EXHIBIT 10.1
STOCKHOLDERS AGREEMENT
by and among
FS EQUITY PARTNERS IV, L.P.,
RIPPLEWOOD PARTNERS, L.P.
RIPPLEWOOD ADVANCE AUTO PARTS
EMPLOYEE FUND I L.L.C.,
NICHOLAS F. TAUBMAN,
ARTHUR TAUBMAN TRUST
DATED JULY 13, 1964
AND
ADVANCE HOLDING CORPORATION
APRIL 15, 1998
TABLE OF CONTENTS
Page
1. Definitions........................................................................... 2
2. Rights Upon Issuance of Additional Securities......................................... 5
2.1 Issuance Notice.................................................................. 5
2.2 Response Notice.................................................................. 5
2.3 Revised Issuance Notice.......................................................... 5
2.4 Pro Rata Share................................................................... 6
2.5 Termination and Assignment....................................................... 6
3. Transfer of Shares by FS Stockholder or Ripplewood Stockholder; Rights of
Inclusion............................................................................. 6
3.1 Right of Inclusion............................................................... 6
3.2 Third-Party Offer................................................................ 7
3.3 Allocation of Included Shares.................................................... 9
3.4 Consummation..................................................................... 9
3.5 Termination and Assignment...................................................... 11
4. Obligation to Sell Securities........................................................ 11
4.1 Sale Obligation................................................................. 11
4.2 Termination and Assignment...................................................... 12
5. Restrictions on Transfers of Securities; Right of First Offer........................ 13
5.1 Transfer Restrictions........................................................... 13
5.2 Right of First Offer............................................................ 15
5.3 Termination and Assignment...................................................... 17
5.4 Taubman Option and Option Shares................................................ 17
6. Registration Rights.................................................................. 17
7. Representation on the Board of Directors............................................. 18
7.1 The Board....................................................................... 18
7.2 Approval Right.................................................................. 19
7.3 Certain Actions of the Board.................................................... 19
7.4 Termination and Assignment...................................................... 21
8. Copy of Agreement.................................................................... 21
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TABLE OF CONTENTS (continued)
Page
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9. Governing Law.................................................................... 21
10. Representations and Warranties................................................... 21
11. Amendment and Waiver; Successors; After Acquired Shares.......................... 22
12. Interpretation................................................................... 22
13. Notices.......................................................................... 22
14. Legends.......................................................................... 23
15. Further Assurances............................................................... 23
16. Injunctive Relief; Disputes...................................................... 24
17. Severability..................................................................... 24
18. Entire Agreement................................................................. 24
19. Counterparts..................................................................... 24
20. Opinions......................................................................... 24
SCHEDULE 1 Ownership of Capital Stock by Stockholders Upon Consummation of
Transactions Contemplated by Merger Agreement........................... 28
EXHIBIT A TERMS OF THE REGISTRATION RIGHTS OF THE COMMON
STOCK................................................................... A-1
EXHIBIT B IRREVOCABLE PROXY....................................................... B-1
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STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made and entered into as
of April 15, 1998 by and among Advance Holding Corporation, a Virginia
corporation (the "Company"), FS Equity Partners IV, L.P., a Delaware limited
partnership ("FSEP IV" or the "FS Stockholder"), Ripplewood Partners, L.P.
("Ripplewood Partners"), Ripplewood Advance Auto Parts Employee Fund I L.L.C.
("Ripplewood Employee Fund" and, together with Ripplewood Partners, the
"Ripplewood Stockholder") and Nicholas F. Taubman and the Arthur Taubman Trust
dated July 13, 1964 (the "Trust") (Mr. Taubman and the Trust collectively, the
"Existing Stockholders" and each individually, an "Existing Stockholder").
RECITALS
A. Pursuant to an Agreement and Plan of Merger dated as of March 4, 1998
among the Company, AHC Corporation ("Investor") and the FS Stockholder (the
"Merger Agreement"), AHC Corporation will merge with and into the Company, so
that after such merger FS Stockholder will own a majority of the Common Stock in
the Company, Ripplewood Stockholder will have a substantial investment in the
Company, and the Existing Stockholders will retain a substantial Common Stock
investment in the Company and options to acquire additional shares of the
Company pursuant to an Option Agreement dated the date hereof (the "Option
Agreement").
B. To induce the FS Stockholder and the Existing Stockholders to
consummate the transactions contemplated by the Merger Agreement, the FS
Stockholder, the Ripplewood Stockholder, the Existing Stockholders and the
Company desire to execute this Agreement.
C. The FS Stockholder's and the Existing Stockholders' obligation to
consummate the transactions contemplated by the Merger Agreement is conditioned
upon the execution of this Agreement by the FS Stockholder, the Existing
Stockholders and the Company.
D. Upon consummation of the transactions contemplated by the Merger
Agreement, FS Stockholder, Ripplewood Stockholder and the Existing Stockholders
will own the shares of capital stock of the Company set forth on Schedule 1
hereto.
E. The Existing Stockholders, the FS Stockholder, Ripplewood Stockholder
and the Company wish to establish through this Agreement certain rights,
obligations and restrictions with respect to the securities of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
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terms shall have the following meanings:
Additional Securities: All Securities which are issued and sold by
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the Company other than (i) the Initial Shares, (ii) any Securities issued or
issuable to all of the holders of Common Stock then outstanding on a
proportionate basis, (iii) any Securities issued or issuable to any Employees
pursuant to any equity incentive plan, individual agreement, bonus, award, stock
purchase plan, stock option plan or other stock agreement or arrangement which
in each event is approved by the Board (a "Benefit Plan"), (iv) any Securities
issued in exchange for debt securities of the Company or any Subsidiary,
provided, that the overall terms of the exchange transaction are fair and in the
best interests of the Company as determined in reasonable good faith by the
Board, and provided, further, that if the FS Stockholder and any other
Stockholder or their respective Affiliates each own debt Securities being
exchanged, such other Stockholders shall have the right to participate in such
exchange on the same terms as the FS Stockholder or its Affiliates, (v) any
Securities issued to any source of, or to any party arranging, financing for the
Company or any Subsidiary of the Company, provided, that the overall terms of
the financing transaction involving the issuance of debt and Securities are fair
and in the best interests of the Company as determined in reasonable good faith
by the Board and provided, further, in the event FS Stockholder, Ripplewood
Stockholder or any of their Affiliates are participating in or providing such
financing, that the Existing Stockholders have the opportunity to participate in
such financing and, if they so participate, to purchase or otherwise receive on
the same terms their Pro Rata Share (as defined in Section 2.4) of any
Securities (vi) any Securities issued pursuant to a public offering registered
under the Securities Act, (vii) any Securities that are issued or issuable in
connection with the acquisition by the Company or a Subsidiary of any business,
business assets or securities from any Person, provided, that such Securities
are not issued for less than their fair market value, as determined in good
faith by the Board, and (viii) any Securities that are issued or issuable upon
the exercise of rights, options or warrants to purchase Securities, or upon the
conversion or exchange of Securities convertible into or exchangeable for
Securities, including the Option Agreement.
Affiliate: Such term shall have the meaning given to such term
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pursuant to Rule 12b-2 of the General Rules and Regulations promulgated under
the Securities Exchange Act of 1934, as amended.
Board: The Board of Directors of the Company.
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Business means the sale of automotive parts and accessories at retail
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or wholesale or by catalog and the rendering of services relating thereto,
including, without limitation, carrying on or participating in the business of
any chain of automotive service facilities, any wholesale or catalog
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operation or retail chain that is engaged as a significant line of business in
the distribution or sale of automotive parts or accessories or rendering
services relating thereto and a "significant line of business" is one that
constitutes 10% or more of consolidated revenues (e.g., Sears or Wal-Mart).
Common Stock: The Class A Common Stock, par value $0.01 per share, of
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the Company.
Employee: Any employee, independent director or consultant of the
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Company or any Subsidiary of the Company.
Existing Stockholders: Nicholas F. Taubman and the Trust.
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FS Principals: Bradford M. Freeman, J. Frederick Simmons, Ronald P.
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Spogli, John M. Roth, Charles P. Rullman, Jr. and William M. Wardlaw.
Initial Shares: Shall mean the 12,500,000 shares of Common Stock
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issued and outstanding on the date hereof and held beneficially and of record by
the Stockholders as set forth on Schedule 1, and any Option Shares shown on
Schedule 1 on the date of the Merger Agreement.
Option Shares: Any shares of Common Stock issued pursuant to the
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exercise of the Taubman Option.
Permitted Transferee: Permitted Transferee shall mean, (w) with
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respect to any Stockholder, a controlled Affiliate which shall include any
investment fund or partnership that is (i) a controlled Affiliate of such
Stockholder or (ii) with respect to the FS Stockholder, organized and controlled
by three or more of the FS Principals or (iii) with respect to the Ripplewood
Stockholder, organized and controlled by Timothy C. Collins, (x) with respect to
the FS Stockholder, for the period ending one year from the date hereof, any
institutional investor, merchant banking firm, or institutional limited partner
of an FS Stockholder who purchases shares in connection with the Merger or from
FS Stockholder within one year from the date hereof (an "Unaffiliated Permitted
Transferee"), provided that the number of Shares of Common Stock transferred to
such Unaffiliated Permitted Transferee would not cause the FS Stockholder (in
the aggregate) to own less than 50% of the Common Stock, grant any approval
rights over major transactions or to transfer any other rights except in
compliance with this Agreement, and provided, further, that such Unaffiliated
Permitted Transferee delivers an undertaking binding upon such Unaffiliated
Permitted Transferee reasonably satisfactory to the Ripplewood Stockholder, Mr.
Taubman and their respective counsel to be bound by all obligations of the FS
Stockholder hereunder, except those explicitly made not binding upon such
Unaffiliated Permitted Transferee, (y) with respect to the Trust, the
beneficiaries of the Trust (the "Trust Transferees") and (z) with respect to Mr.
Taubman and any Permitted Transferee of the Trust pursuant to clause (y) or
their respective Permitted Transferees that are individual persons (an
"Individual Stockholder"), (i) such Individual Stockholder's spouse, children,
grandchildren or other living descendants, or a trust or family partnership of
which there are no principal (i.e., corpus) beneficiaries or partners other than
the grantor or one or more of such Individual Stockholder, the Individual
Stockholder's spouse or described relatives and provided, in
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the case of a trust, that the existing beneficiaries and/or trustee(s) and/or
grantor(s) of such trust have the power to act with respect to the trust's
assets without court approval and, in the case of a family partnership, that the
partners thereof have the power to act with respect to the partnership's assets
without court approval and the partnership is not permitted to (a) distribute
assets to Persons who are not among the relatives listed above or (b) have
partners who are not among the relatives listed above or (ii) a legal
representative of such Individual Stockholder in the event such Individual
Stockholder becomes mentally incompetent or to such Individual Stockholder's
personal representative following the death of such Individual Stockholder.
Person: Any individual, corporation, entity, partnership, joint
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venture, association, joint-stock company, trust, unincorporated organization or
other entity.
Public Market Sale: Any sale of Common Stock after the Initial Public
------------------
Offering which is made pursuant to Rule 144 promulgated by the SEC under the
Securities Act or which is made pursuant to a registration statement filed with
and declared effective by the SEC.
Public Offering: A public offering of shares of Voting Securities of
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the Company registered under the Securities Act, but shall not include an
offering registered on Form S-4 or Form S-8 (or any substitute form that is
adopted by the SEC). The term "Initial Public Offering" shall mean an
underwritten Public Offering of Voting Securities which results in gross
proceeds to the Company in excess of $25 million from the sale of Voting
Securities.
SEC: The Securities and Exchange Commission.
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Securities: Shall mean (i) Voting Securities, (ii) all rights,
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options, warrants to purchase such Voting Securities or the securities described
in the following clause and (iii) all other securities or capital stock of any
type whatsoever, including, without limitation, (A) non-voting common stock,
preferred stock, debt securities and securities that are, or may become,
convertible into or exchangeable for, or that entitle the holder to purchase,
Voting Securities and (B) preferred stock.
Securities Act: The Securities Act of 1933, as amended.
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Stockholders: The FS Stockholder, the Ripplewood Stockholder and the
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Existing Stockholders.
Subsidiary: With respect to any Person, a corporation or other entity
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of which a majority of the shares of stock or other ownership interests are
owned, directly or indirectly, by such Person.
Taubman Option: The options to purchase 500,000 shares of Common
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Stock as described in the Option to Purchase Common Stock dated as of the date
hereof issued one-half to Nicholas F. Taubman and one-half to the Trust by the
Company, as described in the Option Agreement.
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Voting Securities: All Securities of the Company which possess
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general voting power to elect members of the Board (not including, unless the
context dictates otherwise, any options or warrants to purchase Voting
Securities).
