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EXHIBIT 10.11
AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT
dated as of August 3, 1998
among
DLJ MERCHANT BANKING PARTNERS, L.P.,
DLJ INTERNATIONAL PARTNERS, C.V.,
DLJ OFFSHORE PARTNERS, C.V.,
DLJ MERCHANT BANKING FUNDING, INC.,
DLJ FIRST ESC, L.P.,
DLJ ESC II, L.P.,
DLJ CAPITAL CORPORATION,
SPROUT GROWTH II, L.P.,
SPROUT CAPITAL VI, L.P.,
PM FUNDING, INC.,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
ABS CAPITAL PARTNERS II, L.P.,
ARTHUR J. CORMIER,
JOHN F. SCHAEFER,
THE FREEDLAND 1994 UNITRUST,
THE MORARU 1994 UNITRUST,
THE LE 1994 UNITRUST,
THE NAJJAR 1994 UNITRUST,
NEIL H. BRUMBERGER,
HART H. BRUMBERGER,
ROGER D. PETERS AND MARY ANNE CHRISTINE PETERS LIVING
TRUST,
JEFFREY K. RHOTON AND YVONNE H. RHOTON LIVING TRUST,
RAYMOND M. KARAM,
RANDALL E. BYE,
PEDRO A. AYLWIN,
DR. GILBERT F. AMELIO,
WILLIAM E. TERRY
and
PHASE METRICS, INC.
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TABLE OF CONTENTS
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PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................2
ARTICLE 2
CORPORATE GOVERNANCE
SECTION 2.01. Composition of the Board.......................................10
SECTION 2.02. Removal........................................................10
SECTION 2.03. Vacancies......................................................11
SECTION 2.04. Termination of Rights and Obligations..........................11
SECTION 2.05. Action by the Board............................................12
SECTION 2.06. Certificate of Incorporation and Bylaws........................12
ARTICLE 3
RESTRICTIONS ON TRANSFER
SECTION 3.01. General........................................................12
SECTION 3.02. Legend on Securities...........................................13
SECTION 3.03. Permitted Transferees..........................................14
ARTICLE 4
RIGHTS OF FIRST REFUSAL; TAG ALONG RIGHTS; PREEMPTIVE RIGHTS; DRAG ALONG
RIGHTS; TERMINATION AND INAPPLICABILITY OF PROVISIONS
SECTION 4.01. Right of First Refusal; Tag along Rights.......................14
SECTION 4.02. Preemptive Rights..............................................20
SECTION 4.03. Right to Compel Participation in Certain Transfers.............21
SECTION 4.04. Improper Transfer..............................................23
SECTION 4.05. Termination of Agreement.......................................23
SECTION 4.06. Inapplicability of Transfer Restrictions and Corporate
Governance Provisions to PM Funding, Inc..............................23
ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. Demand Registration............................................24
SECTION 5.02. Incidental Registration........................................26
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PAGE
SECTION 5.03. Holdback Agreements............................................28
SECTION 5.04. Registration Procedures........................................29
SECTION 5.05. Indemnification by the Issuer..................................32
SECTION 5.06. Indemnification by Participating Securityholders...............32
SECTION 5.07. Conduct of Indemnification Proceedings.........................33
SECTION 5.08. Contribution...................................................34
SECTION 5.09. Participation in Public Offering...............................36
ARTICLE 6
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.01. Confidentiality................................................36
SECTION 6.02. No Inconsistent Agreements.....................................37
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. Entire Agreement...............................................37
SECTION 7.02. Binding Effect; Benefit........................................37
SECTION 7.03. Assignability..................................................38
SECTION 7.04. Amendment; Waiver; Termination.................................38
SECTION 7.05. Exclusive Financial Advisor and Investment Banking
Advisor...............................................................38
SECTION 7.06. Notices........................................................38
SECTION 7.07. Headings.......................................................44
SECTION 7.08. Counterparts...................................................44
SECTION 7.09. Applicable Law.................................................44
SECTION 7.10. Specific Enforcement...........................................44
SECTION 7.11. Consent to Jurisdiction........................................44
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AMENDED AND RESTATED SECURITYHOLDERS AGREEMENT
AMENDED AND RESTATED AGREEMENT dated as of August 3,
1998 among DLJ Merchant Banking Partners, L.P., DLJ International Partners,
C.V., DLJ Offshore Partners, C.V., DLJ Merchant Banking Funding, Inc., DLJ
First ESC, L.P., DLJ ESC II, L.P., DLJ Capital Corporation, Sprout Growth II,
L.P., Sprout Capital VI, L.P., PM Funding, Inc., a Delaware corporation,
Donaldson Lufkin & Jenrette Securities Corporation (each of the foregoing, a
"DLJ ENTITY", and collectively, the "DLJ ENTITIES"), ABS Capital Partners II,
L.P. ("ABS"), Arthur J. Cormier ("CORMIER"), John F. Schaefer ("SCHAEFER"),
Phase Metrics, Inc. (the "ISSUER"), Richard J. Freedland and Nanette A.
Freedland as Trustees of the Freedland 1994 Unitrust, Alex Moraru and Liliana
Moraru as Trustees of the Moraru 1994 Unitrust, Hung Ba Le and Anh Le as
Trustees of the Le 1994 Unitrust, Loai Najjar and Mickie Najjar as Trustees of
the Najjar 1994 Unitrust (the "SHAREHOLDER TRUSTS"), Neil A. Brumberger and Hart
H. Brumberger (collectively, "BRUMBERGER"), Roger D. and Mary Anne Christine
Peters and Roger D. Peters and Mary Anne Christine Peters, as trustees for the
Roger D. Peters and Mary Anne Christine Peters Living Trust (collectively,
"PETERS"); Jeffrey K. and Yvonne H. Rhoton and Jeffrey K. Rhoton and Yvonne H.
Rhoton, as trustees for the Jeffrey K. Rhoton and Yvonne H. Rhoton Living Trust
(collectively, "RHOTONS"), Raymond M. Karam ("KARAM"), Randall E. Bye ("BYE"),
Pedro A. Aylwin ("AYLWIN"), Dr. Gilbert F. Amelio ("AMELIO") and William E.
Terry ("TERRY").
W I T N E S S E T H :
WHEREAS, the DLJ Entities, Cormier, Schaefer and the Issuer entered into
a Stockholders Agreement dated as of November 23, 1994 (the "ORIGINAL
AGREEMENT") in connection with the acquisition of securities of the Issuer by
certain of such parties pursuant to the Securities Purchase Agreement dated as
of November 23, 1994 (the "1994 SECURITIES PURCHASE AGREEMENT") among the DLJ
Entities (other than PM Funding, Inc.) Cormier, Schaefer and the Issuer;
WHEREAS, the First Amendment to Securityholders Agreement dated as of
June 30, 1995 amended the Original Agreement in certain respects and made the
Shareholder Trusts parties to the Original Agreement;
WHEREAS, the Second Amendment to Securityholders Agreement dated as of
July 18, 1995 further amended the Original Agreement as set forth therein and
made Brumberger a party to the Original Agreement;
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WHEREAS, the Third Amendment to Securityholders Agreement dated as of
January 18, 1996 further amended the Original Agreement as set forth therein and
made Peters and Rhotons parties to the Original Agreement;
WHEREAS, the Fourth Amendment to Securityholders Agreement dated as of
August 23, 1996 further amended the Original Agreement as set forth therein;
WHEREAS, the Fifth Amendment to Securityholders Agreement dated as of
December 31, 1996 further amended the Original Agreement as set forth therein
and made Karam, Bye and Aylwin parties to the Original Agreement; and
WHEREAS, pursuant to the Securities Purchase Agreement dated as of July
31, 1998 (the "SECURITIES PURCHASE AGREEMENT") among the DLJ Entities (other
than PM Funding, Inc.), ABS and the Issuer, the DLJ Entities (other than PM
Funding, Inc., DLJ International Partners, C.V. and DLJ Offshore Partners, C.V.)
and ABS, concurrently with the execution of this Agreement, are acquiring
securities of the Issuer; and
WHEREAS, the parties to this Amended and Restated Agreement, which
applies to all of the Securities of the Issuer outstanding on the date hereof
and held by the parties, as well as Securities acquired by them hereafter,
desire to amend and restate the Original Agreement in its entirety to govern
certain of their rights, duties and obligations after consummation of the
transactions contemplated by the Purchase Agreement;
NOW, THEREFORE the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person, provided that no securityholder of the Issuer shall be deemed an
Affiliate of any other securityholder solely by reason of any investment in the
Issuer. For the purpose of this definition, the term "CONTROL" (including with
correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and
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policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.
"AFFILIATED EMPLOYEE BENEFIT TRUST" means any trust that is a successor
to the assets held by a trust established under an employee benefit plan subject
to ERISA or any other trust established directly or indirectly under such plan
or any other such plan having the same sponsor.
"ALLOWABLE TRANSFER AMOUNT" shall mean, as to Schaefer or Cormier, as
the case may be, at any time in any given calendar year, that number of shares
of Common Stock that equals the excess, if any, of (i) 25% of the shares of
Fully Diluted Common Stock owned by such individual on November 23, 1994 over
(ii) the aggregate number of shares of Fully Diluted Common Stock theretofore
transferred (other than to Permitted Transferees) by such individual up to such
time in such calendar year, provided that the Allowable Transfer Amount of
either such individual shall equal zero at such point as such individual shall
have transferred in aggregate after November 23, 1994 (other than to Permitted
Transferees) 50% of the shares of Fully Diluted Common Stock owned by him on
November 23, 1994 (it being understood that all such determinations shall be
made taking into account any adjustments in accordance with the terms of the
applicable securities).
"BENCHMARK SHARES" means shares of Common Stock sold or proposed to be
sold by the DLJ Entities (other than to their Permitted Transferees) subsequent
to the Closing Date until the aggregate number of shares of Common Stock so sold
or proposed to be sold by the DLJ Entities (other than as aforesaid) equals
5,500,000 (taking into account any stock dividend, stock split or reverse stock
split subsequent to the Closing Date).
"BOARD" means the board of directors of the Issuer.
"BRIDGE SECURITIES PURCHASE AGREEMENT" means the Bridge Securities
Purchase Agreement dated as of November 23, 1994 between the Issuer and PM
Funding, Inc.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"COMMON STOCK" shall have the meaning set forth in the Securities
Purchase Agreement.
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"EQUITY SECURITIES" means Common Stock, securities convertible into or
exchangeable for Common Stock and options, warrants or other rights to acquire
Common Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FULLY DILUTED" means, with respect to Common Stock and without
duplication, all outstanding shares and all shares issuable in respect of
securities convertible into or exchangeable for Common Stock, stock appreciation
rights or options, warrants and other irrevocable rights to purchase or
subscribe for Common Stock or securities convertible into or exchangeable for
Common Stock and any Person shall be deemed to own such number of Fully Diluted
shares of Common Stock as such Person has the right to acquire from any other
Person (including the Issuer).
"HELIOS SHAREHOLDERS" means each Person who received shares of Common
Stock of the Issuer pursuant to that certain Stock Purchase and Exchange
Agreement dated as of June 30, 1995, among the Issuer, Helios Incorporated and
each of the other parties signatory thereto.
"INITIAL PUBLIC OFFERING" means the initial sale after the date hereof
of Common Stock pursuant to an effective registration statement under the
Securities Act (other than a registration statement on Form S-8 or any successor
form).
"NOTES" shall have the meaning set forth in the Securities Purchase
Agreement.
"OTHER SECURITYHOLDERS" means all Securityholders other than any DLJ
Entity, and their respective Permitted Transferees.
"PERCENTAGE OWNERSHIP" means, with respect to any Securityholder or any
group of Securityholders at any time, (i) the number of shares of Fully Diluted
Common Stock that such Securityholder or group of Securityholders owns at such
time, divided by (ii) the total number of shares of Fully Diluted Common Stock
at such time.
