SECURITYHOLDERS AGREEMENT
DATED AS OF OCTOBER 2, 2000
among
BD RECAPITALIZATION
HOLDINGS LLC,
PETCO ANIMAL SUPPLIES, INC.
and
CERTAIN SECURITYHOLDERS
OF PETCO ANIMAL SUPPLIES, INC.
TABLE OF CONTENTS
Page
ARTICLE I. ......................................................................................................2
RESTRICTIONS ON TRANSFER..........................................................................................2
1.1 GENERAL RESTRICTIONS ON TRANSFER.......................................................2
1.2 COMPLIANCE WITH SECURITIES LAWS........................................................2
1.3 AGREEMENT TO BE BOUND..................................................................3
1.4 COOPERATION............................................................................3
1.5 IMPROPER TRANSFER......................................................................3
1.6 INVOLUNTARY TRANSFER...................................................................4
1.7 FIRST OPTION...........................................................................4
1.7.1 NO WAIVER.....................................................................5
1.7.2 EXEMPT TRANSFERS..............................................................5
1.8 CALL OPTION............................................................................6
1.9 STOCK SUBSCRIPTION RIGHTS..............................................................8
1.9.1 RIGHT TO PURCHASE NEW SECURITIES..............................................8
1.9.2 NEW SECURITIES................................................................9
1.9.3 REQUIRED NOTICES..............................................................9
1.9.4 COMPANY'S RIGHT TO SELL.......................................................9
1.9.5 ASSIGNMENT...................................................................10
1.10 TAX TREATMENT.........................................................................10
ARTICLE II. DRAG-ALONG SALES....................................................................................10
2.1 RIGHT OF PURCHASER PARTIES TO REQUIRE SALE............................................10
2.2 DRAG-ALONG NOTICE.....................................................................11
2.3 DELIVERY OF CERTIFICATES..............................................................11
2.4 CONSIDERATION.........................................................................11
2.5 COOPERATION...........................................................................11
ARTICLE III. ...................................................................................................11
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................11
3.1.1 ORGANIZATION.................................................................12
3.1.2 AUTHORITY....................................................................12
3.1.3 BINDING OBLIGATION...........................................................12
3.1.4 NO CONFLICT..................................................................12
3.2 REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDERS.................................12
3.2.1 ORGANIZATION.................................................................12
3.2.2 AUTHORITY....................................................................12
3.2.3 BINDING OBLIGATION...........................................................12
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3.2.4 NO CONFLICT..................................................................13
ARTICLE IV. TERMINATION OF AGREEMENT............................................................................13
4.1 TERMINATION...........................................................................13
ARTICLE V. GENERAL..............................................................................................13
5.1 RECAPITALIZATION, EXCHANGES, ETC., AFFECTING THE SHARES...............................13
5.2 INJUNCTIVE RELIEF.....................................................................13
5.3 NOTICES...............................................................................13
5.4 LEGEND................................................................................14
5.5 TRANSFEREES BOUND.....................................................................15
5.6 AMENDMENT; WAIVER; REPRESENTATIVES....................................................15
5.7 ADDITIONAL DOCUMENTS; FURTHER CHANGES.................................................16
5.8 NO THIRD-PARTY BENEFITS...............................................................16
5.9 SUCCESSORS AND ASSIGNS................................................................16
5.10 SEVERABILITY..........................................................................16
5.11 INTEGRATION...........................................................................16
5.12 GOVERNING LAW.........................................................................17
5.13 ATTORNEYS' FEES.......................................................................17
5.14 HEADINGS..............................................................................17
5.15 INFORMATION FOR NOTICES...............................................................17
5.16 COUNTERPARTS..........................................................................17
5.17 CONSENT TO JURISDICTION...............................................................17
5.18 NO INCONSISTENT AGREEMENTS............................................................18
5.19 CERTAIN LIMITATIONS...................................................................18
5.20 INFORMATION REGARDING BENEFICIAL OWNERSHIP............................................18
5.21 NO TAX ADVICE.........................................................................18
5.22 AFTER ACQUIRED SHARES.................................................................18
5.23 NOTICES...............................................................................18
SCHEDULES AND EXHIBITS
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SECURITYHOLDERS AGREEMENT
THIS
SECURITYHOLDERS AGREEMENT (the "AGREEMENT") is entered into as of
October 2, 2000, by and among PETCO Animal Supplies, Inc., a
Delaware
corporation (the "COMPANY"), BD Recapitalization Holdings LLC, a
Delaware
limited liability company (the "PURCHASER") and the individuals named in
Schedule I hereto (the "INITIAL EMPLOYEE SECURITYHOLDERS") and shall be binding
upon and inure to the benefit of any individual or Person (as defined in Section
1.1) owning Shares (as defined herein) which were received in connection with
the exercise of any option granted under a compensatory benefit plan of the
Company, its parents, its subsidiaries or majority-owned subsidiaries of the
Company's parents (such individuals, together with the Initial Employee
Securityholders, the "EMPLOYEE SECURITYHOLDERS" and each individually, an
"EMPLOYEE SECURITYHOLDER"). Each of the parties to this Agreement (other than
the Company) and any other Person (as defined in Section 1.1) who shall become a
party to or agree to be bound by the terms of this Agreement after the date
hereof is sometimes hereinafter referred to as a "SECURITYHOLDER".
RECITALS
Prior to the execution of this Agreement, the Company and BD
Recapitalization Corp., a subsidiary of the Purchaser ("MERGERSUB"), entered
into an Agreement and Plan of Merger, dated as of May 17, 2000, as amended (the
"MERGER AGREEMENT"), providing for the merger (the "Merger") of MergerSub with
and into the Company, with the Company as the surviving corporation.
Following the consummation of the transactions contemplated by the Merger
Agreement, the Purchaser will own shares of Common Stock, par value $0.001 per
share, of the Company (the "COMMON STOCK") and the Initial Employee
Securityholders will own options ("EMPLOYEE OPTIONS") to purchase shares of
Common Stock. Shares of Common Stock (whether issued or acquired hereafter,
including all shares of capital stock of the Company issuable upon the exercise
of warrants, options or other rights to acquire shares of capital stock of the
Company, or upon the conversion or exchange of any security) and Employee
Options are collectively referred to as the "SHARES".
