**Exhibit9.1.1**

 

 

 

 

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

 

among

 

HCC INDUSTRIES INC.

 

WINDWARD CAPITAL ASSOCIATES, L.P.

 

WINDWARD/PARK HCC, L.L.C.

 

WINDWARD/MERCHANT, L.P.

 

WINDWARD/MERBAN, L.P.

 

and

 

THE OTHER STOCKHOLDERS LISTED HEREIN

 

 

 

 

 

 

 

 

 

 

 

 

 

 
|                                 |
|--------------------------------------|
| Dated  as of February 14, 1997       |
| and  amended as of September 12,2000 |

 

 

 

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TABLE OF CONTENTS

 

 

 
| BACKGROUND                                                                                 |
|--------------------------------------------------------------------------------------------|
|                                                                                       |
| ARTICLE I                                                                                  |
| DEFINITIONS                                                                                |
| 1.1   Definitions                                                                     |
|                                                                                       |
| ARTICLE II                                                                                 |
| CORPORATE  GOVERNANCE                                                                      |
| 2.1  Voting Rights in Charter; Voting Matters Related to Charter  Documents           |
| 2.2  Designation of Directors                                                         |
| 2.3  Replacement of Nominees                                                          |
| 2.4  Calling Special Meetings for the Removal  of Nominees                            |
| 2.5  Calling Special Meetings for the Enforcement of Corporate  Governance Provisions |
| 2.6   Removal for Cause                                                               |
| 2.7   Grant of Proxies                                                                |
| 2.8   Voting Agreement                                                                |
| 2.9   Stockholder Groups                                                              |
|                                                                                       |
| ARTICLE III                                                                                |
| RESTRICTIONS  ON TRANSFER;RIGHTS OF FIRST REFUSAL                                          |
| 3.1  Restrictions on Transfer                                                         |
| 3.2  Rights of First Refusal Generally                                                |
| 3.3  Apportionment of Shares Among Stockholders  in the Event of Over-Subscription    |
| 3.4  Apportionment of Shares Among Stockholders in the Event of  Failure to Purchase  |
| 3.5  Transfer Mechanics                                                               |
| 3.6  Transfers to Third Parties after  Stockholders Decline Rights of First Refusal   |
| 3.7  Exceptions to Rights of First Refusal                                            |
| 3.8  Exceptions for Employee Stockholders                                             |
|                                                                                       |
| ARTICLE IV                                                                                 |
| TAG-ALONG  RIGHTS                                                                          |
| 4.1  Tag-Along Rights Generally                                                       |
| 4.2  Allocation of Shares of Tag-Along Stock                                          |
| 4.3   Transfer Mechanics                                                              |
| 4.4  Transfers to Third Parties after  Stockholders Decline Tag-Along Rights          |

 

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| 4.5  Exceptions to Tag-Along Rights                                 |
|--------------------------------------------------------------------------|
|                                                                     |
| ARTICLE V                                                                |
| RIGHTS TO COMPEL  SALE OR IPO EVENT                                      |
| 5.1  Rights to Compel Sale Generally                                |
| 5.2  Compelled Sale Pursuant to a Sale of  Company Stock            |
| 5.3  Compelled Sale Other Than Pursuant to a  Sale of Company Stock |
| 5.4  Cooperation in Connection with Compelled  Sale                 |
| 5.5  Notice of Consummation of Compelled Sale                       |
| 5.6  Rights to Compel IPO Event                                     |
|                                                                     |
| ARTICLE VI                                                               |
|                                                                     |
| PREEMPTIVE  RIGHTS                                                       |
| 6.1   Preemptive Rights                                             |
|                                                                     |
| ARTICLE VII                                                              |
| PUT AND CALL  RIGHTS ON MANAGEMENT STOCK                                 |
| 7.1  Put and Call Rights                                            |
| 7.2  Obligation to Sell Several                                     |
| 7.3  Deferral of Purchases                                          |
| 7.4   Payment for Stock                                             |
| 7.5   Miscellaneous                                                 |
| 7.6  Proxy and Escrow of Company Stock                              |
| 7.7  Exceptions for Employee Stockholders                           |
|                                                                     |
| ARTICLE VIII                                                             |
| COMPANY  COVENANTS                                                       |
| 8.1  Affiliated Arrangements                                        |
| 8.2   Financial Reports                                             |
| 8.3  Access to Information                                          |
| 8.4   FIRPTA Activities                                             |
|                                                                     |
| ARTICLE IX                                                               |
| REGISTRATION  RIGHTS                                                     |
| 9.1  Demand Registration Rights                                     |
| 9.2  Piggyback Registration Rights                                  |
| 9.3  Priority in Piggyback Registrations                            |
| 9.4   Expenses                                                      |
| 9.5  Restrictions on Public Sale by  Stockholders and Company       |
| 9.6  Indemnification by the Company                                 |
| 9.7  Indemnification by the Stockholders and  Underwriters          |

 

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| 9.8  Notices of Claims, Etc                                   |
|--------------------------------------------------------------------|
| 9.9  Other Indemnification                                    |
| 9.10  Registration Procedure                                  |
| 9.11   Rule 144                                               |
|                                                               |
| ARTICLE X                                                          |
| ADDITIONAL  STOCKHOLDERS                                           |
| 10.1  Transferees of Stockholders or the Company              |
| 10.2   New Stockholders                                       |
| 10.3.  Supplemental Agreements                                |
|                                                               |
| ARTICLE XI                                                         |
| STOCK LEGENDS                                                      |
| 11.1  Stock Certificate Legend                                |
|                                                               |
| ARTICLE XII                                                        |
| APPOINTMENT  OF AGENTS                                             |
| 12.1  Appointment of Agent for Windward Group  Matters        |
| 12.2  Appointment of Agent for the Management  Stockholders   |
|                                                               |
| ARTICLE XIII                                                       |
| TERM OF  AGREEMENT                                                 |
| 13.1  Term                                                    |
|                                                               |
| ARTICLE XIV                                                        |
|                                                               |
| MISCELLANEOUS                                                      |
| 14.1   Confidentiality                                        |
| 14.2  Specific Performance                                    |
| 14.3  Consent to Jurisdiction, Etc.                           |
| 14.4   Attorneys’ Fees                                   |
| 14.5  Headings; No Third Party Beneficiaries                  |
| 14.6   Entire Agreement                                       |
| 14.7   Notices                                                |
| 14.8   Applicable Law                                         |
| 14.9   Severability                                           |
| 14.10  Successors; Assigns; Transferees;  Amendments; Waivers |
| 14.11  Defaults; No Circumvention of Agreement                |
| 14.12  Further Assurances                                     |
| 14.13   Counterparts                                          |
| 14.14   Recapitalization, etc                                 |

 

 

 

 

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AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

 

STOCKHOLDERS AGREEMENT dated as of February 14, 1997, and amended as ofSeptember 12,2000 (the “Agreement”), by and among HCC Industries Inc., aDelaware corporation (the “Company”), Windward Capital Associates, L.P., aDelaware limited partnership (“Windward”), Windward/Park HCC, L.L.C., aDelaware limited liability company (“Windward/Park”), Windward/Merban, L.P., aDelaware limited partnership (“Windward/Merban”), Windward/Merchant, L.P., aDelaware limited partnership (“Windward/Merchant”) and the persons listed inthe Schedule of Management Stockholders attached hereto (such persons, togetherwith any employees of the Company or its subsidiaries who become parties tothis Agreement pursuant to the terms and conditions of this Agreement and eachof their respective Permitted Transferees (as defined herein), are referred toherein, collectively, as the “Management Stockholders”), and such other personsor entities who or which become parties to this Agreement pursuant to the termsand conditions of this Agreement. Windward, Windward/Park, Windward/Merban and Windward/Merchant, togetherwith their respective Permitted Transferees, shall be referred to collectivelyin this Agreement as the “Windward Group”.

 

 

BACKGROUND

 

WHEREAS, pursuant to the terms and conditions of the First Amendmentand Restatement of the Stock Purchase and Sale Agreement dated as of February14, 1997 (the “Stock Purchase Agreement”), by and among the Company, theWindward Group, Metropolitan Life Insurance Company (“MetLife”) and certainstockholders of the Company set forth on the signature pages thereto, amongother things, (a) the Company has agreed to issue to the members of theWindward Group, and the members of the Windward Group have agreed to acquirefrom the Company, 96,335 shares of Common Stock, par value $.10 per share, ofthe Company (the “Common Stock”) (representing in the aggregate approximately67% of the Company’s total outstanding capital stock (without giving effect tothe exercise of any outstanding options, the Warrants (as defined below) orother similar securities)) and (b) the Company has agreed to purchase fromcertain stockholders 

 

 

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of the Company who are parties to the Stock Purchase Agreement and suchstockholders have agreed to sell to the Company certain shares of Common Stockas set forth in the Stock Purchase Agreement;

 

WHEREAS, pursuant to the terms and conditions of the Stock PurchaseAgreement, at the Closing (as defined in the Stock Purchase Agreement), theCompany has agreed to issue to Windward/Merban, Windward/Merchant andWindward/Park, and Windward/Merban, Windward/Merchant and Windward/Park haveagreed to acquire from the Company, certain warrants to acquire additionalshares of Common Stock (subject to the conditions set forth in such warrants)(such warrants, as more fully described in the Stock Purchase Agreement, the“Warrants”);

 

WHEREAS, pursuant to the terms and conditions of the Stock PurchaseAgreement, the Company has the right to repurchase and acquire from Windward/Merban,Windward/Merchant and Windward/Park the Warrants and certain of the shares ofCommon Stock purchased by Windward/Merban, Windward/Merchant and Windward/Parkpursuant to the Stock Purchase Agreement as set forth in Section 7.3 of theStock Purchase Agreement;

 

WHEREAS, after the Closing , the Company has agreed to grant options topurchase additional shares of Common Stock to certain employees of the Companyand its subsidiaries, such options to be subject to the terms (includingperformance criteria) set forth in the plan governing such options and, uponexercise, such employees will, to the extent they are not otherwise partieshereto, become parties to this Agreement pursuant to Article X hereof;

 

WHEREAS, after the Closing, the Company may offer and sell additionalshares of Common Stock to certain other persons and to employees of the Companyand its subsidiaries and such employees will, to the extent they are nototherwise parties hereto, become parties to this Agreement pursuant to ArticleX hereof;

 

WHEREAS, pursuant to and subject to the terms and conditions of ArticleXII hereof, each of the members of the Windward Group have designated andappointed Windward as its attorney-in-fact, agent and representative to act onits behalf and on behalf of its Permitted Transferees

 

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in connection with this Agreement (in such capacity, Windward, and anysuccessor thereof appointed pursuant to such Article XII, shall hereinafter bereferred to as “the Windward Agent”); and

 

WHEREAS, the Stockholders believe it to be in their best interests andin the best interests of the Company that they enter into this Agreementproviding for certain rights and restrictions with respect to the shares ofCommon Stock owned by them or their permitted transferees.

 

NOW, THEREFORE, in consideration of the mutual covenants andobligations set forth in this Agreement, the parties hereto agree as follows:

 

 

ARTICLE I

 

DEFINITIONS

 

1.1  Definitions.  As used in this Agreement, the followingterms shall have the meanings ascribed to them below (such terms to be equallyapplicable to both singular and plural forms of the terms defined or referredto):

 

(a)  The term “Affiliate”or “affiliate” shall mean, with respect to any specified person, (x) anydirector or officer of, or any person that beneficially owns at least 5% of thecapital stock or other equity interests of, such specified person, or (y) anyother person directly or indirectly controlling, controlled by, or under commoncontrol with, such specified person, at any time during the period for whichthe determination of affiliation is being made; provided that in thecase of a person who is an individual, such terms shall also include members ofsuch specified person’s immediate family (as defined in Instruction 2 of Item404(a) of Regulation S-K under the Securities Act).

 

(b)  The term “Board”shall mean the Board of Directors of the Company.

 

(c)  The term “Bona FideOffer” shall mean any offer by a Third Party in writing, setting forth aspecific purchase price and a closing date of no more than 

 

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thirty days therefrom, which is fully financed and not subject to anymaterial conditions.

 

(d)  The term “Book Value”shall mean, as to (x) each share of Common Stock, the sum of (i) the price pershare of Common Stock paid by the Windward Entities pursuant to the StockPurchase Agreement and (ii) the increase (or minus the decrease) in the bookvalue per share of Common Stock (as determined in accordance with GAAP,calculated on a Fully-Diluted Basis) for the period commencing on the first dayof the first fiscal quarter of the Company following the date hereof throughand until the last day of the fiscal quarter of the Company immediatelypreceding the date on which book value shall be determined, and (y) as to eachshare of Company Stock subject to an Option, the positive difference betweenthe Book Value as calculated pursuant to clause (x) of this definition and theapplicable exercise price per share of Company Stock of such Option.

 

(e)  The term “Business Day”shall mean any calendar day which is not a Saturday, Sunday or public holidayunder the laws of the State of New York.

 

(f)  The term “Cause”,used in connection with the termination of employment of any ManagementStockholder by the Company or any subsidiary of the Company, shall mean atermination due to a finding by the Board in good faith that such ManagementStockholder has (a) been engaged in an act or acts of dishonesty that wereintended to and did result directly or indirectly in more than an aggregate of$5,000 in gain or personal enrichment to employee at the expense of theCompany; (b) failed to substantially perform employee’s duties under hisapplicable employment agreement, if any (other than failure resulting fromemployee’s Disability), persisting for a reasonable period following thedelivery to employee of written notice specifying the details of any allegedfailure to perform, which failure has resulted in demonstrable and materialinjury and damage to the Company; (c) violated or failed to comply in anymaterial respect with the Company’s published rules, regulations or policies,as in effect from time to time; (d) breached the applicable employmentagreement, if any, in any material respect; or (e) been convicted of a felonyoffense or a misdemeanor offense involving fraud, theft or dishonestly at anytime, which conviction employee failed to disclose 

 

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to the Company; or (f) been incarcerated for more than 10 days.

 

(g)  The term “Change ofControl” shall mean the occurrence of any of the following events:

 

i)  the sale, lease, transfer orother disposition of all or substantially all of the assets of Company or itssubsidiaries (taken as a whole) to any person or related group of persons otherthan the Stockholders;

 

ii)  the merger or consolidationof the Company with or into another corporation, or the merger of anothercorporation into the Company, with the effect that persons other than theStockholders (and their Permitted Transferees or any “group” (as defined in therules promulgated under Section 13(d) of the Exchange Act) of which anyStockholder or any Permitted Transferee is a member) hold more than 50% of thetotal voting power on a Fully Diluted Basis entitled to vote in the election ofdirectors, managers or trustees of the surviving corporation of such merger orthe corporation resulting from such consolidation; and

 

iii)  any other event whichresults in a Person or a “group” other than the Stockholders (and theirPermitted Transferees or any “group” of which any Stockholder or any PermittedTransferee is a member) holding, directly or indirectly, in the aggregate morethan 50% of common stock outstanding at such time, after giving effect to theissuance of all shares of Company Stock issuable (i) upon conversion of allconvertible securities outstanding at such time and (ii) upon exercise of allother warrants, options and other rights outstanding at such time.

 

(h)  The term “Common Stock”shall mean the capital stock named as “Common Stock” in the second paragraph ofthis Agreement, and any and all shares of capital stock or other securities ofthe Company or any successor or assign of the Company (whether by merger,consolidation, sale of assets or otherwise), which may be issued in respect of,in exchange for, or in substitution for any shares of Common Stock, by reasonof any stock dividend, split, reverse split, combination, recapitalization, 

 

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reclassification, merger,consolidation or otherwise.

 

(i)  The term “Company”shall mean the person named as the “Company” in the first paragraph of this Agreement,and any successor or assign thereof.

 

(j)  The term “Company Stock”shall mean the Common Stock and any other capital stock of any class or seriesof the Company, and any securities of the Company convertible into, orexercisable or exchangeable for, any such Common Stock or other capital stockof the Company (including, without limitation, (i) shares of Common Stockissued (or issuable) pursuant to the Stock Purchase Agreement, (ii) shares ofCommon Stock issued pursuant to the Company Stock Option Plan or any otherstock option plan or employee benefit or other incentive plan presently ineffect or which may be adopted by the Company after the date hereof, (iii)shares of Common Stock issued (or issuable) upon exercise of the Warrants, anyother warrants or upon exercise of preemptive rights granted by the Company,(iv) the Warrants and any warrants or options to purchase Common Stock (the“Options”), and (v) shares of Common Stock issued and outstanding prior to thedate hereof).  The term “Company Stock”shall include, except as otherwise provided herein, any and all shares ofcapital stock or other securities of the Company or any successor or assign ofthe Company (whether by merger, consolidation, sale of assets or otherwise),which may be issued in respect of, in exchange for, or in substitution for anyshares of Company Stock, by reason of any stock dividend, split, reverse split,combination, recapitalization, reclassification, merger, consolidation orotherwise.

 

(k)  The term “Company StockOption Plan” shall mean the HCC Industries Inc. 1997 Stock Option Plan,adopted by the Company as of the date hereof pursuant to the Stock PurchaseAgreement.

 

(l)  The term “control”,when used with respect to any person, shall mean the power to direct themanagement and policies of such person, directly or indirectly, whether throughthe ownership of voting securities, by contract or otherwise; and the terms“controlling” and “controlled” have meanings correlative to the foregoing.

 

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(m)  The term “CreditAgreement” shall mean the Credit Agreement dated as of the date hereofamong the Company, the Lenders (as defined therein), and Fleet CapitalCorporation, as agent for the Lenders, as the same may be amended from time totime.

 

(n)  The term “Disability”shall mean the inability of the Management Stockholder to substantially renderto the Company the services required by the Company in accordance with his jobfor more than 60 days out of any consecutive 120 day period because of mentalor physical illness or incapacity, as determined in good faith by theBoard.  The date of such Disabilityshall be on the last day of such 60-day period.

 

(o)  The term “Duly Endorsed”shall mean (i) duly endorsed in blank by the person or persons in whose name astock certificate or certificate representing a debt security is registered or(ii) accompanied by a duly executed stock or security assignment separate fromthe certificate, in each case with the signature(s) thereon guaranteed by acommercial bank or trust company or a member of a national securities exchangeor of the National Association of Securities Dealers, Inc.

 

(p)  The term “EBITDA”shall mean the consolidated net income (or loss) of the Company and its subsidiaries,excluding (to the extent net income is reduced or increased or net loss isincreased or reduced thereby), without duplication, (a) interest expense, (b)provisions for taxes based on income, (c) depreciation expense, (d)amortization expense from intangibles and goodwill, (e) extraordinary gains orlosses, (f) gains or losses on the sale or disposal of assets, (g) thecumulative effect of any changes in accounting principles, (h) the granting ormodification of options under option (and similar) plans (other than legal andother costs incurred in connection with the establishment and administration ofsuch plan), (i) investment income and losses, and (j) non-cash amounts thatrelate to capitalized inventory, in each case as shown on the Company’s unaudited(or audited, with respect to any four fiscal quarters for which auditedstatements are otherwise available) consolidated financial statements for thefour fiscal quarters of the Company ending immediately prior to the particulardate on which the EBITDA calculation is being made, in each case calculated inaccordance with GAAP.

 

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(q)  The term “Exchange Act”shall mean the Securities Exchange Act of 1934, as amended, and the rules andregulations promulgated thereunder.

 

(r)  The term “Fair MarketValue”, used in connection with the value of (x) a share of Company Stock,shall mean the quotient of (i) the excess of (1) product of (A) 6.5 multipliedby (B) the amount of EBITDA, as shown on the Company’s unaudited (or audited,with respect to any four fiscal quarters for which audited statements areotherwise available) consolidated financial statements for the four fiscalquarters of the Company ending immediately prior to the particular date of terminationof employment in question (or, in the event that the periods during which theexercise of the rights pursuant to Section 7.1 hereof are deferred pursuant toSection 7.3 hereof, immediately prior to the first date on which such periodsrecommence pursuant to such Section 7.3), over (2) the amount of NetIndebtedness as of the end of the period in question, divided by (ii) the totalnumber of shares of Company Stock (calculated on a Fully-Diluted Basis), and(y) a share of Company Stock subject to an Option shall mean the positivedifference between Fair Market Value as calculated pursuant to clause (x) ofthis definition and the applicable exercise price per share of Company Stock ofsuch Option.

 

(s)  The term “FinancingDefault” shall mean an event or circumstance which would constitute (orwith notice or lapse of time or both would constitute) an event of defaultunder either the Subordinated Note Agreement or the Credit Agreement, or anyother indebtedness incurred by the Company ranking senior to or paripassuwith the indebtedness incurred pursuant to the Subordinated Notes, or anyrefunding, refinancing or extension of any of the foregoing (including, withoutlimitation, any debt offering pursuant to Rule 144A promulgated under theSecurities Act), as such agreements may be amended from time to time, and whichevent or circumstance has not been waived or cured.

