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STOCKHOLDERS AGREEMENT
by and among
PHILIPP BROTHERS CHEMICALS, INC.,
PALLADIUM EQUITY PARTNERS II, L.P.,
PALLADIUM EQUITY PARTNERS II-A, L.P.,
PALLADIUM EQUITY INVESTORS II, L.P.,
and
THE STOCKHOLDER(S) SIGNATORY HERETO
dated as of November 30, 2000
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Table of Contents
ARTICLE 1 DEFINITIONS..........................................................1
SECTION 1.1. Certain Defined Terms...................................1
SECTION 1.2. Other Definitional Provisions...........................6
ARTICLE 2 CORPORATE GOVERNANCE.................................................6
SECTION 2.1. Board Representation; Voting............................6
SECTION 2.2. Committees..............................................7
SECTION 2.3. Consent Rights..........................................7
SECTION 2.4. Available Financial Information.........................8
SECTION 2.5. Access.................................................10
SECTION 2.6. Board Procedures.......................................11
SECTION 2.7. Executive Compensation.................................11
SECTION 2.8. Subsidiary Redemptions and Distributions...............11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES......................................12
SECTION 3.1. Authorization; Validity of Agreement; Necessary
Action.................................................12
SECTION 3.2. Voting; Ownership......................................12
ARTICLE 4 OTHER COVENANTS.....................................................12
SECTION 4.1. No Transfer of Voting Stock............................12
SECTION 4.2. Registration Rights....................................13
SECTION 4.3. No Inconsistent Agreements.............................13
SECTION 4.4. Environmental Audits...................................13
SECTION 4.5. Key Man Life Insurance.................................13
SECTION 4.6. Right of First Refusal.................................13
ARTICLE 5 MISCELLANEOUS.......................................................15
SECTION 5.1. Investor Stockholder Indemnification...................15
SECTION 5.2. Termination............................................15
SECTION 5.3. Effective Date.........................................15
SECTION 5.4. Further Assurances.....................................15
SECTION 5.5. Enforcement............................................15
SECTION 5.6. Governing Law; Jurisdiction; Waiver of Jury Trial......16
SECTION 5.7. Successors and Assigns; Assignment.....................16
SECTION 5.8. Entire Agreement; Third Parties........................16
SECTION 5.9. Severability...........................................16
SECTION 5.10. Amendment and Waiver..................................16
SECTION 5.11. Delays or Omissions...................................16
SECTION 5.12. Notices...............................................17
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SECTION 5.13. Interpretation........................................18
SECTION 5.14. Counterparts..........................................18
SCHEDULES
Schedule 2.3 Permitted Transactions
Schedule 3.2 Voting Stock
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STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is entered as of
November 30, 2000, by and among PHILIPP BROTHERS CHEMICALS, INC., a New York
corporation (the "Company"), PALLADIUM EQUITY PARTNERS II, L.P., a Delaware
limited partnership ("PEP II"), PALLADIUM EQUITY PARTNERS II-A, L.P., a Delaware
limited partnership ("PEP II-A"), and PALLADIUM EQUITY INVESTORS II, L.P., a
Delaware limited partnership ("PEI II" and together with PEP II and PEP II-A,
the "Investor Stockholders"), and each stockholder of the Company whose name
appears on the signature pages hereof.
WHEREAS, concurrently with this Agreement, the Company and the
Investor Stockholders are entering into a Stock Purchase Agreement, dated as of
the date hereof (the "Stock Purchase Agreement"), pursuant to which the Investor
Stockholders will purchase 25,000 shares of Series B Preferred Stock (as defined
herein) of the Company, and 20,000 shares of Series C Preferred Stock (as
defined herein) of the Company, for an aggregate purchase price of $45,000,000;
and
WHEREAS, the parties hereto desire to enter into certain
arrangements relating to, among other things, the corporate governance of the
Company, to be effective as of the Closing (as defined herein).
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used herein, the following
terms shall have the following meanings:
"Additional Number" has the meaning assigned to such term in Section
2.1.
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person, for
so long as such Person remains so associated to the specified Person.
"beneficial owner" or "beneficially own" has the meaning given such
term in Rule 13d-3 under the Exchange Act and a Person's beneficial
ownership of any Equity Securities of the Company shall be calculated in
accordance with the provisions of that Rule; provided, however, that for
purposes of determining beneficial ownership, (i) a Person shall be deemed
to be the beneficial owner of any security which may be acquired by such
Person whether within 60 days or thereafter, upon the conversion, exchange
or
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exercise of any warrants, options, rights or other securities and (ii) no
Person shall be deemed to beneficially own any security solely as a result
of such Person's execution of this Agreement.
"Board" means the Board of Directors of the Company.
"Business Day" means any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in
The City of New York.
"Bylaws" means the Bylaws of the Company, as in effect on the date
hereof and as the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof, the terms of the
Restated Certificate and the terms of this Agreement.
"Capital Stock" means, with respect to any Person at any time, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of capital stock, partnership
interests (whether general or limited) or equivalent ownership interests
in or issued by such Person, and with respect to the Company includes,
without limitation, any and all shares of Common Stock and Preferred
Stock.
"Certificate of Amendment" has the meaning assigned to such term in
the Stock Purchase Agreement.
"Change of Control" means (i) any time when Jack C. Bendheim ceases
for any reason to be a Director, (ii) any merger or consolidation with or
into any other entity or any other similar transaction, whether in a
single transaction or series of related transactions where (A) Jack C.
Bendheim in the aggregate ceases to beneficially own more than 50% of the
voting securities of the entity surviving or resulting from such
transaction (or the ultimate parent thereof) or (B) any Person becomes the
beneficial owner of more than 50% of the voting securities of the entity
surviving or resulting from such transaction (or the ultimate parent
thereof), (iii) any transaction or series of related transactions in which
in excess of 50% of the Company's voting securities is transferred to any
Person or Group, including but not limited to such a Transfer or such
series of Transfers by Jack C. Bendheim to any Person or Group (whether by
operation of law or otherwise), (iv) the sale, transfer, lease,
assignment, conveyance, exchange, mortgage or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries, or
(v) any liquidation, dissolution or winding-up of the Company.
"Class A Common Stock" means the Class A Common Shares, par value
$0.10 per share, of the Company and any securities issued in respect
thereof, or in substitution
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therefor, in connection with any stock split, dividend or combination, or
any reclassification, recapitalization, merger, consolidation, exchange or
other similar reorganization.
"Class B Common Stock" means the Class B Common Shares, par value
$0.10 per share, of the Company and any securities issued in respect
thereof, or in substitution therefor, in connection with any stock split,
dividend or combination, or any reclassification, recapitalization,
merger, consolidation, exchange or other similar reorganization.
"Closing" has the meaning assigned to such term in the Stock
Purchase Agreement.
"Closing Date" has the meaning assigned to such term in the Stock
Purchase Agreement.
"Common Stock" means, collectively, the Class A Common Stock, Class
B Common Stock and any other class or series of common stock of the
Company.
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or
more Persons, means the possession, directly or indirectly, of the power
to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise.
"Director" means any member of the Board.
"Equity Securities" means any and all shares of Capital Stock of the
Company, securities of the Company convertible into, or exchangeable or
exercisable for, such shares, and options, warrants or other rights to
acquire such shares.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles, as in effect
in the United States of America from time to time.
"Group" has the meaning assigned to such term in Section 13(d)(3) of
the Exchange Act.
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"Investor Director" means any Director designated by the Investor
Stockholders pursuant to Section 2.1 of this Agreement.
"Investor Observer" means any observer of the Board designated by
the Investor Stockholders pursuant to Section 2.1 of this Agreement.
"Investor Stockholder Indemnitee" has the meaning assigned to such
term in Section 5.1.
"Losses" has the meaning assigned to such term in Section 5.1.
"Management Agreement" means the Management and Advisory Services
Agreement entered into as of the Closing Date between the Company and
Palladium Equity Partners, L.L.C.
"MRT/MMC Agreement" means the Amended and Restated Combined Limited
Liability Company Agreement of Mineral Resource Technologies, L.L.C. and
Stockholders Agreement of MRT Management Corp. ("MMC") dated June 30, 1999
by and among the Company, MMC, Hugh Shannonhouse, Richard Basaraba and
Robert Styron, as amended and in effect on the date hereof, and as
thereafter amended, except for any amendment subsequent to the date hereof
which causes the terms of such agreement to be less favorable in any
respect to the Company or to any Investor Stockholder.
"Person" means any individual, corporation, limited liability
company, limited or general partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, government or any
agency or political subdivisions thereof or any Group comprised of two or
more of the foregoing.
"Phibro-Tech Agreement" means the Stockholders Agreement, dated
February 21, 1995, between Phibro-Tech, Inc., I. David Paley, Nathan
Bistricer and James O. Herlands, as amended and in effect on the date
hereof, and as thereafter amended, except for any amendment subsequent to
the date hereof which causes the terms of such agreement to be less
favorable in any respect to the Company or to any Investor Stockholder.
"Preferred Stock" means, collectively, the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock and any other class
or series of preferred stock of the Company.
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"Principal Stockholder" means Jack C. Bendheim.
"Restated Certificate" means the Restated Certificate of
Incorporation of the Company, as in effect on the date hereof and as the
same may be amended, supplemented or otherwise modified from time to time.
"SEC" means the U.S. Securities and Exchange Commission or any other
federal agency then administering the Securities Act or the Exchange Act
and other federal securities laws.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Series A Preferred Stock" means the Series A Preferred Shares, par
value $100.00 per share, of the Company and any securities issued in
respect thereof, or in substitution therefor, in connection with any stock
split, dividend or combination, or any reclassification, recapitalization,
merger, consolidation, exchange or other similar reorganization.
"Series B Preferred Stock" means the Series B Preferred Shares, par
value $100.00 per share, of the Company and any securities issued in
respect thereof, or in substitution therefor, in connection with any stock
split, dividend or combination, or any reclassification, recapitalization,
merger, consolidation, exchange or other similar reorganization.
"Series C Preferred Stock" means the Series C Preferred Shares, par
value $100.00 per share, of the Company and any securities issued in
respect thereof, or in substitution therefor, in connection with any stock
split, dividend or combination, or any reclassification, recapitalization,
merger, consolidation, exchange or other similar reorganization.
"Stockholder" means any holder of Capital Stock of the Company.
"Subsidiary" means (i) any corporation of which a majority of the
securities entitled to vote generally in the election of directors
thereof, at the time as of which any determination is being made, are
owned by another entity, either directly or indirectly, and (ii) any joint
venture, general or limited partnership, limited liability company or
other legal entity in which an entity is the record or beneficial owner,
directly or indirectly, of a majority of the voting interests or is the
general partner.
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"Sussman Stockholders Agreement" means the Shareholders Agreement
dated December 29, 1987, by and between the Company, Charles H. Bendheim,
Jack C. Bendheim and Marvin S. Sussman, as amended and in effect on the
date hereof, and as thereafter amended, except for any amendment
subsequent to the date hereof which causes the terms of such agreement to
be less favorable in any respect to the Company or to any Investor
Stockholder.
"Transfer" means, directly or indirectly, to sell, transfer, assign,
pledge, encumber, hypothecate or similarly dispose of, either voluntarily
or involuntarily, or to enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer,
assignment, pledge, encumbrance, hypothecation or similar disposition of,
any shares of Equity Securities beneficially owned by a Person or any
interest in any shares of Equity Securities beneficially owned by a
Person.
"Voting Stock" means, at any time, shares of any class or series of
Equity Securities of the Company which are then entitled to vote generally
in the election of Directors. The Class B Common Stock is not deemed to be
Voting Stock as of the date hereof.
"Voting Stockholder" means any holder of Voting Stock.
SECTION 1.2. Other Definitional Provisions. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not only to a particular section of
this Agreement.
ARTICLE 2
CORPORATE GOVERNANCE
SECTION 2.1. Board Representation; Voting.
(a) Effective as of the Closing, the Board will be comprised of five
Directors. Effective from the Closing and until the termination of this
Agreement, the Board will be comprised of at least two Directors who will be
designees of the Investor Stockholders.
(b) If, and for so long as, the Company (i) fails to redeem any one
or more shares of Series B Preferred Stock requested for redemption by an
Investor Stockholder in accordance with Section 3(b) of ARTICLE THIRD of the
Certificate of Amendment, or (ii) fails to redeem any one or more shares of
Series C Preferred Stock requested for redemption by an Investor Stockholder in
accordance with Section 3(b) of ARTICLE FOURTH of the Certificate of Amendment,
then (x) as soon as practicable, the Company and the Voting Stockholder shall
take all action necessary or advisable under applicable law to increase the size
of the Board by such number (the "Additional Number") of additional Directors as
would be necessary, assuming that
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all such additional Directors are designees of the Investor Stockholders, so
that Directors that are designees of the Investor Stockholders constitute a
majority of the entire Board, (y) the number of Directors who will be designees
of the Investor Stockholders, as provided in Section 2.1(a), shall be at least
the sum of two plus the Additional Number, and (z) in connection with any matter
submitted to the vote of the Stockholders (whether by meeting, written consent
or otherwise), the Voting Stockholder shall take all action necessary or
advisable to cause all Equity Securities beneficially owned by such Voting
Stockholder to be voted in the manner directed by the Investor Stockholders;
provided that during the period in which an Investor Stockholder is entitled to
designate an Additional Number of designees to the Board pursuant to this
Section 2.1(b), the Company shall pay Jack Bendheim and Marvin Sussman, whether
or not employed by the Company, an amount not less than the annual base salaries
of Jack Bendheim and Marvin Sussman, respectively, in effect as of immediately
prior to such period, until the earlier to occur of (A) the expiration of such
period, (B) the fifth anniversary of the start of such period, or (C) the
termination of this Agreement.
(c) The Company and the Voting Stockholder shall take all action
necessary or advisable under applicable law to cause the Board to consist of the
number of Directors specified in this Section 2.1 and to include in the slate of
nominees recommended by the Board the designees of the Investor Stockholders;
and the Company and the Voting Stockholder shall use their best efforts to
cause, including but not limited to causing all the Equity Securities
beneficially owned by such Voting Stockholder to be voted in favor of, the
election of each designee of the Investor Stockholders to the Board.
(d) In the event that a vacancy is created at any time by the death,
disability, retirement, resignation or removal (with or without cause) of any
Investor Director, the Company and the Voting Stockholder shall cause the
vacancy created thereby to be filled by a new designee of the Investor
Stockholders as soon as possible, and the Company and the Voting Stockholder
hereby agree to take, at any time and from time to time, all actions necessary
or advisable to accomplish the same, including but not limited to causing all
the Equity Securities beneficially owned by such Voting Stockholder to be voted
in favor of the election of such designee of the Investor Stockholders to the
Board.
(e) In addition to Investor Directors, and whether or not the
Investor Stockholders have designated any Investor Director to the Board, the
Company shall also allow a designee of the Investor Stockholders to attend all
meetings of the Board in a nonvoting capacity, and the Company shall give the
Investor Observer copies of all notices, minutes, consents and other materials,
which the Company provides to members of the Board.
SECTION 2.2. Committees. The Company shall cause any executive
committee, compensation committee, audit committee, investment committee,
nominating committee or other committee of the Board to include at least one
Investor Director.
SECTION 2.3. Consent Rights. In addition to any vote or consent of
the Board or the Stockholders of the Company required by law, the Restated
Certificate or Bylaws, the consent in writing of at least one Investor Director
(or, if no Investor Director is then serving on the Board, at least one Investor
Stockholder) shall be necessary for authorizing, effecting or validating the
following actions by the Company:
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(i) issue any Equity Securities on or after the date hereof;
provided that the Company may issue Equity Securities, without such
consent, to a Person who agrees in writing, in an instrument reasonably
acceptable to at least one Investor Director (or if no Investor Director
is then serving on the Board, at least one Investor Stockholder), to be
bound by all of the terms of this Agreement as if all references to Voting
Stockholder herein shall refer to such Person therein and all references
to Voting Stock herein shall refer to Equity Securities therein;
(ii) except as provided on Schedule 2.3, (A) any sale of the
Company's assets in excess of $10,000,000 to any other Person, or any
acquisition of another Person or the assets thereof in excess of
$10,000,000, in any case whether in a single transaction or series of
related transactions, or (B) any proposed transaction or series of related
transactions involving a Change of Control of the Company;
(iii) any redemption, acquisition or other purchase of any Equity
Securities of the Company except (i) in accordance with the terms of the
Series B Preferred Stock and Series C Preferred Stock or (ii) as required
by the Sussman Shareholders Agreement;
(iv) except as provided on Schedule 2.3, any incurrence of any
indebtedness for borrowed money, acquisitions or otherwise, or any
issuance of any debt security or any warrants or rights to acquire any
debt security, or the assumption, guarantee, endorsement or otherwise as
an accommodation to become responsible for the obligations of any Person,
or make any loans, advances or enter into any financial commitments, which
are, in the aggregate, in excess of $12,500,000, except any indebtedness
used to refinance dollar for dollar all or a part of the Series B
Preferred Stock and the Series C Preferred Stock and except for renewals,
extensions of time, and modifications of then existing indebtedness on
substantially the same terms and conditions as long as the amount of
indebtedness is not increased and the Company is not materially adversely
affected thereby;
(v) except as provided on Schedule 2.3, any transaction or series of
transactions between the Company or any Subsidiary, on the one hand, and,
on the other hand, any of its or their officers, directors, stockholders,
or employees or any family member or Affiliate thereof in excess of
$500,000; and
(vi) any understanding, agreement or contract to do any of the
foregoing.
SECTION 2.4. Available Financial Information. (a) The Company will
deliver, or will cause to be delivered, the following to each Investor Director
(or, if no Investor Director is then serving on the Board, to the Investor
Stockholders):
(i) as soon as practicable after (A) the end of the sixth month
following the Closing and (B) the end of each month thereafter, and in any
event within 30 days after the end of such months (or 45 days after a
month that is the end of a fiscal quarter), (x) a consolidated and
consolidating balance sheet of the Company and its Subsidiaries as of the
end of such month, (y) consolidated and consolidating statements of income
and cash flows of the Company and its Subsidiaries, for each month and for
the current fiscal year of the Company to date, and (z) consolidated and
consolidating statements of revenues and gross profit by major products
for each Subsidiary, for each month and for the current fiscal year
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of the Company to date, all subject to normal year-end audit adjustments,
prepared in accordance with GAAP and certified by the principal financial
or accounting officer of the Company, together with a comparison of such
statements to the corresponding periods of the prior fiscal year and to
the Company's budget then in effect and approved by the Board;
(ii) from the date hereof until the end of the sixth month following
the Closing, and in any event within 30 days after the end of each such
months (or 45 days after a month that is the end of a fiscal quarter), (x)
consolidated and consolidating statements of debt and cash balances as of
the end of each month, (y) a consolidated and consolidating statement of
income of each U.S. based Subsidiary of the Company, including without
limitation Phibro Animal Health (including both foreign and domestic
results), for each month and for the current fiscal year of the Company to
date, subject to normal year-end audit adjustments, prepared in accordance
with GAAP, and (z) consolidated statements of revenues and gross profit of
each non-U.S. based Subsidiary of the Company, for each month and for the
current fiscal year of the Company to date, all certified by the principal
financial or accounting officer of the Company, together with a comparison
of such statements to the corresponding periods of the prior fiscal year
and to the Company's budget then in effect and approved by the Board;
(iii) (x) a detailed consolidated and consolidating monthly budget
for a fiscal year and a five-year business plan revised at least annually
with consolidated and consolidating financial forecasts for the Company,
no later than 30 days before the beginning of the Company's next fiscal
year, in such manner and form as approved by the Board, which shall
include at least a projection of income and a projected cash flow
statement for each month with respect to such budget for such fiscal year
and for each fiscal quarter with respect to such business plan in such
fiscal year and a projected balance sheet as of the end of each month with
respect to such budget for such fiscal year and as of the end of each
fiscal quarter with respect to such business plan in such fiscal year; and
(y) any material changes in such business plan shall be delivered to the
Investor Directors or the Investor Stockholder, as the case may be, as
promptly as practicable after such changes have been approved by the
Board; and
(iv) secured creditor covenant, availability and financial reporting
packages at the same time and frequency as they are delivered to the
Company's bank, or if such packages are not required by the Company's
bank, then every month.
