Exhibit 10.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
INTERNATIONAL AUTOMOTIVE COMPONENTS GROUP NORTH AMERICA, LLC
This Amended and Restated Limited Liability Company Agreement (the
"Agreement"), as it may be further amended, dated as of October 11, 2007 (the
"Effective Date"), is by and among International Automotive Components Group
North America, LLC, a Delaware limited liability company (the "Company"), and
the Stockholders identified on Schedule 1, and provides the terms under which
the Company was organized and will operate.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
I. ORGANIZATIONAL MATTERS
1.1 FORMATION/PURPOSE. (a) The Company was formed by the filing of a
Certificate of Formation with the Secretary of State of the State of Delaware on
March 31, 2007 pursuant to and in accordance with the Delaware Limited Liability
Company Act of 1992, as amended (the "Act").
(b) The Company is organized to (i) be a holding company for various
automotive interiors systems components businesses, including the Lear North
American ISD Business and the C&A North American GST Business, and (ii) engage
in all such other lawful transactions and business activities as may be
determined by the Board, subject to Section 3.4(c).
1.2 GOVERNANCE AS IF A DELAWARE CORPORATION. The rights of the members of
the Company (which are referred to herein as "Stockholders") will be governed by
the applicable Constituent Documents, which will be interpreted as if the
Company were a corporation incorporated under the Delaware General Corporation
Law (the "DGCL") and its members were stockholders of such corporation.
Notwithstanding the foregoing:
(a) Except as required by the Act, neither the Charter, any amendments
thereto nor any other organizational instrument (other than the Certificate of
Formation) will be required to be filed with the Secretary of State of the State
of Delaware as required under Sections 101, 103, 241 or 242 of the DGCL (any
such document which would otherwise be so required to be filed with the
Secretary of State of the State of Delaware will be filed with the Secretary of
the Company);
(b) All taxes and fees otherwise payable by the Company pursuant to
Section 391 of the DGCL will be determined under and payable solely in
accordance with the Act; and
(c) Notwithstanding any other provision hereof, neither the Company
nor any other Person will be subject to the provisions of DGCL Sections 145,
154, 160(a), 170, 172, 173, 174, 203, 220 or 282.
1.3 LIABILITY TO THIRD PARTIES. Except as otherwise set forth in this
Agreement or the other Constituent Documents, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise, will
be solely its debts, obligations and liabilities and none of the direct or
indirect equity holders, directors or Affiliates of the Company (the "Company
Persons") will be personally obligated for any such debt, obligation or
liability. Except as set forth in this Agreement or the other Constituent
Documents, no Company Person will be (i) liable for any debts, obligations or
liabilities, whether arising in contract, tort or otherwise, of the Company or
any other Company Person or (ii) required to loan or contribute any funds to the
Company.
1.4 POWERS. The Company will possess and may exercise all of the powers and
privileges granted by the Act, the DGCL (as if the Company were a corporation),
any other law or this Agreement, together with any powers incidental thereto, so
far as such powers and privileges are necessary or convenient to the conduct,
promotion or attainment of its permitted business purposes or activities.
Without limiting the generality or effect of any other provision hereof, the
Company will have the power to effect the acquisition of any business or take
any other action consistent with the DGCL. As to any third person or entity, the
signature of any officer of the Company on any document will be conclusive
evidence of the authority of such officer to execute such document for and on
behalf and in the name of the Company.
1.5 FIDUCIARY DUTIES. No director of the Company shall be personally liable
to the Company or any of its Stockholders for monetary damages for breach of
fiduciary duty as a director, provided that the foregoing provision shall not
eliminate or limit the liability of a director (i) for breach of such director's
duty of loyalty to the Company or its Stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, or (iii) for any transaction from which such director derived an
improper personal benefit.
II. CAPITALIZATION
2.1 CAPITALIZATION. The capitalization of the Company is as set forth in
the Charter. Subject to Sections 3.2, 3.4(c) and 3.4(d), the Board has the
authority to issue additional Capital Stock, which may include different classes
of equity.
2.2 STOCKHOLDERS. (a) As of the Effective Date, the name and address of
each of the Stockholders and the number of shares of Capital Stock and
percentage holding of each of them respectively is as set forth on Schedule 1.
As of the Effective Date, no other parties shall own or have rights to acquire
any Capital Stock of the Company.
(b) Subject to Sections 3.2, 3.4(c) and 3.4(d), the Company is
authorized to issue Capital Stock in exchange for either capital contributions,
or the
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provision of services (together, "Capital Stock Consideration"), having a Fair
Market Value equal to the value of the Capital Stock issued as determined in
good faith by the Board. The amount of Capital Stock held by each Stockholder
shall not be affected by (i) any issuance by the Company of Capital Stock to
other Stockholders, (ii) any change in the Capital Account of such Stockholder
(other than such changes to reflect additional Capital Stock Consideration from
such Stockholder in exchange for new Capital Stock) or (iii) any distributions
not in redemption of Capital Stock. The shares of Capital Stock shall be
certificated and the Board shall maintain, or cause to be maintained, a Capital
Stock ledger. No Stockholder shall be required to make any additional capital
contributions to the Company.
(c) Except as otherwise provided in this Agreement, no Person other
than the parties set forth on Schedule 1 will be a Stockholder of the Company,
and no Capital Stock of the Company will be issued or transferred, without
compliance with the terms and provisions of the Company's Constituent Documents
and the execution by any such Person of a joinder to this Agreement whereby such
Person agrees to be bound by this Agreement and the Company's other Constituent
Documents.
(d) WLR is the "Majority Stockholder"; provided that once WLR ceases
to own 10% or more of the Class A Common Stock of the Company, it will no longer
be the Majority Stockholder for any purpose hereunder.
(e) Franklin and Lear NAOC are each a "Minority Stockholder" and
together are the "Minority Stockholders"; provided that upon the earlier of (i)
a Minority Stockholder ceasing to own (in the aggregate with its Affiliates) 5%
or more of the Class A Common Stock of the Company or (ii) a Minority
Stockholder selling or transferring (in the aggregate with its Affiliates) more
than 20% of the Class A Common Stock it held as of the Effective Date other than
to a Permitted Transferee or in connection with a pledge (or exercise pursuant
thereto), it will no longer be a Minority Stockholder for any purpose hereunder;
provided however, that in no event shall Lear NAOC cease to be a Minority
Stockholder under clause (i) prior to September 30, 2008.
(f) For purposes of the Act, the Stockholders are the members of the
Company.
III. GOVERNANCE
3.1 CHARTER AND BYLAWS. Except as provided in this Agreement, the Company
will be governed by the Charter and Bylaws.
3.2 PREEMPTIVE RIGHTS. After the Effective Date, the Company will not
issue, sell or exchange, agree to issue, sell or exchange, or reserve or set
aside for issuance, sale or exchange, any Capital Stock or Options
(collectively, the "Preemptive Securities"), unless the Company has first
offered to sell to each holder of Class A Common Stock such Stockholder's Pro
Rata Share (as defined below) of the Preemptive Securities, at a price and on
such other terms as have been specified by the Company in writing delivered to
each such Stockholder (the "Preemptive Offer"), which
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Preemptive Offer will be on terms substantially identical to the terms of the
Company's proposed issuance, sale or exchange of Preemptive Securities and will
remain open and irrevocable for a period of 20 Business Days from the date it is
delivered by the Company (the "Preemptive Offer Period"). Notwithstanding the
foregoing, Preemptive Securities will not include (a) Options or other equity
securities or rights issued pursuant to an Employee Plan approved by the Board
(subject to Section 3.4(b)(ii)) and any Capital Stock issued upon the exercise
of any such Options or other equity securities so long as such Options issued or
the equity securities issuable upon exercise of such Options do not represent in
excess of 10% of the fully diluted Common Stock, (b) the Lear Warrant or any
equity securities issued pursuant to the terms of the Lear Warrant, (c) equity
securities issued by the Company as direct consideration in connection with the
acquisition of another business entity by the Company or a Subsidiary, whether
by merger, purchase of all or substantially all of the assets of such entity or
otherwise, (d) securities issued as a result of any split of, reclassification,
subdivision of or other distribution pro rata with respect to, the equity
securities of the Company, or (e) any equity securities issued in a Public
Offering or pursuant to the Reorganization. Each holder of Class A Common Stock
may elect to purchase (or to have its designated Affiliate that is also, or
simultaneously with such purchase becomes, a holder of Class A Common Stock,
purchase) all or any portion of such Stockholder's Pro Rata Share of the
Preemptive Securities as specified in the Preemptive Offer at the price and on
the terms specified therein by delivering written notice of such election to the
Company as soon as practicable but in any event before the expiration of the
Preemptive Offer Period. Any Preemptive Securities not elected to be purchased
by the end of the Preemptive Offer Period will be reoffered for a five-day
period by the Company on a pro rata basis to the holders of Class A Common Stock
who have elected to purchase their full Pro Rata Share of the Preemptive
Securities. In the event the holders of Class A Common Stock fail to exercise in
full their preemptive rights as set forth above with respect to the Preemptive
Securities, the Company shall have 60 days thereafter to sell such Preemptive
Securities, at a cash or cash equivalent price that is not less than the price
specified in the Preemptive Offer. In the event the Company has not sold the
Preemptive Securities within such 60-day period, the Company shall not
thereafter issue or sell any Preemptive Securities without first complying with
the first offer rights set forth in this Section 3.2. Each Stockholder's "Pro
Rata Share" of Preemptive Securities is the product of (x) the total number of
Preemptive Securities and (y) a fraction, the numerator of which is the total
number of shares or units of Class A Common Stock then owned by such Stockholder
and the denominator of which is the total number of shares or units of Class A
Common Stock then outstanding.
3.3 BOARD COMPOSITION AND REPRESENTATION. (a) The number of directors
comprising the Board will not exceed five. Subject to Section 3.3(b) and Section
3.3(c), the directors comprising the Board will consist of (i) two (or, in the
circumstances described in Section 3.3(b), three) representatives designated by
WLR (as long as WLR is the Majority Stockholder), one of whom will be the
Chairman of the Board, (ii) one representative designated by Franklin (as long
as Franklin is a Minority Stockholder), and (iii) (if Lear NAOC so elects) one
representative designated by Lear NAOC (as long as Lear NAOC is a Minority
Stockholder). The composition of the Board as of the Effective Date will be as
specified on Schedule 2. Lear NAOC may elect to designate a
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director by providing written notice to the Company to that effect identifying
its designee. Such designee shall become a director on the earlier to occur of
(i) the third Business Day after delivery of such notice and (ii) the day on
which WLR designates its third director. Each Stockholder agrees to vote or
cause its shares of Common Stock to be voted at any meeting of the Stockholders
and any and all postponements and adjournments thereof or in any other
circumstances in which a vote, consent or other approval (including by written
consent) is sought to elect or remove the directors designated pursuant to this
Section 3.3 to serve on the Board and any other similar matter.
(b) If and for so long as Lear NAOC exercises its right to designate a
director, WLR shall be entitled to designate a total of three representatives to
the Board pursuant to Section 3.3(a).
(c) If WLR ceases to be the Majority Stockholder or Franklin or Lear
NAOC ceases to be a Minority Stockholder, the director(s) that the Stockholder
that is no longer the Majority Stockholder or a Minority Stockholder, as
applicable, had been entitled to designate will be designated by a Class A
Majority in Interest.
(d) Directors may be removed at any time with or without cause. A
director may only be removed by the affirmative vote of the Stockholder(s)
entitled to designate such director. In the event that a vacancy in the Board is
created at any time by the death, disability, retirement, resignation or removal
(with or without cause) of any director, such vacancy may be filled only by the
Stockholder(s) entitled to designate such director pursuant to this Section 3.3.
(e) The composition of each Subsidiary Board for a wholly-owned
Subsidiary that is incorporated or formed in the United States of America shall
be the same as that of the Board.
(f) Directors appointed to the Board will be compensated in accordance
with the Bylaws.
(g) The Company and the Stockholders will take all action necessary to
cause the Subsidiaries of the Company to implement and not contradict the
actions and resolutions of the Board.
(h) If and for so long as Lear NAOC does not exercise its right to
designate a Board director pursuant to Section 3.3(a), it will be entitled to
designate one representative to attend meetings of the Board, any board of
directors (or equivalent governing body) of any controlled Subsidiary (each, a
"Subsidiary Board") or any committee thereof in a non-voting observer category
(the "Observer"). The Observer will have no voting rights with respect to any
decision of the Board, or any committee of the Board. The Company will provide
written notice to the Observer of each meeting of the Board or Subsidiary Board
or any committee thereof at the same time and in the same manner as notice is
given to the members of the Board or Subsidiary Board and will furnish to the
Observer copies of all written materials and other information
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(including copies of meeting minutes) at the same time as given to directors at,
in advance of, or subsequent to such meetings. Lear NAOC's right to designate an
Observer will terminate if it ceases to be a Minority Stockholder.
