Exhibit 9.1
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT dated as of September ___,
1997 among THE CHILDREN'S PLACE RETAIL STORES, INC., a Delaware corporation
(the "Company"), each of the Persons listed on Schedule 1 and a signatory
hereto (each a "Management Stockholder" and, collectively, the "Management
Stockholders"), THE SK EQUITY FUND, L.P., a Delaware limited partnership
("SK"), SK INVESTMENT FUND, L.P., a Delaware limited partnership ("SKIF"),
and BARRY FEINBERG ("Feinberg") (each of the Management Stockholders, SK,
SKIF and Feinberg, and their permitted Transferees, a "Stockholder" and,
collectively, the "Stockholders").
RECITALS
A. The Company and the
Stockholders entered into a Stockholders Agreement dated June 28, 1996 (the
"Original Stockholders Agreement"), setting forth certain rights and
obligations of the Company and the Stockholders with respect to various
matters, in order to ensure a degree of continuity of management and
ownership of and certain rights in respect of the Company by imposing certain
restrictions and obligations on the ownership, retention and disposition of
the capital stock of the Company.
B. As of the date hereof, the Management Stockholders own an aggregate
of 9,893,400 shares of the Company's Common Stock.
C. As of the date hereof, SK owns 7,458,445 shares of the Company's
Common Stock, SKIF owns 108,108 shares of Common Stock and Feinberg owns
93,336 shares of Common Stock, all of which shares were issued upon
conversion of shares of the Company's Series B Common Stock previously owned
by such holders, in accordance with the terms set forth in the Company's
Amended and Restated Certificate of Incorporation.
D. The Company and the Stockholders have now agreed that, in connection
with the Company's initial public offering, it is desirable and in the best
interest of the Company that the Original Stockholders Agreement be amended
and restated in its entirety to read as hereinafter set forth.
E. NOW, THEREFORE, the parties hereto agree that the Original
Stockholders Agreement is hereby amended and restated in its entirety,
effective as of the Effective Date (as defined below), to read in its
entirety as follows:
I. DEFINITIONS
1.1. Definitions. (a) In addition to the terms defined elsewhere herein,
the following terms have the following meanings when used herein with initial
capital letters:
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with, such
Person. For the purposes of this definition, "control" when used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" means this Agreement, as the same may be amended from time to
time.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to
close.
"Charter" means the Amended and Restated Certificate of Incorporation of
the Company as amended from time to time.
"Change of Control" means when any Person becomes the "beneficial owner"
(as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of
50% or more of either (A) the then outstanding shares of Common Stock of the
Company or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors.
"Common Stock" means the Common Stock, par value $0.10 per share, of the
Company.
"Designated Management Stockholders" means Ezra Dabah, Stanley Silver and
any trust to which Ezra Dabah or Stanley Silver Transferred shares of Common
Stock after the date of the Original Stockholders Agreement.
"Director" means a member of the Board of Directors of the Company.
"Duly Endorsed" means duly endorsed in blank by the Person in whose name
a certificate representing a security is registered or accompanied by a duly
executed instrument of assignment separate from the certificate.
"Effective Date" means the date of consummation of the Company's initial
public offering under the Securities Act.
"Management Permitted Transferee" means with respect to any Management
Stockholder, (i) any spouse or lineal descendant of such Management
Stockholder, (ii) any trust all of the beneficial interests in which is held
by such Management Stockholder and/or such Management Stockholder's spouse
and/or lineal descendants, and (iii) any other Management Stockholder;
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provided, however, that each such Transferee will be a Management Permitted
Transferee for purposes of this Agreement only if such Transferee shall have
executed and delivered to the Company an instrument reasonably satisfactory
to the SK Holders pursuant to which the Transferee shall have agreed to be
bound by the terms of this Agreement applicable to its Transferor.
"Management Stockholder Group" means each of the Management Stockholders
or any Management Permitted Transferee.
"Person" means an individual, corporation, partnership, trust,
association or any other entity or organization, including without limitation
a government or political subdivision or an agency or instrumentality thereof.
"pro rata" means, with respect to any offer including Common Stock, an
offer based on the relative percentages of Common Stock then held by all of
the holders of Common Stock to whom such offer is made.
"Public Offering" means any primary or secondary public offering of
Common Stock pursuant to an effective registration statement under the
Securities Act, other than pursuant to a registration statement on Form S-4
or Form S-8 or any successor or similar form.
"Purchase Agreement" means the Purchase Agreement dated as of June 28,
1996 among the Company, SK and SKIF and Feinberg.
"Relinquishment Time" means the time at which the SK Holders own less
than 25% of the shares of Common Stock owned by SK and SKIF as of the
Effective Date (as adjusted to give effect to any stock dividend, stock
split, recapitalization or similar event affecting the then-outstanding
Common Stock).
"Rule 144" means Rule 144 under the Securities Act, as such rule may be
amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"SK Holder" means SK, SKIF, Feinberg or any permitted Transferee thereof.
For purposes of this Agreement, any action or consent contemplated to be
taken or given by the SK Holders will be effective if taken or given, as the
case may be, by the SK Holder which owns the largest portion of the Common
Stock owned by all SK Holders as of the relevant time.
"Third Party" means a prospective purchaser of Securities in an
arm's-length transaction in which such purchaser is not the Company, an
Affiliate of the Company or an Affiliate of any Stockholder.
"Transferee" means any Person to whom any Stockholder Transfers (as
defined in Section 2.1) any Common Stock other than in a sale pursuant to an
effective registration statement under the Securities Act or a public sale
pursuant to Rule 144.
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(b) Except as otherwise provided herein, any right or action that may
be taken at the election of the Management Stockholder Group will be taken by
a representative of the Management Stockholder Group (the "Management Group
Representative") on behalf of the entire Management Stockholder Group. The
initial Management Group Representative will be Ezra Dabah. Upon the death
or permanent disability (or during any period of temporary disability) of
Ezra Dabah, the Management Stockholder Group may designate a successor
Management Group Representative upon vote of the members thereof holding a
majority of the Common Stock held by the Management Stockholder Group;
provided, however, that (i) if no such successor is so designated within 30
calendar days from such death or permanent disability, such successor will be
a member of the Management Stockholder Group designated by the SK Holders,
until a successor is designated by the Management Stockholder Group and (ii)
in the event that no Person is acting as the Management Group Representative
as of the time any action is otherwise to be taken hereunder by the
Management Group Representative or the Management Stockholder Group, such
action may be taken on behalf of the entire Management Stockholder Group by
written action or consent of the holders of a majority of shares of Common
Stock then held by the members of the Management Stockholder Group. Any
change in the Management Group Representative will become effective upon
notice in accordance with Section 4.3.
II. RIGHTS AND OBLIGATIONS WITH RESPECT TO TRANSFER
2.1 Restrictions on Transfers by Designated Management Stockholders.
None of the Designated Management Stockholders may offer, sell, assign, grant
a participation in, pledge or otherwise transfer ("Transfer") any shares of
Common Stock (other than shares of Common Stock acquired upon exercise of
stock options) during the period of 20 months from the Effective Date without
the prior written consent of the SK Holders and the Company; provided,
however, that the restrictions in this Section 2.1 will not apply (i) to
Transfers to any Management Permitted Transferee, (ii) to Transfers made
pursuant to an effective registration statement under the Securities Act,
(iii) to Transfers in "brokers' transactions" or transactions directly with a
"market maker" pursuant to Rule 144 (a "Rule 144 Transfer"), (iv) to
Transfers in connection with a sale of 100% of the outstanding Common Stock
to a Third Party or (v) to Transfers pursuant to Section 2.7.
2.2 Restrictive Legend. (a) Each certificate representing Common Stock
owned by any Stockholder will include the following legend (in addition to
such legends as may be appropriate under the securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT, DATED AS OF SEPTEMBER ___, 1997, AS FROM TIME TO
TIME AMENDED, A COPY OF WHICH MAY BE OBTAINED FROM THE CHILDREN'S PLACE
RETAIL STORES, INC."
(b) Each certificate representing Common Stock owned by any Stockholder
or any Transferee thereof (other than shares that have been sold pursuant to
an effective registration statement under the Securities Act or in accordance
with Rule 144 under the Securities Act) will (unless otherwise permitted by
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the provisions of Section 2.2(c)) include a legend substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM."
Each holder of Common Stock represented by a certificate which bears the
legend described above, by its acceptance or purchase thereof, agrees that
prior to the effectiveness of any proposed Transfer of any such Common Stock
(except pursuant to an effective registration statement) such holder will
give written notice to the Company of such proposed Transfer, briefly
describing the proposed Transfer. Such notice will, unless waived by the
Company, be accompanied by a written opinion, addressed to the Company, of
counsel for such holder stating that in the opinion of such counsel (which
opinion will be reasonably satisfactory to the Company) such proposed
Transfer does not require registration of such Common Stock under the
Securities Act or the securities laws of any state.
(c) Any Stockholder may, upon providing evidence (which, if required by
the Company, may include an opinion of counsel) reasonably satisfactory to
the Company, that such Securities either are not "restricted securities" (as
defined in Rule 144) or may be sold pursuant to Rule 144(k), exchange the
certificate representing such Securities for a new certificate that does not
bear a legend relating to restrictions under the securities laws.
2.3 Tag-Along Rights. (a) If, at any time prior to when the SK Holders
collectively own 30% or less of the Common Stock owned collectively by the SK
Holders as of the Effective Date, any Designated Management Stockholder (a
"Selling Management Stockholder") proposes to Transfer (other than pursuant
to a Public Offering or a Rule 144 Transfer or pursuant to Section 2.7 or to
a Management Stockholder Permitted Transferee) any of its Common Stock (other
than shares acquired upon exercise of stock options) representing more than
1% of the outstanding Common Stock either to (i) any Third Party pursuant to
a bona fide offer to purchase or (ii) the Company (in the case of clause (i)
and (ii), a "Tag-Along Offer"), the Selling Management Stockholder will
provide written notice of such Tag-Along Offer to the Company and each of the
SK Holders in the manner set forth in this Section 2.3; provided, however,
that nothing in this Section 2.3 will affect the restrictions on Transfers by
the Management Stockholders contained in Section 2.1. Such written notice
will identify the proposed purchaser, the number of shares of Common Stock
proposed to be purchased from the Selling Management Stockholder (or if
greater, the number of shares of Common Stock such Person is willing to
purchase (the "Desired Shares")), the Tag-Along Ratio (as defined in Section
2.3(d)) that would apply if all the SK Holders become Co-Selling Stockholders
(as defined below), the consideration offered and all other material terms
and conditions of the Tag-Along Offer. If the offer price consists in part
or in whole of consideration other than cash, the Selling Management
Stockholder will provide such information, to the extent reasonably available
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to the Selling Management Stockholder, relating to such consideration as any
SK Holder may reasonably request in order to evaluate such non-cash
consideration.
(b) The SK Holders will have the right, exercisable as set forth below,
to accept the Tag-Along Offer for up to the number of shares of Common Stock
determined pursuant to Section 2.3(d). The SK Holders will, within ten
Business Days after receipt of the written notice from the Selling Management
Stockholder, provide the Selling Management Stockholder with an irrevocable
written notice specifying the number of shares of Common Stock the SK Holders
wish to Transfer, not to exceed the number of Desired Shares, and the
allocation of such shares among the SK Holders and will simultaneously
provide a copy of such notice to the Company. If the SK Holders do not
accept the Tag-Along Offer within ten Business Days following receipt of
written notice from the Selling Management Stockholder, the SK Holders will
be deemed to have waived any and all rights under this Section 2.3 with
respect to the Transfer of Common Stock pursuant to such Tag-Along Offer but
nothing herein will affect the SK Holders' rights in respect of any other
transaction or proposed transaction.
(c) Not less than seven Business Days prior to the proposed date of any
sale pursuant to a Tag-Along Offer, the Selling Management Stockholders will
notify the SK Holders which have accepted the Tag-Along Offer (each, a
"Co-Selling Stockholder") of such proposed date. Not less than two Business
Days prior to such proposed date of sale, the Co-Selling Stockholders will
deliver to an Escrow Agent (the costs of which Escrow Agent will be borne by
the Selling Management Stockholder and the Co-Selling Stockholders in
proportion to the shares of Common Stock Transferred by such Selling
Management Stockholder and Co-Selling Stockholders in connection with such
Tag-Along Offer) the Duly Endorsed certificate or certificates representing
the Common Stock to be Transferred by the Co-Selling Stockholders and all
other documents reasonably required to be executed in connection with such
Tag-Along Offer.
(d) Each Co-Selling Stockholder will have the right to Transfer (and the
Selling Management Stockholder will, to the extent necessary, reduce the
amount or number of shares of Common Stock to be Transferred by the Selling
Management Stockholder by a corresponding amount), pursuant to the Tag-Along
Offer, a number of shares of Common Stock equal to the product of the Desired
Shares multiplied by a fraction (the "Tag-Along Ratio"), the numerator of
which will be the aggregate amount or number of shares of Common Stock owned
by such Co-Selling Stockholder and the denominator of which will be the
aggregate number of shares of Common Stock owned by the Selling Management
Stockholder and all Co-Selling Stockholders.
(e) The Selling Management Stockholder will have 90 Business Days from
the end of the ten Business Day period referred to in paragraph (b) above in
which to consummate the Transfer of Common Stock owned by such Selling
Management Stockholder and the Co-Selling Stockholders as contemplated by the
Tag-Along Offer at the price and on the terms contained in such notice. If,
at the end of such 90 Business Day period, the Selling Management Stockholder
has not completed such Transfer, the right of the Selling Management
Stockholder to effect such Transfer will terminate, and the Common Stock of
the Selling Management Stockholders subject to such proposed Transfer will
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to the Selling Management to all the restrictions on sale or other
disposition and other provisions contained in this Agreement.
(f) Immediately after the consummation of the Transfer of Common Stock
pursuant to the Tag-Along Offer, the Escrow Agent will notify the Co-Selling
Stockholders thereof and will remit to each Co-Selling Stockholder the total
sales price attributable to the Common Stock of such Co-Selling Stockholder
sold pursuant thereto less a pro rata portion of the expenses incurred in
connection with such sale.
(g) Notwithstanding anything contained in this Section 2.3, there will
be no liability on the part of the Selling Management Stockholders to any
Stockholder (including any Co-Selling Stockholder) if the Transfer of Common
Stock by the Selling Management Stockholder and any Co-Selling Stockholder
pursuant to Section 2.3 is not consummated for whatever reason. The
Management Stockholders, in their sole discretion, will determine whether to
effect a sale of Common Stock to any Person pursuant to this Section 2.3.
(h) In connection with any Transfer of Common Stock as to which the SK
Holders have Tag-Along rights pursuant to this Section 2.3, the Transferee of
such Common Stock will not be required to execute a counterpart of this
Agreement or become subject to this Agreement.
(i) No failure to exercise any rights or take any other action in
respect of any Tag-Along Offer will affect any SK Holder's rights in respect
of any subsequent Tag-Along Offer or other rights hereunder.
2.4. Restrictions on Transfers by SK Holders. (a) Notwithstanding any
other provision of this Agreement to the contrary, without the prior written
consent of the Company and the Management Group Representative, the SK
Holders will not Transfer any of the Common Stock held by them to any of the
following Persons: (a) any Direct Competitor of the Company, (b) Bain
Capital, (c) The Sprout Group, (d) any Person who serves or who has
designated a representative to serve on the board of directors of any Direct
Competitor of the Company, or (e) any Person who does not agree in writing to
comply with and be bound by this Agreement. For purposes of this Section
2.4, a "Direct Competitor of the Company" means (i) The Gap, Inc. or any
Person under common control with The Gap, Inc. (provided that at the time of
such Transfer, The Gap, Inc. continues to own and operate its GapKids
division), (ii) The Limited, Inc. or any Person under common control with The
Limited, Inc. (provided that at the time of such Transfer, The Limited, Inc.
continues to own and operate its Limited Too division), (iii) Gymboree or
Baby Superstore or any Person under common control with Gymboree or Baby
Superstore, as the case may be, or (iv) any Person whose principal business
activity is the sale of children's apparel and who derives more than 50% of
its gross revenues from the retail sales of children's apparel.
(b) Each of the SK Holders will provide the Company and the Management
Group Representative with ten Business Days' prior written notice of its
intent to pursue or to enter into discussions concerning a sale of any Common
Stock held by the SK Holders to a Third Party.
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2.5. Improper Transfer. (a) Any attempt to Transfer any Common Stock
not in compliance with this Agreement will be null and void and neither the
Company nor any transfer agent of the Company will register, or otherwise
recognize in the Company's records, any such improper Transfer. Any cost or
loss incurred as a result of any such attempt to transfer shall be borne by
the Stockholder who attempted to Transfer.
(b) No Stockholder will enter into any transaction or series of
transactions for the purpose or with the effect of, directly or indirectly,
denying or impairing the rights or obligations of any Person under this
Agreement, and any such transaction will be null and void and, to the extent
that such transaction requires any action by the Company, it will not be
registered or otherwise recognized in the Company's records or otherwise.
2.6. Transferees. Except as expressly provided otherwise in this
Agreement, any and all provisions of this Agreement which apply to the
Stockholders will apply with equal force to any Transferee (other than any
Transferees of Management Stockholders other than the Designated Management
Stockholders.)
2.7. Certain Transfer Rights for Designated Management Stockholders. (a)
Notwithstanding the provisions of Section 2.1 or 2.3, any Designated
Management Stockholder (other than Stanley Silver) may transfer to a Third
Party at any time up to 20% of the Common Stock held by such Designated
Management Stockholder in accordance with the provisions of paragraphs (e),
(f), (g) and (h) of this Section 2.7.
(b) Notwithstanding the provisions of Section 2.1 or 2.3, at any time
after the death or permanent disability of Ezra Dabah, Ezra Dabah or Ezra
Dabah's heirs and successors (the "Dabah Estate"), the wife or any lineal
descendant of Ezra Dabah to whom he Transfers shares (a "Dabah Family
Member"), any of the trusts set forth on Schedule 2.9(b) and any trusts
established by Ezra Dabah which is a Management Permitted Transferee and to
whom he Transfers shares of his Common Stock after June 28, 1996 (each, a
"Dabah Trust" and, together with Ezra Dabah, the Dabah Estate and any Dabah
Family Member, a "Dabah Transferor") shall collectively have the right to
Transfer to a Third Party up to 100% of the Common Stock held collectively by
the Dabah Transferors, in accordance with the provisions of paragraphs (e),
(f), (g) and (h) of this Section 2.7.
(c) Notwithstanding the provisions of Section 2.1 or 2.3, at any time
after the termination of Ezra Dabah's employment without cause (as defined in
his employment agreement) following a Change of Control or Ezra Dabah's
resignation from the Company for good reason (as so defined therein)
following a Change of Control, the Dabah Transferors shall collectively have
the right to Transfer to a Third Party up to 100% of the Common Stock held
collectively by the Dabah Transferors, in accordance with the provisions of
paragraphs (e), (f), (g) and (h) of this Section 2.7; provided, however, that
the Dabah Transferors shall not have the right to Transfer such shares to a
Third Party pursuant to this paragraph (c) in the event that Ezra Dabah
directly Transferred Shares of Common Stock to a Third Party which Transfer
resulted, in whole or in part, in such Change of Control.
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(d) Notwithstanding the provisions of Section 2.1 or 2.3, at any time
after the death, permanent disability or termination of employment without
cause (as defined in his employment agreement) of Stanley Silver, Stanley
Silver or Stanley Silver's heirs and successors (the "Silver Estate"), as the
case may be, the wife or any lineal descendant of Stanley Silver to whom he
Transfers shares (a "Silver Family Member") and any trust established by
Stanley Silver which is a Management Permitted Transferee (a "Silver Trust"
and, together with Stanley Silver, the Silver Estate and any Silver Family
Member, a "Stanley Transferor") shall collectively have the right to Transfer
to a Third Party up to 100% of the Common Stock held collectively by the
Silver Transferors, in accordance with the provisions of paragraphs (e),
(f), (g) and (h) of this Section 2.7.
(e) Prior to consummating any Transfer (excluding Transfers of the types
described in clauses (i), (ii), (iii) or (iv) of the proviso to Section 2.1
or Transfers of shares representing less than 1% of the outstanding Common
Stock) pursuant to this Section 2.7 (a "Third Party Sale"), the Dabah
Transferors or the Silver Transferors (each, a "Transferor," collectively,
the "Transferors"), as the case may be, will deliver to the Company a written
notice (a "Company ROFR Offer Notice"), specifying (i) the aggregate amount
of cash consideration (the "Offer Price") for which the Transferor proposes
to sell shares in such proposed Third Party Sale, (ii) the identity of the
purchaser in such Third Party Sale and (iii) any other material terms of the
proposed Third Party Sale. If the Company delivers to the Transferor a
written notice (a "Company ROFR Acceptance Notice") within 10 calendar days
following the delivery of the Company ROFR Offer Notice (such 10 calendar day
period being referred to herein as the "Company ROFR Acceptance Period")
stating that the Company is willing to purchase all of the offered shares at
the Offer Price, the Transferor will sell all (but not less than all) of the
offered shares to the Company at the Offer Price, and the Company will
purchase such offered shares from the Transferor, on the terms and subject to
the conditions set forth below (the "Company ROFR Purchase").
(f) If the Company does not accept the offer during the Company ROFR
Acceptance Period pursuant to the Company ROFR Offer Notice, then such
Transferor will deliver to the SK Holders a written notice (an "SK ROFR Offer
Notice"), specifying (i) the Offer Price for which the Transferor proposed to
sell its shares in such proposed Third Party Sale (ii) the identity of the
purchaser in such Third Party Sale and (iii) any other material terms of the
proposed Third Party Sale. If the SK Holders deliver to the Transferor a
written notice (an "SK ROFR Acceptance Notice") within 10 calendar days
following the delivery of the SK ROFR Offer Notice (such 10 calendar day
period being referred to herein as the "SK ROFR Acceptance Period") stating
that the SK Holders are willing to purchase all of the offered shares at the
Offer Price, the Transferor will sell all (but not less than all) of the
offer shares to the SK Holders at the Offer Price, and the SK Holders will
purchase such offered shares from the Transferor, on the terms and subject to
the conditions set forth below (the "SK ROFR Purchase").
(g) The consummation of any Company ROFR Purchase or SK ROFR Purchase,
as the case may be, pursuant to this Section 2.7 (the "ROFR Closing") will
occur not later than 60 calendar days following the delivery of a Company
ROFR Acceptance Notice or SK ROFR Acceptance Notice, as the case may be (the
intervening period being referred to herein as the "ROFR Closing Period"), at
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such time and place as may be reasonably designated by the Company or the SK
Holders, as the case may be. At the ROFR Closing, (i) such Transferor will
deliver to the Company or the SK Holders, as the case may be, duly endorsed
certificates evidencing all of the shares of Common Stock to be purchased by
the Company or the SK Holders, as the case may be, and (ii) the Company or
the SK Holders, as the case may be, will deliver to such Transferor by wire
transfer to an account designated by such Transferor an amount in immediately
available funds equal to the Offer Price.
(h) If the Company or the SK Holders, as the case may be, do not accept
the offer during the Company ROFR Acceptance Period or the SK ROFR Acceptance
Period, as the case may be, pursuant to the Company ROFR Offer Notice or the
SK ROFR Offer Notice, as the case may be, then such Transferor may Transfer
to a Third Party the shares so offered at a price no less than 95% of, and on
terms no less favorable to the transferee than the price and other terms set
forth in the original Company ROFR Offer Notice or SK ROFR Offer Notice, as
the case may be, at any time within 90 days after the expiration of the
Company ROFR Acceptance Period or the SK ROFR Acceptance Period, as the case
may be.
(i) In the event that the Company does not accept a Company ROFR Offer
Notice during the Company ROFR Acceptance Period in any case where the
Company ROFR Offer Notice was given as a result of an event described in
paragraph (b) of this Section 2.7, each of the Dabah Transferors agrees that,
if the stockholders of the Company thereafter are given the opportunity to
vote on a proposed sale of the Company or substantially all of the Company's
assets to a third party, the Dabah Transferors shall vote all shares of the
Company's common stock in favor of such proposed sale, if so requested by the
SK Holders.
III. CERTAIN ARRANGEMENTS
3.1. Board of Directors. (a) Prior to consummation of the Company's
initial public offering, the Stockholders will (i) elect those individuals
set forth on Exhibit 3.1A as Directors of the Company, (ii) approve the
adoption of the Amended and Restated Certificate of Incorporation in the form
of Exhibit 3.1B and (iii) cause the Board of Directors to adopt the By-laws
in the form of Exhibit 3.1C. Thereafter and until the Relinquishment Time,
each Stockholder will vote all shares of Common Stock as to which such
Stockholder has voting rights for the election as Directors of the Company of
(x) John Megrue and David Oddi, or, if either of them shall cease to be
affiliated with SK, a substitute for such person designated from time to time
by the SK Holders and acceptable to the Management Group Representative (it
being agreed that any partner, principal, officer or professional employee of
Saunders Karp & Co., L.P. will be deemed acceptable to the Management Group
Representative so long as at least one partner or principal of Saunders Karp
& Megrue, L.P. is a Director of the Company) (the Directors serving pursuant
to this clause (x) being called the "SK Directors"), and (y) three persons
designated from time to time by the Management Group Representative.
(b) Each of the Stockholders further agrees to vote all the shares of
Common Stock with respect to which it has voting rights, and to cause all
persons designated by it as Directors to vote, (i) in favor of the removal
from the Board of Directors, at the request of the SK Holders or the
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Management Group Representative upon notice to the other Stockholders, of any
person or persons designated by the SK Holders or the Management Group
Representative, as the case may be, and to elect to the unexpired term of
each Director so removed another person designated by the SK Holders or the
Management Group Representative, as the case may be, and (ii) in the event of
any vacancy on the Board of Directors by reason of death, resignation or
otherwise, to elect to such unexpired term another person designated in
accordance with Section 3.1(a) by the Stockholder that designated the
Director who previously served as such.
(c) The Company agrees that, until the Relinquishment Time, the
Company shall take all necessary steps to cause one member of the
Compensation Committee of the Board of Directors and, if permitted by the
rules of the New York Stock Exchange, one member of the Audit Committee of
the Board of Directors to be a director nominated by the SK Holders pursuant
to clause (x) of Section 3.1.
(d) The Company and the Stockholders acknowledge their mutual intention
that two additional directors not affiliated with the Company or with the SK
Holders ("Outside Directors") shall be elected to the Board of Directors as
promptly as practicable after the Effective Date, in accordance with the
rules of the New York Stock Exchange. The Outside Directors shall be
selected by Ezra Dabah and shall be approved by the SK Holders (such approval
not to be unreasonably withheld).
3.2. Limitation on Certain Board Actions. (a) Notwithstanding any other
provision of the Charter, the By-Laws or applicable law, without the prior
approval of at least one SK Director, the Company will not:
(i) amend its Charter or By-laws; or
(ii) other than as contemplated by any Employment Agreements in effect
on the Effective Date or by the Company's 1996 Stock Option Plan or 1997
Stock Option Plan, make or enter into, or amend or modify in any
respect, any term or provision of any contract, commitment, arrangement
or transaction involving the transfer of money, property or anything
else of value or provision of services to or by any Stockholder or any
Affiliate thereof, other than transactions entered into in the ordinary
course of business on arm's-length terms with a transaction value of
less than $20,000; provided, however, that the Company may make or enter
into any contract or arrangement for the employment of any relative or
Affiliate on an arm's-length basis in accordance with the following: (i)
the Company shall provide the SK Directors prior written notice of its
intent to extend an employment offer to a relative or Affiliate
including the terms of the offer, (ii) the offer of employment shall be
for a position with the Company below the level of Vice President, (iii)
the position shall provide for total cash compensation (salary and
bonus) of $75,000 or less and offer perquisites and benefits identical
to those offered to similarly situated employees, and (iv) the Company
shall obtain one SK Director's prior written consent before offering any
promotion to such relative or Affiliate to a position of Vice President
or above or to a position that provides for total cash compensation
11
(salary and bonus) in excess of $75,000 or offers perquisites and
benefits not offered to similarly situated employees.
For purposes of this Section 3.2(a), an SK Director shall be deemed to
have approved any matter listed above in this Section 3.2(a) if (i) such
matter received the affirmative vote of a majority of the Directors at a
meeting duly called and held and (ii) neither of the SK Directors attended
(in person or by telephone) such meeting (the "First Meeting") and the notice
of meeting specifically referred to such matter; provided, however, if an SK
Director advised the Company in writing prior to such meeting that he desired
to discuss the matter at a later meeting, such matter shall not be deemed
approved unless neither of the SK Directors attended (in person or by
telephone) a second meeting and the notice of such second meeting
specifically referred to the same such matter referred to in the notice of
the First Meeting.
(b) Notwithstanding any other provision of the Charter, the By-Laws or
applicable law, without the prior approval of at least two-thirds of the
members of the Board of Directors, the Company will not:
(i) agree to acquire, purchase or lease, except operating leases,
any assets which are material, individually or in the aggregate, to the
business of the Company (other than purchases of inventory in the
ordinary course of business);
(ii) other than (x) as provided for in the Loan and Security
Agreement between the Company and Foothill Capital Corporation, as amended
(the "Foothill Agreement"), or any future amendment thereto or (y) pursuant
to any refinancing of the indebtedness under the Foothill Agreement
(whether or not Foothill Capital Corporation is a party to such
refinancing), incur any indebtedness for borrowed money in excess of
$2,000,000 or guarantee any such indebtedness or sell any debt
securities of the Company in a principal amount in excess of $2,000,000
or guarantee any debt securities of any Person (other than debt
securities of a wholly-owned subsidiary in a principal amount not
exceeding $2,000,000);
(iii) voluntarily mortgage, pledge or encumber all or substantially
all of the Company's assets or business, other than as collateral for
indebtedness under the Foothill Agreement or any refinancing thereof;
(iv) establish any committees of the Board of Directors (other than
the Audit Committee, the Compensation Committee or the Stock Option
Committee) or delegate authority to any committees (other than the
authority delegated as of the Effective Date to the aforementioned
committees);
(v) change the number of Directors;
(vi) authorize any delegation by the Board of Directors to any
committee of a power not possessed by the Board of Directors, or any
authorization of any Committee to undertake any action which the
Board of Directors is not authorized to undertake;
12
(vii) make any investments (other than certificates of deposit issued
by domestic banks and short-term liquid investments having maturities not
longer than 90 days) at any one time outstanding in excess of $2,000,000,
individually or in the aggregate;
(viii) commence any case, proceeding or other action relating to
bankruptcy or reorganization of the Company; or
(ix) distribute income or assets or declare any dividends.
3.3. Board Observers. Until the Relinquishment Time, the SK Holders
will have the right, by written notice to the Company, to select two
individuals to observe and be present at meetings of the Board of Directors
(the "Board Observers") in the manner set forth in this Section 3.3. The
Board Observers will be obligated to execute reasonable confidentiality
undertakings and will be entitled (a) to be given notice by the Secretary of
the Company, at the same time as the SK Directors of the time and place at
which such meeting is to be held; (b) to be present at all meetings of the
Board of Directors except those in which the Board of Directors meets in
executive session; (c) to receive copies of the minutes of the Board of
Directors; and (d) receive copies of any reports, memoranda or other
documents distributed to the Board of Directors at the same time such
materials are given to the Directors.
3.4. Financial Information. The Company will transmit to the SK Holders
copies of all monthly management and financial reports, annual operating
budgets and any other financial or other information concerning the Company's
operations at the same time such financial and other information is given to
the Directors. In addition, the Company will promptly provide the SK Holders
all other information concerning the Company as may be reasonably requested
by the SK Holders from time to time to the extent such information can be
provided without interfering with the Company's business.
3.5. Confidentiality. In the event that any SK Holder proposes to make
any investments in any Direct Competitor of the Company, such SK Holder will
provide prior written notice to the Company of such proposed investment and
in connection therewith will enter into an appropriate confidentiality
agreement with the Company containing terms mutually agreed upon by the
Company and such SK Holder.
IV. MISCELLANEOUS
4.1. Headings. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of
any provisions hereof.
4.2. Entire Agreement; After-Acquired Securities. (a) This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter of this Agreement. This Agreement supersedes all prior
agreements and understandings, both oral and written, among the parties with
respect to the subject matter of this Agreement. This Agreement is not
13
intended to confer upon any Person other than the parties hereto and thereto
any rights or remedies hereunder or thereunder.
(b) Subject to Section 4.6, all capital stock or other equity
securities of the Company issued to or acquired by any Stockholder following
the date of this Agreement ("After-Acquired Securities") will be subject to
the terms and provisions of this Agreement as if such After-Acquired
Securities were outstanding on the date hereof.
4.3. Notices. Any notice, request, instruction or other document
required or permitted to be given hereunder by any party hereto to another
party hereto will be in writing and will be given to such party by certified
mail at its address set forth in Exhibit 4.3 attached hereto, with, in the
case of the Company, a copy sent to the Company's Secretary, at the Company's
principal executive offices or, in the case of a Transfer permitted
hereunder, to the address of the permitted Transferee specified by it upon
notice given in accordance with the terms hereof, or to such other address as
the party to whom notice is to be given may provide in a written notice to
the party giving such notice, a copy of which written notice will be on file
with the Secretary of the Company. Each such notice, request or other
communication will be effective (a) if given by certified mail, 96 hours
after such communication is deposited in the mails with certified postage
prepaid addressed as aforesaid, (b) one Business Day after being furnished to
a nationally recognized overnight courier for next Business Day delivery, and
(c) on the date sent if sent by electronic facsimile transmission, receipt
confirmed.
4.4. Governing Law. This Agreement will be governed by, and construed
in accordance with, the laws of the State of New York without regard to the
conflict of laws rules of such state, provided, however, that to the extent
any of the respective rights or obligations of the parties relate to matters
of the General Corporation Law of the State of Delaware (the "GCL"), the
provisions of the GCL shall govern in respect thereof.
4.5. Severability. The invalidity or unenforceability of any provisions
of this Agreement in any jurisdiction will not affect the validity, legality
or enforceability of the remainder of this Agreement in such jurisdiction or
the validity, legality or enforceability of this Agreement, including any
such provision, in any other jurisdiction, it being intended that all rights
and obligations of the parties hereunder will be enforceable to the fullest
extent permitted by law.
4.6. Termination; Termination of Rights. This Agreement may be
terminated at any time by an instrument in writing signed by (i) the SK
Holders owning a majority of the Common Stock then held by the SK Holders and
entitled to the benefits of this Agreement, (ii) the Stockholders, other than
the SK Holders, owning a majority of the Common Stock then held by such
Stockholders and entitled to the benefits of this Agreement and (iii) the
Company. At such time as any Stockholder owns 25% or less of the Common
Stock owned by such Stockholder on the Effective Date, all of such
Stockholder's rights hereunder, including without limitation such
Stockholder's rights under Article II, will terminate; provided, however,
that all of such Stockholder's obligations hereunder will remain in full
force and effect. This Agreement will terminate automatically when no
14
Stockholder owns more than 25% of the Common Stock owned by such Stockholder
on the Effective Date.
4.7. Successors, Assigns and Transferees. The provisions of this
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors, assigns and permitted Transferees.
Except as expressly contemplated hereby, neither this Agreement nor any
provision hereof will be construed so as to confer any right or benefit upon
any Person other than the parties to this Agreement and their respective
successors and assigns.
4.8. Amendments; Waivers. (a) No failure or delay on the part of any
party in exercising any right, power or privilege hereunder will operate as a
waiver thereof, nor will any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided will be cumulative and
not exclusive of any rights or remedies provided by law.
(b) Neither this Agreement nor any term or provision hereof may be
amended or waived except by an instrument in writing signed, by (i) the SK
Holders owning a majority of the Common Stock then held by the SK Holders and
entitled to the benefits of this Agreement, (ii) the Stockholders, other than
the SK Holders, owning a majority of the Common Stock then held by such
Stockholders and entitled to the benefits of this Agreement and (iii) the
Company.
4.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument.
4.10. Remedies. The parties hereby acknowledge that money damages would
not be adequate compensation for the damages that a party would suffer by
reason of a failure of any other party to perform any of the obligations
under this Agreement. Therefore, each party hereto agrees that specific
performance is the only appropriate remedy under this Agreement and hereby
waives the claim or defense that any other party has an adequate remedy at
law.
4.11. Consent to Jurisdiction. Each of the Stockholders and the Company
irrevocably submits to the exclusive jurisdiction of either (i) any court
located in the Borough of Manhattan or the United States Federal Court
sitting in the Southern District of New York or (ii) any court located in the
State of Delaware or the United States District Court for the District of
Delaware (and any appellate court therefrom), over any suit, action or
proceeding arising out of or relating to this Agreement. Each of the
Stockholders and the Company consents to process being served in any such
suit, action or proceeding by serving a copy thereof upon the agent for
service of process provided that to the extent lawful and possible, written
notice of such service will also be mailed to such Stockholders or the any
lawful manner a judgment obtained in one jurisdiction in any other
jurisdiction. Each of the Stockholders and the Company waives any right it
may have to assert the doctrine of forum non conveniens or to object to venue
to the extent any proceeding is brought in accordance with this Section 4.11.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
---------------------------------------------
Ezra Dabah
--------------------------------------------
Renee Dabah
--------------------------------------------
Ivette Dabah
--------------------------------------------
Stanley Silverstein
--------------------------------------------
Stanley Silver
--------------------------------------------
Barbara Dabah
--------------------------------------------
Joseph Krusch
--------------------------------------------
Elliott F. Krusch
--------------------------------------------
Helissa T. Meizlish
--------------------------------------------
Sherry Schirippa
Gila Dweck Grantor Trust
By: --------------------------------------
Name:
Title: Trustee
-16-
Ezra Dabah and Gila Dweck as Trustees
u/a/d 8/25/88 f/b/o Morris Dabah Jr.
By:------------------------------------------
Name:
Title: Trustee
Ezra Dabah and Gila Dweck as Trustees
u/a/d 8/25/88 f/b/o Michael Dabah
By:------------------------------------------
Name:
Title: Trustee
Ezra Dabah and Gila Dweck as Trustees
u/a/d 8/25/88 f/b/o Mac Dabah
By:------------------------------------------
Name:
Title: Trustee
Ezra Dabah and Renee Dabah as Custodians
under the UGMA f/b/o Joia Dabah
By:------------------------------------------
Name:
Title: Custodian
Ezra Dabah and Renee Dabah as Custodians
under the UGMA f/b/o Yaacov Dabah
By:------------------------------------------
Name:
Title: Custodian
Edward Tawil as Trustee
u/a/d 8/29/88 f/b/o Morris Dabah Jr.
By:------------------------------------------
Name:
Title: Trustee
-17-
Edward Tawil as Trustee
u/a/d 8/29/88 f/b/o Michael Dabah
By:------------------------------------------
Name:
Title: Trustee
Edward Tawil as Trustee
u/a/d 8/29/88 f/b/o Mac Dabah
By:------------------------------------------
Name:
Title: Trustee
Edward Tawil as Trustee
u/a/d 8/29/88 f/b/o Stephen Dabah
By:------------------------------------------
Name:
Title: Trustee
Ezra Dabah and Gila Dweck as Trustees
u/a/d 8/31/92 f/b/o Stephen Dabah
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Nina Miner
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Renee Dabah
By:------------------------------------------
Name:
Title: Trustee
-18-
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Flori Silverstein
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Michael Leventhal
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Leslie Kule
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Samuel Miner
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Eva Dabah
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Joia Dabah
By:------------------------------------------
Name:
Title: Trustee
-19-
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Moshe Dabah
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Chana Dabah
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Yaacov Dabah
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Sarah Silverstein
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Benjamin Reines
By:------------------------------------------
Name:
Title: Trustee
Raine Silverstein and Ezra Dabah as Trustees
u/a/d 2/2/97 f/b/o Jacqueline Reines
By:------------------------------------------
Name:
Title: Trustee
-20-
Renee Dabah and Raine Silverstein, Trustees
u/a/d 2/2/97 f/b/o Eva Dabah
By:------------------------------------------
Name:
Title: Trustee
Renee Dabah and Raine Silverstein, Trustees
u/a/d 2/2/97 f/b/o Joia Dabah
By:------------------------------------------
Name:
Title: Trustee
Renee Dabah and Raine Silverstein, Trustees
u/a/d 2/2/97 f/b/o Moshe Dabah
By:------------------------------------------
Name:
Title: Trustee
Renee Dabah and Raine Silverstein, Trustees
u/a/d 2/2/97 f/b/o Chana Dabah
By:------------------------------------------
Name:
Title: Trustee
Renee Dabah and Raine Silverstein, Trustees
u/a/d 2/2/97 f/b/o Yaacov Dabah
By:------------------------------------------
Name:
Title: Trustee
THE SK EQUITY FUND, L.P.
By: SKM PARTNERS, L.P., General Partner
By:------------------------------------------
its General Partner
-21-
SK INVESTMENT FUND, L.P.
By: SKM PARTNERS, L.P., General Partner
By:------------------------------------------
its General Partner
---------------------------------------------
Barry Feinberg
-22-
Schedule 1
Management Stockholders
1. Ezra Dabah
2. Renee Dabah
3. Barbara Dabah
4. Ivette Dabah
5. Stanley Silver
6. Stanley Silverstein
7. Joseph G. Krusch
8. Elliot F. Krusch
9. Helissa T. Meizlish
10. Sherry Schirippa
11. Gila Dweck Grantor Trust
12. Ezra Dabah and Renee Dabah as custodians under the UGMA, F/B/O Joia Dabah.
13. Ezra Dabah and Renee Dabah as custodians under the UGMA, F/B/O Yaacov Dabah.
14. Ezra Dabah and Gila Dweck as Trustees, U/A/D 8/25/88, F/B/O Mac Dabah.
15. Ezra Dabah and Gila Dweck as Trustees, U/A/D 8/25/88, F/B/O Michael Dabah.
16. Ezra Dabah and Gila Dweck as Trustees, U/A/D 8/25/88, F/B/O Morris Dabah, Jr.
17. Ezra Dabah and Gila Dweck as Trustees U/A/D 8/31/92, F/B/O Stephen Dabah.
18. Edward Tawil as Trustee U/A/D 8/29/88, F/B/O Michael Dabah.
19. Edward Tawil as Trustee U/A/D 8/29/88, F/B/O Morris Dabah, Jr.
20. Edward Tawil as Trustee U/A/D 8/29/88, F/B/O Mac Dabah.
21. Edward Tawil as Trustee U/A/D 8/29/88, F/B/O Stephen Dabah.
22. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Nina Miner.
23. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Renee Dabah.
-23-
24. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Flori Silverstein.
25. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Michael Leventhal.
26. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Leslie Kule.
27. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Samuel Miner.
28. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Eva Dabah.
29. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Joia Dabah.
30. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Moshe Dabah.
31. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Chana Dabah.
32. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Yaacov Dabah.
33. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Sarah Silverstein.
34. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Benjamin Reines.
35. Raine Silverstein and Ezra Dabah as Trustees U/A/D 2/2/97, F/B/O Jacqueline Reines.
36. Renee Dabah and Raine Silverstein as Trustees U/A/D 2/2/97 F/B/O Eva Dabah.
37. Renee Dabah and Raine Silverstein as Trustees U/A/D 2/2/97 F/B/O Joia Dabah.
38. Renee Dabah and Raine Silverstein as Trustees U/A/D 2/2/97 F/B/O Moshe Dabah.
39. Renee Dabah and Raine Silverstein as Trustees U/A/D 2/2/97 F/B/O Chana Dabah.
40. Renee Dabah and Raine Silverstein as Trustees U/A/D 2/2/97 F/B/O Yaacov Dabah.
-24-
Exhibit 3.1A
Initial Directors of the Company
Ezra Dabah
Stanley Silver
Stanley Silverstein
John F. Megrue
David Oddi
-25-
Exhibit 3.1B
Amended and Restated Certificate of Incorporation
[to be attached]
-26-
Exhibit 3.1C
Amended and Restated ByLaws
[to be attached]
-27-
Exhibit 4.3
Addresses for Notice
[to be inserted]
-28-