EXHIBIT 7(C)
▇▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS, L.P.
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February 26, 1997
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
c/▇ ▇▇▇▇▇▇▇ Park Associates
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Stockholders Agreement and Subscription Agreement
Dear ▇▇▇▇▇ and ▇▇▇▇:
The purpose of this letter is to evidence the agreement between us to
the following effect:
1. Each of you agrees, and the undersigned agrees on behalf of GEI (as defined
in the below-defined Agreement) to enter into an agreement in substantially
the form of the attached draft dated February 26, 1997 of a Stockholders
Agreement and Subscription Agreement (the "Agreement") contingent upon the
Closing of the Merger Transaction contemplated by the Agreement and Plan of
Merger by and among Leslie's Poolmart, LPM Holdings, Inc. and Poolmart USA,
Inc. of even date herewith (the "Merger Agreement").
2. Each of you agrees that your obligations in this letter agreement extend to
those shares and shareholders over which you exercise control who are
included in the definition of the HPA Group in the Agreement.
Very truly yours,
▇▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS, L.P.
By: LGP Management, Inc. its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ACCEPTED AND AGREED:
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Attorney-in-Fact
TABLE OF CONTENTS
Page
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1. REPRESENTATIONS AND WARRANTIES................................................ 1
(a) Company Representations................................................... 1
(b) Stockholder Representations and Warranties................................ 2
2. SUBSCRIPTION FOR COMMON STOCK; CALL OPTION.................................... 3
(a) Common Stock Subscription................................................. 3
(b) Call Option............................................................... 3
3. COMPLIANCE WITH SECURITIES LAW................................................ 4
4. TRANSFERS OF SECURITIES....................................................... 4
(a) Prohibition on Transfers.................................................. 4
(b) Transfer Procedure; Right of First Refusal................................ 4
(c) Transfers to Related Transferees.......................................... 5
(d) Legend on Certificates.................................................... 6
(e) Transfers in Violation of this Agreement.................................. 6
5. COMPANY CALL OPTION........................................................... 6
(a) Call Purchase Event and Purchase Price.................................... 6
(b) Exercise of Call Option................................................... 7
6. REGISTRATION RIGHTS........................................................... 8
(a) Demand Registration Rights................................................ 8
(b) Piggyback Registration Rights; Cutbacks................................... 9
(c) Expenses of Registration.................................................. 10
(d) Registration Procedures................................................... 11
(e) Indemnification........................................................... 14
(f) Holdback Amount........................................................... 16
(g) Assignment and Assumption................................................. 16
(h) Stock Option Plans........................................................ 17
7. DRAG-ALONG SALES AND TAG-ALONG SALES.......................................... 17
(a) Drag-Along Sales.......................................................... 17
(b) Optional Participation in Sales of Common Stock (Tag-Along Sales)......... 18
(c) Obligations of Drag-Along Sellers......................................... 19
8. TERMINATION AND LAPSE OF RIGHTS AND RESTRICTIONS; APPLICATIONS TO OTHER
STOCK AND ADJUSTMENTS........................................................ 19
9. ELECTION OF DIRECTORS......................................................... 19
10. CERTAIN ADDITIONAL AGREEMENTS................................................ 20
(a) Right to Participate in Equity Issuances.................................. 20
(b) Right to Participate in Equity Repurchases................................ 20
(c) Affiliate Transactions.................................................... 20
(d) Change of Control Transactions............................................ 21
(e) Information............................................................... 21
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Page
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11. NOTICES...................................................................... 21
12. GENERAL...................................................................... 21
13. ADDITIONAL CLASS II STOCKHOLDERS............................................. 24
14. ARBITRATION.................................................................. 24
(a) General................................................................... 24
(b) Scope..................................................................... 24
(c) Deposition................................................................ 24
(d) JAMS...................................................................... 25
(e) Selection of Arbitrators.................................................. 25
(f) Governing Law............................................................. 25
(g) Procedures................................................................ 26
(h) Award..................................................................... 26
15. DEFINITIONS.................................................................. 26
ANNEX A CAPITAL STRUCTURE........................................................ 1
ANNEX B TERMS OF INCENTIVE STOCK OPTION PLAN..................................... 1
ANNEX C TERMS OF NQ OPTIONS...................................................... 1
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STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "AGREEMENT") is entered into as of
__________, 1997, by and among (i) Leslie's Poolmart, Inc., a Delaware
corporation (the "COMPANY"), (ii) Green Equity Investors II, L.P., a Delaware
limited partnership ("GEI"), (iii) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, T.R.U.A. DTD 3/15/90
The ▇▇▇▇▇▇▇▇▇ Family Trust (collectively referred to as the "HPA GROUP") and
(iv) Occidental Petroleum Corporation, a Delaware corporation ("OCCIDENTAL," and
together with GEI and the HPA Group, the "CLASS I STOCKHOLDERS") and the
individual stockholders named on the signature pages hereto (the "CLASS II
STOCKHOLDERS").
WHEREAS, on the date hereof the Company has consummated a merger (the
"MERGER") with Poolmart USA Inc., a Delaware corporation ("POOLMART"), pursuant
to which certain of the outstanding shares of common stock of the Company, $.001
par value per share (which authorized class of stock is hereinafter called
"COMMON STOCK"), remained outstanding and the shares of capital stock of
Poolmart were converted into capital stock of the Company; and
WHEREAS, concurrently with the Merger, GEI acquired ______ shares of Common
Stock, the HPA Group collectively retained _________ shares of Common Stock,
Occidental acquired ______ shares of preferred stock of the Company (the
"PREFERRED STOCK") and warrants (the "WARRANTS") to purchase ________ shares of
Common Stock, subject to adjustment (the "WARRANT SHARES") certain of the Class
II Stockholders are subscribing for Common Stock and certain of the Class II
Stockholders will acquire certain nonqualified options and incentive stock
options, as described on Annex B and Annex C, respectively (collectively, the
"OPTIONS" and the Common Stock issuable upon exercise thereof, the "OPTION
SHARES"); and
WHEREAS, the Company and the Class I and Class II Stockholders
(collectively, the "STOCKHOLDERS") desire to enter into certain agreements
concerning their holdings of Common Stock, Warrants, Warrant Shares, Options
and Option Shares (collectively, the "SECURITIES");
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Representations and Warranties.
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(a) Company Representations. The Company hereby represents and
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warrants to the Class I and Class II Stockholders as follows:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has
full corporate power and authority to carry on its business as and where it
is now being conducted. The Company has full corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by
all necessary corporate action on the part of the Company. This Agreement
has been duly executed and delivered by the Company. This Agreement
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in
equity).
(ii) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will violate or
conflict with (A) any provision of the Certificate of Incorporation or
Bylaws of the Company, or (B) any agreement, indenture, undertaking,
permit, license or other instrument to which the Company is a party or by
which it or any of its properties may be bound or affected, other than such
violations and conflicts which are not reasonably likely to (1) prevent or
materially delay consummation of the transactions contemplated by this
Agreement or (2) prevent the Company from performing its obligations under
this Agreement.
(iii) The Company has no outstanding capital stock or securities
convertible into or exchangeable or exercisable for any shares of its
capital stock, nor any outstanding rights to subscribe for or to purchase,
or any options for the purchase of, or any agreement providing for the
issuance (contingent or otherwise) of any shares of its capital stock or
any securities convertible into or exchangeable or exercisable for any
shares of its capital stock, other than the Preferred Stock and the
Securities.
(b) Stockholder Representations and Warranties. Each Stockholder
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hereby severally represents and warrants as follows:
(i) If it is an entity, it is a corporation, limited
partnership, trust or other entity duly organized and validly existing
under the laws of its state of organization.
(ii) It has full power and authority and, in the case of an
individual, legal and fiduciary capacity to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby. This
Agreement constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its
terms, except as the enforceability hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity
(regardless of whether enforceability is considered in a proceeding at law
or in equity).
(iii) Each of the Class II Stockholders (A) as a result of his
relationship with the Company and experience in financial matters, is able
to evaluate the acquisition of Common Stock and Options, the business and
proposed capital structure of the Company and the risks inherent therein;
(B) has been given the opportunity to obtain any additional information or
documents, and to ask questions and receive answers, from the officers and
representatives of the Company to the extent necessary to evaluate the
risks and merits of an investment in the Company; (C) has determined that
the acquisition of Common Stock
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and Options is consistent both in nature and amount, with his overall
investment program and financial condition, and that his financial
condition is such that he can afford to bear the economic risk of holding
unregistered Securities for which there is no market and acknowledges that
he may suffer a complete loss of such investment.
(iv) (A) the Securities acquired by him are being acquired for
his own account for investment, without any present intention of selling or
further distributing the same, (B) acknowledges that no liquid trading
market currently exists or is expected to exist in the foreseeable future
and as a result, such Stockholder may be unable to sell any of the
Securities for an indefinite period of time and (C) acknowledges that the
Company has no obligation, except as set forth in Section 6 hereof, to
register any of the Securities.
(v) Each member of the HPA Group represents and warrants that
he or it is an accredited investor within the meaning of Regulation D under
the Act.
Each Stockholder acknowledges that the Company is relying upon the truth and
accuracy of the above representations to a material degree in effectuating the
transactions contemplated hereby.
2. Subscription for Common Stock; Call Option.
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(a) Common Stock Subscription. Each Class II Stockholder reflected
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as a purchaser of Common Stock on Annex A hereto (a "PURCHASER") severally
agrees to purchase, and the Company agrees to sell to such Purchaser, the number
of shares of Common Stock set forth opposite his name on Annex A hereto, at the
purchase price shown thereon. Each Purchaser severally agrees to make payment
for the Subscription Shares by delivery to the Company of a certified check or
wire transfer in the amount of the purchase price therefore.