2. Rights Upon Issuance of Additional Securities. The Company hereby
---------------------------------------------
grants to each Stockholder the following rights with respect to any and all
proposed issuances or sales of Additional Securities by the Company:
2.1 Issuance Notice. The Company shall give each Stockholder written
---------------
notice of the Company's intention to issue and sell Additional Securities (the
"Issuance Notice"), describing the type of Additional Securities, the price at
which the Additional Securities will be issued and sold and the general terms
upon which the Company proposes to issue and sell the Additional Securities,
including the anticipated date of such issuance or sale.
2.2 Response Notice. Each Stockholder shall have 30 days from the
---------------
date the Issuance Notice is received to agree to purchase all or any portion of
its Pro Rata Share (as defined below in Subsection 2.4) of such Additional
Securities by giving written notice to the Company of its desire to purchase
Additional Securities (the "Response Notice") and stating therein the quantity
of Additional Securities to be purchased. Such Response Notice shall constitute
the irrevocable agreement of such Stockholder to purchase the quantity of
Additional Securities indicated in the Response Notice at the price and upon the
terms stated in the Issuance Notice. Any purchase by Stockholders of Additional
Securities shall be consummated on the later (i) the closing date specified in
the Issuance Notice or (ii) the closing date on which Additional Securities
described in the applicable Issuance Notice are first issued and sold if other
Persons are also purchasing Additional Securities. Each Stockholder that has
elected to purchase its Pro Rata Share of Additional Securities will have the
right to purchase all or any portion of the Additional Securities unsubscribed
for by the other Stockholders, up to its pro rata share of such unsubscribed
portion (determined by the number of Voting Securities owned by the party or
parties who elect to purchase such unsubscribed for portion) if oversubscribed.
2.3 Revised Issuance Notice. The Company shall have 120 days from
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the date of the Issuance Notice to consummate the proposed issuance and sale of
the Additional Securities that are not being purchased by Stockholders at a
price and upon the terms that are not materially less favorable to the Company
than those specified in the Issuance Notice. If the Company proposes to issue
Additional Securities after such 120-day period or at a price and upon terms
that are materially less favorable to the Company than those specified in the
Issuance Notice it must again comply with this Section 2.
2.4 Pro Rata Share. For purposes of this Section 2, the Pro Rata
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Share of a Stockholder shall be a fraction, (i) the numerator of which shall be
the total number of shares of Voting Securities then held by the Stockholder and
(ii) the denominator of which shall be the total number of shares of Voting
Securities then issued and outstanding and held by parties to this Agreement.
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2.5 Termination and Assignment. The rights provided to each of the
--------------------------
Stockholders under this Section 2 shall terminate upon the later to occur of (i)
the 180th day after the consummation of an Initial Public Offering and (ii)
such time as less than 50% of the outstanding Common Stock is held by the
Stockholders and their Permitted Transferees (the later of such times described
in clauses (i) or (ii) referred to herein as a "Liquidity Event"). A
Stockholder's rights under this Section 2 will terminate after the Stockholder
has transferred a number of Voting Securities which represents 50% or more of
the number of Voting Securities (including the Common Stock purchasable upon
exercise of Existing Stockholder's options to acquire Voting Securities under
the Taubman Option) held by the Stockholder on the date hereof (as appropriately
adjusted for any stock split, recapitalization or similar transaction) (with (i)
Ripplewood Partners and Ripplewood Employee Fund and (ii) the Existing
Stockholders, each considered collectively for this purpose) other than
transfers to a Permitted Transferee or permitted assignee. The rights granted
under this Section 2 shall not be assignable; provided, however that a
Stockholder may assign its rights under this Section 2 relating to the shares
which it is then transferring to a Permitted Transferee or any purchaser in a
private transaction of more than 25% of the shares of Common Stock then held by
such Stockholder (with (i) Ripplewood Partners and Ripplewood Employee Fund and
(ii) the Existing Stockholders, each considered collectively for this purpose).
3. Transfer of Shares by FS Stockholder or Ripplewood Stockholder; Rights
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of Inclusion.
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3.1 Right of Inclusion.
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(a) The FS Stockholder agrees not to Transfer (as defined in
Section 5.1) all or any portion of the shares of Common Stock it holds to any
Person (individually, a "Third Party" and, collectively, "Third Parties") unless
the Ripplewood Stockholder and each Existing Stockholder are given an
opportunity to sell to the Third Party such number of shares of Common Stock
owned by the Ripplewood Stockholder and such Existing Stockholder as is
determined in accordance with Subsection 3.3 of this Section 3; provided,
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however, that the Ripplewood Stockholder and the Existing Stockholders shall
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have no rights pursuant to this Section 3 with respect to Transfers by the FS
Stockholder or a Permitted Transferee of the FS Stockholder of Common Stock to
(i) any Permitted Transferee of the FS Stockholder or Permitted Transferees of
such Permitted Transferee (except Transfers either to an Unaffiliated Permitted
Transferee (x) more than one year after the date hereof or (y) within one year
of the date hereof if after such Transfer, FS Stockholder would own less than
50% of the Common Stock or would have granted any approval rights over major
corporate transactions or would have transferred rights not in compliance with
this Agreement) or (ii) to any limited or general partner or employee of the FS
Stockholder or any Permitted Transferee of the FS Stockholder (unless such
Transfer in the case of clause (ii) would result in the FS Stockholder and its
Affiliates ceasing to continue to nominate a majority of the Board of
Directors).
(b) The Ripplewood Stockholder agrees not to Transfer (as
defined in Section 5.1) all or any portion of the shares of common stock it
holds to any third party unless the FS Stockholder is given an opportunity to
sell to the third party such number of shares of Common Stock owned by the FS
Stockholder as is determined in accordance with subsection 3.3 of this
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Section 3; provided, however, that the FS Stockholder shall have no rights
pursuant to the Section 3 with respect to Transfers by the Ripplewood
Stockholder to any Permitted Transferee of the Ripplewood Stockholder. To the
extent the FS Stockholder exercises its rights under this Section 3.1(b), the
Existing Stockholders shall thereupon have the rights described in Section
3.1(a).
3.2 Third-Party Offer.
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(a) Prior to the consummation of any sale of all or any portion
of the shares of Common Stock held by the FS Stockholder to a Third Party, the
FS Stockholder shall cause each bona fide offer from such Third Party to
purchase such shares from the FS Stockholder (a "Third-Party Offer") to be
reduced to writing and shall send written notice of such Third-Party Offer (the
"Initial Offer Notice") to the other Stockholders. Each Third-Party Offer shall
include an offer to purchase shares of Common Stock from the Existing
Stockholders and the Ripplewood Stockholder, in the amounts determined in
accordance with Subsection 3.3 of this Section 3, at the same time, at the same
price and on the same terms as the sale by the FS Stockholder to the Third
Party, and according to the terms and conditions of this Agreement. The Initial
Offer Notice shall be accompanied by a true copy of the Third-Party Offer
(including all material information available to the FS Stockholder relating
thereto). If a Stockholder desires to accept the offer contained in the Initial
Offer Notice, such Stockholder shall furnish written notice to the FS
Stockholder, within 20 days after its receipt of the Initial Offer Notice,
indicating such Stockholder's irrevocable acceptance of the offer included in
the Initial Offer Notice and setting forth the maximum number of shares of
Common Stock such Stockholder agrees to sell to the Third Party (the "Acceptance
Notice"). If a Stockholder does not furnish an Acceptance Notice to the FS
Stockholder in accordance with these provisions by the end of such 20-day
period, such Stockholder shall be deemed to have irrevocably rejected the offer
contained in the Initial Offer Notice. All shares of Common Stock set forth in
the Acceptance Notices of the Stockholders together with the shares of Common
Stock proposed to be sold by the FS Stockholder to the Third Party are referred
to collectively as "All Offered Shares". Within five days after the date on
which the Third Party informs the FS Stockholder of the total number of shares
of Common Stock which such Third Party has agreed to purchase in accordance with
the terms specified in the Initial Offer Notice, the FS Stockholder shall send
written notice (the "Final Notice") to the participating Stockholders setting
forth the number of shares of Common Stock each participating Stockholder shall
sell to the Third Party as determined in accordance with Subsection 3.3 of this
Section 3, which number shall not exceed the maximum number specified by a
Stockholder in its Acceptance Notice. Within five days after the date of the
Final Notice (or such shorter period as may reasonably be requested by the FS
Stockholder to facilitate the sale), the participating Stockholders shall
furnish to the FS Stockholder (i) a written undertaking to deliver, upon the
consummation of the sale of Common Stock to the Third Party as indicated in the
Final Notice, the certificates representing the shares of Common Stock held by
each Stockholder which will be transferred pursuant to such Third-Party Offer
(such shares shall be referred to herein as the "Included Shares") and (ii) a
limited power-of-attorney authorizing the FS Stockholder to transfer the
Included Shares pursuant to the terms of such Third-Party Offer. Each
Stockholder shall be required to make customary representations and warranties
in connection with such transfer with respect to its own authority to transfer
and its title to the shares of Common Stock transferred. In any such transaction
the Company will cooperate with all Stockholders to facilitate the transaction.
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(b) Prior to the consummation of any sale of all or any portion
of the shares of Common Stock held by the Ripplewood Stockholder to a Third
Party, the Ripplewood Stockholder shall cause each bona fide offer from such
Third Party to purchase such shares from the Ripplewood Stockholder (a
"Ripplewood Third-Party Offer") to be reduced to writing and shall send written
notice of such Ripplewood Third-Party Offer (the "Ripplewood Initial Offer
Notice") to the FS Stockholder. Each Ripplewood Third-Party Offer shall include
an offer to purchase shares of Common Stock from the FS Stockholder, in the
amounts determined in accordance with Subsection 3.3 of this Section 3, at the
same time, at the same price and on the same terms as the sale by the Ripplewood
Stockholder to the Third Party, and according to the terms and conditions of
this Agreement. The Ripplewood Initial Offer Notice shall be accompanied by a
true copy of the Ripplewood Third-Party Offer (including all material
information available to the Ripplewood Stockholder relating thereto). If the FS
Stockholder desires to accept the offer contained in the Ripplewood Initial
Offer Notice, the FS Stockholder shall furnish written notice to the Ripplewood
Stockholder, within 20 days after its receipt of the Ripplewood Initial Offer
Notice, indicating the FS Stockholder's irrevocable acceptance of the offer
included in the Ripplewood Initial Offer Notice and setting forth the maximum
number of shares of Common Stock the FS Stockholder agrees to sell to the Third
Party (the "Acceptance Notice"). If the FS Stockholder does not furnish an
Acceptance Notice to the Ripplewood Stockholder in accordance with these
provisions by the end of such 20-day period, the FS Stockholder shall be deemed
to have irrevocably rejected the offer contained in the Ripplewood Initial Offer
Notice. All shares of Common Stock set forth in the Acceptance Notice of the FS
Stockholder together with the shares of Common Stock proposed to be sold by the
Ripplewood Stockholder to the Third Party are referred to collectively as "All
Offered Shares". Within five days after the date on which the Third Party
informs the FS Stockholder of the total number of shares of Common Stock which
such Third Party has agreed to purchase in accordance with the terms specified
in the Ripplewood Initial Offer Notice, the Ripplewood Stockholder shall send
written notice (the "Ripplewood Final Notice") to the FS Stockholder setting
forth the number of shares of Common Stock the FS Stockholder shall sell to the
Third Party as determined in accordance with Subsection 3.3 of this Section 3,
which number shall not exceed the maximum number specified by the FS Stockholder
in its Acceptance Notice. Within five days after the date of the Ripplewood
Final Notice (or such shorter period as may reasonably be requested by the
Ripplewood Stockholder to facilitate the sale), the FS Stockholder shall furnish
to the Ripplewood Stockholder (i) a written undertaking to deliver, upon the
consummation of the sale of Common Stock to the Third Party as indicated in the
Ripplewood Final Notice, the certificates representing the shares of Common
Stock held by the FS Stockholder which will be transferred pursuant to such
Ripplewood Third-Party Offer (such shares shall be referred to herein as the
"Included Shares") and (ii) a limited power-of-attorney authorizing the
Ripplewood Stockholder to transfer the Included Shares pursuant to the terms of
such Ripplewood Third-Party Offer. Each Stockholder shall be required to make
customary representations and warranties in connection with such transfer with
respect to its own authority to transfer and its title to the shares of Common
Stock transferred. In any such transaction the Company will cooperate with all
Stockholders to facilitate the transaction.
