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EXHIBIT 2.1
STOCKHOLDER AGREEMENT
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SIMONDS INDUSTRIES INC.
135 Intervale Road
Fitchburg, Massachusetts 01420
This Stockholder Agreement dated as of July 7, 1998 is among Simonds
Industries Inc., a Delaware corporation (the "Company"), Fleet Venture
Resources, Inc., a Rhode Island corporation ("FVR"), Kennedy Plaza Partners, a
Rhode Island general partnership ("KPP"), Fleet Equity Partners VI, L.P., a
Delaware limited partnership ("FEP"), Chisholm Partners III, L.P., a Delaware
limited partnership ("Chisholm"), Private Market Fund, L.P., a Delaware limited
partnership ("Pacific"), Heller Financial, Inc., a Delaware corporation
("Heller"), First Union Investors, Inc., a North Carolina corporation ("First
Union"), Donald E. Bates, an individual residing in the Commonwealth of
Massachusetts ("Bates"), and those persons designated as managers on the
signature pages hereto (collectively, the "Managers").
WHEREAS, the parties have entered into a Subscription Agreement (as defined
herein) of even date herewith pursuant to which such parties have agreed to
purchase shares of capital stock in the Company;
WHEREAS, the Company has repurchased various shares of capital stock,
warrants and options held in the Company as of the date hereof pursuant to a
recapitalization of the Company (the "Recapitalization");
WHEREAS, the parties to that certain Amended and Restated Stockholder
Agreement dated June 20, 1995 (the "Prior Agreement") have terminated the Prior
Agreement, effective as of the date hereof; and
WHEREAS, the parties desire to enter into this Stockholder Agreement to
reflect certain agreements concerning the Company's repurchase rights and
obligations set forth in ARTICLE II hereof, and to read in all respects as set
forth herein.
NOW THEREFORE, the parties hereby agree as follows:
Section 1. DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the meanings set forth below:
AFFILIATE. Affiliate shall mean as applied to any specified Person, any
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with such specified Person and shall also include (a)
any Person who is an officer, director, manager or beneficial owner of at least
5% of the then outstanding equity securities of such specified Person and Family
Members and officers, directors or managers of any such Person, (b) any Person
in which such specified Person or an Affiliate (as defined in clause (a) above)
of such specified Person shall, directly or indirectly, either beneficially own
at least 10% of the then outstanding
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equity securities or constitute at least a 10% equity participant, and (c) in
the case of a specified Person who is an individual, any Family Member of such
Person.
APPROVED SALE. See Section 5.1.
BASE RATE. Base Rate shall mean the rate of interest announced from time to
time by Fleet Bank of Massachusetts, N.A. at its head office in Boston,
Massachusetts as its "prime rate".
BATES. See preamble.
BOOK VALUE. Book Value shall mean an amount, to be determined as of any
point in time, which is equal to the sum of the Company's recorded amounts of:
(i) the Stock; (ii) additional paid-in capital specifically related to the
Stock; (iii) the Company's retained earnings or shareholders' deficit, as the
case may be (it being understood that if a deficit exists, whether created by
cumulative net losses or charges for accretion on mandatorily redeemable
preferred stock, such amount will reduce Book Value); (iv) the initial value
assigned to the Warrants at date of issuance (it being understood that any
increase above the initial value will not increase Book Value nor will the
charge to retained earnings associated with such increase reduce Book Value);
(v) the initial value assigned to any outstanding and exercisable options,
warrants, or convertible securities, in each case to the extent then
exercisable; and (vi) treasury stock related to the Stock (it being understood
that any treasury stock amount will reduce Book Value). All of these components
of Book Value shall be determined in accordance with generally accepted
accounting principles, consistently applied.
BOOK VALUE CHANGE. Book Value Change shall mean the increase or decrease in
Book Value from the date hereof (after giving effect to the Recapitalization) to
the applicable Termination Date.
BOOK VALUE DECREASE. Book Value Decrease shall mean the decrease in Book
Value from the date hereof (after giving effect to the Recapitalization) to the
applicable Termination Date.
BOOK VALUE INCREASE. Book Value Increase shall mean the increase in Book
Value from the date hereof (after giving effect to the Recapitalization) to the
applicable Termination Date.
BOOK VALUE PER SHARE. Book Value Per Share shall mean, in the case of each
share of Management Stock being transferred with respect to any Termination
Date, the quotient obtained by dividing (a) the Book Value calculated as of the
date of the end of the month immediately preceding such Termination Date by (b)
the sum of the number of shares of Stock then outstanding, PLUS the sum of the
number of dilutive shares of Stock as determined under the treasury stock method
defined in APB Opinion No. 15 for outstanding and exercisable warrants, options,
or convertible securities.
BOOK VALUE PER SHARE CHANGE. Book Value Per Share Change shall mean the
increase or decrease in Book Value Per Share from the date hereof (after giving
effect to the Recapitalization) to the Applicable Termination Date.
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BOOK VALUE PER SHARE DECREASE. Book Value Per Share Decrease shall mean the
decrease in Book Value Per Share from the date hereof (after giving effect to
the Recapitalization) to the applicable Termination Date.
BOOK VALUE PER SHARE INCREASE. Book Value Per Share Increase shall mean the
increase in Book Value Per Share from the date hereof (after giving effect to
the Recapitalization) to the applicable Termination Date.
CAUSE. Cause shall mean, with respect to any Manager, (a) an act of fraud,
embezzlement, misappropriation or breach of fiduciary duty against the Company
by such Manager as determined by the Company's Board of Directors in its
reasonable discretion, (b) any intentional, knowing or reckless action or
inaction by such Manager which causes the breach of a representation, warranty
or covenant by the Company or any Management Stockholder under any of the
Related Agreements, (c) conviction of such Manager by a court of competent
jurisdiction of or a plea of guilty or nolo contendere by such Manager to any
felony or crime involving moral turpitude, (d) the habitual drug addiction or
intoxication of any Manager, (e) the willful failure or refusal of any Manager
to perform his duties under the terms of his employment with the Company,
including the willful failure or refusal of such Manager to follow the
instructions of the Company's Board of Directors or Chief Executive Officer, (f)
the breach by any Manager of any terms of his employment with the Company
(including, without limitation, the breach of any non-competition,
non-disclosure, or other restrictive covenants), or (g) the breach by such
Manager of any of the covenants, terms and provisions of Sections 3.1, 5, and 7
hereof.
CHARTER. Charter shall include the articles or certificate of
incorporation, statute, constitution, joint venture, partnership or operating
agreement or articles or other organizational document of any Person other than
an individual, each as from time to time amended or modified.
CHISHOLM. See preamble.
COMPANY. See preamble.
CONSENT OF THE FLEET INSTITUTIONAL STOCKHOLDERS. Consent of the Fleet
Institutional Stockholders shall mean the written consent of each of FVR, FEP,
Chisholm and KPP.
CONSENT OF THE INSTITUTIONAL STOCKHOLDERS. Consent of the Institutional
Stockholders means the written consent of Institutional Stockholders holding a
majority of the shares of Stock held by all Institutional Stockholders;
provided, however, that in the case of any matter requiring such consent that
has a material and adverse effect on any Institutional Stockholder that is
substantially and disproportionately more burdensome to such Institutional
Stockholder than to the other Institutional Stockholders, the Consent of the
Institutional Stockholders shall require the consent of any such Institutional
Stockholder so affected; provided, further, in no event shall any consent,
otherwise required hereunder, of any BHC Holder (as defined in the Subscription
Agreement) (other than pursuant to such BHC Holder's rights as a holder of Class
A Common Stock) be so required (i) unless the matter subject to such consent
would "significantly and adversely affect the rights or preferences of the
security or interest" of such BHC Holder, as such
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terms are used in Section 225.2(q)(2)(i) of Regulation Y of the Board of
Governors of the Federal Reserve System or (ii) if the result of such consent
would be to cause the interests of such BHC Holder in the Company (other than
such BHC Holder's Class A Common Stock) to be considered "voting securities" for
purposes of said Regulation Y.