(b) Call Option. Each Class II Stockholder agrees that the Company
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and certain other Stockholders shall have a call ("Call Option") in respect of
certain shares of Common Stock acquired pursuant to Section 2(a) above
("SUBSCRIPTION STOCK"), as well as in respect of the Non-Qualified Options
described on Annex B hereto (the "NQ OPTIONS") and shares issued upon the
exercise thereof. As to each holder of Subscription Stock, of an NQ Option or of
shares issued upon the exercise thereof, the Call Option shall apply only to (i)
two-thirds of all of such holder's shares of Subscription Stock, NQ Options and
shares issued upon exercise of such NQ Options (collectively, "Callable
Securities") if the Call Option is exercised on or before the first anniversary
of the date hereof, and (ii) one-third of the holder's Callable Securities of
each category if the Call Option is exercised on or after the first anniversary
of the date hereof but before the second anniversary of the date hereof. Except
as expressly provided in this Section 2(b), the Call Option shall not otherwise
apply to Subscription Stock, NQ Options or shares issued upon the exercise
thereof. Subscription Stock NQ Options and shares issuable upon the exercise
thereof that are Callable Securities are respectively hereinafter referred to as
"Call Option Stock," "Call NQ Options" and "Call Option Shares."
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3. Notice of Transfer; Compliance with Securities Law. In addition to the
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other applicable restrictions provided in this Agreement, each Stockholder
agrees that prior to effecting any Transfer of any Securities (other than a
Transfer to the Company) such Stockholder will give not less than 15 days'
advance written notice to the Company describing the manner of such proposed
Transfer. Each Stockholder further agrees that he or it will not effect such
proposed Transfer until either (A) such Stockholder has provided to the Company,
if so requested by the Company, an opinion of counsel reasonably satisfactory in
form and substance to the Company that such proposed Transfer is exempt from
registration under the Act and any applicable state securities laws, or (B) a
registration statement under the Act covering such proposed Transfer has been
filed by the Company and become effective under the Act and compliance with
applicable state securities laws has been effected and in each case, the
Company's independent public accountants have advised the Company that it is not
reasonably likely that such Transfer will necessitate a new basis for accounting
for the Company. Each Stockholder also agrees that he or it will not Transfer
any Securities except in compliance with the registration requirements of the
Act, the rules and regulations of the SEC thereunder, the relevant state
securities laws applicable to the Stockholder's actions, and the applicable
terms of this Agreement. The restrictions in this Section 3 shall remain in
effect until, the opinion of counsel for the Company, Securities held by the
Stockholder are no longer subject to restrictions pursuant to the Act or
applicable state securities law.
4. Transfers of Securities.
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(a) Prohibition on Transfers. Each of the members of the HPA Group,
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Occidental and each of the Class II Stockholders hereby agrees that such
Stockholder will not Transfer any Securities (or any interest therein) now or
hereafter at any time owned by such Stockholder, except for Transfers permitted
pursuant to this Section 4, Section 5 or Section 7 of this Agreement (each such
Transfer being a "PERMITTED TRANSFER").
(b) Transfer Procedure; Right of First Refusal. If any member of the
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HPA Group, Occidental or any of the Class II Stockholders hereby shall have
received a bona fide arm's-length written offer (a "BONA FIDE OFFER") which such
Stockholder desires to accept from an independent party unrelated to such
Stockholder (the "OUTSIDE PARTY") for the purchase of Securities for
consideration consisting entirely of cash (it being understood that no sale for
any other consideration would be a Permitted Transfer), then such Stockholder
shall give a notice in writing (the "OPTION NOTICE") to each Class I Stockholder
and the Company setting forth such desire, which notice shall set forth at least
the name and address of the Outside Party and the price and terms of the Bona
Fide Offer and be accompanied by a copy of the Bona Fide Offer. Upon the giving
of such Option Notice, the Company, and to the extent the Company elects not to
do so, the respective Stockholders set forth in the following sentence (each an
"ELECTING STOCKHOLDER") shall have an option to purchase all, but no less than
all, of the Securities specified in the Option Notice, such option to be
exercised within 30 days after the giving of such Option Notice by giving a
counter-notice (the "ELECTION NOTICE") to the Stockholder. If the Stockholder
sending an Option Notice is (i) Occidental or a Class II Stockholder, then GEI
and the HPA Group shall be entitled to be Electing Stockholders; or (ii) a
member of the HPA Group, then GEI and the other members of the HPA Group shall
be entitled to be Electing Stockholders. Where more than one Electing
Stockholder desires to participate in a purchase pursuant to an
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Option Notice, such Stockholders shall participate, pro rata based upon their
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respective Equity Ownership in the Company, with the portion attributable to
Stockholders declining to be Electing Stockholders being redistributed to the
remaining Stockholders pro rata based upon their respective Equity Ownership in
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the Company, it being understood that the Company may elect to purchase up to
all of the Securities and any remainder shall be prorated as aforesaid. The
Company and, if applicable, the Electing Stockholders shall be severally
obligated to purchase, and the Stockholder shall be obligated to sell, the
Securities covered by such Election Notice at the cash price and terms indicated
in the Bona Fide Offer, provided that the closing of the purchase by the
Electing Stockholder shall be held on a business day within 30 days after the
giving of the Election Notice at 10:30 a.m., California time, at the principal
executive office of the Company, or at such other time and place as may be
mutually agreed to by the Stockholder, the Company and, if applicable, the
Electing Stockholders. If an Election Notice is not timely given by the Company
and/or one or more Electing Stockholders within the period specified above after
an Option Notice has been given, the Stockholder thereafter, at any time within
a period of four months from the giving of such Option Notice, may Transfer all
(but not less than all) of the Securities covered by such Option Notice to the
Outside Party at the cash price and terms contained in the Bona Fide Offer;
provided, however, that such Outside Party and such Securities shall thereafter
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be subject to and bound by all of the provisions of this Agreement as if such
party were a Class II Stockholder except as otherwise provided in Section 6(g)
and, as a condition precedent to the completion of such Transfer of Securities
to such Outside Party, shall execute and deliver to the Company a written
consent to such effect in form and substance satisfactory to the Company; and
provided, further, however, that to the extent that the Stockholder has not so
Transferred such Securities to the Outside Party within such four-month period,
then such Securities thereafter shall continue to be subject to all of the
restrictions contained in this Agreement. Any election in any instance by the
Company or any Stockholder entitled to be Electing Stockholders not to exercise
its rights under this clause (b) shall not constitute a waiver of such rights
with respect to any other actual or proposed Transfer of Securities.
(c) Transfers to Related Transferees. Notwithstanding anything to
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the contrary contained in clauses (a) and (b) of this Section 4, any Stockholder
may Transfer Securities to a Related Transferee provided that such Related
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Transferee shall first (i) execute a written consent in form and substance
satisfactory to the Company to be bound by all of the provisions of this
Agreement and (ii) give a duplicate original of such consent to the Company. In
the event of any Transfer by a Stockholder to a Related Transferee of all or any
part of his or its Securities (or in the event of any subsequent Transfer by any
such Related Transferee to another Related Transferee of the Stockholder), such
Related Transferee shall receive and hold such Securities subject to the terms
of this Agreement and the rights and obligations hereunder of a Stockholder as
though such Securities were still owned by the Stockholder, and such Related
Transferee shall be deemed the Stockholder for the purposes of this Agreement.
If the Related Transferee acquired Securities from a Stockholder, such Related
Transferee shall be entitled to participate, collectively with the Stockholders
of the same group, in the registration rights provided for in Section 6 hereof.
There shall be no further Transfer of such Securities by a Related Transferee
except between and among such Related Transferee, the original Stockholder and
other Related Transferees, or except as otherwise permitted by this Agreement.
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(d) Legend on Certificates. Each certificate of the Company issued to
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represent any of the Securities shall bear the following (or substantially
equivalent) legends on the face or reverse side thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (I) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER
SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY
EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE
SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES,
INCLUDING RULE 144, PROVIDED AN OPINION OF COUNSEL IS FURNISHED
TO THE COMPANY, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
THE COMPANY, TO THE EFFECT THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE
SECURITIES LAW IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER COMPLIES WITH THE PROVISIONS OF
THE STOCKHOLDERS AGREEMENT DATED AS OF _____________, 1997, A
COPY OF WHICH IS ON FILE AT THE OFFICES OF THE COMPANY.
Any stock certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon the
completion of a public offering) shall also bear such (or substantially
equivalent) legends, unless the Security represented by such certificate is no
longer subject to the provisions of this Agreement and, in the opinion of
counsel for the Company, the Security represented thereby need no longer be
subject to restrictions pursuant to the Act or applicable state securities law.
(e) Transfers in Violation of this Agreement. The Company shall not
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be required to record on its books and records, or otherwise to recognize or
facilitate, any Transfer of Securities in violation of this Agreement, nor shall
the Company be required to issue any certificate for Securities Transferred in
violation of this Agreement.