The Company and each of the Securityholders desire, for their mutual
benefit and protection, to enter into this Agreement to set forth their
respective rights and obligations with respect to their Shares (whether issued
or acquired hereafter, including all shares of Common Stock issuable upon the
exercise of warrants, options or other rights to acquire shares of Common Stock,
or upon the conversion or exchange of any security).
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
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ARTICLE I.
RESTRICTIONS ON TRANSFER
1.1 GENERAL RESTRICTIONS ON TRANSFER. Each Securityholder agrees that,
except as required in connection with obtaining the Financing (as defined in the
Merger Agreement), or any replacement thereof, and excluding any Transfer (as
defined below) by any Purchaser Party (as defined below) to any other Purchaser
Party or to its equity participants, such Securityholder will not, directly or
indirectly, sell, hypothecate, give, bequeath, transfer, assign, pledge or in
any other way whatsoever encumber or dispose of (whether for or without
consideration, whether voluntarily or involuntarily or by operation of law) (any
such event, a "TRANSFER") any Shares now or hereafter at any time owned by such
Securityholder (or any interest therein) to another individual, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, other entity or government or other agency or
political subdivision thereof (a "Person") ("TRANSFEREE"), other than in
accordance with all applicable provisions of this Agreement. The Company shall
not transfer upon its books any Shares to any Person to the extent prohibited by
this Agreement and any purported transfer in violation hereof shall be null and
void ab initio and of no effect. Each Employee Securityholder represents and
warrants to the Purchaser and the Company that the Shares owned by such Employee
Securityholder were acquired by such Employee Securityholder for investment only
and not with a view to any public distribution thereof, and there is not any
current plan or intention on the part of such Employee Securityholder to offer
to sell, exchange or otherwise dispose of the Shares owned by such Employee
Securityholder in violation of any of the requirements of the Securities Act of
1933, as amended, or any similar federal statute, and the rules and regulations
of the Securities and Exchange Commission or any other agency at the time
administering the Securities Act (as defined herein) thereunder, all as the same
shall be in effect from time to time (the "SECURITIES ACT"), or any comparable
state or foreign securities laws. Purchaser and its members and affiliates and
their limited partners, general partners, principals, stockholders and
affiliates, and any of their Transferees, are sometimes referred to in this
Agreement, collectively, as the "PURCHASER PARTIES" and, individually, as a
"PURCHASER PARTY." The Employee Securityholders and their respective spouses,
any direct or adopted lineal descendants and ancestors and any trusts solely for
the benefit of any or all of the foregoing, and any of their Transferees, are
sometimes referred to in this Agreement, collectively, as the "EMPLOYEE PARTIES"
and, individually, as an "EMPLOYEE PARTY."
1.2 COMPLIANCE WITH SECURITIES LAWS. No Securityholder shall Transfer
any Shares, and the Company shall not transfer on its books any Shares, unless
(a) the Transfer is pursuant to an effective registration statement under the
Securities Act and is in compliance with any applicable state securities or
Blue Sky laws or (b) such Securityholder shall have furnished the Company with
an opinion of counsel, to the extent reasonably required by the Company, which
opinion and counsel shall be reasonably satisfactory to the Company, to the
effect that no such registration is required because of the availability of an
exemption from registration under the
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Securities Act; PROVIDED, HOWEVER, that any Transfer by a Securityholder which
is a state-sponsored employee benefit plan to a successor trust or fiduciary or
pursuant to a statutory reconstitution or which is permitted hereunder pursuant
to the provisions of Section 1.7.2(a) shall be expressly permitted and no
opinions of counsel shall be required in connection therewith and PROVIDED,
FURTHER, that any Transfer by any Purchaser Party to any other Purchaser Party
or to its equity participants shall be expressly permitted and no opinions of
counsel shall be required in connection therewith. As used in this Agreement,
the term "AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person. For purposes of this Agreement, the term "CONTROL," (including,
with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY," and "UNDER
COMMON CONTROL WITH"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
1.3 AGREEMENT TO BE BOUND. No Transfer, including, without limitation,
by means of an Involuntary Transfer, of Shares by a Securityholder shall be
effective (and the Company shall not transfer on its books any Shares) unless
(i) the certificates representing such Shares, as the case may be, issued to
the Transferee shall bear the legend provided in Section 5.4, if required by
such Section 5.4, and (ii) the Transferee shall have executed and delivered to
the Company, as a condition precedent to such Transfer, an instrument or
instruments in form and substance satisfactory to the Company confirming that
the Transferee agrees to be bound by the terms of this Agreement and accepts
the rights and obligations set forth hereunder as if it were the transferor of
the relevant Shares.
1.4 COOPERATION. (a) The Company will provide reasonable assistance to
any Employee Party or any Purchaser Party seeking to sell its Shares in
accordance with the terms of the Agreement, PROVIDED, HOWEVER, that the Company
shall not be required to provide any confidential information to any
prospective purchaser who has not executed a confidentiality agreement in a
form reasonably satisfactory to the Company. Except as otherwise provided
herein, any reasonable out-of-pocket costs to the Company of providing such
assistance shall be paid pro rata by each Securityholder seeking to sell its
Shares. The Company will also cooperate with any Employee Party or any
Purchaser Party in having all stop transfer instructions or notations and
restrictive legends lifted in connection with the sale (other than to an
affiliate of the Company) of Shares pursuant to Rule 144 under the Securities
Act, as such rule may be amended from time to time, or any other similar
regulation hereinafter adopted by the Commission ("RULE 144"); PROVIDED,
HOWEVER, that in such a case the selling Securityholder shall be required to
provide the Company with the opinion provided for in Section 1.2(b) hereof.
1.5 IMPROPER TRANSFER. Any attempt to Transfer or otherwise encumber
any Shares in violation of this Agreement shall be null and void and neither
the Company nor any transfer agent of such Shares shall give any effect to such
attempted Transfer or encumbrance in its stock records.