DELAYED CLOSING DATE. See Section 2.3(b).
DISABILITY. A Manager shall be deemed to have a disability if an
independent medical doctor (selected by the Company's health or disability
insurer) certifies that such Manager has for six (6) months, consecutive or
non-consecutive, in any twelve (12) month period been disabled in such a manner
as to be unable to perform the essential functions of his then current position,
with or without reasonable accommodation. Any refusal by such Manager to submit
to a medical examination for the purpose of certifying disability shall be
deemed to constitute conclusive evidence of such Manager's disability.
EMPLOYEE STOCK OPTION PLAN. Employee Stock Option Plan shall have the same
meaning herein as in the Subscription Agreement.
EXECUTIVE STOCK OPTIONS. Executive Stock Options shall have the same
meaning herein as in the Subscription Agreement.
EXERCISE NOTICE. See Section 2.3(a).
FAMILY MEMBERS. Family Members shall mean, as applied to any individual,
(i) any spouse, child, parent, brother or sister, or spouse of any thereof, and
(ii) each trust or other entity created for the benefit of such individual or
one or more of such Persons and each custodian of property of such individual or
one or more such Persons.
FAMILY TRANSFEREE. Family Transferee shall mean any Family Member of a
Stockholder (i) to whom such Stockholder has transferred shares of Stock
pursuant to Section 3.1 and (ii) who has executed an Instrument of Accession.
FEP. See preamble.
FIRST UNION. See preamble.
FLEET INSTITUTIONAL STOCKHOLDERS. Fleet Institutional Stockholders means
Chisholm, FEP, FVR and KPP.
FVR. See preamble.
HELLER. See preamble.
INSTITUTIONAL STOCK. Institutional Stock shall mean (a) all shares of Stock
issued to the Institutional Stockholders, (b) any shares of Stock issued to an
Institutional Stockholder upon exercise of a Warrant and (c) all shares of Stock
issued with respect to the foregoing by way of stock dividend or stock split or
in connection with any merger, consolidation, recapitalization or
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other reorganization affecting the Stock. Institutional Stock will continue to
be Institutional Stock in the hands of any holder and each transferee thereof
(provided that the transfer to such transferee is permitted by this Agreement)
will succeed to the rights and obligations of a holder of Institutional Stock
hereunder, PROVIDED that shares of Institutional Stock will cease to be shares
of Institutional Stock when transferred (i) pursuant to a Public Sale or an
Approved Sale or (ii) to the Company or its Subsidiaries.
INSTITUTIONAL STOCKHOLDERS. Institutional Stockholders shall mean FVR, FEP,
KPP, Bates, Chisholm, Pacific, Heller, First Union and any other Person who (i)
acquires Institutional Stock pursuant to the terms hereof and (ii) has executed
an Instrument of Accession. Whenever this Agreement refers to the exercise of
consent, voting, or approval rights of the Institutional Stockholders, such
rights shall be exercisable only by Consent of the Institutional Stockholders.
INSTITUTION ELECTION PERIOD. See Section 3.2.
INSTRUMENT OF ACCESSION. Instrument of Accession shall mean an Instrument
of Accession in the form of SCHEDULE 1 hereto.
KOWIN-SIMONDS. Kowin-Simonds shall mean Kowin-Simonds, Inc., a Delaware
corporation of which the Company owns fifty percent (50%) of the issued and
outstanding capital stock.
KPP. See preamble.
MANAGEMENT STOCK. Management Stock shall mean (a) all shares of Stock
purchased by or issued to the Managers, including Stock issued to the Managers
upon exercise of the Executive Stock Options, (b) all shares of Stock issued
with respect to the foregoing by way of stock dividend or stock split or in
Connection with any merger, consolidation, recapitalization or mother
reorganization affecting the Stock, and (c) all shares of Stock issued to any
holder of the Employee Stock Options upon the exercise of the Employee Stock
options. Management Stock will continue to be Management Stock in the hands of
any holder and each transferee thereof (provided that the transfer to such
transferee is permitted by this Agreement) will succeed to rights and
obligations of a holder of Management Stock hereunder, PROVIDED that shares of
Management Stock will cease to be shares of Management Stock when transferred
(i) pursuant to a Public Sale or an Approved Sale or (ii) to the Company.
MANAGEMENT STOCKHOLDERS. Management Stockholders shall mean each Manager
for so long as such Manager holds shares of Management Stock and any other
Person who (i) holds Management Stock and (ii) has executed an Instrument of
Accession.
MANAGERS. Managers shall mean those Persons listed on the signature pages
hereof under the caption "Managers" and any officers, employee, director or
consultant of the Company who receives shares of Stock from the Company and
executes and delivers an Instrument of Accession.
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MARKET VALUE PER SHARE. Market Value Per Share shall mean the fair value
per share of shares of Management Stock being transferred with respect to any
Termination Date, determined as of the applicable Termination Date based on the
number of shares of Stock then outstanding, PLUS the sum of the number of
dilutive shares of Stock as determined under the treasury stock method defined
in APB Opinion No. 15 for outstanding and exercisable warrants, options, or
convertible securities, as determined in the manner set forth below. The
Company's Board of Directors, by affirmative vote of at least a majority of the
Board (excluding any Management Stockholder who is the subject of the
termination giving rise to such determination), shall make a good faith
determination of the fair value per share of such shares of Management Stock
(the "Board Determination") and shall cause such determination to be delivered
to such Management Stockholder. Within fifteen (15) days of such delivery, the
Management Stockholder may object to the Board Determination. If such Management
Stockholder does not so object, then the Market Value Per Share of such shares
of Management Stock shall be equal to the Board Determination. If such
Management Stockholder shall make such an objection, he may select a qualified
appraiser to make a good faith determination of the fair per share value of such
shares of Stock (the "Initial Appraised Value"). If the Initial Appraised Value
does not exceed (or is not less than) the Board Determination by more than ten
percent (10%) of the Board Determination, then the Market Value Per Share of
such shares of Management Stock shall be equal to the mathematical mean of the
Initial Appraised Value and the Board Determination. If the Initial Appraised
Value exceeds (or is less than) the Board Determination by more than ten percent
(10%) of the Board Determination, then a majority of the Board of Directors
(excluding such Management Stockholder) and such Management Stockholder shall
select a mutually acceptable additional qualified appraiser to make a good faith
determination of the fair per share value of such shares of Management Stock
(the "Second Appraised Value"). The Market Value Per Share of such shares of
Management Stock shall be equal to the mathematical mean of the two closest
values of the Board Determination, the Initial Appraised Value and the Second
Appraised Value. The foregoing determinations shall take into consideration (i)
the value of the Company as an ongoing entity, (ii) any and all indebtedness of
the Company for borrowed money, (iii) any and all preferred stock or class or
classes of common stock senior to the shares of Management Stock being
repurchased, and (iv) any and all cash and cash equivalents held by the Company
including any insurance proceeds paid or payable to the Company if the event
giving rise to the termination is the death of the Management Stockholder; but
without taking into consideration any minority discount.
NON-TRANSFERRING STOCKHOLDERS. See Section 3.2.
OFFER NOTICE. See Section 3.2.
OTHER STOCK. Other Stock shall mean (a) all Restricted Securities other
than Institutional Stock and (b) all shares of Stock issued with respect to the
foregoing by way of stock dividend or stock split or in connection with any
merger, consolidation, recapitalization or other reorganization affecting the
Stock. Other Stock will continue to be Other Stock in the hands of any holder
and each transferee thereof (provided that the transfer to such transferee is
permitted by this Agreement) will succeed to the rights and obligations of a
holder of Other Stock hereunder,
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provided that shares of Other Stock will cease to be shares of Other Stock when
transferred (i) pursuant to a Public Sale or an Approved Sale or (ii) to the
Company or its Subsidiaries.
OTHER STOCKHOLDERS. Other Stockholders shall mean each of Stockholders, for
so long as such Person holds shares of Other Stock, and any other Person who (i)
holds Other Stock and (ii) has executed an Instrument of Accession.
PACIFIC. See preamble.
PERMITTED TRANSFERS. See Section 3.1.