"PERMITTED TRANSFEREE" means:
(i) in the case of any DLJ Entity, (A) any other DLJ Entity, (B) any
general or limited partner of any such entity (a "DLJ PARTNER"), and
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any corporation, partnership, Affiliated Employee Benefit Trust or other
entity which is an Affiliate of any DLJ Partner (collectively, the "DLJ
AFFILIATES"), (C) any managing director, general partner, director,
limited partner, officer or employee of such DLJ Entity or a DLJ
Affiliate, or the heirs, executors, administrators, testamentary
trustees, legatees or beneficiaries of any of the foregoing Persons
referred to in this clause (C) (collectively, "DLJ ASSOCIATES"), (D) any
trust, the beneficiaries of which, or any corporation, limited liability
company or partnership, the stockholders, members or general or limited
partners of which, include only such DLJ Entity, DLJ Affiliates, DLJ
Associates, their spouses or their lineal descendants and (E) a voting
trustee for one or more DLJ Entities, DLJ Affiliates or DLJ Associates
under the terms of a voting trust designed to conform with the
requirements of the Insurance Law of the State of New York;
(ii) in the case of any Other Securityholder, (A) the Issuer, (B) (x)
such Securityholder's spouse or (y) such Securityholder's siblings or
lineal descendants, so long as such Securityholder retains the right to
vote such Securities, (C) a Person who acquires Securities from any such
Securityholder pursuant to a will or the laws of descent and
distribution, and (D) any trust the beneficiaries of which consist only
of such Securityholders and/or such Securityholder's spouse, siblings
and lineal descendants and (E) any Securityholder other than any DLJ
Entity or its Permitted Transferees;
(iii) in the case of the Helios Shareholders, in addition to the Permitted
Transferees enumerated in paragraph (ii) above, any beneficiary and/or
trustee of any Helios Shareholder that is a trust; provided, that such
transferee shall have agreed in writing to be bound by the terms of this
Agreement;
(iv) in the case of Schaefer and Cormier, notwithstanding clause (E) of
subsection (ii) above, the DLJ Entities; provided that in no event shall
Schaefer or Cormier transfer to the DLJ Entities in excess of 50,000
shares each of the Series A Preferred Stock in reliance on this
subsection (iv); and
(v) in the case of ABS, (A) any general or limited partner of ABS (an
"ABS PARTNER"), and any corporation, partnership, Affiliated Employee
Benefit Trust or other entity which is an Affiliate of any ABS Partner
(collectively, the "ABS AFFILIATES"), (B) any managing director, general
partner, director, limited partner, officer or employee of such ABS
Affiliate, or the heirs, executors, administrators, testamentary
trustees,
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legatees or beneficiaries of any of the foregoing Persons referred to in
this clause (B) (collectively, "ABS ASSOCIATES") and (C) any trust, the
beneficiaries of which, or any corporation, limited liability company or
partnership, the stockholders, members or general or limited partners of
which, include only ABS or such ABS Affiliates, ABS Associates, their
spouses or their lineal descendants.
"PERSON" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"REGISTRABLE STOCK" means any shares of Common Stock until (i) a
registration statement covering such shares of Common Stock has been declared
effective by the SEC and such shares have been disposed of pursuant to such
effective registration statement, (ii) such shares are sold under circumstances
in which all of the applicable conditions of Rule 144 (or any similar provisions
then in force) under the Securities Act are met or such shares may be sold
pursuant to Rule 144(k) or (iii) such shares are otherwise transferred, the
Issuer has delivered a new certificate or other evidence of ownership for such
shares not bearing the legend required pursuant to this Agreement and such
shares may be resold without subsequent registration under the Securities Act.
"REGISTRATION EXPENSES" means (i) all registration and filing fees, (ii)
fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Securities), (iii) printing expenses, (iv) internal
expenses of the Issuer (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), (v)
reasonable fees and disbursements of counsel for the Issuer and customary fees
and expenses for independent certified public accountants retained by the Issuer
(including expenses relating to any comfort letters or costs associated with the
delivery by independent certified public accountants of a comfort letter or
comfort letters requested pursuant to Section 5.04(h) hereof), (vi) the
reasonable fees and expenses of any special experts retained by the Issuer in
connection with such registration, (vii) reasonable fees and expenses of one
counsel for the Securityholders participating in the offering, selected by the
DLJ Entities, in the case of an offering in which any of the DLJ Entities
participate, or selected by Cormier and Schaefer in any other case involving
exercise of registration rights under Sections 5.01 or 5.02, (viii) fees and
expenses in connection with any review of underwriting arrangements by the
National Association of Securities Dealers, Inc. (the "NASD") including fees and
expenses of any "QUALIFIED INDEPENDENT UNDERWRITER" and (ix) fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but shall not include any
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underwriting fees, discounts or commissions attributable to the sale of
Registrable Stock, or any out-of-pocket expenses (except as set forth in clause
(vii) above) of the Securityholders or any fees and expenses of underwriter's
counsel.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES" means Notes, shares of Common Stock, Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, the Warrants, and
other voting securities of the Issuer held by the Securityholders.
"SECURITYHOLDER" means each Person (other than the Issuer) who shall be
a party to this Agreement, whether in connection with the execution and delivery
hereof as of the date hereof, pursuant to Section 7.03 or otherwise, so long as
such Person shall "BENEFICIALLY OWN" (as such term is defined in Rule 13d-3
under the Exchange Act) any Securities.
"SERIES A PREFERRED STOCK" shall have the meaning set forth in the
Securities Purchase Agreement.
"SERIES B PREFERRED STOCK" shall have the meaning set forth in the
Securities Purchase Agreement.
"SERIES C BENCHMARK SHARES" means shares of Common Stock sold or
proposed to be sold by holders of the Series C Preferred Stock (other than to
their Permitted Transferees) subsequent to the Closing Date until the aggregate
number of shares of Common Stock so sold or proposed to be sold by holders of
the Series C Preferred Stock equals 3,750,000 (taking into account any stock
dividend, stock split of reverse stock split subsequent to the Closing Date).
"SERIES C PERCENTAGE OWNERSHIP" means with respect to any Securityholder
or group of Securityholders that holds Series C Preferred Stock at any time, (i)
the number of shares of Fully Diluted Common Stock represented by each such
Securityholder's shares of Series C Preferred Stock divided by (ii) the total
number of shares of Fully Diluted Common Stock represented by the total number
of shares of Series C Preferred Stock at such time.
"SERIES C PREFERRED STOCK" shall have the meaning set forth in the
Securities Purchase Agreement.
"SPROUT ENTITIES" means DLJ Capital Corporation, Sprout Growth II, L.P.
and Sprout Capital VI, L.P.
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"SUBSIDIARY" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by such Person.
"THIRD PARTY" means a prospective purchaser of shares in an arm's-length
transaction from a Securityholder where such purchaser is not a Permitted
Transferee of such Securityholder.
"TRANSACTION DOCUMENTS" mean this Agreement, the Securities Purchase
Agreement and the inter-securityholder agreement of even date herewith to be
entered into by the parties thereto.
"UNDERWRITTEN PUBLIC OFFERING" means an underwritten public offering of
Registrable Stock of the Issuer pursuant to an effective registration statement
under the Securities Act.
"WARRANTS" means the warrants exercisable to purchase Common Stock
issued to PM Funding, Inc. pursuant to the Bridge Securities Purchase Agreement.
(b) The term "DLJ ENTITIES", to the extent such entities shall have
transferred any of their Securities to "PERMITTED TRANSFEREES", shall mean the
DLJ Entities and the Permitted Transferees of the DLJ Entities, taken together,
and any right or action that may be taken at the election of the DLJ Entities
may be taken at the election of the DLJ Entities, and such Permitted
Transferees.
(c) The term "ABS", to the extent such entity shall have transferred any
of its Securities to "PERMITTED TRANSFEREES", shall mean ABS and the Permitted
Transferees of ABS, taken together, and any right or action that may be taken at
the election of ABS may be taken at the election of ABS, and such Permitted
Transferees.
(d) The term "OTHER SECURITYHOLDERS", to the extent such shareholders
shall have transferred any of their Securities to "PERMITTED TRANSFEREES", shall
mean the other Securityholders and the Permitted Transferees of the other
Securityholders, as the case may be, and any right or action that may be taken
at the election of the other Securityholders may be taken at the election of the
other Securityholders and the Permitted Transferees of the other
Securityholders, as the case may be.
(e) Each of the following terms is defined in the Section set forth
opposite such term:
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Term Section
ABS 1.01(c)
ABS Affiliate 1.01(a)
ABS Associates 1.01(a)
ABS Partner 1.01(a)
Additional Directors 2.01
Aggregate Tag Amount 4.01(g)(i)
Associate 2.01
beneficially own 1.01(a)
Cause 2.02
Confidential Information 6.01(b)
control 1.01(a)
Demand Registration 5.01(a)
DLJ Entities 1.01(b)
DLJ Associates 1.01(a)
DLJ Affiliate 1.01(a)
DLJ Non-Election 4.01(g)(v)
DLJ Partner 1.01(a)
DLJSC 7.05
Electing Individual 4.01(g)(v)
Holders 5.01(a)(ii)
Incidental Registration 5.02(a)
Indemnified Party 5.07
Indemnifying Party 5.07
Inspectors 5.04(g)
Maximum Offering Size 5.01(d)
NASD 1.01(a)
Nominee 2.03(a)
other Securityholders 1.01(d)
Private Transaction 3.01(b)
qualified independent underwriter 1.01(a)
Records 5.04(g)
Representatives 6.01(b)
Section 4.01(h) Aggregate Tag Amount 4.01(h)
Section 4.01(h) Tag along Notice Period 4.01(h)
Section 4.01(h) Tag along Right 4.01(h)
Section 4.01(h) Tag along Sale 4.01(h)
Section 4.01(h) Tag along Seller 4.01(h)
Section 4.01(h) Tagging Person 4.01(h)
Section 3.01(b) Termination Date 3.01(b)
Section 4.01 Offer 4.01(a)
Section 4.01 Offer Notice 4.01(a)
Section 4.01 Offer Price 4.01(a)
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Term Section
Section 4.02 Notice 4.02
Section 4.03 Agreement 4.03(a)
Section 4.03 Notice 4.03(a)
Section 4.03 Notice Period 4.03(a)
Section 4.03 Sale 4.03(a)
Section 4.03 Sale Price 4.03(a)
Selling Securityholder 5.01(a)
Selling Party 4.01(a)
Tag along Notice Period 4.01(g)(i)
Tag along Right 4.01(g)(i)
Tag along Sale 4.01(g)(i)
Tag along Seller 4.01(g)(i)
Tagging Person 4.01(g)(i)
transfer 3.01(a)
(f) Capitalized terms used herein and not otherwise defined herein shall
have the meanings herein that are assigned to such terms in the Securities
Purchase Agreement.
ARTICLE 2
CORPORATE GOVERNANCE
SECTION 2.01. Composition of the Board. The Board shall consist of seven
members, of whom one shall be designated by DLJ Merchant Banking Partners, L.P.,
one shall be designated by Sprout Growth II, L.P., one shall be designated by
ABS, one shall be designated by Schaefer, one shall be designated by Cormier,
and two shall be individuals (the "ADDITIONAL DIRECTORS") (i) one designated by
Cormier and Schaefer and acceptable to the DLJ Entities and (ii) one designated
by the DLJ Entities, which individuals are neither an "AFFILIATE" nor an
"ASSOCIATE" (as those terms are used within the meaning of Rule 12b-2 of the
General Rules and Regulations under the Exchange Act) of the DLJ Entities, ABS,
Schaefer or Cormier. Each Securityholder entitled to vote for the election of
directors to the Board agrees that it will vote its Securities or execute
consents, as the case may be, and take all other necessary action (including
causing the Issuer to call a special meeting of shareholders) in order to ensure
that the composition of the Board is as set forth in this Section 2.01.
SECTION 2.02. Removal. Each Securityholder agrees that if, at any time,
it is then entitled to vote for the removal of directors of the Issuer, it will
not vote any of its Securities in favor of the removal of any director who shall
have been designated or nominated pursuant to Section 2.01 unless such removal
shall be for Cause or the Person entitled to designate or nominate such director
shall have
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consented to such removal in writing; provided that any of the DLJ Entities,
ABS, Cormier or Schaefer may remove, or vote its Securities in favor of the
removal of, the Additional Directors. Removal for "CAUSE" shall mean removal of
a director because of such director's (a) willful and continued failure to
substantially perform his duties with the Issuer in his established position,
(b) willful conduct which is significantly injurious to the Issuer, monetarily
or otherwise, or (c) conviction for, or guilty plea to, a felony. Subject to
Section 2.03, nothing contained in this Section 2.02 shall affect the right of
any Securityholder to designate members of the Board pursuant to Section 2.01.
