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EXHIBIT (c)(7)
JILLIAN'S ENTERTAINMENT HOLDINGS, INC.
STOCKHOLDERS AGREEMENT
Dated as of June [ ], 1997
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JILLIAN'S ENTERTAINMENT HOLDINGS, INC.
STOCKHOLDERS AGREEMENT
TABLE OF CONTENTS
Page
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PREAMBLE................................................................. 1
ARTICLE I Definitions............................................. 2
ARTICLE II Covenants and Conditions................................ 8
Section 2.1 Restrictions on Transfers............................... 7
Section 2.2 Call by the Company..................................... 9
Section 2.3 Come Along.............................................. 13
Section 2.4 Take Along.............................................. 14
Section 2.5 Purchase Rights......................................... 15
Section 2.6 Restrictions on Other
Agreements.............................................. 17
Section 2.7 Synthetic Sales......................................... 17
Section 2.8 Corporate Governance.................................... 17
ARTICLE III Registration Rights..................................... 18
Section 3.1 General................................................. 18
Section 3.2 Demand Registrations.................................... 18
Section 3.3 Piggyback Registration.................................. 19
Section 3.4 Obligations of the Company.............................. 21
Section 3.5 Furnish Information..................................... 25
Section 3.6 Expenses of Registration................................ 25
Section 3.7 Underwriting Requirements............................... 25
Section 3.8 Indemnification......................................... 26
Section 3.9 Lock-Up Agreement....................................... 29
Section 3.10 No Inconsistent Agreements.............................. 29
Section 3.11 Stock Split and Reverse
Stock Split............................................. 29
ARTICLE IV Miscellaneous........................................... 30
Section 4.1 Remedies................................................ 30
Section 4.2 Entire Agreement; Amendment; Waiver..................... 30
Section 4.3 Severability............................................ 31
Section 4.4 Notices................................................. 31
Section 4.5 Binding Effect; Assignment.............................. 32
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Section 4.6 Governing Law........................................... 33
Section 4.7 Termination............................................. 33
Section 4.8 Recapitalization, Exchanges, Etc........................ 33
Section 4.9 JWC Group Stockholder Representative.................... 34
Section 4.10 Action Necessary to Effec-
tuate the Agreement..................................... 34
Section 4.11 Purchase for Investment;
Legend on Certificate................................... 34
Section 4.12 Effectiveness of Transfers.............................. 35
Section 4.13 Additional Stockholders................................. 36
Section 4.14 No Waiver............................................... 36
Section 4.15 Counterparts............................................ 36
Section 4.16 Headings................................................ 36
Section 4.17 Number; Gender.......................................... 36
Section 4.18 Effective Time.......................................... 37
EXHIBIT A Schedule of Stockholders
EXHIBIT B Form of Note
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STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement") is entered
into as of the [ ] day of June, 1997, by and among Jillian's Entertainment
Holdings, Inc., a Delaware corporation (the "Company"), those persons listed as
JWC Group Stockholders on the signature pages hereof, including ▇.▇. Childs
Equity Partners, L.P., a Delaware limited partnership ("Equity Partners")
(collectively, the "JWC Group Stockholders"), those persons listed as
Management Stockholders on the signatures pages hereof (the "Management
Stockholders") and those persons listed as Non-Management Stockholders on the
signatures pages hereof (the "Non-Management Stockholders"). The JWC Group
Stockholders, the Management Stockholders and the Non- Management Stockholders
are collectively referred to herein as the "Stockholders".
WHEREAS, upon consummation of the transactions
contemplated by that certain Purchase Agreement dated as of June [ ], 1997 (the
"Purchase Agreement"), by and among the Company, the Stockholders, those
persons listed as Other Option Holders on the signature pages thereto, those
persons listed as Continuing Option Holders on the signature pages thereto and
those persons listed as Continuing Warrant Holders on the signature pages
thereto, the Stockholders will own the number of shares of Common Stock and
Preferred Stock set forth opposite their respective names on Exhibit A hereto;
and
WHEREAS, each of the Stockholders desires to enter into
this Agreement for the purpose of regulating certain aspects of the
Stockholders' relationships with regard to the Company and certain restrictions
on, and rights and obligations with respect to, the Common Stock and Preferred
Stock owned by the Stockholders.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
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ARTICLE I
Definitions
For the purposes of this Agreement, the following terms
shall be defined as follows:
1933 Act. The "1933 Act" shall mean the Securities Act of
1933, as amended.
1934 Act. The "1934 Act" shall mean the Securities
Exchange Act of 1934, as amended.
Affiliate. An "Affiliate" of a specified Person shall mean
a Person which, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the corporation
or other entity specified and, when used with respect to the Company or any
Subsidiary of the Company, shall include any holder of at least five percent
(5%) of the capital stock, or any officer or director, of the Company.
Anniversary Date. "Anniversary Date" shall mean the date
which is one year after the closing under the Purchase Agreement.
Associate. "Associate," (a) when used to indicate a
relationship with any Person shall mean, (i) any corporation or organization of
which such Person is an officer or partner or is, directly or indirectly, the
beneficial owner of ten percent (10%) or more of any class of equity
securities, (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar fiduciary capacity and (iii) any relative of such Person who
has the same home as such Person or is a parent, aunt or uncle, sibling,
spouse, in-law, child, niece or nephew or grandchild of such Person, or the
spouse of any of them, or (b) when used to indicate a relationship with the
Company, shall also mean a director or officer of the Company or any
Subsidiary. Neither the Company nor any of its Subsidiaries shall be deemed an
Associate of any Stockholder.
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Board. The "Board" shall mean the Board of Directors of
the Company as the same shall be constituted from time to time.
Business Day. "Business Day" shall mean any day which is
not a Saturday, Sunday or legal holiday in the State of Delaware.
Cause. "Cause" shall mean (a) disregard of lawful
instructions of the Board or of a superior officer of the Company or of the
Board of Directors or a superior officer of any Subsidiary of the Company, as
the case may be, relating to the business or affairs of the Company or any
Subsidiary of the Company (the Company or Subsidiary of the Company having
given written notice thereof and the employee having failed to comply, as
promptly as is reasonably practicable, with such instructions upon receipt of
such notice), (b) dishonesty or willful misconduct injurious to the Company or
any Subsidiary of the Company whether monetarily or otherwise of a material
nature, (c) conviction of a felony or any crime involving moral turpitude, (d)
habitual drunkenness or drug abuse or (e) excessive absenteeism not related to
a medically determinable illness or injury.
Common Stock. "Common Stock" shall mean the Company's
common stock, par value $.001 per share, that the Company may be authorized to
issue from time to time, any other securities of the Company into which such
Common Stock may hereafter be changed or for which such Common Stock may be
exchanged after giving effect to the terms of such change or exchange (by way
of reorganization, recapitalization, merger, consolidation or otherwise) and
shall also include any common stock of the Company hereafter authorized and any
capital stock of the Company of any other class hereafter authorized which is
not preferred as to dividends or distribution of assets in liquidation over any
other class of capital stock of the Company and which has ordinary voting power
for the election of directors of the Company.
Company Stock. "Company Stock" shall mean the Common
Stock, the Preferred Stock or any other common or preferred stock of the
Company.
Good Reason. "Good Reason" shall mean with respect to any
Management Stockholder, such Management
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Stockholder's resignation from his employment with the Company or any of its
Subsidiaries following and because of (a) the Company's reducing or reassigning
a material portion of the Management Stockholder's duties under his employment
agreement, if any, without Cause or (b) a reduction of the Management
Stockholder's base salary other than in connection with an across-the-board
reduction of executive compensation imposed by the Board in response to
negative financial results or other adverse circumstances affecting the
Company.
