtain the withdrawal of any
such order at the earliest practicable time), (D) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose (and the Company shall make every reasonable effort to obtain the
withdrawal of any such suspension at the earliest practicable time), (E) of
the occurrence of any event with requires the making of any changes to a
registration statement or related prospectus so that such documents shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading (and the Company shall promptly prepare and furnish to
the participating Stockholders and the Manager a reasonable number of
copies of a supplemented or amended prospectus such that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are
made, not misleading), and (F) of the Company's
12
determination that the filing of a post-effective amendment to the
Registration Statement shall be necessary or appropriate. Each
participating Stockholder agrees that it shall, as expeditiously as
possible, notify the Company at any time when a prospectus relating to a
registration statement covering such Stockholder's Registrable Securities
is required to be delivered under the Securities Act, of the happening of
any event of the kind described in this clause (v) as a result of any
information provided by such Stockholder in writing expressly for inclusion
in such prospectus included in such registration statement and, at the
request of the Company, promptly prepare and furnish to it such information
as may be necessary so that, after incorporation into a supplement or
amendment of such prospectus as thereafter delivered to the purchasers of
such securities, the information so provided by the participating
Stockholders shall not include an untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances under which
they were made, not misleading. Each Stockholder shall be deemed to have
agreed by acquisition of such Registrable Securities that upon the receipt
of any notice from the Company of the occurrence of any event of the kind
described in clause (E) of this clause (v), such Stockholder shall
forthwith discontinue its offer and disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such Stockholder shall have received copies of a supplemented or
amended prospectus which is no longer defective as contemplated by clause
(E) of this clause (v) and, if so directed by the Company, shall deliver to
the Company, at the Company's expense, all copies (other than permanent
file copies) of the defective prospectus covering such Registrable
Securities which are then in such Stockholder's possession;
(vi) use its best efforts to cause all such Registrable
Securities covered by such registration statement to be listed on each
securities exchange or the Nasdaq Stock Market, as applicable, on which
similar securities issued by the Company are then listed, if the listing of
such Registrable Securities is then permitted under the rules and
regulations of such exchange or the Nasdaq Stock Market, as applicable;
(vii) engage and provide a transfer agent for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(viii) whether or not the Underwriting Agreement is entered
into and whether or not any portion of the offering contemplated by such
registration statement is an underwritten offering or is made through a
placement or sales agent or any other entity, (A) make such representations
and warranties to the underwriters, if any, in form, substance and scope as
are customarily made in connection with an offering of common stock or
other equity securities pursuant to any appropriate agreement and/or to a
registration statement filed on the form applicable to such registration;
(B) obtain an opinion of counsel to the Company in customary form and
covering such matters, of the type customarily covered by such opinions, as
the Manager, if any, and as the Stockholder may reasonably request; (C)
obtain a "cold comfort" letter or letters from the independent certified
public accountants of Company addressed to the underwriters, if any,
thereof, dated (i) the effective date of such registration statement and
(ii) the date of the closing
13
under the underwriting agreement relating thereto, such letter or letters
to be in customary form and covering such matters of the type customarily
covered, from time to time, by letters of such type and such other
financial matters as the Manager, if any, may reasonably request; (D)
deliver such documents and certificates, including officers' certificates,
as may be reasonably requested by the underwriters, if any, therefor and
the Manager, if any, thereof to evidence the accuracy of the
representations and warranties made pursuant to clause (A) above and the
compliance with or satisfaction of any agreements or conditions contained
in the underwriting agreement or other agreement entered into by the
Company, and (E) undertake such obligations relating to expense
reimbursement, indemnification and contribution as are provided in this
Agreement;
(ix) permit the participating Stockholders to participate in
the preparation of such registration statement and include therein material
acceptable to the Company and its counsel, furnished to the Company in
writing which, in the reasonable judgment of the participating Stockholders
and their counsel, is required to be included therein;
(x) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of such registration statement by the
SEC or any state securities authority as promptly as possible; and
(xi) cooperate with the participating Stockholders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and enable certificates for such
Registrable Securities to be issued for such number of shares of Company
Common Stock and registered in such names as the participating Stockholders
may reasonably request.
(e) Indemnification
---------------
(i) The Company shall indemnify and hold harmless each
Stockholder, each of its directors, officers and agents, each underwriter
(as defined in the Securities Act) of such Registrable Securities, if any,
and each person who controls (within the meaning of Section 15 of the
Securities Act) such Stockholder or any underwriter of the Registrable
Securities held by or issuable to such Stockholder, against all claims,
losses, expenses, damages and liabilities, joint or several, including any
of the foregoing incurred in settlement of any proceeding, commenced or
threatened, (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to any
such registration, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of
any rule or regulation promulgated under the Act or any state securities
law applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, and shall
reimburse each Stockholder, each of its directors, officers and agents,
each such underwriter and each person who controls such Stockholder or any
such underwriter for any reasonable legal and any other expenses incurred
in connection with investigating, defending or settling any such claim,
14
loss, damage, liability or action, provided, however, that the Company
shall not be liable in any such case to the extent that any such claim,
loss, damage or liability arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by such
Stockholder or such underwriter specifically for use therein. The indemnity
provided by this Section 6(e) shall be in addition to any liability which
the Company may otherwise have.
(ii) Each Stockholder shall indemnify and hold harmless
Company, each of its directors and officers, each underwriter, if any, and
each person who controls the Company or any of the underwriters within the
meaning of the Act, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse the Company or underwriters for
any reasonable legal or any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information pertaining to such Stockholder, which is furnished in
writing to Company by such Stockholder specifically for use therein.
(iii) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an Indemnified Party (as
defined below) in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then the Company and the
Stockholder shall contribute to the amount paid or payable as a result of
such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of
Company on the one hand and the Stockholder on the other in connection with
the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one
hand or the Stockholder on the other and such person's relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company agrees that it would not be just and
equitable if contribution pursuant to this Section 6(e) were determined by
pro rata allocation or by any other method of allocation which does not
--- ----
take account of the equitable considerations referred to above in this
Section 6(e). The amount paid or payable by a party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section 6(e) shall include any legal or other
expenses reasonably incurred by such party in connection with investigating
or defending any such action or claim. 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. No person shall be
15
required to contribute to any settlement effected without its consent,
which consent shall not be unreasonably withheld. If, however,
indemnification is available under this Section 6, the indemnifying parties
shall indemnify each indemnified party to the fullest extent provided
herein without regard to the relative fault of such indemnifying party or
indemnified party or any other equitable considerations.
