EXHIBIT 10.11
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STOCKHOLDERS' AGREEMENT
among
THE PLOW & HEARTH, INC.,
1-800-FLOWERS, INC.,
and
the Persons set forth on Schedule A
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Dated as of the ____ day of March, 1998
TABLE OF CONTENTS
Page
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1. DEFINITIONS............................................................1
1.2 ................................................................12
2. STOCK OWNERSHIP.......................................................14
2.1 Authorized Capital Stock and Current Ownership..................14
2.2 Limited Preemptive Rights.......................................14
2.3 Certain Limitations on Issuance of Options and Shares...........15
3. MANAGEMENT............................................................16
3.1 Management......................................................16
3.2 Election and Removal of Directors...............................16
3.3 Officers........................................................18
3.4 Quorum and Vote.................................................19
3.5 Limitation on Management Power..................................19
3.6 Certain Transactions between the Company and its
Affiliates......................................................21
3.7 Confidentiality Agreement.......................................22
3.8 Action by Stockholders..........................................22
3.9 Other Arrangements....................................................22
4. RESTRICTIONS ON TRANSFERABILITY OF SHARES.............................22
4.1 Restrictions Upon Transfer of Shares............................22
4.2 Restrictive Legend on Certificates..............................23
5. PERMITTED TRANSFERS...................................................23
5.1 Transfers to Permitted Transferees..............................23
5.2 Transfer by Flowers.............................................24
5.3 Additional Requirements of Transfer.............................24
6. PUT AND CALL OPTIONS..................................................26
6.1 Management Stockholder Put Option...............................26
6.2 Company Call Option.............................................28
6.3 Limitation on Company Obligation to Purchase Shares.............30
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7. BRING ALONG AND TAKE ALONG............................................31
7.1 Bring Along Option..............................................31
7.2 Take Along Option...............................................32
7.3 ................................................................33
7.4 Relationship to Section 8.......................................33
8. LIMITED RIGHT OF FIRST OFFER..........................................33
8.1 ................................................................33
8.2 Exercise of First Offer Option..................................34
8.3 Exercise of First Offer Option..................................34
9. MANAGEMENT STOCKHOLDERS CONVERSION AND CASH OUT OPTIONS...............35
9.1 Conversion and Cash Out Options.................................35
9.2 Exercise of Management Stockholder Options......................36
9.3 Exercise of Issuer Conversion Option............................37
9.4 Conversion of Shares on Effective Date and
Consummation Date...............................................37
9.5 Cash Out Of Shares..............................................40
9.6 Purchase of Shares on Private Sale Consummation Date............40
10. PIGGYBACK REGISTRATION RIGHTS.........................................41
10.1 Registration....................................................41
10.2 Obligations of the Issuer.......................................41
10.3 Obligations of the Holder.......................................42
10.4 Expenses of Registration........................................43
11. TERM..................................................................43
11.1 .................................................................43
11.2 .................................................................44
12. MISCELLANEOUS.........................................................44
12.1 Expenses........................................................44
12.2 Notices.........................................................44
12.3 Entire Agreement................................................46
12.4 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies........................................46
12.5 Governing Law...................................................46
12.6 Dispute Resolution..............................................46
12.7 Consent to Jurisdiction.........................................46
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12.8 Binding Effect; No Assignment...................................47
12.9 Further Assurances..............................................47
12.10 Severability....................................................47
12.11 Counterparts....................................................47
12.12 Headings; Interpretation........................................47
12.13 Third Parties...................................................47
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STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT dated as of the __ day of March, 1998 (the
"Agreement") among THE PLOW & HEARTH, INC., a Virginia corporation having an
address at Route 230 West, Madison, Virginia 22727 (the "Company"),
1-800-FLOWERS, INC., a Delaware corporation having an address at 1600 Stewart
Avenue, Westbury, New York 11590 ("Flowers") and the Persons set forth on
Schedule A annexed hereto and incorporated herein;
W I T N E S S E T H
WHEREAS, upon the date hereof, Flowers has acquired 88.31% of the issued
and outstanding shares of capital stock of the Company (70% of the issued and
outstanding capital stock on a fully diluted basis) ("Acquisition") pursuant to
a Stock Purchase Agreement dated as of March 9, 1998 among the Company, Flowers
and the Sellers referred to therein (the "Stock Purchase Agreement"); and
WHEREAS, the Stockholders and the Company desire to promote their mutual
interests by agreeing that the business and affairs of the Company shall, from
and after the date hereof, be conducted subject to the terms and conditions
hereof and by imposing certain restrictions on the sale or other transfer of the
Shares owned by the Stockholders.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, each of the Stockholders and the Company agree as follows:
1. DEFINITIONS
1.1 In addition to the terms defined elsewhere herein, when used
herein the following terms shall have the meanings indicated:
(a) "Affiliate" shall mean, with respect to any Person, (i)
any other Person, who directly or indirectly, is in control of, is controlled by
or is under common control with, such Person, and (ii) any natural person who is
a director or officer of such Person or of any Person described in clause (i)
above. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of capital stock, by
contract or otherwise.
(b) "Bankruptcy" of a Person shall mean (A) the filing by that
Person of a voluntary petition seeking liquidation, reorganization, arrangement
or readjustment, in any form, of its debts under Title 11 of the United States
Code or any other federal or state insolvency law, or a Person's filing an
answer or otherwise consenting to or acquiescing in any such petition, (B) the
making by a Person of any assignment for the benefit of its creditors with
respect to substantially all of the assets of such Person or (C) the expiration
of 90 days after the filing of an involuntary petition under Title 11 of the
United States Code, an application for the appointment of a receiver for
substantially all of the assets of a Person, or any involuntary petition seeking
liquidation, reorganization, arrangement or readjustment of its debts under any
other federal or state insolvency law, provided that the same shall not have
been dismissed, vacated, set aside, stayed or otherwise disposed of within such
90-day period.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Call Event" shall mean (i) the Bankruptcy of a Management
Stockholder or Optionholder; (ii) the death of a Management Stockholder or
Optionholder or the death of a Management Stockholder's or Optionholder's
Related Employee; (iii) the termination of employment of a Management
Stockholder or Optionholder or a Management Stockholder's or Optionholder's
Related Employee, with the Company and its Subsidiaries for any reason other
than without Cause, as a result of a Constructive Termination Without Cause, the
failure of the Company to offer to Renew Employment or the failure of such
Management Stockholder, Optionholder or Related Employee to accept an offer to
Renew Employment; or (iv) a breach or other violation by a Management
Stockholder or Optionholder or a Management Stockholder's or Optionholder's
Related Employee or one of their respective Affiliates of any Confidentiality
Agreement or any Non-Competition Agreement.
(e) "Call Period" shall mean (i) the sixty (60) day period
commencing on April 3, 2004 [the sixth anniversary of the date hereof] and
terminating on June 3, 2004 and (ii) in the event of the termination of
employment of a Management Stockholder, Optionholder or a Management
Stockholder's or Optionholder's Related Employee without Cause or as a result of
a Constructive Termination without Cause, or in the event of the failure of the
Company to offer to Renew Employment to a Management Stockholder, Optionholder
or Related Employee or the failure of a Management Stockholder, Optionholder or
a Management Stockholder's or Optionholder's Related Employee to accept an offer
to Renew Employment, in each case prior to the commencement of the period
referred to in clause (e)(i) above (the "Delayed Call Event"), the later of (A)
the sixty (60) day period commencing on April 3, 2002 [the fourth anniversary of
the date hereof] and terminating on June 3, 2002 or (B) the period commencing on
the occurrence of the Delayed Call Event and terminating sixty (60) days
thereafter.
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(f) "Call Period Trigger Date" shall mean April 3, 2004 [the
sixth anniversary of the date hereof].
(g) "Call Price" shall mean:
(i) except as otherwise provided in clauses (ii), (iii)
and (iv) below, the product of (A) the Management Stockholder's or
Optionholder's Proportionate Interest multiplied by (B) the Company Value;
(ii) if a Call Event results from a termination of
employment for Cause, the product of (A) the Management Stockholder's or
Optionholder's Proportionate Interest multiplied by (B) 50% of the Company
Value;
(iii) in the case of Rice and any Management Stockholder
or Optionholder of whom Rice is a Related Employee, if a Call Event results from
a voluntary termination of employment by Rice other than as a result of
Constructive Termination Without Cause, the product of (A) the Management
Stockholder's or Optionholder's Proportionate Interest multiplied by (B) (1)
until April 3, 1999 [the first anniversary of the date hereof], 50% of the
Company Value; (2) from and after April 3, 1999, until April 3, 2000 [the second
anniversary of the date hereof], 75% of the Company Value; (3) from and after
April 3, 2000 until April 3, 2001, [the third anniversary of the date hereof],
90% of the Company Value; and (4) thereafter 100% of the Company Value;
(iv) in the case of any Person other than Rice or any
Management Stockholder or Optionholder of whom such other Person is a Related
Employee, if a Call Event results from a voluntary termination by the Management
Stockholder, Optionholder or Related Employee other than a Constructive
Termination Without Cause, the product of (A) the Management Stockholder's or
Optionholder's Proportionate Interest multiplied by (B)(1) until April 3, 1999
[the first anniversary of the date hereof], 50% of the Company Value and (2)
thereafter, 100% of the Company Value.
In all cases the Call Price shall be reduced by any loans, advances or similar
monetary obligations owed or otherwise outstanding from the Management
Stockholder, Optionholder, or such Management Stockholder's or Optionholder's
Related Employee or their respective Affiliates (whether or not otherwise due
and payable) to the Company or its Affiliates and any amounts owed to the
Company or its Affiliate by the Management Stockholder, Optionholder, or their
respective Related Employee with respect to the exercise of Options or other
Purchase Rights.
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(h) "Cash Out Price" shall mean with respect to any Management
Stockholder or Optionholder, (i) the product of the Company Value multiplied by
such Management Stockholder's or Optionholder's Proportionate Interest, less
(ii) any loans, advances or similar monetary obligations owed or otherwise
outstanding from such Management Stockholder or Optionholder or their respective
Related Employee or Affiliates (whether or not, otherwise due and payable) to
the Company or its Affiliates, and any amounts owed by such Management
Stockholder, Optionholder or their respective Related Employee to the Company or
its Affiliates with respect to the exercise of Options or other Purchase Rights.
(i) "Cause" shall have the same meaning as in the employment
(or consultancy) agreement between the Company and the applicable employee (or
consultant), and if no such agreement shall exist or if such term is not defined
in such agreement, the term "Cause" shall mean (i) the failure of the employee
(or consultant) to perform his material duties and obligations to the Company,
which failure continues unremedied for a period of ten (10) business days after
receipt of written notice thereof from the Company; (ii) the conviction of the
employee (or consultant) of any felony, or the conviction of the employee of a
misdemeanor which involves moral turpitude, or the entering by him of a plea of
guilty or nolo contendere with respect to any of the foregoing; (iii) any
conduct by the employee (or consultant), which in the reasonable determination
of the Board is likely to adversely affect in any material respect the
reputation or public image of the Company or any Affiliate thereof, provided,
the employee (or consultant) is given the opportunity upon 5 days' prior notice
to be heard by the Board prior to such termination; (iv) the commission by the
employee (or consultant) of any act involving fraud, misappropriation of funds,
dishonesty, disloyalty, breach of fiduciary duty or other gross misconduct
injurious to the Company or any Affiliate; (v) the determination by the Board
that the employee (or consultant) is dependent upon the use of alcohol or drugs;
(vi) a breach by the employee of any Confidentiality Agreement or any
Non-Competition Agreement; or (vii) a violation or breach by the employee (or
consultant) of any material term of his employment (or consultancy) agreement
with the Company or any of its Subsidiaries, and the failure of the employee (or
consultant) to cure such violation or breach within ten (10) days after receipt
of written notice thereof from the Company.
(j) "Common Stock" shall mean the shares of common stock, par
value $.10 per share, of the Company.
(k) "Company Value" shall mean the product of (i) seven (7)
multiplied by (ii) the EBIT of the Company for the twelve-month period ending on
the last day of the calendar month preceding (A) in the case of a Put Option,
the Put Event or the Put Period Trigger Date, as the case may be; (B) in the
case of a Call Option, the Call Event, or the Call Period Trigger Date, as the
case may be; (C) in the case of a Call Option triggered by the circumstances
described in Section 1.1(e)(ii), the later of the Put Period Trigger Date or the
Delayed Call Event;
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(D) in the case of a Cash Out Option, the Effective Date or the Consummation
Date, as the case may be, or (E) in the case of Section 2.2(b), the Investment
Date, or if any such date is the last day of a month, on such date.
(l) "Confidentiality Agreement" shall mean a Confidentiality
and Non-Disclosure Agreement substantially in the form of Exhibit C annexed
hereto, or any other agreement or arrangement between any member of the Flowers
Group, on the one hand, and a Management Stockholder, Optionholder, a Related
Employee of a Management Stockholder or Optionholder or one of their respective
Affiliates, on the other hand, which restricts or otherwise limits the
disclosure or use of any confidential, proprietary or other information or
material of one or more members of the Flowers Group by the Management
Stockholder, Optionholder, Related Employee or one of their respective
Affiliates, including, but not limited to, any such agreement or arrangement
included in an employment or consulting agreement.
