THE DERBY CYCLE CORPORATION
SECOND AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
THIS SECOND AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT is made this
22nd day of November, 2000 by and among:
(1) THE DERBY CYCLE CORPORATION (dba Raleigh USA Bicycle Company), a
corporation organized and existing under the laws of the State of Delaware,
having its registered office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "Company" );
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(2) DERBY FINANCE S.a ▇.▇., a corporation (societe a responsibilite
limitee) incorporated under the laws of the Grand Duchy of Luxembourg, with its
registered office at ▇▇ ▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Grand Duchy of
Luxembourg ("DFS");
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(3) DC CYCLE, L.L.C., a limited liability company organized and
existing under the laws of the State of Delaware, having its registered office
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Cycle LLC ");
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(4) ▇▇▇▇▇▇ EQUITY INVESTORS III, L.P., a limited partnership organized
and existing under the laws of the State of Delaware having its registered
office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇");
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(5) PERSEUS CYCLE, L.L.C., a limited liability company organized and
existing under the laws of the State of Delaware, having its registered office
at ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ "▇" ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ ("Perseus"); and
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(6) QUANTUM INDUSTRIAL PARTNERS LDC, a Cayman Islands limited duration
company ("▇▇▇▇▇").
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WHEREAS, DFS, Perseus, Cycle LLC and ▇▇▇▇▇ are the owners of the
respective numbers of shares of the Company's Common Stock and Preferred Stock
(as each such term is defined in Section 1 of this Agreement) set forth in
Exhibit A;
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WHEREAS, DFS, Perseus, Cycle LLC and ▇▇▇▇▇ wish to set forth certain
agreements with respect to the voting and transfer of their shares of the
Company's Common Stock and Preferred Stock;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties hereto agree as follows:
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1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
set out in this Section 1:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of, or make investment decisions for, a
Person whether through the ownership of voting securities, contract or
otherwise.
"Approval Amount" shall mean (i) five million dollars ($5,000,000)
with respect to acquisitions of shares or assets by the Company and/or its
Subsidiaries; (ii) ten million dollars ($10,000,000) with respect to (A) any
disposition or series of related dispositions of assets or shares of the Company
or its Subsidiaries and (B) any individual or series of related capital
expenditures by the Company or its Subsidiaries occurring in any one fiscal
year; and (iii) fifteen million dollars ($15,000,000) with respect to the
incurrence of new debt or similar obligations (or the settlement or compromise
of obligations in such amounts) by the Company or its Subsidiaries (other than
borrowings under revolving credit facilities, provided that such facilities have
been approved by the Board of Directors).
"Approved Sale" shall have the meaning set forth in Section 11(a)
hereof.
"Board of Directors" shall mean, unless otherwise specified, the Board
of Directors of the Company.
"Cash" shall mean cash and cash equivalents (with amounts deposited in
a Cash escrow deemed as Cash).
"Cause" shall mean (i) the commission by such member of the Board of
Directors of a felony or a crime involving moral turpitude, (ii) the commission
by such member of the Board of Directors of any other act or omission involving
dishonesty, disloyalty or fraud (A) with respect to the Company or any of its
Subsidiaries or any of their employees, customers or suppliers, or (B) adversely
affecting the reputation or standing of the Company or any of its Subsidiaries
or (iii) gross negligence or willful misconduct by such member of the Board of
Directors with respect to the Company or any of its Subsidiaries.
"Certificate of Incorporation" shall mean the Second Amended and
Restated Certificate of Incorporation of the Company as in effect from time to
time (a copy of the Second Amended and Restated Certificate of Incorporation, as
amended and restated on the date hereof, is attached to this Agreement as
Exhibit B and made a part hereof).
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"Chairman" shall mean the chairman of the Board of Directors.
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"Class A Common Stock" shall mean the shares of common stock, Class A,
of the Company, par value $.01 per share, authorized by the Certificate of
Incorporation and such other common equity of the Company into which the Class A
Common Stock shall be converted.
"Class B Common Stock" shall mean the shares of common stock, Class B,
of the Company, par value $.01 per share, authorized by the Certificate of
Incorporation.
"Class C Common Stock" shall mean the shares of common stock, Class C,
of the Company, par value $.01 per share, authorized by the Certificate of
Incorporation.
"Closing Date" shall mean the date of the closing of the transactions
contemplated by the Recapitalization Agreement.
"Common Stock" shall mean the Class A Common Stock, the Class B Common
Stock, the Class C Common Stock and such other common equity of the Company
which the Company may issue from time to time.
"Converted Common" shall mean Class A Common Stock which can be
acquired under clause (ii) of Sections 4B and 4D of Part B of Article Four of
the Certificate of Incorporation.
"Cycle Shareholders" shall mean Cycle LLC and its Permitted
Transferees; provided that a Cycle Shareholder should not be considered a Cycle
Shareholder unless it is controlled by (directly or indirectly) ▇▇▇▇▇▇.
"DCC Share Option Agreement" shall mean that certain DCC Share Option
Agreement by and among the Company, DFS, Cycle LLC, Perseus and Raleigh
Industries of Canada Limited dated May 14, 1998.
"Deemed Common Stock" shall mean the Class A Common Stock and the
shares of Class A Common Stock issuable upon conversion of the Series A
Preferred Stock and the Class C Common Stock in accordance with the terms of the
Certificate of Incorporation (for purposes of this Agreement, such shares of
Class A Common Stock shall be deemed to be outstanding), provided that Deemed
Common Stock shall not include Converted Common.
"Derby Group" shall mean the Company, together with all present or
future Subsidiaries of the Company (so long as they remain Subsidiaries).
"Derby International" shall mean Derby International Corporation, S.A.
"Designee" shall mean any wholly-owned Subsidiary of the Company which
is designated by the Company, in its sole discretion, under the provisions of
Section 9(a) hereof.
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"DFS Shareholders" shall mean DFS and its Permitted Transferees;
provided that a DFS Shareholder shall not be considered a DFS Shareholder unless
it is controlled by (directly or indirectly) The International Heart Foundation
Trust.
"dollars" shall mean the currency of the United States of America.
"Eligible Group" shall mean the DFS Shareholders, so long as the DFS
Shareholders own at least 5% of the voting power of the outstanding capital
stock of the Company; the Cycle Shareholders, so long as the Cycle Shareholders
own at least 5% of the voting power of the outstanding capital stock of the
Company; the Perseus Shareholders so long as (i) the Perseus Shareholders own
any shares of capital stock of the Company and (ii) ▇▇▇▇▇ ▇. ▇▇▇▇▇ controls,
directly or indirectly, Perseus; and the ▇▇▇▇▇ Shareholders, so long as the
▇▇▇▇▇ Shareholders own at least a majority of the outstanding Series D Preferred
Shares.
"Employee" shall mean any individual who is employed by a member of
the Derby Group or any individual whose services are made available to a member
of the Derby Group on a full-time (or substantially full-time) basis under the
terms of an agreement between a member of the Derby Group and any Person which
is not a member of the Derby Group.
"Employee Shareholders" shall mean each of the Employees named on
Schedule 1 attached hereto and such Employee's Permitted Transferees.
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"Exchange Agreements" shall have the meaning ascribed to it in Section
3.2(b)(viii) of the Recapitalization Agreement.
"Exempt Transfer" shall mean, with respect to any Shareholder, (a)
Transfers of Class A Common Stock or Class C Common Stock by such Shareholder
after the date hereof that in the aggregate do not exceed 25% of the Class A
Common Stock held by such Shareholder on the date hereof, (b) Transfers of
Series A Preferred Stock by such Shareholder after the date of this Agreement
that in the aggregate do not exceed 25% of the Series A Preferred Stock held by
such Shareholder on the date of this Agreement, (c) a Public Sale, (d) a
purchase, redemption or conversion of Preferred Stock as provided in the
Certificate of Incorporation and (e) Transfers permitted under Section 7 hereof.
"Family Trust" shall have the meaning set forth in Section 7 of this
Agreement.
"Financing Documents" shall have the meaning set forth in the
Recapitalization Agreement.
"Implied Class B Purchase Price" shall mean the amount per share of
Class B Common Stock that would be distributed in respect of such share of Class
B Common Stock if the Company were liquidated and distributions were made
pursuant to Part D of Article Four of the Certificate of Incorporation of an
amount equal to the sum of (i) the product of (a) the price per share of Deemed
Common Stock payable in a Proposed Disposition or an Approved Sale, as
applicable, and (b) the number of outstanding shares of Deemed Common Stock and
(ii) an amount, when added to the amount determined pursuant to clause (i) of
this definition, that would have yielded proceeds to the Deemed Common Stock
equal to the amount determined
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under clause (i) of this definition upon a liquidation of the Company pursuant
to Part D of Article Four of the Certificate of Incorporation.
"Initial DFS Shares" shall mean the shares of Common Stock acquired by
DFS on or prior to the Closing Date (without duplication), and those shares
which affiliates of DFS are entitled to acquire pursuant to the Exchange
Agreements and those shares of Common Stock distributed to DFS pursuant to the
adjustment mechanism in Sections 4 and 5 of the DCC Share Option Agreement but
shall not mean any Shares redeemed from DFS pursuant to such sections.
"Initial Cycle Shares" shall mean collectively the shares of Common
Stock and Series A Preferred Stock acquired by Cycle LLC on the Closing Date.
"Initial Perseus Shares" shall mean the shares of Common Stock
acquired by Perseus on the Closing Date.
"Initial Public Offering" shall mean a public offering and sale of the
Company's equity securities (i) pursuant to an effective registration statement
under the Securities Act if immediately thereafter the Company has publicly held
equity securities listed on a national securities exchange or the NASD automated
quotation system or (ii) made on any recognized stock exchange in any country
which is a member of the Organization of Economic Cooperation and Development.
"IRR" shall have the meaning set forth in the Certificate of
Incorporation.
