EXHIBIT 4
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STOCKHOLDERS'
AGREEMENT
by and among
CIRMATICA GAMING, S.A.
a Spanish corporation
THE OAK FUND,
a Cayman Islands exempted company
PECONIC FUND LTD.,
a Cayman Islands exempted company
RAMIUS SECURITIES, LLC,
a Delaware limited liability company
OLIVETTI INTERNATIONAL S.A.,
a Luxembourg corporation
and
AUTOTOTE CORPORATION,
a Delaware corporation
Dated: September 6, 2000
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STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (this "AGREEMENT") is entered into as of
September 6, 2000 by and among Autotote Corporation, a Delaware corporation (the
"COMPANY"), Olivetti International S.A., a Luxembourg Company ("OLIVETTI"),
Cirmatica Gaming, S.A., a Spanish corporation ("CIRMATICA"), The Oak Fund, a
Cayman Island exempted company ("OAK"), Peconic Fund Ltd., a Cayman Island
exempted company ("PECONIC") and Ramius Securities, LLC, a Delaware limited
liability company ("RAMIUS").
RECITALS
A. Each of the Stockholders (as defined below) will own shares of
Preferred Stock (as defined below) upon the consummation of the transactions
contemplated by that certain Preferred Stock Purchase Agreement, dated as of the
date hereof, 2000, by and among the Company and the Stockholders.
B. The Company and the Stockholders desire to enter into this Agreement
to, among other things: (i) impose certain restrictions and obligations on the
ownership, retention and disposition on the Preferred Stock, and (ii) provide
the registration rights set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS. In addition to the terms defined elsewhere
herein, the following terms have the following meanings when used herein with
initial capital letters:
"AFFILIATE" means, with respect to any Person or entity (the "REFERENT
PERSON"), any Person or entity that controls the referent Person, any Person or
entity that the referent Person controls, or any Person or entity that is under
common control with the referent Person. For purposes of the preceding sentence,
the term "control" means the power, direct or indirect, to direct or cause the
direction of the management and policies of a Person or entity through voting
securities, by contract or otherwise.
"AGREEMENT" means this Agreement, as the same may be modified,
supplemented or amended from time to time in accordance with its terms.
"ASSETS" means all of the Company's and its Subsidiaries' right, title and
interest in and to all properties, assets and rights of any kind, whether
tangible or intangible, real or personal, owned by the Company or any of its
Subsidiaries.
"BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" means, with respect to any
securities, having "beneficial ownership" of such securities (as determined
pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
beneficially owned by a Person shall include securities beneficially owned by
all other Persons
with whom such Person would constitute a "group" as described in Section
13(d)(3) of the Exchange Act.
"BOARD" has the meaning set forth in Section 4(b) hereof.
"BONA FIDE THIRD PARTY" means a third party unrelated to the Stockholders,
Olivetti S.p.A., Lottomatica S.A., Cirsa or their Affiliates.
"CERTIFICATE OF DESIGNATIONS" means the Certificate of Designations of the
Company relating to the Preferred Stock.
"CHANGE OF CONTROL" means one or more of the following events: (i) less
than a majority of the members of the Board (excluding any directors nominated
or elected by the Stockholders) shall be persons who either (A) were serving as
directors on the date hereof or (B) were nominated as directors and approved by
the vote of the majority of the directors who are directors referred to in
clause (A) above or this clause (B); (ii) the stockholders of the Company shall
approve any plan or proposal for the liquidation or dissolution of the Company;
(iii) an announcement by any Bona Fide Third Party or group of Bona Fide Third
Parties acting in concert, of a merger with the Company or an acquisition of the
Company's securities or other transaction which will require the filing with the
SEC of a Schedule 13D under the Exchange Act with respect to beneficial
ownership of the Company (other than by a financial entity or other similar
institutional investor holding securities of the Company for investment purposes
that is eligible to file a Schedule 13G under the Exchange Act with respect to
such merger or acquisition in accordance with Rule 13d-1(b)(1) of the Exchange
Act) in which Item 4 thereof will indicate a plan or proposal under subsections
(a)-(j) thereof with respect to either (x) the merger with a Bona Fide Third
Party or acquisition of at least twenty percent (20%) of the Company's voting
securities by a Bona Fide Third Party or (y) the merger or consolidation of the
Company with a Bona Fide Third Party where the stockholders of the Company would
not, immediately after the merger or consolidation, own at least fifty percent
(50%) of the voting securities of the entity (unrelated to the Stockholders,
Olivetti S.p.A., Lottomatica S.A., Cirsa and their respective Affiliates)
issuing the cash or securities in the merger or consolidation, or the sale of
substantially all of the assets of the Company; or (iv) the Company enters into
negotiations that might reasonably be expected to cause any of the events
specified in clauses (i), (ii) or (iii) above to occur.
"CIRMATICA" has the meaning set forth in the preamble to this Agreement.
"CIRSA" means Cirsa Business Corporation S.A.
"COMMON STOCK" means the Class A common stock, par value $0.01 per share,
of the Company.
"COMPANY" has the meaning set forth in the preamble to this Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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"FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any successor form under the Securities Act.
"HOLDERS" means the Stockholders and any Person owning or having the right
to acquire Registrable Securities.
"ISSUANCE NOTICE" has the meaning set forth in Section 3 hereof.
"ISSUE AMOUNT" means $110.0 million.
"ISSUE AMOUNT PER SHARE" means the Issue Amount divided by the number of
shares of Common Stock issued and issuable upon conversion of the Preferred
Stock.
"MERGER" has the meaning set forth in Section 4(a) hereof.
"OAK" has the meaning set forth in the preamble to this Agreement.
"OLIVETTI" has the meaning set forth in the preamble to this Agreement.
"PECONIC" has the meaning set forth in the preamble to this Agreement.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust and any other entity or organization.
"PREFERRED STOCK" means the Series A Convertible Preferred Stock, par
value $1.00 per share, of the Company.
"PURCHASE AGREEMENT" means that certain Preferred Stock Purchase
Agreement, dated as of the date hereof, by and among the Company and the
Stockholders, as the same may be amended, supplemented or modified in accordance
with its terms.