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1.6 INVOLUNTARY TRANSFER. In the case of any Transfer of title or
beneficial ownership of Shares upon default, foreclosure, forfeit, court order,
or otherwise than by a voluntary decision on the part of a Securityholder (an
"INVOLUNTARY TRANSFER"), such Securityholder (or his legal representatives)
shall promptly (but in no event later than two (2) Business Days (as defined in
the Merger Agreement) after such Involuntary Transfer) furnish written notice to
the Company indicating that the Involuntary Transfer has occurred, specifying
the name of the Person to whom such Shares have been transferred, giving a
detailed description of the circumstances giving rise to, and stating the legal
basis for, the Involuntary Transfer.
1.7 FIRST OPTION. Except for (i) Drag-Along 100% Sales or Drag-Along
50% Sales made in accordance with Article II or (ii) sales upon exercise of a
Call Option pursuant to Section 1.8, no Employee Party shall Transfer any
Shares except as specifically permitted by this Section 1.7. If at any time any
Employee Party desires to Transfer all or any part of the Shares held by such
Person (an "EMPLOYEE SELLING PARTY") (other than in accordance with Section
1.7.2) such Employee Selling Party shall obtain an irrevocable and
unconditional bona fide arm's length written offer (the "BONA FIDE OFFER") for
the purchase of such Shares for cash, cash equivalents, or a debt instrument
with commercially reasonable terms from a third party unaffiliated with such
Employee Selling Party (an "OUTSIDE PARTY"), following which the Employee
Selling Party shall provide written notice (the "SALE NOTICE") to each of (i)
Purchaser (together with its assigns, the "PURCHASER BUYER") and (ii) the
Company (each of Purchaser Buyer and the Company a "POTENTIAL BUYER") setting
forth such desire to Transfer such Shares, which Sale Notice shall be
accompanied by a photocopy or other facsimile of the Bona Fide Offer and shall
set forth the name and address of the Outside Party and the price and terms of
such Bona Fide Offer. Upon the giving of such Sale Notice, each Potential Buyer
shall, subject to the priorities set forth below, have the option (which option
(the "PURCHASE OPTION"), in the case of Purchaser only, shall be freely
assignable at Purchaser's sole discretion) to purchase all or any portion of
such Shares specified in the Sale Notice, on the same terms and conditions,
including but not limited to the offer price for the Shares as set forth in the
Bona Fide Offer. Each Potential Buyer shall have thirty (30) days from receipt
of the Sale Notice to provide written notice (the "ACCEPTANCE NOTICE") to such
Employee Selling Party of its desire to exercise such Purchase Option. If more
than one Potential Buyer shall deliver an Acceptance Notice within such thirty
(30) day period, the priority as among the Potential Buyers to match the Bona
Fide Offer and purchase such Shares shall be, to the extent such Potential
Buyers have delivered Acceptance Notices, FIRST, the Purchaser Buyer and,
SECOND, the Company.
If a Potential Buyer or Potential Buyers, as applicable, elects to
purchase, all or any portion of the Shares covered by the Bona Fide Offer on the
terms and conditions set forth in the Sale Notice, the Potential Buyer(s)
entitled to purchase such Shares (the "CHOSEN BUYER(S)") shall be determined in
accordance with the priorities set forth, if applicable, above and such Chosen
Buyer(s) shall be obligated to purchase, and such Employee Selling Party shall
be obligated to sell, such Shares at the price and terms specified in the Sale
Notice. The closing of the purchase by the Chosen Buyer(s) shall be held on a
Business Day within ninety days (90) days after the giving of the relevant
Acceptance Notice, at the principal offices of the Chosen
4
Buyer(s), or at such other time and place as may be mutually agreed to by the
Chosen Buyer(s) and the Employee Selling Party. "Business Day" shall mean any
day that is not a Saturday, Sunday or legal holiday in the State of New York.
If Acceptance Notice(s) are not delivered within the periods
specified above by one or more Potential Buyer(s), as applicable, with respect
to all of the Shares included in the Sale Notice, the Selling Party shall, upon
compliance with the provisions of Section 1.3, have the right to consummate the
sale of all (but not less than all) of the Shares covered by the Sale Notice and
not included in an Acceptance Notice to the Outside Party but only at the price
and upon terms and conditions no less favorable to the Selling Party than those
contained in the Sale Notice (PROVIDED that the purchase price must be payable
solely in cash, cash equivalents or, to the extent and in accordance with the
terms set forth in the Sale Notice, a debt instrument with commercially
reasonable terms) and only if such sale occurs on a date within ninety (90) days
of the date of the Sale Notice; PROVIDED, HOWEVER, that in the event the Selling
Party has not so Transferred all such Shares to the Outside Party within such
ninety-day period, then such Shares thereafter shall continue to be subject to
all of the restrictions contained in this Agreement.
1.7.1 NO WAIVER. Any election in any instance by any Potential
Buyer not to exercise its option rights under this Section 1.7 shall not
constitute a waiver of such rights with respect to any other proposed Transfer
of Shares.
1.7.2 EXEMPT TRANSFERS. The provisions of this Section 1.7 shall
not apply and the Transfer shall be permitted:
(a) to any Transfer of Shares by any Employee Securityholder
to the spouse of any of them, any direct or adopted lineal descendant or
ancestor of either of them or any trust solely for the benefit of any or
all of the foregoing, PROVIDED that each of the following conditions shall
be satisfied:
(i) after giving effect to such Transfer, sole voting
power with respect to such Transferred Shares shall be
held by the transferor Employee Securityholder (unless
such Transfer occurs by reason of the death of such
Employee Securityholder); and
(ii) the Transferee of such Transferred Shares shall
have executed and delivered to the Company, as a
condition precedent to such Transfer, an instrument or
instruments in form and substance satisfactory to the
Company confirming that the Transferee agrees to be
bound by the terms of this Agreement and accepts the
rights and obligations set forth in this Agreement as if
it were the transferor Employee Securityholder;
5
(b) to any distribution of Shares by the Purchaser or any
other Purchaser Party to its respective equity participants in accordance
with the terms of any applicable limited partnership agreement, operating
agreement or other governing agreement or instrument;
(c) to any sale of Shares by an Employee Party (as defined
below) to the public pursuant to an effective registration statement under
the Securities Act.
