UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No.6)*
Niagara Corporation
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(Name of Issuer)
Common Stock, par value $.001 per share
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(Title of Class of Securities)
653349100
(CUSIP Number)
Michael J. Scharf
c/o Niagara Corporation
667 Madison Avenue
New York, New York 10021
(212) 317-1000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
April 18, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box |_|.
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
SCHEDULE 13D
CUSIP No. 653349100
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Michael J. Scharf
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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NUMBER OF 7 SOLE VOTING POWER
SHARES 1,209,200 (including shares
BENEFICIALLY issuable upon the exercise of Warrants)
OWNED BY
EACH ----------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON 0
WITH
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9 SOLE DISPOSITIVE POWER
1,209,200 (including shares
issuable upon the exercise of
Warrants)
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10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,209,200 (including shares issuable upon the exercise
of Warrants)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* |X| (excludes 300,000 shares underlying Options which
are not exercisable**)
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.1%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
** The Options will become exercisable with respect to (i) 40,000 of the
underlying Shares on each of the next five anniversaries of September 13,
1996 and (ii) 20,000 of the underlying Shares on each of the next five
anniversaries of April 27, 1997 (provided Mr. Scharf continues to be
employed by the Issuer or one of its subsidiaries on such date) except in
the event of a Change in Control of the Issuer.
Michael J. Scharf hereby amends his Statement on Schedule 13D,
dated August 30, 1993, as amended on September 30, 1993, October 29, 1993,
February 4, 1994, June 7, 1995 and October 10, 1996 (as amended, the
"Schedule 13D"), relating to the Common Stock, par value $.001 per share,
of Niagara Corporation, a Delaware corporation (the "Issuer"). Capitalized
terms used and not defined herein shall have the meanings previously
ascribed to them in the Schedule 13D.
Item 2. Identity and Background.
Item 2(c) of the Schedule 13D is hereby amended to read in its
entirety as follows:
(c) Mr. Scharf is Chairman of the Board, President and Chief
Executive Officer of the Issuer and is Chairman of the Board and holds
various other positions with the Issuer's subsidiaries. Mr. Scharf is also
Vice President, Secretary, Treasurer and a director of Financial Services
Acquisition Corporation ("FSAC"), and a director of Euro Brokers Investment
Corporation ("Euro Brokers"), a wholly owned subsidiary of FSAC. FSAC and
Euro Brokers are each located at Two World Trade Center, 48th Floor, New
York, New York 10048.
Item 3. Source and Amount of Funds or Other Consideration.
Item 3 of the Schedule 13D is hereby amended by adding the
following after the sixth paragraph thereof:
On May 12, 1997, Mr. Scharf purchased, through open market
purchases, an additional 4,600 Shares at $5.655 per Share and an additional
5,850 Shares at approximately $5.627 per Share, for an aggregate
consideration of $58,928.85.
The last paragraph of Item 3 of the Schedule 13D is hereby amended
to read in its entirety as follows:
As described in Item 5(a) hereof, in connection with his serving as
President and Chief Executive Officer of the Issuer, Mr. Scharf was granted
options to purchase an aggregate of 300,000 Shares at $5.50 per Share.
Item 5. Interest in Securities of the Issuer.
Item 5(a) of the Schedule 13D is hereby amended to read in its
entirety as follows:
(a) As described in Item 3 hereof, Mr. Scharf directly owns
(including through IRA accounts) (i) 496,700 Shares and (ii) 437,500
Warrants (representing the right to receive, upon exercise thereof at $5.50
per Warrant, an aggregate of 437,500 Shares). Pursuant to Rule 13d-3 under
the Exchange Act, Mr. Scharf may be deemed to be the beneficial owner of an
additional 200,000 Shares and 75,000 Warrants owned in the aggregate by the
Scharf Trusts for which Mr. Scharf is the trustee. Accordingly, Mr. Scharf
may be deemed to be the beneficial owner of an aggregate of 1,209,200
Shares, representing approximately 27.1% of the sum of (i) 3,954,465
outstanding Shares (based upon information contained in the Issuer's Proxy
Statement, dated May 5, 1997, filed by the Issuer with the Securities and
Exchange Commission) and (ii) 512,500 Shares underlying the 512,500
Warrants owned by Mr. Scharf and the Scharf Trusts.
In connection with his serving as President and Chief Executive
Officer of the Issuer, the Compensation Committee of the Board of Directors
of the Issuer (the "Compensation Committee") granted to Mr. Scharf (i) on
September 13, 1996, an incentive stock option to purchase an aggregate of
100,000 Shares and a non-qualified stock option to purchase an aggregate of
100,000 Shares and (ii) on April 27, 1997, a non-qualified stock option to
purchase an aggregate of 100,000 Shares. The exercise price of each of the
foregoing options ("Options") is $5.50 per Share. As described in Item 6
hereof, no portion of the Options will become exercisable until September
13, 1997 except in the event of a "Change in Control" of the Issuer (as
defined in the Issuer's 1995 Stock Option Plan). Accordingly, the Shares
underlying the Options have not been included for purposes of this
Statement in calculating the number of Shares beneficially owned by Mr.
Scharf.
Other than as described in this Amendment, no other transactions in
securities of the Issuer were effected during the past 60 days by Mr.
Scharf.
Item 6. Contracts, Arrangements, Understandings, or Relationships with
Respect to Securities of the Issuer
The first sentence of the sixth paragraph of Item 6 of the Schedule
13D is hereby amended to read in its entirety as follows:
As described in Item 5(a) above, the Compensation Committee granted
Options to Mr. Scharf on September 13, 1996 and April 27, 1997.
The seventh paragraph of Item 6 of the Schedule 13D is hereby
amended to read in its entirety as follows:
The foregoing is merely a summary of certain provisions of the
Option Agreements, and is qualified in its entirety by reference to the
full text thereof, copies of which are attached hereto as Exhibits 6, 7 and
8, respectively, and incorporated herein by reference.
Item 6 of the Schedule 13D is hereby amended by adding thereto,
before the last paragraph thereof, the following:
On April 18, 1997, in connection with the financing of the
acquisition of LaSalle Steel Company by Niagara Cold Drawn Corp., a
Delaware Corporation and wholly owned subsidiary of the Issuer ("Niagara"),
Mr. Scharf entered into a Stockholders Agreement (the "Stockholders
Agreement") with the Issuer, Niagara, The Prudential Insurance Company of
America, the Equitable Life Assurance Society of the United States and the
United States Fidelity and Guaranty Company. The Stockholders Agreement
provides, among other things, for drag-along rights in connection with
certain transactions effected by Mr. Scharf, and tag-along rights in
connection with certain transactions effected by Mr. Scharf or the Scharf
Trusts. The Stockholders Agreement also carries restrictions on certain
changes in the capital structure of the Issuer.
The foregoing is merely a summary of certain provisions of the
Stockholders Agreement and is qualified in its entirety by the full text
thereof, a copy of which is attached hereto as Exhibit 9 and incorporated
herein by reference. A copy of the Stockholders Agreement was also filed as
Exhibit 4.3 to the Issuer's Report on Form 8-K, dated May 2, 1997.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 - Stock Escrow Agreement, dated August 13, 1993, by and
among the Issuer, the Initial Stockholders and the
Escrow Agent (incorporated by reference to Exhibit 1 to
the Statement on Schedule 13D of Michael J. Scharf,
dated August 30, 1993).
Exhibit 2 - Letter Agreement, dated May 26, 1993, by and between
Michael J. Scharf and GKN Securities Corp (incorporated
by reference to Exhibit 2 to the Statement on Schedule
13D of Michael J. Scharf, dated August 30, 1993).
Exhibit 3 - Letter Agreement, dated May 26, 1993, by and between
the Michael J. Scharf 1987 Guarantor Income Trust and
GKN Securities Corp (incorporated by reference to
Exhibit 3 to the Statement on Schedule 13D of Michael
J. Scharf, dated August 30, 1993).
Exhibit 4 - Letter Agreement, dated May 26, 1993, by and between
the Scharf Family 1989 Trust and GKN Securities Corp
(incorporated by reference to Exhibit 4 to the
Statement on Schedule 13D of Michael J. Scharf, dated
August 30, 1993).
Exhibit 5 - Letter, dated June 1, 1995, from Michael Scharf to all
of the stockholders of Niagara Cold Drawn Corp.
(incorporated by reference to Exhibit 5 to Amendment
No. 4 to the Statement on Schedule 13D of Michael J.
Scharf, dated June 7, 1995).
Exhibit 6 - Stock Option Agreement, dated as of September 13, 1996,
by and between the Issuer and Michael Scharf
(incorporated by reference to Exhibit 6 to Amendment
No. 5 to the Statement on Schedule 13D of Michael J.
Scharf, dated October 10, 1996).
Exhibit 7 - Stock Option Agreement, dated as of September 13, 1996,
by and between the Issuer and Michael Scharf
(incorporated by reference to Exhibit 7 to Amendment
No. 5 to the Statement on Schedule 13D of Michael J.
Scharf, dated October 10, 1996).
Exhibit 8 - Stock Option Agreement, dated as of April 27, 1997, by
and between the Issuer and Michael Scharf.
Exhibit 9 - Stockholders Agreement, dated as of April 18, 1997,
among the Issuer, Niagara Cold Drawn Corp., Michael J.
Scharf, The Prudential Insurance Company of America,
the Equitable Life Assurance Society of the United
States and the United States Fidelity and Guaranty
Company.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this Statement is
true, complete and correct.
Dated: June 4, 1997
/s/ Michael J. Scharf
Michael J. Scharf
Exhibit Index
Exhibit 1 - Stock Escrow Agreement, dated August 13, 1993, by and
among the Issuer, the Initial Stockholders and the
Escrow Agent (incorporated by reference to Exhibit 1 to
the Statement on Schedule 13D of Michael J. Scharf,
dated August 30, 1993).
Exhibit 2 - Letter Agreement, dated May 26, 1993, by and between
Michael J. Scharf and GKN Securities Corp (incorporated
by reference to Exhibit 2 to the Statement on Schedule
13D of Michael J. Scharf, dated August 30, 1993).
Exhibit 3 - Letter Agreement, dated May 26, 1993, by and between
the Michael J. Scharf 1987 Guarantor Income Trust and
GKN Securities Corp (incorporated by reference to
Exhibit 3 to the Statement on Schedule 13D of Michael
J. Scharf, dated August 30, 1993).
Exhibit 4 - Letter Agreement, dated May 26, 1993, by and between
the Scharf Family 1989 Trust and GKN Securities Corp
(incorporated by reference to Exhibit 4 to the
Statement on Schedule 13D of Michael J. Scharf, dated
August 30, 1993).
Exhibit 5 - Letter, dated June 1, 1995, from Michael Scharf to all
of the stockholders of Niagara Cold Drawn Corp.
(incorporated by reference to Exhibit 5 to Amendment
No. 4 to the Statement on Schedule 13D of Michael J.
Scharf, dated June 7, 1995).
Exhibit 6 - Stock Option Agreement, dated as of September 13, 1996,
by and between the Issuer and Michael Scharf
(incorporated by reference to Exhibit 6 to Amendment
No. 5 to the Statement on Schedule 13D of Michael J.
