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EXHIBIT 10.4
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AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
By and Among
MONARCH DENTAL CORPORATION,
The TA Investors
as defined herein and set forth
on the signature pages hereto,
The MacGregor Investors
as defined herein and set forth
on the signature pages hereto,
The Monarch Investors
as defined herein and set forth
on the signature pages hereto
and
The ▇▇▇▇▇ Investors
as defined herein and set forth
on the signature pages hereto
Dated as of August 29, 1996
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MONARCH DENTAL CORPORATION
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
Page
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ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Construction of Terms . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. TRANSFERS BY THE INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 General Restrictions on Transfer by Investors . . . . . . . . . . . . 4
2.2 Right of Last Refusal . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Right of Co-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Sales by Investors . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Contemporaneous Transfers . . . . . . . . . . . . . . . . . . . . . 10
2.6 Sales to Competitors . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III. RIGHTS TO PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Right to Participate in Certain Sales of Additional Securities . . . 10
3.2 Assignment of Rights . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Optional Registrations . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Demand Registrations . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Registrable Securities . . . . . . . . . . . . . . . . . . . . . . . 14
4.4 Further Obligations of the Company . . . . . . . . . . . . . . . . . 14
4.5 Indemnification; Contribution . . . . . . . . . . . . . . . . . . . 16
4.6 Rule 144 Requirements . . . . . . . . . . . . . . . . . . . . . . . 18
4.7 Stand-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.8 Transfer of Registration Rights . . . . . . . . . . . . . . . . . . 19
ARTICLE V. ELECTION OF DIRECTORS; FINANCIAL INFORMATION . . . . . . . . . . . . . . . 19
5.1 Board Composition . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.2 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.4 Increase in Size of Board . . . . . . . . . . . . . . . . . . . . . 20
5.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.6 Financial Statements and Budgetary Information; Inspection . . . . . 20
5.7 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.1 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Assignability of Rights . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Legend on Securities . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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6.5 Section Headings and Gender . . . . . . . . . . . . . . . . . . . . 22
6.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Notices and Demands . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 Remedies; Severability . . . . . . . . . . . . . . . . . . . . . . . 22
6.9 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
1. LIST OF SCHEDULES AND EXHIBITS
Schedule 1.2(a) -- Amended and Restated Certificate of Incorporation
of the Company
Exhibit A -- Addendum Agreement
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AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
This Amended and Restated Stockholders' Agreement is made as of this
29th day of August, 1996, by and among MONARCH DENTAL CORPORATION, a Delaware
corporation (the "Company"), each of the TA Investors identified on the
signature pages hereto (together with any Permitted Transferee (as hereinafter
defined) or other assignee thereof as contemplated by the terms of this
Agreement, individually a "TA Investor" and collectively, the "TA Investors"),
each of the MacGregor Investors identified on the signature pages hereto and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual residing in ▇▇▇▇▇▇ County, Texas (together
with any Permitted Transferee (as hereinafter defined) or other assignee
thereof as contemplated by the terms of this Agreement, individually a
"MacGregor Investor" and collectively, the "MacGregor Investors"), each of the
Monarch Investors, identified on the signature pages hereto (together with any
Permitted Transferee (as hereinafter defined) or other assignee thereof as
contemplated by the terms of this Agreement, individually a "Monarch Investor"
and collectively, the "Monarch Investors") and each of the ▇▇▇▇▇ Investors
identified on the signature pages hereto and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual
residing in Buffalo County, Wisconsin (together with any Permitted Transferee
(as hereinafter defined) or other assignee thereof as contemplated by the terms
of this Agreement, individually a "▇▇▇▇▇ Investor" and collectively, the "▇▇▇▇▇
Investors"). The TA Investors, the MacGregor Investors, the Monarch Investors
and the ▇▇▇▇▇ Investors are sometimes referred to herein collectively as the
"Investors" and individually an "Investor."
WHEREAS, each of the TA Investors, the MacGregor Investors and the
Monarch Investors made an investment in the Company in February 1996 and, along
with the Company, entered into that certain Stockholders' Agreement dated
February 5, 1996, as amended by that certain First Amendment to the
Stockholders' Agreement dated August 1, 1996 (the "Original Stockholders'
Agreement"); and
WHEREAS, concurrently herewith, the ▇▇▇▇▇ Investors are making an
investment in the Company; and
WHEREAS, the parties to the Original Stockholders' Agreement desire to
amend and restate such agreement to add the ▇▇▇▇▇ Investors as a party; and
WHEREAS, in consideration thereof, and for the purpose of setting
forth certain arrangements that will govern the parties' relationship as
investors in the Company, the Company is granting the Investors certain rights
and the Investors are entering into certain agreements and covenants as set
forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
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ARTICLE I. DEFINITIONS
1.1 Construction of Terms. As used herein, the masculine, feminine
or neuter gender, and the singular or plural number, shall be deemed to be or
to include the other genders or number, as the case may be, whenever the
context so indicates or requires.
1.2 Defined Terms. The following capitalized terms, as used in
this Agreement, shall have the meanings set forth below.
An "Affiliate" of any Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with the first mentioned Person. A Person shall be
deemed to control another Person if such first Person possesses directly or
indirectly the power to direct, or cause the direction of, the management and
policies of the second Person, whether through the ownership of voting
securities, by contract or otherwise. An "Affiliate" of any Person, where
applicable, shall also include any professional corporation that employs
dentists and which, directly or indirectly provides or makes available dental
services to such Person.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock, par value $.01 per share and
Class A Common Stock, par value $.01 per share, of the Company, as the context
requires, and any other common equity securities now or hereafter issued by the
Company (but not including the Preferred Stock), and any other shares of stock
issued or issuable with respect thereto (whether by way of a stock dividend or
stock split or in exchange for or upon conversion of such shares or otherwise
in connection with a combination of shares, recapitalization, merger,
consolidation or other corporate reorganization); provided, however, the term
"Common Stock" shall not include any invested shares of the Company's capital
stock that are subject to any restricted stock purchase or similar agreement.
"Company" means Monarch Dental Corporation, a Delaware corporation,
and its successors and assigns, whether by way of merger, consolidation or
otherwise.
"Convertible Participating Preferred Stock" means the Convertible
Participating Preferred Stock, par value $.01 per share, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations promulgated thereunder.
"▇▇▇▇▇ Investors" has the meaning set forth in the first paragraph to
this Agreement.
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"Holder" has the meaning set forth in Section 4.1.
"Investors" has the meaning set forth in the first paragraph of this
Agreement.
"Investor Group" means each group of Investors consisting of (i) the
TA Investors, (ii) the MacGregor Investors, (iii) the Monarch Investors and
(iv) the ▇▇▇▇▇ Investors.
"Investor Group's Pro Rata Share" has the meaning set forth in Section
2.2(b).
"MacGregor Investors" has the meaning set forth in the first paragraph
to this Agreement.
"Monarch Investors" has the meaning set forth in the first paragraph
to this Agreement.
"Notice Period" has the meaning set forth in Section 2.2(b).
"Offer to Purchase" has the meaning set forth in Section 2.2.
"Offer to Sell" has the meaning set forth in Section 2.2(a).
"Offeror" has the meaning set forth in Section 2.2.
"Permitted Transfer" has the meaning set forth in Section 2.1(a).
"Permitted Transferee" has the meaning set forth in Section 2.1.
"Person" means an individual, a corporation, an association, a
partnership, a limited liability company, an estate, a trust, and any other
entity or organization, governmental or otherwise.
"Preferred Stock" means the Convertible Participating Preferred Stock
and the Redeemable Preferred Stock each issued or to be issued in accordance
with and subject to the terms of the Amended and Restated Certificate of
Incorporation of the Company substantially in the form attached hereto as
Schedule 1.2(a) (the "Charter"), together with any other shares issued or
issuable with respect thereto (whether by way of a stock dividend, stock split
or in exchange for or in replacement or upon conversion of such shares or
otherwise in connection with a combination of shares, recapitalization, merger,
consolidation or other corporate reorganization).
