EXHIBIT 4.9
SECURITIES EXCHANGE, PURCHASE AND HOLDERS AGREEMENT
BY AND AMONG
ERICO GLOBAL COMPANY
CITICORP VENTURE CAPITAL EQUITY PARTNERS, L.P.
CVC EXECUTIVE FUND LLC
CVC/SSB EMPLOYEE FUND, L.P.
WILLIAM ROJ
AND
THE MANAGEMENT INVESTORS IDENTIFIED HEREIN
Dated as of July 31, 2002
TABLE OF CONTENTS
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ARTICLE I ACQUISITION OF SECURITIES.............................................................................. 3
1.1. Acquisition of Securities...................................................................... 3
1.2. Closing; Termination........................................................................... 3
1.3. Conditions to Investors' Obligations........................................................... 4
1.4. Conditions to the Company's Obligations........................................................ 4
1.5. Default by any Management Investor............................................................. 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................... 6
2.1. Representations and Warranties of the Company.................................................. 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR...................................................... 7
3.1. Representations and Warranties of Each Investor................................................ 7
3.2. Restrictive Legends............................................................................ 7
3.3. Management Investor Representations and Warranties............................................. 8
3.4. Representations and Warranties of the Fund..................................................... 9
3.5. Restrictions on Transfers of Securities........................................................ 9
3.6. Further Purchases.............................................................................. 12
3.7. Notation....................................................................................... 12
3.8. Management Investor Release.................................................................... 12
3.9. Power of Attorney.............................................................................. 13
ARTICLE IV OTHER COVENANTS, AGREEMENTS AND REPRESENTATIONS....................................................... 13
4.1. Observers' Rights.............................................................................. 13
4.2. Financial Statements and Other Information..................................................... 14
4.3. Regulatory Compliance Cooperation.............................................................. 15
4.4. Required Sale.................................................................................. 15
4.5. Tag-Along Rights............................................................................... 16
4.6. Preemptive Rights.............................................................................. 18
4.7. Public Offerings............................................................................... 20
4.8. Affiliate Transactions......................................................................... 20
4.9. Management Fees................................................................................ 21
ARTICLE V CORPORATE ACTIONS...................................................................................... 22
5.1. Certificate of Incorporation and Bylaws........................................................ 22
5.2. Directors and Voting Agreements................................................................ 22
5.3. Right to Remove Certain of the Company's Directors............................................. 22
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5.4. Right to Fill Certain Vacancies in Company's Board............................................. 22
5.5. Amendment of Certificate of Incorporation and Bylaws........................................... 23
ARTICLE VI ADDITIONAL RESTRICTIONS ON TRANSFERS OF CERTAIN SECURITIES HELD BY MANAGEMENT INVESTORS............... 23
6.1. Certain Definitions............................................................................ 23
6.2. Restrictions on Transfer....................................................................... 24
6.3. Purchase Option................................................................................ 25
6.4. Involuntary Transfers.......................................................................... 27
6.5. Purchaser Representative....................................................................... 28
6.6. Section 83(b) Elections........................................................................ 28
ARTICLE VII REGISTRATION RIGHTS.................................................................................. 29
ARTICLE VIII MISCELLANEOUS....................................................................................... 29
8.1. Amendment and Modification..................................................................... 29
8.2. Survival of Representations and Warranties..................................................... 29
8.3. Successors and Assigns; Entire Agreement....................................................... 29
8.4. Separability................................................................................... 30
8.5. Notices........................................................................................ 30
8.6. Governing Law.................................................................................. 31
8.7. Headings....................................................................................... 31
8.8. Counterparts................................................................................... 31
8.9. Further Assurances............................................................................. 31
8.10. Termination.................................................................................... 31
8.11. Remedies....................................................................................... 31
8.12. Party No Longer Owning Securities.............................................................. 32
8.13. No Effect on Employment........................................................................ 32
8.14. Pronouns....................................................................................... 32
8.15. Future Investors............................................................................... 32
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TABLE OF DEFINED TERMS
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accredited investor.............................................................................................. 9
Affiliate........................................................................................................ 12
Affiliate Transactions........................................................................................... 21
Agreement........................................................................................................ 1
Approved Sale.................................................................................................... 15
Balance Sheet.................................................................................................... 23
Class A Common Stock............................................................................................. 2
Class B Common Stock............................................................................................. 2
Class L Common Stock............................................................................................. 1
Closing.......................................................................................................... 3
Closing Date..................................................................................................... 3
Code............................................................................................................. 2
Common Stock..................................................................................................... 2
Company.......................................................................................................... 1
ERICO............................................................................................................ 1
ERICO Shares..................................................................................................... 1
Escrow Agreement................................................................................................. 1
Escrow Amount.................................................................................................... 18
Escrow Notice.................................................................................................... 18
Escrowed Shares.................................................................................................. 1
Exchange......................................................................................................... 1
Fund............................................................................................................. 1
Fund Issuance.................................................................................................... 19
Fund Observers................................................................................................... 13
Holders.......................................................................................................... 17
Incentive Shares................................................................................................. 24
Investor......................................................................................................... 1
Investors........................................................................................................ 1
JDBR............................................................................................................. 11
Management Investor.............................................................................................. 25
Management Investors............................................................................................. 1
MergeCo.......................................................................................................... 1
Merger Agreement................................................................................................. 1
Net Book Value................................................................................................... 24
Newly Issued Stock............................................................................................... 19
Observers........................................................................................................ 14
Offer............................................................................................................ 9
Option Purchase Price............................................................................................ 26
Per Share Net Book Value......................................................................................... 24
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Permitted Transferee............................................................................................. 11
Preemptive Election.............................................................................................. 20
Preemptive Escrow Amount......................................................................................... 20
Preemptive Escrow Notice......................................................................................... 20
Preemptive Notice................................................................................................ 19
Preemptive Reply................................................................................................. 19
Public Offering.................................................................................................. 24
Purchase Option.................................................................................................. 26
purchaser representative......................................................................................... 9
Qualified Investor............................................................................................... 19
Regulatory Problem............................................................................................... 15
Releasees........................................................................................................ 13
Roj.............................................................................................................. 1
Roj Observer..................................................................................................... 14
Rollover Shares.................................................................................................. 1
Sale Notice...................................................................................................... 27
Securities....................................................................................................... 2
Securities Act................................................................................................... 7
Seller........................................................................................................... 17
Seller's Notice.................................................................................................. 17
Shares........................................................................................................... 2
Special Registration Statement................................................................................... 24
Tag-Along Date................................................................................................... 17
Tag-Along Notice................................................................................................. 17
Tag-Along Rights................................................................................................. 25
Termination Date................................................................................................. 26
Transfer......................................................................................................... 9
Transfer Date.................................................................................................... 28
Unit Offering.................................................................................................... 24
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SECURITIES EXCHANGE, PURCHASE AND HOLDERS AGREEMENT
SECURITIES EXCHANGE, PURCHASE AND HOLDERS AGREEMENT, dated
July 31, 2002 (the "Agreement"), by and among ERICO GLOBAL COMPANY, a Delaware
corporation (the "Company"), CITICORP VENTURE CAPITAL EQUITY PARTNERS, L.P., a
Delaware limited partnership, CVC EXECUTIVE FUND LLC, a Delaware limited
liability company, CVC/SSB EMPLOYEE FUND, L.P., a Delaware limited partnership
(collectively, the "Fund"),and WILLIAM ROJ ("Roj") and the other individuals
listed on the signature pages hereto as "Management Investors" (such
individuals, together with Roj, the "Management Investors"). The Fund and the
Management Investors are sometimes referred to hereinafter individually as an
"Investor" and collectively as the "Investors."
Background
A. The Company was formed in connection with the
transactions contemplated by that certain Agreement and Plan of Merger (the
"Merger Agreement"), dated as of July 31, 2002, by and among the Company, ERICO
Holding Company, an Ohio corporation ("ERICO"), EHC Acquisition Corp., an Ohio
corporation and a wholly-owned subsidiary of the Company ("MergeCo") and the
other parties thereto. Following the Closing hereunder, MergeCo will merge with
and into ERICO pursuant to the terms and conditions set forth in the Merger
Agreement and ERICO will become a wholly-owned subsidiary of the Company.
B. The Management Investors are employed by ERICO or its
direct or indirect subsidiaries. Each of the Management Investors owns the
shares of Class A Common Stock and/or Class B Common Stock of ERICO
(collectively, the "ERICO Shares") set forth opposite his or her name on Exhibit
A-1 attached hereto.
C. Pursuant to the terms hereof, certain Management
Investors will exchange the ERICO Shares owned by such Management Investor for
the number of shares of the Company's Class L Common Stock, par value $.01 per
share (the "Class L Common Stock") set forth opposite such Management Investor's
name on Exhibit A-1 hereto (which exhibit shall be appropriately adjusted to
reflect any additional signatories to this Agreement pursuant to Section 8.15
hereof) (the "Exchange"). The shares of Class L Common Stock set forth opposite
such Management Investor's name on Exhibit A-1 hereto are sometimes hereinafter
referred to as the "Rollover Shares."
D. Pursuant to that certain Escrow Agreement (the
"Escrow Agreement") by and among the Company, ERICO and the other parties
thereto which was entered into in connection with the Merger Agreement, certain
of the Management Investors shall place into escrow that percentage of such
Management Investor's Rollover Shares (the "Escrowed Shares"), pursuant to the
terms of the Escrow Agreement in an amount as provided for in the Merger
Agreement.
E. The Board of Directors of the Company wishes to grant
the opportunity to the Management Investors to make an additional investment in
the Company, and thereby to acquire an increased personal and proprietary
interest in the Company's and ERICO's success and progress through the purchase
of additional securities of the Company pursuant to this Agreement.
F. Certain of the Management Investors desire to
purchase the number of shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), set forth opposite his or her name on Exhibit A-2
attached hereto (which exhibit shall be appropriately adjusted to reflect any
additional signatories to this Agreement pursuant to Section 8.15 hereof). The
shares of Class A Common Stock set forth opposite each Management Investor's
name on Exhibit A-2 hereto are sometimes hereinafter referred to as the
"Incentive Shares."
G. Each Management Investor will pay the purchase price
for the Incentive Shares in cash or such other consideration as is acceptable to
the Company in its sole discretion.
H. The Company desires to issue, and the Fund desires to
purchase, the number of shares of Class L Common Stock equal to the product of
7,290,000 minus the number of Rollover Shares purchased by the Management
Investors. The Fund's purchase of Class L Common Stock and the Exchange are
intended to qualify and be treated by all parties hereto as a tax-free exchange
under Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
I. As used herein, the Class L Common Stock, the Class A
Common Stock and the Class B Common Stock, par value $.01 per share (the "Class
B Common Stock"), are sometimes collectively hereinafter referred to as the
"Common Stock" or the "Shares."
J. As used herein, the term "Securities" shall mean the
Shares held by any party hereto, including shares of Common Stock and all other
securities of the Company (or a successor to the Company) received on account of
ownership of the Shares, including all securities issued in connection with any
merger, consolidation, stock dividend, stock distribution, stock split, reverse
stock split, stock combination, recapitalization, reclassification, subdivision,
conversion or similar transaction in respect thereof.
K. The Investors and the Company wish to set forth
certain agreements regarding their future relationships and their rights and
obligations with respect to the Securities.
Terms
In consideration of the mutual covenants contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
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ARTICLE I
ACQUISITION OF SECURITIES
1.1. Acquisition of Securities. Subject to the terms and
conditions set forth herein, at the Closing:
(a) The Company will issue to each of the Management
Investors listed on Exhibit A-1 hereto the number of shares of Class L Common
Stock set forth opposite each Management Investor's name on Exhibit A-1 hereto,
in exchange for the number of ERICO Shares set forth opposite each such
Management Investor's name on such Exhibit A-1.
(b) The Company will issue and sell to each of the
Management Investors listed on Exhibit A-2 hereto the number of shares of Class
A Common Stock set forth opposite such Management Investor's name on such
Exhibit A-2 at a purchase price of $1.00 per share and, in combination with the
shares of Class A Common Stock sold at Closing, may issue and sell up to a total
of 810,000 shares of Class A Common Stock.
(c) The Company will issue and sell to the Fund the
number of shares of Class L Common Stock equal to the product of 7,290,000 minus
the number of Rollover Shares acquired by the Management Investors at a purchase
price of $11.00 per share of Class L Common Stock.
1.2. Closing; Termination. The closing (the "Closing") of
the issuance of the Shares will take place immediately prior to the closing
under the Merger Agreement at such date and time as selected by the Company and
Roj (the "Closing Date"). At the Closing:
(a) The Company will deliver to each Management Investor
acquiring Incentive Shares certificates evidencing the number of Incentive
Shares to be purchased by such Investor against payment of the purchase price
therefor in cash or such other consideration as is acceptable to the Company in
its sole discretion.
(b) The Company will deliver to each Management Investor
acquiring Rollover Shares certificates evidencing the number of shares of Class
L Common Stock being acquired by such Management Investor, less certificates for
the number of such Management Investor's Escrowed Shares, against delivery by
such Management Investor of the ERICO Shares being exchanged for such Rollover
Shares, duly endorsed for transfer. The Company will deliver all of the Escrowed
Shares on behalf of the Management Investors to the escrow agent pursuant to the
terms of the Escrow Agreement.
