EXHIBIT 10.3
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BARIATRIX PRODUCTS INTERNATIONAL INCORPORATED/
LES PRODUITS BARIATRIX INTERNATIONAL INCORPOREE
UNANIMOUS SHAREHOLDERS AGREEMENT
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BARIATRIX PRODUCTS INTERNATIONAL INCORPORATED/
LES PRODUITS BARIATRIX INTERNATIONAL INCORPOREE
UNANIMOUS SHAREHOLDERS AGREEMENT
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ARTICLE 1. PRELIMINARY................................... 2
ARTICLE 2. FUNDAMENTAL PRINCIPLES........................ 4
ARTICLE 3. DIRECTORS AND OFFICERS........................ 5
ARTICLE 4. SHAREHOLDERS AND THEIR RIGHTS................. 6
ARTICLE 5. FINANCIAL INFORMATION......................... 8
ARTICLE 6. DISTRIBUTIONS................................. 9
ARTICLE 7. PRE-EMPTIVE RIGHTS............................ 10
ARTICLE 8. RIGHT OF FIRST OPPORTUNITY AND LAST REFUSAL... 11
ARTICLE 9. TAG-ALONG/ DRAG-ALONG RIGHTS.................. 14
ARTICLE 10. PUBLIC OFFERING............................... 16
ARTICLE 11. CONFIDENTIALITY............................... 16
ARTICLE 12. ARBITRATION................................... 17
ARTICLE 13. GENERAL PROVISIONS............................ 19
MEMORANDUM OF AGREEMENT ENTERED INTO AT ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇ THE 20TH DAY OF MAY, 1999.
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BY AND BETWEEN: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, businessman, of the
City of Burlington, State of Vermont,
(hereinafter referred to as "ROD")
AND: 3515176 CANADA INC., a body politic and
corporate, duly incorporated according to
law, herein represented by ▇▇▇▇▇ ▇▇ ▇▇▇▇,
its duly authorized representative as he so
declares, (hereinafter referred to as
"3515176")
AND: ▇▇▇▇▇▇ ▇▇▇▇▇, Attorney, of the City of
Westmount, Province of Quebec, (hereinafter
referred to as "▇▇▇▇▇")
AND: 3357481 CANADA INC., a body politic and
corporate, duly incorporated according to
law, herein represented by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
its duly authorized representative as he so
declares, (hereinafter referred to as the
"3357481")
AND: BALANCE BAR COMPANY, a body politic and
corporate, duly incorporated according to
law, herein represented by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
its duly authorized representative as he so
declares, (hereinafter referred to as the
"BBC")
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AND: BARIATRIX PRODUCTS INTERNATIONAL
INCORPORATED, a body politic and corporate,
duly incorporated according to law, herein
represented by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, its duly
authorized representative as he so declares,
(hereinafter referred to as the "COMPANY")
WHEREAS the COMPANY was duly incorporated on the November 6, 1978, pursuant to
the Canada Business Corporations Act;
WHEREAS the sole shareholders of the COMPANY and their respective shareholdings
are as follows:
NAME OF SHAREHOLDER NO. & CLASS OF SHARES
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ROD 2,700 Class "A"
3515176 270 Class "A"
▇▇▇▇▇ 180 Class "A"
3357481 5,850 Class "A"
325,000 Class "D"
1,300,000 Class "F"
1,025,000 Class "H"
BBC 1,000 Class "A"
WHEREAS the sole shareholder of 3515176 is ▇▇▇▇▇ ▇▇ ▇▇▇▇;
WHEREAS the sole shareholders of 3357481 are ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the ▇▇▇▇▇ Family
Trust (the beneficiaries of which are the children and grandchildren of ▇▇▇▇▇▇
▇. ▇▇▇▇▇) and Eri Pharmaceuticals Ltd., a corporation which is wholly-owned by
▇▇▇▇▇▇ ▇. ▇▇▇▇▇;
WHEREAS ROD, 3515176, ▇▇▇▇▇, 3357481 and BBC wish to provide for certain aspects
of the internal management of the COMPANY and to formalize their relationship
inter se as shareholders of the COMPANY;
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NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES, COVENANTS AND
AGREEMENTS HEREIN CONTAINED, IT IS AGREED BY THE PARTIES HERETO AS FOLLOWS:
ARTICLE 1. PRELIMINARY
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1.1 In this Memorandum of Agreement, the following words or terms shall have
the following meanings ascribed thereto:
(a) "Bona Fide Offer" shall mean an arm's length
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irrevocable and unconditional (other than standard due diligence
conditions) written offer presented to a Shareholder by an Outside
Party for the purchase of Shares of the COMPANY where not less than
eighty percent (80%) of the consideration offered for the Shares is
payable in cash;
(b) "Debt" shall mean letters of credit, guarantees, indebtedness for
borrowed money, capital leases, advances payable to companies under
common control, debentures, loans and similar debt obligations of the
COMPANY, determined on a consolidated basis, in accordance with GAAP;
(c) "▇▇▇▇▇ Group" shall mean both ROD and 3357481;
(d) "Equity" shall mean shareholders' equity, determined in accordance
with Canadian generally accepted accounting principles from the
consolidated financial statements of the COMPANY, including the issued
and outstanding Class "D", Class "F" and Class "H" shares in the
capital stock of the COMPANY;
(e) "GAAP" shall mean Canadian generally accepted accounting principles,
as described in the handbook of the Canadian Institute of Chartered
Accountants;
(f) "Outside Party" shall mean a person who is not related to, affiliated
or associated with any of the Shareholders, as such terms are defined
in the Income Tax Act (Canada) (R.S.C. 1985 (5th supp.) c.1), as
amended from time to time);
(g) "Shareholder" shall mean any of ROD, 3515176, ▇▇▇▇▇, 3357481 or BBC,
as the context dictates, and "Shareholders" shall mean all or any
combination of them, as well as the legatees, heirs and permitted
assignees of any of the foregoing;
(h) The "Shares" shall mean the shares in the capital stock of the COMPANY
beneficially owned by all or any combination of the Shareholders, as
the context dictates;
1.2 The preamble hereto shall form an integral part hereof and shall avail as
if recited herein at length.