Scharf, dated October 10, 1996).
Exhibit 7 - Stock Option Agreement, dated as of September 13, 1996,
by and between the Issuer and Michael Scharf
(incorporated by reference to Exhibit 7 to Amendment
No. 5 to the Statement on Schedule 13D of Michael J.
Scharf, dated October 10, 1996).
Exhibit 8 - Stock Option Agreement, dated as of April 27, 1997, by
and between the Issuer and Michael Scharf.
Exhibit 9 - Stockholders Agreement, dated as of April 18, 1997,
among the Issuer, Niagara Cold Drawn Corp., Michael J.
Scharf, The Prudential Insurance Company of America,
the Equitable Life Assurance Society of the United
States and the United States Fidelity and Guaranty
Company.
STOCK OPTION AGREEMENT
AGREEMENT made as of April 27, 1997, by and
between Niagara Corporation (formerly International
Metals Acquisition Corporation), a Delaware corporation
("Niagara"), and Michael Scharf (the "Executive").
WHEREAS, on August 15, 1995, Niagara's Board of
Directors (the "Board") approved the International Metals
Acquisition Corporation 1995 Stock Option Plan (the
"Plan");
WHEREAS, on May 16, 1996, Niagara's
stockholders approved the Plan; and
WHEREAS, the Compensation Committee of the
Board desires to grant to the Executive a Non-Qualified
Stock Option under the Plan to acquire an aggregate of
100,000 shares of Niagara common stock, par value $.001
per share (the "Stock"), on the terms set forth herein.
NOW, THEREFORE, the parties hereby agree as
follows:
1. Definitions. Capitalized terms not
otherwise defined herein shall have the meanings set
forth in the Plan.
2. Grant of Option. The Executive is hereby
granted a Non-Qualified Stock Option (the "Option") to
purchase an aggregate of 100,000 shares of Stock,
pursuant to the terms of this Agreement and the
provisions of the Plan.
3. Option Price. The exercise price of the
Option shall be $5.50 per share of Stock issuable
pursuant to the exercise thereof.
4. Conditions to Exercisability. (a) The
Option shall become exercisable as to twenty percent
(20%) of the shares of Stock covered by the Option on
each of the next five anniversaries of this Agreement,
provided that the Executive continues to be employed by
Niagara or one of its subsidiaries (collectively, the
"Company") on such date.
(b) Notwithstanding the foregoing, the
Option shall become exercisable in full upon the
occurrence of a Change in Control of Niagara (as defined
in the Plan).
5. Period of Option. This Option shall expire
on the earliest to occur of:
(a) the tenth anniversary of the date of
this Agreement; and
(b) 90 days after the termination of the
Executive's employment with the Company for any reason.
6. Exercise of Option. (a) The Option shall
be exercised in the following manner: the Executive shall
deliver to Niagara written notice specifying the number
of shares of Stock which he elects to purchase. The
Executive must include with such notice full payment of
the exercise price for the Stock being purchased pursuant
to such notice. Payment of the exercise price must be
made in cash or in shares of Stock having a Fair Market
Value equal to such Option price or in a combination of
cash and Stock. In lieu of full payment of the exercise
price in cash, upon request of the Executive, Niagara
may, in its discretion, allow the Executive to exercise
the Option or a portion thereof through a cashless
exercise procedure.
(b) Upon the disposition of shares of
Stock acquired pursuant to the exercise of the Option,
Niagara shall have the right to require the payment of
the amount of any taxes which are required by law to be
withheld with respect to such disposition.
(c) The Executive will not be deemed to
be a holder of any shares of Stock pursuant to exercise
of the Option until the date of the issuance of a stock
certificate to him for such shares and until such shares
are paid for in full.
7. Entire Agreement. This Agreement and the
Plan contain all the understandings between the parties
hereto pertaining to the matters referred to herein, and
supersedes all undertakings and agreements, whether oral
or in writing, previously entered into by them with
respect thereto. The Executive represents that, in
executing this Agreement, he does not rely and has not
relied upon any representation or statement not set forth
therein made by the Company with regard to the subject
matter, bases or effect of this Agreement or otherwise.
8. Amendment or Modification, Waiver. No
provision of this Agreement may be amended or waived
unless such amendment or waiver is agreed to in writing,
signed by the Executive and by a duly authorized director
or officer of Niagara. No waiver by any party hereto of
any breach by another party hereto of any condition or
provision of this Agreement to be performed by such other
party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same time, any prior time
or any subsequent time.
9. Notices. Any notice to be given hereunder
shall be in writing and shall be deemed given when
delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return
receipt requested, addressed to the party concerned at
the address indicated below or to such other address as
such party may subsequently give notice of hereunder in
writing:
To the Executive at:
c/o 667 Madison Avenue
New York, New York 10021
To Niagara at:
Niagara Corporation
667 Madison Avenue
New York, New York 10021
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: Milton G. Strom
Telecopy: (212) 735-2000
Any notice delivered personally or by courier
under this Section 9 shall be deemed given on the date
delivered and any notice sent by telecopy or registered
or certified mail, postage prepaid, return receipt
requested, shall be deemed given on the date telecopied
or mailed.
10. Severability. If any provision of this
Agreement or the application of any such provision to any
party or circumstances shall be determined by any court
of competent jurisdiction to be invalid and unenforceable
to any extent, the remainder of this Agreement or the
application of such provision to such person or
circumstances other than those to which it is so
determined to be invalid and unenforceable, shall not be
affected thereby, and each provision hereof shall be
validated and shall be enforced to the fullest extent
permitted by law.
11. Survival. The respective rights and
obligations of the parties hereunder shall survive any
termination of this Agreement to the extent necessary to
the intended preservation of such rights and obligations.
12. Governing Law. This agreement will be
governed by and construed in accordance with the laws of
the State of Delaware, without regard to its conflicts of
laws principles.
13. Headings. All descriptive headings of
sections and paragraphs in this Agreement are intended
solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading
of any section or paragraph.
14. Construction. This Agreement is made
under and subject to the provisions of the Plan, and all
of the provisions of the Plan are hereby incorporated
herein as provisions of this Agreement. If there is a
conflict between the provisions of this Agreement and the
provisions of the Plan, the provisions of the Plan will
govern. By signing this Agreement, the Executive
confirms that he has received a copy of the Plan and has
had an opportunity to review the contents thereof.
15. Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed
an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first above
written.
NIAGARA CORPORATION
By:/s/ Gilbert D. Scharf
---------------------
Gilbert D. Scharf
Vice President
/s/ Michael Scharf
------------------------
Michael Scharf
NIAGARA CORPORATION
STOCKHOLDERS AGREEMENT
DATED AS OF APRIL 18, 1997
TABLE OF CONTENTS
Page
1. TAG-ALONG RIGHTS IN RESPECT OF SALE OF STOCK BY INITIAL
STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Right to Sell Proportionate Number of Shares. . . . 1
1.2 Notice of Proposed Sale. . . . . . . . . . . . . . 2
1.3 Election by Holders. . . . . . . . . . . . . . . . 2
1.4 Pro Rata Cutback of Number of Shares Sold. . . . . 2
1.5 Closing of Sale. . . . . . . . . . . . . . . . . . 3
1.6 Expense of Sale. . . . . . . . . . . . . . . . . . 3
1.7 Election of Rights. . . . . . . . . . . . . . . . . 3
1.8 Remedy. . . . . . . . . . . . . . . . . . . . . . . 3
2. DRAG-ALONG RIGHTS. . . . . . . . . . . . . . . . . . . . 3
2.1 Right to Require Sale. . . . . . . . . . . . . . . 3
2.2 Notice of Drag-Along Sale. . . . . . . . . . . . . 4
2.3 Consummation of Drag-Along Sale. . . . . . . . . . 4
2.4 Expense of Drag-Along Sale. . . . . . . . . . . . . 5
2.5 Coordination of Rights. . . . . . . . . . . . . . . 5
3. REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . 5
3.1 Incidental Registration. . . . . . . . . . . . . . 5
3.2 Shelf Registration . . . . . . . . . . . . . . . . 6
3.3 Registration Procedures. . . . . . . . . . . . . . 8
3.4 Reasonable Investigation. . . . . . . . . . . . . . 11
3.5 Registration Expenses. . . . . . . . . . . . . . . 12
3.6 Indemnification; Contribution. . . . . . . . . . . 12
3.7 Holdback Agreements; Registration Rights to
Others. . . . . . . . . . . . . . . . . . . . . . . 14
3.8 Availability of Information. . . . . . . . . . . . 15
4. CERTAIN RESTRICTIONS ON TRANSFER AND OTHER AGREEMENTS. . 15
4.1 Restrictions on Transfer to Transferees. . . . . . 15
4.2 Cooperation by the Parent. . . . . . . . . . . . . 15
4.3 Legending of Certificates. . . . . . . . . . . . . 15
4.4 Securities Act Restrictions; Legend. . . . . . . . 16
4.5 Termination of Various Provisions of this
Agreement. . . . . . . . . . . . . . . . . . . . . 16
4.6 Parent Activities and Changes in Capital
Structure. . . . . . . . . . . . . . . . . . . . . 17
4.7 Compensation, etc. . . . . . . . . . . . . . . . . 17
5. DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . 18
6. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 28
6.1 Warranties and Representations in Note and Stock
Purchase Agreement. . . . . . . . . . . . . . . . . 28
6.2 Notices. . . . . . . . . . . . . . . . . . . . . . 28
6.3 Amendments and Waivers. . . . . . . . . . . . . . . 28
6.4 Governing Law . . . . . . . . . . . . . . . . . . . 29
6.5 Jurisdiction; Jury Trial . . . . . . . . . . . . . 29
6.6 Counterparts . . . . . . . . . . . . . . . . . . . 29
6.7 Descriptive Headings . . . . . . . . . . . . . . . 29
6.8 Severability . . . . . . . . . . . . . . . . . . . 29
Annex 1 -- Names and Addresses of Purchasers
Annex 2 -- Holdings of Initial Stockholders
Exhibit A -- Form of Transferee Undertaking
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of April 18, 1997 (as the
same may be amended, restated or otherwise modified from time to
time, this "AGREEMENT"), among NIAGARA CORPORATION, a Delaware
corporation (together with its successors and assigns, the
"PARENT"), NIAGARA COLD DRAWN CORP., a Delaware corporation (the
"COMPANY"), a wholly-owned subsidiary of the Parent (the Parent
and the Company together are referred to herein as the
"COMPANIES"), each of the PURCHASERS named on Annex 1 hereto (the
"PURCHASERS") and MICHAEL J. SCHARF (together with, following the
date the appointment of any of the following is effective, his
executors or administrators and any other similar representative
of his person or Property and successors and assigns, "MR.
SCHARF").
PRELIMINARY STATEMENTS:
A. The Board of Directors has authorized the issuance of
285,715 shares of Common Stock (the "NEW COMMON STOCK").
