EXHIBIT 10.07
EXECUTION COPY
SECURITIES PURCHASE AND HOLDERS AGREEMENT
SECURITIES PURCHASE AND HOLDERS AGREEMENT, dated as of August 19, 1998
(the "Agreement"), by and among GREAT LAKES DREDGE & DOCK CORPORATION, a
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Delaware corporation (the "Company"), VECTURA HOLDING COMPANY LLC, a Delaware
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limited liability company ("Vectura"), the individuals designated on Schedule 1
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hereto as Purchasing Management Investors (the "Purchasing Management
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Investors"), the individuals designated on Schedule 1 hereto as Continuing
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Management Investors (the "Continuing Management Investors") and individuals who
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join in this Agreement, as hereinafter provided, as Management Investors. The
Purchasing Management Investors, Continuing Management Investors and individuals
joining this Agreement as Management Investors are sometimes referred to
hereinafter individually as a "Management Investor" and collectively as the
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"Management Investors." Vectura and the Management Investors are sometimes
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referred to hereinafter individually as an "Investor" and collectively as the
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"Investors."
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Background
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A. Vectura and the Company are among the parties to an Agreement and
Plan of Merger dated as of July 20, 1998 (as thereafter amended and restated,
the "Merger Agreement"), pursuant to which, at the Effective Time of the Merger
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(each as defined in the Merger Agreement), the Company will be recapitalized and
the Continuing Management Investors will retain an equity interest in the
Company.
B. As of the Effective Time of the Merger, the authorized capital
stock of the Company will consist of shares of (i) Class A Common Stock, par
value $.01 per share ("Class A Common Stock"), (ii) Class B Common Stock, par
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value $.01 per share ("Class B Common Stock" and, collectively with the Class A
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Common Stock, the "Common Stock") and (iii) 12% Series A Cumulative Compounding
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Preferred Stock, par value $.01 per share ("Series A Preferred Stock," and,
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collectively with the Common Stock, the "Shares").
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C. The Management Investors will be employed by the Company at the
Effective Time of the Merger. Pursuant to the Merger Agreement and certain
letter agreements between each of the Continuing Management Investors and the
Company, each Continuing Management Investor has exercised options to purchase
shares of the Company's previously issued common stock, some of which shares
will be converted, at the Effective Time of the Merger, into the number of
shares of Class A Common Stock and Series A Preferred Stock set forth opposite
the name of such Continuing Management Investor on Schedule 1 attached hereto.
D. Each of the Purchasing Management Investors desires to purchase,
and the Company desires to sell to such Purchasing Management Investor, the
number of shares of Class A Common Stock and Series A Preferred Stock set forth
opposite the name of such Purchasing Management Investor on Schedule 1 hereto.
E. As used herein, the term "Securities" shall mean the Shares held by
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any party hereto, including all shares of Common Stock (including any Incentive
Shares) and all other securities of the Company (or a successor to the Company)
received on account of ownership of Shares, including all securities issued in
connection with any merger, consolidation, stock dividend, stock distribution,
stock split, reverse stock split, stock combination, recapitalization,
reclassification, subdivision, conversion or similar transaction in respect
thereof.
F. The Investors and the Company wish to set forth certain agreements
regarding their future relationships and their rights and obligations with
respect to the Securities.
Terms
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In consideration of the mutual covenants contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
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1.1. As used in this Agreement, the following capitalized terms shall
have the following meanings:
"Adjusted Book Value Price" has the meaning set forth in Section
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7.2(a)(ii)(C)(2) of this Agreement.
"Adjusted Book Value Price Percentage" has the meaning set forth in
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Section 7.3(a)(iii) of this Agreement.
"Adjusted Cost Price" has the meaning set forth in Section
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7.2(a)(ii)(B)(1) of this Agreement.
"Affiliate" has the meaning set forth in Rule 12b-2 of the Rules
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promulgated under the Exchange Act.
"Agreement" has the meaning set forth in the Preamble of this
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Agreement.
"Approved Sale" has the meaning set forth in Section 5.5(a) of this
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Agreement.
"Assurance of Compliance" has the meaning set forth in Section 5.4 of
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this Agreement.
"Called Shares" has the meaning set forth in Section 7.2(a)(iii) of
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this Agreement.
"Cause," when used in connection with the termination of a Management
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Investor's employment with the Company, means the Management Investor's (i) act
or acts of dishonesty, moral turpitude or criminality, (ii) continued failure to
perform such Management Investor's duties as an employee, as reasonably
determined by the Board of Directors of the Company acting in good faith, after
reasonable notice of such failure is given to such employee by the Board of
Directors of the
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Company, for a period of 30 days after such notice and opportunity to cure such
failure, or (iii) willful or deliberate violations of such Management Investor's
obligations to the Company that result in injury to the Company.
"Class A Common Stock" has the meaning set forth in Background Section
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B of this Agreement.
"Class B Common Stock" has the meaning set forth in Background Section
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B of this Agreement.
"Closing" has the meaning set forth in Section 2.2 of this Agreement.
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"Common Stock" has the meaning set forth in Background Section B of
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this Agreement.
"Company" means Great Lakes Dredge & Dock Corporation, a Delaware
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corporation, except that when used in Article VII, "Company" means the Company
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and all other entities of which the Company from time to time owns, directly or
indirectly, 50% or more of the stock or assets.
"Continuing Management Investors" has the meaning set forth in the
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Preamble of this Agreement.
"Escrow Amount" has the meaning set forth in Section 5.6(d)(i) of this
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Agreement.
"Escrow Notice" has the meaning set forth in Section 5.6(d)(ii) of
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this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Incentive Shares" means the shares of Class A Common Stock owned by
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each Management Investor designated as Incentive Shares on Schedule 1, and all
other securities of the Company (or a successor to the Company) received on
account of ownership of such shares, including any and all incentive securities
issued in connection with any merger, consolidation, stock dividend, stock
distribution, stock split, reverse stock split, stock combination,
recapitalization, reclassification, subdivision, conversion or similar
transaction in respect thereof.
"Investor" and "Investors" have the meanings set forth in the Preamble
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of this Agreement.
"Management Investor" and "Management Investors" have the meanings set
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forth in the Preamble of this Agreement.
"Merger Agreement" has the meaning set forth in Background Section A
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of this Agreement.
"Observers" has the meaning set forth in Section 5.1 of this
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Agreement.
"Option Purchase Price" has the meaning set forth in Section
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7.2(a)(ii)(A) of this Agreement.
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"Permitted Transferee" has the meaning set forth in Section 4.5(b) of
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this Agreement.
"Person" means any individual, corporation, limited liability company,
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partnership, firm, association, joint venture, joint stock company, trust or
other entity, or any government or regulatory administrative or political
subdivision or agency, department or instrumentality thereof.
"Preemptive Notice" has the meaning set forth in Section 5.7(c) of
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this Agreement.
"Preemptive Reply" has the meaning set forth in Section 5.7(c) of this
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Agreement.
"Public Offering" means a successfully completed firm-commitment
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underwritten public offering (other than a Unit Offering, as hereinafter
defined) pursuant to an effective registration statement under the Securities
Act in respect of the offer and sale of shares of Common Stock for the account
of the Company resulting in aggregate net proceeds to the Company and any
stockholder selling shares of Common Stock in such offering of not less than
$[30] million.
"Purchase Number" has the meaning set forth in Section 7.2(a)(ii) of
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this Agreement.
"Purchase Option" has the meaning set forth in Section 7.2(a) of this
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Agreement.
"Purchasing Management Investors" has the meaning set forth in the
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Preamble of this Agreement.
"Registration Rights Agreement" has the meaning set forth in Article
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VIII of this Agreement.
"Regulatory Problem" has the meaning set forth in Section 5.3 of this
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Agreement.
"Restricted Investor" has the meaning set forth in Section 4.5 of this
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Agreement.
"Sale Notice" has the meaning set forth in Section 7.3 of this
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Agreement.
"Securities" has the meaning set forth in Background Section E of this
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Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
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"Series A Preferred Stock" has the meaning set forth in Background
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Section B of this Agreement.
"Shares" has the meaning set forth in Background Section B of this
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Agreement.
"Significant Transfer" has the meaning set forth in Section 5.6(a) of
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this Agreement.
"Size Status Declaration" has the meaning set forth in Section 5.4 of
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this Agreement.
"Subsequent Offering" has the meaning set forth in Section
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7.2(a)(iii)(A) of this Agreement.
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"Subsidiary" means, as to any Person, any corporation more than 50% of
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whose stock of any class or classes having by the terms thereof ordinary voting
power to elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time owned by such Person and/or one or more Subsidiaries
of such Person.
