EXHIBIT 10.1
STOCKHOLDERS' AGREEMENT
By and Among
CHI ENERGY, INC.
and
EACH OF THE STOCKHOLDERS OF CHI ENERGY, INC.
Dated as of November 5, 1997
STOCKHOLDERS' AGREEMENT
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS ..................................................................1
ARTICLE II
PARTIES; REPRESENTATIONS AND WARRANTIES.......................................4
Section 2.1 Representations of Each Signing Stockholder...........4
Section 2.2 Additional Parties....................................4
ARTICLE III
TRANSFER RESTRICTIONS .......................................................5
Section 3.1 General Restrictions on Transfer..................... 5
Section 3.2 Permitted Transfers.................................. 5
Section 3.3 Tag-Along Rights..................................... 5
Section 3.5 Deliveries at Closing; Method of Payment of
Purchase Price...................................... 9
Section 3.6 Company Cooperation.................................. 9
Section 3.7 Legend on Certificates...............................10
ARTICLE IV
CORPORATE GOVERNANCE .....................................................10
Section 4.1 Initial Board; Number of Directors...................10
Section 4.2 Nomination and Election of Directors.................11
Section 4.3 Removal of Directors.................................12
Section 4.4 Vacancies............................................12
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ARTICLE V
MISCELLANEOUS .....................................................13
Section 5.1 Effectiveness........................................13
Section 5.2 Waiver and Amendment.................................13
Section 5.3 Termination..........................................13
Section 5.4 Notices..............................................13
Section 5.5 Applicable Law and Time of Essence...................14
Section 5.6 Descriptive Headings, Etc............................14
Section 5.7 Counterparts.........................................14
Section 5.8 Successors, Assigns and Transferees..................14
Section 5.9 Severability.........................................14
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STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT (this "Agreement") is made
as of November 5, 1997, by and among CHI Energy, Inc., a Delaware
corporation (the "Company"), and each of the stockholders of the Company.
W I T N E S S E T H:
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WHEREAS, the Plan of Reorganization, dated as of August
8, 1997, of Consolidated Hydro, Inc., confirmed by order of the United
States Bankruptcy Court for the District of Delaware (the "Plan") provides that
the Company shall enter into an agreement with all of its stockholders to
provide for certain rights and obligations between and among them and subsequent
holders of certain of the Company's securities with respect to the Company; and
WHEREAS, the Company and the Stockholders (as defined
below), being the holders of substantially all of the outstanding common equity
of the Company, wish to enter into this Agreement to provide for certain rights
and obligations between and among them and subsequent holders of certain of the
Company's securities with respect to the Company;
NOW, THEREFORE, in consideration of the premises and
mutual agreements, covenants and provisions contained herein, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall
have the meanings ascribed to them below:
"Agreement" shall have the meaning specified in the
preamble hereof.
"Board of Directors" shall mean the board of directors
of the Company.
"Company" shall mean CHI Energy, Inc., a Delaware
corporation.
"Company Class B Warrant" shall mean any Series B
warrant, issued by the Company pursuant to the Plan, to purchase Shares.
"Company Class C Warrant" shall mean any Series C
warrant, issued by the Company pursuant to the Plan, to purchase Shares.
"Company Management Option" shall mean any option,
issued by the Company to any employee of the Company, to purchase Shares.
"Company Warrant" shall mean any Company Class B Warrant
and/or Company Class C Warrant.
"Compelling Stake" shall mean, in connection with any
proposed Compelled Sale, 66-2/3% or more of the Shares outstanding at the time
such sale is proposed.
"Director" shall mean a duly elected member of the Board
of Directors.
"In-the-Money Company Warrant" shall mean, in connection
with any Tag-Along Sale, a Company Warrant having an exercise price less
than the value of the per share consideration to be received by the most favored
Selling Stockholder in the Tag-Along Sale.
"In-the-Money Company Management Option" shall mean, in
connection with any Tag-Along Sale, a Company Management Option having an
exercise price less than the value of the per share consideration to be received
by the most favored Selling Stockholder in the Tag-Along Sale.
"MS" shall mean Morgan Stanley & Co., Incorporated, a
Delaware corporation.
"MS Director" shall mean a Director designated for
nomination or appointment pursuant to Article IV of this Agreement by MS or an
MS Nomination Successor.
"Plan" shall mean that certain Plan of Reorganization,
dated as of August 8, 1997, of Consolidated Hydro, Inc., as confirmed by the
bankruptcy court of the United States.
"Remaining Stockholders" shall mean, in connection with
any Compelled Sale, every Stockholder that is not a Compelling Stockholder.
"SB" shall mean, collectively, Swiss Bank Corporation,
London Branch, and Swiss Bank Corporation Restructuring & Recovery Fund.
"SB Director" shall mean a Director designated for
nomination or appointment pursuant to Article IV of this Agreement by SB or an
SB Nomination Successor.