(iv) Each party entitled to indemnification under this Section
6(e) (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnification may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the
defense of such claim or litigation, shall be approved by the Indemnified
Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such party's expense,
unless the Indemnified Party in its reasonable judgment determines that
joint representation by counsel for the Indemnifying Party would be
inappropriate due to actual or potential differing interests between the
Indemnifying Party and the Indemnified Party in the conduct of the defense
of such action, in which case the Indemnified Party shall be entitled to be
represented by separate counsel selected by it, the reasonable fees and
expenses of which shall be borne by the Indemnifying Party, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
hereunder, unless such failure resulted in actual detriment to the
Indemnifying Party. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect of such claim or litigation.
(v) Notwithstanding the foregoing, to the extent that the
provisions on indemnification of the underwriters and their controlling
persons contained in the Underwriting Agreement in connection with an
underwritten public offering are in conflict with the foregoing provisions,
the provisions in the Underwriting Agreement shall control as to
indemnification of the underwriters and their controlling persons in the
public offering.
(vi) Notwithstanding the foregoing, in no event shall any
Stockholder be liable under this Section 6(e) for an amount exceeding the
net proceeds received by such Stockholder from the sale of its Registrable
Securities pursuant to the registration rights granted to such Stockholder
hereunder.
(f) Holdback Amount. Each Stockholder agrees that in the event of an
---------------
underwritten public offering of Registrable Securities for the account of any
other Stockholder, such Stockholder and any Related Transferee thereof will not,
without the written consent of the underwriters, offer for public sale (other
than as part of such underwritten public offering) any Securities during the ten
(10) days prior to and such number of days (not to exceed 180 days in the case
of an initial public offering and 90 days in all other cases) after the
effective date of the
16
registration statement in connection with such public offering as the
underwriters may reasonably request in writing.
(g) Assignment and Assumption. For avoidance of doubt, the parties
-------------------------
acknowledge that each Stockholder may assign its rights under this Section 6 as
an incident to any permitted Transfer of Securities held by it to the Transferee
of such Securities, and if the Stockholder retains any Securities, the rights
under this Section 6 shall remain applicable to the retained Securities. If
Securities are acquired from a Class I Stockholder, such Securities shall be
entitled to participate in any Demand Registration as a member of the group
enumerated in clauses (i) through (iii) of Section 6(a) that includes such Class
I Stockholder, without thereby increasing the aggregate number of Demand
Registrations the Company may be required to effect. Each Stockholder shall
promptly notify the Company in writing of each such assignment of rights, and
the assignee shall execute such documentation as the Company may reasonably
request to evidence its agreement to be bound by this Section 6. Registration
rights shall not be assignable to any purchaser of Securities sold under Rule
144 or in any public securities sale. If the Company effects a business
combination in which Stockholders receive securities of another issuer and such
securities cannot be resold by the Stockholders without registration under the
Securities Act, as a condition to the consummation of such business combination,
the Company shall cause such issuer to provide to the Stockholders rights
equivalent to those under this Section 6 unless applicable law would permit free
resale of the Securities so received without registration in a public market.
(h) Stock Option Plans. After the IPO, the Company shall use its
------------------
reasonable efforts to register, on Form S-8 or any similar or successor form,
the Securities underlying the ISOs and NQ Options.
7. Drag-Along Sales and Tag-Along Sales.
------------------------------------
(a) Drag-Along Sales.
----------------
(i) Notwithstanding any other provision hereof, if GEI agrees
to sell Securities held by it pursuant to a transaction in which more than
75% of the then-outstanding Common Stock of the Company will be sold to or
acquired by a Third Party (a "DRAG-ALONG SALE"), then upon the demand of
GEI, (i) in the case of Occidental and the Class II Stockholders, made at
any time after the Closing Date and (ii) in the case of the HPA Group, made
at any time after the fourth anniversary of the Closing Date (the HPA Group
and the Class II Stockholders being collectively referred to for this
purpose as "DRAG-ALONG SELLERS"), each Drag-Along Seller hereby agrees to
sell to such Third Party the same percentage of the total number of
Securities held by such Drag-Along Seller on the date of the Drag-Along
Notice, as the number of Securities GEI is selling in the Drag-Along Sale
bears to the total number of shares held by GEI as of the date of the Drag-
Along Notice (the "SALE PERCENTAGE"), at the same price and form of
consideration and on the same terms and conditions as GEI has agreed to
with such Third Party. If the Drag-Along Sale is in the form of a merger
transaction, the Drag-Along Seller agrees to vote his or her Securities in
favor of such merger and not to exercise any rights of appraisal or dissent
afforded under applicable law. The provisions of this Section 7 shall
17
apply regardless of the form of consideration received in the Drag-Along
Sale. For purposes of Drag-Along Sales, the number of shares owned by each
Drag-Along Seller shall include all shares underlying Options and Warrants,
which Options and Warrants will be exercised by the Drag-Along Sellers
immediately prior to and contingent upon consummation of the Drag-Along
Sale.
(ii) Prior to making any Drag-Along Sale, if GEI elects to
exercise the option described in this Section 7, GEI shall provide the
Drag-Along Seller to whom this Section 7 then applies with written notice
(the "DRAG-ALONG NOTICE") not more than 60 nor less than 15 days prior to
the proposed date of the Drag-Along Sale (the "DRAG-ALONG SALE DATE"). The
Drag-Along Notice shall set forth: (i) a general description of the
transaction and the proposed amount and form of consideration to be paid
per share offered by the Third Party; (ii) the aggregate number of
Securities held by GEI as of the date that the Drag-Along Notice is first
given to a Drag-Along Seller; (iii) the Sale Percentage; and (iv) the Drag-
Along Sale Date.
(iii) On the Drag-Along Sale Date, each Drag-Along Seller shall
deliver a certificate or certificates for the Sale Percentage of its
Securities, duly endorsed for transfer with signatures guaranteed, to such
Third Party in the manner and at the address indicated in the Drag-Along
Notice against delivery of the purchase price therefor; provided, however,
-------- -------
that in the event the Company has possession of any such certificates
pursuant to this Agreement, upon the written request of the Drag-Along
Seller at least five (5) business days in advance of-the Drag-Along Sale
Date, the Company shall deliver such certificates to the purchaser at the
time and in the manner described above.
