Exhibit 10.19
CII TECHNOLOGIES, INC.
STOCKHOLDERS AGREEMENT
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THIS AGREEMENT is made as of September 18, 1997, by and among CII
Technologies, Inc., a Delaware corporation (the "Company"), each of the Persons
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listed on Schedule A attached hereto (the "CHS Group"), each of the Persons
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listed on Schedule B attached hereto (the "TCW/Crescent Group"), each of the
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Persons listed on Schedule C attached hereto (the "Executive Stockholders"), and
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each of the Persons listed on Schedule D attached hereto (the "Other Investors")
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(the CHS Group, the TCW/Crescent Group, the Executive Stockholders and the Other
Investors are collectively referred to herein as the "Stockholders," and
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individually as a "Stockholder"). Capitalized terms used herein are defined in
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Section 8 hereof.
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The parties hereto desire to enter into this Agreement for the
purposes, among others, of (i) establishing the composition of the Company's
Board of Directors (the "Board"), (ii) assuring continuity in the management and
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ownership of the Company, and (iii) limiting the manner and terms by which the
Stockholder Shares may be transferred.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
SECTION 1. Board of Directors.
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(a) From and after the date hereof and until the provisions of this
Section 1 cease to be effective, each Stockholder shall vote all of his or its
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Stockholder Shares and any other voting securities of the Company over which
such Stockholder has voting control and will take all other necessary or
desirable actions within his or its control (whether in his or its capacity as a
shareholder, director, member of a board committee or officer of the Company or
otherwise 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 will take all necessary and desirable actions
within its control, in order to cause:
(i) the authorized number of directors on the Board to be
established at seven (7) directors; provided that the holders of a
majority of the CHS Common Shares may elect to expand the Board to
such number of directors as such holders shall determine by delivering
written notice of such election to the Company and the other
Stockholders;
(ii) the election to the Board of those representatives who are
designated by the holders of a majority of the CHS Common Shares from
time to time (the "Directors"), with Brian P. Simmons, Andrew W. Code,
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Jon S. Vesely, Steven R. Brown, Ramzi A. Dabbagh, Michael Steinback
and G. Daniel Taylor serving as the initial Directors;
(iii) the removal from the Board (with or without cause) of any
Director at the written request of the holders of a majority of the
CHS Common Shares, but only upon such written request and under no
other circumstances; and
(iv) in the event that any Director resigns, or for any other
reason ceases to serve as a member of the Board during his term of
office, the filling of the resulting vacancy on the Board by a
representative designated by the holders of a majority of the CHS
Common Shares.
(b) The Company shall give each of TCW/Crescent Mezzanine, L.P. and
TCW/Crescent Mezzanine Trust (so long as such Stockholder holds any Stockholder
Shares) notice of each meeting of the Board at the same time and in the same
manner as notice is given to the directors, and the Company shall permit a
representative of each such Person to attend (or listen if such meeting is
conducted telephonically) as an observer all meetings of the Board (the "TCW
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Observers"). Each TCW Observer shall be entitled to receive all written
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materials and other information given to directors in connection with such
meetings at the same time such materials and information are given to the
directors. If the Company proposes to take any action by written consent in
lieu of a meeting of the Board, the Company shall give notice thereof to each
TCW Observer at the same time and in the same manner as notice is given to the
directors.
(c) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director and TCW Observer in connection with attending the
meetings of the Board and any committee thereof.
(d) The provisions of this Section 1 will terminate automatically and
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be of no further force and effect upon the tenth anniversary of the date hereof
unless extended by the parties hereto.
SECTION 2. Representations and Warranties of Stockholders. Each
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Stockholder represents and warrants that (i) such Stockholder is the record
owner of the number of Stockholder Shares set forth opposite his or its name on
Schedule A, Schedule B, Schedule C or Schedule D attached hereto, (ii) this
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Agreement has been duly authorized, executed and delivered by such Stockholder
and constitutes the valid and binding obligation of such Stockholder,
enforceable in accordance with its terms, and (iii) such Stockholder has not
granted and is not a party to any proxy, voting trust or other agreement which
is inconsistent with, conflicts with or violates any provision of this
Agreement. No holder of Stockholder Shares shall grant any proxy or become
party to any voting trust or other agreement which is inconsistent with,
conflicts with or violates any provision of this Agreement.
SECTION 3. Restrictions on Transfer of Stockholder Shares.
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(a) Transfer of Stockholder Shares. Until the fifth (5th)
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anniversary of the date of this Agreement, the holders of Minority Stockholder
Shares shall not sell, transfer, assign, pledge or otherwise dispose of (a
"Transfer") any interest in any Stockholder Shares (other than the Warrants),
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except pursuant to (i) the provisions of Section 3(c) or Section 3(d), (ii) a
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Public Sale and (iii) an Approved Sale. The Transfers described in clauses (ii)
and (iii) of this Section 3(a) are
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referred to collectively as the "Excluded Transfers." The Warrants and, after
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the fifth anniversary of the date hereof, other Minority Stockholder Shares may
also be Transferred pursuant to Section 3(b).
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(b) First Refusal Rights.