(c) The Company will deliver to the Fund certificates
evidencing the number of shares of Class L Common Stock being purchased by the
Fund against payment of the purchase price therefor by wire transfer of
immediately available funds to an account designated by the Company prior to the
Closing.
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Immediately upon the termination of the Merger Agreement
pursuant to its terms at any time prior to the closing of the transactions
contemplated by the Merger Agreement, this Agreement will terminate and be of no
further force and effect.
1.3. Conditions to Investors' Obligations. The obligations
of each Investor to deliver the ERICO Shares, cash, or other consideration (as
applicable) at the Closing as required under Section 1.2 hereof are subject to
the satisfaction on or prior to the Closing Date of the following conditions:
(a) The representations and warranties of the Company set
forth in Article II shall be true and correct in all material respects on and as
of the Closing Date as though then made.
(b) The Company's Certificate of Incorporation and Bylaws
shall be substantially in the forms of Exhibits B-1 and B-2, respectively.
(c) The Company shall have delivered to each of the
Investors and the escrow agent certificates for the Shares, as required pursuant
to Sections 1.1 and 1.2.
(d) No preliminary or permanent injunction or order,
decree or ruling of any nature issued by any court or governmental agency of
competent jurisdiction, nor any statute, rule, regulation or executive order
promulgated or enacted by any United States federal, state or local governmental
authority, shall be in effect that would prevent the consummation of the
transactions contemplated by this Agreement or the Merger Agreement.
(e) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not violate the
Company's Certificate of Incorporation or Bylaws or any applicable laws or
orders, regulations, rules or requirements of a court, public body or authority
by which the Company is bound.
(f) All corporate and other proceedings, if any, taken or
to be taken by the Company in connection with the transactions contemplated
hereby to be consummated at the Closing and all documents incident thereto shall
be reasonably satisfactory in form and substance to the Investors, and the
Investors shall have received from the Company all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
(g) The Company and ERICO shall have acknowledged and
agreed that the transactions contemplated by the Merger Agreement shall be
consummated immediately after the Closing.
1.4. Conditions to the Company's Obligations. The
obligations of the Company to issue the Shares at the Closing as required under
Section 1.2 hereof are subject to the satisfaction on or prior to the Closing of
the following conditions:
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(a) The representations and warranties of each Investor
set forth in Article III shall be true and correct in all material respects at
and as of the Closing Date as though then made.
(b) The conditions set forth in paragraph (d) of Section
1.3 shall have been satisfied.
(c) Each Management Investor participating in the
Exchange shall have delivered to the Company certificates representing the ERICO
Shares being exchanged hereunder duly endorsed for transfer, each Management
Investor purchasing Incentive Shares shall have delivered consideration in a
form acceptable to the Company in its sole discretion to the Company in the
amount of the purchase price for such Incentive Shares and the Fund shall have
paid the purchase price for the Shares being purchased by the Fund hereunder in
the manner set forth in Section 1.2(c) hereof.
(d) All corporate and other proceedings, if any, taken or
to be taken by Investors in connection with the transactions contemplated hereby
to be consummated at the Closing and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company, and the Company
shall have received from each Investor all such counterpart originals or
certified or other copies of such documents as it may reasonably request.
(e) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not violate any
applicable laws or orders, regulations, rules or requirements of a court, public
body or authority by which the Investor is bound.
(f) The Company and ERICO shall have acknowledged and
agreed that the transactions contemplated by the Merger Agreement shall be
consummated immediately after the Closing.
1.5. Default by any Management Investor. If any Management
Investor fails to deliver to the Company at Closing any of the ERICO Shares to
be exchanged by such Management Investor hereunder, such failure shall not
relieve any other Management Investor of any obligation hereunder, and at the
Company's option, it may (a) exchange the remaining ERICO Shares contemplated to
be exchanged by the Company hereunder; or (b) in the event that Roj fails to
exchange any of his ERICO Shares, refuse to make such exchange and thereby
terminate all of its obligations hereunder, in either case without prejudice to
the Company's rights against such defaulting Management Investor. In addition,
upon such default the Company shall have the right in its sole discretion to
sell any Rollover Shares that were to be sold to such defaulting Management
Investor prior to such default.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
2.1. Representations and Warranties of the Company. The
Company represents and warrants to each of the Investors as follows:
(a) The Company is a corporation validly existing and in
good standing under the laws of the State of Delaware.
(b) The Company has full corporate power and corporate
authority to make, execute, deliver and perform this Agreement and to carry out
all of the transactions provided for herein.
(c) The Company has taken such corporate action as is
necessary or appropriate to enable it to perform its obligations hereunder,
including, but not limited to, the issuance and sale of the Shares, and this
Agreement constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with the terms hereof.
(d) The Company is a newly formed corporation that has
not engaged in any activities except in connection with the preparation and
execution of the Merger Agreement and any ancillary agreements thereto, this
Agreement and any ancillary agreements hereto and certain financing agreements
(e) The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
non-assessable.
(f) As of the Closing, the authorized capital stock of
the Company will consist of (i) 1,000,000 shares of Preferred Stock, par value
$.01 per share, none of which will be issued and outstanding immediately after
the Closing, (ii) 4,000,000 shares of Class A Common Stock, of which up to
810,000 shares will be issued and outstanding immediately after the Closing,
(iii) 1,000,000 shares of Class B Common Stock, none of which will be issued and
outstanding immediately after the Closing and (iv) 8,000,000 shares of Class L
Common Stock, of which 7,290,000 shares will be issued and outstanding
immediately after the Closing. Except as otherwise set forth herein, as of the
Closing Date, there will be no rights, subscriptions, warrants, options,
conversion rights, or agreements of any kind outstanding to purchase from the
Company, or otherwise require the Company to issue, any shares of capital stock
of the Company or securities or obligations of any kind convertible into or
exchangeable for any shares of capital stock of the Company; the Company will
not be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock; and the Shares will
constitute all of the outstanding shares of the Company's capital stock.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF EACH INVESTOR
3.1. Representations and Warranties of Each Investor. Each
of the Investors severally represents and warrants to the Company that:
(a) Such Investor has full legal right, power and
authority (including the due authorization by all necessary corporate,
partnership or limited liability company action) to enter into this Agreement
and to perform such Investor's obligations hereunder without the need for the
consent of any other person; and this Agreement has been duly authorized,
executed and delivered and constitutes the legal, valid and binding obligation
of such Investor enforceable against such Investor in accordance with the terms
hereof.
(b) The Securities are being acquired by such Investor
for investment, and not with a view to any distribution thereof that would
violate the Securities Act of 1933, as amended (the "Securities Act"), or the
applicable state securities laws of any state; and such Investor will not
distribute the Securities in violation of the Securities Act or the applicable
securities laws of any state.
(c) Such Investor understands that the Securities have
not been registered under the Securities Act or the securities laws of any state
and must be held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or unless an exemption
from such registration becomes or is available therefrom.
(d) Such Investor is financially able to hold the
Securities for long-term investment, believes that the nature and amount of the
Securities being purchased are consistent with such Investor's overall
investment program and financial position, and recognizes that there are
substantial risks involved in the purchase of the Securities.
(e) Such Investor confirms that (i) such Investor is
familiar with the business of ERICO and the Company, (ii) such Investor has had
the opportunity to ask questions of the officers and directors of ERICO and the
Company and to obtain (and that such Investor has received to its, his or her
satisfaction) such information about the business and financial condition of
ERICO and the Company as it has reasonably requested, and (iii) such Investor,
either alone or with such Investor's representative (as defined in Rule 501(h)
promulgated under the Securities Act), if any, has such knowledge and experience
in financial and business matters that such Investor is capable of evaluating
the merits and risks of the prospective investment in the Securities.
3.2. Restrictive Legends.
(a) All Shares. The certificates representing the Shares
shall bear the following legend in addition to any other legend required under
applicable law:
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO THE TERMS AND CONDITIONS OF A SECURITIES EXCHANGE,
PURCHASE AND HOLDERS AGREEMENT BY AND AMONG THE COMPANY AND
THE HOLDERS SPECIFIED THEREIN, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. THE SALE,
TRANSFER OR OTHER DISPOSITION OF THE SECURITIES IS SUBJECT TO
THE TERMS OF SUCH AGREEMENT AND THE SECURITIES ARE
TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH.
(b) Incentive Shares. In addition to the legends required
by Section 3.2(a) above, the following legend shall appear on certificates
representing Incentive Shares (except those Incentive Shares owned by Roj),
provided, that the Company's failure to cause certificates representing
Incentive Shares to bear such legend shall not affect the Company's Purchase
Option described in Section 6.3:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO
SUBJECT FOR A PERIOD OF TIME TO A PURCHASE OPTION OF THE
COMPANY APPLICABLE TO "INCENTIVE SHARES" AS DESCRIBED IN THE
SECURITIES EXCHANGE, PURCHASE AND HOLDERS AGREEMENT BY AND
AMONG THE COMPANY AND THE HOLDERS SPECIFIED THEREIN, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY.
3.3. Management Investor Representations and Warranties.
Each Management Investor severally represents and warrants to the Company that:
(a) Such Management Investor's residence, business
address, business and residence telephone numbers and social security number are
as set forth below his or her signature to this Agreement.
(b) In formulating a decision to enter into this
Agreement, such Management Investor has relied solely upon an independent
investigation of ERICO's and the Company's business and upon consultations with
his or her legal and financial advisers with respect to this Agreement and the
nature of his or her investment; and that in entering into this Agreement no
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reliance was placed upon any representations or warranties other than those
contained in this Agreement.
(c) He or she (i) qualifies as an "accredited investor"
within the meaning of Rule 501(a) of Regulation D under the Securities Act; or
(ii) has retained a "purchaser representative" as defined by Rule 501(h) of
Regulation D under the Securities Act; or (iii) has such knowledge and
experience in financial and business matters that he or she is capable of
evaluating the merits and risks of this investment.
3.4. Representations and Warranties of the Fund. The Fund
represents and warrants to, and covenants and agrees with, the Company that:
(a) It qualifies as an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act, and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of its purchase of the Securities.
3.5. Restrictions on Transfers of Securities. The
following restrictions on Transfer shall apply to all Shares owned by any
Management Investor:
(a) Management Investors (other than Roj):
(i) Prior to any proposed Transfer of Shares
(other than Incentive Shares, which shall governed by the provisions of Article
VI hereof), such Management Investor (other than Roj) or Permitted Transferees
shall submit a written offer (the "Offer") to the Company setting forth (A) the
number, class or series of the Shares subject to the proposed Transfer, (B) the
date or proposed date of the Transfer and the name and address of the proposed
transferee, if known, (C) the principal terms of the Transfer, including the
consideration to be received by the Management Investor or Permitted Transferees
for such Transfer and (D) any other material terms of the Transfer. As used
herein, "Transfer" includes the making of any sale, exchange, assignment,
hypothecation, gift, security interest, pledge or other encumbrance, or any
contract therefor, any voting trust or other agreement or arrangement with
respect to the transfer of voting rights or any other beneficial interest in any
of the Securities, the creation of any other claim thereto or any other transfer
or disposition whatsoever, whether voluntary or involuntary, affecting the
right, title, interest or possession in or to such Securities.
(ii) The Company, or one or more of its designees
selected by a majority of the members of the Board of Directors, shall have the
right to purchase all of the Shares subject to the Offer on the same terms and
conditions specified in the Offer. Within thirty (30) days after receipt of the
Offer, the Company or its designees shall notify the Management Investor or the
Permitted Transferees whether or not it wishes to purchase all of the offered
Shares on the same terms and conditions as set forth in the Offer.
(iii) If the Company or its designees elects to
purchase all of the offered Shares, the closing of the purchase and sale of such
Shares shall be held at the place and on the
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date established by the Company in its notice to the Management Investor in
response to the Offer, which in no event shall be less than 10 or more than 60
days from the date of such Offer. In the event that the Company does not elect
to purchase all the offered Shares, the Management Investor may, subject to the
other provisions of this Agreement, Transfer the remaining offered Shares at a
price no less than the price specified in the Offer and on other terms no more
favorable to the transferees thereof than specified in the Offer during the
90-day period immediately following the last date on which the Company could
have elected to purchase the offered Shares. All such Shares not transferred
within such 90 day period will be subject to the provisions of this Section
3.5(a) upon subsequent Transfer.
(b) Transfers by Roj:
(i) Prior to any proposed Transfer of Shares
(including any Incentive Securities), Roj and his Permitted Transferees shall
submit an Offer to the Company setting forth (A) the number, class or series of
the Shares subject to the proposed Transfer, (B) the date or proposed date of
the Transfer and the name and address of the proposed transferee, if known, (C)
the principal terms of the Transfer, including the consideration to be received
by the Management Investor or Permitted Transferees for such Transfer and (D)
any other material terms of the Transfer.
(ii) The Company, or one or more of its designees
selected by a majority of the members of the Board of Directors, shall have the
right to purchase all of the Shares subject to the Offer on the same terms and
conditions specified in the Offer. Within thirty (30) days after receipt of the
Offer, the Company or its designees shall notify Roj or his Permitted
Transferees whether or not it wishes to purchase any of the offered Shares on
the same terms and conditions as set forth in the Offer.