(m) "Constructive Termination Without Cause" shall have the
same meaning as in the employment or consulting agreement between the Company
and the applicable employee (or consultant), and if no such agreement shall
exist or such term shall not be defined in such agreement, "Constructive
Termination Without Cause" shall mean a termination of the employee's (or
consultant's) employment (or consultancy) at his initiative following the
occurrence, without the employee's (or consultant's) prior written consent, of
one or more of the following events: (i) a reduction in the employee's (or
consultant's) then current base salary payable; (ii) a reduction in the
employee's (or consultant's) other material employee benefit plans and programs
maintained by the Company generally on behalf of its employees on the date
hereof; provided, however, that it shall not be deemed a Constructive
Termination Without Cause if the Company reduces or terminates a material
employee benefit plan or program because the maintenance of such plans or
program would adversely affect the tax treatment of any benefit provided to any
other employee of the Company or the Flowers Group or the tax qualified status
of any employee benefit plan or program maintained by the Company or any other
member of the Flowers Group during such period, provided that, in lieu of such
reduced or the terminated benefit plan or program, the Company shall provide the
employee with benefits that are comparable to employee benefit plans and
programs which Flowers from time to time generally makes available to its
employees; (iii) the failure to elect or reelect the employee (or consultant) to
any of the positions in the Company to which the Company has contractually
agreed to elect or reelect the employee (or consultant); (iv) an action by the
Company which results in a material diminution in employee's (or consultant's)
authority or duties as an executive of the Company (if he is serving as an
executive of the Company), excluding any isolated or inadvertent action; or (v)
if the employee (or consultant) is relocated to a Company office that is located
more than 65 miles from the Company's current headquarters located at Route 230
West, Madison, Virginia.
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(n) "Consummation Date" shall mean the date as of which a Sale
(other than a Private Sale) is deemed consummated.
(o) "Consummation Time" shall mean the time on the
Consummation Date as of which a Sale (other than a Private Sale) is deemed
consummated.
(p) "Conversion Ratio" shall mean with respect to any class of
Shares held by the Management Stockholders or deemed to be held by the
Optionholders, the ratio at which such class shall be converted into a class of
capital stock of the Issuer.
(q) "Disability" shall have the same meaning as set forth in
the employment (or consultancy) agreement between the applicable employee (or
consultant) and the Company, and if no such agreement shall exist or if such
term is not defined in such agreement, the term "Disability" shall mean the
determination by a physician selected by the Company that the employee (or
consultant) is unable, by reason of physical or mental illness, to perform his
duties and responsibilities to the Company for a period of 90 consecutive days
or a period of in excess of 180 days (whether or not consecutive) during any
calendar year during the term of his employment, or if a court of competent
jurisdiction declares the employee (or consultant) is of unsound mind or
otherwise incapable of carrying out his duties and responsibilities to the
Company.
(r) "EBIT" of the Company shall mean the consolidated income
of the Company and its consolidated subsidiaries before interest and taxes and,
until the Company's bonus pool plan existing on the date hereof is terminated,
expenses incurred by the Company under the existing bonus pool plan, calculated
by the Company's independent certified public accountant in accordance with
generally accepted accounting principles, consistently applied, without giving
effect to non-recurring items.
(s) "Effective Date" shall mean the date on which the SEC
declares effective the Registration Statement.
(t) "Fully Diluted Basis" shall mean the amount of capital
stock of the Company issued and outstanding after giving effect to the exercise
of all options and other securities which may be converted into, exercised or
exchanged for, shares of capital stock of the Company.
(u) "Existing Plan" shall mean The Plow & Hearth Inc. Amended
and Restated Stock Option Plan adopted as of March __, 1998 pursuant to which
the Company has issued options to purchase 31,318 shares of Common Stock.
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(v) "Flowers Group" shall mean Flowers and each of its direct
and indirect Subsidiaries and other Affiliates.
(w) "IPO" shall mean an initial public offering of equity
securities of an Issuer pursuant to a Registration Statement filed with the SEC
pursuant to the 1933 Act.
(x) "IPO Closing Date" shall mean the date on which the sale
of shares of capital stock of the Issuer registered in the IPO shall be
consummated.
(y) "Liability" shall mean any direct or indirect
indebtedness, liability, assessment, claim, loss, damage, deficiency, obligation
or responsibility, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, actual or potential,
contingent or otherwise (including any liability under any guaranties, letters
of credit, performance credits or with respect to insurance loss accruals).
(z) "Lien" shall mean any mortgage, lien, claim, pledge,
charge, security interest, preemptive right, right of first refusal, option,
judgment, title defect, or other encumbrance of any kind.
(aa) "Majority-In-Interest of Management Stockholders" shall
mean such Management Stockholders and Optionholders who, at the time in
question, own (or, in the case of Optionholders, are deemed to own) at least a
majority in the aggregate of the Voting Shares and Option Shares then held by
all Management Stockholders and Optionholders on a Fully Diluted Basis.
(ab) "Management Stockholders" shall mean (i) each of the
persons set forth on Schedule A as a Management Stockholder and any permitted
transferees of such persons (except if such transferee is Flowers or one of its
Affiliates), (ii) any other employee, director or consultant of the Company or
any of its Subsidiaries, and any permitted transferee of such persons except if
such transferee is Flowers or one of its Affiliates and, (iii) any person who is
issued Shares upon exercise of Options issued under the Existing Plan and any
permitted transferee of such persons, except if such transferee is Flowers Group
or its Affiliates; provided that in each case such person is a stockholder of
the Company and becomes a party to this Agreement.
(ac) "Non-Competition Agreement" shall mean any agreement or
arrangement between any member of the Flowers Group, on the one hand, and a
Management Stockholder, Optionholder, Related Employee of a Management
Stockholder or Optionholder or any of their respective Affiliates, on the other
hand, which restricts or otherwise limits the ability of the Management
Stockholder, Optionholder, Related Employee and/or any of Affiliates,
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from directly or indirectly engaging in a business competitive with, or
otherwise similar to, the business of any member of the Flowers Group,
including, but not limited to, any of the Employment Agreements entered into
between the Company and any of the Executives (as such term is defined in the
Stock Purchase Agreement) on the date hereof or, any agreement or arrangement
which is included as part of any other employment or other agreement.
(ad) "1933 Act" shall mean the Securities Act of 1933, as
amended.
(ae) "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(af) "Option" shall mean an option to purchase Common Stock
under the Existing Plan.
(ag) "Optionholder" shall mean each person set forth on
Schedule B as an Optionholder and each other person who owns options to purchase
Common Stock pursuant to the Existing Plan and, in each case, provided that such
person is a party to this Agreement.
(ah) "Option Shares" shall mean any shares of Common Stock
which the Company shall be required to issue to an Optionholder upon exercise of
an Option issued pursuant to the Existing Plan.
(ai) "Person" or "person" shall mean an individual,
corporation, partnership, joint venture, limited liability company, association,
trust, unincorporated organization or other entity, or other organization
(whether or not a legal entity), including, but not limited to, a government or
political subdivision or an agency or instrumentality thereof.
(aj) "Proportionate Interest" with respect to any Person,
shall mean a fraction, the numerator of which is the total of number of Shares
and Option Shares being sold by such Person and the denominator of which is the
total number of Shares and Option Shares then outstanding and (in the case of
Optionholders) deemed outstanding on a Fully Diluted Basis.
(ak) "Primary Call Event" shall mean a Call Event which
results from a termination of employment for Cause or the voluntary termination
of employment by the employee other than a Constructive Termination Without
Cause.
(al) "Private Sale Consummation Date" shall mean the date as
of which a Private Sale is deemed consummated.
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(am) "Purchase Rights" shall mean options, warrants and other
rights of any nature to purchase Shares of the Company, including, but not
limited to, the right to convert debt or equity securities into Shares.
(an) "Put Event" shall mean the (i) death of a Management
Stockholder or Optionholder or the death of the Management Stockholder's or
Optionholder's Related Employee, or (ii) termination of employment of the
Management Stockholder or Optionholder or a Management Stockholder's or
Optionholder's Related Employee, with the Company and its Subsidiaries by the
Company and its Subsidiaries as a result of Disability.
(ao) "Put Period" shall mean the sixty (60) day period
commencing on April 3, 2002 [the fourth anniversary of the date hereof] and
terminating on June 3, 2002.
(ap) "Put Price" with respect to any Management Stockholder's
or Optionholder's Put Shares shall mean (i) the product of (A) such Management
Stockholder's or Optionholder's Proportionate Interest multiplied by (B) the
Company Value, less (ii) any loans, advances or similar monetary obligations
owed or otherwise outstanding from such Management Stockholder or Optionholder
or a Related Employee of such Management Stockholder or Optionholder or their
respective Affiliates (whether or not, otherwise due and payable) to the Company
or its Affiliates, and any amounts owed by such Management Stockholder,
Optionholder or Related Employee to the Company or its Affiliate with respect to
the exercise of Options or other Purchase Rights.
(aq) "Put Period Trigger Date" shall mean April 3, 2002 [the
fourth anniversary of the date hereof].
(ar) "Registrable Securities" shall mean all shares of common
stock of an Issuer held by a Management Stockholder or Optionholder, and any
other common equity securities of the Issuer issued in exchange for, upon a
reclassification of, or in a distribution with respect to, such common stock. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities (A) when (i) a registration statement (other than a
registration statement on Form S-8 or any successor form) with respect to the
sale of such securities shall have become effective under the 1933 Act and such
securities shall have been disposed of pursuant to such registration statement,
(ii) a registration statement on Form S-8 (or any successor form), or a reoffer
prospectus, with respect to such securities shall have become effective under
the 1933 Act, (iii) such securities shall be eligible for sale under rule 144
(or any successor provision) under the 1933 Act or under any other rule or
provision of the 1933 Act pursuant to which the purchaser of such securities
will receive certificates not bearing a legend restricting further transfer or
will otherwise be permitted to resell such securities on a national securities
exchange or the Nasdaq Stock Market or the Nasdaq National
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Market without registration, (iv) such securities shall have been otherwise
transferred and new certificates for them not bearing a legend restricting
further transfer shall have been delivered by the Company or (v) such securities
shall have been issued and then ceased to be outstanding, or (B) on or after the
third anniversary of the closing of the IPO.
(as) "Registration Statement" shall mean a registration
statement on Forms S-1, SB-1 or SB-2 or any successor form authorized by the SEC
pursuant to which the equity securities of an Issuer are registered for sale in
an IPO.
(at) "Related Employee" shall mean with respect to any
Management Stockholder or Optionholder who is not an employee or consultant of
the Company or one of its Subsidiaries, the Related Employee identified on
Schedule A or Schedule B, and generally, with respect to any Management
Stockholder or Optionholder, the employee or consultant of the Company or
Subsidiary: (i) who directly or indirectly transferred to the Management
Stockholder or Optionholder the Shares owned by the Management Stockholder or
Optionholder; or (ii) with whom such Management Stockholder or Optionholder is
otherwise Affiliated; or (iii) whose Family Entity the Management Stockholder or
Optionholder is an equity owner or beneficiary of; or (iv) of whom the
Management Stockholder or Optionholder would qualify as a Permitted Transferee
pursuant to Section 5.1(a), (b) or (c). For purposes of this Agreement (i) (A)
Peter M. Rice shall not be deemed a Related Employee of Peter G. Rice, for so
long as Peter M. Rice is employed by the Company or continues to own Shares
which he owns on the date of termination of his employment and (B) Peter G. Rice
shall not be deemed a Related Employee of Peter M. Rice, for so long as Peter G.
Rice is employed by the Company or continues to own shares which he owns on the
date of his termination of employment and (ii) Peter G. Rice and Margaret Rice
shall be deemed Related Employees of each other for so long as they are married
to each other.
(au) "Renew Employment" shall mean an offer by the Company or
one of its Subsidiaries to renew the employment (or consulting) agreement or
arrangement of a Management Stockholder, Optionholder or a Related Employee of a
Management Stockholder or Optionholder at the expiration of its term, on terms
and conditions at least as favorable to such Management Stockholder or
Optionholder or Related Employee as were provided during the expired term.
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(av) "Rice" shall mean Peter G. Rice.
(aw) "Sale" shall mean (a) the disposition of all or
substantially all of the assets of Flowers for consideration to a Person which
is not an Affiliate of Flowers, as a result of which the stockholders of Flowers
at such time and their respective Affiliates will not own, in the aggregate, in
excess of 50% of the Voting Power of the shares of capital stock of the
acquiring Person as to which holders thereof are ordinarily entitled to vote in
the election of directors ("Voting Securities") of the acquiring Person; or (b)
the sale of the capital stock of Flowers for consideration to a Person who is
not an Affiliate of Flowers as a result of which the stockholders of Flower at
such time and their respective Affiliates will not own, in the aggregate, in
excess of 50% of the Voting Power of the Voting Securities of Flowers, as the
case may be; or (c) a merger, consolidation or combination for consideration of
Flowers with or into another Person who is not an Affiliate of Flowers as a
result of which the stockholders of Flowers at such time and their Affiliates,
in the aggregate, will not own in excess of 50% Voting Power of the Voting
Securities of the surviving entity of such merger, consolidation or combination.
(ax) "Shares" shall mean (i) the shares of Common Stock issued
to any of the Stockholders or any other person and (ii) any other shares of the
capital stock of the Company now owned or hereafter acquired by any Stockholder
or any other person, including capital stock issued upon conversion or exercise
of any security.