5. Company "Call" Option.
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(a) Call Purchase Event and Purchase Price. Upon the termination of a
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Class II Stockholder's employment with the Company or its subsidiaries for any
reason (including, without limitation, the voluntary termination, dismissal,
involuntary termination, Retirement, death or Permanent Disability of the
Stockholder) (a "CALL PURCHASE EVENT"), the Company, and
6
to the extent the Company elects not to do so and, in the case of the NQ
Options, such purchase may otherwise be made pursuant to the NQ Option Plan,
GEI, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (or any Related Transferee of
the latter) (collectively the "PURCHASING GROUP") may, collectively and pro
---
rata based upon their respective Equity Ownership in the Company, exercise the
----
Call Option by written notice (a "PURCHASE NOTICE") delivered to the Class II
Stockholder within 90 days after such Call Purchase Event, elect to purchase,
and, upon the giving of such notice, the Company, and if applicable, the
Purchasing Group shall be severally obligated to purchase and the Class II
Stockholder (and the Related Transferees, if any, of the Class II Stockholder)
(in each case, the "SELLER") shall be obligated to sell all, or any lesser
portion indicated in the Purchase Notice, of the Callable Securities owned at
the time of the Call Purchase Event by the Seller; for consideration calculated
as to each share of Call Option Stock and each Call Option Share or Call NQ
Option, as the case may be, as follows:
(i) in the case of voluntary termination by a Class II
Stockholder holding Call NQ Options, an amount equal to the difference
between the cash consideration per share paid in the Merger and the
exercise price of the Call NQ Option; or
(ii) in the case of any other termination (including without
limitation dismissal, involuntary termination, death, Retirement or
Permanent Disability of a Class II Stockholder holding Option Shares)
("OTHER TERMINATION"), of a Class II Stockholder holding Call NQ Options,
the difference between the higher of (A) the cash consideration per share
paid in the Merger and (B) the Fair Market Value of the underlying shares
on the date of the Call Purchase Event, and the exercise price of the Call
NQ Option; or
(iii) in the case of voluntary termination by a Class II
Stockholder holding Call Option Stock, the purchase price therefor; or
(iv) in the case of Other Termination of a Class II Stockholder
holding Call Option Stock, the higher of the Fair Market Value thereof on
the date of the Call Purchase Event and the purchase price paid by the
holder therefor; or
(v) in the case of voluntary termination by a Class II
Stockholder holding Call Option Shares, an amount equal to the cash
consideration per share paid in the Merger; or
(vi) in the case of Other Termination of a Class II Stockholder
holding Call Option shares, the higher of the Fair Market Value of such
shares on the date of the Call Purchase Event and the amount payable
pursuant to clause (v) above.
(b) Exercise of Call Option. In the event the Company and/or any
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Class I Stockholder elects not to participate in the purchase of Callable
Securities pursuant to the Call Option, all remaining Purchasing Group
Stockholders desiring so to participate may do so, pro rata amongst such
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remaining Purchasing Group Stockholders based upon their respective Equity
Ownership in the Company, or in any other proportion as they may agree. The
closing for all purchases and sales of Callable Securities pursuant to this
Section 5 shall be at the principal executive offices of the Company at 10:30
a.m., California time, on the 60th day after the giving
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of the applicable Purchase Notice. The purchase price for the purchase and sale
of Callable Securities shall be paid in cash, by certified or official bank
check. The Seller(s) of Callable Securities sold pursuant to this Section 5
shall cause such Securities to be delivered to the Purchasing Group or the
Company at the relevant closing free and clear of all liens, charges or
encumbrances of any kind. Such Seller(s) shall take all actions as the
Purchasing Group or the Company shall request as necessary to vest in the
members of the Purchasing Group and/or the Company at such closing such Callable
Securities, free and clear of all liens, charges and encumbrances incurred,
voluntarily or involuntarily, by or through Seller(s).
6. Registration Rights.
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(a) Demand Registration Rights. At any time on or after January ▇▇,
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▇▇▇▇, ▇▇▇▇ ▇▇ (▇) ▇▇▇, (▇▇) the HPA Group collectively, and (iii) Occidental
shall be entitled, respectively, to request a registration (a "DEMAND
REGISTRATION") of no less than 50% of its Registrable Securities held by such
Class I Stockholder, and at such time as the Company qualifies for registration
of securities on Form S-3 or any successor short-form, one additional
registration for a period not to exceed 180 days on such form. In such event,
the Company shall:
(i) as soon as reasonably practicable, and at its expense as
set forth in Section 6 hereof, effect such registration and all such
qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of the Class
I Stockholder's Registrable Securities as are specified in such request on
the form specified in such request covering the Registrable Securities;
(ii) use its best efforts to cause such registration to become
and remain effective, as soon as practicable after receipt of the request
of the Class I Stockholder, for the period necessary to effectuate the
distribution contemplated by the Class I Stockholder; and
(iii) at the request of the Class I Stockholder or the Manager,
enter into and perform its obligations under an underwriting or purchase
agreement (the "UNDERWRITING AGREEMENT") in customary form for secondary
offerings of common stock, and otherwise reasonably acceptable to the
parties, with the Manager (acting for itself and/or a group of syndicate of
underwriters) and the Class I Stockholder.
Notwithstanding the foregoing, the Company shall be entitled to delay any such
Demand Registration if (i) the Company has determined in good faith that in view
of pending negotiations or other material developments regarding the Company not
otherwise required to be made public, disclosure of such information is not in
the best interest of the Company (in which case the delay in filing a Demand
Registration may not exceed 90 days); (ii) the Company has initiated discussions
with an underwriter regarding the sale of securities of the same class or
convertible into the same class as the Registrable Securities in a registered
primary public offering, in which case the Demand Registration may be delayed
for up to 180 days from the effectiveness of such primary public offering,
provided that the Company may not invoke the provision of clause (i) for more
than an aggregate of 120 days in any twelve-month period, and may not invoke the
delay in clause (ii) more than once in any such period. In addition, to the
extent a Demand Registration is
8
a "shelf" registration, the Company may interrupt such registration for the
reasons set forth above, provided that sales under such shelf registration shall
in all events be permitted for an aggregate of 180 days if requested.
(b) Piggyback Registration Rights; Cutbacks. Each time the Company
---------------------------------------
proposes to register under the Act (other than registration (A) on Forms S-4 or
S-8 or any successor forms thereto, or (E) filed in connection with an exchange
offer) securities of the same class as any of the Registrable Securities, the
Company shall give written notice of such proposed registration (a "REGISTRATION
NOTICE") to each Class I Stockholder and Class II Stockholder at least 20 days
prior to the filing thereof. Each Registration Notice shall indicate that the
recipient has the right (subject to the provisions of this Section 6) to propose
that its Registrable Securities be included in such registration. Each Class I
Stockholder and Class II Stockholder shall have the right to propose that a
number of its Registrable Securities be included in such registration by written
notice given to the Company within fifteen (15) days after the giving of such
Registration Notice. Subject to the provisions of this Section 6, the Company
shall include all such Registrable Securities in such registration provided,
--------
however, that:
-------
(i) if the registration is in whole or part an underwritten
primary registration on behalf of the Company (whether or not it is also in
part a Demand Registration or other secondary registration on behalf of any
Company securityholders) and the managing underwriters of such offering
determine that the aggregate amount of securities of the Company which all
Stockholders and all other Company securityholders pursuant to future
contractual rights to participate in such registration (such other Company
securityholders, "FUTURE PARTICIPANTS") propose to include in such
registration exceeds the maximum amount of securities that should be
included therein, the Company will include in such registration, first,
-----
the shares which the Company proposes to sell and second, securities to be
------
sold for the account of any Class I Stockholder pro rata among the Class I
--- ----
Stockholders, and third, securities to be sold for the account of the Class
-----
II Stockholders, pro rata among the Class II Stockholders and fourth, the
--- ---- ------
other securities to be sold for the account of Future Participants, pro
---
rata among such Future Participants, in each case on the basis of the
----
relative Equity Ownership of the parties who have requested that securities
owned by them be so included (it being agreed and understood, however, that
such underwriters shall have the right to eliminate entirely the
participation in such registration of all Stockholders and Future
Participants);
(ii) if the registration is pursuant to an underwritten Demand
Registration and the managing underwriters determine that the aggregate
amount of securities which all Stockholders and all Future Participants
propose to include in such registration exceeds the maximum amount of
securities that should be included therein, the Company will include in
such registration, first, the securities to be sold for the account of the
-----
Class I Stockholders, pro rata among the Class I Stockholders, second,
--- ---- ------
securities to be sold for the account of the Company, if any, third,
-----
securities to be sold for the account of the Class II Stockholders, pro
---
rata among the Class II Stockholders and fourth, securities to be sold for
---- ------
the account of the Future Participants electing to include securities in
such registration, pro rata among such Future Participants, in each case,
--- ----
on the basis of their relative Equity Ownership (it being agreed and
understood, however, that such
9
underwriters shall have the right to eliminate entirely the participation
therein of the Company and all such Future Participants not entitled to
demand inclusion of securities in such registration);
(iii) if the registration is pursuant to an underwritten
secondary registration other than as described in clause (ii) above on
behalf of Future Participants and the managing underwriters determine that
the aggregate amount of securities which all Future Participants and
Stockholders propose to include in such registration exceeds the maximum
number of securities that should be included therein, the Company will
include in such registration first, the securities to be sold for the
-----
account of the Future Participants, pro rata among the Future Participants,
--- ----
second, securities to be sold for the account of the Company, if any,
------
third, securities to be sold for the account of the Class I Stockholders,
-----
pro rata among such Stockholders and fourth, securities to be sold for the
--- ---- ------
account of the Class II Stockholders, in each case, on the basis of their
relative Equity Ownership (it being agreed and understood, however, that
such underwriters shall have the right to eliminate the participation
therein of the Company and the Stockholders entirely unless, on the date of
such secondary registration, any Class I Stockholder electing to
participate in such registration shall not theretofore have completed one
Demand Registration in which all of the Registrable Securities it sought to
include were sold, in which case any such Class I Stockholder may convert
such registration into one governed by clause (ii) above);
(iv) in the event that, as a result of the provisions of
Section 6(b)(i) or (ii), a group of Stockholders which has exercised its
rights to request a Demand Registration is unable to register all of the
Registrable Securities as to which the request was made, such Stockholder
shall not be considered to have utilized a Demand Registration under
Section 6(a); and
(v) in exercising the rights of Stockholders in respect of
Registrable Securities in this Section 6, Stockholders comprising the
holders of the Demand Registrations enumerated in clauses (i) through (iii)
of Section 6(a) shall, if more than one Stockholder has or succeeds to such
rights, exercise such rights and make all determinations hereunder acting
by majority-in-interests based upon their respective ownership of
Registrable Securities.
