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EXHIBIT 10.39
EXECUTION COPY
PARTICIPATION RIGHTS AGREEMENT
PARTICIPATION RIGHTS AGREEMENT, dated as of September 9, 1997, by
and among ▇▇▇▇▇/▇▇▇▇▇▇, INC., a Texas corporation (the "COMPANY"), GREAT-WEST
LIFE & ANNUITY INSURANCE COMPANY, LIFE INVESTORS INSURANCE COMPANY OF AMERICA
and NATIONWIDE LIFE INSURANCE COMPANY (each a "PURCHASER" and collectively the
"PURCHASERS") and the holders of the Company's Common Stock, no par value per
share (the "COMMON STOCK"), listed in Schedule I attached hereto or
subsequently made a party hereto pursuant to Section 6 hereof (each a
"STOCKHOLDER" and collectively the "STOCKHOLDERS").
1. Background. The Company and the Purchasers have entered into a
Note and Warrant Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of
September 8, 1997, pursuant to which the Company has agreed, among other
things, to issue and sell its Common Stock Purchase Warrants Expiring August 9,
2004, (the "WARRANTS"), evidencing rights to purchase an aggregate of 3,050,847
shares (subject to adjustment as provided therein) of Common Stock. This
agreement shall become effective upon the issuance of such Warrants.
2. Transfers of Common Stock.
2.1 General. Subject to compliance with the provisions of
Section 2.2 hereof, any Stockholder may transfer shares of Common Stock or
Common Stock Equivalents held by such Stockholder in accordance with applicable
law so long as either (i) such Stockholder first delivers to the Company and
the Tagalong Holders a written agreement of the proposed transferee to become a
party to and be bound by the terms and provisions of this Agreement (unless
such proposed transferee is already a party hereto) or (ii) the transfer (a) is
pursuant to a public offering registered under the Securities Act or (b) is
made in accordance with Rule 144 under the Securities Act (or any similar
successor provision) (a "RULE 144 TRANSFER").
2.2 Rights of Participation. If a Stockholder or Affiliate
thereof proposes to sell shares of Common Stock for value (such Stockholder or
Affiliate thereof being referred to herein as a "TRANSFEROR"), but excluding
(i) a sale which is pursuant to a public offering registered under the
Securities Act or is a Rule 144 Transfer, (ii) a sale to an Affiliate of such
Transferor or (iii) a sale to a Person that is a stockholder of the Company as
of the date of this Agreement, then such Transferor shall offer (the
"PARTICIPATION OFFER") to include in the proposed sale a number of shares of
Common Stock designated by any Tagalong Holder (including, without limitation,
shares of Common Stock issued upon exercise of Warrants subsequent to delivery
of notice by such Transferor to the Tagalong Holders of such proposed sale),
not to exceed, in respect of any such Tagalong Holder, the number of shares
equal to the product of (a) the aggregate number of shares of Common Stock to
be sold by the Transferor to the proposed transferee and (b) a fraction, the
numerator of which shall be the number of shares of Fully Diluted Common Stock
held by such Tagalong Holder and the denominator of which shall be the number
of shares of Fully Diluted
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Common Stock held by the Transferor and all Tagalong Holders. The Transferor
shall give written notice to each Tagalong Holder of the Participation Offer
(the "PARTICIPATION OFFER NOTICE") at least 45 days prior to the proposed sale.
The Participation Offer Notice shall specify the proposed transferee, the
number of shares of Common Stock to be sold to such transferee, the amount and
type of consideration to be received therefor, and the place and date on which
the sale is to be consummated. Each Tagalong Holder who wishes to include
shares of Common Stock in the proposed sale in accordance with this Section 2.2
shall so notify the Transferor not more than 30 days after the date of receipt
of the Participation Offer Notice. The Participation Offer shall be conditioned
upon the Transferor's sale of shares pursuant to the transactions contemplated
in the Participation Offer Notice with the transferee named therein. If any
other Tagalong Holders have accepted the Participation Offer, the Transferor
shall reduce to the extent necessary the number of shares it otherwise would
have sold in the proposed sale so as to permit such other Tagalong Holders to
sell the number of shares that they are entitled to sell under this Section
2.2, and the Transferor and such other Tagalong Holders shall sell the number
of shares specified in the Participation Offer to the proposed transferee in
accordance with the terms of such sale set forth in the Participation Offer
Notice.
2.3 Restrictive Legend. Contemporaneously with the execution
and delivery of this Agreement, each certificate representing shares of
presently outstanding Common Stock held by a Stockholder shall be stamped or
otherwise imprinted with a legend (or shall be exchanged for certificates
bearing a legend) in substantially the following form:
"The shares represented by this certificate are subject to certain
restrictions set forth in a Participation Rights Agreement dated as of
September 9, 1997 among the Corporation, Great-West Life & Annuity
Insurance Company, Life Investors Insurance Company of America and
Nationwide Life Insurance Company and the holders of the Corporation's
outstanding Common Stock parties thereto, and such shares may not be
transferred except in compliance with such restrictions. Such
Participation Rights Agreement is on file at the office of the
Corporation and a copy thereof will be furnished without charge to the
holder of the shares represented by this certificate upon written
request."