(ay) "Stockholders" shall mean, collectively, Flowers, each of
the Persons set forth on Schedule A, any other person who owns capital stock of
the Company pursuant to this Agreement and any permitted transferees of any of
the foregoing, provided that in the case of each of the foregoing such Person
owns capital stock of the Company and is a party to this Agreement.
(az) "Stockholder Option Event" shall mean the first to occur
of an IPO of Flowers or the Sale of Flowers.
(ba) "Subsidiary" of any Person shall mean any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing similar functions
are owned directly or indirectly through one or more intermediaries, or both, by
such Person.
(bb) "SEC" shall mean the United States Securities and
Exchange Commission.
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(bc) "termination of employment" of a Management Stockholder
or an Optionholder or Related Employee of a Management Stockholder or
Optionholder, shall mean the termination of such person's employment or
consultancy with or by the Company and its Subsidiaries for any reason
whatsoever, whether such employment is terminated by the Company and its
Subsidiary or by such person.
(bd) "Voting Shares" shall mean all shares of capital stock of
the Company as to which the holders thereof are ordinarily entitled to vote in
the election of directors.
(be) "Voting Power" shall mean the votes entitled to be cast
by the holder of Voting Shares and Option Shares.
1.2 The following terms are defined in the following sections of
this Agreement:
Term Section
- ---- -------
Bring-Along Option 7.1(a)
Bring-Along Stockholder 7.1(a)
By-Laws 3.1
Call Exchange Notice 6.2(a)
Call Exercise Notice 6.2(a)
Call Option 6.2(a)
Call Shares 6.2(a)
Cash-Out Documents 9.2(b)
Certificate 3.1
Charitable Organization 5.1(c)
Confidentiality Agreement 3.7
Conversion Documents 9.2(b)
Conversion Options 9.1(b)
Credit Documents 6.3(a)
Delayed Call Event 1.1(e)
Directors 3.2(a)
Disposing Stockholder 7.2
Existing Option Plan 2.1
Family Entity 5.1(a)
First Offer Assets 8.1(a)
First Offer Election Period 8.2(b)
First Offer Notice 8.1(a)
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Term Section
- ---- -------
First Offer Option 8.1(a)
First Offer Shares 8.1(a)
First Offer Transaction 8.1(a)
Flowers 9.1(a)
Flowers Director 3.2(b)
Holder 10.2(c)
Independent Industry Director 3.2(b)
Initial Issuance 2.1
Investment Date 2.3(b)
Investor 2.3(b)
Issuer 9.1(a) and 10.1(a)
Issuer Conversion Notice 9.3
Issuer Conversion Option 9.1(b)
Management Director 3.2(b)
New Plan 2.1
Offeree 7.1(a)
Offering Shares 2.2(b)
Permitted Transfer 5.1
Permitted Transferee 5.1
Pledge 6.1(c)
Preemptive Right 2.3(b)
Preemptive Right Notice 2.3(b)
Primary Call Event 1.1(f)
Prime Rate 6.1(c)
Private Sale 9.1(a)(ii)
Private Sale Put Option 9.1(a)(ii)
Private Sale Put Documents 9.2(c)
Proportionate Amount 2.3(b)
Purchaser 7.2
Put Notice 6.1(a)
Put Option 6.1(a)
Put Shares 6.1(a)
Qualified Offer 2.3(b)
Stock Purchase Agreement Recitals
Stockholder Cash Out Option 9.1(a)
Stockholder Conversion Option 9.1(a)
Stockholder Exercise Notice 9.2(b)
Stockholder Options 9.1(a)
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Term Section
- ---- -------
Take-Along Trigger Notice 7.2
Third Party Offer 8.1
Transaction Notice 9.2(a)
Transfer or transfer 4.1
Transferring Stockholder 7.1(a)
Trigger Notice 7.1(a)
Underwriting Agreement 10.2(f)
Voting Securities 1.1(ao)
2. STOCK OWNERSHIP
2.1 Authorized Capital Stock and Current Ownership. The authorized
capital stock of the Company consists of 200,000 shares of Common Stock, of
which 105,356 shares are issued and outstanding as of the date hereof. On the
date hereof there are options to purchase 31,318 shares of Common Stock issued
and outstanding under the Company's Existing Plan and, after giving effect to
the adoption of, and initial issuance of options to purchase 3,504 shares of
Common Stock, ("Initial Issuance") under the Company's 1998 Option Plan (the
"New Plan"), there will be options to purchase 34,822 shares of Common Stock
issued and outstanding under the New Plan. On the date hereof after giving
effect to the Acquisition and assuming the Initial Issuance is completed, each
(a) Stockholder set forth on Schedule A annexed hereto owns that number of
shares of Common Stock and Purchase Rights to purchase that number of Shares as
are set forth opposite its name on Schedule A and (b) each holder of options
under the Existing Plan or New Plan who is not currently a Stockholder, owns
Purchase Rights to purchase that number of Shares as are set forth next to such
person's name on Schedule B. The Shares and Purchase Rights issued to the
Stockholders and other persons as set forth on Schedules A and B are the only
Shares and Purchase Rights of the Company that are issued and outstanding on the
date hereof.
2.2 Limited Preemptive Rights. (a) The Stockholders and
Optionholders acknowledge and agree that, except as expressly set forth in
Section 2.2(b), they are not entitled to any preemptive rights in connection
with their Shares or Options.
(b) (i) If the Company proposes to issue Common Stock or
equity securities convertible into Common Stock ("collectively, Offering
Shares") pursuant to a Qualified Offer, it shall notify the Stockholders and
Optionholders in writing of such proposed issuance not later than ten (10)
business days prior to the closing of a Qualified Offer (the "Preemptive Right
Notice"). The Preemptive Right Notice shall identify the purchaser of Offering
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Shares in the Qualified Offer (the "Investor") and shall set forth the material
terms of the Qualified Offer.
(ii) Each Stockholder and Optionholder shall have the option
("Preemptive Right") to purchase all or any portion of its Proportionate Amount
of Offering Shares at the same valuation and on the same payment terms as the
Investor. A Stockholder or Optionholder shall exercise its Preemptive Right by
delivering written notice to the Company not later than three (3) business days
prior to the closing of the Qualified Offer, which notice shall state what
percentage of its Proportionate Amount of Offering Shares it shall purchase and
shall be accompanied by a certified check or other immediately available funds
for the full purchase price of the Offering Shares to be purchased, together
with all other documentation reasonably requested by the Company.
(iii) The exercise of a Preemptive Right shall not obligate
the Company to consummate a Qualified Offer and, if the Company elects not to
complete a Qualified Offer, the Stockholders and Optionholders shall have no
right to purchase Offering Shares in connection with such proposed Qualified
Offer.
(iv) (A) "Qualified Offer" shall mean the issuance of Common
Stock or equity securities convertible into Common Stock in exchange solely for
cash consideration, constituting not greater than 89.9% of the outstanding
capital stock of the Company on a Fully Diluted Basis after giving effect to the
Qualified Offer, but shall expressly exclude a Stockholder Cash Out Option or
the issuance of any capital stock or securities upon exercise of any options,
stock appreciation rights, phantom stock plans or similar arrangements.
(B) "Proportionate Amount" with respect to any Person,
shall mean that number of Offering Shares such that after giving effect to the
Qualified Offer and all Preemptive Rights exercised in connection therewith,
such Person shall own (or in the case of Option Shares, shall be deemed to own)
the same aggregate percentage of Voting Shares and Option Shares of the Company
on a Fully Diluted Basis immediately after completion of the Qualified Offer as
such Person owned immediately prior to the Qualified Offer.
2.3 Certain Limitations on Issuance of Options and Shares
(a) Until the termination of the Put Period, the Company shall
not issue additional options to purchase Shares to any person except (i) options
under the New Plan which after issuance shall constitute not greater than 10% of
the outstanding Common Stock on a Fully Diluted Basis; (ii) options issued to
financial institutions or other persons who make investments in the Company or
its Subsidiaries (not otherwise prohibited by this
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Agreement) after the date hereof as consideration (in whole or in part) for
their investment; or (iii) as otherwise consented to by Rice or if Rice has
died, is incompetent or no longer owns Shares or Purchase Rights, by the
Management Director;
(b)(i) The Company shall not issue Shares to Flowers or any of
its Affiliates unless such Shares are issued: (A) for consideration and based on
a valuation of the Company (prior to giving effect to the investment and
issuance in question) that is not less than the lower of (1) the Company Value
or (2) the Adjusted Book Value of the Company, or (B) for consideration and
based on a valuation which is otherwise deemed fair to the stockholders of the
Company in the opinion of an independent accounting firm, investment bank
selected by the Company which is experienced in valuing entities such as the
Company; or (C) with the consent of Rice or if Rice has died, is incompetent, is
otherwise unwilling or unable to make such determination or no longer owns Share
or Purchase Rights, by the Management Director.
(ii) For purposes of this Section 2.3, the term Adjusted
Book Value shall mean the sum of: (A) $21,000,000, plus (B) additional capital
contributions made to the Company after the date hereof (including, but not
limited to, any exercise, conversion or similar price paid or deemed paid upon
exercise of an Option or other Purchase Right), but prior to the date such
Shares are issued (the "Investment Date"), plus or minus, as the case may be,
(C) the aggregate cumulative consolidated retaining earnings or net losses of
the Company from the date hereof through the Investment Date, minus (D) the
purchase price paid by the Company for any Shares, Option Shares or other
securities of the Company purchased by the Company since Closing.
3. MANAGEMENT
3.1 Management. The management of the Company shall be conducted in
accordance with the provisions of this Agreement, which are intended to be
reflected, to the extent required by applicable law, in the Amended and Restated
Articles of Incorporation (the "Articles") and Amended and Restated By-laws (the
"By-laws") of the Company, copies of each of which are annexed hereto as Exhibit
A and Exhibit B, respectively. If there is any inconsistency between this
Agreement and the Articles and By-Laws, the provisions of this Agreement shall
govern.
3.2 Election and Removal of Directors. (a) Number of Directors. The
number of directors (the "Directors") on the Board shall be five (5); provided,
however, that the size of the Board may be changed (i) by Flowers with the
consent of the Management Director or a Majority-in-Interest of Management
Stockholders; or (ii) by Flowers if the Management Stockholders and
Optionholders in the aggregate own (or, in the case of Optionholders are deemed
to own) less than 10% of the Voting Power on a Fully Diluted Basis.
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(b) Board Composition. The Board shall consist of:
(i) Not less than three natural persons designated by
Flowers (each, a "Flowers Director"). On the date hereof, Flowers has designated
James F. McCann, Christopher G. McCann and T. Guy Minetti as the initial Flowers
Directors; and
(ii) For so long as the Management Stockholders and
Optionholders, in the aggregate, (A) at any time prior to the termination of the
Put Period, own 2% or more of the aggregate Voting Power on a Fully Diluted
Basis or (B) at any time after the termination of the Put Period, own 10% or
more of the aggregate Voting Power on a Fully Diluted Basis, one natural person
designated by the Management Stockholders and approved by Flowers (the
"Management Director"). On the date hereof, the Management Stockholders have
designated Rice as the initial Management Director and Flowers hereby consents
to the designation of Rice as the Management Director; and
(iii) For so long as the Management Stockholders and
Optionholders, in the aggregate, (A) at any time prior to the termination of the
Put Period, own 2% or more of the aggregate Voting Power on a Fully Diluted
Basis or (B) at any time after the termination of the Put Period, own 10% or
more of the aggregate Voting Power on a Fully Diluted Basis, one natural person
designated by the Management Director; provided that such designee shall not be
an Affiliate of the Management Director or any Management Stockholder, shall be
or within the past three (3) years have been, engaged in the mail order catalog
industry and shall be approved by Flowers (the "Independent Industry Director").
On the date hereof, the Management Director has designated Benjamin Perez as the
initial Independent Industry Director, and Flowers hereby consents to such
designation.
(iv) If, in accordance with the terms hereof, the Board
may be comprised of more than five (5) members or the Management Stockholders
and Optionholders are not entitled to appoint a Management Director or
Independent Industry Director, such additional and/or replacement Director or
Directors shall be designated and appointed in the manner determined by Flowers
in its discretion.
(c) Removal. (i)(A) Flowers shall have the right, at any time
and for any reason (or for no reason), to remove as a Director, any or all of
the Flowers Directors or any other Director which it has designated in
accordance with the terms hereof; (B) for so long as the Management Stockholders
and Optionholders are entitled to appoint the Management Director, the
Management Stockholders and Optionholders shall have the right, at any time and
for any reason (or for no reason), to remove as a Director, the Management
Director; and (C) either Flowers or, for so long as the Management Stockholders
and Optionholders are
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entitled to appoint the Management Director, the Management Director, shall have
the right, at any time and for any reason (or no reason) to remove as a
Director, the Independent Industry Director, in each case which removal shall be
made by written notice to such Director and all Stockholders and Optionholders.
The Stockholders and Optionholders agree to take such action, and to cause the
remaining Directors to take such action, as is necessary or desirable to remove,
or confirm the removal of, such persons as Directors as soon as practicable
following receipt of such notice.
(ii) Immediately upon occurrence of an event that results in the
Management Stockholders and Optionholders no longer being entitled to appoint a
Management Director or the Independent Industry Director hereunder, the
Management Director and Independent Industry Director then serving on the Board
shall automatically, without any further action on his part or on the part of
any Stockholder, Optionholder or other person, be deemed to have resigned from
the Board and the vacancies created by such resignation may be filled as
determined by Flowers in its discretion.