1.8 CALL OPTION. The Employee Securityholders each agree for
themselves and all Employee Parties who subsequently acquire or hold Shares
that the Company and the Purchaser Buyer will have a call option (the "CALL
OPTION") on all Shares held by any Employee Securityholder or Employee Party,
including all Shares issuable upon exercise of any options to acquire Shares
from the Company, (the "CALLABLE SECURITIES") upon the termination of such
Employee Securityholder's employment with the Company for any reason (each, a
"CALL EVENT"); provided, that the Company may provide that the Company and the
Purchaser Buyer may exercise the Call Option through the purchase of the
Employee Securityholder's options to acquire Shares from the Company and, if
by the Purchaser Buyer, such option shall be exercisable by the Purchaser
Buyer in accordance with its terms for the exercise price thereof. The Call
Option will expire as to 20% of the Shares owned, or Shares issuable upon
exercise of any option to acquire Shares from the Company owned, by each such
Person upon each anniversary of the later of (a) the date hereof or, (b) the
date such Employee Securityholder first acquires such Shares or was granted
such option (each, the "GRANT DATE"), and on each anniversary of such Grant
Date through the fifth anniversary of such Grant Date. Upon the occurrence of
a Call Event, the Company and the Purchaser Buyer may exercise the Call Option
by written notice (an "OPTION NOTICE") delivered to the Employee
Securityholder (or, if different, the then current holder of the Shares)
within 90 days after such Call Event, of its election to purchase and, upon
the giving of such notice the Chosen Buyer will be obligated to purchase and
the Employee Securityholder (or, if different, the then current holder of the
Shares) ("SELLER") will be obligated to sell all or any lesser portion
indicated in the Option Notice of the Callable Securities owned at the time of
the Call Event by the Seller. The consideration for the Callable Securities
referred to in the preceding sentence shall be the Employee Stockholder's Cost
of such Callable Securities, plus 10 per cent for each full calendar year from
the applicable Grant Date, provided, however, that in respect of options
granted after the date hereof, if the Employee Stockholder's cost is zero, the
consideration shall be an amount equal to ten (10) percent of the per share
exercise price of such option for each full calendar year from the applicable
Grant Date. For purposes of determining the Chosen Buyer (which term shall
have the same meaning as set forth in Section 1.7 in the context of a Call
Option), the priority as among the Company and the Purchaser Buyer to purchase
the Callable Securities shall be, FIRST, the Purchaser Buyer and, SECOND, the
Company.
In the event the Company or any Purchaser Buyer elects not to participate
in the purchase of Callable Securities pursuant to the Call Option, the same
procedures as to allocation as are set forth in Section 1.7 in respect of the
First Option will govern. The closing for all purchases and
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sales of Callable Securities pursuant to this Section 1.8 will be at the
principal executive offices of the Company on the 60th day after the giving of
the Option Notice. The applicable purchase price for the Callable Securities
will be paid in cash or by cashier's check. The Seller will cause the Callable
Securities to be delivered to the Chosen Buyer at the closing free and clear
of all liens, charges or encumbrances of any kind except those which shall
continue to apply to such Shares by the terms of this Agreement. Such Seller
will take all such actions as the Chosen Buyer reasonably requests to vest in
the Chosen Buyer title to the Callable Securities free of any lien, charge or
encumbrance incurred by or through the Seller.
Notwithstanding any other section of this Agreement, in the event a
Employee Securityholder's employment with the Company is terminated other than
through the Securityholder's Retirement from the Company, all of the
Securityholder's vested options to acquire Shares from the Company may be
exercisable for three months following such termination and the exercise price
may be paid at the Securityholder's election (i) by cash or cashiers check, or
(ii) by surrender of Shares or options to acquire Shares from the Company ("NET
ISSUANCE") as determined below. If the Securityholder elects the Net Issuance
method, the Company will issue Shares in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of Shares to be issued to the Securityholder
Y = the number of Shares requested to be exercised under this
Agreement
A = the Fair Market Value of one (1) Share
B = the Exercise Price
Notwithstanding, any other section of this Agreement, in the event a Employee
Securityholder's employment with the Company is terminated through the
Securityholder's Retirement from the Company, all of the Securityholder's vested
options to acquire Shares from the Company may be exercised at any time and from
time to time until the expiration of such vested options to acquire Shares from
the Company.
For purposes of this Section 1.8, the following terms have the following
meanings:
"EMPLOYEE STOCKHOLDER'S COST" means (x) in respect of the Common
Shares, (1) $22, per share, with respect to Common Shares which are either (A)
retained by the holder thereof pursuant to Section 2.2(c) of the Merger
Agreement or (B) acquired pursuant to the exercise of Options (as defined in the
Merger Agreement) retained by the holder thereof pursuant to Section 2.6(c) of
the Merger Agreement, or (2) the consideration paid for such Common Shares, with
respect to Common Shares which are otherwise acquired, (y) in respect of options
to
7
purchase Common Shares outstanding on the date hereof, the excess of $22.00
over the exercise price thereof, per share, and (z) in respect of options to
purchase Common Stock granted after the date hereof, the excess of the Fair
Market Value of the Shares subject to such option over the net of the exercise
price thereof.
"FAIR MARKET VALUE" means, as of any date, the value of a share of
the Common Stock determined as follows: (i) if the Common Stock is then quoted
on the Nasdaq National Market, its last reported sale price on the Nasdaq
National Market or, if no such reported sale takes place on such date, the
average of the closing bid and asked prices; (ii) if the Common Stock is
publicly traded and is then listed on a national securities exchange but is not
quoted on the Nasdaq National Market, the last reported sale price or, if no
such reported sale takes place on such date, the average of the closing bid and
asked prices on the principal national securities exchange on which the Common
Stock is listed or admitted to trading; (iii) if such Common Stock is publicly
traded but is not quoted on the Nasdaq National Market nor listed or admitted to
trading on a national securities exchange, the average of the closing bid and
asked prices on such date, as reported in the Western Edition of THE WALL STREET
JOURNAL, for the over-the-counter market; or (iv) if none of the foregoing is
applicable, by the Board in good faith.
"RETIREMENT" means retirement pursuant to the Company's standard
retirement policy in effect from time to time but in no event prior to the age
of 65, unless otherwise agreed upon by the Securityholder and the Board.