(c) Expenses of Registration. Whether or not any registration
------------------------
statement prepared and filed pursuant to Section 6(a) or (b) hereof is declared
effective by the SEC (except where a Demand Registration is terminated,
withdrawn or abandoned at the written request of a Class I Stockholder solely
due to market conditions), the Company shall pay all expenses incident to
Company's performance of or compliance with the registration requirements of
this Agreement, including, without limitation, the following: (A) all SEC
registration and filing fees and expenses; (B) the filing fees incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of Registrable Securities; (C) any and all
expenses incident to its performance of, or compliance with, this Agreement,
including, without limitation, any allocation of salaries and expenses of
Company personnel or other general overhead expenses of Company, or other
expenses for the preparation of historical and pro forma financial
10
statements; (D) fees and expenses incurred in connection with the listing of
Registrable Securities on each securities exchange or the NASDAQ Stock Market,
as applicable, on which securities of the same class are then listed; (E) all
transfer and/or exchange agent and registrar fees; (F) fees and expenses in
connection with the qualification of the Registrable Securities under securities
or "blue sky" laws including reasonable fees and disbursements of counsel for
the underwriters in connection therewith; (G) mailing and printing expenses
relating to the registration and distribution of Registrable Securities; (H)
messenger and delivery expenses relating to the registration and distribution of
Registrable Securities; (I) fees and out-of-pocket expenses of a single counsel
for the selling Stockholders and (J) fees and out-of-pocket expenses of counsel
for Company and its independent certified public accountants (including the
expenses of any audit, review and/or "cold comfort" letters) and other persons,
including special experts, retained by Company (collectively, clauses (A)
through (J), "REGISTRATION EXPENSES"); provided, however, that Company shall not
-------- -------
be required to pay, and the Stockholder shall pay, any discounts, commissions or
fees of underwriters, selling brokers and dealers relating to the distribution
of the Registrable Securities.
(d) Registration Procedures. In the case of each registration
-----------------------
effected by Company pursuant to this Agreement, Company shall keep the
participating Stockholders advised in writing as to the initiation of each
registration and as to the completion thereof. The Company shall (i) permit the
Stockholder, the Manager, if any, and their respective counsel to make such
investigation of Company as they may reasonably request, (ii) furnish to the
participating Stockholders, the Manager and their respective counsel drafts of
the registration statement and all amendments thereto, all prospectuses and
supplements thereof prior to filing with the SEC and consider their comments and
suggestions with respect to such documents, and (iii) not file any such
registration statement, amendment, prospectus or supplement to which the
participating Stockholders or the Manager shall reasonably object. At its
expenses, Company shall:
(i) keep such registration effective and current as required
by law for such period necessary to permit the Stockholder to complete the
distribution described in the registration statement relating thereto, or
for such period as may be agreed to in the Underwriting Agreement;
(ii) prepare and file with the SEC such amendments, post-
effective amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to comply with
the provisions of the Securities Act and the Underwriting Agreement and to
keep such registration statement effective and current as required by law
for that period of time specified above, in each case exclusive of any
period during which the prospectus used in connection with such
registration shall not comply with the requirements of Section 10 of the
Securities Act, and respond as promptly as practicable to any comments
received from the SEC with respect to such registration statement or any
amendment thereto;
(iii) furnish such number of copies of the registration
statement, each amendment thereto, each preliminary prospectus,
prospectuses, supplements and incorporated documents and other documents
incident thereto as the Stockholder or the Manager from time to time may
reasonably request;
11
(iv) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Stockholder and the
Manager shall reasonably request, and do any and all other acts and things which
may be necessary or desirable to enable the Stockholder and the Manager to
consummate the offering and disposition of Registrable Securities in such
jurisdictions; provided, however, that the Company shall not, by virtue of this
-------- -------
Agreement, be required to qualify generally to do business as a foreign
corporation, subject itself to taxation, or consent to general service of
process, in any jurisdiction wherein it would not, but for the requirements of
this clause (iv), be obligated to be qualified;
(v) notify the Stockholder and the Manager promptly and, if
requested by any such person, confirm such notification in writing, (A) when a
prospectus or any prospectus supplement has been filed with the SEC, and, with
respect to a registration statement or any post-effective amendment thereto,
when the same has been declared effective by the SEC, (B) of any request by the
SEC for amendments or supplements to a registration statement or related
prospectus, or for additional information, (C) of the issuance by the SEC of any
stop order or the initiation of any proceedings for such or a similar purpose
(and the Company shall make every reasonable effort to obtain the withdrawal of
any such order at the earliest practicable time), (D) of the receipt by Company
of any notification with respect to the suspension of the qualification of any
of the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose (and the Company shall make every
reasonable effort to obtain the withdrawal of any such suspension at the
earliest practicable time), (E) of the occurrence of any event with requires the
making of any changes to a registration statement or related prospectus so that
such documents shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading (and the Company shall promptly prepare and furnish to the
Stockholder and the Manager a reasonable number of copies of a supplemented or
amended prospectus such that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not statements therein, in light of the circumstances under
which they are made, not misleading), and (F) of the Company's determination
that the filing of a post-effective amendment to the Registration Statement
shall be necessary or appropriate. Each Stockholder agrees that it shall, as
expeditiously as possible, notify the Company at any time when a prospectus
relating to a registration statement covering such Stockhloder's Registrable
Securities is required to be delivered under the Securities Act, of the
happening of any event of the kind described in this clause (v) as a result of
any information provided by such Stockholder in writing expressly for inclusion
in such prospectus included in such registration statement and at the request of
the Company, promptly prepare and furnish to it such information as may be
necessary so that, after incorporation into a supplement or amendment of such
prospectus as thereafter delivered to the purchasers of such securities, the
information so provided by the Stockholder shall
12
not include an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading. Each Stockholder shall be deemed to have
agreed by acquisition of such Registrable Securities that upon the receipt
of any notice from the Company of the occurrence of any event of the kind
described in clause (E) of this clause (v), such Stockholder shall
forthwith discontinue its offer and disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such Stockholder shall have received copies of a supplemented or
amended prospectus which is no longer defective as contemplated by clause
(E) of this clause (v) and, if so directed by the Company, shall deliver to
the Company, at the Company's expense, all copies (other than permanent
file copies) of the defective prospectus covering such Registrable
Securities which are then in such Stockholder's possession;
(vi) use its best efforts to cause all such Registrable
Securities covered by such registration statement to be listed on each
securities exchange or the Nasdaq Stock Market, as applicable, on which
similar securities issued by the Company are then listed, if the listing of
such Registrable Securities is then permitted under the rules and
regulations of such exchange or the Nasdaq Stock Market, as applicable;
(vii) engage and provide a transfer agent for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(viii) whether or not the Underwriting Agreement is entered into
and whether or not any portion of the offering contemplated by such
registration statement is an underwritten offering or is made through a
placement or sales agent or any other entity, (A) make such representations
and warranties to the underwriters, if any, in form, substance and scope as
are customarily made in connection with an offering of common stock or
other equity securities pursuant to any appropriate agreement and/or to a
registration statement filed on the form applicable to such registration;
(B) obtain an opinion of counsel to the Company in customary form and
covering such matters, of the type customarily covered by such opinions, as
the Manager, if any, and as the Stockholder may reasonable request; (C)
obtain a "cold comfort" letter or letters from the independent certified
public accountants of Company addressed to the underwriters, if any,
thereof, dated (i) the effective date of such registration statement and
(ii) the date of the closing under the underwriting agreement relating
thereto, such letter or letters to be in customary form and covering such
matters of the type customarily covered, from time to time, by letters of
such type and such other financial matters as the Manager, if any, may
reasonably request; (D) deliver such documents and certificates, including
officers' certificates, as may be reasonably requested by the underwriters,
if any, therefor and the Manager, if any, thereof to evidence the accuracy
of the representations and warranties made pursuant to clause (A) above and
the compliance with or satisfaction of any agreements or conditions
contained in the underwriting agreement or other agreement entered into by
Company, and (E) undertake such obligations relating to expense
reimbursement, indemnification and contribution as are provided in this
Agreement;
13
(ix) permit the Stockholder to participate in the preparation
of such registration statement and include therein material acceptable to
the Company and its counsel, furnished to Company in writing which in the
reasonable judgement of the Stockholder and its counsel is required to be
included therein:
(x) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement by the SEC or
any state securities authority as promptly as possible; and
(xi) cooperate with the Stockholder to facilitate the timely
preparation and delivery certificate representing Registrable Securities to
be sold and enable certificates for such Registrable Securities to be
issued for such number of shares of Company Common Stock and registered in
such names as Stockholder may reasonably request.