(d) Filling Vacancies. If at any time a vacancy is created on
the Board by reason of the death, removal or resignation of any Director or
otherwise, such vacancy shall be filled (i) by Flowers, if the natural person
who has ceased to be a Director was one of the Flowers Directors or was
otherwise designated by Flowers or if such vacancy is created as a result of an
increase in the size of the Board; or (ii) if the Management Stockholders and
Optionholders are then entitled to appoint the Management Director, by the
Management Stockholders and Optionholders (with the approval of Flowers) if the
natural person who has ceased to be a Director was the Management Director; or
(iii) if the Management Stockholders and Optionholders are then entitled to
appoint the Independent Industry Director, by the Management Director with the
approval of Flowers (provided that such person otherwise meets the criteria set
forth in Section 3.2(b)(iii)) if the natural person who has ceased to be a
Director was the Independent Industry Director or (iv) by Flowers, in the event
of a removal of a Management Director or an Independent Industry Director
pursuant to Sections 3.2(c)(ii); in each case, which election shall be made by
written notice to the remaining Directors and the Stockholders and
Optionholders. The Stockholders and Optionholders agree to take such action, and
to cause the remaining Directors to take such action, as is necessary or
desirable to elect, or confirm the election of, such persons as Directors as
soon as practicable following receipt of such notice.
3.3 Officers. (a) Promptly after the execution of this Agreement,
the Board of Directors shall elect James McCann as Chairman of the Board and
Peter G. Rice as President and Chief Executive Officer of the Company. The Board
may appoint such additional officers as it may from time to time determine.
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(b) Officers shall serve at the pleasure of the Board and the
Board may remove any officer with or without cause at any time, and from time to
time, subject to the provisions of the employment agreement (if any) of such
officer, and may fill any vacancies.
3.4 Quorum and Vote. (a) (i) A quorum of directors shall consist of
a majority of the Directors, and any decision of the Board shall require the
affirmative vote of a majority of directors present at a meeting at which a
quorum is present.
(ii) Any action required or permitted to be taken at any
meeting of the Board may be taken without a meeting if all members of the Board
consent thereto in writing, and the writings are filed with the minutes of the
Board (or the committee, as the case may be); provided, that if applicable law
permits Board action to be taken without a meeting by written consent of fewer
than all Board members, then such actions may be taken by the minimum number of
Directors permitted by law, but in no event fewer than a majority of the
Directors.
(iii) Any one or more members of the Board (or any committee
thereof) may participate in a meeting of the Board (or such committee) by means
of a telephone conference or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
(b) (i) A quorum of stockholders shall consist of the holders,
present in person or by proxy, of a majority of the outstanding votes entitled
to be cast and, except as otherwise set forth herein or required by law, all
actions of the stockholders of the Company (including the election of directors)
shall require the affirmative vote of a majority of the outstanding votes cast
at a meeting at which a quorum is present.
(ii) Any action required or permitted to be taken by the
Stockholders may be taken without a meeting, without prior notice and without a
vote, pursuant to a written consent delivered to the Company setting forth the
action so taken and signed by the holders of Shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all Shares entitled to vote thereon were present and
voted.
3.5 Limitation on Management Power. Notwithstanding anything herein
or in the Certificate or By-laws and without limiting the authority of the Board
to oversee the management of the Company, no officer of the Company shall take
any of the following actions without the approval of the Board:
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(i) sell, lease, encumber, lend, exchange or otherwise
transfer the assets of the Company other than in the usual and regular course of
business;
(ii) incur any Liability by or on behalf of the Company
whether actual or contingent in excess of $250,000, including, but not limited
to, any loan, guarantee, or other agreement which may result in indebtedness to
the Company; provided that such limitation shall not apply to Liability incurred
in connection with the purchase of inventory or for catalogue production and
catalogue marketing costs, in each case incurred in the ordinary course of the
Company's business consistent with past practice.
(iii) make any loan or advance to, or otherwise provide funds
or credit to or for, any other Person;
(iv) enter into any agreement not in the usual and regular
course of the Company's business;
(v) organize a Subsidiary or acquire an equity or other
interest in any other Person, or enter into a joint venture or strategic
alliance;
(vi) make any investment, by way of capital contribution or
otherwise, in or with any Person except (a) investments and direct obligations
of, or instruments unconditionally guaranteed by, the United States of America
or in certificates of deposit issued by, and time deposits with, a commercial
bank having capital and surplus in excess of one (1) billion dollars; (b)
investments in any money market account maintained with a financial institution;
(c) demand deposit accounts maintained in the ordinary course of business; (d)
commercial papers rated A-1 or better by Standard and Poor's Corporation or P-1
or better by Moody's Investor Services, Inc.
(vii) make capital expenditures in any fiscal year in excess
of the level approved by the Board in the capital budget adopted by the Board
for that fiscal year.
(viii) issue, distribute, redeem, retire, purchase, acquire or
sell any equity or debt securities of the Company or apply any of its property
to any of the foregoing except as otherwise provided in this Agreement.
(ix) declare or pay any dividends, or set apart any sum for
the payment of any dividends on, or make any other distribution or reduction of
capital otherwise in respect of, any Shares, except as otherwise provided in
this Agreement.
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(x) change the Company's current line of business or enter
into any new line of business;
(xi) retain any attorney, accountant, investment banker,
financial advisor or person performing a similar function to represent or
provide services to the Company;
(xii) authorize or approve the budget for the Company;
(xiii) authorize or enter into any agreement or arrangement
(whether or not in writing) between the Company and any of its officers,
directors, shareholders or Affiliates;
(xiv) file, or consent by answer otherwise to the filing
against it, of a petition for relief or reorganization or arrangement or any
other petition in bankruptcy or insolvency under the laws of any jurisdiction,
make an assignment for the benefit of its creditors or consent to the
appointment of a custodian, receiver, trustee or other officer with similar
powers for itself or for any substantial part of its assets or take or omit any
other action which would result (with the giving of notice or passage of time or
both) in the Bankruptcy of the Company or any of its Subsidiaries; or
(xv) agree (whether or not in writing) to do any of the
foregoing.
3.6 Certain Transactions between the Company and its Affiliates.
Except as otherwise provided in this Agreement, unless (i) Flowers and (ii) the
Management Director or a Majority-in-Interest of Management Stockholders agree
otherwise:
(a) the purchase price and other economic terms and conditions
of a sale or other transfer of assets between the Company, on the one hand, and
any Affiliate of the Company or Flowers, on the other hand, shall be
substantially the same as could reasonably be bargained for in an arm's length
transaction between unrelated parties;
(b) the Company and Flowers, in good faith, shall mutually
determine the prices to be paid for, and other terms and conditions of, the
utilization by either of them of the call center equipment and services of the
other;
(c) the Company and Flowers, in good faith, shall mutually
determine the price and other terms and conditions under which other services
shall be provided by one to the other; and
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(d) the Company and Flowers will provide to each other, at no
cost, customer names and addresses and any other relevant customer database
information.
3.7 Confidentiality Agreement. Concurrently with the execution of
this Agreement, each Stockholder and each Optionholder shall execute a
Confidentiality and Non-Disclosure Agreement substantially in the form of
Exhibit C annexed hereto ("Confidentiality Agreement").
3.8 Action by Stockholders. Each Stockholder and Optionholder shall
vote all of the Shares held by such stockholder and shall take all other
necessary or desirable actions within its control (including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings) to
carry out the provisions of this Agreement including, but not limited to, each
of the provisions of this Section 3.
3.9 Other Arrangements. No Stockholder or Optionholder shall appoint
any attorney-in-fact or enter into or agree to be bound by any voting trust with
respect to any Shares or Option Shares, nor shall any Stockholder or
Optionholder enter into any agreements or arrangements of any kind with any
Person with respect to any Shares, Option Shares, Options or other Purchase
Rights, in each case inconsistent with the provisions of this Agreement (whether
or not such agreements and arrangements are with other Stockholders, or
Optionholders or holders of Shares or Purchase Rights that are not bound by this
Agreement), including, but not limited to, agreements or arrangements with
respect to the acquisition, disposition or voting of Shares, or act, for any
reason, as a member of a group or in concert with any other Persons in
connection with the acquisition, disposition or voting of Shares in any manner
which is inconsistent with the provisions of this Agreement.
4. RESTRICTIONS ON TRANSFERABILITY OF SHARES
4.1 Restrictions Upon Transfer of Shares. Except as, and subject to
the provisions, hereinafter set forth, no Management Stockholder or Optionholder
shall sell, transfer, donate, give, mortgage, pledge, hypothecate, or otherwise
encumber or dispose of, whether voluntarily, by operation of law or otherwise
(each of the foregoing acts are herein referred to as a "transfer" or
"Transfer") any Shares or Options now or hereafter owned by such Management
Stockholder or Optionholder. Any transfer or attempted transfer of the Shares or
Options at any time, unless made pursuant to all of the terms and conditions
hereof, shall be absolutely null and void ab initio, of no force or effect and
may be enjoined. No dividend shall be paid or any distribution made to any
transferee of Shares transferred in violation hereof, nor shall any such
transfer of Shares or transfer of Options be registered on the books of the
Company.
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4.2 Restrictive Legend on Certificates. Every certificate
representing certificated Shares of the Company shall bear the following legend
in addition to any other legend which may be required by applicable law:
"The sale, transfer, pledge, hypothecation, or other disposition or
encumbrance of the securities represented hereby is restricted by
the terms of a certain Stockholders' Agreement dated as of March __,
1998 (the "Agreement"), between the issuer of such securities and
certain of its stockholders, a copy of which is on file at the
principal place of business of such issuer and is available for
inspection by the stockholders during regular business hours of such
issuer. The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"), or under any applicable state securities law. These
securities may not be sold or transferred in the absence of an
effective registration statement under the 1933 Act and any
applicable state securities law or receipt by the issuer of an
opinion of counsel satisfactory to the issuer that registration
under the Act and applicable state law is not required."
5. PERMITTED TRANSFERS
5.1 Transfers to Permitted Transferees. A Management Stockholder may
transfer Shares to the following transferees (each a "Permitted Transferee") so
long as such Management Stockholder's Shares have not then become subject to the
option provisions of Sections 6, 7 or 9 and provided that Permitted Transferees
may not make any further transfers of their Shares pursuant to this Section 5.1,
except that a Family Entity which is a Permitted Transferee may make a further
transfer to its equity owners or beneficiaries. (each of the following transfer
is sometimes referred to herein as a "Permitted Transfer"):
(a) a transfer by a Management Stockholder who is a natural person
to such Stockholder's spouse, children or grandchildren or to a trust,
partnership, limited liability company or other entity the sole beneficiaries or
equity owners of which are such Management Stockholder's spouse, children and/or
grandchildren (a "Family Entity"); and; provided that any general partner,
manager, trustee, guardian, custodian, other fiduciary or other person
performing a similar function (to any of the foregoing) must be either the
transferring Management Stockholder or such Management Stockholder's spouse,
sibling or child;
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(b) a transfer by a Family Entity to its equity owners or
beneficiaries; provided however, if the distribution is to such Management
Stockholder's minor child, or minor grandchild, or to a trust, partnership,
limited liability company or other entity, then any general partner, manager,
trustee, guardian, custodian, other fiduciary or other person performing a
similar function (to any of the foregoing) must be either the Management
Stockholder or such Management Stockholder's spouse, sibling or child;
(c) a transfer to an organization described in Section
501(c)(3) of the Internal Revenue Code of 1986, as amended (a "Charitable
Organization"); provided, however, that Rice may not transfer more than 12,968
Shares [66 2/3% of the Shares he owns on the date hereof on a Fully Diluted
Basis] (subject to adjustment for stock splits and similar recapitalization
events); and, provided, further, however that any such Charitable Organization
shall enter into a voting trust agreement or other arrangement with, or shall
provide a proxy to, the transferring Management Stockholder or its Related
Employee so as to irrevocably grant all voting power with respect to the
transferred Shares to the transferring Management Stockholder or its Related
Employee, in each case in form and substance satisfactory to the Company and its
counsel; or
(d) a transfer by any Management Stockholder or any of its
transferees to Flowers or any of its assignees.
5.2 Transfer by Flowers. Except as expressly limited by Sections 6,
7, 8 and 9 or elsewhere in this Agreement, Flowers and its transferees which are
not Management Stockholders, may transfer their Shares at any time and to any
Person. Any transfer or attempted transfer of Shares in violation of Sections 6,
7, 8 or 9 shall be null and void, ab initio, of no force and effect and may be
enjoined.