"Payment Inflows" shall have the meaning set forth in the Certificate
of Incorporation.
"Payment Outflows" shall have the meaning set forth in the Certificate
of Incorporation.
"Permitted Transferee" shall mean any Family Trust, Qualified
Affiliate or a transferee under and pursuant to the provisions of Section 8(d)
of this Agreement.
"Perseus" shall mean Perseus Cycle, L.L.C., a Delaware limited
liability company.
"Perseus Director" shall mean the members of the Board of Directors,
if any, appointed by the Perseus Shareholders, pursuant to Section 3(a).
"Perseus Shareholders" shall mean Perseus and its Permitted
Transferees; provided that a Perseus Shareholder shall not be considered a
Perseus Shareholder unless it is controlled by (directly or indirectly) Perseus
Capital, L.L.C.
"Person" shall mean an individual, trust, partnership, company,
corporation or other legal entity.
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"Preferred Stock" shall mean the Series A Preferred Stock, the Series
B Preferred Stock, the Series D Preferred Stock, the Series D-1 Preferred Stock
and any other preferred equity of the Company that the Company may issue from
time to time.
"Proposed Disposition" shall have the meaning set forth in Section
8(a) hereof.
"Public Sale" shall mean any sale of Common Stock (i) pursuant to an
offering registered under the Securities Act, (ii) made pursuant to Rule 144
promulgated under the Securities Act or any successor provision serving the same
purpose, or (iii) made on any recognized stock exchange in any country which is
a member of the Organization of Economic Cooperation and Development.
"Recapitalization Agreement" shall mean a certain Recapitalization
Agreement, dated March 10, 1998, by and among the Company, Derby International,
Perseus, Cycle LLC and DFS, as amended.
"Rule 144 Public Sale" shall mean any sale of securities to the public
pursuant to an offering made pursuant to Rule 144 promulgated under the
Securities Act or any successor provision.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior RIC Shares" shall mean the Class A Preferred Shares of Raleigh
Industries of Canada Limited as defined in the Exchange Agreements.
"Series A Preferred Stock" shall mean the shares of the Preferred
Stock, Series A, of the Company, par value $.01 per share, authorized by the
Certificate of Incorporation.
"Series B Preferred Stock" shall mean the shares of the Preferred
Stock, Series B, of the Company, par value $.01 per share, authorized by the
Certificate of Incorporation.
"Series C Preferred Stock" shall mean the shares of the Preferred
Stock, Series C, of the Company, par value $.01 per share, authorized by the
Certificate of Incorporation.
"Series D Preferred Stock" shall mean the shares of the Preferred
Stock, Series D, of the Company, par value $.01 per share, authorized by the
Certificate of Incorporation.
"Series D-1 Preferred Stock" shall mean the shares of the Preferred
Stock, Series D-1, of the Company, par value $.01 per share, authorized by the
Certificate of Incorporation. For the avoidance of doubt, in no event shall
Series D-1 Preferred Stock be deemed to constitute the same class or series of
capital stock of the Company as the Series D Preferred Stock.
"Shares" shall mean the issued shares of Common Stock and Preferred
Stock of the Company from time to time.
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"Shareholder" shall mean the members of the Shareholder Group and
their Permitted Transferees, the Employee Shareholders, and such other Persons
to the extent provided in Section 6(b).
"Shareholder Group" shall mean each of the DFS Shareholders, the Cycle
Shareholders, the Perseus Shareholders or the ▇▇▇▇▇ Shareholders, as applicable.
"Shareholder Group Shares" shall mean the sum of the total number of
shares of Class A Common Stock, Class C Common Stock and the total number of
shares of Series A Preferred Stock held by each Shareholder, and any Shares held
by Derby International acquired pursuant to the Exchange Agreements.
"Simultaneous Offer" shall have the meaning set forth in Section 9(a)
of this Agreement.
"Simultaneous Offer Date" shall have the meaning set forth in Section
9(a) of this Agreement.
"▇▇▇▇▇" shall mean Quantum Industrial Partners LDC, a Cayman Islands
limited duration company.
"▇▇▇▇▇ Director" shall mean the member of the Board of Directors, if
any, appointed by the Soros Shareholders pursuant to Section 3(a).
"▇▇▇▇▇ Shareholders" shall mean ▇▇▇▇▇ and its Permitted Transferees;
provided that a ▇▇▇▇▇ Shareholder shall not be considered a ▇▇▇▇▇ Shareholder
unless it is controlled by (directly or indirectly) by ▇▇▇▇▇ Equity Partners.
"Subsidiary" shall mean a corporation (or equivalent legal entity
under the law of any country) of which the Company owns directly or indirectly
more than fifty percent (50%) of the shares the holders of which are ordinarily
and generally, in the absence of contingencies or special arrangements, entitled
to vote for the election of directors (or the equivalent governing body of the
corporation).
"Term of this Agreement" shall mean the period beginning on the date
of this Agreement and continuing until the earliest of (i) the date there no
longer are at least two (2) Shareholder Groups owning Shareholder Group Shares,
(ii) the date more than fifty percent (50%) of the outstanding Deemed Common
Stock is beneficially owned by a Person or Persons who are not Shareholders, and
(iii) upon the consummation of an Approved Sale.
"Transfer" shall have the meaning set forth in Section 2(a) of this
Agreement.
"Transfer Notice" and "Transferor" shall have the meanings set forth
in Section 8(a) of this Agreement.
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2. TRANSFER OF SHARES
(a) Restriction on Transfer of Shares
During the Term of this Agreement, no Shareholder shall be entitled to
sell, transfer, assign, pledge, charge or otherwise encumber ("Transfer") any
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interest in the Shares to any Person other than the Company, and the Company
shall not register any Transfer of any of the Shares from a Shareholder to any
Person (other than the Company), unless such Transfer is made in accordance with
the terms and conditions of this Agreement.
(b) Restrictions to be Endorsed on Certificates
Each Shareholder shall acquire the Shares subject to all of the
rights, obligations and restrictions provided for in the Certificate of
Incorporation and this Agreement. Each share certificate issued to a Shareholder
or to any Person to whom a Shareholder sells, assigns or otherwise transfers
Shares (other than in a Public Sale) shall be endorsed with a legend in
substantially the following terms:
"THE SHARES OF [COMMON STOCK/PREFERRED STOCK] OF THE DERBY
CYCLE CORPORATION (THE "COMPANY") REPRESENTED BY THIS
CERTIFICATE ARE ENTITLED TO CERTAIN RIGHTS AND ARE SUBJECT
TO CERTAIN RESTRICTIONS, INCLUDING RESTRICTIONS ON THE
TRANSFER THEREOF, CONTAINED IN THE CERTIFICATE OF
INCORPORATION OF THE COMPANY AND/OR SPECIFIED IN THE
SHAREHOLDERS' AGREEMENT AMONG THE COMPANY AND THE HOLDERS OF
THE SHARES OF THE COMPANY DATED MAY 14, 1998 (AND ALL
AMENDMENTS THERETO), COPIES OF WHICH ARE AVAILABLE AT THE
REGISTERED OFFICE OF THE COMPANY. THE SHARES OF THE COMPANY
REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERABLE UPON
THE BOOKS OF THE COMPANY UNLESS AND UNTIL ALL OF THE TERMS
AND CONDITIONS OF THE CERTIFICATE OF INCORPORATION AND THE
SHAREHOLDERS' AGREEMENT (AND ALL AMENDMENTS THERETO) HAVE
BEEN COMPLIED WITH."