(iii) If the Company or its designees elects to
purchase all of the offered Shares, the closing of the purchase and sale of such
Shares shall be held at the place and on the date established by the Company in
its notice to Roj in response to the Offer, which in no event shall be less than
10 or more than 60 days from the date of such Offer. In the event that the
Company does not elect to purchase all the offered Shares, Roj may, subject to
the other provisions of this Agreement, Transfer the remaining offered Shares at
a price no less than the price specified in the Offer and on other terms no more
favorable to the transferees thereof than specified in the Offer during the
90-day period immediately following the last date on which the Company could
have elected to purchase the offered Shares. All such Shares not transferred
within such 90 day period will be subject to the provisions of this Section
3.5(b) upon subsequent Transfer.
(c) Prior to any proposed Transfer of any Securities,
other than a Transfer to the Company or pursuant to Sections 4.4 and 4.5 hereof,
the holder thereof shall give written notice to the Company describing the
manner and circumstances of the proposed Transfer accompanied by a written legal
opinion if requested by the Company, addressed to the Company and the transfer
agent, if other than the Company, and reasonably satisfactory in form and
substance to each addressee, to the effect that the proposed Transfer of the
Securities may be
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effected without registration under the Securities Act and applicable state
securities laws. Each certificate evidencing the Securities transferred shall
bear the legends set forth in Section 3.2, except that such certificate shall
not bear such legend if the opinion of counsel referred to above is to the
further effect that such legend is not required in order to establish compliance
with any provision of the Securities Act or applicable state securities laws.
Notwithstanding the foregoing, no written opinion of legal counsel shall be
required by the Company in connection with a Transfer to any Permitted
Transferee of the type defined in Section 3.5(d)(iii) hereof.
Nothing in Sections 3.5(a) or 3.5(b) shall prevent the
Transfer, free of any restrictions under this Agreement, of Securities by an
Investor or a Permitted Transferee (x) to any person or other entity if such
person or other entity takes such Securities pursuant to a sale in connection
with a public offering under the Securities Act or following a public offering
in open market transactions or under Rule 144 under the Securities Act, (y) to
one or more of its, his or her Permitted Transferees; provided, however, that
each such Permitted Transferee shall take such Securities subject to and be
fully bound by the terms of this Agreement applicable to it, him or her with the
same effect as if it, he or she were a party hereto (including, if the
Securities being Transferred to such Permitted Transferee are Incentive
Securities, Article VI hereof), or (z) to the Company, provided, that (i) no
entity or person shall be a Permitted Transferee unless such transferee executes
a joinder to this Agreement satisfactory in form and substance to the Company,
which such joinder states with respect to any Permitted Transferee other than a
natural person, that such Permitted Transferee agrees to Transfer such
Securities to the Investor from whom such Permitted Transferee received such
Securities immediately prior to the occurrence of any event which would result
in such person no longer being a Permitted Transferee of such Investor and (ii)
no Transfer shall be effected except in compliance with the registration
requirements of the Securities Act or pursuant to an available exemption
therefrom. Each Investor agrees to accept the Transfer of Securities to such
Investor at any time from a Transferee of such Investor.
(d) As used herein, "Permitted Transferee" shall mean:
(i) in the case of any Investor who is a natural
person, such Investor, such Investor's spouse, lineal descendants (in each case,
natural or adopted), siblings, parents, any trust solely for the benefit of any
of the foregoing, or any corporation or partnership in which the direct and
beneficial owner of all of the equity interest is any of the foregoing and, in
the case of Roj, JDBR Holding Company LLC and its members and permitted
transferees ("JDBR"); provided, however, that such transfer shall not be
permitted unless the joinder executed by JDBR provides that Roj retains the
unilateral power to control the vote and disposition of any Securities (to the
same extent as set forth in the power of attorney executed by JDBR as
contemplated by Section 3.9 hereof) transferred to JDBR and any of its
transferees until the successful completion of a Public Offering (as defined in
Section 6.1(e) hereof);
(ii) in the case of any Investor or Permitted
Transferee who is, in each case, a natural person, the heirs, executors,
administrators or personal representatives upon the death of such Investor or
Permitted Transferee or upon the incompetency or disability of such
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Investor or Permitted Transferee for purposes of the protection and management
of his or her assets; and
(iii) in the case of the Fund or its Permitted
Transferees, (A) the Fund or any of its Affiliates, (B) any limited partnership,
limited liability company or other investment vehicle that is sponsored or
managed (whether through the ownership of securities having a majority of the
voting power, as a general partner or through the management of investments) by
the Fund or its Affiliates or by present or former employees of the Fund or its
Affiliates, (C) any present or former managing director, general partner,
director, limited partner, officer or employee of any entity described in clause
(A) or (B) immediately above, or any spouse, lineal descendant (natural or
adopted), sibling, parent, heir, executor, administrator, trustee or beneficiary
of any of the foregoing persons described in this clause (C) or (D) any trust,
the beneficiaries of which, or any charitable trust, the grantor of which,
include the persons or entities described in this subsection (iii).
(e) As used herein, "Affiliate" means, with respect to
any person or entity, any other person or entity directly or indirectly
controlling, controlled by or under common control with such person or entity.
(f) The restrictions on Transfers of Shares owned by any
Management Investor provided under Sections 3.5(a) and 3.5(b) shall terminate
upon the earlier of (i) such time as at least ten percent (10%) of the
outstanding shares of Common Stock shall have been sold pursuant to a Public
Offering or (ii) the day after the date on which the Fund and its corporate
Affiliates own less than ten percent (10%) of the Shares and on which Roj owns
the lesser of (A) ten percent (10%) of the Shares or (B) the number of Shares
held as of Closing.
3.6. Further Purchases.
(a) Upon the Closing, the Fund shall have the right to
purchase all of the shares of Class L Common Stock that are not acquired by the
Management Investors pursuant to the Exchange so that up to 7,290,000 shares of
Class L Common Stock in the aggregate will be outstanding after giving effect to
the Exchange and purchase by the Fund.
(b) The Company intends to sell, or reserve for sale,
810,000 shares of Class A Common Stock in the aggregate to Management Investors.
3.7. Notation. A notation will be made in the appropriate
transfer records of the Company with respect to the restrictions on transfer of
the Securities referred to in this Agreement.
3.8. Management Investor Release. In consideration for the
right to acquire the Shares pursuant to Article I and for the other agreements
contained herein, each Management Investor hereby releases and forever
discharges the Company, ERICO, MergeCo, the Fund and each of their respective
past, present or future Affiliates, stockholders, controlling persons,
directors, officers, subsidiaries, successors and assigns (the "Releasees") from
any and all claims,
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demands, proceedings, causes of action, orders, obligations, contracts,
agreements, debts and liabilities whatsoever, whether known or unknown, both at
law and in equity, which any Management Investor has as of the date such
Management Investor executes this Agreement or has ever had against the
respective Releasees on account of, arising out of or relating to the
transactions contemplated by this Agreement and the Merger Agreement or such
Management Investor's employment (it being understood that such release shall
not apply to any claim by any Management Investor for accrued but unpaid
compensation or benefits as to which such Releasee is aware and concerning which
there is no dispute).
3.9. Power of Attorney. Roj will cause JDBR to grant a
power of attorney to Roj which shall provide Roj with the exclusive right to
control the vote and disposition of all of the Shares beneficially owned by JDBR
to the same extent as JDBR has provided to Roj in connection with Roj's ability
to control the vote and disposition of JDBR's ERICO Shares pursuant to the power
of attorney dated April 21, 2000.
ARTICLE IV
OTHER COVENANTS, AGREEMENTS AND REPRESENTATIONS
4.1. Observers' Rights. (a) So long as the Fund or its
Permitted Transferees own at least five percent (5%) of the Common Stock
outstanding, if no employee of the Fund or its Permitted Transferees is a member
of the Company's Board of Directors, the Fund or such Permitted Transferee shall
have the right to designate two observers (the "Fund Observers") to attend
meetings of the Company's Board of Directors and committees thereof. If only one
employee of the Fund or its Permitted Transferees is a member of the Company's
Board of Directors, the Fund or its Permitted Transferees shall have the right
to designate one observer to attend meetings of the Company's Board of Directors
and committees thereof. Notwithstanding the foregoing, if at any time each of
the Fund and any of its Permitted Transferee(s) own greater than five percent
(5%) of the Common Stock outstanding, the rights granted in this Section 4.1
shall only apply with respect to the entity, among the Fund and its Permitted
Transferee(s), which owns the most shares of Common Stock.
(b) So long as Roj or his Permitted Transferees owns the
lesser of (i) five percent (5%) of the Common Stock outstanding or (ii) the
number of Shares held as of the Closing, if Roj or his designee under Section
5.2(a) hereof is a member of the Company's Board of Directors, Roj or such
Permitted Transferee shall have the right to designate one observer (the "Roj
Observer," and together with the Fund Observers, the "Observers") to attend
meetings of the Company's Board of Directors and committees thereof.
Notwithstanding the foregoing, if at any time each of Roj or any of his
Permitted Transferee(s) own greater than (x) five percent (5%) of the Common
Stock outstanding or (y) the number of Shares held as of the Closing, the rights
granted in this Section 4.1(b) shall only apply with respect to the entity,
among Roj and his Permitted Transferee(s), which owns the most shares of Common
Stock.
(c) The Observers shall not have the right to vote on any
matter presented to the Board of Directors or any committee thereof. The Company
shall give each Observer written
- 13 -
notice of each meeting of the Board of Directors and committees thereof at the
same time and in the same manner as the members of the Board of Directors or
such committee receive notice of such meetings, and the Company shall permit
each Observer to attend as an observer all meetings of its Board of Directors
and committees thereof. Each Observer shall be entitled to receive all written
materials and other information given to the directors in connection with such
meetings at the same time such materials and information are given to the
directors, and each Observer shall keep such materials and information
confidential. If the Company proposes to take any action by written consent in
lieu of a meeting of its Board of Directors or a committee thereof, the Company
shall give written notice thereof to each Observer as soon as practicable prior
to the effective date of such consent. The Company shall provide to each
Observer all written materials and other information given to the directors in
connection with such action by written consent at the same time such materials
and information are given to the directors, and each Observer shall keep such
materials and information confidential. The Company shall pay the reasonable
out-of-pocket expenses of each Observer incurred in connection with attending
such meetings. Notwithstanding the foregoing, any failure by the Company to
comply with the provisions of this Section 4.1(c) will not effect the validity
of any action otherwise properly taken by the Board of Directors.
4.2. Financial Statements and Other Information.
(a) The Company shall deliver to each Investor and
Permitted Transferee as soon as available and in any event within 90 days after
the end of each fiscal year of the Company, a consolidated and consolidating
balance sheet of the Company and its subsidiaries as of the end of such year,
and consolidated and consolidating statements of income and cash flows of the
Company and its subsidiaries for the year then ended prepared in conformity with
generally accepted accounting principles applied on a consistent basis, except
as otherwise noted therein, together with an auditor's report thereon of a firm
of established national reputation. Notwithstanding the foregoing, in the event
that an Investor or Permitted Transferee is not a director, officer or employee
of the Company or any of its subsidiaries, such Investor or Permitted Transferee
shall be required to execute a non-disclosure agreement prior to the delivery of
the financial statements described in this Section 4.2(a).
(b) In addition to the information provided in Section
4.2(a), so long as either of the Fund or Roj, or any Permitted Transferee of the
Fund or Roj, owns or has the right to acquire (i) five percent (5%) or more of
the Common Stock outstanding or (ii) the number of Shares held as of the
Closing, the Company shall deliver to such Investor and such Permitted
Transferee who owns or has the right to acquire such percentage of the Common
Stock outstanding, as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Company,
consolidated balance sheets of the Company and its subsidiaries as of the end of
such period, and consolidated statements of income and cash flows of the Company
and its subsidiaries for the period then ended prepared in conformity with
generally accepted accounting principles applied on a consistent basis, except
as otherwise noted therein, and subject to the absence of footnotes and to
year-end adjustments.
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4.3. Regulatory Compliance Cooperation. So long as the
Fund or its Permitted Transferees beneficially own any of the Securities, before
the Company redeems, purchases or otherwise acquires, directly or indirectly, or
converts or takes any action with respect to the voting rights of, any shares of
any class of its capital stock or any securities convertible into or
exchangeable for any shares of any class of its capital stock, or before the
Company takes any action which would result in the Fund or its Permitted
Transferees having a Regulatory Problem, the Company shall give the Fund thirty
(30) days prior written notice of such pending action. Upon the written request
of the Fund made within thirty (30) days after its receipt of any such notice,
stating that after giving effect to such action the Fund would have a Regulatory
Problem (as described below), the Company will defer taking such action for such
period (not to extend beyond ninety (90) days after the Fund's receipt of the
Company's original notice) as the Fund requests to permit it and its Permitted
Transferees to reduce the quantity of Securities held by it and its Permitted
Transferees, or to take such other necessary actions, in order to avoid the
Regulatory Problem. In addition, the Company will not be a party to any merger,
consolidation, recapitalization or other transaction pursuant to which the Fund
would be required to take any voting securities, or any securities convertible
into voting securities, which might reasonably be expected to cause the Fund to
have a Regulatory Problem. For purposes of this Section, a person will be deemed
to have a "Regulatory Problem" when such person and such person's Permitted
Transferees (i) would own, control or have power over a greater quantity of
securities of any kind issued by the Company than are permitted to be owned
under any requirement of any governmental authority applicable to such person or
(ii) would have been caused to be or could be in violation of any provision of
law applicable to such person.