1.9 STOCK SUBSCRIPTION RIGHTS.
1.9.1 RIGHT TO PURCHASE NEW SECURITIES. The Company hereby grants
to each Securityholder the right to purchase a pro rata portion of all New
Securities (as defined in Section 1.9.2) which the Company may, from time to
time, propose to sell and issue at the cash price and on the terms on which
the Company proposes to sell such New Securities. An Employee Securityholder's
pro rata share, for purposes of this Section 1.9, shall be equal to a fraction
(A) the numerator of which is the number of Common Shares (on fully diluted
basis assuming the exercise of all warrants, options or other rights to
acquire Common Shares and all Common Shares issuable upon the conversion or
exchange of any security) held by such Employee Securityholder on the date of
the Company's written notice pursuant to Section 1.9.3 below; and (B) the
denominator of which is the number of Common Shares outstanding (on fully
diluted basis assuming the exercise of all warrants, options or other rights
to acquire Common Shares and all Common Shares issuable upon the conversion or
exchange of any security) on such date. Purchaser's pro rata share, for
purposes of this Section 1.9, shall be equal to a fraction (A) the numerator
of which is the number of Common Shares (on fully diluted basis assuming the
exercise of all warrants, options or other rights to acquire Common Shares and
all Common Shares issuable upon the conversion or exchange of any security)
held by such Purchaser Securityholder on the date of the Company's written
notice pursuant to Section 1.9.3 below; and (B) the denominator of which is
the number of Common Shares outstanding (on a fully diluted basis assuming
exercise of all outstanding options and warrants to acquire Common Shares on
8
such a date). The right to purchase New Securities shall be subject to the
following additional provisions of this Section 1.9.
1.9.2 NEW SECURITIES. "NEW SECURITIES" shall mean any Common Stock
of the Company whether now authorized or not, and rights, options or warrants to
purchase Common Stock, and securities of any type whatsoever that are, or may by
their terms become, convertible into or exchangeable for Common Stock which are
sold by the Company for cash or indebtedness; PROVIDED, HOWEVER, that the term
New Securities shall not include (i) securities issued in a Public Offering
Event; (ii) Common Stock (including options to purchase Common Stock), issued to
employees, consultants or directors of the Company pursuant to plans or
agreements approved by the Board or any committee thereof, (iii) securities
issued pursuant to any stock dividend, stock split, combination or other
reclassification by the Company of any of its capital stock; or (iv) securities
issued pursuant to the exercise of warrants, rights, options or other securities
issued in connection with financing transactions to which the Company and an
unaffiliated third party may be a party and which are approved by the Board and
issuances of Common Stock pursuant thereto, including, without limitation,
Common Stock issuable pursuant to the exercise of warrants, rights, options or
other securities issued in connection with obtaining the Financing (as defined
in the Merger Agreement). For the purposes of this Agreement, a "PUBLIC OFFERING
EVENT" shall mean a firm commitment underwritten public offering of shares of
Common Stock of the Company pursuant to a registration statement or registration
statements under the Securities Act with aggregate gross proceeds to the Company
of at least seventy five million dollars ($75,000,000), and in connection with
such offering such Common Stock is listed or admitted to trading on a national
securities exchange or on the Nasdaq Stock Market.
1.9.3 REQUIRED NOTICES. In the event the Company proposes to
undertake an issuance of New Securities it shall give each Securityholder
written notice, pursuant to the provisions of Section 5.23 hereof, of its
intention, describing the type of New Securities, the cash price, the number of
shares and the general terms upon which the Company proposes to issue the same.
Each Securityholder shall have 30 days from the date of receipt of any such
notice to agree to purchase any or all of such Securityholder's pro rata share
of such New Securities for the price and upon the general terms specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased.
1.9.4 COMPANY'S RIGHT TO SELL. In the event the existing
Securityholders fail to exercise the right of first refusal as to the New
Securities offered within said thirty (30) day period, the Company shall have 60
days thereafter to sell or enter into an agreement (pursuant to which the sale
of New Securities covered thereby shall be closed, if at all, within 120 days
from the date of said agreement) to sell all such New Securities respecting
which the right to purchase provided in Section 1.9.1 was not exercised, at a
price and upon the general terms not more favorable in any material respect to
the purchasers thereof than specified in the Company's notice. In the event the
Company has not sold within said 60 day period or entered into any agreement to
sell all such New Securities within said 60 day period (or sold and issued all
such New Securities in accordance with the foregoing within 120 days from the
date of said
9
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Securityholders in the manner
provided above.
1.9.5 ASSIGNMENT. The rights provided in this Section 1.9 are not
assignable, except that, notwithstanding any other provision of this Agreement
such rights are assignable by (x) a Employee Securityholder to an Employee Party
or (y) the Purchaser to a Purchaser Party, in accordance with the restrictions
contained in this Agreement.
1.10 TAX TREATMENT. The attachment of restrictions to the Shares held
by the Employee Securityholders and the subsequent lapse of those restrictions
(the "EXCHANGE RESTRICTIONS") is not intended to constitute a transfer of
property in connection with the performance of services by the Employee
Securityholders within the meaning of section 83 of the Code. Accordingly, the
Company will not report compensation to the Employee Securityholders at any
time with respect to the Exchange Restrictions unless required to by
applicable law.
ARTICLE II. DRAG-ALONG SALES.
2.1 RIGHT OF PURCHASER PARTIES TO REQUIRE SALE. Notwithstanding any
other provision of this Agreement, if some or all Purchaser Parties (the
"DRAG-ALONG SELLERS") receive an offer in writing from a third Person or third
Persons who are not affiliates of any of the Drag-Along Sellers (a "THIRD
PARTY") (x) to purchase all or substantially all of the Shares then owned by
the Purchaser Parties (a "DRAG-ALONG 100% SALE"), or (y) to purchase 50% or
more in the aggregate of the outstanding Common Shares or Preferred Shares of
any class or series, in each case, in one or more related transactions (a
"DRAG-ALONG 50% SALE"), or (z) to effect a business combination of the Company
with such Third Party or the purchase or other acquisition of all or
substantially all of the assets of the Company by such Third Party (an
"ACQUISITION PROPOSAL"), and the Purchaser Parties desire to accept or cause
the Company to accept such Acquisition Proposal, then, in any such case, upon
the demand of a majority of the Drag-Along Sellers, each of the other
Securityholders (a "REQUIRED SELLER") shall be required to sell to such Third
Party the number of Shares specified in the applicable Drag-Along Notice (as
defined below), at the same price and on the same purchase terms and
conditions as the Drag-Along Sellers have agreed to with such Third Party,
including, subject to Section 1.4, no greater indemnification liability on a
pro rata basis than the Drag-Along Sellers have agreed to with such Third
Party, or, as the case may be, vote all of the Common Shares beneficially
owned by such Securityholder in favor of such Acquisition Proposal and take
all other necessary or desirable actions within their control (including,
without limitation, by attending meetings in person or by proxy for the
purpose of obtaining a quorum and executing of written consents in lieu of
meetings), to cause the approval of such Acquisition Proposal.
