Preview of our top selling Stock Restriction Agreement
GSI Group - Gsi Stock Restriction/buy-sell Agree- Non-voting
Exhibit 10.17
THE GSI GROUP, INC.
STOCK RESTRICTION AND BUY-SELL AGREEMENT
NON-VOTING SHARES
THIS STOCK RESTRICTION AND BUY-SELL AGREEMENT is made as of the 1st day of January, 1997 by and between The GSI Group, Inc., a Delaware corporation (the "Corporation"), John C. Sloan ("Sloan"), Jorge Andrade ("Andrade"), John Funk ("Funk") and Howard Buffett ("Buffett") (Sloan, Andrade, Funk and Buffett are hereinafter referred to collectively as the "Voting Shareholders"), and the persons identified on Exhibit A attached hereto (the "Non-Voting Shareholders").
R E C I T A L S
---------------
The Voting Shareholders are owners and holders of all of the issued and outstanding voting shares ("Voting Shares") of common stock of the Corporation.
The Non-Voting Shareholders are owners and holders of issued and outstanding non-voting shares ("Shares") of common stock of the Corporation.
The parties hereto believe that in the interest of their continued success, it is desirable to maintain continuity in the management, policies and ownership of the Corporation, provide for the purchase of Shares upon the occurrence of certain contingencies and provide certain other agreements as more fully set forth herein.
NOW, THEREFORE, for and in consideration of the above premises and the mutual covenants and agreements hereinafter contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE
1
INCORPORATION OF RECITALS AND DEFINITIONS
-----------------------------------------
1.1 Incorporation of Recitals. The Recitals are incorporated herein and constitute covenants, representations and warranties of the Shareholders.
1.2 Definitions. For purposes of this Agreement:
(a) The term "and/or" shall mean one or the other or both, or any one or more or all, of the things or persons in connection with which the conjunction is used.
(b) The term "Approved Sale" shall mean the sale of the Corporation to an Independent Third Party (whether by merger, consolidation, sale of all or substantially all of its assets or sale of a majority of the Voting Shares) approved by the Corporation's Board of Directors and/or the Controlling Shareholders.
(c) The term "Controlling Shareholders" shall mean the Voting Shareholders owning more than fifty percent (50%) of the outstanding voting shares of the Corporation's stock.
(d) The term "Independent Third Party" means any person who, immediately prior to the contemplated transactions, does not own in excess of 5% of the Voting Shares, who is not controlling, controlled by or under common control with any such 5% owner of the Voting Shares, and who is not the spouse or descendant (by birth or adoption) of any such 5% owner.
(e) The term "Non-Voting Shareholder" shall mean any person or entity that at any time may become a party hereto by reason of his, her or its ownership of Shares.
(f) The term "Shares" shall mean all shares of the Corporation's non- voting common stock now owned or hereafter acquired by any Shareholder, including but not limited to, newly authorized non-voting shares, non-voting shares issued out of authorized but unissued stock, non-voting shares issued or credited in connection with any stock dividend, stock split, or other capital readjustment, as well as any voting trust certificates (there being none at this date) representing any non-voting shares issued by the Corporation and owned by the Non-Voting Shareholder which are part of any voting trust or similar agreement.
(g) The term "Shareholders" and/or "Shareholder" shall mean the Voting Shareholders, Non-Voting Shareholders and/or any other person or entity that at any time may become a party hereto by reason of his, her or its ownership of Shares and/or voting shares of the Corporation's stock.
(h) The term "Voting Shareholder" shall mean any person or entity that is the record owner of Voting Shares.