5.3 Additional Requirements of Transfer. (a) Any transfer otherwise
permitted by this Agreement shall be further subject to and conditioned upon
full compliance by the transferor and transferee with each of the following
conditions (any of which may be waived by the Company in its sole discretion):
(i) each transferee shall have executed an agreement in form
and substance satisfactory to the Company, by which such transferee shall have
agreed to become a party to and bound by the terms and conditions of this
Agreement and shall have expressly assumed all of the obligations of the
transferring Stockholder or Optionholder;
(ii) each transferee shall pay all filing, publication and
recording fees, all transfer and stamp taxes, if any, and all reasonable
expenses, including,
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without limitation, reasonable counsel fees and expenses, incurred by the
Company in connection with such transaction;
(iii) each transferee shall execute a certificate in form and
substance satisfactory to the Company to the effect that it is acquiring the
Shares for its own account for investment and not with a view to the resale or
distribution thereof and that it will only transfer the acquired Shares to a
Person who so similarly represents and warrants and shall include in such
certificate such other representations, warranties and covenants as the Company
or counsel to the Company may reasonably require;
(iv) the Company receives an opinion of counsel reasonably
acceptable to the Company (who may be counsel for the Company), in form and
substance satisfactory to the Company, that such transfer does not violate
federal or state securities laws or any representation or warranty of such
transferring Stockholder given in connection with the acquisition of its Shares;
(v) if the transfer is to the Company, the Company has
received such instruments of transfer which the Company shall request in order
to transfer record and beneficial ownership of such Shares to the Company;
(vi) each transferee shall execute a Confidentiality Agreement
with the Company and, if the transferor is a party to a Non-Competition
Agreement, at the request of the Company, a Non-Competition Agreement, in each
case in form and substance satisfactory to the Company; and
(vii) each transferee shall execute such other documents or
instruments as counsel to the Company may require (or as may be required by law)
in order to effect the transfer of the Shares;
(b) Notwithstanding anything in this Agreement to
the contrary, no transfer shall be made:
(i) to a Person who, in accordance with applicable law, lacks
the capacity to own, or otherwise is prohibited from owning, such Shares or
Options; or
(ii) to a Person otherwise prohibited by applicable law from
entering into such transaction or holding such Shares or Options; or
(iii) which violates any other provision of this Agreement.
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(c) Upon the transfer of Shares owned by a Management
Stockholder (other than pursuant to a Permitted Transfer), such transferring
Stockholder shall and, if applicable, such transferring Stockholder shall cause
its designees and Related Employee to, submit his or her resignation as a
director and officer of the Company and any Subsidiary of the Company and as
trustee or other fiduciary of any employee benefit plan or trust of the Company
and any Subsidiary of the Company, if, as a result of such transfer, such
Management Stockholder, together with its Permitted Transferees (i) in the case
of Rice (and his Permitted Transferees), holds less than 33% of the number of
outstanding Voting Shares of the Company on a Fully Diluted Basis which Rice
owns on the date hereof; or (ii) in the case of any other Management
Stockholders, has transferred all of his Voting Shares on a fully diluted basis
of the Company.
6. PUT AND CALL OPTIONS
6.1 Management Stockholder Put Option. (a) Each Management
Stockholder shall have the right to cause the Company to purchase all (but not
less than all) of its Shares and each Optionholder shall have the right to cause
the Company to purchase all (but not less than all) of its Options Shares
(collectively, the "Put Option") upon the occurrence of a Put Event or during
the Put Period. A Management Stockholder or Optionholder shall exercise its Put
Option by delivery of written notice thereof ("Put Notice") to the Company (i)
within sixty (60) days after the occurrence of a Put Event or (ii) during the
Put Period, as the case may be. Upon receipt of a Put Notice from a Management
Stockholder or Optionholder in accordance with terms hereof, the Company shall
be obligated to purchase all of such Management Stockholder's Shares or
Optionholder's Option Shares (collectively, "Put Shares") at the Put Price in
accordance with, and subject to, the terms hereof.
(b) The closing of the purchase and sale of Put Shares shall
take place at the principal office of Flowers on a date designated by the
Company upon ten (10) days prior written notice, which date shall be not later
than seventy-five (75) business days after (i) receipt of the Put Notice in
connection with a Put Event or (ii) the end of the Put Period, as the case may
be. At the closing of the purchase and sale of Put Shares, the Management
Stockholder or Optionholder, as the case may be, shall deliver to the Company
certificates representing the Put Shares, duly endorsed or accompanied by stock
powers executed in blank, in form and substance satisfactory to the Company,
together with evidence satisfactory to the Company that such Put Shares are
being transferred to the Company free and clear of all Liens. In addition, the
Management Stockholder or Optionholder, as the case may be, shall deliver to the
Company, and cause its Related Employee to deliver to the Company, resignations
of each such person as a director, and from all officer positions, of the
Company and each of its Subsidiaries and as a fiduciary or trustee of any
benefit or other plan of the Company and any Subsidiary.
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(c) Subject to the provisions of Section 6.3, at the closing,
the Company shall pay the Put Price by delivery of (i) a certified check or
immediately available funds for 25% of the Put Price; (ii) a promissory note
substantially in the form of Exhibit D annexed hereto (the "Repurchase Note")
for the balance of the Put Price, which note shall be payable in eight equal
semiannual installments together with interest accrued thereon an annual rate
equal to the "Prime Rate" on the date of the Repurchase Note, commencing on the
last business day of the earlier of June or December next following the closing
date; and (iii) a pledge agreement substantially in the form of Exhibit E
annexed hereto (the "Pledge"), pursuant to which the Company shall pledge the
Put Shares to the Management Stockholder or Optionholder, as the case may be, as
collateral security for the Company's obligations under the Repurchase Note.
Notwithstanding the foregoing, the Company and the Management Stockholder or
Optionholder exercising a Put Option may agree upon different terms for the
payment of the Put Price. For purposes of this Agreement the term "Prime Rate"
shall mean the rate announced by Chase Manhattan Bank at its New York
headquarters as its prime rate, whether or not such rate is then the most
favorable rate offered by such bank to its customers; provided, however, that
notwithstanding anything herein to the contrary, for purposes of this Agreement
in no event shall the Prime Rate be less than 7% per year or greater than 10%
per year.
(d) At the Closing, the Management Stockholder, Optionholder
and their respective Related Employees shall (to the extent not already included
in calculation of the Put Price) pay in full all loans, advances or similar
monetary obligations owing or otherwise outstanding from the Management
Stockholder, Optionholder, their respective Related Employee or any of their
respective Affiliates, to the Company or its Affiliates, and any amounts owed to
the Company or its Affiliates by the Management Stockholder, Optionholder, or
their respective Related Employees with respect to the exercise of Options or
other Purchase Rights.
(e) The Company may assign its obligation to purchase Put
Shares to Flowers or one or more Company Affiliates, in which event all
references to the Company in this Section 6.1 shall be deemed references to
Company's assignee(s); provided, however, that if the Company assigns its
obligation to purchase Put Shares to a Company Affiliate (other than Flowers)
and pays a portion of the Put Price by delivery of a Repurchase Note, the
Company shall guarantee the assignee's obligations under the Repurchase Note.
(f) Notwithstanding anything herein to the contrary,
Management Stockholders and Optionholders may not exercise Put Options at any
time during which (i) the Company is entitled to exercise a Call Option,
Take-Along Option or Issuer Conversion Option, or (ii) Management Stockholders
or Optionholders are entitled to exercise a Bring Along Option,
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Stockholder Conversion Option, Stockholder Cash Out Option, First Offer Option
or a Private Sale Put Option.
6.2 Company Call Option. (a) The Company shall have the right to
cause any of the Management Stockholders or Optionholders (or their respective
estates, as the case may be) to sell all (but not less than all) of their
respective Shares and Option Shares upon occurrence of a Call Event or during
the Call Period (the "Call Option"). A Management Stockholder or Optionholder
(or their respective Related Employee) which is the subject of a Call Event
shall notify the Company in writing ("Call Event Notice") of the occurrence of
the Call Event and the details thereof, promptly after the occurrence thereof.
The Company shall exercise its Call Option by delivery of written notice thereof
(the "Call Exercise Notice") to the Management Stockholder or Optionholder, as
the case may be, at any time (i) after becoming aware of a Call Event but not
later than the (60) days after receipt of the Call Event Notice or (ii) during
the Call Period. Upon receipt of a Call Notice, the Management Stockholder or
Optionholder (or their respective estates, as the case may be) shall be
obligated to sell all of its Shares and Option Shares (the "Call Shares") to the
Company at the Call Price. If the Company exercises its Call Option, each
Optionholder shall exercise its Options so as to enable the Company to purchase
the Option Shares subject to such Call Option, which exercise shall be
conditioned upon, and shall be deemed effective immediately prior to, the
consummation of the purchase of such Option Shares by the Company.
(b) The closing of the purchase and sale of Call Shares shall
take place at the principal offices of Flowers on the date designated by the
Company upon ten (10) days prior written notice, which date shall be not later
than seventy-five (75) business days after (i) delivery of the Call Exercise
Notice or (ii) the end of the Call Period, as the case may be. At the closing of
the purchase and sale of Call Shares, the Management Stockholder or
Optionholder, as the case may be, shall deliver to the Company certificates
representing the Call Shares duly endorsed or accompanied by stock powers
executed in blank, in form and substance satisfactory to the Company together
with evidence satisfactory to the Company that such Call Shares are being
transferred free and clear of all Liens. In addition, the Management Stockholder
or Optionholder, as the case may be, shall deliver to the Company and cause
their respective Related Employees to deliver to the Company, resignations of
each such person as a director, and from all officer positions, of the Company
and each of its Subsidiaries and as a fiduciary or trustee of any benefit or
other plan of the Company and any Subsidiary.
(c) (i) Subject to the provisions of Section 6.3, at the
closing, the Company shall pay the Call Price for any Call Shares purchased as a
result of a Primary Call Event by delivery of: (A) a promissory note for the
Call Price substantially in the form of Exhibit E annexed hereto (the "Call
Note"), which note shall be payable in seven (7) equal annual payments together
with interest accrued thereon at the rate of 7% per annum, the first payment
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of which shall be made on the later of the last business day of June or December
next following the closing date; and (B) a Pledge, pursuant to which the Company
shall pledge the Call Shares to the Management Stockholder, Optionholder, or
their respective estates, as the case may be, as collateral security for the
Company's obligations under the Call Note. Notwithstanding the foregoing, the
Company and the Management Stockholder or Optionholder, as the case may be,
subject to the Call Event may agree upon different terms for the payment of the
Call Price.
(ii) Subject to the provisions of Section 6.3, at the closing,
the Company shall pay the Call Price for any Call Shares not purchased as a
result of a Primary Call Event by delivery of a certified check or immediately
available funds for the entire Call Price. Notwithstanding the foregoing, the
Company and the Management Stockholder or Optionholder, as the case may be,
subject to the Call Event may agree upon different terms for the payment of the
Call Price.
(d) At the closing, the Management Stockholder, Optionholder and
their respective Related Employees shall (to the extent not already included in
calculation of that Call Price) pay in full all loans, advances or similar
monetary obligations owing or otherwise outstanding from the Management
Stockholder, the Optionholder, their respective Related Employees or any of
their respective Affiliates to the Company or its Affiliates, and any amounts
owed to the Company or its Affiliates by the Management Stockholder, the
Optionholder or their respective Related Employees with respect to the exercise
of Options or other Purchase Rights.
(e) The Company may assign its Call Option to Flowers or one or more
Company Affiliates, in which event all references to the Company in this Section
6.2 shall be deemed references to Company's assignee(s); provided, however, that
if the Company assigns its Call Option to a Company Affiliate (other than
Flowers) and pays a portion of the Call Price by delivery of a Call Note, the
Company shall guarantee the assignee's obligations under the Call Note.
(f) Notwithstanding the foregoing, the Company will not exercise its
Call Option or, alternatively, will withdraw the exercise of its Call Option, if
at the time of closing of the purchase of Call Shares it is prohibited from
purchasing such Call Shares under the terms and conditions then contemplated, by
applicable law or pursuant to applicable Credit Documents or Affiliate Credit
Documents (unless such prohibition is waived).
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6.3 Limitation on Company Obligation to Purchase Shares.
(a) Notwithstanding any provisions set forth in Section 6 to
the contrary, the Company shall not be obligated to purchase any Shares or
Option Shares pursuant to this Agreement if the Company is prohibited from doing
so under applicable law, provided that the Company shall take all reasonable
steps to comply with such applicable law. In addition, the Company shall not be
obligated to make any cash payments under this Section 6 if at the time of the
proposed cash payment there is, or would be upon delivery of such cash payment
and as a consequence thereof, a default under or other violation of the terms of
any loan, credit or investment agreement or note or other instrument of
indebtedness to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound (collectively "Credit
Documents") or if there would be upon delivery of such cash payment and upon
consequence thereof a default under or other violation of the terms of any loan,
credit or investment agreement or note or other instrument or indebtedness to
which Flowers or any other Affiliate of the Company (other than a Company
Subsidiary) is a party or by which Flowers or any other Affiliate of the Company
(other than a Company Subsidiary) is bound (collectively, "Affiliate Credit
Documents"). In such event, the Company shall, in lieu of such cash payment,
issue a Repurchase Note or Call Note, as the case may be, modified so that (i)
such note shall be dated and interest thereon shall accrue from the date that
such cash payment is otherwise due, and (ii) the original principal amount of
such note shall be equal to the cash payment which was not made due to the
existing or prospective default or violation of the terms of the Credit Document
or Affiliate Credit Document and (iii) the maturity date of the note shall be
the same date as the maturity date of the initial Repurchase Note or Call Note
issued by the Company at the closing of the sale of Put Shares or Call Shares,
as the case may be. The Company shall pay such note, however, if and to the
extent the Company will not, as a consequence of such payment, be in violation
of applicable law or, if, and to the extent, there will not be, as a consequence
of such payment, a violation of the terms of any Credit Document or Affiliate
Credit Document. Notwithstanding the foregoing, the Company shall not be
obligated to make any cash payments in respect of any Repurchase Note or Call
Note if at the time of the proposed cash payment there is, or would be upon
delivery of such cash payment and as a consequence thereof, a default under or
other violation of the terms of any Credit Document or Affiliate Credit
Document.