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(i) Prior to making any Transfer of Stockholder Shares (other
than an Excluded Transfer) a holder of Minority Stockholder Shares (a
"Selling Minority Stockholder") shall deliver written notice (an "Offer
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Notice") to the Company and to CHS. The Offer Notice will disclose in
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reasonable detail the identity of the prospective transferee(s), the number
of Stockholder Shares to be transferred and the terms and conditions of the
proposed Transfer. The Selling Minority Stockholder shall not consummate
any Transfer until 30 days after the Offer Notice has been given to the
Company and to CHS, unless the parties to the Transfer have been finally
determined pursuant to this Section 3(b) prior to the expiration of such
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30-day period. (The date of the first to occur of such events is referred
to herein as the "Authorization Date.")
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(ii) The Company may elect to purchase all (but not less than
all) of such Stockholder Shares specified in the Offer Notice at the price
and on the terms specified therein by delivering written notice of such
election to the Selling Minority Stockholder and to CHS as soon as
practical but in any event within 15 days after the delivery of the Offer
Notice. If the Company has not elected to purchase all of such Stockholder
Shares within such 15-day period, CHS may elect to purchase all (but not
less than all) of the Stockholder Shares specified in the Offer Notice at
the price and on the terms specified therein by delivering written notice
of such election to the Selling Minority Stockholder as soon as practicable
but in any event within 30 days after delivery of the Offer Notice (the
"Election Period"). If the Company or CHS has elected to purchase all of
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the Stockholder Shares specified in the Offer Notice from the Selling
Minority Stockholder, the transfer will be consummated as soon as
practicable after the delivery of the election notices, but in any event
within 30 days after the expiration of the Election Period. If neither the
Company nor CHS elect to purchase all of the Stockholder Shares being
offered, the Selling Minority Stockholder may, within 90 days after the
expiration of the Election Period, transfer all of such Stockholder Shares
to the third party(ies) identified in the Offer Notice at a price no less
than the price per Stockholder Share specified in the Offer Notice and on
other terms no more favorable to the transferee(s) than the terms specified
in the Offer Notice. Any Stockholder Shares not transferred within such
90-day period shall be reoffered to the Company and CHS pursuant to this
Section 3(b) prior to Transfer. The purchase price specified in any Offer
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Notice shall be payable solely in cash at the closing of the transaction or
in installments over time, provided, however, that the Company shall
satisfy any such purchase price first by offsetting indebtedness or
obligations owed by such Selling Minority Stockholder to the Company,
including any Executive Promissory Note issued by such Selling Minority
Stockholder. Notwithstanding any provision herein to the contrary, no
Stockholder Shares may be pledged, except on terms and conditions
satisfactory to CHS.
(c) Participation Rights. At least 30 days prior to any Transfer by
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CHS of Stockholder Shares (other than an Excluded Transfer), CHS will deliver a
written notice (the "Sale
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Notice") to the Company and the other Stockholders, specifying in reasonable
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detail the identity of the prospective transferee(s), the Stockholder Shares to
be sold and the terms and conditions of the Transfer. In the event that the
other Stockholders hold the class of Stockholder Shares which are to be
transferred, or securities convertible, exchangeable or exercisable for the
class of Stockholder Shares which are to be transferred, they may elect to
participate in the contemplated Transfer by delivering written notice to CHS
within 15 days after delivery of the Sale Notice. If any other Stockholders have
elected to participate in such Transfer ("Participating Stockholders"), CHS and
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each Participating Stockholder will be entitled to sell in the contemplated
Transfer, at the same price and on the same terms, a number of Stockholder
Shares of such class, or securities convertible, exchangeable or exercisable for
Stockholder Shares of such class, equal to the product of (i) the quotient
determined by dividing the percentage of Stockholder Shares of such class and
securities convertible, exchangeable or exercisable for Stockholder Shares of
such class held by such Person by the aggregate percentage of Stockholder Shares
of such class and securities convertible, exchangeable or exercisable for
Stockholder Shares of such class owned by CHS and all Participating Stockholders
and (ii) the number of Stockholder Shares of such class and securities
convertible, exchangeable or exercisable for Stockholder Shares of such class to
be sold in the contemplated Transfer. All fractional shares resulting from the
calculation contained in the prior sentence will be rounded to the nearest whole
share. CHS shall use its best efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Participating Stockholders in any
contemplated Transfer, and CHS shall not Transfer any of its Stockholder Shares
to the prospective transferee(s) unless (A) the prospective transferee(s) agrees
to allow the participation of the Participating Stockholders or (B) CHS agrees
to purchase the number of such class of Stockholder Shares from any
Participating Stockholders which the Participating Stockholders would have been
entitled to sell pursuant to this Section 3(c). If any securities convertible,
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exchangeable or exercisable for Stockholder Shares are included in any Transfer
under this Section 3(c), the purchase price for such securities shall be equal
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to the full purchase price determined hereunder for the Stockholder Shares
covered by the portion of such securities to be transferred, reduced by the
aggregate exercise price for such shares. Each Stockholder transferring
Stockholder Shares pursuant to this Section 3(c) shall pay his or its pro rata
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share (based on the number of Common Stockholder Shares to be sold) of the
expenses incurred by the Stockholders in connection with such transfer and shall
be obligated to join on a pro rata basis (based on the number of Common
Stockholder Shares to be sold) in any indemnification or other obligations that
CHS agrees to provide in connection with such transfer (other than any such
obligations that relate specifically to a particular Stockholder, such as
indemnification with respect to representations and warranties given by a
Stockholder regarding such Stockholder's title to and ownership of Stockholder
Shares; provided that no holder shall be obligated in connection with such
Transfer to agree to indemnify or hold harmless the transferees with respect to
an amount in excess of the net proceeds paid to such holder in connection with
such Transfer).