10
2.2 DRAG-ALONG NOTICE. Prior to making any Drag-Along Sale, the
Drag-Along Sellers shall promptly provide each Required Seller with written
notice (the "DRAG-ALONG NOTICE") not more than thirty (30) or less than fifteen
(15) days prior to the proposed date of the Drag-Along Sale (the "DRAG-ALONG
SALE DATE"). The Drag-Along Notice shall set forth: (i) the name and address of
the Third Party; (ii) the name and address of each member of the Drag-Along
Sellers; (iii) the proposed amount and form of consideration to be paid per
Share and the terms and conditions of payment offered by the Third Party; (iv)
the number of Shares held of record as of the close of business on the date of
the Drag-Along Sale Notice (the "DRAG-ALONG NOTICE DATE") by the Required Seller
to whom the notice is sent (and in the case of a Drag-Along 100% Sale such total
number of Shares held by the Required Seller shall be the number of Shares
required to be sold by such Required Seller); (v) the aggregate number of Shares
held of record as of the Drag-Along Notice Date by the Drag-Along Sellers; (vi)
in the case of a Drag-Along 50% Sale, the pro rata number of Shares to be sold
by such Required Seller, which shall be in proportion to the portion of the
relevant class or series of securities being sold by the Drag-Along Sellers,
(vii) the Drag-Along Sale Date; and (viii) confirmation that the proposed Third
Party has agreed to purchase the Required Sellers' Shares in accordance with the
terms hereof.
2.3 DELIVERY OF CERTIFICATES. On the date that is at least one Business
Day (as defined in the Merger Agreement) before the Drag-Along Sale Date, each
Required Seller shall deliver a certificate or certificates for all of its
Shares duly endorsed for transfer with signatures guaranteed, free and clear of
any lien, claim, encumbrance, charge or security interest of any kind to such
Third Party in the manner and at the address indicated in the Drag-Along Notice
against delivery of the purchase price for such Required Seller's Shares.
2.4 CONSIDERATION. The provisions of this Article 2 shall apply
regardless of the form of consideration received in the Drag-Along Sale.
2.5 COOPERATION. The Required Sellers shall cooperate in good faith
with the Drag-Along Sellers in connection with the consummation of the
Drag-Along Sale, which cooperation shall include, without limitation, with
respect to all Required Sellers, by executing a document containing
substantially similar representations, warranties, indemnities and agreements
as requested by the Drag-Along Sellers in connection with the Drag Along Sale,
but in no case shall such representations, warranties, indemnities and
agreements made by the Required Sellers be more restrictive than those made by
the Drag-Along Sellers in connection with such Drag-Along Sale.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Securityholders as follows:
11
3.1.1 ORGANIZATION. It is a corporation duly organized and
validly listing under the laws of the State of
Delaware;
3.1.2 AUTHORITY. It has full corporate power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby;
3.1.3 BINDING OBLIGATION. The execution, delivery and performance
of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on its part, and, assuming the due execution by the
Securityholder seeking enforcement against the Company, this Agreement
constitutes its binding obligation, enforceable against it in accordance with
its terms, except insofar as enforceability may be limited by bankruptcy,
insolvency, moratorium or other laws which may affect creditors rights and
remedies generally and by principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law); and
3.1.4 NO CONFLICT. The execution, delivery and performance of
this Agreement by it and the consummation by it of the transactions
contemplated hereby will not, with or without the giving of notice or the
lapse of time, or both, (i) violate any provision of law, statute, rule or
regulation to which it is subject, (ii) violate any order, judgment or decree
applicable to it, or (iii) conflict with, or result in a breach or default
under, any term or condition of its certificate or articles of incorporation
or its bylaws or any material agreement or other material instrument to which
it is a party or by which it or its property is bound.
3.2 REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDERS. Each of the
Securityholders represents and warrants to each other and to the Company as
follows:
3.2.1 ORGANIZATION. If it is an entity, it is a corporation,
limited partnership or other entity duly organized and validly existing under
the laws of its respective state of organization;
3.2.2 AUTHORITY. It has full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby;
3.2.3 BINDING OBLIGATION. The execution, delivery and performance
of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by all necessary
action on its part, and, assuming the due execution by the Company, this
Agreement constitutes its binding obligation, enforceable against it in
accordance with its terms, except insofar as enforceability may be limited by
bankruptcy, insolvency, moratorium or other laws which may affect creditors'
rights and remedies generally and by principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law); and
12
3.2.4 NO CONFLICT. The execution, delivery and performance of
this Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time, or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation, bylaws, trust or equivalent
governing document or any material agreement or other material instrument to
which it is a party or by which it or its property is bound.
ARTICLE IV. TERMINATION OF AGREEMENT
4.1 TERMINATION. Subject to the next succeeding sentence, this Agreement
shall terminate ten (10) years from the date of this Agreement (the "TERMINATION
DATE"). If any rights and obligations provided in Sections 1.3, 1.4, 1.6, 1.7,
1.8 and Section 1.9, and Article II of this Agreement have not terminated
earlier in accordance with the preceding sentence, such rights and obligations
shall terminate on the date of a Public Offering Event.
ARTICLE V. GENERAL
5.1 RECAPITALIZATION, EXCHANGES, ETC., AFFECTING THE SHARES. The
provisions of this Agreement shall apply to the full extent set forth herein
with respect to (a) the Shares and any option, right or warrant to acquire
Shares, and (b) any and all shares of capital stock of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in exchange for, or in
substitution for any Shares, by combination, recapitalization, reclassification,
merger, consolidation or otherwise. In the event of any change in the
capitalization of the Company, as a result of any stock split, stock dividend or
stock combination, the provisions of this Agreement shall be appropriately
adjusted.
