1
EXHIBIT 10.6
THIS SHAREHOLDER AGREEMENT made and entered into as of the 23rd day of
April, 1996 among:
(a) ▇▇▇▇▇ Instruments Corp., a California corporation
(the "Company");
(b) ▇▇▇▇ ▇▇▇▇▇▇, a resident of the State of California acting
in his individual capacity (in such capacity being "▇▇▇▇▇▇"), and also
acting as the trustee (in such capacity being the "▇▇▇▇▇▇ Trustee") of
the ▇▇▇▇▇▇ Living Trust u/d/t dated January 12, 1995 (the "▇▇▇▇▇▇
Trust"), ▇▇▇▇▇ ▇▇▇▇▇▇▇, a resident of the State of California acting in
his individual capacity (in such capacity being "▇▇▇▇▇▇▇"), ▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as trustees (in such capacity being
collectively the "▇▇▇▇▇▇▇ Trustees") of the ▇▇▇▇▇▇▇ 1986 Trust u/d/t
dated October 23, 1986 , 1986 (the "▇▇▇▇▇▇▇ Trust") ▇▇▇ ▇▇▇▇, a
resident of the State of California ("Ezra") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.,
a resident of the State of California ("▇▇▇▇▇▇"; and together with
▇▇▇▇▇▇, the ▇▇▇▇▇▇ Trustee, ▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇ Trustees, and Ezra
being sometimes hereinafter referred to individually as a "Founder" and
collectively as the "Founders"); and
(c) ▇▇▇▇▇▇▇▇▇ ESOP Capital Partners, A Minnesota Limited
Partnership ("CECP"; and together with it successors and assigns and
transferees being sometimes hereinafter referred to individually as a
"Holder" and collectively as the "Holders"; and together with the
Founders being sometimes hereinafter referred to individually as a
"Shareholder" and collectively as the "Shareholders").
WITNESSETH
WHEREAS, the Founders own beneficially and/or of record the issued and
outstanding shares of the Company's Series A Common Stock, no par value (the
"Series A Common Stock") set forth opposite their names on Exhibit A attached
hereto and incorporated herein by reference; and
WHEREAS, the Company and CECP have entered into a Securities Purchase
Agreement (the "Purchase Agreement;" capitalized terms not otherwise defined
herein being used herein as therein defined) dated of even date with this
Agreement pursuant to which CECP will purchase 1,000 shares of the Company's
Series A Preferred Stock, no par value (the "Preferred Stock") and Warrants
permitting CECP to acquire 1,000,000 shares of the Series A Common Stock; and
WHEREAS, the Founders and CECP deem it in their best interest and the best
interest of the Company to provide for the corporate governance of the Company
and desire to enter into this Agreement in order to effectuate that purpose; and
1
2
WHEREAS, the Founders and CECP further desire to establish certain
rights with respect to the sale, assignment, transfer, encumbrance or other
disposition of the shares of Common Stock and to provide for certain other
rights and obligations in respect thereof as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, CECP, the Founders and
the Company, intending to be legally bound, agree as follows:
1. Corporate Governance.
(a) Charter and Bylaws; etc. The Company's Charter and Bylaws
as in effect on the date hereof are attached hereto as Exhibits B and
C, respectively. The Charter and Bylaws may be amended in any manner
permitted thereunder and under the California General Corporation Law
("Cal Code") except that neither the Charter nor the Bylaws shall be
amended in any manner that would conflict with, or be inconsistent
with, the provisions of this Agreement.
(b) Board of Directors. The Founders and CECP agree that:
(i) So long as CECP's rights to have a Purchaser's
Representative to or on the Company's board of directors
have not terminated in accordance with the Purchase
Agreement, CECP shall be entitled to designate one
director; provided, however, that at any time and from
time to time, CECP, by written notice to ▇▇▇▇▇▇ (or his
successor appointed by the Founders holding a majority of
the Voting Stock held by the Founders (such holders being
the "Majority Founders")), may elect not to designate its
director, in which event CECP agrees to vote its shares of
Voting Stock for an additional director designated by the
Majority Founders.
(ii) In addition to its rights under subsection (i)
above but only so long as the Preferred Stock is
outstanding, CECP shall be entitled to designate the
majority of the directors upon the happening and
continuation of a Specified Event of Non-Compliance in
accordance with the Purchase Agreement and the Company's
Charter.
Each Founder and CECP shall retain at all times the right to vote such
person's shares of the Company's Voting Stock, in that person's sole
discretion, on all matters other than those set forth in subsections
(i) and (ii) of this Section (b) or in Section 1(e) that are at any
time presented for a vote to Company's stockholders generally. If CECP
elects not to exercise its right to designate a director at any time,
then CECP
2
3
may subsequently change its election by giving written notice to the
Founders, whereupon the Founders, if necessary to elect CECP's
designee, shall cause one of their designated directors to resign and,
if necessary to elect CECP's designee, CECP and the Founders agree to
call a special meeting of the Company's stockholders to elect a
director designated by CECP at the earliest time permitted by the
Company's Charter and Bylaws.
