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EXHIBIT 2.2
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT, dated as of February 7, 1997 (the
"Stockholders Agreement"), is entered into by and among Search Capital Group,
Inc., a Delaware corporation ("Search"), and the undersigned holders (the
"Stockholders") of shares of the common stock, $.001 par value, of MS
Financial, Inc. (the "MS Financial Stock"), MS Diversified Corporation, a
Mississippi corporation ("MSD"), MS Financial Services, Inc., a Mississippi
corporation and a wholly-owned subsidiary of MSD ("MSDSub"), and ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Fund IV, L.P. ("GTCR IV").
RECITALS
Search, Search Capital Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Search ("Newco"), and MS Financial, Inc., a Delaware
corporation ("MS Financial"), propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement"; capitalized terms
not otherwise defined herein shall have the meaning assigned to such terms in
the Merger Agreement), pursuant to which Newco would be merged (the "Merger")
with and into MS Financial and each outstanding share of MS Financial Stock
would be converted into the right to receive that number of shares of Search
Common Stock, $.01 par value per share ("Search Common Stock"), specified in
the Merger Agreement;
As a condition of its entering into the Merger Agreement, Search has
required each Stockholder to agree, and each Stockholder has agreed, to enter
into this Stockholders Agreement.
Prior to the date hereof, Search and the Stockholders had no
agreement, arrangement or understanding (as defined in Section 203 of the
Delaware Statutes) for the purpose of acquiring, holding, voting or disposing
of shares of Search Common Stock.
AGREEMENT
In consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable consideration, including the inducement
of Search and Newco to consummate the Merger pursuant to the Merger Agreement,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
represents and warrants, severally and not jointly, to Search as follows:
1.1 OWNERSHIP OF SECURITIES. Such Stockholder is the record and
beneficial owner of the number of shares of MS Financial Stock set forth
immediately beneath such Stockholder's name on the signature page(s) to this
Stockholders Agreement (the "Existing Securities," and together with any shares
of MS Financial Stock or other securities of MS Financial hereafter acquired by
the Stockholder prior to the Merger, whether upon exercise of options,
conversion of convertible securities, purchase, exchange or otherwise, the
"Subject Securities"). On the date
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hereof, such Stockholder does not own any securities of MS Financial other than
the Existing Securities. The Stockholder has sole voting power and sole power
to issue instructions with respect to the voting of the Existing Securities,
sole power of disposition, sole power of exercise or conversion and the sole
power to demand appraisal rights, in each case with respect to all of the
Existing Securities and, on the date of the MS Financial Stockholders Meeting,
will have sole voting power and sole power to issue instructions with respect
to the voting of all of such Stockholder's Subject Securities, sole power of
disposition, sole power of exercise or conversion and the sole power to demand
appraisal rights, in each case with respect to all of such Stockholder's
Subject Securities.
1.2 POWER; BINDING AGREEMENT. Such Stockholder has full legal
partnership, or corporate, as the case may be, capacity, power and authority to
enter into and perform all of such Stockholder's obligations under this
Stockholders Agreement. The execution, delivery and performance of this
Stockholders Agreement by such Stockholder will not violate any other agreement
to which such Stockholder is a party, including, without limitation, any trust
agreement, voting agreement, stockholders agreement or voting trust. This
Stockholders Agreement has been duly and validly executed and delivered by such
Stockholder and constitutes a valid and binding agreement of such Stockholder,
enforceable against such Stockholder in accordance with its terms, except that
(i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
1.3 NO CONFLICTS. No filing with, and no permit, authorization,
consent or approval of, any Governmental Authority is necessary for the
execution of this Stockholders Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby, and
neither the execution and delivery of this Stockholders Agreement by such
Stockholder nor the consummation by such Stockholder of the transactions
contemplated hereby, nor compliance by such Stockholder with any of the
provisions hereof, conflicts or will conflict with, or results or will result
in, any breach of any applicable partnership or other organizational documents
applicable to such Stockholder or (with or without notice or lapse of time or
both) a default (or give rise to any third-party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which such Stockholder is a party or by which such
Stockholder's properties or assets may be bound or, to the best of such
Stockholders' knowledge, violate any Law applicable to such Stockholder or any
of such Stockholder's properties or assets.
1.4 NO LIENS. Except to the extent set forth below in Section
6.3, the Existing Securities are, and as of the Effective Time the Subject
Securities will be, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any encumbrances arising hereunder.
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1.5 DISCLOSURE OF CONTRACTS. Except as disclosed in the Schedules
to the Merger Agreement, there are no contracts, agreements and arrangements to
which (a) GTCR and MS Financial and/or its Subsidiary are parties and (b) MSD
and/or MSD Sub and MS Financial and/or its Subsidiary are parties.
1.6 ACCESS TO SECURITIES INFORMATION. Search has made available
to each Stockholder a copy of all Search SEC Reports and such other documents
and information as have been requested by such Stockholder in connection with
the issuance of the Search Common Stock to such Stockholder in the Merger
(collectively the "Search Disclosure Documents"). In addition, Search has made
available to such Stockholder those officers or representatives of Search as
are necessary to respond to any questions such Stockholder may reasonably have
regarding Search and the Search Common Stock. Such Stockholder (a) has such
knowledge, sophistication, experience, and net worth such that such Stockholder
is capable of evaluating the merits and risks of an investment in the Search
Common Stock, (b) fully understands the nature, scope, and duration of the
limitations on transfer contained in this Stockholders Agreement, and (c) can
bear the economic risk of any investment in the Search Common Stock. Such
Stockholder has had an adequate opportunity to ask questions and receive
answers (and has asked such questions and received answers to its satisfaction)
from the officers of Search concerning the business, operations and financial
condition of Search and/or the Search SEC Reports. Stockholder has no
contract, undertaking, agreement or arrangement, written or oral, with any
other person to sell, transfer or grant participations in any shares of Search
Common Stock to be acquired by Stockholder in the Merger and is not acquiring
the Search Common Stock with a view to its distribution. In addition,
Stockholder understands and agrees to abide by the nature of the restrictions
imposed by Rule 145 promulgated by the SEC under the Securities Act as well as
the other restrictions imposed by this Stockholders Agreement.
2. AGREEMENT TO VOTE SHARES PRIOR TO MERGER. At every meeting of the
stockholders of MS Financial called with respect to any of the following, and
at every adjournment thereof, and on every action or approval by written
consent of the stockholders of MS Financial with respect to any of the
following, each Stockholder, severally and not jointly, agrees that it shall
vote all the Subject Securities that it owns, directly or beneficially, on the
record date of any such vote as follows: (a) in favor of the Merger, the
adoption, execution and delivery of the Merger Agreement and the approval of
the terms thereof and the Transactions; (b) against any action or agreement
that would result in a breach in any material respect of any covenant,
representation, or warranty or any other obligation or agreement of MS
Financial under the Merger Agreement; (c), except as otherwise agreed to in
writing in advance by Search, against any of the following actions (other than
the Merger and the Transactions), which shall be known as an "Alternate
Transaction": (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving MS Financial or its
Subsidiary; or (ii) a sale, lease or transfer of a material amount of assets
of MS Financial, its Subsidiary or any Securitization Trust, or a
reorganization, recapitalization, dissolution or liquidation of MS Financial or
its Subsidiary, or any purchase or redemption of MS Financial Stock from the
Stockholder or any other Stockholder; and (d) against (i) any change in the
majority of the Board of Directors of MS Financial, (ii) any material
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change in the present capitalization of MS Financial or any amendment of MS
Financial's Restated Certificate of Incorporation, or (iii) any other material
change in MS Financial's corporate structure or business.
3. IRREVOCABLE PROXY. EACH STOCKHOLDER HEREBY, SEVERALLY AND NOT
JOINTLY, GRANTS TO, AND APPOINTS NEWCO AND THE TREASURER OF NEWCO IN HIS
CAPACITY AS AN OFFICER OF NEWCO, AND ANY INDIVIDUAL WHO SHALL HEREAFTER SUCCEED
TO SUCH OFFICE OF NEWCO AND ANY OTHER DESIGNEE OF NEWCO, AND EACH OF THEM
INDIVIDUALLY, SUCH STOCKHOLDER'S PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION) TO VOTE OR ACT BY WRITTEN CONSENT WITH RESPECT TO SUCH
STOCKHOLDER'S SUBJECT SECURITIES IN ACCORDANCE WITH SECTION 2 HEREOF. THIS
PROXY IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE FOR THE TERM OF THIS
STOCKHOLDERS AGREEMENT, AND EACH STOCKHOLDER WILL TAKE SUCH FURTHER ACTION AND
EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF
THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY IT WITH RESPECT
TO THE SUBJECT SECURITIES.