 

(t)  The term “Fully-DilutedBasis” shall mean, with respect to any calculation of the outstandingnumber of shares of Company Stock or the outstanding amount of common equity ofthe Company (as the case may be), an amount equal to the total outstandingnumber of shares of Company Stock and all other shares of common stock of the 

 

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Company, calculated without duplication and assuming the conversion ofall outstanding shares of convertible capital stock and securities of theCompany and the exercise of all warrants, options and other rights (including,without limitation, employee stock options pursuant to the Company Stock OptionPlan and the Warrants (except that, with respect to such options and theWarrants, if any such options are finally determined to be less than 100%vested or if any such Warrants are finally determined to be less than 100%exercisable, only those shares of Company Stock which may be exercisedfollowing such final determination shall be included in such calculation)) topurchase shares of Company Stock or other common stock of the Company.

 

(u)  The term “GAAP”shall mean U.S. generally accepted accounting principles, as in effect on thedate any calculation thereunder is made, applied on a basis consistent withprior periods.

 

(v)  The term “IPO Event”shall mean an initial public offering of capital stock by the Company involvingthe Registration and sale of an aggregate of $25 million or more of commonequity of the Company, whether involving a primary offering or a combinedprimary and secondary offering, and pursuant to which the Company becomeslisted on a national securities exchange or on the Nasdaq Stock Market orNasdaq National Market; provided that in the event that the WindwardAgent consents to an initial public offering that involves the Registration andsale of less than $25 million of common equity of the Company, then an IPOEvent shall be deemed, for purposes of this Agreement, to mean a Registrationwhich, when taken together with all other Registrations, constitutes a sale bythe Company, its stockholders or any combination thereof, of $25 million or moreof common equity of the Company (as calculated in the manner set forth above).

 

(w)  The term “NetIndebtedness” shall mean (i) Indebtedness (as defined in the CreditAgreement) less (ii) cash and cash equivalents (other than cash held in theDeferred Purchase Price Fund established pursuant to the Deferred PurchasePrice Agreement and the Escrow Agreement (each as defined in the Stock PurchaseAgreement)), in each case, of the Company as shown on the 

 

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Company’s most recently available balance sheet prior to the date ofdetermination.

 

(x)  The term “PermittedTransferee” of a Stockholder shall mean the Company and:

 

i)  in the case of any member ofthe Windward Group, (A) corporations, partnerships or other entities which areAffiliates of any member (or any general or limited partner or equity holder ofany member) of the Windward Group (collectively, the “Windward Affiliates”),(B) any general partner, limited partner, controlling shareholder, director,officer, managing director or other employee of Windward or any WindwardAffiliate (collectively, the “Windward Associates”), (C) the linealdescendants, heirs, executors, administrators, testamentary trustees, legateesor beneficiaries of any Windward Associate and (D) any trust, the beneficiariesof which, or corporation or partnership, the stockholders or general or limitedpartners of which, include only a Windward Associate, his or her spouse,members of his or her immediate family or his or her lineal descendants, towhich any such member of the Windward Group, a Windward Affiliate or a WindwardAssociate has transferred shares of Company Stock; and

 

ii)  in the case of a ManagementStockholder, (A) the lineal descendants, heirs, executors, administrators,testamentary trustees, legatees or beneficiaries of any Management Stockholderand (B) any trust, the beneficiaries of which, or a corporation or partnership,the stockholders or general or limited partners of which, include only aManagement Stockholder, his or her spouse, members of his or her immediatefamily or his or her lineal descendants, to which a Management Stockholder hastransferred shares of Company Stock;

 

provided that in each case (1) each such transferor hasobtained the prior written consent of the Company (which consent shall not bewithheld unless, in the opinion of the Company, such transfer together with allother transfers of Company Stock made after the Closing could result in orcreate a significant risk (as defined below) that the Company may becomesubject to, or after any Registration will continue to be subject to, theinformational requirements of the Exchange Act) and (2) each such transferee(other than the Company) has agreed in writing,

 

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 in accordance with Article Xhereof, to be bound by the terms and conditions of this Agreement to the sameextent and in the same manner as the Stockholder transferring such shares ofCompany Stock; providedfurther that the transfer to any suchperson is in compliance with all applicable federal, state and foreignsecurities laws.  For the purposes ofthis Section 1.1(t), a “significant risk” shall be deemed to arise when thenumber of “holders of record” (as determined in accordance with the ExchangeAct) is greater than 80% of the number of “holders of record” that would causethe application or continued application of the informational requirements ofthe Exchange Act under the then existing circumstances.

 

(y)  The term “person”shall mean an individual, partnership, corporation, business trust, joint stockcompany, trust, unincorporated association, joint venture, or other entity ofwhatever nature.

 

(z)  The term “PiggybackSecurities” shall mean those Registrable Securities which are requested tobe sold by any Stockholder pursuant to Section 9.2 hereof.

 

(aa)  The term “RegistrableSecurities” shall mean shares of Common Stock (including, withoutlimitation, shares of Common Stock issued pursuant to the Stock PurchaseAgreement, shares of Common Stock issued pursuant to the Company Stock OptionPlan or any other stock option plan or employee benefit or other incentive planpresently existing or which may be adopted by the Company after the datehereof, shares of Common Stock issued upon exercise of any warrants or optionsor upon exercise of preemptive rights granted by the Company, and shares ofCommon Stock issued and outstanding prior to the date hereof) and any otherequity securities of the Company or any successor corporation issued inexchange for or in respect of such shares of Common Stock.  As to any particular Registrable Securities,such securities shall cease to be Registrable Securities when (i) suchsecurities shall have been registered under the Securities Act, theregistration statement with respect to the sale of such securities shall havebecome effective under the Securities Act and such securities shall have beendisposed of pursuant to such effective registration statement, (ii) suchsecurities shall have been distributed pursuant to Rule 144 (or any similarprovision then in 

 

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force) under the Securities Act, (iii) such securities shall have beenotherwise transferred, if new certificates or other evidences of ownership forthem not bearing a legend restricting further transfer and not subject to anystop transfer order or other restrictions on transfer shall have been deliveredby the Company and subsequent disposition of such securities shall not requireregistration or qualification of such securities under the Securities Act orany state securities laws then in force or (iv) such securities shall cease tobe outstanding.

 

(bb)  The term “Registration”shall mean a bonafide public offering of the Company’ssecurities pursuant to an effective registration statement under the SecuritiesAct and in compliance with all applicable state securities laws.

 

(cc)  The term “RegistrationExpenses” shall mean all expenses of the Company incident to the Company’sperformance of or compliance with Article IX hereof, including, withoutlimitation, all SEC and stock exchange or National Association of SecuritiesDealers, Inc. (“NASD”) registration, filing and listing fees and expenses, feesand expenses of compliance with securities or blue sky laws (including, withoutlimitation, reasonable fees and disbursements of counsel for the underwritersin connection with blue sky qualifications of the Registrable Securities),rating agency fees, all fees and expenses of the transfer agent and registrarfor the Common Stock, printing expenses, messenger and delivery expenses, thereasonable fees and expenses incurred in connection with the listing of thesecurities to be registered on each securities exchange or national market systemon which Registrable Securities are to be listed or on which similar securitiesissued by the Company are to be listed in connection with such transaction,reasonable fees and disbursements of counsel for the Company and allindependent certified public accountants for the Company (including theexpenses of any annual audit, special audit and “cold comfort” letters requiredin connection therewith or incident thereto), securities laws liabilityinsurance (if the Company so desires or if the underwriters so desire), thereasonable fees and disbursements of underwriters customarily paid by issuersor sellers of securities, all fees and expenses of any qualified independentunderwriter or any person acting in 

 

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a similar capacity under the rules of the NASD, the reasonable fees anddisbursements of one counsel retained in connection with each such registrationby the Stockholders who hold a majority of the Registrable Securities beingregistered, the reasonable fees and expenses of any special experts retained bythe Company in connection with such registration, and fees and expenses ofother persons retained by the Company (but not including any underwritingdiscounts or commissions or transfer taxes, if any, attributable to the sale ofRegistrable Securities by the holders of such Registrable Securities).

 

(dd)  The term “Representative”shall mean, with respect to a particular person, any director, officer, generalpartner, limited partner, co-owner, member, nominee, managing director orcontrolling person of such person.

 

(ee)  The term “Retirement”shall mean, with respect to a Management Stockholder, the ManagementStockholder’s retirement as an employee of the Company or any Companysubsidiary in accordance with the policies of the Company or such subsidiary.

 

(ff)  The term “SecuritiesAct” shall mean the Securities Act of 1933 and the rules and regulationspromulgated thereunder.

 

(gg)  The term “SEC”shall mean the United States Securities and Exchange Commission.

 

(hh)  The term “Stockholders”shall mean (i) each of the members of the Windward Group, (ii) the ManagementStockholders, (iii) persons who or which have acquired shares of the Company’scapital stock from, and are Permitted Transferees of, any of them, and anycombination of them, and (iv) such other persons who or which become parties tothis Agreement pursuant to the terms and conditions of this Agreement.

 

(ii)  The term “SubordinatedNotes” shall mean the 12% Subordinated Notes in the aggregate principalamount of $22,500,000 to be issued by the Company to MetLife, Windward/Merbanand Windward/Merchant pursuant to the Subordinated Note Agreement, dated as ofthe date hereof, between the Company, MetLife, Windward/Merban and

 

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Windward/Merchant (the “Subordinated Note Agreement”), as the same maybe amended from time to time.

 

(jj)  The term “subsidiary”shall have the same meaning as set forth in the Stock Purchase Agreement.

 

(kk)  The term “Third Party”shall mean, with respect to any Stockholder, any person other than (i) suchStockholder’s Permitted Transferees and (ii) the Company.

 

(ll)  The term “Transfer”shall mean any direct or indirect sale, assignment, mortgage, transfer, pledge,gift, hypothecation or other disposition of or transfer of capital stock (otherthan any bonafide pledge or hypothecation of capital stock to afinancial institution(s) in connection with any loan from such financialinstitution(s)).

 

(mm)  The term “Violation”shall mean, with respect to any purchase of shares of Company Stock, any eventor circumstance pursuant to which the purchase of such shares (together withany other purchases of Company Stock pursuant to this Agreement of which theCompany has at such time been given or has given notice) would (A) conflictwith or result in a violation of or breach (or any event which with lapse oftime or the occurrence of any act or event or otherwise would constitute orresult in any of the foregoing) any law, statute, rule, regulation, order,writ, injunction, decree or judgment promulgated or entered by any federal,state, local or foreign court or governmental authority applicable to theCompany or its subsidiaries or any of their properties or assets or (B) violateor conflict with or constitute a breach or default, or an event creating rightsof acceleration or termination (in each case, whether upon lapse of time or theoccurrence of any act or event or otherwise), under any agreement to which theCompany or any of its subsidiaries is a party or by which any of theirproperties or assets may be bound.

 

(nn)  The term “VoluntaryTermination” shall mean the voluntary termination by a ManagementStockholder of his or her employment with the Company or any Company subsidiaryby voluntary resignation or any other means, other than (i) in connection withthe Retirement, Disability or death of such Management Stockholder or 

 

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(ii) simultaneous with or following termination for Cause or at a timewhen there is in existence or outstanding any matter, event or circumstancewhich if known to the Company at the time of such voluntary termination by theManagement Stockholder of his or her employment would have allowed the Companyor any Company subsidiary to have terminated the Management Stockholder’semployment for Cause (regardless of whether the Company knew, or should haveknown, of such matter, event or circumstance).

 

A Voluntary Termination shall be for “Good Reason” if it follows,within a reasonable period of time thereafter, (x) a material breach of theCompany’s obligations under the applicable employment agreement, if any, withsuch Management Stockholder, or (y) the Board, by vote in accordance with ArticleII hereof, but excluding those directors who are officers or employees, orformer officers or employees, of the Company or its subsidiaries, determines inits sole discretion that a Voluntary Termination by the Management Stockholderis for “Good Reason” under the circumstances then prevailing.

 

 

ARTICLE II

 

CORPORATE GOVERNANCE

 

2.1  Voting Rights in Charter; VotingMatters Related to Charter Documents.

 

(a)  The parties heretoacknowledge that the Company’s Restated Certificate of Incorporation (as amendedas contemplated hereby, the “Certificate”) and by-laws (“By-laws”) shall beamended on the date hereof (and each of the Stockholders agrees to use itsrespective best efforts to effect such amendment) to provide that in order forthe Board (or any committee of the Board) to take any action (except asspecifically provided for herein), in addition to any other requirements underthe General Corporation Law of the State of Delaware, the approval of themembers of the Board (or such committee of the Board) that are WindwardNominees acting by majority vote (or by written consent) would be required inorder for the Company to take any action for which Board approval would berequired.  Any committee of

 

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the Board established by the Board in accordance with its Certificateand By-laws shall include at least one Windward Nominee.

 

(b)  From and after the Closing,each Stockholder shall vote its shares of Company Stock (to the extent entitledto vote), at each regular or special meeting of stockholders of the Company orin any written consent executed in lieu of such a meeting of stockholders, andshall take all actions reasonably necessary, to ensure that the Certificate orCompany’s By-laws (x) are consistent with the provisions of Section 2.1(a)above and (y) do not, at any time, conflict with the provisions of thisAgreement.  From and after the Closing,each Stockholder shall use its reasonable best efforts to cause its respectiveNominees (as defined below), if any, to act in a manner consistent with theprovisions of this Agreement (including, without limitation, the provisions ofSection 2.1(a) above).

 

(c)  Any act or action to betaken or permitted to be taken by the Company pursuant to the terms of, or anyamendment, modification, or waiver of, (i) this Agreement, (ii) the StockPurchase Agreement (following the closing thereunder), (iii) any AncillaryAgreement (as defined in the Stock Purchase Agreement), (iv) any employeestock, bonus or other incentive plan or arrangement, or (v) any other agreementor arrangement contemplated hereby or thereby, shall require approval or actionby the Board in accordance with the provisions of this Article II.

 

2.2  Designation of Directors.

 

(a)  From and after the Closing,each of the Stockholders shall vote its shares of Company Stock (to the extententitled to vote), at each regular or special meeting of the stockholders ofthe Company called for the purpose of filling positions on the Board, or in anywritten consent executed in lieu of such a meeting of stockholders, and shalltake all actions reasonably necessary, to ensure the election to the Board ofthe following individuals: (i) two (2) individuals (the “Windward Nominees”)selected by the Windward Agent who may be affiliated with Windward; (ii) one(1) individual selected by the holders of a majority of the percentageinterests (the “Majority WP Holders”) in Windward/Park 

 

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(the “Windward/Park Nominee”), provided, however, that inthe event that at the end of any thirty consecutive day period in which theMajority WP Holders shall have failed to select the Windward/Park Nominee, thenthe Windward Agent shall select the Windward/Park Nominee to serve until suchtime as the Majority WP Holders shall select an individual to serve as theWindward/Park Nominee (at which time the individual appointed by the WindwardAgent to serve as the Windward/Park Nominee shall resign and be replaced by theindividual selected by the Majority WP Holders in accordance with Article IIhereof); (iii) three (3) individuals (the “Independent Nominees”) selected bythe Windward Agent who shall not be employees of Windward; and (iv) three (3)individuals (the “Management Stockholder Nominees”) selected by the ManagementStockholders (or by the Management Stockholders and the Permitted Transfereesof the Management Stockholders, if any, as the Management Stockholders and suchPermitted Transferees may agree between or among themselves by the affirmativevote of the holders of a majority of the shares of Company Stock owned by suchpersons).  To effectuate the provisionsof this Section 2.2, the Secretary of the Company, or if there be no Secretarysuch other officer of the Company as the Board may appoint to fulfill theduties of Secretary (the “Secretary”), shall not record, and the Company shallnot give effect to, any vote or consent contrary to, or inconsistent with, theterms of this Section 2.2.  The WindwardNominees, the Windward/Park Nominee, the Independent Nominees and theManagement Stockholder Nominees are sometimes collectively referred to hereinas the “Nominees” and individually as a “Nominee.”

 

From and after the Closing, Majority WP Holders shall be entitled todesignate (subject to the reasonable approval of the Board) one (1) individualwho shall be entitled to notice of, and shall be entitled to attend, allmeetings of the Board (such designee, the “Windward/Park Observer”).  The Windward/Park Observer shall not be (X) permittedto vote at any meeting of the Board or on any matter which may be considered bythe Board or (Y) counted for purposes of determining whether there issufficient quorum for the Board to conduct its business.  The parties hereto acknowledge and agreethat the Windward/Park Observer shall owe no fiduciary or other duties to theStockholders or otherwise have any director or 

 

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fiduciary duties or liabilities to the Company or its Stockholders.

 

(b)  The Management Stockholders(or the Management Stockholders and the Permitted Transferees of the ManagementStockholders, if any) may recommend to the Windward Agent up to two (2)individuals for consideration by the Windward Agent in selecting the IndependentDirectors; provided, however, the parties hereto acknowledge thatthe Windward Agent shall have the final determination as to the selection ofthe Independent Nominees and as such the Windward Agent may accept or rejectthe recommendations of the Management Stockholders (or the ManagementStockholders and the Permitted Transferees of the Management Stockholders, ifany) for any reason and under any circumstances in the sole discretion of theWindward Agent.  For purposes ofdetermining the individuals to be recommended in accordance with the foregoingsentence, the Management Stockholders (and their Permitted Transferees, if any)may agree on such individuals between or among themselves by the affirmativevote of the holders of a majority of the shares of Company Stock owned by suchpersons.

 

2.3  Replacement of Nominees.  If, prior to his election to the Boardpursuant to Section 2.2 hereof, any Nominee shall be unable or unwilling toserve as a director of the Company, the Stockholder or Stockholders whonominated any such Nominee shall be entitled to nominate a replacement whoshall then be a Nominee for purposes of this Article II.  If, following election to the Board pursuantto Section 2.2 hereof, any Nominee shall resign, die or be removed or be unableto serve for any reason prior to the expiration of his term as a director ofthe Company, the Stockholder or Stockholders who nominated such Nominee shallwithin 30 days of such event, notify the Board in writing of a replacementNominee, and all Stockholders shall vote their shares of Company Stock (to theextent entitled to vote), at any regular or special meeting called for thepurpose of filling positions on the Board, or in any written consent executedin lieu of such a meeting of stockholders, and shall take all actionsnecessary, to ensure the election to the Board of such replacement Nominee tofill the unexpired term of the Nominee whom such new Nominee is replacing; providedthat no person may be selected by a Stockholder or group of Stockholders as aNominee if such person previously 

 

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served as a director of the Company and was previously removed forCause in accordance with Section 2.6 hereof. If a Stockholder or Stockholders shall fail to so notify the Board, theBoard may, in the event that there is an insufficient number of directors toconstitute a quorum or otherwise conduct any business before the Board,nominate any other person to fill the vacancy.

 

2.4  Calling Special Meetings for theRemoval of Nominees.  EachStockholder hereby agrees to use such Stockholder’s best efforts to call, orcause the appropriate officers and directors of the Company to call, a specialmeeting of stockholders of the Company and to vote all of the shares of CompanyStock (to the extent entitled to vote) owned or held of record by suchStockholder for, or to take all actions by written consent in lieu of any suchmeeting necessary to cause, the removal (with or without Cause) of any directorif the persons designating such director pursuant to Section 2.2 hereofrequest, in a writing signed by the holders of a majority of the Company Stockowned by such Stockholders, his removal for any reason (with or without Cause(as set forth in Section 2.6), notwithstanding the provisions of Section2.6).  Except for any action taken inaccordance with the previous sentence of this Section 2.4 or with respect tothe removal of a director for Cause, each Stockholder further agrees to take noaction, whether by voting of shares of Common Stock or otherwise, with respectto the removal of any director that was not designated by such Stockholderpursuant to Section 2.2 hereof.

 

2.5  Calling Special Meetings for theEnforcement of Corporate Governance Provisions.  In order to effectuate the provisions of this Article II, eachStockholder hereby agrees that when any action or vote is required to be takenby such Stockholder pursuant to this Agreement, such Stockholder shall use itsbest efforts to call, or cause the appropriate officers and directors of theCompany to call, a special or annual meeting of stockholders of the Company, asthe case may be, or execute or cause to be executed a consent in writing inlieu of any such meetings to effectuate such stockholder action.

 

2.6  Removalfor Cause. Each Stockholderhereby agrees that, subject to the requirements of applicable law 

 

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and the Certificate, no director shall be removed without Cause (exceptas provided in Section 2.4 hereof).  Forthe purposes of Section 2.4 and this Section 2.6, “Cause” shall mean thecommission of an act of fraud or embezzlement against the Company or any of itssubsidiaries or any conviction or guilty plea for a felony (or a plea of nolocontendere thereto).

 

2.7  Grantof Proxies.  In order toeffectuate the provisions of this Article II and in addition to and not in lieuof Sections 2.1 through 2.6 hereof, (i) the Windward Agent hereby grants to Mr.Gary L. Swenson, or if Mr. Swenson shall cease to be a managing director,officer, director, affiliate or associate (as such terms are defined in therules and regulations under the Exchange Act) of the Windward Agent or of anymember of the Windward Agent or any of its affiliates or associates, to hissuccessor, who shall be a managing director, officer, director, affiliate orassociate of the Windward Agent or of any member of the Windward Agent or anyof its affiliates or associates and shall be selected by the Windward Agent,and (ii) the Management Stockholders hereby grant to Andrew Goldfarb a proxy tovote at any annual or special meeting of stockholders, or to take action bywritten consent in lieu of such meeting with respect to, all of the shares ofCompany Stock owned or held of record by such Stockholder solely for (x) theelection of directors designated in accordance with Section 2.2 hereof, (y) theremoval of directors in accordance with Sections 2.4 and 2.5 hereof, and (z)the election of a director to fill any vacancy on the Board in accordance withSection 2.3 hereof.  The proxies grantedpursuant to this Section 2.7 shall terminate on the ten-year anniversary of thedate hereof, unless terminated prior to such date.