ARTICLE
2
RESTRICTION ON SHARES
---------------------
2.1 Prohibition on Transfer. Except as (i) expressly permitted herein; or (ii) provided under a certain pledge agreement between LaSalle National Bank and the Shareholders (the "LaSalle Pledge Agreement"), and pledge agreements between the Shareholders and each of Larry Sloan, Thomas G. Sloan and James E. Sloan (collectively, the "Sloan Pledge Agreements"), none of the Non-Voting Shareholders shall at any time sell, pledge, hypothecate, transfer, encumber, assign, give away or in any way dispose of any Shares now owned or
2
hereafter acquired by him, nor shall such Shares be transferable, voluntarily or involuntarily, by operation of law or otherwise, except in strict compliance with the covenants, terms and conditions set forth in this Agreement. Any attempt to do so in violation of this Agreement shall not be recognized by the Corporation and shall be null and void and of no force or effect whatsoever. The Shareholders acknowledge and agree that the rights afforded Sloan pursuant to the terms of any documents and/or agreements pertaining to the sale of Shares by Sloan to any given Non-Voting Shareholder shall, with respect to the Shares acquired by such Non-Voting Shareholder from Sloan, supersede the rights and obligations of the parties hereunder.
2.2 Restriction on Certificates. The Corporation shall cause to be placed on each certificate of its Shares which may now or hereafter be issued to a Non- Voting Shareholder (except certificates evidencing Shares sold free of the restrictions of this Agreement), a notice in the following form:
"The shares of stock evidenced by this Certificate are subject to the terms
and conditions of a certain Stock Restriction and Buy-Sell Agreement, dated
as of January 1, 1997 ("Agreement"), between the Corporation and the
Shareholders. A copy of the Agreement is on file at the offices of the
Corporation, reference to all the terms and conditions thereof being hereby
made. No sale or transfer of the Shares evidenced hereby may be effected,
except pursuant to the terms and conditions of the Agreement."
If such legend is placed on the reverse side rather than the face of any such certificate, there shall be placed on the face of such certificate a legend in the following form:
"For restrictions on transfer, see notice on reverse side hereof."
2.3 Wrongful Transfer. Subject to Sections 2.1, no sale, pledge, hypothecation, transfer, encumbrance, assignment, gift or other disposition by a Non-Voting Shareholder of any of his Shares shall be effective, unless and until: (i) he has first complied with all the provisions of this Agreement, and (ii) such transferee shall take such Shares subject to the terms of this Agreement, shall agree in writing to become a party to this Agreement and to be bound by all of the terms, conditions and provisions hereof. If a Non-Voting Shareholder fails to comply with this Agreement, the Voting Shareholders and/or the Corporation shall have the right to compel such Non-Voting Shareholder or any transferee to transfer and deliver his or its Shares in accordance with the provisions of this Agreement.
2.4 Maintenance of S Corporation Status.
(a) Each Non-Voting Shareholder agrees that he will take all action necessary to permit the Corporation to retain its tax status an S Corporation ("S Corporation") under Subchapter S (Section 1361 et seq.) of the Internal Revenue Code of 1986, as amended (the "Code"), including but not limited to, the execution and delivery of any and all consents and other documents required at any time for the continuance of S Corporation status, or required to carry out, effectuate, implement or exercise any and all other elections available to, or powers
3
exercisable by, a corporation having elected S Corporation status. Unless and until the Controlling Shareholders direct otherwise in writing, the Non-Voting Shareholders shall not take any action which will cause the Corporation not to be taxed as an S Corporation.
(b) Subject to the limitations of the Delaware General Corporation Law ("DGCL"), as long as the Corporation remains an S Corporation, each Shareholder agrees to take all actions necessary to cause the Board of Directors of the Corporation to declare and pay to the Shareholders dividends each year in an amount not less than all federal and state income taxes, including but not limited to estimated tax payments, payable by the Shareholders each year with respect to the income of the Corporation, based upon the maximum marginal federal and state individual income tax rates applicable to any Shareholder.
(c) Upon any transfer of the Shares permitted hereunder, the Corporation may require arrangements reasonably satisfactory to it to assure that any transferee shall take any and all action necessary to maintain the election under Section 1362(a) of the Code.