(d) Permitted Transfers. Notwithstanding anything to the contrary in
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any other provision of this Agreement, the restrictions contained in Section
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3(b) and Section 3(c) shall not apply to:
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(i) any Transfer of Stockholder Shares by any Stockholder to or
among any of its Affiliates,
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(ii) a Transfer of Stockholder Shares by any Stockholder
pursuant to the laws of descent and distribution or among such
Stockholder's Family Group,
(iii) in the case of CHS, a Transfer of up to 5% of any class
of Stockholder Shares held by CHS as of the date hereof to employees of,
consultants to and advisors to CHS, the Company or any of their Affiliates,
(iv) the grant of a security interest in and general lien upon
the applicable Stockholder Shares by each of TCW/Crescent Mezzanine Trust
and Crescent/Mach I Partners, L.P. to State Street Bank and Trust Company,
as collateral agent and/or trustee, in accordance with their respective
governing documents, provided, however, that any foreclosure on such
Stockholder Shares shall be subject to the restrictions contained in
Section 3(b), or
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(v) the grant of a security interest in and general lien upon
the applicable Stockholder Shares by each of TCW Leveraged Income Trust,
L.P. to Bankers Trust Company, as administrative agent and/or trustee, in
accordance with their respective governing documents, provided, however,
that any foreclosure on such Stockholder Shares shall be subject to the
restrictions contained in Section 3(b);
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provided further that, in each case, the restrictions contained in this
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Agreement will continue to be applicable to the Stockholder Shares after any
Transfer pursuant to this Section 3(d) and such transferee(s) of such
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Stockholder Shares shall agree in writing to be bound by the provisions of this
Agreement. Upon the Transfer of Stockholder Shares pursuant to this Section
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3(d), the transferees will deliver a written notice to the Company, which notice
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will disclose in reasonable detail the identity of such transferee.
(e) Termination of Restrictions. The restrictions set forth in this
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Section 3 will continue with respect to each Stockholder Share until the earlier
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of (i) the date on which such Stockholder Share has been transferred in a Public
Sale, (ii) the consummation of a Public Offering, and (iii) the consummation of
an Approved Sale.
SECTION 4. Sale of the Company.
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(a) If the Board and the holders of a majority of the Common
Stockholder Shares approve a sale of all or substantially all of the Company's
assets determined on a consolidated basis or a sale of all or substantially all
of the Company's outstanding capital stock (whether by merger, recapitalization,
consolidation, reorganization, combination or otherwise) to any one or more
Independent Third Parties on an arm's length basis (an "Approved Sale"), then
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each holder of Stockholder Shares will consent to and raise no objections
against the Approved Sale. If the Approved Sale is structured as a (i) merger
or consolidation, each holder of Stockholder Shares shall waive any dissenters
rights, appraisal rights or similar rights in connection with such merger or
consolidation or (ii) sale of stock, each holder of Stockholder Shares shall
agree to sell all of his or its Stockholder Shares and rights to acquire
Stockholder Shares on the terms and conditions approved by the Board and the
holders of a majority of the Stockholder Shares then outstanding.
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Each holder of Stockholder Shares shall take all necessary or desirable actions
in connection with the consummation of the Approved Sale as requested by the
Company.
(b) The obligations of the holders of Stockholder Shares with respect
to the Approved Sale are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Sale, each holder of
Stockholder Shares shall receive the same form of consideration and the same
portion of the aggregate consideration such holder would have received if such
aggregate consideration had been distributed by the Company in complete
liquidation pursuant to the rights and preferences set forth in the Company's
Certificate of Incorporation as in effect immediately prior to the consummation
of the Approved Sale; (ii) if any holders of a class of Stockholder Shares are
given an option as to the form and amount of consideration to be received, each
holder of such class of Stockholder Shares shall be given the same option; and
(iii) each holder of then currently convertible, exchangeable or exercisable
rights to acquire a class of Stockholder Shares shall be given an opportunity to
either (A) exercise such rights prior to the consummation of the Approved Sale
and participate in such sale as holders of such class of Stockholder Shares or
(B) to sell as part of such Approved Sale securities convertible, exchangeable
or exercisable for Stockholder Shares at a price equal to the full purchase
price determined for such Stockholder Shares as part of the Approved Sale,
reduced by the aggregate exercise price for such securities.
(c) If the Company or the holders of any of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), each holder of Stockholder Shares will,
at the request of the Company, appoint either a purchaser representative (as
such term is defined in Rule 501) designated by the Company, in which event the
Company will pay the fees of such purchaser representative, or another purchaser
representative (reasonably acceptable to the Company), in which event such
holder will be responsible for the fees of the purchaser representative so
appointed.
(d) Each Stockholder transferring Stockholder Shares pursuant to this
Section 4 will bear his or its pro rata share (based upon the number of Common
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Stockholder Shares to be sold) of the costs of any sale of Stockholder Shares
pursuant to an Approved Sale to the extent such costs are incurred for the
benefit of all such holders of Stockholder Shares and are not otherwise paid by
the Company or the acquiring party. Costs incurred by the holders of
Stockholder Shares on their own behalf will not be considered costs of the
Approved Sale. Each Stockholder transferring Stockholder Shares pursuant to
this Section 4 shall be obligated to join on a pro rata basis (based on the
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number of Common Stockholder Shares to be sold) in any indemnification or other
obligations that are part of the terms and conditions of the Approved Sale
(other than any such obligations that relate specifically to a particular
Stockholder, such as indemnification with respect to representations and
warranties given by a Stockholder regarding such Stockholder's title to and
ownership of Stockholder Shares) (the "Company Indemnity Obligations"). In no
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event shall any holder of Stockholder Shares be obligated in connection with any
Approved Sale to agree to indemnify or hold harmless the transferees with
respect to Company Indemnity Obligations in an amount in excess of the net
proceeds paid to such holder in connection with the Approved Sale.