(b) Optional Participation in Sales of Common Stock (Tag-Along
----------------------------------------------------------
Sales)
-----
(i) If GEI shall at any time desire to Transfer shares of
Common Stock to a third party, other than ratably to its partners, then
each of the HPA Group, Occidental and the Class II Stockholders and their
Related Transferees (each, a "TAG-ALONG SELLER") shall be entitled, to
participate pro rata in such Transfer at the same price and on the same
--- ----
terms and conditions applicable to GEI, based upon their respective Fully
Diluted Ownership in the Company.
(ii) Each Tag-Along Seller shall have the right to Transfer up
to a percentage of the number of shares specified in the Transfer Notice
delivered pursuant to the following sentence of the aggregate number of
shares of Common Stock then owned by GEI. GEI shall deliver or cause to be
delivered to each Tag-Along Seller a written notice (a "TRANSFER NOTICE")
of a proposed tag-along sale no later than 30 days prior to the proposed
closing thereof. Such notice shall make reference to the Tag-Along Sellers'
rights under this Section 7(b) and shall describe in reasonable detail (A)
the aggregate number of shares of Common Stock to be Transferred by GEI if
none of the HPA Group or Class II Stockholders participates, (B) the
aggregate number of shares of Common Stock then owned by GEI, (C) the
person or entity to whom or which such shares of Common Stock are proposed
to be Transferred, (D) the terms and conditions of the Transfer, including
the consideration to be paid therefor, (E) the maximum percentage of
18
its shares such Tag-Along Seller is entitled to include in the Transfer and
(F) the proposed date, time and location of the closing of the Transfer.
Each Stockholder receiving a Transfer Notice shall exercise its right to
participate in a Transfer of Common Stock pursuant to this Section 7 by
delivering to GEI a written notice (a "TAG-ALONG NOTICE") stating its
election to do so and specifying the number of shares (which shall not
exceed the number of shares determined for such Tag-Along Seller in the
Transfer Notice) of Common Stock held by it to be Transferred no later than
fifteen days after receipt of the Transfer Notice. Failure to provide a
Tag-Along Notice within such fifteen-day period shall be deemed to
constitute an election by such Stockholder not to exercise its rights
pursuant to this Section 7, and GEI shall have 90 days following the
expiration of such fifteen-day period in which to Transfer the number of
shares equal to the difference between the number set forth in the Transfer
Notice and the aggregate number of shares as to which GEI has received a
Tag-Along Notice, on terms not more favorable to GEI than those set forth
in the Transfer Notice.
(iii) Each Tag-Along Seller shall be required to deliver at
such closing the certificate or certificates representing the shares to be
Transferred, duly endorsed for transfer, and shall be entitled to receive
the net proceeds allocable to the Transfer thereof, after deduction of such
Tag-Along Seller's proportionate share of the expenses of Transfer, which
share shall not exceed an amount proportionate to the amount of such
expenses allocated to GEI. If, at the end of the 90-day period following
the expiration of such fifteen-day period, GEI has not completed the
Transfer of shares of Common Stock, GEI may not sell the shares of Common
Stock without again fully providing a new Transfer Notice.
(c) Obligations of Drag-Along Sellers. In connection with any Drag-
---------------------------------
Along Sale, Drag-Along Sellers shall not be required to make any representation
or warranty to the purchaser other than to the effect that they hold title to
the Securities they are selling in the Drag-Along Sale, free and clear of liens
and the like, and as to their right, power and authority to sell such
Securities. Except as to such representations, Drag-Along Sellers shall not be
liable beyond the net proceeds of the Drag-Along Sale for any other breach of
representations or warranties. In addition, unless expressly agreed to by a
Drag-Along Seller, no Drag-Along Seller shall be required to enter into any
covenant not to compete or similar agreement restricting their business
activities.
8. Termination and Lapse of Rights and Restrictions; Applications to
-----------------------------------------------------------------
Other Stock and Adjustments.
---------------------------
(a) Termination of Provisions. The provisions of Sections 4, 5, 7, 9
-------------------------
and 10 shall lapse and be of no further effect immediately following the earlier
to occur of a Change in Control or an IPO.
(b) Application. In the event any capital stock of the Company or any
-----------
other corporation shall be distributed on, with respect to, or in exchange for
Securities as a stock dividend, stock split, reverse stock split,
reclassification or recapitalization, or in connection with any merger or
reorganization, the restrictions, rights and options and prices set forth herein
shall
19
apply with respect to such other capital stock to the same extent as they are,
or would have been applicable, to the Securities on or with respect to which
such other capital stock was distributed and shall continue to apply to the
Securities or such other securities outstanding thereafter, in each case with
such adjustments as are necessary or appropriate.
9. Election of Directors. So long as such individuals respectively own
---------------------
the requisite amount of Common Stock set forth herein, each of the other
Stockholders (other than Occidental) agrees to vote his or its Common Stock, and
to cause his Related Transferees to vote their Common Stock, in favor of Xxxxxxx
X. Xxxxxxxx and Xxxxx X. XxXxxxxxx ("XXXXXXXX" and "XXXXXXXXX") in all elections
of the directors of the Company, whether by meeting or action in writing. Such
agreement to vote shall be effective as to each of Xxxxxxxx and XxXxxxxxx so
long as such individual continues to own (directly or, in the case of Xx.
XxXxxxxxx, through a family trust and in either case, through Related
Transferees after the date hereof) at least two-thirds (K) of the Common Stock
owned by him on the date hereof. Such agreement to vote shall cease to be
effective upon the first to occur of: (i) such individual ceasing to own
(directly or indirectly, as aforesaid) in excess of one-third (J) of the Common
Stock owned by him on the date hereof and (ii) a Disproportionate Sale after
which such individual and his Related Transferees own less than two-thirds (K)
of the Common Stock owned by him and such Related Transferees on the date
hereof. A "DISPROPORTIONATE SALE" as to either individual occurs on the date of
a Transfer of Common Stock as a result of which the Common Stock owned by such
individual and Related Transferees has decreased by a percentage that is
greater, by at least five percent (5%), than the corresponding decrease in
ownership of Common Stock of GEI to date. Each of the Stockholders (other than
Occidental) further agrees that he or it shall vote its Common Stock, and cause
its Related Transferees to vote their Common Stock, in all elections of
directors of the Company, whether by meeting or action in writing, in favor of
all nominees for the board of directors proposed by GEI. For purposes of this
Section 9 and the effectiveness of the voting agreements herein, ownership of
Common Stock shall be calculated based upon the Fully Diluted Ownership of the
individual and his Related Transferees, in the aggregate; provided, however,
that to the extent any of the Options included in the Fully Diluted Ownership of
an individual should fail to vest, the calculation as to such individual's
ownership of Common Stock shall thereafter be made as if the aggregate Common
Stock owned by such individual on the date hereof had not included such Options.