4.4. Required Sale.
(a) If each of (i) the majority of the Board of
Directors, (ii) the holders of at least fifty percent (50%) of the outstanding
Common Stock held by the Investors and their Permitted Transferees and (iii)
prior to the second anniversary of the date hereof, Roj, approve (x) the sale of
the Company to a person (whether by merger, consolidation, sale of all or
substantially all of its assets or sale of all or a majority of the outstanding
capital stock) or (y) the transfer or exchange of Class L Common Stock for
Securities of the Company (each, an "Approved Sale"), each Investor and
Permitted Transferee will consent to, vote for, raise no objections against, and
waive dissenters and appraisal rights (if any) with respect to, the Approved
Sale, and if the Approved Sale is structured as a sale, transfer or exchange of
stock, each Investor and Permitted Transferee will agree to sell, transfer or
exchange and will be permitted to sell, transfer or exchange all, or a pro rata
portion, of such Investor's and Permitted Transferee's Common Stock, including
the Escrowed Shares, on the terms and conditions approved by the Board of
Directors and the holders of a majority of the Common Stock then outstanding.
Each Investor and Permitted Transferee will take all necessary and desirable
actions in connection with the consummation of an Approved Sale.
(b) The obligations of each of the Investors with respect
to an Approved Sale are subject to the satisfaction of the conditions that: (i)
upon the consummation of the Approved Sale all of the Investors and Permitted
Transferees will receive the same form and amount of
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consideration per share of Class A Common Stock and Class B Common Stock, or if
any holder of Shares is given an option as to the form and amount of
consideration to be received, all Investors and Permitted Transferees will be
given the same option (subject, however, to the preferences and payments of the
Class L Common Stock set forth in the Company's Certificate of Incorporation,
which provides that upon certain liquidation and non-liquidation transactions
(x) the Class L Common Stock receives a preference yield of 12% per annum and
(y) that, after payment of the yield, and prior to any payment on the Class A
Common Stock or Class B Common Stock, the Class L Common Stock receives a $10
per share preference); and (ii) the terms of sale shall not include any
indemnification, guaranty or similar undertaking of the Investor (other than
undertakings of Management Investors in respect of continued employment set
forth in an employment agreement voluntarily entered into by a Management
Investor) that (A) is not made or given pro rata with other Investors on the
basis of share ownership or (B) could result in liability to such Investor that
is in excess of the fair market value of the consideration to be received by
such Investor in the Approved Sale. After payment of the preferences to the
holders of Class L Common Stock described in the parenthetical to subsection (i)
above, all Investors (and their Permitted Transferees) shall receive the same
form and amount of consideration.
(c) Each Management Investor shall, in connection with a
sale transfer or exchange of its, his or her Common Stock pursuant to this
Section 4.4., at the request of the Fund and without further cost or expense to
the Fund, execute and deliver such other instruments of conveyance and transfer
and take such other actions as may reasonably be requested to consummate the
proposed transfer or exchange, sale of Common Stock by the Investors pursuant to
this Section 4.4. All Investors (and their Permitted Transferees) will bear
their pro rata share (based upon the number of shares sold) of the reasonable
costs of any sale of Shares pursuant to an Approved Sale to the extent such
costs are incurred directly in connection with such Approved Sale and are not
paid by the Company. Costs incurred by any Investor (or its, his or her
Permitted Transferee) on its, his or her own behalf will not be considered costs
of the transaction hereunder.
4.5. Tag-Along Rights.
(a) (i) On or after the "Tag-Along Date" (as
hereinafter defined), except as otherwise provided in Section 4.5(a)(v), no
"Seller" (as hereinafter defined) shall sell any Common Stock in any transaction
or series of related transactions unless all "Holders" (as hereinafter defined)
are offered an equal opportunity to participate ratably in such transaction or
transactions on a per class basis (calculated based on the number of shares of
each class of Common Stock of a Holder divided by the number of shares of such
class Common Stock held by all Investors and their Permitted Transferees) and on
identical terms (including price and type of consideration paid; subject,
however, to the preferences and payments of the Class L Common Stock set forth
in the Company's Certificate of Incorporation, which provides that upon certain
liquidation and non-liquidation transactions (x) the Class L Common Stock
receives a preference yield of 12% per annum and (y) that, after payment of the
yield, and prior to any payment on the Class A Common Stock or Class B Common
Stock, the Class L Common Stock receives a $10
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per share preference). If any Holder elects not to participate in full or in
part on a pro-rata basis, the Seller may increase the number of shares sold by
it or him by the number of shares any such Holder elects not to include pursuant
to the terms hereof. As used in this Section 4.5, "Tag-Along Date" means the
date on which the Fund sells more than five percent (5%) (in the aggregate,
after giving effect to all prior sales other than sales under Section
4.5(a)(iii) hereof and after giving effect to the sale at issue) of the
Securities purchased as of the Closing; "Seller" shall mean the Fund and its
Permitted Transferees; and "Holders" shall mean the Investors (other than the
Sellers) and their Permitted Transferees.
(ii) Except as provided in Section 4.5(b), prior
to any sale of any Common Stock subject to these provisions, the Seller shall
notify the Company in writing of the proposed sale. Such notice (the "Seller's
Notice") shall set forth: (A) the number of shares of Common Stock subject to
the proposed sale; (B) the name and address of the proposed purchaser; and (C)
the proposed amount of consideration and terms and conditions of payment offered
by such proposed purchaser. The Company shall promptly, and in any event within
15 days of the receipt by the Company of the Seller's Notice, mail or cause to
be mailed the Seller's Notice to each Holder who owns shares of Common Stock. A
Holder may exercise the tag-along right by delivery of a written notice (the
"Tag-Along Notice") to the Seller within 15 days of the date the Company mailed
or caused to be mailed the Seller's Notice. The Tag-Along Notice shall state the
number of shares of Common Stock that the Holder proposes to include in the
proposed sale. If no Tag-Along Notice is received during the 15-day period
referred to above, the Seller shall have the right for a 120-day period to
effect the proposed sale of shares of Common Stock on terms and conditions no
more favorable than those stated in the notice and in accordance with the
provisions of this Section 4.5.
(iii) Notwithstanding anything to the contrary, a
Seller may make any of the following sales without offering the Holders the
opportunity to participate: (a) sales by a Seller to any Affiliate or Permitted
Transferee, provided that the proposed purchaser agrees in writing to be bound
by the provisions of this Agreement; (b) sales in connection with a Public
Offering under the Securities Act or following a Public Offering in open market
transactions or under Rule 144 under the Securities Act and (c) sales pursuant
to an Approved Sale.
(iv) Each Investor acknowledges for itself,
himself or herself and its, his or her transferees that the Fund may grant in
the future tag-along rights to other holders of Common Stock and such holders
will (a) have substantially the same opportunity to participate in sales by the
Fund as provided to the parties hereto, and (b) be included in the calculation
of the pro rata basis upon which Holders may participate in a sale.
(v) The tag-along obligations of the Sellers and
the rights of the Holders with respect thereto provided under this Section 4.5
shall terminate upon the earlier of (a) such time as at least ten percent (10%)
of the outstanding shares of Common Stock shall have been sold pursuant to a
Public Offering and (b) as to the Fund, the day after the date on which the Fund
and its corporate Affiliates own less than ten percent (10%) of the Shares.
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(b) Notwithstanding the requirements of this Section 4.5,
a Seller may sell shares of Common Stock at any time without complying with the
requirements of Section 4.5(a)(ii) so long as the Seller deposits into escrow
with a third party at the time of sale that amount of the consideration received
in the sale equal to the "Escrow Amount." The "Escrow Amount" shall equal that
amount of consideration as all the Holders would have been entitled to receive
if they had the opportunity to participate in the sale on a pro rata basis,
determined as if each Holder (A) delivered a Tag-Along Notice to the Seller in
the time period set forth in Section 4.5(a)(ii) and (B) proposed to include all
of its shares of Common Stock in the sale. No later than five (5) business days
after the date of the sale, the Seller shall notify the Company in writing of
the proposed sale. Such notice (the "Escrow Notice") shall set forth the
information required in the Seller's Notice, and in addition, such notice shall
state the name of the escrow agent and, if the consideration (in whole or in
part) for the sale was cash, then the account number of the escrow account. The
Company shall promptly, and in any event within 10 days, mail or cause to be
mailed the Escrow Notice to each Holder.
(c) A Holder may exercise the tag-along right by delivery
to the Seller, within 15 days of the date the Company mailed or caused to be
mailed the Escrow Notice, of (i) a written notice specifying the number of
shares of Common Stock it, he or she proposes to sell and (ii) the certificates
for such shares of Common Stock, with stock powers duly endorsed in blank.
Promptly after the expiration of the 15th day after the Company has mailed or
caused to be mailed the Escrow Notice, (A) the Seller shall purchase that number
of shares of Common Stock as Seller would have been required to include in the
sale had Seller complied with the provisions of Section 4.5(a)(ii), (B) all
shares of Common Stock not required to be purchased by Seller shall be returned
to the Holders thereof, and (C) all remaining funds and other consideration held
in escrow shall be released to Seller. If Seller received consideration other
than cash in its sale, Seller shall purchase the shares of Common Stock tendered
by paying to the Holders non-cash consideration and cash in the same proportion
as received by Seller in the sale.
(d) Each Holder who exercises its, his or her tag-along
rights pursuant to this Section 4.5 shall, at the request of Seller and without
further cost and expense to Seller, execute and deliver such other instruments
of conveyance and transfer, including any sales or indemnification agreements,
and take such other actions as may reasonably be requested to consummate the
proposed sale of Common Stock by Seller and the Holders who have exercised their
tag-along rights pursuant to this Section 4.5.
4.6. Preemptive Rights.
(a) So long as the Company has not consummated a Public
Offering (as defined in Section 6.1(e)), if the Company proposes to issue and
sell any of its shares of Common Stock or any securities containing options or
rights to acquire any shares of Common Stock or any securities convertible into
shares of Common Stock (such shares and other securities are hereinafter
collectively referred to as "Newly Issued Stock") to the Fund or its Affiliates
to whom the Fund has transferred Common Stock (hereinafter, a "Fund Issuance"),
the Company will first offer to each of the other Investors who is an
"accredited investor" or, if not
- 18 -
an accredited investor, to each Investor who has retained a "purchaser
representative" or has such knowledge and experience in financial and business
matters that he or she is capable of evaluating the merits and risks of this
investment (each a "Qualified Investor") a portion of the number or amount of
such securities proposed to be sold in any such transaction or series of related
transactions equal to the product of the percentage each such Qualified Investor
holds of all shares of Common Stock then held by the Investors and the number of
shares proposed to be issued and sold by the Company in any such transaction or
series of related transactions, all for the same price and upon the same terms
and conditions (including any requirement to purchase other securities) as the
securities that are being offered to the Fund, its Affiliates and its Permitted
Transferees to whom the Fund has Transferred Common Stock, in such transaction
or series of transactions.
(b) Notwithstanding the foregoing, the provisions of this
Section 4.6 shall not be applicable to the issuance of shares of Common Stock
(i) upon the conversion of shares of one class of Common Stock into shares of
another class, (ii) as a dividend on the outstanding shares of Common Stock,
(iii) in any transaction in respect of a Security that is available to all
holders of such Security on a pro rata basis, (iv) in connection with grants of
stock or options to employees or directors of the Company or (v) in a Public
Offering pursuant to a registration statement filed with, and declared effective
by, the Securities and Exchange Commission pursuant to the Securities Act.
(c) The Company will cause to be given to the Qualified
Investors a written notice setting forth the terms and conditions upon which the
Qualified Investors may purchase such shares or other securities (the
"Preemptive Notice"). After receiving a Preemptive Notice, the Qualified
Investors must reply, in writing, within 15 days of the date of such Preemptive
Notice that such persons agree to purchase the shares or other securities
offered pursuant to this Section 4.6 on the date of sale to the Fund, its
Affiliates or its Permitted Transferees to whom the Fund has Transferred Common
Stock (the "Preemptive Reply"). If any Qualified Investor fails to make a
Preemptive Reply in accordance with this Section 4.6, shares or other securities
offered to such Qualified Investor in accordance with this Section 4.6 may
thereafter, for a period not exceeding six months following the expiration of
such 15-day period, be issued, sold or subjected to rights or options to the
Fund and its Permitted Transferees to whom the Fund has Transferred Common Stock
and to the Qualified Investors who have delivered a valid Preemptive Reply, on a
pro rata basis, at a price not less than that at which they were offered to the
Qualified Investors. Any such shares or other securities not so issued, sold or
subjected to rights or options to the Fund and its Permitted Transferees to whom
the Fund has Transferred Common Stock and to the Qualified Investors who have
delivered a valid Preemptive Reply that are not purchased shall be reoffered to
the Fund and its Permitted Transferees to whom the Fund has Transferred Common
Stock and to the Qualified Investors who have delivered a valid Preemptive
Reply, on a pro rata basis, and shall continue to be reoffered pursuant to the
procedures set forth above until all of such shares have been purchased.