2.5 Take-along Rights. The Controlling Shareholders agree that if they sell or transfer, in the aggregate, a majority of the Voting Shares to a third party, they will first give written notice (the "Take-along Notice") to the Non- Voting Shareholders stating all of the material terms of the offer. Each of the Non-Voting Shareholders may then participate pro rata in such transfer based on his proportionate holdings of Shares in relation to the total number of outstanding shares (both voting and non-voting) of the common stock of the Corporation. If a Non-Voting Shareholder wishes to participate in such transaction, he will give the Corporation and the Voting Shareholders written notice within five (5) days of receipt of the Take-along Notice, and the sale transaction will not close prior thereto. The foregoing notwithstanding, the provisions of this Section 2.5 shall not apply to (i) any transfers of Voting Shares among or between the Voting Shareholders and/or their respective family members, in trust or otherwise, either during their lifetimes or after their deaths, and (ii) the pledge or hypothecation of Voting Shares.
2.6 Drag-A-Long Rights. In the event of an Approved Sale, each of the Non-Voting Shareholders agrees to sell his Shares on the terms and conditions approved by the Corporation's Board of Directors and/or the Controlling Shareholders. Each Non-Voting Shareholder will not exercise any statutory dissenters' rights with regard to an Approved Sale and will take all necessary and desirable actions in connection with the consummation of the Approved Sale. The foregoing notwithstanding, the right of the Corporation and/or the Controlling Shareholders to consummate any Approved Sale structured as a sale of common stock is subject to the satisfaction of the condition that, upon the consummation of the Approved Sale, each Non-Voting Shareholder will receive the same form and amount of consideration per Share as the Voting Shareholders receive for their Voting Shares, or if the Voting Shareholders are given an option as to the form and amount of consideration to be received, the Non-Voting Shareholders will be given the same option.
4
ARTICLE
3
PURCHASE OF SHARES - RIGHT OF FIRST OFFER
-----------------------------------------
3.1 Notice of Transfer. If a Non-Voting Shareholder ("Offering Shareholder") receives during his lifetime a bona fide offer ("Offer") to sell or otherwise transfer any or all of his Shares ("Offered Shares") to any other Non-Voting Shareholder, the Offering Shareholder shall give at least sixty (60) days prior written notice to the Corporation and the Voting Shareholders of his intention to so transfer his Shares (the "Notice"). The Notice shall state (i) the number of Offered Shares; (ii) the name of the Non-Voting Shareholder who is the proposed transferee (the "Transferee"); (iii) whether or not the transfer is for valuable consideration and, if so, the consideration (the "Offered Price"); (iv) the date upon which the proposed transfer to the Transferee is to be consummated; and (v) all other material terms of the proposed transfer. A copy of any written agreement (whether executed or not) evidencing the Offer shall be attached to the Notice.
3.2 Rights of First Offer. From and after the date of the Notice ("Notice Date"), the Voting Shareholders and the Corporation shall have options to purchase the Offered Shares, upon the terms set forth in Section 3.3 hereof, exercisable in the order of priority and within the time periods set forth below:
(a) Within twenty-one (21) days after the Notice Date (the "Sloan's Option Period"), Sloan shall have the option to acquire all or any portion of the Offered Shares ("Sloan's Option"). Sloan shall exercise Sloan's Option, if at all, by giving written notice to that effect to the Offering Shareholder, the other Voting Shareholders and the Corporation within Sloan's Option Period.
(b) Within twenty one (21) days following the first to occur of (i) the expiration of Sloan's Option Period without Sloan exercising his option or (ii) Sloan's written notice to the Offering Shareholder, the other Voting Shareholders and the Corporation that he will not purchase any or all of the Offered Shares (the "Voting Shareholders' Option Period"), the Voting Shareholders, other than Sloan, shall have the option to acquire all of the Offered Shares not being purchased by Sloan (the "Voting Shareholders' Option"). In the event that one or more of such Voting Shareholders elects to purchase the Offering Shareholder's Shares, then unless otherwise agreed, each electing Voting Shareholder must purchase that percentage of the Shares offered by the Offering Shareholder as is equal to his proportionate ownership of all of the electing Voting Shareholders' Voting Shares. The Voting Shareholders shall exercise the Voting Shareholders' Option, if at all, by giving written notice to that effect to Sloan, the Corporation and the Offering Shareholder within the Voting Shareholders' Option Period.