B. The Parent, the Company, LaSalle Steel Company, a
Delaware corporation, and each of the Purchasers have entered
into separate Note and Stock Purchase Agreements, dated as of
even date herewith (collectively, as the same may be amended,
restated or otherwise modified from time to time, the "NOTE AND
STOCK PURCHASE AGREEMENT"), pursuant to which the Company has
agreed to issue and sell, and the Purchasers have agreed to
purchase, $20,000,000 in aggregate principal amount of the
Company's 12.5% Senior Subordinated Notes due April 18, 2005 (the
"NOTES"), and the Parent has agreed to issue and sell to the
Purchasers, and the Purchasers have agreed to purchase, the New
Common Stock, for an aggregate consideration for both the Notes
and the New Common Stock of $20,000,000 in cash.
C. On the Closing Date, the Initial Stockholders are the
holders of respective numbers of shares of the issued and
outstanding Parent Common Stock, and the other securities
directly or indirectly exercisable for or convertible into shares
of Parent Common Stock, indicated in Annex 2 to this Agreement.
D. To induce the Purchasers to enter into the Note and
Stock Purchase Agreement and consummate the transactions
contemplated therein, the Companies and Mr. Scharf have agreed to
enter into this Agreement with the Purchasers and create and
define certain rights as among and between themselves as further
specified herein.
AGREEMENT:
1. TAG-ALONG RIGHTS IN RESPECT OF SALE OF STOCK BY INITIAL
STOCKHOLDERS.
1.1 RIGHT TO SELL PROPORTIONATE NUMBER OF SHARES. Mr.
Scharf hereby agrees that he will not, nor will he permit any
other Initial Stockholder to, sell, at any time after the Tag-
Along Trigger Event, all or any portion of the Issuable Shares
owned by it unless, as part of such transaction, each holder of
Purchaser Shares shall have the right (but not the obligation) to
sell a proportionate amount of the Purchaser Shares then held by
such holder at the same Imputed Price, on the same terms and to
the same purchaser or purchasers (in the case of a private sale)
or to the public (in the case of a public sale).
For purposes of this Section 1, the "PROPORTIONATE AMOUNT"
that a holder of Purchaser Shares shall be entitled to sell with
respect to any proposed transaction shall be equal to the product
(calculated as of the date of such proposed transaction) of:
(a) the total number of Purchaser Shares then owned by
such holder; times
(b) the quotient of:
(i) the aggregate number of Issuable Shares
proposed to be sold in such transaction by the Initial
Stockholders; divided by
(ii) the aggregate number of Issuable Shares owned
by the Other Stockholders participating in such sale.
1.2 NOTICE OF PROPOSED SALE. If the Tag-Along Trigger
Event shall have occurred (or will occur or will be deemed to
have occurred in connection therewith), Mr. Scharf shall provide
to each of the holders of the Purchaser Shares written notice of
such intention not less than 45 days prior to the closing of such
proposed sale. Such written notice (the "NOTICE OF SALE") shall:
(a) specify in detail the terms of such proposed sale
(including the type of Security proposed to be sold, the
Imputed Price and, in the event that any Rights are being
sold, the Valuation Agent's calculation of the Imputed Price
from the actual purchase price for such Rights),
(b) state that the Tag-Along Trigger Event has
occurred (or will occur or will be deemed to have occurred
as a result of such sale),
(c) state the date on which such proposed sale is to
be consummated, and
(d) designate Mr. Scharf as the party to whom notice
of the determination to participate in such proposed sale
should be delivered.
1.3 ELECTION BY HOLDERS. Upon receipt of a Notice of Sale,
each holder of Purchaser Shares shall have 20 days to deliver
written notice of its election to participate in such sale and
the number of Issuable Shares which it elects to sell, which
number shall not exceed its proportionate amount.
1.4 PRO RATA CUTBACK OF NUMBER OF SHARES SOLD. In the
event that the Initial Stockholders intending to sell the
Issuable Shares (or an underwriter acting on their behalf) shall
be unable to sell the aggregate number of shares to be sold by
the Other Stockholders participating in such sale and which the
holders of the Purchaser Shares have elected to sell pursuant to
Section 1.1 hereof either because the aggregate amount of such
shares exceeds the amount that the purchaser thereof is willing
to purchase and/or adversely affects the selling price therefor
specified in the Notice of Sale, then the number of Issuable
Shares to be sold by the Other Stockholders and such holders of
Purchaser Shares electing to sell such Issuable Shares shall be
reduced ratably (as between such groups and, with respect to the
Purchasers, as among the members of such group) to the extent
necessary to reduce the total number of Issuable Shares to be
included in such offering to the maximum number which the selling
Other Stockholders (or an underwriter acting on their behalf) can
sell to such purchaser at such price. Whether or not any such
adjustment in the number of Issuable Shares to be sold is
required to be made, Mr. Scharf shall give each such holder which
has elected to sell Issuable Shares written notice of the number
of shares it is permitted to sell pursuant to this Section 1
(after giving effect to the provisions of this Section 1.4) not
less than 15 days prior to the date of such sale.
1.5 CLOSING OF SALE. Each holder of Purchaser Shares
electing to participate in a sale described in any Notice of Sale
shall deliver to the purchaser specified in such Notice of Sale,
against payment of the total purchase price for the Issuable
Shares to be purchased (at the price per share specified in such
Notice of Sale), on the closing date specified in such Notice of
Sale, a certificate or certificates representing the number of
Issuable Shares which it has elected to sell (net of any
reduction pursuant to Section 1.4), together with appropriate
instruments of transfer duly endorsed in blank.
1.6 EXPENSE OF SALE. All expenses and costs of any sale of
Issuable Shares pursuant to this Section 1 (other than the fees
of counsel to the holders of Purchaser Shares related to such
sale) shall be for the account of and paid by Mr. Scharf;
provided, however, that if such sale is being effected pursuant
to a registration statement under the Securities Act or pursuant
to Rule 144 under the Securities Act, then Mr. Scharf shall not
be required to pay any underwriting fees, discounts or
commissions attributable to the sale of Purchaser Shares, the
fees and expenses of more than one counsel representing the
holders of Purchaser Shares or any other selling expenses,
discounts or commissions incurred in connection with the sale of
Purchaser Shares; and provided, further, that nothing in this
Section 1.6 or Section 2.4 shall prevent Mr. Scharf from sharing
any such cost or expense with any Other Stockholder in any manner
agreed to among Mr. Scharf and such Other Stockholders.
1.7 ELECTION OF RIGHTS. To the extent that any holder of
Purchaser Shares has rights under this Section 1 and under
Section 3, such holder shall elect which rights it desires to
exercise hereunder.
1.8 REMEDY. In the event that Mr. Scharf shall permit any
Initial Stockholder to sell, at any time after a Tag-Along
Trigger Event, all or any portion of the Issuable Shares it holds
without the holders of Purchaser Shares being afforded its rights
under this Section 1, then Mr. Scharf agrees that, within 30 days
after written demand by any holder of Purchaser Shares, he will
purchase any and all Purchaser Shares which such holder had the
right to sell in connection with such sale by such Initial
Stockholder, in each case, for an aggregate consideration equal
to the amount such holder of Purchaser Shares would have realized
had such holder been afforded the rights set forth in this
Section 1.
2. DRAG-ALONG RIGHTS.
2.1 RIGHT TO REQUIRE SALE. If Mr. Scharf shall engage in a
Parent Sale on Acceptable Drag-Along Sale Terms (a "DRAG-ALONG
SALE"), each holder of Purchaser Shares shall have the
obligation, upon the written request of Mr. Scharf, given
pursuant to Section 2.2 hereof, to participate in such Drag-Along
Sale by selling all, but not less than all, of the Purchaser
Shares held by it.
2.2 NOTICE OF DRAG-ALONG SALE. At least 30 days before the
proposed date of any Drag-Along Sale, Mr. Scharf shall provide
each holder of Purchaser Shares with written notice thereof.
Such notice shall set forth:
(a) the name and address of the proposed transferee in
the Drag-Along Sale;
(b) the identity of each seller participating in such
transfer and the number of shares of Parent Common Stock,
Rights and other Issuable Shares beneficially owned by such
seller;
(c) the proposed amount and kind of consideration to
be paid for shares of Parent Common Stock, Rights and other
Issuable Shares to be sold in such Drag-Along Sale and the
terms and conditions of payment offered by the proposed
transferee;
(d) the number of outstanding shares of Parent Common
Stock at such time; and
(e) a statement that Mr. Scharf intends to exercise
his rights under this Section 2.
2.3 CONSUMMATION OF DRAG-ALONG SALE. Upon receipt of any
such notice required by Section 2.2 hereof, each holder of
Purchaser Shares shall become obligated to sell, transfer or
dispose of its Purchaser Shares upon the terms and conditions of
such Drag-Along Sale so long as:
(a) such sale remains on Acceptable Drag-Along Sale
Terms;
(b) each Other Stockholder shall simultaneously sell,
transfer or dispose of all of its Issuable Shares at an
identical Imputed Price and upon terms and conditions which
are otherwise identical; and
(c) such sales are consummated within 90 days (or, in
the case of a transaction involving the issuance to the
holders of Purchaser Shares and Other Stockholders of Freely
Tradeable Securities, 180 days) of the date of such notice.
So long as the Drag-Along Sale is conducted in compliance with
this Section 2, each holder of Purchaser Shares waives any rights
it may have, under the Delaware General Corporation Law or
otherwise, to appraisal of its Issuable Shares as a dissenting
stockholder and agrees to vote in favor of and otherwise consent
to such Drag-Along Sale.
2.4 EXPENSE OF DRAG-ALONG SALE. All expenses and costs of
the holders of Purchaser Shares in connection with any Drag-Along
Sale (including, without limitation, the reasonable fees and
disbursements of counsel to the holders of Purchaser Shares
related to such sale), shall be for the account of and paid by
Mr. Scharf or the Parent.
2.5 COORDINATION OF RIGHTS. No holder of Purchaser Shares
shall have any obligation under this Section 2 in respect of
Purchaser Shares to be sold pursuant to a Registration under
Section 3 if such holder had given written notice to the Company
of its intention to effect such sale pursuant to such
Registration not less than five (5) days prior to the date of the
receipt by such holder of the notice referred to in Section 2.2.
3. REGISTRATION RIGHTS.
3.1 INCIDENTAL REGISTRATION.
(a) FILING OF REGISTRATION STATEMENT. If the Parent
at any time proposes to register any of its Parent Common
Stock (an "INCIDENTAL REGISTRATION") under the Securities
Act (other than pursuant to (i) a registration statement on
Form S-4 or Form S-8 or any successor forms thereto, in
connection with an offer made solely to existing Security
holders or employees of the Parent, (ii) a registration of
convertible Securities or other Rights, in respect of which
the only shares of Parent Common Stock being registered are
those issuable upon conversion or exercise of such Rights
and (iii) a registration consisting solely of Parent Common
Stock issued or issuable upon exercise of the Bridge
Warrants), for sale in a Public Offering, it will each such
time give prompt written notice to all holders of
Registrable Securities of its intention to do so, which
notice shall be given to all such holders at least thirty
(30) Business Days prior to the date that a registration
statement relating to such Incidental Registration is
proposed to be filed with the SEC. Upon the written request
of any such holder to include its shares under such
registration statement (which request shall be made within
fifteen (15) Business Days after the receipt of any such
notice and shall specify the Registrable Securities intended
to be disposed of by such holder), the Parent will use its
best efforts to effect the registration of all Registrable
Securities that the Parent has been so requested to register
by such holder; 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, the Parent shall determine for any
reason not to register such Securities, the Parent may, at
its election, give written notice of such determination to
each such holder and, thereupon, shall be relieved of its
obligation to register any Registrable Securities of such
Persons in connection with such Incidental Registration.
