EXHIBIT 10(D)
SURVIVING STOCKHOLDERS AGREEMENT
This Surviving Stockholders Agreement entered into on April , 1995 by
and among Quantic Industries, Inc. (the "Company"), James S. Fetherston
("Fetherston"), Charles G. Davis, Jr., individually and as trustee ("Davis"),
Robert M. Valenti ("Valenti"), William David Fahey ("Fahey"), Craig Bambrough
("Bambrough"), Myles H. Kitchen ("Kitchen"), Kenneth E. Willis ("Willis"),
Robert P. Coler ("Coler") (Valenti, Fahey, Bambrough, Kitchen, Willis and Coler
together, "Management"), and Energy Absorption Systems, Inc. ("Energy"). All of
the parties hereto are sometimes referred to collectively as the "Parties."
As the result of a merger effective this date, the Company has 2,000,000
shares of one class of common stock, $.01 par value ("Shares"), authorized for
issuance pursuant to a Certificate of Merger in the form attached hereto as
Exhibit A, and the Company's By-Laws are in the form attached hereto at Exhibit
B.
As a result of said merger, all of the outstanding Shares of the Company
are owned of record and beneficially by the Parties as follows:
Energy 400,000 Shares
Fetherston 331,000 Shares
Davis 223,472 Shares
Valenti 11,410 Shares
Fahey 11,428 Shares
Bambrough 11,428 Shares
Kitchen 5,713 Shares
Willis 1,524 Shares
Coler 4,025 Shares
The Parties wish to provide for further governance of the Company and their
mutual rights and obligations as stockholders of the Company;
NOW THEREFORE, in consideration of the premises and mutual promises herein
made, the Parties agree as follows:
1. Restriction on Transfer of Shares.
(a) No Party shall at any time, directly or indirectly, make or suffer to
be made any sale, bequest, pledge, encumbrance, distribution, hypothecation,
gift, transfer, assignment or other disposition of the Shares owned by him, or
agree to do the same, or grant any option, warrant, right or other convertible
security calling for the performance of any such act (collectively, a
"Transfer") except: (i) to the Company, (ii) to the estate of the deceased
Party, to a member of a Party's immediate family or to a trust for the benefit
of a member of a Party's immediate family or to an affiliate (as defined in the
rules and regulations of the Securities Exchange Commission) of the Party
(provided such transferee agrees to in writing to be bound by the terms of this
Agreement), (iii) as hereinafter expressly permitted by this Agreement, and (iv)
pursuant to the several option agreements between Davis, on the one hand, and
the individual members of Management, on the other hand. The Company shall not
recognize and shall not transfer on its books any Shares, or issue any
certificates on account or in lieu thereof, with respect to any Transfer not
permitted by this Agreement, and any such Transfer shall be void.
(b) Each Party represents that he/it is acquiring the Shares of his/its
own account for investment purposes and not with a view to any offering or
distribution and that he/it will not sell or otherwise dispose of the Shares in
violation of applicable securities laws.
2. Governance.
(a) Notwithstanding the provisions of Delaware law, the Company's
Certificate of Incorporation and By-Laws concerning voting by the stockholders
of the Company, the Board of Directors of the Company shall consist of five
members, two of whom shall be designated by Energy, and three of whom shall be
designated by Fetherston and Davis. The initial Directors shall be Fetherston,
Davis, Edmund R. Manwell, Philip E. Rollhaus, and George D. Ebersole. Each of
the Parties agrees to vote his or its shares for the election to the Board of
Directors of the individuals designated as provided above.
(b) Notwithstanding the provisions of Delaware law, the Certificate of
Incorporation and By-Laws, the Parties agree that Company shall not take the
following action without the prior written consent of Energy until after
December 31, 1996, at which time this subparagraph (b) shall be of no further
force or effect:
(i) amend the Certificate of Incorporation of the Company;
(ii) amend the By-Laws of the Company;
(iii) merge or consolidate the Company;
(iv) sell, lease, exchange, transfer or otherwise dispose of all or a
substantial part of the assets of the Company;
(v) purchase, lease, exchange or otherwise acquire of assets, in a
single transaction or a series of related transactions, of more than $500,000,
individually or in the aggregate;
(vi) increase or reduce the Company's authorized capital; create of a
new class of capital stock; or issue or sell of additional securities, including
capital stock, warrants, options, securities convertible into any of the
foregoing or rights to acquire any of the foregoing, except as set forth in
Section 4 hereof;
(vii) dissolve or liquidate the Company, including commencing an action
or proceeding under any bankruptcy laws, seeking the appointment of a receiver
or custodian, or making a general assignment for the benefit of the Company's
creditors;
(viii) enter into an unrelated field of business;
(ix) increase, in a single transaction or a series of related
transactions, of the Company's debt or other financial obligations to third par-
ties of more than $1,000,000, individually or in the aggregate;
(x) modify the compensation arrangements between the Company and
Fetherston, Davis or Management, whether in base salary, bonus or otherwise; and
(xi) modify the Company's bonus arrangements for all other employees.
3. Business Plan and Operations.
(a) The Parties agree that the Company's business shall be conducted by
reference to an annual Business Plan adopted by the Board of Directors, with the
objective of making an initial public offering of shares of the Company or the
Company and Energy as set forth in Section 5.
(b) The Parties shall cause the Company to provide Energy monthly and
quarterly financial statements including a balance sheet, operating statement
and cash flow statement, to be provided within twenty (20) days of the end of
the particular period, and such other records and information which Energy may
reasonably request.
(c) The Parties shall cause the Company to have regularly scheduled,
monthly management program review meetings at both the Hollister and San Carlos
facilities. The Parties shall cause the Company to give Energy at least two
weeks advance notice of the time and location for each meeting. Energy may
designate representatives to attend all these meetings. The Company shall
deliver to Energy all documentary information presented at those meetings
whether or not an Energy representative attends. The Company shall advise
Energy as soon as practicable of any events that would have a material impact on
the Company including but not limited to events that would have a material
effect on orders or shipments.
4. Grant of Warrant and Options.
(a) The Parties shall cause the Company to grant a warrant to Charterhouse
Equity Partners, L.P. substantially in the form attached hereto as Exhibit A.
(b) The Parties shall cause the Company to create an employee stock option
plan for no less than 20,000 of the authorized but unissued Shares; provided
however, in the discretion of the Board of Directors, this plan may be increased
to an aggregate of 2% of the shares of the Company as it is constituted
immediately prior to the public offering contemplated by Section 5(a) hereof.
The Parties agree to vote their Shares to approve such a plan; provided further,
in the discretion of the Board of Directors, options for up to 50% of the shares
included in the plan may be granted to Management in such proportion as the
Board shall determine.
5. Public Offering; Sale of Business.
(a) On or before January 6, 1996, the Parties plan to engage, or cause the
Company to engage, an investment banking firm which will underwrite an initial
public offering of all or some of the shares of the Company as soon thereafter
as practicable ("Engagement"). The Engagement shall be on such terms and
conditions as are mutually acceptable to Fetherston, Davis and Energy, and the
Parties shall immediately undertake, and shall cause the Company to undertake,
such business, accounting, financial and legal matters necessary to prepare for
the Engagement. The Parties will cooperate with each other to explore the
possibility of combining the businesses of the Company and of Energy into a new
entity which shall be the subject of the initial public offering referred to in
this paragraph.
(b) In the event the Engagement has not been implemented by January 6,
1996, then the Parties may, but are not obligated to, exercise any of the
following alternatives.
(i) Fetherston, Davis and Energy may determine that the Engagement was
not implemented for market condition reasons (whether
the market for initial public offerings of securities, or the market
for the Company's products), and therefore extend implementation of the
Engagement to a mutually acceptable date.
(ii) Either Fetherston, Davis or Energy may present the other Parties with
a written demand that within thirty (30) days of receipt of the demand, the
Parties will engage, or will cause the Company to engage, an investment banker,
broker or agent for the sole purpose of selling the Company.
Notwithstanding any provision of this Section 5, Fetherston, Davis and Energy
shall have the right to decline to participate in, or to veto the terms and
conditions of, an initial public offering, the extension of the Engagement, or
the sale of Shares or of the Company pursuant to this Section 5; provided
however, the Party may not refuse to engage an investment banker, broker, or
agent for the purpose of selling the Company as provided in paragraph (b)(ii).
The Parties agree that in the sale of the Company as provided in this paragraph,
Energy or its affiliate may be a bidder.
(c) The provisions of this Section 5 shall immediately become null and
void if either Fetherston or Davis exercises his rights to put his Shares to
Energy pursuant to Section 6 hereof.
6. Put to Energy.
(a) Either or both of Fetherston and Davis shall have the right, upon the
terms set forth hereinafter, to require Energy to repurchase all, but not less
than all, of their respective Shares (including shares held beneficially or of
record and including all shares held by trusts for the benefit of Fetherston,
Davis and/or their respective spouses, ancestors or lineal descendants but not
including the Shares subject to the options referred to in paragraph 1 hereof)
(the "Put Shares") at an aggregate total purchase price of $5,544,250 and
$3,249,500, respectively, payable, except as set forth hereinafter, in cash in
immediately available funds within 45 days after exercise. This right of
Fetherston and Davis is sometimes herein referred to as a "Put Option."
(b) At 5:00 p.m., C.S.T., January 6, 1996, the Put Option shall expire
with respect to all Shares and shall thereafter have no force or effect.
(c) A Put Option shall be exercised by delivery of a notice of exercise in
accordance with Section 10(g) of that Agreement executed by the Parties hereto,
inter alia, bearing the date hereof.
(d) At the Closing, which shall be held in San Francisco, California, the
person exercising the Put Option ("Seller") shall deliver to Energy the Put
Shares being sold, together with such assignments and stock powers as Energy may
reasonably request, and an agreement providing representations and warranties
and several indemnification, substantially comparable to the representations and
warranties and indemnification provisions of that Agreement between the Parties
hereto inter alia bearing the date hereof, modified to reflect events which have
occurred from the date hereof. Energy shall deliver to Seller the consideration
provided for herein.
(e) If the Put Option is exercised as to Fetherston's Put Shares or Davis'
Put Shares before December 31, 1995, Energy may, but shall not be required to,
pay the purchase price of such Put Shares fifty percent (50%) in cash and fifty
percent (50%) in shares of Quixote Corporation common stock valued at the mean
of the high and low sales price of a shares of Quixote common stock in the over-
the-counter market or the closing price on the principal stock exchange where
Quixote's stock prices are officially quoted on the thirtieth day following
exercise of the Put Option or if not traded on that date, then on the last
preceding day traded. Energy shall, at its sole expense, do all things
necessary or reasonably advisable to enable the Seller lawfully and freely to
sell all such Quixote stock so received immediately in any available market in
the United States.
7. Push/Pull Option.
At any time after January 6, 1996, when Fetherston or Davis still own
Shares of the Company, Fetherston, Davis and Energy shall have the following
rights with respect to the Shares.
(a) Any of Fetherston, Davis or Energy desiring to purchase or sell Shares
(hereinafter "Offeror") shall prepare a written offer (hereinafter "Offer") to
purchase all of the Shares of any of the other Parties of Fetherston, Davis or
Energy (hereinafter "Offeree"). Said Offer shall also be deemed an offer by the
Offeror to sell all of its Shares to the Offeree upon the same terms and condi-
tions. The Offer shall state the total price which the Offeror is willing to
pay to purchase the Shares of the Offeree and said Offer shall also be deemed an
Offer by the Offeror to sell to the Offeree all of its Shares upon the same
terms and conditions as the Offer to purchase; provided, however, the Offer to
Sell shall be deemed to be at a price per Share based on the Company value
implicit in the Offer to purchase.
(b) The Offeree shall have a period of sixty (60) days after receipt of
written notice of the Offer in which to indicate in writing to the Offeror
whether the Offeree elects to sell Shares or whether the Offeree elects to
purchase the Shares of the Offeror. Failure to respond in writing to the Offer
within sixty (60) days shall be deemed an election to sell by the Offeree.
(c) When the determination can be made which Party shall purchase and
which Party shall sell, the purchasing Party shall thereafter have sixty (60)
days in which to consummate purchase of the Shares of the selling Party in
accordance with the terms of the Offer.
(d) Should an Offeree fail or refuse to fulfill obligations to buy the
Shares of the Offeror, the Offeror shall be entitled to purchase the Offeree's
Shares on the same terms and conditions within thirty (30) days of the Offeree's
scheduled closing.
(e) Notwithstanding any other provision hereof, (i) any purchase or sale
of Davis Shares shall exclude the Shares subject to the options referred to in
paragraph 1 hereof, and (ii) in the event of a sale by Fetherston and Davis
hereunder or a purchase by either Fetherston or Davis hereunder, the individual
members of Management shall each have the right to include their respective
Shares in the sale in accordance with the terms of the Offer; such right shall
be exercised by notice to the purchasing Party not more than 20 days after the
determination referred to in paragraph (c) hereof.
8. Indemnification of Energy.
Fetherston, Davis and Management have certain obligations to indemnify
Energy pursuant to Section 8 of that Agreement bearing this date which resulted
in the merger described in the Preamble, and such obligations are several but
not joint obligations among the Parties. The Parties agree that each Party
shall pay to Energy the following percentage of the total indemnification
obligations arising from Section 8 of said Agreement:
Fetherston 55.1666%
Davis 32.3333%
Valenti 3.5237%
Fahey 2.9922%
Bambrough 2.9922%
Kitchen 1.4955%
Willis 0.3992%
Coler 1.0973%
100%
The total indemnification obligations to Energy shall not exceed
$6,700,000.
9. Cancellation of Agreements.
The Parties hereby agree that a certain Stockholders Agreement dated
January 4, 1993, a certain Limited Liability Company Agreement dated January 4,
1993 and a certain Members Agreement dated January 4, 1993 between the Company
and certain of the Parties, inter alia, are hereby terminated and cancelled as
of this date.
10. Miscellaneous.
(a) Each Party agrees that the certificates representing shares held by
him or it may have stamped or printed thereon the following legends referring to
the terms and restrictions contained in this Agreement and those restrictions
required by the Federal and State securities laws.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS UPON
TRANSFER AND OTHER PROVISIONS SET FORTH IN A SURVIVING STOCKHOLDERS AGREEMENT
ENTERED INTO ON APRIL 12, 1995, BY AND AMONG QUANTIC INDUSTRIES, INC., JAMES S.
FETHERSTON, CHARLES G. DAVIS, JR., ROBERT M. VALENTI, WILLIAM DAVID FAHEY, CRAIG
BAMBROUGH, MYLES H. KITCHEN, KENNETH E. WILLIS, ROBERT P. COLER, AND ENERGY
ABSORPTION SYSTEMS, INC., A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
QUANTIC INDUSTRIES, INC., 990 COMMERCIAL STREET, SAN CARLOS, CALIFORNIA 94070.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION
WITH RESPECT TO SUCH TRANSFER OR AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
(b) The term "Shares" as used herein shall include all additional
securities issued with respect thereto pursuant to any stock dividends, stock-
split, recapitalization, reorganization, merger or consolidation or any other
shares acquired by the Parties whether pursuant to the exercise of stock options
or warrants or from third-party purchase.
(c) This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their respective heirs, legal representatives, successors and/or
permitted assigns.
(d) This Agreement may be executed in several counterparts, each of which
shall be deemed an original.
(e) This Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware and shall constitute the entire agreement
among the parties hereto with respect to the subject matter hereof.
(f) None of the terms and conditions of this Agreement may be changed,
modified, waived or cancelled except by a writing signed by all the Parties
hereto, specifying such change, modification, waiver or cancellation. A waiver
at any time of compliance with any of the terms and conditions of this Agreement
shall not be considered a modification, cancellation or waiver of such terms and
conditions, or of any preceding or succeeding breach thereof, unless expressly
so stated.
(g) This Agreement shall terminate upon the earlier of (i) the effective
date of the registration statement for the first underwritten public offering of
the Company's Shares or (ii) fifteen (15) years from the date hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
QUANTIC INDUSTRIES, INC. /s/James S. Fetherston
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JAMES S. FETHERSTON
By: /s/James S. Fetherston
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/s/Charles G. Davis, Jr.
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CHARLES G. DAVIS, JR., individually and as Trustee of
Charles G. Davis, Jr. 1990
Trust Agreement Dated 1/27/90
ENERGY ABSORPTION SYSTEMS, INC.
By: /s/George D. Ebersole /s/Robert M. Valenti
-------------------------------------- ----------------------------------
GEORGE D. EBERSOLE ROBERT M. VALENTI
Its: President /s/William David Fahey
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WILLIAM DAVID FAHEY
/s/Kenneth E. Willis /s/Craig Bambrough
- ------------------------------------------- ----------------------------------
KENNETH E. WILLIS CRAIG BAMBROUGH
/s/Myles H. Kitchen /s/Robert P. Coler
- ------------------------------------------- ----------------------------------
MYLES H. KITCHEN ROBERT P. COLER