Table of Contents

 

ARTICLE 1 CERTAIN DEFINITIONS
SECTION 1.01	Certain Definitions
ARTICLE 2 CORPORATE GOVERNANCE
SECTION 2.01	Composition of the Board
SECTION 2.02	Vacancies
SECTION 2.03	Committees
SECTION 2.04	Certificate of Incorporation and By-Laws to Be Consistent
SECTION 2.05	Approval of the Investor Group Required for Certain Actions
SECTION 2.06	Approval of Independent Directors Required for Certain Actions
ARTICLE 3 VOTING OF SHARES
SECTION 3.01	Agreement with Respect to Voting of Common Stock
ARTICLE 4 STANDSTILL, ACQUISITIONS OF SECURITIES AND OTHER MATTERS
SECTION 4.01	Acquisitions of Common Stock
SECTION 4.02	No Participation in a Group or Solicitation of Proxies
SECTION 4.03	Rights to Purchase New Securities
SECTION 4.04	Takeover Proposals by the Investor Group
SECTION 4.05	Affiliate Transactions
SECTION 4.06	Termination of Standstill Provisions
ARTICLE 5 RESTRICTIONS ON TRANSFERABILITY OF SECURITIES
SECTION 5.01	General
SECTION 5.02	Improper Sale or Encumbrance
SECTION 5.03	Restrictive Legends
SECTION 5.04	Sales of Significant Interests
ARTICLE 6 CORPORATE OPPORTUNITIES AND RELATED MATTERS
SECTION 6.01	Similar Activities or Lines of Business

 

i

 

ARTICLE 7 REPRESENTATIONS AND WARRANTIES
SECTION 7.01	Representations of the Company
SECTION 7.02	Representations of the Members of the Investor Group
ARTICLE 8 CONFIDENTIALITY
SECTION 8.01	Confidentiality
SECTION 8.02	Furnishing of Information
ARTICLE 9 MISCELLANEOUS
SECTION 9.01	Termination
SECTION 9.02	Notices
SECTION 9.03	No Third Party Beneficiaries
SECTION 9.04	Expenses
SECTION 9.05	Governing Law
SECTION 9.06	Waiver of Jury Trial
SECTION 9.07	Specific Performance
SECTION 9.08	Counterparts
SECTION 9.09	Entire Agreement
SECTION 9.10	Assignment
SECTION 9.11	Amendment
SECTION 9.12	Waiver
SECTION 9.13	Severability
SECTION 9.14	No Partnership
SECTION 9.15	Public Announcements
SECTION 9.16	Cumulative Remedies
SECTION 9.17	Interpretation; Headings
SECTION 9.18	Construction
SECTION 9.19	Director Duties
SECTION 9.20	Investors Rights

 

ii

 

STOCKHOLDERS’ AGREEMENT

 

This Stockholders’ Agreement (this “ Agreement ”) is made as of June 9, 2005, among Pathmark Stores, Inc., a Delaware corporation (the “ Company ”), and the Investors identified on the signature pages hereto (collectively, the “ Investors ”).

 

RECITALS

 

WHEREAS, the Company and the Investors have entered into the Securities Purchase Agreement dated as of March 23, 2005 (the “ Securities Purchase Agreement ”);

 

WHEREAS, upon consummation of the transactions contemplated by the Securities Purchase Agreement, the Investors will own an aggregate of 20,000,000 investment units (“ Units ”), consisting of an aggregate of 20,000,000 shares (the “ Shares ”) of common stock, par value $0.01 per share, of the Company (the “ Common Stock ”), 10,060,000 Series A warrants (the “ Series A Investor Warrants ”) to purchase additional shares of Common Stock and 15,046,350 Series B warrants (the “ Series B Investor Warrants ”; together with the Series A Investor Warrants, the “ Investor Warrants ”) to purchase additional shares of Common Stock (the Units, Shares and the Investor Warrants are collectively referred to herein as the “ Purchased Securities ”);

 

WHEREAS, the parties hereto wish to enter into this Agreement to set forth their agreement as to the matters set forth herein; and

 

WHEREAS, the execution and delivery of this Agreement is a condition to the obligations of the Investors and the Company under the Securities Purchase Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE 1
CERTAIN DEFINITIONS

 

SECTION 1.01                     Certain Definitions .  As used in this Agreement, the following terms shall have the following respective meanings:

 

“a ffiliate ” means, with respect to a specified person, a person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified person.

 

“ beneficial owner ” (and the related terms “ beneficially owned ”, “ beneficial owner” and “ beneficial ownership”) has the meaning ascribed to such term in Rule 13d-3 under the Exchange Act.

 

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

 

 

“ By-Laws ” means the Amended and Restated By-Laws of the Company, effective April 16, 2004, as they may hereafter be amended from time to time.

 

“ Cash Equivalents ” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof, (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc., (c) commercial paper maturing not more than one year from the date of issuance thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc., (d) certificates of deposit or bankers’ acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the Laws of the United States or any state thereof having at the date of acquisition thereof combined capital and surplus of not less than $250,000,000, (e) demand deposit accounts maintained with any bank organized under the Laws of the United States or any state thereof so long as the amount maintained with any individual bank is less than or equal to $100,000 and is insured by the Federal Deposit Insurance Corporation and (f) investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (e) above.

 

“ Certificate of Incorporation ” means the Amended and Restated Certificate of Incorporation of the Company, dated as of September 19, 2000, as it may hereafter be amended from time to time.

 

“ Closing ” means the closing of the issuance, purchase and sale of the Units contemplated by the Securities Purchase Agreement.

 

“ Commission ” means the Securities and Exchange Commission.

 

“ Confidentiality Agreement ” means the Confidentiality Agreement, dated as of January 7, 2005, between an affiliate of the Investors and the Company.

 

“ control ” (including the terms “ controlled by ” and “ under common control with ”) means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract, credit agreement or otherwise, including, without limitation, the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such person.

 

“ Discriminatory Transaction ”  means any corporate action that would (a ) impose material limitations on the legal rights of any member of the Investor Group as a holder of a class of voting stock, including any action that would impose material restrictions that are based on the size of security holding, any business in which a security holder is engaged or any other considerations applicable to any member of the

 

2

 

Investor Group and not to holders of the same class of voting stock generally, or (b) deny any material benefit to any member of the Investor Group proportionately as a holder of any class of voting stock that is made available to other holders of that same class of voting stock generally.

 

“ Encumbrance ” (including correlative terms such as “ Encumber ”) means any security interest, pledge, mortgage, lien, charge, adverse claim of ownership or use, hypothecation, violation, condition or restriction of any kind or other encumbrance of any kind.

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“ Fair Market Value ” means, for any applicable measurement date, the closing price of the Common Stock on Nasdaq or, in the event that trading hours on Nasdaq are extended past 4:00 p.m. New York Time, the last sale price at 4:00 p.m. New York Time.

 

“ Fully Diluted Basis ” means, in respect of the Common Stock or warrants to purchase shares of Common Stock, the method of calculating the number of shares of Common Stock outstanding on an applicable measurement date, pursuant to which the following shares shall be deemed to be outstanding:  (i) all shares of Common Stock outstanding on such measurement date and (ii) all shares of Common Stock issuable pursuant to any stock options of the Company or warrants outstanding at such time which are or may become exercisable (assuming all other conditions to or limitations on such exercise were satisfied) for shares of Common Stock at an exercise price at or below the then current Fair Market Value of the Common Stock.

 

“ Geographic Region ” means the States of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, Maryland and Virginia and the District of Columbia.

 

“ group ” means a “group” within the meaning of Section 13(d)(3) of the Exchange Act.

 

“ Independence Standard ” means the standard of independence necessary for a director to qualify as an “Independent Director” as such term (or any replacement term) is used under the rules and listing standards of Nasdaq as such rules and listing standards may be amended from time to time.

 

“ Investor Designated Director ” means such person as is so designated by the Investors prior to the Closing, or the Investor Group after the Closing, from time to time in accordance with this Agreement, to serve as a member of the Board and who is elected or appointed to serve as a member of the Board pursuant to Section 2.01 hereof.

 

“ Investor Group ” means the Investors and any Permitted Transferee of the Investors that has become a party to this Agreement in accordance with the provisions of Section 5.01(c) hereof.

 

“ Law ” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order issued or promulgated by any national, supranational, state, federal, provincial, local or municipal government or any administrative or regulatory body with authority therefrom with jurisdiction over the Company or any member of the Investor Group, as the case may be (including any requirements under the Exchange Act).

 

3

 

“ Management Agreement ” means the Management Agreement dated as of March 23, 2005, between the Company and an affiliate of the Investors, as it may hereafter be amended from time to time.

 

“ Marketable Securities ” means securities that are (a) (i) securities of or other interests in any person that are traded on a United States national securities exchange or quoted on the Nasdaq Stock Market or (ii) debt securities on market terms of an issuer that has debt or equity securities that are so traded or so reported on and in which Marketable Securities a nationally recognized securities firm has agreed to make a market, and (b) not subject to restrictions on transfer as a result of any applicable contractual provisions or the provisions of the Securities Act or, if subject to such restrictions under the Securities Act, are also subject to registration rights reasonably acceptable to the person receiving such Marketable Securities as consideration in a transaction pursuant to Section 4.03.

 

“ Nasdaq ” means The Nasdaq Stock Market, Inc.

 

“ Nasdaq Regulation ” means the rules and regulations of Nasdaq or any other applicable securities exchange on which the Common Stock is then listed.

 

“ New Securities ” means any capital stock of the Company, whether now authorized or not, and rights, options or warrants to purchase such capital stock, and securities of any type whatsoever (including, without limitation, convertible debt securities) that are, or may become, convertible into or exchangeable or exercisable for capital stock of the Company; provided that the term “New Securities” does not include (i) capital stock or rights, options or warrants to acquire capital stock of the Company issued to the employees, consultants, officers or directors of the Company, or which have been reserved for issuance, pursuant to employee stock option, stock purchase, stock bonus plan, or other similar compensation plan or arrangement approved by the Board, (ii) securities of the Company issued to all then-existing stockholders in connection with any stock split, stock dividend, reclassification or recapitalization of the Company, (iii) securities of the Company issued upon the exercise of warrants that are outstanding as of the date of this Agreement, (iv) securities of the Company issued in connection with a transaction of the type described in Rule 145 under the Securities Act, and (v) securities of the Company issued pursuant to a bona fide underwritten public offering.

 

“ Permitted Transferee ” means, with respect to a specified person, any affiliate of such person, provided that such person is not a Restricted Person.

 

“ person ” means any individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including, without limitation, a “person” or “group” within the meaning of Section 13(d)(3) of the Exchange Act), trust, association, or entity or government, political subdivision, agency or instrumentality of government.

 

The terms “ register ,” “ registered ” and “ registration ” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and the declaration or ordering of the effectiveness of such registration statement by the Commission.

 

4

 

“ Related Agreements ” means the Securities Purchase Agreement and the Management Agreement, together with that certain Registration Rights Agreement and that certain Warrant Agreement among the parties hereto and dated as of the date hereof.

 

“ Representative ” means, as to any person, such person’s affiliates and its and their directors, officers, employees, agents, advisors (including, without limitation, financial advisors, counsel and accountants) and such person’s financing sources.

 

“ Restricted Person ” means any person that derives at least 20% of its consolidated revenues from the operation by it of retail supermarkets which are located in the Geographic Region.

 

“ Rule 144 ” means Rule 144 (or any successor provisions) under the Securities Act.

 

“ Sale ” means, in respect of any Common Stock, Investor Warrants, or any other voting capital stock, any sale, assignment, transfer, distribution or other disposition thereof or of a participation therein, or other conveyance of legal or beneficial interest therein, or any short position in a security or any other action or position otherwise reducing risk related to ownership through hedging or other derivative instruments, whether voluntarily or by operation of Law.

 

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“ Sell ” and “ Sold ” means to complete a Sale.

 

“ subsidiary ” or “ subsidiaries ” of any person means any corporation, partnership, limited liability company, joint venture, association or other legal entity of which such person (either alone or together with any other subsidiary) owns, directly or indirectly, more than 50% of the stock or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

 

A “ Substantial Portion ” of any person means, as of any date of determination, more than 10% of the total consolidated assets of such person and its subsidiaries as of the end of its most recent fiscal quarter ending prior to the date of such determination.

 

Each of the following terms is defined in the Section set forth opposite such term:

 

Term		Section
Agreement		Preamble
Change of Control Proposal		4.04
Common Stock		Recitals

 

5

 

Term		Section
Company		Preamble
Confidential Information		8.01(b)
Covered Securities		5.01(a)
Credit Facility		2.05(f)
Independent Directors		2.01(a)
Initial Restricted Period		5.01(a)
Investor Warrants		Recitals
Investors		Preamble
Notice of Issuance		4.03(b)
Purchased Securities		Recitals
Securities Purchase Agreement		Recitals
Series A Investor Warrants		Recitals
Series B Investor Warrants		Recitals
Shares		Recitals
Special Committee		4.04(b)
Subsidiary Board		2.01(f)
Units		Recitals

 

ARTICLE 2
CORPORATE GOVERNANCE

 

SECTION 2.01                                 Composition of the Board .  (a)  Immediately after the Closing, the By-Laws shall be amended to provide that the authorized number of directors comprising the Board shall be eleven, unless changed in accordance with the provisions of this Agreement and the By-Laws.  The Board shall initially be composed of (i) five directors, who shall be designated by the Investors prior to the Closing in accordance with Section 6.08 of the Securities Purchase Agreement and Section 9.20 of this Agreement, and (ii) up to six directors, who shall be designated by the Board prior to the Closing in accordance with Section 6.08 of the Securities Purchase Agreement and who are individuals who comply with the Independence Standards (together with their successors elected in accordance with Section 2.02, the “ Independent Directors ”).  In the event that, immediately after the Closing, there are less than six Independent Directors, the vacancies shall be filled in the manner set forth in Section 2.02, except that the individual(s) selected shall be subject to the consent of the Investor Group, which consent shall not be unreasonably withheld.  The Investor Designated Directors and the Independent Directors shall serve in a manner consistent with the terms of the Certificate of Incorporation and By-Laws.

 

(b) From and after the Closing, the parties hereto shall use all reasonable efforts under applicable Law and Nasdaq Regulations to cause there to be (i) so long as the Investor Group beneficially owns 30% or more of the Common Stock, a number of Investor Designated Directors that is one less than the majority of the number of then-authorized directors of the Board; (ii) so long as the Investor Group beneficially owns less than 30% but 20% or more of the Common Stock, a number of Investor Designated Directors that is two less than the majority of the number of then-authorized directors of the

 

6

 

Board; and (iii) so long as the Investor Group beneficially owns less than 20% but 10% or more of the Common Stock, a number of Investor Designated Directors that is three less than a majority of the number of then-authorized directors of the Board.  In the event that, at any time, the number of Investor Designated Directors then in office exceeds the number set forth in the preceding sentence, at the request of the majority of the Independent Directors then in office, an appropriate number of Investor Designated Directors shall resign from office.  In the event the Investor Group beneficially owns less than 10% of the Common Stock, the Investor Group shall have no right to designate any Investor Designated Director, and, at the request of a majority of the Independent Directors then in office, shall cause any Investor Designated Directors then in office to resign immediately upon such event.  For purposes of the calculations of the percentages set forth in this Section 2.01(b), any shares of voting equity securities issued after the date of this Agreement (other than shares of Common Stock issued upon exercise of the Investor Warrants) shall not be included in the computations of beneficial ownership for purposes of this Section 2.01(b).

 

(c) At each stockholders’ meeting of the Company at which directors will be elected, the Investor Group shall be entitled, any time prior to the mailing of the applicable proxy statement of the Company, to propose and nominate that number of Investor Designated Directors as set forth in Section 2.01(b) as members of the Board.  The Independent Directors to be nominated and elected at any such stockholders’ meeting shall be nominated by a majority of the Independent Directors then in office.  The Company and the Board will include the persons so nominated by the members of the Investor Group and the Independent Directors in each slate of directors proposed, recommended or nominated for election by the Company or the Board and will recommend and use all reasonable efforts to cause the election of such persons nominated.  The Company agrees to use all reasonable efforts to solicit proxies for such nominees for director from all holders of voting stock entitled to vote thereon.  Such nominees shall serve in a manner consistent with the terms of the Certificate of Incorporation and By-Laws.

 

(d) To the extent required by Nasdaq Regulations, those members of the Board that are not Investor Designated Directors shall at all times satisfy the Independence Standard.

 

(e) The Board shall take all necessary action, including amending the By-Laws, to provide that at every meeting of the Board, a majority of the directors constituting all of the then-authorized total number of directors shall constitute a quorum.

 

(f) At any time after the Closing, upon the request of the Investor Group, the Company and the Board shall take all actions necessary so that the composition of the board of directors, general partner, managing member (or controlling committee thereof) or any other board or committee serving a similar function with respect to each of the Company’s subsidiaries (each a “ Subsidiary Board ”) and each committee of each Subsidiary Board shall be proportionate to the composition requirements of the Board and of each committee thereof such that members of the Investor Group shall have the same proportional representation (rounded to the nearest whole number of directors, but in no event less than one) on each Subsidiary Board and committee thereof as the members of

 

7

 

the Investor Group have the right to designate to the Board and committees thereof.  The quorum and action requirements of each Subsidiary Board and of each committee of each Subsidiary Board shall, to the extent requested by the Investor Group, be the same as the quorum and action requirements of the Board and each committee thereof.

 

SECTION 2.02                     Vacancies .  In the event of any vacancy for any reason in any Board seat reserved for Investor Designated Directors, the Investor Group shall have the sole right to nominate another individual to serve as an Investor Designated Director.  In the event of any vacancy for any reason in any Board seat reserved for Independent Directors, a majority vote of the Independent Directors then in office shall have the sole right to nominate another individual to serve as an Independent Director, so long as he or she complies with the Independence Standard, and such new director, when appointed or elected, shall be an Independent Director for purposes of this Agreement.  In each case, to the extent permitted by the Certificate of Incorporation and By-Laws, the Board shall elect each such person so nominated as soon as possible after the occurrence of the nomination to fill such vacancy.  No Investor Designated Director shall be removed as a director of the Company without cause, without the approval of a majority of the other Investor Designated Directors then in office.  No Independent Director shall be removed as a director of the Company without cause, without the approval of a majority of the other Independent Directors then in office.

 

SECTION 2.03                     Committees .  (a)  At Closing, the Board shall have such committees as may be required by Law or Nasdaq Regulation, and such other committees as the Board may from time to time establish.  Each such committee and the Board shall take all actions necessary so that each such committee shall be comprised of not less than three directors.  To the extent permitted by Nasdaq Regulation, and subject to Section 2.03(b), a number of Investor Designated Directors equal to one less than a majority of all directors serving on each committee shall be appointed to such committee.

 

(b) To the extent that no Investor Designated Director is permitted under Nasdaq Regulations to serve on a particular committee of the Board, the Company and the Board shall take all necessary action to permit at least one Investor Designated Director to attend each meeting of such committee as a non-voting observer, in each case to the extent permitted by such Nasdaq Regulation, and such observer shall be provided with such notice of the meeting and information regarding the meeting as is provided to members of such committee.

 

SECTION 2.04                     Certificate of Incorporation and By-Laws to Be Consistent .  The Board shall take or cause to be taken all lawful action necessary or appropriate to ensure that none of the Certificate of Incorporation or the By-Laws or any of the corresponding constituent documents of the Company’s subsidiaries contain any provisions inconsistent with this Agreement or which would in any way nullify or impair the terms of this Agreement or the rights of the Company or of the Investor Group hereunder.

 

SECTION 2.05                     Approval of the Investor Group Required for Certain Actions .  In addition to any approval by the Board required by the Certificate of Incorporation, the By-Laws, applicable Law or Nasdaq Regulation, the prior written approval of the

 

8

 

Investor Group shall be required in order for the Board to validly approve and authorize any of the following:

 

(a) the entry by the Company or any of its subsidiaries into any merger or consolidation, or the acquisition (whether by merger, consolidation, purchase of assets or stock or otherwise) by the Company or any of its subsidiaries of any business or assets, if the value of the consideration to be paid or received by the Company and/or its stockholders in any such individual transaction, or in such transaction when added to the aggregate value of the consideration paid or received by the Company and/or its stockholders in all other such transactions approved by the Board during the preceding 12 months, exceeds a Substantial Portion of the Company;

 

(b) the authorization or issuance of any equity securities or any securities convertible into or exercisable for equity securities of the Company or any subsidiary of the Company (other than options or warrants outstanding on the date of this Agreement or pursuant to employee or director stock option or incentive compensation or similar plans approved by the Board or a duly authorized committee of the Board after the date of this Agreement, including by at least one of the Investor Designated Directors on such Board or committee);

 

(c) any sale, asset exchange, lease, exchange, mortgage, pledge, transfer or other disposition by merger or otherwise by the Company or any of its subsidiaries (in one transaction or a series of related transactions) of any securities or assets of the Company or any subsidiary thereof which constitutes a Substantial Portion of the Company;

 

(d) any amendment to the Certificate of Incorporation or By-Laws, or the adoption of or amendment to the certificate of incorporation or by-laws of any subsidiary of the Company;

 

(e) any change in the authorized number of directors of the Board of the Company or the establishment or abolition of any Board Committee;

 

(f) any incurrence or repayment (prior to scheduled maturity) of indebtedness (including capitalized leases) in an aggregate amount greater than $10,000,000, except for borrowings under the Company’s existing amended and restated credit facility dated as of October 1, 2004 (the “ Credit Facility ”) as such Credit Facility may be amended, restated, refinanced or replaced, in whole or in part, from time to time with the prior written approval of the Investor Group;

 

(g) any action to repurchase, retire, redeem or otherwise acquire any equity securities of the Company or any subsidiary of the Company, pursuant to self-tender offers, stock repurchase programs, open market transactions, privately-negotiated purchases or otherwise;

 

(h) the entry by the Company or any of its subsidiaries into any Discriminatory Transaction;

 

9

 

(i) take any action to declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock or enter into any agreement with respect to the voting of its capital stock;

 

(j) any appointment or termination of any person as the Chief Executive Officer, President or Chief Financial Officer of the Company; or

 

(k) any action to adopt, propose to adopt, or maintain any shareholders’ rights plan, “poison pill” or other similar plan or agreement (or any other plan or arrangement that could reasonably be expected to disadvantage any stockholder on the basis of the size or voting power of its shareholding).

 

The Company shall not, and shall not permit any of its subsidiaries to, take any of the actions specified above without the Investor Group approvals required above. Notwithstanding the foregoing, no approval of the Investor Group shall be required for the Board to approve or authorize (a) the payment of any dividend or the making of any other distributions by any subsidiary of the Company to the Company or another subsidiary of the Company, (b) the payment by any subsidiary of the Company of any indebtedness owed to the Company, (c) the making of any loans by, or advances from, any subsidiary of the Company to the Company, or (d) the transfer by any subsidiary of the Company of any of its property or assets to the Company.

 

SECTION 2.06                     Approval of Independent Directors Required for Certain Actions .  In addition to any approval by the Board required by the Certificate of Incorporation, the By-Laws, applicable Law or Nasdaq Regulations, the vote of at least one of the Independent Directors then in office shall be required in order for the Board to approve and authorize any action; provided, however,  that, at any time when the number of Independent Directors then in office on the Board is five or more, the vote of at least two of the Independent Directors then in office shall be required in order for the Board to approve and authorize any of the following actions:

 

(a) any amendment to the certificate of incorporation or by-laws, or the adoption of or amendment to the certificate of incorporation or by-laws of any subsidiary of the Company (other than to file any amendment that would increase the amount of the Company’s authorized Common Stock or one or more certificates of designation to establish one or more series of preferred stock);

 

(b) any change in the authorized number of directors of the Board or the establishment or abolition of any Board committee;

 

(c) the entry by the Company or any of its subsidiaries into any merger or consolidation, or the acquisition (whether by merger, consolidation, purchase of assets or stock or otherwise) by the Company or any of its subsidiaries of any business or assets, if the value of the consideration to be paid or received by the Company and/or its subsidiaries and/or the Company’s stockholders in any such transaction exceeds $100 million;

 

10

 

(d) take any action to declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock or enter into any agreement with respect to the voting of it’s capital stock;

 

(e) any incurrence of indebtedness (including capitalized leases) which would, when combined with all other indebtedness of the Company and its subsidiaries then outstanding, as reflected on the most recent available consolidated balance sheet of the Company plus indebtedness incurred after the date of such balance sheet, exceed $750 million in the aggregate; and

 

(f) any action to repurchase, retire, redeem or otherwise acquire any equity securities of the Company or any subsidiary of the Company, pursuant to self- tender offers, stock repurchase programs, open market transactions, privately negotiated purchases or otherwise to the extent that the aggregate payments made by the Company therefor after the date of this Agreement exceed $100 million.

 

Notwithstanding the foregoing, no approval of any Independent Directors shall be required for the Board to approve or authorize (a) the payment of any dividend or the making of any other distributions by any subsidiary of the Company to the Company or another subsidiary of the Company, (b) the payment by any subsidiary of the Company of any indebtedness owed to the Company, (c) the making of any loans by, or advances from, any subsidiary of the Company to the Company, or (d) the transfer by any subsidiary of the Company of any of its property or assets to the Company.

 

ARTICLE 3
VOTING OF SHARES

 

SECTION 3.01                                 Agreement with Respect to Voting of Common Stock .  (a)  In any election of directors at a meeting of the stockholders of the Company, the Investor Group shall cause all shares of Common Stock held by them to be represented at such meeting either in person or by proxy and shall vote their shares of voting stock for all nominees nominated by the Independent Directors, in proportion to the votes cast by the holders of Common Stock (other than the Investor Group); provided, however, that, in their sole and absolute discretion, the Investor Group shall be permitted to cast a greater number of votes held by the