"Tag-Along Acceptance Notice" has the meaning set forth in Section
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5.6(b) of this Agreement.
"Tag-Along Right" has the meaning set forth in Section 5.6(a) of this
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Agreement.
"Tag-Along Rightholders" has the meaning set forth in Section 5.6(a)
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of this Agreement.
"Tag-Along Sale Notice" has the meaning set forth in Section 5.6(b) of
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this Agreement.
"Tag-Along Seller" has the meaning set forth in Section 5.6(b) of this
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Agreement.
"Termination Date" has the meaning set forth in Section 7.2(a) of this
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Agreement.
"Transfer" has the meaning set forth in Section 4.5(a) of this
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Agreement.
"Transfer Date" has the meaning set forth in Section 7.4 of this
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Agreement.
"Unit Offering" means an underwritten public offering of a combination
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of debt securities and Common Stock (or warrants or exchange rights to purchase
Common Stock) of the Company in which not more than 15% of the gross proceeds
received for the sale of such securities is attributed to Common Stock.
"Vectura" means Vectura Holding Company LLC, a Delaware limited
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liability company.
"83(b) Election" has the meaning set forth in Section 9.2 of this
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Agreement.
ARTICLE II
PURCHASE OF SECURITIES BY PURCHASING MANAGEMENT INVESTORS
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2.1. Purchase of Securities; Setoff. At the Closing, the Company
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shall issue and sell to each of the Purchasing Management Investors, and each of
the Purchasing Management Investors shall purchase from the Company, the number
of shares of Class A Common Stock and Series A Preferred Stock set forth
opposite such Purchasing Management Investor's name on Schedule 1 at a purchase
price of $1 per share of Class A Common Stock and $1,000 per share of Series A
Preferred Stock. Each Purchasing Management Investor agrees that the purchase
price for the Securities purchased pursuant to this Section 2.1 may be satisfied
by the Company setting off such amounts against moneys otherwise due to such
Management Investor in connection with the Merger, including
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but not limited to, the Sales Bonuses (as such term is used in the Merger
Agreement) payable to such Purchasing Management Investor as contemplated by the
Merger Agreement.
2.2. Closing of the Purchase of Securities. The closing of the
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purchase and sale of the Shares purchased by the Purchasing Management Investors
hereunder (the "Closing") will take place at a location mutually agreed upon by
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the Company and the Purchasing Management Investors and on the same date as the
Effective Time of the Merger. At the Closing, the Company shall deliver to each
Purchasing Management Investor certificates evidencing the number of shares of
Class A Common Stock and the number of shares of Series A Preferred Stock to be
purchased by such Purchasing Management Investor, against payment of the
purchase price therefor by wire transfer of immediately available funds or by
certified check.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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3.1. Representations and Warranties of the Company. The Company
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represents and warrants to each of the Investors as follows:
(a) The Company is a corporation validly existing and in good
standing under the laws of the State of Delaware.
(b) The Company has full corporate power and corporate authority
to make, execute, deliver and perform this Agreement and to carry out all of the
transactions provided for herein.
(c) The Company has taken such corporate action as is necessary
or appropriate to enable it to perform its obligations hereunder, and this
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with the terms hereof.
(d) The Shares, when issued in accordance with the plan of
merger filed with the Secretary of State of Delaware in connection with the
Merger, will be validly issued, fully paid and non-assessable.
(e) As of the Effective Time of the Merger, the authorized
capital stock of the Company will consist of (i) 25,000,000 shares of Class A
Common Stock, of which 1,636,100 will be issued and outstanding, (ii) 25,000,000
shares of Class B Common Stock, of which of which 3,363,900 will be issued and
outstanding and (iii) 250,000 shares of Series A Preferred Stock, of which
45,000 will be issued and outstanding. Except as otherwise set forth herein, as
of the Effective Time of the Merger there will be no rights, subscriptions,
warrants, options, conversion rights or agreements of any kind outstanding to
purchase from the Company, or otherwise require the Company to issue, any shares
of capital stock of the Company or securities or obligations of any kind
convertible into or exchangeable for any shares of capital stock of the Company;
the Company will not be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock; and
the Shares will constitute all of the outstanding shares of the Company's
capital stock.
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF EACH INVESTOR
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4.1. Representations, Warranties and Covenants of Each Investor. Each
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of the Investors severally represents and warrants to, and covenants and agrees
with, the Company that:
(a) Such Investor has full legal right, power and authority
(including the due authorization by all necessary corporate action in the case
of corporate Investors) to enter into this Agreement and to perform such
Investor's obligations hereunder without the need for the consent of any other
Person; and this Agreement has been duly authorized, executed and delivered and
constitutes the legal, valid and binding obligation of such Investor enforceable
against such Investor in accordance with the terms hereof.
(b) The Securities are being received by such Investor for
investment and not with a view to any distribution thereof that would violate
the Securities Act, or the applicable securities laws of any state; and such
Investor will not distribute the Securities in violation of the Securities Act
or the applicable securities laws of any state.
(c) Such Investor understands that the Securities have not been
registered under the Securities Act or the securities laws of any state and must
be held indefinitely unless subsequently registered under the Securities Act and
any applicable state securities laws or unless an exemption from such
registration becomes or is available.
(d) Such Investor is financially able to hold the Securities for
long-term investment, believes that the nature and amount of the Securities
being purchased are consistent with such Investor's overall investment program
and financial position, and recognizes that there are substantial risks involved
in the purchase of the Securities.
(e) Such Investor confirms that (i) such Investor is familiar
with the business of the Company, (ii) such Investor has had the opportunity to
ask questions of officers and directors of the Company and to obtain (and that
such Investor has received to its satisfaction) such information about the
business and financial condition of the Company as it or he has reasonably
requested, and (iii) such Investor, either alone or with such Investor's
representative (as defined in Rule 501(h) promulgated under the Securities Act),
if any, has such knowledge and experience in financial and business matters that
such Investor is capable of evaluating the merits and risks of the prospective
investment in the Securities.
4.2. Legends. (a) All Shares. All certificates representing Shares
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shall bear the following legends in addition to any other legend required under
applicable law:
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
THE EXPRESS TERMS OF THE SHARES REPRESENTED BY THIS CERTIFICATE AND OF THE
OTHER CLASSES AND SERIES OF SHARES WHICH THE COMPANY IS AUTHORIZED TO ISSUE
ARE CONTAINED IN THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION, A
COPY OF WHICH WILL BE MAILED TO THE HOLDER HEREOF WITHOUT CHARGE WITHIN
FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE
TERMS AND CONDITIONS OF A SECURITIES PURCHASE AND HOLDERS AGREEMENT BY AND
AMONG THE COMPANY AND THE HOLDERS SPECIFIED THEREIN, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. THE SALE,
TRANSFER OR OTHER DISPOSITION OF THE SECURITIES IS SUBJECT TO THE TERMS OF
SUCH AGREEMENT AND THE SECURITIES ARE TRANSFERABLE ONLY UPON PROOF OF
COMPLIANCE THEREWITH.
(b) Incentive Shares. In addition to the legends required by Section
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4.2(a) above, the following legend shall appear on certificates representing
Incentive Shares, provided, that the Company's failure to cause certificates
representing Incentive Shares to bear such legend shall not affect the Company's
Purchase Option described in Section 7.2 herein:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT FOR A
PERIOD OF TIME TO A PURCHASE OPTION OF THE COMPANY APPLICABLE TO "INCENTIVE
SHARES" AS DESCRIBED IN THE SECURITIES PURCHASE AND HOLDERS AGREEMENT BY
AND AMONG THE COMPANY AND THE HOLDERS SPECIFIED THEREIN, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
4.3. Management Investor Representations and Warranties. Each Management
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Investor severally represents and warrants to the Company that:
(a) such Management Investor has full legal right, power and
authority to perform such Management Investor's obligations hereunder without
the need for the consent of any other Person; and such obligations constitute
the legal, valid and binding obligation of such Management Investor in
accordance with the terms hereof;
(b) such Management Investor's residence, business address,
business and residence telephone numbers and social security number are as set
forth below such Management Investor's signature to this Agreement; and
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(c) in formulating the decision to (i) exercise such Management
Investor's options to purchase shares of the Company's previously issued common
stock, some of which shares have been converted, pursuant to the Merger
Agreement, into the Shares set forth opposite such Management Investor's name on
Schedule 1 hereto and (ii) enter into this Agreement, such Management Investor
has relied solely upon an independent investigation of the Company's business
and upon consultations with such Management Investor's legal and financial
advisers with respect to this Agreement and the nature of such Management
Investor's investment; and that in entering into this Agreement no reliance was
placed upon any representations or warranties other than those contained in this
Agreement.
