STOCKHOLDERS AGREEMENT
DATED AS OF OCTOBER 2, 2000
among
BD RECAPITALIZATION
HOLDINGS LLC,
PETCO ANIMAL SUPPLIES, INC.
and
CERTAIN STOCKHOLDERS
OF PETCO ANIMAL SUPPLIES, INC.
TABLE OF CONTENTS
Page
ARTICLE I. BOARD OF DIRECTORS....................................................................................2
1.1 Board Composition......................................................................2
1.2 Nomination Rights......................................................................2
1.3 Election of Nominees...................................................................2
1.4 Vacancies..............................................................................3
1.5 Removal of Nominees....................................................................3
1.6 Committees.............................................................................4
1.7 Special Consent........................................................................4
1.8 Actions by the Stockholders............................................................6
1.9 Compensation...........................................................................7
1.10 Executive Employment Agreements........................................................7
1.11 Incentive Plans........................................................................7
1.12 Actions by Management Stockholders.....................................................8
ARTICLE II. RESTRICTIONS ON TRANSFER.............................................................................8
2.1 General Restrictions on Transfer.......................................................8
2.2 Compliance with Securities Laws........................................................9
2.3 Agreement to Be Bound..................................................................9
2.4 Tag-along for the Management Parties and the Financing Parties.........................9
2.4.1 Right to Participate in Sale..................................................9
2.4.2 Sale Notice..................................................................11
2.4.3 Tag-Along Notice.............................................................11
2.4.4 Delivery of Certificates.....................................................12
2.4.5 Exempt Transfers.............................................................12
2.5 Cooperation...........................................................................13
2.6 Improper Transfer.....................................................................13
2.7 Involuntary Transfer..................................................................14
2.8 First Option/First Offer..............................................................14
2.8.1 First Option.................................................................14
2.8.2 First Offer..................................................................15
2.8.3 No Waiver....................................................................16
2.8.4 Exempt Transfers.............................................................16
2.9 Call Option...........................................................................17
2.10 Stock Subscription Rights.............................................................20
2.10.1 Right To Purchase New Securities.............................................20
2.10.2 New Securities...............................................................20
2.10.3 Required Notices.............................................................21
2.10.4 Company's Right To Sell......................................................21
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2.10.5 Purchaser's Acquisition of Additional Shares.................................21
2.10.6 Assignment...................................................................22
2.11 Tax Treatment.........................................................................22
ARTICLE III. DRAG-ALONG SALES...................................................................................22
3.1 Right of Purchaser Parties to Require Sale............................................22
3.2 Drag-Along Notice.....................................................................23
3.3 Delivery of Certificates..............................................................23
3.4 Consideration.........................................................................23
3.5 Cooperation...........................................................................23
ARTICLE IV. REGISTRATION RIGHTS.................................................................................24
4.1 Definitions...........................................................................24
4.2 Demand Registrations..................................................................26
4.2.1 Number of Demand Registrations...............................................26
4.2.2 Registration.................................................................28
4.2.3 Inclusion of Registrable Shares..............................................29
4.2.4 Priority on Demand Registrations.............................................30
4.2.5 Compliance...................................................................30
4.3 Piggyback Registration................................................................31
4.3.1 Right to Include Registrable Shares..........................................31
4.3.2 Priority on Piggyback Registrations..........................................31
4.5 Registration Statement................................................................35
4.6 Registration Procedures...............................................................35
4.7 Holdback Agreements...................................................................41
4.8 Registration Expenses.................................................................42
4.9 Conditions to Holder's Rights.........................................................42
4.9.1 Cooperation..................................................................42
4.9.2 Undertakings.................................................................43
4.9.3 Indemnification..............................................................43
4.10 Indemnification.......................................................................43
4.10.1 Indemnification by the Company...............................................43
4.10.2 Indemnification by Holders of Registrable Shares.............................44
4.10.3 Conduct of Indemnification Proceedings.......................................45
4.10.4 Contribution.................................................................46
4.10.5 Underwriting Agreement to Govern.............................................46
4.11 Rule 144..............................................................................47
ARTICLE V. REPRESENTATIONS AND WARRANTIES.......................................................................47
5.1 Representations and Warranties of the Company.........................................47
5.1.1 Organization.................................................................47
5.1.2 Authority....................................................................47
5.1.3 Binding Obligation...........................................................47
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5.1.4 No Conflict..................................................................47
5.2 Representations and Warranties of the Stockholders....................................48
5.2.1 Organization.................................................................48
5.2.2 Authority....................................................................48
5.2.3 Binding Obligation...........................................................48
5.2.4 No Conflict..................................................................48
ARTICLE VI. TERMINATION OF AGREEMENT............................................................................48
6.1 Termination...........................................................................48
ARTICLE VII. GENERAL............................................................................................48
7.1 Financial Reports and Information.....................................................48
7.2 Recapitalization, Exchanges, Etc., Affecting the Shares...............................49
7.3 Injunctive Relief.....................................................................49
7.4 Notices...............................................................................49
7.5 Legend................................................................................50
7.6 Transferees Bound.....................................................................51
7.7 Amendment; Waiver; Representatives....................................................51
7.8 Additional Documents; Further Changes.................................................52
7.9 No Third-Party Benefits...............................................................52
7.10 Successors And Assigns................................................................52
7.11 Severability..........................................................................52
7.12 Integration...........................................................................52
7.13 Governing Law.........................................................................53
7.14 Attorneys' Fees.......................................................................53
7.15 Headings..............................................................................53
7.16 Information For Notices...............................................................53
7.17 Counterparts..........................................................................53
7.18 Consent to Jurisdiction...............................................................53
7.19 No Inconsistent Agreements............................................................54
7.20 Approval of Management Services Agreement by Stockholders.............................54
7.21 Certain Limitations...................................................................54
7.22 Information Regarding Beneficial Ownership............................................54
7.23 No Tax Advice.........................................................................54
7.24 After Acquired Shares.................................................................55
7.25 Notices...............................................................................55
SCHEDULES AND EXHIBITS
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STOCKHOLDERS AGREEMENT
THIS
STOCKHOLDERS AGREEMENT (the "AGREEMENT") is entered into as of
October 2, 2000, by and among PETCO Animal Supplies, Inc., a
Delaware
corporation (the "COMPANY"), BD Recapitalization Holdings LLC, a
Delaware
limited liability company (the "PURCHASER"), the individuals named in Schedule I
hereto (the "INITIAL MANAGEMENT STOCKHOLDERS") and shall be binding upon and
inure to the benefit of any individual or Person (as defined in Section 2.1)
owning Shares (as defined herein) which were received in connection with the
exercise of any option granted under a compensatory benefit plan (collectively
the "EMPLOYEE STOCKHOLDERS") of the Company's, its parents, its subsidiaries or
majority-owned subsidiaries of the Company's parents (the Initial Management
Stockholders and the Employee Stockholders, collectively, the "MANAGEMENT
STOCKHOLDERS" and each individually, a "MANAGEMENT STOCKHOLDER"), and the
persons named in Schedule II hereto (collectively the "FINANCING STOCKHOLDERS"
and each individually a "FINANCING STOCKHOLDER"). Each of the parties to this
Agreement (other than the Company) and any other Person (as defined in Section
2.1) who shall become a party to or agree to be bound by the terms of this
Agreement after the date hereof is sometimes hereinafter referred to as a
"STOCKHOLDER".
RECITALS
Prior to the execution of this Agreement, the Company and BD
Recapitalization Corp., a subsidiary of the Purchaser ("MERGERSUB"), entered
into an Agreement and Plan of Merger, dated as of May 17, 2000, as amended (the
"MERGER AGREEMENT"), providing for the merger (the "Merger") of MergerSub with
and into the Company, with the Company as the surviving corporation.
Following the consummation of the transactions contemplated by the Merger
Agreement, the Purchaser, the Management Stockholders, and the Financing
Stockholders will own, in the aggregate, that number of shares of Common Stock,
par value $0.001 per share, of the Company (the "COMMON STOCK") set forth
opposite their names on Schedule III, the Financing Stockholders will own, in
the aggregate, that number of warrants (the "WARRANTS") to purchase that number
of shares of Common Stock set forth opposite their names on Schedule III,
Purchaser and the Financing Stockholders will own that number of shares of
Series A 14% Senior Redeemable Exchangeable Cumulative Preferred Stock of the
Company (the "SERIES A PREFERRED STOCK") set forth opposite their names in
Schedule III and that number of shares of Series B 12% Junior Redeemable
Cumulative Preferred Stock of the Company (the "SERIES B PREFERRED STOCK" and,
together with the Series A Preferred Stock, the "PREFERRED STOCK"). Shares of
Common Stock, are collectively referred to as the "COMMON SHARES," shares of
Series A Preferred Stock are collectively referred to as the "SERIES A PREFERRED
SHARES," shares of Series B Preferred Stock are collectively referred to as the
"SERIES B PREFERRED SHARES," Series A Preferred Shares and Series B Preferred
Shares are collectively referred to as the "PREFERRED SHARES" and the Common
Shares, and the Preferred Shares are collectively (whether issued or acquired
hereafter, including all shares of capital stock of the Company issuable upon
the
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exercise of warrants, options or other rights to acquire shares of capital
stock of the Company, or upon the conversion or exchange of any security)
referred to as the "SHARES".
The Company and each of the Stockholders desire, for their mutual benefit
and protection, to enter into this Agreement to set forth their respective
rights and obligations with respect to their Shares (whether issued or acquired
hereafter, including all shares of Common Stock issuable upon the exercise of
warrants, options or other rights to acquire shares of Common Stock or Preferred
Stock, or upon the conversion or exchange of any security).
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I. BOARD OF DIRECTORS
1.1 BOARD COMPOSITION. Commencing as of the effective time of the
Merger, and continuing throughout the term of this Agreement, (a) the Board of
Directors (the "BOARD") of the Company shall, subject to the second sentence
hereof, consist of at least 7 persons and no more than 10 persons; and (b),
except as otherwise provided herein, all actions to be taken by the Board will
require the affirmative vote of a majority of the members of the Board. The
exact number of members of the Board shall be determined by the Board in
accordance with the Company's By-Laws, provided that the number shall not be
less than 7 nor more than 10 without the affirmative vote of at least one of
the Management Stockholder Nominees (as defined below).
1.2 NOMINATION RIGHTS. Management Stockholders holding a majority of
the voting power of all Shares held by the Management Stockholders (the
"MAJORITY MANAGEMENT STOCKHOLDERS") will be entitled to nominate 2 persons to
serve as directors of the Company (the "MANAGEMENT STOCKHOLDER NOMINEES").
Financing Stockholders holding a majority of the voting power of all Shares
held by the Financing Stockholders (the "MAJORITY FINANCING STOCKHOLDERS")
will be entitled to nominate one person to serve as a director of the Company
(the "FINANCING STOCKHOLDER NOMINEE"). Purchaser will be entitled to nominate
at least 4 and no more than 7 persons to serve as directors of the Company
(the "PURCHASER NOMINEES" and, together with the Management Stockholder
Nominees and the Financing Stockholder Nominees, the "NOMINEES"). The initial
Purchaser Nominees are: ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, and
▇▇▇▇▇▇▇ ▇▇▇▇▇. The initial Management Stockholder Nominees are ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇▇ ▇. ▇▇▇▇▇. The initial Financing Stockholder Nominee is ▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇.
1.3 ELECTION OF NOMINEES. Each party hereto will use its respective
best efforts to cause the Nominees to be elected in any and all elections of
directors of the Company held during the term of this Agreement. Without
limiting the generality of the foregoing, each Stockholder will vote, consent
or cause to be voted for the election of the Nominees, in all elections of
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directors of the Company or written consents in lieu thereof held during the
term of this Agreement, all securities entitled to vote or consent in such
election that such Person has the power to vote or consent (or in respect of
which such Person has the power to direct the vote or consent).
1.4 VACANCIES. (a) Each Nominee will hold his or her office as a
director of the Company for such term as is provided in the Company's
organizational documents and applicable law or until his or her death,
resignation, incapacity or removal from the Board or until his or her
successor has been duly elected and qualified in accordance with the
provisions of this Agreement. If any Nominee ceases to serve as a director of
the Company for any reason during his or her term (a "TERMINATING NOMINEE"), a
nominee for the vacancy resulting therefrom will be designated by Purchaser,
the Majority Management Stockholders or the Majority Financing Stockholders,
whichever nominated the Terminating Nominee.
(b) If any of Purchaser, the Majority Management Stockholders or the
Majority Financing Stockholders (each, a "Failing Stockholder") fail at any time
to nominate the maximum number of persons for election to the Board that the
Purchaser, the Majority Management Stockholders or the Majority Financing
Stockholders, as the case may be, is or are entitled to nominate pursuant to
this Agreement, then each directorship in respect of which Purchaser, the
Majority Management Stockholders or the Majority Financing Stockholders so
failed to make a nomination will remain vacant unless such vacancy results in
there being fewer than the minimum number of directors required by the Company's
certificate of incorporation or bylaws or
Delaware law, in which case the
nominee to fill such vacancy or vacancies will be nominated by Purchaser (in the
case of a failure by the Majority Management Stockholders or a failure by the
Majority Financing Stockholders) or the Majority Management Stockholders (in the
case of a failure by the Purchaser), in each such case only unless and until the
applicable Failing Stockholder shall exercise its rights pursuant to (i) Section
1.5 to remove such director, and (ii) this Section 1.4 to fill such vacancy.
1.5 REMOVAL OF NOMINEES. If at any time Purchaser or the Majority
Management Stockholders or the Majority Financing Stockholders shall notify
the Company in writing of its or their desire to have removed from the Board,
with or without cause, any Nominee made by such party, each party hereto shall
use its best efforts to take or cause to be taken all such action as may be
required to remove such Nominee from the Board. Notwithstanding this Section
1.5, if a Board vacancy is filled pursuant to Section 1.4(b) due to the
failure of a Failing Stockholder to nominate the maximum number of persons for
election to the Board, such Failing Stockholder shall have the right to
request the removal such Board member and, in the event of such request, each
party hereto shall use its bests efforts to take or cause to be taken all such
action as may be required to remove such person from the Board.
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1.6 COMMITTEES. The Board may designate one or more committees in
accordance with the bylaws of the Company; PROVIDED THAT the Stockholders
shall cause a majority of the members of any such committee to be Purchaser
Nominees and at least one member of any such committee to be a Management
Stockholder Nominee and at least one member of any such committee to be a
Financing Stockholder Nominee.
1.7 SPECIAL CONSENT. Prior to the occurrence of the later of (i) a
Public Offering Event (as defined below) and (ii) a 50% Sale (as defined
below), the Company or each of the Company's subsidiaries shall not, and the
Stockholders shall cause the Company and each of the Company's subsidiaries
not to, take (or agree to take) any action regarding the following matters
without the affirmative vote of a majority of the Purchaser Nominees:
(a) any merger or consolidation of the Company or its
successors or any subsidiary of the Company or its successors;
(b) any transfer of all or substantially all of the
assets of the Company and its subsidiaries, taken as a whole;
(c) any entry into a line of business other than the business
of selling, retailing, producing, distributing, or marketing pet food, pet
supplies or other pet-related products or services (whether by merger,
stock or asset purchase or otherwise) by the Company or a subsidiary of
the Company;
(d) any acquisition or disposition of assets other than in the
ordinary course of business (including the acquisition of any pet supply
retailer or all or substantially all of its assets), pursuant to a single
transaction or series of related transactions, if the purchase price
therefor (including any debt assumed in connection therewith) or fair
market value thereof exceeds $5 million;
(e) any adoption or amendment of an employee, director or
similar plan under which capital stock, or rights, options or warrants to
acquire capital stock, of the Company or a subsidiary may be issued;
(f) hire or terminate or make any change to the compensation
of any senior management officer (including without limitation the
Chairman of the Board, the President, the Chief Executive Officer, any
Executive Vice President and any Senior Vice President) or director of the
Company or any of its subsidiaries, any adoption of or amendment to any
bonus, profit sharing or other employee benefit plan, or enter into or
amend any employment agreement, severance agreement or similar agreement
or plan;
(g) any issuance or sale of (x) capital stock of the Company
or any of its subsidiaries, (y) rights, options or warrants to acquire
capital stock of the Company or any of its subsidiaries, or (z) any
securities convertible or exchangeable into capital stock
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of the Company or any of its subsidiaries, (other than (a) the issuance
of capital stock of the Company, (b) rights, options or warrants to
acquire capital stock of the Company, under employee stock option or
stock purchase plans approved in accordance with the terms of this
Agreement, (c) the grant of equity interests to the Company's
management in the form of options or rights to purchase stock in an
aggregate amount not to exceed 3% of the equity capitalization (on a
fully diluted basis) of the Company, (d) any issuance or sale by a
subsidiary to the Company or a wholly owned subsidiary of the Company,
and (e) the issuance of any shares of Common Stock upon the exercise or
conversion of any option, warrant or other convertible security
outstanding on the date hereof or issued hereafter in accordance with
the terms of this Agreement);
(h) (i) any incurrence or assumption of indebtedness (except
(a) for the Financing (as defined in the Merger Agreement), including the
initial drawdown of up to $20,000,000 of the Revolving Loans (as defined
in the Credit Agreement, dated October 2, 2000, among the Company, the
lenders listed on the signature pages thereto, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit
Partners, L.P., and ▇▇▇▇▇ Fargo Bank, N.A.), or (b) in the ordinary course
of business, consistent with past practices and in any case which would
not in the aggregate increase the amount of debt of the Company and its
subsidiaries by $1,000,000) or (ii) any assumption, guarantee, endorsement
or other action by which the Company or any of its subsidiaries would
become liable or responsible (whether directly, contingently or otherwise)
for any indebtedness of any other person, except in the ordinary course of
business consistent with past practices and which, in the aggregate
(including amounts incurred in (h)(i) above, without duplication), do not
exceed $1,000,000;
(i) any declaration or payment of any dividend on,
distributions with respect to, or repurchase or redemption of (x)
capital stock of the Company or any of its subsidiaries, (y) rights,
options or warrants to acquire capital stock of the Company or any of
its subsidiaries, or (z) any securities convertible or exchangeable
into capital stock of the Company or any of its subsidiaries;
(j) any amendment of the certificate of incorporation or
bylaws or other organizational documents of the Company or any of its
subsidiaries, other than the restated certificate of incorporation filed
on the date hereof;
(k) any dissolution of, liquidation of or bankruptcy filing
by the Company or any subsidiary;
(l) any replacement of independent accountants;
(m) any transaction with any Stockholder, any person,
controlling, controlled by, or under common control with any of the
Stockholders or the Company (other than the transactions contemplated by
the Merger Agreement, including the Financing, as defined therein, and the
transactions contemplated by this Agreement); or
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(n) any increase or reduction in the number of authorized
members of the Board or any committee of the Board or the creation of or
appointment of members to a committee of the Board, or any direct or
indirect payment to, or on behalf of, any member of such Board, as
compensation for serving thereon or as a member of any committee thereof
(other than reimbursement of expenses in accordance with Section 1.9
hereof).