(c) Initial Board of Directors. As of the date hereof, the
Company's board of directors consists of the following members:
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.,
each of whom shall hold his or her office until the 1997 annual meeting
of stockholders (or such earlier time as may otherwise be provided in
the Charter) at which time directors shall be nominated and elected in
the manner provided in the Charter, Bylaws, Cal Code and this
Agreement.
(d) Covenant to Vote. Each Founder and Holder shall appear in
person or by proxy at any annual or special meeting of stockholders of
the Company for the purpose of obtaining a quorum and shall vote his,
her, or its shares of Voting Stock upon any matter submitted to a
stockholders' vote in a manner so as to be consistent and not in
conflict with, and to implement, the terms of this Agreement including,
without limitation:
(i) each Founder hereby covenants to vote all of that
Founder's shares of Voting Stock in accordance with this
Section 1 for the election of directors designated by CECP;
and
(ii) CECP hereby covenants to vote all of CECP's
shares of Voting Stock in accordance with this Section 1 for
the election of one or more directors designated by the
Majority Founders.
3
4
(e) Certain Corporate Matters. Each Founder agrees with
CECP that, so long as the CECP's rights to have a Purchaser's
Representative to or on the Company's board of directors have not been
terminated in accordance with the Purchase Agreement:
(i) if any of the following actions proposed to be
taken by the Company would constitute an Event of
Non-Compliance (other than after the redemption of the
Preferred Stock), then the Company's taking of such action
requires the affirmative prior vote of the Purchaser's
Representative and that such Founder will not take any action
as a director of the Company or otherwise with respect to any
of such actions that does not receive the Purchaser's
Representative's affirmative vote:
(A) the Company's making of any Distribution;
(B) the Company's merger or consolidation
with any other person or the Company's sale, lease,
exchange or other disposition of its property and
assets;
(C) the Company's commencement of a
voluntary case under Title 11 of the United States
Code as from time to time in effect, or the Company's
authorization of the commencement of such a voluntary
case;
(D) the Company's seeking of relief as a
debtor under any applicable law, other than said
Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the
modification or alteration of the rights of
creditors, or the Company's consenting to or
acquiescing in such relief;
(E) the Company's making an assignment for
the benefit of, or entering into a composition with,
its creditors, or the Company's appointment or
consenting to the appointment of a receiver or other
custodian for all or a substantial part of its
property. or
(F) the Company's issuance of any capital
stock; and
(ii) agrees that if: (A) a Specified Event of
Non-Compliance occurs and is continuing; (B) CECP has
exercised its rights under the Company's Charter to designate
a majority of the Company's directors; and (C) CECP notifies
the Founders in writing (such notice being the "CECP Sale
Notice") that CECP desires that the Company be sold, then such
Founder shall affirmatively vote
4
5
his shares of Voting Stock in favor of a Qualifying Sale
unless, within the 30 day period immediately following
CECP's written presentation to the Founders and the
Company of a bona fide Qualifying Sale offer, the Company
redeems the Preferred Stock in full for the Preferred
Stock Redemption Price and pays the Repurchase Price for
the Warrants and the Warrant Stock in full, in each case
in immediately available funds; provided, however, that
the Fair Market Value used in the computation of the
Repurchase Price shall be determined simultaneously with
the determination of the Appraised Value and through the
same appraisal procedures used in the determination of
such Appraised Value.
2. Co-Sale Rights.
(a) Rights. Except for Permitted Transfers, no Shareholder
(such Shareholder being a "Selling Shareholder") shall sell, transfer
or otherwise dispose of any or all of his shares of the Company's
Common Stock to any person (a "Purchaser") unless each other
Shareholder who is not a Selling Shareholder (individually, a "Co-Sale
Offeree" and collectively, the "Co-Sale Offerees") is given an
opportunity to sell or otherwise dispose to the Purchaser on a pro-rata
basis such Co-Sale Offeree's shares of Common Stock and Warrants (for
purposes of this Section 2, each Warrant shall be treated as the number
of shares of Common Stock for which it is exercisable) in accordance
with the provisions of this Section 2. A Co-Sale Offeree's pro rata
share shall be equal to the product of (M) the fraction, the numerator
of which is the number of shares of Common Stock held by such Co-Sale
Offeree, and the denominator of which is the aggregate number of shares
of Common Stock owned by the Selling Shareholder and the Co-Sale
Offerees participating in such sale, multiplied by (N) the number of
shares of Common Stock to be sold in the contemplated sale, with the
Warrant being considered to represent the number of shares of Common
Stock for which it is exercisable.
(b) Offer. Prior to the consummation by the Selling
Shareholder of any sale or other disposition of all or a portion of
such Selling Shareholder's shares of Common Stock, the Selling
Shareholder shall cause the bona fide offer from the Purchaser to
purchase or otherwise acquire such shares from the Selling Shareholder
to be reduced to writing (the "Co-Sale Offer") and shall deliver
written notice of the Co-Sale Offer, together with a true copy of the
Co-Sale Offer, to each Co-Sale Offeree. Each Co-Sale Offer shall
include an offer to purchase or otherwise acquire from each Co-Sale
Offeree, such Co-Sale Offeree's Common Stock at the same time, at the
same price (except for a reduction equal to the aggregate exercise
price for the Warrants) and on the same terms as apply to the sale or
other disposition by the Selling Shareholder to the Purchaser and
according to the terms and subject to the conditions of this Agreement.
(c) Acceptance Notice. If a Co-Sale Offeree desires to
accept the Co-Sale
5
6
Offer with respect to its shares of Common Stock, such Co-Sale Offeree
shall do so by delivering to the Selling Shareholder a written notice
stating such Co-Sale Offeree's irrevocable acceptance of the Co-Sale
Offer with respect to such Co-Sale Offeree's shares of Common Stock
(the "Co-Sale Acceptance Notice"), which Co-Sale Acceptance Notice
shall be delivered to the Selling Shareholder within 20 days after the
delivery of the Co-Sale Notice to such Co-Sale Offeree. Such Co-Sale
Acceptance Notice shall constitute such Co-Sale Offeree's agreement to
sell such Co-Sale Offeree's shares of the Company's Common Stock to the
Purchaser. In addition, such Co-Sale Acceptance Notice shall include a
written undertaking of the Co-Sale Offeree to cooperate in making
arrangements reasonably satisfactory to the Purchaser regarding
delivery of such documents as shall be reasonably required to transfer
the shares of Common Stock that the Purchaser agrees to sell pursuant
to the Co-Sale Offer. If a Co-Sale Offeree does not deliver a Co-Sale
Acceptance Notice to the Selling Shareholder in accordance with the
provisions of this Section 2(c), such Co-Sale Offeree shall be deemed
to have irrevocably rejected the Co-Sale Offer.
(d) Consummation. If there is a decrease in the price to be
paid by the Purchaser for the shares of the Common Stock to be sold
from the price set forth in the Co-Sale Offer, which decrease is
acceptable to the Selling Shareholder, or other material change in
terms which are less favorable to the Selling Shareholder but which are
acceptable to the Selling Shareholder, the Selling Shareholder shall
notify the Co-Sale Offerees of such decrease or other material change
in terms, and each Co-Sale Offeree shall have five business days from
the date of receipt of the notice of such decrease to rescind its
previously delivered Acceptance Notice. The Selling Shareholder shall
act as agent for the Co-Sale Offerees in connection with such sale or
other disposition and shall cause to be remitted promptly to each of
the Co-Sale Offerees the total consideration of the shares sold by such
Co-Sale Offeree pursuant thereto, which consideration shall be in the
same form as the consideration received by the Selling Shareholder and
shall be net of such Co-Sale Offeree's applicable portion of the
expenses of such sale or other disposition, as provided in Section 2(e)
below and net of the aggregate exercise price of the Warrants which
shall be remitted to the Company. The Selling Shareholder shall
furnish, or shall cause to be furnished, promptly such other evidence
of the consummation and time of consummation of such sale or other
disposition and the terms thereof as shall be reasonably requested. If
the Selling Shareholder does not complete such sale or other
disposition, the Selling Shareholder shall return to the Co-Sale
Offerees all documents (including stock assignments and stock
certificates, if any) and powers-of-attorney which the Co-Sale Offerees
delivered to the Selling Shareholder pursuant to the terms of this
Section 2 or otherwise in connection with such sale or other
disposition.
(e) Expenses. Each Co-Sale Offeree shall bear such Co-Sale
Offeree's pro rata share (based upon the ratio of the number of shares
of Common Stock sold by such Co-Sale Offeree bears to the aggregate
number of shares of Common Stock sold
6
7
in such transaction by all of the Company's stockholders) of the
reasonable expenses incurred by the Selling Shareholder in connection
with any sales or other dispositions of such Co-Sale Offeree's shares
of Common Stock made pursuant to the co-sale rights set forth herein.
(f) Assignability. The rights granted to CECP under this
Section 2 shall be assignable by CECP only to a person acquiring the
number of CECP's shares of Common Stock at least equal to the CECP
Floor Amount on the date of CECP's transfer to such person.
(g) Cumulative Rights. The obligations and rights of the
Founders set forth in this Section 2 are in addition to the obligations
and rights of the Founders set forth in Section 4 but the Offeree
Founders' rights under Section 4 are exercisable prior to the
Shareholders' exercise of their rights under this Section 2.
(h) Termination. The obligations and rights set forth in this
Section 2 shall terminate upon the consummation of a Qualified Public
Sale and shall terminate with respect to any shares of Common Stock
transferred by a Selling Shareholder and any Co-Sale Offeree to any
person after compliance with this Section.
3. Founders' Repurchase Option.
(a) Repurchase Option. If CECP exercises its right under
Section 9.1 of the Purchase Agreement to put its Warrant Stock to the
Company and the Company cannot pay the Repurchase Price for CECP's
Warrant Stock in immediately available funds because of a Statutory
Restriction or a Specified Credit Agreement Restriction, then CECP,
within 10 Business Days after what would have been the Put Closing
Date, shall give notice (a "Repurchase Offer Notice") in writing to the
Founders, setting forth the number of Rescinded Put Shares and the
Repurchase Price thereof. The Founders, subject to the terms and
conditions hereinafter set forth, shall have the irrevocable right and
option (the "Repurchase Option") to purchase all, but not less than
all, of the Rescinded Put Shares at the Repurchase Price thereof. Each
Founder may subscribe to any number of the Rescinded Put Shares;
subject, however to adjustment as hereinafter provided. A Founder
("Repurchase Subscribing Founder") may exercise the Repurchase Option
by depositing with CECP within 30 days of the date of such Repurchase
Offer Notice (such period being the "Repurchase Subscription Period")
an acceptance of the Repurchase Option (a "Repurchase Subscription"),
which acceptance shall be binding and irrevocable. Each Repurchase
Subscription shall state the maximum number of Rescinded Put Shares to
be purchased by the Repurchase Subscribing Founder, up to the total
number of Rescinded Put Shares. At the end of the Repurchase
Subscription Period, CECP shall prepare a list of Repurchase
Subscriptions, showing the maximum number of Rescinded Put Shares to be
purchased pursuant to each Repurchase Subscription, and
7
8
the total maximum number of Rescinded Put Shares to be purchased
pursuant to all Repurchase Subscriptions and shall deliver a copy of
such list to each Founder and the Company. If the total maximum number
of Rescinded Put Shares to be purchased pursuant to all Repurchase
Subscriptions is equal to or greater than the number of Rescinded Put
Shares and (i) if each Repurchase Subscribing Founder shall have
subscribed for at least his pro rata share based upon the ownership
interests of the Repurchase Subscribing Founders, then each Repurchase
Subscribing Founder shall be deemed to have purchased the number of
shares that would be purchased by each Repurchase Subscribing Founder
if such Repurchase Subscribing Founder purchased his pro rata share of
the Rescinded Put Shares, or (ii) if one or more Repurchase Subscribing
Founders shall have subscribed to less than his pro rata share, then
such Repurchase Subscribing Founders shall be deemed to have subscribed
to their actual subscription and the shares in excess of such
Repurchase Subscribing Founder's actual subscriptions shall be
allocated to the oversubscribing Repurchase Subscribing Founders (in
each case, proportionate to the oversubscribing Repurchase Subscribing
Founders' respective pro rata shares) first to all of the
oversubscribing Repurchase Subscribing Founders up to the maximum
number of shares specified in their respective Repurchase Subscriptions
and thereafter to only those oversubscribing Repurchase Subscribing
Founders whose respective Repurchase Subscriptions have not been
accepted up to the maximum number of shares specified therein. For
purposes of this Section, a Founder's pro rata share shall be the ratio
that such Founder's ownership interest in the Company bears to the
total ownership interests of all of the Founders.
(b) Purchase of Shares by Founders. Each Repurchase
Subscribing Founder's Repurchase Subscription shall be accompanied by a
deposit, in immediately available funds, of the Repurchase Price of the
Rescinded Put Shares subject to such Repurchase Subscribing Founder's
Repurchase Subscription; provided, however, that if such Founder's
Repurchase Subscription is for more than his pro rata share, then his
required deposit is limited to his pro rata share of the aggregate
Repurchase Price. At the end of the Repurchase Subscription Period,
CECP shall notify each Repurchase Subscribing Founder of the number of
Rescinded Put Shares purchased by such Repurchase Subscribing Founder,
the aggregate Repurchase Price thereof and the amount of any additional
payment to be made by such Repurchase Subscribing Founder over his
deposit and CECP shall return the excess amount of such Repurchase
Subscribing Founder's deposit to him. Within 5 days after such notice,
each Repurchase Subscribing Founder shall pay, in immediately available
funds, the remainder of the Repurchase Price, if any, for the Rescinded
Put Shares purchased by him.
(c) Failure to Exercise Repurchase Option. Unless all
Rescinded Put Shares are purchased pursuant to Repurchase Subscriptions
delivered to CECP in accordance with this Section 3, then the Founders
and the Repurchase Subscribing
8
9
Founders shall be deemed to have failed to have exercised the
Repurchase Option and the Founders' and the Repurchase Subscribing
Founders' rights hereunder shall terminate at the end of the Repurchase
Subscription Period without further action on the part of CECP.
(d) Notice Requirements. CECP shall give Repurchase Offer
Notices to the Founders in accordance with the terms of this Agreement.
Repurchase Subscriptions in response to an Repurchase Offer Notice
shall be deemed made when received by CECP.
(e) Termination. The rights and obligations set forth in this
Section 3 shall terminate upon the consummation of a Qualified Public
Sale.
4. Right of First Refusal.
(a) Right of First Refusal. In the event a Founder ("Offeror
Founder") proposes to sell, exchange or otherwise dispose of all or any
part of the Offeror Founder's Common Stock ("Offered Shares") or
interest therein, whether for cash or other consideration, and has
received a bona fide offer from a third party to purchase the Offered
Shares, then the Offeror Founder shall, within ten business days
thereof, deliver to the other Founder's (individually an "Offeree
Founder" and collectively the "Offeree Founders") written notice (the
"Option Notice") setting forth in detail the circumstances of such
event, and the Offeree Founders shall have a right of first refusal to
purchase the Offered Shares at the price and upon the terms and
conditions set forth in the Option Notice.
(b) Purchase of Offered Shares. Within 30 days after receipt
of the Option Notice by the Offeree Founders, the Offeree Founders may
elect to purchase the Offered Shares pro rata based on their stock
ownership interests in the Company on the terms and conditions provided
in the Option Notice. If all of the Offeree Founders do not elect to
purchase their pro rata share of the Offered Shares, each Offeree
Founder desiring to purchase a portion of the Offered Shares remaining
in excess of his portionate share thereof shall be entitled to purchase
that proportion of the Offered Shares which remains unpurchased as his
stock ownership interest in the Company bears to the interest of all
other Offeree Founder's desiring to purchase portions of such Offered
Shares in excess of their proportionate shares thereof. If one or more
of the Offeree Founders elect to purchase all of the Offered Shares
during such 30 days period, the Offeror Founder shall sell the Offered
Shares to the Offeree Founder(s), and shall not be required to provide
to any Holder the co-sale rights under Section 2 hereof. If the Offeree
Founders do not elect to purchase all of the Offered Shares within the
30-day period, the Offeror may transfer the Offered Shares to the third
party upon the terms and conditions described in the Option Notice;
provided that the Offeror Founder must provide the co-sale rights in
Section 2 hereof
9
10
to all of the Shareholders.
(c) Termination. The rights and obligations set forth in this
Section 4 shall terminate upon the consummation of a Qualified Public
Sale.
5. Right of Repurchase Upon a Founder's Death.
(a) Mandatory Sale and Purchase. If any Founder's employment
with the Company terminates as a result of his death, then the
representative(s) of the estate of the deceased Founder (hereinafter
called the "Representative") or the respective trustee(s) of the ▇▇▇▇▇▇
Trust, the ▇▇▇▇▇▇▇ Trust or any other Permitted Trust (hereinafter
called the "Trustee") shall sell to the Company, and the Company shall,
subject to any limits then imposed by the Company's lenders, purchase
from the Representative or such Trustee, the number of shares of Common
Stock owned by the deceased Founder (and/or, in the case of ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ or any other Founder who has transferred shares of Common Stock
to a Permitted Trust, owned by the Trustees of the respective ▇▇▇▇▇▇▇
Trust, the ▇▇▇▇▇▇ Trust or such Permitted Trust) in accordance with
this Section 5 (such shares being the "Deceased Founder's Shares").
(b) Purchase Price. The purchase price for the Deceased
Founder's Shares (the "Purchase Price") shall be the Repurchase Price
thereof except that the Fair Market Value to be used in determining the
Repurchase shall be determined in accordance with the Founder Appraisal
Procedures set forth in Section 6(j) hereof. The Purchase Price shall
be paid by check to the Representative or Trustee within ten days of
the later of (A) the Company's receipt of the life insurance proceeds
from the Policies maintained on the deceased Founder's life as
contemplated by Section 5(c) of this Agreement and (B) the
determination of the Founder Fair Market Value. Notwithstanding the
foregoing, if the proceeds from such Policies (after deducting a
reasonable reserve for any tax likely to be borne by the Company
attributable to the proceeds of such Policies) ("Available Proceeds")
are less than the Purchase Price, the Available Proceeds shall be used
to purchase that number of shares equal to the product of (X) the
Available Proceeds times (Y) the number of the Deceased Founder's
Shares divided by the Purchase Price.
(c) Life Insurance.
(i) Subject to the provisions of Section 5(c)(v):
(A) The Company shall apply for and become the
owner and beneficiary of life insurance policies on
the life of each Founder in the amount set forth on
Exhibit D attached to this Agreement
(the "Policies"); and
10
11
(B) So long as a Founder continues to be
employed by the Company (or, in the case of the
▇▇▇▇▇▇▇ Trust, the ▇▇▇▇▇▇ Trust or any Permitted
Trust, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ or the Founder who has
established the Permitted Trust, as the case may be,
continues to be employed by the Company) and while
this Agreement shall be in effect, the Company
shall: (1) use its best efforts to maintain such
Policies in full force and effect; (2) not exercise
any powers of ownership by canceling any such
Policy, by changing the named beneficiary, by
assigning ownership or by otherwise changing the
nature or amounts of the Policies; provided,
however, that the board of directors may increase
the amounts of such Polices to no more than what the
Repurchase Price of such Founder's Deceased
Founder's Shares would be based upon the most
current annual appraisal conducted for the ESOP; and
(3) pay the premiums on all such Policies within 30
days after each such premium shall become due and
payable and may, in its discretion, apply any
dividends declared on the policies to the payment of
such premiums.
(ii) To the extent permitted by any Credit Agreement and
permissible under California law, the Company shall use Available
Proceeds to satisfy its obligation to repurchase the Deceased Founder's
Shares of the deceased Founder, as applicable (except that in the case
of the Policies purchased on the life of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ or other
Founder who has established a Permitted Trust, the proceeds shall be
used to purchase the shares of Common Stock owned by the ▇▇▇▇▇▇▇ Trust,
the ▇▇▇▇▇▇ Trust or the Permitted Trust, respectively).
(iii) If the Available Proceeds of any Policy are insufficient
or unavailable to repurchase the relevant Deceased Founder's Shares in
full, then the full amount of Available Proceeds shall be used to
repurchase the number of such Deceased Founder's Shares calculated in
accordance with Section 5(b) pro rata from the holders thereof or such
other percentages as may be agreed upon by the Representative and the
Trustee. Any shares of Common Stock unavailable to be repurchased shall
no longer be subject to repurchase by the Company but shall remain
subject to the other terms and conditions of this Agreement. For
purposes of this Section, the relevant Representative's or Trustee's
pro rata share shall be the ratio that such person's ownership interest
in the Company bears to the total ownership interests of such
Representative and Trustee.
(iv) If any proceeds remain from the Policies after the
payment of the obligations of the Company as set forth in this Section
5, such proceeds
11
12
shall be retained by the Company and used to pay other
redemption costs and, thereafter, for general corporate
purposes.
(v) Notwithstanding the foregoing, the Company's
board of directors retains its right to terminate or cancel
the Policies on the lives of all, but not less than all, of
the then currently employed Founders or reduce the Policies on
the lives of all, but not less of all, of the then currently
employed Founders proportionate to the amount of the Policies
then in effect.
(c) Termination of Obligation to Buy and Sell. The
obligations of the Representatives, the ▇▇▇▇▇▇▇ Trust, the ▇▇▇▇▇▇
Trust, any Permitted Trust or the Trustee to sell their Common Stock
set forth in this Section 5 of this Agreement and the obligation of the
Company to buy in accordance with such Section shall terminate upon one
of the following events:
(i) A Qualified Public Sale of the Company's Common
Stock;
(ii) A reorganization, merger, or consolidation of
the Company with one or more entities (except for a
transaction, the purpose of which is to change the domicile of
the Company), as a result of which the Company goes out of
existence or becomes a subsidiary of another entity (which
shall be deemed to occur if another entity or group of
entities acting in concert shall own, directly or indirectly,
more than 50% of the aggregate voting power of all outstanding
equity securities of the Company); or
(iii) A sale of all or substantially all of the
Company's assets.
6. Miscellaneous.
(a) Governing Law. All matters relating to the
interpretation, construction, validity and enforcement of this
Agreement shall be governed by the internal laws of the State of
California without giving effect to any choice or conflict of law
provision or rule (whether of the State of California or any other
jurisdiction) that would cause the application of laws of any
jurisdiction other than the State of California.
(b) Legended Certificates. The certificates evidencing
the Common Stock and Preferred Stock shall be legended to disclose the
existence of the rights set forth in this Agreement.
(c) Entire Agreement. This Agreement and exhibits hereto
contain the entire agreement between the parties relating to me subject
matter hereof and supersede all prior agreements and understandings
with respect to such subject matter, and the parties hereto have made
no agreements, representations or warranties relating
12
13
to the subject matter of this Agreement which are not set forth herein.
(d) Amendments. No amendment or modification of this Agreement
shall be deemed effective unless made in writing and signed by all of
the parties hereto.
(e) No Waiver. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any estoppel to enforce
any provisions of this Agreement, except by a statement in writing
signed by the party against whom enforcement of the waiver or estoppel
is sought. Any written waiver shall not be deemed a continuing waiver
unless specifically stated, shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or
condition for the future or as to any act other than that specifically
waived.
(f) Binding Effect. This Agreement shall become effective upon
CECP's exercise in full of its Warrant and, after becoming effective,
shall be binding upon, and inure to the benefit of, the parties hereto
and their respective successors, assigns and personal representatives
except as otherwise expressly stated herein. Until all of the rights
and obligations arising under Sections 1, 2, 3, 4 and/or 5 hereof are
terminated in accordance with their respective terms, no sale,
transfer, assignment, exchange or other disposition of shares of Common
Stock shall be made by any Shareholder to any person unless such person
shall agree in writing to be bound by the then applicable provisions of
this Agreement. The rights of CECP hereunder are afforded to it as a
holder of Series A Common Stock.
(g) Counterparts. This Agreement may be simultaneously
executed in any number of counterparts, and such counterparts executed
and delivered, each as an original, shall constitute but one and the
same instrument.
(h) Severability. To the extent any provision of this
Agreement shall be invalid or unenforceable, it shall be considered
deleted herefrom and the remainder of such provision and of this
Agreement shall be unaffected and shall continue in full force and
effect.
(i) Captions and Headings. The captions and paragraph headings
used in this Agreement are for convenience of reference only, and shall
not affect the construction or interpretation of this Agreement or any
of the provisions hereof.