3.3 Allocation of Included Shares. The maximum number of shares of
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Common Stock that may be sold by FS Stockholder, Ripplewood Stockholder and
each Existing Stockholder and all other holders of Common Stock who have rights
to participate in sales of Common Stock by
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the FS Stockholder or Ripplewood Stockholder pursuant to written agreements by
and between the FS Stockholder, the Ripplewood Stockholder or the Company and
any such holder (the "Other Tag-Along Rights Holders") in any sale governed by
this Section 3 shall be (i) All Offered Shares in the event the Third Party has
agreed to purchase All Offered Shares and all shares of Common Stock that the
Other Tag-Along Rights Holders who have elected to participate in such sale seek
to include in such sale or (ii) such number of shares of Common Stock equal to
the product of (a) the total number of shares of Common Stock which the Third
Party has agreed to purchase times (b) a fraction, the numerator of which is the
total number of shares of Common Stock owned by the FS Stockholder, the
Ripplewood Stockholder, the Existing Stockholders or each Other Tag-Along Rights
Holder who is eligible to and has elected to participate in such sale, as the
case may be, on the date of the Final Notice or Ripplewood Final Notice and the
denominator of which is the total number of shares of Common Stock owned on the
date of the Final Notice or Ripplewood Final Notice by the FS Stockholder, the
Ripplewood Stockholder, the Existing Stockholders and the Other Tag-Along Rights
Holders who have elected to participate in such sale; provided, however, that,
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in the event the FS Stockholder, the Ripplewood Stockholder, the Existing
Stockholders or any Other Tag-Along Rights Holder elects to sell a number of
shares of Common Stock which is less than the number of shares such holder could
sell pursuant to clause (ii) above, the shares of Common Stock that the others
of such holders can sell in such transaction shall be increased by an aggregate
amount equal to the number of shares which any of the FS Stockholder, the
Ripplewood Stockholder, the Existing Stockholders or any Other Tag-Along Rights
Holder could have sold in such transaction but chose not to sell, and any such
increase shall be allocated among such other holders on a pro rata basis based
upon the total number of shares of Common Stock owned on the date of the Final
Notice or Ripplewood Final Notice by such other holders. The Company shall not
grant to any Person that is not a party to this Agreement on the date hereof
rights which are more favorable than or which would interfere with (it being
understood that the granting of substantially similar rights to Other Tag-Along
Rights Holders shall not by itself be deemed to so interfere) those granted to
the Existing Stockholders pursuant to this Section 3 without Mr. Taubman's or
his representative's prior written consent.
3.4 Consummation. The FS Stockholder or Ripplewood Stockholder shall
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have 90 days from the date of the Final Notice or Ripplewood Final Notice,
respectively, in which to sell to the Third Party the shares of Common Stock
owned by the FS Stockholder or Ripplewood Stockholder and the Included Shares of
the other Stockholders having Tag-Along Rights on terms which are not materially
less favorable to the sellers of shares of Common Stock than those specified in
the applicable Initial Offer Notice; provided, however, that in the event there
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is a decrease in the price to be paid by the Third Party for the shares of
Common Stock to be sold from the price set forth in the Initial Offer Notice or
the Ripplewood Initial Offer Notice, as applicable, which decrease is acceptable
to the FS Stockholder (in the case of a Third Party Offer) or Ripplewood
Stockholder (in the case of a Ripplewood Third Party Offer), or other material
change in terms which are less favorable to the FS Stockholder or Ripplewood
Stockholder, as the case may be, but which are acceptable to the FS Stockholder
or Ripplewood Stockholder, as the case may be, the FS Stockholder or Ripplewood
Stockholder, as the case may be, shall notify the participating Stockholders of
such decrease or change in terms, and each of the participating Stockholders
shall have five business days from the date of receipt of the notice of such
decrease or change in terms to
9
reduce the number of shares of Common Stock it will sell to such Third Party as
previously indicated in the applicable Acceptance Notice and the number of
shares that all other participating stockholders (including Other Tag-Along
Rights Holders) may transfer shall be increased in accordance with the
provisions of Section 3.3; and provided, further, that in the event there is an
-------- -------
increase in the price to be paid by the Third Party for the shares of Common
Stock to be sold from the price set forth in the applicable Initial Offer Notice
or other material change in terms which are more favorable to the FS Stockholder
or Ripplewood Stockholder, as the case may be, the FS Stockholder or Ripplewood
Stockholder, as the case may be, shall notify the other Stockholders of such
increase or change in terms, and each of the Stockholders who was eligible to
but did not elect to participate to the full extent of their rights hereunder
shall have five business days from the date of receipt of the notice of such
increase or change in terms to increase the number of shares of Common Stock it
will sell to such Third Party, and the number of shares that all other
participating stockholders (including other Tag-Along Rights Holders) may
transfer shall be decreased proportionately if necessary. A Third Party
purchaser of shares of Common Stock which complies with this Section 3 shall not
be subject to the obligations contained in this Section 3 with respect to future
sales of their shares. The FS Stockholder or Ripplewood Stockholder, as the case
may be, shall cause to be remitted to the participating Stockholders the total
sales price of the Included Shares of the participating Stockholders sold
pursuant thereto, which consideration shall be in the same form and per share
amount as the consideration received by the FS Stockholder or Ripplewood
Stockholder, as the case may be, and as specified in the Initial Offer Notice
(or Ripplewood Initial Offer Notice, as applicable), net (i) in an exercise of
Tag-Along Rights by an Existing Stockholder, of the reasonable, incremental out-
of-pocket expenses incurred by the FS Stockholder in connection with such sale
as a result of the Existing Stockholders' participation therein or (ii) in an
exercise of Tag-Along Rights by the Ripplewood Stockholder or the FS
Stockholder, of the pro rata portion (based on the number of Voting Securities
included by each Stockholder compared to the aggregate number of Voting
Securities included in such sale) of the reasonable out-of-pocket expenses
incurred in connection with a sale consummated pursuant to this Section 3. The
FS Stockholder or Ripplewood Stockholder shall furnish, or shall cause to be
furnished, such other evidence of the completion and time of completion of such
sale and the terms thereof as may be reasonably requested by the participating
Stockholders including, without limitation, evidence of the expenses incurred by
the FS Stockholder or Ripplewood Stockholder, as the case may be, in connection
with such sale. If and to the extent that, at the end of 90 days following the
date of the Final Notice (or Ripplewood Final Notice, as applicable), the FS
Stockholder or Ripplewood Stockholder, as the case may be, has not completed the
sale contemplated thereby, the FS Stockholder or Ripplewood Stockholder, as the
case may be, shall return to the participating Stockholders all certificates
representing the Included Shares and all powers-of-attorney which the
participating Stockholders may have transmitted pursuant to the terms hereof.
3.5 Termination and Assignment. Any Permitted Transferee of the FS
--------------------------
Stockholder (other than an Unaffiliated Permitted Transferee) and any assignee
of the FS Stockholder's rights under Section 4 shall agree to be bound by this
Section 3 to the same extent as the FS Stockholder. Any Permitted Transferee of
the Ripplewood Stockholder shall agree to be bound by this Section 3 to the same
extent as the Ripplewood Stockholder. The obligations of the FS Stockholder and
the Ripplewood Stockholder and any Permitted Transferee or assignee pursuant to
the provisions of this
10
Section 3 shall terminate upon a Liquidity Event or, as to any such holder only,
upon a distribution without consideration of all of the shares of Common Stock
that such holder holds to the limited or general partners or employees of such
holder or their Affiliates. The rights granted to the Existing Stockholders or
Ripplewood Stockholder pursuant to this Section 3 may not be assigned, except
that these rights shall inure to the benefit of a Permitted Transferee of an
Existing Stockholder (and its Permitted Transferees) or a Permitted Transferee
of a Ripplewood Stockholder provided that such persons have agreed to be bound
by Sections 4 and 5 of this Agreement, and may be assigned to a purchaser or
transferee of more than 50% of the shares of Common Stock then held by any
Existing Stockholder or by a Ripplewood Stockholder, and such rights shall be
assignable to any purchaser of more than 50% of the shares of such transferee.
The rights granted to the FS Stockholder with respect to a Ripplewood Third
Party Offer under Section 3.1(b) and 3.2(b) may not be assigned, except that
these rights shall inure to the benefit of a Permitted Transferee of the FS
Stockholder (or its Permitted Transferees), to any general or limited partner of
the FS Stockholder or its Permitted Transferees, or to any purchaser of more
than 50% of the shares of Common Stock then held by FS Stockholder. Subject to
Section 3.3, the FS Stockholder may grant tag-along-rights under this Section 3
to any transferee and such rights shall be assignable to any purchaser of more
than 50% of the shares of such transferee. Nothing in this section shall be
construed as granting rights of inclusion in any Public Market Sale.
4. Obligation to Sell Securities.
-----------------------------
4.1 Sale Obligation. If the FS Stockholder finds a third-party
---------------
buyer to which it sells all of the shares of Common Stock held by the FS
Stockholder (including its Permitted Transferees and assignees) (whether such
sale is by way of purchase, merger or other form of transaction), upon the
request of the FS Stockholder, each of the Existing Stockholders and the
Ripplewood Stockholder shall sell all of the shares of Common Stock and the
Taubman Option beneficially owned by such Existing Stockholder and the
Ripplewood Stockholder to such third-party buyer pursuant to the same terms and
conditions negotiated by the FS Stockholder for the sale of shares of Common
Stock held by the FS Stockholder and subject to the provisions of the Taubman
Option with respect to the consideration to be received for such Option;
provided, that an Existing Stockholder and the Ripplewood Stockholder shall have
- --------
no obligation to sell its shares of Common Stock and the Taubman Option pursuant
to this Section 4 unless the FS Stockholder (including its Permitted Transferees
and assignees) sells all of the shares of Common Stock held by them. Each of
the Existing Stockholders and the Ripplewood Stockholder agrees to such sale and
to execute such agreements, powers of attorney, voting proxies or other
documents and instruments as may be necessary to consummate such sale. Each of
the Existing Stockholders and the Ripplewood Stockholder further agrees to
timely take such other actions as the FS Stockholder may reasonably request as
necessary in connection with the approval of the consummation of such sale,
including voting all Voting Securities in favor of such sale. Each Existing
Stockholder shall pay the reasonable incremental out-of-pocket expenses incurred
by the FS Stockholder in connection with the inclusion of such Existing
Stockholder in a sale consummated pursuant to this Section 4. The Ripplewood
Stockholder shall pay its pro rata portion (based on the total value of the
consideration received by such Stockholder compared to the aggregate
consideration received by all Stockholders in the
11
transaction) of the reasonable out-of-pocket expenses incurred by the FS
Stockholder in connection with a sale consummated pursuant to this Section 4.
4.2 Termination and Assignment. The obligations of the Existing
--------------------------
Stockholders and Ripplewood Stockholder pursuant to this Section 4 shall be
binding on any transferee of or purchaser of shares of Common Stock or all or
any part of the Taubman Option from an Existing Stockholder or from the
Ripplewood Stockholder or from one of their Permitted Transferees, and any
subsequent transferee, except for a transferee purchasing shares in a Public
Market Sale, or any subsequent transferee thereof, and an Existing Stockholder,
the Ripplewood Stockholder, Permitted Transferee or any other transferee shall
obtain and deliver to the FS Stockholder a written commitment to be bound by
such provisions from each such transferee or Permitted Transferee prior to any
Transfer. Notwithstanding the immediately preceding sentence, a Trust
Transferee shall not be required to deliver the written commitment referred to
in such sentence upon receipt of shares by way of distribution from the trust;
provided, however, that if such Trust Transferee does not deliver such
commitment within 30 days after receipt of notice from the Company requesting
delivery of such documents (and referring specifically to this Agreement) (such
period, the "Document Delivery Period"), the Company need not register such
Transfer on its records and the Company (or its designee) shall have a
repurchase right as to such shares pursuant to Section 5.1(b). The Trust shall
promptly notify the Company of the occurrence of any event that would cause a
distribution from the Trust. The obligations pursuant to this Section 4 shall
likewise be binding on any transferee of or purchaser of shares from the FS
Stockholder (and any subsequent transferee), except for a transferee purchasing
shares in a Public Market Sale or any subsequent transferee thereof, or an
assignee of the rights held by FS Stockholder under this Section 4, and the FS
Stockholder shall obtain an undertaking by such transferee to be so bound. The
obligations of the Existing Stockholders and the Ripplewood Stockholder
pursuant to this Section 4, and the obligations of any such transferee and
Permitted Transferee, shall continue after the consummation of an Initial Public
Offering until the occurrence of a Liquidity Event. The rights of FS
Stockholder under this Section 4 shall not be assignable except to a purchaser
of more than 50% of the shares of Common Stock then held by FS Stockholder and
its Permitted Transferees (with FSEP IV and any Permitted Transferee therefrom
considered collectively for this purpose) and holding after such purchase more
than 50% of the outstanding Common Stock or to a Permitted Transferee of all of
FS Stockholder's stock and shall terminate in the event that the FS Stockholder
(or such Permitted Transferee or permitted assignee) holds a number of shares of
Common Stock which represents less than 35% of the total number of shares of
Common Stock outstanding at any time (with FSEP IV, any Permitted Transferee
and/or permitted assignee considered collectively for this purpose).