4. REPRESENTATIONS AND WARRANTIES OF SEARCH.
4.1 POWER; BINDING AGREEMENT. Search has full corporate power and
authority to enter into and perform all of Search's obligations under this
Stockholders Agreement. This Stockholders Agreement has been duly and validly
executed and delivered by Search and constitutes a valid and binding agreement
of Search, enforceable against Search in accordance with its terms, except that
(i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
4.2 NO CONFLICTS. No filing with, and no permit, authorization,
consent or approval of, any Governmental Authority is necessary for the
execution of this Stockholders Agreement by Search and the consummation by
Search of the transactions contemplated hereby, and neither the execution and
delivery of this Stockholders Agreement by Search nor the consummation by
Search of the transactions contemplated hereby, nor compliance by Search with
any of the provisions hereof, conflicts or will conflict with, or results or
will result in, any breach of any organizational documents applicable to Search
or (with or without notice or lapse of time or both) a default (or give rise to
any third-party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to which
Search is a party or by which Search's properties or assets may be bound or
violate any order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to Search or any of Search's properties or assets.
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5. COVENANTS OF EACH STOCKHOLDERS PRIOR TO MERGER. Each Stockholder,
severally and not jointly, hereby agrees and covenants that prior to the
Effective Time:
5.1 NO SOLICITATION. Such Stockholder shall not, directly or
indirectly, solicit, initiate or encourage (including by way of furnishing
information) or respond to any inquiries or the making of any proposal by any
person or entity (other than Search or any Search Affiliate) with respect to MS
Financial or any Securitization Trust that constitutes or could reasonably be
expected to lead to an Alternative Transaction. If any Stockholder receives any
such inquiry or proposal, then it shall promptly inform Search of the terms and
conditions, if any, of such inquiry or proposal and the identity of the person
making it. Such Stockholder will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore that constitutes or could reasonably be expected to lead to an
Alternative Transaction.
5.2 RESTRICTION ON TRANSFER, PROXIES AND NONINTERFERENCE. Such
Stockholder shall not, except as contemplated by this Stockholders Agreement:
(i) directly or indirectly offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract, option or
other arrangement or understanding with respect to, or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of such Stockholder's Subject Securities; (ii) grant
any proxies or powers of attorney with respect to any of such Stockholder's
Subject Securities; (iii) deposit any of such Stockholder's Subject Securities
into a voting trust or enter into a voting agreement with respect to any of
such Stockholder's Subject Securities; or (iv) take any action that would make
any representation or warranty contained herein untrue or incorrect or have the
effect of preventing or disabling such Stockholder from performing its
obligations under this Stockholders Agreement.
5.3 WAIVER OF APPRAISAL RIGHTS. Such Stockholder shall not assert
and hereby waives any rights of appraisal or rights to dissent from the Merger
that such Stockholder may hold or possess.
5.4 RELEASE OF ALL CLAIMS AGAINST MS FINANCIAL. Such Stockholder
shall not pursue or make any claim such Stockholder has or may possess against
MS Financial or any of the directors, officers or other employees of MS
Financial and agrees to sign a release at or prior to the Closing, in
substantially the form attached hereto as Exhibit 5.4, releasing all claims
such Stockholder has or may possess against MS Financial and MS Financial's
directors, officers and other employees for all acts, actions, events or
occurrences arising or occurring at any time to and including the Effective
Time and (b) terminating all contracts described in Section 1.5 above, except
for (i) those agreements specifically described in Section 15.1 below, (ii) the
Merger Agreement, (iii) the Related Documents and (iv) those contracts that
Search requests not be terminated.
5.5 PERFORMANCE BY MS FINANCIAL. Each Stockholder shall cause MS
Financial to comply with the provisions of Section 5.4 of the Merger Agreement.
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6. ADDITIONAL COVENANTS OF STOCKHOLDERS. Each Stockholder, severally and
not jointly, hereby agrees and covenants as follows:
6.1 NON-SOLICITATION OF EMPLOYEES/CUSTOMERS.
(a) Scope. From the date hereof until the expiration of the
period of two (2) years following the Effective Time (the "Restrictive
Period"), it will not, directly or indirectly, (i) solicit or attempt
to induce any employee of Search or MS Financial to leave the
employment of either such employer, or (ii) solicit or otherwise
encourage any customer, client, borrower, lender, supplier, vendor, or
dealer of MS Financial, Search or any Subsidiary of Search or MS
Financial to cease or discontinue doing business with either MS
Financial or Search or any Subsidiary of Search or MS Financial.
(b) Reasonableness of Restraints. Each Stockholder
agrees that the covenants contained in this Section 6.1 are
independent and severable covenants from the other covenants contained
in this Stockholders Agreement. Each Stockholder agrees that the
period of time and other limitations set forth in the aforesaid
covenants are reasonable and acceptable to such Stockholder. Each
Stockholder agrees that the covenants in this Section 6.1 are
necessary to protect the legitimate business interests of Search and
the Surviving Corporation. If a Stockholder violates, or threatens to
violate, this Section 6.1, such Stockholder will cause irreparable
injury to Search and the Surviving Corporation that may not be capable
of being remedied by monetary damages. Therefore, with respect to
each and every breach or violation by such Stockholder of any of the
covenants in this Section 6.1, Search, in addition to all other
remedies, shall be entitled to enjoin the continuance thereof and may,
with notice to such Stockholder, apply to any court of competent
jurisdiction for entry of an immediate restraining order or
injunction. Notwithstanding the foregoing, Search shall be entitled to
recover all damages which Search and/or the Surviving Corporation
suffer due to any violation of this Section 6.1 which shall include
all profits related to such Stockholder's violation of any term or
condition of this Section 6.1. Search and/or the Surviving
Corporation may pursue either or both of the remedies (injunction and
damages) described above concurrently or consecutively in any order,
as to any such breach or violation, and the pursuit of one of such
remedies at any time will not be deemed an election of remedies or
waiver of the right to pursue the other of such remedies. It is
agreed that if a specific covenant in this Section 6.1 is not
enforceable in a specific state, that same covenant may be enforced in
all other states in which it is enforceable. Any judgment prohibiting
enforcement of a covenant herein in a specific state shall not
prohibit enforcement of that covenant in any other state. It is
expressly recognized and agreed that in the event any covenant of this
Section 6.1 be held invalid or unenforceable by a court of competent
jurisdiction, that the same shall not affect any other covenant of
this Section 6.1, and that the remaining covenants in this Section 6.1
shall remain in full force and effect. If the invalidity or
unenforceability of any covenant in this Section 6.1 is due to the
unreasonableness of the restrictions imposed by any of said covenants
or is due to any other reasons, said
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covenants shall nevertheless be effective for such period of time, for
such geographical area and for such restrictions, and subject to such
other terms and conditions as may be determined to be reasonable by a
court of competent jurisdiction. The parties hereto expressly
authorize and direct the court to make any revisions to the
restrictions that are necessary in order to make them enforceable
(such judicial revisions shall apply only to the state affected by the
judgment unless Search consents to applying the judicial revisions to
all states).
6.2 TAX REPRESENTATIONS. Each Stockholder covenants that, at or
immediately prior to the Effective Time, it will execute and deliver to Search
and MS Financial a letter in substantially the form of Exhibit 6.2 hereto. Each
Stockholder acknowledges that the representations made in such letter will be
relied upon by counsel in opining that the Merger constitutes a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code. In
addition, for purposes of maintaining shareholder continuity of interest in the
ownership of the Surviving Corporation as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code, and except as set forth below,
no Stockholder shall be permitted to transfer pursuant to Section 7 below more
than fifty percent (50%) of the Search Common Stock such Stockholder receives
as a result of the Merger for a period of twenty-four (24) months.