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ARTICLE 2. FUNDAMENTAL PRINCIPLES
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2.1 No Shareholder shall, directly or indirectly, sell, transfer, assign,
encumber or otherwise alienate his or its Shares otherwise than with the consent
of all of the other Shareholders or in conformity with any of the other
provisions of this Agreement. Notwithstanding the preceding sentence, any
transaction resulting in a change of control of BBC shall not be prohibited, nor
require the consent of all of the other Shareholders, nor need be effected in
conformity with this Agreement, although notice thereof must be sent to the
COMPANY within ten (10) days following the completion of such transaction. In
any such event, no sale, transfer, assignment, encumbrance or alienation shall
be valid unless the party receiving, acquiring or encumbrancing such Shares
shall become a party to this Agreement.
2.2 Notwithstanding the generality of Section 2.1, it is hereby acknowledged
that the ▇▇▇▇▇ Group, ▇▇▇▇▇ and 3515176 shall enter into a separate agreement
providing for the sale to the ▇▇▇▇▇ Group, upon the happening of certain
triggering events (such as death or departure), of the Shares owned by ▇▇▇▇▇ and
3515176 for a price based upon a valuation of the COMPANY, subject to adjustment
in the event of a subsequent public offering of the securities of the COMPANY,
equal to seven (7) times earnings before interest, taxes, depreciation and
amortization. This Agreement shall continue to govern any Shares so acquired
by the ▇▇▇▇▇ Group. A copy of such agreement and all amendments thereto shall
be provided to BBC.
2.3 In the event that stock options are granted in favour of employees
pursuant to a stock option plan adopted by the Board of Directors, then such
employees shall be required to execute an addendum to this Agreement pursuant to
which they shall intervene herein to the extent necessary for this Agreement to
continue to constitute a unanimous shareholders' agreement within the meaning of
the Canada Business Corporations Act (R.S.C. 1985, c. C-44, as amended from time
to time).
2.4 The Shareholders covenant and agree, whether as shareholders, directors
or officers of the COMPANY, as the case may be, or otherwise, to vote their
respective Shares and exercise their respective powers to ensure that the
COMPANY will carry out the provisions of this agreement in its intent and
purport.
2.5 Notwithstanding anything ever contained in the by-laws, resolutions or
contracts of the COMPANY, in the event of any conflict between any of the
provisions of this Agreement and such by-law, resolution or contract, the
provisions of this Agreement shall supersede such by-law, resolution or
contract.
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ARTICLE 3. DIRECTORS AND OFFICERS
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3.1 The Board of Directors of the COMPANY shall be initially comprised of
five (5) directors and, subject to the provisions of Section 3.3 below, a quorum
for a meeting of the Board of Directors shall be four (4) of the directors. BBC
shall be entitled to nominate at least one (1) director and no less than ten
percent (10%) of the directors constituting the Board of Directors at any time.
The Shareholders shall vote their Shares at each and every meeting of the
Shareholders of the COMPANY so as to cause the nominee(s) from time to time of
BBC to be elected to (and if appropriate, removed from) the Board of Directors
of the COMPANY. The initial nominee of BBC shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
3.2 Notwithstanding the generality of Section 3.1 above, in the event that
the ratio of Debt to Equity of the COMPANY, as reflected in its internal monthly
consolidated financial statements, should exceed 4 to 1 for any two (2)
consecutive months, then BBC shall be entitled to appoint that additional number
of directors to the Board of Directors of the COMPANY which results in the BBC
nominees constituting a majority of the Board, the whole until such time as the
ratio of Debt to Equity, as reflected in its internal monthly consolidated
financial statements, decreases below 4 to 1 for any two (2) consecutive months,
whereupon the additional nominees of BBC shall be removed from the Board.
3.3 Notice of a meeting of the directors of the COMPANY shall be sent, in the
manner specified in Section 13.4 below, at least ten (10) days prior to the date
upon which such meeting is to be held. If the nominee of BBC is not present at
such meeting in person or by telephone, then quorum shall be deemed not to have
been met and the meeting shall be adjourned. If the nominee of BBC shall fail
to attend a second meeting duly called in accordance herewith to continue the
adjourned meeting, such second meeting shall likewise be adjourned. Thereafter,
a third meeting may be called on only five (5) days prior written notice and if
the nominee of BBC shall fail to attend such third meeting, then quorum shall be
met so long as any four (4) directors are present in person or by telephone.
Notwithstanding the generality of the foregoing, BBC undertakes to use its best
efforts to cause its nominee to attend at meetings of the board of directors as
soon as practicable, particularly where the matters to be discussed are of an
urgent nature, such that the business of Bariatrix will not be negatively
affected as a result of the lengthy delays required by this provision.
