SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 23, 1998
MLC HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 000-2896 54-1817218
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
11150 Sunset Hills Road, Suite 110, Reston, Virginia 20190
(Address, including zip code, of principal executive office)
(703) 834-5710
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(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events.
On October 23, 1998, TC Leasing, LLC, a Delaware limited liability company,
purchased 1,111,1111 shares of common stock, $0.0l par value per share, of MLC
Holdings, Inc. ("MLC" or the "Company") for a price of $9.00 per share or
$10,000,000 in aggregate. In addition to the shares, the Company, pursuant to a
Stock Purchase Warrant dated as of October 23, 1998, granted TC Leasing, LLC the
right to purchase an additional 1,090,909 shares of MLC common stock at a price
of $11.00 per share, subject to certain anti-dilution adjustments. The warrant
is exercisable through December 31, 2001, unless it is extended pursuant to the
terms of the warrant.
The shares issued to TC Leasing, LLC were not registered under the
Securities Act of 1933, as amended, and the shares were issued pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended .
The managing member of TC Leasing, LLC is Thayer Equity Investors III,
L.P., a Delaware limited partnership. The general partner of Thayer Equity
Investors III, L.P., is TC Equity Partners, L.L.C., a Delaware limited liability
company. Three individuals, Frederic V. Malek, Carl J. Rickertsen, and Paul G.
Stern, are the only founding members of TC Equity Partners III, L.L.C. and,
accordingly, control TC Leasing, LLC, which purchased the shares of MLC common
stock. Mr. Rickertsen has served as a Director of the Company since November
1996.
TC Leasing, LLC purchased the shares of common stock pursuant to a Common
Stock Purchase Agreement, dated as of October 23, 1998. Under the terms of the
Common Stock Purchase Agreement, MLC has agreed to certain continuing
obligations. In particular, MLC is required to: (i) deliver to TC Leasing, LLC
certain financial statements, operating budgets, press releases and regulatory
filings relating to MLC; (ii) provide prompt notice to TC Leasing, LLC of any
defaults under any agreements of the company or any of its subsidiaries which
are likely to have a material adverse effect on the Company; and (iii) refrain
from engaging in any transaction with any officer, director, employee or
affiliate of MLC (or certain family members thereof) unless such transaction was
negotiated at arms length in good faith and has a value of less than $150,000 or
is approved by TC Leasing, LLC. Significantly, the Company may not pay any
dividends or make any other distributions on MLC common stock until October 23,
1999, without the prior written consent of TC Leasing, LLC.
As a condition to entering into the Common Stock Purchase Agreement, TC
Leasing, LLC entered into a Stockholders Agreement, dated as of October 23,
1998, with the Company, Phillip G. Norton, the Chairman of the Board and Chief
Executive Officer of the Company, Bruce M. Bowen, a Director and the Executive
Vice President of the Company, J.A.P. Investment Group, L.P., a Delaware limited
partnership, Kevin M. Norton, and Patrick J. Norton, Jr. (the "Management
Stockholders").
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Pursuant to the Stockholders Agreement, MLC agreed to expand the Board of
Directors to six persons. The Stockholders Agreement gave TC Leasing, LLC, the
right to name two of the directors. One of such directors, Mr. Rickertsen,
already serves on the Board of Directors of MLC. TC Leasing, LLC has named and
the Board of Directors has elected Mr. Stern to serve as the other director
representing TC Leasing, LLC. The Management Stockholders are permitted to name
two of the remaining four directors. Mr. Phillip Norton and Mr. Bowen, both of
whom are already serving on the Board of Directors of MLC, will serve as
representatives of the Management Stockholders. Under the terms of the
Stockholders Agreement, the last two positions, the independent directors, are
to be chosen by a nominating committee consisting of one representative of TC
Leasing, LLC and one representative of the Management Stockholders. To satisfy
this last provision, TC Leasing, LLC and the Management Stockholders have agreed
that C. Thomas Faulders, III and Terrence O'Donnell, both of whom currently
serve on the Board of Directors of MLC will continue to serve as directors of
MLC.
The Stockholders Agreement also grants TC Leasing, LLC preemptive rights
restricts the ability of the Management Stockholders and TC Leasing, LLC to
transfer their shares of MLC common stock and permits TC Leasing, LLC to force
the sale of the entire Company under certain limited circumstances. Until April
23, 1999, the Company may not issue, without the prior written consent of TC
Leasing, LLC, any shares of MLC common stock, any convertible debt securities,
any security which is a combination of a debt and equity security or any option
warrant or other right to subscribe for such a security. Until October 23, 1999,
the Company may not issue any such securities without first offering to sell
them to TC Leasing, LLC. Finally, until October 23, 2000, the Company may not
sell any such securities without first giving TC Leasing, LLC the opportunity to
purchase enough of such securities to maintain their percentage ownership
position in the Company. However, except for a few instances set forth in the
Stockholders Agreement, regardless of the other rights set forth in the
Stockholders Agreement, without the prior written consent of holders of a
majority of the shares held by the Management Stockholders, TC Leasing, LLC may
not beneficially own more than 33.3% of the issued and outstanding shares of MLC
common stock on a fully diluted basis.
TC Leasing, LLC and the Management Stockholders may transfer their shares
of MLC common stock to their respective affiliates subject to certain
restrictions. In particular, such transferee must join in the Stockholders
Agreement. The limitations on transferability also prevent TC Leasing, LLC from
controlling more than 33.3 percent of the shares of MLC common stock outstanding
on a fully diluted basis without the prior consent of the Management
Stockholders, except for a few instances set forth in the Stockholders
Agreement. The limitataions also prevent TC Leasing, LLC and the Management
Stockholders from transferring shares if such transfer would result in TC
Leasing, LLC and the Management Stockholders controlling less than 51 percent of
the outstanding shares of MLC common stock. The Management Stockholders may in
certain circumstances sell their shares for value to the public subject to TC
Leasing, LLC having a right of first refusal and "tag-along" rights in certain
circumstances. TC Leasing, LLC may only sell a block of shares, i.e., shares
constituting more than 5 percent of the total outstanding shares of MLC common
stock, if TC Leasing, LLC first offers the shares to the Management
Stockholders. Certain other restrictions on the transfer of MLC common stock by
the parties to the Stockholders Agreement are set forth in the agreement.
Under the Stockholders Agreement, TC Leasing, LLC can force a sale of the
Company unless the Management Stockholders agree to purchase TC Leasing, LLC's
shares for the same value as would be paid in the sale transaction. Such a
forced sale may only occur if the consideration to be paid to stockholders of
the Company in the transaction meets certain threshhold levels set forth in the
Stockholders Agreement.
<PAGE>
The Stockholders Agreement also gives TC Leasing, LLC certain demand, shelf
and piggy-back registration rights in connection with the shares TC Leasing, LLC
purchased or has the option to purchase pursuant to the Stock Purchase Warrant.
For additional information regarding the Common Stock Purchase Agreement,
the Stockholders Agreement, and the Stock Purchase Warrant, please refer to the
copies of those documents which are incorporated herein by reference and
included as Exhibits to this Current Report on Form 8-K. The foregoing
discussion is qualified in its entirety by reference to such documents.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MLC HOLDINGS, INC.
(Registrant)
By: /S/ PHILLIP G. NORTON
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By: Phillip G. Norton, Chairman of
the Board, President and Chief
Executive Officer
Date: November 13, 1998
<PAGE>
INDEX TO EXHIBITS
SEQUESTERED
EXHIBIT NO. ITEM PAGE NO
2.1 Stock Purchase Agreement, dated
as of October 23, 1998 by and between
MLC Holdings Inc., and TC Leasing, LLC
2.2 Stockholders Agreement dated as of
October 23, 1998, by and among
MLC Holdings, Inc. TC Leasing, LLC,
Phillip G. Norton, Bruce M. Bowen,
J.A.P. Investment Group, L.P.,
Kevin M. Norton, and Patrick J. Norton, Jr.
2.3 Stock Purchase Warrant, dated as of
October 23, 1998, by and between MLC
Holdings, Inc. and TC Leasing, LLC
99.1 Text of press release, dated October 23,
1998, issued by MLC Holdings, Inc.
COMMON STOCK PURCHASE AGREEMENT
BY AND BETWEEN
MLC HOLDINGS, INC.
AND
TC LEASING, LLC
October 23, 1998
<PAGE>
TABLE OF CONTENTS
Page
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1. Authorization and Closing.......................................1
1A. Authorization of the Common Stock.................1
1B. Purchase and Sale of the Shares...................1
1C. The Closing.......................................1
2. Deliveries at Closing...........................................1
2A. The Company's Deliveries at Closing...............1
2B. Purchaser's Deliveries at the Closing.............3
3. Definitions.....................................................3
3A. Definitions.......................................3
4. Covenants.......................................................8
4A. Financial Statements and Other Information........8
4B. Restrictions.....................................10
4C. Public Disclosures...............................10
4D. Use of Proceeds..................................11
4E. Payment of Bonuses to Norton.....................11
4F. Confidentiality..................................11
4G. Filings..........................................11
4H. Mergers or Consolidations........................12
4I. Material Decisions...............................12
4J. Super Majority Board Approval....................12
4K. Compensation Committee...........................13
4L. Determination Letter.............................13
4M. Transfer Agent Restriction.......................13
5. Representations and Warranties of the Company.............13
5A. Organization, Corporate Power and Licenses.......13
5B. Capitalization and Related Matters...............14
5C. Subsidiaries.....................................14
5D. Authorization; No Breach.........................15
5E. SEC Documents and Financial Statements...........15
5F. Reports with the SEC.............................16
5G. Absence of Undisclosed Liabilities...............16
5H. Absence of Certain Developments..................16
5I. Properties.......................................17
5J. Assets...........................................18
5K. Tax Matters......................................18
5L. Brokerage........................................20
5M. Employees........................................20
5N. ERISA............................................20
5O. Compliance with Laws.............................22
5P. Environmental, Health, and Safety Matters........22
5Q. Affiliated Transactions..........................23
5R. Contracts and Commitments........................23
5S. Intellectual Property............................25
5T. Litigation.......................................25
5U. Year 2000........................................25
5V. Disclosure.......................................26
6. Representations and Warranties of Purchaser....................26
6A. Organization and Power of Purchaser..............26
6B. Authorization; No Breach.........................26
6C. Brokerage........................................27
6D. Purchaser's Investment Representations...........27
7. Termination....................................................27
7A. Termination......................................27
8. Representations and Warranties.................................28
8A. Survival of Representations and Warranties.......28
8B. Indemnification..................................28
9. Miscellaneous..................................................28
9A. Expenses.........................................28
9B. Consent to Amendments............................28
9C. Successors and Assigns...........................28
9D. Severability.....................................28
9E. Counterparts.....................................29
9F. Descriptive Headings; Interpretation.............29
9G. Governing Law....................................29
9H. Notices..........................................29
9I. No Strict Construction...........................30
9J. Entire Agreement.................................30
EXHIBITS:
Exhibit 2.1 -- Stock Purchase Agreement
Exhibit 2.2 -- Stockholders Agreement
Exhibit 2.3 -- Stock Purchase Warrant
Exhibit 99.1 -- Text of Press Release, dated October 23, 1998
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
October 23, 1998, by and between MLC Holdings, Inc., a Delaware corporation (the
"Company"), and TC Leasing, LLC, a Delaware limited liability company (the
"Purchaser"). Capitalized terms used herein are defined in Section 3A hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
1A. Authorization of the Common Stock. The Company has authorized the
issuance and sale to Purchaser of 1,111,111 shares (the "Shares") of the
Company's newly issued Common Stock, par value $.01 per share (the "Common
Stock").
1B. Purchase and Sale of the Shares. At the Closing, subject to the terms
and conditions set forth herein, the Company shall sell to Purchaser and
Purchaser shall purchase from the Company, the Shares, free of all Liens (other
than transfer restrictions imposed by federal or state securities laws), for an
aggregate price of $10,000,000 (the "Purchase Price").
1C. The Closing. The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of Kirkland & Ellis, 655 Fifteenth
Street, N.W., Washington, D.C. 20005 contemporaneously with the execution and
delivery of this Agreement and the execution of the Stockholders Agreement and
the Stock Purchase Warrant. Each of this Agreement, the Stockholders Agreement
and the Stock Purchase Warrant is conditioned upon, and shall only be effective
upon, the consummation of the other agreements.
Section 2. Deliveries at Closing.
2A. The Company's Deliveries at Closing. At or before the Closing, the
Company shall deliver to Purchaser all of the following:
(i) certified copies of the resolutions duly adopted by the board of
directors (including all of the non-employee directors) of Company
authorizing (a) the performance of this Agreement, the Stockholders
Agreement and the Stock Purchase Warrant by the Company, and (b) the
consummation of all transactions contemplated by this Agreement, the
Stockholders Agreement and the Stock Purchase Warrant by the Company;
<PAGE>
(ii) a certified copy of the Certificate of Incorporation of the
Company (the "Charter") as in effect at the Closing, a certified copy of
the by-laws of the Company as in effect at the Closing (as amended as set
forth in Exhibit 2A(ii) attached hereto, the "By-Laws") and a certificate
of good standing of the Company from each jurisdiction in which the Company
is qualified to do business as a domestic or foreign corporation dated
within 5 days of the Closing;
(iii) a certified copy of the certificate of incorporation of each
domestic Subsidiary as in effect at the Closing, a certified copy of the
by-laws of each domestic subsidiary as in effect at the Closing and a
certificate of good standing of each domestic Subsidiary from each
jurisdiction in which such domestic Subsidiary is qualified to do business
as a domestic corporation dated within 5 days of the Closing;
(iv) a legal opinion from Alston & Bird, L.L.P. as to the matters set
forth in Exhibit 2A(iv) attached hereto;
(v) a legal opinion from Geltner & Associates, P.C. as to the matters
set forth in Exhibit 2A(v) attached hereto wit respect to J.A.P. Investment
Group, Inc.;
(vi) an executed copy of this Agreement and all other related
agreements, documents or certificates to which the Company is a party;
(vii) an executed copy of an amendment to the Company's 1998 Long-Term
Incentive Plan in the form set forth in Exhibit 2A(vii) attached hereto;
(viii) stock certificates for the Shares registered in Purchaser's
name;
(ix) certified copies of the resolutions duly adopted by the board of
directors of Company electing Dr. Paul G. Stern as a "Class I" director of
the Company and a member of the Compensation Committee of the board of
directors of the Company;
(x) certified copies of the resolutions duly adopted by the board of
directors of the Company electing Carl J. Rickertsen a member of the Stock
Incentive Committee of the board of directors of the Company;
(xi) certified copies of the resolutions duly adopted by the board of
directors or stockholders, as appropriate, of each domestic Subsidiary
electing Carl J. Rickertsen to the board of directors of each such domestic
Subsidiary;
(xii) a certificate from First Union National Bank Corporate Trust, as
transfer agent for the Company, stating the number of outstanding shares of
Common Stock; and
<PAGE>
(xiii) a certificate from First Union National Bank Corporate Trust,
as transfer agent for the Company, stating that (A) it shall place as of
the date hereof a restriction on transfer on all Common Stock owned by any
of Bruce M. Bowen, Kevin M. Norton or Patrick J. Norton, Jr. (including,
without limitation, stock certificates numbered 12, 13, 90, 93, 95, 96, 187
and 190), and (B) it shall keep such restrictions in place until the legend
set forth in the Stockholders Agreement is placed on such stock
certificates.
2B. Purchaser's Deliveries at the Closing. At or before the Closing,
Purchaser shall:
(i) deliver to the Company certified copies of the resolutions duly
adopted by the Purchaser authorizing (a) the performance of this Agreement,
the Stockholders Agreement and the Stock Purchase Warrant by Purchaser, and
(b) the consummation of all transactions contemplated by this Agreement,
the Stockholders Agreement and the Stock Purchase Warrant by Purchaser;
(ii) pay via wire transfer of immediately available funds to a bank
account designated by the Company an amount equal to the Purchase Price;
(iii) deliver to the Company an executed copy of this Agreement and
all other related agreements, documents or certificates to which Purchaser
is a party; and
(iv) deliver to the Company a legal opinion from Kirkland & Ellis as
to the matters set forth in Exhibit 2B(iv) attached hereto.
Section 3. Definitions.
3A. Definitions. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through the ownership of voting
securities, contract or otherwise, and in the case of Purchaser shall include
Thayer Equity Investors III, L.P. and any of its partners or Affiliates.
"Affiliated Group" means an "affiliated group" as defined in
Section 1504 of the Code, or any similar group defined under local, state or
foreign Tax law for which the Company or any Subsidiary is or has been a member.
"Agreement" has the meaning set forth in the preface hereof.
"Approved Sale" has the meaning set forth in the Stockholders Agreement.
"By-Laws" has the meaning set forth in Section 2A(ii) hereof.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
<PAGE>
"Charter" has the meaning set forth in Section 2A(ii) hereof.
"Closing" has the meaning set forth in Section 1C hereof.
"COBRA" has the meaning set forth in Section 5N(i) hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular Code section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"Common Stock" has the meaning set forth in Section 1A hereof.
"Company" has the meaning set forth in the preface hereof.
"Confidential Information" means any confidential or proprietary
information regarding the Company and any Subsidiary, their Intellectual
Property, their other assets or their operations.
"Credit Agreement" means the Credit Agreement between MLC Group, Inc. and
First Union National Bank, N.A. (successor by merger to CoreStates Bank, N.A.),
dated as of June 5, 1997, as amended by Amendment No. 1, dated September 5,
1997, as further amended by Amendment No. 2, dated December 19, 1997, and as
further amended by Amendment No. 3, dated June 30, 1998, and as further amended
from time to time.
"Disclosure Schedule" has the meaning set forth in Section 5B(i) hereof.
"Environmental and Safety Requirements" means all federal, state, local and
foreign statutes, regulations, ordinances and other provisions having the force
or effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law concerning public health and safety,
worker health and safety and pollution or protection of the environment,
including without limitation all such standards of conduct and bases of
obligations relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
by-products, asbestos, polychlorinated biphenyls (or PCBs), noise or radiation,
each as amended and as now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal law then in force.
<PAGE>
"GAAP" means United States generally accepted accounting principles.
"Indebtedness" means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade payables
and other current liabilities incurred in the Ordinary Course of Business), (iv)
any commitment by which a Person assures a creditor against loss (including,
without limitation, contingent reimbursement obligations with respect to letters
of credit), (v) any indebtedness guaranteed in any manner by a Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a Person's
assets, (viii) all obligations and liabilities under foreign-exchange or
currency swap contracts or similar agreements designed to protect against
fluctuations in currency values, (ix) all obligations and liabilities under or
with respect to any interest rate swap, cap, collar, or similar agreement or
arrangement designed to protect against fluctuations in interest rates, (x) all
obligations under take or pay or, similar agreements or under commodities
agreements, and (xi) any unsatisfied obligation for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under ERISA.
"Intellectual Property" shall mean all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) computer
software (including but not limited to data, data bases and documentation).
"IRS" means the United States Internal Revenue Service.
"Knowledge" shall mean, with respect to the Company, the actual knowledge
or awareness after reasonable inquiry of Norton, Bruce M. Bowen, Thomas B.
Howard, Jr., Steven J. Mencarini or Kleyton L. Parkhurst.
"Latest Balance Sheet" means the audited consolidated balance sheet as of
March 31, 1998 for the Company and the Subsidiaries, which is contained in the
Annual Report of the Company on Form 10-K as filed with the SEC for the
Company's fiscal year ended March 31, 1998.
<PAGE>
"Lease" has the meaning set forth in Section 5I(a) hereof.
"Liability" means any obligation or liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind other than (i) mechanic's, materialmen's, and similar liens
not yet delinquent, (ii) liens for Taxes not yet due and payable, (iii) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (iv) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Loss" means, with respect to any Person, any diminution in value,
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any governmental entity or any department,
agency or political subdivision thereof) against or affecting such Person or
which, if determined adversely to such Person, would give rise to, evidence the
existence of, or relate to, any other Loss and the investigation, defense or
settlement of any of the foregoing.
"Material Adverse Effect" means any material adverse effect on the
business, financial condition, operations, results of operations, employee
relations, customer or supplier relations or assets of the Company and the
Subsidiaries, taken as a whole; provided that any event, fact or circumstance
which has had or has a reasonable likelihood in the future to have a material
adverse effect on the business, financial condition, operations, results of
operations, employee relations, customer or supplier relations or assets of the
Company and the Subsidiaries, taken as a whole, shall also be deemed to have a
Material Adverse Effect.
"Most Recent Financial Statements" means the unaudited consolidated
financial statements as of June 30, 1998 for the Company and the Subsidiaries,
which is contained in the Quarterly Report of the Company on Form 10-Q as filed
with the SEC for the Company's fiscal quarter ended June 30, 1998.
"Norton" means Phillip G. Norton.
"Operating Budget" has the meaning set forth in Section 4A(i)(c) and
Section 4A(i)(d) hereof.
<PAGE>
"Ordinary Course of Business" means the ordinary course of the Company's
and the Subsidiaries' businesses consistent with past practice (including,
without limitation, with respect to collection of accounts receivable, purchases
of inventory and supplies, repairs and maintenance, payment of accounts payable
and accrued expenses, levels of capital expenditures and operation of cash
management practices generally).
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Purchase Price" has the meaning set forth in Section 1B hereof.
"Purchaser" has the meaning set forth in the preface hereto.
"Real Property" has the meaning set forth in Section 5I(a) hereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SEC" means the United States Securities and Exchange Commission and any
governmental body or agency succeeding to the functions thereof.
"SEC Reports" has the meaning set forth in Section 5E.
"Shares" has the meaning set forth in Section 1A hereof.
"Stock Purchase Warrant" means, collectively, the Stock Purchase Warrant,
dated as of the date hereof, by the Company in favor of Purchaser, and any
subsequent stock purchase warrant or stock purchase warrants in favor of
Purchaser or any of its Affiliates issued pursuant to or in connection with the
Stock Purchase Warrant, dated as of the date hereof, by the Company in favor of
Purchaser.
"Stockholders Agreement" means the Stockholders Agreement, dated as of the
date hereof, among the Company and certain of its stockholders.
"Subsidiary" means any Person with respect to which the Company (or a
Subsidiary thereof) owns a majority of the common stock or has the power to vote
or direct the voting of sufficient securities to elect a majority of the
directors or other governing body.
<PAGE>
"Tax" or "Taxes" means (i) any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other withholding, or
other tax of any kind whatsoever, including any interest, penalties or
additional amounts in respect of the foregoing and (ii) any Liability of the
Company for the payment of any amounts of the type described in clause (i) as a
result of any express or implied obligation to indemnify or otherwise assume of
succeed to the liability of another Person.
"Tax Returns" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Thayer Directors" has the meaning set forth in the Stockholders Agreement.
"Thayer Shares" has the meaning set forth in the Stockholders Agreement.
"Treasury Regulations" means the United States Treasury Regulations
promulgated under the Code, and any reference to any particular Treasury
Regulation section shall be interpreted to include any final or temporary
revision of or successor to that section regardless of how numbered or
classified.
Section 4. Covenants.