1.8 ACTIONS BY THE STOCKHOLDERS. Prior to the occurrence of a Public
Offering Event (as defined below), the Company shall not, and the Company
shall cause each of the Company's subsidiaries not to, take (or agree to take)
any action regarding the following matters without the affirmative vote of
holders of a majority of the outstanding shares of Common Stock:
(a) any merger or consolidation of the Company or its
successors or any subsidiary of the Company or its successors, other than
any merger between the Company and any direct or indirect wholly owned
subsidiary, or between direct or indirect wholly owned subsidiaries;
(b) any transfer of all or substantially all of the assets of
the Company and its subsidiaries, taken as a whole (but excluding any
pledge, hypothecation or encumbrance of such assets to provide security
for any BONA FIDE debt approved in accordance with the terms of this
Agreement);
(c) any entry into a line of business other than the business
of selling, retailing, producing, distributing, or marketing pet food, pet
supplies or other pet-related products or services (whether by merger,
stock or asset purchase or otherwise) by the Company or a subsidiary of
the Company;
(d) any acquisition or disposition of assets other than in the
ordinary course of business (including the acquisition of any pet supply
retailer or all or substantially all of its assets), pursuant to a single
transaction or series of related transactions, if the purchase price
therefor (including any debt assumed in connection therewith) exceeds $5
million;
(e) any issuance or sale of capital stock or rights, options
or warrants to acquire capital stock of the Company or any subsidiary of
the Company (other than the issuance of capital stock of the Company or
rights, options or warrants to acquire capital stock of the Company under
employee stock option or stock purchase plans approved in accordance with
the terms of this Agreement, any issuance or sale by a subsidiary to the
Company or a wholly owned subsidiary of the Company, and the issuance of
any shares of Common Stock upon the exercise or conversion of any option,
warrant or other convertible security outstanding on the date hereof or
issued hereafter in accordance with the terms of this Agreement);
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(f) any declaration or payment of any dividend on,
distributions with respect to, or repurchase or redemption of capital
stock of the Company other than (1) PRO RATA dividends on the Common Stock
paid from current earnings, (2) dividends on the Preferred Stock, (3)
payments of dividends on or repurchases of shares of wholly owned
subsidiaries' capital stock or (4) repurchases of Common Stock held by
BONA FIDE, full-time employees of the Company or its subsidiaries in
connection with the death, disability or termination of such employees in
accordance with the terms of this Agreement or of any employment
agreement, employee stock option or stock purchase plan approved in
accordance with the term of this Agreement;
(g) any amendment of the certificate of incorporation or
bylaws or other organizational documents of the Company or any
subsidiary;
(h) any dissolution of, liquidation of or bankruptcy filing by
the Company or any subsidiary;
(i) any replacement of independent accountants; or
(j) any increase or reduction in the number of authorized
members of the Board.
1.9 COMPENSATION. The directors shall not receive any compensation for
their services, but shall be entitled to be reimbursed for reasonable
out-of-pocket expenses incurred in connection therewith.
1.10 EXECUTIVE EMPLOYMENT AGREEMENTS. On or promptly after the date
hereof, the Company will enter into employment agreements (the "Employment
Agreements") substantially similar to the form of agreement contained in EXHIBIT
A hereto with those individuals and with those changes identified in SCHEDULE
1.10. Promptly following the consummation of the Merger, the Company shall hold
a special meeting of stockholders to vote on, or seek approval by written
consent of, a proposal (the "Benefits Proposal") to approve the Employment
Agreements and the benefits payable thereunder, as contemplated by Section 5(l)
of the form of employment agreement attached hereto as EXHIBIT A. The Purchaser
and the Financing Stockholders hereby agree, with respect to all Common Shares
held by the Purchaser or the Financing Stockholders, as applicable, to vote for
the Benefits Proposal at such stockholders meeting or any adjournment thereof
or, if applicable, to consent to the Benefits Proposal by executing a written
consent thereto.
1.11 INCENTIVE PLANS. On or promptly after the date hereof, the Company
will adopt bonus plans and stock option plans, the awards grants, terms and
other conditions of which shall be designed to produce bonuses at least as
favorable to the participants as the bonus plans and stock option plans of the
Company in effect on the date hereof.
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1.12 ACTIONS BY MANAGEMENT STOCKHOLDERS. Any action to be taken by the
Management Stockholders pursuant to this Article I (other than actions taken by
the Management Stockholders at an annual or special meeting of holders of Common
Stock) shall be deemed to have been taken by the Management Stockholders at such
time as a written notice, signed by the Majority Management Stockholders shall
have been delivered in accordance with the notice procedures hereof.
1.13 ACTIONS BY FINANCING STOCKHOLDERS. Any action to be taken by the
Financing Stockholders pursuant to this Article I (other than actions taken by
the Financing Stockholders at an annual or special meeting of holders of Common
Stock) shall be deemed to have been taken by the Financing Stockholders at such
time as a written notice, signed by the Majority Financing Stockholders shall
have been delivered in accordance with the notice procedures hereof.
ARTICLE II. RESTRICTIONS ON TRANSFER
2.1 GENERAL RESTRICTIONS ON TRANSFER. Each Stockholder agrees that,
except as required in connection with obtaining the Financing (as defined in the
Merger Agreement), or any replacement thereof, and excluding any Transfer (as
defined below) by any Purchaser Party (as defined below) to any other Purchaser
Party or to its equity participants, such Stockholder will not, directly or
indirectly, sell, hypothecate, give, bequeath, transfer, assign, pledge or in
any other way whatsoever encumber or dispose of (whether for or without
consideration, whether voluntarily or involuntarily or by operation of law) (any
such event, a "TRANSFER") any Shares now or hereafter at any time owned by such
Stockholder (or any interest therein) to another individual, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, other entity or government or other agency or
political subdivision thereof (a "Person") ("TRANSFEREE"), other than in
accordance with all applicable provisions of this Agreement. The Company shall
not transfer upon its books any Shares to any Person to the extent prohibited by
this Agreement and any purported transfer in violation hereof shall be null and
void ab initio and of no effect. Each Management Stockholder represents and
warrants to the Purchaser, the Financing Stockholders, and the Company that the
Shares owned by such Management Stockholder were acquired by such Management
Stockholder for investment only and not with a view to any public distribution
thereof, and there is not any current plan or intention on the part of such
Management Stockholder to offer to sell, exchange or otherwise dispose of the
Shares owned by such Management Stockholder in violation of any of the
requirements of the Securities Act of 1933, as amended, or any similar federal
statute, and the rules and regulations of the Commission (as defined in Section
4.1) thereunder, all as the same shall be in effect from time to time (the
"SECURITIES ACT"), or any comparable state or foreign securities laws.
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2.2 COMPLIANCE WITH SECURITIES LAWS. No Stockholder or holder of
Warrants shall Transfer any Shares or Warrants, and the Company shall not
transfer on its books any Shares, unless (a) the Transfer is pursuant to an
effective registration statement under the Securities Act and is in compliance
with any applicable state securities or Blue Sky laws or (b) such Stockholder
or holder of Warrants shall have furnished the Company with an opinion of
counsel, to the extent reasonably required by the Company, which opinion and
counsel shall be reasonably satisfactory to the Company, to the effect that no
such registration is required because of the availability of an exemption from
registration under the Securities Act; PROVIDED, HOWEVER, that any Transfer by
a Stockholder or a holder of Warrants which is a state-sponsored employee
benefit plan to a successor trust or fiduciary or pursuant to a statutory
reconstitution or which is permitted hereunder pursuant to the provisions of
Section 2.8.4(a) shall be expressly permitted and no opinions of counsel shall
be required in connection therewith and PROVIDED, FURTHER, that any Transfer
by any Purchaser Party to any other Purchaser Party or to its equity
participants shall be expressly permitted and no opinions of counsel shall be
required in connection therewith. As used in this Agreement, the term
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such
Person. For purposes of this Agreement, the term "CONTROL," (including, with
correlative meanings, the terms "CONTROLLING," "CONTROLLED BY," and "UNDER
COMMON CONTROL WITH"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
2.3 AGREEMENT TO BE BOUND. No Transfer, including, without limitation,
by means of an Involuntary Transfer, of Shares by a Stockholder or of Warrants
by a Financing Stockholder shall be effective (and the Company shall not
transfer on its books any Shares) unless (i) the certificates representing
such Shares or Warrants, as the case may be, issued to the Transferee shall
bear the legend provided in Section 7.5, if required by such Section 7.5, and
(ii) the Transferee shall have executed and delivered to the Company, as a
condition precedent to such Transfer, an instrument or instruments in form and
substance satisfactory to the Company confirming that the Transferee agrees to
be bound by the terms of this Agreement and accepts the rights and obligations
set forth hereunder as if it were the transferor of the relevant Shares or
Warrants.
2.4 TAG-ALONG FOR THE MANAGEMENT PARTIES AND THE FINANCING PARTIES
2.4.1 RIGHT TO PARTICIPATE IN SALE.
(a) Purchaser and its members and affiliates and their
limited partners, general partners, principals, stockholders and
affiliates, and any of their Transferees, are sometimes referred to in
this Agreement, collectively, as the "PURCHASER PARTIES" and,
individually, as a "PURCHASER PARTY." The Management Stockholders and
their respective spouses, any direct or adopted lineal descendants and
ancestors and any trusts solely for the benefit of any or all of the
foregoing, and any of their Transferees, are sometimes
9
referred to in this Agreement, collectively, as the "MANAGEMENT
PARTIES" and, individually, as a "MANAGEMENT PARTY." The Financing
Stockholders, and any accounts managed by Trust Company of the West
("TCW"), and any of their Transferees, are sometimes referred to in
this Agreement, collectively, as the "FINANCING PARTIES" and,
individually, as a "FINANCING PARTY." If all previous transfers for
value of Common Shares made by any Purchaser Party participating in a
transfer, together with any transfers for value of Common Shares
proposed to be made by any Purchaser Party participating in a transfer,
in each case other than the exempt transfers described in Section 2.4
would result in the transfer, in the aggregate for all such
transactions by such Purchaser Parties since the last Tag-Along Sale
(as hereinafter defined), if any, of at least five percent (5%) of the
outstanding Common Shares, (such sale or other disposition for value
being referred to as a "TAG-ALONG SALE"), then such Purchaser Parties
shall afford the Management Parties and the Financing Parties (each,
individually, a "TAG-ALONG STOCKHOLDER" and, collectively, the
"TAG-ALONG STOCKHOLDERS") the opportunity to participate proportionately
in such Tag-Along Sale in accordance with this Section 2.4. The number
of Common Shares that each Tag-Along Stockholder will be entitled to
include in such Tag-Along Sale (the "TAG-ALONG ALLOTMENT") shall be
determined by multiplying (i) the number of Common Shares held by such
Tag-Along Stockholder as of the close of business on the day
immediately prior to the Tag-Along Notice Date (as hereinafter defined)
by (ii) a fraction, the numerator of which shall equal the number of
Common Shares proposed by the Purchaser Parties to be sold or otherwise
disposed of pursuant to the Tag-Along Sale and the denominator of which
shall equal the total number of Common Shares that are beneficially
owned by the Purchaser Parties as of the close of business on the day
immediately prior to the Tag-Along Notice Date (the "COMMON SHARES
PURCHASER FRACTION").
(b) Notwithstanding any other provision hereof, if any of the
Management Parties or the Financing Parties fails to elect to participate
in a Tag-Along Sale within five (5) days of written notification of such
Tag-Along Sale, Purchaser shall give notice of such failure to the other
Tag-Along Stockholders. Such notice shall be made by telephone and
confirmed in writing within two (2) days. The other Tag-Along Stockholders
shall have three (3) days from the date such written notice was given to
agree to sell their pro rata share of any unsold portion. For purposes of
this Section 2.4.1, a participating Tag-Along Stockholder's pro rata share
of any unsold portion of Common Shares shall be equal to the number of
shares obtained by MULTIPLYING (A) the Common Shares Purchaser Fraction
TIMES the total number of Common Shares that are held by the Management
Parties and the Financing Parties that are not participating in the
Tag-Along Sale, if any, BY (B) the number of Common Shares held by such
participating Tag-Along Stockholder DIVIDED by the total number of Common
Shares held by all Tag-Along Stockholders that are participating in the
Tag-Along Sale with respect to Common Shares.
10
2.4.2 SALE NOTICE. The relevant Purchaser Parties shall provide
each Tag-Along Stockholder and the Company with written notice (the "TAG-ALONG
SALE NOTICE") not more than sixty (60) days nor less than fifteen (15) days
prior to the proposed date of the Tag-Along Sale (the "TAG-ALONG SALE DATE").
Each Tag-Along Sale Notice shall be accompanied by a copy of any written
agreement relating to the Tag-Along Sale and shall set forth: (i) the name and
address of each proposed Transferee of Shares in the Tag-Along Sale; (ii) the
number of Common Shares proposed to be Transferred by such Purchaser Parties;
(iii) the proposed amount and form of consideration (including any potential
adjustments to the consideration paid for such Shares contained in the written
agreement relating to the Tag-Along Sale) to be paid for such Shares and the
terms and conditions of payment offered by each proposed Transferee; (iv) the
aggregate number of Common Shares held of record by the Purchaser Parties
proposing to participate in a Tag-Along Sale as of the close of business on the
day immediately prior to the date of the Tag-Along Notice (the "TAG-ALONG NOTICE
DATE"); (v) the Tag-Along Stockholder's Tag-Along Allotment assuming the
Tag-Along Stockholder elected to sell the maximum number of Common Shares; (vi)
confirmation that the proposed Transferee has been informed of the "Tag-Along
Rights" provided for herein and has agreed to purchase Shares from any Tag-Along
Stockholder in accordance with the terms hereof; and (vii) the Tag-Along Sale
Date.
2.4.3 TAG-ALONG NOTICE. Any Tag-Along Stockholder wishing to
participate in the Tag-Along Sale shall provide written notice (the "TAG-ALONG
NOTICE") to the relevant Purchaser Parties no more than ten (10) days after
receipt of the Tag-Along Sale Notice. The Tag-Along Notice shall set forth the
number of Shares that such Tag-Along Stockholder elects to include in the
Tag-Along Sale, which shall not exceed such Tag-Along Stockholder's applicable
Tag-Along Allotment. The Tag-Along Notice given by any Tag-Along Stockholder
shall constitute such Tag-Along Stockholder's binding agreement to sell the
Shares specified in the Tag-Along Notice on the terms and conditions applicable
to the Tag-Along Sale; PROVIDED, HOWEVER, that in the event that there is any
material change in the terms and conditions of such Tag-Along Sale applicable to
the Tag-Along Stockholder (including, but not limited to, any decrease in the
purchase price that occurs other than pursuant to an adjustment mechanism set
forth in the agreement relating to the Tag-Along Sale) after such Tag-Along
Stockholder gives its Tag-Along Notice, then, notwithstanding anything herein to
the contrary, the Tag-Along Stockholder shall have the right to withdraw from
participation in the Tag-Along Sale with respect to all of its Shares affected
thereby. If the proposed Transferee does not consummate the purchase of all of
the Shares requested to be included in the Tag-Along Sale by any Tag-Along
Stockholder on the same terms and conditions applicable to the Purchaser
Parties, then such Purchaser Parties shall not consummate the Tag-Along Sale of
any of its Shares to such Transferee, unless the Shares of such Purchaser
Parties and the Tag-Along Stockholders to be sold are reduced or limited PRO
RATA in proportion to the respective number of Shares actually sold in any such
Tag-Along Sale and all other terms and conditions of the Tag-Along Sale are the
same for such Purchaser Parties and the Tag-Along Stockholders. Notwithstanding
the foregoing, if the number of Shares proposed to be sold in any proposed
Tag-Along Sale are reduced or limited such that the proposed sale is no longer a
Tag-Along Sale in accordance with the terms of this Agreement, then the terms of
this Agreement shall be inapplicable to such
11
proposed sale and no Management Party or other Stockholder shall have the
right hereunder to participate in such proposed transaction as a Tag-Along
Stockholder.
If a Tag-Along Notice from any Tag-Along Stockholder is not received
by such Purchaser Parties within the ten (10) day period specified above, such
Purchaser Parties shall have the right to consummate the Tag-Along Sale without
the participation of such Tag-Along Stockholder, but only on terms and
conditions which are no more favorable in any material respect to such Purchaser
Parties (and, in any event, at no greater a purchase price) than as stated in
the Tag-Along Sale Notice and only if such Tag-Along Sale occurs on a date
within ninety (90) days of the Tag-Along Sale Date. If such Tag-Along Sale does
not occur within such ninety (90) day period, the Shares that were to be subject
to such Tag-Along Sale thereafter shall continue to be subject to all of the
restrictions contained in this Section 2.4.
2.4.4 DELIVERY OF CERTIFICATES. On the Tag-Along Sale Date, each
Tag-Along Stockholder shall deliver a certificate or certificates for the Shares
to be sold by such Tag-Along Stockholder in connection with the Tag-Along Sale,
duly endorsed for transfer with signatures guaranteed, to the Transferee in the
manner and at the address indicated in the Tag-Along Notice against delivery of
the purchase price for such Shares.