3.4 In the event that any committee should ever be formed to which powers of
the Board of Directors are delegated, then the nominee(s) of BBC to the Board of
Directors shall be entitled to participate in such committee, in a proportion at
least equal to the proportion of his or their representation on the Board of
Directors.
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3.5 Except as set forth in Section 4.2 hereof, no resolution may be passed or
adopted by the Board of Directors of the COMPANY unless such resolution shall
have received the affirmative vote of at least three (3) of the directors of the
COMPANY present at a duly called and constituted meeting of the Board of
Directors or unless such resolution shall have been signed by all of the
directors of the COMPANY.
3.6 Meetings of the Board of Directors shall be held not less than quarterly
at the offices of the COMPANY or at such other location as the directors may
agree, and each director shall be entitled to full reimbursement of reasonable
out-of-pocket expenses incurred in order to attend such meetings. A director
may participate in any meeting of the Board of Directors by telephone.
3.7 The officers of the COMPANY, until changed in accordance with the
provisions of paragraph 4.2(c) below, shall be as follows:
CEO - ▇▇▇▇▇▇ ▇▇▇▇▇
President - ▇▇▇▇▇▇ ▇▇▇▇▇
Vice-President - ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Secretary - ▇▇▇▇▇▇ ▇▇▇▇▇
Assistant-Secretary - ▇▇▇▇▇ ▇▇ ▇▇▇▇
ARTICLE 4. SHAREHOLDERS AND THEIR RIGHTS
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4.1 Subject to the following sentence, a quorum for a meeting of the
shareholders shall be one (1) person who holds or acts as proxy for Shareholders
holding a majority of the voting Shares of the COMPANY and meetings of the
Shareholders shall be held at least once per year. Notice of a meeting of the
Shareholders of the COMPANY shall be sent, in the manner provided in Section
13.4 below, at least ten (10) days prior to the date upon which such meeting is
to be held. If BBC is not present (in person or by proxy) at such meeting, then
quorum shall be deemed not to have been met and the meeting shall be adjourned.
If BBC shall fail to attend (or be represented by proxy at) a second meeting
duly called in accordance herewith to continue the adjourned meeting, such
second meeting shall likewise be adjourned. Thereafter, a third meeting may be
called on only five (5) days prior written notice and if BBC shall fail to
attend (or be represented by proxy at) such third meeting, then quorum shall be
met so long as one (1) person who holds or acts as proxy for Shareholders
holding a majority of the voting Shares of the COMPANY is present.
4.2 Notwithstanding any other provision of this Agreement,
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unless BBC provides its prior written consent, the COMPANY shall not take any of
the following actions:
(a) apply for Articles of Amendment or amend, adopt or revoke the by-laws
of the COMPANY or any subsidiary of the COMPANY;
(b) enter into any new arrangements or modify its current arrangements
with any persons or entities that are related to or affiliated with
any of the Shareholders;
(c) appoint, remove or replace any of its officers other than ▇▇▇▇▇▇
▇▇▇▇▇, ROD or ▇▇▇▇▇ ▇▇ ▇▇▇▇, save and except that the consent of BBC
to the appointment of a candidate unanimously proposed by ROD and
▇▇▇▇▇▇ ▇▇▇▇▇ shall not be unreasonably withheld;
(d) significantly alter or modify the nature of the business carried on by
the COMPANY or any of its subsidiaries;
(e) save and except as permitted by the provisions of Article 6, redeem or
purchase for cancellation any shares in its capital stock which are or
may become issued and outstanding;
(f) change or appoint new auditors;
(g) save and except as permitted by the provisions of Article 6, declare
and/or pay any dividends or repay any loans owing to Shareholders;
(h) create, allot or issue any shares in the capital of the COMPANY or any
of its subsidiaries nor any securities convertible into shares in the
capital stock, or any right or option to purchase any shares of the
stock or securities of the COMPANY or any of its subsidiaries
convertible into stock, other than pursuant to the granting of any
stock options to management, with respect to which BBC enjoys the
rights set forth in Section 7.4;
(i) amend or modify the compensation or bonus policies currently in effect
for officers of the COMPANY or any of its subsidiaries, if such
amendment or modification results in increased costs to the COMPANY;
(j) offer any of its securities to the public through an underwritten
public offering which values the COMPANY at less than $US 50,000,000;
(k) adopt, approve or implement an annual budget or
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business plan which significantly alters or modifies the nature of the
business to be carried on by the COMPANY;
(l) take any action which materially deviates from or results in
expenditures which materially exceed the amounts provided in the
annual budget or business plan;
(m) acquire nor enter into any agreement for the acquisition of a business
enterprise the price of which exceeds thirty percent (30%) of the
Equity of the COMPANY;
(n) sell nor enter into any agreement for the sale of thirty percent (30%)
or more of the property of the COMPANY and its subsidiaries, other
than sale of products in the ordinary course of business; or
(o) merge or amalgamate the COMPANY or any of its subsidiaries with any
other corporation or entity.
This Agreement shall constitute a unanimous shareholders' agreement
within the meaning of the Canada Business Corporations Act. Without limiting the
generality of the foregoing, the provisions of this Section 4.2 are intended to
restrict the powers of the directors to manage the business and affairs of the
COMPANY.
ARTICLE 5. FINANCIAL INFORMATION
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5.1 The COMPANY will provide BBC with monthly internal financial statements,
including a balance sheet, statement of income and statement of cash flow within
thirty (30) days following the end of each month.