(e) Indemnification
---------------
(i) The Company shall indemnify and hold harmless each
Stockholder, each of its directors, officers and agents, each underwriter
(as defined in the Securities Act) of such Registrable Securities, if any,
and each person who controls (within the meaning of Section 15 of the
Securities Act) such Stockholder or any underwriter of the Registrable
Securities held by or issuable to such Stockholder, against all claims,
losses, expenses, damages and liabilities, joint or several, including any
of the foregoing incurred in settlement of any proceeding, commenced or
threatened, (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to any
such registration or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of
any rule or regulation promulgated under the Act of any state securities
law applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, and shall
reimburse each Stockholder each of its directors, officers and agents, each
such underwriter and each person who controls such Stockholder or any such
underwriter for any reasonable legal and any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, provided, however, that the Company shall not
-------- -------
be liable in any such case to the extent that any such claim, loss, damage
or liability arises out of or is based on any untrue statement or omission
based upon written information furnished to the Company by such Stockholder
or such underwriter specifically for use therein. The indemnity provided by
this Section (6)(e) shall be in addition to any liability which Company may
otherwise have.
(ii) Each Stockholder shall indemnity and hold harmless
Company, each of its directors and officers, each underwriter, if any, and
each person who controls Company or any of the underwriters within the
meaning of the Act, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereof) arising out of or
14
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse the Company or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information pertaining to such Stockholder, which
is furnished in writing to Company by such Stockholder specifically for use
therein.
(iii) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an Indemnified Party (as
defined below) in respect of any losses, claims, damages or liabilities (or
action in respect thereof) referred to therein, then Company and the
Stockholder shall contribute to the amount paid or payable as a result of
such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of
Company on the one hand and the Stockholder on the other in connection with
the statements or omission which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. Relative fault 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 on the one
hand or the Stockholder on the other and such persons's relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company agrees that it would not be just and
equitable if contribution pursuant to this Section 6(e) were determined pro
---
rata allocation or by any other method of allocation which does not take
----
account of the equitable considerations referred to above in this Section
6(e). The amount paid or payable by a party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this Section 6(e) shall include any legal or other expenses
reasonably incurred by such party in connection with investigating or
defending any such action or claim. No person 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 guilty
of such fraudulent misrepresentation. No person shall be required to
contribute to any settlement effected without its consent, which consent
shall not be unreasonably withheld. If, however, indemnification is
available under this Section 6, the indemnifying parties shall indemnify
each indemnified party to the fullest extent provided here without regard
to the relative fault of such indemnifying party or indemnified party or
any other equitable considerations.
(iv) Each party entitled to indemnification under this Section
6(e) (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided
that
15
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld, and the Indemnified Party may
participate in such defense at such party's expense, unless the Indemnified
Party in its reasonable judgment determines that joint representation by
counsel for the Indemnifying Party would be inappropriate due to actual or
potential differing interests between the Indemnifying Party and the
Indemnified Party in the conduct of the defense of such action, in which
case the Indemnified Party shall be entitled to be represented by separate
counsel selected by it, the reasonable fees and expenses of which shall be
borne by the Indemnifying Party, and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations hereunder, unless such failure
resulted in actual detriment to the Indemnifying Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with
the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation.
(v) Notwithstanding the foregoing, to the extent that the
provisions on indemnification of the underwriters and their controlling
persons contained in the Underwriting Agreement in connection with an
underwritten public offering are in conflict with the foregoing provisions,
the provisions in the Underwriting Agreement shall control as to
indemnification of the underwriters and their controlling persons in the
public offering.
(vi) Notwithstanding the foregoing, in no event shall any
Stockholder be liable under this Section 6(e) for an amount exceeding the
net proceeds received by Stockholder from the sale of its Registrable
Securities pursuant to the registration rights granted to Stockholder
hereunder.
(f) Holdback Amount. Each Stockholder agrees that in the event of an
---------------
underwritten public offering of Registrable Securities for the account of any
Stockholder, such Stockholder and any Related Transferee thereof will not,
without the written consent of the underwriters, offer for public sale (other
than as part of such underwritten public offering) any Securities during the ten
(10) days prior to and such number of days (not to exceed 180 days in the case
of an initial public offering and 90 days in all other cases) after the
effective date of the registration statement in connection with such public
offering as the underwriters may reasonably request in writing.
(g) Assignment and Assumption. For avoidance of doubt, the parties
-------------------------
acknowledge that each Stockholder may assign its rights under this Section 6 as
an incident to any permitted Transfer of Securities held by it to the Transferee
of such Securities, and if the Stockholder retains any Securities, the rights
under this Section 6 shall remain applicable to the retained Securities. If
Securities are acquired from a Class I Stockholder, such Securities shall be
entitled to participate in any Demand Registration as a member of the group
enumerated in clauses (i) through (iii) of Section 6(a), without thereby
increasing the aggregate number of Demand Registrations the Company may be
required to effect. Each Stockholder shall promptly
16
notify the Company in writing of each such assignment of rights, and the
assignee shall execute such documentation as the Company may reasonably request
to evidence its agreement to be bound by this Section 6. Registration rights
shall not be assignable to any purchaser of Securities sold under Rule 144 or in
any public securities sale. If the Company effects a business combination in
which Stockholders receive securities of another issuer and such securities
cannot be resold by the Stockholders without registration under the Securities
Act, as a condition to the consummation of such business combination, the
Company shall cause such issuer to assume the Company's obligations under this
Section 6.
(h) Stock Option Plans. After the IPO, the Company shall use its
------------------
reasonable efforts to register, on Form S-3 or any similar or successor form,
the ISOs and NQ Options so as to permit the non-Affiliate Stockholders to
dispose of Common Stock issuable upon the exercise thereof pursuant to Rule 144.
7. Drag-Along Sales and Tag-Along Sales.
------------------------------------
(a) Drag-Along Sales.
----------------
(i) Notwithstanding any other provision hereof, if GEI agrees to
sell Securities held by it pursuant to a transaction in which more than 75% of
the then-outstanding Common Stock of the Company will be sold to or acquired by
a Third Party (either of such sales, a "DRAG-ALONG SALE"), then upon the demand
of GEI, (i) in the case of Occidental and the Class II Stockholders, made at any
time after the Closing Date and (ii) in the case of the HPA Group, made at any
time after the fourth anniversary of the Closing Date (the HPA Group and the
Class II Stockholders being collectively referred to for this purpose as
"DRAG-ALONG SELLERS"), each Drag-Along Seller hereby agrees to sell to such
Third Party the same percentage of the total number of Securities held by such
Drag-Along Seller on the date of the Drag-Along Notice, as the number of
Securities GEI is selling in the Drag-Along Sale bears to the total number of
shares held by GEI as of the date of the Drag-Along Notice (the "SALE
PERCENTAGE"), at the same price and form of consideration and on the same terms
and conditions as GEI has agreed to with such Third Party. If the Drag-Along
Sale is in the form of a merger transaction, the Drag-Along Seller agrees to
vote his or her Securities in favor of such merger and not to exercise any
rights of appraisal or dissent afforded under applicable law. The provisions of
this Section 7 shall apply regardless of the form of consideration received in
the Drag-Along Sale. For purposes of Drag-Along Sales, the number of shares
owned by each Drag-Along Seller shall include all shares underlying NQ Options,
which NQ Options will be exercised by the Drag-Along Sellers immediately prior
to and contingent upon consummation of the Drag-Along Sale.
(ii) Prior to making any Drag-Along Sale, if GEI elects to
exercise the option described in this Section 7, GEI shall provide the
Drag-Along Seller to whom this Section 7 then applies with written notice (the
"DRAG-ALONG NOTICE") not more than 60 nor less than 15 days prior to the
proposed date of the Drag-Along Sale (the "DRAG-ALONG SALE DATE"). The
Drag-Along Notice shall set forth: (i) a general description of the transaction
and the proposed amount and form of consideration to be
17
paid per share offered by the Third Party; (ii) the aggregate number of
Securities held by GEI as of the date that the Drag-Along Notice is first
given to a Drag-Along Seller; (iii) the Sale Percentage; and (iv) the Drag-
Along Sale Date.
(iii) On the Drag-Along Sale Date, each Drag-Along Seller shall
deliver a certificate or certificates for the Sale Percentage of its
Securities, duly endorsed for transfer with signatures guaranteed, to such
Third Party in the manner and at the address indicated in the Drag-Along
Notice against delivery of the purchase price therefor, provided, however,
-------- -------
that in the eventthe Company has possession of any such certificates
pursuant to this Agreement, upon the written request of the Drag-Along
Seller at least five (5) business days in advance of-the Drag-Along Sale
Date, the Company shall deliver such certificates to the purchaser at the
time and in the manner described above.
(b) Optional Participation in Sales of Common Stock (Tag-Along
----------------------------------------------------------
Sales).
------
(i) If GEI shall at any time desire to Transfer shares of
Common Stock to a third party, other than ratably to its partners, then
each of the HPA Group and the Class II Stockholders and their Related
Transferees (collectively, a "TAG-ALONG SELLER") shall be entitled, to
participate pro rata in such Transfer at the same price and on the same
--- ----
terms and conditions applicable to GEI, based upon their respective Fully
Diluted Ownership in the Company.