 

2.8  VotingAgreement.  Each Stockholderwho is a member of the Windward Group, subject to such Stockholder’s receivingfull disclosure of all material facts relating thereto, shall vote its sharesof Company Stock (to the extent then entitled to vote) at any regular orspecial meeting called for the purposes of approving the arrangements, plans orbonuses contemplated by the Stock Purchase Agreement in effect on the datehereof or to be paid hereafter to the extent approval is contemplated by (or inaccordance with) Section 280G(b)(5)(B) of the Internal Revenue Code of 1986, asamended (the “Code”), or in any written consent executed in lieu of any such 

 

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meeting of Stockholders, and shall take all actions necessary, toensure the approval of such proposal.

 

2.9           Stockholder Groups.  Existing Management Stockholders are listed in the Schedule ofManagement Stockholders attached hereto. “Windward Stockholders” shall meanmembers of the Windward Group.  Newstockholders, regardless of whether they acquire their shares directly from theCompany or are Permitted Transferees, shall thereafter be designated by theWindward Agent as either Management Stockholders or Windward Stockholders forall purposes of this Agreement.

 

ARTICLE III

 

RESTRICTIONS ON TRANSFER;

RIGHTSOF FIRST REFUSAL

 

3.1  Restrictions on Transfer.

 

(a)  No Company Stock now orhereafter owned by any Stockholder or any interest therein may be Transferredprior to the expiration of the third anniversary of the date hereof (the“Restricted Period”), except (i) for the sale by the Windward Group to a ThirdParty of all (subject to any percentage reduction arising as a result of theexercise of any “tag-along” rights pursuant to Article IV hereof) of its equityinterests in the Company, (ii) for any sale of shares in connection with theexercise by the Windward Group of its rights under Sections 5.1 through 5.6hereof, (iii) upon the exercise by the Company (or its designee) of any “call”rights or any Management Stockholder of its “put” rights provided for in ArticleVII hereof or (iv) Transfers to or from a Permitted Transferee.  Notwithstanding the foregoing, in no eventshall any Stockholder transfer any Company Stock prior to April 15, 1997.

 

(b)  After the RestrictedPeriod, no Company Stock now or hereafter owned by any Stockholder or anyinterest therein may be Transferred, except (i) pursuant to any Transfer whichcomplies with the provisions of Articles III or IV hereof (provided that duringthe period in which any Management Stockholder and its Permitted Transfereesare subject to the “put” and “call” provisions of Article VII hereof(including, without 

 

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limitation, any period following any termination of the ManagementStockholder’s employment with the Company and its subsidiaries up until theexpiration of the Company’s put and call periods set forth in Sections 7.1 and7.3 hereof), no such Management Stockholder and its Permitted Transferees shallbe permitted to Transfer any shares of Company Stock pursuant to either theprovisions of Article III hereof or the “tag-along” provisions of Article IVhereof, except for Transfers to the Permitted Transferees of such ManagementStockholder), (ii) pursuant to any Registration contemplated in connection withthe provisions of Article IX hereof (provided that, prior to an IPO Event, noManagement Stockholder and its Permitted Transferees shall be permitted toTransfer any shares of Company Stock pursuant to the provisions of Article IXhereof), (iii) for the sale by the Windward Group to a Third Party of all(subject to any percentage reduction arising as a result of the exercise of any“tag-along” rights pursuant to Article IV hereof) of its equity interests inthe Company, (iv) for any sale of shares in connection with the exercise by theWindward Group of its rights under Sections 5.1 through 5.6 hereof, (v) uponthe exercise by the Company (or its designee) of any “call” rights or anyManagement Stockholder of its “put” rights provided for in Article VII hereof or(vi) Transfers to or from a Permitted Transferee.

 

(c)  Any Transfer of CompanyStock made pursuant to this Section 3.1 to a Permitted Transferee shall beeffective only if such Permitted Transferee shall agree in writing to be boundby the terms and conditions of this Agreement pursuant to the provisions ofArticle X hereof.  No Transfer ofCompany Stock in violation of this Agreement shall be made or recorded on thebooks of the Company and any such Transfer shall be void and of no effect.

 

3.2  Rights of First Refusal Generally.

 

(a)  Subject to the restrictionsof Section 3.1 hereof and the limitations of Section 3.7 hereof, and prior tothe application of any of the provisions of Article IV hereof, if, at any timeduring the term of this Agreement, any Stockholder (the “Offering Stockholder”)receives a bonafide offer which such Stockholder wishes toaccept (a “Transfer Offer”) from any Third Party (the “Offeror”) to purchaseCompany Stock (the 

 

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“Transfer Stock”) then owned by such Stockholder, the OfferingStockholder shall cause the Transfer Offer to be reduced to writing and shallprovide a written notice (the “Right of First Refusal Notice”) of such TransferOffer to the Company, and the Company shall provide written notice of suchTransfer Offer to each of the other Stockholders (the “Stockholder Offerees”and, together with the Company, the “Transfer Offerees”) in the manner setforth in Section 14.7 hereof.  The Rightof First Refusal Notice shall also contain an irrevocable offer to sell theTransfer Stock to the Transfer Offerees (in the manner set forth below) at thesame price and upon substantially the same terms and conditions as the termsand conditions contained in the Transfer Offer and shall be accompanied by atrue and correct copy of the Transfer Offer (which shall identify the Offeror,the Transfer Stock, the price contained in the Transfer Offer and all the otherterms and conditions of the Transfer Offer); provided that (x) the Rightof First Refusal Notice may be combined with a Tag-Along Notice, (y) any suchcombined Tag-Along Notice/Right of First Refusal Notice may state that in theevent that the offer(s) to sell the Transfer Stock to the Transfer Offerees arenot accepted in full in accordance with this Section 3.2, then such noticeshall constitute an offer with respect to Tag-Along Stock in accordance withSection 4.1 hereof and (z) references herein to a Right of First Refusal Noticeshall be deemed to include any such combined Tag-Along Notice/Right of FirstRefusal Notice.

 

(b)  The Transfer Offerees shallhave the right and option, within 30 days after the date the Right of FirstRefusal Notice is received by such Transfer Offerees, to accept irrevocablysuch offer (subject to the priorities and pro rata adjustments set forth inSections 3.3 and 3.4 below), in the aggregate, as to all, but not less than all(unless otherwise consented to by the relevant Offering Stockholders andOfferors), shares of Transfer Stock. Each Transfer Offeree which desires to exercise such option shallprovide the Offering Stockholder with written notice (specifying the number ofshares of the Transfer Stock as to which each Transfer Offeree is accepting theoffer) within such 30-day period.  Unlessthe relevant Offering Stockholders and Offerors shall have otherwise consentedto the purchase of less than all of the shares of Transfer Stock, no TransferOfferee shall have the right to acquire such shares 

 

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of Transfer Stock unless all such shares are being acquired by TransferOfferees pursuant to the provisions of this Article III.

 

(c)  Notwithstanding anything tothe contrary contained in this Article III, there shall be no liability on thepart of the Offering Stockholder to any Stockholder in the event that the saleof Transfer Stock contemplated pursuant to this Article III is not consummatedfor any reason whatsoever.  Whether asale of Transfer Stock contemplated pursuant to this Article III is effected bythe Offering Stockholder is in the sole and absolute discretion of the OfferingStockholder.

 

3.3  Apportionment of Shares AmongStockholders in the Event of Over-Subscription.

 

(a)  If the aggregate number ofshares of Transfer Stock as to which notices of acceptance are provided by allTransfer Offerees exceeds the number of shares of Transfer Stock, the right topurchase the Transfer Stock shall be allocated (i) first, to the StockholderOfferees and (ii) second, to the Company with respect to any shares of TransferStock as to which notices of acceptance have not been provided by theStockholder Offerees.

 

(b)  Notwithstanding theprovisions of paragraph (a) above, if the aggregate number of shares ofTransfer Stock as to which notices of acceptance are provided by theStockholder Offerees exceeds the number of shares of Transfer Stock, then (i)each Stockholder Offeree which provided a notice of acceptance shall first beallocated the lesser of (A) the number of shares of Transfer Stock which suchStockholder Offeree agreed to purchase and (B) the number of shares of TransferStock as is equal to the full number of shares of Transfer Stock offered in theRight of First Refusal Notice multiplied by a fraction, (1) the numerator ofwhich shall be the number of shares of Common Stock held or deemed to be heldby such Stockholder Offeree as of the date of the Right of First Refusal Notice(for the purpose of such calculation, a Stockholder Offeree shall be deemed tohold the number of shares of Common Stock which would be issuable, as of thedate of the Right of First Refusal Notice, to such Stockholder Offeree uponconversion, exercise or exchange of all securities then held by such 

 

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Stockholder Offeree that are then convertible, exercisable orexchangeable (but excluding any unvested options) into or for (whether directlyor indirectly) shares of Common Stock) and (2) the denominator of which shallbe the aggregate number of shares of Common Stock (calculated as aforesaid)held or deemed to be held on such date by all Stockholder Offerees who acceptedthe offer contained in the Right of First Refusal Notice, and (ii) the balanceof the shares of Transfer Stock (if any) offered shall be reallocated among theStockholder Offerees accepting the offer contained in the Right of FirstRefusal Notice in the same proportion as set forth in the preceding clause(i)(B) (provided that no Stockholder Offeree shall be obligated to purchasemore than the number of shares of Transfer Stock which such Stockholder Offereeinitially agreed to purchase) in continuous reallocations until all suchremaining shares have been reallocated fully among such Stockholder Offerees; providedthat all allocations referred to herein shall be determined in good faith bythe Company in accordance with the provisions of this Section 3.3 and any shareamounts so determined shall be rounded to avoid fractional shares.

 

3.4  Apportionment of Shares AmongStockholders in the Event of Failure to Purchase.  If any shares of Transfer Stock are not purchased by aStockholder Offeree who or which previously delivered a written notice ofacceptance relating thereto (collectively, the “Transfer Default Stock”), suchshares of Transfer Default Stock may be purchased by the other StockholderOfferees purchasing Transfer Stock (the “Default Offerees”), allocated amongsuch Default Offerees in proportion to the number of shares of Transfer Stockotherwise being purchased by those of such Default Offerees who agree topurchase Transfer Default Stock; provided that, if the Default Offereesdo not purchase all the Transfer Default Stock, the Company may purchase theremaining Transfer Default Stock; providedfurther that theprovisions of this Section 3.4 shall not excuse the failure by any suchStockholder Offeree to purchase the shares of Transfer Default Stock withrespect to which it previously delivered a written notice of acceptancerelating thereto; providedfurther that all allocations referredto herein shall be determined in good faith by the Company in accordance withthe provisions of this Section 3.4 and any share amounts so determined shall berounded to avoid 

 

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fractional shares.  Theprovisions of the last sentence of Section 3.2(b) shall apply if the DefaultOfferees and the Company do not in the aggregate purchase all of the TransferDefault Stock.

 

3.5  TransferMechanics. The closing of thepurchase of the Transfer Stock by the Transfer Offerees who have exercised theoption pursuant to Section 3.2 hereof shall take place at the principalexecutive offices of the Company on the 45th Business Day after the expirationof the 30-day period after the giving of the Right of First Refusal Notice (orsuch other date as may be mutually agreed to by the parties to suchtransaction).  At such closing, eachTransfer Offeree shall deliver to the Offering Stockholder the appropriate pershare consideration (which, in the event that the Transfer Offer set forth inthe Right of First Refusal Notice contemplated the payment by the Offeror ofnon-cash consideration, shall be paid in cash in an amount equal to the fairmarket value of such non-cash consideration, as determined in accordance with theprovisions of the last sentence of this Section 3.5) pursuant to a bank,cashier’s or certified check or by wire transfer of immediately available funds(unless otherwise specified in the Right of First Refusal Notice provided tothe Transfer Offerees), against delivery of certificates representing theTransfer Stock so purchased Duly Endorsed. For purposes of this Section 3.5, the value of non-cash considerationshall be the fair market value of the aggregate consideration (whether suchconsideration is in the form of cash, securities, other assets or theassumption of liabilities, or any combination thereof) to be paid (withoutassigning any value to the non-economic terms of the particular transaction (e.g.,representations, warranties, covenants, conditions, indemnification, etc. orthe tax treatment of the particular transaction), as determined by the WindwardAgent in its reasonable discretion.  Anytransfer (other than to a Third Party) pursuant to this Article III shall bemade without any representations, warranties, covenants or indemnities; except,that, each transferor shall be deemed to have represented that (i) the transferhas been duly authorized by it, (ii) that it has the capacity, power andauthority to transfer such shares and (iii) that the acquiror shall obtain goodtitle to such shares, free and clear of any defects, encumbrances and adverseinterests (other than as provided for in this Agreement).

 

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3.6  Transfers to Third Parties afterStockholders Decline Rights of First Refusal.  If at the end of the 30-day period followingthe giving of the Right of First Refusal Notice, the Transfer Offerees(including, without limitation, the Company) shall not have collectivelyaccepted the offer contained in such notice as to all shares of Transfer Stockcovered thereby (unless otherwise consented to by the relevant OfferingStockholders and Offerors), the Offering Stockholder shall have 60 days inwhich to sell the Transfer Stock to the Offeror, at a price not less than thatcontained in the Right of First Refusal Notice and on terms and conditions notmore favorable to the Offeror than were contained in the Right of First RefusalNotice.  No sale may be made to anyOfferor unless such Offeror agrees in writing to be bound by the terms andconditions of this Agreement pursuant to the provisions of Article Xhereof.  Promptly after any salepursuant to this Section 3.6, the Offering Stockholder shall notify the Companyof the consummation thereof and shall furnish such evidence of the completion(including time of completion) of such sale and of the terms and conditionsthereof as the Company may reasonably request. If, at the end of such 60 day period, the Offering Stockholder has notcompleted the sale of the Transfer Stock, such Stockholder shall no longer bepermitted to sell such shares pursuant to this Section 3.6 without again fullycomplying with the provisions of this Article III and all the restrictions onTransfer contained in this Agreement shall again be in effect with respect toall such person’s shares of Company Stock, including the Transfer Stock.

 

3.7  Exceptions to Rights of FirstRefusal.  The provisions of thisArticle III shall not be applicable to any Transfer of Company Stock (a) fromany Stockholder to any Permitted Transferee, or from any Permitted Transfereeof such Stockholder to such Stockholder, provided that in any Transfer to aPermitted Transferee such Permitted Transferee (other than the Company) mustagree in writing to be bound by the terms and conditions of this Agreementpursuant to the provisions of Article X hereof, (b) made pursuant to a publicoffering of Company Stock in connection with the exercise by any Stockholder ofits rights pursuant to Article IX hereof or in connection with the exercise bythe Windward Agent of its rights pursuant to Section 5.6 hereof, (c) made inconnection with the exercise by the Windward Group of a Compelled 

 

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Sale Right, (d) by any Tag-Along Offeree pursuant to Article IV hereof(provided that the rights of Tag-Along Offerees pursuant to Article IV hereofshall only apply after application of the provisions of this Article III), or(e) between the Company (or its designee), on the one hand, and any ManagementStockholder or employee of the Company and its subsidiaries, on the other,pursuant to Articles VII or X hereof.

 

3.8           Exceptions for EmployeeStockholders.  With respect toany Stockholder who is an employee or a director of the Company, the foregoingprovisions may be modified, amended or made inapplicable to any equityinterests in the Company held by such person in such person’s applicableemployment agreement, provided that the Board of Directors approves suchemployment agreement.

 

 

ARTICLE IV

 

TAG-ALONG RIGHTS

 

4.1  Tag-Along Rights Generally.

 

(a)  Subject to the restrictionson Transfer set forth in Section 3.1 hereof, and subject to the priorapplication of the right of first refusal provisions of Sections 3.2 through3.7 hereof, any Stockholder or Stockholders may, individually or collectively,in any one transaction or any series of similar transactions, Transfer anyshares of Company Stock to any Third Party, but only if the Stockholder orStockholders desiring to so transfer their Company Stock (collectively, the“Transferor”) first offer to each of the other Stockholders (the “Tag-AlongOfferees”) to include, at the option of each Tag-Along Offeree, in the sale orother disposition to the Third Party, such number of shares of Company Stock(collectively, the “Tag-Along Stock”) as shall be determined in accordance withthis Article IV.

 

(b)  Upon the receipt by anyTransferor or Transferors of a bonafide offer or offers topurchase or otherwise acquire shares of its or their Company Stock from a ThirdParty (other than a Transfer which pursuant to Section 4.5 hereof would not besubject to the provisions of Sections 4.1 through 4.4 hereof) which such

 

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Transferor or Transferors desire to accept, such Transferors shallcause the Third Party’s offer to be reduced to writing and shall provide a copyof such written notice of such Third Party’s offer (the “Tag-Along Notice”) tothe Company, and the Company shall provide a copy of the Tag-Along Notice toeach of the Tag-Along Offerees in the manner set forth in Section 14.7hereof.  The Tag-Along Notice mustcontain an offer to purchase or otherwise acquire shares of Tag-Along Stockfrom the Tag-Along Offerees according to the terms and conditions of thisArticle IV and upon substantially the same terms and conditions as the termsand conditions contained in the Third Party’s offer and shall be accompanied bya true and correct copy of the Third Party’s offer; provided that (x)the Tag-Along Notice may be combined with a Right of First Refusal Notice, (y)the offer by a Third Party with respect to Tag-Along Stock set forth in anysuch combined Tag-Along Notice/Right of First Refusal Notice may be conditionedon the offer(s) with respect to the purchase in accordance with Article IV ofthe Transfer Stock set forth therein not being accepted and (z) referencesherein to a Tag-Along Notice shall be deemed to include any such combinedTag-Along Notice/Right of First Refusal Notice.

 

(c)  At any time within 10Business Days after its receipt of the Tag-Along Notice (or 30 days after itsreceipt of a combined Tag-Along Notice/Right of First Refusal Notice), each ofthe Tag-Along Offerees may irrevocably accept the Third Party offer included inthe Tag-Along Notice for up to such number of shares of Tag-Along Stock as isdetermined in accordance with the provisions of this Article IV by furnishingwritten notice of such acceptance to the Transferor and such Third Party; suchwritten notice of acceptance must be accompanied by the certificate orcertificates representing the shares of Tag-Along Stock (which shall be freeand clear of liens), Duly Endorsed, to be sold or otherwise disposed ofpursuant to such offer by such Tag-Along Offeree, together with a limitedpower-of-attorney authorizing the Transferor to sell or otherwise dispose ofsuch shares of stock pursuant to the terms and conditions of such Third Party’soffer and the terms and conditions of this Article IV.

 

(d)  Notwithstanding anything tothe contrary contained in this Article IV, there shall be no 

 

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liability on the part of the Transferor to any Stockholder in the eventthat the sale of Company Stock to the Third Party contemplated pursuant to thisArticle IV is not consummated for any reason whatsoever.  Whether a sale of Company Stock to the ThirdParty contemplated pursuant to this Article IV is effected is in the sole andabsolute discretion of the Transferor.

 

4.2  Allocation of Shares of Tag-AlongStock.  Each Tag-Along Offereeshall have the right to sell pursuant to the Third Party’s offer a number ofshares of Tag-Along Stock up to the product of (x) the total number of sharesto be acquired by the Third Party as set forth in the Tag-Along Notice (or suchhigher number of shares as such Third Party may agree to), times (y) afraction, the numerator of which shall be the number of shares of Common Stockheld or deemed to be held by such Tag-Along Offeree as of the date of theTag-Along Notice (for the purpose of such calculation, a Tag-Along Offereeshall be deemed to hold the number of shares of Common Stock which would beissuable, as of the date of the Tag-Along Notice, to such Tag-Along Offereeupon conversion, exercise or exchange of all securities then held by suchTag-Along Offeree that are then convertible, exercisable or exchangeable (butexcluding any unvested options) into or for (whether directly or indirectly)shares of Common Stock) and (2) the denominator of which shall be the aggregatenumber of shares of Common Stock (calculated as aforesaid) held or deemed to beheld on such date by all Stockholders; provided that all allocationsreferred to herein shall be determined in good faith by the Company inaccordance with the provisions of this Section 4.2 and any share amounts sodetermined shall be rounded to avoid fractional shares.