"Qualified Public Offering" means the first underwritten public
offering pursuant to an effective registration statement under the Securities
Act, covering the offer and sale of Common Stock to the public in which (i) the
proceeds received by the Company, net of underwriting discounts and
commissions, equal or exceed $20 million
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and the price per share implies a value for the Company of at least $50 million
and (ii) a portion of such proceeds is used to redeem all of the Redeemable
Preferred Stock then outstanding.
"Redeemable Preferred Stock" means the Redeemable Preferred Stock, par
value $.01 per share, of the Company.
"Registrable Securities" shall have the meaning set forth in Section
4.3.
"Right Holder" shall have the meaning set forth in Section 2.2(a).
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations promulgated thereunder.
"Selling Holder" has the meaning set forth in Section 4.5(a).
"TA Investors" has the meaning set forth in the first paragraph to
this Agreement.
"Transfer" has the meaning set forth in Section 2.1 (a). "Transferred"
means the accomplishment of a Transfer, and "Transferee" means the recipient of
a Transfer.
"Transferor" has the meaning set forth in Section 2.2.
ARTICLE II. TRANSFERS BY THE INVESTORS
The following provisions of this Article II shall terminate
immediately prior (and subject) to the closing of a Qualified Public Offering,
provided that the provisions of this Article II shall be inapplicable with
respect to sales by Investors in any transaction which qualifies as such.
2.1 General Restrictions on Transfer by Investors.
(a) Each Investor agrees that it will not directly or
indirectly offer, transfer, donate, sell, assign, pledge, hypothecate or
otherwise dispose of (any such action a "Transfer") all or any portion of the
shares of capital stock of the Company now owned or hereafter acquired by it,
except in connection with, and strictly in compliance with the conditions of,
any of the following (hereinafter "Permitted Transfers"):
(i) Transfers effected pursuant to Sections 2.2,
2.3 and 2.4 hereof, as applicable, and which do not violate Section
2.6 hereof, in each case made in accordance with the procedures set
forth therein;
(ii) with respect to any MacGregor Investor, a
Transfer to (A) any other MacGregor Investor listed on the signature
page hereof or to any
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spouse, child, child of spouse, parent, parent of spouse, grandchild,
grandchild of spouse, sibling, sibling of spouse, aunt or uncle or
aunt or uncle of spouse of any such MacGregor Investor, (B) any trust
for which any such MacGregor Investor and/or the spouse of such
MacGregor Investor is/are the settlor(s) for the sole benefit of any
such spouse, child, grandchild, parent, sibling, aunt or uncle
including by way of gift or the laws of descent and distribution or
(C) any limited partnership of which the sole general partner is the
transferor MacGregor Investor or an entity one hundred percent owned
and controlled by such transferor MacGregor Investor and any person
described in clause (A) and/or clause (B) of this clause (ii), and the
limited partners are persons described in clause (A) and/or clause (B)
of this clause (ii);
(iii) with respect to any Monarch Investor, a
Transfer to (A) any other Monarch Investor listed on the signature
page hereof or to any spouse, child, child of spouse, parent, parent
of spouse, grandchild, grandchild of spouse, sibling, sibling of
spouse, aunt or uncle or aunt or uncle of spouse of any such Monarch
Investor, (B) any trust for which any such Monarch Investor and/or the
spouse of such Monarch Investor is/are the settlor(s) for the sole
benefit of any such spouse, child, grandchild, parent, sibling, aunt
or uncle including by way of gift or the laws of descent and
distribution, (C) any limited partnership of which the sole general
partner is the transferor Monarch Investor or an entity one hundred
percent owned and controlled by such transferor Monarch Investor and
any person described in clause (A) and/or clause (B) of this clause
(iii), and the limited partners are persons described in clause (A)
and/or clause (B) of this clause (iii), or (D) ▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇
▇▇▇▇▇▇;
(iv) with respect to any TA Investor, a Transfer
to any other TA Investor listed on the signature page hereof, to any
other investment fund or other entity for which TA Associates, Inc.
and/or one or more partners thereof, directly or indirectly through
one or more intermediaries, serves as general partner or manager or in
a like capacity (a "TA Fund") or to any partner of a TA Fund; and
(v) with respect to any ▇▇▇▇▇ Investor, a
Transfer to (A) any other ▇▇▇▇▇ Investor listed on the signature page
hereof or to any spouse, child, child of spouse, parent, parent of
spouse, grandchild, grandchild of spouse, sibling, sibling of spouse,
aunt or uncle or aunt or uncle of spouse of any such ▇▇▇▇▇ Investor,
(B) any trust for which any such ▇▇▇▇▇ Investor and/or the spouse of
such ▇▇▇▇▇ Investor is/are the settlor(s) for the sole benefit of any
such spouse, child, grandchild, parent, sibling, aunt or uncle
including by way of gift or the laws of descent and distribution, (C)
any limited partnership of which the sole general partner is the
transferor ▇▇▇▇▇ Investor or an entity one hundred percent owned and
controlled by such transferor ▇▇▇▇▇ Investor and any person described
in clause (A) and/or clause (B) of this clause (v), and the limited
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partners are persons described in clause (A) and/or clause (B) of this
clause (v), or (D) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
Any permitted Transferee of a MacGregor Investor, a Monarch Investor,
a TA Investor or a ▇▇▇▇▇ Investor pursuant to the preceding clause (ii), (iii),
(iv) or (v) shall be referred to herein as a "Permitted Transferee" of such
Investor. In the case of any Permitted Transfer, the provisions of Sections
2.2, 2.3, 2.4 and 2.6 shall not apply, provided that the transferee shall have
entered into an enforceable written agreement substantially in the form
attached hereto as Exhibit A providing that all shares so Transferred shall
continue to be subject to all provisions of this Agreement as if such shares
were still held by the transferring Investor, and in connection therewith such
Permitted Transferee shall be deemed a TA Investor, a MacGregor Investor, a
Monarch Investor, a ▇▇▇▇▇ Investor, as applicable, for purposes of this
Agreement. In addition to compliance with the foregoing conditions, in
connection with any otherwise Permitted Transfer of shares of capital stock
that are restricted shares and are subject to any stock restriction agreement,
any transferee of any such shares shall agree in writing to be bound by the
terms of any such stock restriction or similar agreement, including, without
limitation, any repurchase or similar right contained therein. Anything to the
contrary in this Agreement notwithstanding, transferees permitted by clauses
(ii), (iii), (iv) and (v) of this Section 2.1 (a) shall take any shares so
Transferred subject to all rights and obligations under this Agreement as if
such shares were still held by the relevant Investor whether or not they so
agree with such transferring Investor. If any Transfer is made or attempted
contrary to the provisions of this Agreement, such purported Transfer shall be
void ab initio and the Company and the other Investors shall have, in addition
to any other legal or equitable remedies which they may have, the right to
enforce the provisions of this Agreement by actions for specific performance as
contemplated by Section 6.8; and the Company shall have the right to refuse to
recognize any purported transferee in such a Transfer as one of its
stockholders for any purpose.