(d) Notwithstanding the requirements of this Section 4.6,
the Company may make a Fund Issuance at any time without complying with the
requirements of Section 4.6(a) and
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(c) so long as the Company deposits into escrow with an independent third party
at the time of sale a portion of the Newly Issued Stock equal to the "Preemptive
Escrow Amount." The "Preemptive Escrow Amount" shall equal that amount of Newly
Issued Stock which the Qualified Investors would have been entitled to receive
if they had the opportunity to participate in the Fund Issuance on a pro rata
basis in accordance with Section 4.6(a), determined as if each Qualified
Investor (A) delivered a Preemptive Reply to the Company in the time period set
forth in Section 4.6(c) and (B) proposed to purchase all of the Newly Issued
Stock to which such Qualified Investor would have been entitled to purchase
pursuant to Section 4.6(a) had the Company given such Qualified Investor a
Preemptive Notice.
Within 10 days after the date of the Fund Issuance, the
Company shall notify the Qualified Investors in writing of the Fund Issuance.
Such notice (the "Preemptive Escrow Notice") shall set forth the terms and
conditions upon which the Qualified Investors may purchase shares of Newly
Issued Stock, the pro rata amount of Newly Issued Stock that such Qualified
Investor is entitled to receive (such amount to equal the amount of Newly Issued
Stock that such Qualified Investor would have been entitled to receive if it, he
or she had the opportunity to participate in the Fund Issuance on a pro rata
basis in accordance with Section 4.6(a)) and the name of the escrow agent.
A Qualified Investor may exercise the preemptive right by
delivery to the Fund, within 30 days of the date the Company mailed or caused to
be mailed the Preemptive Escrow Notice, of a written notice specifying the
number of shares of Newly Issued Stock it, he or she proposes to purchase of the
number of shares of Newly Issued Stock such Qualified Investor is entitled to
purchase (the "Preemptive Election") such written notice to be accompanied by
payment in full for such Newly Issued Stock, in a form acceptable to the Company
in its sole discretion.
Promptly after the expiration of the 30th day after the
Company has mailed or caused to be mailed the Preemptive Escrow Notice, (A) the
Company shall sell to each Qualified Investor that number of shares of Newly
Issued Stock that each such Qualified Investor proposed to purchase pursuant to
its Preemptive Election and (B) all remaining Newly Issued Stock held in escrow
shall be sold to the Fund and its Permitted Transferees and to the Qualified
Investors who have delivered a valid Preemptive Reply, on a pro rata basis, upon
the terms and conditions set forth in the Preemptive Escrow Notice.
4.7. Public Offerings. Prior to the second anniversary of
the date hereof, without the prior written consent of Roj, the Company shall not
issue shares of Common Stock (either for its own account or the account of any
other stockholder of the Company) in a Public Offering pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission pursuant to the Securities Act (other than (1) a Special
Registration Statement (as defined in Section 6.1(f)) or (2) a registration
statement relating to a Unit Offering (as defined in Section 6.1(g))).
4.8. Affiliate Transactions.
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(a) So long as the Company has not consummated a Public
Offering (as defined in Section 6.1(e) hereof), the Company will not, and will
not permit any of its subsidiaries to, directly or indirectly, enter into or
permit to exist any transaction or series of related transactions with, or for
the benefit of, any of its Affiliates or the Affiliates of any of the Company's
directors, officers, employees or Investors owning more than 5% of the Company's
outstanding Shares ("Affiliate Transactions") without the unanimous approval of
the Company's directors other than Affiliate Transactions permitted under
Section 4.8(b) below.
(b) The restrictions set forth in Section 4.8(a) shall
not apply to:
(i) reasonable fees and compensation paid to and
indemnity provided on behalf of officers, directors or employees of the Company
or any subsidiary of the Company as determined by the Company's board of
directors or senior management;
(ii) any employment agreement entered into by the
Company or any of its subsidiaries in the ordinary course of business;
(iii) the grant of stock options, restricted stock
or similar rights with respect to the Securities of the Company to any of its,
or its subsidiaries', employees, directors or officers pursuant to plans
approved by the Company's directors;
(iv) loans or advances to employees in the
ordinary course of business, consistent with past practices; and
(v) transactions exclusively between or among
the Company and (A) any of its subsidiaries or (B) portfolio companies of the
Fund, Citicorp Venture Capital, Ltd., 399 Venture Partners, Inc. or Court Square
Capital Limited or exclusively between or among such subsidiaries in the
ordinary course of business.
4.9. Management Fees. The Company acknowledges that in
connection with its investments and monitoring of investments, the Fund normally
requires that the company receiving the investment (a) pay a closing fee to CVC
Management LLC and (b) enter into an advisory agreement with CVC Management LLC.
The Fund has agreed not to require the payment of a fee or the establishment of
an advisory arrangement at the outset of this transaction. The Fund, on behalf
of CVC Management LLC, reserves the right, however, to request fees in the
future for services provided or to be provided by CVC Management LLC. The Fund
acknowledges that its right to receive any such fees is subject to the unanimous
approval of Company's directors as provided in Section 4.8 above; the Fund
further acknowledges that the Company's directors may make the payment of any
such fee subject to such terms and the conditions as the directors determine are
appropriate, including a requirement that the Fund forgo "Unpaid Yield" on
shares of Class L Common Stock held by the Fund in an amount equal to the
proposed fee.
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ARTICLE V
CORPORATE ACTIONS
5.1. Certificate of Incorporation and Bylaws. Each
Investor has reviewed the Certificate of Incorporation and Bylaws of the Company
in the forms attached hereto as Exhibits B-1 and B-2 respectively, and hereby
approves and ratifies the same.
5.2. Directors and Voting Agreements. So long as the
Company has not consummated a Public Offering (as defined in Section 6.1(e)),
each Investor and Permitted Transferee agrees that it, he or she shall take, at
any time and from time to time, all action necessary (including voting the
Common Stock owned it, him or her, calling special meetings of stockholders and
executing and delivering written consents) to ensure that the Board of Directors
of the Company is composed at all times of up to five (5) persons, including one
(1) individual designated by Roj (so long as Roj continues to own at least 5% of
the outstanding Securities of the Company at any one time or 50% of the
Securities purchased by Roj pursuant to this Agreement) or, if Roj no longer
owns such amount of Securities, by his Permitted Transferees (so long as Roj and
his Permitted Transferees continues to own at least 5% of the outstanding
Securities of the Company at any one time or 50% of the Securities purchased by
Roj pursuant to this Agreement) and three (3) individuals designated by the
Fund. The remaining director shall be elected by the holders of a majority of
the outstanding shares of Common Stock (including any shares of Common Stock
held by the Fund and Roj). The initial directors named pursuant to this Section
5.2(a) shall be Michael A. Delaney and William H. Roj.
5.3. Right to Remove Certain of the Company's Directors.
So long as the Company has not consummated a Public Offering (as defined in
Section 6.1(e)), each of the Fund and Roj, as the case may be, may request that
any director designated by it or him be removed (with or without cause) by
written notice to the other Investors, and, in any such event, each Investor
shall promptly consent in writing or vote or cause to be voted all shares of
Common Stock now or hereafter owned or controlled by it, him or her for the
removal of such person as a director. In the event any person ceases to be a
director, such person shall also cease to be a member of any committee of the
Board of Directors of the Company.
5.4. Right to Fill Certain Vacancies in Company's Board.
So long as the Company has not consummated a Public Offering (as defined in
Section 6.1(e)), in the event that a vacancy is created on the Company's Board
of Directors at any time by the death, disability, retirement, resignation or
removal (with or without cause) of a director designated by the Fund or Roj, as
the case may be, or if otherwise there shall exist or occur any vacancy on the
Company's Board of Directors in a directorship subject to designation by the
Fund or Roj, as the case may be, such vacancy shall not be filled by the
remaining members of the Company's Board of Directors but each Investor hereby
agrees promptly to consent in writing or vote or cause to be voted all shares of
Common Stock now or hereafter owned or controlled by it, him or her to elect
that individual designated to fill such vacancy and serve as a director, as
shall be designated by the Fund or Roj, as the case may be.
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5.5. Amendment of Certificate of Incorporation and Bylaws.
So long as the Company has not consummated a Public Offering (as defined in
Section 6.1(e)), each Investor agrees that it, he or she shall not consent in
writing or vote or cause to be voted any shares of Common Stock now or hereafter
owned or controlled by it, him or her in favor of any amendment, repeal,
modification, alteration or rescission of, or the adoption of any provision in
the Company's Certificate of Incorporation or Bylaws inconsistent with this
Agreement unless the Fund and Roj (so long as Roj continues to own at least 5%
of the outstanding Securities of the Company at any one time or 50% of the
Securities purchased by Roj pursuant to this Agreement) or, if Roj no longer
owns such amount of Securities, by his Permitted Transferees (so long as Roj and
his Permitted Transferees continues to own at least 5% of the outstanding
Securities of the Company at any one time or 50% of the Securities purchased by
Roj pursuant to this Agreement) consent in writing to such action or votes or
cause to be voted all of the shares of Common Stock held by both of them in
favor of such action; provided that, so long as the Company has not consummated
a Public Offering (as defined in Section 6.1(e)), the Fund shall not consent to
any amendment which would adversely affect Roj's right to designate a director
to the Company's Board of Directors or remove, or fill any vacancy created with
respect to, any director designated by Roj as set forth in Sections 5.2, 5.3 and
5.4 of this Agreement.
ARTICLE VI
ADDITIONAL RESTRICTIONS ON TRANSFERS OF
CERTAIN SECURITIES HELD BY MANAGEMENT INVESTORS
6.1. Certain Definitions. The terms defined below shall
have the following meanings when used in this Article VI:
(a) "Balance Sheet" shall mean Company's balance sheet
prepared in accordance with generally accepted accounting principles
consistently applied.
(b) "Incentive Shares" means any and all of the Incentive
Shares and all other securities of the Company (or a successor to the Company)
received on account of ownership of the Incentive Shares, including any and all
securities issued in connection with any merger, consolidation, stock dividend,
stock distribution, stock split, reverse stock split, stock combination,
recapitalization, reclassification, subdivision, conversion or similar
transaction in respect thereof.
(c) "Net Book Value" of the Company on any date shall
mean the sum of the stated value of the Company's Class A Common Stock, plus
additional paid-in capital plus retained earnings, less any accumulated other
comprehensive loss, plus any decrease in the per share book value arising from
the accounting treatment of the Exchange under generally accepted accounting
principles.
(d) "Per Share Net Book Value" shall mean the Net Book
Value per share of Class A Common Stock as determined in accordance with
generally accepted accounting principles consistently applied and reflected on
the Company's Balance Sheet as of the end of
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the fiscal quarter immediately preceding the relevant Termination Date,
calculated on a fully diluted basis.
(e) "Public Offering" means a successfully completed firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act (other than (1) a Special Registration
Statement (as defined below) or (2) a registration statement relating to a Unit
Offering (as defined below)) in respect of the offer and sale of shares of
Common Stock for the account of the Company resulting in aggregate net proceeds
to the Company and any stockholder selling shares of Common Stock in such
offering of not less than $20,000,000, net of underwriting discounts and
commissions.
(f) "Special Registration Statement" means (i) a
registration statement on Forms S-8 or S-4 or any similar or successor form or
any other registration statement relating to an exchange offer or an offering of
securities solely to the Company's employees or security holders or (ii) a
registration statement registering a Unit Offering.
(g) "Unit Offering" shall mean a Public Offering of a
combination of debt and equity securities of the Company in which (i) not more
than ten percent (10%) of the gross proceeds received from the sale of such
securities is attributed to such equity securities, and (ii) after giving effect
to such offering, the Company does not have a class of equity securities
required to be registered under the Securities Exchange Act of 1934, as amended.
6.2. Restrictions on Transfer.
(a) In addition to the restrictions imposed by Section
3.5, and notwithstanding anything to the contrary contained herein, no
Management Investor shall effect a Transfer of any Incentive Securities prior to
the fifth anniversary of the Closing Date other than (i) pursuant to Section 4.4
in connection with an Approved Sale, (ii) pursuant to Section 4.5 in connection
with the exercise of "Tag-Along Rights," (iii) pursuant to Section 6.3 in
connection with the Purchase Option (as hereinafter defined), (iv) with the
consent of the Company (as evidenced by a resolution duly adopted by at least a
majority of the non-employee members of the Company's Board of Directors), (v)
to a Permitted Transferee of the Management Investor in question or (vi) in
connection with a Public Offering. In exercising the consent and approval
provided for in clause (iv), the Company may employ its sole discretion in
evaluating the nature of the proposed transferee and the Company may impose such
conditions on Transfer as it deems appropriate in its sole discretion,
including, but not limited to, requirements that the transferee be an employee
of the Company and that the transferee purchase the Management Investor's
Incentive Securities as a "Management Investor" subject to the restrictions of
this Article VI. In the event any Transfer is authorized pursuant to clause (iv)
to an employee of the Company or any of its subsidiaries as a "Management
Investor," such employee shall execute an agreement, in form and substance
satisfactory to the Company, pursuant to which such employee shall agree to be
bound by the terms and conditions of this Agreement, and such other provisions
as the Company may determine, and upon such execution such employee shall be
entitled to the benefit of such provisions hereof and such other provisions as
the Company determines and are set forth in such agreement. In the event any
Transfer is made pursuant to clause (v), the Termination Date (as
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hereinafter defined) for a Permitted Transferee of a Management Investor shall
be the Termination Date with respect to the Management Investor who first
acquired the Incentive Securities held by such Permitted Transferee pursuant to
this Agreement. Any purported Transfer in violation of this Agreement shall be
null and void and of no force and effect and the purported transferees shall
have no rights or privileges in or with respect to the Company. Notwithstanding
the foregoing provisions, each Management Investor agrees that he will not
effect a Transfer of any Incentive Securities prior to the lapse of such period
of time following acquisition thereof as may be required to comply with
applicable state securities laws.