Notwithstanding the prohibitions contained in the immediately preceding
sentence: (a) if, under the Internal Revenue Code of 1986, as amended, or the
regulations promulgated thereunder ("Treasury Regulations"), the shareholder
continuity of interest criteria for a tax-free reorganization can be satisfied
notwithstanding a greater or lesser change of ownership, or a change of
ownership during a shorter or longer holding period, than is required by the
immediately preceding sentence, the minimum percentage of ownership and/or
holding period required to satisfy said continuity of interest criteria shall
become the minimum percentage of ownership and/or holding period which must be
satisfied by each Stockholder in their respective holdings of Search Common
Stock, and (b) a Transfer may occur not in accordance with the prohibitions of
the immediately preceding sentence if (i) Search receives an opinion of tax
counsel satisfactory to Search that a Transfer may occur without jeopardizing
the shareholder continuity of interest criteria for a tax-free reorganization,
(ii) said opinion is rendered to and for the benefit of Search, and (iii) said
tax opinion is rendered at no cost to Search.
6.3 PLEDGED STOCK. MSD has pledged 1,250,000 shares of the
Existing Securities (the "Pledged Existing Securities") to Trustmark National
Bank ("Lienholder"), and Lienholder has agreed to release the Pledged Existing
Securities from its lien and accept Search Common Stock as substitute
collateral following the Effective Time provided that Lienholder receives as
promptly as possible after the Effective Time certificates representing the
shares of Search Common Stock MSD are entitled to receive pursuant to the
Merger in respect of the Pledged Existing Securities. At all times that such
Search Common Stock is pledged to Lienholder, MSD shall retain the right to
vote said Search Common Stock in accordance with and subject to the terms of
this Stockholders Agreement. MSD shall take all actions necessary to satisfy
the terms of this Section 6.3 at or prior to Closing.
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7. SEARCH COMMON STOCK TRANSFER; SALE.
7.1 TRANSFER RESTRICTIONS.
(a) No Stockholder shall Transfer any part of such
Stockholder's Search Common Stock except as set forth in Section 6.3
and this Section 7. All Transfers shall be subject to such
limitations as are applicable under Section 6.2 above. Each
Stockholder covenants and agrees that such Stockholder shall not
Transfer or permit the Transfer of any part or all of such
Stockholder's Search Common Stock for a period of one-hundred eighty
(180) days from and after the Effective Time, except as may be
required pursuant to Section 12 below (the "Lock-Up Period"). Each
Stockholder further covenants, acknowledges and agrees that as an
Affiliate of MS Financial and/or Search, such Stockholder will not
Transfer, or make any offer or agreement to Transfer with respect to,
any shares of Search Common Stock that the Stockholder acquires in
connection with the Merger, except (i) in a transaction permitted
pursuant to Rule 145 promulgated by the SEC under the Securities Act
or (ii) pursuant to a valid registration statement under the
Securities Act.
(b) The Transfer during the term of this Stockholders
Agreement of some portion or all of a Stockholder's Search Common
Stock to its stockholders or partners shall be permitted, provided,
that (i) any such Transfer shall be made only in accordance with the
terms of this Stockholders Agreement and federal and state securities
Law after the end of the Lock-Up Period, (ii) the recipient(s) of such
Search Common Stock pursuant to a Transfer described in this Section
7.1(b) agree not to Transfer the shares of Search Common Stock
distributed to them until the expiration of two years from the
Effective Time without Search's prior written consent, provided, that
if at the time of Transfer such Stockholder owns less than 5% of the
issued and outstanding shares of Search Common Stock, this clause (ii)
shall not apply, (iii) certificates representing shares of Search
Common Stock Transferred shall bear a legend setting forth the
restriction referred to in subsection (b)(ii) and such other
restrictions as are applicable under federal and state securities Law,
(iv) any such Transfer shall not affect the Merger as constituting a
tax-free reorganization under Section 368(a) of the Code, and (v) such
Stockholder shall pay for all of the costs and expenses associated
with any such Transfer described in this Section 7.1(b). If required
in order to comply with applicable federal and state securities Law,
Search will register the shares of Search Common Stock with the SEC
which such Stockholder proposes to distribute to its stockholders or
partners at such Stockholder's expense.
7.2 RULE 145. From and after the end of the Lock-Up Period and
for so long as is necessary in order to permit each Stockholder to sell the
Search Common Stock held by such Stockholder pursuant to Rule 145 promulgated
by the SEC under the Securities Act, Search will use its reasonable efforts to
file on a timely basis all reports required to be filed by it pursuant to the
Exchange Act, and the rules and regulations thereunder, as the same shall be in
effect at the time, referred to in paragraph (c) of Rule 144 under the
Securities Act, in order to permit such
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Stockholder to sell, transfer or otherwise dispose of the Search Common Stock
held by it pursuant to the terms and conditions of Rule 145.
7.3 LEGENDS. Each Stockholder also understands and agrees that
stop transfer instructions will be given to Search's transfer agent with
respect to certificates evidencing the Search Common Stock such Stockholder may
acquire pursuant to the Merger and that there will be placed on the certificate
evidencing the Search Common Stock such Stockholder may acquire pursuant to the
Merger legends stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF THE
SECURITIES ACT OF 1933 AND THE OTHER CONDITIONS SPECIFIED IN THAT
CERTAIN STOCKHOLDERS AGREEMENT DATED FEBRUARY 7, 1997 AMONG SEARCH
CAPITAL GROUP, INC., AND THE STOCKHOLDERS, A COPY OF WHICH STOCKHOLDER
AGREEMENT WILL BE MAILED TO THE HOLDER HEREOF WITHOUT CHARGE WITHIN
FIVE DAYS AFTER RECEIPT OF WRITTEN REQUEST THEREFOR."
Search agrees to notify the transfer agent of the removal of such stop transfer
instructions and legend upon (i) the transfer of the Search Common Stock
represented by such certificate pursuant to a Registration Statement under the
Securities Act or in accordance with the applicable provisions of Rule 145
under the Securities Act (including, without limitation, paragraph (d)
thereof), (ii) the expiration of the restrictive period set forth in Rule
145(d), or (iii) the delivery by Stockholder to Search of a copy of a letter
from the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Search, to the effect that the shares subject
thereto may be offered and sold without registration under the Securities Act.
7.4 ESCROW LEGEND. The Stockholders acknowledge and agree that
even after removal of the legend described in Section 7.3 on the certificates
representing the Search Common Stock, the legend required by the Escrow
Agreement shall remain on any certificates representing shares of Search Common
Stock which are held by the Escrow Agent. Search agrees to remove promptly the
escrow legend by delivery of substitute certificates without such legend upon
the proper release of the aforesaid Search Common Stock from escrow.
7.5 STOCKHOLDER REGISTRATION RIGHTS. Pursuant to the terms of this
Section 7.5, the Stockholders are being granted certain demand and "piggyback"
registration rights in connection with the Search Common Stock they receive
pursuant to the Merger. Section 7.5(a) provides for certain demand
registration rights, Section 7.5(b) provides for certain piggyback registration
rights, and Section 7.5(d) provides Search with certain rights upon receiving a
demand for a
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registration, namely (1) proceeding with such registration, (2) postponing such
registration, and (3) purchasing the shares of Search Common Stock requested to
be included in such registration.
(a) Demand Registrations. Subject to Section 7.5(d)
below, at any time after the end of the Lock- Up Period and so long as
such Stockholder either (y) is subject to Rule 145(d)(1) in respect of
the Search Common Stock acquired by such Stockholder pursuant to the
Merger, or (z) holds at least 5% of the issued and outstanding shares
of Search Common Stock, the Stockholders, as holders of the
Registrable Securities may request one, but not more than one,
registration under the Securities Act of all or part of their
Registrable Securities on Form S-1 or any similar long-form
registration ("Long-Form Registrations"), or, if Search is eligible
for same, on Forms S-2 or S-3 or any similar short-form registration
("Short-Form Registrations"), for which Search will pay all
registration expenses, provided that the expected aggregate net cash
proceeds to all sellers of Registrable Securities in any underwritten
offering is not less than $5 million. The Stockholders (either
jointly or severally)collectively will be entitled to request only one
(1) registration under this Section 7.5(a). A registration will not
count as the one permitted registration until it has become effective;
provided, that if, within 60 days after it has become effective, the
offering of Registrable Securities pursuant to such registration is
interfered with by any stop order, injunction or other order or
requirement of the SEC or other governmental agency or court, such
registration will be deemed not to have been effected. The
registration under this Section 7.5(a) shall be, at the option of the
Stockholders after consultation with Search, either (w) a shelf
registration which Search agrees to keep effective for a period of not
less than ninety (90) days, or (x) an underwritten registration.
Search shall have the right to select the investment banker(s) and
manager(s) to administer any underwritten offering, subject to the
consent of the Stockholder whose shares are being registered
thereunder, which consent shall not be unreasonably withheld. The
registration requested pursuant to this Section 7.5(a) is referred to
herein as a "Demand Registration." The Demand Registration will be a
Short-Form Registration whenever Search is permitted to use any
applicable short form.
(i) Priority on Demand Registrations.
Within fifteen (15) days after Search has provided the
requesting Stockholder with the "Section 7.5(d) Notice" (as
defined in section 7.5(d) below) indicating its intention to
proceed with a registration as provided under subparagraphs
(i) or (ii) of Section 7.5(d), Search will give written notice
of such request to the Stockholders and will include in such
Demand Registration all Registrable Securities with respect to
which Search has received written requests for inclusion
therein within fifteen (15) days after the receipt of Search's
notice. If the managing underwriter of the Demand
Registration advises Search in writing that in its opinion the
number of Registrable Securities and other securities
requested to be included exceeds the number of Registrable
Securities and other securities which can be sold in such
offering or is reasonably expected to result in a reduction of
more than 5% in the estimated public offering price for the
Registrable Securities, Search will include in such
registration (1) the Registrable Securities of the
Stockholder(s) which initiated the
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Demand Registration, (2) Registrable Securities of the other
Stockholders requested to be included in such registration, if
any, and (3) other securities requested to be included in such
registration pro rata among the respective holders thereof on
the basis of their securities requested to be included
therein.
(ii) Restrictions on Registrations.
Search will not be obligated to effect any Demand Registration
within six months after the effective date of a registration
in which the holders or Registrable Securities were given
piggyback rights pursuant to Section 7.5(b) below and in which
there was no reduction in the number of Registrable Securities
requested to be included.
(iii) Registrable Securities. As to any
particular Registrable Securities, the securities held by a
Stockholder will cease to be Registrable Securities at such
time as said Stockholder is either no longer subject to Rule
145(d)(1) or owns less than 5% of the issued and outstanding
shares of Search Common Stock. For purposes of this
Stockholders Agreement, a Person will be deemed to be a holder
of Registrable Securities whenever such Person has the right
to acquire such Registrable Securities (by conversion or
otherwise, but disregarding any legal restrictions upon the
exercise of such right), whether or not such acquisition has
actually been effected. Notwithstanding the foregoing, in the
event of any Transfer of Registrable Securities which is
permitted under this Agreement, then such shares shall
continue to be "Registrable Securities" for purposes of this
Agreement, provided, that if any Transfer is made by a
Stockholder to its stockholders or partners pursuant to
Section 7.1(b) above, and a Demand Registration request is
made pursuant to this Section 7.5, it shall be the obligation
of such Transferring Stockholder to obtain from its
stockholders or partners (as the case may be) at its expense
all information required by Search (acting in a commercially
reasonable manner) necessary to prepare such registration
statement and the Stockholders indemnification obligations
under Section 7.5(c)(vi)(2) shall include such information as
if the information related to the Stockholder obtaining it
from its stockholders or partners
(b) "Piggyback" Registration Rights.
(i) Beginning with the end of the Lock-Up
Period and continuing until such time as said Stockholder is
either no longer subject to Rule 145(d)(1) or owns less than
5% of the issued and outstanding shares of Search Common
Stock, at any time that Search intends to file a registration
statement under the Securities Act for purposes of a public
offering, (including, but not limited to, registration
statements relating to secondary offerings of securities of
Search, but excluding registration statements relating to
employee benefit plans and corporate reorganizations), Search
shall notify that Stockholder in writing of its intent to file
such registration statement at least twenty (20) days prior to
the filing thereof and will afford each Stockholder an
opportunity to include in such registration
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statement all or part of such Stockholder's Registrable
Securities. Each Stockholder desiring to include in any such
registration statement all or any part of its Registrable
Securities shall, within ten (10) days after receipt of the
above-mentioned notice from Search, so notify Search in
writing. Such Stockholder's notice shall state the intended
method of disposition of the Registrable Securities by such
Stockholder. If a Stockholder decides not to include all of
its Registrable Securities in a registration statement
thereafter filed by Search, such Stockholder shall
nevertheless continue to have the right to include any of its
Registrable Securities in any subsequent registration
statement or registration statements as may be filed by Search
with respect to offerings of its securities, all upon the
terms and conditions set forth herein.
(ii) All Stockholders proposing to
distribute their Registrable Securities pursuant to the
registration statement shall enter into an underwriting
agreement in customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding
any other provision hereof, if the underwriter determines in
good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that
may be included in the underwriting shall be allocated, first,
to Search; and second, to the Stockholders and other
stockholders having registration rights on a pro rata basis
based on the total number of shares of Registrable Securities
held by the Stockholders and such other stockholders. No such
reduction shall reduce the securities being offered by Search
for its own account to be included in the registration and
underwriting.
(c) General Provisions Relating to Registration.
(i) Fees. Search shall bear all fees
and expenses incurred in connection with the registrations
under this Section 7.5, including without limitation all
registration, filing, qualification, printers' and accounting
fees, fees and disbursements of counsel to Search, except as
set forth in Section 7.1(b). The Stockholders shall bear all
underwriting discounts and commissions.
(ii) Copies. Search shall also furnish to
the Stockholders such number of copies of the registration
statement and the prospectus included therein (including each
preliminary prospectus) as such persons may reasonably request
in order to facilitate the sale or other disposition of the
Search Common Stock covered by such registration statement.
(iii) Blue Sky. Search shall use
commercially reasonable efforts to register or qualify the
Search Common Stock covered by such registration statement
under Blue Sky Laws in those states chosen by Search, and in
the states of Mississippi, Texas, Illinois and New York to the
extent legally required; if a Stockholder desires for Search
to register or qualify the Search Common Stock in
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another Blue Sky jurisdiction, such Stockholder shall pay for
the fees and expenses incurred in connection therewith.
(iv) Inspection. Search shall make
available for inspection by the Stockholders, and any
attorney, accountant, or other agent retained by each
Stockholder, all financial and other records, pertinent
corporate documents, and properties of Search, and cause
Search's officers, directors, and employees to supply all
information reasonably requested by each such Stockholder or
any such attorney, accountant, or agent in connection with
such registration statement.
(v) Stockholder Information. In connection
with any registration pursuant to this Section 7.5, each
Stockholder will furnish to Search in writing such information
with respect to itself and the proposed distribution by it of
Search Common Stock as shall be reasonably requested by Search
in order to assure compliance with federal and applicable
state securities laws. Search shall immediately notify the
Stockholders at any time of the happening of any event as a
result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of
material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
(vi) Reciprocal Indemnification.
(1) By Search. If any of a
Stockholder's Registrable Securities is registered
under the Securities Act pursuant to this Agreement,
Search will indemnify and hold harmless such
Stockholder against any losses, claims, damages, or
liabilities, to which such Stockholder may become
subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in
any registration under which any of such
Stockholder's Registrable Securities were registered
under the Securities Act pursuant to this Agreement,
any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the
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 Search of any rule or
regulation promulgated under the Securities Act
applicable to Search and relating to action or
inaction by Search in connection with any such
registration, and will reimburse such Stockholder for
any legal or other expenses reasonably incurred by
them in connection with investigating or defending
any such loss, claim, damage, liability or action;
provided, however, that Search will not be liable in
any such case if and to the extent that any such
loss, claim, damage, or liability
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arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged
omission made in such registration statement or
amendment or supplement thereto or in any such
preliminary, final or summary prospectus in reliance
upon and in conformity with written information with
respect to such Stockholder furnished to Search by
such Stockholder for use in the preparation thereof.
(2) By Stockholders. If any of a
Stockholder's Registrable Securities is registered
under the Securities Act pursuant to this Agreement,
such Stockholder (and its underwriter, if any) shall
indemnify and hold harmless Search against any
losses, claims, damages, or liabilities, to which
Search may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or
alleged untrue statement of any material fact
contained in any registration under which any of such
Stockholder's Registrable Securities were registered
under the Securities Act pursuant to this Agreement,
any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, made in reliance upon and in conformity
with written information with respect to such
Stockholder furnished to Search by such Stockholder
for use in the preparation of such registration
statement, preliminary, final or summary prospectus
or amendment or supplement, or a document
incorporated by reference into any of the foregoing,
or any violation by such Stockholder of any rule or
regulation promulgated under the Securities Act
applicable to such Stockholder and relating to action
or inaction by such Stockholder in connection with
any such registration. Such Stockholder will
reimburse Search for any legal or other expenses
reasonably incurred by Search in connection with
investigating or defending any such loss, claim,
damage, liability or action.