2.2 Right of Last Refusal. If at any time on or after the Date
hereof any Investor receives a bona fide offer to purchase any or all of the
shares of any class of capital stock of the Company held by it (the "Offer to
Purchase") from an unaffiliated third party (the "Offeror") which such Investor
wishes to accept (whether initiated by such Investor or the third party), such
Investor may transfer such shares only pursuant to and in accordance with the
following provisions of this Section 2.2 (any Investor receiving an Offer to
Purchase being referred to in this Section 2.2 as the "Transferor"):
(a) The Transferor shall cause the Offer to Purchase to
be reduced to writing and shall notify each of the other Investors, other than
those Investors that are members of the Investor Group in which the Transferor
is a member (or deemed to be a member as provided in this Agreement) (the party
or parties receiving such notice being referred to as the "Right Holders") in
writing of its desire to accept the Offer to Purchase and otherwise comply with
the applicable provisions of this Article II. The
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Transferor's notice shall constitute an irrevocable offer to sell (the "Offer
to Sell") such shares to the Right Holders on the basis described below at a
purchase price equal to the price contained in, and on the same terms and
conditions of, the Offer to Purchase. The notice shall be accompanied by a true
copy of the Offer to Purchase (which shall identify the Offeror and all
relevant information in connection therewith).
(b) At any time within 45 days after the date of the
giving of notice pursuant to Section 2.2(a) (the "Notice Period"), the Right
Holders may, subject to the terms hereof, choose to accept the Offer to Sell
with respect to all or a portion of the shares covered thereby by giving
written notice to the Transferor as follows: all Right Holders that are members
of an Investor Group, if applicable, shall, collectively, indicate the maximum
number of shares that members of such Investor Group wish to purchase including
such number of shares that such Investor Group would purchase if the Right
Holders of any other Investor Group do not in the aggregate elect to purchase
such Investor Group's Pro Rata Share (as defined below). If the members of each
Investor Group which are Right Holders choose to accept such Offer to Sell in
amounts greater than each such Investor Group's Pro Rata Share, the number of
shares for which the Offer to Sell may be accepted by the members of each such
Investor Group shall equal each such Investor Group's Pro Rata Share. If the
members of each Investor Group which are Right Holders choose to accept such
Offer to Sell in amounts equal to each such Investor Group's Pro Rata Share,
the number of shares for which the Offer to Sell may be accepted by the members
of each such Investor Group shall equal each such Investor Group's Pro Rata
Share. If the members of each Investor Group which are Right Holders choose to
accept such Offer to Sell in amounts less than each such Investor Group's Pro
Rata Share, the number of shares for which the Offer to Sell may be accepted by
the members of each such Investor Group shall equal the amounts so accepted by
the members of each such Investor Group. If the members of one or more Investor
Groups which are Right Holders choose to accept such Offer to Sell in amounts
greater than its or their Pro Rata Share and the members of one or more
Investor Groups choose to accept such Offer to Sell in amounts less than its
Pro Rata Share, the members of the Investor Group(s) choosing to so accept in
excess of its (their) Pro Rata Share may accept those shares not accepted by
the other Investor Group(s), with allocation within each such accepting
Investor Group based upon the relative holdings of each such accepting Investor
Group. An "Investor Group's Pro Rata Share" shall equal the number of shares of
Common Stock (including shares of Common Stock issuable upon conversion of
Preferred Stock) then held by the Right Holders that are members of such
Investor Group, divided by the total number of shares of Common Stock
(including shares of Common Stock issuable upon conversion of Preferred Stock)
then held by the members of all Investor Groups which are Right Holders.
Notwithstanding anything contained herein to the contrary, unless otherwise
agreed to by all of the members of an Investor Group, each member of an
Investor Group shall be entitled to its proportionate share of such Investor
Group's Pro Rata Share, based upon the number of shares of Common Stock
(including shares of Common Stock issuable upon conversion of Preferred Stock)
then held by each such member relative to the number of shares of such Common
Stock (including shares of
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Common Stock issuable upon conversion of Preferred Stock) then held by all such
members, and members of an Investor Group shall have the first right to elect
to purchase shares allocable to such Investor Group in connection with any
offer to sell in lieu of any member of any other Investor Group.
(c) If shares covered by any Offer are purchased pursuant
to Section 2.2(b), such purchase shall be (i) at the same price and on the same
terms and conditions as the Offer to Purchase if the Offer to Purchase is for
cash and/or notes or (ii) if the Offer to Purchase includes any consideration
other than cash and notes, then at the equivalent all cash price for such other
consideration determined reasonably and in good faith. The closing of the
purchase of the shares subject to an Offer to Sell pursuant to this Section 2.2
shall take place within 15 days after the expiration of the Notice Period, or
upon satisfaction of any governmental approval requirements, if later, by
delivery by the respective Right Holders of the purchase price for the shares
being purchased as provided above to the Transferor against delivery of the
certificates representing the shares so purchased, appropriately endorsed for
transfer by such Transferor.
2.3 Right of Co-sale. In the event a Transferor proposes to sell
any shares that following the delivery of an Offer to Sell were not purchased
pursuant to Section 2.2, such Transferor may transfer such shares subject
thereto only following compliance with this Section 2.3 and Section 2.4 below.
In such event, promptly following the last day of the Notice Period, the
Transferor shall give a notice of the proposed sale to the Investors (other
than those Investors that are members (or deemed to be members as provided in
this Agreement) of the Investor Group in which the Transferor is a member),
once again enclosing a copy of the Offer to Purchase, if applicable, which
shall identify the Offeror and the number of shares proposed to be sold (the
"Co-Sale Notice"). Each of the Investors (other than those Investors, if
applicable, that are members of the Investor Group in which the Transferor is a
member) thereupon shall have the right, exercisable upon written notice to such
Transferor within 20 days after delivery to it of the Co-Sale Notice (the "Co-
Sale Notice Period"), which notice shall indicate the maximum number of shares
such Investor wishes to sell including the number of shares it would sell if
one or more other Investors do not elect to participate, to participate in the
sale on the terms and conditions stated in the Offer to Purchase and in the
Co-Sale Notice, except that (i) any Investor who holds Preferred Stock shall be
permitted to sell to the relevant purchaser shares of Common Stock acquired
upon conversion thereof or, at its election, an option to acquire such Common
Stock when it receives the same upon such conversion at the election of such
Investor or as otherwise provided in the Charter with the same effect as if
Common Stock were being conveyed, and (ii) in the event the Transferor proposes
to sell shares of Convertible Participating Preferred Stock those Investors
electing to participate in the sale by selling Common Stock shall only be
entitled to receive an amount per share of Common Stock equal to the difference
of (A) the amount per share the Transferor will receive per share of
Convertible Participating Preferred Stock and (B) $2.0834. Each of the
Investors entitled to receive the Co-Sale Notice shall have the
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right to sell all or any portion of its shares on the terms and conditions in
the Co-Sale Notice (subject to the foregoing), with the maximum number of
shares to be sold by each such Investor equal to the product obtained by
multiplying the number of shares proposed to be sold by the Transferor as
described in the Co-Sale Notice by a fraction, the numerator of which is the
number of shares of Common Stock (including shares of Common Stock issuable
upon conversion of Preferred Stock) owned by such Investor on the date of the
Co-Sale Notice and the denominator of which is the sum of the number of shares
of Common Stock (including shares of Common Stock issuable upon conversion of
Preferred Stock) owned by all of the Investors (including all permitted
assignees of the Investors), as of the date of the Co-Sale Notice. To the
extent one or more Investors who receive a Co-Sale Notice elect not to sell the
full amount of shares which they are entitled to sell pursuant to this Section
2.3, the other participating Investors' rights to sell shares under this
Section 2.3 shall be increased by including additional shares up to the amounts
indicated in their notice of election to participate, with participation to be
determined in the event of oversubscription proportionately based on the
relative holdings of Common Stock (including shares of Common Stock issuable
upon conversion of Preferred Stock) of the Investors who elect to participate;
provided, however, that participating Investors within any Investor Group shall
have the first right to include shares in place of non-participating Investors
within such Investor Group. Within 20 days after the expiration of the Co-Sale
Notice Period, the Transferor shall notify each participating Investor of the
number of shares held by such Investor that will be included in the sale and
the date on which the sale will be consummated, which shall be no later than
the later of (i) 30 days after the expiration of the Co-Sale Notice Period and
(ii) the satisfaction of all governmental approval requirements, if any. Each
of the Investors may effect its participation in any Offer to Purchase
hereunder by delivery to the Offeror, or to the Transferor for transfer to the
Offeror, of one or more instruments, certificates and/or option agreements,
properly endorsed for transfer, representing the shares it elects to sell
therein. At the time of consummation of the Offer to Purchase, the Offeror
shall remit directly to each participating Investor that portion of the sale
proceeds to which each such Investor is entitled by reason of its participation
therein. All costs and expenses in connection with any sales pursuant to this
Section 2.3 (including the cost of complying with this Article II) shall be
paid for by the sellers of shares on a pro rata basis (based on participation
rather than holdings) or otherwise as they may have agreed; provided, however,
that all costs and expenses in connection with any sale pursuant to this
Section 2.3 that relate specifically or incrementally to participation therein
by a certain seller (including the fees and expenses of counsel to such seller)
shall be paid for by such seller. No shares may be purchased by the Offeror
from an Investor unless the Offeror simultaneously purchases from the Investors
all of the shares that they have elected to sell pursuant to this Section 2.3.
