THIRD AMENDED AND RESTATED STOCKHOLDERS? AGREEMENT

 

 

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.             Definitions . As used in this Agreement, the following terms shall have the following respective meaning (such meanings being equally applicable to both the singular and plural form of the terms defined):

 

“ 10% Owner ” means any Person who, immediately prior to the contemplated transaction, owns in excess of 10% of the Stock on a Fully Diluted Basis, such percentage subject to appropriate adjustment for stock splits, reverse stock splits, combinations and other recapitalizations.

 

“ 15% Owner ” means any Person who, immediately prior to the contemplated transaction, owns in excess of 15% of the Stock on a Fully Diluted Basis, such percentage subject to appropriate adjustment for stock splits, reverse stock splits, combinations and other recapitalizations.

 

“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries Controls, is controlled by or is under common control with such Person and, as to any Person that is an individual, such individual’s Family Members and any trust for the benefit of any such Persons.

 

“ Agreement ” means this Third Amended and Restated Stockholders’ Agreement, including all amendments, modifications and supplements hereto and any exhibits or schedules to any of the foregoing, and shall refer to this Agreement as the same may be in effect at the time such reference becomes operative.

 

“ Approved Sale ” has the meaning ascribed thereto in Section 3.7 hereof.

 

“ Auction ” has the meaning ascribed thereto in Section 3.5(c) hereof.

 

“ Auction Offeree(s) ” has the meaning ascribed thereto in Section 3.5(c)(i) hereof.

 

“ Audit Committee ” means the Audit Committee of the Board of Directors.

 

“ Bankruptcy Code ” has the meaning ascribed thereto in Section 9.7 hereof.

 

“ Bid Price ” has the meaning ascribed thereto in Section 3.5(c)(i) hereof.

 

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

 

“ Business Day ” has the meaning ascribed thereto in Section 3.5(c)(i) hereof.

 

“ Bylaws ” means the Amended and Restated Bylaws of the Company in the form attached as Exhibit D to the Purchase Agreement.

 

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“ Certificate of Incorporation ” means the Certificate of Incorporation of the Company, as amended.

 

“ Charter Mx ” has the meaning ascribed thereto in the introduction hereof.

 

“ Claims ” has the meaning ascribed thereto in Section 8.2 hereof.

 

“ Committees ” has the meaning ascribed thereto in Section 2.2 hereof.

 

“ Common Share Equivalents ,” at any time, means Common Stock at the time outstanding or issuable upon conversion or exercise of the Series A Stock or any other securities convertible into or exercisable for Common Stock.

 

“ Common Stock ” means the shares of Common Stock, par value $0.01, of the Company.

 

“ Company ” has the meaning ascribed thereto in the introduction hereof.

 

“ Company Notice ” has the meaning ascribed thereto in Section 3.5(c)(ii) hereof.

 

“ Company Securities ” means (i) any shares of its Common Stock, (ii) any other capital stock or other equity securities of the Company or equity-linked securities, including, without limitation, shares of Series A Stock, (iii) any option, warrant or other right to subscribe for, purchase or otherwise acquire any capital stock or other equity securities of the Company, or (iv) any debt or other securities directly or indirectly convertible into capital stock or other equity securities of the Company. “Company Securities” shall not include (x) those options, warrants, convertible securities or shares of Common Stock excluded from the definition of Additional Common Stock pursuant to Section (B)4(d)(i)(4) of the Series A Certificate of Designation; or (y) any securities issued upon exercise or conversion of any other securities, provided that the preemptive rights provided herein applied with respect to the initial sale or issuance of such other securities or such other securities are specifically excluded from the definition of Company Securities pursuant to this clause (x) of this sentence.

 

“ Compensation Committee ” means the Compensation Committee of the Board of Directors.

 

“ Consent Right Holders ” has the meaning ascribed thereto in Section 6.1 hereof.

 

“ Controls ” including, with correlative meanings, the terms “controlled by” and “under common control with,” means, as to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“ Conversion Price ” has the meaning set forth in the Series A Certificate of Designation.

 

“ Equivalent Price ” shall be determined as follows:  with respect to (A) any share of Series A Stock proposed to be sold, the Equivalent Price for a share of Common Stock shall be the lesser of (i) the amount determined by dividing the amount payable in respect of such share of

 

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Series A Stock by the number of Common Share Equivalents represented by such share of Series A Stock and (ii) the fair market value of a share of Common Stock (as determined in good faith by the Board of Directors, taking into account the liquidation preference of the Series A Stock) and (B) any share of Common Stock proposed to be sold, the Equivalent Price for a share of Series A Stock shall be equal to the product of (x) the amount payable in respect of such share of Common Stock and (y) the number of Common Share Equivalents represented by such share of Series A Stock.

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

“ Executive Committee ” means the Executive Committee of the Board of Directors.

 

“ Existing Other Stockholders ” has the meaning ascribed thereto in Section 5.1.

 

“ Existing Shareholders Agreement ” has the meaning ascribed thereto in the recitals hereof.

 

“ Family Member ” means a spouse (or domestic partner), lineal descendant (by birth or adoption), father, mother, brother, sister, niece, nephew or lineal descendant of father or mother (by birth or adoption) of a Stockholder.

 

“ Follow-up Offer ” has the meaning ascribed thereto in Section 4.3 hereof.

 

“ Fully Diluted Basis ” means the amount of Common Stock outstanding calculated as if all securities convertible into or exchangeable for Common Stock at such time has been fully converted into or exchanged for shares of Common Stock, and any outstanding vested warrants, options or other rights for the purchase of Common Stock or securities convertible into Common Stock had been fully exercised as of such time, in each case, without regard to whether such instruments are then exercisable or convertible.

 

“ Future Issuance ” has the meaning ascribed thereto in Section 5.1 hereof.

 

“ Greenhill Funds ” means Greenhill Capital Partners, L.P., a Delaware limited partnership, Greenhill Capital Partners (Cayman), L.P., a Cayman Islands limited partnership, Greenhill Capital Partners (Executives), L.P., a Delaware limited partnership and Greenhill Capital, L.P., a Delaware limited partnership.

 

“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof and any Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

“ Independent Third Party ” means any Person who is not a 15% Owner, who is not controlling, controlled by or under common control with any such 15% Owner and who is not a Family Member of any such 15% Owner or a trust for the benefit of such 15% Owner or such other Person.

 

“ Investors ” has the meaning ascribed thereto in the introduction hereof.

 

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“ Joining Price ” has the meaning ascribed thereto in Section 3.6(b) hereof.

 

“ Joining Terms ” has the meaning ascribed thereto in Section 3.6(b) hereof.

 

“ Key Employees ” has the meaning ascribed thereto in Section 7.3 hereof.

 

“ Knowledge ” of a particular fact or other matter means, in the case of an individual that a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter and, in the case of a Person other than an individual, that any individual who is serving, or who has at any time served, as a director, officer, partner, member, manager, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or other matter.

 

“ Lathi ” has the meaning ascribed thereto in the introduction hereof.

 

“ Lathi Dilutive Sale ” has the meaning ascribed thereto in Section 5.1 hereof.

 

“ Lathi Loan Agreement ” means that certain Loan Agreement dated as of September 1, 2001 between Lathi and the Company, as amended on July 2, 2002, as amended and restated by that certain Amended and Restated Loan Agreement dated as of November 14, 2003 between Lathi and the Company, as amended on March 25, 2004 and as the same may be amended from time to time.

 

“ Liquidation Event ” has the meaning set forth in the Series A Certificate of Designation.

 

“ Lowest-Bid-Price Offeree ” has the meaning ascribed thereto in Section 3.5(c)(iii)(2) hereof.

 

“ Minimum Acceptable Price ” has the meaning ascribed thereto in Section 3.5(c) hereof.

 

“ Notice of Acceptance ” has the meaning ascribed thereto in Section 4.2 hereof.

 

“ Notice of Auction Commencement ” has the meaning ascribed thereto in Section 3.5(c)(ii)(2) hereof.

 

“ Notice of Offer ” has the meaning ascribed thereto in Section 3.5(b) hereof.

 

“ Offer ” has the meaning ascribed thereto in Section 4.1 hereof.

 

“ Offer Price ” has the meaning ascribed thereto in Section 3.5(b) hereof.

 

“ Offered Shares ” has the meaning ascribed thereto in Section 3.5(b) hereof.

 

“ Original Issue Date ” means the date on which the Series A Stock was first issued.

 

“ Original Series A Stock Issue Price ” has the meaning set forth in the Series A Certificate of Designation.

 

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“ Original Stockholder(s) ” has the meaning ascribed thereto in the introduction hereof.

 

“ Other Stockholder(s) ” has the meaning ascribed thereto in the introduction hereof.

 

“ Other Stockholders Dilutive Sale ” has the meaning ascribed thereto in Section 5.1 hereof.

 

“ Permitted Transferees ” has the meaning ascribed thereto in Section 3.4 hereof.

 

“ Person ” means an individual or a corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind.

 

“ Preemptive Right Holder(s) ” has the meaning ascribed thereto in Section 4.1 hereof.

 

“ Proportionate Percentage ” has the meaning ascribed thereto in Section 4.1 hereof.

 

“ Purchase Agreement ” has the meaning ascribed thereto in the recitals hereof.

 

“ Purchase Offer ” has the meaning ascribed thereto in Section 3.6(b) hereof.

 

“ Qualified Public Offering ” means the Company’s sale of shares of its Common Stock in a bona fide firm commitment underwritten public offering pursuant to a registration statement on Form S-1 (or a successor form) under the Securities Act, which results in an aggregate offering price of not less than $75,000,000 and a per share offering price of not less than (x) one and one-half (1.5) times the Conversion Price (appropriately adjusted to reflect the occurrence of any stock split, dividend, combination or similar event) for offerings occurring on or prior to the first anniversary of the Original Issue Date and (y) two (2) times the Conversion Price (appropriately adjusted to reflect the occurrence of any stock split, dividend, combination or similar event) for offerings occurring after the first anniversary of the Original Issue Date.

 

“ Qualifying Bid ” has the meaning ascribed thereto in Section 3.5(c)(i) hereof.

 

“ Remaining Company Securities ” has the meaning ascribed thereto in Section 4.3 hereof.

 

“ RFR Acceptance Notice ” has the meaning ascribed thereto in Section 3.5(c) hereof.

 

“ RFR Option Period ” has the meaning ascribed thereto in Section 3.5(c) hereof.

 

“ RFR Participant(s) ” has the meaning ascribed thereto in Section 3.5(c) hereof.

 

“ Rule 144 Sales ” means open market sales pursuant to Rule 144 under the Securities Act (or any successor rule or regulation) and in compliance with the requirements of paragraphs (c), (e) and (f) of such Rule, without giving effect to paragraph (k) of such Rule.

 

“ Securities Act ” means the Securities Act of 1933, as amended.

 

“ Selling Party ” has the meaning ascribed thereto in Section 3.6(a) hereof.

 

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“ Selling Stockholder ” has the meaning ascribed thereto in Section 3.5(b) hereof.

 

“ Series A Certificate of Designation ” means the Certificate of Designation of Series A Stock of the Company attached as Exhibit A to the Purchase Agreement, as the same may be amended from time to time.

 

“ Series A Director ” means the director(s) appointed by the Series A Investors.

 

“ Series A Investors ” has the meaning ascribed thereto in the introduction hereof.

 

“ Series A Share Equivalents ” means the Series A Stock and any Common Stock issued and outstanding as a result of the conversion or exercise of the Series A Stock.

 

“ Series A Stock ” has the meaning ascribed thereto in the recitals hereof.

 

“ Stock ” means, collectively, the Common Stock and the Series A Stock whenever or however acquired.

 

“ Stockholder(s) ” has the meaning ascribed thereto in the introduction hereof.

 

“ Tag-Along Right Holders ” has the meaning ascribed thereto in Section 3.6 hereof.

 

“ Third-Party Transferee ” has the meaning ascribed thereto in Section 3.5(e) hereof.

 

“ Tier ” has the meaning ascribed thereto in Section 3.5(c)(i) hereof.

 

“ Voting Stock ” means capital stock of any class or classes of the Company, the holders of which are entitled to participate generally in the election of the members of the Board of Directors, and shall include, without limitation, the Common Stock and the Series A Stock.

 

2.             Voting Rights .

 

2.1           Board of Directors . Each Stockholder shall vote (or shall cause to be voted) all shares of Voting Stock owned or controlled by such Stockholder (including any shares of Voting Stock hereafter acquired), at any regular or special meeting of stockholders of the Company, shall take all action by written consent in lieu of such meeting of stockholders, and shall take all other actions necessary, to ensure that:

 

(a)           the Board of Directors of the Company and each of its subsidiaries shall consist of at least six (6) members but no more than fifteen (15) members;

 

(b)           members of the Board of Directors of the Company and each of its subsidiaries shall be elected as follows:

 

(i)            for so long as the outstanding Series A Stock represents 10% or more of the Common Stock, on a Fully Diluted Basis, the holders of the outstanding shares of Series A Stock, voting as a separate class, shall be entitled, as provided in Section (B)5(b) of the Series A Certificate of Designation, to elect a number of directors equal to the

 

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largest whole number that is less than or equal to the number of directors comprising the entire Board of Directors divided by five, but in no event less than one (1) director;

 

(ii)           for so long as Lathi holds 10% or more of the Common Stock, on a Fully Diluted Basis, the holders of the Series A Stock and the Common Stock, voting together as a single class, one (1) director designated by Lathi; and

 

(iii)          the holders of the Series A Stock and the Common Stock, voting together as a single class, shall elect the remaining number of directors authorized; provided , however , that these rights may be modified pursuant to Section (B)5(c) of the Series A Certificate of Designation.

 

2.2           Committees of the Board . The Company shall establish the following committees (collectively, the “ Committees ”) of the Board of Directors:  an Executive Committee, a Compensation Committee and an Audit Committee. Such Committees shall have the powers and duties set forth in the resolutions of the Board of Directors authorizing the establishment of such Committees. The Board of Directors may establish any other committees if it determines that the creation of any such committees is in the best interests of the Company. The Board of Directors shall delegate to any such committees those duties and powers as are customarily performed by committees of such type. No Committee shall have more than three (3) members. At least one (1) director appointed by the holders of the Series A Stock shall serve on each Committee.

 

2.3           Removal . The Bylaws shall provide that: (a) a director designated and elected pursuant to Section 2.1 may be removed from the Board of Directors during such director’s term of office, either for or without cause by, and only by, the affirmative vote of the holders of a majority of the shares of such class or classes, as applicable, given at a special meeting of the stockholders duly called or by an action by written consent for that purpose; and (b) any director (regardless of how designated) may be removed for cause. Each holder of shares of such Voting Stock hereby agrees to vote all such shares then owned or held of record by him, or to take action by written consent, to effect the removal described in clause (a) of this Section 2.3.

 

2.4           Vacancies . In the event that a vacancy is created on the Board of Directors or the respective boards of directors of the Company’s subsidiaries by the death, disability, retirement, resignation or removal (with or without cause) of a director or otherwise there shall exist or occur any vacancy on the Board of Directors or the respective boards of directors of the Company’s subsidiaries, each Stockholder hereby agrees to vote or take action by written consent, in each case, to the extent such Stockholder shall be entitled to do so, to cause the vacancy to be filled by a designee of the particular class or classes of stock who had designated or was entitled to designate the director whose position has become vacant, provided that such designee was not previously a director of the Company or any of its subsidiaries who was removed for cause from the Board of Directors or the respective boards of directors of the Company’s subsidiaries.

 

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2.5           Observer Rights . For so long as the Greenhill Funds owns no less than all of the Series A Stock owned by the Greenhill Funds on the Original Issue Date, the Company shall invite and permit a representative of the Greenhill Funds to attend all meetings of the Board of Directors (and all committees thereof) in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other material that is provided to its directors; provided , however , that the Company reserves the right to exclude such representative from access to any material, meeting or portion thereof if the Company believes upon advice of counsel that such exclusion is reasonably necessary to preserve the attorney-client privilege. Such representative may participate in discussion of matters brought to the Board of Directors and may address the Board of Directors.

 

2.6           No Proxies . Each Stockholder covenants and agrees that, except (i) as a result of transfers permitted by, and pursuant to and in accordance with, this Agreement, (ii) as otherwise provided in the last sentence of Section 2.8 hereof, or (iii) as provided pursuant to a duly called stockholders meeting where such Stockholder grants its proxy to a Board designated proxy holder for the purposes of such meeting (which such proxy permits such designee to vote solely in accordance with the terms of this Agreement), such Stockholder will have sole voting power with respect to such Stockholder’s Voting Stock and will not grant any proxy with respect to such Voting Stock, enter into any voting trust or other voting agreement or arrangement with respect to such Voting Stock or grant any other rights to vote such Voting Stock other than the agreement to vote such Voting Stock set forth herein.

 

2.7           Director Expenses . The Company shall bear all reasonable out-of-pocket travel and related expenses incurred in accordance with the Company’s written policies regarding employees by each non-employee member of the Board of Directors or the respective boards of directors of any of the Company’s subsidiaries associated with attending board meetings and any Committees thereof.

 

2.8           Further Assurances . In order to effectuate the provisions of this Section 2, the Stockholders hereby agree that when any action or vote is required to be taken by such Stockholders pursuant to this Agreement, such Stockholders shall use their respective commercially reasonable efforts to call, or cause the appropriate officers and directors of the Company to call, a special or annual meeting of stockholders of the Company, as the case may be, or execute or cause to be executed a consent in writing in lieu of any such meetings pursuant to the Delaware General Corporation Law, to effectuate such stockholder action. In addition, if any Stockholder shall fail to vote as required by the specific terms of this Section 2, such Stockholder shall be deemed to have irrevocably constituted and appointed the other Stockholders as his proxy coupled with an interest to vote such Stockholder’s Voting Stock on a pro rata basis in accordance with the terms of this Section 2.

 

3.             Restrictions on Transfer .

 

3.1           General Restrictions .

 

(a)           In addition to each other restriction on transfer contained in this Agreement, except for (i) Rule 144 Sales, (ii) a sale of shares in a registered public offering and

 

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(iii) a transfer to the Company, no Stockholder shall sell, assign, transfer, pledge, or otherwise encumber or dispose of any Stock or any interest therein to any Person (regardless of the manner in which such Stockholder initially acquired such Stock), unless (a) the certificates representing the securities issued to the transferee bear appropriate legends reflecting the restrictions on transfer contained in this Agreement substantially to the following effect:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A STOCKHOLDERS’ AGREEMENT DATED AS OF JUNE 25, 2004 (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY) AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS’ AGREEMENT.

 

and (b) the transferee (if not already a party to this Agreement) shall have executed and delivered to the Company, as a condition to its acquisition of any such securities, an executed signature page in the form of Exhibit C to this Agreement and such additional documentation as reasonably requested by the Company, confirming that such transferee takes such securities subject to all the terms and conditions of this Agreement. During the term of this Agreement, each certificate representing securities of the Company held by a Stockholder or any Permitted Transferee shall bear the foregoing legend upon its face.

 

3.2           In addition to each other restriction on transfer contained in this Agreement, no Stockholder shall sell, assign, transfer, pledge or otherwise encumber or dispose of any shares of Stock, or any interest therein, to any Person unless such sale, assignment, transfer, pledge or other encumbrance or disposition is pursuant to an effective registration statement under the Securities Act and under applicable state securities laws or an exemption from such registration is available.

 

3.3                           (a)           The restrictions on transfer contained in this Agreement are in addition to, and not in limitation of, each other restriction on transfer contained in any other agreement between the Company and any Stockholder.

 

(b)           Any transfer of any shares of Stock pursuant to this Agreement shall be subject in all cases to the receipt of any required regulatory approvals.

 

3.4           Certain Permitted Transfers . Notwithstanding anything in this Agreement to the contrary, the restrictions contained in Sections 3.5 through 3.7 of this Agreement with respect to transfers of Stock shall not apply to any one or more transfers:

 

(a)           pursuant to a registered public offering;

 

(b)           without consideration by a Stockholder who is a natural person to a Family Member of such Stockholder or to a trust, corporation, partnership, limited liability

 

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company or other entity of which there are no principal beneficiaries, shareholders, partners or equity holders other than the Family Members of such Stockholder;

 

(c)           to a legal representative in the event any Stockholder who is a natural person becomes mentally incompetent;

 

(d)           by a Stockholder to an Affiliate of such Stockholder (including, without limitation, any transfer by Charter Mx or any of the Greenhill Funds to any of their respective members or partners or to the partners of their Affiliates and by Lathi to Sowood Commodity Partners LP or any of its Affiliates); and

 

(e)           by a Stockholder to the Company pursuant to any agreement between the Company and that Stockholder.

 

provided that in each of cases (b), (c) and (d), it shall be a condition to any such transfer that each transferee execute the signature page attached as Exhibit C hereto and any other agreement in form and substance reasonably satisfactory to the Company pursuant to which such transferee agrees in writing to take such Stock subject to, and to comply with, all terms and conditions contained in this Agreement. In addition, none of the restrictions on transfers of Stock contained in this Agreement shall apply to a transfer by a Stockholder who is a natural person upon his or her death, by will, by the laws of descent or by operation of law, except that it shall be a condition to any such transfer that each transferee execute the signature page attached as Exhibit C hereto and any other agreement in form and substance reasonably satisfactory to the Company pursuant to which such transferee agrees in writing to take such Stock subject to, and to comply with, all terms and conditions contained in this Agreement. Any transfer of Stock, or any interest therein, pursuant to and in compliance with this Section 3.4 shall be a permitted transfer under this Agreement, any transferee of Stock, or any interest therein, pursuant to and in compliance with this Section 3.4 (other than the Company) is herein referred to as a “ Permitted Transferee ,” and if not previously a Stockholder, shall, upon consummation of the transfer, be deemed a Stockholder and shall be included in the class of Stockholders in which the transferring Stockholder was included under this Agreement (for example, the Series A Investors).

 

3.5           Right of First Refusal . Except as otherwise permitted under Section 3.4 of this Agreement, and except for Rule 144 Sales and sales of shares in registered public offerings, a Stockholder may sell or otherwise transfer shares of Stock, or any interest therein, only in compliance with the provisions of this Section 3.5.

 

(a)           No Stock, or any interest therein (including, without limitation, any equity-linked security), shall be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, directly or indirectly, by any Stockholder except in accordance with the provisions of this Agreement, the Bylaws, the Certificate of Incorporation and the Series A Certificate of Designation, as applicable. The Company shall not transfer upon its books and records any Stock purported to be transferred to any Person in violation of this Section 3.5.

 

(b)           If any one or more Stockholders (each, a “ Selling Stockholder ”) wishes to transfer any of its Stock in compliance with this Section 3.5, the Selling Stockholder

 

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shall first deliver written notice to the Company (the “ Notice of Offer ”), which Notice of Offer shall specify (i) the number of shares of Stock owned by the Selling Stockholder which it wishes to sell (the “ Offered Shares ”); (ii) the proposed consideration per share for the Offered Shares (the “ Offer Price ”); and (iii) all other terms and conditions of the offer.

 

(c)           If a Selling Stockholder desires to sell Offered Shares pursuant to Section 3.5 hereof, it may, in its sole discretion, elect in its Notice of Offer delivered pursuant to Section 3.5(b) hereof to authorize the Company to conduct a declining-clock Dutch auction in accordance with the procedures set forth in this Section 3.5(c) (an “ Auction ”). Any Selling Stockholder making such an election shall be deemed irrevocably to have agreed, for the benefit of the Auction Offerees (as defined below) to whom Offered Shares are allocated pursuant to the Auction procedures set forth in this Section 3.5(c), to sell the Offered Shares that are so allocated to such Auction Offerees at the prices (which shall not be less than the Minimum Acceptable Price (as defined below)) determined by the Auction procedures. The Offer Price indicated in the Notice of Offer shall be considered the “ Minimum Acceptable Price ” for purposes of this Section 3.5(c). Notwithstanding the Selling Stockholder’s election, the Board of Directors (with the consent of the Series A Director) may in its sole discretion determine that the Company should decline to conduct an Auction, in which case the provisions of Section 3.5(d) through (g) hereof shall apply to the sale of such Selling Stockholder’s Offered Shares. No Auction Offeree shall be precluded from communicating with any other potential Auction Offeree concerning an Auction conducted pursuant to this Section 3.5(c).

 

(i)            Certain defined terms:

 

(1)           “ Qualifying Bid ” within any Tier (as defined below) means a bid submitted by an Auction Offeree in that Tier that:

 

a.     is timely submitted under the provisions of this Section 3.5(c).

 

b.     offers a bid price (the “ Bid Price ”) at or above the Minimum Acceptable Price.

 

c.     states a number of Offered Shares that such Auction Offeree wishes to purchase, which shall not be in excess of the total number of Offered Shares offered to Auction Offerees in that Tier.

 

d.     irrevocably offers to purchase all Offered Shares allocated to such Auction Offeree in accordance with the Auction procedures set forth in this Section 3.5(c).

 

(2)           “ Tier ” refers to any of the successive stages of an Auction conducted in accordance with this Section 3.5(c) involving offers to successive groups of Auction Offerees as provided under the definition of Auction Offeree (as defined below).

 

(3)           “ Auction Offeree ” means any of the holders of capital stock of the Company who may be offered the opportunity to purchase Offered Shares

 

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under the provisions of this Section 3.5(c) who, if offered the opportunity to purchase Offered Shares under the provisions of this Section 3.5(c), will be offered such opportunity in the following order (in all cases, other than the Selling Stockholders):

 

a.     if the Offered Shares are shares of Common Stock:

 

i.          First-Tier Auction Offeree:  the Company.

 

ii.         Second-Tier Auction Offerees:  the holders of shares of Series A Stock and Lathi.

 

iii.        Third-Tier Auction Offerees:  the Original Stockholders.

 

iv.        Fourth-Tier Auction Offerees:  the Other Stockholders.

 

b.     if the Offered Shares are shares of Series A Stock:

 

i.          First-Tier Auction Offeree:  the Company.

 

ii.         Second-Tier Auction Offerees:  the holders of shares of Series A Stock.

 

iii.        Third-Tier Auction Offerees:  Lathi.

 

iv.        Fourth-Tier Auction Offerees:  the Original Stockholders.

 

v.         Fifth -Tier Auction Offerees:  the Other Stockholders.

 

(4)           “ Business Day ” means any day other than a Saturday, Sunday or day on which national banks in New York City are authorized to close.

 

(ii)           Within five Business Days of receipt by the Company of a Notice of Offer from a Selling Stockholder pursuant to Section 3.5(b) hereof containing an election to authorize the Company to conduct an Auction, the Company shall provide written notice (the “ Company Notice ”) to the Selling Stockholder to the effect that the Board of Directors (with the consent of the Series A Director) has determined that the Company either (a) elects to proceed with an Auction pursuant to this Section 3.5(c), or (b) declines to proceed with an Auction pursuant to this Section 3.5(c). If the Board of Directors determines that the Company elects to proceed with an Auction:

 

(1)           If the Company, as the First Tier Auction Offeree, wishes to purchase any Offered Shares (as determined by the Board of Directors, with the consent of the Series A Director), it shall allocate to itself the number of Offered Shares it wishes

 

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to purchase and shall provide written notice to the Selling Stockholder within five Business Days of the date of the Company Notice. Such notice shall set forth the number of Offered Shares the Company has allocated to itself and the price per share that the Company will pay for such Offered Shares, which shall not be less than the Minimum Acceptable Price.

 

(2)           If the Company, as the First Tier Auction Offeree, does not wish to purchase any or all of the Offered Shares, the Company shall provide written notice to each Second Tier Auction Offeree of the commencement of the Auction for such Tier (“ Notice of Auction Commencement ”) within five Business Days of the date of the Company Notice. The Notice of Auction Commencement delivered to each Second Tier Auction Offeree (and to the Auction Offerees of each subsequent Tier) shall set forth the number and class of Offered Shares being offered to Auction Offerees in such Tier, the amount of the Minimum Acceptable Price and the deadline for submission of a Qualifying Bid. Any Second Tier Auction Offeree who wishes to purchase Offered Shares must submit a Qualifying Bid to the Company within five Business Days of the date of the Notice of Auction Commencement. In the event all Offered Shares are not allocated to Second Tier Auction Offerees who have submitted Qualifying Bids within three Business Days of the conclusion of the five Business-Day period referred to ab