EXHIBIT 10.2
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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
VESTAR/XXXX INVESTORS LLC
BY AND AMONG
VESTAR/SJK INVESTORS LLC
XXXXXX X. XXXX
XXXXX XXXX
XXXXX X. XXXX
XXXXX XXX XXXX TRUST
XXXX FAMILY TRUST
AND
ST. XXXX KNITS INTERNATIONAL, INCORPORATED
Dated as of _______ __, 1999
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TABLE OF CONTENTS
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Page
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ARTICLE I
Definitions...........................................................1
SECTION 1.1 Definitions.............................................1
ARTICLE II
General Provisions....................................................9
SECTION 2.1 Formation...............................................9
SECTION 2.2 Name....................................................9
SECTION 2.3 Term....................................................9
SECTION 2.4 Purpose; Powers.........................................9
SECTION 2.5 Place of Business......................................10
SECTION 2.6 Business Transactions of a Member with the LLC.........10
SECTION 2.7 Fiscal Year............................................10
SECTION 2.8 No State-Law Partnership...............................10
ARTICLE III
Members and Interests................................................11
SECTION 3.1 Members................................................11
SECTION 3.2 Certificates...........................................11
SECTION 3.3 Liability of Members...................................11
SECTION 3.4 Access to and Confidentiality..........................11
ARTICLE IV
Management and Operation of the LLC..................................11
SECTION 4.1 Management.............................................11
SECTION 4.2 Certain Duties and Obligations of the Members..........12
SECTION 4.3 Indemnification of the Managing Member.................12
SECTION 4.4 Expenses...............................................13
SECTION 4.5 Indemnification Rights Non-Exclusive...................13
SECTION 4.6 Insurance..............................................13
SECTION 4.7 Assets of the LLC......................................13
SECTION 4.8 Loans to the LLC.......................................13
SECTION 4.9 Voting of Shares.......................................14
ARTICLE V
Capital Contributions; Distributions.................................16
SECTION 5.1 Capital Contributions..................................16
SECTION 5.2 Distributions..........................................16
SECTION 5.3 Limitations on Distributions...........................16
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ARTICLE VI
Books and Reports; Tax Matters; Capital Accounts; Allocations........17
SECTION 6.1 General Accounting Matters.............................17
SECTION 6.2 Certain Tax Matters....................................17
SECTION 6.3 Capital Accounts.......................................18
SECTION 6.4 Allocations............................................18
ARTICLE VII
Dissolution..........................................................18
SECTION 7.1 Dissolution............................................18
SECTION 7.2 Votes of Members.......................................19
SECTION 7.3 Winding-up; Final Distributions........................19
SECTION 7.4 Further Assurances.....................................20
ARTICLE VIII
Transfer of Member's Units...........................................21
SECTION 8.1 Transfers to be Made Only as Permitted or Required by
this Agreement........................................21
SECTION 8.2 Permitted Transfers....................................21
SECTION 8.3 Tag-Along Rights.......................................21
SECTION 8.4 Drag-Along Rights......................................23
SECTION 8.5 No Transfers...........................................23
SECTION 8.6 Other Transfer Provisions..............................24
ARTICLE IX
The LLC's Registration Rights Relating to Shares of Parent Common
Stock and Related Rule 144 Sales....................................24
SECTION 9.1 Stockholders' Agreement; Transfers of Shares...........24
SECTION 9.2 Exercise of Incidental Registration Rights.............25
SECTION 9.3 Exercise of Demand Registration Rights.................26
SECTION 9.4. Tag-Along Rights.......................................28
SECTION 9.5. Drag-Along Rights......................................30
SECTION 9.6. Public Offerings, etc..................................30
SECTION 9.7. Rights of First Refusal................................31
SECTION 9.8 Initiation of a Rule 144 Sale..........................31
SECTION 9.9 Individual Private Sale................................32
SECTION 9.10 Reduction of Allocated Shares..........................32
SECTION 9.11 Liquidation of the LLC.................................33
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SECTION 9.12 Transfers to be Made Only as Permitted or Required
by this Agreement.....................................33
SECTION 9.13 Liquidity Right........................................33
SECTION 9.14 Certain Limitations on the Parent's Obligations to
Purchase Shares.......................................34
ARTICLE X
Miscellaneous.........................................................36
SECTION 10.1 Equitable Relief.......................................36
SECTION 10.2 Governing Law..........................................36
SECTION 10.3 Successors and Assigns.................................36
SECTION 10.4 Notices................................................36
SECTION 10.5 Counterparts...........................................36
SECTION 10.6 Entire Agreement.......................................36
SECTION 10.7 Amendments.............................................37
SECTION 10.8 Section Titles.........................................37
SECTION 10.9 Representations and Warranties.........................37
SECTION 10.10 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.......38
SECTION 10.11 Reimbursement of Expenses..............................38
SECTION 10.12 Xxxx Representative....................................38
SECTION 10.13 Covenant Not to Compete; Confidential Information......39
SECTION 10.14 Additional Securities Subject to Agreement.............42
Schedule 1 Member Information/Allocated Shares
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VESTAR/XXXX INVESTORS LLC
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of
VESTAR/XXXX INVESTORS LLC, a Delaware limited liability company (the "LLC"),
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dated as of _________ __, 1999, by and among Vestar/SJK Investors LLC, a
Delaware limited liability company (the "Vestar Member"), the parties listed on
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Schedule 1 hereto (each a "Xxxx Member" and, collectively, the "Xxxx Members"),
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such other Persons as shall hereinafter become Members as hereinafter provided,
St. Xxxx Knits International, Incorporated, a Delaware corporation ("Parent")
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and St. Xxxx Knits, Inc., a California corporation (the "Company").
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W I T N E S S E T H
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WHEREAS, the LLC was formed pursuant to (i) a Certificate of Formation
dated as of January 29, 1999 (the "Certificate") and filed for recordation in
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the office of the Secretary of State of the State of Delaware on January 29,
1999 and (ii) a Limited Liability Company Agreement dated as of January 29, 1999
by the Vestar Member (the "Original Agreement"); and
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WHEREAS, the parties hereto desire to enter into this Amended and
Restated Limited Liability Company Agreement of the LLC to permit the admission
as Members (as defined below) of the parties listed on Schedule 1 hereto and
further to make the modifications hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein made and intending to be legally bound hereby, the parties hereto agree
to amend and restate the Original Agreement in its entirety to read as follows:
ARTICLE I
Definitions
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SECTION 1.1 Definitions. Unless the context otherwise requires, the
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following terms shall have the following meanings for purposes of this
Agreement:
"Acquisition" means Pearl Acquisition Corp., a Delaware corporation
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and a wholly-owned direct subsidiary of the LLC.
"Acquisition Merger" shall have the meaning ascribed to such term in
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the Merger Agreement.
"Additional Demand Registrations" shall have the meaning ascribed to
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such term in Section 9.3(a)(iii).
"Affiliate" shall mean, (a) with respect to any Person, (i) any Person
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that directly or indirectly controls, is controlled by or is under common
control with, such Person, or
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(ii) any director, officer, partner, member or employee of such Person or
any Person specified in clause (i) above, or (iii) any Immediate Family
Member of any Person specified in clause (i) or (ii) above; and (b) shall
also include, with respect to any Person who is an individual, a trust the
beneficiaries of which, or a corporation or partnership the stockholders or
limited or general partners of which, include only such individual and such
individual's Immediate Family Members. Notwithstanding the foregoing, the
LLC will not be deemed to be an Affiliate of any Person.
"Agreement" means this Amended and Restated Limited Liability Company
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Agreement, as it may be amended, supplemented, modified or restated from
time to time.
"Allocated Shares" shall mean, in respect of each Member, the number
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of Shares initially allocated to each Member, as set forth on Schedule 1 to
this Agreement, minus the number of such Shares that have been the subject
of a Transfer (which does not include pledges) and plus the number of
additional shares received by the LLC in respect of such Shares.
"Business Day" means a day which is not a Saturday, Sunday or other
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day on which banks in New York, New York or Los Angeles, California are
closed.
"Capital Account" has the meaning set forth in Section 6.3.
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"Capital Contribution" means the total amount of cash and the agreed
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fair market value (net of liabilities) of all other assets contributed to
the LLC by a Member.
"Carrying Value" means, with respect to any asset of the LLC, the
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asset's adjusted basis for federal income tax purposes, except that the
Carrying Values of all assets of the LLC shall be adjusted to equal their
respective fair market values, in accordance with the rules set forth in
Regulations section 1.704-1(b)(2)(iv)(f), except as otherwise provided
herein, as of: (a) the date of the acquisition of any additional Interest
by any new or existing Member in exchange for more than a de minimis
Capital Contribution; (b) the date of the distribution of more than a de
minimis amount of assets of the LLC to a Member; (c) the date an Interest
is relinquished to the LLC; provided, however, that adjustments pursuant to
clauses (a), (b) and (c) above shall be made only if the Managing Member
reasonably determines that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Members. The Carrying Value
of any asset of the LLC distributed to any Member shall be adjusted
immediately prior to such distribution to equal its fair market value and
depreciation shall be calculated by reference to Carrying Value, instead of
tax basis, once Carrying Value differs from tax basis. The Carrying Value
of any asset contributed (or deemed contributed under Regulations section
1.704-1(b)(2)(iv)) by a Member to the LLC will be the fair market value of
the asset at the date of its contribution thereto.
"Certificate" has the meaning set forth in the recitals to this
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Agreement.
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"Code" means the Internal Revenue Code of 1986, as amended from time
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to time, or any successor statute. Any reference herein to a particular
provision of the Code shall mean, where appropriate, the corresponding
provision in any successor statute.
"Common Stock Request" has the meaning set forth in Section 9.3(a)(i).
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"Company Common Stock" means the common stock, no par value per share,
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of Company.
"Company Names" means, collectively, the names "Xxxxx Xxxx", "St Xxxx"
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or "St Xxxx by Xxxxx Xxxx."
"Competing Business" has the meaning set forth in Section 10.13(a)(i).
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"Confidential Information" means information that is not generally
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known to the public and that is used, developed or obtained by the
restricted Group in connection with its business.
"Demand Request" shall have the meaning ascribed to such term in
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Section 9.3(a)(i).
"Demanding Member" shall have the meaning ascribed to such term in
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Section 9.3(a)(i).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Fair Market Value" shall mean, as of any date (the "Valuation Date"),
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with respect to each Share, prior to a Public Offering, the fair market
value thereof, disregarding any discount for minority interest or
marketability of shares, as determined by an independent appraiser,
accountant or investment banking firm (the "Initial Appraiser") selected by
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the Board of Directors of the Parent (and compensated by the Parent) (the
"Initial Determination"); provided, that if the selling Xxxx Employee(s)
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disagree(s), in good faith, with the Initial Determination, such selling
Xxxx Employee(s) shall promptly notify the Parent of such disagreement, in
which event an independent appraiser, accountant or investment banking firm
(the "Second Appraiser") selected by the selling Xxxx Employee(s) shall
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make a determination of the fair market value thereof, disregarding any
discount for minority interest or marketability of shares (the "Second
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Determination"), and if the Second Determination is (i) not at least 110%
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of the Initial Determination, "Fair Market Value" shall be the average of
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the First Determination and the Second Determination and the selling Xxxx
Employee(s) shall pay the cost of the Second Determination or (ii) 110% of
the Initial Determination or greater, an independent appraiser, accountant
or investment banking firm (the "Third Appraiser"; the Second and Third
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Appraisers shall not be permitted to see or otherwise have access to, or be
informed of, the results of the Initial Determination and the Second
Determination, as applicable, or any component of either appraiser's
analysis that led to its conclusions and each of the Parent and the Xxxx
Employees agrees to comply with the foregoing provision) jointly
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agreed upon and selected by the Initial Appraiser and the Second Appraiser
shall make a determination of the fair market value thereof, disregarding
any discount for minority interest or marketability of shares (the "Third
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Determination"), and if the Third Determination (i) falls within the range
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of values that is between the Lower Appraised Amount (as defined below) and
the Higher Appraised Amount (as defined below), "Fair Market Value" shall
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be the Third Determination and the Parent and the selling Xxxx Employee(s)
shall split the cost of the Second Appraiser and the Third Appraiser, or
(ii) is below the Lower Appraised Amount, "Fair Market Value" shall be the
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Lower Appraised Amount and the selling Xxxx Employee(s) shall pay the cost
of the Second Appraiser and the Third Appraiser; or (iii) is above the
Higher Appraised Amount, "Fair Market Value" shall be the Higher Appraised
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Amount and the Parent shall pay the cost of the Second Appraiser and the
Third Appraiser. Subsequent to a Public Offering, the term "Fair Market
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Value" shall mean the price per share equal to the average of the last
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sales price of Parent Common Stock on each of the last thirty trading days
prior to the Valuation Date (the "Repurchase Calculation Period") on each
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exchange on which the Parent Common Stock may at the time be listed or, if
there shall have been no sales on any of such exchanges during the
Repurchase Calculation Period, the average of the closing bid and asked
prices on each such exchange on each day during the Repurchase Calculation
Period or, if there are no such bid and asked prices during the Repurchase
Calculation Period on the next preceding five dates on which such bid and
asked prices occurred or, if the Parent Common Stock shall not be so
listed, the average of the closing sales prices as reported by Nasdaq
during the Repurchase Calculation Period in the over-the-counter market. As
used herein, "Lower Appraised Amount" means the lower of the Initial
Determination and the Second Determination and "Higher Appraised Amount"
means the higher of the Initial Determination and the Second Determination.
"Family Group" shall have the meaning ascribed to such term in Section
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8.2.
"Financing Default" shall mean an event which constitutes (or which
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with notice or lapse of time or both would constitute) an event of default
(which event of default has not been cured or waived) under any of the
following as originally entered into or as they may be amended from time to
time: (i) any agreement under which an amount of indebtedness of the
Parent or the Company in excess of $5,000,000 is outstanding as of the time
of the aforementioned event, and any extensions, renewals, refinancings or
refundings thereof in whole or in part; (ii) any provision of the Parent's
or the Company's or any of their subsidiaries' certificates of
incorporation as in effect on the Closing Date; (iii) any amendment of,
supplement to or other modification of any of the instruments referred to
in clauses (i) or (ii) above; and (iv) any of the securities issued
pursuant to or whose terms are governed by the terms of any of the
agreements set forth in clauses (i) and (ii) above, and any extensions,
renewals, refinancings or refundings thereof in whole or in part.
"Fiscal Year" means the calendar year ending on October 31 of each
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year.
"GAAP" means generally accepted accounting principles in the United
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States of America in effect from time to time.
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"Xxxx Employees" has the meaning set forth in Section 9.13(a).
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"Xxxx Members" shall have the meaning ascribed to such term in the
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preamble hereto.
"Immediate Family Member" shall mean, with respect to any Person, a
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spouse, parent, child or sibling of such Person.
"Incidental Registration" has the meaning set forth in Section 9.2(a).
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"Indemnitee" shall have the meaning ascribed to such term in Section
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4.3.
"Initial Members" means the Vestar Member and the Xxxx Members.
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"Interest" means a limited liability company interest in the LLC as
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provided in this Agreement and under the LLC Act and includes any and all
rights and benefits to which the holder of such Interest may be provided
under this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement. Interests shall be
expressed as a number of Units.
"Joining Member" has the meaning set forth in Section 9.3(a)(iv).
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"Liquidator" has the meaning set forth in Section 7.3.
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"Liquidity Closing" shall have the meaning as ascribed to such term in
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Section 9.13(c).
"Liquidity Event" has the meaning set forth in Section 9.13(a).
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"Liquidity Notice" has the meaning set forth in Section 9.13(c).
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"LLC" shall have the meaning ascribed to such term in the preamble to
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this Agreement.
"LLC Act" means the Delaware Limited Liability Company Act, 6 Del. C.
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(S)(S) 18-101, et seq., as it may be amended from time to time, and any
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successor to such statute.
"LLC Assets" means all right, title and interest of the LLC in and to
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all or any portion of the assets and other rights of the LLC and any
property (real or personal) or estate acquired in exchange therefor or in
connection therewith.
"Managing Member" means the Vestar Member and its successor or assign
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in its capacity as managing member of the LLC.
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"Member" means a Person (a) (i) who is an Initial Member or (ii) who
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is a transferee of an Interest in accordance with the provisions of Article
VIII and (b) who has not resigned or withdrawn as a Member or been
dissolved. Reference to a "Member" shall be to any one of the Members.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
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February 2, 1999, among Parent, the Company, SJKAcquisition, Inc. and Pearl
Acquisition Corp., as the same may be amended, supplemented or otherwise
modified from time to time.
"Net Income (Loss)" for any Fiscal Period means the taxable income or
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loss of the LLC for such period as determined in accordance with the
accounting method used by the LLC for federal income tax purposes with the
following adjustments: (i) any income of the LLC that is exempt from
federal income taxation and not otherwise taken into account in computing
Net Income (Loss) shall be added to such taxable income or loss; (ii) if
the Carrying Value of any asset differs from its adjusted tax basis for
federal income tax purposes, any depreciation, amortization or gain
resulting from a disposition of such asset shall be calculated with
reference to such Carrying Value; (iii) upon an adjustment to the Carrying
Value of any asset, pursuant to the definition of Carrying Value, the
amount of the adjustment shall be included as gain or loss in computing
such taxable income or loss; and (iv) except for items in (i) above, any
expenditures of the LLC not deductible in computing taxable income or loss,
not properly capitalizable and not otherwise taken into account in
computing Net Income (Loss) pursuant to this definition shall be treated as
deductible items.
"90 Day Period" has the meaning set forth in Section 9.3(a)(iii).
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"Noncompete Period" has the meaning set forth in Section 10.13(a)(i).
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"Non-Demanding Members" shall have the meaning ascribed to such term
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in Section 9.3(a)(ii).
"Offer" shall have the meaning as ascribed to such term in Section
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9.7.
"Offeree" has the meaning set forth in Section 9.7.
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"Offeror" shall have the meaning as ascribed to such term in Section
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9.7.
"Organizational Expenses" means all costs and expenses of the LLC and
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the Managing Member arising out of or relating to this Agreement, the
Merger, the Merger Agreement or the transactions contemplated hereby and
thereby, including all fees and expenses of counsel to the LLC and the
Managing Member.
"Original Agreement" has the meaning ascribed to such term in the
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recitals hereto.
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"Parent" has the meaning ascribed to such term in the preamble hereto.
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"Parent Common Stock" means the common stock, $.01 par value per
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share, of Parent.
"Percentage Interest" means, with respect to any Member, such Member's
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Interest expressed as a percentage of all Interests of all Members,
determined by dividing the number of Allocated Shares allocated to such
Member by the total number of Allocated Shares then outstanding and
allocated to all Members. The Percentage Interests of the Members
initially will be determined by reference to Schedule 1.
"Permitted Transferee" has the meaning ascribed to such term in
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Section 8.2.
"Person" means any individual, company, joint venture, corporation,
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partnership, limited liability company, trust, unincorporated organization
or government or any department or agency thereof.
"Post Offering Purchase" has the meaning set forth in Section
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9.3(a)(iii).
"Proceeds" shall have the meaning ascribed to such term in Section
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5.2(a).
"Public Offering" shall mean the sale of Parent Common Stock to the
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public pursuant to an effective registration statement filed under the
Securities Act, which results in an active trading market in such
securities (it being understood that such an active trading market shall be
deemed to exist if, without limitation, such securities are listed on a
national securities exchange or on the NASDAQ National Market).
"Restricted Group" shall have the meaning as ascribed to such term in
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Section 10.13(a)(i).
"Rule 144 Request" has the meaning set forth in Section 9.8.
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"Sale Notice" has the meaning set forth in Section 9.7.
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"SEC" means the Securities and Exchange Commission or any other
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federal agency at the time administering the Securities Act or the Exchange
Act.
"Securities Act" means the Securities Act of 1933, as amended.
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"Share Permitted Transferee" has the meaning set forth in Section 9.9.
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"Shares" shall mean the Shares of Parent Common Stock owned by the LLC
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following the effective time of the Acquisition Merger and shall include
the shares or other securities of Parent that are distributed in respect of
such Common Stock and the
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shares or other securities of any other issuer for which such shares of
Common Stock shall be exchanged or into which such shares of Common Stock
shall be converted.
"Stockholders' Agreement" means that certain Stockholders' Agreement
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dated as of the date hereof among the LLC, Parent, the Company, the Members
and [other management stockholders].
"Tagging Stockholder" has the meaning set forth in Section 9.4(a).
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"Tagging Unitholder" shall have the meaning ascribed to such term in
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Section 8.3(a).
"Tax Matters Member" shall have the meaning ascribed to such term in
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Section 6.2.
"Third Party" shall mean any Person other than the Members, Parent,
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the Company and their respective Affiliates.
"transfer" shall have the meaning ascribed to such term in Section
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8.1.
"Transfer" shall have the meaning ascribed to such term in Section
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9.1.
"Transferring Stockholder" has the meaning set forth in Section
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9.4(a).
"Transferring Unitholder" shall have the meaning ascribed to such term
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in Section 8.3(a).
"Unit" means a fractional share of the Interests of all Members. The
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number of Units outstanding and the holders thereof are set forth on
Schedule 1, as such Schedule may be amended from time to time pursuant to
Section 3.1.
"Vestar Member" has the meaning ascribed to such term in the preamble
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hereto.
ARTICLE II
General Provisions
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SECTION 2.1 Formation. The LLC was formed under the provisions of
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the LLC Act. The Vestar Member is hereby appointed the Managing Member of
the LLC. The Members hereby agree to continue the LLC as a limited
liability company pursuant to the Act, upon the terms and subject to the
conditions set forth in this Agreement. The Managing Member is hereby
designated as an authorized person, within the meaning of the LLC Act, to
execute, deliver and file any amendments and/or restatements of the
Certificate and any other certificates necessary for the LLC to qualify to
do business in a jurisdiction in which the LLC may wish to conduct
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business. The execution by the Managing Member alone of any of the
foregoing certificates (and any amendments and/or restatements thereof)
shall be sufficient.
SECTION 2.2 Name. The LLC shall conduct its activities under the
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name of Vestar/Xxxx Investors LLC or such other name as the Managing Member
shall determine in accordance with this Section 2.2. The Managing Member
shall have the power at any time to change the name of the LLC; provided,
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that the name shall always contain the words "Limited Liability Company" or
the letters "LLC". Prompt notice of any such change shall be given to each
Member.
SECTION 2.3 Term. The term of the LLC commenced on the date of the
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filing of the Certificate and shall continue until the earlier of (a)
December 31, 2009 and (b) such time as the Vestar Member does not own at
least 10% of the total number of Allocated Shares allocated to such Vestar
Member immediately following the Effective Time of the Acquisition Merger,
unless sooner dissolved, wound up and terminated in accordance with Article
VII; notwithstanding any termination of the LLC, the agreements of the
parties set forth in Section 10.13 shall survive the termination of this
Agreement in accordance with their terms.
SECTION 2.4 Purpose; Powers. (a) The purposes of the LLC shall be
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to (i) acquire Shares of Company Common Stock from the Xxxx Members, (ii)
hold Shares that may be issued in exchange for Shares of Company Common
Stock in the Reorganization Merger referred to in the Merger Agreement,
(iii) purchase and acquire 100% of the capital stock of Acquisition, (iv)
hold Shares that may be issued in exchange for Shares of the capital stock
of Acquisition in the Acquisition Merger referred to in the Merger
Agreement, and (v) do all things necessary or incidental to the foregoing,
including exercising the rights of a holder of shares of Company Common
Stock and its rights under the Stockholders' Agreement.
(b) In furtherance of its purposes, the LLC shall have all powers
necessary, suitable or convenient for the accomplishment of its purposes,
alone or with others, including the following, subject to the terms of this
Agreement:
(i) to receive, hold and otherwise exercise all rights,
powers, privileges and other incidents of ownership or possession with
respect to the Shares held by the LLC, including, but not limited to (A)
exercising all voting and other corporate governance rights available to
holders of Shares, (B) receiving and investing any cash dividends declared
and paid by Parent in respect of the Shares owned from time to time by the
LLC or any other cash or cash equivalents owned by the LLC from time to
time and (C) selling, pledging, transferring or otherwise disposing of the
Shares held by the LLC;
(ii) to open, maintain and close bank accounts and draw checks
and other orders for the payment of moneys;
(iii) to engage accountants, custodians, attorneys, investment
bankers and other advisors as may be necessary or advisable for the due and
proper administration of the LLC Assets, and to compensate them as may be
reasonably necessary or advisable;
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(iv) to enter into, make and perform all contracts, agreements
and other undertakings as may be necessary or advisable or incident to
carrying out its purposes; and
(v) to distribute at any time and from time to time to Members
cash or investments or other property of the LLC, or any combination
thereof.
SECTION 2.5 Place of Business. The LLC shall maintain a registered
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office at CT Corporation System, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000, or such other office within the State of Delaware as the
Managing Member determines. The LLC shall maintain an office and principal
place of business at 0000 00xx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000 or at
such other place as the Managing Member may from time to time determine to be
its principal place of business. The name and address of the LLC's registered
agent as of the date of this Agreement is CT Corporation System, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx 00000.
SECTION 2.6 Business Transactions of a Member with the LLC. In
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accordance with section 18-107 of the Act, and except as otherwise provided in
this Agreement, a Member may (but shall be under no obligation to) lend money
to, borrow money from, act as surety, guarantor or endorser for, guarantee or
assume one or more specific obligations of, provide collateral for, and transact
other business with, the LLC and, subject to applicable law, shall have the same
rights and obligations with respect to any such matter as a person who is not a
Member.
SECTION 2.7 Fiscal Year. The fiscal year of the LLC (the "Fiscal
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Year") for financial statement and Federal income tax purposes shall, except as
otherwise required in accordance with the Code, end on October 31 of each year.
SECTION 2.8 No State-Law Partnership. The Members intend that the
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LLC not be a partnership (including, without limitation, a limited partnership)
or joint venture and that no Member be an agent, partner or joint venturer of
any other Member for any purposes other than Federal and state tax purposes, and
this agreement shall not be construed to suggest otherwise.
ARTICLE III
Members and Interests
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SECTION 3.1 Members. Each Member's Interest in the LLC shall be
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represented by Units. Schedule 1 hereto contains the name and address and
number of Units owned by each Member as of the date of this Agreement. Schedule
1 shall be revised by the Managing Member from time to time to reflect the
admission or withdrawal of a Member or the issuance, transfer, assignment,
redemption, relinquishment to the LLC or other cancellation of Units in the LLC
in accordance with the terms of this Agreement and other modifications to or
changes in the information set forth therein.
11
SECTION 3.2 Certificates. Interests in the LLC may be evidenced by a
------------
certificate of limited liability company interest issued by the LLC. Such
Certificates shall bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
OR ASSIGNED TO ANY PERSON EXCEPT IN ACCORDANCE WITH ARTICLE VIII OF
THE AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF
VESTAR/XXXX INVESTORS LLC DATED AS OF [ ], 1999."
SECTION 3.3 Liability of Members. Except as otherwise expressly
--------------------
required by law, all debts, obligations and liabilities of the LLC, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the LLC, and no Member shall be obligated personally for any
such debt, obligation or liability of the LLC solely by reason of being a
Member.
SECTION 3.4 Access to and Confidentiality. (a) Each Member shall
-----------------------------
have the right to obtain from the LLC from time to time upon reasonable demand
for any purpose reasonably related to the Member's interest as a Member of the
LLC the documents and other information described in section 18-305(a) of the
Act.
(b) Any demand by a Member pursuant to this Section 3.4 shall be in
writing and shall state the purpose of such demand.
ARTICLE IV
Management and Operation of the LLC
-----------------------------------
SECTION 4.1 Management. (a) Except as set forth in Section 4.1(b),
----------
the management, control and operation of the LLC shall be vested exclusively in
the Managing Member, and no other Member shall have any right to participate in
or exercise control or management power over the business and affairs of the
LLC. Except as set forth in Section 4.1(b), the Managing Member shall have full
power and authority and absolute discretion to do all things deemed necessary or
desirable by it to conduct the business of the LLC on behalf and in the name of
the LLC.