(ii) Each Tag-Along Seller shall have the right to Transfer up
to a percentage of the number of shares specified in the Transfer Notice
delivered pursuant to the following sentence by the aggregate number of
shares of Common Stock then owned by GEI. GEI shall deliver or cause to be
delivered to each Tag-Along Seller a written notice (a "TRANSFER NOTICE")
of a proposed tag-along sale no later than 30 days prior to the proposed
closing thereof. Such notice shall make reference to the Tag-Along Sellers'
rights under this Section 7(b) and shall describe in reasonable detail (A)
the aggregate number of shares of Common Stock to be Transferred by GEI if
none of the HPA Group or Class II Stockholders participates, (B) the
aggregate number of shares of Common Stock then owned by GEI, (C) the
person or entity to whom or which such shares of Common Stock are proposed
to be Transferred, (D) the terms and conditions of the Transfer, including
the consideration to be paid therefor, (E) the maximum percentage of its
shares such Tag-Along Seller is entitled to include in the Transfer and (F)
the proposed date, time and location of the closing of the Transfer. Each
Stockholder receiving a Transfer Notice shall exercise its right to
participate in a Transfer of Common Stock pursuant to this Section 7 by
delivering to GEI a written notice (a "TAG-ALONG NOTICE") stating its
election to do so and specifying the number of shares (which shall not
exceed the number of shares determined for such Tag-Along Seller in the
Transfer Notice) of Common Stock held by it to be Transferred no later than
fifteen days after receipt of the Transfer Notice. Failure to provide a
Tag-Along Notice within such fifteen-day period shall be deemed to
constitute an election by such Stockholder not to exercise its rights
pursuant to this Section 7, and GEI shall have 90 days following the
expiration of such fifteen-day period in which to Transfer the number of
shares equal to the difference between the number set forth in the Transfer
Notice and the aggregate number of shares
18
as to which GEI has received a Tag-Along Notice, on terms not more
favourable to GEI than those set forth in the Transfer Notice.
(iii) Each Tag-Along Seller shall be required to deliver at such
closing the certificate or certificates representing the shares to be
Transferred, duly endorsed for transfer, and shall be entitled to receive
the net proceeds allocable to the Transfer thereof, after deduction of such
Tag-Along Seller's proportionate share of the expenses of Transfer, which
share shall not exceed an amount proportionate to the amount of such
expenses allocated to GEI. If, at the end of the 90-day period following
the expiration of such fifteen-day period, GEI has not completed the
Transfer of shares of Common Stock, GEI may not sell the shares of Common
Stock without again fully providing a Transfer Notice.
(c) Obligations of Drag-Along Sellers. In connection with any
---------------------------------
Drag-Along Sale, Drag-Along Sellers shall not be required to make any
representation or warranty to the purchaser other than to the effect that they
hold title to the Securities they are selling in the Drag-Along Sale, free and
clear of liens and the like, and as to their right, power and authority to sell
such Securities. Except as to such representations, Drag-Along Sellers shall not
be liable beyond the net proceeds of the Drag-Along Sale for any other breach of
representations or warranties. In addition, unless expressly agreed to by a
Drag-Along Seller, no Drag-Along Seller shall be required to enter into any
covenant not to compete or similar agreement restricting their business
activities.
8. Termination and Lapse of Rights and Restrictions; Applications of
-----------------------------------------------------------------
Other Stock and Adjustments. The provisions of Sections 4, 5, 7, 9, and 10
---------------------------
shall lapse and be of no further effect immediately following the earlier to
occur of a Change in Control or an IPO. In the event any capital stock of the
Company or any other corporation shall be distributed on, with respect to, or in
exchange for Securities as a stock dividend, stock split, reverse stock split,
reclassification or recapitalization, or in connection with any merger or
reorganization, the restrictions, rights and options and prices set forth herein
shall apply with respect to such other capital stock to the same extent as they
are, or would have been applicable, to the Securities on or with respect to
which such other capital stock was distributed and shall continue to apply to
the Securities or such other securities outstanding thereafter, in each case
with such adjustments as are necessary or appropriate.
9. Election of Directors. So long as such individuals respectively own
----------------------
the requisite amount of Common Stock set forth herein, each of the other
Stockholders agrees to vote his or its Common Stock, and cause his Related
Transferees to vote their Common Stock, in favor of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇" and ▇▇▇▇▇▇▇▇▇") in all elections of the directors
of the Company whether by meeting or action in writing. Such agreement to vote
shall be effective as to each such individual so long as such individual
continues to own (directly or, in the case of ▇▇. ▇▇▇▇▇▇▇▇▇, through a family
trust and in either case, through Related Transferees after the date hereof) at
least two-thirds (2/3) of the Common Stock owned by him on the date hereof. Such
agreement to vote shall cease to be effective upon the first to occur of: (i)
such individual ceasing to own (directly or indirectly, as aforesaid) in excess
of one-third (1/3) of the Common Stock owned by him on the date hereof and (ii)
a Disproportionate Sale after
19
which such individual and his Related Transferees own less than two-thirds (2/3)
of the Common Stock owned by him and such Related Transferees on the date
hereof. A "DISPROPORTIONATE SALE" as to either individual occurs on the date of
a Transfer of Common Stock as a result of which the Common Stock owned by such
individual and Related Transferees has decreased by a percentage that is
greater, by at least five percent (5%), than the corresponding decrease in
ownership of Common Stock of GEI to date. Each of the Stockholders further
agrees the he or it shall vote its Common Stock and cause its Related
Transferees to vote their Common Stock, in all elections of directors of the
Company, whether by meeting or action in writing, in favour of all nominees for
the board of directors proposed by GEI. For purposes of this Section 9 and the
effectiveness of the voting agreements herein, ownership of Common Stock shall
be calculated based upon the Fully Diluted Ownership of the individual and his
Related Transferees, in the aggregate.
10. Certain Additional Agreements.
-----------------------------
(a) Right to Participate in Equity Issuances. If the Company shall
----------------------------------------
issue, sell or distribute to GEI or any of its Affiliates any equity or debt
securities of the Company, or any option warrant, or right to acquire, or any
security convertible into or exchangeable for, any of the foregoing (other than
pursuant to an underwritten public offering, a stock dividend, stock split or
other pro rata distribution of securities to stockholders of the Company
--- ----
generally in which the HPA Group participates on an equal basis, including any
Related Transferees), the HPA Group shall be entitled, provided that they
collectively maintain two-thirds (2/3) of the Fully Diluted Ownership held by
them on the date hereof, to participate in such issuance, sale or distribution,
at the same price and on the same terms and conditions applicable to GEI, pro
---
rata, based upon their respective Fully Diluted Ownership in the Company.
----
(b) Right to Participate in Equity Repurchases. GEI agrees that the
------------------------------------------
Company will not purchase any Securities from GEI or any of its Affiliates
unless the Company offers to simultaneously purchase a proportionately equal
number of Securities of the same class from each member of the HPA Group at the
same price and on the same terms and conditions applicable to GEI and its
Affiliates, based upon their respective Fully Diluted Ownership.
(c) Affiliate Transactions. No material transaction or series or
----------------------
related transactions (including any issuance of securities, profits interests,
stock appreciation rights, or similar rights or interests of the Company)
between the Company and GEI or any of its Affiliates involving value in excess
of $1,000,000 may be consummated unless approved (i) if one of ▇▇▇▇▇▇▇▇ or
▇▇▇▇▇▇▇▇▇ then holds at least one-third of his Fully Diluted Ownership as of the
date hereof, by such individual, and otherwise by a majority of the
disinterested directors of the Company, or (ii) by the board of directors of the
Company after it is presented with a fairness opinion of a nationally recognized
investment bank to the effect that the transaction is fair to the Company and
its stockholders. Notwithstanding the foregoing, other than the Management
Agreement of even date herewith between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇ &
Partners, L.P. (the "Management Agreement"), GEI and its Affiliates will not
enter into any consulting management or similar agreement or arrangement with
the Company or increase the fees provided for in the Management Agreement as of
the date hereof, except that such fees may be proportionately increase provided
such increase is calculated on the same basis (1.6% of invested capital) as the
20
fee currently provided for therein and such increase reflects further investment
by GEI consistent with the terms of this Section 10.
(d) Change of Control Transactions. Each of GEI, ▇▇▇▇▇▇▇▇ and
------------------------------
▇▇▇▇▇▇▇▇▇ agrees that no such Stockholder shall, without the prior consent of
the other two Stockholders, pursue, advocate or enter into an agreement in
respect of any recapitalization, reclassification, share exchange,
reorganization, merger, consolidation or similar transaction involving the
Company unless all holders of Common Stock of the Company will be treated
identically in such transaction, but ratably in proportion to their respective
Equity Ownership.
(e) Information. The Company shall provide each Class I Stockholder
-----------
with the following information, all of which each Class I Stockholder agrees to
hold in confidence:
(i) For each fiscal quarter of the Company, as and when
submitted to Green, unaudited consolidated financial statements of the
Company (consisting of balance sheet and statements of operations,
stockholders' equity and cash flows for such fiscal quarter, in the form
submitted to GEI;
(ii) For each fiscal year of the Company, as and when submitted
to Green audited financial statements of the Company for such fiscal year,
certified by the Company's independent certified public accounting firm, in
the form submitted to GEI;
(iii) Such additional information about the Company as such
Class I Stockholder may reasonably request from time to time.
11. Notices. All notices or other communications under this Agreement
-------
shall be given in writing and shall be deemed duly given and received on the
third full business day following the day of the mailing thereof by registered
or certified mail or the next Business Day if sent by overnight courier or when
delivered personally or sent by facsimile transmission as follows:
(a) if to the Company, at its principal executive offices at the time
of the giving of such notice, or at such other place as the Company shall have
designated by notice as herein provided to the Purchaser;
(b) if to a Class I Stockholder, at its principal executive offices
at the time of the giving of such notice, or at such other place as such
Stockholder shall have designated by notice as herein provided to the Company.
(c) if to any Class II Stockholder, at his address as it appears on
Annex A or at such other place as he shall have designated by notice as herein
provided to the Company.
12. General.
-------
(a) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except by a written agreement signed by each of the Company and the Class I
Stockholders and, to the extent their interests are affected, by the Class II
Stockholders, provided, however, that Class II Stockholders having a
-------- -------
21
majority of Equity Ownership as amongst such Stockholders may bind all of such
Stockholders as to any matter adversely affecting them if such adverse effect is
equal, on a proportionate basis, as to all such Stockholders and the consent of
each adversely affected Class II Stockholders shall otherwise be required.