Notwithstanding anything contained in this Agreement to the contrary, the
provisions of this Section 2.3 shall not apply and shall be inapplicable to any
sales of Redeemable Preferred Stock.
2.4 Sales by Investors. Any shares covered by an Offer to Purchase
received by Investor which are not acquired pursuant to Section 2.2 that such
Investor desires
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to sell following compliance with Sections 2.2 and 2.3 may be sold to the
Offeror only during the 90-day period after the expiration of the Co-Sale
Notice Period and only on terms no more favorable to the selling Investor than
those contained in the Offer to Purchase. Promptly after such sale, such
Investor shall notify the other Investors of the consummation thereof and shall
furnish such Investors evidence of the completion and time of completion of
such sale and of the terms thereof. Such Offeror shall take the shares so
Transferred subject to the restrictions of this Article II and with the
benefits contemplated by Sections 2.7, 3.2, 4.8 and 5.5 to the extent
applicable, and thereupon shall be deemed a member of the same Investor Group
as the relevant Transferor and thereby a MacGregor Investor, a Monarch
Investor, a TA Investor or a ▇▇▇▇▇ Investor hereunder except as the parties
hereto may otherwise agree in connection with any proposed transfer. If, at the
end of such 90-day period, the Investor has not completed the sale of such
shares as aforesaid, all the restrictions on Transfer contained in this Article
II shall again be in effect with respect to such shares.
2.5 Contemporaneous Transfers. If two or more Investors propose
concurrent transfers which are subject to this Article II, then the relevant
provisions of Sections 2.2 and 2.3 shall apply separately to each such proposed
transfer.
2.6 Sales to Competitors. Notwithstanding any other provision of
this Article II, each Investor hereby agrees not to directly or indirectly
transfer any securities of the Company or options in respect of any thereof to
any person or company whose activities or services are competitive with
activities or services of the Company as of the date of the proposed transfer.
The Company may impose stop transfer instructions with its transfer agent in
order to enforce the foregoing covenant.
2.7 Assignment. Each Investor shall have the right to assign its
rights under this Article II in connection with any transaction or series of
related transactions involving the transfer to a transferee or two or more
transferees that are Affiliates of each other of at least 50,000 shares of
capital stock of the Company (subject to adjustments for stock splits, stock
dividends, reclassifications, reorganizations and the like and aggregating all
contemporaneous transfers by two or more Investors), or to any TA Fund, and
upon any such transfer, any such transferee or TA Fund thereupon shall be
deemed an "Investor" and a member of the same Investor Group as the relevant
Transferor in connection with its ownership of the shares Transferred for
purposes of this Article II.
ARTICLE III. RIGHTS TO PURCHASE
Notwithstanding anything herein to the contrary, the following
provisions of this Article III shall terminate immediately prior (and subject)
to the closing of a Qualified Public Offering, provided that the provisions of
this Article III shall be inapplicable with respect to any proposed issuance in
a transaction which qualifies as such.
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3.1 Right to Participate in Certain Sales of Additional
Securities. The Company agrees that it will not sell or issue any shares of
capital stock of the Company, or other securities convertible into or
exchangeable for capital stock of the Company, or options, warrants or rights
carrying any rights to purchase capital stock of the Company unless the Company
first submits a written offer to the Investors identifying the terms of the
proposed sale (including price, number or aggregate principal amount of
securities and all other material terms), and offers to each Investor the
opportunity to purchase up to its Pro Rata Share (as hereinafter defined) of
the securities (subject to increase for over-allotment if some Investors do not
fully exercise their rights as provided below) on terms and conditions,
including price, not less favorable to the Investors than those on which the
Company proposes to sell such securities to a third party or parties. Each
Investor's "Pro Rata Share" of such securities shall be based on the ratio
which the shares of Common Stock (including shares issuable upon conversion of
Preferred Stock) owned by it bears to all the issued and outstanding shares of
Common Stock (including shares issuable upon conversion of Preferred Stock)
calculated in each case on a fully-diluted basis giving effect to the
conversion of convertible securities and assuming the exercise of all
outstanding vested options, in each case as of the date of such written offer.
The Company's offer to the Investors shall remain open and irrevocable for a
period of 30 days, and Investors shall elect to purchase by giving written
notice thereof to the Company within such thirty-day period including therein
the maximum number of shares or other securities such Investor would purchase
if other Investors do not elect to purchase, with the rights of electing
Investors to purchase such additional shares to be based upon the relative
holdings of Common Stock (including shares issuable upon conversion of
Preferred Stock) of the electing Investors in the case of over-subscription,
provided that in the event any Investor within an Investor Group does not elect
to purchase its Pro Rata Share, the other members of such Investor Group may
elect to purchase such non-electing Investor's Pro Rata Share or portion
thereof not so elected based on the relevant holdings of the participating
Investors within such Investor Group before any such shares are allocated to
participating Investors within any other Investor Group. Any securities so
offered which are not purchased pursuant to such offer may be sold by the
Company but only on the terms and conditions set forth in the initial offer to
the Investors, at any time within 120 days following the termination of the
above-referenced 30-day period but may not be sold to any other person or on
terms and conditions, including price, that are more favorable to the purchaser
than those set forth in such offer or after such 120-day period without renewed
compliance with this Section 3.1.
Notwithstanding the foregoing, the right to purchase granted under
this Article III shall be inapplicable with respect to any issuance or proposed
issuance by the Company of (i) warrants or options, or stock issued on the
exercise thereof in connection with any financing transaction, (ii) securities
issued in connection with the acquisition of another corporation by the Company
or any Affiliate of the Company, whether by merger, purchase of stock, purchase
of all or substantially all of the assets of such corporation, or otherwise,
(iii) Common Stock issued, or options or rights to
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15
purchase Common Stock granted, to employees, consultants, officers, directors,
advisors or independent contractors of the Company or of any Affiliate of the
Company, (iv) securities issued as a result of any stock split, stock dividend,
reclassification or reorganization of the Company's stock or (v) Common Stock
or Redeemable Preferred Stock issued upon conversion of Convertible
Participating Preferred Stock in accordance with the terms of the Company's
Amended and Restated Certificate of Incorporation.
3.2 Assignment of Rights. Each Investor may assign its rights
under this Article III in connection with any transaction or series of related
transactions involving the transfer to a transferee or two or more transferees
that are Affiliates of each other of at least 50,000 shares of capital stock of
the Company (subject to adjustments for stock splits, stock dividends,
reclassifications, reorganizations and the like and aggregating all
contemporaneous transfers by Investors), or to any TA Fund, and upon any such
transfer any such transferee or TA Fund shall be deemed an "Investor" and a
member of the same Investor Group as the relevant Transferor in connection with
its ownership of the shares Transferred for purposes of Sections 3.1 and 3.2
with the rights set forth in such Sections.