"Shares" shall mean, collectively, the shares of Class A
Common Stock, par value $.01 per share, of the Company, and Class B Common
Stock, par value $.01 per share, of the Company (including Shares issued by the
Company upon the proper exercise of the Company Warrants and the Company
Management Options), and (b) shares of capital stock of the Company issued by
the Company in respect of or in exchange for shares of such common stock in
connection with any stock dividend or distribution, stock split-up,
recapitalization, subdivision, recombination or exchange by the Company
generally of shares of such common stock.
"Signing Stockholders" shall mean the persons or
entities who are signatories to this Agreement.
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"Stockholder" shall mean any person to whom or which
Shares are issued pursuant to the Plan, and any person who becomes the holder of
Shares subsequent to the date of this Agreement upon exercise of any Company
Class B Warrant, Company Class C Warrant or Company Management Option, and any
Permitted Transferee.
"Tag-Along Purchaser" shall mean the party or group of
related parties acquiring Shares in a Tag-Along Sale.
"Tag-Along Sale" shall mean a transaction or series of
substantially contemporaneous related transactions or contractually related
transactions in which Selling Stockholders propose to Transfer to a Tag-Along
Purchaser a number of Shares which, taken together with any Shares sold in such
transaction or related transactions, constitute 50% or more of the Shares then
outstanding.
"Tag-Along Stockholder" shall mean, in connection with
any Tag-Along Sale, each Stockholder (including Stockholder who becomes such
upon exercise of Company Warrants or Company Management Options at any time
prior to the fifth business day prior to the Transfer Date) that is not a
Selling Stockholder.
"Transfer Date" shall mean the Original Transfer Date,
or if any New Transfer Date occurs, the latest occurring New Transfer Date.
"Whole Board" shall mean the number of Directors the
Board of Directors would have assuming no vacancies.
In addition, the following capitalized terms used herein
shall have the meanings ascribed to them in the section of the text
indicated below:
"Cause"...................................Section 4.3(b)
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"Company Nominees"........................Section 4.3(a)
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"Compelled Sale"..........................Section 3.4(a)
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"Compelled Sale Agreement"................Section 3.4(a)
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"Compelled Sale Closing"..................Section 3.4(d)
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"Compelled Sale Date".....................Section 3.4(b)
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"Compelled Sale Notice"...................Section 3.4(b)
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"Compelled Sale Price"....................Section 3.4(a)
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"Compelled Sale Purchaser"................Section 3.4(a)
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"Compelled Sale Termination Date".........Section 3.4(b)
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"Compelling Stockholders".................Section 3.4(a)
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"Designee"................................Section 4.4(b)
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"Election Meeting"........................Section 4.2(a)
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"Included Shares".........................Section 3.3(e)
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"Maximum Number"..........................Section 3.3(b)
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"MS Nomination Successor".................Section 3.2(b)
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"MS Nominees".............................Section 4.2(a)
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"MS Vacancy"..............................Section 4.1(a)
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"New Transfer Date".......................Section 3.3(d)
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"New Transfer Notice".....................Section 3.3(d)
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"New Vacancy Designee"....................Section 4.4(c)
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"Nominating Stockholder"..................Section 4.3(b)
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"Officer Nominees"........................Section 4.2(a)
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"Optionholder"............................Section 2.2
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"Original Transfer Date"..................Section 3.3(c)
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"Original Transfer Notice"................Section 3.3(c)
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"Outside Nominees"........................Section 4.2(a)
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"Remaining Stockholders"..................Section 3.4(a)
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"SB Nominees".............................Section 4.2(a)
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"SB Nomination Successor".................Section 3.2(b)
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"SB Vacancy"..............................Section 4.1(a)
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"Sale Percentage".........................Section 3.3(b)
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"Selling Stockholders"....................Section 3.3(a)
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"Tag Along Allotment".....................Section 3.3(b)
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"Tag Along Notice"........................Section 3.3(e)
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"Tag Along Purchaser".....................Section 3.3(a)
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"Transfer"................................Section 3.1
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"Transfer Allotment"......................Section 3.3(b)
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"Transfer Date"...........................Section 3.3(c)
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"Transfer Notice".........................Section 3.3(c)
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"Warrantholder"...........................Section 2.2
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ARTICLE II
PARTIES; REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations of Each Signing Stockholder. Each Signing
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Stockholder represents and warrants to the Company and to each other Signing
Stockholder that (i) such Stockholder has full right, power and authority (and,
in the case of any natural person, such person has the legal capacity) to
execute and deliver this Agreement and to perform such Signing Stockholder's
obligations hereunder; and (ii) this Agreement has been duly authorized,
executed and delivered by such Signing Stockholder and is valid, binding and
enforceable against such Signing Stockholder in accordance with its terms.