(b) Notwithstanding anything in this Agreement to the contrary, the
Managing Member shall not take any of the following actions on behalf of the LLC
without the prior written consent of the Xxxx Members:
(i) the conduct of any business by the LLC other than in accordance
with the purposes of the LLC enumerated in Section 2.4;
(ii) any Transfer of the Xxxx Members' Allocated Shares except
pursuant to this Agreement;
12
(iii) any voting of the Xxxx Members' Allocated Shares except
pursuant to this Agreement; and
(iv) the amendment of this Agreement other than pursuant to Section
10.7.
SECTION 4.2 Certain Duties and Obligations of the Members. No Member
---------------------------------------------
shall take any action so as to cause the LLC to be classified for federal income
tax purposes as an association taxable as a corporation and not as a
partnership.
SECTION 4.3 Indemnification of the Managing Member. The LLC shall
--------------------------------------
indemnify and hold harmless the Managing Member, its Affiliates and its
respective officers, directors, employees, partners and agents and the heirs,
executors, successors and assigns of each of the foregoing (individually, an
"Indemnitee") from and against any and all losses, claims, demands, costs,
-----------
damages, liabilities, joint and several, expenses of any nature (including
reasonable attorneys' fees and disbursements), judgments, fines, settlements and
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
the Indemnitee was involved or may be involved, or threatened to be involved, as
a party or otherwise, arising out of or in connection with the business of the
LLC, the Managing Member's status as Managing Member or any action taken by the
Managing Member under this Agreement or otherwise on behalf of the LLC,
regardless of whether the Indemnitee continues to be the Managing Member, an
Affiliate, or an officer, director, employee or agent of the Managing Member at
the time any such liability or expense is paid or incurred, to the fullest
extent permitted by the LLC Act and all other applicable laws; provided, that an
--------
Indemnitee shall be entitled to indemnification hereunder only to the extent
that such Indemnitee's conduct did not constitute gross negligence or willful
misconduct. The termination of any proceeding by settlement, judgment, order,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
---- ----------
itself, create a presumption that such Indemnitee's conduct constituted gross
negligence or willful misconduct. The right of any Indemnitee to the
indemnification provided herein shall be cumulative of, and in addition to, any
and all rights to which such Indemnitee may otherwise be entitled by contract or
as a matter of law or equity and shall extend to such Indemnitee's successors,
assigns and legal representatives. Any indemnification under this Section 4.3
(unless ordered by a court) shall be made by the LLC except only in the specific
case upon a determination, upon clear and convincing evidence that
indemnification of the Managing Member, officer, director, employee, partner or
agent is not proper in the circumstances because he has not met the applicable
standard of conduct as set forth in this Section 4.3.
SECTION 4.4 Expenses. Expenses incurred by an Indemnitee in
--------
defending any claim, demand, action, suit or proceeding subject to Section 4.3
shall, from time to time, be advanced by the LLC prior to the final disposition
of such claim, demand, action, suit or proceeding upon receipt by the LLC of an
undertaking reasonably acceptable in form and substance to the Managing Member
by or on behalf of the Indemnitee to repay such amount if it shall be determined
that such Person is not entitled to be indemnified as authorized in Section 4.3.
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Managing Member
deems appropriate.
13
SECTION 4.5 Indemnification Rights Non-Exclusive. The
------------------------------------
Indemnification provided by Section 4.3 shall be in addition to any other rights
to which those indemnified may be entitled under any agreement as a matter of
law or equity or otherwise, both as to action in the Indemnitee's capacity as
the Managing Member, as an Affiliate or as an officer, director, employee or
agent of the Managing Member and as to any action in another capacity, and shall
continue as to an Indemnitee who has ceased to serve in such capacity and shall
inure to the benefit of the heirs, successors, assigns and administrators of the
Indemnitee.
SECTION 4.6 Insurance. The LLC may purchase and maintain insurance,
---------
at the LLC's expenses, on behalf of the Managing Member and such other Persons
as the Managing Member shall determine, against any liability that may be
asserted against, or any expense that may be incurred by, such Person in
connection with the activities of the LLC and/or the Managing Member's acts or
omissions as the Managing Member of the LLC regardless of whether the LLC would
have the power to indemnify such Person against such liability under the
provisions of this Agreement.
SECTION 4.7 Assets of the LLC. Any indemnification under Section 4.3
-----------------
shall be satisfied solely out of the assets of the LLC. No Member shall be
subject to personal liability or required to fund or cause to be funded any
obligation by reason of these indemnification provisions.
SECTION 4.8 Loans to the LLC. In the event the Managing Member
----------------
determines at any time or from time to time that the LLC requires or will
shortly require additional funds to pay any costs and expenses of the LLC, the
Managing Member may advance funds to the LLC in the form of a loan, which loan
shall bear interest at the Vestar Member's cost of funds. Notwithstanding
anything in this Agreement to the contrary, all such loans shall be repaid in
full (including any interest accrued thereon) prior to the LLC making any cash
distributions to the Members pursuant this Agreement, including pursuant to
Section 5.2 or 7.3.
SECTION 4.9 Voting of Shares
----------------
(a) Proportional Voting. Subject to Section 4.9(b), the Managing Member
-------------------
shall vote the Shares and/or exercise any consents relating to the Shares as
directed in writing by the Members in proportion to their Percentage Interests.
(b) Election of Directors.
---------------------
(A) The Managing Member hereby agrees that so long as this Agreement
shall remain in effect, it will vote all of the Shares so as to elect and,
during such period, to continue in office a Board of Directors of the Parent and
the Company, each consisting solely of the following:
(i) 3 designees of the Vestar Member (so long as the Vestar Member
and its Affiliates are allocated an aggregate number of Allocated
Shares not less than one-half (1/2) of the number of Allocated
Shares allocated to the Vestar Member on the date of execution
and delivery of this Agreement)
14
or, if the foregoing condition is not satisfied, 2 designees of
the Vestar Member (so long as the Vestar Member and its
Affiliates are allocated an aggregate number of Allocated Shares
not less than one-third (1/3) of the total number of Allocated
Shares allocated to the Vestar Member on the date of its
execution and delivery of this Agreement) or, if the foregoing
condition is not satisfied, 1 designee of the Vestar Member (so
long as the Vestar Member and its Affiliates are allocated an
aggregate number of Allocated Shares not less than one-tenth
(1/10) of the total number of Allocated Shares allocated to the
Vestar Member immediately following the Effective Time of the
Acquisition Merger), provided, however, that so long as the Xxxx
-------- -------
Members have the right to appoint at least 1 designee and the
Vestar Member (and its Affiliates) has more Allocated Shares
allocated to it than the aggregate number of Allocated Shares
allocated to the Xxxx Members (and their Permitted Transferees)
the Vestar Member shall have the right to appoint at least as
many designees as the Xxxx Members; and
(ii) 2 designees of the Xxxx Members (so long as the Xxxx Members
and their respective Affiliates are allocated an aggregate number
of Allocated Shares not less than one-half (1/2) of the number of
Allocated Shares allocated to the Xxxx Members on the date of
their execution and delivery of this Agreement) or, if the
foregoing condition is not satisfied, 1 designee of the Xxxx
Members (so long as the Xxxx Members and their respective
Affiliates are allocated an aggregate number of Allocated Shares
not less than one-fifth (1/5) of the number of Allocated Shares
allocated to the Xxxx Members immediately following the Effective
Time of the Acquisition Merger).
(B) If at any time during the period specified in paragraph (A)
above, the Vestar Member or the Xxxx Members shall notify the other Stockholders
of its or their desire to remove, with or without Cause, any director of the
Parent or of the Company previously designated by it or them, each Member shall
vote all of the Allocated Shares attributable to it so as to remove such
director.
(C) If at any time during the period specified in paragraph (A) above,
any director previously designated by the Vestar Member or the Xxxx Members
ceases to serve on the Board of Directors of the Parent or the Company (whether
by reason of death, resignation, removal or otherwise), the Member who
designated such director shall be entitled to designate a successor director to
fill the vacancy created thereby.
(D) The parties hereto hereby acknowledge that any individual
designated as a director of the Parent or of the Company may be removed for
Cause pursuant to the Parent's (or the Company's) by-laws and applicable law
with or without the consent of the Member which designated such individual. No
such removal of an individual designated pursuant to this Section 2.1 shall
affect any of the Stockholders' rights to designate a different individual
pursuant to this Section 2.1.
15
(E) No fees shall be paid by the Parent or any of its subsidiaries to
any member of the Board of Directors in his capacity as such; provided that the
--------
foregoing shall not limit reimbursement of expenses in accordance with the
expense reimbursement policy of the Parent and its subsidiaries; and provided
--------
further, that it is understood that the Parent shall pay an advisory fee to
-------
Vestar Capital Partners, an affiliate of the Vestar Member, in the amount of
$500,000 per year pursuant to an advisory agreement to be entered into between
Vestar Capital Partners and Parent.
(c) Other Voting Matters. Each Member agrees that, so long as this
--------------------
Agreement shall remain in effect and (i) the Vestar Member and its Affiliates
beneficially own not less than 50% of the Percentage Interest held by them on
the date hereof, and (ii) the LLC holds Shares representing not less than 25% of
the voting power of Parent, each Member will direct the LLC to vote all of the
Allocated Shares allocated to such Member to ratify, approve and adopt any and
all actions adopted or approved by the Board of Directors of the Parent.
(d) Upon instruction received from any Member, the Managing Member, unless
the Managing Member reasonably believes that any such action would be unlawful,
or would have a material adverse effect upon the LLC, shall exercise, in
accordance with such Member's instructions, any rights of a stockholder with
respect to the Allocated Shares allocated to such Member, other than voting
(which is dealt with in Section 4.9(a), (b) and (c)) or transfer (which is dealt
with in Articles VIII and IX).
ARTICLE V
Capital Contributions;
----------------------
Distributions
-------------
SECTION 5.1 Capital Contributions. No Member shall be required to
---------------------
make a Capital Contribution to the LLC except as set forth in Schedule 2. No
Member shall have any obligation to restore any negative balance in the Member's
Capital Account upon liquidation of the LLC. No Member shall be entitled to
withdraw all or any part of its Capital Contributions except as expressly
provided in this Agreement. No interest shall be payable by the LLC on the
Capital Contributions of any Member except as otherwise provided herein.
SECTION 5.2 Distributions.
-------------
(a) Distributions With Respect to Allocated Shares With respect to
----------------------------------------------
any Transfer of Shares by the LLC pursuant to Article IX hereof, the LLC shall
distribute the proceeds it receives from such Transfer and any reimbursements it
receives in connection with such Transfer less any and all unreimbursed costs,
fees and expenses incurred and paid for by the LLC in connection with such
Transfer (the "Proceeds") to the Member(s) whose Allocated Shares were included
--------
in such Transfer, pro rata on the basis of the number of Allocated Shares
--- ----
actually included in such Transfer, and with respect to cash and any other
property received by the LLC as a distribution in respect of the Allocated
Shares (including any property received as consideration in respect of the
Shares in a merger or other business combination), the LLC shall distribute such
16
cash or other property pro rata to the Members to which such Allocated Shares
--- ----
were allocated as of the date upon which the LLC received such distribution. All
distributions to be made pursuant to this Section 5.2(a) shall be made by the
LLC within three Business Days of its receipt of the Proceeds.
(b) Other Property. Distributions of property other than those
--------------
described in Section 5.2(a) shall be made if, as and when determined by the
Managing Member in its sole and absolute discretion. Each distribution of such
property shall be distributed to the Members in proportion to their respective
Percentage Interests at the time the cash or other property being distributed is
received by the LLC.
(c) The parties hereto acknowledge and agree that notwithstanding that
the provisions of this Article V and Article VII hereof make reference only to
Members, the distributions and allocations provided for in this Article V and
Article VII hereof shall also apply to Permitted Transferees.
SECTION 5.3 Limitations on Distributions. The LLC shall not make a
----------------------------
distribution to a Member if such distribution would violate the LLC Act.
ARTICLE VI
Books and Reports; Tax Matters; Capital Accounts; Allocations
-------------------------------------------------------------
SECTION 6.1 General Accounting Matters. (a) Each Member shall be
--------------------------
supplied with the LLC information necessary to enable such Member to prepare in
a timely manner its Federal, state and local income tax returns and such other
financial or other statements and reports that the Managing Member deems
appropriate.
(b) The Managing Member shall keep or cause to be kept books and
records pertaining to the LLC's business showing all of its assets and
liabilities, receipts and disbursements, realized profits and losses, Members'
Capital Accounts and all transactions entered into by the LLC. Such books and
records of the LLC shall be kept at the office of the LLC and the Members and
their representatives shall at all reasonable times have free access thereto for
the purpose of inspecting or copying the same. The LLC's books of account shall
be kept on an accrual basis or as otherwise provided by the Managing Member and
otherwise in accordance with GAAP, except that for income tax purposes such
books shall be kept in accordance with applicable tax accounting principles.
(c) All determinations, valuations and other matters of judgment
required to be made for accounting and tax purposes under this Agreement shall
be made by or under the direction of the Managing Member and shall be conclusive
and binding on all Members, former Members, their successors or legal
representatives and any other Person except for manifest errors or fraud, and to
the fullest extent permitted by law no such Person shall have the right to an
accounting or an appraisal of the assets of the LLC or any successor thereto
except for manifest errors or fraud.
17
(d) The LLC shall promptly supply each Member with copies of all
information distributed to it by the Parent pursuant to Section 5.14 of the
Stockholders' Agreement.
SECTION 6.2 Certain Tax Matters. The taxable year of the LLC shall
-------------------
be the same as its Fiscal Year. The Tax Matters Member shall cause to be
prepared all federal, state and local tax returns of the LLC for each year for
which such returns are required to be filed and shall cause such returns to be
timely filed. The Tax Matters Member shall determine the appropriate treatment
of each item of income, gain, loss, deduction and credit of the LLC and the
accounting methods and conventions under the tax laws of the United States, the
several states and other relevant jurisdictions as to the treatment of any such
item or any other method or procedure related to the preparation of such tax
returns. The Tax Matters Member shall make the election to amortize
Organizational Expenses pursuant to section 709 of the Code and the regulation
promulgated thereunder. In addition, the Tax Matters Member, in its sole and
absolute discretion, may cause the LLC to make or refrain from making any and
all other elections permitted by the tax laws of the United States, the several
states and other relevant jurisdictions (including, but not limited to, the
election provided for in section 754 of the Code). The "tax matters partner"
for purposes of section 6231(a)(7) of the Code (the "Tax Matters Member") shall
------------------
be the Managing Member. The Tax Matters Member shall have all of the rights,
duties, powers and obligations provided for in sections 6221 through 6234 of the
Code with respect to the LLC.