SECTION 2.03. Vacancies. If, as a result of death, disability,
retirement, resignation, removal (with or without Cause) or otherwise, there
shall exist or occur any vacancy on the Board:
(a) the Person entitled under Section 2.01 to designate or nominate such
director whose death, disability, retirement, resignation or removal resulted in
such vacancy, or its Permitted Transferees, may, subject to the provisions of
Sections 2.01 and 2.04, designate another individual (the "NOMINEE") to fill
such capacity and serve as a director of the Issuer; and
(b) each Securityholder then entitled to vote for the election of the
Nominee as a director of the Issuer agrees that it will vote its Securities, or
execute a written consent, as the case may be, in order to ensure that the
Nominee be elected to the Board.
SECTION 2.04. Termination of Rights and Obligations. The right to
designate one or more members of the Board pursuant to this Article 2 shall
terminate (i) as to Cormier, at such time as Cormier and his Permitted
Transferees in the aggregate own and have the right to acquire less than 5% of
the Fully Diluted Common Stock then outstanding, (ii) as to Schaefer, at such
time as Schaefer and his Permitted Transferees in the aggregate own and have the
right to acquire less than 5% of the Fully Diluted Common Stock then
outstanding, (iii) as to Sprout Growth II, L.P., at such time as the DLJ
Entities in the aggregate own and have the right to acquire less than 5% of the
Fully Diluted Common Stock then outstanding, (iv) as to DLJ Merchant Banking
Partners, L.P., at such time as the DLJ Entities (other than PM Funding, Inc.)
in the aggregate own and have the right to acquire less than 5% of the Fully
Diluted Common Stock then outstanding and (v) as to ABS, at such time as ABS in
the aggregate owns and has the right to acquire less than 5% of the Fully
Diluted Common Stock then outstanding. The obligations imposed on
Securityholders to give effect to the rights to designate directors set forth in
Section 2.01 shall terminate as to any Person when such Person's right to
designate a director is terminated.
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SECTION 2.05. Action by the Board. A quorum of the Board shall consist
initially of four directors. All actions of the Board shall require the
affirmative vote of at least a majority of the directors at a duly convened
meeting of the Board at which a quorum is present or the unanimous written
consent of the Board; provided that, in the event there is a vacancy on the
Board and an individual has been nominated to fill such vacancy, the first order
of business shall be to fill such vacancy.
SECTION 2.06. Certificate of Incorporation and Bylaws. (a) The
Certificate of Incorporation and Bylaws of the Issuer, as in effect on the date
hereof, are attached as Exhibits B and A, respectively, to the Securities
Purchase Agreement.
(b) Each Securityholder shall vote its Securities, and shall take all
other actions necessary, to ensure that the Issuer's Certificate of
Incorporation and Bylaws facilitate and do not at any time conflict with any
provision of this Agreement.
ARTICLE 3
RESTRICTIONS ON TRANSFER
SECTION 3.01. General. (a) No Securityholder may directly or indirectly,
sell, assign, transfer, grant a participation in, pledge or otherwise dispose of
("TRANSFER") any Securities (or solicit any offers to buy or otherwise acquire,
or to take a pledge of, any Securities) except, subject to Section 3.01(b), (i)
transfers permitted by Section 3.03, (ii) transfers in a bona fide Underwritten
Public Offering upon exercise of registration rights pursuant to Article 5,
(iii) transfers pursuant to Rule 144 (or any successor provisions under the
Securities Act), (iv) pledges by Schaefer pursuant to the terms of the
Cormier-Schaefer Agreement as in effect on November 23, 1994 or as amended,
supplemented or modified with the prior consent of the DLJ Entities, (v) subject
to Section 4.01, transfers to any other Person in any Private Transaction (as
defined below); provided that no Securities may be transferred pursuant to
clause (v) to any Person unless such Person shall have agreed in writing to be
bound by the terms of this Agreement applicable to such Securityholder; provided
further that in the case of Schaefer and Cormier, such a transfer shall exclude
any transaction covered by clause (iv) above, and (vi) in the case of any Other
Securityholder, transfers pursuant to Section 4.03 hereof. As used herein,
"PRIVATE TRANSACTION" means any transfer not covered by clause (i), (ii), (iii)
or (vi) above.
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(b) Notwithstanding anything else contained herein, except pursuant to
Sections 3.03 or 4.03, no transfer of any shares of Common Stock may be made by
Cormier or Schaefer at any time to the extent that the number of shares then
sought to be transferred by Cormier or Schaefer, as the case may be, would
exceed the Allowable Transfer Amount applicable to such individual at such time.
From and after the Section 3.01(b) Termination Date (as defined below), (x) the
restriction contained in the preceding sentence shall terminate as to transfers
pursuant to Section 3.01(a)(ii) and 3.01(a)(iii), and (y) transfers of shares of
Common Stock may be made by Cormier or Schaefer pursuant to Section 3.01(a)(ii)
or 3.01(a)(iii) without regard to the Allowable Transfer Amount but only to the
extent such transfers are otherwise in accordance with the provisions of
Articles 3 and 4. The earlier of (i) November 23, 2000 and (ii) such time as the
aggregate number of shares of Fully Diluted Common Stock held by the DLJ
Entities is less than 25% of the aggregate number of shares of Fully Diluted
Common Stock held by the DLJ Entities on the date hereof (determined taking into
account any adjustments in accordance with the terms of the applicable
securities) is referred to as the "SECTION 3.01(B) TERMINATION DATE."
(c) No Securityholder may transfer any Securities at any time except in
compliance with applicable federal or state securities laws.
SECTION 3.02. Legend on Securities. (a) In addition to any other
legend that may be required, each certificate for Securities that is issued to
any Securityholder shall bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT
IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SECURITYHOLDERS AGREEMENT DATED AS
OF JULY 31, 1998, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM PHASE
METRICS, INC. AND ANY SUCCESSOR THERETO."
(b) If any Securities cease to be subject to any and all restrictions on
transfer set forth in this Agreement, the Issuer shall, upon the written request
of the holder thereof, issue to such holder a new certificate evidencing such
Securities without the second sentence of the legend required by Section 3.02(a)
endorsed thereon.
SECTION 3.03. Permitted Transferees. Notwithstanding anything in this
Agreement to the contrary, any Securityholder may at any time transfer any or
all of its Securities to one or more of its Permitted Transferees without the
consent of
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the Board or any other Securityholder or group of Securityholders and without
compliance with Section 4.01 so long as (a) such Permitted Transferee shall have
agreed in writing to be bound by the terms of this Agreement and (b) the
transfer to such Permitted Transferee is not in violation of applicable federal
or state securities laws.
ARTICLE 4
RIGHTS OF FIRST REFUSAL; TAG ALONG RIGHTS; PREEMPTIVE RIGHTS; DRAG ALONG
RIGHTS; TERMINATION AND INAPPLICABILITY OF PROVISIONS
SECTION 4.01. Right of First Refusal; Tag along Rights. (a) Subject to
the provisions of Sections 4.01(g) and 4.01(h), if any Securityholder receives
from or otherwise negotiates with a Third Party in a Private Transaction an
offer to purchase for cash (or, subject to clause (f), non-cash consideration)
any or all of the Securities owned or held by such Securityholder that is
otherwise permitted under this Agreement (including, without limitation, Section
3.01 hereof) (a "SECTION 4.01 OFFER") and such Securityholder (a "SELLING
PARTY") intends to pursue such sale of such Securities to such Third Party in
such Private Transaction, such Selling Party shall provide the Issuer and each
other Securityholder written notice of such Section 4.01 Offer (a "SECTION 4.01
OFFER NOTICE"). The Section 4.01 Offer Notice shall identify the number and type
of Securities subject to the Section 4.01 Offer, the cash price at which a sale
is proposed to be made (the "SECTION 4.01 OFFER PRICE") and all other material
terms and conditions of the Section 4.01 Offer.
(b) Subject to the provisions of Sections 4.01(g) and 4.01(h), the
receipt of a Section 4.01 Offer Notice by the Issuer and each other
Securityholder from any Selling Party shall constitute an offer by such Selling
Party to sell, to the Issuer and each other Securityholder, for cash (or,
subject to clause (f), non-cash consideration) in whole and not in part, with
the Issuer having priority with respect to the acceptance of the Section 4.01
Offer. If the Issuer does not accept the offer, in whole and not in part, in
accordance herewith, then such offer may be accepted, in whole and not in part,
at the Section 4.01 Offer Price by the other Securityholders on a pro rata basis
based on each other Securityholder's Percentage Ownership (unless the other
Securityholders shall agree to another allocation resulting in acceptance of the
Section 4.01 Offer with respect to all Securities subject to the Section 4.01
Offer); provided that in the event there is an undersubscription by the other
Securityholders at the end of the 45-day period referred to below, the
unsubscribed Securities shall be apportioned among those other Securityholders
whose written notice of acceptance referred to below specified a number of
additional shares such Securityholder would like to
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purchase pursuant to this Section 4.01, which apportionment shall be on a pro
rata basis among such Securityholders in accordance with such other
Securityholders' Percentage Ownership. Such offer shall be irrevocable for 45
days after receipt of such Section 4.01 Offer Notice by the Issuer and each
other Securityholder. During such 45-day period, subject to the Issuer's
priority right of exercise as set forth above, each other Securityholder shall
have the right to accept such offer (as provided above) within such 45-day
period. The Section 4.01 Offer may be accepted by giving a written irrevocable
notice of acceptance to such Selling Party prior to the expiration of such
45-day period.
(c) The Issuer or the Securityholders, as the case may be, shall purchase
for cash (or, subject to clause (f), non-cash consideration) at the Section 4.01
Offer Price and pay for all Securities set forth in the Section 4.01 Offer
Notice within a 20-day period following acceptance of the Section 4.01 Offer;
provided that if the purchase and sale of such Securities is subject to
expiration of any applicable statutory waiting period, the time period during
which such purchase and sale may be consummated shall be extended until the
expiration of five Business Days after such waiting period shall have expired;
provided further that such time period shall not exceed 60 days without the
written consent of the Selling Party. If such purchase and sale are not
consummated by the Issuer and the Securityholders within such time period, such
Section 4.01 Offer shall be deemed to be rejected.
(d) Upon the rejection or deemed rejection of the Section 4.01 Offer by
the Issuer and the Securityholders or the failure to obtain any required consent
for the purchase of the Securities subject thereto within 60 days, there shall
commence a 90-day period during which the Selling Party shall have the right,
subject to Section 4.01(g), to consummate the sale to the Third Party making the
Section 4.01 Offer of all but not less than all of the Securities subject to the
Section 4.01 Offer at a price not less than the Section 4.01 Offer Price;
provided that (i) such Third Party shall have agreed in writing to be bound by
the terms of this Agreement and (ii) the transfer to such Third Party is not in
violation of applicable federal or state or foreign securities laws.
Notwithstanding the foregoing, if the purchase and sale of such Securities is
subject to any prior regulatory approval, the time period during which such
purchase and sale may be consummated shall be extended until the expiration of
five Business Days after all such approvals shall have been received but in no
event shall such time period exceed 120 days without the consent of the Issuer.
If such Selling Party does not consummate the sale of any Securities subject to
the Section 4.01 Offer in accordance with the time limitations set forth above
and in Section 4.01(g), such Selling Party may not sell any Securities without
repeating the foregoing procedures.
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(e) Notwithstanding anything in this Agreement to the contrary, the
provisions of this Section 4.01 will not be applicable to transfers made
pursuant to and in compliance with Section 3.03, Section 4.03 or Article 5.
(f) A Securityholder may transfer Securities in accordance with the
foregoing provisions of this Section 4.01 for consideration other than cash only
if such Securityholder has first obtained and delivered to each other
Securityholder and the Issuer an opinion of an investment banking firm of
national standing indicating that the fair market value of the non-cash
consideration that such Securityholder proposes to accept as consideration for
such Securities, together with any cash consideration, is at least equal to the
Section 4.01 Sale Price.