"RAMIUS" has the meaning set forth in the preamble to this Agreement.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (i) the shares of Common Stock issuable or
issued upon conversion of the Preferred Stock, and (ii) any other shares of
capital stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the shares listed in (i); PROVIDED, HOWEVER, that the foregoing definition shall
exclude in all cases any Registrable Securities sold by a Person in a
transaction in which its rights under this Agreement are not assigned in
accordance with this Agreement. Notwithstanding the foregoing, Common Stock or
other securities shall only be treated as Registrable Securities if and so long
as they have not been sold (i) to or through a broker or dealer or underwriter
in a public distribution or a public securities transaction, or (ii) otherwise
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pursuant to an effective registration statement under the Securities Act or an
exemption from registration pursuant to Rule 144 (or any successor rules of the
SEC under the Securities Act).
"REGISTRABLE SECURITIES THEN OUTSTANDING" means the number of shares of
Common Stock outstanding and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities that are, in each case,
Registrable Securities.
"REGULATORY APPROVAL" means all regulatory approvals and findings of
suitability or qualification, including any approvals or findings by state
governing commissions and gaming regulators, or temporary permits or
authorizations, or, if applicable, the expiration of any notice periods with
respect thereto, that are necessary for the Stockholders to own and continue to
hold and vote the Preferred Stock or Registrable Securities and elect or
designate for election at least four (or seven, if applicable) directors to the
Board.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" has the meaning set forth in Section 3 hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERVICE DATE" has the meaning set forth in Section 3 hereof.
"SEVERANCE AGREEMENT" means any agreement between a Person and such
Person's officers, directors, employees, consultants or agents providing for any
payment or benefit, whether contingent or otherwise, upon the occurrence of any
event, development or transaction or any change in circumstances, relating to
the parties to any such agreement.
"STOCKHOLDERS" means Olivetti, Cirmatica, Oak, Peconic, Ramius and any
Person that becomes a party to this Agreement pursuant to Section 7 hereof.
"SUBSIDIARY" means, with respect to any Person, any other Person, whether
or not incorporated, of which at least 50% of the securities or interests
having, by their terms, ordinary voting power to elect members of the board of
directors, or other persons performing similar functions with respect to such
other Person, are held, directly or indirectly, by such first Person.
"TERMINATION EVENT" shall be deemed to have taken place (i) if the Company
fails to (A) cause any of the directors designated or elected by the
Stockholders in accordance with the terms of this Agreement or the Certificate
of Designations to become members of the Board, (B) cause any vacancies created
by the removal or resignation of directors designated or elected by the
Stockholders to be filled by persons selected by the Stockholders in accordance
with the terms of this Agreement or the Certificate of Designations, or (C)
cause at least one director designated or elected by the Stockholders to serve
on each committee of the Board (provided in each case that such director has
received Regulatory Approval for such service), or (ii) in the event of a Change
of Control of the Company.
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2. REGULATORY APPROVAL. Each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable under applicable laws and
regulations to obtain Regulatory Approvals in the most expeditious manner
practicable, including, without limitation cooperating in promptly making any
filings, in furnishing information required in connection therewith and in
timely seeking to obtain any consents, approvals, permits or authorizations in
respect of Regulatory Approvals. Notwithstanding the foregoing, the parties
hereto acknowledge and agree that with respect to Regulatory Approvals, each
party shall only be required to cause its officers, directors and key employees
in their capacity as such and any of its Affiliates that it controls to provide
all required information in connection with such Regulatory Approvals and to use
its reasonable efforts to obtain the cooperation of its stockholders and any
other third party in providing all required information in connection with such
Regulatory Approvals.
3. PREEMPTIVE RIGHTS.
(a) TERM AND TIMING OF NOTICE. For a period commencing on the date of
this Agreement and ending on the earliest to occur of (a) the fourth anniversary
of the date of this Agreement, (b) the date on which all of the shares of
Preferred Stock are redeemed by the Company pursuant to Section 4 of the
Certificate of Designations and (c) the date on which all of the shares of
Preferred Stock are automatically converted into shares of Common Stock pursuant
to Section 5(b) of the Certificate of Designations, and prior to incurring any
debt convertible or exchangeable into equity securities or issuing any equity
securities (including capital stock, rights, options or other equity interests
convertible into, exercisable into or exchangeable for capital stock), whether
privately placed or publicly offered (other than equity securities (a) issued as
consideration to sellers in connection with any merger or to equity holders of a
party to a merger or similar transaction, (b) issued upon exercise of options
granted to officers, directors and employees of the Company pursuant to an
option plan approved by the Board, not to exceed 20% of the fully diluted equity
of the Company on the date of this Agreement, (c) issued upon the conversion of
shares of Preferred Stock into shares of Common Stock pursuant to the
Certificate of Designations or as dividends or distributions in respect of
Common Stock of the Company or (d) issued as contemplated by Section 5(g)(i)(B)
of the Certificate of Designations), the Company shall promptly give written
notice (the "ISSUANCE NOTICE") to the Stockholders (the date on which the
Issuance Notice is delivered or deemed delivered pursuant to Section 10 of this
Agreement is referred to as the "SERVICE DATE") of any of the Company's
proposals to incur any such debt or issue any such equity securities.
(b) ISSUANCE NOTICE. The Issuance Notice shall disclose in reasonable
detail the number of shares of stock proposed to be issued or the amount of debt
to be incurred (collectively, the "SECURITIES") and the terms and conditions
upon which the Company proposes to effect the issuance of the Securities and
shall confirm that the offer by the Company to sell the portion of the
Securities specified below, constituted by the service of the Issuance Notice,
is irrevocable until all the Stockholders have either accepted or rejected (or
been deemed to have rejected) the offer as provided below. The Stockholders
shall, collectively, have the right to purchase, in whole or in part, a portion
of such Securities proportionate to the percentage of the
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fully diluted equity of the Company represented by the shares of Common Stock
issuable and issued upon conversion of the Preferred Stock then owned by the
Stockholders. The Stockholders may elect to purchase such portion of the
Securities, in whole or in part, upon the same terms and conditions as those set
forth in the Issuance Notice by delivering a written notice of such election to
the Company within 15 days after the Service Date based on their respective pro
rata ownership of the shares of Common Stock issuable and issued upon conversion
of the Preferred Stock in proportion to the fully diluted equity of the Company.