(c) Within fourteen (14) days following the first to occur of (i) the expiration of the Voting Shareholders' Option Period without Sloan and/or the other Voting Shareholders exercising their options; or (ii) written notice to the Corporation that neither Sloan nor the other Voting Shareholders intend to purchase all of the Offered Shares (the "Corporation's Option"),
5
the Corporation shall have the option to acquire all of the Offered Shares not being purchased by Sloan or the other Voting Shareholders. The Corporation shall exercise the Corporation's Option, if at all, by giving written notice to that effect to the Offering Shareholder and the Voting Shareholders within the Corporation's Option Period.
The exercise of the aforesaid options must, in the aggregate, include all of the Offered Shares or the exercise of such option(s) shall be null and void.
3.3 Purchase Price and Terms. In the event Sloan's Option, the Voting Shareholders' Option and/or the Corporation's Option is exercised, the party(ies) exercising such option(s) shall purchase the Offered Shares at the lower of (i) the Offered Price or (ii) the Purchase Price (as hereinafter defined) determined in accordance with Section 5.5 hereof, upon the same terms and conditions provided in the Notice. The Closing of such purchase shall occur in the mariner described in Section 7.2(a) hereof.
3.4 Failure to Exercise Rights of First Offer Options. If Sloan, the Voting Shareholders and/or the Corporation fail to exercise their respective Options in accordance with Section 3.2 hereof to purchase in the aggregate all of the Offered Shares, the Offered Shares may be transferred to the Transferee as provided in the Notice. The effectiveness of such transfer is conditioned upon the Transferee then being a Non-Voting Shareholder immediately prior to such transfer and his reaffirming in writing his agreement to be bound by all of the terms, conditions and provisions hereof. If the transfer does not occur in accordance with the terms disclosed in the Notice, such transfer shall be automatically null and void without any further action being required on the part of the Corporation or the Voting Shareholders, and any attempt to transfer the Offered Shares thereafter without first complying with the terms of this Article 3 shall be deemed a wrongful transfer within the meaning of Section 2.3 hereof.
ARTICLE
4
PURCHASE OF SHARES
------------------
4.1 Purchase Upon Death, Permanent Disability or Termination of Employment of Non-Voting Shareholder. If a Non-Voting Shareholder dies (the "Decedent"), becomes Permanently Disabled (as defined below) (the "Disabled Shareholder"), or his employment by the Corporation terminates (the "Terminating Shareholder") (a Decedent, Disabled Shareholder or Terminating Shareholder is sometimes hereinafter referred to as a "Departed Shareholder"), the Shares owned by the Departed Shareholder, shall be subject to the following rights and obligations, and the Non-Voting Shareholders, for themselves and their respective heirs, successors, representatives and assigns, agree as follows:
(a) Within sixty (60) days following: (i) the date of the Decedent's death, (ii) the Effective Date of Permanent Disability (as defined below) of the Disabled Shareholder, or (iii) the last date of employment of the Terminating Shareholder, as the case may be ("Sloan's
6
Purchase Option Period"), Sloan shall have the option to acquire all or any portion of the Shares owned by the Departed Shareholder ("Sloan's Purchase Option"), at the price and on the terms set forth in Articles 5, 6 and 7 hereof. Sloan shall exercise Sloan's Purchase Option, if at all, by giving written notice to that effect to the Departed Shareholder, the other Voting Shareholders and the Corporation within Sloan's Purchase Option Period.