5. Restrictions on Transfers of Securities; Right of First Offer.
-------------------------------------------------------------
5.1 Transfer Restrictions.
---------------------
(a) Transfer Restrictions Binding Existing Stockholders. No
---------------------------------------------------
Existing Stockholder shall, without the prior written approval of FS
Stockholder, (i) pledge, hypothecate or encumber any shares of Common Stock,
(ii) sell, assign, transfer, gift or otherwise dispose of or convey or
distribute to its beneficiaries (in the case of the Trust) ("Transfer") any
shares of Common
12
Stock, or any right, title or interest therein, except in compliance with the
Securities Act and all applicable state securities laws; or (iii) Transfer any
shares of Common Stock or any right, title or interest therein, except for sales
of shares of Common Stock expressly permitted by and in compliance with this
Agreement, including (without limitation) Subsection 5.2; provided that each of
the Existing Stockholders may not Transfer any shares of Common Stock, or any
right, title or interest therein, until after the second anniversary of the date
of this Agreement (the "Permitted Transfer Date"), except pursuant to this
Agreement or due to involuntary dissolution of the Trust or death. As long as
it has any obligations under this Agreement, to the extent permitted by its
Declaration of Trust, the Trust shall remain in full force and effect and shall
not be dissolved or revoked. After the Permitted Transfer Date, or at such
earlier date as required by law or the Declaration of Trust of the Trust, the
Existing Stockholders may Transfer shares of Common Stock to a Permitted
Transferee, without complying with Section 5.2, provided that each of such
transferees (i) executes a written undertaking to be and becomes bound by this
Agreement in the same manner and to the same extent as the Existing
Stockholders, (ii) executes an irrevocable power of attorney appointing Nicholas
F. Taubman (or an individual designated by Nicholas F. Taubman if he is unable
to act due to death or disability) as such transferee's attorney-in-fact with
sole irrevocable power and authority to make all decisions on behalf of and take
all actions required to be taken by such transferee in connection with this
Agreement, including (without limitation) any required sale of shares of Common
Stock pursuant to Section 4 hereof, and (iii) if requested by FS Stockholder,
delivers an opinion of legal counsel reasonably satisfactory to FS Stockholder
that such undertaking is binding and enforceable. Notwithstanding the
immediately preceding sentence, a Trust Transferee shall not be required to
deliver the items referred to in such sentence upon receipt of shares by way of
distribution from the Trust; provided, however, that if such Trust Transferee
-------- -------
does not deliver such items within the Document Delivery Period the Company need
not register such Transfer on its records and the Company (or its designee)
shall have a repurchase right as to such shares pursuant to Section 5.1(c). The
Trust shall promptly notify the Company of the occurrence of any event that
would cause a distribution from the Trust.
(b) Conditions to Transfer. Any attempt to Transfer, pledge,
----------------------
hypothecate or encumber shares of Common Stock, or any right, title or interest
therein, not in compliance with this Agreement shall be null and void, and the
Company shall not give effect to any such attempted transaction or Transfer.
Any shares of Common Stock Transferred pursuant to the terms and requirements of
this Agreement (including Sections 3, 4 and 5) shall be Transferred free and
clear of all mortgages, liens, pledges, charges and security interests or
encumbrances, or any obligations or liabilities in connection therewith, other
than obligations under this Agreement of transferees. Each Stockholder, on the
execution and delivery of this Agreement, agrees that such Stockholder will not
Transfer any shares of Common Stock prior to delivery to the Company of an
opinion of counsel in form and substance reasonably satisfactory to the Company
with respect to compliance with the Securities Act, or until a registration
statement with respect to such shares of Common Stock under the Securities Act
has become effective; except that no opinion shall be required in the case of a
Transfer by any Stockholder to a Permitted Transferee or by FS Stockholder or a
Permitted Transferee to any limited or general partner or employee of the FS
Stockholder or any Permitted Transferee. Except as expressly provided to the
contrary herein, all transferees of shares of Common Stock except for a
transferee acquiring shares in a Public Market Sale and transferees of such
Public
13
Market Sale transferee will be bound by this Agreement in the same manner and to
the same extent as the transferor and prior to any Transfer must deliver to the
Company and the Stockholders a written undertaking to be and become so bound.
Upon completion of any Transfer in compliance with this Agreement, the
transferee shall become a Stockholder and entitled to certain rights hereunder.
(c) Repurchase Option. If Voting Securities held by a Trust Transferee
-----------------
become subject to a repurchase option pursuant to Section 4.2 or Section 5.1(a)
above, upon notice of exercise thereof from the Company (or its designee), such
Voting Securities shall be deemed to have been redeemed by the Company or
purchased by its designee for, and any certificates representing such Voting
Securities shall thereafter represent the right to receive, 85% of their fair
market value in cash (which value shall be determined by an Appraising Firm (as
defined in Section 5.2)). The Company (or its designee) shall have 60 days from
the expiration of the Document Delivery Period to deliver such notice and shall
pay such amount promptly (within 90 days from the expiration of the Document
Delivery Period) upon delivering such notice, whereupon the Company shall
reflect such redemption or sale on the records of the Company. If such notice
and payment is not delivered within 210 days of the distribution by the Trust,
and if the Trust has complied with its notice obligations hereunder, then the
Company shall record the Transfer to the Trust Transferee, notwithstanding the
failure to deliver the documents required by subsection (a). The Company's
rights under this paragraph (b) shall terminate on the date all rights under
Sections 4 and 5 hereof in favor of the FS Stockholder or its Permitted
Transferees have terminated.
(d) Transfer Restrictions Binding Ripplewood Stockholder. The
----------------------------------------------------
Ripplewood Stockholder shall not, without the prior written approval of FS
Stockholder; (i) pledge, hypothecate or encumber any shares of Common Stock,
except that the Ripplewood Employee Fund may pledge shares of Common Stock
subject to Section (e) of this Section 5.2; (ii) Transfer any shares of Common
Stock, or any right, title or interest therein, except in compliance with the
Securities Act and all applicable state securities laws; or (iii) Transfer any
shares of Common Stock or any right, title or interest therein, except for
Transfers of shares of Common Stock expressly permitted by and in compliance
with this Agreement, including (without limitation) subsection 5.2; provided
that the Ripplewood Stockholder may not Transfer any shares of Common Stock, or
any right, title or interest therein (other than to its Permitted Transferee or
as expressly permitted by and in compliance with this Agreement) until the
Permitted Transfer Date.
(e) The Ripplewood Employee Fund may pledge shares of Common Stock to
a lender in connection with the financing of its initial investment in the
Company, provided, that in connection with such pledge:
(i) No foreclosure sale of the pledge Common Stock shall be
consummated unless the FS Stockholder or a person designated by the FS
Stockholder shall be given the right to acquire such pledged shares of Common
Stock pursuant to this clause (i). Upon the pledgor agreeing to sell the shares
of Common Stock, the pledgor shall give written notice to the FS Stockholder of
the agreement to sell, which notice shall include a term sheet stating, among
other material terms, the agreed upon sale price that the purchaser is willing
to pay the pledgor for such
14
shares of Common Stock. FS Stockholder or its designee shall thereafter have the
right for a period of 30 days following receipt of such notice to elect to
purchase such shares of Common Stock at the price and on the terms stated in the
written notice. The FS Stockholder or its designee shall exercise such rights by
delivering its irrevocable written election to purchase such shares prior to
2:00 p.m. Los Angeles time on the final day of said 30-day period. If the FS
Stockholder (or its designee) elects to purchase such shares of Common Stock, it
shall consummate such purchase within 60 days of the final day of the 30-day
period. If the FS Stockholder (or its designee) does not elect to purchase such
shares of Common Stock, the foreclosure sale may be completed if and only if the
transferee agrees in writing to be bound by the obligations of Ripplewood
Stockholder set forth in Section 3, 4, 5 and 7 of this Agreement.
(ii) A transferee of pledged securities in a foreclosure
sale shall not succeed to any rights hereunder of Ripplewood Stockholders,
including without limitation rights set forth in Sections 2, 3, 6 and 7 hereof.
(iii) Any pledgor of shares of Common Stock shall be bound
by Section 4 of this Agreement during such time it may hold shares of Common
Stock.
5.2 Right of First Offer. Each of the Existing Stockholders hereby
--------------------
agrees not to Transfer, for three years after the Permitted Transfer Date, or
until a Liquidity Event, if earlier, any of the shares of Common Stock held by
it to any Person (other than its Permitted Transferees) unless FS Stockholder
(or any third person(s) designated by FS Stockholder, which may include
Affiliates of FS Stockholder or the Company) is given the right to acquire such
shares of Common Stock pursuant to the provisions of this Subsection 5.2. In
addition, until a Liquidity Event, the Existing Stockholders shall not Transfer
any shares of Common Stock to any Person who directly or indirectly carries on
or participates in any business in competition with the Business (whether
conducted by the Company or any Subsidiary or controlled Affiliate of the
Company) without complying with this Section 5.2. The Ripplewood Stockholder
agrees not to Transfer, until a Liquidity Event, any of the shares of Common
Stock held by it to any Person (other than its Permitted Transferees) unless FS
Stockholder (or any third person(s) designated by FS Stockholder, which may
include Affiliates of FS Stockholder or the Company) is given the right to
acquire such shares of Common Stock pursuant to the provisions of this
Subsection 5.2. If an Existing Stockholder or the Ripplewood Stockholder
receives an offer from any Person (other than its Permitted Transferees) to
acquire any shares of Common Stock, or decides to solicit or cause to be
solicited a proposal or proposals to acquire shares of Common Stock, such
Existing Stockholder or the Ripplewood Stockholder shall first give FS
Stockholder written notice (the "Stockholder Notice") of such intention, which
notice shall include a term sheet stating, among other material terms, the
minimum cash sales price (the "Target Price") that such Existing Stockholder or
the Ripplewood Stockholder would entertain for the shares of Common Stock to be
sold (the "Offered Securities"). FS Stockholder (or its designee) shall have
the right for a period of 20 days following the delivery of the Stockholder
Notice (the "Acceptance Period") to accept the offer to purchase all but not
less than all of the Offered Securities at the Target Price and upon the other
terms provided with the Stockholder Notice. The FS Stockholder (or its
designee) shall exercise its rights under this Section 5.2 by delivering to such
Existing Stockholder or the Ripplewood Stockholder an irrevocable written notice
of its election prior to 2:00 p.m.
15
Los Angeles time on the final day of the Acceptance Period. If the FS
Stockholder (or its designee) exercises its rights under this Section 5.2, the
sale of the Offered Securities shall be consummated within 60 days of the final
day of the Acceptance Period (the "Purchase Period"). If the FS Stockholder (or
its designee) does not elect to purchase the Offered Securities on such terms
(and the failure to deliver an irrevocable notice of acceptance shall be
conclusively deemed to be rejection of such opportunity) or fails to consummate
a purchase of the Offered Securities within the Purchase Period, such Existing
Stockholder or the Ripplewood Stockholder shall have the right (without
limitation to other rights it may have) to consummate the sale of the Offered
Securities on terms not materially more favorable to the purchaser than
specified in the Stockholder Notice for a period of 135 days (the "Consummation
Period") after the expiration of the Acceptance Period or, if applicable, the
Purchase Period. If such Existing Stockholder or the Ripplewood Stockholder does
not complete such sale, transfer or conveyance within the Consummation Period,
such Existing Stockholder or the Ripplewood Stockholder shall not have the right
to sell, transfer or convey any of the Offered Securities without again
complying with this Subsection 5.2. In the event such Existing Stockholder or
the Ripplewood Stockholder intends to sell the Offered Securities for
consideration other than cash, such Existing Stockholder or the Ripplewood
Stockholder shall notify the FS Stockholder (or its designee) of the terms of
such non-cash consideration. FS Stockholder (or its designee) may elect within
30 days of such notice to have the fair market value of such non-cash
consideration determined, with the parties jointly selecting an investment
banking firm to resolve any dispute regarding the fair market value of such non-
cash consideration; in the absence of agreement on such firm, a third investment
banking firm (designated by the firms proposed by the FS Stockholders and
Purchasers) shall determine such fair market value. The investment banking firm
so selected is referred to as the "Appraising Firm." If the sum of the fair
market value of the non-cash consideration and the cash consideration (in the
case of a sale that is partially for cash) is less than the cash price offered
to FS Stockholder (or its designee) pursuant to this Subsection 5.2, FS
Stockholder (or its designee) may, within 20 days of the determination of the
fair market value of the non-cash consideration, elect to purchase the Offered
Securities proposed to be sold for an amount in cash equal to the sum of (i) the
fair market value of the non-cash consideration and (ii) the cash consideration,
if any. Such purchase must be consummated within 60 days of the determination of
fair market value. If such Existing Stockholder or the Ripplewood Stockholder
receives a written offer for the Offered Securities at any time during the
Consummation Period which is acceptable to such Existing Stockholder or the
Ripplewood Stockholder but is less than the Target Price or is upon terms
materially less favorable to such Existing Stockholder or the Ripplewood
Stockholder than the terms provided to FS Stockholder (or its designee) in the
Stockholder Notice (the "Below Target Price Offer"), such Existing Stockholder
or the Ripplewood Stockholder shall promptly deliver a copy of such written
offer to FS Stockholder (or its designee). During the 20-day period following
delivery of such written offer, FS Stockholder (or its designee) shall have the
right to accept the offer to purchase the Offered Securities on the terms
reflected in such written offer. FS Stockholder (or its designee) shall, if it
so desires, exercise such right by delivery to such Existing Stockholder or the
Ripplewood Stockholder written notice of its election to purchase all but not
less than all of the Offered Securities prior to 2:00 p.m. Los Angeles time on
the final day of such additional 20 day period and the sale of the Offered
Securities shall be consummated within 60 days of the delivery of such written
notice. If FS Stockholder (or its designee) does not elect to accept the offer
to purchase the Offered Securities on such terms within such 20-day period or
fails to consummate the purchase
16
of the Offered Securities within 60 days of the date of FS Stockholders (or its
designee's) acceptance of the Below Target Price Offer, such Existing
Stockholder or the Ripplewood Stockholder shall have (without limitation to any
other rights it may have) 135 days to consummate the sale of the Offered
Securities at a price and upon terms are not materially less favorable to such
Existing Stockholder or the Ripplewood Stockholder than the price and terms
specified in the written offer delivered to FS Stockholder (or its designee). In
the event a Below Target Price Offer involves any non-cash consideration, the
procedures for valuing such non-cash consideration set forth in Subsection 5.2
above shall be utilized to determine the fair market value of such non-cash
consideration and all time periods specified herein, extended accordingly.