Permitted Transfer. A "Permitted Transfer" shall mean:
(a) a Transfer of Shares by any JWC Group
Stockholder or Management Stockholder who is a natural person to such
Stockholder's spouse, children, grandchildren, parents or siblings or a trust
for the benefit of any of them;
(b) a bona fide pledge of Shares by a JWC Group
Stockholder to a bank, financial institution or other lender;
(c) a Transfer of Shares between any Stockholder
who is a natural person and such Stockholder's guardian or conservator;
(d) a Transfer of Shares from any Stockholder
which is a partnership to its partners, provided such Transfer is reasonably
acceptable to the Company;
(e) a Transfer of Shares from any Stockholder
which is a corporation or partnership to any Affiliate of such Stockholder,
provided such Transfer is reasonably acceptable to the Company;
(f) a Transfer of Shares from any Stockholder
which is a trust to the beneficiaries of such trust or to another trust with
the same beneficiaries, provided such Transfer is reasonably acceptable to the
Company;
(g) a Transfer of Shares by a JWC Group
Stockholder to another JWC Group Stockholder or to an officer, employee or
consultant of ▇.▇. Childs Associates, Inc. ("JWC Associates") or to a
corporation or
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partnership (or other entity for collective investment, such as a fund) which
is controlled by, controlling or under common control with JWC Associates; or
(h) a Transfer of Shares by a Management
Stockholder to another Management Stockholder.
No Permitted Transfer shall be effective unless and until the transferee of the
Shares so Transferred, if such transferee is not already a party to this
Agreement, executes and delivers to the Company an executed counterpart of this
Agreement in accordance with the terms of Section 4.13 hereof. No Permitted
Transfer shall conflict with or result in any violation of a judgment, order,
decree, statute, law, ordinance, rule or regulation.
Permitted Transferee. A "Permitted Transferee" shall mean
any Person who shall have acquired and who shall hold Shares pursuant to a
Permitted Transfer.
Person. "Person" shall mean an individual, corporation,
partnership, limited liability company, trust, or unincorporated association,
or a government or any agency or political subdivision thereof.
Preferred Stock. "Preferred Stock" shall mean the
Company's preferred stock, par value $.001 per share, that the Company may be
authorized to issue from time to time, any other securities of the Company
(other than Common Stock) into which such Preferred Stock may hereafter be
changed or for which such Preferred Stock may be exchanged after giving effect
to the terms of such change or exchange (by way or reorganization,
recapitalization, merger, consolidation or otherwise) and shall also include
any preferred stock of the Company hereafter authorized.
Public Offering. A "Public Offering" shall mean the
completion of a sale of Common Stock, resulting in gross cash proceeds of not
less than $25 million, pursuant to a registration statement which has become
effective under the 1933 Act, excluding registration statements on Form ▇-▇,
▇-▇ or similar limited purpose forms and also excluding the registration of any
equity security issued to non-Affiliates of the Company as part
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of a bona fide debt offering of units comprised of such equity security and a
debt security of the Company.
Registrable Securities. "Registrable Securities" shall
mean all shares of Common Stock held from time to time by any party hereto and
any other securities of the Company or any of its Subsidiaries issued in
exchange for, upon a reclassification of, or in a distribution with respect to,
such Common Stock. As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
1933 Act and such securities shall have been disposed of in accordance with
such registration statement, (b) such securities shall have been sold under a
Rule 144 Transaction, (c) such securities shall have ceased to be outstanding
or (d) with respect to such securities held by a Non-Management Stockholder,
(i) such Non-Management Stockholder owns less than 1% of the shares of Common
Stock then outstanding (on a fully diluted basis after giving effect to the
exercise of all options, warrants and the like and the conversion of all
securities convertible into or exchangeable for Common Stock) and (ii) such
securities may be disposed of by such Non-Management Stockholder in compliance
with Rule 144 under the 1933 Act.
Rule 144 Transaction. "Rule 144 Transaction" shall mean a
Transfer of Shares (a) complying with Rule 144 under the 1933 Act as such Rule
or a successor thereto is in effect on the date of such Transfer (but only a
sale pursuant to a "brokers' transaction" as defined in clauses (i) and (ii) of
paragraph (g) of Rule 144 as in effect on the date hereof) and (b) occurring at
a time when Shares are registered pursuant to Section 12 of the 1934 Act.
Schedule. "Schedule" shall refer to the Schedule of
Stockholders attached hereto as Exhibit A, as amended from time to time in
accordance with Section 4.13.
SEC. "SEC" shall mean the Securities and Exchange
Commission.
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Shares. "Shares" shall mean (a) all shares of Company
Stock and (b) securities of the Company issued in exchange for, upon
reclassification of, or as a distribution in respect of, any Company Stock;
provided that "Shares", when referring to a number of shares of Preferred
Stock, shall mean the number of shares of Common Stock into which such
Preferred Stock is convertible at the prevailing conversion price.
Subsidiary. "Subsidiary," with respect to any entity (the
"parent"), shall mean any corporation, firm, association or trust of which such
parent, at the time in respect of which such term is used, (a) owns directly or
indirectly more than fifty percent (50%) of the equity or beneficial interest,
on a consolidated basis, and (b) owns directly or controls with power to vote,
indirectly through one or more Subsidiaries, shares of capital stock or
beneficial interest having the power to cast a majority of the votes entitled
to be cast for the election of directors, trustees, managers or other officials
having powers analogous to that of directors of a corporation. Unless otherwise
specifically indicated, when used herein the term Subsidiary shall refer to a
direct or indirect Subsidiary of the Company.
Synthetic Sale. "Synthetic Sale" shall mean any hedge,
sale or purchase of any derivative security or other action (other than
Transfers expressly permitted by the terms hereof) having the effect of
reducing a Stockholder's economic interest in Shares or reducing a
Stockholder's exposure to a decrease in fair market value of Shares.
Third Party. "Third Party" shall mean any Person other
than the Company.
Transaction Price. "Transaction Price" shall mean (i)
$0.9322 per Share of Common Stock with respect to Shares issued after the
Effective Time or with respect to Shares issued pursuant to incentive options,
granted as of the Effective Time and exercisable at $0.9322 per Share, under
the Company's 1997 Non-Qualified Stock Option Plan (the "Plan") and (ii) $0.50
per Share of Common Stock with respect to Shares issued and outstanding as of
the Effective Time or with respect to Shares issued pursuant to options granted
under the Plan (excluding those options set forth in (i) above); in each
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case as equitably adjusted for stock dividends, stock splits, reverse stock
splits and other similar reclassifications.
Transfer. "Transfer" shall mean to transfer, sell, assign,
pledge, hypothecate, give, create a security interest in or lien on, place in
trust (voting or otherwise), assign or in any other way encumber or dispose of,
directly or indirectly and whether or not by operation of law or for value, any
Shares.
ARTICLE II
Covenants and Conditions
Section 2.1 Restrictions on Transfers. Without the prior
written consent of JWC Group Stockholders holding a majority of the aggregate
number of Shares held by all of the JWC Group Stockholders, no Stockholder may
Transfer all or any part of the Shares owned by such Stockholder other than a
Transfer of Shares which is (i) a Permitted Transfer, (ii) pursuant to a Public
Offering, (iii) for any JWC Group Stockholder, Management Stockholder or
Non-Management Stockholder, made after a Public Offering, pursuant to a Rule
144 Transaction; provided that no Management Stockholder or Non-Management
Stockholder shall Transfer, pursuant to any Rule 144 Transaction, an aggregate
number of Shares that, together with all prior Transfers by such Management
Stockholder or Non-Management Stockholder pursuant to one or more Rule 144
Transactions and Public Offerings, represents more than (A) the aggregate
number of Shares Transferred by the JWC Group Stockholders other than pursuant
to a Permitted Transfer multiplied by (B) such Management Stockholder's or
Non-Management Stockholder's Proportionate Equity Interest or (iv) pursuant to
another section of this Article II. For purposes of this Section 2.1,
"Proportionate Equity Interest" shall mean the number of Shares set forth on
the Schedule opposite the Management Stockholder's or Non-Management
Stockholder's name plus the number of Shares underlying options granted to such
Management Stockholder or Non-Management Stockholder pursuant to the Purchase
Agreement (to the extent exercisable) divided by the aggregate number of
Shares set forth on the Schedule opposite the names of the JWC Group
Stockholders, in each case as equitably adjusted to account for stock
dividends, stock splits, reverse stock
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splits or other similar reclassifications. For purposes of calculating the
Proportionate Equity Interest only, the number of Shares set forth opposite any
Stockholder's name on the Schedule shall not include any adjustments to such
number arising out of Transfers pursuant to Rule 144 Transactions or Public
Offerings. Any Transfer of Shares pursuant to this Section 2.1 (other than
pursuant to Sections 2.1 (ii) and (iii)) shall remain subject to the Transfer
restrictions of this Agreement, and each intended transferee pursuant to this
Section shall execute and deliver to the Company a counterpart of this
Agreement, which shall evidence such transferee's agreement that the Shares
intended to be Transferred shall continue to be subject to this Agreement and
that as to such Shares the transferee shall be bound by the restrictions of
this Agreement as a Stockholder hereunder.
Section 2.2 Call by the Company.
(a) If the employment of a Management
Stockholder by the Company or any of its Subsidiaries shall terminate (a "Call
Event") prior to the completion of the Company's initial Public Offering, the
Company shall have the right to purchase (the "Call Option"), by delivery of a
written notice (the "Call Notice") to such terminated Management Stockholder or
such Management Stockholder's Permitted Transferees (except such Management
Stockholder's Permitted Transferees who are Management Stockholders and who
received such Transferred Shares pursuant to a good faith Permitted Transfer)
(the "Call Group") no later than ninety (90) days after the date of such Call
Event, and such Management Stockholder and the Call Group shall be required to
sell all (but not less than all) of the Shares which are owned by the members
of the Call Group on the date of such Call Event (collectively, the "Call
Securities") at a price per Share equal to the Call Price (as defined in
Section 2.2(c) below) applicable to such Shares.
(b) Notwithstanding anything set forth in this
Section 2.2 to the contrary, prior to the exercise of the Call Option by the
Company, the Board may, in its sole discretion, elect to assign the Company's
right to exercise the Call Option to purchase all, but not less than all, of
the Call Securities to the JWC Group Stockholders. If the Board so elects, the
Company shall give notice of such assignment to each JWC Group Stockholder
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(the "Call Assignment Notice"), indicating the number of Call Securities each
JWC Group Stockholder is entitled to purchase (including the right to
over-allotment of Call Securities, if any), the Call Price applicable to such
Shares and the date of the closing of such purchase under this Section 2.2.
Within five (5) Business Days of the Call Assignment Notice, those JWC Group
Stockholders who intend to purchase Call Securities pursuant to this Section
2.2(b) (the "Call Securities Electing Stockholders") shall notify the Company
in writing of such intention, indicating the number of Call Securities
(including over-allotments, if any) they intend to purchase. The right to
purchase such Call Securities shall be allocated to the JWC Group Stockholders
pro rata (based on the number of Shares each JWC Group Stockholder (together
with each such JWC Group Stockholder's Permitted Transferees) owns in relation
to the total number of Shares owned by all of the JWC Group Stockholders);
provided, however, that if any JWC Group Stockholder does not elect to purchase
the number of Call Securities which such JWC Group Stockholder (and its
Permitted Transferees) may purchase pursuant to this Section 2.2(b), then the
Call Securities Electing Stockholders (and their Permitted Transferees) may
elect to purchase the remaining Call Securities. The right to purchase the
remaining Call Securities shall be allocated to the Call Securities Electing
Stockholders pro rata (based on the number of Shares each Call Securities
Electing Stockholder (together with their Permitted Transferees) owns in
relation to the total number of Shares owned by all of the Call Securities
Electing Stockholders).
(c) For purposes of this Section 2.2, the term
"Call Price" shall mean (i) if the employment of the Management Stockholder
with the Company or one of its Subsidiaries is terminated for Cause or is
terminated by the Management Stockholder without Good Reason, the lower of the
Transaction Price and the fair market value (as determined by the Board) of
each Share; and (ii) if the employment of the Management Stockholder is
terminated other than for Cause or the Management Stockholder voluntarily
terminates his or her employment with the Company or one of its Subsidiaries
for Good Reason, the greater of the Transaction Price and the fair market value
(as determined by the Board) of each Share.
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(d) The closing of any purchase of Call
Securities pursuant to Section 2.2(a) or 2.2(b) shall take place at the
principal office of the Company (i) with respect to purchases by the Company or
a Designated Employee (as defined below), on the tenth (10th) Business Day
after the date of the Call Notice and (ii) with respect to any JWC Group
Stockholder, on the tenth (10th) Business Day after notifying the Company in
writing of its intention to exercise its right to purchase pursuant to Section
2.2(b). At such closing, the Company, the JWC Group Stockholders or the
Designated Employee, as the case may be, shall deliver to the Call Group,
against delivery of certificates (duly endorsed or accompanied by duly executed
stock powers) representing the Call Securities, a certified check or checks
payable to the Management Stockholder and/or the Permitted Transferees, as the
case may be, in an amount equal to the aggregate Call Price payable in respect
of such Call Securities. All of the foregoing deliveries will be deemed to be
made simultaneously, and none shall be deemed completed until all have been
completed. Notwithstanding anything in this Section 2.3(d) to the contrary, to
the extent that the Company has insufficient funds legally available for the
repurchase of equity securities of the Company or the Company is not permitted
to repurchase for cash equity securities of terminated employees pursuant to
the agreements or indentures governing indebtedness for borrowed money of the
Company or any Subsidiary, the Company may pay the purchase price for any Call
Securities by delivery of a subordinated promissory note (a "Promissory Note")
in substantially the form attached hereto as Exhibit B in an original principal
amount equal to that portion of the Call Price not paid in cash. If an
agreement or indenture referred to in the preceding sentence contains a
restriction on the amount of Call Securities that can be repurchased from any
terminated Management Stockholder or his Permitted Transferees in any given
fiscal year of the Company, the maximum amount which the Company shall be
permitted to pay for the repurchase of Call Securities from a terminated
Management Stockholder or his Permitted Transferees shall be, in the aggregate,
(x) the maximum amount permitted by such agreement or indenture for the fiscal
year of the Company in which such Management Stockholder's employment with the
Company terminates, less (y) the aggregate amount previously paid by the
Company to repurchase Call Securities from any other Management Stockholder
whose employment with the
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Company terminated in such fiscal year. Any amounts which would otherwise be
available with respect to any fiscal year of the Company for the repurchase of
Call Securities shall first be applied to repurchase outstanding Promissory
Notes issued under this Section 2.3(d), in the order in which such Promissory
Notes were issued, until all such Promissory Notes have been repurchased in
accordance herewith. Repurchases shall be applied first to accrued and unpaid
interest and second to principal.
(e) Notwithstanding anything set forth in
this Section 2.2 to the contrary, prior to the exercise by the Company of its
Call Option to purchase Call Securities pursuant to this Section 2.2, one or
more new or existing employees of the Company or any of its Subsidiaries may,
in the sole discretion of the Board, be designated by the Board (individually a
"Designated Employee" and collectively, "Designated Employees") who shall have
the right, but not the obligation, to exercise the Call Option and to acquire,
in lieu of the Company, some or all (as determined by the Company) of the Call
Securities that the Company is entitled to purchase from the Call Group
hereunder, for cash and on the same terms and conditions as set forth in
Section 2.2(d) which apply to the repurchase of Call Securities by the Company.
Concurrently with any such purchase of Call Securities by any such Designated
Employee, such Designated Employee who is not already a Management Stockholder
shall execute a counterpart of this Agreement whereupon such Designated
Employee shall be deemed a "Management Stockholder" and shall have the same
rights and be bound by the same obligations as a Management Stockholder
hereunder.
(f) Subject to Section 2.2(b), if neither the
Company nor any Designated Employee elect to exercise the Call Option and
deliver a Call Notice within ninety (90) days of a Call Event, then the Call
Option provided in this Section 2.2 shall terminate, but the Management
Stockholder or his Permitted Transferees shall continue to hold such Call
Securities pursuant to all of the other provisions of this Agreement.
(g) Notwithstanding anything in this Agreement
to the contrary, the provisions of this Section 2.2 shall not apply upon the
termination of the employment of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to any
Shares
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owned by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or their Permitted Transferees.
Section 2.3 Come Along. Except as provided in Section
2.3(c) hereof, no JWC Group Stockholder shall Transfer (in one or a series of
transactions within any 24-month period) Shares representing more than ten
percent (10%) of the outstanding Shares (calculated on a fully diluted basis)
to a Third Party who is not a Permitted Transferee without complying with the
terms and conditions set forth in Sections 2.3(a) and 2.3(b) below.
(a) Any JWC Group Stockholder, when desiring to
Transfer such Shares (the "Transferor"), shall give not less than ten (10) days
prior written notice of such intended Transfer to each other Stockholder and to
the Company. Such notice (the "Participation Notice") shall set forth the terms
and conditions of such proposed Transfer, including the name of the prospective
transferee, the number of Shares proposed to be transferred (the "Participation
Securities") by the Transfer- or, the purchase price per Share proposed to be
paid therefor and the payment terms and type of transfer to be effectuated.
Within ten (10) days following the delivery of the Participation Notice by the
Transferor to each other Stockholder and to the Company, each Stockholder
desiring to participate in such proposed Transfer (each, a "Participating
Offeree") shall, by notice in writing to the Transferor and to the Company,
have the opportunity and right to sell to the purchasers in such proposed
Transfer (upon substantially the same terms and conditions as the Transferor
provided that if the Transferor is Transferring Preferred Stock and if the
financial condition and prospects of the Company are such that, in the good
faith determination of the Board, the liquidation preference of the Preferred
Stock has value to the proposed transferee, the purchase price per Share of
Common Stock may be adjusted to take into account the value of the liquidation
preference, as determined in good faith by the Board) up to that number of
Shares owned by such Participating Offeree as shall equal the product of (i) a
fraction, the numerator of which is the number of Shares owned by such
Participating Offeree as of the date of such proposed Transfer and the
denominator of which is the aggregate number of Shares actually owned as of the
date of such Participation Notice by the Transferor and by all Participating
Offerees, multiplied by
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(ii) the number of Participation Securities. The amount of Participation
Securities to be sold by the Transferor shall be reduced to the extent
necessary to provide for such sales of Shares by Participating Offerees.
(b) At the closing of any proposed Transfer in
respect of which a Participation Notice has been delivered, the Transferor,
together with all Participating Offerees, shall deliver to the proposed
transferee certificates evidencing the Shares to be sold thereto (duly endorsed
or with duly executed stock powers) and shall receive in exchange therefor the
consideration to be paid or delivered by the proposed transferee in respect of
such Shares as described in the Participation Notice.
(c) The provisions of this Section 2.3 shall not
apply to (i) any Permitted Transfer, (ii) any Transfer pursuant to or following
a Public Offering or (iii) any Transfer pursuant to Section 2.4.
Section 2.4 Take Along.
(a) If a JWC Group Stockholder or group of JWC
Group Stockholders holding more than one-third (1/3) of the then outstanding
Shares (the "Take Along Group") determine to sell or exchange (in a business
combination or otherwise), in one or a series of bona fide arms-length
transactions to a Third Party who is not an Affiliate of the Take Along Group,
50% or more of the aggregate number of Shares owned by the JWC Group
Stockholders on the date of the closing under the Purchase Agreement (as
equitably adjusted to account for stock dividends, stock splits, reverse stock
splits or other similar reclassifications), then, upon fifteen (15) days
written notice by the Take Along Group to each other Stockholder, which notice
shall include reasonable details of the proposed sale or exchange including the
proposed time and place of closing and the consideration to be received by the
Take Along Group (such notice being referred to as the "Sale Request"), each
other Stockholder (each, a "Seller") shall be obligated to, and shall sell,
transfer and deliver, or cause to be sold, transferred and delivered, to such
Third Party on substantially the same terms as the Take Along Group, that
number of Shares owned by such Seller as shall equal the product of (i) a
fraction, the numerator of which is the number of
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Shares proposed to be transferred by the Take Along Group as of the date of
such Sale Request and the denominator of which is the aggregate number of
Shares actually owned as of the date of such Sale Request by the Take Along
Group, multiplied by (ii) the number of Shares actually owned as of the date of
such Sale Request by such Seller; provided that if the Take Along Group is
selling or exchanging Preferred Stock and if the financial condition and
prospects of the Company are such that, in the good faith determination of the
Board, the liquidation preference of the Preferred Stock has value to such
Third Party, the consideration to the Sellers for their Common Stock may be
adjusted to take into account the value of the liquidation preference, as
determined in good faith by the Board. Each Seller shall (i) deliver
certificates for all of its Shares at the closing of the proposed Transfer,
free and clear of all claims, liens and encumbrances and (ii) if stockholder
approval of the transaction is required, vote its Shares in favor thereof.
(b) The provisions of this Section 2.4 shall not
apply to (i) any Transfer pursuant to or following a Public Offering or (ii) a
Permitted Transfer.
Section 2.5 Purchase Rights.
(a) Purchase Rights. In the event that, prior to
March 31, 2000, the Board determines that Jillian's Entertainment Corporation,
a Florida corporation ("Jillian's"), requires additional capital funding in
order to achieve the Base Plan (as defined in the Stock Option Agreement
attached as Exhibit A to the Purchase Agreement and subject to adjustment from
time to time as set forth in such Stock Option Agreement) and neither the
Company nor Jillian's is able to secure such funding, on acceptable terms, at
an all-in cost of capital of no more than twenty percent (20%) annually within
ninety (90) days of such determination (JWC Associates or its Affiliates having
used reasonable best efforts to secure such funding on behalf of the Company or
Jillian's), then each of the Stockholders will have the right to purchase a pro
rata number of newly issued Shares (calculated on a fully diluted basis,
excluding the effect of any options issued under the Company's 1997
Non-Qualified Stock Option Plan) of Common Stock or junior Preferred Stock for
$0.9322 per Share (as equitably adjusted for stock dividends, stock splits,
reverse
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stock splits and other similar reclassifications) (a "Company Purchase Right").
The total number of Shares of Common Stock and junior Preferred Stock that may
be purchased pursuant to the Company Purchase Rights shall not exceed 7,000,000
(as equitably adjusted for stock dividends, stock splits, reverse stock splits
and other similar reclassifications). To the extent that a Stockholder does not
exercise its Company Purchase Right (a "Non-Exercising Stockholder"), the
remaining Stockholders will each have the right to purchase a number of
additional newly issued Shares of Common Stock or junior Preferred Stock for
$0.9322 per Share (as equitably adjusted for stock dividends, stock splits,
reverse stock splits and other similar reclassifications), equal to a pro rata
portion (calculated on a fully diluted basis, excluding the Non-Exercising
Stockholder and the effect of any options issued under the Company's 1997
Non-Qualified Stock Option Plan) of the number of such Shares that could have
been purchased by such Non-Exercising Stockholder pursuant to the exercise of
its Company Purchase Right. The Company Purchase Rights may not be sold,
transferred, assigned, pledged or otherwise disposed of or encumbered, in whole
or in part, without the prior written consent of each of the Stockholders.