The failure by the Stockholders to serve notice in accordance with the foregoing
provisions shall be deemed a rejection of the offer constituted by the service
of the Issuance Notice. In addition, each Stockholder shall have a right of
over-allotment such that if any Stockholder fails to exercise its rights
hereunder to purchase its pro rata share of Securities, the other Stockholders
may purchase the non-purchasing Stockholder's portion on a pro rata basis within
10 days from the date the Company provides written notice to such other
Stockholders that such non-purchasing Stockholder failed to exercise its right
hereunder to purchase its pro rata share of Securities. The Company shall
promptly give written notice to all the other Stockholders of any Stockholder's
failure to exercise its right hereunder to purchase Securities. The failure by
any Stockholder to deliver written notice to the Company of such Stockholder's
election to purchase additional Securities within the above-mentioned 10-day
time period shall be deemed a rejection of the offer to purchase additional
Securities pursuant to the over-allotment right. If the Stockholders elect to
purchase any or all of the Securities, the closing of such purchase shall occur
upon the later to occur of (x) the expiration of 120 days from the Service Date
and (y) 5 days following the satisfaction of any anti-trust governmental
authority consents, or other applicable governmental authority conditions, to
the consummation of the issuance. If the Stockholders elect not to purchase all
of the Securities, then the Company may issue any such Securities not purchased
by the Stockholders at a price and on terms no more favourable to the
transferee(s) thereof than specified in the Issuance Notice during the 120-day
period immediately following the Service Date. Any Securities not issued within
such 120-day period shall thereupon , if still proposed to be issued by the
Company, be subject to the provisions of the preemptive rights set forth in this
Section 3.
4. STANDSTILL, BOARD OF DIRECTORS AND VOTING MATTERS.
(a) STANDSTILL. Until the earlier of (i) the occurrence of a Termination
Event or (ii) the date that the current Chief Executive Officer of the Company
ceases to serve in that capacity, Olivetti, Cirsa, Cirmatica and, if applicable,
their permitted assigns will not, directly or indirectly, without the prior
written consent of the Company, (A) for four years from the closing of the
merger of a wholly owned Subsidiary of the Company with and into Scientific
Games Holdings Corp. (the "MERGER"), acquire beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) of any equity interest or any interest
convertible or exchangeable into, or any right to acquire, any equity interest
(including by becoming a member of a "group" as defined in Section 13(d)(3) of
the Exchange Act) which, together with any equity interest and any such other
interest beneficially owned by Olivetti, Cirsa, Cirmatica and, if applicable,
their permitted assigns, would equal more than 45% of the then outstanding
shares of Common Stock of the Company or securities convertible into Common
Stock of the Company (including any paid-in-kind
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dividends on the Preferred Stock or any Common Stock into which such
paid-in-kind dividends were converted) on a fully diluted basis or (B) for three
years from the closing of the Merger, solicit proxies with respect to the
Company. Notwithstanding the foregoing, no calculation of beneficial ownership
for purposes of this Section 4(a) shall (i) include any equity securities owned
by Oak, Peconic or Ramius or their permitted assigns or (ii) or be affected by
any change in Olivetti's, Cirmatica's and, if applicable, their permitted
assigns, ownership by virtue of a stock repurchase, stock split,
reclassification or similar transaction effected by the Company.
(b) COMPOSITION OF BOARD. (i) The Stockholders and the Company
acknowledge that, pursuant to the Certificate of Designations, the Stockholders
holding Preferred Stock shall be entitled, as a single class, to elect a number
of directors of the Company upon substantially the same terms, and under the
same circumstances, as set forth below. To preserve the rights of the
Stockholders to have their representatives on the Board in the event that any or
all of the shares of Preferred Stock are converted into Common Stock, the
Stockholders and the Company agree to the following provisions relating to the
Board and its committees. Subject to the Certificate of Designations and Section
4(b)(ii) hereof, the Board of Directors of the Company (the "BOARD") shall
consist of ten (10) directors, and the Stockholders shall have the right to
designate and have elected and appointed:
(A) that number of directors equal to four (4) minus the
number of directors the holders of Preferred Stock are entitled to
elect as a single class pursuant to the Certificate of Designations;
PROVIDED, that the Stockholders beneficially own in the aggregate
shares of Common Stock plus shares of Preferred Stock having the
right to convert into a number of shares of Common Stock that equals
or exceeds twenty-five percent (25%) of the sum of (i) the number of
shares of Common Stock outstanding plus (ii) the number of shares of
Common Stock into which or for which all outstanding securities of
the Company convertible into or exercisable or exchangeable for
Common Stock (including, without limitation, the Preferred Stock)
may be converted, exercised or exchanged;
(B) that number of directors equal to three (3) minus the
number of directors the holders of Preferred Stock are entitled to
elect as a single class pursuant to the Certificate of Designations;
PROVIDED, that the Stockholders beneficially own in the aggregate
shares of Common Stock plus shares of Preferred Stock having the
right to convert into a number of shares of Common Stock that equals
or exceeds twenty percent (20%) of the sum of (i) the number of
shares of Common Stock outstanding plus (ii) the number of shares of
Common Stock into which or for which all outstanding securities of
the Company convertible into or exercisable or exchangeable for
Common Stock (including, without limitation, the Preferred Stock)
may be converted, exercised or exchanged;
(C) that number of directors equal to two (2) minus the
number of directors the holders of Preferred Stock are entitled to
elect as a single class
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pursuant to the Certificate of Designations; PROVIDED, that the
Stockholders beneficially own in the aggregate shares of Common
Stock plus shares of Preferred Stock having the right to convert
into a number of shares of Common Stock that equals or exceeds ten
percent (10%) of the sum of (i) the number of shares of Common Stock
outstanding plus (ii) the number of shares of Common Stock into
which or for which all outstanding securities of the Company
convertible into or exercisable or exchangeable for Common Stock
(including, without limitation, the Preferred Stock) may be
converted, exercised or exchanged; and
(D) that number of directors equal to one (1) minus the
number of directors the holders of Preferred Stock are entitled to
elect as a single class pursuant to the Certificate of Designations;
PROVIDED, that Stockholders beneficially own in the aggregate shares
of Common Stock plus shares of Preferred Stock having the right to
convert into a number of shares of Common Stock that equals or
exceeds five percent (5%) of the sum of (i) the number of shares of
Common Stock outstanding plus (ii) the number of shares of Common
Stock into which or for which all outstanding securities of the
Company convertible into or exercisable or exchangeable for Common
Stock (including, without limitation, the Preferred Stock) may be
converted, exercised or exchanged;
PROVIDED, HOWEVER, that if the Company shall have failed to comply with
any provision of Section 3 or Section 4(b), (d) or (e) of the this Agreement,
then for as long as such failure continues, the number of directors on the Board
shall be increased to a number that is equal to three (3) more than the then
current number of directors, and the Stockholders shall have a right to
designate and have elected and appointed immediately by the Board by resolution
or, if specified by the Stockholders, at the next annual meeting of the
stockholders or at any special meeting, three (3) additional directors to the
Board, regardless of the number of shares of Common Stock and Preferred Stock
then held by the Stockholders.