The parties acknowledge that the provisions of the Preferred Stock could, under
the circumstances specified therein, entitle the holders thereof to elect all of
the Company's directors, making this Section 9 inoperative.
10. Certain Additional Agreements.
-----------------------------
(a) Right to Participate in Securities Issuances. If the Company
shall issue, sell or distribute to GEI or any of its Affiliates any equity or
debt securities of the Company, or any option, warrant, or right to acquire,
or any security convertible into or exchangeable for, any of the foregoing
(other than pursuant to an underwritten public offering, a stock dividend,
stock split or other pro rata distribution of securities to stockholders of
--- ----
the Company generally in which the HPA Group, Xxxxx and Occidental
participates on an equal basis, including any Related Transferees), the
members of the HPA Group, Xxxxx and Occidental shall be entitled, provided
that they collectively maintain two-thirds (2/3) of the Fully Diluted
Ownership held by them on the date hereof, to participate in such issuance,
sale or distribution, at the same price and on the
20
same terms and conditions applicable to GEI, pro rata, based upon their
--- ----
respective Fully Diluted Ownership in the Company. The Company shall provide at
least twenty (20) days' prior notice to the members of the HPA Group, Xxxxx and
Occidental as to its intention so to issue equity, debt or related securities to
GEI, and in the event any member of the HPA Group, Xxxxx or Occidental fails to
respond within such twenty-day period, such member shall be deemed to have
waived his or its right so to participate in the issuance of securities. The
members of the HPA Group and Xxxxx may determine amongst themselves that to the
extent any member does not desire to participate, other members may increase
their participation, provided that the aggregate participation does not exceed
that offered to the HPA Group and Xxxxx as a whole and that notice, which shall
be binding upon all the HPA Group members and Xxxxx and as to which GEI shall
have no duty to inquire, shall be given to GEI within such 20-day period as to
the aggregate number of securities being subscribed for. The parties
acknowledge that time is of the essence as to this Section 10(a).
(b) Right to Participate in Equity Repurchases. The Company and GEI
------------------------------------------
agree that the Company will not purchase any Securities from GEI or any of its
Affiliates unless the Company offers to simultaneously purchase a
proportionately equal number of Securities of the same class from each member of
the HPA Group, Xxxxx and Occidental at the same price and on the same terms and
conditions applicable to GEI and its Affiliates, based upon their respective
Fully Diluted Ownership.
(c) Affiliate Transactions. No material transaction or series or
----------------------
related transactions (including any issuance of securities, profits interests,
stock appreciation rights, or similar rights or interests of the Company)
between the Company and GEI or any of its Affiliates involving value in excess
of $1,000,000 may be consummated unless approved (i) if one of Xxxxxxxx or
XxXxxxxxx then holds at least one-third of his Fully Diluted Ownership as of the
date hereof, by such individual, and otherwise by a majority of the
disinterested directors of the Company, or (ii) by the board of directors of the
Company after it is presented with a fairness opinion of a nationally recognized
investment bank to the effect that the transaction is fair to the Company and
its stockholders. Notwithstanding the foregoing, other than the Management
Agreement of even date herewith between the Company and Xxxxxxx Xxxxx &
Partners, L.P. (the "Management Agreement"), GEI and its Affiliates will not
enter into any consulting, management or similar agreement or arrangement with
the Company or increase the fees provided for in the Management Agreement as of
the date hereof, except that such fees may be proportionately increased provided
such increase is calculated on the same basis (1.6% of invested capital) as the
fee currently provided for therein and such increase reflects further investment
by GEI consistent with the terms of this Section 10.
(d) Change of Control Transactions. Each of GEI, Xxxxxxxx and
------------------------------
XxXxxxxxx agrees that no such Stockholder shall, without the prior consent of
the other two Stockholders, pursue, advocate or enter into an agreement in
respect of any recapitalization, reclassification, share exchange,
reorganization, merger, consolidation or similar transaction involving the
Company unless all holders of Common Stock of the Company will be treated
identically in such transaction, but ratably in proportion to their respective
Equity Ownership.
21
(e) Information. The Company shall provide each Class I Stockholder
-----------
and Xxxxx with the following information, all of which each Class I Stockholder
and Xxxxx agrees to hold in confidence:
(i) For each fiscal quarter of the Company, as and when
submitted to Green, unaudited consolidated financial statements of the
Company (consisting of balance sheet and statements of operations,
stockholders' equity and cash flows for such fiscal quarter, in the form
submitted to GEI;
(ii) For each fiscal year of the Company, as and when
submitted to Green, audited financial statements of the Company for such
fiscal year, certified by the Company's independent certified public
accounting firm, in the form submitted to GEI;
(iii) Any information the Company provides generally to the
holders of its Common Stock; and
(iv) Such additional information about the Company as such
Class I Stockholder or Xxxxx may reasonably request from time to time.
11. Notices. All notices or other communications under this Agreement shall
-------
be given in writing and shall be deemed duly given and received on the third
full business day following the day of the mailing thereof by registered or
certified mail or the next Business Day if sent by overnight courier or when
delivered personally or sent by facsimile transmission as follows:
(a) if to the Company, at its principal executive offices at the time
of the giving of such notice, or at such other place as the Company shall have
designated by notice as herein provided to the Purchaser;
(b) if to a Class I Stockholder, at its principal executive offices
at the time of the giving of such notice, or at such other place as such
Stockholder shall have designated by notice as herein provided to the Company.
(c) if to any Class II Stockholder, at his address as it appears on
Annex A or at such other place as he shall have designated by notice as herein
provided to the Company.
12. General.
-------
(a) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except by a written agreement signed by each of the Company and the Class I
Stockholders and, to the extent their interests are affected, by the Class II
Stockholders, provided, however, that Class II Stockholders having a majority of
-------- -------
Equity Ownership as amongst such Stockholders may bind all of such Class II
Stockholders as to any matter adversely affecting them if such adverse effect is
equal, on a proportionate basis, as to all such Class II Stockholders and the
consent of each adversely affected Class II Stockholder shall otherwise be
required.