5.3 Termination and Assignment. The obligations of a Stockholder
--------------------------
pursuant to this Section 5 shall not apply to a Public Market Sale. The rights
granted to FS Stockholder under Subsection 5.2 shall be assignable to its
Permitted Transferees (other than an Unaffiliated Permitted Transferee) and any
designee, as provided in this Section 5, or to a purchaser acquiring more than
50% of the outstanding Common Stock from the FS Stockholder. Any transferee of
shares of Common Stock from an Existing Stockholder, the Ripplewood Stockholder
or the FS Stockholder, as the case may be, other than a purchaser of shares in a
Public Market Sale or any subsequent transferee thereof, a transferee who shall
have acquired Securities following FS Stockholder declining to exercise its
rights of first offer hereunder (if the undertaking required by Section 4.2 is
delivered), or a purchaser of more than 50% of the shares of Common Stock held
by the FS Stockholder, shall be bound by the provisions of this Section 5 and
the Existing Stockholder, the Ripplewood Stockholder or the FS Stockholder, as
the case may be, shall obtain and deliver to each other Stockholder a written
commitment by such transferee to be bound by such provisions prior to any
transfer.
5.4 Taubman Option and Option Shares. Any reference in this
--------------------------------
Agreement (including any reference in Section 4) to shares of Common Stock shall
include the Option Shares as defined in the Option Agreement. After the
Permitted Transfer Date, the Taubman Option is transferable, but shall be
subject to the provisions of Sections 4, 5.1 and 5.2 hereof to the same extent
as Shares of Common Stock.
6. Registration Rights. FSEP IV, the Ripplewood Stockholder and the
-------------------
Existing Stockholders shall be entitled to certain registration rights with
respect to their shares of Common Stock (the "Registration Rights"). The terms
of the Registration Rights are set forth in Exhibit A attached hereto. The
rights granted to Stockholders under this Section 6 shall not be assignable,
except that a Stockholder may assign such rights to a Permitted Transferee
(provided, that any Permitted Transferee of the Existing Stockholders shall
deliver to the Company a power-of-attorney appointing Mr. Taubman (or an
individual he designates if he is unable to act due to death or disability), as
such Permitted Transferee's attorney-in-fact for purposes of exercising such
Transferee's rights and fulfilling such Transferee's obligations under this
Section 6) or to any purchaser of more than 50% of the shares of Common Stock
then held by such Stockholder (with (i) the Ripplewood Stockholder, and (ii) the
Existing Stockholders, each considered collectively for this purpose).
17
7. Representation on the Board of Directors.
----------------------------------------
7.1 The Board. Subject to the terms and conditions of this Section
---------
7, until the earlier to occur of (a) the date that is both (i) at least the
180/th/ day after the consummation of an Initial Public Offering, and (ii) such
time as less than 25% of the outstanding Common Stock is held by the
Stockholders and their Permitted Transferees or (b) the date of the sale by FS
Stockholder or its Permitted Transferees of more than 50% of the Initial Shares
held by them,(the earlier of such dates described in clauses (a) or (b) referred
to herein as a "Board Rights Termination Event"), at each annual or special
meeting of stockholders of the Company, or in any written consent executed in
lieu of a stockholder meeting, at or pursuant to which persons are being elected
to fill positions on the Board, the FS Stockholder, the Ripplewood Stockholder
and the Existing Stockholders agree to exercise, or cause to be exercised,
voting rights with respect to the shares of Voting Securities then held of
record or beneficially owned by them, in such a manner that (i) the candidates
nominated by FS Stockholder, (ii) Mr. Taubman or, in the event of his death or
disability, his representative designated in writing, and (iii) one (1)
candidate nominated by the Ripplewood Stockholder shall be elected to fill and
continue to hold positions on the Board. If necessary, the Board shall elect
such additional independent members, if any, as may be required under applicable
law or stock exchange requirements or by the National Association of Securities
Dealers or underwriters in connection with the Initial Public Offering, and the
FS Stockholder and the Existing Stockholders shall each take all actions
necessary in connection therewith. Mr. Taubman (or his representative) may not
be removed from the Board without cause. In addition, Mr. Taubman shall not be
disqualified from being a director by virtue of his age.
If, at any time from and after the date hereof until a Board Rights
Termination Event, FS Stockholder, Mr. Taubman or the Ripplewood Stockholder
shall give notice of its desire to remove any director previously nominated by
that party to serve on the Board, the FS Stockholder, the Ripplewood
Stockholder and the Existing Stockholders agree to exercise or cause to be
exercised voting rights with respect to all Voting Securities held of record or
beneficially owned by it or them so as to remove such director of the Company.
If at any time from and after the date hereof, until Board Rights Termination
Event any director previously nominated by FS Stockholder, Mr. Taubman or the
Ripplewood Stockholder to serve on the Board ceases to be a director (whether by
reason of death, resignation, removal or otherwise), FS Stockholder, Mr. Taubman
or the Ripplewood Stockholder, as the case may be, shall be entitled to nominate
a successor director to fill the vacancy created thereby, and the FS
Stockholder, the Ripplewood Stockholder and the Existing Stockholders agree to
exercise voting rights with respect to the shares of Voting Securities held of
record or beneficially owned by them so as to elect such nominee as a director
of the Company.
In furtherance of its obligations under this Section 7.1, and its
-----------
other obligations hereunder, effective on the date hereof the Ripplewood
Stockholder shall and hereby does grant to FSEP IV an irrevocable proxy to vote
the shares of the Ripplewood Stockholder in any manner that FSEP IV shall choose
consistent with the terms of this Agreement, in the form attached hereto as
Exhibit B. The irrevocable proxy shall be transferable to any Permitted
Transferee of the FS Stockholder, and the Ripplewood Stockholder shall execute
and deliver a new irrevocable proxy if necessary to effect such transfer. No
Transfer by the Ripplewood Stockholder to any Permitted
18
Transferee or other transferee (or any subsequent transferee) shall be effective
unless such transferee first delivers a substantially identical irrevocable
proxy in favor of FSEP IV or its Permitted Transferee. Any such irrevocable
proxy shall expire upon consummation of an Initial Public Offering.
7.2 Approval Right. Notwithstanding any other provision of this
--------------
Agreement to the contrary, until the third anniversary of this Agreement, the
Company (including any successor to the Company's business) may not Transfer any
significant portion of its assets to, or merge with or into, AutoZone, Inc. or
any Affiliate thereof and FS Stockholder, including any Permitted Transferee,
assignee or designee of FS Stockholder, may not directly or indirectly transfer
any interest in or control over any Voting Securities to AutoZone, Inc., or any
Affiliate thereof, without the prior written approval of Mr. Taubman.
7.3 Certain Actions of the Board.
----------------------------
(a) Without the approval of Mr. Taubman or his representative,
the Company shall not (i) issue any capital stock for consideration having a
value less than the fair market value of such capital stock (as determined in
reasonable good faith by the Board), unless such capital stock is issued in
connection with a financing transaction the overall terms of which are fair and
in the best interests of the Company, as determined in reasonable good faith by
the Board and provided, in the event that FS Stockholder or any of its
Affiliates is participating in or providing such financing the Existing
Stockholders have the opportunity to participate in such financing and, if they
so participate, to purchase or otherwise receive on the same terms their Pro
Rata Share (as defined in Section 2.4) of such Securities, or in connection with
a debt exchange, the overall terms of which the Board determines in reasonable
good faith are fair and in the best interests of the Company, (ii) enter into
any transaction or series of related transactions with any Affiliates of the FS
Stockholder or of the Ripplewood Stockholder, except on terms (as determined in
reasonable good faith based on full and fair disclosure by the Board) no less
favorable to the Company than are available from an unaffiliated third party, or
(iii) execute any amendment to the Articles of Incorporation or the Bylaws of
the Company, in each case as amended as of the effective time of the Merger
pursuant to the Merger Agreement, which would adversely affect the rights and
obligations of Mr. Taubman or his representative thereunder, as the case may be,
except for amendments which are applicable to holders of Voting Securities
generally and do not disproportionately disadvantage the Existing Stockholders,
or execute any amendment to this Agreement which adversely affects the rights
and obligations of the Existing Stockholders and their Permitted Transferees and
representatives, provided that this Agreement may be amended to add new parties
hereto who are purchasers of Securities (including an amendment granting
additional registration rights to such purchasers on terms permitted hereunder).
(b) Without a meeting of the Board of Directors of the Company
(as opposed to a committee thereof) having been called and convened for the
purpose of discussing any such action, the Company shall not (i) commence a
voluntary case or consent to the entry of an order for relief against it in an
involuntary case under Chapter 7 or Chapter 11 of the United States Bankruptcy
Code, (ii) acquire (including by merger) stock or assets of another business
(other than assets acquired in the ordinary course of business), from any seller
or group of related sellers in one
19
transaction or in a series of related transactions, for consideration having a
fair market value in excess of $25 million, (iii) effect an Initial Public
Offering, (iv) engage in any debt financing whereby the Company and any of its
subsidiaries, taken together, incur in excess of $100 million of debt,
determined as of the time of such financing, other than pursuant to the terms of
any credit facility then outstanding for purposes of working capital, or
acquisitions or expenditures considered pursuant to clause (ii) of this Section
7.3(b), (v) hire or terminate the employment of an executive officer of the
Company, (vi) other than pursuant to employee plans approved by the Board of
Directors, issue any additional equity securities, (vii) sell assets not in the
ordinary course of business (including by merger or sale of stock of a
subsidiary), to any buyer or group of related buyers in one transaction or in a
series of related transactions, for consideration having a fair market value in
excess of $25 million, (viii) participate in a merger, share exchange, or other
business combination transaction having a fair market value in excess of $25
million or (ix) exercise its postponement rights pursuant to Section 2.1(d) of
Exhibit A.
(c) Without the approval of the director nominated by the
Ripplewood Stockholder, the Company shall not (i) enter into any transaction or
series of related transactions with any Affiliates of the FS Stockholder, except
on terms (as determined in reasonable good faith based on full and fair
disclosure by the Board) no less favorable to the Company than are available
from an unaffiliated third party or (ii) execute any amendment to the Articles
of Incorporation or the Bylaws of the Company, in each case as amended as of the
effective time of the Merger pursuant to the Merger Agreement, which would
adversely affect the rights and obligations of the Ripplewood Stockholder
thereunder, except for amendments which are applicable to holders of Voting
Securities generally and do not disproportionately disadvantage the Ripplewood
Stockholder, or execute any amendment to this Agreement which adversely affects
the rights and obligations of the Ripplewood Stockholder and their Permitted
Transferees and representatives, provided that this Agreement may be amended to
add new parties hereto who are purchasers of Securities (including an amendment
granting additional registration rights to such purchasers on terms permitted
hereunder).
(d) Except with respect to the matters set forth in Section
7.3(c), the director nominated by the Ripplewood Stockholder (the "Ripplewood
Director") shall, until the consummation of an Initial Public Offering, cast any
vote at a meeting of the Board of Directors together with a majority of the
directors nominated by and affiliated with the FS Stockholder (the "FS
Directors") and shall execute and deliver to the Secretary of the Company any
written consent of the Board executed by all of the FS Directors. Except as set
forth in the preceding sentence, the Ripplewood Stockholder shall not take any
action as a Director except as required by law or as directed by a majority of
the FS Directors. Notwithstanding the foregoing, but subject to the next
paragraph, the Ripplewood Director shall not be required to vote or act in a
manner that he or she believes in good faith based on the advice of counsel
would violate applicable law, provided that in such circumstance the Ripplewood
--------
Director shall abstain from voting or acting altogether.