(b) Notwithstanding anything set forth in this Section 6.3 to
the contrary, the Company shall not be obligated to deliver any Repurchase Note
or any Call Note if the Company is at the time of the proposed delivery of such
note or would be upon delivery of such note and as a consequence thereof, in
violation of applicable law or there is at the time of the proposed delivery of
such note or would be upon delivery of such note and as a consequence thereof, a
default under or other violation of the terms of any Credit Document or
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Affiliate Credit Document and no payment of principal or interest due under such
note shall be made if the Company is at the time of the delivery of such
payment, or would be upon delivery of such payment and as a consequence thereof,
in violation of applicable law or if there is at the time of the proposed
delivery of such note or would be upon delivery of such note and as a
consequence thereof, a default under or otherwise in violation of the terms of
any Credit Document or any Affiliate Credit Document. In the event the Company
cannot deliver a Repurchase Note or Call Note for the reasons set forth herein,
the Company will undertake to deliver such note and to make payment of principal
and interest due under such note at such time as the Company is not in violation
of any applicable law or there is not a default under or other violation of any
Credit Agreement or any Affiliate Credit Document and the Company or any
Affiliate would not be so in default or in violation, or there otherwise would
not be a default or violation, by virtue of the delivery of such note or any
payment of principal and interest due under such note as contemplated herein.
(c) Without in any way limiting the other provisions of this
Section 6, Flowers agrees to use, and to cause the Company to use, reasonable
efforts to cause any holder of the Company's or Flower's senior indebtedness to
(a) include a provision in the appropriate Credit Documents or Affiliate Credit
Documents so as to permit the Company to deliver a Repurchase or Call Note or
make a payment thereunder or otherwise, upon exercise of a Put Option or Call
Option, in accordance with Sections 6.1 and 6.2 or (b) exclude a provision from
the appropriate Credit Documents or Affiliate Credit Documents that would have
the effect of prohibiting the Company from delivering a Repurchase Note or Call
Note, or making a payment thereunder or otherwise, upon exercise of a Put Option
or Call Option in accordance with Sections 6.1 and 6.2.
7. BRING ALONG AND TAKE ALONG
7.1 Bring Along Option. (a) If Flowers and/or its transferees,
elects to transfer for consideration Shares which it or they own (the
"Transferring Stockholder") to a third party (the "Offeree") which is not such
Transferring Stockholder's Affiliate, representing in the aggregate 50% or more
of the Voting Power, then the Transferring Stockholders shall notify the
Management Stockholders and Optionholders in writing of such proposed
transaction (the "Trigger Notice"). Subject to the provisions of Section 7, each
of the Management Stockholders, Optionholder or any of them (each, a
"Bring-Along Stockholder") may by notice to the Transferring Stockholder
delivered within fifteen (15) days of receipt of the Trigger Notice irrevocably
elect to transfer to the Offeree a proportionate amount of the Shares and Option
Shares which it owns (or in the case of Optionholders, will own after exercise
of its Options) upon transfer of the Transferring Stockholder's Shares to the
Offeree (the "Bring-Along Option").
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(b) If a Bring-Along Stockholder exercises its Bring-Along
Option, it shall be entitled to transfer, and the Transferring Stockholder shall
be required to arrange for the transfer to the Offeree by such Bring-Along
Stockholder, that number of Shares and Option Shares which, in the aggregate, is
equal to the total number of Shares and Option Shares which such Bring-Along
Stockholder owns (after giving effect to the exercise of any Options which the
Bring-Along Stockholder shall exercise prior to the transfer of Shares and
Option Shares pursuant to the Bring-Along Option) multiplied by a fraction, the
numerator of which is equal to the number of Shares being transferred by the
Transferring Stockholder and the denominator of which is equal to the total
number of Shares owned by the Transferring Stockholder on a Fully Diluted Basis
without giving effect to the proposed transfer; provided, however, if the
Offeree refuses to purchase the full amount of Shares and Option Shares which
are offered for sale as a result of the exercise of Bring-Along Options
hereunder, then the Transferring Stockholder and each Bring-Along Stockholder
shall reduce the number of Shares and Option Shares they are to sell
proportionally (based on the number of Shares and Option Shares they have each
offered to sell to the Offeree) to the maximum number of Shares and Option
Shares which the Offeree is willing to purchase. If a Bring-Along Stockholder
exercises its Bring-Along Option, it shall transfer its Shares and Option Shares
to the Offeree on the same terms and conditions as the Transferring Stockholder
shall transfer its Shares to the Offeree. Notwithstanding anything herein to the
contrary, the exercise by a Bring-Along Stockholder of its Bring-Along Option
shall not obligate the Transferring Stockholder to transfer its Shares, and if
the Transferring Stockholder elects not to complete the transfer of its Shares,
the Bring-Along Stockholder shall have no rights or obligations to transfer its
Shares or Option Shares pursuant to the Bring-Along Option unless and until the
conditions of Section 7.1(a) shall again occur.
7.2 Take Along Option. If Flowers and/or its transferees (a
"Disposing Stockholder") elect to transfer for consideration Shares representing
50% or more of the Voting Power on a Fully Diluted Basis to a third party which
is not its Affiliate (the "Purchaser"), the Disposing Stockholder may by notice
to the remaining Stockholders and Optionholders (the "Take-Along Trigger
Notice") demand that the remaining Stockholders and Optionholders shall be
required to transfer a pro rata portion (based on the percentage of shares being
transferred by the Disposing Stockholder) of the Shares and Option Shares which
they own (or in the case of Optionholders, are deemed to own) on a Fully Diluted
Basis to the Purchaser upon transfer of the Disposing Stockholder's Shares to
such Purchaser (the "Take-Along Option"). If the Disposing Stockholder exercises
it Take-Along Option, the other Stockholders and Optionholders shall be required
to so transfer their Shares and Option Shares to the Purchaser on the same terms
and conditions as the Disposing Stockholder shall transfer its Shares to the
Purchaser. Notwithstanding anything herein to the contrary, the exercise by the
Disposing Stockholder of its Take-Along Option shall not obligate the Disposing
Stockholder to transfer its Shares, and if the Disposing Stockholder elects not
to transfer its Shares the other
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Stockholders and Optionholders shall have no right to transfer their Shares and
Option Shares to the Purchaser hereunder.
7.3 Exercise of Options. If a Bring-Along Stockholder exercises its
Bring-Along Option or Disposing Stockholder exercises it Take-Along Options,
each Optionholder shall exercise such number of Options as shall be necessary in
order to enable such Optionholder to transfer the number of Option Shares
requested to be transferred by Bring-Along Stockholder or the Disposing
Stockholder, as the case may be, which exercise shall be conditioned upon, and
shall be deemed effective immediately prior to, the consummation of the purchase
of such Option Shares by the Offeree or Purchaser, as the case may be.
7.4 Relationship to Section 8. The provisions of this Section 7
shall be subject to the provisions of Section 8, so that any transfer of
Bring-Along Shares or Take-Along Shares which together with the Shares being
transferred by the Transferring Stockholder or Disposing Stockholder would
result in the sale of 90% or more of the Shares in a First Offer Transaction,
shall first be subject to the First Offer Option contained in Section 8;
provided, that, the time periods referred to in this Section 7 shall run
parallel with the time periods in Section 8 and shall not begin anew after
completion of the time periods in Section 8.
8. LIMITED RIGHT OF FIRST OFFER
8.1 If the Company desires to sell, assign, dispose or otherwise
convey all or substantially all of the assets of the Company ("First Offer
Assets") or if Flowers desires to enter into a transaction as a result of which
(and after giving effect to the exercise, if any, of Flowers' Take-Along Option
that would otherwise be exercised by Flowers) 90% or more of the Shares and
Option Shares on a Fully Diluted Basis will be sold, assigned, disposed or
otherwise transferred ("First Offer Shares") for consideration to a third party
other than an Affiliate of the Company in each case, at a purchase price which
is calculated based on a valuation of the Company of less than $40 million (a
"First Offer Transaction"), then the Management Stockholders and Optionholders
shall be entitled to a first right to purchase such First Offer Assets or First
Offer Shares in accordance with the provisions hereof (the "First Offer
Option"). The Company shall not be required to obtain an offer from a third
party to sell First Offer Assets or First Offer Shares (a "Third Party Offer")
as a pre-condition to the exercise of a First Offer Option. The Company shall
deliver written notice of the proposed First Offer Transaction (the "First Offer
Notice") to the Management Stockholders and Optionholders. If the Company has
received a Third Party Offer, the First Offer Notice shall describe in
reasonable detail the material terms and conditions of the Third Party Offer and
if the Third Party Offer is in writing shall include a copy thereof. If the
Company has not received a Third Party Offer, the First Offer Notice shall set
forth such terms and conditions, if any, as the Company may have set for the
First Offer Transactions.
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8.2 Exercise of First Offer Option. (a) The Management Stockholders
and Optionholders may elect to purchase all (but not less than all) of the First
Offer Assets or the First Offer Shares, as the case may be, at the price and on
the terms agreed to by the Company and the Management Stockholders and
Optionholders or, if the Company has received a Third Party Offer, at the price
and on the terms of the Third Party Offer, by delivering written notice of such
election to the Company within fifteen (15) business days after the delivery of
the First Offer Notice ("First Offer Election Period"). Notwithstanding the
previous sentence, if the Third Party Offer includes non-cash consideration, the
Management Stockholders and Optionholders exercising the First Offer Option
shall, nevertheless, be required to pay the full amount of the consideration in
cash. For these purposes, the value of the non-cash component of the Third Party
Offer consideration shall be determined by mutual agreement of Flowers, on the
one hand, and Rice, or if Rice has died, is incompetent, is otherwise unwilling
or unable to make such determination or no longer owns Shares or Purchase
Rights, by the Management Director, on the other hand, or if they are unable to
agree upon such value within ten (10) business days by an independent investment
banker, accounting firm or other qualified appraiser mutually agreeable to
Flowers, on the one hand, and Rice or the Management Director, as the case may
be, on the other hand. If the parties are unable to agree on such third party
within thirty (30) days, the cash value shall be determined by one of the "Big
Six" accounting firms (or a successor firm) selected by Flowers who is not
otherwise providing service to any member of the Flowers Group or to the
Management Stockholders and Optionholders.
(b) Within forty-five (45) days after the termination of the
First Offer Election Period (the "Financing Commitment Period"), the Management
Stockholders and Optionholders shall provide to the Company written evidence,
reasonably satisfactory to the Company, that the Management Stockholders and
Optionholders have obtained, or received a firm commitment to obtain, all of the
financing necessary to enable the Management Stockholders and Optionholders to
pay the full cash purchase price for the First Offer Assets or First Offer
Shares (the "Financing Commitment").
(c) If the Management Stockholders and Optionholders do not
elect to purchase all of the First Offer Assets or First Offer Shares, as the
case may be, during the First Offer Period, or if the Company does not receive
the Financing Commitment prior to the termination of the Financing Commitment
Period, the Company shall have the right to transfer the First Offer Assets and
First Offer Shares, (subject to the provisions of Section 7) to any Person;
provided, however, that such transfer is for a purchase price which is equal to
95% or more of the purchase price set forth in the First Offer Notice.
8.3 Exercise of First Offer Option. If the Management Stockholders
and/or Optionholders have exercised their First Offer Option, the purchase of
First Offer Shares or First
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Offer Assets by the Management Stockholders and Optionholders shall be closed at
Flowers' principal offices on a date specified by the purchaser(s) upon at least
ten (10) business days' notice, which is not later than forty-five (45) days
after the termination of the Financing Commitment Period. If the closing does
not occur within such period Flowers or the Company shall have the right to sell
the First Offer Shares or the First Offer Assets, as the case may be, to a third
party subject to Section 8.2(c). At the closing, the purchasers shall pay the
Company the purchase price for the First Offer Assets or First Offer Shares set
forth in the First Offer Notice, and the Company shall deliver to the
purchaser(s) the First Offer Assets or certificate or certificates evidencing
the First Offer Shares, together with stock transfer form(s) duly executed in
favor of the purchaser.
9. MANAGEMENT STOCKHOLDERS CONVERSION AND CASH OUT OPTIONS
9.1 Conversion and Cash Out Options. (a) Management Stockholder
Options. (i) Upon the occurrence of the first to occur of an IPO of Flowers
(Flowers is sometimes referred to in this Section 9 as an "Issuer"), or the Sale
of Flowers, each of the Management Stockholders and Optionholders shall have the
option to cause (A) all (but not less than all) of its Shares and Option Shares
to be converted into that number of shares of capital stock of the Issuer to be
determined by applying the Conversion Ratio to the Shares and the Option Shares
of such Management Stockholders and Optionholders (the "Stockholder Conversion
Option") or (B) in the event of an IPO and subject to approval of the managing
underwriter of the IPO in its sole discretion, the Issuer to purchase for cash,
all of its Shares and Option Shares at the Cash Out Price (the "Stockholder Cash
Out Option" and, collectively, together with the Stockholder Conversion Option,
the "Stockholder Options"), in each case in accordance with the provisions
hereof.