5.2 INJUNCTIVE RELIEF. It is hereby agreed and acknowledged that it will
be impossible to measure in money the damages that would be suffered if the
parties fail to comply with any of the obligations herein imposed on them and
that, in the event of any such failure, an aggrieved person will be irreparably
damaged and will not have an adequate remedy of law. Any such person shall,
therefore, be entitled to injunctive relief, including specific performance, to
enforce such obligations, without the posting of any bond and if any action
should be brought in equity to enforce any of the provisions of this Agreement,
none of the parties hereto shall raise the defense that there is an adequate
remedy at law.
5.3 NOTICES. Except as otherwise expressly provided herein, any and all
notices, demands or other communications required or permitted hereunder shall
be in writing and shall be made by hand delivery (deemed given upon receipt), or
by certified mail return receipt requested (deemed given upon execution of such
return receipt), addressed to a Securityholder at the address set forth below
such Securityholder's signature on such Securityholder's Amended and Restated
Stock Option Agreement (as defined below). Any party may change its address for
13
notice by notice given to each Securityholder and the Company in accordance with
the foregoing. No objection may be made to the method of delivery of any notice
actually and timely received.
5.4 LEGEND. In addition to any other legend which may be required by
applicable law, each share certificate representing Shares which are subject to
this Agreement shall have endorsed, to the extent appropriate, upon its face the
following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS
EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II)
ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE
SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING
RULE 144, PROVIDED AN OPINION OF COUNSEL IS FURNISHED TO THE
COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE
COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE SECURITIES LAW IS
AVAILABLE.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF A
SECURITYHOLDERS AGREEMENT DATED AS OF OCTOBER 2, 2000, AS SUCH MAY
BE AMENDED FROM TIME TO TIME (THE "
SECURITYHOLDERS AGREEMENT"), A
COPY OF WHICH IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL
OFFICE OF THE COMPANY. NO TRANSFER OF THE SECURITIES WILL BE MADE ON
THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH
SECURITYHOLDERS AGREEMENT. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO OTHER
RIGHTS AND OBLIGATIONS AS SET FORTH IN THE
SECURITYHOLDERS AGREEMENT.
14
To the extent the circumstances or provisions requiring any of the above legends
have ceased to be effective, the Company will upon request reissue certificates
without the applicable legend or legends.
5.5 TRANSFEREES BOUND. All Shares owned by a Transferee shall, subject to
the terms of Section 1.3 of this Agreement, for all purposes be subject to the
terms of this Agreement, whether or not such Transferee has executed a consent
to be bound by this Agreement. The foregoing shall not apply in the case of any
Shares acquired by a Transferee pursuant to a sale of Shares pursuant to an
effective registration statement under the Securities Act or, except for sales
to an affiliate of the Company or sales made prior to a Public Offering Event,
pursuant to Rule 144.
5.6 AMENDMENT; WAIVER; REPRESENTATIVES. This Agreement may be amended,
modified, supplemented or terminated only by a written instrument signed by each
of (i) the Company, (ii) Securityholders holding a majority of the Shares held
by the Purchaser Parties, and (iii) Employee Securityholders holding a majority
of the Shares held by the Employee Securityholders. No provision of this
Agreement may be waived orally, but only by a written instrument signed by the
party against whom enforcement of such waiver is sought. Securityholders shall
be bound from and after the date of the receipt of a written notice from the
Company setting forth such amendment or waiver by any consent authorized by this
Section 5.6, whether or not the Shares shall have been marked to indicate such
consent; no alteration, modification or impairment shall be implied by reason of
any previous waiver, extension of time, delay or omission in exercise, or other
indulgence. For purposes of this Agreement, the parties hereto shall designate
and appoint representatives (each, a "REPRESENTATIVE") as provided in this
Section 5.6. The Purchaser Parties hereby designate and appoint Purchaser (or
any successor designated in writing by the Purchaser Parties holding Shares that
constitute, on a fully-diluted basis, a majority in value of the Shares held by
all of the Purchaser Parties) as Representative on behalf of the Purchaser
Parties and the Employee Parties hereby designate and appoint ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(or any successor designated in writing by the Employee Parties holding Common
Shares that constitute, on a fully-diluted basis, a majority in value of the
Common Shares held by all of the Employee Parties) as Representative on behalf
of the Employee Parties. Each Representative shall have the authority to receive
any notices, settle any claims, agree to any amendments, and grant any consents
or waivers on behalf of the parties that such Representative represents. The
parties hereto shall be entitled to deal exclusively with the respective
Representatives with respect to matters arising out of this Agreement, and the
parties hereto shall be entitled to deliver any notices to the respective
Representatives and rely on any action of the respective Representatives with
respect to actions taken under this Agreement on behalf of the parties hereto.
15
5.7 ADDITIONAL DOCUMENTS; FURTHER CHANGES. Each party hereto agrees to
execute any and all further documents and writings within its powers and to
perform such other actions which may be or become necessary or expedient to
effectuate and carry out this Agreement. Each party hereto acknowledges and
agrees to negotiate in good faith to amend this Agreement to the extent
necessary to provide for customary and reasonable changes required by any
third-party co-investor or other person acquiring an equity interest in the
Company pursuant to the financing of the transactions contemplated by the Merger
Agreement.
5.8 NO THIRD-PARTY BENEFITS. None of the provisions of this Agreement
shall be for the benefit of, or enforceable by, any third-party beneficiary.
5.9 SUCCESSORS AND ASSIGNS. Subject to the terms hereof, this Agreement
shall be binding upon and shall inure to the benefit of the Securityholders, and
their respective successors and permitted assigns; PROVIDED, HOWEVER, (i)
neither this Agreement nor any rights or obligations hereunder may be
transferred by the Company and (ii) no rights or obligations of any
Securityholder under this Agreement may be assigned except that (x) any
Securityholder may transfer its rights and obligations hereunder, in whole or in
part in connection with a Transfer of Shares made in compliance with all of the
provisions of this Agreement and (y) any Purchaser Party may transfer such
Purchaser Party's rights hereunder, including, without limitation, the right to
nominate Purchaser Nominees pursuant to Section 1.2, in whole or in part, to any
affiliate in connection with a Transfer of Shares made in compliance with all of
the provisions of this Agreement.