In the event (i) the Ripplewood Director shall fail to comply with the
agreement in the preceding paragraph, (ii) the Ripplewood Director shall
exercise his or her right to abstain pursuant to the last sentence of the
preceding paragraph, or (iii) this Section 7.4(d) shall be determined (other
than at the instance of the FS Stockholder or its affiliates) to be invalid,
illegal or unenforceable in
20
whole or in part in any respect, or the Ripplewood Director, Ripplewood
Stockholders or their affiliates shall assert such invalidity, illegality or
unenforceability, then, in any such case, the FS Stockholder shall be entitled
to remove the Ripplewood Director from the Board, and the Board shall be
entitled to appoint another director in its sole discretion, and the Ripplewood
Director shall immediately resign from the Board without casting any further
votes or taking any further actions as a Director. In addition, if clause (i) or
(iii) of the preceding sentence is applicable, then, without, further action by
any party to this Agreement, the Stockholders' Obligation to elect a nominee of
the Ripplewood Stockholder to the Board shall be of no further force and effect;
if clause (ii) of the preceding sentence is applicable, then at any time after
the FS Stockholder shall have replaced the Ripplewood Director on the Board and
the Board has had a reasonable opportunity to reconsider the vote or action with
respect to which the Ripplewood Director abstained, promptly upon the Ripplewood
Stockholder's or Ripplewood Director's request, the Ripplewood Stockholder shall
be entitled to be reappointed a Director under Section 7.1.
7.4 Termination and Assignment. The rights contained in Section 7.1
--------------------------
shall not be assignable other than by FS Stockholder to a Permitted Transferee
(provided that the FS Stockholders and their Permitted Transferees continue to
own a majority of the outstanding Common Stock) or by the Ripplewood Stockholder
to a Permitted Transferee or by Mr. Taubman to a Permitted Transferee (of the
type described in clause (w) of the definition thereof). Mr. Taubman's or his
representative's rights under Sections 7.1 and 7.3 shall terminate if Mr.
Taubman and his Permitted Transferees own less than 5% of the issued and
outstanding shares of Common Stock.
8. Copy of Agreement. A copy of this Agreement and all amendments hereto
-----------------
shall be filed with the Secretary of Company and shall be kept at the principal
executive offices of Company.
9. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the Commonwealth of Virginia without
regard to the conflicts of laws rules thereof.
10. Representations and Warranties. Each Stockholder represents and
------------------------------
warrants (a) that such Stockholder has full power, capacity, right and
authority, and any requisite approvals or consents to enter into and perform
this Agreement; (b) that this Agreement and the performance of its obligations
hereunder have been duly authorized, and that this Agreement has been duly
executed and delivered by such Stockholder and is a valid and binding agreement,
enforceable against such Stockholder in accordance with its terms; (c) that such
Stockholder owns beneficially and of record the shares of Common Stock and the
rights, options or warrants to purchase any capital stock of the Company set
forth opposite its name on Schedule 1 hereto, free and clear of any lien, claim,
charge, option, security interest, restriction or encumbrance and (d) that such
Stockholder does not own beneficially or of record any other securities or
rights, options or warrants to purchase any securities of the Company. The
Trust further represents and warrants that it is a trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia.
The sole living Trust beneficiaries are: Nicholas F. Taubman (during his
lifetime) and, upon the death of Nicholas F. Taubman, his children then living
(presently his children are Marc E. Taubman and Lara L. Taubman).
21
The execution, delivery and performance of this Agreement will not violate any
trust document establishing or governing the Trust.
11. Amendment and Waiver; Successors; After Acquired Shares. This
-------------------------------------------------------
Agreement may be amended, modified or supplemented, and compliance with any
provision hereof may be waived, only with the written consent of each of FSEP IV
and except in order to add additional parties who are purchasers of Securities
(including the granting of Registration Rights to such parties on terms
permitted hereunder), (x) the Existing Stockholders holding a majority of the
shares of Common Stock then held by the Existing Stockholders, and (y) to the
extent the Ripplewood Stockholder would be prejudiced thereby, the Ripplewood
Stockholder, and any amendment, modification, supplement or waiver so consented
to in writing shall be binding upon the parties hereto and their successors and
Permitted Transferees and assigns (if any). This Agreement shall be binding on
the parties hereto and, their successors, transferees, assigns, heirs and
personal representatives; provided however, that unless expressly permitted
herein to an assignee or Permitted Transferee, this Agreement and the rights
granted hereunder shall not be assignable without the written consent of all of
the parties hereto, which consent may be withheld in each such party's sole
discretion. If any right hereunder is not assignable, it shall not be
transferred to any subsequent holder of shares of Common Stock by reason of the
transfer of shares to such holder. The Agreement shall apply to all shares of
Common Stock now owned or hereafter acquired by any Stockholder, and the term
"Common Stock" includes any securities into which Common Stock may hereafter be
changed or which may hereafter be issued to holders of shares of Common Stock.
12. Interpretation. The headings of the Sections contained in this
--------------
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not affect the meaning or interpretation of this
Agreement.
13. Notices. All notices and other communications provided for or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or delivered by telecopier (with receipt
confirmed), on the date of such delivery or transmission, (i) if to Company, at
the address or telecopier number set forth in the Purchase Agreement, (ii) if to
the FS Stockholder, at Freeman Spogli & Co. Incorporated, 11100 Santa Monica
Boulevard, Suite 1900, Los Angeles, California 90025, Attention: William M.
Wardlaw, telecopier: (310) 444-1870, (iii) if to Mr. Taubman at 2818 Avenham
Ave., SW, Roanoke, VA 24104, with a copy to Douglas W. Densmore, Esq., Flippin,
Densmore, Morse, Rutherford & Jessee, 300 First Campbell Square, Drawer 1200,
Roanoke, Virginia 24006; (iv) if to the Trust at c/o Nicholas F. Taubman at 2818
Avenham Ave., SW, Roanoke, VA 24104, with a copy to Douglas W. Densmore, Esq.,
Flippin, Densmore, Morse, Rutherford & Jessee, 300 First Campbell Square, Drawer
1200, Roanoke, Virginia 24006; and (v) if to the Ripplewood Stockholder at
Ripplewood Holdings L.L.C., 1 Rockefeller Plaza, 32nd Floor, New York, NY 10020,
Attention: John Duryea, telecopier: (212) 582-4110, with a copy to Debevoise &
Plimpton, 875 Third Avenue, New York, NY, Attention: Robert M. Quaintance, Jr.,
telecopier (212) 909-6836 (or at such other address or telecopier number for
any party as shall be specified by like notice provided that notices of a change
of address or telecopier number shall be effective only upon receipt thereof).
22
14. Legends. All certificates evidencing shares of Common Stock which are
-------
issued to any of FSEP IV, the Ripplewood Stockholder and the Existing
Stockholders shall be legended as follows (in addition to any other legend
required to be placed thereon):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS AND OBLIGATIONS WITH RESPECT TO THE TRANSFER, PLEDGE,
HYPOTHECATION, DISTRIBUTION AND VOTING THEREOF AS SET FORTH IN THAT CERTAIN
STOCKHOLDERS AGREEMENT DATED AS OF APRIL 15, 1998, WHICH MAY BE REVIEWED AT
THE PRINCIPAL PLACE OF BUSINESS OF THE CORPORATION AND A COPY OF WHICH MAY
BE OBTAINED FROM THE CORPORATION WITHOUT CHARGE UPON WRITTEN REQUEST
THEREFOR."
All certificates evidencing shares of Common Stock which are issued to the
Trust shall be legended as follows (in addition to the above legend and any
other legend required by law to be placed thereon):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
ADDITIONAL RESTRICTIONS AND OBLIGATIONS WITH RESPECT TO THE TRANSFER
THEREOF RELATING TO THE ARTHUR TAUBMAN TRUST DATED JULY 13, 1964 AS SET
FORTH IN SECTIONS 5.1(A) AND (B) OF THAT CERTAIN STOCKHOLDERS AGREEMENT
DATED AS OF APRIL 15, 1998, WHICH MAY BE REVIEWED AT THE PRINCIPAL PLACE OF
BUSINESS OF THE CORPORATION AND A COPY OF WHICH MAY BE OBTAINED FROM THE
CORPORATION WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR."
15. Further Assurances. The Stockholders shall exercise, or cause to be
------------------
exercised, voting rights with respect to Voting Securities held of record or
beneficially owned by them in a manner so that, and shall otherwise take any
necessary actions in order that, the covenants and understandings of the parties
set forth in this Agreement shall be implemented. Each party hereto agrees to
perform any further acts and execute and deliver any documents which may be
reasonably necessary to carry out the intent of this Agreement and to make
appropriate changes to the procedures set forth herein to implement such rights
to the extent necessary to conform to the Virginia Stock Corporation Act or
other applicable law. FS Stockholder further agrees that it will not take any
action (such as amending the articles of incorporation or bylaws of the Company)
that would materially interfere with or prevent the exercise of any rights of
the Existing Stockholders or the Ripplewood Stockholder under this Agreement.
The Company covenants and agrees that it will act in good faith to preserve for
each of the Stockholders the benefits of this Agreement and that it will take no
voluntary action to impair the benefit hereof or to avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder or to deny to any of the Stockholders any of the benefits or
protections contemplated hereby.
23
16. Injunctive Relief; Disputes. It is acknowledged that it will be
---------------------------
impossible to measure in money the damages that would be suffered if the parties
hereto fail to comply with any of the obligations herein imposed on them and
that, in the event of any such failure, an aggrieved party hereto will be
irreparably damaged and will not have an adequate remedy at law. Any such party
shall, therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action should be brought in
equity to enforce any of the provisions of this Agreement, none of the parties
hereto shall raise the defense that there is an adequate remedy at law.
17. Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect to the maximum extent permitted by applicable
law. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
this Agreement be enforced as originally contemplated to the greatest extent
possible.
18. Entire Agreement. This Agreement (and Exhibits hereto), together with
----------------
the Company's Articles of Incorporation and Bylaws as in effect on the date
hereof constitute the entire agreement and understanding among the parties
pertaining to the subject matter hereof and supersede any and all prior
agreements, whether written or oral, relating hereto.
19. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
20. Opinions. Upon the execution of this Agreement, FS Stockholder and
--------
the Ripplewood Stockholder shall receive an opinion from Flippin, Densmore,
Morse, Rutherford & Jessee with respect to the enforceability of this Agreement
against the Existing Stockholders and the Existing Stockholders and the
Ripplewood Stockholder shall receive an opinion from Hunton & Williams with
respect to the enforceability of this Agreement against FS Stockholder and the
FS Stockholder and the Existing Stockholders shall receive an opinion from
Debevoise & Plimpton with respect to the enforceability of this Agreement
against the Ripplewood Stockholder (assuming that Virginia law is the same as
Delaware law).
21. Term. This Agreement shall terminate and be of no further force and
----
effect on the date that is ten years from the date hereof, provided that subject
to Section 7.4, Mr. Taubman's rights under Section 7.1 shall survive termination
of this Agreement so long as he shall live.
24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ADVANCE HOLDING CORPORATION
By: /s/ Garnett E. Smith
-----------------------------
Its: President
----------------------------
NICHOLAS F. TAUBMAN
/s/ Nicholas F. Taubman
--------------------------------
THE ARTHUR TAUBMAN TRUST DATED JULY 13, 1964
By: /s/ Eugenia Taubman
-----------------------------------------------
Trustee
RIPPLEWOOD PARTNERS, L.P.
a Delaware limited partnership
By: /s/ John Duryea
---------------------------------------------------------
Its: Manager
--------------------------------------------------------
RIPPLEWOOD ADVANCE AUTO PARTS
EMPLOYEE FUND I L.L.C.,
a Delaware limited liability company
By: /s/ John Duryea
---------------------------------------------------------
Its: Manager
--------------------------------------------------------
25
FS EQUITY PARTNERS IV, L.P.
a Delaware limited partnership
By: FS Capital Partners, LLC
Its: General Partner
By: /s/ Mark J. Doran
-----------------------------------------------------
Its Managing Member
-----------------------------------------------------
26
SCHEDULE 1
OWNERSHIP OF CAPITAL STOCK
BY STOCKHOLDERS UPON CONSUMMATION OF
TRANSACTIONS CONTEMPLATED BY MERGER AGREEMENT
OPTIONS TO
PURCHASE
COMMON
STOCKHOLDER COMMON STOCK STOCK
- --------------------------------------- -------------------------------------------------
FS Equity Partners IV, L.P............. 8,050,000 ---
Ripplewood Partners, L.P............... 1,911,000 ---
Ripplewood Advance Auto Parts 89,000 ---
Employee Fund I L.L.C.................
Nicholas F. Taubman.................... 1,000,000 250,000
Arthur Taubman Trust................... 750,000 250,000
27
EXHIBIT A
---------
TERMS OF THE REGISTRATION RIGHTS
OF THE COMMON STOCK
Capitalized terms used herein and not otherwise defined shall have the
respective meanings given such terms in the Stockholders' Agreement (the
"Agreement") to which this Exhibit A is attached.