(g) (i) If any Section 4.01 Offer constitutes a proposed transfer by
Brumberger, Cormier, Schaefer, Peters, Rhotons, Karam, Bye, Aylwin, Amelio,
Terry or the Helios Shareholders (each a "TAG ALONG SELLER") in a Private
Transaction permitted by Section 3.01(a)(v) and 3.01(b) (a "TAG ALONG SALE"),
the DLJ Entities or ABS or both may, at their option, elect to exercise their
rights under this Section 4.01(g) in lieu of their rights under Section 4.01(b)
(or, in the event of a DLJ Non-Election (as defined below) and an ABS
Non-Election (as defined below), the Electing Individual (as defined below) may
elect to exercise his rights under this Section 4.01(g) in lieu of his rights
under Section 4.01(b)). In the event that the DLJ Entities or ABS or both so
elect to exercise their rights under this Section 4.01(g) in lieu of their
rights under Section 4.01(b) (or, in the case of a DLJ Non-Election and an ABS
Non-Election, the Electing Individual elects to exercise his rights under this
Section 4.01(g) in lieu of his rights under Section 4.01(b)), the DLJ Entities
or ABS or both and such of Brumberger, Cormier, Schaefer, Peters, Rhotons,
Karam, Bye, Aylwin, Amelio, Terry and the Helios Shareholders as is not a Tag
along Seller in such Private Transaction (each of the DLJ Entities, ABS and such
entity or individual, a "TAGGING PERSON") shall have the right (a "TAG ALONG
RIGHT"), exercisable by written notice given to the Tag along Seller within 45
days after receipt of the Section 4.01 Offer Notice (the "TAG ALONG NOTICE
PERIOD"), to request the Tag along Seller to include in the proposed transfer to
the Third Party the number of shares of Common Stock or Securities convertible
into shares of Common Stock held by such Tagging Person as is specified in such
notice; provided that (x) the Tag along Seller shall be required only to include
in the proposed transfer a number (the "AGGREGATE TAG AMOUNT") of shares of
Common Stock or Securities that are convertible into Common Stock held by such
Tagging Persons equal to not more than the number of shares of Common Stock
proposed to be sold by the Tag along Seller to such Third Party in such
transaction multiplied by a fraction, the numerator of which is the number of
shares of Fully Diluted Common Stock owned by all such Tagging Persons
immediately prior to the Tag along Sale, and the denominator of which is
the total number of shares of Fully Diluted Common Stock immediately prior to
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the Tag along Sale and (y) if the aggregate number of shares of Common Stock
proposed to be sold by all Tagging Persons in such transaction exceeds the
Aggregate Tag Amount, the Aggregate Tag Amount of shares permitted to be sold
shall be allocated among all Tagging Persons pro rata based on Percentage
Ownership. If the DLJ Entities or ABS or both exercise their Tag along Right
hereunder (or, in the case of a DLJ Non-Election and an ABS Non-Election, if the
Electing Individual exercises his Tag along Right hereunder), each Tagging
Person shall deliver to the Tag along Seller the certificate or certificates
representing the Securities of such Tagging Person to be included in the
transfer, together with a limited power-of-attorney authorizing the Tag along
Seller to transfer such Securities on the terms set forth in the Section 4.01
Offer Notice. Delivery of such certificate or certificates representing the
Securities to be transferred and the limited power-of-attorney authorizing the
Tag along Seller to transfer such Securities shall constitute an irrevocable
acceptance of the Tag along Sale by such Tagging Persons. If, at the end of a
120-day period after such delivery, the Tag along Seller has not completed the
transfer of all such Securities, the Tag along Seller shall return to each
Tagging Person the limited power-of- attorney (and all copies thereof) together
with all certificates representing the Securities which such Tagging Person
delivered for transfer pursuant to this Section 4.01(g), then Brumberger,
Schaefer, Peters, Rhotons, Karam, Bye, Aylwin, Cormier, Amelio, Terry and the
Helios Shareholders may not effect another Tag along Sale without repeating the
foregoing procedures.
(ii) The per share consideration to be paid to the Tag along Seller and
the Tagging Persons in any Tag along Sale shall be the Section 4.01 Offer Price
in the case of sales of Common Stock and in the case of Securities convertible
into Common Stock shall be the Section 4.01 Offer Price multiplied by the number
of shares of Common Stock into which the Securities in question are convertible.
(iii) Concurrently with the consummation of the Tag along Sale, the Tag
along Seller shall notify the Tagging Persons thereof, shall remit to the
Tagging Persons the total consideration for the Securities of the Tagging
Persons transferred pursuant thereto (computed pursuant to Section 4.01(g)(ii)),
and shall, promptly after the consummation of such Tag along Sale furnish such
other evidence of the completion and time of completion of such transfer and the
terms thereof as may be reasonably requested by the Tagging Persons.
(iv) If at the termination of the Tag along Notice Period any Tagging
Person shall not have elected to participate in the Tag along Sale, such Tagging
Person will be deemed to have waived its rights under this Section 4.01(g) with
respect to the transfer of its Securities pursuant to such Tag along Sale.
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(v) In any Tag along Sale in which the DLJ Entities or ABS or both have
exercised their Tag along Right, the right of any party pursuant to Section
4.01(b) to accept the offer referred to therein shall be deemed to have
terminated. If both the DLJ Entities and ABS elect not to exercise their Tag
along Right in any Tag along Sale and elect to accept the offer referred to in
Section 4.01(b), no other Person may exercise any Tag along Right under this
Section 4.01(g). In the event that (A) the DLJ Entities elect neither to
exercise their Tag along Right in any Tag along Sale pursuant to Section 4.01(g)
nor to accept the offer referred to in Section 4.01(b) (an "DLJ NON-ELECTION")
and (B) ABS elects neither to exercise its Tag along Right in any Tag along Sale
pursuant to Section 4.01(g) nor to accept the offer referred to in Section
4.01(b) (an "ABS NON-ELECTION"), such of Brumberger, Cormier, Schaefer, Peters,
Rhotons, Karam, Bye, Aylwin, Amelio, Terry or the Helios Shareholders as is not
a Selling Party under Section 4.01(a) or a Tag along Seller under Section
4.01(g) (the "ELECTING INDIVIDUAL") may elect, subject to the provisions of this
Section 4.01, either (i) to accept the offer referred to in Section 4.01(b) or
(ii) to exercise a Tag along Right in any Tag along Sale pursuant to Section
4.01(g).
(h) (i) If any Section 4.01 Offer constitutes a proposed transfer by the
DLJ Entities or ABS, as the case may be, (each a "SECTION 4.01(h) TAG ALONG
SELLER") in a Private Transaction permitted by Section 3.01(a)(v) (each a
"SECTION 4.01(h) TAG ALONG SALE") and, in the case of a Section 4.01(h)
Tag-along Sale by the DLJ Entities, the DLJ Entities have not exercised their
right to compel a sale pursuant to Section 4.03, either of ABS or the DLJ
Entities that is not proposing such Section 4.01(h) Tag along Sale (each a
"SECTION 4.01(h) TAGGING PERSON") may, at their option, elect to exercise its
rights under this Section 4.01(h) in lieu of its rights under Section 4.01(b).
In the event that a Section 4.01(h) Tagging Person so elects to exercise its
rights under this Section 4.01(h) in lieu of its rights under Section 4.01(b),
the Section 4.01(h) Tagging Person shall have the right (a "SECTION 4.01(h) TAG
ALONG RIGHT"), exercisable by written notice given to the Section 4.01(h) Tag
along Seller within 45 days after receipt of the Section 4.01 Offer Notice (the
"SECTION 4.01(h) TAG ALONG NOTICE PERIOD"), to request the Section 4.01(h) Tag
along Seller to include in the proposed transfer to the Third Party the number
of shares of Common Stock or Securities convertible into shares of Common Stock
held by the Section 4.01(h) Tagging Person as is specified in such notice;
provided that (x) the Section 4.01(h) Tag along Seller shall be required only to
include in the proposed transfer a number (the "SECTION 4.01(h) AGGREGATE TAG
AMOUNT") of shares of Common Stock or Securities that are convertible into
Common Stock held by the Section 4.01(h) Tagging Person equal to not more than
the number of shares of Common Stock proposed to be sold by the Section 4.01(h)
Tag along Seller to such Third Party in such transaction multiplied by a
fraction, the numerator of which is the number of shares of Fully Diluted Common
Stock owned by the Section 4.01(h) Tagging Person
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immediately prior to the Section 4.01(h) Tag along Sale, and the denominator of
which is the total number of shares of Fully Diluted Common Stock held by the
Section 4.01(h) Seller and the Section 4.01(h) Tagging Person immediately prior
to the Section 4.01(h) Tag along Sale and (y) if the aggregate number of shares
of Common Stock proposed to be sold by the Section 4.01(h) Tagging Person in
such transaction exceeds the Section 4.01(h) Aggregate Tag Amount, the number of
shares permitted to be sold by the Section 4.01(h) Tagging Person shall be
reduced to the Section 4.01(h) Aggregate Tag Amount. If the Section 4.01(h)
Tagging Person exercises its Section 4.01(h) Tag along Right hereunder, the
Section 4.01(h) Tagging Person shall deliver to the entity designated by the
Section 4.01(h) Tag along Seller certificate or certificates representing the
Securities of the Section 4.01(h) Tagging Person to be included in the transfer,
together with a limited power-of-attorney authorizing the Section 4.01(h) Tag
along Seller to transfer such Securities on the terms set forth in the Section
4.01 Offer Notice. Delivery of such certificate or certificates representing the
Securities to be transferred and the limited power-of-attorney authorizing the
Section 4.01(h) Tag along Seller to transfer such Securities shall constitute an
irrevocable acceptance of the Section 4.01(h) Tag along Sale by the Section
4.01(h) Tagging Person. If, at the end of a 120-day period after such delivery,
the Section 4.01(h) Tag along Seller have not completed the transfer of all such
Securities, the Section 4.01(h) Tag along Seller shall return to the Section
4.01(h) Tagging Person the limited power-of-attorney (and all copies thereof)
together with all certificates representing the Securities which the Section
4.01(h) Tagging Person delivered for transfer pursuant to this Section 4.01(h),
then the Section 4.01(h) Tag along Seller may not effect another Section 4.01(h)
Tag along Sale without repeating the foregoing procedures.
(ii) The per share consideration to be paid to the DLJ Entities and ABS in
any Section 4.01(h) Tag along Sale shall be the Section 4.01 Offer Price in the
case of sales of Common Stock and in the case of Securities convertible into
Common Stock shall be the Section 4.01 Offer Price multiplied by the number of
shares of Common Stock into which the Securities in question are convertible.
(iii) Concurrently with the consummation of the Section 4.01(h) Tag along
Sale, the Section 4.01(h) Tag along Seller shall notify the Section 4.01(h)
Tagging Person thereof, shall remit to the Section 4.01(h) Tagging Person the
total consideration for the Securities of the Section 4.01(h) Tagging Person
transferred pursuant thereto (computed pursuant to Section 4.01(h)(ii)), and
shall, promptly after the consummation of such Section 4.01(h) Tag along Sale
furnish such other evidence of the completion and time of completion of such
transfer and the terms thereof as may be reasonably requested by the Section
4.01(h) Tagging Person.
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(iv) If at the termination of the Section 4.01(h) Tag along Notice
Period ABS or the DLJ Entities, as the case may be, shall not have elected to
participate in the Section 4.01(h) Tag along Sale, ABS or the DLJ Entities, as
the case may be, will be deemed to have waived their rights under this Section
4.01(h) with respect to the transfer of their Securities pursuant to such
Section 4.01(h) Tag along Sale.
(v) In any Section 4.01(h) Tag along Sale in which a Section 4.01(h)
Tagging Person has exercised its Section 4.01(h) Tag along Right, the right of
any party pursuant to Section 4.01(b) to accept the offer referred to therein
shall be deemed to have terminated. If ABS or the DLJ Entities, as the case may
be, elects not to exercise their Section 4.01(h) Tag along Right in any Section
4.01(h) Tag along Sale and elect to accept the offer referred to in Section
4.01(b), no other Person may exercise any Tag along Right under this Section
4.01(h).