(3) Procedure. Promptly after
receipt by an indemnified party of notice of the
commencement of any action for which indemnification
may be obtained hereunder, the indemnified party
shall, if a claim in respect thereof is to be made
against an indemnifying party hereunder, notify the
indemnifying party in writing thereof; but the
omission to so notify the indemnifying party shall
not relieve the indemnifying party from any liability
which the indemnifying party may have to the
indemnified party other than under this Section
7.5(c) and, in any event, only to the extent the
indemnifying party has been materially prejudiced by
the indemnified party's failure to provide the
indemnifying party with such notice. In case any
such action shall be brought against the
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indemnified party, the indemnifying party shall be
entitled to participate in and, to the extent the
indemnifying party shall agree that it is liable to
the indemnified party for indemnification hereunder,
to assume and undertake the defense thereof with
counsel of the indemnifying party's own choosing,
and, after notice from the indemnifying party to the
indemnified party of the indemnifying party's
election so to assume and undertake the defense
thereof and of its agreement that it is liable for
indemnification hereunder, the indemnifying party
shall not be liable to the indemnified party under
this Section 7.5(c) for any legal expenses
subsequently incurred by indemnified party in
connection with the defense thereof other than
reasonable costs of investigation and of liaison with
counsel so elected; provided, however, that if the
defendants in any such action include both the
indemnifying party and the indemnified party, and the
indemnified party shall have reasonably concluded
that there may be reasonable defenses available to
the indemnified party which are different from or
additional to those available to the indemnifying
party or if the interests of indemnified party
reasonably may be deemed to conflict with the
interests of the indemnifying party, the indemnified
party shall have the right to select separate
counsel, satisfactory to the indemnifying party in
its commercially reasonable discretion, and to assume
such legal defenses and otherwise to participate in
the defense of such action, with the reasonable
expenses and fees of such separate counsel and other
expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) Search's Rights in the Event of a Demand
Registration. In the event the Stockholder(s) delivers a request for
a Demand Registration pursuant to Section 7.5(a), Search shall have a
fifteen (15)- day period to notify the requesting Stockholder(s) in
writing (a "Section 7.5(d) Notice") of Search's intent to proceed
under either subparagraph (i), (ii), or (iii) of this Section 7.5(d),
as follows:
(i) Prompt Registration. Search shall
proceed with the filing of the registration statement pursuant
to such Demand Registration, and shall file such registration
statement with the SEC within thirty (30) days from the date
the Section 7.5(d) Notice was delivered to the Stockholder,
and shall use all reasonable efforts to have the SEC declare
the registration statement effective as soon as practicable
thereafter.
(ii) Delayed Registration. If Search
reasonably concludes that the filing of a registration
statement would require disclosure of material information
which Search has a bona fide business purpose for preserving
confidential, Search's Section 7.5(d) Notice may so inform the
requesting Stockholder, in which case Search may delay the
registration but, in any event, shall file such registration
statement with the SEC within sixty (60) days from the date
the Section 7.5(d) Notice was delivered to the Stockholder,
and shall use all
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reasonable efforts to have the SEC declare the registration
statement effective as soon as practicable thereafter.
(iii) Purchase of Search Common Stock. If
a Demand Registration request is received, in lieu of
proceeding with the registration as provided in Sections
7.5(d)(i) or 7.5(d)(ii) above, Search shall thereupon have the
right to purchase, or cause a third party designated by Search
to purchase, all, but not less than all, of the Stockholder's
Search Common Stock identified in the such Demand Registration
request. If Search or the designated third party exercises
Search's right to purchase, Search shall notify the
Stockholder of the same within fifteen (15) days of receipt of
such Demand Registration request. If Search or the designated
third party does not timely exercise Search's right to
purchase, such right shall lapse and be null and void with
respect to the number of shares of Registrable Securities
described in such Demand Registration request. The purchase
price for the Registrable Securities identified in such Demand
Registration request shall be in cash and in an amount agreed
to by the parties and such purchase shall be consummated
within thirty (30) days from the date the Section 7.5(d)
Notice is delivered to the Stockholder. If, however, the
parties are unable to agree on the purchase price within
fifteen (15) days from the date the Section 7.5(d) Notice is
delivered, then Search must proceed under clause (i) or (ii)
above.
8. STANDSTILL PROVISIONS.
8.1 STANDSTILL COVENANTS OF STOCKHOLDERS. For the period of time
set forth below in Section 13.2, and subject to Section 9 below, the
Stockholders severally covenant that the Stockholders shall not, and the
Stockholders shall cause each Stockholder Affiliate (and each such Affiliate's
own affiliates and associates) not to:
(a) No Acquisition of Additional Search Securities:
acquire, offer or propose to acquire, or agree to acquire, directly or
indirectly, alone or in concert with any other Person, by purchase,
exchange, gift or otherwise, any Search Securities or direct or
indirect rights, warrants or options to acquire (through purchase,
exchange, conversion or otherwise) any Search Securities, or any
securities issued in connection with any merger, consolidation, sale
of assets, combination or otherwise to which Search or any Search
Affiliate is a party, other than the Search Common Stock which such
Stockholder acquires pursuant to the Merger or which Search issues to
such Affiliate as part of an employment or other arrangement with
Search or Newco.
(b) No Proxy Solicitation: (i) make, or in any way
participate in, directly or indirectly, alone or in concert with
others, any "solicitation" of "proxies" (as such terms are defined or
used in Regulation 14A under the Exchange Act, as in effect at the
Effective Time) or become a "participant" in any "election contest"
(as such terms are defined or used in Rule 14a-11 under the Exchange
Act) with respect to Search or any
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Search Affiliate; or (ii) seek to advise or influence any Person with
respect to the voting of any Search Securities, or (iii) initiate,
propose or otherwise solicit Search Securities holders for the
approval of one or more stockholders' or other securities holders'
proposals or induce or attempt to induce any other Person to initiate
any stockholder or other securities holder proposal.
(c) No Formation of a Group; No Influence: take any
action, alone or in concert with any other Person, to (i) form, join
or in any way participate in a Group with respect to any Search
Securities; (ii) acquire or affect the control of Search or any Search
Affiliate; (iii) control or influence the management, Board of
Directors, policies or affairs of Search or any Search Affiliate; or
(iv) participate in or encourage any Persons to take any action which
is prohibited to be taken by the Stockholders or any Stockholder
Affiliate pursuant to this Stockholders Agreement.
(d) No Election of Directors: other than for ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇., or any replacement MSD designee to Search's Board of Directors
approved by Search's management (acting in a commercially reasonable
manner) if ▇▇. ▇▇▇▇▇▇ is unable or unwilling to serve on Search's
Board of Directors, vote their shares for the election of any director
to Search's Board of Directors not approved by the management of
Search.
(e) No Statements: publicly propose any transaction with
respect to Search or any Search Affiliate, including but not limited
to a tender offer for voting securities of Search, or a merger or
other business combination, sale or transfer of assets, liquidation or
other corporate transaction by Search or any Search Affiliate, or any
demand, request or proposal to amend, waive or terminate any provision
of this Stockholders Agreement.
(f) No Shopping: alone, or in concert with any other
Person, solicit, encourage, entertain or discuss with any Person, any
proposal with respect to Search or any Search Affiliate, including but
not limited to, a business combination or other transaction with, or a
change of control of, Search or any Search Affiliate; provided,
however, that the terms of this Section 8.1(f) shall not apply to any
efforts by a Stockholder to Transfer all or any part of its Search
Common Stock, subject to the terms of Section 6.2 of this Stockholders
Agreement.
(g) No Tender Offers: make, solicit, encourage, discuss
or participate in, alone or in concert with any other Person, a tender
offer for or exchange for any Search Securities.
(h) No Asset Acquisition Offers: acquire, offer to
acquire or agree to acquire, directly or indirectly, alone or in
concert with any other Person, by purchase, exchange or otherwise (i)
all or a substantial portion of the assets, tangible and/or
intangible, of Search and/or any Search Affiliate, or (ii) direct or
indirect rights, warrants or options to acquire any assets of Search
and/or any Search Affiliate.