SECTION 1
SECTION 1.1 Definitions. For purposes of this Exhibit A, the following
----------- ---------
terms shall have the following meanings:
"Demand Registration" means a Demand Registration as defined in
Section 2.1.
"Excess Amount" means. with respect to an underwritten offering, the
number of Registrable Securities requested by a Holder or Holders to be sold
pursuant to Section 2.1 or 2.2 which the managing Underwriter or Underwriters
determines exceeds the largest number of Registrable Securities which can
successfully be sold in an orderly manner in such offering within a price range
acceptable to sellers holding a majority of the Registrable Securities proposed
to be sold in such underwritten offering.
"Holder" means the FS Stockholder, the Ripplewood Stockholder and/or
any Existing Stockholder (or any Permitted Transferee or permitted assignee
thereof).
"Other Holder Notice" means an Other Holder Notice as defined in
Section 2.1.
"Piggy-Back Registration" means a Piggy-Back Registration as defined
in Section 2.2.
"Registrable Security" means any share of Common Stock outstanding
until (i) a registration statement covering such Common Stock has been declared
effective by the SEC and it has been disposed of pursuant to such effective
registration statement, (ii) it is 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 it may be sold pursuant to Rule 144(k) under
such Act or (iii) it has been otherwise Transferred, the Company has delivered a
new certificate or other evidence of ownership for it not bearing the legend
required pursuant to the Stockholders Agreement and it may be resold without
subsequent registration under the Securities Act.
"Requisite Share Number" means the lesser of (i) a number of
Registrable Securities representing not less than 5% of the total number of
shares of Common Stock then outstanding or (ii) the number of shares of Common
Stock representing not less than $20,000,000 in fair market value as determined
by the Board.
A-1
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a registration statement under the Securities Act.
"Transfer" means any direct or indirect transfer, sale, assignment or
other disposition of Common Stock.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal in an underwritten offering and not as part of such
dealer's market-making activities.
SECTION 2
SECTION 2.1 Demand Registration.
-------------------
(a) Request for Registration. At any time on or after the date
------------------------
which is 180 days following the closing of the Initial Public Offering any
Holder or Holders owning, individually or in the aggregate, at least the
Requisite Share Number may make a written request for registration under the
Securities Act of all or part of its or their Registrable Securities (a "Demand
Registration"); provided that the Holder or Holders making the request are
--------
together requesting that the Requisite Share Number be registered; provided
--------
further that the Company shall not be obligated to effect (i) more than three
- -------
(3) Demand Registrations for the FS Stockholder and its Permitted Transferees
and permitted assignees, as a group; (ii) more than two (2) Demand Registrations
for the Existing Stockholders and their Permitted Transferees as a group or
(iii) more than one (1) Demand Registration for the Ripplewood Stockholder and
its Permitted Transferees as a group. Such request will specify the number of
shares of Registrable Securities proposed to be sold and will also specify the
intended method of disposition thereof. The Company shall give written notice of
such registration request within 10 days after the receipt thereof to all other
Holders. The first time an Existing Stockholder or the Ripplewood Stockholder
requests a Demand Registration, the FS Stockholder (or its Permitted Transferees
or permitted assignees) shall be entitled to submit to the Company, within ten
(10) days after receipt of notice of such Existing Stockholder's or Ripplewood
Stockholder's request for a Demand Registration, a written request for a Demand
Registration (the "Simultaneous Registration") and shall thereby join in the
request of such Existing Stockholder or the Ripplewood Stockholder, and
thereupon each of the Existing Stockholders, Ripplewood Stockholder, and FS
Stockholder shall be entitled to include Registrable Securities in such Demand
Registration on a pro rata basis, determined based on the number of Registrable
Securities then sought to be included by the FS Stockholders, all Existing
Stockholders, the Ripplewood Stockholder (in each case including any Permitted
Transferees) and other Persons entitled to include shares therein pursuant to
Demand Registration rights, respectively, up to the number of Registrable
Securities proposed to be sold in such Demand Registration and, for purposes of
Section 2.3, prior to any person including Registrable Securities under section
2.2 or other Piggy-Back Registration Rights. Each such Simultaneous Registration
shall be treated as one of the FS Stockholder's three (3) Demand Registrations.
The first time the Ripplewood Stockholder requests a Demand Registration, if (i)
within the 10-day period set forth in the preceding sentence the FS Stockholder
does not request a Simultaneous Registration, and (ii) the Existing Stockholders
has not previously requested a Demand Registration counted under Section 2.1(b),
then, by giving notice within three
A-2
(3) business days of the end of said 10-day period, the Existing Stockholders
may request a Simultaneous Registration with the Ripplewood Stockholder, and if
such a request is made, thereupon the Existing Stockholders and the Ripplewood
Stockholder shall be entitled to include Registrable Securities in such Demand
Registration on a pro rata basis, determined based on the number of Registrable
Securities then sought to be included by the Ripplewood Stockholder, all
Existing Stockholders (in each case including Permitted Transferees) and other
Persons entitled to include shares therein pursuant to Demand Registration
rights (it being understood that FS Stockholder shall have waived its right to
participate therein except pursuant to Section 2.2), respectively, up to the
number of Registrable Securities proposed to be sold in such Demand Registration
and, for purposes of Section 2.3, prior to any Person including Registrable
Securities under Section 2.2 or other Piggy-Back Registration Rights. Such
Simultaneous Registration shall count as one of the Existing Shareholders two
(2) Demand Registrations. Within 10 days after receipt by a Holder of notice of
the request for a Demand Registration by another Holder, a Holder may request in
writing that Registrable Securities be included in such Demand Registration
pursuant to Section 2.2. Each such request by such other Holders (each, an
"Other Holder Notice") shall specify the number of shares of Registrable
Securities proposed to be sold and the intended method of disposition thereof.
(b) Effective Registration. A registration will not count as a Demand
----------------------
Registration (or request therefor) until (x) it has become effective or (y) if
the amount of Registrable Securities requested by the initiating Holder is
reduced pursuant to Section 2.3 by more than 50%; provided that, in the case of
any Simultaneous Registration, the Existing Stockholder's request shall not
count as one of the Existing Stockholders' two Demand Registrations (unless a
Simultaneous Registration is requested by the Existing Shareholders) and the
Ripplewood Stockholder's request shall not count as its Demand Registration.
(c) Underwritten Offering. If the Company or the initiating Holder of
---------------------
a Demand Registration so elects, the offering of such Registrable Securities
pursuant to such Demand Registration shall be in the form of an underwritten
offering. The Company and the initiating Holder of the Demand Registration
shall jointly select one or more nationally recognized firms of investment
bankers to act as the managing Underwriter or Underwriters in connection with
such offering and shall select any additional managers to be used in connection
with the offering.
(d) Required Delays. Notwithstanding anything contained in this
---------------
Section 2.1 to the contrary, if any request for Demand Registration is delivered
at a time when the Company has determined or is currently planning (and has
discussed with its Board of Directors its plan) to file a Registration Statement
with respect to an underwritten primary registration of Common Stock on behalf
of the Company (so long as a Registration Statement is filed with respect
thereto within one month of the Holder's or Holders' request for Demand
Registration), the Company may require the Holder or Holders to postpone such
request until the sooner of the expiration of the 90-day period following the
effective date of such registration or six months from the day of the Holder's
or Holders' request for such Demand Registration; and, provided further,
----------------
however, that if such request is delivered at a time when such registration
- -------
would adversely affect a material acquisition or merger to which the Company is
a party, or otherwise materially and adversely affect the Company or the
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market for the Company's Common Stock (it being understood that the ordinary
effect of a Registration on the market for securities does not meet the
foregoing standard) (a "Material Event Postponement"), the Company may require
the Holder to postpone such request for an appropriate period (not to exceed 90
consecutive days (with a 30-day break between any two consecutive periods) or
180 days in any 12-month period). In the event of a Material Event Postponement,
the Company shall deliver a certificate signed by the President or the Chairman
confirming the Company's reasons for postponing the registration and will effect
such registration as promptly as possible after removal of such reasons, and if
requested by the demanding Holder, shall prepare a registration statement during
the pendency of such postponement so that the registration statement may be
filed as soon as practicable following a resolution of the circumstance giving
rise to such Material Event Postponement.
SECTION 2.2 Piggy-Back Registration. If at any time on or after the
-----------------------
date which is 180 days following the closing of the Company's Initial Public
Offering, the Company proposes to file a registration statement under the
Securities Act with respect to an offering by the Company for its own account or
for the account of any of its respective security holders of any class of
security of the same class as the Registrable Securities (other than a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC), a registration statement filed in connection with an
exchange offer or offering of securities solely to the Company's existing
security holders), then the Company shall give written notice of such proposed
filing to the Holders as soon as practicable, and such notice shall offer such
Holders the opportunity to register such number of shares of Registrable
Securities as each such Holder may request in writing within 10 days of receipt
of such notice (which request shall specify the Registrable Securities intended
to be disposed of by such Holder and the intended method of distribution
thereof) (a "Piggy-Back Registration"). The Company shall use its best efforts
to cause the managing Underwriter or Underwriters of a proposed underwritten
offering to permit the Registrable Securities requested to be included in a
Piggy-Back Registration to be included on the same terms and conditions as any
similar securities of the Company included therein to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Subject to Section 2.3(b), any Holder shall have
the right to withdraw its request for inclusion of its Registrable Securities in
any Piggy-Back Registration by giving written notice to the Company of its
request to withdraw within 20 days of its request for inclusion, provided that
the Registration Statement including such shares (a "Piggy-Back Registration
Statement") is not yet effective. The Company may withdraw a Piggy-Back
Registration Statement at any time prior to the time it becomes effective.
SECTION 2.3 Reduction of Offering.
---------------------
(a) Notwithstanding anything contained herein, if the managing
Underwriter or Underwriters of an offering described in Section 2.1 or 2.2
determine that the size of the offering that the Holders, the Company or any
other Persons intend to make is such that the success of the offering would be
adversely affected by inclusion of the Registrable Securities requested to be
included, then (i) with respect to a Demand Registration, if the size of the
offering is the basis of such Underwriter's or Underwriters' determination, the
Company shall not include in such registration an amount of Registrable
Securities requested to be included in such offering equal to the Excess Amount,
such
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reduction first to be allocated pro rata among the Holders or other Persons
who did not initiate the request for a Demand Registration according to the
number of Registrable Securities requested for inclusion, with the Holder or
Holders or other Persons who initiated the request for a Demand Registration
entitled to include shares therein to the maximum extent possible provided that
if such Holders cannot include all their shares in such offering, the amount of
Registrable Securities to be registered shall be reduced pro rata among the
initiating Holders (provided further that if the FS Stockholder initiates a
Demand Registration pursuant to Section 2.1(a) and an Existing Stockholder or
the Ripplewood Stockholder requests to participate in such Demand Registration,
the FS Stockholder and such Existing Stockholder, the Ripplewood Stockholder and
each of them participating shall be treated pari passu with respect to a
---- -----
reduction under this Section 2.3) and (ii) in the case of a Piggy-Back
Registration, if securities are being offered for the account of other Persons
as well as the Company, the securities the Company seeks to include shall have
priority over securities sought to be included by any other Person (including
the Holders) and, with respect to the Registrable Securities intended to be
offered by Holders, the proportion by which the amount of such class of
securities intended to be offered by Holders is reduced shall not exceed the
proportion by which the amount of such class of securities intended to be
offered by such other Persons is reduced (it being understood that with respect
to the Holders and third parties such reduction may be all of such class of
securities).
(b) If, as a result of the proration provisions of Section 2.3(a), any
Holder shall not be entitled to include all Registrable Securities in a Demand
Registration or Piggy-Back Registration that such Holder has requested to be
included, such Holder may elect to withdraw his request to include Registrable
Securities in such registration (a "Withdrawal Election"); provided however,
-------- -------
that a Withdrawal Election shall be irrevocable and, after making a Withdrawal
Election, a Holder shall no longer have any right to include Registrable
Securities in the registration as to which such Withdrawal Election was made.
SECTION 2.4 Additional Rights. The Company shall not grant to any
-----------------
Person registration rights on terms which are more favorable to such Person than
or which otherwise interferes with (it being understood that the granting of
registration rights to other stockholders shall not by itself be deemed to so
interfere) those accorded to the Ripplewood Stockholder or the Existing
Stockholders.
SECTION 2.5 Initial Public Offering. To the extent that FS
-----------------------
Stockholder elects to include shares in the Initial Public Offering, then all
Holders shall be entitled to include shares therein on a pro rata basis,
determined based on the number of Registrable Securities then held by such
Holders and other Persons entitled to include shares therein.
SECTION 3
SECTION 3.1 Filings; Information. Whenever any Holder requests that
--------------------
any Registrable Securities be registered pursuant to Sections 2.1, the Company
will use its best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof as quickly as practicable, and in connection with any such request:
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(a) The Company will, subject to Section 2.1(d), as expeditiously as
possible prepare and file with the SEC a registration statement on any form for
which the Company then qualifies and which form shall be available for the sale
of the Registrable Securities 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 until the earlier of
(i) 90 days from the date such registration statement became effective or (ii)
the date on which the sale of Registrable Securities has been completed. If the
Company receives multiple demands for registration in accordance with this
Agreement, then, except as provided in Section 2.1(a), such demands shall be
handled in the order received.