(i) Lear NAOC and Franklin will each be entitled to designate one
representative to attend meetings of any board of directors (or equivalent
governing body) of any controlled foreign Subsidiary (each a "Foreign Subsidiary
Board") or any committee thereof in a non-voting observer category (the "Foreign
Subsidiary Observer"). The Foreign Subsidiary Observer will have no voting
rights with respect to any decision of the Foreign Subsidiary Board or any
committee of the Foreign Subsidiary Board. The Company will assure that there is
provided to each Foreign Subsidiary Observer written notice of each meeting of
the Foreign Subsidiary Board at the same time and in the same manner as notice
is given to the members of the Foreign Subsidiary Board and will furnish to each
Foreign Subsidiary Observer copies of all written materials and other
information (including copies of meeting minutes) at the same time as given to
directors at, in advance of, or subsequent to such meetings. Lear NAOC's right
and Franklin's right to designate a Foreign Subsidiary Observer will terminate
if it ceases to be a Minority Stockholder.
(j) The Company shall pay all out-of-pocket expenses incurred by each
director and any permitted Observer or Subsidiary Observer in connection with
attending any meetings of the Board, any Subsidiary Board or any committee
thereof. In the event that the Company pays any fee to a director for serving on
the Board, any Subsidiary Board or any committee thereof, the Company shall pay
to each director a fee in an amount equal to the amount paid to such other
director. So long as any director appointed by WLR, Lear NAOC or Franklin serves
on the Board and for three years thereafter, the Company shall maintain
directors and officers indemnity insurance coverage reasonably satisfactory to
such Stockholder and the Charter and Bylaws shall provide for indemnification
and exculpation of directors to the fullest extent permitted under applicable
law.
3.4 MANAGEMENT; OFFICERS. (a) The Board will be responsible for and will
have authority to generally oversee the management of the Company. The current
officers of the Company are specified on Schedule 2. Unless otherwise determined
by the Board, the authority of the officers of the Company and the Subsidiaries
will be as is customary for officers of a Delaware corporation, including, but
not limited to, the right and obligation to manage all labor relations and
personnel affairs of the Company in a manner consistent with the Company's
status as a single employer separate and apart from any other entity, without
limitation.
(b) The Company will not take, and the Company will cause the Board
and officers of each Subsidiary to not take, any of the following actions
without the Required Board Approval:
(i) incur debt for borrowed money in the aggregate in excess of
$75.0 million;
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(ii) create any employee option, incentive or similar plan
pursuant to which Company equity securities may be issued ("Employee
Plans");
(iii) enter into any material contracts or arrangements outside
the ordinary course of the Company's and the Subsidiaries' business,
excluding any acquisition of any business by the Company or any Subsidiary,
whether by merger, purchase of all or substantially all of the assets of
such business or otherwise;
(iv) consummate a Reorganization or a Public Offering;
(v) enter into or modify any agreement or enter into any
transaction between the Company or a Subsidiary and a Stockholder or any of
its Affiliates other than in relation to any issuance of shares of Capital
Stock at Fair Market Value that complies with Section 3.2;
(vi) make any amendment to this Agreement or, except as
contemplated in Section 6.1 in connection with a Reorganization, to the
Company's Constituent Documents;
(vii) enter into an agreement pursuant to which it will sell or
otherwise transfer all or substantially all of the Company's and the
Subsidiaries' assets, whether by sale or transfer of assets, sale of
equity, merger or a transaction of a similar nature (a "Sale Transaction");
or
(viii) approve the dissolution, winding-up, liquidation or
bankruptcy of the Company or a material Subsidiary.
(c) The Company will not take, and the Company will cause the Board
and officers of each Subsidiary to not take, any of the following actions
without the approval of each Minority Stockholder:
(i) consummate a Sale Transaction in which all Stockholders
holding the same class of Capital Stock do not receive the same
consideration on the same terms, determined on the same basis;
(ii) approve the dissolution, winding-up, liquidation or
bankruptcy of the Company or a material Subsidiary;
(iii) enter into or modify any agreement or enter into any
transaction between the Company or a Subsidiary and a Stockholder or any of
its Affiliates other than on arms length terms; provided, that with respect
to any such transaction (or series of related transactions) that involves
aggregate payments or other property with a fair market value in excess of
$5 million, the Company shall, prior to the consummation thereof, obtain a
favorable opinion as to the fairness of such transaction or series of
related transactions to the Company or the relevant Subsidiary,
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as the case may be, from a financial point of view, from an Arbiter
experienced in the subject matter of such transaction or transactions;
provided however, that if Lear NAOC ceases to be a Minority Stockholder,
neither the Company nor a Subsidiary shall enter into or modify any
agreement or enter into any transaction between the Company or a Subsidiary
and a Stockholder or any of its Affiliates, without the approval of
Franklin;
(iv) launch or acquire a new line or lines of business which is
or are (a) individually or in the aggregate reasonably likely to represent
20% or more of the Company's and Subsidiaries' consolidated annual sales in
the twelve months following its launch or acquisition (as applicable), and
(b) is significantly different from the business conducted by the Company
and the Subsidiaries as of the Effective Date (after giving effect to the
C&A Closing);
(v) issue any shares of Capital Stock at less than Fair Market
Value;
(vi) issue any shares of Capital Stock other than Common Stock to
any Stockholder or Affiliate of any Stockholder;
(vii) consummate any recapitalization or reorganization of the
Company's Capital Stock in which all Stockholders holding the same class of
Capital Stock do not receive the same consideration, on the same terms,
determined on the same basis;
(viii) except as specifically provided for in this Agreement or
the Charter or Bylaws, effect any redemption or repurchase of any Capital
Stock or make or pay any dividends or other distributions other than on a
pro rata basis as among Stockholders holding the same class of Capital
Stock;
(ix) make any amendment to this Agreement or, except as
contemplated by Section 6.1 or Section 7.1(b) in connection with a
Reorganization, to the Company's Constituent Documents; or
(x) enter into any Change of Control or Restructuring transaction
between the Company or a Subsidiary and a Stockholder or any of its
Affiliates (other than the Company or a Subsidiary) other than on arms
length terms, provided that any such transaction (or series of related
transactions) shall be deemed to be on arms length terms if the Company,
prior to the consummation thereof, obtains an opinion as to the appropriate
value(s) to be ascribed to the elements of such transaction and a favorable
opinion as to the fairness to each of the Stockholders, Company or the
relevant Subsidiary, as the case may be, from a financial point of view,
from an Arbiter experienced in the subject matter of such
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transaction or transactions. The Company shall nominate a party to serve as
the Arbiter and shall disclose to the Minority Stockholders all
relationships between the Company or the Majority Stockholder and such
nominee during the preceding three years in a written notice (the "Arbiter
Notice"). No later than 15 days after a Minority Stockholder's receipt of
the Arbiter Notice, such Minority Stockholder shall notify the Company in
writing whether it consents to the use of such nominee, which consent shall
not be unreasonably withheld. If a Minority Stockholder does not so notify
the Company as to its consent within 15 days after its receipt of the
Arbiter Notice, it will be deemed to have consented to the nominee set
forth therein. If a Minority Stockholder does not consent to the use of
such nominee, it shall provide the Company and the other Stockholders with
a written statement of its reasons for such failure to consent and the
Company shall then select another Arbiter and the parties shall comply with
the foregoing provisions of this Section 3.4(c)(x) until such time as an
Arbiter has been selected. Notwithstanding anything contained herein to the
contrary or in the Act or in the DGCL, but subject to Section 3.4(d)(viii),
if the Company complies with the provisions of this Section 3.4(c)(x), the
Stockholders shall be foreclosed from alleging that the Company, any
Stockholder or any officer or director of the Company has breached or
violated any fiduciary duty owed by such Person to the Company or any
Stockholder with respect to the valuation of the proposed transaction and
waives any and all rights it or any of its Affiliates may have relating to
the valuation of such transaction.
(d) The Company will not take, and the Company will cause the Board and
officers of each Subsidiary to not take, any of the following actions without
the approval of a Class B Majority in Interest:
(i) consummate a Sale Transaction in which all Stockholders
holding the same class of Capital Stock do not receive the same
consideration on the same terms, determined on the same basis;
(ii) issue any shares of Capital Stock at less than Fair Market
Value;
(iii) issue any shares of Capital Stock other than Common Stock
to any Stockholder or Affiliate of any Stockholder;
(iv) consummate any recapitalization or reorganization of the
Company's Capital Stock in which all Stockholders holding the same class of
Capital Stock do not receive the same consideration, on the same terms,
determined on the same basis;
(v) except as specifically provided for in this Agreement or the
Charter or Bylaws, effect any redemption or repurchase of any Capital Stock
or make or pay any dividends or other distributions other than on a
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pro rata basis as among Stockholders holding the same class of Capital
Stock;
(vi) except as contemplated by Section 7.1(b), make any amendment
to, or waive any provision of, this Agreement that adversely and
disproportionately affects the rights of the holders of Class B Common
Stock;
(vii) except as contemplated by 7.1(b), make any amendment to the
Company's Constituent Documents that adversely and disproportionately
affects the rights of the holders of Class B Common Stock; or
(viii) enter into any Change of Control or Restructuring
transaction between the Company or a Subsidiary and International
Automotive Components Group, LLC or one of its subsidiaries other than on
arms length terms, provided that any such transaction (or series of related
transactions) shall be deemed to be on arms length terms if the Company,
prior to the consummation thereof, obtains a favorable opinion as to the
fairness of such transaction from one of the following three firms (or
their successors): Xxxxxxxx Xxxxx Xxxxxx & Xxxxx, Xxxxxx Xxxxxxx or Xxxxxxx
Xxxxx. Notwithstanding anything contained herein to the contrary or in the
Act or in the DGCL, if the Company complies with the provisions of this
Section 3.4(d)(viii), the holders of the Class B Common Stock shall be
foreclosed from alleging that the Company, any Stockholder or any officer
or director of the Company has breached or violated any fiduciary duty owed
by such Person to the Company or any Stockholder with respect to the
valuation of the proposed transaction and waives any and all rights it or
any of its Affiliates may have relating to the valuation of such
transaction.
(e) No vote or other action of the Stockholders is required to authorize
the Company to take or refrain from taking any action, other than as provided
for in Section 3.4.
(f) For purposes of Sections 3.4(c)(i), (vii) and (viii), Sections
3.4(d)(i), (iv) and (v) and Section 4.4(b), the Class A Common Stock and the
Class B Common Stock will be considered the same class of Capital Stock.
3.5 COMPETITIVE ACTIVITIES. The Company Persons, directly or through
Affiliated entities, are or may be engaged in businesses that may be competitive
with the business of the Company or companies it owns or in which it invests.
Nothing herein, in the Act, the DGCL, any Constituent Document or otherwise
(collectively, the "Applicable Rules") will be deemed to restrict any Company
Person from engaging in such other business activity (regardless of the effects
thereof on the Company or companies it owns or in which it invests) and,
notwithstanding any Applicable Rule to the contrary, in no event will any
Company Person have any obligation to act or refrain
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from acting (including without limitation presenting any opportunity or other
matter to the Company for it to consider or pursue or to maintain the
confidentiality of, or not use, any confidential or proprietary information) by
reason of any relationship with, or actual or alleged duty to, the Company,
provided, however, that this Section 3.5 will not limit the scope or
applicability of Section 6.5, or any other written contract between a Company
Person and the Company or any other Company Person. The Company and the other
Company Persons will have no rights by virtue of this Agreement in and to such
independent ventures of any Company Person or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
Company's business, will not be deemed wrongful or improper. Each party hereto
agrees that, in any such case, to the extent a court might otherwise hold that
the conduct of such activity is a breach of any Applicable Rule, it has hereby
irrevocably waived any and all rights of recovery it may otherwise have by
reason thereof.
3.6 MANAGEMENT OF WORKFORCE AND BUSINESS. From and after the Effective
Date, and notwithstanding any other provision of this Agreement, the management
and direction of the Company's and its Subsidiaries' workforce and business, and
the terms and conditions thereof, including all wage and salary programs
(including bonuses, and incentive compensation), medical and other benefit
programs, other compensation and benefit programs and the establishment of
procedures, policies and protocols for hiring, disciplining and firing employees
and setting general employee standards shall be determined by the Board of
Directors (as delegated to the officers of the Company and its Subsidiaries).