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(i) No Financing: arrange, or in any way participate in
or encourage, directly or indirectly, alone or in concert with any
other Person, any financing for the purchase, exchange, acquisition or
transfer of any assets of Search or any Search Affiliate or any of the
Search Securities.
(j) No Call of Meeting: alone or in concert with any
other Person (i) call, or seek to call, any meeting of Search's
shareholders, noteholders, securities holders and/or other creditors,
or (ii) in connection with such meeting make any request to examine,
copy or make extracts from any of Search's books, records, or list of
shareholders.
(k) No Announcement: announce an intention to do, or
enter into any agreement, arrangement or understanding with any other
Person to do, any of the actions restricted or prohibited under this
Section 8, including but not limited to announcing a change in their
intent, purpose, plans or proposals with respect to either Search, any
Search Affiliate or any of the Search Securities.
(l) No Creditor Actions; Bankruptcy: alone, or in
concert with any other Person, (i) communicate with any of Search's
creditors regarding Search or any Search Affiliate; (ii) file, or
initiate the filing of any bankruptcy petition against Search or any
Search Affiliate; or (iii) take any other action which has a material
negative effect on Search's financial condition.
8.2 PERMITTED COMMUNICATIONS. Notwithstanding any of the
foregoing, each of the Stockholders may (i) file any documents required by the
SEC and (ii) respond to any legal subpoena requiring the production of
documents relating to, or governed by the terms of, this Stockholders
Agreement, provided that such Stockholder shall provide Search with notice of
the subpoena, including the information requested thereunder, immediately
following its receipt of such subpoena.
9. SEARCH BOARD DESIGNEE. Nothing contained in this Stockholders
Agreement shall be construed as preventing ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. (or any
replacement for ▇▇. ▇▇▇▇▇▇ if ▇▇. ▇▇▇▇▇▇ is unable or unwilling to serve on
Search's Board of Directors) from serving on Search's Board of Directors and
taking any necessary action as a Director of Search which he is required to
take to fulfill his fiduciary duty as a Director of Search.
10. INDEMNIFICATION BY STOCKHOLDERS.
10.1 INDEMNIFICATION. Each Stockholder, for such Stockholder and
its successors and assigns (individually, an "Indemnifying Party" and
collectively, the "Indemnifying Parties"), covenants and agrees to indemnify,
defend, protect and hold harmless Search, Newco and the Surviving Corporation
and their respective officers, directors, employees, successors and assigns
(individually, a "Search Indemnified Party" and collectively "Search
Indemnified Parties") from, against and in respect of:
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(a) all liabilities, losses, claims, damages, punitive
damages, causes of action, lawsuits, administrative proceedings
(including informal proceedings), investigations, audits, demands,
assessments, adjustments, judgments, settlement payments,
deficiencies, penalties, fines, interest (including interest from the
date of such damages) and costs and expenses (including without
limitation reasonable attorneys' fees and disbursements of every kind,
nature and description) (collectively, "Claims") suffered, sustained,
incurred or paid by the Search Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any Securities Claim, as that term
is defined in the document listed as the last item on Schedule
3.19 to the Merger Agreement, whether or not such Claim is
covered by that document; or
(ii) item 7 on Schedule 3.7 of the
Merger Agreement (the "Texas Litigation"), or claims alleged
or substantiated by other individuals which are based upon the
same events or occurrences as have been alleged in the Texas
Litigation, to the extent that all Claims incurred in
connection therewith exceed $400,000; or
(b) any and all Claims incident to any of the foregoing
or to the enforcement of this Section 10.
(c) The Stockholders' obligations as Indemnifying Parties
under this Stockholders Agreement shall be joint and several. Subject
to Section 10.3(a)(ii) below, the Stockholders' respective obligations
as Indemnifying Parties under this Section 10 shall be limited to the
amount of Search Common Stock deposited into the General Escrow Fund
on behalf of the Stockholders pursuant to Section 12.1 below.
(d) Notwithstanding anything to the contrary in this
Section 10, if (i) any Claim governed by this Section 10 which arises
or accrues prior to Closing is reflected in the Most Recent Financial
Statements (as defined in Section 1.2(g) of the Merger Agreement, and
(ii) a purchase price adjustment occurs pursuant to Section 1.2(g) of
the Merger Agreement, then all such Claims, to the extent reflected in
the Most Recent Financial Statements, shall not be subject to
indemnification by the Indemnifying Parties pursuant to this Section
10.
10.2 NOTICE OF CLAIMS
(a) Any Search Indemnified Party seeking indemnification
hereunder shall give to the Indemnifying Party a notice (a "Claim
Notice") describing in reasonable detail the facts giving rise to any
Claim and shall include in such Claim Notice (if then known) the
amount or the method of computation of the amount of such Claim;
provided, that a Claim Notice in respect of any action at law or suit
in equity by or against a third person as to which indemnification
will be sought shall be given promptly after the action or suit
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has commenced; provided, further, that failure to give such notice
shall not relieve the Indemnifying Party of its obligations hereunder
except to the extent it shall have been materially prejudiced by
such failure.
(b) After the giving of any Claim Notice pursuant hereto,
the amount of indemnification to which a Search Indemnified Party
shall be entitled under this Section 10 shall be determined, to the
extent feasible: (i) by the written agreement between the Search
Indemnified Party and the Indemnifying Party; (ii) by a binding
nonappealable award in an arbitration proceeding; (iii) by a final
judgment or decree of any court of competent jurisdiction; or (iv) by
any other means to which the Search Indemnified Party and the
Indemnifying Party shall agree. The judgment or decree of a court
shall be deemed final when the time for appeal, if any, shall have
expired and no appeal shall have been taken or when all appeals taken
shall have been finally determined. Notwithstanding the foregoing,
unless the Indemnifying Parties dispute the coverage of the Claim by
this Section 10, the Search Indemnified Party shall be entitled to
receive from the Escrow Fund its costs and expenses incurred regarding
investigating and defending any such Claim regardless of whether the
parties have agreed to the exact amount of indemnification coverage as
set forth above in this Section 10.2(b).
10.3 THIRD PERSON CLAIMS.
(a) (i) Subject to Section 10.3(b), the
Search Indemnified Party shall have the right to conduct and
control, through counsel of its choosing, the defense,
compromise or settlement of any third person claim, action or
suit (a "Third Person Claim") against such Search Indemnified
Party as to which indemnification will be sought hereunder,
and in any such case the Indemnifying Party shall cooperate in
connection therewith and shall furnish such records,
information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be
reasonably requested by the Search Indemnified Party in
connection therewith; provided, that the Indemnifying Party
may participate, through counsel chosen by it and at its own
expense, in the defense of any such Third Person Claim as to
which the Search Indemnified Party has so elected to conduct
and control the defense thereof; and provided, further, that
the Search Indemnified Party shall not, without the written
consent of the Indemnifying Party (which consent shall not be
unreasonably withheld), pay, compromise or settle any such
Third Person Claim, except that no such consent shall be
required if, following a written request from the Search
Indemnified Party, the Indemnifying Party shall fail, within
fifteen (15) days after the making of such request, to
acknowledge and agree in writing that, if such Third Person
Claim shall be adversely determined, such Indemnifying Party
has an obligation to provide indemnification hereunder to such
Search Indemnified Party.
(ii) Provided the Indemnifying Party has
acknowledged its indemnification obligation pursuant to
Section 10.3(a)(i) above, in respect of a
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Third Party Claim and if the Search Indemnified Party obtains
a preliminary settlement from a third party regarding such
Third Person Claim, the Search Indemnified Party shall submit
such preliminary settlement, including the proposed settlement
amount, to the Indemnifying Party for approval. If such
preliminary settlement is rejected by the Indemnifying Party,
and subsequently such Third Party Claim is settled by the
Indemnifying Party, the amount by which the settlement reached
by the Indemnifying Party is equal to the proposed settlement
amount shall be paid to the Search Indemnified party from
Escrow, and any excess amount of the settlement reached by the
Indemnifying shall be paid to the Search Indemnified Party in
an equivalent amount of Search Common Stock by the
Indemnifying Party within one business day after the date of
the settlement. Any such excess payment shall not be subject
to the maximum limit in the Escrow Fund.