PERSON. Person shall mean an individual, partnership, corporation limited
liability company, association, trust, joint venture, unincorporated
organization, or any government, governmental department or agency or political
subdivision thereof.
PERSONAL REPRESENTATIVE. Personal Representative shall mean the successor
or legal representative (including without limitation, a guardian, executor,
administrator or conservator) of a deceased or incompetent Stockholder.
PRINCIPAL SUBSIDIARY. Principal Subsidiary shall mean Simonds Holding,
Simonds FSC and any other Subsidiary designated in writing to the Company's
Board of Directors as a, "Principal Subsidiary" by FVR, FEP, KPP and Chisholm.
PUBLIC SALE. Public Sale shall mean any sale of Restricted Securities to
the public pursuant to a public offering registered under the Securities Act or
to the public through a broker or market-maker pursuant to the provisions of
Rule 144 (or any successor rule) adopted under the Securities Act or any other
public offering not required to be registered under the Securities Act.
REGISTRATION RIGHTS AGREEMENT. Registration Rights Agreement shall mean the
Registration Rights Agreement of even date herewith among the Company and the
Stockholders pursuant to which the Stockholders are entitled to certain
registration rights in respect of the Restricted Securities as provided therein.
REMAINING INSTITUTIONAL STOCKHOLDERS. Remaining Institutional Stockholders
means those Institutional Stockholders other than the Fleet Institutional
Stockholders.
REMAINING MANAGEMENT STOCKHOLDERS. See Section 2.3(a).
RELATED AGREEMENTS. Related Agreements shall mean the Repurchase
Agreements, the Subscription Agreement and the Registration Rights Agreement.
REPURCHASE AGREEMENTS. Repurchase Agreements means those certain agreements
listed on SCHEDULE 2 hereof.
RESTRICTED SECURITIES. Restricted Securities shall mean at any particular
time all of the Company's then outstanding shares of Stock and options,
warrants, including the Warrants, and securities convertible therefor which have
not been sold in a Public Sale.
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RETIREMENT. Retirement means the retirement of a Manager at the retirement
age prescribed by any applicable employment agreement between such Manager and
the Company, or if no such agreement exists, prescribed by the Company for
employees of the Company holding positions comparable to such Manager.
SECURITIES ACT. Securities Act shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission, thereunder, all as the same shall be in
effect from time to time.
SIMONDS CANADA. Simonds Canada shall mean Simonds Industries, Inc., a
business corporation organized under the Ontario Business Corporation Act of
which Simonds Holding owns one hundred percent (100%) of the issued and
outstanding capital stock.
SIMONDS FSC. Simonds FSC shall mean Simonds Industries FSC, Inc., a
corporation formed under the laws of the U.S. Virgin Islands of which the
Company owns one hundred percent (100%) of the issued and outstanding capital
stock.
SIMONDS HOLDING. Simonds Holding shall mean Simonds Holding Company, Inc.,
a Delaware corporation of which the Company owns one hundred percent (100%) of
the issued and outstanding capital stock.
SIMONDS U.K. Simonds U.K. shall mean Simonds Industries Limited, a company
formed under the laws of the United Kingdom of which Simonds Holding owns one
hundred percent (100%) of the issued and outstanding capital stock.
STOCK. Stock shall mean (a) the Class A Common Stock, $.0l par value, and
Class B Common Stock, $.01 par value, of the Company and (b) any shares of any
other class of capital stock of the Company hereafter issued which is (i) not
preferred in the Company's Charter as to dividends or assets over any class of
stock of the Company, (ii) not subject to redemption in the Company's Charter,
or (iii) issued to the holders of shares of Stock upon any reclassification
thereof.
STOCKHOLDERS. Stockholders shall mean, initially, the Institutional
Stockholders, the Other Stockholders and thereafter any Person who becomes a
party to this Agreement by executing an Instrument of Accession in connection
with the transfer or issuance to or acquisition by such Person of any Restricted
Securities; provided that a Person shall cease to be a Stockholder hereunder at
such time as such Person ceases to own Restricted Securities.
SUBSCRIPTION AGREEMENT. Subscription Agreement shall mean the Subscription
and Investment Agreement of even date herewith among the Company, the
Institutional Stockholders and the Management Stockholders pursuant to which,
INTER ALIA, the Institutional Stockholders and the Management Stockholders
agreed to purchase Stock.
SUBSIDIARY. Subsidiary shall mean any Person of which the Company or other
specified Person now or hereafter shall at the time own directly or indirectly
through a Subsidiary at least a majority of the outstanding capital stock (or
other shares of beneficial interest) entitled to vote
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generally, including without limitation Simonds FSC, Simonds Holding,
Kowin-Simonds, Simonds U.K., Simonds Canada and Wespa.
TERMINATED MANAGER. Any Manager whose employment with the Company and its
Subsidiaries has been terminated for any reason.
TERMINATION DATE. The date on which any Manager's employment with the
Company and its Subsidiaries is terminated.
TRANSFER. See Section 3.1.
TRANSFERRING STOCKHOLDER. See Section 3.2.
WARRANTS. Warrants means those certain warrants issued to the Institutional
Holders on the date hereof listed on SCHEDULE 3 hereto.
WESPA. Wespa shall mean Wespa Metallsagenfabrik Simonds Industries GmbH, a
German business entity of which Simonds Holding owns one hundred percent (100%)
of the issued and outstanding capital stock.
Section 2. REPURCHASE RIGHTS AND OBLIGATIONS WITH RESPECT TO MANAGEMENT
STOCK.
2.1. TERMINATION FOR CAUSE; RESIGNATION.
(a) Subject to and in accordance with the other provisions of this Section
2, if the employment or other engagement by the Company or any of its
Subsidiaries of any Manager is terminated for Cause by the Company or any of its
Subsidiaries at any time after the date hereof, the Company may, but shall not
be obligated to, repurchase from such Terminated Manager and, if the Company so
elects, such Terminated Manager shall be obligated to sell to the Company, all
or any portion of such Terminated Manager's shares of Management Stock (whether
held by such Terminated Manager or such Terminated Manager's Transferees) at a
purchase price share equal to the lowest of (i) four hundred fifty-eight dollars
and 52/100 ($458.52) per share reduced by Book Value Per Share Decrease, if any,
(ii) the Market Value Per Share determined as of the applicable Termination Date
or (iii) the Market Value Per Share determined as of the date of the first to
occur of (a) the effective date of any Public Sale or (b) the effective date of
the sale of the Company (whether by merger, consolidation, sale of all or
substantially all of the Company's assets or of the assets of the Subsidiaries,
or sale of all the outstanding shares of Stock). The purchase price payable in
such event shall be paid in accordance with the provisions of Section 2.3
hereof.
(b) Subject to and in accordance with the other provisions of this Section
2, if the employment or other engagement by the Company or any of its
Subsidiaries of any Manager is terminated by reason of such Manager's
resignation (other than by reason of Retirement) at any time after the date
hereof, the Company may, but shall not be obligated to, repurchase from such
Terminated Manager and, if the Company so elects, such Terminated Manager shall
be obligated
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to sell to the Company, all or any portion of such Terminated Manager's shares
of Management Stock (whether held by such Terminated Manager or such Terminated
Manager's Transferees) at a purchase price share equal to four hundred
fifty-eight dollars and 52/100 ($458.52) per share increased or decreased as the
case may be by the Book Value Per Share Change determined as of the Applicable
Termination Date. The purchase price payable in such event shall be paid in
accordance with the provisions of Section 2.3 hereof.
2.2. DEATH, DISABILITY OR TERMINATION WITHOUT CAUSE. Subject to and in
accordance with the other provisions of this Section 2, if the employment or
other engagement by the Company or any of its Subsidiaries of any Manager is
terminated at any time by reason of such Manager's death or Disability, or if
the Company or any of its Subsidiaries terminates such Manager's employment
other than for Cause, then the Company may, but shall not be obligated to,
repurchase from such Terminated Manager or such Terminated Manager's Personal
Representative, as applicable, all or any portion of such Terminated Manager's
Management Stock (whether held by such Terminated Manager or such Terminated
Manager's Family Transferees) at a purchase price per Share equal to the higher
of (i) the Market Value Per Share or (ii) the Book Value Per Share Increase,
determined as of the applicable Termination Date. The purchase price payable in
such event shall be paid in accordance with the provisions of Section 2.3
hereof.
2.3 REPURCHASE CLOSINGS.
(a) In the event that the Company elects to exercise its call rights
pursuant to this Section 2, the Company shall deliver written notice to the
Terminated Manager or such Terminated Manager's Personal Representative, as
applicable, (the "Exercise Notice") specifying the number of shares of
Management Stock to be repurchased within 90 days following the applicable
Termination Date. The repurchase of such shares pursuant to the exercise of such
call shall be completed at the Company's principal office within 30 days after
delivery of the Exercise Notice, except as otherwise provided in Section 2.3(b)
or Section 2.3(d) below. In the event that the Company fails to deliver an
Exercise Notice within 90 days following the later of the applicable Termination
Date or the date on which a Personal Representative is appointed for such
Terminated Manager, if applicable, (i) the call rights under this Section 2 with
respect to the Terminated Manager's Management Stock shall terminate, (ii) the
Company shall deliver written notice of the same (the "Company Call Expiration
Notice") to each other Management Stockholder (the "Remaining Management
Stockholders") and (iii) each of the Remaining Management Stockholders may
elect, by delivery of written notice to the Company within 15 days after
delivery of the Company Call Expiration Notice, to repurchase all or any Portion
of such Terminated Manager's Management Stock that is subject to the Company's
call rights for cash at the same price as the Company would have paid for such
Management Stock had the Company exercised its call rights with respect thereto
pursuant to this Section 2. In the event that the aggregate number of shares
which the Remaining Management Stockholders elect to purchase exceeds the total
number of shares of such Terminated Manager's Management Stock that is subject
to the Company's call rights, each Remaining Management Stockholder will be
entitled to purchase a PRO RATA portion of such shares based upon the respective
number of such shares which each Remaining Management Stockholder had elected to
purchase. The repurchase
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of such shares by the Remaining Management Stockholders shall be completed at
the Company's principal office within 30 days after delivery of the Company Call
Expiration Notice, except as otherwise provided by Section 2.3(d). In the event
that any remaining Management Stockholder fails to notify the Company of his
election to repurchase any shares of Management stock of the Terminated Manager
within 15 days after the applicable Company all Expiration Notice or, except as
otherwise provided in Section 2.3(d), fails to tender cash payment of the
purchase price for such shares at the Company's principal office within 30 days
following such Company Call Expiration Notice, the call rights of such Remaining
Management Stockholder with respect to such Terminated Manager's Management
Stock shall lapse. At any closing of any purchase of any shares of Management
Stock pursuant to this SECTION 2 other than the purchase of shares under Section
2.1(a) hereof (as to which the Company or the purchasing Management Stockholders
have elected the special purchase option provided for in Section 2.3(d)), the
Terminated Manager, the Terminated Manager's Personal Representative and any
Family Transferees (subject to Section 2.4) shall deliver to the Company, or the
purchasing Management Stockholders, as applicable, duly endorsed stock
certificates for the shares of Management Stock being repurchased by the
Company, or the purchasing Management Stockholders, as applicable, against
receipt of such Person's check for the purchase price therefor, subject to the
provisions of Sections 2.3(b) and (c) below.
(b) Notwithstanding the foregoing, in the event that the payment by the
Company of any portion of the purchase price for any shares of Management Stock
that the Company is entitled to, repurchase pursuant to this Section 2 is, at
the time such payment would otherwise be due hereunder, prohibited by law due to
any existing or prospective impairment of the Company's capital, or by the terms
of any documents evidencing the Company's Indebtedness, as such term is defined
in the Subscription Agreement (a "Lender Prohibition"), the Company shall
continue to have the right to repurchase such Management Stock, but the closing
of the repurchase by the Company of any remaining unrepurchased Management Stock
shall be delayed until first date on which the Company has sufficient capital to
purchase lawfully such Management Stock or until any such Lender Prohibition is
no longer applicable (the "Delayed Closing Date"). In the event of any such
delay, the Company will be obligated to pay, on the Delayed Closing Date,
interest on the purchase price (as such purchase price may be adjusted as of the
payment date pursuant to Section 2.3(d) hereof) for such Management Stock, at a
floating rate equal to the Base Rate, from the 120th day following the
applicable Termination Date, until such Delayed Closing Date. Until such Delayed
Closing Date, the holders of any shares of Management Stock to be repurchased on
such Delayed Closing Date shall retain all rights of Management Stockholders
hereunder, except that if the Company's call right arises under Section 2.1
hereof, such holders shall have only the rights of stockholders under the
Delaware General Corporation law, as amended at the time of reference thereto.
Notwithstanding the foregoing provisions of this Section 2.3(b), in the event
that such Delayed Closing Date does not occur within 90 days following the
applicable Termination Date, or at such later time as may be required by Section
2.3(d), the Company shall deliver written notice of the same to each Management
Stockholder other than the Terminated Manager and each such Management
Stockholder may elect by delivery of written notice to the Company to repurchase
such Management Stock. Any such repurchase by the Management Stockholders shall
be completed in accordance with the provisions of Section 2.3(a) within 30 days
following delivery of such
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notice. In the event that such Management Stockholders fail to complete such
repurchase of Management Stock by the end of such 30 day period, then (i) the
call rights of such Management Stockholders with respect to such Management
Stock shall terminate and (ii) such Management Stock shall once again be subject
to the call rights of the Company pursuant to Section 2.3(a).
(c) Notwithstanding the foregoing, the Company shall be entitled to
complete the repurchase of any shares of Management Stock that the Company is
entitled to repurchase pursuant to this Section 2 other than the purchase of
shares under Section 2.1(a) hereof (as to which the Company or the purchasing
Management Stockholders have elected the special purchase option provided for in
Section 2.3(d)) by delivering to the appropriate Terminated Manager or his
Personal Representative or Family Transferees (A) a check for that portion of
the purchase price which is equal to the Minimum Cash Amount (as defined below)
and (B) a promissory note for the balance of the purchase price (including any
interest accrued on such purchase price pursuant to paragraph (b) above). Each
such promissory note shall (x) bear interest at a floating rate equal to the
Base Rate, and (y) provide for the payment of the principal evidenced thereby in
three equal annual installments commencing one year after such repurchase, and
(z) be subordinated to the Company's indebtedness to its lenders on terms
satisfactory to such lenders. For purposes of this Section 2.3(c), the term
"Minimum Cash Amount" shall mean one quarter of the total purchase price due
with respect to such Management Stock except in the case of Management Stock
initially held by Nancy Bent, which shall have a Minimum Cash Amount equal to
the total purchase price due with respect to such Management Stock.
(d) In the case of a purchase of shares under Section 2.1)(a), and subject
to Section 2.3(b), the purchase price may, at the option of the Company, or the
purchasing Management Stockholders, as applicable, be payable in full, without
interest, on the earliest of (i) the effective date of any Public Sale or (ii)
the effective date of any sale of the Company (whether by merger, consolidation,
sale of all or substantially all of the Company's or of the assets of the
Subsidiaries, or sale of all of the outstanding shares of Stock) or (iii) July
7, 2005. If payment is required prior to July 7, 2005 due to the occurrence of
(a) a Public Sale or (b) a sale of the Company, (either of the occurrences
specified in subparagraph (a) or subparagraph (b) of this sentence are hereafter
referred to as a "Triggering Event") the purchase price shall be redetermined as
of the date of the Triggering Event pursuant to the formula set forth in Section
2.l(a). In such event, the Terminated Manager, the Terminated Manager's Personal
Representative and Family Transferees shall deliver to the Company, or the
purchasing Management Stockholders, as applicable, within 30 days after delivery
of the Exercise Notice referred to in Section 2.3(a), duly endorsed stock
certificates for the shares of Management Stock being repurchased by the
Company, or the purchasing Management Stockholders, as applicable, against
receipt of such Person's promissory note containing the terms set forth in the
preceding sentence. The promissory note may state the amount due as the figure
representing the lower of (i) four hundred fifty-eight dollars and 52/100
($458.52) per share reduced by Book Value Decrease, if any, and (ii) the Market
Value Per Share, as of the Termination Date multiplied in either case by the
number of shares of Management Stock subject to repurchase under Section 2.1(a),
provided that the note expressly states that the purchase price is subject to
redetermination upon the occurrence of a Triggering Event based on the lowest of
(i) four hundred fifty-eight dollars and 52/100 ($458.52) per share, reduced by
Book Value Decrease, if any, (ii) the Market
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Value Per Share determined as of the applicable Termination Date and (iii) the
Market Value Per Share determined as of the date of the Triggering Event.