4.4. Representations and Warranties of Vectura.
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(a) Vectura represents and warrants to, and covenants and agrees
with the Company that, Vectura qualifies as an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act, and has such
knowledge and experience in financial and business matters that Vectura is
capable of evaluating the merits and risks of its purchase of the Securities;
and
(b) The execution, delivery and performance of this Agreement by
Vectura do not contravene or violate any laws, rules or regulations applicable
to it.
4.5. Restrictions on Transfers of Securities. The following restrictions
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on Transfer shall apply to all Securities owned by any Restricted Investor. As
used herein, "Restricted Investor" shall mean any Investor or Permitted
Transferee except a Permitted Transferee by virtue of Section 4.5(b)(iii)
hereof:
(a) No Restricted Investor shall Transfer (other than in connection
with a redemption or purchase by the Company) any Securities unless (i) such
Transfer is to a Permitted Transferee or a Person approved in advance in writing
by the holders of at least 25% of the outstanding Common Stock then held by the
Investors (including shares held by the transferor) and (ii) such Transfer
complies with the provisions, if applicable, of Sections 5.5, 5.6 and 5.7, this
Section 4.5 and, in addition, in the case of Securities held by Management
Investors, the applicable provisions of Article VII of this Agreement. No
Restricted Investor may effect any Transfer of Shares unless the transferee
(other than a Permitted Transferee under Section 4.5(b)(iii)) executes an
agreement pursuant to which such transferee agrees to be bound by the terms and
provisions of this Agreement applicable to the transferor (except as otherwise
specifically provided herein). Any purported Transfer in violation of this
Agreement shall be null and void and of no force and effect and the purported
transferee shall have no rights or privileges in or with respect to the Company.
As used herein, "Transfer" means the making of any sale, exchange, assignment,
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hypothecation, gift, security interest, pledge or other encumbrance, or any
contract therefor, any voting trust or other agreement or arrangement with
respect to the transfer of voting rights or any other beneficial interest in any
of the Securities, the creation of any other claim thereto or any other transfer
or disposition whatsoever, whether voluntary or involuntary, affecting the
right, title, interest or possession in or to such Securities.
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Prior to any proposed Transfer of any Securities, the holder thereof
shall give written notice to the Company describing the manner and circumstances
of the proposed Transfer accompanied by a written opinion of legal counsel,
addressed to the Company and the transfer agent, if other than the Company, and
reasonably satisfactory in form and substance to each addressee, to the effect
that the proposed Transfer of the Securities may be effected without
registration under the Securities Act and applicable state securities laws. Each
certificate evidencing the Securities transferred shall bear the legends set
forth in Section 4.2(a) and, if applicable, the legend set forth in Section
4.2(b), except that such certificate shall not bear the legends set forth in
Section 4.2(a) if the opinion of counsel referred to above is to the further
effect that such legend is not required in order to establish compliance with
any provision of the Securities Act or applicable state securities laws.
(b) As used herein, "Permitted Transferee" shall mean:
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(i) in the case of any Investor or Permitted Transferee who
is a natural person, such person's spouse or children or grandchildren (in each
case, natural or adopted), any trust for the sole benefit of such person and
such person's spouse or children or grandchildren (in each case, natural or
adopted), any charitable trust the grantor of which is an Investor or Permitted
Transferee, or any corporation or partnership in which the direct and beneficial
owner of all of the equity interest is such individual person or such person's
spouse or children or grandchildren (in each case, natural or adopted) (or any
trust solely for the benefit of such persons);
(ii) in the case of any Investor or Permitted Transferee who
is, in each case, a natural person, the heirs, executors, administrators or
personal representatives upon the death of such person or upon the
incompetency or disability of such person for purposes of the protection
and management of such person's assets;
(iii) in the case of any Investor or Permitted Transferee, any
Person if such Person takes such Securities pursuant to a sale in connection
with a Public Offering or following a Public Offering in open market
transactions or under Rule 144 under the Securities Act;
(iv) in the case of Vectura or any Permitted Transferee of
Vectura, (A) 399 Venture Partners Inc., Citibank Delaware or any Affiliate of
Citicorp, a Delaware corporation; (B) any employee or director of any of the
foregoing entities, or any trust, partnership or other entity established solely
for the benefit of such officers, employees or directors; or (C) any qualified
institutional buyer (as such term is defined in Rule 144A under the Securities
Act) organized under the laws of the United States or any State thereof,
provided that such qualified institutional buyer shall only be a Permitted
Transferee of up to 3% of the outstanding Common Stock and up to $2.0 million in
liquidation value of Class A Preferred Stock).
4.6. Notation. A notation will be made in the appropriate transfer
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records of the Company with respect to the restrictions on transfer of the
Securities referred to in this Agreement.
4.7. Limitation on Repurchase of Company Stock. Each Investor
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understands that concurrently with the issuance of the Shares, the Company is
entering into certain financing
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agreements which will contain prohibitions, restrictions and limitations on the
ability of the Company to purchase any of the Shares and to pay dividends on the
Shares.
4.8. Reliance. Each Investor acknowledges that the Company and each of
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the other Investors is entering into this Agreement in reliance upon such
Investor's representations and warranties and other covenants and agreements
contained herein.
ARTICLE V
OTHER COVENANTS AND REPRESENTATIONS
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5.1. Observers' Rights. So long as Vectura or its Affiliates own at
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least 5% of the Common Stock outstanding, if no employee of Vectura or its
Affiliates is a member of the Company's Board of Directors, Vectura shall have
the right to designate two observers (the "Observers") to attend meetings of the
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Company's Board of Directors and committees thereof. If at least one employee of
Vectura or its Affiliates is a member of the Company's Board of Directors,
Vectura shall have the right to designate one Observer to attend meetings of the
Company's Board of Directors and committees thereof. The Observers shall not
have the right to vote on any matter presented to the Board of Directors or any
committee thereof. The Company shall give each Observer written notice of each
meeting of the Board of Directors and committees thereof at the same time and in
the same manner as the members of the Board of Directors or such committee
receive notice of such meetings, and the Company shall permit each Observer to
attend as an observer all meetings of its Board of Directors and committees
thereof. Each Observer shall be entitled to receive all written materials and
other information given to the directors in connection with such meetings at the
same time such materials and information are given to the directors, and each
Observer shall keep such materials and information confidential. If the Company
proposes to take any action by written consent in lieu of a meeting of its Board
of Directors or a committee thereof, the Company shall give written notice
thereof to each Observer prior to the effective date of such consent. The
Company shall provide to each Observer all written materials and other
information given to the directors in connection with such action by written
consent at the same time such materials and information are given to the
directors, and each Observer shall keep such materials and information
confidential. The Company shall pay the reasonable out-of-pocket expenses of
each Observer incurred in connection with attending such meetings.
5.2. Financial Statements and Other Information. So long as Vectura
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owns any of the Securities, the Company shall deliver to Vectura:
(a) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Company,
consolidated balance sheets of the Company and its subsidiaries as of the end of
such period, and consolidated statements of income and cash flows of the Company
and its subsidiaries for the period then ended prepared in conformity with
generally accepted accounting principles applied on a consistent basis, except
as otherwise noted therein, and subject to the absence of footnotes and to year-
end adjustments; and
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(b) as soon as available and in any event within 90 days after
the end of each fiscal year of the Company, a consolidated and consolidating
balance sheet of the Company and its subsidiaries as of the end of such year,
and consolidated and consolidating statements of income and cash flows of the
Company and its subsidiaries for the year then ended prepared in conformity with
generally accepted accounting principles applied on a consistent basis, except
as otherwise noted therein, together with an auditor's report thereon of a firm
of established national reputation.
5.3. Regulatory Compliance Cooperation. So long as Vectura or its
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Affiliates beneficially own any of the Securities, before the Company redeems,
purchases or otherwise acquires, directly or indirectly, or converts or takes
any action with respect to the voting rights of, any shares of any class of its
capital stock or any securities convertible into or exchangeable for any shares
of any class of its capital stock, the Company shall give Vectura 30 days prior
written notice of such pending action. Upon the written request of Vectura made
within 30 days after its receipt of any such notice, stating that after giving
effect to such action Vectura would have a Regulatory Problem (as described
below), the Company will defer taking such action for such period (not to extend
beyond 90 days after Vectura's receipt of the Company's original notice) as
Vectura requests to permit it and its Affiliates to reduce the quantity of
Securities held by it and its Affiliates in order to avoid the Regulatory
Problem. In addition, the Company will not be a party to any merger,
consolidation, recapitalization or other transaction pursuant to which Vectura
would be required to take any voting securities, or any securities convertible
into voting securities, which might reasonably be expected to cause Vectura to
have a Regulatory Problem. For purposes of this paragraph, a Person will be
deemed to have a "Regulatory Problem" when such Person and such person's
------------------
Affiliates own, control or have power over (or believes that there is a
substantial risk of an assertion that such Person owns, controls or has power
over) a greater quantity of securities of any kind issued by the Company than
are permitted to be owned by such Person under any requirement of any
governmental authority applicable to such Person.