(b) Notwithstanding the foregoing, the provisions set
forth in Sections 6.2, 6.3 and 6.4 relating to the transfer of Incentive
Securities shall not be applicable to Roj or his Permitted Assignees.
6.3. Purchase Option.
(a) General Terms. In the event that on or prior to the
fifth anniversary of the Closing Date, any Management Investor who is employed
by the Company on the date such Management Investor executes this Agreement (or
a joinder to this Agreement) shall cease to be employed by the Company or its
subsidiaries for any reason (including, but not limited to, death, disability,
retirement at age 65 or more under the Company's or its subsidiaries' normal
retirement policies, resignation or termination by the Company or its
subsidiaries, as the case may be, with or without cause), other than by reason
of a leave of absence approved by the Company, such Management Investor (or his
or her heirs, executors, administrators, transferees, successors or assigns, and
the persons or entities deemed to be included in the definition of such
Management Investor pursuant to this Agreement) shall give prompt notice to the
Company of such termination (except in the case of termination by the Company),
and the Company, or one or more designees selected by a majority of the members
of the Board of Directors, shall have the right and option at any time within 90
days after the later of the effective date of such termination of employment
(the "Termination Date") or the date of the Company's receipt of the aforesaid
notice, to purchase from such Management Investor, or his or her heirs,
executors, administrators, transferees, successors or assigns (including the
persons or entities deemed to be included in the definition of such Management
Investor pursuant to this Agreement), as the case may be, any or all of the
Incentive Securities then owned by such Management Investor (and his or her
Permitted Transferees) at a purchase price equal to the Option Purchase Price
(as hereinafter defined). The Company or its designees shall give notice to the
terminated Management Investor (or his or her heirs, executors, administrators,
transferees, successors or assigns and the persons or entities deemed to be
included in the definition of such Management Investor pursuant to this
Agreement) of its intention to purchase Incentive Securities at any time not
later than 90 days after the Termination Date. The right of the Company and its
designee(s) set forth in this Section 6.3 to purchase a terminated Management
Investor's Incentive Securities (and the Incentive Securities of the persons or
entities deemed to be included in the definition of such Management Investor
pursuant to this Agreement) is hereinafter referred to as the "Purchase Option".
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(i) Exercise of Purchase Option. The Purchase
Option shall be exercised by written notice to the terminated Management
Investor (or his or her heirs, executors, administrators, transferees,
successors or assigns and the persons or entities deemed to be included in the
definition of such Management Investor pursuant to this Agreement) signed by an
officer of the Company on behalf of the Company or by its designee(s), as the
case may be. Such notice shall set forth the number of Incentive Securities
desired to be purchased and shall set forth a time and place of closing which
shall be no earlier than 10 days and no later than 60 days after the date such
notice is sent. At such closing, the seller shall deliver the certificates
evidencing the number of Incentive Securities to be purchased by the Company
and/or its designee(s), accompanied by stock powers duly endorsed in blank or
duly executed instruments of transfer, and any other documents that are
necessary to transfer to the Company and/or its designee(s) good title to such
of the Incentive Shares to be transferred, free and clear of all pledges,
security interests, liens, charges, encumbrances, equities, claims and options
of whatever nature other than those imposed under this Agreement, and
concurrently with such delivery, the Company and/or its designee(s) shall
deliver to the seller the full amount of the Option Purchase Price for such
Securities in cash by certified or bank cashier's check.
(ii) Option Purchase Price. Subject to Section
6.3 (a)(iii) below, the "Option Purchase Price" for the Incentive Securities to
be purchased from such Management Investor (or the persons or entities deemed to
be included in the definition of such Management Investor pursuant to this
Agreement) pursuant to the Purchase Option shall equal the product of (i) the
number of Incentive Shares being repurchased pursuant to the Purchase Option
multiplied by (ii) the Per Share Net Book Value. Notwithstanding anything to the
contrary contained herein, in connection with the exercise of any Purchase
Option pursuant to Section 6.3, the Company may offset from the Option Purchase
Price paid to any Management Investor (or the persons or entities deemed to be
included in the definition of such Management Investor pursuant to this
Agreement) the aggregate amount of any outstanding principal and accrued but
unpaid interest due on any indebtedness of such Management Investor to the
Company, including any note issued by such Management Investor for the purchase
of the Incentive Shares.
(iii) Sale in Public Offering. Incentive
Securities sold in a Public Offering will be sold free of the restrictions
contained in this Article VI, but this Article VI shall continue to apply in
accordance with its terms to all Incentive Securities not sold in such offering.
(b) Company's Right of First Refusal. So long as the
Company has not consummated a Public Offering, in the event that, on or prior to
the fifth anniversary of the Closing Date, (i) a Management Investor is no
longer employed by the Company and (ii) the Management Investor or his heirs,
executors, administrators, transferees, successors or assigns (including the
persons or entities deemed to be included in the definition of such Management
Investor pursuant to this Agreement) thereafter proposes to sell any or all of
his or her shares of Incentive Securities to a third party in a bona fide
transaction, the Management Investor may not Transfer such shares of Common
Stock without first offering to sell such shares of Common Stock to the Company
pursuant to this Section 6.3(b). With respect to any Management
- 26 -
Investor's Incentive Securities, the terms of the right of first refusal granted
in this Section 6.3(b) shall only apply in the event the Company or its designee
has declined to exercise its Purchase Option with respect to such Incentive
Securities as provided in Section 6.3(a).
The Management Investor shall deliver a written notice (a
"Sale Notice") to the Company describing in reasonable detail the shares of
Common Stock being offered, the name of the offeree, the purchase price
requested and all other material terms of the proposed Transfer. Upon receipt of
the Sale Notice, the Company, or a designee selected by a majority of the
non-employee members of the Board of Directors of the Company, shall have the
right and option to purchase all or any portion of the shares of Common Stock
being offered at the price and on the terms of the proposed Transfer set forth
in the Sale Notice. Within 30 days after receipt of the Sale Notice, the Company
shall notify such Management Investor whether or not it wishes to purchase any
or all of the offered shares of Common Stock.
If the Company elects to purchase any of the offered shares of
Common Stock, the closing of the purchase and sale of such shares of Common
Stock shall be held at the place and on the date established by the Company in
its notice to the Management Investor in response to the Sale Notice, which in
no event shall be less than 10 or more than 60 days from the date of such
notice. In the event that the Company does not elect to purchase all the offered
shares of Common Stock, the Management Investor may, subject to the other
provisions of this Agreement, Transfer the remaining offered shares of Common
Stock to the offeree specified in the Sale Notice at a price no less than the
price specified in the Sale Notice and on other terms no more favorable to the
transferees thereof than specified in the Sale Notice during the 180-day period
immediately following the last date on which the Company could have elected to
purchase the offered shares of Common Stock. Any such shares of Common Stock not
transferred within such 180 day period will be subject to the provisions of this
Section 6.3(b) upon subsequent Transfer.
6.4. Involuntary Transfers. So long as the Company has not
consummated a Public Offering, in the event shares of Common Stock owned by any
Management Investor shall be subject to sale or other Transfer (the date of such
sale or transfer shall hereinafter be referred to as the "Transfer Date") prior
to the fifth anniversary of the Closing Date by reason of (i) bankruptcy or
insolvency proceedings, whether voluntary or involuntary, or (ii) distraint,
levy, execution or other involuntary Transfer, then such Management Investor
shall give the Company written notice thereof promptly upon the occurrence of
such event stating the terms of such proposed Transfer, the identity of the
proposed transferee, the price or other consideration, if readily determinable,
for which the shares of Common Stock are proposed to be transferred, and the
number of shares of Common Stock to be transferred. After its receipt of such
notice or, failing such receipt, after the Company otherwise obtains actual
knowledge of such a proposed Transfer, the Company, or a designee selected by a
majority of the non-employee members of the Board of Directors of the Company,
shall have the right and option to purchase all, but not less than all of such
shares of Common Stock which right shall be exercised by written notice given by
the Company to such proposed transferor within 60 days following the Company's
receipt of such notice or, failing such receipt, the Company's obtaining actual
knowledge of such
- 27 -
proposed Transfer. Any purchase pursuant to this Section 6.4 shall be at the
price and on the terms applicable to such proposed Transfer. If the nature of
the event giving rise to such involuntary Transfer is such that no readily
determinable consideration is to be paid for the Transfer of the shares of
Common Stock, the price to be paid by the Company shall be the Option Purchase
Price. The closing of the purchase and sale of the shares of Common Stock shall
be held at the place and the date to be established by the Company, which in no
event shall be less than 10 or more than 60 days from the date on which the
Company gives notice of its election to purchase the Securities. At such
closing, the Management Investor shall deliver the certificates evidencing the
number of shares of Common Stock to be purchased by the Company, accompanied by
stock powers duly endorsed in blank or duly executed instruments of transfer,
and any other documents that are necessary to transfer to the Company good title
to such of the shares of Common Stock to be transferred, free and clear of all
pledges, security interests, liens, charges, encumbrances, equities, claims and
options of whatever nature other than those imposed under this Agreement, and
concurrently with such delivery the Company shall deliver to the Management
Investor the full amount of the purchase price for such shares of Common Stock
in cash by certified or bank cashier's check.
6.5. Purchaser Representative. If the Company or any
Investor enters into any negotiation or transaction for which Rule 506 (or any
similar rule then in effect) promulgated by the Securities and Exchange
Commission under the Securities Act may be available with respect to such
negotiation or transaction (including a merger, consolidation or other
reorganization), each Management Investor will, at the request of the Company,
appoint a purchaser representative (as such term is defined in Rule 501(h)
promulgated by the Securities and Exchange Commission under the Securities Act)
reasonably acceptable to the Company. If any Management Investor appoints the
purchaser representative designated by the Company, the Company will pay the
fees of such purchaser representative, but if any Management Investor declines
to appoint the purchaser representative designated by the Company such
Management Investor will appoint another purchaser representative (reasonably
acceptable to the Company), and such Management Investor will be responsible for
the fees of the purchaser representative so appointed.
6.6. Section 83(b) Elections. Each Management Investor
shall make the election to include in his or her income, in the year he
purchases Incentive Shares, the excess, if any, of the fair market value of the
Incentive Shares at that time over $1.00 per share, pursuant to Section 83 (b)
of the Code, in the manner and within the time period specified by the
regulations promulgated thereunder, and shall promptly furnish a copy of such
election to the Company after it has been filed. The parties agree to report the
Incentive Shares as having a fair market value of $1.00 per share for purposes
of Section 83 of the Code. THE COMPANY SHALL BEAR NO RESPONSIBILITY OR LIABILITY
FOR ANY ADVERSE TAX CONSEQUENCES TO A MANAGEMENT INVESTOR FOR HIS OR HER FAILURE
TO MAKE SUCH SECTION 83(B) ELECTION OR HIS OR HER MAKING SUCH SECTION 83(B)
ELECTION.
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ARTICLE VII
REGISTRATION RIGHTS
The Investors shall have registration rights with respect to
the Shares as set forth in the Registration Rights Agreement attached hereto as
Exhibit C. Each of the Investors agrees not to effect any public sale or
distribution of any securities of the Company during the periods specified in
the Registration Rights Agreement, except as permitted by the Registration
Rights Agreement, and each such Investor agrees to be bound by the rights of
priority to participate in offerings as set forth therein.
ARTICLE VIII
MISCELLANEOUS
8.1. Amendment and Modification. This Agreement may be
amended or modified, or any provision hereof may be waived, provided that such
amendment or waiver is set forth in a writing executed by (i) the Company, (ii)
the holders of a majority of the Common Stock held by the Fund and its Permitted
Transferees (so long as the Fund and its Permitted Transferees own in the
aggregate the lesser of (A) ten percent (10%) of the outstanding Common Stock on
a fully diluted basis or (B) the number of Shares held as of the Closing), (iii)
the holders of a majority of the Common Stock held by Roj and his Permitted
Transferees (so long as Roj and his Permitted Transferees own in the aggregate
the lesser of (A) ten percent (10%) of the outstanding Common Stock on a fully
diluted basis or (B) the number of Shares held as of the Closing), (iv) the
holders of a majority of the outstanding Common Stock on a fully diluted basis
(including Shares owned by the Fund and its Affiliates and Roj) and (v) only
with respect to amendments of Sections 3.5(a), 4.2(a), 4.4, 4.5, 4.6, 6.2, 6.3
or 6.4 hereof, or, in the event that either Roj or his Permitted Transferees no
longer have the rights set forth in subsection (iii) hereof, any other term
herein that directly and adversely affects only the Management Investors, the
holders of a majority of the Common Stock held by the Management Investors
(other than Roj) if such amendment would materially adversely affect such
Management Investors. No course of dealing between or among any persons having
any interest in this Agreement will be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
8.2. Survival of Representations and Warranties. All
representations, warranties, covenants and agreements set forth in this
Agreement will survive the execution and delivery of this Agreement and the
Closing Date and the consummation of the transactions contemplated hereby,
regardless of any investigation made by an Investor or on its, his or her
behalf.