Section 2.2 Additional Parties. The Company shall include as a
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provision of each warrant agreement relating to each Company Warrant and of each
option agreement relating to each Company Management Option that acceptance and
exercise of such Company Warrant or Company Management Option constitutes the
agreement of the holder thereof to become a party to and to be bound by this
Agreement upon the acquisition of Shares by such Warrantholder or Optionholder
upon exercise of such Company Warrant or Company Management Option.
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ARTICLE III
TRANSFER RESTRICTIONS
Section 3.1 General Restrictions on Transfer. No Stockholder shall, directly or
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indirectly, sell, offer for sale, transfer, assign, pledge, hypothecate or
otherwise dispose of any Shares or any right thereto or interest therein (any
such transaction, other than by operation of law, a "Transfer") at any time
except in compliance with applicable federal and state securities laws and in
compliance with this Agreement.
Section 3.2 Permitted Transfers. (a) Subject to Section 3.1, a
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Stockholder may Transfer Shares at any time to any party, provided that upon
acceptance of such transferred Shares, and by virtue of the Transfer and this
Agreement, the party to whom such Transfer is to be made shall become bound by
all the terms of this Agreement to the same extent as a Stockholder is so bound.
Any party to whom such Transfer has been made consistent with the provisions of
this Article III (any such Transfer, a "Permitted Transfer") is herein referred
to as a "Permitted Transferee" and, after the consummation of such Permitted
Transfer, such Permitted Transferee shall be deemed a Stockholder for purposes
of this Agreement.
(b) MS or SB may assign to any Permitted Transferee part or
all of MS's or SB's rights, respectively, to designate Directors and fill
certain vacancies on the Board of Directors pursuant to Sections 4.2 and 4.4 of
this Agreement (such transferee, an "MS Nomination Successor" or an "SB
Nomination Successor", as the case may be); provided, however, that the total
number of Directors with respect to which MS and all MS Nomination Successors
together, and SB and all SB Nomination Successors together, shall have
designation and vacancy filling rights, respectively, shall not exceed the
lesser of (i) two and (ii) the number of Directors with respect to which MS and
the MS Nomination Successors, or SB and the SB Nomination Successors, as the
case may be, shall have rights pursuant to Sections 4.2(b) and 4.2(c); and
provided, further, that no assignment of any of MS's or SB's rights pursuant to
this paragraph shall be effective or recognized by the Company unless set forth
in a written agreement between MS or SB, as the case may be, and the prospective
MS Nomination Successor or SB Nomination Successor, as the case may be; and
provided, further, that neither MS nor SB shall enter into a written agreement
with any party that, when taken together with any other written agreement or
agreements entered into by MS or SB, respectively, would grant rights with
respect to the designation or nomination of Directors or the filling of
vacancies on the Board of Directors inconsistent with or in excess of those
provided for in this Section 3.2(b) and in Section 4.2(b). The assignor of any
assignment described in this Section 3.2(b) shall give written notice of such
assignment, including the identity of the assignee, to the Company no later than
two business days after such assignment is effected.
Section 3.3 Tag-Along Rights. (a) In the event any Stockholder or
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"group" (within the meaning of Section 13(d)(3) of the Exchange Act) of
Stockholders proposes to Transfer Shares in a Tag-Along Sale (the "Selling
Stockholders"), each Tag-Along Stockholder shall be afforded the opportunity to
participate therein in accordance with this Section 3.3.
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(b) In connection with each Tag-Along Sale, each Tag-Along
Stockholder shall have the right to Transfer to the Tag-Along Purchaser a
number of Shares (a "Tag Along Allotment") held by such Tag-Along Stockholder
equal to the total number of Shares held by such Tag-Along Stockholder
multiplied by the Sale Percentage (as defined below), such Transfer to be upon
identical terms and conditions as those of the most favored Selling Stockholder
in the Tag-Along Sale and at a price equal to the greater of (1) the price to be
paid to the most favored Selling Stockholder in the Tag Along Sale or (2) a
fraction the numerator of which shall be the aggregate consideration paid by the
Tag-Along Purchaser for all of the Shares, if any, purchased by it in any
related transaction constituting a part of the Tag-Along Sale or in any other
transaction occurring during the 60 days immediately preceding the date the
Original Transfer Notice (as defined below) is sent, and the denominator of
which shall be the total number of Shares purchased by the Tag-Along purchaser
during such 60-day period. "Sale Percentage" shall be a fraction the numerator
of which shall be the total number of Shares to be acquired by the Tag-Along
Purchaser in the Tag-Along Sale (the "Maximum Number") and the denominator of
which shall be the total number of Shares held collectively by the Selling
Stockholders and the Tag-Along Stockholders on the date the Tag-Along Sale is
consummated.