22
(b) No waiver of any breach or default hereunder shall be considered
valid unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
(c) Except as otherwise expressly provided herein, this Agreement
shall be binding upon and inure to the benefit of each of the Company, the
Stockholders and their respective heirs, personal representatives, successors
and assigns; provided, however, that nothing contained herein shall be construed
-------- -------
as granting any Stockholder the right to Transfer any of the Securities except
in accordance with this Agreement and any Transferee shall hold such Securities
having only those rights and being subject to the restrictions provided for in
this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
(e) Each Class II Stockholder agrees that nothing herein shall be
deemed to create any implication concerning the adequacy of his services to the
Company, or shall be construed as an agreement by the Company, express or
implied, to employ him or contract for his services, to restrict the right of
the Company to discharge him or cease contracting for his services or to modify,
extend or otherwise affect in any manner whatsoever, the terms of any employment
agreement or contract for services which may exist between him and the Company
or its subsidiaries. Each Class II Stockholder represents that he has been
advised, to the extent he deemed necessary, by legal counsel and tax advisors of
his choice in connection with this Agreement. Each Class II Stockholder further
represents that, if he is married, his spouse has executed and delivered to the
Company the Acknowledgment and Agreement of Spouse set forth at the end of this
Agreement.
(f) In the event any day upon which a sale, notice or other matter is
required to occur hereunder is not a Business Day, such matter shall be deferred
until the next Business Day.
(g) The section headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents of such
sections. The masculine pronoun shall be deemed to include and incorporate the
feminine pronoun.
(h) Each party hereto shall cooperate and shall take such further
action and shall execute and deliver such further documents as may be reasonably
requested by any other party in order to carry out the provisions and purposes
of this Agreement.
(i) Words in the singular shall be read and construed as though in
the plural and words in the plural shall be read and construed as though in the
singular in all cases where they would so apply.
23
(j) This Agreement may be executed in one or more counterparts, all
of which taken together shall be deemed one original.
(k) Due to the fact the securities of the Company cannot be readily
purchased or sold in the open market, and for other reasons, the parties will be
irreparably damaged in the event that this Agreement is not specifically
enforced. In the event of a breach or threatened breach of the terms, covenants
and/or conditions of this Agreement by any of the parties hereto, the other
parties shall, subject to Section 13, in addition to all other remedies, be
entitled to a temporary and/or permanent injunction, without showing any actual
damage or that monetary damages would not provide an adequate remedy, and/or a
decree for specific performance, in accordance with the provisions hereof. Each
Stockholder hereby irrevocably and unconditionally consents to the jurisdiction
of any California State court or federal court of the United States sitting in
the State of California in any action or proceeding relating to this Agreement
and consents to service of process in connection therewith by the delivery of
notice to such Stockholder's address set forth in this Agreement.
(l) This Agreement shall be deemed to be a contract under the laws of
the State of Delaware and for all purposes shall be construed and enforced in
accordance with the internal laws of such state without regard to the principles
of conflicts of law.
13. Additional Class II Stockholders. Prior to issuing any Options, Common
--------------------------------
Stock or other right exercisable for or convertible into Common Stock, and as a
condition to the receipt thereof, the Company shall require the recipient to
execute and deliver a duplicate counterpart of this Agreement, and such
recipient shall become a Class II Stockholder for all purposes hereof.
14. Arbitration.
-----------
(a) Scope. The parties, except Occidental, mutually consent to the
-----
resolution by binding arbitration of all claims or controversies ("CLAIMS")
arising out of or related to this Agreement; provided that such consent shall
not apply to any claim to which Occidental is a party. Notwithstanding the
foregoing, the parties may have recourse to the courts for injunctive or
equitable relief in respect of matters arising out of or relating to this
Agreement.
(b) Deposition. Each party to a dispute shall have the right to take
----------
the deposition of up to two individuals and any expert witness designated by
each other party. Each party also shall have the right to make requests for
production of documents to any party. The subpoena right specified below shall
be applicable to discovery pursuant to this paragraph. Additional discovery may
be had only where the arbitrator selected pursuant to this Section 14 so orders,
upon a showing of reasonable and substantial need. At least 30 days before the
arbitration, the parties must exchange lists of witnesses, including any expert,
and copies of all exhibits intended to be used at the arbitration. Each party
shall have the right to subpoena witnesses and documents for the arbitration.
(c) JAMS. The Arbitration will be held under the auspices of either
----
the American Arbitration Association ("AAA") or Judicial Arbitration & Mediation
Services, Inc. ("J.A.M.S."), with the designation of the sponsoring organization
to be made by the party who
24
did not initiate the claim. The parties agree that, except as provided in this
Agreement, the arbitration shall be in accordance with the AAA's then-current
arbitration procedures (if AAA is designated) or the then-current J.A.M.S.
arbitration rules (if J.A.M.S. is designated). The arbitration shall be
conducted by a single arbitrator selected from the AAA large complex case panel
(the "ARBITRATOR"). The arbitration shall take place in Los Angeles, California.
(d) Selection of Arbitrator. If the parties to the dispute cannot
-----------------------
agree upon the selection of the arbitrator within 30 days from the day the
matter is submitted to arbitration, then, on application of any party, the
arbitrator shall be designated by the sponsoring organization.
(e) Governing Law. The Arbitrator shall apply the substantive law
-------------
(and the law of remedies, if applicable) of the state of Delaware. The
Arbitrator shall be without jurisdiction to apply any different substantive law,
or law of remedies. The Arbitrator, and not any federal, state, or local court
or agency, shall have exclusive authority to resolve any dispute relating to the
interpretation, applicability, enforceability or formation of this Agreement,
including but not limited to any claim that all or any part of this Agreement is
void or voidable. The arbitration shall be final and binding upon the parties,
except as provided in this Agreement.
(f) Procedures. The Arbitrator shall have jurisdiction to hear and
----------
rule on pre-hearing disputes and are authorized to hold pre-hearing conferences
by telephone or in person, as the Arbitrator deems necessary. The Arbitrator
shall have the authority to entertain a motion to dismiss and/or a motion for
summary judgment by any party and shall apply the standards governing such
motions under the Federal Rules of Civil Procedure. Such proceedings shall be
concluded within 180 days of the commencement of the arbitration, as evidenced
by the rendering of the award described below. Any party to a dispute, at its
expense, may arrange for and pay the cost of a court reporter to provide a
stenographic record of proceedings. If such a transcript is prepared, it shall
be the official transcript of the proceedings for all purposes. Any party to a
dispute, upon request at the close of hearing, shall be given leave to file a
post-hearing brief. The time for filing such a brief shall be set by the
Arbitrator.