(ii) Upon the occurrence of a "Private Sale" prior to the
termination of the Put Period, each Management Stockholder and Optionholder
shall have the right to cause the Company to purchase all (but not less than
all) of its Shares and Option Shares (the "Private Sale Put Option") at the Put
Price. A "Private Sale" shall mean the Sale of the Issuer as a result of which
Management Stockholders and Optionholders would receive in consideration for
their Shares or Option Shares (or securities of the Issuer into which such
Shares or Option Shares would be converted) equity securities of the acquiring
or surviving entity which are not traded on a United States or foreign
securities exchange or traded or reported on the Nasdaq National Market or the
Nasdaq Stock Market or substantially equivalent foreign automated quotation
system.
(iii) If an Optionholder exercises a Stockholder Option or
Private Sale Put Option, it shall exercise all of its Options so that the
Options Shares thereunder may be converted or sold in accordance with the
provisions hereof, which exercise shall be
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conditioned upon, and shall be deemed effective immediately prior to, the
consummation of the conversion or sale, as the case may be, of such Option
Shares.
(b) Issuer Option. If any Management Stockholder or
Optionholder has elected not to exercise its Stockholder Conversion Option,
Stockholder Cash Out Option or Private Sale Put Option in connection with a
Stockholder Option Event, then the Issuer shall have the option to cause all
(but not less than all) of the Shares and Option Shares of such Management
Stockholder or Optionholder to be converted into capital stock of the Issuer in
accordance with the provisions hereof (the "Issuer Conversion Option"; and,
collectively together with the Stockholder Conversion Options, the "Conversion
Options"). If the Issuer exercises its Issuer Conversion Option, each
Optionholder shall exercise all of its Options so that the Option Shares
thereunder may be converted into Issuer Shares in accordance with the provisions
hereof, which exercise shall be conditioned upon, and shall be deemed effective
immediately prior to, the consummation of the conversion of the Option Shares.
9.2 Exercise of Management Stockholder Options. (a) The Issuer shall
notify the Management Stockholders and Optionholders of a proposed IPO or Sale
not later than thirty (30) days prior to the anticipated Effective Date or
Consummation Date, as the case may be ("Transaction Notice") and shall set forth
in such notice (i) the Conversion Ratio; (ii) to the extent known, the estimated
range of the public offering price of the Issuer's securities to be sold in the
IPO, or the purchase price of, and the terms of payment of the purchase price
of, the Sale, as the case may be; and (iii) whether the managing underwriter of
the IPO will permit Management Stockholders to exercise Stockholder Cash Out
Options. In addition, in connection with an IPO, the Issuer shall provide to the
Management Stockholders and Optionholders together with the Transaction Notice a
copy of the latest preliminary prospectus filed by the Issuer with the SEC in
connection with the IPO. If the estimated range of the public offering price of
the IPO or the purchase price and/or terms of payment of the purchase price of
the Sale are not known at the time the Transaction Notice is sent, or if a
preliminary prospectus has not yet been filed with the SEC, the Issuer shall
notify the Management Stockholders and Optionholders of such range or such price
and terms, as the case may be, within a reasonable period of time after such
information is known to the Issuer and/or shall deliver to the Management
Stockholders and Optionholders a copy of such preliminary prospectus within a
reasonable period of time after it has been filed with the SEC.
(b) Within fifteen (15) business days after receipt of the
Transaction Notice, each Management Stockholder and Optionholders shall notify
the Issuer in writing whether it shall elect irrevocably to exercise its
Stockholder Conversion Option or (if available) its Stockholder Cash Out Option
or (if available) its Private Sale Put Option with respect to all of its Shares
and Option Shares (the "Stockholder Exercise Notice").
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(c) If a Management Stockholder or Optionholder has elected to
exercise a Stockholder Option or a Private Sale Put Option, it shall deliver to
the Issuer, together with the Stockholder Exercise Notice, the exercise price
due and payable for the purchase of each Option Shares (to the extent such
Option exercise price is required to, or otherwise will, be paid in cash)
certificates representing all of its Shares and Option Shares together with such
other documents as the Issuer shall reasonably request so as to effect the
conversion of the Shares and Option Shares into shares of capital stock of the
Issuer (collectively, the "Conversion Documents") or so as to effect the cash
out of the Management Stockholder and Optionholders Shares and Option Shares,
including but not limited to, evidence that the Shares and Option Shares shall
be purchased free and clear of all Liens (collectively, the "Cash-Out
Documents"), or so as to effect the sale of the Shares and Option Shares to the
Company pursuant to the Private Sale Put Option free and clear of all Liens (the
"Private Sale Put Documents"), as the case may be. Any Management Stockholder
who fails to exercise a Stockholder Option in accordance with the foregoing
provisions, shall be deemed to have elected to waive its right to exercise
Stockholder Options.
9.3 Exercise of Issuer Conversion Option. The Issuer shall have the
right at any time up to five (5) business days prior to the Effective Date or
Consummation Date, as the case may be, to exercise its Issuer Conversion Option
with respect to any Shares and Option Shares for which Management Stockholders
and Optionholders have not properly exercised Stockholder Conversion Options,
Stockholder Cash Out Options or Private Sale Put Options hereunder. The Issuer
shall exercise its Issuer Conversion Option by delivery of written notice
thereof to the Management Stockholders and Optionholders with respect to whom
the Issuer is exercising its option (the "Issuer Conversion Notice"). Promptly
upon receipt of the Issuer Conversion Notice, Management Stockholder and
Optionholders shall deliver to the Issuer certificates representing all of its
Shares and Option Shares together with the Conversion Documents.
9.4 Conversion of Shares on Effective Date and Consummation Date (a)
On the IPO Closing Date, all Shares and Option Shares with respect to which
either Stockholder Conversion Options or Issuer Conversion Options have been
properly exercised, automatically, without any further action on the part of the
Management Stockholders or Optionholders, the Issuer or any other Person, shall
be converted into the type and number of shares of capital stock of the Issuer
as shall be calculated by applying the Conversion Ratio for each class of Shares
and Option Shares, to the total number of Shares and Option Shares in such class
held by the Management Stockholders and Optionholders.
(b) On the Consummation Date, all Shares and Option Shares
with respect to which either Stockholder Conversion Options or Issuer Conversion
Options have been properly exercised, automatically, without any further action
on the part of the
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Management Stockholders, Optionholders, the Issuer or any other Person, shall be
converted into the type and number of shares of capital stock of the Issuer as
shall be calculated by applying the Conversion Ratio for each class of Shares
and Option Shares, to the total number of Shares and Option Shares in such class
held by the Management Stockholders and Optionholders. Such conversion shall be
deemed to occur on the Consummation Date immediately prior to the Consummation
Time or at such earlier time so as to enable such converting Management
Stockholders and Optionholders to participate in the Sale as a stockholder of
the Issuer. In the event that subsequent to such conversion it is determined
that the Sale shall not be consummated, then automatically and without any
action on the part of the Management Stockholders or the Optionholders, the
Issuer or any other Person, the conversion of the Shares and Option Shares into
capital stock of the Issuer shall be deemed null and void ab initio and of no
force and effect, and each of the Issuer, the Stockholders, the Optionholder and
the Company shall take all such actions as the Company shall deem necessary or
desirable to nullify such conversion.
(c) In the case of a conversion of Shares or Option Shares
into capital stock of Flowers, the Shares and Option Shares shall be converted,
into such class of capital stock of Flowers as is being registered in the IPO or
being sold in the Sale.
(d) (iv) In connection with an IPO, the Conversion Ratio shall
be determined by the managing underwriter of the IPO, or if the managing
underwriter, in its discretion, shall permit, and the Management Director shall
so request, by such other investment bank, financial advisor or appraiser as the
Issuer shall select and the Management Director shall approve, which approval
shall not be unreasonably withheld, and such determination shall be binding upon
the Issuer, the Management Stockholders and the Optionholders.
(v) In the event of an IPO, the determination of the
Conversion Ratio shall be made by valuing the Company, on the one hand, and the
Issuer, on the other hand, as separate entities. Although the Issuer is the
entity actually engaged in the IPO, in valuing the Company, the managing
underwriter shall also value the Company as if the Company itself were being
valued in connection with an initial public offering of its own equity
securities pursuant to a Registration Statement filed with the SEC pursuant to
the 1933 Act. In valuing the Company and the Issuer, the managing underwriter
shall take into account, among other factors: (A) the historical and projected
earnings and cash flow (as measured by EBIT or other appropriate measurement
standards) of each of the Company and Issuer respectively; (B) multiples or
other formulas typically used in valuing public companies that are comparable
(by virtue of the nature of business, size, years of operations and/or other
appropriate characteristics) to the Company, on the one hand, and Issuer, on the
other hand, (notwithstanding the fact that the Company is then a privately held
company); and (C) to the
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extent not already included in the calculations made pursuant to clauses (A) and
(B) above, the impact on the value of each of the Company and Issuer of the
synergies and economies of scale which have resulted and are projected to result
from the affiliation of the Company and the Issuer. In addition, in valuing the
Company, the managing underwriter shall ignore any discount that might otherwise
apply as a result of the Issuer's control of the Company or the lack of
liquidity or transferability of the Shares created by such control or this
Agreement.
(e) (i) In connection with a Sale, the Conversion Ratio shall
be determined by the Issuer's investment banker or other financial advisor
retained in connection with such Sale, or if there is no such banker or advisor,
or if such banker or advisor, in its discretion, shall permit, and the
Management Director shall so request, by such other investment banker or
financial advisor or appraiser as the Issuer shall select and the Management
Director shall approve, which approval shall not be unreasonably withheld, and
such determination shall be binding upon the Issuer and the Management
Stockholders and the Optionholders.
(ii) In the event of a Sale, the determination of the
Conversion Ratio shall be made by valuing the Company, on the one hand, and the
Issuer, on the other hand, as separate entities. In valuing the Company and the
Issuer, the investment banker shall take into account, among other factors: (A)
the historical and projected earnings and cash flow (as measured by EBIT or
other appropriate measurement standards) of each of the Company and Issuer
respectively; (B) multiples or other formulas typically used in transactions of
this nature to value companies that are comparable (by virtue of the nature of
business, size, years of operations and/or other appropriate characteristics) to
the Company, on the one hand, and Issuer, on the other hand; and (C) to the
extent not already included in the calculations made pursuant to clauses (A) and
(B) above, the impact on the value of each of the Company and Issuer of the
synergies and economies of scale which have resulted and are projected to result
from the affiliation of the Company and the Issuer. In addition, in valuing the
Company, the investment banker shall ignore any discount that might otherwise
apply as a result of the Issuer's control of the Company or the lack of
liquidity or transferability of the Shares created by such control or this
Agreement.
(f) The Issuer shall bear the cost of determining the
Conversion Ratio.
(g) (i) The Issuer shall issue to the Management Stockholders
and Optionholders who are the subject of Conversion Options in connection with
an IPO, stock certificates representing the Issuer capital stock into which
their Shares and Option Shares have been converted within fifteen (15) business
days following the IPO Closing Date provided
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that the Management Stockholders and Optionholders have provided to the Issuer
all required Conversion Documents.
(ii) The Issuer shall issue to Management Stockholders and
Optionholders who are the subject of Conversion Options in connection with a
Sale, stock certificates representing the Issuer capital stock into which their
Shares and Option Shares have been converted within such time as is necessary to
enable the Management Stockholders and Optionholders to participate in the Sale
as stockholders of the Issuer; provided, however, that the Issuer shall not be
required to issue any such certificates if (A) such certificates shall not be
required to enable the Management Stockholders and Optionholders to so
participate in the Sale or (B) a Management Stockholder or Optionholders has not
provided the Issuer with all required Conversion Documents.
9.5 Cash Out Of Shares. If a Management Stockholder or Optionholders
has properly elected to exercise its Stockholder Cash Out Option in connection
with an IPO, within fifteen (15) business days after the IPO Closing Date, the
Issuer shall pay to such Management Stockholder or Optionholders the Cash Out
Price by check against delivery to the Issuer of all Cash Out Documents.
9.6 Purchase of Shares on Private Sale Consummation Date. If a
Management Stockholder or Optionholder has properly exercised its Private Sale
Put Option in connection with a Private Sale, within forty-five (45) days after
the Private Sale Consummation Date, the Issuer shall pay to the Management
Stockholder or Optionholder the Put Price in accordance with the provisions of
Section 6.1(c), (d), and (e) each of which shall be applicable fully to the
exercise and closing of the Private Sale Put Option.
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10. PIGGYBACK REGISTRATION RIGHTS
10.1 Registration. (a) If, at any time after Flowers, Flowers or the
Company (for purposes of this Section 10, the "Issuer") has completed an IPO,
the Issuer determines to register any of its securities for its own account
under the 1933 Act, (other than pursuant to a registration on form S-4 or S-8 or
any successor form) in connection with the public offering of such securities,
the Issuer shall, at each such time, promptly give each Stockholder and its
transferees who then holds Registrable Securities written notice of such
determination. Subject to Section 9, upon the written request of a Stockholder
and/or its transferees received by the Issuer within thirty (30) days after the
giving of any such notice by the Issuer, the Issuer shall use its best efforts
to cause to be registered under the 1933 Act all of the Registrable Securities
that have been requested to be registered. If the total amount of Registrable
Securities that are to be included by the Issuer for its own account and at the
request of holders thereof exceeds the amount of securities that the managing
underwriter of the offering believes compatible with the success of the
offering, then the Issuer will include in such registration only the number of
securities which in the opinion of the managing underwriter can be sold, in the
following order:
(i) first, the securities of the Company;
(ii) then the Registrable Securities requested to be
included by any stockholder of the Issuer which has exercised a demand
registration right in connection with such offering; and
(iii) then the Registrable Securities requested to be
included by all other Stockholders and their transferees and any other Person
exercising piggyback registration rights with respect to such Offering pro rata
based on the number of Registrable Securities owned by each of them which each
of them requested be included in such registration or in such different
proportion as all such Persons shall agree upon.