(b) SELECTION OF UNDERWRITERS. Notice of the Parent's
intention to register such Securities shall designate the
proposed underwriters of such offering (which shall be one
or more underwriting firms of recognized standing) and shall
contain the Parent's agreement to use its best efforts, if
requested to do so, to arrange for such underwriters to
include in such underwriting the Registrable Securities that
the Parent has been so requested to register pursuant to
this Section 3.1, it being understood that the holders of
Registrable Securities shall have no right to select
different underwriters for the disposition of their
Registrable Securities.
(c) PRIORITY ON INCIDENTAL REGISTRATIONS. If the
managing underwriter shall advise the Parent in writing
(with a copy to each holder of Registrable Securities
requesting sale) that, in such underwriter's opinion, the
number of shares of Securities requested to be included in
such Incidental Registration exceeds the number that can be
sold in such offering within a price range acceptable to the
Parent (such writing to state the basis of such opinion and
the approximate number of shares of Securities that may be
included in such offering without such effect), the Parent
will include in such Incidental Registration, to the extent
of the number of shares of Securities that the Parent is so
advised can be sold in such offering:
(i) in the case of any Incidental Registration
initiated by the Parent for the purpose of selling
Securities for its own account:
(A) first, shares that the Parent proposes
to issue and sell for its own account; and
(B) second, Registrable Securities requested
to be sold by the holders of Purchaser Shares
pursuant to this Section 3.1 and all Securities
proposed to be registered by the Other
Stockholders, pro rata among such holders on the
basis of the number of Registrable Shares
requested to be so registered by such holders; and
(ii) in the case of an Incidental Registration
initiated by any Other Stockholder pursuant to demand
or required registration rights in favor of such Other
Stockholder (whether or not the right to such a
registration exists on the date hereof):
(A) first, Registrable Securities requested
to be sold by the Other Stockholders requesting
such Registration;
(B) second, Registrable Securities requested
to be sold by the holders of Purchaser Shares
pursuant to this Section 3.1 and all Securities
proposed to be registered by the Other
Stockholders (other than those referred to in
Section 3.1(c)(ii)(A), pro rata among such holders
on the basis of the number of Registrable Shares
requested to be so registered by such holders; and
(C) third, shares that the Parent proposes
to issue and sell for its own account.
3.2 SHELF REGISTRATION.
(a) FILING AND EFFECTIVENESS. On or prior to the
Shelf Filing Date, the Parent will file a "shelf"
registration statement (the "SHELF REGISTRATION") on an
appropriate form pursuant to Rule 415 under the Securities
Act or any similar rule that may be adopted by the SEC with
respect to dispositions of all of the Registrable Securities
in such manner or manners specified by the holders thereof.
The Parent agrees to cause the Shelf Registration to be
declared effective as promptly as is practicable after such
filing (and in any event, prior to the Shelf Effective Date)
and agrees to keep the Shelf Registration effective (and to
take any and all other actions necessary in order to permit
public resale of the Registrable Securities covered by the
Shelf Registration) for a period (the "SHELF EFFECTIVE
PERIOD") beginning on the date such Shelf Registration shall
first be declared effective under the Securities Act and
ending upon the earlier to occur of the day following the
first day upon which all Registrable Securities may be
resold by the holders of Registrable Securities pursuant to
Rule 144(k) under the Securities Act (or any successor
provision providing a safe harbor for resales without any
restrictions as to the manner of sale, number of shares sold
or availability of public information by holders of
Purchaser Shares who are not Affiliates) and such date as no
Registrable Securities shall remain, subject to the terms
and conditions set forth in this Agreement. The Parent
further agrees, if necessary, to supplement or make
amendments to such Shelf Registration, if required by the
registration form utilized by the Parent for the Shelf
Registration or by the instructions applicable to such
registration form or by the Securities Act, and the Parent
agrees to furnish to the holders of the Registrable
Securities covered by the Shelf Registration copies of any
such supplement or amendment prior to its being used or
filed with the SEC.
(b) APPROVAL OF SHELF REGISTRATIONS. If the Requisite
Holders shall have approved the filing of the Shelf
Registration as provided in Section 3.3(a), but any holder
of Registrable Securities objects to such filing on the
grounds that the disclosure contained in the Shelf
Registration contains any misstatement of a material fact or
omits to state a fact required to be stated therein or
necessary to make the statements therein not misleading,
then such holder shall have the right, in its sole
discretion, to withdraw from the Shelf Registration. If the
Parent receives notice of such withdrawal from any holder
wishing to withdraw from the Shelf Registration, then the
Parent shall not name such holder in the registration
statement or, in the case of withdrawal in connection with
any amendment or supplement to a registration statement in
which such holder is already named, shall amend such
registration statement to delete references to such holder,
and to withdraw the Registrable Securities of such holder,
from the registration statement. The Shelf Registration
shall not be considered effective with respect to any such
withdrawing holder.
(c) SELECTION OF UNDERWRITERS. If any offering
pursuant to the Shelf Registration is in the form of an
underwritten offering, the underwriters of such offering
shall be one or more underwriting firms of recognized
standing selected by the Requisite Holders and reasonably
acceptable to the Parent. In the event of an underwritten
offering pursuant to the Shelf Registration, no securities
of the Parent (other than the Registrable Securities) shall
be included in any such offering without the prior written
consent of all holders of Registrable Securities
participating in such offering.
(d) POTENTIAL MATERIAL EVENTS. Notwithstanding
anything to the contrary in this Section 3.2, at any time
and from time to time after the first date of effectiveness
of the Shelf Registration, the Parent may notify the holders
of Registrable Securities in writing of a Potential Material
Event. From the time of receipt of such notice to the
earliest to occur of:
(i) the public disclosure by the Parent of the
Potential Material Event;
(ii) receipt of written notice from the Parent
that such Potential Material Event no longer exists;
and
(iii) the date 60 days after the date of the
notice of such Potential Material Event;
the holders of Registrable Securities shall not offer or
sell any Registrable Securities pursuant to the Shelf
Registration; provided, however, that the Parent may not
deliver more than one notice of a Potential Material Event
in respect of any one Potential Material Event, and may not
deliver any notice of a Potential Material Event for a
period of 180 days following the expiration or earlier
termination of any other period during which the holders of
Registrable Securities may not by virtue of the provisions
of this Section 3.2(d) sell or offer to sell Registrable
Securities.
3.3 REGISTRATION PROCEDURES. The Parent will use its best
efforts to effect each Registration, and to cooperate with the
sale of such Registrable Securities in accordance with the
intended method of disposition thereof as quickly as practicable,
and the Parent will as expeditiously as possible:
(a) subject, in the case of an Incidental
Registration, to the proviso to Section 3.1(a), prepare and
file with the SEC the registration statement and use its
best efforts to cause the Registration to become effective;
provided, however, that before filing any registration
statement or prospectus or any amendments or supplements
thereto, the Parent will furnish to the holders of the
Registrable Securities covered by such registration
statement, their counsel, and the underwriters, if any, and
their counsel, copies of all such documents proposed to be
filed at least 10 days prior thereto, which documents will
be subject to the reasonable review, within such 10-day
period, of such holders, their counsel and the underwriters;
and the Parent will not file any registration statement or
amendment thereto or any prospectus or any supplement
thereto (including such documents incorporated by reference)
to which the Requisite Holders shall reasonably object
within such 10-day period;
(b) subject, in the case of an Incidental
Registration, to the proviso to Section 3.1(a), prepare and
file with the SEC such amendments and post-effective
amendments to any registration statement and any prospectus
used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the
provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such
registration statement; and cause the prospectus to be
supplemented by any required prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the
Securities Act;
(c) furnish to each holder of Registrable Securities
included in such Registration and the underwriter or
underwriters, if any, without charge, at least one signed
copy of the registration statement and any post-effective
amendment thereto, upon request, and such number of
conformed copies thereof and such number of copies of the
prospectus (including each preliminary prospectus and each
prospectus filed under Rule 424 under the Securities Act),
any amendments or supplements thereto and any documents
incorporated by reference therein, as such holder or
underwriter may reasonably request in order to facilitate
the disposition of the Registrable Securities being sold by
such holder (it being understood that the Parent consents to
the use of the prospectus and any amendment or supplement
thereto by each holder of Registrable Securities covered by
such registration statement and the underwriter or
underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by the prospectus
or any amendment or supplement thereto);
(d) notify each holder of the Registrable Securities
of any stop order or other order suspending the
effectiveness of any registration statement, issued or
threatened by the SEC in connection therewith, and take all
reasonable actions required to prevent the entry of such
stop order or to remove it or obtain withdrawal of it at the
earliest possible moment if entered;
(e) if requested by the managing underwriter or
underwriters, if any, or any holder of Registrable
Securities in connection with any sale pursuant to a
registration statement, promptly incorporate in a prospectus
supplement or post-effective amendment such information
relating to such underwriting as the managing underwriter or
underwriters, if any, or such holder reasonably requests to
be included therein; and make all required filings of such
prospectus supplement or post-effective amendment as soon as
practicable after being notified of the matters incorporated
in such prospectus supplement or post-effective amendment;
(f) on or prior to the date on which a Registration is
declared effective, use its best efforts to register or
qualify, and cooperate with the holders of Registrable
Securities included in such Registration, the underwriter or
underwriters, if any, and their counsel, in connection with
the registration or qualification of the Registrable
Securities covered by such Registration for offer and sale
under the securities or "blue sky" laws of each state and
other jurisdiction of the United States as any such holder
or the managing underwriter, if any, reasonably requests in
writing; use its best efforts to keep each such registration
or qualification effective, including through new filings,
or amendments or renewals, during the period such
registration statement is required to be kept effective; and
do any and all other acts or things necessary or advisable
to enable the disposition in all such jurisdictions
reasonably requested of the Registrable Securities covered
by such Registration; provided, however, that the Parent
will not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to
take any action which would subject it to general service of
process in any such jurisdiction where it is not then so
subject;
(g) in connection with any sale pursuant to a
Registration, cooperate with the holders of Registrable
Securities and the managing underwriter or underwriters, if
any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends)
representing Securities to be sold under such Registration,
and enable such Securities to be in such denominations and
registered in such names as the managing underwriter or
underwriters, if any, or such holders may request;
(h) use its best efforts to cause the Registrable
Securities to be registered with or approved by such other
governmental agencies or authorities within the United
States and having jurisdiction over the Parent, the Company
or any other Subsidiary as may reasonably be necessary to
enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such
Securities;
(i) enter into such agreements (including underwriting
agreements in customary form) and take such other actions as
the Requisite Holders shall reasonably request in order to
expedite or facilitate the disposition of such Registrable
Securities;
(j) use its best efforts to obtain:
(i) at the time of effectiveness of each
Registration, a "comfort letter" from the Parent's
independent certified public accountants covering such
matters of the type customarily covered by "cold
comfort letters" as the Requisite Holders and the
underwriters reasonably request; and
(ii) at the time of any underwritten sale pursuant
to the registration statement, a "bring-down comfort
letter," dated as of the date of such sale, from the
Parent's independent certified public accountants
covering such matters of the type customarily covered
by comfort letters as the Requisite Holders and the
underwriters reasonably request;
(k) use its best efforts to obtain, at the time of
effectiveness of each Registration and at the time of any
sale pursuant to each Registration, an opinion or opinions,
favorable to the Requisite Holders in form and scope, from
counsel for the Parent in customary form;
(l) notify each seller of Registrable Securities
covered by such Registration, upon discovery that, or upon
the happening of any event as a result of which, any
prospectus included in such Registration, as then in effect,
includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and
promptly prepare, file with the SEC and furnish to such
seller or holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers
or prospective purchasers of such Securities, such
prospectus shall not include 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 not misleading in light of the circumstances under
which they are made;
(m) otherwise comply with all applicable rules and
regulations of the SEC, and make generally available to its
security holders (as contemplated by section 11(a) under the
Securities Act) an earnings statement satisfying the
provisions of Rule 158 under the Securities Act no later
than 90 days after the end of the 12-month period beginning
with the first month of the Parent's first fiscal quarter
commencing after the effective date of the registration
statement, which statement shall cover said 12-month period;
(n) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered
by each Registration from and after a date not later than
the effective date of such Registration; and
(o) use its best efforts to cause all Registrable
Securities covered by each Registration to be listed subject
to notice of issuance, prior to the date of first sale of
such Registrable Securities pursuant to such Registration,
on each securities exchange on which the Parent Common Stock
is then listed; and, if the Parent Common Stock is not so
listed, to use its best efforts to cause all Registrable
Securities covered by each Registration to be designated as
National Market System Securities, if the Parent Common
Stock is so designated (and, if the Parent Common Stock is
listed on the NASDAQ National Market or the NASDAQ SmallCap
Market, to cause all Registrable Securities to be so
listed); and, if the Parent Common Stock is not so
designated, to arrange for at least two market makers to
register with the NASD as such with respect to such
Registrable Securities.