(b) The Company will promptly deliver to the Investor Stockholders
when available one copy of each annual report on Form 10-K and quarterly report
on Form 10-Q of the Company, as filed with the SEC. In the event an annual
report on Form 10-K or quarterly report on Form 10-Q is unavailable, the Company
may, in lieu of the requirements of the preceding sentence, deliver, or cause to
be delivered, the following to the Investor Directors or the Investor
Stockholders, as the case may be:
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(i) as soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety 90 days thereafter, a consolidated
balance sheet of the Company and its Subsidiaries as of the end of such
fiscal year, and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such year, prepared in accordance with
GAAP and setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and accompanied by the
opinion of an independent public accountant of recognized national
standing selected by the Company, and a Company-prepared comparison to the
Company's budget for such year as approved by the Board;
(ii) as soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and
in any event within 45 days thereafter, a consolidated balance sheet of
the Company and its Subsidiaries as of the end of each such quarterly
period, and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such period and for the current fiscal
year to date, prepared in accordance with GAAP and setting forth in
comparative form the figures for the corresponding periods of the previous
fiscal year and to the Company's budget then in effect and approved by the
Board, subject to changes resulting from normal year-end audit
adjustments, all in reasonable detail and certified by the principal
financial or accounting officer of the Company, except that such financial
statements need not contain the notes required by GAAP; and
(iii) as soon as practicable after the end of first, second, third
and fourth quarterly accounting periods in each fiscal year of the
Company, and in any event within 45 days thereafter, a consolidating
balance sheet of the Company and its Subsidiaries as of the end of each
month of such quarter and consolidating statements of income and cash
flows of the Company and its Subsidiaries, for each month of such quarter
and for the current fiscal year of the Company to date, all subject to
normal year-end audit adjustments, prepared in accordance with GAAP and
certified by the principal financial or accounting officer of the Company,
together with a comparison of such statements to the corresponding periods
of the prior fiscal year and to the Company's budget then in effect and
approved by the Board.
(c) The Company shall deliver to the Purchasers before December 31,
2000 (i) a detailed consolidated and consolidating monthly budget for the fiscal
year ending June 30, 2001, which shall include a projected income statement and
a projected cash flow statement for each month of such fiscal year and a
projected balance sheet as of the end of each month of such fiscal year and (ii)
the Company's foreign currency hedging strategy in such detail as reasonably
determined by the Board.
SECTION 2.5. Access. The Company shall, and shall cause its
Subsidiaries, officers, directors, employees, auditors and other agents to, (a)
afford the officers, employees, auditors and other agents of the Investor
Stockholders, during normal business hours, reasonable access at reasonable
times to the Company's officers, employees, auditors, legal counsel, properties,
offices, plants and other facilities and to all books and records, (b) furnish
the Investor Stockholders with all financial, operating and other data and
information as an Investor Stockholder may reasonably request, and (c) afford
the Investor Stockholders the opportunity to
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discuss the Company's affairs, finances and accounts with the Company's officers
from time to time as an Investor Stockholder may reasonably request.
SECTION 2.6. Board Procedures. Unless otherwise agreed by the
parties hereto or approved by the Board with the consent of at least one
Investor Director (or, if no Investor Director is then serving on the Board, the
Investor Observer), the Board shall follow the following procedures:
(a) Meetings. Special meetings of the Board may be held at any time
permitted pursuant to the Bylaws, by oral, telephonic, telegraphic or facsimile
notice duly given or sent, or by written notice sent by two-day courier, in each
case to be received at least two days before any actions to be taken by written
resolution, at least three days before any telephonic meeting and at least seven
days before any in-person meeting to each director. Reasonable efforts shall be
made to ensure that each Director actually receives timely notice of any
meeting.
(b) Frequency. The Company will have at least five meetings per year
composed of one meeting per quarter as well as one annual meeting to review and
approve the annual budget and five-year business plan.
(c) Agenda. A reasonably detailed agenda shall be supplied to each
Director reasonably in advance of each meeting of the Board, together with other
appropriate documentation with respect to agenda items calling for Board action,
to inform adequately Directors regarding matters to come before the Board. Any
Director wishing to place a matter on the agenda for any meeting of the Board
may do so by communicating with the Chairman of the Board sufficiently in
advance of the meeting of the Board so as to permit timely dissemination to all
Directors of information with respect to the agenda.
(d) D&O Insurance. At all times when an Investor Director is a
member of the Board, the Company shall maintain directors and officers insurance
in an amount not less than $10,000,000.
SECTION 2.7. Executive Compensation. The salaries, bonuses, profit
sharing, stock option and other compensation or benefits of the top three
executives of the Company and the president of each Subsidiary of the Company
must be approved by the Board as part of the annual budget referenced in Section
2.4(a)(iii) hereof; provided that, if the actual amount of salary, bonus, profit
sharing, stock option and other compensation or benefits, in the aggregate, to
be provided to any key executive of the Company in any year exceeds 5% of the
aggregate amount provided in the annual budget for that year for such executive,
such deviation from the annual budget must be approved by the Board and such
Board approval must include the approval of at least one Investor Director or,
if no Investor Director is then serving on the Board, such Board approval must
be accompanied by the consent of the Investor Stockholders, which consent shall
not be unreasonably withheld or delayed.