ARTICLE IV. REGISTRATION RIGHTS
4.1 Optional Registrations. If at any time or times after the date
hereof, the Company shall seek to register any shares of its capital stock or
securities convertible into capital stock under the Securities Act (whether in
connection with a public offering of securities by the Company (a "primary
offering"), a public offering of securities by shareholders of the Company (a
"secondary offering"), or both), the Company will promptly give written notice
thereof to each Investor (the "Holders," subject to Section 4.8) holding
Registrable Securities as hereinafter defined in Section 4.4 below. If within
30 days after their receipt of such notice one or more Holders request the
inclusion of some or all of the Registrable Securities owned by them in such
registration, the Company will, subject to the limitations and conditions
contained herein, use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which such Holders may request in
a writing delivered to the Company within 30 days after their receipt of the
notice given by the Company. In the case of the registration of shares of
capital stock by the Company in connection with any underwritten public
offering, if the underwriter(s) determines in its sole discretion that
marketing factors require a limitation on the number of Registrable Securities
to be offered, the Company shall not be required to register Registrable
Securities in excess of the amount, if any, of shares of the capital stock
which the principal underwriter of such underwritten offering shall reasonably
and in good faith agree to include in such offering in excess of any amount to
be registered for the Company. If any limitation of the number of shares of
Registrable Securities to be registered by the Holders is required pursuant to
this Section 4.1, the number of shares that may be included in the registration
on behalf of the Holders shall be allocated among the
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Holders or the holders of any other registration rights in proportion, as
nearly as practicable, to their respective holdings of Registrable Securities;
provided, however, that participating Holders within any Investor Group shall
have the first right to include shares in place of non-participating Investors
within such Investor Group before shares are allocated to participating
Investors within any other Investor Group. In connection with any underwritten
public offering, the Registrable Securities of Holders included in any such
offering as provided in this Section 4.1 must be sold to the underwriter on the
same terms and conditions as those securities being sold by the Company. The
provisions of this Section will not apply to a registration effected solely to
implement (i) an employee benefit plan, or (ii) a transaction to which Rule 145
or any other similar rule of the Securities and Exchange Commission (the "SEC"
or the "Commission") under the Securities Act is applicable. Notwithstanding
anything herein to the contrary, (i) no Holder shall be entitled to register
and sell any securities of the Company pursuant to this Section 4.1 prior to a
Qualified Public Offering and (ii) the Company may in its sole discretion prior
to its effectiveness withdraw any registration statement under this Section
4.1.
4.2 Demand Registrations.
(a) TA Investor Demand Registrations. If on any two (2)
occasions after the earlier of (a) 120 days after the initial public offering
of capital stock of the Company and (b) the second anniversary of the date
hereof, one or more TA Investors holding Registrable Securities shall notify
the Company in writing that they intend to offer or cause to be offered for
public sale all or any portion of their Registrable Securities, the Company
will notify all of the Holders who would be entitled to notice of a proposed
registration under Section 4.1 above and any other holder of piggyback
registration rights of its receipt of such notification from the requesting
Holders. Subject to Section 4.1, upon the written request of any such Holder or
other holder of the Company's securities delivered to the Company within 20
days after receipt from the Company of such notification, the Company will
either (i) elect to make a primary offering, in which case the rights of such
Holders shall be as set forth in Section 4.1 above (in which case the
registration shall not count as one of the permitted demand registrations
hereunder), or (ii) use its best efforts to cause such of the Registrable
Securities as may be requested by any Holders and any other holders of
piggyback registration rights to be registered under the Securities Act in
accordance with the terms of this Section 4.2.
(b) Form S-3. If on any occasion (subject to the further
provisions of this Section 4.2(b)) after the Company becomes eligible to use
Form S-3 under the Securities Act or a comparable successor form, Holders of
Registrable Securities who are TA Investors, MacGregor Investors, Monarch
Investors or ▇▇▇▇▇ Investors, as applicable, shall notify the Company that they
intend to offer or cause to be offered for public sale all or any portion of
their Registrable Securities in a transaction anticipated to result in
aggregate offering proceeds to such requesting Holder or Holders, net of
underwriting discounts and commissions, of at least $500,000 (or at least 80%
of the
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requesting Holder or Holders' Registrable Securities, if less), the Company
will notify all of the Holders who would be entitled to notice of a proposed
registration under Section 4.1 above and any other holder of "piggyback"
registration rights of its receipt of such notification from the requesting
Holders. Upon the written request of any such Holder or other holder of the
Company's securities delivered to the Company within 20 days after receipt from
the Company of such notification, the Company will use its best efforts to
cause such of the Registrable Securities as may be requested by any Holders and
any other holders of piggyback registration rights to be registered under the
Securities Act in accordance with the terms of this Section 4.2. The Company
shall not be obligated to effect more than one registration statement on Form
S-3 per any twelve-month period at the initial request of Holders who are
members of the same Investor Group.
(c) Certain Limitations. The Company may postpone the
filing of any registration statement required hereunder for a reasonable period
of time, not to exceed 90 days during any twelve-month period, if the Company
has been advised by legal counsel that such filing would require a special
audit or the disclosure of a material impending transaction or other matter and
the Company's Board of Directors determines reasonably and in good faith that
such disclosure would have a material adverse effect on the Company. The
Company shall not be required to cause a registration statement requested
pursuant to this Section 4.2 to become effective prior to 180 days following
the effective date of the registration statement in connection with the
Company's initial public offering, or more than 120 days following the
effective date of any other registration statement on Form ▇-▇, ▇-▇ or S-B
which is initiated by the Company; provided, however, that the Company shall
use its best efforts to achieve such effectiveness promptly thereafter.
4.3 Registrable Securities. For the purposes of this Article IV,
the term "Registrable Securities" shall mean any shares of Common Stock held by
a Holder or subject to acquisition by a Holder upon conversion of Convertible
Participating Preferred Stock, as applicable, including any shares issued by
way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization;
provided, however, that if an Investor owns Convertible Participating Preferred
Stock or Common Stock, the Investor may exercise its registration rights
hereunder by converting the shares to be sold publicly into Common Stock as of
the closing of the relevant offering and shall not be required (except as
provided in the Company's Amended and Restated Certificate of Incorporation) to
cause such Convertible Participating Preferred Stock to be converted to Common
Stock until and unless such closing occurs, it being understood that such
conversion shall be wholly contingent upon the closing of the relevant offering
and, in the case of a mandatory redemption of Redeemable Preferred Stock as
provided in the Company's Amended and Restated Certificate of Incorporation,
the qualification of the relevant offering as a "Qualified Public Offering" as
defined in such Amended and Restated Certificate of Incorporation; and
provided, further, that any Common Stock that (a) is sold in a registered sale
pursuant to an effective registration statement
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under the Securities Act or pursuant to Rule 144 thereunder, or (b) may be sold
without restriction as to volume or otherwise pursuant to Rule 144 under the
Securities Act (as confirmed by an unqualified opinion of counsel to the
Company), shall not be deemed Registrable Securities.
4.4 Further Obligations of the Company. Whenever the Company is
required hereunder to register any Registrable Securities, it agrees that it
shall also do the following:
(a) Pay all expenses of such registrations and offerings
(exclusive of underwriting discounts and commissions) and the reasonable fees
and expenses of not more than one independent counsel for the Holders
satisfactory to the Holders requesting the relevant registration or a majority
in interest (based on shares proposed to be sold) of the Holders in the case of
a Company-initiated registration;
(b) Use its best efforts (with due regard to management
of the ongoing business of the Company and the allocation of managerial
resources) diligently to prepare and file with the SEC a registration statement
and such amendments and supplements to said registration statement and the
prospectus used in connection therewith as may be necessary to keep said
registration statement effective for at least 90 days (or 30 days in the case
of Form S-3) and to comply with the provisions of the Securities Act with
respect to the sale of securities covered by said registration statement for
such period or any shorter period necessary to complete the proposed public
offering;
(c) Furnish to each selling Holder such copies of each
preliminary and final prospectus and such other documents as such Holder may
reasonably request to facilitate the public offering of its Registrable
Securities;
(d) Enter into any reasonable underwriting agreement
required by the proposed underwriter for the selling Holders, if any, (which
underwriter shall be selected by the Holders initiating the registration in the
case of a Holder-initiated demand and reasonably acceptable to the Company) in
such form and containing such terms as are customary; provided, however, that
if the underwriter requires that representations or warranties be made and that
indemnification be provided in respect of the Company's business, operations,
financial information and the like and the disclosures relating thereto in the
prospectus, the Company shall make all such representations and warranties and
provide all such indemnities.
(e) Use its best efforts (with due regard to management
of the ongoing business of the Company and the allocation of managerial
resources) to register or qualify the securities covered by said registration
statement under the securities or "blue sky" laws of such jurisdictions as any
selling Holder (or in the case of an underwritten offering, the underwriter)
may reasonably request, provided that the Company shall not be required to
register or qualify the securities in any jurisdictions
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which require it to (i) execute a general consent to service of process in
effecting such registration or qualification or (ii) qualify to do business as
a foreign corporation where doing so would subject it to taxation in such
jurisdiction unless the Company is already subject to service or taxation in
such jurisdiction;
(f) Immediately notify each selling Holder, at any time
when a prospectus relating to his Registrable Securities is required to be
delivered under the Securities Act, of the happening of any event as a result
of which such prospectus contains an untrue statement of a material fact or
omits any material fact necessary to make the statements therein not
misleading, and, at the request of any such selling Holder, prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(g) Cause all such Registrable Securities to be listed on
each securities exchange or quotation system on which similar securities issued
by the Company are then listed or quoted;
(h) Otherwise use its best efforts to comply with the
securities laws of the United States and other applicable jurisdictions and all
applicable rules and regulations of the SEC and comparable governmental
agencies in other applicable jurisdictions and make generally available to its
holders, in each case as soon as practicable, but not later than 45 days after
the close of the period covered thereby, an earnings statement of the Company
which will satisfy the provisions of Section 11(a) of the Securities Act;
(i) Use its best efforts to obtain and furnish to each
selling Holder, immediately prior to the effectiveness of the registration
statement (and, in the case of an underwritten offering, at the time of
delivery of any Registrable Securities sold pursuant thereto), a cold comfort
letter from the Company's independent public accountants in customary form and
covering such matters of the type customarily covered by cold comfort letters
as the holders of a majority of the Registrable Securities being sold may
reasonably request; and
(j) Otherwise cooperate with the underwriter or
underwriters, the Commission and other regulatory agencies and take all actions
and execute and deliver or cause to be executed and delivered all documents
necessary to effect the registration of any Registrable Securities under this
Article IV.
4.5 Indemnification; Contribution.
(a) Incident to any registration statement referred to in
this Article IV, the Company will indemnify and hold harmless each underwriter,
each Holder who offers or sells any such Registrable Securities in connection
with such registration
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statement (including its partners, (partners of partners and stockholders of
any such partners), and directors, officers, employees and agents of any of
them (a "Selling Holder"), and each person who controls any of them within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(a "Controlling Person"), from and against any and all losses, claims, damages,
expenses and liabilities, joint or several (including any investigation, legal
and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, as the
same are incurred), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities arise out of or are based on (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement
(including any related preliminary or definitive prospectus, or any amendment
or supplement to such registration statement or prospectus), (ii) any omission
or alleged omission to state in such document a material fact required to be
stated in it or necessary to make the statements in it not misleading, or (iii)
any violation by the Company of the Securities Act, any state securities or
"blue sky" laws or any rule or regulation thereunder in connection with such
registration; provided, however, that the Company will not be liable to the
extent that such loss, claim, damage, expense or liability arises from and is
based on an untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information furnished in
writing to the Company by such underwriter, Selling Holder or Controlling
Person expressly for use in such registration statement. With respect to such
untrue statement or omission or alleged untrue statement or omission in the
information furnished in writing to the Company by such Selling Holder
expressly for use in such registration statement, such Selling Holder will
indemnify and hold harmless each other underwriter, the Company (including its
directors, officers, employees, shareholders and agents), each other Holder
(including its partners (including partners of partners and stockholders of
such partners) and directors, officers, employees and agents of any of them,
and each person who controls any of them within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, from and against any and
all losses, claims, damages, expenses and liabilities, joint or several, to
which they, or any of them, may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise to the same extent provided in the immediately preceding
sentence. However, the liability of a Selling Holder for indemnification under
this Section 4.5(a) shall not exceed the lesser of (i) that proportion of the
total of such losses, claims, damages or liabilities indemnified against equal
to the proportion of the total securities sold under such registration
statement which is being sold by such Selling Holder or (ii) the proceeds
received by such Selling Holder from its sale of Registrable Securities under
such registration statement.
(b) If the indemnification provided for in Section 4.5(a)
above for any reason is held by a court of competent jurisdiction to be
unavailable to an indemnified party in respect of any losses, claims, damages,
expenses or liabilities referred to therein, then each indemnifying party under
this Section 4.5, in lieu of indemnifying
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21
such indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
expenses or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the other Selling Holders and the
underwriters from the offering of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, the
other Selling Holders and the underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company, the Selling Holders and the
underwriters shall be deemed to be in the same respective proportions that the
net proceeds from the offering (before deducting expenses) received by the
Company and the Selling Holders and the underwriting discount and fees received
by the underwriters, in each case as set forth in the table on the cover page
of the applicable prospectus, bear to the aggregate public offering price of
the Registrable Securities. The relative fault of the Company, the Selling
Holders and the underwriters shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company, the Selling Holders or the underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Holders, and the underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 4.5(b)
were determined by pro rata or per capita allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. However, a Selling Holder shall not
be required to contribute any amount under this Section 4.5(b) in excess of the
lesser of (i) that proportion of the total of such losses, claims, damages or
liabilities indemnified against equal to the proportion of the total
Registrable Securities sold under such registration statement which are being
sold by such Selling Holder or (ii) the proceeds received by such Selling
Holder from its sale of Registrable Securities under such registration
statement. No person found guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.
(c) The amount paid by an indemnifying party or payable
to an indemnified party as a result of the losses, claims, damages and
liabilities referred to in this Section 4.5 shall be deemed to include, subject
to the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim, payable as the same are incurred. The
indemnification and contribution provided for in this Section 4.5 will remain
in full force and effect regardless of any investigation made by or on
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behalf of the indemnified parties or any officer, director, employee, agent or
controlling person of the indemnified parties.
4.6 Rule 144 Requirements. In the event that the Company becomes
subject to Section 13 or Section 15(d) of the Exchange Act, the Company shall
use its best efforts to take all action as may be required as a condition to
the availability of Rule 144 under the Securities Act (or any successor or
similar exemptive rules hereafter in effect). The Company shall furnish to any
Holder, within 15 days of a written request, a written statement executed by
the Company as to the steps it has taken to comply with the current public
information requirement of Rule 144 or such successor rules.