The Parent may require each holder of Registrable Securities that
will be included in such Registration to furnish the Parent with
such information in respect of such holder of its Registrable
Securities that will be included in such Registration as the
Parent may reasonably request in writing and as is required by
applicable laws or regulations.
3.4 REASONABLE INVESTIGATION. The Parent shall:
(a) give the holders of Registrable Securities, their
underwriters, if any, and their respective counsel and
accountants the opportunity to participate in the
preparation of the registration statement, each prospectus
included therein or filed with the SEC and each amendment
thereof or supplement thereto;
(b) give each such holder and underwriter reasonable
opportunities to discuss the business of the Parent with its
officers, counsel and the independent public accountants who
have certified its financial statements;
(c) make available for inspection by any holder of
Registrable Securities included in any Registration, any
underwriter participating in any disposition pursuant to any
Registration, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial
and other records, pertinent corporate documents and
properties of the Parent; and
(d) cause the Parent's officers, directors and
employees to supply all information reasonably requested by
any such Person in connection each Registration;
in each such case, as shall be reasonably necessary, in the
opinion of such holder or such underwriter, to enable it to
conduct a "reasonable investigation" within the meaning of
section 11(b)(3) of the Securities Act and to satisfy the
requirement of reasonable care imposed by section 12(a)(2) of the
Securities Act.
3.5 REGISTRATION EXPENSES. The Parent will pay all
Registration Expenses incurred in connection with each
Registration, including, without limitation, any such
Registration not effected by the Parent.
3.6 INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE PARENT. The Parent shall
indemnify, to the fullest extent permitted by law, each
holder of Registrable Securities, its officers, directors
and agents, if any, and each Person, if any, who controls
such holder within the meaning of section 15 of the
Securities Act, against all losses, claims, damages,
liabilities (or proceedings in respect thereof) and expenses
(under the Securities Act or common law or otherwise), joint
or several, resulting from any violation by the Parent of
the provisions of the Securities Act or any untrue statement
or alleged untrue statement of a material fact contained in
any registration statement or prospectus (and as amended or
supplemented if amended or supplemented) or any preliminary
prospectus or caused by any omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of
any prospectus, in light of the circumstances under which
they were made) not misleading, except to the extent that
such losses, claims, damages, liabilities (or proceedings in
respect thereof) or expenses are caused by any untrue
statement or alleged untrue statement contained in or by any
omission or alleged omission from information concerning any
holder, or as to such holder's plan of distribution with
respect to such holder's Registrable Securities, in each
case furnished in writing to the Parent by such holder
expressly for use therein. If the offering pursuant to any
registration statement provided for under this Section 3 is
made through underwriters, no action or failure to act on
the part of such underwriters (whether or not such
underwriter is an affiliate of any holder of Registrable
Securities) shall affect the obligations of the Parent to
indemnify any holder of Registrable Securities or any other
Person pursuant to the preceding sentence. If the offering
pursuant to any registration statement provided for under
this Section 3 is made through underwriters, the Parent
agrees, to the extent required by such underwriters, to
enter into an underwriting or other agreement providing for
indemnity of such underwriters, their officers, directors
and agents, if any, and each Person, if any, who controls
such underwriters within the meaning of section 15 of the
Securities Act to the same extent as hereinbefore provided
with respect to the indemnification of the holders of
Registrable Securities; provided that the Parent shall not
be required to indemnify any such underwriter, or any
officer or director of such underwriter or any Person who
controls such underwriter within the meaning of section 15
of the Securities Act, to the extent that the loss, claim,
damage, liability (or proceedings in respect thereof) or
expense for which indemnification is claimed results from
such underwriter's failure to send or give a copy of an
amended or supplemented final prospectus to the Person
asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such
amended or supplemented final prospectus prior to such
written confirmation and the underwriter was provided with
such amended or supplemented final prospectus.
(b) INDEMNIFICATION BY THE HOLDERS. In connection
with any registration statement in which a holder of
Registrable Securities is participating, each such holder,
severally and not jointly, shall indemnify, to the fullest
extent permitted by law, the Parent, each underwriter (if
the underwriter so requires) and their respective officers,
directors and agents, if any, and each Person, if any, who
controls the Parent or such underwriter within the meaning
of section 15 of the Securities Act, against any losses,
claims, damages, liabilities (or proceedings in respect
thereof) and expenses resulting from any untrue statement or
alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated
in the registration statement or prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein (in the case of any
prospectus, in light of the circumstances under which they
were made) not misleading, but only to the extent that such
untrue statement is contained in or such omission is from
information so concerning a holder, or as to such holder's
plan of distribution with respect to such holder's
Registrable Securities, in either case furnished in writing
by such holder expressly for use therein; provided, however,
that such holder's obligations hereunder shall be limited to
an amount equal to the proceeds to such holder of the
Registrable Securities sold pursuant to such registration
statement.
(c) CONTROL OF DEFENSE. Any Person entitled to
indemnification under the provisions of this Section 3.6
shall give prompt notice to the indemnifying party of any
claim with respect to which it seeks indemnification and
unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim,
permit such indemnifying party to assume the defense of such
claim, with counsel reasonably satisfactory to the
indemnified party; and if such defense is so assumed, such
indemnifying party shall not enter into any settlement
without the consent of the indemnified party if such
settlement attributes liability to the indemnified party and
such indemnifying party shall not be subject to any
liability for any settlement made without its consent (which
shall not be unreasonably withheld); and any underwriting
agreement entered into with respect to any registration
statement provided for under this Section 3 shall so
provide. In the event an indemnifying party shall not be
entitled, or elects not, to assume the defense of a claim,
such indemnifying party shall not be obligated to pay the
fees and expenses of more than one counsel or firm of
counsel for all parties indemnified by such indemnifying
party in respect of such claim, unless in the reasonable
judgment of any such indemnified party a conflict of
interest may exist between such indemnified party and any
other of such indemnified parties in respect to such claim.
(d) CONTRIBUTION. If for any reason the foregoing
indemnity is unavailable, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified
party as a result of such losses, claims, damages,
liabilities or expenses:
(i) in such proportion as is appropriate to
reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified
party on the other; or
(ii) if the allocation provided by clause (i)
above is not permitted by applicable law or provides a
lesser sum to the indemnified party than the amount
hereinafter calculated, in such proportion as is
appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and
the indemnified party on the other but also the
relative fault of the indemnifying party and the
indemnified party as well as any other relevant
equitable considerations.
Notwithstanding the foregoing, no holder of Registrable
Securities shall be required to contribute any amount in
excess of the amount such holder would have been required to
pay to an indemnified party if the indemnity under Section
3.6(b) hereof was available. 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. The obligation of any Person to
contribute pursuant to this Section 3.6 shall be several and
not joint.
(e) TIMING OF PAYMENTS. An indemnifying party shall
make payments of all amounts required to be made pursuant to
the foregoing provisions of this Section 3.6 to or for the
account of the indemnified party from time to time promptly
upon receipt of bills or invoices relating thereto or when
otherwise due or payable.
(f) SURVIVAL. The indemnity and contribution
agreements contained in this Section 3.6 shall remain in
full force and effect regardless of any investigation made
by or on behalf of a participating holder of Registrable
Securities, its officers, directors, agents or any Person,
if any, who controls such holder as aforesaid, and shall
survive the transfer of such Securities by such holder.
3.7 HOLDBACK AGREEMENTS; REGISTRATION RIGHTS TO OTHERS.
(a) In connection with each underwritten sale of
Registrable Securities, the Parent agrees, and each holder
of Registrable Securities by acquisition of such Registrable
Securities agrees, to enter into customary holdback
agreements concerning sale or distribution of Registrable
Securities and other equity Securities of the Parent,
except, in the case of any holder of Registrable Securities,
to the extent that such holder is prohibited by applicable
law or exercise of fiduciary duties from agreeing to
withhold Registrable Securities from sale or is acting in
its capacity as a fiduciary or investment adviser. Without
limiting the scope of the term "fiduciary," a holder shall
be deemed to be acting as a fiduciary or an investment
adviser if its actions or the Registrable Securities
proposed to be sold are subject to the Employee Retirement
Income Security Act of 1974, as amended, or the Investment
Company Act of 1940, as amended, or if such Registrable
Securities are held in a separate account under applicable
insurance law or regulation.
(b) If the Parent shall at any time after the date
hereof provide to any holder of any Securities of the Parent
rights with respect to the registration of such Securities
under the Securities Act:
(i) such rights shall not be in conflict with or
adversely affect any of the rights provided in this
Section 3 to the holders of Registrable Securities; and
(ii) if such rights are provided on terms or
conditions more favorable to such holder than the terms
and conditions provided in this Section 3, the Parent
will provide (by way of amendment to this Section 3 or
otherwise) such more favorable terms or conditions to
the holders of Registrable Securities.