IV. TRANSFERS
4.1 TRANSFERS. (a) Except for Transfers that comply with this Article IV,
without the Required Board Approval (which, for purposes of clarification, shall
not in any event prejudice the rights of any Stockholder under Section 4.2 or
4.3), no Stockholder may Transfer all or any portion of such Stockholder's
Capital Stock or Options or make or support an application being made for entry
of a decree under Section 18-802 of the Act or enter into an agreement to do or
permit any of the foregoing actions. Notwithstanding the foregoing, Xxxx NAOC
shall be permitted to pledge its Capital Stock and the Xxxx Warrant as
collateral to secure indebtedness to a bank or trustee incorporated and doing
business in the United States having a combined capital and surplus of at least
$1 billion upon 45 days prior written notice (a "Pledge Notice") to the Company,
WLR (as long as WLR is a Majority Stockholder) and Franklin (as long as Franklin
is a Minority Stockholder). In no event may a Stockholder Transfer Capital Stock
or Options to any Person who, in the reasonable opinion of the Board, is engaged
(whether directly or through Affiliated entities) in any material business that
is competitive with the Business. The Board shall notify any Stockholder within
20 Business Days of receipt of notice of any proposed Transfer of Capital Stock
or Options whether or not the Board, in its reasonable discretion, deems such
Transfer to be a prohibited Transfer to a competitor in accordance with the
foregoing sentence. Notwithstanding the foregoing, nothing in this Agreement
shall restrict a Change in Control transaction with respect to Xxxx Corporation
or any resulting Transfer as a result thereof. Any purported Transfer of a
Stockholder's Capital Stock or Options which is in
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violation of this Agreement (a "Prohibited Transfer") shall be invalid and void,
shall not bind the Company and shall have no effect whatsoever on the Company or
its Stockholders. Any Stockholder which engages in any Prohibited Transfer shall
be liable to the Company for all costs and expenses incurred by the Company as a
result thereof or related thereto, including with respect to legal action
required to enforce the terms of this Agreement.
(b) Notwithstanding the foregoing, but subject to Section 4.1(e), the
prohibitions in Section 4.1(a) shall not apply to: (i) the Transfer by any
Stockholder of Capital Stock or Options to the Permitted Transferees of such
Stockholder, and (ii) the Transfer by any Stockholder of Capital Stock or
Options to a third party, provided that such Stockholder complies with Sections
4.2 and 4.3, if applicable.
(c) Any Transfer of Capital Stock or Options which is not prohibited
by Section 4.1(a) or 4.1(e) shall be effective only if (i) such Transfer is in
compliance with all applicable federal, state and foreign securities laws and
(ii) the Transferee has agreed in writing to be bound by the terms and
conditions of this Agreement.
(d) If shares of Capital Stock or Options are certificated, each
certificate representing the Capital Stock or Options shall be stamped or
otherwise imprinted with a legend or legends customary in form reflecting the
restrictions on transfer set forth in this Agreement and under applicable
securities laws.
(e) Notwithstanding anything to the contrary in this Agreement, in no
event may a Transfer by any Stockholder be made if the Board concludes in good
faith that such Transfer is reasonably likely to result in (i) the Company being
in violation of any applicable law, (ii) the dissolution of the Company or (iii)
the Company having more than 450 holders of record (as such concept is
understood for purposes of Section 12(g) of the Securities Exchange Act of 1934,
as amended from time to time, and any relevant rules promulgated thereunder) of
any class of its Capital Stock. In making the determination whether a Transfer
is reasonably likely to result in any of the foregoing, the Board, in its sole
discretion, may require the assignee to furnish, at such assignee's expense, an
opinion of counsel passing on this issue in a form reasonably acceptable to the
Board, with such counsel to be reasonably acceptable to the Board.
4.2 RIGHT OF FIRST REFUSAL. (a) Except as otherwise provided herein, if at
any time any Stockholder proposes to Transfer any Capital Stock or Options in
any manner to one or more third parties (other than to Permitted Transferees),
then such Stockholder (the "Transferring Stockholder") shall give the holders of
the Class A Common Stock (the "Offeree Stockholders") written notice of its
intention to make the Transfer (the "Transfer Notice"), which Transfer Notice
must include (i) a description and the number of shares of Capital Stock to be
transferred and a description of the Options, if any, to be transferred and the
number of shares of Capital Stock for which such Options are exercisable
(collectively, "Offered Securities"), (ii) the identity of the prospective
transferee(s) (the "Proposed Transferee"), (iii) the consideration, if any (the
"Offered Price"), and the material terms and conditions upon which the proposed
Transfer is to be made (the "Offered Terms"), and (iv) an offer to sell the
Offered
12
Securities to the Offeree Stockholders at the Offered Price and on the Offered
Terms. The Transfer Notice must certify that the Transferring Stockholder has
received a bona fide offer from the Proposed Transferee(s) and in good faith
believes a binding agreement for the Transfer is obtainable on the terms set
forth in the Transfer Notice. The Transfer Notice must also include a copy of
any written proposal, term sheet, or letter of intent or other agreement
relating to the proposed Transfer. Upon the request of the Company or any
Offeree Stockholder, the Transferring Stockholder shall promptly furnish to the
Company or to such Offeree Stockholder such other information as may reasonably
be requested to establish that the offer from the Proposed Transferee(s) is bona
fide. If the Offered Price includes consideration other than cash or if there is
no consideration, the cash-equivalent value of the non-cash consideration or the
Fair Market Value of the Offered Securities, as the case may be, will be
determined by the Board in good faith pursuant to the Required Board Approval.
(b) Offeree Stockholders' Option. The Offeree Stockholders will have
an option for a period of 20 Business Days from receipt of the Transfer Notice
(the "Holder Option Period") to elect to purchase all (but not less than all) of
such Offeree Stockholder's pro rata portion, calculated relative to the Capital
Stock held by all Offeree Stockholders electing to purchase Offered Securities,
at the same price and subject to the same material terms and conditions as
described in the Transfer Notice (the "Holders' Purchase Option"). Each Offeree
Stockholder may exercise the Holders' Purchase Option by so notifying the
Transferring Stockholder in writing before expiration of the Holder Option
Period. If one or more Offeree Stockholders gives the Transferring Stockholder
notice that they desire to purchase Offered Securities, payment for such Offered
Securities shall be in cash by certified check or wire transfer, against
delivery of certificates representing such Offered Securities, at a place agreed
upon between the parties and at the time of the scheduled closing therefor,
which shall be no later than 30 Business Days after the Offeree Stockholders'
receipt of the Transfer Notice. Any Offered Securities not elected to be
purchased by the end of the Holder Option Period will be re-offered for a
five-day period by the Transferring Stockholder to the Offeree Stockholders who
have elected to purchase their full pro-rata portion of the Offered Securities;
if such Offeree Stockholders collectively subscribe for more than the available
Offered Securities, such Offered Securities will be allocated on a pro-rata
basis.
(c) Transferring Stockholder's Right to Transfer. If the Offeree
Stockholders do not exercise the Holders' Purchase Option with respect to all of
the Offered Securities, then all elections to purchase such Offered Securities
shall be null and void and the Transferring Stockholder may Transfer the Offered
Securities to the Proposed Transferee at the Offered Price or at a higher price
as long as such Transfer is consummated within 75 days after the date of the
Transfer Notice. If the Offered Shares are not transferred to the Proposed
Transferee within such period, a new Transfer Notice must be given before the
Transferring Stockholder may Transfer any Capital Stock or Options.
4.3 TAG-ALONG RIGHTS. (a) If one or more Stockholders other than Xxxx NAOC
("Selling Stockholder") proposes to sell Capital Stock to a third party
purchaser
13
other than a Permitted Transferee (the "Prospective Purchaser") pursuant to a
bona fide offer to purchase such Capital Stock (a "Qualified Offer") and, in the
case where the Selling Stockholder is a holder of Class B Common Stock, the
Capital Stock proposed to be sold represents 5% or more of the Capital Stock
then outstanding (calculated on a fully diluted basis), such Selling
Stockholders may engage in such transaction, subject to their prior compliance
with Section 4.2, only if they assure that the other Stockholders or holders of
Options ("Tag-Along Stockholders") also shall be afforded the right to sell a
proportionate share of their Capital Stock or Options to the Prospective
Purchaser simultaneously therewith on terms and conditions at least as favorable
to the Selling Stockholders as the terms and conditions set out in the Qualified
Offer. Upon receipt by one or more Selling Stockholders of a Qualified Offer,
the Selling Stockholders shall notify the Tag-Along Stockholders in writing of
such offer and its terms and conditions (the "Offer Notice"), which written
notice shall include the name of the Prospective Purchaser and the consideration
offered in connection therewith. In order to exercise their right to sell their
Capital Stock or Options as set forth above, the Tag-Along Stockholders must
provide written notice of such intention to the Selling Stockholders within 20
days after the date of their receipt of the Offer Notice. If the Tag-Along
Stockholders do not provide such written notice within 20 days, the Selling
Stockholders may sell their Capital Stock to the Prospective Purchaser on the
terms of the Qualified Offer as long as such sale is consummated within 75 days
after the date of the Offer Notice. If the Capital Stock is not transferred to
the Prospective Purchaser within such period, a new Offer Notice must be given
before the Selling Stockholders may sell any Capital Stock. Each participating
Tag-Along Stockholder individually, not jointly and severally, shall make such
Tag-Along Stockholder's proportionate share of any representations and
warranties made in connection with any such Transfer. In no event shall any
Tag-Along Stockholder be liable for indemnification or similar obligations in
connection with such Transfer other than severally on a pro rata basis in an
amount not greater than the proceeds actually received by such Tag-Along
Stockholder in connection with such Transfer.
(b) The co-sale rights provided to any Tag-Along Stockholder under
Section 4.3(a) shall be applicable to any direct or indirect sale (including by
means of a merger, reorganization, or other similar transaction) of the Capital
Stock of the Company held by a Stockholder, other than Xxxx NAOC, including any
transfer (including by means of a merger, reorganization, or other similar
transaction) of all or substantially all of the issued and outstanding capital
stock, or its equivalent, of such Stockholder or its Affiliates to a third
party; provided that Section 4.3(a) shall not apply to a Transfer of Capital
Stock by a Stockholder that is an advisory client of Franklin or a limited
partner or comparable passive investor in a fund or other investment vehicle
included in the definition of "WLR" that receives capital stock pursuant to a
normal course distribution (including a winding up) pursuant to the constituent
documents of such fund or other investment vehicle.
4.4 SALE OF THE COMPANY.
(a) If the Board approves a Sale Transaction in accordance with
Section 3.4, each Stockholder will consent to such Sale Transaction and will
vote all of
14
its Capital Stock in favor of such Sale Transaction, if such vote is required
under applicable law, and, if Capital Stock is to be transferred, will Transfer
all of its Capital Stock and Options on, and subject to, the terms and
conditions of such Sale Transaction. Subject to Section 4.4(b), each Stockholder
agrees to (i) cooperate in any Sale Transaction as reasonably requested by the
Board and (ii) execute and deliver all documents and instruments reasonably
requested by the Board, in each case, as are required in order to effectuate
such Sale Transaction.
(b) The obligations of each Stockholder set forth in Section 4.4(a) in
connection with a Sale Transaction are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Sale Transaction, each
Stockholder of the same class shall receive or have the option to receive the
same form of consideration and the same amount of per share consideration (with
respect to any Options on an as converted or exercised basis); (ii) if any
Stockholder is given an option as to the form and amount of consideration to be
received, each Stockholder of the same class shall be given the same option; and
(iii) (in the case of Xxxx NAOC only) if the consideration to be received by the
Stockholders for the Capital Stock or Options upon consummation of the Sale
Transaction does not consist of cash or Marketable Securities any securities
issued to Xxxx NAOC as consideration for the Sale Transaction will be subject to
substantially similar liquidity protections (whether granted by the buyer or
another party) as those set forth in this Agreement. Each Stockholder
individually, not jointly or severally, shall make such Stockholder's
proportionate share of any representations and warranties made in connection
with any such Sale Transaction; provided, however, that while Xxxx NAOC may be
required to provide its proportionate share of indemnification with respect to
representations and warranties regarding the Company, in no event shall Xxxx
NAOC be required to make any representations and warranties other than with
respect to title to the Capital Stock or Options to be sold by Xxxx NAOC in
connection with such Sale Transaction, its authority to enter into and perform
its obligations in connection with such Sale Transaction, and the lack of any
conflicts resulting from its execution, delivery and performance of the
documents and transactions in connection with such Sale Transaction. In no event
shall any Stockholder be liable for indemnification or similar obligations in
connection with such Sale Transaction in an amount greater than the proceeds
actually received by such Stockholder in connection with such Sale Transaction.
Notwithstanding the above, the Board, if requested by Xxxx NAOC, shall use
commercially reasonable efforts to obtain the agreement of the purchaser in a
Sale Transaction to purchase the Xxxx Warrant (as adjusted to account for the
exercise price thereof) without requiring the holder thereof to exercise the
Xxxx Warrant in connection with such Sale Transaction.
4.5 CALL OPTION. If Xxxx NAOC intends to make a Xxxx Demand Request, it
will first notify the Company (whether before or after the date on which Xxxx
NAOC has the right to exercise a Demand Registration Right) and will offer
(and/or cause to be offered) to WLR (as long as WLR is a Majority Stockholder)
and Franklin (as long as Franklin is a Minority Stockholder) (the
"Optionholders") the option (the "Call Option") to acquire all (but not less
than all) of the shares of Capital Stock and Options held by it (and its
Permitted Transferees) at the Call Price by delivering written notice to that
effect (a "Call Notice") to the Company, WLR and Franklin. The Call Option may
be exercised
15
by the Optionholders only in whole and not in part. The Optionholders may assign
the Call Option to the Company, but only in whole and not in part.