5.4. Small Business Administration Forms.
-----------------------------------
Prior to and after the Effective Time of the Merger, the Company shall,
if requested by Vectura or any Permitted Transferee of Vectura, execute Forms
480 ("Size Status Declaration") and 652-D ("Assurance of Compliance") of the
----------------------- -----------------------
Small Business Administration and any other documents that may be required by
the Small Business Administration or any other governmental agency having
jurisdiction over the activities of Vectura, or which Vectura or such Permitted
Transferee may reasonably require in connection therewith.
5.5. Sale of the Company.
-------------------
(a) So long as the Company has not consummated a Public Offering,
if holders of at least 50% of the Common Stock (including voting and non-voting
shares voting as a single class) then outstanding vote in favor of (at a duly
called and duly held meeting of stockholders of the Company) or consent in
writing to the merger or consolidation of the Company or the sale of all or
substantially all of its assets or sale of all of the outstanding capital stock
or any other similar transaction (provided such holders include Vectura if it
owns at least 15% of the outstanding Common Stock) (any of the foregoing, an
"Approved Sale"), (i) each Restricted Investor will consent to, vote
-------------
12
for, and raise no objections against, and waive dissenters and appraisal rights
(if any) with respect to, the Approved Sale, (ii) if the Approved Sale includes
a sale of Securities, each Restricted Investor will agree to sell and will be
permitted to sell all of such Restricted Investor's Securities on the terms and
conditions approved by the holders of a majority of the Common Stock then
outstanding. Each Restricted Investor will take all necessary and desirable
actions in connection with the consummation of an Approved Sale.
(b) The obligations of each of the Investors with respect to an
Approved Sale are subject to the satisfaction of the conditions that upon the
consummation of the Approved Sale all of the Investors and Permitted Transferees
will receive the same form and amount of consideration per share of Common
Stock, or if any holder of Common Stock is given an option as to the form and
amount of consideration to be received, all Investors and Permitted Transferees
will be given the same option.
5.6. Tag-Along Rights.
----------------
(a) Except in the case of a Public Offering or a Transfer to a
Permitted Transferee, neither Vectura nor any Permitted Transferee that owns
more than 40% of the outstanding Common Stock will effect a Transfer of shares
of Common Stock in, or otherwise participate in, any transaction or series of
related transactions that constitute a "Significant Transfer" unless all other
Investors and their Permitted Transferees and assigns (collectively, the
"Tag-Along Rightholders") are offered an equal opportunity (the "Tag-Along
---------------------- ---------
Right") to participate in such transaction or transactions on a pro rata basis
-----
and on identical terms. As used herein, a "Significant Transfer" means a
--------------------
Transfer alone or in the aggregate to any Person or Persons of 50% or more of
the total number of shares of Common Stock owned by Vectura or such Permitted
Transferee.
(b) Prior to any sale of Common Stock subject to these
provisions, the seller (the "Tag-Along Seller") shall notify the Company in
----------------
writing of the proposed sale. Such notice (the "Tag-Along Sale Notice") shall
---------------------
set forth (i) the number of shares of Common Stock subject to the proposed sale;
(ii) the name and address of the proposed purchaser; and (iii) the proposed
amount of consideration and terms and conditions of payment offered by such
proposed purchaser. The Company shall promptly, and in any event within ten
days, mail or cause to be mailed the Tag-Along Sale Notice to the Tag-Along
Rightholders. Each Tag-Along Rightholder may exercise the Tag-Along Right by
delivery of a written notice (the "Tag-Along Acceptance Notice") to the Tag-
---------------------------
Along Seller within ten days of the date the Company mailed or caused to be
mailed the Tag-Along Sale Notice. The Tag-Along Acceptance Notice shall state
the number of shares of Common Stock that the Tag-Along Rightholder proposes to
include in the proposed sale. If no Tag-Along Acceptance Notice is received
during the ten-day period referred to above, Tag-Along Seller shall have the
right for a 120-day period to effect the proposed sale of shares of Common Stock
on terms and conditions no more favorable to the transferee than those stated in
the Tag-Along Sale Notice.
(c) Each Tag-Along Rightholder other than Vectura acknowledges
and agrees that Vectura or a Permitted Transferee of Vectura may grant similar
"tag-along" rights to other Persons and, in such event, such other Persons shall
be offered an equal opportunity to
13
participate in such transaction or transactions to the same extent as such Tag-
Along Rightholders hereunder and shall be included in the calculation of the pro
rata basis upon which such Tag-Along Rightholders may participate in such
transaction or transactions.
(d) (i) Notwithstanding the requirements of this Section 5.6, a
Tag-Along Seller may sell Common Stock at any time without complying with the
requirements of Section 5.6(b) so long as the Tag-Along Seller deposits into
escrow with an independent third party at the time of sale that amount of
consideration received in the sale equal to the "Escrow Amount." As used herein,
the "Escrow Amount" shall equal that amount of consideration as all Tag-Along
-------------
Rightholders would have been entitled to receive if they had the opportunity to
participate in the sale on a pro rata basis, determined as if each Tag-Along
Rightholder (A) delivered a Tag-Along Notice to the Tag-Along Seller in the time
period set forth in Section 5.6(b) and (B) proposed to include all of his, her
or its shares of Common Stock in such sale.
(ii) The Tag-Along Seller shall notify the Company in writing
of the proposed sale pursuant to this Section 5.6(d) no later than the date of
such sale. Such notice (the "Escrow Notice") shall set forth the information
-------------
required in the Tag-Along Sale Notice, and in addition, such notice shall state
the name of the escrow agent and, if the consideration (in whole or in part) for
the sale was cash, then the account number of the escrow account. The Company
shall promptly, and in any event within ten days, mail or cause to be mailed the
Escrow Notice to each Tag-Along Rightholder. Such Tag-Along Rightholder may
exercise the tag-along right by delivery to the Tag-Along Seller, within ten
days of the date the Company mailed or caused to be mailed the Escrow Notice, of
(A) a written notice specifying the number of shares of Common Stock it proposes
to sell; and (B) the certificates for such Common Stock, with stock powers duly
endorsed in blank and with signatures guaranteed.
(iii) Promptly after the expiration of the tenth day after
the Company has mailed or caused to be mailed the Escrow Notice, (A) the Tag-
Along Seller shall purchase that number of shares of Common Stock as the Tag-
Along Seller would have been required to include in the sale had the Tag-Along
Seller complied with the provisions of Section 5.6(b), (B) all shares of Common
Stock not required to be purchased by the Tag-Along Seller shall be returned to
the Tag-Along Rightholders thereof and (C) all funds and other consideration
held in escrow shall be released to the Tag-Along Seller. If the Tag-Along
Seller received consideration other than cash in his, her or its sale, the Tag-
Along Seller shall purchase the shares of Common Stock tendered by paying to the
Tag-Along Rightholders non-cash consideration and cash in the same proportion as
received by the Tag-Along Seller in the sale.
(e) The Tag-Along Rights provided pursuant to this Section 5.6
shall terminate upon the earlier of (i) a Public Offering or sale of the
Company; and (ii) the day after the date on which Vectura and its permitted
Transferees that are not natural persons own less than 40% of the Common Stock.
In addition, the rights of the Management Investors under this Section 5.6 shall
terminate on the date on which the Management Investors and their Permitted
Transferees own less than 50% of the shares of Common Stock purchased or
retained by the Management Investors hereunder.
14
5.7. Preemptive Rights
-----------------
(a) If the Company proposes to issue and sell any of its shares
of Common Stock or any securities containing options or rights to acquire any
shares of Common Stock or any securities convertible or exchangeable into shares
of Common Stock to Vectura, 399 Venture Partners Inc. or any of their respective
Affiliates, the Company will first offer to each of the other Investors a
portion of the number or amount of such securities proposed to be sold in any
such transaction or series of related transactions equal to the product of (i)
the percentage each such Investor and such Investor's Permitted Transferees
holds of all shares of Common Stock then held by the Investors and (ii) the
number of shares represented by the securities proposed to be issued and sold by
the Company in any such transaction or series of related transactions, all for
the same price and upon the same terms and conditions as the securities that are
being offered to Vectura, Citicorp Venture Capital Ltd. and their respective
Affiliates in such transaction or series of transactions.