5.2 BBC shall also be provided with such additional financial and operating
information which BBC may reasonably request from time to time, subject to the
right of the COMPANY to refuse to give BBC access to any internal management
information that may contain information concerning any of BBC's competitors,
such as pricing policies, product formulations, negotiations in progress with
potential customers and the like. The COMPANY will not, however, limit BBC's
access to information reasonably necessary for BBC to evaluate the condition or
future prospects of its investment in the COMPANY.
5.3 In addition, the COMPANY will provide BBC, on a timely basis following
reasonable notice from BBC, all financial data, business data and other
information required by BBC in order to meet its reporting obligations to the
U.S. Securities and Exchange Commission.
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5.4 The COMPANY will likewise provide to BBC, on a timely basis following
reasonable notice from BBC, all financial data, business data and other
information required by BBC in order to fulfil its tax and other informational
obligations to the U.S. Internal Revenue Service and any other U.S. federal,
state or municipal regulatory authorities.
5.5 BBC agrees to provide to the COMPANY, on a timely basis following
reasonable notice from the COMPANY, all financial data, business data and other
information required by the COMPANY to fulfil its tax and informational
obligations to Revenue Canada, the Minister of Revenue (Quebec) and any other
Canadian federal, provincial and local authorities.
5.6 Subject to Sections 5.3 and 5.4 above, all information disclosed or
provided by the COMPANY to BBC or by BBC to the COMPANY in accordance with this
Article shall be held strictly confidential by the recipient and shall not be
used for any purpose other than the purpose for which the information was
supplied, without the prior written consent of the disclosing party.
ARTICLE 6. DISTRIBUTIONS
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6.1 It is hereby agreed that all funds in the COMPANY which the Directors
determine to be available for distribution each year shall be distributed in the
following order of priority:
(a) first, dividends on the Class "D" shares currently issued and
outstanding (or so many of them as remain issued and outstanding at
the end of the relevant fiscal year), at a rate of six percent (6%)
per annum shall be declared and paid annually, notwithstanding the
stipulation in the Articles of Incorporation as amended, that the
holders of Class "D" shares are only entitled to non-cumulative
dividends. Notwithstanding the generality of the foregoing, the
amount remaining to be declared and paid for the fiscal year ending
August 31, 1999 is $6,771;
(b) second, a number of Class "D", "F" and "H" shares held by 3357481 may
be redeemed and paid for in accordance with the following schedule:
Fiscal Year Maximum Value of Redemption
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Sept.1, 2000 - 2.5% of net income
August 31, 2001
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Sept.1, 2001 - 3.5% of net income
August 31, 2002
Sept.1, 2002 - 3.5% of net income
August 31, 2003
Any year commencing 5.5% of net income
on or after Sept. 1,
2003
and, for the purposes hereof, the net income of the COMPANY for any
fiscal year shall be determined on a consolidated basis by the auditors
of the COMPANY in accordance with GAAP;
(c) third, after the maximum number of shares have been redeemed in
accordance with paragraph (b), dividends may be declared and paid on
the Class "A" shares of the COMPANY.
6.2 The Class "D", Class "F" and Class "H" shares held by 3357481 which are
redeemed in accordance with the schedule set forth in Section 0 will be redeemed
at an amount equal to five percent (5%) less than the full redemption value
thereof stipulated in the Articles of Incorporation (as amended) of the COMPANY.
In the event that additional shares are redeemed in the context of a public
offering of the securities of the COMPANY, then the discount on such additional
redemptions will be ten percent (10%), rather than five percent (5%) below full
redemption value. Any Class "D", Class "F" or Class "H" shares not redeemed
while BBC is a Shareholder shall be redeemed, as and when determined by the
Board of Directors, at an amount equal to the full redemption value thereof.
6.3 3357481 acknowledges and accepts the terms and conditions of the
redemption of its Class "D" , Class "F" and Class "H" shares described above and
hereby agrees not to request the redemption of any of its Class "H" shares in
advance of the schedule provided above.
ARTICLE 7. PRE-EMPTIVE RIGHTS
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7.1 No further shares in the capital stock of the COMPANY shall be issued
from treasury (including, without limitation, those issued pursuant to a stock
option plan contemplated by Section 7.4 below) unless BBC shall have first been
given the option, by notice in writing sent by pre-paid registered or certified
mail, to purchase that number and class of shares which will result in BBC
continuing to own ten percent (10%) of the equity and ten percent of the voting
shares of the COMPANY after
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the completion of the proposed issue, the whole upon the same terms and
conditions as the shares to be issued pursuant to the proposed issue (the "Pre-
Emptive Right"). Such notice shall set forth in full all of the material terms
and conditions of the proposed issue.
7.2 The Pre-Emptive Right shall be exercisable by BBC by notice in writing to
the COMPANY of its desire to purchase all, but not less than all of the relevant
number of shares of the COMPANY, within thirty (30) days of receipt of the
notice described in Section 7.1, accompanied by the full purchase price for such
shares, in readily available funds.
7.3 In the event that BBC fails to notify the COMPANY of its desire to
exercise the Pre-Emptive Right in the manner and within the delay contemplated
by Section 7.2, then the COMPANY thereafter, at any time within a period ninety
(90) days following the expiry of the thirty (30) day period within which BBC
may otherwise have exercised its Pre-Emptive Right, may issue all of the shares
contemplated by the proposed issue, upon the terms and conditions set forth in
the notice sent in accordance with Section 7.1.