(b) No waiver of any breach or default hereunder shall be considered
valid unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
(c) Except as otherwise expressly provided herein, this Agreement
shall be binding upon and inure to the benefit of each of the Company, the
Stockholders and their respective heirs, personal representatives, successors
and assigns; provided, however, that nothing contained herein shall be construed
-------- -------
as granting any Stockholder the right to Transfer any of the Securities except
in accordance with this Agreement and any Transferee shall hold such Securities
having only those rights and being subject to the restrictions provided for in
this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
(e) Each Class II Stockholder agrees that nothing herein shall be
deemed to create any implication concerning the adequacy of his services to the
Company, or shall be construed as an agreement by the Company, express or
implied, to employ him or contract for his services, to restrict the right of
the Company to discharge him or cease contracting for his services or to modify,
extend or otherwise affect in any manner whatsoever, the terms of any employment
agreement or contract for services which may exist between him and the Company
or its subsidiaries. Each Class II Stockholder represents that he has been
advised, to the extent he deemed necessary, by legal counsel and tax advisors
of his choice in connection with this Agreement. Each Class II Stockholder
further represents that, if he is married, his spouse has executed and delivered
to the Company the Acknowledgment and Agreement of Spouse set forth at the end
of this Agreement.
(f) In the event any day upon which a sale, notice or other matter is
required to occur hereunder is not a Business Day, such matter shall be deferred
until the next Business Day.
(g) The section headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents of such
sections. The masculine pronoun shall be deemed to include and incorporate the
feminine pronoun.
(h) Each party hereto shall cooperate and shall take such further
action and shall execute and deliver such further documents as may be reasonably
requested by any other party in order to carry out the provisions and purposes
of this Agreement.
22
(i) Words in the singular shall be read and construed as though in
the plural and words in the plural shall be read and construed as though in the
singular in all cases where they would so apply.
(j) This Agreement may be executed in one or more counterparts, all
of which taken together shall be deemed one original.
(k) Due to the fact the securities of the Company cannot be readily
purchased or sold in the open market, and for other reasons, the parties will be
irreparably damaged in the event that this Agreement is not specifically
enforced. In the event of a breach or threatened breach of the terms, covenants
and/or conditions of this Agreement by any of the parties hereto, the other
parties shall, subject to Section 13, in addition to all other remedies, be
entitled to a temporary and/or permanent injunction, without showing any actual
damage or that monetary damages would not provide an adequate remedy, and/or a
decree for specific performance, in accordance with the provisions hereof. Each
Stockholder hereby irrevocably and unconditionally consents to the jurisdiction
of any California State court or federal court of the United States sitting in
the State of California in any action or proceeding relating to this Agreement
and consents to service of process in connection therewith by the delivery of
notice to such Stockholder's address set forth in the Agreement.
(l) This Agreement shall be deemed to be a contract under the laws of
the State of Delaware and for all purposes shall be construed and enforced in
accordance with the internal laws of such state without regard to the principles
of conflicts of law.
13. Additional Class II Stockholders. Prior to issuing any Options, Common
--------------------------------
Stock or other right exercisable for or convertible into Common Stock, and as a
condition to the receipt thereof, the Company shall require the recipient to
execute and deliver a duplicate counterpart of this Agreement, and such
recipient shall become a Class II Stockholder for all purposes hereof.
14. Arbitration.
-----------
(a) General. Except as provided in this Section 14, the Federal
-------
Arbitration Act shall govern the interpretation, enforcement and all proceedings
pursuant to this Section 14. To the extent that the Federal Arbitration Act is
inapplicable, Delaware law pertaining to agreements to arbitrate shall apply.
(b) Scope.
-----
(i) The parties mutually consent to the resolution by
arbitration of all claims or controversies ("CLAIMS"), past, present, or
future, whether or not arising out of matters related to this Agreement or
that any party may have against another party or against its partners,
officers, directors, employees, agents or trustees in their capacity as
such or otherwise. The only claims that are arbitrable are those that, in
the absence of this Section 14, would have been justifiable under
applicable state or federal law. Except as otherwise provided in this
Section 14, no party shall initiate or prosecute any lawsuit or
23
administrative action (other than an administrative charge of
discrimination) in any way related to any claim covered by this Section 14.
(ii) Claims for workers' compensation or unemployment
compensation benefits are not covered by this Section 14. Also not covered
are claims by any of the parties for injunctive and/or other equitable
relief including but not limited to claims for specific performance.
(c) Deposition. Each party to a dispute shall have the right to take
----------
the deposition of up to [two] individuals and any expert witness designated by
each other party. Each party also shall have the right to make requests for
production of documents to any party. The subpoena right specified below shall
be applicable to discovery pursuant to this paragraph. Additional discovery may
be had only where the arbitrator selected pursuant to this Section 14 so orders,
upon a showing of reasonable and substantial need. At least 30 days before the
arbitration, the parties must exchange lists of witnesses, including any expert,
and copies of all exhibits intended to be used at the arbitration. Each party
shall have the right to subpoena witnesses and documents for the arbitration.
(d) JAMS. The Arbitration will be held under the auspices of either
----
the American Arbitration Association ("AAA") or Judicial Arbitration & Mediation
Services, Inc. ("J.A.M.S"), with the designation of the sponsoring organization
to be made by the party who did not initiate the claim. The parties agree that,
except as provided in this Agreement, the arbitration shall be in accordance
with the AAA's then-current arbitration procedures (if AAA is designated) or the
then-current J.A.M.S arbitration rules (if J.A.M.S is designated). The
arbitration shall be conducted by a panel of three arbitrators each of whom
shall be either a retired judge, or an attorney licensed to practice law in the
state in which the arbitration is convened (the "ARBITRATORS"). The arbitration
shall take place in Los Angeles, California.
(e) Selection of Arbitrators. The Arbitrators shall be selected as
------------------------
follows:
(i) If the dispute to be resolved is between the Company and
another party, shall each select an arbitrator from a list of arbitrators
provided by the sponsoring organization and meeting the criteria set forth
above. If the dispute is between two Stockholders, each shall select an
arbitrator from such list. If the dispute involves more than two parties
and if the parties to the dispute agree to being separated into two groups,
each group may select one arbitrator from such list. If the parties to a
dispute cannot agree on a third arbitrator, the arbitrators so selected
shall select a third arbitrator who also meets the above criteria. If the
two named arbitrators are unable to agree upon the third arbitrator, or
fail to designate such arbitrator within 30 days from the day the matter is
submitted to arbitration, then, on application of any party, the third
arbitrator shall be designated by the sponsoring organization.
(ii) If two arbitrators cannot be selected by the process
described in subparagraph (i) within 30 days from the day the matter is
submitted to arbitration, then, on application of any party, the three
arbitrators shall be designated by the sponsoring organization.
24
(iii) The decision of any two (2) Arbitrators shall constitute a
final decision and award hereunder.
(f) Governing Law. The Arbitrators shall apply the substantive law
-------------
(and the law of remedies, if applicable) of the state of Delaware or federal
law, or both, as applicable to the claim(s) asserted. The Arbitrators are
without jurisdiction to apply any different substantive law, or law of remedies.
The Federal Rules of Evidence shall apply. The Arbitrators, and not any federal,
state, or local court or agency, shall have exclusive authority to resolve any
dispute relating to the interpretation, applicability, enforceability or
formation of this Agreement, including but not limited to any claim that all or
any part of this Agreement is void or voidable. The arbitration shall be final
and binding upon the parties, except as provided in this Agreement.
(g) Procedures. The Arbitrators shall have jurisdiction to hear and
----------
rule on pre-hearing disputes and are authorized to hold pre-hearing conferences
by telephone or in person, as the Arbitrators deem necessary. The Arbitrators
shall have the authority to entertain a motion to dismiss and/or a motion for
summary judgment by any party and shall apply the standards governing such
motions under the Federal Rules of Civil Procedure. Any party to a dispute, at
its expense, may arrange for and pay the cost of a court reporter to provide a
stenographic record of proceedings. Any party to a dispute, upon request at the
close of hearing, shall be given leave to file a post-hearing brief. The time
for filing such a brief shall be set by the Arbitrators.
(h) Award. The Arbitrators shall render an award and opinion
-----
outlining in reasonable detail the findings of fact and conclusions of law upon
which the award is based. The award of the Arbitrators shall be final, binding
and conclusive on the parties. If the Company is a party to the dispute, the
Company shall bear the fees and costs of the Arbitrators. If Company is not a
party to the dispute, the parties to the dispute shall equally share the fees
and costs of the Arbitrators. Each party shall pay for its own costs and
attorneys' fees.
15. Definitions. As used in this Agreement, unless the context requires
-----------
otherwise, the capitalized terms described in this Section 15 shall have the
meanings indicated herein.