8.3. Successors and Assigns; Entire Agreement. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns and executors, administrators and heirs. This Agreement sets forth the
entire agreement and understanding among the parties as to the subject
- 29 -
matter hereof and merges and supersedes all prior discussions and understandings
of any and every nature among them.
8.4. Separability. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
8.5. Notices. All notices provided for or permitted
hereunder shall be made in writing by hand-delivery, registered or certified
first-class mail, telex, telecopier or air courier guaranteeing overnight
delivery to the other party at the following addresses (or at such other address
as shall be given in writing by any party to the others):
If to the Company to:
ERICO Global Company
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue, 14th Floor
New York, New York 10043
Attention: Michael A. Delaney
Facsimile: (212) 888-2940
With a required copy to:
Dechert
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Craig L. Godshall, Esquire
Facsimile: (215) 994-2222
If to the Fund, to:
Citicorp Venture Capital Equity Partners, L.P.
399 Park Avenue, 14th Floor
New York, New York 10043
Attention: Michael A. Delaney
Facsimile: (212) 888-2940
If to Roj, to:
William H. Roj
19200 North Park Boulevard
- 30 -
Shaker Heights, Ohio 44120
Facsimile: (216) 321-0096
If to the Management Investors, to:
Peter B. Korte
ERICO Holding Company
30575 Bainbridge Road
Suite 300
Solon, Ohio 44139
Facsimile: (440) 349-2996
If to the other Management Investors or any of them, to their
addresses as listed in the books of the Company.
All such notices shall be deemed to have been duly given: when
delivered by hand, if personally delivered; five business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when transmission confirmation is received, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
8.6. Governing Law. The validity, performance,
construction and effect of this Agreement shall be governed by and construed in
accordance with the internal law of the State of Delaware, without giving effect
to principles of conflicts of law.
8.7. Headings. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
8.8. Counterparts. This Agreement may be executed in two
or more counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same instrument.
8.9. Further Assurances. Each party shall cooperate and
take such action as may be reasonably requested by another party in order to
carry out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
8.10. Termination. Unless sooner terminated in accordance
with its terms, this Agreement shall terminate on the fifteenth (15th)
anniversary of the Closing Date.
8.11. Remedies. In the event of a breach or a threatened
breach by any party to this Agreement of its, his or her obligations under this
Agreement, any party injured or to be injured by such breach, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its, his or her rights
- 31 -
under this Agreement. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of such provision will be
inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
8.12. Party No Longer Owning Securities. If a party hereto
ceases to own any Securities, such party will no longer be deemed to be an
Investor or Management Investor for purposes of this Agreement, except that such
party will continue to be obligated to reacquire Securities Transferred to a
Permitted Transferee as required by Section 3.5(a) and will be deemed to be an
Investor and/or a Management Investor at such time as such party reacquires such
Securities.
8.13. No Effect on Employment. Nothing herein contained
shall confer on any Management Investor the right to remain in the employ of the
Company or any of its subsidiaries or Affiliates.
8.14. Pronouns. Whenever the context may require, any
pronouns used herein shall be deemed also to include the corresponding neuter,
masculine or feminine forms.
8.15. Future Investors. The parties hereto hereby agree
that any current or future person who is granted the right to acquire Securities
from the Company subsequent to the date hereof may become a signatory to this
Agreement by executing a written instrument setting forth that the person agrees
to be bound by the terms and conditions of this Agreement and this Agreement
will be deemed to be amended to include such person as an Investor and the
number of Securities to be acquired by it, him or her (it being understood that
the Parties hereto anticipate that additional Management Investors shall become
parties to this Agreement prior to the Closing).
- 32 -
IN WITNESS WHEREOF, the parties hereto have executed this
Securities Exchange, Purchase and Holders Agreement the day and year first above
written.
ERICO GLOBAL COMPANY
By: /s/ William H. Roj
----------------------------------------
Name:
Title:
CITICORP VENTURE CAPITAL EQUITY
PARTNERS, L.P.
By: CVC PARTNERS, LLC, its General Partner
By: /s/ Michael A. Delaney
--------------------------------
Name:
Title:
CVC EXECUTIVE FUND LLC
By: CITIGROUP VENTURE CAPITAL GP
HOLDINGS, LTD., its Managing Member
By: /s/ Michael A. Delaney
--------------------------------
Name:
Title:
CVC/SSB EMPLOYEE FUND, L.P.
By: CVC PARTNERS, LLC, its General Partner
By: /s/ Michael A. Delaney
----------------------------------
Name:
Title:
- 33 -
IN WITNESS WHEREOF, the parties hereto have executed this
Securities Exchange, Purchase and Holders Agreement the day and year first above
written.
MANAGEMENT INVESTORS:
/s/ William Roj
-------------------------------------------
William Roj
19200 North Park Boulevard
Shaker Heights, Ohio 44120
- 34 -
EXHIBIT A-1
ROLLOVER SHARES
Management Investor ERICO Shares Shares of Class L Common Stock
- ------------------- ------------ ------------------------------
William H. Roj 1,000 Class A shares 1,854,545
13,160 Class B Shares
- 35 -
EXHIBIT A-2
INCENTIVE SHARES
Management Investor Shares of Class A Common Stock
- ------------------- ------------------------------
William H. Roj 324,000
- 36 -
EXHIBIT B-1
CERTIFICATE OF INCORPORATION OF THE COMPANY
OMITTED
EXHIBIT B-2
BY-LAWS OF THE COMPANY
OMITTED
EXHIBIT E
FORM OF REGISTRATION RIGHTS FOR COMMON STOCK
The below document detailing registration rights was given to each of the
investors in connection with the July 31, 2002 and the December 31, 2003 private
placements.
REGISTRATION RIGHTS FOR COMMON STOCK
1. Definitions.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A Common Stock, par value $.01
per share, of the Company, including shares of Class A Common Stock issuable
upon the conversion of shares of Class B Common Stock, par value $.01 per share,
of the Company, or in respect of shares of Class L Common Stock, par value $.01
per share, of the Company, and as adjusted for any stock dividend or
distribution payable thereon or stock split, reverse stock split,
recapitalization, reclassification, reorganization, exchange, subdivision or
combination thereof.
"Demand Registration" has the meaning set forth is Section
4(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Fund Associate" means any Permitted Transferee of the Fund.
"Initial Public Offering" means the first issuance of Common
Stock by the Company in a Public Offering pursuant to a registration statement
filed with, and declared effective by, the Securities and Exchange Commission
pursuant to the Securities Act (other than (1) a Special Registration Statement
or (2) a registration statement relating to a Unit Offering).
"Person" means an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference in such Prospectus.
"Registration Expenses" means the costs and expenses of all
registrations and qualifications under the Securities Act, and of all other
actions the Company is required to take
- 1 -
in order to effect the registration of Registrable Securities under the
Securities Act pursuant to the terms hereof (including all federal and state
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company and the fees and expenses of the Company's independent
public accountants (including the expenses of any special audit and "cold
comfort" letters required by or incident to such registration)) other than the
costs and expenses of any Investors whose Registrable Securities are to be
registered pursuant to the terms hereof comprising underwriters' commissions,
brokerage fees, transfer taxes or the fees and expenses of any accountants or
other representatives retained by any Investor, provided, however, that the term
"Registration Expenses" shall include the fees and expenses of one counsel for
the holders of Registrable Securities designated by the holder of a majority of
Registrable Securities being registered, or proposed to be registered, in any
offering pursuant to the terms hereof.
"Registration Statement" means any registration statement of
the Company which covers any of the Registrable Securities pursuant to the terms
hereof, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.
"Registrable Securities" has the meaning set forth in Section
2 hereof.
"underwritten registration" or "underwritten offering" means a
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
All other capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them thereto in the Securities
Exchange, Purchase and Holders Agreement (the "Agreement").
2. Registrable Securities. The securities entitled to
the benefits set forth herein are the Registrable Securities. As used herein,
"Registrable Securities" means the shares of Common Stock that are issued (or
issuable) and outstanding on the date hereof and the shares of Common Stock that
become issued (or issuable) and outstanding after the date hereof; provided,
that, that each share of Common Stock shall cease to be a Registrable Security
when (i) it has been effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering it; (ii) it
is distributed to the public pursuant to Rule 144 (or any similar provisions
then in force) under the Securities Act; or (iii) it has otherwise been
transferred and a new certificate or other evidence of ownership for it not
bearing or requiring a legend as set forth in Section 3.2 of the Agreement (or
other legend of similar import) and not subject to any stop transfer order has
been delivered by or on behalf of the Company and no other restriction on
transfer exists under the Securities Act.
3. Incidental Registration.
(a) Right to Include Common Stock. If at any
time or from time to time following the date which is six months after the
Company has registered its Common Stock pursuant to Section 12 of the Exchange
Act the Company at any time proposes to register any of its Common Stock under
the Securities Act (other than on a Special Registration Statement),
- 2 -
whether or not for sale for its own account, it will each such time give prompt
written notice (the "Notice") to all holders of Registrable Securities of its
intention to issue its Common Stock under the Securities Act and of such
holders' rights under this Section 3. Upon the written request of any such
holders of Registrable Securities made within 15 days of the date of the Notice
(which request shall specify the aggregate number of the Registrable Securities
to be registered and will also specify the intended method of disposition
thereof), the Company will effect the registration under the Securities Act of
all Registrable Securities which the Company has been so requested to register
by the holders thereof (an "Incidental Registration"), to the extent required to
permit the public disposition (in accordance with such intended methods thereof)
of the Registrable Securities to be so registered; provided, that (i) if, at any
time after giving written notice of its intention to register shares of Common
Stock and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register the Company's Common Stock, the Company shall give written
notice of such determination to each holder of Registrable Securities and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith); (ii) if a registration
requested pursuant to this Section 3 shall involve an underwritten public
offering, any holder of Registrable Securities requesting to be included in such
registration may elect, in writing at least 30 days prior to the effective date
of the registration statement filed in connection with such registration, not to
register such securities in connection with such registration; and (iii) if, at
any time after the 180-day or shorter period specified in Section 3(b), the sale
of the securities has not been completed, the Company may withdraw from the
registration on a pro rata basis (based on the number of Registrable Securities
requested by each holder of Registrable Securities to be so registered) the
Registrable Securities which the Company has been requested to register and
which have not been sold.
(b) Priority in Incidental Registrations. If a
registration pursuant to Section 3(a) involves an underwritten offering and the
managing underwriter advises the Company in writing that, in its opinion, the
total number of shares of Common Stock to be included in such registration,
including the Registrable Securities requested to be included pursuant to this
Section 3, exceeds the maximum number of shares of Common Stock specified by the
managing underwriter that may be distributed without adversely affecting the
price, timing or distribution of such shares of Common Stock, then the Company
shall include in such registration only such maximum number of Registrable
Securities which, in the reasonable opinion of such underwriter or underwriters,
can be sold in the following order of priority: (i) first, all of the shares of
Common Stock that the Company proposes to sell for its own account, if any, (ii)
second, all of the shares of Common Stock being registered by holder(s) of
Registrable Securities pursuant to a Demand Registration (as hereinafter
defined), and (iii) third, the Registrable Securities of the holder(s) of
Registrable Securities requested to be included in such Incidental Registration.
To the extent that shares of Common Stock to be included in the Incidental
Registration must be allocated among the holders(s) of Registrable Securities
pursuant to clause (iii) above, such shares shall be allocated pro rata among
the holders(s) of Registrable Securities based on the number of shares of Common
Stock that such holders(s) of Registrable Securities shall have requested to be
included therein. Notwithstanding the foregoing, if an Incidental Registration
is an underwritten offering, the managing underwriter or underwriters may select
shares for inclusion, or exclude shares completely, in such Incidental
Registration on
- 3 -
a basis other than a pro rata basis if, in the reasonable opinion of such
underwriter or underwriters, selection on such other basis, or inclusion of such
shares, would be material to the success of the offering.
(c) Expenses. The Company will pay all
Registration Expenses in connection with any registration of Registrable
Securities requested pursuant to this Section 3.
(d) Liability for Delay. The Company shall not
be held responsible for any delay in the filing or processing of a registration
statement which includes any Registrable Securities due to requests by holders
of Registrable Securities pursuant to this Section 3 nor for any delay in
requesting the effectiveness of such registration statement.
(e) Participation in Underwritten Registrations.
No holder of Registrable Securities may participate in any underwritten
registration hereunder unless such holder (i) agrees to sell his or its Common
Stock on the basis provided in any underwriting arrangements approved by the
persons who have selected the underwriter and (ii) accurately completes in a
timely manner and executes all questionnaires, powers of attorney, escrow
agreements, underwriting agreements and other documents customarily required
under the terms of such underwriting arrangements.