(c) At the time any Tag-Along Sale is proposed, the Selling
Stockholders shall give written notice to each Tag-Along Stockholder of its
right to sell Shares hereunder (the "Original Transfer Notice"), which notice
shall identify the proposed Tag-Along Purchaser and state the Maximum Number of
Shares to be acquired by the Tag-Along Purchaser in the Tag-Along Sale, an
estimate of the Sale Percentage (based on the number of Shares that would be
outstanding as of the date such notice is sent assuming the exercise of all
In-the-Money Company Warrants and In-the-Money Company Management Options), the
proposed transfer price (including the form and terms of any non-cash
consideration to be received in connection therewith), the proposed consummation
date of any such Transfer (the "Original Transfer Date") and any other material
terms and conditions of the proposed Transfer. The Original Transfer Notice
shall be accompanied by a complete and correct copy of any offer to, or
agreement with, the Selling Stockholders by the Tag-Along Purchaser to purchase
such Shares. The Original Transfer Notice shall be provided to the Tag-Along
Stockholders not less than 30 days prior to the Original Transfer Date. The
Selling Stockholders shall supply a copy of the Original Transfer Notice to the
Company at the same time that it is furnished to the Tag-Along Stockholders. The
Company shall provide a copy of the Original Transfer Notice to each holder of
an In-the-Money Company Warrant and each holder of an In-the-Money Company
Management Option not later than the 25th day prior to the Original Transfer
Date, it being understood that holders of In-the-Money Company Warrants and
In-the-Money Company Management Options who exercise such warrants or options
prior to the fifth business day prior to the Transfer Date shall be Tag-Along
Stockholders with respect to all Shares held by them as of such day and shall be
permitted to participate in the Tag-Along Sale with respect to such Shares by
complying with all of the provisions of this Section 3.3 that are applicable to
Tag-Along Stockholders.
(d) In the event of any change in the consideration to be
paid by the Tag-Along Purchaser or any change in any other material term or
condition of the Tag-Along Sale, a new transfer notice (a "New Transfer Notice")
shall be provided to the Tag-Along Stockholders
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(with a copy to the Company) and a new transfer date (a "New Transfer Date")
shall be set, which New Transfer Date shall be not less than 30 days next
following the date such New Transfer Notice is provided to the Tag-Along
Stockholders; provided, however, that in the event of an increase in the
consideration to be received by the Selling Stockholders and the Tag-Along
Stockholders, a New Transfer Notice shall be provided to the Tag-Along
Stockholders but no New Transfer Date need be set, and the Tag-Along Sale may be
consummated on the Original Transfer Date, so long as the New Transfer Notice is
provided to the Tag-Along Stockholders not later than the seventh day prior to
the Original Transfer Date, or, if such New Transfer Notice is provided to the
Tag-Along Stockholders on or after the seventh day prior to the Original
Transfer Date, the New Transfer Notice may specify a New Transfer Date, which
date shall not be fewer than seven days from the date the New Transfer Notice is
provided to the Tag-Along Stockholders, and the Tag-Along Sale may be
consummated on such New Transfer Date. The Company shall provide a copy of the
New Transfer Notice to holders of In-the-Money Company Warrants and In-the-Money
Company Options not later than the 25th day prior to the New Transfer Date.
(e) Each Tag-Along Stockholder that wishes to participate
in the Tag-Along Sale shall provide written notice (or oral notice confirmed in
writing) (the "Tag-Along Notice") to the Selling Stockholders not less than two
business days prior to the Transfer Date. The Tag-Along Notice shall set forth
the number of Shares ("Included Shares") that such Tag-Along Stockholder elects
to include in the Transfer, which number shall not exceed such Tag-Along
Stockholder's Tag-Along Allotment; provided, however, that the number of
Included Shares for any Tag-Along Notice that fails to set forth a number of
Included Shares, or sets forth a number of Included Shares in excess of such
Tag-Along Stockholder's Tag-Along Allotment, shall be deemed to be such
Tag-Along Stockholder's Tag-Along Allotment. The Tag-Along Notices given by the
Tag-Along Stockholders shall constitute their binding agreements to sell such
Shares on the terms and conditions applicable to the Tag-Along Sale.
(f) At the consummation of the Tag-Along Sale, the
Tag-Along Purchaser shall accept Transfer of (i) from each Tag-Along
Stockholder, upon the terms and at the price set forth in paragraph (b), the
number of Included Shares indicated on such Tag-Along Stockholder's timely
received Tag-Along Notice, and (ii) from the Selling Stockholders a number of
shares equal to the difference between the Maximum Number and the aggregate
number of Included Shares indicated on all timely received Tag-Along Notices.
(g) No Tag-Along Stockholder shall be required to make any
representations and warranties to any person in connection with a Tag-Along Sale
except that Tag-Along Stockholders may be required to make such representations
and warranties as are made by all of the Selling Stockholders, to the extent
applicable to a particular Tag-Along Stockholder.
(h) The provisions of this Section 3.3 shall not apply to
any Transfers pursuant to an underwritten public offering, whether by the
Company or a Stockholder or group of Stockholders.