4.7 Stand-Off. Each Holder agrees, if requested by the Company and
an underwriter of Registrable Securities of the Company, not to sell or
otherwise transfer or dispose of any securities of the Company (including,
without limitation pursuant to Rule 144 under the Securities Act (or any
successor or similar exemptive rules hereafter in effect)) held by it following
the effective date of any registration statement of the Company on Form ▇-▇,
▇▇▇▇ ▇-▇ or Form S-B filed under the Securities Act as the Company or such
underwriter shall specify reasonably and in good faith, not to exceed 180 days
in the case of the Company's initial public offering or 90 days in the case of
any other offering on Form ▇-▇, ▇-▇ or S-B.
4.8 Transfer of Registration Rights. The registration rights and
related obligations under this Article IV of the Holders with respect to their
Registrable Securities may be assigned in connection with any transaction or
series of related transactions involving the transfer to a transferee or one or
more transferees that are Affiliates of each other, other than pursuant to an
effective registration statement under the Securities Act or pursuant to Rule
144 thereunder, of at least 1,000 shares of capital stock of the Company
(subject to adjustments for stock splits, stock dividends, reclassifications,
reorganizations and the like and aggregating all contemporaneous transfers by
Holders), or (in the case of the Investors) to any TA Fund, and upon any such
transfer such transferee or TA Fund shall be deemed to be included within the
definition of a "Holder" and a member of the same Investor Group as the
relevant Transferor for purposes of this Article IV with the rights set forth
herein. The relevant Holder as the case may be, shall notify the Company at the
time of such transfer.
ARTICLE V. ELECTION OF DIRECTORS; FINANCIAL INFORMATION
5.1 Board Composition. Each Investor agrees to vote all its shares
of the Company's capital stock having voting power (and any other shares over
which it exercises voting control) in connection with the election of Directors
and to take such other actions as are necessary so as to fix the number of
members of the Board of Directors of the Company at five or six, as indicated
below, and to elect and thereafter continue in (and not remove from (except as
provided in Section 5.2)) office as Directors of the Company:
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23
(1) one (1) individual nominated by the Monarch Investors
who shall initially be ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
(2) one (1) individual nominated by the MacGregor
Investors who shall initially be ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇;
(3) one (1) individual nominated by the TA Investors who
shall initially be ▇▇▇▇▇ ▇. ▇▇▇▇▇▇; provided, however, that the TA
Investors may at any time upon notice to the other Investors designate
a second nominee and promptly upon such notice the other parties
hereto will take such action as is necessary, including the voting of
their shares, to expand the Board of Directors of the Company to six
members and to cause the additional nominee of the TA Investors to be
nominated and elected as a director of the Company as a second nominee
of the TA Investors; and
(4) two (2) individuals (the "Outside Directors") who are
not employed by the Company or any subsidiary or Affiliate of the Company or
any of the Investors or affiliated with or related to any Investor or any of
their Affiliates and who are designated with the joint approval of two thirds
in interest (based on aggregate holdings of the Company's outstanding voting
power of all Investor Groups) of the TA Investors, the MacGregor Investors, the
Monarch Investors and the ▇▇▇▇▇ Investors; provided, however, that an Outside
Director shall be removed or not renominated for election as a Director of the
Company if two-thirds in interest (based on aggregate holdings of the Company's
outstanding voting power of all Investor Groups) of the TA Investors, the
MacGregor Investors, the Monarch Investors and the ▇▇▇▇▇ Investors so request,
whereupon an approved successor in the manner provided above shall be
appointed. If an Outside Director fails to be renominated as provided herein, a
replacement Outside Director shall be nominated for election in accordance with
the provisions of this Article V.
5.2 Removal. Each Investor agrees to vote all of its shares of the
Company's capital stock having voting power (and any other shares over which
she or it exercises voting control) for the removal of any Director upon the
request of the Investor Group designating such Director and for the election to
the Board of Directors of a substitute designated by such party in accordance
with the provisions of Section 5.1 hereof.
5.3 Vacancies. Each Investor agrees to vote all shares of the
Company's capital stock having voting power (and any other shares over which
she or it exercises voting control) in such manner as shall be necessary or
appropriate to ensure that any vacancy on the Board of Directors of the Company
(occurring for any reason) shall be filled only in accordance with the
provisions of this Article V.
5.4 Increase in Size of Board. Any increase in the size of the
Board of Directors to a number greater than six (6) shall require an amendment
to this Agreement.
- 20 -
24
5.5 Assignment. Each Investor agrees, as a condition to any
transfer of its shares, to cause the transferee to agree to the provisions of
this Article V, whereupon such transferee shall be subject to the provisions
hereof as an Investor and a member of the same Investor Group as the relevant
Transferor in connection with its ownership of the shares Transferred for
purposes of this Article V.
5.6 Financial Statements and Budgetary Information; Inspection.
The Company will deliver to the Investors internally prepared unaudited monthly
and quarterly consolidated and consolidating financial statements and audited
annual consolidated and consolidating financial statements, as well as annual
budgetary information. The monthly and quarterly consolidated and consolidating
financial information will be provided to the Investors within 35 days after
the end of each month and quarter. The annual budgetary information will be
presented at a Board of Directors' meeting at least one month prior to each
fiscal year-end of the Company. An annual audit by a so-called "Big Six"
accounting firm selected by the Board of Directors will be provided within 90
days after each fiscal year-end of the Company.
The Company will, upon reasonable prior notice to the Company, permit
authorized representatives of the Investors to visit and inspect any of the
properties of the Company and its subsidiaries, including its books of account
(and to make copies thereof and take extracts therefrom), and to discuss its
affairs, finances and accounts with its officers, administrative employees and
independent accountants, all at such reasonable times and as often as may be
reasonably requested.
5.7 Term. This Article V shall remain in effect until the closing
of a Qualified Public Offering or, if sooner, February 5, 2006.
ARTICLE VI. GENERAL
6.1 Amendment and Waiver. Any party may waive any provision hereof
intended for its benefit in writing. No failure or delay on the part of any
party hereto in exercising any right, power or remedy hereunder shall operate
as a waiver thereof. The remedies provided for herein are cumulative and are
not exclusive of any remedies that may be available to any party hereto at law
or in equity or otherwise. This Agreement may be amended with the prior written
consent of two-thirds in interest (based on aggregate holdings of the Company's
outstanding voting power of all Investor Groups) of the TA Investors, the
Monarch Investors, the MacGregor Investors and the ▇▇▇▇▇ Investors; provided,
however, any amendment that affects an Investor materially, adversely and in a
manner different than other members of the Investor Group of which such
Investor is a member, shall require such Investor's consent. Any actions
required to be taken, or consents required to be given, by any Investor Group
separately shall require the approval of a two-thirds in interest (based on
relative holdings of the Company's outstanding voting power) of the members of
such Investor
- 21 -
25
Group. Any amendment or waiver effected in accordance with this Section 6.1
shall be binding upon each party to this Agreement and each assignee of such a
party.
6.2 Assignability of Rights. All covenants and agreements made
herein shall bind the successors and assigns of the parties hereto, and such
covenants and agreements and the rights and obligations of the parties herein
shall be assignable as provided in Sections 2.7, 3.2, 4.8 and 5.5, whether so
expressed or not, and, except as otherwise provided in this Agreement, all such
covenants and agreements shall inure to the benefit of the Investors'
successors and assigns and to transferees of the Securities, whether so
expressed or not, subject to the provisions of Sections 2.7, 3.2, 4.8 and 5.5.
6.3 Legend on Securities. The Company and the Investors
acknowledge and agree that the following legend shall be typed on each
certificate evidencing any of the securities issued hereunder held at any time
by an Investor:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE
SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY
LAWS.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF AUGUST 29, 1996,
INCLUDING THEREIN CERTAIN RESTRICTIONS ON TRANSFER, AND VOTING AGREEMENTS. A
COMPLETE AND CORRECT COPY OF THIS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
6.4 Governing Law. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws of Delaware,
without giving effect to conflict of laws principles thereof.