SECTION 4.02. Preemptive Rights. For so long as any Notes, shares of
Series B Preferred Stock or shares of Series C Preferred Stock remain
outstanding, the Issuer shall provide each Securityholder with a written notice
(a "SECTION 4.02 NOTICE") of any proposed issuance by the Issuer of Equity
Securities at least 60 days prior to the proposed issuance date. Such notice
shall specify the price at which the Equity Securities are to be issued and the
other material terms of the issuance. Each Securityholder shall be entitled to
purchase, at the price and on the terms specified in such Section 4.02 Notice,
the Equity Securities proposed to be issued on a pro rata basis based upon such
Securityholder's Percentage Ownership. A Securityholder may exercise its rights
under this Section 4.02 by delivering written notice of its election to purchase
Equity Securities to the Issuer within 30 days of receipt of the Section 4.02
Notice. Each Securityholder shall deliver a copy of any such written notice to
the Issuer and each other Securityholder at least five Business Days prior to
the expiration of such 30-day period. A delivery of such a written notice (which
notice shall specify the number of shares (or amount) of Equity Securities to be
purchased by the Securityholder submitting such notice) by a Securityholder
shall constitute a binding agreement of such Securityholder to purchase, at the
price and on the terms specified in the Section 4.02 Notice, the number of
shares (or amount) of Equity Securities specified in such Securityholder's
written notice. In the case of any issuance of Equity Securities, the Issuer
shall have 90 days from the date of the Section 4.02 Notice to consummate the
proposed issuance of any or all of such Equity Securities which the
Securityholders have not elected to purchase at the price and upon terms that
are not materially less favorable to the Issuer than those specified in the
Section 4.02 Notice. At the consummation of such issuance, the Issuer shall
issue certificates representing the Equity Securities to be purchased by each
Securityholder exercising preemptive rights pursuant to this Section 4.02
registered in the name of such Securityholder, against payment by such
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Securityholder of the purchase price for such Equity Securities. If the Issuer
proposes to issue Equity Securities after such 90-day period, it shall again
comply with the procedures set forth in this Section. Notwithstanding the
foregoing, no Securityholder shall be entitled to purchase Equity Securities as
contemplated by this Section 4.02 in connection with issuances of Equity
Securities (i) to employees of the Issuer or any Subsidiary of the Issuer
pursuant to employee benefit plans or arrangements approved by the Board
(including upon the exercise of employee stock options), (ii) in connection with
an Initial Public Offering, (iii) in connection with any bona fide, arm's-length
restructuring of outstanding debt of the Issuer or any Subsidiary of the Issuer,
(iv) in connection with any bona fide, arm's-length direct or indirect merger,
acquisition or similar transaction, or (v) upon the conversion of any shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
Notes into Common Stock. The Issuer shall not be under any obligation to
consummate any proposed issuance of Equity Securities, regardless of whether it
shall have delivered a Section 4.02 Notice in respect of such proposed issuance.
Unless earlier terminated pursuant to the terms of this Section 4.02, the
provisions of this Section 4.02 shall terminate upon the consummation of an
Initial Public Offering.
SECTION 4.03. Right to Compel Participation in Certain Transfers. (a) If
the DLJ Entities should propose to transfer for consideration of cash or stock
of no less than $5.00 per share (as adjusted to take into account any
subdivisions, combinations or reclassifications of the Common Stock after the
date hereof) of Common Stock all shares of Common Stock that they own or have
the right to acquire to any Third Party (a "SECTION 4.03 SALE"), the DLJ
Entities may, at their option, require all but not less than all the Other
Securityholders to participate in such transfer and, in the case of Other
Securityholders that hold any shares of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, (together, "PREFERRED STOCK")
require such Securityholders to convert such shares of Preferred Stock to Common
Stock upon consummation of such transfer; provided that in any sale for cash
consideration the DLJ Entities may only require Securityholders that hold Series
C Preferred Stock to participate in such transfer and convert their shares if
the cash consideration to be received upon sale of the Common Stock received
upon such conversion causes the total cash consideration received, divided by
the number of shares of Series C Preferred Stock so converted, to equal or
exceed the applicable liquidation preference for a share of Series C Preferred
Stock as set forth in the Issuer's Certificate of Incorporation. The DLJ
Entities shall provide written notice of such Section 4.03 Sale to the Other
Securityholders (a "SECTION 4.03 NOTICE") and a copy of the agreement pursuant
to which such shares are proposed to be transferred (the "SECTION 4.03
AGREEMENT"). The Section 4.03 Notice shall identify the transferee, the number
of shares of Common Stock subject to the Section 4.03 Sale, the consideration
per share of Common Stock for which a transfer is proposed to be made (the
"SECTION
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4.03 SALE PRICE") and all other material terms and conditions of the Section
4.03 Sale. Each Other Securityholder shall be required to participate in the
Section 4.03 Sale on the terms and conditions set forth in the Section 4.03
Notice and to tender all its shares of Common Stock, and Securities convertible
into Common Stock as set forth below. The price of such transfer shall be the
Section 4.03 Sale Price in the case of shares of Common Stock, and in the case
of Securities convertible into Common Stock shall be the Section 4.03 Sale Price
multiplied by the number of shares of Common Stock into which such Securities
are convertible. Within ten Business Days following the date of the Section 4.03
Notice (the "SECTION 4.03 NOTICE PERIOD"), each of the Other Securityholders,
except ABS, shall deliver to a representative of the DLJ Entities designated in
the Section 4.03 Notice certificates representing all shares of Common Stock
held by such Other Securityholder and all Securities convertible into Common
Stock held by such Other Securityholder, duly endorsed, together with all other
documents required to be executed in connection with such Section 4.03 Sale or,
if such delivery is not permitted by applicable law, an unconditional agreement
to deliver such Securities pursuant to this Section 4.03(a) at the closing for
such Section 4.03 Sale against delivery to such Other Securityholder of the
consideration therefor. If an Other Securityholder should fail to deliver such
certificates to the DLJ Entities, the Issuer shall cause the books and records
of the Issuer to show that such Securities are bound by the provisions of this
Section 4.03(a) and that such Securities shall be transferred to the Third Party
immediately upon surrender for transfer by the Other Securityholder thereof.
Within the Section 4.03 Notice Period, ABS shall deliver to a representative of
the DLJ Entities designated in the Section 4.03 Notice an unconditional
agreement to deliver certificates representing all shares of Common Stock held
by ABS and all Securities convertible into Common Stock held by ABS, duly
endorsed, together with all other documents required to be executed in
connection with such Section 4.03 Sale pursuant to this Section 4.03(a) at the
closing for such Section 4.03 Sale against delivery to ABS of the consideration
therefor. If ABS should fail to deliver such certificates to the closing for
such Section 4.03 Sale, the Issuer shall cause the books and records of the
Issuer to show that such Securities are bound by the provisions of this Section
4.03(a) and that such Securities shall be transferred to the Third Party
immediately upon surrender for transfer by ABS.
(b) If, within 120 days after the DLJ Entities give the Section 4.03
Notice, they have not completed the transfer of all the Securities subject to
the Section 4.03 Sale, the DLJ Entities shall return to each of the Other
Securityholders, except ABS, all certificates representing Securities that such
Other Securityholder delivered for transfer pursuant hereto, together with any
documents in the possession of the DLJ Entities executed by the Other
Securityholder in connection with such proposed transfer, and all the
restrictions on transfer contained in this Agreement or otherwise applicable at
such time with
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respect to Securities owned by the Other Securityholders shall again be in
effect. If, within 120 days after the DLJ Entities give the Section 4.03 Notice,
they have not completed the transfer of all the Securities subject to the
Section 4.03 Sale, the DLJ Entities shall return to ABS the unconditional
agreement of ABS and all the restrictions on transfer contained in this
Agreement or otherwise applicable at such time with respect to Securities owned
by ABS shall again be in effect.
(c) Promptly after the consummation of the transfer of Securities of the
DLJ Entities and the Other Securityholders pursuant to this Section 4.03, the
DLJ Entities shall give notice thereof to the Other Securityholders, except ABS,
shall remit to each of the Other Securityholders who have surrendered their
certificates the total consideration for the shares of Common Stock and
Securities convertible into Common Stock transferred pursuant hereto and shall
furnish such other evidence of the completion and time of completion of such
transfer and the terms thereof as may be reasonably requested by such Other
Securityholders.
SECTION 4.04. Improper Transfer. Any attempt to transfer any Securities
not in compliance with this Agreement shall be null and void and neither the
Issuer nor any transfer agent shall give any effect in the Issuer's records to
such attempted transfer.
SECTION 4.05. Termination of Agreement. This Agreement shall
terminate upon the earliest of
(i) the tenth anniversary of the date hereof;
(ii) such time as at least 50% of the shares of Fully Diluted Common
Stock are held by Persons (other than any Securityholder) who acquired
their shares in a sale pursuant to (x) Rule 144 under the Securities Act
or (y) a public offering registered under the Securities Act; and
(iii) such time as the DLJ Entities own less than 5% of the aggregate
number of shares of Fully Diluted Common Stock.
SECTION 4.06. Inapplicability of Transfer Restrictions and Corporate
Governance Provisions to PM Funding, Inc. Notwithstanding anything else
contained herein, PM Funding, Inc. shall not be bound by or subject to any of
(i) the restrictions on or obligations with respect to transfers of Securities
set forth in Article 3 or in Section 4.01(a) through (f) or Section 4.01(h) or
(ii) the corporate governance provisions set forth in Article 2.
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ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. Demand Registration. (a) Commencing on the date which is
six months after the Initial Public Offering Schaefer and Cormier may make a
written request, commencing on the date which is the first anniversary of the
date hereof (x) holders of a majority of the outstanding shares of Series C
Preferred Stock may make a written request and (y) ABS may make a written
request, and at any time the DLJ Entities may make a written request (any such
requesting Person, a "SELLING SECURITYHOLDER") that the Issuer effect the
registration under the Securities Act of all or a portion of such Selling
Securityholder's Registrable Stock, and specifying the intended method of
disposition thereof (it being understood that (A) all such written requests will
be sent to the Issuer and each potential Selling Securityholder and (B) more
than one Selling Securityholder may request a Demand Registration at the same
time). The Issuer will promptly give written notice of such requested
registration (a "DEMAND REGISTRATION") at least 30 days prior to the anticipated
filing date of the registration statement relating to such Demand Registration
to the other Securityholders and thereupon will use its best efforts to effect,
as expeditiously as possible, the registration under the Securities Act of:
(i) the Registrable Stock which the Issuer has been so requested to
register by the Selling Securityholders, then held by the Selling
Securityholders; and
(ii) subject to Section 5.02, all other Registrable Stock which any other
Securityholder entitled to request the Issuer to effect an Incidental
Registration (as such term is defined in Section 5.02) pursuant to
Section 5.02 (all such Securityholders, together with the Selling
Securityholders, the "HOLDERS") has requested the Issuer to register by
written request received by the Issuer within 15 days after the receipt
by such Holders of such written notice given by the Issuer,
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Stock so to be
registered; provided that, subject to Section 5.01(c) hereof, the Issuer shall
not be obligated to effect more than one Demand Registration for Schaefer and
Cormier collectively, one Demand Registration for the holders of the Series C
Preferred Stock, collectively, one Demand Registration for ABS and four Demand
Registrations for the DLJ Entities collectively, pursuant to this Section 5.01
other than any such Demand Registrations effected on Form S-3; and provided
further that the Issuer shall not be obligated to effect a Demand Registration
unless the Registrable Stock requested to be included in such Demand
Registration
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constitutes at least 25% of the Common Stock then outstanding or to be issued
upon conversion of the Notes and/or Series B Preferred Stock or, in the case of
a Demand Registration by the holders of a majority of the outstanding shares of
Series C Preferred Stock, 25% of the Common Stock issued or to be issued upon
conversion of the Series C Preferred Stock. In no event will the Issuer be
required to effect more than two Demand Registrations on Form S-3 within any 12
month period.
Promptly after the expiration of the 15-day period referred to in
Section 5.01(a)(ii) hereof, the Issuer will notify all the Holders to be
included in the Demand Registration of the other Holders and the number of
shares of Registrable Stock requested to be included therein. The Selling
Securityholders requesting a registration under this Section 5.01(a) may, at any
time prior to the effective date of the registration statement relating to such
registration, revoke such request, without liability to any of the other
Holders, by providing a written notice to the Issuer revoking such request, in
which case such request, so revoked, shall be considered a Demand Registration
unless such revocation arose out of the fault of the Issuer, in which case such
request shall not be considered a Demand Registration. Notwithstanding anything
contained in this Agreement to the contrary, nothing herein shall be construed
as requiring the Issuer to register any of its securities other than Common
Stock.
(b) The Issuer will pay all Registration Expenses in connection with any
Demand Registration.