(g) Award. The Arbitrator shall render an award and opinion outlining
-----
in reasonable detail the findings of fact and conclusions of law upon which the
award is based. The award of the Arbitrator shall be final, binding and
conclusive on the parties. If the Company is a party to the dispute, the Company
shall bear the fees and costs of the Arbitrator. If Company is not a party to
the dispute, the parties to the dispute shall equally share the fees and costs
of the Arbitrator. Each party shall pay for its own costs and attorneys' fees.
15. Definitions. As used in this Agreement, unless the context requires
-----------
otherwise, the capitalized terms described in this Section 15 shall have the
meanings indicated herein.
(a) Each of the following capitalized terms shall have the meaning
ascribed to such term in the section of this Agreement indicated:
Term Section
-------------------------------- ---------------
Act............................. 15(b)
25
Term Section
-------------------------------- ---------------
Affiliate....................... 15(b)
Agreement....................... Introduction
Bona Fide Offer................. 4(b)
Business Day.................... 15(b)
Callable Securities............. 2(b)
Call Purchase Event............. 5(a)
Call Option..................... 2(b)
Change in Control............... 15(b)
Class I Stockholder............. Introduction
Class II Stockholder............ Introduction
Common Stock.................... Recitals
Company......................... Introduction
Control......................... 13(b)
Demand Registration............. 6(a)
Demand Seller................... 6(b)
Disproportionate Disposition.... 9
Drag-Along Notice............... 7(b)
Drag-Along Sale................. 7(a)
Drag-Along Sale Date............ 7(b)
Drag-Along Seller............... 15(b)
Electing Stockholder............ 4(b)
Equity Ownership................ 15(b)
Fair Market Value............... 15(b)
Fully Diluted Ownership......... 15(b)
Future Stockholder.............. 6(b)
Future Participants............. 6(a)
GEI............................. Introduction
GEI Distribution................ 12
Stockholder..................... 6(a)
IPO............................. 15(b)
Living Trust.................... 15(b)
Manager......................... 15(b)
NQ Option....................... 2(b)
Option Notice................... 4(b)
Other Termination............... 5(a)
Outside Party................... 4(b)
Permanent Disability............ 15(b)
Permitted Transfer.............. 4(a)
Purchase Notice................. 5(a)
Purchaser....................... 2(b)
Purchasing Group................ 5(a)
Registrable Securities.......... 15(b)
Registration Notice............. 6(a)
26
Term Section
------------------------------------------ -------------
Related Transferee........................ 15(b)
Retirement................................ 15(b)
Rule 144.................................. 15(b)
Sale Percentage........................... 7(a)
SEC....................................... 15(b)
Securities................................ Introduction
Seller.................................... 5(a)
Subscription Stock........................ 2(a)
Tag-Along Notice.......................... 7(e)
Tag-Along Seller.......................... 7(d)
Third Party............................... 7(a)
Transfer.................................. 15(b)
Transfer Notice........................... 7(e)
(b) Each of the following capitalized terms shall have the meanings
indicated in this clause (b):
"ACT" means the Securities Act of 1933, as amended from time to time.
"AFFILIATE" has the meaning set forth in Rule 405 under the Act.
"BUSINESS DAY" means a day on which banks are open for business in the
State of California.
"CHANGE IN CONTROL" means any of (i) a sale or other disposition by the
Company of all or substantially all of the assets of the Company and its
subsidiaries, taken as a whole, or (ii) a merger or consolidation of the Company
if, immediately following such merger or consolidation, there is not Control of
the surviving entity of such merger or consolidation, or (iii) a sale of capital
stock of the Company (by any holder thereof or by the Company) if, immediately
following such sale, there is not Control of the Company.
"CONTROL" means that the holders of the capital stock of the Company
immediately following the Merger (including the Class I Stockholders) hold, in
the aggregate, directly and indirectly, the power to elect a majority of the
directors of the Company that are not elected pursuant to the provisions of the
Preferred Stock (or, as the case may be, the surviving entity of a merger or
consolidation of the Company).
"EQUITY OWNERSHIP" means the relative interests of the holders of the
Company's outstanding Common Stock as of the date of determination.
"FAIR MARKET VALUE" of Securities means the fair market value of Securities
as determined as of the time of the Call Purchase Event (or other event
requiring valuation) by the Company's Board of Directors in the exercise of its
reasonable discretion; provided, however, that in the event that the Common
-------- -------
Stock is traded publicly on any national securities exchanges)
27
(including without limitation NASDAQ National Market System or the NASDAQ
"Small-Cap" Issues System), such fair market value shall be based upon the
closing price for such Common Stock on such exchange(s) on the date preceding
the Call Purchase Event (or other event requiring valuation).
"FULLY DILUTED OWNERSHIP" means, as to any Stockholder, his or its
aggregate ownership of all equity interests in the Company, including all
Options and all other securities exercisable, convertible or exchangeable for
Common Stock.
"IPO" means the completion of the first underwritten public offering of the
Company's shares of Common Stock registered under the Act after the date hereof
"LIVING TRUST" means a revocable living trust established by the Purchaser
for estate planning purposes and pursuant to which no one other than the
Purchaser and/or the Purchaser's spouse is the beneficiary during the
Purchaser's lifetime.
"MANAGER" means the investment banking firm or firms designated by the
Stockholders effecting a Demand Registration as the managing underwriter(s) of
an offering registered pursuant to this Agreement, which firm or firms shall be
the existing investment bankers for or other nationally recognized investment
bankers reasonably acceptable to the Company.
"PERMANENT DISABILITY" of a Class II Stockholder means that (i) the Class
II Stockholder becomes physically or mentally incapacitated or disabled so that
he is unable to perform for the Company substantially the same services as he
performed prior to incurring such incapacity or disability, and (ii) such
incapacity or disability continues for a period of 120 days, whether or not
consecutive, over a period of six consecutive months; provided, however, that
-------- -------
(x) the Company, at its option and expense, shall be entitled to retain a
physician to confirm the existence of such incapacity or disability, and (y) the
determination of such physician shall be binding upon the Company and the Class
II Stockholder.