(j) Certain Definitions. In addition to the terms defined
elsewhere in this Agreement, for purposes of this Agreement, the
following terms shall have the meanings ascribed to them in this
subsection:
"Appraised Value" shall mean the appraised value of
the Company as determined by an appraiser (the "Independent
Appraiser") selected in
13
14
accordance with the procedures set forth in this definition. Within 30
days after CECP delivers the CECP Sale Notice, CECP shall select an
appraiser (the "CECP Appraiser") and notify the Founders in writing
(such notice being the "CECP Appraiser Notice") of CECP's selection. If
the Majority Founders do not notify CECP in writing of their objection
(such objection being the "Founder Objection") to such selection within
15 days after receipt of the CECP Appraiser Notice, then the CECP
Appraiser shall be deemed to be the Independent Appraiser and the
appraised value determined by the CECP Appraiser shall be the Appraised
Value. If the Majority Founders timely object to the CECP Appraiser,
then, within 15 days after the delivery of the Founder Objection, the
Majority Founders shall select an Appraiser (the "Founder Appraiser")
and notify CECP in writing (such notice being the "Founder Appraiser
Notice") of the selection of the Founder Appraiser; provided, however,
that if the Majority Founders fail to timely select the Founder
Appraiser, then the CECP Appraiser shall be deemed to be the
Independent Appraiser and the appraised value determined by the CECP
Appraiser shall be the Appraised Value. If CECP does not notify the
Founders in writing of its objection (such objection being the "CECP
Objection") to such selection within 15 days after receipt of the
Founder Appraiser Notice, then the Founder Appraiser shall be deemed to
be the Independent Appraiser and the appraised value determined by the
Founder Appraiser shall be the Appraised Value. If CECP timely objects
to the Founder Appraiser, then the CECP Appraiser and the Founder
Appraiser shall meet to select the Independent Appraiser within 15 days
after CECP's delivery of the CECP Objection. If the CECP Appraiser and
the Founder Appraiser cannot agree upon the Independent Appraiser
within 30 days after CECP's delivery of the CECP Objection to the
Founder Appraiser, then the selection of the Independent Appraiser
shall be submitted to the Chief Judge of the United States District
Court for the District of Minnesota. Appraised Value shall then be
determined by the Independent Appraiser within 30 days after its
selection, and the determination of the Independent Appraiser shall be
conclusive and binding upon the Company, the Founders and CECP. All
expenses of the Founder Appraiser, the CECP Appraiser and the
Independent Appraiser shall be borne by the Company.
"Common Stock" shall mean the Company's Series A Common Stock,
and Series B Common Stock.
"Founder Appraisal Procedures" shall mean the procedures set
forth in this definition. For a period of 60 days after the date on
which any Founder's employee status with the Company is terminated as a
result of his death (the "Negotiation Period"), the Representative, any
applicable Trustee and the Company agree to negotiate in good faith to
reach agreement upon the Fair
14
15
Market Value. In the event that the Representative, the applicable
Trustee and the Company are unable to agree upon the Fair Market Value
by the end of the Negotiation Period, the Fair Market Value shall be
determined for purposes of Section 5 by an appraiser (the "Independent
Appraiser") selected in accordance with the following procedures:
(a) Within 30 days after the end of the
Negotiation Period, the Company shall select an
appraiser (the "Company Appraiser") and notify the
Representative and applicable Trustee in writing
(such notice being the "Company Appraiser Notice") of
the Company's selection. If the Representative or
such Trustee does not notify the Company in writing
of its objection (such objection being the "Estate
Objection") to such selection within 15 days after
receipt of the Company Appraiser Notice, then the
Company's Appraiser shall be deemed to be the
Independent Appraiser and the fair market value
determined by the Company Appraiser shall be the Fair
Market Value.
(b) If the Representative or the applicable
Trustee timely objects to the Company Appraiser,
then, within 15 days after the delivery of the Estate
Objection, the objecting person (or, if both the
Representative and the Trustee timely object, then
the Representative and the Trustee jointly) shall
select an Appraiser (the "Estate Appraiser") and
notify the Company in writing (such notice being the
"Estate Appraiser Notice") of the selection of the
Estate Appraiser; provided, however, that if the
objecting person(s) fail to timely select the Estate
Appraiser, then the Company Appraiser shall be deemed
to be the Independent Appraiser and the appraised
value determined by the Company Appraiser shall be
the Fair Market Value.
(c) If the Company does not notify the
Representative and the applicable Trustee in writing
of its objection (such objection being the "Company
Objection") to such selection within 15 days after
receipt of the Estate Appraiser Notice, then the
Estate Appraiser shall be deemed to be the
Independent Appraiser and the fair market value
determined by the Estate Appraiser shall be the Fair
Market Value.
(d) If the Company timely objects to the
Estate Appraiser, then the Company Appraiser and the
Estate Appraiser shall meet to select the Independent
Appraiser within 15 days after the Company's delivery
of the Company Objection. If the Company Appraiser
and the Estate Appraiser cannot agree upon the
Independent Appraiser within 30 days after the
Company's delivery of the Company Objection to the
Estate Appraiser, then the selection of the
Independent Appraiser shall
15
16
be submitted to Judicial Arbitration Mediator
Services, Inc./ENDISPUTE in Orange County,
California.
(e) In all cases, the Independent Appraiser
shall determine the Fair Market Value within 30 days
after its selection, and the determination of the
Independent Appraiser shall be conclusive and binding
upon the Company, the Representative and the Trustee.
(f) All expenses of the Company Appraiser
shall be borne by the Company, all expenses of the
Estate Appraiser shall be borne pro rata by the
Representative and the Trustee and all expenses of
the Independent Appraiser shall be borne equally by
the Company, the Representative and the Trustee.
"Qualifying Sale" shall mean any merger,
consolidation, liquidation or sale of the Company's assets or
transaction involving the sale of at least a majority of the
shares of the Company's issued and outstanding capital stock
that CECP proposes be accepted by the Company and/or the
holders of the shares of the Company's stock, as the case may
be, where the consideration payable in such transaction is
based upon a value of the Company equal to at least 85% of the
Company's Appraised Value.
"Permitted Transfers" shall mean: (a) any transfer by
a Founder of shares of Common Stock, without consideration, to
the trustee of a trust (a "Permitted Trust" for the benefit of
such Founder and the family members of such Founder where such
Founder is the initial trustee and such trust is revocable and
the trustee agrees to be bound by the terms of this Agreement;
provided, however, that the grantor Founder's rights under
this Agreement shall not inure to the benefit of such
Permitted Trust except as provided in Sections 2, 3 or 5 but
the grantor Founder's obligations under this Agreement shall
be binding upon such Permitted Trust to the same extent as
binding upon the grantor Founder at the time of transfer; (b)
any transfer by a Shareholder or a Permitted Trust of shares
of Common Stock through a Public Sale so long as all of the
Shareholders have had an opportunity to participate in such
Public Sale; (c) any transfer by CECP of Rescinded Put Shares
to a Repurchase Subscribing Founder pursuant to Section 3 or
of any transfer to any person of Rescinded Put Shares that
were not timely repurchased by the Founders in accordance with
Section 3; (d) any transfer by CECP of shares of Common Stock
to the Company pursuant to Section 9.1 or 9.3 of the Purchase
Agreement; and (e) any transfer by an Offeror Founder of
Offered Shares to the Offeree Founders pursuant to Section 5.
"Specified Credit Agreement Restriction" shall mean
any Credit
16
17
Agreement Restriction which prohibits the Company from paying
the Repurchase Price of the shares of Warrant Stock put to the
Company pursuant to Section 9.1 of the Purchase Agreement at
any time after the principal of, and accrued interest on, the
Term Note (or any Refinancing Indebtedness in respect thereof)
has been paid in full and no event of default has occurred and
is continuing on the then applicable Credit Agreement or would
result from such payment.
"Voting Stock" shall mean the Company's capital stock
that is entitled to participate in the election of directors
and shall include the Company's Series A Common Stock and the
Company's Series B Common Stock.
(k) Notices. Any notice provided for in this Agreement will be
in writing and will be deemed properly delivered if either personally
delivered or sent by overnight courier or telecopier or mailed
certified or registered mail, return receipt requested, postage
prepaid, to the recipient at the address specified below:
(i) if to a CECP, at CECP's address for notices
under the Purchase Agreement;
(ii) if to any other Holder, at such Holder's
address on the stock transfer books of the Company;
(iii) if to the Company or any Founder, at:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(k). Any such notice
shall be effective (A) if delivered personally or by telecopy, when
received, (B) if sent by overnight courier, when receipted for, and (C)
if mailed, three (3) days after being mailed as described above.
(l) Prior Agreement Superseded. This Agreement hereby
supersedes in its entirety the Amended and Restated Stock Transfer and
First Refusal Agreement dated as of January 31, 1995 by and among the
Shareholders ("Prior Agreement"). Upon the execution of this Agreement
by the parties, the Prior Agreement shall no longer be of any force or
effect.
17
18
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set forth in the first paragraph hereof.
▇▇▇▇▇ Instruments Corp.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Its: Chairman and Chief Executive Officer
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ in his capacity as a
trustee of the ▇▇▇▇▇▇ Living Trust
created under Agreement dated
January 12, 1995.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ in his capacity as a
trustee of the ▇▇▇▇▇▇▇ 1986 Trust
under Agreement dated October 23, 1986.
/s/ ▇▇▇ ▇▇▇▇
-----------------------------------------
▇▇▇ Ezra
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇
▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Capital Partners,
A Minnesota Limited Partnership
By: ▇▇▇▇▇▇▇▇▇ Capital Investment Partners,
A Minnesota Limited Partnership
Its: General Partner
By: ▇▇▇▇▇▇▇▇▇ Capital, Inc.
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Its: Vice President
19
20
EXHIBIT A TO
SHAREHOLDER AGREEMENT
FOUNDERS AND SHARES
Founder Shares
------- ------
▇▇▇▇ ▇▇▇▇▇▇ directly and as a beneficiary
of the ▇▇▇▇▇▇ Trust. 1,275,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ directly and as a beneficiary
of the ▇▇▇▇▇▇▇ Trust. 762,500
▇▇▇ ▇▇▇▇ 295,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. 167,500
1
21
EXHIBIT D TO
SHAREHOLDER AGREEMENT
INSURANCE POLICIES FOR SHAREHOLDERS
Person Upon Whose Life the
Policy is to be Issued Amount of Policy
▇▇▇▇ ▇. ▇▇▇▇▇▇ $ 9,630,000.00
▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 4,965,000.00
▇▇▇ ▇▇▇▇ $ 1,534,000.00
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $ 871,000.00
1