SECTION 6.3 Capital Accounts. There shall be established for each
----------------
Member on the books of the LLC as of the date hereof, or such later date on
which such Member is admitted to the LLC, a capital account (each being a
"Capital Account"). Each Capital Contribution shall be credited to the Capital
----------------
Account of such Member on the date such contribution of capital is paid to the
LLC. In addition, each Member's Capital Account shall be (a) credited with such
Member's allocable share of any Net Income of the LLC, (b) debited with (i)
distributions to such Member of cash or the fair market value of other property
and (ii) such Member's allocable share of Net Loss of the LLC and expenditures
of the LLC described or treated under section 704(b) of the Code as described in
section 705(a)(2)(B) of the Code, and (c) otherwise maintained in accordance
with the provisions of the Code. Any other item which is required to be
reflected in a Member's Capital Account under section 704(b) of the Code or
otherwise under this Agreement shall be so reflected. Capital Accounts shall be
appropriately adjusted to reflect transfers of part (but not all) of a Member's
Interest. Interest shall not be payable on Capital Account balances.
Notwithstanding anything to the contrary contained in this Agreement, the LLC
shall maintain the Capital Accounts of the Members in accordance with the
principles and requirements set forth in section 704(b) of the Code and
Regulations section 1.704-1(b)(2)(iv).
SECTION 6.4 Allocations. (a) Net Income and Losses shall be
-----------
allocated among the Members in accordance with their Percentage Interests
provided, however, that Net Income and Losses with respect to any Transfer of
-------- -------
Allocated Shares shall be allocated to the Member(s) whose Allocated Shares were
included in such Transfer, pro rata on the basis of the number of such Allocated
--- ----
Shares included in such Transfer.
18
(b) For income tax purposes only, each item of income, gain, loss
and deduction of the LLC shall be allocated among the Members in the same manner
as the corresponding items of Net Income (Loss) and specially allocated items
are allocated for Capital Account purposes; provided that in the case of any
--------
asset of the LLC the Carrying Value of which differs from its adjusted tax basis
for U.S. federal income tax purposes, income, gain, loss and deduction with
respect to such asset shall be allocated solely for income tax purposes in
accordance with the principles of sections 704(b) and (c) of the Code (in any
manner determined by the Managing Member) so as to take account of the
difference between Carrying Value and adjusted basis of such asset.
ARTICLE VII
Dissolution
-----------
SECTION 7.1 Dissolution. (a) No Member shall have the right to
-----------
terminate this agreement or dissolve the LLC or withdraw or otherwise retire or
resign as a Member except pursuant to the prior written consent of (i) the
Managing Manager and (ii) Members representing more than 85% of the Percentage
Interests. Any purported withdrawal, retirement or resignation without such
prior written consent shall be void and of no effect. Except as expressly
provided for herein, a Member may not withdraw capital from the LLC.
(b) The LLC shall be dissolved and, except as specifically provided
herein, this Agreement shall terminate, upon the first to occur of any of
the following:
(i) December 31, 2009;
(ii) the bankruptcy, dissolution, resignation, or expulsion of
the Managing Member;
(iii) the sale, in one transaction or in a series of directly
related transactions, of all of the assets of the LLC;
(iv) the unanimous agreement of the Managing Member and the Xxxx
Members to dissolve the LLC; or
(v) on or after the earlier of (A) the consummation of a Public
Offering and (B) the fifth anniversary of the date hereof, upon the
request of the Vestar Member or the Xxxx Members.
Except as expressly set forth above, there are no other events pursuant to
which the LLC shall be dissolved and its affairs wound up. Furthermore, no
Member, except pursuant to the written consent of the Managing Member,
shall wind up or attempt to wind up the LLC. The LLC shall not be
dissolved upon the bankruptcy, any other bankruptcy event, if any,
described in the LLC Act, dissolution, death, insanity, retirement,
resignation or expulsion of any Member which is not the Managing Member.
Each Member agrees not
19
to apply for judicial dissolution pursuant to Section 18-802 of the
Delaware Limited Liability Parent Act prior to June 30, 2004.
SECTION 7.2 Votes of Members. If an act or other event described in
----------------
Section 7.1(b) (ii) hereof occurs and the Members owning a majority of the
profits interests and a majority of the capital interests owned by all the
Members (excluding the Managing Member) within 90 days of the date of such act
or event, elect in writing to continue the business of the LLC such event or
other act shall not constitute a dissolution of the LLC.
SECTION 7.3 Winding-up; Final Distributions. (a) When the LLC is
-------------------------------
dissolved, the business and property of the LLC shall be wound up and liquidated
by the Managing Member or, by such liquidating trustee as may be appointed by
the Managing Member (the Managing Member or such liquidating trustee, as the
case may be, being hereinafter referred to as the "Liquidator"). In the event
----------
of a dissolution under the circumstances described in any of Section 7.1(b)(i),
(iv) or (v), after satisfying the obligations of clauses (i), (ii), (iii) and
(iv) below, the Shares shall be distributed pro rata to the Members in
accordance with their respective Percentage Interests. In all other
circumstances, the Liquidator shall use its best efforts to reduce to cash and
cash equivalent items such assets of the LLC as the Liquidator shall deem it
advisable to sell, subject to obtaining fair value for such assets and any tax
or other legal considerations. The Liquidator shall be responsible for winding
up and terminating the affairs of the LLC and shall determine all matters in
connection therewith (including, without limitation, the arrangements to be made
with creditors, to what extent and under what terms the assets of the LLC are to
be sold, and the amount or necessity of cash reserves to cover contingent
liabilities) as the Liquidator deems advisable and proper; and all decisions of
the Liquidator shall be made in accordance with the fiduciary duty owed by the
Liquidator to the LLC and each of the Members, and any disposition of the
properties of the LLC shall be by auction with prior notice to all Persons who
were Members at the time of the dissolution. The Liquidator shall thereafter
liquidate the assets of the LLC as promptly as is consistent with obtaining the
fair market value thereof, and the proceeds therefrom, to the extent sufficient
therefor, shall be applied and distributed in the following manner and order:
(i) to the payment of the expenses of the winding-up,
liquidation and dissolution of the LLC;
(ii) to pay all creditors of the LLC, other than Members, either
by the payment thereof or the making of reasonable provision therefor;
(iii) to establish reserves, in amounts established by the
Members or such Liquidator, to meet other liabilities of the LLC; and
(iv) to pay, in accordance with the provisions of this agreement
applicable to such loans or in accordance with the terms agreed among
them and otherwise on a pro rata basis, all creditors of the LLC that
--- ----
are Members, either by the payment thereof or the making of reasonable
provisions therefor.
20
The remaining assets of the LLC shall be applied and distributed in
accordance with Section 5.2.
(b) Notwithstanding anything to the contrary in Section 7.3(a) hereof,
the Liquidator shall not sell any Allocated Shares of a Member without the
express written consent of such Member. Without such consent, any Allocated
Shares of such Member shall be distributed to such Member.
(c) After all of the assets of the LLC have been distributed, the LLC
shall terminate; if at any time thereafter any funds in any cash reserve fund
referred to in Section 7.3(a) hereof are released because the need for such cash
reserve fund has ended, such funds shall be distributed to the Members in the
same manner as if such distribution had been made pursuant to clauses (i)
through (iv) of Section 7.3(a) hereof.
SECTION 7.4 Further Assurances. Following the dissolution of the LLC
------------------
other than under the circumstances described in Section 7.1(b)(iii), the Shares
shall be distributed to the Members in accordance with their respective
Percentage Interests, and the Member's rights thereto shall be governed by the
Stockholders' Agreement, and each Member agrees that so long as the
Stockholders' Agreement remains in effect it will take all actions, and execute
all amendments or modifications to the Stockholders' Agreement and all other
certificates, agreements or other documents reasonably necessary to effect the
intentions of this Agreement and to ensure that each Member shall remain bound
by the terms of the Stockholders' Agreement with respect to the Allocated Shares
allocated to such Member to the same extent as it is bound by this Agreement.
ARTICLE VIII
Transfer of Member's Units
--------------------------
SECTION 8.1 Transfers to be Made Only as Permitted or Required by
-----------------------------------------------------
this Agreement. Subject to Section 8.2, the Xxxx Members may not, directly or
--------------
indirectly, sell, assign, transfer, pledge or otherwise encumber or dispose of
(for purposes of this Article VIII, a "transfer") any Interests, except as
--------
specifically permitted or required by this Article VIII; any other purported
transfer shall be void and of no effect. The Vestar Member may transfer any
Interests freely, subject to Section 8.3 and, in the case of transfers to its
Affiliates, subject to written agreement by the transferee (in form and
substance reasonably satisfactory to the Managing Member) to be bound by this
Agreement as if the transferee were the transferring Member.
SECTION 8.2 Permitted Transfers. The Xxxx Members may transfer any
-------------------
of their Interests to (i) their respective beneficiaries, spouses, parents or
descendants or any executor, estate, trustee of the Xxxx Family Trust or the
Xxxxx Xxxx Trust (as applicable), guardian, committee, trustee or other
fiduciary acting as such on behalf or for the benefit of any such spouse, parent
or descendant (the Xxxx Members' "Family Group") or (ii) any trust, corporation,
------------
partnership or limited liability company, all of the beneficial interests in
which shall be held,
21
directly or indirectly, by the Xxxx Members and/or one or more of the Family
Group of the Xxxx Members; provided, however, that during the period that any
-------- -------
such trust, corporation, partnership or limited liability company holds any
right, title or interest in any Interest, no person other than the Xxxx Members
or the Family Group of the Xxxx Members may be or become beneficiaries,
stockholders or general partners or members thereof. No transfer pursuant to
this Section 8.2 shall be valid unless the transferee agrees in writing (in form
and substance reasonably satisfactory to the Managing Member) to be bound by
this Agreement as if the transferee were the transferring Member. A transferee
under Section 8.1 or 8.2 is referred to as a "Permitted Transferee."
--------------------
SECTION 8.3 Tag-Along Rights. (a) So long as this Agreement shall
----------------
remain in effect, unless a Public Offering shall have occurred, with respect to
any proposed transfer by the Vestar Member or any of its Affiliates (in such
capacity, a "Transferring Unitholder") of Units (excluding any transfers by the
-----------------------
Vestar Member to its Affiliates), the Transferring Unitholder shall have the
obligation, and each other Member and its Permitted Transferees shall have the
right (such Member and its Permitted Transferees that exercise such right being
a "Tagging Unitholder") to require the proposed transferee to purchase from each
------------------
holder of Units a number of Units up to the product (rounded up to the nearest
whole number) of (i) the quotient determined by dividing (A) the aggregate
number of Units beneficially owned by such Tagging Unitholder and sought by the
Tagging Unitholder to be included in the contemplated transfer by (B) the
aggregate number of Units beneficially owned by the Transferring Unitholder and
the aggregate number of Units beneficially owned by all Tagging Unitholders and
sought by all Tagging Unitholders to be included in the contemplated transfer
and (ii) the total number of Units proposed to be acquired by the transferee in
the contemplated transfer, and at the same price per Unit and upon the same
terms and conditions (including, without limitation, time of payment and form of
consideration) as to be paid and given to the Transferring Unitholder, provided
--------
that in order to be entitled to exercise its right to sell Units to the proposed
transferee pursuant to this Section 8.3, a Tagging Unitholder must agree to make
to the transferee the same representations, warranties, covenants, indemnities
and agreements as the Transferring Unitholder agrees to make in connection with
the proposed transfer of the Units by the Transferring Unitholder (except that
in the case of representations and warranties pertaining specifically to the
Transferring Unitholder, a Tagging Unitholder shall make the comparable
representations and warranties pertaining specifically to itself, and except
that in the case of covenants or agreements capable of performance only by
certain holders of Units, such covenants or agreements shall be made only by
such certain holders of Units); and provided further that all representations,
----------------
warranties, covenants, agreements and indemnities made by the Transferring
Unitholder and the Tagging Unitholders pertaining specifically to themselves
shall be made by each of them severally and not jointly; and provided further
-------- -------
that each of the Transferring Unitholder and each Tagging Unitholder shall be
severally (but not jointly) liable for breaches of representations, warranties,
covenants and agreements of or (in the case of representations and warranties)
pertaining to the LLC or Parent and its subsidiaries, as the case may be, and
for indemnification obligations arising out of or relating to any such breach or
otherwise pertaining to the LLC, on a pro rata basis, such liability of each
such Unitholder not to exceed such Unitholder's pro rata portion of the gross
proceeds of the sale.
(b) The Transferring Unitholder shall give notice to all relevant
holders of Units and their Permitted Transferees of each proposed transfer
giving rise to the rights of the Tagging
22
Unitholders set forth in the first sentence of Section 8.3(a) at least 30 days
prior to the proposed consummation of such transfer, setting forth the name of
the Transferring Unitholder, the number of Units proposed to be so transferred,
the name and address of the proposed transferee, the proposed amount and form of
consideration and other terms and conditions offered by the proposed transferee,
and a representation that the proposed transferee has been informed of the tag-
along rights provided for in this Section 8.3 and has agreed to purchase Units
in accordance with the terms hereof. The tag-along rights provided by this
Section 8.3 must be exercised by each Tagging Unitholder within 15 days
following receipt of the notice required by the preceding sentence, by delivery
of a written notice to the Transferring Unitholder as the case may be,
indicating such Tagging Unitholder's desire to exercise its rights and
specifying the number of Units it desires to sell. If the proposed transferee
fails to purchase Units from any Tagging Unitholder that has properly exercised
its tag-along rights, then the Transferring Unitholder shall not be permitted to
make the proposed transfer, and any such attempted transfer shall be void and of
no effect.