(b) Notice from the Company. In the event the
Company proposes to issue Shares pursuant to Section 2.5(a), the Company shall
give each Stockholder written notice of such proposal, describing the type of
Shares to be issued and the price and the terms upon which the Company proposes
to issue the same. For a period of ten (10) days following the delivery of such
notice by the Company, the Company shall be deemed to have irrevocably offered
to sell to each Stockholder its pro rata portion of such Shares, calculated in
accordance with Section 2.5(a), for the price and upon the terms specified in
the notice. Each Stockholder may exercise its Company Purchase Right by giving
written notice to the Company within such ten (10) day period and stating
therein the quantity of such Shares to be purchased.
(c) Failure to Exercise. In the event that any
Stockholder fails to exercise in full its Company Purchase Right within said
ten (10) day period, the Company shall give written notice to each Stockholder
who fully exercised its Company Purchase Right of the aggregate number of
additional Shares which may be purchased
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by such Stockholders pursuant to Section 2.5(a). For a period of ten (10) days
following the delivery of such notice by the Company, the Company shall be
deemed to have irrevocably offered to sell to each such Stockholder its pro
rata portion of such Shares, calculated in accordance with Section 2.5(a), for
the price and upon the terms specified in the notice. Each such Stockholder may
exercise its right to purchase such Shares by giving written notice to the
Company within such ten (10) day period.
(d) Closing. The closing for any issuance
pursuant to this Section 2.5 shall take place as proposed by the Company with
respect to the Shares to be issued, at which closing the Company shall deliver
certificates for the Shares in the respective names of the purchasing
Stockholders against receipt of payment therefor.
Section 2.6 Restrictions on Other Agreements. Until the
completion of a Public Offering by the Company, no Stockholder (other than the
JWC Group Stockholders as among themselves) shall grant any proxy or enter into
or agree to be bound by any voting trust with respect to the Shares, nor shall
any Stockholder enter into any stockholders agreements or arrangements of any
kind with any person with respect to the Shares on terms which conflict with
the provisions of this Agreement (whether or not such agreements and
arrangements are with other Stockholders), including, but not limited to,
agreements or arrangements with respect to the acquisition, disposition or
voting of Shares inconsistent herewith.
Section 2.7 Synthetic Sales. Any Synthetic Sales by a
Management Stockholder then employed by the Company or any of its Subsidiaries
shall require the prior written approval of the Board.
Section 2.8 Corporate Governance. Until the tenth (10th)
anniversary of the date of the closing under the Purchase Agreement, the
Company and each of the Stockholders shall take all action (including but not
limited to such Stockholder's voting, or executing proxies or written
consents with respect to, the Shares held at the time by such Stockholder) as
may be requested from time to time by the JWC Group Stockholder Representative
(as defined below) or a majority in interest of the ▇▇▇
▇▇
▇▇
Group Stockholders, so that the Board shall include such number of members
designated by the JWC Group Stockholder Representative or a majority in
interest of the JWC Group Stockholders. The JWC Group Stockholder
Representative or a majority in interest of the JWC Group Stockholders shall
also be entitled to require that any member of the Board so designated pursuant
to this Section 2.8 be removed or replaced by another designee of the JWC Group
Stockholder Representative or a majority in interest of the JWC Group
Stockholders, in which event the Company and each of the Stockholders shall
take all action (including but not limited to such Stockholder's voting, or
executing written consents with respect to, the Shares held at the time by such
Stockholder) as may be necessary to effect such removal or replacement.
ARTICLE III
Registration Rights
Section 3.1 General. For purposes of Article III: (a) the
terms "register", "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with
the 1933 Act and the declaration or ordering of effectiveness of such
registration statement; and (b) the term "Holder" means any Stockholder or
Permitted Transferee thereof.
Section 3.2 Demand Registrations.
(a) If the Company shall receive a written
request (specifying that it is being made pursuant to this Section 3.2) from
the JWC Group Stockholders who together with their Permitted Transferees own in
the aggregate at least ten percent (10%) of the Shares (as equitably adjusted
to account for stock dividends, stock splits, reverse stock splits or other
similar reclassifications) acquired by the JWC Group Stockholders at the time
of the closing under the Purchase Agreement (the "Requesting JWC Group
Stockholders") that the Company file a registration statement under the 1933
Act, or a similar document pursuant to any other statute then in effect
corresponding to the 1933 Act, covering the registration of Common Stock, then
the Company shall, not later than ninety (90) days after receipt by the Company
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of a written request for a demand registration pursuant to this Section 3.2,
file a registration statement with the SEC relating to such Registrable
Securities as to which such request for a demand registration relates (the
"Requested Shares"), and the Company shall use its best efforts to cause the
offering of such Requested Shares to be registered under the 1933 Act. The
Company shall be obligated to effect only three (3) registrations of
Registrable Securities pursuant to this Section 3.2 and such registrations may
be effected no earlier than six (6) months, twelve (12) months or eighteen (18)
months, respectively, following completion of an initial Public Offering of
Common Stock by the Company.
(b) If, pursuant to Section 3.3, the total
amount of securities that all Holders and all other holders of securities which
have applicable registration rights request to be included in an offering made
pursuant to this Section 3.2 exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of the offering,
then the Company will include in such registration only the number of
securities which, in the good faith opinion of such underwriters, can be sold,
selected from the securities requested to be included by all Holders and such
other holders pro rata based on the number of securities which each of them
owns.
Section 3.3 Piggyback Registration.
(a) If, at any time, the Company determines to
register any of its equity securities (including securities convertible into
equity securities, but excluding equity securities being registered pursuant to
a registration statement on Form S-8 and equity securities issued in connection
with mezzanine debt or senior financing of the Company, or equity securities
issued upon conversion or exchange thereof or in connection therewith), for its
own account in connection with the public offering of such securities (other
than the initial Public Offering), the Company shall, at each such time,
promptly give each JWC Group Stockholder or Permitted Transferee thereof
written notice of such determination no later than twenty (20) days before the
effective date of any such registration. Upon the written request of any JWC
Group Stockholder or Permitted Transferee thereof received by the Company
within ten (10) days after the
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giving of any such notice by the Company, the Company shall use its best
efforts to cause to be registered under the 1933 Act all of the Registrable
Shares of each JWC Group Stockholder or Permitted Transferee thereof that such
JWC Group Stockholder or Permitted Transferee thereof has requested be
registered. If the total amount of securities that are to be included by the
Company in such registration exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of the offering,
then the Company will include in such registration only the number of
securities which in the opinion of such underwriters can be sold, selected from
the securities requested to be included by all JWC Group Stockholders and
Permitted Transferees thereof pro rata based on the number of securities which
each of them owns.
(b) If, at any time, the Company determines to
register for the account of any JWC Group Stockholder (whether pursuant to the
provisions of Sections 3.2 or 3.3(a) or otherwise), any of its equity
securities (including securities convertible into equity securities, but
excluding equity securities being registered pursuant to a registration
statement on Form S-8 and equity securities issued in connection with mezzanine
debt or senior financing of the Company, or equity securities issued upon
conversion or exchange thereof or in connection therewith), under the 1933 Act
in connection with the public offering of such securities (other than the
initial Public Offering), the Company shall, at each such time, promptly give
each Holder written notice of such determination no later than twenty (20) days
before the effective date of any such registration. Upon the written request of
any Holder received by the Company within ten (10) days after the giving of any
such notice by the Company, the Company shall use its best efforts to cause to
be registered under the 1933 Act all of the Registrable Shares of each Holder
that such Holder has requested be registered. If the total amount of securities
that are to be included by the Company in such registration exceeds the amount
of securities that the underwriters reasonably believe compatible with the
success of the offering, then the Company will include in such registration
only the number of securities which in the opinion of such underwriters can be
sold, selected from the securities requested to be included by all Holders
(including
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the JWC Group Stockholders) pro rata based on the number of securities which
each of them owns.