2.4. REPURCHASE OF STOCK HELD BY FAMILY TRANSFEREES. The repurchase
provisions set forth of this Section 2 shall bind and apply to each Manager's
Family Transferees and all Management Stock transferred to such Family
transferees pursuant to Section 3 hereof, and upon termination of such Manager's
employment or other engagement with the Company or the death or Disability of
such manager, all Management Stock so Transferred shall be subject to repurchase
as provided in this Section 2.
2.5. PRIORITY OF REPURCHASES. In the event that (a) any Terminated Manager
has transferred any or all of his shares of his shares of Management Stock to a
Family Transferee and (b) such shares of Management Stock are subject to
repurchase pursuant to this Section 2, the Company shall repurchase the shares
of Management Stock it is entitled to repurchase pursuant to this Section 2 from
such Terminated Manager and the Family Transferees of such Terminated Manager
PRO RATA in accordance with the number of shares of Management Stock held by
such Terminated Manager and each such Family Transferee. The repurchase price
for the shares of Management Stock so repurchased shall be payable to such
Terminated Manager and such Terminated Manager's Family Transferees PRO rata,
both as to the portion of the purchase price evidenced by a check and that
portion evidenced by a promissory note (in accordance with Section 2.3 above),
in accordance with the numbers of repurchased shares of Management Stock held by
each such Person.
2.6 RIGHT OF FLEET INSTITUTIONAL STOCKHOLDERS TO APPROVE REPURCHASE OF
MANAGEMENT STOCK. Notwithstanding anything to the contrary, the Company's
exercise of its call rights pursuant to this Section 2 shall be subject to the
prior Consent of the Fleet Institutional Stockholders.
Section 3. RESTRICTIONS ON TRANSFER OF SHARES.
3.1 TRANSFER. No Stockholder will sell, assign, pledge or otherwise
transfer (a "Transfer") any interest in any Restricted Securities, either
voluntarily or involuntarily, by operation of law or otherwise, except (a) in
the case of any Institutional Stockholder (other than Bates) in compliance with
the provisions of Sections 3.2, 3.3, 3.4, and 3.5 hereof and the requirements of
any applicable federal or state securities laws, (b) in the case of any of the
Other Stockholders and Bates: (i) to such Stockholder's Family Members, provided
that such Stockholder has retained the right to exercise all voting rights
attributable to the Restricted Securities so transferred, (ii) to such
Stockholder's Personal Representative, or (iii) to the Company pursuant to the
terms of this Agreement or with the prior Consent of the Fleet Institutional
Stockholders, (c) pursuant to a Public Sale or an Approved Sale, or (d)
transfers of the Institutional Stock among the Institutional Stockholders or (d)
a transfer of up to a total of 1,304 shares of stock by Ross B. George and/or
Joseph L. Sylvia to employees of the Company within 30 days from the date of
this Agreement (collectively, "Permitted Transfers"); PROVIDED that (x) the
restrictions contained in this Section 3.1 will continue to be applicable to the
Restricted Securities after any such Permitted Transfer pursuant to clause (a),
(b), (c) or (d)
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above other than a Permitted Transfer to the Company and (y) the transferee of
such Restricted Securities pursuant to this Section 3.1 above shall have
executed and delivered an Instrument of Accession as a condition precedent to
the transfer thereof.
3.2 FIRST RIGHT OF PURCHASE. Any Institutional Stockholder (other than
Bates) may Transfer any interest in any Restricted Securities to any transferee
PROVIDED that any such Transfer shall be made in accordance with the provisions
of this Section 3.2 and Sections 3.3 and 3.4 and in compliance with the
requirements any applicable federal or state securities laws. At least 30 days
prior to making any such Transfer of any Institutional Stock, the transferring
Institutional Stockholder (the "Transferring Stockholder") will deliver a
written notice (the "Offer Notice") to each of the other Institutional
Stockholders. The Offer Notice will disclose in reasonable detail the proposed
number of shares of Restricted Securities to be transferred, the type of such
Restricted Securities, the proposed price, terms and conditions of the Transfer
and the identity of the transferee. Any Institutional Stockholder may elect (by
itself or through an Affiliate of such Institutional Stockholder) to purchase
all of the shares of any Restricted Securities specified in any Offer Notice
given by a Transferring Stockholder at the price and on the terms specified
therein by written notice of such election to the Transferring Stockholder
within 30 days after delivery of such Offer Notice (the "Institution Election
Period"). If any of the Institutional Stockholders elects to purchase all of
such Restricted Securities, the Transfer of the Restricted Securities will be
consummated within 15 days after the expiration of the Institution Election
Period. If more than one Institutional Stockholder elects to purchase all of the
Restricted Securities to be transferred, each Institutional Stockholder electing
to purchase such Restricted Securities will be entitled to purchase a PRO RATA
portion (based upon the respective numbers of shares of Restricted Securities
then held by such Institutional Stockholders (on a fully diluted basis)) of the
Restricted Securities proposed to be transferred. If none of the Institutional
Stockholders elects to purchase all of the Restricted Securities being offered,
the Transferring Stockholder may, within 90 days after the expiration of the
Institution Election Period, Transfer the Restricted Securities specified in the
Offer Notice to one or more third parties specified in the Offer Notice at a
price and on terms no more favorable to the transferees than the price and terms
offered to the Institutional Stockholders in the Offer Notice, PROVIDED that no
such Transfer may be completed except in compliance with Section 3.3 and unless
each of such transferees shall have executed and delivered an Instrument of
Accession as a condition precedent to the transfer thereof. If the Transferring
Stockholder fails to consummate such transfer within the 90 day period after the
expiration of the Institution Election Period, any subsequent proposed Transfer
of the Restricted Securities shall be once again subject to the provisions of
this Section 3.2.
3.3. PARTICIPATION RIGHTS. (a) In the event that the other Institutional
Stockholders fail to purchase the Restricted Securities specified in the Offer
Notice, the Transferring Stockholder shall offer, by written notice (the
"Tag-along Notice") each of the other Institutional Stockholders and each of the
Other Stockholders (the "Non-Transferring Stockholders") the opportunity to
participate in such sale, subject to the provisions of subparagraph (b) of this
Section 3.3. Each of the Non-Transferring Stockholders may elect to participate
in the contemplated sale by delivering written notice to the Transferring
Stockholder within 15 days after receipt of the Tag-along Notice. If any of the
Non-Transferring Stockholders elects to
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participate in such sale (the "Tag-along Sale"), each of the Transferring
Stockholder and such participating Non-Transferring Stockholders will be
entitled to sell, in the contemplated sale, at the same price and on the same
terms, a number of shares of Restricted Securities of the class proposed to be
sold equal to the product of (i) the fraction, the numerator of which is the
number of shares of Restricted Securities (on a fully-diluted basis, treating
all classes of Restricted Securities as a single class) held by such Person, and
the denominator of which is the aggregate number of shares of Restricted
Securities (on a fully-diluted basis, treating all classes of Restricted
Securities as a single class) owned by the Transferring Stockholder and such
participating Non-Transferring Stockholders, MULTIPLIED BY (ii) the number of
shares of Restricted Securities (on a fully diluted basis) to be sold in the
contemplated sale.