(c) A registration requested pursuant to this Section 5.01 shall not be
deemed to have been effected unless the registration statement relating thereto
(i) has become effective under the Securities Act and (ii) has remained
effective for a period of at least 90 days (or such shorter period in which all
Registrable Stock of the Holders included in such registration has actually been
sold thereunder); provided that if after any registration statement requested
pursuant to this Section 5.01 becomes effective (i) such registration statement
is interfered with by any stop order, injunction or other order or requirement
of the SEC or other governmental agency or court or (ii) less than 75% of the
Registrable Stock included in such registration statement has been sold
thereunder, such registration statement shall be at the sole expense of the
Issuer and shall not be considered a Demand Registration, unless any such
interference referred to in clause (i) of this proviso arose out of the fault of
the Selling Securityholders, in which case such registration statement shall be
considered a Demand Registration.
(d) If a Demand Registration involves an Underwritten Public Offering and
the managing underwriter shall advise the Issuer and the Selling Securityholders
that, in its view, (i) the number of shares of Common Stock
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requested to be included in such registration (including Common Stock which the
Issuer proposes to be included which is not Registrable Stock) or (ii) the
inclusion of some or all of the Securities owned by the Holders, in either case,
exceeds the largest number of Securities which can be sold without having an
adverse effect on such offering, including the price at which such Securities
can be sold (the "MAXIMUM OFFERING SIZE"), the Issuer will include in such
registration, in the priority listed below, up to the Maximum Offering Size:
(A) first, all Benchmark Shares requested to be registered by
the DLJ Entities (allocated, if necessary for the offering not to
exceed the Maximum Offering Size, pro rata among the DLJ Entities
on the basis of the relative number of shares of Registrable
Stock requested to be included in such registration) and all
Series C Benchmark Shares requested to be registered by holders
of the Series C Preferred Stock (allocated among the holders of
the Series C Preferred Stock that requested such registration pro
rata based on Series C Percentage Ownership) allocated pro rata
between the Benchmark Shares and the Series C Benchmark Shares,
based upon the total Percentage Ownership represented by the
holders of the Benchmark Shares and the holders of the Series C
Benchmark Shares, respectively;
(B) second, all Registrable Stock requested to be registered
by any one or more Selling Securityholders that have requested
the Demand Registration pursuant to Section 5.01 (allocated, if
necessary for the offering not to exceed the Maximum Offering
Size, pro rata among such Selling Securityholders on the basis of
the relative number of shares of Registrable Stock (excluding any
Benchmark Shares and Series C Benchmark Shares) so requested to
be included in such registration);
(C) third, all Registrable Stock requested to be included in
such registration by any other Holder (allocated, if necessary
for the offering not to exceed the Maximum Offering Size, pro
rata among such other Holders on the basis of the relative number
of shares of Registrable Stock (excluding any Benchmark Shares
and Series C Benchmark Shares) so requested to be included in
such registration); and
(D) fourth, any Common Stock proposed to be registered by the
Issuer.
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SECTION 5.02. Incidental Registration. (a) If the Issuer proposes to
register any of its Common Stock under the Securities Act (other than a
registration (A) in connection with an Initial Public Offering, (B) on Form S-8
or S-4 or any successor or similar forms, (C) relating to Common Stock issuable
upon exercise of employee stock options or in connection with any employee
benefit or similar plan of the Issuer or (D) in connection with a direct or
indirect merger, acquisition or other similar transaction) whether or not for
sale for its own account, it will each such time, subject to the provisions of
Section 5.02(b) hereof, give prompt written notice at least 30 days prior to the
anticipated filing date of the registration statement relating to such
registration to each Securityholder, which notice shall set forth such
Securityholders' rights under this Section 5.02 and shall offer all
Securityholders the opportunity to include in such registration statement such
number of shares of Registrable Stock as each such Securityholder may request
(an "INCIDENTAL REGISTRATION"). Upon the written request of any such
Securityholder made within 15 days after the receipt of notice from the Issuer
(which request shall specify the number of shares of Registrable Stock intended
to be disposed of by such Securityholder), the Issuer will use its best efforts
to effect the registration under the Securities Act of all Registrable Stock
which the Issuer has been so requested to register by such Securityholders, to
the extent requisite to permit the disposition of the Registrable Stock so to be
registered; provided that (i) if such registration involves an Underwritten
Public Offering, all such Securityholders requesting to be included in the
Issuer's registration must sell their Registrable Stock to the underwriters
selected as provided in Section 5.04(f) on the same terms and conditions as
apply to the Issuer and the Selling Securityholders and (ii) if, at any time
after giving written notice of its intention to register any stock pursuant to
this Section 5.02(a) and prior to the effective date of the registration
statement filed in connection with such registration, the Issuer shall determine
for any reason not to register such stock, the Issuer shall give written notice
to all such Securityholders and, thereupon, shall be relieved of its obligation
to register any Registrable Stock in connection with such registration. No
registration effected under this Section 5.02 shall relieve the Issuer of its
obligations to effect a Demand Registration to the extent required by Section
5.01 hereof. The Issuer will pay all Registration Expenses in connection with
each registration of Registrable Stock requested pursuant to this Section 5.02.
(b) If a registration pursuant to this Section 5.02 involves an
Underwritten Public Offering (other than in the case of an Underwritten Public
Offering requested by any Securityholder in a Demand Registration, in which case
the provisions with respect to priority of inclusion in such offering set forth
in Section 5.01(d) shall apply) and the managing underwriter advises the Issuer
that, in its view, the number of shares of Common Stock which the Issuer and the
selling Securityholders intend to include in such registration exceeds the
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Maximum Offering Size, the Issuer will include in such registration, in the
following priority, up to the Maximum Offering Size:
(i) first, so much of the Common Stock proposed to be registered
by the Issuer as would not cause the offering to exceed the Maximum
Offering Size;
(ii) second, all Benchmark Shares requested to be included in
such registration statement by any DLJ Entity pursuant to this Section
5.02 (allocated, if necessary for the offering not to exceed the Maximum
Offering Size, pro rata among such DLJ Entities on the basis of the
relative number of shares of Registrable Stock requested to be so
included) and all Series C Benchmark Shares requested to be included in
such registration statement by holders of the Series C Preferred Stock
(allocated among the holders of the Series C Preferred Stock that
requested such registration pro rata based on Series C Percentage
Ownership) allocated between the Benchmark Shares and the Series C
Benchmark Shares pro rata based upon the total Percentage Ownership
represented by the holders of the Benchmark Shares and the holders of
the Series C Benchmark Shares, respectively;
(iii) third, all Registrable Stock other than Benchmark Shares
and Series C Benchmark Shares requested to be included in such
registration by any Securityholder pursuant to this Section 5.02
(allocated, if necessary for the offering not to exceed the Maximum
Offering Size, pro rata and such Securityholders on the basis of the
relative number of shares of Registrable Stock (excluding any Benchmark
Shares and Series C Benchmark Shares) so requested to be included in
such registration).
SECTION 5.03. Holdback Agreements. If any registration of Registrable
Stock shall be in connection with an Underwritten Public Offering, each
Securityholder agrees not to effect any public sale or distribution, including
any sale pursuant to Rule 144, or any successor provision, under the Securities
Act, of any Registrable Stock, and not to effect any such public sale or
distribution of any other Common Stock of the Issuer or of any stock convertible
into or exchangeable or exercisable for any Common Stock of the Issuer (in each
case, other than as part of such Underwritten Public Offering) during the 14
days prior to the effective date of such registration statement (except as part
of such registration) or during the period after such effective date that such
managing underwriter and the Issuer shall agree (but not to exceed 90 days). Any
waiver of any restriction on sales or distributions referred to in this Section
5.03 shall be effective as to each of ABS, Brumberger, Cormier, Schaefer,
Peters, Rhotons, Karam, Bye, Aylwin, Amelio, Terry, the Helios Shareholders and
the DLJ
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Entities, regardless of whether the waiver was in fact requested by, or granted
to, only certain of such Persons.
SECTION 5.04. Registration Procedures. Whenever Securityholders request
that any Registrable Stock be registered pursuant to Section 5.01 or 5.02
hereof, the Issuer will, subject to the provisions of such Sections, use its
best efforts to effect the registration and the sale of such Registrable Stock
in accordance with the intended method of disposition thereof as quickly as
practicable, and in connection with any such request:
(a) The Issuer will as expeditiously as possible prepare and file with
the SEC a registration statement on any form for which the Issuer then qualifies
or which counsel for the Issuer shall deem appropriate and which form shall be
available for the sale of the Registrable Stock to be registered thereunder in
accordance with the intended method of distribution thereof, and use its best
efforts to cause such filed registration statement to become and remain
effective for a period of not less than 90 days (or such shorter period in which
all of the Registrable Stock of the Holders included in such registration
statement shall have actually been sold thereunder).
(b) The Issuer will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to each
Securityholder and each underwriter, if any, of the Registrable Stock covered by
such registration statement copies of such registration statement as proposed to
be filed, and thereafter the Issuer will furnish to such Securityholder and
underwriter, if any, such number of copies of such registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto
and documents incorporated by reference therein), the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as such Securityholder or underwriter may reasonably request in
order to facilitate the disposition of the Registrable Stock owned by such
Securityholder.
(c) After the filing of the registration statement, the Issuer will
promptly notify each Securityholder holding Registrable Stock covered by such
registration statement of any stop order issued or threatened by the SEC and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
(d) The Issuer will use its best efforts to (i) register or qualify the
Registrable Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdictions in the United States as any
Securityholder holding such Registrable Stock reasonably (in light of such
Securityholder's intended plan of distribution) requests and (ii) cause such
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Registrable Stock to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Issuer and do any and all other acts and things that may be
reasonably necessary or advisable to enable such Securityholder to consummate
the disposition of the Registrable Stock owned by such Securityholder; provided
that the Issuer will not be required to (A) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this paragraph (d), (B) subject itself to taxation in any such jurisdiction or
(C) consent to general service of process in any such jurisdiction.
(e) The Issuer will immediately notify each Securityholder holding such
Registrable Stock covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Stock, such prospectus will not contain an 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 not misleading and promptly
prepare and make available to each such Securityholder and file with the SEC any
such supplement or amendment.
(f) Subject to Section 7.05, the Issuer may select, in its sole
discretion, the underwriter or underwriters in connection with any Underwritten
Public Offering as it may deem appropriate. Notwithstanding the foregoing, (i)
the DLJ Entities will have the right, in their sole discretion, to select the
underwriter or underwriters in connection with any underwritten Demand
Registration requested by any of the DLJ Entities pursuant to Section 5.01, (ii)
Cormier and Schaefer will have the right, in their sole discretion, to select
the underwriter or underwriters in connection with any underwritten Demand
Registration requested by them only (and not also by any DLJ Entity) pursuant to
Section 5.01 and (iii) ABS will have the right, in its sole discretion, to
select the underwriter or underwriters in connection with any underwritten
Demand Registration requested by it only (and not also by any DLJ Entity)
pursuant to Section 5.01; provided that if such Demand Registration referred to
in clause (iii) is also requested by any DLJ Entity, such DLJ Entity will have
the right, in its sole discretion, to select the lead managing underwriter in
connection with such underwritten Demand Registration and ABS will have the
right, in its sole discretion, to select a co- managing underwriter in
connection with such underwritten Demand Registration. Any Affiliate of any of
the DLJ Entities may be selected as underwriter for an Underwritten Public
Offering. The Issuer will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Stock, including the engagement of a "QUALIFIED INDEPENDENT
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UNDERWRITER" in connection with the qualification of the underwriting
arrangements with the NASD.
(g) The Issuer will make available for inspection by any Securityholder
and any underwriter participating in any disposition pursuant to a registration
statement being filed by the Issuer pursuant to this Section 5.04 and any
attorney, accountant or other professional retained by any such Securityholder
or underwriter (collectively, the "INSPECTORS"), all financial and other
records, pertinent corporate documents and properties of the Issuer
(collectively, the "RECORDS") as shall be reasonably requested by any such
Person, and cause the Issuer's officers, directors and employees to supply all
information reasonably requested by any Inspectors in connection with such
registration statement.
(h) The Issuer will furnish to each such Securityholder and to each such
underwriter, if any, a signed counterpart, addressed to such underwriter, of (i)
an opinion or opinions of counsel to the Issuer and (ii) a comfort letter or
comfort letters from the Issuer's independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as a majority of such
Securityholders or the managing underwriter therefor reasonably requests.