(b) Notwithstanding the foregoing, the provisions of this Section
5.7 shall not be applicable to the issuance of shares of Common Stock (i) upon
the conversion of shares of one class of Common Stock into shares of another
class; (ii) as a dividend on all the outstanding shares of Common Stock; (iii)
in any transaction in respect of a Security that is available to all holders of
such Security on a pro rata basis, provided, that for purposes of this clause
(iii) all classes of Common Stock shall be treated as a single security; (iv) in
connection with grants of stock or options to employees or directors of the
Company; or (v) in an offering or sale of securities pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission pursuant to the Securities Act.
(c) The Company will deliver or cause to be delivered to the
Investors a written notice setting forth the terms and conditions (including the
consideration per share) upon which the Investors may purchase such shares or
other securities (the "Preemptive Notice"). After receiving a Preemptive Notice,
-----------------
an Investor must deliver or cause to be delivered to the Company a written
notice (the "Preemptive Reply") within 45 days of the date of such Preemptive
----------------
Notice that such Investor agrees to purchase the shares or other securities
offered pursuant to this Section 5.7 on the date of sale to Vectura, 399 Venture
Partners Inc. and their respective Affiliates. If any Investor fails to make a
Preemptive Reply in accordance with this Section 5.7, shares or other securities
offered to such Investor in accordance with this Section 5.7 may thereafter, for
a period not exceeding six months following the expiration of such 45-day
period, be issued, sold or subjected to rights or options to Vectura, Citicorp
Venture Capital Ltd. and their respective Affiliates at a price not less than
that at which they were offered to the Investors and on such other terms and
conditions no more favorable than those offered to the Investors. Any such
shares or other securities not so issued, sold or subjected to rights or options
to Vectura, Citicorp Venture Capital Ltd. and their respective Affiliates during
such six-month period will thereafter again be subject to the preemptive rights
provided for in this Section 5.7.
5.8. Covenant Not To Compete.
-----------------------
(a) In consideration of the opportunity to participate in the
equity offering of the Company, each Management Investor covenants and agrees
that, for one (1) year
15
after termination of such Management Investor's employment with the Company or
any of its Subsidiaries, neither Management Investor nor any of his or her
Affiliates shall engage, directly or indirectly, in lines of business similar to
the business of the Company or any of its Subsidiaries anywhere in the world.
Each Management Investor and the Company agrees that the foregoing covenant is
intended to prohibit each Management Investor from engaging in such activities,
as the case may be, as owner, creditor (except as a trade creditor in the
ordinary course of business), partner, stockholder, lender, officer, director,
manager, employee, contractor or agent for any person, firm or corporation
(except (i) with respect to the Company or (ii) as a holder of equity or debt
securities in a corporation which has a class of securities that is publicly
traded on a stock exchange or the recognized over-the-counter market, and then
only to the extent of owning not more than two percent (2%) of the issued and
outstanding debt or equity securities of such corporation).
(b) Each Management Investor acknowledges and agrees that the
remedy at law for any breach, or threatened breach, of any of the provisions of
this Section 5.8 will be inadequate and, accordingly, each Management Investor
covenants and agrees that the Company shall, in addition to any other rights and
remedies which the Company may have, be entitled to equitable relief, including
injunctive relief, and to the remedy of specific performance with respect to any
breach or threatened breach of such covenant, as may be available from any court
of competent jurisdiction. Such right to obtain equitable relief may be
exercised, at the option of the Company, concurrently with, prior to, after, or
in lieu of, the exercise of any other rights or remedies which the Company may
have as a result of any such breach or threatened breach.
(c) In the event that the provisions of this Section 5.8 shall be
determined by a court of competent jurisdiction to be unenforceable under
applicable law as to that jurisdiction (the parties agreeing that such decision
shall not be binding, res judicata or collateral estoppel in any other
jurisdiction) for any reason whatsoever, then any such provision or provisions
shall not be deemed void, but the parties hereto agree that said limits may be
modified by the court and that said covenant contained in this Section 5.8 shall
be amended in accordance with said modifications, it being specifically agreed
by each Management Investor and the Company that it is their continuing desire
that this covenant be enforced to the full extent of its terms and conditions or
if a court finds the scope of the covenant unenforceable, the court should
redefine the covenant so as to comply with applicable law.
16
ARTICLE VI
CORPORATE ACTIONS
-----------------
6.1. Certificate of Incorporation and Bylaws. Each Investor has
---------------------------------------
reviewed the Restated Certificate of Incorporation of the Company and the
Restated Bylaws of the Company in the forms attached hereto as Exhibits A and B,
respectively, and hereby approves and ratifies the same.
6.2. Directors and Voting Agreements. Each Investor shall take, at any
-------------------------------
time and from time to time, all action necessary (including, without limitation,
voting the Class A Common Stock owned by him, her or it, calling special
meetings of stockholders and executing and delivering written consents) to
ensure that the Board of Directors of the Company is composed at all times of up
to five persons, determined as follows: (i) the chief executive officer of the
Company; (ii) one individual designated by Vectura; (iii) up to two independent
directors, who shall be designated by Vectura (to the extent permitted by
applicable law as determined by Vectura in its sole discretion), subject to the
right of the holders of a majority of the outstanding shares of Class A Common
Stock (including any shares of Class A Common Stock held by Vectura) to veto the
election of any such independent director, provided that in the event that
Vectura concludes that it is unable to designate, or elects not to designate for
any reason, one or more of such independent directors or the election of any
such independent director is not approved by the holders of a majority of the
outstanding shares of Class A Common Stock, such directorship(s) shall not be
filled by the remaining members of the Company's Board of Directors but shall
remain vacant until the election of a director designated by Vectura to fill
such vacancy in accordance with this Section 6.2; and (iv) at all times, but
only at such times, when the Board of Directors of the Company includes two
independent directors determined in accordance with clause (iii) of this Section
6.2, one additional individual designated by Vectura, and provided that,
notwithstanding clauses (i) through (iv) of this Section 6.2, if Vectura at any
time owns of record in excess of 50% of the Class A Common Stock then
outstanding, then the Board of Directors of the Company shall consist of the
chief executive officer of the Company and up to four individuals designated by
Vectura in its sole discretion. The initial directors named pursuant to this
Section 6.2 shall be βββββββ β. ββββββ; βββββββ β. βββββββ and βββββ ββββββββ
III.
6.3. Right to Remove Vectura Directors. Vectura may request that any
---------------------------------
director designated by Vectura pursuant to clause (ii) or (iv) of Section 6.2 be
removed (with or without cause) by written notice to the other Investors, and,
in any such event, each Investor shall promptly consent in writing or vote or
cause to be voted all shares of Common Stock entitled to vote thereon now or
hereafter owned or controlled by it for the removal of such Vectura Director as
a director. In the event any person ceases to be a director, such person shall
also cease to be a member of any committee of the Board of Directors of the
Company.
6.4. Right to Fill Certain Vacancies in Company's Board. In the event
--------------------------------------------------
that a vacancy is created on the Company's Board of Directors at any time by the
death, disability, retirement, resignation or removal (with or without cause) of
a Vectura Director, or if otherwise there shall exist or occur any vacancy on
the Company's Board of Directors in a directorship subject to designation by
Vectura, such vacancy shall not be filled by the remaining members of the
Company's
17
Board of Directors but each Investor hereby agrees promptly to consent in
writing or vote or cause to be voted all shares of Common Stock entitled to vote
thereon now or hereafter owned or controlled by it to elect that individual
designated to fill such vacancy and serve as a director, as shall be designated
by Vectura, which individual shall thereafter be a Vectura Director.
6.5. Directors of Company Subsidiaries. The Company shall take, and
---------------------------------
each of the Investors agrees that he or it shall cause the Company to take, at
any time and from time to time, all action necessary (including voting all
shares of common stock of any Subsidiary of the Company, calling special
meetings of stockholders and executing and delivering written consents) to
ensure that the Boards of Directors of all Subsidiaries of the Company (except
NATCO Limited Partnership and North American Trailing Company) are identical to
the Board of Directors of the Company.
6.6. Termination of Voting Agreements. The voting agreements in
--------------------------------
Sections 6.2, 6.3, 6.4 and 6.5 shall terminate on the earlier of (i) the date
the Company consummates a Public Offering (if requested by the underwriter with
respect to such offering) and (ii) the date when Vectura and its Permitted
Transferees and their respective Affiliates no longer own at least 15% of the
issued and outstanding Common Stock.