(iii) Notwithstanding the foregoing, the
Search Indemnified Party shall have the right to pay, settle
or compromise any such Third Person Claim without the
Indemnifying Party's consent, provided that in such event the
Search Indemnified Party shall waive any right to indemnity
therefor hereunder unless such consent is unreasonably
withheld.
(b) If any Third Person Claim is solely for money damages
within the escrow amount or will have no continuing effect in any
material respects on the business of the Surviving Corporation, then
the Indemnifying Party shall have the right to conduct and control,
through counsel of its choosing, the defense, compromise or settlement
of any such Third Person Claim if the Indemnifying Party has
acknowledged and agreed in writing that, if the same is adversely
determined, the Indemnifying Party has an obligation to provide
indemnification to the Search Indemnified Parties in connection
therewith; provided, that the Search Indemnified Party may
participate, through counsel chosen by it and at its own expense, in
the defense of any such Third Person Claim, provided, that in such
event the Search Indemnified Party shall waive any right to indemnity
therefor hereunder unless the Search Indemnified Party shall have
sought the consent of the Indemnifying Party to such payment,
settlement or compromise and such consent was unreasonably withheld,
in which event no Claim therefor hereunder shall be waived.
11. RESERVED.
12. ESCROWS OF SEARCH COMMON STOCK.
12.1 GENERAL ESCROW. Subject to Section 12.2, upon the Closing,
that number of shares of Search Common Stock to be delivered pursuant to
Section 1.3 of the Merger Agreement to or for the account of the Stockholders
having a value, based on the Valuation Period Market Value, equal to Two
Million Five Hundred Thousand Dollars ($2,500,000) (the "Escrow Fund") shall be
delivered to the Escrow Agent to be held by the Escrow Agent pursuant to the
Escrow Agreement, a copy of which is attached as Schedule 12.1. The parties
hereto, and the Escrow Agent, shall execute the Escrow Agreement at Closing.
The portion of the Escrow
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Fund to be delivered to the Escrow Agent for the account of each Stockholder
shall be equal to the ratio that the Merger Consideration received by that
Stockholder bears to the aggregate Merger Consideration receivable by all of
the Stockholders. The Escrow Agent shall hold all of the Escrow Fund pursuant
to the Escrow Agreement and shall distribute the same pursuant to the terms of
the Escrow Agreement, joint instructions signed by Search and the Stockholders,
or pursuant to court order. The Escrow Agreement shall provide that subject to
the existence of an indemnification claim or Pending Claim, the Escrow Agent
shall, commencing 12 months from the Effective Time and continuing every six
(6) months thereafter, transfer to the Stockholders from the Escrow Fund pro
rata an amount equal to twenty-five percent (25%) of the original number of
shares of Search Common Stock constituting the Escrow Fund (as adjusted for
stock splits, etc.) not reserved for such indemnification claim or Pending
Claim. To the extent there is an indemnification claim, the Escrow Agent shall
transfer to Search shares of Search Common Stock to the extent necessary to
satisfy the indemnification claims in accordance with Section 10 and the Escrow
Agreement. If there are any Pending Claims existing at the time the Escrow
Agent would otherwise make an interim or the final distribution according to
the provisions of this Section 12.1, the parties hereto shall attempt to
negotiate the value of such Pending Claims. If a value has been agreed upon by
the parties hereto, the Escrow Agent shall retain 1.5 times the agreed upon
value for disposition upon the determination of liabilities in regard to the
Pending Claims. If the parties are not able to agree to a value of the Pending
Claims, then the Escrow Agent shall retain all of the securities remaining in
the Escrow Fund until final resolution of the Pending Claims. Upon the final
resolution of any Pending Claims, the Escrow Agent shall distribute any shares
of Search Common Stock, including dividends, remaining in Escrow.
12.2 ADJUSTMENT OF ESCROW FUND SIZE. Notwithstanding anything to
the contrary in Section 12.1, if Search, acting in a commercially reasonable
manner, believes it is necessary to increase the size of the Escrow Fund prior
to Closing, based on the likelihood or magnitude of Claims, it shall notify the
Stockholders of the same and the amount of the proposed increase, in any event
at least ten days prior to Closing. The maximum amount of the increase to the
Escrow Fund which can be proposed by Search pursuant to this Section 12.2 shall
be One Million Dollars ($1,000,000.00). If the Stockholders agree with the
proposed increase, additional Search Common Stock shall be contributed to the
Escrow Fund at Closing pro rata by or on behalf of the Stockholders. If,
however, the Stockholders dispute in whole or part the amount of the proposed
increase in the Escrow Fund, they shall notify Search of such dispute, in which
event Search and the Stockholders shall attempt to reasonably resolve their
differences prior to Closing. If the Stockholders and Search are unable to
reconcile their differences, the parties shall follow the procedures set forth
below in Section 16.7.
12.3 STOCKHOLDERS RECEIVE BENEFIT OF VALUE INCREASE. If the value
of the Search Common Stock held in the Escrow Fund (but not in the Tax Holdback
Fund set forth in Section 12.4) increases above the value of the Escrow Fund as
of Closing (not including any additional contribution of Search Common Stock to
the Escrow Fund which may occur pursuant to Section 12.2 above), the
Stockholders shall be entitled to receive the benefit of any such increase in
the value of the Escrow Fund in excess of the original Escrow Fund value. For
example, if 500,000 shares of Search Common Stock valued at $5.00 per share is
contributed to the Escrow Fund at
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Closing, and at the time of the final distribution by the Escrow Agent the
parties agree that Pending Claims exist totalling $2.5 Million, and the value
of the Search Common Stock has increased to $10.00 per share, 250,000 shares of
Search Common Stock shall be retained in Escrow to satisfy the Pending Claims,
and the remaining 250,000 shares shall be distributed to the Stockholders pro
rata. (The foregoing example ignores the interim distributions to the
Stockholders pursuant to 12.1.) Conversely, if the value of the Escrow Fund
decreases below the original Escrow Fund value, the Stockholders shall not be
obligated to contribute any additional shares of Search Common Stock to the
Escrow Fund to restore the Escrow Fund to its original value.
12.4 TAX HOLDBACK ESCROW. MS Financial has represented to Search
that MS Financial is entitled to receive a total of $6.3 million of income tax
refunds from the Internal Revenue Service and various state taxing authorities,
in regard to which MS Financial has already reflected on the Current Balance
Sheet an income tax receivable of at least $4,000,000. As assurance that such
income tax refunds will be collected by MS Financial or the Surviving
Corporation, upon the Closing, that number of shares of Search Common Stock to
be delivered pursuant to Section 1.3 of the Merger Agreement to or for the
account of the Stockholders having a value, based on the Valuation Period
Market Value, equal to Two Million Three Hundred Thousand Dollars ($2,300,000)
(the "Tax Holdback Fund") shall be delivered to the Escrow Agent to be held by
the Escrow Agent pursuant to Escrow Agreement. The portion of the Tax Holdback
Fund to be delivered to the Escrow Agent for the account of each Stockholder
shall be equal to the ratio that the Merger Consideration received by that
Stockholder bears to the aggregate Merger Consideration receivable by all of
the Stockholders. The Escrow Agent shall hold all of the Tax Holdback Fund
pursuant to the relevant provisions of the Escrow Agreement and shall
distribute the same pursuant to the terms of the Escrow Agreement, joint
instructions signed by Search and the Stockholders, or pursuant to court order.
On a quarterly basis, shares of Search Common Stock held in the Tax Holdback
Fund shall be released from escrow in an amount that is determined by
multiplying (i) the number of shares of Search Common Stock originally
transfered into the Tax Holdback Fund at the Closing by (ii) the fraction
determined by dividing (A) the total dollar amount of income tax refunds
received by MS Financial or the Surviving Corporation in excess of $4,000,000
by (B) $2,300,000 and (b) subtracting from the product the total number of
shares of Search Common Stock, if any, previously released from the Tax
Holdback Escrow Fund pursuant to this sentence. It is agreed by the parties
that upon receipt by the Surviving Corporation of the full income tax refund,
the Escrow Agent shall make the final distribution from the Tax Holdback Fund;
provided, however, that, if any portion of the income tax refund has not been
received by MS Financial or the Surviving Corporation by the first annual
anniversary of the Closing, all of the remaining Search Common Stock held in
the Tax Holdback Fund shall revert to Search; provided, further, that, to the
extent that any portion of the income tax refund is received by the Surviving
Corporation subsequent to such reversion, Search shall transfer to the
Stockholders either, at Search's option, cash in the amount of any portion of
the income tax refund so received or that number of shares of Search Common
Stock that would have been released from escrow pursuant to this Section 12.4
had such portion of the income tax refund been received prior to first annual
anniversary of the Closing.