(c) If any of the Tagging Unitholders exercise their rights under
Section 8.3(a), the closing of the purchase of Units with respect to which such
rights have been exercised shall take place concurrently with the closing of the
sale of the Transferring Unitholder's Units. No transfer shall occur pursuant
to this Section 8.3 unless the transferee shall agree in writing to become a
party to, and be bound by this Agreement to the same extent as its transferor.
SECTION 8.4 Drag-Along Rights. So long as this Agreement shall
-----------------
remain in effect, if the Vestar Member or any of its Affiliates receives an
offer from a Third Party to purchase (whether pursuant to a sale of units, a
merger or otherwise) all, but not less than all, outstanding Units subject to
this Agreement and such offer is accepted by the Vestar Member, then each holder
of Units hereby agrees that it will, if requested by the Vestar Member, transfer
all Units owned by it to such Third Party on the terms of the offer so accepted
by the Vestar Member, including making the same representations, warranties,
covenants, indemnities and agreements that the Vestar Member agrees to make
(except that, in the case of representations and warranties pertaining
specifically to the Vestar Member, each other holder of Units shall make the
comparable representations and warranties pertaining specifically to itself, and
except that, in the case of covenants or agreements capable of performance only
by certain holders of Units, such covenants or agreements shall be made only by
such certain holders of Units, and provided that all representations,
warranties, covenants, agreements and indemnities made by the holders of Units
pertaining specifically to themselves shall be made by each of them severally
and not jointly and provided further that each holder of Units shall be
severally (but not jointly) liable for breaches of representations, warranties,
covenants and agreements of or (in the case of representations and warranties)
pertaining to the LLC, or the Parent and its subsidiaries, as the case may be,
and for indemnification obligations arising out of or relating to any such
breach or otherwise pertaining to the LLC, on a pro rata basis, such liability
of each such holder of Units not to exceed such holder of Units' pro rata
portion of the gross proceeds of the sale).
SECTION 8.5 No Transfers. Other than as set forth in this agreement,
------------
no Member, without the prior written consent of the Managing Member (which
consent may be withheld in the sole discretion of the Managing Member), shall
(i) transfer all or any part of its direct or indirect Interest in the LLC or
(ii) resign as a Member. Without limiting the limitations set forth in this
Section 8.5, no transfer of any Interest in the LLC may be made unless the
23
transferring Member delivers to the LLC an opinion of counsel stating, or other
evidence satisfactory to the LLC, that (i) registration of the transferred
Interest in the LLC is not required under the Securities Act, and such transfer
shall not violate applicable state securities or blue sky registration
requirements in any respect, and (ii) such transfer shall not cause the LLC to
be treated as an association taxable as a corporation rather than as a
partnership subject to the provisions of Subchapter K of the Code. Any such
opinion of counsel shall be rendered by counsel, and shall be in form and
substance, reasonably acceptable to the Managing Member and all costs and
expenses thereof shall be borne by the transferring Member. In no event shall
any Interest in the LLC be transferred to a minor (except pursuant to a bequest
by a Member, provided that any right exercised pursuant to this Agreement shall
--------
be exercised on behalf of such minor by an appropriately appointed custodian
under the Uniform Transfers to Minors Act) or an incompetent or in violation of
any state or Federal law. No consent to a transfer pursuant to this Section 8.5
shall be construed as a consent to any other transfer of the same or any other
Interest or Member.
SECTION 8.6 Other Transfer Provisions. If any Interest is
-------------------------
transferred during any accounting period pursuant to this Agreement, each item
of income, gain, loss, expense, deduction and credit and all other items
attributable to such Interest for such period shall be divided and allocated
between the transferor and the transferee by taking into account their varying
Interests during such period in accordance with section 706(d) of the Code,
using any conventions permitted by law and selected by the Managing Member. All
distributions on or before the date of such transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
ARTICLE IX
The LLC's Registration Rights Relating to
Shares of Parent Common Stock and Related Rule 144 Sales
---------------------------------------------------------
SECTION 9.1 Stockholders' Agreement; Transfers of Shares.
--------------------------------------------
(a) The provisions of this Article IX are intended to govern the
LLC's exercise of its registration rights under the Stockholders' Agreement and
the sale or other disposition by the LLC (any such sale, assignment, transfer,
pledge or other encumbrance or disposition of Shares or any interest therein,
whether pursuant to a registration or otherwise a "Transfer") of the Shares.
--------
(b) The LLC shall exercise its rights under the Stockholders'
Agreement, and shall effect Transfers of Shares, only as provided in this
Article IX. Notwithstanding any other provision of this Agreement to the
contrary, (i) the rights and obligations of the Members and the LLC pursuant to
this Article IX with respect to the Stockholders' Agreement are subject to the
provisions of the Stockholders' Agreement and (ii) the rights and obligations of
the Members and the LLC with respect to the Stockholders' Agreement and all
Transfers of Shares shall be subject to all applicable laws including, without
limitation, the Securities Act, the Exchange Act and applicable state securities
or blue sky laws.
24
(c) Subject to Section 9.5, the rights of any Member to request the
registration or the Transfer of any Shares shall be limited to the Allocated
Shares allocated to such Member, and upon the Transfer by the LLC of all the
Allocated Shares allocated to such Member, and the distribution to such Member
of any Proceeds relating to the Transfer of such shares, all rights of such
Member under this Article IX shall cease.
(d) Notwithstanding any provision in this Agreement to the contrary,
if the LLC receives advice from the Parent, or if the Managing Member determines
in its reasonable judgment, at the time that the LLC receives a request to
effect a registration or a Transfer (other than a Transfer to the Parent
pursuant to Section 9.13(a) or 9.13(b)), that, as a result of any such
registration or Transfer, (i) there would be an adverse effect on a then
contemplated public offering of Parent's securities, (ii) the registration and
offering would interfere with any material financing, acquisition, corporate
reorganization or other material corporate transaction or development involving
the Parent that is pending or imminent, (iii) the disclosures that would be
required to be made by Parent in connection with such registration or Transfer
would be materially harmful to Parent because of transactions then being
considered by, or other events then concerning, Parent, or (iv) registration at
the time would require the inclusion of pro forma or other information, which
requirement Parent is reasonably unable to comply with, and the LLC promptly
gives notice of that determination to each Member that has requested such
registration or Transfer, which may be a general notice, then the LLC may defer
requesting such registration or effecting such Transfer. If the LLC shall so
postpone requesting a registration statement, the Demanding Member, in the case
of any registration referred to in Section 9.3 hereof, shall have the right to
withdraw its or his Demand Request by giving written notice to the LLC within 30
days after the receipt of the notice of the postponement and, in the event of
the withdrawal, the Demand Request that was withdrawn shall not be deemed to
have been made.
(e) Notwithstanding the fact that Sections 9.2, 9.3 and 9.4 pertain
only to Members, to the extent that any Member has transferred any Interests to
a Permitted Transferee, (i) such Permitted Transferee shall be deemed for the
purpose of this Article IX to have been apportioned a pro rata share of the
--- ----
Allocated Shares allocated to such Member (based upon the amount of the Interest
transferred), (ii) all such Permitted Transferees shall receive any notice to be
provided under this Article IX to the Member and (iii) any notice given or
action to be taken by a Member other than an action under Section 9.4 or 9.5,
which action shall not require the majority referred to in this clause (iii))
may be given or taken by such Member and the Permitted Transferees of such
Member that have been apportioned a majority of the Allocated Shares of the
Member and the Permitted Transferees of such Member. Whenever this Article IX
shall make a pro rata allocation based upon the number of Allocated Shares
--- ----
allocated to a Member, such allocation shall be made upon the basis of the
Allocated Shares allocated to such Member and the Permitted Transferees of such
Member.
(f) When this Article IX states that the LLC shall cause the Parent
to take any action, it shall be interpreted to mean that the LLC shall take such
actions as the Managing Member reasonably believes is appropriate to cause the
Parent to take such action.
SECTION 9.2 Exercise of Incidental Registration Rights.
------------------------------------------
25
(a) Right to Incidental Registration. Whenever the LLC receives notice
--------------------------------
that the Parent proposes to register any of its common stock (or securities
convertible into or exchangeable or exercisable for common stock) under the
Securities Act for its own account or the account of any stockholder of the
Parent (other than offerings pursuant to employee plans, a dividend reinvestment
plan or a business combination transaction, recapitalization or exchange offer)
(an "Incidental Registration"), the LLC shall give prompt written notice to each
-----------------------
Member of the intention of the Parent to effect such a registration and, subject
to Section 9.2(c), shall use all reasonable efforts to cause the Parent to
include in such registration all the Shares with respect to which the LLC has
received written request specifying the number of Allocated Shares of a Member
for inclusion therein within 20 days after receipt of the LLC's notice by each
Member (12 days if the Parent gives telephonic notice to the LLC pursuant to
Section 4.2(a) of the Stockholders' Agreement).
(b) Designation of Pricing. Any Member exercising its Incidental
----------------------
Registration rights may designate a minimum offering price and maximum
underwriting or selling discounts at which the Allocated Shares allocated to
such Member may be sold.
(c) Priority. If an Incidental Registration pursuant to this Section
--------
9.2 involves an underwritten offering, the LLC shall not be required to cause
the Parent to register any Allocated Shares of any Member unless such Member
accepts the terms of the underwriting agreement, to the extent applicable to
such Member, and then only in such quantity as shall not, in the opinion of the
managing underwriter, exceed the maximum number of shares (or other securities)
that can be marketed without materially and adversely affecting the offering, if
any, by Parent or the stockholders of Parent, as the case may be. If the
managing underwriter advises the LLC in good faith that in its opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering without having an adverse effect on
such offering, including the price at which such securities can be sold, then
the LLC shall cause Parent to include in such registration the maximum number of
Shares that such underwriter advises can be so sold, allocated as follows:
(i) if such registration was initiated by Parent, (x) first, to
the securities Parent proposes to sell, (y) second, among the Shares
requested to be included in such registration by the Members, pro rata, on
--- ----
the basis of the number of Allocated Shares allocated to each Member, and
(z) third, among other securities, if any, requested and otherwise eligible
to be included in such registration; and
(ii) if such registration was initiated by the LLC at the
request of any Demanding Member pursuant to Section 9.3, (x) first, among
the Allocated Shares requested to be included in such registration by the
Members, pro rata, on the basis of the number of Allocated Shares allocated
--- ----
to each Member (y) second, to any securities the Parent proposes to sell,
and (z) third, among other securities, if any, requested and otherwise
eligible to be included in such registration.
SECTION 9.3 Exercise of Demand Registration Rights .
--------------------------------------
(a) Right to Demand.
---------------
26
(i) At any time when the LLC is permitted by the Stockholders'
Agreement, any of (A) the Vestar Member or (B) no earlier than twelve
months following the consummation of a Public Offering, any Xxxx Member or
its Permitted Transferees (in each case a "Demanding Member") may request
----------------
the LLC to exercise a "Common Stock Request" under the Stockholders'
Agreement (a "Demand Request"), provided that in the case of a Xxxx Member,
-------------- --------
either (x) such Demanding Member shall have proposed to register together
with all other Shares proposed to be registered at such time by any other
Demanding Member at least 10% of the outstanding Shares, or (y) such
Demanding Member shall have proposed to register, together with all of the
Shares proposed to be registered at such time by any other Demanding
Member, shares having an aggregate Fair Market Value of at least $50
million.
(ii) Within 10 days after receipt of any Demand Request, the
Managing Member shall give written notice of the Demand Request to the
other Members (collectively, the "Non-Demanding Members") and shall,
---------------------
subject to the provisions of the last paragraph of this Section 9.3(a), use
all reasonable efforts to exercise the Demand Registration Right with
respect to the Allocated Shares specified in the Demand Request and,
subject to Section 9.3(b), to cause the Parent to include in the
registration all the additional Shares with respect to which the LLC has
received written requests for inclusion therein within 60 days after the
receipt of the Demand Request by the Non-Demanding Members.
(iii) The LLC shall cause the Parent to effect not more than
four Demand Registrations on behalf of the Vestar Member and two Demand
Registrations in the aggregate on behalf of the Xxxx Members or their
Permitted Transferees pursuant to paragraph (i) of this Section 9.3(a),
provided that if for any reason the number of Demand Registrations
--------
available to the LLC under the Stockholders' Agreement is not reduced as a
result of any Demand Request, such Demand Request shall not reduce the
number of Demand Requests that such Demanding Member may request under this
Section 9.3(a), provided, further, that in the event that any of the Xxxx
-------- -------
Employees is terminated without "Cause" by the Company or the Parent or
resigns for "Good Reason" from the Company and the Parent, as such terms
are defined in their current respective employment contracts with the
Company, then such Xxxx Employee, together with all other such terminated
or resigning Xxxx Employees, shall have the right, beginning six months
following the consummation of a Public Offering, to four additional Demand
Registrations (the "Additional Demand Registrations"), which may be used no
-------------------------------
more often than once in any 12-month period following such termination or
resignation, and in which 25% of the Allocated Shares allocated to all such
terminated or resigning Xxxx Employees (or allocated to a trust of which
such Xxxx Employee is a beneficiary) on the date of their respective
terminations or resignations, in the aggregate, shall have first priority
alone (without sharing such priority with the Vestar Member); provided,
--------
further, that the Additional Demand Registrations shall not be subject to
-------
the restrictions contained in Section 9.3(a)(i) hereof, provided, further,
-------- -------
that if a registration statement filed pursuant to an Additional Demand
Registration is not effective within 90 days (the "90 Day Period") of the
-------------
receipt by the Parent of such Additional Demand Registration request, if
the terminated or resigning Xxxx Employee so elects, the Parent (or, at the
option of such
27
Xxxx Employee, the Company, to the extent that the Parent is precluded due
to regulatory or state law reasons) will purchase (a "Post Offering
-------------
Purchase") the Shares being registered which would have had first priority
--------
alone at a purchase price equal to the product of (x) the total number of
Shares being registered that would have had first priority alone and (y) a
price per share equal to the Fair Market Value as of the date of the
Additional Demand Registration Request, provided, further, that during
-------- -------
any twelve month period, the Parent and the Company, in the aggregate,
shall not be obligated to purchase from all such terminated or resigning
Xxxx Employees, in the aggregate, a number of shares greater than 25% of
the aggregate number of shares allocated to all such terminated or
resigning Xxxx Employees (or allocated to a trust of which such Xxxx
Employee is a beneficiary) on the date of their respective terminations or
resignations less all shares sold by the Xxxx Employees pursuant to
Sections 9.9 and 9.13(a) and (b) during such 12-month period, provided,
--------
further, that if a registration statement to be filed pursuant to an
-------
Additional Demand Registration is filed within 45 days of the Additional
Demand Registration request, the 90 Day Period shall be extended by 45
days.