SECTION 2.8. Subsidiary Redemptions and Distributions. The Company
shall not directly or indirectly through one or more of its Subsidiaries
(whether now in existence or hereafter acquired or created), and shall cause
each of its Subsidiaries (whether now in existence or hereafter acquired or
created) to agree not to, redeem, acquire or otherwise purchase, or make
<PAGE>
12
any dividend or distribution with respect to, any Capital Stock of any
Subsidiary of the Company which Capital Stock is not owned by the Company or one
of its Subsidiaries except as required by the MRT/MMC Agreement or the
Phibro-Tech Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
The Company and the Voting Stockholder, jointly and severally,
represent and warrant to the Investor Stockholders as follows:
SECTION 3.1. Authorization; Validity of Agreement; Necessary Action.
Each of the Company and the Voting Stockholder has full power and authority to
execute and deliver this Agreement, to perform their respective obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance by each of the Company and the Voting Stockholder of
this Agreement and the consummation by them of the transactions contemplated
hereby have been duly and validly authorized by them, and no other actions or
proceedings on the part of the Company or the Voting Stockholder are necessary
to authorize the execution and delivery by them of this Agreement and the
consummation by them of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Company and the Voting Stockholder, and,
assuming this Agreement constitutes a valid and binding obligation of the
Investor Stockholders, constitutes a valid and binding obligation of the Company
and the Voting Stockholders, enforceable against them in accordance with its
terms.
SECTION 3.2. Voting; Ownership. The only authorized Voting Stock is
the Class A Common Stock. As of the date hereof, all shares of Voting Stock
issued and outstanding are beneficially owned and held of record by the Voting
Stockholder as listed on Schedule 3.2 hereto, and no shares of Voting Stock are
beneficially owned or held of record by any Person other than the Voting
Stockholder. As of the date hereof, there is no agreement to issue or otherwise
Transfer any Voting Stock, and there are no securities convertible into, or
otherwise evidencing the right to acquire, any Voting Stock. The Voting
Stockholder has sole voting power, sole power of disposition, and sole power to
effect the matters set forth in this Agreement, in each case with respect to all
of the Voting Stockholder's Voting Stock, with no limitations, qualifications or
restrictions on such powers.
ARTICLE 4
OTHER COVENANTS
SECTION 4.1. No Transfer of Voting Stock. The Voting Stockholder
shall not Transfer any Voting Stock, any Voting Stock acquired after the date
hereof, or any interest in any of the foregoing to any Person, except to a
Person who agrees in writing, in an instrument acceptable to the Company (which
acceptance must include the consent of at least one Investor
<PAGE>
13
Director (or if no Investor Director is then serving on the Board, at least one
Investor Stockholder)), to be bound by all of the terms of this Agreement as a
Voting Stockholder. Any Transfer in violation of this Section 4.1 is null and
void. As long as this Agreement is in effect, the Voting Stockholder and the
Company shall cause all certificates representing Voting Stock to have a legend
thereon stating that such shares are subject to the Transfer restrictions
hereof.
SECTION 4.2. Registration Rights. If the Company grants to any
Person any right (whether demand or piggyback) to register Equity Securities of
the Company under the Securities Act (other than registrations on Forms S-4 or
S-8 or successor forms thereto), then no later than concurrently with the grant
of such rights, the Company shall enter into a written agreement with the
Investor Stockholders providing them with such rights on substantially the same
terms and conditions.
SECTION 4.3. No Inconsistent Agreements. The Company and the Voting
Stockholder agree that they will not enter into any agreement that is
inconsistent with their respective obligations under this Agreement or the Stock
Purchase Agreement.
SECTION 4.4. Environmental Audits. The Company shall retain an
independent environmental consultant to perform on the Company and on its
Subsidiaries environmental audits, which shall be sufficient in scope to give a
reasonably reliable indication of the extent to which the Company and its
Subsidiaries are managing their obligations to comply with, and are minimizing
their potential liabilities under, applicable Environmental Laws (as defined in
the Stock Purchase Agreement), at least once every fiscal year. Such independent
environmental consultant, if not GaiaTech Inc., shall be reasonably qualified
and competent to perform such audits and approved by at least one Investor
Director, or if there is no Investor Director, at least one Investor
Stockholder. The results of such audit will be presented to the Board and the
Investor Stockholders.
SECTION 4.5. Key Man Life Insurance. The Company shall maintain key
man life insurance on Jack C. Bendheim in an amount of at least $45,000,000,
with premiums to be paid by the Company, and agrees that the proceeds thereof
shall be held in trust for the holders of Series B Preferred Stock and Series C
Preferred Stock and shall be distributed therefrom only for payment of dividends
on, payment upon liquidation, dissolution or winding up of the Company with
respect to, or redemption of Series B Preferred Stock and Series C Preferred
Stock and only pro rata to the holders thereof, as long as any such shares are
outstanding.
SECTION 4.6. Right of First Refusal. (a) Each Investor Stockholder
may Transfer any or all of its shares of Series B Preferred Stock or Series C
Preferred Stock or both either (i) to an Affiliate of the Investor Stockholder
that agrees to be bound by the provisions of Section 4.6(b) as if such Affiliate
were an Investor Stockholder and without compliance with the provisions of
Section 4.6(b) or (ii) to a third party that is not such an Affiliate upon
compliance and in accordance with the provisions of Section 4.6(b) and that
agrees to be bound by the provisions of Section 4.6(b) as if such third party
were an Investor Stockholder.
(b) If an Investor Stockholder (the "Offering Stockholder") desires
to Transfer any or all of its shares of Series B Preferred Stock or Series C
Preferred Stock or both (the "Offered Shares") other than in a transaction under
Section 4.6(a)(i) or in a public offering
<PAGE>
14
registered under the Securities Act of Equity Securities of the Company as
contemplated in Section 4.2, the Offering Stockholder shall first obtain a bona
fide written offer from a third party for the purchase of such Offered Shares
(the "Purchase Offer") and the provisions of this Section 4.6(b) shall apply.
(i) Promptly upon receipt of the Purchase Offer, the Offering
Stockholder shall offer to sell to the Company and the Principal
Stockholder (collectively, the "Preemptive Purchasers") all but not less
than all of the Offered Shares at the same price and upon substantially
the same terms and conditions as the Purchase Offer; provided, however,
that in the event such Purchase Offer shall provide for any non-cash
consideration, such may be paid in cash equal to the fair market value of
such non-cash consideration. Such offer by the Offering Stockholder to the
Preemptive Purchasers (the "Stockholder Offer") shall be in writing (the
"Notice") and irrevocable for a period of not more than 30 days, shall
have a copy of the Purchase Offer attached thereto, and shall be
delivered, in accordance with the notice provisions hereof, to each
Preemptive Purchaser.
(ii) The Preemptive Purchasers, collectively, shall have a period of
30 days after delivery of the Notice within which to accept the
Stockholder Offer in its entirety, including but not limited to all and
not less than all the Offered Shares. Any such acceptance and election
(the "Acceptance") of any Stockholder Offer shall be in writing and
delivered, in accordance with the notice provisions hereof, to the
Offering Stockholder.
(iii) The sale of all such Offered Shares to the Preemptive
Purchasers shall be consummated as soon as practicable after the later of
the delivery of the final Acceptance or the expiration of such 30-day
election period, which closing shall occur not more than 30 days
thereafter (subject to any delay required to comply with any applicable
regulatory requirements) as may be mutually agreed to by the Offering
Stockholder and a majority of the Preemptive Purchasers. At such closing
the Offering Stockholder shall deliver to each accepting Preemptive
Purchaser a certificate or certificates evidencing the Offered Shares,
duly endorsed in blank or accompanied by a stock power duly executed in
blank, together with all requisite stock transfer tax stamps affixed
thereto. At such closing, payment of the purchase price for the Offered
Shares shall be made by wire transfer in immediately available funds or by
bank or certified check.
(iv) In the event the Preemptive Purchasers fail to elect to
purchase all of the Offered Shares, the Offering Stockholder may then sell
all of the Offered Shares to the third party who made the Purchase Offer
at the price and upon substantially the same terms and conditions of the
Purchase Offer, and such third party shall receive the Offered Shares so
purchased free and clear of the restrictions of this Agreement; provided
that any material change from such specific price or material change in
terms and conditions of the Purchase Offer or change in the third party
purchaser (except for an Affiliate of such third party who made the
applicable Purchase Offer) shall make operative again the terms of this
Section 4.6(b), and the Offering Stockholder shall again be required to
offer such Offered Shares pursuant to the procedures set forth in this
Section 4.6(b) to each Preemptive Purchaser at such changed price or upon
such changed terms and conditions. The Offering Stockholder shall not make
any sale or other disposition of any of such
<PAGE>
15
Offered Shares unless such sale or other disposition is concluded within
90 days after the Notice. Upon the expiration of such period, the
provisions of this Section 4.6(b) shall again apply to all Offered Shares
remaining unsold.
ARTICLE 5
MISCELLANEOUS
SECTION 5.1. Investor Stockholder Indemnification. The Company
agrees to indemnify and hold harmless each Investor Stockholder and its
Affiliates (including the directors, officers, partners, members, employees,
agents and controlling persons thereof, each, an "Investor Stockholder
Indemnitee") from and against any and all liability, including, without
limitation, all obligations, costs, fines, claims, actions, injuries, demands,
suits, judgments, proceedings, investigations, arbitrations (including
stockholder claims, actions, injuries, demands, suits, judgments, proceedings,
investigations or arbitrations) and expenses, including, without limitation,
accountant's and attorney's fees and expenses (collectively, the "Losses"),
incurred by an Investor Stockholder Indemnitee before, on or after the date of
this Agreement and arising out of, resulting from, or relating to (i) such
Investor Stockholder's purchase or ownership of Equity Securities, (ii) the
transactions contemplated by this Agreement, (iii) any litigation to which an
Investor Stockholder Indemnitee is made a party in its capacity as a stockholder
or owner of Equity Securities or (iv) any franchise taxes imposed on the
Investor Stockholder Indemnitee.
SECTION 5.2. Termination. The provisions of this Agreement other
than Article 5 shall terminate at such time, with respect to each Investor
Stockholder, as such Investor Stockholder shall own, together with its
Affiliates, no Equity Securities. Nothing herein shall relieve any party from
any liability for the breach of any of the agreements set forth in this
Agreement.
SECTION 5.3. Effective Date. This Agreement shall become effective
upon the Closing.