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SECTION 5. Repurchase of Executive Securities
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(a) Repurchase of Executive Securities without Cause, etc. If any
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Executive Stockholder's employment with the Company terminates (the
"Termination") due to (i) termination by the Company without Cause (as defined
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below), (ii) death, disability or retirement at age 65, or (iii) resignation by
such Executive Stockholder for Good Reason (as defined below), then:
(i) the Company and CHS shall have the right to repurchase all
(but not less than all) of the Executive Securities of such Executive
Stockholder at a price equal to Fair Market Value; and
(ii) the Executive Stockholder shall have the right to sell all
(but not less than all) of the Executive Securities of such Executive
Stockholder to the Company at a price equal to the greater of (A) Original
Cost and (B) Book Value.
(b) Repurchase of Executive Securities for Cause, etc. If any
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Executive Stockholder's employment with the Company terminates due to (i)
termination by the Company for Cause or (ii) resignation by the Executive
Stockholder without Good Reason, then the Company and CHS have the right to
repurchase all or any portion of the Executive Securities of such Executive
Stockholder at a price equal to the lesser of (A) Original Cost and (B) Fair
Market Value.
(c) Repurchase Procedure for the Company. The Company may elect to
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repurchase Executive Securities of an Executive Stockholder whose employment
with the Company has terminated under Sections 5(a) or 5(b) (the "Repurchase
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Option") by delivery of written notice (a "Repurchase Notice") to the holders of
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such Executive Securities within 60 days after the date of the Termination (the
"Repurchase Notice Period"). The Repurchase Notice shall set forth the number of
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Executive Securities to be acquired, the aggregate consideration to be paid for
such Executive Securities and the time and place for the closing of the
transaction.
(d) Repurchase Procedure for CHS. If for any reason the Company does
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not elect to purchase all of the Executive Securities available pursuant to the
Repurchase Option, CHS shall be entitled to exercise the Repurchase Option for
the Executive Securities the Company has not elected to purchase (the "Available
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Securities"). As soon as practicable after the Company has determined that
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there will be Available Securities, but in any event within 60 days after the
Termination, the Company shall give written notice (the "Option Notice") to CHS
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setting forth the number of Available Securities and the purchase price for the
Available Securities. CHS may elect to purchase Available Securities under
Sections 5(a) and 5(b) by giving written notice to the Company within 30 days
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after the Option Notice has been delivered to CHS by the Company. As soon as
practicable, and in any event within ten days, after the expiration of the 30
day period set forth in the immediately preceding sentence, the Company shall
deliver a written notice to the holders of such Executive Stockholder's
Executive Securities setting forth the number of Executive Securities being
purchased by CHS (the "Supplemental Repurchase Notice"). At the time the
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Company delivers the Supplemental Repurchase Notice to the holders of such
Executive Securities, the Company shall also deliver written notice to CHS
setting forth the number of shares CHS is entitled to purchase, the aggregate
purchase price and the time and place of the closing of the transaction.
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(e) Sale Procedure for Executive Stockholders. In the event a
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Executive Stockholder's Termination is due to the circumstances set forth in
Section 5(a), and neither the Company nor CHS elects to purchase the Executive
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Securities of such Executive Stockholder under the Repurchase Option, the
Executive Stockholder may elect to sell all of his Executive Securities under
Section 5(a)(ii) by delivering a written notice to the Company within 120 days
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after the date of Termination. Such notice shall set forth the number of
Executive Securities of such Executive Stockholder and the holders thereof.
Within 15 days after the receipt of such notice, the Company shall provide the
Executive Stockholder with the aggregate consideration to be paid for his
Executive Securities, an explanation of the manner by which the amount of such
consideration was determined, and the time and place for the closing of the
transaction.
(f) Manner of Payment. If the Company purchases all or any part of
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such Executive Securities, including Executive Securities held by one or more
transferees, the Company shall pay for such Executive Securities first by
offsetting indebtedness or obligations owed by such Executive Stockholder to the
Company, including such Executive Stockholder's Executive Promissory Note (if
any) and second by certified check or wire transfer of funds; provided that if
such cash payment would (A) cause the Company to violate the General Corporation
Law of the State of Delaware, (B) cause the Company to breach any agreement to
which it is a party relating to the indebtedness for borrowed money or any other
material agreement or (C) otherwise be imprudent in view of the Company's
financial condition (A, B and C are collectively referred to as the "Reasons for
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Deferral") then the Company shall have the right to pay such amount as soon as
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no Reason for Deferral exists so long as the Company also pays interest at the
prime rate (as published in The Wall Street Journal on the date of Termination)
for the deferral period at the time when such payment is made. If CHS elects to
purchase all or any portion of the Available Securities, CHS shall pay for such
Executive Securities by certified check or wire transfer of funds.
(g) Termination of Restrictions. The Repurchase Option set forth in
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this Section 5 shall terminate upon a Public Offering.
