EXHIBIT C
EMPLOYEE STOCKHOLDERS AGREEMENT
Employee Stockholders Agreement dated as of June 1, 1997 among CSN,
INC., a Delaware corporation (the "COMPANY"), KCSN ACQUISITION COMPANY, L.P., a
Delaware limited partnership ("KCSN"), and each of the employees of the Company
which have executed this Agreement or have otherwise agreed to be bound by the
provisions hereof (the "EMPLOYEE STOCKHOLDERS").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement, the
following terms have the indicated meanings:
"AFFILIATE" of a person means any other person controlling, controlled
by or under common control with such person, whether by ownership of voting
securities, by contract or otherwise, and in the case of KCSN shall include any
member of KCSN and in the case of the Company shall include any officer or
director of the Company.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means, with respect to any Employee Stockholder, (i) the
commission by the Employee Stockholder of theft or embezzlement of Company
property or other acts of dishonesty or criminal conduct harmful in any
significant respect to the business, property or reputation of the Company or
the commission by the Employee Stockholder of other acts harmful in any
significant respect to the business, property or reputation of the Company; (ii)
the commission by the Employee Stockholder while an employee of the Company or
its Affiliates of an act determined in good faith by the Company's Board of
Directors to amount to gross, willful or wanton negligence of the Employee
Stockholder's duties under the terms of his or her employment; (iii) the refusal
by the Employee Stockholder while an employee of the Company or its Affiliates
to perform, or substantial neglect of, the duties assigned to the Employee
Stockholder by the Company; (iv) any significant violation by the Employee
Stockholder of any statutory or common law duty of loyalty to the Company; or
(v) a material breach by the Employee Stockholder of his or her employment
agreement (if any) with the Company. The determination of Cause shall be made
in good faith by the Board of Directors after written notice to the Employee
Stockholder and, in the case of conduct described in clause (iii), (iv) or (v)
above, a reasonable opportunity to cure such conduct.
"COMMON STOCK" means the Company's Nonvoting Common Stock, $.01 par
value.
"EMPLOYEE STOCK" means Stockholder Shares held by the Employee
Stockholders.
"FAIR MARKET VALUE" means, the fair market value of a share of Common
Stock as determined in good faith by the Board.
"INDEPENDENT THIRD PARTY" means any person who does not own in excess
of 10% of the Common Stock on a fully-diluted basis, who is not controlling,
controlled by or under common control with any such 10% owner of Common Stock
and who is not the spouse, ancestor or descendant (by birth or adoption) of any
such 10% owner of Common Stock.
"INVESTOR STOCK" means the Voting Stock held by KCSN, its Affiliates
and their Permitted Transferees.
"EMPLOYEE STOCK" means Stockholder Shares held by the Employee
Stockholders.
"ORIGINAL COST" means a Employee Stockholder's average original
purchase price per share of Employee Stock and held by such Employee
Stockholder, as reflected in the records of the Company.
"PERMITTED TRANSFEREE" is defined in Section 3(c).
"SALE OF THE COMPANY" means the acquisition of beneficial ownership of
a majority or more of the outstanding voting securities of the Company by any
person or "group" (as that term is used in Regulation 13D under the Securities
Exchange Act of 1934) other than stockholders of the Company as of the date
hereof and their respective Affiliates.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STOCKHOLDER SHARES" means (i) all shares of Common Stock held or
deemed to be held by the Employee Stockholders, including all shares of Common
Stock acquired pursuant to exercise of Options or conversion of Notes, and (ii)
all shares of Common Stock or other securities issued or issuable directly or
indirectly with respect to the securities referred to in clause (i) by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. Stockholder
Shares shall cease to be such when they have been sold (x) pursuant to a
registered public offering under the Securities Act, or (y) to the public
pursuant to Rule 144 under the Securities Act or any successor provision.
"VOLUNTARY TERMINATION" means the voluntary termination of employment
by a Employee Stockholder within three years after the date hereof.
"VOTING STOCK" means the common stock, par value $.01 per share, of
the Company.
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SECTION 2. REPURCHASE ON TERMINATION OF EMPLOYMENT.
(a) REPURCHASE OPTION. Upon the termination of a Employee
Stockholder's employment by the Company and its subsidiaries:
(i) if such termination is for any reason other than for Cause
or a Voluntary Termination, the Company may elect to repurchase all but not
less than all of the Employee Stock held by such Employee Stockholder and
his Permitted Transferees at a cash price per share equal to Fair Market
Value (as of the date of termination); and
(ii) if such termination is for Cause or is a Voluntary
Termination, the Company may elect to repurchase all but not less than all
of the Employee Stock held by such Employee Stockholder and his Permitted
Transferees at a cash price per share equal to the lesser of Fair Market
Value (as of the date of termination and Original Cost).