3. DIRECTORS OF THE COMPANY AND ITS SUBSIDIARIES
(a) Nomination and Election of Directors of the Company
The following persons have been appointed as directors of the Company
for the period ending with the annual general meeting of shareholders of the
Company for the fiscal year ending December 31, 2000:
▇▇▇▇ ▇. Finden-Crofts
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A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Each of the Shareholders shall vote all of the Shares owned by such Shareholder
that are entitled to vote on matters submitted to the stockholders of the
Company in favor of the appointment to the Board of Directors of each Person
nominated by the DFS Shareholders, the Perseus Shareholders, the Cycle
Shareholders and the ▇▇▇▇▇ Shareholders in accordance with the following:
(i) for so long as the Cycle Shareholders hold Shares representing:
(1) not less than sixty percent (60%) of the aggregate voting power of the
Initial Cycle Shares (for this purpose, loss in voting power attributable
to dilution resulting from the issuance of Shares by the Company to any
Person shall be ignored); or (2) greater voting power than the Shares held
by the DFS Shareholders, then:
(A) the Board of Directors shall consist of nine (9) directors;
and
Cycle 5
DFS 2
Perseus 1
▇▇▇▇▇ 1
(B) the Shareholders shall have the right at all times to
nominate the numbers of persons set forth opposite such Shareholders
name and elect in subsection A above:
provided, however, that if the Perseus Shareholders are no longer
part of the Eligible Group, then the Shareholder Group that holds a majority of
the voting power of the Shares held by the Eligible Group shall be entitled to
nominate and elect an additional director to the Board of Directors; or
(ii) at such time as the Cycle Shareholders hold Shares representing:
(1) less than sixty percent (60%) of the aggregate voting power of the
Initial Cycle Shares (for this purpose, loss in voting power attributable
to dilution resulting from the issuance of Shares by the Company to any
Person shall be ignored); and (2) voting power equal to or less than the
voting power of the Shares held by the DFS Shareholders (such occurrence
being referred to as the "Trigger Event"), then:
(A) the Board of Directors shall consist of nine (9) directors;
and
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(B) (x) the Shareholder Group, if any, that holds a majority of
the voting power of the Shares held by the Eligible Group shall be
entitled to nominate and elect five (5) directors, the Shareholder
Group that holds the second largest amount of the voting power of the
Shares held by the Eligible Group shall be entitled to nominate and
elect two (2) directors, and the two Shareholder Groups that holds the
smallest amount of the voting power of the Shares held by the Eligible
Group shall be each entitled to nominate and elect one (1) director;
provided that if the Eligible Group consists of only three (3)
Shareholder Groups, then the Shareholder Group that holds the majority of the
voting power of the Shares held by the Eligible Group shall be entitled to
nominate and elect five (5) directors, the Shareholder Group that holds the
second largest amount of the voting power of the Shares held by the Eligible
Group shall be entitled to nominate and elect three (3) directors and the
Shareholder Group that holds the smallest amount of the voting power of the
Shares held by the Eligible Group shall be entitled to nominate and elect one
(1) director;
provided further that if the Eligible Group consists of only two
(2) Shareholder Groups, then the Shareholder Group that holds a majority of the
voting power of the Shares held by the Eligible Group shall be entitled to
nominate and elect six (6) directors and the Shareholder Group that holds the
second largest amount of the voting power of the Shares held by the Eligible
Group shall be entitled to nominate and elect three (3) directors, and, provided
further, that if the Eligible Group only consists of one Shareholder Group, then
such Shareholder Group shall be entitled to nominate and elect nine (9)
directors; and
(C) (y) if no Shareholder Group holds a majority of the voting
power of the Shares held by the Eligible Group, then the Shareholder
Group that holds the largest amount of the voting power of the Shares
held by the Eligible Group shall be entitled to nominate and elect
four (4) directors, the Shareholder Group that holds the second
largest amount of the voting power of the Shares held by the Eligible
Group shall be entitled to nominate and elect three (3) directors and
the two Shareholder Group that hold the smallest amounts of the voting
power of the Shares held by the Eligible Group shall be entitled to
nominate and elect one (1) director each;
provided that if there are only two (2) Shareholder Groups, then
the Shareholder Group that holds the largest amount of voting power of
the Shares held by the Eligible Group shall be entitled to nominate
and elect five (5) directors, and the Shareholder Group that holds the
second largest amount of the voting power of the Shares held by the
Eligible Group shall be entitled to nominate and elect four (4)
directors);
(iii) if, at any time after the Trigger Event, the number of seats on
the Board of Directors of the Company that the Eligible Group is entitled to
nominate and elect is changed (including, for example, upon an Initial Public
Offering, in connection with the offer and sale of equity securities of the
Company to new investors or otherwise), then the number of seats shall be
allocated among the Eligible Group in proportion (as close as practicable) to
the respective voting power held by each Shareholder Group; and
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(iv) if prior to a Trigger Event, the number of seats on the Board of
Directors of the Company that the Eligible Group is entitled to nominate and
elect is changed (including, for example, upon an Initial Public Offering, in
connection with the offer and sale of equity securities of the Company to new
investors or otherwise), then the number of seats which each Shareholder Group
is entitled to nominate shall be adjusted proportionately so as to achieve (as
close as practicable) the same proportion of nominees for each Shareholder Group
as applicable prior to such change.
(b) Directors to be Elected Annually; Removal
All members of the Board of Directors shall be elected or re-elected
annually and shall serve until their respective successors are elected. A
Shareholder Group that nominated a Person to be a member of the Board of
Directors may remove such Person with or without Cause on delivery of written
notice to the Company of such removal. The only other circumstances under which
a Person may be removed from the Board of Directors shall be as otherwise
required by this Agreement, by law or by a majority of the other members of the
Board of Directors for Cause. In the event that any Person designated under
Section 3(a) hereof by a Shareholder Group for any reason ceases to serve as a
member of the Board of Directors, the Shareholder Group that designated the
Person that will no longer serve on the Board of Directors shall have the right
to nominate a Person to fill the vacancy and such Person shall be elected to the
Board of Directors by a majority of the remaining directors at a meeting called
in accordance with Section 3(d) hereof or at a special meeting of the
shareholders convened for that purpose. The Chairman or any other officer of the
Company shall call a special meeting of the stockholders for such purpose as
promptly as practicable upon any request for such meeting from the Shareholder
Group entitled to nominate a director under this Section 3(b). At any such
shareholders meeting, each of the Shareholders shall vote all Shares owned by
such Shareholder that are entitled to vote with respect to the election of
directors in favor of the election of the Person nominated by such Shareholder
Group under this Section 3(b).
(c) Quorum for Meetings of the Board of Directors
At all meetings of the Board of Directors, a majority of the members
shall constitute a quorum for the transaction of business.
(d) Meetings of the Board of Directors
Meetings of the Board of Directors shall be called by the Secretary or
any other officer of the Company at the request of the Chairman, any member of
the Board of Directors or any Shareholder Group. Notice of any meeting of the
Board of Directors shall be given to each director in person or by telephone,
telex, telefax, or other electronic means (provided that in the case of an e-
mail notice, such notice must be promptly confirmed in person or by telephone,
telex or telefax). Each notice shall notify the directors that the meeting will
be held on the third day next succeeding the date of the notice unless a member
of the Shareholder Group notifies the Chairman, the Secretary or the officer who
provided the notice within 24 hours after the delivery of such notice that none
of its representatives on the Board of Directors is available to participate
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in a meeting held on such date, in which case the meeting will be held on the
seventh day next succeeding the date of the original notice. If a member of the
Shareholder Group so notifies the Chairman of the Board of Directors or the
Secretary within the time period specified above that none of its
representatives is available to participate in a meeting held on the third day
next succeeding the date of the notice, the Chairman of the Board, the Secretary
or another officer of the Company will so notify the other directors and will
confirm that the meeting will be held on the seventh day next succeeding the
date of the original notice. Any notice required by this Section 3(d) may be
waived by all members of the Board of Directors. All notices of meetings of the
Board of Directors shall state in reasonable detail the business to be
transacted at such meetings and, to the extent applicable, the right of a
Shareholder Group to postpone the meeting in accordance with this Section 3(d).
(e) Action by the Directors without a Meeting
The Board of Directors may take action without a meeting by unanimous
written consent expressed in one or more documents, letters or telefaxes.
(f) Board of Directors of Subsidiaries
The Board of Directors of each Subsidiary shall be nominated and
elected by the Board of Directors of the Company.
(g) Termination of DFS Voting Rights
The right of the DFS Shareholders to nominate and remove members of
the Board of Directors under this Section 3 shall terminate if (1) the DFS
Shareholders are no longer part of the Eligible Group or (2) during the lifetime
of A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("AEG"), AEG ceases to be the chairman of either DFS or
Derby International; provided however, that if AEG dies or is physically or
mentally disabled, then the right of the DFS Shareholders to nominate and elect
directors pursuant to this Section 3 shall continue and the DFS Shareholders
shall be entitled to nominate, elect and remove directors pursuant to Section 3
hereof if and only if at least one of the directors that the DFS Shareholders
are entitled to nominate and elect is a person who is independent from and not a
shareholder, director or employee of DFS, Derby International or The
International Heart Foundation Trust or any of their Affiliates, is experienced
in business matters and is reasonably acceptable to the Cycle Shareholders and
the Perseus Shareholders.
(h) Termination of Cycle LLC Voting Rights
The right of the Cycle Shareholders to nominate and remove members of
the Board of Directors under this Section 3 shall terminate if (1) ▇▇▇▇▇▇ shall
own and control, directly or indirectly, less than 51% of the outstanding voting
and equity interests in the Cycle Shareholders or (2) the Cycle Shareholders are
no longer part of the Eligible Group.
-12-
(i) Termination of Perseus Voting Rights
The right of the Perseus Shareholders to nominate and remove members
of the Board of Directors under this Section 3 shall terminate if Perseus is no
longer a member of the Eligible Group.
(j) Termination of ▇▇▇▇▇ Voting Rights
The right of the ▇▇▇▇▇ Shareholders to nominate and remove members of
the Board of Directors under this Section 3 shall terminate if ▇▇▇▇▇ is no
longer a member of the Eligible Group.
(k) Reallocation of Nominees
In the event that either the Cycle Shareholders or the DFS
Shareholders lose their rights to nominate directors under Sections 3(g) and
3(h) above, the Shareholder Group owning stock with the largest amount of voting
power on such date shall succeed to the right to nominate such directors, except
to the extent otherwise provided in Section 3(a)(ii) hereof.
(l) Executive Committee
So long as ▇▇▇▇▇ is a member of the Eligible Group, ▇▇▇▇▇ shall have a
right to appoint a member to any executive committee of the Board of Directors
(or an equivalent thereof).
(m) D&O Insurance
So long as the ▇▇▇▇▇ Director is a member of the Board of Directors,
the Company shall cause to be maintained directors' and officers' liability
insurance covering all Directors and officers of the Company, including coverage
in an amount not less than the coverage amount on the date hereof.
(n) The Calculation of the Majority of Interests of the Series D Preferred
Shares
In calculating whether the ▇▇▇▇▇ Shareholders hold a majority in
interest of the Series D Preferred Shares or in defining Eligible Group, any
additional issuances of Series D Preferred Shares without the approval of the
director nominated by ▇▇▇▇▇ shall be disregarded.
4. APPOINTMENT OF AUDITORS
During the Term of this Agreement, for each fiscal year of the Company
and each of the Subsidiaries which begins after December 31, 1997, each
Shareholder shall vote all of the Shares held by such Shareholder which are
entitled to vote thereon in favor of the election of any recognized accounting
firm of international standing nominated by a majority of the Board of Directors
of the Company as auditor for the Company.
