Exhibit 10.7
Execution Version
EXECUTIVE SECURITIES AGREEMENT
This Executive Securities Agreement ("AGREEMENT") is made as of August
21, 1997 by and among Beacon Holding Corporation, a Delaware corporation (the
"COMPANY"), Xxxxx Xxxxx ("EXECUTIVE") and Code, Xxxxxxxx & Xxxxxxx III, L.P., a
Delaware limited partnership ("CHS").
R E C I T A L:
The Company, CHS and Executive desire to enter into an agreement
pursuant to which (a) Executive shall purchase, and the Company shall sell, a
combination of (i) shares of Class A Common Stock, $.01 par value, of the
Company and (ii) Subordinated Notes (as herein defined) of the Company and (b)
the manner and terms by which the Company's equity and subordinated debt may be
transferred.
A G R E E M E N T S:
The parties hereto agree as follows:
1. Definitions.
(a) For purposes of this Agreement, the following terms shall have
the following meanings unless the context indicates otherwise:
"AFFILIATE" of a Person means any other Person controlling, controlled
by or under common control with such Person and any partner of such
Person if such Person is a partnership. An "Affiliate", with respect to
the Company includes each of the Company's direct or indirect
subsidiaries.
"BEACON OPERATING" means Beacon Sales Acquisition, Inc., a Delaware
corporation.
"BOARD" means the board of directors of the Company.
"CAUSE" means any of the following, as determined by the Board in its
reasonable judgment: (i) Executive's failure or refusal to perform such
duties and responsibilities as are requested by the Board or the
President of the Company or the Board of Directors or President of
Beacon Operating or any other Subsidiary of Beacon Operating with which
Executive is employed, (ii) Executive's failure to observe all material
policies of the Company, Beacon Operating and their Affiliates
generally applicable to executives of such Persons, (iii) Executive's
gross negligence or willful misconduct in the performance of
Executive's duties, (iv) the commission by Executive of any act of
fraud or embezzlement against the Company, Beacon Operating or any of
their Affiliates, or the commission of any felony or act involving
dishonesty or moral turpitude, (v) Executive's unauthorized
dissemination of information, observations and data concerning the
business plans, financial data, referral sources, customers, suppliers,
manufacturing procedures and techniques, trade secrets or acquisition
strategies of the Company, Beacon Operating or any Subsidiaries, or any
Confidential Information or (vi) Executive's failure (as determined by
the President of Beacon Operating or the Company in his sole
discretion) or refusal to perform duties and responsibilities which are
commensurate with Executive's position with Beacon Operating or the
Company.
"CLASS A SHARES" means shares of Class A Common Stock, $.01 par value
per share, of the Company.
"CLASS B SHARES" means shares of Class B Common Stock, $.01 par value
per share, of the Company.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"CREDIT AGREEMENT" means (i) that certain Credit Agreement dated August
21, 1997 among Beacon Sales Acquisition, Inc., Beacon Holding
Corporation and NationsCredit Commercial Corporation, as Agent
("NationsCredit"), and (ii) any replacement credit or loan agreement
between the Company and/or Beacon Operating and any new or replacement
lender.
"DISABILITY" means Executive is unable, by reason of accident or
illness (including mental illness), to perform his duties with Beacon
Operating and its Subsidiaries for ninety (90) consecutive days and
from which Executive is not expected to recover in the reasonably near
future, all as determined upon examination by a physician acceptable to
both Executive (or Executive's personal representative) and the Company
and retained by the Company. Executive shall cooperate fully with such
physician. If such physician determines that Executive is so disabled,
the physician shall deliver to the Company a certificate certifying
both that Executive is disabled and the date upon which the condition
of disability commenced. The determination of the physician shall be
conclusive and binding on both parties.
"EXECUTIVE SECURITIES" means (i) all Executive Shares, (ii) all
Subordinated Notes acquired by the Executive, (iii) all vested Options
issued to Executive, and (iv) all securities of the Company issued or
issuable with respect to the securities referred to in clauses (i),
(ii), and (iii) above by way of a stock split, stock dividend or other
recapitalization. Executive Securities shall continue to be Executive
Securities in the hands of any holder other than Executive (other than
the Company, its Subsidiaries or CHS and except for transferees in a
Public Sale or a Sale of the Company), and, except as otherwise
provided in this Agreement, each such other Holder shall succeed to all
rights and obligations attributable to Executive as a Holder hereunder.
"EXECUTIVE SHARES" means all Shares acquired by Executive pursuant to
this Agreement or any other agreement, option plan or other arrangement
with the Company or any Subsidiary, whether on or following the date of
this Agreement, and all Shares of the Company issued or issuable with
respect to such Shares by way of a stock split, stock dividend or other
recapitalization.
"EXEMPT TRANSACTION" means any transfer of Executive Securities
pursuant to Section 3, 4, 6(d) or 8 of this Agreement.
"FAIR MARKET VALUE" of any security of the Company means:
(i) the average of the closing prices of the
sales of such security on all securities exchanges on which
such security may at the time be listed, or, if there have
been no sales on any such exchange on any particular day, the
average of the highest bid and lowest asked prices on all such
exchanges at the end of such particular day, or, if on any
particular day such security is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ
System as of 4:00 p.m., New York time, or, if on any
particular day such security is not quoted in the NASDAQ
System, the average of the
-2-
highest bid and lowest asked prices on such particular day in
the domestic over-the-counter market as reported by the
National Quotation Bureau Incorporated, or any similar
successor organization, in each such case averaged over a
period of twenty-one (21) business days ending on the day as
of which the Fair Market Value is being determined; or
(ii) with respect to any security which is not
listed on any securities exchange or quoted in the NASDAQ
System or the over-the-counter market for the entire
twenty-one (21) day averaging period specified above, the fair
value of such security as determined by a majority of the
members of the Board.
With respect to Options, "Fair Market Value" means the amount determined
pursuant to the preceding sentence less the exercise price for such Option. The
fair value of Executive Shares shall be determined by the Board (or by
representatives engaged by the Board) using the same methodology used by CHS to
establish the purchase price for the assets of Beacon Sales Company,
Incorporated purchased by Beacon Operating on the date hereof (i.e. a multiple
of earnings before interest, taxes, depreciation and amortization minus normal
capital expenditures, less debt and other appropriate items). In determining the
fair value of securities, the Board shall not apply a discount for minority
interest or lack of liquidity.
"FAMILY GROUP" means the spouse and immediate descendants (whether
natural or adopted) of Executive (collectively, "RELATIVES"), any
custodian of a custodianship for and on behalf of one or more Relatives
or Executive and any trustee of a trust solely for the benefit of one
or more Relatives.
"FULLY-DILUTED BASIS" shall mean the number of Shares which would be
outstanding, as of the date of computation, if all convertible
obligations, options and warrants and like rights and instruments, to
acquire Shares had been converted or exercised.
"HOLDER" means any holder of Executive Securities (including, without
limitation, Executive and Executive's Permitted Transferees).
"INDEPENDENT THIRD PARTY" means any Person who, immediately prior to
the contemplated transaction, does not directly or indirectly
beneficially own in excess of five percent (5%) of the Shares on a
Fully-Diluted Basis, who is not an Affiliate of any five percent (5%)
owner of such Shares and who is not the spouse or descendant (by birth
or adoption) of any five percent (5%) owner.
"INTELLECTUAL PROPERTY" means all discoveries, inventions,
improvements, computer programs, formulas, ideas, devices, writings or
other intellectual property (including any notes, records, reports,
sketches, plans, memoranda and other tangible information relating to
such Intellectual Property), whether or not subject to protection under
the patent or copyright laws, which Executive shall conceive solely or
jointly with others, in the course of, or within the scope of
employment, or which relates directly to the business of the Company,
Beacon Operating and its Subsidiaries or their actual or anticipated
research and development, or which was conceived or created using the
Company's Beacon Operating's and its Subsidiaries' materials or
facilities, whether during or after working hours.
"NEW ENGLAND REGION" means Connecticut, Delaware, Maine, Maryland,
Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode
Island and Vermont.
-3-
"1933 ACT" means the Securities Act of 1933, as amended from time to
time, or any successor thereto.
"1934 ACT" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor thereto.
"OPEN MARKET TRANSACTION" means any Transfer of Executive Securities in
the open market following a Public Sale.
"OPTIONS" means (i) all warrants, options or other rights to subscribe
for purchase or otherwise acquire Executive Shares and (ii) all or any
securities convertible into or exchangeable for Executive Shares.
"ORIGINAL COST" means $1,000 per Class A Share (such amount to be
equitably adjusted, upward or downward, for stock splits, stock
dividends and recapitalizations), provided that the Original Cost of
Executive Shares purchased pursuant to the exercise of Options shall be
the exercise price, if any, actually paid therefor, and if such Options
have not been exercised, the Original Cost of such Options shall be the
greater of $0.01 per Option or the cash price actually paid therefor.
"OUTSTANDING INDEBTEDNESS" means, as of the date of determination, the
outstanding principal balance of, and all accrued and unpaid interest
under, the applicable Subordinated Note(s).
"PERSON" means an individual, a partnership, a limited partnership, a
corporation, a limited liability company or partnership, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or the United States of America or any
other nation, any state or other political subdivision thereof, or any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of government.
"PUBLIC OFFERING" means a public offering of Shares (or the securities
of any successor to the Company) or any shares of capital stock of a
subsidiary pursuant to an effective registration statement under the
1933 Act.
"PUBLIC SALE" means any sale pursuant to a Public Offering or any sale
to the public pursuant to Rule 144 (as defined below).
"RESIGNATION" means voluntary termination by Executive of his
employment with Beacon Operating and the Subsidiaries.
"RETIREMENT" means the voluntary termination of Executive's employment
with Beacon Operating and its Subsidiaries when Executive is at least
65 years old, which termination is in accordance with Beacon
Operating's and the Subsidiaries' established retirement policies.
"SALE OF THE COMPANY" means the sale (in a single transaction or in a
series of related transactions) of the Company to any Independent Third
Party or group of Independent Third Parties pursuant to which such
party or parties acquire (i) Shares (whether by merger, consolidation,
sale or transfer of shares, reorganization, recapitalization or
otherwise) possessing the voting power under normal circumstances to
elect a majority of the members of the Board of Directors of the
Company or (ii) all or substantially all of the assets of the Company
and its Subsidiaries, determined on a consolidated basis.
-4-
"SHARES" means Class A Shares or Class B Shares (now or hereafter
issued), and any shares issued in respect of such shares pursuant to a
dividend, stock split reclassification or like action, or pursuant to
an exchange (including a merger).
"SUBORDINATED NOTES" means the 12% Junior Subordinated Promissory Notes
issued from time to time by the Company or assumed by the Company from
time to time.
"SUBSIDIARY" means any Person of which the Company or Beacon Operating
owns securities having a majority of the voting power in electing the
board of directors directly or through one or more Subsidiaries (or, in
the case of a partnership, limited liability company or other similar
entity, securities conveying, directly or indirectly, a majority of the
economic interests in such partnership or entity). In the case of the
Company, the term Subsidiary or Subsidiaries shall include Beacon
Operating.
"TRANSFER" shall mean any transfer, sale, assignment, pledge,
encumbrance or other disposition (irrespective of whether any of the
foregoing are effected, with or without consideration, voluntarily or
involuntarily, by operation of law or otherwise, or whether INTER VIVOS
or upon death).
(b) OTHER DEFINITIONS. Other defined terms are contained in the
body of this Agreement.
2. Purchase and Sale of Executive Shares and Subordinated Notes.
(a) CLOSING. Executive hereby purchases from the Company, and the
Company hereby sells to Executive, (i) 45 Class A Shares at a price of
$1,000 per Class A Share, (ii) a Subordinated Note in the original
principal amount of $135,000 at face value (the aggregate purchase
price of $180,000 for the Class A Shares and Subordinated Notes being
referred to herein as the "ORIGINAL SUBSCRIPTION PRICE"). The Company
hereby acknowledges payment by Executive of the Original Subscription
Price by delivery of immediately available funds in the aggregate
amount of the Original Subscription Price.
(b) EXECUTIVE REPRESENTATIONS AND WARRANTIES. In connection with
the purchase and sale of Executive Securities pursuant to this
Agreement, Executive represents and warrants to the Company, and agrees
and acknowledges that:
(i) The Executive Securities to be acquired by
Executive pursuant to this Agreement are and shall be acquired
for Executive's own account, for investment purposes only and
not with a present view to, or intention of, distribution or
resale thereof in violation of the 1933 Act or any state
securities laws and that, irrespective of any other provisions
of this Agreement, the Executive Securities shall be
Transferred only in compliance with all applicable federal and
state securities laws, including, without limitation, the 1933
Act.
(ii) The Executive Securities are not registered
under the 1933 Act and must be held by Executive until such
Executive Securities are registered under the 1933 Act or an
exemption from such registration is available; the Company
shall have no obligation to take any actions that may be
necessary to make available any exemption from registration
under the 1933 Act; and the Company shall place "stop
transfer" restrictions on the party responsible for recording
Transfers of Executive Securities in violation of the
foregoing provisions of this clause (ii).
-5-
(iii) Executive is familiar with Rule 144 ("RULE
144") adopted by the Securities and Exchange Commission
("SEC") which establishes guidelines governing, among other
things, the resale of "restricted securities" (securities,
such as Executive Securities, which are acquired from the
issuer of such securities in a transaction not involving any
Public Offering).
(iv) Rule 144 is not presently available for
Transfers of the Executive Securities because, among other
things, the Company is not presently required to file the
reports required to be filed by Section 15(d) of the 1934 Act,
and does not have a class of securities registered pursuant to
Section 12 of that statute; and, even if the Company were
required to file reports under the 1934 Act, and had filed all
reports required to be filed, reliance on Rule 144 to Transfer
securities is subject to other restrictions and limitations,
as set forth in Rule 144.
(v) In connection with any Transfer of Executive
Securities under Rule 144 or pursuant to any other exemption,
Executive may, at the option of the Company, be required to
deliver to the Company an opinion from counsel for Executive
(reasonably acceptable to the Company) and/or receive an
opinion from counsel for the Company, to the effect that all
applicable federal and state securities law requirements have
been met.
(vi) Executive has been an executive employee of
Beacon Sales Company, Incorporated, a Massachusetts
corporation and is an executive employee of Beacon Operating.
(vii) Executive is able to evaluate the risks and
merits of the investment in the Executive Securities and of
making an informed investment decision with respect thereto.
(viii) Executive is able to bear the economic risk
of Executive's investment in the Executive Securities for an
indefinite period of time because the Executive Securities
have not been registered under the 1933 Act and, therefore,
cannot be sold unless subsequently registered under the 1933
Act or unless an exemption from such registration is
available.
(ix) Executive has reviewed the financial and
other information with respect to the Company, Beacon
Operating and the Subsidiaries contained in the materials
attached hereto as Exhibit A, and all such other documents and
information made available to, or requested by, Executive, and
Executive has had the opportunity to ask questions and receive
answers concerning all such materials and the terms and
conditions of the offering of the Executive Securities.
Executive has had full access to such other information and
materials concerning the Company as Executive has requested.
The Company has answered all inquiries that Executive has made
to the Company relating to the Company and the sale of the
Executive Securities hereunder.
(x) The execution, delivery and performance of
this Agreement by Executive does not and shall not conflict
with, violate or cause a breach of any agreement, contract or
instrument to which Executive is a party or any judgment,
order or decree to which Executive is subject.
(xi) The Executive has not granted any proxy or
become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of
this Agreement.
-6-
(xii) Executive has the legal capacity to execute
and perform this Agreement. This Agreement has been duly
executed and delivered by Executive, and constitutes a valid
and legally binding obligation of Executive, enforceable
against him in accordance with its terms (except to the extent
that enforcement may be affected by laws relating to
bankruptcy, reorganization, insolvency and creditors' rights
and by the availability of injunctive relief, specific
performance and other equitable remedies). Executive's spouse
has the legal capacity to execute and deliver the Spousal
Consent attached to this Agreement (the "SPOUSAL CONSENT") and
to deliver the Spousal Consent and such consent has been
validly executed and delivered.
(c) COMPANY REPRESENTATIONS AND WARRANTIES. In connection with the
purchase and sale of Executive Securities pursuant to this Agreement,
the Company represents and warrants to Executive that:
(i) The Company is duly organized, validly
existing and in good standing under the laws of the State of
Delaware. The Company has full power and authority to enter
into and perform its obligations under this Agreement. The
execution and delivery by the Company of this Agreement and
the performance by the Company of its obligations hereunder
have been duly authorized and approved by all requisite
action. This Agreement has been duly executed and delivered by
a duly authorized officer of the Company.
(ii) The execution, delivery and performance of
this Agreement by the Company does not and shall not conflict
with, violate or cause a breach of any of the terms or
provisions of the Certificate of Incorporation of the Company
or its by-laws, or of any agreement, contract or instrument to
which the Company is a party, or any judgment, order or decree
to which the Company is subject.
(iii) On the date of this Agreement and after
giving effect to the transactions contemplated by (1) this
Agreement, (2) other Executive Securities Agreements with
terms similar hereto (together with this Agreement, the
"EXECUTIVE SECURITIES AGREEMENTS"), (3) the Chief Executive
Securities Agreement dated of even date herewith among the
Company, CHS and Xxxxxx X. Xxxxx, (4) the Investor Securities
Agreement dated of even date herewith among the Company, CHS,
and certain investors and (5) certain other agreements with
NationsCredit Commercial Corporation (the "Agent"), (A) the
number of all Class A Shares issued and outstanding shall be
2,000, (B) the number of all Class B Shares issued and
outstanding shall be zero, (C) the face value of all
Subordinated Notes issued and outstanding shall be $6,000,000
and (D) the Company shall have issued to Agent, the Company's
senior lender, a warrant to purchase 162 shares of Class B
common stock of the Company (representing 7.5% of the
outstanding common stock of the Company). All Shares
heretofore issued and delivered by the Company to any Holder
have been, and all Shares to be issued by the Company to any
Holder pursuant to this Agreement, when issued and delivered,
shall be, duly authorized, validly issued, fully paid and
non-assessable. The Executive Securities issued pursuant to
this Agreement are subject to dilution by future issuances of
securities of the Company including by issuance of common
stock to lenders pursuant to warrants.
(d) ADDITIONAL AGREEMENTS AND UNDERSTANDINGS. As an additional
inducement to the Company to issue Executive Shares to Executive,
Executive acknowledges and agrees that:
-7-
(i) Neither the issuance of Executive Shares to
Executive nor any provision contained herein shall entitle
Executive to remain in the employment of the Company or any of
its Subsidiaries or affect the right of the Company or any
such Subsidiary to terminate Executive's employment at any
time for any reason.
(ii) The Company shall have no duty or obligation
to disclose to Executive, and Executive shall have no right to
be advised of, any material information regarding the Company
and its Subsidiaries at any time prior to, upon or in
connection with the repurchase of Executive Shares upon the
termination of Executive's employment with the Company and its
Subsidiaries or as otherwise provided under this Agreement.
(iii) Shares issued by the Company pursuant to a
stock dividend, stock split, reclassification or like action,
or pursuant to the exercise of a right granted by the Company
to all holders of Shares to purchase Shares on a proportionate
basis, shall be Transferred only, and for all purposes be
treated, in the same manner as, and be subject to the same
options with respect to, the Shares which were split or
reclassified or with respect to which a stock dividend was
paid or rights to purchase Shares on a proportionate basis
were granted. In the event of a merger of the Company where
this Agreement does not terminate, partnership units,
membership units or shares of common stock (and/or securities
convertible into such units or shares) which are issued in
exchange for Shares shall thereafter be deemed to be Shares
subject to the terms of this Agreement.
(iv) Any Person to whom Executive Securities are
to be Transferred (except pursuant to a Public Offering) shall
execute and deliver, as a condition to such Transfer, whatever
documents are deemed reasonably necessary by the Company, in
consultation with its counsel, to evidence such party's
joinder in, acceptance of, and agreement with, the obligations
with respect to the Executive Securities contained in this
Agreement.
(v) Within thirty (30) days from the date
hereof, Executive shall make an election with the Internal
Revenue Service under Section 83(b) of the Internal Revenue
Code and the regulations promulgated thereunder in form and
substance reasonably satisfactory to the Company.
(vi) Except with the prior written consent of
CHS, Executive shall not grant any proxy or become party to
any voting trust or other agreement with respect to the
Executive Securities or any interest therein.
(vii) Pursuant to a management agreement of even
date herewith, Beacon Operating and its Subsidiaries will pay
to an Affiliate of CHS management fees in the amount of
$300,000 per annum (payable monthly) plus reasonable out of
pocket expenses.
3. Repurchase Option.
(a) GENERAL. Upon the termination of Executive's employment with
Beacon Operating for any reason ("TERMINATION"), all Executive
Securities issued to Executive, whether held by Executive or one or
more of Executive's transferees (collectively, the "AVAILABLE
SECURITIES"), shall be subject to repurchase by CHS and the Company
pursuant to the terms and conditions set forth in this Section 3 (the
"REPURCHASE OPTION").
-8-
(b) COMPANY OPTION. The Board, acting in good faith, may elect (in
its sole discretion) to cause the Company to purchase all or any
portion of the Available Securities pursuant to the Repurchase Option
by delivering written notice (the "REPURCHASE NOTICE") to CHS and
Executive within thirty (30) days following Termination. The Repurchase
Notice shall set forth the number and amount of Available Securities to
be acquired from each Holder, the aggregate consideration to be paid
for such securities and the time and place for the closing of such
purchase.
(c) CHS OPTION. If for any reason the Company does not elect to
purchase all of the Available Securities pursuant to the Repurchase
Option, CHS may elect (in its sole discretion) to exercise the
Repurchase Option for all (but not less than all) of the Available
Securities which the Company has not elected to purchase (the
"SECURITIES AVAILABLE FOR CHS"). Within sixty (60) days following
Termination, CHS may elect to purchase all (but not less than all) of
the Securities Available for CHS by giving written notice to Executive
as to the number and amount of securities being purchased by CHS from
each Holder (the "SUPPLEMENTAL REPURCHASE NOTICE").
(d) REPURCHASE PRICE. Upon exercise of the Repurchase Option, the
purchase price for the Available Securities (the "REPURCHASE PRICE")
shall be as follows:
(i) if the Repurchase Option is triggered by
termination of Executive's employment by reason of Executive's
death, Executive's Disability or termination of Executive's
employment by Beacon Operating without Cause, the Repurchase
Price shall be the Fair Market Value of the Available
Securities as of the date of Termination;
(ii) subject to SUBSECTION 3(d)(iii) below, if
the Repurchase Option is triggered by termination of
Executive's employment by Beacon Operating for Cause or
Resignation of the Executive (other than upon Retirement), the
Repurchase Price of the Available Securities shall be the
lesser of (A) the Original Cost (in the case of Executive
Shares and Options) and the Outstanding Indebtedness (in the
case of Subordinated Notes constituting Available Securities)
and (B) the Fair Market Value of the Available Securities; and
(iii) in the event of Resignation of Executive
following the fourth anniversary of the date hereof (and
provided Executive has been continuously employed by Beacon
Operating and the Subsidiaries through such date of
Resignation) (such Resignation a "VESTED RESIGNATION"), the
Repurchase Price of the Available Securities shall be (i) the
Fair Market Value for the Vested Executive Securities (as
defined below) as of the date of Termination, and (ii) the
purchase price determined pursuant to subsection 3(d)(ii) for
all Available Securities which are not Vested Executive
Securities. As used herein, the term "Vested Executive
Securities" shall mean the percentage of Executive Securities
held by the Executive vested at the time of his Resignation,
determined as follows:
If the Executive's Resignation the Percentage
Date is on or after the: and before the: of Vesting is:
------------------------------ --------------- --------------
Fourth Anniversary Fifth Anniversary 33.3%
Fifth Anniversary Sixth Anniversary 66.6%
Sixth Anniversary any time thereafter 100%
The purchase price for the Available Securities under this Section 3(d) shall be
computed as of the date of Termination, and shall be determined by the Board
within sixty (60) days after Termination and such determination shall be final
and binding, absent fraud and manifest error. In connection with the
-9-
determination of the purchase price of Available Securities, the Board shall
prepare and present to Executive a reasonably detailed written statement
reflecting the calculation of the Repurchase Price including the methodology
used to calculate such Repurchase Price.
(e) CLOSING. If and only if the Company and CHS collectively have
elected to purchase all (but not less than all) of the Available
Securities, the purchase of Available Securities pursuant to this
Section 3 shall be consummated at the Company's principal office at
10:00 a.m., on the thirtieth (30th) day next following the final
determination of the Repurchase Price as provided in Section 3(d) or on
such earlier day as designated by CHS or the Company, as the case may
be, in its sole discretion, upon not less than ten (10) days prior
notice to Executive. If such date is a Saturday, Sunday or legal
holiday, the closing shall occur at the same time and place on the next
succeeding business day. Subject to Section 5 hereof, at the option of
the Company and/or CHS, the Person exercising the Repurchase Option
shall pay for the Available Securities to be purchased pursuant to the
Repurchase Option by (i) delivery of a cashier's check or wire transfer
of immediately available funds, (ii) delivery of a non-negotiable
junior subordinated promissory note (the "REPURCHASE NOTE") in the form
of Exhibit B attached hereto, the principal amount of which shall bear
interest at the rate of eight percent (8%) per annum, with interest and
a pro rata portion of principal payable quarterly over a three-year
period following delivery of the Repurchase Note, and with such
additional terms (including subordination provisions) as shall be
required by the senior lenders to the Company and/or its Subsidiaries
and/or (iii) by set off against any and all obligations due and owing
the Company and/or its Subsidiaries from the Executive. Notwithstanding
the terms described in the immediately preceding sentence, in the event
of exercise of a Repurchase Option upon a Vested Resignation, the
Repurchase Note issued in connection therewith (the "Resignation
Repurchase Note") shall provide for payment of the entire principal
amount thereof on the earlier of (i) the tenth (10th) anniversary of
the date of issuance of the Note, or (ii) a Sale of the Company.
Interest under the Resignation Repurchase Note shall be payable
annually on each anniversary date thereof. The purchasers of Executive
Securities to be purchased pursuant to the Repurchase Option hereunder
shall be entitled to receive customary representations and warranties
as to ownership, title, authority to sell and the like from the Holders
regarding such sale and to receive such other evidence, including
applicable inheritance and estate tax waivers, as may reasonably be
necessary to effect the purchase of the Executive Securities to be
purchased pursuant to the Repurchase Option. Notwithstanding anything
to the contrary herein contained, if the Company and CHS collectively
have elected to purchase less than all of the Available Securities,
then the Company and CHS shall be deemed to have elected not to
purchase any of the Available Securities pursuant to the Repurchase
Option.
(g) FAILURE TO DELIVER SHARES. If Executive or any other Holder of
Executive Securities whose Executive Securities are to be purchased
pursuant to Section 3, 4 or 6 fails to deliver them on the scheduled
closing date of such purchase, the Company or CHS (as the case may be)
may elect to deposit the consideration representing the purchase price
of the Executive Securities with the Company's attorney (or any other
third party, including a bank or a financial institution), as escrowee.
In the event of the foregoing election, the Executive Securities shall
be deemed for all purposes (including the right to vote and receive
payment for dividends) to have been Transferred to the purchasers
thereof and the Company shall issue new certificates representing the
Executive Securities to the Company, CHS or their respective designees,
as the case may be, and the certificates or instruments registered in
the name of the Person obligated to sell such Executive Securities
shall be deemed to have been canceled and to represent solely a right
to receive payment of the purchase price, without interest, from the
escrow funds. If, prior to the third (3rd) anniversary of the scheduled
closing date for the purchase pursuant to Sections 3, 4 or 6, the
proceeds of sale have not been claimed by the Executive or other seller
of the Executive Securities, the escrow deposit (and any interest
earned thereon) shall be returned to the Person
-10-
originally depositing the same, and the transferors whose Executive
Securities were so purchased shall look solely to the purchasers
thereof for payment of the purchase price. The escrowee shall not be
liable for any action or inaction taken by it in good faith.
(h) TERMINATION OF REPURCHASE OPTION. The rights of the Company
and/or CHS to purchase Executive Securities pursuant to Section 3 shall
terminate upon the earliest to occur of (i) the consummation of a Sale
of the Company (ii) the consummation of a Public Offering, and (iii)
termination of Executive's employment upon Retirement.
4. PUT.
(a) GENERALLY. Upon the occurrence of a termination of Executive's
employment with Beacon Operating as a result of Executive's death or
Disability or as a result of termination by Beacon Operating of
Executive's employment without Cause (other than a termination which
otherwise does not constitute a breach of Executive's employment
arrangements) (a "PUT EVENT"), Executive may require the Company to
repurchase all (but not less than all) of the Executive Securities
owned by the Executive as of the date of such termination, pursuant to
the terms and conditions in this Section 4 (the "PUT").
(b) PUT NOTICE. Upon the occurrence of a Put Event, Executive (or
his personal representative, if Executive is deceased or incompetent)
may exercise the Put by delivering written notice (the "PUT NOTICE") to
the Company within fifteen (15) days following the occurrence of the
Put Event.
(c) PUT PRICE. Upon the exercise of the Put, the purchase price
for the Executive Securities (the "PUT PRICE") shall be the Fair Market
Value of such securities computed as of the date of the Put Event. The
Board shall calculate the Put Price within thirty (30) days following
delivery of a Put Notice (provided, however, that Fair Market Value
shall be determined in accordance with the definition thereof in
Section 1).
(d) MANNER OF PAYMENT. Subject to Section 5, the Put Price payable
in connection with the exercise of a Put Option shall, at the option of
the Company, be paid on the Put Closing Date (as defined herein) by (i)
delivery of cashier's check or wire transfer of immediately available
funds, (ii) by delivery of a Repurchase Note, and/or (iii) by set off
against any and all obligations due and owing the Company or any of its
Affiliates from the Executive. In the event of exercise of the Put in
case of Executive's death or Disability, the Company will use its best
efforts to pay to Executive (or his personal representative) at the
Closing thereof, as payment of a portion or the full amount (as the
case may be) of the Put Price, an amount equal to the lesser of the
Original Cost and the original principal amount of the Available
Securities or the Fair Market Value of the Available Securities.
(e) CLOSING. The closing of the purchase of Executive Securities
pursuant to the Put (the "PUT CLOSING") shall take place on the date
(the "PUT CLOSING DATE") designated by the Company in a written notice
to Executive, which date shall be not more than thirty (30) days after
final determination of the Put Price as provided in Section 4(c).
(f) TERMINATION OF RIGHT. The right of Executive to require the
Company to repurchase Executive Securities pursuant to this paragraph 4
will terminate upon the earlier of (i) consummation of a Sale of the
Company and (ii) consummation of a Public Offering.
5. Manner of Payment and Restriction on the Company's Right to
Purchase.
-11-
(a) GENERAL RESTRICTION. Notwithstanding anything to the contrary
contained in this Agreement, the Company shall not be obligated to
purchase, pursuant to Section 4 or otherwise, such Executive Securities
as the Company may then be prohibited by law or bona fide contract from
purchasing, including, without limitation, the Delaware General
Corporation Law (the "DELAWARE ACT") and covenants contained in the
Credit Agreement and any other loan agreements or other bona fide
agreements to which the Company or any Subsidiary is then a party. For
the purposes of this Agreement, the Company shall not be obligated to
purchase Executive Securities if any loan or other bona fide agreement
to which any Subsidiary of the Company is a party or is bound would
prohibit the Subsidiaries from paying to the Company dividends or
distributions sufficient to permit the Company to pay the entire
purchase price for such Executive Securities. To the extent such
Executive Securities cannot be repurchased pursuant to applicable
contracts or law, the option contained in Section 4 shall be of no
force and effect and shall be null and void. Notwithstanding the
immediately preceding sentence, in the event of a Termination of
Executive's employment by Beacon Operating without Cause, upon written
election of Executive, delivered to the Company within thirty (30) days
following such Termination, the period for exercise of the Put Option
shall be tolled and shall be exercisable only on the first date (the
"Exercise Date") on which payments under, and incurrence of
indebtedness (and issuance of a Repurchase Note) pursuant to, the Put
Option are permitted under the terms of the Credit Agreement and such
payments and indebtedness are sufficient to satisfy the Put Price in
full. If the Put Option is exercised pursuant to the preceding
sentence, the Put Price shall be paid pursuant to subsection 4(d), but
subject to subsection 5(b). If tolled, the option in Section 4 shall be
exercisable as if the Executive had been terminated without Cause on
the Exercise Date and shall be exercisable in accordance with Section
4.
(b) PAYMENT LIMITATION. Notwithstanding anything to the contrary
contained in this Agreement or in any Repurchase Note delivered
pursuant to the terms hereof, the Company's obligation to make a
payment pursuant to a Repurchase Note delivered pursuant to Section
3(e) or 4(d) of this Agreement shall be suspended to the extent and for
so long as (x) the making of such payment, together with the making of
all other payments to be made during such fiscal year on account of the
Company's purchases of Executive Securities pursuant to this Agreement
and securities purchased pursuant to any other agreements with
shareholders of the Company, would result in a violation of the
Delaware Act or a breach of any covenant contained in any loan or other
bona fide agreement to which the Company or any of its Subsidiaries is
a party, or (y) the Company's Subsidiaries are unable to pay to the
Company dividends or other distributions sufficient to permit the
Company to pay the entire purchase price for such Executive Securities
in cash as a result of applicable law or any covenant contained in any
bona fide agreement to which any of such Subsidiaries are a party. If
any portion of the Company's obligation to Executive or any of
Executive's transferees has been tolled for a period in excess of three
(3) years from the original closing date, Executive (or such
transferee), by written notice delivered to the Company, may elect to
rescind the sale of that portion of the Executive Securities, the
proceeds of sale of which are represented by unpaid notes made by the
Company which are owed to Executive or such transferee. If payments are
suspended pursuant to this Section 5(b), at such time as the Company is
able to resume making payments without violation of the Delaware Act,
applicable law or a covenant in any bona fide agreement to which the
Company or any of its Subsidiaries is a party, the Company shall first
make payments of arrearage owed to the former shareholders on a
proportional (to the amount of arrearage) basis, and shall then make
regularly scheduled payments.
6. RESTRICTIONS ON TRANSFER OF EXECUTIVE SECURITIES. This Section
6 shall apply to any proposed Transfer of Executive Securities. Notwithstanding
anything to the contrary contained herein, a Transfer of Executive Securities
shall not be valid or have any force or effect unless (i) such Transfer is
-12-
made in accordance with the provisions of this Agreement, (ii) such Transfer
would not result in a violation of any applicable federal or state securities
law, and (iii) the intended transferee of such Transfer is not engaged in a
Competitive Business, has not been engaged in a Competitive Business in the
immediately preceding two years, and is not developing a Competitive Business.
(a) TRANSFER OF EXECUTIVE SECURITIES. No Holder shall Transfer any
interest in any Executive Securities except pursuant to an Exempt
Transaction or pursuant to this Section 6. No Holder shall consummate
any such Transfer (except pursuant to an Exempt Transaction or pursuant
to Section 6(c)) until sixty-one (61) days following the latest of the
delivery to the Company and CHS of the Offer Notice (as defined below),
unless all rights provided in Section 6(b) have been exercised or
waived, and the parties to the Transfer have been finally determined
pursuant to such exercises or waivers prior to the expiration of such
sixty-one (61) day period (the "ELECTION PERIOD"). Notwithstanding
anything to the contrary herein contained, except pursuant to an Exempt
Transaction, neither Executive nor any of his Permitted Transferees
shall Transfer any interest in Executive Securities (i) unless
Executive or such Permitted Transferee(s) has received a bona fide
written offer to purchase such Executive Securities, (ii) until one
hundred twenty (120) days following Executive's Termination and (iii)
in any event without the prior written consent of a majority of the
members of the Board (which approval may be withheld for any reason or
no reason).
(b) FIRST REFUSAL RIGHT. If any Holder desires to Transfer any
Executive Securities other than in an Exempt Transaction or a
transaction pursuant to Section 6(c), such Holder (the "TRANSFERRING
HOLDER") shall deliver a written notice (the "OFFER NOTICE") to the
Company and CHS. The Offer Notice shall disclose in reasonable detail
the identity of the proposed transferee(s) (including, without
limitation, all parties holding controlling interests in such proposed
transferee), the proposed number, amount and type of Executive
Securities to be transferred and the proposed terms and conditions of
the Transfer and any other material information reasonably requested by
the Board or CHS and shall include a true and correct copy of the
written offer to purchase Executive Securities received by him. The
delivery by the Transferring Holder of the Offer Notice shall create
the following two (2) options:
(i) First, the Board, acting in good faith, may
elect (in its sole discretion) to cause the Company to
purchase all or any portion of the Executive Securities
specified in the Offer Notice at the price and on the terms
specified therein (provided, however, that any promissory note
given by the Company pursuant to the terms of this Section 6
shall be subordinated to indebtedness owed to financial
institutions on terms reasonably acceptable to such financial
institutions and that the Company shall be entitled set off
against the purchase price any and all obligations due and
owing the Company or any of its Affiliates from the Executive)
by delivering written notice of such election to the
Transferring Holder as soon as practical, but in any event
within thirty (30) days following the delivery of the Offer
Notice (the "COMPANY OFFER PERIOD").
(ii) If the Company has not elected to purchase
all of the Executive Securities within the Company Offer
Period, then CHS may elect (in its sole discretion) to
purchase all (but not less than all) of the Executive
Securities not elected to be purchased by the Company at the
price and on the terms specified in the Offer Notice by
delivering written notice of such election to the Transferring
Holder as soon as practical, but in any event within sixty
(60) days following the delivery of the Offer Notice.
If the Company and/or CHS have elected to purchase all (but not less than all)
of the Executive Securities offered by the Transferring Holder, the Transfer of
such Executive Securities to the Company and/or
-13-
CHS, as the case may be, shall be consummated as soon as practical after the
delivery of the election notices, but in any event within thirty (30) days
following the expiration of the Election Period. The purchasers of Executive
Securities offered in the Offer Notice hereunder shall be entitled to receive
customary representations and warranties as to ownership, title, authority to
sell and the like from the Holder regarding such sale and to receive such other
evidence, including applicable inheritance and estate tax waivers, as may
reasonably be necessary to effect the purchase of the Executive Securities
offered in the Offer Notice. Notwithstanding anything to the contrary herein
contained, if the Company and CHS collectively have elected to purchase less
than all of the Executive Securities offered by the Transferring Holder, then
the Company and CHS shall be deemed to have elected not to purchase any of the
Executive Securities offered by the Transferring Holder pursuant to this Section
6.
(c) TRANSFER SUBSEQUENT TO EXPIRATION OF ELECTION PERIOD. If the
Company and CHS have not collectively elected to purchase all Executive
Securities being offered, such Transferring Holder may, within sixty
(60) days following the expiration of the Election Period and subject
to the provisions of this Section 6 other than Section 6(b), Transfer
such Executive Securities referred to in the Offer Notice to the party
or parties named therein at a price no less than the price specified in
the Offer Notice and on other terms and conditions offered in the Offer
Notice. Executive Securities Transferred pursuant to the previous
sentence shall thereafter continue to be subject to all restrictions on
Transfer and other provisions of this Agreement, including, without
limitation, the provisions of this Section 6 with respect to further
Transfers of the Executive Securities and a transferee, as a condition
of any such Transfer, shall agree in writing to be bound by the
provisions of this Agreement. Any Executive Securities not transferred
within such sixty (60) day period shall be subject to the provisions of
this Section 6 with respect to any subsequent Transfer.
(d) PERMITTED TRANSFERS. Anything contained in this Agreement to
the contrary notwithstanding, Executive Securities may be Transferred
without first complying with the provisions of Section 6 other than as
provided in this paragraph (d): (i) by Executive or a Permitted
Transferee to CHS (it being agreed and understood that CHS shall not be
a Holder as a result of such Transfer of Securities), (ii) by Executive
to any member of such Executive's Family Group, (iii) by a Permitted
Transferee to Executive who Transferred such Executive Securities to
such Permitted Transferee, (iv) to the personal representative of
Executive or a Permitted Transferee who is deceased or adjudicated
incompetent, (v) by the personal representative of Executive or a
Permitted Transferee who is deceased or adjudicated incompetent to any
member of such Executive's or Permitted Transferee's Family Group, (vi)
upon termination of a trust or custodianship which is a Permitted
Transferee of a Holder, by the trustee of such trust or custodian of
such custodianship to the person or persons who, in accordance with the
provisions of such trust or custodianship, are entitled to receive the
Executive Securities held in trust or custody, or (vii) the pledge by
Executive to the Company of the Executive Securities pursuant to a
pledge agreement (collectively, the "PERMITTED TRANSFEREES"); provided
that (A) the restrictions contained in this Section 6 shall continue to
be applicable to the Executive Securities after any such Transfer, and
(B) the Permitted Transferees of such Executive Securities shall have
agreed in writing to be bound by all of the provisions of this
Agreement affecting the Executive Securities so transferred.
(e) CONSIDERATION FOR TRANSFER. Notwithstanding anything to the
contrary herein contained, except as may be required by Section 5
hereof, where a Transfer is made for consideration, in no event shall
any such Transfer by Executive of Executive Securities be made for any
consideration other than (i) United States dollars payable in full upon
consummation of such Transfer and/or (ii) a promissory note with all
amounts owed thereunder payable in United States dollars.
-14-
(f) DURATION OF SECTION 6. Notwithstanding anything to the
contrary contained in this Agreement, the provisions of this Section 6
shall terminate upon the consummation of a Public Offering or Sale of
the Company.
7. TRANSFER OF SHARES IN OPEN MARKET TRANSACTIONS. This Section 7
shall apply to any proposed Transfer of Shares by any Holder in an Open Market
Transaction during all such times as CHS owns in the aggregate greater than
thirty percent (30%) of the Shares. During each calendar quarter during which
sales of Shares are permitted to be made in accordance with agreements
("STANDSTILL AGREEMENTS") with the underwriters engaged in connection with a
Public Sale, and during each calendar quarter following the termination of the
Standstill Agreements, any such Holder that desires to Transfer Shares may sell
such number of Shares as equals his pro rata share of one percent (1.0%) of the
then outstanding Shares (or such lesser percentage or number as may be permitted
by the Standstill Agreements). Fifteen (15) business days prior to the beginning
of each calendar quarter during which sales of Shares are permitted under the
Standstill Agreements, and fifteen (15) days prior to each calendar quarter
after the termination of the Standstill Agreements, each such Holder that
desires to Transfer Shares shall deliver a written notice to the Company setting
forth the number of Shares that such Holder desires to sell (up to such Holder's
pro rata share of the aggregate quarterly maximum specified above) in Open
Market Transactions during the succeeding quarter. If such Holder that is
Transferring does not elect to sell his pro rata share, the Company may allocate
the right to sell such unused pro rata share to any stockholder of the Company.
Within three (3) business days following the beginning of each applicable
quarter, the Company shall deliver a written notice to such Holder that is
Transferring setting forth the amount of Shares permitted to be sold (as
determined in accordance with this Section 7) by such Holder during such
applicable calendar quarter in Open Market Transactions. The Company may, in its
discretion, from time to time increase the aggregate amount of Shares which may
be sold in any calendar quarter in Open Market Transactions. Any Shares sold in
an Open Market Transaction shall cease to be bound by the terms and provisions
of this Agreement.
8. Sale of the Company.
(a) If the holder(s) of a majority of the Shares then outstanding
and (if necessary under applicable law) the Board approve a Sale of the
Company (an "APPROVED SALE") (and if the Sale of the Company is to an
entity that is Controlled by CHS, the consideration for such Sale of
the Company is fair to the Company and the holders of Shares as
determined pursuant to the same mechanism used to determine Fair Market
Value under Section 1), each Holder shall consent to and raise no
objections against the Approved Sale, and if the Approved Sale is
structured as a sale of Shares, each Holder shall, if requested by the
holder(s) of a majority of the Shares then outstanding, sell (or
otherwise Transfer) that percentage of his Executive Securities, on
terms and conditions approved by the Board (if necessary under
applicable law) and the holder(s) of a majority of the Shares then
outstanding, as shall equal the percentage of Shares and other
securities owned by CHS that are to be included in such transaction.
Each Holder shall take all actions reasonably necessary or reasonably
desirable (as determined by the holder(s) of a majority of the Shares
then outstanding) in connection with the consummation of the Approved
Sale. Without limiting the foregoing, (i) if the Approved Sale is
structured as a merger, consolidation, joint venture or similar
transaction, each Holder shall vote in favor of such transaction and
waive any dissenters' rights, appraisal rights or similar rights in
connection with such merger or consolidation, and (ii) if the Approved
Sale is structured as a sale or exchange of Shares, each Holder shall
agree to sell or exchange all of the Shares and Options held by such
Holder on the terms and conditions approved by the Board and the
holders of a majority of the Shares then outstanding. The Company shall
use best efforts to notify Executive in writing not less than thirty
(30) days prior to the proposed consummation of an Approved Sale (or,
Participation Sale as described in Section 8(b) below); PROVIDED that
such Executive agrees that he or she will not,
-15-
directly or indirectly (without the prior written consent of the
Company), disclose to any other Person (other than to such Executive's
legal counsel in confidence, as otherwise necessary to protect such
Executive's rights under this Agreement or as otherwise required by
law) any information related to such potential Sale of the Company.
(b) If CHS proposes to sell to a purchaser or related group of
purchasers such number of Shares as equals or exceeds 50% of the then
outstanding Shares determined on a Fully-Diluted Basis (whether in one
transaction or a series of transactions) (a "PARTICIPATION SALE"),
Executive may elect to participate in the contemplated transaction by
delivering written notice to the Company and CHS within ten (10) days
following the receipt by Executive of notice of such transaction.
Executive shall be entitled to sell, at the same price and on the same
terms as CHS, a number of Shares equal to the product of (1) the number
of Shares owned by Executive on a Fully-Diluted Basis multiplied by (2)
the quotient of (x) the number of Shares to be sold by CHS in such
transaction divided by (y) the aggregate number of Shares held by CHS
at such time, on a Fully-Diluted Basis. Notwithstanding anything to the
contrary herein contained, this Section 8(b) shall not apply to (x) any
sale to any officer, director, employee, agent, or lender to the
Company, Beacon Operating or any of its Subsidiaries, or (y) any sale
or other Transfer to any successor CHS approved fund or to any
affiliate of CHS.
(c) If a Holder is required or elects to participate in an
Approved Sale or a Participation Sale pursuant to Subsection (a) or (b)
above: (i) upon the consummation of the Approved Sale or the
Participation Sale, as the case may be, all of the Holders of Shares
similarly situated shall receive the same form and amount of
consideration per Share, or if any Holders are given an option as to
the form and amount of consideration to be received, all such Holders
shall be given the same option; (ii) upon the consummation of the
Approved Sale or the Participation Sale, as the case may be, all of the
holders of Subordinated Notes similarly situated shall receive the same
form and amount of consideration in relation to the face amount of
Subordinated Notes held by such holders, or if any such holders are
given an option as to the form and amount of consideration to be
received, all holders shall be given the same option; and (iii) all
Holders of then currently exercisable Options shall be given an
opportunity to either (A) exercise such rights prior to the
consummation of the Approved Sale or the Participation Sale, as the
case may be, and participate in such sale as Holders, or (B) upon the
consummation of the Approved Sale or the Participation Sale, as the
case may be, receive in exchange for such rights consideration equal to
the amount determined by multiplying (1) the same amount of
consideration per Share received by the Holders in connection with the
Approved Sale or the Participation Sale, as the case may be, less the
exercise price per share of such rights to acquire Shares, by (2) the
number of Shares represented by such rights. Without limiting the
foregoing, any Holder participating in a transaction pursuant to this
Section 8 shall be required to make such representations, warranties
and covenants, and grant such indemnification, as may be required by
the purchaser of the Shares and which have been made by CHS or the
holders of a majority of the outstanding Shares, as the case may be.
(d) If the Board or the holders of a majority of the outstanding
Shares of the Company enter into any negotiation or transaction for
which Rule 506 (or any similar rule then in effect) promulgated by the
SEC under the 1933 Act may be available with respect to such
negotiation or transaction (including a merger, consolidation or other
reorganization), each Holder shall, acting together with other Holders,
at the request of the Company, appoint a purchaser representative (as
such term is defined in Rule 501 under the 0000 Xxx) reasonably
acceptable to the Company. If Executive appoints a purchaser
representative designated by the Company, the Company shall pay the
fees of such purchaser representative, but if Executive declines to
appoint the purchaser representative designated by the Company,
Executive shall appoint another purchaser
-16-
representative (reasonably acceptable to the Company), and Executive
shall be responsible for the fees of the purchaser representative so
appointed.
(e) Each Holder shall bear such Holder's pro-rata share (based
upon the number of Shares sold on a Fully-Diluted Basis) of the costs
of any sale of Executive Securities pursuant to an Approved Sale or a
Participation Sale to the extent such costs are not otherwise paid by
the Company or the acquiring party; provided, however, that all Holders
are treated on an equal basis. Costs incurred by a Holder on such
Holder's own behalf shall not be considered costs of the transaction
hereunder.
(f) Notwithstanding anything to the contrary contained in this
Agreement, the provisions of Section 8 shall terminate upon the
consummation of a Sale of the Company or a Public Offering.
9. Limited Preemptive Rights.
(a) Except for the issuance of Shares or Options (A) in connection
with the acquisition of another Person's's business by the Company or
any of its Subsidiaries or Affiliates (whether by acquisition of stock
or assets, or by merger, consolidation or other similar transaction),
the acquisition of any stock or assets of any Person or the formation
of a joint venture, (B) pursuant to a Public Offering, (C) to current
or future officers, employees, directors, agents or consultants of the
Company or its Subsidiaries, to Affiliates of the Company (or any of
their respective officers, directors, employees or agents) or to
holders of the existing securities of the Company, or (D) to the
Company's or any Subsidiary's lenders in connection with the
incurrence, renewal or maintenance of indebtedness (including funded
indebtedness), if the Company authorizes the issuance and sale of any
Shares (other than as a dividend on the outstanding Shares) or any
Options (pursuant to the exercise of warrants or otherwise) the Company
shall first offer to sell to Executive a portion of such Shares or
Options equal to the percentage determined by dividing (1) the number
of Shares held by Executive immediately prior to the proposed issuance
of such securities, on a Fully-Diluted Basis, by (2) the aggregate
number of Shares outstanding at such time, on a Fully-Diluted Basis.
Executive, if he is exercising his pre-emptive rights pursuant to this
Section 9, shall, as a condition to such exercise, also be required to
purchase the same proportionate amount of any other securities that the
purchasers of such Shares or Options purchase in connection with the
issuance of the securities subject to the preemptive rights.
Notwithstanding anything in this Section 9 to the contrary, if
preemptive rights are exercised pursuant to this Section and pursuant
to the preemptive rights granted under the
Executive Securities
Agreements and the Chief
Executive Securities Agreements for an
aggregate number of Shares or Options which is greater than 100% of the
Shares or Options to be issued and sold by the Company, then the number
of Shares that each executive, including without limitation the
Executive, shall be entitled to purchase pursuant to such agreements
shall be reduced, on a pro rata basis among all such executives
exercising preemptive rights under such agreements, to the extent
necessary such that the number of Shares and Options purchased pursuant
to the preemptive rights exercised under such agreements equal the
number of Shares and Options to be issued and sold by the Company.
(b) Executive shall exercise Executive's pre-emptive rights
hereunder within fifteen (15) days following the receipt of written
notice from the Company describing in reasonable detail the purchase
price, the payment terms for the Shares or Options, the period in which
the pre-emptive right hereunder is to be exercised, and Executive's
percentage allotment. The Executive exercising the Executive's
pre-emptive right shall execute all documentation, and take all
actions, as may be reasonably requested by the Company in connection
therewith.
-17-
(c) Upon the expiration of the offering period described above,
the Company shall be entitled to sell such Shares or Options which
Executive has not elected to purchase during the sixty (60) day period
following such expiration, on terms and conditions no more favorable to
the purchasers thereof than those offered to Executive. Any Shares or
Options offered or sold by the Company following such one hundred
eighty (180) day period shall be reoffered to Executive pursuant to the
terms of this Section 9.
(d) The rights of the Executive under this Section 9 shall
terminate upon the earlier of (i) consummation of a Sale of the
Company, (ii) the consummation of a Public Offering, or (iii)
termination of Executive's employment with the Company or any of its
Subsidiaries.
10. Additional Restrictions on Transfer.
(a) LEGEND. All certificates evidencing Executive Shares which are
subject to this Agreement shall bear the following legend:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SHARES REPRESENTED HEREBY ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN
AN
EXECUTIVE SECURITIES AGREEMENT BETWEEN BEACON HOLDING
CORPORATION ("THE COMPANY") AND THE ORIGINAL HOLDER HEREOF
DATED AS OF AUGUST 21, 1997 AND THE COMPANY RESERVES THE
RIGHT TO REFUSE THE TRANSFER OF THIS SECURITY UNTIL THE
CONDITIONS THEREIN HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS
WITHOUT CHARGE."
If Executive Shares remain restricted following a Public Offering and the above
legend thereby becomes inappropriate in whole or in part, a new, appropriate
legend shall be set forth on such certificates.
(b) OPINION OF COUNSEL. Executive may not Transfer any Executive
Shares without first delivering to the Company, if reasonably requested
by the Company, an opinion of counsel (reasonably acceptable in form
and substance to the Company) that neither registration nor
qualification under the 1933 Act and applicable state securities laws
is required in connection with such Transfer.
11. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by confirmed facsimile
(provided, however, that notices delivered by facsimile shall only be effective
if such notice is also delivered by hand, or mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
(charges prepaid), on or before two (2) business days after its delivery by
facsimile) or by reputable overnight courier service (charges prepaid) to the
recipient at the address indicated below:
-18-
TO THE COMPANY:
Beacon Holding Corporation
c/o Code, Xxxxxxxx & Xxxxxxx III, L.P.
00 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx and Xxxxx X. Xxxxxx
WITH A COPY (WHICH SHALL NOT CONSTITUTE
NOTICE TO THE COMPANY) TO:
Altheimer & Xxxx
00 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: S. Xxxxxxx Xxxx, Esq. and Xxxxx X. Xxxxxx, Esq.
TO EXECUTIVE:
Xxxxx Xxxxx
00 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
WITH A COPY (WHICH SHALL NOT CONSTITUTE
NOTICE TO THE EXECUTIVE) TO:
Xxxxxxxxx, Xxxxxx & Xxxxxxx, P.C.
Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Esq. and Xxxxxxxx Xxxxxxxxx, Esq.
TO CHS:
Code, Xxxxxxxx & Xxxxxxx III, L.P.
00 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxx and Xxxxx X. Xxxxxx
WITH A COPY (WHICH SHALL NOT CONSTITUTE
NOTICE TO CHS) TO:
Altheimer & Xxxx
00 Xxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: S. Xxxxxxx Xxxx, Esq. and Xxxxx X. Xxxxxx, Esq.
and/or such other address and/or to the attention of such other person as the
recipient party shall have designated by notice given in accordance with this
Section 11. Any notice under this Agreement shall be deemed to have been given,
(a) if delivered in person or sent by confirmed facsimile or overnight courier,
-19-
one business (1) day following delivery to recipient, facsimile transmission or
delivery to the courier (as the case may be), or (b) if mailed, three (3)
business days following deposit in the U.S. mail.
12. RESTRICTIVE COVENANTS. In the event of termination of
Executive's employment with Beacon Operating ("Termination") as a result of
Resignation or termination for Cause, Executive shall not, for a period of six
(6) months from the date of termination, engage or participate (whether as
employee, shareholder, officer, director, partner, member, consultant, advisor,
principal or otherwise) in any Competitive Business (as defined herein). As used
herein, Competitive Business means any Person which engages in the wholesale
distribution of products similar to those sold by Beacon Operating at the time
of termination of such Executive's employment in the states in the New England
Region in which Beacon Operating or the Subsidiaries are then conducting
business. In addition, for a period of six months following Termination,
Executive shall not disclose or use any confidential, proprietary or trade
secret information of Beacon Operating ("Confidential Information"). Such
information includes information about Beacon Operating's products, including
specifications, materials, costs and designs; information concerning Beacon
Operating's management, financial condition, financial operation, purchasing
activities, sales activities, marketing activities and business plans;
information concerning Beacon Operating's actual or potential customers,
including their identities, the quantity of products purchased from Beacon
Operating and the prices paid; and all other types and categories of information
which are generally understood by employees in the roofing products industry to
be trade secret information. In addition, for a period of six months following
Termination, Executive shall not hire or offer to hire any of Beacon Operating's
officers, employees or agents or entice them to discontinue their relationship
with Beacon Operating, or divert or attempt to divert from Beacon Operating any
business by influencing or attempting to influence any customer or supplier of
Beacon Operating. Executive agrees that these obligations may be enforced by
equitable remedies, including injunction.
13. Amendment and Termination.
(a) This Agreement shall be terminated: (i) upon the mutual
agreement of the Company (with the approval of the Board) CHS and
holders of at least seventy percent of the Executive Securities or (ii)
upon the consummation of a Sale of the Company (other than as a result
of a sale in a Public Offering) provided, however, that the
representations and warranties of the parties hereto contained in
Section 2(b) and 2(c) of this Agreement shall survive termination of
this Agreement, and the obligations of Executive set forth in Section
12 of this Agreement, shall survive termination for the periods
expressly set forth therein. The rights and obligations of the parties
shall survive termination of the Agreement to the extent that any
performance is required after such termination.
(b) This Agreement may be amended by the written consent of CHS
and Executive; provided that in no event shall any such amendment
materially and adversely affect the rights of any one Holder without
the prior written consent of such Holder unless such amendment
materially and adversely affects the rights of all Holders.
14. General Provisions.
(a) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provision or any other
jurisdiction, and this Agreement shall be reformed, construed and
enforced in such jurisdiction so as to best give effect to the intent
of the parties under this Agreement.
-20-
(b) COMPLETE AGREEMENT. This Agreement and the Subordinated Note
executed concurrently herewith, together embody the complete agreement
and understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in
any way.
(c) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.
(d) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be
enforceable by Executive, the Company, CHS and their respective legal
representatives, heirs, successors and assigns (including subsequent
holders of Executive Securities); provided that the rights and
obligations of Executive under this Agreement shall not be assignable
except in connection with a permitted transfer of Executive Securities
hereunder.
(e) CHOICE OF LAW. This Agreement shall be governed and construed
in accordance with the internal laws of the State of
Illinois, without
giving effect to any choice of law or conflict of law provision or rule
(whether of the Commonwealth of Massachusetts or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of
Illinois.
(f) CONSENT TO JURISDICTION. Executive irrevocably consents and
submits to the exclusive jurisdiction of any local, state or federal
court within the County of Xxxx in the State of
Illinois for
enforcement by the Company or CHS of this Agreement. The Company and
CHS irrevocably consent and submit to the exclusive jurisdiction of any
local, state or federal court within the County of Xxxx in the State of
Illinois for enforcement by Executive of this Agreement. Executive, the
Company and CHS irrevocably waive any objection they may have to venue
in the defense of an inconvenient forum to the maintenance of such
actions or proceedings to enforce this Agreement.
(g) REMEDIES. Each of the parties to this Agreement shall be
entitled to enforce its rights under this Agreement specifically, to
recover damages and costs caused by any breach of any provision of this
Agreement and to exercise all other rights existing in such party's
favor. In the event of a dispute hereunder, the prevailing party's
reasonable attorney's fees and costs shall be reimbursed by the
opposing party or parties in such dispute within fourteen days
following a judgment by a court or tribunal of competent jurisdiction
over such exercise or enforcement. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may in
its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(h) WAIVER. The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver
of such provisions and shall not affect the right of such party
thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
(i) BUSINESS DAYS. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the state in which the Company's chief executive office is
located, the time period shall be automatically extended to the
business day immediately following such Saturday, Sunday or legal
holiday.
-21-
(j) NO STRICT CONSTRUCTION. The parties hereto jointly
participated in the negotiation and drafting of this Agreement. The
language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their collective mutual intent,
this Agreement shall be construed as if drafted jointly by the parties
hereto, and no rule of strict construction shall be applied against any
Person.
(k) GENDER. As used in this Agreement, the masculine, feminine or
neuter gender shall be deemed to include the others whenever the
context so indicates or requires.
(l) HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.
* * *
-22-
IN WITNESS WHEREOF, the parties hereto have executed this
Executive
Securities Agreement on the date first written above.
BEACON HOLDING CORPORATION
By: /s/ Xxxxxx Xxxxxx
-----------------------------
Its: Vice President
-----------------------------
CODE, XXXXXXXX & XXXXXXX III, L.P.
By: CHS Management III, L.P.,
-----------------------------
its general partner
-----------------------------
By: CODE, XXXXXXXX & XXXXXXX, INC.,
-----------------------------
its general partner
-----------------------------
By: /s/ Xxxxx X. Xxxxxx
-----------------------------
Its: Principal
-----------------------------
EXECUTIVE
/s/ Xxxxx Xxxxx
-----------------------------
Name: Xxxxx Xxxxx
-----------------------------
-23-
SPOUSAL CONSENT
I acknowledge that I have read the foregoing
Executive Securities
Agreement and that I know its contents. I am aware that by its provisions, my
spouse agrees, among other things, to a right of first refusal, to the granting
of rights to purchase and to the imposition of certain restrictions on the
transfer of the shares of the Company, including my community interest therein
(if any), which rights and restrictions may survive my spouse's death. I hereby
consent to such rights and restrictions, approve of the provisions of the
Agreement, and agree that I will bequeath any interest which I may have in said
shares or any of them, including my community interest, if any, or permit any
such interest to be purchased, in a manner consistent with the provisions of
this Agreement. I direct that any residuary clause in my will shall not be
deemed to apply to my community interest (if any) in such shares except to the
extent consistent with the provisions of this Agreement.
I further agree that in the event of a dissolution of the marriage
between myself and my spouse, in connection with which I secure or am awarded
Executive Securities of the Company, or any interest therein through property
settlement agreement or otherwise, I shall receive and hold said Executive
Securities subject to all the provisions and restrictions contained in the
foregoing Agreement, including any option of the Company or CHS to purchase such
shares or interest from me.
I also acknowledge that I have been advised to obtain independent
counsel to represent my interests with respect to this Agreement but that I have
declined to do so and hereby expressly waive my right to such independent
counsel.
/s/ Xxxxxxxx X. Xxxxx
--------------------------
Name:
-24-