(i) The Issuer will otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
The Issuer may require each such Securityholder to promptly furnish in
writing to the Issuer such information regarding the distribution of the
Registrable Stock as the Issuer may from time to time reasonably request and
such other information as may be legally required in connection with such
registration.
Each such Securityholder agrees that, upon receipt of any notice from
the Issuer of the happening of any event of the kind described in Section
5.04(e) hereof, such Securityholder will forthwith discontinue disposition of
Registrable Stock pursuant to the registration statement covering such
Registrable Stock until such Securityholder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 5.04(e) hereof, and,
if so directed by the Issuer, such Securityholder will deliver to the Issuer all
copies, other than any permanent file copies then in such Securityholder's
possession, of the most recent prospectus covering such Registrable Stock at the
time of receipt of such notice. In the event that the Issuer shall give such
notice, the Issuer shall extend the
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period during which such registration statement shall be maintained effective
(including the period referred to in Section 5.04(a) hereof) by the number of
days during the period from and including the date of the giving of notice
pursuant to Section 5.04(e) hereof to the date when the Issuer shall make
available to such Securityholder a prospectus supplemented or amended to conform
with the requirements of Section 5.04(e) hereof.
SECTION 5.05. Indemnification by the Issuer. The Issuer agrees to
indemnify and hold harmless each Securityholder holding Registrable Stock
covered by a registration statement, its officers, directors and agents, and
each Person, if any, who controls such Securityholder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Stock (as
amended or supplemented if the Issuer shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by 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, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission so made in strict
conformity with information furnished in writing to the Issuer by such
Securityholder or on such Securityholder's behalf expressly for use therein;
provided that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, or in any prospectus,
as the case may be, the indemnity agreement contained in this paragraph shall
not apply to the extent that any such loss, claim, damage, liability or expense
results from the fact that a current copy of the prospectus (or, in the case of
a prospectus, the prospectus as amended or supplemented) was not sent or given
to the Person asserting any such loss, claim, damage, liability or expense at or
prior to the written confirmation of the sale of the Registrable Stock concerned
to such Person if it is determined that the Issuer has provided such prospectus
and it was the responsibility of such Securityholder to provide such Person with
a current copy of the prospectus (or such amended or supplemented prospectus, as
the case may be) and such current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The Issuer also agrees
to indemnify any underwriters of the Registrable Stock, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of the Securityholders provided in
this Section 5.05.
SECTION 5.06. Indemnification by Participating Securityholders. (a)
Subject to Section 5.06(b), each Securityholder holding Registrable Stock
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included in any registration statement agrees, severally but not jointly, to
indemnify and hold harmless the Issuer, its officers, directors and agents and
each Person, if any, who controls the Issuer within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Issuer to such Securityholder, but
only (i) with respect to information furnished in writing by such Securityholder
or on such Securityholder's behalf expressly for use in any registration
statement or prospectus relating to the Registrable Stock, or any amendment or
supplement thereto, or any preliminary prospectus or (ii) to the extent that any
loss, claim, damage, liability or expense described in Section 5.05 results from
the fact that a current copy of the prospectus (or, in the case of a prospectus,
the prospectus as amended or supplemented) was not sent or given to the Person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the Registrable Stock concerned to such
Person if it is determined that it was the responsibility of such Securityholder
to provide such Person with a current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) and such current copy of the
prospectus (or such amended or supplemented prospectus, as the case may be)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. Subject to Section 5.06(b), each such Securityholder also agrees to
indemnify and hold harmless underwriters of the Registrable Stock, their
officers and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the Issuer
provided in this Section 5.06. As a condition to including Registrable Stock in
any registration statement filed in accordance with Article 5 hereof, the Issuer
may require that it shall have received an undertaking reasonably satisfactory
to it from any underwriter to indemnify and hold it harmless to the extent
customarily provided by underwriters with respect to similar securities.
(b) No Securityholder shall be liable under Section 5.06(a) for any
damage thereunder in excess of the net proceeds realized by such Securityholder
in the sale of the Registrable Stock of such Securityholder.
SECTION 5.07. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
this Article 5, such Person (an "INDEMNIFIED PARTY") shall promptly notify the
Person against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all fees and expenses; provided that the failure of
any Indemnified Party so to notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent that the
Indemnifying Party is materially prejudiced by such failure to notify. In any
such
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proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) in the
reasonable judgment of such Indemnified Party representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the Indemnified
Parties. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any and all losses, claims, damages, liabilities and expenses or
liability (to the extent stated above) by reason of such settlement or judgment.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or threatened proceeding
in respect of which any Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability arising out of such proceeding.
SECTION 5.08. Contribution. If the indemnification provided for in this
Article 5 is held by a court of competent jurisdiction to be unavailable to the
Indemnified Parties in respect of any losses, claims, damages or liabilities
referred to herein, then each such Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (i)
as between the Issuer and the Securityholders holding Registrable Stock covered
by a registration statement on the one hand and the underwriters on the other,
in such proportion as is appropriate to reflect the relative benefits received
by the Issuer and such Securityholders on the one hand and the underwriters on
the other, from the offering of the Registrable Stock, or if such allocation is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits but also the relative fault of the Issuer and
such Securityholders on the one hand and of such underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between the Issuer on the one hand and each such
Securityholder on the other, in such proportion as is appropriate to reflect the
relative fault of the Issuer and of each such
34
38
Securityholder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Issuer and such Securityholders on the one hand and such underwriters on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Issuer and such Securityholders bear to the total
underwriting discounts and commissions received by such underwriters, in each
case as set forth in the table on the cover page of the prospectus. The relative
fault of the Issuer and such Securityholders on the one hand and of such
underwriters on the other 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 Issuer and such Securityholders or by such underwriters. The
relative fault of the Issuer on the one hand and of each such Securityholder on
the other 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 such party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Issuer and the Securityholders agree that it would not be just and
equitable if contribution pursuant to this Section 5.08 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.08, no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Stock underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Securityholder
shall be required to contribute any amount in excess of the amount by which the
net proceeds realized on the sale of the Registrable Stock of such
Securityholder exceeds the amount of any damages which such Securityholder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 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. Each Securityholder's obligation to
35
39
contribute pursuant to this Section 5.08 is several in the proportion that the
proceeds of the offering received by such Securityholder bears to the total
proceeds of the offering received by all such Securityholders and not joint.
SECTION 5.09. Participation in Public Offering. No Person may
participate in any Underwritten Public Offering hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and the provisions of
this Agreement in respect of registration rights.
ARTICLE 6
CERTAIN COVENANTS AND AGREEMENTS
SECTION 6.01. Confidentiality. (a) Each Securityholder hereby agrees
that Confidential Information (as defined below) furnished and to be furnished
to it was and will be made available in connection with such Securityholder's
investment in the Issuer. Each Securityholder agrees that it will not use the
Confidential Information in any way to the competitive disadvantage of the
Issuer. Each Securityholder further acknowledges and agrees that it will not
disclose any Confidential Information to any Person; provided that Confidential
Information may be disclosed (i) to such Securityholder's Representatives (as
defined below) in the normal course of the performance of their duties, (ii) to
the extent required by applicable law, rule or regulation (including complying
with any oral or written questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process to which a
Securityholder is subject), (iii) to any Person to whom such Securityholder is
contemplating a transfer of its Securities (provided that such transfer would
not be in violation of the provisions of this Agreement and as long as such
potential transferee is advised of the confidential nature of such information
and agrees to be bound by a confidentiality agreement in form and substance
satisfactory to the Issuer and consistent with the provisions hereof) or (iv) if
the prior written consent of the Board shall have been obtained. Nothing
contained herein shall prevent the use of Confidential Information in connection
with the assertion or defense of any claim by or against the Issuer or any
Securityholder.
(b) "CONFIDENTIAL INFORMATION" means any information concerning the
Issuer, its financial condition, business, operations or prospects in the
possession of or to be furnished to any Securityholder in its capacity as a
shareholder of the Issuer or by virtue of its present or former right to
designate a director of the Issuer; provided that the term "CONFIDENTIAL
INFORMATION" does not include
36
40
information which (i) becomes generally available to the public other than as a
result of a disclosure by a Securityholder or its partners, directors, officers,
employees, agents, counsel, investment advisers or representatives (all such
persons being collectively referred to as "REPRESENTATIVES") in violation of any
of the Transaction Documents (as such term is defined in the Securities Purchase
Agreement), (ii) is or was available to such Securityholder on a nonconfidential
basis prior to its disclosure to such Securityholder or its Representatives by
the Issuer or (iii) was or becomes available to such Securityholder on a non-
confidential basis from a source other than the Issuer, provided that such
source is or was (at the time of receipt of the relevant information) not, to
the best of such Securityholder's knowledge, bound by a confidentiality
agreement with (or other confidentiality obligation to) the Issuer or another
Person.
SECTION 6.02. No Inconsistent Agreements. Neither the Issuer nor any
Securityholder is presently a party to or will hereafter enter into any
agreement with respect to any Securities which is inconsistent with the rights
granted to any Securityholder by this Agreement or any other agreements relating
to the Securities to which the Securityholders are parties or which otherwise
conflicts with the provisions hereof or thereof, or will in the future grant or
cause to be granted to any holder or prospective holder of any Securities, any
rights relating thereto, including, for example, registration rights, which are,
in the aggregate, made available on more favorable terms (including, without
limitation, terms which are more favorable than those set forth in Article 5) to
such holder than those granted to the Securityholders hereunder and thereunder,
unless the Securityholders are given all of the benefits of such favorable terms
and consent thereto.
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. Entire Agreement. The Transaction Documents constitute the
entire agreement between the parties with respect to the subject matter of the
Transaction Documents and supersede all prior agreements and understandings,
both oral and written, between the parties with respect to the subject matter of
this Agreement and the other Transaction Documents.
SECTION 7.02. Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto, and their respective heirs, successors, legal
representatives and
37
41
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
SECTION 7.03. Assignability. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by the Issuer or any Securityholder, except in connection with a
transfer of securities of the Issuer pursuant to the terms hereof; provided that
any Person acquiring Securities who is required by the terms of this Agreement
to become a party hereto shall execute and deliver to the Issuer an agreement to
be bound by this Agreement and shall thenceforth be a "SECURITYHOLDER". Any
Securityholder who ceases to beneficially own any Securities shall cease to be
bound by the terms hereof (other than Sections 5.06, 5.07, 5.08 and 6.01).
SECTION 7.04. Amendment; Waiver; Termination. (a) No provision of this
Agreement may be waived except by an instrument in writing executed by the party
against whom the waiver is to be effective. No provision of this Agreement may
be amended or otherwise modified except by an instrument in writing executed by
the Issuer with the approval of the Board and Securityholders holding or having
the right to acquire at least 85% of the Fully Diluted Common Stock held by
parties to this Agreement.
(b) In addition, any amendment, modification or termination of any
provision of this Agreement that would adversely affect a DLJ Entity may be
effected only with the consent of such DLJ Entity.
(c) In addition, any amendment, modification or termination of any
provision of this Agreement that would adversely affect Cormier or Schaefer may
be effected only with the consent of Cormier or Schaefer, respectively.
(d) In addition, any amendment, modification or termination of any
provision of this Agreement that would adversely affect ABS may be effected only
with the consent of ABS.
SECTION 7.05. Exclusive Financial Advisor and Investment Banking
Advisor. During the period from the date hereof through and including November
23, 1998, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC"), or any
Affiliate of DLJSC that the DLJ Entities may choose in their sole discretion,
shall be engaged as the exclusive financial advisor and investment banker for
the Issuer for an annual retainer fee (i) which shall be $200,000 effective for
November 23, 1998 and (ii) which thereafter shall be on commercially reasonable
terms to be agreed between the Issuer and DLJSC.
38
42
SECTION 7.06. Notices. All notices and other communications given or
made pursuant hereto or pursuant to any other agreement among the parties,
unless otherwise specified, shall be in writing and shall be deemed to have been
duly given or made if sent by fax (with confirmation in writing), delivered
personally or sent by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the fax number or address set forth below
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made upon
receipt:
if to the DLJ Entities, to:
DLJ Merchant Banking Funding, Inc.
DLJ Merchant Banking Partners, L.P.
277 Park Avenue
New York, New York 10172
Attention: Thompson Dean
Fax: (212) 892-7552
and to:
DLJ International Partners, C.V.