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Section 3.4 Rights to Compel Sale. (a) In the event any Stockholder
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or group of Stockholders holding a Compelling Stake (the "Compelling
Stockholders") shall enter into a written agreement with an unaffiliated party
(a "Compelled Sale Purchaser") to sell solely for cash or securities listed on a
U.S. national securities exchange or included for quotation in a U.S.
inter-dealer quotation system of a registered national securities association
all, but not less than all, of the then outstanding Shares in a bona fide
transaction (a "Compelled Sale Agreement"), the Compelling Stockholders shall
have the right, subject to the terms and conditions set forth below, to require
each of the Remaining Stockholders to sell all, but not less than all, of the
Shares held by each such Remaining Stockholder (a "Compelled Sale"). Subject to
the terms and conditions set forth below, the Remaining Stockholders shall, and
hereby agree to, sell such Shares on the same terms and conditions as the most
favored Compelling Stockholder sells its Shares pursuant to the Compelled Sale
Agreement and at a consideration per Share (the "Compelled Sale Price") equal to
the greater of (i) the consideration to be received by the most favored
Compelling Stockholder pursuant to the Compelled Sale Agreement and (ii) the
greatest consideration received by any Compelling Stockholder in any transaction
between such Compelling Stockholder and the Compelled Sale Purchaser during the
60-day period preceding the date the Compelled Sale Notice (as defined below) is
given.
(b) Within two business days following execution of any
Compelled Sale Agreement, the Compelling Stockholders shall provide each
Remaining Stockholder with written notice thereof (the "Compelled Sale Notice").
The Compelled Sale Notice shall attach a copy of the Compelled Sale Agreement
and shall set forth: (i) the name and address of the Compelled Sale Purchaser;
(ii) the Compelled Sale Price and the terms and conditions of payment offered by
the Compelled Sale Purchaser; and (iii) all other material terms of such
Compelled Sale, including the proposed consummation date of the Compelled Sale
(the "Compelled Sale Date"), which shall be not less than 20 days following the
delivery of the Compelled Sale Notice, and the outside termination date of the
Compelled Sale Agreement (the "Compelled Sale Termination Date"), which shall be
not more than 180 days following the delivery of the Compelled Sale Notice. In
the event of any change in the consideration to be paid, or any material change
to any of the terms or conditions of the Compelled Sale, a new Compelled Sale
Notice shall be provided to the Remaining Stockholders, and the Compelled Sale
Closing (as defined below) shall not occur earlier than the 20th day subsequent
to the date on which such new Compelled Sale Notice is provided.
(c) Subject to the satisfaction or waiver of the terms and
conditions of the Compelled Sale Agreement (other than any condition relating to
the delivery of Shares by the Remaining Stockholders), the Compelled Sale shall
occur at a closing (the "Compelled Sale Closing") on the Compelled Sale Date
during normal business hours at a time and place reasonably designated by the
Compelling Stockholders and the Compelled Sale Purchaser; provided that if the
Compelled Sale Closing shall not have occurred on or prior to the Compelled Sale
Termination Date, the Remaining Stockholders will be released from their
obligations under this Section 3.4, unless and until the Compelling Stockholders
deliver a new Compelled Sale Notice in compliance with this Section 3.4.
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(d) No Remaining Stockholder shall be required to make any
representations and warranties to any person in connection with such Compelled
Sale except as to (i) good title and the absence of liens with respect to such
Remaining Stockholder's Shares, (ii) the corporate or other existence of such
Remaining Stockholder and (iii) the authority for and the validity and binding
effect of, and the absence of any conflicts under the charter documents and
material agreements of such Remaining Stockholder as to, any agreements entered
into by such Remaining Stockholder in connection with such Transfer. The
Remaining Stockholders shall not be required to provide any indemnities in
connection with such Transfer except for a breach of such representations and
warranties.
(e) In lieu of a sale of Shares, the Compelled Sale may be
accomplished by, and the Compelled Sale Agreement may provide for, a merger,
consolidation or other business combination permitted by Delaware law.
(f) In the event the Compelled Sale is accomplished in any
manner permitted by this Section 3.4 that would otherwise give rise to
appraisal, dissenters' or other similar rights under any applicable law, no
Stockholder shall take any action to exercise, enforce or perfect such rights,
if any, and each Stockholder hereby expressly waives (on behalf of itself and
any transferee or other successor) all such rights.
Section 3.5 Deliveries at Closing; Method of Payment of Purchase
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Price. (a) At the closing of any Tag-Along Sale or Compelled Sale, each
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Tag-Along Stockholder or Remaining Stockholder, as the case may be, shall
deliver to the Tag-Along Purchaser or the Compelled Sale Purchaser, as the case
may be, against delivery of the purchase price for the Shares being sold by it,
(i) certificates appropriately endorsed and representing the Shares being sold,
if any, free and clear of any lien, claim or encumbrance, and (ii) such other
documents, including, without limitation, executed stock powers and evidence of
ownership and authority, as the purchasers may reasonably request. The purchase
price shall be paid by wire transfer of immediately available funds to the bank
account designated by each Tag-Along Stockholder or Remaining Stockholder, as
the case may be, or by certified check if the amount payable to the recipient
thereof is less than $1,000,000.
(b) If any Remaining Stockholder fails to deliver
certificates representing its Shares as required by this Section 3.5 and the
Compelled Sale in question is consummated, then such Remaining Stockholder shall
not be entitled to the consideration it is to receive under this Section 3.5
until it cures such failure (provided that after curing such failure it shall be
so entitled to such consideration without interest). Such Remaining Stockholder
shall, until such failure is cured, hold such certificates in trust for the
Compelled Sale Purchaser, who shall be deemed to be the beneficial owner of the
Shares represented by such certificates.
Section 3.6 Company Cooperation. At any time the Company is not
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filing periodic reports with the United States Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended, the
Company shall cooperate with the Stockholders and make available on a timely
basis such information as the Stockholders may reasonably request (to the extent
that such information can be provided without unreasonable expense
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or disruption of the Company's affairs) to facilitate a Transfer of 5% or more
of the issued and outstanding Shares to any prospective bona fide Permitted
Transferee. The Company shall provide to each Stockholder consolidated financial
statements for the Company and its subsidiaries, prepared in accordance with
generally accepted accounting practices as in effect from time to time, for each
fiscal year and each of the first three fiscal quarters of each fiscal year.
Section 3.7 Legend on Certificates. Each certificate representing
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Shares shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF A
STOCKHOLDERS' AGREEMENT (THE "STOCKHOLDERS' AGREEMENT") DATED AS OF
NOVEMBER 5, 1997 (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
CHI ENERGY, INC. AND WILL BE MAILED TO A STOCKHOLDER WITHOUT CHARGE
WITHIN FIVE DAYS AFTER RECEIPT BY CHI ENERGY, INC. OF A WRITTEN
REQUEST THEREFOR FROM SUCH STOCKHOLDER). NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT AS
OTHERWISE PROVIDED IN SUCH STOCKHOLDERS' AGREEMENT. IN ADDITION, THE
STOCKHOLDERS' AGREEMENT CONTAINS CERTAIN RESTRICTIONS AND AGREEMENTS
WITH RESPECT TO THE VOTING OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE.
ARTICLE IV
CORPORATE GOVERNANCE
Section 4.1 Initial Board; Number of Directors. (a) The number of Directors
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constituting the Whole Board initially shall be seven. The initial Board of
Directors shall consist of the five individuals listed below, and two vacancies,
one to be filled at any time by MS in accordance with Section 4.4(b) (the "MS
Vacancy") and one to be filled at any time by SB in accordance with Section
4.4(b) (the "SB Vacancy"). The five initial Directors shall be James T. Stewart,
Edward M. Stern, Charles F. Goff, Michael Petrick and James DuPlessie. For
purposes of Section 4.2, Messrs. Stewart and Stern will be considered Officer
Nominees, Mr. Goff will be considered an Outside Nominee, Mr. Petrick will be
considered an MS Nominee and Mr. DuPlessie will be considered an SB Nominee.
Each Director shall serve as a Director until his death, disability,
resignation or removal or until his successor shall thereafter have been duly
elected and qualified in accordance with the provisions of this Agreement.
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(b) For so long as this Agreement is in effect, no
Stockholder shall vote in favor of or consent to any change in the number of
Directors constituting the Whole Board.
4.2 Nomination and Election of Directors. (a) The Company and the
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Stockholders agree that the following procedures shall govern the nomination and
election of Directors of the Company:
(i) At each meeting of the Company's stockholders at which
Directors are to be elected (each, an "Election Meeting"), subject
to paragraph (b) below, the Company shall nominate each of the
following (collectively, the "Company Nominees"), and no others: up
to two individuals designated by MS and/or an MS Nomination
Successor (the "MS Nominees"), up to two individuals designated by
SB and/or an SB Nomination Successor (the "SB Nominees"), two
individuals designated by majority vote of the Whole Board, both of
whom shall be executive officers of the Company (the "Officer
Nominees"), and one individual (the "Outside Nominee") designated
by the number of directors constituting the Whole Board less one,
which individual shall not be, and shall not have been during the
three years immediately preceding the date of the relevant Election
Meeting, employed by, a director of, or otherwise affiliated with
the Company (except as the incumbent Outside Nominee) or any of its
affiliates or MS or SB or any of their respective affiliates.
(ii) No Stockholder shall make any nomination at an Election
Meeting.
(iii) Each Stockholder agrees to vote (or execute a consent with
respect to) all Shares over which it may exercise voting power in
favor of the election as a Director of each Company Nominee.
(b) In the event that at any time the voting power of the
Shares held collectively by MS and any MS Nomination Successor or held
collectively by SB and any SB Nomination Successor, respectively, is less than
15% but not less than 7% of the total voting power of the Shares then
outstanding, the number of Directors MS and any MS Nomination Successor or SB
and any SB Nomination Successor, as the case may be, shall have the right to
designate for nomination shall be reduced to one. At such time, MS or SB, as the
case may be, shall cause one of the MS Directors or SB Directors, as the case
may be, to resign, and the Board of Directors shall act to fill the vacancy
caused by such resignation with a person meeting the qualifications of an
Officer Nominee or an Outside Nominee in accordance with Section 4.4(c) of this
Agreement, or, if the MS Vacancy or SB Vacancy, as the case may be, shall not be
filled at such time, MS or SB shall not cause any MS Director or SB Director, as
the case may be, to resign, but the Board of Directors shall fill such MS
Vacancy or SB Vacancy, as the case may be, with a person meeting the
qualifications of an Officer Nominee or an Outside Nominee in accordance with
Section 4.4(c) of this Agreement.
(c) In the event that at any time the voting power of the
Shares held collectively by MS and any MS Nomination Successor or held
collectively by SB and any SB Nomination Successor, respectively, is less than
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7% of the total voting power of the Shares then outstanding, MS and any MS
Nomination Successor or SB and any SB Nomination Successor, as the case may be,
shall no longer have the right to designate individuals for nomination. At such
time, MS or SB, as the case may be, shall cause any remaining MS Directors or SB
Directors, as the case may be, to resign, and the Board of Directors shall act
to fill the vacancy caused by such resignation in accordance with the Bylaws as
then in effect.
Section 4.3 Removal of Directors. (a) Except as provided in
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subparagraph (b) below, Directors may be removed in accordance with the Bylaws
as then in effect.
(b) No Stockholder shall take any action to remove, or to
vote in favor of or to consent to the removal of any MS Director or SB
Director, except that (1) any Stockholder may take action to remove any such
director for Cause (as defined below) and (2) upon request of the Nominating
Stockholder of any MS Director or SB Director, with or without cause, and at any
time, each Stockholder immediately shall consent in writing to the removal of
such MS Director or SB Director, as the case may be. The term "Nominating
Stockholder" means any of MS, SB or any MS Nomination Successor or SB Nomination
Successor who shall have designated the relevant MS Director or SB Director for
nomination by the Company. Removal for "Cause" shall mean removal of a Director
because of such Director's (i) willful and continued failure to perform
substantially his duties with the Company in such Director's established
position, (ii) willful misconduct which is significantly injurious to the
Company monetarily or otherwise, (iii) abuse of any illegal drug or other
controlled substance or habitual intoxication, (iv) conviction for, or guilty
plea (or plea of nolo contendere) to, a crime involving moral turpitude or (v)
conviction for, or guilty plea (or plea of nolo contendere) to, a felony.
Section 4.4 Vacancies. (a) Except as provided in paragraph (b) and
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paragraph (c) below, vacancies on the Board of Directors shall be filled in
accordance with the Bylaws as then in effect.
(b) At any time, and without prior notice, MS or SB may
request that the MS Vacancy or the SB Vacancy, respectively, be filled and, in
connection therewith, MS or SB, respectively, shall designate an individual to
fill each such vacancy (each, a "Designee"), and the remaining Directors, prior
to conducting any other business, shall act to appoint each Designee as
Director. If the remaining Directors fail to appoint any Designee as Director,
or if the remaining Directors fill any such vacancy otherwise than with the
Designee in accordance with the foregoing sentence, the Stockholders shall
immediately cause a special meeting of stockholders to be called, or shall act
by written consent without a meeting, for the purpose of removing such person
and/or filling such vacancy with the Designee, and each Stockholder agrees to
vote all of the Shares which such Stockholder is entitled to vote at such
meeting, or to execute a written consent in respect of all such Shares, as the
case may be, in favor of removing, if necessary, any such vacancy filled with a
person who is not a Designee and in favor of the election of such Designee.
(c) If at any time after the date hereof a vacancy is
created on the Board of Directors as a result of the death, disability, removal
or resignation of any one or more MS Directors or SB Directors, the Nominating
Stockholder of each Director whose death, disability,
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removal or resignation caused a vacancy shall be entitled to designate a another
individual (each, a "New Vacancy Designee") to fill each such vacancy, and the
remaining Directors, prior to conducting any other business, shall act to elect
each New Vacancy Designee as Director. If the remaining Directors fail to elect
any New Vacancy Designee as Director, or if the remaining Directors fill any
such vacancy otherwise than with the New Vacancy Designee in accordance with the
foregoing sentence, the Stockholders shall immediately cause a special meeting
of stockholders to be called, or shall act by written consent without a meeting,
for the purpose of removing such person and/or filling such vacancy with the New
Vacancy Designee, and each Stockholder agrees to vote all of the Shares which
such Stockholder is entitled to vote at such meeting, or to execute a written
consent in respect of all such Shares, as the case may be, in favor of removing,
if necessary, any such vacancy filled with a person who is not a New Vacancy
Designee and in favor of the election of such New Vacancy Designee.
ARTICLE V
MISCELLANEOUS
Section 5.1 Effectiveness. As provided in Section 9.6 of the Plan, this
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Agreement shall become effective on the later of the Effective Date (as defined
in the Plan) and the first date on which holders of not less than 66-2/3% of the
Shares issued pursuant to the Plan execute this Agreement.
Section 5.2 Waiver and Amendment. (a) Any party hereto may waive its
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rights under this Agreement at any time, provided that any agreement on the part
of any such party to any such waiver shall be valid only if set forth in an
instrument in writing signed by such party.
(b) Except as otherwise required by law, this Agreement may
be amended at any time, but only by a written instrument signed by
Stockholders holding not less than 66-2/3% of the total voting power of the
Shares then outstanding.
Section 5.3 Termination. Unless extended in a writing signed by all
-----------
of the Stockholders, this Agreement shall terminate on and be of no force or
effect from and after the first occurrence of any of the following events: (i)
the consummation of a Tag-Along Sale or a Compelled Sale (including consummation
of a Compelled Sale accomplished by merger, consolidation or sale of
substantially all of the Company's assets) pursuant to Section 3.3 or Section
3.4, respectively, of this Agreement, or (ii) the first date on which no party
has the right to nominate a director pursuant to Section 4.2(b) of this
Agreement. In addition, this Agreement may be terminated (x) at any time by a
written instrument signed by Stockholders holding not less than 66-2/3% of the
total voting power of the Shares then outstanding, or (y) in connection with an
underwritten public sale (whether by the Company or any Stockholder or group of
Stockholders) of 20% or more of the number of Shares then outstanding, by a
written instrument signed by Stockholders holding not less than a majority of
the Shares outstanding immediately prior to such public sale.
Section 5.4 Notices. All notices and other communications provided
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for herein shall be dated and in writing and shall be deemed to have been duly
given when delivered, if delivered personally, or when deposited in the mail if
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sent by registered or certified mail, return receipt requested, postage prepaid
and when received if delivered otherwise, to the party to whom it is directed to
the address of such Stockholder, Warrantholder, or Optionholder as shown in the
stock record book or other records of the Company or at such other address as
the parties hereto shall have specified by notice in writing to the other
parties.
Section 5.5 Applicable Law and Time of Essence. The laws of the
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State of Delaware shall govern the interpretation, validity and performance of
the terms of this Agreement, regardless of the law that might be applied under
principles of conflicts of law. Time shall be of the essence with respect to
this Agreement and of every part hereof.
Section 5.6 Descriptive Headings, Etc. The headings in this
-------------------------
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning of terms contained herein. Unless the context of this
Agreement otherwise requires, (i) words of any gender shall be deemed to include
each other gender; (ii) words using the singular or plural number shall also
include the plural or singular number, respectively; and (iii) references to
"hereof," "herein," "hereby" and similar terms shall refer to this entire
Agreement.
Section 5.7 Counterparts. This Agreement may be executed in multiple
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counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
Section 5.8 Successors, Assigns and Transferees. This Agreement
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shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors, assigns and transferees except to the extent that
the terms of this Agreement limit or otherwise restrict the transferability of
any rights or obligations hereunder.
Section 5.9 Severability. In the event that any one or more of the
------------
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
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IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first above written.
CHI ENERGY, INC.
By:
Name:
Title:
STOCKHOLDERS:
MORGAN STANLEY & CO., INCORPORATED
By:
Name:
Title:
SWISS BANK CORPORATION, LONDON BRANCH
By:
Name:
Title:
SWISS BANK CORPORATION RESTRUCTURING & RECOVERY FUND
By:
Name:
Title:
15
STONE HILL OFFSHORE PARTNERS LIMITED
By: Stone Hill Advisors LLC
By:_____________________________
John A. Motulsky
Managing Member
STONE HILL INVESTMENT CORP.
By: ______________________________________
John A. Motulsky
Vice President
for and on behalf of Stone Hill Partners, L.P.
Aurora Limited Partnership
GRS Partners III
MERRILL LYNCH CORPORATE BOND FUND, INC. -
HIGH INCOME PORTFOLIO
CORPORATE HIGH YIELD FUND, INC.
MERRILL LYNCH VARIABLE SERIES FUNDS - HIGH
CURRENT INCOME FUND
By: ________________________________________
Name:
Title:
MERRILL LYNCH GLOBAL CURRENCY BOND
SERIES - CORPORATE HIGH INCOME PORTFOLIO
By: Merrill Lynch Asset Management,
as investment advisor
By:_______________________________
Name:
Title:
16