"REGISTRABLE SECURITIES" means the Common Stock and the Warrant Shares held
by the Stockholders, subject to adjustment pursuant to Section 8 hereof.
"RELATED TRANSFEREE" means (i) in the case of any individual, any of the
Stockholder's spouse, adult lineal descendants, adult spouses of such lineal
descendants, a Living Trust, trusts solely for the benefit of the Stockholder's
spouse or the Stockholder's minor or adult lineal descendants, and (in the event
of the Stockholder's death) the Stockholder's personal representatives (in their
capacities as such), estate or named beneficiaries and (ii) in the case of a
business organization, any individual or other business organization controlled
by or under common control with such business organization, as such terms are
defined within the meaning of Rule 405 under the Act.
"RETIREMENT" means retirement pursuant to the Company's standard retirement
policy in effect from time to time but in no event prior to the age of 65,
unless pursuant to a specific determination by the Board of Directors of the
Company.
28
"RULE 144" means Rule 144 under the Act, as amended from time to time, or
any successor or similar rule.
"SEC" means the Securities and Exchange Commission.
"TRANSFER," used as a noun, means any sale, pledge, gift, bequest,
transfer, assignment or any other encumbrance or disposition, whether direct or
indirect, conditional or unconditional. "TRANSFER," used as a verb, means to
make a Transfer.
29
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date written above.
Number of Shares of Purchase
LESLIE'S POOLMART, INC. Subscription Stock Price
------------------ --------
By /s/ Xxxxx X. XxXxxxxxx
----------------------------
Its PRESIDENT & C.E.O
----------------------------
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P.,
its sole general partner
By: Grand Avenue Capital Corporation,
its sole general partner
By: [SIGNATURE ILLEGIBLE]
------------------------------------------
Name __________________________________________
Title _________________________________________
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxx Xxxxxxxx
-----------------------------------------------
Xxxx Xxxxxxxx
/s/ Xxxxx X. XxXxxxxxx
-----------------------------------------------
Xxxxx X. XxXxxxxxx
/s/ Xxxxxxx XxXxxxxxx / Xxxxx XxXxxxxxx
-----------------------------------------------
Xxxxx X. XxXxxxxxx and Xxxxxxx X. XxXxxxxxx,
T.R.U.A. DTD 3/15/90 The XxXxxxxxx Family Trust
/s/ Xxxxxx Xxxxx
-----------------------------------------------
Xxxxxx Xxxxx
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date written above.
Number of Shares of Purchase
LESLIE'S POOLMART, INC. Subscription Stock Price
------------------ --------
By ____________________________
Its ____________________________
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P.,
its sole general partner
By: Grand Avenue Capital Corporation,
its sole general partner
By: __________________________________________
Name __________________________________________
Title _________________________________________
_______________________________________________
Xxxxxxx X. Xxxxxxx
_______________________________________________
Xxxxxxx X. Xxxxxxxx
/s/ Xxxx Xxxxxxxx
-----------------------------------------------
Xxxx Xxxxxxxx
_______________________________________________
Xxxxx X. XxXxxxxxx
_______________________________________________
Xxxxx X. XxXxxxxxx and Xxxxxxx X. XxXxxxxxx,
T.R.U.A. DTD 3/15/90 The XxXxxxxxx Family Trust
_______________________________________________
Xxxxxx Xxxxx
30
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date written above.
Number of Purchase Price
Shares of of Subscription
Common Stock Stock
------------ ---------------
LESLIE'S POOLMART, INC.
By ____________________________________
Its ____________________________________
GREEN EQUITY INVESTORS II, L.P. 1,055,172
By: Grand Avenue Capital Partners, L.P.,
its sole general partner
By: Grand Avenue Capital Corporation,
its sole general partner
By:________________________________________
Name_______________________________________
Title______________________________________
OCCIDENTAL PETROLEUM CORPORATION
By /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name Xxxxxxx X. Xxxxxx
--------------------------------------
Title Executive Vice President - Corporate Development
-------------------------------------
22,414
___________________________________________
Xxxxxxx X. Xxxxxxx
160,539
___________________________________________
Xxxxxxx X. Xxxxxxxx
10,000
___________________________________________
Xxxx Xxxxxxxx
___________________________________________
Xxxxx X. XxXxxxxxx
30
OCCIDENTAL PETROLEUM CORPORATION
By _________________________________________
Name _______________________________________
Title ______________________________________
CLASS II STOCKHOLDERS
---------------------
/s/ Xxxxxx X. Xxxxx
--------------------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxx Xxxxxxx
--------------------------------------------
Xxxx Xxxxxxx
/s/ Xxxxxxx Xxxxx
--------------------------------------------
Xxxxxxx Xxxxx
/s/ Xxxxxxx Xxxxxx
--------------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxxx
--------------------------------------------
Xxxxxxx Xxxxxxx
31
/s/ Xxxx Xxxxxx
--------------------------------------------
Xxxx Xxxxxx
/s/ Xxxx Xxx
-------------------------------------------
Xxxx Xxx
/s/ Xxxxxx Xxxxxx
-------------------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxx Xxxx
-------------------------------------------
Xxxxx Xxxx
/s/ Xxxxx Xxxxx
-------------------------------------------
Xxxxx Xxxxx
/s/ Xxxx Xxxxx
-------------------------------------------
Xxxx Xxxxx
/s/ Xxxx Xxxxxx
--------------------------------------------
Xxxx Xxxxxx
/s/ Xxxx Xxx
-------------------------------------------
Xxxx Xxx
/s/ Xxxxxx Xxxxxx
-------------------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxx
/s/ Xxxxx Xxxx
-------------------------------------------
Xxxxx Xxxx
/s/ Xxxxx Xxxxx
-------------------------------------------
Xxxxx Xxxxx
/s/ Xxxx Xxxxx
-------------------------------------------
Xxxx Xxxxx
ACKNOWLEDGMENT AND AGREEMENT OF SPOUSE
--------------------------------------
The undersigned, being the spouse of a Class II Stockholder, hereby agrees
to be bound by the provisions of this Agreement.
/s/ Xxxxxxxxx X Xxx
-----------------------------------
Name Xxxxxxxxx X Xxx
------------------------------
33
ACKNOWLEDGMENT AND AGREEMENT OF SPOUSE
--------------------------------------
The undersigned, being the spouse of a Class II Stockholder, hereby agrees
to be bound by the provisions of this Agreement.