(a) Determination of Call Price. Upon delivery of a Call Notice to the
Optionholders, the Optionholders and Xxxx NAOC shall endeavor in good faith to
promptly determine the applicable Call Price. If the Optionholders and Xxxx NAOC
cannot agree on the applicable Call Price within 10 days after the delivery of
the Call Notice, as the case may be, they will, as soon as practicable, select
an Arbiter to determine the applicable Call Price. If the Optionholders and Xxxx
NAOC cannot agree on an Arbiter within 12 days after delivery of the Call
Notice, the Optionholders and Xxxx NAOC shall each select an Arbiter and shall
each instruct their respective Arbiters to select, within 15 days after delivery
of the Call Notice, a third Arbiter to determine the Call Price. The
Optionholders and Xxxx NAOC shall instruct the selected Arbiter to determine the
Call Price within 30 days after delivery of the Call Notice. The determination
of the Call Price by such selected Arbiter shall be final, binding and
conclusive, absent manifest error; provided, that following the determination of
the Call Price, Xxxx NAOC can withdraw its Xxxx Demand Request and the Call
Option by written notice to the Optionholders within 10 days after the
determination of the Call Price (a "Xxxx Demand Withdrawal"). Xxxx NAOC and the
Company shall bear all fees, costs and expenses of the Arbiters engaged pursuant
to this Section 4.5 in proportion to Xxxx NAOC's Percentage Interest relative to
the Optionholders' aggregate Percentage Interest.
(b) Exercise of Call Option. If after the Call Price is agreed or
determined and absent a Xxxx Demand Withdrawal, an Optionholder wishes to
exercise the Call Option, it will notify Xxxx NAOC of its intention to do so
within 10 days of the Call Price being agreed or determined and will specify the
number of shares of Capital Stock and/or Options it wishes to acquire. In the
event of competition between the Optionholders, the number of shares of Capital
Stock and/or Options to be acquired by them pursuant to the Call Option shall be
calculated on a pro rata basis ("Proportionate Interests"), relative to the
Capital Stock and/or Options held by all Optionholders wishing to exercise the
Call Option ("Accepting Optionholders").
(c) Closing of the Call Option. The closing of the Call Option
pursuant to this Section 4.5 (a "Call Option Closing") shall occur on a Business
Day specified by written notice from the Optionholder holding the greater
Proportionate Interest to Xxxx NAOC no later than five Business Days prior to
the proposed Call Option Closing. The Call Option Closing shall occur no later
than 30 days after the final determination of the Call Price. At the Call Option
Closing, the Accepting Optionholders shall pay, without condition, Xxxx NAOC the
applicable Call Price by wire transfer in lawful money of the United States of
America and in immediately available funds, and Xxxx NAOC shall deliver to the
Accepting Optionholders an assignment of, and any certificates evidencing, the
Capital Stock and Options being transferred to them respectively.
4.6 REDEMPTION. Upon the occurrence of a Redemption Event in relation to
any Stockholder (the "Affected Stockholder"), if the Board (excluding any
director designated by the Affected Stockholder) so elects (by written notice
(the "Redemption
16
Notice") to the Affected Stockholder within 30 days after the Company becomes
aware of the Redemption Event), all of the shares of Capital Stock and Options
owned by the Affected Stockholder and any Affiliate of the Affected Stockholder
shall be deemed automatically redeemed by the Company for the Redemption Price
without further action of the Affected Stockholder, subject to the right of Xxxx
NAOC to withdraw its delivery of a Pledge Notice as set forth below; provided,
that if the Board reasonably expects that a Bankruptcy Decision is likely to
occur with respect to a Stockholder, the Board may elect prior to the occurrence
of any such Bankruptcy Decision that the Company shall exercise the redemption
right pursuant to this Section 4.6, effective automatically upon the occurrence
of a Bankruptcy Decision. The Redemption Price of the Capital Stock and Options
of any Affected Stockholder shall be determined as of the date of the Redemption
Event, as follows. Upon delivery of the Redemption Notice to the Affected
Stockholder, the Company and the Affected Stockholder shall endeavor in good
faith to promptly determine the applicable Redemption Price. If the Company and
the Affected Stockholder cannot agree on the applicable Redemption Price within
15 days after the delivery of the Redemption Notice, they will, as soon as
practicable, select an Arbiter to determine the applicable Redemption Price. If
the Company and the Affected Stockholder cannot agree on an Arbiter within 20
days after delivery of the Redemption Notice, the Company and the Affected
Stockholder shall each select an Arbiter and shall each instruct their
respective Arbiters to select, within 25 days after delivery of the Redemption
Notice, a third Arbiter to determine the Redemption Price. The Company and the
Affected Stockholder shall instruct the selected Arbiter to determine the
Redemption Price within 50 days after delivery of the Redemption Notice. The
determination of the Redemption Price by such selected Arbiter shall be final,
binding and conclusive, absent manifest error. Xxxx NAOC shall have the right,
exercisable within 10 days after determination of the Redemption Price, to
withdraw its delivery of a Pledge Notice, in which event the Company shall not
have the right to redeem Xxxx NAOC's Capital Stock and Options pursuant to this
Section 4.6. The Affected Stockholder shall bear a portion of the fees, costs
and expenses of the Arbiters engaged pursuant to this Section 4.6 equal to such
Affected Stockholder's Percentage Interest. The Company shall bear the balance
of such fees, costs and expenses. Payment for such redemption shall be made no
later than 45 days after the later of delivery of the Redemption Notice and the
final determination of the applicable Redemption Price. Each director designated
by the Affected Stockholder shall be excluded from any Board decisions (and from
the definition of "Required Board Approval") in connection with this Section 4.6
and, if the Affected Stockholder is a Minority Stockholder, its approval
pursuant to Section 3.4(c) shall not be required in connection with any Company
action in connection with this Section 4.6.
V. TAX MATTERS; ALLOCATIONS AND DISTRIBUTIONS
5.1 TAX CHARACTERIZATION. The Stockholders agree to a partnership
characterization under section 301.7701-3 of the Regulations, and no election
inconsistent with such treatment shall be made unless unanimously approved by
the Board.
17
5.2 TAX MATTERS MEMBER. WLR is designated as the tax matters partner of the
Company pursuant to section 6231(a)(7) of the Code (the "Tax Matters Member")
and must take such actions as are necessary to cause each other Stockholder to
become a "notice partner" within the meaning of section 6223 of the Code. WLR
may not take any action contemplated by sections 6223 through 6229 of the Code
unless unanimously approved by the Board. Except as provided in Section 5.1 and
in this Section 5.2, upon prior notice to Franklin and Xxxx NAOC, the Tax
Matters Member is authorized to make all appropriate tax elections to be made by
the Company. WLR may notify the Board that WLR no longer desires to serve as the
Tax Matters Member; in such case, the Board will designate another Stockholder
to serve as the Tax Matters Member.
5.3 ALLOCATION OF PROFITS AND LOSSES. (a) Except as provided in Section
5.3(b) or 5.4, Profits and Losses will be allocated among the Stockholders in
proportion to the number of shares of Common Stock held by each of them.
(b) Allocations Related to Capital Events. Upon the occurrence of a
Capital Event, all items of income, gain, loss and deduction that are
attributable to such Capital Event will be allocated among the Stockholders in a
manner such that the Adjusted Capital Account balance of each Stockholder,
immediately after giving effect to such allocation and taking into account all
distributions made, will be, as nearly as possible, equal to such Stockholder's
Target Balance.
5.4 SPECIAL ALLOCATIONS.
(a) Notwithstanding any other provision of this Agreement, if there is
a net decrease in Minimum Gain during any taxable year, each Stockholder shall
be specially allocated items of Company income and gain for such year (and, if
necessary, for subsequent years) in proportion to, and to the extent of, an
amount equal to such Stockholder's share of the net decrease in Partnership
Minimum Gain determined in accordance with Regulations Section 1.704-2(g)(2).
The items to be so allocated shall be determined in accordance with Treasury
Regulation Section 1.704-2(j)(2)(i). This Section 5.4(a) is intended to comply
with the minimum gain chargeback requirement in the Regulations and shall be
interpreted consistently therewith
(b) Nonrecourse deductions for any taxable year shall be allocated to
the Stockholders in proportion to the number of shares of Common Stock held by
each of them. For purposes of this Section 5.4(b), "nonrecourse deductions"
shall have the meaning set forth in Section 1.704-2(b)(1) of the Regulations.
(c) Notwithstanding any other provision of this Agreement, if there is
a net decrease in Stockholder Minimum Gain attributable to Stockholder
Nonrecourse Debt during any taxable year, each Stockholder who has a share of
the Stockholder Minimum Gain attributable to such Stockholder Nonrecourse Debt
shall be specially allocated items of Company income and gain for such year
(and, if necessary, subsequent Company taxable years) equal to such
Stockholder's share of the net decrease in Stockholder Minimum Gain. The items
to be so allocated shall be
18
determined in accordance with Treasury Regulation Section 1.704-2(j)(2)(ii). Any
Stockholder's share of the net decrease in Stockholder Minimum Gain shall be
determined in accordance with Regulation Section 1.704-2(i)(5). This Section
5.4(c) is intended to comply with the partner minimum gain chargeback
requirements in the Regulations and shall be interpreted consistently therewith.
(d) Any Stockholder Nonrecourse Deductions for any taxable year shall
be specially allocated to the Stockholder who bears the economic risk of loss
with respect to the Stockholder Nonrecourse Debt to which such Stockholder
nonrecourse deductions are attributable in accordance with Regulation Section
1.704-2(i). The amount of Stockholder Nonrecourse Deductions with respect to a
Stockholder Nonrecourse Debt for a taxable year equals the excess, if any, of
the net increase, if any, in the amount of Stockholder Minimum Gain attributable
to such Stockholder Nonrecourse Debt during that Taxable year over the aggregate
amount of any distributions during that taxable year to the Stockholder that
bears the economic risk of loss for such Stockholder Nonrecourse Debt to the
extent such distributions are from the proceeds of such Stockholder Nonrecourse
Debt and are allocable to an increase in Stockholder Minimum Gain attributable
to such Stockholder Nonrecourse Debt, determined in accordance with Regulation
Section 1.704-2(i)(1).
(e) In the event any Stockholder unexpectedly receives any adjustment,
allocation or distribution described in paragraphs (4), (5) or (6) of Regulation
Section 1.704-1(b)(2)(ii)(d), a pro rata portion of each item of Company income
and gain shall be specially allocated to the Stockholder in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of that Stockholder as quickly as possible. The items to
be allocated will be determined in accordance with Regulations Section
1.704-1(b)(2)(ii)(d)(6). This Section 5.4(e) is intended to comply with
Regulations Section 1.704-1(b)(2)(ii)(d) and will be applied and interpreted in
accordance with such regulation; provided, that an allocation pursuant to this
Section 5.4(e) shall be made only if and to the extent that such Stockholder
would have an Adjusted Capital Account Deficit after all other allocations
provided for in this Article V have been tentatively made as if this Section
5.4(e) were not in the Agreement.
(f) In the event that any Stockholder has a deficit balance in its
Adjusted Capital Account at the end of any taxable year, that Stockholder shall
be specially allocated items of Company income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 5.4(f) shall be made only if and to the extent that such Stockholder
would have a deficit balance in its Adjusted Capital Account after all other
allocations provided for in this Article V have been made as if Section 5.4(e)
and this Section 5.4(f) were not in this Agreement.
(g) No items of loss or deduction will be allocated to any Stockholder
to the extent that any such allocation would cause the Stockholder to have (or
increase the amount of) a Deficit balance in its Adjusted Capital Account at the
end of any Company taxable year. All items of loss or deduction in excess of the
limitation set forth in this Section 5.4(g) shall be allocated among such other
Stockholders, which do not have a
19
deficit balance in their Adjusted Capital Accounts, pro rata, in proportion to
the number of shares of Common Stock held by each of them, until no Stockholder
may be allocated any such items of loss or deduction without having or
increasing such a deficit balance in its Adjusted Capital Account. Thereafter,
any remaining items of loss or deduction shall be allocated to the Stockholders,
pro rata, in proportion to the number of shares of Common Stock held by each of
them.
(h) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into
account in determining Capital Accounts, the amount of that adjustment to the
Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases the basis
of the asset), then that gain or loss shall be specially allocated to the
Stockholders in the manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to that Regulation.
(i) The allocations set forth in Section 5.4(a) through (h) hereof
(the "Regulatory Allocations") are intended to comply with certain requirements
of Treasury Regulations Section 1.704-1(b) and 1.704-2. The Regulatory
Allocations may not be consistent with the manner in which the Stockholders
intend to divide Company distributions. Accordingly, the Board is authorized to
divide allocations of Profits, Losses and other items among the Stockholders so
as to prevent the Regulatory Allocations from distorting the manner in which
Company distributions are required to be divided among the Stockholders pursuant
to this Agreement. In general, the Stockholders anticipate that this will be
accomplished by specially allocating Profits and Losses and items of income,
gain, loss and deduction among the Stockholders so that the net amount of the
Regulatory Allocations and such special allocations to each Stockholder is zero.