7.4 The COMPANY shall be entitled to issue shares in its capital stock to any
of its management employees, pursuant to the stock option plan currently being
established or otherwise and BBC hereby agrees to vote in favour of any such
plan or the issue of shares thereunder provided that same is unanimously
approved by ROD, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇ ▇▇▇▇. Notwithstanding the generality
of Section 7.1, in the event that the COMPANY issues shares to management
pursuant to a stock option plan approved by its Board of Directors, then BBC's
Pre-Emptive Right shall be exercisable for a nominal consideration, regardless
of the subscription price to be paid by management.
7.5 It is hereby acknowledged that the COMPANY shall be entitled, subject to
the provisions of Section 7.1 above, to issue shares to major clients of the
COMPANY, provided that such clients are not competitors of BBC. In the event of
a dispute as to whether such client is a competitor of BBC, the matter may be
submitted to arbitration by either BBC or the COMPANY, in accordance with
Article 12 below.
ARTICLE 8. RIGHT OF FIRST OPPORTUNITY AND LAST REFUSAL
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8.1 If either of BBC or the ▇▇▇▇▇ Group desires to sell all or any part of
the Shares owned by such Shareholder (the "Selling Shareholder"), then the
Selling Shareholder shall first be required to offer such Shares (the "Offered
Shares") to the other of them (the "Remaining Shareholder"), for such price and
on such terms and conditions as the Selling Shareholder may determine.
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Such offer shall be sent by the Selling Shareholder to the Remaining Shareholder
by pre-paid registered or certified mail and the parties shall have a period of
sixty (60) days following the receipt of such notice by the Remaining
Shareholder within which to negotiate, in good faith, the sale of the Offered
Shares by the Selling Shareholder to the Remaining Shareholder.
8.2 If the Selling Shareholder is the ▇▇▇▇▇ Group and the parties reach an
agreement for the sale of the Offered Shares to BBC, then the provisions of
Sections 9.1 to 9.6 inclusive, shall apply, mutatis mutandis, to provide 3575176
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and ▇▇▇▇▇ with a Tag-Along Offer, as such term is defined therein.
8.3 In the event that the Selling Shareholder and the Remaining Shareholder
are unable to reach an agreement for the sale of the Offered Shares within such
sixty (60) day period, then the Selling Shareholder thereafter, within a further
period of ninety (90) days, may solicit offers for the Offered Shares from any
Outside Party whom it may choose, other than a competitor of either BBC or
Bariatrix. In the event of a dispute as to whether an Outside Party is a
competitor of BBC or Bariatrix, the matter may be submitted to arbitration by
either BBC or the ▇▇▇▇▇ Group, in accordance with the provisions of Article 12
below.
8.4 In the event that the Selling Shareholder receives a Bona Fide Offer for
the purchase of the Offered Shares from an Outside Party within such ninety (90)
day period, the Selling Shareholder shall deliver or send a notice by pre-paid
registered or certified mail addressed to the Remaining Shareholder, in the
manner contemplated by Section 8.1 (the "Second Notice"), together with a copy
of the original executed Bona Fide Offer setting forth in full the price, terms
and conditions of such offer. If the Selling Shareholder is the ▇▇▇▇▇ Group,
then the ▇▇▇▇▇ Group shall likewise send a copy of the Second Notice to each of
3515176 and ▇▇▇▇▇ and the provisions of Sections 9.1 to 9.6 shall apply, mutatis
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mutandis, to provide 3575176 and ▇▇▇▇▇ with a Tag-Along Offer, as such term is
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defined therein.
8.5 If the Selling Shareholder is:
(a) the ▇▇▇▇▇ Group, then upon receipt of the Second Notice, BBC shall
have an option to:
(i) purchase, at the price and on the terms and conditions indicated in
the Bona Fide Offer, all of the Offered Shares, (the "Purchase
Offer"); or
(ii) sell, at the price and on the terms and conditions indicated in the
Bona Fide Offer, some or all of its Shares to the Outside Party
pursuant to and in accordance with the provisions of Sections 9.1
to 9.6 below, mutatis mutandis (the "Tag-Along
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Offer"); or
(iii) subject to the provisions of Section 9.7 below, which shall
prevail over the provisions of this paragraph (iii), do neither
of the above, in which case BBC will continue to own its Shares
and the ▇▇▇▇▇ Group shall be free to sell its Shares to the
Outside Party in accordance with the provisions of Section 8.8
below.
The Purchase Offer or the Tag-Along Offer shall be exercisable by
counter-notice in writing to the Selling Shareholder within sixty (60)
days following the date upon which the Second Notice was received by
the Remaining Shareholder. Such notice shall be sent in accordance
with Section 8.1 mutatis mutandis; or
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(b) BBC, then upon receipt of the Second Notice, the ▇▇▇▇▇ Group shall be
entitled to purchase upon the same terms and conditions as those set
forth in the Purchase Offer described in paragraph 8.5(a)(i) above,
mutatis mutandis, all of the Offered Shares and, for greater
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certainty, shall not be entitled to exercise any Tag-Along Offer.
8.6 If the Remaining Shareholder elects in its counter-notice to purchase
all but not less than all of the Offered Shares, then the Remaining Shareholder
shall purchase and the Selling Shareholder shall sell such Shares, at the price
and on the terms and conditions indicated in the Bona Fide Offer. In addition,
if the Selling Shareholder is the ▇▇▇▇▇ Group, then the Remaining Shareholder
shall also purchase and those of 3515176 and ▇▇▇▇▇ as shall have exercised his
or its Tag-Along Offer shall sell the relevant number of Shares held by such
Shareholder(s), the whole at the price and on the terms and conditions indicated
in the Bona Fide Offer.
8.7 If the Remaining Shareholder elects in its counter-notice to accept
its Tag-Along Offer, then BBC, the ▇▇▇▇▇ Group and, if the Selling Shareholder
is the ▇▇▇▇▇ Group, those of 3515176 and/or ▇▇▇▇▇ as shall have elected to
exercise his or its Tag-Along Offer, shall all sell to the Outside Party, on
such date and upon the terms and conditions set forth in the Bona Fide Offer,
the relevant number of his or its Shares.
8.8 If the Remaining Shareholder fails to send any counter-notice in the
manner and within the period described in Section 8.5 above as to all but not
less than all of the Offered Shares, then the Selling Shareholder thereafter, at
any time within a period of ninety (90) days subsequent to the expiry of the
period within which the Remaining Shareholder's notice may have otherwise been
given, may sell all but not less than all of such Offered
-14-
Shares to the Outside Party at the price and on the terms and conditions
contained in Bona Fide Offer, subject, if the Selling Shareholder is the ▇▇▇▇▇
Group, to the Tag-Along Offer of those of 3515176 and/or ▇▇▇▇▇ as shall have
exercised same.
8.9 In the event that the Selling Shareholder has not sold the Offered Shares
to the Outside Party within such ninety (90) day period, then the Offered Shares
shall continue to be subject to this Agreement and the provisions of this
Article will have to be followed once again, should the Selling Shareholder
continue to desire to sell the Offered Shares.
8.10 If any Shares are sold to an Outside Party, such Shares shall continue
to be subject to this Agreement. Should any Shareholder sell less than all of
his or its Shares to an Outside Party, then all of the remaining Shares owned by
such Shareholder which have not been sold in accordance with this Article shall
likewise remain subject to the provisions of this Agreement.
ARTICLE 9. TAG-ALONG/ DRAG-ALONG RIGHTS
-----------------------------------------
9.1 If the ▇▇▇▇▇ Group, at any time when it owns at least fifty percent (50%)
of the issued and outstanding Class "A" shares of the COMPANY, desires to sell
all or a part of the Shares owned by it and the ▇▇▇▇▇ Group shall have received
a Bona Fide Offer for the purchase of such Shares from an Outside Party who is
not a competitor of Bariatrix or BBC, which offer the ▇▇▇▇▇ Group wishes to
accept, the ▇▇▇▇▇ Group shall deliver or send a notice by pre-paid registered or
certified mail addressed to all of the other Shareholders. Such written notice
(hereinafter referred to as the "Option Notice") shall (i) set forth the ▇▇▇▇▇
Group's desire to sell such Shares; (ii) be accompanied by a copy of the
original executed Bona Fide Offer, setting forth in full the price and terms of
such offer; and (iii) contain an offer (the "Tag-Along Offer") by the ▇▇▇▇▇
Group to permit all of the other Shareholders to sell some or all of their
Shares to the Outside Party together with the Selling Shareholder, at the price
and on the terms and conditions set forth in the Bona Fide Offer, the whole on a
pro rata basis as between all of the Shareholders interested in selling their
Shares. In the event of a dispute as to whether an Outside Party is a
competitor of BBC or Bariatrix, the matter may be submitted to arbitration by
either BBC or the ▇▇▇▇▇ Group, in accordance with the provisions of Article 12
below.
9.2 The Tag-Along Offer shall operate such that each of the other
Shareholders shall be entitled to sell that proportion of his or its Shares to
the Outside Party as is equal to the proportion of the Shares held by the ▇▇▇▇▇
Group being sold by the ▇▇▇▇▇ Group. However, in the event that the Outside
Party does not wish to purchase a greater number of Shares then that which it
had offered to purchase from the ▇▇▇▇▇ Group, then the Tag-Along
-15-
Offer shall operate such that all of the Shareholders who accept the Tag-Along
Offer, together with the ▇▇▇▇▇ Group, shall sell, in the aggregate, that number
of Shares which the Outside Party had offered to purchase from the ▇▇▇▇▇ Group,
the whole on a pro rata basis as between them in accordance with their
respective holdings of Class "A" shares of the COMPANY.
9.3 Each of the other Shareholders shall have a period of sixty (60) days
from receipt of the notice sent pursuant to Section 9.1 to accept the Tag-Along
Offer, by counter-notice sent in accordance with Section 9.1 mutatis mutandis.
9.4 If a Shareholder does not respond by counter-notice sent in accordance
with Section 9.1 within the said sixty (60) day period, then such Shareholder
shall be conclusively deemed to have declined to accept the Tag-Along Offer.
9.5 If a Shareholder elects, in the counter-notice contemplated by Section
9.3, to accept the Tag-Along Offer, then such Shareholder shall sell to the
Outside Party, on such date and upon the terms and conditions set forth in the
Bona Fide Offer, the relevant number of his or its Shares.
9.6 If none of the Shareholders choose to exercise the Tag-Along Option, then
the ▇▇▇▇▇ Group, at any time within a period of ninety (90) days subsequent to
the expiry of the sixty (60) day period within which the counter-notice may
otherwise have been sent, may sell that number of Shares which the Outside Party
offered to purchase, the whole for the price and on the terms and conditions
contained in the Bona Fide Offer.
9.7 In the event that any Shareholder or group of Shareholders holding at
least eighty percent (80%) of the issued and outstanding Class "A" shares of the
COMPANY should receive a Bona Fide Offer from an Outside Party for the purchase
of all, but not less than all of the Shares of the COMPANY, for consideration in
excess of $US 70,000,000, which offer such Shareholder or group of Shareholders
desires to accept, then such Shareholder or group of Shareholders shall deliver
or send a notice by pre-paid registered or certified mail addressed to each of
the other Shareholders, accompanied by a complete copy of the original executed
Bona Fide Offer setting forth in full the price and all of the terms and
conditions thereof. Upon receipt of such notice, each of the other Shareholders
shall be obliged to sell and hereby agrees that he or it shall sell his or its
Shares to the Outside Party on such date, for such price and upon the terms and
conditions set forth in the Bona Fide Offer.
9.8 Notwithstanding the generality of Section 9.7 above, in the event that
the Shareholder or a group of Shareholders who receive the Bona Fide Offer and
who wish to accept same is not or
-16-
does not include BBC, then BBC shall have the option, exercisable by counter-
notice in writing within sixty (60) days following receipt or deemed receipt of
the notice contemplated by Section 9.7, to purchase upon the same terms and
conditions as those set forth in the Bona Fide Offer, all of the Shares of the
Shareholder or group of Shareholders who received the Bona Fide Offer, the whole
in the manner contemplated by Section 9.7, mutatis mutandis.
----------------
ARTICLE 10. PUBLIC OFFERING
----------------------------
10.1 It is hereby agreed that in the event that the COMPANY should decide to
proceed with an initial public offering of any of its securities, then the
COMPANY will use its best efforts to include a secondary offering of Shares held
by the Shareholders at the time of the initial public offering, with respect to
which the Shareholders shall be entitled to participate on a pro rata basis.
10.2 In the event that the regulatory authorities and/or the underwriters
require that any Shares held by the Shareholders be escrowed, then each of the
▇▇▇▇▇ Group and BBC shall be required to escrow their Shares, on a pro rata
basis, in proportion to their respective shareholdings. ▇▇▇▇▇ and 3515176 will
not be required to participate in such escrow, unless specifically required by
the underwriters or regulatory authorities.
ARTICLE 11. CONFIDENTIALITY
----------------------------
11.1 Subject to the provisions of Sections 5.3 and 5.4 above, none of the
Shareholders, at any time during or after his or its association with the
COMPANY, directly or indirectly, in any capacity whatsoever, shall divulge,
disclose or communicate to any person, legal or physical, entity, firm or any
other third party, or utilize for his or its personal benefit or for the benefit
of any other party, any confidential information regarding the COMPANY or any of
its subsidiaries or affiliated entities. For greater certainty, confidential
information shall include, but shall not be limited to any technical or non-
technical data, formulae, product formulations, methods, techniques, designs,
financial data, pricing policies, business plans, lists of actual or potential
customers or suppliers and their particular needs or interests and any
information regarding the COMPANY's marketing, sales or dealer network, which is
not generally known to the public through legitimate origins.
11.2 In the event that any of the Shareholders breaches any of the terms
contained in Section 11.1 the Shareholders stipulate and agree that said breach
will result in immediate and irreparable harm to the business and goodwill of
the COMPANY and that damages, if any, and remedies at law for such breach would
be inadequate. In addition to any and all such remedies available to
-17-
the COMPANY, the COMPANY or any of them, as the case may be, shall therefore be
entitled to apply for and receive from any court of competent jurisdiction an
injunction to restrain any violation of this Agreement and for such further
relief as the court may deem just and proper.
11.3 The obligations, duties and liabilities of the Shareholders pursuant to
this Article 11 are continuing, absolute and unconditional and shall remain in
full force and effect as provided therein despite any termination of this
Agreement for any reason whatsoever.
ARTICLE 12. ARBITRATION
------------------------
12.1 The parties hereby agree that any dispute or disagreement hereunder or
which may arise pursuant to this Agreement shall be referred to the senior
management of the parties in dispute for good faith negotiations to settle such
dispute and, failing settlement by senior management, shall be referred to
binding arbitration in accordance with the rules and procedures set forth
herein.
12.2 If any party wishes to submit a dispute to arbitration, it shall give
notice to the other party or parties with whom the dispute arises (the
"Arbitration Notice") specifying the particulars of the matter or matters in
dispute and proposing the name of the person it wishes to appoint as the single
arbitrator. Within 15 days after receipt of the Arbitration Notice, the other
party shall give notice to the party who sent the Arbitration Notice advising
whether the proposed arbitrator is acceptable. If no such notice is given
within such 15 day period, the party who received the Arbitration Notice shall
be deemed to have accepted the arbitrator proposed therein. If the party
receiving the Arbitration Notice responds within such 15 day period, to the
effect that the arbitrator proposed in the Arbitration Notice is not acceptable,
then the parties shall have a further period of 10 days within which to agree
upon the appointment of a single arbitrator, failing which, either party may
apply to a Judge of the Superior Court of the Province of Quebec for the
appointment of a single arbitrator (the "Arbitrator"). For greater certainty,
the individual selected as Arbitrator shall be at arm's length from both parties
and shall not be a member of the audit or legal firm or firms who then advise or
who may have advised either party, within a period of 5 years prior to the date
upon which the Arbitration Notice is sent, nor shall the Arbitrator be an
individual who is otherwise regularly retained by either of the parties for any
purpose.
12.3 The arbitration will be conducted in as informal a manner as possible.
In the event that the Arbitrator experiences difficulties with such informal
proceedings, then the Arbitrator
-18-
will apply all or part of the rules of procedures set out in Book VII entitled
"Arbitration" of the Code of Civil Procedure of Quebec.