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13. TERM; TERMINATION.
13.1 GENERAL RULE. Except as set forth below in Section
13.2, this Stockholders Agreement and the obligations of each
Stockholder hereunder shall terminate on the first to occur of (i) the
termination of the Merger Agreement in accordance with the terms of
such Merger Agreement (including, without limitation, the termination
of the Merger Agreement pursuant to Section 7.1(h) thereof); or (ii)
if the Merger Agreement is not terminated and the Merger is
consummated, then on the third (3rd) anniversary of the Effective
Time. If this Stockholders Agreement is terminated, each party shall
bear its own expenses with respect to this Stockholders Agreement.
13.2 EXCEPTIONS. Notwithstanding Section 13.1 above, (a)
Section 8 shall terminate on the earlier of (i) two years after the
Effective Time, and (ii) when the amount of Search Common Stock which
that Stockholder owns is less than five percent (5%) of all of the
issued and outstanding Search Common Stock; and (b) Sections 10 and 12
shall terminate upon full distribution of the Escrow Fund pursuant to
the terms of Section 12.1 and the Escrow Agreement.
14. DEFINED TERMS. Terms used herein but not otherwise defined shall have
the meanings set forth in the Merger Agreement. Notwithstanding the foregoing,
for purposes of this Stockholders Agreement, the following terms shall have the
following definitions:
"Group" has the same meaning as the term "group" set forth in Section
13(d)(3) of the Exchange Act.
"Pending Claim" shall mean any Claim governed by Section 10 which has
not been resolved as of any interim or final distribution date under
Section 12.1.
"Registrable Securities" means (i) any Search Common Stock held by the
Stockholders and (ii any securities issued or issuable with respect to
the Search Common Stock referred to in clause (i) by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, and
(iii) any other shares of Search Common Stock held by persons holding
securities described in clauses (i) or (ii) above.
"Search Affiliate" means each "affiliate" or "associate" of Search
(as such terms are defined in Rule 12b-2 under the Exchange Act as of
the Effective Time), whether or not such Person is such an Affiliate
as of the Effective Time, and each officer, director, employee,
shareholder, consultant, agent, representative, successor and assign,
of either Search or any Search Affiliate; excluding, however, each of
the Stockholders and any Stockholder Affiliate.
"Search Securities" means all common stock (including but not limited
to the Search Common Stock issued to the Stockholders pursuant to the
Merger), preferred stock,
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options, warrants, notes, and debentures (whether senior or
subordinated, secured or unsecured, convertible or nonconvertible),
and any other securities, which have been issued prior to the
Effective Time and/or which are issued during the term of this
Stockholders Agreement, by Search or any member of the Search Group.
"Stockholder Affiliate" means each "affiliate" or "associate" of a
Stockholder (as such terms are defined in Rule 12b-2 under the
Exchange Act as of the Effective Time), whether or not such Person is
such an Affiliate as of the Effective Time, and each officer,
director, employee, shareholder, consultant, agent, representative,
successor and assign, of either a Stockholder or any Stockholder
Affiliate; excluding, however, Search and any Search Affiliate.
"Transfer" means to pledge, sell, hypothecate, give, exchange, assign,
convey or otherwise transfer.
15. MSD AGREEMENTS.
15.1 TRADEMARK; SUBLEASE; MIS. MSD hereby covenants and agrees
that: (a) a modified, royalty free license agreement reasonably acceptable to
Search related to use of the "MS" logo and trademark will be entered into at or
prior to Closing between itself as Licensor and MS Financial as Licensee
effective as of the Effective Time; (b) the Office Building Sublease Agreement
dated as of January 1, 1994 by and between MSD as sublandlord and MS Financial
as subtenant shall not be modified or amended prior to the Effective Time and
shall terminate at the end of its current term on October 31, 1997; and (c) the
Data Processing Hardware System Service Agreement dated January 1, 1994 between
MSD and MS Financial, as amended, will be further amended to provide that it
will terminate ninety (90) days after the Effective Time at no cost to Search
other than obligations existing in said agreement on the date this Stockholders
Agreement is signed.
15.2 MSDSUB OBLIGATIONS. MSD covenants and agrees to take all
action necessary to cause MSDSub to perform all of its agreements, covenants
and obligations under this Stockholders Agreement. MSD shall be liable for any
breach of any representation, warranty, covenant or agreement of MSDSub and for
any breach of this covenant.
16. MISCELLANEOUS.
16.1 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier or sent by
electronic transmission, with confirmation received, to the telecopy numbers
specified below:
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If to MSD or
MSDSub: MS Diversified Corporation
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
President and CEO
If to GTCR IV: Golder, Thoma, Cressy, Rauner, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
If to Search
or Newco: Search Capital Group, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇.▇. ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chairman, President & CEO and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Executive Vice
President and General Counsel
With a copy
to: Riezman & Blitz, P.C.
▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: 314-727-6458
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or to such other address or telecopy number as any party may have furnished to
the other parties in writing in accordance herewith.
16.2 ASSIGNMENT; BENEFITS. The rights and obligations of Search
hereunder may be assigned, in whole or in part, to Newco or any other direct
wholly-owned subsidiary of Search, to the extent and for so long as it remains
a direct wholly-owned subsidiary of Search. Other than as permitted in the
preceding sentence, this Stockholders Agreement may not be assigned by any
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party hereto without the prior written consent of the other parties. This
Stockholders Agreement shall be binding upon, and shall inure to the benefit
of, Search and its successors and permitted assigns.
16.3 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable harm would occur in the event that any of the provisions of this
Stockholders Agreement were not performed in accordance with its specific terms
or were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Stockholders Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state thereof having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
16.4 AMENDMENT. This Stockholders Agreement may not be amended or
modified, except by an instrument in writing signed by or on behalf of each of
the parties hereto. This Stockholders Agreement may not be waived by either
party hereto, except by an instrument in writing signed by or on behalf of the
party granting such waiver.
16.5 GOVERNING LAW. This Stockholders Agreement shall be governed
by and construed in accordance with the internal laws of the State of Delaware.
16.6 COUNTERPARTS. This Stockholders Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
16.7 DISPUTE RESOLUTION. Unless otherwise provided herein, in the
event that any dispute shall arise in connection with this Agreement, the
parties hereto shall agree on the use of a form of alternate dispute resolution
for the resolution of such dispute. If the parties are unable to agree on the
form of alternate dispute resolution, then such dispute shall be finally
settled by arbitration by three (3) arbitrators in Dallas, Texas, pursuant to
the Commercial Arbitration Rules then pertaining of the American Arbitration
Association, it being the intent of the parties that such arbitration shall be
concluded as promptly as reasonably practicable. If such an arbitration
occurs, the arbitrators shall be required to award reasonable attorneys' fees
and expenses to the prevailing party, which shall be paid by the non-prevailing
party in cash or its ready equivalent. Judgment upon the award may be entered
in any court having jurisdiction. If any dispute arises regarding Articles 10
and/or 12 hereof, and Search is the prevailing party, the required award of
attorneys' fees and expenses shall not be governed or limited by the maximum
limit of the Escrow Fund, nor shall the amount of such attorneys fees and
expenses be credited against the Escrow Fund in any manner.
* * * * *
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IN WITNESS WHEREOF, this Stockholders Agreement has been executed by
or on behalf of each of the parties hereto, all as of the date first above
written.
SEARCH CAPITAL GROUP, INC.
("Search")
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Title: President/CEO
MS FINANCIAL SERVICES, INC.
("MSDSub")
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
Title: President
Shares of MS Financial Stock Owned: 3,070,000
-----------------------------------------------------
MS DIVERSIFIED CORPORATION
("MSD")
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
Title: President
Shares of MS Financial Stock Owned: 1,250,000
---------------------------------------------------
GOLDER, THOMA, ▇▇▇▇▇▇, ▇▇▇▇▇▇ FUND IV, L.P.
("GTCR IV")
By: GTCR IV, L.P., its General Partner
By: Golder, Thoma, Cressy, Rauner, Inc.,
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Authorized Officer
Shares of MS Financial Stock Owned: 3,720,000
-----------------------------------------------------
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