 

4.3  TransferMechanics.  The purchasefrom the Tag-Along Offerees pursuant to this Article IV shall be on the sameterms and conditions, including any representations, warranties, covenants andindemnities and the per share price (which, in the event of cash consideration,shall be paid by bank, cashier’s or certified check or by wire transfer ofimmediately available funds, unless otherwise specified in the Tag-Along Noticeprovided to the Tag-Along Offerees by the Company) and the date of sale orother disposition, as are received by the Transferor and stated in theTag-Along Notice provided to the Tag-Along Offerees by the Company.  As promptly as 

 

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practicable (but in no event later than 5 days) after the consummationof the sale or other disposition of Company Stock of the Transferor andTag-Along Stock of the Tag-Along Offerees to the Third Party pursuant to theThird Party’s offer, the Transferor shall notify the Tag-Along Offereesthereof, shall remit to each Tag-Along Offeree who accepted the Third Party’soffer in accordance with the provisions of this Article IV the total salesprice of the shares of Tag-Along Stock of such Tag-Along Offeree sold orotherwise disposed of pursuant thereto (together with any excess shares ofTag-Along Stock of such Tag-Along Offeree which are not sold or otherwisedisposed of pursuant thereto), and shall furnish such other evidence of thecompletion and time of completion of such sale or other disposition and theterms and conditions thereof as may be reasonably requested by the Tag-AlongOfferees.

 

4.4  Transfers to Third Parties after StockholdersDecline Tag-Along Rights.  If within10 Business Days after the receipt of the Tag-Along Notice (or 30 days afterits receipt of a combined Tag-Along Notice/Right of First Refusal Notice), anyTag-Along Offeree has not accepted the offer contained in the Tag-Along Notice,such Tag-Along Offeree will be deemed to have waived any and all rights withrespect to the sale or other disposition of Tag-Along Stock described in theTag-Along Notice and the Transferor shall have 60 days in which to sell orotherwise dispose of the shares of Company Stock described in the Third Party’soffer, on terms and conditions not more favorable to the Transferor than wereset forth in the Tag-Along Notice.  If,at the end of 60 days following the receipt of the Tag-Along Notice, theTransferor has not completed the sale or other disposition of Company Stock ofthe Transferor and Tag-Along Stock of any Tag-Along Offeree in accordance withthe terms and conditions of the Third Party’s offer, the Transferor shall returnto such Tag-Along Offeree all certificates representing shares of Tag-AlongStock which such Tag-Along Offeree delivered for sale or other dispositionpursuant to this Article IV, and all the restrictions on Transfer contained inthis Agreement with respect to Company Stock owned by the Transferor shallagain be in effect.

 

4.5  Exceptions to Tag-Along Rights.  The provisions of this Article IV shall notbe applicable to 

 

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any Transfer of Company Stock (a) from any Stockholder to any PermittedTransferee, or from any Permitted Transferee of such Stockholder to suchStockholder, provided that in any Transfer to a Permitted Transferee suchPermitted Transferee (other than the Company) must agree in writing to be boundby the terms and conditions of this Agreement pursuant to the provisions ofArticle X hereof, (b) made pursuant to a public offering of Company Stock inconnection with the exercise by any Stockholder of its rights pursuant toArticle IX hereof or in connection with the exercise by the Windward Group ofits rights pursuant to Section 5.6 hereof, (c) made in connection with theexercise by the Windward Group of a Compelled Sale Right or (d) between theCompany (or its designee), on the one hand, and any Management Stockholder oremployee of the Company and its subsidiaries, on the other, pursuant toArticles VII or X hereof.

 

 

ARTICLE V

 

RIGHTS TO COMPEL SALE OR IPOEVENT

 

5.1  Rights to Compel Sale Generally.  The Windward Group shall have the right (the“Compelled Sale Right”) to cause the sale of all or substantially all of theCompany to a Third Party (the “Third Party Purchaser”), whether pursuant to asale of Company Stock, merger, consolidation, stock swap, business combination,sale of assets or similar transaction (any such sale, the “Compelled Sale”); providedthat the Windward Group gets treated no more favorably as to the terms andconditions of the Compelled Sale than the other Stockholders (other than withrespect to any transaction fee arrangements entered into by the Company andWindward (or any of its Affiliates) in connection with a Compelled Sale whichsuch transaction fee arrangements, in the case of any Compelled Sale, shall besubject to the approval of a majority of the directors of the Company who arenot Windward Nominees).  If the WindwardGroup proposes to exercise its Compelled Sale Right, the Windward Agent shallsend written notice of the exercise of its Compelled Sale Right to each of theremaining Stockholders, setting forth the consideration to be paid by the ThirdParty Purchaser and the other terms and conditions of such transaction (suchnotice, the “Compelled Sale Notice”).

 

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5.2  Compelled Sale Pursuant to a Sale ofCompany Stock

 

(a)  In the event that theWindward Group determines to exercise its Compelled Sale Right pursuant to asale of Company Stock to the Third Party Purchaser, then the Windward Agentmay, at its option, require the remaining Stockholders and their respectivePermitted Transferees to sell all Company Stock (along with all rights toacquire Company Stock and similar interests) held by them to the Third PartyPurchaser for the same consideration per share (appropriately adjusted in thecase of securities such as options and warrants) and otherwise on the sameterms and conditions upon which the Windward Group sells its shares of CompanyStock (along with all rights to acquire Company Stock and similar interests).  Within 10 days following the date on whichthe Windward Agent delivers the Compelled Sale Notice, each of the remainingStockholders shall deliver to a representative of the Windward Agent designatedin the Compelled Sale Notice, certificates representing all shares of CompanyStock (along with all rights to acquire Company Stock and similar interests)held by such Stockholder, Duly Endorsed, together with all other documentsrequired to be executed in connection with such transaction; providedthat in the event that the Windward Group does not anticipate consummating suchCompelled Sale within 30 days after the date of delivery of the Compelled SaleNotice, the Windward Group shall subsequently notify the remaining Stockholdersof the anticipated date of consummation of such Compelled Sale and suchremaining Stockholders shall thereupon deliver to such designatedrepresentative of the Windward Agent, within 5 days prior to such anticipateddate of consummation, such certificates and documents.

 

(b)  In the event that aremaining Stockholder and its Permitted Transferees should fail to deliver suchcertificates and documents to the Windward Agent, then (i) the Company shallcause the books and records of the Company to show that such shares are boundby the provisions of this Article V and that such shares may be transferredonly to the Third Party Purchaser and (ii) such remaining Stockholder and eachof its Permitted Transferees (A) shall not be entitled to the consideration itis to receive under this Section 5.2 until it cures such failure (provided thatafter curing such 

 

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failure it shall be so entitled to such consideration withoutinterest), (B) shall for all purposes be deemed no longer to be a stockholderof the Company and have no voting rights with respect to such shares of CompanyStock, (C) shall not be entitled to any dividends or other distributions withrespect to the shares of Company Stock held by it, (D) shall have no otherrights or privileges granted to stockholders under this or any other agreementand (E) in the event of liquidation of the Company, shall have rightssubordinate to the rights of any equity holder with respect to anyconsideration it would have received if it had complied with this Section 5.2,if any, until it cures such failure (provided, that after curing such failureit shall be so entitled to such consideration without interest).  If any party so fails to deliver suchcertificates and documents as so required it shall execute, acknowledge anddeliver all such further agreements and take all such further actions as may bereasonably necessary or desirable to give effect to the provisions of thisSection 5.2.

 

(c)  If, within one year afterthe Windward Agent gives such notice, the Windward Group has not completed thesale of all the shares of Company Stock (along with all rights to acquireCompany Stock and similar interests) of the Stockholders in accordanceherewith, the Windward Agent shall return to each of the remaining Stockholdersall certificates representing shares of Company Stock that such Stockholderdelivered for sale pursuant hereto and that were not purchased pursuant to thisArticle V.

 

(d)           Stockholders whodeliver to the Windward Agent certificates representing shares of Company Stockin accordance with this Section 5.2 or otherwise pursuant to a Compelled Saleshall retain full voting control (to the extent such shares are entitled tovote) and any other rights and incidents of ownership associated with suchStockholder’s ownership of such shares until the applicable Compelled Sale hasbeen completed or such shares have been returned in accordance with theprovisions of this Article V and such shares will be held by the Windward Agentfor the benefit of such Stockholder until such time.

 

5.3  Compelled Sale Other Than Pursuant toa Sale of Company Stock.  In theevent that the Windward 

 

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Group determines to exercise its Compelled Sale Right pursuant to amerger, consolidation, stock swap, business combination, sale of assets orsimilar transaction, then the Windward Agent may, at its option, require theremaining Stockholders and their respective Permitted Transferees to vote infavor of such transaction.  Inparticular, in the event of any such proposed transaction, upon any request bythe Windward Agent, each of the Stockholders shall use its respective bestefforts (i) to call, or cause the appropriate officers and directors of theCompany to call, a special meeting of stockholders of the Company to considerapproval of such proposed transaction, and (ii) vote in favor of such proposedtransaction all of the shares of Company Stock owned or held of record by suchStockholder (to the extent entitled to vote), at each regular or special meetingof the stockholders of the Company called for the purpose of voting on suchmatter, or in any written consent executed in lieu of such a meeting ofstockholders, and shall take all actions reasonably necessary, to ensure thatall necessary stockholder approvals for such transaction are obtained.

 

5.4  Cooperation in Connection with CompelledSale.  Each Stockholder shallcooperate with the Windward Agent and the other members of the Windward Groupin the event that the Windward Group determines to exercise its Compelled SaleRight pursuant to this Article V and shall take all necessary and appropriateactions in connection with any such Compelled Sale as may be reasonablyrequested by the Windward Agent (including, without limitation, entering into suchagreements and instruments in connection with any such Compelled Sale as may berequested by the Windward Agent (subject to the provisions of the nextsentence)).  Without limitation to theforegoing provisions, each Stockholder hereby covenants and agrees that, at therequest of the Windward Agent, it will promptly enter into any agreements andinstruments (which may include such representations, warranties, covenants andindemnities as may be negotiated by the Windward Agent) with a Third Party Purchaserrelating to any Compelled Sale that is negotiated by the Windward Agent; provided,however, that, unless the Stockholders shall otherwise agree, all suchrepresentations, warranties and indemnities shall be several and not joint asamong the Stockholders.

 

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5.5  Notice of Consummation of CompelledSale. Promptly (but in no event later than 2 Business Days) after theconsummation of any sale transaction contemplated pursuant to Section 5.1hereof, the Windward Agent shall give notice thereof to the remainingStockholders, shall remit to each of the remaining Stockholders the totaltransaction proceeds to which such Stockholders are entitled pursuant thereto,and shall furnish such other evidence of the completion and time of completionof such sale or other disposition and the terms and conditions thereof as maybe reasonably requested by such Stockholders.

 

5.6  Rights to Compel IPO Event.  (a) The Windward Agent may, on behalf of the Windward Group, at any time, inits sole discretion, cause the Company to effect an IPO Event (which mayinclude, at the Windward Agent’s option, the secondary sale of shares ofCompany Stock then held by the Windward Group); provided that theWindward Group’s election to include any of its shares of Company Stock in suchpublic offering shall entitle the Management Stockholders to participate inaccordance with (and subject to the restrictions applicable to) the “piggyback”registration rights provisions of Article 9 hereof.

 

(b)  In the event that theWindward Agent, on behalf of the Windward Group, elects to exercise its rightspursuant to Section 5.6(a) above, the Windward Agent shall have the right todesignate all of the material terms of such IPO Event (e.g., the underwriters,if any, to be retained by the Company in connection therewith, the securitiesexchanges or national market systems, if any, where the Company’s equity wouldbe listed for trading, the price, timing and other terms of the proposed publicoffering, etc.).  In addition, in theevent that the Windward Agent elects to exercise the rights of the WindwardGroup contemplated pursuant to Section 5.6(a) above, then the Windward Agentmay, at its option, require the remaining Stockholders and their respectivePermitted Transferees to vote in favor of any amendment(s) to the Certificateand By-Laws which are reasonably requested by any underwriter retained inconnection with such IPO Event.  Inparticular, in the event of any such proposed IPO Event, upon any request bythe Windward Agent, each of the Stockholders shall use 

 

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its respective best efforts (i) to call, or cause the appropriateofficers and directors of the Company to call, a special meeting of stockholdersof the Company to consider approval of such proposed amendment(s), and (ii)vote in favor of such proposed amendment(s) all of the shares of Company Stockowned or held of record by such Stockholder (to the extent entitled to vote),at each regular or special meeting of the stockholders of the Company calledfor the purpose of voting on such matter, or in any written consent executed inlieu of such a meeting of stockholders, and shall take all actions reasonablynecessary, to ensure that all necessary stockholder approvals for suchamendment(s) and such IPO Event are obtained.

 

 

ARTICLE VI

PREEMPTIVE RIGHTS

 

6.1  PreemptiveRights.

 

(a)  The Company hereby grantsto each Stockholder who is a member of the Windward Group or a ManagementStockholder (and their respective Permitted Transferees) (each, a “PreemptingStockholder”) a right of first refusal to purchase, with respect to theissuance by the Company of new or additional equity securities for cash, thatportion of such new or additional equity securities as may be necessary inorder to permit such Stockholder to maintain their relative ownership of theaggregate amount of the Company’s total common equity (calculated on aFully-Diluted Basis).  Such right offirst refusal would be offered to each Preempting Stockholder (such offer, the“Preemptive Rights Offer”) pursuant to a written notice from the Companyoffering each Preempting Stockholder such securities on the same terms andconditions as offered to the other offeree(s) (such written notice, the“Preemptive Rights Notice”).  EachPreempting Stockholder would have 15 days from the date of the Company’sdelivery of the Preemptive Rights Notice to notify the Company in writing ofits binding acceptance of such Preemptive Rights Offer with respect to all (butnot less than all) equity securities which are offered to such PreemptingStockholder pursuant to such Preemptive Rights Offer.

 

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(b)  If a Preempting Stockholderaccepts the Preemptive Rights Offer in accordance with the provisions of thepreceding sentence, the Company and any such accepting party shall have 30 daysin which to consummate such binding agreement. In the event that a Preempting Stockholder does not accept thePreemptive Rights Offer within such 15-day period in accordance with theprovisions of the preceding sentence or fails to consummate any such purchasewithin such 30-day period, the Company would have the right, subject to theprovisions of Section 12.1(f) but not the obligation to issue such securitieson terms and conditions in the aggregate no more favorable to the otherofferee(s) than those set forth in the Preemptive Rights Notice, pursuant to adefinitive agreement to be entered into no later than 120 days after such date.

 

(c)  Notwithstanding anything tothe contrary contained herein, no rights of first refusal pursuant to Section6.1(a) above would apply in the event of (i) any issuances or grants of equitysecurities to the officers, directors or employees of the Company or any of itssubsidiaries, (ii) the exercise of any employee or director options or theexercise or conversion of any options, warrants or convertible securities inexistence as of the date of the Closing or issued pursuant to or in connectionwith the Stock Purchase Agreement, or the issuance of any securities to theemployees or directors of the Company or its subsidiaries pursuant to anyrestricted stock or other incentive plan of the Company or any of itssubsidiaries or the issuance upon the conversion or exercise of convertiblesecurities or warrants the issuance of which was subject to this Article VI,(iii) the issuance of equity securities, either directly or indirectly, inconnection with the acquisition, strategic business combination or investmentby the Company in any party which is not prior to such transaction an Affiliateof either the Company or any of the Stockholders (whether by merger,consolidation, stock swap, sale of assets or securities, or otherwise), (iv)the issuance of securities (including any convertible securities or options andthe conversion or exercise thereof) to any third party which is at such time acreditor of the Company, in connection with the refinancing or restructuring ofthe indebtedness owed to such third party, (v) an issuance of securities by theCompany in connection with an IPO Event or any other Registration, 

 

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(vi) an issuance of securities by the Company in connection with anyCompelled Sale Right, (vii) the distribution by the Company of its securitiesto all of its stockholders on a prorata basis or (viii) anyissuance of securities by the Company pursuant to the Stock PurchaseAgreement.  Notwithstanding anything tothe contrary herein, for as long as the Subordinated Notes remain outstanding,the Company shall not issue any shares of Common Stock to any of its directors;provided, however, that the Company may (i) issue shares upon theexcercise of options granted to directors in accordance with the terms of theCompany Stock Option Plan and (ii) issue up to 2,000 shares of Common Stock toIndependent Nominees and an additional 500 shares of Common Stock to aWindward/Park Nominee who is not an employee of MetLife, in each case at apurchase price per share at least equal to the price per share paid by theWindward Entities pursuant to the Stock Purchase Agreement.

 

 

ARTICLE VII

 

PUT AND CALL RIGHTS ONMANAGEMENT STOCK

 

7.1  Putand Call Rights.

 

(a)  Termination WithoutCause.  If, prior to an IPO Event, aManagement Stockholder’s employment with the Company and its subsidiaries isterminated (x) by the Company and its subsidiaries for any reason other thanCause or other than in connection with the Retirement, Disability or death ofsuch Management Stockholder, or (y) by reason of Voluntary Termination for GoodReason, then the Company (or its designee) shall have the right, for 120 daysfollowing the date of termination of such employment and subject in each caseto the provisions of Section 7.3 hereof, upon the approval of at least 75% ofthe members of the Board, to purchase from such Management Stockholder and hisor her Permitted Transferees, and such Management Stockholder and his or herPermitted Transferees shall be required to sell on one occasion to the Company(or its designee), all Company Stock then held by such person(s) at a priceequal to 90% of the Fair Market Value; provided, however, thatthe Company may not exercise such right if payment for such shares must be madein Management Repurchase Notes (as defined in Section 7.4) in accordance withSection 7.4.

 

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(b)  Termination UponDisability, Death or Retirement. (i)  If, prior to an IPO Event, aManagement Stockholder’s employment with the Company and its subsidiaries isterminated due to the Retirement, Disability or death of the ManagementStockholder, then the Company (or its designee) shall have the right, for 120days following the date of termination of such employment and subject in eachcase to the provisions of Sections 7.3 hereof, to purchase from such ManagementStockholder (or the personal representatives of such deceased ManagementStockholder, as the case may be) and his or her Permitted Transferees, and suchManagement Stockholder (or the personal representatives of such deceasedManagement Stockholder, as the case may be) and his or her PermittedTransferees shall be required to sell on one occasion to the Company (or itsdesignee), all Company Stock then held by such person(s) at a price equal to85% of the Fair Market Value; provided, however, that in theevent of such “call” (a “Management Stockholder Call Event”), if prior to 180days after the consummation of such Management Stockholder Call Event, a Changeof Control shall have occurred, the Company will pay to such ManagementStockholder upon consummation of such Change of Control (x) the positivedifference between (i) the price per share of Company Stock paid toStockholders in connection with the Change of Control (based on the value ofcash or property (including the retained value of any security and the presentvalue of any right to receive payment in the future) paid to such Stockholdersin the Change of Control) and (ii) the purchase price per share of CompanyStock paid to the Management Stockholder in such Management Stockholder CallEvent, multiplied by (y) the number of shares of Company Stock sold in suchManagement Stockholder Call Event.

 

(ii)           If, prior to an IPOEvent, a Management Stockholder’s employment with the Company and itssubsidiaries is terminated due to the Retirement, Disability or death of theManagement Stockholder, then, subject in each case to the provisions of Section7.3 hereof, such Management Stockholder (or the personal representatives ofsuch deceased Management Stockholder, as the case may be) and all of his or herPermitted Transferees shall have the right, for 90 days following the date oftermination of such employment, to sell to the Company (or its designee), and theCompany (or its designee) shall be required to purchase on one occasion 

 

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from such Management Stockholder and his or her Permitted Transferees,all shares of Company Stock held by all such person(s) as a price equal to 80%of the Fair Market Value; provided, however that in the event that theCompany pays such purchase price in Management Repurchase Notes in accordancewith the provisions of Section 7.4, the purchase price shall be equal to 90% ofthe Fair Market Value.

 

(c)  Voluntary Termination.  If, prior to an IPO Event, a ManagementStockholder’s employment with the Company and its subsidiaries is terminated byreason of Voluntary Termination (other than Voluntary Termination for GoodReason), then the Company (or its designee) shall have the right, for 120 daysfollowing the date of termination of such employment and subject in each caseto the provisions of Section 7.3 hereof, to purchase from such ManagementStockholder and his or her Permitted Transferees, and such ManagementStockholder and his or her Permitted Transferees shall be required to sell onone occasion to the Company (or its designee), all Company Stock then held bysuch person(s) at a price equal to 85% of the Fair Market Value.  For purposes of this Section 7.1(c) andSection 7.1(d), the termination of the employment of a Management Stockholderwho is a party to an employment or consulting contract or agreement with theCompany or its subsidiaries by reason of Voluntary Termination (other thanVoluntary Termination for Good Reason) shall be deemed to be a termination forCause and such Stockholder shall be subject to the provisions of Section7.1(d).

 

(d)  Termination for Cause.  If, prior to an IPO Event, (x) a ManagementStockholder’s employment with the Company and its subsidiaries is terminatedfor Cause (or is deemed terminated for Cause pursuant to Section 7.1(c)) or (y)a Management Stockholder voluntarily terminates his or her employmentsimultaneous with or following termination for Cause or an event which if knownto the Company at the time of such voluntary termination by the ManagementStockholder of his or her employment would allow the Company and itssubsidiaries to terminate the Management Stockholder’s employment for Cause,then the Company (or its designee) shall have the right, for 120 days followingthe date of termination of such employment and subject in each case to theprovisions of Section 7.3 hereof, to purchase from such Management Stockholderand his or her Permitted Transferees, and such Management 

 

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Stockholder and his or her Permitted Transferees shall be required tosell on one occasion to the Company (or its designee), all shares of CompanyStock then held by such person(s) at a price equal to the lower of cost, BookValue or 75% of the Fair Market Value.