3.8 AVAILABILITY OF INFORMATION. The Parent will comply
with the reporting requirements of sections 13 and 15(d) of the
Exchange Act (whether or not it shall be required to do so
pursuant to such Sections) and will comply with all other public
information reporting requirements of the SEC from time to time
in effect. In addition, the Parent shall file such reports and
information, and shall make available to the public and to the
holders of Purchaser Shares such information, as shall be
necessary to permit such holders to offer and sell Registrable
Shares pursuant to the provisions of Rules 144 and 144A
promulgated under the Securities Act. The Parent will also
cooperate with each such holder in supplying such information as
may be necessary for such holder to complete and file any
information reporting forms presently or hereafter required by
the SEC as a condition to the availability of an exemption from
the registration provisions of the Securities Act in connection
with the sale of any Issuable Shares. The Parent will furnish to
each such holder, promptly upon their becoming available, copies
of all financial statements, reports, notices and proxy
statements sent or made available generally by the Parent to its
stockholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Parent
with any securities exchange or with the SEC.
4. CERTAIN RESTRICTIONS ON TRANSFER AND OTHER AGREEMENTS.
4.1 RESTRICTIONS ON TRANSFER TO TRANSFEREES. No party
hereto shall sell, assign, transfer or otherwise dispose of any
Issuable Shares held by such party to any transferee under any
circumstance, and the Parent shall neither issue nor sell any
additional Issuable Shares to any such transferee, unless such
transferee shall have assumed in writing all of the obligations
of its transferor imposed by this Agreement and shall have agreed
to be bound by each of the terms and provisions of this Agreement
to which such transferor was bound, pursuant to an undertaking
substantially in the form set forth as Exhibit A hereto.
4.2 COOPERATION BY THE PARENT. The Parent shall refuse to
register any transfer of any Issuable Shares held by any party to
this Agreement to any transferee unless the Parent shall have
received from the prospective transferee a written agreement to
be bound by the provisions of this Agreement as required by
Section 4.1 hereof, and such other evidence as the Parent may
reasonably require to establish compliance with such Section 4.1.
The Parent shall be protected in, and shall have no liability to
any Other Stockholder for, and no such holder shall assert any
claim against the Parent for, failing to register any transfer of
any Issuable Shares in an effort to comply with the provisions of
this Agreement, unless such refusal to transfer is made in bad
faith.
The Parent shall refuse to register any transfer by an
Initial Stockholder unless it has received evidence reasonably
satisfactory to it that Mr. Scharf has complied with the
provisions of Section 1 with respect to such transfer.
4.3 LEGENDING OF CERTIFICATES. Each certificate
representing any Issuable Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF A STOCKHOLDERS AGREEMENT, DATED
AS OF APRIL 18, 1997, THE PROVISIONS OF WHICH ARE
INCORPORATED HEREIN BY REFERENCE. SUCH STOCKHOLDERS
AGREEMENT PROVIDES, AMONG OTHER THINGS, THAT THIS
SECURITY MAY NOT BE SOLD OR TRANSFERRED TO ANY PERSON
WHO HAS NOT EXPRESSLY ASSUMED THE OBLIGATIONS OF SUCH
AGREEMENT AND CONTAINS, AMONG OTHER PROVISIONS,
PROVISIONS WHICH LIMIT THE TRANSFER OF THIS SECURITY.
A COPY OF SUCH STOCKHOLDERS AGREEMENT IS AVAILABLE FROM
THE PARENT UPON REQUEST."
4.4 SECURITIES ACT RESTRICTIONS; LEGEND. The Parent shall
not register any transfer of Issuable Shares held by a party
hereto if it has reason to believe that such transfer is being
requested in violation of the registration requirements of
section 5 of the Securities Act. Except as otherwise permitted
by this Agreement, each certificate representing an Issuable
Share held by a party hereto shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE OFFERED OR SOLD EXCEPT IN A
TRANSACTION REGISTERED UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT."
4.5 TERMINATION OF VARIOUS PROVISIONS OF THIS AGREEMENT.
(a) WITH RESPECT TO SHARES SOLD IN A PUBLIC OFFERING.
Each and all of the provisions of this Section 4 shall
terminate immediately as to any Issuable Shares held by a
party hereto (but this Section 4 shall remain in force with
respect to any other such Issuable Shares):
(i) when such Issuable Shares have been
effectively registered under the Securities Act and
disposed of in accordance with the registration
statement covering such Issuable Shares; or
(ii) when they shall have been distributed to the
public pursuant to Rule 144 (or any successor
provision) under the Securities Act; or
(iii) when they shall have been otherwise
transferred and subsequent disposition of them shall
not require registration or qualification under the
Securities Act or any similar state law then in force.
Whenever such restrictions shall terminate as to any such
Issuable Shares, the holder thereof shall be entitled to
receive from the Parent, without expenses (other than
transfer taxes, if any), new Issuable Shares of like tenor
not bearing the applicable legends set forth in Section 4.3
or Section 4.4 hereof.
(b) TAG-ALONG RIGHTS. The provisions of Section 1 of
this Agreement shall terminate immediately with respect to
Purchaser Shares sold in any sale pursuant to Section 1 or
Section 3 of this Agreement or when they shall have been
distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act.
(c) DRAG-ALONG OBLIGATIONS. The provisions of Section
2 of this Agreement shall terminate immediately with respect
to Purchaser Shares sold (but the provisions of Section 2 of
this Agreement shall remain in force with respect to any
remaining Purchaser Shares not so sold) in any sale pursuant
to Section 3 of this Agreement or when they shall have been
distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act.
(d) UPON DRAG-ALONG SALE. Each and all of the
provisions of this Agreement shall terminate immediately as
to all Issuable Shares upon the consummation in full of any
Drag-Along Sale.
4.6 PARENT ACTIVITIES AND CHANGES IN CAPITAL STRUCTURE.
The Parent shall not, without the written consent of the holders
of at least 80% of the Purchaser Shares:
(a) fail to own at any time 100% of the issued and
outstanding capital stock of the Company;
(b) amend the Charter so as to change or modify the
rights or preferences of, or terms or provisions applicable
to, the Parent Common Stock; or
(c) create or authorize any issue of capital stock, or
any class thereof (other than the creation, authorization
and issuance of Parent Common Stock and other than the
creation, authorization and issuance of Preferred Stock
limited to payment of a fixed amount, and not otherwise
entitled to participate in any distribution of any proceeds,
in connection with any liquidation, dissolution, merger,
consolidation or sale of all or substantially all Property
of the Parent or any Parent Sale) not authorized in the
Charter as in effect on the date hereof.
4.7 COMPENSATION, ETC.
(a) RIGHTS, ETC. The Parent will not at any time
issue or grant, or allow to be issued or granted, any Rights
to any employee of the Parent or any employee of any
Subsidiary of the Parent,
(i) for cash consideration (including the
conversion or exercise price with respect to such
Rights) received by the Parent (or to be received by
the Parent upon such conversion or exercise) less than
the Closing Price (on the trading day immediately prior
to the date of such issuance or grant per share) of
Parent Common Stock into which such Rights are
convertible or exercisable, or
(ii) if, after giving effect to such issuance or
grant, the aggregate number of Rights issued or granted
to such employee since the date of organization of the
Parent would exceed one-third of all Rights issued or
granted to all employees of the Parent and its
Subsidiaries since such date or organization
(excluding, in each case, all Rights that shall have
terminated or expired without being converted or
exercised; the numbers of Rights issued or granted to
any employee shall, for purposes of this clause
(a)(ii), be measured by the number of shares of Parent
Common Stock into which such Rights are convertible or
exercisable).
(b) CASH COMPENSATION, ETC. The Parent will not at
any time permit the compensation paid in the form of cash or
cash equivalents to any employee of the Parent, or any
employee of any Subsidiary of the Parent, during any Fiscal
Year to exceed the greater of
(i) $500,000, or
(ii) 5% of Consolidated EBITDA for the immediately
preceding Fiscal Year.
(c) COMPENSATION LIMIT TERMINATION EVENT.
Notwithstanding anything else in this Section 4.7, the
provisions of this Section 4.7 shall terminate immediately
upon the occurrence of any Compensation Limit Termination
Event.
5. DEFINED TERMS.
As used herein, the following terms have the respective
meanings set forth below or set forth in the paragraph,
preliminary statement or Section hereof following such term:
ACCEPTABLE DRAG-ALONG SALE TERMS -- means, with respect to
any sale of all Issuable Shares held by the Other Stockholders,
the following terms:
(a) the sale by the holders of Purchaser Shares shall
be for the same Imputed Price, on the same terms and
conditions and for the same type and amount of consideration
(on a per share basis) as is to be received in the proposed
sale by the Other Stockholders; provided, however, that if
any Other Stockholder shall be entitled to receive from the
purchaser of all Issuable Shares an imputed price greater
than its pro rata share thereof (based upon the aggregate
number of Issuable Shares), then the holders of Purchaser
Shares shall be entitled to receive an Imputed Price per
share not less than the highest consideration per share paid
to any Other Stockholder in connection with such sale;
(b) the consideration to be paid to the holders of
Purchaser Shares in connection with such sale consists
solely of cash, Freely Tradeable Securities or cash and
Freely Tradeable Securities;
(c) each holder of Purchaser Shares shall have
received an opinion, addressed to such holder or stating
that such holder is entitled to rely thereon, of a Valuation
Agent stating that the per share consideration to be paid to
the holders of Purchaser Shares is fair from a financial
point of view;
(d) if any consideration consists of Freely Tradeable
Securities, each holder of Purchaser Shares shall have
received an opinion, addressed to such holder or stating
that such holder is entitled to rely thereon, of a firm of
nationally recognized securities counsel reasonably
acceptable to the Required Holders to the effect that each
such holder may immediately resell any and all such Freely
Tradeable Securities pursuant to a valid exemption under the
Securities Act (provided, however, that such counsel need
express no opinion as to restrictions on such a resale that
might arise under Rule 145 under the Securities Act or any
successor provision that imposes substantially similar
restrictions); and
(e) no holder of Purchaser Shares shall be required to
make any representations or warranties except as to its
title to and authority to convey the shares of Parent Common
Stock to be sold by it in connection with such sale.
AFFILIATE -- means, at any time, a Person (other than a
Subsidiary or a Purchaser):
(a) that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under
common control with, the Parent;
(b) that beneficially owns or holds 10% or more of any
class of the Voting Stock of the Parent; or
(c) 10% or more of the Voting Stock (or in the case of
a Person that is not a corporation, 10% or more of the
equity interest) of which is beneficially owned or held by
the Parent, the Company or another Subsidiary;
at such time.
As used in this definition,
Control -- means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
AGREEMENT -- is defined in the introductory paragraph.
BOARD OF DIRECTORS -- means the board of directors of the
Parent or any committee thereof that, in the instance, shall have
the lawful power to exercise the power and authority of such
board of directors.