The Board will have discretion to accomplish this result in any reasonable
manner.
(j) In the event that a guaranteed payment to a Stockholder is
ultimately recharacterized as a distribution for federal income tax purposes (as
the result of an audit of the Company's return or otherwise) and if such
recharacterization has the effect of disallowing a deduction or reducing the
adjusted basis of any asset of the Company, then an amount of Company gross
income equal to such disallowance or reduction shall be allocated to the
recipient of such payment. In the event that a distribution to a Stockholder is
ultimately recharacterized as a guaranteed payment for federal income tax
purposes (as a result of an audit of the Company's return or otherwise), and if
any such recharacterization gives rise to a deduction, such deduction shall be
allocated to the recipient of the distribution.
(k) The expense for each tax paid or accrued by the Company shall be
allocated to each Stockholder's Capital Account in proportion to the allocation
among such Capital Accounts of the income to which such tax relates (in the
manner contemplated by Regulations Section 1.704-1(b)(4)(viii) and the examples
relating thereto). In so allocating expense for each tax paid or accrued by the
Company, the Company will not take into account revaluation gains and losses, as
described in
20
paragraph (b) of the definition of "Book Value," in computing the total income,
expenses, gains and losses allocated to each Capital Account.
5.5 DISTRIBUTIONS. (a) The Board may approve the payment of Distributions
to Stockholders from time to time, subject to Sections 3.4(c) and 3.4(d).
Distributions may be authorized, declared and paid by the Board in any amount
that it deems to be in the best interests of the Company and its Stockholders,
provided, however, that the Board may not authorize the payment of any
Distribution in any fiscal year that would be reasonably likely to result in the
Company's (i) breach or violation of any ongoing contractual obligation of the
Company or any of its Subsidiaries or (ii) violation of applicable law.
(b) Subject to the limitations of Section 5.5(a), the Board will
authorize, declare and pay quarterly Distributions to Stockholders in an amount
at least equal to the estimated U.S. federal, state or local taxes such
Stockholders will be required to pay by virtue of the allocation of Company
taxable income to such Stockholders (the "Tax Distribution"). The amount of the
Tax Distribution for each Stockholder for any fiscal period will be calculated
by approximating each such Stockholder's or, in the case of a pass-through
entity, its direct or indirect equity holders', tax liability in respect of
taxable income allocated to it during the preceding quarter, and using the
single highest effective tax rate determined by the Board in good faith for
application to all Stockholders. Further, to the extent the Company is required
by any federal, state or local law or regulation to withhold from, or pay income
taxes with respect to, any distribution or allocation to any member, such amount
of taxes withheld or paid shall be considered as a distribution to pay taxes
under this Section 5.5. The amount of such taxes withheld or paid with respect
to any Stockholder shall be applied against the amount of the distribution
otherwise payable to the Stockholder under this Section 5.5. Any Tax
Distribution made to a Stockholder will be treated as having been distributed
under Section 5.5(c) or Section 5.5(d), as applicable, and thus will reduce,
dollar for dollar, the distributions to which such Stockholder would otherwise
be entitled pursuant to Section 5.5(c) or Section 5.5(d).
(c) Subject to the limitations of Section 5.5(a), the Board may
authorize, declare and pay Distributions to Stockholders in addition to those
required pursuant to Section 5.5(b). Such distributions will be made to the
Stockholders in proportion to the number of shares of Common Stock held by each
of them.
(d) Upon the liquidation of the Company, distributions of the assets
of the Company to the Stockholders will be made in proportion to the number of
shares of Common Stock held by each of them. It is intended that such
distributions will result in the Stockholders receiving aggregate distributions
equal to their respective positive Capital Account balances, after giving effect
to all adjustments for the taxable year in which liquidation of the Company
occurs. However, if the positive balances in the Capital Accounts of the
Stockholders are not equal to the amounts to be distributed to each such
Stockholder pursuant to this Section 5.5(d), constituent items of income, gain,
loss and deduction will be reallocated among the Stockholders for the year of
liquidation, to the extent permissible under Code Section 704(b) (and, if
necessary and
21
permissible under Code Section 704(b), for prior Company taxable years for which
the deadline (determined without regard to extensions) for the filing of the
Company's federal income tax return has not passed), so as to cause the balances
in the Capital Accounts of the Stockholders to be in the amounts necessary to
assure that such result is achieved.
5.6 ALLOCATIONS AND DISTRIBUTIONS TO NEW STOCKHOLDERS. If shares of Common
Stock are transferred or if additional shares of Common Stock are issued to a
new Stockholder during any fiscal year, Profits and Losses for the fiscal year
will be allocated to the new Stockholder in accordance with section 706(d) of
the Code, using any conventions permitted by law and selected by the
Stockholders. All Distributions on or before the date of a transfer will be made
to the transferor, and all Distributions after the date of a transfer must be
made to the transferee.
5.7 CAPITAL ACCOUNTS. The Company will maintain an accounting record of
each Stockholder's capital interest in the Company as determined under the rules
set forth in Regulation Section 1.704-1(b) (a "Capital Account"). There shall be
credited to each Stockholder's Capital Account (a) the amount of any
contribution of cash by that Stockholder, (b) the Book Value of property
contributed by that Stockholder, (c) that Stockholder's allocable share of
Profits and any items in the nature of income or gain that are specially
allocated to that Stockholder, and (d) the amount of any Company liabilities
assumed by such Stockholder or which are secured by any property distributed to
such Stockholder. There shall be debited against each Stockholder's Capital
Account (i) the amount of all distributions of cash to that Stockholder unless a
distribution to the Stockholder is a loan or is deemed a payment under Code
Section 707(c), (ii) the Book Value of property distributed to that Stockholder
by the Company, (iii) that Stockholder's allocable share of Losses and any items
in the nature of expenses or losses which are specially allocated to that
Stockholder, and (iv) the amount of any liabilities of such Stockholder assumed
by the Company or which are secured by any property contributed by such
Stockholder to the Company. This definition of Capital Account and the other
provisions herein relating to the maintenance of Capital Accounts are intended
to comply with Regulation Sections 1.704-1(b) and 1.704-2 and shall be
interpreted and applied in a manner consistent with those Regulation Sections.
In the event the Board reasonably determines that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto, are
computed in order to comply with that Regulation, the Board may make such
modification, provided that such modifications are not reasonably expected to
materially alter the amount and timing of distributions to the Stockholders
pursuant to Section 5.5 hereof. The Board shall also make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulation Sections 1.704-1(b) and 1.704-2,
provided that such modifications are not reasonably expected to materially alter
the amount and timing of distributions to the Stockholders pursuant to Section
5.5 hereof.
5.8 TAX ALLOCATIONS. (a) Any item of income, gain, deduction or loss
(including creditable foreign tax expenditures) with respect to any property
(other than money) that has been contributed by a Stockholder to the capital of
the Company and
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which is required to be allocated to Stockholders for income tax purposes under
section 704(c) of the Code so as to take into account the variation between the
tax basis of such property and its Book Value at the time of its contribution,
will be allocated to the Stockholders for income tax purposes using such method
permitted under section 1.704-3 of the Regulations as the Company may select
through unanimous consent of the Board. If the Capital Accounts are adjusted
pursuant to section 1.704-1(b)(2)(iv)(f) or (g) of the Regulations with respect
to a revaluation of any asset of the Company, subsequent allocations of income,
gain, loss, and deduction, including depreciation or deductions for cost
recovery with respect to such asset, will take account of any variation between
the then existing adjusted basis of such asset for federal income tax purposes
and the Book Value of such asset as required by section 1.704-1(b)(2)(iv)(g) of
the Regulations. Notwithstanding the foregoing, if any Stockholder contributed
property with an adjusted tax basis in excess of the initial Book Value for such
property, the Company shall take into account such variation only in determining
the amount of items allocated to the contributing Stockholder, and except as
provided in Regulations, in determining the amount of items allocated to the
noncontributing Stockholders, the tax basis of the contributed property in the
hands of the Company shall be treated as being equal to its initial Book Value.
Creditable foreign tax expenditures shall be allocated among the Stockholders
for federal income tax purposes by taking into account such 704(c) built-in gain
or loss as provided in Regulations Section 1.704-1(b)(4)(viii)).
(b) Each Stockholder represents and warrants that by executing this
Agreement or a joinder to this Agreement it is aware of the income tax
consequences of allocations of profit and loss and hereby agrees to report its
share of such profits and loss for income tax purposes in a manner consistent
with such allocations.
5.9 TAX WITHHOLDING. Each Stockholder agrees to allow the Company or the
Tax Matters Member to make appropriate tax withholdings pursuant to section 1446
of the Code. Any federal tax obligation withheld on distributable net income by
the Company or by the Tax Matters Member pursuant to section 1446 of the Code
will be directly attributable to the Stockholder or Stockholders that are
subject to such withholding in proportion to each Stockholder's share of
distributable net income.
5.10 SECTION 754 ELECTIONS. The Company shall be required to make a section
754 election upon proper notice and request of a transferee Stockholder and
provide information to the Stockholders regarding the adjustment to the
transferee.
5.11 GRANT OF PROFITS INTEREST IN EXCHANGE FOR SERVICES. By executing this
Agreement, the Stockholders and the Company agree that the Company and the Board
are authorized and directed to take such actions (including the making of an
appropriate tax elections) as may be required by any authority that may be
issued in the future with respect to the taxation of "profits interests"
transferred in connection with the performance of services to conform the tax
consequences to any Stockholder that receives such "profits interest" as closely
as possible to the consequences under Revenue Procedure 93-27 and Revenue
Procedure 2001-43. The Company and each of its Stockholders (including the
"profits interest" recipient Stockholder) agree to comply
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with all requirements imposed in respect of such actions and consents to the
amendment of this Agreement to the extent such subsequent authority in order to
permit the issuance of such "profits interests," provided that such amendment is
not materially adverse to any Stockholder (other than due to a lower tax
deduction to the Company).
5.12 PREPARATION OF TAX RETURNS. The Company shall arrange for the
preparation by the independent certified public accountants retained by the
Company of, and the timely filing of all returns of the Company for federal,
state, local and foreign tax purposes and shall cause to be furnished to the
Stockholders, the tax information reasonably required for the Stockholders'
federal, state, local and foreign tax reporting purposes (including but not
limited to required U.S. reporting of foreign operations) on or before June 30th
of each year in the U.S. The classification, realization and recognition of
income, gain, losses and deductions and other items, for tax purposes, shall be
on that method of accounting adopted by unanimous consent of the Stockholders.
5.13 TAX CONTROVERSIES. The Tax Matters Member is authorized and required
to represent the Company (at the Company's expense) in connection with all
examinations of the Company's affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Company funds for
professional services and costs associated therewith. The Tax Matters Member
agrees to promptly provide to the other Stockholders copies of any
correspondence or other documents received from or sent to any federal, state,
local or foreign tax authorities relating to any examination of the Company's
affairs. Each Stockholder, shall at its own expense, be permitted to attend and
participate in any discussions, negotiations or proceedings in which the Tax
Matters Member is involved on behalf of the Company.
5.14 CAPITAL ACCOUNT DEFICIT RESTORATION. No Stockholder shall be obligated
to restore after the liquidation of the Company any deficit in its Adjusted
Capital Account balance, and no creditor of the Company shall have any right to
enforce any obligation to restore any deficit Adjusted Capital Account balance
of any Stockholder.
5.15 TAX ELECTIONS AND OTHER TAX MATTERS. Unless otherwise specifically
provided herein, all United States federal income tax elections applicable to
the Company shall be made by the unanimous approval of the Board. In addition,
if proposed Treasury Regulation Section 1.704-1(s) is finalized, or a similar
regulation is promulgated, the Stockholders will cooperate in good faith to
avoid the recognition by Lear NAOC of any taxable income or taxable gain in
respect of Lear NAOC's exercise of the Lear Warrant.
5.16 UBTI NOTICE. The Company shall provide written notice to all
Stockholders at least five Business Days prior to the Company engaging in any
activity or investment that the Company believes is reasonably likely to cause
any Stockholder (or any partner or member of a Stockholder that is a
flow-through entity for federal income tax purposes) to recognize gross income
taken into account for purposes of calculating unrelated business taxable income
as defined in Sections 512 or 514 of the Code.
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5.17 ECI NOTICE. The Company shall provide written notice to all
Stockholders at least five Business Days prior to the Company engaging in any
activity or investment that the Company believes is reasonably likely to cause
any Stockholder (or any partner or member of a Stockholder that is a
flow-through entity for federal income tax purposes) to recognize income: (A)
that is effectively connected with the conduct of a "trade or business within
the United States" within the meaning of Sections 871(a) or 882(a) of the Code
or (B) as a result of a direct interest in U.S. real estate or any other
interest which is or would be treated as a "United States real property
interest" within the meaning of Section 897(c) of the Code.