SECTION 5.4. Further Assurances. At any time or from time to time
after the date hereof, the parties agree to cooperate with each other, and at
the request of any other party, to execute and deliver any further instruments
or documents and to take all such further action as the other party may
reasonably request in order to evidence or effectuate the consummation of the
transactions contemplated hereby and to otherwise carry out the intent of the
parties hereunder.
SECTION 5.5. Enforcement.. Each party hereto acknowledges that money
damages would not be an adequate remedy in the event that any of the covenants
or agreements in this Agreement are not performed in accordance with its terms,
and therefore the parties agree that in addition to and without limiting any
other remedy or right they may have, the non-breaching party will have the right
to an injunction, temporary restraining order or other equitable relief in any
court of competent jurisdiction enjoining any such breach and enforcing
specifically the terms and provisions hereof.
<PAGE>
16
SECTION 5.6. Governing Law; Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York. No suit, action or proceeding with respect to this
Agreement may be brought in any court or before any similar authority other than
in a court of competent jurisdiction in the State of New York, and the parties
hereto submit to the exclusive jurisdiction of these courts for the purpose of
such suit, proceeding or judgment. The parties hereto irrevocably waive any
right which they may have to bring such an action in any other court, domestic
or foreign, or before any similar domestic or foreign authority. Each of the
parties hereto irrevocably and unconditionally waives trial by jury in any legal
action or proceeding in relation to this Agreement and for any counterclaim
therein.
SECTION 5.7. Successors and Assigns; Assignment. Neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any of the parties hereto, in whole or in part (whether by operation
of law or otherwise), without the prior written consent of the other parties,
and any attempt to make any such assignment without such consent shall be null
and void, except that an Investor Stockholder may assign its rights and
obligations hereunder to any Affiliate or Affiliates. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 5.8. Entire Agreement; Third Parties. This Agreement, the
Stock Purchase Agreement, the schedules and exhibits hereto and thereto, and the
other documents delivered in connection herewith, constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof. This
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto, and nothing in this Agreement, express or implied, is intended to confer
upon any other Person any right, benefit or remedy of any nature under or by
reason of this Agreement.
SECTION 5.9. Severability. If any term or provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 5.10. Amendment and Waiver. This Agreement may be amended
only by the written consent of all the parties hereto. Any waiver, consent or
approval of any kind by any party hereto of any breach, default or noncompliance
under this Agreement or any waiver by such party of any provision or condition
of this Agreement must be in writing and is effective only to the extent
specifically set forth in such writing.
SECTION 5.11. Delays or Omissions. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or
<PAGE>
17
noncompliance by another party under this Agreement, shall impair any such
right, power or remedy, nor shall it be construed to be a waiver of any such
breach, default or noncompliance, or any acquiescence therein, or of or in any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach, default or noncompliance under this
Agreement or any waiver on such party's part of any provisions or conditions of
this Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to any party, shall be cumulative and
not alternative.
SECTION 5.12. Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified; (b) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day; (c) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (d) one business
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications are
to be sent to the addresses set forth below:
If to the Company or the Voting Stockholder:
Philipp Brothers Chemicals, Inc.
One Parker Plaza
Fort Lee, NJ 07024
Telephone: (201) 944-6020
Telecopy: (201) 944-5937
Attn: Jack C. Bendheim
President
with copies to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036-8299
Tel: (212) 969-3325
Fax: (212) 969-2900
Attn: Ronald R. Papa, Esq.
If to the Investor Stockholders:
c/o Palladium Equity Partners, L.L.C.
1270 Avenue of the Americas
Suite 2200
New York, NY 10020
Tel: (212) 218-5150
Fax: (212) 218-5155
Attn: Adam R. Karr
<PAGE>
18
with copies to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Tel: (212) 455-2000
Fax: (212) 455-2502
Attn: Gary Sellers, Esq.
SECTION 5.13. Interpretation. When a reference is made in this
Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be
to an Article or Section of or Exhibit or Schedule to this Agreement unless
otherwise indicated. The table of contents, titles and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
SECTION 5.14. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered.
[Signature page to follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders Agreement as of the date set forth in the first paragraph hereof.
PHILIPP BROTHERS CHEMICALS, INC.
By: /s/
------------------------------------
Name: Jack C. Bendheim
Title: President
PALLADIUM EQUITY PARTNERS II, L.P.
By: Palladium Equity Partners II, L.L.C.
By: /s/
--------------------------------
Name: Peter A. Joseph
Title: Member
PALLADIUM EQUITY PARTNERS II-A, L.P.
By: Palladium Equity Partners II, L.L.C.
By: /s/
--------------------------------
Name: Peter A. Joseph
Title: Member
PALLADIUM EQUITY INVESTORS II, L.P.
By: Palladium Equity Partners II, L.L.C.
By: /s/
--------------------------------
Name: Peter A. Joseph
Title: Member
STOCKHOLDERS
/s/
----------------------------------------
Jack C. Bendheim
<PAGE>
Schedule 2.3
Permitted Transactions
The provisions of Section 2.3(ii) shall not apply to the sale of the Agtrol
Division and the sale of ODDA.
<PAGE>
Schedule 3.2
Voting Stock
Number of Shares of
Voting Stockholder Class A Common Stock
------------------ --------------------
Jack C. Bendheim 12,600.00