 

(e)  Notice of Exercise;Closing.  (i)  If the Company (or its designee) desires toexercise its option to purchase shares of Company Stock pursuant to its rightsunder this Section 7.1, the Company (or its designee) shall, not later than theexpiration date of the 120-day call period referred to in clauses (a), (b)(i),(c) and (d) above (as it may be extended pursuant to the provisions of Section7.3 hereof), send written notice of its intention to purchase all of the sharesof Company Stock held by such Management Stockholder and his or her PermittedTransferees pursuant to this Section 7.1. Subject in each case to the provisions of Section 7.3 hereof, theclosing of the purchase shall take place at the principal office of the Companyon the tenth day following the giving of such notice or as soon thereafter aspracticable but in no event later than twenty days after the giving of suchnotice.  The purchase price shall bepaid in accordance with Section 7.4 hereof.

 

(ii)  Each ManagementStockholder (and the Permitted Transferees thereof) which desires to sell allof its shares of Company Stock pursuant to its rights under this Section 7.1shall, not later than the expiration date of the 90-day put period referred toin clause (b)(ii) above, send a written, irrevocable notice of its intention tosell all of its shares of Company Stock pursuant to this Section 7.1.  Subject in each case to the provisions ofSection 7.3 hereof, the closing of the purchase shall take place at theprincipal office of the Company on the tenth day following the giving of suchnotice.  The purchase price shall bepaid in accordance with Section 7.4 hereof.

 

(f)  For purposes of thisArticle VII only, Andrew Goldfarb shall be deemed not to be a ManagementShareholder.

 

7.2  Obligation to Sell Several.  In the event that any Management Stockholderhas transferred any

 

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shares of Company Stock to any Permitted Transferees, the failure ofany one member of such group to perform its obligations hereunder shall notexcuse or affect the obligations of any other member thereof, and the closingof the purchases from such other members by the Company (or its designee) shallnot excuse, or constitute a waiver of the Company’s rights against, thedefaulting member(s).

 

7.3  Deferral of Purchases.

 

(a)  Events of Deferral.  The Company (and its designee) shall not beobligated to purchase any shares of Company Stock, at any time pursuant to thisArticle VII, regardless of whether it has in the case of Section 7.1 hereofdelivered a notice of its election to purchase any such shares, (x) to theextent that the purchase of such shares would give rise to or result in aViolation or (y) if immediately prior to the time of purchase there exists, orif immediately after giving effect to such purchase there would exist, aFinancing Default.

 

(b)  Extension of Put andCall Periods.  The period during whichthe Company (or its designee) shall have the right or obligation to purchaseshares of Company Stock pursuant to the exercise of any “put” rights pursuantto Section 7.1 (a “Put Right”) or pursuant to the exercise of any right topurchase shares of Company Stock pursuant Section 7.1 hereof (a “Call Right”),shall, except with respect to the Call Right contemplated by Section 7.1, beextended in the event the Board in good faith determines that any Violation orFinancing Default exists or would result as a result of any purchase of CompanyStock pursuant to this Article VII until 90 days (in the event of the exerciseof any Put Rights), or 120 days (in the event of the exercise of any CallRights), as the case may be, after the Board determines that such is no longerthe case; provided that, in order to exercise such rights, (i) theManagement Stockholder (or the personal representatives of such deceasedManagement Stockholder, as the case may be) exercising any Put Rights must havegiven notice of its intention to exercise its Put Rights within 90 days fromthe date the Management Stockholder’s termination of employment, and (ii) theCompany (or its designee) must have given notice of its intention to exerciseits Call Rights within 120

 

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days from the date of the Management Stockholder’s termination ofemployment.

 

7.4  Paymentfor StockThe purchase price of shares of Company Stock to be purchasedby the Company (or its designee) pursuant to this Article VII will be paid by(a) at the Company’s option, the cancellation of indebtedness owing from theManagement Stockholder to the Company or any of its subsidiaries, if any, and(b) then by the Company’s delivery of a bank cashier’s check or certified checkfor the remainder of the purchase price, if any, against delivery of thecertificates or other instruments representing the Company Stock so purchased,Duly Endorsed; provided that, in the event (x) that the Company does nothave sufficient cash flow to finance the payment of such purchase pricereferred to in clause (b) above, as determined in good faith the Board, or (y)that the Company is not permitted, pursuant to the provisions of either theCredit Agreement or the Subordinated Notes, or any refinancing, refunding oramendment thereof (after seeking in good faith to obtain from the lendersthereunder a consent reasonably acceptable to the Company with respect toeffecting a cash repurchase), to pay cash in payment of such purchase pricereferred to in clause (b) above, but is permitted, pursuant thereto andpursuant to all other credit obligations of the Company to issue a ManagementRepurchase Note, then, in any of such events, the Company (or its designee)may, at its option, pay for such purchase price with the delivery of a junior,subordinated promissory note bearing interest at an eight percent (8%) annualrate of interest, due on the fifth anniversary of the date of issuance thereof(or such later date as may be required by any financing agreement to which theCompany is a party) and substantially in the form attached hereto as Exhibit Afor the remainder of the purchase price, if any (such promissory note, the“Management Repurchase Note”); providedfurther that if aManagement Repurchase Note is issued by the Company in connection with theexercise of the “call” right pursuant to Section 7.1(c), such ManagementRepurchase Note shall be deemed a priority note (a “Priority Note”) and theCompany covenants, notwithstanding the term of the Management Repurchase Notes,to use its reasonable efforts to repay any Priority Notes as promptlythereafter as the Company’s financing documents or cash flow shall reasonably,as determined by the Board, permit; provided, that, the Companyshall not be bound by the foregoing 

 

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covenant to the extent that (and for as long as) any payment of anyPriority Notes would give rise to or result in a Violation.  In the event that the Company (or itsdesignee) intends to deliver a Management Repurchase Note upon the exercise ofany Put Right or any Call Right, the Company (or its designee) shall notify theintended recipient thereof prior to the delivery thereof.  The Company (or its designee) shall have therights set forth in subsections (a) and (b) of the first sentence of thisSection 7.4 whether or not any Permitted Transferee(s) of the ManagementStockholder owing amounts to the Company or its subsidiaries, if applicable, isitself an obligor of the Company or its subsidiaries.

 

7.5  Miscellaneous.  Notwithstanding anything to the contrary setforth in this Agreement, (a) the Company shall be permitted to reach anyagreement with any Management Stockholder (or his estate, as the case may be)concerning the purchase of such Management Stockholder’s shares of CompanyStock, and (b) the Company, in its sole discretion, shall have the right, butnot the obligation, to assign any of its rights, and delegate any of itsobligations, to purchase any shares of Common Stock of any ManagementStockholder (or his estate, as the case may be) pursuant to Article VII hereofto any employee stock ownership plan or similar compensation or benefit planthat the Company may have, or to any subsidiary or employee of the Company (orany combination of the foregoing).

 

7.6  Proxy and Escrow of Company Stock.

 

(a)  In the event that theCompany (or its designee) does not exercise its rights under Section 7.1 topurchase all shares of Company Stock held by a Management Stockholder, theCompany may, at its option, require such Management Stockholder to execute anddeliver to the Secretary irrevocable proxies (which proxies shall be deemed tobe coupled with an interest and which shall terminate upon an IPO Event) insuch form and as the Company may from time to time prescribe, in favor of suchperson as the Board may from time to time prescribe, entitling such person tovote such shares, if at all, on matters in direct proportion to the affirmativeand negative votes and abstentions of all other voting securities thenoutstanding.

 

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(b)  Each Management Stockholderagrees that he or she will, upon termination of such Management Stockholder’semployment for any reason, or prior to termination at the request of theCompany, deliver to the Secretary, to be held by the Secretary for the benefitof such Management Stockholder, the certificates representing all shares ofCompany Stock of such Management Stockholder.

 

7.7  Exceptions for Employee Stockholders.  With respect to any Stockholder who is anemployee or a director of the Company, the foregoing provisions may bemodified, amended or made inapplicable to any equity interests in the Companyheld by such person in such person’s applicable employment agreement, providedthat the Board of Directors approves such employment agreement.

 

 

ARTICLE VIII

 

COMPANY COVENANTS

 

8.1  Affiliated Arrangements.  The Company agrees that it will not enterinto any contractual arrangements or effect any transactions (including,without limitation, the payment of any management or transactional fees)between the Company and any of the Stockholders or their respective Affiliates,other than (a) those fee arrangements contemplated by the Letter Agreement,dated as of the date hereof, among the Company and Windward Capital Partners,L.P., (b) any transaction fee arrangements entered into by the Company andWindward or its Affiliates in connection with an IPO Event, a Compelled Sale orany other similar transaction, and (c) those which have been approved by amajority of the members of the Board that are disinterested in suchtransaction.

 

8.2  FinancialReports.  The Companyshall prepare and distribute to each of the Stockholders unaudited quarterlyand audited annual financial reports of the Company and its consolidatedsubsidiaries (including consolidated balance sheets and consolidated statementsof income and cash flow) as soon as reasonably practicable after the end of theapplicable financial period (but in no event later than 45 days after the endof any fiscal quarter of the Company or 90 days after the end of any fiscalyear of the Company).

 

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8.3  Access to Information.  Subject to the provisions of Section 14.1hereof, the Company shall provide to each Stockholder access to the books andrecords of the Company and its subsidiaries during the regular business hoursof the Company and such subsidiaries, following the Company’s receipt of awritten notice from such Stockholder requesting such access.

 

8.4  FIRPTAActivities.  The Company agreesthat it will not, without first obtaining the prior written consent of theWindward Agent, take any actions that would result in the Company becoming aUnited States real property holding company within the meaning of section897(c)(2) of the Code (or any successor statutory or regulatory provision ofsimilar effect).

 

 

ARTICLE IX

 

REGISTRATION RIGHTS

 

9.1  Demand Registration Rights.

 

(a)  Upon written notice from aStockholder entitled to request Registration pursuant to Section 9.1(c) below(the “Requesting Stockholder”), the Company shall use its best efforts toeffect at the earliest possible date and maintain the registration under theSecurities Act of offers and sales of Common Stock by the RequestingStockholder (and no offers and sales of any other securities by any otherperson shall be registered with such Common Stock of the Requesting Stockholderwithout the Requesting Stockholder’s prior consent), its Permitted Transfereesand any underwriter with respect to such stock, in accordance with the intendedmethod or methods of disposition specified by the Requesting Stockholder(including, but not limited to, an offering on a delayed or continuous basispursuant to Rule 415 (or any successor rule) promulgated under the SecuritiesAct); provided that if, after a Registration request pursuant to thisSection 9.1 has been made, the outside legal counsel of the Company hasdetermined in good faith that the filing of a Registration request wouldrequire the disclosure of material information which the Company has a bonafide business purpose for preserving as confidential, the Company shallnot be obligated to effect a Registration pursuant to this Section 9.1 untilthe

 

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earlier of (A) the date upon which such material information isdisclosed to the public or ceases to be material, or (B) 45 days after suchoutside legal counsel of the Company first makes such good faith determination;providedfurther that no Requesting Stockholder may request anysuch Registration pursuant to this Section 9.1 (x) until at least six (6)months after the anniversary of the closing of the last Registration and saleof Company securities and (y) unless the Registrable Securities sought to beregistered has a Fair Market Value of at least $2,500,000; provided, however,that the Requesting Stockholder shall not have the right to utilize theservices of an underwriter unless the Fair Market Value of the Company Stock tobe offered exceeds $20,000,000.  TheRequesting Stockholder(s) requesting a Registration under this Section 9.1 may,at any time prior to the effective date of the registration statement relatingto such Registration, revoke such request by providing written notice thereofto the Company.

 

(b)  In connection with anyRegistration requested pursuant to this Section 9.1, (i) the RequestingStockholder shall have the right, subject to the penultimate sentence ofSection 9.1(a), to designate the managing underwriter(s) and (ii) the Companyshall take such other actions, including, without limitation, listing suchshares for trading on any securities exchange or national market system andregistering or qualifying such shares under state securities laws, as may bereasonably requested by the Requesting Stockholder.  If the Requesting Stockholder consents to the inclusion of offersand sales of any other securities in a Registration of Common Stock by the RequestingStockholder pursuant to this Section 9.1 and the underwriter(s) retained inconnection with such Registration advise the Company in writing that suchoffering would be materially and adversely affected by the inclusion of suchsecurities, the Requesting Stockholder may in its sole discretion exclude allor some of such securities from such offering.

 

(c)  After the occurrence of anIPO Event:

(i)  the Windward Agent, onbehalf of the Windward Group, will have the right to request Registration ofCompany Stock of the Windward Group as a Requesting Stockholder pursuant tothis Section 9.1 an aggregate of three (3) times; provided that if theWindward Group had elected, pursuant to Section 5.6 hereof, to cause the

 

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Company to effect the IPO Event, such election will not be a requestfor Registration of Company Common Stock for purposes of this Section 9.1(c)hereof; and

 

(ii) Andrew Goldfarb, on behalf of the Management Stockholders upon therequest of holders of a majority of the shares of Common Stock held byManagement Stockholders at such time, will have the right to requestRegistration of Company Stock of the Management Stockholders pursuant to thisSection 9.1 an aggregate of two (2) times; provided, that, priorto such time the Windward Group shall have effected one Registration pursuantto Section 9.1(c)(i); provided, further, that in the eventAndrew Goldfarb, on behalf of the Management Stockholders, requestsRegistration pursuant to this Section 9.1(c)(ii), the Company shall notify theWindward Agent in writing of such request and the Windward Agent may elect, inits sole discretion (the “Windward Election”), within 15 days of receipt ofsuch written notice, to request Registration pursuant to Section 9.1(c)(i) inwhich case the Windward Group shall be treated as a Requesting Stockholder forpurposes of such Registration and the Management Shareholders shall not betreated as Requesting Stockholders for purposes of such Registration (and suchRegistration request shall not be counted with respect to the ManagementShareholders for purposes of the preceding sentence), however the WindwardAgent shall only be allowed to make one Windward Election and after suchelection may no longer make a Windward Election unless the requested Registrationpursuant to the Windward Election is not deemed effective (as set forth below)in which case such election shall not be deemed to be the Windward Election;

 

providedfurther that any Registration requested byany Requesting Stockholder pursuant to this Section 9.1 shall not be deemed tohave been effected (and, therefore, not requested for purposes of this Section9.1(c)), (i) unless it has become effective, provided that a registration whichdoes not become effective after the Company has filed a registration statementwith respect thereto solely by reason of the refusal to proceed by theRequesting Stockholder (other than a refusal to proceed based upon the adviceof counsel relating to a matter with respect to the Company) shall be deemed tohave been effected by the Company at the request of such Requesting Stockholderunless the Requesting Stockholder shall have 

 

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elected to pay all Registration Expenses in connection with suchregistration, (ii) if after it has become effective such Registration isinterfered with by any stop order, injunction or other order or requirement ofthe SEC or other governmental agency or court for any reason other than amisrepresentation or an omission by the Requesting Stockholder and, as a resultthereof, the Common Stock requested to be registered cannot be completelydistributed in accordance with the plan of distribution set forth in therelated registration statement or (iii) if the closing pursuant to the purchaseagreement or underwriting agreement entered into in connection with suchRegistration does not occur.  AnyRegistration effected pursuant to Section 9.2 shall not be deemed to have beenrequested by a Requesting Stockholder for purposes of this Section 9.1(c).

 

9.2  Piggyback Registration Rights.  If at any time following the completion ofan IPO Event the Company proposes to effect another Registration, whether ornot for sale for its own account and (subject to the provisions of Section 9.1above) whether or not pursuant to the exercise of any of the demandregistration rights referred to in Section 9.1 hereof, in a manner which wouldpermit Registration of Registrable Securities for sale to the public under theSecurities Act, it will each such time, subject to the provisions of Sections9.1 and 9.2(c) hereof, give prompt written notice to all Stockholders of recordof Registrable Securities of its intention to do so and of such Stockholders’rights under this Article IX, at least 25 days prior to the anticipated filingdate of the registration statement relating to such Registration.  Such notice shall offer all suchStockholders the opportunity to include in such registration statement suchnumber of Registrable Securities as each such Stockholder may request.  Upon the written request of any suchStockholder made within 10 days after the receipt of the Company’s notice(which request shall specify the number of Registrable Securities intended tobe disposed of by such Stockholder and the intended method of dispositionthereof), the Company will use its best efforts to effect the Registrationunder the Securities Act and the qualification under any applicable statesecurities or Blue Sky laws of all Registrable Securities which the Company hasbeen so requested to register by the Stockholders thereof, to the extentrequired to permit the disposition (in accordance with such intended

 

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methods thereof) of the Registrable Securities so requested to be registered;provided that:

 

(a)  if such Registrationinvolves an underwritten public offering, all Stockholders requesting thattheir Registrable Securities be included in the Company’s Registration must,upon request by the underwriter(s), sell their Registrable Securities to suchunderwriter(s) selected by the Company (or the Requesting Stockholders inaccordance with Section 9.1, as the case may be) on the same terms andconditions as apply to the Company or any selling securityholder (or onequivalent terms and conditions, in the event that such requesting Stockholdershold different securities from those being sold by the Company or such sellingsecurityholder), including, without limitation, executing and delivering suchunderwriting agreements or other related agreements to which the Company or anysuch selling securityholder has agreed to execute and deliver;

 

(b)  if, at any time aftergiving written notice of its intention to register any securities pursuant tothis Section 9.2 and prior to the effective date of the registration statementfiled in connection with such Registration, the Company shall determine for anyreason not to register such securities, the Company shall give written noticeto all Stockholders of Registrable Securities and, thereupon, shall be relievedof its obligation to register any Registrable Securities in connection withsuch Registration (without prejudice, however, to the rights of theStockholders immediately to request that such registration be effected as aRegistration under Section 9.1);

 

(c)  if a Registration pursuantto this Section 9.2 involves an underwritten public offering, any Stockholderof Registrable Securities requesting to be included in such Registration mayelect, in writing at least 10 days prior to the effective date of theregistration statement filed in connection with such Registration, not toregister such securities in connection with such Registration;

 

(d)  the Company shall not berequired to effect any Registration of Common Stock under this Section 9.2incidental to the registration of any of its securities in connection withmergers, acquisitions, 

 

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exchange offers, subscription offers, dividend reinvestment plans orstock option or other executive or employee benefit or compensation plans(including, without limitation, any registration of securities on a Form S-4 orS-8 registration statement or any successor or similar forms); and

 

(e)  no Registration of CommonStock effected under this Section 9.2 shall relieve the Company of itsobligation to effect a Registration of shares of Common Stock pursuant toSection 9.1.

 

9.3  Priority in Piggyback Registrations.

 

(a)  If at any time following anIPO Event the Company proposes to effect another Registration in connectionwith an underwritten offering (other than any Registration pursuant to theexercise of any of the demand registration rights referred to in Section 9.1hereof or any demand registration rights which specify a priority for “piggyback”registration rights which is the same as set forth in Section 9.3(b) below(such latter form of demand registration rights, the “Permitted DemandRegistration Rights”)), including any Registration for the Company’s account,and the managing underwriter(s) advise the Company in writing that, in its ortheir judgement, the number of shares of equity securities of the Company(including all shares of Registrable Securities) which the Company, theStockholders and any other persons intend to include in such Registrationexceeds the largest number of securities which can be sold without having anadverse effect on such offering, including the price at which such securitiescan be sold, the Company shall include in such Registration: (i) first, allsecurities the Company proposes to sell for its own account (the “CompanySecurities”), (ii) second, to the extent that the number or dollar amount ofthe Company Securities to be offered by the Company is less than the number ofshares of securities which the Company has been advised can be sold in suchoffering without having the adverse effect referred to above, the number ofPiggyback Securities requested to be sold by any Stockholder who is a member ofthe Windward Group or a Management Stockholder (provided that if the number ofthe Company Securities and Piggyback Securities exceeds the number of shares ofsecurities which the Company has been advised can be sold in such offeringwithout having the adverse effect referred to

 

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above, the number of such Piggyback Securities to be included in suchoffering shall be allocated pro rata among all holders of such PiggybackSecurities on the basis of the relative number or amount of PiggybackSecurities each such holder has requested to be included in such Registration),and (iii) third, to the extent that the number of Company Securities andPiggyback Securities held by Stockholders is less than the number of shares ofsecurities which the Company has been advised can be sold in such offeringwithout having the adverse effect referred to above, the equity securitiesrequested to be sold for the account of any other persons (allocated among thepersons holding such other securities in such proportions as such persons and theCompany may agree).