For example, if the notice from the Transferring Stockholder contemplated a
sale of 100 shares of Restricted Securities by the Transferring Stockholder and
the Transferring Stockholder at such time owns 300 shares of Restricted
Securities, and if one Non-Transferring Stockholder elects to participate in
such sale and such Non-Transferring Stockholder owns 200 shares of Restricted
Securities (on a fully-diluted basis), such Transferring Stockholder would be
entitled to sell 60 shares (300/500 x 100 shares) and such Non-Transferring
Stockholder would be entitled to sell 40 shares (200/500 x 100 shares).
(b) The Transferring Stockholder will use its best efforts to obtain the
agreement of the prospective transferee(s) to the participation of the
Non-Transferring Stockholders in any contemplated sale and will not transfer any
of its Restricted Securities to the prospective transferee(s) if the prospective
transferee(s) declines to allow the participation of the Non-Transferring
Stockholders on the terms specified herein.
(c) The Non-Transferring Stockholders electing to participate in the
Tag-Along Sale shall bear their PRO RATA share of transaction costs incurred in
connection with such Tag-Along Sale to the extent such costs would otherwise be
borne by the Transferring Stockholder. To the extent a Non-Transferring
Stockholder(s) elects not to participate in any Tag-Along Sale, the Transferring
Stockholder may sell additional shares of Institutional Stock in an amount equal
to the aggregate number of shares of Institutional Stock such Non-Transferring
Stockholder(s) would otherwise be entitled to sell pursuant to such Tag-Along
Sale.
3.4. EXEMPTED TRANSFERS. Notwithstanding any provision to the contrary, (a)
any Institutional Stockholder may Transfer shares of Institutional Stock to a
successor corporation or other successor entity as a result of a merger or
consolidation with, or a sale of all or substantially all of the assets of, such
Institutional Stockholder or a transfer to one or more of its Affiliates or, if
a general or limited partnership, in connection with the liquidation and
dissolution of such partnership, without the requirement of complying with
Sections 3.2 and 3.3 hereof and (b) any Institutional Stockholder may Transfer
shares of Institutional Stock to the extent required by governmental rule, law
or regulation, or any directive or order of any governmental authority without
the requirement of complying with Section 3.3 hereof. Any transferee of shares
pursuant to this Section 3.4 shall become a party to this Agreement and execute
an Instrument of Accession.
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Section 3.5. REGULATORY COMPLIANCE COOPERATION.
(i) In the event that FVR, FEP, or any other Institutional Stockholder that
is a Small Business Investment Company within the meaning of the Small Business
Investment Act of 1958, as amended or is subject to regulation under the Bank
Holding Company Act of 1956, as amended (a "Regulated Holder") determines that
it has a Regulatory Problem (as defined below), such Regulated Holder shall have
the right to transfer its Stock without regard to any restriction on transfer
set forth in this Agreement other than the securities laws restrictions set
forth in Section 3.1 (provided that the transferee agrees to become a party to
this Agreement and executes an Instrument of Accession), and the Company shall
take all such actions as are reasonably requested by such Regulated Holder in
order to (a) effectuate and facilitate any transfer by such Regulated Holder of
any securities of the Company then held by such Regulated Holder to any Person
designated by such Regulated Holder, (b) permit such Regulated Holder (or any of
its affiliates) to exchange all or any portion of any voting security then held
by it on a share-for-share basis for shares of a nonvoting security of the
Company, which nonvoting security shall be identical in all respects to the
voting security exchanged for it, except that it shall be nonvoting and shall be
convertible into a voting security on such terms as are requested by such
Regulated Holder in light of regulatory considerations then prevailing, and (c)
amend this Agreement, the Company's Charter, the Company's bylaws and related
agreements and instruments to effectuate and reflect the foregoing. The parties
to this Agreement agree to vote their securities in favor of such amendments and
actions. The Company shall give reasonable prior notice to each Regulated
Holder, if such Regulated Holder does not otherwise receive notice thereof
hereunder, of any repurchase or redemption of Stock, or other corporate
transaction, that would increase such Regulated Holder's percentage ownership of
the Stock or any class thereof.
(ii) For purposes of this Agreement, a "Regulatory Problem" means any set
of facts or circumstances wherein it has been asserted by any governmental
regulatory agency (or any Regulated Holder believes that there is a substantial
risk of such assertion) that such Regulated Holder is not entitled to hold, or
exercise any significant right with respect to, the Stock.
Section 4. CERTAIN REGISTRATION RIGHTS.
Each of the parties to this Agreement, contemporaneously with the execution
and delivery hereof, has executed and delivered the Registration Rights
Agreement.
Section 5. SALE OF THE COMPANY.
5.1 CONSENT OF OTHER STOCKHOLDERS. In the event of (i) the sale of the
Company (whether by merger, consolidation, sale of all or substantially all of
the Company's assets or of the assets of the Subsidiaries, or sale of all of the
outstanding shares of Stock) to a third party which is not an Affiliate of a
Fleet Institutional Stockholder or (ii) the offer by the Company to repurchase
shares of Stock held by each Stockholder on a PRO RATA basis, is approved by the
Consent of the Fleet Institutional Stockholders (an "Approved Sale"), each of
the Remaining Institutional Stockholders and the Other Stockholders hereby
waives, to the extent permitted by applicable law, all rights to object to or
dissent from such Approved Sale of the Company and hereby agrees that each will
raise no objections against such Approved Sale of the Company.
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Each of the Remaining Institutional Stockholders and the Other Stockholders
agree to vote their respective Restricted Securities entitled to vote to approve
the terms of any such Approved Sale and any matters ancillary thereto as may be
necessary in the judgment of the Fleet Institutional Stockholders, acting by
Consent of the Fleet Institutional Stockholders, to effect such Approved Sale.
If the Approved Sale of the Company is structured as a sale of stock, each of
the Remaining Institutional Stockholders and the Other Stockholders agree to
sell all of their respective shares of Stock (and any options, warrants
including the Warrants, or other rights to acquire any Stock) on the terms and
conditions approved by Consent of the Fleet Institutional Stockholders. The sale
provisions set forth in this Section 5.1 shall bind and apply to each Family
Transferee and all Stock transferred to such Family Transferees pursuant to
Section 3 hereof.
5.2. OBLIGATIONS OF STOCKHOLDERS.
(a) The Company, the Remaining Institutional Stockholders and the Other
Stockholders hereby agree to cooperate fully in any Approved Sale and not to
take any action prejudicial to or inconsistent with such sale. Without limiting
the generality of the foregoing, the Remaining Institutional Stockholders and
the Other Stockholders will, upon request, deliver their stock (together with
executed instruments of transfer) in escrow (pending receipt of the purchase
price therefor) to counsel for the Company (selected by the Fleet Institutional
Stockholders) in such sale.
(b) The Company shall cause its officers, employees, agents, contractors
and others under its control to cooperate in any proposed sale pursuant to this
Section 5.1 and not to take any action which might impede any such sale. Any
resignation or threat thereof prior to closing of such Approved Sale by any
Manager shall be regarded as a breach of this provision. Pending the completion
of any proposed sale, the Company shall operate only in the ordinary course and
shall maintain all existing business relationships in good standing.
5.3 CONDITIONS. The obligations of each Remaining Institutional Stockholder
and each Other Stockholder with respect to the Approved Sale of the Company are
subject to the satisfaction of the condition that, upon the consummation of the
Approved Sale, each Remaining Institutional Stockholder and each Other
Stockholder will receive that form and amount of consideration per share of
outstanding Stock given to all other holders of Stock (in their capacity as
stockholders) pursuant to the Company's Charter and, if any holder of Stock is
given an option as to the form and amount of consideration to be received, each
Remaining Institutional Stockholder and each Other Stockholder will be given the
same option. In addition, in connection with any such Approved Sale, each
Remaining Institutional Stockholder and each Other Stockholder shall share all
indemnifications, escrows and other liabilities incurred in connection with any
such Approved Sale on a pro rata basis with all Stockholders based upon their
relative holdings of Stock and such respective liability shall, except as
provided in the next sentence, be in all events limited to an amount equal to
the consideration received by each Stockholder pursuant to such Approved Sale.