(b) Within thirty (30) days following the first to occur of (i) the expiration of Sloan's Purchase Option Period without Sloan exercising his option or (ii) Sloan's written notice to the Departed Shareholder, the other Voting Shareholders and the Corporation that he will not purchase any or all of the Departed Shareholder's Shares (the "Voting Shareholders' Purchase Option Period"), the Voting Shareholders, other than Sloan, shall have the option to acquire all of the Departed Shareholder's Shares not being purchased by Sloan (the "Voting Shareholders' Purchase Option"), at the price and on the terms set forth in Articles 5, 6 and 7 hereof. In the event that one or more of such Voting Shareholders elects to purchase the Departed Shareholder's Shares, then, unless otherwise agreed, each electing Voting Shareholder must purchase that percentage of the Departed Shareholder's Shares as is equal to his proportionate ownership of all of the electing Voting Shareholders' Voting Shares. The Voting Shareholders shall exercise the Voting Shareholders' Purchase Option, if at all, by giving written notice to that effect to Sloan, the Corporation and the Departed Shareholder within the Voting Shareholders' Purchase Option Period.
(c) Subject to Section 4.2 hereof, the Corporation shall purchase, and the Departed Shareholder or his legal representative shall sell, all of the Shares owned by the Departed Shareholder which are not purchased by Sloan and/or the other Voting Shareholders pursuant to Sections 4.1(a) or (b) above, at the price and on the terms set forth in Articles 5, 6 and 7 hereof.
(d) Notwithstanding the foregoing provisions of this paragraph 4.1 but subject in all events, however, to the rights and obligations to sell Shares otherwise set forth herein, any Senior Terminating Shareholder (as defined below) who resigns prior to January 1, 2002, may irrevocably elect to defer the purchase and sale of his Shares (due to such termination of employment), such that with respect to determining the Purchase Price for such Senior Terminating Shareholder's Shares, the Event (as defined in paragraph 5.1 hereof) shall be deemed to have occurred either on January 1, 2002 or on the fifth (5th) anniversary of the last day of such Senior Terminating Shareholder's employment by the Corporation. The Senior Terminating Shareholder shall give written notice of such election to the Voting Shareholders and the Corporation within thirty (30) days following the last day of his employment, which notice shall express such irrevocable election and shall specify whether the Event shall be deemed to occur on January 1, 2002 or on the fifth (5th) anniversary of the last date of his employment. In such circumstance, Sloan's Purchase Option Period, the Voting Shareholder's Purchase Option Period and the respective rights and obligations of the Voting Shareholders, the Corporation and such Senior Terminating Shareholder with respect to the purchase and sale of his Shares shall pertain as if the date designated by such Senior Terminating Shareholder for the Event was the last day of his employment. As used herein, the term "Senior Terminating Shareholder" means a Terminating Shareholder who was either (i) 62 years of age, or
7
(ii) employed by the Corporation for a period of at least twenty (20) years, at the time he first acquired Shares.
4.2 Termination of Employment for Cause. Notwithstanding the terms of Section 4.1(c) above, if the Terminating Shareholder's employment by the Corporation is terminating for Cause (as defined below), then the Corporation shall not be obligated to purchase the Terminating Shareholder's Shares, and in lieu of any such obligation, the Corporation shall have the option to acquire all or any portion of the Terminating Shareholder's Shares not being purchased by Sloan or the other Voting Shareholders pursuant to their respective options as set forth above, on the terms set forth in Articles 5, 6 and 7 hereof. The Corporation shall exercise such option, if at all, by giving written notice to that effect to the Terminating Shareholder and the Voting Shareholders within one hundred eighty (180) days following the first to occur of (i) the expiration of Sloan's Purchase Option and the Voting Shareholders' Purchase Option without them having exercised such options or (ii) Sloan's and the other Voting Shareholders' written notice to the Corporation and the Terminating Shareholder stating that they will not purchase the Terminating Shareholder's Shares. In the event that neither Sloan, the other Voting Shareholders nor the Corporation exercise their respective options to purchase the Shares of a Terminating Shareholder whose employment is terminated for Cause, the Terminating Shareholder, or his heirs, representatives, successors and assigns, shall hold such Shares not so purchased subject to the terms, conditions and provisions of this Agreement.