Section 3.4 Obligations of the Company.
(a) Whenever required under Section 3.2 or 3.3
hereof to use its best efforts to effect the registration of any Registrable
Securities, the Company shall:
(1) prepare and file with the SEC a
registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to
become and remain effective, including, without limitation, filing
of post-effective amendments and supplements to any registration
statement or prospectus necessary to keep the registration statement
current; provided, however, that if such registration statement does
not become effective, then any demand registration pursuant to
Section 3.2 prompting such undertaking by the Company shall be
deemed to be rescinded and retracted and shall not be counted as, or
deemed or considered to be or to have been, a demand registration
pursuant to Section 3.2 for any purpose;
(2) as expeditiously as reasonably
possible, prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary
to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement
and to keep each registration and qualification under this Agreement
effective (and in compliance with the 1933 Act) by such actions as
may be necessary or appropriate for a period of up to 180 days (if,
in the reasonable discretion of the Holders owning securities
covered by such registration statement, such period of time is
necessary for the successful completion of the offering of such
securities) after the effective date of such
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registration statement, all as requested by such Holders;
(3) as expeditiously as reasonably
possible, furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with
the requirements of the 1933 Act, and such other documents as they
may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them;
(4) as expeditiously as reasonably
possible, use its best efforts to register and qualify the
securities covered by such registration statement under such
securities or "blue sky" laws of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities
covered by the registration statement, provided that the Company
shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to
service of process in any such jurisdiction, and further provided
that (anything in this Agreement to the contrary notwithstanding
with respect to the bearing of expenses) if any jurisdiction in
which the securities shall be qualified shall require that expenses
incurred in connection with the qualification of the securities in
that jurisdiction be borne by selling stockholders, then such
expenses shall be payable by selling stockholders pro rata to the
extent required by such jurisdiction;
(5) use its best efforts to cause all
Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof to consummate the disposition of such Registrable Securities
in the United States;
(6) notify each seller of Registrable
Securities covered by such registration statement, at any time when
a prospec-
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tus relating thereto is required to be delivered under the 1933 Act,
upon discovery that, or upon the happening of any event as a result
of which, the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made, and at the request
of any such seller or Holders promptly prepare to furnish to such
seller or Holders a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made;
(7) otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC, and
make generally available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of
at least twelve (12) months, but not more than eighteen (18) months,
beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the 1933 Act, and will
furnish to each such seller a copy of any post-effective amendment
or supplement to such registration statement or prospectus;
(8) provide and cause to be
maintained a transfer agent and registrar for all Registrable
Securities covered by such registration statement from and after a
date not later than the effective date of such registration
statement; and
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(9) use its best efforts to list all
Registrable Securities covered by such registration statement on any
securities exchange on which any class of Registrable Securities is
then listed.
(b) In the case of any underwritten offering,
the Company will furnish to each Holder on whose behalf Registrable Securities
have been registered pursuant to this Agreement a signed counterpart, addressed
to such Holder, of an opinion of counsel for the Company dated the effective
date of such registration statement, and such opinion of counsel shall cover
those matters which are customarily covered in opinions of issuer's counsel
delivered to underwriters in connection with underwritten public offerings of
securities.
(c) Except as otherwise set forth in Section
3.3, if the Company at any time proposes to register any of its securities
under the 1933 Act, whether or not for sale for its own account, and such
securities are to be distributed by or through one or more underwriters, then
the Company will make reasonable efforts, if requested by any Holder of
Registrable Securities who requests registration of Registrable Securities in
connection therewith pursuant to Section 3.2 or 3.3 hereof, to arrange for such
underwriters to include such Registrable Securities among the securities to be
distributed by or through such underwriters.
(d) In connection with the preparation and
filing of each registration statement registering Registrable Securities under
this Agreement, the Company will give the Holders of Registrable Securities on
whose behalf such Registrable Securities are to be so registered and their
underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto, and will give each of them such access to its
books and records and such opportunities to discuss the business of the Company
with its officers, its counsel and the independent public accountants who have
certified its financial statements, as shall be necessary, in the opinion of
such Holders or such underwriters or their respective
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counsel, in order to conduct a reasonable and diligent investigation within the
meaning of the 1933 Act.
Section 3.5 Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to
Article III that the Holders shall furnish to the Company such information
regarding them, the Registrable Securities held by them, and the intended
method of disposition of such securities as the Company shall reasonably
request and as shall be required in connection with the action to be taken by
the Company.
Section 3.6 Expenses of Registration. All expenses
incurred in connection with a registration pursuant to Section 3.2 or 3.3
hereof (excluding underwriters' discounts and commissions, which shall be borne
by the sellers), including without limitation all registration and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one
counsel for the selling Holders (which counsel shall be selected by a majority
in interest of such Holders based on the number of Registrable Securities
included in such registration) shall be borne by the Company.
Section 3.7 Underwriting Requirements. In connection with
any underwritten registration of Registrable Securities under this Agreement,
the Company will, if requested by the underwriters for any Registrable
Securities included in such registration, enter into an underwriting agreement
with such underwriters for such offering, such agreement to contain such
representations and warranties by the Company, and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, provisions relating
to indemnification and contribution. The Holders on whose behalf Registrable
Securities are to be distributed by such underwriters shall be parties to any
such underwriting agreement, and the representations and warranties by the
Company and the other agreements on the part of the Company to and for the
benefit of such underwriters shall be also made to and for the benefit of such
Holders of Registrable Securities. Such underwriters shall be selected (i) by
the Company, in the case of a registration pursuant to Section 3.3, or (ii) by
the Holders
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requesting a demand registration, in the case of a registration pursuant to
Section 3.2.
Section 3.8 Indemnification. In the event any Registrable
Securities are included in a registration statement under Article III:
(a) To the fullest extent permitted by law, the
Company will indemnify and hold harmless each Holder requesting or joining in a
registration, any underwriter (as defined in the ▇▇▇▇ ▇▇▇) for it, and each
person, if any, who controls such Holder or such underwriter within the meaning
of the 1933 Act, from and against any losses, claims, damages, expenses
(including reasonable attorneys' fees and expenses and reasonable costs of
investigation) or liabilities, joint or several, to which they or any of them
may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages, expenses or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based on any
untrue or alleged untrue statement of any material fact contained in such
registration statement including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or arise out of or
are based upon 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 arise out of any alleged violation by the Company of any
rule or regulation promulgated under the 1933 Act applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration; provided, however, that the indemnity agreement contained in
this Section 3.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, expense, liability or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable to anyone for any such
loss claim, damage, expense, liability or action to the extent that it arises
out of or is based upon an untrue statement or omission made in connection with
such registration statement, preliminary prospectus, final prospectus or
amendments or supplements thereto in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, underwriter or control person. Such indemnity
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shall remain in full force and effect regardless of any investigation made by
or on behalf of such Holder, underwriter or control person and shall survive
the transfer of such securities by such Holder.
(b) To the fullest extent permitted by law, each
Holder requesting or joining in a registration will indemnify and hold harmless
the Company, as the case may be, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who controls
the Company within the meaning of the 1933 Act, and each agent and any
underwriter for the Company and any person who controls any such agent or
underwriter and each other Holder and any person who controls such Holder
(within the meaning of the ▇▇▇▇ ▇▇▇) against any losses, claims, damages or
liabilities to which the Company or any such director, officer, control person,
agent, underwriter, or other Holder may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon an untrue statement of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or omission was made in such registration
statement, preliminary or final prospectus, or amendments or supplements
thereto, in reliance upon and in conformity with written information furnished
by such Holder with respect to such Holder expressly for use in connection with
such registration; and such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, control
person, agent, underwriter, or other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity obligation of each such Holder hereunder shall be limited to
and shall not exceed the proceeds actually received by such Holder upon a sale
of Registrable Securities pursuant to a registration statement hereunder; and
provided, further, that the indemnity agreement contained in this Section
3.8(b) shall not apply to amounts paid in settlements effected without the
consent of such Holder (which
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consent shall not be unreasonably withheld). Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer, Holder, underwriter or control
person and shall survive the transfer of such securities by such Holder.
(c) Any person seeking indemnification under
this Section 3.8 will (i) give prompt notice to the indemnifying party of any
claim with respect to which it seeks indemnification (but the failure to give
such notice will not affect the right to indemnification hereunder, unless the
indemnifying party is materially prejudiced by such failure) and (ii) unless in
such indemnified party's reasonable judgment a conflict of interest may exist
between such indemnified and indemnifying parties with respect to such claim,
permit such indemnifying party, and other indemnifying parties similarly
situated, jointly to assume the defense of such claim with counsel reasonably
satisfactory to the parties. In the event that the indemnifying parties cannot
mutually agree as to the selection of counsel, each indemnifying party may
retain separate counsel to act on its behalf and at its expense. The
indemnified party shall in all events be entitled to participate in such
defense at its expense through its own counsel. If such defense is not assumed
by the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to
such claim, in which event the indemnifying party shall be obligated to pay the
reasonable fees and expenses of such additional counsel.
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(d) If for any reason the foregoing
indemnification is unavailable to any party or insufficient to hold it harmless
as and to the extent contemplated by the preceding paragraphs of this Section
3.8, then each indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage,
expense or liability in such proportion as is appropriate to reflect the
relative benefits received by the applicable indemnifying party, on the one
hand, and the applicable indemnified party, as the case may be, on the other
hand, and also the relative fault of the applicable indemnifying party and the
applicable indemnified party, as the case may be, as well as any other relevant
equitable considerations.
Section 3.9 Lock-Up Agreement. If required by the
underwriter, each Stockholder agrees not to sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company held by such
Stockholder (other than securities included in the applicable registration
statement or shares purchased in the public market after the effective date of
registration) or any interest or future interest therein during such period
(not to exceed 180 days) as is acceptable to the underwriter following the
effective date of each registration statement of the Company filed under the
1933 Act which includes securities to be sold to the public in an underwritten
offering. The Company may impose stop transfer instructions with respect to the
shares of Common Stock (or other securities) subject to the foregoing
restriction until the end of said period.
Section 3.10 No Inconsistent Agreements. The Company
represents and warrants that it has not entered into, and agrees that it will
not hereafter enter into, any agreement with respect to the registration of its
securities that is inconsistent with (or superior to) the rights granted to the
Holders of Registrable Securities in this Agreement.
Section 3.11 Stock Split and Reverse Stock Split. If, on
or after the receipt by the Company of a request for registration of a public
offering pursuant to Section 3.2 hereof, the proposed managing underwriter or
underwriters of such offering reasonably believes that the number of shares to
be registered is not the number necessary for the success of such offering, the
Company
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33
shall use its best efforts to cause each share of its outstanding Common Stock
to be converted into such number of shares of such Common Stock so that the
number of shares of Registrable Securities to be registered is equal to the
number which such managing underwriter or underwriters reasonably believes is
necessary for the success of such offering. If necessary in connection
therewith, the Company shall use its best efforts to cause to be recommended,
approved and adopted by its Board and approved and adopted by its stockholders,
and, if so approved and adopted, file and cause to become effective, an
amendment to its certificate of incorporation increasing the number of shares
of Common Stock which the Company is authorized to issue. Each Stockholder,
together with its Permitted Transferees, hereby agrees to vote the Shares held
by it in favor of adopting such amendment.
ARTICLE IV
Miscellaneous
Section 4.1 Remedies. The parties to this Agreement
acknowledge and agree that the covenants of the Company and the Stockholders
set forth in this Agreement may be enforced in equity by a decree requiring
specific performance. In the event of a breach of any material provision of
this Agreement, the aggrieved party will be entitled to institute and prosecute
proceedings in any court of competent jurisdiction to enforce specific
performance of such provision, as well as to obtain damages for breach of this
Agreement. Without limiting the foregoing, if any dispute arises concerning the
sale or other disposition of any of the Shares subject to this Agreement or
concerning any other provisions hereof or the obligations of the parties
hereunder, the parties to this Agreement agree that an injunction may be issued
in connection therewith (including, without limitation, restraining the sale or
other disposition of such Shares or rescinding any such sale or other
disposition). Such remedies shall be cumulative and non-exclusive and shall be
in addition to any other rights and remedies the parties may have under this
Agreement or otherwise.
Section 4.2 Entire Agreement; Amendment; Waiver. This
Agreement, together with the Schedule hereto and the Purchase Agreement, sets
forth the entire
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understanding of the parties, and as of the closing contemplated by the
Purchase Agreement supersedes all prior agreements and all other arrangements
and communications, whether oral or written, with respect to the subject matter
hereof. The Schedule may be amended to reflect changes in the composition of
the Stockholders and changes in stock ownership that may occur from time to
time as a result of Permitted Transfers or Transfers permitted under Article II
hereof. Amendments to the Schedule reflecting Permitted Transfers or Transfers
permitted under Article II hereof shall become effective when a copy of this
Agreement, as executed by any new transferee, is filed with the Company, except
as otherwise provided in Section 4.13 hereof. Any other amendment to, or the
termination of, this Agreement shall be in writing and shall require the
written consent of (i) the Company and (ii) either the JWC Group Stockholder
Representative or a majority in interest of the JWC Group Stockholders.
Notwithstanding the preceding sentence, no amendment may adversely affect the
JWC Group Stockholders, the Non-Management Stockholders or the Management
Stockholders at any time, unless consented to in writing by a majority in
interest of such adversely affected group. Notwithstanding any provisions to
the contrary contained herein, any party may waive any rights with respect to
which such party is entitled to the benefits under this Agreement. No waiver of
or consent to any departure from any provision of this Agreement shall be
effective unless signed in writing by the party entitled to the benefit
thereof.
Section 4.3 Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if the invalid or unenforceable provision were omitted.
Section 4.4 Notices. All notices and other communications
necessary or contemplated under this Agreement shall be in writing and shall be
delivered in the manner specified herein or, in the absence of such
specification, shall be deemed to have been duly given three (3) Business Days
after mailing by certified mail, when delivered by hand, upon confirmation of
receipt by telecopy, or one (1) day after sending by overnight delivery
service, to the respective addresses of the parties set forth below:
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(a) For notices and communications to the
Management Stockholders or the Non-Management Stockholders, to the respective
addresses set forth in the Schedule;
(b) for notices and communications to the
Company:
Jillian's Entertainment
Holdings, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇.▇. Childs Associates, L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) for notices and communications to the JWC
Group Stockholders, to the respective addresses set forth in the Schedule, with
a copy to:
Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
By notice complying with the foregoing provisions of this Section 4.4, each
party shall have the right to change the mailing address for future notices and
communications to such party.
Section 4.5 Binding Effect; Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and to
their respective transferees, successors and assigns; provided, however, that
the rights under this Agreement may not be assigned except as expressly
provided herein, it being understood
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that the Company's rights hereunder may be assigned by the Company to any
corporation which is the surviving entity in a merger, consolidation or like
event involving the Company if such merger, consolidation or like event does
not result in a change in control of the Company. No such assignment shall
relieve an assignor of its obligations hereunder.