Each certificate issued upon the direct or indirect transfer of any such
outstanding Common Stock held by a Stockholder shall also be stamped or
otherwise imprinted with the foregoing legend.
2.4 Effect of Violation. Any purported transfer of Common
Stock or Common Stock Equivalents which is not permitted by this Agreement or
which is in violation of such Agreement shall be void and of no force and
effect whatsoever.
3. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
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"AFFILIATE" shall mean, with respect to any Person, any other
Person who, directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. As used herein, the term "control"
means possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall mean this Participation Rights Agreement, as
the same may be amended from time to time.
"COMMON STOCK" shall have the meaning specified in the
introductory paragraph of this Agreement.
"COMMON STOCK EQUIVALENTS" shall mean all options, rights or
warrants to purchase shares of Common Stock, all securities convertible into or
exchangeable for shares of Common Stock and all shares of Common Stock into
which shares of Common Stock of another class have been converted.
"COMPANY" shall have the meaning specified in the introductory
paragraph of this Agreement.
"FULLY DILUTED COMMON STOCK" shall mean, at any time, the then
outstanding Common Stock plus (without duplication) all shares of Common Stock
issuable, whether at such time or upon the passage of time or the occurrence of
future events, upon the exercise, conversion or exchange of all then
outstanding options, rights or warrants (including, without limitation, the
Warrants) or securities convertible into or exchangeable for Common Stock.
"RULE 144 TRANSFER" shall have the meaning specified in
Section 2.1.
"PARTICIPATION OFFER" shall have the meaning specified in
Section 2.2.
"PARTICIPATION OFFER NOTICE" shall have the meaning specified in
Section 2.2.
"PERSON" shall mean a corporation, an association, a partnership,
a limited liability company, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
"PURCHASE AGREEMENT" shall have the meaning specified in
Section 1.
"PURCHASER" and "PURCHASERS" shall have the respective meanings
specified in the introductory paragraph of this Agreement.
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"REQUIRED HOLDERS" shall mean any holder or holders of 66 2/3%
(by number of shares of Common Stock issued or issuable) of the Warrants or of
Common Stock issued upon the exercise of Warrants.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any successor statute thereto.
"STOCKHOLDERS" shall mean the parties to this Agreement who are
record or beneficial owners of any shares of Common Stock.
"TAGALONG HOLDER" shall mean any holder of (i) Warrants or (ii)
Common Stock issued upon the exercise of Warrants.
"TRANSFEROR" shall have the meaning specified in Section 2.2.
"WARRANTS" shall have the meaning specified in Section 1.
4. Agreement. A copy of this Agreement shall be filed with the
permanent records of the Company and shall be kept at all times at the
principal place of business of the Company.
5. Further Assurances. Each party agrees to do, or cause to be done,
such further acts and to execute and deliver, or to cause to be executed and
delivered, such further agreements, instruments, certificates and other
documents as may be necessary or appropriate to effectuate and carry out the
purposes of this Agreement.
6. Additional Stockholders to be Made Parties. In addition, the
Company agrees that it shall cause any Person who subsequently acquires ten
percent or more of the outstanding Common Stock of the Company to become a
party to this Agreement and a "Stockholder" for all purposes hereunder by
executing and delivering a supplement to this Agreement in form, scope and
substance satisfactory to the Purchasers.
7. Amendments and Waivers. This Agreement may be amended and the
Stockholders and the Company may take any action herein prohibited or omit to
perform any act herein required to be performed, only if the prior written
consent of the Required Holders to such amendment, action or omission to act
shall have been obtained.
8. Notices. All communications provided for hereunder shall be sent
by first-class mail and (a) if addressed to a Tagalong Holder, addressed to
such Tagalong Holder in the manner set forth in the Purchase Agreement, or at
such other address as such Tagalong Holder shall have furnished to the other
parties hereto in writing, (b) if addressed to the Company, at ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: President, or at such
other address, or to the attention of such other officer, as the Company shall
have furnished to the other parties hereto in writing; provided, however, that
any such communication to the Company may also, at the option of any of the
other
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parties hereto, be either delivered to the Company at its address set forth
above or to any officer of the Company, or (c) if to any Stockholder, addressed
to such Stockholder at its address set forth in Schedule I hereto, or at such
other address as such party shall have furnished to the other parties hereto in
writing
9. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and assigns. In
addition, and whether or not any express assignment shall have been made, the
provisions of this Agreement which are for the benefit of the Purchaser shall
also be for the benefit of and enforceable by any subsequent Tagalong Holder.
10. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
11. Specific Performance. The parties hereto recognize and agree that
money damages may be insufficient to compensate the Tagalong Holders for
breaches by the Company or the Stockholders of the terms hereof and,
consequently, that the equitable remedy of specific performance of the terms
hereof will be available in the event of any such breach.
12. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York.
13. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement, or
caused this Agreement to be executed and delivered by their respective officers
thereunto duly authorized, as of the date first above written.
▇▇▇▇▇/▇▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: CEO
GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By:
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Name:
Title:
By:
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Name:
Title:
LIFE INVESTORS INSURANCE COMPANY
OF AMERICA
By:
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Name:
Title:
