EXECUTION COPY
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT is dated as of October 8, 1999,
among Alyn Corporation, a Delaware corporation (the "Company"), Xxxx xxx Xxxx
("xxx Xxxx") and Xxxxx X. Xxxxxx ("Xxxxxx"; together with xxx Xxxx, referred to
herein as "Management Stockholders"), Xxxxxxx US Discovery Fund III, L.P. and
Xxxxxxx US Discovery Offshore Fund III, L.P. (collectively, the "Xxxxxxx
Funds"). The Xxxxxxx Funds, any Xxxxxxx Holder and any Transferee are
collectively referred to herein as the "Investor Group" and, individually, an
"Investor."
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Stock and Warrant
Purchase Agreements, dated as of September 29, 1999, between the Company and
each of the Xxxxxxx Funds (the "Stock and Warrant Purchase Agreements"), the
Xxxxxxx Funds have purchased 75,000 shares of the Company's Series C Convertible
Preferred Stock, par value $.01 per share (the "Series C Preferred");
WHEREAS, xxx Xxxx beneficially owns (i) 11,000 shares of the
Company's Common Stock, par value $.001 per share (the "Common Stock"), which
constitutes approximately one-tenth of one percent (0.10%) of the outstanding
shares of Common Stock (such shares, along with any shares of Common Stock or
other equity securities of the Company that xxx Xxxx may subsequently acquire,
the "xxx Xxxx Shares"), and (ii) options exercisable for the purchase of 750,000
shares of Common Stock and warrants exercisable for the purchase of 50,000
shares of Common Stock;
WHEREAS, Xxxxxx beneficially owns (i) 2,544,500 shares of
Common Stock, which constitutes approximately twenty-one percent (21.0%) of the
outstanding shares of the Common Stock (such shares along with any shares of
Common Stock or other equity securities of the Company that Xxxxxx may
subsequently acquire, the "Xxxxxx Shares"; together with the xxx Xxxx Shares,
referred to herein as "Management Shares");
WHEREAS, it is a condition precedent to the Company's and the
Xxxxxxx Funds' respective obligations to consummate the transactions
contemplated by the Stock and Warrant Purchase Agreements that the parties
hereto shall have entered into this Agreement; and
WHEREAS, each of van Roon, Carden, the Company and the Xxxxxxx
Funds desires to enter into this Agreement to regulate certain aspects of their
relationship;
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NOW, THEREFORE, in consideration of the arguments and mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. RIGHTS OF INCLUSION (TAG-ALONG RIGHTS).
(a) In the event a Management Stockholder proposes to Transfer
any Management Shares (the "Transferor Shares") to any Person (the "Buyer"), as
a condition to such Transfer, such Management Stockholder shall cause the Buyer
to offer (the "Inclusion Offer") to purchase from each Investor, at each such
Investor's option, up to that number of Investor Shares determined in accordance
with Section 1(b) on the same terms and conditions as are applicable to the
Transferor Shares (including any consideration to be received by such Management
Stockholder in the form of bonuses, consulting fees, noncompetition payments,
pursuant to employment arrangements or similar arrangements), except that each
Investor shall not be required to provide any representation, warranty or other
undertaking other than with respect to its ownership of, and authority to
Transfer, the Investor Shares owned by it free of any liens or encumbrances.
Such Management Stockholder shall provide prompt written notice to each Investor
(the "Inclusion Notice") setting forth all the terms and conditions of the
Inclusion Offer, and each Investor may accept the Inclusion Offer in whole or in
part by providing a written notice of acceptance with respect to Investor Shares
owned by it to such Management Stockholder within ten (10) business days of
delivery of the Inclusion Notice to it (the "Acceptance Notice").
(b) Each Investor shall have the right to sell, pursuant to
the Inclusion Offer, Investor Shares representing the same percentage of all
Investor Shares owned by it as the Transferor Shares are of all Management
Shares owned by such Management Stockholder (such percentage shall be calculated
on the basis that all shares of Series C Preferred owned by each Investor have
been converted into shares of Common Stock at the current conversion price per
share under Section 5 of the Certificate of Designations); provided, however,
that if no Investor elects to exercise such right, such Management Stockholder
shall nonetheless be entitled to Transfer all or any portion of the Transferor
Shares described in the Inclusion Notice. In the event the number of Investor
Shares for which the Investor Group elects to exercise such right, along with
the Transferor Shares and any other shares of the Company to be sold by other
stockholders pursuant to any similar rights granted to such other stockholders,
exceed the number of shares which the Buyer is willing to purchase, the number
of shares to be Transferred to the Buyer by each transferor shall be reduced so
that each transferor is entitled to Transfer the same percentage of its shares
included in its Acceptance Notice as each other transferor. Any such Investor
shall, prior to or simultaneously with such Transfer, convert such shares of
Series C Preferred into shares of Common Stock so that each Investor Transfers
only Common Stock to the Buyer.
(c) Such Management Stockholder shall have ninety (90) days,
commencing on the date of the Inclusion Notice, in which to Transfer, on behalf
of himself and the Investor Group up to the number of shares covered by the
Inclusion Offer (including the Transferor Shares) to the Buyer. The terms of
such Transfer, including, without limitation, price and form of consideration,
shall be as set forth in the Inclusion Notice. If at the end of such ninety (90)
day period such Management Stockholder has not completed the Transfer of the
Transferor Shares and the Investor Shares (if any) proposed to be Transferred,
such Management Stockholder may not proceed with such Transfer or any other
Transfer without first giving a new Inclusion Notice pursuant to the provisions
of this Section 1.
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(d) If such Management Stockholder is able to complete the
Transfer of the Transferor Shares and the Investor Shares (if any) proposed to
be Transferred within such ninety (90) day period, at the closing thereof, each
Investor shall deliver to the Buyer a certificate or certificates representing
the Investor Shares owned by it to be Transferred pursuant to the Inclusion
Offer, free and clear of all liens and encumbrances, and the Buyer shall pay to
each such Investor the purchase price for the Investor Shares so Transferred
pursuant to this Section 1 and shall furnish such other evidence of the
completion of such Transfer and the terms thereof as may be reasonably requested
by the Investor Group.
(e) The provisions of this Section 1 shall not apply to any
Transfer or proposed Transfer by a Management Stockholder of Management Shares
which represents twelve and one-half percent (12.5%) or less of the Management
Shares held by such Management Stockholder on the Closing Date (as defined in
the Stock and Warrant Purchase Agreements) if such Transfer or proposed Transfer
by such Management Stockholder of Management Shares, together with all other
Transfers by such Management Stockholder of Management Shares on or prior to the
date of such Transfer, represent twenty-five percent (25%) or less of the
Management Shares held by such Management Stockholder on the Closing, with
Management Shares held by such Management Stockholder on the Closing Date to be
appropriately adjusted to reflect any stock split, stock dividend,
recapitalization or similar event; provided, however, that each Transfer of such
Management Shares that takes place within one year of any other Transfer to the
same Person or any Affiliate of such Person shall be aggregated for purposes of
such twelve and one-half percent (12.5%) threshold. In the event that such
Management Stockholder desires to exercise an option to purchase shares of
Common Stock of the Company, then such Management Stockholder may Transfer
Management Shares to the extent necessary to obtain the funds to exercise such
option and such Transfer shall not be included in the calculation of the
percentages in this Section 1(e).
(f) The provisions of this Section 1 shall only apply to such
Management Stockholder so long as such Management Stockholder is an executive
officer of the Company at the time of any proposed Transfer.
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2. Board Observer Rights; Committees.
(a) The Company agrees with the Xxxxxxx Funds that the Xxxxxxx
Holders (or if no shares of Series C Preferred are held by a Xxxxxxx Holder, any
Transferee), shall have the right to have up to two (2) representatives (the
"Xxxxxxx Observer" or "Xxxxxxx Observers") (subject to the provisions of Section
2(b) herein) attend and participate in meetings of the Company's Board of
Directors, or any committee thereof, and the Company shall permit any Xxxxxxx
Observer to attend and participate in all such meetings as an observer, provided
that, so long as (x) at least 50% of the Series C Preferred is outstanding, the
Xxxxxxx Holders or the Transferee, as the case may be, shall have the right to
have up to two (2) Xxxxxxx Observers and (y) at least 25% but less than 50% of
the Series C Preferred is outstanding, the Xxxxxxx Holders or the Transferee, as
the case may be, shall have the right to have one (1) Xxxxxxx Observer, and
provided further that, upon the request of the Company, each Xxxxxxx Observer
shall (I) execute a confidentiality agreement between the Company and such
Xxxxxxx Observer, in form and substance reasonably satisfactory to the Company
and (II) execute an acknowledgement to the xxxxxxx xxxxxxx policy of the
Company. A Xxxxxxx Observer shall not have the right to vote on any matter
presented to the Board or any committee thereof. The Company shall give all
Xxxxxxx Observers written notice of each meeting of the Board of Directors or
any committee thereof and all written materials and other information given to
the Company's directors and committee members in the same manner and at the same
time such notices, materials and other information are given to the directors
and committee members. The Company shall reimburse any Xxxxxxx Observer for
coach travel and other expenses in connection with such meetings to the same
extent that the Company reimburses its directors and committee members. If the
Board of Directors or any committee thereof proposes to take any action by
written consent in lieu of a meeting, the Company shall give written notice
thereof to all Xxxxxxx Observers prior to the effective date of such consent
describing the nature and substance of such action.
(b) During such time that the holders of the Series C
Preferred have elected at least one director to the Company's Board of Directors
(or have waived their right to so elect such director) pursuant to Section 4 of
the Company's Certificate of Designations with respect to the Series C Preferred
(the "Investor Director"), the number of Xxxxxxx Observers that the Xxxxxxx
Holders or the Transferee, as the case may be, shall be able to exercise their
rights as provided in Section 2(a) shall be modified such that (x) in the event
there is one (1) Investor Director, the Xxxxxxx Holders or the Transferee, as
the case may be, shall have the right to have up to one (1) Xxxxxxx Observer,
and (y) in the event there are two (2) Investor Directors, the Xxxxxxx Holders
or the Transferee, as the case may be, shall not have the right to have any
Xxxxxxx Observer.
(c) So long as at least 25% of the shares of Series C
Preferred issued pursuant to the Stock and Warrant Purchase Agreements are
outstanding, the Company, xxx Xxxx and Xxxxxx acknowledge that the parties to
this Agreement desire that one Investor Director be appointed to the Executive,
Compensation, Stock Option and Audit Committees of the Company's Board of
Directors (provided that the holders of the Series C Preferred have exercised
their right to elect an Investor Director pursuant to Section 4 of the Company's
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Certificate of Designations with respect to the Series C Preferred) and at each
time the Company's Board of Directors appoints committee members, agree to use
their best efforts and take any other action necessary or appropriate to ensure
such appointment; provided, however, that the agreements of this paragraph (c)
shall terminate with respect to an Investor Director upon the Xxxxxxx Holders'
or the Transferee's delivery of a written notice to the Company, xxx Xxxx and
Xxxxxx to the effect that such Investor Director need not be appointed to the
aforesaid committees.
3. Definitions.
As used herein, the following terms shall have the respective
meanings set forth below:
"ACCEPTANCE NOTICE" shall have the meaning set forth in
Section 1(a) hereof.
"AFFILIATE" shall have the meaning given it in Section 3 of
the Stock and Warrant Purchase Agreements.
"BOARD" OR "BOARD OF DIRECTORS" shall have the meaning given
it in Section 3 of the Stock and Warrant Purchase Agreements.
"BUYER" shall have the meaning set forth in Section 1(a)
hereof.
"CAPITAL STOCK" means the Common Stock (including, without
limitation, any Common Stock issuable upon conversion of the Series C Preferred
or upon exercise of the Warrants), Series C Preferred and any other class of
equity security which the Company may issue and any securities or other rights
convertible, exchangeable or exercisable for or into any Capital Stock.
"XXXXXX" shall have the meaning set forth in the first
paragraph hereof.
"XXXXXX SHARES" shall have the meaning set forth in the Third
WHEREAS clause hereof.
"CERTIFICATE OF DESIGNATIONS" shall have the meaning given it
in Section 1(a) of the Stock and Warrant Purchase Agreements.
"COMMON STOCK" shall have the meaning set forth in the second
WHEREAS clause hereof.
"COMPANY" shall have the meaning set forth in the first
paragraph hereof.
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"XXXXXXX FUNDS" shall have the meaning set forth in the first
paragraph hereof.
"XXXXXXX HOLDERS" shall have the meaning given it in Section 3
of the Stock and Warrant Purchase Agreements.
"XXXXXXX OBSERVER" shall have the meaning set forth in Section
2(a) hereof.
"FULLY DILUTED BASIS" means, with respect to the calculation
of the number of shares of Capital Stock, as of each date of determination
thereof, (i) all shares of Capital Stock outstanding at the time of
determination and (ii) all shares of Capital Stock issuable upon the exchange,
exercise or conversion of any security or other right then outstanding which is
exchangeable, exercisable or convertible into Capital Stock.
"INCLUSION NOTICE" shall have the meaning set forth in Section
1(a) hereof.
"INCLUSION OFFER" shall have the meaning set forth in Section
1(a) hereof.
"INVESTOR" shall have the meaning set forth in the first
paragraph hereof.
"INVESTOR DIRECTOR" shall have the meaning set forth in
Section 2(b) hereof.
"INVESTOR GROUP" shall have the meaning set forth in the first
paragraph hereof.
"INVESTOR SHARES" means all Series C Preferred and Common
Stock owned by the Investor Group.
"MANAGEMENT SHARES" shall have the meaning set forth the third
WHEREAS clause hereof.
"MANAGEMENT STOCKHOLDER" shall have the meaning set forth in
the first paragraph hereof.
"PERSON" means an individual, corporation, partnership, firm,
association, joint venture, trust, unincorporated organization, governmental
body, agency, political subdivision or other entity.
"PRO RATA" means with respect to a stockholder, in proportion
to the number of shares of Capital Stock on a Fully Diluted Basis owned by such
stockholder.
"SERIES C PREFERRED" shall have the meaning set forth in the
first WHEREAS clause hereof.
"STOCK AND WARRANT PURCHASE AGREEMENTS" shall have the meaning
set forth in the first WHEREAS clause hereof.
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"TRANSFER" means, with respect to any security, any direct or
indirect sale, transfer, assignment, hypothecation, pledge or any other
disposition of such security or any interest therein.
"TRANSFEREE" shall have the meaning given it in Section 3 of
the Stock and Warrant Purchase Agreements.
"TRANSFEROR SHARES" shall have the meaning set forth in
Section 1(a) hereof.
"XXX XXXX" shall have the meaning set forth in the first
paragraph hereof.
"XXX XXXX SHARES" shall have the meaning set forth in the
second WHEREAS clause hereof.
"WARRANTS" shall have the meaning set forth in Section 1 of
the Stock and Warrant Purchase Agreements.
4. MISCELLANEOUS.
(a) In the event of a breach by any party to this Agreement of
its obligations under this Agreement, any party injured by such breach, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of any such provision will
be inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
(b) Except as otherwise provided herein, no modification,
amendment or waiver of any provision of this Agreement will be effective against
any party hereto unless such modification, amendment or waiver is approved in
writing by all parties hereto. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
(c) All covenants and agreements in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
(d) All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or sent by nationally recognized
overnight courier service to the parties at the following addresses or facsimile
numbers:
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(i) If to an Investor, to:
the address indicated on Schedule 1 to the Stock and
Warrant Purchase Agreements.
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
(ii) If to the Company, to:
Alyn Corporation
00000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Secretary
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
(iii) If to xxx Xxxx, to:
Xxxx xxx Xxxx
Alyn Corporation
00000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
(iv) If to Xxxxxx, to:
Xxxxx X. Xxxxxx
Xxxx Corporation
00000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
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All such notices, requests and other communications will (x)
if delivered personally to the address as provided in this Section 4(d), be
deemed given upon delivery, (y) if delivered by facsimile transmission to the
facsimile number as provided in this Section 4(d), be deemed given upon receipt
and (z) if delivered by nationally recognized overnight courier service in the
manner described above to the address as provided in this Section 4(d), be
deemed given on the business day following the day it was sent (in each case
regardless of whether such notice, request or other communication is received by
any other Person to whom a copy of such notice is to be delivered pursuant to
this Section 4(d)). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other parties hereto.
(e) The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
(f) If any provision of this Agreement is held to be illegal,
invalid or unenforceable, and if the rights or obligations of any party hereto
under this Agreement will not be materially and adversely affected thereby, (i)
such provision will be fully severable, (ii) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
(g) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof.
(h) This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have duly executed this
Stockholders' Agreement as of the date first written above.
ALYN CORPORATION
By:____________________________________
Name: Xxxx xxx Xxxx
Title: Chief Executive Officer
By:____________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
With respect to the obligations contained in
Sections 1, 2(c), 3 and 4 hereof only:
_______________________________________
Xxxx xxx Xxxx
_______________________________________
Xxxxx Xxxxxx
XXXXXXX US DISCOVERY FUND III, L.P.
By: XXXXXXX US DISCOVERY
PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC, its general
partner
By: _________________________________
Xxxxxx X. Xxxx, member
XXXXXXX US DISCOVERY OFFSHORE
FUND III, L.P.
By: XXXXXXX US DISCOVERY
PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC, its general
partner
By: ________________________________
Xxxxxx X. Xxxx, member
[Signature page to Stockholders' Agreement]
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