VI. OTHER COVENANTS
6.1 PUBLIC OFFERING. (a) Lear Demand Request. Provided that Lear NAOC has
first complied with Section 4.5 and either the Call Option granted pursuant
thereto has not been exercised or the Call Option has been exercised but the
Call Option Closing has not occurred by the date that is 20 days after the final
determination of the Call Price, Lear NAOC may exercise its demand registration
rights set forth in the Registration Rights Agreement (a "Lear Demand Request").
Lear NAOC's right to make the Lear Demand Request will terminate upon Lear
NAOC's transfer of any shares of Capital Stock or Options other than (i) in
connection with a pledge (or exercise pursuant thereto) of all of the Capital
Stock and Options owned by Lear NAOC permitted pursuant to Section 4.1(a), or
(ii) a Transfer in accordance with this Agreement.
(b) Board Decision. Subject to Section 3.4(b), in the event that the
Board determines pursuant to the Required Board Approval that it would be
advisable to cause the equity of the Company or its business to be sold to the
public in a Public Offering, it may invoke Section 6.1(c). By entering into the
Agreement, the parties hereto agree to be bound by the terms and conditions of
the Registration Rights Agreement.
(c) Reorganization. If a Lear Demand Request is made or Section 6.1(b)
is invoked, the Board shall seek to facilitate a Public Offering by: (i)
interposing between the Company and one of more of the Subsidiaries a
corporation that would be suitable for having its equity sold to the public in a
Public Offering (a "Newco") or (ii) causing the Company to be reorganized
(including by way of merger, conversion, recapitalization, asset and liability
transfer, or equity exchange) into a Newco. The Board shall accomplish the
foregoing (a "Reorganization") as promptly as practicable in such manner as it
reasonably deems appropriate, efficient (including in terms of tax treatment)
and in the best interests of each of the Stockholders, subject to the
requirements of this Section 6.1. In connection with any Reorganization and any
Public Offering, each share of Class A Common Stock and Class B Common Stock
shall be converted into or exchanged for the same per share consideration. The
organizational documents of Newco will be in such form as is approved by the
Board, and each Stockholder agrees to vote its shares of Capital Stock and
execute all documents and agreements as reasonably requested by the Board in
furtherance of a Reorganization.
25
(d) Consummation of the Reorganization. Upon the consummation of the
Reorganization, each Stockholder will be entitled to cause the Company to redeem
or exchange all (but not less than all) of its Capital Stock for the applicable
pro rata portion of the Newco common stock held by the Company, with fractional
shares of Newco common stock rounded or cashed out in an equitable manner, as
determined by the Board in good faith.
6.2 CONFIDENTIALITY. Any Stockholder receiving any Confidential Information
related to the Company or its Subsidiaries or Affiliates agrees to keep such
Confidential Information confidential and not disclose such Confidential
Information to any third party without the prior written consent of the Company
(in its sole discretion), provided that nothing in this Agreement will prevent
such Stockholder from disclosing such Confidential Information (i) as required
by law, regulation, other legal process or the rules of any national stock
exchange applicable to such Stockholder or any of its Affiliates, (ii) to its
limited partners or shareholders, representatives (including attorneys and
accountants), agents and affiliates, provided such Persons agree to be bound by
the provisions of this Section 6.2, (iii) as part of such Stockholder's normal
reporting, rating or review procedures (including normal credit rating or
pricing process) and (iv) in connection with the transfer or proposed transfer
of Common Stock, if the transferee or proposed transferee agrees in an agreement
that can be enforced by the Company to be bound by the provisions hereof.
6.3 INFORMATION RIGHTS. (a) The Company will, and will cause each of its
Subsidiaries, Affiliates, officers, directors, employees, auditors and agents,
to afford each of WLR, Lear NAOC and Franklin (as long as it is a Majority or
Minority Stockholder, as applicable) and its representatives and agents, upon
reasonable notice, reasonable access during business hours to its officers,
employees, auditors, agents, properties, offices and other facilities and to all
books and financial and other records of the Company and the Subsidiaries.
(b) The Company will furnish to each Stockholder the following:
(i) within 30 days following the conclusion of each of the
Company's first three fiscal quarters of each fiscal year, quarterly
unaudited consolidated financial statements of the Company and the
Subsidiaries; and
(ii) within 60 days following the conclusion of the Company's
fiscal year, annual audited consolidated GAAP financial statements of
the Company and the Subsidiaries audited by the Company's independent
accountants.
(c) The Company will also furnish to each holder of Class A Common
Stock the following:
26
(i) within 15 days following the conclusion of each month,
unaudited consolidated financial statements of the Company and the
Subsidiaries for such month;
(ii) within 15 days following the conclusion of each of the
Company's first three fiscal quarters of each fiscal year, quarterly
U.S. GAAP tax accrual workpapers prepared in accordance with SFAS 109,
Accounting for Income Taxes; and
(iii) within 30 days following the conclusion of the Company's
fiscal year, annual U.S. GAAP tax accrual workpapers prepared in
accordance with SFAS 109, Accounting for Income Taxes.
6.4 WLR ADVISORY FEE. For as long as WLR is the Majority Stockholder, XX
Xxxx & Co. LLC shall be entitled to the following advisory fees: (a) in the case
of a cash capital contribution by Franklin or Lear NAOC to the Company or a
Subsidiary, Franklin or Lear NAOC, as the case may be, will pay XX Xxxx & Co.
LLC an advisory fee equal to 1.5% of such cash capital contribution; and (b) in
the case of a cash capital contribution to the Company or a Subsidiary from a
Person other than WLR, Franklin or Lear NAOC, such Person will be required to
pay XX Xxxx & Co. LLC an advisory fee equal to 4.0% of such cash capital
contribution; provided, however, that such advisory fee shall be waived for the
contributions made by the holders of the Class B Common Stock on the Effective
Date. The advisory fee shall be payable in cash contemporaneously with, and as a
condition to, the capital contribution on which it is based. For the avoidance
of doubt, the parties acknowledge and agree that XX Xxxx & Co. LLC shall not be
entitled pursuant to this Section 6.4 to any advisory fee in connection with a
Transfer of Capital Stock by a Stockholder or in connection with a Public
Offering.
6.5 NONCOMPETITION. (a) Each of WLR and Franklin, each on behalf of itself
and its Affiliates, and Lear NAOC, on behalf of itself and Xxxx Corporation and
its Subsidiaries, agrees that, as long as it is a Stockholder and, in the case
of Lear NAOC and WLR, for a period of one year thereafter (the "Non-Compete
Period"), it will not at any time without the prior written consent of the
Company, directly or indirectly, in any state, territory or possession of the
United States of America, the United Mexican States or Canada in which the
Business has material operations as of the Effective Date (the "Territory")
form, acquire, finance, own an interest in, operate or control an enterprise
which is directly competitive with the Business (a "Competing Business").
Nothing herein shall prohibit any Stockholder from (x) being a passive owner,
directly or indirectly, of not more than 20% of the outstanding equity, or
instruments convertible into 20% of the outstanding equity, of any Person that
is a Competing Business which is publicly traded, so long as it does not have an
active participation in the business of such Persons, or (y) managing
investments in Competing Businesses for the account of Persons who are not
Affiliates. Notwithstanding anything to the contrary in this Agreement, with
respect to Lear NAOC the restrictions in this Section 6.5 shall terminate upon a
Change in Control with respect to Lear NAOC or on the first anniversary of Lear
NAOC's ceasing to be a Minority Stockholder; provided, that in the
27
case of a Change in Control with respect to Lear NAOC, Lear NAOC or its
successor shall (a) cause its Board designees (as designated pursuant to Section
3.3(a) herein) and Observers to immediately resign from the Board and each
Subsidiary Board, (b) cease to have any right to appoint any individual to fill
such vacancies, (c) retain in strict confidence any Confidential Information
that it has obtained as a member of the Board or any Subsidiary Board, as the
case may be, and shall not use for any purpose whatsoever, or divulge,
disseminate or disclose to any third party or Person involved in a Competing
Business, any such Confidential Information, it being understood that the
exceptions in clauses (ii)-(iv) of Section 6.2 shall no longer apply to Lear
NAOC or its successor, and (d) no longer be entitled to receive any Confidential
Information. Notwithstanding anything to the contrary in this Agreement, Lear
NAOC shall be entitled to: (i) engage in sequencing activities in relation to a
Competing Business, (ii) to generate annual gross revenues of up to $200,000,000
attributable to a Competing Business (as determined without regard to sequencing
revenues), if such revenues are attributable to ancillary activities of Lear
NAOC relating to Lear NAOC's core business operations, provided, that Lear NAOC
shall first provide the Company the opportunity to bid for such ancillary
activities and will award such activities to the Company if its bid is more
competitive than the terms on which Lear NAOC is willing to provide such
activities, and (iii) engage in activities related to the development,
manufacture and/or sale of automotive seats or seat components, electrical
distribution systems or components, or electronic systems or components. In
addition, notwithstanding the above, in the event Lear NAOC directly or
indirectly acquires all of or any portion of any Person, whether by merger,
consolidation, purchase of assets or otherwise, this Section 6.5 shall not apply
with respect to the continued operation of the business of such Person if (i)
such Person, at the time of the acquisition, has annual gross revenue from a
Competing Business equal to or less than $100,000,000, or (ii) such Person, at
the time of the acquisition, has annual gross revenue from a Competing Business
greater than $100,000,000 and, in the case of clause (ii), Lear NAOC disposes of
such Competing Business to a third party purchaser within 15 months after the
acquisition thereof; provided that in each case Lear NAOC does not provide
Confidential Information to any Person involved in such Competing Business.
(b) The Stockholders subject to this Section 6.5 agree that the
covenants set forth in this Section 6.5 are reasonable in temporal and
geographical scope and in all other respects.
(c) The Company and the Stockholders subject to this Section 6.5
intend that the covenants of this Section 6.5 shall be deemed to be a series of
separate covenants, one for each county or province of each and every state,
territory or jurisdiction of each country within the Territory and one for each
month of the Non-Compete Period.
(d) If, at the time of enforcement of this Section 6.5, a court shall
hold that the duration or scope stated herein is unreasonable under
circumstances then existing, the Company and the Stockholders subject to this
Section 6.5 agree that the maximum duration or scope under such circumstances
shall be substituted for the
28
stated duration or scope and that the court shall be allowed to revise the
restrictions contained herein to cover the maximum period and scope permitted by
law.
(e) Each of the Minority Stockholders shall have the right to seek to
enforce the terms of this Section 6.5 against any of the other Stockholders
subject to this Section 6.5.
(f) Each Stockholder subject to this Section 6.5 recognizes and
affirms that in the event of its breach of any provision of this Section 6.5,
money damages would be inadequate and the Company would not have an adequate
remedy at law. Accordingly, each Stockholder subject to this Section 6.5 agrees
that in the event of a breach or a threatened breach by any Stockholder subject
to this Section 6.5 of any of the provisions of this Section 6.5, the Company
and the other Stockholders subject to this Section 6.5, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof (without posting a bond or other security).
(g) For purposes of this Section 6.5, "Stockholder," "WLR" and
"Franklin" shall mean, with respect to WLR and Franklin, WLR and Franklin and
each of their Affiliates, and "Stockholder" and "Lear NAOC" shall mean, with
respect to Lear NAOC, Lear NAOC and Xxxx Corporation and its Subsidiaries.
VII. GENERAL
7.1 WAIVERS AND CONSENTS; AMENDMENTS. (a) No course of dealing and no delay
in exercising any rights hereunder will operate as a waiver of the rights
hereof. No provision hereof may be waived other than by a written instrument
signed by the party or parties waiving such provision. The Company shall not
waive any provision of this Agreement without the consent of each of the
Minority Stockholders. Subject to Section 3.4(d)(vi), except as provided in
Section 7.1(b), this Agreement may only be amended by the Required Board
Approval and the consent of each of the Minority Stockholders, provided, that no
amendment shall (i) change the limitation on liability of the Stockholders or
the Stockholders' right to distributions on a pro rata basis in each case
without the written consent of each affected Stockholder or (ii) adversely
affect any holder of Class A Common Stock without the written consent of the
Stockholder so adversely affected.
(b) The Stockholders hereby specifically consent to the amendment of
this Agreement from time to time in such manner as is determined by counsel for
the Company to be necessary upon publication of final regulations in the federal
Register (or other official pronouncement), to provide for (A) the election of a
safe harbor under proposed Treasury Regulations Section 1.83-3(l) (or any
similar provision) under which the fair market value of Capital Stock that is
transferred in connection with the performance of services is treated as being
equal to the liquidation value of that interest, (B) an agreement by the Company
and all of its Stockholders to comply with all the requirements set forth in
such proposed Treasury Regulations and Notice 2005-43 (and
29
any other guidance provided by the Internal Revenue Service with respect to such
election) with respect to all Common Stock transferred in connection with the
performance of services while the election remains effective, and (C) any other
related amendments.
