STOCKHOLDERS AGREEMENT

Exhibit 4.1

Execution

 

STOCKHOLDERS AGREEMENT

among

PTHR HOLDINGS, INC.

and

THE STOCKHOLDERS PARTY HERETO

Dated as of June 10, 2005

 

 

TABLE OF CONTENTS

 

 

 

STOCKHOLDERS AGREEMENT

This STOCKHOLDERS AGREEMENT (the “ Agreement ”) is made as of June 10, 2005 by and among:

 

(i)

PTHR Holdings, Inc. (the “ Company ”);

 

(ii)

Fenway Panther Holdings, LLC and such other Persons who from time to time become party hereto by executing a counterpart signature page hereof and are designated by the Board as “Investors” (collectively, the “ Investors ”);

 

(iii)

Daniel K. Sokolowski (“ Sokolowski ”), Antares Capital Corporation and such other Persons who from time to time become party hereto by executing a counterpart signature page hereof and are designated by the Board as “Other Investors” (collectively, the “ Other Investors ”); and

 

(iv)

each Person who is, or from time to time becomes, party hereto by executing a counterpart signature page hereof, and whose Shares are designated by the Board as Management Shares hereunder (the “ Managers ” and together with the Investors and the Other Investors, the “ Stockholders ”).

RECITALS

1. On or about the date hereof, the Company caused its wholly-owned subsidiary Panther Acquisition, Inc. (“ Purchaser ”), an Ohio corporation, to acquire Panther II Transportation, Inc. (“ Panther ”) in accordance with the terms of the Contribution and Share Purchase Agreement dated as of May 22, 2005 among the Company, Purchaser, Panther and the Shareholders party thereto (the “ Stock Purchase Agreement ”).

2. Following the consummation of the acquisition contemplated by the Stock Purchase Agreement, upon the filing of a certificate of merger as provided in Section 1702.43 of the Ohio General Corporations Law, Purchaser has been merged with and into Panther, the separate organizational existence of Purchaser has ceased and Panther continues as the surviving corporation and a wholly-owned subsidiary of the Company.

3. Upon the Closing (as defined below), the Company’s Common Stock and Preferred Stock is held as set forth on Schedule I hereto.

4. The parties believe that it is in the best interests of the Company and the Stockholders to set forth their agreements on certain matters.

 

AGREEMENT

N OW , THEREFORE , the parties hereto hereby agree as follows:

1. EFFECTIVENESS; DEFINITIONS.

1.1. Closing . This Agreement will become effective upon consummation of the closing under the Stock Purchase Agreement (the “ Closing ”).

1.2. Definitions . Certain terms are used in this Agreement as specifically defined herein. These definitions are set forth or referred to in Section 11 hereof.

2. VOTING AGREEMENT.

2.1. Election of Directors . Each holder of Shares hereby agrees to cast all votes to which such holder is entitled in respect of the Shares, whether at any annual or special meeting, by written consent or otherwise, (a) to fix the number of members of the board of directors of the Company (the “ Board ”) at seven or such higher number as may be specified from time to time by the Majority Investors and (b) to elect as members of the Board the following individuals:

 

(i)

five (5) directors designated by the Majority Investors who shall initially be W. Gregg Smart, John Anderson, Marc Kramer, Tim Mayhew and Peter Lamm;

 

(ii)

Sokolowski for so long as he is the Chief Executive Officer of the Company; and

 

(iii)

for so long as Sokolowski is the Chief Executive Officer of the Company, one director nominated by Sokolowski and approved by the Majority Investors, such approval not to be unreasonably withheld, who initially shall be Eric Schless.

2.2. Removal . No director may be removed from the Board without the consent of the Majority Investors; provided , however that the directors designated pursuant to Section 2.1(b)(ii) and 2.1(b)(iii) above may not be removed without the consent of Sokolowski for so long as he is entitled to serve as a director (in the case of Section 2.1(b)(ii)) or nominate such director (in the case of Section 2.1(b)(iii)).

2.3. Significant Transactions . Each holder of Shares agrees to cast all votes to which such holder is entitled in respect of the Shares, whether at any annual or special meeting, by written consent or otherwise, in the same proportion as Investor Shares are voted by the Investors to approve any sale, recapitalization, merger, consolidation, reorganization or any other transaction or series of transactions involving the Company or its subsidiaries (or all or any portion of their respective assets) in connection with, or in furtherance of, the exercise by the Majority Investors of their rights under Section 4.2.

2.4. Consent to Amendment . Each holder of Shares agrees to cast all votes to which such holder is entitled in respect of the Shares, whether at any annual or special meeting, by written consent or otherwise, in the same proportion as Investor Shares are voted by the Majority Investors to increase the number of authorized shares of Common Stock to the extent necessary to permit the Company to comply with the provisions of its Certificate of Incorporation or any agreement to which the Company is a party.

 

2.5. Grant of Proxy . Each holder of Shares other than the Investors hereby grants to the Investors an irrevocable proxy coupled with an interest to vote his Shares in accordance with his agreements contained in this Section 2, which proxy will be valid and remain in effect until the provisions of this Section 2 expire pursuant to Section 2.7.

2.6. The Company . The Company agrees not to give effect to any action by any holder of Shares or any other Person that is in contravention of this Section 2.

2.7. Period . The foregoing provisions of this Section 2 will expire on the earlier of (a) a Change of Control and (b) the last date permitted by law.

3. TRANSFER RESTRICTIONS.

No holder of Shares will Transfer any of such Shares to any other Person except as provided in this Section 3.

3.1. Permitted Transferees .

3.1.1. Affiliates . Subject to the provisions of Section 5.1, if applicable, any holder of Shares may Transfer any or all of such Shares to an Affiliate of such holder, provided, that the holders of the beneficial interests of such Affiliate have delivered to the Company and the Majority Investors a written acknowledgment and agreement in form and substance reasonably satisfactory to the Company and the Majority Investors that they will not Transfer any such beneficial interests or permit such Affiliate to issue any beneficial interests except to the extent such Transfer or issuance (treating such issuance as a Transfer by such holders) would be permitted under this Section 3.1 if the beneficial interests were Shares.

3.1.2. Upon Death . Subject to the provisions of Section 5.1, if applicable, upon the death of any holder of Shares who is a natural Person, such Shares may be distributed by the will or other instrument taking effect at death of such holder or by applicable laws of descent and distribution to such holder’s estate, executors, administrators and personal representatives, and then to such holder’s heirs, legatees or distributees, whether or not such recipients are Members of the Immediate Family of such holder.

3.1.3. Investors and Company . Any holder of Shares may Transfer any or all of such Shares to (a) any Investor or (b) with the Board’s approval, the Company or any subsidiary of the Company.

3.1.4. Additional Permitted Transfers by the Investors . Any holder of Investor Shares may Transfer any or all of such Shares (a) to an Investor or an Affiliated Fund, (b) to its partners or to Affiliates of any of the foregoing or (c) to any director, officer or employee of, or consultant or adviser to, the Company or its subsidiaries.

 

No Transfer permitted under the terms of this Section 3.1 will be effective unless the transferee of such Shares (each, a “ Permitted Transferee ”) has delivered to the Company a written acknowledgment and agreement in form and substance reasonably satisfactory to the Company that such Shares to be received by such Permitted Transferee will remain Investor Shares, Other Investor Shares or Management Shares, as the case may be, and will be subject to all of the provisions of this Agreement and that such Permitted Transferee will be bound by, and will be a party to, this Agreement as a holder of Investor Shares, Other Investor Shares or Management Shares, as the case may be, hereunder; provided, however, that Shares Transferred to any director, officer or employee of, or consultant or adviser to, the Company or any of its subsidiaries by a holder of Investor Shares will thereafter become Management Shares hereunder; and provided further that no Transfer by any holder of Shares to a Permitted Transferee will relieve such holder of any of its obligations hereunder.

3.2. Tag Alongs, Drag Alongs, Etc . In addition to Transfers permitted under Section 3.1:

(a) any holder of Investor Shares may Transfer such Shares if (i) such holder has complied with the “tag along” provisions contained in Section 4.1, (ii) the Majority Investors have exercised their “drag along” rights set forth in Section 4.2 or (iii) if, after giving effect to such Transfer, the Investors, their partners and Affiliates of any of the foregoing will continue to own not less than 80% of the Shares originally issued to the Investors; and

(b) any holder of Other Investor Shares or Management Shares may Transfer any or all of such Shares in accordance with the provisions, terms and conditions of Sections 4.1 and 4.2 solely in their capacity as Participating Sellers thereunder.

Any Shares Transferred after compliance with the terms of Sections 4.1 and 4.2 will conclusively be deemed thereafter not to be Shares or Registrable Securities under this Agreement and not to be subject to any of the provisions hereof or entitled to the benefit of any of the provisions hereof.

3.3. Public . Subject to the provisions of Section 7.3.4, any holder of Shares may Transfer such Shares in a Public Offering or, after the closing of the Initial Public Offering, pursuant to Rule 144, which Shares will conclusively be deemed thereafter not to be Shares or Registrable Securities under this Agreement and not to be subject to any of the provisions hereof or entitled to the benefit of any of the provisions hereof.

3.4. Impermissible Transfer . Any attempted Transfer of Shares not permitted under the terms of this Section 3 will be null and void, and the Company will not in any way give effect to any such impermissible Transfer.

3.5. Period . The foregoing provisions of this Section 3 will expire upon the earlier of (a) a Change of Control and (b) the effectiveness of the Company’s registration statement in connection with a Qualified Public Offering.

 

4. “TAG ALONG” AND “DRAG ALONG” RIGHTS.

4.1. Tag Along . If one or more holders of Investor Shares (each such holder, a “ Prospective Selling Investor ”) proposes to Sell any such Shares to any Prospective Purchaser in a transaction (a) not constituting a Transfer pursuant to the terms of Sections 3.1 or 3.2(a)(iii) and (b) in connection with which the Majority Investors have not elected to exercise their “drag along” rights under Section 4.2:

4.1.1. Notice . The Prospective Selling Investors will deliver a written notice (the “ Tag Along Notice ”) to each other holder of Shares (each, a “ Tag Along Holder ”) at least ten business days prior to such proposed Transfer. The Tag Along Notice will include:

(a) The principal terms of the proposed Sale insofar it relates to such Shares, including (i) the number and class of the Shares to be purchased from the Prospective Selling Investors, (ii) the fraction(s) expressed as a percentage, determined by dividing the number of Shares of each class to be purchased from the Prospective Selling Investors by the total number of Investor Shares of each such class originally purchased by the Investors (the “ Tag Along Sale Percentage ”), (iii) the maximum and minimum per share purchase price and (iv) the name and address of the Prospective Purchaser; and

(b) An invitation to each Tag Along Holder to make an offer to include in the proposed Sale to the applicable Prospective Purchaser an additional number of Shares held by such Tag Along Holder (not in any event to exceed the Tag Along Sale Percentage of the total number of Shares of the applicable class held by such Tag Along Holder), on the same terms and conditions (subject to Section 4.3.4 in the case of Options, Warrants and Convertible Securities), with respect to each Share Sold, as the Prospective Selling Investors will Sell each of their Shares.

4.1.2. Exercise . Within five business days after the effectiveness of the Tag Along Notice, each Tag Along Holder desiring to make an offer to include issued and outstanding Shares in the proposed Sale (each a “ Participating Seller ” and, together with the Prospective Selling Investors, collectively, the “ Tag Along Sellers ”) will furnish a written notice (the “ Tag Along Offer ”) to the Prospective Selling Investors offering to include an additional number of Shares (not in any event to exceed the Tag Along Sale Percentage of the total number of Shares of the applicable class held by such Participating Seller) that such Participating Seller desires to have included in the proposed Sale. Each Tag Along Holder who does not accept the Prospective Selling Investors’ invitation to make an offer to include Shares in the proposed Sale will be deemed to have waived all of his rights with respect to such Sale, and the Tag Along Sellers will thereafter be free to Sell to the Prospective Purchaser, at a per share price no greater than the maximum per share price set forth in the Tag Along Notice and on other principal terms that are not materially more favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, without any further obligation to such non-accepting Tag Along Holder.

 

4.1.3. Irrevocable Offer . The offer of each Participating Seller contained in his Tag Along Offer will be irrevocable, and, to the extent such offer is accepted, such Participating Seller will be bound and obligated to Sell in the proposed Sale on the same terms and conditions, with respect to each Share Sold (subject to Section 4.3.4 in the case of Options, Warrants and Convertible Securities), as the Prospective Selling Investors, up to such number of Shares as such Participating Seller will have specified in his Tag Along Offer; provided, however, that if the principal terms of the proposed Sale change with the result that the per share price will be less than the minimum per share price set forth in the Tag Along Notice or the other principal terms will be materially less favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, each Participating Seller will be permitted to withdraw the offer contained in his Tag Along Offer and will be released from his obligations thereunder.

4.1.4. Reduction of Shares Sold . The Prospective Selling Investors will attempt to obtain the inclusion in the proposed Sale of the entire number of Shares that each of the Tag Along Sellers requested to have included in the Sale (as evidenced in the case of the Prospective Selling Investors by the Tag Along Notice and in the case of each Participating Seller by such Participating Seller’s Tag Along Offer). In the event the Prospective Selling Investors will be unable to obtain the inclusion of such entire number of Shares in the proposed Sale, the number of Shares to be sold in the proposed Sale will be allocated among the Tag Along Sellers in proportion, as nearly as practicable, to the respective number of Shares that each Tag Along Seller requested to be included in the proposed Sale.

4.1.5. Additional Compliance . If (a) prior to consummation, the terms of the proposed Sale change with the result that the per share price to be paid in such proposed Sale will be greater than the maximum per share price set forth in the Tag Along Notice or the other principal terms of such proposed Sale will be materially more favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, the Tag Along Notice will be null and void, and it will be necessary for a separate Tag Along Notice to be furnished, and the terms and provisions of this Section 4.1 separately complied with, in order to consummate such proposed Sale pursuant to this Section 4.1; provided, however, that in the case of such a separate Tag Along Notice, the applicable period to which reference is made in Sections 4.1.1 and 4.1.2 will be five business days and three business days, respectively, and (b) the Prospective Selling Investors have not completed the proposed Sale by the end of the 180th day following the date of the effectiveness of the Tag Along Notice, each Participating Seller will be released from his obligations under his Tag Along Offer, the Tag Along Notice will be null and void, and it will be necessary for a separate Tag Along Notice to be furnished, and the terms and provisions of this Section 4.1 separately complied with, in order to consummate such proposed Sale pursuant to this Section 4.1, unless the failure to complete such proposed Sale resulted from any failure by any Participating Seller to comply with the terms of this Section 4.

4.1.6. Classes of Shares . Notwithstanding the foregoing provisions of this Section 4.1, the right of any Tag Along Holder to include Shares in any Sale in accordance with this Section 4.1 shall be limited to a right to include Shares in such Sale

 

which are of the same Class as the Shares to be included in such Sale by the Prospective Selling Investors, and all determinations under this Section 4.1 shall be made on the basis of the holdings of Shares of the Class of Shares to be included in such Sale by the Prospective Selling Investor (including the Tag Along Sale Percentage).

4.2. Drag Along . Each holder of Shares hereby agrees, if requested by the Majority Investors, to Sell a specified percentage (the “ Drag Along Sale Percentage ”) of such Shares, directly or indirectly, to a Prospective Purchaser in the manner and on the terms set forth in this Section 4.2 in connection with the Sale by one or more holders of Investor Shares (each such holder, a “ Prospective Selling Investor ”) of the Drag Along Sale Percentage of the total number of Investor Shares held by all holders of Investor Shares to the Prospective Purchaser.

4.2.1. Exercise . If the Majority Investors elect to exercise their rights under this Section 4.2, the Prospective Selling Investors will furnish a written notice (the “ Drag Along Notice ”) to each other holder of Shares. The Drag Along Notice will set forth the principal terms of the proposed Sale insofar as it relates to such Shares including (i) the number and class of Shares to be acquired from the Prospective Selling Investors, (ii) the Drag Along Sale Percentage, (iii) the per share consideration to be received in the proposed Sale and (iv) the name and address of the Prospective Purchaser. If the Prospective Selling Investors consummate the proposed Sale to which reference is made in the Drag Along Notice, each other holder of Shares (each a “ Participating Seller ”, and, together with the Prospective Selling Investors, collectively, the “ Drag Along Sellers ”) will be bound and obligated to Sell the Drag Along Sale Percentage of his Shares in the proposed Sale on the same terms and conditions, with respect to each Share Sold (subject to Section 4.3.4 in the case of Options, Warrants and Convertible Securities), as the Prospective Selling Investors will Sell each Investor Share in the Sale (subject to Section 4.3.4 in the case of Options, Warrants and Convertible Securities). If at the end of the 180th day following the date of the effectiveness of the Drag Along Notice the Prospective Selling Investors have not completed the proposed Sale, the Drag Along Notice will be null and void, each Participating Seller will be released from his obligation under the Drag Along Notice and it will be necessary for a separate Drag Along Notice to be furnished and the terms and provisions of this Section 4.2 separately complied with, in order to consummate such proposed Sale pursuant to this Section 4.2.

4.2.2. Classes of Shares . Notwithstanding the foregoing provisions of this Section 4.2, the obligation of any holder of Shares to include Shares in any Sale in accordance with this Section 4.2 shall be limited to an obligation to include Shares in such Sale which are of the same Class as the Shares to be included in such Sale by the Prospective Selling Investors, and all determinations under this Section 4.2 shall be made on the basis of the holdings of Shares of the Class of Shares to be included in such Sale by the Prospective Selling Investor (including the Drag Along Sale Percentage).

 

4.3. Miscellaneous . The following provisions will be applied to any proposed Sale to which Section 4.1 or 4.2 applies:

4.3.1. Certain Legal Requirements . In the event the consideration to be paid in exchange for Shares in a proposed Sale pursuant to Section 4.1 or Section 4.2 includes any securities, and the receipt thereof by a Participating Seller would require under applicable law (a) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities or (b) the provision to any Tag Along Seller or Drag Along Seller of any information regarding the Company, such securities or the issuer thereof, such Participating Seller will not have the right to Sell Shares in such proposed Sale. In such event, the Prospective Selling Investors will have the right, but not the obligation, to cause to be paid to such Participating Seller in lieu thereof, against surrender of the Shares (in accordance with Section 4.3.6 hereof) that would have otherwise been Sold by such Participating Seller to the Prospective Purchaser in the proposed Sale, an amount in cash equal to the Fair Market Value of such Shares as of the date such securities would have been issued in exchange for such Shares.

4.3.2. Further Assurances . Each Participating Seller, whether in his capacity as a Participating Seller, stockholder, officer or director of the Company, or otherwise, will take or cause to be taken all such actions as may be necessary or reasonably desirable in order expeditiously to consummate each Sale pursuant to Section 4.1 or 4.2 and any related transactions, including, without limitation, executing, acknowledging and delivering consents, assignments, waivers and other documents or instruments; furnishing information and copies of documents; filing applications, reports, returns, filings and other documents or instruments with governmental authorities; and otherwise cooperating with the Prospective Selling Investors and the Prospective Purchaser; provided, however, that Participating Sellers will be obligated to become liable in respect of any representations, warranties, covenants, indemnities or otherwise to the Prospective Purchaser solely to the extent provided in the immediately following sentence. Without limiting the generality of the foregoing, each Participating Seller agrees to execute and deliver such agreements as may be reasonably specified by the Prospective Selling Investors to which such Prospective Selling Investors will also be party, including, without limitation, agreements to (i) (a) make individual representations, warranties, covenants and other agreements as to the unencumbered title to its Shares and the power, authority and legal right to Transfer such Shares and the absence of any Adverse Claim with respect to such Shares and (b) be liable without limitation as to such representations, warranties, covenants and other agreements and (ii) be liable (whether by purchase price adjustment, indemnity payments or otherwise) in respect of representations, warranties, covenants and agreements in respect of the Company and its subsidiaries; provided, however, that the aggregate amount of liability described in this clause (ii) in connection with any Sale of Shares will not exceed the lesser of (i) such Participating Seller’s pro rata portion of any such liability, to be determined in accordance with such Participating Seller’s portion of the total number of Shares included in such Sale, or (ii) the proceeds to such Participating Seller in such Sale.

4.3.3. Sale Process . The Investors will, in their sole discretion, decide whether or not to pursue, consummate, postpone or abandon any proposed Sale and the terms and conditions thereof. No Investor or any Affiliate of any Investor will have any liability to

 

any other holder of Shares arising from, relating to or in connection with the pursuit, consummation, postponement, abandonment or terms and conditions of any proposed Sale, except to the extent such Investor will have failed to comply with the provisions of this Section 4.

4.3.4. Treatment of Options, Warrants and Convertible Securities . Each Participating Seller agrees that to the extent he desires or is obligated to include Options, Warrants or Convertible Securities in any Sale of Shares pursuant to Section 4, he will be deemed to have exercised, converted or exchanged such Options, Warrants or Convertible Securities immediately prior to the closing of such Sale to the extent necessary to Sell Common Stock to the Prospective Purchaser, except to the extent permitted under the terms of any such Option, Warrant or Convertible Security and agreed by the Prospective Purchaser. If any Participating Seller will Sell Options, Warrants or Convertible Securities in any Sale pursuant to Section 4, such Participating Seller will receive in exchange for such Options, Warrants or Convertible Securities consideration equal to the amount (if greater than zero) determined by multiplying (a) the purchase price per share of Common Stock received by the holders of the Prospective Selling Investors in such Sale less the exercise price, if any, per share of such Option, Warrant or Convertible Security by (b) the number of shares of Common Stock issuable upon exercise, conversion or exchange of such Option, Warrant or Convertible Security (to the extent exercisable, convertible or exchangeable at the time of such Sale), subject to reduction for any tax or other amounts required to be withheld under applicable law.

4.3.5. Expenses . All costs and expenses incurred by the Prospective Selling Investors or the Company in connection with any proposed Sale pursuant to this Section 4 (whether or not consummated), including without limitation all attorneys fees and expenses, all accounting fees and charges and all finders, brokerage or investment banking fees, charges or commissions, will be paid by the Company. The reasonable fees and expenses of a single legal counsel representing any or all of the other Tag Along Sellers or Drag Along Sellers (including any participating Managers) in connection with any proposed Sale pursuant to this Section 4 (whether or not consummated) will be paid by the Company. Any other costs and expenses incurred by or on behalf of any or all of the other Tag Along Sellers or Drag Along Sellers in connection with any proposed Sale pursuant to this Section 4 (whether or not consummated) will be borne by such Tag Along Seller(s) or Drag Along Seller(s).

4.3.6. Closing . The closing of a Sale to which Section 4.1 or 4.2 applies will take place at such time and place as the Prospective Selling Investors will specify by notice to each Participating Seller. At the closing of such Sale, each Participating Seller will deliver the certificates evidencing the Shares to be Sold by such Participating Seller, duly endorsed, or with stock (or equivalent) powers duly endorsed, for transfer with signature guaranteed, free and clear of any liens or encumbrances, with any stock (or equivalent) transfer tax stamps affixed, against delivery of the applicable consideration.

 

4.4. Period . The foregoing provisions of this Section 4 will expire on the earlier of (a) a Change of Control or (b) the effectiveness of the Company’s registration statement in connection with a Qualified Public Offering.

5. OPTIONS TO PURCHASE OR SELL SHARES.

5.1. Call Option . Except as the Company may otherwise agree with any Manager with respect to his Shares, upon any termination of the employment by the Company and its subsidiaries of any holder of Management Shares the Company will have the right to purchase for cash (or notes to the extent provided below in Section 5.2) all or any portion of the Management Shares that are not Options held by such holder or originally issued to such holder but held by one or more Permitted Transferees on the following terms (the “ Call Option ”):

5.1.1. Termination .

5.1.1.1. Termination due to Death or Disability or by Company other than for Cause or by the Holder . If such termination is the result of (i) the death or disability of such holder, (ii) termination of such holder’s employment by the Company other than for Cause or (iii) termination of such holder’s employment by such holder then, in any such event, the Company may purchase all or any portion of the Management Shares that are not Options held by such holder (or Permitted Transferee, if applicable) at a per Share price equal to the Fair Market Value of such Shares.

5.1.1.2. Termination by Company for Cause . If such termination is the result of termination of such holder’s employment by the Company for Cause then the Company may purchase all or any portion of the Management Shares that are not Options held by such holder (or Permitted Transferee, if applicable) at a per Share price equal to the lesser of the Cost or the Fair Market Value of such Shares.

5.1.2. Notices, Etc . Any Call Option may be exercised by delivery of written notice thereof (the “ Call Notice ”) to the applicable holder of Management Shares not later than the 70th day (or, in the case of a termination resulting from the death of such holder, the 130th day) after the effectiveness of the applicable termination of employment (the “ Call Option Exercise Period ”). The Call Notice will state that the Company has elected to exercise the Call Option, and the number and price of the Shares with respect to which the Call Option is being exercised.

5.2. Form of Payment . In each case Shares are purchased pursuant to Section 5.1, the Company will pay for such Shares by (i) paying the holder not less than one-half of the purchase price in cash, as determined by the Board and (ii) issuing for the balance of the purchase price not so paid in cash a promissory note in a principal amount equal to such balance. The principal of such note will be due and payable in four equal annual installments, the first such installment becoming due and payable on the first anniversary of the issuance of such note, and interest will accrue thereon at a rate equal to the applicable federal rate and be payable annually in arrears, in

 

each case subject to the provisions of this Section 5.2; provided, however, that if any payment of cash required upon the purchase and sale of Shares upon the exercise of any Call Option or any payment on a promissory note issued under Section 5.1 would (a) constitute, result in or give rise to any breach or violation of, or any default or right or cause of action under, any agreement to which the Company or any of its subsidiaries is, from time to time, a party or (b) leave the Company and its subsidiaries with less cash or borrowing availability than, in the good faith judgment of the Board, is necessary to operate the business of the Company and its subsidiaries in the ordinary course of business, then,

(i) in the case of a cash payment due at a closing of any purchase and sale of Shares upon the exercise of any Call Option, the Company will issue a promissory note in the aggregate principal amount of such payment, the principal amount of which note will be due and payable in four equal annual installments, the first such installment becoming due and payable on the first anniversary of the issuance of such note, and interest will accrue thereon at a rate equal to the applicable federal rate and be payable annually in arrears, in each case subject to the provisions of clause (ii) below, and

(ii) in the case of the cash payment in respect of a promissory note issued under this Section 5.2, notwithstanding any of the provisions of such note, including without limitation, the stated maturity of such note and the stated date on which interest payments are due, such payment will not become due and payable until such time as such payment can be made without violating any such agreement and not resulting in the Company and its subsidiaries having less cash or borrowing availability than the Board determines is necessary to operate the business as contemplated above.

Any promissory note issued under this Section 5.2 may be prepaid in whole or in part at any time and from time to time without premium or penalty.

5.3. Closing .

5.3.1. The closing of any purchase and sale of Shares pursuant to this Section 5 will take place as soon as reasonably practicable and in no event later than 30 days after termination of the Call Option Exercise Period at the principal office of the Company, or at such other time and location as the parties to such purchase may mutually determine.

5.3.2. At the closing of any purchase and sale of Shares following the exercise of any Call Option, the holders of Shares to be sold will deliver to the Company a certificate or certificates representing the Shares to be purchased by the Company duly endorsed, or with stock (or equivalent) powers duly endorsed, for transfer with signature guaranteed, free and clear of any lien or encumbrance, with any necessary stock (or equivalent) transfer tax stamps affixed, and the Company will pay to such holder by certified or bank check or wire transfer of immediately available federal funds or note, as may be applicable, the purchase price of the Shares being purchased by the Company. The delivery of a certificate or certificates for Shares by any Person selling Shares pursuant to

 

any Call Option will be deemed a representation and warranty by such Person that: (i) such Person has full right, title and interest in and to such Shares; (ii) such Person has all necessary power and authority and has taken all necessary action to sell such Shares as contemplated; (iii) such Shares are free and clear of any and all liens or encumbrances and (iv) there is no Adverse Claim with respect to such Shares.

5.4. Acknowledgment . Each holder of Management Shares acknowledges and agrees that neither the Company nor any Person directly or indirectly affiliated with the Company (in each case whether as a director, officer, manager, employee, agent or otherwise) will have any duty or obligation to affirmatively disclose to him, and he will not have any right to be advised of, any material information regarding the Company or otherwise at any time prior to, upon, or in connection with (i) any termination of his employment by the Company and its subsidiaries or (ii) the exercise of any Call Option or any purchase of the Shares pursuant thereto.

5.5. Period . The foregoing provisions of this Section 5 will expire upon the earlier of (a) a Change of Control and (b) the effectiveness of the Company’s registration statement in connection with a Qualified Public Offering.

6. RIGHT OF PARTICIPATION.

The Company will not issue or sell any shares of any of its capital stock or any securities convertible into or exchangeable for any shares of its capital stock, issue or grant any options or warrants for the purchase of, or enter into any agreements providing for the issuance (contingent or otherwise) of, any of its capital stock or any stock or securities convertible into or exchangeable for any shares of its capital stock, in each case, to any Investor, any Affiliated Fund or any limited partner of an Investor (each an “ Issuance ” of “ Subject Securities ”), except in compliance with the provisions of Section 6.1 or 6.2.

6.1. Right of Participation .

6.1.1. Offer . Not fewer than fifteen days prior to the consummation of an Issuance, a notice (the “ Participation Notice ”) will be furnished by the Company to each holder of Investor Shares and Other Investor Shares (the “ Participation Offerees ”). The Participation Notice will include:

(a) The principal terms of the proposed Issuance, including, without limitation, (i) the amount and kind of Subject Securities to be included in the Issuance, (ii) the number of Equivalent Shares represented by such Subject Securities (if applicable), (iii) the percentage of the total number of Shares consisting of Common Stock outstanding as of immediately prior to giving effect to such Issuance that the number of Shares consisting of Common Stock held by such Participation Offeree constitutes (the “ Participation Portion ”), (iv) the maximum and minimum price (including, without limitation, if applicable, the maximum and minimum Price Per Equivalent Share) per unit of the Subject Securities and (v) the name and address of the Investor or Affiliated Fund to whom the Subject Securities will be issued (the “ Prospective Subscriber ”); and

 

(b) An offer by the Company to issue, at the option of each Participation Offeree, to such Participation Offeree such portion of the Subject Securities to be included in the Issuance as may be requested by such Participation Offeree (not to exceed the Participation Portion of the total amount of Subject Securities to be included in the Issuance), on the same economic terms and conditions, with respect to each unit of Subject Securities issued to the Participation Offerees, as each of the Prospective Subscribers will be issued units of Subject Securities.

6.1.2. Exercise .

6.1.2.1. General . Each Participation Offeree desiring to accept the offer contained in the Participation Notice will send a written commitment to the Company within ten days after the effectiveness of the Participation Notice specifying the amount of Subject Securities (not in any event to exceed the Participation Portion of the total amount of Subject Securities to be included in the Issuance) that such Participation Offeree desires to be issued (each such Participation Offeree desiring to purchase Subject Securities, a “ Participating Purchaser ”). Each Participation Offeree who has not so accepted such offer will be deemed to have waived all of his rights with respect to the Issuance, and the Company will thereafter be free to issue Subject Securities in the Issuance to the Prospective Subscriber and any Participating Purchasers, at a price no less than the minimum price set forth in the Participation Notice and on other principal terms not substantially more favorable to the Prospective Subscriber than those set forth in the Participation Notice, without any further obligation to such non-accepting Participation Offerees with respect to such proposed issuance. If, prior to consummation, the terms of such proposed Issuance will change with the result that the price will be less than the minimum price set forth in the Participation Notice or the other principal terms will be substantially more favorable to the Prospective Subscriber than those set forth in the Participation Notice, it will be necessary for a separate Participation Notice to be furnished, and the terms and provisions of this Section 6.1 separately complied with, in order to consummate such Issuance pursuant to this Section 6.1.

6.1.2.2. Irrevocable Acceptance . The acceptance of each Participating Purchaser will be irrevocable except as hereinafter provided, and each such Participating Purchaser will be bound and obligated to acquire in the Issuance on the same terms and conditions, with respect to each unit of Subject Securities issued, as the Prospective Subscriber, such amount of Subject Securities as such Participating Purchaser will have specified in such Participating Purchaser’s written commitment.

6.1.2.3. Time Limitation . If at the end of the 180th day following the date of the effectiveness of the Participation Notice the Company has not completed the Issuance, each Participating Purchaser will be released from his obligations under the written commitment, the Participation Notice will be null

 

and void, and it will be necessary for a separate Participation Notice to be furnished, and the terms and provisions of this Section 6.1 separately complied with, in order to consummate such Issuance pursuant to this Section 6.1.

6.1.3. Other Securities . The Company may condition the participation of the Participation Offerees in an Issuance upon the purchase by such Participation Offerees of any securities (including, without limitation, debt securities) other than Subject Securities (“ Other Securities ”) in the event that the participation of the Prospective Subscriber in such Issuance is so conditioned. In such case, each Participating Purchaser will acquire in the Issuance, together with the Subject Securities to be acquired by it, Other Securities in the same proportion to the Subject Securities to be acquired by it as the proportion of Other Securities to Subject Securities being acquired by the Prospective Subscriber in the Issuance, on the same terms and conditions, as to each unit of Subject Securities and Other Securities issued to the Participating Purchasers, as the Prospective Subscriber will be issued units of Subject Securities and Other Securities.

6.1.4. Certain Legal Requirements . In the event that the participation in the Issuance by a holder of Shares as a Participating Purchaser would require under applicable law (i) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities or (ii) the provision to any participant in the Sale of any information regarding the Company or the securities, such holder of Shares will not have the right to participate in the Issuance. Without limiting the generality of the foregoing, it is understood and agreed that the Company will not be under any obligation to effect a registration of such securities under the Securities Act or similar state statutes.

6.1.5. Further Assurances . Each Participation Offeree and each Stockholder to whom the Shares held by such Participation Offeree were originally issued, will, whether in his capacity as a Participating Purchaser, Stockholder, officer or director of the Company, or otherwise, take or cause to be taken all such reasonable actions as may be necessary or reasonably desirable in order expeditiously to consummate each Issuance pursuant to this Section 6.1 and any related transactions, including, without limitation, executing, acknowledging and delivering consents, assignments, waivers and other documents or instruments; filing applications, reports, returns, filings and other documents or instruments with governmental authorities; and otherwise cooperating with the Company and the Prospective Subscriber. Without limiting the generality of the foregoing, each such Participating Purchaser and Stockholder agrees to execute and deliver such subscription and other agreements specified by the Company to which the Prospective Subscriber will be party.

6.1.6. Expenses . All reasonable costs and expenses incurred by the holders of Investor Shares or the Company in connection with any proposed Issuance of Subject Securities (whether or not consummated), including without limitation all attorney’s fees and charges, all accounting fees and charges and all finders, brokerage or investment banking fees, charges or commissions, will be paid by the Company. The reasonable fees and expenses of a single legal counsel representing any or all of the other holders of

 

Shares in connection with such proposed Issuance of Subject Securities (whether or not consummated) will be paid by the Company. Any other costs and expenses incurred by or on behalf of any other holder of Shares in connection with such proposed Issuance of Subject Securities (whether or not consummated) will be borne by such holder.

6.1.7. Closing . The closing of an Issuance pursuant to Section 6.1 will take place at such time and place as the Company will specify by notice to each Participating Purchaser. At the Closing of any Issuance under this Section 6.1.7, each Participating Purchaser will be delivered the notes, certificates or other instruments evidencing the Subject Securities (and, if applicable, Other Securities) to be issued to such Participating Purchaser, registered in the name of such Participating Purchaser or his designated nominee, free and clear of any liens or encumbrances, with any transfer tax stamps affixed, against delivery by such Participating Purchaser of the applicable consideration.

6.2. Post-Issuance Notice . Notwithstanding the notice requirements of Sections 6.1.1 and 6.1.2, the Company may proceed with any Issuance prior to having complied with the provisions of Section 6.1; provided, that the Company will:

(a) provide to each holder of Shares who would have been a Participation Offeree in connection with such Issuance (i) with prompt notice of such Issuance and (ii) the Participation Notice described in Section 6.1.1 in which the actual price per unit of Subject Securities (and, if applicable, actual Price Per Equivalent Share) will be set forth; and

(b) include in the subscription (or similar) agreement with the purchaser(s) of the Subject Securities and, if applicable, Other Securities, a provision permitting the Company to repurchase such securities in an amount necessary to satisfy the offers made by holders of Shares in accordance the provisions of Section 6.1.2 in response to the Participation Notice furnished pursuant to clause (a) above.

6.3. Excluded Transactions . Notwithstanding the preceding provisions of this Section 6, the preceding provisions of this Section 6 will not restrict:

(a) Any Issuance of Common Stock upon the exercise or conversion of any Common Stock, Options or Convertible Securities outstanding on the date hereof or issued after the date hereof in compliance with the provisions of this Section 6;

(b) The Issuance of Shares to the Investors at Closing; and

(c) Any Issuance of capital stock in connection with the financing of any business combination or business acquisition transaction involving the Company or any of its subsidiaries.

6.4. Acquired Shares . Any Subject Securities constituting shares of capital stock acquired by any holder of Shares pursuant to this Section 6 will be deemed for all purposes hereof to be Investor Shares or Other Investor Shares hereunder of like kind with the Shares then held by the acquiring holder.

 

6.5. Period . The foregoing provisions of this Section 6 will expire on the earlier of (a) a Change of Control or (b) the effectiveness of the Company’s registration statement in connection with an Initial Public Offering.

7. REGISTRATION RIGHTS.

The Company will perform and comply, and cause each of its subsidiaries to perform and comply, with such of the following provisions as are applicable to it. Each holder of Shares will perform and comply with such of the following provisions as are applicable to such holder.

7.1. Demand Registration Rights for Investor Shares .

7.1.1. General . One or more holders of Investor Shares representing at least 25% of the total amount of Investor Shares then outstanding (“ Initiating Investors ”), by notice to the Company specifying the intended method or methods of disposition, may request that the Company effect the registration under the Securities Act for a Public Offering of all or a specified part of the Registrable Securities held by such Initiating Investors (for purposes of this Agreement, “ Registrable Investor Securities ” will mean Registrable Securities constituting Investor Shares). The Company will then use its best efforts to effect the registration under the Securities Act of the Registrable Securities that the Company has been requested to register by such Initiating Investors together with all other Registrable Securities that the Company has been requested to register pursuant to Section 7.2 or by other holders of Registrable Investor Securities by notice delivered to the Company within 20 days after the Company has given the notice required by Section 7.2.1 (which request will specify the intended method of disposition of such Registrable Securities), all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities that the Company has been so requested to register; provided, however, that the Company will not be obligated to take any action to effect any such registration pursuant to this Section 7.1.1 within 180 days immediately following the effective date of any registration statement pertaining to an underwritten public offering of securities of the Company for its own account (other than a Rule 145 Transaction or a registration relating solely to employee benefit plans).

7.1.2. Form . Each registration requested pursuant to Section 7.1.1 will be effected by the filing of a registration statement on Form S-l (or any other form that includes substantially the same information as would be required to be included in a registration statement on such form as currently constituted), unless the use of a different form has been agreed to in writing by holders of at least a majority of the Registrable Investor Securities to be included in the proposed registration statement in question (the “ Majority Participating Investors ”).

7.1.3. Payment of Expenses . The Company will pay all reasonable expenses of holders of Investor Shares incurred in connection with each registration of Registrable Securities requested pursuant to this Section 7.1, other than underwriting discount and commission, if any, and applicable transfer taxes, if any.

 

7.1.4. Additional Procedures . In the case of a registration pursuant to Section 7.1 hereof, whenever the Majority Participating Investors will request that such registration will be effected pursuant to an underwritten offering, the Company will include such information in the written notices to holders of Registrable Securities referred to in Section 7.2. In such event, the right of any holder of Registrable Securities to have securities owned by such holder included in such registration pursuant to Section 7.1 will be conditioned upon such holder’s participation in such underwriting and the inclusion of such holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed upon by the Majority Participating Investors and such holder). If requested by such underwriters, the Company together with the holders of Registrable Securities proposing to distribute their securities through such underwriting will enter into an underwriting agreement with such underwriters for such offering containing such representations and warranties by the Company and such holders and such other terms and provisions as are