In the case of liabilities relating to knowing or intentional misrepresentation,
it shall not be required that the liability of each Stockholder be
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limited to an amount equal to the consideration received by each Stockholder
pursuant to such Approved Sale.
Section 6. LIMITED PRE-EMPTIVE RIGHTS.
6.1. ANTI-DILUTION PROVISION. Except for the issuance of Stock (or
securities convertible into or containing options or rights to acquire shares of
Stock) (i) pursuant to a Public Sale, (ii) pursuant to the Warrants, (iii)
pursuant to the exercise of stock options issued pursuant to the Employee Stock
Option Plan or exercise of the Executive Stock Options, (iv) upon conversion of
shares of Class B Common Stock of the Company to Class A Common Stock of the
Company pursuant to the Company's Charter, and (v) upon the exercise of any
outstanding warrants or options or the conversion of any outstanding convertible
securities the issuance of which does not violate the provisions of this Section
6, if the Company authorizes the issuance and sale of any shares of Stock or any
securities convertible into or containing options or rights to acquire any
shares of Stock (other than as a dividend on the outstanding Stock), the Company
will first offer to sell to each of the Stockholders a portion of such
securities equal to the percentage determined by dividing (A) the sum of (1) the
number of shares of Stock held by such Stockholder and (2) the number of shares
of Stock then purchasable by such Stockholder upon the exercise of all
outstanding options and warrants and the conversion of all outstanding
convertible securities held by such Stockholder, by (B) the sum of (x) the
number of shares of Stock held by all Stockholders and (y) the number of shares
of Stock then purchasable upon exercise of all outstanding options and warrants
and the conversion of all outstanding convertible securities held by all
Stockholders. Each Stockholder will be entitled to purchase all or part of such
stock or securities at the same price and on the same terms as such stock or
securities are to be offered to any other Persons. Each Institutional
Stockholder may assign its rights and obligations under this Section 6 to an
Affiliate of such Institutional Stockholder.
6.2 STOCKHOLDERS' EXERCISE OF RIGHT. Each Stockholder must exercise such
Stockholder's purchase rights hereunder within 30 days after receipt of written
notice from the Company describing in reasonable detail the stock or securities
being offered, the purchase price thereof, the payment terms and such
Stockholder's percentage allotment. If all of the stock or securities offered to
the Stockholders are not fully subscribed by the Stockholders, the stock or
securities which are not so subscribed for will be reoffered to the Stockholders
purchasing their full allotment upon the terms set forth in this Section 6,
except that such Stockholders must exercise their purchase rights within 15 days
after receipt of such reoffer.
6.3 COMPANY'S EXERCISE OF RIGHT. Upon the expiration of the offering
periods described above, the Company will be free to sell such stock or
securities which the Stockholders have not elected to purchase during the 90
days following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to the Stockholders. Any stock or
securities offered or sold by the Company after such 90-day period must be
reoffered to the Stockholders pursuant to the terms of this Section 6.
6.4 COMPLIANCE WITH SUBSCRIPTION AGREEMENT AND APPLICABLE LAW. The Company
and each Stockholder hereby acknowledges and agrees that, notwithstanding
anything contained
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in this Section 6, the Company will not issue or sell any shares of Stock or any
securities convertible into or containing options or rights to acquire any
shares of Stock except in accordance with the provisions of the Subscription
Agreement, the Securities Act and applicable state blue sky laws and except to
purchasers who execute Instruments of Accession in accordance with Section 13
hereof.
Section 7. BOARDS OF DIRECTORS.
7.1 BOARDS OF DIRECTORS: VOTING AGREEMENTS; ATTENDANCE RIGHTS.
(a) In any and all elections of directors of the Company and any Principal
Subsidiary (whether at a meeting or by written consent in lieu of a meeting),
each Stockholder shall vote, or cause to be voted, or cause such Stockholder's
designees as directors to vote, all shares of Stock or stock of any Subsidiary
owned by such Stockholder or over which such Stockholder has voting control so
as to fix the number of directors of each of the Company and each Principal
Subsidiary at five, and to nominate and elect such five directors of each of the
Company and each Principal Subsidiary as follows:
(i) One individual designated by Chisholm;
(ii) One individual designated by FEP;
(iii) One individual designated by FVR; and
(iv) Ross B. George and Joseph L. Sylvia during the period of their
employment by the Company and, upon their resignation or termination of their
employment for any reason, two individuals designated by the Company's then
current Chief Executive Officer (the "Company's CEO").
If Chisholm, FEP, FVR or the Company's CEO, as applicable, choose not to
designate one or more directors as provided above, the number of directors of
each of the Company and each Principal Subsidiary shall be reduced by one, two,
three, four or five, as applicable, until such time as Chisholm, FEP, FVR or the
Company's CEO, as applicable, exercise their or his rights as provided above, at
which time the number of directors of each of the Company and each Principal
Subsidiary shall be increased by one, two, or three, four or five, as
applicable.
(b) If any vacancy shall occur in the Board of Directors of the Company or
of any Principal Subsidiary as a result of death, disability, resignation or any
other termination of a director, the replacement for such vacating director
shall be designated by the Person who, pursuant to Section 7.1(a) above,
originally designated such vacating director. Each Person entitled to designate
a director pursuant to this Section 7 shall also be entitled to designate the
removal of such director with or without cause and a replacement for any
director so removed. Each Stockholder hereby agrees to vote or cause to be voted
or cause such Stockholder's designees as directors to vote all shares of Stock
owned by such Stockholder so as to comply with; this Section 7.1(b).
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(c) Pacific and First Union shall each have the right to designate a
representative to attend all meetings of the Board of Directors in a nonvoting
observer capacity, to receive a notice of such meetings and to receive the
information provided by the Company to the Board of Directors; provided,
however, that the Company may require as a condition precedent to the rights
under this Section 7.1(c) that each person proposing to attend any meeting of
the Board of Directors and each person to have access to any of the information
provided by the Company to the Board of Directors shall agree to hold in
confidence and trust and to act in a fiduciary manner with respect to all
information so received during such meetings or otherwise and provided, further,
that the Company reserves the right not to provide information and to exclude
such representatives from any meeting or portion thereof if delivery of such
information or attendance at such meeting by such representatives would
adversely affect the attorney-client privilege between the Company and its
counsel. The right of First Union or Pacific to designate a representative
hereunder shall terminate as to First Union or Pacific, as the case may be, upon
the dissolution or liquidation of the designating party.
7.2 PROXY. EACH STOCKHOLDER HEREBY GRANTS TO THE COMPANY AN IRREVOCABLE
PROXY, COUPLED WITH AN INTEREST, TO VOTE ALL SHARES OF STOCK TO THE EXTENT
NECESSARY TO CARRY OUT THE PROVISIONS OF THIS SECTION 7 IN THE EVENT OF ANY
BREACH BY SUCH STOCKHOLDER OF ITS OBLIGATIONS UNDER THE VOTING AGREEMENT
CONTAINED HEREIN.
7.3 ACTION BY STOCKHOLDERS. Each Stockholder will not vote any shares owned
by such Stockholder or over which such Stockholder has voting control or take
any action by written consent, or take any other action as a stockholder of the
Company, to circumvent the voting arrangements required by this Section 7.
Without limiting the generality of the foregoing, each Stockholder agrees not to
(i) vote any shares owned by such Stockholder or over which such Stockholder has
voting control, or take any other action as a stockholder of the Company, to
approve any corporate action or transaction by the Company not previously
approved by the Board of Directors of the Company in accordance with this
SECTION 7 or (ii) commence or maintain any shareholder's derivative suit
challenging any action or transaction approved by the Company's Board of
Directors. The limitation set forth in Section 7.3(ii) shall not apply to a
shareholder's derivative suit which involves solely allegations of intentional
fraud or allegations that any such action or transaction was made in violation
of this Agreement or the Subscription Agreement.