ARTICLE VII
ADDITIONAL RESTRICTIONS ON TRANSFERS OF
SECURITIES HELD BY MANAGEMENT INVESTORS
---------------------------------------
7.1. Restrictions on Transfer. In addition to any restrictions on
------------------------
Transfer imposed by Section 4.5, no Management Investor shall effect a Transfer
of any Securities (other than a Transfer to a Permitted Transferee pursuant to
Sections 4.5(b)(i) or 4.5(b)(ii)) without the consent of the Company, as
evidenced by a resolution duly adopted by at least a majority of the Board of
Directors. In the event of such a Transfer to a Permitted Transferee, for
purposes of determining the applicability of the Purchase Option of the Company
described in Section 7.2 herein and, if applicable, the amount of the Option
Purchase Price for Incentive Shares purchased under such Purchase Option,
reference shall be made to the Termination Date of the Management Investor who
first owned the Incentive Shares transferred in such Transfer. In exercising the
consent and approval described in the first sentence of this Section 7.1, the
Company may employ its sole discretion in evaluating the nature of the proposed
transferee and the Company may impose such conditions on Transfer as it deems
appropriate in its sole discretion, including, but not limited to, requirements
that the transferee be an employee of the Company and that the transferee
purchase the Management Investor's Securities as a "Management Investor" subject
to the restrictions of this Article VII. Any purported Transfer in violation of
this Agreement shall be null and void and of no force and effect and the
purported transferees shall have no rights or privileges in or with respect to
the Company.
7.2. Purchase Option.
----------------
(a) General Terms. In the event that on or prior to the fifth
-------------
anniversary of the Effective Time of the Merger, any Management Investor shall
cease to be employed by the
18
Company for any reason (including, but not limited to, death, temporary or
permanent disability, retirement at age 65 or more under the Company's normal
retirement policies, resignation or termination by the Company with or without
Cause), such Management Investor (or such Management Investor's heirs,
executors, administrators, transferees, successors or assigns) shall give prompt
notice to the Company of such termination (except in the case of termination by
the Company with or without Cause), and the Company, or one or more designee(s)
selected by a majority of the members of the Board of Directors, shall have the
right and option at any time within 90 days after the later of the effective
date of such termination of employment (the "Termination Date") or the date of
----------------
the Company's receipt of the aforesaid notice, to purchase from such Management
Investor, or such Management Investor's heirs, executors, administrators,
transferees, successors or assigns, as the case may be, any or all of the
Incentive Shares then owned by such Management Investor and such Management
Investor's Permitted Transferees at a purchase price equal to the Option
Purchase Price. The Company or its designee(s) shall give notice to the
terminated Management Investor (or such Management Investor's heirs, executors,
administrators, transferees, successors or assigns) of its intention to purchase
Incentive Shares at any time not later than 90 days after the Termination Date.
(The right of the Company and its designee(s) set forth in this Section 7.2 to
purchase a terminated Management Investor's Incentive Shares is hereinafter
referred to as the "Purchase Option"). As a condition to purchasing a Management
---------------
Investor's Incentive Shares pursuant to this Section 7.2, any designee(s)
selected by the Board of Directors must agree in writing to assume the Company's
obligations under Section 7.2(a)(iii). A designee's agreement to assume such
obligations will relieve the Company of its obligations under Section
7.2(a)(iii) with regard to the particular terminated Management Investor and
such Management Investor shall thereafter have no recourse against the Company
under Section 7.2(a)(iii).
(i) Exercise of Purchase Option. The Purchase Option shall
---------------------------
be exercised by written notice to the terminated Management Investor (or such
Management Investor's heirs, executors, administrators, transferees, successors
or assigns) signed by an officer of the Company on behalf of the Company or by
its designee(s), as the case may be. Such notice shall set forth the number of
Incentive Shares desired to be purchased and shall set forth a time and place of
closing which shall be no earlier than ten days and no later than 60 days after
the date such notice is sent. At such closing, the seller shall deliver the
certificates evidencing the number of Incentive Shares to be purchased by the
Company and/or its designee(s), accompanied by stock powers duly endorsed in
blank or duly executed instruments of transfer, and any other documents that are
necessary to transfer to the Company and/or its designee(s) good title to such
of the Incentive Shares to be transferred, free and clear of all pledges,
security interests, liens, charges, encumbrances, equities, claims and options
of whatever nature other than those imposed under this Agreement, and
concurrently with such delivery, the Company and/or its designee(s) shall
deliver to the seller the full amount of the Option Purchase Price for such
Incentive Shares in cash or by certified or bank cashier's check.
(ii) Option Purchase Price. (A) If the Management Investor
---------------------
shall be terminated by the Company without Cause or shall cease to be employed
by the Company by reason of death, normal retirement at age 65 or more under the
Company's normal retirement policies, or temporary or permanent disability, the
"Option Purchase Price" for the Incentive
---------------------
19
Shares to be purchased from such Management Investor or such Management
Investor's Permitted Transferees pursuant to the Purchase Option (such number of
Incentive Shares being the "Purchase Number") shall equal the price calculated
---------------
as set forth in the table below opposite the applicable Termination Date of such
Management Investor:
If the Termination Date Occurs: Option Purchase Price
------------------------------- ---------------------
On or prior to the first anniversary of the Effective Adjusted Cost Price multiplied by the
Time of the Merger Purchase Number
After the first anniversary of the Effective Time of Adjusted Cost Price multiplied by 80% of the
the Merger, and on or prior to the second Purchase Number, plus Adjusted Book
anniversary of the Effective Time of the Merger Value Price multiplied by 20% of the
Purchase Number
After the second anniversary of the Effective Time Adjusted Cost Price multiplied by 60% of the
of the Merger, and on or prior to the third Purchase Number, plus Adjusted Book
anniversary of the Effective Time of the Merger Value Price multiplied by 40% of the
Purchase Number
After the third anniversary of the Effective Time of Adjusted Cost Price multiplied by 40% of the
the Merger, and on or prior to the fourth Purchase Number, plus Adjusted Book
anniversary of the Effective Time of the Merger Value Price multiplied by 60% of the
Purchase Number
After the fourth anniversary of the Effective Time Adjusted Cost Price multiplied by 20% of the
of the Merger, and on or prior to the fifth Purchase Number, plus Adjusted Book
anniversary of the Effective Time of the Merger Value Price multiplied by 80% of the
Purchase Number
(B) If the Management Investor shall cease to be employed by
the Company for any reason other than those set forth in clause (A) of this
Section 7.2(a)(ii) (including, but not limited to, as the result of voluntary
resignation or termination for Cause), the Option Purchase Price for all
Incentive Shares to be purchased from the Management Investor (and such
Management Investor's Permitted Transferees) pursuant to the Purchase Option
shall equal the Adjusted Cost Price multiplied by the Purchase Number.
(C) As used herein:
(1) "Adjusted Cost Price" for each Incentive Share
-------------------
means One Dollar ($1.00), which represents the Management Investor's original
cost per share; and
(2) "Adjusted Book Value Price" for each Incentive
-------------------------
Share means the greater of (i) the Adjusted Cost Price or (ii) the consolidated
net worth of the
20
Company per share of Common Stock (adjusted to reflect the pro forma exercise in
full of any dilutive securities, regardless of whether such securities are
exercisable at the time or would otherwise satisfy any requirements under
generally accepted accounting principles as they relate to the determination of
"dilutive securities") as reflected in the Company's consolidated financial
statements as of the end of the fiscal quarter immediately preceding the
Termination Date; provided, however, that in reflecting the pro forma exercise
of dilutive securities no amount shall be added to the consolidated net worth of
the Company on account of the assumed exercise of dilutive securities that is in
excess, on a per share basis, of the consolidated net worth per share of the
Company calculated without regard to the exercise of any dilutive securities;
and provided, further, that if any of the Common Stock is traded on a national
securities exchange or reported on the National Association of Securities
Dealers, Inc. Automated Quotation System, then the "Adjusted Book Value Price"
shall equal for each Incentive Share the closing price per share of Common Stock
on such exchange or as so reported on the Management Investor's Termination
Date.