5.10 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein; PROVIDED, HOWEVER, that the parties hereto shall
use their reasonable best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
invalid, illegal or unenforceable term, provision, covenant or restriction.
5.11 INTEGRATION. This Agreement contains the entire understanding of the
parties with respect to the subject matter hereof. There are no restrictions,
agreements, promises, representations, warranties, covenants or undertakings
with respect to the subject matter hereof other than those expressly set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter.
16
5.12 GOVERNING LAW. THE RIGHTS AND LIABILITIES OF THE PARTIES SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
DELAWARE, REGARDLESS OF THE CHOICE
OF LAWS PROVISIONS OF SUCH STATE OR ANY OTHER JURISDICTION.
5.13 ATTORNEYS' FEES. Should any litigation or arbitration be commenced
(including any proceedings in a bankruptcy court) between the parties hereto or
their representatives concerning any provision of this Agreement or the rights
and duties of any person or entity hereunder, the party or parties prevailing in
such proceeding shall be entitled, in addition to such other relief as may be
granted, to the reasonable attorneys' fees and court costs incurred by reason of
such litigation or arbitration.
5.14 HEADINGS. The headings in this Agreement are inserted only as a
matter of convenience, and in no way define, limit, or extend or interpret the
scope of this Agreement or of any particular Section.
5.15 INFORMATION FOR NOTICES. No Securityholder (other than a
Securityholder as of the date of this Agreement with respect to the Shares held
as of such date) shall hold any of its Shares in nominee name unless it
otherwise provides the Company and the other Securityholders with its name and
address and other information reasonably requested by the Company in order to
establish such Securityholder's particular status under this Agreement (e.g.,
Purchaser Party, Employee Party, etc.).
5.16 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.
5.17 CONSENT TO JURISDICTION. Each Securityholder agrees that any
proceeding arising out of or relating to this Agreement or the breach or
threatened breach of this Agreement may be commenced and prosecuted in a court
in the State of
Delaware. Each Securityholder hereby irrevocably and
unconditionally consents and submits to the non-exclusive personal jurisdiction
of any court in the State of
Delaware in respect of any such proceeding. Each
Securityholder consents to service of process upon it with respect to any such
proceeding by registered mail, return receipt requested, and by any other means
permitted by applicable laws and rules. Each Securityholder waives any objection
that it may now or hereafter have to the laying of venue of any such proceeding
in any court in the State of
Delaware and any claim that it may now or hereafter
have that any such proceeding in any court in the State of
Delaware has been
brought in an inconvenient forum.
17
5.18 NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter into
any agreements with respect to its securities which are inconsistent with or
violate in any material respects the rights granted to the parties to this
Agreement.
5.19 CERTAIN LIMITATIONS. Notwithstanding anything to the contrary
contained in this Agreement, prior to the issuance or sale of any shares of the
Company's capital stock pursuant to an effective registration statement under
the Securities Act, the Company shall not be required to register any transfer
of Shares on the Company's books if in the reasonable, good faith judgment of
the Company, registering such transfer would cause the Company to become subject
to registration pursuant to the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder.
5.20 INFORMATION REGARDING BENEFICIAL OWNERSHIP. Each Securityholder
agrees to promptly provide to the Company any information or representations
that the Company may request regarding such holder's beneficial ownership of
shares of any class of the Company's capital stock.
5.21 NO TAX ADVICE. Each Employee Securityholder acknowledges that the
United States federal, state, local, and other tax consequences to such
stockholder of acquiring, holding, and selling or otherwise disposing of its
Shares may be affected by an election by such stockholder under Section 83(b) of
the Internal Revenue Code of 1986, as amended (an "83(b) ELECTION") with regard
to such Shares. Each Employee Securityholder understands and acknowledges that
(i) it has not relied on the Company or Purchaser (or any of their affiliates,
employees, agents or advisors) with regard to the desirability or manner of
making an 83(b) Election and (ii) the Company has urged such stockholder to
consult its tax advisor with regard to the desirability and manner of making an
83(b) Election. Each Employee Securityholder shall promptly provide the Company
with a copy of any 83(b) Elections made by such stockholder with regard to its
Shares.
5.22 AFTER ACQUIRED SHARES. The provisions of this Agreement shall apply
to any shares of capital stock of the Company acquired after the date hereof by
any party hereto or by any party that agrees to be bound by the terms thereof.
5.23 NOTICES. Unless otherwise specified herein, all notices and other
communications hereunder shall be in writing and shall be deemed given upon
personal delivery, facsimile transmission (which is confirmed), telex or
delivery by an overnight express courier service (delivery, postage or freight
charges prepaid), or on the fourth day following deposit in the United States
mail (if sent by registered or certified mail, return receipt requested,
delivery, postage or freight charges prepaid, and otherwise to be sent by first
class mail), addressed to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
18
if to the Company, to:
PETCO Animal Supplies, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to any of the Purchaser Parties, to:
BD Recapitalization Holdings LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Partners, L.P.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
19
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to any of the Employee Parties, to the address and/or
telephone number set forth below such Securityholder's name on
the signature pages of such Securityholder's Amended and
Restated Stock Option Agreement.
5.24 AMENDED AND RESTATED STOCK OPTION AGREEMENT. Any Employee
Securityholder that executes an Amended and Restated Stock Option Agreement,
which agreement incorporates the terms of this Agreement, substantially in the
form included in Schedule 5.24, shall be a party to this Agreement and all
options to purchase Shares and all Shares issuable upon the exercise of such
options shall be subject to the terms of this Agreement.
20
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first set forth above.
PETCO ANIMAL SUPPLIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President and
Chief Financial Officer
BD RECAPITALIZATION HOLDINGS LLC
GREEN EQUITY INVESTORS III, L.P.,
Managing Member
By: GEI Capital III, LLC General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Manager
TPG PARTNERS III, L.P.
By: TPG GenPar III, L.P. Its General Partner,
Managing Member
By: TPG Advisors III, Inc.
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Vice President
SCHEDULE I
INITIAL EMPLOYEE SECURITYHOLDERS