DLJ Offshore Partners, C.V.
c/o DLJ Offshore Management N.V.
John B. Gorsiraweg 6
Willemstad, Curacao
Netherlands Antilles
Attention: Germaine Sprock
MeesPierson Trust (Curacao) N.V.
DLJ Capital Corporation
Sprout Growth II, L.P.
Sprout Capital VI, L.P.
3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, California 94025
Attention: Robert Finzi
Fax: (650) 234-2779
39
43
Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Ivy Dodes
Fax: (212) 892-2689
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: George R. Bason, Jr.
Fax: (212) 450-4800
if to ABS, to:
ABS Capital Partners II, L.P.
101 California Street, 47th Floor
San Francisco, California 94111
Attention: Andrew T. Sheehan
Fax: 415-477-3229
and to:
ABS Capital Partners II, L.P.
One South Street
Baltimore, Maryland 21202
Attention: Donald B. Hebb, Jr.
Fax: 410-895-4380
with a copy to:
Hogan & Hartson, L.L.P.
111 South Calvert Street, Suite 1600
Baltimore, Maryland 21202
Attention: Walter G. Lohr, Jr.
Fax: 410-539-6981
40
44
if to Cormier, to:
Arthur J. Cormier
P.O. Box 1714
Rancho Sante Fe, CA 92067
with a copy to:
Paul, Hastings, Janofsky & Walker
695 Town Center Drive
17th Floor
Costa Mesa, CA 92626
Attention: Robert R. Burge
Fax: (714) 979-1921
if to Schaefer or the Issuer, to:
Phase Metrics, Inc.
10260 Sorrento Valley Blvd.
San Diego, CA 92121
Attention: John F. Schaefer
Fax: (619) 646-4846
with a copy to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Newport Beach, CA 92618
Attention: Richard A. Fink
Fax: (949) 790-6301
if to the Helios Shareholders to:
Richard J. Freedland and Nanette A. Freedland
as Trustees of the Freedland 1994 Unitrust
1010 Madison Drive
Mountain View, CA 94040
Hung Ba Le and Anh Le
as Trustees of the Le 1994 Unitrust
2051 Edgegate
San Jose, CA 95122
41
45
Alex Moraru and Liliana Moraru
as Trustees of the Moraru 1994 Unitrust
4349 Nicolet
Fremont, CA 94536
Loai Najjar and Mickie Najjar
as Trustees of the Najjar 1994 Unitrust
P.O. Box 3307
Santa Clara, CA 94087
with a copy to:
Fenwick & West
Two Palo Alto Square, Suite 800
Palo Alto, CA 94306
Attention: Dennis Debroeck
Fax: (415) 857-0361
if to Brumberger to:
Neil A. Brumberger
121 Fiesta Circle
Orinda, CA 94563
Fax: (510) 376-4609
with a copy to:
Latham & Watkins
505 Montgomery Street
Suite 1900
San Francisco, CA 94111
Attn: Christopher L. Kaufman, Esq.
Fax: (415) 395-8095
if to Peters to:
Roger D. Peters
Mary Anne Christine Peters
152 Chicago Way
San Francisco, CA 94112
42
46
with a copy to:
Bronson, Bronson & McKinnon
505 Montgomery Street
San Francisco, CA 94111-2514
Attn: William T. Manierre, Esq.
Fax: (415) 982-1394
if to Rhotons to:
Jeffrey K. Rhoton
Yvonne H. Rhoton
30 Woodland Court
San Ramon, CA 94583
with a copy to:
Bronson, Bronson & McKinnon
505 Montgomery Street
San Francisco, CA 94111-2514
Attn: William T. Manierre, Esq.
Fax: (415) 982-1394
if to Karam to:
Raymond M. Karam
226 East Junipero
Santa Barbara, CA 93105
with a copy to:
Price, Postel & Parma LLP
200 East Carrillo Street
Suite 400
Santa Barbara, CA 93101
Attn: Raymond P. Le Blanc
Fax: (805) 965-3978
43
47
if to Bye to:
Randall E. Bye
535 Chalkhill Road
Solvang, CA 93463
with a copy to:
Price, Postel & Parma LLP
200 East Carrillo Street, Suite 400
Santa Barbara, CA 93101
Attn: Raymond P. Le Blanc
Fax: (805) 965-3978
if to Aylwin to:
Pedro A. Aylwin
1054 Miramonte Drive, #3
Santa Barbara, CA 93107
with a copy to:
Price, Postel & Parma LLP
200 East Carrillo Street, Suite 400
Santa Barbara, CA 93101
Attn: Raymond P. Le Blanc
Fax: (805) 965-3978
if to Amelio to:
Dr. Gilbert F. Amelio
The Parkside Group
650 California Street, #2400
San Francisco, CA 94108
Fax: (408) 295-1737
if to Terry to:
William E. Terry
925 Laurel Glen Drive
Palo Alto, CA 94304-1323
Fax: (650) 948-8960 or (650) 852-2955
44
48
Any Person who becomes a Securityholder shall provide its address and
fax number to the Issuer, which shall promptly provide such information to each
other Securityholder.
SECTION 7.07. Headings. The headings contained in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
SECTION 7.08. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
SECTION 7.09. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the conflicts of law rules of such state.
SECTION 7.10. Specific Enforcement. Each party hereto acknowledges that
the remedies at law of the other parties for a breach or threatened breach of
this Agreement would be inadequate and, in recognition of this fact, any party
to this Agreement, without posting any bond, and in addition to all other
remedies which may be available, shall be entitled to obtain equitable relief in
the form of specific performance, a temporary restraining order, a temporary or
permanent injunction or any other equitable remedy which may then be available.
SECTION 7.11. Consent to Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of the
parties hereby consents to the non-exclusive jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient form. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 7.06 shall be deemed
effective service of process on such party.
45
49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
DLJ MERCHANT BANKING
PARTNERS, L.P.
By: DLJ MERCHANT BANKING, INC.
Managing General Partner
By: /s/ IVY DODES
---------------------------------------
Name: Ivy Dodes
Title: Vice President
DLJ INTERNATIONAL PARTNERS,
C.V.
By: DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: /s/ IVY DODES
---------------------------------------
Name: Ivy Dodes
Title: Vice President
DLJ OFFSHORE PARTNERS, C.V.
By: DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: /s/ IVY DODES
---------------------------------------
Name: Ivy Dodes
Title: Vice President
46
50
DLJ MERCHANT BANKING FUNDING,
INC.
By: /s/ IVY DODES
---------------------------------------
Name: Ivy Dodes
Title: Vice President
DLJ FIRST ESC, L.P.
DLJ ESC II, L.P.
By: DLJ LBO PLANS MANAGEMENT
CORPORATION
Their General Partner
By: /s/ IVY DODES
----------------------------------------
Title: Vice President
DLJ CAPITAL CORPORATION
By: /s/ ROBERT FINZI
----------------------------------------
Robert Finzi
Vice President
SPROUT GROWTH II, L.P.
By: DLJ CAPITAL CORPORATION
Managing General Partner
By: /s/ ROBERT FINZI
----------------------------------------
Robert Finzi
Vice President
47
51
SPROUT CAPITAL VI, L.P.
By: DLJ CAPITAL CORPORATION
Managing General Partner
By: /s/ ROBERT FINZI
----------------------------------------
Robert Finzi
Vice President
ABS CAPITAL PARTNERS II, L.P.
By: ABS PARTNERS II, L.L.C.
Its General Partner
By: /s/ DONALD B. HEBB
----------------------------------------
Name: Donald B. Hebb, Jr.
Title: Managing Member
PM FUNDING, INC.
By: /s/ ROBERT GREEN
----------------------------------------
Name: Robert Green
Title: Senior Vice President
/s/ ARTHUR J. CORMIER
----------------------------------------
Arthur J. Cormier
/s/ JOHN F. SCHAEFER
----------------------------------------
John F. Schaefer
PHASE METRICS, INC.
By: /s/ JOHN F. SCHAEFER
----------------------------------------
Name: John F. Schaefer
Title: CEO
48
52
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ IVY DODES
---------------------------------------
Ivy Dodes
Vice President
THE FREEDLAND 1994 UNITRUST
By:
---------------------------------------
Richard J. Freedland, Trustee
By:
---------------------------------------
Nanette A. Freedland, Trustee
THE MORARU 1994 UNITRUST
By:
---------------------------------------
Alex Moraru, Trustee
By:
---------------------------------------
Liliana Moraru, Trustee
THE LE 1994 UNITRUST
By:
---------------------------------------
Hung Ba Le, Trustee
By:
---------------------------------------
Anh Le, Trustee
49
53
THE NAJJAR 1994 UNITRUST
By:
----------------------------------------
Loai Najjar, Trustee
By:
----------------------------------------
Mickie Najjar, Trustee
----------------------------------------
Neil H. Brumberger
----------------------------------------
Hart H. Brumberger
ROGER D. PETERS AND MARY
ANNE CHRISTINE PETERS LIVING
TRUST
By:
----------------------------------------
Roger D. Peters, individually and as Co-
Trustee with Mary Anne Christine Peters
By:
----------------------------------------
Mary Anne Christine Peters,
individually and as Co-Trustee with
Roger D. Peters
JEFFREY K. RHOTON AND
YVONNE H. RHOTON LIVING
TRUST
By:
----------------------------------------
Jeffrey K. Rhoton, individually and as
Co-Trustee with Yvonne H. Rhoton
By:
----------------------------------------
Yvonne H. Rhoton, individually and as
Co-Trustee with Jeffrey K. Rhoton
50
54
---------------------------------------
Raymond M. Karam
---------------------------------------
Randall E. Bye
---------------------------------------
Pedro A. Aylwin
/s/ GILBERT F. AMELIO
---------------------------------------
Dr. Gilbert F. Amelio
/s/ WILLIAM E. TERRY
---------------------------------------
William E. Terry
ACKNOWLEDGMENT OF SPOUSES:
The undersigned spouses of the foregoing individuals acknowledge and agree to be
bound by the terms and conditions of this Agreement
- ---------------------------------
- ---------------------------------
- ---------------------------------
/s/ MRS. AMELIO
- ---------------------------------
/s/ MRS. TERRY
- ---------------------------------
51
55
CROSS-REFERENCE TARGET LIST
NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT APPEAR IN THE TARGET PULL-DOWN LIST.
(This list is for the use of the wordprocessor only, is not a part of this document and may be discarded.)
ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME
1.01(a).....................terms
1.01(b)........extent transferred
1.01(c)....................extent
1.01(d)..................election
2.................corp.governance
2.01...............composition.bd
2.03....................vacancies
2.03(a)........entitled.designate
2.04............term.rights.oblig
3....................restrictions
3.01......................general
3.01(a).............until.earlier
3.01(a)(ii)....transfers.bonafide
3.01(a)(iii)....transfers.rule144
3.01(a)(v)...no.securities.transf
3.01(b)...............no.transfer
3.02(a)...............bear.legend
3.03...........permitted.transfer
4...........art.right.1st.refusal
4.01............right.1st.refusal
4.01(a).................negotiate
4.01(b)...................receipt
4.01(g).........proposed.transfer
4.01(g)(i).........elect.exercise
4.01(g)(ii)...share.consideration
4.01(g)(v)...........accept.offer
4.01(h).....offer consitutes prop
4.01(h)(ii)....per share consider
?.........................in.lieu
?.....................offer.price
4.02............preemptive.rights
4.03.................right.compel
4.03(a).............transfer.cash
5...................regist.rights
5.01................demand.regist
5.01(a)...........written.request
5.01(a)(ii).....registrable.stock
5.01(a)(ii)...............removal
5.01(c)..........regist.requested
5.01(d)........underwriter.advise
5.01(d)........underwriter.advise
5.02............incidental.regist
5.02(a)...........issuer.proposes
5.02(b)...........underwritten.po
5.03................holdback.agts
5.04............regist.procedures
5.04(a)............issuer.prepare
5.04(e).............issuer.notify
5.04(f).............issuer.select
5.04(g).................available
5.04(h)............issuer.furnish
5.05..............indemnification
5.06.........indemn.participating
5.06(a)...................holding
5.06(b)....................liable
5.07......................conduct
5.08.................contribution
6.01..............confidentiality
6.01(b)...............confid.info
7.03................assignability
7.05..........exclusive.finan.adv
7.06......................notices
56
ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME
2