7.2 GOVERNING LAW. This Agreement will be deemed to be a contract made
under, and will be construed in accordance with, the laws of the State of
Delaware without giving effect to conflict of laws principles thereof.
7.3 NOTICES AND DEMANDS. Any notice or demand which is required or
permitted to be given under this Agreement must be given, and will be deemed to
have been sufficiently given for all purposes of this Agreement, on the date
delivered by hand or distributed by fax or e-mail prior to 5:00 p.m., Eastern
Standard Time (otherwise, such notice will be deemed received on the next
succeeding business day in the place of receipt), or the next business day after
being sent by overnight delivery by a reputable overnight courier service
providing receipt of delivery, to the addresses of the Stockholders set forth on
Schedule 1.
7.4 REMEDIES; SEVERABILITY. It is specifically understood and agreed that
any breach of the provisions of this Agreement by any Person subject hereto will
result in irreparable injury to the other parties hereto, that the remedy at law
alone will be an inadequate remedy for such breach and that, in addition to any
other remedies which they may have, such other parties may enforce their
respective rights by actions for specific performance (to the extent permitted
by law). Whenever possible, each provision of this Agreement will be interpreted
in such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement is deemed prohibited or invalid under such
applicable law, such provision will be ineffective to the extent of such
prohibition or invalidity, and such prohibition or invalidity will not
invalidate the remainder of such provision or the other provisions of this
Agreement.
7.5 INTEGRATION. This Agreement, including any exhibits or schedules
referred to herein or attached hereto (each of which is a part of this
Agreement), constitutes the entire agreement, and supersedes all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
7.6 BINDING AGREEMENT. This Agreement will be binding upon and enforceable
by, and will inure to the benefit of, the parties hereto and their respective
successors, heirs, executors, administrators and permitted assigns, and no
others. Nothing in this Agreement will give any other Person not named herein
the benefit of any legal or equitable right, remedy or claim under this
Agreement. The rights and obligations under this Agreement are evidenced by the
ownership of the Capital Stock and Options. Notwithstanding the foregoing, the
rights of the Majority Stockholder and the Minority Stockholders in their
capacities as such (i.e., in contrast to the rights of Stockholders generally)
may only be transferred by WLR, Franklin and Lear NAOC in connection with a
Transfer of Capital Stock and Options to their Permitted Transferees.
30
7.7 TERMINATION. (a) This Agreement will terminate automatically on the
earlier of:
(i) the written agreement of each of the holders of the Class A
Common Stock and a Class B Majority in Interest; or
(ii) the consummation of an initial Public Offering.
7.8 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts (including facsimile copies), any one of which need not
contain the signatures of more than one party, but all such counterparts taken
together will constitute one and the same agreement.
7.9 JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) Each party hereby
irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of the New York state court located in the Borough of
Manhattan, City of New York or the United States District for the Southern
District of New York (as applicable, the "New York Court"), and any appellate
court from any such court, in any proceeding arising out of or relating to any
Constituent Document, or for recognition or enforcement of any judgment
resulting from any such proceeding, and each party hereby irrevocably and
unconditionally agrees that all claims in respect of any such suit, action or
proceeding may be heard and determined in the New York Court.
(b) It will be a condition precedent to each party's right to bring
any such proceeding that such proceeding, in the first instance, be brought in
the New York Court (unless such proceeding is brought solely to obtain discovery
or to enforce a judgment), and if each such court refuses to accept jurisdiction
with respect thereto, such proceeding may be brought in any other court with
jurisdiction; provided that the foregoing will not apply to any proceeding by a
party seeking indemnification or contribution pursuant to any Constituent
Document or otherwise in respect of a proceeding against such party by a third
party if such proceeding by such party seeking indemnification or contribution
is brought in the same court as the proceeding against such party.
(c) No party may move to (i) transfer any such proceeding from the New
York Court to another jurisdiction, (ii) consolidate any such proceeding brought
in the New York Court with a proceeding in another jurisdiction, or (iii)
dismiss any such proceeding brought in the New York Court for the purpose of
bringing the same in another jurisdiction.
(d) Each party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, (i) any objection which it
may now or hereafter have to the laying of venue of any proceeding arising out
of or relating to the Constituent Documents in the New York Court, (ii) the
defense of an inconvenient forum to the maintenance of such proceeding in any
such court, and (iii) the right to object, with respect to such proceeding, that
such court does not have jurisdiction over such
31
party. Each party irrevocably consents to service of process in any manner
permitted by law.
7.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF
OR IN ANY WAY RELATED TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
7.11 NO STRICT CONSTRUCTION. The parties have participated jointly in the
preparation of the Constituent Documents. In the event an ambiguity or question
of intent or interpretation arises, any provision contained in the Constituent
Documents will be construed as if drafted jointly by the parties, and no
presumption or burden of proof will arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of the Constituent Documents.
7.12 CERTAIN OTHER INTERPRETIVE MATTERS. (a) Titles and headings to
Sections herein are inserted for convenience of reference only, and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
(b) Unless the context otherwise requires, (i) all references to
articles, sections or schedules are to articles, sections or schedules of this
Agreement, (ii) the words "include", "includes", and "including" shall be deemed
to be followed by "without limitation" whether or not they are in fact followed
by such words or words of similar import, (iii) each term defined in this
Agreement has the meaning assigned to it, and (iv) each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in accordance
with U.S. GAAP. All references to "$" or dollar amounts are references to lawful
currency of the United States of America.
7.13 EXPENSES. All Reimbursable Expenses incurred by WLR, Franklin and Lear
NAOC will be paid or reimbursed by the Company. The Company will pay and be
responsible for all expenses and fees relating to its formation.
7.14 DEFINITIONS. For purposes of this Agreement, in addition to the terms
defined elsewhere herein, the following terms have the following meanings when
used herein with initial capital letters:
"Accepting Optionholders" has the meaning set forth in Section 4.5.
"Adjusted Capital Account" means, with respect to any Stockholder,
such Stockholder's Capital Account increased by the sum of (i) such
Stockholder's share of "partnership minimum gain" within the meaning of section
1.704-2(d) of the Regulations and (ii) such Stockholder's share of "partner
nonrecourse debt minimum gain" within the meaning of section 1.704-2(i) of the
Regulations.
"Affected Stockholder" has the meaning set forth in Section 4.6.
32
"Affiliate" of a Person means any Person or entity which directly or
indirectly controls, is controlled by, or is under common control with (within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act) such Person or entity.
"Arbiter" means a reputable investment banking or accounting firm
nationally recognized in the United States with no material relationship to the
Company or any of WLR, Franklin or Lear NAOC.
"Asset Sale" means the sale or other disposition of all or a
substantial portion of the assets of the Company, as determined by the Board in
good faith.
"Bankruptcy Decision" means, with respect to any Person, any of the
following actions: (a) filing any voluntary petition in bankruptcy on behalf of
such Person, (b) consenting to the filing of any involuntary petition in
bankruptcy against such Person, (c) filing any petition seeking, or consenting
to, reorganization or relief under any applicable federal, state or foreign law
relating to bankruptcy or insolvency, on behalf of such Person, (d) consenting
to the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of such Person or a substantial part of the property
of such Person, or (e) making any assignment for the benefit of creditors on
behalf of such Person.
"Board" means the Company's Board of Directors.
"Book Value" means with respect to any Company asset, the asset's
adjusted tax basis, except as follows:
(a) the initial Book Value of any asset contributed by a Stockholder to the
Company shall be the gross Fair Market Value of that asset;
(b) the Book Value of all Company assets shall be adjusted to equal their
respective gross Fair Market Values as of the date upon which any of the
following occurs: (i) the acquisition of an additional interest in the
Company after the Effective Date by any new or existing Stockholder, in
exchange for more than a de minimis Capital Contribution or the
distribution by the Company to a Stockholder of more than a de minimis
amount of Company property as consideration for an interest in the Company,
if the Board reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Stockholders
of the Company; (ii) the liquidation of the Company within the meaning of
Regulation Section 1.704-1(b)(2)(ii)(g); and (iii) the grant of an interest
in the Company as consideration for the provision of services to or for the
benefit to the Company;
(c) the Book Value of any Company asset distributed to any Stockholder
shall be the gross Fair Market Value of that asset on the date of
distribution; and
33
(d) if an election under Code Section 754 has been made, the Book Value of
Company assets shall be increased (or decreased ) to reflect any
adjustments to the adjusted basis of the assets pursuant to Code Section
734(b) or Code Section 743(b), but only to the extent that those
adjustments are taken into account in determining Capital Accounts pursuant
to Regulation Section 1.704-1(b)(2)(iv)(m) and Section 5.4(h) hereof;
provided, however, that Book Value shall not be adjusted pursuant to this
subsection (d) to the extent that the Board reasonably determines that an
adjustment pursuant to subsection (b) hereof is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subsection (d).
If the Book Value of an asset has been determined or adjusted hereby, that Book
Value shall thereafter be determined by taking into account all adjustments for
depreciation, if any, taken with respect to that asset for purposes of computing
Profits and Losses.
"Business" means (a) the business and operations comprising the Lear
North American ISD Business as of the date of the Lear Acquisition Agreement
(consisting of instrument panels, headliners, cockpits, flooring, acoustics,
door panels, blow molding and other miscellaneous automotive plastic parts),
excluding the existing joint ventures of Lear NAOC or its Affiliates, being the
Amtex, Xxxxx and CLA joint ventures, and (b) the business and operations of the
C&A North American GST Business as of the Effective Date.
"Business Day" means a day that is not a Saturday, Sunday or day on
which commercial banking institutions located in New York City are authorized or
required to close.
"Bylaws" means the Company's bylaws, attached as Annex B.
"C&A" means Xxxxxxx & Xxxxxx Corporation, a Delaware corporation.
"C&A Acquisition Agreement" means that certain Asset Purchase
Agreement dated as of April 20, 2007, among International Automotive Components
Group North America, Inc. and C&A and certain of C&A's subsidiaries, as amended.
"C&A Closing" means the Closing as defined in the C&A Acquisition
Agreement.
"C&A North American GST Business" means the "Carpet & Acoustics"
business as conducted by C&A and the other "Sellers" under the C&A Acquisition
Agreement as of the Effective Date, consisting of the manufacture of a variety
of automotive flooring and acoustics products, consisting of molded, non-woven
and tufted carpet, accessory mats, alternative molded flooring, absorbing
materials, damping materials, engine compartment noise vibration and harshness
systems and interior insulators.
"Call Notice" has the meaning set forth in Section 4.5.
34
"Call Option" has the meaning set forth in Section 4.5.
"Call Option Closing" has the meaning set forth in Section 4.5.
"Call Price" means the fair market value of the Capital Stock subject
to the Call Option determined based on the equity value of the Company and its
Subsidiaries as a whole multiplied by the Percentage Interest represented by
such Capital Stock after application of any reasonably relevant discounts, for
minority ownership status or the like, but not for liquidity, all as agreed or
determined in accordance with Section 4.5. The Call Price for an Option will
equal the Call Price for the Capital Stock for which such Option is exercisable
less the applicable exercise price.
"Capital Account" means the capital account maintained for each
Stockholder pursuant to Section 5.7.
"Capital Contributions" means, with respect to any Stockholder, the
amount of money and the initial Book Value of any property (other than money),
net of the amount of any debt to which such property is subject, contributed to
the Company with respect to the Common Stock in the Company held by such
Stockholder. The principal amount of a promissory note which is not readily
tradable on an established securities market and which is contributed to the
Company by the maker of the note shall not be included in the Capital Account of
any Person until the Company makes a taxable disposition of the note or until
(and to the extent) such Stockholder makes principal payments on the note, all
in accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2).
"Capital Event" means (i) an Asset Sale, or (ii) the liquidation of
the Company, including, without limitation, a liquidation pursuant to an initial
Public Offering.
"Capital Stock" includes all equity interests of the Company or any
Subsidiary, including common stock, preferred stock, membership interests and
all other equity interests of any kind.
"Change in Control" means, with respect to any Person, the occurrence
of any of the following events: (i) any Person becomes the beneficial owner (as
defined in Rules 13d 3 and 13d 5 of the Securities Exchange Act of 1934) of
securities of such Person representing more than 40% of the total voting power
of such Person's outstanding securities determined on a fully diluted basis;
(ii) any transaction (including, without limitation, any merger or
consolidation) involving such Person after the consummation of which the holders
of such Person's equity securities immediately prior to such consummation will
not own a majority of the outstanding equity interest and voting power of the
surviving corporation immediately after such consummation; or (iii) the sale of
a majority of such Person's assets. For the avoidance of doubt, a Change in
Control with respect to Xxxx Corporation shall be considered a Change in Control
with respect to Lear NAOC.
"Charter" means the Company's charter, attached hereto as Annex A.
35
"Class A Common Stock" means Common Stock designated in the Company's
Constituent Documents as Class A Common Stock.
"Class A Majority in Interest" means the affirmative vote of
Stockholders that hold more than 50% of the Class A Common Stock outstanding as
of the record date for such vote.