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SECTION 6. Legend. Each certificate evidencing Stockholder Shares
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and each certificate issued in exchange for or upon the transfer of any
Stockholder Shares (if such securities remain subject to the terms of this
Agreement after such transfer) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A STOCKHOLDERS AGREEMENT DATED AS OF SEPTEMBER 18, 1997
AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND
CERTAIN OF THE COMPANY'S STOCKHOLDERS. A COPY OF SUCH
STOCKHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY
THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The legend set forth above shall be removed from the certificates evidencing any
shares which cease to be Stockholder Shares in accordance with the definition
thereof in Section 8.
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SECTION 7. Transfer. Prior to transferring any Stockholder Shares
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(other than in a Public Sale or Approved Sale) to any Person, the transferring
Stockholder will cause the prospective transferee to be bound by this Agreement
and to execute and deliver to the Company and the other Stockholders a
counterpart to this Agreement. Any Transfer or attempted Transfer of any
Stockholder Shares in violation of any provision of this Agreement shall be
void, and the Company shall not 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 8. Definitions.
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"Affiliate" means with respect to any Person, any other Person
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controlling, controlled by, or under common control with such first Person and
in the case of a Person which is a partnership, any partner of that Person.
"Book Value" means, with respect to the Common Stock, the quotient
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determined by dividing (A) the excess of the book value of the Company's assets
over the book value of its liabilities as of the end of the fiscal quarter
immediately preceding the date such Common Stock is valued, determined on a
consolidated basis in accordance with generally accepted accounting principles,
consistently applied, less the liquidation value of all outstanding Preferred
Stock, by (B) the total number of Common Stock outstanding on a fully-diluted
basis. "Book Value" means, with respect to the Preferred Stock and Junior
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Subordinated Notes, their Original Cost. Regardless of when a transaction based
on a Book Value valuation is executed, Book Value shall be determined as of the
date of the Termination of the Executive Stockholder's employment with the
Company (less any amounts paid on the Junior Subordinated Notes between the
Termination date and the date the transaction is executed).
"Cause" shall be defined to mean (i) the commission of a felony or a
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crime involving moral turpitude or the commission of any other act or omission
involving dishonesty, disloyalty or fraud with respect to the Company or any of
its Subsidiaries or any of their customers or suppliers, (ii) conduct tending to
bring the Company or any of its Subsidiaries into substantial public disgrace or
disrepute, or (iii) gross negligence or willful misconduct with respect to the
Company or any of its Subsidiaries.
"CHS" means Code, Hennessy & Simmons III, L.P., a Delaware limited
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partnership.
"CHS Common Shares" means any Common Stockholder Shares issued to or
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held by any member of the CHS Group.
"Common Stock" means the Company's Common Stock, par value $.01 per
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share.
"Common Stockholder Shares" means Stockholder Shares which are (i)
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Common Stock, (ii) warrants, options or other rights to subscribe for or to
acquire, directly or indirectly, Common Stock, whether or not then exercisable
or convertible (including, without limitation, the Warrants), and (iii) stock or
other securities which are convertible into or exchangeable for, directly or
indirectly, Common Stock, whether or not then convertible or exchangeable. As
to any particular Common Stockholder Shares, such shares shall cease to be
Common Stockholder Shares when they
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have been disposed of in a Public Sale or repurchased by the Company or any
Subsidiary. References in this Agreement to a majority of, or a certain
percentage of, the Stockholder Shares or the Common Stockholder Shares, shall be
deemed to be references to a majority of the Common Stockholder Shares or a
certain percentage of Common Stockholder Shares (calculated on a fully-diluted
basis), as applicable.
"Executive Promissory Notes" means the Executive Promissory Notes made
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by certain of the Executive Stockholders in favor of the Company dated as of the
date hereof.
"Executive Securities" for any particular Executive Stockholder means
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all Stockholder Shares currently owned or hereafter acquired by such Executive
Stockholder. Executive Securities will continue to be Executive Securities in
the hands of any other Person (except for the Company and CHS and except for
transferees in a Public Sale), and, except as otherwise provided herein, each
such other holder of such Executive Securities will succeed to all rights and
obligations attributable to the Executive Stockholder as a holder of Executive
Securities hereunder.