(b) The Issuer shall retain the right to withdraw its
registration statement from filing prior to the effective date thereof, in which
event the holders of Registrable Securities who have elected to have their
Registrable Securities included therein shall have no further rights to register
their Registrable Securities under such registration statement pursuant to this
Section 10.1.
10.2 Obligations of the Issuer. Whenever required under Sections
10.1 hereof to use its best efforts to effect the registration of any shares,
the Issuer shall: (a) prepare and file with the SEC, a registration statement
with respect to the Registrable Securities and use its
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best efforts to cause such registration statement to become effective; (b)
furnish to every holder of Registrable Securities included in the registration
statement ("Holder") and its permitted transferees such numbers of copies of
such registration statement, prospectuses and preliminary prospectuses as they
may reasonably request; and (c) use its best efforts to register and qualify the
securities covered by the registration statement under such securities or blue
sky laws of such jurisdictions and with such other governmental agencies or
authorities and take such other actions that may be reasonably requested to
enable Holders and their permitted transferees to consummate the disposition in
such jurisdictions of the Registrable Securities; and (d) if requested by the
managing underwriter for any underwritten registration enter into an
underwriting agreement with the underwriters for such offering ("Underwriting
Agreement") (i) satisfactory in substance and form to the Issuer and the
underwriters, and (ii) containing such representations and warranties by the
Issuer and such other terms as are customarily used in agreements of this type,
including, without limitation, indemnification and contribution obligations
customarily required by such underwriters in such agreement and indemnification
and contribution rights customarily provide to selling securityholders in such
agreement.
10.3 Obligations of the Holder. Each holder selling Registrable
Securities in any registration pursuant to Section 10.1 shall, as a condition
for inclusion of such Registrable Securities in such registration:
(a) execute and deliver an Underwriting Agreement (i)
satisfactory in substance and form to the Issuer and the underwriters, and (ii)
containing such representations and warranties and such other terms as are
customarily used in agreements of this type, including, without limitation,
indemnification and contribution obligations customarily required by such
underwriters in such agreement. Notwithstanding the foregoing, no underwriting
agreement (or other agreement in connection with such offering) shall require
any Holder to make any representations or warranties to or agreements with the
Issuer or the underwriters other than representations, warranties or agreements
regarding such Holder, such Holder's Registrable Securities and such Holder's
intended method of distribution and any other representation required by law;
(b) furnish to the Issuer such information regarding them, the
Registrable Securities held by it, and the intended method of disposition of
such securities as the Issuer shall reasonably request and as shall be required
in connection with any action to be taken by the Issuer hereunder; and
(c) to the fullest extent permitted by law, indemnify and hold
harmless the Issuer, each of its directors, each of its officers who has signed
the registration statement, each person, if any, who controls the Issuer within
the meaning of the 1933 Act, and
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each agent and any underwriter for the Issuer and any Person who controls any
such agent or underwriter and each other Holder and any person who controls such
Holder (within the meaning of the 1933 Act) against any losses, claims, damages
or liabilities (or actions in respect thereto) which arise out of or are based
upon an untrue statement of any material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or arise out of or are based
upon the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, that such untrue statement or omission was made in such registration
statement, preliminary or final prospectus, or amendments or supplements
thereto, in reliance upon and in conformity with written information furnished
by such Holder expressly for use in connection with such registration; provided,
however, that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Issuer or any underwriter or
other indemnitee from whom the person asserting any such losses, claims,
damages, liabilities and judgments purchased Shares, or any person controlling
such Issuer or underwriter or other indemnitee, if the Issuer shall have
furnished any amendments or supplements to such preliminary prospectus and a
copy of such preliminary prospectus as so amended or supplemented was not sent
or given by or on behalf of such underwriter to such person, if required by law
so to have been delivered, at or prior to the written confirmation of the sale
of the Shares to such person, and if the prospectus as so amended and
supplemented by the Issuer would have cured the defect giving rise to such loss,
claim, damage, liability or judgment. Such Holder will reimburse any legal or
other expenses reasonably incurred by the Issuer or any such director, officer,
control person, agent, underwriter, or other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action.
10.4 Expenses of Registration. All expenses incurred in connection
with the registration pursuant to this Section 10 (excluding underwriter's
discounts and commissions attributable to the Holder's Registrable Securities,
and fees and expenses of Holders' counsel, all which shall be borne by Holders)
shall be borne by the Issuer.
11. TERM
11.1 This Agreement shall terminate with respect to the Company and
all Stockholders upon the occurrence of any of the following events:
(a) any Stockholder becoming the owner of all of the Shares
which are then subject to this Agreement;
(b) the merger, consolidation or combination of the Company
with or into, or the acquisition of the stock or assets of the Company by,
another person (other than an
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Affiliate of the Company or Flowers) as a result of which the Stockholders and
Optionholders and their permitted transferees own less than fifty percent (50%)
of the Voting Power on a Fully Diluted Basis of such entity;
(c) the execution of a written instrument by the Company and
each of the Stockholders terminating this Agreement; or
(d) the completion of an IPO of Flowers or the Company (except
that in the event of an IPO of Flowers the provisions of Sections 9 and 10 shall
survive the termination of the Agreement).
11.2 This Agreement shall automatically terminate with respect to a
Stockholder or Optionholder in the event that his interest in his Shares and
Options completely terminates and, upon such complete termination, such
Stockholder or Optionholders shall have no further rights or obligations
hereunder other than those rights and obligations arising prior to such
termination. If such Stockholder or Optionholders subsequently acquires or
reacquires Shares or Options, he shall automatically become bound once again by
the terms of this Agreement. This Section in no event shall be interpreted so as
to relieve a Stockholder or Optionholders of liability for his breach of or
failure to comply with any term or provision hereof arising or existing prior to
or at the time of the termination of this Agreement.
12. MISCELLANEOUS
12.1 Expenses. Except as otherwise specifically provided in this
Agreement, each of the parties hereto shall bear their respective expenses
incurred in connection with the preparation, execution and performance of this
Agreement including, without limitation, all fees and expenses of the respective
parties' attorneys and other representatives. This Section 12.1 shall survive
the termination of this Agreement.
12.2 Notices. (a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally by
hand or by recognized overnight courier, telecopied or mailed (by registered or
certified mail, postage prepaid return receipt requested) if addressed to the
Stockholders or Optionholders at the addresses set forth on Schedule A hereto,
and as follows:
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(i) If to Flowers, one copy to:
1-800-Flowers, Inc.
1600 Stewart Avenue
Westbury, New York 11590
Telecopier: (516) 237-6060
Attn: William Shea
with a copy to:
Gallagher Walker & Bianco
98 Willis Avenue
Mineola, New York 11501
Telecopier: (516) 248-2394
Attn: Gerard M. Gallagher, Esq.
(ii) If to the Company, one copy to:
The Plow & Hearth, Inc.
Route 230 West
Madison, Virginia 22727
Telecopier: (540) 948-5369
Attn: Peter G. Rice
with a copy to:
LeClair Ryan, a Professional Corporation
707 East Main Street, 11th Floor
Richmond, Virginia 23219
Telecopier: (804) 783-2294
Attn: Steven J. Keeler, Esq.
(b) Each such notice or other communication shall be effective
(i) if given by telecopier, when such telecopy is transmitted to the telecopier
number specified on Schedule A hereto (with confirmation of transmission); or
(ii) if given by any other means, when delivered at the address specified on
Schedule A hereto. Any party by notice given in accordance with this Section
12.2 to the other party may designate another address (or telecopier number) or
person for receipt of notices hereunder. Notices by a party may be given by
counsel to such party.
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12.3 Entire Agreement. This Agreement (including the Schedules and
Exhibits) contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, written or oral, with
respect thereto.
12.4 Waivers and Amendments; Non-Contractual Remedies; Preservation
of Remedies. This Agreement may be amended upon the prior written consent of (i)
Flowers and its transferees other than Management Stockholders and Optionholders
and (ii) holders of at least a Majority-in-Interest of Management Stockholders.
This Agreement may be waived, only by a written instrument signed by the party
hereto waiving compliance. No failure or delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof. Nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege. Except as otherwise provided herein, the
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies that any party may otherwise have at law or in equity.
12.5 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed entirely within such State (except to the extent that
corporate governance matters set forth herein are required as a matter of law,
to be governed by the laws of the Commonwealth of Virginia), without regard to
the conflict of laws rules thereof.
12.6 Dispute Resolution. Any and all disputes, controversies or
claims arising out of or relating to this Agreement, or the enforcement or the
breach thereof, shall be settled by arbitration in Garden City, New York
administered by the American Arbitration Association under its Commercial
Arbitration Rules and the Supplementary Procedures for Large, Complex Disputes,
and judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
12.7 Consent to Jurisdiction. Subject to Section 12.6, each of the
parties hereto irrevocably and voluntarily submits to personal jurisdiction in
the State of New York and in the Federal and state courts in such state located
in the Eastern District of New York in any action or proceeding arising out of
or relating to this Agreement and agrees that all claims in respect of such
action or proceeding may be heard and determined in any such court. Each of the
parties hereto further consents and agrees that such party may be served with
process in the same manner as a notice may be given under Section 12.2. Each of
the parties hereto agrees that any action or proceeding instituted by any of
them against any other party with respect to this Agreement will be instituted
exclusively in the state courts located in, and in the United States District
Court for, the Eastern District of New York. The parties hereto irrevocably
-46-
and unconditionally waive and agree not to plead, to the fullest extent
permitted by law, any objection that they may now or hereafter have to the
laying of venue or the convenience of the forum of any action or proceeding with
respect to this Agreement in any such courts.
12.8 Binding Effect; No Assignment. This Agreement and all of its
provisions, rights and obligations shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs, legal
representatives and permitted assigns.
12.9 Further Assurances. Each of the parties shall do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged or
delivered, all such further documents, instruments or assurances, as may be
necessary, desirable or proper to carry out the intent and accomplish the
purposes of this Agreement.
12.10 Severability. If any provision of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, this Agreement shall be
amended so as to enforce the illegal, invalid or unenforceable provision to the
maximum extent permitted by applicable law, and the parties shall cooperate in
good faith to further modify this Agreement so as to preserve to the maximum
extent possible the intended benefits to be received by the parties.
12.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
12.12 Headings; Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. The use of the neuter gender herein
shall be deemed to include the masculine and feminine genders wherever necessary
or appropriate, the use of the masculine gender shall be deemed to include the
neuter and feminine genders and the use of the feminine gender shall be deemed
to include the neuter and masculine genders wherever necessary or appropriate.
12.13 Third Parties. Except as specifically set forth or referred to
herein, nothing herein express or implied is intended or shall be construed to
confer upon or give to any person other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Stockholders
Agreement as of the date first above written.
THE PLOW & HEARTH, INC.
By:_____________________________________
1-800 FLOWERS, INC.
By:_____________________________________
MANAGEMENT STOCKHOLDERS:
________________________________________
Donald C. Beck
________________________________________
Michael E. Burns
________________________________________
Carol A. Cate
________________________________________
Dawn M. Cottrell, as Joint Tenant with
Right of Survivorship
________________________________________
Ronald J. Cottrell, as Joint Tenant with
Right of Survivorship
________________________________________
James K. Kepchar
IN WITNESS WHEREOF, the parties have executed this Stockholders Agreement
as of the date first above written.
LASAHANE INVESTMENTS
By: Frank Borden Hanes, Jr., its
Managing Partner
By:_______________________________
Name:
Title:
________________________________________
Peter G. Rice
THE PETER VAN S. RICE FAMILY TRUST
By:_____________________________________
Name:
Title: as Trustee
________________________________________
Steven R. Wagner
TUCKER ANTHONY, INC., CUSTODIAN FBO/C.
CARTER WALKER, JR. IRA
By:_____________________________________
Name:
Title: as Trustee
IN WITNESS WHEREOF, the parties have executed this Stockholders Agreement
as of the date first above written.
OPTIONHOLDERS:
________________________________________
Anna M. Allen
________________________________________
Caroline C. Busick
________________________________________
Dawn M. Cottrell
________________________________________
Thomas M. Freshwater
________________________________________
Norman D. Hensel
________________________________________
Robert G. Kohler
________________________________________
Margaret S. Rice
________________________________________
Peter M. Rice
________________________________________
Richard N. VanSantvoord
________________________________________
John H. Whitlow
Schedule A
% of
Outstanding
Options to Shares giving
Related No. of Purchase effecting to Options to % of Out-
Employee Shares of % of Common Stock Exercise of Purchase Common standing
Stockholder/ of Owned Outstanding under the Options under Stock under the Shares
Optionholder Common Stock Shares Existing Plan Existing Plan New Plan Fully Diluted
------------ ------- ------------ ------ ------------- ------------- -------- -------------
Name:
Address:
Tel No.:
Fax No.:
STEVE: PLEASE HAVE THE COMPANY BEGIN TO PREPARE THIS SCHEDULE]