Section 4.6 Governing Law. This Agreement shall be
governed by and construed in accordance with the General Corporation Law of the
State of Delaware as to matters within the scope thereof and as to all other
matters shall be governed by and construed in accordance with the internal laws
of the Commonwealth of Massachusetts (without giving effect to the principles
of conflicts of law thereof).
Section 4.7 Termination. Without affecting any other
provision of this Agreement requiring termination of any rights in favor of any
Stockholder, Permitted Transferee or any other transferee of Shares, the
provisions of Articles II and III of this Agreement shall terminate as to such
Stockholder, Permitted Transferee or other transferee, when, pursuant to and in
accordance with this Agreement such Stockholder, Permitted Transferee or other
transferee as the case may be, no longer own any Shares; provided that
termination pursuant to this Section 4.7 shall only occur in respect of a
Stockholder after all Permitted Transferees in respect thereof also no longer
own any Shares. As provided above, the provisions of Sections 2.3, 2.4, 2.5 and
2.6 shall not apply to the Shares owned by Stockholders following a Public
Offering.
Section 4.8 Recapitalization, Exchanges, Etc. The
provisions of this Agreement shall apply, to the full extent set forth herein
with respect to Shares, to 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 of the Shares, by reason of a stock dividend, stock
split, stock issuance, reverse stock split, combination, recapitalization,
reclassification, merger, consolidation or otherwise.
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Section 4.9 JWC Group Stockholder Representative. Each
JWC Group Stockholder hereby designates and appoints (and each Permitted
Transferee of each such JWC Group Stockholder is hereby deemed to have so
designated and appointed) each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as his
attorney-in-fact with full power of substitution for each of them (the "JWC
Group Stockholder Representative"), to serve as the representative of each such
JWC Group Stockholder to perform all such acts as are required, authorized or
contemplated by this Agreement to be performed by such JWC Group Stockholder
and hereby acknowledges that the JWC Group Stockholder Representative shall be
the only person authorized to take any action so required, authorized or
contemplated by this Agreement by each such person. Each such JWC Group
Stockholder further acknowledges that the foregoing appointment and designation
shall be deemed to be coupled with an interest and shall survive the death or
incapacity of such JWC Group Stockholder. Each such person hereby authorizes
(and each such Permitted Transferee shall be deemed to have authorized) the
other parties hereby to disregard any notice or other action taken by such
person pursuant to this Agreement except for the JWC Group Stockholder
Representative. The other parties hereto are and will be entitled to rely on
any action so taken or any notice given by the JWC Group Stockholder
Representative and are and will be entitled and authorized to give notices only
to the JWC Group Stockholder Representative for any notice contemplated by this
Agreement to be given to any such person. A successor to the JWC Group
Stockholder Representative may be chosen by a majority in interest of the JWC
Group Stockholders, provided that notice thereof is given by the new JWC Group
Stockholder Representative to the Company and to each other Stockholder.
Section 4.10 Action Necessary to Effectuate the Agreement.
The parties hereto agree to take or cause to be taken all such corporate and
other action as may be necessary to effect the intent and purposes of this
Agreement.
Section 4.11 Purchase for Investment; Legend on
Certificate. Each of the parties acknowledges that all of the Shares held by
such party are being (or have been) acquired for investment and not with a view
to the distribution thereof and that no Transfer of Shares may
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be made except in compliance with applicable federal and state securities laws.
Each of the certificates of Shares of the Company which are now or hereafter
owned by the Stockholders and which are subject to the terms of this Agreement
shall have endorsed in writing, stamped or printed, thereon the following
legend:
"The shares represented by this stock certificate are
subject to the terms and conditions, including restrictions on transfer, of a
Stockholders Agreement dated as of June [ ], 1997, as amended from time to
time. A copy of the Stockholders Agreement is on file with the Secretary of the
Company and will be mailed to any properly interested person without charge
upon the Company's receipt of a written request therefor. Any sale or transfer
in violation of said Agreement shall be null and void."
All certificates of Shares shall also bear all legends
required by federal and state securities laws.
Section 4.12 Effectiveness of Transfers. All Shares
Transferred by a Stockholder (other than pursuant to an effective registration
statement under the 1933 Act or pursuant to a Rule 144 Transaction) shall,
except as otherwise expressly stated herein, be held by the transferee thereof
pursuant to this Agreement. Such transferee shall, except as otherwise
expressly stated herein, have all the rights and be subject to all of the
obligations of a Stockholder under this Agreement (as through such party had so
agreed pursuant to Section 4.13 hereof) automatically and without requiring any
further act by such transferee or by any parties to this Agreement. Without
affecting the preceding sentence, if such transferee is not a Stockholder on
the date of such Transfer, then such transferee, as a condition to such
Transfer, shall confirm such transferee's obligations hereunder in accordance
with Section 4.13 hereof. No Shares shall be Transferred on the Company's books
and records, and no Transfer of Shares shall be otherwise effective, unless any
such Transfer is made in accordance with the terms and conditions of this
Agreement, and the Company is hereby authorized by all of the Stockholders to
enter appropriate stop transfer notations on its transfer records to give
effect to this Agreement.
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Section 4.13 Additional Stockholders. Subject to the
restrictions on Transfers of Shares contained herein, any Person who is not
already a Stockholder acquiring Shares (except for transferees acquiring Shares
in an offering registered under the 1933 Act or in a Rule 144 Transaction and
except as otherwise permitted by the Board) shall, on or before the Transfer or
issuance to it of Shares, sign a counterpart signature page hereto in form
reasonably satisfactory to the Company and shall thereby become a party to this
Agreement to be bound hereunder as (a) a Management Stockholder if a Permitted
Transferee of a Management Stockholder or an employee of the Company or any of
its Subsidiaries, (b) a JWC Group Stockholder if a Permitted Transferee or an
employee or affiliate of ▇.▇. Childs Associates, Inc. or Equity Partners or (c)
a Non-Management Stockholder if such person or entity does not fall within
either (i) or (ii) above; provided that a transferee which is a Permitted
Transferee under clause (b) of the definition of Permitted Transferee shall not
be obligated to so agree until foreclosure on its pledge.
Section 4.14 No Waiver. No course of dealing and no delay
on the part of any party hereto in exercising any right, power or remedy
conferred by this Agreement shall operate as waiver thereof or otherwise
prejudice such party's rights, powers and remedies. No single or partial
exercise of any rights, powers or remedies conferred by this Agreement shall
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
Section 4.15 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.
Section 4.16 Headings. All headings and captions in this
Agreement are for purposes of reference only and shall not be construed to
limit or affect the substance of this Agreement.
Section 4.17 Number; Gender. When the context so requires,
the singular shall include the plural and the plural shall include the singular
and the gender of any pronoun shall include the other gender.
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Section 4.18 Effective Time. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall become binding and
effective as of the date of the closing under the Purchase Agreement.
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IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be duly executed under seal as of the date and year first above
written.
JILLIAN'S ENTERTAINMENT
HOLDINGS, INC.
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
JWC Group Stockholders:
▇.▇. CHILDS EQUITY PARTNERS, L.P.
By: ▇.▇. Childs Advisors, L.P., its
general partner
By: ▇.▇. Childs Associates, L.P.,
its general partner
By: ▇.▇. Childs Associates, Inc.,
its general partner
By:
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
42
JWC Group Stockholders
(continued):
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as agent and
attorney-in-fact for certain
coinvestors under Purchaser
Appointment of Agent and Power of
Attorney and not in his individual
capacity
43
Management Stockholders:
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
44
Non-Management Stockholders:
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
THE BLIND TRUST
UDT 3/26/93
By: --------------------------
Name:
Title:
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