(iv) The LLC confirms and agrees that a Demanding Member (the
"Joining Member") that joins in a Demand Registration initiated by another
---------------
Demanding Member shall not by reason thereof be deemed to have used any of
the Demand Registrations provided herein for such Joining Member.
(b) Priority. If a Demand Request pursuant to this Section 9.3
--------
involves an underwritten offering, the LLC shall not be required to cause Parent
to register any Allocated Shares allocated to any Non-Demanding Member unless
such Non-Demanding Member accepts the terms of the underwriting agreement, to
the extent applicable to it, and then, only in such quantity as shall not, in
the written opinion of the managing underwriter, exceed the maximum shares of
common stock or other securities that can be marketed without materially
adversely affecting the offering, if any, by the Demanding Member. If the
managing underwriter advises the LLC in good faith that in its opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without having an adverse effect on
such offering, including the price at which such securities can be sold, then
the LLC shall cause the Parent to include in such registration the maximum
number of Shares that such underwriter advises can be so sold, allocated (x)
first, among the Allocated Shares requested to be included in such registration
by the Members, pro rata, on the basis of the number of Allocated Shares
--- ----
allocated to each such Member, (y) second, to any securities that Parent
proposes to sell, and (z) third, among other securities, if any, requested and
otherwise eligible to be included in such registration.
(c) Selection of Underwriters. In connection with any Demand
-------------------------
Registration involving an underwritten offering, the Parent shall select a
managing underwriter or underwriters, which underwriter or underwriters shall be
nationally recognized and shall be reasonably acceptable to the Demanding
Member.
SECTION 9.4. Tag-Along Rights. (a) So long as this Agreement or the
-----------------
Stockholders Agreement shall remain in effect and the Vestar Member (and its
Affiliates) has more Allocated Shares allocated to it than the aggregate number
of Allocated Shares allocated to
28
the Xxxx Members and their Permitted Transferees, unless a Public Offering shall
have occurred, with respect to any proposed Transfer by the LLC of the Vestar
Member's or any of its Affiliates' (in such capacity, a "Transferring
------------
Stockholder") Allocated Shares (excluding any Transfers by the Vestar Member to
-----------
its Affiliates), the Transferring Stockholder shall have the obligation, and
each other Member and its Permitted Transferees shall have the right (such
Member and its Permitted Transferees that exercise such right shall be referred
to as a "Tagging Stockholder"), to require the LLC to sell and the proposed
-------------------
transferee to purchase from the LLC a number of its Allocated Shares up to the
product (rounded up to the nearest whole number) of (i) the quotient determined
by dividing (A) the aggregate number of Allocated Shares allocated to such
Tagging Stockholder and sought by the Tagging Stockholder to be included in the
contemplated Transfer by (B) the sum of the aggregate number of Allocated Shares
allocated to such Transferring Stockholder and the aggregate number of Allocated
Shares allocated to such Tagging Stockholders and sought by all Tagging
Stockholders to be included in the contemplated Transfer and (ii) the total
number of Allocated Shares proposed to be acquired by the transferee in the
contemplated Transfer, and at the same price per Allocated Share and upon the
same terms and conditions (including without limitation time of payment and form
of consideration) as to be paid and given to the Transferring Stockholder,
provided that in order to be entitled to exercise its right to sell Allocated
--------
Shares to the proposed transferee pursuant to this Section 9.4, a Tagging
Stockholder must agree to make to the transferee the same representations,
warranties, covenants, indemnities and agreements as the Transferring
Stockholder agrees to make in connection with the proposed transfer of the
Allocated Shares of the Transferring Stockholder (except that in the case of
representations and warranties pertaining specifically to the Transferring
Stockholder, a Tagging Stockholder shall make the comparable representations and
warranties pertaining specifically to itself, and except that in the case of
covenants or agreements capable of performance only by certain Members, such
covenants or agreements shall be made only by such certain Members); and
provided further that all representations, warranties, covenants, agreements and
----------------
indemnities made by the Transferring Stockholder and the Tagging Stockholders
pertaining specifically to themselves shall be made by each of them severally
and not jointly; and provided further that each of the Transferring Stockholder
----------------
and each Tagging Stockholder shall be severally (but not jointly) liable for
breaches of representations, warranties, covenants and agreements of or (in the
case of representations and warranties) pertaining to the LLC or Parent and its
subsidiaries, as the case may be, and for indemnification obligations arising
out of or relating to any such breach or otherwise pertaining to the LLC, Parent
and its subsidiaries, on a pro rata basis, such liability of each such
Stockholder not to exceed such Stockholder's pro rata portion of the gross
proceeds of the sale.
(b) The Transferring Stockholder shall give notice to each other
Member and their Permitted Transferees of each proposed Transfer giving rise to
the rights of the Tagging Stockholders set forth in the first sentence of
Section 9.4(a) at least 30 days prior to the proposed consummation of such
Transfer, setting forth the name of the Transferring Stockholder, the number of
Allocated Shares proposed to be so Transferred, the name and address of the
proposed transferee, the proposed amount and form of consideration and other
terms and conditions offered by the proposed transferee, and a representation
that the proposed transferee has been informed of the tag-along rights provided
for in this Section 9.4 and has agreed to purchase Allocated Shares in
accordance with the terms hereof. The tag-along rights provided by this Section
9.4 must be exercised by each Tagging Stockholder within 15 days following
receipt of the notice required by the preceding sentence, by delivery of a
written notice to the Transferring
29
Stockholder indicating such Tagging Stockholder's desire to exercise its rights
and specifying the number of Allocated Shares it desires to sell. If the
proposed transferee fails to purchase Allocated Shares from any Tagging
Stockholder that has properly exercised its tag-along rights, then the
Transferring Stockholder shall not be permitted to make the proposed Transfer,
and any such attempted Transfer shall be void and of no effect.
(c) If any of the Tagging Stockholders exercise their rights under
Section 9.4(a), the closing of the purchase of the Allocated Shares with respect
to which such rights have been exercised shall take place concurrently with the
closing of the sale of the Transferring Stockholder's Allocated Shares. No
Transfer shall occur pursuant to this Section unless the transferee shall agree
to become a party to, and be bound to the same extent as its transferor by the
terms of the Stockholders' Agreement.
SECTION 9.5. Drag-Along Rights. So long as this Agreement or the
------------------
Stockholders Agreement shall remain in effect and the Vestar Member (and its
Affiliates) has more Allocated Shares allocated to it than the aggregate number
of Allocated Shares allocated to the Xxxx Members or their Permitted
Transferees, if the Vestar Member or any of its Affiliates receives an offer
from a Third Party to purchase (whether pursuant to a sale of stock, a merger or
otherwise) all, but not less than all, of the Allocated Shares allocated to the
Vestar Member and its Affiliates (other than shares, if any, not being purchased
in order to preserve the availability of recapitalization accounting treatment)
and such offer is accepted by the Vestar Member or such Affiliate, then each
Member other than the Vestar Member hereby agrees that it will, if requested by
the Vestar Member, allow the LLC to Transfer all the Allocated Shares allocated
to such Member to such Third Party on the terms of the offer so accepted by the
Vestar Member, including making the same representations, warranties, covenants,
indemnities and agreements that the Vestar Member agrees to make (except that,
in the case of representations and warranties pertaining specifically to the
Vestar Member, each other Member shall make the comparable representations and
warranties pertaining specifically to itself, and except that, in the case of
covenants or agreements capable of performance only by certain Members, such
covenants or agreements shall be made only by such certain Members, and provided
that all representations, warranties, covenants, agreements and indemnities made
by the Members pertaining specifically to themselves shall be made by each of
them severally and not jointly and provided further that each Member shall be
severally (but not jointly) liable for breaches of representations, warranties,
covenants and agreements of or (in the case of representations and warranties)
pertaining to the LLC, or Parent or its subsidiaries, as the case may be, and
for indemnification obligations arising out of or relating to any such breach or
otherwise pertaining to the LLC, the Parent or its subsidiaries, on a pro rata
basis, such liability of each such Member not to exceed such Member's pro rata
portion of the gross proceeds of the sale.
SECTION 9.6. Public Offerings, etc. The provisions of Sections 9.4,
----------------------
9.5 and 9.7 shall not be applicable to Transfers in a Public Offering or
Transfers pursuant to Section 9.8.
SECTION 9.7. Rights of First Refusal. If, at any time on or after
-----------------------
the date hereof, any Xxxx Member or any of their respective Permitted
Transferees (an "Offeree") receives a bona fide offer to purchase any or all of
-------
its Allocated Shares (the "Offer") (and, pursuant to such Offer, such
-----
Stockholder could, without violating the terms of this Agreement, cause the LLC
to Transfer the Shares that are the subject of such Offer) from a Third Party
(the "Offeror") which
30
such Offeree wishes to accept, such Offeree shall cause the Offer to be reduced
to writing and shall notify the Parent in writing of its wish to accept the
Offer (the "Sale Notice"). The Sale Notice shall contain an irrevocable offer to
-----------
sell such Allocated Shares to the Parent (in the manner set forth below) at a
purchase price equal to the price contained in, and otherwise on the same terms
and conditions of, the Stock Offer, and shall be accompanied by a true copy of
the Offer (which shall identify the Offeror). At any time within 30 Business
Days after the date of the receipt by the Parent of the Sale Notice, the Parent
shall have the right and option to commit to purchase, or to arrange for one or
more third parties designated by the Parent to purchase, all of the Allocated
Shares covered by the Offer either (i) for the same consideration and on the
same terms and conditions as the Offer or (ii) if the Offer includes any
consideration other than cash, then, at the sole option of the Parent, at the
equivalent all cash price, determined in good faith by a nationally recognized
independent investment banking firm, and otherwise on the same terms and
conditions as the Offer. If the option referred to in the preceding sentence is
exercised, on or prior to the 30th Business Day after the date of receipt by the
Parent of the Sale Notice the Parent (or its designees) shall pay the relevant
cash consideration by delivering a certified bank check or checks in (or, if the
Offeree so elects at least three Business Days prior to the closing date in a
writing specifying the Offeree's bank account and other wire transfer
instructions, by wire transferring) the appropriate amount and shall deliver the
relevant non-cash consideration to the Offeree against delivery to the Parent by
the LLC of certificates representing the Allocated Shares being purchased,
appropriately endorsed by the Offeree. If, at the end of the aforementioned 30
Business Day period, the Parent (or its designees) has not exercised its option
in the manner set forth above, the Offeree may during the succeeding 30 Business
Day period sell not less than all of the Allocated Shares covered by the Offer
to the Offeror at a price and on terms no less favorable to the Offeree than
those contained in the Offer. Such Offeror shall agree in a writing in form and
substance reasonably satisfactory to the Parent to become a party hereto and be
bound to the same extent as the Offeree by the provisions hereof other than this
Section 9.7. Promptly after such sale, the Offeree shall notify the Parent of
the consummation thereof and shall furnish such evidence of the completion and
time of completion of such sale and of the terms thereof as may reasonably be
requested by the Parent. If, at the end of 30 Business Days following the
expiration of the 30 Business Day period for the Parent (or its designees) to
commit to purchase the aforementioned Allocated Shares, the Offeree has not
completed the sale of such Allocated Shares as aforesaid, all the restrictions
on transfer contained herein shall again be in effect with respect to such
Allocated Shares.
SECTION 9.8 Initiation of a Rule 144 Sale. After a Public Offering,
-----------------------------
any Member may request that all or any portion of the Allocated Shares of such
Member be the subject of a Transfer by the LLC in accordance with Rule 144 under
the Securities Act (a "Rule 144 Request"). A Rule 144 Request shall specify the
number of Allocated Shares that is subject to such request, provided that a
--------
Member shall not request the inclusion of a number of Shares during any three-
month period that is greater than the maximum number of Shares that the LLC
could sell pursuant to Rule 144 multiplied by a fraction, the numerator of which
is the number of Allocated Shares allocated to such Member (or in the case of
any of the Xxxx Members or their Permitted Transferees, all of the Xxxx Members
and their Permitted Transferees) and the denominator of which is the total
number of Shares then held by the LLC. Promptly upon receipt of a Rule 144
Request, the LLC shall give each other Member notice of the Rule 144 Request and
shall use its best efforts to effect the Transfer of the Allocated Shares in
respect of which the LLC receives written requests for inclusion within 30 days
after such Member shall have
31
received the LLC's notice pursuant to this Section 9.8. Any Transfer proposed to
be made pursuant to this Section 9.8 (i) shall be subject in all respects to
compliance by the LLC with the provisions of Rule 144, (ii) shall be subject to
interruption and termination as a result of any registration of securities by
Parent, regardless of whether initiated pursuant to the Stockholders' Agreement
and (iii) in the event such Transfer is proposed to be made by a Xxxx Member
employed by the Parent or so long as the Xxxx Members have the right to
designate directors, shall be subject to interruption and termination for any of
the reasons set forth in Section 9.1(d).