"Class B Common Stock" means Common Stock designated in the Company's
Constituent Documents as Class B Common Stock.
"Class B Majority in Interest" means the affirmative vote of
Stockholders that hold more than 50% of the Class B Common Stock outstanding as
of the record date for such vote.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any corresponding provisions of any succeeding law.
"Common Stock" means Capital Stock issued pursuant to the Company's
Constituent Documents that is designated therein as "common stock."
"Confidential Information" means all intellectual property, documents,
financial statements, records, business plans, reports and other information
(whether written or oral) of whatever kind or nature, which has value to the
Company or the Subsidiaries, or which is treated by the Company or a Subsidiary
as confidential and regardless of whether such information is marked
"confidential", except such information that (i) is or becomes generally
available to the public through no action of the party (including its limited
partners, representatives, agents and affiliates) to which such information was
furnished, (ii) becomes available to the receiving party from a Person who is
not, to the receiving party's knowledge, subject to any legally binding
obligation to keep such information confidential, (iii) is in the possession of
the receiving party prior to receipt from the Company or (iv) is developed
independently by the receiving party.
"Constituent Documents" of an entity means the entity's certificate of
incorporation or formation, operating agreement, charter, bylaws and other
documents pursuant to which the entity was legally formed and, as applied to the
Company, this Agreement, the Charter and Bylaws.
"Demand Registration" means a Demand Registration pursuant to Section
1.1 of the Registration Rights Agreement.
"Distribution" means a transfer of cash or property to a Stockholder
on account of Capital Stock. All amounts required to be withheld pursuant to
Code section 1446 or any other provision of federal, state or local tax law are
treated as Distributions to the Stockholders subject to such requirement.
"Fair Market Value" means the fair market value as determined in good
faith by the Board pursuant to the Required Board Approval.
36
"Foreign Subsidiary Board" has the meaning set forth in Section 3.3.
"Foreign Subsidiary Observer" has the meaning set forth in Section
3.3.
"Franklin" means the Stockholders identified under the name "Franklin"
on Schedule 1, together with any of their Affiliates holding Capital Stock or
Options.
"Lear Acquisition Agreement" means that certain Asset Purchase
Agreement dated as of November 30, 2006, among Xxxx Corporation, the Company,
International Automotive Components Group North America, Inc., WLR and Franklin,
as amended.
"Lear Demand Request" has the meaning set forth in Section 6.1.
"Lear ISD Closing" means the Closing as defined in the Lear
Acquisition Agreement.
"Lear NAOC" means Xxxx North Atlantic Operations Corporation and the
Stockholders identified under the name "Lear NAOC" on Schedule 1, together with
any of their Affiliates holding Capital Stock or Options.
"Lear North America ISD Business" shall mean the Business (as defined
in the Lear Acquisition Agreement).
"Lear Warrant" means the warrant dated March 31, 2007 to acquire
Common Stock issued to Lear NAOC by the Company.
"Marketable Securities" means securities (i) which are of a class: (a)
of securities issued or fully guaranteed by the United States of America or any
agency thereof and entitled to the full faith and credit of the United States of
America, for which price quotations are routinely quoted and for which there is
a ready liquid market; or (b) both (I) registered pursuant to either section
12(b) or section 12(g) of the Securities Exchange Act of 1934, as amended, and
(II) either listed on a national securities exchange or on the Nasdaq Stock
Market; and (ii) which may be resold immediately in the public markets without
requirement of further registration under the Securities Act or which include
contractual rights that could result in the registration of such securities
under the Securities Act within six months of the date of acquisition of such
securities.
"Minimum Gain" shall have the meaning set forth in Regulation Section
1.704-2(d).
"Observer" has the meaning set forth in Section 3.3(h).
"Options" means a security convertible into, exercisable for or
exchangeable for Capital Stock or any other right or option to acquire Capital
Stock, including, without limitation, the Lear Warrant.
"Optionholders" has the meaning set forth in Section 4.5.
37
"Percentage Interest" means, with respect to a given Stockholder or
shares of Capital Stock, the percent derived by dividing the number of shares of
Capital Stock held by such Stockholder by the number of shares of Capital Stock
then issued and outstanding.
"Permitted Transferee" of a specified Person shall mean (a) in the
case of any holder of Class A Common Stock, (i) any Affiliate of such Person
(and/or, in the case of Franklin, any advisory client of Franklin Mutual
Advisers, LLC), or in the case of WLR, any limited partner or comparable passive
investor in a fund or other investment vehicle included in the definition of
"WLR" that receives Capital Stock or Options pursuant to a normal course
distribution (including a winding up) pursuant to the constituent documents of
such fund or other investment vehicle; provided that, in any such case, such
transferee is not engaged directly or indirectly in a business that competes
with the Business, or (ii) any direct or indirect acquiror of such Person in
connection with a Change in Control and (b) in the case of any holder of Class B
Common Stock, (i) any other holder of Class B Common Stock, (ii) any Affiliate
of such Person, or (iii) any direct or indirect acquiror of such Person in
connection with a Change in Control.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or any unincorporated organization.
"Pledge Notice" has the meaning set forth in Section 4.1.
"Profits" and "Losses" for any period means the taxable income or loss
of the Company for such period, as determined for federal income tax purposes,
adjusted as follows:
(a) Items that are required by Section 703(a)(i) of the Code to be
separately stated shall be included;
(b) Tax-exempt income as described in section 705(a)(1)(B) of the Code
realized by the Company during such fiscal year are taken into account as if it
was not tax exempt;
(c) Expenditures of the Company described in section 705(a)(2)(B) of
the Code for such year, including items treated under section
1.704-1(b)(2)(iv)(i) of the Regulations as items described in section
705(a)(2)(B) of the Code, are taken into account as if they were deductible
items;
(d) With respect to property (other than money) which has been
contributed to the capital of the Company, Profit and Loss are computed in
accordance with the provisions of section 1.704-1(b)(2)(iv)(g) of the
Regulations by computing depreciation, amortization, gain or loss based upon the
Fair Market Value of such property on the books of the Company;
(e) With respect to any property of the Company which has been
revalued as required or permitted by the Regulations under section 704(b) of the
Code,
38
Profit or Loss are determined based upon the Fair Market Value of such property
as determined in such revaluation;
(f) The difference between the Book Value and the Fair Market Value of
any asset of the Company are treated as gain or loss from the disposition of
such asset in the event that any revaluation of assets occur pursuant to section
1.704-1(b)(2)(iv)(e) or (f), including whenever, any new or existing Stockholder
acquires an additional interest in the Company in exchange for a non-de minimis
contribution to the capital of the Company; or such asset of the Company is
distributed to a Stockholder or a distribution is made to a Stockholder as
consideration for a reduction of such Stockholder's interest in the Company or
in liquidation of such interest as defined in section 1.704-1(b)(2)(ii)(g) of
the Regulations; and
(g) Interest paid on loans made to the Company by a Stockholder and
fees and other compensation paid to any Stockholder are deducted in computing
Profit and Loss.
"Proportionate Interests" has the meaning set forth in Section 4.5.
"Public Offering" means any firm commitment, underwritten public
offering of the Common Stock of the Company registered under the Securities Act,
other than a registration relating solely to a transaction under Rule 145 under
the Securities Act (or any successor thereto) or to an employee benefit plan of
the Company.
"Redemption Event" means (i) a Bankruptcy Decision with respect to any
Stockholder or (ii) (with respect to Lear NAOC only) a Change in Control with
respect to Xxxx Corporation or the delivery of a Pledge Notice.
"Redemption Notice" has the meaning set forth in Section 4.6.
"Redemption Price" means the fair market value of the Capital Stock
being redeemed pursuant to Section 4.6 determined based on the equity value of
the Company and its Subsidiaries as a whole multiplied by the Percentage
Interest represented by such Capital Stock after application of any reasonably
relevant discounts, for minority ownership status, liquidity or the like, all as
agreed or determined in accordance with Section 4.6, provided, however, that the
Redemption Price shall not include a discount for liquidity if the applicable
Redemption Event occurs after the date on which Lear NAOC may first exercise the
Lear Demand Right. The Redemption Price for an Option will equal the Redemption
Price for the Capital Stock for which it is exercisable less the applicable
exercise price.
"Registration Rights Agreement" means the Amended and Restated
Registration Rights Agreement by and among the Company and the holders of the
Company's common stock attached hereto as Annex C.
"Regulations" means regulations of the Department of the Treasury
under the Code as such regulations may be changed from time to time.
39
"Reimbursable Expenses" means all reasonable documented third-party
fees and expenses incurred by WLR, Franklin or Lear NAOC (including for legal
and other professional fees) in connection with this Agreement, and the
transactions contemplated hereby and thereby (excluding, for the avoidance of
doubt, the Lear Acquisition Agreement).
"Reorganization" has the meaning set forth in Section 6.1.
"Required Board Approval" means either (i) if the Board comprises less
than five directors, the unanimous approval of the Board, or (ii) if the Board
comprises five directors, the approval of four of the five members of the Board.
"Restructuring" means the Company or any of its Subsidiaries or
Affiliates (a) becomes a party to any merger or consolidation or (b) purchases
or otherwise acquires all or a substantial part of the assets or equity of any
Person.
"Sale Transaction" the meaning set forth in Section 3.4.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholder Minimum Gain" means an amount, with respect to each
Stockholder Nonrecourse Debt, equal to the Minimum Gain that would result if
such Stockholder Nonrecourse Debt were treated as a nonrecourse liability,
determined in accordance with Regulation Section 1.704-2(i).
"Stockholder Nonrecourse Debt" shall have the meaning of "partner
nonrecourse debt" set forth in Regulation Section 1.704-2(b)(4).
"Stockholder Nonrecourse Deductions" has the same meaning as "partner
nonrecourse deduction" in Treasury Regulation Section 1.704-2(i)(1).
"Subsidiary" means any entity directly or indirectly controlled
(within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act) by the Company, whether or not in existence as of the date
hereof.
"Target Balance" means, for any Stockholder as of any date, the amount
that would be distributable to such Stockholder on such date if (i) all the
assets of the Company were sold for cash equal to their respective Book Values
as of such date, (ii) all liabilities of the Company were paid in full (except
that in the case of a nonrecourse liability, such payment would be limited to
the Book Value of the asset or assets securing such liability), and (iii) all
remaining cash were distributed to the Stockholders pursuant to Section 5.5(d).
"Transfer" of Capital Stock or an Option means to, directly or
indirectly, sell, transfer, gift, assign or otherwise dispose of, or permit,
voluntarily or involuntarily or by operation of law, the grant or imposition of
any security, encumbrance, interest, pledge, mortgage, lien, charge, adverse
claim, option, warrant, grant of voting rights, preferential arrangement or
restriction of any kind upon, such Capital Stock or Option or
40
an interest therein, provided that an indirect transfer of Capital Stock or an
Option caused by a change in the identity of or investors in advisory clients of
any Stockholder (including, without limitation, Franklin or funds or other
investment vehicles included in the definition of "WLR") will not be considered
a "Transfer" for purposes of this Agreement.
"WLR" means the Stockholders identified under the name "WLR" on
Schedule 1, together with any of their Affiliates holding Capital Stock or
Options.
[Signature page to follow]
41
Executed as of the Effective Date.
International Automotive Components
Group North America, LLC
By: /s/ Xxxxxxx Toy
------------------------------------
Name: Xxxxxxx Toy
Title: Vice President, Treasurer and
Secretary
Mutual Beacon Fund of Franklin Mutual
Series Fund, Inc.
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Mutual Discovery Fund of Franklin Mutual
Series Fund, Inc.
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Mutual Qualified Fund of Franklin Mutual
Series Fund, Inc.
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Mutual Shares Fund of Franklin Mutual
Series Fund, Inc.
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Mutual Beacon Fund
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Mutual Discovery Fund
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Mutual Discovery Securities Fund of
Franklin Xxxxxxxxx Variable Insurance
Products Trust
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Mutual Shares Securities Fund of
Franklin Xxxxxxxxx Variable Insurance
Products Trust
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Franklin Mutual Beacon Fund of Franklin
Xxxxxxxxx Investment Funds
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Franklin Mutual Recovery Fund
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Mutual Recovery Fund Limited
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Franklin Mutual Shares Fund of Franklin
Xxxxxxxxx Funds
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Franklin Mutual Global Discovery Fund of
Franklin Xxxxxxxxx Investment Funds
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
EQ/Mutual Shares Portfolio of EQ/
Advisors Trust
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Vice President
Lear North Atlantic Operations
Corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President & Secretary
WLR RECOVERY FUND III, LP
By: /s/ Xxxxxxx Toy
------------------------------------
Name: Xxxxxxx Toy
Title: Managing Director
Class B Common Stockholders(1)
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
----------
(1) The Class B Common Stockholders joined this Agreement as of the Effective
Date pursuant to their respective Subscription Agreements for the Class B
Common Stock, and their respective signature pages to such Subscription
Agreements constitute counterpart signature pages to this Agreement.