BRIDGE WARRANTS -- means the 300,000 bridge warrants
described in section 3.3.6 of the Warrant Agreement made as of
August 13, 1993 between the Parent and Continental Stock Transfer
& Trust Company, as warrant agent thereunder.
BUSINESS DAY -- means a day other than a Saturday, a Sunday
or a day on which banks in the State of New York are required or
permitted by law (other than a general banking moratorium or
holiday for a period exceeding four consecutive days) to be
closed.
CHARTER -- means the certificate of incorporation of the
Parent from time to time in effect and on file with the Secretary
of the State of Delaware.
CLOSING DATE -- means April 18, 1997.
CLOSING EQUITY MARKET CAPITALIZATION -- means, for any
trading day, the sum of:
(a) the product of (i) the Closing Price multiplied by
(ii) the aggregate number of shares of Parent Common Stock
then outstanding (excluding any such shares then held
directly or indirectly by the Parent or any Subsidiary),
plus
(b) the product of (i) the excess, if any, of the
Closing Price over the price at which the Existing Warrants
are then exercisable (if there is no such excess, or if such
excess would be a negative number, or if the Existing
Warrants are no longer exercisable, then the amount referred
to in this clause (b) shall be deemed to be $0), multiplied
by (ii) the aggregate number of Existing Warrants then
outstanding (excluding any such warrants then held directly
or indirectly by the Parent or any Subsidiary).
CLOSING PRICE -- means, on any date with respect to any
share of Parent Common Stock:
(a) the last sale price, regular way, on such date or,
if no such sale takes place on such date, the average of the
closing bid and asked prices on such date, in each case as
officially reported on the principal national securities
exchange on which any Parent Common Stock is then listed or
admitted to trading; and
(b) if no Parent Common Stock is then listed or
admitted to trading on any national securities exchange, but
is listed on the NASDAQ National Market or the NASDAQ
SmallCap Market, as the case may be, the last trading price
of any Parent Common Stock on such date as reported by
NASDAQ, or if there shall have been no trading on such date,
the average of the reported closing bid and asked prices on
such date as shown by NASDAQ.
COMPANIES -- is defined in the introductory paragraph.
COMPANY -- is defined in the introductory paragraph.
COMPENSATION LIMIT TERMINATION EVENT -- means the occurrence
at any time of any one or more of the following events or
conditions:
(a) Consolidated EBITDA (as such term is defined in
the Note and Stock Purchase Agreements) for the period of 12
consecutive months most recently ended at such time shall
have exceeded $30,000,000;
(b) $16,000,000 or more in aggregate principal amount
of the Notes shall have been paid to the holders thereof;
(c) a 1993 Warrant Call Option Event (as such term is
defined in the Note and Stock Purchase Agreements) shall
have occurred and the Company shall have satisfied in full
all of its prepayment obligations pursuant to Sections
4.4(b) of the Note and Stock Purchase Agreements following
such occurrence;
(d) pursuant to Section 4.5 of this Agreement, the
provisions of one or more of Sections 1, 2 and 4 shall have
terminated with respect to 58% or more of the number of
Purchaser Shares issued on the Closing Date; or
(e) if Parent Common Stock is then listed or admitted
to trading on a national securities exchange in the United
States, or if Parent Common Stock is then listed on the
NASDAQ National Market or the NASDAQ SmallCap Market, the
Closing Equity Market Capitalization shall have been more
than $45,000,000 for five consecutive trading days.
DRAG-ALONG SALE -- is defined in Section 2.1.
EXCHANGE ACT -- means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the SEC promulgated
thereunder.
EXCLUDED RIGHTS -- means and includes all Rights issued to
employees of the Parent or the Company as compensation or
pursuant to any incentive stock option or similar employee
benefit plan, so long as:
(a) after giving effect to the issuance of such
Rights, the aggregate number of Issuable Shares issuable
upon the exercise of all Rights so issued since the Closing
Date and then remaining outstanding does not exceed 5% of
the number of shares of Parent Common Stock outstanding on a
fully-diluted basis; and
(b) no other holder of any Rights or any Securities
convertible or exchangeable into, shares of Parent Common
Stock or any other Securities of the Parent, shall have the
right to any preemptive, subscription or similar rights in
respect of such issuance.
EXISTING WARRANTS -- means the Redeemable Common Stock
Purchase Warrants issued pursuant to the Warrant Agreement made
as of August 13, 1993 between the Parent and Continental Stock
Transfer & Trust Company, as warrant agent thereunder.
FAIR VALUE -- means, with respect to any share of Parent
Common Stock, the quotient of:
(a) the fair salable value of the Parent, as a going
concern, giving effect to all Property thereof and subject
to all liabilities thereof, that would be realized in an
arm's length sale between an informed and willing buyer and
an informed and willing seller, under no compulsion to buy
or sell, respectively, as of a date that is within 15 days
of the date as of which the determination is to be made,
determined by the Valuation Agent, such determination to be
made without regard to the absence of a liquid or ready
market for such Parent Common Stock; divided by
(b) the total number of shares of Parent Common Stock
outstanding at such time.
FREELY TRADEABLE SECURITIES -- means Securities:
(a) that are of a class:
(i) of Securities issued or fully guaranteed by
the United States of America or any agency thereof and
entitled to the full faith and credit of the United
States of America, for which price quotations are
routinely quoted and for which, in the opinion of the
Required Holders, there is a ready liquid market; or
(ii) both registered pursuant to either section
12(b) or section 12(g) of the Exchange Act and either
listed on a national securities exchange or on the
NASDAQ National Market; and
(b) which may be resold immediately in the public
markets by each and every holder of Purchaser Shares without
requirement of further registration under the Securities
Act.
IMPUTED PRICE -- means:
(a) in the case of a sale of Parent Common Stock, the
price per share paid for such Parent Common Stock; and
(b) in the case of a sale of Rights, the assumed price
per underlying share of Parent Common Stock, as determined
by a Valuation Agent in accordance with generally accepted
financial practice, which would yield the actual purchase
price to be paid for such Rights.
INCIDENTAL REGISTRATION in defined in Section 3.1.
INITIAL STOCKHOLDERS -- means and includes:
(a) Mr. Scharf, his wife, his children and his
grandchildren;
(b) the estate of, following the date the appointment
of any of the following is effective, the executors or
administrators and any other similar representative of the
person or Property of any of the Persons named in clause
(a);
(c) any trusts for the benefit of any, all or any
group of the foregoing persons;
(d) any partnerships all the partners of which, and
all corporations, limited liability companies or similar
Persons all of the equity interests in which, are owned
solely by the foregoing Persons, or any of them or any group
of them; and
(e) their respective successors and assigns.
ISSUABLE SHARE -- means and includes at any time,
(a) a share of issued and outstanding Parent Common
Stock; and
(b) a Right, and (without duplication) all shares of
Parent Common Stock issuable upon exercise of such Right, in
each case at such time.
For purposes of this definition, a Right to acquire one share of
Parent Common Stock shall constitute one Issuable Share, and a
Person shall be deemed to own an Issuable Share if such Person
has a Right to acquire such share whether or not such Right is
exercisable at such time.
MARKET PRICE -- means, per share of Parent Common Stock, as
of any date of determination, the arithmetic mean of the daily
Closing Prices for the 20 consecutive trading days before such
date of determination; provided that if no Parent Common Stock is
then either listed or admitted to trading on any national
securities exchange, the NASDAQ National Market or the NASDAQ
SmallCap Market, then "MARKET PRICE" means the Fair Value of one
share of Parent Common Stock, as determined by the Valuation
Agent as of the date of determination.
NATIONAL MARKET SYSTEM SECURITY -- has the meaning ascribed
thereto in Rule 11Aa2-1 under the Exchange Act.
NASD -- means the National Association of Securities
Dealers, Inc.
NASDAQ -- means the NASDAQ Stock Market, Inc., a subsidiary
of the NASD.
NASDAQ NATIONAL MARKET -- has the meaning ascribed thereto
in Rule 4200(r) of the NASDAQ.
NASDAQ SMALLCAP MARKET -- has the meaning ascribed thereto
in Rule 4200(t) of the NASDAQ.
NEW COMMON STOCK -- is defined in Preliminary Statement A.
NOTE AND STOCK PURCHASE AGREEMENT -- is defined in
Preliminary Statement B.
NOTES -- is defined in Preliminary Statement B.
NOTICE OF SALE -- is defined in Section 1.2.
OTHER STOCKHOLDERS -- means and includes the Initial
Stockholders and all other holders of the Parent Common Stock
other than:
(a) holders who are not Affiliates and who hold no
shares of Parent Common Stock which are "restricted
securities" (as such term is defined in Rule 144(a)(1) under
the Securities Act); and
(b) holders of Purchaser Shares.
PARENT -- is defined in the introductory paragraph.
PARENT COMMON STOCK -- means the Common Stock, par value
$.001 per share, of the Parent.
PARENT GUARANTY AGREEMENT -- means the Guaranty Agreement,
dated as of the date hereof, entered into by the Parent in favor
of the Purchasers.
PARENT SALE -- means a transfer, sale or other disposition
of, or the execution and delivery by Mr. Scharf of a binding
agreement to transfer, sell or otherwise dispose of, directly or
indirectly, all of the Issuable Shares owned by the Other
Stockholders to a Person other than the Parent, the Company or
any Affiliate or Subsidiary.
PERMITTED ISSUABLE SHARES AMOUNT -- means that number of
Issuable Shares (appropriately adjusted for any reclassification
(by combination, subdivision or otherwise) or dividend payable in
Parent Common Stock or Rights) equal to 25% of the Issuable
Shares beneficially owned by the Initial Stockholders, taken as a
group, on the Closing Date (as indicated in Annex 2 hereto).
PERSON -- means an individual, partnership, corporation,
limited liability company, trust, unincorporated organization, or
a government or agency or political subdivision thereof.
POTENTIAL MATERIAL EVENT -- means and includes the
following:
(a) the possession by the Parent of material non-
public information not ripe for disclosure in a registration
statement; or
(b) any material engagement or activity by the Parent
which would, in the good faith determination of the Board of
Directors, be adversely affected by disclosure in a
registration statement at such time.
PREFERRED STOCK -- means and includes the Preferred Stock,
par value $.001 per share of the Parent, and all other capital
stock of the Parent of any class which is preferred, as to
payment of dividends, payment upon a liquidation or dissolution
of the Parent or both, over the Parent Common Stock.
PROPERTY -- means any and all interests in any kind of
property of asset whatsoever, whether real, personal or mixed and
whether tangible or intangible.
PUBLIC OFFERING -- shall mean, with respect to any Issuable
Shares, any sale in a transaction either registered under, or
requiring registration under, section 5 of the Securities Act.
PURCHASERS -- is defined in the introductory paragraph.
PURCHASER SHARES -- means the shares of Parent Common Stock
issued to the Purchasers pursuant to the terms of the Note and
Stock Purchase Agreement on the Closing Date.