(iii) Adjustments to Option Purchase Price. If the Company
------------------------------------
or its designee exercises the Purchase Option with respect to any or all of the
Incentive Shares of any Management Investor whose employment with the Company
was terminated by the Company without Cause (the "Called Shares"), and if within
-------------
six months after the closing pursuant to such exercise of the Purchase Option by
the Company or its designee:
(A) the Company is merged into, consolidated with or
otherwise combined with or acquired by another Person, or there is a liquidation
of the Company, or there is a Public Offering (a "Subsequent Offering") of the
-------------------
Company's Common Stock pursuant to an effective registration statement under the
Securities Act in which other Management Investors participate as selling
stockholders (other than (1) a registration statement on Form S-8 or any
successor forms or any other registration statement relating to a special
offering to the Company's employees or (2) a registration statement relating to
a Unit Offering); and
(B) the per share consideration received by the
stockholders of the Company in such transaction, or the per share net proceeds
received for the Company's Common Stock in the Subsequent Offering, as the case
may be (in each case after being adjusted downward to reflect what the per share
consideration or per share net offering proceeds, as the case may be, would have
been had the Common Stock of such terminated Management Investor purchased by
the Company or its designee pursuant to the Purchase Option been outstanding on
the date of the closing of such transaction or Subsequent Offering), exceeds the
Adjusted Book Value Price used in calculating the Option Purchase Price pursuant
to the exercise of the Purchase Option,
then such Management Investor shall be entitled to receive from the Company or
its designee an amount per Called Share equal to such excess multiplied by the
applicable Adjusted Book Value Price Percentage within 30 days after the closing
of any such transaction or Subsequent Offering. "Adjusted Book Value Price
-------------------------
Percentage" means 20% multiplied by the number of full years elapsed between the
----------
Effective Time of the Merger and the Termination Date for such Management
Investor.
7.3. Company's Right of First Refusal. If a Management Investor or his
--------------------------------
or her
21
Permitted Transferees proposes to sell any or all of such Management Investor's
or Permitted Transferee's Securities to a third party in a bona fide
transaction, and provided such transaction is permitted under any applicable
restrictions set forth in Sections 4.5 and 7.1 herein, the Management Investor,
or his Permitted Transferees, may not Transfer such Securities without first
offering to sell such Securities to the Company pursuant to this Section 7.3.
The Management Investor, or his Permitted Transferees, shall deliver a
written notice (a "Sale Notice") to the Company describing in reasonable detail
-----------
the Securities being offered, the name of the offeree, the purchase price
requested and all other material terms of the proposed Transfer. Upon receipt of
the Sale Notice, the Company, or a designee selected by a majority of the
directors appointed by Vectura pursuant to Section 6.2, shall have the right and
option to purchase all or any portion of the Securities being offered at the
price and on the terms of the proposed Transfer set forth in the Sale Notice.
Within 30 days after receipt of the Sale Notice, the Company shall notify such
Management Investor, or his Permitted Transferees, whether or not it wishes to
purchase any or all of the offered Securities.
If the Company elects to purchase any of the offered Securities, the
closing of the purchase and sale of such Securities shall be held at the place
and on the date established by the Company in its notice to the Management
Investor, or his Permitted Transferees, in response to the Sale Notice, which in
no event shall be less than ten or more than 60 days from the date of such
notice. In the event that the Company does not elect to purchase all the offered
Securities, the Management Investor, or his Permitted Transferees, may, subject
to the other provisions of this Agreement, Transfer the remaining offered
Securities to the offeree specified in the Sale Notice at a price no less than
the price specified in the Sale Notice and on other terms no more favorable to
the transferee(s) thereof than specified in the Sale Notice during the 180-day
period immediately following the last date on which the Company could have
elected to purchase the offered Securities. Any such Securities not transferred
within such 180-day period will be subject to the provisions of this Section 7.3
upon subsequent Transfer.
7.4. Involuntary Transfers. In the event that Securities owned by any
---------------------
Management Investor, or his Permitted Transferees, shall be subject to sale or
other Transfer (the date of such sale or Transfer shall hereinafter be referred
to as the "Transfer Date") by reason of (i) bankruptcy or insolvency
-------------
proceedings, whether voluntary or involuntary, or (ii) distraint, levy,
execution or other involuntary Transfer, then such Management Investor, or his
Permitted Transferees, shall give the Company written notice thereof promptly
upon the occurrence of such event stating the terms of such proposed Transfer,
the identity of the proposed transferee, the price or other consideration, if
readily determinable, for which the Securities are proposed to be transferred,
and the number of shares of Common Stock to be transferred. After its receipt of
such notice or, failing such receipt, after the Company otherwise obtains actual
knowledge of such a proposed Transfer, the Company, or a designee selected by a
majority of the non-employee members of the Board of Directors of the Company,
shall have the right and option to purchase all, but, not less than all of such
Securities which right shall be exercised by written notice given by the Company
to such proposed transferor within 60 days following the Company's receipt of
such notice or, failing such receipt, the Company's obtaining actual knowledge
of such proposed Transfer. Any purchase pursuant to this Section 7.4 shall be at
the price and on the terms applicable to such proposed transfer. If the nature
of the event giving rise to such involuntary
22
Transfer is such that no readily determinable consideration is to be paid for
the Transfer of the Securities, the price to be paid by the Company shall be the
Option Purchase Price that would have been applicable hereunder had the
Management Investor incurred a Termination Date as of the date of such proposed
Transfer of the Securities and such Securities had been Incentive Shares. The
closing of the purchase and sale of Securities shall be held at the place and
the date to be established by the Company, which in no event shall be less than
ten or more than 60 days from the date on which the Company gives notice of its
election to purchase the Securities. At such closing, the Management Investor,
or his Permitted Transferees, shall deliver the certificates evidencing the
number of shares of Common Stock to be purchased by the Company, accompanied by
stock powers duly endorsed in blank or duly executed instruments of transfer,
and any other documents that are necessary to transfer to the Company good title
to such of the securities to be transferred, free and clear of all pledges,
security interests, liens, charges, encumbrances, equities, claims and options
of whatever nature other than those imposed under this Agreement, and
concurrently with such delivery, the Company shall deliver to the Management
Investor, or his Permitted Transferees, the full amount of the purchase price
for such Securities in cash by certified or bank cashier's check.
7.5. Lapse. The provisions of Sections 7.1 and 7.3, insofar as they
-----
relate to Securities other than Incentive Shares, and Section 7.4, shall
terminate (i) immediately after consummation of an Approved Sale or (ii) upon
the consummation of a Public Offering.
ARTICLE VIII
REGISTRATION RIGHTS
-------------------
The Investors shall have registration rights with respect to the Shares
as set forth in the Registration Rights Agreement among the parties hereto and
dated as of the date hereof, the form of which is attached hereto as Exhibit C
(the "Registration Rights Agreement"). Each of the Investors agree not to effect
-----------------------------
any public sale or distribution of any securities of the Company during the
periods specified in the Registration Rights Agreement, except as permitted by
the Registration Rights Agreement, and each such Investor agrees to be bound by
the rights of priority to participate in offerings as set forth therein.
ARTICLE IX
MISCELLANEOUS
-------------
9.1. Purchaser Representative. If the Company or any Investor enters
------------------------
into any negotiation or transaction for which Rule 506 (or any similar rule then
in effect) promulgated by the Securities and Exchange Commission under the
Securities Act may be available with respect to such negotiation or transaction
(including a merger, consolidation or other reorganization), each Management
Investor will, at the request of the Company, appoint a purchaser representative
(as such term is defined in Rule 501(h) promulgated by the Securities and
Exchange Commission under the Securities Act) reasonably acceptable to the
Company. If any Management Investor appoints the purchaser representative
designated by the Company, the Company will pay the fees of such purchaser
representative, but if any Management Investor
23
declines to appoint the purchaser representative designated by the Company such
Management Investor will appoint another purchaser representative (reasonably
acceptable to the Company), and such Management Investor will be responsible for
the fees of the purchaser representative so appointed.
9.2. Section 83(b) Elections. Each Management Investor shall make the
-----------------------
election (the "83(b) Election") to include in such Management Investor's income,
--------------
in the year such Management Investor receives the Incentive Shares, the excess,
if any, of the fair market value of the Incentive Shares on the date such shares
are acquired (determined without regard to restrictions which lapse) over One
Dollar ($1.00), the price deemed paid per Incentive Share, pursuant to Section
83(b) of the Internal Revenue Code of 1986, as amended, in the manner and within
the time period specified by the regulations promulgated thereunder. EACH
MANAGEMENT INVESTOR ACKNOWLEDGES THAT (1) HE ALONE IS RESPONSIBLE FOR FILING
WITH THE INTERNAL REVENUE SERVICE, BY THE APPLICABLE DEADLINE, ALL APPLICABLE
FORMS REQUIRED TO EFFECT THE 83(B) ELECTION, (2) NO EXTENSION OF THE 83(B)
ELECTION DEADLINE WILL BE AVAILABLE UNDER LAW AND (3) ADVERSE TAX CONSEQUENCES
MAY RESULT TO SUCH MANAGEMENT INVESTOR IF THE 83(B) ELECTION IS NOT TIMELY MADE.