4A. Financial Statements and Other Information. The Company shall deliver
to Purchaser:
(i) copies of all financial statements and other documents, notices
and information (including any management discussion and analysis of such
financial statements or information) which the Company is required to (or
actually does) deliver under the Credit Agreement, and giving effect to any
subsequent waivers, amendments, modifications and terminations which do not
materially reduce the scope or detail of, or increase the timing for, such
delivery requirements, at the time such materials are required to be
delivered thereunder, whether or not any Indebtedness is outstanding;
provided that in no event shall delivery of such financial statements be on
a basis which is less frequent than quarterly; and provided further that,
to the extent the following financial statements and other documents,
notices and information are not included among the foregoing items, and
whether or not such financial statements and other documents, notices and
information are required to be delivered under the Credit Agreement:
(a) promptly upon its availability, and in any event within
forty-five (45) days after the end of each of the first three (3)
quarters of each fiscal year, an unaudited consolidated balance sheet
of the Company and the Subsidiaries as of the end of such quarter, an
unaudited consolidated statement of cash flow of the Company and the
Subsidiaries as of the end of such quarter and for the interim period,
and an unaudited consolidated statement of income or loss of the
Company and the Subsidiaries for the interim period;
<PAGE>
(b) promptly upon its availability, and in any event within
ninety (90) days after the end of each fiscal year, an audited
consolidated balance sheet of the Company and the Subsidiaries as of
the end of such fiscal year, an audited consolidated statement of
income or loss of the Company and the Subsidiaries for such fiscal
year, and an audited consolidated statement of cash flow of the
Company and the Subsidiaries as of the end of such fiscal year, all
accompanied by an opinion thereon of the Company's certified
independent accountants, such balance sheet, statement of income or
loss and statement of cash flow to include a comparison of such fiscal
year with the immediately preceding fiscal year;
(c) promptly upon its availability, and in any event prior to
December 31, 1998, an operating budget prepared on a monthly basis for
the Company and the Subsidiaries for the five fiscal quarters ending
March 31, 1998 and approved by the board of directors of the Company
(the "Operating Budget");
(d) promptly upon its availability, and in any event at least 2
months prior to the beginning of each fiscal year (beginning with the
fiscal year beginning on April 1, 1999), an annual operating budget
prepared on a monthly basis for the Company and the Subsidiaries for
such fiscal year and approved by the board of directors of the Company
(also, the "Operating Budget");
(e) promptly upon its availability, and in any event no more than
10 days after the end of each calender month (beginning with the month
ending April 30, 1999), an update of the then current Operating Budget
which includes updated projections and forecasts.
(ii) to the extent not provided under clause (i) above, promptly (but
in any event within thirty business days) after the discovery or receipt of
notice of any default under any agreement to which it or any Subsidiary is
a party or any other event or circumstance affecting the Company or any
Subsidiary (including without limitation the filing of any litigation
against the Company or any Subsidiary or the existence of any dispute with
any Person which involves a reasonable likelihood of such litigation being
commenced), which default, event or circumstance would have a Material
Adverse Effect, a certificate from the Company specifying the nature and
period of existence thereof and what actions the Company has taken and
proposes to take with respect thereto;
(iii) to the extent not provided under clause (i) above, concurrently
with the transmission or release thereof, copies of all press releases made
available generally by the Company to the public concerning material
developments in the Company's or any Subsidiary's business;
<PAGE>
(iv) within ten days after transmission thereof, copies of all
registration statements, proxy statements and all regular, special or
periodic reports which the Company files, or, to the Company's Knowledge,
any of its officers or directors file with respect to the Company, with the
SEC or with any securities exchange on which any of its securities are then
listed; and
(v) to the extent not provided under clause (i) above, with reasonable
promptness, such other information and financial data concerning the
Company as Purchaser may reasonably request.
Each of the documents, notices and information referred to in this Section 4A
(other than financial statements and the Operating Budget) shall be true and
correct in all material respects and each of the financial statements referred
to in this Section 4A shall be prepared in accordance with GAAP and shall
present fairly the consolidated financial position, cash flows and results of
operations of the Company and the Subsidiaries as of the dates and for the
periods stated therein; provided, however, that the unaudited financial
statements are subject to changes resulting from normal year-end audit
adjustments (none of which would have a Material Adverse Effect) and may lack
footnotes and other presentation items.
4B. Restrictions. Without the prior written consent of Purchaser, the
Company shall not, and shall cause each Subsidiary not to:
(i) until the first anniversary of the Closing, directly or indirectly
declare or pay any dividends or make any distributions upon any of its
capital stock or other equity securities;
(ii) authorize, issue, sell or enter into any "anti-takeover" measure
or agreement, including, without limitation, providing for the issuance or
sale (contingent or otherwise) of securities or other rights which would
have the effect of materially increasing the cost or difficulty of a Person
of acquiring (via purchase, merger or otherwise) the securities or assets
of the Company or any Subsidiary (i.e., a "poison pill"); or
(iii) enter into any transaction with any of its officers, directors,
employees or Affiliates or any individual related by blood or marriage to
any such Person or any entity in which any such Person or individual owns a
beneficial interest, except to the extent that (a) such transaction is at
arms-length and on terms that are obtainable from unrelated third parties,
(b) the Company notifies the Purchaser in writing at least 5 business days
prior to entering into such transaction and (c) such transaction involves
consideration or has a value of less than $150,000.
<PAGE>
4C. Public Disclosures. Except, in each case, to the extent required by law
or the rules of any relevant stock exchange, neither the parties hereto, nor the
subsidiaries or Affiliates of any of them, shall make any public announcement
after the Closing relating to the other party, this Agreement, the Stockholders
Agreement, the Stock Purchase Warrant or the consummation of any of the
transactions contemplated by this Agreement, the Stockholders Agreement or the
Stock Purchase Warrant (including any exercise of a Stock Purchase Warrant)
without the prior consent of the other party, which consent shall not be
unreasonably withheld. The text of any such public announcement which any party
proposes to make shall be submitted to the other party not less than three
business days before the day on which the announcement is to be made.
4D. Use of Proceeds. The Company shall use the proceeds of the sale of the
Shares to finance growth and acquisitions.
4E. Payment of Bonuses to Norton. The Company hereby agrees to withhold and
not pay to Norton any bonus otherwise due to him under any employment,
consulting or other similar agreement between the Company and any Subsidiary and
him if the Company is at the time or had been within the preceding two years in
default of its obligations under Section 4A(i)(c), 4A(i)(d) or 4A(i)(e) and such
default in the case of Section 4A(i)(c) or 4A(i)(d) remains or remained uncured
for 20 business days and in the case of Section 4A(i)(e) remains or remained
uncured for 5 business days.
4F. Confidentiality. Purchaser will treat and hold as confidential all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, the Stock Purchase
Agreement, the Stock Purchase Warrant, the Stockholders Agreement and the
Purchaser's ownership of Common Stock hereunder and thereunder. In the event
that Purchaser is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Purchaser will notify the Company promptly of the request or
requirement so that such Stockholder may seek an appropriate protective order or
waive compliance with the provisions of this Section 4F. If, in the absence of a
protective order or the receipt of a waiver hereunder, Purchaser is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, Purchaser may disclose the
Confidential Information to the tribunal; provided, however, that Purchaser
shall use reasonable efforts to obtain, at the request and expense of the
Company, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the Company. The foregoing provisions shall not apply to any
Confidential Information that is generally available to the public immediately
prior to the time of disclosure. Notwithstanding anything herein to the
contrary, Purchaser may provide Confidential Information to any Person if
Purchaser deems necessary or desirable in connection with any transfer or
proposed transfer of Purchaser's Common Stock so long as such Persons have
entered into appropriate confidentiality arrangements with Purchaser (which
shall name the Company as an intended beneficiary).
<PAGE>
4G. Filings. The Company and Purchaser shall make all filings required to
be made with the SEC, any stock exchange in which the Common Stock is listed and
all other governmental or quasi-governmental entities in connection with the
consummation of the transactions contemplated hereby and under the Stockholders
Agreement and the Stock Purchase Warrant. All such filings shall be in
compliance with all applicable laws, regulations, rules and ordinances of all
applicable stock exchanges and governmental and quasi-governmental entities in
all material respects and shall not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they shall be made not
misleading.
4H. Mergers or Consolidations. If the Thayer Directors do not vote in favor
of an acquisition, merger, consolidation or other transaction involving any
Person pursuant to Section 4J(ii), neither Purchaser nor its Affiliates shall
acquire (via stock purchase, asset purchase, merger, recapitalization, share
exchange, consolidation or other transaction) or make an investment in such
Person within two years after the date on which the Board of Directors of the
Company voted on such acquisition, merger, consolidation or other transaction.
4I. Material Decisions. The Company shall not make any material employment,
termination or compensation decision regarding the chief executive officer, the
president, the executive vice president, the chief financial officer or the
chief operating officer of the Company or any Subsidiary without the prior
consent of the board of directors of the Company or any Subsidiary, as
applicable.
4J. Super Majority Board Approval. Without the prior consent of at least
65% of the members of the Board of Directors of the Company, the Company shall
not, and shall cause each Subsidiary not to:
(i) make any capital expenditures for purchases of property or
equipment (other than capital expenditures for property or equipment to be
leased or sold in the Ordinary Course of Business) which shall cause the
Company's and the Subsidiaries' expenditures for any fiscal year to exceed
by more than 10% the amount set forth for capital expenditures for
purchases of property and equipment (other than capital expenditures for
property and equipment to be leased or sold in the Ordinary Course of
Business) in the applicable Operating Budget;
(ii) acquire (via stock purchase, asset purchase, merger,
recapitalization, share exchange, consolidation or other transaction) or
make an investment in any Person or permit any Subsidiary to acquire (via
stock purchase, asset purchase, merger, recapitalization, share exchange,
consolidation or other transaction) or make an investment in any Person;
provided that Company or any Subsidiary may acquire (via stock purchase,
asset purchase, merger, recapitalization, share exchange, consolidation or
other transaction) or make an investment in any Person without the consent
of at least 65% of the members of the Board of Directors of the Company so
long as such transaction involves consideration or has a value of less than
$5,000,000; or
<PAGE>
(iii) except in the Ordinary Course of Business, sell, lease or
otherwise dispose of, or permit any Subsidiary to sell, lease or otherwise
dispose of, more than 20% of the consolidated assets of the Company and its
Subsidiaries (computed on the basis of book value, determined in accordance
with GAAP consistently applied, or fair market value, determined by the
Board of Directors of the Company in its reasonable good faith judgment) in
any transaction or series of related transactions.
4K. Compensation Committee. Without the prior consent of at least 51% of
the members of the Compensation Committee of the Board of Directors of the
Company, the Company shall not, and shall cause each Subsidiary not to:
(i) grant any stock option, stock appreciation right, restricted stock
or other stock based compensation to any officer, employee, director or
consultant of the Company or any Subsidiary other than pursuant to the 1998
Long-Term Incentive Plan or the Employee Share Purchase Plan, each as in
effect on the date of this Agreement; or
(ii) accelerate the vesting of or remove any restrictions upon any
stock option, stock appreciation right, restricted stock or other stock
based compensation except as specifically required under the terms of such
stock option, stock appreciation right, restricted stock or other stock
based compensation.
4L. Determination Letter. As soon as possible following the Closing (but in
no event later than two months thereafter), the Company shall cause to be
submitted to the IRS an application for a determination that the MLC Group, Inc.
401(k) Plan is qualified under Section 401(a) of the Code, and shall take any
and all actions as may be required by the IRS (including, but not limited to,
entering into a closing agreement) in order to cause the IRS to issue such a
determination.
4M. Transfer Agent Restriction. The Company shall cause First Union
National Bank Corporate Trust, as transfer agent for the Company, to (i) place
as of the date hereof a restriction on transfer on all Common Stock owned by any
of Bruce M. Bowen, Kevin M. Norton or Patrick J. Norton, Jr. (including, without
limitation, stock certificates numbered 12, 13, 90, 93, 95, 96, 187 and 190),
and (ii) keep such restrictions in place until the legend set forth in the
Stockholders Agreement is placed on such stock certificates
Section 5.. Representations and Warranties of the Company. As a material
inducement to Purchaser to enter into this Agreement and purchase the Shares
hereunder, the Company hereby represents and warrants as of the date hereof as
follows:
<PAGE>
5A. Organization, Corporate Power and Licenses. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify, except
where the failure to so qualify would not have a Material Adverse Effect. The
Company possesses all requisite corporate power and authority and all material
licenses, permits and authorizations necessary to own and operate its
properties, to carry on its businesses as now conducted and as presently
proposed to be conducted and to carry out the transactions contemplated by this
Agreement, the Stockholders Agreement and the Stock Purchase Warrant.
5B. Capitalization and Related Matters.
(i)......As of immediately before the Closing, the authorized capital stock
of the Company shall consist of: (x) 2,000,000 shares of Preferred Stock, $.01
per share par value, of which zero shares are issued and outstanding, and (y)
25,000,000 shares of Common Stock, $.01 per share par value, of which 6,348,603
shares are issued and outstanding. As of immediately before the Closing, neither
the Company nor any Subsidiary shall have outstanding any capital stock,
options, convertible securities, securities or rights containing any profit
participation features, or any stock appreciation right or phantom stock plan,
except as set forth on Section 5B of the Disclosure Schedule attached hereto
(the "Disclosure Schedule"). Section 5B of the Disclosure Schedule accurately
sets forth the following information with respect to all outstanding options and
rights to acquire the Company's and the Subsidiaries' capital stock: the holder,
the number of shares covered, the exercise price and the expiration date. As of
immediately before the Closing, neither the Company nor any Subsidiary shall be
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any warrants, options or
other rights to acquire its capital stock, except as set forth on Section 5B of
the Disclosure Schedule. As of the Closing, all of the outstanding shares of the
Company's capital stock shall be validly issued, fully paid and nonassessable.
(ii).....There are no statutory or, to the Company's Knowledge, contractual
stockholders' preemptive rights or rights of refusal with respect to the
issuance of the Shares. Assuming Purchaser's representations and warranties set
forth in Section 6 are true and correct as of the date hereof, the Company has
not violated any applicable federal or state securities laws in connection with
the offer, sale or issuance of any of its capital stock, and the offer, sale and
issuance of the Shares do not require registration under the Securities Act or
any applicable state securities laws. To the Company's Knowledge, other than the
Stockholders Agreement and the Stock Purchase Warrant, there are no agreements
between the Company's shareholders with respect to the voting or transfer of the
Company's capital stock or with respect to any other aspect of the Company's
affairs.
<PAGE>
5C. Subsidiaries. Section 5C of the Disclosure Schedule correctly sets
forth the name of each Subsidiary, the jurisdiction of its incorporation or
under which it was formed and the Persons owning the outstanding securities of
such Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction under which it was formed, possesses
all requisite power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted in the future, and
is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify except where the failure
to so qualify would not have a Material Adverse Effect. All of the outstanding
securities of a Subsidiary which are owned by the Company or another Subsidiary
are owned free and clear of any Lien and are not subject to any option or right
to purchase any such shares. Except as set forth in Section 5C of the Disclosure
Schedule, neither the Company nor any Subsidiary owns or holds the right to
acquire any shares of stock or any other security or interest in any other
Person.
5D. Authorization; No Breach. The execution, delivery and performance of
this Agreement, the Stockholders Agreement and the Stock Purchase Warrant by the
Company have been duly authorized by the Company. Each of this Agreement, the
Stockholders Agreement and the Stock Purchase Warrant, when it is executed by
the other parties thereto, will constitute a valid and binding obligation of the
Company enforceable in accordance with its respective terms except to the extent
that the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws of general application relating to or affecting the enforcement of
creditors' rights or by general principles of equity. Except as set forth in
Section 5D of the Disclosure Schedule, the execution and delivery by the Company
of this Agreement, the Stockholders Agreement and the Stock Purchase Warrant,
the offering, sale and issuance of the Shares hereunder and the fulfillment of
and compliance with the respective terms hereof and thereof by the Company do
not and shall not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any Lien upon the Company's or any Subsidiaries' securities or
assets pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental body
or agency pursuant to, (A) the Charter, the By-Laws or the constituting
documents of any Subsidiary, (B) any law, statute, rule or regulation to which
the Company or any Subsidiary is subject, or (C) any material agreement or
instrument, or any order, judgment or decree to which the Company or any
Subsidiary is subject, except in the case of (B) and (C) were such conflict,
default or violation would not have a Material Adverse Effect.
5E. SEC Documents and Financial Statements. The Company has heretofore
delivered to Purchaser each of the
following:
(i) Annual Report of the Company on Form 10-K as filed with the SEC
for the Company's fiscal year ended March 31, 1998; and
(ii) Quarterly Report of the Company on Form 10-Q as filed with the
SEC for the fiscal quarter of the Company ended June 30, 1998.
<PAGE>
Each of the foregoing documents (the "SEC Reports") did not at the time it was
filed with the SEC, and except as set forth on Schedule 5E of the Disclosure
Schedule or a subsequent SEC Report, do not as of the date hereof, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, or are now made, respectively, not misleading. All of the
financial statements contained in the SEC Reports have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, fairly present in all material respects the financial position
of the Company and the Subsidiaries as of such dates and the results of
operations and cash flows of the Company and the Subsidiaries for such periods,
and are consistent with the books and records of the Company and the
Subsidiaries; provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (none of which could, alone or in the
aggregate, reasonably be expected to have a Material Adverse Effect) and lack
footnotes and other presentation items.
5F. Reports with the SEC. The Company and the Subsidiaries have made all
filing with the SEC which they are required to make (including without
limitation all required filings under the Securities Act and the Exchange Act),
and have not received any request from the SEC to file any amendment or
supplement to any of the reports filed with the SEC. Section 5F of the
Disclosure Schedule sets forth all substantive correspondence between the SEC
and the Company concerning or relating to Securities Act or Exchange Act
compliance.
5G. Absence of Undisclosed Liabilities. The Company and the Subsidiaries
have no Liabilities except (i) obligations under executory contracts or
commitments described in Section 5R of the Disclosure Schedule or under
executory contracts and commitments which are not required to be disclosed
thereon (but not Liabilities for breaches thereof), (ii) Liabilities reflected
on the liabilities side of the Latest Balance Sheet and (iii) Liabilities which
have arisen after the date of the Latest Balance Sheet in the Ordinary Course of
Business or otherwise in accordance with the terms and conditions of this
Agreement (none of which is a Liability resulting from, arising out of, or
relating to any breach of contract, breach of warranty, tort, infringement or
violation of law or environmental matter, including those arising under
Environmental and Safety Requirements).
5H. Absence of Certain Developments. Except as set forth on Section 5H of
the Disclosure Schedule or expressly contemplated by this Agreement, since the
date of the Latest Balance Sheet, (i) neither the Company nor any Subsidiary has
suffered an event which would have a Material Adverse Effect, (ii) the
businesses of the Company and the Subsidiaries have been operated only in the
Ordinary Course of Business, (iii) there has not been any material loss of, or
material reduction in the amount of business done with, or any threat or such
material loss or reduction by, any key customer of the Company or any
Subsidiary, or any material loss or threatened loss of any source of supply for
goods or services to the Company or any Subsidiary that is material to its
business and (iv) neither the Company nor any Subsidiary has taken any of the
following actions:
(a) amended its certificate of incorporation or by-laws;
(b) (w) split, combined or reclassified any of its respective capital
stock, (x) declared, set aside or paid any dividend or other distribution
payable in cash, stock or property with respect to its capital stock, (y)
issued or sold any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, shares of its capital stock, or (z) redeemed, purchased or
otherwise acquired directly or indirectly any capital stock;
<PAGE>
(c) (x) acquired, sold, licensed, leased or disposed of any property,
including real property and Intellectual Property (except in the Ordinary
Course of Business), or (y) entered into any commitment or transaction
which individually or in the aggregate would be material to the Company or
any of the Subsidiaries;
(d) (w) incurred or assumed any Indebtedness in excess of $500,000 in
the aggregate, (x) made any material loans, advances or capital
contributions to, or investments in, any other Person, (y) pledged or
otherwise encumbered shares of capital stock, or (z) mortgaged or pledged
any of its material assets, or create any Liens with respect thereto;
(e) (x) acquired (by merger, consolidation, acquisition of stock or
assets, or otherwise) any Person or division thereof or any equity interest
therein, (y) entered into any contract or agreement which would be material
to the Company and the Subsidiaries, or (z) authorized any new capital
expenditure or expenditures which, in the aggregate, are in excess of
$500,000;
(f) changed any of the accounting methods used unless required by
GAAP;
(g) adopted or amended in any material respect any collective
bargaining agreement;
(h) filed any amended Tax Return, surrendered any right to claim a
refund of Taxes or take any similar action, or omitted to take any action
relating to the filing of any Tax Return or the payment of any Tax, if such
election, adoption, change, amendment, agreement, settlement, surrender,
consent, or other action or omission would have the effect of increasing
the present or future tax liability or decreasing any present or future Tax
asset of the Company, Purchaser or any Affiliate of Purchaser; or
(i) authorized or entered into an agreement, whether in writing or
otherwise, to do any of the actions prohibited above.
5I. Properties.
<PAGE>
(a)..Attached as Schedule 5I is a list of all leases, subleases and
other occupancy agreements, including all amendments, extensions and other
modifications (the "Leases") for real property (the "Real Property"). The
Company has a good and valid leasehold interest in and to all of the Real
Property, subject to no Liens. Each Lease is in full force and effect and is
enforceable in accordance with its terms. There exists no default or condition
which, with the giving of notice, the passage of time or both, would become a
default under any Lease. Except as described on Schedule 5I, no consent, waiver,
approval or authorization is required form any landlord under any Lease as a
result of the execution of this Agreement, the Stockholders Agreement, the Stock
Purchase Warrant or the consummation of the transactions contemplated hereby or
thereby.
(b)......The Real Property constitutes all of the real property owned,
lease, occupied or otherwise utilized in connection with the business of the
Company and its Subsidiaries. Other than the Company and the Subsidiaries, there
are no parties in possession or parties having any current or future right to
occupy any of the Real Property. All improvements located on the Real Property
have direct access to a public road adjoining such Real Property. No such
improvements or accessways encroach on land not included in the Real Property
and no such improvement is dependent for its access, operation or utility on any
land, building or other improvement not included in the Real Property.
(c)......There are no proceedings in eminent domain or other similar
proceedings pending or, to the Knowledge of the Company, threatened, affecting
any portion of the material Real Property owned or leased by the Company or any
Subsidiary. There exists no writ, injunction, decree, order or judgment
outstanding, nor any litigation, pending or threatened, relating to the
ownership, lease, use, occupancy or operation by any Person of any such Real
Property. The current use of the Real Property does not violate in any material
respect any instrument of record or agreement affecting such Real Property.
There is no violation of any covenant, condition, restriction, easement,
agreement or order of any governmental authority having jurisdiction over any of
the Real Property that affects such Real Property or the use or occupancy
thereof, except a violation which would not have a Material Adverse Effect. No
damage or destruction has occurred with respect to any of the Real Property
that, individually or in the aggregate, has had or will have a Material Adverse
Effect.
5J. Assets. Except as set forth on Section 5J of the Disclosure Schedule,
the Company and the Subsidiaries have good and marketable title to, or a valid
leasehold interest in, the material Real Property and assets used by them,
located on their premises or shown on the Latest Balance Sheet or acquired
thereafter, free and clear of all Liens, except for sales of inventory in the
Ordinary Course of Business since the date of the Latest Balance Sheet. Except
as described on the Section 5J of the Disclosure Schedule, the assets are in
good operating condition in all material respects, reasonable wear and tear
excepted, and are fit for use in the Ordinary Course of Business. The Company
and the Subsidiaries validly own or lease all buildings, machinery, equipment,
and other tangible assets necessary for the conduct of their businesses as
presently conducted.
5K. Tax Matters. Except as set forth on Section 5K of the Disclosure
Schedule:
(i) the Company, the Subsidiaries and each Affiliated Group have
timely filed all material Tax Returns which are required to be filed, and
all such Tax Returns are true, complete and accurate in all material
respects and have been prepared in all material respects in compliance with
applicable law;
<PAGE>
(ii) except for Taxes less than $25,000 in the aggregate which are
being contested in good faith and by appropriate proceedings (with respect
to which adequate reserves have been established and are being maintained
in accordance with GAAP), all Taxes due and payable by the Company, the
Subsidiaries and each Affiliated Group, whether or not shown on a Tax
Return, have been paid by the Company, the Subsidiaries and each Affiliated
Group, respectively, and no Taxes are delinquent;
(iii) the amount accrued as a current liability for taxes on the
Latest Balance Sheet shall be sufficient to pay in full all Taxes for
taxable periods (or portions thereof) of the Company, Subsidiaries and each
Affiliated Group ending on or before the date of the Latest Balance Sheet,
whether or not such Taxes are due on or before such date and, since the
date of the Latest Balance Sheet, the Company has not incurred any
Liability for Taxes other than in the Ordinary Course of Business;
(iv) there is no action, suit, taxing authority proceeding or audit
now in progress, pending or, to the Knowledge of the Company, threatened
against or with respect to the Company, any Subsidiary or any Affiliated
Group and neither the Company, any Subsidiary, nor any Affiliated Group
reasonably expect any taxing authority to claim or assess any additional
Taxes in respect of the Company or any Subsidiary for any period, except in
each case which, if adversely determined, would not have a Material Adverse
Effect;
(v) the Company and the Subsidiaries have not been members of an
Affiliated Group, other than one in which the Company was the ultimate
parent, and the Company and the Subsidiaries have no liability for Taxes of
any Person other than under Treasury Regulations Section 1.1502-6 or any
similar provision of local, state or foreign Tax law;
(vi) the Company, the Subsidiaries and each Affiliated Group has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party;
(vii) the Company and the Subsidiaries have not consented to extend to
a date later than the date hereof the time in which any Tax may be assessed
or collected by any taxing authority; and no Affiliated Group has consented
to extend to a date later than the date hereof the time in which any Tax
may be assessed or collected by any taxing authority with respect to a
taxable period during which the Company or any Subsidiary was a member of
the Affiliated Group;
(viii) the Company and the Subsidiaries are not a party to or bound by
any Tax allocation or Tax sharing agreement and have no current or
potential contractual obligation to indemnify any other Person with respect
to Taxes; and
<PAGE>
(ix) the Company, each Subsidiary and each Affiliated Group have not
made any payments, and are not and will not become obligated (under any
contract entered into on or before the Closing) to make any payments, that
will be non-deductible under Section 280G of the Code (or any corresponding
provision of state, local or foreign income Tax law).
5L. Brokerage. Except as set forth in Section 5L of the Disclosure
Schedule, there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement binding upon the Company or any
Subsidiary. The Company shall pay, and hold Purchaser harmless against, any
Liability, Loss or expense (including, without limitation, reasonable attorneys'
fees and out-of-pocket expenses) arising in connection with any such claim.
5M. Employees. Except as set forth on Section 5M of the Disclosure
Schedule, to the Knowledge of the Company, no key executive employee and no
group of employees or independent contractors of the Company or any Subsidiary
has any plans to terminate his, her or its employment or relationship as an
independent contractor with the Company or any Subsidiary. Except as set forth
in Section 5M of the Disclosure Schedule, no organizational effort is presently
being made or, to the Knowledge of the Company, threatened by or on behalf of
any labor union with respect to any employees of the Company or any Subsidiary
and none of their employees are represented by any labor union. Except as set
forth in Section 5M of the Disclosure Schedule and, in each case, where the
failure to comply would not have a Material Adverse Effect, the Company and the
Subsidiaries are in compliance with all applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours, and are not engaged in any unfair labor practice and, to the Knowledge of
the Company, there is no reasonable basis for any unfair labor practice
complaint or claim to be asserted against the Company or any Subsidiary, and
there is no labor strike, dispute, slowdown or stoppage actually pending or, to
the Knowledge of the Company, threatened, against the Company or any Subsidiary.
The Company and the Subsidiaries have no labor contracts with any representative
of any of the Company's or any Subsidiary's employees.
5N. ERISA.
<PAGE>
(i) Except as set forth on Section 5N of the Disclosure Schedule, with
respect to current or former employees of the Company or any Subsidiary, the
Company and the Subsidiaries do not maintain or contribute to or have any actual
or potential liability with respect to any (a) deferred compensation or bonus or
retirement plans or arrangements, (b) qualified or nonqualified defined
contribution or defined benefit plans or arrangements which are employee pension
benefit plans (as defined in Section 3(2) of ERISA), or (c) employee welfare
benefit plans, (as defined in Section 3(1) of ERISA), stock option or stock
purchase plans, or material fringe benefit plans or programs whether in writing
or oral and whether or not terminated. The Company has never contributed to any
multiemployer pension plan (as defined in Section 3(37) of ERISA), and neither
the Company nor any of its Subsidiaries has ever maintained or contributed to
any defined benefit plan (as defined in Section 3(35) of ERISA). The plans,
arrangements, programs and agreements referred to in the preceding two sentences
are referred to collectively as the "Plans." The Company does not maintain or
contribute to any Plan which provides health, accident or life insurance
benefits to former employees, their spouses or dependents, or to any other
Person, other than in accordance with Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code ("COBRA").
(ii) Except as set forth on Section 5N of the Disclosure Schedule attached
hereto, the Plans (and related trusts and insurance contracts) set forth on
Section 5N of the Disclosure Schedule comply in form and in operation with the
requirements of applicable laws and regulations, including ERISA and the Code
and the nondiscrimination rules thereof. All contributions, premiums or payments
which are due on or before the Closing Date under each Plan have been paid. Each
Plan which is intended to be qualified under Section 401(a) of the Code has
received from the Internal Revenue Service a determination letter stating that
such Plan is qualified under Section 401(a) of the Code, and nothing has
occurred since the date of such determination that could adversely affect the
qualification of such Plan.
(iii) All required reports and descriptions (including Form 5500 annual
reports, summary annual reports and summary plan descriptions) with respect to
the Plans set forth on Section 5N of the Disclosure Schedule have been properly
and timely filed with the appropriate government agency and distributed to
participants as required. The Company has complied with the requirements of
COBRA.
(iv) With respect to each Plan set forth on Section 5N of the Disclosure
Schedule attached hereto, (a) there have been no non-exempt prohibited
transactions as defined in Section 406 of ERISA or Section 4975 of the Code, (b)
no fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach
of fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of such Plans, and (c) no actions,
investigations, suits or claims with respect to the Plans or assets thereof
(other than routine claims for benefits) are pending or threatened, and the
Company has no Knowledge of any facts which would give rise to or could
reasonably be expected to give rise to any such actions, suits or claims.
(v) With respect to each of the Plans listed on Section 5N of the
Disclosure Schedule attached hereto, the Company has furnished to Purchaser true
and complete copies of (a) the current plan documents, summary plan descriptions
and summaries of material modifications and other material employee
communications, (b) the Form 5500 annual report (including all schedules and
other attachments) for the most recent three years, (c) all related trust
agreements, insurance contracts or other funding agreements which implement such
plans and (d) all contracts relating to each such plan, including, without
limitation, service provider agreements, insurance contracts, investment
management agreements and record keeping agreements.
<PAGE>
(vi) The Company has not incurred and has no Knowledge of any basis upon
which it could reasonably incur any Liability to the Pension Benefit Guaranty
Corporation (other than routine premium payments) or otherwise under Title IV of
ERISA (including any withdrawal liability) or under the Code with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) that the
Company or any member of its "controlled group" (within the meaning of Code
Section 414) maintains or ever has maintained or to which any of them
contributes, ever has contributed, or ever has been required to contribute.
5O. Compliance with Laws. The Company and the Subsidiaries are, and at all
times have been, in compliance with all applicable laws, regulations and
ordinances of any governmental entity, and no claims have been filed against the
Company or any Subsidiary alleging a violation of any such laws or regulations,
and the Company and the Subsidiaries have not received notice of any such
violations, except, in each case, where the failure to comply would not have a
Material Adverse Effect.
5P. Environmental, Health, and Safety Matters. Except as set forth in
Section 5P of the Disclosure Schedule:
(i) the Company, the Subsidiaries and their respective Affiliates have
complied and are in compliance with all Environmental and Safety
Requirements (including without limitation all permits and licenses
required thereunder).
(ii) the Company, the Subsidiaries and their respective Affiliates
have not received any written or oral notice, report or other information
regarding any actual or alleged violation of Environmental and Safety
Requirements, or any Liabilities or potential Liabilities, including any
investigatory, remedial or corrective obligations, relating to any of them
or its facilities arising under Environmental and Safety Requirements;
(iii) none of the following exists at any property or facility owned
or operated by the Company or any Subsidiary or any of their respective
Affiliates: (a) underground storage tanks, (b) asbestos-containing material
in any form or condition, (c) materials or equipment containing
polychlorinated biphenyls, or (d) landfills, surface impoundments, or
disposal areas;
(iv) neither the Company, any Subsidiary nor any of their predecessors
or Affiliates has treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled, or released any substance, including
without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by
any such substance) in a manner that has given or would give rise to
Liabilities, including without limitation any Liability for response costs,
corrective action costs, personal injury, property damage, natural
resources damages or attorney fees, pursuant to the CERCLA, the Solid Waste
Disposal Act, as amended or any other Environmental and Safety
Requirements;
<PAGE>
(v) neither this Agreement nor the consummation of the transactions
contemplated hereby will result in any obligations for site investigation
or cleanup, or notification to or consent of government agencies or third
parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental and Safety Requirements;
(vi) the Company, the Subsidiaries and their Affiliates have not,
either expressly or by operation of law, assumed, undertaken or otherwise
become subject to any Liability, including without limitation any Liability
for corrective or remedial action, of any other Person relating to
Environmental and Safety Requirements; and
(vii) no facts, events or conditions relating to the past or present
facilities, properties or operations of the Company, any Subsidiary or any
of their predecessors of Affiliates will prevent, hinder or limit continued
compliance with Environmental and Safety Requirements, give rise to any
investigatory, remedial or corrective Liabilities pursuant to Environmental
and Safety Requirements, or give rise to any other Liabilities pursuant to
Environmental and Safety Requirements, including without limitation any
Liability relating to onsite or offsite releases or threatened releases of
hazardous materials, substances or wastes, personal injury, property damage
or natural resources damage;
except, in each case, where the failure to comply would not have a Material
Adverse Effect.
5Q. Affiliated Transactions. Except for those agreements or transactions
listed on Section 5Q of the Disclosure Schedule or contemplated by this
Agreement, neither the Company nor any Subsidiary has (i) paid, loaned or
advanced any amount to, (ii) sold, transferred or leased any properties or
assets to or (iii) entered into or continued any agreement, arrangement or
understanding (written or otherwise) with, any of its officers, directors,
employees or Affiliates or any individual related by blood, marriage or adoption
to any such Person or entity in which any such Person owns a beneficial
interest.
5R. Contracts and Commitments. Section 5R of the Disclosure Schedule lists
the following agreements to which the Company or any Subsidiary is a party or by
which any of their assets are bound:
(i) any indenture, mortgage, note, bond or other evidence of
Indebtedness, any loan, security, credit, factoring or similar agreement
under which the Company or any Subsidiary has borrowed or may borrow money
or issued any note, bond, indenture or other evidence of Indebtedness for
more than $10,000 individually or $25,000 in the aggregate or under which
the Company or any Subsidiary has imposed (or may impose) a Lien on any of
its respective assets, tangible or intangible (except for non-recourse
notes relating to specific leases entered into by the Company or any
Subsidiary in the Ordinary Course of Business, in which case, the Company
has made available to Purchaser a sample of such notes);
<PAGE>
(ii) any confidentiality, non-solicitation or non-competition
agreement or any agreement which restricts, limits or prohibits the Company
or any Subsidiary from entering into any new, or expanding any existing,
line of business or any agreement which contains geographic or other
limitations, prohibitions or restrictions on the Company's or any
Subsidiary's ability to conduct business activities;
(iii) any agreement under which the Company or any Subsidiary could
have Liabilities after the Closing with any current or former directors,
officers, and employees in the nature of an employment agreement, a
consulting agreement or a severance agreement;
(iv) any agreement under which the Company or any Subsidiary could
have Liabilities in the future relating to the acquisition or disposition
of material assets or properties by way of merger, consolidation, purchase,
sale or otherwise, or granting to any Person a right at such Person's
option to purchase or acquire any material asset or property, of the
Company or any Subsidiary or any interest therein (not including
dispositions of inventory in the Ordinary Course of Business);
(v) any agreement for the construction, acquisition or modification of
any land, building, structure, improvement, fixture or other fixed asset,
or for the incurrence of any other capital expenditure involving amounts in
excess of $500,000 in the aggregate;
(vi) any agreement with the Company or any Subsidiary, on the one
hand, and any officer, director, employee or Affiliate of the Company or
any Subsidiary, on the other hand; and
(vii) any agreement not otherwise required to be disclosed pursuant to
this Section 5R the consequences of a default or termination thereunder
would have a Material Adverse Effect.
The Company has made available to Purchaser a correct and complete copy of each
written agreement listed in Section 5R of the Disclosure Schedule and a written
summary setting forth the terms and conditions of each oral agreement listed in
Section 5R of the Disclosure Schedule. Except as set forth in Section 5R of the
Disclosure Schedule, all such agreements are valid, binding and enforceable
obligations of the Company, as applicable, in accordance with their terms,
except to the extent that the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws of general application relating to or
affecting the enforcement of creditors' rights or by general principles of
equity. Neither the Company nor any Subsidiary is in default in the observance
or the performance of any material term or obligation to be performed by it
under any such agreement, and to the Knowledge of the Company, no other Person
is in default in the observance or the performance of any material term or
obligation to be performed by such Person under any such agreement, except where
such default would not have a Material Adverse Effect.
<PAGE>
5S. Intellectual Property.
(i) Section 5S of the Disclosure Schedule contains a complete and
accurate list of all (a) patented or registered Intellectual Property owned
by the Company or any Subsidiary, (b) pending patent applications and
applications for registrations of other Intellectual Property filed by the
Company or any Subsidiary, (c) material unregistered trade names and
corporate names owned or used by the Company or any Subsidiary and (d)
material unregistered trademarks, service marks, copyrights, and computer
software owned or used by the Company or any Subsidiary. Section 5S of the
Disclosure Schedule also contains a complete and accurate list of all
licenses and other rights granted by the Company or any Subsidiary to any
third party with respect to any Intellectual Property and all material
licenses and other rights granted by any third party to the Company or any
Subsidiary with respect to any Intellectual Property, in each case
identifying the subject Intellectual Property. All of the material licenses
set forth in Section 5S of the Disclosure Schedule are valid and binding
obligations of the Company or any Subsidiary, and to the Knowledge of the
Company, the other parties thereto, and are enforceable against the Company
or any Subsidiary, and to the Knowledge of the Company, the other parties
thereto, in accordance with their respective terms, except to the extent
that the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws of general application relating to or affecting the
enforcement of creditors' rights or by general principles of equity.
(ii) Except as set forth in Section 5S the Disclosure Schedule, the
Company or a Subsidiary owns and possesses all right, title and interest in
and to, or has the right to use pursuant to a valid license, all
Intellectual Property necessary for the operation of the businesses of the
Company and the Subsidiaries as presently conducted.
5T. Litigation. Except as set forth in Section 5T of the Disclosure
Schedule, there are no actions, suits, complaints, charges, proceedings, orders,
investigations or claims (i) pending other than those filed but not yet served
on the Company or any Subsidiary or, (ii) to the Company's Knowledge, threatened
against the Company, any Subsidiary or any of their assets or properties which,
if adversely determined, would have a Material Adverse Effect.
5U. Year 2000. To the Knowledge of the Company,
(i none of the computer software, computer firmware, computer hardware
(whether general or special purpose) or other similar or related items of
automated, computerized or software systems that are used or relied on by
Company or by any of its Subsidiaries in the conduct of their respective
businesses will malfunction, will cease to function, will generate
incorrect data or will produce incorrect results when processing, providing
or receiving (a) date-related data from, into and between the twentieth and
twenty-first centuries or (b) date-related data in connection with any
valid date in the twentieth and twenty-first centuries;
<PAGE>
(ii none of the products and services sold, licensed, leased,
rendered, or otherwise provided by the Company or by any of its
Subsidiaries in the conduct of their respective businesses will
malfunction, will cease to function, will generate incorrect data or will
produce incorrect results when processing, providing or receiving (a)
date-related data from, into and between the twentieth and twenty-first
centuries or (b) date-related data in connection with any valid date in the
twentieth and twenty-first centuries; and, accordingly, neither the Company
nor any of its Subsidiaries is or will be subject to any claim, demand,
action, suit, liability, damage, material loss, or material expense arising
from, or related to, circumstances where such products and services
malfunction, cease to function, generate incorrect data, or produce
incorrect results when processing, providing or receiving (x) date-related
data from, into and between the twentieth and twenty-first centuries or (y)
date-related data in connection with any valid date in the twentieth and
twenty-first centuries; and
(iii neither Company nor any of its Subsidiaries has made any other
representations or warranties regarding the ability of any product or
service sold, licensed, leased, rendered, or otherwise provided by Company
or by any of its Subsidiaries in the conduct of their respective businesses
to operate without malfunction, to operate without ceasing to function, to
generate correct data or to produce correct results when processing,
providing or receiving (a) date-related data from, into and between the
twentieth and twenty-first centuries and (b) date-related data in
connection with any valid date in the twentieth and twenty-first centuries.
5V. Disclosure. Neither this Agreement nor the Disclosure Schedule or any
statements, documents, certificates or other items prepared or supplied to
Purchaser by or on behalf of the Company or any Subsidiary as set forth in or
required under this Agreement contain any untrue statement of a material fact or
omit a material fact necessary to make each statement contained herein or
therein not misleading.
Section 6. Representations and Warranties of Purchaser. As a material
inducement to the Company to enter into this Agreement and sell the Shares,
Purchaser hereby represents and warrants as of the date hereof as follows:
6A. Organization and Power of Purchaser. Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and is qualified to do business in every jurisdiction in
which its ownership of property or conduct of business requires it to qualify.
<PAGE>
6B. Authorization; No Breach. The execution, delivery and performance of
this Agreement, the Stockholders Agreement and the Stock Purchase Warrant by
Purchaser have been duly authorized by Purchaser. Each of this Agreement, the
Stockholders Agreement and the Stock Purchase Warrant, when it is executed by
the other parties thereto, will constitute a valid and binding obligation of
Purchaser enforceable in accordance with its respective terms except to the
extent that the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws of general application relating to or affecting the enforcement
of creditors' rights or by general principles of equity. The execution and
delivery by Purchaser of this Agreement, the Stockholders Agreement and the
Stock Purchase Warrant, the purchase of the Shares hereunder and the fulfillment
of and compliance with the respective terms hereof and thereof by Purchaser do
not and shall not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any Lien upon Purchaser's securities or assets pursuant to, (iv)
give any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any court or administrative or governmental body or agency pursuant to,
(A) the constituting documents of Purchaser, (B) any law, statute, rule or
regulation to which Purchaser is subject, or (C) any material agreement or
instrument, or any order, judgment or decree to which Purchaser is subject,
except in the case of (B) and (C) were such conflict, default or violation would
not have a material adverse effect on Purchaser.
6C. Brokerage. There are no claims for brokerage commissions, finders' fees
or similar compensation in connection with the transactions contemplated by this
Agreement, based on any arrangement or agreement binding upon Purchaser for
which the Company or the Subsidiaries could become liable. Purchaser shall pay,
and hold the Company harmless against, any Liability, Loss or expense
(including, without limitation, reasonable attorneys' fees and out-of-pocket
expenses) arising in connection with any such claim.
6D. Purchaser's Investment Representations. Purchaser hereby represents
that it is acquiring the Shares purchased hereunder or acquired pursuant hereto
for its own account with the present intention of holding such securities for
purposes of investment, and that it has no intention of selling such securities
in a public distribution in violation of the federal securities laws or any
applicable state securities laws; provided that nothing contained herein shall
prevent Purchaser and subsequent holders of Shares from transferring such
securities in compliance with the applicable federal and state securities laws,
subject to the provisions of the Stockholders Agreement.
Section 7. Termination.
7A. Termination. All rights of Purchaser and obligations of the Company to
the Purchaser under Section 4B shall terminate upon Thayer Shares constituting
less than 5% of the issued and outstanding Common Stock, and such sections shall
remain terminated even if Purchaser, its Affiliates and any holders of Thayer
Shares later own in the aggregate 5% or more of the issued and outstanding
Common Stock; provided that the limited partners of Thayer Equity Investors III,
L.P. shall not be treated as Affiliates of Thayer or the holders of Thayer
Shares for the purposes of this Section 7A. Except with respect to the
representations and warranties contained herein, all other rights of Purchaser
and obligations of the Company to Purchaser shall terminate upon the first to
occur of (i) there being no Thayer Shares, and (ii) the consummation of an
Approved Sale.
<PAGE>
Section 8. Representations and Warranties.
8A. Survival of Representations and Warranties. All representations and
warranties contained herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
continue in full force and effect until thirty days after the Company delivers
to Purchaser audited financial statements of the Company and the Subsidiaries as
set forth in Section 4A(i)(b) for the fiscal year ending March 31, 1999.
8B. Indemnification. Notwithstanding anything herein to the contrary, the
Company shall not be liable for any inaccuracy of any representation or warranty
contained herein unless all such inaccuracies, in the aggregate, shall have a
Material Adverse Effect, provided that for the purpose of determining any
inaccuracy of a representation or warranty, any qualification as to materiality
or Material Adverse Effect contained therein shall be ignored.
Section 9. Miscellaneous.
9A. Expenses. The Company shall pay all out-of-pocket fees and expenses
(including reasonable attorneys fees) of the Company and the Purchaser incurred
in connection with this Agreement, the Stockholders Agreement, the Stock
Purchase Warrant and the transactions contemplated hereby and thereby.
9B. Consent to Amendments. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended or waived and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Company has obtained the prior written consent
of Purchaser. No other course of dealing between the Company and Purchaser or
any delay in exercising any rights hereunder or under the Stockholders Agreement
or the Stock Purchase Warrant shall operate as a waiver of any rights of any
such holders.
9C. Successors and Assigns. Except as otherwise expressly provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and Purchaser and their respective permitted successors and assigns,
provided, however that Purchaser shall not assign this Agreement or any of the
rights or interests hereunder (except any right or interest directly related to
the ownership of the Shares) to any Person other than an Affiliate of Purchaser
within two years of the date hereof.
9D. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
<PAGE>
9E. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.
9F. Descriptive Headings; Interpretation. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a substantive
part of this Agreement. The use of the word "including" in this Agreement shall
be by way of example rather than by limitation.
9G. Governing Law. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the exhibits and
schedules hereto (including the Disclosure Schedule) shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
9H. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (i) when delivered personally to
the recipient, (ii) on the day following the date on which the same shall have
been sent to the recipient by reputable overnight courier service (charges
prepaid), (iii) when delivered via facsimile (with appropriate confirmation of
receipt), or (iv) on the third day following the date on which the same shall
have been mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to Purchaser and to the Company at the addresses
indicated below:
If to Purchaser:
c/o Thayer Equity Investors III, L.P.
1455 Pennsylvania Avenue, Suite 350
Washington, DC 20004
FAX: 202-371-0391
Attention: Carl J. Rickertsen
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W., Suite 1200
Washington, DC 20005-5793
FAX: 202-879-5200
Attention: Jack M. Feder, Esq.
<PAGE>
If to the Company:
MLC Holdings, Inc.
11150 Sunset Hills Road, Suite 110
Reston, VA 20190-5321
FAX: 703-834-5718
Attention: Phillip G. Norton
with a copy to:
Alston & Bird, LLP
601 Pennsylvania Avenue, N.W.
North Building, 11th Floor
Washington, DC 20004
FAX: 202-508-3333
Attention: Frank M. Conner, III, Esq.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
9I. No Strict Construction. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
9J. Entire Agreement. This Agreement (including the Disclosure Schedule and
the exhibits attached hereto), the Stockholders Agreement and the Stock Purchase
Warrant embody the complete agreement and understanding among the parties hereto
with respect to the subject matter hereof and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
[END OF PAGE]
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Common Stock
Purchase Agreement on the date first written above.
MLC HOLDINGS, INC.
By: /s/BRUCE M. BOWEN
--------------------------
Name: Bruce M. Bowen
Title: Executive Vice President
TC LEASING, LLC
By: THAYER EQUITY INVESTORS III, L.P.,
its managing member
By: TC EQUITY PARTNERS, L.L.C.,
its general partner
By: /s/JEFFREY W. GOETTMAN
-------------------------------
Name: Jeffrey W. Goettman
Title: Member
STOCKHOLDERS AGREEMENT
Dated as of October 23, 1998
Among
MLC HOLDINGS, INC.
AND CERTAIN OF ITS STOCKHOLDERS
<PAGE>
-iii-
DOCUMENT3
TABLE OF CONTENTS
Page
Section 1. Definitions.......................................-1-
Section 2. Voting Arrangements...............................-7-
(a) Election of Directors.............................-7-
(b) Additional Directors..............................-7-
(c) Removal of Directors..............................-8-
(d) Vacancies.........................................-8-
(e) Rights Unimpaired.................................-8-
(f) APPOINTMENT OF PROXY..............................-8-
(g) Committees........................................-9-
(h) Stock Purchase Warrant............................-9-
(i) Initial Thayer Directors..........................-9-
(j) Fiduciary Duties Unchanged........................-9-
(k) Election of Subsidiaries' Directors...............-9-
Section 3. Restrictions on Transfer..........................-9-
(a) Restrictions on Transfer..........................-9-
(b) Certain Permitted Transfers......................-10-
(c) Tag-Along Rights.................................-12-
(d) Public Thayer Offer..............................-14-
(e) Transfers in Violation of this Agreement.........-14-
Section 4. Legends..........................................-14-
(a) Stockholders Agreement Legend....................-14-
(b) Removal of Legends...............................-15-
Section 5. Preemptive Rights................................-15-
(a) Restrictions.....................................-15-
(b) Thayer Offer.....................................-15-
(c) Stock Offer......................................-15-
(d) Refused Securities...............................-16-
(e) Exclusions.......................................-16-
(f) Excluded Securities..............................-16-
(g) 33.3% Limitation.................................-16-
Section 6. Qualified Sale of the Company....................-17-
(a) Approved Sale....................................-17-
(b) Management Offer.................................-17-
Section 7. Registration Rights..............................-19-
(a) Shelf Registration...............................-19-
(b) Demand Registration..............................-19-
(c) Incidental Registration..........................-19-
(d) Holdback Agreements..............................-20-
(e) Registration and Maintenance Procedures..........-21-
(f) Registration Expenses............................-24-
(g) Indemnification; Contribution....................-25-
(h) Rule 144 Sales...................................-28-
(i) Underwritten Registrations.......................-28-
(j) No Inconsistent Agreements.......................-28-
(k) S-3 Demands......................................-28-
Section 8. Operating Budget.................................-29-
Section 9. Redemption.......................................-29-
Section 10. Rights of First Refusal or First Offer...........-30-
(a) Assignment.......................................-30-
(b) Irrevocable Proxy and Stock Rights Agreement.....-30-
Section 11. Amendment and Waiver.............................-30-
Section 12. Severability.....................................-31-
Section 13. Entire Agreement.................................-31-
Section 14. Successors and Assigns...........................-31-
Section 15. Counterparts.....................................-31-
Section 16. Remedies.........................................-31-
Section 17. Notices..........................................-31-
Section 18. Governing Law....................................-32-
Section 19. Descriptive Headings.............................-33-
Section 20. Survival; Termination............................-33-
Section 21. Other Registration Rights........................-33-
<PAGE>
Schedules and Exhibits:
Schedule I --.......Other Management Stockholders
Exhibit A --.......Form of Joinder Agreement to Stockholders Agreement
<PAGE>
DOCUMENT3
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is dated as of
October 23, 1998 among (i) MLC HOLDINGS, INC., a Delaware corporation (the
"Company"), (ii) TC Leasing, LLC, a Delaware limited liability company
("Thayer"), (iii) Phillip G. Norton ("Norton"), Bruce M. Bowen and the other
Persons listed on Schedule I hereto (collectively, the "Management
Stockholders") and (iv) each Person who hereafter executes a counterpart of this
Agreement (or otherwise agrees to be bound by the provisions hereof). Thayer,
the Management Stockholders and the other Persons that are or may become parties
to this Agreement are sometimes referred to herein collectively as the
"Stockholders").
The parties hereby agree as follows:
Section 1.......Definitions. For purposes of this Agreement,
the following terms have the indicated meanings:
"Affiliate" of a Person means any other Person controlling,
controlled by or under common control with such Person, whether by ownership of
voting securities, by contract or otherwise, and in the case of Thayer shall
include Thayer Equity Investors III, L.P. and any of its partners or Affiliates,
and in the case of a natural Person shall include any member of such Person's
Family Group.
"Agreement" is defined in the preface.
"Allocable Shares" is defined in Section 3(c)(ii).
"Approved Sale" is defined in Section 6(a).
"Block of Shares" means Thayer Shares which constitute 5% or
more of the Common Shares of the Company, and includes all Thayer Shares which
are transferred pursuant to Section 3(b)(vi) or 3(b)(xiii) in a single
transaction or in a series of related transactions.
"Board" means the Company's Board of Directors.
"Buyers" is defined in Section 6(b).
"Common Shares" means shares of the Company's Common Stock.
"Common Stock" means, collectively, the Company's common
stock, par value $.01 per share, and any other class or series of authorized
capital stock of the Company which is not limited to a fixed sum or percentage
of par or stated value in respect to the rights of the holders thereof to
participate in dividends or in the distribution of assets upon any liquidation,
dissolution or winding up of the Company.
<PAGE>
DOCUMENT3
"Common Stock Purchase Agreement" means the Common Stock
Purchase Agreement, dated as of the date hereof, by and between the Company and
Thayer.
"Company" is defined in the preface.
"Co-Redemption Notice" is defined in Section 9.
"Demand Registration" is defined in Section 7(b)(i).
"Demand Right" is defined in Section 7(b)(i).
"Exchange Act" means the Securities Exchange Act of 1934, .
as amended
"Excluded Securities" is defined in Section 5(f).
"Family Group" means such Person's spouse and lineal
descendants (whether natural or adopted) and any trust formed and maintained
solely for the benefit of such Person, such Person's spouse or such Person's
lineal descendants.
"Incidental Registration" is defined in Section 7(c)(i).
"Incidental Registration Statement" is defined in Section 7(c)
(i).
"Indemnified Company" is defined in Section 7(g)(ii).
"Indemnified Parties" is defined in Section 7(g)(ii).
"Indemnified Stockholder" is defined in Section 7(g)(i).
"Indemnifying Party" is defined in Section 7(g)(iii).
"Independent Directors" is defined in Section 2(a).
"Irrevocable Proxy and Stock Rights Agreement" means the
Irrevocable Proxy and Stock Rights Agreement, made as of September 1, 19
Group, Inc.
"Joinder Agreement" is defined in Section 3(b)(i).
"Losses" is defined in Section 7(g)(i).
"Management Directors" is defined in Section 2(a).
"Management Offer Notice" is defined in Section 6(b).
"Management Reply" is defined in Section 6(b).
<PAGE>
"Management Shares" means Stockholder Shares held by the
Management Stockholders and their permitted transferees. Management Shares shall
cease to be such when they cease to be Stockholder Shares.
"Management Stockholders" is defined in the preface.
"Market Value" means, with respect to any security on any
date, (x) if such security is quoted on NASDAQ or listed on a national
securities exchange, the average daily closing sales price of such security on
NASDAQ or a national securities exchange, as applicable, for the 20 trading days
prior to such date, and (y) if such security is not quoted on NASDAQ or listed
on a national securities exchange, the fair value per share determined jointly
by the Company and Thayer, provided that if the Company and Thayer are unable to
reach an agreement within a reasonable period of time, such fair value shall be
determined by a recognized investment banking firm jointly selected by the
Company and Thayer, whose determination shall be final and binding upon the
Company and Thayer (and the fees and expenses of such recognized investment
banking firm shall be paid by the Company).
"NASDAQ" means National Association of Securities Dealers
Automated Quotations National Market System.
"New Securities" is defined in Section 5(a).
"Norton" is defined in the preface.
"Norton Family Stockholder" means each of J.A.P. Investment
Group, Inc., Kevin M. Norton and Patrick J. Norton, Jr.
"Offered Securities" is defined in Section 3(c)(i).
"Options" means any options to purchase Common Stock granted
by the Company.
"Other Holder" is defined in Section 3(c)(i).
"Other Redeemers" is defined in Section 9.
"Other Stockholders" is defined in Section 6(a).
"Ownership Percentage" means, with respect to any Stockholder,
a percentage equal to the product of (a) a fraction, the numerator of which is
the sum of (i) the number of Common Shares owned by such Stockholder, and (ii)
the number of Common Shares issuable upon the exercise of any Stock Purchase
Warrant or Option owned by such Stockholder, and the denominator of which is the
sum of (x) the number of shares of the Company's outstanding Common Shares, and
(y) the number of Common Shares issuable upon the exercise of all Stock Purchase
Warrants or Options owned by any of the Stockholders, multiplied by (b) 100.
"Permitted Transfers" is defined in Section 3(b).
<PAGE>
"Person" means any individual, corporation, partnership, firm,
joint venture, association, limited liability company, joint-stock company,
trust, unincorporated organization, governmental or regulatory body or other
legal entity.
"Proceeding" is defined in Section 7(g)(iii).
"Public Offering" means a sale of Common Stock to the public
in an offering pursuant to an effective registration statement filed with the
SEC pursuant to the Securities Act, as then in effect, provided that a Public
Offering shall not include an offering made in connection with a business
acquisition or combination or an employee benefit plan.
"Public Sale" means a sale of Common Stock pursuant to a
Public Offering or a Rule 144 Sale.
"Qualified Sale of the Company" means a Sale of the Company
pursuant to which the effective price per Common Share for the holders of
Stockholder Shares would be as follows: (i) if the Sale of the Company occurs
before the first anniversary of the date hereof, (x) 75% greater than the
average daily closing sales price of the Common Shares on NASDAQ for the 3
months prior to the date of the public announcement of the proposed Sale of the
Company and (y) greater than $20.00 (as such amount is proportionately adjusted
for stock splits, stock combinations, stock dividends and recapitalizations
affecting the Common Shares after the date hereof); (ii) if the Sale of the
Company occurs on or after the first anniversary of the date hereof and before
the second anniversary of the date hereof, (x) 60% greater than the average
daily closing sales price of the Common Shares on NASDAQ for the 3 months prior
to the date of the public announcement of the proposed Sale of the Company and
(y) greater than $18.00 (as such amount is proportionately adjusted for stock
splits, stock combinations, stock dividends and recapitalizations affecting the
Common Shares after the date hereof); (iii) if the Sale of the Company occurs on
or after the second anniversary of the date hereof and before the third
anniversary of the date hereof, (x) 45% greater than the average daily closing
sales price of the Common Shares on NASDAQ for the 3 months prior to the date of
the public announcement of the proposed Sale of the Company and (y) greater than
$16.00 (as such amount is proportionately adjusted for stock splits, stock
combinations, stock dividends and recapitalizations affecting the Common Shares
after the date hereof); and (iv) if the Sale of the Company occurs on or after
the third anniversary of the date hereof, (x) 30% greater than the average daily
closing sales price of the Common Shares on NASDAQ for the 3 months prior to the
date of the public announcement of the proposed Sale of the Company and (y)
greater than $14.00 (as such amount is proportionately adjusted for stock
splits, stock combinations, stock dividends and recapitalizations affecting the
Common Shares after the date hereof), provided that if the Common Shares are not
then traded on NASDAQ, then the average price per Common Shares for the 3 months
prior to the date of the public announcement of the proposed Sale of the Company
as determined in good faith by the Board.
"Redeemable Shares" is defined in Section 9.
"Redemption Notice" is defined in Section 9.
<PAGE>
"Refused Securities" is defined in Section 5(d).
"Registrable Securities" means any Common Shares, except
Common Shares which have been Transferred in a Public Sale.
"Registration Notice" is defined in Section 7(b)(i).
"Registration Request" is defined in Section 7(b)(i).
"Registration Statement" means any registration statement of
the Company under which any of the Registrable Securities are included therein
pursuant to the provisions of this Agreement, including the prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement. The Shelf shall be deemed a Registration Statement.
"Requesting Holders" is defined in Section 7(b)(i).
"Rule 144 Sale" means a sale of Common Stock to the public
through a broker, dealer or market-maker pursuant to the provisions of Rule 144
adopted under the Securities Act (or any successor rule or regulation).
"S-3 Demand Registration" is defined in Section 7(k)(i).
"S-3 Registration Notice" is defined in Section 7(k)(i).
"S-3 Registration Request" is defined in Section 7(k)(i).
"S-3 Requesting Holders" is defined in Section 7(k)(i).
"Sale Notice" is defined in Section 3(c)(i).
"Sale of the Company" means, whether in a single transaction
or in a series of related transactions, (i) a sale of all or substantially all
of the assets of the Company and its Subsidiaries on a consolidated basis, or
(ii) the Transfer or other disposition of more than 50% of the outstanding
Common Stock or the outstanding common equity securities of any of the Company's
Subsidiaries (in each case whether accomplished by stock purchase, asset
purchase, merger, recapitalization, reorganization or other transaction).
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Holder" is defined in Section 3(c)(i).
"Shelf" is defined in Section 7(a).
<PAGE>
"Stockholders" is defined in the preface.
"Stock Notice of Acceptance" is defined in Section 5(c).
"Stock Offer" is defined in Section 5(c).
"Stock Offer Period" is defined in Section 5(c).
"Stock Option Plans" means the 1998 Long-Term Incentive Plan,
the Employee Share Purchase Plan and any other plan of the Company pursuant to
which the Company issues options, stock appreciation rights, restricted stock or
other stock based compensation to officers, employees, directors or consultants
of the Company or any of its Subsidiaries.
"Stock Purchase Warrant" means, collectively, the Stock
Purchase Warrant, dated as of the date hereof, by the Company in favor of
Thayer, and any subsequent stock purchase warrant or stock purchase warrants in
favor of Thayer or any of its Affiliates issued pursuant to or in connection
with the Stock Purchase Warrant, dated as of the date hereof, by the Company in
favor of Thayer.
"Stockholder Shares" means (i) all shares of Common Stock now
owned or in the future acquired by the Stockholders, including all shares of
Common Stock acquired pursuant to the exercise of Options or the Stock Purchase
Warrant, and (ii) all shares of Common Stock or other securities issued or
issuable directly or indirectly with respect to the securities referred to in
clause (i) by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. Stockholder Shares shall cease to be such as provided in the
last sentence of Section 3(b).
"Subsidiary" means, with respect to any Person, any other
Person of which at least a majority of the outstanding shares or other equity
interests having ordinary voting power for the election of directors or
comparable managers of such Person are owned, directly or indirectly, by the
first Person or one or more Subsidiaries of such first Person.
"Tag-Along Notice" is defined in Section 3(c)(i).
"Thayer" is defined in the preface.
"Thayer Directors" is defined in Section 2(a) and 2(b).
"Thayer Notice of Acceptance" is defined in Section 5(b).
"Thayer Offer" is defined in Section 5(b).
"Thayer Offer Period" is defined in Section 5(b).
"Thayer Shares" means Stockholder Shares held by the Thayer
and its permitted transferees. Thayer Shares shall cease to be such when they
cease to be Stockholder Shares.
<PAGE>
"Transfer" means, with respect to any Stockholder Shares, the
gift, sale, assignment, transfer, pledge, hypothecation or other disposition
(whether for or without consideration and whether voluntary, involuntary or by
operation of law) of such Stockholder Shares or any interest therein.
"Warrant Shares" means the Common Shares issued in connection
with the exercise of the Stock Purchase Warrant, so long as such Common Shares
continue to be Stockholder Shares.
Section 2. Voting Arrangements.
(a) Election of Directors. Except as set for in Section 2(b),
each Stockholder agrees that such Person will vote, or cause to be voted, all
voting securities of the Company over which such Person has the power to vote or
direct the voting, and will take all other necessary or desirable action within
such Person's control, and the Company will take all necessary and desirable
actions within its control, to cause the authorized number of directors for the
Company to be established at six directors, and to elect or cause to be elected
to the Board and cause to be continued in such offices as follows: (i) two
individuals designated by Thayer (the "Thayer Directors"), (ii) two individuals
designated by the Management Stockholders (the "Management Directors") and (iii)
two individuals who are not employees of the Company or its Subsidiaries or
Affiliates, designated by a nominating committee comprised of one individual
designated by the Management Stockholders and one individual designated by
Thayer (the "Independent Directors"); provided that for so long as the Board is
divided into three classes, the "Class I" directors shall consist of one Thayer
Director and one Independent Director, the "Class II" directors shall consist of
one Thayer Director and one Independent Director and the "Class III" directors
shall consist of two Management Directors.
<PAGE>
(b) Additional Directors. Notwithstanding anything herein to
the contrary, in the event that (x) the Board does not approve an Approved Sale
and the Thayer Directors voted in favor of such Approved Sale or (y) the Board
does not vote on whether to approve an Approved Sale within a reasonable period
of time after Thayer requests the Board to approve an Approved Sale, each
Stockholder agrees that such Person will vote, or cause to be voted, all voting
securities of the Company over which such Person has the power to vote or direct
the voting, and will take all other necessary or desirable action within such
Person's control, and the Company will take all necessary and desirable actions
within its control, to cause the authorized number of directors for the Company
and each of its Subsidiaries to be increased from six directors to nine
directors, and to elect or cause to be elected to the Board, and cause to be
continued in such office (for so long as reasonably necessary for the Board to
approve and the Company to consummate such Approved Sale), the three additional
directors of the Board designated by Thayer (also, the "Thayer Directors");
provided, however, that if the Board is then divided into classes, each
Stockholder agrees that such Person will vote, or cause to be voted, all voting
securities of the Company over which such Person has the power to vote or direct
the voting, and will take all other necessary or desirable action within such
Person's control, and the Company will take all necessary and desirable actions
within its control, including if necessary abolishing the three classes of
directors and establishing only one class of directors, to cause the majority of
the directors on the then current Board to consist of Thayer Directors.
(c) Removal of Directors. If at any time Thayer shall notify
the other Stockholders of its desire to remove, with or without cause, any
individual designated by Thayer pursuant to Section 2(a), 2(b) or 2(k) from a
directorship, or if at any time the Management Stockholders shall notify the
other Stockholders of their desire to remove, with or without cause, any
individual designated by the Management Stockholders pursuant to Section 2(a)
above from a directorship, all such Persons so notified will vote, or cause to
be voted, all voting securities of the Company or any Subsidiary of the Company,
as applicable, over which they have the power to vote or direct the voting, and
will take all other necessary or desirable action within such Person's control,
and the Company will take all necessary and desirable actions within its
control, to cause the removal of such director.
(d) Vacancies. If at any time any director ceases to serve on
the board of directors of the Company or any Subsidiary of the Company (whether
due to resignation, removal or otherwise), then Thayer or the Management
Stockholders, as applicable, shall be entitled to designate a successor director
to fill the vacancy created thereby on the terms and subject to the conditions
of Section 2(a), 2(b) or 2(k), as applicable. Each Stockholder agrees that he,
she or it will vote, or cause to be voted, all voting securities of the Company
or any Subsidiary of the Company over which such Person has the power to vote or
direct the voting, and shall take all such other actions promptly as shall be
necessary or desirable to cause the successor designated by Thayer or the
Management Stockholders, as applicable, to be elected to fill such vacancy.
(e) Rights Unimpaired. Nothing in this Agreement shall be
construed to impair any rights that the stockholders of the Company or any
Subsidiary of the Company may have to remove any director for cause. No removal
for cause of an individual designated pursuant to this Section 2 shall affect
the right of Thayer or the Management Stockholders, as applicable, to designate
a different individual pursuant to this Section 2 to fill the directorship from
which such individual was removed.
<PAGE>
(f) APPOINTMENT OF PROXY. IN ORDER TO SECURE THE OBLIGATIONS
OF EACH AND EVERY MANAGEMENT STOCKHOLDER TO VOTE ALL COMMON SHARES HELD BY SUCH
MANAGEMENT STOCKHOLDER IN ACCORDANCE WITH ALL OF THE PROVISIONS OF SECTION 2(b)
OF THIS AGREEMENT, EACH MANAGEMENT STOCKHOLDER HEREBY IRREVOCABLY CONSTITUTES
AND APPOINTS CARL J. RICKERTSEN AS SUCH MANAGEMENT STOCKHOLDER'S TRUE AND LAWFUL
ATTORNEY, AGENT AND PROXY, WITH FULL POWER OF SUBSTITUTION, TO ATTEND MEETINGS
OF STOCKHOLDERS OF THE COMPANY HELD FROM TIME TO TIME, AND TO VOTE ON SUCH
MANAGEMENT STOCKHOLDER'S BEHALF AND IN SUCH STOCKHOLDER'S NAME, PLACE, AND
STEAD, OR TO EXECUTE WRITTEN CONSENTS IN LIEU OF SUCH MEETINGS, THE NUMBER OF
VOTES THAT SUCH MANAGEMENT STOCKHOLDER WOULD BE ENTITLED TO CAST IF ACTUALLY
PRESENT OR WITH RESPECT TO WHICH SUCH MANAGEMENT STOCKHOLDER WOULD BE ENTITLED
TO EXECUTE A WRITTEN CONSENT, IN CONNECTION WITH ANY ELECTION OF DIRECTORS (IN
ACCORDANCE WITH SECTION 2(b)) OR ANY APPROVED SALE (IN ACCORDANCE WITH SECTION
6). THE POWERS GRANTED HEREIN WILL BE DEEMED TO BE COUPLED WITH AN INTEREST,
WILL BE IRREVOCABLE AND WILL SURVIVE THE DEATH, INCOMPETENCY, DISABILITY OR
DISSOLUTION OF ANY MANAGEMENT STOCKHOLDER.
(g) Committees. The Compensation Committee of the Board shall
at all times grant all awards under the Stock Option Plans. The Compensation
Committee shall consist of four members, two of which shall be Independent
Directors and two of which shall be Thayer Directors. All other committees of
the Board shall at all times consist of at least one Thayer Director.
(h) Stock Purchase Warrant. Each Stockholder agrees that such
Person will vote, or cause to be voted, all voting securities of the Company
over which such Person has the power to vote or direct the voting, and will take
all other necessary or desirable action within such Person's control, and the
Company will take all necessary and desirable actions within its control, so
that Thayer (or any Person designated by Thayer) may exercise its rights under
the Stock Purchase Warrant pursuant to the terms thereof.
(i) Initial Thayer Directors. Thayer hereby designates Carl J.
Rickertsen as the initial "Class II" Thayer Director and Dr. Paul G. Stern as
the initial "Class I" Thayer Director.
(j) Fiduciary Duties Unchanged. Nothing in this Agreement
shall be construed to limit, change or eliminate any fiduciary duties a director
of the Company or any Subsidiary of the Company may have to the stockholders of
the Company or any Subsidiary of the Company under Delaware law.
(k) Election of Subsidiaries' Directors. The Company will take
all necessary and desirable actions within its control to elect or cause to be
elected to the respective boards of directors of each of the Company's domestic
Subsidiaries, and cause to be continued in such offices, at least one Thayer
Director. Thayer hereby designates Carl J. Rickertsen as the initial Thayer
Director for the purposes of this Section 2(k).
Section 3.........Restrictions on Transfer.
(a) Restrictions on Transfer. No holder of Stockholder
Shares may Transfer such Stockholder Shares except in a Permitted Transfer.
<PAGE>
(b) Certain Permitted Transfers. Section 3(a) shall
not apply to Transfers ("Permitted Transfers") of Stockholder Shares:
(i) to any Affiliate of the holder of such
Stockholder Shares, provided that (x) such Transfers do not violate
federal or state securities laws, and (y) the transferees (other than
partners of Thayer Equity Investors III, L.P.) execute a Joinder
Agreement substantially in the form attached hereto as Exhibit A (a
"Joinder Agreement") and thereby become a party to this Agreement;
(ii) from a Norton Family Stockholder to Norton
pursuant to the Irrevocable Proxy and Stock Rights Agreement;
(iii) to the Company, subject to the provisions of
Section 9, provided that in no event shall such Transfers occur without
the prior written consent of Thayer if such Transfers (after taking
into account all Transfers in connection with related Co-Redemption
Notices as provided in Section 9) would result in the Management Shares
and Thayer Shares, collectively, constituting less than 51% of the
outstanding Common Shares of the Company;
(iv) to Thayer or any Affiliate thereof pursuant to
Section 10(a), provided that in no event shall such Transfers occur
without the prior written consent of the holders of at least a majority
of the then outstanding Management Shares if such Transfers would
result in the Thayer Shares and Common Shares issuable in connection
with the exercise of a Stock Purchase Warrant in the aggregate
constituting more than 33.3% of the Common Shares of the Company on a
fully diluted basis, provided further that if such Transfers are to any
Affiliate of Thayer, (x) such Transfers do not violate federal or state
securities laws, and (y) such Affiliate executes a Joinder Agreement;
(v) to Thayer or any Affiliate thereof pursuant to
Section 10(b), provided that if such Transfers are to an Affiliate of
Thayer, (x) such Transfers do not violate federal or state securities
laws, and (y) such Affiliate executes a Joinder Agreement;
(vi) pursuant to Section 6(b), provided that (x) such
Transfers do not violate federal or state securities laws, and (y) the
transferees execute a Joinder Agreement and thereby become a party to
this Agreement (unless the applicable Block of Shares constituted 85%
or more of the Common Shares then owned by Thayer and its Affiliates
(provided that the limited partners of Thayer Equity Investors III,
L.P. shall not be treated as Affiliates of Thayer for the purposes of
this Section 3(b)(vi)) and Thayer elected in the applicable Management
Offer Notice for the transferees not to execute a Joinder Agreement);
(vii) in a Public Sale, subject to the provisions of
Section 3(d), provided that in no event shall such Transfers occur
without the prior written consent of Thayer if such Transfers would
result in the Management Shares and Thayer Shares, collectively,
constituting less than 51% of the outstanding Common Shares of the
Company;
<PAGE>
(viii) in a Public Sale, subject to the provisions of
Section 3(d), provided that in no event shall such Transfers occur
without the prior written consent of Thayer if (w) such transferor is
Bruce M. Bowen or any of his Affiliates, and such Transfers (combined
with all other Transfers pursuant to this Section 3(b)(viii)(w)) are
for more than 20,000 Common Shares in any 3 month period or for more
than 80,000 Common Shares, (x) such transferor is JAP Investment Group,
Inc. or any of its Affiliates, and such Transfers (combined with all
other Transfers pursuant to this Section 3(b)(viii)(x)) are for more
than 25,000 Common Shares in any 3 month period or for more than
100,000 Common Shares, (y) such transferor is Kevin M. Norton or any of
his Affiliates, and such Transfers (combined with all other Transfers
pursuant to this Section 3(b)(viii)(y)) are for more than 12,500 Common
Shares in any 3 month period or for more than 50,000 Common Shares or
(z) such transferor is Patrick J. Norton, Jr. or any of his Affiliates,
and such Transfers (combined with all other Transfers pursuant to this
Section 3(b)(viii)(z)) are for more than 12,500 Common Shares in any 3
month period or for more than 50,000 Common Shares;
(ix) pursuant to an Approved Sale, subject to the
provisions of Sections 3(c) and 6(b);
(x) incidental to the exercise, conversion or
exchange thereof in accordance with their terms, any combination of
shares (including any reverse stock split) or any recapitalization,
reorganization or reclassification of, or any merger or consolidation
involving, the Company;
(xi) from a Management Stockholder to Thayer, any
Affiliate thereof or any Person designated by Thayer, provided that in
no event shall such Transfers occur without the prior written consent
of the holders of at least a majority of the then outstanding
Management Shares if such Transfers would result in the Thayer Shares
and Common Shares issuable in connection with the exercise of a Stock
Purchase Warrant in the aggregate constituting more than 33.3% of the
Common Shares of the Company on a fully diluted basis (except to the
extent permitted under Section 3(d)), provided further that if such
Transfers are to an Affiliate of Thayer or any Person designated by
Thayer, (x) such Transfers do not violate federal or state securities
laws, and (y) such Affiliate or any Person designated by Thayer, as
applicable, executes a Joinder Agreement;
(xii) pursuant to Section 3(c), provided that (x)
such Transfers do not violate federal or state securities laws, and (y)
if the transferees in the Transfers to which the tag-along right under
Section 3(c) is related execute a Joinder Agreement, the transferees
pursuant to the Transfer pursuant to this clause (xi) execute a Joinder
Agreement and thereby become a party to this Agreement; and
<PAGE>
(xiii) to any Person other than pursuant to a
Transfer described above, subject to the provisions of Sections 3(c)
and 6(b), provided that (x) such Transfers do not violate federal or
state securities laws, and (y) the transferees execute a Joinder
Agreement and thereby become a party to this Agreement (unless such
Transfers are by Thayer or any Affiliate thereof of 85% or more of the
Common Shares then owned by Thayer and its Affiliates (provided that
the limited partners of Thayer Equity Investors III, L.P. shall not be
treated as Affiliates of Thayer for the purposes of this Section
3(b)(xiii)) Thayer Shares, in which case such transferees shall only
execute a Joinder Agreement if Thayer so elects).
Any Stockholder Shares transferred pursuant to clause (i), (ii), (iv), (v),
(vi), (x), (xi) or (xiii) above shall continue to be Stockholder Shares for
purposes of this Agreement, any Stockholder Shares transferred pursuant to
clause (iii), (vii), (viii) or (ix) above shall no longer be Stockholder Shares
and hence no longer subject to any of the restrictions set forth herein, and any
Stockholder Shares transferred pursuant to clause (xii) above (x) shall continue
to be Stockholder Shares if the Stockholder Shares transferred in the Transfer
to which the tag-along right under Section 3(c) is related continue to be
Stockholder Shares, and (y) shall no longer be Stockholder Shares if the
Stockholder Shares transferred in the Transfer to which the tag-along right
under Section 3(c) is related cease to be Stockholder Shares.
(c) Tag-Along Rights.
<PAGE>
(i)... Prior to making any Transfer of Stockholder Shares pursuant to
Section 3(b)(ix) or 3(b)(xiii), any holder of Stockholder Shares proposing to
make such a Transfer (for purposes of this Section 3(c), a "Selling Holder")
shall give at least thirty (30) days prior written notice to each other holder
of Stockholder Shares (for purposes of this Section 3(c) each, an "Other
Holder") and the Company, which notice (for purposes of this Section 3(c), the
"Sale Notice") shall identify the type and amount of Stockholder Shares to be
sold (for purposes of this Section 3(c), the "Offered Securities"), describe the
terms and conditions of such proposed Transfer, and identify each prospective
transferee. Any of the Other Holders may, within fifteen (15) days after the
receipt of the Sale Notice, give written notice (each, a "Tag-Along Notice") to
the Selling Holder that such Other Holder wishes to participate in such proposed
Transfer upon the terms and conditions set forth in the Sale Notice, which
Tag-Along Notice shall specify the Common Shares such Other Holder desires to
include in such proposed Transfer; provided, however, that (1) each Other Holder
shall be required, to the extent applicable, as a condition to being permitted
to sell Common Shares pursuant to Section 3(b)(xiii) and this Section 3(c) in
connection with a Transfer of Offered Securities, to elect to sell Common Shares
of the same type and class and in the same relative proportions as the Common
Shares which comprise the Offered Securities; and (2) to exercise such Person's
tag-along rights hereunder, each Other Holder must agree to make to the
transferee the same representations, warranties, covenants, indemnities and
agreements as the Selling Holder agrees to make in connection with the Transfer
of the Offered Securities (except that in the case of representations and
warranties pertaining specifically to, or covenants made specifically by, the
Selling Holder, the Other Holders shall make comparable representations and
warranties pertaining specifically to (and, as applicable, covenants by) such
Persons), and must agree to bear such Person's pro rata share (which may be
joint and several but shall be based on the value of Common Shares that are
Transferred) of all liabilities to the transferees arising out of
representations, warranties and covenants (other than those representations,
warranties and covenants that pertain specifically to a given Person, who shall
bear all of the liability related thereto), indemnities or other agreements made
in connection with the Transfer. Each Stockholder will bear (x) such Person's
own costs of any sale of Common Shares pursuant to Section 3(b)(xiii) and this
Section 3(c) and (y) such Person's pro rata share (based upon the relative
amount of Common Shares sold) of the reasonable costs of any sale of Common
Shares pursuant to Section 3(b)(xiii) and this Section 3(c) to the extent such
costs are incurred for the benefit of all selling Stockholders and are not
otherwise paid by the acquiring party.
(ii).....If none of the Other Holders gives the Selling Holder a timely
Tag-Along Notice with respect to the Transfer proposed in the Sale Notice, then
the Selling Holder may Transfer such Offered Securities on the terms and
conditions set forth in the Sale Notice to or among any of the transferees
identified (or Affiliates of transferees identified) in the Sale Notice at any
time within ninety days after expiration of the fifteen-day period for giving
Tag-Along Notices with respect to such Transfer. Any such Offered Securities not
Transferred by the Selling Holder during such ninety-day period will again be
subject to the provisions of this Section 3(c) upon a subsequent Transfer. If
one or more Other Holders give the Selling Holder a timely Tag-Along Notice,
then the Selling Holder shall use all reasonable efforts to obtain the agreement
of the prospective transferee(s) to the participation of the Other Holders in
any contemplated Transfer, on the same terms and conditions as are applicable to
the Offered Securities, and no Selling Holder shall Transfer any of such
Person's shares to any prospective transferee if such prospective transferee(s)
declines to allow the participation of the Other Holders. If the prospective
transferee(s) is unwilling or unable to acquire all of the Offered Securities
and all of the Common Shares to be Transferred by the Other Holders specified in
a timely Tag-Along Notice upon such terms, then the Selling Holder may elect
either to cancel such proposed Transfer or to allocate the maximum number of
each class of Common Shares that the prospective transferees are willing to
purchase (the "Allocable Shares") among the Selling Holder and the Other Holders
giving timely Tag-Along Notices as follows (it being understood that the
prospective transferees shall be required to purchase Common Shares of the same
class on the same terms and conditions taking into account the provisions of
clause (1) of Section 3(c)(i), and to consummate such Transfer on those terms
and conditions):
(x) each participating Stockholder
(including the Selling Holder) shall be entitled to sell a
number of shares of Common Shares (not to exceed, for any
Other Holder, the number of shares of such Common Shares
identified in such Other Holder's Tag-Along Notice) equal to
the product of (A) the number of Allocable Shares of such
class of Common Shares and (B) a fraction, the numerator of
which is such Stockholder's Ownership Percentage of such class
of Common Shares and the denominator of which is the aggregate
Ownership Percentage for all participating Stockholders of
such class of Common Shares; and
(y) if after allocating the Allocable Shares
of any class of Common Shares to such Stockholders in
accordance with clause (x) above, there are any Allocable
Shares of such class that remain unallocated, then they shall
be allocated (in one or more successive allocations on the
basis of the allocation method specified in clause (x) above)
among the Selling Holder and each such Other Holder that has
elected in its Tag-Along Notice to sell a greater number of
shares of such class of Common Shares than previously has been
allocated to such Person pursuant to clause (x) and this
clause (y) (all of whom (but no others) shall, for purposes of
clause (x) above, be deemed to be the participating
Stockholders) until all such Allocable Shares have been
allocated in accordance with this clause (y).
<PAGE>
(d) Public Thayer Offer. Notwithstanding anything herein to
the contrary, prior to any holder of Management Shares transferring such
Management Shares pursuant to Section 3(b)(vii) or 3(b)(viii), such holder shall
give at least three business days prior written notice to Thayer, which notice
shall identify the type, amount and price per share of the Management Shares to
be sold. Thayer may, within such three business day period, give written notice
to such holder that Thayer and/or any Person designated by Thayer wishes to
purchase all or a portion of such Management Shares at such price. If Thayer (or
any Person designated by Thayer) elects to purchase all or a portion of such
Management Shares by giving a timely notice to such holder, such Transfer to
Thayer or any Person designated by Thayer, applicable, shall occur within 15
business days after the date the applicable notice was sent to Thayer pursuant
to the terms and conditions set forth in Section 3(b)(xi), provided that if the
holder of Management Shares sent the notice pursuant to Section 3(b)(viii), the
33.3% limitation regarding Thayer Shares and Common Shares issuable upon the
exercise of a Stock Purchase Warrant shall be waived. If Thayer does not elect
to purchase all of such Management Shares (or a Transfer of such Management
Shares pursuant to Section 3(b)(xi) does not occur within the applicable 15
business day period despite the reasonable best efforts of such holder of
Management Shares), then such holder of Management Shares may Transfer such
remaining Management Shares at a price per share no less than 95% of the price
per share set forth in the applicable notice at any time within ninety days
after such holder sent the notice of such proposed Transfer to Thayer. Any
Management Shares not transferred by such holder during such ninety-day period
shall again be subject to the provisions of this Section 3(d) upon a subsequent
Transfer pursuant to Section 3(b)(vii) or 3(b)(viii).
(e) Transfers in Violation of this Agreement. Any Transfer or
attempted Transfer of any Stockholder Shares in violation of this Agreement
shall be void, and the Company shall not be obligated to record such Transfer on
its books or treat any purported transferee of such Common Shares as the owner
of such Common Shares for any purpose.
Section 4.........Legends.
(a) Stockholders Agreement Legend. The certificates
representing Stockholder Shares shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT DATED AS OF OCTOBER 23, 1998 AMONG MLC HOLDINGS,
INC. AND CERTAIN OF ITS STOCKHOLDERS, A COPY OF WHICH MAY BE OBTAINED
WITHOUT CHARGE BY THE HOLDER HEREOF AT THE PRINCIPAL PLACE OF BUSINESS
OF MLC HOLDINGS, INC. DISPOSITION OF THIS CERTIFICATE OR THE SECURITIES
REPRESENTED HEREBY OR ANY RIGHTS OR INTERESTS THEREIN IN VIOLATION OF
SUCH STOCKHOLDERS AGREEMENT SHALL BE NULL AND VOID.
Each holder of Stockholder Shares shall provide the Company promptly after the
date hereof (and in no event later than 14 days after the date hereof) with his
or her certificates representing Stockholder Shares so that such legend can be
placed thereon.
<PAGE>
(b) Removal of Legends. Whenever the restrictions described
above cease to be applicable to any Stockholder Shares, the holder thereof shall
be entitled to receive from the Company, without expense to the holder, a new
certificate not bearing a legend stating such restriction.
Section 5.........Preemptive Rights. The Company may
authorize, issue, sell or enter into any agreement providing for the issuance or
sale (contingent or otherwise) of equity securities (including, without
limitation, the Common Stock) only in accordance with the provisions of this
Section 5.
(a) Restrictions. On or prior to the six month anniversary of
the date hereof, except in the case of Excluded Securities, without Thayer's
prior written consent, the Company shall not issue, sell or exchange, agree to
issue, sell or exchange, or reserve or set aside for issuance, sale or exchange,
any (i) Common Shares, (ii) any debt security of the Company which by its terms
is convertible into or exchangeable for any equity security of the Company or
has an equity kicker or other participation rights, (iii) any security of the
Company that is a combination of debt and equity or (iv) any option, warrant or
other right to subscribe for, purchase or otherwise acquire any equity security
or any such debt security of the Company (subsections (i) through (iv),
collectively, the "New Securities").
(b) Thayer Offer. After the six month anniversary of the date
hereof, but on or prior to the second anniversary of the date hereof, except in
the case of Excluded Securities or as set forth in Section 5(g), without
Thayer's prior written consent, the Company shall not issue, sell or exchange,
agree to issue, sell or exchange, or reserve or set aside for issuance, sale or
exchange, any New Securities unless in each case, the Company shall have first
offered to sell all of such New Securities to Thayer, at a price and on such
other terms as shall have been specified by the Company in writing delivered to
Thayer at least 15 business days prior to the proposed consummation of the sale
of the New Securities (the "Thayer Offer"), which Thayer Offer by its terms
shall remain open and irrevocable for a period of 10 business days from the date
it is delivered by the Company (the "Thayer Offer Period"). Notice of Thayer's
intention to accept, in whole or in part, the Thayer Offer shall be in writing
signed and delivered to the Company prior to the end of the Thayer Offer Period,
setting forth such portion of the New Securities as Thayer elects to purchase
(the "Thayer Notice of Acceptance").
(c) Stock Offer. After the second anniversary of the date
hereof, except in the case of Excluded Securities or as set forth in Section
5(g), without Thayer's prior written consent, the Company shall not issue, sell
or exchange, agree to issue, sell or exchange, or reserve or set aside for
issuance, sale or exchange, any New Securities unless in each case, the Company
shall have first offered to sell to Thayer a portion of such New Securities
equal to Thayer's Ownership Percentage, at a price and on such other terms as
shall have been specified by the Company in writing delivered to Thayer at least
15 business days prior to the proposed consummation of the sale of the New
Securities (the "Stock Offer"), which Stock Offer by its terms shall remain open
and irrevocable for a period of 10 business days from the date it is delivered
by the Company (the "Stock Offer Period"). Notice of Thayer's intention to
accept, in whole or in part, the Stock Offer shall be in writing and delivered
to the Company prior to the end of the Stock Offer Period, setting forth such
portion of the New Securities as Thayer elects to purchase (the "Stock Notice of
Acceptance").
<PAGE>
(d) Refused Securities. The Company shall have three months
from the expiration of the Thayer Offer Period or the Stock Offer Period, as
applicable, to sell all or any of such New Securities which Thayer has not
purchased pursuant to Section 5(b) or 5(c), as applicable (the "Refused
Securities"), to any other Person(s), but only at a price no less than 95% of
the price per share set forth in the Thayer Offer or the Stock Offer, as
applicable, and upon such other terms and conditions, which are no more
favorable to such other Person(s) or less favorable to the Company than those
set forth in the Thayer Offer or the Stock Offer, as applicable. Upon the
closing, which shall include full payment to the Company, of the sale to such
other Person(s) of all the Refused Securities, Thayer shall purchase from the
Company, and the Company shall sell to Thayer, the New Securities in respect of
which a Thayer Notice of Acceptance or Stock Notice of Acceptance, as
applicable, was delivered to the Company by Thayer at the terms specified in the
Thayer Offer or the Stock Offer, as applicable.
(e) Exclusions. In each case, any New Securities not purchased
by Thayer or any other Person(s) within three months after the expiration of the
Thayer Offer Period or the Stock Offer Period, as applicable, in accordance with
Section 5 may not be sold or otherwise disposed of until they are again offered
to Thayer under the procedures specified in this Section 5.
(f)Excluded Securities.The rights of Thayer under this Section
5 shall not apply to the following securities (the "Excluded Securities"):
(i) Common Shares issued in connection
with, or upon exercise of, Options or the Stock Purchase
Warrant; and
(ii) Common Shares issued incidental to the
exercise, conversion or exchange thereof in accordance with
their terms, any combination of shares (including any reverse
stock split) or any recapitalization, reorganization or
reclassification of, or any merger, acquisition or
consolidation involving, the Company.
(g) 33.3% Limitation. Notwithstanding anything herein to the
contrary, without the prior written consent of the holders of at least a
majority of the then outstanding Management Shares, Thayer shall not purchase
from the Company pursuant to this Section 5 (and the Company need not sell or
offer to sell to Thayer pursuant to this Section 5) any shares of New Securities
which would result in the Thayer Shares and Common Shares issuable in connection
with the exercise of a Stock Purchase Warrant in the aggregate constituting more
than 33.3% of the Common Shares of the Company on a fully diluted basis;
provided, however if both (x) the proposed sale, issuance or exchange of such
New Securities shall occur before the first anniversary of the date hereof, and
(y) the price per share of the New Securities in such proposed sale, issuance or
exchange is equal to or less than $9.00 (as such amount is proportionately
adjusted for stock splits, stock combinations, stock dividends and
recapitalizations affecting the Common Stock after the date hereof), then Thayer
shall retain all rights granted in this Section 5 as if this Section 5(g) were
not included in this Agreement.
<PAGE>
Section 6.........Qualified Sale of the Company.
(a) Approved Sale. Subject to Section 6(b), if Thayer approves
a Qualified Sale of the Company (an "Approved Sale"), Thayer may notify the
Company and the Stockholders of Thayer's election to exercise its rights under
this Section 6, and the other holders of Stockholder Shares (the "Other
Stockholders") shall consent to and raise no objections against such Approved
Sale (and shall waive any rights of appraisal arising in connection therewith)
and shall fully cooperate with and take all necessary and desirable actions in
connection with the consummation of such Approved Sale, including without
limitation (i) executing a purchase and sale agreement and any other agreement
reasonably necessary to effectuate such Approved Sale in the form to be entered
into by Thayer, (ii) amending the Company's or any of its Subsidiaries'
Certificate of Incorporation or by-laws, (iii) merging, combining or
consolidating the Company with any other Person, (iv) reorganizing or
recapitalizing the Company, (v) exchanging or splitting stock of the Company,
(vi) selling, leasing or exchanging all or substantially all of the property and
assets of the Company and its Subsidiaries on a consolidated basis or (vii) if
such Stockholder is not an "accredited investor" (within the meaning of Rule
501(a) of the Securities Act), at the request of Thayer, appoint a purchaser
representative (as such term is defined in Rule 501 under the Securities Act)
approved by Thayer. If the Approved Sale is structured as a sale of stock, the
Other Stockholders shall agree to sell all of their shares of Common Stock and
rights to acquire shares of Common Stock on the terms and conditions approved by
Thayer. The obligations of the Other Stockholders with respect to any Approved
Sale are subject to the conditions that (x) the Approved Sale is not to an
Affiliate of Thayer, and (y) upon the consummation of such Approved Sale, each
Stockholder shall receive the same form and amount of consideration per Common
Share, or if any Stockholders are given an option as to the form and amount of
consideration to be received, each Stockholder shall be given the same option;
provided, however if Thayer then owns a Stock Purchase Warrant, Thayer shall
elect, in its sole discretion, to either (A) exercise the Stock Purchase Warrant
prior to the consummation of the Approved Sale and participate in such sale as a
holder of such class of Common Stock, or (B) upon the consummation of the
Approved Sale, receive in exchange for such Stock Warrant Purchase consideration
equal to the amount determined by multiplying (1) the same amount of
consideration per share of a class of Common Stock received by holders of such
class of Common Stock in connection with the Approved Sale less the exercise
price per share of such class of Common Stock of the Stock Purchase Warrant to
acquire such class of Common Stock by (2) the number of shares of such class of
Common Stock represented by the Stock Purchase Warrant. Notwithstanding anything
herein to the contrary, no Approved Sale shall be consummated until the Company
receives, at the Company's expense, a "fairness opinion" from an investment
banking firm reasonably acceptable to the Company.
<PAGE>
(b) Management Offer. Notwithstanding anything in Section
3(b)(ix), 3(b)(xiii) or 6(a) to the contrary, at least 20 days prior to Thayer
transferring a Block of Shares pursuant to Section 3(b)(xiii) or approving a
Qualified Sale of the Company, Thayer shall deliver a written notice (a
"Management Offer Notice") to all Management Stockholders. The Management Offer
Notice shall disclose in reasonable detail the proposed Transfer of a Block of
Shares pursuant to Section 3(b)(xiii) or Qualified Sale of the Company, as
applicable, and the prospective transferee(s) (if known). The Management
Stockholders, may elect for any of them and/or any other Person(s) (including
the Company) chosen by the Management Stockholders in their sole discretion
(collectively, the "Buyers") to purchase all (but not less than all) of the
Thayer Shares at the price and on the terms specified in the Management Offer
Notice by delivering written notice of such election (a "Management Reply") to
Thayer as soon as practical but in any event within 20 days after delivery of
the Management Offer Notice. The Management Reply shall be signed by each
Management Stockholder (including those who elect not to purchase Thayer
Shares), and shall include (x) evidence reasonably satisfactory to Thayer that
the Buyers shall have within 60 days after the delivery of the Management Offer
Notice sufficient funds to purchase such Thayer Shares, and (y) representations
and warranties from each Management Stockholder that (X) the Buyers shall use
reasonable best efforts to consummate such purchase within 60 days after the
delivery of the Management Offer Notice, and (Y) the Buyers shall have within 60
days after the delivery of the Management Offer Notice sufficient funds to
purchase such Thayer Shares. If the Management Stockholders elect to purchase
the Thayer Shares, such purchase shall be consummated as soon as practical after
the delivery of the Management Reply, but in any event within 60 days after the
delivery of the Management Offer Notice. If either:
(A) Thayer does receive a Management Reply signed by
each Management Stockholder within 20 days after delivery of the
Management Offer Notice;
(B) Thayer is not reasonably satisfied within 20 days
after delivery of the Management Offer Notice that the Buyers will have
within 60 days after the delivery of the Management Offer Notice
sufficient funds to purchase such Thayer Shares;
(C) the purchase of the Thayer Shares pursuant to the
Management Reply is not consummated within 60 days after the delivery
of the Management Offer Notice; or
(D) after 20 days after delivery of the Management
Offer Notice but before 60 days after delivery of the Management Offer
Notice, Thayer gives written notice to the Management Stockholders that
Thayer reasonably believes that despite reasonable best efforts by
Thayer to consummate the purchase the Buyers will not be unable to
consummate the purchase within 60 days after the delivery of the
Management Offer Notice and the Management Stockholders are unable to
provide Thayer reasonable assurance to the contrary within 5 business
days after receiving such notice by Thayer,
then Thayer may, within 210 days after the delivery of the Management Offer
Notice, Transfer such Block of Shares pursuant to Section 3(b)(xiii) or approve
a Qualified Sale of the Company pursuant to Section 6(a), as applicable, at a
price no less than 95% of the price per share specified in the Management Offer
Notice and on other terms no more favorable to the transferees thereof than
offered to the Management Stockholders in the Management Offer Notice. If such
Transfer of such Block of Shares or Qualified Sale of the Company, as
applicable, is not consummated within 210 days after the delivery of the
Management Offer, Thayer shall have to deliver another Management Offer Notice
under this Section 6(b) prior to any subsequent Transfer of a Block of Shares
pursuant to Section 3(b)(xiii) or Qualified Sale of the Company, as applicable.
The Management Stockholders shall be jointly and severally liable to Thayer for
the breach of any representation or warranty set forth in the Management Reply.
<PAGE>
Section 7.........REGISTRATION RIGHTS.
(a) Shelf Registration. Thayer shall have the right at any
time to demand that the Company include any and all Stockholder Shares owned by
Thayer or its Affiliates in the Company's shelf registration statement in effect
as of the date hereof (the "Shelf").
(b) DEMAND REGISTRATION.
(i)......So long as any Thayer Shares are not included in the Shelf and/or
the Shelf is not then effective, Thayer shall have the right (the "Demand
Right") to request registration under the Securities Act of all or any portion
of the Registrable Securities held by Thayer and its Affiliates (in each case,
referred to herein as the "Requesting Holders") by delivering a written notice
to the Company, which notice identifies the Requesting Holders and specifies the
number of Registrable Securities to be included in such registration (the
"Registration Request"). The Company will give prompt written notice of such
Registration Request (the "Registration Notice") to all other Stockholders and
will thereupon use its reasonable best efforts to effect the registration (a
"Demand Registration") under the Securities Act on any form available to the
Company of:
(x) the Registrable Securities requested to be registered by the
Requesting Holders; and
(y) all other Registrable Securities which the Company has received a
written request from another Stockholder to register within 30 days after
the Registration Notice is given.
The Company shall be obligated to effect three Demand Registrations.
(ii).....A registration undertaken by the Company a the request of the
Requesting Holders will not count as a Demand Registration if, pursuant to the
applicable Demand Right, the Requesting Holders fail to register and sell at
least 50% of the Registrable Securities requested to be included in such
registration by the Requesting Holders.
(iii)....If the sole or managing underwriter of a Demand Registration
advises the Company in writing that in its opinion the number of Registrable
Securities and other securities requested to be included exceeds the number of
Registrable Securities and other securities which can be sold in such offering
without adversely affecting the distribution of the securities being offered,
the price that will be paid in such offering or the marketability thereof, the
Company will include in such registration the greatest number of Registrable
Securities proposed to be registered by the Stockholders which in the opinion of
such underwriter can be sold in such offering without adversely affecting the
distribution of the securities being offered, the price that will be paid in
such offering or the marketability thereof, ratably among the Stockholders
proposing to register based on each such Stockholder's Ownership Percentage;
provided, however, that the Requesting Holders shall have the right to receive
priority over all other Stockholders in the third Demand Registration.
(c) INCIDENTAL REGISTRATION.
<PAGE>
(i) .....At any time the Company proposes to register any Common Shares
under the Securities Act (other than pursuant to Section 7(b) or in connection
with a business acquisition or combination or an employee benefit plan), whether
in connection with a primary or secondary offering, the Company will give
written notice to each Stockholder at least thirty (30) days prior to the
initial filing of such Registration Statement with the SEC of its intent to file
such Registration Statement and of such Stockholder's rights under this Section
7(c). Upon the written request of any Stockholder made within twenty (20) days
after any such notice is given (which request shall specify the Registrable
Securities intended to be disposed of by such Stockholder), the Company will use
its reasonable best efforts to effect the registration (an "Incidental
Registration") under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders thereof; provided,
however, that if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the Registration
Statement filed in connection with such Incidental Registration (each an
"Incidental Registration Statement"), the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each Stockholder and,
thereupon, (x) in the case of a determination not to register, the Company shall
be relieved of its obligation to register any Registrable Securities under this
Section 7(c) in connection with such registration (but not from its obligation
to pay the expenses incurred in connection therewith), and (y) in the case of a
determination to delay registration, the Company shall be permitted to delay
registering any Registrable Securities under this Section 7(c) during the period
that the registration of such other securities is delayed.
(ii).....If the sole or managing underwriter of a registration advises the
Company in writing that in its opinion the number of Registrable Securities and
other securities requested to be included exceeds the number of Registrable
Securities and other securities which can be sold in such offering without
adversely affecting the distribution of the securities being offered, the price
that will be paid in such offering or the marketability thereof, the Company
will include in such registration the Registrable Securities and other
securities of the Company in the following order of priority:
(x) first, the greatest number of securities of the Company proposed
to be included in such registration by the Company for its own account
which in the opinion of such underwriter can be so sold; and
(y) second, after all securities that the Company proposes to register
for its own account have been included, the greatest amount of Registrable
Securities requested to be registered by the Stockholders of which in the
opinion of such underwriter can be sold in such offering without adversely
affecting the distribution of the securities being offered, the price that
will be paid in such offering or the marketability thereof, ratably among
the Stockholders proposing to register based on each such Stockholder's
Ownership Percentage.
(d) Holdback Agreements.
<PAGE>
(i) .....Each Stockholder agrees that if requested in connection with an
underwritten offering made pursuant to this Section 7 by the managing
underwriter or underwriters of such underwritten offering, such Stockholder will
not effect any Public Sale or distribution of any of the securities being
registered or any securities convertible or exchangeable or exercisable for such
securities (except as part of such underwritten offering), during the period
beginning 10 days prior to, and ending 180 days after, the closing date of each
underwritten offering made pursuant to such Registration Statement (or for such
shorter period as to which the managing underwriter or underwriters may agree).
(ii).....The Company agrees not to effect any Public Sale or distribution
of its Common Stock, or any securities convertible into or exchangeable or
exercisable for such Common Stock, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten Demand
Registration (or for such shorter period as to which the managing underwriter or
underwriters may agree), except as part of such Demand Registration or in
connection with any employee benefit or similar plan, any dividend reinvestment
plan, or a business acquisition or combination.
(e) Registration and Maintenance Procedures. In connection
with the registration of any Registrable Securities and/or the maintenance of
the Shelf and/or any other Registration Statement, the Company shall, to the
extent applicable, at its own expense, as promptly as reasonably possible:
(i) Prepare and file with the SEC a
Registration Statement or Registration Statements on a form
available for the sale of the Registrable Securities by the
holders thereof in accordance with the intended method of
distribution thereof, and use its reasonable best efforts to
cause each such Registration Statement to become effective;
(ii) Prepare and file with the SEC such
amendments and post-effective amendments to each Registration
Statement as may be necessary to keep such Registration
Statement continuously effective for a period ending on the
earlier of (x) 90 days from the effective date and (y) such
time as all of such securities have been disposed of in
accordance with the intended method of disposition thereof;
and cause the related prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in
force) under the Securities Act; and comply with the
provisions of the Securities Act, the Exchange Act and the
rules and regulations of the SEC promulgated thereunder
applicable to it with respect to the disposition of all
securities covered by such Registration Statement as so
amended or in such prospectus as so supplemented;
<PAGE>
(iii) Notify the selling Stockholders
promptly (but in any event within two business days), and
confirm such notice in writing, (A) when a prospectus or any
prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective,
(B) of the issuance by the SEC of any stop order suspending
the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary
prospectus, (C) if at any time when a prospectus is required
by the Securities Act to be delivered in connection with sales
of Registrable Securities the Company becomes aware that the
representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated
by Section 7(e)(viii) cease to be true and correct in all
material respects, (D) of the receipt by the Company of any
notification with respect to the suspension of the
qualification or exemption from qualification of a
Registration Statement or any of the Registrable Securities
for offer or sale in any jurisdiction, (E) if the Company
becomes aware of the happening of any event that makes any
statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material
respect or that requires the making of any changes in such
Registration Statement, prospectus or documents so that, in
the case of such Registration Statement, it will not contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the
case of the prospectus, it will not contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading;
(iv) Use its reasonable best efforts to
prevent the issuance of any order suspending the effectiveness
of a Registration Statement or of any order preventing or
suspending the use of a prospectus or suspending the
qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, and, if
any such order is issued, to obtain the withdrawal of any such
order at the earliest possible moment;
(v) Deliver to each selling Stockholder and
the underwriters, if any, without charge, as many copies of
the prospectus or prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such
Persons may reasonably request; and, the Company hereby
consents to the use of such prospectus and each amendment or
supplement thereto by each of the selling Stockholders and the
underwriters or agents, if any, in connection with the
offering and sale of the Registrable Securities covered by
such prospectus and any amendment or supplement thereto;
(vi) Prior to any public offering of
Registrable Securities, to use its reasonable best efforts to
register or qualify, and cooperate with the selling
Stockholders, the underwriters, if any, the sales agents and
their respective counsel in connection with the registration
or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and
sale under the securities or "blue sky" laws of such
jurisdictions within the United States as necessary;
<PAGE>
(vii) Upon the occurrence of any event
contemplated by Section 7(e)(iii)(E), as promptly as
practicable prepare a supplement or post-effective amendment
to the Registration Statement or a supplement to the related
prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder, such
prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading;
(viii) Enter into an underwriting agreement
in form, scope and substance as is customary in underwritten
offerings and take all such other actions as are reasonably
requested by the managing or sole underwriter in order to
expedite or facilitate the registration or the disposition of
such Registrable Securities, and in such connection, (A) make
such representations and warranties to the underwriters, with
respect to the business of the Company and its Subsidiaries,
and the Registration Statement, prospectus and documents, if
any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when requested; (B)
obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing
underwriters), addressed to the underwriters covering the
matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be
reasonably requested by underwriters; (C) obtain "cold
comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if
necessary, any other independent certified public accountants
of any Subsidiary of the Company or of any business acquired
by the Company for which financial statements and financial
data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters, such
letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in
connection with underwritten offerings; and (D) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to
the Stockholders than those set forth in Section 7(g) (or such
other provisions and procedures acceptable to holders of a
majority of the Registrable Securities covered by such
Registration Statement and the managing underwriters or
agents) with respect to all parties to be indemnified pursuant
to Section 7(g). The above shall be done at each closing under
such underwriting agreement, or as and to the extent required
thereunder;
<PAGE>
(ix) Comply with all applicable rules and
regulations of the SEC and make generally available to its
Stockholders earnings statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no
later than 45 days after the end of any 12-month period (or 90
days after the end of any 12-month period if such period is a
fiscal year) (x) commencing at the end of any fiscal quarter
in which Registrable Securities are sold to underwriters in a
firm commitment or best efforts underwritten offering and (y)
if not sold to underwriters in such an offering, commencing on
the first day of the first fiscal quarter of the Company after
the effectiveness of a Registration Statement, which
statements shall cover said 12-month periods; and
(x) Use its reasonable best efforts to cause
all such Registrable Securities covered by such Registration
Statement to be designated as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 or listed on the
principal securities exchange on which Common Stock is then
listed (if any).
The Company may require each Stockholder as to which any registration is being
effected to furnish to the Company such information regarding such Stockholder
and the distribution of such Registrable Securities as the Company may, from
time to time, reasonably request in writing; provided that such information
shall be used only in connection with such registration. The Company may exclude
from such registration the Registrable Securities of any Stockholder who
unreasonably fails to furnish such information promptly after receiving such
request. Each Stockholder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
7(e)(iii)(B), 7(e)(iii)(D) or 7(e)(iii)(E), such Stockholder will forthwith
discontinue disposition of such Registrable Securities covered by such
Registration Statement or prospectus until such Stockholder's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 7(e),
or until such Stockholder is advised in writing by the Company that the use of
the applicable prospectus may be resumed, and has received copies of any
amendments or supplements thereto.
(f) Registration Expenses. All fees and expenses incident to the
performance of or compliance the Company with the provisions of Section 7 shall
be borne by the Company, whether or not any Registration Statement is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses of compliance with
state securities or "blue sky" laws), (ii) reasonable messenger, telephone and
delivery expenses, (iii) fees and disbursements of counsel for the Company, (iv)
fees and disbursements of all independent certified public accountants referred
to in Section 7(e)(viii), (v) underwriters' fees and expenses (excluding
discounts, commissions, or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to the
distribution of the Registrable Securities, which shall be paid by the selling
stockholders), (vi) Securities Act liability insurance, if the Company so
desires such insurance, (vii) internal expenses of the Company, (viii) the
expense of any annual audit, (ix) the fees and expenses incurred in connection
with the listing of the securities to be registered on any securities exchange,
and (x) the fees and expenses of any Person, including special experts, retained
by the Company. In connection with any Demand Registration or Incidental
Registration hereunder, the Company shall reimburse the holders of the
Registrable Securities being registered in such registration for the reasonable
fees and disbursements of not more than one counsel (together with appropriate
local counsel) chosen by Thayer, if pursuant to a Demand Registration, or the
Company, in all other cases, and other reasonable out-of-pocket expenses of the
Stockholders incurred in connection with the registration of the Registrable
Securities.
<PAGE>
(g) Indemnification; Contribution.
(i)......The Company shall, without limitation as to time, indemnify and
hold harmless, to the full extent permitted by law, each Stockholder, the
officers, directors, members, agents and employees of each of them, each Person
who controls each such Person (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), the officers, directors,
agents and employees of each such controlling person and any financial or
investment adviser (each, an "Indemnified Stockholder"), to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities,
actions or proceedings (whether commenced or threatened) reasonable costs
(including, without limitation, reasonable costs of preparation and reasonable
attorneys' fees) and reasonable expenses (including reasonable expenses of
investigation) (collectively, "Losses"), as incurred, arising out of or based
upon any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, prospectus or form of prospectus or in any amendment or
supplements thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, except to
the extent, but only to the extent, that such untrue or alleged untrue statement
is contained in, or such omission or alleged omission is required to be
contained in, any information so furnished in writing by the Company to such
Stockholder expressly for use in such Registration Statement or prospectus and
that such statement or omission was reasonably relied upon by such Stockholder
in preparation of such Registration Statement, prospectus or form of prospectus;
provided, however, that the Company shall not be liable in any such case to the
extent that the Company has furnished in writing to such Stockholder within a
reasonable period of time prior to the filing of any such Registration Statement
or prospectus or amendment or supplement thereto information expressly for use
in such Registration Statement or prospectus or any amendment or supplement
thereto which corrected or made not misleading, information previously furnished
to such Stockholder, and such Stockholder failed to include such information
therein; provided, further, however, that the Company shall not be liable to any
Person who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter(s) within
the meaning of the Securities Act to the extent that any such Losses arise out
of or are based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in any preliminary prospectus if (A) such Person failed
to send or deliver a copy of the prospectus with or prior to the delivery of
written confirmation of the sale by such Person to the Person asserting the
claim from which such Losses arise, (B) the prospectus would have corrected such
untrue statement or alleged untrue statement or such omission or alleged
omission, and (C) the Company has complied with its obligations under Section
7(e)(iii). Each indemnity and reimbursement of costs and expenses shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Stockholder.
<PAGE>
(ii).....In connection with any Registration Statement in which a
Stockholder is participating, such Stockholder, or an authorized officer of such
Stockholder, shall furnish to the Company in writing such information as the
Company reasonably requests for use in connection with any Registration
Statement or prospectus and agrees, severally and not jointly, to indemnify, to
the full extent permitted by law, the Company, its directors, officers, agents
and employees, each Person who controls the Company (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling persons (each, an
"Indemnified Company", and together with the Indemnified Stockholders, the
"Indemnified Parties"), from and against all Losses, as incurred, arising out of
or based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, prospectus or form of prospectus or in
any amendment or supplements thereto or in any preliminary prospectus, or
arising out of or based upon any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except to the extent, but only to the extent, that such untrue or
alleged untrue statement is contained in, or such omission or alleged omission
is required to be contained in, any information so furnished in writing by such
Stockholder to the Company expressly for use in such Registration Statement or
prospectus and that such statement or omission was reasonably relied upon by the
Company in preparation of such Registration Statement, prospectus or form of
prospectus; provided, however, that such Stockholder shall not be liable in any
such case to the extent that such Stockholder has furnished in writing to the
Company within a reasonable period of time prior to the filing of any such
Registration Statement or prospectus or amendment or supplement thereto
information expressly for use in such Registration Statement or prospectus or
any amendment or supplement thereto which corrected or made not misleading,
information previously furnished to the Company, and the Company failed to
include such information therein. In no event shall the liability of any selling
Stockholder hereunder be greater in amount than the after-tax dollar amount of
the proceeds (net of payment of all expenses) received by such Stockholder upon
the sale of the Registrable Securities giving rise to such indemnification
obligation. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Company.
<PAGE>
(iii)....Any Indemnified Party shall give prompt notice to the party or
parties from which such indemnity is sought (the "Indemnifying Parties") of the
commencement of any action, suit, proceeding or investigation or written threat
thereof (a "Proceeding") with respect to which such Indemnified Party seeks
indemnification or contribution pursuant hereto; provided, however, that the
failure to so notify the Indemnifying Parties shall not relieve the Indemnifying
Parties from any obligation or liability except to the extent that the
Indemnifying Parties have been prejudiced by such failure. The Indemnifying
Parties shall have the right, exercisable by giving written notice to an
Indemnified Party promptly after the receipt of written notice from such
Indemnified Party of such Proceeding, to assume, at the Indemnifying Parties'
expense, the defense of any such Proceeding, with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that an Indemnified
Party or Indemnified Parties (if more than one such Indemnified Party is named
in any Proceeding) shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Indemnified
Parties unless: (x) the Indemnifying Parties agree to pay such fees and
expenses; (y) the Indemnifying Parties fail promptly to assume the defense of
such Proceeding or fail to employ counsel reasonably satisfactory to such
Indemnified Party or Indemnified Parties; or (z) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
or Indemnified Parties and the Indemnifying Parties, and there may be one or
more defenses available to such Indemnified Party or Indemnified Parties that
are different from or additional to those available to the Indemnifying Parties,
in which case, if such Indemnified Party or Indemnified Parties notifies the
Indemnifying Parties in writing that it elects to employ separate counsel at the
expense of the Indemnifying Parties, the Indemnifying Parties shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Parties, it being understood, however, that, unless there
exists a conflict among Indemnified Parties, the Indemnifying Parties shall not,
in connection with any one such Proceeding or separate but substantially similar
or related Proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for such Indemnified Party or Indemnified Parties. Whether or not such
defense is assumed by the Indemnifying Parties, such Indemnifying Parties or
Indemnified Party or Indemnified Parties will not be subject to any liability
for any settlement made without its or their consent (but such consent will not
be unreasonably withheld). The Indemnifying Parties shall not consent to entry
of any judgment or enter into any settlement which (A) provides for other than
monetary damages without the consent of the Indemnified Party or Indemnified
Parties (which consent shall not be unreasonably withheld or delayed) or (B)
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party or Indemnified Parties of a release, in form
and substance satisfactory to the Indemnified Party or Indemnified Parties, from
all liability in respect of such Proceeding for which such Indemnified Party
would be entitled to indemnification hereunder.
(iv).....If the indemnification provided for in this Section 7(g) is
unavailable to an Indemnified Party or is insufficient to hold such Indemnified
Party harmless for any Losses in respect of which this Section 7(g) would
otherwise apply by its terms, then each applicable Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall have a joint and several
obligation to contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses, in such proportion as is appropriate to reflect the
relative fault of and relative benefit to the Indemnifying Party, on the one
hand, and such Indemnified Party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party, on the one hand, and Indemnified Party, on the other hand, shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been taken by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent any such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
Proceeding, to the extent such party would have been indemnified for such
expenses if the indemnification provided for in Section 7(g)(i) or 7(g)(ii) was
available to such party. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(g)(iv) were determined by
pro-rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in this Section 7(g)(iv).
Notwithstanding the provisions of this Section 7(g)(iv), an Indemnifying Party
that is a selling Stockholder shall not be required to contribute any amount in
excess of the amount by which the net after-tax proceeds received by such
Indemnifying Party exceeds the amount of any damages that such Indemnifying
Party has otherwise been required to pay by reasons of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
<PAGE>
(h) Rule 144 Sales. The Company shall file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, and will take such further action as any
Stockholder may reasonably request, all to the extent required from time to time
to enable such Stockholder to sell Registrable Securities (subject to Section
3(b)(vii) or 3(b)(viii)) without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144. Upon the request of any
Stockholder, the Company shall deliver to such Stockholder a written statement
as to whether it has complied with such requirements.
(i) Underwritten Registrations. No Stockholder may participate in any
underwritten registration hereunder unless such Stockholder (x) agrees to sell
such Stockholder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (y) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
(j) No Inconsistent Agreements. The Company has not and will not, enter
into any agreement with respect to the Company's securities that is inconsistent
with the rights granted to the Stockholders in this Section 7 or otherwise
conflicts with the provisions hereof.
(k) S-3 Demands.
(i)......So long as (A) any Thayer Shares are not included in the Shelf
and/or the Shelf is not then effective and (B) the Company is permitted under
Securities Act to register securities on Form S-3, Thayer shall have the right
to request registration on Form S-3 of all or any portion of the Registrable
Securities held by Thayer and its Affiliates (in each case, referred to herein
as the "S-3 Requesting Holders") by delivering a written notice to the Company,
which notice identifies the S-3 Requesting Holders and specifies the number of
Registrable Securities to be included in such registration (the "S-3
Registration Request"). The Company will give prompt written notice of such S-3
Registration Request (the "S-3 Registration Notice") to all other Stockholders
and will thereupon use its reasonable best efforts to effect the registration (a
"S-3 Demand Registration") on Form S-3 of:
(x) the Registrable Securities requested to be registered by the S-3
Requesting Holders; and
(y) all other Registrable Securities which the Company has received a
written request from another Stockholder to register within 30 days after
the S-3 Registration Notice is given.
The Company shall be obligated to effect an unlimited number of S-3 Demand
Registrations. S-3 Demand Registrations shall not constitute Demand
Registrations.
<PAGE>
(ii).....If the sole or managing underwriter of a S-3 Demand Registration
advises the Company in writing that in its opinion the number of Registrable
Securities and other securities requested to be included exceeds the number of
Registrable Securities and other securities which can be sold in such offering
without adversely affecting the distribution of the securities being offered,
the price that will be paid in such offering or the marketability thereof, the
Company will include in such registration the greatest number of Registrable
Securities proposed to be registered by the Stockholders which in the opinion of
such underwriter can be sold in such offering without adversely affecting the
distribution of the securities being offered, the price that will be paid in
such offering or the marketability thereof, ratably among the Stockholders
proposing to register based on each such Stockholder's Ownership Percentage.
Section 8.........Operating Budget. Norton hereby agrees that
he shall not accept or attempt to collect from the Company or any of its
Subsidiaries any bonus otherwise do to him under any employment, consulting or
other similar agreement between the Company and any Subsidiary and him if the
Company is at the time or had been within the preceding two years in default of
its obligations under Section 4A(i)(c), 4A(i)(d) or 4A(i)(e) of the Common Stock
Purchase Agreement and such default in the case of Section 4A(i)(c) or 4A(i)(d)
of the Common Stock Purchase Agreement remains or remained uncured for 20
business days and in the case of Section 4A(i)(e) of the Common Stock Purchase
Agreement remains or remained uncured for 5 business days.
Section 9.........Redemption. Subject to the limitations on
transferring Common Shares to the Company set forth in Section 3(b)(iii), prior
to redeeming, purchasing or otherwise acquiring (contingent or otherwise),
directly or indirectly, or entering into any agreement for the redemption,
purchase or acquisition (contingent or otherwise), directly or indirectly, of
any Common Shares from any holder of Management Shares, the Company shall give
at least thirty (30) days prior written notice to Thayer, which notice (for
purposes of this Section 9, the "Redemption Notice") shall identify the type and
amount of Common Shares to be redeemed, describe the terms and conditions of
such proposed redemption, and identify each prospective transferor of the Common
Shares to be redeemed (the "Other Redeemers"). Thayer or any of its Affiliates
may, within fifteen (15) days after the receipt of the Redemption Notice, give
written notice (each, a "Co-Redemption Notice") to the Company that such Person
wishes to participate in such proposed redemption upon the terms and conditions
set forth in the Redemption Notice, which Co-Redemption Notice shall specify the
type and amount of Common Shares such Person desires to redeem. If none of
Thayer and its Affiliates give the Company a timely Co-Redemption Notice, then
the Company may redeem such Common Shares on the terms and conditions set forth
in the Redemption Notice of the Other Redeemers at any time within ninety days
after expiration of the fifteen-day period for giving Co-Redemption Notices with
respect to such redemption. Any such Common Shares not redeemed by the Company
during such ninety-day period will again be subject to the provisions of this
Section 9 upon a subsequent redemption. If Thayer and/or its Affiliates give the
Company a timely Co-Redemption Notice, then the Company, at its option, shall
(a) redeem all Common Shares which Thayer, its Affiliates and the Other
Redeemers desire to redeem, or (b) allocate the maximum number of each class of
Common Shares that the Company is willing to redeem (the "Redeemable Shares")
among Thayer, its Affiliates and the Other Redeemers as follows:
<PAGE>
(i) each Stockholder holding Thayer Shares shall be
entitled to redeem a number of Common Shares (not to exceed, for any
such Stockholder, the number of shares of such Common Shares identified
in such Stockholder's Co-Redemption Notice) equal to the product of (A)
the number of Redeemable Shares of such class of Common Shares and (B)
such Stockholder's Ownership Percentage of such class of Common Shares;
and
(ii) the Other Redeemers shall be entitled to redeem
all Redeemable Shares remaining after taking into account clause (i)
above (with the allocation among the Other Redeemers as decided by the
Company in its sole discretion).
Section 10........Rights of First Refusal or First Offer.
(a) Assignment. Except with respect to the Irrevocable Proxy
and Stock Rights Agreement, each of the Management Stockholders hereby agrees to
assign, or cause to be assigned, to Thayer or any Affiliate of Thayer designated
by Thayer any right of first refusal or first offer or any preemptive right of
any kind with respect to any Common Shares granted to or otherwise controlled by
such Management Stockholder or any Affiliate of such Management Stockholder,
including any such right hereafter created, under any agreement other than this
Agreement, the Common Stock Purchase Agreement or the Stock Purchase Warrant;
provided, however that (i) if such right is not assignable for any reason and
(ii) there is no prohibition under such right or by law against the Transfer to
Thayer or any Affiliate of Thayer designated by Thayer of the Common Shares
underlying such right immediately after the exercise thereof, then at Thayer's
request and expense, such Management Stockholder shall, or shall cause such
Management Stockholder's Affiliate to, exercise such right and immediately
thereafter Transfer to Thayer or any Affiliate of Thayer designated by Thayer
the Common Shares purchased under such right. Each of the Management
Stockholders hereby agrees to notify Thayer as soon as practical upon receiving
notice from any Person or otherwise becoming aware that such Management
Stockholder or any Affiliate of such Management Stockholder has any exercisable
or soon to be exercisable right of first refusal or first offer or any
preemptive right of any kind with respect to any Common Shares.
(b) Irrevocable Proxy and Stock Rights Agreement. Norton
hereby agrees that if Norton elects not to exercise his "right to purchase"
pursuant to Article 3 of the Irrevocable Proxy and Stock Rights Agreement, then
Norton shall assign such right to purchase to Thayer or any Affiliate of Thayer
designated by Thayer; provided, however that notwithstanding anything in the
Irrevocable Proxy and Stock Rights Agreement to the contrary, the purchase price
per share with respect to such assigned right to purchase shall be Market Value.
Norton hereby agrees to notify Thayer as soon as practical upon receiving notice
from any Person or otherwise becoming aware that Norton has any exercisable or
soon to be exercisable right to purchase under the Irrevocable Proxy and Stock
Rights Agreement.
Section 11........Amendment and Waiver. Except as otherwise
provided herein, no amendment or waiver of any provision of this Agreement shall
be effective against the Company or Stockholders unless such amendment or waiver
is approved in writing by the Company, Thayer and the holders of at least a
majority of the then-outstanding Management Shares. The failure of any party to
enforce any provision of this Agreement shall not be construed as a waiver of
such provision and shall not affect the right of such party thereafter to
enforce each provision of this Agreement in accordance with its terms.
<PAGE>
Section 12........Severability. If any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other jurisdiction,
but this Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.
Section 13........Entire Agreement. Except as otherwise
expressly set forth herein, this document embodies the complete agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
Section 14........Successors and Assigns. This Agreement shall
bind and inure to the benefit of and be enforceable by the Company and the
Stockholders and their respective permitted successors and assigns so long as
such Stockholders and their respective permitted successors and assigns hold
Stockholder Shares, provided, however that Thayer shall not assign this
Agreement or any of the rights or interests hereunder (except any right or
interest directly related to the ownership of the Common Shares) to any Person
other than an Affiliate of Purchaser within two years of the date hereof.
Section 15........Counterparts. his Agreement may be executed
in separate counterparts each of which shall be an original and all of which
taken together shall constitute one and the same agreement.
Section 16........Remedies. The Company and the Stockholders
shall be entitled to enforce their rights under this Agreement specifically to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that the Company or any Stockholder may
in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief (without posting
a bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
Section 17........Notices. Any notice provided for in this
Agreement shall be in writing and shall be either personally delivered, or sent
via facsimile, or mailed first class mail (postage prepaid) or sent by reputable
overnight courier service (charges prepaid) to such Person as follows:
if to the Company:
MLC Holdings, Inc.
11150 Sunset Hills Road, Suite 110
Reston, VA 20190-5321
FAX:..... 703-834-5718
Attention: Phillip G. Norton
<PAGE>
with a copy to:
Alston & Bird, LLP
601 Pennsylvania Avenue, N.W.
North Building, 11th Floor
Washington, DC 20004
FAX:..... 202-508-3333
Attention: Frank M. Conner, III, Esq.
if to Thayer:
c/o Thayer Equity Investors III, L.P.
1455 Pennsylvania Avenue, Suite 350
Washington, DC 20004
FAX:..... 202-371-0391
Attention: Carl J. Rickertsen
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W., Suite 1200
Washington, DC 20005-5793
FAX: 202-879-5200
Attention: Jack M. Feder, Esq.
if to a Management Stockholder:
at the address set forth below such Management
Stockholder's signature on the signature page hereto
if to any Person who becomes a Party hereto after the date hereof:
at the address set forth below such Person's signature
on the signature page to such Person's Joinder
Agreement;
or at such address or to the attention of such other Person as the recipient
party has specified by prior written notice to the sending party. Notices will
be deemed to have been given hereunder when delivered personally or sent via
facsimile (against receipt therefor), five business days after deposit in the
U.S. mail and one business day after deposit with a reputable overnight courier
service.
Section 18........Governing Law. The corporate law of Delaware shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity and interpretation of
this Agreement shall be governed by the internal law, and not the law of
conflicts, of Delaware.
<PAGE>
Section 19........Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
Section 20........Survival; Termination. Common Shares acquired by the
Stockholders after the date hereof shall be Stockholder Shares and hence fully
subject to the provisions of this Agreement. Stockholder Shares shall cease to
be such as provided in the last sentence of Section 3(b). Sections 2, 5, 6, 7, 8
and 9 hereof shall terminate upon Thayer Shares constituting less than 5% of the
issued and outstanding Common Shares, and such sections shall remain terminated
even if Thayer, its Affiliates and any holders of Thayer Shares later own in the
aggregate 5% or more of the issued and outstanding Common Shares; provided that
the limited partners of Thayer Equity Investors III, L.P. shall not be treated
as Affiliates of Thayer or the holders of Thayer Shares for the purposes of this
Section 20. Any prohibition against Transfers without the prior written consent
of Thayer if such Transfers would result in Management Shares and Thayer Shares,
collectively, constituting less than 51% of the outstanding Common Shares of the
Company shall terminate upon Management Shares and Thayer Shares, collectively,
constituting less than 35% of the outstanding Common Shares of the Company. All
rights and obligations of the Stockholders and the Company shall terminate upon
the first to occur of (i) there being no Thayer Shares, and (ii) the
consummation of an Approved Sale.
Section 21........Other Registration Rights. Each of the Management
Stockholders hereby agrees to waive any right to demand that the Company
register any Common Shares under the Securities Act or include any Common Shares
in the Shelf or other registration statement and any other registration right of
any kind granted by the Company to such Management Stockholder under any
agreement other this Agreement.
[END OF PAGE]
[SIGNATURE PAGES FOLLOW]
<PAGE>
DOCUMENT3
IN WITNESS WHEREOF, the parties have executed this
Stockholders Agreement as of the date first above written.
MLC HOLDINGS, INC.
By: /s/ PHILLIP G. NORTON
------------------------------
Name: Phillip G. Norton
Title: President and Chief Executive Officer
TC LEASING, LLC
By: THAYER EQUITY INVESTORS III, L.P.,
its managing member
By: TC EQUITY PARTNERS, L.L.C., its general partner
By: /s/JEFFREY W. GOETTMAN
------------------------------
Name: Jeffrey W. Goetmann
Title:
/s/ PHILLIP G. NORTON
---------------------------------------
PHILLIP G. NORTON
Address: ___________________________
___________________________
FAX: ___________________________
/s/ BRUCE M. BOWEN
-----------------
BRUCE M. BOWEN
Address: ___________________________
___________________________
FAX: ___________________________
<PAGE>
JAP INVESTMENT GROUP, L.P.
By: J.A.P., Inc., its general partner
By: /s/ PHILLIP G. NORTON
_________________________________
Name: Phillip G. Norton
Title:
<PAGE>
/s/ KEVIN M. NORTON
---------------------------------------
KEVIN M. NORTON
Address: ___________________________
___________________________
FAX: ___________________________
/s/ PATRICK J. NORTON, JR.
---------------------------------------
PATRICK J. NORTON, JR.
Address: ___________________________
___________________________
FAX: ___________________________
<PAGE>
SCHEDULE I
OTHER MANAGEMENT STOCKHOLDERS
JAP Investment Group, L.P.
Kevin M. Norton
Patrick J. Norton, Jr.
<PAGE>
FORM OF JOINDER
TO
STOCKHOLDERS AGREEMENT
This Joinder (this "Agreement") is made as of the date written
below by the undersigned (the "Joining Party") in favor of and for the benefit
of MLC Holdings, Inc., TC Leasing, LLC, the Management Stockholders and the
other parties to the Stockholders Agreement, dated as of October 23, 1998 (the
"Stockholders Agreement"). Capitalized terms used but not defined herein shall
have the meanings given such terms in the Stockholders Agreement.
The Joining Party hereby acknowledges, agrees and confirms
that, by his or her execution of this Agreement, the Joining Party will be
deemed to be a party to the Stockholders Agreement and shall have all of the
obligations of a Stockholder thereunder as if he or she had executed the
Stockholders Agreement. The Joining Party hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
contained in the Stockholders Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Joinder
as of the date written below.
------------------------------------------
Name: _________________________________
Date: _________________________________
Address: _________________________________
_________________________________
FAX: _________________________________
THIS WARRANT, AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF, HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS OR "BLUE SKY" LAWS, AND MAY NOT BE
TRANSFERRED UNLESS SO REGISTERED OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
MLC HOLDINGS, INC.
STOCK PURCHASE WARRANT
Date of Issuance: October 23, 1998 Certificate No. W-1
FOR VALUE RECEIVED, MLC Holdings, Inc., a Delaware corporation
(the "Company"), hereby grants to TC Leasing, LLC or its registered assigns (the
"Registered Holder") the right to purchase from the Company 1,090,909 shares of
Warrant Stock at a price per share of $11.00 (as adjusted from time to time
hereunder, the "Exercise Price"). The amount and kind of securities obtainable
pursuant to the rights granted hereunder and the purchase price for such
securities are subject to adjustment pursuant to the provisions contained in
this Stock Purchase Warrant (this "Warrant").
This Warrant is subject to the following provisions:
Section 1. Definitions. The following terms have meanings set
forth below:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Aggregate Exercise Price" has the meaning set forth in
Section 2B(i)(d)(1) hereof.
"Assignee" has the meaning set forth in Section 6A hereof.
"Assignment" has the meaning set forth in Section 2B(i)(c)
hereof.
"Base Price" has the meaning set forth in Section 3A(i) hereof.
"Common Stock" means, collectively, the Company's Common
Stock, par value $.01 per share, and any capital stock of any class of the
Company hereafter authorized which is not limited to a fixed sum or percentage
of par or stated value in respect to the rights of the holders thereof to
participate in dividends or in the distribution of assets upon any liquidation,
dissolution or winding up of the Company.
<PAGE>
"Common Stock Deemed Outstanding" means, at any given time,
the number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock deemed to be outstanding pursuant to paragraphs
3B(i) and 3B(ii) hereof regardless of whether the Options or Convertible
Securities are actually exercisable at such time.
"Common Stock Purchase Agreement" means the Common Stock
Purchase Agreement, dated as of the date hereof, by and between the Company and
TC Leasing, LLC.
"Company" has the meaning set forth in the preface hereof.
"Convertible Securities" means any stock or securities
(directly or indirectly) convertible into or exchangeable for Common Stock,
except for any such stock or securities issued or granted pursuant to the
Company's Master Stock Incentive Plan (including any of its component plans) or
1998 Long-Term Incentive Plan, each as in effect on the Date of Issuance.
"Date of Issuance" means October 23, 1998.
"Exercise Agreement" has the meaning set forth in Section 2C
hereof.
"Exercise Period" has the meaning set forth in Section 2A
hereof.
"Exercise Price" has the meaning set forth in the preamble
hereto.
"Exercise Time" has the meaning set forth in Section 2B hereof.
"GAAP" means United States generally accepted accounting
principles.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended from time to time.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind.
"Liquidating Dividend" has the meaning set forth in Section 4
hereof.
<PAGE>
"Market Price" means, with respect to any security on any
date, (x) if such security is quoted on NASDAQ or listed on a national
securities exchange, the closing sales price of such security on NASDAQ or a
national securities exchange, as applicable, on the last trading day prior to
such date, and (y) if such security is not quoted on NASDAQ or listed on a
national securities exchange, the fair value per share determined jointly by the
Company and the Registered Holder, provided that if the Company and the
Registered Holder are unable to reach an agreement within a reasonable period of
time, such fair value shall be determined by a recognized investment banking
firm jointly selected by the Company and the Registered Holder, whose
determination shall be final and binding upon the Company and the Registered
Holder (and the fees and expenses of such recognized investment banker shall be
paid by the Company).
"Material Adverse Effect" has the meaning set forth in the
Common Stock Purchase Agreement.
"NASDAQ" means National Association of Securities Dealers
Automated Quotations National Market System.
"Options" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities, except for any rights or
options to subscribe for or purchase Common Stock or Convertible Securities
issued or granted pursuant to the Company's Master Stock Incentive Plan
(including any of its component plans) or 1998 Long-Term Incentive Plan, each as
in effect on the Date of Issuance.
"Organic Change" has the meaning set forth in Section 3D
hereof.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means a sale of Common Stock to the public
in an offering pursuant to an effective registration statement filed with the
SEC pursuant to the Securities Act, as then in effect, provided that a Public
Offering shall not include an offering made in connection with a business
acquisition or combination or an employee benefit plan.
"Purchase Rights" has the meaning set forth in Section 5
hereof.
"Purchaser" has the meaning set forth in Section 2B(i)(A)
hereof.
"Requirement Date" has the meaning set forth in Section 6B
hereof.
"Requirement Notice" has the meaning set forth in Section 6A
hereof.
"Sale of the Company" means, whether in a single transaction
or in a series of related transactions, (i) a sale of all or substantially all
of the assets of the Company and its Subsidiaries on a consolidated basis, or
(ii) the transfer or other disposition of more than 50% of the outstanding
Common Stock or the outstanding common equity securities of any of the Company's
Subsidiaries (in each case whether accomplished by stock purchase, asset
purchase, merger, recapitalization, reorganization or other transaction).
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
<PAGE>
"SEC" means the United States Securities and Exchange
Commission and any governmental body or agency succeeding to the functions
thereof.
"Stockholders Agreement" means the Stockholders Agreement,
dated as of the date hereof, among the Company and certain of its stockholders.
"Subsidiary" means any Person with respect to which the
Company (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors or other governing body.
"Warrant" has the meaning set forth in the preamble hereto.
"Warrant Stock" means the Company's Common Stock, par value
$.01 per share; provided that if there is a change such that the securities
issuable upon exercise of this Warrant are issued by an entity other than the
Company or there is a change in the type or class of securities so issuable,
then the term "Warrant Stock" shall mean one share of the security issuable upon
exercise of the Warrant if such security is issuable in shares, or shall mean
the smallest unit in which such security is issuable if such security is not
issuable in shares.
Section 2. Exercise of Warrant.
2A. Exercise Period. The Registered Holder may exercise, in
whole or in part (but not as to a fractional share of Warrant Stock), the
purchase rights represented by this Warrant at any time and from time to time
after the Date of Issuance to and including December 31, 2001 (as may be
extended pursuant to Section 2B(vi) hereof, the "Exercise Period").
2B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when the Company
has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, executed
by the Person exercising all or part of the purchase rights
represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the
name of the Purchaser, an assignment (an "Assignment") in the
form set forth in Exhibit II hereto evidencing the assignment
of this Warrant to the Purchaser, in which case the Registered
Holder shall have complied with the provisions set forth in
Section 7 hereof; and
<PAGE>
(d) either (1) a check or wire transfer
payable to the Company in an amount equal to the product of
the Exercise Price multiplied by the number of shares of
Warrant Stock being purchased upon such exercise (the
"Aggregate Exercise Price"), (2) with the prior approval of
the Company, the surrender to the Company of debt or equity
securities of the Company having a Market Price equal to the
Aggregate Exercise Price of the Warrant Stock being purchased
upon such exercise (provided that for purposes of this
subsection, the Market Price of any note or other debt
security or any preferred stock shall be deemed to be equal to
the aggregate outstanding principal amount or liquidation
value thereof plus all accrued and unpaid interest thereon or
accrued or declared and unpaid dividends thereon) or (3) with
the prior approval of the Company, a written notice to the
Company that the Purchaser is exercising the Warrant (or a
portion thereof) by authorizing the Company to withhold from
issuance a number of shares of Warrant Stock issuable upon
such exercise of the Warrant which when multiplied by the
Market Price of the Warrant Stock is equal to the Aggregate
Exercise Price (and such withheld shares shall no longer be
issuable under this Warrant).
(ii) Certificates for shares of Warrant Stock purchased upon exercise of
this Warrant shall be delivered by the Company to the Purchaser within five
business days after the date of the Exercise Time. Unless this Warrant has
expired or all of the purchase rights represented hereby have been exercised,
the Company shall prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant which have not
expired or been exercised and shall, within such five-business day period,
deliver such new Warrant to the Person designated for delivery in the Exercise
Agreement.
(iii) The Warrant Stock issuable upon the exercise of this Warrant shall be
deemed to have been issued to the Purchaser at the Exercise Time, and the
Purchaser shall be deemed for all purposes to have become the record holder of
such Warrant Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Warrant Stock upon exercise
of this Warrant shall be made without charge to the Registered Holder or the
Purchaser for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Warrant Stock. Each share of Warrant Stock issuable upon exercise of this
Warrant shall, upon payment of the Exercise Price therefor, be fully paid and
nonassessable and free from all Liens with respect to the issuance thereof.
(v) The Company shall not close its books against the transfer of this
Warrant or of any share of Warrant Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
<PAGE>
(vi) The Company and the Registered Holder or Purchaser, as applicable,
shall use their best efforts to make any filings with any governmental body,
NASDAQ or any stock exchange in which the Warrant Stock is listed or obtain any
approvals of any governmental body, NASDAQ, any stock exchange in which the
Warrant Stock is listed or the stockholders of the Company (including those in
connection with under the HSR Act) required prior to or in connection with any
exercise of this Warrant within a reasonable period of time. The Exercise Period
shall be extended to the extent necessary to allow such filings to be made and
such approvals to be obtained. The costs and expenses (including reasonable
attorneys fees) associated with any filing or approval required (including those
in connection with the HSR Act) shall be paid by the Company.
(vii) Notwithstanding any other provision hereof, if an exercise of any
portion of this Warrant is to be made in connection with a Public Offering or
the Sale of the Company, the exercise of any portion of this Warrant may, at the
election of the holder hereof, be conditioned upon the consummation of the
Public Offering or the Sale of the Company in which case such exercise shall not
be deemed to be effective until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Warrant Stock solely for the purpose of
issuance upon the exercise of the Warrants, such number of shares of Warrant
Stock issuable upon the exercise of all outstanding Warrants. The Company shall
take all such actions as may be necessary to assure that all such shares of
Warrant Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Warrant Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance). The Company shall not take any action which would cause the number of
authorized but unissued shares of Warrant Stock to be less than the number of
such shares required to be reserved hereunder for issuance upon exercise of the
Warrants.
2C. Exercise Agreement. Upon any exercise of this Warrant, the
exercise agreement (the "Exercise Agreement") shall be substantially in the form
set forth in Exhibit I hereto, except that if the shares of Warrant Stock are
not to be issued in the name of the Person in whose name this Warrant is
registered, the Exercise Agreement shall also state the name of the Person to
whom the certificates for the shares of Warrant Stock are to be issued, and if
the number of shares of Warrant Stock to be issued does not include all the
shares of Warrant Stock purchasable hereunder, it shall also state the name of
the Person to whom a new Warrant for the unexercised portion of the rights
hereunder is to be delivered. Such Exercise Agreement shall be dated the actual
date of execution thereof.
Section 3. Adjustment of Exercise Price and Number of Shares.
In order to prevent dilution of the rights granted under this Warrant, the
Exercise Price shall be subject to adjustment from time to time as provided in
this Section 3, and the number of shares of Warrant Stock obtainable upon
exercise of this Warrant shall be subject to adjustment from time to time as
provided in this Section 3.
3A. Adjustment of Exercise Price and Number of Shares upon
Issuance of Common Stock.
<PAGE>
(i) Except as set forth in Section 3A(iii), if and whenever the Company
issues or sells, or in accordance with Section 3B is deemed to have issued or
sold, any shares of Common Stock for a gross consideration per share (not net of
discounts and commissions to underwriters) less than either (A) $11.00 (as such
amount is proportionately adjusted for stock splits, stock combinations, stock
dividends and recapitalizations affecting the Common Stock after the Date of
Issuance, the "Base Price") or (B) the Market Price of the Common Stock
determined as of the date of such issue or sale, then immediately upon such
issue or sale the Exercise Price shall be reduced to whichever of the following
Exercise Prices is lower:
(a) the Exercise Price determined by
dividing (1) the sum of (x) the product derived by multiplying
the Exercise Price in effect immediately prior to such issue
or sale by the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale, plus (y)
the gross consideration (not net of discounts and commissions
to underwriters), if any, received by the Company upon such
issue or sale, by (2) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale; or
(b) the Exercise Price determined by
multiplying the Exercise Price in effect immediately prior to
such issue or sale by a fraction, the numerator of which shall
be the sum of (1) the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale multiplied
by the Market Price of the Common Stock determined as of the
date of such issuance of sale, plus (2) the gross
consideration (not net of discounts and commissions to
underwriters), if any, received by the Company upon such issue
or sale, and the denominator of which shall be the product
derived by multiplying the Market Price of the Common Stock by
the number of shares of Common Stock Deemed Outstanding
immediately after such issue or sale.
(ii) Upon each such adjustment of the Exercise Price hereunder, the number
of shares of Warrant Stock acquirable upon exercise of this Warrant shall be
adjusted to the number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares of Warrant
Stock acquirable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(iii) Notwithstanding the foregoing, there shall be no adjustment to the
Exercise Price or the number of shares of Warrant Stock obtainable upon exercise
of this Warrant with respect to (w) the issuance and sale of Common Stock, or
the granting of any rights or options to subscribe for or purchase Common Stock
or Convertible Securities, pursuant to an acquisition by the Company or any
Subsidiary, (x) the granting of any rights or options to subscribe for or
purchase Common Stock or Convertible Securities pursuant to the Company's Master
Stock Incentive Plan (including any of its component plans) or 1998 Long-Term
Incentive Plan, each as in effect on the Date of Issuance, (y) the exercise of
such rights and options or (z) the issuance and sale of Common Stock pursuant to
the Employee Stock Purchase Plan, as in effect on the date hereof.
<PAGE>
3B. Effect on Exercise Price of Certain Events. For purposes
of determining the adjusted Exercise Price under Section 3A, the following shall
be applicable:
(i) Issuance of Rights or Options. If the Company in
any manner grants or sells any Options and the price per share for
which Common Stock is issuable upon the exercise of such Options, or
upon conversion or exchange of any Convertible Securities issuable upon
exercise of such Options, is less than either (a) the Base Price in
effect immediately prior to the time of the granting or sale of such
Options or (b) the Market Price determined as of such time, then the
total maximum number of shares of Common Stock issuable upon the
exercise of such Options, or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the
exercise of such Options, shall be deemed to be outstanding and to have
been issued and sold by the Company at such time for such price per
share. For purposes of this Section 3B(i), the "price per share for
which Common Stock is issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities" is determined by
dividing (A) the total amount, if any, received or receivable by the
Company as consideration for the granting or sale of such Options, plus
the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus in the case of such
Options which are exercisable into Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the
Company upon the issuance or sale of such Convertible Securities and
the conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon exercise of such Options or upon
the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such Options. No further adjustment of the
Exercise Price shall be made upon the actual issuance of such Common
Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
<PAGE>
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Securities and
the price per share for which Common Stock is issuable upon conversion
or exchange thereof is less than either (a) the Base Price in effect
immediately prior to the time of such issue or sale or (b) the Market
Price determined as of such time, then the maximum number of shares of
Common Stock issuable upon conversion or exchange of such Convertible
Securities shall be deemed to be outstanding and to have been issued
and sold by the Company for such price per share. For the purposes of
this Section 3B(ii), the "price per share for which Common Stock is
issuable upon conversion or exchange thereof" is determined by dividing
(A) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities. No further
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments
of the Exercise Price had been or are to be made pursuant to other
provisions of this Section 3B, no further adjustment of the Exercise
Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or exchange
of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock
changes at any time, the Exercise Price in effect at the time of such
change shall be adjusted immediately to the Exercise Price which would
have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold and the number of
shares of Warrant Stock shall be correspondingly adjusted. For purposes
of this Section 3B, if the terms of any Option or Convertible Security
which was outstanding as of the date of issuance of this Warrant are
changed in the manner described in the immediately preceding sentence,
then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed
to have been issued as of the date of such change; provided that no
such change shall at any time cause the Exercise Price hereunder to be
increased.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Securities without the exercise of such Option or right, the Exercise
Price then in effect and the number of shares of Warrant Stock
acquirable hereunder shall be adjusted immediately to the Exercise
Price and the number of shares which would have been in effect at the
time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued. For purposes of this
Section 2B, the expiration or termination of any Option or Convertible
Security which was outstanding as of the date of issuance of this
Warrant shall not cause the Exercise Price hereunder to be adjusted
unless, and only to the extent that, a change in the terms of such
Option or Convertible Security caused it to be deemed to have been
issued after the date of issuance of this Warrant.
<PAGE>
(v) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration received
therefor shall be deemed to be the net amount received by the Company
therefor. In case any Common Stock, Options or Convertible Securities
are issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Company shall be the
fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration
received by the Company shall be the Market Price thereof as of the
date of receipt. In case any Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity
the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities shall be determined jointly
by the Company and the Registered Holder. If such parties are unable to
reach agreement within a reasonable period of time, such fair value
shall be determined by a recognized investment banking firm jointly
selected by the Company and the Registered Holder. The determination of
such recognized investment banker shall be final and binding on the
Company and the Registered Holder of the Warrants, and the fees and
expenses of such recognized investment banker shall be paid by the
Company.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties
thereto, the Options shall be deemed to have been issued without
consideration.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or
held by or for the account of the Company or any Subsidiary, and the
disposition of any shares so owned or held shall be considered an issue
or sale of Common Stock.
(viii) Record Date. If the Company takes a record of
the holders of Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (B) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
3C. Subdivision or Combination of Common Stock. If the Company
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Warrant
Stock obtainable upon exercise of this Warrant shall be proportionately
increased. If the Company at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Warrant Stock obtainable upon exercise of this Warrant shall be proportionately
decreased.
<PAGE>
3D. Reorganization, Reclassification, Consolidation, Merger or
Sale. Except as provided in Section 9, any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction, which in each case is effected in such a
way that the holders of Common Stock are entitled to receive (either directly or
upon subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "Organic Change." Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision (in form and substance satisfactory to the Registered Holder) to
insure that the Registered Holder shall thereafter have the right to acquire and
receive, in lieu of or addition to (as the case may be) the shares of Warrant
Stock immediately theretofore acquirable and receivable upon the exercise of
this Warrant, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for the number of shares of Warrant Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such Organic Change not taken place. In any such case, the Company shall
make appropriate provision (in form and substance satisfactory to the Registered
Holder) with respect to the Registered Holders' rights and interests to insure
that the provisions of this Section 3 and Sections 4 and 5 hereof shall
thereafter be applicable to the Warrants. The Company shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes by written instrument (in
form and substance satisfactory to the Registered Holder), the obligation to
deliver to the Registered Holder such shares of stock, securities or assets as,
in accordance with the foregoing provisions, such holder may be entitled to
acquire.
3E. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 3 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features
(except in each case pursuant to the Company's Master Stock Incentive Plan
(including any of its component plans) or 1998 Long-Term Incentive Plan, each as
in effect on the Date of Issuance)), then the Company's board of directors shall
make an appropriate adjustment in the Exercise Price and the number of shares of
Warrant Stock obtainable upon exercise of this Warrant so as to protect the
rights of the Registered Holder; provided that no such adjustment shall increase
the Exercise Price or decrease the number of shares of Warrant Stock obtainable
as otherwise determined pursuant to this Section 3.
3F. Notices.
(i) Immediately upon any adjustment of the Exercise Price, the Company
shall give written notice thereof to the Registered Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the Registered Holder at
least 20 days prior to the date on which the Company closes its books or takes a
record (A) with respect to any dividend or distribution upon the Common Stock,
(B) with respect to any pro rata subscription offer to holders of Common Stock
or (C) for determining rights to vote with respect to any Organic Change, Sale
of the Company, dissolution or liquidation.
(iii) The Company shall also give written notice to the Registered Holders
at least 20 days prior to the date on which any Organic Change, dissolution or
liquidation shall take place.
<PAGE>
Section 4. Liquidating Dividends. If the Company declares or
pays a dividend upon the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with GAAP) except for a
stock dividend payable in shares of Common Stock (a "Liquidating Dividend"),
then the Company shall pay to the Registered Holder at the time of payment
thereof the Liquidating Dividend which would have been paid to the Registered
Holder on the Warrant Stock (after netting out the Aggregate Exercise Price) had
this Warrant been fully exercised immediately prior to the date on which a
record is taken for such Liquidating Dividend, or, if no record is taken, the
date as of which the record holders of Common Stock entitled to such dividends
are to be determined.
Section 5. Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then the Registered Holder shall
be entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if the
Registered Holder had held the number of shares of Warrant Stock acquirable upon
complete exercise of this Warrant immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
Section 6. Company's Right to Require Exercise.
<PAGE>
6A. Requirement Notice. Subject to Section 6B, if on any date
during the Exercise Period the daily closing sales price of a share of Warrant
Stock quoted on NASDAQ equals or exceeds $11.00 per share (as such amount is
proportionately adjusted for stock splits, stock combinations, stock dividends
and recapitalizations affecting the Warrant Stock after the Date of Issuance)
for the 20 consecutive trading days immediately prior to such date, the Company
may, by giving written notice (the "Requirement Notice") to the Registered
Holder within three business days of such date, require the Registered Holder to
exercise, in whole or in part (but not as to a fractional share of Warrant
Stock), the purchase rights represented by this Warrant within 15 business days
of receipt of the Requirement Notice; provided, however such 15 business day
period shall be extended to the extent necessary for the Company and the
Registered Holder to make any filings with any governmental body, NASDAQ or any
stock exchange in which the Warrant Stock is listed or obtain any approvals of
any governmental body, NASDAQ, any stock exchange in which the Warrant Stock is
listed or the stockholders of the Company (including those in connection with
under the HSR Act) required prior to or in connection with any exercise of this
Warrant. Except as explicitly set forth in this Section 6, the exercise of this
Warrant shall follow the procedures set forth in Section 2B. Notwithstanding
anything in this Section 6 to the contrary, the Registered Holder can satisfy
its obligations under this Section 6 by assigning this Warrant pursuant to
Section 8 to another Person (the "Assignee") within 10 business days of receipt
of the Requirement Notice, so long as the Assignee exercises the assigned
Warrant within 10 business days of such assignment; provided, however such 10
business day period shall be extended to the extent necessary for the Company
and the Assignee to make any filings with any governmental body, NASDAQ or any
stock exchange in which the Warrant Stock is listed or obtain any approvals of
any governmental body, NASDAQ, any stock exchange in which the Warrant Stock is
listed or the stockholders of the Company (including those in connection with
under the HSR Act) required prior to or in connection with any exercise of the
assigned Warrant.
6B. Conditional Precedent to Requirement Notice.
Notwithstanding anything in Section 6A to the contrary, the obligations of the
Registered Holder or the Assignee, as applicable, under Section 6A shall be
subject to the Registered Holder or the Assignee, as applicable, having received
on or before the date of the closing of the exercise of the Warrant pursuant to
this Section 6 (the "Requirement Date") a certificate signed by the chief
executive officer of the Company certifying that as of the Requirement Date, (x)
the representations and warranties of the Company set forth in the Common Stock
Purchase Agreement shall be true, correct and complete in all respects on and as
of the Requirement Date to the same extent as though made on and as of such
date, except to the extent such representations and warranties specifically
related to an earlier date, in which case such representations and warranties
shall have been true, correct and complete in all respects on and as of such
earlier date (provided that the requirements of this clause (x) shall be deemed
satisfied unless all inaccuracies of such representations and warranties in the
aggregate have a Material Adverse Effect, ignoring any qualification as to
materiality or Material Adverse Effect contained therein), (y) the Company shall
have performed in all material respects all agreements which the Common Stock
Purchase Agreement provides shall be performed by the Company and (z) the
Company is not subject to any debt or credit agreement under which a default, an
event of default, a right of acceleration or a right to bring an action against
any property of the Company may be triggered if (A) Phillip G. Norton does not
maintain effective control of the Company or MLC Group, Inc., or (B) any
specified Person does not own any specified number or percentage of shares of
Common Stock (provided, however, such agreement can provide a default, an event
of default, a right of acceleration or a right to bring an action against any
property of the Company may be triggered if (1) one or more of Phillip G.
Norton, Patricia A. Norton, any of their lineal descendants or siblings and any
trust formed and maintained solely for the benefit of any such Persons
beneficially owns in the aggregate less than 1,600,000 shares of Common Stock,
or (2) one or more of Phillip G. Norton, Bruce M. Bowen, Thomas B. Howard, Jr.,
Steven J. Mencarini, Kleyton L. Parkurst, any other employee of the Company, any
of their lineal descendants, siblings or spouses and any trust formed and
maintained solely for the benefit of any such Persons beneficially owns in the
aggregate less than 2,000,000 shares of Common Stock).
6C. No Manipulation. Each of the parties hereto hereby agrees
that neither it nor any of its Affiliates shall take any action or omit to take
any action which increases or decreases the daily closing sales price of a share
of Warrant Stock quoted on NASDAQ for the primary purpose of effecting whether
or not the Company shall have the right to require the Registered Holder to
exercise, in whole or in part, the purchase rights represented by this Warrant.
<PAGE>
Section 7. No Voting Rights; Limitations of Liability. Except
as otherwise provided in the Stockholders Agreement, this Warrant shall not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision hereof, in the absence of affirmative action by the
Registered Holder to purchase Warrant Stock, and no enumeration herein of the
rights or privileges of the Registered Holder shall give rise to any liability
of such holder for the Exercise Price of Warrant Stock acquirable by exercise
hereof or as a stockholder of the Company.
Section 8. Warrant Transferable. Subject to federal and state
securities laws, this Warrant and all rights hereunder are transferable, in
whole or in part, without charge to the Registered Holder, upon surrender of
this Warrant with a properly executed Assignment at the address of the Company
set forth in Section 12.
Section 9. Sale of the Company. Notwithstanding anything
herein the contrary, prior to the consummation of a Sale of the Company, the
Registered Holder shall be given the option, in its sole discretion, to either
(x) exercise this Warrant prior to the consummation of the Sale of the Company
and participate in such sale as a holder of such class of Common Stock, or (y)
upon the consummation of the Sale of the Company, receive in exchange for this
Warrant consideration equal to the amount determined by multiplying (1) the same
amount of consideration per share of a class of Common Stock received by holders
of such class of Common Stock in connection with the Approved Sale less the
Exercise Price by (2) the number of shares of such class of Common Stock
represented by this Warrant.
Section 10. Warrant Exchangeable for Different Denominations.
This Warrant is exchangeable, upon the surrender hereof by the Registered Holder
at the address of the Company set forth in Section 12, for new Warrants of like
tenor representing in the aggregate the purchase rights hereunder, and each of
such new Warrants shall represent such portion of such rights as is designated
by the Registered Holder at the time of such surrender. The date the Company
initially issues this Warrant shall be deemed to be the "Date of Issuance"
hereof regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly represented by this Warrant shall be
issued. Each holder of a new Warrant shall have the rights and privileges of the
Registered Holder of this Warrant as provided herein.
Section 11. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing this Warrant, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the Company
(provided that if the Registered Holder is Thayer Equity Investors III, L.P. or
any of its Affiliates, then its own agreement shall be satisfactory), or, in the
case of any such mutilation upon surrender of such certificate, the Company
shall (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the same rights represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
Section 12. Notices. Any notice provided for in this Warrant
shall be in writing and shall be either personally delivered, or sent via
facsimile, or mailed first class mail (postage prepaid) or sent by reputable
overnight courier service (charges prepaid) to such Person as follows:
if to the Company:
MLC Holdings, Inc.
11150 Sunset Hills Road, Suite 110
Reston, VA 20190-5321
<PAGE>
FAX: 703-834-5718
Attention: Phillip G. Norton
with a copy to:
Alston & Bird, LLP
601 Pennsylvania Avenue, N.W.
North Building, 11th Floor
Washington, DC 20004
FAX: 202-508-3333
Attention: Frank M. Conner, III, Esq.
if to the Registered Holder:
c/o Thayer Equity Investors III, L.P.
1455 Pennsylvania Avenue, Suite 350
Washington, DC 20004
FAX: 202-371-0391
Attention: Carl J. Rickertsen
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W., Suite 1200
Washington, DC 20005-5793
FAX: 202-879-5200
Attention: Jack M. Feder, Esq.
or at such address or to the attention of such other Person as the recipient
party has specified by prior written notice to the sending party. Notices will
be deemed to have been given hereunder when delivered personally or sent via
facsimile (against receipt therefor), five business days after deposit in the
U.S. mail and one business day after deposit with a reputable overnight courier
service.
Section 13. Amendment and Waiver. Except as otherwise provided
herein, the provisions of this Warrant may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holder.
<PAGE>
Section 14. Descriptive Headings; Governing Law. The
descriptive headings of the several sections of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporation
laws of the State of Delaware shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by the internal law of the State of Delaware, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Delaware.
* * * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Stock Purchase
Warrant to be signed and attested by its duly authorized officers under its
corporate seal and to be dated the Date of Issuance hereof.
MLC HOLDINGS, INC.
By: /s/ BRUCE M. BOWEN
Name: Bruce M. Bowen
Title: Executive Vice President
[Corporate Seal]
Attest:
/s/ KLEYTON L. PARKHURST
------------------------------------
Kleyton L. Parkhurst, Secretary
ACKNOWLEDGED AND AGREED TO
AS OF THE DATE OF ISSUANCE:
TC LEASING, LLC
By: THAYER EQUITY INVESTORS III, L.P., its managing member
By: TC EQUITY PARTNERS, L.L.C., its general partner
By: /S/ JEFFREY W. GOETTMAN
- --------------------------------
Name: Jeffrey W. goettman
Title:Member
<PAGE>
EXERCISE AGREEMENT
Dated: _____________
The undersigned, pursuant to the provisions set forth in the
attached Stock Purchase Warrant (Certificate No. W-____), hereby agrees to
subscribe for the purchase of ______ shares of the Warrant Stock covered by such
Stock Purchase Warrant and makes payment herewith in full therefor at the price
per share provided by such Stock Purchase Warrant. A certificate for such shares
of Warrant Stock shall be made in the name of _______________________, and shall
be mailed to the following address:___________________________. [A new stock
purchase warrant for the unexercised portion of the rights under the attached
Stock Purchase Warrant shall be issued in the name of ______________________,
and shall be mailed to the following address:
- ---------------------------------.]
Name of Registered Holder: ___________________________
Signature: _______________________________________
Name: _______________________________________
Title: _______________________________________
<PAGE>
ASSIGNMENT
Dated: ______________
FOR VALUE RECEIVED, _________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Stock Purchase Warrant (Certificate No. W-_____) with respect to the
number of shares of the Warrant Stock covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
- ----------------- ------- -------------
Name of Assignor: ___________________________________
Signature: ___________________________________
Name: ___________________________________
Title: ___________________________________
For Release at 8:45 A.M. EST on October 23, 1998
MLC Holdings Raises $10 Million in Growth Equity from Thayer Capital Partners
Investment Strengthens Balance Sheet and Positions Company for Growth
RESTON, VA - October 23, 1998 - MLC Holdings, Inc. (Nasdaq: "MLCH") announced
today that Thayer Capital Partners has invested $10,000,000 in an equity private
placement through the purchase of 1,111,111 shares of unregistered common stock
of MLCH at a price of $9.00 per share. The purchase price is at a premium over
yesterday's close and the Company's 10-day trailing average. Thayer's investment
will represent approximately 15% of the outstanding common stock of MLC. In
addition to the initial equity investment, Thayer also received a warrant to
purchase 1,090,909 shares of MLCH common stock at an exercise price of $11.00
per share. The warrant expires December 31, 2001.
"This transaction strenthens MLC's balance sheet and helps continue our strong
growth," said Phillip G. Norton, Chairman, President and CEO of MLC. "The new
equity allows us to retain more leases on our balance sheet which should provide
higher margin opportunitites for our business. Thayer's investment should also
enable us to increase our line of credit to facilitate our expanding lease
origination volume. In addition to the equity capital, Thayer will provide
experience and expertise in mergers and acquisitions which should help us
achieve our plan of becoming a more significant player in the industry."
Mr. Norton added, "We are pleased to be able to add to our capital base at a
time when many specialty finance companies have been particularly hard hit by
the turmoil in the securitization markets. MLC has not used securitization as a
financing mechanism and the Company has avoided the liquidity and pricing
pressures affecting other specialty finance business."
Commenting on the investment, Frederic V. Malek, a founding partner of Thayer
Capital, said, "We were atracted to MLC because of its excellent history of
growth in lease originations and profitability. We feel that MLC has
differentiated itself among other leasing competitors with its asset management
services that position the company for continued rapid growth in the IT leasing
sector."
Dr. Paul G. Stern, a partner of Thayer, has joined MLC's Board of Directors,
increasing Thayer's representation to two board seats. Rick Rickertsen, a
partner at Thayer, is already a member of the board. Dr. Stern is the former
Chairman and Chief Executive Officer of Northern Telecom Ltd. ("NT"), and the
former President and COO of Burroughs Corporation. He currently serves on the
Board of Directors of Dow Chemical Company ("DOW"), Derby Cycle, LTV Corporation
("LTV") and Whirlpool Corporation ("WHR"), as well as serving as Chairman of two
Thayer investments, Aegis Communications Group, Inc. ("AGIS") and Colorado
Prime. "Paul brings valuable experience and will be a great asset to MLC's Board
of Directors. I feel that our strong independent board members have provided
great assistance, and I expect that Paul's addition will help us realize our
growth potential," stated Mr. Norton.
Thayer Capital Partners is a private equity investment firm based in Washington,
D.C. Thayer manages Thayer Equity Investors III, L.P., a $364 million limited
partnership, raised in 1996 by Thayer partners Mr. Malek, Mr. Rickertsen and Dr.
Stern. Thayer Equity Investors III focuses its investments in industries such as
IT services, travel & leisure services, and outsourced manufacturing and to date
has acquired seventeen businesses in eight portfolio companies. Other public
Thayer portfolio companies include Software AG Systems, Inc. (NYSE: AGS), Global
Vacation Group, Inc. (NYSE: GVG), and Aegis Communications Group, Inc.
(NASD:AGIS).
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: The statements contained in this release which are not historical facts
may be deemed to contain forward-looking statements. Actual results may vary due
to the following risks and uncertainties, including, without limitation, demand
and competition for the Company's lease financing and equipment sales and asset
management services, and the products to be leased or sold by the Company, the
continued availability to the Company of adequate financing, the ability of the
Company to recover its investment in equipment through remarketing, the
availability of companies and portfolios at reasonable prices and on adequate
terms and conditions, and other risks or uncertainties detailed in the Company's
Securities and Exchange Commission filings. Investors are cautioned that current
financial results may not be indicative of future results.
For Investor Relations and Additional Information:
Kley Parkhurst, Investor Relations
(703) 709-1924/[email protected]
Steve Mencarini, CFO
(703) 810-2596/[email protected]
www.mlcgroup.com