6.5 Section Headings and Gender. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
The use in this Agreement of the masculine pronoun in reference to a party
hereto shall be deemed to include the feminine or neuter, and vice versa, as
the context may require.
- 22 -
26
6.6 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which when so executed and delivered shall
be taken to be an original; but such counterparts shall together constitute but
one and the same document.
6.7 Notices and Demands. Any notice or demand which is required or
provided to be given under this Agreement shall be deemed to have been
sufficiently given and received for all purposes when delivered by hand,
telecopy, telex or other method of facsimile, or five days after being sent by
certified or registered mail, postage and charges prepaid, return receipt
requested, or two days after being sent by overnight delivery providing receipt
of delivery, to the following addresses: if to the Company at ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at any other address designated by
the Company to the Investors in writing; if to an Investor, at its mailing
address as shown on the signature pages hereto, or to any other address
designated by such Investor to the Company, and the other Investors in writing.
6.8 Remedies; Severability. It is specifically understood and
agreed that any breach of the provisions of this Agreement by any person
subject hereto will result in irreparable injury to the other parties hereto,
that the remedy at law alone will be an inadequate remedy for such breach, and
that, in addition to any other legal or equitable remedies which they may have,
such other parties may enforce their respective rights by actions for specific
performance (to the extent permitted by law) and the Company may refuse to
recognize any unauthorized transferee as one of its shareholders for any
purpose, including, without limitation, for purposes of dividend and voting
rights, until the relevant party or parties have complied with all applicable
provisions of this Agreement. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
6.9 Integration. This Agreement, including the exhibits, documents
and instruments referred to herein or therein, constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
*****
- 23 -
27
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered in one or more counterparts as of the day and year first
above written.
COMPANY:
MONARCH DENTAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S., CEO
- 24 -
28
TA INVESTORS:
ADVENT VII L.P.
By: TA Associates VI L.P.,
its General Partner
By: TA Associates, Inc.,
its General Partner
By: *
------------------------------------
ADVENT ATLANTIC AND PACIFIC II L.P.
By: TA Associates AAP II Partners,
its General Partner
By: *
------------------------------------
ADVENT NEW YORK L.P.
By: TA Associates VI L.P.,
its General Partner
By: *
------------------------------------
TA VENTURE INVESTORS L.P.
By: *
------------------------------------
Address for Each of the above TA Investors is as follows:
c/o TA Associates, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
- 25 -
29
SPOUSE'S CONSENT
I acknowledge that I have read the
foregoing Agreement and that I
understand the contents thereof.
* *
------------------------------ -----------------------------------
▇▇▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, III
SPOUSE'S CONSENT
I acknowledge that I have read the
foregoing Agreement and that I
understand the contents thereof.
* *
------------------------------ -----------------------------------
▇▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
SPOUSE'S CONSENT
I acknowledge that I have read the
foregoing Agreement and that I
understand the contents thereof.
* *
------------------------------ -----------------------------------
▇▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Address for each of the three immediately
preceding TA Investors is as follows:
c/o Wellington Associates, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
- 26 -
30
SPOUSE'S CONSENT
I acknowledge that I have read the
foregoing Agreement and that I
understand the contents thereof.
* *
------------------------------ -----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
*
-----------------------------------
H. ▇▇▇▇▇ ▇▇▇▇▇▇
SPOUSE'S CONSENT
I acknowledge that I have read the
foregoing Agreement and that I
understand the contents thereof.
* *
------------------------------ -----------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
SPOUSE'S CONSENT
I acknowledge that I have read the
foregoing Agreement and that I
understand the contents thereof.
* *
------------------------------ -----------------------------------
------------------------ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Address for each of the four immediately
preceding TA Investors is as follows:
c/o Goodwin, Procter & ▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
- 27 -
31
SPOUSE'S CONSENT
I acknowledge that I have read the
foregoing Agreement and that I
understand the contents thereof.
* *
------------------------------ -----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
* /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
*By ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
I, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, represent and warrant to the parties to this
Agreement that I am duly authorized to execute this Agreement on behalf of all
of the TA Investors and their spouses as set forth above.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
- 28 -
32
MacGREGOR INVESTORS:
SHEARS VANGUARD, LTD.
ATTEST By: SHEARS VANGUARD
GENERAL, INC.,
its general partner
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------- ---------------------------------
Secretary Title: President
[Corporate Seal] ------------------------------
SPOUSE'S CONSENT
I acknowledge that I have read the
foregoing Agreement and that I
understand the contents thereof.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------ -----------------------------------
▇▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address for each of the MacGregor
Investors is as follows:
▇▇▇▇ ▇▇ ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------
- 29 -
33
SPOUSE'S CONSENT MONARCH INVESTORS:
I acknowledge that I have read
the foregoing Agreement and that I
understand the contents thereof.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
------------------------------ -----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
SPOUSE'S CONSENT
I acknowledge that I have read
the foregoing Agreement and that I
understand the contents thereof.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇ ▇. ▇▇▇▇▇, III D.D.S.
------------------------------ -----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇, III D.D.S.
SPOUSE'S CONSENT ▇▇▇▇▇ INVESTORS:
I acknowledge that I have read
the foregoing Agreement and that I
understand the contents thereof.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, D.D.S.
------------------------------ -----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇, D.D.S.
Address for each of the ▇▇▇▇▇ Investors
is as follows:
------------------------
------------------------
- 30 -
34
Schedule 1.2(a)
Amended and
Restated Certificate
of Incorporation
- 31 -
35
EXHIBIT A
ADDENDUM AGREEMENT
Addendum Agreement made this _____ day of __________, _____, by and
between ____________________ (the "New Stockholder") and MONARCH DENTAL
CORPORATION, a Delaware corporation (the "Company"), who is a party to that
certain Amended and Restated Stockholders' Agreement dated August 29, 1996 (the
"Agreement"), among the Company and the stockholders of the Company.
W I T N E S S E T H:
WHEREAS, the Company and stockholders of the Company entered into the
Agreement to impose certain restrictions and obligations upon the stockholders
and the shares of common stock, par value $.01 per share (the "Common Stock"),
and other equity securities of the Company owned by such stockholders;
WHEREAS, the New Stockholder is desirous of becoming a stockholder of
the Company as a Permitted Transferee (as defined in the Agreement) of a
__________ Investor (as defined in the Agreement); and
WHEREAS, the Company and the stockholders of the Company have provided
in the Agreement that all Permitted Transferees shall be made a party to the
Agreement, binding the New Stockholder to the Agreement to the same extent as
if it were an original party thereto, so as to promote the mutual interests of
the Company, the stockholders of the Company and the New Stockholder by
imposing the same restrictions and obligations on the New Stockholder and the
shares of Common Stock to be acquired by the New Stockholder as were imposed
upon the stockholders of the Company under the Agreement.
NOW, THEREFORE, in consideration of the mutual promises of the
parties, and as a condition of the transfer of the shares of Common Stock, the
New Stockholder acknowledges that the New Stockholder has read the Agreement.
The New Stockholder agrees for the benefit of the Company and each of the other
parties to the Agreement that such New Stockholder shall be bound by, and shall
have the benefit of, all the terms and conditions set out in the Agreement as a
"__________ Investor" as defined in the Agreement. This Addendum Agreement
shall be attached to and become a part of the Agreement.
* * * * *
- 32 -
36
NEW STOCKHOLDER:
-----------------------------------------
-------------------
Address for notices under Section 6.7
of the Agreement:
-----------------------------------------
-----------------------------------------
Consented and agreed to by the Company pursuant to Section 2.1 of the
Agreement.
COMPANY:
MONARCH DENTAL CORPORATION
a Delaware corporation
By:
-------------------------------------
---------------------------
- 33 -