2.4.5 EXEMPT TRANSFERS. The provisions of this Section 2.4 shall
not apply:
(a) to any sale or other disposition of Shares by and
exclusively among Purchaser Parties;
(b) to any sale of Shares to the public pursuant to an
effective registration statement under the Securities Act or pursuant to
Rule 144 under the Securities Act, as such rule may be amended from time
to time, or any other similar regulation hereinafter adopted by the
Commission ("RULE 144");
(c) to, or from and after, a Public Offering Event (as
defined below);
(d) to any Transfer occurring by reason of the death of
any Stockholder; or
(e) to any Involuntary Transfer.
For the purposes of this Agreement, a "PUBLIC OFFERING EVENT" shall mean a firm
commitment underwritten public offering of shares of Common Stock of the Company
pursuant to a registration statement or registration statements under the
Securities Act with aggregate gross proceeds to the Company of at least seventy
five million dollars ($75,000,000), and in connection with such offering such
Common Stock is listed or admitted to trading on a national securities exchange
or on the Nasdaq Stock Market.
12
2.5 COOPERATION. (a) The Company will provide reasonable assistance to
any Management Party or any Purchaser Party or any Financing Party seeking to
sell its Shares in accordance with the terms of the Agreement, PROVIDED,
HOWEVER, that the Company shall not be required to provide any confidential
information to any prospective purchaser who has not executed a
confidentiality agreement in a form reasonably satisfactory to the Company.
Except as otherwise provided herein, any reasonable out-of-pocket costs to the
Company of providing such assistance shall be paid pro rata by each
Stockholder seeking to sell its Shares. The Company will also cooperate with
any Management Party or any Purchaser Party or any Financing Party in having
all stop transfer instructions or notations and restrictive legends lifted in
connection with the sale (other than to an affiliate of the Company) of Shares
pursuant to Rule 144; PROVIDED, HOWEVER, that in such a case the selling
Stockholder shall be required to provide the Company with the opinion provided
for in Section 2.2(b) hereof.
(b) Any Management Party seeking to sell its Shares shall
enter into an agreement (the "Tag Along Sale Agreement") in connection
with a Tag-Along Sale containing substantially similar representations,
warranties, indemnities and agreements as made by the Purchaser Party in
connection with such Tag-Along Sale, but in no case shall such
representations, warranties, indemnities and agreements made by the
Management Party or the Financing Party be more restrictive than those
made by the Purchaser Party in connection with such Tag-Along Sale.
(c) Any Financing Party seeking to sell its Shares in
connection with a Tag-Along Sale shall be required to make in the
Tag-Along Sale Agreement only a representation and warranty with respect
to its own ownership of the Shares to be sold by it and its ability to
convey title thereto free and clear of liens, encumbrances or adverse
claims; the liability of each Financing Party with respect to any
representation and warranty made in connection with a sale of Shares
pursuant to this Section 2.5 shall be several and not joint with any other
person; such liability shall be limited to the amount of consideration
actually received by each such Financing Party in the sale of Shares
pursuant to Section 2.4, and no Financing Party shall be required to
provide any indemnification or escrow (other than a pro rata share of any
escrow provided by all Stockholders and an indemnity limited to such pro
rata share) to anyone in connection with the sale of Shares pursuant to
Section 2.4, other than with respect to the representations and warranties
made by such Financing Party in connection with the sale of Stock pursuant
to Section 2.4.
2.6 IMPROPER TRANSFER. Any attempt to Transfer or otherwise encumber
any Shares in violation of this Agreement shall be null and void and neither
the Company nor any transfer agent of such Shares shall give any effect to
such attempted Transfer or encumbrance in its stock records.
13
2.7 INVOLUNTARY TRANSFER. In the case of any Transfer of title or
beneficial ownership of Shares upon default, foreclosure, forfeit, court
order, or otherwise than by a voluntary decision on the part of a Stockholder
(an "INVOLUNTARY TRANSFER"), such Stockholder (or his legal representatives)
shall promptly (but in no event later than two (2) Business Days (as defined
in the Merger Agreement) after such Involuntary Transfer) furnish written
notice to the Company indicating that the Involuntary Transfer has occurred,
specifying the name of the Person to whom such Shares have been transferred,
giving a detailed description of the circumstances giving rise to, and stating
the legal basis for, the Involuntary Transfer.
2.8 FIRST OPTION/FIRST OFFER.
2.8.1 FIRST OPTION. Except for (i) Tag-Along Sales made in
accordance with Section 2.4 or (ii) Drag-Along 100% Sales or Drag-Along 50%
Sales made in accordance with Article III or (iii) sales upon exercise of a
Call Option pursuant to Section 2.9, no Management Party shall Transfer any
Shares except as specifically permitted by this Section 2.8. If at any time
any Management Party desires to Transfer all or any part of the Shares held by
such Person (a "MANAGEMENT SELLING PARTY") (other than in accordance with
Section 2.8.4) such Management Selling Party shall obtain an irrevocable and
unconditional bona fide arm's length written offer (the "BONA FIDE OFFER") for
the purchase of such Shares for cash, cash equivalents, or a debt instrument
with commercially reasonable terms from a third party unaffiliated with such
Management Selling Party (an "OUTSIDE PARTY"), following which the Management
Selling Party shall provide written notice (the "SALE NOTICE") to each of (i)
Purchaser (together with its assigns, the "PURCHASER BUYER") and (ii) the
Company (each of Purchaser Buyer and the Company a "POTENTIAL BUYER") setting
forth such desire to Transfer such Shares, which Sale Notice shall be
accompanied by a photocopy or other facsimile of the Bona Fide Offer and shall
set forth the name and address of the Outside Party and the price and terms of
such Bona Fide Offer. Upon the giving of such Sale Notice, each Potential
Buyer shall, subject to the priorities set forth below, have the option (which
option (the "PURCHASE OPTION"), in the case of Purchaser only, shall be freely
assignable at Purchaser's sole discretion) to purchase all or any portion of
such Shares specified in the Sale Notice, on the same terms and conditions,
including but not limited to the offer price for the Shares as set forth in
the Bona Fide Offer. Each Potential Buyer shall have thirty (30) days from
receipt of the Sale Notice to provide written notice (the "ACCEPTANCE NOTICE")
to such Management Selling Party of its desire to exercise such Purchase
Option. If more than one Potential Buyer shall deliver an Acceptance Notice
within such thirty (30) day period, the priority as among the Potential Buyers
to match the Bona Fide Offer and purchase such Shares shall be, to the extent
such Potential Buyers have delivered Acceptance Notices, FIRST, the Purchaser
Buyer and, SECOND, the Company.
If a Potential Buyer or Potential Buyers, as applicable, elects to
purchase, all or any portion of the Shares covered by the Bona Fide Offer on the
terms and conditions set forth in the Sale Notice, the Potential Buyer(s)
entitled to purchase such Shares (the "CHOSEN BUYER(S)") shall be determined in
accordance with the priorities set forth, if applicable, above and such Chosen
Buyer(s) shall be obligated to purchase, and such Management Selling Party shall
be
14
obligated to sell, such Shares at the price and terms specified in the Sale
Notice. The closing of the purchase by the Chosen Buyer(s) shall be held on a
Business Day within ninety days (90) days after the giving of the relevant
Acceptance Notice, at the principal offices of the Chosen Buyer(s), or at such
other time and place as may be mutually agreed to by the Chosen Buyer(s) and
the Management Selling Party. "Business Day" shall mean any day that is not a
Saturday, Sunday or legal holiday in the State of New York.
If Acceptance Notice(s) are not delivered within the periods
specified above by one or more Potential Buyer(s), as applicable, with respect
to all of the Shares included in the Sale Notice, the Selling Party shall, upon
compliance with the provisions of Section 2.3, have the right to consummate the
sale of all (but not less than all) of the Shares covered by the Sale Notice and
not included in an Acceptance Notice to the Outside Party but only at the price
and upon terms and conditions no less favorable to the Selling Party than those
contained in the Sale Notice (PROVIDED that the purchase price must be payable
solely in cash, cash equivalents or, to the extent and in accordance with the
terms set forth in the Sale Notice, a debt instrument with commercially
reasonable terms) and only if such sale occurs on a date within ninety (90) days
of the date of the Sale Notice; PROVIDED, HOWEVER, that in the event the Selling
Party has not so Transferred all such Shares to the Outside Party within such
ninety-day period, then such Shares thereafter shall continue to be subject to
all of the restrictions contained in this Agreement.
2.8.2 FIRST OFFER. Except for (i) Tag-Along Sales made in
accordance with Section 2.4, (ii) Drag-Along 100% Sales made in accordance
with Article III, or (iii) the ninety (90) day period immediately following
the Effective Time (as defined in the Merger Agreement), no Financing Party
shall Transfer any Shares except as specifically permitted by this Section
2.8. If at any time any Financing Party desires to Transfer all or any part of
the Shares held by such Person (other than in accordance with Section 2.8.4)
(a "FINANCING SELLING PARTY"), then such Financing Selling Party shall deliver
written notice of its desire to sell such Shares (a "NOTICE OF INTENTION"),
accompanied by a copy of a proposal relating to such sale (the "SALE
PROPOSAL"), to each of the Purchaser and the Company, setting forth such
Financing Selling Party's desire to make such sale, the number and class of
Shares proposed to be transferred (the "OFFERED SECURITIES"), the cash price
at which such Financing Selling Party proposes to sell the Offered Securities
(the "FIRST OFFER PRICE") and other terms applicable thereto.
Upon receipt of the Notice of Intention, the Purchaser and the Company
shall then have the right to purchase at the First Offer Price and on the other
terms specified in the Sale Proposal, all, but not less than all (unless the
Financing Selling Party shall have consented to the purchase of less than all of
such Offered Securities). The rights of the Purchaser and the Company pursuant
to this Section 2.8.2 shall be exercisable by the delivery of notice to the
Financing Selling Party (the "NOTICE OF EXERCISE"), within thirty (30) calendar
days from the date of delivery of the Notice of Intention. If the Financing
Selling Party receives more than one Notice of Exercise within such thirty (30)
day period, the priority as among the Purchaser and the Company to match the
First Offer Price and purchase such Shares shall be, FIRST, the Purchaser and,
SECOND, the Company. The Notice of Exercise shall state that the Purchaser or
the
15
Company, as the case may be, is willing to purchase the Offered Securities on
the terms specified in the Sale Proposal. A copy of such Notice of Exercise
shall also be delivered by the Purchaser or the Company, as the case may be,
to each of the Purchaser or the Company, as the case may be. The rights of the
Purchaser and the Company pursuant to this Section 2.8.2 shall terminate if
unexercised thirty (30) calendar days after the date of delivery of the Notice
of Intention.
In the event that the Purchaser or the Company exercise their rights to
purchase all (unless the Financing Selling Party shall have consented to the
purchase of less than all) of the Offered Securities in accordance with this
Section 2.8.2, then the Selling Financing Party must sell the Offered Securities
to the Purchaser and/or the Company, as the case may be, within thirty (30)
calendar days from the date of delivery of the Notice of Exercise received by
the Selling Financing Party, on such date as shall be determined by the
Financing Selling Party by written notice thereof.
If all notices required pursuant to this Section 2.8.2 have been duly
given and the Purchaser and the Company do not exercise their respective options
to purchase the Offered Securities at the First Offer Price, then the Financing
Selling Party shall have the right, subject to compliance by the Financing
Selling Party with the provisions of Section 2.3 hereof, for a period of ninety
(90) calendar days from the earlier of (i) the expiration of the option period
pursuant to this Section 2.8.2 with respect to such Sale Proposal or (ii) the
date on which such Financing Selling Party receives notice from the Purchaser or
the Company that they will not exercise all of the option granted pursuant to
this Section 2.8.2, to sell to any third party all, but not less than all, of
the Offered Securities remaining unsold at a price of not less than the First
Offer Price and on terms not less favorable to the Financing Selling Party than,
the other terms specified in the Sale Proposal.
Notwithstanding the foregoing, in the event that the Financing Selling
Party desires to Transfer Senior Subordinated Notes of the Company due 2010
("Notes") or Warrants together with the Offered Securities, such Notes and/or
Warrants shall constitute "Offered Securities" for purposes of this Section
2.8.2. In such event, neither the Purchaser nor the Company may exercise their
respective option to purchase any of the Shares or Warrants constituting Offered
Securities unless all of the Notes and Warrants included in the Offered
Securities are purchased as well.
2.8.3 NO WAIVER. Any election in any instance by any Potential
Buyer not to exercise its option rights under this Section 2.8 shall not
constitute a waiver of such rights with respect to any other proposed Transfer
of Shares.
2.8.4 EXEMPT TRANSFERS. The provisions of this Section 2.8 shall
not apply and the Transfer shall be permitted:
(a) to any Transfer of Shares by any of the persons listed on
SCHEDULE I hereto (each, a "MANAGEMENT PERSON") to the spouse of any of
them, any direct or
16
adopted lineal descendant or ancestor of either of them or any trust
solely for the benefit of any or all of the foregoing, PROVIDED that each
of the following conditions shall be satisfied:
(i) after giving effect to such Transfer, sole voting
power with respect to such Transferred Shares shall be
held by the transferor Management Person (unless such
Transfer occurs by reason of the death of such
Management Person); and
(ii) the Transferee of such Transferred Shares shall
have executed and delivered to the Company, as a
condition precedent to such Transfer, an instrument or
instruments in form and substance satisfactory to the
Company confirming that the Transferee agrees to be
bound by the terms of this Agreement and accepts the
rights and obligations set forth in this Agreement as if
it were the transferor Management Person;
(b) to any distribution of Shares by (i) the Purchaser or any
other Purchaser Party or (ii) a Financing Party to its respective equity
participants in accordance with the terms of any applicable limited
partnership agreement, operating agreement or other governing agreement or
instrument;
(c) to any Transfer of Shares by any Financing Party to any
other Financing Party, any Person who controls, is controlled by or is
under common control with TCW; provided, that for the purposes of this
Section 2.8.4 "control" means the beneficial ownership of more than 50% of
the total voting power of a Person normally entitled to vote in the
election of directors, managers or trustees, as applicable of a Person,
PROVIDED that if the Transferee of such Transferred Shares is not already
a party to this Agreement, it shall have executed and delivered to the
Company, as a condition precedent to such Transfer, an instrument or
instruments in form and substance satisfactory to the Company confirming
that the Transferee agrees to be bound by the terms of this Agreement and
accepts the rights and obligations set forth in this Agreement as if it
were the transferor Financing Party; or
(d) to any sale of Shares by a Management Party or Financing
Party to the public pursuant to an effective registration statement under
the Securities Act.
2.9 CALL OPTION. The Management Stockholders each agree for themselves
and all Management Parties who subsequently acquire or hold Shares that the
Company and the Purchaser Buyer will have a call option (the "CALL OPTION") on
all Shares held by any Management Stockholder or Management Party, including
all Shares issuable upon exercise of any options to acquire Shares from the
Company, (the "CALLABLE SECURITIES") upon the termination of such Management
Stockholder's employment with the Company for any reason
17
(each, a "CALL EVENT"); provided, that the Company may provide that the
Company and the Purchaser Buyer may exercise the Call Option through the
purchase of the Management Stockholder's options to acquire Shares from the
Company and, if by the Purchaser Buyer, such option shall be exercisable by
the Purchaser Buyer in accordance with its terms for the exercise price
thereof. The Call Option will expire as to 20% of the Shares owned, or Shares
issuable upon exercise of any option to acquire Shares from the Company owned,
by each such Person upon each anniversary of the later of (a) the date hereof
or, (b) the date such Management Stockholder first acquires such Shares or was
granted such option (each, the "GRANT DATE"), and on each anniversary of such
Grant Date through the fifth anniversary of such Grant Date. Upon the
occurrence of a Call Event, the Company and the Purchaser Buyer may exercise
the Call Option by written notice (an "OPTION NOTICE") delivered to the
Management Stockholder (or, if different, the then current holder of the
Shares) within 90 days after such Call Event, of its election to purchase and,
upon the giving of such notice the Chosen Buyer will be obligated to purchase
and the Management Stockholder (or, if different, the then current holder of
the Shares) ("SELLER") will be obligated to sell all or any lesser portion
indicated in the Option Notice of the Callable Securities owned at the time of
the Call Event by the Seller. The consideration for the Callable Securities
referred to in the preceding sentence shall be the Management Stockholder's
Cost of such Callable Securities, plus 10 per cent for each full calendar year
from the applicable Grant Date, provided, however, that in respect of options
granted after the date hereof, if the Management Stockholder's cost is zero,
the consideration shall be an amount equal to ten (10) percent of the per
share exercise price of such option for each full calendar year from the
applicable Grant Date. For purposes of determining the Chosen Buyer (which
term shall have the same meaning as set forth in Section 2.8.1 in the context
of a Call Option), the priority as among the Company and the Purchaser Buyer
to purchase the Callable Securities shall be, FIRST, the Purchaser Buyer and,
SECOND, the Company.
In the event the Company or any Purchaser Buyer elects not to participate
in the purchase of Callable Securities pursuant to the Call Option, the same
procedures as to allocation as are set forth in Section 2.8 in respect of the
First Option will govern. The closing for all purchases and sales of Callable
Securities pursuant to this Section 2.9 will be at the principal executive
offices of the Company on the 60th day after the giving of the Option Notice.
The applicable purchase price for the Callable Securities will be paid in cash
or by cashier's check. The Seller will cause the Callable Securities to be
delivered to the Chosen Buyer at the closing free and clear of all liens,
charges or encumbrances of any kind except those which shall continue to apply
to such Shares by the terms of this Agreement. Such Seller will take all such
actions as the Chosen Buyer reasonably requests to vest in the Chosen Buyer
title to the Callable Securities free of any lien, charge or encumbrance
incurred by or through the Seller.
Notwithstanding any other section of this Agreement, in the event a
Management Stockholder's employment with the Company is terminated other than
through the Stockholder's Retirement from the Company, all of the Stockholder's
vested options to acquire Shares from the Company may be exercisable for three
months following such termination and the exercise price may be paid at the
Stockholder's election (i) by cash or cashiers check, or (ii) by surrender of
18
Shares or options to acquire Shares from the Company ("NET ISSUANCE") as
determined below. If the Stockholder elects the Net Issuance method, the Company
will issue Shares in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of Shares to be issued to the Stockholder
Y = the number of Shares requested to be exercised under this
Agreement
A = the Fair Market Value of one (1) Share
B = the Exercise Price
Notwithstanding, any other section of this Agreement, in the event a Management
Stockholder's employment with the Company is terminated through the
Stockholder's Retirement from the Company, all of the Stockholder's vested
options to acquire Shares from the Company may be exercised at any time and from
time to time until the expiration of such vested options to acquire Shares from
the Company.