(b) The Company will, prior to filing a registration statement or
prospectus or any amendment or supplement thereto, furnish to each Selling
Holder, one counsel representing all such Selling Holders, and each Underwriter,
if any, of the Registrable Securities covered by such registration statement
copies of such registration statement as proposed to be filed, together with
exhibits thereto, which documents will be subject to prompt review and approval
by the foregoing, and thereafter furnish to such Selling Holder, counsel 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 Selling Holder or Underwriter may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Selling Holder.
(c) After the filing of the registration statement, the Company will
promptly notify each Selling Holder of Registrable Securities 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 Company will use its best efforts to (i) register or qualify
the Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States as any Selling Holder reasonably (in light of
such Selling Holder's intended plan of distribution) requests and (ii) cause
such Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary by
virtue of the business and operations of the Company and do any and all other
acts and things that may be reasonably necessary or advisable to enable such
Selling Holder to consummate the disposition of the Registrable Securities owned
by such Selling Holder; provided that the Company 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 Company will immediately notify each Selling Holder of such
Registrable Securities, 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 Securities,
such prospectus will not contain an untrue statement of a material fact or omit
to state any material
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fact required to be stated therein or necessary to make the statements therein
not misleading and promptly make available to each Selling Holder any such
supplement or amendment.
(f) The Company will enter into customary agreements (including, if
applicable, 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 Securities.
(g) The Company will deliver promptly to each Selling Holder of such
Registrable Securities and each Underwriter, if any, subject to restrictions
imposed by the United States federal government or any agency or instrumentality
thereof, copies of all correspondence between the SEC and the Company, its
counsel or auditors and all memoranda relating to discussions with the SEC or
its staff with respect to the registration statement and make available for
inspection by any Selling Holder of such Registrable Securities, any Underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other professional retained by any such Selling Holder
or Underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), subject to restrictions imposed by any
governmental authority governing access to classified information, as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any Inspectors in connection with
such registration statement. Records which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the disclosure or release of such Records is
requested or required pursuant to oral questions, interrogatories, requests for
information or documents or a subpoena or other order from a court of competent
jurisdiction or other process; provided that prior to any disclosure or release
--------
pursuant to clause (ii), the Inspectors shall provide the Company with prompt
notice of any such request or requirement so that the Company may seek an
appropriate protective order or waive such Inspectors' obligation not to
disclose such Records; and provided further, that if failing the entry of a
----------------
protective order or the waiver by the Company permitting the disclosure or
release of such Records, the Inspectors, upon advice of counsel, are compelled
to disclose such Records, the Inspectors may disclose that portion of the
Records which counsel has advised the Inspectors that the Inspectors are
compelled to disclose. Each Selling Holder of such Registrable Securities agrees
that information obtained by it solely as a result of such inspections (not
including any information obtained from a third party who, insofar as is known
to the Selling Holder after reasonable inquiry, is not prohibited from providing
such information by a contractual, legal or fiduciary obligation to the Company)
shall be deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Company or its Affiliates unless
and until such is made generally available to the public. Each Selling Holder
of such Registrable Securities further agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential.
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(h) The Company will otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the SEC, and make available
to its security holders, 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.
(i) The Company will use its best efforts (a) to cause all such
Registrable Securities to be listed on each national securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of such
exchange or (b) to secure designation of all such Registrable Securities as a
National Association of Securities Dealers Automatic Quotation ("NASDAQ")
"national market system security" within the meaning of Rule 11Aa2-l of the SEC
or, to secure NASDAQ authorization for such Registrable Securities, if similar
securities issued by the Company are so designated.
(j) The Company may require each Selling Holder of Registrable
Securities to promptly furnish in writing to the Company such information
regarding the distribution of the Registrable Securities as the Company may from
time to time reasonably request and such other information as may be legally
required in connection with such registration.
(k) The Company will use its reasonable best efforts to facilitate the
distribution of the Registrable Securities in accordance with the intended
method of distribution thereof, including making management of the Company
available for "road show" presentations and similar selling efforts.
Each Selling Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.1(e)
hereof, such Selling Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Selling Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3.1(e) hereof (such
period during which a Selling Holder is required to refrain from disposition of
Registrable Securities, a "Suspension Period"), and, if so directed by the
Company, such Selling Holder will deliver to the Company all copies, other than
permanent file copies then in such Selling Holder's possession, of the most
recent prospectus covering such Registrable Securities at the time of receipt of
such notice. In the event the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective (including the period referred to in Section 3.1(a) hereof) by the
number of days during the period from and including the date of the giving of
notice pursuant to Section 3.1(e) hereof to the date when the Company shall make
available to the Selling Holders of Registrable Securities covered by such
registration statement a prospectus supplemented or amended to conform with the
requirements of Section 3.1(e) hereof.
SECTION 3.2 Registration Expenses. In connection with any Demand
---------------------
Registration pursuant to Section 2.1 hereof and any registration statement filed
pursuant to Sections 2.2, the Company shall pay the following registration
expenses incurred in connection with the registration hereunder (the
"Registration Expenses"): (i) all registration and filing fees, (ii) fees and
expenses of
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compliance with securities or blue sky laws (including fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), (iii) printing expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses, if
any, incurred in connection with the listing of the Registrable Securities, (vi)
fees and disbursements of counsel for the Company and fees and expenses for
independent certified public accountants retained by the Company, (vii) the fees
and expenses of any special experts retained by the Company in connection with
such registration, and (viii) with respect to a Demand Registration only,
reasonable fees and expenses of one counsel (who shall be reasonably acceptable
to the Company) for all of the Selling Holders, with such counsel selected by
Holders of a majority of the Registrable Securities. The Company shall have no
obligation to pay any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities, or any out-of-pocket expenses of the
Holders.
SECTION 4
SECTION 4.1 Indemnification by the Company.
------------------------------
(a) The Company agrees to indemnify and hold harmless each Selling
Holder of Registrable Securities, its officers, directors and agents, and each
Person, if any, who controls such Selling Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act from and against any
loss, claim, damage or liability and any action in respect thereof to which such
Selling Holder, its officers, directors and agents, and any such controlling
Person may become subject under the Securities Act or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Securities (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or arises out of, or is
based upon, any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse each Selling Holder, its officers, directors and
agents, and each such controlling Person for any legal and other expenses
reasonably incurred by that Selling Holder, its officers, directors and agents,
or any such controlling Person in investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action. The Company
also agrees to indemnify any Underwriters of the Registrable Securities, their
officers and directors and each Person who controls such Underwriters on
substantially the same basis as that of the indemnification of the Selling
Holders provided in this Section 4.1.
(b) The indemnity agreement contained in Section 4.1(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage or liability
and any action in respect thereof if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any loss, claim, damage,
liability and any action in respect thereof to the extent that it arises from or
is based upon written information relating to the Indemnified Person furnished
expressly for use in connection with such registration by such Person, nor shall
the Company be liable to any Person for any such loss, claim, damage or
liability and any action in respect thereof to the extent it arises from or is
based
A-9
upon (a) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Registrable Securities delivered by such Person after such Person had received
written notice from the Company pursuant to Section 3.1(a) that such
registration statement or prospectus contained such untrue statement or alleged
untrue statement of a material fact and stating specifically that a Suspension
Period is then in effect, (b) 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 after such Person has received written notice
from the Company pursuant to Section 3.1(a) that such registration statement or
prospectus contained such omission or alleged omission and stating specifically
that a Suspension Period is then in effect, or (c) the failure of such Person to
deliver any preliminary or final prospectus, or any amendments or supplements
thereto, required under applicable securities laws, including the Securities
Act, to be so delivered, provided that a sufficient number of copies thereof had
been provided by the Company to such Person.
SECTION 4.2 Indemnification by Holders of Registrable Securities.
----------------------------------------------------
Each Selling Holder agrees, severally but not jointly, to indemnify and hold
harmless the Company, its officers, directors and agents and each Person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Selling Holder, but only with reference to
(i) information related to such Selling Holder furnished in writing by such
Selling Holder or on such Selling Holder's behalf expressly for use in any
registration statement or prospectus relating to the Registrable Securities, or
any amendment or supplement thereto, or any preliminary prospectus or (ii) the
matters set forth in Section 4.1(b). Each Selling Holder also agrees to
indemnify and hold harmless Underwriters of the Registrable Securities, their
officers and directors and each Person who controls such Underwriters on
substantially the same basis as that of the indemnification of the Company
provided in this Section 4.2. In no event, however, shall any indemnity
obligation under this Section 4.2 exceed the gross proceeds from the offering
received by such Selling Holder.
SECTION 4.3 Conduct of Indemnification Proceedings. Promptly after
--------------------------------------
receipt by any person in respect of which indemnity may be sought pursuant to
Section 4.1 or 4.2 (an "Indemnified Party") of notice of any claim or the
commencement of any action, the Indemnified Party shall, if a claim in respect
thereof is to be made against the person against whom such indemnity may be
sought (an "Indemnifying Party") notify the Indemnifying Party in writing of the
claim or the commencement of such action provided that the failure to notify the
Indemnifying Party shall not relieve it from any liability which it may have to
an Indemnified Party except to the extent of any actual prejudice resulting
therefrom. If any such claim or action shall be brought against an Indemnified
Party, and it shall notify the Indemnifying Party thereof, the Indemnifying
Party shall be entitled to participate therein, and, to the extent that it
wishes, jointly with any other similarly notified Indemnifying Party, to assume
the defense thereof with counsel satisfactory to the Indemnified Party. After
notice from the Indemnifying Party to the Indemnified Party of its election to
assume the defense of such claim or action, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation; provided that the Indemnified Party
--------
shall have the right to employ separate counsel to represent the Indemnified
Party and its controlling
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Persons who may be subject to liability arising out of any claim in respect of
which indemnity may be sought by the Indemnified Party against the Indemnifying
Party, but the fees and expenses of such counsel shall be for the account 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) based
upon the advice of counsel of such Indemnified Party representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any claim or
pending or threatened proceeding in respect of which the 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 claim or
proceeding.
SECTION 4.4 Contribution. If the indemnification provided for in
------------
this is unavailable to, or is insufficient to hold harmless, 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 Company and the Selling Holders on the one hand and the
Underwriters on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Holders on the one
hand and the Underwriters on the other from the offering of the Registrable
Securities, 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 Company and the Selling Holders on the one hand and of
the 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 Company on the
one hand and each Selling Holder on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of each Selling
Holder in connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Selling Holders on the one hand and the 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 Company and the Selling Holders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the prospectus. The relative fault of
the Company and the Selling Holders on the one hand and of the 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 Company
and the Selling Holders or by the Underwriters. The relative fault of the
Company on the one hand and of each Selling Holder 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 Company and the Selling Holders agree that it would not be just
and equitable if contribution pursuant to this Section 4.4 were determined by
pro rata allocation (even if the
A-11
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 4.4, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities 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 Selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Selling Holder were offered to
the public (less underwriting discounts and commissions) exceeds the amount of
any damages which such Selling Holder 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 Selling
Holder's obligations to contribute pursuant to this Section 4.4 are several in
proportion to the proceeds of the offering received by such Selling Holder bears
to the total proceeds of the offering received by all the Selling Holders and
not joint.
SECTION 5
SECTION 5.1 Participation in Underwritten Registrations. No Person
-------------------------------------------
may participate in any underwritten registration 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 these
Registration Rights; provided that (i) such Person will not be required to make
--------
any representations or warranties except those which relate solely to themselves
and (ii) the liability of such Person to any Underwriter under such underwriting
agreement will be limited to liability arising from misstatements in, or
omissions from, written information regarding such Person provided by or on
behalf of such Person in writing specifically for inclusion in the prospectus.
SECTION 5.2 Rule 144. The Company covenants that it will use its
--------
reasonable best efforts to file any reports required to be filed by it under the
Securities Act and the Exchange Act and that it will take such further action as
any Holder may reasonably request, all to the extent reasonably required from
time to time to enable Holders to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 or Rule 144A under the Securities Act, as such Rules
may be amended from time to time, or (b) any similar Rule or regulation
hereafter adopted by the SEC. Upon the request of any Holder, the Company will
deliver to such Holder a written statement as to whether it has complied with
such requirements.
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SECTION 5.3 Holdback Agreements. Each Holder of Registrable
-------------------
Securities agrees not to effect any sale or distribution of the issue being
registered or of a similar security of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, including a
sale pursuant to Rule 144 or Rule 144A under the Securities Act, during the 14
days prior to, and during the 90-day period (180 days in the case of the
Company's Initial Public Offering) beginning on, the effective date of the
registration statement filed by the Company (except as part of such
registration) if, and to the extent, requested by the managing Underwriter or
Underwriters in the case of an underwritten public offering.
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