REGISTRABLE SECURITIES -- means, at any time, any Purchaser
Shares, provided that as to any particular Registrable Securities
once issued, such Securities shall cease to be Registrable
Securities:
(a) when a registration statement with respect to the
sale of such Securities shall have become effective under
the Securities Act and such Securities shall have been
disposed of in accordance with such registration statement;
(b) when they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision)
under the Securities Act;
(c) when they shall have been otherwise transferred
and subsequent disposition of them shall not require
registration or qualification under the Securities Act or
any similar state law then in force; or
(d) when they shall have ceased to be outstanding.
REGISTRATION -- means and includes the Shelf Registration
and each registration of Parent Common Stock in respect of the
which the holders of Purchaser Shares have the right to
participate under Section 3.1.
REGISTRATION EXPENSES -- means all expenses incident to the
Parent's performance of or compliance with compliance with
Section 3.1 through Section 3.4 inclusive, including, without
limitation:
(a) all registration and filing fees;
(b) fees and expenses of compliance with securities or
blue sky laws (including reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the
Registrable Securities);
(c) expenses of printing certificates for the
Registrable Securities in a form eligible for deposit with
Depositary Trust Company;
(d) messenger and delivery expenses;
(e) internal expenses (including, without limitation,
all salaries and expenses of its officers and employees
performing legal or accounting duties);
(f) fees and disbursements of counsel for the Parent
and its independent certified public accountants (including
the expenses of any management review, cold comfort letters
or any special audits required by or incident to such
performance and compliance);
(g) securities acts liability insurance (if the Parent
elects to obtain such insurance);
(h) the reasonable fees and expenses of any special
experts retained by the Parent in connection with such
Registration;
(i) fees and expenses of other Persons retained by the
Parent; and
(j) fees and expenses of Hebb & Gitlin, a Professional
Corporation, or such other counsel for holders of
Registrable Securities, selected by the Requisite Holders;
but not including any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities or fees and
expenses of more than one counsel representing the holders of
Registrable Securities or any other selling expenses, discounts
or commissions incurred in connection with the sale of
Registrable Securities.
REQUIRED HOLDERS -- means, at any time, the holders (other
than the Parent, the Company or any Affiliate or other
Subsidiary) of at least 51% of the Purchaser Shares at such time
(excluding any Purchaser Shares held directly or indirectly by
the Parent, the Company or any other Subsidiary).
REQUISITE HOLDERS -- means, with respect to any Registration
or proposed Registration of Registrable Securities pursuant to
Section 3 hereof, any holder or holders (other than the Parent,
the Company or any Affiliate or any other Subsidiary) holding at
least 51% of the shares of Registrable Securities (excluding any
shares of Registrable Securities directly or indirectly held by
the Parent, the Company or any Affiliate or other Subsidiary) to
be so registered.
RIGHT -- means and includes any warrant (including, without
limitation, any Existing Warrant), option or other right, to
acquire Parent Common Stock and including, without limitation,
any right pursuant to the provisions of any Security convertible
or exchangeable into Parent Common Stock.
SCHARF, MR. -- is defined in the introductory paragraph.
SEC -- means, at any time, the Securities and Exchange
Commission or any other federal agency at such time administering
the Securities Act.
SECURITIES ACT -- means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
SECURITY -- means "security" as defined by section 2(1) of
the Securities Act.
SENIOR CREDIT AGREEMENT -- is defined in the Note and Stock
Purchase Agreement.
SHELF EFFECTIVE DATE -- means December 31, 1997.
SHELF EFFECTIVE PERIOD -- is defined in Section 3.2(a).
SHELF FILING DATE -- means August 15, 1997.
SHELF REGISTRATION -- is defined in Section 3.2(a).
SUBSIDIARY -- means, as to any Person, any corporation in
which such Person or one or more Subsidiaries of such Person or
such Person and one or more Subsidiaries of such Person owns
sufficient voting securities to enable it or them (as a group)
ordinarily, in the absence of contingencies, to elect a majority
of the directors (or Persons performing similar functions) of
such corporation. The term "SUBSIDIARY," as used herein without
reference to any Person, shall mean a Subsidiary of the Parent.
TAG-ALONG TRIGGER EVENT -- shall been deemed to have
occurred at any time when the Initial Stockholders, taken as a
group (and without giving effect to sales, transfers or other
dispositions of Issuable Shares by any Initial Stockholder to any
other Initial Stockholder), shall have sold, transferred or
otherwise disposed of a number of Issuable Shares which (after
giving effect to all prior or contemporaneous transfers,
dispositions, purchases and acquisitions) is more than the
Permitted Issuable Shares Amount in any sale, transfer or
disposal (or series of sales, transfers or disposals (whether
related or not)) after the Closing Date, provided that in
connection with any sale, transfer or other disposal if:
(a) immediately prior thereto, the aggregate amount of
Issuable Shares so sold, transferred or otherwise disposed
of by the Initial Stockholders since the Closing Date is
less than the Permitted Issuable Shares Amount, and
(b) any of the Initial Stockholders sell Issuable
Shares in such transaction that, together with all other
Issuable Shares sold, transferred or otherwise disposed of
by the Initial Stockholders since the Closing Date, equal or
exceed the Permitted Issuable Shares Amount,
then, for the purposes of this Agreement, the "TAG-ALONG TRIGGER
EVENT" shall be deemed to have occurred immediately prior to such
sale, transfer or other disposal.
VALUATION AGENT -- means a firm of independent certified
public accountants, an investment banking firm or a securities
rating service (which firm or service shall own no Securities of,
and shall not be an Affiliate, Subsidiary or a related Person of,
the Parent) of recognized national standing retained by the
Parent and reasonably acceptable to the Required Holders.
VOTING STOCK -- means, with respect to any corporation, any
shares of stock of such corporation whose holders are entitled
under ordinary circumstances to vote for the election of
directors of such corporation (irrespective of whether at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
6. MISCELLANEOUS.
6.1 WARRANTIES AND REPRESENTATIONS IN NOTE AND STOCK
PURCHASE AGREEMENT. Mr. Scharf hereby warrants and represents to
the Purchasers that each of the warranties and representations of
the Companies contained in the Note and Stock Purchase Agreement
are true and correct as of the Closing Date.
6.2 NOTICES. All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if the
sender on the same day sends a confirming copy of such notice by
a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested
(postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
(i) if to any holder of Purchaser Shares, if such
holder is a Purchaser, then at the address set forth in
Annex 1 hereto for such Purchaser, or, if such holder is not
a Purchaser, then at the address provided to the Parent by
such holder or such other address as such holder shall
designate to the Parent in writing;
(ii) if to the Parent, to the Parent at 677 Madison
Avenue, New York, NY 10021, Attention: President, telephone
(212) 317-1000, telecopier (212) 317-1001, or at such other
address or telecopier as the Parent shall have specified to
the holder of each Purchaser Share in writing,
(iii) if to the Company, to the Company (with a
courtesy copy to the Parent) at 110 Hopkins Street, P.O. Box
399, Buffalo, NY 14240, Attention: President, telephone
(716) 827-7010, telecopier (716) 827-8855, or at such other
address or telecopier as the Company shall have specified to
the holder of each Purchaser Share in writing, or
(iv) if to Mr. Scharf, to Mr. Scharf in care of the
Parent at 677 Madison Avenue, New York, NY 10021, Attention:
Michael J. Scharf, telephone (212) 317-1000, telecopier
(212) 317-1001, or at such other address or telecopier as
Mr. Scharf shall have specified to the holder of each
Purchaser Share in writing.
Notices under this Section 6.2 will be deemed given only when
actually received.
6.3 AMENDMENTS AND WAIVERS.
(a) The provisions of Section 6 hereof, and of any
term defined in Section 5 hereof as used in any such
Section, may be amended, modified or supplemented, and
compliance with any such Section hereof waived, only by a
writing duly executed by or on behalf of the Required
Holders and the Companies.
(b) the provisions of Section 3 hereof, and of any
term defined in Section 5 hereof as used in Section 3
hereof, may be amended, modified or supplemented only by a
writing duly executed by or on behalf of the Requisite
Holders and the Parent; and
(c) the provisions of Section 1, Section 2 and Section
4 hereof, and of any term defined in Section 5 hereof as
used in any such Section, may be amended, modified or
supplemented, and compliance with any such Section hereof
waived, only by a writing duly executed by or on behalf of
the Required Holders, Mr. Scharf and the Parent.
6.4 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE INTERNAL LAW OF THE STATE OF NEW YORK.
6.5 JURISDICTION; JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE
UNITED STATES FEDERAL DISTRICT COURT OF THE SOUTHERN DISTRICT OF
NEW YORK OR ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND INSTRUMENTS
CONTEMPLATED HEREBY AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. NONE
OF THE PARTIES HERETO SHALL SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION PROCEDURE BASED UPON
OR ARISING OUT OF OR OTHERWISE RELATED TO THIS AGREEMENT OR THE
PARENT COMMON STOCK AND EACH OF THE PARTIES HERETO HEREBY WAIVES
ANY AND ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY SUCH PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 6.5.
6.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
6.7 DESCRIPTIVE HEADINGS. Descriptive headings of the
several sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction
of any of the provisions hereof.
6.8 SEVERABILITY. The fact that any given provision of
this Agreement is found to be unenforceable, void or voidable
under the laws of any jurisdiction shall not effect the validity
of the remaining provisions of this Agreement in such
jurisdiction, and shall not effect the enforceability of the
entire Agreement under the laws of any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered, all as of the date
and year first above written.
NIAGARA CORPORATION
By: /s/ Michael J. Scharf
Name: Michael J. Scharf
Title: President
NIAGARA COLD DRAWN CORP.
By: /s/ Frank Archer
Name: Frank Archer
Title: President
[SIGNATURE PAGE FOR STOCKHOLDERS AGREEMENT IN CONNECTION WITH THE
ISSUANCE BY NIAGARA CORPORATION OF 285,715 SHARES OF COMMON
STOCK]
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: /s/ Kevin J. Kraska
Name: Kevin J. Kraska
Title: Vice President
[SIGNATURE PAGE FOR STOCKHOLDERS AGREEMENT IN CONNECTION WITH THE
ISSUANCE BY NIAGARA CORPORATION OF 285,715 SHARES OF COMMON
STOCK]
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/ U. Peter C. Gummeson
Name: U. Peter C. Gummeson
Title: Investment Officer
[SIGNATURE PAGE FOR STOCKHOLDERS AGREEMENT IN CONNECTION WITH THE
ISSUANCE BY NIAGARA CORPORATION OF 285,715 SHARES OF COMMON
STOCK]
FALCON ASSET MANAGEMENT, INC., AS
ATTORNEY IN FACT FOR UNITED STATES
FIDELITY AND GUARANTY COMPANY
By: /s/ Therese A. Ray
Name: Therese A. Ray
Title: Vice President
[SIGNATURE PAGE FOR STOCKHOLDERS AGREEMENT IN CONNECTION WITH THE
ISSUANCE BY NIAGARA CORPORATION OF 285,715 SHARES OF COMMON
STOCK]
/s/ Michael J. Scharf
MICHAEL J. SCHARF
[SIGNATURE PAGE FOR STOCKHOLDERS AGREEMENT IN CONNECTION WITH THE
ISSUANCE BY NIAGARA CORPORATION OF 285,715 SHARES OF COMMON
STOCK]