SECTION 9.9 Individual Private Sale. (A) In the case of the Xxxx
-----------------------
Members or their Permitted Transferees, after the earlier to occur of (i) a
Public Offering and (ii) the fifth anniversary of the date hereof, the Xxxx
Members may, and (B) in the case of the Vestar Member, at any time the Vestar
Member may, request that, to the extent that it may lawfully do so, the LLC
shall effect a Transfer of all or any portion of the Allocated Shares allocated
to such Member pursuant to any available exemption from the registration
requirement under the Securities Act, subject to written agreement by the
transferee (in form and substance reasonably satisfactory to the Managing
Member) to be bound by this Agreement as if the transferee were the transferring
Member. A transferee under this Section 9.9 is referred to as a "Share
-----
Permitted Transferee". No transfer of any such Shares may be made unless such
--------------------
Member delivers to the LLC an opinion of counsel stating, or other evidence
satisfactory to the LLC, that registration of such Shares is not required under
the Securities Act, and such transfer shall not violate applicable state
securities or blue sky laws. Any such opinion of counsel shall be rendered by
counsel, and shall be in form and substance, reasonably acceptable to the
Managing Member and all costs and expenses thereof shall be borne by such
Member. Notwithstanding the foregoing to the contrary, the LLC shall not take
the action referred to in the first sentence of this Section 9.9 if the Managing
Member reasonably believes that any such action would be unlawful, or could have
an adverse effect on Parent. The LLC agrees to use its reasonable best efforts
to take all actions reasonably requested by any Xxxx Member or its Permitted
Transferee to facilitate a Transfer pursuant to this Section 9.9.
SECTION 9.10 Reduction of Allocated Shares. Upon the consummation by
-----------------------------
the LLC of any Transfer of Shares, (i) the number of Allocated Shares of each
Member shall be reduced by the number of such Member's Allocated Shares that
were actually included in such Transfer, provided that such reduction shall be
--------
made only on the basis of whole Shares and the LLC shall allocate any fractional
Shares among such Members by lot or pursuant to any other method that the LLC
deems, in its sole judgment, to be just and equitable and (ii) the Percentage
Interests of the Members shall be adjusted to reflect the number of remaining
Allocated Shares that are allocated to each such Member.
SECTION 9.11 Liquidation of the LLC. Upon the liquidation of the
----------------------
LLC, (a) the Demand Registration rights provided for in Section 9.3(a) shall be
distributed to the Members and each Share Permitted Transferee to the extent
that such Demand Registration Rights have not been exercised and (b) the
incidental registration rights provided for in Section 9.2(a) hereof shall be
assigned to each Member and each Share Permitted Transferee thereof.
SECTION 9.12 Transfers to be Made Only as Permitted or Required by
-----------------------------------------------------
this Agreement. Until the earlier to occur of (i) a Public Offering and (ii)
--------------
the fifth anniversary of the
32
date hereof, except as permitted by this Article IX, the Xxxx Members may not,
directly or indirectly, request the Transfer of the Allocated Shares allocated
to each of them, except as specifically permitted or required by this Article
IX; any other purported transfer shall be void and of no effect. The Vestar
Member may request the Transfer of its Allocated Shares at any time subject only
to the restrictions in this Article IX.
SECTION 9.13 Liquidity Right.
---------------
(a) Prior to a Public Offering, as long as this Agreement or the
Stockholders' Agreement shall remain in effect, if Xxxxxx X. Xxxx ceases to
serve as Chairman or Chief Executive Officer of the Company or Parent or the
employment with the Company of any of Xxxxx Xxxx or Xxxxx X. Xxxx (together with
Xxxxxx X. Xxxx, the "Xxxx Employees") ceases for any reason (including, but not
--------------
limited to, a cessation under the circumstances set forth in Section 9.13(b)
hereof) (a "Liquidity Event"), then such Xxxx Employee, such Xxxx Employee's
---------------
executor or estate, or the trustees of the Xxxx Family Trust or the Xxxxx Xxxx
Trust shall have the right, subject to the provisions of Section 9.14 hereof, at
any time, upon at least four business days' written notice, following the date
of the cessation of the employment of such Xxxx Employee, to sell to the Parent
(or, at the option of such Xxxx Employee, the Company, to the extent that the
Parent is precluded due to regulatory or state law reasons), and the Parent (or,
at the option of such Xxxx Employee, the Company, to the extent that the Parent
is precluded due to regulatory or state law reasons) shall be required to
purchase (subject to the provisions of Section 9.14 hereof), all or part of the
Allocated Shares allocated to such Xxxx Employee (or allocated to a trust of
which such Xxxx Employee is a beneficiary) at a purchase price equal to the
product of (x) the total number of Shares being sold and (y) a price per share
equal to the Fair Market Value as of the date of the Liquidity Notice (as
defined below); provided, however, that during any twelve month period, the
-------- -------
Parent and the Company shall not, in the aggregate, be required to purchase
pursuant to this Section 9.13(a) from all Xxxx Employees, in the aggregate, a
number of Shares having an aggregate Fair Market Value that exceeds $5 million
less the amount of net proceeds received in respect of all shares sold by the
Xxxx Employees during such twelve-month period pursuant to Section 9.9 and
9.13(b).
(b) Prior to a Public Offering, as long as this Agreement or the
Stockholders' Agreement shall remain in effect, in the event that any of the
Xxxx Employees is terminated by the Parent or the Company without "Cause" or
resigns from the Parent and the Company for "Good Reason", as such terms are
defined in their current respective employment contracts with the Company, then
such Xxxx Employee, such Xxxx Employee's executor or estate, or the trustees of
the Xxxx Family Trust or the Xxxxx Xxxx Trust shall have the right, subject to
Section 9.14 hereof and on the terms described in Section 9.13(c), to sell to
the Parent (or, at the option of such Xxxx Employee, the Company, to the extent
that the Parent is precluded due to regulatory or state law reasons) and the
Parent (or, at the option of such Xxxx Employee, the Company, to the extent that
the Parent is precluded due to regulatory or state law reasons) shall be
required to purchase all or part of the Allocated Shares allocated to such Xxxx
Employee (or allocated to a trust of which such Xxxx Employee is a beneficiary)
at a purchase price equal to the product of (x) the total number of Shares being
sold and (y) a price per share equal to the Fair Market Value as of the date of
the Liquidity Notice; provided, however, that the Parent and the Company shall
-------- -------
33
not, in the aggregate, be required to purchase pursuant to this Section 9.13(b)
during any 12-month period from all Xxxx Employees, in the aggregate, a number
of Shares greater than 25% of the aggregate number of Allocated Shares allocated
to all such terminated or resigning Xxxx Employees (and allocated to any trusts
of which any such Xxxx Employees are a beneficiary) on the date of their
respective terminations or resignations less all Shares sold by the Xxxx
Employees during such twelve-month period pursuant to Sections 9.9 and 9.13(a);
provided, further, that if such Xxxx Employee so notifies the Parent pursuant to
-------- -------
the first Liquidity Notice (or any subsequent Liquidity Notice) given by such
Xxxx Employee pursuant to this Section 9.13(b), the Fair Market Value in respect
of all Allocated Shares allocated to such Xxxx Employee (or allocated to a trust
of which such Xxxx Employee is a beneficiary) for all subsequent sales to the
Parent (or, at the option of such Xxxx Employee, the Company, to the extent that
the Parent is precluded due to regulatory or state law reasons) by such Xxxx
Employee pursuant to this Section 9.13(b) shall be deemed to be the Fair Market
Value as of the date of such Liquidity Notice.
(c) Each Xxxx Employee desiring to sell Shares which may be sold
pursuant to this Section 9.13 or 9.3(a)(iii) shall send at least four business
days' written notice (the "Liquidity Notice") to the Parent and the Vestar
----------------
Member stating its intention to sell Shares and the number of Shares to be
sold. Subject to Section 9.14, the closing of the purchase (the "Liquidity
---------
Closing") shall take place at the principal office of the Parent on the earlier
-------
to occur of (i) the 30th day after the giving of such notice by the selling Xxxx
Employee, (ii) the determination of the Fair Market Value of the selling Xxxx
Employee's shares pursuant to this Agreement and (iii) agreement between the
selling Xxxx Employee and the Parent as to the Fair Market Value of the Shares
to be sold. If, after the issuance of a Liquidity Notice but before the
Liquidity Closing associated with such a notice, a Public Offering occurs,
neither the Parent nor the Company shall have any obligation whatsoever to
purchase Shares pursuant to this Section 9.13.
SECTION 9.14 Certain Limitations on the Parent's Obligations to
--------------------------------------------------
Purchase Shares. Notwithstanding anything to the contrary elsewhere herein,
---------------
neither the Parent nor the Company shall be obligated to purchase any Shares of
Parent Common Stock at any time pursuant to Sections 9.3(a)(iii) or 9.13 hereof
(a) to the extent that the purchase of such Shares (together with any other
purchases of Shares pursuant to Sections 9.13 and 9.3(a)(iii)) would result (i)
in a violation of any law, statute, rule, regulation, policy, order, writ,
injunction, decree or judgment promulgated or entered by any federal, state,
local or foreign court or governmental authority applicable to the Parent or the
Company or any of its subsidiaries or any of its or their property or (ii) after
giving effect thereto (including any dividends or other distributions or loans
from a subsidiary of the Parent to the Parent in connection therewith), would
result in a Financing Default, or (b) if immediately prior to such purchase
there exists a Financing Default which prohibits such purchase (including any
dividends or other distributions or loans from a subsidiary of the Parent to the
Parent in connection therewith). The Parent shall within 5 days of learning of
any such fact so notify (the "Delay Notice") the relevant Xxxx Employee that
------------
neither it nor the Company is obligated to purchase Shares at such time. If, in
the case of a purchase pursuant to Sections 9.3(a)(iii), 9.13(a) or 9.13(b), the
Parent gives such a notice: (A) each Share the purchase of which by Parent would
result in a Financing Default (the "Default Shares") shall be exchanged for a
--------------
share of redeemable preferred stock, $.01 par value, of the Parent ("Xxxx
----
34
Preferred Stock"), having the following terms: (1) such shares of Xxxx
---------------
Preferred Stock shall have an aggregate liquidation preference equal to the Fair
Market Value of the Default Shares as of the date of the original Liquidity
Notice in respect of such Default Shares; (2) cash dividends with respect to the
Xxxx Preferred Stock shall accrue at a rate of 10% per annum on the liquidation
preference, provided that to the extent that the aggregate liquidation
--------
preference in respect of all shares of Xxxx Preferred Stock outstanding would
exceed $2,500,000, dividends shall accrue on all shares of Xxxx Preferred Stock
having an aggregate liquidation preference in excess of such amount at a rate of
12% per annum, and in each case such dividends will be payable by the Parent
annually, on each anniversary of the date of this Agreement, in an aggregate
amount not to exceed $250,000 with respect to all shares of Xxxx Preferred Stock
outstanding, provided that no Financing Default has occurred or would result
from the payment of such dividend; (3) shares of Xxxx Preferred Stock may be
exchanged at the option of the holder on a one-for-one basis for Shares of
Common Stock, but only if immediately upon such exchange such Shares of Common
Stock are to be transferred to a Third Party in a transfer made in accordance
with the provisions of this Agreement (it being understood that the Parent
shall retain the obligation to pay to the holder of Xxxx Preferred Stock any
accrued and unpaid dividends thereon at the time of such exchange); (4) the Xxxx
Preferred Stock shall not be transferable, except that a Xxxx Employee may
transfer Xxxx Preferred Stock to his or her Immediate Family Member or any other
member of his or her Family Group; and (5) the Xxxx Preferred Stock may not
mature or be mandatorily redeemable until [ ], 2010; (B) until
all shares of Xxxx Preferred Stock are purchased by the Parent (or, at the
option of such Xxxx Employee, the Company, to the extent that the Parent is
precluded due to regulatory or state law reasons) in accordance with this
Section 9.14, the Vestar Member will not receive any distributions or dividends
in respect of its Allocated Shares; and (C) unless all shares of Xxxx Preferred
Stock (or Shares of Common Stock issued in exchange therefor) have been sold in
one or more separate transactions or the Xxxx Members shall have otherwise sold
all shares of Xxxx Preferred Stock (or Shares of Common Stock issued in exchange
therefor) eligible for sale during the twelve-month period in respect of which
the Liquidity Notice was given, such shares of Xxxx Preferred Stock shall be
purchased (a "Delayed Purchase") by the Parent (or, at the option of such Xxxx
----------------
Employee, the Company, to the extent that the Parent is precluded due to
regulatory or state law reasons) on the tenth Business Day after such date or
dates that it is no longer permitted to defer purchasing such shares pursuant to
the first sentence of this Section 9.14, and the Parent shall give the Xxxx
Employees at least five business days' prior notice of any such purchase. The
Parent shall issue shares of Xxxx Preferred Stock to a Xxxx Employee in the
circumstances described above upon receipt by the Parent from such Xxxx Employee
of certificates representing the shares to be exchanged (such shares to be
deemed to be issued as of the date of the relevant Liquidity Notice). Upon the
issuance of the Xxxx Preferred Stock, all shares received in exchange therefor
shall be canceled. Any Delayed Purchase shall be made at the Fair Market Value
as of the date of the original Liquidity Notice in respect of such purchase.
The Company and Parent agree to use all commercially reasonable efforts to cure
any such Financing Default which is curable. It is understood that for purposes
of the foregoing, any shares in respect of which a Liquidity Notice shall be
given shall be treated on a "first-in, first-out" basis, with the first shares
in respect of which a Liquidity Notice has been given having the right to be
redeemed first and any related Xxxx Preferred Stock accruing dividends at a rate
of 10% per annum, until all applicable limits shall be reached.
35
ARTICLE X
Miscellaneous
-------------
SECTION 10.1 Equitable Relief. The Members hereby confirm that
----------------
damages at law would be an inadequate remedy for a breach or threatened breach
of this Agreement and agree that, in the event of a breach or threatened breach
of any provision hereof, the respective rights and obligations hereunder shall
be enforceable by specific performance, injunction or other equitable remedy,
but, nothing herein contained is intended to, nor shall it, limit or affect any
right or rights at law or by statute or otherwise of a Member aggrieved as
against the other for a breach or threatened breach of any provision hereof, it
being the intention by this Section 10.1 to make clear the agreement of the
Members that the respective rights and obligations of the Members hereunder
shall be enforceable in equity as well as at law or otherwise and that the
mention herein of any particular remedy shall not preclude a Member from any
other remedy it or he might have, either in law or in equity.
SECTION 10.2 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to
contracts executed and to be performed in such State.
SECTION 10.3 Successors and Assigns. This Agreement shall be binding
----------------------
upon and shall inure to the benefit of the parties hereto, their respective
successors and assigns.
SECTION 10.4 Notices. Subject to Section 10.12, whenever notice is
-------
required or permitted by this Agreement to be given, such notice may be in
writing (including facsimile) and if in writing shall be given to any Member at
its address or facsimile number shown in the LLC's books and records (including
Schedule 1 hereto).
SECTION 10.5 Counterparts. This Agreement may be executed in any
------------
number of counterparts, all of which together shall constitute a single
instrument.
SECTION 10.6 Entire Agreement. This Agreement and the Stockholders'
----------------
Agreement embody the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, agreements, representations, warranties, covenants or undertakings
with respect to the subject matter hereof, other than those expressly set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter hereof.
SECTION 10.7 Amendments. Any amendment to this Agreement shall be
----------
effective only if such amendment is evidenced by a written instrument duly
executed and delivered by (a) the holders of a majority of the Units held by the
Xxxx Members, (b) the Managing Member and (c) the Vestar Member, and with
respect to the matters set forth in Section 10.13, Parent, the Company and the
relevant Xxxx Member.
SECTION 10.8 Section Titles. Section titles are for descriptive
--------------
purposes only and shall not control or alter the meaning of this Agreement as
set forth in the text hereof.
36
SECTION 10.9 Representations and Warranties. Each Member represents,
------------------------------
warrants and covenants to each other Member that:
(a) such Member, if not a natural Person, is duly formed and validly
existing under the laws of the jurisdiction of its organization with full
power and authority to conduct its business to the extent contemplated in
this Agreement;
(b) such Member, if a natural Person, has the capacity to enter into
and perform its obligations under this Agreement;
(c) this Agreement has been duly authorized (in the case of Members
that are not natural Persons), executed and delivered by such Member and
constitutes the valid and legally binding agreement of such Member
enforceable in accordance with its terms against such Member except as
enforceability hereof may be limited by bankruptcy, insolvency, moratorium
and other similar laws relating to creditors' rights generally and by
general equitable principles;
(d) the execution and delivery of this Agreement by such Member and
the performance of its duties and obligations hereunder do not result in a
breach of any of the terms, conditions or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, credit agreement,
note or other evidence of indebtedness, or any lease or other agreement, or
any license, permit, franchise or certificate, to which such Member is a
party or by which it is bound or to which its properties are subject, or
require any authorization or approval under or pursuant to any of the
foregoing, or violate any statute, regulation, law, order, writ,
injunction, judgment or decree to which such Member is subject;
(e) no consent, approval or authorization of, or filing,
registration or qualification with, any court or governmental authority on
the part of such Member is required for the execution and delivery of this
Agreement by such Member and the performance of its obligations and duties
hereunder.
SECTION 10.10 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. Each
------------------------------------------------
of the parties hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, to the non-exclusive general
jurisdiction of the Courts of the State of New York in New York County, the
Courts of the United States of America for the Southern District of New
York and the Central District of California, the Courts in the State of
California in the County of Orange and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same to the extent permitted by applicable law;
37
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the party,
as the case may be, at its address set forth in Schedule 1 or at such other
address of which the other party shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to xxx in any other jurisdiction for recognition and enforcement of
any judgment or if jurisdiction in the courts referenced in paragraph (i)
hereof is not available despite the intentions of the parties hereto; and
(e) waives trial by jury in any litigation in any court with respect
to, in connection with, or arising out of this Agreement or any other
instrument or document delivered pursuant hereto, or any other claim or
dispute howsoever arising, to which the parties are party. This waiver is
informed and freely made.
SECTION 10.11 Reimbursement of Expenses. Promptly after the date of
-------------------------
this Agreement, the LLC, to the extent it does not pay such costs and expenses
directly, will reimburse the Managing Member for Organizational Expenses
incurred by the Managing Member.
SECTION 10.12 Xxxx Representative. Each Xxxx Member hereby
-------------------
designates and appoints (and each Permitted Transferee of each such Xxxx Member
shall be deemed to have so designated and appointed) Xxxxxx X. Xxxx, with full
power of substitution (the "Xxxx Representative") the representative of each
such Person to perform all such acts as are required, authorized or contemplated
by this Agreement to be performed by any such Person and hereby acknowledges
that the Xxxx Representative shall be the only Person authorized to take any
action so required, authorized or contemplated by this Agreement by each such
Person, except that the foregoing shall not apply to the rights of any Xxxx
Employee pursuant to Sections 9.3(a)(iii), 9.13(a) and 9.13(b). Each such Person
further acknowledges that the foregoing appointment and designation shall be
deemed to be coupled with an interest and shall survive the death or incapacity
of such Person. Each such Person hereby authorizes (and each Permitted
Transferee shall be deemed to have authorized) the other parties hereto to
disregard any notice or other action taken by such Person pursuant to this
Agreement on any action so taken or any notice given by the Xxxx Representative
and are and will be entitled and authorized to give notices only to the Xxxx
Representative for any notice contemplated by this Agreement to be given to any
such Person. A successor to the Xxxx Representative may be chosen by a majority
of the Xxxx Employees, provided that written notice thereof is given by the
--------
successor Xxxx Representative to the LLC. Whenever any action or consent (but
not any forbearance) is required to be taken or given by the Xxxx Members, the
action or consent of the Xxxx Representative shall be considered the act or
consent of all the Xxxx Members, and the Vestar Member and the Managing Member
shall be protected in relying on such act or consent.
SECTION 10.13 Covenant Not to Compete; Confidential Information.
-------------------------------------------------
38
(a) The following covenant shall apply to each of Xxxxxx X. Xxxx, Xxxxx
Xxxx and Xxxxx Xxxx (the "Xxxx Employees"), individually, and each of them
hereby agrees, with respect to himself or herself, to the following:
(i) In consideration of the Parent and the Vestar Member entering
into this Agreement with the Xxxx Members, each of the Xxxx
Employees hereby agrees, effective as of the Effective Time of
the Acquisition Merger (as defined in the Merger Agreement), for
so long as he or she is employed by the Company, Parent or one of
their respective subsidiaries (the "Restricted Group") and for a
----------------
period of five years (the "Noncompete Period") after he or she
-----------------
has ceased to be employed by the Restricted Group, that (i) he or
she shall not, directly or indirectly, engage in the design,
manufacturing, production, marketing, sale or distribution of any
women's clothing or accessories anywhere in the world in which
the Restricted Group is doing business (the "Competing
---------
Business"), other than through his or her employment with the
Restricted Group; provided, however, that in the event Xxxxx Xxxx
-------- -------
is terminated without "Cause" by the Parent or the Company or
resigns for "Good Reason" from the Parent and the Company, as
such terms are defined in her current employment contract, the
term of such Noncompete Period with respect to her shall be three
years; provided further that she shall not be precluded from
-------- -------
being employed by Saks Fifth Avenue, Neiman Marcus or a similar
broad-based specialty store or from working at an advertising
agency, provided that she is not otherwise in violation of this
Section 10.13 and is not engaging in activities in such
employment that are directly competitive with or otherwise would
reasonably be expected to be injurious or adverse to the business
of the Company. For purposes of this Agreement, the phrase
"directly or indirectly engage in" shall include any direct or
indirect ownership or profit participation interest in such
enterprise, whether as an owner, stockholder, partner, director,
joint venturer or otherwise, and shall include any direct or
indirect participation in such enterprise as an executive,
designer, consultant, licensor of technology or otherwise;
provided that the Xxxx Employees shall be permitted to be passive
equity investors in an amount not to exceed 5% (in the aggregate
among all of the Xxxx Employees) of the voting power or 5% (in
the aggregate among all of the Xxxx Employees) of the equity in
any company engaged in a Competing Business provided he or she is
not otherwise in violation of this covenant. Notwithstanding the
foregoing, Xxxxxx X. Xxxx shall be permitted to remain a "passive
equity investor" in "Xxxxxxx Xxxxxxxx", so long as he remains
inactive in the management of that business and his investment in
"Xxxxxxx Xxxxxxxx" does not increase beyond its level as of the
date hereof.
(ii) Each of the Xxxx Employees agrees that he or she will not,
without the prior written consent of the Parent, directly or
indirectly, use or grant a third party their consent to use or a
license to use or any other right to use,
39
the names "Xxxxx Xxxx", "St. Xxxx" or "St. Xxxx by Xxxxx Xxxx"
(collectively, the "Company Names") or any combination,
-------------
derivative, variation or element thereof, in any Competing
Business or in any other manner which use would be reasonably
likely to infringe, dilute or endanger the validity or value of,
any trademarks or trade names of the Restricted Group. The Parent
agrees not to unreasonably withhold its consent with respect to
any uses of the Company Names by Xxx Xxxx, Xxxxx Xxxx or Xxxxx
Xxxx for non-commercial projects.
(iii) Each of the Xxxx Employees agrees not to disclose or use at any
time any Confidential Information (as defined below) of which he
or she is or becomes aware, whether or not such information is
developed by any one of them, except to the extent that such
disclosure or use is directly related to and required by his or
her performance of duties, if any, assigned to him or her by the
Restricted Group. As used in this Agreement, the term
"Confidential Information" means information that is not
generally known to the public and that is used, developed or
obtained by the Restricted Group in connection with its business,
including but not limited to (i) products or services, (ii) fees,
costs and pricing structures, (iii) designs, (iv) computer
software, including operating systems, applications and program
listings, (v) flow charts, manuals and documentation, (vi) data
bases, (vii) accounting and business methods, (viii) inventions,
devices, new developments, methods and processes, whether
patentable or unpatentable and whether or not reduced to
practice, (ix) customers and clients and customer or client
lists, (x) other copyrightable or trademarked works, (xi) all
technology and trade secrets, (xii) strategic business plans, and
(xiii) all similar and related information in whatever form.
Confidential Information will not include any information that is
generally available to the public prior to the date any of the
Xxxx Employees proposes to disclose or use such information.
Each of the Xxxx Employees acknowledges and agrees that all
copyrights, works, inventions, innovations, improvements,
developments, patents, trademarks and all similar or related
information which relates to the actual or anticipated business
of the Restricted Group (including its predecessors) and
conceived, developed or made by any of the Xxxx Employees while
employed by the Restricted Group belong to the Restricted Group.
Each of the Xxxx Employees agrees to perform all actions
reasonably requested by the Restricted Group (whether during or
after the Noncompete Period) to establish and confirm such
ownership at the Restricted Group's expense (including without
limitation assignments, consents, powers of attorney and other
instruments).
(iv) Notwithstanding clauses (i), (ii) and (iii) above, if at any time
a court holds that the restrictions stated in any of such clauses
(i), (ii), (iii) or clause (b) below are unreasonable or
otherwise unenforceable under circumstances then existing, the
parties hereto agree that the maximum period, scope or
40
geographic area determined to be reasonable under such
circumstances by such court will be substituted for the stated
period, scope or area. Because the Xxxx Employees' services are
unique and because the Xxxx Employees have had access to
Confidential Information, the parties hereto agree that money
damages will be an inadequate remedy for any breach of this
Agreement. In the event of a breach or threatened breach of this
Agreement, each of the Xxxx Employees agrees that the Restricted
Group or their successors or assigns may, in addition to other
rights and remedies existing in their favor, apply to any court
of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce, or prevent any violations
of, the provisions hereof (without the posting of a bond or other
security).
(b) Xxxxx Xxxx hereby assigns to the Restricted Group, in connection with
the Restricted Group's current and future business and the advertising thereof,
in all forms of media: (A) the exclusive right to use the Company Names in
connection with any Competing Business; (B) all of Xxxxx Xxxx'x rights of
privacy, publicity and similar rights necessary or desirable for the Restricted
Group to conduct and advertise its current and future business; provided that
the Restricted Group may not use the Company Names in any manner that would
tarnish or disparage Xxxxx Xxxx'x name or reputation; and (C) all rights to xxx
at law or in equity for any infringement or other impairment of the foregoing,
including the right to receive all proceeds and damages therefrom; Xxxxx Xxxx
agrees to take all actions and execute all documents reasonably requested by the
Restricted Group to accomplish the foregoing.
(c) This Section 10.13 shall survive the termination of this Agreement.
SECTION 10.14 Additional Securities Subject to Agreement. Each Member
------------------------------------------
agrees that any other Shares (or shares of capital stock of the Parent having
voting rights) which it shall hereafter acquire by means of a stock split, stock
dividend, distribution or other similar event (other than pursuant to a Public
Offering) shall be subject to the provisions of this Agreement to the same
extent as if held as Shares on the date hereof, and in the event of any such
stock split, combination, reclassification, reorganization or other similar
event, where appropriate, the numbers and percentages in this Agreement shall be
adjusted accordingly to replicate the intention of the parties on the date
hereof.
41
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Limited Liability Company Agreement as of the day and year first above
written.
VESTAR/SJK INVESTORS LLC
By:
-------------------------------------------
Name:
Title:
----------------------------------------------
XXXXXX X. XXXX
----------------------------------------------
XXXXX XXXX
----------------------------------------------
XXXXX X. XXXX
XXXX FAMILY TRUST
By:
-------------------------------------------
Name: Xxxxxx X. Xxxx
By:
-------------------------------------------
Name: Xxxxx Xxxx
XXXXX XXX XXXX TRUST
By:
-------------------------------------------
Name: Xxxxxx X. Xxxx
By:
-------------------------------------------
Name: Xxxxx Xxxx
ST. XXXX KNITS INTERNATIONAL,
INCORPORATED
By:
-------------------------------------------
Name:
Title:
42
ST. XXXX KNITS, INC.
By:
-------------------------------------------
Name:
Title:
SCHEDULE 1
Xxxx Members Number of Allocated
------------ Units Shares
--------- ---------
Vestar Capital Partners III, L.P. 8.409 5,121,222
0000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Xxxxxx X. Xxxx -- --
St. Xxxx Knits, Inc.
00000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxx Xxxx -- --
St. Xxxx Knits, Inc.
00000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxx X. Xxxx 587 357,571
St. Xxxx Knits, Inc.
00000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxx Family Trust 914 556,772
c/o Xxxxxx X. Xxxx
St. Xxxx Knits, Inc.
00000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxx Xxx Xxxx Trust 90 54,640
c/o Xxxxxx X. Xxxx
St. Xxxx Knits, Inc.
00000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Totals
Schedule 2
Immediately prior to the Effective Time of the Reorganization Merger, Vestar
will make a capital contribution to the LLC of $153,636,664