4. Demand Registration.
(a) Right to Demand Registration. Subject to
Section 4(b) below, the Fund, any Fund Associate (so long as such Fund Associate
holds at least 10% of the Common Stock) and Roj shall be entitled to make a
written request ("Demand Registration Request") to the Company for registration
with the Commission under and in accordance with the provisions of the
Securities Act of all or part of the Registrable Securities owned by it (a
"Demand Registration") (which Demand Registration Request shall specify the
intended number of Registrable Securities to be disposed of by such holder and
the intended method of disposition thereof); provided, that (i) the Company may,
if the Board of Directors so determines in the exercise of its reasonable
judgment that due to a pending or contemplated acquisition or disposition or
public offering it would be inadvisable to effect such Demand Registration at
such time, defer such Demand Registration for a single period not to exceed 90
days, and (ii) if the Company elects not to effect the Demand Registration
pursuant to the terms of this sentence, no Demand Registration shall be deemed
to have occurred for purposes hereof. Promptly after receipt of the Demand
Registration Request, the Company will serve written notice (the "Notice") of
such Demand Registration Request to all holders of Registrable Securities and,
subject to paragraph (c) below, the Company will include in such registration
all Registrable Securities of such holders with respect to which the Company has
received written requests for inclusion therein from such holders within fifteen
(15) business days after the receipt by the applicable holder of the Notice. All
requests made pursuant to this paragraph 4(a) will specify the aggregate number
of the Registrable Securities to be registered and will also specify the
intended methods of disposition thereof.
(b) Number of Demand Registrations. The Fund and
any Fund Associate shall be entitled to make one or more Demand Registration
Requests at any time after
- 4 -
the earlier to occur of the Initial Public Offering or the second anniversary of
the date hereof. Roj shall be entitled to make two Demand Registration Requests
at any time after the Initial Public Offering. A Demand Registration shall not
be counted as a Demand Registration hereunder until such Demand Registration has
been declared effective and maintained continuously effective for a period of at
least six months or such shorter period when all Registrable Securities included
therein have been sold in accordance with such Demand Registration.
(c) Priority on Demand Registration. If any of
the Registrable Securities proposed to be registered pursuant to a Demand
Registration are to be sold in a firm commitment underwritten offering and the
managing underwriter or underwriters of a Demand Registration advise the Company
and the holders of such Registrable Securities in writing that in its or their
reasonable opinion the number of shares of Common Stock proposed to be sold in
such Demand Registration exceeds the maximum number of shares specified by the
managing underwriter that may be distributed without adversely affecting the
price, timing or distribution of the Common Stock, the Company shall include in
such registration only such maximum number of Registrable Securities which, in
the reasonable opinion of such underwriter or underwriters can be sold in the
following order of priority: (i) first, the Registrable Securities requested to
be included in such Demand Registration held by the party requesting such Demand
Registration; (ii) second, shares of Common Stock requested to be included in
such Demand Registration held by holders granted Demand Registration rights
pursuant to the terms hereof other than the holder requesting the relevant
Demand Registration, provided that such amount shall be allocated among such
other holders on a pro rata basis based upon their respective percentage of
ownership of the total number of shares of Common Stock then outstanding, (iii)
third, shares of Common Stock to be offered by the Company in such Demand
Registration; and (iv) fourth, shares of Common Stock requested to be included
in such Demand Registration held by all other holders of Common Stock, provided
that such amount shall be allocated among such other holders on a pro rata basis
based upon their respective percentage of ownership of the total number of
shares of Common Stock then outstanding.
(d) Expenses. The company will pay all
Registration Expenses in connection with any registration of Registrable
Securities requested pursuant to this Section 4.
5. Registration Procedures. If and whenever the Company
is required to effect or cause the registration of any Registrable Securities
under the Securities Act as provided herein, the Company will, as expeditiously
as possible:
(a) prepare and file with the Commission a
registration statement with respect to such Registrable Securities, and use its
best efforts to cause such registration statement to become effective; provided,
however, that the Company may discontinue any registration of its securities
which is being effected pursuant to Sections 3 or 4 herein at any time prior to
the effective date of the registration statement relating thereto;
(b) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 180
- 5 -
days or such shorter period which will terminate when all Registrable Securities
covered by such registration statement have been sold (but not before the
expiration of the applicable period referred to in Section 4(3) of the
Securities Act and Rule 174 thereunder, if applicable) and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(c) furnish to each seller of such Registrable
Securities such number of copies of such registration statement and of each such
amendment and supplement thereof (in each case including all exhibits), such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and summary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities by such seller;
(d) use its best efforts to register or qualify
such Registrable Securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as each seller shall
request, and do any and all other acts and things which may be necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller; provided,
however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject itself to general
taxation in any jurisdiction where it is not then so subject;
(e) immediately notify each seller of any
Registrable Securities covered by such registration statement, at any time when
a prospectus relating thereto is required to be delivered under the Act within
the appropriate period mentioned in clause (b) of this Section 5, of the Company
becoming aware that the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and within ten days prepare and furnish to all sellers a reasonable
number of copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
(f) use its best efforts to list such
Registrable Securities on any securities exchange on which the Common Stock is
then listed or the Nasdaq National Market ("Nasdaq") if the Common Stock is then
quoted on Nasdaq, if such Registrable Securities are not already so listed or
quoted and if such listing is then permitted under the rules of such exchange or
Nasdaq, and provide an independent transfer agent and registrar for such
Registrable Securities covered by such registration statement not later than the
effective date of such registration statement;
- 6 -
(g) furnish to each seller of Registrable
Securities covered by such registration statement a signed counterpart,
addressed to such seller (and the underwriters, if any) of:
(i) an opinion of counsel for the
Company, dated the effective date of such registration statement (or, if such
registration involves an underwritten public offering, dated the date of the
closing under the underwriting agreement), reasonably satisfactory in form and
substance to the sellers of not less than 50% of such Registrable Securities
(and the managing underwriter, if any); and
(ii) a "comfort" letter, dated the
effective date of such registration statement (or, if such registration involves
an underwritten public offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants who have
certified the Company's financial statements included in such registration
statement, covering such matters with respect to such registration statement as
are customarily covered in accountants' letters delivered to the underwriters in
underwritten offerings of securities as may reasonably be requested by the
sellers of not less than 50% of such Registrable Securities (and the managing
underwriter, if any); and
(h) make available for inspection by any seller
of such Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such seller or any such underwriter (individually, an "Inspector" and
collectively, the "Inspectors"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility (collectively, the "Records"), and cause all of the Company's
officers, directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement; provided that any Records that are designated
by the Company in writing as confidential shall be kept confidential by the
Inspectors unless (A) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such registration statement or (B) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction or by any regulatory authority having
jurisdiction. Each Investor agrees that non-public information obtained by it as
a result of such Inspections shall be deemed confidential and acknowledges its
obligations under the Federal securities laws not to trade any securities of the
Company on the basis of material non-public information.
The Company may require each seller of Registrable Securities
as to which any registration is being effected promptly to furnish to the
Company such information regarding the distribution of such Registrable
Securities as may be legally required. Such information shall be furnished in
writing and shall state that it is being furnished for use in the registration
statement.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in clause (e) of this Section
5, such holder will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such
- 7 -
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by clause (e) of this Section 5,
and, if so directed by the Company, such holder will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of the Company's notice. In the event the Company
shall give any such notice, the period mentioned in clause (b) of this Section 5
shall be extended by the number of days during the period from and including the
date of the giving of such notice pursuant to clause (e) of this Section 5 and
including the date when each seller of Registrable Securities covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus contemplated by clause (e) of this Section 5.
6. Indemnification.
(a) Indemnification by the Company. The Company
hereby agrees to indemnify and hold harmless each holder of Registrable
Securities which shall have been registered under the Securities Act, and such
holder's officers, directors and agents and each other Person, if any, who
controls such holder within the meaning of the Securities Act and each other
Person (including underwriters) who participates in the offering of such
Registrable Securities against any losses, claims, damages, liabilities,
reasonable attorneys' fees, costs or expenses (collectively, the "Damages"),
joint or several, to which such holder or controlling Person or participating
Person may become subject under the Securities Act or otherwise, insofar as such
Damages (or proceedings in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact made by the
Company or its agents contained in any registration statement under which such
Registrable Securities are registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein, or in any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse such holder of Registrable Securities or such controlling Person or
participating Person in connection with investigating or defending any such
Damages or proceeding; provided, however, that the Company will not be liable in
any such case to the extent that any such Damages arise out of or are based upon
(i) an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such holder or such
controlling or participating Person, as the case may be, specifically for
inclusion in any such document; or (ii) an untrue statement or alleged untrue
statement, omission or alleged omission in a prospectus if such untrue statement
or alleged untrue statement, omission or alleged omission is corrected in an
amendment or supplement to the prospectus which amendment or supplement is
delivered to such holder in a timely manner and such holder thereafter fails to
deliver such prospectus as so amended or supplemented prior to or concurrently
with the sale of such Registrable Securities to the Person asserting such
Damages.
(b) Indemnification by the Holders of
Registrable Securities Which Are Registered. It shall be a condition of the
Company's obligations herein to effect any registration under the Securities Act
that there shall have been delivered to the Company an agreement or agreements
duly executed by each holder of Registrable Securities to be so
- 8 -
registered, whereby such holder agrees to indemnify and hold harmless the
Company, its directors, officers and agents and each other Person, if any, which
controls the Company within the meaning of the Securities Act against any
Damages, joint or several, to which the Company, or such other Person or such
Person controlling the Company may become subject under the Securities Act or
otherwise, but only to the extent that such Damages (or proceedings in respect
thereof) arise out of or are based upon any untrue statements or alleged untrue
statement of any material fact contained, on the effective date thereof, in any
registration statement under which such Registrable Securities are registered
under the Securities Act, in any preliminary prospectus or final prospectus
contained therein or in any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, which, in each such case, has been made in or omitted from such
registration statement, said preliminary or final prospectus or said amendment
or supplement in reliance upon, and in conformity with, written information
furnished to the Company by such holder of Registrable Securities specifically
for inclusion in such document. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above, with respect to information furnished in writing by
such Persons specifically for inclusion in any prospectus or registration
statement.
(c) Conduct of Indemnification Proceedings. Any
Person entitled to indemnification hereunder shall (i) give prompt written
notice to the indemnifying party of the commencement of any action or proceeding
involving a claim referred to in the preceding Sections 6(a) and 6(b); and (ii)
unless the indemnified party has been advised by its counsel that a conflict of
interest exists between such indemnified and indemnifying parties with respect
to such claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party. Whether or
not such defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without its consent
(but such consent will not be unreasonably withheld). No indemnifying party will
consent to the entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
claim or litigation; provided, however, that no indemnifying party will consent
to the entry of any judgment or enter into any settlement (other than for the
payment of money only) without the consent of the indemnified party (which
consent will not be unreasonably withheld). An indemnifying party who is not
entitled to, or elects not to, assume the defense of the claim, will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the
indemnification provided for in the preceding Sections 6(a) or 6(b) is
unavailable to an indemnified party in respect of any Damages referred to
therein, the indemnifying party shall contribute to the amount paid or payable
by the indemnified party as a result of such Damages in such proportion as is
appropriate
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to reflect not only the relative benefits received by the indemnified party and
the indemnifying party, but also the relative fault of the indemnified party and
the indemnifying party, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action; provided, however, that in no event shall the
liability of any selling holder of Registrable Securities hereunder be greater
in amount than the difference between the dollar amount of the proceeds received
by such holder upon the sale of the Registrable Securities giving rise to such
contribution obligation and all amounts previously contributed by such holder
with respect to such Damages. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of fraudulent misrepresentation.
7. Hold-Back Agreements
(a) Restrictions on Public Sale by Holder of
Registrable Securities. Each holder of Registrable Securities whose Registrable
Securities are eligible for inclusion in a Registration Statement filed pursuant
to Sections 3 or 4 agrees, if requested by the managing underwriter or
underwriters in an underwritten offering of any Registrable Securities, not to
effect any public sale or distribution of Registrable Securities, including a
sale pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act (except as part of such underwritten registration), during the
10-day period prior to, and during the 180-day period (or such shorter period as
may be agreed to by the parties hereto) beginning on the effective date of such
Registration Statement, to the extent timely notified in writing by the Company
or the managing underwriter or underwriters.
The foregoing provisions shall not apply to any holder of
Registrable Securities if such holder is prevented by applicable statute or
regulation from entering into any such agreement; provided, however, that any
such holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of
Registrable Securities (except as part of such underwritten registration) during
such period unless it has provided 45 days prior written notice of such sale or
distribution to the managing underwriter or underwriter.
(b) Restrictions on Public Sale by the Company
and Others. The Company shall (i) not effect any public sale or distribution of
any of its Common Stock for its own account during the 10-day period prior to,
and during the 180-day period beginning on, the effective date of a Registration
Statement filed pursuant to Sections 3 or 4 (except as part of a Special
Registration Statement), and (ii) use reasonable efforts to cause each holder of
Common Stock purchased from the Company at any time after the date of the
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution of any such securities during such period,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of such underwritten registration, if permitted).
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8. Underwritten Registration
If any of the Registrable Securities covered by any Incidental
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the Company and, in the case of a Demand Registration
approved by the Fund.
Notwithstanding anything herein to the contrary, no Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwritten arrangements approved by the Persons entitled hereunder to approve
such arrangement and (b) accurately completes and executes all questionnaires,
powers of attorney, indemnities, custody agreements, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
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