(b) REPURCHASE PROCEDURE. The Company may exercise its option to
purchase Employee Stock pursuant to Section 2(a) by delivery to the Employee
Stockholder, within 30 days after the termination of such Employee Stockholder's
employment, of a written notice specifying the number of shares of Employee
Stock to be repurchased. The closing of any repurchase of securities pursuant
to this Section 2 shall take place not later than 90 days following the
termination of the Employee Stockholder's employment. The shares of Employee
Stock to be repurchased by the Company shall be satisfied (i) first, from the
shares of Employee Stock held by the Employee Stockholder at the time of
delivery of the Repurchase Notice and (ii) second, if the number of such shares
is less than the number of shares to be repurchased by the Company, from the
shares of Employee Stock held by the Permitted Transferees of such Employee
Stockholder in such proportions as shall be determined by the Employee
Stockholder.
SECTION 3. RESTRICTIONS ON TRANSFER.
(a) PROHIBITION ON TRANSFERS. No Employee Stock may be sold,
transferred, pledged or otherwise disposed of (including by gift) otherwise than
in accordance with this Section 3. No Employee Stock may be transferred without
the prior written consent of the Company, which will not be unreasonably
withheld.
(b) RIGHT OF FIRST REFUSAL.
(i) Not less than 30 days prior to any proposed transfer of
Employee Stock, the transferring Employee Stockholder shall deliver to the
Company a written notice (the "OFFER NOTICE") specifying in reasonable
detail the number of shares to be transferred, the identity of the
transferee(s), the price (which shall be payable solely in cash) and the
other terms and conditions of the proposed transfer. The Company may elect
to purchase all but not less than all of the Employee Stock proposed to be
transferred upon the terms and conditions specified in the Offer Notice by
delivering to the transferring Employee Stockholder a written notice of
such election within the 20-day period following its receipt of the Offer
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Notice (the "ELECTION PERIOD"). The purchase of such shares by the Company
shall be consummated within 30 days following expiration of the Election
Period.
(ii) In the event that the Company does not elect to purchase the
Employee Stock described in the Offer Notice, during the 30-day period
following expiration of the Election Period, the transferring Employee
Stockholder may transfer such Employee Stock to the transferee(s) specified
in the Offer Notice on terms no more favorable to such transferee(s) than
those specified in the Offer Notice. Any shares of Employee Stock not
transferred within such 30-day period shall again be subject to
Section 3(b)(i) in connection with any proposed transfer thereof.
(c) CERTAIN PERMITTED TRANSFERS. Sections 3(a) and 3(b) shall not
apply to transfers of Employee Stock (i) pursuant to Section 5 hereof, or (ii)
within a Employee Stockholder's family group (including by will or pursuant to
applicable laws of descent and distribution); provided that, in connection with
any transfer pursuant to this clause (ii), each transferee (a "PERMITTED
TRANSFEREE") agrees in writing to be bound by the provisions of this Agreement.
Any shares of Employee Stock transferred to a Permitted Transferee shall
continue to be Employee Stock for purposes of this Agreement. A Employee
Stockholder's "FAMILY GROUP" means such Employee Stockholder's spouse and lineal
descendants (whether natural or adopted) and any trust formed and maintained
solely for the benefit of such Employee Stockholder, such Employee Stockholder's
spouse and/or such Employee Stockholder's lineal descendants.
SECTION 4. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) STOCK LEGEND. The certificates representing Stockholder Shares
shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED ON _______________, 19__, HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH
IN AN EMPLOYEE STOCKHOLDERS AGREEMENT DATED AS OF JUNE 1, 1997
AMONG CSN, INC. AND CERTAIN STOCKHOLDERS THEREOF, A COPY OF WHICH
MAY BE OBTAINED WITHOUT CHARGE BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS.
(b) OPINION OF COUNSEL. No holder of Stockholder Shares may sell,
transfer or dispose of any such stock (other than pursuant to an effective
registration statement under the
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Securities Act) without first delivering to the Company upon its request an
opinion of counsel reasonably acceptable in form and substance to the Company
that registration under the Securities Act is not required in connection with
such transfer.
SECTION 5. SALE OF THE COMPANY. If the holders of a majority of
the Investor Stock then outstanding approve the sale of the Company to an
Independent Third Party, whether by merger, consolidation, sale of all or
substantially all of its assets, sale of all of the outstanding Common Stock or
otherwise (an "APPROVED SALE"), the Employee Stockholders shall consent to and
raise no objections against such Approved Sale (including exercising any rights
of appraisal) and shall take all necessary and desirable actions in their
capacities as stockholders in connection with the consummation of such Approved
Sale. If the Approved Sale is structured as a sale of stock, the Employee
Stockholders shall agree to sell all of their shares of Common Stock and rights
to acquire shares of Common Stock on the terms and conditions approved by the
holders of a majority of the Investor Stock then outstanding. The obligations
of the Employee Stockholders with respect to any Approved Sale are subject to
the condition that, upon the consummation of such Approved Sale, all of the
holders of Common Stock will receive the same form and amount of consideration
per share of Common Stock, or if any holders are given an option as to the form
and amount of consideration to be received, all holders will be given the same
option.
SECTION 6. LOCK-UP. In the event that any shares of Voting Stock
are registered for sale under the Securities Act (other than on Form S-8), each
Employee Stockholder agrees that for a period of 180 days from the consummation
of any such offering, he shall not offer for sale, sell, or otherwise dispose
of, directly or indirectly, any shares of Voting Stock, including any shares of
Voting Stock issued on conversion of the Common Stock, or sell or grant options,
rights or warrants with respect to any shares of Voting Stock, without the prior
written consent of the managing underwriter for any such offering.