"Fair Market Value" of any Stockholder Shares means the composite
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closing price of the sales of such Stockholder Shares on the securities
exchanges on which such Stockholder Shares may at the time be listed (as
reported in The Wall Street Journal), or, if there have been no sales on any
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such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if such Stockholder Shares are
not so listed, the closing price (or last price, if applicable) of sales of such
Stockholder Shares on The Nasdaq Stock Market (as reported in The Wall Street
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Journal), or if such Stockholder Shares are not quoted in The Nasdaq Stock
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Market but are traded over-the-counter, the average of the highest bid and
lowest asked prices on such day in the over-the-counter market as reported by
the National Quotation Bureau Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days consisting of
the day as of which the Fair Market Value is being determined and the 20
consecutive business days prior to such day. If at any time such Stockholder
Shares are not listed on any securities exchange, quoted in The Nasdaq Stock
Market, or quoted in the over-the-counter market, the "Fair Market Value" of
such Stockholder Shares shall mean the fair market value of such Stockholder
Shares, as between a willing buyer and a willing seller, taking into account all
relevant factors determinative of value (including the lack of liquidity of such
Stockholder Shares due to the Company's status as a privately held corporation,
but without regard to any discounts for minority interests), using valuation
techniques then prevailing in the securities industry (e.g., discounted cash
flows and/or comparable companies) and assuming full disclosure of all relevant
information and a reasonable period of time for effectuating such sale, as
determined by the Board in good faith; provided that if a Executive Stockholder
owned Stockholder Shares of $250,000 or more (calculated as of immediately
following the consummation of the transactions contemplated by the
Recapitalization Agreement and based on their Original Cost), and he disagrees
with the Board's determination of Fair Market Value, then the Executive
Stockholder shall provide notice of his disagreement within ten days after the
Board provides notice to the Executive Stockholder of its determination, in
which case "Fair Market Value" shall be determined by an investment banking firm
agreed upon by the Company and the Executive Stockholder, which firm shall
submit to the Company and the Executive Stockholder a report within 30 days of
its engagement setting forth such determination. If the parties are unable to
agree on an investment banking firm within 20 days after
-10-
the Executive Stockholder provides notice to the Board of his disagreement, the
Company and the Executive Stockholder shall each select an investment bank of
recognized national standing and such two investment banking firms shall select
a third investment banking firm. Such third investment banking firm shall render
a determination within 30 days of its engagement. The expenses of such firms
will be split equally between the Company and the Executive Stockholder, and the
determination of such firm will be final and binding upon all parties. The
Company may require that the investment banking firm keep confidential any non-
public information received as a result of this paragraph pursuant to reasonable
confidentiality arrangements. Regardless of when a transaction based on a Fair
Market Value valuation is executed, Fair Market Value shall be determined as of
the date of the Termination of the Executive Stockholder's employment with the
Company (less any amounts paid on the Junior Subordinated Notes between the
Termination date and the date the transaction is executed).
"Family Group" means a Person's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of the Person and/or
any of the Person's spouse and/or descendants.
"Good Reason" shall be defined to mean (i) the assignment to the
-----------
Executive Stockholder in question of duties that represent a substantial adverse
alteration in the nature or status of his/her responsibilities, or (ii) any
reduction in his/her annual base salary.
"Independent Third Party" means any Person who, immediately prior to
-----------------------
the contemplated transaction, does not own in excess of 15% of the Company's
equity securities on a fully-diluted basis (a "15% Owner"), who is not an
---------
Affiliate of any such 15% Owner and who is not the spouse or descendent (by
birth or adoption) of any such 15% Owner or a trust for the benefit of any such
15% Owner and/or such other Persons.
"Junior Subordinated Notes" means the Junior Subordinated Notes of the
-------------------------
Company issued pursuant to the Recapitalization Agreement.
"Minority Stockholder Shares" means any Stockholder Shares issued to
---------------------------
or held by any Person other than CHS.
"Original Cost" with respect to the Common Stock shall be equal to $10
-------------
per share (as adjusted for stock splits, stock dividends or other
recapitalizations occurring after the date hereof). "Original Cost" with respect
to the Preferred Stock shall be equal to $1,000 per share plus any accrued
dividends thereon (as adjusted for stock splits, stock dividends or other
recapitalizations occurring after the date hereof). "Original Cost" with respect
to the Junior Subordinated Notes shall be equal to the outstanding principal
amount and accrued interest thereon. Regardless of when a transaction based on
an Original Cost valuation is executed, Original Cost shall be determined as of
the date of the termination of the Executive Stockholder's employment with the
Company (less any amounts paid on the Junior Subordinated Notes between the
Termination date and the date the transaction is executed).
"Person" means an individual, a partnership, a corporation, an
------
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization or
-11-
any other entity (including, without limitation, any governmental entity or any
department, agency or political subdivision thereof).
"Preferred Stock" means the Series A Preferred Stock, par value $.01
---------------
per share, of the Company.
"Public Offering" means an initial public offering and sale of equity
---------------
securities of the Company.
"Public Sale" means any sale of Stockholder Shares to the public
-----------
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
(or any similar provision then in effect) adopted under the Securities Act.
"Recapitalization Agreement" means that certain Recapitalization
--------------------------
Agreement dated August 6, 1997 by and among the Company and the other parties as
specified therein, as amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time.
"Stockholder Shares" means any of the following held by any
------------------
Stockholder: (i) any capital stock of the Company, (ii) the Warrants and any
other warrants, options or other rights to sub scribe for or to acquire,
directly or indirectly, capital stock of the Company, whether or not then
exercisable or convertible, (iii) any stock, notes or other securities which are
convertible into or exchangeable for, directly or indirectly, capital stock of
the Company, whether or not then convertible or exchangeable, (iv) any capital
stock of the Company issued or issuable upon the exercise, conversion or
exchange of any of the securities referred to in clauses (ii) and (iii) above,
(v) any securities issued or issuable directly or indirectly with respect to the
securities referred to in clauses (i), (ii), (iii) and (iv) above by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, and (vi) the
Junior Subordinated Notes. As to any particular shares constituting Stockholder
Shares, such shares will cease to be Stockholder Shares when they have been
transferred in a Public Sale or have been repurchased by the Company or any
Subsidiary of the Company.
"Subsidiaries" means, with respect to any Person, any corporation,
------------
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of such Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of such Person or entity or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any
-12-
managing director or general partner of such limited liability company,
partnership, association or other business entity.
"Warrants" means the warrants of the Company issued to members of the
--------
TCW/Crescent Group as of the date hereof. The Warrants will continue to be
Stockholder Shares in the hands of any other Person (except for the Company and
CHS and except for transferees in a Public Sale), and, except as otherwise
provided herein, each such other holder of such Warrants will succeed to all
rights and obligations attributable to the TCW/Crescent Group as a holder of
such Stockholder Shares hereunder.
SECTION 9. Miscellaneous.
-------------
(a) Amendment and Waiver. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement will be
effective against the Company or the Stockholders, unless such modification,
amendment or waiver is approved in writing by the Company and the holders of at
least a majority of the Common Stockholder Shares then outstanding; provided,
however, that in the event that such amendment or waiver would materially and
adversely affect a holder or group of holders of Stockholder Shares in a manner
different than any other holders of Stockholder Shares, then such amendment or
waiver will require the consent of such holder of Stockholder Shares or a
majority of the Common Stockholder Shares held by such group of holders
materially and adversely affected; provided, further, that any amendment or
waiver of Section 3(c) or Section 5 will require the consent of the majority of
------------ ---------
the Common Stockholder Shares held by the Executive Stockholders. The failure
of any party to enforce any of the provisions of this Agreement will in no way
be construed as a waiver of such provisions and will not affect the right of
such party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
(b) Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but 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 will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Entire Agreement. Except as otherwise expressly set forth herein,
----------------
this Agreement, those documents expressly referred to herein and other documents
of even date herewith embody the complete agreement and understanding among the
parties and supersede and preempt 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.
(d) Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement will bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and their respective successors and assigns, so
long as they hold Stockholder Shares.
-13-
(e) Counterparts. This Agreement may be executed in separate
------------
counterparts each of which will be an original and all of which taken together
shall constitute one and the same agree ment.
(f) Remedies. The 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 any Stockholder may in its sole discretion apply to any court
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.
(g) Notices. Any notice provided for in this Agreement must be in
-------
writing and must be either personally delivered, sent by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the Company at the address set forth below
and to the other parties at the addresses indicated on the Schedule A, Schedule
---------- --------
B, Schedule C and Schedule D attached hereto and to any subsequent holder of
- - - ---------- ----------
Stockholder Shares subject to this Agreement at such address as is indicated in
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 notice to the
sending party. Notices will be deemed to have been given hereunder when
delivered personally, three days after deposit in the U.S. mail and one day
after deposit with a reputable overnight courier service. The Company's address
is:
Chief Executive Officer
CII Technologies, Inc.
1396 Charlotte Highway
Fairview, NC 28730
with copies to:
--------------
Code, Hennessy & Simmons III, L.P.
c/o Code, Hennessy & Simmons
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
Attn: Brian P. Simmons
Steven R. Brown
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Sanford E. Perl
(h) Governing Law. The corporate law of the State of Delaware shall
-------------
govern all issues and questions concerning the relative rights and obligations
of the Company and its stock-
-14-
holders. All other issues and questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Illinois or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Illinois.
(i) Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * *
-15-
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the day and year first above written.
COMPANY: CII TECHNOLOGIES, INC.
By:
______________________________
Its: ______________________________
CHS GROUP: CODE, HENNESSY & SIMMONS III, L.P.
By: CHS Management III, L.P.
Its: General Partner
By: Code, Hennessy & Simmons, Inc.
Its: General Partner
By:
______________________________
Its: ______________________________
___________________________________
Paige P. Walsh
___________________________________
Tracy A. Hogan
[Continuation of Stockholders Agreement Signature Page]
TCW/CRESCENT GROUP: TCW/CRESCENT MEZZANINE
PARTNERS, L.P.
TCW/CRESCENT MEZZANINE TRUST
TCW/CRESCENT MEZZANINE
INVESTMENT PARTNERS, L.P.
By: TCW/Crescent Mezzanine, L.L.C.
Its: General Partner or Managing Owner
By: ______________________________
Name: _________________
Title: _________________
By: ______________________________
Name: _________________
Title: _________________
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW Advisors (Bermuda), Limited
Its: General Partner
By: ______________________________
Name: _________________
Title: _________________
By: TCW Investment Management Company
Its: Investment Advisor
By: ______________________________
Name: _________________
Title: _________________
[Continuation of Stockholders Agreement Signature Page]
TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW Investment Management Company
Its: Investment Advisor
By: ______________________________
Name: _________________
Title: _________________
By: ______________________________
Name: _________________
Title: _________________
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company
Its: Investment Manager and Attorney-In-Fact
By: ______________________________
Name: _________________
Title: _________________
By: ______________________________
Name: _________________
Title: _________________
[Continuation of Stockholders Agreement Signature Page]
EXECUTIVE STOCKHOLDERS:
___________________________________
Ramzi A. Dabbagh
___________________________________
Grady D. Taylor
___________________________________
Michael A. Steinback
___________________________________
David Henning
___________________________________
Theodore H. Anderson
___________________________________
Raymond McClinton
___________________________________
Gary L. McGill
___________________________________
Jeffrey W. Boyce
___________________________________
Bascombe Ray
___________________________________
Richard J. Lisdero, Jr.
[Continuation of Stockholders Agreement Signature Page]
___________________________________
Kirsten L. Byrd
___________________________________
Rennard A. Madrazo
___________________________________
Carl R. Freas
___________________________________
George L. Sutton
___________________________________
Timothy B. Hasenour
___________________________________
Thomas A. Witte
___________________________________
Douglas D. Wagenknecht
___________________________________
Daniel R. McAllister
___________________________________
Patrick J. McPherson
___________________________________
Robert A. Helman
[Continuation of Stockholders Agreement Signature Page]
___________________________________
Michael J. Moschitto
___________________________________
Michael H. Molyneux
___________________________________
James R. Mikesell
___________________________________
Joseph R. Murach
___________________________________
Mary Lynn Papador
___________________________________
Bernard Bush
___________________________________
Don L. McGowan
[Continuation of Stockholders Agreement Signature Page]
OTHER INVESTORS:
___________________________________
Don E. Dangott
___________________________________
Alan D. Gordon
___________________________________
Jan Endresen
[Continuation of Stockholders Agreement Signature Page]
OTHER INVESTORS (CONTINUED):
CIIT HOLDINGS, LLC
By: ______________________________
Name: _______________
Title: _______________
SCHEDULE A
CHS GROUP
---------
Number of Shares
----------------
Code, Hennessy & Simmons II, L.P. 7,361,180 Common Stock
c/o Code, Hennessy & Simmons
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
Attn: Brian P. Simmons
Steven R. Brown
with a copy to:
--------------
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Sanford E. Perl
Tracy A. Hogan 890 Common Stock
c/o Code, Hennessy & Simmons
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
Paige Walsh 890 Common Stock
c/o Code, Hennessy & Simmons
10 South Wacker Drive, Suite 3175
Chicago, IL 60606
SCHEDULE B
TCW/CRESCENT GROUP
------------------
Number of Shares
----------------
TCW/Crescent Mezzanine Partners, L.P.
c/o TCW/Crescent Mezzanine, L.L.C. 54,066 Common Stock
11100 Santa Monica Boulevard, Suite 2000 6,827 Common Warrant
Los Angeles, CA 90025
Attn: Jean-Marc Chapus
TCW/Crescent Mezzanine Trust 16,457 Common Stock
c/o TCW/Crescent Mezzanine, L.L.C. 2,078 Common Warrant
11100 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
Attn: Jean-Marc Chapus
TCW Leveraged Income Trust, L.P. 1,477 Common Stock
c/o Trust Company of the West 186 Common Warrant
11100 Santa Monica Boulevard, Suite 2050
Los Angeles, CA 90025
Attn: Jean-Marc Chapus
TCW Shared Opportunity Fund II, L.P. 3,200 Common Stock
c/o TCW/Crescent Mezzanine, L.L.C. 404 Common Warrant
11100 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
Attn: Jean-Marc Chapus
TCW/Crescent Mezzanine Investment Partners, L.P. 3,200 Common Stock
c/o TCW/Crescent Mezzanine, L.L.C. 404 Common Warrant
11100 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
Attn: Jean-Marc Chapus
Crescent/MACH I Partners, L.P. 1,600 Common Stock
c/o Trust Company of the West 202 Common Warrant
200 Park Avenue, Suite 2200
New York, New York 10166
Attn: Mark Gold
c/o Trust Company of the West
11100 Santa Monica Boulevard, Suite 2050
Los Angeles, CA 90025
Attn: Alena Tabera
each with a copy to:
- - --------------------
O'Melveny & Myers and TCW/Crescent Mezzanine, L.L.C.
555 13th Street, N.W., Suite 500W 200 Crescent Court, Suite 1600
Washington, D.C. 20004 Dallas, TX 75201
Attn: Harold H. Henderson Attn: Timothy P. Costello
SCHEDULE C
EXECUTIVE STOCKHOLDERS
----------------------
Number of Shares
----------------
Ramzi A. Dabbagh 48,000 Common Stock
Grady D. Taylor 20,000 Common Stock
Michael A. Steinback 30,480 Common Stock
David Henning 10,940 Common Stock
Theodore H. Anderson 6,960 Common Stock
Raymond McClinton 2,480 Common Stock
Gary L. McGill 6,960 Common Stock
Jeffrey W. Boyce 3,480 Common Stock
Bascombe Ray 600 Common Stock
Richard J. Lisdero, Jr. 600 Common Stock
Kirsten L. Byrd 600 Common Stock
Rennard A. Madrazo 2,000 Common Stock
Carl R. Freas 2,000 Common Stock
George L. Sutton 600 Common Stock
Timothy B. Hasenour 1,000 Common Stock
Thomas A. Witte 400 Common Stock
Douglas D. Wagenknecht 600 Common Stock
Daniel R. McAllister 10,040 Common Stock
Patrick J. McPherson 4,980 Common Stock
Robert A. Helman 2,040 Common Stock
Michael J. Moschitto 1,660 Common Stock
Michael H. Molyneux 860 Common Stock
James R. Mikesell 1,000 Common Stock
Joseph R. Murach 1,200 Common Stock
Mary Lynn Papador 720 Common Stock
Bernard Bush 400 Common Stock
Don L. McGowan 400 Common Stock
c/o Ramzi A. Dabbagh
CII Technologies, Inc.
1396 Charlotte Highway
Fairview, NC 28730
SCHEDULE D
OTHER INVESTORS
---------------
Number of Shares
----------------
Don E. Dangott 5,600 Common Stock
9459 North Broadmoor Road
Milwaukee, WI 53217
Alan D. Gordon 8,000 Common Stock
c/o Richland, Gordon & Company
9330 Sears Tower
233 South Wacker Drive
Chicago, IL 60606
CIIT Holdings, LLC 4,000 Common Stock
c/o Bob Calton
Bowles Hollowell Conner & Co.
227 W. Trade Street
Charlotte, North Carolina 28202
Jan Endresen 4,000 Common Stock
c/o AeroTech World Tade Corporation
11 New King Street
White Planes, NY 10606