-13-
5. PRINCIPAL CORPORATE ACTION BY THE COMPANY AND SUBSIDIARIES
(a) Corporate Action by the Company not in the Ordinary Course of Business
During the Term of this Agreement but only for so long as (1) the DFS
Shareholders own at least 9% of the voting power of the outstanding Shareholder
Group Shares and at least 6% of the voting power of the outstanding capital
stock of the Company, (2) the Cycle Shareholders own at least 15% of the voting
power of the outstanding Shareholder Group Shares and at least 10% of the voting
power of the outstanding capital stock of the Company, (3) the ▇▇▇▇▇
Shareholders own at least a majority of the outstanding Series D Preferred
Shares and (4) no Shareholder Group owns more than 82.5% of the voting power of
the outstanding Shareholder Group Shares, the Company shall not take any of the
following actions unless (I) if the provisions of Section 3(a)(ii) are not then
operative, such action is approved by the affirmative vote of a majority of the
Board of Directors of the Company, which majority must include (x) either a
director nominated by the Perseus Shareholders or the DFS Shareholders and (y)
the ▇▇▇▇▇ Shareholders or (II) if the provisions of Section 3(a)(ii) are then
operative, such action is approved by the affirmative vote of five members of
the Board of Directors of the Company including the ▇▇▇▇▇ Director (so long as
the ▇▇▇▇▇ Shareholders own at least a majority of the outstanding Series D
Preferred Shares):
(i) make any material change in the nature of the business of the
Company and the Subsidiaries, taken as a whole;
(ii) purchase, acquire, manage or launch any new business or any part
of a new business, or purchase or acquire more than five percent (5%) of
the shares or other securities of any Person (other than a Person which is
a Subsidiary before the date of such purchase or acquisition), for a total
consideration in excess of the Approval Amount or the equivalent thereof in
any other currency;
(iii) make any investment of any kind in any corporation, company,
firm or business enterprise controlled by one or more Shareholders or their
Affiliates (other than a member of the Derby Group) or employees of the
Shareholders or their Affiliates (other than a member of the Derby Group);
(iv) purchase or lease any fixed assets or property from any
Shareholder or Employee or any of their Affiliates (other than from a
member of the Derby Group);
(v) lend any money, make any guarantee or pledge the credit of the
Company (or the credit of any Subsidiary) to or for the benefit of any
Person other than a member of the Derby Group, except in the ordinary
course of business of the Company;
(vi) enter into any plan of liquidation or dissolution;
(vii) sell, lease, charge or encumber any of the assets, revenues or
property, tangible or intangible, or transfer or dispose of all or any
substantial part
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of the undertaking, assets or revenue of the Company or any of its
Subsidiaries for total consideration exceeding the Approval Amount, except:
(A) in the ordinary course of business and on arm's-length terms; or (B) if
the assets, revenues or undertakings are not material to the business of
the Derby Group, taken as a whole, provided such transaction is on arm's-
length terms; or (C) to, or in favor of, a member of the Derby Group;
(viii) amalgamate or merge with any other company or business
enterprise (other than a member of the Derby Group);
(ix) enter into any plan of reorganization or recapitalization which
results in a change of ownership of the outstanding Shares (other than with
a member of the Derby Group);
(x) pay any dividends or distributions to Shareholders, except in
accordance with the terms and conditions of this Agreement;
(xi) incur any liability, commitment or obligation, or settle or
compromise any claim, which is not otherwise specifically described above
and which is out of the ordinary course of business of the Derby Group for
an amount in excess of the Approval Amount or the equivalent thereof in any
other currency;
(xii) issue or sell any shares of Class A Common Stock (other than
shares not subject to the Preemptive Rights as described in Section 12(a)
of this Agreement) for no consideration or for a consideration less than
the fair market value thereof (as such fair market value is determined in
good faith by the Company's independent auditors); or
(xiii) take steps or omit to take steps which will result in the
termination of the rights to use the Derby trademark in any jurisdiction
under that certain Trademark License Agreement of even date herewith.
(b) Prohibitions on Action by Subsidiaries
During the Term of this Agreement but only for so long as (1) the DFS
Shareholders own at least 9% of the voting power of the outstanding Shareholder
Group Shares and at least 6% of the voting power of the outstanding capital
stock of the Company, (2) the Cycle Shareholders own at least 15% of the voting
power of the outstanding Shareholder Group Shares and at least 10% of the voting
power of the outstanding capital stock of the Company, (3) the ▇▇▇▇▇
Shareholders own at least a majority of the outstanding Series D Preferred
Shares and (4) no Shareholder Group owns more than 82.5% of the voting power of
the outstanding Shareholder Group Shares, the Company and each of the
Shareholders shall take such action as may be necessary or appropriate (by
voting the Shares held by such Shareholder, by causing action to be taken by the
Board of Directors of the Company or any Subsidiary, or otherwise) to prevent
any Subsidiary from taking the following actions unless (I) if the provisions of
Section 3(a)(ii) are not then operative, such action is approved by the
affirmative vote of a majority of the Board of Directors of the Company, which
majority must include (x) either a
-15-
director nominated by the Perseus Shareholders or the DFS Shareholders and (y)
the ▇▇▇▇▇ Shareholders or (II) if the provisions of Section 3(a)(ii) are then
operative, such action is approved by the affirmative vote of five members of
the Board of Directors of the Company including the ▇▇▇▇▇ Director (so long as
the ▇▇▇▇▇ Shareholders own at least a majority of the outstanding Series D
Preferred Shares):
(i) make any material change in the nature of the business of such
Subsidiary; or
(ii) take any of the actions described in clauses (ii) through (xiii)
of Section 5(a).
(c) ▇▇▇▇▇ Director Approval
During the Term of this Agreement but only for so long as the ▇▇▇▇▇
Shareholders own at least a majority of the outstanding Series D Preferred
Shares, the Company shall not, without the approval of the ▇▇▇▇▇ Director take
any of the following actions:
(i) issue any equity security senior or pari-passu to the Series D
Preferred Shares (including additional Series D Preferred Shares) or any
security convertible or exchangeable for any such security (other than Series C
Preferred Shares);
(ii) incur any debt other than the increase in the Company's existing
senior credit facility by the Deutschmark equivalent of $11,500,000;
(iii) pay any dividends or make any distributions on, or repurchase,
redeem or otherwise retire, any shares of Class A Common Stock, Class B Common
Stock, Class C Common Stock, Series A Preferred Stock, Series B Preferred Stock,
any other equity security of the Company or its Subsidiaries (other than Series
C Preferred Stock), or any security (other than Series C Preferred Stock) that
is convertible into or exchangeable for any of the foregoing; or
(iv) make any change in the Chief Executive Officer or Chief
Financial Officer of the Company.
(d) Cycle Shareholders Exit and Distress Situations.
Sections 5(a), 5(b) and 5(c) shall not apply and only the vote of the
members of the Board of Directors of the Company nominated by the Shareholder
Group that hold the majority of the voting power of the Shares held by the
Eligible Group shall be required to approve any action by the Company or any
Subsidiary:
(i) during the period that a payment default under the Financing
Documents is not cured or after any acceleration of Indebtedness under the
Financing Documents;
(ii) during the period that an event of default under the Financing
Documents resulting from unpaid judgments, the insolvency of the Company,
the
-16-
filing for bankruptcy protection (whether voluntary or involuntary) or
similar event until such event of default is cured;
(iii) during any period during which the financial covenants under the
Financing Documents are not satisfied, resulting in a default under such
documents, provided that Sections 5(a), 5(b) and 5(c) hereof shall continue
to apply to the sale of any Principal Subsidiary (as defined in the
Recapitalization Agreement) or the actions described in Sections 5(a)(vii)
(asset sale) and (viii) (merger) until such default continues for two
consecutive fiscal quarters of the Company;
(iv) in connection with or in order to effect a transaction in which
(A) a majority of the Cycle Shareholders' equity interest in the Company is
being exchanged for cash or other property or in which a dividend or other
distributions outside the ordinary course of business is being paid pro
rata (based upon the ownership of Deemed Common Stock) by the Company and
(B) the Series D Preferred Stock is being redeemed in accordance with
Section 6E of Part B of Article IV of the Certificate of Incorporation; and
(v) in connection with or in order to effect the completion of one
or more Public Sales as a part of a course of action for the sale of a
majority of the Cycle Shareholders' equity interest in the Company;
provided that following completion of the Initial Public Offering, Common
Stock having a market value of at least $40 million, or stock equal to at
least twenty-five percent (25%) of the outstanding common equity of the
Company will be publicly-traded.
(e) Affiliated Transactions.
Notwithstanding anything to the contrary herein, the Company and its
Subsidiaries shall not enter into any transaction with, or make any payments to,
any Shareholder or its Affiliates (other than the Company or its Subsidiaries)
or the officers, directors, employees or shareholders of any of them unless the
Parties to such transaction have received the prior written approval of the
Shareholder Group (with respect to Perseus, Cycle LLC, DFS and ▇▇▇▇▇) not a
party to such transaction, provided that such approval shall not be required if
such transaction is contemplated by this Agreement or the Certificate of
Incorporation.
6. CONDITIONS OF CERTAIN TRANSFERS
(a) It shall be a condition of any transaction permitted under Section 7
or 8(d) of this Agreement, other than a Public Sale or a Transfer described in
clause (a)(ii) of Section 7 hereof, that any Person to whom any interest in the
Shares has been issued, sold, transferred, assigned, pledged, charged or
otherwise encumbered shall, on the date on which such Person becomes entitled to
any interest in the Shares, become a party to this Agreement, and thereupon be
deemed to be a "Shareholder" for all purposes hereof, by executing a counterpart
of this Agreement and by entering into valid and binding obligations to perform
all of the executory terms and provisions of this Agreement applicable to such
Person.
-17-
(b) It shall be a condition of any Transfer permitted under this Agreement
(other than a Transfer pursuant to Section 7 of this Agreement, to the Company
or in a Public Sale), that any Person to whom any interest in the Shares has
been issued, sold, transferred, assigned, pledged, charged or otherwise
encumbered shall, on the date on which such Person becomes entitled to any
interest in the Shares, become a party to this Agreement, and thereupon be bound
by this Agreement as a "Shareholder" for purposes of Sections 2 (No Transfers),
3(a) (Directors), 11(a) through (d) (Approved Sale), 13 (Transfer Mechanics),
and 14(b) (Confidentiality) hereof, by executing a counterpart of this Agreement
and by entering into valid and binding obligations to perform all of the
executory terms and provisions of this Agreement applicable to such Person
pursuant to such Sections; provided, however, that such Person shall have none
of the rights of a Shareholder under this Agreement (other than rights
incidental to the obligations contained in such Sections).
7. CERTAIN PERMITTED TRANSFERS OF SHARES
(a) Subject to the condition contained in Section 6(a) of this Agreement,
(i) any Shareholder who is an individual may at any time sell, assign or
otherwise transfer all or part of the Shares owned by such Shareholder to or
among any trust or trusts established for the benefit of such Shareholder or the
spouse, issue, siblings or parents of such Shareholder (a "Family Trust") and
for purposes of Sections 3 (Directors), 8 (Right of First Offer), 9 (Actions in
the Event of Transfers not permitted by this Agreement), 10 (Rights on Certain
Dispositions), 11 (Approved Sale) and 12 (Preemptive Rights) of this Agreement,
any Shares held by a Family Trust shall be treated as if they were still owned
by the Shareholder who sold, assigned or otherwise transferred such Shares to
the Family Trust, (ii) at any time after an Initial Public Offering, Perseus,
▇▇▇▇▇▇ and ▇▇▇▇▇ may distribute Shares to their members or partners without
consideration pro rata in accordance with the terms of the partnership agreement
of ▇▇▇▇▇▇ Equity Investors III, L.P., the limited liability company agreement of
Perseus Capital, L.L.C., and the organization documents of ▇▇▇▇▇, as the case
may be, and (iii) any Shares owned by any Shareholder who is not an individual
may be sold, assigned or transferred to any Affiliate of such Shareholder (a
"Qualified Affiliate"); provided, however, any subsequent Transfer, whether
-------------------
direct or indirect, of an interest in a Qualified Affiliate to a Person that is
not an Affiliate transferor shall be deemed to be a Transfer of the Shares held
by such Qualified Affiliate subject to the terms and conditions of this
Agreement and, upon such subsequent transfer, such Qualified Affiliate shall no
longer be deemed to be a Shareholder for purposes of this Agreement except to
the extent provided in Section 6(b) hereof or a DFS Shareholder, Cycle
Shareholder or Perseus Shareholder, as the case may be.
(b) Any Transfer permitted under Section 7(a) hereof shall not relieve the
transferor of any liabilities and obligations it has under the Recapitalization
Agreement. In connection with, and as a condition to, any Transfer under clauses
(i) and (iii) of Section 7(a) hereof, the transferee must agree to assume such
obligations, if any, of the transferor under the Recapitalization Agreement.
8. RIGHT OF FIRST OFFER
(a) Transfer Notice to Board of Directors
-18-
Except as otherwise permitted under Section 7 of this Agreement or in
connection with a Public Sale, no Shareholder shall sell, transfer, assign,
pledge, charge or otherwise encumber all or any part of such Shareholder's
interest in the Class A Common Stock, Class C Common Stock, the Series A
Preferred Stock or the Series D Preferred Stock (any such action being referred
to as a "Proposed Disposition"), unless such Shareholder (a "Transferor") shall
-------------------- ----------
give a written notice (the "Transfer Notice") to the other Shareholders stating
---------------
that the Transferor wishes to make a Proposed Disposition. The Transfer Notice
shall state the material terms of the Proposed Disposition, including the number
of Shares to be sold and the cash purchase price per Share and, if known at such
time, the name(s) of any proposed transferee(s). The delivery of the Transfer
Notice to the other Shareholders shall constitute an offer to sell in accordance
with the provisions of this Section 8 all (but not less than all) of the Class A
Common Stock, Class C Common Stock, Series A Preferred Stock and the Series D
Preferred Stock covered in such Transfer Notice (the "Offered Shares") on the
--------------
same terms, including the same price, as specified in such Transfer Notice on a
date not earlier than thirty (30) days and not later than sixty (60) days after
the date of the Transfer Notice.
(b) Response from Other Shareholders
Within thirty (30) days after the date of receipt of a Transfer
Notice, the Other Shareholders shall give notice to the Transferor indicating
such Shareholder's willingness to purchase the Offered Shares. If the Offered
Shares are accepted for purchase by more than one Shareholder, the Offered
Shares shall be allocated among such accepting Shareholders pro rata based on
their respective ownership of Deemed Common Stock. Once accepted by a
Shareholder (and subject to the foregoing pro ration) such agreement between the
Transferor and such Shareholder(s) shall become unconditional.
(c) Disposals in the Event of Non-Acceptance of Offered Shares
If the Offered Shares are not accepted by one or more of the other
Shareholders under Section 8(b) hereof: (i) the Transferor may withdraw the
Transfer Notice; or (ii) the Transferor may make the Proposed Disposition of the
whole (but not part) of the Offered Shares on terms no less favorable to the
Transferor than those set out in the Transfer Notice, provided that the price
per Offered Share received in the actual sale can be as little as ninety-five
percent (95%) of the cash price specified in the Transfer Notice, provided
further, that if the entire price per Offered Share received in the actual sale
is not in cash, then the Company's independent auditors shall determine the
value of the non-cash consideration received in the actual sale of the Offered
Shares in order to determine whether the aggregate price per Offered Share
received in the actual sale exceeds or is equal to ninety-five percent (95%) of
the cash price per Offered Share specified in the Transfer Notice. Any Proposed
Disposition permitted by this Section 8(c) may be made at any time within one
hundred and ninety (190) days after the date of the Transfer Notice.
(d) Special Provision
Subject to the fulfillment of the condition contained in Section 6(a)
of this Agreement, the provisions of Sections 8(a) through 8(c) hereof shall not
apply to any transfer of any Shares from a Shareholder to his estate upon death,
to his heirs by operation of the laws of
-19-
intestacy, to his heirs or legatees under the terms of a will or codicil or to
any legal representative of such Shareholder who is appointed by a court of law
in the event of the incapacity of such Shareholder (and such estate, heirs,
legatees or legal representative may acquire and hold good and valid title to
any such Shares so transferred without payment of consideration, subject to
fulfillment of the condition contained in Section 6(a) of this Agreement).
(e) Waiver of Right of First Offer
Notwithstanding anything to the contrary, if the approval of the
Perseus Director is required for any Proposed Disposition pursuant to Section
11(e), then the provisions of Sections 8(a) through 8(c) hereof shall not apply.
9 ACTION IN THE EVENT OF TRANSFERS NOT PERMITTED BY THIS AGREEMENT
(a) Events Resulting in a Simultaneous Offer
If any of the following events shall occur, each Shareholder involved
in such event shall be deemed to have made a simultaneous offer (the
"Simultaneous Offer") to sell to the Company or its Designee all of the Shares
------------------
owned by such Shareholder on the date on which the event occurs (the
"Simultaneous Offer Date"):
-----------------------
(i) a Shareholder takes any action or makes any attempt to Transfer
any Shares, or omits to take any action that would prevent a Transfer of
any Shares, owned by such Shareholder except in accordance with the terms
and conditions of this Agreement and the Certificate of Incorporation;
(ii) any order, judgment or decree is made by a court having
jurisdiction in the matter adjudging a Shareholder bankrupt or insolvent;
(iii) any order, judgment or decree is made by a court having
jurisdiction in the matter which results in the appointment of a receiver,
liquidator, trustee or assignee in bankruptcy or insolvency of a
Shareholder (or his or its property), and such order, judgment or decree
shall have continued undischarged or unstayed for a period of sixty (60)
days;
(iv) a Shareholder institutes proceedings to be adjudicated a
voluntary bankrupt, or consents to the filing of a bankruptcy or insolvency
petition against such Shareholder or consents to the appointment of a
receiver, liquidator, trustee or assignee in bankruptcy or insolvency of
such Shareholder (or his or its property), or makes an assignment for the
benefit of creditors;
(v) any judgment is obtained in any legal or equitable proceeding
against a Shareholder and a sale of all or any part of the Shares is
threatened under legal process as a result of such judgment, or any
execution process is issued against any such Shareholder or any Shares
owned by him or it, or any other form of legal proceeding or process is
instituted as a result of which any
-20-
Shares are threatened to be sold and such execution is not dismissed,
discontinued or stayed within a period of ninety (90) days from the
occurrence thereof;
provided that the Shareholder involved in the event which causes the
Simultaneous Offer shall have ninety (90) days from the Simultaneous Offer Date
to cure the event which caused such Simultaneous Offer.
(b) Purchase Price
(i) The price for each Share for which a Simultaneous Offer is deemed
to be made in accordance with Section 9(a)(i) shall be the lesser of (i) eighty
percent (80%) of the fair market value of such Share (as determined by the
independent auditors of the Company in good faith) and (ii) the book value of
such Share, in each case as of the Simultaneous Offer Date, plus interest at the
"Base Rate" for dollars of Citibank N.A., in effect from time to time, from the
Closing Date (or, if later, the date of purchase or issue of such Shares) until
the Simultaneous Offer Date.
(ii) The purchase price for each Share for which a Simultaneous Offer
is deemed to be made in accordance with any of Section 9(a)(ii) through (v)
shall be determined as follows: (A) the price for each share of Class A Common
Stock shall be $800.00, plus interest at the "Base Rate" for dollars of Citibank
N.A., in effect from time to time, from the Closing Date (or, if later, the date
of purchase or issue of such Shares) until the Simultaneous Offer Date; (B) the
price for each share of Class B Common Stock shall be $800.00, plus interest at
the "Base Rate" for dollars of Citibank N.A., in effect from time to time, from
the Closing Date (or, if later, the date of purchase or issue of such Shares)
until the Simultaneous Offer Date; (C) the price for each share of Class C
Common Stock shall be $1,200, plus interest at the "Base Rate" for dollars of
Citibank N.A., in effect from time to time, from the Closing Date (or, if later,
the date of purchase or issue of such Shares) until the Simultaneous Offer Date;
(D) the price for each share of Series A Preferred Stock shall be $1,200, plus
interest at the "Base Rate" for dollars of Citibank N.A., in effect from time to
time, from the Closing Date (or, if later, the date of purchase or issue of such
Shares) until the Simultaneous Offer Date; (E) the price for each share of
Series B Preferred Stock shall be $800, plus interest at the "Base Rate" for
dollars of Citibank N.A., in effect from time to time, from the Closing Date
(or, if later, the date of purchase or issue of such Shares) until the
Simultaneous Offer Date; (F) the price for each share of Series D Preferred
Stock shall be $800, plus interest at the "Base Rate" for dollars of Citibank
N.A., in effect from time to time from the date of purchase or issue of such
Shares until the Simultaneous Offer Date; and (G) the price for each share of
Series D-1 Preferred Stock shall be $800, plus interest at the "Base Rate" for
dollars of Citibank N.A., in effect from time to time from the date of purchase
or issue of such Shares until the Simultaneous Offer Date.
(c) Payment of Purchase Price
The price to be paid for each Share purchased pursuant to this Section
9 shall be paid in dollars at the registered office of the Company sixty (60)
days after the date on which the Board of Directors gives notice to the relevant
Shareholder of the Company's intent to purchase such Common Stock, and any
member of the Board of Directors of the Company is hereby
-21-
authorized to take all action necessary to carry out on behalf of the
Shareholders concerned the transfer of all Shares included in the Simultaneous
Offer.
(d) Extension of Simultaneous Offer
Within thirty (30) days after the date on which the Board of Directors
learn of the event which causes the Simultaneous Offer to be made, the Board of
Directors may, but shall not be required to, extend the Simultaneous Offer as to
all or part of any Shares included in the Simultaneous Offer to all of the other
Shareholders pro rata based upon the Payment Outflows made by each such
Shareholder in respect of the Shares held by such Shareholder on the
Simultaneous Offer Date, and such other Shareholders may purchase the Shares so
offered in place of the Company or its Designee. Acceptance of such offer must
be made and the sale must be completed within twenty-one (21) days and thirty
(30) days, respectively, after the date on which the Board of Directors extends
the offer to the other Shareholders pursuant to this Section 9(d).
10. RIGHTS ON CERTAIN DISPOSITIONS
(a) At least 30 days prior to any Transfer of Class A Common Stock, Class
B Common Stock, Class C Common Stock, Series A Preferred Stock, Series B
Preferred Stock or Series D Preferred Stock by any Shareholder, the transferring
Shareholder (the "Selling Shareholder") will deliver written notice (the "Sale
------------------- ----
Notice") to the Company and all other Shareholders who hold Common Stock and
------
Preferred Stock (the "Other Shareholders"), specifying in reasonable detail the
------------------
identity of the prospective transferee(s) and the terms and conditions of the
Transfer. The Other Shareholders may elect to participate in the contemplated
Transfer by delivering written notice (the "Election Notice") to the Selling
---------------
Shareholder within 10 days after delivery of the Sale Notice. If any Other
Shareholders have elected to participate in such Transfer, the Selling
Shareholder and each such Other Shareholders will be entitled to sell in the
contemplated Transfer (A) a number of shares (in the case of each Other
Shareholder, not to exceed the number specified in such Other Shareholder's
Election Notice) of (1) Deemed Common Stock equal to the product of the Selling
Percentage (as defined below) and the number of shares of Deemed Common Stock
owned by such Person, (2) Class B Common Stock equal to the product of the
Selling Percentage and the number of shares of Class B Common Stock owned by
such Person, (3) Converted Common (if any) equal to the product of the Selling
Percentage and the number of shares of Converted Common such Person could
acquire under Section 4D(ii) of Part B of Article IV of the Certificate of
Incorporation at the purchase price provided below, (4) Series B Preferred Stock
equal to the product of the Selling Percentage and the number of shares of
Series B Preferred Stock owned by such Person and (5) Series D Preferred Stock
equal to the product of the Selling Percentage and the number of shares of
Series D Preferred Stock owned by such Person plus (B) a pro rata share (based
upon the ownership of Shares) of the Shares requested to be sold in the Sale
Notice and the Election Notices but not otherwise allocated to the Selling
Shareholder and the Other Shareholders under clause (A) above. The Selling
Shareholder will not Transfer any of its shares of Class A Common Stock, Class C
Common Stock, Series A Preferred or Series D Preferred Stock to the prospective
transferee(s) unless simultaneously with such Transfer, the prospective
transferee or transferees purchase from the Other Shareholders all of the shares
of Common Stock, Preferred Stock and Converted Common, as the case may be, which
the Other Shareholders are entitled to sell to such
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prospective transferee(s) pursuant to this Section 10(a) and subject to the
terms and conditions of Section 10(c) hereof. The "Selling Percentage" means, as
applicable, (I) the percentage derived by dividing (w) the number of shares of
Deemed Common Stock being offered for sale by the Selling Shareholder by (x) the
number of shares of Deemed Common Stock outstanding as of the date of the Sale
Notice or (II) the percentage derived by dividing (y) the number of shares of a
class of Common Stock and/or a series of Preferred Stock, as the case may be,
being offered for sale by the Selling Shareholder by (z) the number of shares of
such class of Common Stock and/or such series of Preferred Stock, as the case
may be, outstanding as of the date of the Sale Notice; provided, however, that
the number of shares of Deemed Common Stock being offered for sale by the
Selling Shareholder shall be reduced as necessary to permit the participation in
the proposed sale of the Government of Singapore Investment Corporation pursuant
to the terms of that certain Senior Subordinated Loan Agreement dated as of
February 3, 1999 between the Company and GSIC. None of the provisions of Section
10 hereof shall apply to an Exempt Transfer.
(b) In the event that:
(i) a Shareholder wishes to make a Proposed Disposition of
Shares pursuant to Section 8 of this Agreement (other than a transaction
permitted by Section 7 of this Agreement); and
(ii) such Proposed Disposition complies with all of the terms
and conditions of Section 8; and
(iii) after the Proposed Disposition (taking into account the
exercise of any rights of other Shareholders under this Section 10),
Shareholders on the date on which the notice of such Proposed Disposition
is received, will own, in the aggregate, less than fifty-one percent (51%)
of the voting power of the outstanding capital stock of the Company,
then the Selling Shareholders shall obtain from the prospective transferees an
offer to each Other Shareholder to acquire all of the Shares of the Other
Shareholders.
(c) The terms and conditions applicable to the Shares to be sold by the
Other Shareholders under this Section 10 are as follows: (i) with respect to the
Class A Common Stock owned by such Shareholder, at the same price applicable to,
and on terms and subject to conditions substantially identical to those offered
in the Proposed Disposition with respect to, the Deemed Common Stock, (ii) with
respect to the Series B Preferred Stock owned by such Shareholder, on terms and
subject to conditions substantially identical to those offered in the Proposed
Disposition, and at a price per share equal to the Liquidation Amount (as
defined in the Certificate of Incorporation) thereof plus all accrued and
accumulated but unpaid dividends thereon, and (iii) with respect to the Class B
Common Stock owned by such Shareholder, at a price per share equal to the
Implied Class B Purchase Price, and on terms and subject to conditions
substantially identical to those offered in the Proposed Disposition.
Notwithstanding the foregoing, in the event that all of the outstanding equity
securities of the Company are to be sold in a Proposed Disposition, each
Shareholder shall be paid, in respect of the Shares held by such Shareholder,
the amount that such Shareholder would have received if such aggregate
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consideration payable in such Proposed Disposition had been distributed by the
Company in complete liquidation pursuant to the rights and preferences set forth
in Part D of Article Four of the Certificate of Incorporation.
11. APPROVED SALE
(a) Obligation to "Go Along"
Subject to Sections 5(a) and 5(c) of this Agreement, if the Board of
Directors of the Company approves a sale of all or substantially all of the
Company's assets determined on a consolidated basis or a sale of all or
substantially all (i.e., greater than 66 2/3%) of the Company's outstanding
capital stock (whether by sale of stock, merger, recapitalization,
consolidation, reorganization, combination or otherwise) to any Person or group
of Persons (collectively an "Approved Sale"), each Shareholder will consent to
-------------
and raise no objections against such Approved Sale. If the Approved Sale is
structured as (i) a merger or consolidation, each Shareholder will waive any
dissenter's rights, appraisal rights or similar rights in connection with such
merger or consolidation or (ii) sale of stock, each Shareholder will agree to
sell all of its Shares and rights to acquire Shares on the terms and conditions
approved by the Board of Directors of the Company. Each Shareholder will take
all reasonable actions in connection with the consummation of the Approved Sale
as requested by the Company.
(b) Conditions
The obligations of the Shareholders with respect to an Approved Sale
are subject to the satisfaction of the condition that upon the consummation of
the Approved Sale; (A) all of the Class A Common Stock to be sold in such
Approved Sale shall be sold at the same price applicable to, and on terms and
subject to conditions substantially identical to those applicable to, the Deemed
Common Stock in such Approved Sale, (B) all of the Class C Common Stock to be
sold in such Approved Sale shall be sold at the same price, and on terms and
subject to conditions substantially identical to those applicable to the Deemed
Common Stock in such Approved Sale, (C) all of the Series B Preferred Stock to
be sold in such Approved Sale shall be sold on the same terms (other than with
respect to price) and subject to conditions substantially identical to those
applicable to the Deemed Common Stock in such Approved Sale, and at a price per
share equal to the Liquidation Amount (as defined in the Certificate of
Incorporation) thereof plus all accrued and accumulated but unpaid dividends
thereon, (D) all of the Class B Common Stock to be sold in such Approved Sale
shall be sold at a price per share equal to the Implied Class B Purchase Price,
and on terms (other than with respect to price) and subject to conditions
substantially identical to those applicable to the Deemed Common Stock in such
Approved Sale, and (E) all of the Series D Preferred Stock to be sold in such
Approved Sale shall be sold on the same terms (other than with respect to price)
and subject to conditions substantially identical to those applicable to the
Deemed Common Stock in such Approved Sale, but only for cash and at a price per
share equal to the Liquidation Amount (as defined in the Certificate of
Incorporation) thereof plus all accrued and accumulated but unpaid dividends
thereon. Notwithstanding the foregoing, in the event that all of the outstanding
equity securities of the Company are to be sold in an Approved Sale, each
Shareholder shall be paid, in respect of the Shares held by such Shareholder,
the amount that such Shareholder would have received if such aggregate
consideration payable in such Approved Sale had been distributed by the Company
in complete
-24-
liquidation pursuant to the rights and preferences set forth in Part D of
Article Four of the Certificate of Incorporation.
(c) Appointment of Purchaser Representative
If the Company or a Shareholder enters into any negotiation or
transaction for which Rule 506 (or any similar rule then in effect) promulgated
under the Securities Act may be available with respect to such negotiation or
transaction (including a merger, consolidation or other reorganization), each
Shareholder will, at the request of the Company, appoint a purchaser
representative (as such term is defined in Rule 501) reasonably acceptable to
the Company. If any Shareholder appoints a purchaser representative designated
by the Company, the Company will pay the fees of such purchaser representative.
If any Shareholder declines to appoint the purchaser representative designated
by the Company such Shareholder will appoint another purchaser representative,
and such Shareholder will be responsible for the fees of the purchaser
representative so appointed. This Section 11(c) shall apply only to Shareholders
that are required to appoint a purchaser representative under Regulation D (or
any successor regulation then in effect) promulgated under the Securities Act.
(d) Costs
Shareholders will bear their pro-rata share (based upon the proceeds
to be received by each Shareholder) of the costs of any sale of Shares pursuant
to an Approved Sale to the extent such costs are incurred for the benefit of all
Shareholders and are not otherwise paid by the Company or the acquiring party.
For purposes of this Section 11(d), costs incurred in exercising reasonable
efforts to take all necessary actions for the consummation of an Approved Sale
in accordance with Section 11(a) hereof shall be deemed to be for the benefit of
all Shareholders. Costs incurred by Shareholders on their own behalf will not be
considered costs of the transaction hereunder.
(e) Perseus Approval
Notwithstanding anything to the contrary, if the consideration to be
received by the Shareholders in an Approved Sale is other than Cash, then the
approval of the Perseus Director shall be required unless any one of the
following conditions are met:
(i) the IRR on each of the Shareholder Groups' investment in Class A
Common Stock (including for this purpose, Class A Common Stock issuable
upon conversion of the Series A Preferred Stock) shall be more than twenty
percent (20%) based solely on the Cash portion of the total Payment Inflows
received prior to the date of such Approved Sale and to be received upon
consummation of such Approved Sale in respect of such investment;
(ii) (A) the Cash portion of the consideration to be received in such
Approved Sale exceeds fifty percent (50%) of the total value of such
consideration, (B) the non-Cash portion of the consideration to be received
in such Approved Sale is in the form of securities of another Person that
has consolidated net worth at least equal to at least $500,000,000, and (C)
Perseus and
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DFS shall each have the ability to sell or otherwise liquidate such
securities of such other Person pursuant to puts, calls or other such
devices within three years of the consummation of the Approved Sale;
(iii) the Cash portion of the consideration to be received in such
Approved Sale exceeds ninety percent (90%) of the total value of such
consideration;
(iv) the IRR on the total investment of the Cycle Shareholders in the
Company would be less than twenty percent (20%) after taking into account
all Payment Inflows to be received by the Cycle Shareholders in such
Approved Sale (where any notes included in such Payment Inflows are valued
at their face value and any securities included in such Payment Inflows are
valued without applying any discount of any nature);
(v) if the consideration received by the Shareholders is in the form
of securities of another Person, the market capitalization (as determined
in the Board of Directors' good faith judgement) of such Person is (or
prior to giving effect to the Approved Sale is) greater than eight hundred
million dollars ($800,000,000); or
(vi) each of the Perseus Shareholders and the DFS Shareholders can
sell or otherwise liquidate any consideration it receives which is in the
form of securities of another company, corporation or other legal entity
within nine (9) months after the consummation of the Approved Sale under
Rule 144 Public Sales (based on the trading volume of such securities at
the time the Approved Sale was approved by the Board of Directors) taking
into account the ability to exercise any demand registration rights granted
to the Perseus Shareholders or the DFS Shareholders in such Approved Sale;
provided that this Section 11(e) shall not apply if there are no Perseus
Directors elected to the Board of Directors.
12. PREEMPTIVE RIGHTS
(a) Right to Purchase
Except for the issuance of Common Stock (and/or securities exercisable
for or convertible into Common Stock) (i) to the Company's or its Subsidiaries'
directors or employees (other than an Affiliate of any Shareholder) in their
capacity as such, (ii) in connection with an Approved Sale, (iii) in connection
with any merger, consolidation, acquisition of stock, acquisition of assets,
business combination or similar transaction permitted by this Agreement
(including without limitation approval under Section 5), (iv) pursuant to a
Public Sale, (v) to any providers of debt financing to the Company or any of its
Subsidiaries, (vi) upon the conversion or exercise of securities convertible or
exchangeable into or containing options or rights to acquire Common Stock or in
connection with the issuance of Shares pursuant to the Exchange Agreements,
(vii) pursuant to any adjustments required under Section 7A or 7B of Part B of
the
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Certificate of Incorporation, or (viii) to the holders of Class A Common Stock
in connection with a subdivision or combination of Class A Common Stock, a
reverse stock split or a stock dividend payable solely in shares of Class A
Common Stock, in each case if each holder of Class A Common Stock receives
Common Stock proportionate to its ownership of Class A Common Stock in
connection with the transaction described in this clause (viii), upon any
proposed issuance of any capital stock the Company shall first offer to sell to
each member of the Shareholder Group a portion of such stock or securities (the
"Offered Securities") determined based on the face value of the Shares held by
------------------
such member of the Shareholder Group; provided, however, that if the members of
the Shareholder Group do not subscribe for the total amount of stock or
securities offered to the Shareholder Group, then the holders of shares of Class
B Common Stock or Series B Preferred Stock shall be entitled to subscribe for
such unsubscribed for stock or securities pro rata, based on the Payment
Outflows made by each such holder in respect of its Class B Common Stock and
Series B Preferred Stock. Each member of the Shareholder Group shall be entitled
to purchase such stock or securities at the most favorable price and on the most
favorable terms as such stock or securities are to be offered to any other
Person. The purchase price for all stock and securities offered to the
Shareholder Group shall be payable in cash by wire transfer of immediately
available funds or if such Common Stock is being offered to Persons not a party
to this Agreement on such other terms as offered to such Persons.
(b) Exercise of Right
In order to exercise its purchase rights hereunder, each member of the
Shareholder Group must deliver a written notice to the Company describing its
election hereunder within thirty (30) days after receipt of written notice from
the Company describing in reasonable detail the stock or securities being
offered, the purchase price thereof, the payment terms and such member of the
Shareholder Group's percentage allotment.
Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the members of
the Shareholder Group have not elected to purchase during the one hundred ninety
(190) days following such expiration on terms and conditions no more favorable
to the purchasers thereof than those offered to the Shareholder Group. Any stock
or securities offered or sold by the Company to any Person after such 190-day
period must be reoffered to the Shareholder Group pursuant to the terms of this
Section 12.
13 GENERAL PROVISION WITH RESPECT TO SHARE TRANSFERS
The Company shall not register any transfer of any Shares from any
Shareholder to any Person unless such transfer is made pursuant to the terms and
conditions of this Agreement and the Certificate of Incorporation. The Company
shall take all lawful action necessary or appropriate to implement the
provisions of this Agreement and the Certificate of Incorporation and to prevent
the acquisition, disposition or transfer by a Shareholder of any Shares except
in accordance with the terms and conditions of this Agreement and the
Certificate of Incorporation. Such action may include (but shall not be limited
to) the execution and delivery of all instruments and documents and the taking
of all such other action as the Company may deem reasonably necessary or
appropriate, on behalf of and in the name of any Shareholder, in order to carry
out the terms, provisions and purposes of this Agreement and the Certificate of
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Incorporation. Each Shareholder hereby appoints the Company his or its agent or
attorney-in-fact for the purpose of taking any action provided for in this
Section 13. The power given by the Shareholders to the Company pursuant to this
Section 13 shall survive the death or bankruptcy of any Shareholder and may be
revoked only with the written consent of the Company.
14 BOOKS AND RECORDS; CONFIDENTIALITY
(a) Maintenance of Accounts, Books and Records
The Company shall take the following action with respect to financial
record keeping, and the Company shall cause its Subsidiaries to take
corresponding action appropriate to local conditions and requirements:
(i) maintain books, records and accounts which, in reasonable detail,
accurately and fairly reflect the transactions of the Company or such
Subsidiary and dispositions of the assets and liabilities of the Company or
such Subsidiary; and
(ii) devise and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that:
(A) transactions are executed in accordance with management's
general or specific authorization;
(B) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such
statements and to maintain accountability for assets;
(C) access to assets is permitted only in accordance with
management's general or specific authorization; and
(D) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(b) Confidentiality
Each Shareholder covenants and agrees that he or it will not (and, in
the case of a corporate, limited liability or partnership Shareholder, shall use
its best efforts to procure that its directors, members, officers, partners,
employees or agents will not), at any time during the Term of this Agreement or
thereafter, communicate or disclose to any unauthorized person or use for his or
its own account or business any information, observations, data, written
materials, records or documents which are prepared or obtained by such
Shareholder or which come into his or its possession during the Term of this
Agreement and which relate to the performance by the Derby Group of its business
or affairs. The obligations contained in this Section 14(b) (i) shall not
-28-
apply in the event and to the extent that the information, observations, data,
written materials, records or documents referred to in this Section 14(b) become
generally known to or available for use by the public other than by an act or
omission of a Shareholder in violation of the terms of this Agreement, (ii) are
disclosed to the Shareholder's auditors, lenders, professional advisors or, in
the case of a corporate Shareholder, its directors, officers, shareholders and
warrant holders, or in the case of a Shareholder that is a partnership or
limited liability company to its partners or members, as the case may be
(subject in each case to the terms of the first parenthetical clause in this
Section 14(b), (iii) to potential transferees of any Shares (provided that such
potential transferee agrees to be bound by the provisions of this Section 14(b)
or (iv) as may be necessary upon advice of counsel in connection with litigation
relating to the enforcement of such Shareholder's rights under this Agreement.
The obligations of each of the Shareholders under this Section 14(b) shall not
be affected by any sale, assignment, transfer or other disposition of the Shares
and shall survive the termination of this Agreement. In the event that any
Shareholder is required by a governmental agency or otherwise by law to disclose
any information relating to the Derby Group, the Shareholder shall provide the
Company with prompt notice of such request, including a description of the
request and the information to be disclosed, so that the Company may seek an
appropriate protective order and/or waive the Shareholder's compliance with the
provisions of this Section 14(b). If, in the absence of a protective order or
the receipt of a waiver from the Company, the Shareholder is nonetheless, in the
written opinion of the Shareholder's legal advisers, compelled to disclose
information concerning the Derby Group to any court or other tribunal or else
stand liable for contempt or suffer other censure or penalty, the Shareholder
may disclose such information to such tribunal without liability under this
Agreement; provided, however, that the Shareholder shall give the Company notice
of the information to be so disclosed as far in advance of its disclosure as is
practicable, and the Shareholder shall use his or its reasonable best efforts to
obtain an order or other reliable assurance that confidential treatment will be
accorded to such portion of the information required to be disclosed as the
Company designates.
15 ADDITIONAL ACTION
Each party to this Agreement shall execute and deliver such other
documents and do such other acts and things as may be necessary or desirable to
carry out the terms, provisions and purposes of this Agreement.
16 AMENDMENTS
No amendment, interpretation or waiver of any of the provisions of
this Agreement shall be effective unless made in writing and signed by the
parties to this Agreement.
17 COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which shall constitute one agreement, and each such counterpart shall be deemed
to have been made, executed and delivered on the date set out at the head of
this Agreement, without regard to the dates or times when any such counterparts
may actually have been made, executed or delivered.
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18 ASSIGNMENT BY THE PARTIES
This Agreement shall be binding upon and shall inure to the benefit of
each party, his heirs and legal representatives or its or his successors or
assigns, except that the obligations of each party under this Agreement may only
be assigned or transferred in conjunction with a sale, assignment or transfer of
the Shares owned by such party which is permitted by the terms and conditions of
this Agreement.
19 ENFORCEMENT
The failure to enforce or to require the performance at any time of
any of the provisions of this Agreement shall in no way be construed to be a
waiver of such provisions, and shall not affect either the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
each and every provision in accordance with the terms of this Agreement.
20 ENTIRE AGREEMENT
This Agreement contains the entire agreement of the parties with
respect to the subject matter of this Agreement and supersedes all prior
agreements between the parties, whether written or oral, with respect to the
subject matter of this Agreement.
21 EXHIBITS AND HEADINGS
The exhibits to this Agreement are an integral part hereof. The
headings of Sections and subsections are used for convenience only and shall not
affect the meaning or construction of the contents of this Agreement.
22 GOVERNING LAW
THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL ISSUES CONCERNING THE
RELATIVE RIGHTS OF THE COMPANY AND THE SHAREHOLDERS. ALL OTHER ISSUES CONCERNING
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF
LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE CO-
EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY,
OVER ANY LAWSUIT UNDER THIS AGREEMENT AND WAIVES ANY OBJECTION BASED ON VENUE OR
FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN. EACH PARTY
HEREBY WAIVES THE NECESSITY FOR PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL (RETURN RECEIPT REQUESTED), WITH A COPY ALSO BEING SENT BY
FACSIMILE (WITH RECEIPT
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CONFIRMED), IN EACH CASE DIRECTED TO SUCH PARTY AT ITS ADDRESS SET FORTH IN AND
WITH COPIES SENT AS REQUIRED BY, SECTION 23 BELOW, AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED ON THE DATE OF ACTUAL RECEIPT. EACH PARTY HEREBY CONSENTS
TO SERVICE OF PROCESS AS AFORESAID. NOTHING CONTAINED IN THIS SECTION 22 WILL
PROHIBIT PERSONAL SERVICE IN LIEU OF THE SERVICE BY MAIL CONTEMPLATED HEREIN.
23 NOTICES
All notices, demands or other communications under this Agreement
shall be given or made in writing, and shall be delivered personally, sent by
certified or registered air mail (with return receipt requested) or sent by
telefax or courier service, addressed to the other party at the address set out
in Exhibit C to this Agreement or at such other address as may be designated by
notice from such party to each other party, provided that any notice, demand or
other communication which is sent by telefax shall also be confirmed by airmail
in the manner provided for above. Any notice, demand or other communication
given or made by mail in the manner prescribed in this Section 23 shall be
deemed to have been received five (5) days after the date of mailing. Any
notice, demand or other communication given or made by telefax in the manner
provided for in this Section 23 shall be deemed to have been received when
actually received by the addressee or five (5) days after the date of mailing of
the confirmation, whichever is earlier.
24 PARTNERSHIP OR AGENCY
Nothing in this Agreement shall be deemed to constitute a partnership
or joint venture between the parties. Except as expressly provided for, nothing
contained in this Agreement shall authorize any party to act as agent or
representative of any other party or to authorize any party to assume or create
any obligations on behalf of any other party.
25 SUCCESSORS OF THE COMPANY
This Agreement shall be binding upon and shall inure to the benefit of
the Company and any successor of the Company, and any such successor shall be
deemed substituted for the Company under the provisions of this Agreement. For
purposes of this Section 25, the term "successor" shall mean any Person which at
any time, whether by purchase, merger, assignment or otherwise, acquires all or
substantially all of the assets or business of the Company.
26 SEVERABILITY
If any severable provision of this Agreement is held to be invalid or
unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgment, and the
Agreement shall be carried out as nearly as possible according to its original
terms and intent.
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27 SPECIAL PROVISIONS UPON AN INITIAL PUBLIC OFFERING
(a) The parties hereto agree that, notwithstanding any other provision
herein to the contrary, if in connection with the Initial Public Offering the
sole or managing underwriter thereof advises the Company that in its opinion the
continuation of any provision contained in this Agreement would adversely affect
the distribution of the securities being offered in the Initial Public Offering,
the price that will be paid in such Initial Public Offering or the marketability
thereof, then the parties shall amend this Agreement to the extent requested by
such sole or managing underwriter to prevent such effect and this Agreement, as
so amended, shall continue thereafter in full force and effect. The parties
further agree that, notwithstanding the foregoing, each of the parties hereto
shall use commercially reasonable efforts to cause all of this Agreement to
remain in effect following an Initial Public Offering.
(b) Each party to this Agreement agrees to take all such actions as may be
reasonably required to cause each share of Class A Common Stock outstanding
immediately prior to an Initial Public Offering (including Class A Common Stock
acquired pursuant to Section 2B of Part C of the Certificate of Incorporation)
to be converted in connection with the closing of the Initial Public Offering,
on a share for share basis, into shares of the common equity securities of the
Company offered in the Initial Public Offering.
(c) The parties hereto agree that in connection with the Initial Public
Offering each such party shall take all such actions as are reasonably requested
by the sole or managing underwriter thereof in connection with such Initial
Public Offering, including without limitation, entering into customary
standstill agreements or other agreements that may be reasonably required of the
Company's stockholders to facilitate such Initial Public Offering.
28 SEVERABILITY
If any provision of this Agreement is held to be invalid or unenforceable
by any judgement of a tribunal of competent jurisdiction, the remainder of the
provisions of this Agreement shall not be affected by such judgement, and the
understanding of the parties embodied in this Agreement shall be carried out as
nearly as possible according to their original terms and intent.
29 SENIOR RIC SHARES
For all purposes of this Agreement, the DFS Shareholders (without
duplication) shall be deemed to own any securities of the Company which would be
acquired in exchange for the Senior RIC Shares under the Exchange Agreement, and
such shares shall be deemed outstanding capital stock of the Company as of May
14, 1998. The parties hereto agree that, in the event any matter is submitted to
the Shareholders for their approval, the DFS Shareholders shall be deemed to own
any voting securities of the Company which can be obtained in exchange for the
Senior RIC Shares pursuant to the Exchange Agreement. For purposes of
determining whether any such matter has been approved by the requisite number of
votes, such voting securities shall be deemed outstanding, and the votes of such
securities shall be counted. Any Shares issued to DICSA pursuant to the Exchange
Agreements shall be deemed to have been issued as of May 14, 1998. The Company
agrees to take all actions necessary to effect the Transactions described in
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the Exchange Agreements, including, without limitation, consenting to and
waiving any restrictions on redemptions or the issuance of new Shares at less
than fair market value.
30 SHAREHOLDERS AGREEMENT IS CONTROLLING
To the extent that there is any inconsistency between this Agreement and
the Company's Bylaws, this Agreement shall control and shall be deemed to have
hereby amended the Bylaws.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year set out at the head of this Agreement.
THE DERBY CYCLE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Financial Officer
THE SHAREHOLDERS
DERBY FINANCE S.ar.l.
By: /s/ A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------
Name: A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chairman
DC CYCLE, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Manager
▇▇▇▇▇▇ EQUITY INVESTORS III, L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Director
PERSEUS CYCLE, L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Managing Director
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Title:
QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Attorney-in-Fact
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