4.3 Definition of Permanent Disability. A Non-Voting Shareholder shall be deemed to be "Permanently Disabled" upon the first to occur of the following events:
(a) if by reason of injury, sickness or other incapacity he is unable, for a period of six (6) consecutive months or for six (6) months during any nine (9) consecutive month period, to discharge his regular duties and responsibilities as an employee and/or officer of the Corporation. If the parties shall at any time be unable to agree on whether a Non-Voting Shareholder is or has been so disabled, the Corporation and the Non-Voting Shareholder shall promptly and jointly appoint a medical doctor or if they are unable to so agree, they shall each promptly appoint a medical doctor to make such determination, and the collective decision of such medical doctors shall be binding on all parties hereto. If such doctors are unable to agree, they shall promptly appoint a third medical doctor to make such determination, and the decision of such third medical doctor shall be binding on all parties hereto; or
(b) the failure or refusal of a Non-Voting Shareholder to submit to any examination or to appoint a medical doctor pursuant to subsection (a) of this Section 4.3 within sixty (60) days after the date on which the Non-Voting Shareholder receives a notice from the Voting Shareholders and/or the Corporation to do so; or
(c) the adjudication of such Non-Voting Shareholder as an incompetent or a disabled person by a court of competent jurisdiction.
8
4.4 Definition of Effective Date of Permanent Disability. If a Non-Voting Shareholder is deemed to be Permanently Disabled pursuant to Section 4.3 hereof, then the "Effective Date of Permanent Disability" shall be the first to occur of the following:
(a) the date upon which the examining doctor(s) shall determine that the Non-Voting Shareholder is Permanently Disabled; or
(b) the sixtieth (60th) day immediately succeeding the day on which the Non-Voting Shareholder receives a notice from the Voting Shareholders and/or the Corporation to submit to an examination pursuant to Section 4.3(a) hereof, if the Non-Voting Shareholder fails or refuses to submit to such examination or fails or refuses to appoint a medical doctor; or
(c) the sixtieth (60th) day immediately succeeding the date of the adjudication described in Section 4.3(c) hereof unless prior to the expiration of such period the adjudication has been reversed; or
(d) the first day of the seventh (7th) consecutive month or the first day of the seventh (7th) month during any nine (9) consecutive month period of the Non-Voting Shareholder's inability to perform his regular duties and responsibilities as an employee and/or officer of the Corporation.
4.5 Definition of Cause. As used herein "Cause" shall mean one or more of the following as determined by the Board of Directors in its sole discretion: (i) commission of any dishonest act by a Non-Voting Shareholder in connection with his employment by the Corporation or any act of willful misconduct which has affected or can be reasonably expected to affect the business or reputation of the Corporation in a materially adverse manner; or (ii) diversion of any material corporate opportunity of the Corporation for the Non-Voting Shareholder's direct or indirect benefit.
ARTICLE
5
DETERMINATION OF THE PURCHASE PRICE
-----------------------------------
5.1 Purchase Price. The parties hereto recognize the problems relative to determining the value of the Corporation. As a result, the parties hereto agree that subject to the terms of Section 5.5 hereof, the purchase price ("Purchase Price") for each Share to be purchased pursuant to Articles 3 or 4 hereof shall be the greatest of the following amounts:
(i) Six and 34/100 Dollars ($6.34) per Share;
(ii) two (2) times the Book Value (as defined below) of the
Corporation divided by the total number of shares (both voting and non-
voting) of the Corporation's
9
stock outstanding as of the date of the event which triggers the purchase
and sale hereunder (the "Event"); and
(iii) an amount equal to: (a) five (5) times the Corporation's EBITDA
(as defined below), minus (b) the principal balance of the Corporation's
interest bearing debt as of the date of the Event, divided by (c) the total
number of shares (both voting and non-voting) of the Corporat...
View agreement details