12.4 Within 20 days after the appointment of the Arbitrator, the party who
sent the Arbitration Notice shall present, in writing, to the Arbitrator and to
the other party, a description of the claim and the relief sought. The other
party shall have a period of 20 days within which to respond thereto.
12.5 Thereafter, if requested by the Arbitrator, all parties and witnesses
will be present at a location chosen by the Arbitrator in Montreal, Quebec
should the Arbitrator desire to hear the parties and their respective witnesses
as to matters of fact.
12.6 Thereafter, if requested by the Arbitrator, the parties will present
their oral arguments. If the Arbitrator is not a member of the Bar of Quebec,
then the Arbitrator may retain the services of legal counsel at his or her
choice to advise the Arbitrator on legal matters, provided such legal counsel is
independent of both of the parties to the arbitration. The fees of such
counsel will be considered a disbursement of the arbitration.
12.7 The arbitration shall be conducted in the English language.
12.8 The Arbitrator shall rule on all issues raised by the parties within a
delay of 60 days from the end of the hearing by means of a written award to be
sent by registered mail to each of the parties. The award will list each of the
issues between the parties and resolve each issue, in whole or in part, in
favour of one or both of the parties. The Arbitrator shall provide reasons for
his or her decision, unless the parties otherwise agree.
12.9 The Arbitrator will allocate the amount of his or her fees and
disbursements to one or both of the parties at the same time as he or she
renders his or her award. To the extent possible, in the sole judgment of the
Arbitrator, the allocation of such fees and disbursements will be proportionate,
on a weighted basis, to the success of each party in advancing its respective
position.
12.10 The decision of the Arbitrator shall be final and binding on the
parties hereto and shall not be subject to any appeal or review procedure
provided that the Arbitrator has followed the rules provided herein and in the
Code of Civil Procedure and has proceeded in accordance with the principles of
natural justice.
-19-
ARTICLE 13. GENERAL PROVISIONS
-------------------------------
13.1 The share certificate or certificates representing the Shares owned by
the Shareholders shall have inscribed thereon the following words or words
having a similar intent or purport, namely:
"The ownership of these shares is subject to the terms of an agreement
dated the 20th day of May, 1999."
13.2 Notwithstanding any provision of this Agreement, any Shareholder who is
an individual may sell, transfer or assign Shares to a corporation (hereinafter
referred to as "Holdco") related to him within the meaning of the Income Tax Act
(Canada), the Shareholders of which are also related to such Shareholder,
provided that (i) none of the Shareholders of Holdco shall be a competitor of
BBC; (ii) that Holdco becomes a party to this Agreement or an amended Agreement
necessitated by the replacement of a Shareholder by Holdco pursuant to such
sale, transfer or assignment; and (iii) such Shareholder shall hold and
continue to hold the majority of the voting shares in Holdco.
13.3 The parties hereto bind and oblige their heirs, executors,
administrators, successors in title and assigns to sign all documents, execute
all deeds and do all things necessary to effect the transfer of the Shares in
accordance with the provisions of this Agreement.
13.4 Any notice to be given by one party to another hereunder shall be given
in writing and delivered (i) by overningt courier service or (ii) by facsimile
at the address given below and such notice shall conclusively be deemed to have
been received; (i) upon the date of signature of the courier waybill; or (ii) on
the date upon which the facsimile transmission is confirmed:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
c/o BARIATRIX PRODUCTS
INTERNATIONAL INCORPORATED
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
3515176 CANADA INC.
c/o BARIATRIX PRODUCTS
INTERNATIONAL INCORPORATED
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Fascimile: (▇▇▇) ▇▇▇-▇▇▇▇
-20-
Attention: ▇▇▇▇▇ ▇▇ ▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
c/o SPIEGEL ▇▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
3357481 CANADA INC.
c/o BARIATRIX PRODUCTS
INTERNATIONAL INCORPORATED
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
and, in the case of each of the foregoing, with a copy to:
SPIEGEL ▇▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
BALANCE BAR COMPANY
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇.▇.▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
-----------------------------------
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
BARIATRIX PRODUCTS
INTERNATIONAL INCORPORATED
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
provided however, that any party may, by written notice sent to the other in
accordance with the provisions of this Section 13.40,
-21-
specify a new address to which any notice shall thereafter be addressed.
13.5 This agreement shall terminate on the occurrence of any of the following
events:
(a) the decision of Shareholders holding ninety-five percent (95%) of the
issued and outstanding voting Shares of the COMPANY; or
(b) the successful completion of an underwritten offering of any of the
securities of the COMPANY to the public; or
(c) all of the Shares being beneficially owned by a single party; or
(d) the liquidation, winding-up or dissolution of the COMPANY.
13.6 The rights of the parties hereto and the provisions hereof shall be
interpreted and construed according to the laws of the Province of Quebec.
13.7 The parties have requested that this Agreement and all court proceedings
thereto related be drafted in English. Les parties aux presentes ont exige a ce
que ce contrat et toutes procedures judiciaires y afferentes soient rediges en
Anglais.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE SIGNED AT THE PLACE AND ON THE DATE
FIRST HEREINABOVE MENTIONED.
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
3515176 CANADA INC.
Per: /s/ ▇▇▇▇▇ ▇▇ ▇▇▇▇
------------------------
▇▇▇▇▇ ▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
3357481 CANADA INC.
-22-
Per: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
BALANCE BAR COMPANY
Per: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
BARIATRIX PRODUCTS
INTERNATIONAL INCORPORATED
Per: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