7.4 DELEGATION OF VOTING POWER. By execution of this Agreement, Bates
hereby delegates to each of the Fleet Institutional Stockholders, acting by
Consent of the Fleet Institutional Stockholders, all right, power, and authority
to vote or cause to be voted all shares of Stock owned by such Stockholder and
to exercise any and all voting and consent rights attributable to such
Stockholder under this Agreement as such Fleet Institutional Stockholders shall
determine in their sole discretion, and, in any event, agrees to vote or cause
to be voted all shares of such stock owned by such Stockholder and to exercise
any such voting and consent rights attributable to such Stockholder under this
Agreement as such Fleet Institutional Stockholders shall direct in their sole
discretion.
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Section 8. LEGEND. So long as any shares of Restricted Securities are
subject to this Agreement, all certificates or instruments representing the
Restricted Securities will have imprinted on the following legend:
"The [shares] [warrant] evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended. No transfer, sale or
other disposition of these [shares] [warrants] may be made unless a Registration
Statement with respect to these [shares] [warrants] has become effective under
said Act, or Simonds Industries Inc. (the "Company") has been furnished with an
opinion of counsel reasonably satisfactory to the Company that such registration
is not required.
The [shares] [warrant] represented by this certificate are subject to the
terms of a certain Stockholder Agreement, dated as of July 7, 1998, among the
issuer of this [certificate] [warrant] and certain investors. The Stockholder
Agreement contains certain restrictive provisions relating to the [voting and
transfer of shares of the stock represented hereby] [the transfer of the warrant
represented hereby and the voting and transfer of the shares of stock issuable
upon the exercise of the warrant represented hereby]. A copy of the Stockholder
Agreement is on file at the Company's principle offices. Upon written request to
the Company's Secretary, a copy of the Stockholder Agreement will be provided
without charge to appropriately interested persons."
Section 9. AMENDMENT AND WAIVER. 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 Consent of the Institutional Stockholders and the holders of at least
51% of the total number of outstanding shares of Management Stock.
Section 10. 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, but if any
provisions 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.
Section 11. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein and in the Related Agreements, this document embodies the complete
agreement and understanding among the parties hereto with respect to the subject
matter hereof and thereof and supersedes and preempts any prior understandings,
agreements or representation by or among the parties, written or oral, which may
have related to the subject matter hereof in any way.
Section 12. SUCCESSORS AND ASSIGNS. This Agreement will bind and inure to
the benefit of and be enforceable by (i) the company and its successors and
assigns and (ii) the Stockholders and any subsequent holders of Restricted
Securities and the respective successors and assigns of each of them so long as
they hold Restricted Securities.
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Section 13. NEW STOCKHOLDERS. The Company will not issue any shares of
capital stock or enter into any commitment, conditional or otherwise, to do so
unless the holder or transferee of such stock or commitment shall have first
executed an Instrument of Accession if such Person is not already a party to
this Agreement.
Section 14. COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which will be an original and all of which taken together
will constitute one and the same agreement.
Section 15. REMEDIES. The Stockholders will be entitled to enforce their
rights under this Agreement specifically (without posting a bond or other
security), 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 law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce or prevent any violation of the provisions of this Agreement. In the
event of any dispute involving the terms of this Agreement, the prevailing party
shall be entitled to collect reasonable fees and expenses incurred by the
prevailing party in connection with such dispute from the other parties to such
dispute.
Section 16. EMPLOYMENT. Nothing contained in this Agreement is intended to
create for any Management Stockholder who is an employee of the Company or any
of its Subsidiaries a right to continue employment with the Company or
employment in the same position or on the same terms as those currently in
effect.
Section 17. NOTICES. Any notice provided for in this Agreement will be in
writing and will be deemed properly delivered if either personally delivered or
mailed certified or registered mail, return receipt requested, postage prepaid
to the recipient at the address listed for such Stockholder in the stock records
of the Company. The Company agrees to make available to each Stockholder upon
request an address list of all Stockholders to ensure correct delivery of all
notices hereunder.
Section 18. TERMINATION. This Agreement will terminate upon the earliest to
occur of (i) the completion of the distribution of the proceeds of an Approved
Sale under Section 5.1(i) to the Stockholders, (ii) the date on which no
Institutional Stock remains outstanding, (iii) the completion of any voluntary
or involuntary liquidation or dissolution of the Company, and (iv) the
completion of any Public Sale resulting in gross proceeds to the Company of at
least $50 million.
Section 19. NO EFFECT UPON LENDING RELATIONSHIPS. Notwithstanding anything
herein to the contrary, nothing contained in this Agreement shall affect, limit
or impair the rights and remedies of Heller or any other lender in their
capacity as a lender(s) to the Company or any of its Subsidiaries pursuant to
any agreement under which the Company or any of its Subsidiaries has borrowed
money.
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Section 19. GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF
THE STATE OF DELAWARE.
Section 20. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
SIGNATURES APPEAR ON THE NEXT PAGE
24
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Stockholder Agreement on the day and year first above written.
THE COMPANY:
------------
SIMONDS INDUSTRIES, INC.
By:
----------------------------------------
Title:
-------------------------------------
INSTITUTIONAL STOCKHOLDERS:
---------------------------
FLEET VENTURE RESOURCES, INC.
By:
----------------------------------------
Title:
-------------------------------------
Address: 50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attention: Habib Y. Gorgi, President
FLEET EQUITY PARTNERS VI, L.P.
By: FLEET GROWTH RESOURCES II,
INC., its general partner
By:
----------------------------------------
Title:
-------------------------------------
Address: 50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attention: Habib Y. Gorgi, President
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CHISHOLM PARTNERS III, L.P.
By: Silverado III, L.P., Its General Partner
By: Silverado III Corp., Its General Partner
By:
-----------------------------------------
Title:
--------------------------------------
Address: 50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attention: Habib Y. Gorgi, President
--------------------------------------------
Donald E. Bates
Address:
------------------------------------
------------------------------------
KENNEDY PLAZA PARTNERS
By:
-----------------------------------------
Address: 50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attention: Habib Y. Gorgi,
Managing General Partner
PRIVATE MARKET FUND, L.P.
By: Pacific Corporate Capital, Inc.,
Its General partner
By:
-----------------------------------------
FIRST UNION INVESTORS, INC.
By:
-----------------------------------------
Title:
--------------------------------------
HELLER FINANCIAL, INC.
By:
-----------------------------------------
Title:
--------------------------------------
[MANAGERS]
----------
[Signatures appear on the next page.]
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MANAGERS
--------
-------------------------------------------
Signature
Print Name:
--------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
-------------------------------------------
Signature
Print Name:
--------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
Signature
Print Name:
Address:
-------------------------------------------
Signature
Print Name:
--------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
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Schedule 1
TO STOCKHOLDER AGREEMENT
------------------------
Instrument of Accession
Reference is made to that certain Stockholder Agreement dated as of
_______________, 1998, a copy of which is attached hereto (as amended and in
effect from time to time, the "Stockholder Agreement"), among Simonds
Industries, Inc., a Delaware corporation (the "Company"), and the Stockholders
of the Company (as defined therein) and the holders of certain warrants of the
Company.
The undersigned, _________________, in order to become the owner or holder
of _____ shares (the "Shares") of Stock of the Company, hereby agrees that by
the undersigned's execution hereof (a) the undersigned is an [Institutional]
[Other] Stockholder party to the Stockholder Agreement subject to all of the
restrictions and conditions set forth in the Stockholder Agreement, and (b) all
of the Shares (and any and all shares of stock of the Company issued in respect
thereof) constitute [Institutional] [Other Stock] [Restricted Securities]
subject to all the restrictions and conditions applicable to [Institutional]
[Other Stock] [Restricted Securities] as set forth in the Stockholder Agreement.
This Instrument of Accession shall take effect and shall become a part of said
Stockholder Agreement immediately upon execution.
Executed as of the date set forth below under the laws of the State of
Delaware.
Signature:
-------------------------------
Address:
--------------------------------
----------------------------------------
----------------------------------------
Date:
-----------------------------------
Accepted:
SIMONDS INDUSTRIES INC.
By:
------------------------------------
Date:
----------------------------------
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