/s/ Xxxxxx Xxxxxxx
-----------------------------------
Name XXXXXX XXXXXXX
-------------------------------
33
ACKNOWLEDGMENT AND AGREEMENT OF SPOUSE
--------------------------------------
The undersigned, being the spouse of a Class II Stockholder, hereby agrees
to be bound by the provisions of this Agreement.
/s/ Xxxxxx Xxxxxx
-----------------------------------
Name XXXXXX XXXXXX
-------------------------------
33
ACKNOWLEDGMENT AND AGREEMENT OF SPOUSE
--------------------------------------
The undersigned, being the spouse of a Class II Stockholder, hereby agrees
to be bound by the provisions of this Agreement.
/s/ Xxxxx Xxxxxx
-----------------------------------
Name Xxxxx Xxxxxx
-------------------------------
33
ACKNOWLEDGMENT AND AGREEMENT OF SPOUSE
--------------------------------------
The undersigned, being the spouse of a Class II Stockholder, hereby agrees
to be bound by the provisions of this Agreement.
/s/ Xxxxxxxxx Xxxx Xxxxx
-----------------------------------
Name Xxxxxxxxx Xxxx Xxxxx
-------------------------------
33
ACKNOWLEDGMENT AND AGREEMENT OF SPOUSE
--------------------------------------
The undersigned, being the spouse of a Class II Stockholder, hereby agrees
to be bound by the provisions of this Agreement.
/s/ Xxxxxx X. Hertinson
-----------------------------------
Name XXXXXX X. HERTINSON
-------------------------------
33
ACKNOWLEDGMENT AND AGREEMENT OF SPOUSE
--------------------------------------
The undersigned, being the spouse of a Class II Stockholder, hereby agrees
to be bound by the provisions of this Agreement.
/s/ Xxxxx X. Xxxxx
-----------------------------------
Name Xxxxx X. Xxxxx
-------------------------------
33
ACKNOWLEDGMENT AND AGREEMENT OF SPOUSE
--------------------------------------
The undersigned, being the spouse of a Class II Stockholder, hereby agrees
to be bound by the provisions of this Agreement.
/s/ Xxxxx X. Sch????
-----------------------------------
Name Xxxxx X. Sch???
-------------------------------
33
ANNEX A
COMMON STOCK
------------
CAPITAL STRUCTURE
-----------------
Fully
Diluted
Common
Shares
------------
Xxxxxxx X. Xxxxxxxx 160,539
Xxxxx XxXxxxxxx 166,552
Xxxxxxx X. Xxxxxxx 22,414
Xxxx Xxxxxxxx 10,000
------------
Total Stock Remaining Outstanding 359,505
Xxxxxxx X. Xxxxxxxx 4,976
Xxxxxx Xxxxx 52,761
Other Management 25,862
------------
Total Options 83,599
Xxxxxx Xxxxx--Cash 16,966
Xxxxxxx Xxxxx--Cash 2,000
Green Equity Investors II, L.P. 1,055,172
Occidental Warrants 316,092
Management Incentive Stock Options 273,946
Total 2,107,280
xxxxxxxxxxxx
X-0
XXXXX X
XXXXX XX XX OPTION PLAN
-----------------------
Number of Shares....... 83,599 total. The number of shares covered by each
individual grant will be the quotient of (i) the
product of (x) the number of shares subject to the
corresponding canceled option multiplied by (y) the
difference between $14.50 and such canceled option's
exercise price, divided by (ii) $9.50. In the case of
Messrs. Xxxxxxxx and Xxxxx, the foregoing formula
results in the issuance of options for a maximum of
4,976 and 52,761 shares, respectively, with the balance
to be allocated to management as heretofore agreed.
Exercise Price......... $5.00
Type of Options........ Non-Qualified, ten-year options
Termination
of Employment.......... A portion of options and shares are subject to
repurchase upon termination of employment prior to the
second anniversary of the Closing Date as set forth in
the Agreement, all other NQ Options remain exercisable
notwithstanding employment status of optionee
Adjustment............. The number of shares subject to NQ Options, and the
exercise price, will be proportionately adjusted for
each subdivision and combination of Company common
stock.
Acceleration........... NQ Options will accelerate and may be cashed out upon
the occurrence of a Change of Control. In a cash-out
situation, Class I Optionholders will be treated as
Class I Stockholders and Class II Optionholders will be
treated as Class II Stockholders.
B-1
ANNEX C
TERMS OF INCENTIVE STOCK OPTION PLAN
------------------------------------
Number of Shares....... 273,946
Exercise Price......... Fair Market Value (opening equity price)
Type of Options........ Incentive, ten-year options
Vesting................ One-third (1/3) on the first, second and third
anniversaries of the Closing Date, except in respect of
performance portion
Performance Portion.... Options equivalent to 71,647 of the fully-diluted
Common Stock outstanding on the Closing Date vest upon
achievement (assuming continued employment) of
performance targets as follows:
EBITDA for Year Ended: Number of Stores Opened by:
--------------------- --------------------------
$18 M.............. 1997 30...........March 31, 1998
$22M .............. 1998 30...........March 31, 1999
$26M .............. 1999 30...........March 31, 2000
Note: Vesting also occurs if the store opening target
----
is met in each prior year and the Company achieves 95%
of a year's EBITDA target and the sum of that year and
the following year's EBITDA equals 100% of the combined
targets. EBITDA means the Consolidated Net Income of
the Company (i) plus (minus) any extraordinary or
nonrecurring gain (loss); (ii) plus (minus) any gain
(loss) due solely to fluctuations in currency values;
(iii) plus provision for taxes; (iv) plus consolidated
interest expense, whether paid or accrued and whether
or not capitalized (and including any amortization of
deferred financing costs); (v) plus any noncash charges
for such period (including LIFO charges); (vi) plus
depreciation, amortization (including amortization of
goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in
a prior period) and other noncash charges.
C-1
Termination of
Employment............. Vested options may be exercised for 90 days post-
termination; unvested options are forfeited and become
eligible for future grant at Fair Market Value
Adjustment............. The number of shares subject to Options, and the
exercise price, will be proportionately adjusted for
each subdivision and combination of Company common
stock
Acceleration........... ISO Options will accelerate and may be cashed out upon
the occurrence of a Charge of Control. In a cash-out
situation, Class I Optionholders will be treated as
Class I Stockholders and Class II Optionholders will be
treated as Class II Stockholders.
C-2