SECTION 7. ASSIGNMENT OF RIGHTS; REPRESENTATIONS ON SALE. The
Company may assign to one or more third parties its right to repurchase shares
of Employee Stock pursuant to Section 2, subject only to compliance with
applicable securities laws. The purchasers of Employee Stock pursuant to
Sections 2 and 3 shall be entitled to receive customary representations and
warranties from the seller regarding the seller's good title to, and freedom
from liens, encumbrances and restrictions on the sale of, such Employee Stock.
SECTION 8. TRANSFERS IN VIOLATION OF AGREEMENT. Any transfer or
attempted transfer of any Stockholder Shares in violation of this Agreement
shall be void, and the Company shall not be obligated to record such transfer on
its books or treat any purported transferee of such Stockholder Shares as the
owner of such shares for any purpose.
SECTION 9. AMENDMENT AND WAIVER. Except as otherwise provided
herein, no amendment or waiver of any provision of this Agreement shall be
effective against the Company, KCSN, or the Employee Stockholders unless such
amendment or waiver is approved in writing by the Company, KCSN, or the holders
of at least a majority of the then-outstanding Employee Stock, as the case may
be. The failure of any party to enforce any provision of this Agreement
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shall not be construed as a waiver of such provision and shall not affect the
right of such party thereafter to enforce each provision of this Agreement in
accordance with its terms.
SECTION 10. SEVERABILITY. If any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision or any other jurisdiction, but this
Agreement shall be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.
SECTION 11. ENTIRE AGREEMENT. Except as otherwise expressly set
forth herein, this document embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of and be enforceable by the Company, KCSN and their
respective successors and transferees, and by the Employee Stockholders and
their Permitted Transferees, in each case so long as such persons hold
Stockholder Shares.
SECTION 13. COUNTERPARTS. This Agreement may be executed in
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
SECTION 14. REMEDIES. The Company and KCSN shall be entitled to
enforce their rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that the Company and KCSN may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief (without posting a bond or other
security) in order to enforce or prevent any violation of the provisions of this
Agreement. In the event of any legal proceedings seeking to enforce any rights
or obligations under this Agreement, the prevailing party shall be entitled to
recover its attorneys fees and costs in connection with such proceeding from the
non-prevailing party.
SECTION 15. NOTICES. Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, or sent by
telecopy (confirmed in writing) or sent by reputable overnight courier service
for next-day delivery (charges prepaid) to the Company or KCSN at their
respective addresses set forth below and to any other recipient at the address
indicated on the schedules hereto and to any subsequent holder of Employee Stock
subject to this Agreement at such address as indicated by the Company's records,
or at such address or to the attention of such other person as the recipient
party has specified by prior written notice to the
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sending party. Notices will be deemed to have been given hereunder when
delivered personally, on the date of transmission if sent by confirmed telecopy
(or on the next business day if transmission is not made on a business day) or
on the next business day after deposit with a reputable overnight courier
service.
The Company's address is:
CSN, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
KCSN's address is:
c/o Kohlberg & Company, L.L.C.
000 Xxxxx Xxxxxx
Xx. Xxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telecopy: (000) 000-0000
SECTION 16. GOVERNING LAW. The corporate law of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and not
the law of conflicts, of California.
SECTION 17. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
SECTION 21. SPOUSAL CONSENT. By his or her signature on this
Agreement, each spouse of a Employee Stockholder agrees to be bound by the
provisions hereof to the extent of such spouse's interest in any Stockholder
Shares and further agrees (i) in the event of the death of such spouse, the
surviving Employee Stockholder shall succeed to such deceased spouse's interest
in the Stockholder Shares held by such Employee Stockholder on the date of
death, (ii) in the event of separation or dissolution of marriage, the Employee
Stockholder shall have the right to purchase the spouse's interest in the
Stockholder Shares held by such Employee Stockholder at Fair Market Value (as
defined in Section 1), and (iii) any decree of divorce or dissolution of
marriage, separate maintenance agreement or property settlement between any
Employee Stockholder and his or her spouse shall include a provision granting
such Employee Stockholder such spouse's entire interest in the Stockholder
Shares held by such Employee Stockholder as part of the division of the
community property or separate property of the marriage.
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SECTION 23. TERMINATION; SURVIVAL. This Agreement (other than
Section 6 hereof) shall terminate and be of no further force and effect upon
consummation of the Company's initial public offering of Common Stock under the
Securities Act. This Agreement shall terminate in its entirety on the tenth
anniversary of the date hereof.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CSN, INC.
By:
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Xxxxxxx Xxxxxxxx
Chief Executive Officer
KCSN ACQUISITION COMPANY, L.P.
By KCSN Management Company, L.P.
Its General Partner
By KCSN G.P., Inc.
Its General Partner
By:
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Xxxxxx X. Xxxxxxx
Vice President
EMPLOYEE STOCKHOLDERS:
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