 

(b)  If at any time following anIPO Event the Company proposes to effect another Registration in connectionwith an underwritten offering pursuant to the exercise of any of the demandregistration rights referred to in Section 9.1 hereof or any Permitted DemandRegistration Rights, and the managing underwriter(s) advise the Company inwriting that, in its or their judgement, the number of shares of equitysecurities of the Company (including all shares of Registrable Securities) whichthe Company, the Stockholders and any other persons intend to include in suchRegistration exceeds the largest number of securities which can be sold withouthaving an adverse effect on such offering, including the price at which suchsecurities can be sold, the Company shall include in such Registration: (i)first, all securities which are held by the Stockholders or other persons whoare exercising the demand registration rights referred to in Section 9.1 hereofor any Permitted Demand Registration Rights (the “Demand Securities”), (ii)second, to the extent that the number or dollar amount of the Demand Securitiesto be offered by the Company is less than the number of shares of DemandSecurities which the sellers thereof have been advised can be sold in suchoffering without having the adverse effect referred to above, the number ofPiggyback Securities requested to be sold by any Stockholder who is a member ofthe Windward Group or a Management Stockholder (provided that if the number ofthe Demand Securities and Piggyback Securities exceeds the number of shares ofsecurities which the Company has been advised can be sold in such offeringwithout having the adverse effect referred 

 

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to above, the number of such Piggyback Securities to be included insuch offering shall be allocated pro rata among all holders of such PiggybackSecurities on the basis of the relative number or amount of PiggybackSecurities each such holder has requested to be included in such Registration),and (iii) third, to the extent that the number of Demand Securities andPiggyback Securities held by Stockholders is less than the number of shares ofsecurities which the Company has been advised can be sold in such offeringwithout having the adverse effect referred to above, the equity securitiesrequested to be sold for the account of the Company and any other persons(allocated among the Company and the persons holding such other securities insuch proportions as such persons and the Company may agree).

 

9.4  Expenses.  The Company will pay all RegistrationExpenses in connection with each Registration of Registrable Securitiesrequested pursuant to this Article IX (including any Registration deemed not tobe “effected” under Section 9.1(c) or not consummated as contemplated bySection 9.2(b)) and any other actions that may be taken in connection with anysuch Registration as contemplated by this Article IX; provided that theCompany will not be obligated to pay any underwriting discounts or commissionsor transfer taxes, if any, relating to the sale or disposition of shares soldby persons other than the Company pursuant to any such Registration.

 

9.5  Restrictions on Public Sale byStockholders and Company.

 

(a)  In connection with anyoffering of securities of the Company, including, without limitation, anyoffering contemplated by this Article IX, each Stockholder agrees that, whetheror not such Stockholder’s Registrable Securities are included in suchRegistration, it will consent and agree to comply with any “hold back”restriction, relating to Common Stock or any other securities of the Companythen owned by such holder, that may be reasonably requested by theunderwriter(s) or placement or other selling agent(s) of such offering.  Without limitation to the foregoing, eachStockholder shall, upon request by such underwriter(s) or agent(s), agree notto effect any public sale or distribution, including any sale pursuant to Rule144 under the Securities Act, of any Registrable Securities, and not to effectany such 

 

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public sale or distribution of any other equity security of the Companyor of any security convertible into or exchangeable or exercisable for anyequity security of the Company (in each case, other than as part of suchunderwritten public offering) during the 30 days prior to, and during the 180day period beginning on, the effective date of such registration statement(except as part of such Registration).

 

(b)  If any Registration ofRegistrable Securities pursuant to Article IX shall be in connection with anunderwritten public offering, the Company agrees, if requested by theunderwriter(s) or placement or other selling agent(s), (i) not to effect anypublic sale or distribution of any of its equity securities or of any securityconvertible into or exchangeable or exercisable for any equity security of theCompany (other than any such sale or distribution of such securities inconnection with any merger or consolidation by the Company or a subsidiary ofthe Company or in connection with the purchase of all or substantially all theassets of any other person or in connection with an employee stock option orother benefit plan) during the 30 days prior to, and during the 180 day periodbeginning on, the effective date of such registration statement (except as partof such Registration) and (ii) that any agreement entered into after the dateof this Agreement pursuant to which the Company issues or agrees to issue any privatelyplaced equity securities shall contain a provision under which holders of suchsecurities agree not to effect any public sale or distribution of any suchsecurities during the period referred to in the foregoing clause (i) or duringany of the periods referred to in Section 9.5(a) above, including any salepursuant to Rule 144 under the Securities Act (except as part of suchRegistration, if permitted).

 

(c)  In connection with anyoffering of securities of the Company contemplated by this Article IX, theCompany shall take such other actions in connection therewith as may benecessary or appropriate, including, without limitation, entering intocustomary underwriting arrangements and agreeing to indemnify any RequestingStockholder or any other Stockholder selling Common Stock in such offering.

 

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9.6  Indemnification by the Company.  In the event of any Registration of anysecurities of the Company under the Securities Act pursuant to Article IX, theCompany will, and it hereby does, indemnify and hold harmless, to the fullextent permitted by law, each of the Stockholders holding any RegistrableSecurities covered by such registration statement, its Representatives, eachother person who participates as an underwriter in the offering or sale of suchsecurities and each other person, if any, who controls, is controlled by or isunder common control with such Stockholder or any such underwriter within themeaning of the Securities Act, against any and all losses, claims, damages orliabilities, joint or several, and expenses (including any amounts paid in anysettlement effected with the Company’s consent, which consent shall not beunreasonably withheld) to which such Stockholder, any such Representative orany such underwriter or controlling person may become subject under theSecurities Act, state securities or blue sky laws, common law or otherwise,insofar as such losses, claims, damages or liabilities (or actions orproceedings in respect thereof) or expenses arise out of or are based upon (i)any untrue statement or alleged untrue statement of any material fact containedin any registration statement under which such securities were registered underthe Securities Act, any preliminary, final or summary prospectus containedtherein, or any amendment or supplement thereto, (ii) any omission or allegedomission to state therein a material fact required to be stated therein ornecessary to make the statements therein not misleading, or (iii) any violationby the Company of any federal, state or common law rule or regulationapplicable to the Company and relating to action required of or inaction by theCompany in connection with any such Registration, and the Company willreimburse such Stockholder and each such Representative or underwriter andcontrolling person for any legal or any other expenses reasonably incurred bythem in connection with investigating or defending such loss, claim, liability,action or proceeding; provided that the Company shall not be liable inany such case to the extent that any such loss, claim, damage, liability (oraction or proceeding in respect thereof) or expenses arises out of or is basedupon any untrue statement or alleged untrue statement or omission or allegedomission made in such registration statement or amendment or supplement theretoor in any such preliminary, final or summary

 

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prospectus in reliance upon and in conformity with written informationfurnished to the Company through an instrument duly executed by suchStockholder or any such Representative or underwriter specifically stating thatit is for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of anyinvestigation made by or on behalf of such Stockholder or any suchRepresentative or underwriter and shall survive the transfer of such securitiesby such Stockholder.

 

9.7  Indemnification by the Stockholdersand Underwriters.  The Company mayrequire, as a condition to including any Registrable Securities in anyregistration statement filed in accordance with Article IX, that the Companyshall have received an undertaking reasonably satisfactory to it from theStockholders of such Registrable Securities and any underwriter, to indemnifyand hold harmless (in the same manner and to the same extent as set forth inSection 9.6) the Company and its Representatives and all other prospectivesellers and their respective Representatives, and their respective controllingpersons with respect to any statement or alleged statement in or omission oralleged omission from such registration statement, any preliminary, final orsummary prospectus contained therein, or any amendment or supplement thereto,if such statement or alleged statement or omission or alleged omission was madein reliance upon and in conformity with written information furnished to theCompany or its representatives through an instrument duly executed by or onbehalf of such Stockholder or underwriter, as the case may be, specificallystating that it is for use in the preparation of such registration statement,preliminary, final or summary prospectus or amendment or supplement thereto, ora document incorporated by reference into any of the foregoing.  Such indemnity shall remain in full forceand effect regardless of any investigation made by or on behalf of the Companyor any of the Stockholders, underwriters or any of their respectiveRepresentatives or controlling persons and shall survive the transfer of suchsecurities by such Stockholder; provided that no such Stockholder shallbe liable under this Section 9.7 for any amounts exceeding the product of thepurchase price per Registrable Security and the number of RegistrableSecurities being sold pursuant to such registration statement or prospectus bysuch Stockholder (net of any underwriters’ or placement agents’ fees, discountsor commissions related 

 

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thereto and net, in the case of the members of the Windward Group, ofthe purchase price paid by such member pursuant to the Stock PurchaseAgreement).

 

9.8  Noticesof Claims, Etc.  Promptly afterreceipt by an indemnified party hereunder of written notice of the commencementof any action or proceeding with respect to which a claim for indemnificationmay be made pursuant to this Article IX, such indemnified party will, if aclaim in respect thereof is to be made against an indemnifying party, promptlygive written notice to the latter of the commencement of such action; provided,however, that the failure of any indemnified party to give notice asprovided herein shall not relieve the indemnifying party of its obligationsunder the preceding subsections of this Article IX, except to the extent that theindemnifying party is actually materially prejudiced by such failure to givenotice.  In case any such action isbrought against an indemnified party, unless in such indemnified party’sreasonable judgment a conflict of interest between such indemnified andindemnifying parties may exist in respect of such claim, the indemnifying partywill be entitled to participate in and, jointly with any other indemnifyingparty similarly notified, to assume the defense thereof, to the extent that itmay wish, with counsel reasonably satisfactory to such indemnified party, andafter notice from the indemnifying party of its election so to assume thedefense thereof, the indemnifying party will not be liable to such indemnifiedparty for any legal or other expenses subsequently incurred by the latter inconnection with the defense thereof, unless in such indemnified party’sreasonable judgment a conflict of interest between such indemnified andindemnifying parties arises in respect of such claim after the assumption ofthe defense thereof, and the indemnifying party will not be subject to anyliability for any settlement made without its consent (which consent shall notbe unreasonably withheld).  Noindemnifying party will consent to entry of any judgment or enter into anysettlement which does not include as an unconditional term thereof the givingby the claimant or plaintiff to such indemnified party of a release from allliability in respect to such claim or litigation.  An indemnifying party who is not entitled to, or elects not to,assume the defense of a claim will not be obligated to pay the fees andexpenses of more than one counsel for all parties indemnified by suchindemnifying party with 

 

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respect to such claim, unless in the reasonable judgment of anyindemnified party a conflict of interest may exist between such indemnifiedparty and any other of such indemnified parties with respect to such claim, inwhich event the indemnifying party shall be obligated to pay the fees andexpenses of such additional counsel or counsels.

 

9.9  Other Indemnification.  Indemnification similar to that specified inthe preceding Sections of this Article IX (with appropriate modifications)shall be given by the Company and each Stockholder of Registrable Securitieswith respect to any required Registration or other qualification of securitiesunder any federal or state law or any regulation of a governmental authorityother than arising under the Securities Act.

 

9.10   Registration Procedure.

 

(a)   If and whenever the Companyis required to effect or cause the Registration of any Registrable Securitiespursuant to this Article IX, the Company will, as expeditiously as possible:

 

(1)  Prepare in cooperation withthe sellers (and, in the event of an underwritten public offering, with theunderwriter(s)), and file with the SEC, in a manner consistent with theprovisions of this Article IX, a registration statement with respect to suchRegistrable Securities on any form for which the Company then qualifies orwhich counsel for the Company shall deem appropriate as the case may be, andwhich form shall be available for the sale of the Registrable Securities inaccordance with the intended methods of distribution thereof, and use its bestefforts to cause such registration statement to become and remain effective; providedthat before filing with the SEC a registration statement or prospectus or anyamendments or supplements thereto, the Company will (i) furnish to one counselselected by the Requesting Stockholder(s), in the event of a Registrationeffected pursuant to Section 9.1 hereof, or selected by the holders of amajority of the Registrable Securities covered by such registration statement,in the event of any other Registration, copies of all such documents proposedto be filed, which documents will be subject to the timely review of suchcounsel, and (ii) notify each holder of Registrable Securities covered by

 

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such registration statement of any stop order issued or threatened bythe SEC and take all reasonable actions required to prevent the entry of suchstop order or to remove it if entered.

 

(2)  Prepare and file with theSEC such amendments and supplements to such registration statement and theprospectus used in connection therewith as may be necessary to keep suchregistration statement effective for a period of not less than 120 days or suchshorter period which will terminate when all Registrable Securities covered by suchregistration statement have been sold (but not before the expiration of the90-day period referred to in Section 4(3) of the Securities Act and Rule 174thereunder, if applicable) and comply with the provisions of the Securities Actwith respect to the disposition of all securities covered by such registrationstatement during such period in accordance with the intended methods ofdisposition by the seller or sellers thereof set forth in such registrationstatement.

 

(3)  Furnish to each holder ofRegistrable Securities covered by the registration statement and to eachunderwriter, if any, of such Registrable Securities, such number of copies ofsuch registration statement, each amendment and supplement thereto (in eachcase including all exhibits thereto), and the prospectus included in suchregistration statement (including each preliminary prospectus), and such otherdocuments, as such person may reasonably request, in order to facilitate thepublic sale or other disposition of the Registrable Securities owned by suchholder.

 

(4)  Use its best efforts toregister or qualify such Registrable Securities covered by such registrationstatement under such other securities or blue sky laws of such jurisdictions asany holder, and underwriter, if any, of Registrable Securities covered by suchregistration statement shall reasonably request, and do any and all other actsand things which may be reasonably necessary or advisable to enable such sellerto consummate the disposition in such jurisdictions of the RegistrableSecurities owned by such seller; provided that the Company shall not forany such purpose, be required to (A) qualify to do business as a foreigncorporation in any jurisdiction where, but for the requirements of this Section9.10, it is not then so qualified, 

 

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(B) subject itself to taxation in any such jurisdiction, or (C) takeany action which would subject it to consent to general or unlimited service orprocess not then so subject.

 

(5)  Use its best efforts tocause such Registrable Securities covered by such registration statement to beregistered with or approved by such other governmental agencies or authoritiesas may be necessary by virtue of the business and operations of the Company toenable the seller or sellers thereof to consummate the disposition of suchRegistrable Securities.

 

(6)  Immediately notify eachseller of Registrable Securities covered by such registration statement, at anytime when a prospectus relating thereto is required to be delivered under theSecurities Act, of the happening of any event which comes to the Company’sattention if as a result of such event the prospectus included in suchregistration statement, as then in effect, includes any untrue statement of a materialfact or omits to state a material, fact necessary in order to make thestatements made therein, in the light of the circumstances under which theywere made, not misleading and at the request of any such seller, deliver areasonable number of copies of an amended or supplemental prospectus as may benecessary so that, as thereafter delivered to the purchasers of suchRegistrable Securities, such prospectus shall not include any untrue statementof a material fact or omit to state a material fact necessary in order to makethe statements made therein, in the light of the circumstances under which theywere made, not misleading.

 

(7)  Otherwise use its bestefforts to comply with all applicable rules and regulations of the SEC and makeavailable to its security holders, in each case as soon as practicable, anearnings statement covering a period of at least 12 months, beginning with thefirst month after the effective date of the registration statement (as the term“effective date” is defined in Rule 158(c) under the Securities Act), whichearnings statement shall satisfy the provisions of Section 11(a) of theSecurities Act including, at the option of the Company, Rule 158 thereunder.

 

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(8)  Use its best efforts tocause all such Registrable Securities to be listed on such national securitiesexchange or the National Association of Securities Dealers National MarketSystem as may be reasonably requested by the Requesting Stockholder, and if anysimilar securities issued by the Company are then listed on any securitiesexchanges or national market systems, to also list all such RegistrableSecurities on such securities exchanges or national market systems, and enterinto such customary agreements including a listing application andindemnification agreement in customary form, provided that the applicablelisting requirements are satisfied, and to provide a transfer agent andregistrar for such Registrable Securities covered by such registration statementno later than the effective date of such registration statement.

 

(9)  Use its best efforts toobtain a “cold comfort” letter from the independent public accountants for theCompany in customary form and covering matters of the type customarily coveredby such letters as may be reasonably requested by the RequestingStockholder(s), in the event of a Registration effected pursuant to Section 9.1hereof, or by the holders of a majority of the Registrable Securities coveredby such registration statement, in the event of any other Registration.

 

(10)  Execute and deliver allinstruments and documents (including in an underwritten offering anunderwriting agreement in customary form) and take such other actions andobtain such certificates and opinions as sellers of a majority of theRegistrable Securities being sold reasonably request in order to effect anunderwritten public offering of such Registrable Securities.  The Company may require each holder ofRegistrable Securities as to which any Registration is being effected tofurnish to the Company such information regarding such holder and thedistribution of such Registrable Securities as the Company may from time totime reasonably request in writing in connection with effecting such offering.

 

(b)  Each holder of RegistrableSecurities will, upon receipt of any notice from the Company of the happeningof any event of the kind described in Section 9.10(a)(6), forthwith discontinuedisposition of the 

 

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Registrable Securities pursuant to the registration statement coveringsuch Registrable Securities until such holder’s receipt of the copies of thesupplemented or amended prospectus contemplated by Section 9.10(a)(6), and, ifso directed by the Company, such holder will deliver to the Company (at theCompany’s expense) all copies, other than permanent file copies, then in suchholder’s possession, of the prospectus covering such Registrable Securities atthe time of receipt of such notice.

 

9.11  Rule144.  If the Company shall havefiled a registration statement pursuant to the requirements of Section 12 ofthe Exchange Act or a registration statement pursuant to the requirements ofthe Securities Act, the Company covenants that it will file the reports requiredto be filed by it under the Securities Act and the Exchange Act and the rulesand regulations adopted by the SEC thereunder (or, if the Company is notrequired to file such reports, it will, upon the request of any holder ofRegistrable Securities, make publicly available other information), and it willtake such further action as any holder of Registrable Securities may reasonablyrequest, all to the extent required from time to time to enable such holder tosell shares of Registrable Securities without registration under the SecuritiesAct within the limitation of the exemptions provided by (i) Rule 144 under theSecurities Act, as such Rule may be amended from time to time, or (ii) anysimilar rule or regulation hereafter adopted by the SEC.  Upon the request of any holder ofRegistrable Securities, the Company will deliver to such holder a writtenstatement as to whether it has complied with such requirements.

 

 

ARTICLE X

 

ADDITIONAL STOCKHOLDERS

 

10.1  Transferees of Stockholders or theCompany.  No Transfers of sharesof Company Stock may be made (and shall not be effective) to a PermittedTransferee or to any Third Party, unless in each case prior to such Transferany such transferee agrees in writing to be bound (to the same extent ascontemplated with respect to the Stockholder (or the Permitted Transferee(s)thereof) transferring such shares of Company Stock) by the terms 

 

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and conditions of this Agreement pursuant to a supplementary agreementreasonably satisfactory in form and substance to the Company.  The Company may, as a condition to anyoriginal issuance of Company Stock to a person who or which is not at such timea Stockholder, require that such person agree in writing to be bound by the termsand conditions of this Agreement pursuant to a supplementary agreementreasonably satisfactory in form and substance to the Company.  Upon entering into such supplementaryagreement, such transferee or purchaser of Company Stock shall be deemed to bea Stockholder for all purposes of this Agreement.  The provisions of this Section 10.1 shall not apply to anyTransfer (a) made pursuant to a public offering of Company Stock, including inconnection with the exercise by any Stockholder of its rights pursuant toArticle IX hereof or in connection with the exercise by the Windward Agent ofits rights pursuant to Section 5.6 hereof, or (b) made in connection with theexercise by the Windward Group of a Compelled Sale Right.

 

10.2  NewStockholders.  Each IndependentNominee, member of management or other employee of the Company or any of itssubsidiaries who becomes a holder of Company Stock after the date hereof shallbe deemed, upon the execution of a supplementary agreement described below, tohave the same rights and obligations as a Stockholder for purposes of thisAgreement.  The Company shall not issueCompany Stock to any Independent Nominee, member of management or otheremployee of the Company or any of its subsidiaries unless the person to whomthe Company Stock is to be issued or transferred agrees in writing to be boundby the terms and conditions of this Agreement pursuant to a supplementaryagreement reasonably satisfactory in form and substance to the Company; uponentering into such agreement, such member of management or other employee ofthe Company or any of its subsidiaries shall be deemed to be a ManagementStockholder for all purposes of this Agreement.  The parties hereto acknowledge and agree that the Company StockOption Plan (or the agreements entered into in connection therewith) shallprovide that optionholders thereunder will be required to become parties tothis Agreement upon any exercise of options granted thereunder, as a conditionto the exercise of such options.

 

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10.3  Supplemental Agreements.  Each supplementary agreement referred to inSections 10.1 and 10.2 above, shall become effective upon its execution by theCompany and the new holder of Company Stock, and it shall not require thesignatures or the consent of the other Stockholders (or their respectivePermitted Transferees).  Thesupplementary agreement between the Company and any new holder of Company Stockmay modify some of the terms and conditions of this Agreement as they affectthe rights and obligations of the new holder of Company Stock, provided thatthe modified terms and conditions shall be no less favorable to the otherStockholders (or their respective Permitted Transferees) than the terms andconditions set forth in this Agreement. The Schedule of Management Stockholders attached hereto shall be updatedfrom time to time to include each Management Stockholder who becomes a party tothis Agreement after the date hereof.

 

 

ARTICLE XI

 

STOCK LEGENDS

 

11.1  Stock Certificate Legend.   A copy of this Agreement shall be filed withthe Secretary of the Company and kept with the records of the Company.  Each of the Stockholders agrees that thefollowing two legends shall be placed on the certificates representing any sharesof Company Stock owned by them:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TORESTRICTIONS ON TRANSFER AND CERTAIN OTHER CONDITIONS, AS SPECIFIED IN ASTOCKHOLDERS AGREEMENT DATED AS OF FEBRUARY 14, 1997 (COPIES OF WHICH ARE ONFILE WITH THE SECRETARY OF HCC INDUSTRIES INC. (TOGETHER WITH ITS SUCCESSORS,THE “COMPANY”) AND WHICH WILL BE MAILED TO A STOCKHOLDER WITHOUT CHARGE WITHINFIVE DAYS AFTER RECEIPT BY THE COMPANY OF A WRITTEN REQUEST THEREFOR FROM SUCHSTOCKHOLDER).  THE HOLDER OF THISCERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OFTHE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT.

 

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NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITIONOF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT PURSUANTTO THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT AND, EXCEPT AS OTHERWISEPROVIDED IN SUCH AGREEMENT, (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENTUNDER THE SECURITIES ACT OF 1933 AND THE RULES AND REGULATIONS IN EFFECTTHEREUNDER AND ALL APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS (SUCH FEDERALAND STATE LAWS, THE “SECURITIES LAWS”) OR (B) IF THE COMPANY HAS BEEN FURNISHEDWITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BEREASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER, SALE,ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THEPROVISIONS OF THE SECURITIES LAWS.”

 

All Stockholders shall be bound by the requirements of such legends tothe extent that such legends are applicable. Upon a Registration of any shares of Company Stock, the certificaterepresenting such shares shall be replaced, at the expense of the Company, withcertificates bearing only the first of the two legends referred to above.

 

 

ARTICLE XII

 

APPOINTMENT OF AGENTS

 

12.1  Appointment of Agent for WindwardGroup Matters.

 

(a)  Each member of the WindwardGroup hereby irrevocably (subject to the provisions of paragraph (e) below)designates and appoints Windward as its attorney-in-fact, agent andrepresentative, to act on its behalf and on behalf of its PermittedTransferees, (i) in connection with exercising any of its rights hereunder,performing any of its duties or obligations hereunder or enforcing any claimsor rights on its behalf under this Agreement, (ii) to investigate, contest,litigate, demand, sue for, collect, recover and receive all claims, debts,monies and other amounts whatsoever which may hereafter become due to themembers of the Windward Group in connection with this Agreement (including,without limitation, instituting any action, suit or legal proceeding 

 

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to enforce any of its rights hereunder) and to make, execute anddeliver receipts, releases, settlements, adjustments and other dischargestherefor, (iii) to defend, settle, adjust, submit to arbitration or compromiseall actions, suits, accounts, reckonings, claims and demands that may bebrought against the members of the Windward Group in connection with thisAgreement (including, without limitation, defending, or settling any claimsbrought by the Company, the Management Stockholders or any of the other partieshereto in connection with this Agreement), (iv) to amend, supplement or grantany waiver under, this Agreement or any other agreement or documentcontemplated hereby, (v) to vote at any annual or special meeting ofstockholders, or to take action by written consent in lieu of such meeting withrespect to, all of the shares of Company Stock owned or held of record by suchStockholder, but only for (1) the election of directors designated inaccordance with Section 2.2 hereof, (2) the removal of directors in accordancewith Sections 2.4 and 2.5 hereof, and (3) the election of a director to fillany vacancy on the Board in accordance with Section 2.3 hereof, (vi) inexecuting, acknowledging, verifying and/or delivering any and all agreements,certificates and instruments in connection with taking any of the actionsreferred to in clauses (i), (ii), (iii), (iv) and (v) above, and (vii) indoing, executing and performing any other act, deed, matter or thing, of anykind or nature whatsoever, that is necessary, appropriate or advisable toenforcing any claims or rights under this Agreement or performing any of itsduties or obligations hereunder or otherwise representing its interestshereunder; all of the foregoing actions may be taken in such manner as Windwarddetermines in its sole discretion to be appropriate, advisable or necessary.

 

(b)  The designation andappointment of Windward referred to in the previous paragraph (a) shall bedeemed to be irrevocable (subject to the provisions of paragraph (e) below) andcoupled with an interest and shall survive the death, dissolution, bankruptcy,incompetency or legal disability of any member of the Windward Group.  Without limitation to the foregoing andnotwithstanding anything to the contrary contained in this Agreement, if anypayments or other amounts are received by Windward on behalf of the members ofthe Windward Group from the Company, the Management Stockholders or 

 

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any of the other parties hereto in connection with this Agreement,Windward shall, after deducting any expense reimbursement amounts with which itmay be entitled, distribute such amounts to the various members of the WindwardGroup in such manner as Windward deems reasonably appropriate in light of eachmember’s relevant interests and the particular circumstances.

 

(c)  Each of the parties to thisAgreement acknowledges and agrees that, notwithstanding anything in thisAgreement to the contrary, the provisions of this Section 12.1 may be amended,modified or supplemented by a majority in number of the members of the WindwardGroup (such majority in number of members, the “Requisite Members”); providedthat (i) such amendment, modification or supplement is in writing and copiesthereof are provided to the other parties to this Agreement within a reasonableperiod following the date of such amendment, modification or supplement and(ii) such amendment, modification or supplement does not adversely affect anyof the rights, duties or obligations of any party to this Agreement (other thanthe members of the Windward Group). Other than Windward (or any successor thereof appointed pursuant toSection 12.1(e) hereof) and other than any actions taken at the request or withthe consent of Windward or such successor, each of the members of the WindwardGroup agrees that it will not take any action, nor institute any actions orproceedings, against the Company, the Management Stockholders or any of theother parties hereto (other than another member of the Windward Group) inconnection with this Agreement or with respect to any matters referred to inthis Agreement, except with the prior written consent of the Requisite Members.

 

(d)  Windward (or any successorthereof appointed pursuant to this Section 12.1(e)) may resign from theperformance of all its functions and duties as agent on behalf of the WindwardGroup under this Agreement at any time by giving at least 30 Business Days’prior written notice to the other parties to this Agreement.  Such resignation shall take effect upon theacceptance by a successor agent of its appointment pursuant to this Section12.1(e).  Upon any such notice ofresignation by Windward (or any such successor thereof), the Requisite Membersshall appoint a successor agent.  If asuccessor agent shall not have been so appointed within said 30 Business Dayperiod, Windward (or any duly appointed 

 

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successor thereof) shall then appoint a successor who shall serve asagent on behalf of the Windward Group under this Agreement until such time, ifany, as the Requisite Members appoint a successor agent as provided in thisSection 12.1(e).  Windward (or anysuccessor thereof appointed pursuant to this Section 12.1(e)) may be removed bythe Requisite Members and replaced with another person, at any time and for anyreason, upon ten (10) days prior written notice given by the Requisite Membersto the agent then in effect and all other parties to this Agreement.  Upon the appointment of a successor agenthereunder, references in this Agreement to Windward, acting in its role asagent for the Windward Group, shall, for all purposes of this Agreement,thereafter mean such successor agent.

 

(e)  In the event that anymember of the Windward Group does not opt to purchase its allocable share ofCompany Stock pursuant to the exercise of any preemptive rights pursuant toArticle VI hereof or the right of first refusal in Article III, or sell itsallocable shares pursuant to the “tag-along” rights in Article IV, Windward (orany successor thereof appointed pursuant to Section 12.1(e) above) mayreallocate such shares among the remaining members of the Windward Group, insuch manner as it deems reasonably appropriate in light of each member’srelevant interests and the particular circumstances.

 

12.2  Appointment of Agentfor the Management Stockholders.  Each Management Stockholder hereby irrevocably designates andappoints Andrew Goldfarb as its attorney-in-fact, agent and representative, toact on its behalf and on behalf of its Permitted Transferees in connection withexercising any of its rights, performing any of its duties or obligations orenforcing any claims or rights on its behalf, arising pursuant to Article IX ofthis Agreement.

 

 

ARTICLE XIII

 

TERM OF AGREEMENT

 

13.1  Term.  This Agreement shall terminate, and be of nofurther force or effect, automatically without any further action on the partof any parties hereto, 

 

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upon the earlier of (a) the ten (10) year anniversary of the datehereof, (b) an IPO Event, (c) a sale of all or substantially all of the assetsor equity interests in the Company to a Third Party (whether by merger,consolidation, sale of assets or securities or otherwise), (d) approval by theWindward Agent and by those Management Stockholders who hold at least amajority of the total amount of the then-outstanding Company Stock held byManagement Stockholders at such time, or (e) the Windward Group (together withits Permitted Transferees) ceases to own at least five percent (5%) of thetotal outstanding number of shares of Company Stock (calculated on aFully-Diluted Basis), unless such reduction is the result of any Transfers toPermitted Transferees in accordance with this Agreement; provided that,in the event of an IPO Event, the provisions of Articles VIII, IX, X, XI, XII,XIII and XIV (other than Section 14.1) of this Agreement shall continue in fullforce and effect until the earliest to occur of the events set forth in clauses(a), (c), (d) or (e).

 

 

ARTICLE XIV

 

MISCELLANEOUS

 

14.1  Confidentiality.  Except with the prior written consent of theCompany (which consent may not be unreasonably withheld) and except asotherwise required by law or the listing requirements of any securitiesexchange on which the securities of such Stockholder are then traded, eachStockholder shall, and shall cause each of its Representatives to (a) hold instrict confidence all confidential, proprietary or other non-public informationor trade secrets relating to the Company or its subsidiaries or theirrespective assets or operations (the “Confidential Information”), and (b) notrelease or disclose in any manner whatsoever to any other person any suchConfidential Information; provided that (i) the foregoing provisionsshall not apply to any disclosure, to the extent reasonably required, to (A)those of such Stockholder’s auditors, attorneys and other representatives whoagree to be bound by the provisions of this Section 8.1 and (B) any otherpersons in connection with any actions to be taken pursuant to Article V ofthis Agreement, (ii) the foregoing provisions shall not apply where suchStockholder or any of its Representatives is 

 

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compelled to disclose such Confidential Information, by judicial oradministrative process or, in the reasonable opinion of its counsel, by otherrequirements of law (provided that prior written notice of such disclosure isgiven to the Company and any such disclosure is limited to only that portion ofthe Confidential Information which such person is compelled to disclose), (iii)the term “Confidential Information” shall not include information (A) which isor becomes generally available to the public other than as a result ofdisclosure of such information by such Stockholder or any of itsRepresentatives, (B) becomes available to the recipient of such information ona non-confidential basis from a source which is not, to the recipient’sknowledge, bound by a confidentiality or other similar agreement, or by anyother legal, contractual or fiduciary obligation which prohibits disclosure ofsuch information to the other parties hereto, or (C) which can be demonstratedto have been developed independently by the representatives of such recipientwhich representatives have not had any access to any information which wouldotherwise be deemed to be “Confidential Information” pursuant to the provisionsof this Section 8.1, and (iv) each of the Stockholders acknowledges and agreesthat any information they may receive from the Company in its reports tostockholders is confidential, proprietary and non-public in nature.

 

14.2  Specific Performance.  Each of the Stockholders acknowledges andagrees that in the event of any breach of this Agreement, the non-breachingparty or parties would be irreparably harmed, no adequate remedy at law wouldexist and damages would be difficult to determine.  It is accordingly agreed that (x) in the event of a breach of anyprovision of this Agreement, the aggrieved party shall be entitled to specificperformance of this Agreement and to enjoin any continuing breach of thisAgreement (without the necessity of proving actual damages and without postingbond or other security), in addition to any other remedy to which suchaggrieved party may be entitled at law or in equity, and (y) the Stockholderswill waive the defense in any action for specific performance or otherequitable relief that a remedy at law would be adequate.

 

14.3         Consent to Jurisdiction, Etc.  Each of the parties hereto irrevocably andunconditionally (a) agrees 

 

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that all suits, actions or other legal proceedings arising out of thisAgreement or any of the transactions contemplated hereby (a “Suit”)shall be brought and adjudicated solely in the United States District Court inthe State of New York, or, if such courts will not accept jurisdiction, in anycourt of competent civil jurisdiction sitting in the State of New York, (b)submits to the exclusive jurisdiction of any such court for the purpose of anysuch Suit and (c) waives and agrees not to assert by way of motion, as adefense or otherwise in any such Suit, any claims that it is not subject to thejurisdiction of the above courts, that such Suit is brought in an inconvenientforum or that the venue of such Suit is improper.  Each of the parties hereto also irrevocably and unconditionallyconsents to the service of any process, summons, pleadings, notices or otherpapers in a manner permitted by the notice provisions of Section 14.7 hereofand agrees that any such form of service shall be effective in connection withany such Suit; provided that nothing contained herein shall affect theright of any party to serve process, pleadings, notices or other papers in anyother manner permitted by applicable Law. Each of the parties hereto also agrees that any final and unappealablejudgment against a party hereto in any Suit shall be conclusive and binding onsuch party and that such judgment may be enforced in any other jurisdiction,either within or outside of the United States, by suit on the judgment, acertified or exemplified copy of which shall be conclusive evidence of the factand amount of such judgment.

 

14.4  Attorneys’Fees.  In any legal action orproceeding (including, without limitation, any arbitration proceeding) broughtto enforce any provision of this Agreement, or where any provision hereof isvalidly asserted as a defense, or because of an alleged dispute, breach ordefault in connection with any of the provisions of this Agreement, thesuccessful or prevailing party or parties shall be entitled to recoverreasonable attorneys’ fees and other costs incurred in that action or proceeding,in addition to any other available remedy or relief to which such party orparties may be entitled.

 

14.5  Headings; No Third Party Beneficiaries.  The headings and captions contained hereinare for convenience of reference only and shall not control or affect themeaning or construction of any of the provisions 

 

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hereof.  Except as otherwiseexpressly provided herein, the covenants, agreements and other provisionscontained in this Agreement are for the sole benefit of the parties hereto andtheir permitted successors and assigns, and they shall not be construed asconferring, and are not intended to confer, any rights, remedies or otherbenefits hereunder on any other persons. Neither this Agreement nor any purchase or sale of Company Stock shallcreate, or be construed or deemed to create, any right to employment in favorof the Management Stockholder or any other person by the Company or anysubsidiary of the Company.

 

14.6  EntireAgreement. This Agreement constitutes the entire agreement andunderstanding of the parties hereto in respect of the subject matter containedherein, and there are no restrictions, promises, representations, warranties,covenants or undertakings with respect to the subject matter hereof, other thanthose expressly set forth or referred to herein.  This Agreement supersedes all prior agreements and understandingsamong the parties hereto with respect to the subject matter hereof.

 

14.7  Notices.  All notices, requests, instructions or andother communications to be given hereunder by any party hereto to another partyhereto shall be in writing and, unless otherwise provided herein, shall bedeemed duly given if delivered personally, telecopied (which is confirmed) orsent by registered or certified mail (postage prepaid, return receiptrequested) or by Federal Express or other similar courier service (i) to theCompany, any member of the Windward Group at the addresses set forth below,(ii) in the case of a Permitted Transferee, to the address set forth in thewritten agreement executed pursuant to Article X hereof, (iii) if to aManagement Stockholder, as listed on the signature page hereto, or, if not solisted, to it at its address as reflected in the stock records of the Company,or (iv) in the case of any member of management or other employee of theCompany or any of its subsidiaries who becomes a holder of Company Stock oroptions to acquire Company Stock after the date hereof, to the address setforth in the written agreement executed pursuant to Article X hereof:

 

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If to the Company or to any Management Stockholder, to it at:

 

HCC Industries Inc.

4232 Temple City Blvd.

Rosemead, CA 91770

Attention:  President

Fax: (818) 443-9074

 

With copies to:

 

O’Melveny & Meyers

1999 Avenue of the Stars

Suite 700

Los Angeles, CA 90067

Attention:  Robert D. Haymer,Esq.

Fax:  (310) 246-6779

 

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY  10036

Attention:  Howard L. Ellin,Esq.

Fax:  (212) 735-2001

 

Andrew Goldfarb

14170 Chandler Blvd.

Sherman Oaks, CA 91401

Fax:  (818) 906-8344

 

If to Windward or any member

of the Windward Group, to:

 

Windward Capital Partners, L.P.

1177 Avenue of the Americas

42nd  Floor

New York, NY  10036

Attention:  Thomas J. Sikorski

Fax: (212) 382-6536

 

With copies to:

 

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY  10036

Attention:  Howard L. Ellin,Esq.

Fax:  (212) 735-2001

 

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If to Windward/Park, to:

 

Windward/Park HCC, L.L.C.

c/o Metropolitan Life Insurance Company

Corporate Equities

334 Madison Avenue, P.O. Box 633

Covenant Station, NJ 07961-0633

Attention: Vice President

Telecopy No.: (201) 254-3055

 

and:

 

Metropolitan Life Insurance Company

One Madison Avenue, Area 7H

New York, New York 10010

Attention: Thomas C. Hoi, Esq.

Telecopy No.: (212) 578-3916

 

; provided that in the event any of the parties referred toabove desires to designate another address to which such notices should be sentto such party, such party may designate such other address by giving notice tothe other parties hereto in writing as set forth in this Section 14.7 (providedthat any change of address shall be effective only upon receipt thereof).

 

14.8  ApplicableLaw.  **THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDERAND THE PARTIES SUBJECT HERETO SHALL BE GOVERNED BY, AND CONSTRUED ANDINTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVINGEFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF.**

 

14.9  Severability.  The invalidity or unenforceability of anyprovision of this Agreement in any jurisdiction shall not affect the validity,legality or enforceability of the remainder of this Agreement in suchjurisdiction or the validity, legality or enforceability of this Agreement,including any such provision, in any other jurisdiction, it being intended thatall rights and obligations of the parties hereunder shall be enforceable to thefullest extent permitted by law.

 

14.10  Successors; Assigns; Transferees;Amendments; Waivers.

 

(a)  The provisions of thisAgreement shall be binding upon and accrue to the benefit of the 

 

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parties hereto and their respective heirs, successors and permittedassigns.  Notwithstanding the foregoing,this Agreement may not be amended, modified or supplemented, no waivers of,consents to or departures from the provisions hereof may be given, and neitherthis Agreement nor any right, remedy, obligation or liability arising hereunderor by reason hereof shall be assignable by the Company or any Stockholderwithout the prior written consent of (i) each of the Company and the WindwardAgent (and their respective Permitted Transferees) and (ii) the ManagementStockholders owning a majority of the shares of Common Stock which are owned byall the Management Stockholders; provided that this Agreement may beamended, modified or supplemented by the Company, and waivers of, consents toor departures from the provisions hereof may be given by the Company, in orderto cure any ambiguity, defect or inconsistency in this Agreement, so long as(x) such action does not adversely affect the rights of any Stockholder in anymaterial respect and (y) the Company promptly notifies each Stockholder inaccordance with the provisions of Section 14.7 hereof of such action.

 

(b)  The rights and remedies ofthe Stockholders and the Company under this Agreement shall be cumulative andnot exclusive of any rights or remedies which either would otherwise havehereunder or at law or in equity or by statute, and no failure or delay byeither party in exercising any right or remedy shall impair any such right orremedy or operate as a waiver of such right or remedy, nor shall any single orpartial exercise of any power or right preclude such party’s other or furtherexercise or the exercise of any other power or right.

 

14.11  Defaults; No Circumvention ofAgreement.  A default by any partyto this Agreement in such party’s compliance with any of the conditions orcovenants hereof or performance of any of the obligations of such partyhereunder shall not constitute a default by any other party.  No Stockholder or any of its PermittedTransferees may do indirectly, through the sale of capital stock of its ortheir subsidiaries or otherwise, that which is not permitted by this Agreement(including, without limitation, the provisions of Articles III, IV and Vhereof).

 

76

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14.12  Further Assurances.  Each party hereto or person subject hereto shall do and performor cause to be done and performed all such further acts and things and shallexecute and deliver all such other agreements, certificates, instruments anddocuments as any other party hereto or person subject hereto may reasonablyrequest in order to carry out the intent and accomplish the purposes of thisAgreement and the consummation of the transactions contemplated hereby.

 

14.13  Counterparts.  This Agreement may be executed in two ormore counterparts, each of which shall be deemed an original but all of whichshall constitute one and the same Agreement.

 

14.14  Recapitalization,etc.  Except as otherwise providedin this Agreement, the provisions of this Agreement shall apply to any and allshares of capital stock or other securities of the Company or any successor orassign of the Company (whether by merger, consolidation, sale of assets, orotherwise) which may be issued in respect of, in exchange for, or insubstitution of, any shares of Company Stock by reason of any reorganization,any recapitalization, reclassification, merger, consolidation, partial orcomplete liquidation, sale of assets, spin-off, stock dividend, split,distribution to stockholders or combination of the shares of Company Stock orany other change in the Company’s capital structure, in order to preservefairly and equitably as far as practicable, the original rights and obligationsof the parties hereto under this Agreement.

 

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IN WITNESS WHEREOF, this Agreement has been duly executed by each ofthe parties hereto as of the date first written above.

 

 
|   | HCC  INDUSTRIES INC.               |
|--------|------------------------------------|
|   |                               |
|   |                               |
|   | By:                                | /s/  Richard Ferraid |   |
|   |                               | Name:  Richard Ferraid |
|   |                               | Title:President  and CEO |
|   |                               |
|   |                               |
|   | WINDWARD  CAPITAL ASSOCIATES, L.P. |
|   |                               |
|   |                               |
|   | By:                                | Windward  Capital |
|   |                               | Associates,  Inc., |
|   |                               | its  general partner |
|   |                               |
|   |                               |
|   | By:                                | /s/  Gary Swenson |   |
|   |                               | Name:  Gary Swenson |
|   |                               | Title:  President |
|   |                               |
|   |                               |
|   | WINDWARD/PARK  HCC L.L.C.          |
|   |                               |
|   |                               |
|   | By:                                | Windward  Capital Associates, |
|   |                               | L.P.,  its manager |
|   |                               |
|   |                               |
|   |                               | By: | Windward  Capital |
|   |                               |   | Associates,  Inc., |
|   |                               |   | its  general partner |
|   |                               |
|   |                               |
|   | By:                                | /s/  Gary Swenson |   |
|   |                               | Name:  Gary Swenson |
|   |                               | Title:  President |
|   |                               |
|   |                               |
|   | WINDWARD/MERBAN,  L.P.             |
|        |                                    |  |  |  |

 

----

 
|   | By:                                      | Windward  Capital Associates, |
|--------|------------------------------------------|-------------------------------|
|   |                                     | L.P.,  its general partner    |
|   |                                     |
|   |                                     | By:  Windward Capital    |
|   |                                     | Associates,  Inc.,            |
|   |                                     | its  general partner          |
|   |                                     |
|   |                                     |
|   | By:                                      | /s/  Gary Swenson        |   |
|   |                                     | Name:  Gary Swenson           |
|   |                                     | Title:  President             |
|   |                                     |
|   |                                     |
|   | WINDWARD/MERCHANT,  L.P.                 |
|   |                                     |
|   |                                     |
|   | By:                                      | Windward  Capital Associates, |
|   |                                     | L.P.,  its general partner    |
|   |                                     |
|   |                                     |
|   |                                     | By:                           | Windward  Capital |
|   |                                     |                          | Associates,  Inc., |
|   |                                     |                          | its  general partner |
|   |                                     |
|   |                                     |
|   | By:                                      | /s/  Gary Swenson        |   |
|   |                                     | Name:  Gary Swenson           |
|   |                                     | Title:  President             |
|   |                                     |
|   |                                     |
|   |    /s/  Andrew Goldfarb        |                          |
|   | Andrew  Goldfarb, Co-Trustee for the     |
|   | Andrew  and Denise Goldfarb Revocable    |
|   | Trust  of 1995                           |
|   |                                     |
|   |                                     |
|   |                                     |                          |
|   | Denise  Goldfarb, Co-Trustee for the     |
|   | Andrew  and Denise Goldfarb Revocable    |
|   | Trust  of 1995                           |
|   |                                     |
|   |                                     |
|   |                                     |                          |
|   | Steven  H. Goldfarb, Trustee for the     |
|   | Jessica  Anne Goldfarb Irrevocable Trust |
|        |                                          |                               |  |  |

 

----

 
|   |                                  |   |
|--------|---------------------------------------|--------|
|   | Steven  Goldfarb, Trustee for the     |
|   | Rebecca  Goldfarb Irrevocable Trust   |
|   |                                  |
|   |                                  |
|   |                                  |   |
|   | Robert  Rau, Co-Trustee for the Rau   |
|   | Family  Trust dated December 14, 1984 |
|   |                                  |
|   |                                  |
|   |                                  |   |
|   | Mercedes  Rau, Co-Trustee for the Rau |
|   | Family  Trust dated December 14, 1984 |
|   |                                  |
|   |                                  |
|   |                                  |   |
|   | John  Michael Leonis, Co-Trustee for  |
|   | the  Leonis Family 1989 Inter Vivos   |
|   | Family  Trust                         |
|   |                                  |
|   |                                  |
|   |                                  |   |
|   | Edith  Ann Leonis, Co-Trustee for     |
|   | the  Leonis Family 1989 Inter Vivos   |
|   | Family  Trust                         |
|   |                                  |
|   |                                  |
|   |                                  |   |
|   | Christopher  H. Bateman               |
|   |                                  |
|   |                                  |
|   |                                  |   |
|   | Linda  C. Rillorta                    |
|   |                                  |
|   |                                  |
|   |                                  |   |
|   | Richard  L. Ferraid                   |
|   |                                  |
|   |                                  |
|   |                                  |   |
|   | Debra  E. Ferraid                     |
|   |                                  |
|   |                                  |
|   |                                  |   |
|   | Dennis  L. Moore                      |

 

 

----

 
|   |                         |   |
|--------|------------------------------|--------|
|   | Linda  L. Moore              |
|   |                         |
|   |                         |
|   |                         |   |
|   | Mansoor  Mosallaie           |
|   |                         |
|   |                         |
|   |                         |   |
|   | Sepideh  Kessai              |
|   |                         |
|   |                         |
|   |                         |   |
|   | Darwin  Stuckey              |
|   |                         |
|   |                         |
|   |                         |   |
|   | Normand  O. Allard           |
|   |                         |
|   |                         |
|   |                         |   |
|   | Carol  A. Allard             |
|   |                         |
|   |                         |
|   |                         |   |
|   | Steven  Goldfarb             |
|   | (to  the extent a beneficial |
|   | owner  of any Company Stock) |

 

----

 

 
| Date: |   |   |   |
|-------|--------|--------|--------|

[Signature of Management

 Stockholder]

 

 
| Name:    |           |
|----------|----------------|
|     | [Please Print] |
|     |           |
| Address: |           |
|     |           |
|     |           |
|     |           |
|     |           |
|     |           |
|     |           |

 

 

Spousal Waiver

 

                                          [Name of spouse] herebywaives and releases any and all equitable or legal claims and rights, actual,inchoate or contingent which                                                       [he or she]may acquire with respect to the disposition, voting or control of the shares ofCompany Stock subject to this Agreement, except for rights in respect of theproceeds of any disposition of such Company Stock.

 

 
|                   |
|------------------------|
| [Signature  of spouse] |

 

----

 

 

Schedule of Management Stockholders

 

 

Andrew Goldfarb, a resident of California

 

Denise Goldfarb, a resident of California

 

Christopher Bateman, a resident of California

 

Linda Rillorta, a resident of California

 

Richard L. Ferraid, a resident of New Jersey

 

Debra Ferraid, a resident of New Jersey

 

Dennis Moore, a resident of California

 

Linda Moore, a resident of California

 

Mansoor Mosallaie, a resident of California

 

Sepideh Kessai, a resident of California

 

Darwin Stuckey, a resident of Ohio

 

Norm Allard, a resident of Ohio

 

Carol Allard, a resident of Ohio

 

Steven Goldfarb, a resident of California

 

----

 

Exhibit A

 

 

Form of Junior Subordinated Promissory Note

 

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EXHIBIT A TO STOCKHOLDERS AGREEMENT

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, ASAMENDED (THE “SECURITIES ACT”).  NOSALE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS NOTE (OTHER THAN TOTHE ISSUER THEREOF) MAY BE MADE UNLESS (A) EITHER PURSUANT TO AN EFFECTIVEREGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTIONFROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (B) IN ACCORDANCEWITH THE PROVISIONS OF THIS NOTE.

 

 

 

JUNIOR SUBORDINATED PROMISSORY NOTE

 

 

FOR VALUE RECEIVED, the undersigned, HCC INDUSTRIES INC., a Delawarecorporation [ALTERNATIVELY, INSERT NAME OF DESIGNEE OF COMPANY] (the“Obligor”), hereby promises to pay to [INSERT NAME OF MANAGEMENT STOCKHOLDER ORPERMITTED TRANSFEREE (AS THE CASE MAY BE)] (such person, or any AuthorizedTransferee (as defined in Section 3 hereof) of such person, the “Holder”) theprincipal amount of [INSERT PRINCIPAL AMOUNT OF NOTE] ($_________), plusinterest accrued but unpaid thereon, on [INSERT DATE WHICH IS [FIFTH]ANNIVERSARY OF THE DATE OF ISSUANCE OF THIS NOTE (or such later date as may berequired pursuant to the terms of any financing agreement of the Company).  Interest in the unpaid principal amounthereof shall accrue at an eight percent (8%) annual rate of interest, from thedate hereof until maturity, computed on the basis of a 365-day year for the actualnumber of days elapsed and shall be payable semi-annually on the first day ofJune and December in each year commencing with the June or December nextfollowing the issuance of this Note (each such semiannual date, an “InterestPayment Date”); provided that in the event that, on any Interest PaymentDate, the Company (as defined below) is permitted to defer any repurchases ofCommon Stock pursuant to Section 7.3 of the Stockholders Agreement, the Companyshall be permitted to defer such payment of interest until the next InterestPayment Date on which it is no longer permitted to defer any repurchases ofCommon Stock pursuant to Section 7.3 of the Stockholders Agreement (at whichtime all interest accrued to such date shall become due and payable).

 

 

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1.  Stockholders Agreement.  This Note has been issued pursuant to theprovisions of Article VII of the Stockholders Agreement dated as of February14, 1997 (the “Stockholders Agreement”), by and among by and among HCCIndustries Inc., a Delaware corporation (the “Company”), Windward CapitalAssociates, L.P., a Delaware limited partnership, Windward/Park HCC, L.L.C., aDelaware limited liability company, Windward/Merban, L.P., a Delaware limitedpartnership, Windward/Merchant, L.P., a Delaware limited partnership and themembers of the Company’s management listed in the Schedule of ManagementStockholders attached hereto, and such other persons or entities who or whichbecome parties to the Stockholders Agreement pursuant to the terms andconditions of the Stockholders Agreement. All capitalized terms used herein and not otherwise defined herein shallhave the same meanings as set forth in the Stockholders Agreement.

 

2.  Payment of Amounts.  Payments of principal and interest shall bemade in lawful money of the United States of America at the principal office ofthe Obligor upon presentation of this Note for notation of such payment hereon.

 

3.  Non-Transferability ofNote.  This Note is not negotiableand may be transferred by the Holder only to one or more of its Affiliates whoagree to be bound by the transfer restrictions hereunder (any such transfereeto whom this Note is transferred in compliance with the provisions of thisNote, an “Authorized Transferee”).  Withrespect to any such authorized transfer, this Note is transferable only bysurrender and cancellation of this Note at the principal office of the Obligor4232 Temple City Blvd., Rosemead, California 91770 or at such other location asshall at such time be the principal office of the Obligor, by the Holder inperson or by an attorney-in-fact duly authorized in writing.  Upon any such authorized transfer a newnote, in the name of such Authorized Transferee(s), in substantially the formof this Note and for the aggregate unpaid principal amount hereof, will beissued in exchange hereof.

 

4.  Registered Holder.  The Obligor, and any agents of the Obligor,may deem and treat the Holder as the registered holder hereof, and as theabsolute owner of this Note, for the purpose of receiving payment of or onaccount of the principal of and interest on this Note

 

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and neither the Obligor nor any such agent shall be affected by anynotice to the contrary.  The Obligor,and any agent of the Obligor, may without liability refuse to recognize anyassignee or other holder of this Note, other than any Authorized Transferee, asowner of this Note for any and all purposes whatsoever.

 

5.  Optional Prepayment.  The amounts owed under this Note areprepayable (at the discretion of the Obligor) at any time and from time totime, in whole or in part, upon notice to the Holder given by certified mail,return receipt requested, not less than 10 Business Days prior to the datefixed for prepayment, at a prepayment price equal to the principal amount ofthis Note to be prepaid, together with the interest accrued but unpaid hereon,to the date fixed for prepayment.  Anyprepayment of less than the entire principal amount of this Note (plus allaccrued but unpaid interest thereon) shall be applied first towards the paymentof unpaid interest hereon and then to the unpaid principal hereof.

 

6.  Mandatory Prepayment.  The Obligor covenants and agrees that,within 10 Business Days following the consummation of (a) a Compelled Sale or(b) a sale of all or substantially all of the assets of or equity interests inthe Company to a Third Party, it shall give written notice thereof to theHolder.  Subject to Section 9 hereof,within 10 Business Days following the date of delivery of such notice theObligor will prepay this Note in full, at a prepayment price equal to theoutstanding principal amount of this Note, together with the interest accruedbut unpaid hereon, to the date fixed for prepayment.

 

7.  Offset.  The indebtedness evidenced hereunder may bereduced or offset by the Obligor in respect of any and all indebtedness owed tothe Obligor by the Holder.

 

8.  Events of Default.

 

(a)  Subject to the provisionsof Section 9 hereof and to the proviso set forth in the preamble hereto, an“Event of Default” occurs if: (i) the Obligor defaults in the payment of anyinterest on the Note when the same becomes due and payable, and such defaultcontinues for 10 days; (ii) the Obligor defaults in the payment 

 

3

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of the principal of the Note when the same becomes due and payable atthe stated maturity, upon mandatory redemption, acceleration or otherwise; or(iii) the Obligor or any of its subsidiaries pursuant to or within the meaningof any Bankruptcy Law (as defined in the Subordinated Note Agreement): (A)commences a voluntary case; (B) consents to the entry of an order for reliefagainst it in an involuntary case; (C) consents to the appointment of acustodian of it or for any substantial part of its property; (D) makes ageneral assignment for the benefit of its creditors; or (E) a court ofcompetent jurisdiction enters an order or decree under any Bankruptcy Law that:(1) is for relief against the Obligor in an involuntary case; (2) appoints acustodian of the Obligor or for any substantial part of its property; or (3)orders the winding up or liquidation of the Obligor or any of its subsidiaries,and the order or decree remains unstayed and in effect for 60 days.

 

(b)  Subject to the provisionsof Section 9 hereof, if an Event of Default pursuant to clause (a)(iii) occursand is continuing, then the amounts amount owed under the Note shall ipsofacto become and be immediately due and payable without any declarationor other act on the part of the Holder. Subject to the provisions of Section 9 hereof, upon an Event of Defaultpursuant to clauses (a)(i) or (a)(ii) above, the Holder, at its option, maydeclare the entire principal amount of this Note to be, and such Note shallforthwith mature and become, due and payable, but only after such Holdernotifies the Obligor of the default and the Obligor does not cure the defaultwithin 30 days after receipt of such notice; such notice by the Holder mustspecify the default and demand that it be remedied.

 

9.  Subordination.  The principal amount of and the interest onthis Note shall be fully subordinated and junior to the prior payment in fullin cash all Senior Debt (as hereinafter defined) of the Obligor, whetheroutstanding at the date of this Note or created or incurred by the Obligorafter the date of this Note on the terms and conditions set forth below:

 

(a)  Upon maturity of any SeniorDebt by lapse of time, acceleration or otherwise, then all such mature SeniorDebt shall first be paid in full 

 

4

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before any payment on account of principal or interest is made on thisNote.

 

(b)  In the event of anyinsolvency, bankruptcy, liquidation, reorganization or other similarproceedings, or any receivership proceedings in connection therewith, relativeto the Obligor or its creditors or its property, and in the event of anyproceedings for partial or total liquidation, dissolution or other winding upof the Obligor, whether or not involving insolvency or bankruptcy proceedings,then all Senior Debt shall first be paid in full before any payment on accountof principal or interest is made upon this Note.  In any of the proceedings referred to in the first sentence ofthis subparagraph (b) (“Insolvency Proceedings”), unless and until all SeniorDebt shall have been paid in full, if any payment shall have been made, or anypayment or distribution of any kind or character, whether in cash, property,stock or obligations, which may be payable or deliverable in respect of theprincipal amount of or interest on this Note shall be made, then such amountsshall be paid or delivered directly to the holders of Senior Debt (or to abanking institution selected by the court or person making the payment ordelivery or designated by any holder of Senior Debt) for application in paymentthereof, and the holders of Senior Debt shall be entitled to enforce all claimsof the Holder with respect to the principal and interest payable hereunder andto take generally any action in connection with such Insolvency Proceedingswhich the Holder hereof might otherwise take in respect of such Holder’s claimshereunder.

 

(c)  During the continuance ofany default in the payment of any Senior Debt or any other default (whether ornot matured) under any instrument or agreement evidencing Senior Debt, (i) theObligor shall not make, and the Holder shall not accept, any payment ofprincipal of or interest on, or purchase or acquire for value, this Note, and(ii) the Holder shall not commence any Insolvency Proceedings or take any otherlegal or other action of any kind to enforce any of its rights to paymenthereunder.

 

5

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(d)  Any payment of principal orinterest on this Note made to or received by the Holder other than incompliance with this Section 9 shall be held in trust for the benefit of andpaid over to the holders of Senior Debt.

 

(e)  Until the Senior Debt shallhave been indefeasibly paid in full, in the event that, and during thecontinuance of any Event of Default described in Section 8(a) hereof, all orany portion of the unpaid principal amount of this Note shall have beendeclared due and payable pursuant to the provisions of Section 8 hereof, suchdeclarations shall not be effective until the earlier of (i) the date on whichan Event of Default under Section 8(a)(iii) has occurred, or (ii) the date onwhich the maturity of any Senior Debt is accelerated.

 

(f)  Subject to the indefeasiblepayment in full of all Senior Debt, the Holder shall be subrogated to therights of the holders of Senior Debt to receive payments or distributions ofassets of the Obligor payable or distributable to the holders of Senior Debt,until this Note and interest hereon shall be paid in full and, as between theObligor, its creditors other than the holders of Senior Debt, and the Holder,no payments or distributions otherwise payable or deliverable in respect tothis Note but, by virtue of the provisions hereof, paid or delivered to theholders of Senior Debt shall be deemed to be a payment by the Obligor onaccount of Senior Debt and no payments or distributions paid to the Holder, byvirtue of subrogation herein provided for, shall be deemed to be a payment bythe Obligor on account of this Note.

 

(g)  The provisions of thisSection 9 are for the purpose of defining the relative rights of the holders ofSenior Debt on the one hand and the Holder on the other hand, and as betweenthe Obligor and the Holder, nothing herein shall impair the obligation of theObligor, which is unconditional and absolute, to pay to the Holder theprincipal hereof and any interest thereon in accordance with its terms(provided, however, that this provision is not intended to limit therestrictions on payments on this Note set forth in Section 9(c) hereof).

 

6

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(h)  As used herein, the term“Senior Debt” shall mean all Debt (as defined in the Subordinated NoteAgreement) of HCC Industries Inc., a Delaware corporation, for principal,interest, fees and other amounts (i) with respect to or relating to the CreditAgreement and the Subordinated Note Agreement, (ii) all Senior Debt (as definedin the Subordinated Note Agreement) and (iii) all Debt with respect to orrelating to any refinancing, refunding, renewal, extension, amendment ormodification of any Debt referred to in clauses (i) and (ii) above.

 

10.  No Recourse AgainstAffiliates.  No recourse for thepayment of principal of or interest on this Note, or for any claim based hereonor otherwise in respect hereof, or in relation to the creation of anyindebtedness represented hereby, shall be had against any incorporator,stockholder, officer of the Obligor or any of its Affiliates or of anysuccessor thereof, either directly or through the Obligor or any of itsAffiliates or any successor thereof, whether by virtue of any statute or ruleof law or by the enforcement of any assessment or penalty or otherwise, allsuch liability being, by the acceptance hereof and as part of the considerationfor the issue hereof, expressly waived or released.

 

11.  Applicable Law.  **THIS NOTESHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THELAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAWPRINCIPLES THEREOF OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERALCORPORATION LAW.**

 

12.  Headings; No Third PartyBeneficiaries.  The headings and captions contained herein are for convenience ofreference only and shall not control or affect the meaning or construction ofany of the provisions hereof.  Except asotherwise expressly provided herein (including, without limitation, thesubordination provisions of Section 9 hereof), the provisions contained in thisNote are for the sole benefit of the Holder, and they shall not be construed asconferring, and are not intended to confer, any rights, remedies or otherbenefits hereunder on any other persons or entities.

 

7

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13.  Successors and Assigns.  All covenants and agreements of the Obligorunder this Note shall be binding on the Obligor and its successors and assigns.

 

14.           Severability.  The invalidity or unenforceability of anyprovision of this Note in any jurisdiction shall not affect the validity,legality or enforceability of the remainder of this Note in such jurisdictionor the validity, legality or enforceability of this Note, including any suchprovision, in any other jurisdiction, it being intended that all rights andobligations of the parties hereunder shall be enforceable to the fullest extentpermitted by law.

 

IN WITNESS WHEREOF, the Obligor has caused this Note to be dulyexecuted effective as of this         day of        ,           .

 

 

**[INSERTNAME OF OBLIGOR]**

 
|   |   |
|--------|--------|
|   | By:    |   |   |
|   |   | Name: |
|   |   | Title: |

 

8

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