ADDUS HOLDING CORPORATION STOCKHOLDERS' AGREEMENT

Exhibit 4.2

 

ADDUS HOLDING CORPORATION

STOCKHOLDERS’ AGREEMENT

September 19, 2006

 

TABLE OF CONTENTS

 

 

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FORM OF STOCKHOLDERS’ AGREEMENT

STOCKHOLDERS’ AGREEMENT (this “ Agreement ”) dated as of September 19, 2006, among Addus Holding Corporation, a Delaware corporation (the “ Corporation ”), the Investors (as defined herein) and the Management Stockholders (as defined herein).

WHEREAS , each Stockholder (as defined herein) owns, as of the date hereof, that number of Shares (as defined herein) set forth opposite such Stockholder’s name on Annex I attached hereto or Annex II attached hereto, as applicable; and

WHEREAS , the Stockholders believe it to be in the best interest of the Corporation and the Stockholders to provide for the continued stability of the business and policies of the Corporation and its subsidiaries, as the same may exist from time to time.

NOW THEREFORE , in consideration of the mutual covenants and agreements contained in this Agreement, the sufficiency of which is hereby acknowledged, the parties agree as follows:

ARTICLE I

DEFINITIONS; RULES OF CONSTRUCTION

The following terms have the following meanings:

“ Additional Investor Directors ” shall have the meaning set forth in Section 2.1(b)(v) hereof.

“ Affiliate ” means, with respect to any Person, any (a) director, officer, limited or general partner, member or stockholder holding 5% or more of the outstanding capital stock or other equity interests of such Person, (b) spouse, parent, sibling or descendant of such Person (or a spouse, parent, sibling or descendant of a Person specified in clause (a) above relating to such Person) and (c) other Person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. The term “control” includes, without limitation, the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“ Agreement ” shall have the meaning set forth in the preamble.

“ Approved Sale ” shall have the meaning set forth in Section 3.7 hereof.

“ Arbitrator ” shall have the meaning set forth in Section 6.3(b).

“ Authorized Representatives ” shall have the meaning set forth in Section 5.2 hereof.

“ Board ” means the Board of Directors of the Corporation.

“ Board Expansion Option ” shall have the meaning set forth in Section 2.8 hereof.

“ Business Day ” means any day that is not a Saturday, Sunday or a day on which banking institutions in New York, New York are not required to be open.

“ Bylaws ” shall mean the bylaws of the Corporation (as the same may be amended, modified or supplemented from time-to-time after the date hereof).

“ Cause ” shall have the meaning set forth in the applicable Employment Agreement, or, in the absence of an Employment Agreement, shall mean a Termination of Employment for Cause (as defined herein).

“ Charter ” means the Certificate of Incorporation of the Corporation in effect at the time in question, as the same may be amended, modified or supplemented from time-to-time after the date hereof (as permitted by the terms of this Agreement).

“ Common Stock ” means the Corporation’s common stock, par value $0.001 per share.

“ Common Stock Equivalent ” means, at any time, one share of Common Stock or the right to acquire, whether or not such right is immediately exercisable, one share of Common Stock, whether evidenced by an option, warrant, convertible security or other instrument or agreement.

“ Corporation ” shall have the meaning set forth in the preamble.

“ Corporation Governing Body ” shall have the meaning set forth in Section 2.6(b) hereof.

“ Co-Sale Notice ” shall have the meaning set forth in Section 3.4(a)(i) hereof.

“ Co-Sale Transferee ” shall have the meaning set forth in Section 3.4(a) hereof.

“ Co-Sale Transferor ” shall have the meaning set forth in Section 3.4(a) hereof.

“ Disability Notice ” shall have the meaning set forth in Section 3.3(e) hereof.

“ Employment Agreement ” means, with respect to any Management Stockholder, the employment agreement entered into between such Management Stockholder and Addus HealthCare, Inc. or Addus Management Corporation (as each such Employment Agreement may be amended, restated or otherwise supplemented from time-to-time).

“ Eos Capital ” means Eos Capital Partners III, L.P., a Delaware limited partnership.

“ Eos Capital Director ” shall have the meaning set forth in Section 2.1(b)(i).

“ Eos Entities ” means Eos Capital, Eos SBIC III and any Permitted Transferee thereof.

 

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“ Eos SBIC Directors ” shall have the meaning set forth in Section 2.1(b)(ii).

“ Eos SBIC III ” means Eos Partners SBIC III, L.P., a Delaware limited partnership.

“ Equity Securities ” means all shares of capital stock of the Corporation, all securities convertible into or exchangeable for shares of capital stock of the Corporation, and all options, warrants, and other rights to purchase or otherwise acquire from the Corporation shares of such capital stock, including any stock appreciation or similar rights, contractual or otherwise.

“ Exchange Act ” means the Securities and Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations promulgated thereunder.

“ Excluded Stock ” means (i) shares of Common Stock at any time issuable upon the exercise of options granted to directors, officers, bona fide consultants and employees of the Corporation issued pursuant to a Board-approved option or incentive plan including the Corporation’s 2006 Stock Incentive Plan in an amount not to exceed 83,272 shares of Common Stock in the aggregate (as adjusted from time-to-time in the event of any stock dividend or distribution, stock split, reverse stock split or combination or other similar pro rata recapitalization event affecting any class or series of Common Stock), (ii) stock, warrants or other securities issued to a bank or other financial institution in connection with a financing, not to exceed five percent (5%) of the issued and outstanding shares of Common Stock in the aggregate, (iii) shares of Common Stock issuable upon conversion of the Series A Convertible Preferred Stock, (iv) shares of Common Stock issued in connection with any acquisition by the Corporation approved by the Board (including at least one director nominated pursuant to Section 2.1(b)(i) or 2.1(b)(ii) of this Agreement), (v) shares of Common Stock issued by the Corporation in a QIPO, (vi) Equity Securities of the Corporation issued after the date hereof to give effect to any stock dividend or distribution, stock split, reverse stock split or combination or other similar pro rata recapitalization event affecting any class or series of Common Stock, and (vii) securities of the Corporation that are redeemable by the Corporation upon a date certain by the Corporation but are not Common Stock Equivalents.

“ Fair Market Value ” shall have the meaning set forth in Section 3.3(d) hereof.

“ Financing Documents ” shall have the meaning set forth in Section 3.3(e) hereof.

“ For Cause Repurchase Right ” shall have the meaning set forth in Section 3.3(a) hereof.

“ Freeport ” means Freeport Loan Fund LLC and any Permitted Transferee thereof.

“ Future Stockholder ” shall have the meaning set forth in Section 3.1 hereof.

“ Governmental Entity ” has the meaning ascribed to such term in the Purchase Agreement.

“ Group ” means:

(a) in the case of any Stockholder who is an individual, (i) such Stockholder, (ii) the spouse, parent, sibling or lineal descendants of such Stockholder, (iii) all trusts for the benefit of such Stockholder or any of the foregoing, (iv) all Persons principally owned by and/or organized or operating for the benefit of any of the foregoing, and (v) all Affiliates of such Stockholder;

 

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(b) in the case of any Stockholder that is a partnership, (i) such Stockholder, (ii) its limited, special and general partners, (iii) any Person to which such Stockholder shall Transfer all or substantially all of its assets or with which it shall be merged, and (iv) all Affiliates and employees of and consultants to, such Stockholder; and

(c) in the case of any Stockholder which is a corporation or a limited liability company, (i) such Stockholder, (ii) its stockholders or members as the case may be, (iii) any Person to which such Stockholder shall Transfer all or substantially all of its assets, and (iv) all Affiliates of such Stockholder.

“ Independent Directors ” shall have the meaning set forth in Section 2.1(b)(iv) hereof.

“ Initial Subscribing Investor ” shall have the meaning set forth in Section 3.5(f) hereof.

“ Investor Directors ” means the Eos Capital Director, the Eos SBIC Directors and the Additional Investor Directors, if any.

“ Investor Nominee ” shall have the meaning set forth in Section 3.7(c) hereof.

“ Investors ” means the Persons set forth on Annex I hereto and any Person who becomes a party to this Agreement as an Investor pursuant to Section 3.1 or 3.2.

“ Investor Shares ” means all Equity Securities of the Corporation held at any time during the term of this Agreement by the Investors.

“ Joinder Agreement ” shall have the meaning set forth in Section 3.1 hereof.

“ Liquidation ” shall have the meaning set forth in the Charter.

“ Major Management Stockholder ” means any Management Stockholder that owns (i) more than 10% of all the outstanding Common Stock Equivalents or (ii) more than 50% of all the outstanding Common Stock Equivalents owned by all Management Stockholders (so long as at least 50% of the Original Management Stockholder Shares remain outstanding).

“ Majority in Interest ” means, (i) with respect to the Investor Shares, the holders of at least a majority of the Investor Shares then outstanding and (ii) with respect to the Management Stockholder Shares, the holders of at least a majority of the Management Stockholder Shares then outstanding, and, if applicable, the Original Management Stockholder Threshold.

 

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“ Management Agreement ” means that certain Management and Consulting Agreement dated as of the date hereof between Addus HealthCare, Inc. and Eos Management, Inc. (as it may be amended, restated, supplemented or otherwise modified from time-to-time).

“ Management Directors ” shall have the meaning set forth in Section 2.1(b)(iii) hereof.

“ Management Stockholder ” means the Persons set forth on Annex II hereto and any Person who becomes a party to this Agreement as a Management Stockholder pursuant to Section 3.1 or 3.2.

“ Management Stockholder Shares ” means all Equity Securities held at any time during the term of this Agreement by the Management Stockholders.

“ NASDAQ ” means the National Association of Securities Dealers Automated Quotations.

“ New Securities ” means all Equity Securities other than Excluded Stock.

“ Observer ” shall have the meaning set forth in Section 2.6(a).

“ Offer Notice ” shall have the meaning set forth in Section 3.6(a).

“ Offerees ” shall have the meaning set forth in Section 3.6(a).

“ Original Management Stockholder Shares ” means the Management Stockholder Shares outstanding on the date hereof.

“ Original Management Stockholder Threshold ” means the holders of a majority of the Original Management Stockholder Shares so long as at least fifty percent (50%) of the Original Management Stockholder Shares remain outstanding.

“ Original Purchase Price ” means One Hundred Dollars ($100) per share (subject to pro rata adjustment in the event of any stock split, stock dividend or other subdivision of the Equity Securities or other similar pro rata recapitalization event effecting the Equity Securities).

“ Other Accredited Stockholders ” shall have the meaning set forth in Section 3.5(f) hereof.

“ Other Stockholders ” shall have the meaning set forth in Section 3.4(a)(i) hereof.

“ Permitted Family Transferee ” means, with respect to any Management Stockholder (and each Permitted Transferee of such Management Stockholder), (i) the spouse, sibling or any lineal descendant (including adopted children) of such Person, (ii) any trust solely for the benefit of such Person and/or the spouse or lineal descendants (including adopted children) of such Person, (iii) a charitable foundation under the Control of such Person, (iv) a family trust, partnership or limited liability company under the Control of such Person or established solely for the benefit of such Person and/or such Person’s spouse or lineal

 

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descendants (including adopted children) or for estate planning purposes provided such family trust, partnership or limited liability company remains under the Control of such Person, or (v) the estate of such Person.

“ Permitted Transfer ” means (a) with respect to a Management Stockholder, any Transfer by such Management Stockholder to (i) a Permitted Family Transferee of such Management Stockholder, (ii) any Transferee approved in writing by the Investors holding a majority of the Investor Shares outstanding at such time or (iii) any other Management Stockholder or any Permitted Family Transferee of such Management Stockholder, (b) with respect to a Stockholder who is an Investor, any Transfer by such Investor to a member of such Investor’s Group and (c) with respect to W. Andrew Wright, III, any transfer to an officer of the Corporation not to exceed up to five officers in the aggregate.

“ Permitted Transferee ” means any Person to whom a Permitted Transfer is made.

“ Person ” shall be construed as broadly as possible and shall include an individual or natural person, a partnership (including a limited liability partnership), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a Governmental Entity.

“ Preemptive Offer ” shall have the meaning set forth in Section 3.5(a) hereof.

“ Preemptive Offer Notice ” shall have the meaning set forth in Section 3.5(a) hereof.

“ Preemptive Offer Number ” shall have the meaning set forth in Section 3.5(b) hereof.

“ Preemptive Offer Period ” shall have the meaning set forth in Section 3.5(a) hereof.

“ Preferred Stock ” shall have the meaning set forth in the Charter.

“ Prevailing Party ” means, in an action seeking (i) monetary damages, a party securing as a final judgment, a dollar amount (excluding interest) that is equal to or greater than fifty percent (50%) of the amount claimed as damages in the complaint or as a counterclaim in the answer, and, if such party fails to secure an amount equal to or greater than fifty percent (50%) of the amount claimed, then the other party shall be deemed to be the prevailing party for purposes of this Agreement; (ii) a declaratory ruling or a permanent injunction, a party successfully securing the relief sought, and, if such party is unsuccessful securing such relief, then the other party shall be deemed to be the prevailing party; and (iii) monetary damages and a demand for a declaratory ruling or permanent injunction, a party satisfying the criteria in both clauses (i) and (ii), and, if such party does not satisfy such criteria, then the other party shall be deemed to be the prevailing party; provided, however , if one party would be a prevailing party under one of the clauses in this definition and the other party would be a prevailing under another clause, then neither party shall be deemed a prevailing party for purposes of this Agreement.

 

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“ Pro Rata Amount ” means, with respect to any Stockholder, the quotient obtained by dividing (i) the number of Common Stock Equivalents held by such Stockholder by (ii) the aggregate number of Common Stock Equivalents held by all Stockholders or class of Stockholders (as applicable); provided, however, that “out-of-the-money” stock options shall not be deemed Common Stock Equivalents for purposes of calculating the Pro Rata Amount.

“ Public Offering ” shall mean the offering of Common Stock on a public exchange.

“ Purchase Agreement ” means that certain Stock Purchase Agreement dated as of September 19, 2006 by and among the Corporation, Addus Management Corporation, Addus Acquisition Corporation, Addus HealthCare, Inc., W. Andrew Wright, III, as Sellers’ Representative, and the sellers set forth on Exhibit A thereto (as the same may be amended, restated or otherwise modified from time-to-time).

“ Purchase Notice ” shall have the meaning set forth in Section 3.5(b) hereof.

“ QIPO ” means the consummation of the first firm commitment underwritten public offering pursuant to an effective registration statement filed on Form S-1 (or its successor form) under the Securities Act resulting in aggregate proceeds (net of underwriting discounts and commissions) to the Corporation of not less than Fifty Million Dollars ($50,000,000).

“ Refusal Shares ” shall have the meaning set forth in Section 3.6(a) hereof.

“ Registration Rights Agreement ” means that certain Registration Rights Agreement dated as of the date hereof among the Corporation and the Stockholders (as amended, modified or supplemented from time-to-time).

“ Regulatory Agreement ” means that certain Regulatory Agreement dated as of the date hereof among the Corporation and Eos SBIC III (as amended, modified or supplemented from time-to-time).

“ Related Person ” shall have the meaning set forth in Section 4.1 hereof.

“ Representative ” shall have the meaning set forth in Section 6.3(b).

“ Repurchase Disability ” shall have the meaning set forth in Section 3.3(e) hereof.

“ Repurchase Date ” shall have the meaning set forth in Section 3.3(b) hereof.

“ Repurchase Notice ” shall mean the notice provided by the Corporation to a Management Stockholder (or a Permitted Transferee of such Management Stockholder) in connection with the Corporation’s exercise of a Repurchase Right.

“ Repurchase Price ” shall have the meaning set forth in Section 3.3(b) hereof.

“ Repurchase Price Adjustment ” shall have the meaning set forth in Section 3.3(b) hereof.

 

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“ Repurchase Right ” shall have the meaning set forth in Section 3.3(a) hereof.

“ Sale of the Corporation ” shall have the meaning set forth in the Charter.

“ Securities Act ” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations promulgated thereunder.

“ Seller ” shall have the meaning set forth in Section 3.6(a) hereof.

“ Series A Preference Amount ” shall have the meaning set forth in the Charter.

“ Series A Preferred Stock ” means the Corporation’s Series A Convertible Preferred Stock, $0.001 par value per share.

“ Shares ” means all Investor Shares and all Management Stockholder Shares.

“ Stockholders ” means the Investors, the Management Stockholders and any Future Stockholders.

“ Stock Incentive Plan ” means the Corporation’s 2006 Stock Incentive Plan (as such plan may be amended, restated or otherwise modified from time-to-time).

“ Subscribing Stockholders ” shall have the meaning set forth in Section 3.5(a) hereof.

“ Subsidiary ” means, with respect to any Person, any other Person the majority of whose Equity Securities or voting securities are directly or indirectly owned or controlled by such Person.

“ Subsidiary Governing Body ” shall have the meaning set forth in Section 2.6(b) hereof.

“ Tag Along Notice ” shall have the meaning set forth in Section 3.4(c) hereof.

“ Termination Date ” means the earlier to occur of: (i) the closing of a QIPO and (ii) the closing of a Liquidation.

“ Termination of Employment for Cause ” shall mean termination relating to (i) the conviction of a crime involving fraud, theft or dishonesty by the Management Stockholder; (ii) the Management Stockholder’s willful and continuing disregard of lawful instructions of the Board or superiors (if any), or the Management Stockholder’s willful misconduct in carrying out his or her position and duties of employment; (iii) the use of alcohol or drugs by the Management Stockholder to an extent that such use interferes in any manner with the performance of the Management Stockholder’s duties and responsibilities as an employee of the Corporation; (iv) the failure by the Management Stockholder to observe material Corporation policies generally applicable to employees of the Corporation, or (v) the conviction of the Management Stockholder for violating any law constituting a felony (including the Foreign Corrupt Practices Act of 1977).

 

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“ Third Party ” means, with respect to any Stockholder, any Person that is not (i) the Corporation or (ii) a member of the Group of such Stockholder.

“ Transfer ” means to sell, transfer, assign, pledge, hypothecate or otherwise dispose of Equity Securities, either voluntarily or involuntarily and with or without consideration excluding by Management Stockholders to the Corporation upon a termination of employment or by any Investors to the Corporation.

“ Transferee ” means any Person to whom a Stockholder shall Transfer Shares.

ARTICLE II

BOARD REPRESENTATION

 

2.1.	Board Representation.

(a) The Corporation and the Stockholders shall take such corporate actions as may be required to ensure that (i) the number of directors constituting the Board is at all times no greater than eight (8) (subject to increase pursuant to the Board Expansion Option), and (ii) the presence of at least two (2) Investor Directors is required to constitute a quorum of the Board. The Board shall initially be set at five (5) members.

(b) The Board shall be comprised as follows:

(i) Subject to clause (vi) below, Eos Capital shall be entitled: (A) to nominate two (2) individuals to the Board to serve as directors (the “ Eos Capital Directors ”) until their respective successors are elected and qualified, (B) to nominate each successor to the Eos Capital Directors and (C) to direct the removal from the Board of any director nominated under the foregoing clauses (A) or (B); the Eos Capital Directors shall initially be Brian Young and Mark L. First;

(ii) Subject to clause (vi) below, Eos SBIC III shall be entitled: (A) to nominate one (1) individual to the Board to serve as director (the “ Eos SBIC Director ”) until his respective successor is elected and qualified, (B) to nominate each successor to the Eos SBIC Director and (C) to direct the removal from the Board of any director nominated under the foregoing clauses (A) or (B); the Eos SBIC Director shall initially be Simon Bachleda;

(iii) Subject to Section 2.1(d), a Majority in Interest of the Management Stockholders, so long as they continue to own, directly or indirectly, at least fifty percent (50%) of the Management Stockholder Shares owned by them in the aggregate on the date hereof, shall be entitled: (A) to nominate two (2) individuals to the Board to serve as directors (each, a “ Management Director ”, and together the “ Management Directors ”) until their respective successors are elected and qualified, (B) to nominate each successor to the Management Directors and (C) to direct the removal from the Board of any director nominated under the foregoing clauses (A) or (B); provided , however , that if the Management Stockholders continue to own, directly or indirectly, less than fifty percent (50%) but at least twenty-five percent (25%) of the

 

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Management Stockholder Shares owned by them in the aggregate on the date hereof, a Majority in Interest of the Management Stockholders shall be entitled to nominate only one (1) Management Director to the Board. For purposes of clarification, if the Management Stockholders own, directly or indirectly, less than twenty-five percent (25%) of the Management Stockholder Shares owned by them in the aggregate on the date hereof, they shall no longer be entitled to nominate a Management Director to the Board. The Management Directors shall initially be W. Andrew Wright, III and Mark S. Heaney;

(iv) a majority of the Investor Directors and the Management Directors (that includes the vote of at least one (1) Management Director) acting together shall be entitled: (A) to nominate up to three (3) individuals to the Board to serve as directors (the “ Independent Directors ”) until their respective successors are elected and qualified, (B) to nominate each successor to the Independent Directors and (C) to direct the removal from the Board of any director nominated under the foregoing clauses (A) or (B); provided , however , that such nominee and any successor may not be (x) an officer or employee of the Corporation, (y) any Management Stockholder or (z) any Investor, and shall be knowledgeable in the Corporation’s industry;

(v) upon the occurrence of the Board Expansion Option in accordance with Section 2.8, a Majority in Interest of the Investors shall be entitled: (A) to nominate up to three (3) individuals to the Board to serve as directors (the “ Additional Investor Directors ”) until their respective successors are elected and qualified, (B) to nominate each successor to the Additional Investor Directors and (C) to direct the removal from the Board of any Additional Investor Director nominated under the foregoing clauses (A) or (B); and

(vi) For so long as the Eos Entities have not received their aggregate Series A Preference Amount, the Eos Entities shall continue to retain the rights set forth in Section 2.1(b)(i), Section 2.1(b)(ii), Section 2.1(b)(v) and Section 2.8. At such time as the Eos Entities have been paid their aggregate Series A Preference Amount in full, the following provisions shall apply:

 

(A)

so long as the Investors continue to own, directly or indirectly, at least twenty-five percent (25%) of the Investor Shares owned by them in the aggregate on the date hereof, Section 2.1(b)(i), Section 2.1(b)(ii), Section 2.1(b)(v) and Section 2.8 shall remain in full force and effect;

 

(B)

so long as the Investors continue to own, directly or indirectly, at least five percent (5%) but less than twenty-five percent (25%) of the Investor Shares owned by them in the aggregate on the date hereof, (x) Section 2.1(b)(ii) shall remain in full force and effect, (y) Section 2.1(b)(i)(A) shall be amended such that Eos Capital shall only be entitled to nominate (and remove) one (1) individual to the Board to serve as a director and (z) Section 2.1(b)(v) and the Board Expansion Option set forth in Section 2.8 shall terminate and be of no further force and effect; and

 

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(C)

if the Investors own, directly or indirectly, less than five percent (5%) of the Investor Shares owned by them in the aggregate on the date hereof, the Eos Entities shall no longer be entitled to nominate any individuals to the Board.

(c) Each nomination or any proposal to remove from the Board any director shall be made by delivering to the Corporation a notice signed by the party or parties entitled to such nomination or proposal. As promptly as practicable, but in any event within ten (10) days, after delivery of such notice, the Corporation shall take or cause to be taken such corporate actions as may be reasonably required to cause the election or removal proposed in such notice. Such corporate actions may include calling a meeting or soliciting a written consent of the Board, or calling a meeting or soliciting a written consent of the Stockholders.

(d) Notwithstanding anything to the contrary contained herein, the Management Stockholders may not appoint an individual other than (i) W. Andrew Wright, III, (ii) Mark S. Heaney or (iii) any individual set forth on Annex III hereto, as a Management Director without the prior written consent of Eos Capital, which consent shall not be unreasonably withheld.

 

2.2.	Voting Agreement.

(a) Each Stockholder covenants and agrees to vote all Equity Securities held by such Stockholder for (i) the election to the Board of all individuals nominated in accordance with Section 2.1 and for the removal from the Board of all directors proposed to be removed in accordance with Section 2.1, and (ii) the election to each committee of the Board of the Investor Directors and the Management Directors nominated in accordance with Section 2.4, and in each case shall take all actions required on its behalf to give effect to the agreements set forth in this Article II. Each Stockholder shall use its respective best efforts to cause each director originally nominated by such Stockholder to vote for the election to the Board of all individuals nominated in accordance with Section 2.1.

(b) Pursuant to this Section 2.2, each undersigned Stockholder hereby approves and votes all of his, her or its Equity Securities in favor of the election to the Board of each of the initial designees named pursuant to Section 2.1(b) above.

(c) Each Management Stockholder hereby delivers to Eos Capital an irrevocable proxy, coupled with an interest, authorizing Eos Capital to act as proxy of such Management Stockholder solely in connection with such Management Stockholder’s agreements contained in this Article II, with full powers of substitution and resubstitution, and hereby authorizes Eos Capital to vote, give consents and in all other ways act in such Management Stockholder’s place with respect to all Management Stockholder Shares held by such Management Stockholder (and any and all other Equity Securities issued in respect thereof) solely in connection with such Management Stockholder’s agreements contained in this Article II, which proxy shall be valid and remain in effect until the provisions of this Article II expire; provided , however , that a Management Stockholder’s ability to vote to appoint or remove a Management Director or appoint or remove an Independent Director shall not be subject to the irrevocable proxy, interest or authority delivered in this Section 2.2(c).

 

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2.3.	Interim Director.

The Corporation shall notify each Stockholder of the occurrence of any vacancy in any seat of the Board. If the Stockholders entitled to nominate a successor to fill such vacancy fail to do so within fifteen (15) days after delivery of such notice, such vacancy may be filled in accordance with the Bylaws (subject in all cases to Section 2.5(b) below) until a successor has been nominated and elected to the Board in accordance with Sections 2.1 and 2.2 of this Agreement.

 

2.4.	Committees; Subsidiaries.

(a) Each Stockholder shall use its respective best efforts to cause each director of the Corporation originally nominated by such Stockholder to take such corporate actions as may be reasonably required to ensure that each committee of the Board contains at least one (1) Investor Director and one (1) Management Director.

(b) The Investor Directors and the Management Directors shall have the right (but not the obligation) to cause the Corporation and each Stockholder to take, and each Stockholder shall use its respective best efforts to cause each director of the Corporation originally nominated by such Stockholder to take, such corporate actions as may be reasonably required to ensure that the composition of the board of directors (or similar governing body) of all direct and indirect Subsidiaries of the Corporation is identical to the composition of the Board.

 

2.5.	Vacancies and Removal.

(a) The directors designated in Section 2.1(b) will be elected at any annual or special meeting of the Stockholders (or by written consent in lieu of a meeting of the Stockholders) and will serve until their successors are duly elected and qualified or until their earlier resignation or removal.

(b) The Corporation shall notify each Stockholder of the occurrence of any vacancy in any seat of the Board. Subject to the foregoing regarding the appointment of directors, in the event a vacancy is created on the Board by reason of the death, disability, removal (with or without Cause) or resignation of any director, each of the directors hereby agrees that (i) such vacancy shall be filled in accordance with the procedures set forth in Section 2.1 and (ii) no Stockholder shall have the ability to fill any vacancy to the extent that the ability to appoint such Stockholder is specifically granted to other Stockholders pursuant to Section 2.1. No Stockholder shall have the ability to remove a director to the extent that such director was not nominated by such Stockholder (other than in the case where a director is removed as a result of being terminated by the Corporation for Cause, in which case the vacancy created thereby will again be filled by the Stockholders entitled to nominate such director).

(c) No Person may serve as a director to the extent such Person has been terminated by the Corporation for Cause.

 

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2.6.	Non-Voting Observers.

(a) In addition to their other rights under this Agreement, (i) the Eos Entities shall be entitled to have an unlimited number of non-voting observers and (ii) if, pursuant to Section 2.1(d), the Management Stockholders appoint a Management Director other than W. Andrew Wright, III or Mark S. Heaney, each such Management Director shall be entitled to have one (1) non-voting observer (collectively, the “ Observers ”) who shall be designated by the applicable Eos Entity, or the Management Director, as applicable, in its sole discretion, by notice to the Corporation from time to time (and who shall also be subject to removal for no reason or any reason whatsoever by such Eos Entity or Management Director, as applicable, by notice to the Corporation from time to time).

(b) Each Observer shall be entitled to be present at all meetings of the Board (and each committee thereof that the designating director is a member of) (each, a “ Corporation Governing Body ”), as well as at all meetings of the board of directors (or similar governing body) of all direct and indirect Subsidiaries of the Corporation (and each committee thereof that the designating director is a member of) (each, a “ Subsidiary Governing Body ”). The Corporation shall notify each Observer of each meeting of each Corporation Governing Body and each meeting of each Subsidiary Governing Body, including the time and place of such meeting, in the same manner and at the same times as the members of such Corporation Governing Body or Subsidiary Governing Body, as the case may be, are notified.

(c) Each Observer shall (i) have the same access to information concerning the business and operations of the Corporation and its Subsidiaries, including, but not limited to, notes, minutes and consents, at the same times as the members of each Corporation Governing Body or Subsidiary Governing Body may receive access to such information, (ii) be entitled to participate in discussions of the affairs, finances and accounts of, and consult with, and make proposals and furnish advice to, the Corporation Governing Bodies and the Subsidiary Governing Bodies, and the members of the Corporation Governing Bodies and the Subsidiary Governing Bodies and the Corporation shall use its reasonable best efforts to cause the officers of the Corporation and its Subsidiaries to take such proposals or advice seriously and give due consideration thereto, provided , that nothing herein is intended to require compliance with any such proposal or advice or to impose liability for any failure so to comply, and (iii) be provided with copies of all notices, minutes, consents, and forms of consents in lieu of meetings of the Corporation Governing Bodies and the Subsidiary Governing Bodies and all other material that the Corporation or any of its Subsidiaries provides to members of any Corporation Governing Body or Subsidiary Governing Body as such, in each case at the same time or times as such notices, minutes, consents or forms are issued or circulated by or to, or such other material is provided to, such members. A majority of the Board shall have the right to exclude any Observer from portions of meetings of the Board or omit to provide any Observer with certain information if such members of the Board believe that (i) access to such information could be reasonably expected to adversely affect the attorney-client privilege between the Corporation and its counsel, or (ii) such disclosure is prohibited by an agreement with a third party; provided , however , that in the case of the preceding clause (ii), the Corporation will use commercially reasonable efforts to provide such documentation, which requirement shall be satisfied if the Observer is offered the opportunity to obtain such documentation by executing or otherwise becoming a party to the confidentiality restrictions on substantially the same terms (including

 

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any standstill provisions) as are applicable to the Corporation. Notwithstanding anything to the contrary contained in this Agreement, an Observer may not use or disclose any information received by such Observer, unless and except to the extent that such use or disclosure could have been made by a director of the Corporation in compliance with all laws and duties applicable to a director as such under such circumstances.

 

2.7.	Meetings; Expenses.

(a) The Corporation shall convene meetings of the Board at least once every three months. Upon any failure by the Corporation to convene any meeting required by this paragraph, an Investor Director or Management Director shall be empowered to convene such meeting.

(b) The Corporation shall (i) reimburse each Director and each Observer for his or her reasonable out-of-pocket expenses (including travel) incurred in connection with the attendance of meetings of the Board or any committee thereof and (ii) reimburse each Director for his or her reasonable out-of-pocket expenses (including travel) incurred in connection with conducting any other business of the Corporation (or any subsidiary thereof).

 

2.8.	Board Expansion Option.

Subject to Section 2.1(b)(vi), a Majority in Interest of the Investors may, in their sole discretion and at any time, by written notice to the Corporation, increase the number of directors constituting the Board up to eleven (11) and designate Additional Investor Directors to the Board in accordance with Section 2.1(b)(v) (such election, the “ Board Expansion Option ”).

ARTICLE III

ISSUANCE AND TRANSFER OF SHARES

 

3.1.	Future Stockholders.

The Corporation shall require each Person that acquires Equity Securities (excluding options to acquire Common Stock) after the date hereof (a “ Future Stockholder ”), as a condition to the effectiveness of such acquisition, to execute a joinder to this Agreement, substantially in the form attached hereto as Exhibit A (the “ Joinder Agreement ”), agreeing to be treated as (i) an Investor, if such Person acquires such Equity Securities from an Investor, (ii) a Management Stockholder, if such Person acquires such Equity Securities from a Management Stockholder, or (iii) a Management Stockholder, if such Person is not otherwise an Investor and acquires Equity Securities from the Corporation, whereupon, in each case, such Person shall be bound by, and entitled to the benefits of, the provisions of this Agreement relating to Investors or Management Stockholders, as the case may be. The parties hereto agree to take all actions to permit the Corporation to comply with all of its obligations under all agreements with the Stockholders.

 

3.2.	Limitations on Transfers.

(a) No Transfer of any Equity Securities by any Stockholder shall become effective unless and until (i) the transferee (unless already subject to this Agreement) executes

 

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and delivers to the Corporation a Joinder Agreement, agreeing to be treated in the same manner as the transferring Stockholder (i.e., as either an Investor or a Management Stockholder) and (ii) such Transfer is either (x) a Permitted Transfer or (y) otherwise made in compliance with this Article III. Upon such Transfer and such execution and delivery, the Transferee shall be bound by, and entitled to the benefits of, this Agreement with respect to the transferred Equity Securities in the same manner as the transferring Stockholder. The provisions regarding Transfers of Equity Securities contained in this Article III shall apply to all Equity Securities now owned or hereafter acquired by a Stockholder. Any Transfer of Equity Securities by a Stockholder not made in accordance with this Article III shall be void ab initio .

(b) Notwithstanding anything to the contrary contained herein, no Stockholder may Transfer any Equity Securities to any Person (or to any Affiliate thereof), other than in connection with an Approved Sale, who directly or indirectly competes with the Corporation or any of the Corporation’s Subsidiaries, as determined in good faith by the Board.

(c) Each Stockholder shall, after complying with the provisions of this Agreement, but prior to any Transfer of Equity Securities, give written notice to the Corporation of such proposed Transfer. Each such notice shall describe the manner and circumstances of the proposed Transfer. Upon request by the Corporation, each Stockholder seeking to Transfer Equity Securities shall deliver a written opinion, addressed to the Corporation, of counsel for such Stockholder, stating that in the opinion of such counsel (which opinion and counsel shall be reasonably satisfactory to the Corporation) such proposed Transfer does not involve a transaction requiring registration or qualification of such Equity Securities under the Securities Act or the securities laws of any State of the United States; provided, however , that no such opinion shall be required for a Transfer which is a Permitted Transfer or a Transfer effected pursuant to Sections 3.3, 3.4, 3.5(f), 3.6 or 3.7 hereof. Subject to compliance with the other provisions of this Agreement, if the Corporation does not request such an opinion within ten (10) Business Days of receipt of the notice, the Transferring Stockholder shall be entitled to Transfer such Equity Securities, on the terms set forth in the notice, within sixty (60) days of delivery of the notice.

(d) Notwithstanding anything to the contrary contained herein, no Management Stockholder shall be permitted to Transfer all or any part of its Equity Securities to any Person prior to the date that is five (5) years from the date hereof, other than (i) to Permitted Transferees, (ii) pursuant to Sections 3.3, 3.4, 3.5(f) or 3.7 or (iii) with the written consent of Eos Capital (which consent may be withheld in the sole discretion of Eos Capital).

(e) Each Stockholder that is an entity that was formed for the sole purpose of directly or indirectly acquiring Equity Securities or that has no substantial assets other than Equity Securities or direct or indirect interests in Equity Securities agrees that (i) certificates for shares of its common stock or other instruments reflecting equity interests in such entity (and the certificates for shares of common stock or other equity interests in any similar entities controlling such entity) will note the restrictions contained in this Agreement on the restrictions on transfer of shares as if such common stock or other equity interests were Equity Securities, (ii) no shares of such common stock or other equity interests may be transferred to any person other than in accordance with the terms and provisions of this Agreement as if such common stock or other equity inte