For purposes of this Section 2.9, the following terms have the following
meanings:
"MANAGEMENT STOCKHOLDER'S COST" means (x) in respect of the Common
Shares, (1) $22, per share, with respect to Common Shares which are either (A)
retained by the holder thereof pursuant to Section 2.2(c) of the Merger
Agreement or (B) acquired pursuant to the exercise of Options (as defined in the
Merger Agreement) retained by the holder thereof pursuant to Section 2.6(c) of
the Merger Agreement, or (2) the consideration paid for such Common Shares, with
respect to Common Shares which are otherwise acquired, (y) in respect of options
to purchase Common Shares outstanding on the date hereof, the excess of $22.00
over the exercise price thereof, per share, and (z) in respect of options to
purchase Common Stock granted after the date hereof, the excess of the Fair
Market Value of the Shares subject to such option over the net of the exercise
price thereof.
"FAIR MARKET VALUE" means, as of any date, the value of a share of
the Common Stock determined as follows: (i) if the Common Stock is then quoted
on the Nasdaq National Market, its last reported sale price on the Nasdaq
National Market or, if no such reported sale takes place on such date, the
average of the closing bid and asked prices; (ii) if the Common Stock is
publicly traded and is then listed on a national securities exchange but is not
quoted on the Nasdaq National Market, the last reported sale price or, if no
such reported sale takes place on such date, the average of the closing bid and
asked prices on the principal national securities exchange on which the Common
Stock is listed or admitted to trading; (iii) if such Common Stock is publicly
traded but is not quoted on the Nasdaq National Market nor listed or admitted
19
to trading on a national securities exchange, the average of the closing bid
and asked prices on such date, as reported in the Western Edition of THE WALL
STREET JOURNAL, for the over-the-counter market; or (iv) if none of the
foregoing is applicable, by the Board in good faith.
"RETIREMENT" means retirement pursuant to the Company's standard
retirement policy in effect from time to time but in no event prior to the age
of 65, unless otherwise agreed upon by the Stockholder and the Board.
2.10 STOCK SUBSCRIPTION RIGHTS.
2.10.1 RIGHT TO PURCHASE NEW SECURITIES. The Company hereby grants
to each Stockholder the right to purchase a pro rata portion of all New
Securities (as defined in Section 2.10.2) which the Company may, from time to
time, propose to sell and issue at the cash price and on the terms on which
the Company proposes to sell such New Securities. A Management Stockholder's
pro rata share, for purposes of this Section 2.10, shall be equal to a
fraction (A) the numerator of which is the number of Common Shares (on fully
diluted basis assuming the exercise of all warrants, options or other rights
to acquire Common Shares and all Common Shares issuable upon the conversion or
exchange of any security) held by such Management Stockholder on the date of
the Company's written notice pursuant to Section 2.10.3 below; and (B) the
denominator of which is the number of Common Shares outstanding (on fully
diluted basis assuming the exercise of all warrants, options or other rights
to acquire Common Shares and all Common Shares issuable upon the conversion or
exchange of any security) on such date. A Financing Stockholder's pro rata
share, for purposes of this Section 2.10, shall be equal to a fraction (A) the
numerator of which is the number of Common Shares (on a fully diluted basis
assuming the exercise of all warrants, options or other rights to acquire
Common Shares and all Common Shares issuable upon the conversion or exchange
of any security) held by such Financing Stockholder on the date of the
Company's written notice pursuant to Section 2.10.3 below; and (B) the
denominator of which is the number of Common Shares (on fully diluted basis
assuming the exercise of all warrants, options or other rights to acquire
Common Shares and all Common Shares issuable upon the conversion or exchange
of any security) outstanding. Purchaser's pro rata share, for purposes of this
Section 2.10, shall be equal to a fraction (A) the numerator of which is the
number of Common Shares (on fully diluted basis assuming the exercise of all
warrants, options or other rights to acquire Common Shares and all Common
Shares issuable upon the conversion or exchange of any security) held by such
Purchaser Stockholder on the date of the Company's written notice pursuant to
Section 2.10.3 below; and (B) the denominator of which is the number of Common
Shares outstanding (on a fully diluted basis assuming exercise of all
outstanding options and warrants to acquire Common Shares on such a date). The
right to purchase New Securities shall be subject to the following additional
provisions of this Section 2.10.
2.10.2 NEW SECURITIES. "NEW SECURITIES" shall mean any Common
Stock of the Company whether now authorized or not, and rights, options or
warrants to purchase Common Stock, and securities of any type whatsoever that
are, or may by their terms become, convertible
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into or exchangeable for Common Stock which are sold by the Company for cash
or indebtedness; PROVIDED, HOWEVER, that the term New Securities shall not
include (i) securities issued in a Public Offering Event; (ii) Common Stock
(including options to purchase Common Stock), issued to employees, consultants
or directors of the Company pursuant to plans or agreements approved by the
Board or any committee thereof, (iii) securities issued pursuant to any stock
dividend, stock split, combination or other reclassification by the Company of
any of its capital stock; or (iv) securities issued pursuant to the exercise
of warrants, rights, options or other securities issued in connection with
financing transactions to which the Company and an unaffiliated third party
may be a party and which are approved by the Board and issuances of Common
Stock pursuant thereto, including, without limitation, Common Stock issuable
pursuant to the exercise of warrants, rights, options or other securities
issued in connection with obtaining the Financing (as defined in the Merger
Agreement).
2.10.3 REQUIRED NOTICES. In the event the Company proposes to
undertake an issuance of New Securities it shall give each Stockholder written
notice, pursuant to the provisions of Section 7.4 hereof, of its intention,
describing the type of New Securities, the cash price, the number of shares
and the general terms upon which the Company proposes to issue the same. Each
Stockholder shall have 30 days from the date of receipt of any such notice to
agree to purchase any or all of such Stockholder's pro rata share of such New
Securities for the price and upon the general terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
2.10.4 COMPANY'S RIGHT TO SELL. In the event the existing
Stockholders fail to exercise the right of first refusal as to the New
Securities offered within said thirty (30) day period, the Company shall have
60 days thereafter to sell or enter into an agreement (pursuant to which the
sale of New Securities covered thereby shall be closed, if at all, within 120
days from the date of said agreement) to sell all such New Securities
respecting which the right to purchase provided in Section 2.10.1 was not
exercised, at a price and upon the general terms not more favorable in any
material respect to the purchasers thereof than specified in the Company's
notice. In the event the Company has not sold within said 60 day period or
entered into any agreement to sell all such New Securities within said 60 day
period (or sold and issued all such New Securities in accordance with the
foregoing within 120 days from the date of said agreement), the Company shall
not thereafter issue or sell any New Securities, without first offering such
securities to the Stockholders in the manner provided above.
2.10.5 PURCHASER'S ACQUISITION OF ADDITIONAL SHARES. The Purchaser
agrees with the Management Stockholders that if the Purchaser or any of its
affiliates makes any future equity investments in the Company in connection
with any acquisition of another corporation or entity by the Company by merger
or otherwise (an "ACQUISITION INVESTMENT"), the Purchaser shall (i) with
respect to the first $50 million, in the aggregate, so invested acquire Common
Stock (which shares of Common Stock are New Securities as specified in Section
2.10.2 hereof, notwithstanding the proviso thereto) and preferred stock (with
terms substantially similar to the Preferred Stock purchased by the Purchaser
in connection with the Merger) in the same
21
proportion as was acquired by the Purchaser in connection with the Merger, and
(ii) with respect to any Acquisition Investments made by the Purchaser in
excess of the first $50 million, in the aggregate, of Acquisition Investments,
the Purchaser shall use reasonable efforts to ensure that any such Acquisition
Investment is made in a manner that provides the Management Stockholders the
opportunity to maintain their relative Common Stock ownership on similar terms
(but in any event on terms less favorable to the Management Stockholders than
those set forth in clause (i) hereof). For illustrative purposes, an example
of the Purchaser's agreement in connection with Acquisition Investments is set
forth on EXHIBIT B attached hereto. The terms of this Section 2.10.5 shall be
for solely for the benefit, or enforceable by, the Management Stockholders.
The terms of this Section 2.10.5 may be waived by the Majority Management
Stockholders.
2.10.6 ASSIGNMENT. The rights provided in this Section 2.10 are
not assignable, except that, notwithstanding any other provision of this
Agreement such rights are assignable by (x) a Management Stockholder to a
Management Party, (y) a Financing Stockholder to another Financing Party, or
(z) the Purchaser to a Purchaser Party, in accordance with the restrictions
contained in this Agreement.
2.11 TAX TREATMENT. The attachment of restrictions to the Shares held
by the Management Stockholders and the subsequent lapse of those restrictions
(the "EXCHANGE RESTRICTIONS") is not intended to constitute a transfer of
property in connection with the performance of services by the Management
Stockholders within the meaning of section 83 of the Code. Accordingly, the
Company will not report compensation to the Management Stockholders at any
time with respect to the Exchange Restrictions unless required to by
applicable law.
ARTICLE III. DRAG-ALONG SALES.
3.1 RIGHT OF PURCHASER PARTIES TO REQUIRE SALE. Notwithstanding any
other provision of this Agreement, if some or all Purchaser Parties (the
"DRAG-ALONG SELLERS") receive an offer in writing from a third Person or third
Persons who are not affiliates of any of the Drag-Along Sellers (a "THIRD
PARTY") (x) to purchase all or substantially all of the Shares then owned by
the Purchaser Parties (a "DRAG-ALONG 100% SALE"), or (y) to purchase 50% or
more in the aggregate of the outstanding Common Shares or Preferred Shares of
any class or series, in each case, in one or more related transactions (a
"DRAG-ALONG 50% SALE"), or (z) to effect a business combination of the Company
with such Third Party or the purchase or other acquisition of all or
substantially all of the assets of the Company by such Third Party (an
"ACQUISITION PROPOSAL"), and the Purchaser Parties desire to accept or cause
the Company to accept such Acquisition Proposal, then, in any such case, upon
the demand of a majority of the Drag-Along Sellers, each of the other
Stockholders (a "REQUIRED SELLER") shall be required to sell to such Third
Party the number of Shares specified in the applicable Drag-Along Notice (as
defined below), at the same price and on the same purchase terms and
conditions as the Drag-Along Sellers have agreed to with such
22
Third Party, including, subject to Section 3.5, no greater indemnification
liability on a pro rata basis than the Drag-Along Sellers have agreed to with
such Third Party, or, as the case may be, vote all of the Common Shares
beneficially owned by such Stockholder in favor of such Acquisition Proposal
and take all other necessary or desirable actions within their control
(including, without limitation, by attending meetings in person or by proxy
for the purpose of obtaining a quorum and executing of written consents in
lieu of meetings), to cause the approval of such Acquisition Proposal
(provided, however, that in the case of a Drag-Along 50% Sale, Stockholder
shall not include a Financing Stockholder).
3.2 DRAG-ALONG NOTICE. Prior to making any Drag-Along Sale, the
Drag-Along Sellers shall promptly provide each Required Seller with written
notice (the "DRAG-ALONG NOTICE") not more than thirty (30) or less than
fifteen (15) days prior to the proposed date of the Drag-Along Sale (the
"DRAG-ALONG SALE DATE"). The Drag-Along Notice shall set forth: (i) the name
and address of the Third Party; (ii) the name and address of each member of
the Drag-Along Sellers; (iii) the proposed amount and form of consideration to
be paid per Share and the terms and conditions of payment offered by the Third
Party; (iv) the number of Shares held of record as of the close of business on
the date of the Drag-Along Sale Notice (the "DRAG-ALONG NOTICE DATE") by the
Required Seller to whom the notice is sent (and in the case of a Drag-Along
100% Sale such total number of Shares held by the Required Seller shall be the
number of Shares required to be sold by such Required Seller); (v) the
aggregate number of Shares held of record as of the Drag-Along Notice Date by
the Drag-Along Sellers; (vi) in the case of a Drag-Along 50% Sale, the pro
rata number of Shares to be sold by such Required Seller, which shall be in
proportion to the portion of the relevant class or series of securities being
sold by the Drag-Along Sellers, (vii) the Drag-Along Sale Date; and (viii)
confirmation that the proposed Third Party has agreed to purchase the Required
Sellers' Shares in accordance with the terms hereof.
3.3 DELIVERY OF CERTIFICATES. On the date that is at least one
Business Day (as defined in the Merger Agreement) before the Drag-Along Sale
Date, each Required Seller shall deliver a certificate or certificates for all
of its Shares duly endorsed for transfer with signatures guaranteed, free and
clear of any lien, claim, encumbrance, charge or security interest of any kind
to such Third Party in the manner and at the address indicated in the
Drag-Along Notice against delivery of the purchase price for such Required
Seller's Shares.
3.4 CONSIDERATION. The provisions of this Article 3 shall apply
regardless of the form of consideration received in the Drag-Along Sale.
3.5 COOPERATION. The Required Sellers shall cooperate in good faith
with the Drag-Along Sellers in connection with the consummation of the
Drag-Along Sale, which cooperation shall include, without limitation, with
respect to all Required Sellers other than Required Sellers that are Financing
Parties, by executing a document containing substantially similar
representations, warranties, indemnities and agreements as requested by the
Drag-Along Sellers in connection with the Drag Along Sale, but in no case
shall such representations, warranties, indemnities and agreements made by the
Required Sellers be more restrictive than
23
those made by the Drag-Along Sellers in connection with such Drag-Along Sale.
With respect to Required Sellers that are Financing Parties, such document
shall contain only a representation and warranty with respect to each such
Financing Party's own ownership of the Shares to be sold by it and its ability
to convey title thereto free and clear of liens, encumbrances or adverse
claims; the liability of each Financing Party with respect to any
representation and warranty made in connection with a sale of Shares pursuant
to this Article III shall be several and not joint with any other person; such
liability shall be limited to the amount of proceeds actually received by each
such Financing Party in the sale of Shares pursuant to Article III, and no
Financing Party shall be required to provide any indemnification or escrow
(other than a pro rata shares of any escrow provided by all Stockholders) to
anyone in connection with the sale of Shares pursuant to this Article III;
provided, however, that a Financing Party shall not be obligated to
participate in a sale of Shares pursuant to this Article III unless such
Financing Party would not by virtue of such participation be in violation of
the registration or qualification requirements of federal or applicable state
securities laws, or, if such Financing Party is not provided with an opinion
of counsel to the Company to such effect, the Company shall indemnify the
Financing Party for any violation.
ARTICLE IV. REGISTRATION RIGHTS.
4.1 DEFINITIONS.
"CLOSING" means the closing under the Merger Agreement.
"COMMISSION" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"DEMAND REGISTRATION" means the registration under the Securities
Act (including, but not limited to, a shelf registration under Rule 415
promulgated under the Securities Act) by the Company of all or part of the
Registrable Shares of the Management Holders, the Financing Holders or the
Purchaser Holders, as applicable, pursuant to a Demand received by the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder.
"FINANCING HOLDER" means a Holder of Registrable Financing Shares,
including a Transferee of Registrable Financing Shares if (i) the Transfer to
such Transferee is not prohibited by this Agreement, and (ii) the Shares
Transferred to such transferee continue to be Registrable Shares.
"HOLDER" means a Holder of Registrable Shares. A Person is deemed to
be a Holder of Registrable Shares whenever such Person owns Registrable Shares;
PROVIDED, HOWEVER, that unless the Company is otherwise notified by the Holder
of Registrable Shares, the
24
Holder of Registrable Shares shall be deemed to be that Person set forth on
the books and records of the Company or the registrar for such Registrable
Shares.
"MANAGEMENT HOLDER" means a Holder of Registrable Common Management
Shares, including a Transferee of Registrable Common Management Shares if (i)
the Transfer to such Transferee is not prohibited by this Agreement, and (ii)
the Shares Transferred to such Transferee continue to be Registrable Shares.
"PURCHASER HOLDER" means a Holder of Registrable Purchaser Shares,
including a Transferee of Registrable Purchaser Shares if (i) the Transfer to
such Transferee is not prohibited by this Agreement, and (ii) the Shares
Transferred to such transferee continue to be Registrable Shares.
"REGISTRABLE COMMON FINANCING SHARES" means the shares of Common
Stock owned by the Financing Parties immediately following the Closing or
subsequently acquired by any Financing Party (and any securities issued or
issuable with respect to such Common Stock by way of stock dividends or stock
splits or in connection with a combination of shares, recapitalization, merger,
consolidation, or other reorganization or otherwise);
"REGISTRABLE COMMON MANAGEMENT SHARES" means the shares of Common
Stock owned by the Management Parties immediately following the Closing or
subsequently acquired by any Management Party (and any securities issued or
issuable with respect to such Common Stock by way of stock dividends or stock
splits or in connection with a combination of shares, recapitalization, merger,
consolidation, or other reorganization or otherwise).
"REGISTRABLE COMMON PURCHASER SHARES" means the shares of Common
Stock or subsequently acquired by any Purchaser Party (and any securities issued
or issuable with respect to such Common Stock by way of stock dividends or stock
splits or in connection with a combination of shares, recapitalization, merger,
consolidation, or other reorganization or otherwise).
"REGISTRABLE COMMON SHARES" means the Registrable Common Financing
Shares, the Registrable Common Management Shares, and the Registrable Common
Purchaser Shares.
"REGISTRABLE FINANCING SHARES" means the Registrable Common
Financing Shares and the Registrable Preferred Financing Shares.
"REGISTRABLE PREFERRED FINANCING SHARES" means the shares of Series
A Preferred Stock and/or Series B Preferred Stock owned by the Financing Parties
immediately following the Closing or subsequently acquired by any Financing
Party (and any securities issued or issuable with respect to such Series A
Preferred Stock and/or Series B Preferred Stock by way of stock dividends or
stock splits or in connection with a combination of shares, recapitalization,
25
merger, consolidation, or other reorganization or otherwise; including but not
limited to any exchange debentures issued in exchange for shares of Series A
Preferred Stock).
"REGISTRABLE PREFERRED PURCHASER SHARES" means the shares of Series
A Preferred Stock and/or Series B Preferred Stock owned by the Purchaser
immediately following the Closing to Purchaser or subsequently acquired by any
Purchaser Party (and any securities issued or with respect to such Series A
Preferred Stock and/or Series B Preferred Stock by way of stock dividends or
stock splits or in connection with a combination of shares, recapitalization,
merger, consolidation, or other reorganization or otherwise; including but not
limited to any exchange debentures issued in exchange for shares of Series A
Preferred Stock).
"REGISTRABLE PREFERRED SHARES" means the Registrable Preferred
Financing Shares and the Registrable Preferred Purchaser Shares.
"REGISTRABLE PURCHASER SHARES" means the Registrable Common
Purchaser Shares and the Registrable Purchaser Preferred Shares.
"REGISTRABLE SHARES" means the Registrable Financing Shares, the
Registrable Common Management Shares and the Registrable Purchaser Shares;
PROVIDED, HOWEVER, that any such Shares will cease to be Registrable Shares, as
the case may be, when (i) a registration statement covering such Shares has been
declared effective and such Shares have been disposed of pursuant to such
effective registration statement, or (ii) such Shares are distributed to the
public pursuant to Rule 144.
"SELLING HOLDER" means, with respect to any registration statement,
any Holder whose Registrable Shares are included therein.
4.2 DEMAND REGISTRATIONS.
4.2.1 NUMBER OF DEMAND REGISTRATIONS.
(a) PURCHASER HOLDERS' DEMAND RIGHTS.
(i) Purchaser Holders shall be entitled to make
written request (any such written request pursuant to this Section 4.2 by
Purchaser Holders, Management Holders or Financing Holders, a "DEMAND") of the
Company to register (any such Demand by Purchaser Holders, Management Holders or
Financing Holders to register Registrable Common Shares pursuant to this Section
4.2, a "COMMON DEMAND REGISTRATION") all or part of their Registrable Common
Purchaser Shares under the Securities Act (including, but not limited to, a
shelf registration under Rule 415 promulgated under the Securities Act);
PROVIDED, HOWEVER, that not more than an aggregate of four (4) Demand
Registrations with respect to the Registrable Common Purchaser Shares may be
made pursuant to the rights granted by this Section 4.2.1(a)(i).
26
(ii) Purchaser Holders shall be entitled to Demand
the Company to register (any such Demand by the Purchaser Holders to register
Registrable Preferred Shares pursuant to this Section 4.2, a "PREFERRED DEMAND
REGISTRATION") all or part of their Registrable Preferred Purchaser Shares under
the Securities Act (including, but not limited to, a shelf registration under
Rule 415 promulgated under the Securities Act); PROVIDED, HOWEVER, that not more
than an aggregate of four (4) Preferred Demand Registrations with respect to the
Registrable Preferred Purchaser Shares may be made pursuant to the rights
granted by this Section 4.2.1(a)(ii).
(b) MANAGEMENT HOLDERS' DEMAND RIGHTS.
(i) Commencing on the date that is six (6) months after
the later of (i) a Public Offering Event and (ii) the sale (a "25% SALE") by
Purchaser, any Purchaser Party and the equity participants of any Purchaser
Party, in the aggregate when combined with all such sales (excluding any
Transfer by any Purchaser Party to any other Purchaser Party or to its equity
participants) by all such parties, of Shares equal to twenty-five percent
(25%) or more of the Shares owned by Purchaser immediately following the
Effective Time (as defined in the Merger Agreement), the Majority Management
Stockholders on the date thereof shall be entitled to Demand of the Company
one Common Demand Registration.
(ii) Commencing on the date that is six (6) months after
the later of (i) a Public Offering Event and (ii) the sale (a "50% SALE") by
Purchaser, any Purchaser Party and the equity participants of any Purchaser
Party, in the aggregate when combined with all such sales (excluding any
Transfer by any Purchaser Party to any other Purchaser Party or to its equity
participants) by all such parties, of Shares equal to fifty percent (50%) or
more of the Shares owned by Purchaser immediately following the Effective Time
(as defined in the Merger Agreement), the Majority Management Stockholders on
the date thereof shall be entitled to Demand of the Company (i) one Common
Demand Registration, or (ii) if the Majority Management Stockholders have not
made a Common Demand Registration pursuant to Section 4.2.1(b)(i), two Common
Demand Registrations.
(c) FINANCING HOLDERS' DEMAND RIGHTS. Commencing on the
earlier of (i) the date that is six (6) months after a Public Offering
Event, and (ii) the fifth anniversary of the date of this Agreement,
Financing Holders, acting collectively as a group, holding an aggregate
number of Registrable Financing Shares at least equal to or greater than
fifty percent (50%) of the number of Registrable Financing Shares
outstanding on the date of their Demand shall be entitled to make a Demand
of the Company to consummate a Demand Registration of all or part of the
Registrable Financing Shares; PROVIDED, HOWEVER, that not more than one
(1) Demand Registration with respect to the Registrable Financing Shares
may be made pursuant to the rights granted by this Section 4.2.1(c).
27
(d) SELECTION OF UNDERWRITER. Any Demand Registration
hereunder shall be on any appropriate form under the Securities Act
permitting registration of such Registrable Shares for resale by the
Selling Holders in the manner or manners designated by them (including,
without limitation, pursuant to one or more underwritten offerings). The
determination of whether the offering will involve an underwritten
offering, and the selection of investment bankers and managers, if any,
and counsel, shall be made by Holders of a majority of the Registrable
Shares demanded to be included in such registration, PROVIDED, HOWEVER,
that the selection of investment bankers and managers, if any, and counsel
so selected shall be reasonably satisfactory to the Company. If requested,
the Company shall enter into an underwriting or purchase agreement with an
investment banking firm in connection with a Demand Registration,
containing representations, warranties, indemnities and agreements then
customarily included in underwriting or purchase agreements by such
underwriter with respect to secondary distributions of securities.
4.2.2 REGISTRATION. The Company shall file a registration statement
with respect to each Demand Registration and use its best efforts to cause the
same to be declared effective as promptly as practicable following such Demand,
but not later than one hundred twenty (120) days thereafter. Unless all of the
Registrable Shares covered by the registration statement have earlier been sold
or withdrawn from sale, the Company shall keep any such Registration Statement
effective for a period of at least one hundred eighty (180) days after such
registration statement is first declared effective plus a period equal to (x)
any period during which the Selling Holders are prohibited from making sales
because of any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court plus (y) any Demand
Suspension Period (as defined below) plus (z) any holdback period pursuant to
Section 4.7 that occurs while the registration statement is effective (the
"DEMAND PERIOD") and a registration will not count as a Demand Registration
unless it is declared effective by the Commission and remains effective until
the earlier of such time as all of the Registrable Shares included in such
registration have been sold or disposed of or withdrawn from sale by the Selling
Holders or the expiration of the Demand Period or, if the registration remains
effective for a shorter period, the Selling Holders have sold at least eighty
percent (80%) of their Registrable Shares included in such Demand Registration.
In addition, a request for registration shall not be deemed to constitute a
Demand Registration if: (i) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such Demand
Registration are not satisfied other than by reason of some act or omission by
the Selling Holders; (ii) the Company voluntarily takes any action that would
result in the Selling Holders not being able to sell such Registrable Shares
covered thereby during the Demand Period; (iii) after it has become effective,
such Demand Registration becomes subject to any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court and
such order, injunction or requirement is not promptly withdrawn or lifted, and
such Demand Registration has not otherwise remained effective for the Demand
Period (including effective periods both before and after the order, injunction
or requirement is made or imposed); or (iv) such Demand Registration does not
involve an underwritten offering and the Selling Holders determine not to
28
proceed following any delay imposed hereunder by the Company; PROVIDED, HOWEVER,
that prior to such a delay under this clause (iv), the Selling Holders have not
sold more than eighty percent (80%) of the Registrable Shares included in such
Demand Registration. Notwithstanding the foregoing, the Company may, at any
time, delay the filing or delay or suspend the effectiveness of the Demand
Registration or, without suspending such effectiveness, instruct the Selling
Holders not to sell any securities included in the Demand Registration, if the
Company shall have determined in good faith (as evidenced by a resolution of the
Board of Directors of the Company delivered to the Selling Holders) that
proceeding with the Demand Registration at such time may have a material adverse
effect on the Company or the Company shall have determined upon the advice of
counsel that as a result of complying with such Demand it would be required to
disclose any material actions proposed to be taken by the Company in good faith
and for valid business reasons, including without limitation, the acquisition or
divestiture of assets, which disclosure may have a material adverse effect on
the Company or on such actions (a "DEMAND SUSPENSION PERIOD"), by providing the
Selling Holders with written notice of such Demand Suspension Period and the
reasons therefor. The Company shall use its reasonable best efforts to provide
such notice at least ten (10) days prior to the commencement of such a Demand
Suspension Period; PROVIDED, HOWEVER, that in any event the Company shall
provide such notice no later than the commencement of such Demand Suspension
Period; and PROVIDED, FURTHER, that in no event shall the Demand Suspension
Periods exceed a total of sixty (60) days in any twelve (12) month period.
The Company further agrees to supplement or amend such registration
statement with respect to such Demand Registration, as required by the
registration form utilized by the Company or by the instructions applicable to
such registration form or by the Securities Act for the registration of
securities or as reasonably requested (which request shall result in the filing
of a supplement or amendment subject to approval thereof by the Company, which
approval shall not be unreasonably withheld) by any Selling Holder or any
managing underwriter of Registrable Shares to which such Demand Registration
relates, and the Company agrees to furnish to the Selling Holders (and any
managing underwriter) copies, in substantially the form proposed to be used
and/or filed, of any such supplement or amendment prior to its being used and/or
filed with the Commission. The Company shall amend or supplement the
registration statement with respect to such Demand Registration no less
frequently than every forty five (45) days to update the list of Selling Holders
pursuant to written requests by such Holders.
4.2.3 INCLUSION OF REGISTRABLE SHARES. Any written request for a
Demand shall specify the number of Registrable Common Shares or Registrable
Preferred Shares (specifying the number of Series A Preferred Shares and Series
B Preferred Shares included therein) to be registered and the intended methods
of disposition thereof. Within ten (10) days after receipt of such Demand, the
Company shall give written notice of such registration request to all Holders of
Registrable Common Shares or Registrable Preferred Shares, as applicable, which
have not made the Demand, and the Company shall include in such registration all
Registrable Common Shares or Registrable Preferred Shares, as applicable, with
respect to which the Company has received written requests for inclusion therein
within fifteen (15) days after the date on which
29
such notice is given. Each such request shall also specify the aggregate
number of Registrable Common Shares or Registrable Preferred Shares
(specifying the number of Series A Preferred Shares and Series B Preferred
Shares included therein), as applicable, to be registered. The Company may
also include in such Demand Registration shares of Common Stock for the
account of the Company and any other Persons who hold shares of Common Stock.
4.2.4 PRIORITY ON DEMAND REGISTRATIONS. If a Demand Registration
is an underwritten registration and the managing underwriters of such offering
determine that the aggregate number of (i) Registrable Shares of the Selling
Holders exercising their rights to participate in the Demand Registration on a
demand basis, pursuant to this Section 4.2; (ii) Shares of the Company; and
(iii) Shares of any other Persons entitled to participate in such Demand
Registration, in each case proposed to be included in such registration
statement, exceeds the maximum number of Shares that can reasonably be expected
to be sold within a price range acceptable to the Company and the Selling
Holders, then the number of shares to be offered for the account of the Company
and for the account of all such other Persons, other than holders of Registrable
Shares who initiated the demand, participating in such registration shall be
reduced or limited PRO RATA (and to zero, if necessary) in proportion to the
respective number of Shares requested to be registered to the extent necessary
to reduce the total number of Shares requested to be included in such
registration statement to the maximum number of Shares that can reasonably be
expected to be included therein and still satisfy such price requirement. If the
foregoing market "cutback" does not reduce the aggregate number of Shares
proposed to be included in the registration statement to the maximum number of
Shares that can reasonably be expected to be sold within the price range
acceptable to the Company and the Selling Holders, the Company shall further
reduce the number of Shares to be included in such registration PRO RATA among
all such remaining Selling Holders on the basis of the number of Registrable
Shares of the Company requested to be included by all such Selling Holders. Any
request for registration with respect to which such a market "cutback" with
respect to such Selling Holders occurs shall be deemed to constitute a Demand
Registration for all purposes of this Article 4; PROVIDED, HOWEVER, that if any
such market "cutback" occurs with respect to a Demand Registration and all
Selling Holders who initiated the Demand are not able to sell at least eighty
percent (80%) of the Registrable Shares which such Holders proposed to sell
pursuant to such Demand Registration, then, although such request for
registration will be effectuated, such request will not count against the number
of Demands to which the Purchaser Holders, the Management Holders and the
Financing Holders are entitled pursuant to Section 4.2 hereof.
4.2.5 COMPLIANCE. Notwithstanding any other provisions hereof,
the Company shall use its reasonable best efforts to ensure that (i) any
registration statement filed in connection with a Demand Registration, and any
amendment thereto, and any prospectus forming a part thereof, and any supplement
thereto, complies in all material respects with the Securities Act and the rules
and regulations thereunder, (ii) any registration statement filed in connection
with a Demand Registration, and any amendment thereto, does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part
30
of any registration statement filed in connection with a Demand Registration,
and any supplement to such prospectus, does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to
make the statements, in the light of the circumstances under which they are
made, not misleading.
4.3 PIGGYBACK REGISTRATION.
4.3.1 RIGHT TO INCLUDE REGISTRABLE SHARES. If the Company at any
time proposes to register any of its equity securities under the Securities
Act, whether or not for sale for its own account, on a form and in a manner
which would permit registration of Registrable Shares for a public offering
under the Act (other than on a registration statement (i) on Form S-4 or Form
S-8 or any successor form thereto or (ii) filed in connection with an
exchange offer), the Company shall give written notice of the proposed
registration to each Holder at least fifteen (15) days prior to the filing
thereof, and each Holder shall have the right to request that all or any part
of its Registrable Shares of the same class or series of the equity
securities proposed to be registered by the Company be included in such
registration by giving written notice to the Company within ten (10) days
after the giving of such notice by the Company. If the registration statement
is to cover an underwritten offering, such Registrable Shares shall be
included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. Notwithstanding the
foregoing, a Holder may not request the registration of its Registrable
Shares if such Shares may, at the time (or within thirty days thereafter), be
distributed to the public pursuant to Rule 144, or any other similar
provision hereafter adopted by the Commission.
4.3.2 PRIORITY ON PIGGYBACK REGISTRATIONS.
(b) COMPANY REGISTRATIONS. If the registration is an
underwritten primary registration on behalf of the Company and the managing
underwriter(s) of such offering determine in their good faith judgment that the
aggregate number of securities, including Registrable Shares, of the Company
which all Holders and all other security holders of the Company, pursuant to
contractual rights to participate in such registration (the "OTHER HOLDERS"),
propose to include in such registration statement exceeds the maximum number of
securities, including Registrable Shares, that can reasonably be expected to be
sold in such offering without materially and adversely affecting the
marketability of the offering or the selling price to be obtained, the Company
will include in such registration, first, the shares of Common Stock or other
securities which the Company proposes to sell and, second, the Registrable
Shares of such Selling Holders and other securities to be sold for the account
of Other Holders, PRO RATA among all such Selling Holders and Other Holders,
taken together, on the basis of the number of Registrable Shares or other
securities of the Company requested to be included by all Selling Holders and
Other Holders who have requested that securities owned by them be so included
(it being agreed and understood, however, that such managing underwriter(s)
shall have the right to eliminate entirely the participation in such
registration of all Selling Holders and Other Holders).
31
(c) SELLING HOLDERS' REGISTRATION. (i) If the registration
is being made pursuant to a Demand by Purchaser Holders pursuant to Section 4.2
hereof, and the managing underwriter(s) determine that the aggregate number of
securities which all Selling Holders, the Company and all Other Holders propose
to include in such registration exceeds the maximum number of securities that
can reasonably be expected to be sold within the price range acceptable to the
Company and the Selling Holders, the Company will include in such registration,
first, the Registrable Purchaser Shares of the Selling Holders participating in
such registration on a demand basis in accordance with Section 4.2.4 hereof,
and, second, any securities to be sold for the account of the Company,
securities to be sold for the account of the Selling Holders that are either
Purchaser Holders or Management Holders or Financing Holders and that are
participating in such offering on a piggyback basis and any securities to be
sold for the account of the Other Holders electing to include securities in such
registration, PRO RATA among the Company, all such Selling Holders and all such
Other Holders, taken together, on the basis of the number of Shares or other
securities to be sold by the Company in the absence of such PRO RATION, number
of Registrable Shares or other securities requested to be included by all such
Selling Holders and the number of Shares or other securities requested to be
included by all such Other Holders (it being agreed and understood, however,
that such managing underwriter(s) shall have the right to eliminate entirely the
participation therein of the Company and of all such Selling Holders and Other
Holders pursuant to the terms of this sentence).
(ii) If the registration is being made pursuant to a Demand
by Management Holders pursuant to Section 4.2 hereof, and the managing
underwriter(s) determine that the aggregate number of securities which all
Selling Holders, the Company and all Other Holders propose to include in such
registration exceeds the maximum number of securities that can reasonably be
expected to be sold within the price range acceptable to the Company and the
Management Holders that are Selling Holders, the Company will include in such
registration, first, the Registrable Common Management Shares of the Selling
Holders participating in such registration on a demand basis in accordance with
Section 4.2.4 hereof, and, second, any securities to be sold for the account of
the Company, securities to be sold for the account of the Selling Holders that
are either Purchaser Holders or Management Holders or Financing Holders and that
are participating in such offering on a piggyback basis and any securities to be
sold for the account of the Other Holders electing to include securities in such
registration, PRO RATA among the Company, all such Selling Holders and all such
Other Holders, taken together, on the basis of the number of Shares or other
securities to be sold by the Company in the absence of such PRO RATION, number
of Registrable Shares or other securities requested to be included by all such
Selling Holders and the number of Shares or other securities requested to be
included by all such Other Holders (it being agreed and understood, however,
that such managing underwriter(s) shall have the right to eliminate entirely the
participation therein of the Company and of all such Selling Holders and Other
Holders pursuant to the terms of this sentence).
(iii) If the registration is being made pursuant to a Demand
by Financing Holders pursuant to Section 4.2 hereof, and the managing
underwriter(s) determine that the aggregate number of securities which all
Selling Holders, the Company and all Other
32
Holders propose to include in such registration exceeds the maximum number of
securities that can reasonably be expected to be sold within the price range
acceptable to the Company and the Financing Holders that are Selling Holders,
the Company will include in such registration, first, the Registrable
Financing Shares of the Selling Holders participating in such registration on
a demand basis in accordance with Section 4.2.4 hereof, and, second, any
securities to be sold for the account of the Company, securities to be sold
for the account of the Selling Holders that are either Purchaser Holders or
Management Holders or Financing Holders and that are participating in such
offering on a piggyback basis and any securities to be sold for the account
of the Other Holders electing to include securities in such registration, PRO
RATA among the Company, all such Selling Holders and all such Other Holders,
taken together, on the basis of the number of Shares or other securities to
be sold by the Company in the absence of such PRO RATION, number of
Registrable Shares or other securities requested to be included by all such
Selling Holders and the number of Shares or other securities requested to be
included by all such Other Holders (it being agreed and understood, however,
that such managing underwriter(s) shall have the right to eliminate entirely
the participation therein of the Company and of all such Selling Holders and
Other Holders pursuant to the terms of this sentence).
(c) OTHER HOLDERS' REGISTRATION. If the registration is an
underwritten secondary registration on behalf of any of the Other Holders
pursuant to demand registration rights and the managing underwriters determine
that the aggregate number of securities which all Selling Holders, the Company
and all Other Holders propose to include in such registration exceeds the
maximum number of securities that can reasonably be expected to be sold within
the price range acceptable to the Company and the Other Holders that are Selling
Holders, the Company will include in such registration, first, the securities to
be sold for the account of the Other Holders demanding registration (but only to
the extent such Other Holders are entitled to demand inclusion thereof pursuant
to demand registration rights), second, any securities to be sold for the
account of the Company, and, third, the Registrable Shares of such Selling
Holders and other securities to be sold for the account of the Other Holders
electing to include (but not being entitled pursuant to demand registration
rights to demand inclusion of) securities in such registration, PRO RATA among
all such Selling Holders and Other Holders, taken together, on the basis of the
number of Registrable Shares or other securities of the Company requested to be
included by all Selling Holders and such Other Holders who have requested that
securities owned by them be included (it being agreed and understood, however,
that such managing underwriter(s) shall have the right to eliminate entirely the
participation therein of all such Selling Holders and Other Holders with respect
to such securities since they are not entitled to demand inclusion of such
securities pursuant to demand registration rights).
(d) UNDERWRITERS. Registrable Shares proposed to be
registered and sold for the account of any Selling Holder pursuant to a
piggyback registration shall be sold to prospective underwriters selected or
approved by the Company, and on the terms and subject to the conditions of
one or more underwriting agreements negotiated between the Company, the
Selling Holders, if any, and/or Other Holders demanding registration and such
prospective underwriters. The Selling Holders shall be permitted to withdraw
all or a part of the Registrable
33
Shares held by such Selling Holders which were to be included in such
piggyback registration at any time prior to the effective date of such
registration. The Company may withdraw any registration statement for such
registration at any time before it becomes effective, or postpone the
offering of securities, without obligation or liability to any Selling Holder
participating on a piggyback basis (except pursuant to Section 4.8 hereof).
4.4 REGISTRATIONS ON FORM S-3. At such time as the Company shall have
qualified for the use of Form S-3, or any similar form or forms promulgated by
the Commission, the Holders of Registrable Securities shall each have the right
to request an unlimited number of registrations of Form S-3. Any such request
shall be in writing, shall specify the Registrable Securities intended to be
sold or disposed of by the Holders thereof, shall state the intended method of
disposition of such Registrable Securities by the Holder(s) requesting such
registration and shall relate to Registrable Securities having proposed gross
cash offering proceeds (prior to deduction of underwriters commissions and
expenses, if any) of Two Million Dollars ($2,000,000) or more for all
Registrable Securities to be included, on the basis of a reasonable (in light of
the current market price) proposed per share offering price. The Company shall
be obligated to effect such registration or registrations on Form S-3 as soon as
practicable after receipt of such request; provided, however, that the Company
shall not be obligated to effect the filing of a registration pursuant to this
Section 4.4(i) during the period starting with the date ninety (90) days prior
to the Company's estimated date of filing of, and ending on a date one hundred
eighty (180) days following the effective date of, a registration statement
pertaining to a public offering of Common Stock for the account of the Company,
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective and that, in
the good faith judgement of the Company's underwriter for an underwritten
offering or of the Company's Board of Directors for any other offering, an
offering pursuant to such a registration statement would interfere in any
material respect with the successful marketing (including pricing) of the Common
Stock to be included in the Company's proposed registration statement, or (ii)
if the Company's Board of Directors shall determine in good faith that such
filing will interfere in any material respect with a pending or contemplated
financing, merger, sale of assets, recapitalization or other similar corporate
action of the Company. In the event the Company's obligations are abated
pursuant to the foregoing PROVISO, and if any of the Holders on whose behalf the
requested registration statement would be filed and who were unable to have all
of the Registrable Securities included in the Company's registration statement
pursuant to Section 4.2 hereof and then want such registration statement to be
filed, the Company shall file such registration statement as promptly as
practicable following (x) one hundred eighty (180) days after the effective date
of the registration statement with respect to the offering referred to in clause
(i) above, or (y) the date on which the transactions referred to in clause (ii)
above shall have been completed or abandoned (as the case may be), but not later
than one hundred twenty (120) days after the initial registration request notice
was given; PROVIDED FURTHER, HOWEVER, that the Company shall not be obligated to
file and cause to become effective (a) more than two (2) registrations on Form
S-3 in any one twelve (12) month period or (b) any registration on Form S-3
within six (6) months after the effective date of any previous registration
statement filed under Section 4.2 or Section 4.3, with respect to which all
Holders
34
who had requested the inclusion of any such shares in a registration
statement were entitled to included in such registration statement all
Registrable Securities requested to be included therein. No registration
pursuant to this Section 4.4 shall count as a Demand Registration pursuant to
Section 4.2 hereof.
4.5 REGISTRATION STATEMENT. In connection with any registration of
Registrable Shares under the Securities Act pursuant to this Agreement, the
Company will furnish each Selling Holder and each underwriter, if any, with a
copy of the registration statement and all amendments thereto and will supply
each such Selling Holder with copies of any prospectus included therein
(including a preliminary prospectus and all amendments and supplements thereto),
in each case including all exhibits, and such other documents as may be
reasonably requested, in such quantities as may be reasonably necessary for the
purposes of the proposed sale or distribution covered by such registration (the
Company hereby consenting to the use in accordance with all applicable law of
each such registration statement (or amendment or post-effective amendment
thereto) and each such prospectus (or preliminary prospectus or supplement
thereto) by each such Selling Holder and the underwriters, if any, in connection
with the offering and sale of the Registrable Shares covered by such
registration statement or prospectus). The Company shall not, however, be
required to maintain the registration statement relating to a Demand
Registration and to supply copies of a prospectus for a period beyond the Demand
Period, and, at the end of such period, the Company may register any Registrable
Shares covered by such registration statement and not then sold or distributed.
In connection with any such registration of Registrable Shares, the Company
will, at the request of the managing underwriter with respect thereto (or, if
not an underwritten offering, at the request of Selling Holders holding a
majority of the Registrable Shares to be included in the registration) use its
reasonable best efforts to register or qualify such Registrable Shares for sale
under the securities laws of such states as is reasonably requested to permit
the distribution of such Registrable Shares and to use its reasonable efforts to
keep each such registration or qualification effective during the period such
registration statement is required to be kept effective and to do such other
acts or things reasonably necessary to enable the disposition in such
jurisdictions of the securities covered by the applicable registration statement
in accordance with applicable Blue Sky securities laws of such jurisdictions;
PROVIDED, HOWEVER, that the Company shall not be required in connection
therewith or as a condition thereof to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction or become
subject to taxation in any jurisdiction. In connection with any offering of
Registrable Shares registered pursuant to this Agreement, the Company shall (i)
furnish each Selling Holder, at the Company's expense and at least three (3)
business days prior to the sale of any Registrable Shares to the underwriters,
with unlegended certificates in a form eligible for deposit with The Depository
Trust Company representing ownership of the Registrable Shares which are sold
pursuant to the registration statement, in such denominations and registered in
such names as the managing underwriter, if any, or such Selling Holder shall
reasonably request, and (ii) instruct the transfer agent and registrar of the
Common Stock to release any stop transfer orders with respect to the Registrable
Shares so sold.
35
4.6 REGISTRATION PROCEDURES. In connection with the Company's obligations
to effect a registration pursuant to Sections 4.2, 4.3 and 4.4 (but subject to
the last sentence of Section 4.3.2(d) and PROVIDED that any time periods set
forth in this Section 4.6 regarding effective periods and the like shall apply
only in the event of a Demand Registration), the Company will as expeditiously
as is reasonably practicable:
(a) prepare and file with the Commission as soon as
practicable (in the case of a Demand Registration) a registration
statement with respect to such Registrable Shares, on a form available for
the sale of the Registrable Shares by the Holders thereof in accordance
with the intended method or methods of distribution thereof and use its
commercially reasonable efforts to cause each such registration statement
to become and remain effective; PROVIDED, HOWEVER, that before filing a
registration statement or prospectus or any amendments or supplements
thereto (including documents that would be incorporated or deemed to be
incorporated therein by reference) and, whether or not filed pursuant to
Section 4.2, 4.3 or 4.4, the Company will furnish to the Holders of the
Registrable Shares covered by such registration statement and the
underwriters, if any, and any attorney, accountant or other agent retained
by the Holders of Registrable Shares covered by such registration
statement, copies of all such documents proposed to be filed, which
documents will be subject to the review and comment of such Holders, such
counsel and underwriters, if any. The Company will not file any
registration statement or any amendment thereto or any prospectus or any
supplement thereto in connection with a Demand Registration pursuant to
Section 4.2 (including such documents incorporated by reference and
proposed to be filed after the initial filing of the registration
statement) to which the Holders of a majority of the Registrable Shares
covered by such registration statement or the underwriters, if any, shall
reasonably and timely object;
(b) prepare and file with the Commission such amendments and
post-effective amendments to such registration statement and such
supplements to the prospectus used in connection therewith as may be
necessary to keep such registration statement effective (to the extent
otherwise required by this Agreement) and to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such
registration statement or the expiration of the Demand Period (in the case
of a Demand Registration), whichever occurs earlier; PROVIDED, HOWEVER,
that the only remedy for any failure to keep the registration statement so
effective shall be as set forth in Section 4.2.2 and PROVIDED, FURTHER,
that the Company will have no obligation to a Selling Holder participating
on a "piggyback" basis in a registration statement that has become
effective to keep such registration statement effective for a period
beyond 120 days from the effective date of such registration statement;
(c) cooperate and assist in any filings required to be
made with the National Association of Securities Dealers, Inc. (the
"NASD");
36
(d) notify each Selling Holder and the managing underwriter,
if any, promptly (and in any event within three (3) business days): (A)
when the prospectus or any prospectus supplement or post-effective
amendment has been filed, and with respect to the registration statement
or any post-effective amendment, when the same has become effective; (B)
of any request by the Commission or any other federal or state
governmental authority for any amendments or supplements to the
registration statement or the prospectus or for additional information;
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation of any
proceedings for that purpose; (D) if, at any time prior to the closing
contemplated by an underwriting agreement entered into in connection with
such registration statement, that the representations and warranties of
the Company contained in such agreement cease to be true and correct; (E)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (F) of the happening of any event which makes any statement made
in the registration statement, the prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue or which requires
the making of any changes in the registration statement, the prospectus or
any document incorporated therein by reference in order to make the
statements therein not misleading; and (G) of the Company's reasonable
determination that a post-effective amendment to a registration statement
would be required;
(e) make commercially reasonable efforts to prevent the
issuance of any order suspending the effectiveness of the registration
statement or of any order preventing or suspending the use of a prospectus
or suspending the qualification of any of the Registrable Shares included
therein for sale in any jurisdiction (subject to the proviso at the end of
the penultimate sentence of Section 4.5), and, in the event of the
issuance of any stop order suspending the effectiveness of the
registration statement, or of any order suspending or preventing the use
of any related prospectus or suspending the qualification of any Common
Shares included in such registration statement for sale in any
jurisdiction (subject to the proviso at the end of the penultimate
sentence of Section 4.5), the Company will use its reasonable best efforts
to promptly obtain the withdrawal of any such order;
(f) furnish to each Selling Holder and the managing
underwriters, if any, without any additional charge, one signed copy of
the registration statement and any post-effective amendment thereto,
including financial statements and schedules, all documents incorporated
therein by reference and all exhibits (including those incorporated by
reference);
(g) as promptly as reasonably practicable, if required, based
on the advice of the Company's counsel, or upon the occurrence of any
event contemplated by
37
Section 4.6(d) hereof, prepare and file a supplement or post-effective
amendment to the registration statement, the related prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Shares, the prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make
the statements therein not misleading;
(h) cause all Registrable Shares covered by the registration
statement to be listed on each securities exchange on which identical
securities issued by the Company are then listed if requested by the
Selling Holders holding a majority in number of the Registrable Shares
covered by the Registration Statement or the managing underwriters, if
any;
(i) provide and cause to be maintained a transfer agent and
registrar for all Registrable Shares covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
(j) use its reasonable best efforts to provide a CUSIP number
for the Registrable Shares, not later than the effective date of the
registration statement;
(k) use its reasonable best efforts to (A) obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters,
if any, and not objected to by the Holders of a majority of the
Registrable Shares being sold), and updates thereof addressed to the
Selling Holders, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by the underwriters, if any; and (B) obtain "cold
comfort" letters and updates thereof (which letters and updates (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and counsel to the Holders of a majority of the
Registrable Shares being sold) from the Company's independent certified
public accountants addressed to such Selling Holders (and, if necessary,
any other independent certified public accountants of any subsidiary of
the Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
registration statement), such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters by
accountants in connection with underwritten offerings and such other
matters as the underwriters, if any, or the Holders of a majority of the
Registrable Shares being sold, reasonably request. The above shall be done
at each closing under such underwriting or similar agreement or as and to
the extent required thereunder or, if not an underwritten offering, as
otherwise reasonably requested by the Holders of a majority of the
Registrable Shares being sold;
(l) make available for inspection by a representative of the
Selling Holders and any attorneys or accountants retained by such Holders
(and, to the extent
38
reasonably requested, furnish copies), in connection with the
preparation of a registration statement pursuant to this Agreement, all
financial and other records and pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such representative(s), attorney(s) or accountant(s) in connection with
such registration; PROVIDED, HOWEVER, that any records, information or
documents that are designated by the Company in writing as confidential
shall be kept confidential by such persons unless disclosure of such
records, information or documents is required by court or administrative
order or under applicable law; and PROVIDED, FURTHER, that appropriate
arrangements are made, to the extent required by applicable antitrust
law, to limit access to such information of the Company to
representatives of the Holders who are not officers or employees of the
Selling Holders; and PROVIDED, FURTHER, that, without limiting the
foregoing, no such information shall be used by any such Person in
connection with any market transactions in securities of the Company or
its subsidiaries in violation of law;
(m) enter into such agreements reasonably requested
(including, as applicable, an underwriting agreement in form, scope and
substance as is customary in underwritten secondary offerings and is
reasonably satisfactory to the Company) and take all such other customary
and reasonable actions in connection therewith (including those requested
by the managing underwriters) in order to expedite or facilitate the
disposition of the Registrable Shares, and in such connection, whether or
not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(i) make such representations and warranties to the
Holders of such Registrable Shares included in the
registration statement and the underwriters, if any,
with respect to the business of the Company and the
registration statement, prospectus and documents, if
any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters
in underwritten offerings and confirm the same, if and
when reasonably requested; and
(ii) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority of the
Registrable Shares being included in the registration
statement and managing underwriters, if any, to evidence
compliance with clause (a) above and with any provisions
contained in the underwriting agreement or other similar
agreement entered into by the Company;
39
The above shall be done at each closing under such underwriting or similar
agreement or, if not an underwritten offering, to the extent otherwise
reasonably requested by the Holders of a majority of the Registrable Shares
being sold pursuant to the registration statement;
(n) (a) if so required by the managing underwriter in an
underwritten offering of Registrable Shares covered by a registration
statement filed pursuant to Section 4.2, 4.3 or 4.4 hereof, not publicly
or privately sell, make any short sale of, loan, grant any option, effect
any public sale or distribution of or otherwise dispose of its equity
securities or securities convertible into or exchangeable or exercisable
for any of such securities during the ten (10) days prior to and the
ninety (90) days after any underwritten registration pursuant hereto has
become effective, except as part of such underwritten registration and
except pursuant to any exchange offer or registrations on Form S-4 or S-8
or any successor or similar forms thereto, except that the Company may
make grants of options under its stock option plans and may issue
securities issuable upon the exercise or conversion of outstanding
convertible securities, stock options and other options, warrants and
rights of the Company and (b) if requested, use reasonable efforts to
cause each holder of ten percent (10%) or more of the securities of the
same class as the securities included in any underwritten registration
pursuant to Section 4.2 hereof, or any securities convertible into or
exchangeable or exercisable for such securities, in each case purchased
from the Company at any time after the date of this Agreement (other than
in a registered public offering) to agree not to effect any public or
private sale or distribution or otherwise dispose (including sales
pursuant to Rule 144 promulgated under the Act) of any such securities
during the ten (10) days prior to and the ninety (90) days after any
underwritten registration pursuant hereto has become effective (except as
part of such underwritten registration, if otherwise permitted), unless
the underwriters managing the registered public offering otherwise agree;
(o) if requested, furnish each Selling Holder with a copy (or
a reasonable number of copies, as requested) of the registration statement
(together with the Exhibits thereto) and each amendment thereto prior to
the filing thereof with the Commission;
(p) if requested by the managing underwriters, if any, or a
Holder of Registrable Shares being sold, promptly incorporate in a
prospectus, supplement or post-effective amendment such information as the
managing underwriters, if any, and the Holders of the Registrable Shares
being sold reasonably request to be included therein relating to the sale
of the Registrable Shares, including, without limitation, information with
respect to the number of Registrable Shares being sold to underwriters,
the purchase price being paid therefor by such underwriters and with
respect to any other terms of the underwritten offering of the Registrable
Shares to be sold in such offering; and make all required filings of such
prospectus, supplement or post-effective amendment promptly following
notification of the matters to be incorporated in such supplement or
post-effective amendment;
40
(q) upon the occurrence of any event that would cause a shelf
registration statement (A) to contain a material misstatement or omission
or (B) to be not effective and usable for resale of Registrable Shares
during the Demand Period, the Company shall promptly file an amendment to
such shelf registration statement, in the case of clause (A), correcting
any such misstatement or omission and, in the case of either clause (A) or
(B), use its commercially reasonable efforts to cause such amendment to be
declared effective and such shelf registration statement to become usable
as soon as reasonably practicable thereafter;
(r) otherwise use its reasonable best efforts to (x) comply
with all applicable rules and regulations of the Commission and to take
all other steps reasonably necessary to effect the registration of the
Registrable Shares covered by the registration statement contemplated
hereby, and (y) make available to its security holders an earnings
statement which satisfies the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule promulgated
under the Act) no later than forty-five (45) days after the end of any
twelve-month (12) period (or ninety (90) days after the end of any
twelve-month (12) period if such period is a fiscal year) (or in each case
within such extended period of time as may be permitted by the Commission
for filing the applicable report with the Commission) (i) commencing at
the end of any fiscal quarter in which Registrable Shares are sold to
underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on
the first day of the first fiscal quarter of the Company after the
effective date of a Registration Statement, which statements shall cover
said twelve-month (12) periods; and
(s) in connection with any underwritten offering, cooperate
with all marketing efforts reasonably requested by the managing
underwriter or managing underwriters in connection with the sale of the
Registrable Shares, including, without limitation, participation in a
reasonable number of road-show presentations and other marketing activity
by Management Stockholders and other employees of the Company requested by
such underwriter or underwriters PROVIDED, HOWEVER, that the scheduling of
the road-show presentations shall be set in consultation with the Company
and will not require the Company's involvement at any time or place to
which the Company has a reasonable objection.
4.7 HOLDBACK AGREEMENTS. Each of the Company and each Holder of
Registrable Shares (whether or not such Registrable Shares are covered by a
Registration Statement filed pursuant to Section 4.2 or 4.3 hereof) agrees,
if requested (pursuant to a timely written notice) by the managing
underwriter or underwriters in an underwritten offering, not to effect any
public sale or distribution of any of the Company's securities, including a
sale pursuant to Rule 144 (except as part of such underwritten offering),
during the period beginning ten (10) days prior to, and ending one hundred
and eighty (180) days after, the closing date of the underwritten offering
made pursuant to such Registration Statement. The foregoing provisions shall
not apply to the
41
Company or any Holder of Registrable Shares if such Person is prevented by
applicable statute or regulation from entering into any such agreement;
PROVIDED, HOWEVER, that any such Person shall undertake not to effect any
public sale or distribution of the class of securities covered by such
Registration Statement (except as part of such underwritten offering) during
such period unless it has provided sixty (60) days' prior written notice of
such sale or distribution to the managing underwriter.
4.8 REGISTRATION EXPENSES. Except as otherwise required by state
securities laws or the rules and regulations promulgated thereunder, all
expenses, disbursements and fees incurred by the Company and the Selling
Holders in connection with carrying out their obligations under this Article
4, including but not limited to, (i) the reasonable and documented fees and
expenses of one law firm (plus local counsel) for the Selling Holders (which
counsel shall be selected by Holders of a majority of the Registrable Shares
held by the Holders who initially requested the applicable registration),
(ii) all registration, filing fees and expenses (including fees with respect
to filings made with the NASD, including, if applicable, the fees and
expenses of any "qualified independent underwriter" and its counsel, as may
be required by the rules and regulations of the NASD), (iii) fees and
expenses of compliance with securities or Blue Sky laws (including fees and
disbursements of counsel for the underwriters or Selling Holders in
connection with Blue Sky qualifications of the Registrable Shares and
determinations of their eligibility for investment under the laws of such
jurisdiction as the managing underwriters or Holders of a majority of the
Registrable Shares being sold may designate, subject to the proviso to the
last sentence of the penultimate sentence of Section 4.5), (iv) printing
expenses (including printing certificates for the Registrable Shares to be
sold and the registration statements and prospectuses), messenger and
delivery expenses, duplication, word processing, and telephone expenses, (v)
fees and disbursements of counsel for the Company, and (vi) fees and
disbursements of all independent certified public accountants of the Company
incurred in connection with such registration (including the expenses of any
special audit and "cold comfort" letters incident to such registration) and
fees and disbursements of underwriters (excluding discounts, commissions or
fees of underwriters, selling brokers, dealer managers or similar securities
industry professionals relating to the distribution of the Registrable
Shares) and other Persons retained by the Company (all such expenses being
herein called "REGISTRATION EXPENSES"), will be borne by the Company
regardless of whether a registration statement becomes effective; PROVIDED,
HOWEVER, that the Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit or quarterly review, the fees and expenses of any Person, including
special experts, retained by the Company, the expense of any liability
insurance and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities issued by
the Company are then listed or on the Nasdaq Stock Market; and PROVIDED,
FURTHER, that each Selling Holder shall pay (x) all costs and expenses of
counsel (other than the counsel costs referred to in (i) above), accounting
or financing professionals retained by such Selling Holder, (y) all
underwriting discounts, commissions, fees and expenses and all transfer taxes
with respect to the Shares sold by such Selling Holder, and (z) all other
expenses incurred
42
by such Selling Holder and incidental to the sale and delivery of the Shares
to be sold by such Holder.
4.9 CONDITIONS TO HOLDER'S RIGHTS. It shall be a condition of each
Selling Holder's rights hereunder that:
4.9.1 COOPERATION. Such Selling Holder shall cooperate with the
Company by supplying information and executing documents relating to such
Selling Holder or the securities of the Company owned by such Selling Holder
in connection with such registration which are customary for offerings of this
type (including agreeing to sell such Selling Holder's Registrable Shares on
the basis provided in any underwriting arrangements containing customary terms
reasonably satisfactory to such Selling Holder);
4.9.2 UNDERTAKINGS. Such Selling Holder shall enter into any
undertakings and take such other action relating to the conduct of the proposed
offering which the Company or the underwriters may reasonably request as being
necessary to insure compliance with federal and state securities laws and the
rules or other requirements of the NASD or which the Company or the underwriters
may reasonably request to otherwise effectuate the offering; and
4.9.3 INDEMNIFICATION. Such Selling Holder shall execute and deliver
an agreement to indemnify to the fullest extent permitted by law and hold
harmless the Company, each of its directors, each of its officers who has signed
the registration statement, any underwriter (as defined in the Securities Act),
and each person, if any, who controls the Company or such underwriter within the
meaning of the Securities Act, against such losses, claims, damages or
liabilities (including reimbursement for legal and other expenses) to which the
Company or any such director, officer, underwriter or controlling person may
become subject under the Securities Act or otherwise, in such manner as is
customary for registrations of the type then proposed, but only with respect to
written information about or pertaining to such Selling Holder furnished by such
Selling Holder for inclusion in the Registration Statement.
4.10 INDEMNIFICATION.
4.10.1 INDEMNIFICATION BY THE COMPANY. In the case of any offering
registered pursuant to this Agreement, the Company agrees to indemnify to the
fullest extent permitted by law and hold each Selling Holder, each affiliate of
such Selling Holder and each director, officer, agent, representative,
principal, partner and employee of such Selling Holder and its affiliates, each
Person who controls each Selling Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and the directors, officers,
agents, principals, partners or employees of each such controlling person
harmless against any and all losses, claims, damages, liabilities, actions
(including reasonable and documented costs, including, without limitation, costs
of preparation and reasonable attorneys' fees and disbursements) and expenses,
including reasonable expenses of investigation (collectively "LOSSES") to which
they or any of them may become subject under the Securities Act or any other
statute or common law or otherwise, insofar
43
as any such Losses shall arise out of, be caused by or shall be based upon (i)
any untrue statement or alleged untrue statement of a material fact contained
in the registration statement relating to the sale of the Registrable Shares
covered thereby, or 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 (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus
(as amended or supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereof), if used prior to the
effective date of such registration statement, or contained in the prospectus
(as amended or supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereof, including the
information deemed part of such registration statement pursuant to Rule 430A
promulgated under the Securities Act), if used within the period during which
the Company shall be required to keep the registration statement to which such
prospectus relates current pursuant to the terms of this Agreement, or the
omission or alleged omission to state therein (if so used) a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that the indemnification agreement contained in this Section 4.10.1 shall not
apply to such Losses which shall arise from the sale of Registrable Shares to
any Person if such Losses shall arise out of, shall be caused by or shall be
based upon any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, (i) if such statement or omission shall have
been made in reliance upon and in conformity with information furnished in
writing to the Company by and about such Selling Holder specifically for use
in connection with the preparation of the registration statement or any
preliminary prospectus or prospectus contained in the registration statement
or any such amendment thereof or supplement thereto; (ii) if such untrue
statement or omission was made in any preliminary prospectus to the extent
that (a) the prospectus corrected such untrue statement or such omission and
(b) the Selling Holder was legally required to and failed to send or deliver a
copy of the prospectus with or prior to the delivery of written confirmation
of the sale by such Selling Holder of Registrable Shares to the Person
asserting the claim from which such Losses arise and the Company made the
prospectus available to such Selling Holder in accordance with the terms of
the Agreement; or (iii) if any such Losses arise out of, are caused by or are
based upon an untrue statement or omission in the prospectus, to the extent
that (a) such untrue statement or omission is corrected in an amendment or
supplement to the prospectus and (b) having previously been furnished by or on
behalf of the Company with copies of the prospectus as so amended or
supplemented, such Selling Holder was legally required to and thereafter fails
to deliver such prospectus as so amended or supplemented, prior to or
concurrently with the sale of Registrable Shares to the Person asserting the
claim from which such Losses arise. This indemnity shall be in addition to any
other indemnification arrangements to which the Company may otherwise be a
party.
1.10.2 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SHARES. Each
Selling Holder agrees to indemnify to the fullest extent permitted by law and
hold the Company and each other Selling Holder, and their respective
affiliates, directors, officers, agents, members, principals, partners and
employees, each Person who controls the Company or such other Selling Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act and the
44
directors, officers, agents or employees of such controlling persons harmless
against any and all Losses arising out of, caused by or based upon any untrue
statement of a material fact contained in any registration statement,
prospectus or form of prospectus, or arising out of, caused by or based upon
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the preliminary prospectus and the
prospectus, in each case including amendments or supplements), in the light of
the circumstances in which they were made not misleading, to the extent, but
only to the extent, that such untrue statement or omission was contained in
any information regarding such Selling Holder furnished in writing by such
Selling Holder to the Company, expressly for use in such registration
statement or prospectus; PROVIDED, HOWEVER, that the obligation to indemnify
will be several and not joint and in no event shall the liability of any
Selling Holder hereunder be greater in amount than the dollar amount of the
proceeds (net of the payment of underwriting discounts and commissions payable
by such Selling Holder) received by any such Selling Holder upon the sale of
the Registrable Shares giving rise to such indemnification obligation. The
Company and the Selling Holders shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution to the same extent as provided
above with respect to information so furnished in writing by such Persons and
regarding such Person expressly for use in any prospectus or registration
statement.
4.10.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled
to indemnity under this Agreement (an "INDEMNIFIED PARTY") shall give prompt
written notice to the party from which such indemnity is sought (the
"INDEMNIFYING PARTY") of any claim or of the commencement of any proceeding
with respect to which such Indemnified Party seeks indemnification or
contribution pursuant hereto; PROVIDED, HOWEVER, that the failure so to notify
the Indemnifying Party shall not relieve the indemnifying party from any
obligation or liability except to the extent that the Indemnifying Party has
been prejudiced materially by such failure. The Indemnifying Party shall have
the right exercisable by giving written notice to an Indemnified Party
promptly after the receipt of written notice from such Indemnified Party of
such claim or proceeding to assume, at the Indemnifying Party's expense, the
defense of any such claim or proceeding, with counsel reasonably satisfactory
to such Indemnified Party; PROVIDED, HOWEVER, that under such circumstances an
Indemnified Party shall have the right to employ separate counsel in any such
claim or proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless: (1) the Indemnifying Party agrees to pay such fees and expenses; or
(2) the Indemnifying Party fails promptly to assume the defense of such claim
or proceeding or fails to employ counsel reasonably satisfactory to such
Indemnified Party; or (3) the Indemnified Party shall have been advised by
counsel that (i) there may be one or more material defenses available to such
Indemnified Party that are different from or additional to those available to
the Indemnifying Party or its affiliates, or (ii) a conflict of interest
likely exists if such counsel represents such Indemnified Party and such
Indemnifying Party or its affiliate, in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ separate
counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof, it being understood,
however, that the Indemnifying Party shall not, in
45
connection with any one such claim or proceeding, or separate but
substantially similar or related claims or proceedings arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel which such counsel shall be designated by the Indemnified Party and be
reasonably acceptable to the Indemnifying Party) at any time for such
Indemnified Party, or for fees and expenses that are not reasonable. Whether
or not such defense is assumed by the Indemnifying Party, such Indemnifying
Party will not be subject to any liability for any settlement made without its
consent (which consent shall not be unreasonably withheld). The Indemnifying
Party shall not consent to entry of any judgment or settle or compromise any
pending or threatened claim, action or proceeding, unless it contains as an
unconditional term thereof the giving by the claimant or plaintiff to the
Indemnified Party of a release, in form and substance satisfactory to such
Indemnified Party, from all liability in respect of such claim or litigation
for which such Indemnified Party would be entitled to indemnification
hereunder.
The Indemnifying Party's liability to any such Indemnified Party
hereunder shall not be extinguished solely because any other Indemnified Party
is not entitled to indemnity hereunder.
4.10.4 CONTRIBUTION. If the indemnification provided for in this
Section 4.10 is unavailable to an Indemnified Party in respect of any Losses
or is insufficient to hold such Indemnified Party harmless, then, except to
the extent that contribution is not permitted under Section 11(f) of the
Securities Act, each applicable Indemnifying Party shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses,
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party, on the one hand, and such Indemnified Party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations appropriate
under the circumstances. The relative fault of such Indemnifying Party, on the
one hand, and such Indemnified Party, on the other hand, shall be determined
by reference to, among other things, whether any action in question, including
any untrue statement of a material fact or omission to state a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information concerning the matter with respect to which
the claim was asserted and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a result of
any Losses shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.10.4 were determined by PRO RATA
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 4.10.4, no Indemnifying Party
that is a Selling Holder shall be required to contribute any amount in excess of
the amount by which the net proceeds received by such Selling Holder from the
sale of Registrable Shares exceeds the amount of any damages that such Selling
Holder has otherwise
46
been required to pay by reason of such untrue or alleged untrue statement or
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
4.10.5 UNDERWRITING AGREEMENT TO GOVERN. At such time as an
underwriting agreement with respect to a particular underwriting is entered
into, the terms of any such underwriting agreement shall govern with respect to
the matters set forth therein to the extent inconsistent with this Section 4.10;
PROVIDED, HOWEVER, however, that the indemnification provisions of such
underwriting agreement as they relate to Selling Holders are customary for
registrations of the type then proposed and provide for indemnification by such
Selling Holders only with respect to written information regarding such Selling
Holder furnished by such Selling Holders.
4.11 RULE 144. Following a Public Offering Event, the Company shall
file the reports required be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission
thereunder and will take such further action as any Holder of Registrable
Shares may reasonably request, all to the extent required from time to time to
enable such Holder to sell Registrable Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
Upon the request of any Holder of Registrable Shares, the Company will deliver
to such Holder a written statement as to whether it has complied with such
requirements.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Stockholders as follows:
5.1.1 ORGANIZATION. It is a corporation duly organized and
validly listing under the laws of the State of
Delaware;
5.1.2 AUTHORITY. It has full corporate power and authority to
execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby;
5.1.3 BINDING OBLIGATION. The execution, delivery and performance of
this Agreement by it and the consummation by it of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on its part, and, assuming the due execution by the Stockholder seeking
enforcement against the Company, this Agreement constitutes its binding
obligation, enforceable against it in accordance with its terms, except insofar
as enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws which may affect creditors rights and remedies generally and by principles
of equity (regardless of whether enforceability is considered in a proceeding in
equity or at law); and
47
5.1.4 NO CONFLICT. The execution, delivery and performance of this
Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its certificate or articles of incorporation or its bylaws or any
material agreement or other material instrument to which it is a party or by
which it or its property is bound.
5.2 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each of the
Stockholders represents and warrants to each other and to the Company as
follows:
5.2.1 ORGANIZATION. If it is an entity, it is a corporation,
limited partnership or other entity duly organized and validly existing under
the laws of its respective state of organization;
5.2.2 AUTHORITY. It has full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby;
5.2.3 BINDING OBLIGATION. The execution, delivery and performance of
this Agreement by it and the consummation by it of the transactions contemplated
hereby have been duly and validly authorized by all necessary action on its
part, and, assuming the due execution by the Company, this Agreement constitutes
its binding obligation, enforceable against it in accordance with its terms,
except insofar as enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws which may affect creditors' rights and remedies
generally and by principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law); and
5.2.4 NO CONFLICT. The execution, delivery and performance of this
Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation, bylaws, trust or equivalent
governing document or any material agreement or other material instrument to
which it is a party or by which it or its property is bound.
ARTICLE VI. TERMINATION OF AGREEMENT
6.1 TERMINATION. Subject to the next succeeding sentence, this
Agreement shall terminate ten (10) years from the date of this Agreement (the
"TERMINATION DATE"). If any rights and obligations provided in Article I,
Sections 2.3, 2.4, 2.5, 2.7, 2.8, 2.9 and Section 2.10, and Article III of
this Agreement have not terminated earlier in accordance with the preceding
sentence, such rights and obligations shall terminate on the date of a Public
Offering Event.
48
ARTICLE VII. GENERAL
7.1 FINANCIAL REPORTS AND INFORMATION.
(a) Within one hundred twenty (120) days after the end of each
fiscal year of the Company, for so long as this Agreement shall be in
effect, the Company agrees to furnish each of the Financing Stockholders
with audited consolidated financial statements of the Company for such
fiscal year (showing comparison to the prior fiscal year) which shall
include a statement of income and retained earnings for each such fiscal
year, a balance sheet as at the last day thereof, and a statement of cash
flows prepared in accordance with generally accepted accounting principles
consistently applied.
(b) If for any period any company shall have any subsidiary or
subsidiaries whose accounts are consolidated with those of the Company,
then in respect of such period the financial statements delivered pursuant
to the foregoing Section 7.1(a) shall be the consolidated financial
statements of the Company and all such consolidated subsidiaries.
(c) Promptly upon becoming available, the Financing
Stockholders shall be given copies of all financial statements, reports,
press releases, notices, proxy statements and other documents sent by the
Company to its lenders (including, without limitation, the information to
be provided pursuant to Section 6.1 of the Credit Agreement, dated October
2, 2000, among the Company, the lenders listed on the signature pages
thereto, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners, L.P., and ▇▇▇▇▇ Fargo Bank, N.A.,
as in effect on the date hereof) or released to the public and copies of
all regular and periodic reports, if any, filed by the Company with the
Commission or any securities exchange.
7.2 RECAPITALIZATION, EXCHANGES, ETC., AFFECTING THE SHARES. The
provisions of this Agreement shall apply to the full extent set forth herein
with respect to (a) the Shares and any option, right or warrant to acquire
Shares, and (b) any and all shares of capital stock of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in exchange for, or in
substitution for any Shares, by combination, recapitalization, reclassification,
merger, consolidation or otherwise. In the event of any change in the
capitalization of the Company, as a result of any stock split, stock dividend or
stock combination, the provisions of this Agreement shall be appropriately
adjusted.
7.3 INJUNCTIVE RELIEF. It is hereby agreed and acknowledged that it will
be impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that, in the event of any such failure, an aggrieved person will be irreparably
damaged and will not have an adequate remedy of law. Any such person shall,
therefore, be entitled to injunctive relief, including specific performance, to
enforce
49
such obligations, without the posting of any bond and if any action should be
brought in equity to enforce any of the provisions of this Agreement, none of
the parties hereto shall raise the defense that there is an adequate remedy
at law.
7.4 NOTICES. Except as otherwise expressly provided herein, any and all
notices, demands or other communications required or permitted hereunder shall
be in writing and shall be made by hand delivery (deemed given upon receipt), or
by certified mail return receipt requested (deemed given upon execution of such
return receipt), addressed to a Stockholder and the Company at the address set
forth below such person's or entity's signature. Any party may change its
address for notice by notice given to each Stockholder and the Company in
accordance with the foregoing. No objection may be made to the method of
delivery of any notice actually and timely received.
7.5 LEGEND. In addition to any other legend which may be required by
applicable law, each share certificate representing Shares which are subject to
this Agreement shall have endorsed, to the extent appropriate, upon its face the
following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS
EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II)
ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE
SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING
RULE 144, PROVIDED AN OPINION OF COUNSEL IS FURNISHED TO THE
COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE
COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE SECURITIES LAW IS
AVAILABLE.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF A
STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER 2, 2000, AS SUCH MAY BE
AMENDED FROM TIME TO TIME (THE "
STOCKHOLDERS AGREEMENT"), A COPY OF
WHICH IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF
50
THE COMPANY. NO TRANSFER OF THE SECURITIES WILL BE MADE ON THE BOOKS
OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE
TERMS OF SUCH
STOCKHOLDERS AGREEMENT. THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE ALSO SUBJECT TO OTHER RIGHTS AND OBLIGATIONS AS
SET FORTH IN THE
STOCKHOLDERS AGREEMENT.
To the extent the circumstances or provisions requiring any of the above legends
have ceased to be effective, the Company will upon request reissue certificates
without the applicable legend or legends.
7.6 TRANSFEREES BOUND. All Shares owned by a Transferee shall, subject
to the terms of Section 2.3 of this Agreement, for all purposes be subject to
the terms of this Agreement, whether or not such Transferee has executed a
consent to be bound by this Agreement. The foregoing shall not apply in the case
of any Shares acquired by a Transferee pursuant to a sale of Shares pursuant to
an effective registration statement under the Securities Act or, except for
sales to an affiliate of the Company or sales made prior to a Public Offering
Event, pursuant to Rule 144.
7.7 AMENDMENT; WAIVER; REPRESENTATIVES. This Agreement may be amended,
modified, supplemented or terminated only by a written instrument signed by each
of (i) the Company, (ii) Stockholders holding a majority of the Registrable
Purchaser Shares, (iii) Management Stockholders holding a majority of the
Registrable Common Management Shares, and (iv) Financing Stockholders holding a
majority of the Registrable Financing Shares. No provision of this Agreement may
be waived orally, but only by a written instrument signed by the party against
whom enforcement of such waiver is sought. Stockholders shall be bound from and
after the date of the receipt of a written notice from the Company setting forth
such amendment or waiver by any consent authorized by this Section 7.7, whether
or not the Shares shall have been marked to indicate such consent; no
alteration, modification or impairment shall be implied by reason of any
previous waiver, extension of time, delay or omission in exercise, or other
indulgence. For purposes of this Agreement, the parties hereto shall designate
and appoint representatives (each, a "REPRESENTATIVE") as provided in this
Section 7.7. The Purchaser Parties hereby designate and appoint Purchaser (or
any successor designated in writing by the Purchaser Parties holding Shares that
constitute, on a fully-diluted basis, a majority in value of the Shares held by
all of the Purchaser Parties) as Representative on behalf of the Purchaser
Parties; the Management Parties hereby designate and appoint ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (or
any successor designated in writing by Management Parties holding Common Shares
that constitute, on a fully-diluted basis, a majority in value of the Common
Shares held by all of the Management Parties) as Representative on behalf of the
Management Parties; and the Financing Parties hereby designate and appoint
▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇ (or any successor designated in writing by
51
Financing Parties holding Shares that constitute, on a fully-diluted basis, a
majority in value of the Shares held by all of the Financing Parties) as
Representative on behalf of the Financing Parties. Each Representative shall
have the authority to receive any notices, settle any claims, agree to any
amendments, and grant any consents or waivers on behalf of the parties that
such Representative represents. The parties hereto shall be entitled to deal
exclusively with the respective Representatives with respect to matters
arising out of this Agreement, and the parties hereto shall be entitled to
deliver any notices to the respective Representatives and rely on any action
of the respective Representatives with respect to actions taken under this
Agreement on behalf of the parties hereto.
7.8 ADDITIONAL DOCUMENTS; FURTHER CHANGES. Each party hereto agrees to
execute any and all further documents and writings within its powers and to
perform such other actions which may be or become necessary or expedient to
effectuate and carry out this Agreement. Each party hereto acknowledges and
agrees to negotiate in good faith to amend this Agreement to the extent
necessary to provide for customary and reasonable changes required by any
third-party co-investor or other person acquiring an equity interest in the
Company pursuant to the financing of the transactions contemplated by the Merger
Agreement.
7.9 NO THIRD-PARTY BENEFITS. Other than Section 4.10 hereof, none of the
provisions of this Agreement shall be for the benefit of, or enforceable by, any
third-party beneficiary.
7.10 SUCCESSORS AND ASSIGNS. Subject to the terms hereof, this Agreement
shall be binding upon and shall inure to the benefit of the Stockholders, and
their respective successors and permitted assigns; PROVIDED, HOWEVER, (i)
neither this Agreement nor any rights or obligations hereunder may be
transferred by the Company and (ii) no rights or obligations of any Stockholder
under this Agreement may be assigned except that (x) any Stockholder may
transfer its rights and obligations hereunder, in whole or in part in connection
with a Transfer of Shares made in compliance with all of the provisions of this
Agreement and (y) any Purchaser Party may transfer such Purchaser Party's rights
hereunder, including, without limitation, the right to nominate Purchaser
Nominees pursuant to Section 1.2, in whole or in part, to any affiliate in
connection with a Transfer of Shares made in compliance with all of the
provisions of this Agreement.
7.11 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein; PROVIDED, HOWEVER, that the parties hereto shall
use their reasonable best efforts to find and employ an
52
alternative means to achieve the same or substantially the same result as that
contemplated by such invalid, illegal or unenforceable term, provision,
covenant or restriction.
7.12 INTEGRATION. This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof. There are no
restrictions, agreements, promises, representations, warranties, covenants or
undertakings with respect to the subject matter hereof other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter.
7.13 GOVERNING LAW. THE RIGHTS AND LIABILITIES OF THE PARTIES SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
DELAWARE, REGARDLESS OF THE CHOICE
OF LAWS PROVISIONS OF SUCH STATE OR ANY OTHER JURISDICTION.
7.14 ATTORNEYS' FEES. Should any litigation or arbitration be commenced
(including any proceedings in a bankruptcy court) between the parties hereto or
their representatives concerning any provision of this Agreement or the rights
and duties of any person or entity hereunder, the party or parties prevailing in
such proceeding shall be entitled, in addition to such other relief as may be
granted, to the reasonable attorneys' fees and court costs incurred by reason of
such litigation or arbitration.
7.15 HEADINGS. The headings in this Agreement are inserted only as a
matter of convenience, and in no way define, limit, or extend or interpret the
scope of this Agreement or of any particular Section.
7.16 INFORMATION FOR NOTICES. No Stockholder (other than a Stockholder
as of the date of this Agreement with respect to the Shares held as of such
date) shall hold any of its Shares in nominee name unless it otherwise provides
the Company and the other Stockholders with its name and address and other
information reasonably requested by the Company in order to establish such
Stockholder's particular status under this Agreement (e.g., Purchaser Holder,
Management Party, etc.).
7.17 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.18 CONSENT TO JURISDICTION. Each Stockholder agrees that any
proceeding arising out of or relating to this Agreement or the breach or
threatened breach of this Agreement may be commenced and prosecuted in a court
in the State of
Delaware. Each Stockholder hereby irrevocably and
unconditionally consents and submits to the non-exclusive personal
jurisdiction of any court in the State of
Delaware in respect of
53
any such proceeding. Each Stockholder consents to service of process upon it
with respect to any such proceeding by registered mail, return receipt
requested, and by any other means permitted by applicable laws and rules. Each
Stockholder waives any objection that it may now or hereafter have to the
laying of venue of any such proceeding in any court in the State of
Delaware
and any claim that it may now or hereafter have that any such proceeding in
any court in the State of
Delaware has been brought in an inconvenient forum.
7.19 NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreements with respect to its securities which are inconsistent with
or violate in any material respects the rights granted to the Holders of
Registrable Shares in this Agreement.
7.20 APPROVAL OF MANAGEMENT SERVICES AGREEMENT BY STOCKHOLDERS. Each of
the Stockholders, by such Stockholder's execution of this Agreement, hereby (i)
approves the payment by the Company to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners, L.P. ("LGP")
and TPG GenPar III, L.P. ("TPG") of certain fees in connection with the
consummation of the transactions contemplated by the Merger Agreement and
certain fees in connection with the provision of ongoing services to the
Company, and (ii) approves and adopts the Management Services Agreement to be
entered into between the Company and LGP and TPG, dated as of the date hereof
(the "MANAGEMENT SERVICES AGREEMENT"). The payment of any fees, expenses, or
other related items under this Section 7.20 or under the Management Services
Agreement shall be excluded from and shall not affect the determination or the
amount of any bonus payments made under any of the Company's bonus plans,
including those to be adopted pursuant to Section 1.11 hereof, all such
determinations and amounts of bonus payments shall be calculated and made as if
any such fees were neither paid nor payable by the Company.
7.21 CERTAIN LIMITATIONS. Notwithstanding anything to the contrary
contained in this Agreement, prior to the issuance or sale of any shares of the
Company's capital stock pursuant to an effective registration statement under
the Securities Act, the Company shall not be required to register any transfer
of Shares on the Company's books if in the reasonable, good faith judgment of
the Company, registering such transfer would cause the Company to become subject
to registration pursuant to the Exchange Act.
7.22 INFORMATION REGARDING BENEFICIAL OWNERSHIP. Each Stockholder agrees
to promptly provide to the Company any information or representations that the
Company may request regarding such holder's beneficial ownership of shares of
any class of the Company's capital stock.
54
7.23 NO TAX ADVICE. Each Management Stockholder acknowledges that the
United States federal, state, local, and other tax consequences to such
stockholder of acquiring, holding, and selling or otherwise disposing of its
Shares may be affected by an election by such stockholder under Section 83(b) of
the Internal Revenue Code of 1986, as amended (an "83(b) ELECTION") with regard
to such Shares. Each Management Stockholder understands and acknowledges that
(i) it has not relied on the Company or Purchaser (or any of their affiliates,
employees, agents or advisors) with regard to the desirability or manner of
making an 83(b) Election and (ii) the Company has urged such stockholder to
consult its tax advisor with regard to the desirability and manner of making an
83(b) Election. Each Management Stockholder shall promptly provide the Company
with a copy of any 83(b) Elections made by such stockholder with regard to its
Shares.
7.24 AFTER ACQUIRED SHARES. The provisions of this Agreement shall apply
to any shares of capital stock of the Company acquired after the date hereof by
any party hereto or by any party that agrees to be bound by the terms thereof.
7.25 NOTICES. Unless otherwise specified herein, all notices and other
communications hereunder shall be in writing and shall be deemed given upon
personal delivery, facsimile transmission (which is confirmed), telex or
delivery by an overnight express courier service (delivery, postage or freight
charges prepaid), or on the fourth day following deposit in the United States
mail (if sent by registered or certified mail, return receipt requested,
delivery, postage or freight charges prepaid, and otherwise to be sent by first
class mail), addressed to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to the Company, to:
PETCO Animal Supplies, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
55
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to any of the Purchaser Parties, to:
BD Recapitalization Holdings LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners, L.P.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
56
if to any of the Management Parties, to the address and/or
telephone number set forth below such Stockholder's name on
the signature pages hereto
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Lorne, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to any of the Financing Parties, to:
TCW/Crescent Mezzanine LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
with a copy (which shall not constitute notice) to:
Trust Company of the West
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier no.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
with another copy to (which shall not constitute
notice):
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
3000 Two ▇▇▇▇▇ Square
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier no.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
7.26 AMENDED OPTION AGREEMENT. Any Employee Stockholder that executes an
Amended Option Agreement substantially in the form included in Schedule 7.26
shall be a party to this Agreement and all options to purchase Shares and all
Shares issuable upon the exercise of such options shall be subject to the terms
of this Agreement.
57
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first set forth above.
PETCO ANIMAL SUPPLIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
BD RECAPITALIZATION HOLDINGS LLC
GREEN EQUITY INVESTORS III, L.P.,
Managing Member
By: GEI Capital III, LLC General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Manager
TPG PARTNERS III, L.P.
By: TPG GenPar III, L.P. Its General Partner,
Managing Member
By: TPG Advisors III, Inc.
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Vice President
MANAGEMENT STOCKHOLDERS
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW Advisers (Bermuda), Ltd.
as its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Group Managing Director
By: TCW Investment Management Company
as Investment Advisor
By: /s/ ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
TCW LEVERAGED INCOME TRUST II, L.P.
By: TCW (▇▇▇▇ ▇▇), L.P.
as its General Partner
By: TCW Advisers (Bermuda), Ltd.
its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Group Managing Director
By: TCW Investment Management Company
as Investment Adviser
By: /s/ ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
TCW LEVERAGED INCOME TRUST IV, L.P.
By: TCW Asset Management Company
as its Investment Adviser
By: /s/ ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
By : /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Group Managing Director
By: TCW (▇▇▇▇ ▇▇), L.L.C.
as General Partner
By: TCW Asset Management Company
as its Managing Member
By: /s/ ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Group Managing Director
TCW/CRESCENT MEZZANINE PARTNERS II, L.P.
By: TCW/Crescent Mezzanine II, L.P.
its General Partner or Managing Member
By: TCW/Crescent Mezzanine, L.L.C.
its General Partner
By: /s/ ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
TCW/CRESCENT MEZZANINE TRUST II
By: TCW/Crescent Mezzanine II, L.P.
its General Partner or Managing Member
By: TCW/Crescent Mezzanine, L.L.C.
its General Partner
By: /s/ ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
SCHEDULE I
INITIAL MANAGEMENT STOCKHOLDERS
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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SCHEDULE II
FINANCING STOCKHOLDERS
TCW Leveraged Income Trust, L.P.
TCW Leveraged Income Trust II, L.P.
TCW Leveraged Income Trust IV, L.P.
TCW/Crescent Mezzanine Partners II, L.P.
TCW/Crescent Mezzanine Trust II
SCHEDULE III
STOCKHOLDER COMMON STOCK SERIES A PREFERRED STOCK SERIES B PREFERRED STOCK WARRANTS
----------- ------------ ------------------------ ------------------------ --------
BD Recapitalization 708,624 102,308 72,103 0
Holdings LLC
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 87,976 0 0 0
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 8,798 0 0 0
▇▇▇▇▇ ▇. ▇▇▇▇ 17,595 0 0 0
▇▇▇▇▇ ▇. ▇▇▇▇▇ 11,184 0 0 0
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 8,798 0 0 0
TCW Leveraged Income Trust, L.P. 2,460 1,084 764 6,393
TCW Leveraged Income Trust II, L.P. 2,460 1,084 764 6,393
TCW Leveraged Income Trust IV, L.P. 2,460 1,084 764 6,393
TCW/Crescent Mezzanine Partners II, L.P. 9,068 3,996 2,816 23,560
TCW/Crescent Mezzanine Trust II 2,200 970 684 5,711