(a) Each of the following capitalized terms shall have the meaning
ascribed to such term in the section of this Agreement indicated:
Term Section
---------------------------------------------- ----------------
Act.......................................... 15(b)
Affiliate.................................... 15(b)
Agreement.................................... Introduction
Bona Fide Offer.............................. 4(b)
Business Day................................. 15(b)
Callable Securities.......................... 2(b)
Call Purchase Event.......................... 5(a)
Call Option.................................. 2(b)
Change in Control............................ 15(b)
Class I Stockholder.......................... Introduction
25
Term Section
---------------------------------------------- ----------------
Class II Stockholder......................... Introduction
Common Stock................................. Recitals
Company...................................... Introduction
Control...................................... 13(b)
Demand Registration.......................... 6(a)
Demand Seller................................ 6(b)
Disproportionate Disposition................. 9
Drag-Along Notice............................ 7(b)
Drag-Along Sale.............................. 7(a)
Drag-Along Sale Date......................... 7(b)
Drag-Along Seller............................ 15(b)
Electing Stockholder......................... 4(b)
Equity Ownership............................. 15(b)
Fair Market Value............................ 15(b)
Fully Diluted Ownership...................... 15(b)
Future Stockholder........................... 6(b)
Future Participants.......................... 6(a)
GEI.......................................... Introduction
GEI Distribution............................. 12
Stockholder.................................. 6(a)
IPO.......................................... 15(b)
Living Trust................................. 15(b)
Manager...................................... 15(b)
NQ Option.................................... 2(b)
Option Notice................................ 4(b)
Other Termination............................ 5(a)
Outside Party................................ 4(b)
Permanent Disability......................... 15(b)
Permitted Transfer........................... 4(a)
Purchase Notice.............................. 5(a)
Purchaser.................................... 2(b)
Purchasing Group............................. 5(a)
Registrable Securities....................... 15(b)
Registration Notice.......................... 6(a)
Related Transferee........................... 15(b)
Retirement................................... 15(b)
Rule 144..................................... 15(b)
Sale Percentage.............................. 7(a)
SEC.......................................... 15(b)
Securities................................... Introduction
Seller....................................... 5(a)
Subscription Stock........................... 2(b)
Tag-Along Notice............................. 7(e)
26
Term Section
---------------------------------------------- ----------------
Tag-Along Seller............................. 7(d)
Third Party.................................. 7(a)
Transfer..................................... 15(b)
Transfer Notice.............................. 7(e)
(b) Each of the following capitalized terms shall have the meanings
indicated in this clause (b):
"ACT" means the Securities Act of 1933, as amended from time to time.
"AFFILIATE" has the meaning set forth in Rule 405 under the Act.
"BUSINESS DAY" means a day on which banks are open for business in the
State of California.
"CHANGE IN CONTROL" means any of (i) a sale or other disposition by the
Company of all or substantially all of the assets of the Company and its
subsidiaries, taken as a whole, or (ii) a merger or consolidation of the Company
if, immediately following such merger or consolidation, there is not Control of
the surviving entity of such merger or consolidation, or (iii) a sale of capital
stock of the Company (by any holder thereof or by the Company) if, immediately
following such sale, there is not Control of the Company.
"CONTROL" means that the holders of the capital stock of the Company
immediately following the Merger (including the Class I Stockholders) hold, in
the aggregate, directly and indirectly, the power to elect a majority of the
directors of the Company that are not elected pursuant to the provisions of the
Preferred Stock (or, as the case may be, the surviving entity of a merger or
consolidation of the Company).
"EQUITY OWNERSHIP" means the relative interests of the holders of the
Company's outstanding Common Stock as of the date of determination.
"FAIR MARKET VALUE" of Securities means the fair market value of Securities
as determined as of the time of the Call Purchase Event by the Company's Board
of Directors in the exercise of its reasonable discretion; provided, however,
-------- -------
that in the event that the Common Stock is traded publicly on any national
securities exchanges) (including without limitation NASDAQ National Market
System or the NASDAQ "Small-Cap" Issues System), such fair market value shall be
based upon the closing price for such Common Stock on such Exchange(s) on the
date preceding the Call Purchase Event.
"FULLY DILUTED OWNERSHIP" means, as to any Stockholder, his or its
aggregate ownership of all equity interests in the Company, including all
Options and all other securities exercisable convertible or exchangeable for
Common Stock.
27
"IPO" means the completion of the first underwritten public offering of the
Company's shares of Common Stock registered under the Act.
"LIVING TRUST" means a revocable living trust established by the Purchaser
for estate planning purposes and pursuant to which no one other than the
Purchaser and/or the Purchaser's spouse is the beneficiary during the
Purchaser's lifetime.
"MANAGER" means the investment banking firm or firms designated by the
Stockholder as the managing underwriter(s) of an offering registered pursuant to
this Agreement, which firm or firms shall be the existing investment bankers for
or other nationally recognized investment bankers reasonably acceptable to the
Company.
"PERMANENT DISABILITY" of a Class II Stockholder means that (i) the Class
II Stockholder becomes physically or mentally incapacitated or disabled so that
he is unable to perform for the Company substantially the same services as he
performed prior to incurring such incapacity or disability, and (ii) such
incapacity or disability continues for a period of 120 days, whether or not
consecutive, over a period of six consecutive months; provided, however, that
-------- -------
(x) the Company, at its option and expense, shall be entitled to retain a
physician to confirm the existence of such incapacity or disability, and the
determination of such physician shall be binding upon the Company and the Class
II Stockholder.
"REGISTRABLE SECURITIES" means the Common Stock and the Warrant Shares,
subject to adjustment pursuant to Section 8 hereof.
"RELATED TRANSFEREE" means (i) in the case of any individual, any of the
Stockholder's spouse, adult lineal descendants, adult spouses of such lineal
descendants, a Living Trust, trusts solely for the benefit of the Stockholder's
spouse or the Stockholder's minor or adult lineal descendants, and (in the event
of the Stockholder's death) the Stockholder's personal representatives (in their
capacities as such), estate or named beneficiaries and (ii) in the case of a
business organization, any individual or other business organization controlled
by or under common control with such business organization, as such terms but
defined within the meaning of Rule 405 under the Act.
"RETIREMENT" means retirement pursuant to the Company's standard retirement
policy in effect from time to time but in no event prior to the age of 65,
unless pursuant to a specific determination by the Board of Directors of the
Company.
"RULE 144" means Rule 144 under the Act, as amended from time to time, or
any successor or similar rule.
"SEC" means the Securities Exchange Commission.
"TRANSFER," used as a noun, means any sale, pledge, gift, bequest,
transfer, assignment or any other encumbrance or disposition, whether direct or
indirect, conditional or unconditional. "TRANSFER," used as a verb means to make
a Transfer.
28
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date written above.
LESLIE'S POOLMART, INC.
By___________________________________
Its__________________________________
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners,
L.P., its sole general partner
By: Grand Avenue Capital
Corporation, its sole
general partner
By:__________________________________
Name_________________________________
Title________________________________
_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_____________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
T.R.U.A. DTD 3/15/90 The ▇▇▇▇▇▇▇▇▇ Family
Trust
OCCIDENTAL PETROLEUM CORPORATION
By___________________________________
Name_________________________________
Title________________________________
29
ACKNOWLEDGMENT AND AGREEMENT OF SPOUSE
--------------------------------------
The undersigned, being the spouse of a Purchaser listed on Annex A hereto,
hereby agrees to be bound by the provision of this Agreement and consents to the
Purchaser's subscription for the Common Stock pursuant hereto.
_____________________________________
Name_________________________________
30
ANNEX A
CAPITAL STRUCTURE
-----------------
Fully
Diluted
Shares
-------------
▇▇▇▇▇▇▇ ▇. Fouricq 160,539
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 166,552
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 22,414
▇▇▇▇ ▇▇▇▇▇▇▇▇ 10,000
-------------
Total Stock Remaining Outstanding 359,505
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 4,976
▇▇▇▇▇▇ ▇▇▇▇▇ 52,761
Other Management 25,862
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Total Options 83,599
▇▇▇▇▇▇ ▇▇▇▇▇-Cash 14,768
Other Management Cash 4,198
Green Equity Investors II, L.P. 1,055,172
Occidental Warrants 316,092
Management Incentive Stock Options 273,946
Total 2,107,280
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A-1
ANNEX B.
TERMS OF INCENTIVE STOCK OPTION PLAN
------------------------------------
Number of Shares............ 83,599 total. The number of shares covered by each
individual grant will be the quotient of (i) the
product of (x) the number of shares subject to the
corresponding cancelled option multiplied by (y)
the difference between $14.50 and such cancelled
option's exercise price, divided by (ii) $9.50. In
the case of Messrs. Fourtiqc and ▇▇▇▇▇, the
foregoing formula results in the issuance of
options for a maximum of 4,976 and 52,761 shares,
respectively, with the balance to be allocated to
management as heretofore agreed.
Exercise Price.............. $5.00
Type of Options............. Non-Qualified, ten year options
Termination of
Employment.................. A portion of options and shares are subject to
repurchase upon termination of employment prior to
the second anniversary of the Closing Date as set
forth in the Agreement, all other options remain
exercisable notwithstanding employment status of
optionee
Adjustment.................. The number of shares subject to Options, and the
exercise price, will be proportionately adjusted
for each subdivision and combination of Company
common stock.
B-1
ANNEX C
TERMS OF ISO OPTIONS
--------------------
Number of Shares......... 13% of the Company's fully-diluted Common
Stock on the Closing Date
Exercise Price........... Fair Market Value (opening equity price)
Type of Options.......... Incentive, ten-year options
Vesting.................. One-third (1/3) on the first, second and third
anniversaries of the Closing Date, except in respect
of performance portion
Performance Portion ..... Options equivalent to 3% of the fully-diluted Common
Stock outstanding on the Closing Date vest upon
achievement (assuming continued employment) of
performance targets as follows:
EBITDA for Year Ended: Number of Stores Opened by:
--------------------- --------------------------
$18M............. 1997 30...........March 31, 1998
$22M............. 1998 30...........March 31, 1999
$26M............. 1999 30...........March 31, 2000
Note: Vesting also occurs if the store opening
----
target is met in each prior year and the Company
achieves 95% of a year's EBITDA target and the sum
of that year and the following year's EBITDA equals
100% of the combined targets
Termination of
Employment .............. Vested options may be exercised for 90 days post-
termination; unvested options are forfeited and
become eligible for future grant at Fair Market
Value
Adjustment............... The number of shares subject to Options, and the
exercise price, will be proportionately adjusted for
each subdivision and combination of Company common
stock.
C-1