(ii) Whenever such voting rights with respect to three additional
directors pursuant to Section 4(b) shall have vested, such rights may be
exercised by written consent of the Stockholders then holding a majority of the
outstanding shares of Common Stock and shares of Common Stock that would be
issued upon the conversion of the Preferred Stock then held by the Stockholders
or at a special meeting of the Stockholders, called as hereinafter provided, or
at any annual meeting of stockholders held for the purpose of electing
directors. Such right of the Stockholders to designate three additional
directors may be exercised until the Company has cured any such failure, at
which time the right of the Stockholders to elect such number of directors shall
cease, the term of such three additional directors previously elected pursuant
to Section 4(b) shall thereupon terminate, and the authorized number of
directors shall thereupon return to the number of authorized directors otherwise
in effect, but subject always to the same provisions for the renewal and
divestment of such special voting rights as provided in Section 4(b).
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(iii) At any time when such voting rights with respect to the
designation of 3 additional directors shall have vested in the Stockholders
pursuant to Section 4(b) and if such right shall not already have been initially
exercised by written consent or otherwise, a proper officer of the Company
shall, upon the written request of any Stockholder, addressed to the Secretary
of the Company, call a special meeting of Stockholders. Such meeting shall be
held at the earliest practicable date upon the notice required for annual
meetings of stockholders at the place for holding annual meetings of
stockholders of the Company or if none at a place designated by the Secretary of
the Company. If such meeting shall not be called by the proper officers of the
Company within thirty (30) days after the personal service of such written
request upon the Secretary of the Company, or within thirty (30) days after
mailing the same, within the United States, by registered mail, addressed to the
Secretary of the Company at its principal office (such mailing to be evidenced
by the registry receipt issued by the postal authorities), then the Stockholders
of record of ten percent (10%) of the outstanding shares of Common Stock and
shares of Common Stock that would be issued upon conversion of the Preferred
Stock then held by all Stockholders may designate in writing a Stockholder to
call such meeting at the expense of the Company, and such meeting may be called
by such Person so designated upon the notice required for annual meeting of
stockholders and shall be held at the place for holding annual meetings of the
Company or, if none, at a place designated by such Stockholder. Any Stockholder
that would be entitled to vote at such meeting shall have access to the stock
books of the Company for the purpose of causing a meeting of stockholders to be
called pursuant to the provisions of this Section 4(b). Notwithstanding the
provisions of this Section 4(b), no such special meeting shall be called if any
such request is received less than 90 days before the date fixed for the next
ensuing annual or special meeting of stockholders.
(iv) If a director so elected by the Stockholders shall cease to
serve as a director for any reason before his or her term expires (other than in
the event that the Stockholders are no longer entitled to designate such a
director pursuant to the terms of this Agreement), or shall not receive or
retain Regulatory Approval for service as a director, the Stockholders may by
written consent or at a special meeting of the Stockholders called as provided
above, elect a successor to hold office for the unexpired term of the director
whose place shall be vacant, provided that any successor to ▇▇▇▇▇ ▇▇▇▇▇ shall be
reasonably satisfactory to the Board as a whole.
(v) As soon as practicable after the date hereof, the Board shall
adopt resolutions increasing the size of the Board to ten (10) members and
appoint ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
as directors of the Company. In addition, the Company shall at all such times
exercise all authority under applicable law and use its best efforts to cause
the directors designated by the Stockholders for election to the Board to be
nominated as Board members by the nominating committee of the Company as
provided below or otherwise. The Company shall, if necessary to permit the
Stockholders' designees to be elected to the Board, (i) cause the Stockholders'
designees to be included in the slate of designees recommended by the Board to
the Company's stockholders for election as directors at each annual meeting of
the stockholders of the Company (or at any special meeting held for the election
of directors) and (ii) use its best efforts to cause the election of the
Stockholders'
designees at such annual or special meeting, including soliciting proxies in
favor of the election of such Persons.
(c) NOMINATING COMMITTEE. Until the earlier of (i) three years from the
closing of the Merger, (ii) a Termination Event, (iii) the date that the current
Chief Executive Officer of the Company ceases to serve in that capacity or (iv)
a Bona Fide Third Party commences a public solicitation of proxies pursuant to
the Exchange Act seeking to replace a majority of the Board or otherwise seeks
at a meeting of the stockholders to replace a majority of the Board, no member
of the Board or candidate for the Board (except those designated or elected, as
the case may be, by the Stockholders or holders of Preferred Stock in accordance
with the terms of this Agreement or the Certificate of Designations) shall be
proposed, nominated or elected except in accordance with the following
procedures. There shall be a nominating committee of the Board composed of three
directors, of whom (i) one member shall be the current Chief Executive Officer
of the Company, (ii) one member shall be a person who either (A) was serving as
a director on the date of the Merger or (B) was nominated for such committee and
approved by the vote of the majority of the directors who are directors referred
to in clause (A) above or this clause (B), and (iii) one member shall be a
person who was designated or elected, as the case may be, by the Stockholders in
accordance with the terms of this Agreement or the Certificate of Designations.
No member of the Board or candidate for the Board shall be proposed, nominated
or elected (including filling any vacancy on the Board) (except those designated
or elected, as the case may be, by the Stockholders or holders of Preferred
Stock in accordance with the terms of this Agreement or the Certificate of
Designations), unless first approved by a majority vote of such nominating
committee (which vote, in the case of any person who is not a director at the
time of the Merger, shall include the vote (not to be unreasonably withheld) of
the member of such committee who is a director elected by the Stockholders in
accordance with the terms of this Agreement and the Certificate of Designations)
and thereafter approved by a majority vote of the entire Board. At the time of
any such Board vote, at least two of the members of the Board (not including any
members of the Board designated or elected, as the case may be, by the
Stockholders or the holders of Preferred Stock in accordance with the terms of
this Agreement or the Certificate of Designations) shall qualify as independent
directors for purposes of the applicable rules of the principal securities
exchange on which the Company's Common Stock is then listed. The Stockholders
agree to vote, or cause to be voted, any voting securities of the Company
beneficially owned by them for the election of all members of the Board of
Directors or candidates for the Board of Directors nominated as provided in this
Section 4, and not for any other person (except those designated by the
Stockholders in accordance with the terms of this Agreement); PROVIDED that if
the Stockholders are prohibited from agreeing to so vote by the applicable rules
of the principal securities exchange on which the Company's Common Stock is then
listed, then the Stockholders agree not to vote, or cause to be voted, any such
securities against any members or candidates so nominated and if such agreement
as so modified is also prohibited by such rules, then the Stockholders agree to
be subject to such agreement with respect to the foregoing matters, to the
extent not prohibited by the rules of such securities exchange, as shall most
closely achieve the purposes and effects of this Section 4(c). For purposes of
this Section 4(c), the equity interests of a Stockholder and its Affiliates
shall be aggregated. Except as set forth in Section 4(c) with respect to the
election of certain directors, the parties hereto acknowledge that each
Stockholder is free to vote its shares of Preferred Stock
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or Common Stock into which such Preferred Stock is converted as it desires
(subject to any agreements among the Stockholders).
(d) OTHER COMMITTEES. For so long as any director has been designated or
elected by the Stockholders or the holders of Preferred Stock in accordance with
the Certificate of Designations, as the case may be, at least one of the
directors so designated or elected by the Stockholders or the holders of the
Preferred Stock in accordance with the Certificate of Designations, as the case
may be, shall serve on all committees of the Board.
(e) VOTING RIGHTS. For so long as the Stockholders and their Affiliates
collectively have beneficial ownership of a number of shares of Common Stock
plus shares of Preferred Stock having the right to convert into a number of
shares of Common Stock that equals or exceeds 10% of the then outstanding shares
of Common Stock, the affirmative consent of the Stockholders and their
Affiliates that beneficially own more than fifty percent (50%) of the
outstanding shares of Common Stock issuable and issued upon conversion of the
Preferred Stock then owned by all the Stockholders, given in person or by proxy,
either in writing without a meeting or by vote at any meeting called for that
purpose, shall be necessary for authorizing, effecting or validating:
(i) any amendment, alteration or repeal of any of the provisions
of the Certificate of Designations of the Company;
(ii) any amendment, alteration or repeal of any of the provisions
of the Certificate of Incorporation of the Company that would adversely
affect the preferences, rights or powers of the Preferred Stock;
(iii) any authorization, issuance or creation of (by
reclassification or otherwise) any class or series (or any security of any
class or series) of capital stock of the Company;
(iv) any increase in the size of the Board (except as required
pursuant to the terms of this Agreement or the Certificate of
Designations);
(v) any change in the state of incorporation of the Company;
(vi) any delisting of the Common Stock from the American Stock
Exchange or listing of Common Stock on a different exchange or national
quotation system; and
(vii) any decision, or the entering into of any agreement,
commitment or arrangement, to effect any of the foregoing.
(f) RESERVATION OF SHARES. For so long as any of the shares of Preferred
Stock are outstanding, the Company shall keep reserved for issuance a sufficient
number of shares of Common Stock to satisfy its conversion obligations under the
Certificate of Designations.
(g) AVAILABLE FINANCIAL INFORMATION. (i) The Company will deliver, or
will cause to be delivered, the following to each director designated by the
Stockholders: an annual budget, a
11
business plan and financial forecasts for the Company for the next fiscal year
of the Company, no later than thirty (30) days before the beginning of the
Company's next fiscal year, in such manner and form as approved by the Board,
which shall include at least a projection of income and a projected cash flow
statement for each fiscal quarter in such fiscal year and projected balance
sheet as of the end of each fiscal quarter in such fiscal year. Any material
changes in such business plan shall be delivered to the directors designated by
the Stockholders as promptly as practicable after the Board has approved such
changes.
(ii) Within 20 days after the end of each calendar month, the
Company will provide each director designated by the Stockholders with the
interim financial statements of the Company and its Subsidiaries relating to
such calendar month. Such interim financial statements shall (a) be in
accordance with the books and records of the Company and its Subsidiaries, (b)
be prepared in accordance with U.S. generally accepted accounting principles
consistently applied throughout the periods covered thereby (except for the
absence of footnotes) and present fairly and accurately in accordance with U.S.
generally accepted accounting principles, in all material respects, the Assets,
liabilities (including, without limitation, reserves) and financial condition of
the Company and its Subsidiaries as of the respective dates thereof and the
results of operations, stockholders' equity and cash flows for the periods
covered thereby.
(iii) The Company will promptly deliver to each director designated
by the Stockholders when available one copy of each annual report on Form 10-K
and quarterly report on Form 10-Q of the Company, as filed with the SEC. In the
event an annual report on Form 10-K or quarterly report on Form 10-Q is
unavailable, the Company may, in lieu of the requirements of the preceding
sentence, deliver, or cause to be delivered, the following to each director
designated by the Stockholders:
(A) as soon as practicable after the end of each fiscal year
of the Company, and in any event within ninety (90) days thereafter,
a consolidated balance sheet of the Company and its Subsidiaries as
of the end of such fiscal year, and consolidated statements of
income and cash flows of the Company and its Subsidiaries for such
year, prepared in accordance with U.S. generally accepted accounting
principles and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and
followed promptly thereafter by such financial statements
accompanied by the opinion of independent public accountants of
recognized national standing selected by the Company, and a
Company-prepared comparison to the Company's business plan for such
year as approved by the Board; and
(B) as soon as practicable after the end of the first,
second and third quarterly accounting periods in each fiscal year of
the Company, and in any event within forty-five (45) days
thereafter, a consolidated balance sheet of the Company and its
Subsidiaries as of the end of each such quarterly period, and
consolidated statements of income and cash flows of the Company and
its Subsidiaries for such period and for the current fiscal year to
dated, prepared in accordance with U.S. generally accepted
accounting principles and setting forth in
12
comparative form the figures for the corresponding periods of the
previous fiscal year and to the Company's business plan then in
effect and approved by the Board, subject to changes resulting from
normal year-end audit adjustments, all in reasonable detail and
certified by the principal financial or accounting officer of the
Company, except that such financial statements need not contain the
notes required by U.S. generally accepted accounting principles.
(h) TAX MATTERS. (i) The Company and each Stockholder acknowledge and
agree that it is intended that the Preferred Stock not constitute "preferred
stock" within the meaning of Section 305 of the Internal Revenue Code of 1986,
as amended, and the Treasury Regulations promulgated thereunder, and neither the
Company nor the Stockholders shall treat the Preferred Stock as such.
Accordingly, payment of any and all PIK Dividends (as defined in the Certificate
of Designations) to be made under the Certificate of Designations or under any
other transaction document by the Company to or for the benefit of any
Stockholder is intended to be made free and clear of, and without deduction for,
U.S. federal income and withholding taxes ("U.S. TAXES"). If the Company shall
be required by law to deduct any such U.S. Taxes from or in respect of any PIK
Dividends to be paid under the Certificate of Designations by the Company to or
for the benefit of any Stockholder, then (a) the Stockholder shall pay to the
Company the amount of such U.S. Taxes not to exceed ten percent (10%) of the
fair market value of such PIK Dividend on the date such PIK Dividend is
distributed in accordance with the Certificate of Designations (the "FAIR MARKET
VALUE"), and (b) upon payment by the applicable Stockholder, the Company shall
pay to or for the benefit of the applicable Stockholder, in addition to such PIK
Dividend, an additional amount (the "TAX GROSS-UP AMOUNT"), in cash, as
necessary so that after making all required deductions on account of U.S. Taxes
(including deductions applicable to additional sums required to be paid or
deposited under this Section 4(h)) the amount received by such Stockholder
(disregarding the payment made by such Stockholder to the Company pursuant to
this sentence) shall be equal to the sum that would have been so received had no
such deductions been made. If a Stockholder is required to pay any U.S. Taxes
(other than U.S. Taxes determined on a net income basis) with respect to any PIK
Dividends (as a result of the Company's failure to withhold such U.S. Taxes or
otherwise) in excess of ten percent (10%) of the Fair Market Value of such PIK
Dividends, the Company shall indemnify and hold harmless such Stockholder from
any such U.S. Taxes in an amount equal to the Tax Gross-Up Amount, and if the
Company is required to pay any such U.S. Taxes with respect to any PIK
Dividends, the Stockholder shall indemnify and hold harmless the Company from
any such U.S. Taxes in an amount up to ten percent (10%) of the Fair Market
Value of such PIK Dividends.
(ii) The amount to be paid by the Company under this Section 4(h)
shall be reduced by the amount of any credit, against any other tax due in any
other jurisdiction, available to the Stockholder or its Affiliates by reason of
the payment of U.S. Taxes pursuant to this Section 4(h). In no event shall the
Company be liable for any U.S. Taxes required to be deducted from or in respect
of any PIK Dividends by reason of any change in applicable law after the Initial
Issue Date (as defined in the Certificate of Designations) (which shall be the
responsibility of the Stockholder), or be obligated to make any payment under
this Section 4(h) if, at the time of such payment, such payment (a "BLOCKED
PAYMENT") would violate, or result in a default or event of default under, the
Indenture relating to the Company's 12 1/2% Senior Subordinated
13
Notes due 2010 or the Company's Senior Credit Agreement dated as of September 6,
2000 (in each case including any amendments, modifications, extensions,
refinancings or replacements thereof) (collectively, the "FINANCING DOCUMENTS").
Notwithstanding the foregoing, in the event the Company does not make a payment
as required by this Section 4(h) because such payment would be deemed a Blocked
Payment, (A) the Stockholder shall have no obligation to make the payment as
described in clause (a) of Section 4(h)(i), but shall pay the amount otherwise
required to be deducted directly to the U.S. taxing authority, and (B) the
Company shall be obligated to pay an amount equal to any such Blocked Payments
plus interest at an annual rate of 6% starting from the date any such Blocked
Payment otherwise would have been made to the applicable Stockholders promptly
following the date in which any such previously Blocked Payments would no longer
violate, or result in a default or event of default under, the Financing
Documents. Each Stockholder shall, if requested in writing by the Company,
promptly provide the Company with a properly completed Form W-8 BEN or Form W-8
IMY (or successor forms), as applicable, including, if applicable, the
eligibility of such Stockholder for a reduced rate of withholding pursuant to an
applicable treaty.
5. REGISTRATION RIGHTS.
The Company and the Holders covenant and agree as follows:
(a) REQUEST FOR REGISTRATION.
(i) If the Company shall receive at any time, a written request
from any Holder of Registrable Securities then outstanding that the Company file
a registration statement under the Securities Act covering the registration of
Registrable Securities then outstanding then the Company shall, within ten (10)
days of the receipt thereof, give written notice of such request to all Holders
and shall, subject to the limitations of Section 5(b), use its best efforts to
effect as soon as practicable the registration under the Securities Act of all
Registrable Securities which the Holders request to be registered within fifteen
(15) days of the delivery or deemed delivery of such notice by the Company in
accordance with Section 10.
(ii) If the Holders initiating the registration request hereunder
("INITIATING HOLDERS") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise
the Company as a part of their request made pursuant to this Section 5(a) and
the Company shall include such information in the written notice referred to
in Subsection 5(a)(i). The underwriter will be selected by a majority in
interest of the Initiating Holders and shall be reasonably acceptable to the
Company. In such event, the right of any Holder to include its Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed
by a majority in interest of the Initiating Holders and such Holder) to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
Subsection 5(d)(v)) enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 5(a), if the underwriter
advises the Initiating Holders in writing that marketing
14
factors require a limitation of the number of Registrable Securities to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company requested to be included by each Holder;
PROVIDED, HOWEVER, that the number of shares of Registrable Securities to be
included in such underwriting shall not be reduced unless all other securities
are first entirely excluded from the underwriting.
(iii) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 5(a), a
certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 60 days after receipt of the request of the
Initiating Holders; PROVIDED, HOWEVER, that the Company may not utilize this
right more than once in any twelve-month period.
(b) COMPANY REGISTRATION. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock under
the Securities Act in connection with the public offering of such securities
solely for cash (other than a registration relating solely to the sale of
securities to participants in a Company stock or similar plan or a transaction
covered by Rule 145 (or any successor rule) under the Securities Act), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20)
days after delivery or deemed delivery of such notice by the Company in
accordance with Section 10, the Company shall, subject to the provisions of
Section 5(g), cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.
(c) FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of the Registrable Securities then outstanding a written
request or requests that the Company effect a registration on Form S-3 (or any
comparable or successor form or forms) and any related reasonable qualification
or compliance with respect to all or a part of the Registrable Securities owned
by such Holder or Holders, the Company will:
(i) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration and all such reasonable qualifications and compliances as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request as are
specified in a written request given within 15 days after receipt of such
written notice from the Company; PROVIDED,
15
HOWEVER, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 5(c): (i) if
Form S-3 is not available for such offering by the Holders; (ii) if the Company
shall furnish to the Holders a certificate signed by the President or Chief
Executive Officer of the Company stating that in the good faith judgment of the
Board, it would be seriously detrimental to the Company and its stockholders for
such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than 60 days after receipt of the request of
the Holder or Holders under this Section 5(c); PROVIDED, HOWEVER, that the
Company shall not utilize this right more than once in any twelve-month period;
or (iii) in any particular jurisdiction in which the Company would be required
to qualify to do business or to execute a general consent to service of process
in effecting such registration, qualification or compliance.
(iii) Subject to the foregoing, the Company shall file a
registration statement on Form S-3 (or successor form) covering the Registrable
Securities and other securities so requested to be registered as soon as
practicable after receipt of the request or requests of the Holders.
(iv) Without limiting the rights of the Holders pursuant to this
Section 5(c), the Company acknowledges and agrees that, if requested in writing
by any Holder or Holders of Registrable Securities then outstanding, the Company
shall effect the Form S-3 (or successor form) registration under the Securities
Act pursuant to this Section 5(c) for an offering on a delayed or continuous
basis pursuant to Rule 415 (or any successor provision then in force) under the
Securities Act (a "Shelf Registration") or maintain the effectiveness of a
registration statement to effect a Shelf Registration at the request of the
Holders or Holders pursuant to this Section 5(c).
(d) OBLIGATIONS OF THE COMPANY. Whenever required under this Section 5
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of the Registrable Securities registered thereunder, keep such registration
statement effective for up to one hundred twenty (120) days (except in the case
of a registration statement pursuant to Section 5(c)(iv)) or until the Holders
have completed the distribution relating thereto; PROVIDED, HOWEVER, that such
one hundred twenty (120) day period shall be extended for a period of time equal
to the period the Holder refrains from selling any securities included in such
registration at the request of an underwriter.
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
16
(iii) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
PROVIDED that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(v) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(vi) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(vii) Cause all such Registrable Securities registered hereunder to
be listed on each securities exchange on which securities of the same class
issued by the Company are then listed.
(viii) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
(ix) Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 5, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 5, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
17
(e) FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 5 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
(f) EXPENSES OF REGISTRATION.
(i) REGISTRATION. All expenses (other than underwriting discounts
and commissions) incurred in connection with registrations, filings or
qualifications pursuant to Section 5(a), including, without limitation, all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them with the
approval of the Company, which approval shall not be unreasonably withheld,
shall be borne by the Company.
(g) UNDERWRITING REQUIREMENTS. In connection with any offering involving
an underwriting, the Company shall not be required under Section 5(b) to include
any of the Holders' securities in such underwriting unless they accept the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it (or by other persons entitled to select the underwriters), and
then only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the Company. If
the total amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders) but in no event shall the amount of
securities of the selling Holders included in the offering be reduced unless all
securities offered by Persons other than the Company are first entirely excluded
from the underwriting. For purposes of the preceding parenthetical concerning
apportionment, for any selling stockholder which is a Holder and which is a
partnership or corporation, the partners, retired partners and stockholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "SELLING STOCKHOLDER," and any pro-rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder," as defined in this sentence.
(h) DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 5.
18
(i) INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 5:
(i) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each Person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "VIOLATION"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law; and the
Company will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 5(i)(i) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable to any Holder, underwriter or controlling Person for
any such loss, claim, damage, liability, or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling Person.
(ii) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this Section 5(i)(ii), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; PROVIDED, HOWEVER, that the indemnity agreement contained
in this Section 5(i)(ii) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; PROVIDED, that in no event shall any indemnity under this Section
5(i)(ii)
19
exceed the net proceeds from the offering received by such Holder, except in the
case of willful fraud by such Holder.
(iii) Promptly after receipt by an indemnified party under this
Section 5(i) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 5(i), deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel reasonably
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
5(i), but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 5(i).
(iv) If the indemnification provided for in this Section 5(i) is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; PROVIDED, that in no event shall any contribution by a Holder
under this Section 5(i)(iv) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
(v) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
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(vi) The obligations of the Company and Holders under this Section
5(i) shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 5, and otherwise.
(j) REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to
use its best efforts to:
(i) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times, so long as the Company
remains subject to the periodic reporting requirements under Sections 13 or
15(d) of the Exchange Act;
(ii) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities,;
(iii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(iv) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144,
the Securities Act and the Exchange Act, or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
(k) LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 5(a) hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of such Holder's securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 5(a).
21
6. LIQUIDATED DAMAGES.
If any Holder requests that the Company file a registration statement
pursuant to Section 5(a), and such registration statement is not declared
effective by the SEC within 150 days after such Holder's request (the
"EFFECTIVENESS TARGET DATE") (such failure to have such registration statement
declared effective, a "REGISTRATION DEFAULT"), then commencing on the day
following the date on which such Registration Default occurs, the Company agrees
to pay to each such Holder 2% of the Issue Amount Per Share ("LIQUIDATED
DAMAGES"), in respect of the Registrable Securities requested to be included in
such registration statement by such Holder, in cash or, if the Company is not
able to pay cash, in shares of Preferred Stock, each month, or a pro rata amount
for any portion thereof, until the registration statement relating to the
Registrable Securities requested by the Holder(s) has been declared effective by
the SEC.
7. BINDING EFFECT; SUCCESSOR AND ASSIGNS.
The provisions of this Agreement shall be binding upon and accrue to the
benefit of the parties hereto and their respective heirs, legal representatives,
successors and, assigns. Each of the Stockholders may transfer or assign, in
whole or in part, any of its rights and obligations hereunder to any Person;
PROVIDED that such transferee executes and delivers a counterpart copy of this
Agreement to the Company and each of the Stockholders thereby agreeing to be
bound by the terms and provisions set forth herein.
8. AMENDMENT.
This Agreement may be amended only by a written instrument signed by the
parties hereto.
9. APPLICABLE LAW.
The laws of the State of New York shall govern the interpretation,
validity and performance of the terms of this Agreement.
10. NOTICES.
All notices, requests, demands and other communications which are required
or may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when received, if personally delivered; when transmitted,
if transmitted by telecopy, upon receipt of telephonic or electronic
confirmation; the day after it is sent, if sent for next day delivery to a
domestic address by recognized overnight delivery service (E.G., Federal
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. In each case notice shall be sent to:
22
(a) If to the Company, addressed to:
Autotote Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Secretary and General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Cirmatica, addressed to:
Cirmatica Gaming, S.A.
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇, ▇(▇), ▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Guillem
Telecopy: (▇▇▇▇▇) ▇▇ ▇▇▇ ▇▇▇▇
With a copy to:
Lottomatica S.p.A.
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
23
(c) If to Olivetti, addressed to
Olivetti International S.A.
125 Avenue du X Septembre
Luxemborg
Attention: ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇
With a copy to:
Olivetti S.p.A.
▇.▇▇▇ ▇▇▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇ ▇▇▇▇
Telecopy: (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇▇▇) ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(d) If to Oak, addressed to
The Oak Fund
PO Box 31106 SMB, Corporate Center
West Bay Road
Grand Cayman, Cayman Islands
Attention: ▇▇▇▇▇ ▇▇▇▇
Telecopy: (▇▇▇▇) ▇▇▇-▇▇▇▇
(e) If to Peconic, addressed to
Peconic Fund Ltd.
c/o Ramius Capital Group, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
24
(f) If to Ramius, addressed to
Ramius Securities, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as the party shall have specified by notice in writing
to the other parties in accordance with this Section 9.
11. HEADINGS.
The headings in this Agreement are for convenience of reference only and
will not control or affect the meaning or construction of any provisions hereof.
12. ENTIRE AGREEMENT.
This Agreement, the Purchase Agreement and Certificate of Designations
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof. This Agreement, the Purchase Agreement and
Certificate of Designations supersede all prior agreements and understandings,
both oral and written, among the parties with respect to the subject matter
hereof and thereof. This Agreement, the Purchase Agreement and Certificate of
Designations is not intended to confer upon any Person other than the parties
hereto and thereto and their respective permitted assigns any rights or remedies
hereunder or thereunder, except as expressly provided herein and therein.
13. SEVERABILITY.
The invalidity or unenforceability of any provisions of this Agreement in
any jurisdiction will not affect the validity, legality or enforceability of the
remainder of this Agreement in such jurisdiction or the validity, legality or
enforceability of this Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder will be enforceable to the fullest extent permitted by law.
14. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall an original, but all of which together shall constitute one and the same
instrument.
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15. REMEDIES.
The parties hereby acknowledge and agree that money damages would not be
adequate compensation for the damages that a party would suffer by reason of a
breach of this Agreement or a failure of any other party to perform any of its
obligations under this Agreement. Therefore, each party hereto agrees that in
addition to and without limiting any other remedy or right it may have, the
non-breaching part will have the right to an injunction, temporary restraining
order or other equitable relief in any court of competent jurisdiction enjoining
any such breach and enforcing specifically the terms and provisions hereof.
[Signature Page Follows]
26
IN WITNESS WHEREOF, the parties have executed this Stockholders' Agreement
as of the date first above written.
AUTOTOTE CORPORATION OLIVETTI INTERNATIONAL S.A.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇
--------------------------- ----------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇
Title: Vice President Title: Director
CIRMATICA GAMING S.A.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Director
THE OAK FUND
By: /s/ ▇▇▇▇▇ ▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Director
PECONIC FUND LTD.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Principal
RAMIUS SECURITIES, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Principal
27