9.3. Amendment and Modification. This Agreement may be amended or
--------------------------
modified, or any provision hereof may be waived, provided that such amendment,
modification or waiver is set forth in a writing executed by (i) the Company,
(ii) Vectura (so long as Vectura and its Permitted Transferees own in the
aggregate at least 15% of the outstanding Common Stock on a fully diluted basis)
and (iii) the holders of a majority of the outstanding Common Stock on a fully
diluted basis (including Shares owned by Vectura and its Affiliates) held by the
Investors; provided, however that without the approval of the holders of a
majority of the outstanding Common Stock then held by Management Investors, (A)
the provisions of this Agreement cannot be amended to treat Management Investors
differently than the other Investors and (B) the provisions of Sections 5.6,
5.7, 6.2, 9.3 and Article VII of this Agreement may not be amended or modified
to the detriment of Management Investors. No course of dealing between or among
any Persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any Person under or by reason of this Agreement.
9.4. Survival of Representations and Warranties. All representations,
------------------------------------------
warranties, covenants and agreements set forth in this Agreement will survive
the execution and delivery of this Agreement, the Effective Time of the Merger,
and the consummation of the transactions contemplated hereby and by the Merger
Agreement, regardless of any investigation made by an Investor or on its behalf.
9.5. Successors and Assigns; Entire Agreement. This Agreement and all
----------------------------------------
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns and
executors, administrators and heirs. This Agreement, together with the
Registration Rights Agreement, sets forth the entire agreement and understanding
among the parties as to the subject matter hereof and merges and supersedes all
prior discussions, agreements and understandings of any and every nature among
them.
24
9.6. Separability. In the event that any provision of this Agreement or
------------
the application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
9.7. Notices. All notices provided for or permitted hereunder shall be
-------
made in writing by hand delivery, registered or certified first-class mail,
telecopier or air courier guaranteeing overnight delivery to the other party at
the following addresses (or at such other address as shall be given in writing
by any party to the others):
If to the Company to:
Great Lakes Dredge & Dock Corporation
ββββ ββββ ββββ
βββ βββββ, ββββββββ βββββ
Telecopy number: (βββ) βββ-ββββ
Attention: βββββ β. βββββββ
with required copies to:
399 Venture Partners, Inc.
βββ ββββ ββββββ
βββββ βββββ
βββ ββββ, βββ ββββ βββββ
Telecopy number: (βββ) βββ-ββββ
Attention: βββββββ β. βββββββ
and
Dechert Price & ββββββ
4000 ββββ Atlantic Tower
ββββ ββββ ββββββ
ββββββββββββ, ββββββββββββ βββββ
Telecopy number: (βββ) βββ-ββββ
Attention: G. ββββββ β'βββββββ
If to Vectura to:
Vectura Holding Company LLC
ββββ βββββββ ββββββ, βββββ ββββ
βββ βββββββ, βββββββββ βββββ
Telecopy number: (βββ) βββ-ββββ
Attention: βββββ Wasgstaff III
with a required copy to:
25
Dechert Price & ββββββ
4000 ββββ Atlantic Tower
ββββ ββββ ββββββ
ββββββββββββ, ββββββββββββ βββββ
Telecopy number: (βββ) βββ-ββββ
Attention: G. ββββββ β'βββββββ
If to the Management Investors or any of them, to their addresses as
listed in the books of the Company.
All such notices shall be deemed to have been duly given: when
delivered by hand, if personally delivered; five business days after being
deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air courier
guaranteeing overnight delivery.
9.8. Governing Law. The validity, performance, construction and
-------------
effect of this Agreement shall be governed by and construed in accordance with
the internal law of Delaware, without giving effect to principles of conflicts
of law.
9.9. Waiver of Jury Trial. Each of the parties to this Agreement
--------------------
waives, to the fullest extent permitted by law, any right to trial by jury of
any claim, demand, action or cause of action (i) arising under this Agreement or
(ii) in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the transactions related
hereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise. Each of the parties to this Agreement
agrees and consents that any such claim, demand, action or cause of action shall
be decided by court trial without a jury and that the parties to this Agreement
may file an original counterpart of a copy of this Agreement with any court as
written evidence of the consent of the parties hereto to the waiver of the right
to trial by jury.
9.10. ACKNOWLEDGMENT OF MANAGEMENT INVESTORS. EACH MANAGEMENT
--------------------------------------
INVESTOR ACKNOWLEDGES THAT HE IS A SOPHISTICATED BUSINESSPERSON WHO WAS
ADEQUATELY REPRESENTED BY COUNSEL DURING NEGOTIATIONS REGARDING THE PROVISIONS
OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE PROVISIONS RESTRICTING THE
TRANSFER OF SECURITIES BY MANAGEMENT INVESTORS SET FORTH IN SECTION 4.5 AND
ARTICLE VII, AND SPECIFICALLY SECTION 7.2, WHICH SETS FORTH THE COMPANY'S
PURCHASE OPTION WITH RESPECT TO INCENTIVE SHARES. EACH MANAGEMENT INVESTOR
ACKNOWLEDGES THAT ANY PROPERTY RIGHT THAT HE HAS IN INCENTIVE SHARES IS SUBJECT
IN ALL RESPECTS TO THE COMPANY'S PRIOR RIGHT TO REPURCHASE SUCH INCENTIVE SHARES
AS PROVIDED IN ARTICLE VII. EACH MANAGEMENT INVESTOR FURTHER ACKNOWLEDGES THAT
IF THE COMPANY EXERCISES ITS PURCHASE OPTION SUCH MANAGEMENT INVESTOR'S
INCENTIVE SHARES COULD BE PURCHASED BY THE COMPANY AT A PRICE THAT IS LESS THAN
THE FAIR MARKET VALUE OF SUCH SECURITIES AT THE TIME OF SUCH EXERCISE.
26
9.11. Tax Payment Obligation. The Company acknowledges and affirms in
----------------------
this Agreement its obligation, pursuant to an Option Exercise and Stock Sale
Agreement among the Company, Vectura and the Management Investors, and pursuant
to this Section 9.11 of this Agreement, to make payments to or on behalf of
certain Management Investors in amounts sufficient to cover certain taxes of the
Management Investors as a result of certain income received upon the exercise of
options to purchase the Company's previously issued common stock.
9.12. No Effect on Employment. Nothing herein contained shall confer on
-----------------------
any Management Investor the right to remain in the employ of the Company or any
of its subsidiaries or Affiliates.
9.13. Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.
9.14. Counterparts. This Agreement may be executed in two or more
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same instrument.
9.15. Further Assurances. Each party shall cooperate and take such
------------------
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
9.16. Termination. Unless sooner terminated in accordance with its
-----------
terms, this Agreement shall terminate on the tenth anniversary of the Effective
Time of the Merger.
9.17. Remedies. In the event of a breach or a threatened breach by any
--------
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The parties
agree that the provisions of this Agreement shall be specifically enforceable,
it being agreed by the parties that the remedy at law, including monetary
damages, for breach of such provision will be inadequate compensation for any
loss and that any defense in any action for specific performance that a remedy
at law would be adequate is waived.
9.18. Party No Longer Owning Securities. If a party hereto ceases to
---------------------------------
own any Securities, such party will no longer be deemed to be an Investor or
Management Investor for purposes of this Agreement.
Pronouns. Whenever the context may require, any pronouns used herein
--------
shall be deemed also to include the corresponding neuter, masculine or feminine
forms.
27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
GREAT LAKES DREDGE & DOCK CORPORATION
By: /s/ βββββ β. βββββββ
-----------------------------------------
Name: βββββ β. βββββββ
Title: Sr. Vice President
VECTURA HOLDING COMPANY LLC
By: /s/ βββββββ β. βββββββ
-----------------------------------------
Name: βββββββ β. βββββββ
Title: Vice President & Assistant Secretary
MANAGEMENT INVESTOR
-----------------------------------------
Name:
Title:
Social Security Number:
Residence Address:
Residence Telephone:
Business Address:
Business Telephone:
28
SCHEDULE 1
CONTINUING MANAGEMENT INVESTOR
-------------------------------------------------------------------------------------------------
Number of Shares Number of
Name of of Class A Shares of Class Number of Shares
Management Investor Common Stock A Common of Series A
(non-Incentive Stock Preferred Stock
Shares) (Incentive
Shares)
------------------------- ------------------- ----------------- -------------------
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
GREAT LAKES DREDGE & DOCK CORPORATION
EXHIBIT B
RESTATED BYLAWS
OF
GREAT LAKES DREDGE & DOCK CORPORATION
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT