EXHIBIT 10.5
STOCKHOLDERS AGREEMENT
Stockholders Agreement dated as of December 31, 1996 among (i) COLOR
SPOT NURSERIES, INC., a Delaware corporation whose name is to be changed to
"CSN, Inc." (the "COMPANY"), (ii) KCSN ACQUISITION COMPANY, L.P., a Delaware
limited partnership ("KCSN"), (iii) HELLER EQUITY CAPITAL CORPORATION, a
Delaware corporation ("HELLER"), and (iv) MICHAEL F. VUKELICH, JERRY L.
HALAMUDA and the other members of management of the Company who have executed
this Agreement or have otherwise agreed to be bound by the provisions hereof
(the "MANAGEMENT STOCKHOLDERS" and, together with KCSN and Heller, the
"STOCKHOLDERS").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement, the following
terms have the indicated meanings:
"AFFILIATE" of a person means any other person controlling, controlled
by or under common control with such person, whether by ownership of voting
securities, by contract or otherwise, and in the case of KCSN shall include
any member of KCSN and in the case of the Company shall include any officer
or director of the Company.
"APPROVED STOCK PLAN" means, collectively, all contracts, plans or
agreements which have been approved by the Company's Board of Directors
(including the Company's 1997 Stock Option Plan) pursuant to which securities
representing up to an aggregate of 15% of the Common Stock outstanding on a
fully-diluted basis may be issued to employees, officers, directors,
consultants or other service providers of the Company or its subsidiaries.
"CAUSE" means (i) the commission by the Management Stockholder of theft
or embezzlement of Company property or other acts of dishonesty or criminal
conduct harmful in any significant respect to the business, property or
reputation of the Company or the commission by the Management Stockholder of
other acts harmful in any significant respect to the business, property or
reputation of the Company; (ii) the commission by the Management Stockholder
while an employee of the Company or its Affiliates of an act determined in
good faith by the Company's Board of Directors to amount to gross, willful or
wanton negligence of the Management Stockholder's duties under the terms of
his or her employment; (iii) the refusal by the Management Stockholder while
an employee of the Company or its Affiliates to perform, or substantial
neglect of, the duties assigned to the Management Stockholder by the Company;
(iv) any significant violation by the Management Stockholder of any statutury
or common law duty of loyalty to the Company; or (v) a material breach by the
Management Stockholder of his or her employment agreement (if any) with the
Company. The determination of Cause shall be made in good faith by the Board
of Directors after written notice to the Management Stockholder and, in
the case of conduct described in clause (iii), (iv) or (v) above, a
reasonable opportunity to cure such conduct.
"COMMON STOCK" means, collectively, the Company's Common Stock, $.01 par
value, and the Company's Nonvoting Common Stock, $.01 par value.
"FAIR MARKET VALUE" as of any date means the per-share value of the
Common Stock determined under the following formula: (i) the product of the
amount of the Company's earnings before interest, taxes, depreciation and
amortization (calculated for the 12-month period preceding the date of
determination) multiplied by five, less (ii) all long-term debt (including,
without limitation, the average outstanding amounts under any revolving
credit facility of the Company for the 12 months preceding the date of
determination), divided by (iii) the total number of the then-outstanding
shares of Common Stock, determined as if all then-outstanding "in the money"
options (whether or not vested), warrants and other rights exercisable,
convertible or exchangeable into shares of Common Stock had been exercised,
converted or exchanged (as the case may be) and all consideration payable in
connection with such exercise, conversion or exchange had in fact been paid.
"HELLER STOCK" means Stockholder Shares held by Heller and its
transferees giving effect to the conversion of all Notes held by such persons.
"INDEPENDENT THIRD PARTY" means any person who does not own in excess
of 10% of the Common Stock on a fully-diluted basis, who is not controlling,
controlled by or under common control with any such 10% owner of Common Stock
and who is not the spouse, ancestor or descendant (by birth or adoption) of any
such 10% owner of Common Stock.
"INVESTOR STOCK" means Stockholder Shares held by KCSN, its Affiliates
and their respective transferees.
"MANAGEMENT STOCK" means Stockholder Shares held by the Management
Stockholders and their respective Permitted Transferees, including without
limitation all shares acquired pursuant to the exercise of Options.
"NOTES" means the Company's 8.0% Convertible Subordinated Notes.
"OPTIONS" means options to purchase shares of Common Stock granted
pursuant to the Company's 1997 Stock Option Plan.
"OPTION STOCK" means Management Stock acquired upon exercise of Options
granted pursuant to the Company's 1997 Stock Option Plan.
"ORIGINAL COST" means a Management Stockholder's average original
purchase price per share of Option Stock acquired from the Company and held
by such Management Stockholder, as reflected in the records of the Company.
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"SALE OF THE COMPANY" means the acquisition of beneficial ownership of a
majority or more of the outstanding voting securities of the Company by any
person or "group" (as that term is used in Regulation 13D under the Securities
Exchange Act of 1934) other than stockholders of the Company as of the date
hereof and their respective Affiliates.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STOCKHOLDER SHARES" means (i) all shares of Common Stock held or deemed
to be held by the Stockholders, including all shares of Common Stock acquired
pursuant to exercise of Options or conversion of Notes, and (ii) all shares
of Common Stock or other securities issued or issuable directly or indirectly
with respect to the securities referred to in clause (i) by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. Stockholder
Shares shall cease to be such when they have been sold (x) pursuant to a
registered public offering under the Securities Act, or (y) to the public
pursuant to Rule 144 under the Securities Act or any successor provision.
"VESTED OPTIONS" means Options that are exercisable by the holder
thereof on the date of determination.
"VOLUNTARY TERMINATION" means the voluntary termination of employment by
a Management Stockholder within three years after the date hereof.
SECTION 2. REPURCHASE ON TERMINATION OF EMPLOYMENT.
(a) REPURCHASE OPTION. Upon the termination of a Management Stockholder's
employment by the Company and its subsidiaries:
(i) if such termination is for any reason other than for Cause
or a Voluntary Termination (A) the Company may elect to repurchase all but
not less than all of the Management Stock and Vested Options held by such
Management Stockholder and its Permitted Transferees at a cash price per
share equal to Fair Market Value (as of the date of termination) and, in
the case of Vested Options, the excess of Fair Market Value (as of the date
of termination) over the exercise price per share under such Options, and
(B) all Options held by such Management Stockholder other than Vested
Options shall be automatically cancelled; and
(ii) if such termination is for Cause or is a Voluntary
Termination (A) the Company may elect to repurchase all but not less than
all of the Management Stock held by such Management Stockholder and its
Permitted Transferees at a cash price per share equal to Fair Market Value
(as of the date of termination) or, in the case of Option Stock, the lesser
of Fair Market Value (as of the date of termination) or Original Cost, and
(B) all Options held by such Management Stockholder (whether or not vested)
shall be automatically cancelled.
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(b) REPURCHASE OBLIGATION. In the event of termination of a Management
Stockholder's employment with the Company due to death or permanent
disability (as determined in good faith by the Board of Directors), the
Management Stockholder (or his estate or personal representative) may require
the Company to repurchase all or any portion of the Management Stock (other
than Option Stock) held by such Management Stockholder and his Permitted
Transferees at a cash price per share equal to Fair Market Value as of the
date of termination, which purchase price shall be payable in four equal
annual installments on the date of closing of such repurchase and on the
three succeeding anniversaries of such date. The portion of the purchase
price not paid at closing will bear interest at the applicable federal rate
for medium-term obligations, and will become due and payable upon
consummation of the Company's initial public offering under the Securities
Act or a Sale of the Company. Notwithstanding any other provision of this
Section 2, the Company shall not be obligated to repurchase Management Stock
pursuant to this Section 2(b) to the extent that such repurchase is not
permitted pursuant to the terms of any of the Company's indebtedness for
borrowed money or by applicable corporate law. In the event of a restriction
on the purchase of Management Stock, the Company shall purchase the maximum
amount of Management Stock that it is able to purchase consistent with such
restriction and shall exercise reasonable commercial efforts (in no event to
require the refinancing of the Company's indebtedness or the payment of
money) to remove such restriction and, upon such removal, the Company shall
purchase the balance of such Management Stock.
(c) REPURCHASE PROCEDURE. The Company may exercise its option to
purchase Management Stock and Vested Options pursuant to Section 2(a) by
delivery to the Management Stockholder, within 30 days after the termination
of such Management Stockholder's employment, of a written notice specifying
the number of shares of Management Stock and/or Vested Options to be
repurchased. The Management Stockholder (or his estate or personal
representative) may exercise his option to require the Company to repurchase
Management Stock pursuant to Section 2(b) by delivery to the Company, within
30 days after the termination of such Management Stockholder's employment, of
a written notice specifying the number of shares of Management Stock to be
repurchased. The closing of any repurchase of securities pursuant to this
Section 2 shall take place not later than 90 days following the termination
of the Management Stockholder's employment. The shares of Management Stock
to be repurchased by the Company shall be satisfied (i) first, from the
shares of Management Stock held by the Management Stockholder at the time of
delivery of the Repurchase Notice and (ii) second, if the number of such
shares is less than the number of shares to be repurchased by the Company,
from the shares of Management Stock held by the Permitted Transferees of such
Management Stockholder in such proportions as shall be determined by the
Management Stockholder.
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SECTION 3. RESTRICTIONS ON TRANSFER.
(a) PROHIBITION ON TRANSFERS. No Management Stock may be sold,
transferred, pledged or otherwise disposed of (including by gift) otherwise
than in accordance with this Section 3. No Management Stock may be
transferred without the prior written consent of the Company, which will not
be unreasonably withheld.
(b) RIGHT OF FIRST REFUSAL.
(i) Not less than 30 days prior to any proposed transfer of
Management Stock, the transferring Management Stockholder shall deliver to
KCSN and the other Management Stockholders a written notice (the "OFFER
NOTICE") specifying in reasonable detail the number of shares to be
transferred, the identity of the transferee(s), the price (which shall be
payable solely in cash) and the other terms and conditions of the proposed
transfer. KCSN and the other Management Stockholders may elect to purchase
all but not less than all of the Management Stock proposed to be
transferred upon the terms and conditions specified in the Offer Notice by
delivering to the transferring Management Stockholder a written notice of
such election within the 20-day period following its receipt of the Offer
Notice (the "ELECTION PERIOD"). Each electing Stockholder shall be
entitled to purchase its pro rata share of the Management Stock covered by
the Offer Notice (based on its percentage ownership of the Common Stock on
a fully-diluted basis) and, in the event that less than all the
Stockholders elect to purchase their pro rata shares, the remaining shares
shall be reoffered to the electing Stockholders for a period of 10 days
following the Election Period and shall be purchased by the electing
Stockholders in proportion to the numbers of shares requested to be
purchased by them in excess of their pro rata shares. The purchase of such
shares by KCSN and/or the other Management Stockholders shall be
consummated within 30 days following expiration of the Election Period.
(ii) In the event that KCSN and/or the other Management
Stockholders do not elect to purchase the Management Stock described in the
Offer Notice, during the 30-day period following expiration of the Election
Period, the transferring Management Stockholder may transfer such
Management Stock to the transferee(s) specified in the Offer Notice on
terms no more favorable to such transferee(s) than those specified in the
Offer Notice. Any shares of Management Stock not transferred within such
30-day period shall again be subject to Section 3(b)(i) in connection with
any proposed transfer thereof.
(c) CERTAIN PERMITTED TRANSFERS. Sections 3(a) and 3(b) shall not
apply to transfers of Management Stock (i) pursuant to Sections 5, 6 or 7
hereof, or (ii) within a Management Stockholder's family group (including by
will or pursuant to applicable laws of descent and distribution); provided that,
in connection with any transfer pursuant to this clause (ii), each transferee (a
"PERMITTED TRANSFEREE") agrees in writing to be bound by the provisions of this
Agreement. Any shares of Management Stock transferred to a Permitted Transferee
shall continue to be Management Stock for purposes of this Agreement. A
Management Stockholder's "FAMILY GROUP" means such Management Stockholder's
spouse and lineal descendants (whether natural
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or adopted) and any trust formed and maintained solely for the benefit of
such Management Stockholder, such Management Stockholder's spouse and/or such
Management Stockholder's lineal descendants.
SECTION 4. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) STOCK LEGEND. The certificates representing Stockholder Shares
shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED ON _______________, 19__, HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH
IN A STOCKHOLDERS AGREEMENT DATED AS OF DECEMBER 31, 1996 AMONG
COLOR SPOT NURSERIES, INC. AND CERTAIN STOCKHOLDERS THEREOF, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF
AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS.
(b) OPINION OF COUNSEL. No holder of Stockholder Shares may sell,
transfer or dispose of any such stock (other than pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company upon its request an opinion of counsel reasonably acceptable in form and
substance to the Company that registration under the Securities Act is not
required in connection with such transfer.
SECTION 5. SALE OF THE COMPANY. If the holders of a majority of the
Investor Stock then outstanding approve the sale of the Company to an
Independent Third Party, whether by merger, consolidation, sale of all or
substantially all of its assets, sale of all of the outstanding Common Stock
or otherwise (an "APPROVED SALE"), the Stockholders shall consent to and
raise no objections against such Approved Sale (including exercising any
rights of appraisal) and shall take all necessary and desirable actions in
their capacities as stockholders in connection with the consummation of such
Approved Sale. If the Approved Sale is structured as a sale of stock, the
Stockholders shall agree to sell all of their shares of Common Stock and
rights to acquire shares of Common Stock on the terms and conditions approved
by the holders of a majority of the Investor Stock then outstanding. The
obligations of the Stockholders with respect to any Approved Sale are subject
to the condition that, upon the consummation of such Approved Sale,
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all of the holders of Common Stock will receive the same form and amount of
consideration per share of Common Stock, or if any holders are given an
option as to the form and amount of consideration to be received, all holders
will be given the same option. In connection with an Approved Sale, each
holder of Vested Options or Notes may elect to exercise such Options or
convert such Notes and participate in the Approved Sale as a holder of Common
Stock or, in lieu of the exercise of Options, to receive in exchange for such
Options the excess of the consideration per share of Common Stock receivable
in such Approved Sale over the exercise price per share under such Options.
SECTION 6. PARTICIPATION RIGHTS. Not less than 30 days prior to any
proposed transfer of Common Stock by KCSN or any Affiliate of KCSN, such
transferring Stockholder shall deliver to the other Stockholders a written
notice (the "SALE NOTICE") specifying in reasonable detail the identity of
the proposed transferee(s) and the terms and conditions of the proposed
transfer. Each other Stockholder may elect to participate in the proposed
transfer by delivering to the transferring Stockholder a written notice of
such election within the 20-day period following delivery of the Sale Notice.
If any Stockholders elect to participate in such transfer, the transferring
Stockholder and each such participating Stockholder will be entitled to sell
in such proposed transfer, at the same price and on the same terms, a number
of shares of Common Stock equal to the product of (i) the quotient determined
by dividing the percentage of the Common Stock then held by the transferring
Stockholder or such participating Stockholder, as the case may be, by the
aggregate percentage of the Common Stock then held by the transferring
Stockholder and all participating Stockholders, multiplied by (ii) the number
of shares of Common Stock to be sold in such proposed transfer. For purposes
of this Section 6, each participating Stockholder shall be deemed to hold all
shares of Common Stock acquirable pursuant to the exercise of Vested Options
or the conversion of Notes then held by such Stockholder. The participating
Stockholders shall pay a pro rata portion of the transaction expenses
associated with such transfer. This Section 6 shall not apply to transfers to
Affiliates of KCSN (provided that such Affiliates shall continue to be bound
by the terms hereof).
SECTION 7. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION. At any time not less than 180 days after the
consummation of the Company's initial public offering of Common Stock under
the Securities Act, (i) the holders of a majority of the then-outstanding
Investor Stock shall have the right to require the Company to effect up to
four registrations of their Common Stock on Form S-1 under the Securities Act
and, if available, unlimited registrations on Form S-2 or S-3 under the
Securities Act, and (ii) the holders of a majority of the then-outstanding
Heller Stock shall have the right to require the Company to effect one
registration of their Common Stock under the Securities Act on Form S-1 or,
if available, on Form S-2 or S-3 (any such registration, a "DEMAND
REGISTRATION"). Upon receipt of any request for a Demand Registration, the
Company shall give prompt written notice of such request to each Stockholder,
and shall include in such Demand Registration all Stockholder Shares with
respect to which the Company has received written requests for inclusion
therein within 30 days after the delivery of the Company's notice, including
shares covered by Vested Options or Notes to the extent that the Company
receives appropriate assurances that such
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Options will be exercised or such Notes will be converted upon effectiveness
of such registration. If other securities are included in any Demand
Registration that is not an underwritten offering, all Stockholder Shares
included in such offering shall be sold prior to the sale of any of such
other securities. If other securities are included in any Demand
Registration that is an underwritten offering, and the managing underwriter
for such offering advises the Company that in its opinion the number of
securities to be included exceeds the number of securities which can be sold
in such offering without adversely affecting the marketability thereof, the
Company will include in such registration all Stockholder Shares requested to
be included therein prior to the inclusion of any securities that are not
Stockholder Shares. If the number of Stockholder Shares requested to be
included in such registration exceeds the number of securities which in the
opinion of such underwriter can be sold without adversely affecting the
marketability of such offering, such Stockholder Shares shall be included pro
rata among the holders thereof based on the percentage of the outstanding
Stockholder Shares held by each such Stockholder (assuming the exercise of
all Vested Options and conversion of all Notes). The Company shall have the
right to select the investment banker(s) and manager(s) to administer any
Demand Registration that is an underwritten offering, subject to the approval
of the holders of a majority of the Stockholder Shares to be included in such
Demand Registration. If, as a result of inclusion of Stockholder Shares
other than Investor Stock or Heller Stock in any Demand Registration
initiated by such holders, the holders of Investor Stock or Heller Stock (as
applicable) are unable to sell at least 80% of the Investor Stock or Heller
Stock requested to be included in such registration, such registration shall
not count as one of the Demand Registrations afforded the holders of Investor
Stock or Heller Stock under this Section 7(a).
(b) COMPANY REGISTRATION. In the event that the Company proposes to
register any Common Stock under the Securities Act in connection with a
public offering (other than a Demand Registration) on any form (other than
Form S-4 or Form S-8) that would legally permit the inclusion of Stockholder
Shares, the Company shall give each of the Stockholders written notice
thereof as soon as practicable but in no event less than 30 days prior to
such registration, and shall include in such registration all Stockholder
Shares requested in writing to be included therein, including shares covered
by Vested Options or Notes to the extent that the Company receives
appropriate assurances that such Options will be exercised or such Notes will
be converted upon effectiveness of such registration, subject to the
limitations set forth in this Section 7(b). If in connection with such
proposed registration the managing underwriter for such offering advises the
Company that the number of Stockholder Shares requested to be included
therein exceeds the number of shares that can be sold in such offering, any
shares to be sold by the Company in such offering shall have priority over
any Stockholder Shares, and the number of Stockholder Shares to be included
by a Stockholder in such registration shall be reduced pro rata on the basis
of the numbers of shares of Common Stock held by such Stockholder (assuming
the exercise of all Vested Options and conversion of all Notes) and all other
holders of the Company's securities exercising similar registration rights.
(c) COSTS OF REGISTRATION. The Company shall bear the costs of each
registration in which Stockholders participate pursuant to this Section 7,
including the reasonable fees and expenses of one counsel for the selling
Stockholders (to be selected by the holders of a majority
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of the Stockholder Shares to be included in such registration) but excluding
any underwriting discounts or commissions on the sale of Stockholder Shares
or the fees and expenses of any additional counsel retained by the
Stockholders. As a condition to the inclusion of Stockholder Shares in any
registration, the participating Stockholder and the Company shall execute an
underwriting agreement or similar agreement in a form reasonably acceptable
to the Company and the underwriter(s), if any, for such offering containing
customary indemnification and holdback provisions. Notwithstanding the
foregoing, no Stockholder shall be required to incur indemnification
obligations (whether several or joint and several) which is in excess of the
net proceeds received by such Stockholder pursuant to such registration or
relates to information not supplied by such Stockholder for inclusion in the
registration statement.
(d) INITIAL PUBLIC OFFERING. Notwithstanding any other provision of
this Section 7, (i) the Company shall not be required to include Stockholder
Shares in a registration that relates to the Company's initial public
offering of Common Stock if no Investor Stock is sold in such offering, and
(ii) the Company shall not be required to include in any registration
pursuant to this Section 7 any Stockholder Shares (other than any Investor
Stock or Heller Stock in the case of a Demand Registration) that are then
eligible for transfer pursuant to Rule 144 under the Securities Act or may
otherwise be freely transferred without registration under the Securities Act.
SECTION 8. PREEMPTIVE RIGHTS. If the Company or any subsidiary of the
Company proposes to issue any shares of capital stock or other equity
securities (other than issuances by a subsidiary of the Company to the
Company, issuances to persons that are not Affiliates of the Company,
issuances pursuant to the Approved Stock Plan or issuances of Common Stock
upon the exercise or conversion of options, warrants or convertible
securities that were originally issued to non-Affiliates or pursuant to the
Approved Stock Plan), each Stockholder shall have the right of first refusal
to purchase a portion of such securities equal to such Stockholder's
percentage interest in the Common Stock on a fully-diluted basis (giving
effect to the exercise of all Vested Options and the conversion of all
outstanding Notes) immediately prior to such issuance. The Company shall give
each Stockholder at least 30 days' prior written notice of any such proposed
issuance setting forth in reasonable detail the proposed terms and conditions
thereof and shall offer to each Stockholder the opportunity to purchase such
securities at the same price, on the same terms, and at the same time as the
securities are proposed to be issued by the Company; provided, however, that
if such securities are to be sold for non-cash consideration, the Board of
Directors shall make a good faith determination of the fair value of such
non-cash consideration and the Stockholders shall be entitled to pay such
value in cash. A Stockholder may exercise its right of first refusal by
delivery of an irrevocable written notice to the Company not more than 20
days after delivery of the Company's notice. The obligation of the
Stockholders exercising their rights pursuant to this Section 8 to purchase
and pay for securities shall be conditioned upon the consummation of the
proposed issuance by the Company. Notwithstanding the foregoing, in the
event that the Company proposes to issue shares of Common Stock to the
Stockholders in connection with the Company's proposed acquisition of Lone
Star Growers, Heller shall be entitled to purchase a number of shares
sufficient to increase its percentage interest in the Common Stock on a
fully-diluted basis to the percentage interest it would have held immediately
prior to such issuance assuming KCSN had purchased $20.0 million of Common
Stock pursuant
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to the Recapitalization and Stock Purchase Agreement of even date herewith
among the Company, KCSN, Heller and certain of the other Stockholders.
SECTION 9. CORPORATE GOVERNANCE.
(a) BOARD OF DIRECTORS. Each Stockholder agrees to vote all
securities of the Company over which such Stockholder has voting control and
to take all other necessary or desirable actions within its control (whether
as a stockholder, director or officer of the Company or otherwise, and
including without limitation attendance at meetings in person or by proxy for
purposes of obtaining a quorum and execution of written consents in lieu of
meetings), and the Company shall take all necessary and desirable actions
within its control (including, without limitation, calling special board and
stockholder meetings), so that:
(i) the Company shall have a Board of Directors comprised of no
more than nine members;
(ii) the following persons shall be elected to the Board of
Directors:
(A) Two representatives of management which shall be
Michael F. Vukelich and Jerry L. Halamuda so long as such persons are
employed as executive officers of the Company;
(B) Five representatives designated by KCSN; and
(C) Two independent directors reasonably acceptable to KCSN
(initially Gary E. Mariani and Richard E. George).
(iii) in the event that any director for any reason ceases to
serve as a member of the Board during his term of office, the
resulting vacancy on the Board shall be filled by the Stockholders
entitled to designate such director as provided in this Section 9 and
not by a vote of the Stockholders generally; and
(iv) if the Stockholders fail to designate a representative to
fill a directorship pursuant to the terms of this Section 9, such
directorship shall remain vacant until filled by the Stockholders
entitled to designate such director.
(b) OBSERVER RIGHTS. Prior to the Company's initial public offering
under the Securities Act, so long as Heller holds any Notes or Common Stock
representing 5% or more of the then-outstanding Common Stock, Heller shall be
entitled to designate a non-voting observer to attend all meetings of the
Board of Directors either in person, by telephone or by teleconference (if
available). The reasonable travel expenses of such observer incurred in
attending meetings shall be reimbursed by the Company to the same extent that
expenses of directors are reimbursed. In the event that Heller is entitled
to observation rights pursuant to this Section 9(b), the Company shall give
Heller copies of all notices of meetings of the Board of Directors, all
actions to be taken
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by unanimous written consent and all other written materials provided to
members of the Board in their capacities as directors concurrently with
delivery of such materials to members of the Board. Notwithstanding the
foregoing, the Company may exclude Heller's observer from any meeting of the
Board (or portion thereof) or restrict access to any materials if the Company
believes upon the advice of counsel that such exclusion or restriction is
necessary to preserve the Company's attorney-client privilege. In no event
shall Heller's representative be deemed a member of the Board for any purpose
or be charged with any of the duties or obligations (fiduciary or otherwise)
imposed upon members of the Board.
(c) INCONSISTENT PROVISIONS. To the extent that any provision of the
Company's Certificate of Incorporation or by-laws is inconsistent with the
provisions of this Agreement, the Stockholders agree to take all actions
necessary to effect such amendments to the Certificate of Incorporation or
by-laws as may be necessary and appropriate to give full effect to the
provisions of this Agreement.
SECTION 10. ASSIGNMENT OF RIGHTS; REPRESENTATIONS ON SALE. The
Company may assign to one or more third parties its right to repurchase
shares of Management Stock pursuant to Section 2, subject only to compliance
with applicable securities laws. The purchasers of Management Stock pursuant
to Sections 2 and 3 shall be entitled to receive customary representations
and warranties from the seller regarding the seller's good title to, and
freedom from liens, encumbrances and restrictions on the sale of, such
Management Stock.
SECTION 11. TRANSFERS IN VIOLATION OF AGREEMENT. Any transfer or
attempted transfer of any Stockholder Shares in violation of this Agreement
shall be void, and the Company shall not be obligated to record such transfer
on its books or treat any purported transferee of such Stockholder Shares as
the owner of such shares for any purpose.
SECTION 12. AMENDMENT AND WAIVER. Except as otherwise provided
herein, no amendment or waiver of any provision of this Agreement shall be
effective against the Company, KCSN, Heller or the Management Stockholders
unless such amendment or waiver is approved in writing by the Company, KCSN,
Heller or the holders of at least a majority of the then-outstanding
Management Stock, as the case may be. The failure of any party to enforce
any provision of this Agreement shall not be construed as a waiver of such
provision and shall not affect the right of such party thereafter to enforce
each provision of this Agreement in accordance with its terms.
SECTION 13. SEVERABILITY. If any provision of this Agreement is held
to be invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
SECTION 14. ENTIRE AGREEMENT. Except as otherwise expressly set
forth herein, this document embodies the complete agreement and understanding
among the parties hereto with
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respect to the subject matter hereof and supersedes and preempts any prior
understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any
way.
SECTION 15. SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of and be enforceable by the Company, KCSN, Heller and
their respective successors and transferees, and by the Management
Stockholders and their Permitted Transferees, in each case so long as such
persons hold Stockholder Shares.
SECTION 16. COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
SECTION 17. REMEDIES. The Company, KCSN, Heller and the Management
Stockholders shall be entitled to enforce their rights under this Agreement
specifically to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights existing in their favor. The
parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that
the Company, KCSN, Heller or any Management Stockholder may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief (without posting a bond or
other security) in order to enforce or prevent any violation of the
provisions of this Agreement. In the event of any legal proceedings seeking
to enforce any rights or obligations under this Agreement, the prevailing
party shall be entitled to recover its attorneys fees and costs in connection
with such proceeding from the non-prevailing party.
SECTION 18. NOTICES. Any notice provided for in this Agreement shall
be in writing and shall be either personally delivered, or sent by telecopy
(confirmed in writing) or sent by reputable overnight courier service for
next-day delivery (charges prepaid) to the Company, KCSN or Heller at their
respective addresses set forth below and to any other recipient at the
address indicated on the schedules hereto and to any subsequent holder of
Management Stock subject to this Agreement at such address as indicated by
the Company's records, or at such address or to the attention of such other
person as the recipient party has specified by prior written
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notice to the sending party. Notices will be deemed to have been given
hereunder when delivered personally, on the date of transmission if sent by
confirmed telecopy (or on the next business day if transmission is not made
on a business day) or on the next business day after deposit with a reputable
overnight courier service.
The Company's address is:
Color Spot Nurseries, Inc.
3478 Buskirk Avenue, Suite 260
Pleasant Hill, CA 94523
Attention: Michael F. Vukelich
Telecopy: (510) 935-0799
KCSN's address is:
c/o Kohlberg & Co., L.L.C.
2400 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Attention: W. Dexter Paine, III
Telecopy: (415) 854-5415
Heller's address is:
Heller Equity Capital Corporation
500 West Monroe Street
Chicago, IL 60661
Attention: Charles Brissman, Esq.
Telecopy: (312) 441-7173
SECTION 19. GOVERNING LAW. The corporate law of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and
not the law of conflicts, of California.
SECTION 20. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
SECTION 21. SPOUSAL CONSENT. By his or her signature on this
Agreement, each spouse of a Management Stockholder agrees to be bound by the
provisions hereof to the extent of such spouse's interest in any Stockholder
Shares and further agrees (i) in the event of the death of such spouse, the
surviving Management Stockholder shall succeed to such deceased spouse's
interest in the Stockholder Shares held by such Management Stockholder on the
date of death, (ii) in the event of separation or dissolution of marriage,
the Management Stockholder shall have the right to purchase the spouse's
interest in the Stockholder Shares held by such Management
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Stockholder at Fair Market Value (as defined in Section 1), and (iii) any
decree of divorce or dissolution of marriage, separate maintenance agreement
or property settlement between any Management Stockholder and his or her
spouse shall include a provision granting such Management Stockholder such
spouse's entire interest in the Stockholder Shares held by such Management
Stockholder as part of the division of the community property or separate
property of the marriage.
SECTION 22. PRIOR AGREEMENTS. All prior stockholders' agreements
between the Company, Heller and the Management Stockholders are hereby
terminated and shall be of no further force and effect.
SECTION 23. TERMINATION; SURVIVAL. This Agreement (other than
Sections 5, 7 and 9 hereof) shall terminate and be of no further force and
effect upon consummation of the Company's initial public offering of Common
Stock under the Securities Act. This Agreement shall terminate in its
entirety on the tenth anniversary of the date hereof.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COLOR SPOT NURSERIES, INC.
By: /s/ Michael F. Vukelich
---------------------------------
Name:
Title:
KCSN ACQUISITION COMPANY, L.P.
By KCSN Management Company, L.P.
Its General Partner
By KCSN G.P., Inc.
Its General Partner
By: /s/ Samuel P. Frieder
---------------------------
Samuel P. Frieder
Vice President
HELLER EQUITY CAPITAL
CORPORATION
By: /s/ Jeffrey Gonyo
---------------------------------
Name: Jeffrey Gonyo
Title: Vice President
MANAGEMENT STOCKHOLDERS:
/s/ Michael F. Vukelich
----------------------------------------
Michael F. Vukelich
Spouse:/s/ Karla D. Vukelich
----------------------
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/s/ Jerry Halamuda
----------------------------------------
Jerry Halamuda
Spouse: /s/ Ellen N. Halamuda
----------------------
/s/ Gary E. Mariani
----------------------------------------
Gary E. Mariani
Spouse: /s/ Mary M. Mariani
----------------------
/s/ Gene Malcolm
----------------------------------------
Gene Malcolm
Spouse:
----------------------
/s/ Steven J. Bookspan
----------------------------------------
Steven J. Bookspan
Spouse: /s/ Sarah Bookspan
----------------------
/s/ Michael T. Neenan
----------------------------------------
Michael T. Neenan
Spouse: /s/ Hilary Neenan
----------------------
/s/ Robert F. Strange
----------------------------------------
Robert F. Strange
Spouse: /s/ Ann Marie Strange
----------------------
/s/ Jim Tsurudome
----------------------------------------
Jim Tsurudome
Spouse: /s/ Laura L. Tsurudome
----------------------
/s/Dick George
----------------------------------------
Dick George
Spouse: /s/ Judy George
----------------------
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/s/ Gary Crook
----------------------------------------
Gary Crook
Spouse: /s/ Joy Crook
----------------------
/s/ Dave Grimshaw
----------------------------------------
Dave Grimshaw
Spouse: /s/ Maria D. Grimshaw
----------------------
/s/ John Negrete
----------------------------------------
John Negrete
Spouse: /s/ Susan L. Negrete
----------------------
/s/ Dennis Bahen
----------------------------------------
Dennis Bahen
Spouse: /s/ Christine Bahen
----------------------
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